27 Relationships with related parties

Given the existence of a de facto situation of control by CDP S.p.A. over Snam S.p.A., in accordance with the provisions of IFRS 10 - “Consolidated Financial Statements”, Snam’s related parties, based on the group’s current ownership structure, include not only Snam’s associates and joint ventures, but also the parent company CDP S.p.A. and its subsidiaries and associates, as well as the companies directly or indirectly controlled by the Ministry of Economy and Finance (MEF).

Members of the Board of Directors, Statutory Auditors and Group Snam managers with strategic responsibilities, and their families, are also regarded as related parties.

As explained in detail below, transactions with related parties mainly concern the purchase and/or exchange of assets and the provision of regulated services in the gas sector. Transactions between Snam and related parties are part of ordinary business operations and are generally settled under market conditions, i.e. the conditions that would be applied between two independent parties. All the transactions carried out were in the interest of the Snam Group companies.

Pursuant to the provisions of the relevant legislation, the company has adopted internal procedures to ensure that transactions carried out by Snam or its subsidiaries with related parties are transparent and correct in their substance and procedure.

Directors and auditors declare their interests affecting the company and the Group every six months, and/or when changes in said interests occur; they also inform the CEO (or the Chairman, in the case of the CEO), who in turns informs the other directors and the Board of Statutory Auditors, of individual transactions that the company intends to carry out and in which they have an interest.

Snam is not subject to management and coordination activities. Snam manages and coordinates its subsidiaries, pursuant to Article 2497 et seq. of the Italian Civil Code.

The amounts involved in commercial, financial and other transactions with related parties as defined above are shown below for the first halves of 2014 and 2015. The nature of the most significant transactions is also stated.

Commercial and other transactions

Commercial and other transactions can be broken down as follows:

Jointly controlled entities

Relations with TIGF Holding mainly concern receivables for dividends for 2014, not yet paid out at 30 June 2015.

Transactions with TAG, which are governed by the Service Balance Agreement, concern the sale and purchase of gas with a view to ensuring the daily balance between the quantities metered and the quantities expected at the Tarvisio entry point.

Transactions with other jointly controlled entities relate to the provision of IT services governed by contracts entered into under normal market conditions.

Companies owned or controlled by the State

Transactions with state-owned or -controlled companies relate mainly to the Eni group and the Enel group, and concern natural gas transportation, regasification, distribution and storage services, which are settled on the basis of tariffs set by the Authority.

The most significant passive commercial relations with the eni group include: (i) the planning and supervision of works to build natural gas transportation infrastructure, governed by contracts concluded under normal market conditions; (ii) the provision of electricity and the purchase of natural gas used in activities connected to the building of storage infrastructure, governed by contracts concluded under normal market conditions; and (iii) the provision of consultancy services and technical and operational assistance relating to storage reservoirs. These transactions are governed by service agreements on the basis of the costs incurred.

As at 30 June 2015, there were liabilities with Eni arising from price adjustment mechanisms, as established by the contract for the purchase of Italgas and Stogit from Eni signed on 30 June 2009, and assets posted in reference to transactions arising from the national tax consolidation scheme in force until 31 July 2012.

Transactions with GME relate to natural gas sales in the first half of 2015.

Financial transactions

Financial transactions can be broken down as follows:

Jointly controlled entities

Transactions with TAG GmbH refer to receivables arising from the granting of a short-term revolving credit line by Snam S.p.A. to TAG, pursuant to the contractual agreements relating to the acquisition from CDP GAS S.r.l.¹⁷ of its equity investment in TAG.

Transactions with Gasbridge 1 B.V. and Gasbridge 2 B.V. refer to payables for financing received and repayable on demand.

Impact of related-party transactions or positions on the balance sheet, income statement and statement of cash flows

The impact of related-party transactions or positions on the balance sheet and income statement is summarised in the following table:

Transactions with related parties are generally governed on the basis of market conditions, i.e. the conditions which would be applied between two independent parties.

The principal cash flows with related parties are shown in the following table.

The effect of cash flows with related parties is shown in the following table: