Income statement

Net profit

Net profit for the first half of 2016 totalled €526 million, down by €86 million (14.1%) compared with the first half of 2015. The reduction was mainly due to the fall in EBIT (-€145 million; -14.3%) and lower income from equity investments valued using the equity method (-€5 million; -7.2%). These factors were partly offset by the lower financial expenses (+€10 million; 5.4%), mainly following lower expenses related to net financial debt (+€20 million, 10.4%), which benefited thanks to the reduction in the average cost of debt and the fall in income taxes (+€54 million; 19.1%), mainly due to the lower pre-tax profit.

Regulated revenue (€1,700 million, net of consolidation elimination) fell by €96 million compared with the first half of 2016 (-5.3%). Revenue from regulated activities, net of components offset in costs, stood at €1,644 million and relate to transportation (€918 million), distribution (€501 million), storage (€215 million) and regasification (€10 million). The reduction of €78 million (4.5%) compared with the first half of 2015, is due mainly to the lower net invested capital return rate (WACC) for 2016, which affected the natural gas transport sector (from 6.3% in 2015 to 5.4% in 2016) and distribution sector (from 6.9% in 2015 to 6.1% in 2016; from 7.2% in 2015 to 6.6% in 2016 for metering). With regard to the storage sector, the increase in regulated revenue (+€10 million, +4.9%) was basically due to the adoption of reference parameters for determining the WACC for 2016, calculated in accordance with the criteria established by the Authority through resolution 583/2015/R/com, improvements compared with the reference ones for determining the WACC for 2015, the first year of the fourth regulation period for the storage service, which led to the WACC for 2016 being calculated as 6.5% compared with 6% for 2015.

Non regulated revenue (€24 million, net of consolidation eliminations) mainly involves income from the leasing and maintenance of fibre optic telecommunication cables (€6 million), from rental (€3 million) and insurance payments (€2 million). The reduction compared with the first half of 2015, equal to €17 million, is mainly due to lower sales of natural gas no longer part of operations.

Operating costs of regulated activities

Controllable fixed costs (€235 million, net of components which are offset in revenues), which comprise the sum of personnel expenses and recurring external costs, fell by €13 million, or 5.2%, compared with the first half of 2015 (€248 million). The reduction was essentially due to lower external costs (-€9 million).

Variable costs totalled €14 million, net of components that are offset in revenues, up by €3 million compared with first half of 2015.

Other costs (€67 million, net of components which are offset in revenues), essentially involve: (i) concession fees for natural gas distribution concessions (€26 million); (ii) capital losses (€15 million); (iii) net provisions for risks and charges (€11 million). The increase, net of components which are offset in revenues, equal to €33 million is essentially due to the dynamics of the provision for risks and charges, following the net provisions made in the first half of 2016 for net usage recorded in the first half of 2015.

Operating costs of non-regulated activities

Non-regulated operating costs totalled €38 million, broadly in line with the corresponding period in 2015 (+€2 million, +5.6%).

Operating costs, net of components that are offset in revenues, amounted to €354 million, up by €25 million, equal to 7.6% compared with the first half of 2015.

The number of employees as at 30 June 2016 (6,395 people) is analysed below by professional status:

Amortisation and depreciation (€447 million) increased by €25 million, 5.9%, compared with the first half of 2015, mainly following the increased amortisation and depreciation (+€25 million), recorded in all business segments. The increase is basically due to the new infrastructures coming into service.

EBIT¹² for the first half of 2016 totalled €867 million, down by €145 million (14.3%) compared with the first half of 2015. The reduction is due to lower revenues (-€95 million, net of components offset in costs, -5.4%) and to the rise in operating costs (-€25 million, net of components offset in revenues, equal to 7.6%). The increase in operating costs is mainly due to the dynamics of the provision for risks and charges, following net provisions for risks and charges for usage made in the first half of 2015 (-€33 million), the effects of which were only partly offset by less income for the sale of natural gas no longer part of operations (+€17 million). The reduction in EBIT was also affected by the increase in amortisation and depreciation (-€25 million, 5.9%) recorded in all business segments.

Net financial expense amounted to €176 million, down by €10 million (5.4%) compared with the first half of 2015. The reduction was mainly attributable to the lower financial expenses related to net financial expense (-€20 million), due mainly to the decrease in the average cost of borrowing, thanks partly to the measures implemented by the Group to improve its financial structure. These effects were partly offset by lower capitalisation of financial expense (+€5 million) and by the effects related to the recording in the income statement of the ineffective portion resulting from the valuing at fair value of hedging derivative instruments (+€2 million).

Net income from equity investments (€64 million) concerns the share of net profit for the period of companies valued using the equity method (€64 million; -€6 million), with particular reference to Trans Austria Gasleitung GmbH - TAG (€37 million; -€2 million), TIGF Holding S.A.S. (€16 million; +€1 million), Toscana Energia S.p.A. (€9 million; -€2 million), Gasbridge 1 B.V. and Gasbridge 2 B.V (€4 million in total; -€1 million) as well as the share of the negative result for the period of Trans Adriatic Pipeline AG - TAP (-€2 million), a company involved in the development of the project that will enable gas to be transported from Azerbaijan to Europe.

Income tax for the first half of 2016 (€229 million) decreased by €54 million, or 19.1%, compared with the corresponding period of the previous year. The reduction is mainly due to the lower pre-tax profit and increase in ACE benefit - (Economic Growth Aid) for companies that strengthen their capital structure - introduced by Decree Law 201 of 6 December 2011 converted by Law 214 of 22 December 2011 and later amendments and supplements.

The tax rate was 30.3% (31.6% in the first half of 2015).