27 Relationships with related parties

Considering the existence of a fact control situation on behalf of CDP S.p.A. over Snam S.p.A., pursuant to the international accounting standard IFRS 10 - Consolidated Financial Statements, based on the current Group ownership structure, the related parties of Snam are represented not only by Snam’s associates and joint ventures, but by the mother company CDP S.p.A. and its subsidiaries and associates, and also by the direct or indirect subsidiaries, associates and joint ventures of the Ministry of Economy and Finance (MEF). Furthermore, the members of the Board of Directors are also considered as correlated parties, so as the Statutory Auditors and managers with strategic responsibilities and their families, of the Snam Group and CDP.

As explained in the following details, the related-party transactions mainly concern the exchange of goods 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 companies of the Snam Group.

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.

The directors and statutory auditors declare to have potential interests related to the Company and the Group every six months, and/or when the changes in the before mentioned interests occur; they also inform the Chief Executive Officer (or the Chairman, in the case of the Chief Executive Officer’s interests), who in turn will informs the other directors and the Board of Statutory Auditors, of the individual transactions that the Company intends to carry out and over which they have an interest.

Snam is not managed or coordinated by any other entity. Snam manages and coordinates its subsidiaries, pursuant to Article 2497 et seq. of the Italian Civil Code.

As part of the separation operation of Italgas from Snam, approved on 28 June 2016, by the Board of Directors of Snam¹³ and to be implemented through three operations (transfer; sale and splitting), it is reported that: (i) the splitting with a proportional assignment of shares to the shareholders does not constitute a ‘”Related party transaction” under of the disclosure requirements of CONSOB Regulation no. 17221 of 12 March 2010 and Consob Communication No. DEM/10078683 of 24 September 2010; (ii) the operations of transfer and sale, while qualifying as related party transactions, fall within the exemption to Article 14, paragraph 2, of the RPT Regulation and Article X, Section 8, of the RPT Procedure of Snam, which provides that procedures applicable in Related Party Transactions do not apply in the case of transactions with subsidiaries (ITG Holding). In the light of the involvement of CDP as a Related Party of Snam, Snam has not availed itself of the above mentioned exemption and referred the whole Operation to the procedure for “Material Transactions” under Article 8 of the RPT Regulation and art. VI of the RPT Procedure¹⁴.

The amounts involved in commercial, miscellaneous and financial transactions with related parties for the first semester of 2015 and 2016 are reported below. The nature of the most significant transactions is also stated.

Commercial and other transactions

Commercial and other transactions can be broken down as follows:

Companies under joint control and associates

Transactions with TAP related to contractual agreements under which the shareholders are responsible for financing the project for gas exports in western Europe, according to the level of their respective shareholdings, both through the Shareholders’ Loan, as well as through the subscription of capital increases, until the pipeline enters into service, and if its capacity is expanded.

Companies under joint control of the mother company Cassa Depositi e Prestiti

Among the passive commercial transactions with the companies jointly controlled by Cassa Depositi e Prestiti, it is noted that the planning and supervision of works to build natural gas transportation and storage infrastructure carried out by Saipem, governed by contracts concluded 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 transactions with the Eni Group include: (i) the supplying of electricity used for the development of activities and purchase of natural gas used in the realization of storage infrastructures, regulated by contracts entered into under normal market conditions; (ii) the provision of consulting and technical-operational assistance services related to the storage deposits. These transactions are governed by service agreements on the basis of the costs incurred.

On 30 June 2016, there were assets with Eni posted in reference to transactions arising from the national tax consolidation scheme in force until 31 July 2012.

Financial transactions

Financial transactions can be broken down as follows

Companies under joint control and associates

Transactions with TAP AG refer to Snam’s share of the Shareholders’ Loan in favour of associate company Trans Adriatic Pipeline AG (TAP).

Transactions with Gasbridge 1 B.V. and Gasbridge 2 B.V. refer to 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: