Group economic results

The economic data below are shown net of consolidation adjustments, with the exception of the performance of the Industrial Areas.

€m 31.12.2010 31.12.09
Restated
Increase/ (Decrease) Increase / (Decrease) %
Revenue from sales and services 3,508.5 2,878.3 630.2 21.9%
Other revenues and income 91.2 73.0 18.3 25.0%
Consolidated net revenue 3,599.7 2,951.3 648.4 22.0%
Staff costs 274.9 286.4 (11.5) -4.0%
Costs of materials and overheads 2,667.0 2,106.2 560.8 26.6%
Consolidated operating costs 2,941.9 2,392.6 549.3 23.0%
Net income/(costs) from commodity risk management 8.7 2.2 6.4 288.2%
Gross Operating Profit 666.5 560.9 105.6 18.8%
Amortisation, depreciation, provisions and impairment charges 348.6 375.7 (27.1) -7.2%
Operating profit/(loss) 317.9 185.2 132.7 71.7%
Finance (costs)/income (98.9) (85.3) (13.6) 16.0%
Profit/(loss) on investments 2.6 0.8 1.8 213.9%
Profit/(loss) before tax 221.6 100.7 120.8 119.9%
Taxation 85.4 147.8 (62.4) -42.2%
Net profit/(loss) for the period 136.2 (47.0) 183.2 389.6%
Profit/(loss) attributable to minority interests 7.9 5.5 2.3 42.2%
Net profit/(loss) attributable to the Group 128.3 (52.6) 180.9 344.2%
Fair value adjustment of discontinued operations (36.2) 0.0 (36.2) -100.0%
Net profit (loss) attributable to the Group after the fair value adjustment of discontinued operations 92.1 (52.6) 144.7 275.3%
Importi in milioni di Euro

The final balance of the ACEA Group in December 2010 showed an EBITDA of 666.5 million euros, up by 105.6 million euros compared to the previous year, thanks to the strong performances of the Energy Segment (+ 46.4 million euros), with particular reference to gas and power trading activities and sales activities, the Water Segment (+ 45.9 million euros), as a result of the growth of ACEA Ato2, and the Networks Segment (up 8.9 million euros), due to the excellent results from the photovoltaic activities managed by Arse.

EBITDA incorporates the well-known problems, which remained essentially unchanged as recorded by ACEA Ato5 and Gori, relating to the water segment tariffs and the improvement of the Parent Company (+ 12.3 million euros), details of which are provided below.

Consolidated net revenue

As regards consolidated net revenue (3,599.7 million euros), a change of 648.4 million euros was recorded, equal to 22%, essentially resulting from all the business managed by the Group: In particular:

  • revenue deriving from electricity and gas chain activities amounted to 2,555.3 million euros, up by 553.6 million euros, mainly due to generation and sales companies revenues (up 547.9 million euros) thanks to the favourable volume/price mix. Regulated distribution activities recorded an increase of 13.4 million euros, consistent with the rise in the primary margin of ACEA Distribuzione (+ 7.1 million euros).
  • revenues relating to environmental certificates amounted to 47.4 million euros, up by 2.2 million euros; these are broken down as follows (i) the reduction of 7.8 million euros relating to energy efficiency certificates determined essentially by Arse, (ii) a decrease of 2.8 million euros in the contribution to cover the purchase costs of CO2 quotas, relating to the Terni waste-to-energy plant due to the plant shutdown for revamping in August 2010 and (iii) the growth of 11.2 million euros relating to green certificate and CO2 quota trading,
  • revenues from integrated water services stood at 667.3 million euros, up by 22.2 million euros, essentially due to ACEA Ato2, that recorded growth of 18.1 million euros in this item. The remainder of the change (+ 4.1 million euros) is the result of contrasting phenomena: water companies operating in Tuscany and Umbria recorded increases in said revenues of 7.6 million euros and 4.6 million euros relating to Nuove Acque, whose contribution in the previous year concerned solely the last quarter; an opposite trend was recorded by ACEA Ato5 (- 4.1 million euros), that developed 2010 revenues by using the inflated tender plan tariff in place of the tariff set out in the revised 2007 Area Plan which was cancelled, as is well-known, by the Mayors’ Conference,
  • revenues delivered by water companies operating abroad stood at 23.6 million euros: the increase of 9.2 million euros is mainly attributable to Aguazul Bogotà that consolidated the income of the Conazul consortium, the entity that carried out an order in Peru,
  • income from waste transfer and landfill management came to 28.1 million euros, marking an increase of 1.9 million euros, thanks to the growth of the Aquaser Group (+ 4.8 million euros), driven by Kyklos and the decrease of the ARIA Group (- 2.9 million euros), caused by the shutdown of the Terni plant for revamping,
  • revenues from services to customers amounted to 157.8 million euros, recording a change of 42.6 million euros, deriving mainly (33.4 million euros) from the sales of photovoltaic panels by Arse starting from the year just closed. Management of the public lighting service in Rome and Naples also contributed to the increase (total of 6 million euros) as a result of more works carried out on the request of Roma Capitale and the start of a new order in the Municipality of Naples, upon stipulation of the contract in said Municipality; as regards said order ACEA participates in ATI (Temporary Joint Ventures) with other shareholders, its share standing at around 30%,
  • other revenues and income totalled 91.2 million euros, up by 18.3 million euros; the variation owed to the capital gain of 9.5 million euros deriving from the sale of a Parent Company property and Arse‘s energy account (+ 5.4 million euros) attributable to photovoltaic plants owned by the company.

 

Consolidated operating costs

Consolidated operating costs (2,941.9 million euros) increased by 549.3 million euros, (23%) and are broken down as follows:

  • the cost of labour net of costs set aside for investments stood at 274.9 million euros, down by 11.5 million euros due to the reduction in the workforce as a result of the implementation of ACEA Ato2 and ACEA Distribuzione mobility schemes, subject to an allocation in the financial statements of the previous year, and the substantial standstill in turnover partially offset by the increase in unit costs, for the growth of capitalised costs (7.1 million euros) essentially deriving from ACEA Ato2 and the booking, in the 2009 consolidated financial statements, of redundancy costs of 8.5 million euros (of which 6.7 million euros paid to top management that left in March 2009). The gross cost of labour amounted to 331.9 million euros, down by 4.4 million euros. The average and final numbers came to 6,721 and 6,913 respectively, recording an increase of 34 average units and 193 final units: the change is mainly a result of the expansion of the scope of activities, with particular reference to those carried out abroad by Conazul / Aguazul Bogotà. An overall decrease of 118 average units was recorded by companies that implemented mobility and redundancy schemes (ACEA Distribuzione, ACEA Ato2, ACEA Ato5 and Tirreno Power),
  • variable costs relating to electricity and gas chain activities amounted to 2,142.6 million euros, up by 511.9 million euros in line with the increase in correlated revenues (+ 555.8 million euros); the change is essentially attributable to generation, trading and sales companies in relation to sourcing and the charges related to the electricity system,
  • costs for the purchase of materials at the close of the year amounted to 73.9 million euros, up by 27.6 million euros as a result of purchases for the installation and sale of photovoltaic panels; in fact, Arse contributed 30.3 million euros to the growth in said item, in line with the increase in revenues from services to customers, mentioned above. Photovoltaic activities also generated an increase in revenues from the energy account of 5.4 million euros,
  • service costs totalled 323.6 million euros, up by 15.5 million euros; the change was essentially a result of higher costs for works (totalling 4.8 million euros) and technical and administrative services (5.3 million euros): expenses for works mainly concerned (i) maintenance and implementation activities carried out as part of the public lighting service and (ii) the functioning and maintenance of Tirreno Power plants, also as a result of damages to a unit in the Torrevaldaliga plant which occurred in 2010. The higher costs of the public lighting service are essentially covered by the increase in revenues from third party account works. Technical and administrative services include the costs incurred by the Parent Company for legal, tax and financial support for the termination of the joint venture agreement with GdF-Suez (3.5 million euros) and IT consultancy (+ 2.2 million euros). In addition, an increase was recorded in administrative and commercial costs related to the management of the seller’s customer portfolio,
  • concession fees imposed on water companies by the respective Management Agreements amounted to 57.4 million euros and remained essentially unchanged,
  • costs relating to the use of third party assets came to 33.9 million euros, marking an increase of 2.4 million euros, mainly due to higher costs for the purchase of licence agreements and hiring of cars for private and business use by Group executives,
  • sundry operating costs amounted to 35.6 million euros, up by 2.9 million euros: the increase (1.2 million euros) is a result of the Headquarters Project implemented by the Parent Company and, the remainder relates to the different weight of energy items relating to previous years.

 

Net income from commodity risk management

Net income from commodity risk management contributed to the Group’s EBITDA (8.7 million euros), which represents the change of the fair value valuation, with contracts stipulated predominantly by AceaElectrabel Trading and Tirreno Power recorded in the income statement. This item includes the results of the measurement made on the cash flow hedge contracts for the ineffective portion as well as results of the valuation made on FVPL contracts.

The total net amount of the fair value measurement of said contracts (whose effects will be felt in 2011) was a positive 5.5 million euros and regards (i) + 3.7 million euros relating to the valuation of the power portfolio (up 0.9 million euros as at 31 December 2009), (ii) + 2.1 million euros relating to the valuation of the gas portfolio (- 0.4 million euros as at 31 December 2009) and (iii) – 0.3 million euros (- 3.7 million euros at the end of the previous year) in relation to the measurement of financial contracts falling under the responsibility of Central Risk Management (CRM), a unit set up in AceaElectrabel Trading at the end of the previous year in charge of the centralised management of risk factors deriving from the two main portfolios (gas and power). 

Amortisation, depreciation, provisions and impairment charges

Amortisation, depreciation, provisions and impairment charges amounted to 348.6 million euros, down by 27.1 million euros. In particular:

  • amortisation and depreciation of tangible and intangible assets amounted to 237.6 million euros, up by 18.1 million euros, mainly due to the investments made by Group companies that carried out regulated activities (+ 8 million euros) and the development of photovoltaic business (up 1.6 million euros),
  • impairment in the year came to 6.7 million euros, up by 6.1 million euros: these refer to the write-down of the sections of the Terni waste-to-energy plant that shall be disposed of as part of the revamping started in August (2.8 million euros) and the write-down of the portion of goodwill that emerged during the acquisition of the Crea Group (3.4 million euros),
  • provisions for liabilities and charges amounted to 47.2 million euros, down by 70.3 million euros, The considerable variation is a result of the allocation in the previous year relating to the following phenomena:
    • tax risks for 36 million euros, related to the irregularity communicated by the Tax Authorities to the Parent Company, concerning the 2004 corporate restructuring operation through which ACEA transferred 50% of ACEA Distribuzione to Arse;
    • regulatory risks in the water and electricity sectors of 28.9 million euros relating mainly to the well-known ACEA Ato5 tariff legitimacy problem.
    This is augmented by the decrease recorded in voluntary mobility and redundancy provisions (13.7 million euros).
    However, it should be noted the estimated loss of an AceaElectrabel Elettricità sale contract is recorded under provisions, as a result of withdrawal by the client (6.7 million euros).
  • write-downs of receivables amounted to 63.9 million euros, up by 25.1 million euros, essentially due to allocations made by water companies (+ 20.8 million euros); electricity sales companies (+ 2.6 million euros) and ACEA Distribuzione (+ 1.5 million euros) contributed to the remainder of the change.

 

Financial management

Financial management closed the year with net charges of 98.9 million euros, marking an increase of 13.6 million euros. The table below shows the breakdown and changes compared to 2009.

In €/thousand 31/12/2010 31/12/2009 Increase/ (Decrease)
Finance costs/(income) relating to debt (A) 76,957 68,567 8,390
Costs (Income) on interest rate swaps 7,732 3,150 4,581
Interest on debenture loans 36,771 15,196 21,575
Interest on medium/long-term borrowings 38,766 50,897 (12,131)
Interest on short-term borrowings 8,553 13,045 (4,492)
Financial charges on forward transactions 2,651 1,641 1,010
Interest on amounts due from customers (7,041) (8,806) 1,765
Interest on loans and receivables (7,387) (5,325) (2,062)
Bank interest income (3,088) (1,231) (1,857)
Other Finance costs/(income) (B) 21,939 16,698 5,240
Interest payable to end users 1,650 2,162 (511)
Default and deferred interest 966 7,075 (6,109)
Interest costs less actuarial gains 4,576 6,020 (1,444)
Factoring fees 10,263 2,238 8,025
Interest on delayed payment for tax disputes 3,788 0 3,788
Interest on other receivables (1,401) (1,280) (121)
Other charges/(income) 2,095 483 1,612
Net financial charges (A) + (B) 98,895 85,265 13,630
Importi in migliaia di Euro

The increase in interest on debenture loans relates to the placement, in the first quarter of 2010, of a 500 million euro bond and a private placement of 20 million yen; in relation to the latter instrument, a cross currency hedge was subscribed, which hedges the euro/yen exchange rate and transforms the yen rate applied to a fixed rate in euro.

The two new instruments are both bullet types and expire after ten and fifteen years respectively.

The average rate of interest paid by the Group on its medium/long-term borrowings and on short-term loans at 31 December 2010 is 3.52%. The average maturity of the debt is 10 years.

Profit/(loss) on investments amounted to 2.6 million euros and relates mainly to profit from the consolidation of some companies according to the equity method.

Taxation for the year stands at 85.4 million euros and is down by 62.4 million euros.

The reduction is partly due to the inclusion, in taxes of the previous year, of the economic impact of the tax moratorium period (78.9 million euros) and permanent non-deductibility of some allocations to the provision for liabilities made in 2009 among all the tax provisions totalling 36 million euros.

Conversely, 2010 benefitted from a number of positive events such as the deduction from taxable income of the amount of the eligible investments pursuant to the so-called Tremonti-ter law. In this regard, it should be noted that taxes for the year do not include the benefits of the application of the aforementioned law to waste-to-energy investments: this was a result of the interpretation provided in September 2010 by the Ministry of Economic Development to GSE and the Tax Authorities regarding the prohibition of combining the Tremonti ter law with other forms of incentive such as green certificates and CIP6. Said prohibition appears to be nullified by the third paragraph of article 26 of the Legislative Decree governing renewable source energy incentives, currently being published, approved by the Council of Ministers on 3 March 2011 and signed by the President of the Republic on 7 March 2011.

Therefore, net Group profit came to 128.3 million euros, an increase of 180.9 million euros.

The fair value adjustment of discontinued operations refers to the AceaElectrabel Produzione Group and is determined, in compliance with IFRS 5, by the difference between the equity value recognised by the parties as regards the corporate and plant perimeter subject to transfer to GdF-Suez and net fixed assets consolidated by the ACEA Group in relation to said perimeter.

The equity value at which the other companies will be transferred (Eblacea and Tirreno Power, AceaElectrabel Trading) will lead, at the date the transaction is carried out, to a capital gain that will be booked in 2011.