Related Party Transactions

ACEA GROUP AND ROMA CAPITALE

Trading relations between ACEA Group companies and Roma Capitale include the supply of electricity and water and provision of services to the Municipality.

Among the principal services are the management, maintenance and upgrading of public lighting facilities and, with regard to environmental-water services, the maintenance of fountains and drinking fountains, the additional water service, as well as contract work.

Such relations are governed by appropriate service contracts and the supply of water and electricity is conducted on an arm’s length basis.

ACEA and ACEA Ato 2, respectively, provide public lighting and integrated water services under the terms of two thirty-year concessions. Further details are provided in the section “Service concession arrangements”.

With regard to public lighting, the Group provides public lighting services on an exclusive basis within the Rome area. As part of the thirty-year free concession granted by the Municipality of Rome in 1998, the economic terms of the concession services are currently governed by a ten-year service contract signed by the parties and effective as of May 2005.

The contract envisages a lump-sum payment for day-to-day management, routine and extraordinary maintenance, the supply of electricity and the implementation of a pre-established investment plan, whilst the installation of new plant and equipment is to be commissioned and paid for separately.

The annual fee is to be billed monthly with payment due at 60 days, whilst specific bills are to be issued for the installation of new plant and equipment.

In the light of the provisions contained in the current service contract – according to which the economic terms had to be renegotiated before expiry of the current agreement – in January 2011 the Board of Directors of ACEA approved a draft contract in addition to the current one. The additions are detailed below:

  • the term of the service contract should be aligned with the expiry of the concession (2027), given that the contract is merely additional to the agreement;
  • annual update of the compensation concerning consumption of electricity and maintenance;
  • annual increase in the lump-sum payment with regard to the new lighting points installed.

 

Moreover, the investments for the service can be (i) required and financed by the Municipality or (ii) financed by ACEA: in the first case, such interventions will be paid based on a price list agreed by the parties (and subject to review every two years) and will result in a percentage decrease of the ordinary fee. In the second case, the Municipality is not bound to pay any extra-fee; however, ACEA will be awarded all, or part of the saving expected in both energy and economic terms, according to pre-established methods.

Moreover, it has been established that qualitative/quantitative parameters shall be renegotiated in 2018.

Upon natural or anticipated expiry, ACEA will be awarded an allowance corresponding to the residual carrying amount, that will be paid by the Municipality or the incoming operator if this obligation is expressly set out in the call for tenders for the selection of the new operator.

The contract sets out a list of events that represent a reason of anticipated revocation of the concession and/or resolution of contract by the will of the parties. Among these events, reference is made to newly arising needs linked with public interests, including the one set out in Article 23 bis of Law Decree 112/2008, according to which ACEA has the right to receive an allowance according to the product, that is discounted based on the percentage of the annual contractual amount and the number of years until expiry of the concession. 

The supplementary agreement was signed by the parties on 15 March 2011.

Based on the fact that the supplementary agreement exceeds the reference thresholds set out by the Company with regard to Related party transactions, it was analysed by the Board of Directors and approved during the meeting held on 1 February 2011, having obtained the favourable opinion of the Committee for related party transactions.

As a local authority, Roma Capitale has the power to regulate municipal taxes and duties that the Group companies are required to pay and which fall under its territorial jurisdiction. However, the Group - with respect to other companies operating in the municipality – is in no case the sole payer of any of these taxes and duties.

Single agreements govern the terms and conditions applicable to reciprocal receivables and payables:

  1. for the public lighting service contract, payment shall take place within sixty days of receipt of the invoice and, in case of delayed payment, the legal interest rate will be applied for the first sixty days, after which the default interest rate will be applied, as set out from year to year by a Decree of the Minister of Public Works and the Minister of Economy and Finance;
  2. with reference to all other service contracts, the payment term for Roma Capitale as regards service contracts is sixty days of receipt of an invoice, and in case of late payment the parties have agreed to apply the current bank rate at the time;
  3. for the supply of electricity and water to Roma Capitale (solely with reference to users of the regulated market), it is stipulated that Roma Capitale shall make an advance payment of 90% within 40 days of receiving a summarised list of the invoices issued by Group companies. Moreover, Roma Capitale must settle the remaining balance by June of the following year. In the case of late payment for electricity or water, interest shall be paid under the terms of the provisions issued by the Electricity and Gas Authority at the time;
  4. the prices applied to sales of electricity to free market users are in line with the commercial policies of AceaElectrabel Elettricità. Payment terms are sixty days and, in case of delay, a default interest rate will be applied;
  5. the terms of payment for the ACEA Group relating to fees for the water services concession and the rental on its head office premises are set at thirty days from receipt of the invoice, and in the case of late payment interest shall be paid in accordance with the current bank rate at the time.

For further information regarding relations between the ACEA Group and Roma Capitale, reference should be made to the disclosures regarding receivables and payables in note 23.

The following table shows details of revenues and costs for 2010 of the ACEA Group (compared with those for the same period of the previous year) deriving from the most significant financial relations.

 
REVENUES COSTS
 
31.12.2010 31.12.2009 31.12.2010 31.12.2009
Supply of fresh water 27,423 24,667  
 
Sewerage service 0 0  
 
Supply of electricity 12,608 11,090  
 
Public lighting service contract 68,349 64,874  
 
Water maintenance service contract 899 899  
 
Monumental fountain service contract 899 899  
 
Upgrading of water services in the suburbs of Rome 0 350  
 
Concession fee  
 
19,162 19,047
Rental of company offices  
 
54 54
Taxes and duties  
 
2,330 2,452
Amounts are shown in thousand of euros

ACEA GROUP AND ROMA CAPITALE GROUP

The ACEA Group also maintains trading relations with other companies, special companies (aziende speciali) and bodies owned by Roma Capitale, concerning the supply of electricity and water.

The supply of services to entities owned by the Roma Capitale Group is conducted on an arm’s length basis. The prices applied to sales of electricity to free market users are in line with the commercial policies of AceaElectrabel Elettricità.

The following table shows amounts (in thousand of euros) for revenues, costs, receivables and payables deriving from relations between the ACEA Group and entities owned by the Roma Capitale Group.

 
Revenues
Costs Receivables Payables
 
31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009
Cotral Group 1,005 5,204 0 1,199 1,307 650 0 28
Trambus 17 3,608 0 2 26 1,188 2 8
Ama 3,241 3,005 1,347 1,016 4,536 7,792 773 399
Atac 16,738 780 0 0 15,361 331 0 0
Palaexpò 0 151 0 0 0 43 0 0
Musica per Roma 40 39 0 0 45 43 0 0
Risorse per Roma 88 83 0 0 133 111 0 0
 
21,128 12,869 1,347 2,217 21,409 10,160 775 435
Amounts are shown in thousand of euros

The following table summarises receivables and payables due from and to entities owned by the Roma Capitale Group.

 
31.12.2010 31.12.2009 Increase/
(Decrease)
TRADE RECEIVABLES 134,981 102,181 32,800
TRADE PAYABLES 96,979 140,066 (43,087)
NET BALANCE OF TRADE ITEMS 38,002 (37,885) 75,887
LOANS AND RECEIVABLES 98,512 42,564 55,948
BORROWINGS 2,213 2,213 0
NET BALANCE OF FINANCIAL ITEMS 96,299 40,351 55,948
NET BALANCE 134,301 2,466 131,835
Amounts are shown in thousand of euros

THE ACEA GROUP AND ITS MAIN ASSOCIATES

The company Marco Polo operates facility management services following the transfer of the relevant division under a nine-year lease from ACEA, which previously carried out this activity.

The supply of services to ACEA Group companies is conducted on an arm’s length basis.
Similarly, Marco Polo is provided with administrative services from ACEA under an annual service contract. This supply of services is conducted on an arm’s length basis.

The following table shows amounts (thousand of euros) for revenues, costs, receivables and payables deriving from relations between the ACEA Group and the company Marco Polo.


Revenues
Costs Receivables
Payables
 
31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009
Marco Polo 2,086 2,249 11,428 12,719 2,185 8,464 22,762 20,930
Amounts are shown in thousand of euros

ACEA GROUP AND MAIN GdF-Suez GROUP COMPANIES

Following incorporation of the joint venture between ACEA and Electrabel (now GdF-Suez), the companies established and/or acquired within the context of the partnership engage in regular trading relations, as well as in trading and financial relations with some companies of the Electrabel Group (now GdF-Suez).

As regards the mutual relations between the companies of the AceaElectrabel joint venture, these are reflected in the consolidated financial statements with regard to the part exceeding the derecognition of inter-company balances, having taken into consideration that these companies are held by the ACEA Group according to different shareholdings and are consolidated on a proportionate basis.

The relations between the companies of the AceaElectrabel joint venture and some companies of the GdF-Suez Group mainly consist in contracts for the sale or procurement of electricity, technical and administrative support provided by Electrabel (now GdF-Suez) to certain companies, above all AceaElectrabel Trading and AceaElectrabel Produzione, and financial contracts. For further information refer to the comments on the items in the Balance Sheet.

The following table shows amounts (thousand of euros) for revenues, costs, receivables and payables deriving from relations between the ACEA Group and principal companies in the Electrabel Group (now GdF-Suez).

 
Revenues
Costs Receivables
Payables
 
31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009
GAZ De France 69,914 15,009 138,503 98,451 24,752 4,848 15,403 18,930
GDF SUEZ Energia Italia 0 183 15,282 10,182 0 127 108,268 104,022
Rosen 95 63 297 338 67 18 8 40
Laborelec 0 0 197 26 0 0 104 17
Amounts are shown in thousand of euros

In December 2010, ACEA and GdF-Suez (through the subsidiary GdF-Suez Energia Italia) signed a Framework Agreement aimed at governing the acts and the activities that the parties intend to carry out in order to terminate the joint venture contract signed in 2002 and any related relations, positions, rights and obligations.
As part of the Framework Agreement, ACEA and GdF-Suez undertake to carry out a complex transaction, after which:

  • ACEA and GdF Suez will carry out a partial, unproportional demerger transaction of AceaElectrabel Produzione, with the incorporation of a new company ("Newco") whose share capital will be fully held by AceaElectrabel and that will include the assets and activities necessary to manage the hydroelectric plants and the plants in Tor di Valle and Montemartini (including the goods and assets related to district heating) owned by AceaElectrabel Produzione, in addition to financial liabilities and similar liabilities established by the Parties. At the end of the demerger, GdF-Suez will hold 100% of AceaElectrabel Produzione (post-demerger) that, at the end of the transaction, will hold three combined-cycle plants (also through the subsidiaries Voghera Energia and Roselectra) and wind farms (also with regard to the plants of the subsidiary Longano Eolica);
  • ACEA will purchase from GdF-Suez 40.59% of AceaElectrabel, of which it will hold 100% and, indirectly, 100% of the share capital of Newco, which will include the hydroelectric activities and the plants of Tor di Valle and Montemartini, that are currently held by AceaElectrabel Produzione; and 100% of AceaElectrabel Elettricità, as well as the investments held for any related shareholdings;
  • GdF-Suez will acquire from ACEA 30% of Eblacea, that in turn holds 50% of Tirreno Power;
  • GdF-Suez will hold 100% of AceaElectrabel Trading, following the acquisition of the 84.17% shareholding from AceaElectrabel;
  • GdF-Suez will grant to ACEA an irrevocable and unconditioned option that can be exercised by 30 September 2011 in order to sign a five-year electricity supply contract for an annual amount of 5TWh.

This transaction is expected to be carried out by the first quarter of 2011.
For further details, reference is made to note 22 of these Consolidated Financial Statements.

This transaction – that exceeds the reference thresholds set out by the Company with regard to Related party transactions, having taken into account its importance in terms of company structure – was approved by the Board of Directors during the meeting held on 25 November 2010, having obtained the favourable opinion of the Committee for related party transactions.