Significant events in 2012

Purchase of the Site

On 23 January 2012, the purchase of the Piazzale Ostiense site was completed, taking advantage of the opportunity presented by the disposal carried out by Beni Stabili, by exercising the right of first offer set out in the lease. The purchase price amounted to 110 million euros.

 

Approval of the ACEA Group’s 2012 - 2016 Business Plan

On 22 February 2012, ACEA S.p.A.’s Board of Directors approved the Group’s Business Plan for the 2012-2016 period.

The 2012-2016 Strategic-Business Plan realised through the definition of solid and realistic objectives which generate an increase in value for shareholders. The business plan describes the strategic guidelines and pre-established objectives for the next five-year period: increased workforce in all operating segments, focusing particularly on regulated activities that currently generate around 80% of consolidated EBITDA; a strong commitment to operating and organisational efficiency and improved service quality; consolidation of the Group as an efficient entity serving the area, with a strong focus on sustainability and the enhancement of expansion options.

ACEA’s corporate strategy, through adequate strategic planning focused on optimising resources and forecasting and managing future industry changes, has channelled the Group’s development through the following main strategic guidelines:

  • implementation of projects already launched in the Environment segment and development of new initiatives focusing particularly on the Lazio Region in order to overcome the imminent waste emergency;
  • focus on energy efficiency to reduce energy consumption and develop new technologies (smart grids, accumulators, etc.);
  • potential partnerships with the party awarded the gas distribution service in Rome;
  • strengthening of customer relations with customer satisfaction & loyalty tools to improve the service offered, also assessing partnerships with specialist operators with a view to selective outsourcing;
  • strengthening of the leadership position in the Italian water sector and operating excellence in electricity distribution activities;
  • retail sales coverage through agreements and/or assessment of opportunities becoming available upstream of the energy sector on the Italian market.

 

ACEA Ato5 2012 tariff determination

On 8 March 2012, following an affirmative response contained in corporate order dated 13 February 2012, the Commissioner for deeds signed a decree on the “Determination of the integrated water service tariff applicable for 2012 in ATO 5 Southern Lazio – Frosinone” which the company was informed of on 9 March 2012.

The Commissioner for deeds has reconstructed the trend in the tariff curve from 2003 to 2012 to current values, applying the cumulative inflation factor for each year of operations to the real average tariff values envisaged in the original Area Plan. Consequently, the real average tariff calculated for 2012 was identified by the Commissioner, in accordance with the original Area Plan, as 1.359 euros per cubic metre with the aim of rapidly addressing a situation of economic and financial imbalance in the service, due to failure to update the tariff in line with the inflation rate and with the provisions of the Area Plan and the Concession Agreement.


Agreement with Italgas

On 22 March 2012, Acea and Italgas signed an agreement aimed, inter alia, at analysing the possibility of jointly conducting some activities relative to natural gas distribution in the municipal territory of Rome.

The agreement also sets forth that Acea is entitled to ask Italgas to purchase a stake of between 5% and 25% of a newly established company to which the Italgas business unit for gas distribution in the municipality of Rome would be contributed, in line with applicable competition regulations and subject to obtaining the required authorisations.

The relative price shall be determined taking into account, inter alia, how much Italgas paid to the municipality of Rome for the awarding of the tender for the gas distribution service in the municipal territory of Rome.


ARIA - CIP6/92 incentives

On 16 April ARIA and the national grid operator signed the agreement regulating the withdrawal of energy on the second and third lines of the San Vittore plant in Lazio.

The agreement entered into force on 20 April 2011 and expires on 19 April 2019.

 

Approval of ATO2 tariff

On 17 April 2012 the Mayors’ Conference approved the new average tariff for 2012-2032 with particular reference to:

  1. the non-recognition of the 7% return on invested capital for investments included in the tariff after the outcome of the referenda with recognition only of the portion of amortisation: in this respect the amount envisaged in the tariff review resolution was set at 440 million euros,
  2. MALL parameter: it was decided that the total penalties calculated by applying the parameter to operating costs should be allocated to investments in the elimination of non-compliant sewage disposal and to adapt the treatment plants to current regulations: these investments were calculated as a total of 21 million euros and will be the sole liability of the Operator, with no recognition in the integrated water service tariff,
  3. Tariff adjustments: the adjustments recognised at 31 December 2011 were covered by the resolution.

For further details, please refer to the section on the performance of this Area.

 

Antitrust Authority investigation of the acquisition of Publiacqua

On 24 September 2012, the Council of State, to which an appeal had been submitted by the Antitrust Authority (AGCM) against the Regional Administrative Court decision which had cancelled the AGCM measure requiring ACEA (and Suez Environnement) to pay a penalty of 8.3 million euros (and 3 million euros), handed down its ruling.

The Council of State cancelled the ruling of the Regional Administrative Court, to which ACEA had appealed, and rejected the cross-appeal filed by ACEA.

ACEA paid the 8.3 million euro fine in November 2012.

 

2012 Tariff measures - GORI

On 27 October 2012, the Area Authority’s General Meeting approved the proposals made by that Authority’s Board of Directors on 12 October. The decisions made concern:

  • the new tariff system for 2012 which envisages an annual revenue level of 127.3 million euros (Group portion 47.2 million euros),
  • the procedure for determining tariff adjustments recorded by GORI with reference to the years 2003-2011; that procedure resulted in (i) the recognition of receivables for tariff adjustments, until 2008, to the extent corresponding to what was already posted to the relative financial statements (a total of 75.4 million euros, with a Group portion of 27.9 million euros) and (ii) the recognition, for 2009, 2010 and 2011 of 73.5 million euros (Group portion: 27.2 million euros), taking into consideration the Regional Administrative Court’s cancellation of the 2011 tariff approved by the Area Authority’s General Meeting on 2 August 2011. Therefore, the Area Authority’s General Meeting verified tariff adjustments for the 2003-2011 period totalling 148.9 million euros (Group portion: 55.2 million euros), 13.1 million euros (Group portion: 4.9 million euros) higher than the amount reported up to and including 31 December 2011,
  • the approval of the draft agreement with the Campania Region, aimed at normalising relations relative to the wholesale water supply and waste water collection and treatment services provided through regionally managed plants. The aforementioned draft agreement is currently awaiting approval, and some of its formal and substantial aspects could be changed compared to what was approved by the aforementioned Area Authority General Meeting.

 

Rating

On 7 March 2012, Fitch indicated that it had reduced ACEA’s long-term rating from “A” to “A-”, with a negative outlook.

That change is due to, inter alia, the following factors: the current regulatory uncertainty in the water sector; the new “business profile” of the Energy Area, less balanced between energy production and sales; the uncertainty linked to the future dividends policy and Italy’s downgrade. As regards the Environment Area, in which ACEA expects significant developments, the agency highlighted the still unstable regulatory framework. The negative outlook reflects Fitch’s expectations with respect to a generally particularly difficult economic scenario.

 

On 16 March 2012, Standard & Poor’s indicated that it had reduced ACEA’s long-term rating from “A-” to “BBB+”.

According to the agency, the rating adjustment is basically due to adverse market conditions and the resulting higher future difficulties in collecting receivables - especially those due from the Public Administration - which could cause an increase in the Company’s working capital and net debt.

The negative outlook is confirmed, in consideration of: (i) a possible further revision of the rating linked to the possible downgrade of Roma Capitale and a possible negative evolution of water sector regulations; (ii) the expectation that the debt level will remain high due to potential unfavourable trends in working capital within a particularly difficult macroeconomic environment.

The agency in any event judges the Company’s business profile as “solid” and the financial structure as “adequate”.

 

On 16 July 2012, Moody’s indicated that it had reduced ACEA’s long-term rating from “Baa1” to “Baa2”. The rating adjustment follows the downgrade of Italy’s sovereign debt rating by the same agency.

 

On 30 October 2012, Moody’s confirmed ACEA’s long-term rating of “Baa2”, with a negative outlook. With that decision, the agency concludes the rating revision process which began on 16 July.

According to Moody’s, the rating confirmation reflects the Company’s commitment and efforts to strengthen the financial structure and improve working capital by: enacting measures aimed at overcoming difficulties and collecting receivables - especially those due from the Public Administration - within a particularly difficult macroeconomic environment; solving problems generated by implementing the new information system in the Energy area.

 

On 31 October 2012, Standard & Poor’s indicated that it had reduced ACEA’s long-term rating from “BBB+” to “BBB-”, with a negative outlook.

According to the agency, the rating revision mainly reflects the level of indebtedness and the increase in working capital, partially resulting from the current difficulties in collecting receivables, within a particularly complex economic and financial context.

 

Resolution no. 462/2012/S/EEL of 8 November 2012

With the resolution indicated above, AEEG launched penalty proceedings with regard to Acea Energia to investigate violations concerning billing and general quality standards in the sale of electricity. The investigation’s duration was set at 120 days from the date of communication of the measure.

 

Resolution no. 484/2012/R/IDR of 15 November 2012

With the aforementioned resolution, AEEG launched an enquiry to complete the verification of the ATO3 Medio-Valdarno Area Plan, in order to check that it was properly prepared.

 

Advance on 2012 dividend

As at 20 December 2012, ACEA SpA’s Board of Directors resolved the distribution of an advance on the ordinary 2012 dividend of 0.21 euro per share.

This decision regarding the advance on the 2012 dividend was taken on the basis of the accounting situation of the Acea Group as at 30 September 2012 in light of the business outlook for the year in progress.

On 20 December 2012, Independent Auditors Reconta Ernst & Young issued a judgment as set forth by article 2433-bis of the Italian Civil Code.

 

Resolution no. 585/2012/r/idr of 28 December 2012: regulation of water services: approval of the temporary tariff method (MTT) for determining tariffs in the years 2012 and 2013

The resolution defines the content of the temporary tariff method, identifying its criteria defined at the national level to determine tariffs for the years 2012 and 2013.

The proposed methodology, anticipating the general outline of the definitive methodology expected to apply beginning in 2014, regards all operations excluding those that currently adopt the CIPE tariff method and the services in the autonomous provinces of Trento and Bolzano and in the autonomous region of Valle d’Aosta.

Some of the main updates in the new temporary methodology are:

  • the maintenance of the current tariff breakdown by operator/tariff area;
  • the precise identification of the role of Area Authorities for the purpose of determining the tariff;
  • compliance with the referendum results and resulting elimination of the “return on capital” but the recognition of the “cost of financial resources”;
  • introduction of a recognition to cover delays in the recognition of investments (regulatory time lag), quantified as +1% for investments made beginning in 2012 and included in tariffs in the year n+2;
  • introduction for the two applicable years of a limit to changes in tariffs, to protect end users from the impact;
  • abandonment of the reference to planned inflation and the updating of operating and capital costs in relation to actual inflation;
  • introduction of a lump-sum amount to compensate net working capital.

 

Disposal of Apollo S.r.l.

On 28 December 2012, Acea Reti e Servizi Energetici S.p.A. (ARSE), an energy service company wholly owned by Acea S.p.A. which operates in the sector of renewable energy offering the market sustainable energy solutions with a focus on energy savings and efficiency, signed an agreement with RTR Capital S.r.l. (Terra Firma subsidiary) concerning the disposal of Apollo Srl, active in the PV sector, whose asset portfolio includes plants with a total of 32.544 MW of installed power, after a competitive procurement procedure which initially involved the interest of thirty sector operators.

The disposal price was 102.5 million euros, for an average price of over 3 million euros per MW.