ACEA Group economic results

  31.12.2012 31.12.2011 Increase/ (Decrease) Increase/ (Decrease) %
         
Revenue from sales and services 3,526.3 3,464.7 61.5 1.8%
Other revenues and proceeds 86.5 73.3 13.2 18.0%
Consolidated net revenue 3,612.7 3,538.0 74.7 2.1%
         
Staff costs 282.0 280.6 1.5 0.5%
Costs of materials and overheads 2,635.3 2,599.9 35.3 1.4%
Consolidated operating costs 2,917.3 2,880.5 36.8 1.3%
         
Net income/(costs) from commodity risk management (0.2) (1.7) 1.4 -86.0%
         
Gross Operating Profit 695.2 655.8 39.4 6.0%
         
Amortisation, depreciation, provisions and impairment charges 401.4 433.3 (31.9) -7.4%
         
Operating profit/(loss) 293.8 222.6 71.2 32.0%
         
Finance (costs)/income (120.6) (120.6) 0.0 0.0%
         
Profit/(loss) on investments 0.9 57.1 (56.3) -98.5%
         
Profit/(loss) before tax 174.1 159.1 15.0 9.4%
         
Taxation 88.8 65.6 23.2 35.4%
         
Net profit/(loss) 85.3 93.5 (8.2) -8.8%
         
Net profit/(loss) from discontinued operations 0.0 0.0 0.0 0.0%
         
Net profit/(loss) from continuing operations 85.3 93.5 (8.2) -8.8%
         
Profit/(loss) attributable to minority interests 7.9 7.6 0.4 4.7%
         
Net profit/(loss) attributable to the Group 77.4 86.0 (8.6) -10.0%

The income statement shown above is provided gross of IFRS 5 reclassifications, i.e. including the economic data of the PV business unit sold and the Companies of the joint venture, sold last year.

Consolidated net revenue

Total revenue for the period amounts to 3,612.7 million euros (3,538.0 million euros at 31 December 2011), representing an increase of 74.7 million euros (+2.1%) over the same period in the previous year.

Revenue from sales and services amounted to 3,526.3 million euros and can be broken down as follows:

  31.12.2012 31.12.2011 Absolute increase/ (Decrease) Increase/ (decrease) %
Electricity sales and services revenues 2,417.6 2,306.0 111.6 4.8%
Gas sales revenues 53.4 134.5 (81.1) -60.3%
Revenues from the sale of certificates and rights 37.4 19.7 17.7 90.0%
Revenues from integrated water services 792.8 717.5 75.4 10.5%
Overseas Water Services 37.4 35.9 1.5 4.2%
Revenues from biomass transfer and waste management 32.1 28.9 3.2 10.9%
Revenues from services to customers 128.6 185.9 (57.3) -30.8%
Connection contributions 26.9 36.3 (9.5) -26.1%
Revenue from sales and services 3,526.3 3,464.7 61.5 1.8%

A brief description is provided below of the more significant changes in this item compared to the end of 2011.

Revenue from electricity sales and services recorded a total increase of 111.6 million euros, of which 26.9 million euros due to the change in the basis of consolidation following winding-up of the joint venture with GDF Suez Energia Italia on 31 March 2011. In particular, the effect of companies sold generated a negative difference of 153.6 million euros, offset by the effect of full consolidation of Acea Produzione and Acea Energia which, with its subsidiaries and the effect of higher consolidation netting, generate a positive overall change of 180.5 million euros. On a like-for-like basis, the remaining 84.7 million euros are associated with opposing factors:

  • the overall growth of 53.8 million euros in revenues from the generation and sales activity. Please note that sales to the free market recorded a 2,880 GWh reduction in volumes (-22%) due to the consistent decrease in the Elga Sud and Voghera Energia Vendita portfolios, as well as the downsize in the portfolio of Acea Energia, which decided to decrease the volumes sold to the Public Administration and industrial customers. The average sale prices of ACEA Energia are higher than in 2011. With respect to the protected market, there was a 7% decrease in volumes accompanied by an increase in average revenues, also due to AEEG resolution 583/2012, which contains an upward revision of the level of the RCV component for the remuneration of primary utility providers,
  • higher income from the sale of energy to the national grid operator generated by ARIA-owned plants, in reference to the two new lines of the San Vittore plant (19 million euros);
  • higher revenue achieved by ARSE and Ecogena for the sale of electrical energy produced by photovoltaic and cogeneration plants (0.2 million euros).

Gas sales revenue recorded a decrease compared to 31 December 2011 of 81.1 million euros, mainly due to the change in the basis of consolidation (87.1 million euros) following the exit of AceaElectrabel Trading. On a like-for-like basis the Acea Energia Group recorded an increase of 6 million euros, reaching 53.4 million euros at 31 December 2012 compared to 47.4 million euros at 31 December 2011, largely attributable to the higher average sale prices which offset the decrease in volumes sold (-10%).

Revenue from the sale of certificates and rights recorded an increase of 17.7 million euros to reach 37.4 million euros at the end of the year. The positive change was achieved through the sale of energy efficiency bonds, obtained by implementing energy savings projects, for 23.6 million euros (+6.5 million euros). Contributing to the change was the recognition of Acea Produzione revenue from green certificates (+10.4 million euros) in relation to energy produced at the Salisano and Orte plants which began operating in 2012 after the repowering of those plants.

The total of such income recognised at 31 December of the previous year by companies sold amounted to 0.9 million euros.

Revenue from the Integrated Water Service amounted to 792.8 million euros, up 10.5% (75.4 million euros) on the figure of 717.5 million euros recorded at 31 December 2011.

The Companies operating in the Lazio and Campania regions report total revenues of 617 million euros (+78 million euros), whilst the Tuscany and Umbria Companies ended the year with revenues of 175.9 million euros (-2.6 million euros).

The change in that item is mainly as a result of the different methods for determining integrated water service revenues measured on the basis of AEEG resolution 585/2012 (Temporary Tariff Method valid for 2012 and 2013) as well as the recognition of higher tariff adjustments (40.4 million euros) - deriving from the spread between guaranteed and actual revenues for the years 2006 - 2011 - as resolved by the Mayors’ Conference on 17 April 2012.

Please note that the quantification of the restriction on guaranteed revenues (VRG) of the operators to which the MTT applies represents the best estimate, calculated on the basis of elements available to date, generated by the interpretation of the new rules also borne out by the calculation models provided by AEEG on its website.

Those estimates should be confirmed in the tariff proposals that the Area Authorities must complete by 31 March 2013 and AEEG must validate by 30 June 2013.

The water companies did not include the amount of the FNI (New Investments Fund) component, which is estimated at roughly 15 million euros for the Group, within the period’s revenues, since on the basis of the provisions of resolution 585/2012, that component must be expressly recognised by the Area Authority which establishes if and to what extent that form of advance should be included in the tariff.

Finally, it should be noted that for ACEA Ato5, that revenue item includes the amount of 10.8 million euros, which represents the estimate of the difference between the maximum growth set forth in article 7.1 of the aforementioned resolution - that of the Standardised Method plus planned inflation rates (6.5%) - and the amount of the VRG determined as indicated above. Article 7.1 provides that that spread should be subject to a dedicated AEEG enquiry, in order to “...ascertain, with the involvement of the Area Authorities, the data provided, the correct application of the temporary tariff method and the efficiency of the metering service...”. The same article also sets forth that the surplus compared to the maximum growth shall be recovered as an adjustment component in 2014.

Revenue from services to customers decreased compared to 31 December 2011 by a total of 57.3 million euros, to 128.6 million euros at the end of 2012 (from 185.9 million euros). The more important changes were recorded in revenue from the sale of PV panels (-46.1 million euros, currently at 13.2 million euros), revenue from intragroup services (5.7 million euros, down 7 million euros) and revenue from public lighting activities in the Municipality of Rome (totalling 64.6 million euros, -6.7 million euros) and in the Municipality of Naples (7.6 million euros, +1 million euros).

This item also includes revenue from services to third parties (29.5 million euros, up 0.8 million euros) and income from cemetery lighting systems (7.7 million euros, up 0.4 million euros).

Connection fees recorded a decrease of 9.5 million euros, down to 26.9 million euros at 31 December 2012 from the 36.3 million euros for the end of 2011, and were achieved on the free and protected energy markets (20.9 million euros, -8.8 million euros) and the water market (5.9 million euros, -0.7 million euros).

Other revenue and proceeds amounted to 86.5 million euros, up on 31 December 2011 by a total of 13.2 million euros, equal to 18% (from 73.3 million euros) and breaks down as shown below:

 € millions 31.12.2012 31.12.2011 Increase/ (Decrease) Increase/ (Decrease)
Property income 2.5 2.6 (0.0) -0.9%
Income from end users 0.9 1.0 (0.2) -15.3%
Gains on disposals 2.1 0.1 1.9 19.0%
Heating systems 0.0 0.5 (0.5) -99.7%
Coverage of costs for tariff subsidies for employees 0.7 1.7 (1.0) -58.8%
Contingent assets and other revenues 33.5 22.7 10.8 47.7%
Reimbursement for damages, penalties and fines 6.1 5.4 0.7 12.4%
Service continuity bonuses 5.5 5.3 0.2 0.0%
Electricity and water use accessory revenues 0.0 0.1 (0.1) -72.2%
Government grant (Decree of the President of the Council of Ministers of 23/04/04) 1.9 4.2 (2.3) -54.2%
Regional grants 6.5 6.7 (0.2) -3.0%
Energy Account 20.9 17.8 3.0 17.0%
Seconded staff 3.1 1.9 1.2 63.4%
Recharged cost of governance bodies 0.9 0.8 0.1 7.7%
IFRIC 12 margin 1.9 2.4 (0.5) -20.7%
Other revenues and proceeds 86.5 73.3 13.2 18.0%

The change was mainly due to:

  • the increase of 10.8 million euros in contingent assets and other revenue, mainly due to the recognition of the non-realisation of costs provisions in previous years and revenue due from previous years, together with energy items. That item includes the recognition obtained by ARSE from the national grid operator as an incentive associated with energy production from renewable sources (10.8 million euros) and the reimbursement of contributions deriving from connection of the Pomezia plant (1 million euros).
  • higher energy account revenue for 3 million euros,
  • the recognition of the gain generated by the disposal of the PV business unit, for 1.9 million euros.

 

Consolidated operating costs

Operating costs totalled 2,917.3 million euros at the end of the year, up 36.8 million euros (+1.3%) compared to those incurred in the same period last year, which amounted to 2,880.5 million euros.

The breakdown is as follows:

€ millions 31.12.2012 31.12.2011 Absolute increase/ (Decrease) Increase/ (decrease) %
Staff costs 282.0 280.6 1.5 0.5%
Costs of materials and overheads 2,635.3 2,599.9 35.3 1.4%
Energy, gas and fuel 2,084.2 2,034.1 50.1 2.5%
Materials 62.4 104.0 (41.6) -40.0%
Services 333.1 331.6 1.5 0.5%
Concession fees 74.0 61.0 13.1 21.4%
Lease expense 30.0 33.3 (3.4) -10.1%
Other operating costs 51.6 36.0 15.6 43.2%
Consolidated operating costs 2,917.3 2,880.5 36.8 1.3%

With regard to staff costs note the 0.5% increase, equal to 1.5 million euros, deriving from the effect caused by the increase recorded at Corporate level (+5.8 million euros), partly offset by the decrease in costs incurred by the business areas. In particular:

  • the Networks segment recorded a decrease of 3.5 million euros, attributable to ACEA Distribuzione;
  • the Energy segment, affected by the change in the basis of consolidation for 0.1 million euros, decreased its staff costs by a total of 1.8 million euros;
  • the Water segment contributed to reducing the period performance by 1.1 million euros, mainly attributable to the companies operating in Lazio and Campania;
  • the Environment segment recorded 8 million euros, down 0.6 million euros,
  • Corporate recorded overall growth of 8.5 million euros, and totalled 55.6 million euros.

In addition to the increase in average per capita costs following renewal of the employment contracts and remuneration policies, and the effect of the changes in average workforce, staff costs were considerably affected by the reinstatement at Corporate level from 1 January 2012 of staff returning from the business unit rented to Marco Polo following expiry of the rental agreement. The cost relating to this phenomenon was approximately 6.6 million euros.

The voluntary redundancy procedures implemented by the main Group companies make it possible to benefit from a decrease in that cost component.

The Group’s average number of staff was 7,179, basically in line with last year.

The cost of materials and overheads at the end of the reporting period reached 2,635.3 million euros (+1.4%, equal to 35.3 million euros) and includes:

a)   energy, gas and fuel costs of 2,084.2 million euros, up 50.1 million euros on the figure at 31 December 2011 (which was 2,034.1 million euros), with breakdown as follows:

€ millions 31/12/2012 31/12/2011 Increase/ (Decrease)
Electrical energy procurement 2,027.2 1,846.3 181.0
Gas purchase for production and resale 40.1 171.3 (131.1)
Green certificates and CO2 rights 0.0 4.2 (4.1)
White certificates 12.2 4.3 7.9
Other expenses 4.6 8.2 (3.5)
Total 2,084.2 2,034.1 50.1

This increase is caused by the change in the basis of consolidation (-45 million euros): the change on a like-for-like basis would be 95.1 million euros.

b)   materials which at 31 December 2012 amounted to 62.4 million euros, decreased by 41.6 million euros (40%), mainly as a result of the use of ARSE-owned PV panels (-41.3 million euros) and the funding needs associated with the “Piano Luce” (Lighting Plan) commissioned by Roma Capitale to the Parent Company ACEA (-3.1 million euros), partially offset by the increase in costs for the purchase of materials, recorded in all industrial areas, particularly with regard to ACEA Ato2 (+3.3 million euros).

c)   services and contract work totalled 333.1 million euros, and compared to the previous year they changed by 1.5 million euros. They were affected by the change in the basis of consolidation which stood at a total of -8.4 million euros. The main changes during the year relate to:

(i) the increase in costs incurred for sludge, waste, ash and refuse disposal and transport, and cleaning and porterage, for a total of 13 million euros. That change was mainly due to higher costs incurred by ACEA Ato2 during the period due to the seizure of some treatment plants (8.4 million euros),

(ii)lower intragroup costs during the year, largely due to the elimination of services provided by Marco Polo in reference to facility management services supplied until 31 December 2011 (12 million euros),

(iii) the decrease in costs for contract work (-4.9 million euros). That change is basically due to the 6.4 million euro decrease recorded by ACEA Distribuzione due to the reduction in costs for maintenance works in the public lighting division and for distribution services requested, partially offset by the increase in costs incurred by the companies operating in the Water area (1.2 million euros) and by the Parent Company (+0.6 million euros),

(iv) the 2.6 million euro increase in costs for electricity, water and gas consumption, due to the 6 million euro increase recorded by the water companies operating in Tuscany and Umbria, particularly Umbra Acque, partially offset by a lower contribution (1.2 million euros) to the consolidated result by that type of cost of the water companies operating in Lazio and the parent company (-1.2 million euros, also due to the change in the percentage of consolidation of Acea Energia,

(v) the increase in costs for insurance expenses (2.2 million euros),

(vi) internal use of electricity of +2.2 million euros, attributable to ACEA Ato2.

c)    concession fees amounted to 74 million euros, up by 13.1 million euros mainly attributable to ACEA Ato2 (+3.1 million euros) and GORI (+8 million euros) as a result of decisions made by the Authority’s General Meeting of 27 October 2012. Further details are provided in the section “Operating review”.

d)   Lease expense totalled 30 million euros, down 3.4 million euros on the figure at 31 December 2011 (33.3 million euros) mainly as a result of elimination of the lease payment on the registered office in Rome following its purchase on 23 January 2012.

e)   other operating costs equal 51.6 million euros and increase by 15.6 million euros over 31 December 2011. The change during the period mainly includes: (i) 8.3 million euros for the fine due to the Antitrust Authority, imposed on ACEA and Suez Environnement with measure no. 17623 of 22 November 2007, concerning irregularities committed during tenders for the awarding of water services in Tuscany, carried out in 2001 - 2004, (ii) 4.7 million euros due to the increase in taxes and duties caused by higher IMU tax payments due, (iii) the remaining portion is related to costs from previous years and adjustments of previously recognised revenues, particularly relative to ACEA Ato2 (+1.9 million euros) and the Energy area (+4.6 million euros).

 

Net income/(costs) from management of commodity risk

This item recorded net costs of 0.2 million euros referring to the fair value of financial contracts signed during the year by Acea Energia and Acea Energia Holding, which took over the Energy Management role in the ACEA Group’s Energy segment.

 

Amortisation, depreciation, provisions and impairment charges

These totalled 401.4 million euros compared to the 433.3 million euros recognised to the 2011 Consolidated Financial Statements (-31.9 million euros), broken down as follows:

  • Depreciation of property, plant and equipment and amortisation of intangible assets amounted to 263.4 million euros, down 1.3 million euros on the figure at 31 December last year. The change in the basis of consolidation amounted to -3.5 million euros, of which -8.7 million euros referring to companies sold and +5.2 million euros to the change in the percentage consolidation of Acea Energia Holding and its subsidiaries. Please note that amortisation and depreciation in the Energy Area was also affected by Law 134/2012, which introduces significant amendments to the timing and criteria for awarding tenders for hydroelectric concessions, affecting article no. 12 of Legislative Decree 79/99 (Bersani Decree). As a result of that change, beginning in 2012 hydroelectric plants shall be depreciated on the basis of the technical residual useful life, since that law requires payment of an indemnity in favour of the outgoing operator. That change leads to an approximately 3 million euro decrease in amortisation and depreciation for Acea Produzione. The breakdown of this item by industrial area is as follows:
 € millions 31.12.2012 31.12.2011 Absolute increase/ (Decrease) Increase/ (decrease) %
Networks 112.9 105.1 7.7 7.4%
Energy 19.6 28.6 (9.0) -31.6%
Water 91.9 89.9 1.9 2.2%
Environment 26.4 29.0 (2.5) -8.8%
Parent Company 12.6 12.0 0.6 4.6%
Depreciation of property, plant and equipment and amortisation of intangible assets 263.4 264.7 (1.3) -0.5%
  • impairment charges and losses on receivables total 83.5 million euros as at 31 December 2012, up 28.5 million euros as a result of the following opposing factors: (i) the 15.6 million euro increase for the Energy area companies, of which 2.9 million euros is due to the change in the basis of consolidation, (ii) the 8.6 million euro increase recorded by the water companies, particularly ACEA Ato2 (+8.8 million euros) and (iii) higher impairment charges carried out by Corporate, for 3.7 million euros. Please note that that item is influenced by the outcome of the settlement signed in December with the Extraordinary Commissioner of the Roma Capitale Administration established by the Central Government, for a total of 14 million euros,
  • provisions allocated by the Group at 31 December 2012 totalled 54.5 million euros compared to 113.5 million euros recognised at the end of last year. The breakdown of this item by type is as follows:
Nature of the provision 31.12.2012 31.12.2011 Increase/ (Decrease)
Legal reserve 13.3 9.3 3.9
Tax reserve 3.2 0.8 2.4
Regulatory risks 10.4 52.4 (42.0)
Investee 7.0 0.0 7.0
Contribution risks 6.1 8.0 (1.9)
Redundancy and retirement 0.2 27.5 (27.3)
Contracts and supplies 2.7 2.1 0.6
Insurance excesses 0.9 1.1 (0.2)
Other liabilities and charges 1.0 0.6 0.3
TOTAL 44.6 101.8 (57.2)
Restoration charges - IFRIC12 9.9 11.7 (1.8)
TOTAL PROVISIONS 54.5 113.5 (59.0)

The main changes versus the comparison period regard the recognition in 2011 of risks (i) deriving from non-recognition of the tariffs and related adjustments by ACEA Ato5 and to the assessment of risks associated with the difficult financial position of GORI (for a total of 49 million euros) and (ii) provisions against the early retirement and voluntary redundancy procedures launched the previous year.

Provisions for the year include the estimate (7.9 million euros) of charges from the return of the portion of return on invested capital for the year 2011.

On 25 January 2013, the Council of State issued the opinion requested by AEEG concerning the effects of the June 2011 abrogative referendum, specifying that the component remunerating investments recognised to operators should not include the “return on invested capital” already beginning from 21 July 2011, and that that requirement must be taken into consideration already when determining the Temporary Method. To cover that risk, the company allocated a dedicated Provision for charges calculated on the basis of the instructions provided by AEEG during the consultation phase in the second half of 2012.

On 31 January 2013, AEEG approved resolution no. 38/2013/R/idr with which it launches a procedure to determine:

  • the criteria based on which Area Authorities will have to identify, without prejudice to the full cost recovery principle, the amounts unduly paid by each user for return on invested capital in the period 21 July 2011 - 31 December 2011, to be returned to the user,
  • procedures and tools to ensure that the aforementioned amounts are actually returned to end users,
  • the methods that the Authority will use to verify and approve the Area Authority decisions,

The proceeding duration has been set at 120 days, beginning on the publication date.

 

Finance income/(costs)

Net finance costs of 120.6 million euros are basically in line with last year (-0.02%). The change includes growth in net costs relative to borrowings (+12.3 million euros, equal to 16.1%) and a reduction in costs relating to other financial receivables and payables (-12.3 million euros). With regard to the finance costs from borrowing, there was an increase in those accrued in the medium-long term (+9.3 million euros) essentially due to the funding needs generated by the purchase of the registered office, which resulted in the drawdown of the second tranche of a loan taken out by the Parent Company (100 million euros) and, in the short-term, as a result of an increase in average annual bank borrowings, partially offset by a slight decrease in very short-term rates. As regards other net finance costs, the decrease is mainly related to the discounting in 2011 of public lighting receivables (-13.1 million euros) following the signing of the supplemental contract between ACEA and Roma Capitale, which aligned the expiry of the service agreement with that of the concession (2027).

The detailed breakdown of this item is as follows:

€ millions  31.12.2012 31.12.2011 Increase/ (Decrease)
Finance Costs/ (Income) related to debt (A) 88.5 76.2 12.3
Costs (Income) on interest rate swaps 6.8 6.9 (0.0)
Interest on bond loans 42.3 42.2 0.1
Interest on medium/long-term borrowings 43.1 39.3 3.8
Interest on short-term borrowings 18.0 8.8 9.3
Finance costs/income on forward transactions 0.0 0.2 (0.2)
Interest on amounts due from customers (19.3) (14.8) (4.5)
Interest on loans and receivables (1.9) (5.1) 3.2
Bank interest income (0.6) (1.2) 0.6
Other finance (costs)/income (B) 32.0 44.3 (12.3)
Interest payable to end users 0.9 1.1 (0.2)
Default and deferred interest 5.5 3.4 2.1
Interest cost net of actuarial gains and losses 4.4 5.0 (0.7)
Factoring fees 25.3 23.6 1.6
Interest on other receivables (2.8) (0.6) (2.2)
Other costs/(income) 0.8 0.6 0.1
Costs/(income) from discounting receivables (1.9) 11.2 (13.1)
Net finance costs (A) +(B) 120.6 120.6 (0.0)

Income/(Costs) from investments

Net income from investments amounted to 0.9 million euros, compared to 57.1 million euros as at 31 December 2011 and refer to the measurement of consolidated companies at equity. At the end of the year the capital gains from the winding-up of the joint venture with GDF Suez Energia Italia and the positive result of the fair value measurement of the Group’s interest in Acea Energia (a total of 55.3 million euros) had been allocated to this item.

Taxation for the year amounted to 88.8 million euros, with a 51% impact, compared to a 41.2% impact at 31 December 2011. The overall increase in taxes recorded for the year, equal to 23.2 million euros, is the result of the combined effect of the increase in profit before tax and the substantial cancellation of the positive effect of deferred taxation.

The change compared to last year is mostly due to the recognition of gains in 2011 from the winding up of the joint venture between ACEA and GSEI, essentially exempt from taxation. That phenomenon positively affected the 2011 tax rate by roughly 7 percentage points.

The change is also due to the deferred taxation affected by actions to limit the Group’s receivables, with particular reference to cancellations of receivables carried out during the year as well as the definitive closure of relations with the Roma Capitale Administration established by the Central Government. This resulted in greater use of deferred tax assets, by around 10 million euros, compared to last year.