Analysis of changes

The increase was caused in higher investments of the Corporate Area (+111.8 million euros), the Environment Area (+16.9 million euros) and the Energy Area (+4.6 million euros), partly offset by the decrease in all Industrial Areas (total decrease of 33.7 million euros). For Corporate, the increase is mainly due to the purchase of the registered office; in the Environment Area, the higher investments are related to the revamping underway on the Terni waste-to-energy plant and on the first line of the San Vittore del Lazio plant; in the Energy Area, the increase in investments mainly refers to ACEA Produzione, for the repowering of the Salisano and Orte hydroelectric power stations.

The Networks Area accounts for most of the lower investments, specifically ARSE due to the completion of the owned plants. The Water Area also had lower investments (-6 million euros) due to the combined effect of higher investments of the companies operating in Tuscany and Umbria (totalling 2.3 million euros) and lower investments of the companies operating in Lazio and Campania (totalling 9 million euros).

The following also contribute to the change:

(i) the recognition in Rights on infrastructure of 20.8 million euros relative to future obligations assumed by ACEA Ato2, consisting of works financed by grants from 2012 to 2017, against the non-application of penalties regarding application of the MALL parameter decided by the Mayors’ Conference at its 17 April 2012 session and due for the years until 2012.

Against the recognition of the 20.8 million euro concession right, the Group allocated a provision for charges of an equal amount, which was used in 2012 to cover investments made. The concession right is amortised for the residual duration of the concession and, therefore, in 2012 a portion of amortisation of roughly 1 million euros was recorded,

(ii) the recognition in the item Property, plant and equipment of 11 million euros for the updating of costs for post-closure operations at the SAO waste dump as a result of its expansion,

(iii) the reduction in intangible assets posted by GORI (-15.1 million euros) relative to long-term costs where the costs relative to the loan instalments to be repaid to the municipalities were allocated; that reduction was caused by decisions made by the Authority’s General Meeting on 27 October 2012,

(iv) the recognition of the amount of green certificates accrued by the Salisano and Orte hydroelectric power stations, totalling 12.1 million euros,

(v) the change in the basis of consolidation caused by the disposal of the PV business unit in December, for 99 million euros,

(vi) the recognition, among Non-current assets held for sale, of the amount of 6.7 million euros, which represents the fair value of the repurchase commitment, if certain contractual conditions are not satisfied, as a result of the possible exercise of the put option granted to the buyer of the PV business unit.

Investments amount to 21.1 million euros, up 1.7 million euros essentially as a result of the Eur Power share capital increase resolved by Ecogena for 0.8 million euros and the measurements of investments in associates using the equity method (0.9 million euros).

The balance of other non-current assets (equalling 416.6 million euros) is mainly made up of deferred tax assets (358.2 million euros), long-term receivables of 49.3 million euros deriving from the Public Lighting service contract, which represents the overall investments carried out until 31 December 2010 linked to the same service, from applying IFRIC 12 with the financial method, and accrued income and prepayments (6.9 million euros), mainly referring to white certificate production activities and concession fees paid in advance.

The balance of this item is essentially in line with the end of the previous year (-0.2 million euros compared with the end of 2011). 

Staff termination benefits and other defined-benefit plans amounting to 105.3 million euros recorded an increase of 0.5 million euros compared to the end of the previous year, as a result of the net effect of:

  • - 0.9 million euros relating to staff termination benefits,
  • + 0.5 million euros relating to monthly bonuses,
  • - 0.3 million euros relating to tariff subsidies,
  • + 1.3 million relating to the medium/long term Incentive Scheme.

The performance of the first two items was considerably influenced by both the period's provision of 15.7 million euros and by the outlay during the period resulting from the implementation of ACEA, Ato2 and ACEA Distribuzione voluntary redundancy procedures and the reinstatement of employees returning from the business unit that was rented to Marco Polo (1.9 million euros).

With respect to the choice of the discounting rate, with regard to the current highly volatile situation in the financial markets and the guidance of the Italian National Order of Actuaries, the rate applied has been identified in line with IAS 19 and with the same methodology as was used for previous valuations, referring to the government bonds market (Italian government bonds expiring in beyond ten years).

Therefore, a measurement rate of 4.25% was applied (compared to last year’s rate of 4.60%).

The provision for liabilities and charges contributed 272.4 million euros to net invested capital, increasing by 21.5 million euros compared to the previous year, mainly due to provisions for the period (54.5 million euros), net of uses (totalling 53.2 million euros) of sums set aside in previous years to cover mobility, disputes and litigation and tender risks.

The main changes refer to:

  • the provision allocated for GORI relative to allocations made in prior years against unassessed loan instalments to be paid back to municipalities (-11.8 million euros). That cancellation is the result of decisions made by the Area Authority’s General Meeting on 27 October 2012. Please see the section “Operating Review” for more information,
  • the provision allocated for charges deriving from the redundancy and retirement plan which decreased by 12 million euros as a result of amounts used, mainly by ACEA Ato2, ACEA Distribuzione and the Parent Company,
  • the provision for investee liabilities (+7.1 million euros), essentially resulting from allocations made during the year against the precarious situations faced by Marco Polo and Voghera Vendita Energia,
  • 4.9 million euros use of the provision allocated last year against risks relating to differences between the guaranteed tariff and that applied by GORI,
  • the provision to cover contributions-related problems recorded a net decrease of 15.3 million euros as a result of divisions into instalments completed during the year of the payables due to Equitalia for INPS and directly to INPS,
  •  the provision allocated for repairs costs amounting to 9.9 million euros relates to the charges necessary to keep the infrastructure used for the water service in good condition.

The change in that item was also affected by the recognition of the amount of obligations of ACEA Ato2 (20.8 million euros) and SAO (11 million euros) with regard to which more information is provided in the comments to Property, plant and equipment and intangible assets.

The following table provides a breakdown of the provision for liabilities and charges by nature.

Type of provision 31.12.2012 31.12.2011 Increase/ (Decrease)
Legal reserve 32.9 27.4 5.5
Tax reserve 4.5 2.4 2.1
Regulatory risks 83.6 79.2 4.4
Investee 10.0 2.8 7.1
Contribution risks 11.2 26.5 (15.3)
Redundancy and retirement 0.7 12.6 (12.0)
Post closure 26.4 15.4 11.0
Concession fees 0.0 11.8 (11.8)
Other liabilities and charges 21.5 18.3 3.2
TOTAL 190.6 196.4 (5.7)
Provisions for restoration charges 64.4 54.5 9.9
Provisions for commitments under management agreements 17.4 0.0 17.4
TOTAL PROVISION 272.4 250.9 21.5

For more information, refer to paragraph “Update on major disputes and litigation” in the Consolidated Financial Statements 2012.

Other non-current liabilities contribute 375.9 million euros to the reduction in net invested capital and, compared to 31 December 2011, decreased by 1.4 million euros. This item consists of:

  • provision for deferred taxes of 97.2 million euros (-1.6 million euros),
  • advances of 114.2 million euros (-15.8 million euros): this item includes the amount of guarantee deposits and consumption advance subject to adjustment by water service companies. Advances for works carried out on behalf of Arse were also allocated here. After completing the installation of photovoltaic plants on behalf of third parties, the amount of 19.8 million euros was reduced to zero,
  • grants related to assets of 66.8 million euros (same as in 2011),
  • water area connection fees totalling 60.3 million euros (+5.3 million euros),

long-term deferred income of 37.4 million euros (+10.7 million euros). The increase of 10.7 million euros is mainly attributable to ACEA Distribuzione’s recognition of the deferred income on the grant obtained to replace electromechanical meters with electronic meters pursuant to Resolution 292/06. Based on current regulations the company requested advance payment of this amount net of a 1 million euro discount allocated to finance costs.