ATO 1

In ATO1 Toscana Nord, the ACEA Group is present through its wholly owned subsidiary CREA S.p.A., in liquidation, which holds shares in GEAL (manager of integrated water services for the city of Lucca alone), AZGA Nord and Lunigiana Acque (both in liquidation).

GEAL S.p.A. manages integrated water services in the municipal territory of Lucca.

In 2011, on conclusion of a long dispute with the Area Authority and also following the repeal of art. 23-bis of Italian Law Decree 112/2008, GEAL fully consolidated its operations in the Municipality of Lucca, under the current regulatory framework guaranteeing operational continuity until the natural expiry on 31 December 2025 of the concession agreement.

Therefore in a context of new and more tranquil relations with the Area Authority following the end of the dispute, on 29 December 2011 GEAL signed a Memorandum of Understanding with the Authority and the Municipality of Lucca awarding the water service which transferred planning power to the Area Authority (in any event to be exercised jointly with the Municipality of Lucca) and control of operations in the municipality of Lucca, with the introduction for GEAL of the tariff method based on the Decree of the Ministry of Public Works of 01.08.1996 (called the Standardised Tariff Method - MTN), replacing that no longer applicable by law (art. 10, paragraph 28 of Law Decree 70/2011, converted to Law 106/2011) based on resolutions of the Interdepartmental Committee for Economic Planning (CIPE), so that the company is guaranteed the conditions for growth and development.

On 30 April 2012, in implementation of the content of the Memorandum of 29 December 2011, the Tuscany Water Authority Conference no. 1 “Toscana Nord” (formerly AATO 1) issued Decree of the Commissioner no. 18, approving the municipality of Lucca’s area plan containing the integrated water service tariff determined according to the criteria pursuant to the aforementioned Decree of the Ministry of Public Works of 01.08.1996, and Decree of the Commissioner no. 16 of 30 April 2012, approving the 2012 - 2014 Investments Operating Plan, for a total amount of 25.6 million euros.

Although formally approved on 30 April 2012, the new tariff was applied to users beginning on 1 August 2012 after obtaining the favourable opinion - through the institution of silence/assent - of the Ministry of the Environment regarding the Area Plan prepared by the Tuscany Water Authority.

On 31 October 2012, the company sent the Tuscan Water Authority and AEEG statements with data and information concerning integrated water services.

This information forms the basis for calculating the water tariff for the years 2012 and 2013 on the basis of the Temporary Tariff Method (MTT) approved by AEEG with its resolution 585/2012/R/IDR of 28.12.2012.

As it currently stands, the applicable Area Authority is checking the data acquired from the company and making the relative calculations in compliance with the MTT to prepare a proposal for the new tariff for the years 2012 and 2013 by 31.03.2013, which must be definitively approved by AEEG.

The draft of the new concession agreement was prepared with the municipality of Lucca to ensure its consistency with the provisions of the Memorandum of 29.12.2011, and it must be approved by the Authority’s decision-making bodies presumably within the first four months of 2013.

Furthermore, on 27.02.2012, all appeals concerning the issue of the so-called “tax moratorium” were combined and discussed at the Florence Regional Tax Commission, which accepted the claims of the Tax Authorities, although limited to the principal component and not interest, therefore deeming the Office’s calculation of those amounts erroneous, as claimed by GEAL.

The Tax Authorities filed an appeal before the Supreme Court.

Without prejudice to the dispute under way, the company has settled all of its obligations with the Tax Authorities with regard to this issue.

Please recall that although AZGA Nord S.p.A. was placed in liquidation in December 2010, the liquidators were authorised to continue operations while waiting for the competent Authority to assign a new party to manage integrated water services in the municipality of Pontremoli. Following the entry into force of Regional Law no. 69/2011, the Authority of ATO no. 1 “Toscana Nord” intends to proceed with directly assigning the service to GAIA S.p.A., in-house operator of integrated water services for a large part of the Area since 1 January 2005. This transaction has not yet been completed due to the opposition of the municipality of Pontremoli.

Lunigiana S.p.A. was placed into liquidation in July 2011. Despite being in liquidation, management continued in order to ensure continuity in the provision of an essential public service, while awaiting the assignment of the integrated water service to a new operator.

This assignment was transferred to GAIA S.p.A. following resolution no. 17 of 6 December 2011 of the General Meeting of the Area Authority and will take effect on 1 April 2012. Therefore, Lunigiana Acque’s management will cease definitively on 31 March 2012. Relations between GAIA and Lunigiana Acque have been governed by a business unit lease agreement signed on 30 March 2012, which envisaged its definitive transfer by 30 September 2012, a transfer which has not yet taken place due to the Tuscan Water Authority’s failure to complete the enquiry process regarding the non-amortised assets of Lunigiana Acque to be transferred for payment to the new operator and to be recognised in the tariff to the latter. On this point, GAIA submitted requests to extend the term for signing the business unit transfer agreement pending the completion of the Authority’s preliminary enquiry process, the first on 1 October 2012 and most recently, since the enquiry had still not been completed, on 21 December 2012. In particular, the last request asked to postpone signing the agreement to the end of February 2013, without prejudice to additional extensions.