26. Provisions for liabilities and charges - 272,401 thousand euros

At 31 December 2012, these provisions total 272,401 thousand euros (250,892 thousand euros at 31 December 2011) and are intended to cover potential liabilities that may derive from litigation pending, estimated on the basis of information provided by the company’s internal and external legal advisors. The provisions do not take account of the effects of litigation that is expected to be concluded in the company’s favour or of litigation where the potential liability arising from a negative outcome is merely considered possible.

In calculating the size of the provisions, account is taken both of the estimated costs that may derive from litigation or other disputes arising during the year and an update of estimates of the potential liabilities deriving from the litigation involving the Company in previous years.

The following table shows a breakdown of provisions and movements in the period:

    Increase/ (Decrease)  
€/thousand 31.12.2011 Uses Reclassifications/Other movements Provisions 31.12.2012
    (-) (-)/(+) (+)  
Provisions for liabilities 167,864 40,684 20,170 44,456 191,807
Sundry provisions 28,488 12,492 0 152 16,148
Provisions for restoration charges 54,539 0 0 9,907 64,446
Total provisions 250,892 53,176 20,170 54,516 272,401

The major movements are as follows:

  • uses, amounting to 53,176 thousand euros, primarily include:
  • 12,492 thousand euros used by a number of companies relating to the provision for redundancy and retirement costs, essentially due to ACEA Distribuzione (3,800 thousand euros), ACEA Ato2 (4,425 thousand euros), ACEA (3,208 thousand euros), Acea Energia (801 thousand euros) and ACEA Produzione (193 thousand euros);
  • 21,255 thousand euros regarding costs for social security contributions, particularly ACEA Distribuzione (7,575 thousand euros), ACEA Ato2 (9,471 thousand euros) and ACEA (3,082 thousand euros);
  • 6,863 thousand euros of provisions used by the Parent Company and certain subsidiaries in relation to litigation.
  • 4,997 thousand euros use of the provision allocated last year against risks relating to differences between the guaranteed tariff and that applied by GORI. This use derives from the different method for estimating revenue adopted by the company in the position at 31 December 2011 consolidated by ACEA and that in the 2011 financial statements pending approval. In short, the Campania Regional Administrative Court sentence annulled the Area Authority general meeting resolution of 2 August 2011 regarding calculation of the tariff for that year, forcing GORI to set aside revenue based on the amount actually billed to end users;
  • 3,470 thousand euros relative to the use of the provision for commitments under management agreements by ACEA Ato2, following the non-refundable investments made in 2012;
  • use of 740 thousand euros from the provision by ACEA Distribuzione to pay the service continuity penalty to Acea Energia;
  • 693 thousand euros by ACEA Distribuzione for works done for the Vatican State;
  • 671 thousand euros by Publiacqua, particularly regarding the use of the provision for tax disputes;
  • 190 thousand euros by Gori for the use of the provision for interest payable to the Campania Regional Government for the pumping service;
  • Reclassifications, amounting to 20,170 thousand euros, primarily include:
  • ACEA Ato2 (+20,820 thousand euros), relating to the provision allocated for an amount equal to the concession right relating to the future obligations assumed by ACEA Ato2 consisting of works financed by grants from 2012 to 2017, against the non-application of the penalties relative to the application of the MALL parameter decided upon by the Mayors’ Conference at its session of 17 April 2012 and due for the years until 2012. That provision was used in 2012 to cover investments made,
  • SAO (+10,999 thousand euros) for the updating of costs for post-closure operations at the waste dump as a result of its expansion,
  • GORI (-11,813 thousand euros) due to the reclassification of allocations made in prior years against unassessed loan instalments to be paid back to municipalities. 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,
  • Allocations, amounting to 54,516 thousand euros, primarily include:
  • 6,302 thousand euros in provisions associated with contributions-related issues,
  • 13,274 thousand euros in provisions allocated for legal disputes, mainly by ACEA (5,666 thousand euros), ACEA Ato2 (2,177 thousand euros), ARIA (1,572 thousand euros), Acea Energia (296 thousand euros) and Publiacqua (1,068 thousand euros), for potential liabilities the companies may be expected to pay if the results of pending disputes are unfavourable,
  • 1,473 thousand euros refer to charges for supply and contract risk, particularly Umbra Acque (480 thousand euros), Publiacqua (344 thousand euros) and ACEA Ato2 (588 thousand euros);
  • 1,164 thousand euros allocated for the dispute between GORI and the Campania Regional Government;
  • 7,927 thousand euros regarding the estimate of 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;

  • 6,986 thousand euros concerning investment management risks, particularly with reference to Acea Energia to neutralise all risks generated by the liquidation of Voghera Energia Vendite in liquidation and Marco Polo (1,936 thousand euros),
  • 493 thousand euros for allocations made against the risk that Publiacqua tariff adjustments from prior years will not be recognised (451 thousand euros);
  • 800 thousand euros for ACEA Distribuzione’s payment of the service continuity penalty to Acea Energia;
  • 850 thousand euros regarding the estimated insurance excess on litigation pending; 

Finally, this item includes the amount of 9,907 thousand euros concerning the costs necessary to keep the infrastructure used for water service management in a good state of repair.

At 31 December 2012, the provision for liabilities and charges essentially included the types in the table.

Type of provision 2012 2011 Increase/ (Decrease)
Legal 32,870 27,387 5,483
Tax 4,489 2,351 2,138
Regulatory risks* 83,577 79,152 4,425
Investees 9,960 2,839 7,121
Contribution risks 11,182 26,526 (15,344)
Redundancy and retirement 656 12,642 (11,986)
Post closure 26,399 15,400 10,999
Concession fees 0 11,765 (11,765)
Other liabilities and charges 21,471 18,291 3,180
TOTAL  190,605 196,353 (5,748)
Provisions for commitments under management agreements 17,350 0 17,350
Provisions for restoration charges - IFRIC 12 64,446 54,539 9,907
TOTAL PROVISION 272,401 250,892 21,509

ACEA maintains that the settlement of ongoing disputes and other potential disputes should not create any additional charges for Group companies, with respect to the amounts set aside, which represent the best estimate possible on the basis of elements available as of today.

For further information refer to the section “Update on major disputes and litigation”.