7. Finance costs/(income) - (120,554) thousand euros

  31.12.2012 31.12.2011 Increase/ (Decrease)
Finance Costs/ (Income) related to debt (A) 88,543 74,333 14,210
Expenses/(Income) on interest rate swaps 6,825 6,642 182
Interest on bond loans 42,330 42,181 149
Interest on medium/long-term borrowings 43,116 38,550 4,566
Interest on short-term borrowings 18,037 8,063 9,975
Finance costs/income on forward transactions 0 0 0
Interest on amounts due from customers (19,344) (14,844) (4,500)
Interest on loans and receivables (1,867) (5,109) 3,242
Bank interest income (553) (1,150) 597
Other finance costs/(income) (B) 32,011 44,089 (12,078)
Interest payable to end users 864 1,055 (190)
Default and deferred interest and divisions into instalments 5,518 3,434 2,084
Interest cost net of actuarial gains and losses 4,379 5,030 (651)
Factoring fees 25,254 23,631 1,623
Interest on other receivables (2,833) (620) (2,212)
Other costs/(income) 755 380 375
Costs/(income) from discounting receivables (1,926) 11,180 (13,107)
Net finance costs (A) + (B) 120,554 118,422 2,133

Net finance costs totalled 120,554 thousand euros, recording an increase of 2,133 thousand euros compared to 31 December 2011.

As a whole, said increase is due to:

  • an increase in interest accrued on medium-long term borrowings (+9,975 thousand 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 short-term borrowings, as a result of an increase in average annual bank borrowings, partially offset by a slight decrease in very short-term rates.
  • higher costs deriving from factoring (+1,623 thousand euros, of which 1,008 thousand euros due to the change in the basis of consolidation) which includes the effect of the change in the basis of consolidation following the acquisition of 100% of Acea Energia and the related greater volumes factored. It should be noted that in 2012, in order to reduce the credit risk in respect of Public Administration, a series of non-recourse factoring transactions were carried out, with notification by means of notarial deed, relating to a portion of receivables accrued and past due from the Public Administration. The associated cost incurred is represented almost entirely by the interest component (DSO), i.e. invoice payment time estimated by the Bank. This is therefore a cost that the Group would have incurred in any event, and which forms part of the sales margin applied to the customer,
  • the recognition in 2011 of costs deriving from the discounting of receivables for Public Lighting (9,346 thousand euros) after signing of the additional agreement by ACEA and Roma Capitale, which aligned the expiry date of the service agreement to that of the concession agreement (2027). As previously mentioned, this additional agreement involved application of the IFRIC 12 pure financial method, and the costs (1,833 thousand euros) of discounting receivables for ACEA Ato5 tariff adjustments relative to the spread between actual revenue billed and “guaranteed” revenue in relation to the original Area Plan for the 2006-2011 period.
  • the decrease in interest accrued on loans and receivables (-2,122 thousand euros), largely due to the change in the basis of consolidation following winding-up of the joint venture. 

The average “all in” global cost of the ACEA Group’s debt (including components referring to discontinued operations) was 3.46% in 2012 compared to 3.71% in 2011.

With regard to finance costs related to borrowings, the following is noted:

  • net swap costs (6,825 thousand euros) were generated by flows exchanged during the period for cash flow hedges against interest rate and exchange rate risk,
  • interest on bond loans stood at 42,330 thousand euros, and was in line with that of last year; in particular:
    • the fixed rate bond loan of 300,000 thousand euros placed by ACEA in 2004 (10-year bullet repayment): 14,607 thousand euros,
    • the fixed rate bond loan of 500,000 thousand euros placed by ACEA in March 2010 (10-year bullet repayment): 22,549 thousand euros,
    • the private placement of 20 billion yen finalised by ACEA in March 2010 (15-year bullet repayment): 4,667 thousand euros without considering hedges allocated to net swap costs,
  • interest on medium/long-term borrowings amounted to 43,116 thousand euros, up 4,566 thousand euros gross of related hedges,
  • interest accrued on short-term bank borrowings and other borrowings totalled 18,037 thousand euros, of which 15,092 thousand euros attributable to ACEA, and increased by 9,975 thousand euros.

In relation to expenses deriving from transfers of receivables, the breakdown by company is shown below:

  • ACEA Distribuzione 3,468 thousand euros (1,827 thousand euros at 31 December 2011);
  • ACEA Ato2 4,091 thousand euros (5,469 thousand euros at 31 December 2011);
  • ACEA Energia 17,694 thousand euros (5,469 thousand euros at 31 December 2011, 6,477 thousand euros on a like-for-like basis).

Lastly, note the increase in (i) default and deferred interest and divisions into instalments (+2,084 thousand euros) mainly due to recognition of the amount applied by Equitalia to the payments by instalments finalised towards the end of 2011 and (ii) the discount applied by the AEEG (1,039 thousand euros) for early settlement, as requested by ACEA Distribuzione, of the contribution to cover costs to replace the electromechanical meters.

The following table provides a breakdown by industrial area:

€ thousand 31.12.2012 31.12.2011 Absolute increase/ (Decrease) Increase/ (decrease) %
Networks 26,063 24,855 1,208 4.9%
Energy 6,598 9,529 (2,930) -30.8%
Water 8,040 12,317 (4,277) -34.7%
Environment 790 530 259 48.9%
Parent Company 79,063 71,191 7,873 11.1%
Finance costs/(income) 120,554 118,422 2,133 1.8%