Net financial debt

The Company's net financial debt at 31 December 2012 (€5,621 million) is broken down as follows.

€ million 31.12.2012 31.12.2011 Change
A. Medium- and long-term debt:
Bond (1) 6,544 4,304 2,240
Floating-rate loans (1) 2,366 2,435 (69)
Derivative financial instruments (2) (614) (411) (203)
Loan to Terna Rete Italia S.r.l. (3) (500) (500) -
Total 7,796 5,828 1,968
B. Short-term debt (liquidity):
Floating-rate loans (current portions) (4) 69 60 9
Short-term investments - (150) 150
Net current a/c position of intercompany treasury (5) 250 181 69
Cash and cash equivalents (2,494) (1,114) (1,380)
Total (2,175) (1,023) (1,152)
TOTAL 5,621 4,805 816
In the statement of financial position: (1) this figure corresponds to the item “Long-term loans”; (2) this figure corresponds to the items “Non-current financial liabilities” and “Non-current financial assets” for the value of FVH derivatives (€754.9 million); (3) this figure is included under “”Non-current financial assets”; (4) this figure corresponds to the item “Current portion of long-term loans”; (5) this figure corresponds to the item “Short-term loans”;
 

Net financial debt records an increase of €816 million, mainly as a result of the combination of:

  • increase in bond loans (€2,240 million), due essentially to the bonds issued in February and October for a nominal amount of €1,250 and €750 million (totalling €1,991 million at 31 December 2012 net of initial expenses and issue discounts) and as a result of adjusting bond loans to fair value (€234 million, including the amortised cost) and of capitalising inflation in the period linked to the IL bond (€15 million);
  • repayment of EIB loan instalments falling due for €60 million;
  • increase in the positive net balance of derivative financial instruments (€203 million), mainly due to lowering of the reference interest rate curve compared to the previous financial year. In particular, note the change in fair value hedges of bonds of +€233 million and the change in cash flow hedges of floating-rate debt of -€30 million;
  • advance redemption of deposit certificates subscribed in 2011 and due on 14 June 2013 (€150 million);
  • increase in the net negative balance of intercompany current accounts held by the Company with its subsidiaries (€69 million);
  • increased cash and cash equivalents (€1,380 million) mainly due to the liquidity generated by issuing the bonds described above and by core business.

Statement of cash flows

€ million Cash flow at 31.12.2012 Reconciliation financial statements Cash flow at 31.12.2011 Reconciliation financial statements
Opening cash and cash equivalents & intercompany current accounts 1,114.3   168.7  
Profit for the year 463.2   453.6  
Amortisation and depreciation 370.6   348.8  
Net change in provisions (165.3)   (80.4)  
Employee benefits   (105.3)   (3.0)
Provision for future risks and charges   (20.5)   (22.8)
Deferred tax liabilities   (39.5)   (54.6)
Net losses (gains) on asset disposals (1) (5.9)   (3.9)  
Self-financing 662.6   718.1  
Change in net working capital: 47.6   336.5  
Inventories   12.4   (1.0)
Trade receivables   (178.3)   (188.4)
Current financial assets   (15.0)   (5.3)
Income tax assets   (14.4)   -
Other current assets   (36.7)   1.5
Trade payables   223.0   494.9
Income tax liabilities   (37.8)   19.1
Current financial liabilities   35.2   15.9
Other liabilities   59.2   (4.8)
Discontinued operations and assets held for sale   -   4.6
Cash flows from operating activities 710.2   1,054.6  
Total investments (1,1668) (1,172.4)
Property, plant and equipment (2) (1,113.0)   (1,122.7)
Intangible assets (3) (53.8)   (49.7)
Other changes in non-current assets 60.6   (38.2)  
Property, plant and equipment (2)   112.3   1.2
Non-current financial assets   (56.1)   (39.0)
Other non-current assets   4.4   (0.4)
Total cash flows generated by/(used in) investing activities (1,106.2)   (1,210.6)  
Change in loans 2,195.5   1,546.8  
Current financial assets   150.0   (150.0)
Non-current financial assets   (233.1)   (321.5)
Non-current financial liabilities   29.8   64.3
Long-term loans   2,170.7   1,591.2
Current portion of long-term loans   9.7   -
Short-term loans   68.4   108.2
Discontinued operations and assets held for sale   -   500.0
Liabilities from discontinued operations and assets held for sale   -   (245.4)
Other changes in equity (17.4)   (23.1)  
Equity - Share capital and other reserves (4)   (17.4)   (23.1)
Dividends (4) (402.0)   (422.1)  
Total cash flows generated by/(used in) financing activities 1,776.1   1,101.6  
Total cash flows for the year 1,380.1   945.6  
Closing cash and cash equivalents & intercompany current accounts 2,494.4   1,114.3  
(1) Included in the “Other revenue and income” and “Other operating costs” captions of the income statement; (2) See note 11 to the financial statements; (3) See note 13 to the financial statements; (4) See the Statement of Changes in Equity.

Change in net financial position

€ million 2012 2011
Opening net financial debt (4,805) (4,204)
Self-financing 662 718
Change in net working capital 48 337
Cash flows generated from operating activities 710 1,055
Total investments (1.167) (1.173)
Infra-group disposals (acquisitions) of fixed assets 16 (18)
Disposals (acquisitions) of equity investments (56) (39)
Other changes in non-current assets 101 19
Cash flows used in investing activities (1,106) (1,211)
Dividends distributed (402) (422)
Other changes in equity (18) (23)
Equity movements (420) (445)
Change in financial debt (816) (601)
Closing net financial debt (5,621) (4,805)
 

The liquidity generated from operating activities during the financial year, about €710 million, is related to self-financing (+€662 million) and the change in net working capital (+€48 million). In particular, with regard to self-financing, note the profit for the period of €463 million, the amortisation and depreciation for the period of €371 million and a net decrease in provisions of €166 million, which reflects the change in provisions for employee benefits, for net deferred tax liabilities and for the provisions for risks and charges mentioned above.

The management of net working capital has generated net financial resources of €48 million and is mostly attributable to the net increase in trade payables (including pass-through energy-related economic items).

Investing activities led to a net use of cash of about €1,106 million. These resources are for the most part relating to the investments during the financial year in property, plant and machinery (€1,113 million of which €1,090 million relating to investments in core-business) and in intangible assets (€54 million); other changes can be seen in this context, mainly relating to the impairment of fixed assets for €43 million for the capitalisations carried out in previous periods due to allocations to the risk provision "Projects for urban and environmental renewal", currently considered unlikely, to set-up grants relating to plants for €24 million and disposals and other changes for €23 million. The change also reflects the transfer of eight rapid installation electricity stations (SCRI) and one transformer (located in Brindisi) to the subsidiary Terna Plus (€16 million) which took place upon the transfer of the business unit effective 1 August 2012. Of particular note amongst the financial investments is the subscription by Terna of two separate capital increases of the subsidiary Terna Cnra Gora d.o.o. during 2012 (for a total €34 million), in order to provide the subsidiary with the resources necessary to develop the business, and for the transfer of the business unit to the subsidiary Terna Plus S.r.l., with effect from 1 August 2012, which increased Terna S.p.A.'s holding in the subsidiary (by €18 million).

Cash used in relation to equity movements is essentially the result of the distribution of the 2011 dividends (€261 million) and the interim dividend for 2012 (€141 million). The other changes in equity attributable to owners of the Parent relate to recognition at fair value of CFH derivative instruments hedging floating-rate debt, net of the related tax effect (-€18 million).

Therefore, cash flows used in investing activities and equity movements for the year resulted in total uses of liquidity of €1,526 million, which was funded in part by cash flows generated from operating activities (€710 million) and the remaining through new debt (€816 million).