Reclassified statement of financial position of Terna S.p.A.

The reclassified statement of financial position of Terna S.p.A. at 31 December 2012 and 2011 is summarised below. The table is obtained by reclassifying the data stated in the Statement of financial position.

€ million  at 31.12.2012 at 31.12.2011 Change
Net non-current assets      
Intangible assets and goodwill 364 363 1
Property, plant and equipment 8,203 7,514 689
Financial assets (1) 681 629 52
Total 9,248 8,506 742
Net Working Capital      
Trade receivables (2) 722* 606 116
Inventories - 13 (13)
Other assets (3) 31 17 14
Trade payables (4) 650 723 (73)
Payables for pass-through energy items, net (5) 481* 247 234
Net tax liabilities (6) (14) 96 (110)
Other Liabilities (7) 399 285 114
Total (763) (715) (48)
Gross Invested Capital 8,485 7,791 694
Sundry provisions (8) 265 431 (166)
NET INVESTED CAPITAL 8,220 7,360 860
Equity 2,599 2,555 44
Net financial debt (9) 5,621 4,805 816
TOTAL 8,220 7,360 860
(*) Net of the items used to offset against an operator in the electricity market, paid in January 2013. Reported in the statement of financial position as: (1) “Other non-current assets” and “Non-current financial assets” for the value of equity investments (€678.9 million); (2) “Trade receivables” net receivables for energy-related pass-through revenue (€1,018.1 million) and the items used to offset against an operator in the electricity market, paid in January 2013 (€122.0 million); (3) “Other current assets” net of other tax assets (€46.2 million) and “Current financial assets”; (4) “Trade payables” net of the payable for energy-related pass-through costs (€1,621.1 million); (5) “Trade receivables” for the value of pass-through energy revenue (€1,018.1 million) and “Trade payables” for the value of payables for pass-through energy costs (€1,621.1 million), net of the items used to offset against an operator in the electricity market, paid in January 2013 (€122.0 million); (6) “Income tax assets”, “Other current assets” for the value of other tax receivables (€46.2 million), “Other current liabilities” for the value of other tax liabilities (€1.0 million) and “Income tax liabilities”; (7) “Other non-current liabilities”, “Current financial liabilities” and “Other current liabilities” net of other tax liabilities (€112.7 million); (8) “Employee benefits”, “Provisions for risks and charges” and “Deferred tax liabilities”; (9) “Long-term loans”, “Current portion of long-term loans”, “Non-current financial liabilities”, “Short-term loans”, “Cash and cash equivalents”, “Non‑current financial assets”, for the value of the loan to Terna Rete Italia S.r.l. and the FVH derivatives (€500.0 and €754.9 million, respectively).
      

The €742 million increase in net non-current assets since 31 December 2011, is mainly attributable to:

  • property, plant and equipment, which increased by €689 million.

The following is a breakdown of the changes in property, plant and equipment for the year:

€ million
Investments
- Transmission lines 579
- Transformation stations 443
- Other 68
Investments in property, plant and equipment - core business 1,090
Investments in property, plant and equipment - non-core business 23
Total investments in property, plant and equipment 1,113
Depreciation (318)
Disposals, impairment losses and other changes (90)
Intra-group transactions (16)
TOTAL 689
 

The change (+€689 million) is attributable to the net effect of new investments (€1,113 million, of which €1,090 million in core business), the depreciation for the year (-€318 million), the impairment of the fixed assets related to capitalisations carried out in previous years with accruals made to the risk provision "Projects for urban and environmental renewal" currently considered unlikely (for €43 million) and the other disposals and other changes (-€47 million) occurring during the year. In addition, it reflects the transfer of eight rapid installation electricity stations (SCRI) and one transformer (located in Brindisi) to the subsidiary Terna Plus for a total €16 million which took place upon the transfer of the business unit effective 1 August 2012, falling in the scope of the reorganisation process of the Terna Group's operational activity;

  • financial assets, which show an increase of €52 million, mainly due to Terna's subscribing on 10 February 2012 (€5 million) and on 22 November (€29 million) two separate capital increases of the subsidiary Terna Cnra Gora d.o.o., 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 deed dated 19 July 2012 (as modified on 31 October 2012) and with effect from 1 August 2012, which increased Terna S.p.A.'s holding in the subsidiary by €18 million.

Net working capital stands at a negative €763 million and generated €48 million in liquidity during the year essentially deriving from the following:

  • net payables for pass-through energy items: the increase (€234 million) is largely related to:
    • reduction of the net receivables connected to the Uplift (€117 million);
    • increase in net debt deriving from virtual interconnection activities (€66 million);
    • increase in net debt relating to provisioning of interruptible resources (€23 million);
  • other liabilities: the increase (+€114 million) chiefly refers to the recognition of the payable due to Terna Rete Italia S.p.A. originating from the transfer of net liabilities included in the business unit (+€87 million), the higher security deposits received from electricity market operators connected with dispatch contracts (+€36 million), the greater liabilities for unsettled net interest expense for the period (+€35 million) relating mainly to the bond loans issued during the financial year. The increase in other liabilities was offset by the lower payables to employees and social security institutions (-€23 million and -€16 million respectively) as a result of transferring human resources as part of the business unit leased to the subsidiary Terna Rete Italia S.p.A.;
  • trade receivables: the increase of €116 million mainly refers to the CTR fees (+€113 million) chiefly due to the recognition of the receivable due from CCSE for the revenue for the period deriving from the "mitigation" mechanism pursuant to Resolution 118/08, as well as receivables from third party customers for diversified business (+€21 million, including €17 million from Wind for fibre optic housing);
  • trade payables: the decrease (-€73 million) mainly derives from the considerable payables for the investment activity outstanding at 31 December 2011 which was paid in the first few days of the current financial year. Note that, following the application of the inter-company contracts signed in the context of the new Terna Group organisational structure described above, the significant decrease in payables to third party suppliers (€497 million) is offset by the higher payables to the subsidiary Terna Rete Italia S.p.A. (€454 million) relating mainly to upgrading and development activities (€379 million) and ordinary maintenance and to technical services on the TNG (€73 million);
  • net tax liabilities: the decrease of €110 million is due mainly to lower payables to the tax authorities for current taxes (-€44 million, essentially attributable to the lower payments made in the previous financial year, because they did not take into account, as provided for, the new regulations introduced in the second half of 2011, in line with what is referred to as the "Robin Hood Tax"), to the increase in net receivables from the tax authority for VAT (€51 million) and for IRES pursuant to Legislative Decree 16/2012 of 2 March 2012 (€8.0 million).

It is specified that the changes in trade receivables and net payables for pass-through energy items referred to above do not take into account the items used to offset against an operator in the electricity market (€122 million), paid in January 2013.

The gross invested capital therefore amounts to €8,485 million, recording an increase of €694 million as compared with 31 December 2011.

Sundry provisions, amounting to €265 million, post a decrease of €166 million, mainly due to:

  • a decrease in termination benefits and other employee funds (€105 million) mainly attributable to the transfer of the liabilities connected with the employees belonging to the business unit leased to Terna Rete Italia S.p.A. (€104 million);
  • a decrease in the risk provision "Projects for urban and environmental renewal" for the release of the earlier allocations currently considered unlikely (€43 million) and for the net use for the current contractual payments (€11 million);
  • use of amounts set aside previously for deferred tax liabilities relating to additional amortisation and depreciation over the assets’ estimated useful life (€42 million);
  • recording of the deferred tax asset on the change of the fair value associated with the derivative cash flow hedging instruments for €11 million;
  • accruals made to the provision for risks related to the IMU tax, estimated by applying Memorandum 6/2012 of the Agency of the Territory (land registry) on registering the land of electrical stations (€16 million).

Net invested capital stands at €8,220 million and is financed through equity for €2,599 million (as compared with €2,555 million as of 31 December 2011) and by net financial debt for €5,621 million (+€816 million as compared with 31 December 2011).

The debt/equity ratio (net financial debt/equity) stands at 2.16.

The following is a breakdown of net financial debt:

€ million at 31.12.2012 at 31.12.2011 Change
Long-term debt (inclusive of the short-term portion) and related hedges 8,365 6,388 1,977
Short-term investments - (150) 150
Cash and cash equivalents (2,494) (1,114) (1,380)
Financial transactions with subsidiaries
Loan to Terna Rete Italia S.r.l. (500) (500) -
Net current a/c position of intercompany treasury 250 181 69
Net financial debt from continuing operations 5,621 4,805 816
Total financial debt 5,621 4,805 816

For a breakdown of the individual components of this net debt at 31 December 2012, see "Cash flows" below.