2020 Integrated Annual Report
IT

Management report

CONSOLIDATED FINANCIAL STATEMENTS

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Management report

CONSOLIDATED FINANCIAL STATEMENTS

Other information

Treasury shares

The company did not own any treasury shares as of 31 December 2020.

Related party transactions

Based on Italgas’ current ownership structure, Italgas related parties include, in addition to directors, statutory auditors, executives with strategic responsibilities, companies associated with the Group or under its joint control, also the subsidiaries directly or indirectly controlled by CDP, therefore including the shareholder Snam, and the Ministry of Economy and Finance (MEF). Transactions with these entities relate to the exchange of assets, the provision of services and, in the case of CDP, the provision of financial resources.

These transactions are part of ordinary business operations and are generally settled at arm’s length, i.e. the conditions which would be applied between two independent parties. All the transactions carried out were in the interest of the companies of the Italgas Group.

Pursuant to the provisions of the applicable legislation, the Company has adopted internal procedures to ensure that transactions carried out by the Company or its subsidiaries with related parties are transparent and correct in their substance and procedure.

The Directors and Statutory Auditors declare potential interests that they have in relation to the Company and the Group every six months, and/or when changes in said interests occur; in any case, they promptly inform the Chief Executive Officer (or the Chairman, in the case of the Chief Executive Officer’s interests), who in turn informs the other directors and the Board of Statutory Auditors, of the individual transactions that the Company intends to carry out and in which they have an interest.

CDP and CDP Reti consolidate Italgas pursuant to IFRS 10. In addition, through the Board of Directors’ decision of 1 August 2019, CDP reclassified its investment in Italgas S.p.A. as a controlling interest pursuant to Article 2359, paragraph 1.2) of the Italian Civil Code and Article 93 of the Consolidated Finance Act. Italgas is not subject to management and coordination activities by CDP.
As of 31 December 2020, Italgas manages and coordinates its subsidiaries, pursuant to Article 2497 et seq. of the Italian Civil Code.

The amounts involved in commercial, miscellaneous and financial relations with related parties, descriptions of the key transactions and the impact of these on the balance sheet, income statement and cash flows, are provided in the paragraph “Related-party transactions” of the Notes to the consolidated financial statements.

Relations with Key Managers are shown in the paragraph “Operating costs” of the Notes to the consolidated financial statements.

Operating performance of subsidiaries

For information on the Outlook of areas where Italgas operates in whole or in part through subsidiaries, please refer to “Operating performance” and “Comment on the economic and financial results” of this Report.

Branch offices

In compliance with Art. 2428, fourth paragraph of the Italian Civil Code, note that the Italgas does not have secondary offices.

Research and development

Italgas’ research and development activities are not relevant. For more details, please refer to the note to the consolidated financial statements.

Significant events after year end

The significant transactions carried out after 31 December 2020 are summarised below. The Integrated Annual Report was brought to the attention of the Company’s Board of Directors and its publication was authorised on 10 March 2021. Therefore, this document does not recognise any events that occurred after that date.

Corporate transactions and concessions

The acquisition of Mediterranea Energia’s business unit relating to the Gas distribution concession in the Municipality of Olevano sul Tusciano was finalised on 28 January 2021, following the framework agreement signed between Italgas and CONSCOOP on 28 December 2018. The network spans around 26 kilometres, covering a potential catchment area of 2500 households overall.

Following the aforesaid agreement, the parties agreed that by the deadline of 5 July 2021 and once certain conditions precedent have been met, Italgas will acquire the entire equity investment in Isgas 33, in which it currently holds a minority stake of 10%.

The public session on the “Open tender procedure for the concession of the natural Gas distribution service in the Napoli 1 – Città di Napoli e impianto costiero” ATEM was held on 29 January 2021. The tender committee announced that it would verify the appropriateness of the bids received and suspended tender operations pending the outcome of these checks.

On 4 March 2021, the Municipality of Turin contracting authority officially awarded Italgas Reti the tender for the management of the natural Gas distribution service in the territorial area of Turin 1, which encompasses the regional capital and the municipalities of Moncalieri, Grugliasco, Rivoli, Rivalta di Torino and Nichelino. The awarding of the ATEM, consisting of approximately 560 thousand users, allows the company to seamlessly continue managing the service in an area where it has operated since 1837 and for which an investment plan worth around € 330 million has been envisaged.

Legal and Regulatory

On 12 February 2021, the company contested Resolution no. 550/2020/r/efr, with which the tariff contribution for Energy Efficiency Certificates was determined for the year 2019. A date is yet to be set for the hearing on the merits.

Also, on 12 February 2021 and 18 February 2021, it contested, with two separate appeals, Resolution no. 567/2020/R/gas, challenging its lawfulness both with reference to the provisions for cancellation of premiums due for safety recoveries for the year 2017 and to provisions relating to the cancellation of premiums for the emergency intervention service for the year 2017. The setting of a date for the hearing is therefore currently pending.

On 18 February 2021, the Regional Administrative Court of Lombardy issued the ruling with which, without entering into the merits of the grounds for complaint reported by Italgas, it solely declared that Resolution no. 270/2020/R/efr did not violate the judgement of the previous Regional Administrative Court of Lombardy ruling no. 2358/2019 on EECs. The latter states that Italian Ministerial Decree of 10 May 2018, in the part where it set the cap on the tariff recognition of costs incurred for the purchase of certificates at € 250/EEC, unlawfully exceeded the tariff powers granted to ARERA. A new hearing will be scheduled to decide on the merits.

With Resolution no. 74/2021/S/gas of 2 March 2021, ARERA issued Italgas Reti a fine for € 500 thousand, deeming the company to be in breach of the Regulation of the Quality of Gas Distribution and Metering services for the 2014-2019 period, as well as of the Guidelines of the Italian Gas Committee, regarding the emergency intervention service. The company is considering appealing against the Resolution.

On 3 March 2021, with reference to the investigation launched against Italgas Reti for the alleged abuse of a dominant position in certain municipalities in the Venice 1 ATEM, the AGCM accepted the company’s undertakings and closed the investigation without establishing any wrongdoing by the latter.

With reference to the rehearing before the Council of State requested by the municipalities belonging to the Belluno ATEM against ruling no. 1208 of 7 December 2020, with which the Regional Administrative Court of Veneto declared the appeal against the awarding of the tender to Italgas Reti to be inadmissible, at the hearing of 4 March 2021, the Council of State took note of the waiving of the interlocutory application by the municipalities (the appellants), and set the date for the hearing on the merits at 7 October 2021.

Other events

On 5 February 2021, Italgas, implementing the EMTN Programme, successfully completed the launch of the fixed-rate 7- and 12-year “dual tranche” bond issue, both tranches at a fixed rate and for a total of € 500 million each, with an annual coupon of 0% and 0.5% respectively.

On the same date, a bond buyback transaction was launched, relating to two bond issues – one for an original nominal value of € 750 million maturing in January 2022, and one for an original nominal value of € 650 million maturing in March 2024. The buyback was finalised on 15 February 2021 with a buyback percentage of more than 58% for the first and more than 20% for the second, and a total nominal value of around € 256.0 million.

On 10 March 2021, the Board of Directors resolved to propose the Annual General Meeting a free capital increase through the issuance of a maximum number of 4,500,000 ordinary shares of the Company for a total nominal value of 5.580.000 reserved to the beneficiaries of the Co-Investment Plan 2021-2023.

Furthermore, it was executed the first tranche of the free share capital increase resolved by the Annual General Meeting of the shareholders on 19 April 2018 and reserved to the beneficiaries of the Co-Investment Plan 2018-2020 resolved in the same Meeting, for a maximum of 4,960,000 euros through the issuance of a maximum number of 4,000,000 ordinary shares to be attributed, in accordance to art. 2349 of Italian Civil Code, and recognizing the equivalent amount from the reserves accounted as income carried forward. The first tranche of said share capital increase was executed on 10 March 2021, following a resolution of the Board of Directors, through the issuance of 632,852 ordinary shares of the Company for a nominal amount of 784,736,48 euros, attributed to the beneficiaries of the Co-Investment Plan 2018-2020.