Reclassified income statement

in

The reclassified consolidated income statement of Terna S.p.A. for 2008 and 2009 is shown below.

In millions of euros   
2009 2008 Change%
Revenue        
Grid transmission fees (1)  1,087.9   1,060.5   27.4   2.6% 
Other energy items (1)  91.5   48.4   43.1   89.0% 
Other revenue from sales and services (1)  73.8   43.1   30.7   71.2% 
Other revenue and income  42.0   44.1   -2.1   -4.8% 
Total revenue  1,295.2   1,196.1   99.1   8.3% 
Operating expenses        
Personnel expense  182.3   201.2   -18.9   -9.4% 
Services and use of third-party assets  126.3   110.7   15.6   14.1% 
Materials
 17.7   11.8   5.9   50.0% 
Other expenses (2)  35.1   21.7   13.4   61.8% 
Total operating expenses  361.4   345.4   16.0   4.6% 
EBITDA  933.8   850.7   83.1   9.8% 
Amortisation and depreciation (3)  279.4   253.5   25.9   10.2% 
EBIT  654.4   597.2   57.2   9.6% 
Net financial income/(expense) (4)  -149.1   -124.1   -25.0   20.1% 
Profit before taxes  505.3   473.1   32.2   6.8% 
Income taxes  179.5   174.6   4.9   2.8% 
Profit for the year from continuing operations  325.8   298.5   27.3   9.1% 
Profit for the year from discontinued operations and assets held for sale  464.2   36.8   427.4   1,161.4% 
Profit for the year  790.0   335.3   454.7   135.6% 

In the income statement:
(1) this figure is included in “Revenue from sales and services”;
(2) corresponds to “Other operating expenses” and “Amortisation, depreciation and impairment losses” for the impairment of non-current assets (€2.8 million) and the accrual to the provision for bad debts (€14.1 million);
(3) corresponds to “Amortisation, depreciation and impairment losses” net of the impairment of non-current assets (€2.8 million) and the accrual to the provision for bad debts (€14.1 million);
(4) corresponds to the balance of the items described under points 1 and 2 of “C. Financial income/expense”.

Revenue for 2009, in the amount of €1,295.2 million, increased by €99.1 million (+8.3% over the €1,196.1 million of 2008) due mainly to the following:

  • the increase of about €27.4 million (+2.6%) for NTG fees, essentially as a result of the following factors:
    • a €38.5 million increase in revenue from grid transmission fees, due to the revised rates for 2009 (as per Resolution no. 188/08);
    • greater grid transmission fees related to the defence plan (up €3.8 million);
    • lower past-year grid transmission fees balancing payments (down €14.9 million), with the previous year benefiting from the release of the provision set aside for a technical dispute with a dispatching withdrawal operator (€14.0 million);
  • other energy items (+€43.1 million, or +89%) related mostly to the increase in revenue for the incentives connected with the optimisation of resources for the provisioning services on the Ancillary Services Market, as called for by ARG/elt Resolution no. 206/08 of the Authority for Electricity and Gas (€40.0 million);
  • other sales and services, which increased by €30.7 million (+71.2%) due essentially to the increase in revenue related to the unregulated activities for construction work (up €8.3 million) and maintenance (up €3.2 million, including revenue from the maintenance and technical services contract with the subsidiary TELAT, which was previously recognised as being with Enel Distribuzione) for high- and very-high-voltage lines. The 2009 balance also reflects the technical services and management fees in execution of the related portions of the contracts signed with the subsidiaries TELAT (€14.0 million) and SunTergrid (€5.9 million, including services related to the construction of the photovoltaic plants in the amount of €5.1 million).

Operating expenses totalled €361.4 million, increasing by €16.0 million (+4.6%) from 2008 due mainly to the combined effect of the following factors:

  • “Personnel expense”: the reduction of €18.9 million from 2008 is essentially due to the release of the energy discount provision (-€26.8 million) as a result of the agreement signed with Enel Servizio Elettrico, related to the recalculation of the population of retired employee beneficiaries, as well as to the increase in capitalized personnel expense as a result of the greater investment made during the year (-€8.9 million). Ordinary expenses for salaries, wages and social security charges for the year increased (by €16.8 million) due mainly to the greater per-unit cost, which also includes an estimate of charges for contract renewal;
  • “Services and use of third-party assets”: in the amount of €126.3 million, increased by €15.6 million (14.1%) over the previous year due essentially to the increase in technical services and contracts for plants (€9.5 million), as well as technical, legal and other professional services (€2.8 million) and insurance (€0.9 million);
  • “Materials”: the €5.9 million increase is due almost entirely to activities for third parties, including those related to the contract with EL.IT.E. for the construction of the merchant line in Valtellina, the underground alternate-current interconnection between Italy and Switzerland (€2.2 million), and the provision of the armoured power plant for A2A (€1.4 million);
  • “Other expenses”: the €13.4 million increase is due mainly to the accrual to the provision for bad debts for the year related to receivables that are unlikely to be collected (€14.1 million).

EBITDA (gross operating profit) reached €933.8 million, equal to 72.1% of revenue (up one percentage point from 2008), rising by €83.1 million over the €850.7 million of 2008 (+9.8%).

Amortisation and depreciation for the year came to €279.4 million, increasing by €25.9 million from 2008 (+10.2%), due mainly to the start of operations of new plant and machinery, particularly the first pole of SA.PE.I. (€747.5 million vs. the €134.4 million of 2008).

EBIT (operating profit) came to €654.4 million, for an increase of 9.6% (€57.2 million) from 2008.

Net financial expense for the year came to €149.1 million, for an increase of €25.0 million over the previous year due mainly to the following:

  • an increase in financial expense related to medium- and long-term debt and the relative hedges (€8.3 million) due to an increase in debt, which was offset by a decline in market rates;
  • net financial income (for a reduction of €5.7 million) for the fair value adjustment of bonds and relative hedges;
  • increase in capitalised costs on non-current assets (a reduction of €3.6 million);
  • an increase in net financial expense related to the uplift for the period (€15.2 million);
  • a negative impact (of €10.9 million) due to the combined effect of the coverage (not hedges) of dividends and the intercompany loan repatriated by the subsidiary Terna Participações, which was partially offset by the interest income on said loan.

Income taxes for the year came to €179.5 million (of which a negative €29.9 million was for net deferred taxes). This is equal to an effective tax rate on profits from continuing operations of 35.5%, which is down from the 36.9% of 2008 (net of the reclassification of amounts directly attributable to the Brazilian subsidiaries as “Profit for the year from discontinued operations and assets held for sale”) due mainly to the positive adjustments related to previous years related, in particular, to the application of Law no. 2 of January 28, 2009, which allows the recovery of the greater taxes paid prior to the 2008 fiscal year due to the regional business tax (IRAP) not being deducted from corporate income taxes (IRES) (€4.2 million).

Profit from continuing operations came to €325.8 million, up €27.3 million (+9.1%) from the €298.5 million of 2008.

Profit for the year, including the Profit for the year of discontinued operations, came to €790.0 million, an increase of €454.7 million over the previous year. This significant increase is mostly due to the sale of the equity investment in the Brazilian subsidiary Terna Participações, which had a positive effect on financial performance totalling €464.2 million, including:

  • the gain on the sale in the amount of €385.0 million, net of the costs of the sale and other directly related expenses, as well as of hedging derivatives and related taxes on the transaction;
  • the net dividends distributed by Terna Participações prior to the sale totalling €79.2 million.