Net financial debt

The Group’s net financial debt at 31 December 2011 (€5,123.1 million) is broken down in the table below.

In millions of euros
31.12.2011 31.12.2010 Change
Net financial debt from continuing operations      
A. Medium- and long-term debt:      
Bond (1) 4,303.9 2,728.2 1,575.7
Floating-rate loans (1) 2,434.8 2,419.3 15.5
Derivative financial instruments (2) (410.4) (153.2) (257.2)
Total A
6,328.3 4,994.3 1,334.0
B. Short-term debt (liquidity):      
Floating-rate loans (current portion) (3) 59.7 59.7 0.0
Short-term loans 0.0 73.1 (73.1)
Short-term investments (4) (150.0) 0.0 (150.0)
Cash and cash equivalents (1,114.9) (150.1) (964.8)
Total B
(1,205.2) (17.3) (1,187.9)
Net financial debt from continuing operations 5,123.1 4,977.0 146.1
Actual net financial debt from continuing operations (*) 5,123.1 4,722.4* 400.7
Total financial debt from discontinued operations and assets held for sale 0.0 (28.3) 28.3
Total 5,123.1 4,948.7 174.4
(*) At 31.12.2010, includes the net cash position with regard to RTR (€254.6 million). Reported in the consolidated statement of financial position as: (1) this balance corresponds to the “Long term loans” caption; (2) this figure corresponds to “Non-current financial liabilities” and “Non-current financial assets” for the value of the fair value hedge derivatives (€521.8 million); (3) this balance corresponds to the “Current portion of long-term loans” caption; (4) this balance is included in the “Current financial assets” caption.

The increase of €400.7 million with respect to actual net financial debt from continuing operations at 2010 year-end - which considers the de-consolidation of the net cash position with regard to RTR at 31 December 2010 (amounting to 254.6 million) - is mainly the result of the combined effect of:

  • increase in bonds (€1,575.7 million), for the issue of a bond in March 2011, for a total value of €1,250.0 million (amounting to €1,234.8 million net of expenses and issue fees), as a result of the fair value adjustment of financial instruments (€323.8 million, including the amortised cost) and the capitalisation of period inflation (€17.1 million);
  • increase in floating-rate loans (€15.5 million), essentially by virtue of the combined effect of the following changes:
    • obtaining on 1 August 2011 by the European Investment Bank (EIB) of a loan of €325 million expiring in 2030;
    • use on 8 April 2011 of the credit line of €500 million granted by Cassa Depositi e Prestiti (CDP);
    • repayment of the syndicated bank loan (revolving credit facility) originally taken out on 13 December 2004 and subsequently renegotiated on 10 April 2006 with Banco Bilbao Vizcaya Argentaria S.A., Mediobanca, Intesa Sanpaolo, BNL, Unicredit and Monte dei Paschi di Siena S.p.A. for a total amount of €750 million;
    • repayment of the EIB loan instalments due for €59.7 million;
  • increase of the positive net balance of derivative financial instruments (€257.2 million), mainly due to the lowering of the reference interest rates compared to the previous financial year. In particular, we note the change in fair value hedges of bonded loans for €321.5 million and the change in cash flow hedges of the floating-rate debt for a negative €64.3 million;
  • repayment of the short-term loan taken out in late 2010 (€50 million);
  • subscription in 2011 of deposit certificates maturing on 14 June 2013 and with the faculty to request early redemption every three months, for a total of €150 million;
  • increase in liquid funds for €964.8 million, due to the operations described above in relation to the bonds and other loans and to cash inflows from the extraordinary operations occurring during the financial year, in addition to the operations connected with the core business.

Financial debt from discontinued operations and assets held for sale at 31 December 2010, amounting to a negative €28.3 [7] million, was represented by the CFH derivative asset of the companies transferred, RTR and Valmontone Energia S.r.l. (€22.1 million) - to hedge a loan stipulated in January 2011 - and liquid funds on bank current accounts (€6.2 million).

Statement of cash flows

In millions of euros

 

Cash flow at 31.12.2011

Reconciliation financial statements

 

Cash flow at 31.12.2010

Reconciliation financial statements
Opening cash and cash equivalents 156.3   0.1  
of which Cash and cash equivalents of discontinued operations   6.2   0.0
Profit for the year 440.0   612.0  
of which Profit for the year from continuing operations   327.3   465.1
Amortisation and depreciation 394.1   360.5  
Net change in provisions (34.2)   (10.9)  
Employee benefits   (3.1)   (2.8)
Provisions for risks and charges   22.2  
22.2
Deferred tax liabilities  
(53.3)  
(30.3)
Net losses (gains) on asset disposals (1) (3.6)   (3.1)  
Self-financing 796.3   958.5  
Change in net working capital 342.9   (203.5)  
Inventories  
(4.9)  
0.3
Trade receivables  
(194.4)  
(326.7)
Current financial assets  
(5.0)  
0.5
Income tax receivables  
(0.2)  
0.0
Other current assets  
(0.2)  
7.3
Trade payables  
487.6  
60.2
Tax liabilities
46.9
25.6
Current financial liabilities
15.9
(1.3)
Other liabilities
(2.8)
30.6
Cash flows from operating activities 1,139.2   755.0  
Investments        
Property, plant and equipment (2) (1,178.1)   (1,104.4)  
of which continuing operations - core business investments
(1,168.7)
(1,103.4)
Intangible assets (3) (51.1)   (58.3)  
Other changes in non-current assets (20.8)   (29.7)  
Other intangible assets
0.0
0.2
Property, plant and machinery (2)
22.8
(20.6)
of which contribution of newly purchased companies
0.0
(43.4)
Non-current financial assets
(0.1)
(0.5)
Other non-current assets
(0.3)
(0.8)
Equity-accounted investees
(43.2)
(8.1)
Discontinued operations
0.0
0.1
Total cash flows generated by/(used in) investing activities (1,250.0)   (1,192.4)  
NIC in discontinued operations and assets held for sale 398.8   (398.8)  
Change in loans 1,133.0   1,346.7  
Non-current financial assets
(321.5)
(77.1)
Current financial assets
(150.0)
500.0
Non-current financial liabilities
64.3
(35.5)
Long-term loans
1,591.2
948.3
Short-term loans
(73.1)
33.1
Discontinued operations and assets held for sale
22.1
(22.1)
Other changes in equity attributable to the owners of the Parent (4) (40.1)   46.3  
Equity attributable to the owners of the Parent - Share capital, other reserves and retained earnings/losses carried forward
(24.1)
30.3
Equity attributable to the owners of the Parent - Reserves for assets held for sale   (16.0)   16.0
Dividends paid to the owners of the Parent (4) (422.1)
(400.8)
Equity attributable to non-controlling interests in discontinued operations and assets held for sale (4) (0.2)   0.2  
Total cash flows generated by/(used in) financing activities 670.6   992.4  
Total cash flows for the year 958.6   156.2  
of which continuing operations
964.8
150.0
Closing cash and cash equivalents 1,114.9   156.3  
of which Cash and cash equivalents included in discontinued operations and assets held for sale
0.0
6.2
(1) Included in the balances of “Other revenue and income” and “Other operating expenses” of the consolidated income statement. (2) See note 13 to the financial statements. (3) See note 15 to the financial statements. (4) See the statement of changes in consolidated equity.

Change in net financial position

In order to more clearly present the actual cash flows for the year, the table below shows the contribution of continuing operations to the generation or use of cash in operating activities, investing activities, and in return on capital.

In millions of euros 31.12.2011 31.12.2010
Opening net financial debt (4,948.7) (3,758.2)
Self-financing 796.3 958.5
of which continuing operations 686.5 811.6
Change in net working capital 342.9 (203.5)
Cash flows generated from operating activities 1,139.2 755.0
Investments in property, plant and equipment (1,178.1) (1,104.4)
of which continuing operations - core business investments (1,168.7) (1,103.4)
Investments in intangible assets (51.1) (58.3)
Other changes in non-current assets 22.5 (21.1)
Change in equity investments (43.3) (8.6)
Cash flows used in investing activities (1,250.0) (1,192.4)
NIC Assets held for sale 398.8 (398.8)
Dividends (422.1) (400.8)
Other changes in equity attributable to the owners of the Parent (40.1) 46.3
of which continuing operations (24.1) 30.3
Equity attributable to non-controlling interests (0.2) 0.2
Self-financing flows (462.4) (354.3)
Change in financial debt (174.4) (1,190.5)
of which continuing operations* (400.7) (964.2)
Closing net financial debt (5,123.1) (4,948.7)
(*) At 31.12.2010, includes the net cash position with regard to RTR (€254.6 million).

The cash flow generated from operating activities during the financial year stands at about €1,139.2 million and is related to self-financing (€796.3 million) and other financial resources generated by net working capital (€342.9 million).

Under the scope of self-financing, we have a profit for the financial year of €440 million (of which €327.3 million referred to continuing operations), amortisation/depreciation for the year of €394.1 million and a net decrease in provisions amounting to €34.2 million, which reflects the changes in the provision for deferred tax liabilities and the provision for risks and charges.

The change in net working capital, equal to €342.9 million, is for the most part due to the net increase of trade payables.

Investing activitieshave used financial resources for approximately €1,250 million, for the most part relating to investments made during the financial year in property, plant and equipment (€1,178.1 million, of which €1,168.7 million relating to investments in core business) and in intangible assets (€51.1 million) - attributable to the Parent Company for a total of €1,172.4 million - net of set-up grants (€12.1 million) and changes for net divestments and impairment (€7.1 million). Financial investments include an equity interest of 22.09% in the share capital of the Montenegro associate CGES (€36 million) and the increase in the value of the equity interest in CESI S.p.A. (€7.1 million).

Cash flows used in self-financing are essentially the result of the distribution of the 2010 dividends to the owners of the Parent Company (€261.3 million) and the interim dividend for 2011 (€160.8 million).

The other changes in equityattributable to the owners of the Parent refer to the fair value measurement of the cash flow hedges on the floating-rate debt, net of the related tax effect, of the Parent Company (a negative €34.7 million) and of the transfer of the derivative asset following sale of the company RTR (a negative €16 million) and the effects of the stock options exercised during the year (€11.6 million) as well as the effects of the acquisition of additional equity interests in the associate CESI S.p.A. (a negative €1 million).

With reference to discontinued operations and assets held for sale, the sale of the equity interest in Rete Rinnovabile generated total liquid funds of more than €200 million, whilst the contribution of the sale of NRTS to the self-financing of the Group amounted to €28.3 million.

Therefore, in view of the extraordinary transactions carried out during the financial year, the financial resources generated by operating activities and those used by investing activities and by changes in shareholders’ equity, the Group has increased its net debt by €400.7 million with respect to actual net financial debt from continuing operations at 31 December 2010.

(7) Effective financial debt of discontinued operations and assets held for sale at 31 December 2010 amounted to €226.3 million if we consider the net financial liability of RTR to Terna S.p.A..