Reclassified consolidated income statement

The reclassified consolidated income statement of the Terna Group for 2011 and 2010 is shown below.

In millions of euros 2011 2010 Change %
Revenue:        
Grid transmission fees (1) 1,380.9 1,306.3 74.6 5.7%
Other energy items (1) 163.4 169.8 (6.4) (3.8%)
Other revenue from sales and services (1) 47.0 57.0 (10.0) (17.5%)
Other revenue and income 44.3 56.1 (11.8) (21.0%)
Total revenue 1,635.6 1,589.2 46.4 2.9%
Operating expenses:        
Personnel expenses 211.0 212.2 (1.2) (0.6%)
Services and leases and rentals 149.0 152.2 (3.2) (2.1%)
Materials 20.7 28.2 (7.5) (26.6%)
Other costs (2) 25.2 21.7 3.5 16.1%
Total operating expenses 405.9 414.3 (8.4) (2.0%)
EBITDA (gross operating profit) 1,229.7 1,174.9 54.8 4.7%
Amortisation and depreciation (3) 394.1 360.5 33.6 9.3%
EBIT (operating profit) 835.6 814.4 21.2 2.6%
Net financial income (expense) (4) (121.0) (102.5) (18.5) 18.0%
Profit before taxes 714.6 711.9 2.7 0.4%
Income taxes 387.3 246.8 140.5 56.9%
Profit for the year from continuing operations 327.3 465.1 (137.8) (29.6%)
Profit for the year from discontinued operations and assets held for sale 112.7 146.9 (34.2) (23.3%)
Profit for the year 440.0 612.0 (172.0) (28.1%)
- Attributable to owners of the Parent 440.0 612.0 (172.0) (28.1%)
In the consolidated income statement: (1) this amount is included in the “Revenue from sales and services” caption; (2) corresponds to “Other operating expenses” and “Amortisation, depreciation and impairment” for the impairment of non-current assets (€2.1 million) and trade receivables (€0.1 million); (3) corresponds to “Amortisation, depreciation and impairment” net of the impairment of non-current assets (€2.1 million) and trade receivables (€0.1 million); (4) total of the captions presented in points 1, 2 and 3 of letter C. “Financial income/expense”.

In 2011, the Terna Group recorded revenue for €1,635.6 million, relating to the Parent Company for approximately €1,484.5 million and to the subsidiary Terna Rete Italia for approximately €150.1 million, up €46.4 million on the previous financial year (+2.9%), attributable to the trend of the grid transmission fees, up €74.6 million and relating to:

  • the Parent Company for €64.6 million, as a result of the combination of:
    • review of the tariffs (€51.2 million, including the incentive on the remuneration of strategic works, pursuant to Resolution ARG/elt 87/10) and the related contingency items of competence (€2.1 million);
    • grid transmission fees related to the Defence Plan (€11.3 million);
  • the subsidiary Terna Rete Italia, for its share of the NTG, €10.0 million (compared with the  €133.3 million reported in 2010).

The increase in the transmission fee is partially compensated for by lesser revenue (overall for a negative €28.2 million) for:

  • dispatching activities, totalling a negative €6.4 million, mainly attributable to lower investments made on dispatching infrastructures (5) with respect to the previous financial year (a negative €4.2 million);
  • other sales and services (a negative €10 million), mainly for less engineering and renewable plant connection activities; and
  • lower other revenue and income (a negative €11.8 million), mainly due to the recognition during the previous financial year of:
    • gain from bargain purchase, of €6.0 million, deriving from the acquisition of the investment in Rete di Trasmissione Brescia; and
    • greater reimbursements for damages to major plants (3.5 million) recognised by the Parent Company.

In 2011, operating expenses amounted to €405.9 million and mainly referred to the Parent Company (€394.4 million) and the subsidiary Terna Rete Italia (€10.8 million), recording a decrease of approximately €8.4 million on last year (a negative 2%), mainly by virtue of the combined effect of the following phenomena:

  • personnel expenses: a €1.2 million reduction, mainly due to greater capitalisation;
  • costs for services and materials: overall reduction of €10.7 million, referring to lesser investments in dispatching infrastructures (6) (a negative €4.3 million), mainly for the optimisation on the Services Market in 2010; and for the reduction of non-regulated activities and engineering towards third parties;
  • other costs: the item in question increases by €3.5 million, referring for the most part to greater impairment of fixed assets (€1.9 million) and to higher net costs linked to energy transmission and dispatching (€1.4 million).

EBITDA (gross operating profit) for the year stands at around €1,229.7 million, up €54.8 million on the €1,174.9 million recorded for 2010 (+4.7%). Terna Rete Italia contributes for €139.3 million (amounting to approximately 11.3%).

The increase in revenue, together with the drop in costs is reflected in the EBITDA margin which went from 73.9% in 2010 to 75.2% in financial year 2011.

Amortisation and depreciation for the year are up by €33.6 million on 2010, for €30.0 million related to the Parent Company, basically for the start-up of new plants, and for €3.5 million to the amortisation of the subsidiary Terna Rete Italia.

As a result, EBIT (operating profit) stands at about €835.6 million, up by €21.2 million (+2.6%) compared with 2010.

Net financial expense, amounting to €121.0 million, refers entirely to the Parent Company and increases to €18.5 million from €102.5 million of 2010, mainly as a result of the increase in financial expense relating to the medium and long-term debt and related hedges (a negative €60 million), mainly due to the increase in gross debt and the rise in market interest rates; partially compensated for by:

  • greater liquidity invested at higher interest rates (€21.2 million); and
  • higher capitalised financial expense (€8.5 million) due to greater capital expenditure during the financial year;
  • positive impact deriving from the currency adjustment to the provision for probable expenses relating to the sale of the equity interest held in the Brazilian subsidiaries (€6.8 million);
  • recognition and adjustment of the equity interests in the companies CGES (€1.8 million) and CESI (€2.3 million) to the share held in the shareholders’ equity of the associates.

After the impact of net financial expense, the profit before taxes stands at €714.6 million, €2.7 million higher than the previous financial year (+0.4%).

Income taxes for the financial year amount to €387.3 million, up on the previous financial year by €140.5 million (+56.9%), mainly as a result of the “corrective manoeuvre-bis” (the “Robin Hood Tax”), against a pre-tax result that was basically in line with 2010.
More specifically, greater taxes are recognised for the year for €153.8 million resulting from the adjustment to net deferred tax liabilities for approximately €65.4 million and greater current taxes for €88.4 million.
Income taxes also reflect the overall impact of the IRAP adjustment (€8.7 million) with reference to the effects of the economic manoeuvre for the concession holders, lower income from prior years adjustments (€4.0 million) and the one-off positive effects relating to the release of Terna Rete Italia goodwill which is seen in the consolidated financial statements (a negative €23.5 million).
The year’s tax rate amounts to 54.2%; without considering one-off elements, it stands at 46%, up approximately 11 points on the 2010 figure, mainly as a consequence of the IRES tax (the “Robin Hood Tax”, +10.7%) and also for the additional IRAP (regional tax on prodictive activities) tax on pre-tax profit (+0.5%).

Profit from continuing operations consequently stands at €327.3 million, down €137.8 million on 2010.
The profit from continuing operations adjusted by the total effects of the “Robin Hood Tax”, and the extraordinary one-off items described above, including IRAP adjustment, amounts to €465.3 million, up €5.2 million on the same figure of the previous financial year (+1.1%).

The Group’s profit amounts to €440 million and includes €112.7 million net profit deriving from discontinued operations and assets held for sale, relating to extraordinary transactions in the photovoltaic sector (€50.6 million for the share of RTR S.r.l. and €28.3 million for NRTS S.r.l.) and the release of the guarantee connected with the sale of the Brazilian subsidiaries (€33.8 million). In the previous financial year, the item “Profit for the financial year from discontinued operations and assets held for sale”, amounting to €146.9 million mainly included the net margin for 2010 realised on photovoltaic plants sold with the subsidiary RTR.

(5) Pursuant to IFRIC 12.