Net financial debt

Net financial debt of the Company (€4,805.0 million) at 31 December 2011 can be broken down as follows:

In millions of euros 31.12.2011 31.12.2010 Change
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)
Loan to Terna Rete Italia (3) (500.0) (500.0) 0.0
Total 5,828.3 4,494.3 1,334.0
B. Short-term debt (liquidity):      
Floating-rate loans (current portion) (4) 59.7 59.7 0.0
Short-term loans 0.0 73.1 (73.1)
Short-term investments (5) (150.0) 0.0 (150.0)
Net current a/c position of intercompany treasury (6) 181.3 (18.6) 199.9
Cash and cash equivalents (6) (1,114.3) (150.1) (964.2)
Total (1,023.3) (35.9) (987.4)
Total financial debt from continuing operations 4,805.0 4,458.4 346.6
Total financial debt from discontinued operations 0.0 (254.6) 254.6
Total 4,805.0 4,203.8 601.2
In the statement of financial position: (1) this figure 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 figure is included under “Non-current financial assets”; (4) this figure corresponds to the “Current portion of long-term loans” caption; (5) this figure is included under “Current financial assets”; (6) this figure is included under “Cash and cash equivalents”.

Net financial debt of continuing operations records an increase of €346.6 million, mainly as a result of the combination 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 rate compared to the previous financial year. In particular, we note the change in fair value hedges of bonds 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 cash and cash equivalents of €764.3 million - including the change in the net position on the intercompany current accounts held with the subsidiaries in the context of the centralised treasury management - due to the transactions connected with the core business and to the operations described above.

The financial debt from discontinued operations, amounting to a negative €254.6 at 31 December 2010, is represented by the loan granted by Terna to RTR (€500 million), net of the liability of the treasury current a/c (€245.4 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 & intercompany current accounts 168.7
0.1
Profit for the year 453.6
432.1
of which continuing operations  
419.8  
430.7
Amortisation and depreciation 348.8
318.8
Net change in provisions (80.4)
(9.8)
Employee benefits  
(3.0)  
(2.8)
Provision for future risks and charges  
(22.8)  
17.2
Deferred tax liabilities
(54.6)
(24.2)
Net losses (gains) on asset disposals (1) (3.9)
(3.1)
Self-financing 718.1
738.0
Change in net working capital 336.5
(179.6)
Inventories
(1.0)
0.3
Trade receivables
(188.4)
(318.5)
Current financial assets
(5.3)
0.4
Other current assets
1.5
7.9
Trade payables
494.9
65.2
Tax liabilities
19.1
48.3
Current financial liabilities
15.9
(1.3)
Other liabilities
(4.8)
22.7
Discontinued operations and assets held for sale
4.6
(4.6)
Cash flows from operating activities 1,054.6
558.4
Investments



Property, plant and equipment (2) (1,122.7)
(1,063.4)
Intangible assets (3) (49.7)
(57.0)
Other changes in non-current assets (38.2)
(13.2)
Property, plant and equipment
1.2
(4.7)
Other intangible assets
0.0
0.2
Non-current financial assets
(39.0)
(8.1)
Other non-current assets
(0.4)
(0.7)
Discontinued operations and assets held for sale
0.0
0.1
Total cash flows generated by/(used in) investing activities (1,210.6)
(1,133.6)
Change in loans 1,365.5
1,111.5
Current financial assets
(150.0)
500.0
Non-current financial assets
(321.5)
(77.1)
Non-current financial liabilities
64.3
(35.5)
Long-term loans
1,591.2
948.3
Short-term loans
(73.1)
30.4
Discontinued operations and assets held for sale
500.0
(500.0)
Liabilities from discontinued operations and assets held for sale
(245.4)
245.4
Other changes in equity (4) (23.1)
33.1
Equity - Share capital and other reserves
(23.1)
33.1
Dividends (4) (422.1)
(400.8)
Total cash flows generated by/(used in) financing activities 920.3
743.8
Total cash flows for the year 764.3
168.6
Closing cash and cash equivalents & intercompany current accounts 933.0
168.7
(1) Included in the “Other revenue and income” and “Other operating costs” captions of the income statement. (2) See note 11 to the financial statements. (3) See note 13 to the financial statements. (4) See the statement of changes in consolidated equity.

Change in net financial position

In millions of euros 2011 2010
Opening net financial debt (4,203.8) (3,260.9)
Self-financing 718.1 738.0
of which continuing operations 684.3 736.6
Change in net working capital 336.5 (179.6)
Cash flows generated from operating activities 1,054.6 558.4
Investments in property, plant and equipment (1,122.7) (1,063.4)
Infra-group disposals (acquisitions) of fixed assets (18.0) (21.2)
Investments in intangible assets (49.7) (57)
Disposals (acquisitions) of equity investments (39.0) (8.1)
Other changes in non-current assets 18.8 16.1
Cash flows used in investing activities (1,210.6) (1,133.6)
Dividends distributed (422.1) (400.8)
Other changes in equity (23.1) 33.1
Equity movements (445.2) (367.7)
Change in financial debt (601.2) (942.9)
Closing net financial debt (4,805.0) (4,203.8)

The liquidity generated by operating activities during the year, amounting to €1,054.6, can be ascribed to self-financing (€718.1 million, of which €684.3 million continuing operations) and to changes in net working capital (€336.5 million). More specifically, as part of the self-financing, it includes the profit for the financial year of €453.6 million, comprising the result deriving from discontinued operations and assets held for sale (amounting to €33.8 million for the release of the provision referring to the contractual obligations connected with the sale of Terna Participações), amortisation and depreciation for €348.8 million and the net decrease in provisions for €80.4 million that reflects the change in the provision for net deferred tax liabilities and the provision for risks as commented on previously.

The change in net working capital, equal to €336.5 million, is largely due to the net increase in trade payables.

Investing activities led to a net use of cash of about €1,210.6 million. These cash flows mainly concerned investments in property, plant and equipment (€1,122.7 million) and intangible assets (€49.7 million) for the year, net of set-up grants (€11.8 million). Cash flow also reflects the acquisition from the subsidiary Terna Rete Italia (formerly TELAT) of some transmission plants involved by development and renewal works (€19.6 million) and the transfer to the subsidiary SunTergrid (€1.6 million) of a MV/HV utility electrical substation. Financial investments recognise the equity interest amounting to 22.09% of the share capital of the Montenegro transmission operator CGES (€34.2 million), the increase in the equity interest in the associate CESI (€2.7 million) and the incorporation of the companies Terna Crna Gora and Terna Plus (€2.0 million).

Cash used in relation to equity movements is essentially the result of the distribution of the 2010 dividends (€261.3 million) and the interim dividend for 2011 (€160.8 million). Other changes in equity refer to the fair value adjustment of derivative instruments hedging floating-rate payables (cash flow hedges), net of the related tax effect (a negative €34.7 million) and the effects of the stock options exercised during the year (€11.6 million).

Therefore, cash flows used in investing activities and equity movements for the year resulted in total uses of liquidity in the amount of €1,655.8 million, which was funded in part by cash flows generated from operating activities (€1,054.6 million) and the remaining €601.2 million through new debt.