ACEA Group: Results of operations

Below is an illustration of economic trends for the period, comparing the data at 31 December 2014 with those for the same period of the previous year, suitably “restated”, as described in full in the paragraph “Effects deriving from the application of IFRS10 (Consolidated Financial Statements) and IFRS11 (Joint control agreements)” in this document.

Ref. Nota   31.12.2014 31.12.2013 Restated Increase/ (Decrease) % Increase/ (Decrease)
1 Revenue from sales and services 2,931.6 3,203.6 (272.0) (8.5%)
2 Other revenue and proceeds 106.7 85.4 21.2 24.8%
  Consolidated net revenue 3,038.3 3,289.0 (250.8) (7.6%)
3 Staff costs 229.5 238.3 (8.8) (3.7%)
4 Cost of materials and overheads 2,109.8 2,405.7 (295.9) (12.3%)
  Consolidated operating costs 2,339.3 2,644.0 (304.7) (11.5%)
5 Net income/(costs) from commodity risk management 0.0 0.1 (0.1) (169.8%)
6 Income/(Costs) from equity investments of a
non-financial nature
18.8 30.3 (11.5) (37.9%)
  Gross Operating Profit 717.7 675.4 42.3 6.3%
7 Amortisation, depreciation, provisions and impairment charges 327.3 312.2 15.1 4.8%
  Operating profit/(loss) 390.4 363.2 27.2 7.5%
8 Financial income 28.2 27.1 1.1 4.0%
8 Financial costs (129.3) (126.4) (3.0) 2.3%
9 (Costs)/Income from Equity Investments 0.5 (4.8) 5.3 (111.1%)
  Profit/(loss) before tax 289.8 259.2 30.6 11.8%
10 Taxation 120.9 105.8 15.1 14.3%
  Net profit/(loss) from continuing operations 168.9 153.4 15.5 10.1%
  Net profit/(loss) from discontinued operations 0.0 0.0 0.0 0.0%
  Net profit/(loss) 168.9 153.4 15.5 10.1%
  Profit/(loss) attributable to minority interests 6.5 11.4 (4.9) (43.4%)
  Net profit/(loss) attributable to the Group 162.5 142.0 20.5 14.4%

Amounts in millions of euros

1. Revenue from sales and services - 2,931.6 million euros

3,203.6 million euros in 2013, broken down as follows:

€ millions 

31.12.2014 31.12.2014 Restated Increase/ (Decrease) % Increase/ (Decrease)
Revenue from electricity sales and services 2,101.4 2,417.1 (315.6) (13.1%)
Revenue from gas sales 59.0 63.8 (4.8) (7.5%)
Revenue from the sale of certificates and rights 21.6 16.4 5.2 31.7%
Revenue from the Integrated Water Service 580.4 535.9 44.5 8.3%
Revenue from Overseas Water Services 7.7 10.4 (2.7) (26.0%)
Revenue from biomass transfer and landfill management 39.4 36.4 3.0 8.2%
Revenue from services to customers 93.5 95.0 (1.5) (1.6%)
Connection fees 28.5 28.5 0 0.0%
Revenue from sales and services 2,931.6 3,203.6 (272.0) (8.5%)

Revenue from electricity sales and services dropped 315.6 million euros to 2,101.4 million euros compared to last year. This decrease was mainly caused by the following events:

  • a 297.8 million euros reduction in revenue from the sale of electricity due to the lesser quantities sold, with reference to the Protected Categories service (- 7.2%) and the Free Market (- 15.9%);
  • Decrease of 10.3 million euros in revenue from the transport and metering of energy, due to the different value attributed to the tariff parameters, as well as the combined effect of the reduced electricity fed into the grid and lower volumes;
  • the decrease in revenues from electricity and heat generation (- 6.8 million euros) mainly derived from district heating, following a drop in market prices to below the expected minimum. This led to production in the combined cycle section of the Tor di Valle plant being suspended.

Revenue from gas sales fell by 4.8 million euros compared with the previous year mainly due to lower volumes sold and lower sale prices.

Revenue from the sale of certificates and rights was up 5.2 million euros due to increased revenue from ACEA Produzione green certificates accrued in relation to energy produced at the Salisano and Orte plants following repowering operations.

Revenue from the Integrated Water Service rose by 44.5 million euros, basically due to the updating of ACEA Ato2 and ACEA Ato5 2014 rates. The VRG (Guaranteed Income) for ACEA Ato2 was quantified based on the AEEGSI resolution of 25 September 2014, approving 2014-2015 tariffs. This positive variation was also due to adjustments of "pass-through items", i.e. inclusion in the tariff of some types of costs related to 2012 and 2013. More specifically, for ACEA Ato2 these adjustments contributed 23.5 million euros to revenue growth for the period and included coverage of the costs incurred to address the environmental emergency and other cost components (i.e. electricity and local charges) as well as inflation as envisaged in the regulation in force.

Revenue from Overseas Water Services was down by 2.7 million euros, due mainly to a decrease in Aguazul Bogotá activities.

Revenue from biomass transfer and landfill management rose by 3.0 million euros. The change was influenced both by an increase in transferred quantities, especially from agriculture and composting, and by the average price.

Revenue from services to customers fell by 1.5 million euros, due mainly to some negative events:

  • new Public Lighting in Roma Capitale as a result of greater design and construction activities for new installations in 2014;
  • a fall in the marketing of photovoltaic panels and installation to third parties of 1.5 million euros;
  • a drop in revenue for works performed for third parties of 5.6 million euros.

Connection fees were basically in line with the previous year.

2. Other revenue and proceeds - 106.7 million euros

This item showed a rise 21.2 million euros. Breakdown as follows:

 € millions 31.12.2014 31.12.2013 Restated

Increase/(Decrease)

% Increase/(Decrease)

Contributions from Entities for Energy Saving Certificates 36.7 0.4 36.3 9,075.0%
Non-recurring gains and other revenues 25.4 35.2 (9.8) (27.9%)
Other revenue 11.1 18.3 (7.3) (39.3%)
Reimbursement for damages, penalties and charge-backs 7.7 7.4 0.3 4.0%
Feed-in-tariff 5.0 5.4 (0.3) (7.4%)
Proceeds from fraudulent withdrawals 5.4 0 5.4 100.0%
Government grant (Prime Ministerial Decree of 23/04/04) 4.9 7.9 (3.0) (37.9%)
Regional grants 2.1 1.8 0.3 16.7%
Income from end users 2.4 1.5 0.8 60.0%
Seconded staff 1.5 2.0 (0.5) (25.0%)
Property income 1.7 1.7 0 (0.5%)
IFRIC 12 margin 1.2 0.9 0.3 35.9%
Recharged cost of governance bodies 1.1 1.5 (0.4) (24.2%)
Gains on asset disposals 0.3 0.3 0 0.0%
Service continuity bonuses 0.2 1.1 (0.9) (81.4%)
Other revenue and proceeds 106.7 85.4 21.2 24.8%

Changes vis-à-vis 31 December 2013 were mainly due to the following effects:

(i) revenues recognized for 36.7 million euros resulting from recognition of energy saving certificates, of which 28.3 million euros refer to the estimated tariff contribution due to ACEA Distribuzione in relation to its meeting the 2013 and 2014 obligations and 8.4 million euros refer to the release of the provision for risks and charges allocated in 2013 to cover the costs of purchasing certificates during the reporting period to meet the aforementioned regulatory energy efficiency requirement;

(ii) the reduction in non-recurring gains and other revenues, by 9.8 million euros and 7.3 million euros respectively;

(iii) revenue recognised for fraudulent withdrawals pursuant to AEEGSI resolution no. 637/2013 of 5.4 euros million;

(iv)  3.0 million euros reduction in contribution from Italian State to supplement income deriving from services supplied to the Vatican State. This change is the result of variations in the consideration of this contribution in quantifying the Restriction on Guaranteed Revenues (VRG) for ACEA Ato2.

(v)   0.9 million euros drop in the service continuity bonus from AEEGSI to ACEA Distribuzione.

Consolidated operating costs - 2,339.3 million euros

The breakdown is provided in the following table.

€ millions 31.12.2014

31.12.2013 Restated

Increase/ (Decrease) % Increase/ (Decrease)
Staff costs 229.5 238.3 (8.8) (3.7%)
Costs of materials and overheads 2,109.8 2,405.7 (295.9) (12.3%)
Consolidated operating costs 2,339.3 2,644.0 (304.7) (11.5%)

3. Staff costs - € 229.5 million euros

The increase in staff costs, inclusive of capitalised costs, amounted to 9.4 million euros and was influenced by the partial release in the first quarter of 2013 of provisions allocated for MBO and Bonuses to be paid to Executives and Middle Managers, as objectives were only partially achieved.

The change was also affected by the wage increase resulting from contract renewals in 2013.

Capitalised costs rose by 18.1 million euros, mainly attributable to the water companies. This increase was due to the great commitment of personnel in Group Companies to the ACEA2.0 Project and to an updating of methods for capitalising internal costs.

The trends by Operating Segment, including capitalised costs, are shown in the following table:

€ millions 31.12.2014

31.12.2013 Restated

Increase/ (Decrease) % Increase/ (Decrease)
Environment segment 11.2 10.7 0.5 4.7%
Energy segment 23.3 26.0 (2.7) (10.4%)
Water segment 115.2 114.2 1.0 0.9%
Networks segment 88.5 87.1 1.4 1.6%
Parent company 57.3 51.2 6.2 12.1%
Total staff costs excluding capitalised costs 298.6 289.2 9.4 3.3%

4. Cost of raw materials and overheads - 2,109.8 million euros

This item showed an overall drop of 295.9 million euros (-12.3%) compared with the figure of 2,405.7 million euros at 31 December 2013.

€ millions 31.12.2014 31.12.2013 Restated Increase/ (Decrease) % Increase/ (Decrease)
Electricity, gas and fuel 1,746.5 2,042.1 (295.6) (14.5%)
Materials 27.5 28.4 (0.9) (3.1%)
Services 234.9 229.0 5.9 2.6%
Concession fees 43.1 41.0 2.1 5.2%
Lease expenses 23.9 23.8 0.1 0.4%
Other operating costs 33.9 41.4 (7.5) (18.2%)
Consolidated operating costs 2,109.8 2,405.7 (295.9) (12.3%)

Purchase costs of electricity, gas and fuel amounted to 1,746.5 million euros, down 295.6 million euros compared with the previous year. This decrease is due to costs for the procurement of electricity for the protected and free markets along with related transport costs (- 318.0 million euros). This decrease resulted from the combined effect of the lower amount of electricity distributed and sold and the different price/quantity mix in the various months and time brackets, partially offset by recognition of the cost for the purchase of energy saving certificates by ACEA Distribuzione in order to meet its obligations for 2013 and 2014 (+ 30.6 million euros).

Costs for the purchase of materials amounted to 27.5 million euros, a drop of 0.9 million euros.

Service costs were 234.9 million euros, a rise of 5.9 million euros vis-à-vis last year. This result was chiefly the result of: i) an increase in technical and consulting services of 7.9 million euros, ii) the fall in insurance costs, telephone and advertising charges of 4.4 million euros, iii) an increase in expenses for general services of 4.7 million euros and iv) a drop in costs for contract work of 3.2 million euros.

Concession fees rose by 2.1 million euros, referring in particular to higher costs borne by ACEA Ato2 (+ 1.9 million euros).

Lease expenses amounted to 23.9 million euros, basically in line with the previous year (23.8 million euros).

Other operating costs amounted to 33.9 million euros, dropping by 7.5 million euros vis-à-vis 2012. The change refers to: lower overheads and a decrease in non-recurring losses related to costs pertaining to previous years.

5.Net income/(costs) from commodity risk management - 0.0 million euros

At 31 December 2014 the change in the Fair Value measurement of financial contracts was practically 0.0 million euros.

The portfolio of financial instruments under Hedge Accounting was the predominant component of the overall portfolio.

For further details, refer to the section "Additional disclosures on financial instruments and risk management policies" in the 2014 Consolidated Financial Statements.

6. Income/(Costs) from equity investments of a non-financial nature  - 18.8 million euros

This item is the consolidated result according to the equity method that is included among the components of the consolidated EBITDA. The breakdown of this item is detailed below:

€ millions 31.12.2014

31.12.2013 Restated

Increase/ (Decrease)
Gross operating profit 125.7 122.3 3.4
Amortisation, depreciation, impairment charges and provisions (82.4) (71.1) (11.3)
Financing activities (9.7) 2.0 (11.7)
Taxation (14.8) (22.9) 8.1
Income from equity investments of a non-financial nature 18.8 30.3 (11.5)

The decrease compared to 31 December 2013 was principally due to:

  • with regard to Gross Operating Profit, recognition in 2013 of higher revenues (12.8 million euros) pertaining to the 2012 financial year, with specific reference to the FNI (New Investments Fund) component approved by the Area Authorities in 2013;
  • with regard to financing activities, recognition in 2013 of financial income of 14.389 thousands euros, arising from the discounting to present value of GORI's payables to the Campania Region; it is recalled that in June 2013 GORI, the Area Authority and the Campania Region signed an agreement that, inter alia, set the payables related to water purchases at 212 million euros (Group share 78.6 million euros) and established a twenty-year repayment plan with interest payable as of the eleventh year.

Excluding the effects of these extraordinary items, performance for the period was broadly in line with that of 2013.

7. Amortisation, depreciation, provisions and impairment charges - 327.3 million euros

€ millions 31.12.2014 31.12.2013 Restated Increase/ (Decrease) % Increase/ (Decrease)
Amortisation and depreciation 203.5 194.8 8.8 4.5%
Provision for impairment of receivables 110.2 79.6 30.6 38.5%
Provision for liabilities and charges 13.6 37.8 (24.3) (64.1%)
TOTAL 327.3 312.2 15.1 4.8%

Depreciation and any accumulated impairment charges totalled 203.5 million euros, up 8.8 million euros (+ 4.5%). This increase refers to higher amortisation/depreciation as a result of normal investment trends. The item also includes write-downs on some assets, such as the Paliano plant damaged by fire in 2013, and photovoltaic installations as a result of the drop in profitability due to the so-called “stretched feed-in tariff” decree.

Impairment charges amounted to 110.2 million euros, up 30.6 million euros, chiefly due to higher provisions made by Energy companies (+ 13.9 million euros) and water companies (+ 12.4 million euros).

Provisions for liabilities, net of released excess funds, amounted to 13.6 million euros (- 64.1% vis-à-vis previous year). The drop is the combined effect of various events: i) the increase in provisions for early retirements and redundancies (+ 3.6 million euros vis-à-vis 2013) and for tax risks (+ 2.1 million euros vis-à-vis 2013) and ii) the decrease due to the release of ACEA Ato5 liability funds of 18.8 million euros due to the non-allocation of provisions for potential liabilities deriving from the questioned legitimacy of tariffs applied by the company in the years 2006 – 2010.

It is also noted that in the 2013 financial statements provisions were made for the cost deriving from the purchase of energy saving certificates, estimated at 8.4 million euros. This year this cost was registered in operating costs.

8. Finance costs and income - (101.2) million euros

Net finance costs totalled 101.2 million euros, a rise of 1.9 million euros. This result derives from higher financial costs of 2.9 million euros and higher income of 1.1 million euros. The higher costs are the combined result of an increase in interest on bonds and a drops in i) interest on short, medium and long-term borrowing, and ii) factoring fees.

9. Income and costs from Equity Investments - 0.5 million euros

These refer to consolidation using the net equity method of some Group companies, with special reference to Agua de San Pedro, GEAL, Sienergia and Marco Polo in liquidation. The latter item includes the reversal of provisions for liabilities and charges which proved in excess by 2.3 million euros. 

10. Taxation for the period -120.9 million euros

Overall tax expenses for the period were estimated at 120.9 million euros compared to 105.8 million euros at 31 December 2013.

The overall increase recorded in the period, of 15.1 million euros at December 2014, is the combined effect of the increase in profit before tax and the cost of 17 million deriving from the recalculation of deferred taxation on the IRES surcharge due to publication of the Constitutional Court ruling, declaring the unconstitutionality of the tax as from 2015. The tax rate for 2014 was 41.7% (40.8% in 2013).