Information on corporate governance and ownership structure

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Snam Annual Report 2012 / Report on corporate governance and ownership structure125must be certified by the Electricity and Gas Authority. Having obtained this certification, the Operator isapproved and appointed by the Ministry of Economic Development as the “Operator of the TransportationSystem”. The appointment is notified to the European Commission and published in the Official Journalof the European Union.Furthermore, the Decree: (i) confirmed the system of commercial and functional unbundling ofdistribution activities, as already provided by Directive 2003/55/EC; (ii) enforced the commercialunbundling of the transportation network from the ownership structure for storage activities, in thecases where the transportation network had adopted the ISO model (designed for minor transportationcompanies); and (iii) confirmed, with regard to regasification of liquefied natural gas (LNG), the principleof unbundling the accounts of LNG regasification activities from the other activities in the gas supplychain and identified the duties of the operator of the LNG gas system.In order to comply with the Decree, the Snam Board of Directors decided that the most efficient way toproceed was to transfer the transportation, dispatching, remote control and metering business unit to itswholly owned subsidiary Snam Rete Gas, on behalf of which certification as an Independent TransmissionOperator was then requested.As a result of the ensuing corporate reorganisation, an organisational structure was created which, inorder to reinforce the rules of functional unbundling from the vertically integrated company (eni), ismade up of four operating companies that are direct subsidiaries of Snam (GNL Italia, Italgas, Snam ReteGas and Stogit, alongside the indirect subsidiary Napoletanagas, the “Subsidiaries”), which are focusedon the management and development of their respective businesses, plus a corporate company (Snam),which is responsible for:a) strategic planning, management, coordination and control of the subsidiaries;b) providing business support services to the subsidiaries (including by taking over the services previouslyprovided by eni and its subsidiaries) in accordance with the rules of the Decree, in order to retain thelevels of operating efficiency obtained following the acquisitions of Italgas and Stogit in 2009.In accordance with the provisions of the Decree, Snam Rete Gas has been given a system of governance,responsibilities and organisational structures that are in line with the Decree’s specific requirements,including in terms of personnel and asset ownership.On 8 June 2012, the Electricity and Gas Authority published its preliminary decision regarding thecertification of Snam Rete Gas as an Independent Transmission Operator, pursuant to Article 9, paragraph8 of the Directive and Article 10, paragraph 1, letter a) of the Decree (Resolution 191/2012/E/gas), whichwas followed with a request for an opinion from the European Commission on 1 August 2012. On 4October 2012, the Electricity and Gas Authority concluded the procedure for the certification of SnamRete Gas as an Independent Transmission Operator, through the issuing of Resolution 403/2012/R/gas(“Resolution 403/12”). While the certification process for Snam Rete Gas as an Independent TransmissionOperator was being finalised, Law 27 of 24 March 2012 was passed, which converted into law Decree-Law 1 of 24 January 2012 (“Law 27/12”), Article 15 of which makes it mandatory to ensure the ownershipunbundling of the regulated services of natural gas transportation, storage, regasification and distributionfrom the other activities of the relative competitive activities by 24 September 2013.To this end, Prime Ministerial Decree of 25 May 2012 established the “criteria, conditions and procedureswhich Snam S.p.A. complies with in order to adopt the ownership unbundling model for the domestic gastransportation network and to ensure the full impartiality of Snam S.p.A. towards vertically integratedcompanies that produce and supply natural gas and electricity”.The provisions of the Prime Ministerial Decree of 25 May 2012 create an ownership unbundling regime(hereinafter, “OU”) in Italy which is decidedly more incisive than the one provided by the “Third EnergyPackage”. Indeed, in addition to not imposing an OU obligation for natural gas transportation, Europeanlaw provides for: (i) the possibility of adopting an OU regime only in relation to natural gas transportation,while it provides only for ownership and functional unbundling for distribution, functional unbundling forSnam Annual Report 2012
126Snam Annual Report 2012 / Report on corporate governance and ownership structurestorage and merely the administrative and accounting unbundling for regasification; and (ii) the presence,if an OU regime is in operation, of a “minority” interest in the share capital by the vertically integratedcompany and strong restrictions regarding its voting rights (Article 9 of Directive 2009/73/EC).Conversely, in Italy an OU regime which encompasses all regulated activities of natural gas transportation,distribution, storage and regasification has been opted for, and furthermore the vertically integratedcompany (eni) is required to transfer the entire equity interest it holds in the share capital of Snam.The Prime Ministerial Decree provides that within the shortest time possible allowed by market conditionsbut no later than 25 September 2013, eni will reduce its equity interest in order to transfer control toSnam and subsequently transfer its remaining equity interest in the share capital of Snam. In particular,the Prime Ministerial Decree of 25 May 2012 provides that eni:- within the shortest time possible allowed by market conditions, will transfer to CDP, potentially inseveral tranches, a share that overall will be no less than 25.1% of Snam’s share capital through directnegotiations;- following the transfer of at least 25.1% of Snam’s share capital to CDP, it shall transfer the remainingshare it holds in Snam’s share capital using transparent sales procedures that do not discriminatebetween retail and institutional investors.The Prime Ministerial Decree provides that as a result of purchasing at least 25.1% of the share capital ofSnam, CDP will ensure the independence and full impartiality between eni and Snam. To this end, Article2 of the Prime Ministerial Decree of 25 May 2012 provides that:- even in the event that Snam is included in the separate operation of CDP, all decisions regarding themanagement of Snam’s equity investments shall be adopted by the Board of Directors of CDP, as ifthe equity investment were included in ordinary operations, therefore excluding the planning powersof the Ministry of Economy and Finance and ensuring that members of the CDP Board of Directorsfor administration of separate operation cannot influence these decisions;- CDP’s equity investment in eni shall not change;- the members of the corporate and managerial bodies of eni and its subsidiaries shall not be membersof the corporate bodies of CDP or Snam and their subsidiaries nor will they hold managerial positionstherein or any relation, whether direct or indirect, of a professional or equity nature with thesecompanies or vice versa.In regard to the latter, Snam and its subsidiaries have carried out the necessary verifications proving that theaforementioned incompatibility does not apply to the Directors and managers of Snam and its subsidiaries.With regard to statutory auditors, in the event that such incompatibility is found, the measures which aimto resolve situations of incompatibility have been taken and the Boards of Statutory Auditors of the SnamGroup have been composed so that they conform to the aforementioned regulation.The Prime Ministerial Decree also provides that, starting from the first date between 25 September 2013and the date on which eni lost control over Snam, eni’s voting rights (or those of other gas and/or electricityproducers or suppliers or the companies controlling them or which are controlled by or associated to them)in the Snam Shareholders’ Meeting shall be limited to the provisions of Article 19 of the Decree.Pursuant to the provisions of the Prime Ministerial Decree and upon occurrence of the conditionsprecedent indicated in the relative acquisition contract (including the granting of authorisation by theCompetition Authority), eni completed the transfer to CDP Reti S.r.l. (a company that is wholly owned byCDP) of 30% minus one share of the voting capital of Snam.As a result of eni’s loss of control over Snam, the application for the re-certification of Snam ReteGas as the transmission system operator under the ownership unbundling regime was submitted on 14December 2012.After the completion of the ownership unbundling, the conditions linked to the legal regime for thetransmission operator were fulfilled, and therefore on 19 December 2012 the Shareholders’ Meetingof Snam Rete Gas adapted its Bylaws (effective from 1 January 2013).Snam Annual Report 2012
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