Half-yearly financial Report at June 30, 2013 - A2A

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Half-yearly financial report at June 30, 2013Risks and uncertainties2012 and falling due in November 2019. As described above, on July 10, 2013 A2A S.p.A.additionally issued a public bond for 500 million euro redeemable in January 2021.The bonds that have been issued have terms and conditions that are in line with the market forthat specific type of lending instrument.Credit rating clauses exist in the loan agreements with the European Investment Bank (inparticular for loans originally of 100 million euro falling due in 2014-2016, 200 million eurofalling due in 2023, 200 million euro falling due in 2025/2026, 95 million euro falling due in 2026and 70 million euro of which 30 million euro drawn, falling due in 2027), for ratings lower thanBBB or the equivalent. As a result of the downgrading to Baa3 by the ratings agency Moody’s inNovember 2012 and as the result of talks with the EIB as specified in the loan agreements anaccord was reached with the EIB to amend those agreements which provides for theactivation of the credit rating clause should the rating fall below BBB- or an equivalent level.In addition, the EIB loan agreements for 200 million euro falling due in 2025, 95 million eurofalling due in 2026 and 70 million euro (of which 30 million euro drawn) falling due in 2027,entitle the bank to call for the early repayment of the loan in the case of a change of control ofthe parent, subject to prior notification to the company with an indication of the reasons.219The agreement entered into with UniCredit, brokered by the EIB, for a floating rate loan of 85million euro falling due in June 2018 contains a credit rating clause that provides for acommitment by the company to maintain an investment grade rating for the whole loan term.If that commitment is not met, certain covenants relating to the debt/equity ratio, thedebt/gross operating margin ratio and the gross operating margin/ interest expense ratio mustbe satisfied on an annual basis.A credit rating clause is also contained in the agreements for the two loans taken out withCassa Depositi e Prestiti originally of 200 million euro falling due in 2025 and 95 million eurofalling due in 2023 and comes into effect in the event of a rating below investment grade(BBB-); the latter loan was entered into in June 2013 and has not yet been drawn down.In addition, the agreement for the private bond loan in yen falling due in 2036 – and the relatedcross currency swap derivative – contains a put right clause in favor of the investor (and thefinancial counterparty in the case of the derivative) which comes into effect if the rating islower than BBB- (sub-investment grade).Covenants are included in the agreements for the loan of 1,196 million euro made in May 2012to Edipower S.p.A. and Delmi S.p.A. bearing floating rate interest and falling due in May 2017;these relate to the NFP/EBITDA ratio, the debt service cover ratio and the investment ceiling.This loan is secured by a lien on the shares of Edipower S.p.A. and Delmi S.p.A..
Half-yearly financial report at June 30, 2013Risks and uncertaintiesAs stated above, the A2A Group has obtained a number of revolving committed lines of creditfrom various financial institutions for a total of 1,640 million euro (of which 1,590 million euroobtained by A2A S.p.A.) which are not subject to any covenants, with the exception of:• the revolving line of credit of 50 million euro granted to Edipower S.p.A. (currently notdrawn) having the same covenants as the principal loan;• the revolving credit line (currently not drawn) entered into by A2A S.p.A. in April 2012 for atotal of 600 million euro having a five year term for which a covenant based on the ratiobetween the net financial position and EBITDA must be complied with.The following are included in the agreements for the bond loans, the above-mentioned loansand the revolving committed lines of credit: (i) negative pledge clauses under which theparent undertakes not to pledge real guarantees on its assets or those of its directly heldsubsidiaries over and above a specific threshold; (ii) cross default/acceleration clauses whichentail immediate reimbursement of the loans in the event of serious non-performance; and(iii) clauses that provide for immediate repayment in the event of declared insolvency on thepart of certain directly held subsidiaries.220The loan taken out by the subsidiary Abruzzoenergia S.p.A. is secured by a mortgage of up to264 million euro.Certain financial covenants which are included as part of a loan of 35 million euro taken out bythe subsidiary EPCG with the EBRD (European Bank for Reconstruction and Development), ofwhich 23.5 million euro had been drawn at June 30, 2013, were not fully complied with atDecember 31, 2012 . An agreement has been reached with the lending bank which provides forthe suspension of the effects of these covenants with retroactive effect.As matters currently stand there is no default on the part of companies of the A2A Group.Context riskLegislative and regulatory riskThe A2A Group operates in a highly regulated sector. As a consequence, one of the risk factorsof the business is the constant and not always predictable evolution of the legislative andregulatory situation for the electricity and natural gas sectors, as well as for the sectorsrelating to the management of the water cycle and environmental services.In order to deal with these risk factors the Group has adopted a policy of monitoring andmanaging legislative risk by having various levels of control, in order to mitigate the impact of
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Half-yearly financial Report at June 30, 2013 - A2A

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