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Analysis of the Gas Area

As at 31 December 2010, the Gas area is up on the previous year, increasing its contribution to the Groups EBITDA margin by over one percentage point, as highlighted in the following table:

(millions of )31-dic-0931-dic-10Change% Change
Gas area EBITDA174,4193,9+19,5+11,2%
Group EBITDA567,3607,3+40,0+7,1%
Percentage weight30,8%31,9%+1,1 p.p.

The following table shows the main quantitative indicators of the area:

Quantitative data31-dic-0931-dic-10Change% Change
Number of customers (thousand units)1.070,61.072,5+1,9+0,2%
Gas volumes distributed (millions of cubic metre)2.334,42.504,1+169,7+7,3%
Gas volumes sold (millions of cubic metre)2.802,72.914,0+111,3+4,0%
of which trading volumes627,9721,8+93,9+15,0%
Heat volumes supplied (Gwht)476,4534,5+58,1+12,2%

The gas volumes distributed, with the same number of concessions managed, increased from 2,334.4 million cubic metres in 2009 to 2,504.1 in 2010, with a 7.3% increase; this increase is basically in line with the approximately 9% growth registered at a national level; we should note that a portion of the new connection development activities were concentrated in favour of growth in district heating.

The volumes of gas sold increased from 2,802.7 million cubic metres in 2009 to 2,914.0 in 2010, with an increase of 4.0%, due to the weather conditions that affected domestic consumption, and the higher levels supplied to large consumption centres (for example thermoelectric plants) by Hera Trading.

The volumes of heat supplied increased from 476.4 GWht in 2009 to 534.5 in 2010, with a 12.2% increase following significant developments in the Imola area after start up of the cogeneration plant and Bologna.

A summary of the economic results in the area is shown hereunder:

Income statement
(millions of )
31-dic-09% Inc.31-dic-10% Inc.Abs. Change% Change
Operating costs(1.067,8)-82,7%(1.003,3)-81,1%-64,5-6,0%
Personnel costs(63,5)-4,9%(66,9)-5,4%+3,4+5,4%
Capitalised costs15,01,2%27,02,2%+12,0+79,9%

Revenues decreased by 4.2%, falling from Euro 1290.7 million in 2009 to Euro 1237.1 million in 2010 due to the decrease in the price of raw materials, which similarly affects operating costs, but in the opposite sign; this effect prevails over the positive effect of the increase in volumes sold and distributed.

The higher capitalised costs are related to both the accounting reclassification of the plants and works within the Group, and application of the IFRIC 12 standard. If these effects are not considered, a comparison between the periods would show an increase of Euro 5.0 million.

The EBITDA in the Gas area increased by Euro 19.5 million, from Euro 174.4 million to Euro 193.9 million, with a significant increase of the percentage profit, which rose from 13.5% in 2009 to 15.7% in 2010.

This result is due to the following factors: (i) higher volumes of gas sales and better performance in trading activities; (ii) higher revenues from gas distribution. For more information, refer to the specific section regarding the regulatory aspects of the business; (iii) higher volumes of heat supplied and the lower average procurement cost of raw materials, related to the heat sold from the new cogeneration plant in Imola as regards district heating; (iv) better gas purchasing terms for the thermal year 2010/2011 that had an effect on the last quarter of the year.

When comparing the two periods, it should also be considered that there were capital gains in the last quarter of the previous year of about Euro 15 million, related to the transfer of the gas networks in the Ravenna and Imola areas.

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