Investor Relations

On 13 February 2013, ERG, through its subsidiary ERG Renew, closed the agreement with International Power Consolidated Holding Ltd. (100% GDF SUEZ) for the acquisition of 80% of the capital of IP Maestrale Investments Ltd., a primary operator in Italy in the segment of renewable energy from wind power with an installed capacity of 636 MW, of which 550 MW in Italy and 86 MW in Germany. On the same date, the Shareholders’ Meeting of IP Maestrale resolved to change the name of the company to ERG Wind Investments Ltd.

As a result of the acquisition, the ERG Group increased its installed power by 636 MW, reaching a total of approximately 1,232 MW, of which approximately 1,062 MW in Italy, positioning itself as the first wind power operator in Italy and among the largest ten in Europe. The enterprise value of the acquisition is EUR 859 million, i.e. approximately EUR 1.35 million per installed MW. The price for the equity at the closing of the transaction was EUR 28.2 million for 80% of the share capital of IP Maestrale. The agreements prescribe a put and call option on the remaining 20% of the capital, which may be exercised no earlier than three years after the date of closing. The farms
are already entirely financed with non-recourse project financing with maturity in December 2022, issued by a group of primary Italian and international banks. Italian wind farms are located in Sicily (161 MW), Sardinia (111 MW), Campania (95 MW), Puglia (91 MW), Basilicata (55 MW), Molise (37 MW), whilst the five farms in Germany (86 MW) are located in the Centre and North of the country. High quality assets have a producibility of approximately 2,000 hours/year, above the national average.

On 15 January 2013, won the tender that enabled it to benefit from the twenty-year incentives
for the project of a 34 MW wind farm in the municipality of Palazzo San Gervasio (PZ), with a 2.5% bidding discount.

On 22 March 2013 ERG Eolica Amaroni S.r.l. (100% ERG Renew ) executed the project financing loan agreement for its own wind farm located in the Catanzaro province, subsequently commissioned in the fourth quarter of 2012, with an installed capacity of 22.5 MW. The agreement, for a total amount of EUR 35 million and a term of validity of 14 years, was underwritten by the Mandated Lead Arrangers (MLA) ING Bank and Crédit Agricole CIB, which also acts as agent bank, and Cariparma Crédit Agricole CIB as account bank.

On 30 July 2012, the Board of Directors of ERG S.p.A. decided to exit the project for the
construction of a Liquefied Natural Gas (LNG) regasification terminal in the Municipality of Melilli, in the Siracusa province, with a capacity of 8 billion cubic metres per year. The project, launched in 2005 with the incorporation of the equal-share joint venture Ionio Gas in partnership with Shell Energy Europe B.V., in recent years has received the favourable opinions of all bodies having cognisance on safety and environmental compatibility matters and it currently awaits the issue of the Single Authorisation by the Region. The decision not to continue with the project was based on the significant changes in both energy and economic-financial scenarios, which took place as a result of the crisis that started in 2008, and the current configuration of the Group’s activities.

On 30 July 2012, the Board of Directors di ERG S.p.A. resolved to adhere to the new edition of the Corporate Governance Code of listed companies of December 2011. The Report on Corporate Governance and Ownership, to be published in 2013, shall provide punctual information on the Company’s implementation of the changes brought about by the new edition.

3 September 2012 was the closing date of the transaction related to the exercise of the put option by ERG for 20% of the share capital of ISAB S.r.l. LUKOIL paid ERG consideration of EUR 485 million, including the value of inventory. As a result of the transaction, LUKOIL holds 80% of the share capital of ISAB S.r.l., ERG the remaining 20%.
The aforesaid exercise of the put option had been approved by the Board of Directors of ERG S.p.A. on 31 January 2012. Subsequently, the transaction obtained the Antitrust clearance by the European Commission on 27 July 2012.
ERG maintains a presence in the ISAB S.r.l. Board of Directors and management committees, whilst the Operating Processing Agreement was temporarily amended in line with ERG’s new positioning within ISAB S.r.l. ERG and LUKOIL amended the agreements stipulated in 2008, with particular reference to ERG's lock-up period for exercising the put option on the remaining 20% share of ISAB S.r.l., now extended to 1 October 2013.
Moreover, if ERG exercises the put option on the remaining 20% share between the 1st and the 31st of October 2013, the parties will undertake to complete the transaction between the 15th and the 31st of December 2013. All other conditions have remained unchanged.
This transaction enables ERG to reduce its presence in the refining segment in a scenario of persistent crisis and further to strengthen the Group’s financial structure to support future development projects in a challenging financial environment. ERG continues to maintain a significant industrial presence at the Priolo site, where it has important commercial relationships with ISAB S.r.l. for the thermoelectric plants of ERG Power and of ISAB Energy.

On Il 20 April 2012 the Ordinary Shareholders’ Meeting of ERG S.p.A. appointed the new Board of Directors for the 2012 – 2014 period, with Riccardo Garrone confirmed as Honorary Chairman and Edoardo Garrone as Chairman of the company.
The new Board of Directors, of which Marco Costaguta and Umberto Quadrino become members for the first time in place of the directors Giuseppe Gatti and Aldo Garozzo, then appointed Alessandro Garrone as Executive Deputy Chairman and Luca Bettonte as Chief Executive Officer. The Board also confirmed Giovanni Mondini Deputy Chairman and Graziella Merello Executive Director in charge of overseeing the functioning of the internal control system.
Alessandro Garrone, as Executive Deputy Chairman and Strategic Committee Chairman of ERG, will supervise the strategic choices of the Group and the definition of the macro organisational structure, also carrying out activities of direction and coordination of the extraordinary transactions including structured finance.
The Chief Executive Officer was vested with all the powers required for carrying out all the deeds concerning the company activity, except for what is reserved to the Board of Directors (by law or by the Articles of Association) and what is delegated to the other Directors.
 

On 10 May 2012, the Board of Directors of ERG S.p.A. resolved to start implementing the plan to purchase and sell treasury shares, in accordance with the resolution of the aforesaid Ordinary Shareholders' Meeting of 20 April 2012, with the authority purchase a maximum number of shares of 5,416,000 (i.e., 3.6% of share capital) with a maximum expenditure of EUR 35,200,000. On 25 June 2012, ERG S.p.A. notified the market that it had purchased the prescribed maximum number of shares in accordance with the aforesaid plan, for a total price of EUR 25,646,648.88 (carrying value, EUR 4.735 per share). Considering the shares already in the portfolio, ERG holds treasury shares representing 5% of the share capital at an average carrying value of EUR 6.873 per share.

On 17 May 2012 ERG disclosed that on the same date the Board of Directors of the TotalErg investee (51% ERG – 49% Total) had approved the project to transform the industrial site of the Rome Refinery (Raffineria di Roma) – its wholly owned subsidiary – into a major logistical facility for the storage and handling of petroleum products.
The project will be launched upon the final shut-down of the refining systems, expected by the third quarter of 2012.
 

On 27 July 2012, the European Commission issued the instruction whereby, having noted the applicability of the simplified procedure, it recognised that there are no reasons to oppose the completion of the transfer of the ISAB share to Lukoil as per the exercise of the put option on 31 January 2012 and it declared the compatibility of the transaction with the internal market.

On 30 July 2012, the Board of Directors of ERG S.p.A. decided to exit the project for the construction of a Liquefied Natural Gas (LNG) regasification terminal in the Municipality of Melilli, in the Siracusa province, with a capacity of 8 billion cubic metres per year. The project, launched in 2005 with the incorporation of the equal-share joint venture Ionio Gas in partnership with Shell Energy Europe B.V., in recent years has received the favourable opinions of all bodies having cognisance on safety and environmental compatibility matters and it currently awaits the issue of the Single Authorisation by the Region. The decision not to continue with the project was based on the significant changes in both energy and economic-financial scenarios, which took place as a result of the crisis that started in 2008, and the current configuration of the Group’s activities.

On 31 January 2012, the Board of Directors of ERG S.p.A. approved the exercise of the put option for 20% of ISAB S.r.l. for a counter-value of EUR 400 million (excluding inventory). As a result of the aforesaid transaction, LUKOIL will hold 80% of ISAB and ERG will hold 20%.
The transaction is expected to close in the second quarter of 2012.
ERG will maintain a presence in the ISAB Board of Directors and management committees, whilst the Operating Processing Agreement was temporarily amended in line with ERG’s new positioning within ISAB.
ERG and LUKOIL have also amended the agreements signed in 2008, with particular reference to ERG's lock-up period for the exercise of the put option on the remaining 20% of ISAB, now extended to 1 October 2013.
Moreover, if ERG exercises the put option on the remaining 20% between 1 and 31 October 2013, the parties undertake to close the transaction between 15 and 31 December 2013. The other conditions remain unchanged.
This transaction enables ERG to reduce its presence in refining in a persistent recessive scenario and further to strengthen the Group’s financial structure to support future growth projects in a challenging financial environment. ERG continues to maintain a significant presence in the industrial site of Priolo, where it has important business relations with the ISAB for the ERG Power and ISAB Energy thermoelectric plants.
 

On 2 February 2012 LUKERG Renew, joint venture between ERG Renew and LUKOIL- Ecoenergo, signed an agreement with Raiffeisen Energy & Environment, company of the Austrian Raiffeisen banking group, for the purchase of 100% of a wind farm in Bulgaria, in the Dobrich region, for an installed capacity of approximately 40 MW, in operation as from 2009.
The enterprise value of the acquisition is approximately EUR 52 million.
The transaction, subject to the approval of the competent Antitrust Authority, is expected to close by the first half of 2012.
The transaction allows LUKERG Renew, a few months from its establishment, to enter the Bulgarian market of wind energy with a significant market share. As part of a multi-year development plan, the company is also considering additional growth opportunities, both personnel and through acquisitions, in Romania and Bulgaria.
 

On 16 February 2012 ERG Eolica Fossa del Lupo S.r.l. (100% ERG Renew) signed the loan agreement in project financing for its own wind farm located in the province of Catanzaro, which gradually came in production in 2011 and with an installed capacity of 97.5 MW. The loan was subsequently disbursed on 12 March 2012.
The agreement, for a total amount of EUR 126 million and a period of validity of 14 years, was signed by ING Bank as Mandate Lead Arranger (MLA) and documentation bank, by Crédit Agricole CIB as MLA and technical bank and by Centrobanca as MLA, modelling bank and agent bank.
 

On 24 March 2012, the Italian Law Decree no. 1/2012 concerning "Urgent provisions on competition, infrastructure development and competitiveness" was converted with amendments. This law was prepared by the Government with the aim of encouraging private economic initiative, domestic and foreign investment, innovation and higher levels of efficiency in general. The newly introduced legislation contains measures to widen the scope of markets and stimulate competition.
With regard to measures affecting the business areas of the ERG Group, the following are of particular note: the provisions to enhance safety, efficiency and competition within the electricity market (Article 21), simplification of the procedures for the approval of the development plan of the national transmission network (Article 23), measures for the reduction of the price of natural gas for vulnerable customers (Article 13), measures for reducing the supply costs of natural gas for companies (Article 14) and the provisions relating to the fuel distribution sector (Article 17).
These provisions did not have significant effects on the operation of the business lines managed by the Group in the quarter.
 

On 26 October 2011 saw the collection from LUKOIL of €3.5 million by way of final settlement of the transfer price of the stake of 11% of ISAB S.r.l. that took place on 1 April 2011.

On 16 November 2011 ERG sold its equity investment in DSI Servizi Industriali S.r.l. and on 2 December 2011 it sold its equity investment in SODAI Italia S.p.A., a company operating in the treatment of industrial waste sector, banking a total amount of €5 million and taking to the Profit and Loss Account an overall write-down of €3.3 million. SODAI Italia S.p.A. operates using purification platforms situated next to 20 Trenitalia workshops while DSI Servizi Industriali S.r.l. carries out the activity of treating solid and liquid waste on behalf of third parties and SODAI Italia.

On 30 December 2011 ERG Eolica Italia S.r.l. was merged into ERG Renew S.p.A. effective from 1 January 2012. Consequently, from 1 January 2012 onwards, ERG Eolica Italia S.r.l. was
extinguished, the corporate bodies are no longer in office and ERG Renew S.p.A. has taken over all implied and explicit legal relations of the merged company.

On 10 November 2011 ERG and IREN, through the subsidiary IREN Mercato, signed a binding Master Agreement which provides for a contract to be drawn up for ERG to supply IREN Mercato with a total of 2 terawatt-hours (TWh) of electricity each year for six years. The sales price will be index-linked to the market price of wholesale electricity. Furthermore, the Master Agreement provides for IREN Mercato to acquire the ERG branch of business related to the marketing and sale of electricity to a base of more than 15,000 business and mid-business clients, thus ensuring continuity. The consideration to be paid by IREN Mercato to ERG for the transaction, net of trade receivables, is set at €3.3 million. Both contracts, which were then finalised in December 2011, are effective from 1 January 2012 and therefore do not have any economic or financial effects on these Financial Statements.

On 20 July 2011 as a result of the delisting of the Company and of the resignations tendered by the Directors of ERG Renew S.p.A., the Shareholders’ Meeting of that company appointed a new Board of Directors chaired by Mr. Luca Bettonte, who thus replaced Mr. Pietro Giordano. On the same date, the new Board of Directors appointed Mr. Massimo Derchi as Chief Executive Officer of the Company, replacing Mr. Francesco Del Balzo.

On 28 July 2011 the decisive Services Conference of the Ministry of the Environment approved the project for the securing and clean-up of the ISAB Impianti Sud Refinery and on 2 August 2011 ISAB S.r.l. signed the settlement with the Ministry of the Environment within the scope of the Priolo Programme Agreement of November 2008. The settlement agreement worth about EUR 30 million, will definitively end the prolonged administrative dispute with the Ministry of the Environment, and the areas of the South site will become available for future developments.

On 4 August 2011 TotalErg, a joint venture between ERG a Total, executed a five-year loan agreement denominated in Euro and Dollars, with a group of primary Italian and foreign credit institutions. The loan, constituted by a term credit line of EUR 400 million and a revolving credit line of EUR 500 million, for a total amount of EUR 900 million, is senior and it is not secured by any collateral or other guarantees provided by the two shareholders. The loan replaces the EUR 900 million Bridge Loan matured on 30 September 2011, and it enables TotalErg to be financial autonomous for its operating management and for recurring development activities.

On 5 August 2011 ERG Eolica Italia S.r.l., sub-holding of ERG Renew S.p.A., closed the acquisition of 100% of IVPC Power 3 S.p.A., owner of five wind farms, in operation since 2008 between the provinces of Avellino and Benevento, with about 112 MW of total installed capacity.
The enterprise value of the acquisition is about EUR 2.1 million per MW. ERG paid about EUR 100 million to the seller for the equity and repaid an intra-group loan (EUR 33 million as at 31
December 2010).

On 13 September 2011 ERG Eolica Italia S.r.l. acquired 100% of the share capital of Amaroni Energia S.r.l., owner of a fully authorised 22.5 MW wind power project in the Municipality of Amaroni (CZ).

On 3 January 2011 ERG S.p.A. filed with Consob the draft document for the takeover bid made on all shares of common stock representing the entire share capital of ERG Renew S.p.A. not in the possession of ERG S.p.A..

On 13 January 2011 the Board of Directors of ERG Renew S.p.A. approved the notice per Article 103, Paragraph 3 of Legislative Decree no. 58 of 24 February 1998 with respect to the voluntary takeover bid by the parent company ERG S.p.A. on all shares of ERG Renew S.p.A. stock not held by ERG S.p.A..
The Board of Directors acknowledged the fairness opinion issued by the independent financial advisor Merrill Lynch International and deemed the price of EUR 0.97 per share proposed by ERG S.p.A. to be sufficient in financial terms.

On 18 January 2011 Consob approved the document on the takeover bid promoted by ERG S.p.A. on all shares of common stock representing the entire share capital of ERG Renew S.p.A. not in the possession of ERG S.p.A., including the ERG Renew S.p.A. notice per Article 103, Paragraph 3 of Legislative Decree no. 58 of 24 February 1998.

On 18 February 2011 ERG S.p.A. disclosed, after the expiration of the validity of the takeover bid made on all shares of common stock of the entire share capital of ERG Renew S.p.A. not in its possession already, that it had obtained acceptances for a total of 13,962,309 shares, representing 62.748% of the shares involved in the Bid and 10.524% of the share capital of the Issuer, for total value of EUR 13,543,439.73. During the Bid acceptance period, ERG also made acquisitions outside the Bid, purchasing 952,629 shares, representing 0.718% of the share capital of the Issuer. Therefore, taking into account the shares handed over in acceptance of the Bid, the shares already owned on the initial date of the Bid and of those acquired outside the bid, at 18 February 2011 the Bidder held a total number of 125,557,206 shares, i.e. 94.641% of the share capital of the Issuer. Although a share of at least 95% of the capital of the Issuer was not obtained, ERG, deeming the share thus obtained to be sufficient, waived the Condition of the Minimum Level of Acceptances specified in Paragraph A.1.(i) of the Bid Document and announced that it deemed the Condition of Effectiveness of the Bid, specified in Paragraph A.1.(ii) of the Bid Document, to be fulfilled as well.
In consideration of the above, ERG deemed the Bid to be effective and therefore it announced that it would acquire all Shares handed over in acceptance of the Bid according to terms per the Bid Document.

On 24 May 2011 ERG S.p.A., during the sell out period within the takeover bid made on all shares of common stock of the entire share capital of ERG Renew S.p.A. not already in its possession, that it had exceeded the 95% of the aforesaid share capital.

On 27 May 2011 ERG S.p.A. announced the conclusion of the sell out phase of the takeover bid made on ERG Renew stock and the consequent attainment of 96.904% share of ERG Renew capital.

On 7 June 2011, at the conclusion of the takeover bid promoted by ERG S.p.A., ERG Renew stock were delisted from the Electronic Stock Market.

On 31 January 2011, the Board of Directors of ERG S.p.A. approved the exercise of the put option for 11% of ISAB S.r.l.

On 20 May 2011. ERG Renew and LUKOIL-Ecoenergo executed an agreement for the incorporation of the joint venture LUKErg Renew, with its registered office in Vienna, as an instrument of collaboration in the renewable energies market in Eastern European Countries and in Russia

On 21 June 2011 Director and Deputy Chairman Pietro Giordano resigned. Mr. Alessandro Careri was co-opted to replace him.

On 23 June 2011 ERG S.p.A. announced that it had reached an agreement with Maluni S.r.l. (formerly IVPC S.a.s.) to purchase the entire share capital of IVPC Power 3 S.r.l., owner of 5 wind farms, in operation since 2008, between the provinces of Avellino and Benevento, with a total installed capacity of about 112 MW.

On 3 January 2011 ERG S.p.A. filed a draft document with Consob relating to the takeover bid
launched on all ordinary shares making up the entire share capital of ERG Renew S.p.A. not held by ERG S.p.A.
On 13 January 2011 the Board of Directors of ERG Renew S.p.A. approved the notice pursuant to Art. 103, paragraph 3, of Legislative Decree no. 58 of 24 February 1998 relating to the voluntary takeover bid launched by the Parent Company on all shares of ERG Renew S.p.A. not held by ERG S.p.A.
Having taken into account the fairness opinion issued by the independent financial advisor, Merrill Lynch International, the Board of Directors, from a financial viewpoint, deemed ERG S.p.A.’s proposal of EUR 0.97 per share reasonable.
On 18 January 2011 Consob approved the document for the takeover bid launched by ERG
S.p.A. on all ordinary shares making up the entire share capital of ERG Renew S.p.A., not held by ERG S.p.A., inclusive of the notice by ERG Renew S.p.A. pursuant to Art. 103, paragraph 3 of
Legislative Decree no. 58 of 24 February.
On 18 February 2011 ERG S.p.A. announced that - following the end of the tender offer period
on all ordinary shares making up the entire share capital of ERG Renew S.p.A. not already held - it had collected subscriptions for a total of 13,962,309 shares, representing 62.748% of the shares under tender offer and 10.524% of the Issuer’s share capital, for a total of EUR
13,543,439.73. Moreover, during the Offering period, ERG made acquisitions outside the tender offer for a total of 952,629 shares, accounting for 0.718% of the Issuer’s share capital. As a result - considering the shares tendered in the Offer, the shares already held at the Offer’s date of commencement and the shares acquired outside the Tender Offer - the Bidder held a total of 125,557.206 shares on 18 February 2011 which accounted for 94.641% of the Issuer’s share capital. Although a minimum of 95% of the Issuer’s share capital was not reached, ERG deemed the achieved stake satisfactory, waived the minimum acceptance condition under paragraph A.1.(i) of the Tender Offer Document and announced that the condition for validity of the offer under paragraph A.1.(ii) of the Tender Offer Document was deemed to have been fulfilled.
In view of the above, ERG considered the Offer valid and announced its decision to acquire all
shares tendered in the Offer under the terms and conditions set forth in the Offer document.

On 31 January 2011, the Board of Directors of ERG S.p.A. resolved to exercise the put option
for 11% of ISAB S.r.l.
The transaction is part of an agreement signed with LUKOIL in 2008, which sought to establish a Joint Venture for the co-management of the ISAB refinery in Priolo, Sicily. Indeed, the agreement provides ERG with a put option on its shareholding, which may be exercised over four years either in whole or in part, and no more than once every twelve months.
The sale of the 11% shareholding in ISAB to LUKOIL (excluding inventory) is valued at EUR 205 million after a reduction of EUR 15 million as provided by subsequent changes to the original agreement of 24 June 2008.
Subsequent to the transaction, LUKOIL will have a 60% shareholding in ISAB and ERG will have 40%. The Company will continue to be managed by the two partners on the basis of the existing shareholders’ agreement with a joint governance structure for all major business decisions as well an operating agreement which ensures its operational autonomy and independence.
The transaction was completed on 1 April 2011 for a consideration of EUR 241 million, inclusive of inventory and stock value. The transaction has had no impact on this Interim Report on Operations.