Financial Financial statements statements 2013 2013
Piazza della Croce Rossa,1 00161 Roma www.trenitalia.com
TRENITALIA S.p.A. FINANCIAL STATEMENTS AT 31 DECEMBER 2013
Disclaimer
This Annual Report 2013 has been translated into English solely for the convenience of the international reader. In the event of conflict or inconsistency between the terms used in the Italian version of the report and the English version, the Italian version shall prevail, as the Italian version constitutes the sole official document.
TRENITALIA S.p.A.
Trenitalia SpA
Company with a sole shareholder subject to the direction and coordination activities of Ferrovie dello Stato Italiane S.p.A.
Share capital: Euro 1,654,464,000.00 fully paid-up
Registered office: Piazza della Croce Rossa no. 1, 00161 Rome
Fiscal code and Register of companies: 05403151003
R.E.A. (Repertorio Economico Amministrativo, Administrative Economic Register): no.: 0883047
VAT: 05403151003
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OUR MISSION
Trenitalia operates in the sector of services for the mobility of passengers and goods within a national and international context.
For Trenitalia, the basic conditions underlying its mission are the safety of the service, quality, workers’ health, protection of the environment and it considers the importance of the relationship with the customer as the means to achieve a steady competitive advantage and create value for shareholders.
The whole organisation of Trenitalia, which is committed to meeting the needs of customers and the requirements of the market, always guarantees the highest standards of safety and it implements development and modernisation plans in compliance with social and environmental sustainability.
In order to achieve its mission the Company has created an organisational structure split into Divisions, each of which is assigned a specific mission depending on the particular features of its relevant market.
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CORPORATE BODIES AND INDEPENDENT AUDITORS
Board of Directors:
Chairman Marco ZANICHELLI
CEO Vincenzo SOPRANO
Directors Domenico BRACCIALARGHE
Francesco ROSSI
Barbara MORGANTE
Board of Statutory Auditors:
Chairman Silvana AMADORI
Regular members Enrico ROSSI
Roberto SERRENTINO
Substitute members Francesco ROSSI RAGAZZI
Gianpaolo Davide ROSSETTI
Independent auditors: PRICEWATERHOUSECOOPERS S.p.A.
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TABLE OF CONTENTS
Report on operations
Main indicators ...... 8
Main events in the financial year ...... 9 Macro-economic scenario...... 12 Performance of the relevant markets...... 16 Relations with customers ...... 17 Income statement and statement of financial position ...... 22 Human resources ...... 34 Environmental policy and safety ...... 37 Investments ...... 41 The Trenitalia fleet ...... 46 Risk factors...... 47 Relations with Related Parties ...... 47 Trenitalia Group ...... 48 Own shares ...... 54 Other information ...... 54 Outlook ...... 57 Proposed allocation of the result for the year ...... 58
Accounting statements
Statement of financial position ...... 60 Income statement ...... 61 Statement of comprehensive income ...... 62 Statement of changes in equity ...... 63 Statement of cash flows ...... 64
Notes to the financial statements
Preamble ...... 65 Company ...... 65 Criteria for the preparation of the financial statements ...... 66 Accounting standards applied ...... 67 Financial risk management and other risk factors ...... 87
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Information on the balance sheet ...... 99 Information on the income statement ...... 124 Contingent assets and liabilities ...... 132 Fee due to directors and statutory auditors ...... 132 Fees due to the independent auditors ...... 133 Information on the direction and coordination activity ...... 134 Related parties ...... 135 Guarantees ...... 141 Events after the balance sheet date ...... 141
Annex 1 ...... 143
Certification issued by the Manager responsible for preparing Company’s accounting documents and CEO
Board of Statutory Auditors’ and Independent Auditors’ Reports
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Report on Operations
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MAIN INDICATORS
Final balance Final balance Final balance Final balance 2013 2012 2011 2010
ECONOMIC HIGHLIGHTS (amounts in millions of euros)
Operating revenues 5,497.8 5,498.0 5,708.0 5,707.8 Operating costs (4,112.5) (4,147.8) (4,317.0) (4,458.4) EBITDA 1,385.3 1,350.2 1,391.1 1,249.4 EBIT 431.7 418.3 496.2 341.9 Net result 181.5 206.5 156.4 73.1 ECONOMIC AND FINANCIAL RATIOS
ROI 5.2% 5.1% 6.5% 4.3% ROS 7.9% 7.6% 8.7% 6.0% NAT 0.66 0.67 0.74 0.71
PROFITABILITY RATIOS
Personnel (FTE) 33,665 35,770 37,549 40,924 Train-Km/Employee (th.) 7.88 7.27 7.19 6.76 Operating revenues/Employee 163,307 153,704 152,018 139,473 EBITDA Margin 25.2% 24.6% 24.4% 21.9%
FINANCIAL RATIOS (amounts in millions of euros)
Net financial position 6,241 6,339 5,854 6,337 D/E 2.98 3.31 3.22 3.82 Operating Cash Flow 544 242 1,054 342 Investments (excluding cyclical maintenance) (552) (752) (509) (497) Amortisation and depreciation (excluding cyclical maintenance)/Investments 1.2 0.9 1.2 1.4 Financial requirements (98) 481 (483) 39
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MAIN EVENTS IN THE FINANCIAL YEAR
January
On 16 January 2013 the Share Capital of Cisalpino was reduced to CHF 100,750 (a decrease of CHF 162,399,250), thus applying the resolution passed by the Shareholders’ Meeting at the end of 2012. This decision fell within the scope of the shareholders’ decision to dissolve the Company.
February
On 5 February Trenitalia and ECTAA (the European Travel Agents and Tour Operators’ Associations) signed a strategic partnership for the promotion and distribution of Trenitalia tickets and the entire range of its services through all European travel agencies and tour operators. Trenitalia is the first railway company to have concluded an agreement with ECTAA, the association founded in 1961 which combines more than 30 national travel agents and tour operators’ associations.
On 6 February the Trenitalia Board of Directors decided that Trenitalia, in the capacity of Founder, would be a party to the establishment of the FS Italiane Foundation together with Ferrovie dello Stato Italiane and Rete Ferroviaria Italiana, authorising the contribution of 196 items of rolling stock and endowing the Foundation with the library and archives, respectively, of the Library and Archives of the former Materials and Traction Service in Florence.
On 14 February a letter of intent was signed by Trenitalia and Expo 2015 SpA in view of the Milan Universal Exhibition. There will be “train and admission” packages, connections will be boosted and there will be a vast campaign to promote the offer. The projects envisaged in the letter of intent will help to show that trains are the most ecological means of transport in the world, thus taking up one of the most important challenges of the Milan Universal Exhibition: sustainable mobility.
During February Dusmann Service S.p.A. won the Trenitalia tender for the High-Speed Frecce trains cleaning services. Features of the contract are: the introduction of best practices and innovative technologies that are absolutely the latest in the whole of Europe, the reorganisation of the cleaning service on the train and constant attention to customer satisfaction.
March
The first edition of Frecciaviaggi was published, a new quarterly magazine that joins the monthly La Freccia. This latest publishing project is a travel magazine distributed in thousands of copies on the Frecciarossa and Frecciargento trains, at Fiumicino Airport and in travel agencies. It provides its readers with helpful, original and exclusive advice so that they can enjoy our fascinating country to the most.
April
On 11 April Giorgio Napolitano, the President of the Republic, opened the Frecciarossa Village 1000, set up in Piazza del Popolo in Rome to present the new train.
May
On 27 May Trenitalia joined the health and prevention programme to fight addiction to smoking in the framework of the World No Tobacco Day. For four days from 28 to 31 May a team of specialists from
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anti-smoking centres of the Italian Health Service (Servizio Sanitario Nazionale), in collaboration with the staff of the Observatory of Smoking, Alcohol and Drugs (Osservatorio Fumo Alcol e Droga) of the Italian Higher Institute of Health (Istituto Superiore della Sanità), offered Frecce travellers advice on the prevention and treatment of smoke-related diseases.
June
On 23 June the Children’s Train, a special Frecciargento train carrying more than 250 children in difficulty, left Milan at 7.30 a.m. and arrived in Rome just before noon. The little travellers were received by Pope Francis on the platform of St Peter’s Station in the Vatican City.
July
On 3 July there was an exclusive preview of the new Frecciarossa 1000 high-speed train, completely fitted out, at the Bombardier plant in Vado Ligure, named after Pietro Mennea. The new train was ordered by Trenitalia and constructed by Bombardier and AnsaldoBreda and with designer Bertone.
On 9 July a memorandum of understanding was signed by Trenitalia and Enel Energia regarding, in particular, an increase in the efficiency of the Naples Multifunctional Facility (Impianto Dinamico Polifunzionale) for the maintenance of the Frecciarossa trains. Under this arrangement, Enel Energia will check and analyse the energy consumption of the facility, which is connected to Naples Central Station, by installing, operating and reading an electricity load monitoring system. This understanding is a further step in a direction that Trenitalia has taken for some time and which it considers its own particular mission: to make a contribution to energy saving and the reduction of polluting emissions from transport.
September
During the summer more than 21 million visitors chose Trenitalia’s services. The main flows were towards the big cities, the metropolitan areas and the art cities. A summer services schedule was drawn up in order to meet the growing demand for mobility services and to make travelling conditions as comfortable as possible, increasing the number of trains for the destinations most in demand and enhancing customer assistance facilities.
On 20 September the Certification Body conducted the second supervisory inspection at the Foggia engineering shop, also in the presence of ACCREDIA, the Italian accreditation body, to conclude the three-year programme from 2010 to 2013 during which all the Cyclical Maintenance Shops (Officine di Manutenzione Cicilica) were first certified and afterwards had their certification confirmed in accordance with UNI EN 15085 standards for all maintenance work having an impact on welding processes.
The European Sustainable Mobility Week ended on 22 September. The aim of this EU-funded initiative is to encourage the public to use means other than private cars for their daily travel. Each year the Frecce trains enable about 900,000 tons of CO2 to be saved with respect to the amount produced if the same people had used their cars, and 1.4 million tons with respect to aeroplanes.
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October
The third edition of Frecciarosa started during the month of October: this campaign, which promotes awareness and prevention of women’s diseases, was conducted together with the Associazione IncontraDonna charity. The 2013 Frecciarosa programme again included medical consultations on board trains and the distribution of handbooks containing advice and useful tips for the entire female world with the aim of making women, their health and their rights the centre of attention.
November
During November technical on-track tests began in order to obtain approval for the new regional transport train, designed and constructed in Italy by Alstom.
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MACRO-ECONOMIC SCENARIO
The international macroeconomic scenario, still profoundly affected by the consequences of the financial crisis, did not show sufficiently firm signs of recovery during 2013. The expansion of global economic activity and international trade was meagre and irregular, but while the emerging economies slowed down – even if they continue to be the driving force behind global growth – the advanced economies gradually strengthened.
The growth in world economy came to 2.9%, substantially in line with the value posted in 2012 (+3.0%), with a 4.6% contribution from emerging countries and 1.2% from developed countries.
The highest rate of growth on the global scene was again that of China, the second economy in the world. This country’s 7.6% growth rate was obtained despite the Government having set a slightly lower target (7.5%). China is now getting ready to tackle major structural reforms in order to achieve a more balanced growth system, mainly driven by investments and domestic consumption rather than exports.
After overcoming the difficulties arising from the budget and public debt, the US economy gave signs of rediscovered vigour owing to a slow improvement in the labour market and a favourable trend in domestic demand. US GDP rose by 1.9% on average on an annual basis.
Japanese economic growth (+1.8%) was stimulated by the Government’s adoption of a monetary expansion policy, a more flexible fiscal policy and an increase in public expenditure, also to encourage private investments.
Even if growth in international trade was quite brisk in the last part of the year, volumes were stationary on last year’s figures (+2.1%).
Global inflation was limited, more so for the industrialised countries, in which inflation rates were well below 2% (USA 1.5%; Eurozone 1.4%), than for the emerging and developing countries (India 7.8%; Russia 6.9%).
As regards the prices of energy products, Brent quality crude oil ($ 108.6 per barrel) was lower than in previous years in spite of some tension in Libya, in which the offer was well below the country’s potential, mitigated by an increase in supply from Saudi Arabia.
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Global Economic data 2013 2012
GDP (% change over the previous year) World 2.9 3.0 Developed countries 1.2 1.3 USA 1.9 2.8 Japan 1.8 1.4
Eurozone -0.4 -0.6 Emerging Countries China 7.6 7.9 India 3.5 4.1 Latin America 2.6 2.4
World trade 7.1 2.1
Oil ($per barrel) Brent 108.6 112.1
Source: Prometeia Rapporto di Previsione gennaio 2014 (Prometeia Forecast Report of January 2014)
Unlike the expansionary monetary policies adopted in the United States and Japan, monetary rigour and attention to borrowing limits persisted in the Eurozone. GDP in the area as a whole fell by 0.4%, feeling the effects of lower consumption owing to the squeeze on household income caused by the high jobless rate, which touched 12% with higher rates in Spain and Greece, countries in which nearly 27% of the population are out of work. At the tail-end of the year, however, there was a recovery, slight as it was, as a result of a sluggish increase in domestic demand and a gradual rise in exports. Core European countries such as Germany performed more steadily, while recovery was much slighter in the peripheral countries.
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Eurozone Economic data 2013 2012 GDP (% change over the previous year)
-0.4 -0.6 Eurozone
0.5 0.9 Germany
0.2 0.0 France
-1.8 -2.6 Italy
-1.2 -1.6 Spain Inflation (% change over the previous year)
1.4 2.5 Eurozone
1.6 2.1 Germany
1.0 2.2 France Italy 1.3 3.3 Spain 1.5 3.0 Domestic demand (% change over the previous year)
-1.0 -2.2 Eurozone
0.9 -0.2 Germany
0.4 -0.9 France Italy -2.5 -5.2 Spain -3.1 -4.0
Source: Prometeia Rapporto di Previsione gennaio 2014 (Prometeia Forecast Report of January 2014)
The Italian economy, engaged in a laborious process of putting the country’s accounts on a stable footing again, slowly marched towards an exit from the recession. The economic situation improved slightly during the autumn months after a long period of decline. However, the change in the GDP on average on an annual basis was still strongly negative (-1.8%).
The trend of the economic cycle showed a drop in GDP (-0.6%) in the 1st quarter, but at a slower rate than the last quarter of 2012. GDP also showed a reduction in the 2nd quarter, but at a lower rate (-0.3%). In the third quarter GDP stabilised, interrupting a fall that had persisted since the summer of 2011, and increased by 0.4% in the fourth quarter (according to the last data of the national accounting).
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Italy Economic data Q1 Q2 Q3 Q4 % changes GDP -0.6 -0.3 0 0.4
Domestic demand -0.4 -0.7 0.3 0.2
Household spending -0.5 -0.5 -0.2 0 PA* and ISP** spending 0.1 0 0 -0.3
Gross fixed capital formation -2.9 0 -0.6 -0.2 constructions -4 -0.9 0 -1 other investment assets -1.7 1 -1.2 0.7
Imports of goods and services -0.5 -0.7 2 0.1 Exports of goods and services -1.2 0.7 0.7 0.5 Source: Prometeia Rapporto di Previsione gennaio 2014 (Prometeia Forecast Report of January 2014)
* PA = Pubblica Amministrazione, Public Administration **ISP = Istituzioni Sociali Private, Private Social Institutions
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PERFORMANCE OF THE RELEVANT MARKETS
In spite of the weakening of the economic cycle and the consequent decline in domestic and international trade, during 2013 there was an attenuation of the negative trend of previous years in the overall performance of the transport sector, both in the passenger and in the cargo segment.
The results achieved in the cargo sector in a scenario of a fall in industrial production (-3.0%), slightly positive exports (+1.3%) and a sharp drop in exports (-9.5%) constituted, on the whole, an inversion of the trend, in line with the situation in the Italian economy. For example, the Air transport sector recorded an increase of 1.9% in tonnes handled; once again, Milan Malpensa airport ranked first by volume of cargo handled (421 thousand tons, equal to about 50% of the total), with an increase of 3.8% compared to 2012. Rome Fiumicino ranked second, with 136 thousand tonnes handled (-0.6% compared to the previous year). Highway traffic also showed a fall compared to 2012: a total of about 16 billion heavy vehicles/km was recorded between January and November, showing a decrease of 2.7% compared to 2012. The maritime transport of containers in the main Italian ports showed an increase of 4.0% in the first half of the year. The driving force behind this recovery was Gioia Tauro, the biggest Italian transhipment port, with a 15% growth.
The passenger segment still recorded negative trends, to a more or less pronounced extent, for all means of transport. Air transport proved to be badly affected by a reduction in the services offered by the traditional carriers, which were no longer in a position to remain widely represented in the Italian airport system, in favour of low-cost airlines and increasing competition from high-speed trains on some of the country’s major routes. During 2013 about 144 million passengers passed through the 38 Italian airports monitored by Assaeroporti (the Italian association of operators of the Italian civil airports), recording a decline of 1.9% compared to 2012. Once again, Rome Fiumicino airport ranked first in passenger transport, with more than 36 million passengers (-2.2% compared to 2012), followed by Milan Malpensa airport with about 18 million passengers (-3.1% compared to 2012). Highway traffic also recorded a decline, which produced about 54 billion light vehicles/km from January to November, corresponding to a decline of 1.7% compared to the same period in 2012. In the maritime transport sector, the cruise segment reported a growth of about 2% according to the last Cemar projections.
The traffic results of the main European railway companies
Demand for railway transport in Europe has been at a standstill for several years owing to the unfavourable economic scenario. According to the provisional data to hand at the moment (source: UIC, Union internationale des chemins de fer, International Union of Railways), there was a decline in the railway passenger transport sector (-0.4% compared to 2012), while the fall in the railway cargo transport sector was even more pronounced (-5.1% compared to 2012) noticeably exceeding the decrease in industrial production in the Eurozone (-0.8% compared to 2012).
In the cargo sector, in spite of the European Community’s adoption of measures and instruments to strengthen competition, railway undertakings continued to linger in a phase of stagnation. The Spanish Renfe was the best among them, with a 16% increase in volumes in tons/km. While there was an overall decrease in the amount of freight carried by the French Sncf (-1.8%) and by the German DB AG (-5.6%).
Renfe stood out in the passenger sector too, recording a 16% increase in its volumes, expressed in passengers/km. While there was a decline in passengers/km transported by Sncf (-1.5%) and DB AG (-2.1%).
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RELATIONS WITH CUSTOMERS
“Market Service” – National and International Passenger Segment
2013 was characterised by an improvement in the offer in the Market Service segment and by the gradual completion of diversification in service levels; the segment’s offer accounted for +13% compared to 2012. 2013 was also characterised by the full operation of competition in the High Speed segment.
Pricing policy for all the products of the Division was subject to a substantial process of change represented by a new pricing structure, which was presented to customers, with a mixture of flexibility and low cost: BASE – ECONOMY - SUPERECONOMY. Furthermore, starting from April 2013, the Economy fares were also extended to the Executive service level, in order to harmonise the range and expand the potential market.
Apart from the price range, fares were offered specially conceived for certain customer targets or particular occasions related to special events: Speciale 2x1, Bimbi Gratis, CartaFreccia Special.
Promotional offers also continued for customers buying one-day or week-end return and fares with some seats also on the Frecciabianca trains and Premium and Executive services and the possibility of one change of time per leg.
The Night + High-Speed offer was maintained for night-train travellers. It offers a special price for a journey on the High-Speed Frecciarossa and Frecciargento trains combined with a night connection in order to make travel from one part of the country to another more efficient and more feasible.
During the year the number of customers with Cartafreccia programme loyalty cards exceeded the 2.5 million threshold. This programme was enriched with exclusive extra benefits, such as the possibility of buying journeys at special prices.
2013, in consideration of the positive results reported in 2012, saw the confirmation of Trenitalia into the world of sports marketing with the football clubs that are included in the Frecciarossa network: Juventus, Turin, Milan, Inter, Bologna, Fiorentina, Rome, Lazio and Naples.
The percentage of medium/long-distance trains in the market Service segment that arrived at their destination in time or in any case with a delay of 0-15 minutes band remained stable, beyond 96%. The customer satisfaction data recorded by entities outside the company showed the overall travel satisfaction level, at the end of the year, equal to 93.6%, showing a slight improvement compared to the results recorded at the end of 2012.
The main developments in 2013 were:
Frecciarossa
During the year the restyling of the ETR500 fleet were completed for the Frecciarossa train with the adaptation of the new Executive, Business, Premium and Standard environments.
At the same time work started on the first Bistrò Frecciarossa carriages, which will gradually replace the present restaurant cars.
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WIFI and UMTS internet services continued being consolidated and improved with the extension of the entertainment service using the Android system at terminals and enriching the programme by including films that can be seen free of charge.
High-Speed Frecciarossa services were further boosted on the Turin, Milan and Rome lines, cutting the minimum journey time between Rome and Turin down to 3 hours 52 minutes. This allowed the Rome to Milan line to be better served, also as a result of the creation of new fast Bologna-Rome-Naples links and more services for travellers returning after the week end.
A new Frecciarossa Milan-Adriatic line service was launched during 2013 in order to adjust supply to demand and 32 more trains now stop at Rome Tiburtina.
The percentage of Frecciarossa trains arriving at destination on time or, in any case, in the 0–15 minutes band exceeded 98% in 2013. The customer satisfaction data, recorded by entities outside the company, showed a level of overall travel satisfaction of 96.1% at the end of the year, in line with the results recorded at the end of 2012.
Frecciargento
During 2013 substantial investments were made in the entire Frecciargento fleet to raise the standards of comfort and make it easier to use technological services, in fact, the upholstering of the first-class seats on the ETR 600s and ETR610s in leather (seat, back, headrest and armrest) and of any devices necessary for providing on-board train multimedia services, was completed. The Frecciargento Portal was opened to customers on 18 December, containing the same range of services as those on the Frecciarossa Portal: a free- of-charge WIFI internet connection, multimedia entertainment and travel information.
In 2013 Frecciargento services were further expanded by more trains between Venice/Bolzano and Naples and more trains stopping at Rome Tiburtina: 36 additional trains on the Rome to Venice service stopped at this station.
The percentage of Frecciargento trains arriving at destination on time or, in any case, in the 0–15 minutes band exceeded 98% at the end of the year. The customer satisfaction data showed a level of overall travel satisfaction of 92.5% at the end of the year.
Frecciabianca
The Frecciabianca product travels on traditional lines and serves three main lines: Padana Cross Road (Turin- Milan-Venice/Udine/Trieste), Adriatic (Milan-Bologna-Ancona-Bari/Lecce/Taranto) and Tyrrhenian (Rome- Genoa-Milan). During 2013 the work of opening bar services on all Frecciabianca connections was completed and the quarterly Frecciaviaggi magazine began to be distributed. The process of the replacement of the ordinary and ETR460 rolling stock livery with the new Frecciabianca markings continued, while the first two ETR460 materials were also completed.
The percentage of Frecciabianca trains arriving at destination on time or, in any case, in the 0–15 minutes band exceeded 94% at the end of the year. The customer satisfaction data showed a level of overall travel satisfaction of 92.5 at the end of the year.
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International traffic
In June a cooperation agreement was signed with the Swiss Railway Company (FFS). The objective of the arrangement is to improve transport service quality between the two countries by providing additional trains into Milan and renewing the rolling stock. It was entered into in order to satisfy growing demand for services between the two countries after the opening of the San Gotthard and Ceneri Base Tunnels and EXPO 2015 in Milan.
From the pricing point of view, various promotional offers were made on the Italy-Switzerland EuroCity trains and the number of seats reserved for the promotional offers on Euronight Thello, Germany Night and Austria trains was increased.
“Universal Service” Passenger Segment
In line with the provisions of the service contract for long-distance routes, 2013 saw the confirmation of the model of products defined by the customer, the Ministry of Infrastructures and Transport. This offer provide, among other things, for some night trains from the South to stop at the Rome hub and from this hub passengers travelling towards the cities of northern Italy can continue their journey using High-Speed trains. The Notte + AV (“Night + High-Speed Train”) promotion was confirmed for such travellers, which has been mentioned above.
The percentage of medium- and long-distance Universal Service and Other trains that arrived on time or not more than 15 minutes late exceeded 90%, in any case showing a decline compared to 2012, also as a result of the introduction of new door control technology.
Regional Transport
In 2013 the Regional Transport segment recorded a 3.3 %, increase in revenues from traffic compared to the previous financial year. This change was mainly linked to the increase in the fares applied by the regional Governments to offset, albeit partially, the reduction in fees in some cases; these changes entailed a 4.2% increase in average unit revenues; the production of trains/km fell by 0.8% in consideration of the cuts applied by some regional Governments. 2014 is the year in which most of the contracts with the Regional Governments expire. The Regions may, if they decide to do so, extend the present contracts for another six years with amendments that must be agreed by the parties. In this context, the Emilia Romagna Regional Government has extended the Service Contract up to 30 June 2015, while starting the tender for the awarding of railway services, providing for a coverage of about 22 years. In November 2013, the company submitted its expression of interest for the participation in the tender.
In December 2013 the Veneto, Abruzzo and Tuscany Regional Governments informed that they were to start tender procedures for the awarding of railway services, while the publication of the call for tenders for the Friuli Venezia Giulia Region is expected to be published in the first four-month period of 2014. The Service Contract between the Special Regions (Regioni a Statuto Speciale) and the Ministry for Infrastructures and Transport has been awaiting renewal for a long time and the company is continuing to provide services on the basis of requests that the Ministry is confirming from one year to another; the Ministry’s requests also involve
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the extensiveness of the services. At the same time the Ministry has been gradually devolving responsibility to the Special Regions; in fact, following the programme agreement that was entered into by the Sardinia Regional Government and the competent Ministries on 7 June 2012, the procedure was completed for the transfer of financial resources from the Ministry of Economy and Finance to the regional government itself. The same procedure is being conducted with the Sicily Regional Government. According to the latest legislative measures, the State remains responsible for the services provided for the Valle d’Aosta Regional Government and the joint services.
The percentage of regional transport trains that arrived at their destination in the 0-5 minutes band exceeded 92%.
Customer satisfaction data recorded improvements, specifically the customer satisfaction relating to the overall travel achieved 73.8% in 2013 compared 71.9% in 2012; while, as regards the quality of cleanliness perceived on board regional trains showed a significant improvement compared to 2012, passing from 50.2% in 2012 to 54.8% in 2013, compared to 33% a few years ago. This result was achieved after a full review of the entire cleaning cycle and of the several changes in the contractors made in previous years.
A number of measures have been taken and investments made to make it easier for passengers to make use of the services:
electronic tickets are also now available on regional trains; it is no longer necessary to print a ticket purchased on line; it is sufficient to show the rail staff on the train the file received on the passenger’s computer, smartphone or tablet after the purchase on screen. Electronic tickets allow travel on the regional train of choice or within the four hours following purchase on the same stretch. May be purchased from seven days before the journey date to 30 minutes before departure; the project for the replacement of the former self-service ticket machines, which involved the installation of 1,265 new machines in main passenger traffic stations, including some with substantial passenger flows, such as universities and exhibition districts, has been all but completed. The quality and security of the new self-service machines are far superior to the former generation machines, are very easy for customers to use and allow the purchase of fares for all company’s domestic services not only in cash but also by credit or debit card; the installation of new ticket reading machines has also been completed. These machines, among other functions, enable new ticket recognition methods to be used, such as for example through the reading of the bar code and cards with microchips; the first electronic ticketing system was tried out in Piedmont, as also integrated through cards with microchips.
Cargo
The transport segment, the railway traffic was affected by the difficult economic situation of the Italian market and recorded a reduction in international traffic, from and to Germany, Austria, France, Poland, Slovenia and Hungary, while the domestic railway transport remained almost stable or recorded a minimum decline.
International railway transport in all the commodity sectors were affected by the crisis to an equal extent, the most marked declines being in the traditional traffic sector, such as those in the steel and automotive
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industry, while intermodal traffic held well, thanks above all to container movements from and to the ports of Genoa, La Spezia, Trieste and Livorno.
Domestic cargo transport performed better than the previous year. In the automobile, steel and chemical sectors the loyalty policies adopted for big customers that stabilised traffic by means of long-term contracts succeeded in limiting the effect of the crisis in these sectors. In the Raw Materials and Consumer Goods sectors, the steady increase in transportation for the Large-Scale Retail Trade (Grande Distribuzione Organizzata) (mineral waters and various consumer goods) managed to offset the serious decrease in the amount of raw materials handled for industries such as building and manufacturing. There was also a recovery, however marginal it was owing to poor demand, in the transportation of timber from Austria.
Combined maritime and land domestic traffic fluctuated considerably with a decline over the year as a whole notwithstanding the creation of new services and the reorganisation of those already existing in order to raise the quality of the range offered.
Nonetheless, even if domestic transport volumes held, this was not enough to offset the losses on international traffic due to constant falls in demand.
The complex project of rationalisation of the Cargo Division was pursued, enabling the plan for reorganising internal corporate processes to be put in hand so that permanent economic stability could be attained in this division in the shortest possible time.
2013 Financial Statements 21 TRENITALIA S.p.A.
INCOME STATEMENT AND STATEMENT OF FINANCIAL POSITION
Income Statement
amounts in millions of Euro 2013 2012 Change
Operating revenues 5,497.8 5,498.0 (0.2)
- Revenues from sales and services 5,272.8 5,279.3 (6.5) - Other revenues 225.0 218.7 6.3
Operating costs (4,112.5) (4,147.8) 35.3
EBITDA 1,385.3 1,350.2 35.1
Amortisation and depreciation (932.7) (924.6) (8.1) Write-downs, impairment losses (value write- (20.8) (7.3) (13.5) backs)
EBIT 431.7 418.3 13.4
Finance income and costs (169.3) (202.3) 33.0
PRE-TAX RESULT 262.4 216.0 46.4
Income taxes (80.9) (9.5) (71.4)
NET PROFIT (LOSS) FOR THE YEAR 181.5 206.5 (25.0)
2013 recorded a Net Profit of Euro 181.5 million compared to a profit of Euro 206.5 million in 2012; in this regard, it should be noted that the 2012 net profit benefitted from the recognition of deferred tax assets of about Euro 72 million through profit and loss. Accordingly, net of this effect, the net profit also showed a sharp improvement. EBITDA passed from Euro 1,350.2 million in 2012 to Euro 1,385.3 million in 2013 with an increase of 2.6%, the impact of 25.2% on operating revenues in 2013, up compared to 24.6% recorded in 2012.
EBIT also recorded an increase of 3.2% coming to a positive result of Euro 431.7 million compared to Euro 418.3 million in the previous year, with an impact of 7.9% on operating revenues in 2013 (7.6% in 2012).
The elements in the scenario that affected performance in 2013 cannot be overlooked in analysing the net profit for the year. Particularly to be considered is the persistence of the negative performance of the Italian and world economy, which had an unfavourable effect on all business sectors, even if to different degrees of intensity, and Trenitalia’s high-speed train competitor completed its entry into this market in the same period. Even against this background of greater difficulty, the Company managed to attain important objectives, not only in terms of the quality of its range, and succeeded in keeping and improving its economic fundamental, compared to previously years.
2013 Financial Statements 22 TRENITALIA S.p.A.
The Company succeeded in carrying out measures that enabled it to keep up its leading position in the High- Speed train market by continuous adjustments and improvements to the marketing mix, product differentiation and a pricing policy aimed at meeting the needs of the different categories of customer. The operations involved in changes to Universal Service Medium- and Long-distance and Regional Transport services continued in order to adapt them to customers’ needs, in strict compliance with service contracts.
The Cargo Division went on with the complex process that it has been conducting over the recent years for the rationalisation/reorganisation of its operating structure in order to adapt it to market requirements and lay the foundations for achieving economic and structural stability. Among market operations, the Cargo Division is the Company’s business area that has been affected more than others by the serious economic crisis that is affecting industry in all sectors.
The table below summarises the trend in the two main economic indicators of the company. It should be pointed out that, for a correct reading of the unit values from previous years, operating revenues and costs of the table reported below are net of charges-back to Trenord (2010 and 2011), as they relate to clearing entries, with a substantial zero balance on the income statement. This approach allows a reading that is not impaired by costs that no longer concern the production of Trains/Km of Trenitalia. This figure points to the progress that the Company has made towards financial stability, even considering the complex factors involved in the sectors of which it is composed.
ITA GAAP IAS
22 21.1 21.0 20.7 20.2 20 18.9
17.9 18 16.8 15.7 16 15.8 15.9 15.7 15.5 15.2 15.0 15.2 14 15.0
12 2006 2007 2008 2009 2010 2011 2012 2013
Costs for Train Km Revenues for Train Km
The total trains/Km includes trains/Km recorded by other railway companies and realised on the Cargo Division’s foreign networks on a subcontract basis.
2013 Financial Statements 23 TRENITALIA S.p.A.
Operating revenues
The table below reports the main indicators relating to the three Business Divisions through which Trenitalia operates in the relevant markets.
For the National and International Passenger Division, some indicators are reported for “Market services” for which there are no public grants and, therefore, there are no regulations laid down by service contracts and “Universal Service” to which the trains which are produced on the basis of the specific service contract with the Government are allocated.
2013 2012 Delta %
National and International Passenger
Transport Division Operating revenues (€/mil.) 2,236 2,224 0.5%
Passengers / Km (mil.): 18,862 18,444 2.3% - of which: Market Service 14,550 13,987 4.0% - of which: Universal Service 4,312 4,457 -3.3% Trains /km (thousand) 77,531 71,058 9.1% - of which: Market Service 53,888 48,098 12.0% - of which: Universal Service 23,642 22,960 3.0%
Regional Transport Operating revenues (€/mil.) 2,711 2,689 0.8%
Passengers / km (million) 18,890 19,045 -0.8% Trains / km (thousand) 154,531 154,785 -0.2%
Cargo transport Operating revenues (€/mil.) 637 666 -4.3%
Tons / km (million) (*) 14,953 15,412 -3.0% Trains / km (thousand) (**) 33,115 34,261 -3.3%
Other Revenues/Eliminations (***) -86 -81 6.5%
Total Operating Revenues 5,498 5,498 0.0%
(*) Includes foreign Tons/Km.
(**) Includes Trains/Km from other railway companies and realised in foreign countries. (***) Eliminations related to the offsetting of interdivision items.
Revenues from sales and services
Revenues from sales and services recorded a slight decrease of 0.1%, coming to Euro 5,272.8 million at the end of the financial year, compared to Euro 5,279.3 million in 2012. Below are summarized the changes that occurred by individual type of revenues:
2013 Financial Statements 24 TRENITALIA S.p.A.
Change Description 2013 2012 %
Revenues from Traffic 3,121.6 3,107.1 0.5% Revenues from Service Contracts 2,021.7 2,022.2 0.0% Revenues from other transport-related 129.5 150.0 -13.7% services Total 5,272.8 5,279.3 -0.1%
Revenues from Traffic
Revenues from National and International Passenger Transport: The medium- and long-distance passenger transport recorded a positive performance in revenues from traffic of Euro 13.5 million (0.7%) compared to 2012. This performance was characterised by different dynamics between the different types of service:
Market Services Segment: An overall increase of 1.1%, equal to Euro +17 million, was recorded. This performance was due to the increase in revenues from “Freccia” products for about Euro 39.4 million, mainly related to a better offer in the High Speed system in the Turin-Milan-Naples-Salerno section; the positive performance of the “Freccia” products was partially offset by reduced revenues from services for which there is little demand and with negative margins, which forced the Company to outline a rationalization plan; this transaction involved, in particular, some InterCity day trains (Euro -10.8 million); a decline was also recorded in revenues from international trains (Euro -8.4 million) and charter trains for religious tourism (Euro -3.2 million). The increase in revenues from “Freccia” products is particularly worthy of mention, despite the full operation of competitors in the High Speed segment market. Universal Service: note a reduction of Euro 3.6 million (-1.2%). This reduction was affected by the gradual shifting of the share, on long-distance routes, to alternative means of transport in line with what has already occurred in Europe.
Regional Passenger Transport:
Revenues from traffic in the regional transport segment recorded an increase of Euro 26.2 million (+3.3%), compared to 2012; this change was mainly linked to the increase in tariffs equal to 4.2%; trains/km went down by 0.2% after the Regional Governments carried out a review of services in order to counter the growing difficulties in local authority finances. In general terms, however, passenger/kilometres only went down by 0.8%.
2013 Financial Statements 25 TRENITALIA S.p.A.
Cargo Transport:
In 2013 the Cargo Division recorded overall revenues from traffic equal to Euro 478.6 million, with a decrease of -5.1% compared to 2012. The Company reported an overall amount of 33.1 million trains/km, recording a decrease (-3.3%) compared to 2012. 4.8 million trains/km were produced abroad, showing an increase of 4.2% compared to 2012. The main business sectors, which follow the relevant product areas, recorded the following performance:
Traditional Transport Business
In 2013 the Traditional Transport Business recorded a decrease of -4.8% in volumes, compared to 2012, in terms of trains/km produced, with a decrease of -8.2% in turnover compared to 2012.
Below is an analysis of the performance of the main traditional transport business segments:
Iron and steel segment: 2013 closed with an overall decline of -3.8% in trains/km compared to 2012 and a decrease of -9.5% in revenues compared to the previous year, in particular as a result of a decline in the production of steel. Automotive segment: 2013 closed with a reduction of -7.1% in volumes in terms of trains/km, above all because of lower traffic from and to international routes, with a decrease of -10.4% in revenues compared to 2012. Chemical segment: this segment recorded a decline of -9.5% in the overall amount of trains/km compared to 2012, with a more limited reduction of -2.2% in revenues. Other sectors - Raw Materials and Consumers’ Goods: the sector of building materials showed significant turnover losses also in 2013, as did the timber and paper sectors. Railway transport in this sector fell by -6% over 2012 in terms of trains/km, while the acquisition of new traffic (mineral water and refrigerated products) partly made up for the decrease in other commodities.
Combined Transport Business
The performance of the European container market was uneven in the extreme, and the trend of railway traffic in terms of trains/km was therefore also irregular: there was a slight recovery in domestic freight (+1.1% in terms of trains/km compared to 2012, +0.3% for turnover), thanks to the substantial turnover in the customer portfolio of the combined maritime traffic, which was sufficient to counter-balance the loss of traffic on combined land traffic. Turnover held up well in spite of lower international transport volumes (- 12.1% in terms of trains/km compared to 2012), equal to +2.5% compared to 2012. There was a more pronounced decrease in volumes in the international combined land traffic since it tended to be increasingly related to the reduction in the volumes handled by international MTOs (Multimodal Transport Operators) owing to poor demand.
Revenues from Service Contracts
Revenues arising from fees for public service contracts (Regional Governments and the Government) remained substantially unchanged compared to 2012.
The performance of the various contracts was uneven. No changes were recorded in the fees applied to service contracts for Medium- and Long-distance and Cargo transport compared to the previous year. While
2013 Financial Statements 26 TRENITALIA S.p.A.
fees for services acquired by the State for Special Regions (Regioni a Statuto Speciale) showed an increase of about Euro 22.6 million as a result of the recognition of revenues related to the performance of some services which has been formally required by the Ministry of Infrastructure and Transportation.
As regards service contracts with Ordinary Regions (Regioni a Statuto Ordinario), public finance obligations entailed a reduction of about Euro 15.5 million in the fees, which was partially offset by increased fares that allowed the Regional governments to meet the commitments undertaken under the contracts; these two factors did not affect the financial equilibrium of the contracts themselves.
Revenues from Other Transport-Related Services
Revenues from other transport-related services recorded an overall decrease of Euro 20.5 million compared to 2012. This decrease mainly arose from changes in the following kind of fees:
A decrease for accompaniment, handling and drive services attributable to the services provided to Trenord S.r.l. (Euro -5.4 million); A decrease in rolling stock maintenance services on account of third parties (Euro -15 million), which was mainly relating to a reduction in the services provided by the Company’s Technical Head Office in favour of Trenord S.r.l..
Other Revenues
Other Revenues recorded an increase of Euro 6.3 million compared to 2012.
The following are the main items in which there were changes compared with 2012, mainly attributable to the treatment of some non-core business items between the two financial years:
an increase in revenues from rolling stock scrapping for Euro 16.1 million; an increase in fees receivable for Euro 2.1 million; a decrease in withholdings for travel tickets and reimbursements for Euro 3.9 million; a reduction in general services and amounts debited to Trenord srl for about Euro 2.6 million; lower insurance indemnities for Euro 5.1 million.
Operating costs
Operating costs recorded an overall improvement of Euro 35.3 million (-0.9%) compared to 2012.
This effect was due to the dynamics reported below:
Personnel cost recorded an improvement of Euro 59.4 million (-3.0%). This reduction was mainly due to the combined effect of some factors such as:
lower costs for reduction in average staff (FTE) by 2,105 units, with a positive effect of about Euro 111.3 million; higher costs of Euro 89.0 million, as a result of an increase in average unit costs following the full application of the financial terms and conditions of the collective labour agreement;
2013 Financial Statements 27 TRENITALIA S.p.A.
higher revenues from reimbursements for personnel seconded to other group companies for Euro 4.5 million; higher personnel-related costs for Euro 8 million relating to luncheon vouchers and clothing; higher labour litigation costs for Euro 4.9 million; lower accruals to the income support fund (fondo di sostegno al reddito) for Euro 33.8 million; for more details, reference should be made to the 2012 financial statements; the release of an excess portion of the income support fund (for Euro 11.6 million) following the final discounting-back of projects to be included in the fund compared to the regulatory rules.
Other costs, net of capitalization for cyclical maintenance and other operations for revamping of rolling stock, recorded an increase equal to Euro 24.1 million (1.1%). This item was affected by:
higher charges connected to transport services (production and circulation of trains) for about Euro 1.3 million as a result of an increase in the costs of access to the infrastructure (toll and electricity) for Euro 27.9 million arising from an increase in the commercial offer in the long-distance Market Services segment, net of the effect of Euro 9 million arising from a reduction in the tolls on the High Speed routes starting from September; this increase was almost fully offset by lower costs for rolling stock hire, equal to Euro 16.2 million, which were mostly due to the termination of a contract in 2012, regarding the hire of the ETR 610 rolling stock of Cisalpino, following the acquisition of the same that took place in accordance with the agreements which provided for the dissolution of Cisalpino; lower costs for the purchase of fuels, equal to Euro 3.4 million, as a result of both lower consumption and lower prices and costs for the ferry services provided by the infrastructure manager, equal to Euro 2.4 million; lower shunting costs of about Euro 14 million in the Cargo segment after the rationalisation of the train formation process; higher costs of on-board train services (Euro +17 million) arising from an increase in costs for catering services (Euro +15.4 million) as a result of both an increase in the number of trains (+12% of trains/km on Market Services trains compared to 2012) and an increase in the passengers transported (+4% of passengers/km on Market Services trains compared to 2012), to which welcome drink costs are correlated; higher costs of on-board train services were partially offset by a reduction in the night train steward service, mostly due to the decrease in the number of trains (Euro -2.3 million); higher costs connected to maintenance and cleaning of the rolling stock for Euro 2.6 million; higher sales and distribution costs for about Euro 11 million, mainly attributable to the sales fees payable to travel agencies for Euro 3.2 million, to external communication expenses for about Euro 1.6 million and to the costs of services for passengers with reduced mobility for about Euro 3.5 million; the remaining costs recorded a net overall increase of about Euro 6.2 million compared to 2012. An analysis of these costs shows that the increase was mainly due to higher expenses for IT services for about Euro 7 million following the gradual entry into service of new systems.
2013 Financial Statements 28 TRENITALIA S.p.A.
Amortisation and depreciation
Amortisation and depreciation increased by Euro 8.1 million. This change was determined by amortisation relating to the capitalization of value-increasing maintenance for the 2013 financial year, which accounted for about Euro 54.2 million; the remaining change was due to the combined effect of new investments and the completion of the amortisation and depreciation of some assets. Impairment losses
Impairment losses increased by Euro 13.5 million; this change was mainly due to an increase in the write- downs of rolling stock (Euro -10.8 million) and workshop equipment (Euro -2.5 million).
Finance income and costs
Finance income and costs recorded an overall improvement of Euro 33.0 million. This result was attributable both to finance income, which showed an improvement of Euro 11.8 million and to finance costs, which recorded a decrease of Euro 21.2 million compared to 2012.
Finance income benefitted from exchange differences of Euro 16.7 million, mainly correlated to the implementation of a decrease in the Share Capital of Cisalpino AG down to CHF 100,750 (a reduction of CHF 162,399,250), which took place on 16 January 2013, following the resolution passed by the Shareholders’ Meeting at the end of 2012. Exchange difference gains were partially offset by reduced dividends from the subsidiary TX Logistik for Euro 7.5 million. Finally, there was a positive recognition of the time value component of the derivatives for about Euro 2 million.
The performance of finance costs connected to the debt servicing on medium- and long-term loans recorded an improvement of Euro 6 million. These lower costs were attributable to reduced average cost of debt, which passed from 2.87% in 2012 to 2.75% in 2013. This reduction was due to the fall in market interest rates which enabled the Company to seize the financial benefits on both the short-term and the medium-term debt components, whose hedges, collars and caps allowed the capitalisation of the downward trend in interest rates. Furthermore, finance income and costs benefitted from a reduced interest cost of the severance pay for about Euro 18.6 million, arising from a reduction in the rate applied, which passed from 4.05% to 2.05% and from a debt reduction, following the considerable outs of personnel in 2013. Furthermore, there was an increase in the write-downs of equity investments for Euro 9.9 million, which was fully attributable to the adjustment made to the book value of the equity investment in order to bring it into line with the equity of the subsidiary Thello S.a.S. and reduced interest on trade and sundry payables for about Euro 2.1 million.
Income taxes
The tax burden for the period increased by Euro 71.4 million. This increase was correlated to the following dynamics:
a negative change for Euro 75.0 million arising from the assessment of deferred tax assets in the 2012 financial statements against tax benefits quantified for the subsequent financial years. As reported in the previous financial statements, the 2012 financial year confirmed the ongoing stability of Trenitalia’s results and that it had almost completely finished its reorganisation process. Therefore,
2013 Financial Statements 29 TRENITALIA S.p.A.
as it reported substantial previous tax losses which could be recovered without any time limits according to the provisions of law, Trenitalia recorded an appropriate value of deferred tax assets of Euro 72 million. In fact, the Company adopted an extremely prudent policy in recognising this credit item in profit and loss on the basis of the 2013 budget and the 2014 plan, only assessing recoverability over this timescale. In 2013 this item was adjusted on the basis of the new business plan, again keeping to the same two-year time horizon for recovery, resulting in a negative effect of Euro 3 million on the tax burden arising from the recognition of deferred tax assets assessed for 2013 in profit and loss (Euro 44.0 million) and the estimated amount for 2015 (Euro 41.0 million). There were no significant changes in the amount of the income tax for the year compared to the previous year, even if, looking into details, it is seen that the IRAP (Imposta Regionale sulle Attività Produttive, Local Tax on Production Activities) tax liability was about Euro 2.7 million lower, while the IRES (Imposta sul Reddito delle Società, Corporate Income Tax) tax liability increased by about Euro 2.9 million as a result of changes in the related taxable basis; Finally, there were positive changes of Euro 5.5 million arising from the recognition of adjustments to estimates of taxes from previous periods which were settled with the submission of the related returns during 2013.
2013 Financial Statements 30 TRENITALIA S.p.A.
Reclassified balance sheet
Amounts in millions of Euro 31.12.2013 31.12.2012 Change ASSETS
Net current operating assets 952.4 781.2 171.2 Other net assets (liabilities) (536.4) (297.0) (239.4) Current assets 416.0 484.3 (68.3)
Property, plant and equipment 8,991.6 9,053.7 (62.1) Equity investments under non-current assets 144.2 195.7 (51.5) Net fixed assets 9,135.8 9,249.3 (113.5)
Severance pay (952.2) (1,094.2) 142.0 Other provisions (267.1) (387.4) 120.2 Severance pay and Other provisions (1,219.3) (1,481.6) 262.2
TOTAL NET INVESTED CAPITAL 8,332.5 8,252.1 80.4 COVERAGE
Short-term net financial position 1,068.8 1,478.4 (409.6) Medium/long-term net financial position 5,172.2 4,860.7 311.5 Net financial position 6,241.0 6,339.1 (98.1)
Equity 2,091.5 1,912.9 178.5
COVERAGE 8,332.5 8,252.1 80.4
Net Invested capital
Net Invested Capital increased by Euro 80.4 million compared to 31 December 2012. This increase was due to a decrease of Euro 262.2 million in the Severance Pay and Other provisions, which was partially offset by a reduction of Euro 113.5 million in net fixed assets and a reduction of Euro 68.3 million in current assets.
Net Current Operating Assets: Net Current Operating Assets increased by Euro 171.2 million; this change was due to the movements in balances described below:
a decrease of about Euro 221.9 million in trade receivables, which was attributable to a decrease in receivables from the Ministry of Economy and Finance (Euro -112.1 million), as well as in receivables from Regional Governments (Euro -75.4 million); finally, there was a reduction in other trade receivables (Euro -36 million). There was a substantial decrease in overdue receivables from Regional Governments (Euro -117.4 million) and an increase in those due but not overdue (+42.4%). Despite the situation improved slightly, the amounts owed by some Regional Governments were still at a no longer physiologically acceptable level in spite of the regular transfers of funds to the Regional
2013 Financial Statements 31 TRENITALIA S.p.A.
Governments from the Ministry of Economy and Finance during 2013. At 31 December 2013 the overall overdue receivables from Regional Governments amounted to about Euro 689 million compared to Euro 793 million in 2012. As well as having taken appropriate legal steps for the collection of its credit in order to safeguard its assets, the Company arranged repayment plans with some Regional Governments and constantly monitored their compliance with these plans. This should result in a further gradual return of the Company’s exposure to within acceptable limits; the increase in stock of about Euro 26 million, in particular with reference to the component of serviceable materials, while that referred to spare parts remained substantially unchanged; trade payables reduced by Euro 367.2 million; Euro 195.6 million of this changes was due to the financial settlement of the debt to Cisalpino incurred mainly in order to purchase rolling stock (ETR 610 and ETR 470). The amount was settled by offsetting it against a receivable of Euro 117.4 million arising from the assumption of the financial debt to Eurofima and the credit consisting of the amount of the reduction in the relative share capital (Euro 65.7 million) and the consequent payment of the difference; furthermore, there was a decrease in payables to RFI S.p.A. (Euro -80.2 million).
Other Net Assets (Liabilities) decreased by Euro 239.4 million, mainly as a result of:
a reduction of about Euro -117.4 million in the receivable from Cisalpino AG, following the financial settlement of the takeover, through FSI, of the Eurofima loan for the purchase of the rolling stock of Cisalpino AG referred to in the Split agreement signed in December 2012; a decrease of Euro -35.7 million in receivables for deferred tax assets, which was mainly linked to the adjustment of derivatives at fair value ; an increase of Euro 84.1 million in payables to personnel, due to the amount transferred from the corporate restructuring fund (bilateral fund) for projects to be implemented.
Net Fixed Assets: the performance of Fixed Assets recorded a net decrease of Euro 113.5 million, due to a reduction in non-current assets, which was mainly attributable to net increases in amounts accounted for in relation to the investments for the period (Euro 892.6 million), on one hand, and on the other, to amortization, depreciation and write-downs (Euro 953.5 million) for the period; furthermore, the net value was affected by a reduction in the value of the equity investment in Cisalpino AG (Euro -50.5 million) as a result of the capital decrease resolved by the company in December 2012.
Severance Pay and Other Provisions: the Provisions reduced by Euro 262.2 million; this change was due:
a reduction of Euro 142 million in the Severance Pay and Other Employee Benefits, arising from the use of the Severance Pay for Euro 121.1 million as a result of the termination of employment contracts and advances paid, which was offset by accrued interest cost of Euro 23.2 million in the year, as well as by actuarial gains of Euro 44.1 million; a decrease in other provisions by about Euro 120.2 million, mainly due to the reclassification as payables of the portion of the industrial restructuring fund for projects which had already started, for Euro 124.9 million, as well as to the release of Euro 11.6 million in profit and loss, as commented on above, which were partially offset by an accrual of Euro 6.4 million for write-downs of equity investments and by an increase of Euro 11.3 million in the provision for deferred tax liabilities.
2013 Financial Statements 32 TRENITALIA S.p.A.
Net Financial Position
The Company’s net financial position came to Euro 6,241.0 million, recording an overall improvement of Euro 98.1 million in 2013. In 2013 current operations generated a positive cash flow of Euro 770.3 million. Current operations benefited from the favourable effects of a partial improvement in payments from the Regional Governments and from the State which cut down the amount of overdue debts.
The cash flow from current operations was used for Euro 532.1 million for investments and for Euro 153.3 million to serve the financial facilities, and benefitted from an amount of Euro 14.2 million from investment grants, which was offset by the payment of a VAT of Euro 17 million for customs clearance in connection with the purchase of the ETR 610 trains from Cisalpino.
As regards medium- to long-term financial operations, during September a loan of Euro 600 million from the Parent Company taken out during 2007 was repaid on its natural expiry date.
After the issue of the MTN programme bonds, the Company took out a loan from the Parent Company, totalling Euro 600 million, which was disbursed in two instalments, one of Euro 500 million in August and the other tranche of Euro 100 million in December, in order to support its investment programme.
Equity
The Equity reported in the reclassified statement includes, with respect to the Statutory Equity, payables arising from hedging financial instruments (derivatives); therefore, for avoidance of doubt, below is reported the statement of reconciliation between equity and the statutory equity.
31.12.2013 31.12.2012 Changes
Reclassified Equity 2,091.5 1,912.9 178.5 Payables for derivatives included under equity (174.7) (295.5) 120.9
Statutory equity 1,916.8 1,617.4 299.4
Equity increased by Euro 178.5 million. This change was due to the result of operations for the period, equal to about Euro 181.5 million and to an increase of Euro +118 million in the Cash Flow Hedge reserve and Actuarial Gains/Losses, which was offset by a reduction in payables for derivatives, equal to Euro 120.9 million.
2013 Financial Statements 33 TRENITALIA S.p.A.
HUMAN RESOURCES
The size of the company’s workforce reached 32,489 units at the end of the period; the statement below reports the most important information:
Middle Employees Managers Total managers Numbers as at 31.12.2012 30,446 4,106 267 34,819 Increases 153 62 6 221 Decreases (1,909) (622) (20) (2,551)
Numbers as at 31.12.2013 28,690 3,546 253 32,489
With the exception of transfers between companies, recruitment related almost exclusively to staff involved in maintenance activities within railway operations.
Decreases recorded in the year were due to ordinary employment termination, to projects being realised in relation to the activation of the Income Support Fund (Fondo di Supporto al Reddito) and intergroup transfers.
Below is reported the trend in the numbers of staff members in the last years:
Trenitalia (*) 2006 2007 2008 2009 2010 2011 2012 2013
FTE 50,183 49,243 46,273 43,737 40,925 37,549 35,770 33,665
(*)All the scenarios were based on proforma data in order to make them comparable; specifically: - 2006: the perimeter was adjusted as a result of the demerger of the Handling and Facility branch and the transfer of the former Lombardy Region branch. - 2007: the perimeter was adjusted as a result of the demerger of the Handling branch and the transfer of the former Lombardy Region branch. - 2008/9/10: the perimeter was adjusted as a result of the transfer of the former Lombardy Region branch.
The Income Support Fund has the purpose - for the companies in the FS Italiane Group which are not provided with the traditional “social shock absorbers” - to implement the actions envisaged under article 59, paragraph 6, of the organic law no. 449 of 1997, aimed at encouraging the reorganization and restructuring of the Group itself in consideration of the process of restructuring and development of the railway transport system.
As highlighted in the previous financial statements, a trade union agreement was reached nationally in November 2010 which allowed trade union procedures to be launched in 2010 and 2011 at local level and agreements to be reached for the identification of surplus workers to be made redundant from March 2011 through the activation of the special benefits of the Fund; the special measures of the fund relating to 2011 and 2012 have been described in the respective Reports on Operations.
During July the FS Group and the Trade Unions signed an agreement to start the negotiating procedures for terminations of employment and access to extraordinary benefits from the income and employment support fund for the employees of the FS Group companies that had have paid the minimum number of contributions. Extraordinary payments from this Fund in connection with the process of the Company’s production reorganisation were made to 936 persons from all business sectors. 872 of these received benefits from the
2013 Financial Statements 34 TRENITALIA S.p.A.
fund during the same year as a result of projects that had been completed and 64 more were helped in connection with the tail-ends of 2012 projects.
An intense liaison activity continued with INPS (Istituto Nazionale della Previdenza Sociale, National Social Security Institute) offices continued for the operation of the Fund’s operational procedures for allowing access to the Fund and the payment of special benefits at the scheduled times. Starting from December 2012, INPS started updating the social security positions of former employees of the Company that had received these special benefits, applying rules that envisage:
the adjustment of retirement requirements to increased expectation of life from 2013 (law no. 122/2010, article 12, paragraph 12-bis);
the postponement of the payment of pensions to persons who have paid contributions for at least 40 years starting from 2012 (law no. 111/2011, article 18, paragraph 22-ter);
the gradual increase in the pensionable age of 60 for women starting from 2014 (law no. 148/2011, article 1, paragraph 20).
The financial effects of the review of these social security positions and the additional costs estimated in order to implement the programmes that are to be carried out in accordance with the Plan have been recognised in the accounts.
Trenitalia training activities
Training has gained importance as a tool for passing on knowledge, enhancing experience and developing the skills of staff, for focusing and orienting activities on themes relating to rail transport and operational safety, support for company processes and professional families.
The 2013 Trenitalia Training Plan gave rise to about 138,500 man/days of training (145,000 man/days of training in 2012) with about 128,000 days of attendance (126,000 days of attendance in 2012). The aim of the Plan was to support the attainment of the Company’s business targets, focusing attention on issues related to the Business Plan, namely:
developing competitiveness and the market, both national and international;
ensuring safety at work and the protection of the environment;
to enhance attention to customers in a free market environment.
Contributions from Fondimpresa totalling Euro 3.7 million were used to fund training. This is the entire sum provided by this body for the training projects to be realised before the end of the year.
Below are the details relating to the areas of intervention of Trenitalia training activities in 2013:
Company training: training which presents the company to new graduates, new recruits with professional experience and trainee Train Service Managers (Capi Servizio Treno) when they join the FS Italiane Group.
Managerial training: training on typical managerial, behavioural and relational skills. It is aimed at managers and at other roles that need support or accompaniment in moments of growth.
2013 Financial Statements 35 TRENITALIA S.p.A.
Technical/vocational training: training measures aimed at giving staff the technical/vocational skills, both practical and theoretical, that are essential to be able to carry out their working activity, such as technical and vocational qualifications and updates for train driving, checking, accompanying and training staff, training of Instructors and Tutors and training for workplace safety with particular reference to certification of managers and the staff in the prevention and protection service.
In connection with this, sales personnel were given training courses when the new PICO (Piattaforma Commerciale Integrata, Integrated Sales Platform) sales system came into service and an e-learning refresher course regarding Legislative Decree 231 was arranged in order to inform all staff of the new developments in this sphere and of the consequent changes to the code of ethics.
Safety at work
The Group’s objective of reducing the number and rates of accidents at work entailed a range of activities performed at central and local level:
special attention is now paid to near misses: the internal procedure was revised so that all accidents and near misses are thoroughly and systematically analysed by the Prevention and Protection Service (SPP - Servizio Prevenzione e Protezione) function in consultation with workers and the Workers’ Safety Representative (RLS - Rappresentante dei Lavoratori per la Sicurezza). With these new methods, prompt corrective and preventive action will be taken in relation to both actual accidents and near misses; reports on accident trends, classified under 7 macro-causes, are drawn up and circulated periodically and compared with the corresponding period the previous year; setting work accident indicators as specific corporate and divisional targets (absolute number of accidents, incidence rate, severity rate) and monitoring them; a campaign was launched to inform personnel and enhance their awareness of safety issues and of the need to provide correct and complete information in reports of accidents; training continued, paying special attention to health and safety at work management systems in addition to providing the various legally obligatory courses. The main aspects in which training was given were work-related stress, explosive atmospheres and pressurised containers.
The activities carried out allowed the preset corporate targets to be exceeded for the reduction in the number of accidents (- 5%) and incidence rate (- 2%), as shown below.
Unfortunately a fatal accident also occurred in 2013, in Naples during a shunting operation, caused by human error; no corporate liability emerged even after a public prosecutor’s investigation. In any case the Company set up training sessions for the detailed discussion of shunting activities, together with the operational risks attached to them.
2013 Financial Statements 36 TRENITALIA S.p.A.
Type 2013 2012 Change
Number of accidents - 12.46 (> 3 days, indemnified by INAIL or still to be defined, 1,307 1,493 % excluding accidents while commuting)
Incidence rate 38.68 41.61 -7.06 % (Number of accidents X 1000 / average number)
Of which Number of fatal accidents 1 1 0
ENVIRONMENTAL POLICY AND SAFETY
Integrated system for quality, environment and safety at work
During 2013, the activities concerning safety and environmental protection were mainly aimed at the following:
Training projects implemented in 2013 were aimed at employees dealing with environmental issues, with the aim to train experts to be able to handle environmental issues autonomously. This entails applying the regulations governing the sector, acquiring the necessary technical and legal environmental expertise, specifically: with regard to environmental law, emissions into the atmosphere, ozone-depleting substances, the greenhouse gas effect, the defence of the soil, water protection and water discharges, waste management, reclamation, environmental damage, energy, noise and electro-smog, offences against the environment, hazardous substances and fire prevention.
Emission Trading System: at the end of 2013 Trenitalia had 7,869 emission rights filed with the EU Registry of Quotas and Emissions. The unit value of a quota was Euro 4.84 as of 31 December 2013. No emission rights were purchased in 2013 because the power stations released a lower number of tons of
CO2 into the atmosphere than they were allowed (emission rights). The third period of the implementation of the Emission Trading Directive began on 1 January 2013. This period will last until 2020: the number of allowances issued to installations free of charge was considerably reduced.
After a number of studies conducted into energy efficiency measures during the past few years, an Energy Service Company (ESCO) was appointed to carry out the procedure for obtaining Energy Efficiency Certificates (TEE, Titoli di Efficienza Energetica) and the proposals in the “Metering Project and Programme” (Progetto e Programma di Misura) for the workshops in Verona, Foligno and Foggia were already presented to and approved by the competent authorities (ENEA and GSE). After the necessary assessments and energy analyses, procedures were started for the installation of PV panels and energy efficiency improvements at four pilot plants.
The collection for recycling of special waste assimilated to urban waste was extended not only to all office units but also to all workshops, setting each division a target for the reduction of the special waste sent for disposal from maintenance and services.
2013 Financial Statements 37 TRENITALIA S.p.A.
Continuous attention was paid to noise pollution problems. A number of measurements were taken in many of the Company’s production sites (e.g. the Milan Martesana yard, the Bari and Lecce plants, the Lecce Surbo cargo station, the Trento plant, the Naples High-Speed train area, etc.). A plan for the reduction and abatement of noise at Milan Martesana was sent to the Ministry for Environment and Territory, the Lombardy Regional Government and Milan City Council in June and a contract was signed with Italcertifer for taking acoustics measurements in order to retain the certificate that approves the rolling stock at present in service.
Trenitalia and the environment on www.trenitalia.com: this is a new section of Trenitalia’s website dedicated to environment and sustainability issues, which gives information on the most important steps that Trenitalia takes to reduce the impact of its activities on the environment, details of commercial arrangements that encourage intermodality between the train and other sustainable means of transport and provides Ecopassenger customers with an on-line calculator which estimates and compares the impact of their journeys on the environment in terms of the greenhouse gases and polluting emissions produced.
Operational safety
The corporate Operational Safety Policy contains themes that commit the Company to observe the binding requirements that are specific to the sector and, at the same time, the findings of the internal Operational Safety Management System (Sistema di Gestione della Sicurezza di Esercizio, SGSE) evaluation process in a process of continuous improvement. Appropriate safety macro-objectives are taken from among the issues referred to in the Policy, and prevention and mitigation action and measures are selected each year that are introduced into the Company’s annual Safety Plan, in which the Policy is also published. In accordance with the SGSE procedures, the Policy is reviewed every year on the basis of developments inside and outside the Company. The 2013 Policy confirms the general principles and the commitments already contained in the 2012 Policy and considers the developments that have occurred in the process of the reorganisation of the regulatory framework governing operational safety, promoted and coordinated by the National Railway Safety Agency. In Decree 4/2012, ANSF laid down rules for railway operators’ activities and responsibilities in this process of reframing operational regulations in the light of regulatory, technical and scientific progress. Considering the scope of this new law and the commitment it requires, the Company’s management included, among the commitments that it declares in the Policy, that of fostering, “... the implementation of procedures, instructions and requirements with the aim of regulating the adoption of mandatory rules and standards by operating units in line with the safety guidelines issued by ANSF, also in the light of Decree 4/2012” (regulatory reorganisation)...".
In the view of the Company, the safety of railway operations is the binding and fundamental basis for all its activities and is therefore a strategic area for its business development.
The safety of railway operations is mainly assured by conformity to mandatory standards and rules. The scrupulous observance of rules is, above all, a cultural value underlying the activities of the Company’s personnel, who have always seen safety as their ethical duty in their day-to-day work.
2013 Financial Statements 38 TRENITALIA S.p.A.
The compliance model that has been adopted requires all Executives, Middle Managers and operational personnel, at their different levels, to assume their responsibilities in order to ensure the safety of travellers, personnel and third parties in addition to that of things and the environment.
Specifically, the Company deems it indispensable:
to see that the human resources responsible for the SGSE system work in close contact with resources responsible for operational processes with the objective of the continuous improvement of their respective parts of the system, “...in order to tend towards achieving zero accidents, considering the evolution of regulations, technical and scientific progress and giving priority to the prevention of serious accidents” (ANSF Decree 4/2012, Article 2). For this purpose safety information is managed transparently, completely and promptly, unequivocally stating the level at which instances of non-compliance have been ascertained, establishing the causes, putting the appropriate corrective action and measures in hand and verifying that they are effective, ensuring that all action taken is traceable by all those concerned;
to exploit the human factor as a vehicle to spread the awareness among the personnel of their own roles in the safety process and of the need to prepare for the mission they are to undertake, using the following means:
- ensure that the Policy is circulated among all personnel as widely and efficiently as possible;
- plan continuous training and refresher sessions for all the personnel and all those involved in performing the service by means of a constant process, managed and organised in such a way as to make the best possible use of the operators’ own know-how;
- involve personnel at all levels, in addition to their representatives, with a view to the acceptance of all suggestions that help to create a virtuous circle of operators’ experience in order to attain the corporate and Policy safety targets;
- see that the greatest possible attention is paid to the awareness and growth of the Company’s human resources as a decisive factor in providing transport safety.
to foster investments in technology that meets the highest international standards;
to ensure that rolling stock is correctly and promptly serviced through the coordinated supervision of all the operational, technological and logistic variables of the maintenance process;
to promote the implementation of procedures, instructions and directions to regulate the adoption of mandatory rules and standards by operating units according to the guidelines laid down in this matter by ANSF, also in the light of Decree 4/2012 (regulatory reorganisation) and also to foster a cycle of the continuous improvement of safety performance;
to stimulate the risk assessment culture:
- when substantial changes (operational, organisational or technical) are made to the railway system;
- when the risks attached to operational activities are periodically monitored in order to take appropriate mitigation measures, if necessary;
2013 Financial Statements 39 TRENITALIA S.p.A.
- encourage the development of IT systems to support operational safety processes and activities in order to simplify their operational procedures and cause them to be more effectively traceable.
The Company’s commitment to safety also envisages cooperation with the Infrastructure Manager and the other railway operators (railway companies, suppliers, entities in charge of maintenance, keepers, etc.) in conformity to the Italian and European regulatory framework and its evolution.
Safety on board trains
The FS Italiane-Polfer (Polizia Ferroviaria, Railway Police) agreement, now fully implemented, has allowed increased Police presence and checks on board trains and in stations in order to guarantee customers and workers a safe trip that is free, as far as possible, from petty crime.
Prevention measures also involved the most critical trains, i.e. night trains and very busy urban trains.
From the point of view of technology, video surveillance appliances are being installed on rolling stock; these were in any event envisaged when the material was first built.
2013 Financial Statements 40 TRENITALIA S.p.A.
INVESTMENTS
The commitments reported in the Trenitalia’s 2014-2017 Investment Plan are equal to about Euro 4,040 million. 80% of said commitments, equal to Euro 3,280 million, arises from the portfolio of investments in progress, made up of about 350 projects.
These commitments do not include value-increasing maintenance capitalisations. The capitalisations estimated for each year are equal to:
2014 Euro 805 million; 2015 Euro 1,551 million; 2016 Euro 1,019 million; 2017 Euro 666 million.
On the basis of the current planning, an amount of about Euro 450 million is still to be accounted for after 2017.
2013 accounting
The amounts entered in the accounts in relation to the investments made in 2013 were equal to about Euro 950 million, whose breakdown, compared to 2012, is reported in the following table:
Changes 2013 2012 Absolute % (amounts in millions of euro)
Purchasing * 310 436 (126) -41%
Revamping 113 138 (25) -18%
Rolling Stock 423 573 (150) -26%
On-board Technology 10 54 (45) -82%
Plants & other 46 45 1 1%
Development 0.03 1 (0,8) -96%
Information Technology 74 79 (5) -7%
TOTAL 552 752 (201) -27%
Value-increasing Maintenance 398 369 29 8%
(*)the item “Purchasing” includes: contract advance payments equal to Euro 163.2 million and recoveries of advances paid for Euro 32.8 million in previous financial years. These changes mainly relate to advances paid out against purchase of new rolling stock.
2013 Financial Statements 41 TRENITALIA S.p.A.
It should be noted that in 2012 seven ETR 610 trains were bought from Cisalpino, after the closure of the joint venture with SBB, for a value of Euro 149 million; therefore, net of this acquisition, the 2012 value of accounting would have been equal to Euro 287 million. Furthermore, the orders for the purchase of 150 E464 electric locomotives for regional transport were completed during 2013 and the process of the reorganisation of the present High-Speed trains according to a model based on a range of four levels of service was also terminated in 2013. The on-board technology project was practically concluded during the year as well.
Below is the breakdown of investments by Division/Management:
Changes (amounts in millions of euro) 2013 2012 Absolute %
Passenger Division 189 333 (144) -43% Regional Passenger Division 299 310 (11,0) -3.55% Cargo Division 10 9 1 15% Other 54 101 (47) -47%
TOTAL 552 752 (201) -27%
Value-increasing Maintenance 398 369 29 8%
Passenger Division: investments included accounting of Euro 67 million for work progress reports for the purchase of the new High-Speed “Frecciarossa 1000” electric trains. Dynamic tests are in progress for approval.
The project to renovate the present High Speed trains, in accordance with the new product offer model based on four new levels of service, accounted for Euro 22 million. The last 14 trains were refurbished during the year. About Euro 2 million was accounted for on upgrading the signalling and energy supply system.
The layout of the ETR 500 Bistrot coach was concluded. About Euro 6 million was accounted for on this project and 15 carriages were delivered.
Work continued at the Milan Martesana facility, Euro 1.1 million, and at the Vicenza factory with the objective of reorganising and developing maintenance sites to ensure maintenance activities on the High Speed fleet.
Tender procedures were started for the construction of the new “IMC Torino Smistamento” current maintenance plant, which provided for maintenance activities to be allocated to a single site, both as regards the Passenger Division and as regards the Regional Transport according to efficiency criteria. In 2013 about Euro 1.4 million was accounted for.
Some corrective work was carried out on the ETR 485 trains, mainly on the electricity circuits in order to enhance their reliability in service, accounting for Euro 4.8 million.
The amounts accounted for in relation to the upgrading of coaches and locomotives for the offering relating to the “Frecciabianca” trains were equal to Euro 39 million. Adjustments were made to the control units for the
2013 Financial Statements 42 TRENITALIA S.p.A.
doors of 232 carriages, accounting for Euro 9.4 million, and work continued on upgrading on-board systems and internet for an amount of Euro 6.8 million.
An amount of Euro 4.3 million was accounted for as regards work on station environments, relating to improvements to the areas in which ticket offices, customer assistance and Freccia Club rooms are located.
The other investments on the plants were the enlargement of the Milan Greco maintenance installation for Euro 1.3 million, and the upgrading and reorganisation of the Naples installation for Euro 1.1 million. An amount of about Euro 1.6 million was accounted for on renewing equipment in various plants.
Regional transport: the regional transport fleet expansion programme continued according to the commitments in the service contracts with the Regional Governments.
The purchase of the new single-deck Coradia-type EMU trains accounted for Euro 44 million and deliveries were completed in relation to the orders in progress for E464 locomotive, which accounted for Euro 15.4 million.
Activities continued for the purchase of Double Decker coaches: in 2013 an amount of about Euro 150 million was accounted for and 108 coaches were delivered. The Medium-distance coach face-lift programme was continued, which will increase comfort and conform the trains to safety standards; the project accounted for an amount of Euro 31 million.
The Low-Floor carriages were refurbished, Euro 2 million, and the transformation of the UIC-X carriages into driving van trailer mode continued, Euro 1.4 million. Other work involved door controls for Euro 1.5 million.
After the negative outcome of the tender for the purchase of double-decker EMU trains owing to the unsustainable cost, it was agreed with the customers Regional Governments to replace this type with trains composed of traditional double-decker carriages and 464 locomotives.
In this regard, an option was exercised for the purchase of additional 150 Double-Decker carriages and 29 E464 electric locomotives.
Three FLIRT trains were purchased for the Autonomous Province of Bolzano, accounting for an amount of Euro 12.5 million.
In the Liguria Region work was in progress for strengthening the maintenance network in accordance with the new organisational model which envisages freight train measures, allowing the reduction in the activities of shunting and putting together trains. The project for the reorganisation of the maintenance network in the Veneto Region continued, accounting for an amount of Euro 1.4 million.
The renewal of the self-service ticket issuing and validating machines continued, accounting for an amount of Euro 15.5 million. An amount of Euro 3.9 million was accounted for on the STIMER (Sistemi di Tariffazione Integrata Magnetico-elettronica Regionale, Integrated Regional Magnetic-Electronic Fare Systems) project, while an amount of Euro 2.1 million was accounted for on the interoperability of the electronic ticketing systems. The pilot Regions were Piedmont and Emilia Romagna.
Furthermore, an amount of Euro 0.6 million was accounted for on increasing the number of washing platforms at Rome Tuscolana, Cassino and Formia, while an amount of Euro 2.7 million was accounted for on the renewal of equipment and the maintenance of the infrastructures of various installations.
2013 Financial Statements 43 TRENITALIA S.p.A.
Cargo: an amount of about Euro 1.8 million was accounted for in relation to the final activities for the purchase of wagons. Activities continued in relation to the process of adapting the fleet of wagons to the technical regulations concerning “coupling parts” of rolling stock which must comply with the requirements of interoperability.
Work on permanent ways, track replacement and switches was in the final phase, as also work on the current maintenance plants at Bologna San Donato and Verona Santa Lucia to restore conditions of safety in handling rolling stock, which accounted for Euro 1 million.
2013 saw the definition of the transfer of some assets and activities concerning the “Chemistry & Environment” process from FS Logistica to Trenitalia. The transfer involved containers, wagons and junctions for an amount of Euro 1.3 million.
Technical Head Office: most of the work was done on the technological upgrading of Workshops for Euro 4 million and the renewal of equipment for Euro 5.4 million.
Investments across business areas: during 2013 supply contracts were closed and the credit and debit items were settled with the supplier in connection with the SCMT (Sistema Controllo Marcia Treno, Train March Control System) equipment; these contracts also included all work on the STB System (Sistema Tecnologico di Bordo, On-Board Technologic System), such as the DIS black box, CAB Radio and GSM-R appliances. A new project was started under the responsibility of the Regional Passenger Division for completing the STB installations on the remaining 370 rolling stock. An amount of about Euro 10 million was accounted for on this during the year.
As regards ITC investments, work was in progress in relation to the implementation of the PICO platform through the integration of the various sales channels and the Infomobility development, Euro 10.4 million, distributed between the Passenger Division for Euro 8.1 million and the ITC Division for Euro 2.3 million.
Activities continued in relation to the “CRM – Customer Relationship Management” for integrated customer management and in order to offer a high-quality service level on a multi-channel basis. In 2013 amounts were accounted for Euro 5.3 million, of which Euro 2.8 million for the Passenger Division and Euro 2.5 million for the Regional Passenger Division.
Trenitalia set up an Integrated Sales System Program (Programma Sistema Commerciale Integrato) to oversee and operate the different company sales platforms, with the aim of discovering all the possible market combinations and opportunities among its different lines of business.
The year saw the implementation and completion of the Production Platform (Piattaforma di Produzione, PdP), which included activities for: changing and updating the train timetable, using the staff, scheduling the maintenance at the Current Maintenance Plants (Impianti di Manutenzione Corrente, IMC) and managing the railway traffic within control rooms. An amount of Euro 7.7 million was accounted for, of which Euro 7.5 million for the Integrated Planning Function and Euro 0.2 million for the Regional Passenger Division.
As regards the Cargo Information System (SIM, Sistema Informativo Merci), the new integrated platform entered into service in support of the sales and distribution cycle and of traffic in the Cargo Division, accounting for an amount of Euro 3 million.
2013 Financial Statements 44 TRENITALIA S.p.A.
Among the other IT projects in the Technical Head Office, about Euro 2 million was invested in the RSMS - Rolling Stock Management System and the automated WMS - Warehouse Management System, Euro 1.1 million.
As regards the IT Systems Division, an amount of Euro 3.6 million was accounted for in relation to the replacement of obsolete hardware, the rationalisation of the Data Centres and the technical management of the systems in service and of the networks and the applications.
Safety investments: an amount of Euro 8 million was accounted for on programmes regarding conformity to Legislative Decree 81 of 9 April 2008 in the matter of health and safety at work, broken down as follows: Euro 1.4 million in the Passenger Division, Euro 4.4 million in the Regional Passenger Division and Euro 2.1 million in the Technical Head Office.
Below is reported the number of vehicles purchased and those that were the object of the main revamping actions:
New rolling stock Revamping
no. of vehicles no. of vehicles
Locomotives 10 - Passengers 6 - Regional Transport 4 -
Coaches/Wagons 108 284
Passengers • ES* City - 60 • ETR500 Bistrot Coach - 15 Regional Transport • Double-Decker 108 - • MD Medium Distance - 207 • UIC-X with a driving van trailer - 2
Trains 14
Passengers • Frecciarossa (ETR 500) - 14
In the Long-Haul Passenger Division: - the doors of 232 carriages were fitted with a CSDE (Correct Side Door Enable) system. In the Regional Transport Division: - the train door control system of 517 light vehicles, 72 TAF (Treni ad Alta Frequentazione, High Occupancy Trains) and 281 trains with a driving van trailer was upgraded; - the train door control system of 46 diesel locomotives was upgraded. In the Cargo Division work was done on the couplings of 137 wagons.
2013 Financial Statements 45 TRENITALIA S.p.A.
THE TRENITALIA FLEET
The Trenitalia fleet, following investments and disposals made in 2013, is made up as follows:
Rolling Stock Fleet operating as of 31.12.2013
Category Description Unit
Driving material Electric Locomotives 1,427 Driving material Diesel Locomotives 196 Total driving material 1,623
light vehicles Electric vehicles (Ale, Le) 900 light vehicles Diesel (Aln, Ln) 604 Total light vehicles 1,504 Complexes TAF 98 Complexes Minuetto Trains 195 Complexes Electric trains 121 Total complexes 414
Locomotives/Diesel Power Handling vehicles Cars 559 Total handling vehicles 559
Driven material Passenger Coaches 6,314 Driven material Wagons 20,883 Driven material Wagons and car vehicles 10 Driven material Other 40 Total driven material 27,247
2013 Financial Statements 46 TRENITALIA S.p.A.
RISK FACTORS
No significant risks and uncertainties were expected as at the reporting date of the current report on operations, which could have caused significant effects on the Company’s economic and financial position in the short term, in addition to those that will be mentioned in the notes to the financial statements to which reference is made. The crisis in public finance, which is taking a particular serious form with regard to local authorities, could lead to uncertainties regarding compliance with contractual deadlines for the collection of payments on service contracts. The operational risks deriving from the new operator’s entry into the High Speed sector were assessed in the Company’s Business Plan. At the moment these risks still appear to be consistent with the assumptions made. Whether the assumptions are confirmed depends on the performance of the mobility market and the extent to which it undergoes pressure as a result of exploiting the price factor: if this is done there could be effects on profit levels. Any effects of a failure to renew the service contracts with the Regional Governments would emerge after 2014 and cannot be forecast at the moment; in any case, they are considered risks attributable to a company which operates on a free market. As already reported, up to now three Regional Governments have announced that they do not intend to renew their contracts when they expire on 31 December 2014 and will start tender procedures for the awarding of rail services. During 2014 there could be more requests from certain Regional Governments to reorganise services in order to tailor them to the funds available: this could also affect profitability levels. In executing the service contracts, the Company has included suitable safeguarding clauses to protect the investments it has made and counter the risk of agreements not being renewed.
RELATIONS WITH RELATED PARTIES
The interrelationships between the Group companies, and between them and any other related parties are maintained according to criteria of material correctness with a view to mutual economic convenience, at arm’s length, for the identification of which – if required – they also make use of external professionals.
Intercompany transactions pursue the common objective of creating value for the entire Group. In this regard, it should be pointed out that, in accordance with the Business Plan of the Ferrovie dello Stato Italiane Group, a more rational allocation of assets has been implemented and is being completed within the Group itself, in order to concentrate the focus of each company on its core business, providing each company with the assets considered essential for the regular performance of its business activities. To date, this objective has been carried out through a number of demergers which the company reported in its previous financial years. These processes and transactions take place in compliance with the specific regulations governing the sector, statutory and tax regulations, in accordance with the policies set out by the supervising Ministries and taking account of the features and peculiarities of the activities carried out by many Group companies.
Credit and debit relationships maintained with controlling companies and any other affiliated companies during the year and any information on relations with related parties are reported in the notes to the financial statements, to which reference is made.
2013 Financial Statements 47 TRENITALIA S.p.A.
TRENITALIA GROUP
At 31 December 2013 the Trenitalia Group was made up as follows:
In 2013 the investment portfolio of Trenitalia did not report significant changes; however, on 27 November 2013 the Company acquired 4.5% of the share capital of La Spezia Shunting Railways S.p.A, in order to promote railway services in the La Spezia Port. The subsidiary Serfer also participated in the transaction, acquiring 15.5% of the share capital. On 1 January 2014, the Company exercised its right to withdraw from the Campania Unico consortium while continuing to belong to the integrated fare system.
2013 Financial Statements 48 TRENITALIA S.p.A.
ECONOMIC PERFORMANCE OF SUBSIDIARIES
Below are reported the 2013 economic results of Serfer S.r.l., TX Logistik AG, Cisalpino AG, Trenord S.r.l. and Thello Thello S.a.s.
SERFER S.r.l.
(amounts in €/000)
2013 2012 Operating revenues 60,643 62,542
Costs (56,806) (58,774)
EBITDA 3,837 3,768
Amortisation and depreciation (1,106) (1,096) Write-downs, impairment losses / (180) (622) value write-backs EBIT 2,551 2,050
Finance income and costs (192) (241)
Pre-tax result 2,359 1,809
Income taxes (2,007) (1,286)
Net profit (loss) for the year 352 523
The company is active in the railway business and provides handling, railway traction, rolling stock maintenance services, as well as services for the design, construction and maintenance of railway sidings.
2013 financial year recorded a decrease in operating revenues, totalling about 3%. This reduction was characterised by upswings and downswings in different business areas, as there was a strongly rising trend in shunting services also as a result of combining opportunities with Group companies, resulting during the period in starting new activities in the Regional Transport and Cargo sectors of Trenitalia, Trenord and FS Logistica, while railway market services fell owing to some line closures. Among the other business areas, there was a fall in turnover in the junction construction sector on one hand and a rise in the locomotive maintenance sector on the other hand.
Operating costs fell by about 3.3% overall. There was an increase of about 10.9% in labour costs owing to the rise in the number of workers (59.2% increase in Full-Time Equivalent employment compared with 2012), mainly engaged in shunting and to contract pay increases arising from the entry into force of the Mobility CCNL (Contratto Collettivo Nazionale di Lavoro, National Collective Labour Agreement). Other operating costs, on the other hand, dropped by about 14.2%, mainly due to the
2013 Financial Statements 49 TRENITALIA S.p.A.
reduction in the volumes of work carried out in the Railway Company area and the junction construction and maintenance segment.
The economic performance of operations allowed the consolidation of the positive results already achieved in the previous financial year both at gross profit level (EBITDA Margin 6.3%) and operating result (EBIT Margin 4.2%). The balance of financial operations showed an improvement compared to 2012.
The net profit for the year showed a decrease because of a higher tax burden, the increase in which was due to an increase in both IRAP and IRES taxes, in addition to the fact that, in the previous year, taxes had benefitted from the tax relief of Euro 643 thousand as a result of the application of the rule under Decree Law no. 2001/2011 concerning the deductibility of IRAP tax concerning labour costs incurred from 2007 to 2011 from the IRES tax.
TX Logistik AG
(amounts in €/000)
2013 2012 Operating revenues 204,009 186,595
Costs (199,198) (180,156)
EBITDA 4,811 6,439
Amortisation and depreciation (1,091) (663) Write-downs, impairment losses/ (405) 65 value write-backs EBIT 3,316 5,841
Finance income and costs (73) 143
Pre-tax result 3,243 5,985
Income taxes (1,667) (1,549)
Net profit (loss) for the year 1,576 4,436
This company, which operates in the logistics sector at European level, specialises in integrated railway transport and is one of the main rail operators. The TX Group is licensed to carry out railway activities in Germany, Austria, Switzerland, Holland, Sweden, Norway, Denmark and Italy and offers the market a high- quality integrated logistics long-haul service. During 2013, the European rail transport market was even more noticeably affected by the persistence of the difficult economic conditions. In this scenario, some operators gave the market up, while others were placed on the market by their shareholders, who no longer considered their accumulated losses to be sustainable. In spite of the critical economic situation in the European transport market, the company pursued its target of raising operating revenues (+9.3%) during 2013, taking on an increasingly important role among independent undertakings. Another feature of the 2013 financial year was strong price competition, especially forcefully pursued by the German leader with a view to recovering market shares. Among other factors were the substantial increases in costs (+10.5%) relating to tolls and, above all, in the cost of energy arising from the use of the German infrastructure. In spite of these circumstances, the policies and measures adopted by TX Logistik resulted in a net profit for the year of Euro 1.6 million. In order to sustain its growth, this company carried out a careful process of
2013 Financial Statements 50 TRENITALIA S.p.A.
revision of its structure and internal processes and, among other steps, started a major programme of acquisition of rail trucks specially designed to carry semi-trailers, thus mitigating the effects of the intense volatility of leasing costs and making sure that rolling stock was always available; it also continued to put driving personnel on a permanent basis, only making use of agency staff to meet peak period requirements. At the end of the period the first signs of possible stable economic growth were to be glimpsed: this is a great challenge and a major opportunity for TX Logistik to pursue its objective of being increasingly competitive.
Cisalpino AG
(amounts in €/000)
2013 2012 Operating revenues 469 36,905
Costs (697) (6,972)
EBITDA (228) 29,933 Amortisation and depreciation/write- - (65,088) downs/provisions EBIT (228) (35,155)
Finance income and costs 1,115 13,997
Pre-tax result 887 (21,158)
Income taxes (34) 23
Net profit (loss) for the year 853 (21,135)
The company closed the financial year with a positive net profit of Euro 853 thousand. The 2013 financial year is not comparable with 2012 because operations had been of a different nature in the latter year. In the first part of 2012 the company’s business consisted of hiring the ETR 610 fleet out to the shareholding companies (SBB and Trenitalia), while in the second part it transferred the ownership of the fourteen trains (ETR 610) to the two shareholders in equal parts, transferring the original supply contract, the remaining debts and the loan taken out from Eurofima at the same time. As a result of this it carried out no operations, which, in practice, made the results of 2012 and 2013 hardly comparable. The 2013 income statement merely presents the company’s functioning costs. Therefore, the positive net profit was substantially attributable to the contribution from financing activities for Euro 1.1 million, mainly arising from foreign exchange gains.
It was not yet possible to wind up and liquidate the company because there were still two actions pending regarding accidents to travellers during 2007 and 2008, the damages for which are covered by insurance.
January 2013 saw the implementation of the resolution passed by the Shareholder’s Meeting in 2012, concerning the capital decrease of Euro 134.7 million. The company also issued guarantees to the Italian Revenue Agency in connection with the refund of a VAT credit of about Euro 19.4 million for the years from 2007 to 2010: the amount is expected to be paid during the first half of 2014.
2013 Financial Statements 51 TRENITALIA S.p.A.
In consideration of the expected winding-up of the company, the going-concern requirements no longer apply; however, the financial statements have been prepared according to accounting policies on a going- concern basis, as the most of the company’s financial items is made up of liquidity and, therefore, there are no substantial differences arising from the application of the accounting policies.
Trenord S.r.l.
(amounts in €/000)
2013 2012 Operating revenues 759,770 733,054
Costs (705,237) (673,223)
EBITDA 54,533 59,831 Amortisation and depreciation/write- (35,246) (41,058) downs/provisions EBIT 19,287 18,773
Balance of finance income and costs (5,113) (4,451)
Pre-tax result 14,174 14,322
Income taxes (14,074) (11,139)
Net profit (loss) for the year 100 3,183
This company provides transport services for travellers mainly within the borders of the Lombardy Region or in the other local areas specified in the service contract with the Lombardy Regional Government, which will expire on 31 December 2014.
In its session on 24 January 2014 the Lombardy Regional Government resolved the approval of the outline for a “Addendum supplementing and amending the 2012-2014 Service Contract for regional and local public railway transport”, which supplemented the contract in force as at the date. In the same resolution the Lombardy Regional Government also undertook to award the regional and local public railway transport Service Contract for the period from 1 January 2015 to 31 December 2020 directly to the Trenord s.r.l. railway company on the basis of the terms and conditions of the current Service Contract.
In 2013 Trenord further strengthened its operating programme, and production passed from 38.2 to 39.9 million trains/km, with an increase of about 4.6%. The main reason for the rise is the increase in the services provided but the effects of the inefficiencies in December 2012 are another reason. Service quality performance indicators were falling because service was affected by the knock-on effects of the change of timetable in December 2012, the effects of works on the railway line in view of Expo 2015 and the absence of specific rolling stock for the railway by-pass. In 2013 the company reported a Net Profit of Euro 0.1 million, with EBITDA of Euro 54.5 million, down compared to 2012 (-8.9%), while EBIT came to Euro 19.3 million, up compared to (+2.7%). At the end of the 2013 financial year, the company’s staff members came to 4,207 people employed.
2013 Financial Statements 52 TRENITALIA S.p.A.
Thello S.a.s.
(amounts in €/000)
2013 2012 Operating revenues 38,218 28,736
Costs (47,752) (30,672)
EBITDA (9,534) (1,936) Amortisation and depreciation/write- (259) (190) downs/provisions EBIT (9,793) (2,126)
Finance income and costs 6 -
EBIT (9,788) (2,126)
Income taxes (596) (439)
Net profit for the year (10,384) (2,565)
In 2013 Thello revised its international connections: the Paris-Rome service was first performed with 2 pairs of night trains daily, joining the Venice to Paris service. In October the Paris-Rome service was reduced and in the middle of December it was cut. Now the company only has a Venice-Paris service.
The company closed the financial year with a negative result of Euro 10.4 million. On 23 December 2013 the company increased its capital up to Euro 5.2 million, through shareholders’ payments of Euro 3.7 million (Trenitalia’s share of Euro 2.4 million); at the same time, the capital itself was reduced to Euro 1.5 million to cover losses accrued in previous financial years.
In 2014 Thello is reviewing its range of services, introducing a new form of Paris to Rome service with a change in Milan, thus connecting the service to Paris with the Frecce trains.
2013 Financial Statements 53 TRENITALIA S.p.A.
OWN SHARES
As at 31 December 2013 Trenitalia S.p.A. did not own, nor did it buy or sell, during the year, own shares and/or shares of the controlling company, neither directly, nor through trustee companies or third parties.
OTHER INFORMATION
Investigations and proceedings in progress
As regards the investigations and proceedings in progress at the end of the financial year, it should be pointed out that:
Criminal proceedings no. 20758/2011 R.G.N.R. (Ruolo Generale delle Notizie di Reato, General Register of Crimes) of the Public Prosecutor’s Office of Rome (initially no. 78261/2007 R.G.N.R.): these proceedings originated in complaints from some workers regarding the safety of carriage door opening, closing and control systems. The Public Prosecutor’s office confirmed its request for the case to be dismissed, also since no evidence pointing to the possibility of successful criminal action emerged from the additional investigations it had conducted. Criminal proceedings no. 11126/2012 R.G.N.R. (Registro Generale delle Notizie di Reato, General Register of Crimes) of the Public Prosecutor’s Office of Rome: the Public Prosecutor asked for the case to be dismissed on the grounds that the matter was attributable to a complex relationship in civil law with regard to which a criminal action would probably not have led to a conviction. The origin of the proceeding was a complaint from Pietro Mazzoni Ambiente S.p.A. (PMA) of “bid-rigging in a public procurement process” following the actions taken by Trenitalia S.p.A. (termination of contracts and master agreements, as well as exclusion from future tenders) because it had found serious breaches of contract in PMA’s management of train cleaning. PMA deemed that Trenitalia S.p.A. decision was a pretext (breaches of contract that were non-existent or not correctly evaluated) and a means of preventing certain undertakings from succeeding in being awarded additional tender contracts. Criminal proceedings no. 2709/2009 R.G.N.R. (Registro Generale delle Notizie di Reato, General Register of Crimes) of the Public Prosecutor’s Office of Massa: these proceedings concerned the relations with DELCA, which specialises in taking over, storing and destroying railway sleepers acquired from RFI S.p.A. for which Trenitalia S.p.A. only provided transportation services through its Cargo Division. After severing the matter from the original action, the Public Prosecutor opened case no. 3228/2011 R.G.N.R., in which the Managing Director of Trenitalia S.p.A. was under investigation for corruption. The proceedings are still in the investigation stage and the time limit for this stage to be concluded has been extended by the Preliminary Investigation Judge (GIP, Giudice Indagini Preliminari) of the Court of Massa. Criminal proceedings no. 2317/2013 R.G.N.R. (Ruolo Generale delle Notizie di Reato, General Register of Crimes) (severed from initial proceedings no. 3723/2012 R.G.N.R.) of the Public Prosecutor’s Office of Bergamo: this procedure was initiated after an accident on 18 August 2010 while the R 2098 train was leaving Treviglio Station, when two travellers, in spite of the fact that the Guard had closed the doors automatically, left the moving train forcing a carriage door. The case against the Managing Director was dismissed in the end by order of the Preliminary Investigation Judge, who considered the
2013 Financial Statements 54 TRENITALIA S.p.A.
charge unfounded since the elements obtained during the preliminary investigations did not appear to justify a prosecution. Criminal proceedings no. 6305/09 RGNR (Ruolo Generale delle Notizie di Reato, General Register of Crimes), - which are pending before the Public Prosecutor’s Office of Lucca, as a result of the railway accident that occurred in Viareggio on 29 June 2009 –, the trial is at present in the stage of discussion after all the accused persons and entities were committed to trial pursuant to Legislative Decree no. 231/2001, as ordered by the Judge for Preliminary Hearing (GUP, Giudice dell’Udienza Preliminare) on 18 July 2013, while granting the requests submitted by the Public Prosecutor at the end of the preliminary investigations. Currently, no liabilities can be surmised that are payable by the Companies in the FS Italiane Group, which are covered by suitable insurance policies. Criminal proceedings no. 491/2012 RGNR (Ruolo Generale delle Notizie di Reato, General Register of Crimes) - no. 956/2012 R.G. G.I.P. (Ruolo Generale del Giudice Indagini Preliminari, General Register of the Preliminary Investigation Judge) of the Court of Mondovì. The event that gave rise to this procedure was an accident to a guard, in Ceva Station, in the Province of Cuneo, who was the victim of an attack by an unidentified traveller while carrying out his activity and involved the managing director in connection with the offence of causing serious bodily harm, committed in breach of the rules governing the prevention of accidents at work. The Preliminary Investigation Judge authorised an extension of the time limit for the completion of the preliminary investigations at the request of the local Public Prosecutor’s Office. Criminal proceedings no. 35874/13 R.G.N.R. (Ruolo Generale delle Notizie di Reato, General Register of Crimes) of the Public Prosecutor’s Office at the Court of Rome: they originated in an alleged violation of Legislative Decree 81/2008 in connection with the measures adopted from 3 August 2010 to 24 January 2011 after the introduction of the “sole agent/only agent” drivers’ handbook to prevent the risks attached to cases of emergency and/or the need for first aid that might arise as a result of only using one driver. The investigations were first conducted by the Genoa Public Prosecutor’s Office, which afterwards forwarded the file to the Rome Public Prosecutor’s Office. On 12 March 2014, the Competition Authority (Autorità Garante della Concorrenza e del Mercato) served an order for the closure of the “proceedings A/443 - NTV/FS/Impediments to access to the market of high-speed railway transport services for passengers” on the Company. The proceedings ended without Trenitalia having been guilty of any infringement and, accordingly, no sanction was inflicted.
For any other pending investigations and judicial proceedings, there are no significant changes to be reported with respect to the information reported in the 2012 financial statements.
Legislative Decree no. 231/2001
In 2013, the Company’s Supervisory Board carried out supervisory activity with regard to the operation of and compliance with the Company’s “Organisational, Management and Control Model” by analysing and monitoring information flows sent by corporate units and the performance of targeted audits, with the operational support of the Audit department, in the areas theoretically considered at risk of crime.
2013 Financial Statements 55 TRENITALIA S.p.A.
The Supervisory Board devoted itself to working on the completion of the revision of the Model, which it had begun in 2012 after additions were made to the list of criminal offences for which businesses have administrative liability pursuant to Legislative Decree 231/2001 referred to in Legislative Decree no. 109 of 16 July 2012, concerning the employment of illegally-staying third-party nationals, and Law no. 190 of 6 November 2012, which made some amendments to the section on offences of corruption (improper inducement to give or promise something of value and corruption between private persons).
The process of updating the Model concluded on 19 December 2013, with the approval of the new Model of Trenitalia on the part of the Board of Directors. The changes to the Model were widely publicised through internal information tools, are published on the Company’s intranet site and may be consulted by all its employees.
All personnel carrying out work in which it is considered that there is a theoretical risk of the commission of criminal offences for which a corporate entity is liable under Legislative Decree no. 231/2001 were given training sessions in e-learning mode during the year. At the end of the sessions participants were tested to confirm that they had actually mastered the contents of the course.
Disclosures relating to article 2497-ter of the Italian Civil Code
Any activities carried out for extraordinary transactions, such as demergers and purchases of equity investments, originate in the Company’s Business Plan as approved by the Parent Company. As regards operating activities, the company complied with the provisions laid down in the Corporate Governance regulations.
2013 Financial Statements 56 TRENITALIA S.p.A.
OUTLOOK
The results were substantially in line with the 2011-2015 Business Plan.
Operating cash flows (before investments) show a positive balance, despite significant delays in the receipts from some Italian regional governments. The compliance with the payments would allow the Company to further improve its operating cash flow, thus being able to limit finance costs.
As described in the risk factors to which the Company is exposed, it should be remembered that medium- and long-distance passenger transport services are conditional on consumption levels, employment levels and the overall development of the main economic factors. The High-Speed segment of the “Market” sector was affected by changes in market equilibrium resulting from the entry of new private operators. The risks resulting from the entry of the new operator were assessed in the Company’s Business Plan and reflected in the forecasts and plans; these assumptions are consistent with performance as observed up to this time and no changes such as to modify the trend are expected in the near future. Whether the assumptions behind the Company’s plans are correct depends on trends in the mobility market and the extent to which the market is attracted by means of further pricing mechanisms. If this happens, profitability margins could be affected.
Market risks are especially plain to see in the Cargo sector, which is particularly affected by the poor performance of the country’s economy. The price lever could still be a factor leading customers to discriminate between one operator and another and this policy would enable the company to defend the market share that is open to competition, while of course impacting on its Cargo Division's profit margins.
The Company is also engaged in completing the challenging Cargo sector reorganisation plan in accordance with the guidelines that were marked out in the second half of 2009, whose aim is to lead this sector towards a position of overall financial stability.
The possible effects arising from the failure to renew service contracts with the Regional Governments will report effects, if any, in the periods after 2014.
The reorganisation plans that were scheduled and practically completed towards the end of 2013 lay the foundations for a further review of baseline operating costs, in the light of the trade union agreements signed at the end of July.
It is appropriate to point out that the maintenance of the investment plan resolved in previous years entails considerable financial commitments for the company. The recapitalization transactions resolved by the Board of Directors of Trenitalia in September 2009, and only partly already implemented, represent a decisive support which allows a gradual re-equilibrium of the equity structure.
In light of the considerations reported, the Company expects that the results achieved in 2013 will be confirmed in 2014.
2013 Financial Statements 57 TRENITALIA S.p.A.
PROPOSED ALLOCATION OF THE RESULT FOR THE YEAR
The Company’s financial statements for the year ended 31 December 2013 showed a net profit of Euro 181,488,615 that is proposed to be allocated as follows:
Euro 9,074,431 to Legal Reserve
Euro 172,414,184 to the Reserve for Profits Carried Forward.
The Board of Directors
The Chairman
2013 Financial Statements 58 TRENITALIA S.p.A.
Financial Statements: accounting statements and notes
2013 Financial Statements 59 TRENITALIA S.p.A.
Statement of financial position
(Euro) Notes 31.12.2013 31.12.2012
Assets Property, plant and equipment (6) 8,885,478,183 8,964,110,287 Intangible assets (7) 106,130,521 89,562,341 Deferred tax assets (8) 116,434,403 152,135,321 Equity investments (9) 144,201,722 195,670,815 Non-current financial assets (including derivatives) (10) 23,329,135 23,922,569 Other non-current assets (11) 26,482,383 28,933,006 Total non-current assets 9,302,056,347 9,454,334,339
Inventories (12) 686,857,910 660,905,867 Current trade receivables (13) 1,880,905,804 2,098,621,410 Current financial assets (including derivatives) (10) 16,609,354 2,352,173 Cash and cash equivalents (14) 123,760,033 61,511,053 Tax receivables (15) 625,247 2,746,133 Other current assets (11) 62,657,890 193,969,357 Total current assets 2,771,416,239 3,020,105,993 Total assets 12,073,472,586 12,474,440,332
Equity Share capital (16) 1,654,464,000 1,654,464,000 Valuation reserve (16) (225,465,493) (343,416,330) Other reserves (16) 199,859,139 189,537,922 Profits (Losses) carried forward (16) 106,473,559 (89,629,556) Profit (Loss) for the year (16) 181,488,615 206,424,332 Total Equity 1,916,819,820 1,617,380,368
Liabilities Medium/long term loans (17) 5,195,528,297 4,884,697,416 Severance pay and other employee benefits (18) 952,227,122 1,094,217,685 Provisions for risks and charges (19) 144,605,997 278,448,713 Deferred tax liabilities (8) 118,544,242 107,361,364 Non-current financial liabilities (including derivatives) (20) 174,634,972 248,874,260 Other non-current liabilities (21) 80,598,396 25,916,808 Total non-current liabilities 6,666,139,026 6,639,516,246
Short-term loans and current portion of medium-long term loans (17) 423,594,686 740,870,121 Short-term portion of Provisions for risks and charges (19) 3,963,453 1,549,147 Current trade payables (22) 1,622,122,560 1,989,329,908 Current financial liabilities (including derivatives) (20) 804,339,208 870,755,565 Other current liabilities (21) 636,493,832 615,038,977 Total current liabilities 3,490,513,740 4,217,543,718 Total liabilities 10,156,652,766 10,857,059,964 Total equity and liabilities 12,073,472,586 12,474,440,332
2013 Financial Statements 60 TRENITALIA S.p.A.
Income Statement
Income statement
(Euro) Notes 2013 2012
Revenue and income Revenues from sales and services (23) 5,272,761,352 5,279,323,113 Other income (24) 225,014,274 218,665,431 Total revenues 5,497,775,626 5,497,988,544
Operating costs Personnel costs (25) 1,919,715,554 1,979,140,642 Raw and secondary materials, consumables and goods for sale (26) 385,907,241 382,770,989 Costs for services (27) 2,063,270,032 2,010,685,170 Leases and rentals (28) 129,521,162 151,468,450 Other operating costs (29) 45,453,396 33,910,555 Capitalization of internal construction costs (30) (431,367,920) (410,185,222) Total costs 4,112,499,464 4,147,790,584
Amortisation and depreciation (31) 932,740,417 924,642,671 Write-downs, impairment losses (reversals) (32) 20,833,449 7,324,533 Write-down of property, plant and equipment 20,545,341 6,674,434 Value adjustments and write-backs on receivables 288,107 650,099 Provisions for risks and charges - - Operating result 431,702,297 418,230,756
Finance income and costs Finance income (33) (35) 26,324,883 14,548,962 Finance costs (34) (35) 195,605,715 216,781,574 Pre-tax result 262,421,464 215,998,144
Income taxes (36) 80,932,849 9,573,812 Profit for the Year from continuing operations 181,488,615 206,424,332
Net profit for the year 181,488,615 206,424,332
2013 Financial Statements 61 TRENITALIA S.p.A.
Statement of comprehensive income
(Euro) 2013 2012
Net profit for the year 181,488,615 206,424,332
Other comprehensive income
Components that will not be reclassified subsequently under profit/(loss) for the period, gross of tax affect: Profits (losses) relating to actuarial benefits 43,867,123 (174,612,481) Tax effect of profits/(losses) relating to actuarial benefits (12,127,796) 46,972,281
Components that will be reclassified subsequently under profit/(loss) for the period, (if certain conditions are met), gross of tax effects: Effective portion of changes in fair value of cash flow hedge 118,912,428 (52,292,829) Tax effect of the effective portion of changes in fair value of (32,700,918) 14,380,528 cash flow hegde Other comprehensive income for the year, net of tax effects 117,950,837 (165,552,501) Total comprehensive income for the year 299,439,452 40,871,831
2013 Financial Statements 62 Statement of Changes in Equity
Equity (Euro) Reserves Reserves Valuation reserves
Share capital Reserve for Reserve for Extraordinary change in FV on Actuarial gains Profits (losses) Profits (losses) Legal reserve Total Reserves Total Equity reserve derivatives - (losses) for carried forward for the year Cash Flow Hedge employee benefits
Balance as at 1 January 2012 1,654,464,000 4,635,139 177,084,324 (173,353,541) (4,510,289) 3,855,633 (238,180,293) 156,369,196 1,576,508,537 Capital increase Distribution of dividends Allocation of the net profit for the 7,818,460 7,818,460 148,550,736 (156,369,196) - previous year Recognised comprehensive Profit/(Loss) of which: Profit/(Loss) recognised directly in (37,912,301) (127,640,200) (165,552,501) (165,552,501) equity Profit (Loss) for the year 206,424,332 206,424,332
Balance as at 31 December 2012 1,654,464,000 12,453,599 177,084,324 (211,265,842) (132,150,489) (153,878,408) (89,629,557) 206,424,332 1,617,380,368 Capital increase Distribution of dividends Allocation of the net profit for the 10,321,217 10,321,217 196,103,115 (206,424,332) - previous year Recognised comprehensive Profit/(Loss) of which: Profit/(Loss) recognised directly in 86,211,510 31,739,327 117,950,837 117,950,837 equity Profit (Loss) for the year 181,488,615 181,488,615 Balance as at 31 December 2013 1,654,464,000 22,774,816 177,084,324 (125,054,332) (100,411,162) (25,606,354) 106,473,558 181,488,615 1,916,819,820
______2013 Financial Statements 63
Statement of cash flows
Euro 2013 2012
Net profit for the year 181,488,615 206,424,332 Amortisation and depreciation 932,740,417 924,642,671 Provision for risks and charges 27,961,307 175,262,106 Write-downs 24,024,495 6,687,434 Provision for employee benefits 21,780,069 38,666,222 Provisions and write-downs 73,765,871 220,615,762 (Capital gains)/Losses from disposal (23,464,564) (7,903,264) Change in inventories (25,952,043) (6,248,326) Change in trade receivables 217,715,606 (414,833,929) Change in trade payables (367,207,348) 206,852,845 Change in other assest and liabilities 214,074,555 (125,352,405) Uses of provisions for risks and charges (159,389,717) (294,210,416) Payment of employee benefits (119,903,508) (106,588,488) Cash flow generated from (used by) operating activities 923,867,884 603,398,782 Investments in property, plant and equipment (901,009,913) (1,080,116,514) Investments in intangible assets (49,535,553) (40,432,373) Investments valued at equity (2,511,790) (296,300) Investments, including grants (953,057,256) (1,120,845,187) Grants in property, plant and equipment 14,224,990 9,082,621 Grants 14,224,990 9,082,621 Divestments of property, plant and equipment 67,897,319 24,229,108 Divestments of intangible assets 665,830 3,164,185 Divestments of equity intrests 50,501,729 186,614 Divestments 119,064,878 27,579,907 Change in financial assets (13,663,746) (2,369,093) Net cash flow generated/(used) in investing activities (833,431,134) (1,086,551,752) Use and repayment of medium/long term loans (90,885,901) 32,857,411 Use and repayment of short-term loans 84,441,347 (4,636,180) Change in financial liabilities (6,423,809) 5,095,712 Cash flow generated from financing activities (12,868,363) 33,316,943 Total cash flows generated/(used) in the year 77,568,387 (449,836,027) Cash and cash equivalents at the beginning of the year (739,418,960) (289,582,933) Cash and cash equivalents at the end of the year (661,850,573) (739,418,960) Intercompany current account (785,610,607) (800,930,013) Cash and cash equivalents 123,760,034 61,511,053
2013 Financial Statements 64 TRENITALIA S.p.A.
NOTES TO THE FINANCIAL STATEMENTS
1. Preamble
These financial statements for the year ended 31 December 2013 (hereinafter also referred to as the “financial statements”) were prepared in accordance with the International Financial Reporting Standards, issued by the International Accounting Standards Board and adopted by the European Union (“EU-IFRS”). Specifically it should be noted that Trenitalia S.p.A. made use of the right provided for in Legislative Decree no. 38 of 28 February 2005, which regulates the exercise of the options under article 5 of Regulation (EC) no. 1606/2002 on the application of international accounting standards. Specifically, pursuant to articles 3 and 4 of the abovementioned legislative decree, the Company applied the EU-IFRS to the preparation of the Separate Financial Statements starting from the financial year ended 31 December 2010. Up to the financial year ended 31 December 2009, the Company prepared its separate financial statements in accordance with the relevant provisions laid down under Legislative Decree no. 127 of 9 April 1991, as interpreted by the accounting standards issued by the Italian Accounting Board (Organismo Italiano di Contabilità) (the “Italian GAAPs”).
2. Company
Trenitalia S.p.A. (hereinafter also referred to as the “Company” or” Trenitalia”) is a company incorporated and domiciled in Italy and is organised according to the Italian legal system of the Italian Republic. The Company has its registered office in Rome, at Piazza della Croce Rossa no. 1.
The Company is subject to the direction and coordination activities of the Parent Company Ferrovie dello Stato Italiane S.p.A..
On 26 March 2014 the Directors approved the draft annual accounts as at 31 December 2013 which were made available, from said date, within the time limits set out in article 2429 of the Italian Civil Code. These financial statements will be submitted to the Shareholders’ Meeting for approval on 23 April 2014, within the time limits set out in article 2364 of the Italian Civil Code, and will be filed within the time limits set out in article 2435 of the Italian Civil Code. The Shareholders’ Meeting is entitled to make amendments to these financial statements. For the purposes of paragraph 17 of IAS 10, the date taken into consideration by the Directors in preparing the financial statements is 26 March 2014, the date of approval of these financial statements by the Board of Directors.
The Company has opted for the exemption from the obligation to prepare consolidated financial statements, even if there are controlling interests, making use of the exemption provided for in paragraph 10 of IAS 27. The consolidated financial statements for public use have been prepared by the controlling company Ferrovie dello Stato Italiane S.p.A., with registered office in Rome, Piazza della Croce Rossa no. 1, the address at
2013 Financial Statements 65 TRENITALIA S.p.A.
which it is possible to obtain them within the time limits and according to the methods set out in the current regulations.
PricewaterhouseCoopers S.p.A. has been appointed to carry out the statutory audit of accounts, pursuant to article 14 of Legislative Decree no. 39/2010 and articles 2409-bis and ff. of the Italian Civil Code.
3. Criteria for the preparation of financial statements
Below are reported the main criteria and accounting standards applied to the preparation of the financial statements.
As previously specified, the financial statements were prepared in accordance with EU-IFRS, including all International Financial Reporting Standards, all International Accounting Standards (IAS), all interpretations of the International Financial Reporting Interpretations Committee (IFRIC), which was previously named Standing Interpretations Committee (SIC), as adopted by the European Union and contained in the related EU Regulations published until 26 March 2014, i.e. the date when the Company’s Board of Directors approved this document. Specifically, the EU-IFRS were consistently applied to all the periods presented herein. Furthermore, it should be pointed out that these financial statements were prepared on the basis of the best knowledge of EU-IFRS and taking account of the best relevant doctrine; future interpretation guidelines and updates (if any) will be reflected in subsequent financial years, according to the procedures set out in the relevant accounting standards from time to time.
The financial statements were prepared and presented in Euro, which represents the Company’s functional currency, i.e. the current money of the countries where the Company mainly operates; all amounts included in the tables of the following notes, except as otherwise specified, are expressed in thousands of euros.
Below are specified the schedules used in the financial statements and the related classification criteria adopted by the Company within the options provided for in IAS 1 “Presentation of Financial Statements”:
The statement of financial position was prepared by recognising assets and liabilities according to the “current/non-current” classification;
The income statement was prepared by classifying operating costs by nature;
The statement of comprehensive income includes the profit for the year, as well as any other changes in equity items attributable to transactions that have not been carried out with the Company’s shareholders; furthermore, as a result of amendments made to IAS 1- Presentation of Financial Statements - the Company shows other comprehensive income separately, depending on whether or not they can be subsequently reclassified to profit or loss;
The statement of cash flows was prepared by reporting cash flows arising from operating activities according to the “indirect method”.
These financial statements were prepared on a going-concern basis, as the directors established the non- existence of indicators of a financial, operational or any other nature that could report criticalities about the
2013 Financial Statements 66 TRENITALIA S.p.A.
Company’s capacity to meet its obligations in the foreseeable future and specifically in the next 12 months. The description of the procedures through which the Company manages financial risks is contained in note 5 “Financial and operating risk management” below.
The financial statements were prepared on the basis of the conventional historical cost principle, except for the valuation of financial assets and liabilities, including derivative instruments, in the cases which require the application of the fair value criterion.
4. Accounting standards applied
Below are reported the most significant accounting standards and accounting policies used for the preparation of financial statements.
Property, plant and equipment
Property, plant and equipment are entered at purchase or production cost, net of accumulated depreciation and impairment losses (if any). The purchase or production cost includes any charges that are directly incurred to make assets available for use, as well as dismantlement and removal charges (if any) that will be incurred as a result of contractual obligations that require the asset to be returned to its original conditions. Any financial charges that are directly attributable to the acquisition, construction or production of qualified assets are capitalized and depreciated on the basis of the useful life of the asset to which they refer. Any costs for value-increasing improvement, upgrade and transformation of property, plant and equipment are recognized under balance sheet assets.
Any charges incurred for ordinary maintenance and repairs are directly charged to the income statement at the time they are incurred. The capitalization of costs concerning the expansion, upgrade or improvement of the structural elements owned or used by third parties is made within the limits in which they meet the requirements to be separately classified as assets or part of an asset, applying the component approach method, according to which each component that is capable of an independent valuation of the useful life and of the related value must be treated individually.
Depreciation is calculated systematically and on a straight-line basis on the basis of the rates that are deemed to represent the estimated economic and technical useful life of the assets.
The useful life of property, plant and equipment and their residual value are reviewed and updated, where necessary, at least at the end of every financial year. Land is not depreciated.
Below are the depreciation rates used: Rolling stock - Components to be restored 15.4% - 20% - Components subject to wear and tear 15.4% - 20% - Restyling/Safety of Driving Material 8% 2013 Financial Statements 67 TRENITALIA S.p.A.
- Restyling/Safety of Driven Material 10%
- Basic component 4.3% - 3.3% - Capitalised second-level maintenance 15.4% - 20% - Value-increasing maintenance (large revamping) 5.5%
Land and buildings - Property land -
- Land for auxiliary uses - - Industrial buildings and light construction 2% - Value-increasing maintenance of Industrial Buildings 5% - Leasehold improvements 20%
Industrial systems - Workshop systems 5% - Value-increasing maintenance of Workshop systems 10%
Industrial equipment - Vehicles circulating on road and rail 7.5% - Machinery and equipment 10% - Loading vehicles 10% - Communication systems 25%
Other assets - Motor vehicles 20% - 25% - Furniture and fittings 12% - Ordinary office machines 12% - Electronic office machines 20% - Mobile phones 20% - Specific systems 12% - General systems 8% - Sundry and small equipment 12% - Health equipment 12.5% - Leasehold improvements 20%
2013 Financial Statements 68 TRENITALIA S.p.A.
Intangible assets
Intangible assets are made up of non-monetary elements that are identifiable and without physical substance, that can be controlled and are aimed at generating future economic benefits. These elements are recognized at purchase and/or production cost, including any directly-attributable expenses incurred to make the asset available for use, net of accumulated amortization and impairment losses (if any). Interest expense (if any), which accrue during and for the development of intangible assets, are considered to form part of the purchase cost. Amortisation begins when the asset is available for use and is distributed systematically in relation to the residual possible use of the same, i.e. on the basis of its estimated useful life. Specifically, the following main intangible assets can be identified within the Company:
(a) Concessions, licenses and trademarks
Concessions, licences and trademarks are amortised on a straight-line basis and on the basis of the related term.
Costs of software licences, including any expenses incurred to make the software available for use, are amortised on a straight-line basis and on the basis of the related term.
Any costs relating to the maintenance of software programmes are expensed at the time when they are incurred. (b) Research and development costs
Costs relating to the research activity are charged to the income statement of the year at the time they are incurred, while development costs are entered under intangible assets where all the following conditions are fulfilled:
the project is clearly identified and any costs referred thereto are identifiable and can be measured reliably;
it has been demonstrated that the project is technically feasible;
it has been demonstrated that there is the intention to complete the project and to sell the intangible assets generated by the project;
there is a potential market or, in case of internal use, it is demonstrated that the intangible asset is useful for the production of the intangible assets generated by the project;
technical and financial resources are available which are necessary to complete the project.
The amortisation of development costs (if any) entered under intangible assets begins from the date when the result generated by the project can be used and is carried out in a period of 5 years.
If the research phase of an identified internal project to create an intangible asset cannot be distinguished from the development phase, the cost arising from this project is fully charged to the income statement as if it were incurred in the research phase only.
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Profits and losses arising from the sale of an intangible asset are determined as the difference between the value of disposal, net of selling costs, and the book value of the asset and are recognised in the income statement at the time of the disposal.
Below are reported the amortisation rates used with reference to the intangible assets with a definite useful life:
Rates
Development costs 20%
Software 20%
Impairment of intangible assets and property, plant and equipment
i) Intangible assets and property, plant and equipment with a definite useful life
At each balance sheet date, a review is carried out which is aimed at establishing if there is any evidence that the property, plant and equipment and intangible assets may be impaired. For this purpose, account is taken of both external and internal indicators of impairment. In relation to the first ones (internal indicators) the following must be considered: the obsolescence of or physical damage to the asset, significant changes (if any) in the use of the asset and the economic performance of the asset with respect to what is expected. As regards external indicators, the following must be considered: the trend in the market prices of the assets, negative changes (if any) in technology, markets or laws, the trend in market interest rates or in the cost of capital used to measure investments.
If there is an indication that an asset may be impaired, it is necessary to estimate the recoverable amount of the abovementioned assets, charging the write-down (if any) compared to the related book value in the income statement. The recoverable amount of an asset is represented by the higher of an asset's fair value less additional costs to sell and its value in use, the latter being the current value of the future cash flows estimated for this asset. In determining the value in use, the expected future cash flows are discounted using a discount rate, including taxes, which reflects the current market valuations of the cost of money, compared to the period of investment and to the specific risks of the asset. The recoverable amount of an asset that does not generate largely independent cash flows is determined in relation to the cash generating unit to which this asset belongs.
An impairment loss is recognised in the income statement in the event that the entry value of the asset, or of the related cash generating unit to which the same is allocated, is higher than its recoverable amount. The impairment of cash generating units is charged firstly as a reduction in the carrying amount of the goodwill (if any) assigned to the same and therefore as a reduction in the other assets, proportionally to their carrying amount and within the limits of the related recoverable amount. If the reasons for a write-down previously carried out no longer apply, the carrying amount of the asset is restored and charged to the income
2013 Financial Statements 70 TRENITALIA S.p.A.
statement, within the limits of the net book value that the asset in question would have had had the write- down not been carried out and had the related amortization or depreciation been made.
Equity investments in subsidiaries, associates and jointly-controlled entities and other investments
Equity investments in subsidiaries, associates and jointly-controlled entities are valued at their cost as adjusted for any impairment.
The equity investment held by the company, which is neither a subsidiary nor an associate and which is not listed in an active market and for which the use of an appropriate valuation model should not be reliable, is in any case valued at cost.
In the case of equity investments valued at cost, they are written down through profit and loss, where any lasting losses of value are identified. If the reasons for a write-down no longer apply, it is necessary to restore the value at most up to the amount of the initial cost. This reinstatement is entered in the income statement.
Financial Instruments
Financial assets and trade receivables Financial assets are initially measured at fair value and classified under loans and receivables, available-for- sale financial assets or financial assets at fair value through profit or loss, depending on the related nature and the purposes for which they have been acquired.
Financial assets are accounted for at the trade date of the acquisition/sale and are derecognised from the accounts when the right to receive the related cash flows is extinguished and the company has substantially transferred all risks and rewards relating to the financial instrument and the related control.
Loans and receivables
Loans and receivables are non-derivative instruments with fixed or determinable payments that are not quoted in an active market. Specifically, this category classifies the following items of the statement of financial position: “Non-current financial assets (including derivatives)”, “Current financial assets (including derivatives)” and “Current trade receivables”.
Loans and receivables are initially accounted for at fair value and subsequently measured at amortised cost using the effective interest rate, net of the provision for write-down. Loans and receivables are included under current assets, except for those having a contractual term exceeding twelve months compared to the balance sheet date, which are classified under non-current assets.
Any losses on loans and receivables are recognised when there is any objective evidence that the company will not be able to collect the due amount from the counterparty on the basis of the contractual terms. The objective evidence includes events such as:
2013 Financial Statements 71 TRENITALIA S.p.A.
significant financial difficulties of the issuer or debtor;
legal disputes pending with the debtor in relation to receivables;
the probability of the debtor being declared bankrupt or of other financial reorganisation procedures being started.
The amount of the write-down is measured as the difference between the carrying amount of the asset and the present value of the expected future financial flows and recognized in the income statement under the item “Write-downs and impairment losses (reversals)”. Unrecoverable loans and receivables are recognised in the statement of financial position, net of the provision for write-down. If the reasons for the write-downs previously carried out no longer apply in the subsequent periods, the value of the assets is reinstated up to the amount of the value that would be derived from the application of the amortised cost method.
Available-for-sale financial assets
Available-for-sale financial assets are any non-derivative financial assets expressly designated as available for sale and are included under non-current assets, except for those assets which the directors intend to transfer in the twelve months subsequent to the balance sheet date.
Available-for-sale financial assets are initially measured at fair value, as increased by any additional charges and are subsequently always measured at fair value, charging the subsequent profits or losses from measurement to an equity reserve. Their recognition in the income statement is made only at the time when the financial asset is actually transferred, or, in the case of accumulated negative changes, at the time when the same are considered to be durable and significant.
Any dividends arising from equity investments entered under the category in object are charged to the income statement, at the time when the Company becomes entitled to receive the related payment.
At each balance sheet date the Company assesses whether there is any objective evidence of an impairment loss of the financial assets. In the case of equity investments classified as available for sale, a reduction in the fair value of the equity investment to below the initial cost is considered to be an impairment loss. If this evidence exists for available-for-sale financial assets, the cumulative loss – which is calculated as the difference between the acquisition cost and the fair value at the balance sheet date, net of impairment losses (if any) previously accounted for in the income statement – is transferred from equity and recognised in the income statement. These losses crystallise and therefore they cannot be subsequently reinstated in the income statement. Any changes in the exchange rates relating to the equity investments entered under available-for-sale financial assets are recognised under the specific equity reserve.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are represented by securities held for trading, as they are acquired for the purpose of being transferred in the short-term. Derivatives are measured as securities held for trading, unless they are designated as hedging financial instruments.
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Financial assets at fair value through profit or loss are initially recognized at fair value and the related additional charges are immediately expensed in the income statement. Subsequently, these assets are measured at fair value with changes in profit or loss.
Cash and cash equivalents
Cash and cash equivalents include cash on hand and available bank deposits and any other forms of short- term investment, with an initial maturity of three months or less. At the balance sheet date, current account overdrafts are classified as borrowings under current liabilities in the statement of financial position. The elements included in cash and cash equivalents are measured at fair value with changes recognized in profit or loss.
Loans, trade payables and other financial liabilities
Loans, trade payables and other financial liabilities are initially entered at fair value, net of directly-attributable additional costs, and are subsequently valued at amortised cost, applying the effective interest rate method. If there is a change in the estimated expected cash flows, the value of the liabilities is recalculated to reflect this change on the basis of the present value of the new expected cash flows and of the effective internal rate as initially determined. Loans, trade payables and other financial liabilities are classified under current liabilities, except for those with a contractual term beyond twelve months compared to the balance sheet date and those for which the Company has an unconditional right to defer their settlement for at least twelve months after the reporting date. Loans, trade payables and other financial liabilities are derecognized at the time of their repayment and when the company has transferred all risks and charges related to the instrument itself.
Derivative financial instruments
Derivative financial instruments entered into by the Company are aimed at coping with the exposure to the interest rate risks and a diversification of the indebtedness parameters that may allow a reduction in their cost and volatility. At the date of execution of the contract, derivative instruments are initially accounted for at fair value and, if the derivative instruments are not accounted for as hedging instruments, the subsequent fair value changes are treated as components of the income statement.
Hedging derivative financial instruments are accounted for according to the procedures set out for hedge accounting only when:
at the inception of the hedge, there is formal designation and documentation of the hedging relationship itself;
hedge is expected to be highly effective;
effectiveness can be measured reliably;
2013 Financial Statements 73 TRENITALIA S.p.A.
the hedge itself is highly effective during the different accounting periods for which it is designated.
If the derivative financial instruments are eligible for hedge accounting, the following accounting treatments shall apply:
Cash flow hedge
If a derivative financial instrument is designated as a hedge of the exposure to variability in cash flows of a recognized asset or liability or of a highly probable forecast transaction, the effective portion of profits or losses arising from the fair value adjustment to the derivative instrument is recognized under a specific equity reserve. The cumulative profit or loss is reversed from the equity reserve and accounted for in the income statement in the same financial years in which the effects of the transaction being hedged are recognised in the income statement. The profit or loss associated with the ineffective portion of the hedge is immediately entered in the income statement. If the transaction being hedged is no longer considered to be probable, the profits or losses that have not yet been realised, accounted for in the equity reserve, are immediately recognized in the income statement.
Derivative financial instruments are accounted for at the trade date.
Estimate of the fair value
The fair value of the financial instruments listed in an active market is based on the market prices at the balance sheet date. Instead, the fair value of the financial instruments that are not listed in an active market is determined by using valuation techniques based on a series of methods and assumptions linked to market conditions at the balance sheet date.
Given the short-term features of trade receivables and payables, it is deemed that the book values represent a good approximation of the fair value.
Inventories
Inventories, which are mainly made up of spare parts for the maintenance of rolling stock, are entered at the lower of purchase and/or production cost and net realizable value. The cost is determined according to the weighted average cost method.
The accounting management of inventories is made according to the so-called “metodo patrimoniale”.
The net realisable value corresponds, for finished products to the selling price estimated in the ordinary course of business, net of estimated selling costs. For raw and secondary materials and consumables, the net realisable value is represented by the replacement cost.
The purchase cost includes additional charges; the production cost includes directly-attributable costs and a portion of indirect costs, which are reasonably attributable to the products. 2013 Financial Statements 74 TRENITALIA S.p.A.
The obsolete and/or slow-moving inventories are written down in relation to their alleged possible use or future sale, through the recognition of a special provision adjusting the value of inventories. The write-down is derecognised in the subsequent financial years if the reasons for the same no longer apply.
Employee benefits
Short-term benefits are represented by salaries, wages, related social security contributions, paid vacation and incentives paid out in the form of bonuses payable in the twelve months of the balance sheet date. These benefits are accounted for as personnel cost components in the period in which the working activity is performed.
Severance pay and other employee benefits
The Company has in place both defined contribution and defined benefit plans. Defined contribution plans are managed by third parties that manage funds, in relation to which there are no legal or any other obligations to pay additional contributions if the fund has no sufficient assets to meet the commitments undertaken to employees. For defined contribution plans, the Company pays contributions, either voluntary or set out as per contract, into public and private insurance pension funds. Contributions are entered as personnel costs on an accruals basis. Advance payments of contributions are entered as an asset that will be repaid or entered as an offset of future payments, if they are due.
A defined benefit plan is a plan that cannot be classified as a defined contribution plan. Under defined benefit plans the amount of the benefit to be paid out to the employee can be quantified only after the termination of the employment relationship, and is linked to one or more factors, such as age, years of service and remuneration. Therefore, defined benefit obligations are determined by an independent actuary using the projected unit credit method. The present value of defined benefit plans is determined by discounting future cash flows at an interest rate equal to that of (high-quality corporate) bonds issued in the foreign currency in which the liability will be settled and that takes account of the term of the related pension plan. Profits and losses arising from the actuarial calculation are fully charged to equity, in the reporting year, taking account of the related deferred tax effect.
Specifically, it should be pointed out that the Company manages a defined benefit plan that is represented by the provision for Severance Pay (Trattamento di Fine Rapporto, TFR). The Italian Companies are required to set aside this provision pursuant to article 2120 of the Italian Civil Code; it is treated as a deferred remuneration and is correlated to the duration of the working life of the employees and to the remuneration received in the period of service performed. Starting from 1 January 2007, law no. 296 of 27 December 2006, “2007 Finance Act” and subsequent Decrees and Regulations, introduced significant amendments to the TFR regulations, including the worker’s right to choose to allocate its accruing TFR being accrued either to supplementary pension funds or to the “Treasury Fund” managed by the INPS (Istituto Nazionale di Previdenza Sociale, National Social Security Institute). Therefore, this has entailed that the obligation to the INPS and the contributions paid into supplementary pension funds are now treated, pursuant to IAS 19 2013 Financial Statements 75 TRENITALIA S.p.A.
“Employee benefits”, as defined contribution plans, while the quotas entered in the provision for TFR at 1 January 2007 are still treated as defined benefit plans. The provision for TFR also includes the retirement allowance due to the personnel for the period of service rendered up to 31 December 1995.
The Company also has in place a defined benefit pension plan referred to the “Free Travel Card” (Carta di Libera Circolazione, CLC) that grants the employees, even if they are retired employees, and to their relatives, the right to make use - free of charge or, in some cases, through the payment of admission fees – of the Company’s railway services.
Therefore, a provision has been set aside in the accounts, on the basis of the actuarial techniques previously mentioned, which includes the discounted charge relating to retired employees who are entitled to the benefit, as well as the portion of benefit accrued for the employees in service and to be paid out after the termination of the employment relationship. The accounting treatment of the benefits produced by the Free Travel Card and the effects arising from the actuarial measurement are the same as those envisaged for the provision for Severance Pay.
Provisions for risks and charges
Provisions for risks and charges are entered against certain or probable losses and charges, whose amount and/or date of occurrence cannot be determined. The provision is recognized only when a current obligation (legal or constructive) exists as a result of past events and it is probable that a future outflow of financial resources will be required to settle the obligation. This amount represents the best estimate of the charge to fulfil the obligation. The rate used to determine the present value of the liability reflects the current market values and takes account of the specific risk that can be associated to each liability.
When the financial effect of time is significant and the dates of payment of the liabilities can be estimated reliably, provisions are measured at the present value of the outlay expected by using a rate that reflects market conditions, any change in the cost of money over time and the specific risk inherent in the obligation. The increase in the value of the provision determined by changes in the cost of money over time is accounted for as an interest expense.
The risks for which the emergence of a liability is only possible are specified in the special section on contingent liabilities and no provision has been made for them.
Translation of currency items
Any transactions in a currency other than the functional currency are recognised at the exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in a currency other than the Euro are subsequently adjusted at the exchange rate prevailing at the closing date of the financial year. Non-monetary assets and liabilities denominated in a currency other than the Euro are entered at historical cost using the exchange rate prevailing at the date of initial recognition of the transaction. Any exchange differences that may arise are reflected in the income statement. 2013 Financial Statements 76 TRENITALIA S.p.A.
Revenues
Revenues are recognised insofar as it is probable that economic benefits will flow to the Company and their amount can be determined reliably, taking account of the value of returns, rebates, trade discounts and premiums concerning quantity (if any).
Revenues from performance of services are recognised in the income statement with reference to the state of completion of the service and only when the result of the service can be estimated reliably.
Revenues from sales of goods are measured at the fair value of the consideration received or due. Revenues from sales of goods are recognized when the significant risks and the rewards of ownership of the assets are transferred to the purchaser and the related costs can be estimated reliably.
Interest income is recorded in the income statement on the basis of the effective rate of return.
Government grants
Government grants, in the presence of a formal resolution assigning them and, in any case, when the right to their payment is deemed final as there is reasonable certainty that the Company will comply with any conditions attached to the grant and that the grants will be received, are recognised on an accruals basis in direct correlation with the costs incurred.
i) Set-up grants
Government set-up grants refer to sums paid out by the Government and by any other Public Bodies to the Company for the implementation of initiatives aimed at the construction, reactivation and expansion of property, plant and equipment. Set-up grants are accounted for as a direct reduction in the assets to which they refer and contribute, as a reduction, to the calculation of the depreciation rates.
ii) Operating grants
Operating grants refer to sums paid out by the Government or by any other Public Bodies to the Company by way of reduction in costs and charges incurred. Operating grants are charged to the income statement under “Other income”, as a positive component of the income statement.
Cost recognition
Costs are recognised when they relate to goods and services acquired or consumed in the year or by systematic allocation.
2013 Financial Statements 77 TRENITALIA S.p.A.
Income taxes
Current taxes are determined on the basis of the estimated taxable income and in accordance with the regulations in force.
Deferred tax assets, relating to previous tax losses, are recognized insofar as it is probable that a future taxable income will be available against which the same may be recovered. Deferred tax assets and liabilities are determined using the tax rates that are expected to be applied in the financial years in which the differences will be realized or discharged.
Current taxes, deferred tax assets and liabilities are recognised in the income statement, except for those relating to items recognised under other components in the comprehensive income and directly debited or credited to equity. In the latter cases, deferred tax liabilities are recognised under the item “Tax effect” relating to the other components of the comprehensive income and directly in equity, respectively. Deferred tax assets and liabilities are offset when the same are applied by the tax authorities themselves, there is a legal right of setoff and a settlement of the net balance is expected.
Any other taxes that are not correlated to income, such as indirect taxes and duties, are included in the income statement item “Other operating costs”.
Assets and liabilities held for sale and discontinued operations
Non-current assets (or disposal groups) whose carrying amount will be recovered mainly through the sale rather than through their continuous use are classified as held for sale and are entered separately from any other assets and liabilities in the statement of financial position. The corresponding equity values of the previous year are not reclassified. A Discontinued Operation is a component of the entity that has been disposed of or classified as held for sale; and:
represents either a major line of business or a geographical area of operations;
is part of a co-ordinated plan to dispose of a major line of business or geographical area of operations; or
is a subsidiary acquired exclusively with a view to resale.
The results from discontinued operations – either disposed of or classified as held for sale and being divested – are recognized separately in the income statement, net of tax effects. The corresponding values relating to the previous financial year, where present, are reclassified and recognized separately in the separate income statement, net of tax effects, for comparative purposes. Non-current assets (or disposal groups) classified as held for sale, are firstly recognized in accordance with the specific relevant IFRS applicable to each asset and liability and, subsequently, are recognised at the lower of carrying amount and the related fair value, net of selling costs. Subsequent impairment losses (if any) are recognised directly as an adjustment to non-current assets (or disposal groups) classified as held for sale through profit or loss.
2013 Financial Statements 78 TRENITALIA S.p.A.
Instead, a reinstatement of value is recognised for each subsequent increase in the fair value of an asset, net of selling costs, but only up to the amount of the total impairment loss previously recognized.
First-time adoption accounting standards
The EU legislator has adopted some accounting standards and interpretations, whose application became compulsory on 1 January 2013, which regulate cases and case studies that were not present within the Company at the date of this annual financial report, but which could have accounting effects on future transactions and agreements:
IFRS 13 – Fair value measurement
On 12 May 2011 the IASB issued IFRS 13 – Fair value measurement which illustrates the procedures for determining the fair value for the purposes of the financial statements and will be applicable to all the cases in which the standards require or allow fair value measurement or the presentation of information based on the fair value, with some limited exclusions. Furthermore, the standard requires more extensive information on the fair value measurement (fair value hierarchy) than that required by IFRS 7.
The company adopted this new standard on a prospective basis from 1 January 2013.
IAS 19 – Employee benefits
On 16 June 2011 the IASB issued an amendment to IAS 19 – Employee benefits, which eliminates the option to defer the recognition of actuarial gains and losses according to the corridor method, providing for all actuarial gains or losses to be recognised immediately in the Other comprehensive income (OCI), so that the entire net amount of provisions for defined benefits (net of assets serving the plan) is entered in the consolidated statement of financial position. The amendment also provides for any changes in the provision for defined benefits and of any assets serving the plan, between a financial year and the subsequent one, to be divided into three components: the cost components linked to the working activity of the financial year must be recognised as “service costs” in the income statement; net financial charges, which are calculated by applying the appropriate discount rate to the net balance of the provision for defined benefits, net of assets arising at the beginning of the financial year, must be recognised in the income statement as such; actuarial gains and losses that arise from the re-measurement of liabilities and assets must be entered in the statement of comprehensive income. Furthermore, the return of the assets included under net financial charges, as specified above, shall be calculated on the basis of the discount rate of the liabilities and no longer on the basis of the expected return of the assets.
Finally, the amendment introduces new additional information to be provided in the notes to the financial statements. The application of these amendments to the standard has not entailed any effect on the Company, as employee benefits are already treated through their recognition under other comprehensive income.
The company adopted this amendment on a retrospective basis as from 1 January 2013.
2013 Financial Statements 79 TRENITALIA S.p.A.
IAS 1 – Presentation of financial statements
On 16 June 2011 the IASB issued an amendment to IAS 1 – Presentation of financial statements to require the companies to group all the components reported in the “Other comprehensive income” depending on whether or not they can be subsequently reclassified to profit or loss.
The company adopted this amendment as from 1 January 2013.
IFRS 7 – Financial Instruments: disclosures
On 16 December 2011 the IASB issued some amendments to IFRS 7 – Financial Instruments: disclosures. These amendments require information on the actual or potential effects of the setoff of financial assets and liabilities on the statement of financial position of an enterprise.
The company adopted these amendments as from 1 January 2013.
IFRS 1 – First-time adoption of International Financial Reporting Standards
On 14 March 2012 the IASB issued an amendment to IFRS 1, First-Time Adoption of International Financial Reporting Standards, which introduces another exception to the retrospective application of IFRS 9 and IAS 20 in relation to the recognition of government loans in being on the transition date, equating the positions of first-time users to those of entities that have already prepared their financial statements according to international accounting standards previously.
This amendment has not had any effects on the Company’s financial statements.
Annual Improvements to IFRSs: 2009-2011 Cycle
On 17 May 2012 the IASB published a document named Annual Improvements to IFRSs: 2009-2011 Cycle, which adopts the changes to the standards in the framework of their annual improvement process, concentrating on changes that are deemed necessary but not urgent. After this it refers to those that will entail a change in the presentation, reporting and measurement of the items in the accounts, setting aside those that entail changes in terminology or editing changes with very little effect in terms of accounting, or those that have an impact on the standards or interpretations not applicable to the company:
IAS 1 Presentation of financial statements – Comparative information: it is clarified that, in the event that additional comparative information is provided, it must be presented in accordance with IAS/IFRS; if an entity voluntarily provides additional comparative information, this may be included even in only one of the mandatory financial statements, for which the related notes must be then provided. Furthermore, it is clarified that in the event that an entity changes an accounting standard or makes a retrospective adjustment/reclassification, the entity itself shall also present a balance sheet at the beginning of the comparative period (“third statement of financial position” in the financial statements), while no comparative disclosures are required to be reported in the notes to the financial statements in relation to this “third statement of financial position”, except for any relevant items.
2013 Financial Statements 80 TRENITALIA S.p.A.
IAS 16 Property, plant and equipment – Classification of servicing equipment: it is clarified that any servicing equipment shall be classified under “Property, plant and equipment” if it is used for more than one financial year; otherwise, under “Inventories”.
IAS 32 Financial instruments: presentation – Direct taxes it is clarified that direct taxes on distributions to holders of equity instruments and transaction costs on equity instruments will apply IAS 12.
IAS 34 Interim Financial Reporting – Information on operating segments”: this standard clarifies requirements on information to be reported in interim reports as to assets and liabilities relating to operating segments.
The company adopted these amendments as from 1 January 2013.
Standards endorsed by the European Union and not applied by the Company in advance
IFRS 10 – Consolidated Financial Statements
On 12 May 2011 the IASB issued IFRS 10 – Consolidated Financial Statements, which replaces SIC-12 Consolidation - Special Purpose Entities and IAS 27 - Consolidated and Separate Financial Statements, which will be renamed “Separate Financial Statements” and will regulate the accounting treatment of equity investments in separate financial statements. The new standard identifies a single control model applicable to all companies. Below are the main developments:
according to IFRS 10, there is only one fundamental principle for the consolidation of all types of entity, and this principle is based on control. This change removes the inconsistency that was perceived between the previous IAS 27 (based on control) and SIC 12 (based on the transfer of risks and rewards);
a firmer definition of control has been introduced with respect to the past, based on three elements on the part of the investor: (a) power over the acquired enterprise; (b) exposure or rights to variable returns from the investor’s involvement with the investee; and (c) the ability of the investor to use its power over the investee to affect the amount of the investor’s returns;
IFRS 10 requires an investor, if it wishes to assess whether it has control over the acquired enterprise, to focus on the activities that significantly affect its returns;
IFRS 10 states that only substantive rights should be considered in assessing the existence of control, namely those that can be exercised in practice when important decisions are to be taken concerning the acquired enterprise;
IFRS 10 gives practical guidance in order to help in the assessment of whether there is control in complex situations, such as de facto control, potential voting rights, situations in which it has to be established whether the decision-maker is acting as agent or principal, etc..
2013 Financial Statements 81 TRENITALIA S.p.A.
The standard will be applicable on a retrospective basis from 1 January 2014, with early application permitted as from 1 January 2013. This standard has no effects as no Trenitalia’ consolidated accounts are prepared.
IFRS 11 – Joint arrangements
On 12 May 2011 the IASB issued IFRS 11 – Joint arrangements which replaces SIC-13 – Jointly Controlled Entities – Non-monetary Contributions by Venturers and IAS 31 – Interests in Joint Ventures. IFRS 11, without prejudice to the criteria to identify joint control, sets out the reporting principles for entities that are parties to said agreements, defining the equity method as the only method of accounting for the purposes of consolidated financial statements. According to IFRS 11, the existence of a separate vehicle is not a sufficient condition to classify a joint arrangement as a joint venture.
Following the issue of the standard, IAS 28 – Investments in Associates and joint venture was amended in order to also include interests in joint ventures within its scope of application from the effective date of the standard.
The standard will be applicable on a retrospective basis from 1 January 2014, with early application permitted as from 1 January 2013. This standard has no effects as no Trenitalia’ consolidated accounts are prepared.
IFRS 12 – Disclosure of Interests in Other Entities
On 12 May 2011 the IASB issued IFRS 12 – Disclosure of Interests in Other Entities, which is a new and complete standard on the additional information to be provided in the consolidated financial statements on any type of equity investment, including those held in subsidiaries, joint arrangements, associates, unconsolidated special purpose entities and any other vehicle company.
The standard will be applicable on a retrospective basis from 1 January 2014, with early application permitted as from 1 January 2013. This standard has no effects as no Trenitalia’ consolidated accounts are prepared.
IAS 32 – Financial Instruments: presentation
On 16 December 2011 the IASB issued some amendments to IAS 32 – Financial Instruments: presentation, in order to clarify the application of some criteria for the setoff of financial assets and liabilities governed by IAS 32, thus actually making it more difficult. The amendments will be applicable on a retrospective basis for the financial years commencing on or after 1 January 2014, with early application permitted as from 1 January 2013.
IFRS 10 IFRS 11 IFRS 12 – Amendments: transition guidance
On 28 June 2012 the IASB issued some amendments to IFRS 10 – Consolidated financial statements, IFRS 11 – Joint arrangements and IFRS 12 – Disclosure of Interests in Other Entities, as resulting from the proposals contained in the Exposure Draft – Transition Guidance published in December 2011. The amendments substantially provide further relief in the transition to the new standards by limiting the obligation to provide adjusted comparative information to the previous comparative financial year only. Furthermore, for the first year that IFRS 12 is applied, the requirement to present comparative information for the disclosures related to unconsolidated structured entities is removed. The amendments will be applicable
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for the financial years commencing after 1 January 2014, with early application permitted as from 1 January 2013.
IFRS 10 IFRS 12 IAS 27 – Investment entity
On 31 October 2012 the IASB published some amendments to IFRS 10 – Consolidated Financial Statements, IFRS 12 – Disclosure of Interests in Other Entities and IAS 27 – Separate Financial Statements. The abovementioned amendments clarify the definition of “investment entity” and introduce an exception to the application of the principle of consolidation for such entities, and allow the same to measure their subsidiaries at Fair Value. Furthermore, the amendments better define some disclosure requirements that the investment entities must provide in the notes. The standard will be applicable for the financial years commencing on or after 1 January 2014.
IAS 36 – Impairment of Assets – Disclosures on the recoverable amount of non-financial assets
On 29 May 2013 the IASB issued an amendment to IAS 36 – Impairment of Assets – Disclosures on the recoverable amount of non-financial assets. The amendment regulates the information to be provided in relation to the recoverable amount of an impaired asset in the case this amount is determined at the asset’s fair value less costs of disposal.
The standard will be applicable for the financial years commencing on 1 January 2014.
IAS 39 – Financial Instruments: Recognition and Measurement
On 27 June 2013 the IASB issued some amendments to IAS 39 – Financial Instruments: Recognition and Measurement, named “Novation of Derivatives and Continuation of Hedge Accounting.” The amendments provide an exception to the requirement to discontinue hedge accounting in situations where derivatives designated in hedging relationships are novated to replace the original counterparty as a consequence of laws or regulations, in order to ensure the successful discharge of the obligation undertaken and if certain conditions are met.
The same amendment will be included in IFRS 9 – Financial Instruments. These amendments will be applicable from the financial years commencing on 1 January 2014, with early application permitted.
Accounting standards not endorsed by the European Union.
As at the date of these Financial Statements, the competent bodies of the European Union had not yet concluded the necessary process of endorsement for the adoption of the following accounting standards and amendments:
IFRS 9 – Financial instruments
On 12 November 2009 the IASB published IFRS 9 – Financial instruments, which represents the first stage of a phased process that is aimed at fully replacing IAS 39 and introduces new criteria for the classification and measurement of financial assets and liabilities. Specifically, the new standard applies, for financial assets, a single approach based on the procedures to manage financial instruments and on the characteristics of contractual cash flows of the financial assets themselves in order to determine their
2013 Financial Statements 83 TRENITALIA S.p.A.
accounting policy, replacing the different rules laid down in IAS 39 up to now. On the contrary, as to financial liabilities, the main amendment concerns the accounting treatment of changes in fair value of a financial liability designated as financial liability at fair value through profit and loss, in the event that they are due to a change in the credit rating of the liability itself. According to the new standard, these changes must be recognized in Other comprehensive income (OCI) and will no longer be taken through profit or loss. The endorsement of this standard is currently suspended.
IFRIC 21 – Levies
On 20 May 2013 the IASB issued IFRIC 21 – Levies, which is an interpretation of IAS 37 – Provisions, Contingent Liabilities and Contingent Assets. IFRIC 21 provides guidance on when an entity must recognise a liability for levies imposed by a government, except for those already regulated by other standards (e.g. IAS 12 – Income Taxes).
One of the requirements laid down under IAS 37 for the recognition of a liability is represented by the existence of a present obligation of the entity as a result of a past event (obligating event). The interpretation clarifies that an entity recognises a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs.
IFRIC 21 will be effective from the financial years commencing on 1 January 2014.
IAS 19 – Employee benefits
On 21 November 2013 the IASB issued some amendments to IAS 19 – Employee Benefits, named “Defined Benefit Plans: Employee Contributions”. The objective of the amendments is to simplify the accounting for contributions that are independent of the number of years of employee service, such as, for example, employee contributions that are calculated according to a fixed percentage of salary. The amendments will be applicable from 1 July 2014, with early application permitted.
Annual Improvements to IFRSs: 2010-2012 Cycle
On 12 December 2013 the IASB published a document named Annual Improvements to IFRSs: 2010- 2012 Cycle, which adopts the changes to the standards in the framework of their annual improvement process, in response to eight issues addressed during the 2010-2012 cycle. The standards included in this cycle are: IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 7, IAS 16/38 and IAS 24. These amendments will be applicable from 1 July 2014, with early application permitted.
Annual Improvements to IFRSs: 2011-2013 Cycle
On 12 December 2013 the IASB published a document named Annual Improvements to IFRSs: 2011- 2013 Cycle, which adopts the changes to the standards in the framework of their annual improvement process, in response to four issues addressed during the 2011-2013 cycle. The standards included in this 2013 Financial Statements 84 TRENITALIA S.p.A.
cycle are: IFRS 1, IFRS 3, IFRS 13 and IAS 40. These amendments will be applicable from 1 July 2014, with early application permitted.
Use of estimates and valuations
The preparation of the financial statements requires the directors to apply accounting standards and methods, which are based, in some circumstances, on difficult and subjective valuations and estimates based on historical experience and on assumptions that are from time to time considered to be reasonable and realistic depending on the related circumstances. Therefore, the final results of the items in the financial statements, whose current calculation is based on the abovementioned estimates and assumptions have been used may in the future differ, even significantly, from those reported in the financial statements, because of the uncertainty that characterizes the assumptions and conditions on which the estimates are based. The estimates and assumptions are reviewed periodically and the effects of any change are recognized in the income statement, if the same affects the financial year only. In the event that the review affects financial years, both current and future, the change is recognized in the financial year when the review is carried out and in the related future financial years.
Therefore, the final results may differ, even significantly, from these estimates following possible changes in the factors considered in the determination of these estimates.
Below are briefly summarised the accounting standards that require, more than others, a major subjectivity by the directors in the preparation of estimates and for which a change in the conditions behind the assumptions used could have a significant impact on the financial data: i) Impairment of assets
In accordance with the accounting standards applied by the Company, property, plant and equipment and intangible assets with a definite life are subject to a test aimed at establishing whether there is an impairment loss, which must be recognized through a write-down, when there is evidence that difficulties will arise for the recovery of the related net book value through the use. The test to check the existence of the abovementioned evidence requires the directors to make subjective valuations based in the information available within the Company and in the market, as well as from the historical experience. Furthermore, should it be established that there is a potential impairment loss, the Company determines the same using valuation techniques that are considered to be suitable. The correct identification of the elements indicating the existence of a potential impairment loss, as well as any estimates for the determination of the same depend on factors that may vary over time, thus affecting valuations and estimates made by the directors.
ii) Amortisation and depreciation
The cost of property, plant and equipment and intangible assets is amortised and depreciated on a straight- line basis over the estimated useful life of the related assets. The useful economic life of the Company’s fixed assets is determined by the directors at the time when the fixed asset has been purchased; it is based on the 2013 Financial Statements 85 TRENITALIA S.p.A.
historical experience for similar fixed assets, market conditions and forecasts concerning future events that may have an impact on the useful life. Therefore, the actual economic life may differ from the estimated useful life. The Company assesses any technological and sector changes to update the residual useful life on a periodical basis. This periodical update may entail a change in the period of amortisation and depreciation and then also in the amortisation and depreciation rates of future financial years. iii) Provisions for risks and charges
Provisions are set aside against legal and tax risks which represent the risk of a negative outcome. The value of recognised provisions relating to these risks represents the best estimate made by the directors at the reporting date. This estimate entails the adoption of assumptions that depend on factors which may vary over time and which may have significant effects compared to the current estimates made by the directors for the preparation of the Company’s financial statements. iv) Taxes
The recognition of deferred tax assets is made on the basis of the forecast income expected in future financial years. The valuation of any expected income for the purposes of the recognition of deferred taxes depends on factors that may vary over time and determine significant effects on the measurement of deferred tax assets. v) Fair value of derivative financial instruments
The fair value of derivative financial instruments that are not listed in active markets is determined using valuation techniques. The Company uses valuation techniques that use inputs that can be observed in the market, either directly or indirectly, at the end of the financial year, and that are connected to the assets and liabilities being measured. Even if the estimates of the abovementioned fair values are considered to be reasonable, any possible changes in the estimate factors on which the calculation of the aforesaid values is based may produce different valuations. vi) Operating segments
As at the date of these Financial Statements, the Company had not debt instruments or shares listed on a regulated market and was included in the scope of consolidation of the FS Italiane Group, which provides information on its operating segments in the Notes to the Consolidated Financial Statements, in accordance with IFRS 8.2 b.
2013 Financial Statements 86 TRENITALIA S.p.A.
5. Financial risk management and other risk factors
FINANCIAL RISKS
The activities carried out by the Company expose it to various types of risks that include market risk (interest rate, price and exchange risk), liquidity risk and credit risk.
This section provides information relating to the Company’s exposure to each of the risks listed above, the objectives, policies and processes for the management of these risks and the methods used to assess them, as well as the management of the capital. These financial statements also include additional quantitative information. The Company’s risk management focuses on the volatility of financial markets and is aimed at minimizing potential side effects on the Company’s economic and financial performance.
Credit risk
The credit risk is the risk that a customer or one of the counterparties of a financial instrument may cause a financial loss in not complying with an obligation. The credit risk mainly arises from trade receivables, receivables from the public administration, the company’s financial investments and cash and cash equivalents. For financial institutions and banks, the company will only accept counterparties with an independent rating.
The Company has issued organisational procedures for credit management in order to define strategies and guidelines of the commercial credit policy, to assign credit limits for customers, to split credit risk, to check customers’ solvency and to start debt collection operations.
The forecast recoverability of credits is valued position by position, taking account of the instructions given by the heads of department and by the internal and external legal counsels who deal with the recovery procedure (if any). Accordingly, any credits for which as at the balance sheet date it is probable that a loss will arise are written down.
In relation to derivative financial instruments which are used for hedging purposes and which can potentially generate credit exposure to counterparties, the company applies a policy that defines concentration limits by counterparty and by class of rating.
The table below reports the Company’s exposure to credit risks:
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31.12.2013 31.12.2012
Current trade receivables 2,111,791 2,318,843 Provision for bad debts (230,886) (220,353) Current trade receivables, net of provision for bad debts 1,880,906 2,098,490 Other current assets 51,413 175,593 Provision for bad debts (1,671) (2,027) Other current assets, net of provision for bad debts 49,742 173,566 Non-current financial assets (including derivatives) 23,329 23,923 Provision for bad debts - - Non-current financial assets (including derivatives), net of provision for bad debts 23,329 23,923 Other non-current assets 21,629 24,079 Provision for bad debts - - Other non-current assets, net of provision for bad debts 21,629 24,079 Cash and cash equivalents 123,760 61,511 Current financial assets (including derivatives) 16,609 2,352 Provision for bad debts - - Current financial assets (including derivatives), net of provision for bad debts 16,609 2,352 Total exposure, net of provision for bad debts 2,115,975 2,383,922
The tables below report the exposure to credit risks by counterparty, in absolute terms and as a percentage, excluding Cash and cash equivalents:
31.12.2013 31.12.2012
Public Administration, Italian Government, Regions 1,438,144 1,529,979 Ordinary customers 171,663 259,983 Financial institutions 22,750 22,750 Other debtors 359,659 509,699
Total exposure, net of provision for bad debts 1,992,215 2,322,411
31.12.2013 31.12.2012 Public Administration, Italian Government, Regions 72.19% 65.88% Ordinary customers 8.62% 11.19% Financial institutions 1.14% 0.98% Other debtors 18.05% 21.95%
Total exposure, net provision for bad debts 100% 100%
Owing to the activities that the Company performs, among its receivables are the sums due to it in accordance with services contracts with the Regional Governments and the Government and receivables from ordinary customers which are mainly related to its work for Cargo customers. Therefore, the type of receivables claimed by the Company is largely attributable to government and public bodies, such as the Ministry of Economy and Finance and Regional Governments. Special procedures are followed that tend to 2013 Financial Statements 88 TRENITALIA S.p.A.
minimise the risk of creditors’ insolvency by assessing their degree of reliability, especially big Cargo customers. Only companies that issue satisfactory guarantees are allowed to exceed the credit limit. Therefore, the credit risk, which is represented by the Company’s exposure to potential losses arising from the failure by its own debtors to comply with their obligations is significantly reduced.
The table below provides a distribution of financial assets at 31 December 2013, as broken down by overdue items, net of provision for bad debts and excluding cash and cash equivalents:
31.12.2013 Overdue by Not expired 0-180 180-360 360-720 beyond 720 Total
Public Administration, Italian Government, Regions (gross) 612,323 540,769 171,787 133,796 - 1,458,675 Provision for bad debts (3,901) - - (16,631) - (20,531) Public Administration, Italian Government, Regions (net) 608,423 540,769 171,787 117,165 - 1,438,144 Ordinary customers (gross) 137,288 23,367 172,741 26,887 - 360,283 Provision for bad debts (1,144) - (164,051) (23,426) - (188,620) Ordinary customers (net) 136,145 23,367 8,690 3,461 - 171,663 Financial institutions 22,750 22,750 Other debtors (gross) 271,438 25,714 14,667 70,212 1,033 383,064 Provision for bad debts (1,677) - - (21,728) - (23,405) Other debtors (net) 269,761 25,714 14,667 48,485 1,033 359,659
Total exposure, net of provision for bad debts 1,014,328 589,849 195,144 191,861 1,033 1,992,215
31.12.2012 Overdue by Not expired 0-180 180-360 360-720 beyond 720 Total
Public Administration, Italian Government, Regions (gross) 724,708 435,859 164,766 217,629 - 1,542,963 Provision for bad debts (3,901) - - (9,084) - (12,984) Public Administration, Italian Government, Regions (net) 720,808 435,859 164,766 208,545 - 1,529,979 Ordinary customers (gross) 179,769 47,238 165,322 48,643 - 440,972 Provision for bad debts (1,086) - (155,844) (24,059) - (180,988) Ordinary customers (net) 178,683 47,238 9,478 24,584 - 259,983 Financial institutions 22,750 22,750 Other debtors (gross) 393,545 58,489 12,504 73,568 - 538,106 Provision for bad debts (2,272) - - (26,135) - (28,407) Other debtors (net) 391,273 58,489 12,504 47,433 - 509,699 Total exposure, net of provision for bad debts 1,290,763 541,587 186,748 303,313 - 2,322,411
Receivables from Public Administrations mainly related to receivables from regions and from the Ministry of Economy and Finance for Services contracts, equal to about Euro 1,205 million and Euro 246 million, respectively, of which about 58% has already expired. Particular importance is attached to expired receivables from Regions: Lazio (about Euro 254 million), Campania (about Euro 196 million) and Piedmont (about Euro 168 million).
Liquidity risk
The liquidity risk is the risk that an entity may have difficulties in complying with the obligations associated with financial liabilities to be settled delivering cash on hand or any other financial asset. As stated in the previous paragraph, the Company claims considerable receivables from the Government and the Regional Governments, which are not collected within the due time limits. However, the payment of the same by the
2013 Financial Statements 89 TRENITALIA S.p.A.
Government and the Regional Governments, even if slow, allows the Company to manage any financial requirements arising from the need to meet the expiry dates of medium-long terms debts envisaged in the 2014 financial year. For this purpose, the Company has access to credit facilities on committed and uncommitted terms that are held by the Parent Company, specifically earmarked for Trenitalia in order to meet temporary cash requirements, and it also belongs to the Ferrovie dello Stato Italiane Group’s cash pooling system for the optimisation of liquidity. The committed and uncommitted credit lines amount to about Euro 130 million.
The table below reports the contractual expiry dates of financial liabilities, including interest to be paid:
Book Contractual 6 months or 6-12 Beyond 5 31/12/2013 value 1-2 years 2-5 years cash flows less months years
Non-derivative financial liabilities Loans from banks 2,075,596 2,209,943 122,805 163,568 368,799 930,576 624,195 Loans from shareholders 3,543,527 4,078,812 144,476 31,280 291,557 1,362,779 2,248,720 Trade payables 1,622,123 1,622,123 1,622,123 - - - - Financial liabilities 785,611 785,611 785,611 - - - - Total 8,026,857 8,696,489 2,675,015 194,848 660,356 2,293,355 2,872,915
Derivative financial liabilities Derivatives on interest rate 193,364 181,015 44,390 40,786 64,289 30,288 1,262 Total 193,364 181,015 44,390 40,786 64,289 30,288 1,262
Book Contractual 6 months or 6-12 Beyond 5 31/12/2012 value 1-2 years 2-5 years cash flows less months years
Non-derivative financial liabilities Loans from banks 2,158,926 2,289,730 47,594 47,317 286,466 1,112,194 796,159 Loans from shareholders 3,466,642 3,791,937 60,991 606,529 22,135 888,755 2,213,527 Trade payables 1,989,330 1,989,330 1,989,330 - - - - Financial liabilities 801,342 801,342 801,342 - - - - Total 8,416,240 8,872,339 2,899,257 653,846 308,601 2,000,949 3,009,686
Derivative financial liabilities Derivatives on interest rate 318,288 305,679 60,337 60,978 84,979 94,739 4,646 Total 318,288 305,679 60,337 60,978 84,979 94,739 4,646
The tables below report the repayments of financial liabilities as at 31 December 2013 and 31 December 2012, as broken down by maturity within 12 months, from 1 to 5 years and beyond 5 years:
2013 Financial Statements 90 TRENITALIA S.p.A.
Within 12 Beyond 5 31/12/2013 Book value 1-5 years months years
Non-derivative financial liabilities
Loans from banks 2,075,596 274,554 1,227,708 573,334 Loans from Shareholders 3,543,527 149,040 1,426,026 1,968,461 Trade payables 1,622,123 1,622,123
Financial liabilities 785,611 785,611 Total 8,026,857 2,831,328 2,653,734 2,541,795
Within 12 Beyond 5 31/12/2012 Book value 1-5 years months years
Non-derivative financial liabilities
Loans from banks 2,158,926 83,926 1,337,708 737,292 Loans from Shareholders 3,466,642 656,944 822,121 1,987,577
Trade payables 1,989,330 1,989,330 Financial liabilities 801,342 801,342
Total 8,416,240 3,531,542 2,159,829 2,724,869
The contractual flows from variable-rate loans have been calculated by using the forward rates estimated at the closing date of the financial statements. The balance of the intercompany current account and short-term loans payable disbursed by the Parent Company are classified, due to their nature, under the shorter maturity (“6 months or less”) set out in the disclosure table.
Market risk
The market risk is the risk that the fair value or future cash flows of a financial instrument may fluctuate following changes in market prices, due to changes in exchange rates, interest rates or quotations of equity instruments. The objective of the market risk management is the management and control of the Company’s exposure to this risk within acceptable levels, while optimizing returns on investments. The Company uses hedging transactions for the purpose of managing the volatility of the results.
Interest rate risk
The company is mainly exposed to the interest rate risk relating to medium/long-term loans payable. For the purposes of optimising interest rate risk, the company has opted to benchmark its own long-term financial debt only to the most liquid market index (6-month Euribor).
2013 Financial Statements 91 TRENITALIA S.p.A.
Following the resolution passed by the Board of Directors of Trenitalia starting from 2005 and with subsequent resolutions the Company has defined an interest rate risk management policy. The policy, which was updated in 2013, provides for:
a hedge of up to 50% of the medium/long-term debt through plain vanilla derivative instruments on interest rates that have a term equal to that of the transaction;
constant monitoring of the residual 50% in order to seize further hedging opportunities in a short period.
The objective of the strategy, as a whole, is to limit changes in cash flows relating to financing operations in place (Cash Flow Hedge) in order to meet the borrowing cost objectives laid down in the long-term plan and/or annual budget. The Company only uses Interest Rate Swaps/Plain Vanilla Collars/Plain Vanilla Caps. The implementation of the strategy has allowed the Company to limit borrowing costs, including the credit spread, below 3% in the last 3 financial years.
As of 31 December 2013 the portion of medium- to long-term debt with fixed finance costs or costs covered until the maturity of the transaction concerned was nearly 50%.
Hedging transactions that are more limited in time, effective between the second half of 2013 and the second half of 2015, are at present in being with regard to the portion of debt that is not covered until maturity. 70% of this debt has been hedged through Interest Rate Collars, while the remaining 30% is hedged through Interest Rate Caps.
The tables below report the indebtedness of Trenitalia, including short-term debt, and the related hedges.
The table below reports the breakdown of medium/long-term loans (including the short-term portion) and current and non-current financial liabilities, excluding hedging derivatives, at variable and fixed rate:
Book Current Contractual beyond 5 value portion 1 and 2 years 2 and 5 years cash flows years
Variable rate 5,727,505 6,214,910 1,214,011 633,855 2,185,613 2,181,431 Fixed rate 677,228 859,456 33,728 26,501 107,743 691,484
Balance at 31 december 2013 6,404,733 7,074,366 1,247,739 660,356 2,293,356 2,872,915
Variable rate 6,350,532 6,796,005 1,561,675 298,771 1,965,903 2,969,656 Fixed rate 76,377 87,003 2,098 9,830 35,046 40,029
Balance at 31 December 2012 6,426,909 6,883,008 1,563,773 308,601 2,000,949 3,009,685
The table below reports the incidence of medium/long-term loans (including the short-term portion) and current and non-current financial liabilities, excluding hedging derivatives, which convert variable rates into fixed rates or which provide hedging against rises in variable rates beyond the preset maximum levels:
2013 Financial Statements 92 TRENITALIA S.p.A.
31.12.2013 31.12.2012
Before hedging with derivative instruments Variable rate 89.43% 98.81% Fixed rate 10.57% 1.19%
After hedging with derivative instruments Variable rate 14.96% 13.95% Protected variable rate 57.68% 48.77% Fixed rate 27.36% 37.28%
The Company does not account for fixed-rate financial assets or liabilities at fair value through profit or loss and does not designate derivative instruments (interest rate swaps) as hedging instruments according to the fair value hedging model. Accordingly, any changes in interest rates at the closing date of the financial statements would have no effects on the income statement.
Below is reported a sensitivity analysis that shows the effects that would have been recorded in terms of changes in financial charges had a change arisen, either as an increase or a decrease, of 50 basis points in the Euribor interest rates applied to loans payable in the course of 2013:
Shift + 50 bps Shift - 50 bps
Interest expense on variable-rate debt 26,791 (26,791) Net Cash Flow from hedging transactions (21,398) 23,109
Total 5,393 (3,682)
It should be noted that an increase in financial charges on the variable-rate debt is partially offset by a reduction in net flows from hedging derivatives (and vice versa).
Below is also reported a sensitivity analysis that shows the effects of a parallel shift of 50 basis points, either as an increase or a decrease, in the swap rate curve recorded as at 31 December 2013 on the fair value of hedging derivative instruments:
Shift + 50 bps Shift - 50 bps
Fair value of hedging derivatives 40,472 (42,962)
Total 40,472 (42,962)
Exchange risk
The company is mainly active in the Italian market, and in any away in countries of the Euro zone and, therefore, the risk arising from the different currencies in which it operates is very limited.
2013 Financial Statements 93 TRENITALIA S.p.A.
It should be noted that the Company has loans in place which are denominated in Swiss francs for an overall amount of CHF 81 million, as reported in the table below:
31/12/2013 31/12/2012
Counter-value Counter-value CHF CHF in EUR in EUR
Payables to Group companies 65,982 81,000 67,097 81,000
Gross exposure in the Balance Sheet 65,982 81,000 67,097 81,000 Forward contracts on foreign exchange rates - - - - Net exposure 65,982 81,000 67,097 81,000
Capital management
The Company’s main objective within the capital risk management is that of safeguarding the going-concern basis of the business so as to ensure the protection and the increase in the value for shareholder and benefits to the other stakeholders.
Financial assets and liabilities by category
To complete information on financial risks, the table below reports a reconciliation between financial assets and liabilities as reported in the statement of financial position and category of financial assets and liabilities identified on the basis of the requirements of IFRS 7:
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Receivables Payables and Hedging 31 December 2013 and loans loans received derivatives disbursed
Non-current financial assets (including derivatives) 23,329 Other non-current assets 26,482 Current trade receivables 1,880,906 Current financial assets (including derivatives) 16,609 Cash and cash equivalents 123,760 Tax receivables 625 Other current assets 62,958 Medium/long-term loans 5,195,528 Non-current financial liabilities (including derivatives) 174,635 174,635 Other non-current liabilities 80,598 Short-term loans and current portion of medium/long-term loans 423,595 Current trade payables 1,622,123 Current financial liabilities (including derivatives) 804,339 18,729 Other current liabilities 636,494
Receivables Payables and Hedging 31 December 2012 and loans loans received derivatives disbursed
Non-current financial assets (including derivatives) 23,923 Other non-current assets 28,933 Current trade receivables 2,098,621 Current financial assets (including derivatives) 2,352 Cash and cash equivalents 61,511 Tax receivables 2,746 Other current assets 193,969 Medium/long-term loans 4,884,697 Non-current financial liabilities (including derivatives) 248,874 248,874 Other non-current liabilities 25,917 Short-term loans and current portion of medium/long-term loans 740,870 Current trade payables 1,989,330 Current financial liabilities (including derivatives) 870,756 69,414 Other current liabilities 615,039
2013 Financial Statements 95 TRENITALIA S.p.A.
OTHER RISK FACTORS
Business risks
The medium- and long-distance Passenger Transport, as reported in the 2012 Financial Statements, is conditional on consumption levels, employment levels and the overall development of the main economic factors. The competition in the means of transport is a decisive factor to be successful in the railway transport market.
High Speed lines and related accessory services allowed the railway sector in question to start competition with the other means of transport (airplane-car), above all through the reduction in travel times, the comfort of the journey and the arrival to the urban centres of major cities. In this market segment the successful crucial factor will increasingly be the maintenance of and improvement in the quality of the service offered and the rapid adaptation to the trend in market demand. For this reason the Company has taken important actions that will allow it to respond to the expectations of its customers, including: renewal of the fleet starting from 2015 with the new High Speed trains, the expansion of the High Speed offer, the diversification of service levels in lieu of classes, the improvement in the Frecciarossa services (WiFi, multi-media services, etc.) and the new sales platform via Web and on the traditional channels.
Starting from 2012 the “market” sector was also affected by the change in market equilibriums resulting from the entry of new private operator, which began to run a gradually increasing number of services on the High Speed Rome Venice and Turin Salerno lines. At present, operating risks arising from the entrance of the new operator in the High Speed sector, appear to be consistent with the assumptions made in the Company’s Business Plan. Furthermore, whether the assumptions are confirmed depends on the performance of the mobility market and the extent to which it undergoes pressure as a result of exploiting the price factor: if this is done there could be effects on profit levels.
Changes to law took place in 2012, coming into effect during the year 2013, which contemplated the obligation, afterwards abrogated in Constitutional Court judgment no. 199 of 20 July 2012, for Regional Governments to put regional transport services out to tender when the current contracts expired. Nevertheless tenders are allowable even if they are no longer compulsory and some Regional Governments have confirmed their intention to proceed in this manner. In fact, during the year, some Regional Governments (Emilia Romagna, Tuscany, Veneto and Umbria) informed that they did not intend to renew the contract upon expiry and that were to start tender procedures for the award of railway services. The Friuli Venezia Giulia Regional Government call for tender was expected to be published as early as in the first four months of 2014. Discussions were started, on the other hand, in other Regions regarding the renewal of expiring services contracts. The possible effects should the services contracts with the Regional Governments not be renewed will come into play in financial years following 2014; they are not foreseeable at the moment and are, in any case, to be considered as risks run by a company operating on the free market. In executing the services contracts, the Company has included suitable safeguarding clauses to protect the investments it has made in order to counter the risk of agreements not being renewed. It is absolutely evident that this uncertainty reflects on the company plans and on the commitments undertaken by the Company with the
2013 Financial Statements 96 TRENITALIA S.p.A.
Regional Governments in the definition of the services contracts, with specific regard to the sums to be destined to investments.
The crisis in public funds, which has been seriously affecting local authorities for some time, could lead to uncertainties as to whether the payments of the fees for the services will be collected at the contractually agreed times. However, Trenitalia has signed contracts with the Italian Regional Governments which do not depend from the procedures through which the Regional Governments themselves find the necessary sources of financing for the service; nevertheless, the uncertainty that dominates the entire sector and the lack of available resources induced the Regional Governments to reduce the offer in the course of the financial year, as permitted by the contracts themselves. These processes, even if included within the company’s capacity to adapt, are in clear conflict with the mobility needs expressed by local areas on one hand, and on the other with a planning criterion, even if minimum, which is imposed by the railway sector in relation to the time required for the implementation of any investment plans which could accompany the offer development.
The market risks continue to be particularly evident in the Cargo transport sector, which is heavily affected by the negative trend in the economy with a sharply reduced industrial production The price lever is a factor that discriminates between the different operators and the different forms of transport in a significantly shrinking market. Against this background, in the Cargo Division the complex process of the rationalisation of the operational structure continued with a view to the reorganisation of processes, which will enable the corporate restructuring plan to be implemented; this plan has been designed so that the Division can become more efficient and competitive in terms of service costs. The Cargo Division also continued with its efforts to penetrate the French market specifically with the transport of goods in the cereals, motor vehicle and steel sectors.
Operational risks
As already reported in the 2012 Financial Statements, the Company makes use of outside suppliers to do maintenance work and construct new rolling stock and also always for the provision of spare parts for maintenance. During the past few years Trenitalia has put a substantial change to procurement policies in hand during the last few years by reformulating its internal procedures and, in compliance with public contracts legislation, has made even stronger efforts to buy all components connected with safety only from original manufacturers, while it has always called public tenders for all other components.
The staying power of some suppliers in the maintenance and construction sector of rolling stock was severely strained by the financial crisis, followed by a severe credit squeeze, owing to their intrinsically weak position in the structure of their business financing.
The Company continues to monitor the different issues reported, in particular in the past, on important job orders that have generated disputes with suppliers but that have generated above all operational difficulties in the year and heavy disservices in some cases.
In other cases, contracts were terminated due to the non-compliance by the suppliers themselves, activating the enforcement of the sureties given to secure contracts. It is absolutely evident that the general crisis of the 2013 Financial Statements 97 TRENITALIA S.p.A.
credit market also affected heavily railway sub-suppliers, thus creating, in some cases, strong tensions on the manufacturers, which are also small/medium-sized businesses.
An additional risk may arise from the management of cleaning service contracts that could have an impact on the quality of the service.
Legal and contractual risks
No major legal or contract risks are reported additional to those mentioned in the financial statements at 31 December 2012, which mainly arise from disputes pending between the company and various parties, such as suppliers, customers and personnel. In relation to these risks, instructions are given and provisions are set aside after having estimated the respective probability of contractual and legal risks arising. The current utilization of these provisions depends on when the risk materializes and to the extent that it was estimated.
In this regard, note in particular:
(i) the numerous actions brought by the former cleaning service contractors following the termination of contracts decided by the company as a result of the serious defaults reported in the performance of the contracts; (ii) a litigation brought by the company responsible for the building of the Impianto Dinamico Polifunzionale (IDP) plant in Naples for objections that were raised during the performance of the work; (iii) some disputes brought by a manufacturing company of rolling stock with reference to objections raised by the Customer for delays or disservices that occurred within the supplies which have been subjected to the penalties set out as per contract, a portion of which has been deducted from the payments made; (iv) the recourse to legal actions by the former employees of the cleaning firms that have not been awarded contracts, in order to seek enforcement actions to recover, against the company (joint liability), portions of remuneration and/or TFR not paid out by their employers at the end of the employment relationship; (v) the payment orders against some Regional Governments for the collection of expired receivables.
2013 Financial Statements 98 TRENITALIA S.p.A.
Information on the Balance Sheet
6. Property, plant and equipment
Below is reported the statement of amounts of property, plant and equipment at 31 December 2013 with the related changes of the financial year. It should be noted that, during 2013, no changes were recorded in the estimated useful life of the assets.
PROPERTY, PLANT AND EQUIPMENT
Fixed assets Land, buildings, Industrial and Plant and under railway and port business Other assets Total machinery construction and infrastructure equipment advances Historical cost 1,976,470 13,810,819 165,316 375,854 821,110 17,149,569 Depreciation and impairment losses (595,569) (6,898,336) (112,832) (318,292) (12,448) (7,937,477) Grants - (398,451) - (76) (2,846) (401,373) Balance at 01.01.2012 1,380,901 6,514,032 52,484 57,486 805,816 8,810,719 Investments 64 1,080,053 1,080,117 Entries into service 28,950 938,391 6,457 38,366 (1,010,604) 1,560 Depreciation (22,900) (842,900) (11,720) (20,275) (897,795) Impairment losses (6,190) (6,190) Disposals and divestments (11,331) (8) (16) (4,971) (16,326) Other changes - Change in grants (3,981) (5,101) (9,082) Other reclassifications 23,518 (23,518) 1,107 1,107 Total changes 29,568 50,471 (5,271) 19,246 59,377 153,391 Historical cost 2,028,938 14,714,361 171,765 415,375 885,588 18,216,027 Depreciation and impairment losses (618,469) (7,747,426) (124,552) (338,567) (12,448) (8,841,462) Grants - (402,432) - (76) (7,947) (410,455) Balance as at 31.12.2012 1,410,469 6,564,503 47,213 76,732 865,193 8,964,110 Investments 72 900,937 901,009 Entries into service 15,539 928,200 7,507 34,277 (986,405) (882) Depreciation (23,736) (841,351) (11,478) (22,857) (899,422) Impairment losses (12,524) (18) (2) (7,392) (19,936) Disposals and divestments* (8,014) (1) (1,117) (9,132) Increases in grants for the period (10,669) (3,556) (14,225) Other changes (35,853) (35,853) Other reclassifications** - (191) (191) Total changes (8,197) 55,642 (3,990) 10,373 (132,460) (78,632) Historical cost 2,044,477 15,634,547 179,271 448,607 764,076 19,070,978 Depreciation and impairment losses (642,205) (8,601,301) (136,048) (361,426) (19,840) (9,760,820) Grants - (413,101) 0 (76) (11,503) (424,680) Balance as at 31.12.2013 1,402,272 6,620,145 43,223 87,105 732,733 8,885,478
Disposals and divestments* Decreases in historical cost from disposals and divestments (246,049) (49) (8,883) (254,981) Decreaeses in depreciation fund for disinvestments 131,887 48 7,766 139,701 Decreases in impairment losses for disposals 106,148 106,148 Total disposals and disinvestments - (8,014) (1) (1,117) - (9,132)
Reclassifications** Change in historical cost for reclassifications (191) (191) Changes in depreciation fund for reclassifications - Changes in impairment losses for reclassifications - Totale reclassifications - - - (191) (191)
2013 Financial Statements 99 TRENITALIA S.p.A.
The most significant changes recorded in the financial year related to:
Investments of Euro 901,009 thousand mainly relate to rolling stock for Euro 829,280 thousand (including advances for the purchase of rolling stock) and to other investments in workshop systems and buildings and technical equipment for Euro 71,657 thousand. Specifically, for investments in rolling stock, note that the Company completed the project for the purchase of light E464 locomotives and the project for the refurbishment of High Speed trains in accordance with the new offer model based on four new levels of service. Work continued on the projects for the purchase of the Double-Decker carriages and the new Frecciarossa 1000 high-speed electric trains, the refurbishment of Low-Floor carriages and on the projects for upgrading the fleet of cargo carriages to the new technical regulations. For a more detailed analysis, reference should be made to the paragraph on “Investments” in the Report on Operations;
Entries into service for Euro 986,405 thousand, specifically concerning the rolling stock, both for new acquisitions, such as Double Decker coaches (Euro 151 million), E464 and E403 locomotives (Euro 39 million) and an ETR170 train (Euro 9 million), as well as value-increasing maintenance (Euro 445 million) and restyling e revamping (Euro 234 million). As regards Other assets, the ticketing and validating machines (Euro 18 million) and hardware (Euro 14 million) came into service;
Depreciation shows the portion recognised in the income statement in the financial year according to the rates defined for property, plant and equipment;
Impairment losses, equal to 19,936 thousand, are essentially attributable to the write-down of four ETR 450 trains, which will no longer be used in 2014 (Euro 10,812 thousand), the write-down of workshop equipment (Euro 2,003 thousand) and other investments that no longer meet the requirements set out by the Company (Euro 7,392 thousand);
Disposals and divestments, equal to Euro 9,132 thousand, essentially relate to fixed assets that can no longer be used in the production cycle;
Other changes, equal to 35,853 thousand, show a reduction in fixed assets under construction and advances related to the closure during 2013 of the SCMT equipment contracts and the settlement with the supplier of the related credit and debit items.
Any guarantees on the rolling stock issued in favour of Eurofima for the medium- and long-term loans raised through the Controlling Company Ferrovie dello Stato Italiane amounted to Euro 3,409,660 thousand.
Below is reported the information on the statutory revaluation by type of fixed assets, including and excluding depreciation.
2013 Financial Statements 100 TRENITALIA S.p.A.
Revaluation pursuant to Law no.2 of 28/01/2009
TYPE OF ASSET Revaluation including
depreciation
2008 2013
Land 50,878 50,878
Buildings 139,100 124,495
189,978 175,373
The above revaluation, according to article 5 of Ministerial Decree no. 162/2001, was applied only to historical cost, against an entry under a revaluation reserve subject to tax relief, excluding the value of the provision for deferred tax liabilities, a provision that is taken to the income statement in relation to the taxation of non- deductible depreciation.
7. Intangible assets
Below is reported the statement of amounts of intangible assets at 31 December 2013 with the related changes. In 2013 no changes were recorded in the estimated useful life of said assets.
2013 Financial Statements 101 TRENITALIA S.p.A.
INTANGIBLE ASSETS
Concessions, Fixed assets Development licences, under Total costs trademarks and development similar rights and advances
Historical cost 12,908 413,775 6,954 433,637 Amortisation and impairment losses (10,272) (338,682) (26) (348,980) Grants (1,959) (428) (2,387) Balance as at 01.01.2012 677 74,665 6,928 82,270 Investments 40,432 40,432 Entries into service 217 38,285 (40,062) (1,560) Amortisation (190) (26,658) (26,848) Impairment losses (460) (460) Disposals and divestments (3,164) (3,164) Other reclassifications (1,108) (1,108) Total changes 27 10,519 (3,254) 7,292 Historical cost 13,125 452,060 4,160 469,345 Amortisation and impairment losses (10,462) (366,448) (486) (377,396) Grants (1,959) (428) (2,387) Balance as at 31.12.2012 704 85,184 3,674 89,562 Investments 49,536 49,536 Entries into service 93 41,755 (40,966) 882 Amortisation (222) (33,096) (33,318) Impairment losses (57) (57) Disposals and divestments* (666) (666) Other reclassifications** 191 191 Total changes (129) 7,993 8,704 16,568 Historical cost 13,219 493,149 12,921 519,097 Amortisation and impairment losses (10,684) (399,544) (543) (410,580) Grants (1,959) (428) - (2,387) Balance as at 31.12.2013 576 93,177 12,378 106,130
Disposals and divestments* Decreases in historical cost from disposals and divestments (1,187) (1,187) Decreases in amortisation fund for divestments 384 384 Decreases in impairment losses for divestments 137 137 Total disposals and divestments - (666) - (666)
Reclassifications** Change in historical cost for reclassifications 191 191 Changes in amortisation fund for reclassifications - Changes in impairment losses for reclassifications - Total reclassifications - - 191 191
The changes recorded in 2013 both in “Investments” (Euro 49,536 thousand) and “Entries into service” (Euro 40,966 thousand) were essentially attributable to “Software”. The investments in this sphere were made in order to continue with the work involving:
2013 Financial Statements 102 TRENITALIA S.p.A.
the implementation of the PICO integrated sales platform to combine the different sales channels and on the Infomobility development;
the construction of an integrated platform on the SIM cargo information system to support the Cargo Division sales, distribution and traffic cycles;
the construction of the CRM - Customer Relationship Management system for integrated customer management and for the delivery of a high level of service from a multi-channel point of view,
the development of a production platform (PdP, Piattaforma di Produzione) to change and update the railway timetable, to manage the use of personnel, to schedule maintenance at the Current Maintenance plants and to manage railway traffic from operations rooms.
Amortisation, equal to Euro 33,318 thousand, related to the portion recognised in the income statement in the financial year according to the rates defined for intangible assets.
Impairment test for cash generating units
For the purposes of the impairment test, the Company had already identified the Cash Generating Units (CGUs) that represent independent business units, which can be clearly identified within the company’s organisation and which are able to generate cash flows that are largely independent within the company itself. The CGUs have been identified consistently with the business, and therefore organisational and operating, structure of the company, as the three operating business segments:
Medium- and Long-Distance Passengers;
Regional Passenger Transport;
Cargo Transport.
In accordance with the company’s control model, the cross-company divisions (Technical Head Office, Industrial Logistics Head Office, Industrial Planning Head Office and Staff) are already allocated to the income statements of the various CGUs; on the contrary, the balance sheet items referred to the cross-company divisions have been allocated to the CGUs by using appropriate drivers.
In the 2013 financial year, cash flows were determined on the basis of the best information to hand at the time of their preparation in accordance with the 2014 budget forecasts and the figures in the last version of the 2015 -2017 Business Plan; instead, as regards 2018, since no forecast data were available, the 2017 data were employed. The Value in Use was estimated by applying the method of the unlimited capitalization of the prospective cash flow of the last year of explicit forecast, making reference to normalized growth rates. The calculation of the Value in Use also made reference to “normalised” investments as defined by assuming stable conditions for each CGU on the basis of long-term forecasts. For the purposes of the determination of the value in use defined on the basis of the prospective cash flow of the last year of forecast, average growth rates were 2013 Financial Statements 103 TRENITALIA S.p.A.
considered which were equal to the rates inferable from the long-term forecasts of the inflation rate equal to 2%.
The discount rate used is the “WACC” (Weighted Average Cost of Capital) rate measured for each CGU.
Below are reported the values used for the purposes of the test:
Net invested Discount rate Growth CGU capital (WACC) Rate (€/mil.)
Medium/Long 3,337 7.1 % 2% Distance Passengers Regional Passenger 5,354 7.1 % 2% Transport
Cargo transport 745 9.0 % 2%
Totals 9,436
No impairment losses arose from comparing the invested capital of the individual CGUs and the discounted value of cash flows.
8. Deferred tax assets and deferred tax liabilities
The statements below report the amounts of deferred tax assets and deferred tax liabilities at 31 December 2013, with the related changes that occurred in the year.
Increase Other 31.12.2012 (decrease) 31.12.2013 Changes through P&L Deferred tax assets - Measurement of financial instruments 80,135 (32,701) 47,434 - Deferred tax assets on past losses 72,000 (3,000) 69,000
Total 152,135 (3,000) (32,701) 116,434
Deferred tax liabilities - Value differences on property, plant and equipment and intangible assets 121,285 (819) 120,466 - Severance pay and other employee benefits (14,432) 12,128 (2,304) - Other items: Provision for Charges for Workshops 508 (126) 382
Total 107,361 (945) 12,128 118,544 Balance (44,774) 2,055 44,829 2,110
2013 Financial Statements 104 TRENITALIA S.p.A.
Deferred tax assets recorded an overall decrease of Euro 35,701 thousand of which: Euro 32,701 thousand related to the measurement at fair value of the hedging of any risks of changes in interest rates against an entry under equity, while Euro 3,000 thousand related to the difference between the recognition of the 2013 portion of deferred tax assets on previous losses through profit or loss (Euro 43,975 thousand) and to the adjustment to the receivable for the losses that were considered to be “recoverable” in the 2014 and 2015 financial years on the basis of the expected positive results (Euro 40,975 thousand).
The tax losses that have already been transferred to the Group’s consolidated accounts, which Trenitalia still has the right to offset financially as envisaged in Group procedure (up to 80% of the taxable income) and which was not yet utilised as of 31 December 2013, amount to about Euro 1,393,000 thousand. This value includes tax losses for which the effect of the recognition of deferred tax assets has been determined as specified above.
The overall amount of tax losses currently transferred to the Group’s consolidated accounts does not take account of the recalculation of the tax losses for the period arising from the application for the refund of IRES tax, for the higher deduction of IRAP tax, relating to costs for subordinate employees and employees treated as such (Article 2, paragraph 1-quater, of Decree Law 201/2011).
Deferred tax liabilities, equal to Euro 118,544 thousand, recorded a net increase of Euro 11,183 thousand. This increase was essentially due to the adjustment to the provision following the recognition of actuarial gains on employee benefits (TFR) to be charged to equity (Euro 12,128 thousand), which was partially offset by the release of deferred taxes in the income statement, which had been entered in previous financial years, for Euro 945 thousand, as detailed in the table.
Furthermore, it should be noted that the value of deferred tax assets and liabilities was determined by applying rates of 27.5% for IRES and 4.23% for IRAP taxes (taking account of regional additional taxes).
9. Equity investments
The tables below report the amounts of the equity investments in question at the beginning and at the end of the year, as broken down by category, and of the related changes that were recorded in 2013.
Accumulated provision for write- Net value as at Net value as at down as at 31.12.2012 31.12.2013 31.12.2013
Equity investments in Subsidiaries 99,542 98,535 1,013 Jointly-controlled entities 93,569 43,101 - Associates 1,607 1,613 648 Other companies 953 953 3,470
195,671 144,202 5,131
2013 Financial Statements 105 TRENITALIA S.p.A.
Below are the changes reported in 2012:
Net Value Accumulated Net Value as at Acquisitions / Acquisitions/ Write-downs / Other Reclassifications as at provision for 31.12.2011 subscriptions Repayments write-backs changes 31.12.2012 write-down
Equity investments in subsidiaries 98,535 256 751 99,542 6 Serfer Srl 7,088 7,088 TX Logistik AG 91,410 91,410 Trenitalia Logistik France S.a.S. 37 37 6 Thello S.a.S. - 256 751 1,007
Equity investments in jointly- controlled entities 94,319 (751) 93,569 - Cisalpino AG 55,509 55,509 Trenord Srl 38,060 38,060 Trenitalia Veolia Transdev S.a.S. 750 (751) -
Equity investments in associates 1,789 40 (35) (187) 1,607 642 Pol Rail Srl 1,522 1,522 568 East Rail SrL in liquidation 18 40 (35) 23 74 Alpe Adria SpA 44 44 Logistica S.A. 19 19 FS Formazione SpA in liquidation 187 (187)
Other companies 957 (4) 953 3,470 Eurogateway S.r.l. 75 75 Centro Merci Orte 24 24 28 Consorzio Unico Campania 28 28 Gestione Servizi Interporto 77 77 ICF intercontainer Interfrigo in liquidation - - 3,329 Interporto Padova 316 316 Interporto Toscano Amerigo Vespucci 129 129 Interporto Bergamo Montello-Sibem 35 35 89 Interporto Bologna 204 204 Verona Cargo Center in liquidation 4 (4) 10 Consel S.c.a.r.l. 1 1 Ralpin AG 20 20 Consorzio Trasporti Integrati 10 10 Isfort 34 34 14
195,600 296 (39) (187) 195,671 4,118
2013 Financial Statements 106 TRENITALIA S.p.A.
Below are the changes reported in 2013:
Accumulated Net Value provision for Net Value as at Acquisitions / Acquisitions/ Write-downs / Other Reclassifications as at write-down 31.12.2012 subscriptions Decreases write-backs changes 31.12.2013 as at 31.12.2013
Equity investments in subsidiaries 99,542 2,467 (2,467) (1,007) 98,535 1,013 Serfer Srl 7,088 7,088 TX Logistik AG 91,410 91,410 Trenitalia Logistik France S.a.S. 37 37 6 Thello S.a.S. 1,007 2,467 (2,467) (1,007) 1,007 Equity investments in jointly- controlled entities 93,569 (50,468) 43,101 Cisalpino AG 55,509 (50,468) 5,041 Trenord Srl 38,060 38,060
Equity investments in associates 1,607 45 (34) (5) 1,613 648 Pol Rail Srl 1,522 1,522 569 Logistica S.A. 19 19 Alpe Adria SpA 44 44 East Rail SrL in liquidation 23 (5) 18 79 La Spezia Shunting Railways SpA 45 (34) 11
Other companies 953 953 3,470 Eurogateway S.r.l. 75 75 Centro Merci Orte 24 24 28 Consorzio Unico Campania 28 28 Gestione Servizi Interporto 77 77 ICF intercontainer Interfrigo in liquidazione - - 3,329 Interporto Padova 316 316 Interporto Toscano Amerigo Vespucci 129 129 Interporto Bergamo Montello-Sibem 35 35 89 Interporto Bologna 204 204 Verona Cargo Center in liquidation - - 10 Consel S.c.a.r.l. 1 1 Ralpin AG 20 20 Consorzio Trasporti Integrati 10 10 Isfort 34 34 14 195,671 2,512 (52,969) (1,012) - - 144,202 5,131
Note the following:
the carrying amount of the investment in Cisalpino AG was recalculated for Euro 50,468 thousand, after the reduction in its Share Capital resolved by the Shareholders’ Meeting preliminary to the company’s winding-up and consequent liquidation;
the investment in Thello S.a.s. was written down for Euro 1,007 thousand in view of its persistently negative operating result, after having participated in the capital increase and the simultaneous reduction for covering previous losses (Euro 2,467 thousand), as already described in the Report on Operations;
the alignment of the value of the equity investment with Equity of East Rail Srl;
the acquisition of La Spezia Shunting Railways SpA for Euro 45 thousand, of which an amount of Euro 11 thousand was paid at the time of the subscription and an amount of Euro 34 thousand for amounts due for subscribed capital to be paid up.
2013 Financial Statements 107 TRENITALIA S.p.A.
The table below reports the comparison between the carrying amounts of equity investments in subsidiaries, jointly-controlled entities and associates and the corresponding portion of equity for the period.
Carrying amount as Profit (loss) for Equity as at Accrued Difference HQ Share capital Ownership % at the year 31.12.2013 equity (a) (b) - (a) 31.12.2013 (b)
Equity investments in subsidiaries Serfer Srl Genoa, Via Rolla 22r 5,000 352 9,531 100% 9,531 7,088 (2,443) Bad Honnef, Rhondarfer Str. TX Logistik AG 85 286 1,576 17,631 100% 17,631 91,409 73,778 Trenitalia Logistik France S.a.S. Paris, 182 rue Lafayette 43 11 56 100% 56 38 (18) Thello S.a.S. Paris, 15 rue des Sablons 1,500 (10,384) (9,563) 67% (6,376) 0 6,376 98,535 Equity investments in jointly- controlled entities Cisalpino AG (*) Bern, Fabrikstrasse 35 82 853 38,956 50% 19,478 5,041 (14,437) Trenord S.r.l. Milan, Via P. Paleocapa 6 76,120 100 74,296 50% 37,148 38,060 912 43,101 Equity investments in associates La Spezia Shunting Railways SpA (**) La Spezia, Via del Molo 1 1,000 0 1,000 4.5% 45 11 ( 34) Pol Rail Srl Rome, Via Scalo S.Lorenzo 16 2,000 407 3,613 50% 1,807 1,522 ( 285) East Rail SrL in liquidation Trieste, Via Ghega 1 130 (17) 54 32% 17 18 1 Trieste, Via S.Caterina da Alpe Adria SpA (***) Siena 1 120 20 172 33% 57 44 ( 13)
Logistica S.A. Clichy la Garenne Cedex, Cap West 7/9 Allées d l'Europe 37 310 3,104 50% 1,552 18 ( 1,534) 1,613
TOTAL 143,249 (*) average Swiss Franc exchange rate 2013: 1.2307; as at 31/12/2013: 1.2274 (**) non-operating company incorporated on 27 November 2013 (***) estimated values as at 31/12/2013
Below are analysed the most significant positive changes between carrying amounts and equity pertaining to equity investments:
In TX Logistik AG the positive difference is to be considered to be fully recoverable as it reflects the company’s ability to generate income, which is estimated on the business plan of the same.
In Thello S.a.s., the equity investment was written down owing to the improbability of the recovery of the losses in the short term (Euro 1,007 thousand) and a provision for risks was set aside for Euro 6,376 thousand, equal to the accrued portion of negative equity.
As regards La Spezia Shunting Railways S.p.A., the difference between the carrying amount and the related equity (Euro 34 thousand) is made up of the payable to the company for subscribed capital to be paid up.
Below is reported the summary of the main financial and economic items of jointly-controlled companies and associated companies:
2013 Financial Statements 108 TRENITALIA S.p.A.
Non- Non-current Total Ownership % Current assets Total assets Current liabilities current Revenues Costs Profit/(loss) assets liabilities liabilities Equity investments in jointly- controlled entities Cisalpino AG (**) 50% 172,015 5,741 177,756 4,492 - 4,492 63,965 85,100 ( 21,135) Trenord S.r.l. 50% 299,558 187,709 487,267 319,011 94,508 413,519 737,107 733,924 3,183
Equity investments in associates Pol Rail Srl 50% 8,745 330 9,075 5,404 3671 9,075 19,504 19,018 486 East Rail SrL in liquidation 32% 96 1 97 25 72 97 10 27 ( 16) Alpe Adria SpA 33.33% 9,957 56 10,013 9,799 62 9,861 37,425 37,410 15 Logistica S.A. 50% 788 2,762 3,550 755 1 756 247 564 ( 317) 31.12.2012
Equity investments in jointly- controlled entities Cisalpino AG (**) 50% 21,530 18,580 40,111 1,155 - 1,155 2,184 1,331 853 Trenord S.r.l. 50% 341,241 240,142 581,383 409,959 171,425 581,384 760,433 760,333 100
Equity investments in associates Pol Rail Srl 50% 8,385 75 8,460 4,648 3,812 8,460 26,562 26,155 407 East Rail SrL in liquidation 32% 77 - 77 23 54 77 2 19 ( 17) Alpe Adria SpA 33.33% nd nd - nd nd - nd nd nd Logistica S.A. 50% 842 3,080 3,922 816 1 817 603 293 310 31.12.2013 (**) values in euro
10. Current and non-current financial assets (including derivatives)
The table below reports the breakdown of financial assets compared to the previous financial year:
Book value 31.12.2013 31.12.2012 Differences Non- Non- Non- Current Total Current Total Current Total current current current
Financial assets - Receivables for loans 23,329 16,609 39,938 23,923 2,352 26,275 (594) 14,257 13,663
23,329 16,609 39,938 23,923 2,352 26,275 (594) 14,257 13,663
The increase in this item was due to current receivables and was essentially attributable to the positive balance of the transaction account held with Trenord S.r.l. (Euro 15,919 thousand).
The table below summarises the breakdown of the receivables for loans:
Residual Receivable 31.12.2013 31.12.2012 Non- Non- Current Total Current Total current current From Banks 579 579 833 - 833 Trenord Srl 22,750 15,919 38,669 22,750 3 22,753 Ferrovie dello Stato Italiane SpA - 340 340 340 1,999 2,339 Logistica SA - 350 350 - 350 350 Total 23,329 16,609 39,938 23,923 2,352 26,275
2013 Financial Statements 109 TRENITALIA S.p.A.
11. Other non-current and current assets
This item is broken down as follows:
31.12.2013 31.12.2012 Differences Non- Non- Non- current Current Total current Current Total current Current Total
Other receivables from group companies 16,111 16,111 136,054 136,054 (119,943) (119,943) VAT receivables from the controlling 4,851 2,557 7,408 4,851 6,593 11,444 (4,036) (4,036) company Receivables for the consolidated tax 10,341 10,341 13,926 13,926 (3,585) (3,585) base Other VAT receivables 3 3 3 7 10 (7) (7) Other State administrations 20,831 7,210 28,041 23,098 5,729 28,827 (2,267) 1,481 (786) Sundry receivables and accruals 797 28,110 28,907 981 33,687 34,668 (184) (5,577) (5,761) /deferrals Total 26,482 64,329 90,811 28,933 195,996 224,929 (2,451) (131,667) (134,118) Provision for write-downs (1,671) (1,671) (2,027) (2,027) 356 356 Total, net of Provision for write- down 26,482 62,658 89,140 28,933 193,969 222,902 (2,451) (131,311) (133,762)
The item “Other non-current and current assets” mainly includes:
non-trade receivables from group companies, equal to Euro 16,111 thousand; for detailed disclosures on transactions with the same, reference is made to the paragraph on related parties. The decrease compared to the previous year, equal to Euro 119,943 thousand, essentially related to the financial settlement of the receivable from the subsidiary Cisalpino following the assumption of the financial debt to Eurofima (Euro 117,420 thousand) ;
VAT receivables from the controlling company, equal to Euro 7,408 thousand. The reduction in said receivables compared to the previous year (Euro 4,036 thousand) was due to the periodical VAT payments for the 2013 financial year;
the receivable from the controlling company for tax consolidation, equal to Euro 10,341 thousand. The receivable essentially reduced as a result of the financial settlement of the IRES tax charge accrued in 2013 (Euro 10,994 thousand);
receivables from Other State administrations, equal to Euro 28,041 thousand, relating to receivables from the Ministry of Infrastructures and Transport, for grants correlated to the Autostrada Ferroviaria Alpina project (of which a non-current portion of Euro 20,831 thousand and a current portion of Euro 7,007 thousand);
other receivables, equal to Euro 28,907 thousand, which include: receivables from social security institutions (Euro 5,716 thousand); receivables from personnel (Euro 3,461 thousand), sundry receivables from the distributors of tickets for regional traffic (Euro 7,117 thousand), advances to suppliers (Euro 6,770 thousand) and other minor receivables (Euro 5,046 thousand).
It should be noted that the recoverable value of receivables from third parties was adjusted by the corresponding provision for bad debts (Euro 1,671 thousand).
2013 Financial Statements 110 TRENITALIA S.p.A.
The maximum exposure to credit risk, as broken down by geographical area, is the following one:
31.12.2013 31.12.2012 Differences Non- Non- Non- current Current Total current Current Total current Current Total
26,482 61,165 87,647 28,933 67,874 96,807 (2,451) (6,709) (9,160) National regions Eurozone countries 2,242 2,242 7,315 7,315 (5,073) (5,073) United Kingdom 12 12 26 26 (14) (14) Other European countries (non-euro EU) 199 199 7 7 192 192 Other non-EU European countries 711 711 120,773 120,773 (120,062) (120,062) Other countries 1 1 (1) (1) 26,482 64,329 90,811 28,933 195,996 224,929 (2,451) (131,667) (134,118)
12. Inventories
Inventories are broken down as follows:
31.12.2013 31.12.2012 Differences Raw and secondary materials, and consumables 893,995 873,152 20,843 Provision for write-down (216,181) (218,601) 2,420 Net value 677,814 654,551 23,263
Written-off assets to be disposed of 20,907 16,496 4,411 Provision for write-down (11,863) (10,141) (1,722) Net value 9,044 6,355 2,689
Total Inventories 686,858 660,906 25,952
Increase is mainly due to Inventories of Raw and secondary materials and consumables, which reported, compared to the previous year, an increase of Euro 20,843 thousand, mainly attributable to the purchases of new serviceable components. The net value also increased as a result of the reduction in the provision for write-down (Euro 2,420 thousand) that arose from the combined effect of the use for about Euro 19 million to cover the scrapping of stock materials, which was partially offset by a provision of Euro 17 million recognized in the application of the write-down procedures adopted by the Company. Written-off assets to be disposed of, net of the related provision, represent the presumed realisable value estimated by the structures that manage these assets.
2013 Financial Statements 111 TRENITALIA S.p.A.
13. Current trade receivables
Trade receivables are broken down as follows:
31.12.2013 31.12.2012 Differences
Ordinary customers - Customers 192,727 227,772 (35,045) - Customers for travel irregularities 167,555 153,666 13,889
State Administrations and other Public Administrations 115,549 121,199 (5,650) Foreign Railways 29,344 27,604 1,740 Railways under concession 6,362 9,004 (2,642) Agencies and other transport agencies 24,760 26,828 (2,068) Receivables from Service Contract: - Service Contract with Regional Governments 1,089,903 1,077,448 12,455
- Service Contract with the Government 246,013 398,121 (152,108) Receivables from Group companies 239,579 277,332 (37,753) Total 2,111,792 2,318,974 (207,182) Provision for write-down (230,886) (220,353) (10,533) Total net provision 1,880,906 2,098,621 (217,715)
The decrease in receivables compared to the previous financial year, equal to Euro 217,715 thousand, was substantially attributable to the combined effect of:
an increase in receivables from Regional Governments (Euro 12,455 thousand) for local passenger transport service contracts, following the extension of the periods of time for the payment of considerations;
a decrease, as a result of the financial settlements that took place in the year, in receivables from the Ministry of Economy and Finance (MEF, Ministero dell’Economia e delle Finanze), for the Public Service Contract for Euro 152,108 thousand;
a decrease in receivables from Group companies for Euro 37,753 thousand, following a better financial settlement that took place in the year. For detailed information on the transactions with said companies, reference should be made to the annex on related parties.
In 2013, for a better presentation, some customers were reclassified from “Ordinary customers” to “State Administrations and other public administrations”. For a homogeneous comparison, the same reclassification was made in the 2012 values for an amount of Euro 59,535 thousand.
It should be noted that, excluding the Ministry of Economy and Finance and Regional Governments, transactions with individual ordinary customers did not exceed 10% of revenues of Trenitalia.
2013 Financial Statements 112 TRENITALIA S.p.A.
Below is reported the maximum exposure to the credit risk, as broken down by geographical region:
31.12.2013 31.12.2012 Differences National regions 2,053,913 2,250,174 (196,261) Eurozone countries 48,608 52,339 (3,731) United Kingdom 11 193 (182) Other European countries (non-Euro UE) 852 712 140 Other non-EU European Countries 8,301 15,449 (7,148) Other countries 107 107 - 2,111,792 2,318,974 (207,182)
The provision for bad debts recorded an increase, compared to the previous financial year, whose change is reported below:
Provision for write-down of trade receivables 31.12.2012 Provisions Uses Reclassifications 31.12.2013 Ordinary customers - Customers 30,827 420 (1,183) (5,494) 24,570 - Customers for travel irregularities 150,162 35,088 (21,199) 164,051 State Administrations and other Public Administrations 12,985 (10) 7,556 20,531 Railways under concession 6 6 Agencies and other transport agencies 16,035 (2,209) (171) 13,655 Receivables from Group companies 10,338 (152) (2,113) 8,073 Total 220,353 35,508 (24,753) (222) 230,886
The provision for 2013 is almost fully referred to the increase recorded in the provision for the coverage of travel irregularities (Euro 35,088 thousand).
14. Cash and cash equivalents The item is broken down as follows:
Description 31.12.2013 31.12.2012 Differences
Bank and postal accounts 52,633 1,587 51,046 Cheques 2 2 0 Cash and cash on hand 38,332 49,579 (11,247) Treasury current accounts 32,793 10,343 22,450 Total 123,760 61,511 62,249
The positive balance of “bank and postal accounts” essentially relates to receipts that were settled by the banks on 31 December and that passed through the daily cash pooling system operating between the Controlling Company and the Company at the beginning of 2014.
The item “cash and cash on hand” represents the share of receipts from ticket offices paid into the current bank accounts of the Company by 31 December 2013, but that the credit institutions credited on a subsequent date of transaction.
2013 Financial Statements 113 TRENITALIA S.p.A.
The “Treasury current accounts” item, equal to Euro 32,793 thousand, represents the payments made to Ferrovie dello Stato Italiane’s treasury current account by the Ministry of Economy and Finance as considerations for the public service contract with the Special Regions (Euro 30,000 thousand) and commuter transportation on the Rosarno-Reggio Calabria-Melito line (Euro 2,793 thousand), not yet cleared for collection, which were recorded in the banking system at the beginning of 2014.
15. Tax receivables
Tax receivables, equal to Euro 625 thousand, showing a decrease of Euro 2,121 thousand compared to 2012, substantially represent the IRAP tax credit for self-taxation on account for 2013 (Euro 80,479 thousand), net of IRAP tax payable in the year (Euro 80,032 thousand).
16. Equity
The changes recorded in 2012 and 2013 for the equity items are reported analytically in the statement reported after the financial statement schedules. Share capital
At 31 December 2013 the share capital of the Company, which was fully subscribed and paid up, was made up of 3,308,928 ordinary shares, with a par value of Euro 500 each, for a total of Euro 1,654,464 thousand. Legal reserve
The legal reserve, which aims at covering share capital against any losses that may arise, is set up through the allocation of 5% of annual net profits, up to an amount equal to the fifth of the share capital. At 31 December 2013 it was equal to Euro 22,775 thousand, following the attribution of the 5% of profit of the 2012 financial year, equal to Euro 10,321 thousand. Extraordinary reserves
This item includes the revaluation reserve that was set up in 2008, pursuant to article 15, paragraphs 16 and 23, of Decree Law no. 185/2008 (so-called Anti-Crisis Decree Law), as converted by Law no. 2 of 28 January 2009, following the revaluation of some workshop complexes deriving from the FRE demerger, on the basis of the surplus values specified in the expert’s report. The revaluation, as required by paragraph 18 of the abovementioned Decree, was set up net of the Provision for deferred taxes and is equal to Euro 177,084 thousand. Reserve for change in fair value on derivatives (Cash Flow Hedge)
The reserve for change in fair value on derivatives includes the effective portion of the cumulative net change in the fair value of cash flow hedge derivatives relating to related transactions that have not yet taken place. This Reserve as at 31 December 2013 showed a negative balance of Euro 125,054 thousand. The reserve decreased, compared to 31 December 2012, by a gross amount of Euro 118,912 thousand, as a result of the
2013 Financial Statements 114 TRENITALIA S.p.A.
changes in the fair value of derivatives (IRSs and Collars) held in the portfolio as at 31 December 2013, which was offset by a change of opposite sign of Euro 32,701 thousand relating to deferred tax assets generated. Reserve for actuarial gains (losses) for employee benefits
The reserve for actuarial gains (losses) for employee benefits includes the effects of the actuarial changes in the Severance Pay and in the Free Travel Card and amounted to Euro 100,411 thousand at 31 December 2013. In 2013 there was the recognition of an actuarial gain of Euro 31,739 thousand (net of a tax effect of Euro 12,128 thousand), compared to an actuarial loss of Euro 127,640 thousand recorded in 2012. This positive change was essentially due to an increase in the discount rate of liabilities for employee benefits considered as at 31 December 2013 compared to the end of the previous year, as well as to a reduction in the debt as a result of the 2013 change in the number of staff members. Profits (losses) carried forward
After the allocation of the 2012 profit of Euro 196,103 thousand, net of the portion allocated to Legal reserve (Euro 10,321 thousand), as at 31 December 2013 profits had been carried forward for Euro 106,474 thousand, after having covered losses carried forward for Euro 89,630 thousand as at 31 December 2012 . Profit for the year
The 2013 financial year reported a net profit equal to Euro 181,489 thousand. Availability of Reserves
The table below specifies the origin, availability and distributability of Equity items, as well as their use in the three previous years:
Summary of uses in the three previous years Amounts as at Unavailable Available Distributable Origin Distribution 31.12.2013 share (a) share (b) share of b Capital Coverage to Other (a+b) increase of losses shareholders Share Capital 1,654,464 1,654,464 ------
Capital reserves: Revaluation Reserve (L.D. 185/2008) 177,084 - 177,084 - - - - - Reserve for FV change on CHF (125,055) ------Derivatives (125,055) Reserve for actuarial gains (losses) for (100,411) (100,411) ------employee benefits
Retained earnings: Legal reserve 22,775 22,775 ------Profits (losses) carried forward 106,474 43,054 63,420 - - - - -
TOTAL 1,735,331 1,494,827 240,504 - - - - -
2013 Financial Statements 115 TRENITALIA S.p.A.
17. Medium/long-term and short-term loans
Book value
Medium/long term loans 31.12.2013 31.12.2012 Differences Loans from banks 1,801,041 2,075,000 (273,959) Loans from shareholders 3,394,487 2,809,697 584,790 Non-current total 5,195,528 4,884,697 310,831
Current portion of medium / long term loans 31.12.2013 31.12.2012 Differences Loans from banks 274,554 83,926 190,628 Loans from shareholders 7,782 600,127 (592,345) Total 282,336 684,053 (401,717)
Short-term loans 31.12.2013 31.12.2012 Differences Loans from banks - 1,370 (1,370) Loans from shareholders 141,258 55,447 85,811 Total 141,258 56,817 84,441 Current total 423,594 740,870 (317,276)
(6,445) Total 5,619,122 5,625,567
This item includes medium/long-term and short-term loans from the Controlling Company and the Banks.
The medium- to long-term portion of loans was equal to Euro 5,195,528 thousand (Euro 4,884,697 thousand as at 31 December 2012), showing an increase of Euro 310,831 thousand, mainly as a result of the new fixed- rate loans from the Parent Company of Euro 593,604 thousand, partially offset by the reclassification of the loans maturing in 2014 as short-term loans: from the Parent Company for the Eurofima loan of Euro 7,700 thousand, from Banca Infrastrutture Innovazione e Sviluppo (formerly Opi) for Euro 83,333 thousand and from the European Investment Bank for Euro 190,625 thousand.
The current portion of medium-to long-term loans fell by Euro 401,717 thousand as a result of the difference between these reclassifications of portions of loans maturing in 2014 (Euro 281,658 thousand) and the payment of the principal of the loans that expired in 2013: a loan of Euro 600,000 thousand from the Parent Company and a loan of Euro 83,333 thousand granted by Banca Infrastrutture Innovazione e Sviluppo (formerly Opi).
Short-term loans, equal to Euro 141,258 thousand (Euro 56,817 thousand as at 31 December 2012) increased by Euro 84,441 thousand, mainly as a result of an increase in the short-term bank withdrawal towards the Parent Company.
This item also includes the accruals calculated on the loans themselves.
The table below summarises the terms and conditions of all medium/long-term loans:
2013 Financial Statements 116 TRENITALIA S.p.A.
31.12.2013 31.12.2012 Year of Creditor Currency Nominal Interest Rate Nominal value Nominal value expiry
FERROVIE DELLO STATO ITALIANE EUR 6-month Euribor +/- Spread 2013 € - € 600.000 FERROVIE DELLO STATO ITALIANE EUR 3,885% 2014 € 7.700 € 7.700 FERROVIE DELLO STATO ITALIANE EUR 6-month Euribor +/- Spread 2015 € 165.300 € 165.300 FERROVIE DELLO STATO ITALIANE EUR 6-month Euribor +/- Spread 2015 € 83.000 € 83.000 FERROVIE DELLO STATO ITALIANE EUR 6-month Euribor +/- Spread 2016 € 310.000 € 310.000 FERROVIE DELLO STATO ITALIANE EUR 6-month Euribor +/- Spread 2016 € 194.000 € 194.000 FERROVIE DELLO STATO ITALIANE EUR 6-month Euribor +/- Spread 2016 € 32.300 € 32.300 EUROPEAN INVESTMENT BANK EUR 6-month Euribor +/- Spread 2017 € 600.000 € 600.000 EUROPEAN INVESTMENT BANK EUR 6-month Euribor +/- Spread 2018 € 325.000 € 325.000 FERROVIE DELLO STATO ITALIANE EUR 6-month Euribor +/- Spread 2018 € 200.000 € 200.000 FERROVIE DELLO STATO ITALIANE EUR 6-month Euribor +/- Spread 2018 € 200.000 € 200.000 FERROVIE DELLO STATO ITALIANE EUR 6-month Euribor +/- Spread 2018 € 149.400 € 149.400 FERROVIE DELLO STATO ITALIANE EUR 6-month Euribor +/- Spread 2018 € 62.700 € 62.700 FERROVIE DELLO STATO ITALIANE EUR 6-month Euribor +/- Spread 2019 € 160.000 € 160.000 FERROVIE DELLO STATO ITALIANE EUR 6-month Euribor +/- Spread 2019 € 183.000 € 183.000 FERROVIE DELLO STATO ITALIANE EUR 6-month Euribor +/- Spread 2020 € 62.700 € 62.700 FERROVIE DELLO STATO ITALIANE EUR 6-month Euribor +/- Spread 2020 € 47.400 € 47.400 FERROVIE DELLO STATO ITALIANE EUR 4,20% 2020 € 500.000 € - FERROVIE DELLO STATO ITALIANE EUR 3,70% 2021 € 100.000 € - FERROVIE DELLO STATO ITALIANE EUR 6-month Euribor +/- Spread 2022 € 120.000 € 120.000 BANCA INFRASTRUTTURE INNOVAZIONE E SVILUPPO EUR 6-month Euribor +/- Spread 2022 € 450.000 € 533.333 BANCA INFRASTRUTTURE INNOVAZIONE E SVILUPPO EUR 6-month Euribor +/- Spread 2022 € 300.000 € 300.000 FERROVIE DELLO STATO ITALIANE EUR 6-month Euribor +/- Spread 2024 € 122.200 € 122.200 BANCA INFRASTRUTTURE INNOVAZIONE E SVILUPPO EUR 6-month Euribor +/- Spread 2024 € 400.000 € 400.000 FERROVIE DELLO STATO ITALIANE EUR 6-month Euribor +/- Spread 2025 € 42.500 € 42.500 FERROVIE DELLO STATO ITALIANE EUR 6-month Euribor +/- Spread 2026 € 190.000 € 190.000 FERROVIE DELLO STATO ITALIANE EUR 6-month Euribor +/- Spread 2026 € 100.000 € 100.000 FERROVIE DELLO STATO ITALIANE EUR 6-month Euribor +/- Spread 2026 € 116.000 € 116.000 FERROVIE DELLO STATO ITALIANE EUR 6-month Euribor +/- Spread 2027 € 128.700 € 128.700 FERROVIE DELLO STATO ITALIANE EUR 6-month Euribor +/- Spread 2027 € 65.700 € 65.700
Totale EUR loans € 5.417.600 € 5.500.933
FERROVIE DELLO STATO ITALIANE CHF 2,606% 2016 CHF 12.500 CHF 12.500 FERROVIE DELLO STATO ITALIANE CHF 2,900% 2017 CHF 23.500 CHF 23.500 FERROVIE DELLO STATO ITALIANE CHF 2,675% 2020 CHF 45.000 CHF 45.000
Total CHF loans CHF 81.000 CHF 81.000 Counter-value in Euro € 65.982 € 67.097
Total loans € 5.483.582 € 5.568.030
18. Severance pay and other employee benefits
31.12.2013 31.12.2012
Preent value of Severance Pay obligations 935,439 1,077,427 Present value of Free Travel Card obligations 16,694 16,676 Total present value of Severance Pay and Free Travel Card obligations 952,133 1,094,103 Other employee benefits 94 115 Totale Severance Pay and other employee benefits 952,227 1,094,218
2013 Financial Statements 117 TRENITALIA S.p.A.
The table below illustrates the changes that were recorded in the present value of liabilities for defined benefit obligations for TFR and CLC:
Severance pay (TFR) 2013 2012
Defined benefit obligations at 1 January 1,077,427 974,469 Interest cost (*) 21,169 37,961 Actuarial (gains) losses recognised in equity (44,101) 170,809 Advances and uses (119,056) (105,812) Severance pay liabilities 935,439 1,077,427
Free travel card (CLC)
Defined benefit obligations at 1 January 16,676 12,928 Service cost (**) 172 119 Interest cost (*) 439 586 Actuarial (gains) losses recognised in equity 234 3,804 Advances and uses (827) (761) Free Travel Card liabilities 16,694 16,676
(*) with recognition through P&L (**) expected present value of benefits payables in the future
The use of the provision for TFR, equal to Euro 119,056 thousand, was generated from benefits paid to the personnel leaving the Company in the course of the financial year, advances and transfers of employees to other Group companies. The difference between the value of the expected allocations at the end of the period of observation and the expected present value of the benefits payable in the future as recalculated at the end of the period, on the basis of the regular staff resulting at that date and of the new valuation assumptions, constitutes the amount of actuarial gains/(losses).
In the current financial year, this item generated, for the provision for TFR, actuarial gains of Euro 44,101 thousand compared to the actuarial loss of Euro 170,809 thousand in 2012. This change was mainly due to the increase in the discount rate of the TFR liability (2.50% at 31 December 2013 compared to 2.05% at 31 December 2012).
The Free Travel Card constitutes a defined benefit plan for the employees of the Company and consists of the possibility of making use, free of charge, of the railway services rendered by the Company, except for the payment of the right of admission for some additional products or services. The present value of the benefit was determined by using actuarial techniques and was equal to Euro 16,694 thousand at 31 December 2013, compared to Euro 16,676 thousand at 31 December 2012. The Free Travel Card also generated actuarial losses of Euro 234 thousand compared to actuarial losses of Euro 3,804 thousand in 2012.
Other employee benefits at 31 December 2013, equal to Euro 94 thousand (Euro 115 thousand at 31 December 2012), are made up of a supplementary insurance policy towards the staff.
2013 Financial Statements 118 TRENITALIA S.p.A.
Actuarial assumptions Below are reported the main assumptions made for the actuarial estimate process:
31.12.2013 31.12.2012
Discount rate of Severance Pay 2.50% 2.05% Discount rate of Free Travel Card 3.2% 2.7% Annual increase rate of Severance Pay 3% 3% Rate of inflation 2% 2% Expected turnover rate of employees 3% 3% Expected rate of advances 2% 2% Mortality tables RG48 published by the Mortality General Accounting Office INPS tables broken down by age Disability and gender
100% subject to meeting the Retirement age Compulsory General Insurance requirements
The assumptions relating to the expected mortality are based on statistics published by the General Accounting Office (Ragioneria Generale dello Stato), while the assumptions relating to disability are based on the INPS tables broken down by age and gender.
Below is reported a sensitivity analysis that shows the possible present values of defined benefit obligations, following reasonably possible changes in actuarial assumptions.
31.12.2013 TFR CLC
Turnover rate +1% 934,845 - Inflation rate +0.25% 947,463 17,083 Inflation rate -0.25% 923,621 15,557 Discount rate +0.25% 917,901 15,854 Discount rate -0.25% 953,528 16,775
The tables below show the contribution expected for the subsequent financial year, the average duration of the defined benefit plans obligation and the payments scheduled by the plan.
31.12.2013 TFR CLC
Service cost - 166 Duration of the plan (in years) 8.3 12.2
Estimated future disbursements 1 64,759 914 2 59,737 926 3 64,454 936 4 68,947 945 5 77,610 957
2013 Financial Statements 119 TRENITALIA S.p.A.
19. Provisions for risks and charges
The table below reports the amounts at the beginning and at the end of the year and the changes recorded in provisions for risks and charges for 2013, showing the short-term portion.
Release of Uses and other Description 31.12.2012 Provisions excess Reclassifications 31.12.2013 changes provisions Provision for industrial reorganisation 171,190 (124,888) (11,560) 34,742 Other provisions: Provision for Charges for Workshops 16,273 457 (2,517) 14,213 Provision for risks and charges 90,986 27,504 (22,839) 95,651 Non-current total 278,449 27,504 (147,270) (11,560) (2,517) 144,606 Short-term portion of Provision for Charges for Workshops 1,549 (103) 2,517 3,963 Current total 1,549 - (103) - 2,517 3,963 Total Provisions for risks and charges 279,998 27,504 (147,373) (11,560) - 148,569
The Provision for Industrial reorganisation recognises the forecast expenditure necessary to implement income support policies, as described in detail in the 2012 Financial Statements, to which reference is made. In 2013 the changes concerned the use of Euro 124,888 thousand against the commitments relating to both the completion of projects started in 2012 (Euro 11 million) and the new 2013 projects (Euro 112 million); on the contrary, the surplus in the provision was recognised in the income statement, equal to Euro 11,560 thousand, as a result of the assessment of the financial commitments required to take the projects started in 2013 to a close, estimated at Euro 34,742 thousand.
The Provision for Charges for Workshops (Euro 18,176 thousand) did not report significant changes in the financial year. It should be noted that the short-term portion was equal to Euro 3,963 thousand.
At 31 December 2013 the Provision for Risks and Charges was equal to Euro 95,651 thousand (Euro 90,986 thousand at 31 December 2012) and was broken down as follows:
labour litigation for Euro 18,709 thousand (Euro 15,745 thousand as at 31 December 2012) relating to charges estimated against disputes of court concerning labour issues pertaining to the company; specifically, this item includes disputes in the current financial year, which mainly involved the following cases: subcontract of workers, higher duties, length of service and other issues;
any possible penalties to Regional Governments for Euro 9,623 thousand (Euro 14,192 thousand as at 31 December 2012) as to the quality of the transport services rendered in relation to the Services Contract;
civil litigation for disputes and other risks connected to customer relations and towards third parties for Euro 60,943 thousand (Euro 61,049 thousand as at 31 December 2012), which could have an unfavourable outcome for the company;
risks on equity investments for Euro 6,376 thousand, against losses incurred by the investee company Thello S.a.s, as described in note 9. 2013 Financial Statements 120 TRENITALIA S.p.A.
The Provision for Risks and Charges was adjusted by Euro 27,504 thousand in 2013, relating to: (a) labour litigation for Euro 11,777 thousand; (b) any possible objections by the Regional Governments for Euro 6,703 thousand; (c) disputes and any other risks connected to customer relations and towards third parties for Euro 2,648 thousand; and (d) accrued charges on equity investments for Euro 6,376 thousand.
Finally, this provision was used for Euro 22,839 thousand: penalties payable in relation to the cargo sector (Euro 1,815 thousand), the penalties acknowledged to the Regional Governments for Service Contracts (Euro 11,272 thousand), the charges incurred against disputes in court or out of court concerning labour issues pertaining to the Company (Euro 8,813 thousand) and the disputes with other third parties that have been settled unfavourably for the company (Euro 939 thousand).
20. Non-current and current financial liabilities (including derivatives)
31.12.2013 31.12.2012 Differences Non- Non- Non- Current Total Current Total Current Total current current current
Financial liabilities Hedging derivative 174,635 18,729 193,364 248,874 69,414 318,288 (74,239) (50,685) (124,924) financial instruments
Other financial - 785,610 785,610 - 801,342 801,342 - (15,732) (15,732) liabilities 174,635 804,339 978,974 248,874 870,756 1,119,630 (74,239) (66,417) (140,656)
The item “Hedging derivative financial instruments” reports the overall value of the transactions of Interest Rate Swaps (IRS) and Interest Rate Collars, as calculated according to the standard market valuation formulas (fair value) as specified by IFRS 13, entered into by the Company to cover fluctuations in interest rates on medium/long-term loans at variable rate. The overall fair value, equal to Euro 193,364 thousand, was calculated in relation to all the transactions in place as at 31 December 2013 and showed a decrease of Euro 124,924 thousand compared to the previous year.
The fair value of hedging derivatives is attributable to level 2 on the basis of the fair value hierarchy laid down in IFRS 7.
The item “Other financial liabilities” related to the debit balance of the intercompany current account held with the Parent Company, equal to Euro 785,610 thousand (Euro 800,930 as at 31 December 2012), which showed a decrease of Euro 15,320 thousand compared to the previous year as a result of the fact that on the reporting date less cash in hand was required than on the previous year’s reporting date.
2013 Financial Statements 121 TRENITALIA S.p.A.
21. Other non-current and current liabilities
Other non-current and current liabilities were broken down as follows:
31.12.2013 31.12.2012 Differences Non- Non- Non- current Current Total current Current Total current Current Total
Payables to Social Security Institutions 133,204 133,204 132,273 132,273 931 931 VAT payables 93,462 93,462 79,190 79,190 14,272 14,272 Other payables to Group companies 18,158 18,158 38,192 38,192 (20,034) (20,034) Other payables and accrued expenses and deferred income 80,598 391,670 472,268 25,917 365,384 391,301 54,681 26,286 80,967 Total 80,598 636,494 717,092 25,917 615,039 640,956 54,681 21,455 76,136
Other current liabilities showed an overall increase of Euro 21,455 thousand compared to 2012, which was essentially attributable to the changes in the following items:
the increase recorded in “VAT payables”, equal to Euro 14,272 thousand, is attributable to the increase in the deferred VAT payable on the invoices issued to the Public Administration that becomes payable only at the time of the collection; the decrease in “Payables to group companies (Euro 20,034 thousand) is essentially attributable to the settlement of non-trade payables to the affiliate company RFI; the increase in “Other payables and accrued expenses and deferred income” equal to Euro 26,286 thousand.
Below is reported the breakdown of the latter item, showing the related changes:
payables to the bilateral management Fund equal to Euro 149,830 thousand (of which Euro 80,597 thousand beyond the year), which increased by Euro 84,225 thousand compared to the previous year as a result of the difference between the settlement that took place in 2013 (Euro 44,158 thousand) and the activation of the 2013 projects to be paid for in coming years (Euro 124,888 thousand) and the allocation by the Parent Company of the accrued portion of the ordinary fund equal to Euro 3,496 thousand;
payables to personnel for Euro 173,666 thousand; the decrease of Euro 14,537 thousand is mainly due to lower payables for additional fees to be paid, essentially attributable to a reduction in the number of staff members;
payables for withholding taxes for IRPEF purposes for Euro 46,034 thousand, down by Euro 5,796 thousand;
guarantee deposits of Euro 28,787 thousand, up by Euro 5,796 thousand;
deferred income of Euro 43,426 thousand, with an increase of Euro 7,375 thousand compared to 2012, which essentially related to deferred revenues related to the customer loyalty campaign and advance sales of tickets.
For an analysis of relations with Group companies, reference is made to the paragraph on related parties. 2013 Financial Statements 122 TRENITALIA S.p.A.
22. Current trade payables The item is broken down as follows:
31.12.2013 31.12.2012 Differences
Payables to suppliers 809,046 868,751 (59,705) Commercial advances 222 343 (121) Trade payables to Group companies 812,854 1,120,236 (307,382) Total 1,622,122 1,989,330 (367,208)
The decrease in the item “trade payables”, compared to the previous financial year, equal to Euro 367,208 thousand is attributable to:
a decrease of Euro 59,705 thousand in payables to suppliers as a result of the financial settlements that took place in the year;
l00ower payables to group companies for Euro 307,382 thousand. The decrease was mainly attributable to the financial settlement of the payable to Cisalpino AG for the purchase of rolling stock (Euro 195,612 thousand), which was carried out through setoff against the receivable of Euro 117,420 thousand for the assumption of the financial debt to Eurofima and the receivable corresponding to the countervalue of the capital decrease (Euro 65,705 thousand) and the consequent payment of the difference; and to the financial settlement of trade payables to RFI S.p.A. (Euro 80,185 thousand).
For more details on trade payables to Group companies, reference should be made to the paragraph on related parties.
2013 Financial Statements 123 TRENITALIA S.p.A.
Information on the Income Statement
23. Revenues from sales and services
The tables and comments below report the breakdown of the items that make up revenues from sales and services.
2013 2012 Changes Revenues from Transport Services 5,143,279 5,129,307 13,972 Market revenues 3,121,624 3,107,115 14,509 Passenger traffic products 2,652,279 2,613,165 39,114 Cargo traffic products 469,345 493,950 (24,605) Fees for the Public Service Contract 2,021,655 2,022,192 (537) Fees from the Government 489,990 514,263 (24,273) Fees from Regional Governments 1,531,665 1,507,929 23,736 Revenues from Services to Railway Companies and Additional Traffic Services 129,482 150,016 (20,534)
Total 5,272,761 5,279,323 (6,562)
The item amounted to Euro 5,272,761 thousand, showing a decrease of Euro 6,562 thousand compared to the previous year owing to the difference between revenues from transport services (Euro +13,972 thousand) and revenues from services to railway companies and additional traffic services (Euro -20,534 thousand).
The positive change in market revenues for Euro 14,509 thousand is mainly attributable to:
An increase in revenues both from the medium- and long-distance sector for Euro 12,268 thousand, mainly due to increased revenues from “Freccia” products, and from the regional transport sector for Euro 26,849 thousand, mainly connected to increased fares;
a decrease of Euro 24,605 thousand in revenues from Cargo transport, substantially due to a reduction in the trains/km linked to the general negative performance of the economy that entailed a sharp decline in railway cargo traffic.
Revenues arising from fees for public service contracts (Regional Governments and the Government) remained substantially unchanged compared to 2012. For an analysis of the internal performance of the single contracts, reference is made to the comments on the reclassified income statement in the report on operations.
The table below reports the breakdown of fees for the Public Service Contract with the Government:
2013 2012 Changes Fees for the Public Service Contract with the Government For passenger transport 386,800 408,174 (21,374) For cargo transport 103,190 106,089 (2,899) Total 489,990 514,263 (24,273)
2013 Financial Statements 124 TRENITALIA S.p.A.
Revenues from other transport-related services showed an overall decrease of Euro 20,534 thousand compared to 2012. This decrease was essentially attributable to a reduction in the performance of services for rolling stock maintenance for Euro 15,945 thousand, of which Euro 14,996 thousand was attributable to relations with Trenord Srl.
24. Other income The table below reports the breakdown of other income:
2013 2012 Changes Revenues from Property Management 10,120 9,722 398 Capital gains 27,328 10,693 16,635 Other sundry income 187,566 198,250 (10,684) Total 225,014 218,665 6,349
Other income recorded an overall increase of Euro 6,349 thousand compared to the 2012. The most significant changes in other income included:
an increase of Euro 16,635 thousand in capital gains, mainly due to scrapped rolling stock;
a decrease of Euro 10,684 thousand in Sundry income, mainly due to lower insurance compensation payments (Euro 5,103 thousand) and to reductions in withholdings on tickets and other third-party reimbursements (Euro 4,052 thousand).
25. Personnel costs The table below reports personnel costs:
2013 2012 Changes Permanent staff 1,855,916 1,923,448 (67,532) Wages and salaries 1,381,962 1,406,565 (24,603) Social security contributions 378,863 375,269 3,594 Other permanent staff costs 1,537 8,813 (7,276) Severance pay 93,615 92,355 1,260 Provisions/Releases (61) 40,446 (40,507) Self-Employed Staff and Collaborators 92 239 (147) Wages and salaries 75 214 (139) Social security contributions 17 25 (8) Other costs 63,708 55,454 8,254 Service costs CLC (654) (643) (11) Temporary employment, Seconded staff and Stage 1,206 1,010 196 Other costs 63,156 55,087 8,069 Total 1,919,716 1,979,141 (59,425)
Personnel costs, which totalled Euro 1,919,716 thousand, showed a decrease of Euro 59,425 thousand compared to the previous year.
2013 Financial Statements 125 TRENITALIA S.p.A.
This change was attributable to:
a reduction in permanent staff costs (Euro -67,532 thousand) due to a reduction by 2,084 resources in average staff and to lower accruals to the income support fund;
an increase of Euro 8,254 thousand in other personnel costs, mainly relating to luncheon vouchers.
The table below reports the company’s average staff broken down by category:
PERSONNEL 2013 2012 Change
Executives 255 273 (18) Middle managers 3,865 4,177 (312) Other staff 29,672 31.426 (1,754) TOTAL 33,792 35,876 (2,084)
26. Raw and secondary materials, consumables and goods for resale The item is broken down as follows:
2013 2012 Changes Raw materials and consumables 310,678 310,056 622 Electricity and drive fuels 63,810 60,913 2,897 Lighting and driving force 11,419 11,802 (383) Total 385,907 382,771 3,136
“Raw materials and consumables”, equal to Euro 310,678 thousand, related to the consumption of stock materials for Euro 298,591 thousand, to the purchase of heating fuel for Euro 4,707 thousand and to the consumption of materials bought locally for the remaining amount.
2013 Financial Statements 126 TRENITALIA S.p.A.
27. Costs for services The balance is broken down in the table below:
2013 2012 Changes Transport services 1,082,340 1,062,337 20,003 Toll 857,097 832,660 24,437 Cargo transport services 103,956 104,590 (634) Other Transport-related services 60,210 55,003 5,207 Handling services 42,943 49,581 (6,638) Ferrying services 18,134 20,503 (2,369) Maintenance, cleaning and other contracted services 524,400 513,681 10,719 Services and works contracted-out on behalf of third parties 364 311 53 Cleaning services and other contracted-out services 224,925 218,256 6,669 Maintenance and repair of intangible assets and property, plant and equipment 299,111 295,114 3,997 Real estate services and utilities 36,392 34,137 2,255 Administrative and IT services 96,459 89,264 7,195 External communication and advertising costs 15,825 14,237 1,588 Sundry services 307,854 297,029 10,825 Professional services 5,695 6,102 (407) Tenders and fees to other Railway Companies 15,268 15,362 (94) Group common costs 2,057 2,133 (76) Insurance 28,758 30,492 (1,734) Night train services 20,923 23,571 (2,648) Catering 65,370 50,746 14,624 Consultancy 693 399 294 Commissions to agencies 44,521 41,050 3,471 Other 121,921 127,151 (5,230) Provisions/Releases 2,648 23 2,625 Total 2,063,270 2,010,685 52,585
The trend in costs for services shows an increase equal to Euro 52,585 thousand.
The most significant changes included:
transport services increased by Euro 20,003 thousand, attributable to higher costs for tolls (Euro +24,437 thousand) due to an increase in the offer of Long-Distance market services and to higher costs of providing assistance to passengers with reduced mobility, which were partially offset by lower costs for ferrying services (Euro -2,369 thousand) and lower costs for handling services (Euro - 6,638 thousand);
costs for maintenance, cleaning services and other contracted services increased by about Euro 10,719 thousand, mainly due to increased costs for cleaning services;
the cost of administrative and IT services rose by Euro 7,195 thousand owing to an increase in the amount of maintenance of the outsourcer’s software;
2013 Financial Statements 127 TRENITALIA S.p.A.
costs for sundry services increased by Euro 10,825 thousand; this change was mainly due to higher costs for catering services (Euro 14,624 thousand), for commissions to agencies (Euro 3,471 thousand) and higher provisions for civil disputes (Euro 2,625 thousand) set aside compared to the same period in the previous year, which were partially offset by a reduction in insurance costs (Euro -1,734 thousand), costs for night train services (Euro -2,648 thousand) and savings in sundry costs, in particular for Logistics and Facility management services.
28. Leases and rentals The table below reports the breakdown of costs for leases and rentals.
2013 2012 Changes Operating lease rentals 8 2 6 Lease rentals, service charges and IRE 77,624 77,071 553 Rentals and indemnities of rolling stock and other 37,006 49,912 (12,906) IT services and other 14,883 24,483 (9,600) Total 129,521 151,468 (21,947)
The cost of leases and rentals decreased by Euro 21,947 thousand owing to a fall in the amount of rolling stock leased (Euro 12,906 thousand) as a result of the cancellation of the ETR 610 lease agreement with Cisalpino AG after these trains had been transferred to Trenitalia in 2012 and also as a result of lower rentals payable for the use of Ferrovie dello Stato Italiane brand for Euro 9,600 thousand as a result of amendments to the contract.
29. Other operating costs The table below reports the breakdown of other operating costs:
2013 2012 Changes Other costs 34,886 26,936 7,950 Capital losses 3,864 2,790 1,074 Provisions/Releases 6,703 4,185 2,518 Total 45,453 33,911 11,542
The increase in other operating costs, equal to Euro 11,542 thousand, was essentially attributable to higher costs for the single municipal tax (Imposta Municipale Unica, IMU) (Euro 1,199 thousand), higher waste collection charges (Euro 2,119 thousand), higher contractual penalties to Group companies (Euro 2,568 thousand) and the capital losses arising from the disposal of rolling stock in the production cycle (Euro 1,074 thousand). Furthermore, there were higher provisions of Euro 2,518 thousand in relation to possible disputes with the Regional Governments.
2013 Financial Statements 128 TRENITALIA S.p.A.
30. Capitalization of internal construction costs
Capitalization of internal construction costs mainly related to the value of costs of materials, personnel and transport costs capitalised in 2013 against value-increasing maintenance actions of rolling stock carried out at the workshops owned by the Company.
The amount of the item (Euro 431,368 thousand) is almost fully attributable to the capitalisation of value- increasing maintenance.
31. Amortisation and depreciation The item is broken down as follows:
2013 2012 Changes Amortisation of intangible assets 33,318 26,848 6,470 Depreciation of property, plant and equipment 899,422 897,795 1,627 Total 932,740 924,643 8,097
The overall increase of Euro 8,097 thousand in this item was due to the entry into operation of new assets and to the ordinary course of the process of amortisation/depreciation of any assets already in operation.
32. Write-downs and impairment losses (reversals) The item is broken down as follows:
2013 2012 Changes Write-downs of property, plant and equipment 20,545 6,675 13,870 Value adjustments and write-backs on receivables 288 650 (362) Total 20,833 7,325 13,508
Write-downs and impairment losses increased by Euro 13,508 thousand; this change was mainly attributable to an increase in write-downs of rolling stock (Euro 10,812 thousand) and workshop equipment (Euro 2,531 thousand).
33. Finance income
The table below reports the breakdown of finance income:
2013 2012 Changes Finance income from non-current receivables and securities 1,038 1,055 (17) Sundry finance income 3,392 2,997 395 Finance income on derivatives 1,999 0 1,999 Dividends 2,683 10,012 (7,329) Foreign exchange gains 17,213 485 16,728 Total 26,325 14,549 11,776
2013 Financial Statements 129 TRENITALIA S.p.A.
The balance of finance income was equal to Euro 26,325 thousand, showing an increase of Euro 11,776 thousand. This increase was due to finance income on derivatives (Euro 1,999 thousand) and to foreign exchange gains (for more information, reference is made to note 35 on net foreign exchange gains). Furthermore, there was a reduction of Euro 7,329 thousand due to lower dividends collected from TX Logistik.
34. Finance costs The table below reports the breakdown of finance costs:
2013 2012 Changes Finance costs on payables 161,467 171,998 (10,531) Finance costs for employee benefits (TFR and CLC) 24,132 42,410 (18,278) Finance costs on derivatives (CAPS and COLLARS) 0 1.056 (1,056) Write-downs of financial assets 9,855 38 9.817 Foreign exchange losses 152 1,280 (1,128) Total 195,606 216,782 (21,176)
Finance costs on payables showed a decrease, compared to 2012, equal to Euro 21,176 thousand, which was mainly attributable to the combined effect of the reduction in interest rates recorded in international markets and in particular of the Euribor rate to which charges from debt service are linked and of the reduction in the average debt for the year. This item, which totalled Euro 161,467 thousand, is essentially made up of:
interest expense on loans from banks for Euro 11,701 thousand;
interest expense on IRS derivative instruments for Euro 73,321 thousand;
interest expense and premiums on Cap and Collar derivatives for Euro 43,190 thousand;
interest expense on loans and other charges to the subsidiary for Euro 30,338 thousand.
Finance costs for employee benefits, amounting to Euro 24,132 thousand, are attributable to the discounting of provisions for TFR (Euro 23,236 thousand, of which Euro 2,067 related to the portion of the revaluation paid to the Tax Office) and Free Travel Card (Euro 439 thousand) determined by the actuarial valuation of the two balance sheet items. Write-downs of financial assets (Euro 9,855 thousand) related to the adjustment to the book value of the equity investment in order to bring it into line with the equity of the subsidiary Thello SaS. For more information, reference is made to the note on equity investments.
35. Foreign exchange gains (losses)
Net foreign exchange gains, which totalled Euro 17,061 thousand, showed an increase of Euro 16,266 thousand compared to 2012, which was mainly attributable to the recognition of foreign exchange gains from the decrease in the share capital of Cisalpino.
2013 Financial Statements 130 TRENITALIA S.p.A.
36. Current, deferred tax assets and liabilities for the year The table below reports the breakdown of income taxes:
2013 2012 Changes IRAP tax 73,019 80,698 (7,679) IRES tax 5,859 3,464 2,395 Deferred tax assets and liabilities 2,055 (74,588) 76,643 Total 80,933 9,574 71,359
The tax charge accrued in the year, which was determined through a prudent application of the current tax regulations, increased by Euro 71,359 thousand. The increase was the result of the following developments:
a negative change of Euro 76,643 thousand in deferred tax assets and liabilities arising from the comparison between the deferred tax assets calculated in the 2012 accounts against tax benefits quantified in the subsequent periods (equal to Euro 72,000 thousand) and the adjustment made in 2013, with a negative effect of Euro 3 million on the tax charge due to the recognition of deferred tax assets for 2013 (Euro 43,975 thousand) through profit or loss and the amount of tax estimated for 2014-2015 (Euro 40,975 thousand);
a reduction of Euro 7,679 thousand in the IRAP tax charge. The amount accruing in 2013 is reported net of the adjustments to the estimated tax for previous periods, settled with the presentation of the relative returns during 2013;
an increase of Euro 2,395 thousand in the IRES tax charge. The amount accruing in 2013 is reported net of the income resulting from the Company’s adoption of the Group’s consolidated tax base and the adjustments to the estimated tax for previous periods, settled with the presentation of the relative returns during 2013.
Below is reported the table of reconciliation of the actual tax rate:
2013 Financial Statements 131 TRENITALIA S.p.A.
2013 % 2012 %
Profit (loss) for the year 181,489 206,424 Total income tax from the financial statements 80,933 9,574 Pre-tax profit 262,421 215,998
Theoretical IRES tax (27.50%) 72,166 27.5% 59,399 27.5%
Lower taxes: Use of Provisions for Risks and charges and Corporate Restructuring (40,625) -15.5% (71,727) -33.2% IRAP amount related to personnel costs deductible from IRES tax (15,385) -5.9% (18,320) -8.5% Dividends recognized through P&L (701) -0.3% (2,616) -1.2% Other Changes (17,396) -6.6% (295) -0.1%
Higher taxes:
Impairment losses and accruals that cannot be deducted in whole or in part 18,455 7.0% 54,170 25.1%
Other Changes 38,454 14.7% 19,953 9.2%
Total current income taxes (IRES tax) 54,968 20.9% 40,564 18.8% Income from adoption of the consolidated tax base and other
adjustments (49,109) -18.7% (37,100) -17.2% IRES tax 5,859 2.2% 3,464 1.6% IRAP tax 73,018 27.8% 80,698 37.4% Total deferred taxation 2,055 0.8% (74,588) -34.5% TOTAL INCOME TAXES 80,933 30.8% 9,574 4.4%
37. Contingent assets and liabilities
As at the balance sheet date, there were no contingent assets or liabilities to be reported.
38. Fees due to Directors and Statutory Auditors
Below are reported the fees due to the Directors and to the members of the Board of Statutory Auditors for the performance of their duties:
RECIPIENTS 2013 2012 Change Directors 491 499 (8) Statutory Auditors 63 63 0 554 562 (8)
Fees due to Directors include emoluments envisaged for the positions of Chairman and Chief Executive Officer, as well as any emoluments envisaged for the remaining Board members.
To the above fees must be added the fees due to the external member (Chairman) of the Supervisory Board for about Euro 40 thousand.
2013 Financial Statements 132 TRENITALIA S.p.A.
39. Fees due to the Independent Auditors
It should be noted that – pursuant to article 37, paragraph 16, of Legislative Decree no. 39/2010 and letter 16-bis of article 2427 of the Italian Civil Code, the total amount of fees due to the Independent Auditors is equal to Euro 611 thousand, including the relevant fees paid to them in the financial year for other auditing services other than statutory audit (Euro 142 thousand).
2013 Financial Statements 133 TRENITALIA S.p.A.
40. Information on the direction and coordination activity
The essential data of the controlling company Ferrovie dello Stato Italiane S.p.A., which are reported in the summary statement required by article 2497-bis of the Italian Civil Code, have been taken from the related financial statements for the financial year ended 31 December 2012. For an adequate and full understanding of the equity and financial position of Ferrovie dello Stato Italiane S.p.A. (controlling company) at 31 December 2012, as well as of the result of operations achieved by the company in the financial year ended on that date, reference is made to the financial statements that are available, together with the report of the independent auditors, in the forms and according to the manners prescribed by law.
amounts in thousands of euro (Euro) 31.12.2012 31.12.2011
Assets Total non-current assets 41,342,070 43,084,969 Total current assets 3,664,642 2,534,679 Total assets 45,006,712 45,619,648
Equity Share capital 38,790,425 38,790,425 Reserves 298,488 298,231 Profits (losses) carried forward (2,987,495) (3,026,753) Profit (loss) for the year 73,291 41,305 Total Equity 36,174,709 36,103,209
Liabilities Total non-current liabilities 5,663,086 7,601,630 Total current liabilities 3,168,917 1,914,808 Total liabilities 8,832,003 9,516,439 Total equity and liabilities 45,006,712 45,619,648
2012 2011
Operating revenues 156,569 145,739 Operating costs 146,360 152,121 Amortisation and depreciation 21,474 18,902 Write-downs and impairment losses (reversals) 1,323 1,552 Provisions for risks and charges 0 3,000 Finance income and costs 72,770 13,238 Income taxes (12,649) (57,904)
Profit from assets held for sale, net of tax effects 460 -
Profit (loss) for the year 73,291 41,305
It should be noted that Ferrovie dello Stato Italiane S.p.A. prepares consolidated accounts.
2013 Financial Statements 134 TRENITALIA S.p.A.
41. Related parties
Transactions with executives with strategic responsibilities Below are reported the fees due to executives with strategic responsibilities:
2013 2012 Short-term benefits 4,229 3,785 Post-employment benefits 214 218
4,443 4,003
The benefits relate to the fees paid to executives with strategic responsibilities, plus MBO fees (if any). In addition to short-term benefits of Euro 4,229 thousand paid out in 2013, note a variable part to be paid in 2014, for an amount not exceeding Euro 730 thousand (Euro 740 thousand in 2012).
It should be noted that the executives with strategic responsibilities did not receive benefits for the termination of the employment relationship, nor any other long-term benefits.
Other transactions with related parties
Below are described the main relations with related parties maintained by the Ferrovie dello Stato Italiane Group, which are all regulated at arm’s length:
2013 Financial Statements 135 TRENITALIA S.p.A.
Name Credit relationships Debt relationships
Subsidiaries
Serfer S.r.l. Cargo Transport service Handling services Rolling stock maintenance and hire Railway transport terminalisation services Hire of carriages Carriages maintenance Secondment of staff Trenitalia Logistik France S.a.s. International cargo transport service Handling support services Thello S.a.s. Rolling stock maintenance and hire Commissions expense Sale of railway tickets Sales commissions Secondment of staff Tx Logistik AG International cargo transport service International cargo transport service Rolling stock maintenance and hire Handlings, terminalisation services Secondment of staff Jointly-controlled entities Cisalpino AG Purchase of materials Financial relationships: Interest expense Trenord S.r.l. Rolling stock hire Commissions expense Rolling stock maintenance Servizi integrati gestione circolazione Handling and traffic services Sales commissions Secondment of staff Financial relationships: Interest income on loans Associates Credit relationships Debt relationships
Pol Rail S.r.l. Cargo transport service Cargo transport service Rolling stock hire Alpe Adria S.p.A. Cargo transport service Logistica SA Financial relationships: Interest on loans
Controlling companies Ferrovie dello Stato Italiane S.p.A. (a) Supply and management of staff Transport of employees and relatives services Train hire Secondment of staff Secondment of staff Corporate positions Rentals and charges for lease of Tickets properties Licence for use of the Brand Financial relationships: Financial relationships: Interest income Intercompany current account Interest expense on loans Guarantees
Other affiliates Credit relationships Debt relationships
Rete Ferroviaria Italiana S.p.A. (b) Transport of employees and relatives Toll Cargo transport service Electricity for train drive Rolling stock maintenance Handling service Rolling stock hire Ferrying service Maintenance engineering Additional traffic services
Secondment of staff Maintenance 2013 Financial Statements Railway Police services 136 Health services Secondment of staff
Rentals and charges for lease of properties Name Credit relationships Debt relationships
Subsidiaries
Serfer S.r.l. Cargo Transport service Handling services Rolling stock maintenance and hire Railway transport terminalisation services Hire of carriages Carriages maintenance Secondment of staff Trenitalia Logistik France S.a.s. International cargo transport service Handling support services Thello S.a.s. Rolling stock maintenance and hire Commissions expense Sale of railway tickets Sales commissions Secondment of staff Tx Logistik AG International cargo transport service International cargo transport service Rolling stock maintenance and hire Handlings, terminalisation services Secondment of staff Jointly-controlled entities Cisalpino AG Purchase of materials Financial relationships: Interest expense Trenord S.r.l. Rolling stock hire Commissions expense Rolling stock maintenance Servizi integrati gestione circolazione Handling and traffic services Sales commissions Secondment of staff Financial relationships: Interest income on loans Associates Credit relationships Debt relationships
Pol Rail S.r.l. Cargo transport service Cargo transport service Rolling stock hire Alpe Adria S.p.A. Cargo transport service Logistica SA Financial relationships: Interest on loans
Controlling companies Ferrovie dello Stato Italiane S.p.A. (a) Supply and management of staff Transport of employees and relatives services Train hire Secondment of staff Secondment of staff Corporate positions Rentals and charges for lease of Tickets properties Licence for use of the Brand Financial relationships: Financial TRENITALIA relationships: S.p.A. Interest income Intercompany current account Interest expense on loans Guarantees
Other affiliates Credit relationships Debt relationships
Rete Ferroviaria Italiana S.p.A. (b) Transport of employees and relatives Toll Cargo transport service Electricity for train drive Rolling stock maintenance Handling service Rolling stock hire Ferrying service Maintenance engineering Additional traffic services Secondment of staff Maintenance Railway Police services Health services Secondment of staff
Rentals and charges for lease of properties Netinera Deutschland GmbH (b) Secondment of staff SGT S.p.A. Rolling stock hire Handling service Cemat S.p.A. Cargo transport service Integrated logistics Rolling stock maintenance and testing Terminali Italia S.r.l. Hire of carriages Tickets FS Logistica S.p.A. (b) Cargo transport service Transport and shipment Railway transport terminalisation Operation of cargo terminals services Rolling stock hire Manual labourers for porterage Secondment of staff Rolling stock hires Tickets Leases of areas Ferservizi S.p.A. (b) Transport of employees and relatives Personnel administration Accounting and treasury Facilities management Ferrotel Catering administrative management Group purchasing services Metropark S.p.A. Parking agreements Grandi Stazioni S.p.A. (b) Tickets Rentals for lease of properties Sponsorships Advertising campaigns at stations Service charges Centostazioni S.p.A. (b) Tickets Maintenance of properties Pubblicità sui treni System cleaning service Rentals and charges for lease of properties Busitalia - Sita Nord (b) Rental for parking areas Replacement bus services Fercredit S.p.A. (b) Tickets Credit scoring services Transferee of payables to suppliers Financial relationships: Interest expense Italferr S.p.A. (b) Transport of employees and relatives Engineering services Rentals and charges for lease of properties Italcertifer Soc.Cons.p.A. (b) Secondment of staff Testing activities Certification and Testing FS Sistemi urbani S.r.l. (b) Rentals and charges for lease of properties 2013 Financial Statements 137 TRENITALIA S.p.A.
Other related parties
Pension funds Secondment of staff Complementary pension funds Tickets
CDP Group Tickets Purchase of materials Enel Group Transport of material Lighting and driving force Lease rentals Electricity utilities Eni Gropu Transport of material Drive diesel Tickets Gas utilities
EXPO 2015 Group Rolling stock hire Finmeccanica Group National and international cargo transport Rolling stock maintenance Nolo materiale rotabile Purchase of materials GSE Group Tickets Invitalia Group Tickets IPZS Group Tickets Poste Group National cargo transport Ticket printing, publications Transport and shipment Postal charges Rai Group Subscriptions Sogin Group Tickets
(a) The company that carries out direction and coordination activities. (b) Jointly-controlled entity.
The table below summarises the financial and economic values of the financial year ended 31 December 2013 for transactions with related parties.
2013 Financial Statements 138 TRENITALIA S.p.A.
Business and other relations (in thousand of euro) 31.12.2013 2013
Name Purchases for Payables Guarantees Costs Revenues Receivables investments Commitments
Subsidiaries 17,279 13,145 - - - 37,151 30,649 Serfer S.r.l. 3,973 7,093 22,807 3,141 Trenitalia Logistik France S.a.s. 1,068 24 315 3,579
Thello S.a.s. 9,942 352 1,131 17,545
Tx Logistik AG 2,296 5,676 12,898 6,384
Jointly-controlled entities 49,031 20,657 1,736 - - 12,237 110,525
Cisalpino AG 83 303 291 41 154
Trenord S.r.l. 48,948 20,354 1,445 12,196 110,371 Associates 2,128 1,205 - - - 5,964 12,400
Pol Rail S.r.l. 1,655 1,196 5,953 7,051
Alpe Adria S.p.A. 466 9 11 5,342
East-Rail S.r.l in liquidation 7 7 Controlling companies 23,218 33,918 - - - 50,446 2,210
Ferrovie dello Stato Italiane S.p.A. (a) 23,218 33,918 50,446 2,210 Other Affiliates 181,880 761,943 19,065 - - 1,221,379 187,505
Rete Ferroviaria Italiana S.p.A. (b) 103,175 447,941 13,273 1,032,304 129,274
Netinera Deutschland GmbH (b) 604 210
SGT S.p.A. 167 624 541 66
Cemat S.p.A. 23,350 7,996 2,427 44,808
Terminali Italia S.r.l. 1 27 45
FS Logistica S.p.A. (b) 38,408 12,801 1,327 27,367 8,400
NET in liquidation 1 7
Ferservizi S.p.A. (b) 1,007 28,324 83,022 2,185
Metropark S.p.A. 230 128
Grandi Stazioni S.p.A. (b) 114 7,429 1,178 30,578 181
Centostazioni S.p.A. (b) 52 4,446 141 12,048 608
Busitalia - Sita Nord (b) 375 10,633 32,092 294
Fercredit S.p.A. (b) 35 239,733 215 9
Italferr S.p.A. (b) 2,456 1,056 2,985 1,291
Sita S.p.A. in liquidation 10,204 29
Italcertifer Soc.Cons.p.A. (b) 1,930 598 161 232 133
FS Sistemi Urbani S.r.l. (b) 1 69 425 1
2013 Financial Statements 139 TRENITALIA S.p.A.
Other related parties 155,364 167,041 110,566 - - 78,453 37,693
Pension Funds 38 1,092 272
CDP Group 35 824 1,570 163
Enel Group 1,575 995 10,136 1,931
Eni Group 1,785 1,233 16,866 18,631
EXPO 2015 Group 16
Finmeccanica Group 151,885 161,113 110,566 46,141 16,019
GSE Group 21
Invitalia Group 23 126
IPZS Group 16 59
Poste Group 1,548 3,680 206
Rai Group 236 60
Sogin Group 7 249 TOTAL 428,900 997,909 131,367 - - 1,405,630 380,982
Financial relations
(in thousand of euro) 31.12.2013 2013 Name Receivables Payables Guarantees Commitments Charges Income
Subsidiaries - - - - - 2,500
Tx Logistik AG 2,500
Jointly-controlled entities 38,670 - - - 143 1,351
Trenord S.r.l. 38,670 1,351
Cisalpino AG 143 Associates 350 - - - - 185
Logistica SA 350 3
Pol Rail S.r.l. 182 Controlling companies 340 4,329,046 - - 30,338 -
Ferrovie dello Stato Italiane S.p.A. 340 4,329,046 30,338 Other affiliates - - - - 350 -
Fercredit S.p.A. 350 TOTAL 39,360 4,329,046 - - 30,831 4,036
2013 Financial Statements 140 TRENITALIA S.p.A.
42. Guarantees
The overall value of guarantees given is Euro 3,577,737 thousand and essentially relates to:
collaterals on pledges on the Company-owned rolling stock, issued by the company in favour of Eurofima to secure medium- and long-term loans raised through Ferrovie dello Stato Italiane (Euro 3,409,660 thousand);
guarantees issued in favour of the Regional Governments for the Service Contract and to other Entities on the part of Credit Institutions and Poste (Euro 168,077 thousand).
43. Events after the balance sheet date
In January 2014 Trenitalia learned from the Infrastructure Manager that the electric energy traction costs was to be increased from 1 January 2014 by virtue of Resolution no. 641/2013/R/COM passed by the Energy and Gas Authority (Autorità dell’Energia Elettrica e Gas, AEEG) on 27 December 2013. Specifically, given the ongoing revision of the costs saddling power intensive companies, the resolution changed profoundly the application of the Additional Tariff Components (Componenti Tariffarie Aggiuntive) (Stranded Costs), which in fact resulted in a significant abatement of the tariff discounts extended, among others, to railway companies. The company initiated administrative proceedings to request the Court to declare the AEEG resolution null and void.
On 24 February the IC 660 train that derailed at Andora on 17 January 2014 owing to a landslide from private land was removed using a crane lighter. Work began with the positioning of the lighter at 6 a.m. and railway services resumed along the whole line some days later.
On 17 February, the ruling was filed which rejected the class action initiated by certain Calabrian passengers and municipalities requesting, through an appeal filed with the Lazio Regional Administrative Court in October 2012, that night train service be restored on the south-north line. The Court ruled that Trenitalia did not “violate the obligations contained in the service charters and the quality and economic standards set for public service concessionaires”, defining the Company’s choices “consistent with the general rules and regulations as well as with the provisions of the service contract.” The railway services covered by the appeal, in fact, are part of the universal services that Trenitalia performs upon request of the State, which outlines in the specific service contract the relevant quantity and characteristic plans.
Starting from 27 February, Trenitalia’s tickets may be purchased from the TV at home. This innovative sales channel was activated thanks to the “ProntoTreno” application which, after the success of the versions created for smartphones and tablets, has now been made available on Samsung’s smart TVs. With ProntoTreno travellers can now purchase tickets for national and regional destinations and can change their bookings, apply for a refund, see whether train in circulation are running on time, check the departing track and receive useful information directly while sitting in front of the TV at home.
2013 Financial Statements 141 TRENITALIA S.p.A.
On 19 March 2014 the Company was informed that the Council of State had filed a favourable judgment in the appeal submitted in 2007 by a group of railway undertakings, including Trenitalia, regarding the application of the criterion for the calculation of the K2 charge for access to the railway infrastructure. At the moment the Company is waiting to learn the contents of the judgment and the amount of discount on the access charge that will be payable for the previous financial years. It is appropriate to observe that the amount of the discount could constitute a substantial contribution to the Company’s revenues.
2013 Financial Statements 142 TRENITALIA S.p.A.
Annex 1
Reclassified Balance Sheet of the cargo transport segment
(in thousand of euro) 31.12.2013 31.12.2012 Differences NET ASSETS
Net current operating assets 159,122 219,970 (60,848) Other net assets (66,878) (72,925) 6,047 Net working capital 92,244 147,045 (54,801)
Property, plant and equipment 598,852 596,278 2,574 Investments under non-current financial assets 101,024 101,019 5 Net fixed assets 699,876 697,297 2,574
Severance Pay (TFR) (144,391) (185,981) 41,590 Other provisions (34,238) (34,423) 185 Total provisions (178,629) (220,404) 41,775
TOTAL NET INVESTED CAPITAL 613,491 623,938 (10,447)
Full-cost Reclassified Income Statement of the cargo transport segment
(in thousand of euro) 2013 2012 Differences Operating revenues 637,168 665,660 (28,492) - Revenues from sales and services 578,885 610,211 (31,326) - Other revenues 58,283 55,449 2,834
Operating costs (626,006) (686,405) 60,399
EBITDA 11,162 (20,745) 31,907
Amortisation and depreciation (67,213) (74,218) 7,005 Write-downs and impairment losses (reversals) 0 (8) 8
EBIT (56,051) (94,971) 38,920
2013 Financial Statements 143 AUDITORS’ REPORT IN ACCORDANCE WITH ARTICLE 14 OF LEGISLATIVE DECREE No. 39 OF 27 JANUARY 2010
TRENITALIA SPA
FINANCIAL STATEMENTS AS OF 31 DECEMBER 2013 AUDITORS’ REPORT IN ACCORDANCE WITH ARTICLE 14 OF LEGISLATIVE DECREE No. 39 OF 27 JANUARY 2010
To the Shareholder of di Trenitalia SpA
1 We have audited the financial statements of Trenitalia SpA as of 31 December 2013, which comprise the statement of financial position, income statement, statement of comprehensive income, statement of changes in equity, statement of cash flows and related explanatory notes. The directors of Trenitalia SpA are responsible for the preparation of these financial statements in compliance with International Financial Reporting Standards as adopted by the European Union. Our responsibility is to express an opinion on these financial statements based on our audit.
2 We conducted our audit in accordance with the auditing standards issued by the Italian Accounting Profession (Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili) and recommended by Consob, the Italian Commission for Listed Companies and the Stock Exchange. Those standards require that we plan and perform the audit to obtain the necessary assurance about whether the financial statements are free of material misstatement and, taken as a whole, are presented fairly. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors. We believe that our audit provides a reasonable basis for our opinion.
For the opinion on the financial statements of the prior period, which are presented for comparative purposes, reference is made to our report dated 7 May 2013.
3 In our opinion, the financial statements of Trenitalia SpA as of 31 December 2013 comply with International Financial Reporting Standards as adopted by the European Union; accordingly, they have been prepared clearly and give a true and fair view of the financial position, result of operations and cash flows of Trenitalia SpA for the year then ended.
4 The directors of Trenitalia SpA are responsible for the preparation of a report on operations in compliance with the applicable laws. Our responsibility is to express an opinion on the consistency of the report on operations with the financial statements, as required by law. For this purpose, we have performed the procedures required under Italian Auditing Standard no.
PricewaterhouseCoopers SpA
Sede legale e amministrativa: Milano 20149 Via Monte Rosa 91 Tel. 0277851 Fax 027785240 Cap. Soc. Euro 6.812.000,00 i.v., C .F. e P.IVA e Reg. Imp. Milano 12979880155 Iscritta al n° 119644 del Registro dei Revisori Legali - Altri Uffici: Ancona 60131 Via Sandro Totti 1 Tel. 0712132311 - Bari 70124 Via Don Luigi Guanella 17 Tel. 0805640211 - Bologna 40126 Via Angelo Finelli 8 Tel. 0516186211 - Brescia 25123 Via Borgo Pietro Wuhrer 23 Tel. 0303697501 - Catania 95129 Corso Italia 302 Tel. 0957532311 - Firenze 50121 Viale Gramsci 15 Tel. 0552482811 - Genova 16121 Piazza Dante 7 Tel. 01029041 - Napoli 80121 Piazza dei Martiri 58 Tel. 08136181 - Padova 35138 Via Vicenza 4 Tel. 049873481 - Palermo 90141 Via Marchese Ugo 60 Tel. 091349737 - Parma 43100 Viale Tanara 20/A Tel. 0521275911 - Roma 00154 Largo Fochetti 29 Tel. 06570251 - Torino 10122 Corso Palestro 10 Tel. 011556771 - Trento 38122 Via Grazioli 73 Tel. 0461237004 - Treviso 31100 Viale Felissent 90 Tel. 0422696911 - Trieste 34125 Via Cesare Battisti 18 Tel. 0403480781 - Udine 33100 Via Poscolle 43 Tel. 043225789 - Verona 37135 Via Francia 21/C Tel.0458263001 www.pwc.com/it 001 issued by the Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili and recommended by Consob. In our opinion the report on operations is consistent with the financial statements of Trenitalia SpA as of 31 December 2013.
Rome, 8 April 2014
PricewaterhouseCoopers SpA
Signed by
Leda Ciavarella (Partner)
This report has been translated into the English language from the original, which was issued in Italian, solely for the convenience of international readers.
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