BASE PROSPECTUS
EDISON S.p.A. (incorporated as a società per azioni in the Republic of Italy) €3,000,000,000 Euro Medium Term Note Programme
Under the €3,000,000,000 Euro Medium Term Note Programme (the "Programme") described in this Base Prospectus, Edison S.p.A. ("Edison" or the "Issuer"), subject to all applicable legal and regulatory requirements, may from time to time issue notes in bearer form and in any currency agreed between the Issuer and the relevant Dealer(s) (as defined below) (the "Notes"). The maximum aggregate nominal amount of all Notes from time to time outstanding under the Programme will not exceed €3,000,000,000 (or its equivalent in other currencies at the date of issue), save that the maximum aggregate principal amount may be increased from time to time, subject to compliance with the relevant provisions of the Programme and applicable laws and regulations in force from time to time.
This Base Prospectus has been approved by the Luxembourg Commission de Surveillance du Secteur Financier (the "CSSF"), which is the Luxembourg competent authority for the purpose of Directive 2003/71/EC (the "Prospectus Directive"), as a base prospectus issued in compliance with the Prospectus Directive and relevant implementing measures in Luxembourg for the purpose of giving information with regard to the issue of Notes during the period of twelve months after the date hereof. Applications have been made for such Notes to be admitted during the period of twelve months after the date hereof to listing on the official list and to trading on the regulated market (as defined in Directive 2004/39/EC) of the Luxembourg Stock Exchange. The Programme also permits Notes to be issued on the basis that: (i) they will be admitted to listing, trading and/or quotation by such other or further competent authorities, stock exchanges and/or quotation systems as may be agreed with the Issuer; or (ii) they will not be admitted to listing, trading and/or quotation by any competent authority, stock exchange and/or quotation system.
Investing in Notes issued under the Programme involves certain risks. For a discussion of these risks, see "Risk Factors" below.
The Notes may be issued on a continuing basis to one or more of the Dealers specified on page 6 and any additional Dealer appointed under the Programme from time to time, which appointment may be for a specific issue or on an ongoing basis (each, a "Dealer" and, together, the "Dealers"). References in this Base Prospectus to the "relevant Dealer" shall, in the case of an issue of Notes being (or intended to be) purchased by one Dealer, be to such Dealer and, in the case of an issue of Notes being (or intended to be) purchased by more than one Dealer, be to the lead manager of such issue.
Arrangers Banca IMI BNP PARIBAS UniCredit Bank Dealers Banca IMI Banco Bilbao Vizcaya Argentaria, S.A Barclays Capital BNP PARIBAS BofA Merrill Lynch Citi Crédit Agricole CIB Deutsche Bank HSBC J.P. Morgan Mediobanca MPS Capital Services Natixis The Royal Bank of Scotland Santander Global Banking & Markets Société Générale Corporate & Investment Banking UniCredit Bank
1 October 2010
TABLE OF CONTENTS
IMPORTANT NOTICES ...... 1 INFORMATION INCORPORATED BY REFERENCE ...... 3 FINAL TERMS AND DRAWDOWN PROSPECTUSES ...... 5 GENERAL DESCRIPTION OF THE PROGRAMME...... 6 RISK FACTORS ...... 10 FORMS OF THE NOTES ...... 23 TERMS AND CONDITIONS OF THE NOTES ...... 26 FORM OF FINAL TERMS ...... 48 SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM ...... 62 DESCRIPTION OF THE ISSUER...... 65 CAPITALISATION ...... 95 SUMMARY FINANCIAL INFORMATION ...... 96 REGULATORY FRAMEWORK AND MARKET OVERVIEW ...... 99 TAXATION ...... 112 SUBSCRIPTION AND SALE ...... 120 GENERAL INFORMATION ...... 124
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IMPORTANT NOTICES
The Issuer accepts responsibility for the information contained in this Base Prospectus and declares that, having taken all reasonable care to ensure that such is the case, the information contained in this Base Prospectus is to the best of its knowledge, in accordance with the facts and contains no omission likely to affect its import.
Each Tranche (as defined herein) of Notes will be issued on the terms set out herein under "Terms and Conditions of the Notes" (the "Conditions") as amended and/or supplemented by a document specific to such Tranche called final terms (the "Final Terms") or, to the extent that the information relating to that Tranche constitutes a significant new factor in relation to the information contained in this Base Prospectus, in a separate prospectus specific to such Tranche (the "Drawdown Prospectus") as described under "Final Terms and Drawdown Prospectuses" below. In the case of a Tranche of Notes which is the subject of a Drawdown Prospectus, each reference in this Base Prospectus to information being specified or identified in the relevant Final Terms shall be read and construed as reference to such information being specified or identified in the relevant Drawdown Prospectus unless the context requires otherwise. This Base Prospectus must be read and construed together with any amendments or supplements hereto and with any information incorporated by reference herein (see "Information Incorporated by Reference" below) and, in relation to any Tranche of Notes which is the subject of Final Terms, must be read and construed together with the relevant Final Terms.
The Issuer has confirmed to the Dealers that this Base Prospectus contains all information which is (in the context of the Programme and the issue, offering and sale of the Notes) material; that such information is true and accurate in all material respects and is not misleading in any material respect; that any opinions, predictions or intentions expressed herein are honestly held or made and are not misleading in any material respect; that this Base Prospectus does not omit to state any material fact necessary to make such information, opinions, predictions or intentions (in the context of the Programme and the issue, offering and sale of the Notes) not misleading in any material respect; and that all proper enquiries have been made to verify the foregoing.
No person has been authorised to give any information or to make any representation not contained in or not consistent with this Base Prospectus or any other document entered into in relation to the Programme or any information supplied by the Issuer or such other information as is in the public domain and, if given or made, such information or representation should not be relied upon as having been authorised by the Issuer or any Dealer.
Neither the Dealers nor any of their respective affiliates have authorised the whole or any part of this Base Prospectus and none of them makes any representation or warranty or accepts any responsibility as to the accuracy or completeness of the information contained in this Base Prospectus. Neither the delivery of this Base Prospectus or any Final Terms nor the offering, sale or delivery of any Note shall, in any circumstances, create any implication that the information contained in this Base Prospectus is true subsequent to the date hereof or the date upon which this Base Prospectus has been most recently amended or supplemented or that there has been no adverse change, or any event reasonably likely to involve any adverse change, in the prospects or financial or trading position of the Issuer since the date thereof or, if later, the date upon which this Base Prospectus has most recently been amended or supplemented or that any other information supplied in connection with the Programme is correct at any time subsequent to the date on which it is supplied or, if different, the date indicated in the document containing the same.
The distribution of this Base Prospectus and any Final Terms and the offering, sale and delivery of the Notes in certain jurisdictions may be restricted by law. Persons into whose possession this Base Prospectus or any Final Terms comes are required by the Issuer and the Dealers to inform themselves about and to observe any such restrictions. For a description of certain restrictions on offers, sales and deliveries of Notes and on the distribution of this Base Prospectus or any Final Terms and other offering material relating to the Notes, see "Subscription and Sale". In particular, Notes have not been and will not be registered under the United States Securities Act of 1933 (as amended) (the "Securities Act") and are subject to U.S. tax law requirements. Subject to certain exceptions, Notes may not be offered, sold or delivered within the United States or to U.S. persons.
Neither this Base Prospectus nor any Final Terms constitutes an offer or an invitation to subscribe for or purchase any Notes and should not be considered as a recommendation by the Issuer, the Dealers or any of them that any recipient of this Base Prospectus or any Final Terms should subscribe for or purchase any Notes. Each recipient of this Base Prospectus or any Final Terms shall be taken to have made its own investigation and appraisal of the condition (financial or otherwise) of the Issuer and the Group (as defined below) and of the rights attaching to the relevant Notes.
The maximum aggregate principal amount of Notes outstanding at any one time under the Programme will not exceed €3,000,000,000 and, for this purpose, any Notes denominated in another currency shall be translated into Euro at the date of the agreement to issue such Notes (calculated in accordance with the provisions of the Dealer Agreement as defined under "Subscription and Sale"). The maximum aggregate principal amount of Notes which may be outstanding
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at any one time under the Programme may be increased from time to time, subject to compliance with the relevant provisions of the Dealer Agreement and applicable laws and regulations in force from time to time.
In this Base Prospectus, unless otherwise specified: references to a "Member State" are references to a Member State of the European Economic Area; references to "U.S.$", "U.S. dollars" or "dollars" are to United States dollars; references to "€" "EUR" or "euro" are to the single currency introduced at the start of the third stage of European Economic and Monetary Union, as defined in Article 2 of Council Regulation (EC) No. 974/98 of 3 May 1998 on the introduction of the Euro, as amended.
Certain figures included in this Base Prospectus have been subject to rounding adjustments; accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them.
MARKET STATISTICS
Except where sourced from internal management's analysis of the Issuer's consolidated financial statements and those of its competitors, information and statistics presented in this Base Prospectus regarding market trends, market volumes, the market share of the Group and its market share in comparison to competitors are either derived from, or are based on, publicly available data from various independent sources. Although the Issuer believes that the external sources used are reliable, the Issuer has not independently verified the information provided by such sources. Such data have been produced accurately in this Base Prospectus and, as far as the Issuer is aware and is able to ascertain from the information published by those sources, no facts have been omitted which would render such reproduced information inaccurate or misleading.
* * * * *
In connection with the issue of any Tranche of Notes under the Programme, the Dealer or Dealers (if any) named as the Stabilising Manager(s) (or any person acting for the Stabilising Manager(s)) in the applicable Final Terms may over-allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail for a limited period. However, there is no assurance that the Stabilising Manager(s) (or persons acting on behalf of a Stabilising Manager) will undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the relevant Tranche of Notes is made and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue date of the relevant Tranche of Notes and 60 days after the date of the allotment of the relevant Tranche of Notes. Any stabilisation action or over-allotment must be conducted by the relevant Stabilising Manager(s) (or person(s) acting on behalf of any Stabilising Manager(s)) in accordance with all applicable laws and rules.
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INFORMATION INCORPORATED BY REFERENCE
The information set out in the cross-reference lists below is incorporated in, and form part of, this Base Prospectus. Such information is contained in the following documents which have previously been published and have been filed with the CSSF:
(1) the audited consolidated and non-consolidated annual financial statements of the Issuer as at and for the years ended 31 December 2009 and 2008;
(2) the unaudited consolidated half-yearly financial statements of the Issuer as at and for the six months ended 30 June 2010 and 2009; and
(3) the Report on Corporate Governance and on the Company's Ownership Structure 2009 published by the Issuer, in the case of (1) and (2) above, together with the accompanying notes and auditors' reports.
Any information contained in any of the documents specified above which is not listed below is either not relevant to investors or is covered elsewhere in this Base Prospectus.
Any statement contained in this Base Prospectus or in any of the documents incorporated by reference in, and forming part of, this Base Prospectus shall be deemed to be modified or superseded for the purpose of this Base Prospectus to the extent that a statement contained in any document subsequently incorporated by reference, by way of supplement prepared in accordance with Article 16 of the Prospectus Directive, modifies or supersedes such statement.
Copies of the documents specified above as containing information incorporated by reference in this Base Prospectus may be inspected, free of charge, at the specified offices of the Paying Agents and on the website of the Luxembourg Stock Exchange (www.bourse.lu), on the website of the Issuer (www.edison.it) and on the website of Borsa Italiana S.p.A. (www.borsaitaliana.it).
Cross-reference lists
Audited Annual Financial Statements As at 31 December 2009 2008 Non-consolidated Balance sheet ...... Page 2 Page 154 Income statement ...... Page 3 Page 155 Cash flow statement ...... Page 4 Page 156 Statement of changes in shareholders' equity ...... Page 5 Page 157 Accounting policies and explanatory notes...... Pages 7 - 58 Pages 159 - 217 Auditors' report ...... Pages 81 - 83 Pages 241 - 243
As at 31 December 2009 2008 Consolidated Balance sheet ...... Page 2 Page 66 Income statement ...... Page 3 Page 67 Cash flow statement ...... Page 4 Page 68 Statement of changes in shareholders' equity ...... Page 5 Page 69 Accounting policies and explanatory notes...... Pages 7 – 80 Pages 71 – 138 Auditors' report ...... Pages 91 - 93 Pages 149 - 151
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Unaudited Interim Financial Statements As at 30 June 2010 2009 Consolidated Status of the main pending and legal tax disputes at June 30, 2010.. Pages 87 - 96 N.A. Balance sheet ...... Page 126 Page 42 Income statement ...... Page 127 Page 43 Cash flow statement ...... Page 128 Page 44 Statement of changes in shareholders' equity ...... Page 129 Page 45 Accounting policies and explanatory notes...... Pages 130 - 169 Pages 46 – 100 Auditors' report on review of half-yearly financial statements ...... Pages 171 - 172 Pages 154- 155
The Issuer's Report on Corporate Governance and on the Company's Ownership Structure 2009 is incorporated by reference in this Base Prospectus in its entirety.
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FINAL TERMS AND DRAWDOWN PROSPECTUSES
In this section the expression "necessary information" means, in relation to any Tranche of Notes, the information necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profits and losses and prospects of the Issuer and of the rights attaching to the Notes. In relation to the different types of Notes which may be issued under the Programme the Issuer has endeavoured to include in this Base Prospectus all of the necessary information except for information relating to the Notes which is not known at the date of this Base Prospectus and which can only be determined at the time of an individual issue of a Tranche of Notes.
The Issuer may agree with any Dealer to issue Notes in a form not contemplated in the section of the Base Prospectus entitled "Form of Final Terms". Any information relating to the Notes which is not included in this Base Prospectus and which is required in order to complete the necessary information in relation to a Tranche of Notes will be contained either in the relevant Final Terms or in a Drawdown Prospectus. Such information will be contained in the relevant Final Terms unless any of such information constitutes a significant new factor relating to the information contained in this Base Prospectus in which case such information, together with all of the other necessary information in relation to the relevant series of Notes, may be contained in a separate Drawdown Prospectus specific to such Tranche.
For a Tranche of Notes which is the subject of Final Terms, those Final Terms will, for the purposes of that Tranche only, supplement this Base Prospectus and must be read in conjunction with this Base Prospectus. The terms and conditions applicable to any particular Tranche of Notes which is the subject of Final Terms are the Conditions as supplemented, amended and/or replaced to the extent described in the relevant Final Terms.
The terms and conditions applicable to any particular Tranche of Notes which is the subject of a Drawdown Prospectus will be the Conditions as supplemented, amended and/or replaced to the extent described in the relevant Drawdown Prospectus. In the case of a Tranche of Notes which is the subject of a Drawdown Prospectus, each reference in this Base Prospectus to information being specified or identified in the relevant Final Terms shall be read and construed as a reference to such information being specified or identified in the relevant Drawdown Prospectus unless the context requires otherwise.
Each Drawdown Prospectus will be constituted either (1) by a single document containing the necessary information relating to the Issuer and the relevant Notes or (2) by a registration document (the "Registration Document") containing the necessary information relating to the Issuer, a securities note (the "Securities Note") containing the necessary information relating to the relevant Notes and, if necessary, a summary note. In addition, if the Drawdown Prospectus is constituted by a Registration Document and a Securities Note, any significant new factor, material mistake or inaccuracy relating to the information included in the Registration Document which arises or is noted between the date of the Registration Document and the date of the Securities Note which is capable of affecting the assessment of the relevant Notes will be included in the Securities Note.
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GENERAL DESCRIPTION OF THE PROGRAMME
This section constitutes a general description of the Programme, as provided for under Article 22(5)(3) of Regulation (EC) 809/2004. The following overview does not purport to be complete and is qualified by the remainder of the Base Prospectus and, in relation to the terms and conditions of any particular Tranche, by the applicable Final Terms. This section must be read as an introduction to this Base Prospectus and any decision to invest in the Notes should be based on a consideration of the Base Prospectus as a whole, including any information incorporated by reference.
Words and expressions defined in the "Terms and Conditions of the Notes" below or elsewhere in this Base Prospectus have the same meanings in this general description.
Issuer: Edison S.p.A.
Arrangers: Banca IMI S.p.A. BNP Paribas UniCredit Bank AG
Dealers: Banca IMI S.p.A., Banco Bilbao Vizcaya Argentaria, S.A., Banco Santander, S.A., Barclays Bank PLC, BNP Paribas, Citigroup Global Markets Limited, Crédit Agricole Corporate and Investment Bank, Deutsche Bank AG, London Branch, HSBC Bank plc, J.P. Morgan Securities Ltd., Mediobanca - Banca di Credito Finanziario S.p.A., Merrill Lynch International, MPS Capital Services S.p.A., Natixis, The Royal Bank of Scotland plc, Société Générale, UniCredit Bank AG and any other Dealer appointed from time to time by the Issuer either generally in respect of the Programme or in relation to a particular Tranche of Notes.
Fiscal Agent: BNP Paribas Securities Services, Luxembourg Branch.
Listing Agent: BNP Paribas Securities Services, Luxembourg Branch.
Final Terms or Drawdown Prospectus: Notes issued under the Programme may be issued either (1) pursuant to this Base Prospectus and associated Final Terms or (2) pursuant to a Drawdown Prospectus. The terms and conditions applicable to any particular Tranche of Notes will be the Terms and Conditions of the Notes as supplemented, amended and/or replaced to the extent described in the relevant Final Terms or, as the case may be the relevant Drawdown Prospectus.
Listing and Trading: Applications have been made for Notes to be admitted during the period of twelve months after the date hereof to listing on the official list and to trading on the regulated market of the Luxembourg Stock Exchange. The Programme also permits Notes to be issued on the basis that they will not be admitted to listing, trading and/or quotation by any competent authority, stock exchange and/or quotation system or that they will be admitted to listing, trading and/or quotation by such other or further competent authorities, stock exchanges and/or quotation systems as may be agreed with the Issuer.
Clearing Systems: Euroclear and/or Clearstream, Luxembourg and/or, in relation to any Tranche of Notes, any other clearing system as may be specified in the relevant Final Terms.
Programme Amount: Up to €3,000,000,000 (or its equivalent in other currencies) aggregate principal amount of Notes outstanding at any one time, save that the maximum aggregate principal amount may be increased from time to time, subject to compliance with the relevant provisions of the Programme and applicable laws and regulations in force from time to time. In particular, the aggregate outstanding amount of Notes issued is subject to certain limits under Italian law, as described in more detail in "Subscription and Sale".
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Method of Issue: Notes may be issued on a syndicated or non-syndicated basis.
Issue in Series: Notes will be issued in Series. Each Series may comprise one or more Tranches issued on different issue dates. The Notes of each Tranche forming part of the same Series will all be subject to identical terms, save that the Issue Price, the Issue Date, the Interest Commencement Date and the amount of the first payment of interest may be different in respect of different Tranches and each Tranche may comprise Notes of different denominations.
Further Issues: Further Notes may be issued so as to form a single Series with the Notes of any particular Series, all as more fully provided in Condition 18 (Further Issues).
Forms of Notes: Notes may only be issued in bearer form. Each Tranche of Notes will initially be in the form of either a Temporary Global Note or a Permanent Global Note, in each case as specified in the relevant Final Terms. Each Global Note which is not intended to be issued in new global note form (a "Classic Global Note" or "CGN"), as specified in the relevant Final Terms, will be deposited on or around the relevant issue date with a depositary or a common depositary for Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system and each Global Note which is intended to be issued in new global note form (a "New Global Note" or "NGN"), as specified in the relevant Final Terms, will be deposited on or around the relevant issue date with a common safekeeper for Euroclear and/or Clearstream, Luxembourg.
Each Temporary Global Note will be exchangeable for a Permanent Global Note or, if so specified in the relevant Final Terms, for Definitive Notes. If the TEFRA D Rules are specified in the relevant Final Terms as applicable, certification as to non-U.S. beneficial ownership will be a condition precedent to any exchange of an interest in a Temporary Global Note or receipt of any payment of interest in respect of a Temporary Global Note. Each Permanent Global Note will be exchangeable for Definitive Notes in accordance with its terms. Definitive Notes will, if interest-bearing, have Coupons attached and, if appropriate, a Talon for further Coupons.
The Notes will be issued pursuant to Articles 2410 to 2420 of the Italian Civil Code, as amended and supplemented from time to time.
Currencies: Notes may be denominated in euro or in any other currency or currencies, subject to compliance with all applicable legal and/or regulatory and/or central bank requirements. Payments in respect of Notes may, subject to such compliance, be made in and/or linked to, any currency or currencies other than the currency in which such Notes are denominated.
Status of the Notes: Notes will be issued on an unsubordinated basis.
Issue Price: Notes may be issued at any price and either on a fully or partly paid basis, as specified in the relevant Final Terms. The price and amount of Notes to be issued under the Programme will be determined by the Issuer and the relevant Dealer(s) at the time of issue in accordance with prevailing market conditions.
Interest: Notes may be interest-bearing or non-interest bearing as specified in the relevant Final Terms. Interest (if any) may accrue at a fixed rate or a floating rate or other variable rate or be index-linked and the method of calculating interest may vary between the issue date and the maturity date of the relevant Series.
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Fixed Rate Notes: Notes bearing interest at a fixed rate will be payable on such date or dates as may be agreed between the Issuer and the relevant Dealer(s) and on redemption and will be calculated on the basis of such Day Count Fraction as may be agreed between the Issuer and the relevant Dealer(s).
Floating Rate Notes: Where Notes bear interest at a floating rate, such rate will be determined:
(i) on the same basis as the floating rate under a notional interest rate swap transaction governed by an agreement incorporating the 2006 ISDA Definitions, as amended and updated as at the date of issue of the first Tranche of the Notes of the relevant Series (as specified in the relevant Final Terms), as published by the International Swaps and Derivatives Association, Inc.; or
(ii) on the basis of the relevant rate appearing on the screen page of a commercial quotation service,
in each case, as may be agreed between the Issuer and the relevant Dealer(s) and as specified in the relevant Final Terms.
Index-Linked Interest Notes: Payments of interest in respect of Index-Linked Interest Notes will be calculated by reference to such index and/or formula or to changes in the prices of securities or commodities or to such other factors as may be agreed between the Issuer and the relevant Dealer(s) and as specified in the relevant Final Terms.
Zero Coupon Notes: Zero Coupon Notes will be offered and sold at a discount on their aggregate principal amount and will not bear interest, in each case as may be agreed between the Issuer and the relevant Dealer(s) and as specified in the relevant Final Terms.
Dual Currency Notes: Payments of principal and/or interest in respect of Dual Currency Notes will be made in such currencies, and based on such rates of exchange, as may be agreed between the Issuer and the relevant Dealer(s) and as specified in the relevant Final Terms.
Maturities: Notes may have any maturity, subject to compliance with all applicable legal and/or regulatory and/or central bank requirements.
Redemption: Notes may be redeemable at par or at such other Redemption Amount (detailed in a formula, index or otherwise) as may be specified in the relevant Final Terms. Notes may also be redeemable in two or more instalments on such dates and in such manner as may be specified in the relevant Final Terms.
Optional Redemption: Notes may be redeemed in whole or in part before their stated maturity at the option of the Issuer and/or the Noteholders to the extent (if at all) specified in the relevant Final Terms.
Tax Redemption: Early redemption will also be permitted for tax reasons as described in Condition 10(b) (Redemption and Purchase – Redemption for tax reasons).
Denominations: Notes will be issued in such denominations as may be specified in the relevant Final Terms, subject to compliance with all applicable legal and/or regulatory and/or central bank requirements and save that the minimum denomination of each Note will be €50,000 (or, if the Notes are denominated in a currency other than euro, the equivalent amount in such currency).
Negative Pledge: The Notes will have the benefit of a negative pledge as described in
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Condition 5 (Negative Pledge).
Cross Default: The Notes will have the benefit of a cross default as described in Condition 13 (Events of Default).
Taxation: All payments in respect of the Notes will be made free and clear of withholding or deduction for or on account of tax of Italy, unless such withholding or deduction is required by law. In that event, the Issuer will (subject as provided in Condition 12 (Taxation)) pay such additional amounts as will result in the Noteholders receiving such amounts as they would have received in respect of such Notes had no withholding or deduction been required.
However, as more fully set out in Condition 12 (Taxation) the Issuer will not be liable to pay any additional amounts to holders of the Notes under certain circumstances, including any payment, withholding or deduction pursuant to Italian Legislative Decree No. 239 of 1 April 1996, as amended, on account of Italian substitute tax (imposta sostitutiva), as defined therein in relation to interest or premium payable on, or other income deriving from, any Notes. See also "Taxation ".
Governing Law: English law. Provisions concerning meetings of Noteholders and the appointment of a Noteholders' Representative in respect of the Notes are subject to compliance with the laws of Italy.
Enforcement of Notes in Global Form: In the case of Global Notes, individual investors' rights against the Issuer will be governed by a Deed of Covenant dated 1 October 2010, copies of which will be available for inspection at the specified office of the Fiscal Agent.
Selling Restrictions: For a description of certain restrictions on offers, sales and deliveries of Notes and on the distribution of offering material in the United States of America, the European Economic Area (including the United Kingdom and Italy) and Japan, see "Subscription and Sale" below.
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RISK FACTORS
This section set out the factors which the Issuer believes may affect its ability to fulfil its obligations under Notes issued under the Programme, as well as factors which are material for the purpose of assessing the market associated with such Notes. Most of these factors are contingencies which may or may not occur and the Issuer is not in a position to express a view on the likelihood of any such contingency occurring. The Issuer believes that the factors described below represent the principal risks inherent in investing in Notes but the inability of the Issuer to pay interest, principal or another amounts on or in connection with any Notes may occur for other reasons which the Issuer, based on the information currently available to it, may not be able to anticipate or may not consider significant risks.
Prospective investors should also read the detailed information set out elsewhere in this Base Prospectus and reach their own views, based on their own judgment and upon advice from such financial, legal, tax and other advisers as they have deemed necessary prior to making an investment decision.
Words and expressions defined in the "Terms and Conditions of the Notes" below or elsewhere in this Base Prospectus have the same meanings in this section.
Factors that may affect the Issuer's ability to fulfil its obligations under the Notes
Risks related to changes in regulation on electric power
Law Decree No. 185 of 29 November 2008 (the "Anti-Crisis Decree"), converted into law on 28 January 2009, includes a series of provisions designed to reform the electric power market, which could radically change some of the market‘s operating mechanisms. Ministerial decree of 29 April 2009 by the Ministry of Economic Development implemented the provisions of Anti-Crisis Decree, providing, inter alia, for detailed regulation of the Intra-Day Market and of the dispatching services market, which are already effective. In addition, the Anti-Crisis Decree provides for the functional integration of these two markets beginning from 1 January 2011, while the introduction of the so called ―Pay- As-Bid‖ mechanism has been postponed to 1 April 2012, subject to the existence of certain conditions. The scope of this reform and the significance of the implementation regulations, which will require additional regulatory measures the content of which is not yet completely known, would seem to indicate the possibility of a significant discontinuity with respect to the way the market currently functions, with a potential impact on the operating and financial performance of market operators such as Edison. Should this occur, there is a risk that the Issuer may be unable to repay the Notes at maturity.
Risks related to changes in the regulation of carbon dioxide allowances
In relation to the reduction of carbon dioxide emissions, the current European regulation imposes burdens on the electricity sector with respect to the generation or purchase of CO2 allowances and these burdens are likely to become more severe in the future. The future introduction of bid procedures for CO2 allowances for the production of electric power and an increase of the allowance market instability could have a material adverse effect on the results of operations and financial condition of Edison. Should this occur, there is a risk that the Issuer may be unable to repay the Notes at maturity.
Risks related to hydroelectric concessions
On 14 January 2008, the Italian Constitutional Court ruled that the ten-year extension of concessions for the use of water for large-scale hydroelectric power plants, introduced by Law No. 266 of 23 December 2005 (the ―2006 Budget Law‖), is unconstitutional and is, therefore, invalid. As a consequence, paragraphs 6, 7 and 8 of Art. 12 of Legislative Decree No. 79 of 16 March 1999, which previously governed the renewal of concessions should be considered once again in force. As a result, the large water concessions granted to Edison and its subsidiaries expiring before 31 December 2010 are extended to such date while large water concessions that are due to expire after 31 December will maintain their existing expiry date provided in the relevant concession. However, pursuant to paragraph 1-bis of Art.12 of Legislative Decree No. 79 of 16 March 1999 (introduced by Law Decree No. 78/2010 converted into Law No. 122/2010) concession holders will be granted a 5-year extension of their concessions, although such extension is applicable only until different regional regulations are enacted.
Should no further changes in the legislative framework occur, Edison, which has several concessions that are set to expire in the next few years, may have to apply for new concessions by participating to the relevant public tenders and, in case of unsuccessful participation in these tenders, may suffer material adverse effects on its financial situation. Should this occur, there is a risk that the Issuer may be unable to repay the Notes at maturity.
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Risks related to the current disruption in the global credit markets and associated impacts
Since the second half of 2007, disruption in the global credit markets, coupled with the repricing of credit risk, has created increasingly difficult conditions in the financial markets. Financial markets are subject to periods of historic volatility which may impact the Issuer‘s ability to fund its business in a similar manner, and at a similar cost, to the funding raised in the past. Challenging market conditions have resulted in greater volatility and also in reduced liquidity, widening of credit spreads and lack of price transparency in credit markets. Changes in investment markets, including changes in interest rates, exchange rates and returns from equity, property and other investments, may affect the financial performance of the Group. In addition, the financial performance of the Group could be adversely affected by a worsening of general economic conditions in the markets in which it operates.
Any such effect on the Group's financial performance could have a consequent negative impact on the Issuer‘s ability to repay the Notes at maturity.
Risks related to the demand of natural gas and electric power
The trend of electric energy and gas consumption is generally related to gross domestic product. In the context of the recent global economic and financial crisis characterised by a deterioration of the macroeconomic conditions that led to a contraction in consumption and industrial production worldwide, in 2009 the demand of electric power in Italy experienced its first reduction since 1981. However, starting from January 2010, this negative trend reversed, with demand beginning to improve and the trend showing signs of positive growth. The same trend was observed for natural gas demand, which reversed its negative trend in October 2009 (if compared with the same month of the previous year), due in part to colder weather, and maintained this upward trend throughout the first six months of 2010. Notwithstanding this slight improvement in demand, it seems reasonable to expect that, for 2010 as a whole and for the near future, demand for energy will be substantially below the level achieved before the economic crisis. In addition, the decrease in demand for energy put steady pressure on sales margins due also to enhanced competition, particularly in the natural gas area. It is possible that such pressure will continue to be felt unless Edison is successful in re- negotiating its long-term natural gas contracts in line with its new benchmark scenario. In the event that the negative trend in demand for energy and/or in sales margins continues, it could result in lower sales volumes of electric power and natural gas by Edison and in the Group‘s overall sales margins being reduced. Therefore, a material adverse effect on Edison‘s economic and financial situation could occur. In such a case, there is a risk that the Issuer may be unable to repay the Notes at maturity.
Risks related to weather and hydrological conditions
Edison‘s electric power generation involves hydroelectric generation and, accordingly, the Issuer is dependent upon hydrological conditions prevailing from time to time in the geographic regions where the relevant hydroelectric generation facilities are located. If hydrological conditions result in droughts or other conditions that negatively affect Edison‘s hydroelectric generation business, the Issuer‘s results of operations could be materially adversely affected. Should this occur, there is a risk that the Issuer may be unable to repay the Notes at maturity.
At the same time, the electrical business is affected by atmospheric conditions such as the average temperatures that influence consumption. Significant changes in weather conditions from year to year may affect demand for natural gas and electricity, as in colder years the demand is normally higher and may also have a negative impact on electric generation system in terms of performance of thermoelectric power plants and variability of wind farms production. Accordingly, the results of operations of the gas and electricity segment and, to a lesser extent, the comparability of results over different periods, may be affected by such changes in weather conditions.
Furthermore, power plants and natural gas fields are exposed to extreme weather phenomena that can result in material disruption to the Issuer operations and consequent loss or damage of properties and facilities.
Risks related to technological developments
Edison is constantly engaged in a process of on-going research activities aimed at developing new technologies, including for the power plants already in operation, as well as initiatives concerning energy efficiency and renewable sources innovation. In order to manage potential risks related to radical changes of a technological nature in the energy industry, Edison continuously monitors the technological development in the hydrocarbon and electric industry, mainly through its research & development department and the other technology functions and is also engaged in the assessment of innovative technologies in the fields of energy efficiency and generation from renewable sources.
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Risks related to Edison's investments
Edison is planning and is presently making substantial investments to develop its different activities. These investments include, but are not limited to, the replacement of assets, organic growth, growth via establishment of joint ventures and mergers and acquisitions. Should Edison fail to successfully manage such investments or should such investments not be eventually profitable, the Issuer may suffer significant adverse effects on its economic and financial situation. Should this occur, there is a risk that the Issuer may be unable to repay the Notes at maturity.
Risk of operations and/or risks relating to interruptions in service at its facilities or plants
Edison‘s core business includes building and managing technologically complex facilities for the production of electric power and hydrocarbons that are interconnected along the entire length of the value chain. These plants and networks are exposed to risks that can cause significant damages to the assets themselves and, in more serious cases, the production capacity may be compromised. The Group is continuously exposed to the risk of malfunctions and/or interruptions in service resulting from events outside of the Group‘s control. The risk of losses or damages can arise from extreme weather phenomena, natural disasters, fire, terrorist attacks, accidents, labour disputes and mechanical breakdown as well as the unexpected unavailability of one or more pieces of equipment of critical importance for the productions process caused by material damages to the equipment or specific components of it. Any such events could result in economic losses and/or cost increases. Additionally, service interruptions or malfunctions — or casualties or other significant events — could result in the Group being exposed to litigation, which could generate obligations to pay damages. Prevention and control activities designed to contain the frequency of such events or minimise their impact require the adoption of high security standards, as well as frequently scheduled equipment overhauls, contingency planning and maintenance. When appropriate, adequate risk management policies and ad hoc industrial insurance policies help to minimise the potential consequences of such damaging events. In cases where insurance coverage proved insufficient to fully offset the cost of paying such damages, the occurrence of one or more of the events described above, or other similar events, could have a material adverse effect on the business prospects, results of operations and financial condition of Edison and the Group. Should this occur, there is a risk that the Issuer may be unable to repay the Notes at maturity.
Risks related to competition
The energy markets where the Issuer operates are subject to strong competition in Italy and worldwide. In particular, Edison encounters competition:
• in its domestic electricity business, where Edison competes with other producers and traders from Italy or outside of Italy who sell electricity in the Italian market to industrial, commercial and residential clients;
• in its domestic natural gas business, where Edison faces increasingly strong competition from both national and international natural gas suppliers. Increasingly high levels of competition in the Italian natural gas market could possibly entail reduced natural gas selling margins. In addition, Legislative Decree No. 164/2000 grants the Energy Authority certain regulatory powers in matters of natural gas pricing and access to infrastructures. Furthermore, a number of national gas producers from countries with large gas reserves are planning to sell natural gas directly to final clients in Italy, which would threaten the market position of companies like Edison which resell gas purchased from producing countries to final customers. These developments may increase the level of competition in the national market for natural gas and reduce Edison‘s operating profit;
• in the exploration and production business, Edison faces competition from both international companies and state run gas companies for obtaining exploration and development rights, particularly outside of Italy; and
• with state-owned energy companies who are partners of Edison in certain gas and electricity projects in the countries where Edison conducts its upstream operations and who, in some cases, may unilaterally change contractual terms and conditions of the relevant agreements relating to gas and electricity projects in order to obtain a larger profit share.
In addition, the energy markets in which the Group operates are undergoing a process of gradual liberalisation, which is being implemented through different approaches and on different timetables from country to country. As a result of the process of liberalisation, in the future new competitors may enter many markets in which the Group operates. The Group‘s ability to develop its businesses and improve its financial results may be constrained by such new competition. An increase in the competition could have an impact on the prices paid or obtained in the Group‘s electricity production and trading activities.
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Among the various actions taken to minimise the competition risk in the hydrocarbon area, the following are worth mentioning: a strategy of integration along the entire value chain through the development of proprietary reserves and a geographic and logistical diversification of supply source implemented by developing major transportation infrastructures on an international scale.
The Group‘s failure or inability to respond effectively to competition could adversely impact the Group‘s growth prospects, future results of operations and cash flows. Should this occur, there is a risk that the Issuer may be unable to repay the Notes at maturity.
Risks related to information technology
The Group‘s operations are supported by complex information systems, specifically with regard to the technical, commercial and administrative areas. Risk issues also exist with regard to the adequacy of these systems and the integrity and confidentiality of data and information. The continuous development of IT solutions to support business activities, the adoption of strict security standards and of authentication and profiling systems help to mitigate these risks. In addition, to limit the risk of activity interruption caused by a system fault, Edison has adopted a high reliability hardware and software configuration for those applications that support critical activities. Specifically, the services provided by the Group‘s outsourcer include a disaster recovery service that guarantees system recovery within time frames that are consistent with the critical relevance of the affected applications.
Energy markets risk
Edison is exposed to the risk of fluctuations in the prices of all of the energy commodities that it handles, including, specifically, electric power, natural gas, coal, oil, oil products and environmental credits. These fluctuations affect Edison‘s results both directly and indirectly, through indexing mechanisms contained in pricing formulas. Moreover, because some of the abovementioned commodity prices are quoted in U.S. dollars, the Group is also exposed to the resulting exchange rate risk (see "- Exchange Rate Risk" below).
In order to manage its exposure to the energy markets, Edison implements appropriate hedging activities for stabilising cash flows generated by the global portfolio of assets and contracts and for protecting Edison industrial margin from fluctuations attributable to market risk and foreign exchange risk inherent in the commodities in which it trades. Stabilisation of cash flows also serves the purpose of protecting the value of assets and of avoiding the need for write- downs caused by excessive market-price volatility.
Hedging is implemented on the basis of a cash flow hedging strategy and is carried out gradually over the year in response to market trends and changes in projections of assets and volumes of industrial portfolio, in order to reduce the risk profile within acceptable limits. As a policy, Edison seeks to minimise the use of financial hedging and to maximise the natural hedge offered by the vertical and horizontal integration of its different business operations. In this context energy markets exposures are assessed through a netting process that offsets opposite market risks within Edison's global portfolio.
In order to manage residual market risk, Edison uses approved financial derivatives traded on organised markets and over the counter (swaps, forward, contracts for differences and options) with the underlying commodities being crude oil, refined products, electricity and emission credits. Such derivatives are evaluated at fair value on the basis of market prices provided from specialised sources or, in absence of liquid market prices, on the basis of estimates provided by brokers or suitable evaluation techniques. For a detailed disclosure on results of use of financial instruments on commodities, prospective investors should make reference to the explanatory notes to the Group‘s semi-annual consolidated financial statements as at and for the six months ended 30 June 2010, which are incorporated by reference herein.
Risks related to the obtaining and maintenance of the required licences, permits, approvals and consents
In order to carry on and expand its business, Edison needs to maintain or obtain a variety of permits and approvals from regulatory, legal, administrative, tax and other authorities and agencies. The processes for obtaining these permits and approvals are often lengthy, complex, unpredictable and costly. If Edison is unable to maintain or obtain the relevant permits and approvals, its ability to achieve its strategic objectives could be impaired. The regulatory, legal, administrative, tax and other environment in which Edison businesses operate is complex and subject to change, and adverse changes in that framework could impose costs on Edison and/or limit its revenues and profitability.
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Risks related to increase in levels of taxes
Edison operates in different countries around the world and any of these countries could modify their tax laws, regarding both income taxes and other kind of taxes, in ways that would adversely affect Edison‘s results of operations and its financial condition. Should this occur, there is a risk that the Issuer may be unable to repay the Notes at maturity.
Management believes that adverse changes are always possible in the tax regimes of any country in which Edison conducts its gas and electricity operations, regardless of the level of stability of the political and legislative framework in each country. These adverse changes would translate into negative impacts on Edison‘s future results of operations and cash flows. Furthermore, the marginal tax rate in the gas and electricity industry may tend, in the long-term, to change in correlation with the price of crude oil and may prevent Edison to translate higher oil prices into increased net profit.
Risks related to different regulatory regimes in countries in which the Group operates
The Group is subject to the laws of various countries and jurisdictions, including Italy and the European Union, as well as the regulations of particular regulatory agencies, including, in Italy, the Authority for Electrical Energy and Gas (Autorità per l’Energia Elettrica e il Gas). These laws and regulations are subject to changes.
Sector-wide regulation affects many aspects of the Group‘s business and, in many respects, determines the manner in which the Group conducts its business and the fees it charges or obtains for its products and services, including in respect of electricity generation (both traditional and from renewable resources). See the section entitled ―Regulatory framework and market overview‖ below. Future changes in the directives, laws and regulations issued by the European Union, the Italian Republic, the Authority for Electricity and Gas, or governments or authorities in the other countries and/or markets in which the Group operates could materially and adversely affect Edison‘s and the Group‘s business prospects, financial condition and results of operations.
Risks deriving from extensive environmental laws, rules and regulations
Compliance with environmental laws, rules and regulations requires the Group to incur significant costs relating to environmental monitoring, installation of pollution control equipment, emission fees, maintenance and upgrading of facilities, maintenance and/or obtaining permits. In view of the current public focus on environmental matters, more rigorous environmental rules may be introduced in Italy or the European Union or in other countries where the Group operates, which could increase costs or cause the Group to face environmental liabilities. Edison is not able to foresee the nature and the potential effects of future regulations on its results of operations. Any increase in such costs could have an adverse impact on the Group‘s business and results of operations, financial position and cash flows, with a consequent adverse impact on the Issuer‘s ability to repay the Notes in full at their maturity.
Risks deriving from environmental, health and safety accidents and liabilities
Risks of environmental, health and safety accidents and liabilities are inherent in many of Edison‘s operations and products. Notwithstanding management‘s belief that Edison adopts high standards to ensure safety of its operations, it is always possible that incidents like blow-outs, spill-over, contaminations and similar events could occur that would result in damage to the environment, workers and communities.
Management expects that a series of remedial actions will be implemented in future years. The Group has accrued risk provisions to cope with all existing environmental liabilities where either a legal or constructive obligation to perform a clean-up or other remedial actions is in place and the associated costs can be reasonably estimated. The accrued amount represents the management‘s best estimates of future environmental expenses to be incurred. Notwithstanding this, management believes that it is possible that in the future Edison may incur significant environmental expenses and liabilities in addition to the amounts already accrued due to: (i) unknown contamination; (ii) the results of on-going surveys or surveys to be carried out on the environmental status of certain Edison‘s industrial sites as required by the applicable regulations on contaminated sites; and (iii) the possibility that new litigation might arise.
Risks from acquisitions
Edison constantly monitors the gas and electricity market in search of opportunities to acquire individual assets or corporations in order to achieve its growth targets or complement its asset portfolio.
Acquisitions entail an execution risk, including the risk that the acquirer will not be able to integrate the purchased assets so as to achieve expected synergies. In addition, during high oil price periods, acquisitions entail the financial risk of not being able to recover the purchase costs of acquired assets, where a prolonged decline in the market prices of oil
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and natural gas occurs. Edison may also incur unanticipated costs or assume unexpected liabilities and losses in connection with companies or assets it acquires. If the integration and financial risks connected to acquisitions materialise, the Issuer‘s financial performance may be adversely affected.
Risks related to legal proceedings
Edison is party to a number of proceedings arising in the ordinary course of the business. In addition to existing provisions accrued as of the balance sheet date to account for ongoing proceedings, it is possible that in future years Edison may incur significant losses in addition to amounts already accrued in connection with pending legal proceedings due to: (i) uncertainty regarding the final outcome of each proceeding; (ii) the occurrence of new developments that management could not take into consideration when evaluating the likely outcome of each proceeding in order to accrue the risk provisions as of the date of the latest financial statements; (iii) the emergence of new evidence and information; and (iv) underestimation of probable future losses. For further information, see "Description of the Issuer - Litigation".
Exchange rate risk
Exchange rate risk derives from the fact that Edison‘s operations are partially conducted in currencies other than euro or are linked to exchange rates‘ variations through indexation formulas. Revenues and costs denominated in foreign currencies may be significantly affected by exchange rate fluctuations having an impact on commercial margins (economic risk) and commercial and financing payables and receivables denominated in foreign currencies may be significantly affected by conversion rates used for profit and loss computation (transactional risk). Finally, exchange rate fluctuations affect the Group‘s consolidated results and net equity as financial statements of subsidiaries denominated in currencies other than euro are translated from their functional currency into euro (translation risk).
Edison‘s foreign exchange risk management policy is to minimise economic exposures arising from foreign currency movements by harmonising foreign exchange impacts on purchases and sales and by compensating opposite exposures through a netting on portfolio basis. Residual exposure is monitored and hedged according to approved limits and strategies using financial derivatives, such as currency swaps, forwards and options. These derivatives are evaluated at fair value on the basis of market prices provided by specialist sources (for a detailed disclosure on results of use of financial instruments on foreign currencies, see the explanatory notes to the unaudited condensed consolidated semi- annual financial statements of the Issuer as at and for the six months ended 30 June 2010, which are incorporated herein by reference).
Credit risk
Credit risk represents Edison's exposure to potential losses that could be incurred if a commercial or financial counterpart fails to meet its obligations. This risk arises primarily from economic/financial factors (i.e. where the counterpart defaults on its obligations), as well as from factors that are technical/commercial or administrative/legal in nature (disputes over the type/quantity of goods supplied, the interpretation of contractual clauses, supporting invoices, etc.). The Group's exposure to credit risk is due mainly to its growing commercial activity as a seller of electric power and natural gas in the deregulated market. To control this risk, the Group has implemented procedures and programme designed to evaluate customer credit worthiness (using specially designed scoring grids) and subsequently monitor the expected cash flows and any collection actions. The policies and tools used to preventively assess credit worthiness and the monitoring and collection activities employed vary depending on the customer type and the consumption level profile. As required by internal credit policies and depending on the customer's credit worthiness, in some cases the Group may ask customers to provide appropriate guarantees. In choosing its counterparties for transactions to manage temporary excess liquidity or execute financial hedging contracts (derivatives), the Group deals only with entities with an acceptable credit rating. Information on this item is provided in the explanatory notes to the unaudited condensed consolidated semi-annual financial statements of the Issuer as at and for the six months ended 30 June 2010, which are incorporated herein by reference.
Interest rate risk
Changes in interest rates affect the market value of financial assets and liabilities of the Group and the level of finance charges. Edison‘s interest rate risk management policy is to minimise risk with the aim of achieving financial structure objectives defined and approved in the management‘s finance plans. Borrowing requirements of the Group‘s companies are pooled by the Group‘s central finance department in order to manage net positions and the funding of portfolio developments consistently with management‘s plans while maintaining a level of risk exposure within prescribed limits. Edison enters into interest rate derivative transactions, in particular interest rate swaps, to effectively manage the balance between fixed and floating rate debt. Such derivatives are evaluated at fair value on the basis of market prices provided from specialised sources.
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Liquidity risk
Liquidity risk is the risk that suitable sources of funding for the Group may not be available, or the Group is unable to sell its products in the market place and is unable to meet short-term finance requirements and to settle obligations thus causing material financial losses where the Group is required to incur additional expenses to meet its obligations or under the worst of conditions a default. Edison manages liquidity risk by targeting a sound optimal ratio between equity and total debt consistent with management finance plans and business objectives. This includes prescribed limits in terms of maximum indebtedness rate and of minimum debt ratio between medium-long term debt and total debt as well as between fixed rate debt and total medium-long term debt. This enables Edison to maintain an appropriate level of liquidity and funding capacity as to minimise borrowing expenses and to achieve an adequate profile of composition and maturity of indebtedness. The Group has access to a wide range of funding at competitive rates through the capital markets and banks and coordinates relationships with banks centrally.
At present, the Group believes it has access to sufficient funding and has also both committed and uncommitted borrowing facilities to meet currently foreseeable borrowing requirements. Effective management of the liquidity risk has the objective of ensuring both availability of adequate funding to meet short term requirements and due obligations, and a sufficient level of flexibility in order to fund development plans of the Group businesses, maintaining an adequate finance structure in terms of debt composition and maturity. This implies adoption of a strategy intended to pursue an adequate structure of borrowing facilities (particularly availability of committed borrowings facilities) and the maintenance of cash reserves.
Risks related to rating
As at the date of this Base Prospectus the long-term credit rating assigned to Edison is ―Baa2‖ with a ―negative outlook‖ with regard to Moody‘s and ―BBB+‖ with a ―negative outlook‖ with regard to S&P. S&P has also affirmed its ―A-2‖ short-term credit rating to Edison.
Tranches of Notes issued under the Programme may be rated or unrated. Where a tranche of Notes is rated, such rating will not necessarily be the same as the rating(s) assigned to Edison at the date of this Base Prospectus o to other Notes issued under the Programme (see "Risks related to the market generally – Credit ratings may not reflect all risks", below).
The possibility to access capital markets, other financing instruments and related costs depend, inter alia, on the rating assigned to Edison, therefore potential reduction of it might represent a limitation to the possibility of access capital markets and an increase in costs of funding and/or refinancing of actual debt with consequential negative effects on the economic and financial situations of the Issuer and the Group.
Risks related to development projects
Edison is involved in certain development projects for the production of hydrocarbon reserves. Edison‘s future results of operations rely upon its ability to develop and operate major projects as planned. Key factors that may affect the economics of these projects include:
• crude oil prices, the single largest variable that affects the Group‘s results of operations and financial condition, and natural gas prices, as Edison‘s profitability depends heavily on crude oil and natural gas prices;
• high levels of capital expenditure and particular risks, such as, natural hazards, uncertainties on the physical characteristics of natural gas fields, the imposition of specific drilling and other work obligations, environmental protection measures, control over the development and abandonment of fields and installations, and restrictions on production;
• uncertainties inherent in estimating quantities of proved reserves and in projecting future rates of production and timing of development expenditures, as the accuracy of proved reserve estimates depends on a number of factors, assumptions and variables;
• the outcome of negotiations with co-venturers, governments, suppliers, customers or others including, for example, Edison‘s ability to negotiate favourable long-term contracts with customers;
• the development of reliable spot markets that may be necessary to support the development of particular production projects, or commercial arrangements for pipelines and related equipment to transport and market hydrocarbons;
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• the presence of partners and co-ventures, who reduce the ability of the Group to manage risks and costs, and over whose operations, behaviour and performance of its partners Edison could have limited influence and control;
• timely issuance of permits and licenses by government agencies;
• the Group‘s relative size compared to its main competitors which may prevent it from affording opportunities to participate in large-scale projects or affect its ability to reap benefits associated with economies of scale, for example by obtaining more favourable contractual terms by supplier of goods and services;
• the ability to design development projects so as to prevent the occurrence of technical inconvenience;
• delays in manufacturing and delivery of critical equipment, or shortages in the availability of such equipment, causing cost overruns and delays;
• risks associated with the use of new technologies and the inability to develop advanced technologies to maximize the recoverability rate of hydrocarbons or gain access to previously inaccessible reservoirs;
• changes in operating conditions and costs, including the sharp rise in procurement costs and costs for leasing third party equipment or purchase services such as drilling rigs and shipping that Edison has experienced in recent years as a result of industry-wide cost inflation, resulting in cost overruns;
• the actual performance of the reservoir and natural field decline; and
• the ability and time necessary to build suitable transport infrastructures to import production to final markets.
Developing and marketing hydrocarbon reserves typically requires several years following discovery. This is due to the complexities and timescales involved in a development project, which include appraising a discovery in order to evaluate its commerciality, sanctioning a development project and building and commissioning related facilities. As a consequence, rates of return for such long-lead-time projects are exposed to the volatility of gas prices which may be substantially lower with respect to prices assumed when the investment decision was actually made, leading to lower rates of return.
Future gas production is dependent on the Group‘s ability to access new reserves through new discoveries, application of improved techniques, success in development activity, negotiation with countries and other owners of known reserves and acquisitions. An inability to replace reserves could adversely impact future production levels and growth prospects, thus negatively affecting Edison‘s future results of operations and financial condition. Should this occur, there is a risk that the Issuer may be unable to repay the Notes at maturity.
Risks related to negative conditions in countries, outside Italy, where the Group has operations could have an adverse affect on the Group and/or the market value of the Notes
The Group has significant operations in Greece and Egypt. There are a number of risks associated with operations outside of Italy, including differences in economic frameworks, laws, policies and measures; regulatory requirements affecting trade and investment; differences in social, political, labour and economic conditions, including foreign exchange rates; difficulties in staffing and managing foreign operations; potential adverse foreign tax consequences.
Negative conditions in these countries or other countries, both inside and outside the European Union, where the Group is already partly present or where, according to its strategy of business development, the Group might invest in the future, or other markets may adversely affect the Group‘s operating results and financial condition, with a consequent adverse impact on the Issuer‘s ability to repay the Notes in full at their maturity.
The Issuer is dependent on its subsidiaries to cover its operating expenses and dividend payments
As a holding company, among the Issuer‘s principal sources of funds are dividends from subsidiaries and funds that may be raised from time to time through the issuance of debt or equity securities or through bank facilities or other borrowings.
The Issuer expects that dividends received from subsidiaries and other sources of funding available to the Issuer will continue to cover its operating expenses, including (i) interest payments on its outstanding financing arrangements and (ii) dividend payments with respect to its outstanding shares. Generally, however, creditors of a subsidiary, including
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trade creditors, secured creditors and creditors holding indebtedness and guarantees issued by the subsidiary will be entitled to the assets of that subsidiary before any of those assets can be distributed to shareholders upon liquidation or winding up. As a result, in terms of access to the assets of Edison‘s subsidiaries, the Issuer‘s obligations in respect of the Notes will effectively be subordinated to the prior payment of all the debts and other liabilities of the Issuer‘s direct and indirect subsidiaries, including the rights of trade creditors and contingent liabilities, all of which could be substantial. Any reduction or delay of dividends received from its subsidiaries could have an adverse effect on the Issuer's business and results of operations, financial position and cash flows, with a consequent negative impact on the Issuer‘s ability to pay interest on the Notes or to repay the Notes in full at their maturity.
Factors which are material for the purpose of assessing the market risks associated with the Notes
The Notes may not be a suitable investment for all investors
Each potential investor in the Notes must determine the suitability of that investment in the light of its own circumstances. In particular, each potential investor should:
(i) have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained or incorporated by reference in this Base Prospectus or any applicable supplement;
(ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio;
(iii) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including Notes with principal or interest payable in one or more currencies, or where the currency for principal or interest payments is different from the potential investor's currency;
(iv) understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant indices and financial markets;
(v) consider all of the risks of an investment in the Notes, including Notes with principal or interest payable in one or more currencies, or where the currency for principal or interest payments is different from the potential investor's currency; and
(vi) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.
Some Notes are complex financial instruments. Sophisticated institutional investors generally do not purchase complex financial instruments as stand-alone investments. They purchase complex financial instruments as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of risk to their overall portfolios. A potential investor should not invest in Notes which are complex financial instruments unless it has the expertise (either alone or with a financial adviser) to evaluate how the Notes will perform under changing conditions, the resulting effects on the value of the Notes and the impact this investment will have on the potential investor's overall investment portfolio.
Risks related to the structure of a particular issue of Notes
A wide range of Notes may be issued under the Programme. A number of these Notes may have features which contain particular risks for potential investors. Set out below is a description of the most common features (but are not intended to be an exhaustive description):
Notes subject to optional redemption by the Issuer
An optional redemption feature of Notes is likely to limit their market value. During any period when the Issuer may elect to redeem Notes, the market value of those Notes generally will not rise substantially above the price at which they can be redeemed. This also may be true prior to any redemption period. The Issuer may be expected to redeem Notes when its cost of borrowing is lower than the interest rate on the Notes. At those times, an investor generally would not be able to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Notes being
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redeemed and may only be able to do so at a significantly lower rate. Potential investors should consider reinvestment risk in the light of other investments available at that time.
Redemption for tax reasons
Unless in the case of any particular Tranche of Notes the relevant Final Terms specifies otherwise, in the event that the Issuer would be obliged to increase the amounts payable in respect of any Notes due to any withholding or deduction for or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of Italy or any political subdivision thereof or any authority therein or thereof having power to tax, the Issuer may redeem all outstanding Notes in accordance with the Conditions. In such circumstances an investor may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as that of the relevant Notes.
Index-Linked Interest Notes and Dual Currency Notes
The Issuer may issue Notes with principal or interest determined by reference to an index or formula, to changes in the prices of securities or commodities, to movements in currency exchange rates or other factors which determine the amount of principal or interest (each, a "relevant factor"). In addition, the Issuer may issue Notes with principal or interest payable in one or more currencies which may be different from the currency in which the Notes are denominated. Potential investors should be aware that:
(i) the market price of such Notes may be volatile;
(ii) they may receive no interest;
(iii) payment of principal or interest may occur at a different time or in a different currency than expected;
(iv) they may lose all or a substantial portion of their principal;
(v) the relevant factors may be subject to significant fluctuations that may not correlate with changes in interest rates, currencies or other securities or indices;
(vi) if a relevant factor is applied to the Notes in conjunction with a multiplier greater than one or contains any other leverage factor, the effect of changes in the relevant factor on principal or interest payable is likely to be magnified; and
(vii) the timing of changes in a relevant factor may affect the actual yield to investors, even if the average level is consistent with their expectations.
The historical performances of an underlying index should not be viewed as an indication of the future performance of such underlying index during the term of any Index-Linked Interest Notes and Dual Currency Notes. Accordingly, each potential investor should consult its own financial and legal advisers about the risks entailed by an investment in any series of Index-Linked Interest Notes or Dual Currency Notes and the suitability of such Notes in light of its particular circumstances. In addition, in recent years, value and performances of underlying indices have been volatile and prospective investors should be aware that volatility may continue in the future.
Partly-paid Notes
The Issuer may issue Notes where the issue price is payable in more than one instalment. Failure to pay any subsequent instalment could result in an investor losing all of his investment.
Fixed Rate Notes
Investment in Fixed Rate Notes involves the risks that substantial changes in market interest rates adversely affect the value of the Fixed Rate Notes.
Variable rate Notes with a multiplier or other leverage factor
Notes with variable interest rates can be volatile investments. If they are structured to include multipliers or other leverage factors, or caps or floors, or any combination of those features or other similar related features, their market values may be even more volatile than those for securities that do not include those features.
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Inverse Floating Rate Notes
Inverse Floating Rate Notes (also known as Reverse Floating Rate Notes) have an interest rate equal to a fixed rate minus a rate based upon a reference rate such as LIBOR. The market values of those Notes typically are more volatile than market values of other conventional floating rate debt securities based on the same reference rate (and with otherwise comparable terms). Inverse Floating Rate Notes are more volatile because an increase in the reference rate not only decreases the interest rate of the Notes, but may also reflect an increase in prevailing interest rates, which further adversely affects the market value of these Notes.
Fixed/Floating Rate Notes
Fixed/Floating Rate Notes may bear interest at a rate that the Issuer may elect to convert from a fixed rate to a floating rate, or from a floating rate to a fixed rate. The Issuer's ability to convert the interest rate will affect the secondary market and the market value of the Notes since the Issuer may be expected to convert the rate when it is likely to produce a lower overall cost of borrowing. If the Issuer converts from a fixed rate to a floating rate, the spread on the Fixed/Floating Rate Notes may be less favourable than then prevailing spreads on comparable Floating Rate Notes tied to the same reference rate. In addition, the new floating rate at any time may be lower than the rates on other Notes. If the Issuer converts from a floating rate to a fixed rate, the fixed rate may be lower than then prevailing rates on its Notes.
Notes issued at a substantial discount or premium
The market values of securities issued at a substantial discount or premium from their principal amount tend to fluctuate more in relation to general changes in interest rates than do prices for conventional interest-bearing securities. Generally, the longer the remaining term of the securities, the greater the price volatility as compared to conventional interest- bearing securities with comparable maturities.
Risks related to Notes generally
Set out below is a brief description of certain risks relating to the Notes generally:
EU Savings Directive
Under EC Council Directive 2003/48/EC of 3 June 2003 (the "EU Savings Directive") on the taxation of savings income, each Member State is required, from 1 July 2005, to provide to the tax authorities of another Member State details of payments of interest or other similar income (within the meaning of the EU Savings Directive) paid by a person within its jurisdiction to, or collected by such a person for an individual resident or certain limited types of entity established in that other Member State. However, for a transitional period, Austria and Luxembourg are permitted to apply an optional information reporting system, whereby if a beneficial owner (within the meaning of the EU Savings Directive) does not comply with one of two procedures for information reporting, the relevant Member State will levy a withholding tax on payments to such beneficial owner. The withholding tax system applies for a transitional period during which the withholding tax rate will raise, over time, to 35 per cent. (20 per cent. from 1 July 2008 to 30 June 2011 and 35 per cent. as from 1 July 2011). The transitional period is to terminate at the end of the first full fiscal year following agreement by certain non-EU countries to the exchange of information relating to such payments. Belgium, which was formerly entitled to apply the withholding tax, has replaced such system with the regime of exchange of information to the Member State of residence as from 1 January 2010.
Also with effect from 1 July 2005, a number of non-EU countries, including Switzerland and certain dependent or associated territories of certain Member States, have agreed to adopt similar measures (either provision of information or transitional withholding) in relation to payments made by a person within its jurisdiction to, or collected by such a person for an individual resident or certain limited types of entity established in a Member State. In addition, the Member States have entered into provision of information or transitional withholding arrangements with certain of those dependent or associated territories in relation to payments made by a person in a Member State to, or collected by such a person for an individual resident or certain limited types of entity established in one of those territories.
On 13 November 2008, the European Commission published a proposal for amendments to the EU Savings Directive, which included a number of suggested changes which, if implemented, would broaden the scope of the requirements described above. Investors who are in any doubt as to their position should consult their professional advisers.
For further information on the EU Savings Directive, see the section entitled "Taxation".
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Taxation
The tax regime in Italy and in any other relevant jurisdiction (including, without limitation, the jurisdiction in which each Noteholder is resident for tax purposes) may be relevant to the acquiring, holding and disposing of Notes and the receiving of payments of interest, principal and/or other income under the Notes. Prospective investors in the Notes should consult their own tax advisers as to which countries' tax laws could be relevant and the consequences of such actions under the tax laws of those countries.
Change of law
The conditions of the Notes are based on English law in effect as at the date of this Base Prospectus, save that provisions convening meetings of Noteholders and the appointment of a Noteholders' Representative in respect of any Series of Notes are subject to compliance with mandatory provisions of Italian law. No assurance can be given as to the impact of any possible judicial decision or change to English law and/or Italian law (where applicable) or administrative practice after the date of this Base Prospectus.
Because the Global Notes are held by or on behalf of Euroclear and Clearstream, Luxembourg, investors will have to rely on their procedures for transfer, payment and communication with the Issuer
Notes issued under the Programme may be represented by one or more Global Notes. Such Global Notes will be deposited with a common depositary or common safekeeper for Euroclear and Clearstream, Luxembourg. Except in the circumstances described in the relevant Global Note, investors will not be entitled to receive definitive Notes. Euroclear and Clearstream, Luxembourg will maintain records of the beneficial interests in the Global Notes. While the Notes are represented by one or more Global Notes, investors will be able to trade their beneficial interests only through Euroclear and Clearstream, Luxembourg. While the Notes are represented by one or more Global Notes, the Issuer will discharge its payment obligations under the Notes by making payments to the common depositary or common safekeeper for Euroclear and Clearstream, Luxembourg for distribution to their account holders. A holder of a beneficial interest in a Global Note must rely on the procedures of Euroclear and Clearstream, Luxembourg to receive payments under the relevant Notes. The Issuer has no responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in the Global Notes. Holders of beneficial interests in the Global Notes will not have a direct right to vote in respect of the relevant Notes. Instead, such holders will be permitted to act only to the extent that they are enabled by Euroclear and Clearstream, Luxembourg to appoint appropriate proxies.
Delisting of the Notes
Application has been made for Notes issued under the Programme to be listed on the Official List and admitted to trading on the regulated market of the Luxembourg Stock Exchange and Notes issued under the Programme may also be admitted to trading, listing and/or quotation by any other listing authority, stock exchange or quotation system (each, a "listing"), as specified in the relevant Final Terms. Such Notes may subsequently be delisted despite the best efforts of the Issuer to maintain such listing and, although no assurance is made as to the liquidity of the Notes as a result of listing, any delisting of the Notes may have a material effect on a Noteholder's ability to resell the Notes on the secondary market.
Denominations and restrictions on exchange for Definitive Notes
Notes may in certain circumstances be issued in denominations including (i) a minimum denomination of €50,000 (or its equivalent in another currency) and (ii) an amount which is greater than €50,000 (or its equivalent) but which is an integral multiple of a smaller amount (such as €1,000). Where this occurs, Notes may be traded in amounts in excess of €50,000 (or its equivalent) that are not integral multiples of €50,000 (or its equivalent). In such a case, a holder who as a result of trading such amounts, holds a principal amount of less than the minimum denomination of €50,000 will not receive a Definitive Note in respect of such holding (should Definitive Notes be printed) and would need to purchase a principal amount of Notes such that it holds an amount equal to an integral multiple of €50,000.
Risks related to the market generally
Set out below is a brief description of the principal market risk, including liquidity risk and exchange rate risk, that may be relevant in connection with an investment in Notes:
The secondary market generally
Notes may have no established trading market when issued, and one may never develop. If a market does develop, it may not be very liquid. Therefore, investors may not be able to sell their Notes easily or at prices that will provide them
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with a yield comparable to similar investments that have a developed secondary market. This is particularly the case for Notes that are especially sensitive to interest rate, currency or market risks, are designed for specific investment objectives or strategies or have been structured to meet the investment requirements of limited categories of investors. These types of Notes generally would have a more limited secondary market and more price volatility than conventional debt securities. Illiquidity may have a severely adverse effect on the market value of Notes.
Exchange rate risks and exchange controls
The Issuer will pay principal and interest on the Notes in the Specified Currency. This presents certain risks relating to currency conversions if an investor‘s financial activities are denominated principally in a currency or currency unit (the "Investor's Currency") other than the Specified Currency. These include the risk that exchange rates may significantly change (including changes due to devaluation of the Specified Currency or revaluation of the Investor's Currency) and the risk that authorities with jurisdiction over the Investor's Currency may impose or modify exchange controls. An appreciation in the value of the Investor's Currency relative to the Specified Currency would decrease (i) the Investor's Currency-equivalent yield on the Notes, (ii) the Investor's Currency equivalent value of the principal payable on the Notes and (iii) the Investor's Currency equivalent market value of the Notes. Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal.
Credit ratings may not reflect all risks
One or more independent credit rating agencies may assign credit ratings to the Notes. The ratings may not reflect the potential impact of all risks related to structure, market, additional factors discussed above, and other factors that may affect the value of the Notes. A credit rating is not a recommendation to buy, sell or hold securities and may be revised or withdrawn by the rating agency at any time. Notwithstanding the above, any adverse change in an applicable credit rating could adversely affect the trading price for the Notes issued under the Programme.
Legal investment considerations may restrict certain investments
The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (i) Notes are legal investments for it, (ii) Notes can be used as collateral for various types of borrowing and (iii) other restrictions apply to its purchase or pledge of any Notes. Each prospective investor should consult their legal advisors or the appropriate regulators to determine the appropriate treatment of Notes under any applicable risk-based capital or similar rules.
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FORMS OF THE NOTES
Each Tranche of Notes will initially be in the form of either a temporary global note (the "Temporary Global Note"), without interest coupons, or a permanent global note (the "Permanent Global Note"), without interest coupons, in each case as specified in the relevant Final Terms. Each Temporary Global Note or, as the case may be, Permanent Global Note (each a "Global Note") which is not intended to be issued in new global note ("NGN") form, as specified in the relevant Final Terms, will be deposited on or around the issue date of the relevant Tranche of the Notes with a depositary or a common depositary for, Euroclear Bank S.A./N.V. ("Euroclear") and/or Clearstream Banking, société anonyme, Luxembourg ("Clearstream, Luxembourg") and/or any other relevant clearing system. Each Global Note which is intended to be issued in NGN form, as specified in the relevant Final Terms, will be deposited on or around the issue date of the relevant Tranche of the Notes with a Common Safekeeper for Euroclear and/or Clearstream, Luxembourg.
Since 1 January 2007, international debt securities in global bearer form issued through the ICSDs Euroclear Bank (Belgium) and Clearstream, Luxembourg must, in order to be eligible for European Central Bank credit operations, be issued in NGN form and must be deposited with a Common Safekeeper which is an international central securities depositary or, if applicable, a central securities depositary that fulfils the minimum standards established by the European Central Bank.
The relevant Final Terms will also specify whether United States Treasury Regulation §1.163-5(c)(2)(i)(C) (the "TEFRA C Rules") or United States Treasury Regulation §1.163-5(c)(2)(i)(D) (the "TEFRA D Rules") are applicable in relation to the Notes or, if the Notes do not have a maturity of more than 365 days, that neither the TEFRA C Rules nor the TEFRA D Rules are applicable.
Temporary Global Note exchangeable for a Permanent Global Note
If the relevant Final Terms specifies the form of Notes as being "Temporary Global Note exchangeable for a Permanent Global Note", then the Notes will initially be in the form of a Temporary Global Note which will be exchangeable, in whole or in part, for interests in a Permanent Global Note, without interest coupons, not earlier than 40 days after the issue date of the relevant Tranche of the Notes upon certification as to non-U.S. beneficial ownership. No payments will be made under the Temporary Global Note unless exchange for interests in the Permanent Global Note is improperly withheld or refused. In addition, interest payments in respect of the Notes cannot be collected without such certification of non-U.S. beneficial ownership.
Whenever any interest in the Temporary Global Note is to be exchanged for an interest in a Permanent Global Note, the Issuer shall procure (in the case of first exchange) the prompt delivery (free of charge to the bearer) of such Permanent Global Note to the bearer of the Temporary Global Note or (in the case of any subsequent exchange) an increase in the principal amount of the Permanent Global Note in accordance with its terms against:
(i) presentation and (in the case of final exchange) surrender of the Temporary Global Note to or to the order of the Fiscal Agent; and
(ii) receipt by the Fiscal Agent of a certificate or certificates of non-U.S. beneficial ownership, within seven days of the bearer requesting such exchange.
The principal amount of the Permanent Global Note shall be equal to the aggregate of the principal amounts specified in the certificates of non-U.S. beneficial ownership; provided, however, that in no circumstances shall the principal amount of the Permanent Global Note exceed the initial principal amount of the Temporary Global Note.
The Permanent Global Note will be exchangeable in whole, but not in part, for Notes in definitive form ("Definitive Notes"):
(i) on the expiry of such period of notice as may be specified in the relevant Final Terms; or
(ii) at any time, if so specified in the relevant Final Terms; or
(iii) if the relevant Final Terms specifies "in the limited circumstances described in the Permanent Global Note", then if (a) Euroclear or Clearstream, Luxembourg or any other relevant clearing system is closed for business for a continuous period of 14 days (other than by reason of legal holidays) or announces an intention permanently to cease business or (b) any of the circumstances described in Condition 13 (Events of Default) occurs.
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Where the Permanent Global Note may be exchanged for Definitive Notes in the circumstances described in (i) and (ii) above, Notes may only be issued in denominations which are integral multiples of the minimum denomination and may only be traded in such amounts, whether in global or definitive form.
Whenever the Permanent Global Note is to be exchanged for Definitive Notes, the Issuer shall procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly authenticated and with Coupons and Talons attached (if so specified in the relevant Final Terms), in an aggregate principal amount equal to the principal amount of the Permanent Global Note to the bearer of the Permanent Global Note against the surrender of the Permanent Global Note to the order of the Fiscal Agent within 30 days of the bearer requesting such exchange.
Temporary Global Note exchangeable for Definitive Notes
If the relevant Final Terms specifies the form of Notes as being "Temporary Global Note exchangeable for Definitive Notes" and also specifies that the TEFRA C Rules are applicable or that neither the TEFRA C Rules or the TEFRA D Rules are applicable, then the Notes will initially be in the form of a Temporary Global Note which will be exchangeable, in whole but not in part, for Definitive Notes not earlier than 40 days after the issue date of the relevant Tranche of the Notes.
If the relevant Final Terms specifies the form of Notes as being "Temporary Global Note exchangeable for Definitive Notes" and also specifies that the TEFRA D Rules are applicable, then the Notes will initially be in the form of a Temporary Global Note which will be exchangeable, in whole or in part, for Definitive Notes not earlier than 40 days after the issue date of the relevant Tranche of the Notes upon certification as to non-U.S. beneficial ownership. Interest payments in respect of the Notes cannot be collected without such certification of non-U.S. beneficial ownership.
Whenever the Temporary Global Note is to be exchanged for Definitive Notes, the Issuer shall procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly authenticated and with Coupons and Talons attached (if so specified in the relevant Final Terms), in an aggregate principal amount equal to the principal amount of the Temporary Global Note to the bearer of the Temporary Global Note against the surrender of the Temporary Global Note to or to the order of the Fiscal Agent within 30 days of the bearer requesting such exchange.
Where the Temporary Global Note is to be exchanged for Definitive Notes, Notes may only be issued in denominations which are integral multiples of the minimum denomination and may only be traded in such amounts, whether in global or definitive form.
Permanent Global Note exchangeable for Definitive Notes
If the relevant Final Terms specifies the form of Notes as being "Permanent Global Note exchangeable for Definitive Notes", then the Notes will initially be in the form of a Permanent Global Note which will be exchangeable in whole, but not in part, for Definitive Notes:
(i) on the expiry of such period of notice as may be specified in the relevant Final Terms; or
(ii) at any time, if so specified in the relevant Final Terms; or
(iii) if the relevant Final Terms specifies "in the limited circumstances described in the Permanent Global Note", then if (a) Euroclear or Clearstream, Luxembourg or any other relevant clearing system is closed for business for a continuous period of 14 days (other than by reason of legal holidays) or announces an intention permanently to cease business or (b) any of the circumstances described in Condition 13 (Events of Default) occurs.
Where the Permanent Global Note may be exchanged for Definitive Notes in the circumstances described in (i) and (ii) above, Notes may only be issued in denominations which are integral multiples of the minimum denomination and may only be traded in such amounts, whether in global or definitive form.
Whenever the Permanent Global Note is to be exchanged for Definitive Notes, the Issuer shall procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly authenticated and with Coupons and Talons attached (if so specified in the relevant Final Terms), in an aggregate principal amount equal to the principal amount of the Permanent Global Note to the bearer of the Permanent Global Note against the surrender of the Permanent Global Note to the order of the Fiscal Agent within 30 days of the bearer requesting such exchange.
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Terms and Conditions applicable to the Notes
The terms and conditions applicable to any Definitive Note will be endorsed on that Note and will consist of the terms and conditions set out under "Terms and Conditions of the Notes" below and the provisions of the relevant Final Terms which supplement, amend and/or replace those terms and conditions.
The terms and conditions applicable to any Note in global form will differ from those terms and conditions which would apply to the Note were it in definitive form to the extent described under "Summary of Provisions Relating to the Notes while in Global Form" below.
Legend concerning United States persons
In the case of any Tranche of Notes having a maturity of more than 365 days, the Notes in global form, the Notes in definitive form and any Coupons and Talons appertaining thereto will bear a legend to the following effect:
"Any United States person who holds this obligation will be subject to limitations under the United States income tax laws, including the limitations provided in Sections 165(j) and 1287(a) of the Internal Revenue Code."
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TERMS AND CONDITIONS OF THE NOTES
The following is the text of the terms and conditions which, as supplemented, amended and/or replaced by the relevant Final Terms, will be endorsed on each Note in definitive form issued under the Programme. The terms and conditions applicable to any Note in global form will differ from those terms and conditions which would apply to the Note were it in definitive form to the extent described under "Summary of Provisions Relating to the Notes while in Global Form" below.
1. Introduction
(a) Programme: Edison S.p.A. (the "Issuer") has established a Euro Medium Term Note Programme (the "Programme") for the issue of up to €3,000,000,000 in aggregate principal amount of notes (the "Notes"), or such other maximum aggregate principal amount of Notes which may be outstanding under the Programme as may be increased from time to time, subject to compliance with the relevant provisions of the Programme and applicable laws and regulations. The Notes are issued pursuant to Articles 2410 to 2420 of the Italian Civil Code, as amended and supplemented from time to time.
(b) Final Terms: Notes issued under the Programme are issued in series (each a "Series") and each Series may comprise one or more tranches (each a "Tranche") of Notes. Each Tranche is the subject of final terms (the "Final Terms") which supplements these terms and conditions (the "Conditions"). The terms and conditions applicable to any particular Tranche of Notes are these Conditions as supplemented, amended and/or replaced by the relevant Final Terms. In the event of any inconsistency between these Conditions and the relevant Final Terms, the relevant Final Terms shall prevail.
(c) Agency Agreement: The Notes are the subject of an issue and paying agency agreement dated 1 October 2010 (as amended or supplemented from time to time, the "Agency Agreement") between the Issuer and BNP Paribas Securities Services, Luxembourg Branch as fiscal agent (the "Fiscal Agent", which expression includes any successor fiscal agent appointed from time to time in connection with the Notes) and the paying agents named therein (together with the Fiscal Agent, the "Paying Agents", which expression includes any successor or additional paying agents appointed from time to time in connection with the Notes).
(d) The Notes: All subsequent references in these Conditions to "Notes" are to the Notes which are the subject of the relevant Final Terms. Copies of the relevant Final Terms are available for inspection by Noteholders during normal business hours at the Specified Office of the Fiscal Agent.
(e) Summaries: Certain provisions of these Conditions are summaries of the Agency Agreement and are subject to its detailed provisions. The holders of the Notes (the "Noteholders") and the holders of the related interest coupons, if any (the "Couponholders" and the "Coupons", respectively), are bound by, and are deemed to have notice of, all the provisions of the Agency Agreement applicable to them. Copies of the Agency Agreement are available for inspection by Noteholders during normal business hours at the Specified Offices of each of the Paying Agents, the initial Specified Offices of which are set out below.
2. Definition and Interpretation
(a) Definitions:
In these Conditions the following expressions have the following meanings:
"Accrual Yield" has the meaning given in the relevant Final Terms;
"Additional Business Centre(s)" means the city or cities specified as such in the relevant Final Terms;
"Additional Financial Centre(s)" means the city or cities specified as such in the relevant Final Terms;
"Business Day" means:
(i) in relation to any sum payable in euro, a TARGET Settlement Day and a day on which commercial banks and foreign exchange markets settle payments generally in each (if any) Additional Business Centre; and
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(ii) in relation to any sum payable in a currency other than euro, a day on which commercial banks and foreign exchange markets settle payments generally in London, in the Principal Financial Centre of the relevant currency and in each (if any) Additional Business Centre;
"Business Day Convention", in relation to any particular date, has the meaning given in the relevant Final Terms and, if so specified in the relevant Final Terms, may have different meanings in relation to different dates and, in this context, the following expressions shall have the following meanings:
(i) "Following Business Day Convention" means that the relevant date shall be postponed to the first following day that is a Business Day;
(ii) "Modified Following Business Day Convention" or "Modified Business Day Convention" means that the relevant date shall be postponed to the first following day that is a Business Day unless that day falls in the next calendar month in which case that date will be the first preceding day that is a Business Day;
(iii) "Preceding Business Day Convention" means that the relevant date shall be brought forward to the first preceding day that is a Business Day;
(iv) "FRN Convention", "Floating Rate Convention" or "Eurodollar Convention" means that each relevant date shall be the date which numerically corresponds to the preceding such date in the calendar month which is the number of months specified in the relevant Final Terms as the Specified Period after the calendar month in which the preceding such date occurred provided, however, that:
(A) if there is no such numerically corresponding day in the calendar month in which any such date should occur, then such date will be the last day which is a Business Day in that calendar month;
(B) if any such date would otherwise fall on a day which is not a Business Day, then such date will be the first following day which is a Business Day unless that day falls in the next calendar month, in which case it will be the first preceding day which is a Business Day; and
(C) if the preceding such date occurred on the last day in a calendar month which was a Business Day, then all subsequent such dates will be the last day which is a Business Day in the calendar month which is the specified number of months after the calendar month in which the preceding such date occurred; and
(v) "No Adjustment" means that the relevant date shall not be adjusted in accordance with any Business Day Convention;
"Calculation Agent" means the Fiscal Agent or such other Person specified in the relevant Final Terms as the party responsible for calculating the Rate(s) of Interest and Interest Amount(s) and/or such other amount(s) as may be specified in the relevant Final Terms;
"Calculation Amount" has the meaning given in the relevant Final Terms;
"Consolidated Assets Less Intangibles" means at any particular time, the aggregate amount of the total fixed assets and total current assets of the Issuer less any amounts represented by goodwill, trade marks or any other intangible assets of the Issuer, in each case on a consolidated basis and as determined by reference to the latest consolidated financial statements of the Group, whether annual, six-monthly or three-monthly;
"Coupon Sheet" means, in respect of a Note, a coupon sheet relating to the Note;
"Day Count Fraction" means in respect of the calculation of an amount for any period of time (the "Calculation Period"), such day count fraction as may be specified in these Conditions or the relevant Final Terms and:
(i) if "Actual/Actual (ICMA)" is so specified, means:
(A) where the Calculation Period is equal to or shorter than the Regular Period during which it falls, the actual number of days in the Calculation Period divided by the product of (1) the
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actual number of days in such Regular Period and (2) the number of Regular Periods in any year; and
(B) where the Calculation Period is longer than one Regular Period, the sum of:
(1) the actual number of days in such Calculation Period falling in the Regular Period in which it begins divided by the product of (A) the actual number of days in such Regular Period and (B) the number of Regular Periods in any year; and
(2) the actual number of days in such Calculation Period falling in the next Regular Period divided by the product of (A) the actual number of days in such Regular Period and (B) the number of Regular Periods in any year;
(ii) if "Actual/365" or "Actual/Actual (ISDA)" is so specified, means the actual number of days in the Calculation Period divided by 365 (or, if any portion of the Calculation Period falls in a leap year, the sum of (A) the actual number of days in that portion of the Calculation Period falling in a leap year divided by 366 and (B) the actual number of days in that portion of the Calculation Period falling in a non-leap year divided by 365);
(iii) if "Actual/365 (Fixed" is so specified, means the actual number of days in the Calculation Period divided by 365;
(iv) if "Actual/360" is so specified, means the actual number of days in the Calculation Period divided by 360;
(v) if "30/360" is so specified, means:
(A) where the Final Terms specify that the term "ISDA Definitions" (as defined below) means the 2000 ISDA Definitions, the number of days in the Calculation Period divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30-day months (unless (i) the last day of the Calculation Period is the 31st day of a month but the first day of the Calculation Period is a day other than the 30th or 31st day of a month, in which case the month that includes that last day shall not be considered to be shortened to a 30-day month, or (ii) the last day of the Calculation Period is the last day of the month of February, in which case the month of February shall not be considered to be lengthened to a 30-day month)); or
(B) in all other cases, the number of days in the Calculation Period divided by 360, calculated on a formula basis as follows
Day Count Fraction = [360 x (Y2 Y1)] [30 x (M 2 M1)] (D2 D1) 360
where:
"Y1" is the year, expressed as a number, in which the first day of the Calculation Period falls;
"Y2" is the year, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;
"M1" is the calendar month, expressed as a number, in which the first day of the Calculation Period falls;
"M2" is the calendar month, expressed as number, in which the day immediately following the last day included in the Calculation Period falls;
"D1" is the first calendar day, expressed as a number, of the Calculation Period, unless such number would be 31, in which case D1 will be 30; and
"D2" is the calendar day, expressed as a number, immediately following the last day included in the Calculation Period, unless such number would be 31 and D1 is greater than 29, in which case D2 will be 30";
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(vi) if "30E/360" or "Eurobond Basis" is so specified, means:
(A) where the Final Terms specify that the term "ISDA Definitions" (as defined below) means the 2000 ISDA Definitions, the number of days in the Calculation Period divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30-day months, without regard to the date of the first day or last day of the Calculation Period unless, in the case of the final Calculation Period, the date of final maturity is the last day of the month of February, in which case the month of February shall not be considered to be lengthened to a 30-day month); or
(B) in all other cases, the number of days in the Calculation Period divided by 360, calculated on a formula basis as follows:
Day Count Fraction = [360 x (Y2 Y1)] [30 x (M 2 M1)] (D2 D1) 360
where:
"Y1" is the year, expressed as a number, in which the first day of the Calculation Period falls;
"Y2" is the year, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;
"M1" is the calendar month, expressed as a number, in which the first day of the Calculation Period falls;
"M2" is the calendar month, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;
"D1" is the first calendar day, expressed as a number, of the Calculation Period, unless such number would be 31, in which case D1 will be 30; and
"D2" is the calendar day, expressed as a number, immediately following the last day included in the Calculation Period, unless such number would be 31, in which case D2 will be 30; and
(vii) if "30E/360 (ISDA)" is so specified, means the number of days in the Calculation Period divided by 360, calculated on a formula basis as follows:
Day Count Fraction = [360 x (Y2 Y1)] [30 x (M 2 M1)] (D2 D1) 360
where:
"Y1" is the year, expressed as a number, in which the first day of the Calculation Period falls;
"Y2" is the year, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;
"M1" is the calendar month, expressed as a number, in which the first day of the Calculation Period falls;
"M2" is the calendar month, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;
"D1" is the first calendar day, expressed as a number, of the Calculation Period, unless (i) that day is the last day of February or (ii) such number would be 31, in which case D1 will be 30; and
"D2" is the calendar day, expressed as a number, immediately following the last day included in the Calculation Period, unless (i) that day is the last day of February but not the Maturity Date or (ii) such number would be 31, in which case D2 will be 30,
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provided, however, that in each such case the number of days in the Calculation Period is calculated from and including the first day of the Calculation Period to but excluding the last day of the Calculation Period;
"Early Redemption Amount (Tax) " means, in respect of any Note, its principal amount or such other amount as may be specified in, or determined in accordance with, the relevant Final Terms;
"Early Termination Amount" means, in respect of any Note, its principal amount or such other amount as may be specified in, or determined in accordance with, these Conditions or the relevant Final Terms;
"Edipower" means Edipower S.p.A., a company limited by shares incorporated under the laws of Italy and registered at Companies Registry of Milan under registration number 13442230150;
"Extraordinary Resolution" has the meaning given in the Agency Agreement;
"Final Redemption Amount" means, in respect of any Note, its principal amount or such other amount as may be specified in, or determined in accordance with, the relevant Final Terms;
"First Interest Payment Date" means the date specified in the relevant Final Terms;
"Fixed Coupon Amount" has the meaning given in the relevant Final Terms;
"Group" means the Issuer and its Subsidiaries;
"Guarantee" means, in relation to any Indebtedness of any Person, any obligation of another Person to pay such Indebtedness or to assume liability for such Indebtedness or any indemnity given by another Person in respect of such Indebtedness;
"Indebtedness" means any indebtedness of any Person for money borrowed or raised;
"Interest Amount" means, in relation to a Note and an Interest Period, the amount of interest payable in respect of that Note for that Interest Period;
"Interest Commencement Date" means the Issue Date of the Notes or such other date as may be specified as the Interest Commencement Date in the relevant Final Terms;
"Interest Determination Date" has the meaning given in the relevant Final Terms;
"Interest Payment Date" means the date or dates specified as such in, or determined in accordance with the provisions of, the relevant Final Terms and, if a Business Day Convention is specified in the relevant Final Terms:
(i) as the same may be adjusted in accordance with the relevant Business Day Convention; or
(ii) if the Business Day Convention is the FRN Convention, Floating Rate Convention or Eurodollar Convention and an interval of a number of calendar months is specified in the relevant Final Terms as being the Specified Period, each of such dates as may occur in accordance with the FRN Convention, Floating Rate Convention or Eurodollar Convention at such Specified Period of calendar months following the Interest Commencement Date (in the case of the first Interest Payment Date) or the previous Interest Payment Date (in any other case);
"Interest Period" means each period beginning on (and including) the Interest Commencement Date or any Interest Payment Date and ending on (but excluding) the next Interest Payment Date;
"ISDA Definitions" means the 2006 ISDA Definitions (as amended and updated as at the date of issue of the first Tranche of the Notes of the relevant Series (as specified in the relevant Final Terms) as published by the International Swaps and Derivatives Association, Inc.) or, if so specified in the relevant Final Terms, 2000 ISDA Definitions (as amended and updated as at the date of issue of the first Tranche of the Notes of the relevant Series (as specified in the relevant Final Terms) as published by the International Swaps and Derivatives Association, Inc.);
"Issue Date" has the meaning given in the relevant Final Terms;
"Margin" has the meaning given in the relevant Final Terms;
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"Material Subsidiary" means, at any time, any Subsidiary of the Issuer (not being a Project Finance Subsidiary) whose net revenues or total assets on a consolidated basis as shown on its most recent audited consolidated or non-consolidated financial statements represent 10 per cent. or more of the consolidated net revenues or consolidated total assets, respectively, of the Issuer, as shown in the Issuer's most recent audited consolidated financial statements, in each case where the Issuer holds or controls, either directly or indirectly and whether as legal or as beneficial owner, at least 50.1 per cent. of the Voting Capital of such Subsidiary;
"Maturity Date" has the meaning given in the relevant Final Terms;
"Maximum Redemption Amount" has the meaning given in the relevant Final Terms;
"Minimum Redemption Amount" has the meaning given in the relevant Final Terms;
"Noteholders' Representative" means a person appointed, inter alia, to represent the interests of Noteholders (rappresentante comune) in respect of the Notes, as described in Condition 17(b) (Noteholders' Representative);
"Optional Redemption Amount (Call)" means, in respect of any Note, its principal amount or such other amount as may be specified in, or determined in accordance with, the relevant Final Terms;
"Optional Redemption Amount (Put)" means, in respect of any Note, its principal amount or such other amount as may be specified in, or determined in accordance with, the relevant Final Terms;
"Optional Redemption Date (Call)" has the meaning given in the relevant Final Terms;
"Optional Redemption Date (Put)" has the meaning given in the relevant Final Terms;
"Participating Member State" means a Member State of the European Communities which adopts the euro as its lawful currency in accordance with the Treaty;
"Payment Business Day" means:
(i) if the currency of payment is euro, any day which is:
(A) a day on which banks in the relevant place of presentation are open for presentation and payment of bearer debt securities and for dealings in foreign currencies; and
(B) in the case of payment by transfer to an account, a TARGET Settlement Day and a day on which dealings in foreign currencies may be carried on in each (if any) Additional Financial Centre; or
(ii) if the currency of payment is not euro, any day which is:
(A) a day on which banks in the relevant place of presentation are open for presentation and payment of bearer debt securities and for dealings in foreign currencies; and
(B) in the case of payment by transfer to an account, a day on which dealings in foreign currencies may be carried on in the Principal Financial Centre of the currency of payment and in each (if any) Additional Financial Centre;
"Permitted Reorganisation" means:
(i) in the case of a Material Subsidiary and/or Edipower, (A) an amalgamation, reorganisation, merger, demerger, consolidation or restructuring whilst solvent whereby the assets and undertaking of such Material Subsidiary and/or Edipower (as the case may be, are transferred to or otherwise vested in the Issuer or another Subsidiary of the Issuer or (B) a sale, demerger or other disposal of assets to any Person on commercial arm's length terms; or
(ii) in the case of the Issuer, an amalgamation, reorganisation, merger, demerger, consolidation or restructuring whilst solvent whereby the assets and undertaking of the Issuer (or, in the case of a demerger, all or substantially all of such assets and undertaking) are vested in a body corporate in good standing and such body corporate (1) assumes or maintains (as the case may be) liability as
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principal debtor in respect of the Notes; and (2) continues substantially to carry on the business of the Issuer;
"Person" means any individual, company, corporation, firm, partnership, joint venture, association, organisation, state or agency of a state or other entity, whether or not having separate legal personality;
"Principal Financial Centre" means, in relation to any currency, the principal financial centre for that currency provided, however, that:
(i) in relation to euro, it means the principal financial centre of such Member State of the European Communities as is selected (in the case of a payment) by the payee or (in the case of a calculation) by the Calculation Agent; and
(ii) in relation to Australian dollars, it means either Sydney or Melbourne and, in relation to New Zealand dollars, it means either Wellington or Auckland; in each case as is selected (in the case of a payment) by the payee or (in the case of a calculation) by the Calculation Agent;
"Project Finance Indebtedness" means any present or future indebtedness incurred in financing the ownership, acquisition, development, leasing and/or operation of an asset or assets (including, for the avoidance of doubt, concessions), whether or not an asset of a member of the Group:
(i) which is incurred by a Project Finance Subsidiary; or
(ii) in respect of which the Person or Persons to whom any such indebtedness is or may be owed by the relevant borrower (whether or not a member of the Group) has or have no recourse whatsoever to any member of the Group (other than a Project Finance Subsidiary) for the repayment thereof other than:
(A) recourse for amounts limited to the cash flow or net cash flow (other than historic cash flow or historic net cash flow) from such asset or assets; and/or
(B) recourse for the purpose only of enabling amounts to be claimed in respect of such indebtedness in an enforcement of any Security Interest given by such borrower over such asset or assets or the income, cash flow or other proceeds, deriving therefrom (or given by any shareholder or the like, including any member of the Group, in the borrower over its shares or the like in the capital of the borrower) to secure such indebtedness,
provided that (a) the extent of such recourse is limited solely to the amount of any recoveries made on any such enforcement, and (b) such Person or Persons is/are not entitled, by virtue of any right or claim arising out of or in connection with such indebtedness, to commence proceedings for the winding up or dissolution of any member of the Group (other than a Project Finance Subsidiary) or to appoint or procure the appointment of any receiver, trustee or similar person or officer in respect of any member of the Group (other than a Project Finance Subsidiary) or any of its assets (save for the assets secured by such Security Interest);
"Project Finance Subsidiary" means any Subsidiary of the Issuer either:
(i)
(A) which is a single purpose company whose principal assets and business are constituted by the ownership, acquisition, development, leasing and/or operation of an asset or assets (including, for the avoidance of doubt, concessions); and
(B) none of whose Indebtedness in respect of the financing of such ownership, acquisition, development, leasing and/or operation of an asset or assets is subject to any recourse whatsoever to any member of the Group (other than such Subsidiary or another Project Finance Subsidiary) in respect of the repayment thereof, except as expressly referred to in sub-paragraph (ii) of the definition of Project Finance Indebtedness; or
(ii) at least 60 per cent. in principle amount of whose Indebtedness is of the kind described in paragraph (ii) of the above definition of Project Finance Indebtedness;
"Put Option Notice" means a notice which must be delivered to a Paying Agent by any Noteholder wanting to exercise a right to redeem a Note at the option of the Noteholder;
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"Put Option Receipt" means a receipt issued by a Paying Agent to a depositing Noteholder upon deposit of a Note with such Paying Agent by any Noteholder wanting to exercise a right to redeem a Note at the option of the Noteholder;
"Rate of Interest" means the rate or rates (expressed as a percentage per annum) of interest payable in respect of the Notes specified in the relevant Final Terms or calculated or determined in accordance with the provisions of these Conditions and/or the relevant Final Terms;
"Redemption Amount" means, as appropriate, the Final Redemption Amount, the Early Redemption Amount (Tax), the Optional Redemption Amount (Call), the Optional Redemption Amount (Put), the Early Termination Amount or such other amount in the nature of a redemption amount as may be specified in, or determined in accordance with the provisions of, the relevant Final Terms;
"Reference Banks" has the meaning given in the relevant Final Terms or, if none, four major banks selected by the Calculation Agent in the market that is most closely connected with the Reference Rate;
"Reference Price" has the meaning given in the relevant Final Terms;
"Reference Rate" has the meaning given in the relevant Final Terms;
"Regular Period" means:
(i) in the case of Notes where interest is scheduled to be paid only by means of regular payments, each period from and including the Interest Commencement Date to but excluding the first Interest Payment Date and each successive period from and including one Interest Payment Date to but excluding the next Interest Payment Date;
(ii) in the case of Notes where, apart from the first Interest Period, interest is scheduled to be paid only by means of regular payments, each period from and including a Regular Date falling in any year to but excluding the next Regular Date, where "Regular Date" means the day and month (but not the year) on which any Interest Payment Date falls; and
(iii) in the case of Notes where, apart from one Interest Period other than the first Interest Period, interest is scheduled to be paid only by means of regular payments, each period from and including a Regular Date falling in any year to but excluding the next Regular Date, where "Regular Date" means the day and month (but not the year) on which any Interest Payment Date falls other than the Interest Payment Date falling at the end of the irregular Interest Period;
"Relevant Date" means, in relation to any payment, whichever is the later of (a) the date on which the payment in question first becomes due and (b) if the full amount payable has not been received in the Principal Financial Centre of the currency of payment by the Fiscal Agent on or prior to such due date, the date on which (the full amount having been so received) notice to that effect has been given to the Noteholders;
"Relevant Financial Centre" has the meaning given in the relevant Final Terms;
"Relevant Indebtedness" means any Indebtedness which is in the form of or represented by any bond, note, debenture, debenture stock, loan stock, certificate or other instrument which is listed, quoted or traded on any stock exchange or in any securities market (including, without limitation, any over-the-counter market) but which shall exclude Project Finance Indebtedness;
"Relevant Screen Page" means the page, section or other part of a particular information service (including, without limitation, Reuters) specified as the Relevant Screen Page in the relevant Final Terms, or such other page, section or other part as may replace it on that information service or such other information service, in each case, as may be nominated by the Person providing or sponsoring the information appearing there for the purpose of displaying rates or prices comparable to the Reference Rate;
"Relevant Time" has the meaning given in the relevant Final Terms;
"Reserved Matter" means any proposal at a meeting of Noteholders:
(i) to change any date fixed for payment of principal or interest in respect of the Notes, to reduce the amount of principal or interest payable on any date in respect of the Notes or to alter the method of
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calculating the amount of any payment in respect of the Notes on redemption or maturity or the date for any such payment;
(ii) to effect the exchange or substitution of the Notes for, or the conversion of the Notes into, shares, bonds or other obligations or securities of the Issuer or any other person or body corporate formed or to be formed;
(iii) to change the currency in which amounts due in respect of the Notes are payable;
(iv) to amend the definition of Reserved Matter;
(v) to approve any other proposal by the Issuer for any modification, abrogation, variation or compromise of any of the Conditions, other than those of a formal, minor or technical nature; or
(vi) to change the quorum required at any Meeting or the majority required to pass an Extraordinary Resolution;
"Security Interest" means any mortgage, charge, pledge, lien or other security interest including, without limitation, anything analogous to any of the foregoing under the laws of any jurisdiction;
"Specified Currency" has the meaning given in the relevant Final Terms;
"Specified Denomination(s)" has the meaning given in the relevant Final Terms;
"Specified Office" has the meaning given in the Agency Agreement;
"Specified Period" has the meaning given in the relevant Final Terms;
"Subsidiary" means in relation to the Issuer at any particular time, any company:
(i) at whose shareholders' ordinary meetings the Issuer has at its disposal a majority of the votes that may be cast;
(ii) in whom the Issuer has at its disposal a sufficient number of votes to give it a dominant influence over ordinary meetings of the shareholders of that company;
(iii) over whom the (A) Issuer exercises a dominant influence by virtue of certain contractual relationship(s) or (B) has the right, by virtue of a contract or a provision in the by-laws, to exercise a dominant influence, where the applicable law permits such contracts or provisions;
(iv) over whom the Issuer alone, on the basis of agreements with other shareholders, has at its disposal a sufficient number of votes to exercise a dominant influence at ordinary meetings of the shareholders of that company,
in each case, whereby any rights or votes referred to above include the rights and votes (i) of any other Subsidiary and (ii) which are exercisable by any trustee or fiduciary of the first person or any other intermediate person, and in each case as provided under Article 2359 of the Italian Civil Code and Article 93 of Legislative Decree No. 58 of 24 February 1998 and any laws, legislation, rules or regulations amending, supplementing, consolidating or replacing the foregoing;
"Talon" means a talon for further Coupons;
"TARGET2" means the Trans-European Automated Real-Time Gross Settlement Express Transfer payment system which utilises a single shared platform and which was launched on 19 November 2007;
"TARGET Settlement Day" means any day on which TARGET2 is open for the settlement of payments in euro;
"Treaty" means the Treaty establishing the European Communities, as amended;
"Voting Capital" means the total capital as represented by the shares or any other securities or instruments of a company to which is attached the right to vote at any ordinary shareholders meeting of that company, including any securities or instruments in respect of which the right to vote has been temporarily suspended
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pursuant to applicable laws or regulations or pursuant to the order of any competent court or public authority; and
"Zero Coupon Note" means a Note specified as such in the relevant Final Terms.
(b) Interpretation: In these Conditions:
(i) in the event of any Permitted Reorganisation of the Issuer, any reference in these Conditions to the "Issuer" shall be a reference to the body corporate in which the assets and undertaking (or, where the Permitted Reorganisation is a demerger, all or substantially all of the assets and undertaking) of the Issuer are vested following the Permitted Reorganisation, with effect from the period commencing from the date on which such Permitted Reorganisation becomes effective under applicable law;
(ii) any reference to any legislation (whether primary legislation or regulations or other subsidiary legislation made pursuant to primary legislation) shall be construed as a reference to such legislation as the same may have been amended or re-enacted;
(iii) if the Notes are Zero Coupon Notes, references to Coupons and Couponholders are not applicable;
(iv) if Talons are specified in the relevant Final Terms as being attached to the Notes at the time of issue, references to Coupons shall be deemed to include references to Talons;
(v) if Talons are not specified in the relevant Final Terms as being attached to the Notes at the time of issue, references to Talons are not applicable;
(vi) any reference to principal shall be deemed to include the Redemption Amount, any additional amounts in respect of principal which may be payable under Condition 12 (Taxation), any premium payable in respect of a Note and any other amount in the nature of principal payable pursuant to these Conditions;
(vii) any reference to interest shall be deemed to include any additional amounts in respect of interest which may be payable under Condition 12 (Taxation) and any other amount in the nature of interest payable pursuant to these Conditions;
(viii) references to Notes being "outstanding" shall be construed in accordance with the Agency Agreement;
(ix) if an expression is stated in Condition 2(a) (Definitions) to have the meaning given in the relevant Final Terms, but the relevant Final Terms gives no such meaning or specifies that such expression is "not applicable", then such expression is not applicable to the Notes; and
(x) any reference to the Agency Agreement shall be construed as a reference to the Agency Agreement, as the case may be, as amended and/or supplemented up to and including the Issue Date of the Notes.
3. Form, Denomination and Title
The Notes are in bearer form in the Specified Denomination(s) with Coupons and, if specified in the relevant Final Terms, Talons attached at the time of issue. In the case of a Series of Notes with more than one Specified Denomination, Notes of one Specified Denomination will not be exchangeable for Notes of another Specified Denomination. Title to the Notes and the Coupons will pass by delivery. The holder of any Note or Coupon shall (except as otherwise required by law) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any other interest therein, any writing thereon or any notice of any previous loss or theft thereof) and no Person shall be liable for so treating such holder.
4. Status
The Notes constitute direct, general, unconditional, unsubordinated and (subject to Condition 5 (Negative Pledge)) unsecured obligations of the Issuer which will at all times rank pari passu among themselves and at least pari passu with all other present and future unsecured and unsubordinated obligations of the Issuer, save for such obligations as may be preferred by provisions of law that are both mandatory and of general application.
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5. Negative Pledge
So long as any Note remains outstanding, the Issuer shall not, and the Issuer shall procure that none of its Material Subsidiaries will, create or permit to subsist any Security Interest upon the whole or any part of its present or future undertaking, assets or revenues (including uncalled capital) to secure (i) any Relevant Indebtedness, or (ii) any Guarantee of Relevant Indebtedness, in each case without (a) at the same time or prior thereto securing the Notes equally and rateably therewith or (b) providing such other security for the Notes as may be approved by an Extraordinary Resolution of Noteholders provided, however, that:
(i) the foregoing restrictions will not apply to any Security Interest which has been provided by a company which becomes a Subsidiary of the Issuer after the date of the relevant Final Terms and where such Security Interest already exists at the time that company becomes a Subsidiary of the Issuer (provided that such Security Interest was not created in contemplation of that company becoming a Subsidiary of the Issuer and the aggregate principal amount secured at the time of that company becoming a Subsidiary of the Issuer is not subsequently increased); and
(ii) nothing in this Condition 5 shall prevent the Issuer or any of its Material Subsidiaries from creating or permitting to subsist any Security Interest to secure Relevant Indebtedness upon, or with respect to, any of its present or future assets (including receivables) or revenues or any part thereof which is created pursuant to any securitisation, asset backed financing or like arrangement, whereby the aggregate principal amount of such Relevant Indebtedness outstanding from time to time shall not exceed 10 per cent. of the Consolidated Assets Less Intangibles of the Group and whereby all payment obligations in respect of the Relevant Indebtedness or any guarantee of or indemnity in respect of the Relevant Indebtedness, as the case may be, secured by such Security Interest or having the benefit of such secured guarantee or other indemnity, are to be discharged solely from such assets (including receivables) or revenues.
6. Fixed Rate Note Provisions
(a) Application: This Condition 6 (Fixed Rate Note Provisions) is applicable to the Notes only if the Fixed Rate Note Provisions are specified in the relevant Final Terms as being applicable.
(b) Accrual of interest: The Notes bear interest from the Interest Commencement Date at the Rate of Interest payable in arrear on each Interest Payment Date, subject as provided in Condition 11 (Payments). Each Note will cease to bear interest from the due date for final redemption unless, upon due presentation, payment of the Redemption Amount is improperly withheld or refused, in which case it will continue to bear interest in accordance with this Condition 6 (both before and after judgment) until whichever is the earlier of (i) the day on which all sums due in respect of such Note up to that day are received by or on behalf of the relevant Noteholder and (ii) the day which is seven days after the Fiscal Agent has notified the Noteholders that it has received all sums due in respect of the Notes up to such seventh day (except to the extent that there is any subsequent default in payment).
(c) Fixed Coupon Amount: The amount of interest payable in respect of each Note for any Interest Period shall be the relevant Fixed Coupon Amount and, if the Notes are in more than one Specified Denomination, shall be the relevant Fixed Coupon Amount in respect of the relevant Specified Denomination.
(d) Calculation of interest amount: The amount of interest payable in respect of each Note for any period for which a Fixed Coupon Amount is not specified shall be calculated by applying the Rate of Interest to the Calculation Amount, multiplying the product by the relevant Day Count Fraction and rounding the resulting figure to the nearest sub-unit of the Specified Currency (half a sub-unit being rounded upwards) and multiplying such rounded figure by a fraction equal to the Specified Denomination of such Note divided by the Calculation Amount. For this purpose a "sub-unit" means, in the case of any currency other than euro, the lowest amount of such currency that is available as legal tender in the country of such currency and, in the case of euro, means one cent.
7. Floating Rate Note and Index-Linked Interest Note Provisions
(a) Application: This Condition 7 (Floating Rate Note and Index-Linked Interest Note Provisions) is applicable to the Notes only if the Floating Rate Note Provisions or the Index-Linked Interest Note Provisions are specified in the relevant Final Terms as being applicable.
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(b) Accrual of interest: The Notes bear interest from the Interest Commencement Date at the Rate of Interest payable in arrear on each Interest Payment Date, subject as provided in Condition 11 (Payments). Each Note will cease to bear interest from the due date for final redemption unless, upon due presentation, payment of the Redemption Amount is improperly withheld or refused, in which case it will continue to bear interest in accordance with this Condition (both before and after judgment) until whichever is the earlier of (i) the day on which all sums due in respect of such Note up to that day are received by or on behalf of the relevant Noteholder and (ii) the day which is seven days after the Fiscal Agent has notified the Noteholders that it has received all sums due in respect of the Notes up to such seventh day (except to the extent that there is any subsequent default in payment).
(c) Screen Rate Determination: If Screen Rate Determination is specified in the relevant Final Terms as the manner in which the Rate(s) of Interest is/are to be determined, the Rate of Interest applicable to the Notes for each Interest Period will be determined by the Calculation Agent on the following basis:
(i) if the Reference Rate is a composite quotation or customarily supplied by one entity, the Calculation Agent will determine the Reference Rate which appears on the Relevant Screen Page as of the Relevant Time on the relevant Interest Determination Date;
(ii) in any other case, the Calculation Agent will determine the arithmetic mean of the Reference Rates which appear on the Relevant Screen Page as of the Relevant Time on the relevant Interest Determination Date;
(iii) if, in the case of (i) above, such rate does not appear on that page or, in the case of (ii) above, fewer than two such rates appear on that page or if, in either case, the Relevant Screen Page is unavailable, the Calculation Agent will:
(A) request the principal Relevant Financial Centre office of each of the Reference Banks to provide a quotation of the Reference Rate at approximately the Relevant Time on the Interest Determination Date to prime banks in the Relevant Financial Centre interbank market in an amount that is representative for a single transaction in that market at that time; and
(B) determine the arithmetic mean of such quotations; and
(iv) if fewer than two such quotations are provided as requested, the Calculation Agent will determine the arithmetic mean of the rates (being the nearest to the Reference Rate, as determined by the Calculation Agent) quoted by major banks in the Principal Financial Centre of the Specified Currency, selected by the Calculation Agent, at approximately 11.00 a.m. (local time in the Principal Financial Centre of the Specified Currency) on the first day of the relevant Interest Period for loans in the Specified Currency to leading European banks for a period equal to the relevant Interest Period and in an amount that is representative for a single transaction in that market at that time,
and the Rate of Interest for such Interest Period shall be the sum of the Margin and the rate or (as the case may be) the arithmetic mean so determined; provided, however, that if the Calculation Agent is unable to determine a rate or (as the case may be) an arithmetic mean in accordance with the above provisions in relation to any Interest Period, the Rate of Interest applicable to the Notes during such Interest Period will be the sum of the Margin and the rate or (as the case may be) the arithmetic mean last determined in relation to the Notes in respect of a preceding Interest Period.
(d) ISDA Determination: If ISDA Determination is specified in the relevant Final Terms as the manner in which the Rate(s) of Interest is/are to be determined, the Rate of Interest applicable to the Notes for each Interest Period will be the sum of the Margin and the relevant ISDA Rate where "ISDA Rate" in relation to any Interest Period means a rate equal to the Floating Rate (as defined in the ISDA Definitions) that would be determined by the Calculation Agent under an interest rate swap transaction if the Calculation Agent were acting as Calculation Agent for that interest rate swap transaction under the terms of an agreement incorporating the ISDA Definitions and under which:
(i) the Floating Rate Option (as defined in the ISDA Definitions) is as specified in the relevant Final Terms;
(ii) the Designated Maturity (as defined in the ISDA Definitions) is a period specified in the relevant Final Terms; and
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(iii) the relevant Reset Date (as defined in the ISDA Definitions) is either (A) if the relevant Floating Rate Option is based on the London inter-bank offered rate (LIBOR) for a currency, the first day of that Interest Period or (B) in any other case, as specified in the relevant Final Terms.
(e) Index-Linked Interest: If the Index-Linked Interest Note Provisions are specified in the relevant Final Terms as being applicable, the Rate(s) of Interest applicable to the Notes for each Interest Period will be determined in the manner specified in the relevant Final Terms.
(f) Maximum or Minimum Rate of Interest: If any Maximum Rate of Interest, Maximum Amount of Interest, Minimum Rate of Interest or Minimum Amount of Interest is specified in the relevant Final Terms, then the Rate of Interest shall in no event be greater than the maximum or be less than the minimum so specified.
(g) Calculation of Interest Amount: The Calculation Agent will, as soon as practicable after the time at which the Rate of Interest is to be determined in relation to each Interest Period, calculate the Interest Amount payable in respect of each Note for such Interest Period. The Interest Amount will be calculated by applying the Rate of Interest for such Interest Period to the Calculation Amount, multiplying the product by the relevant Day Count Fraction, rounding the resulting figure to the nearest sub-unit of the Specified Currency (half a sub-unit being rounded upwards) and multiplying such rounded figure by a fraction equal to the Specified Denomination of the relevant Note divided by the Calculation Amount. For this purpose a "sub-unit" means, in the case of any currency other than euro, the lowest amount of such currency that is available as legal tender in the country of such currency and, in the case of euro, means one cent.
(h) Calculation of other amounts: If the relevant Final Terms specifies that any other amount is to be calculated by the Calculation Agent, the Calculation Agent will, as soon as practicable after the time or times at which any such amount is to be determined, calculate the relevant amount. The relevant amount will be calculated by the Calculation Agent in the manner specified in the relevant Final Terms.
(i) Publication: The Calculation Agent will cause each Rate of Interest and Interest Amount determined by it, together with the relevant Interest Payment Date, and any other amount(s) required to be determined by it together with any relevant payment date(s) to be notified to the Paying Agents and each competent authority, stock exchange and/or quotation system (if any) by which the Notes have been admitted to listing, trading and/or quotation as soon as practicable after such determination but (in the case of each Rate of Interest, Interest Amount and Interest Payment Date) in any event not later than the first day of the relevant Interest Period. Notice thereof shall also promptly be given to the Noteholders. The Calculation Agent will be entitled to recalculate any Interest Amount (on the basis of the foregoing provisions) without notice in the event of an extension or shortening of the relevant Interest Period. If the Calculation Amount is less than the minimum Specified Denomination the Calculation Agent shall not be obliged to publish each Interest Amount but instead may publish only the Calculation Amount and the Interest Amount.
(j) Notifications etc: All notifications, opinions, determinations, certificates, calculations, quotations and decisions given, expressed, made or obtained for the purposes of this Condition by the Calculation Agent will (in the absence of manifest error) be binding on the Issuer, the Paying Agents, the Noteholders and the Couponholders and (subject as aforesaid) no liability to any such Person will attach to the Calculation Agent in connection with the exercise or non-exercise by it of its powers, duties and discretions for such purposes.
8. Zero Coupon Note Provisions
(a) Application: This Condition 8 (Zero Coupon Note Provisions) is applicable to the Notes only if the Zero Coupon Note Provisions are specified in the relevant Final Terms as being applicable.
(b) Late payment on Zero Coupon Notes: If the Redemption Amount payable in respect of any Zero Coupon Note is improperly withheld or refused, the Redemption Amount shall thereafter be an amount equal to the sum of:
(i) the Reference Price; and
(ii) the product of the Accrual Yield (compounded annually) being applied to the Reference Price on the basis of the relevant Day Count Fraction from (and including) the Issue Date to (but excluding) whichever is the earlier of (i) the day on which all sums due in respect of such Note up to that day are received by or on behalf of the relevant Noteholder and (ii) the day which is seven days after the Fiscal Agent has notified the Noteholders that it has received all sums due in respect of the Notes up to such seventh day (except to the extent that there is any subsequent default in payment).
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9. Dual Currency Note Provisions
(a) Application: This Condition 9 (Dual Currency Note Provisions) is applicable to the Notes only if the Dual Currency Note Provisions are specified in the relevant Final Terms as being applicable.
(b) Rate of Interest: If the rate or amount of interest falls to be determined by reference to an exchange rate, the rate or amount of interest payable shall be determined in the manner specified in the relevant Final Terms.
10. Redemption and Purchase
(a) Scheduled redemption: Unless previously redeemed, or purchased and cancelled, the Notes will be redeemed at their Final Redemption Amount on the Maturity Date, subject as provided in Condition 11 (Payments).
(b) Redemption for tax reasons: The Notes may be redeemed at the option of the Issuer in whole, but not in part:
(i) at any time (if neither the Floating Rate Note Provisions or the Index-Linked Interest Note Provisions are specified in the relevant Final Terms as being applicable); or
(ii) on any Interest Payment Date (if the Floating Rate Note Provisions or the Index-Linked Interest Note Provisions are specified in the relevant Final Terms as being applicable),
on giving not less than 30 nor more than 60 days' notice to the Noteholders (which notice shall be irrevocable), at their Early Redemption Amount (Tax), together with interest accrued (if any) to the date fixed for redemption, if (A) the Issuer has or will become obliged to pay additional amounts as provided or referred to in Condition 12 (Taxation) as a result of any change in, or amendment to, the laws or regulations of the Republic of Italy ("Italy") or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws or regulations (including a holding by a court of competent jurisdiction), which change or amendment becomes effective on or after the date of issue of the first Tranche of the Notes; and (B) such obligation cannot be avoided by the Issuer taking reasonable measures available to it provided, however, that no such notice of redemption shall be given earlier than:
(i) where the Notes may be redeemed at any time, 90 days prior to the earliest date on which the Issuer would be obliged to pay such additional amounts if a payment in respect of the Notes were then due; or
(ii) where the Notes may be redeemed only on an Interest Payment Date, 60 days prior to the Interest Payment Date occurring immediately before the earliest date on which the Issuer would be obliged to pay such additional amounts if a payment in respect of the Notes were then due.
Prior to the publication of any notice of redemption pursuant to this paragraph, the Issuer shall deliver or procure that there is delivered to the Fiscal Agent (1) a certificate signed by two duly authorised officers of the Issuer stating that the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer so to redeem have occurred and (2) an opinion of independent legal advisers of recognised standing to the effect that the Issuer has or will become obliged to pay such additional amounts as a result of such change or amendment. Upon the expiry of any such notice as is referred to in this Condition 10(b), the Issuer shall be bound to redeem the Notes in accordance with this Condition 10(b).
(c) Redemption at the option of the Issuer: If the Call Option is specified in the relevant Final Terms as being applicable, the Notes may be redeemed at the option of the Issuer in whole or, if so specified in the relevant Final Terms, in part on any Optional Redemption Date (Call) at the relevant Optional Redemption Amount (Call) on the Issuer's giving not less than 30 nor more than 60 days' notice to the Noteholders (which notice shall be irrevocable and shall oblige the Issuer to redeem the Notes or, as the case may be, the Notes specified in such notice on the relevant Optional Redemption Date (Call) at the Optional Redemption Amount (Call) plus accrued interest (if any) to such date).
(d) Partial redemption: If the Notes are to be redeemed in part only on any date in accordance with Condition 10(c) (Redemption at the option of the Issuer), the Notes to be redeemed shall be selected by the drawing of lots in such place as the Fiscal Agent approves and in such manner as the Fiscal Agent considers appropriate, subject to compliance with applicable law and the rules of each competent authority, stock exchange and/or quotation system (if any) by which the Notes have then been admitted to listing, trading and/or quotation, and the notice to Noteholders referred to in Condition 10(c) (Redemption at the option of the Issuer) shall specify the serial
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numbers of the Notes so to be redeemed. If any Maximum Redemption Amount or Minimum Redemption Amount is specified in the relevant Final Terms, then the Optional Redemption Amount (Call) shall in no event be greater than the maximum or be less than the minimum so specified.
(e) Redemption at the option of Noteholders: If the Put Option is specified in the relevant Final Terms as being applicable, the Issuer shall, at the option of the Noteholder redeem such Note on the Optional Redemption Date (Put) specified in the relevant Put Option Notice at the relevant Optional Redemption Amount (Put) together with interest (if any) accrued to such date. In order to exercise the option contained in this Condition 10(e), the Noteholder must, not less than 30 nor more than 60 days before the relevant Optional Redemption Date (Put), deposit with any Paying Agent such Note together with all unmatured Coupons relating thereto and a duly completed Put Option Notice in the form obtainable from any Paying Agent. The Paying Agent with which a Note is so deposited shall deliver a duly completed Put Option Receipt to the depositing Noteholder. No Note, once deposited with a duly completed Put Option Notice in accordance with this Condition 10(e), may be withdrawn; provided, however, that if, prior to the relevant Optional Redemption Date (Put), any such Note becomes immediately due and payable or, upon due presentation of any such Note on the relevant Optional Redemption Date (Put), payment of the redemption moneys is improperly withheld or refused, the relevant Paying Agent shall mail notification thereof to the depositing Noteholder at such address as may have been given by such Noteholder in the relevant Put Option Notice and shall hold such Note at its Specified Office for collection by the depositing Noteholder against surrender of the relevant Put Option Receipt. For so long as any outstanding Note is held by a Paying Agent in accordance with this Condition 10(e), the depositor of such Note and not such Paying Agent shall be deemed to be the holder of such Note for all purposes.
(f) No other redemption: The Issuer shall not be entitled to redeem the Notes otherwise than as provided in Conditions 10(a) (Scheduled redemption) to (e) (Redemption at the option of Noteholders).
(g) Early redemption of Zero Coupon Notes: Unless otherwise specified in the relevant Final Terms, the Redemption Amount payable on redemption of a Zero Coupon Note at any time before the Maturity Date shall be an amount equal to the sum of:
(i) the Reference Price; and
(ii) the product of the Accrual Yield (compounded annually) being applied to the Reference Price from (and including) the Issue Date to (but excluding) the date fixed for redemption or (as the case may be) the date upon which the Note becomes due and payable.
Where such calculation is to be made for a period which is not a whole number of years, the calculation in respect of the period of less than a full year shall be made on the basis of such Day Count Fraction as may be specified in the Final Terms for the purposes of this Condition 10(g) or, if none is so specified, a Day Count Fraction of 30E/360.
(h) Purchase: The Issuer or any of its Subsidiaries may at any time purchase Notes in the open market or otherwise (subject to any applicable law or regulations and the rules of any stock exchange) and at any price, provided that all unmatured Coupons are purchased therewith. Such Notes may be held, reissued, resold or, at the option of the Issuer, surrended to the Fiscal Agent for cancellation.
(i) Cancellation: All Notes so redeemed or purchased by the Issuer or any of its Subsidiaries and subsequently surrendered for cancellation and any unmatured Coupons attached to or surrendered with them shall be cancelled and may not be reissued or resold.
11. Payments
(a) Principal: Payments of principal shall be made only against presentation and (provided that payment is made in full) surrender of Notes at the Specified Office of any Paying Agent outside the United States by cheque drawn in the currency in which the payment is due on, or by transfer to an account denominated in that currency (or, if that currency is euro, any other account to which euro may be credited or transferred) and maintained by the payee with, a bank in the Principal Financial Centre of that currency (in the case of a sterling cheque, a town clearing branch of a bank in the City of London).
(b) Interest: Payments of interest shall, subject to Condition 11(h) (Payments other than in respect of matured Coupons), be made only against presentation and (provided that payment is made in full) surrender of the appropriate Coupons at the Specified Office of any Paying Agent outside the United States in the manner described in Conditions 11(a) (Principal).
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(c) Payments in New York City: Payments of principal or interest may be made at the Specified Office of a Paying Agent in New York City if (i) the Issuer has appointed Paying Agents outside the United States with the reasonable expectation that such Paying Agents will be able to make payment of the full amount of the interest on the Notes in the currency in which the payment is due when due, (ii) payment of the full amount of such interest at the offices of all such Paying Agents is illegal or effectively precluded by exchange controls or other similar restrictions and (iii) payment is permitted by applicable United States law.
(d) Payments subject to fiscal laws: All payments in respect of the Notes are subject in all cases to any applicable fiscal or other laws and regulations, but without prejudice to the provisions of Condition 12 (Taxation). No commissions or expenses shall be charged to the Noteholders or Couponholders in respect of such payments.
(e) Deductions for unmatured Coupons: If the relevant Final Terms specifies that the Fixed Rate Note Provisions are applicable and a Note is presented without all unmatured Coupons relating thereto:
(i) if the aggregate amount of the missing Coupons is less than or equal to the amount of principal due for payment, a sum equal to the aggregate amount of the missing Coupons will be deducted from the amount of principal due for payment; provided, however, that if the gross amount available for payment is less than the amount of principal due for payment, the sum deducted will be that proportion of the aggregate amount of such missing Coupons which the gross amount actually available for payment bears to the amount of principal due for payment;
(ii) if the aggregate amount of the missing Coupons is greater than the amount of principal due for payment:
(A) so many of such missing Coupons shall become void (in inverse order of maturity) as will result in the aggregate amount of the remainder of such missing Coupons (the "Relevant Coupons") being equal to the amount of principal due for payment; provided, however, that where this sub-paragraph would otherwise require a fraction of a missing Coupon to become void, such missing Coupon shall become void in its entirety; and
(B) a sum equal to the aggregate amount of the Relevant Coupons (or, if less, the amount of principal due for payment) will be deducted from the amount of principal due for payment; provided, however, that, if the gross amount available for payment is less than the amount of principal due for payment, the sum deducted will be that proportion of the aggregate amount of the Relevant Coupons (or, as the case may be, the amount of principal due for payment) which the gross amount actually available for payment bears to the amount of principal due for payment.
Each sum of principal so deducted shall be paid in the manner provided in Condition 11(a) (Principal) against presentation and (provided that payment is made in full) surrender of the relevant missing Coupons.
(f) Unmatured Coupons void: If the relevant Final Terms specifies that this Condition 11(f) is applicable or that the Floating Rate Note Provisions or the Index-Linked Interest Note Provisions are applicable, on the due date for final redemption of any Note or early redemption in whole of such Note pursuant to Condition 10(b) (Redemption for tax reasons), Condition 10(c) (Redemption at the option of the Issuer), Condition 10(e) (Redemption at the option of Noteholders) or Condition 13 (Events of Default), all unmatured Coupons relating thereto (whether or not still attached) shall become void and no payment will be made in respect thereof.
(g) Payments on business days: If the due date for payment of any amount in respect of any Note or Coupon is not a Payment Business Day in the place of presentation, the holder shall not be entitled to payment in such place of the amount due until the next succeeding Payment Business Day in such place and shall not be entitled to any further interest or other payment in respect of any such delay.
(h) Payments other than in respect of matured Coupons: Payments of interest other than in respect of matured Coupons shall be made only against presentation of the relevant Notes at the Specified Office of any Paying Agent outside the United States (or in New York City if permitted by Condition 11(c) (Payments in New York City)).
(i) Partial payments: If a Paying Agent makes a partial payment in respect of any Note or Coupon presented to it for payment, such Paying Agent will endorse thereon a statement indicating the amount and date of such payment.
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(j) Exchange of Talons: On or after the maturity date of the final Coupon which is (or was at the time of issue) part of a Coupon Sheet relating to the Notes, the Talon forming part of such Coupon Sheet may be exchanged at the Specified Office of the Fiscal Agent for a further Coupon Sheet (including, if appropriate, a further Talon but excluding any Coupons in respect of which claims have already become void pursuant to Condition 14 (Prescription)). Upon the due date for redemption of any Note, any unexchanged Talon relating to such Note shall become void and no Coupon will be delivered in respect of such Talon.
12. Taxation
(a) Gross up: All payments of principal and interest in respect of the Notes and the Coupons by or on behalf of the Issuer shall be made free and clear of, and without withholding or deduction for, any taxes, duties, assessments or governmental charges of whatsoever nature imposed, levied, collected, withheld or assessed by Italy or any political subdivision or any authority thereof or therein having power to tax, unless such withholding or deduction is required by law. In that event, the Issuer shall pay such additional amounts as will result in the receipt by the Noteholders and the Couponholders after such withholding or deduction of such amounts as would have been received by them if no such withholding or deduction had been required, except that no such additional amounts shall be payable:
(i) in respect of any Note or Coupon presented for payment:
(A) by or on behalf of a holder which is liable to such taxes, duties, assessments or governmental charges in respect of such Note or Coupon by reason of its having some connection with the jurisdiction by which such taxes, duties, assessments or charges have been imposed, levied, collected, withheld or assessed other than the mere holding of such Note or Coupon; or
(B) where such withholding or deduction is required to be made pursuant to European Council Directive 2003/48/EC of 3 June 2003, as amended form time to time, or any law or agreement implementing or complying with, or introduced in order to conform to, such Directive; or
(C) by or on behalf of a holder who would have been able to avoid such withholding or deduction by presenting the relevant Note or Coupon to another Paying Agent in a Member State of the EU; or
(D) by or on behalf of a Noteholder who is entitled to avoid such withholding or deduction by making a declaration of non-residence or other similar claim for exemption; or
(E) more than 30 days after the Relevant Date except to the extent that the relevant holder of such Note or Coupon would have been entitled to such additional amounts if it had presented such Note or Coupon for payment on the last day of such period of 30 days; or
(ii) in relation to any payment or deduction on any interest, principal or other proceeds of any Notes or any Coupon relating thereto, on account of imposta sostitutiva (at the date of the issue of the Notes at 12.5 per cent. or such higher rate as may replace it) pursuant to Italian Legislative Decree No. 239 of 1 April 1996, as amended or supplemented from time to time ("Decree 239") and any law or regulation which has or may be enacted pursuant thereto, including in all circumstances in which the procedures required under Decree 239 and the relevant implementing rules in order to benefit from an exemption from imposta sostitutiva have not been promptly complied with; or
(iii) in respect of any Notes having a Maturity Date which falls less than 18 months after the Issue Date, where such withholding or deduction is required pursuant to Italian Presidential Decree No. 600 of 29 September 1973, as amended or supplemented from time to time; or
(iv) in respect of any Notes classified as atypical securities (titoli atipici), where such withholding or deduction is required under Italian Law Decree No. 512 of 30 September 1983, converted into Law No. 649 of 25 November 1983, as amended or supplemented from time to time.
(b) Taxing jurisdiction: If the Issuer becomes subject at any time to any taxing jurisdiction other than Italy, references in these Conditions to Italy shall be construed as references to Italy and/or such other jurisdiction.
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13. Events of Default
If any of the following events occurs and is continuing:
(a) Non-payment: the Issuer fails to pay any amount of principal in respect of the Notes within seven days of the due date for payment thereof or any amount of interest in respect of the Notes within 14 days of the due date for payment thereof; or
(b) Breach of other obligations: the Issuer defaults in the performance or observance of any of its other obligations under or in respect of the Notes and such default remains unremedied for 30 days after written notice thereof, addressed to the Issuer by any Noteholder, has been delivered to the Issuer or to the Specified Office of the Fiscal Agent; or
(c) Cross-default/cross-acceleration of Issuer or Material Subsidiary:
(i) any Indebtedness of the Issuer is not paid when the same becomes due or (as the case may be) after the elapsing of any applicable grace period;
(ii) any Indebtedness of the Issuer becomes due and payable in accordance with the terms of such Indebtedness prior to its stated maturity by reason of an event of default, howsoever described;
(iii) any Material Subsidiary becomes bound to pay any of its Indebtedness or any amount payable by it under any Guarantee either (A) at its stated maturity date or (as the case may be) after the elapsing of any originally applicable grace period and such Indebtedness remains unpaid, or (B) by reason of an event of default (howsoever described) by any such Material Subsidiary, prior to its stated maturity date and after the elapsing of any originally applicable grace period, in either case following which a written or other demand (if applicable) is made for payment; or
(iv) the Issuer fails to pay when due any amount payable by it under any Guarantee or (as the case may be) within any applicable grace period;
provided, however, that the amount of Indebtedness referred to in sub-paragraph (i) and/or sub- paragraph (ii) and/or sub-paragraph (iii) above and/or the amount payable under any Guarantee referred to in sub-paragraphs (iii) and/or (iv) above, individually or in the aggregate, exceeds €50,000,000 (or its equivalent in any other currency or currencies) and in each of the above cases unless the Issuer or the relevant Material Subsidiary is taking action in good faith to contest payment by all appropriate means, including (where applicable) an application to a competent court for a declaration that the relevant Indebtedness is not due and payable; or
(d) Unsatisfied judgment: one or more judgment(s) or order(s) from which no further appeal or judicial review is permissible under applicable law for the payment of an aggregate amount in excess of €25,000,000 (or its equivalent in any other currency or currencies) is rendered against the Issuer or any Material Subsidiary and continue(s) unsatisfied and unstayed for a period of 60 days after the date(s) upon which payment under such order or judgment (as the case may be) becomes due under the laws of the relevant jurisdiction; or
(e) Security enforced: a secured party takes possession, or a receiver, manager or other similar officer is appointed, of all or substantially all of the undertaking, assets and revenues of the Issuer or any Material Subsidiary; or
(f) Insolvency etc: (i) the Issuer, Edipower or any Material Subsidiary is declared insolvent or becomes unable to pay its debts as they fall due, (ii) an administrator or liquidator of the Issuer, Edipower or any Material Subsidiary or the whole or any part of the undertaking, assets and revenues of the Issuer, Edipower or any Material Subsidiary is appointed under any applicable law (or application for any such appointment is made unless such application is contested or stayed in good faith or dismissed within 60 days) or (iii) the Issuer, Edipower or any Material Subsidiary takes any action for a general readjustment or deferment of any of its obligations (other than any agreement evidenced in writing amending the terms of any obligation entered into in the ordinary course of its business by the Issuer, Edipower or a Material Subsidiary (as the case may be), in each case whilst solvent and in circumstances other than inability to pay debts in which no event of default (howsoever described)
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has occurred) or makes a general assignment or an arrangement or composition with or for the benefit of its creditors or declares a moratorium in respect of any of its Indebtedness or any Guarantee given by it under any applicable law; or
(g) Cessation of business: the Issuer, Edipower or any Material Subsidiary ceases or threatens to cease to carry on all or any substantial part of its business (otherwise than for the purposes of or pursuant to a Permitted Reorganisation); or
(h) Winding up etc: an order of a court of competent jurisdiction is made or an effective resolution is passed for the winding up, liquidation or dissolution of the Issuer, Edipower or any Material Subsidiary (otherwise than for the purposes of or pursuant to a Permitted Reorganisation); or
(i) Analogous event: any event occurs which under the laws of Italy has an analogous effect to any of the events referred to in paragraphs (e) to (h) above; or
(j) Unlawfulness: it is or will become unlawful for the Issuer to perform or comply with any of its obligations under or in respect of the Notes unless the matter giving rise to such unlawfulness is promptly remedied by the Issuer; or
(k) Government intervention: (A) all or any substantial part of the undertaking, assets and revenues of the Issuer or any Material Subsidiary is condemned, seized or otherwise appropriated by any Person acting under the authority of any national, regional or local government, or (B) the Issuer or any Material Subsidiary is prevented by any such Person from exercising normal control over all or any substantial part of its undertaking, assets and revenues,
then any Note may, by written notice addressed by the Noteholder to the Issuer and delivered to the Issuer or to the Specified Office of the Fiscal Agent, be declared immediately due and payable, whereupon it shall become immediately due and payable at its Early Termination Amount together with accrued interest (if any) without further action or formality, provided, however, that references in this Condition 13 to Edipower shall cease to apply during any period in which:
(i) the Issuer does not hold (either directly or through one or more of its Subsidiaries) more than 20 per cent. of the Voting Capital of Edipower; or
(ii) Edipower's total assets, by reference to its most recent audited annual financial statements, represent an amount less than 20 per cent. of the consolidated total assets of the Issuer, by reference to the most recent audited consolidated annual financial statements of the Issuer,
provided further that nothing in the foregoing proviso shall affect this Condition 13 to the extent that Edipower is, or merges with or into, a Material Subsidiary.
14. Prescription
Claims for principal shall become void unless the relevant Notes are presented for payment within ten years of the appropriate Relevant Date. Claims for interest shall become void unless the relevant Coupons are presented for payment within five years of the appropriate Relevant Date.
15. Replacement of Notes and Coupons
If any Note or Coupon is lost, stolen, mutilated, defaced or destroyed, it may be replaced at the Specified Office of the Fiscal Agent (and, if the Notes are then admitted to listing, trading and/or quotation by any competent authority, stock exchange and/or quotation system which requires the appointment of a Paying Agent in any particular place, the Paying Agent having its Specified Office in the place required by such competent authority, stock exchange and/or quotation system), subject to all applicable laws and competent authority, stock exchange and/or quotation system requirements, upon payment by the claimant of the expenses incurred in connection with such replacement and on such terms as to evidence, security, indemnity and otherwise as the Issuer may reasonably require. Mutilated or defaced Notes or Coupons must be surrendered before replacements will be issued.
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16. Agents
In acting under the Agency Agreement and in connection with the Notes and the Coupons, the Paying Agents act solely as agents of the Issuer and do not assume any obligations towards or relationship of agency or trust for or with any of the Noteholders or Couponholders.
The initial Paying Agents and their initial Specified Offices are listed below. The initial Calculation Agent (if any) is specified in the relevant Final Terms. The Issuer reserves the right at any time to vary or terminate the appointment of any Paying Agent and to appoint a successor fiscal agent or Calculation Agent and additional or successor paying agents; provided, however, that:
(a) the Issuer shall at all times maintain a Fiscal Agent; and
(b) the Issuer shall at all times ensure that it maintains a Paying Agent in an EU member state that is not obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/EC or any law or agreement implementing or introduced to comply with such Directive; and
(c) if a Calculation Agent is specified in the relevant Final Terms, the Issuer shall at all times maintain a Calculation Agent; and
(d) if and for so long as the Notes are admitted to listing, trading and/or quotation by any competent authority, stock exchange and/or quotation system which requires the appointment of a Paying Agent in any particular place, the Issuer shall maintain a Paying Agent having its Specified Office in the place required by such competent authority, stock exchange and/or quotation system.
Notice of any change in any of the Paying Agents or in their Specified Offices shall promptly be given to the Noteholders.
17. Meetings of Noteholders; Noteholders' Representative; Modification
(a) Meetings of Noteholders: The Agency Agreement contains provisions for convening meetings of Noteholders to consider matters relating to the Notes, including the modification of any provision of these Conditions. Any such modification may be made if sanctioned by an Extraordinary Resolution. Any Extraordinary Resolution duly passed at any such meeting shall be binding on all the Noteholders and Couponholders, whether present or not.
In relation to the convening of meetings, quorums and the majorities required to pass an Extraordinary Resolution, the following provisions shall apply in respect of the Notes but are subject to compliance with mandatory laws, legislation, rules and regulations of Italy in force from time to time and shall be deemed to be amended, replaced and supplemented to the extent that such laws, legislation, rules and regulations are amended at any time while the Notes remain outstanding:
(i) a meeting of Noteholders may be convened by the Issuer and/or the Noteholders' Representative and shall be convened by either of them upon the request in writing of Noteholders holding not less than one-twentieth of the aggregate principal amount of the outstanding Notes;
(ii) a meeting of Noteholders will be validly held if (A) there are one or more persons present, being or representing Noteholders holding at least half of the aggregate principal amount of the outstanding Notes, or (B) in the case of a second meeting following adjournment of the first meeting for want of quorum, there are one or more persons present being or representing Noteholders holding more than one third of the aggregate principal amount of the outstanding Notes, or (C) in the case of a third meeting or any subsequent meeting following a further adjournment for want of quorum, there are one or more persons present being or representing Noteholders holding at least one fifth of the aggregate principal amount of the outstanding Notes provided, however, that (1) the quorum shall always be at least one half of the aggregate principal amount of the outstanding Notes for the purposes of considering a Reserved Matter and (2) the Issuer's by-laws may in each case (to the extent permitted under applicable Italian law) provide for a higher quorum; and
(iii) the majority required to pass an Extraordinary Resolution at any meeting (including any meeting convened following adjournment of the previous meeting for want of quorum) will be (A) for voting on any matter other than a Reserved Matter, one or more persons holding or representing at least two thirds of the aggregate principal amount of the Notes represented at the meeting or (B) for voting on a
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Reserved Matter, one or more persons holding or representing at least one half of the aggregate principal amount of the outstanding Notes, provided, however, that the Issuer's by-laws may in each case (to the extent permitted under applicable Italian law) provide for a larger majority.
(b) Noteholders' Representative: Pursuant to Articles 2415 and 2417 of the Italian Civil Code, a Noteholders' Representative will be appointed, inter alia, to represent the interests of Noteholders in respect of each Series of Notes, such appointment to be made by an Extraordinary Resolution or by an order of a competent court at the request of one or more Noteholders or the Issuer. Each such Noteholders' Representative shall have the powers and duties set out in Article 2418 of the Italian Civil Code.
(c) Modification: The Notes and these Conditions may be amended by the Fiscal Agent without the consent of the Noteholders or the Couponholders to correct a manifest error. In addition, the parties to the Agency Agreement may agree to modify any provision thereof, but the Issuer shall not agree, without the consent of the Noteholders, to any such modification unless it is of a formal, minor or technical nature, it is made to correct a manifest error, it is made to comply with mandatory laws, legislation, rules and regulations of Italy applicable to the convening of meetings, quorums and the majorities required to pass an Extraordinary Resolution and entered into force at any time while the Notes remain outstanding (including, without limitation, Directive 2007/36/EC of the European Parliament and of the Council of 11 July 2007 on the exercise of certain rights of shareholders in listed companies as implemented in Italy) or it is, in the opinion of such parties, not materially prejudicial to the interests of the Noteholders.
18. Further Issues
The Issuer may from time to time, without the consent of the Noteholders or the Couponholders, create and issue further notes having the same terms and conditions as the Notes in all respects (or in all respects except for the Issue Date, the Interest Commencement Date and the first payment of interest) so as to form a single series with the Notes.
19. Notices
Notices to the Noteholders pursuant to these Conditions shall be valid if published in a leading Italian language daily newspaper published in Italy (which is expected to be Il Sole-24 Ore) and in a leading English language daily newspaper published in London (which is expected to be the Financial Times) and, if the Notes are admitted to trading on the Luxembourg Stock Exchange and it is a requirement of applicable law or regulations, a leading newspaper having general circulation in Luxembourg (which is expected to be the Luxemburger Wort) or published on the website of the Luxembourg Stock Exchange (www.bourse.lu) or, in each of the above cases, if such publication is not practicable, in a leading English language daily newspaper having general circulation in Europe. Any such notice shall be deemed to have been given on the date of first publication (or if required to be published in more than one newspaper, on the first date on which publication shall have been made in all the required newspapers). Couponholders shall be deemed for all purposes to have notice of the contents of any notice given to the Noteholders.
20. Currency Indemnity
If any sum due from the Issuer in respect of the Notes or the Coupons or any order or judgment given or made in relation thereto has to be converted from the currency (the "first currency") in which the same is payable under these Conditions or such order or judgment into another currency (the "second currency") for the purpose of (a) making or filing a claim or proof against the Issuer, (b) obtaining an order or judgment in any court or other tribunal or (c) enforcing any order or judgment given or made in relation to the Notes, the Issuer shall indemnify each Noteholder, on the written demand of such Noteholder addressed to the Issuer and delivered to the Issuer or to the Specified Office of the Fiscal Agent, against any loss suffered as a result of any discrepancy between (i) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency and (ii) the rate or rates of exchange at which such Noteholder may in the ordinary course of business purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof.
This indemnity constitutes a separate and independent obligation of the Issuer and shall give rise to a separate and independent cause of action.
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21. Rounding
For the purposes of any calculations referred to in these Conditions (unless otherwise specified in these Conditions or the relevant Final Terms), (a) all percentages resulting from such calculations will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point (with 0.000005 per cent. being rounded up to 0.00001 per cent.), (b) all United States dollar amounts used in or resulting from such calculations will be rounded to the nearest cent (with one half cent being rounded up), (c) all Japanese Yen amounts used in or resulting from such calculations will be rounded downwards to the next lower whole Japanese Yen amount, and (d) all amounts denominated in any other currency used in or resulting from such calculations will be rounded to the nearest two decimal places in such currency, with 0.005 being rounded upwards.
22. Governing Law and Jurisdiction
(a) Governing law: The Notes and any non-contractual obligations arising out of or in connection with the Notes are governed by English law. Condition 17 (Meetings of Noteholders; Noteholders' Representative; Modification) and the provisions of the Agency Agreement concerning the meetings of Noteholders and the appointment of a Noteholders' Representative in respect of the Notes are subject to compliance with the laws of Italy.
(b) English courts: The courts of England have exclusive jurisdiction to settle any dispute (a "Dispute") arising out of or in connection with the Notes (including a dispute relating to the existence, validity or termination of the Notes or any non-contractual obligation arising out of or in connection with the Notes) or the consequences of their nullity.
(c) Appropriate forum: The Issuer agrees that the courts of England are the most appropriate and convenient courts to settle any Dispute and, accordingly, that it will not argue to the contrary.
(d) Rights of the Noteholders to take proceedings outside England: Condition 22(b) (English courts) is for the benefit of the Noteholders only. As a result, nothing in this Condition 22 (Governing Law and Jurisdiction) prevents any Noteholder from taking proceedings relating to a Dispute ("Proceedings") in any other courts with jurisdiction. To the extent allowed by law, Noteholders may take concurrent Proceedings in any number of jurisdictions.
(e) Process agent: The Issuer agrees that the documents which start any Proceedings and any other documents required to be served in relation to those Proceedings may be served on it by being delivered to Euroil Exploration Limited at Erico House, 93-99 Upper Richmond Road, Putney, London SW15 2TG or, if different, its registered office for the time being or at any address of the Issuer in Great Britain at which process may be served on it in accordance with Parts 34 and 37 of the Companies Act 2006. If such Person is not or ceases to be effectively appointed to accept service of process on the Issuer's behalf, the Issuer shall, on the written demand of any Noteholder addressed to the Issuer and delivered to the Issuer or to the Specified Office of the Fiscal Agent, appoint a further Person in England to accept service of process on its behalf and, failing such appointment within 15 days, any Noteholder shall be entitled to appoint such a Person by written notice addressed to the Issuer and delivered to the Issuer or to the Specified Office of the Fiscal Agent. Nothing in this paragraph shall affect the right of any Noteholder to serve process in any other manner permitted by law. This Condition applies to Proceedings in England and Proceedings elsewhere.
23. Third Party Rights
No person shall have any right to enforce any term of the Notes under the Contracts (Rights of Third Parties) Act 1999.
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FORM OF FINAL TERMS
The Final Terms in respect of each Tranche of Notes will be substantially in the following form, duly supplemented (if necessary), amended (if necessary) and completed to reflect the particular terms of the relevant Notes and their issue. Text in this section appearing in italics does not form part of the form of the Final Terms but denotes directions for completing the Final Terms.
Final Terms dated [date]
EDISON S.p.A.
Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes]
under the €3,000,000,000 Euro Medium Term Note Programme
PART A – CONTRACTUAL TERMS
This document constitutes the Final Terms relating to the issue of Notes described herein. [Terms used herein shall be deemed to be defined as such for the purposes of the Conditions (the "Conditions") set forth in the Base Prospectus dated 1 October 2010 [and the supplement[s] to the Base Prospectus dated [date] and [date]] which [together] constitute[s] a base prospectus (the "Base Prospectus") for the purposes of the Prospectus Directive (Directive 2003/71/EC) (the "Prospectus Directive"). This document constitutes the Final Terms of the Notes described herein for the purposes of Article 5.4 of the Prospectus Directive. These Final Terms contain the final terms of the Notes and must be read in conjunction with such Base Prospectus [as so supplemented].
Full information on the Issuer and the offer of the Notes described herein is only available on the basis of the combination of these Final Terms and the Base Prospectus [as so supplemented]. The Base Prospectus [and the supplement[s] to the Base Prospectus] [is] [are] available for viewing [at [website]] [and] during normal business hours at [address] [and copies may be obtained from [address]]. ] The Base Prospectus and, in the case of Notes admitted to trading on the regulated market of the Luxembourg Stock Exchange, the applicable Final Terms will also be published on the website of the Luxembourg Stock Exchange (www.bourse.lu).
The following alternative language applies if the first tranche of an issue which is being increased was issued under a base prospectus with an earlier date and either (1) the Notes which are the subject of the Final Terms are not being (a) offered to the public in a member state (other than pursuant to one or more of the exemptions set out in Article 3.2 of the Prospectus Directive) or (b) admitted to trading on a regulated market in a member state or (2) the Conditions (as defined in the next paragraph) do not contain, by comparison with the Base Prospectus, any "significant new factor" within the meaning of Article 16.1 of the Prospectus Directive. If neither (1) nor (2) applies the Issuer will need to consider effecting the issue by means of a supplement to the Base Prospectus or a stand alone prospectus rather than by Final Terms.
[Terms used herein shall be deemed to be defined as such for the purposes of the Conditions (the "Conditions") set forth in the base prospectus dated [original date] [and the supplement[s] to the base prospectus dated [date] and [date]]. These Final Terms contain the final terms of the Notes and must be read in conjunction with the Base Prospectus dated 1 October 2010 [and the supplement[s] to the Base Prospectus dated [date] and [date]] which [together] constitute[s] a base prospectus (the "Base Prospectus") for the purposes of the Prospectus Directive (Directive 2003/71/EC) (the "Prospectus Directive"), save in respect of the Conditions which are extracted from the base prospectus dated [original date] and are attached hereto. This document constitutes the Final Terms relating to the issue of Notes described herein for the purposes of Article 5.4 of the Prospectus Directive.
Full information on the Issuer and the offer of the Notes is only available on the basis of the combination of these Final Terms and the base prospectuses dated [original date] and 1 October 2010 [and the supplement[s] to the base prospectuses dated [date] and [date]]. The base prospectuses [and the supplement[s] to the base prospectuses] are available for viewing [at [website]] [and] during normal business hours at [address] [and copies may be obtained from [address]].] The Base Prospectus and, in the case of Notes admitted to trading on the regulated market of the Luxembourg Stock Exchange, the applicable Final Terms will also be published on the website of the Luxembourg Stock Exchange (www.bourse.lu).
[The purchase of Notes involves substantial risks and is suitable only for investors who have the knowledge and experience in financial and business matters necessary to enable them to evaluate the risks and merits of an investment
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in the Notes. Before making an investment decision, prospective purchasers of Notes should ensure that they understand the nature of the Notes and the extent of their exposure to risks and that they consider carefully, in the light of their own financial circumstances, financial condition and investment objectives, all the information set forth in the Base Prospectus (including "Risk Factors") [and the Supplement to the Base Prospectus dated [ ] referred to above and these Final Terms.
No person have been authorised to give any information or make any representation not contained in or inconsistent with these Final Terms, or any other information supplied in connection with the Notes and, if given or made, such information or representation must not be relied upon as having been authorised by the Issuer or the Dealer.
By investing in the Notes, each investor represents that:
(a) Non-reliance. It is acting for its own account, and it has made its own independent decisions to invest in the Notes and as to whether the investment in the Notes is appropriate or proper for it based upon its own judgment and upon advice from such advisers as it has deemed necessary. It is not relying on any communication (written or oral) of the Issuer or the Dealers as investment advice or as a recommendation to invest in the Notes, it being understood that information and explanations related to the Conditions of the Notes shall not be considered to be investment advice or a recommendation to invest in the Notes. No communication (written or oral) received from the Issuer or the Dealers shall be deemed to be an assurance or guarantee as to the expected results of the investment in the Notes.
(b) Assessment and Understanding. It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice) and understands and accepts the terms and conditions and the risks of the investment in the Notes. It is also capable of assuming and assumes the risks of the investment in the Notes.
(c) Status of the Parties. Neither the Issuer nor the Dealers is acting as a fiduciary for or adviser to it in respect of the investment in the Notes.]
[Include whichever of the following apply or specify as "Not Applicable" (N/A). Note that the numbering should remain as set out below, even if "Not Applicable" is indicated for individual paragraphs or sub-paragraphs. Italics denote guidance for completing the Final Terms.]
[When completing any final terms, or adding any other final terms or information, consideration should be given as to whether such terms or information constitute "significant new factors" and consequently trigger the need for a supplement to the Base Prospectus under Article 16 of the Prospectus Directive.]
1. Issuer: Edison S.p.A.
2. (i) Series Number: [ ]
(ii) Tranche Number: [ ]
(If fungible with an existing Series, details of that Series, including the date on which the Notes become fungible.)
3. Specified Currency or Currencies: [ ]
4. Aggregate Nominal Amount: [ ]
(i) Series: [ ]
(ii) Tranche: [ ]
5. (i) Issue Price: [ ] per cent. of the Aggregate Nominal Amount [plus accrued interest from [insert date] (in the case of fungible issues only, if applicable)]
6. (i) Specified Denominations: [ ] [and integral multiples of [ ] in excess thereof up to and including [ ]. No notes in definitive form will be issued with a denomination above [ ].]
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[No Notes shall be issued that have a minimum denomination of less than €50,000 or its equivalent in another currency.]
(ii) Calculation Amount: [ ]
7. [(i)] Issue Date: [ ]
[(ii)] Interest Commencement Date (if [Specify/Issue Date/Not Applicable] different from the Issue Date):
8. Maturity Date: [Specify date or (for Floating Rate Notes) Interest Payment Date falling in the relevant month and year]
[If the Maturity Date is less than one year from the Issue Date and either (a) the issue proceeds are received by the Issuer in the United Kingdom, or (b) the activity of issuing the Notes is carried on from an establishment maintained by the Issuer in the United Kingdom, (i) the Notes must have a minimum redemption value of £100,000 (or its equivalent in other currencies) and be sold only to "professional investors" or (ii) another applicable exemption from section 19 of the FSMA must be available.]
9. Interest Basis: [ ] per cent. Fixed Rate] [[Specify reference rate] +/- [ ] per cent. Floating Rate] [Zero Coupon] [Index-Linked Interest] [Other (specify)] (further particulars specified below)
10. Redemption/Payment Basis: [Redemption at par] [Index-Linked Redemption] [Dual Currency] [Partly Paid] [Instalment] [Other (specify)]
11. Change of Interest or Redemption/Payment [Specify details of any provision for convertibility of Basis: Notes into another interest or redemption/payment basis]
12. Put/Call Options: [Investor Put]/ [Issuer Call/Not Applicable] [(further details specified below)]
13. [(i)] Status of the Notes: Senior
[(ii)] [Date of [Board] approval for issuance [ ] [and [ ], respectively of Notes obtained:
14. Method of distribution: [Syndicated/Non-syndicated]
PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE
15. Fixed Rate Note Provisions [Applicable/Not Applicable]
(If not applicable, delete the remaining sub-paragraphs of this paragraph)
(i) Rate(s) of Interest: [ ] per cent. per annum [payable [annually/semi- annually/quarterly/monthly/other (specify)] in arrear]
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(ii) Interest Payment Date(s): [ ] in each year [adjusted in accordance with the [(specify Business Day Convention and any Additional Business Centre(s) to the definition of "Business Day")]
(iii) Fixed Coupon Amount[(s)]: [ ] per Calculation Amount
(iv) Broken Amount(s): [[ ] per Calculation Amount payable on the Interest Payment Date falling [in/on] [ ]/Not Applicable]
(v) Day Count Fraction: [30/360/Actual/Actual (ICMA/ISDA)/Other (specify)]
(vi) Business Day Convention [Not Applicable/give details]
(vii) Other terms relating to the method of [Not Applicable/give details] calculating interest for Fixed Rate Notes:
16. Floating Rate Note Provisions [Applicable/Not Applicable]
(If not applicable, delete the remaining sub-paragraphs of this paragraph).
(i) Specified Periods: [Applicable/Not Applicable] [Insert details, if applicable]
(Specified Period and Interest Payment Dates are alternatives. A Specified Period, rather than Interest Payment Dates, will only be relevant if the Business Day Convention is the FRN Convention, Floating Rate Convention or Eurodollar Convention. Otherwise, insert "Not Applicable".)
(ii) Interest Payment Dates: [Applicable/Not Applicable] [Insert details, if applicable]
(Specified Period and Interest Payment Dates are alternatives. If the Business Day Convention is the FRN Convention, Floating Rate Convention or Eurodollar Convention, insert "Not Applicable".)
(iii) First Interest Payment Date: [ ]
(iv) Business Day Convention: [Floating Rate Convention/Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/other (give details)]
(v) Additional Business Centre(s): [Not Applicable/give details]
(vi) Party responsible for calculating the [[Name] shall be the Calculation Agent (no need to Rate(s) of Interest and Interest specify if the Fiscal Agent is to perform this function)] Amount(s) (if not the Fiscal Agent):
(vii) Screen Rate Determination: [Not Applicable/Not Applicable]
- Reference Rate: [For example, LIBOR or EURIBOR]
- Interest Determination Date(s): [ ]
- Relevant Screen Page: [For example, Reuters LIBOR 01/EURIBOR 01]
- Relevant Time: [For example, 11.00 a.m. London time/Brussels time]
- Relevant Financial Centre: [For example, London/Euro-zone (where Euro-zone means the region comprised of the countries whose lawful
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currency is the euro)]
(viii) ISDA Determination:
- Floating Rate Option: [ ]
- Designated Maturity: [ ]
- Reset Date: [ ]
(ix) Margin(s) : [+/-] [ ] per cent. per annum
(x) Minimum Rate/Amount of Interest: [ ] per cent. per annum
(xi) Maximum Rate/Amount of Interest: [ ] per cent. per annum
(xii) Day Count Fraction: [ ]
(xiii) Fall back provisions, rounding [ ] provisions, denominator and any other terms relating to the method of calculating interest on Floating Rate Notes, if different from those set out in the Conditions:
17. Zero Coupon Note Provisions [Applicable/Not Applicable]
(If not applicable, delete the remaining sub-paragraphs of this paragraph)
(i) [Amortisation/Accrual] Yield: [ ] per cent. per annum
(ii) Reference Price: [ ]
(iii) Any other formula/basis of determining [Consider whether it is necessary to specify a Day Count amount payable: Fraction for the purposes of Condition 10(g) (Early redemption of Zero Coupon Notes)]
18. Index-Linked Interest Note Provisions [Applicable/Not Applicable]
(If not applicable, delete the remaining sub-paragraphs of this paragraph)
(i) Index/Formula/other variable: [Give or annex details]
(ii) Party responsible for calculating the [ ] interest due (if not the Fiscal Agent):
(iii) Provisions for determining Coupon [ ] where calculation by reference to Index and/or Formula and/or other variable:
(iv) Interest Determination Date(s) [ ]
(v) Provisions for determining Coupon [ ] where calculation by reference to Index and/or formula and/or other variable is impossible or impracticable:
(vi) Interest or calculation period(s): [ ]
(vii) Specified Period: [Applicable/Not Applicable (give details)]
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(Specified Period and Interest Payment Dates are alternatives. A Specified Period, rather than Interest Payment Dates, will only be relevant if the Business Day Convention is the FRN Convention, Floating Rate Convention or Eurodollar Convention. Otherwise, insert "Not Applicable".)
(viii) Interest Payment Date(s): [Applicable/Not Applicable (give details)]
(Specified Period and Specified Interest Payment Dates are alternatives. If the Business Day Convention is the FRN Convention, Floating Rate Convention or Eurodollar Convention, insert "Not Applicable".)
(ix) Business Day Convention: [Floating Rate Convention/Following Business Day Convention/Modified Following Business Convention/Preceding Business Day Convention/other (give details)]
(x) Additional Business Centre(s): [ ]
(xi) Minimum Rate of Interest/Interest [ ] per cent. per annum Amount:
(xii) Maximum Rate of Interest/Interest [ ] per cent. per annum Amount:
(xiii) Day Count Fraction: [ ]
19. Dual Currency Note Provisions [Applicable/Not Applicable]
(If not applicable, delete the remaining sub-paragraphs of this paragraph)
(i) Rate of Exchange/method of calculating [Give details] Rate of Exchange:
(ii) Calculation Agent, if any, responsible [ ] for calculating the principal and/or interest due:
(iii) Provisions applicable where calculation [Need to include or description of any market disruption by reference to Rate of Exchange or settlement disruption events and adjustment impossible or impracticable or provisions.] otherwise disrupted:
(iv) Person at whose option Specified [ ] Currency(ies) is/are payable:
PROVISIONS RELATING TO REDEMPTION
20. Call Option [Applicable/Not Applicable]
(If not applicable, delete the remaining sub-paragraphs of this paragraph)
(i) Optional Redemption Date(s) (Call): [ ]
(ii) Optional Redemption Amount(s) (Call) [ ] per Calculation Amount/other/see Appendix] of each Note and method, if any, of calculation of such amount(s):
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(iii) If redeemable in part:
Minimum Redemption Amount: [ ] per Calculation Amount
Maximum Redemption Amount: [ ] per Calculation Amount
(iv) Notice period (if other than as set out in [ ] the Conditions):
21. Put Option [Applicable/Not Applicable]
(If not applicable, delete the remaining sub-paragraphs of this paragraph)
(i) Optional Redemption Date(s): [ ]
(ii) Optional Redemption Amount(s) and [[ ] per Calculation Amount/other/see Appendix] method, if any, of calculation of such amount(s):
(iii) Notice period (if other than as set out in [ ] the Conditions):
22. Final Redemption Amount of each Note [ ] per Calculation Amount
In cases where the Final Redemption Amount is (N.B. If the Final Redemption Amount is other than 100 Index-Linked or other variable-linked: per cent. of the principal amount, the Notes will be derivative securities for the purposes of the Prospectus Directive and the requirements of Annex XII to the Prospectus Directive will apply.)
(i) Index/Formula/variable: [give or annex details]
(ii) Party responsible for calculating the Final Redemption Amount (if not the Fiscal Agent):
(iii) Provisions for determining Final [ ] Redemption Amount where calculated by reference to Index and/or Formula and/or other variable:
(iv) Date for determining Final Redemption [ ] Amount where calculation by reference to Index and/or Formula and/or other variable:
(v) Provisions for determining Final [ ] Redemption Amount where calculation by reference to Index and/or Formula and/or other variable is impossible or impracticable or otherwise disrupted:
(vi) [Payment Date]: [ ]
(vii) Minimum Final Redemption Amount: [ ] per Calculation Amount
(viii) Maximum Final Redemption Amount: [ ] per Calculation Amount
23. Early Redemption Amount [Not Applicable
Early Redemption Amount(s) per Calculation (If both the Early Redemption Amount (Tax) and the Early Amount payable on redemption for taxation Termination Amount are the principal amount of the
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reasons or on event of default or other early Notes/specify the Early Redemption Amount (Tax) and/or redemption and/or the method of calculating the Early Termination Amount if different from the the same (if required or if different from that principal amount of the Notes)] set out in the Conditions):
GENERAL PROVISIONS APPLICABLE TO THE NOTES
24. Form of Notes: Bearer Notes:
[Temporary Global Note exchangeable for a Permanent Global Note which is exchangeable for Definitive Notes on [ ] days‘ notice/at any time/in the limited circumstances specified in the Permanent Global Note.]
[Temporary Global Note exchangeable for Definitive Notes on [ ] days‘ notice.]
[Permanent Global Note exchangeable for Definitive Notes on [ ] days‘ notice/at any time/in the limited circumstances specified in the Permanent Global Note]
25. New Global Note: [Yes] [No]
26. Additional Financial Centre(s) or other special [Not Applicable/give details. Note that this item relates to provisions relating to Payment Dates: the place of payment, and not interest period end dates, to which items 15(ii), 16(iv) and 18(x) relate]
27. Talons for future Coupons or Receipts to be [Yes/No. If yes, give details] attached to Definitive Notes (and dates on which such Talons mature):
28. Details relating to Partly Paid Notes: amount of [Not Applicable/give details] each payment comprising the Issue Price and date on which each payment is to be made [and consequences (if any) of failure to pay, including any right of the Issuer to forfeit the Notes and interest due on late payment]:
29. Details relating to Instalment Notes: amount of [Not Applicable/give details] each instalment, date on which each payment is to be made:
30. Redenomination, renominalisation and [Not Applicable/The provisions annexed to these Final reconventioning provisions: Terms apply]
31. Other terms or special conditions: [Not Applicable/give details]
(When adding any other final terms consideration should be given as to whether such terms constitute "significant new factors" and consequently trigger the need for a supplement to the Base Prospectus under Article 16 of the Prospectus Directive.)
DISTRIBUTION
32. (i) If syndicated, names of Managers: [Not Applicable/give names and addresses]
(ii) Stabilising Manager (if any): [Not Applicable/give name and addresses]
33. If non-syndicated, name of Dealer: [Not Applicable/give name and addresses]
34. U.S. Selling Restrictions: Reg. S Compliance Category [1/2/3]; TEFRA [C/D/ not
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applicable]
35. Additional selling restrictions: [Not applicable/give details]
PURPOSE OF FINAL TERMS
These Final Terms comprise the final terms required for the issue and admission to trading on [specify relevant regulated market] of the Notes described herein pursuant to the €3,000,000,000 Euro Medium Term Note Programme of Edison S.p.A.
RESPONSIBILITY
The Issuer accepts responsibility for the information contained in these Final Terms. [(Relevant third party information) has been extracted from (specify source). The Issuer confirms that such information has been accurately reproduced and that, so far as it is aware, and is able to ascertain from information published by (specify source), no facts have been omitted which would render the reproduced information inaccurate or misleading.]
Signed on behalf of the Edison S.p.A.:
By: ...... Duly authorised
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PART B – OTHER INFORMATION
1. LISTING AND ADMISSION TO TRADING
(i) Listing [Luxembourg/Other(specify)/None]
(ii) Admission to trading [Application [is expected to be/has been] made by the Issuer (or on its behalf) for the Notes to be admitted to trading on [specify relevant regulated market]] with effect from [ ].] [Not Applicable.]
(Where documenting a fungible issue need to indicate that original Notes are already admitted to trading.)
(iii) Estimate of total expenses related to [ ] admission to trading
2. RATINGS
Ratings: The Notes to be issued have been rated:
[S & P: [ ]]
[Moody's: [ ]]
[Fitch: [ ]]
[[Other]: [ ]]
(The above disclosure should reflect the rating allocated to Notes of the type being issued under the Programme generally or, where the issue has been specifically rated, that rating.)
3. [INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE ISSUE/OFFER]
[Need to include a description of any interest, including conflicting ones, that is material to the issue/offer, detailing the persons involved and the nature of the interest. May be satisfied by the inclusion of the following statement:
"Save as discussed in [the sections of the Base Prospectus entitled "Subscription and Sale" and "General Information"], so far as the Issuer is aware, no person involved in the offer of the Notes has an interest material to the offer."]
(When adding any other description, consideration should be given as to whether such matters described constitute "significant new factors" and consequently trigger the need for a supplement to the Base Prospectus under Article 16 of the Prospectus Directive.)
4. [REASONS FOR THE OFFER, ESTIMATED NET PROCEEDS AND TOTAL EXPENSES
[(i) Reasons for the offer [ ]
(See "Use of Proceeds" in the section of the Base Prospectus entitled "General Information" – if reasons for offer different from making profit and/or hedging certain risks will need to include those reasons here.)]
[(ii) Estimated net proceeds: [ ]
(If proceeds are intended for more than one use will need to split out and present in order of priority. If proceeds insufficient to fund all proposed uses state amount and
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sources of other funding.)]
[(iii) Estimated total expenses: [ ]
[Include breakdown of expenses] (Not required unless the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies, in which case it is only necessary to include disclosure of net proceeds and total expenses at (ii) and (iii) above where disclosure is included at (i) above.)]
5. [Fixed Rate Notes only – YIELD
Indication of yield: [ ]
Calculated as [include details of method of calculation in summary form] on the Issue Date.
As set out above, the yield is calculated at the Issue Date on the basis of the Issue Price. It is not an indication of future yield. ]
6. [Floating Rate Notes only - HISTORIC INTEREST RATES
Details of historic [LIBOR/EURIBOR/other] rates can be obtained from [Reuters].]
7. [Index-linked or other variable-linked notes only – PERFORMANCE OF INDEX/FORMULA/OTHER VARIABLE, EXPLANATION OF EFFECT ON VALUE OF INVESTMENT AND ASSOCIATED RISKS AND OTHER INFORMATION CONCERNING THE UNDERLYING
(Need to include:
(i) details of the exercise price or the final reference price of the underlying;
(ii) details of where past and future performance and volatility of the index/formula/other variable can be obtained and a clear and comprehensive explanation of how the value of the investment is affected by the underlying and the circumstances when the risks are most evident;
(iii) description of any market disruption or settlement disruption events that affect the underlying;
(iv) adjustment rules in relation to events concerning the underlying;
(v) where the underlying is a security, the name of the issuer of the security and its ISIN or other such security identification code;
(vi) where the underlying is an index, the name of the index and a description if composed by the Issuer and, if the index is not composed by the Issuer, details of where the information about the index can be obtained;
(vii) where the underlying is not an index, equivalent information;
(viii) where the underlying is an interest rate, a description of the interest rate;
(ix) where the underlying is a basket of underlyings, disclosure of the relevant weightings of each underlying in the basket; and
(x) any other information concerning the underlying required by Paragraph 4.2 of Annex XII of the Prospectus Directive Regulation.)
(When completing this paragraph, consideration should be given as to whether such matters described constitute "significant new factors" and consequently trigger the need for a supplement to the Prospectus under Article 16 of the Prospectus Directive.)
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The Issuer [intends to provide post-issuance information [specify what information will be reported and where it can be obtained]] [does not intend to provide post-issuance information].]
8. [Dual Currency Notes only – PERFORMANCE OF RATE[S] OF EXCHANGE AND EXPLANATION OF EFFECT ON VALUE OF INVESTMENT
[Need to include details of where past and future performance and volatility of the relevant rate[s] can be obtained and a clear and comprehensive explanation of how the value of the investment is affected by the underlying and the circumstances when the risks are most evident.]
[When completing this paragraph, consideration should be given as to whether such matters described constitute "significant new factors" and consequently trigger the need for a supplement to the Base Prospectus under Article 16 of the Prospectus Directive.]]
9. OPERATIONAL INFORMATION
ISIN Code: [ ]
Common Code: [ ]
Any clearing system(s) other than Euroclear [Not Applicable/give name(s) and number(s)] Bank S.A./N.V. and Clearstream Banking, société anonyme and the relevant identification number(s):
Delivery: Delivery [against/free of] payment
Names and addresses of initial Paying [ ] Agent(s):
Names and addresses of additional Paying [ ] Agent(s) (if any):
Intended to be held in a manner which would [Yes][No][Not Applicable] allow Eurosystem eligibility: [Note that the designation "yes" simply means that the Notes are intended upon issue to be deposited with one of the ICSDs as common safekeeper and does not necessarily mean that the Notes will be recognized as eligible collateral for Eurosystem monetary policy and intra day credit operations by the Eurosystem either upon issue or at any or all times during their life. Such recognition will depend upon the ECB being satisfied that Eurosystem eligibility criteria have been met.][include this text if "yes" selected in which case the Notes must be issued in NGN form]
10. FURTHER INFORMATION IN RESPECT OF THE ISSUER
The following information relating to the Issuer is provided pursuant to Article 2414 of the Italian Civil Code.
[The information set out in this Schedule may need to be updated if, at the time of issue of the Notes, any of it has changed since the date on which the Programme was established.]
Objects: [The objects of the Issuer, as set out in Article 3 of its by- laws are:
1. The company, either directly or indirectly through its subsidiaries or through companies in which it has a minority shareholding, operates:
(a) in the electric energy sector, including research, production, import and export,
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distribution, sales and transmission;
(b) in the liquid and gas hydrocarbons sector, including research and exploration, extraction, production, import and export, storage and transformation, together with distribution and sales;
(c) in the water sector, including collection, extraction, distribution, sewerage and purification, together with the protection, monitoring and upgrading of the water infrastructure;
(d) in the telecommunications sector, by the making of fixed and/or mobile telecommunications systems and networks and the provision of services related thereto;
(e) in the network and public utility services sector; and
(f) within the area of maintenance and customer care in respect of the sectors specified in paragraphs a) to e) above.
2. The company may carry out directly, in the interests of its subsidiaries and any companies in which it has a shareholding, any activities in connection with or serving the purpose of furthering its business or the business of its subsidiaries or of companies in which it has a shareholding.
3. The company may also carry out any commercial, industrial, real estate, financial or securities transactions (except, in the case of the latter two, with the public) that are considered necessary, useful or workable for the purposes of achieving the company‘s objects, including the granting of loans and financing and, on a non-professional basis, of performance bonds, guarantees, mortgages and any other kind of security or guarantee, including any in favour of third parties.
4. The company may also continue to run its existing shareholdings in companies operating in sectors other than those indicated in paragraph 1, in order to dispose of such shareholdings with the aim of obtaining maximum value from the said shareholdings.
5. All financial dealings with the public and all activities restricted by law are excluded from the company‘s objects.]
Registered Office: [Foro Buonaparte 31, 20121 Milan, Italy.]
Company‘s Registered Number: [Companies‘ Registry of Milan no. 06722600019, Chamber of Commerce of Milan, Italy.]
Amount of paid-up share capital and reserves: Paid-up share capital: € [ ], consisting of [ ] ordinary shares with a nominal value of € [ ] each and [ ] non-
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convertible savings shares with a nominal value of € [ ] each.
Reserves: € [ ]
Date of resolutions authorising the issue of the Resolution passed on [ ], registered at the Companies‘ Notes: Registry of Milan on [ ]
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SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM
Clearing System Accountholders
Each Global Note will be in bearer form. Consequently, in relation to any Tranche of Notes represented by a Global Note, references in the Terms and Conditions of the Notes to "Noteholder" are references to the bearer of the relevant Global Note which, for so long as the Global Note is held by a depositary or a common depositary in the case of a CGN, or a common safekeeper in the case of an NGN, for Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system, will be that depositary or common depositary or as the case may be, common safekeeper.
Each of the persons shown in the records of Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system as being entitled to an interest in a Global Note (each an "Accountholder") must look solely to Euroclear and/or Clearstream, Luxembourg and/or such other relevant clearing system (as the case may be) for such Accountholder‘s share of each payment made by the Issuer to the bearer of such Global Note and in relation to all other rights arising under the Global Note. The extent to which, and the manner in which, Accountholders may exercise any rights arising under the Global Note will be determined by the respective rules and procedures of Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system from time to time. For so long as the relevant Notes are represented by the Global Note, Accountholders shall have no claim directly against the Issuer in respect of payments due under the Notes and such obligations of the Issuer will be discharged by payment to the bearer of the Global Note.
Exchange of Temporary Global Notes
Whenever any interest in a Temporary Global Note is to be exchanged for an interest in a Permanent Global Note, the Issuer shall procure:
(a) in the case of first exchange, the prompt delivery (free of charge to the bearer) of such Permanent Global Note, duly authenticated and, in the case of an NGN, effectuated to the bearer of the Temporary Global Note; or
(b) in the case of any subsequent exchange, an increase in the principal amount of such Permanent Global Note in accordance with its terms, in each case in an aggregate principal amount equal to the aggregate of the principal amounts specified in the certificates issued by Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system and received by the Fiscal Agent against presentation and (in the case of final exchange) surrender of the Temporary Global Note at the Specified Office of the Fiscal Agent within seven days of the bearer requesting such exchange.
Whenever a Temporary Global Note is to be exchanged for Definitive Notes, the Issuer shall procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly authenticated and with Coupons and Talons attached (if so specified in the relevant Final Terms), in an aggregate principal amount equal to the principal amount of the Temporary Global Note to the bearer of the Temporary Global Note against the surrender of the Temporary Global Note at the Specified Office of the Fiscal Agent within 45 days of the bearer requesting such exchange.
If:
(a) a Permanent Global Note has not been delivered or the principal amount thereof increased by 5.00 p.m. (Luxembourg time) on the seventh day after the bearer of a Temporary Global Note has requested exchange of an interest in the Temporary Global Note for an interest in a Permanent Global Note; or
(b) Definitive Notes have not been delivered by 5.00 p.m. (Luxembourg time) on the forty-fifth day after the bearer of a Temporary Global Note has requested exchange of the Temporary Global Note for Definitive Notes; or
(c) a Temporary Global Note (or any part thereof) has become due and payable in accordance with the Terms and Conditions of the Notes or the date for final redemption of a Temporary Global Note has occurred and, in either case, payment in full of the amount of principal falling due with all accrued interest thereon has not been made to the bearer of the Temporary Global Note in accordance with the terms of the Temporary Global Note on the due date for payment, then the Temporary Global Note (including the obligation to deliver a Permanent Global Note or increase the principal amount thereof or deliver Definitive Notes, as the case may be) will become void at 5.00 p.m. (Luxembourg time) on such seventh day (in the case of (a) above) or at 5.00 p.m. (Luxembourg time) on such thirtieth day (in the case of (b)
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above) or at 5.00 p.m. (Luxembourg time) on such due date (in the case of (c) above) and the bearer of the Temporary Global Note will have no further rights thereunder (but without prejudice to the rights which the bearer of the Temporary Global Note or others may have under the deed of covenant dated 1 October 2010 (the "Deed of Covenant") executed by the Issuer). Under the Deed of Covenant, persons shown in the records of Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system as being entitled to an interest in a Temporary Global Note will acquire directly against the Issuer all those rights to which they would have been entitled if, immediately before the Temporary Global Note became void, they had been the holders of Definitive Notes in an aggregate principal amount equal to the principal amount of Notes they were shown as holding in the records of Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system.
Exchange of Permanent Global Notes
Whenever a Permanent Global Note is to be exchanged for Definitive Notes, the Issuer shall procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly authenticated and with Coupons and Talons attached (if so specified in the relevant Final Terms), in an aggregate principal amount equal to the principal amount of the Permanent Global Note to the bearer of the Permanent Global Note against the surrender of the Permanent Global Note at the Specified Office of the Fiscal Agent within 45 days of the bearer requesting such exchange.
If:
(a) Definitive Notes have not been delivered by 5.00 p.m. (Luxembourg time) on the forty-fifth day after the bearer of a Permanent Global Note has duly requested exchange of the Permanent Global Note for Definitive Notes; or
(b) a Permanent Global Note (or any part of it) has become due and payable in accordance with the Terms and Conditions of the Notes or the date for final redemption of the Notes has occurred and, in either case, payment in full of the amount of principal falling due with all accrued interest thereon has not been made to the bearer of the Permanent Global Note in accordance with the terms of the Permanent Global Note on the due date for payment, then the Permanent Global Note (including the obligation to deliver Definitive Notes) will become void at 5.00 p.m. (Luxembourg time) on such forty-fifth day (in the case of (a) above) or at 5.00 p.m. (Luxembourg time) on such due date (in the case of (b) above) and the bearer of the Permanent Global Note will have no further rights thereunder (but without prejudice to the rights which the bearer of the Permanent Global Note or others may have under the Deed of Covenant executed by the Issuer. Under the Deed of Covenant, persons shown in the records of Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system as being entitled to an interest in a Permanent Global Note will acquire directly against the Issuer all those rights to which they would have been entitled if, immediately before the Permanent Global Note became void, they had been the holders of Definitive Notes in an aggregate principal amount equal to the principal amount of Notes they were shown as holding in the records of Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system.
Conditions applicable to Global Notes
Each Global Note will contain provisions which modify the Terms and Conditions of the Notes as they apply to the Global Note. The following is a summary of certain of those provisions:
Payments: All payments in respect of the Global Note will be made against presentation and (in the case of payment of principal in full with all interest accrued thereon) surrender of the Global Note to or to the order of any Paying Agent and will be effective to satisfy and discharge the corresponding liabilities of the Issuer in respect of the Notes. On each occasion on which a payment of principal or interest is made in respect of the Global Note, the Issuer shall procure, in respect of a CGN, that the payment is noted in a schedule thereto and, in respect of an NGN, that the payment is entered pro rata in the records of Euroclear and Clearstream, Luxembourg.
Exercise of put option: In order to exercise the option contained in Condition 10(e) (Redemption at the option of Noteholders) the bearer of the Permanent Global Note must, within the period specified in the Conditions for the deposit of the relevant Note and put notice, give written notice of such exercise to the Fiscal Agent specifying the principal amount of Notes in respect of which such option is being exercised. Any such notice will be irrevocable and may not be withdrawn.
Partial exercise of call option: In connection with an exercise of the option contained in Condition 10(c) (Redemption at the option of the Issuer) in relation to some only of the Notes, the Permanent Global Note may be redeemed in part in the principal amount specified by the Issuer in accordance with the Conditions and the Notes to be redeemed will not be
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selected as provided in the Conditions but in accordance with the rules and procedures of Euroclear and Clearstream, Luxembourg (to be reflected in the records of Euroclear and Clearstream, Luxembourg as either a pool factor or a reduction in principal amount, at their discretion).
Notices: Notwithstanding Condition 19 (Notices), while all the Notes are represented by a Permanent Global Note (or by a Permanent Global Note and/or a Temporary Global Note) and the Permanent Global Note is (or the Permanent Global Note and/or the Temporary Global Note are) deposited with a depositary or a common depositary for Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system or a Common Safekeeper, notices to Noteholders may be given by delivery of the relevant notice to Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system and, in any case, such notices shall be deemed to have been given to the Noteholders in accordance with Condition 19 (Notices) on the date of delivery to Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system except that, for so long as such Notes are admitted to trading on the Luxembourg Stock Exchange and it is a requirement of applicable law or regulations, such notices shall be published in a leading newspaper having general circulation in Luxembourg (which is expected to be the Luxemburger Wort) or published on the website of the Luxembourg Stock Exchange (www.bourse.lu).
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DESCRIPTION OF THE ISSUER
Overview
Edison is a joint stock company limited by shares (società per azioni) incorporated under Italian law. Its registered office is at Foro Buonaparte 31, 20121 Milan, Italy and it is registered with the register of enterprises of Milan under number 06722600019.
Edison may be contacted by telephone on +39 02 62228415 and by fax on +39 02 62227847.
Pursuant to its by-laws, Edison's term of incorporation shall last until 31 December 2100, which may be extended.
Edison is one of Italy's leading energy companies, active in the procurement, production and sale of electric power and hydrocarbons.
As at 31 December 2009, Edison had a total installed power capacity of approximately 12,300 MW, of which approximately 9,300 MW are produced by gas fired thermoelectric plants and 2,100 MW are produced by renewable sources (mainly hydro plants and wind farms). The balance is represented by coal and oil thermoelectric plants.
In 2009, Edison's net electricity production in Italy amounted to 41.6 Terawatthours (TWh), representing approximately 15.0 per cent. of the Italian power net production of that year (pursuant to management‘s elaborations based on Terna S.p.A.: "Dati di Esercizio 2009").
In order to diversify its customer base and to stabilise profitability over the intermediate term in the power sector, Edison recently decided to target the Italian residential market. Edison plans to exploit the important investments made in the past and the flexibility and efficiency of its production facilities to consolidate its position as one of the leading operators in Italy's electric power market; Edison also intends to further expand its presence in the downstream segment, in order to achieve an increasingly balanced position between production and sales.
In the hydrocarbon sector, Edison has a strong presence in the production, importation, distribution and sale of oil and natural gas, with a market share of gas sales in the Italian market of 17 per cent. as at 31 December 2009 (Source: Management's elaborations based on data from the Italian Ministry of Economic Development). In 2009, Edison sold approximately 13.2 billion cubic meters of gas in Italy, of which approximately 8.2 billion cubic meters is represented by thermoelectric fuel uses. The balance is represented by residential uses (approximately 3.0 billion cubic meters), industrial uses (approximately 1.4 billion cubic meters) and other sales (approximately 0.6 billion cubic meters).
In the hydrocarbon market, Edison aims at making further progress in the development of international infrastructural projects, in order to confirm its position as one of Italy's leading natural gas operators, with further potential growth opportunities in the downstream end-markets.
Neither Edison nor any company in the Group have carried out transactions that have materially affected, or that might be reasonably expected to materially affect, Edison's ability to meet its obligations towards the holders of its debt securities.
Ownership
As at 30 June 2010, Edison has a share capital of euro 5,291,700,671, divided into 5,181,108,251.00 ordinary shares, with a par value of euro 1 each, equal to 97.91 per cent. of the total share capital, and 110,592,420 savings shares, with a par value of euro 1 each, equal to 2.09 per cent. of the total share capital. Edison shares are listed in the Blue Chip segment of the telematic stock market of the Italian Stock Exchange. Since 30 June 2010, there has been no change to the Issuer‘s share capital.
On the basis of the information made available to Edison, which is also available on the website of the Commissione Nazionale per le Società e la Borsa (―CONSOB‖) (www.consob.it), at the date of this Base Prospectus Edison's main shareholders which, directly or indirectly, own a shareholding exceeding 2 per cent. of the ordinary shares are the following:
Transalpina di Energia S.r.l. ("TdE"): 61.28 per cent. of the ordinary capital
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Électricité de France S.A. ("EDF"): 19.36 per cent. of the ordinary capital
Carlo Tassara S.p.A. ("Carlo Tassara"): 10.03 per cent. of the ordinary capital
For further information on the shareholder structure see the 2009 report on Edison's corporate governance and ownership structure (the ―Corporate Governance Report‖) available on Edison's website (www.edison.it) and incorporated by reference herein (see "Information Incorporated by Reference").
Edison is controlled by TdE which, pursuant to the definition provided in Article 93 of the Italian Legislative Decree No. 58/1998 ("TUF"), is not controlled by any individual or legal entity. TdE shares are owned by WRGM Holding 4 S.p.A. ("WRGM"), a wholly owned subsidiary of EDF, and Delmi S.p.A ("Delmi"), a subsidiary of A2A S.p.A. Delmi's other shareholders are: Iren S.p.A., formerly known as Enìa S.p.A., ("Iren") (15 per cent.), Società Elettrica Altoatesina-SEL S.p.A. ("Sel") (10 per cent.), Dolomiti Energia S.p.A. (10 per cent.), Mediobanca – Banca di Credito Finanziario S.p.A. ("Mediobanca") (6 per cent.), Fondazione Cassa di Risparmio di Torino (5 per cent.) and Banca Popolare di Milano S.c.a r.l.("Banca Popolare di Milano") (3 per cent.).
History
Edison was incorporated on 25 May 1994 as Alimenta S.r.l. On 1 July 2001, it changed its name to Italenergia S.p.A. and again on 1 December 2002 to its current name, Edison S.p.A.
TdE took control of Edison in 2005; subsequently TdE launched a mandatory tender offer over all of Edison's ordinary shares and a voluntary tender offer over Edison's warrants.
Before the TdE tender offer Edison was jointly owned by EDF and Fiat S.p.A. through Italenergia S.p.A. ("Italenergia"), which had successfully seized control of the former Edison S.p.A. and its controlling shareholder Montedison S.p.A. ("Montedison" and together with the former Edison, the "Montedison Group") following two tender offers in 2001.
The successful takeover of the Montedison Group by Italenergia was followed by a euro nine billion divestiture programme of all non-energy assets of the Montedison Group which was duly completed over a period of three years. This programme included the (i) sale of, among others, the agro-industry, the engineering, the pharmaceutical and the telecommunication businesses, the gas assets based in Egypt and (ii) spin-off of the non-energy assets of Falck S.p.A. ("Falck"), a company controlled following two tender offers in 2000 together with its subsidiary Sondel S.p.A ("Sondel") which owned energy assets.
On 1 May 2002, the former Edison, Fiat Energia S.p.A. and Sondel were merged into Montedison, which was subsequently renamed Edison S.p.A.
On 1 December 2002, Edison S.p.A. was merged into Italenergia and the incorporating company was renamed Edison S.p.A., the current Issuer, whose ordinary and savings shares were admitted to trading on the Italian Stock Exchange on 2 December 2002.
Edison's history, however, dates back to 1884 when the first electric light to be used in Europe lit the Scala di Milano using Edison's patented light bulb, from which the Issuer derives its name.
During the first part of the twentieth century the original Edison was active in the production of electricity, the majority of which was hydroelectric. Following the nationalisation of the Italian power industry and the transfer of substantially all electric assets not used for own consumption to Enel S.p.A. ("Enel") in 1966, Edison was merged with Montecatini S.p.A., a chemical company, and was subsequently renamed Montedison S.p.A. (―Montedison‖) holding a total of 21 hydroelectric power stations along with the first thermoelectric power station at its Porto Marghera site. In March 1979, Montedison transferred the 21 hydroelectric plants to the newly established SELM S.p.A. (Servizi Elettrici Montedison S.p.A.), together with two thermoelectric plants at Porto Marghera in northern Italy.
In 1987, Montedison began the extraction of crude oil from the oilfield of Vega (located off the coast of Sicily). In such year, MonteShell S.p.A. ("MonteShell"), a joint venture between SELM S.p.A. and Shell S.p.A., acquired the business made up of the national distribution network and other natural gas, lubricants and bitumen-related activities in Italy, owned by Total S.A. Subsequently, in 1992, the Edison Group consolidated its leadership among private Italian
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operators by buying the interests held by Deutsche Shell AG in Italy, including total reserves of over 20 thousand million cubic meters of natural gas.
SELM S.p.A. was listed on the Italian Stock Exchange in July 1982 and inherited the name Edison S.p.A. in 1991.
In 1992, the Comitato Interministeriale Prezzi approved the so called "CIP6" regulation pursuant to which certain price incentives were granted to producers of electric power deriving from renewable or assimilated to renewable sources and the sale of such power was guaranteed.
Under the CIP6 regulation, the price of the electric power was determined having regard to:
three cost components: investment cost, O&M costs and fuel cost; and
an incentive component.
The incentive component was awarded only during the first eight years of the plant's operation, while the predetermined fixed tariff and the dispatching priority remained in place for 15 years.
Taking advantage of the CIP6 regulation, Edison built a series of new plants between 1992 and 2002, which generated a constant and predictable cash flow that enhanced Edison‘s operating results.
In 1997, Edison, which was already active in the exploration and production of hydrocarbons in Italy, discovered a giant gas reservoir in an off-shore block off the coast of Egypt, allowing it to become an important player in the gas production business.
It was during the following years that Edison decided to focus its business on two main projects: the creation of alternative gas supply sources, by building an LNG terminal off the coast of Venice and the construction of 7,000 MW of new gas fired power plants, to take full advantage of the liberalisation of the energy markets, both of which were successfully completed by 2008.
At the end of 2001, Enel was forced to divest part of its electric generation capacity to favour the ongoing market liberalisation. Eurogen S.p.A. ("Eurogen"), a special purpose vehicle to which certain production assets of Enel were transferred, was included in the disposal programme, which was carried out via an auction process. Edison, together with AEM S.p.A., AEM Torino S.p.A. and ATEL (together, the "Industrial Sponsors"), as well as Interbanca S.p.A, The Royal Bank of Scotland plc and UniCredito Italiano S.p.A. (jointly, the "Financial Shareholders") participated in the successful bid through Edipower S.p.A. ("Edipower"), a joint stock company limited by shares, 40 per cent. of whose share capital was owned by Edison at that time. At the time of the acquisition, Eurogen was the second largest producer of electricity in Italy, after Enel Produzione S.p.A., with 7,412 MW of installed capacity consisting of 6 thermal power stations and 3 hydroelectric power plants geographically spread throughout Italy. Upon the acquisition, Eurogen was merged into Edipower.
Below is a description of the key events of the last four years.
Key events of 2007
In 2007, Edison streamlined its portfolio of CIP6 facilities and completed its programme of increasing production capacity of its electric power operations with the construction of eight latest-generation, combined-cycle power plants fuelled by natural gas. With the additional capacity of about 7,000 MW, Edison's overall generating capacity increased to 13,000 MW.
Edison also started to pursue new projects aimed at expanding its operations outside of Italy.
On 24 July 2007, Edison and Hellenic Petroleum S.A., Greece's largest hydrocarbon company and the country's leading independent electric power operator, entered into an agreement to establish a 50/50 joint venture ("Elpedison") to combine Hellenic Petroleum S.A.'s existing electric assets – a 390 MW combined-cycle power plant fuelled by natural gas – and Edison's 65 per cent. interest in Thisvi S.A., a company that has undertaken to construct a 400 MW combined-cycle power plant fuelled by natural gas in Thisvi, Greece (the completion of such construction is expected to take place in October 2010). Elpedison‘s purpose is to develop a generating capacity exceeding 1,500 MW (including the 390 MW that is already operational) to achieve a market share of approximately 12 per cent. in the Greek power production market, thereby becoming the second largest electric power operator in Greece, as well as power trading and
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marketing activities. Elpedison may also pursue investments in renewable energy sources in Greece as well as opportunities in power generation and trading in the Balkans (for further information, see ―Key events of 2009‖ below).
Key events of 2008
At the beginning of 2008, the Industrial Sponsor of Edipower exercised certain call option rights pursuant to the relevant agreements and acquired, pro rata, from the Financial Shareholders (i.e., Interbanca S.p.A., The Royal Bank of Scotland plc and UniCredito Italiano S.p.A.) 10 per cent. of the share capital of Edipower. As a result, Edison‘s interest in Edipower increased to 50 per cent. of the issued share capital, while the remaining 50 per cent. is now held by the other Industrial Sponsors (i.e., A2A S.p.A., AARE Ticino S.A. di Elettricità ("ATEL") and Iride S.p.A. (formerly known as AEM Torino S.p.A.).
Consistent with its strategy of developing a significant position also in foreign markets, in 2008 Edison established a 50/50 joint venture ("Poseidon ") with DEPA S.A., the Greek public gas corporation. Poseidon is a special purpose vehicle incorporated under the laws of Greece for the purpose of engineering, developing, building and operating the Greece-Italy natural gas pipeline linking Greece and Italy which, once finalised, will import up to 8 billion cubic meters of natural gas per year from the Caspian Sea Basin, where over 20 per cent. of the world's reserves are located, thereby helping diversify the supply sources for Italy and Europe as a whole (for further information, see ―Key events of 2010‖ below).
Edison continued to streamline its portfolio of generating facilities, by renovating and upgrading the power plants with a plan that added 7,000 MW in new combined-cycle generating capacity. With regard to the portfolio of hydroelectric power plants, the Group entered into two joint venture agreements with Dolomiti Energia S.p.A. and SEL S.p.A. Pursuant to the agreements three power plants owned by Edison (Taio-Santa Giustina, Mezzocorona-Mollaro and Pozzolago) in the provinces of Trento were transferred to Dolomiti Edison Energy (a company whose shares are owned for 51 per cent. by Dolomiti Energia S.p.A. and 49 per cent. by Edison) and seven power plants owned by Edison (Lasa, Brunico, Marlengo, Prati di Vizze, Ponte Gardena, Curon and Premesa) in the province of Bolzano, were transferred to Hydros S.p.A. (a company whose shares are owned for 60 per cent. by SEL S.p.A. and 40 per cent. by Edison) It is expected that these transactions, for which Edison received a consideration of euro 161 million will enable Edison to maintain an important presence in this area over the long term.
In the course of 2008, Edison also closed the sale of six thermoelectric facilities operating under CIP 6/92 contracts, with a combined installed capacity of about 370 MW to Cofathec Servizi S.p.A., a company that is part of the Gaz de France Group. The sales price paid generated a loss of euro 4 million, recognised in the annual financial statement as at 31 December 2008 as a loss from discontinued operations, but it produced a positive effect of euro 189 million on the consolidated net financial position of the Edison Group. This transaction, which is in line with Edison's industrial plan, was part of a process aimed at streamlining Edison's facilities portfolio and focusing on combined-cycle power plants serving the deregulated market and the development of facilities using renewable sources of energy.
In September 2008, the LNG Adriatic terminal, a regasification facility with a capacity of 8 billion cubic meters per year, arrived at its permanent Adriatic Sea location, offshore, in the province of Rovigo. This event represents the last step of a project which started in the late 1990s to import natural gas from Qatar. This project, together with the Galsi and the Poseidon pipelines, is part of the Edison‘s project to become wholly independent in natural gas procurement, as well as to be free to set an its own price policy both to residential and to non-residential customers. Pursuant to the underlying agreements, the LNG terminal is controlled by Qatar Petroleum and EXXonMobil, with Edison maintaining a 10 per cent. share in the project and the right to 80 per cent. of the terminal capacity, equal to 6.4 billion cubic meters of natural gas per year for 25 years to be supplied by Qatar Petroleum (for further information on the LNG Adriatic terminal, see ―Key events of 2009‖ below).
The growing demand for gas, coupled with the forecasts of a gradual contraction in natural gas production in Italy, prompted Edison to pursue also a strategy of importing gas. On 2 December 2008, Edison International S.p.A. signed a binding agreement with the Egyptian General Petroleum Corporation ("EGPC") for the exploration, development and production rights of the Abu Qir offshore concession, located north of Alexandria, in Egypt. The concession has a 20- year duration, which may be extended for an additional 10 year-period at Edison's request. The Abu Qir fields produce about 1.5 billion cubic meters of natural gas and 1.5 million barrels of oil per year through three platforms. EGPC and Edison plan to increase production from existing reserves and develop the concession's high exploration potential. On 31 March 2009, the Abu Qir Petroleum Company made a new hydrocarbon discovery in the Abu Qir concession after drilling a new well – known as the NAQ PII-2 – at a depth of 3,750 meters offshore Alexandria, in Egypt. The well drilling was started by EGPC on 26 December 2008 and jointly continued with Edison starting from 15 January 2009. The well tested a cumulative production of approximately 1.85 million cubic meters of natural gas and 850 barrels of
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condensate per day. The area that encompasses the new deposit and includes the NAQ PII-2 well is located in the northern section of the concession, where the identified reserves are higher than originally projected, confirming the concession's high development potential.
In addition, in the second half of 2008, Edison made two important natural gas discoveries in the Straits of Sicily, successfully drilling the Cassiopea 1 well approximately 22 km offshore and the Argo 2 field well approximately 20 km offshore. Edison controls and operates 40 per cent. of these facilities, with the remaining respective 60 per cent. controlled and operated by Eni S.p.A.
In order to diversify its customer base, in 2008 Edison also announced its intention to start operating in the residential market in order to receive financial benefits from the implementation of the total deregulation of the electric power market, launched on 1 July 2007.
Key events of 2009
As part of its strategy of diversifying its customer base, on 10 March 2009, Edison purchased 80 per cent. of the share capital of AMG Gas S.r.l., a natural gas distributor that serves more than 133,000 customers in the province of Palermo and sells 80 million cubic meters of natural gas per year. The acquisition had a purchase price of euro 25 million. As a result of this transaction, Edison doubled the number of its residential gas clients, passing the milestone of 300,000 households served and increasing its share of the residential market for natural gas.
In May 2009, Edison underwrote a euro 600 million loan agreement with a pool of international banks. Such term loan facility, originally set to expire in May 2012, has been voluntary prepaid in full in April 2010.
On 22 July 2009, Edison issued the ―€700,000,000 4.25 per cent. Notes due 2014‖ (ISIN XS0441402681) under the Programme.
In October 2009, the last of a series of transactions was concluded to allow the full operation of the joint venture Elpedison Power Generation S.A. (―Elpedison Power‖) established by Elpedison B.V. (jointly controlled by Edison and Hellenic Petroleum S.A. directly or through their subsidiaries) and the minority shareholders of Thisvi S.A. (Hed S.A. and Halcor S.A.) (for further information, see ―Key events of 2007‖ above). Elpedison Power is the result of a merger by way of incorporation of Thisvi S.A. in Energiaki Thessalonikis S.A. completed on 9 September 2009. At the same time as the merger, the incorporating company, Energiaki Thessalonikis S.A. changed its name to Elpedison Power. As a result of the merger, Elpedison Power, which already owned the 390-MW CCGT power plant in Thessaloniki, took over the construction of the 420-MW CCGT plant in Thisvi (the completion of such construction is expected to take place in October 2010). Following the merger, in order to refinance the then existing debt of Elpedison Power, certain bond loans were issued by Elpedison Power, for a total amount of euro 280 million, guaranteed pro rata by its direct and indirect shareholders. As at 30 June 2010 the overall indebtedness of Elpedison Power amounted to euro 360 million. Furthermore, Elpedison B.V. established Elpedison Trading S.A. (―Elpedison Trading‖) which is operating in Greece as a trading company to provide sales of energy to the wholesale and retail market and energy management services.
In September 2009, one year after the introduction of its first electric power sales package for residential customers (for further information on such residential offer, see ―Key events of 2008‖ above), Edison launched the ―Edison Luce&Gas‖ sales campaign. With an intense advertising campaign on the main media, Edison presented to the residential market a broad range of affordable solutions for all levels of consumption requirements, equally available throughout Italy, from large cities to small towns.
In October 2009, the interconnecting line linking Campocologno, in Switzerland, with Tirano, in Italy was inaugurated. Such 150-kV interconnecting line, having a length of 4.4 kilometres, increased the transmission capacity between the two countries by 150 MW, therefore strengthening the link between Italy and Northern Europe. This infrastructure has been built and is being managed by EL.IT.E. S.p.A. (―ELITE‖), a company established specifically for this purpose in 2008. ELITE is owned by Edison (48.45%), Repower A.G. (formerly known as Raetia Energie A.G.) (46.55%) and the Municipality of Tirano (5%).
In October 2009, the LNG Adriatic terminal started commercial operations (for further information on the LNG Adriatic terminal, see ―Key events of 2008‖ above). The availability of 8 billion cubic meters of gas from Qatar is expected to enhance the diversification and security of energy sources in Italy (the terminal has a yearly import capacity amounting to approximately 10% of gas demand in Italy and from 2010 it is expected to enable Edison to reduce its dependence on domestic purchases.
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In the second half of 2009, due to the challenging market conditions in Italy determined by the steep decline in power and gas demand in Italy in 2009, both Moody‘s Investors Service Inc. (―Moody’s‖) and Standard & Poor's Ratings Services (―S&P‖) revised the rating outlook assigned to the long-term credit rating of Edison from stable to negative. As at the date of this Base Prospectus, the long-term credit rating assigned to Edison is ―Baa2‖ with a ―negative outlook‖ with regard to Moody‘s and ―BBB+‖ with a ―negative outlook‖ with regard to S&P. S&P has also affirmed its ―A-2‖ short-term credit rating of Edison.
Key events of 2010
In March 2010, in Thessaloniki, Bulgarian Energy Holding EAD (former Bulgargaz Holding EAD), a sole owner joint- stock company with a 100% Bulgarian state ownership, (―BEH‖) and IGI Poseidon SA, a 50-50 joint venture established by DEPA (as defined below) and Edison (―IGI Poseidon‖) entered into an agreement to establish an asset company (owned by BEH as to 50% and by IGI Poseidon as to 50%) that will build the new gas pipeline Interconnector Greece-Bulgaria (the ―IGB‖) between Greece and Bulgaria. The IGB will transport new gas to Bulgaria and the Balkan countries from the Southern Corridor (for further information on the Southern Corridor, see below). With a transport capacity of 3-5 billion cubic meters of gas a year, the IGB pipeline will be 160 km long connecting Komotini (Greece) and Stara Zagora (Bulgaria). The IGB will enable Bulgaria to diversify its supply routes by accessing new sources from the Caspian area (e.g. Azerbaijan) through Greece. The IGI Poseidon investments forecasted amount to a total of Euro 140 million, with the possibility to access to the funds of the European Economic Recovery Plan of the European Union for about euro 45 million. The pipeline is forecasted to be operational starting 2013.
On 17 March 2010, Edison issued the ―€500,000,000 3.25 per cent. Notes due 17 March 2015‖ (ISIN XS0495756537) under its €3,000,000,000 Euro Medium Term Note Programme.
On 17 June 2010, in Ankara,Turkey, Edison, the Public Gas Corporation S.A. (DEPA S.A.), being the Greek state gas company (―DEPA‖) and BOTAS Boru Hatları İle Petrol Taşıma Anonim Şirketi A.S., being the Turkish state gas and oil transportation and gas trade company (―BOTAS‖) signed a memorandum of understanding which draws the framework for the transit through Turkey of the natural gas for the pipeline Interconnection Turkey-Greece-Italy (―ITGI‖), the first European realisation of the so called ―Southern Corridor‖ recognised by the EU as ―Project of European Interest‖ in the European Recovery Plan, with a proposed financing of euro 100 million. The ITGI represents a new route of supply for the European energy system, aimed at both enhancing the security and increasing the competition on the EU gas market. The agreement sets forth the general terms and conditions governing the gas transit for the ITGI project through Turkey and the use of the existing capacity in the Turkish network operated by BOTAS, up to the border with Greece, for the gas volumes required by the ITGI gas pipeline. This agreement strengthens the partnership between Edison, DEPA and BOTAS, by creating the possibility for BOTAS to acquire an interest in IGI Poseidon. The Southern Corridor ITGI comprises the following sections: (i) the national Turkish gas grid which will be upgraded in order to enable the transit of the volumes to Greece and Italy, (ii) the Interconnection Turkey-Greece (ITG), a 36 inch pipeline completed in 2007, (iii) the Interconnection Greece-Italy (IGI) , to be built and (iv) the Interconnection Greece-Bulgary (IGB), to be built. Once completed, the Southern Corridor ITGI will have a transport capacity of 10 billion cubic meters of gas a year and will be 800 km long. The pipeline includes two sections: IGI Poseidon (200 km offshore pipeline across the Ionian Sea under development by IGI Poseidon) and IGI Onshore (600 km onshore, under development by Desfa, a company controlled by DEPA and owner of the Greek Transmission System).
On 25 June 2010, in Syracuse (Sicily, Italy) the Floating Storage and Offloading vessel (the ―FSO‖) Leonis was inaugurated. This FSO has allowed production to resume from the Vega oil field held by Edison (60%) and Eni S.p.A. (40%) and operated by Edison. The FSO Leonis system is connected, through three underwater pipes, with the oil platform, where the production facilities are located and its mooring system (consisting of a buoy-yoke-tanker beam) was entirely designed by Edison and provides a high level of security even under extreme weather and sea conditions. The Vega field is located in the Strait of Sicily, about 12 miles off the Pozzallo (Syracuse) coast. The field began producing in 1987 and oil is currently flowing from 20 wells. From 1987 to present, the field has produced 55.5 million barrels of oil; it has been estimated that the Vega field is capable of producing an additional 12 million barrels of oil all over the field life.
On 11 August 2010, Edison Energie Speciali S.p.A. completed the acquisition of 100% of Parco Eolico San Francesco S.r.l. from Gamesa Energia SA;. Parco Eolico San Francesco S.r.l. operates a wind farm in the municipality of Melissa (KR), in the South of Italy, with a capacity of 26 MW.
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Selected financial data for the year ended and as at 31 December 2009
In 2009, the Group reported sales revenues of euro 8,867 million, 11.9 per cent. lower than the results for the previous year (when the Group sales revenues amounted to euro 10,064 million). Lower average prices for the benchmark energy commodities and a contraction in demand for electric power and natural gas, especially from industrial and thermoelectric users, are the main reasons of such decrease.
In 2009, EBITDA (i.e., earnings before interest, taxation, depreciation and amortisation) amounted to euro 1,471 million, euro 172 million lower (-10.5 per cent.) than in 2008 when EBITDA was euro 1,643 million.
At 31 December 2009, the net financial debt of the Group totalled euro 3,858 million, which was euro 938 million more than the euro 2,920 million owed at 31 December 2008.
At 30 June 2010, the net financial debt of the Group totalled euro 4,171 million.
Organisational structure STRUTTURA SEMPLIFICATA DEL GRUPPO
Electric Power Power Renewable Energy Operations International Sources Management Development and Management of Development and management of Dispatching and facilities to generate manage-ment of facilities to generate sales on the Power thermoelectric and international Marketing & energy from wind Exchange and to hydroelectric energy thermoelectric power wholesalers Distribution plants and electric power power and other inter-connector systems renewable sources Sales of electric Edipower Spa (2) Elpedison BV Edison Energie Speciali Spa Edison Trading Spa power and natural Hydros Srl Elite Spa gas to end users Dolomiti Edison Energy Srl Edison Energia Spa Edison Spa (1) Energy Efficiency and Sustainable Hydrocarbons Natural Gas Gas Supply Development Operations International & Logistics Solutions for sustain- Hydrocarbon exploration Procurement able energy use Development of management, and production and international natural natural gas storage, logistics and sales to gas interconnector transmission and wholesalers and systems distribution in Italy and thermoelectric power abroad plants
Edison International Spa Itgi-Poseidon SA Abu Qir Petroleum Co Galsi Spa
*Edison Stoccaggio Spa *Edison D.G. Spa
Electric Power Business Unit Hydrocarbons Business Unit Main consolidated companies (1) – Edison S.p.A., through its business units and corporate activities, is directly engaged in the production of electric power from hydroelectric and thermoelectric power* Companiesplants, subject and to functionalproduces, unbundling importsrequirements. and distributes hydrocarbon products.
(2) – Edipower S.p.A. is consolidated at 50% by the proportional method.
Business Strategic Guidelines
In 2009, the economic and financial crisis resulted in an unprecedented slump in energy consumption: in Italy, demand for electric power and natural gas contracted by 7% and 8%, respectively, compared with 2008. However, starting from 2010, the economic recovery is expected to produce a gradual increase in global energy consumption.
Edison intends to respond to the challenge posed by this scenario, leveraging on its proven ability to grow by anticipating market changes.
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Edison's strategy is aimed at pursuing the following targets:
consolidating its competitive position in the Italian electric power generation market and strengthening its role as the second-largest operator in the natural gas procurement sector in Italy;
focusing its commercial strategy on increasing its penetration in the small business-SOHO and residential segments, leveraging on its ability to supply both power and natural gas;
increasing and fully exploiting the Abu Qir reserves, with the objective of covering 15% of its hydrocarbons portfolio through own production;
compensating the gradual reduction of the regulated margins generated by CIP6 electric power production tripling its storage capacity; and
participating, over the long term and consistently with the macroeconomic evolution, in the development of two natural gas import pipelines from Africa and the Middle East and in the privatisation of the electric power industry currently in course in the Balkans and in Turkey.
The pace of growth of the Group will be modulated to ensure, inter alia, that the level of investments reflects the changing trends in energy demand.
Business of the Edison group
General
Edison is a leading operator in Italy's energy industry. Its operations include every aspect of the electric power and natural gas businesses, from procurement to production and sales. The competitive position achieved by the Group is the result of major investments planned and carried out over the years. In 1992 Edison was the first company in Italy to adopt the combined-cycle technology for gas-fired power plants. In Italy, the Edison Group's electric power operations have installed about 7,000 MW of new generating capacity during the past five years.
Edison is the second largest operator of electricity in Italy and is a leader amongst private operators in the production and sale of electrical energy and natural gas in Italy (Source: AEEG – Annual report on the state of services and the regulatory activities dated 15 July 2010). Edison also has an international presence in natural gas production, such as the Abu Qir facility and in electricity generation such as Elpedison.
The financial information reported below and related to the six-month periods ended on 30 June 2010 and 2009 respectively are unaudited.
Principal Activities and Markets
As at 30 June 2010, the Group's supply of electric power was produced by facilities with an installed capacity of about 12.3 GW, including Edison's share of capacity provided by Edipower. In the first six months of 2010, Edison's net production of electric power amounted to 20.3 TWh, equal to 14.7 per cent. of Italy's total production.
As at 30 June 2010, the supply of natural gas available to the Group in Italy was 8.2 billion cubic meters, which met 18.5 per cent. of the domestic market's total needs. In the hydrocarbon area, as at 31 December 2009 Edison owns 56.1 billion cubic meters of equivalent reserves that are significantly higher than those of the previous financial year as a result of the acquisition of the Abu Qir concession in Egypt in January 2009. Edison also operates two storage facilities in Italy and a third one is currently under development. In addition, the Rovigo terminal became operative in the second half of 2009, allowing the regassification of LNG imported from Qatar by sea.
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The following table shows selected operating data relating to Edison's electricity and gas operations in Italy for each of the past four years and for the first semester of 2010.
31 31 31 31 30 June December December December December 2010 2009 2008 2007 2006 Net installed capacity (GW) 12.3 12.3 12.1 12.5 11.7 Net electricity production (GWh) 20,321 41,601 50,151 53,404 51,923 Electricity sales on the deregulated market (TWh) 27.4(1) 46.9(1) 47.6(1) 41.2 40.4 Total electricity sold in Italy (TWh) 34.7(1) 60.4(1) 65.2(1) 63.5(2) 65.3(2) Electricity sales customers at end of period na 226,000 45,000 15,000 8,700 Natural gas sales to end users (billions of m3) 2.8 4.4 3.9 3.7 4.5 Natural gas sales customers at end of period na 314,000 170,000 171,900 168,300
Source: Edison‘s annual and semi-annual reports, except: (1)excluding the trading portfolio. (2) figures derived from Edison‘s internal accounts but not reported in Edison‘s financial statements.
Operating performance of the Group
Sales revenues increased to euro 5,087 million in the first half of 2010, or 10.9 per cent. compared with the same period in 2009 (electric power operations and the hydrocarbons operations reported gains of 6.4 per cent. and 9 per cent., respectively). This positive performance was made possible by higher sales volumes in both areas of business in Italy, which more than offset the impact of a decline in average unit sales prices both for electric power and natural gas caused by the scenario in the benchmark commodities markets. The surge in sales volumes recorded in Italy – with growth rates of 21.2 per cent. for electric power and 30.1 per cent. for natural gas – reflects primarily higher unit sales to end customers (up 15.6 per cent. for the electric power operations and 13.4 per cent. for the natural gas operations), consistent with the Group‘s strategy of consolidating its presence in these market segments.
EBITDA for the first half of 2010 amounted to euro 626 million, compared with euro 732 million in the first six months of 2009. This decrease is primarily the result of: (i) the reduction of euro 128 million in EBITDA booked by the electric power operations (euro 428 million compared with euro 556 million in the same period last year), (ii) a gain of euro 24 million for the hydrocarbons operations, which earned EBITDA of euro 247 million in the first half of 2010, up from euro 223 million in the same period in 2009 and (iii) an euro 49 million negative EBITDA for the corporate activities segment, compared with a loss of euro 47 million in the first half of 2009.
Electric Power
Edison's electric power business includes the generation of electricity by operating thermoelectric plants (mainly combined cycle), hydroelectric and wind power generation plants.
As of 30 June 2010, Edison controls approximately 14.7 per cent. of net electricity volumes produced in Italy (Source: Terna and AU preliminary data, Edison estimates).
Except for distribution, an activity normally carried out by a large number of municipalities pursuant to long term concession agreements, Edison is engaged in all stages of the electric power chain (generation, import/trading, transmission and sale). Edison also imports power from foreign suppliers and buys electricity on the domestic market.
Generation
Edison Group's combined installed capacity comprises thermoelectric power (10.2 GW), hydroelectric power (1.7 GW) and wind and other renewable (0.4 GW).
Most of Edison's 28 thermal power stations are Combined Cycle Gas Turbine ("CCGT") enabling the average efficiency ratio of 50 per cent. (compared to an Italian average of approximately 40 per cent.).
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Edison's 68 hydroelectric plants are mainly located in northern Italy. Edison also owns power plants in Switzerland through KHR S.A. (125 MW), in Brazil through Ibiritermo, (113 MW) and in Greece through Elpedison (195 MW in operation and additional 205 MW currently in a start-up phase).
Edison exploits wind generation power through 32 wind farms with an aggregate generating capacity of more than 400 MW, constantly increasing, through Edison Energie Speciali S.p.A. (EDENS). Furthermore, Edison operates in the renewable energy sector through photovoltaic and biomass plants for approximately 10 MW in aggregate.
Operating Performance
Sales revenues totalled 3,438 million euro in the first half of 2010. The increase of 6.4 per cent. compared with the revenues compared with the revenues reported at 30 June 2009 is the direct result of sharply higher unit sales, which compensated for a reduction in unit sales prices that reflected the impact of a benchmark commodities scenario also characterised by lower prices.
EBITDA for the first half of 2010 amounted to euro 428 million, or 23 per cent. less than the 556 million earned in the first six months of 2009.
Sales and marketing
Sales of electric power amounted to 34,652 GWh in the first half of 2010, with an increase of 21.2 per cent. compared with the first six months of 2009.
Sales in the CIP 6/92 segment were slightly down mainly due to the expiration of contracts. Sales to captive customers grew by 28.9 per cent. reflecting the effect of an upturn in steel production at the mills served by dedicated power plants. The deregulated market was characterised by opposing sales trends, depending on the business segment. Given the scenario of extreme volatility, the Group opted to reduce its exposure to the risk of fluctuations in commodity prices, focusing on sales to end customers and wholesalers and reducing the volumes offered on the Italian Power Exchange.
Edison has increased its market share in the large industrial business sector (both for electric energy and gas) focusing on the dual fuel supply to large business customers. Edison has improved sales volumes and its share in the mass market through an increase in indirect sales.
The majority of current subscriptions arrive via call centres, websites and agencies.
Production and procurement
In the six months ended 30 June 2010, the Group's net production amounted to 20,321 GWh, about the same as in the first half of 2009, due to the fact that the decrease of 13.7 per cent. in hydroelectric output was offset by increased production for thermoelectric power plants, wind farms and other renewable-source facilities.
Other purchases carried out to complete the sources portfolio increased by almost 74 per cent. compared with the first half of 2009, reflecting the impact of a strategy of optimising the average cost of source energy, which enables the Group to benefit from outside purchases whenever a margin advantage over production costs justifies it. This category includes purchases that occur when facilities operate in bidding mode and other transactions with relatively low unit margins.
Production outside Italy totalled 330 GWh in the first half of 2010 as opposed to a result equal to zero in the previous year; such increase is due to the contribution provided by the power plant operated by Elpedison Power in Greece, which is being consolidated as of 31 March 2009.
Capital investments
Capital expenditures by the electric power operations, which amounted to euro 139 million in the first six months of 2010, were allocated as follows: approximately euro 69 million for thermoelectric operations, approximately euro 11 million for the development of wind power operations in Italy, including, primarily, the Mistretta wind farms; approximately euro 31 million to streamline and renovate the portfolio of hydroelectric facilities; approximately euro 26 million for the development of the Thisvi power plant in Greece and approximately euro 2 million for photovoltaic and energy efficiency projects.
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Green Certificates
Edison plans to invest in wind production and in improvements in hydroelectric production in part to increase the number of Green Certificates it is awarded.
The regulation governing Green Certificates in Italy provides that electricity producers and importers are obliged to enter into the grid a pre-determined stake of green energy calculated on the basis of total electricity produced or imported from conventional sources (excluding electricity produced from cogeneration and auto consumptions) during the previous year. According to the 2008 Italian Budget Law, the pre-determined stake, equal to 5.30 per cent. of the total energy produced in 2009, shall increase by 0.75 per cent. per year until 2012, up to 7.55 per cent. Every entity that is eligible may choose to either produce renewable energy, for which Green Certificates are awarded, or purchase Green Certificates.
Green Certificates may be traded on the market or through bilateral contracts. In case of long market (supply higher than demand), the current regulation provides that up to 2011 unsold Green Certificates will be purchased by the Gestore del Sistema Elettrico (GSE) at a price equal to the average price in the previous three years, thus guaranteeing the producers from a fall of price. As from 2012, at the end of the so-called "transitory period", GSE will purchase only unsold Green Certificates in cases where the 3-year validity has elapsed. The purchase price of such expiring Green Certificates will be equal to the average price of Green Certificates recorded in the preceding year.
The 2008 Budget Law also extended the Green Certificates incentive period relating to production from new power plants from 12 to 15 years.
For further information on the electrical energy sector in Italy, see "Regulatory Framework and Market Overview" below.
Hydrocarbons Operations
Exploration activities
In the first half of 2010, the Group invested approximately euro 21 million in exploration. Virtually the entire amount was allocated to projects outside Italy, in particular in Egypt in which approximately euro 13 million were allocated for drilling projects in Abu Qir and in the West Wadi el Rayan block.
The locations of exploration and production activities carried out abroad involving exploration activities are: Algeria, Reggane Basin, Egypt, (WWER and SAER Blocks), Norway and Ivory Coast while the technical assessment of the exploration concessions located in Iran is continuing prior to the definition of future programmes.
Operating performance
In the first half of 2010, sales revenues increased to euro 2,552 million, or 9 per cent. more than the same period of 2009. This improvement was made possible by a substantial increase in unit sales, which more than offset the impact of the sharp reduction in average sales prices caused by a negative benchmark scenario.
EBITDA of the Group as at 30 June 2010 amounted to euro 247 million, euro 24 million more (or 10.8 per cent. higher) than the first six months of 2009.
Sales and marketing
Total unit sales of natural gas to customers in Italy amounted to 8,179 million cubic meters, recording an increase of 30.1 per cent. compared with the first half of 2009, due to the increased supply made available by the LNG Adriatic terminal.
Specifically, in the first half of 2010 sales to residential and industrial users increased by 11.4 per cent. and 18.8 per cent respectively, while deliveries to thermoelectric users rose by 36.3 per cent. Wholesalers and volumes traded on the virtual exchange facility amounted to 542 million cubic meters (277 million cubic meters during first six months of 2009).
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Production and procurement
Net production of natural gas, taking into account both Italian and international operations, amounted to 991 million cubic meters in the first half of 2010, 13.4 per cent. more than the same period last year. More specifically, production outside Italy increased (+ 28.9 per cent.) due mainly to the additional output provided by the Abu Qir concession in Egypt, which production more than offset the natural depletion of existing fields in Italy.
Production of crude oil amounted to 1,761,000 barrels, up from 1,268,000 barrels in the first six months of 2009, due to the output generated by the Abu Qir concession and the new West Wedi el Rayan field in Egypt.
Pipeline imports of natural gas under long-term contracts recorded a decrease of 11.9% compared with the first half of 2009, while LNG imported from Qatar and regasified at the Rovigo LNG terminal (which was not included in the data as at 30 June 2009) amounted to 2,874 million cubic meters in the first six months of 2010 (the terminal went on stream in the third quarter of 2009). This new supply source enabled the Group to reduce its purchases from other Italian operators to just 710 million cubic meters (46.8% less than in the first half of 2009), thereby effectively achieving a major strategic target (i.e. gradual reduction of the reliance on sources that are not directly managed by Edison).
Capital Investments
Capital investments amounted to euro 96 million in the first half of 2010.
The main investments in Italy included: euro 8 million to expand the Cellino Attanasio (Teramo) and Collalto (Treviso) fields; euro 2 million for the San Potito and Cotignola (Ravenna) fields; euro 2 million euro for the preparatory activities required to develop the Panda and Cassiopea deposits; euro 2 million to develop the Tresauro field; and euro 1 million to develop the new Capparuccia (Ascoli Piceno) field.
Investment projects in Egypt focused on the Abu Qir concession (euro 31 million), where work included a continuation of drilling activities and design activities for the construction of the new NAQ PII platform and the renovation and expansion of the existing NAQ PI and WAQ PI platforms.
In Croatia, the commissioning and start-up activities for the Izabela South and Izabela North offshore platforms are continuing, at a cost of euro 34 million.
Maintenance
The Edison Group's maintenance strategy has focused on improving performance and on increasing the availability of the Group's plants and power stations. The Group has installed systems that constantly monitor the status of the most important machinery. This assists in choosing the most appropriate time to carry out maintenance on the plants and power stations with the aim of minimising the shut-down of machines, whilst preserving their reliability. A group of specialists have been trained to lead the maintenance teams, providing a uniform approach. Based on the maintenance strategy, management believes that the Group's plants and power stations are in good operating condition, consistent with their age and state of use, including wear due to normal use.
Litigation
The Group, in the ordinary course of its business, is subject to certain claims and is party to a number of legal proceedings relating to a variety of issues, including commercial and contractual disputes, personal injuries to past employees and environmental proceedings. The Group is also involved in disputes with the Italian tax authorities.
With regard to the existing claims and proceedings against companies of the Group, although it is difficult to determine their outcome with certainty, the management of the Edison Group, based on information available as at the date of this Base Prospectus, believes that:
(viii) liabilities relating to these claims and proceedings are unlikely to have, in the aggregate, a material adverse effect on the consolidated financial condition or result of operations of the Group;
(ix) where liabilities relating to these claims and proceedings are probable and quantifiable, adequate provisions, in terms of established reserves and in the light of the circumstances currently known to Edison, have been made in the Group's financial statements; and
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(x) where liabilities relating to these claims and proceedings are probable but not quantifiable, adequate disclosure has been made in the Group's financial statements.
For further details of the claims and proceedings referred to above, see "Status of the main pending legal and tax disputes at June 30, 2010" on pages 87 to 96 of the unaudited consolidated half-yearly financial statements of the Issuer as at and for the six months ended 30 June 2010, incorporated by reference in this Base Prospectus.
Material Contracts
The following are the material agreements entered into in by Edison:
Commercial Agreements
(i) the long term liquefied natural gas sale and purchase contract entered into between Edison and Ras Laffan Liquefied Natural Gas Company Ltd. II on 20 November 2003, for the acquisition by Edison of 6.4 billion cubic meters of liquefied natural gas;
(ii) the annual natural gas transmission contract executed between Edison and SNAM Rete Gas S.p.A. on 17 September 2008;
(iii) the regasification contract executed between Edison and Terminale GNL Adriatico S.r.l. on 2 May 2005 for a term of 25 years starting from the date of the first LNG delivery to the terminal (which occurred at the end of 2009);
(iv) the long term natural gas supply contracts entered into between Edison and Sonatrach on 25 July 2006 and 15 November 2006, respectively, for the acquisition by Edison of a total of 4 billion cubic meters of natural gas; and
(v) the concession agreement entered into on 15 January 2009, between Edison, acting through its subsidiary Edison International S.p.A., the Arab Republic of Egypt and the Egyptian General Petroleum Corporation granting Edison the rights, for a twenty years period (which may be extended for ten additional years at Edison‘s request) for the exploration, production and development of the Abu Qir offshore concession, located to the North of Alexandria, in Egypt.
Financing Agreements – Facilities
(i) the credit facility agreement for euro 1.5 billion entered into among Edison and a pool of banks dated April 2006 with expiration date falling on April 2013.
Financing Agreements – Issue of bonds
Edison is the primary obligor under:
(i) the ―€700,000,000 5.12 per cent. Notes due December 2010‖ (ISIN XS181582056) which were issued on 12 December 2003 under the €2,000,000,000 Euro Medium Term Note Programme of December 2003;
(ii) the ―€500,000,000 Floating Rate Notes due 19 July 2011‖ (ISIN XS196762263) which were issued on 19 July 2004 under the €2,000,000,000 Euro Medium Term Note Programme of December 2003;
(iii) the ―€700,000,000 4.25 per cent. Notes due 2014‖ (ISIN XS0441402681) which were issued on 22 July 2009 under the €2,000,000,000 Euro Medium Term Note Programme of July 2009; and
(iv) the ―€500,000,000 3.25 per cent. Notes due 17 March 2015‖ (ISIN XS0495756537) which were issued on 17 March 2010 under the €2,000,000,000 Euro Medium Term Note Programme of July 2009.
Strategic Agreements:
(i) the joint venture agreement between Edison International Holding and Hellenic Petroleum S.A., entered into on 3 July 2008 and executed on 12 March 2009, relating to the establishment of a joint venture to develop the
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Greek power market, including the operation of 2 CCGT gas fired power plant for approximately 800 MW in aggregate (for further information, see ―Key events of 2009‖ above);
(ii) the project development agreement between Edison International Holding and DEPA S.A. entered into on 11 June 2008 for the purpose of engineering, developing, building and operating, the Greece – Italy natural gas pipeline linking Greece and Italy, which will be used to import up to 8 billion cubic meters of natural gas per year to Italy (for further information, see ―Key events of 2010‖ above); and
(iii) the shareholders agreement entered into on 20 December 2006 among Edison, Sonatrach, Enel, Wintershall, Sfirs and Hera Trading in relation to the management of the company during the development phase (currently in place) which is envisaged to end on June 2010 when the shareholders will be required to resolve upon the final investment decision.
Shareholders Structure
Shareholders' agreements
As publicly available on CONSOB's website, pursuant to art. 122 of TUF, the following agreements are the shareholders' agreements relating to Edison's shares:
(i) A framework agreement executed on 12 May 2005 by EDF, its WGRM subsidiary, A2A (formerly AEM ) and its Delmi subsidiary for the purpose of acquiring joint control of Edison through a 50/50 joint venture of Delmi and WGRM, subsequently known as TdE which is not a party to the Agreement.
(ii) A shareholders' agreement executed by the same parties concurrently with the abovementioned agreement, which concerns the joint management and corporate governance of Edison and TdE. This Agreement is deemed to have been renewed for three years, starting on 16 September 2008, as no notice of cancellation was given by either party to the Agreement by 15 March 2008 (i.e., six months before the original expiration date of 15 September 2008).
(iii) Investment and Shareholders' Agreement executed on 7 July 2005 by A2A (formerly AEM), Dolomiti Energia , SEL S.p.A. , Mediobanca, Banca Popolare di Milano and Fondazione Cassa di Risparmio di Torino, and a subsequent agreement amending and supplementing the earlier stipulations, which was executed on 18 July 2005 by the abovementioned parties and Enìa S.p.A. (now Iren S.p.A.). These two agreements governed the following: the inclusion of Dolomiti Energia, Mediobanca, Banca Popolare di Milano, Fondazione Cassa di Risparmio di Torino and, subsequently, Enìa (now Iren S.p.A.) in Delmi's shareholder base; an increase of SEL‘s interest in Delmi; capitalisation and financing commitments by Delmi's shareholders, and the relationships between and interests of the signatories with respect to the organisation and operations of Delmi and, limited to certain issues, of TdE and Edison. These agreements shall be deemed to have been automatically renewed for three years (i.e., until 6 July 2011), as no notice of cancellation was given by either party to the Agreements during the ninety days prior to the expiration date of 7 July 2008.
(iv) shareholders' agreement executed on 7 July 2005 by Mediobanca, Banca Popolare di Milano and Fondazione Cassa di Risparmio di Torino (Delmi's financial shareholders) covering the mutual obligation to provide information and communication of voting decisions made by the parties to the agreement ahead of meetings of Delmi's Management Committee and of meetings of the Boards of Directors and Shareholders' Meetings of Delmi, TdE and Edison. The agreement also governs how votes will be cast at the abovementioned meetings and the inclusion of new shareholders in Delmi's shareholder base. This agreement is deemed to have been renewed for a further three years, as none of the parties to it gave notice of cancellation within the stipulated deadline (the original expiration was 7 July 2008).
Summaries of the abovementioned shareholders' agreements were published in press releases and are available on CONSOB's website (www.consob.it) and on Edison‘s website (www.edison.it).
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Corporate Governance
Overview
Corporate governance rules for Italian companies like Edison whose shares are listed on the Italian Stock Exchange are provided pursuant to the Italian Civil Code, in the TUF and in the corporate governance rules set forth by the voluntary code of corporate governance issued by Borsa Italiana (the "Code").
Edison has adopted a system of corporate governance, based on a conventional organisational model involving the shareholders' meetings, the board of directors (which operates through the directors who have executive authority and are empowered to represent Edison, and is supported by an audit committee, a compensation committee and a strategy committee), the board of statutory auditors and the independent auditors.
Through their vote on resolutions, shareholders' meetings are the means by which shareholders express their will. Resolutions adopted pursuant to law and Edison's by-laws are binding on all shareholders, including absent or dissenting shareholders. However, in certain instances, dissenting shareholders have the right to demand redemption of their shares. The shareholders' meeting is convened to adopt resolutions on issues that the law reserves for its jurisdiction in accordance with the laws and regulations that apply to companies with shares traded on regulated markets.
Edison is managed by a board of directors which, pursuant to its by-laws, must be composed of twelve members or if one or more minority lists of candidates are filed and voted by the shareholders' meeting, of thirteen directors. Edison's by laws requires that at least two directors must be independent.
The role of the board of directors is to define the strategic guidelines that must be followed by Edison and the Group under Edison's control and is responsible for governing its business operations. Accordingly, it has wide powers to carry out all corporate actions, including dispositions, that it deems useful for the furtherance of the corporate purpose, the sole exception being those that by law require express shareholder approval. The board of directors delegates some of its management responsibilities to the chief executive officer and establishes committees, all of which make recommendations and provide support to the board of directors. The committees established at the date of this Base Prospectus are: the Strategy Committee, the Audit Committee and the Compensation Committee.
Pursuant to Italian law and Edison's by laws, the board of statutory auditors (collegio sindacale) is composed of three auditors and three alternative auditors who have to meet specific requirements of independence, professionalism and integrity. The alternate auditors will automatically replace any statutory auditors who resign or are otherwise unable to serve as a statutory auditor
The board of statutory auditors monitors Edison's compliance with the applicable laws and its by-laws and has a supervisory function with regard to the actions of management, being specifically required to ensure that the principles of sound management are being followed, the structure of Edison's organization is adequate, the Code's guidelines are effectively implemented, transactions with related parties are carried out fairly, and the subsidiaries have been given appropriate instructions concerning the obligation to disclose insider information to the market. Pursuant to law, it is not responsible for accounting oversight, which is entrusted to independent auditors selected by the shareholders' meeting from those listed in a special register maintained by the Consob.
The independent auditors ascertain whether the accounting records are properly maintained and record faithfully the results from operations. They also determine whether the statutory financial statements and the consolidated financial statements are consistent with the data contained in the accounting records and the results of their audits and comply with the requirements of the applicable statutes. They may also perform additional reviews required by industry regulations and provide additional services that the board of directors may ask them to perform, provided they are not incompatible with their audit assignment.
Edison's corporate governance structure also includes a system of internal controls, the "Edison's Code of Ethics" and the procedures for allocating and delegating authority, which are described below.
Independent directors
In accordance with the procedure adopted by the board of directors to verify the independence of directors, directors must declare their eligibility to qualify as independent directors when slates of candidates for election are filed and when they accept their nomination, and their credentials are verified by the board of directors at the first meeting held
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after their nomination. An independent director must also undertake to inform promptly the board of directors of any situation that could undermine his or her ability to meet the independence requirement. Upon approving the report on corporate governance and Edison's ownership structure, the board of directors renews the request for credentials from the independent directors and reviews any additional information supplied by them.
Every year, the board of statutory auditors verifies that the vetting criteria and procedures adopted by the board of directors to assess the independence of its members are properly applied and reports its findings in its yearly Report to the shareholders' meeting.
Committees of the Board of Directors
In accordance with the Codice di Autodisciplina, the voluntary Code of Corporate Governance, of the Italian Stock Exchange (Borsa Italiana S.p.A.), since 2002 Edison has had an Internal Audit Committee and a Compensation Committee which is made up of members of the Board of Directors. A Strategy Committee followed in 2003.
Audit Committee
Consistent with the powers it received from the board of directors and recommendations put forth by committee members, this Committee makes proposals and provides advice on the following matters:
(i) together with the corporate accounting documents officer and the independent auditors, it assesses the correct utilization of the accounting principles and their consistency with those used in the consolidated financial statements and reviews the accounting treatment of the principal corporate transactions, particularly with regard to their effect on financial reporting;
(ii) it assists the board of directors in assessing the effectiveness of the system of internal controls and the risk management process, relying for this purpose on the support of the internal control officer, a function performed by the manager of the internal control systems department;
(iii) it reviews the work plan submitted by the internal control officer and the reports provided periodically by the internal control officer with regard to the items listed in the preceding paragraph;
(iv) upon request by the board of directors or the director responsible for overseeing the functionality of the system of internal controls, it provides opinions concerning specific aspects of the system of internal controls and the risk management system;
(v) it evaluates the work programmes for independent audits and reviews the findings of audit reports and the suggestions contained in the management letter;
(vi) it carries out all other tasks assigned to it by the board of directors; and
(vii) it reports to the board of directors at least semi-annually, when the annual report and the semi-annual report are approved, on the work it has performed and on the effectiveness of Edison's system of internal controls.
The chairman of the board of statutory auditors or another statutory auditor that he designates, the chief financial officer and the chief operating officer (the latter in a consulting capacity) may also attend meetings of the Audit Committee. From time to time, the chairman of the committee may also invite employees and independent experts, including a representative of the independent auditors, to attend meetings in a consulting capacity. The Committee met five times in 2009 and held two meetings in the first six months of 2010.
This committee reported twice to the board of directors about the work it performed and the adequacy and functionality of the system of internal controls.
Compensation Committee
The Compensation Committee has the following tasks:
(i) submit recommendations and/or proposals to the board of directors and monitor their implementation of: (a) the compensation of the Chairman of the Board of Directors, the Chief Executive Officer and Directors who perform special functions within Edison or receive special assignments from time to time or serve on Company
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Committees; (b) long-term share-based or cash compensation plans and any related benefits; (c) at the request of the Board of Directors, the compensation policies applicable to senior executives of Edison or the Group. When appropriate, the Audit Committee can perform all of these tasks using the support of external consultants paid by Edison; and
(ii) review proposals by the chief executive officer concerning the compensation of the chief financial officer and the chief operating officer and render an opinion about such proposals. From time to time, the chairman of the committee, may invite employees and independent experts to attend meetings in a consulting capacity. The chairman and the chief executive officer do not attend the meeting when the committee discusses motions involving compensation of these two officers. The Compensation Committee met seven times in 2009 and held three meetings in the first six months of 2010.
Strategy Committee
The board of directors assigned to the Strategy Committee the task of developing, assessing and submitting to the board of directors strategic options for Edison and its Group companies. When appropriate, the committee may rely on the support of external consultants paid by Edison.
The chief financial officer and the chief operating officer of Edison, acting in a consulting capacity, may also attend meetings of the Strategy Committee. The chairman of the Strategy Committee and the chief executive officer may each invite another director to attend meetings in a consulting capacity. In addition, employees and independent experts may be invited to attend meetings from time to time, also in a consulting capacity.
The Strategy Committee meets on a regular basis, preferably a few days in advance of meetings of the board of directors for which it is required to provide preparatory work in its areas of expertise. The committee met six times in 2009 and held two meetings in the first six months of 2010.
For further information on the Corporate Governance see the Corporate Governance Report available on Edison's website (www.edison.it) and incorporated by reference herein (see "Information Incorporated by Reference").
Management
Board of Directors
The table below sets out the current members of Edison's board of directors. They are thirteen, one of whom was appointed by minority shareholders. Unless otherwise indicated, current directors were appointed during the Shareholders' Meeting held on 2 April 2008 and their current mandates will expire at the shareholders' meeting which approves the financial statements of Edison for the financial year ending 31 December 2010, which meeting is expected to be held by April 2011.
Name Position Date elected Giuliano Zuccoli Chairman 2 April 2008 Umberto Quadrino Chief Executive Officer 2 April 2008 Marc Boudier Director 2 April 2008 Mario Cocchi Director 2 April 2008 Gregorio Gitti Director 2 April 2008 Gian Maria Gros-Pietro Director 2 April 2008 Marco Merler Director 2 April 2008 Thomas Piquemal1 Director 29 June 2010 Henri Proglio2 Director 8 February 2010 Renato Ravanelli Director 2 April 2008 Paolo Rossetti Director 2 April 2008 Andrea Viero3 Director 12 November 2008
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Name Position Date elected Gerard Wolf Director 2 April 2008
1 Co-opted by the Board of Directors on 29 June 2010 to replace Didier Calvez, who resigned. Thomas Piquemal will remain in office until the next Edison Ordinary Shareholders' Meeting. 2 Co-opted by the Board of Directors on 8 February 2010 to replace Pierre Gadonneix, who resigned, and appointed by the Shareholders‘ Meeting of 23 March 2010. 3 Co-opted by the Board of Directors on 12 November 2008 to replace Ivan Strozzi, who resigned, and appointed by the shareholders' meeting of 31 March 2009.
All directors are domiciled for the purposes of their offices, at the Issuer‘s registered office.
The principal business activities, experience and other principal directorships, if any, of each of the member of the board of directors are summarised below.
Giuliano Zuccoli was born in Morbegno (province of Sondrio) on 12 April 1943. He took a degree in Electronic Engineering from the Milan Polytechnic in 1968. Mr. Zuccoli began his career at the steel producer Falck Group. In 1985, he was also appointed general manager of Società Nordelettrica S.p.A. Sondel an electric utility listed on the Milan Stock Exchange, where he was later appointed chief executive officer. From 1986 to 1994, he served as deputy chairman of Unapace, the Italian association of companies that generate and consume electric power. In December 1996, he was appointed as director on the board of directors of Milan's AEM S.p.A., having been nominated by the Manufacturers' Association of the Province of Sondrio. In June 1997, Mr. Zuccoli was given the power to coordinate and manage AEM's business activities. In September 1997, he was appointed chief executive officer of AEM S.p.A. and was named chairman of the board of directors in May 1999. From 1999 to 2002, he served as chairman of Fastweb S.p.A. From March 2002 to July 2006, he served as chairman of Edipower, the company that submitted the winning bid to acquire Eurogen, one of the generating companies divested by Enel , and continues to sit on its board of directors. In June 2002, he was appointed to the managing board of Assolombarda. Mr. Zuccoli has been chairman of Federelettrica since July 2000. Since July 2001, he has been a member of the Managing Board of Assonime, the association of Italian corporations. In April 2003, he was elected to the board of directors of Aar e Ticino SA di Elettricità (ATEL), a leading European energy company with operations in Switzerland, Italy, Germany, Eastern and Central Europe. In October 2003, he was re-elected chairman of Federelettrica (from January 2004, Federenergia) and, in June 2005, was appointed as Chairman of Federutility. In July 2005, he was elected Chairman of Delmi S.p.A. and is currently a Director and Chief Executive Officer of Transalpina di Energia S.r.l and Chairman of Edison. In March 2008, he was named Chairman of the Managing Board of A2A S.p.A., a company created in January 2008 as a result of the merger of AEM S.p.A.and ASM Brescia S.p.A..
Umberto Quadrino was born in Turin on 15 May 1946. He graduated with a Degree in Business Administration from Turin University in 1969. In 1970, after working at the research department of the Turin Manufacturers' Association, he joined the Accounting and Finance Department of the Fiat Group. In 1976, he became an assistant to Cesare Romiti, Fiat's chief executive officer, where he remained until 1980, when he was named Accounting and Control Manager of Fiat S.p.A. From 1982, he held management positions at the manufacturing divisions of the Fiat Group, serving first as Finance, accounting and control manager and head of international operations at Iveco (commercial vehicles division) and later, in 1987, as chief executive officer of Gilardini (industrial components division). In 1991, he returned to Fiat S.p.A., where he served as executive vice president with responsibility for coordinating the non-automotive divisions. In 1996, he was appointed chief executive officer of New Holland, Fiat S.p.A.‘s agricultural and construction equipment division. At the end of 2000, he returned to Fiat S.p.A. and was named executive vice president in charge of the following divisions: aviation (Fiat Avio), rolling stock and railways systems (Fiat Ferroviaria), engineering (Fiat Engineering), automotive components (Magneti Marelli), metallurgic products (Teksid), production systems (Comau), and the Fiat Research Center. In September 2001, following the takeover of Montedison by Italenergia (in which Fiat held a major equity interest), he was appointed Chairman both of Montedison and Edison, which were later merged into one company. Currently, he is Edison's Chief Executive Officer and director of Transalpina di Energia S.r.l.
Marc Boudier is 54 years old. He graduated in Law from Sciences Po University in Paris and is a fellow of the ENA Institute (class of 1981). He began his professional career at the French Ministry of Finance, Department of Foreign Trade Relations. In 1984, he was appointed Advisor to the French Industry and Trade Minister and, from 1985 to 1990, served as Advisor to President François Miterrand for International Economic Affairs (bilateral and multilateral trade relations, EU and G7 meetings, establishment of the BERD). Before joining EdF, he worked for nine years at the
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Vivendi Group, where he managed the International Department with responsibility for Central and Eastern Europe. In this capacity, he established, developed and headed Dalkia, currently an energy joint venture of Vivendi Environment (now named Veolia) and EdF. He joined EdF in 2001, first as manager of the group's operations in the European Union and Switzerland and, in February 2002, as Director for Continental Europe (including Germany and the countries in Central and Eastern Europe). In the spring of 2005, he was appointed Director for Europe, with responsibility for managing and developing the investments of the EdF Sa Group in Germany, Italy, Benelux, Switzerland, Austria, Spain and the countries in Central and Eastern Europe. He sits on the Boards of Directors of EnBW, SPE in Belgium, AlpiqHolding (of which he is also the Deputy Chairman), Transalpina di Energia and Edison.
Mario Cocchi was born in Niardo (BS) on 18 July 1953. He has been working at the Tassara Group since 1973. In 1973, he joined the Tassara Group, where he handled increasingly challenging assignments, rising to the post of Chief Operating Officer, which he held from 2 September 1997 to 20 September 2007, later becoming the Chief Executive Officer of Carlo Tassara Spa, the Tassara Group‘s parent company. He also serves as Chairman or Chief Executive Officer of various subsidiaries and affiliates of Carlo Tassara Spa and is Sole Director of Fincamuna S.p.A. and Chairman of Energia e Servizi Srl. He was the principal promoter of the establishment of E.L.V.A. S.p.A., a consortium engaged in the distribution of electric power. He was a director of and served on the strategy committee of Edison from October 2002 until November 2005. On 11 March 2008, he was appointed to the Managing Board of A2A S.p.A. and was re-elected to this role in June 2009. On 1 May 2005, he was honoured with the Star of Labor Merit, which was given to him personally by Giulio Tremonti, Finance Minister of the Republic of Italy. In 2009, he was elected to the Board of Directors of Hopa S.p.A.
Gregorio Gitti was born in Brescia on 21 June 1964. He holds a degree in Law from the University of Pavia. On 16 January 1991, he was appointed researcher for the Private Law scientific-disciplinary area at the Pavia Law School. On 1 November 1999, he was appointed associate professor of Institutions of Private Law at the School of Economics of the S. Cuore Catholic University of Milan. On 1 November 2000, he was appointed extraordinary professor of Institutions of Private Law at the School of Economics of the University of Brescia. On 10 September 2003 he was named tenured professor of Institutions of Private Law at the Law School of the University of Milan, effective as of 1 November 2003. Mr. Gitti is founding partner of Studio Legale Gitti – Pavesi, established in Milan on December 2002, which specialises in providing support, in court proceedings and in extrajudicial settings, in the areas of civil law, commercial law, corporate law and financial and banking market law. He has been chairman of Metalcam S.p.A. (a company of the Tassara Group) since March 2008, and Director of Ansaldo STS S.p.A. and Hopa S.p.A. since April 2008 and of Sabaf S.p.A. since April 2009.
Gian Maria Gros-Pietro was born in Turin on 4 February 1942. He is Professor of Economics at the LUISS Guido Carli University in Rome, Director of the University's Economics and Business Sciences department and has published numerous works on economic and industrial subjects. Since July 2005, he has been a member of the Italian National Economic and Labour Council (CNEL). He is a member of the Managing Board and Executive Committee of Confindustria and Chairman of Federtrasporto, the Italian federation of transportation companies that are members of Confindustria. From 1997 to 1999, he served as Chairman of IRI and was ENI's Chairman from November 1999 to May 2002. From 1974 and 1995, he managed CERIS, the most important institute within CNR. He has been Chairman of the Atlantia Group (formerly Autostrade S.p.A.) from June 2002 to April 2010. He also serves as an independent Director of Fiat, Banca Piccolo Credito Valtellinese S.C.p.A. and of Caltagirone S.p.A. and is Chairman of Credito Piemontese.
Marco Merler was born in Trento, on 23 June 1965. He holds a degree in Economics and Business Administration from the University of Trento. He is licensed to practice as a certified public accountant and listed in the Register of Independent Auditors. From 1991 to 1998, he worked as an instructor in the context of post-graduate courses organized by several institutions and funded by the European Social Fund, mainly in the areas of management information technology and valuation of financial instruments He was also contractual professor for the securities market economics course at the School of Economics of the University of Trent in the 1996/1997 academic year. Following his degree dissertation, he collaborated in the design and implementation of a result assessment and financial planning IT system for Mediocredito del Trentino Alto-Adige. He continued this activity collaborating with and providing consulting support to small and medium-size businesses in the areas of currency and company management systems, financial management systems and management reporting in general. Mr. Merler was director of Autostrada del Brennero S.p.A. from December 1998 until May 2004, director of Aeroporto Caproni S.p.A. since May 1999; deputy chairman from May 2000 to September 2001 of Aeroporto Caproni S.p.A.; director of Infostrutture del Trentino since June 2000 and, following a merger, director of Alpikom until December 2009; director of Trentino Servizi S.p.A. since September 2001 and Chief Executive Officer with full operational authority from June 2004 until the company‘s merger with Dolomiti Energia in March 2009; director of SET Distribuzione S.p.A. from 2005 until March 2009. He is chairman of Trenta Spa since 2005 and Chief Executive Officer since March 2009; Chief Executive Officer of Dolomiti Energia
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S.p.A. since March 2009; Chairman of Multiutility Spa since October 2009; member of the Board of Statutory Auditors of ISA S.p.A. since May 1999; member of the Board of Statutory Auditors of Delmi S.p.A. from 2005 to 2008.
Thomas Piquemal was born in Lavelanet (France) on 13 May 1969. He is a graduate at the "Ecole Supérieure des Sciences Economiques et Commerciales" (ESSEC – College for Economics and Business) and is the ―Group Senior Executive Vice President, Finance‖ of French Group EDF. Thomas Piquemal started his career in 1991 with audit firm Arthur Andersen and in 1995 he joined the Mergers and Acquisitions Department of the bank Lazard Frères. In this context, he was involved in the major financial and strategic transactions of Veolia, in particular the company's capital restructuring and the EDF/Dalkia partnership. In 2008, he took over responsibility in London for the strategic partnership signed between Lazard and the American investment fund Apollo. In January 2009, he joined Veolia Environnement as Senior Executive Vice President in charge of Finance and joined the group‘s executive committee. In this role he devoted his efforts to debt reduction, in particular through an asset disposal programme. In addition, in conjunction with the Caisse des Dépôts (French bank for official deposits) he managed the merger of their respective subsidiary companies, Transdev and Veolia Transport, to create a world leader in collective passenger transport and sustainable mobility.
Henri Proglio was born in Antibes (France) on 29 June 1949. He obtained a MBA, Master of Business Administration in 1971. In 1973, he joined Compagnie Générale des Eaux ("CGE"). In 1990, he was named President and General Manager of CGEA – Compagnie Générale d‘Entreprises Automobiles, which operates all of the CGE group‘s janitorial and transportation services. In 1991, he became Director of CGE. In 1996, he was appointed to the Executive Committee and was named Deputy General Manager in 1997. In 1999, he became President of CGEA, Director and Executive General Manager of Vivendi Water, President of Compagnie Générale des Eaux and Delegated General Manager of Vivendi. In 2000, he was appointed Chairman of the Executive Committee of Vivendi Environnement, Vivendi Water, Onyx, Connex and Dalkia. In 2003, he became President and General Manager of Veolia Environnement. In November 2009, he was elected Chairman of the Board of Directors of Veolia Environnement and was appointed President and General Manager of EDF. He is a Director of CNP Assurances, Natixis and Dassault Aviation. He was appointed Officer of the Legion of Honour in 2006, Commander of the National Order of Merit in 2009 and new Chairman of Transalpina di Energia S.r.l., the holding company jointly controlled by EDF and Delmi, which owns 61.3% of Edison, in 2010.
Renato Ravanelli was born in Milan in 1965. He holds a degree in business administration from Università Cattolica of Milan. In 1996, he joined AEM as manager of the economic research department. Subsequently, he was in charge of Strategic Group Planning and was later named chief financial officer. At the AEM Group, he also served as chief executive officer and managing director of AEM Trading S.r.l. In 2005, he was appointed group chief financial officer of Edison S.p.A. and served in this capacity until July 2007. He is currently General Manager, Corporate and Market Area, of the A2A Group and member of the Managing Board of A2A S.p.A.
Paolo Rossetti was born in Brescia on 25 June 1951, graduated from Politecnico University in Milan in 1975 with a degree in mechanical engineering (electronic tools) and was licensed to practice as a professional engineer in 1976. From 1976 to 1981 he worked for Ocean Spa Group as Production Quality Manager (1976-1977); Product Manager for the European and U.S. markets (1977-1980); Deputy Director for product design and relations with major customers (1980-1981); member of the ANIE international certification commission and of similar commissions for Europe (BSI, VDE, AFNOR and Kema) and the United States (UL). From 1981 to 2007 he was in ASM S.p.A., now A2A S.p.A.; Manager of the Organizational Development and Training Department (1981-1984); Project Manager of the Sintesi S.p.A.project (1984-1987); Head of Personnel Recruitment, Training and Development (1987-1992); Head of Management Control, Economic Analysis, Organization and Quality (1993-1995); Manager of the Personnel Department (1996-1999); Director of the Corporate Function (2000-2007) and, since 2002, also Deputy General Manager. Since 1 December 2009 he has been a member of the Board of Governors of FederUtility and Chairman of Commision for Energy Network of FederUtility.
Andrea Viero is 45 years old. He holds a degree in Business Economics from the Luigi Bocconi University in Milan and a Diploma from the Italian Academy of Business Economics. Since 1989 he has been a professor at the Business Management School of the L. Bocconi University, in Milan. From 1989 to 1996, he has been contract professor of Public Administration Economics at Luigi Bocconi University in Milan. Mr. Viero collaborated on the reorganisation of offices and accountant systems of several municipalities for Italian National Highway Administration (formerly ANAS) and was involved in project financing in the project Emster in Brandenburg Land. From 1992 to 1993 he was a professor at New York University in New York City. From 1996 to 2008 he served as General Manager of Municipality of Trieste (since 1996), Central Manager of the Municipality of Milan (since 2001), General Manager of the Municipality of Gorizia (since 2002), and a General Manager of Independent Region of Friuli Venezia Giulia (since
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2004). In May 2008, he was appointed Chief Executive Officer of Enìa S.p.A.and, in this capacity, managed the merger of Enìa S.p.A.and Iride S.p.A.
Gérard Wolf is 55 years old. He is an agricultural engineer and a graduate of the National Institute of Agriculture and the Institut d'Etudes Politiques in Paris. He joined EDF in 1998, serving as Executive Coordinator for the CEO‘s office until March 2000, when he was appointed Executive Vice President for Group Coordination (2001-2002) and Executive Vice President for the Group‘s business networks (2003-2004). From November 2004 until 2005, he was in charge of Group Development and Major Projects for the EDF Group. Since March 2006, he has served as Senior Executive Vice President of the EDF Group with responsibility for international operations. Between 1986 and 1986, before joining EDF, Gérard Wolf served in various positions at the Ministry of Internal Affairs in various regions. Concurrently with these assignments, he served on the staff of the Minister of Defense, handling relations with defense contractors. Between 1984 and 1986, he was a member of various teams at the Department of Overseas Territories, in Paris and Nouméa.
Board of Directors' other offices
The table below lists the offices on the boards of directors, boards of statutory auditors, supervisory committees or other positions other than those within Edison held by the members of Edison's board of directors.
Name Post Held Place and End of term Post held at other companies date of birth of office(a)
Giuliano Zuccoli Chairman(b) Morbegno, 12/31/2010 Chairman Managing Board of A2A S.p.A. 04/12/1943 Deputy Chairman of Banca Piccolo Credito Valtellinese S.C.p.A. Director of Delmi S.p.A. Chairman of Ecodeco S.r.l. Director of EPCG - Elektroprivreda Crne Gore AD Nikšić Chief Executive Officer of Transalpina di Energia S.r.l.
Umberto Chief Torino, 12/31/2010 Director of Edipower S.p.A. Quadrino Executive 05/15/1946 Chairman of Edison Trading S.p.A. Officer(b) Director of Transalpina di Energia S.r.l.
Marc Boudier Director(b)(c) Sallanches, 12/31/2010 Deputy Chairman of ALPIQ Holding Sa 04/23/1954 Chairman of EDF Belgium Director and Chief Executive Officer of EDF International Sa Chairman of EDF Péninsule Ibérique Member of the Supervisory Board of EnBW Ag Director of SPE Sa Director of Transalpina di Energia S.r.l. Director of SPE Power Sa anziché Chairman.
Mario Cocchi Director(c) Niardo, 12/31/2010 Member of the Managing Board of A2A S.p.A. 05/18/1953 Chief Executive Officer of Carlo Tassara S.p.A. Director of Carlo Tassara International S.p.A. Chairman of Energia e Servizi S.r.l. Sole Director of Fincamuna S.p.A. Director of Finanziaria di Valle Canonica S.p.A. Director of HOPA S.p.A. Chief Executive Officer of Metalcam S.p.A.
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Name Post Held Place and End of term Post held at other companies date of birth of office(a)
Gregorio Gitti Director(c)(e) Brescia, 12/31/2010 Director of Ansaldo STS S.p.A. 06/21/1964 Director of Bassilichi S.p.A. Director of Flos S.p.A. Director of HOPA S.p.A. Director of Librerie Feltrinelli S.r.l. Chairman of Lombarda 24 – 7 Finance S.r.l. Chairman of Lombarda Lease Finance 2 S.r.l. Chairman of Lombarda Lease Finance 3 S.r.l. Chairman of Lombarda Lease Finance 4 S.r.l. Chairman of Metalcam S.p.A. Director of Sabaf S.p.A. Deputy Chairman of Tethys S.r.l. Chairman of di UBI Finance 2 S.r.l. Chairman of GZ Corporate Finance S.r.l. Director of Skira Editore S.p.A.
Gian Maria Gros- Director(c)(d) Torino, 12/31/2010 Chairman of Credito Piemontese S.p.A. Pietro (e) 02/04/1942 Director of Fiat S.p.A. Director of Banca Piccolo Credito Valtellinese S.C.p.A. Director of Caltagirone S.p.A.
Marco Merler Director(d) Trento, 12/31/2010 Director of AGS S.p.A. 06/23/1965 Director of Delmi S.p.A. Chief Executive Officer of Dolomiti Energia S.p.A. Director of Transalpina di Energia S.r.l. Chairman and Chief Executive Officer of Trenta S.p.A. Chairman of Dolomiti Edison Energy S.p.A. Statutory Auditor of Istituto Atesino di Sviluppo S.p.A. Chairman of Multiutility S.p.A.
Thomas Piquemal Director(d) Lavelanet, 12/31/2010 Member of the Executive Committee of Group 05/13/1969 EDF Director of EDF Energy Holdings Ltd Director of EDF Energy UK Ltd Director of EDF Energies Nouvelles Sa Member of the Supervisory Board of EnBW Ag Deputy Chairman of the Supervisory Board of ERDF Member of the Supervisory Board of RTE EDF Transport Director of Fimalac Director of Transalpina di Energia Srl
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Name Post Held Place and End of term Post held at other companies date of birth of office(a)
Henri Proglio Director Antibes 12/31/2010 Chairman and Chief Executive Officer of EDF (France), Sa 06/29/1949 Director of CNP Assurances Sa Director of Dassault Aviation Sa Chairman of EDF Energy Holdings Ltd Chairman of EDF Energy UK Ltd Director of Natixis Sa Director of FCC Fomento de Construciones y Contratas Sa Chairman of Transalpina di Energia Srl Chairman and Chief Executive Officer of Veolia Environnement S.A.
Renato Ravanelli Director(b) Milano, 12/31/2010 General Manager and Member of the Managing 04/14/1965 Board of A2A S.p.A. Sole Director of A2A Energia S.p.A. Sole Director of A2A Trading S.r.l. Chairman of ASM Energia e Ambiente S.r.l. Director of Delmi S.p.A. Director of Dolomiti Energia S.p.A. Director of Ecodeco S.r.l. Director of Edipower S.p.A. Director of Hydros S.r.l. Chairman of Selene S.p.A. Director of Transalpina di Energia S.r.l. Director of PremiumGas S.r.l. Director of EPCG - Elektroprivreda Crne Gore AD Nikšić
Paolo Rossetti Director Brescia, 12/31/2010 General Manager and Member of the Managing 06/25/1951 Board of A2A S.p.A. Sole Director of A2A Calore e Servizi S.r.l. Chairman of A2A Reti Elettriche S.p.A. Chairman of A2A Reti Gas S.p.A. Director of Aprica S.p.A. Director of Delmi S.p.A. Director of Ecodeco S.r.l. Director of Edipower S.p.A. Director of Transalpina di Energia S.r.l.
Andrea Viero Director(d) Marostica, 12/31/2010 Director with responsibility for Finance, 04/07/1964 Financial Statements, M&A and General Manager of IREN S.p.A. Chief Executive Officer of IREN Emilia S.p.A. Chief Executive Officer of IREN Ambiente S.p.A. Chief Executive Officer of Sinergie Italiane S.r.l. Director of Transalpina di Energia S.r.l.
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Name Post Held Place and End of term Post held at other companies date of birth of office(a)
Gerard Wolf Director Geneva, 12/31/2010 Member Supervisory Board of Dalkia 07/04/1954 Director of Dalkia International Director of EDF Energy Holdings Ltd Director of EDF Energy UK Ltd Director and General Manager of EDF International S.A. Director of EDF Trading Member of the Sea Acquisitions Plc Director of Transalpina di Energia Srl
______(a) The term of office ends when the Shareholders‘ Meeting approves the financial statements for the year ended on the date shown below; (b) Member of the Strategy Commitee; (c) Member of the Compensation Commitee; (d) Member of the Audit Commitee; (e) Member of the Oversight Board (Legislative Decree no. 231/2001).
Independent directors
The current board of directors includes three directors who meet statutory independence requirements and qualify as independent directors in accordance with the guidelines provided by the Code. As at the date of this Base Prospectus the independent directors are Mario Cocchi, Gregorio Gitti e Gian Maria Gros-Pietro. The board of directors chose not to designate a lead independent director, as, in its opinion, it is not currently required by the Code, since it did not believe that the Code's requirements for such a designation exist at this time.
The Code‘s requirement that independent directors constitute a majority of the members of committees of the board of directors was complied only with respect to the compensation committee.
Audit committee
The current audit committee was appointed on 13 May 2008 and is comprised of four non-executive Directors, including one independent director. Its members are: Gian Maria Gros-Pietro (independent member), Marco Merler, Thomas Piquemal (who replaced Didier Calvez as from 29 June 2010) and Andrea Viero. The audit committee appointments are in accordance with the guidelines of the Code, which recommends that at least one of its members should be experienced in accounting and financial issues, which is met by its chairman, Thomas Piquemal.
Compensation committee
The current compensation committee was appointed on 13 May 2008 and is comprised of four non-executive directors, including three independent directors. Its members are Gregorio Gitti (chairman and independent member), Marc Boudier, Mario Cocchi (independent member) and Gian Maria Gros-Pietro (independent member).
Strategy committee
The current strategy committee was appointed on 13 May 2008. The strategy committee is comprised of four non- independent directors, three of whom do not have executive authority. Its members are Giuliano Zuccoli (chairman), Marc Boudier, Umberto Quadrino (director with executive authority) and Renato Ravanelli.
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Officers
The table below sets forth Edison's current executive officers who are not also directors, together with their representative positions and the year they were appointed to such position at the date of this Base Prospectus.
Year joined Year of appointment Name Position the Group to current position
Pierre Vergerio Chief Operating Officer 2008 2008
Marco Andreasi Chief Financial Officer 2007 2007
The principal business activities and experience of Edison's executive officers as listed above are briefly summarised below.
Pierre Vergerio was born in Rabat (Marocco) on 9 November 1951. He is a graduated from France‘s Ecole Nationale Supérieure d’Electrotechnique in Grenoble where he took a degree in Engineering. Before joining Edison he spent four years as chief executive officer of Fenice S.p.A., an Italian incorporated company that is part of the EDF Group that provides cogeneration and clean energy services to major industrial clients. Pierre Vergerio started his career within the EDF Group in 1975, in the electricity transmission and dispatching network division, then subsequently in its international division. He transferred to the Lebanon in 1993 in order to lead the rebuilding of the national electricity system which was undertaken by EDF. On his return to France, he managed EDF's Strasbourg operating unit for four years, before being named managing director of EDF‘s Egyptian subsidiary. Two 700MW methane-fuelled thermal power plants were successfully commissioned under his leadership. Pierre Vergerio was appointed chief operating officer of the Edison Group on 1 November 2008.
Marco Andreasi was born in Milan on 8 may 1960, after taking a degree in Economics from Università Cattolica di Milano, was a researcher for the faculty of Economics and Political Science in the same university. He started his career in Costruzioni Aeronautiche Giovanni Agusta S.p.A. as a function analyst in the financial control division. In 1988, he joined Andersen Consulting where, as part of the "financial" group, he worked on re-engineering and internal control model structuring for major industrial groups. In 1994, he joined Kraft Jacobs Suchard S.p.A. as a finance project manager and subsequently became group accounting manager and group controller with responsibility for planning and control. In August 1999, Mr. Andreasi was appointed as administration, finance and control director in Pirelli Cavi e Sistemi Italia S.p.A., where his responsibilities included integration of assets acquired from Siemens and BICC. In 2000, he was appointed as chief financial officer of Pirelli Cavi e Sistemi Energia S.p.A. In 2002, he joined Techint S.p.A., the holding company of the Techint group, a worldwide leading operator in engineering and technology for the mining, metallurgic and health industries, where he was appointed chief executive officer for administration control and general affairs. Besides planning and control, administration, M&A, tax planning, internal audit, legal affairs and insurance, Andreasi oversaw the Techint's restructuring, the acquisition, the reorganisation and the disposal of important assets as well as the establishment of certain foreign subsidiaries. On 8 November 2007, Mr. Andreasi was appointed as chief financial officer of Edison. From 1987 to 2004 he was contractual professor of information systems for the faculty of Economics in the Università Cattolica in Milan. Moreover, Andreasi is a partner of ANDAF, the National Association of Administrative and Financial Directors, and member of the Advisory Board of "Executive Master of Accounting" at SDA Bocconi in Milan.
Transactions with related parties and conflicts of interest
Since July 2005, the board of directors has had the sole discretion over decisions regarding contracts for the purchase or sale of natural gas, electric power, other raw materials and securities representing green certificates or rights to release CO2 emissions involving an amount greater than euro 30 million per transaction or series of related transactions, or any other contract, acts or transactions of any amount or type (including those covered by the powers granted to the chief executive officer) that involve, either directly or indirectly, the following: (i) TdE; (ii) shareholders of TdE; (iii) shareholders of shareholders of TdE; (iv) one or more related parties (as defined by the International Accounting Standards); (v) other companies or entities that control, are controlled by or are under the joint control of the abovementioned parties; and (vi) other companies or entities in which the abovementioned parties hold an equity interest.
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If a transaction does not require the prior approval of the board of directors and falls within the scope of the power awarded to the director affected by it, including when the transaction is being executed by means of a special power of attorney issued by the same director, such director is required to refrain from executing the transaction and cause his representatives to do the same, instead submitting the transaction to the board of directors for prior approval. In all cases, the applicable resolution of the board of directors must contain an adequate explanation of the reasons for the transaction and of the benefits that the transaction would have for Edison.
Due to the composition of the board of directors and due to the fact that the directors who are not independent belong to companies that are part of Edison's chain of control and operate, for the most part, in the same market as Edison, the board of directors has established a practice whereby, at the beginning of each meeting, it reviews the posts held by non-independent directors in their respective companies and the criteria by which they were appointed to those posts.
Board of statutory auditors
The current board of statutory auditors was appointed during the shareholders' meeting held on 2 April 2008. Its current term of appointment is due to expire at the shareholders' meeting held to approve Edison's annual financial statements as at 31 December 2010.
The following table sets out the current members of the board of statutory auditors.
Name Position Alfredo Fossati Chairman Angelo Maria Palma Standing auditor Leonello Schinasi Standing auditor Giuseppe Cagliero Alternate auditor Alessandro Catapano Minotti Alternate auditor Leonardo Dabrassi Alternate auditor
As required by law, the chairman is the auditor elected by the minority shareholders.
Under Italian law, statutory auditors may be elected by shareholders for a term of up to three years and may be re- elected. Members may only be removed for just cause and with the approval of an Italian court.
Board of Statutory Auditors' other offices
The table below lists the offices on the boards of directors, boards of statutory auditors, supervisory committees or other positions other than those within Edison held by the members of Edison's board of statutory auditors.
Name Post Held Place and End of term Post held at other companies date of of office(a) birth
Alfredo Fossati Chairman Monza, 12/31/2010 Chairman Board Statutory Auditors Benelli Armi 08/02/1958 S.p.A. Director of Carlo Tassara S.p.A. Chairman Board Statutory Auditors Castello Srl (in liquidation) Chairman Board Statutory Auditors Credione Società di Mediazione Creditizia S.p.A. Chairman Board Statutory Auditors E.C.P.I Srl Statutory Auditor of Energetic Source S.p.A. Sole Director of Feam One Srl Chairman Board Statutory Auditors Flyenergia S.p.A. Statutory Auditor of Hewlett Packard Italiana Srl Chairman Board Statutory Auditors Hewlett Packard
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Name Post Held Place and End of term Post held at other companies date of of office(a) birth
Distributed Computing Services Srl Chairman Board Statutory Auditors HP Enterprise Service Italiana S.p.A. Sole Director of Giardino 8 Srl Director of Lavoro 2 S.p.A. Director of Lavoro 3 S.p.A. Chairman Board Statutory Auditors Linara Srl Statutory Auditor of Marazzi Group S.p.A. Chairman Board Statutory Auditors Mediterranean Cement Company S.p.A. Director of Metalcam S.p.A. Sole Director of Mirage Srl Sole Director of Milival Srl Statutory Auditor of Mittel S.p.A. Chairman Board Statutory Auditors Mittel Corporate Finance S.p.A. Chairman Board Statutory Auditors Permira Associati S.p.A. Chairman Board Statutory Auditors Permira SGR S.p.A. Chairman Board Statutory Auditors Valentino Fashion Group S.p.A. Chairman Board Statutory Auditors Valentino S.p.A. Chairman Board Statutory Auditors VFG Distribuzione S.p.A. Chairman Board Statutory Auditors VFG Italia Srl
Angelo Maria Statutory Como, 12/31/2010 Chairman Board Statutory Auditors Comense Beni Palma Auditor 10/06/1940 Stabili S.p.A. Deputy Chairman of Credito Piemontese S.p.A. Director of Italplastic Industriale S.p.A. Director of Lechler S.p.A. Director of Rigamonti Salumificio S.p.A. Chairman Board Statutory Auditors Seco Tools S.p.A. Director of Sviluppo Como S.p.A. Sole Director of Tritone Srl Director of Celleografia Gerosa S.p.A. Deputy Chairman of Banca Piccolo Credito Valtellinese Scpa
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Name Post Held Place and End of term Post held at other companies date of of office(a) birth
Leonello Statutory Cairo, 12/31/2010 Chairman of the Board Statutory Auditors of A. Schinasi Auditor 06/05/1950 Raymond Italiana S.r.l. Chairman of the Board Statutory Auditors of Aran World S.r.l. Statutory Auditor of Bticino S.p.A. Chairman of the Board Statutory Auditors of Fontex Chairman of the Board Statutory Auditors of Micron Technology Italia S.r.l. Chairman of the Board Statutory Auditors of MNTC Holding S.r.l. Chairman of the Board Statutory Auditors of Tyco Electronics Amp Italia Products S.p.A. Statutory Auditor of Transalpina di Energia S.r.l. Chairman of the Board Statutory Auditors of Varian S.p.A. Chairman of the Board Statutory Auditors of WGRM Holding 4 S.p.A.
Leonardo Alternate Brescia, 12/31/2010 Chairman of the Board Statutory Auditors of Dabrassi Auditor 11/08/1946 GESITALIA S.r.l. Statutory Auditor of Parco Eolico di Florinas S.r.l. Statutory Auditor of E.ON Italia Power & Fuel S.r.l.
Giuseppe Alternate Turin, 12/31/2010 Statutory Auditor of Avenance Italia S.p.A. Cagliero Auditor 02/28/1965 Chairman Board Statutory Auditors Avenance Investimenti S.p.A. Chairman Board Statutory Auditors Barberis Srl Chairman Board Statutory Auditors Concerta S.p.A. Statutory Auditor of Cooper-Standard Automotive Italy S.p.A. Chairman Board Statutory Auditors Copra Ristorazione Srl Statutory Auditor of CSA Italy Holding Srl Statutory Auditor of Elichef Holding S.p.A. Chairman Board Statutory Auditors Finairport Service Srl Statutory Auditor of Fondazioni Speciali Srl Statutory Auditor of Globalchef Srl Statutory Auditor of Hypertac S.p.A. Chairman Board Statutory Auditors Italterra Srl Chairman Board Statutory Auditors Liabel Spa Statutory Auditor of Meridia Spa Statutory Auditor of Mychef Ristorazione Commerciale S.p.A. Statutory Auditor MNTC Holding Srl
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Name Post Held Place and End of term Post held at other companies date of of office(a) birth
Alessandro Alternate Rome, 12/31/2010 Chairman of the Board Statutory Auditors of Asso Catapano Auditor 10/10/1968 Werke S.r.l. Minotti Statutory Auditor of CIV S.p.A. Statutory Auditor of FINDA S.r.l. Chairman of the Board Statutory Auditors of Iron Mountain Italia Statutory Auditor of Immobiliare Celsa S.r.l. Statutory Auditor of Lavoro 2 S.p.A. Statutory Auditor of Servizi Immobiliari 2000 S.r.l. Statutory Auditor of Sicre S.r.l. Statutory Auditor of Sviluppo International RE S.p.A. Statutory Auditor of Hewlett Packard Distributed Computing Services Srl Statutory Auditor of LINARA Srl
______(a) The term of office ends when the Shareholders‘ Meeting approves the financial statements for the year ended on the date shown below.
Independent auditors
The current independent auditors of Edison are PricewaterhouseCoopers S.p.A. (―PWC‖ or the ―Auditors‖), with registered office at Via Monte Rosa, 91 Milan.
The Auditors' current appointment will expire on the date of the shareholders' meeting convened to approve Edison's annual financial statements as at 31 December 2010. As provided by the current temporary provisions of Legislative Decree No. 303/2006, the expiry date is in accordance with the shareholder resolution dated 6 April 2007, which approved the extension of the Auditors' term of appointment, which was due to expire upon the approval of Edison's annual financial statements as at 31 December 2007, by a further three years. As a result, the Auditors' total term of appointment will be nine years, which is the maximum period allowed by law.
PWC is registered in the Special Register of auditing firms (Albo speciale delle società di revisione) held by CONSOB.
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The Edison Group
As at 10 September 2010 the Edison Group is made up as set forth in the chart below.
TdE, Edison‘s controlling shareholder, does not exercise management and coordination authority over Edison. TdE was established as an equity investment holding company without an independent organizational structure. Consequently, it does not exercise single management authority over Edison, owing also to the fact that the corporate governance agreements, by establishing TdE as a joint venture, granted to the parties to the agreements symmetrical and equal powers with regard to the composition and operating procedures of the corporate governance and oversight bodies of TdE and Edison.
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CAPITALISATION
The following table sets out the capitalisation on a consolidated basis of Edison as at 30 June 2010. This information has been extracted from and should be read in conjunction with, and is qualified in its entirety by reference to, the unaudited consolidated half-yearly financial statements of the Issuer as at and for the six months ended 30 June 2010 which are incorporated by reference herein.
As at 30 June 2010 In millions of Euro Unaudited Long-term debt Bonds – non-current portion ...... 1,695 Non-current bank loans ...... 1,464 Amounts due to other lenders – non-current portion ...... 53 Total long-term debt ...... 3,212 Short-term debt Bonds – current portion ...... 781 Current loans payable ...... 674 Total short-term debt ...... 1,455
Shareholders’ equity Share capital ...... 5,292 Equity reserves ...... - Other reserves ...... 1,681 Reserves for currency translations ...... 8 Retained earnings ...... 884 Profit for the period ...... 142 Group interest in shareholders’ equity ...... 8,007 Minority interest in shareholders‘ equity ...... 176 Total shareholders’ equity ...... 8,183 Total capitalisation ...... 12,850
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SUMMARY FINANCIAL INFORMATION
Set out below is summary balance sheet and income statement information of the Issuer, which is derived from:
(i) the audited consolidated financial statements of the Issuer as at and for the years ended 31 December 2009 and 2008; and
(ii) the unaudited consolidated half-yearly financial statements of the Issuer as at and for the six months ended 30 June 2010 and 2009.
The annual and half-yearly financial statements referred to above have been prepared in accordance with International Financial Reporting Standards, as adopted by the European Union under Regulation (EC) 1606/2002. Such financial statements, together with the audit and review reports of PricewaterhouseCoopers S.p.A. (as applicable) and the accompanying notes, are incorporated by reference into this Base Prospectus. PricewaterhouseCoopers S.p.A. has audited the annual consolidated financial statements of the Issuer referred to above and has performed a limited review of the half-yearly financial statements of the Issuer in accordance with CONSOB Resolution No. 10867 of 31 July 1997. PricewaterhouseCoopers S.p.A is also a member of ASSIREVI, the Italian association of auditing firms. The financial information below should be read in conjunction with, and is qualified in its entirety by reference to, such financial statements, reports and the notes thereto. See also "Information Incorporated by Reference".
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CONSOLIDATED BALANCE SHEETS
As at As at As at As at 30 June 31 December 31 December 31 December 2010 2009 2009 2008 In Millions of euro Unaudited Unaudited Restated(*)(§) Audited Audited Property, plant and equipment ...... 7,431 7,445 7,517 7,416 Investment property ...... 11 12 12 14 Goodwill ...... 3,538 3,538 3,538 3,521 Hydrocarbon concessions ...... 1,230 1,259 1,259 273 Other intangible assets ...... 112 108 36 47 Investments in associates ...... 47 43 43 51 Available-for-sale investments ...... 297 304 304 248 Other financial assets ...... 93 98 98 92 Deferred tax assets ...... 120 103 103 84 Other assets ...... 103 21 21 63 Total non current assets ...... 12,982 12,931 12,931 11,809 Inventories ...... 273 308 308 304 Trade receivables ...... 2,028 1,862 1,862 2,330 Current tax assets ...... 30 33 33 14 Other receivables ...... 546 545 545 422 Current financial assets ...... 70 30 30 26 Cash and cash equivalents ...... 338 748 748 188 Total current assets ...... 3,285 3,526 3,526 3,284 Assets held for sale ...... - - - - Total assets ...... 16,267 16,457 16,457 15,093 Share capital ...... 5,292 5,292 5,292 5,292 Equity reserves ...... - - 703 480 Other reserves ...... 1,681 1,830 1,127 1,171 Reserve for currency translation...... 8 4 4 (3) Retained earnings (Loss carry forward) ...... 884 711 711 623 Profit (Loss) for the period ...... 142 240 240 346 Group interest in shareholders’ equity ...... 8,007 8,077 8,077 7,909 Minority interest in shareholders‘ equity ...... 176 177 177 164 Total shareholders’ equity...... 8,183 8,254 8,254 8,073 Provision for employee several indemnities and provision for pensions ...... 63 64 64 65 Provision for deferred taxes ...... 579 584 584 519 Provision for risks and charges ...... 811 837 837 777 Bonds ...... 1,695 1,199 1,199 1,198 Long-term borrowings and other financial 1,517 2,184 2,184 liabilities ...... 1,101 Other liabilities ...... 28 30 30 30 Total non current liabilities ...... 4,693 4,898 4,898 3,690 Bonds ...... 781 721 721 9 Short-term borrowings ...... 674 611 611 899 Trade payables ...... 1,523 1,469 1,469 1,659 Current taxes payable ...... 20 38 38 54 Other liabilities ...... 393 466 466 709 Total current liabilities ...... 3,391 3,305 3,305 3,330 Liabilities held for sale ...... - - - - Total liabilities and shareholders’ equity ...... 16,267 16,457 16,457 15,093
(*) Source: unaudited financial statements of the Issuer as at 30 June 2010. (§) The data for "Property, plant and equipment" and "Other intangible assets" are being presented merely for comparative purposes to reflect the adoption of IFRIC 12.
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CONSOLIDATED INCOME STATEMENTS
Six months Six months Year ended Year ended Year ended ended ended 31 December 31 December 31 December 30 June 2010 30 June 2009 2009 2008 2008 In Millions of euro (except per Unaudited share information) Unaudited Unaudited Audited Restated(*)(§) Audited Sales revenues ...... 5,087 4,589 8,867 10,064 11,066 Other revenues and income ...... 268 226 517 665 684 Total net revenues ...... 5,355 4,815 9,384 10,729 11,750 Raw materials and service used ...... (4,602) (3,967) (7,673) (8,863) (9,884) Labour costs ...... (127) (116) (240) (223) (223) EBITDA ...... 626 732 1,471 1,643 1,643 Depreciation, amortization and write-downs ...... (362) (378) (772) (782) (782) EBIT...... 264 354 699 861 861 Net financial income/(expenses) ...... (51) (80) (156) (100) (100) Income from (expense on) (1) 1 (3) - equity investments ...... - Other income (expenses), net ...... 30 2 (11) (31) (31) Profit before taxes ...... 242 277 529 730 730 Income taxes...... (96) (150) (278) (379) (379) Profit (Loss) from continuing operations ...... 146 127 251 351 351 Profit (Loss) from discontinuing operations ...... - - - (4) (4) Profit (Loss) for the period ...... 146 127 251 347 347 Broken down as follows: Minority interest in profit (loss) ...... 4 5 11 1 1 Group interest in profit (loss) ...... 142 122 240 346 346
(*) Source: audited financial statements of the Issuer as at 31 December 2009. (§) Net revenues and raw materials and services used reflect a new presentation of trading activities that recognizes only the resulting "trading margin" (net presentation).
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REGULATORY FRAMEWORK AND MARKET OVERVIEW
The principal legislative and regulatory measures that have had and/or may have an impact on the various businesses of the Group as well as the main Italian laws and regulations relevant for the Edison‘s business activities are summarised below.
Hydroelectric power production
In accordance with Legislative Decree No. 79 of 16 March 1999 (―Implementation of Directive 96/92/CE regulating the internal market of electric power‖) (the ―Bersani Decree‖) as amended by Law No. 266 of 23 December 2005 (―Regulations concerning the short and long-term Budget‖) (the ―2006 Budget Law‖) and Law No. 122 of 30 July 2010 (―Law No. 122/2010‖, which converted into law, with amendments, Law Decree No. 78 of 31 May 2010 (―Urgent measures concerning the financial stabilization and business competitiveness‖)), the granting of concessions for large-scale diversions of water for hydroelectric power plants (i.e. those with an average nominal power higher than 3 MW) is subject to a public tender procedure. The provisions will be enacted by means of a specific Ministerial Decree, which is still to be issued.
Originally, the 2006 Budget Law provided for the introduction of a 10-year extension of existing concessions. However, on 14 January 2008, the Italian Constitutional Court ruled that the 10-year extension of concessions was unconstitutional.
Pursuant to article 12 of the Bersani Decree, new concessions (i.e. concessions granted after the entry into force of the Bersani Decree) shall last for a period of 30 years, whereas expired concessions or existing concessions that are due to expire prior to 31 December 2010 will be extended until such date. Where a concession expires before the new concession-holder has been actually appointed, such concession will be extended, on the same terms and conditions, until the date on which the new concession-holder steps in.
According to Article 15 of Law No. 122/2010, concessions of large-scale diversions of water for hydroelectric power plants are subject to the following:
an increase, effective from 1 January 2010, in extra fees due to municipalities and consortiums of mountain drainage basins fixed at € 28.00 and € 7.00 (instead of € 21.08 and € 4.50 as formerly provided for) per each kW of nominal capacity of the relevant power plant;
a five-year extension of concessions for large-scale diversions of water referred to in Article 12 of the Bersani Decree;
a seven-year extension of concessions for large-scale diversions of water in force on 31 December 2010, provided that such concessions:
(i) fall, in whole or in part, within the territories of the provinces indicated under article 1, paragraph 153 of Law No. 296 of 27 December 2006 (―Regulations concerning the short and long-term Budget‖) (the ―2007 Budget Law‖); and
(ii) were assigned by the relevant concession-holder, prior to the date of publication of the relevant call for tender (as provided for by the Bersani Decree), to companies limited by shares (società per azioni) whose corporate capital is owned by public and private shareholders. In particular, the public shareholder must be one of the provinces mentioned above under point (i) (or, alternatively, a company controlled by such province) and such public shareholder must hold a stake in the company no lower than 30 per cent. and not higher than 40 per cent..
However, the above amendments (including, without limitation, both the five-year and seven-year extension) introduced by Law No. 122/2010 in relation to hydroelectric concessions are applicable only until different regional regulations are enacted in this respect.
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CIP 6/92
Adjustment of the “avoided fuel cost” component
On 22 January 2008, the Council of State upheld an appeal (ricorso in appello) filed by the AEEG against a decision of the Administrative Regional Court of Lombardy in 2007 that nullified Resolution No. 249/06, which concerned the computation and updating of the cost of natural gas used to determine the component rate that covers avoided fuel costs (the ―AFC‖). This component rate, as defined in the CIP 6/92 Resolution, is used to determine the price at which electric power produced using renewable sources can be sold. In its decision of 28 March 2008, the Council of State ruled that the power to update this component lies with the AEEG, which has exercised its power properly thus far. The Administrative Regional Court of Lombardy held that the power held by the AEEG is a regulatory power that it already had and which was confirmed by Law No. 244 of 24 December 2007 (―Regulations concerning the short and long-term Budget‖) (the ―2008 Budget Law‖). Subsequently, the AEEG began a consultation process concerning a proposal to adopt a new method to update the component rate. As a result, the AEEG issued Resolution ARG/elt No. 154/08 on 21 October 2008, by which it defined the methods that should be used to update the AFC rate component for the year ended 31 December 2008.
On 28 April 2009, the AEEG issued Resolution ARG/elt 50/09 establishing the terms and conditions for calculating the adjustment value of the AFC rate component for 2008 and, lastly, on 12 July 2010, the Ministry of Economic Development (the ―MED‖) issued a decree establishing the new terms and conditions for calculating the adjustment value of the AFC rate component for 2009.
Early termination of CIP 6/92 contracts
On 2 August 2010, the Ministry of Economic Development enacted a decree providing for terms and conditions for the early termination of the CIP 6/92 regime, implementing the provisions of the Decree dated 2 December 2009. Such Decree is currently under registration at the Corte dei Conti and will come into force when it is subsequently published in the Official Gazette of the Italian Republic (Gazzetta Ufficiale).
Pursuant to article 2 of such Decree, the application for the early termination of CIP 6/92 contracts shall be sent to Gestore dei Servizi Energetici S.p.A. (―GSE‖) within 30 days from the date on which the Decree comes into force.
Ministerial Decree dated 2 August 2010 applies only to ―gas-fired power stations‖, whereas, as specified in the preamble, the terms and conditions for the step-out from the CIP 6/92 regime with reference to ―process gas- fired power stations‖, will be fixed by a subsequent decree.
Nuclear
Under Legislative Decree No. 31 of 15 February 2010 (―Decree No. 31/2010‖) (―Regulations concerning location, realisation and operation of nuclear power stations pursuant to article 25 of Law No. 9 of 23 July 2009‖), which became effective on 23 March 2010, the Italian Government provided for the reorganisation of the legislation governing the production of energy from nuclear sources. In particular, a new set of regulations has been established with reference to:
the location, construction and operation of nuclear power stations;
the storage of radioactive waste;
compensatory measures; and
public information campaigns .
Pursuant to Decree No. 31/2010, the construction and operation of nuclear power stations is subject to the issuance of a single authorisation by the MED, in agreement with the State-Region Unified Conference (a special office operating within the Cabinet Office aimed at promoting cooperation between the State and the Regions in relation to special political negotiations) and the Ministry for the Environment and Territory and the Ministry of Infrastructure and Transportation.
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The requirements for operators entitled to apply for the single authorisation and the procedures to be followed shall be set out at a later stage by the MED, in agreement with the Ministry for the Environment and Territory and the Ministry of Infrastructure and Transportation, through further and specific decrees to be enacted.
The strategic targets of the nuclear policy, the maximum capacity of the nuclear power stations and the timing for the realisation and operation thereof shall be defined in a specific programmatic plan (the ―Nuclear Strategy‖) by the Council of Ministries (Consiglio dei Ministri) based on a proposal to be submitted by the MED in accordance with the Ministry for the Environment and Territory, the Ministry of Infrastructure and Transportation and the Ministry of Instruction. As at the date of this Base Prospectus, such Nuclear Strategy (which should have been adopted within 3 months from the effectiveness of Decree No. 31/2010) has still to be adopted.
According to Article 8 of Decree No. 31/2010, within 60 days from the date of adoption of the Nuclear Strategy, the MED, in agreement with the Ministry for the Environment and Territory and the Ministry of Infrastructures and Transportation and based on a proposal to be submitted by the Agency for Nuclear Safety (the ―ASN‖), shall set out, through a specific decree to be enacted (the ―Areas Location Decree‖), the criteria for determining where nuclear power stations will be allowed. As at the date of this Base Prospectus, such decree is still to be adopted.
According to Article 9 of Decree No. 31/2010, the criteria defined in the Areas Location Decree, together with the Nuclear Strategy, will in any case be subject to a Strategic Environmental Assessment (i.e. the so-called ‗Valutazione Ambientale Strategica (‘VAS’)) pursuant to Legislative Decree No. 152 of 3 April 2006 and to the respect of the principles set forth under EU Council Directive 96/29/EURATOM, which defines a series of specific requirements related to the safe use of radiation sources and to public and occupational exposure.
Following completion of the Strategic Environmental Assessment, the Nuclear Strategy and the Areas Location Decree shall be reviewed and amended by the competent Ministries for the purpose of taking into account the results and the requirements of the Strategic Environmental Assessment and they shall be submitted to the Council of Ministries (Consiglio dei Ministri) for final approval.
Within 90 days from the publication of the Nuclear Strategy and of the Areas Location Decree, as reviewed and amended following the Strategic Environmental Assessment, it will be possible for the interested operators to submit to the MED and to the ASN a request for the verification and assessment of the selected areas (istanza per la certificazione dei siti), following the procedure described under Article 10 of Decree No. 31/2010. Article 11 of Decree No. 31/2010 describes the procedure which shall be followed for the certification of the sites (certificazione dei siti) and the specific responsibilities of any and all the relevant authorities. Following completion of such certification procedure, the list of the certified sites (siti certificati) will be finally determined by the MED through the issuance of a specific decree.
Within 24 months from the issuance by the MED of such decree, the operator which requested the certification of a specific site must submit to the MED the application for the single authorisation for the construction and operation of a nuclear power plant and storage of nuclear waste. The operator will have the right to ask for an extension of such 24 month term on reasonable grounds (see paragraph 11 of Article 11 of Decree No. 31/2010). Should such term (as it may be extended) expires without the operator having applied for the single authorisation, the certification of the relevant site will become ineffective.
The procedure for the nuclear plant single authorisation is regulated under Article 13 of Decree No. 31/2010 which, for several issues, refer to decrees to be issued at a later stage.
Article 23 of Decree No. 31/2010 provides specific economic benefits that the operator will have to pay for (during both the construction phase and the operation phase) to local residents, authorities and companies operating near the nuclear power stations.
The MED, in agreement with the Ministry for the Economy will provide at a later stage the format of the conventions to be executed between the operator (holding the single authorisation) and the relevant local entities and authorities and will set-out the terms and conditions for payment of the above mentioned economic benefits.
Finally, Decree No. 31/2010 (see articles 25 and ff. for further details) also provides for the regulation for the localisation, construction and operation of a national site (deposito nazionale) for the storage of nuclear waste and of the so-called Parco Tecnologico which will be realised and operated by Sogin S.p.A.
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Environment
Emissions trading — quota allocations
On 27 November 2008, the Committee for the Implementation and Management of Directive No. 2003/87/CE (―Introduction of a CO2 emissions trading system in the European Community and amendments to Directive No. 96/61/CE‖), as subsequently amended by Directive No. 2009/29/CE dated 23 April 2009, (the ―Committee‖) published Resolution No. 20, after authorisation on 20 October 2008 by the European Commission to proceed with the allocation of CO2 quotas for 2008-2012 and to award the CO2 quotas for 2008. The CO2 quotas that Italy is entitled to allocate are equivalent to approximately 196 million tons of CO2 a year. The quotas that fall within the scope of this amount, which are about 6 million tons less than the ceiling set forth in the allocation decision issued by the Ministry of Environment and the Ministry of Economic Development on 29 February 2008 and enacted by means of the aforesaid Resolution No. 20, do not apply to existing Edison facilities. On 10 April 2009, by means of resolutions No. 4, 9, 13, 15 and 18, the Committee awarded CO2 quotas to the New Second Period Entrants (i.e., with reference to 2008-2012 allocation period, installations subject to emission trading rules whose authorisation to release greenhouse gas emission was amended or updated due to variations in the nature and functioning of the relevant installation or further development of the same installation, following the notification to the European Commission of the ‗National Allocation Plan‘ – the plan drafted by the Committee specifying (a) the overall number of CO2 quotas to be allocated to each installation subject to emission trading rules and (b) the criteria of allocation and issue of same CO2 quotas, as indicated under Legislative Decree No. 216 of 4 April, 2006 (―Implementation of Directives No.s 2003/87 and 2004/101/CE concerning the CO2 emissions trading system in the European Community, with reference to the Kyoto Protocol planning‖).
Law No. 111 of July 2010, amending the Law Decree No. 72 of May 2010, containing urgent measures for the postponement of deadlines for compliance with environmental and self-transmission requirements and the allocation of CO2 emissions rights, was published on 20 July 2010. Such law calls for the allocation of CO2 emissions rights to energy and industrial operators who own facilities commissioned after the adoption of the National Allocation Plan covering the above–mentioned rights for the 2008-2012 period.
Emissions trading — CO2 costs
On 11 June 2008, the Autorità per l’Energia Elettrica e il Gas (i.e., the Italian energy and gas regulatory authority, ―AEEG‖) published Resolution ARG/elt No. 77/08, which defined the criteria for refunding costs incurred by operators of CIP 6/92 power plants (i.e., power plants selling electricity to the GSE, the Italian entity managing the renewable market, pursuant to terms, conditions and prices set forth under resolution CIP 6/92) for the first allocation period from 2005 to 2007 and the second allocation period from 2008 to 2012. In particular, pursuant to the terms and conditions set forth under resolution CIP 6/92 and Resolution ARG/elt No. 77/08, operators of CIP 6/92 power plants are entitled to reimbursement of costs borne in order to buy CO2 quotas in an amount equal to the greenhouse gas emissions actually released by each CIP6 power plants and in addition to CO2 quotas freely allocated pursuant to the National Allocation Plan. The criteria defines the CO2 quotas for which refunds will be provided and the corresponding amounts for each year and for each CIP 6/92. In July 2008, Edison filed a separate application with the AEEG for each CIP 6/92 power plant seeking reimbursement of CO2 costs. At the same time, it asked the AEEG to clarify how Resolution ARG/elt No. 77/08 will be applied to (i) mixed production facilities (i.e. that partially produce CIP 6/92) and (ii) power plants with contracts that are due to expire during the course of a year; indeed the original allocation criteria set forth under Resolution ARG/elt No. 77/08 provided for a calculation of reimbursement of CO2 costs borne on a solar year basis. The AEEG has amended and supplemented Resolution ARG/elt 77/08 by means of Resolution ARG/elt 156/08, Resolution ARG/elt 177/08 and by guidelines published on 23 October 2008, which provided that:
(i) in case of demonstrable separate allocations by sections in the National Allocation Plan for the second allocation period (specifically for Edison, the Taranto and the Piombino power plants), the shortfall should be determined on a section by section basis;
(ii) in case of mixed facilities and power plants with contracts expiring during the course of a calendar year and not at the end of a calendar year (other than plants with separate allocation in the National Allocation Plan indicated under paragraph (i) above), operators should ask the Committee to provide allocations broken down by section, or by period of operation under CIP 6/92 rules for power plants with expiring contracts.
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Lastly, by means of Resolution ARG/elt No. 155/09 dated 27 October 2009, the AEEG has defined the relevant markets and contracts in order to calculate the reimbursement of CO2 costs (i.e. PFLEX and PEUA) pursuant to Resolution ARG/elt No. 77/08 and, by means of its determination dated 19 April 2010, the AEEG itself has quantified the amounts of each CO2 emissions quota to be refunded for the year 2009, i.e. PFLEX equal to 11,82 euro/ton and equal to 13,26 euro/ton.
Efficiency in the end usage of energy
On 21 December 2007, the Ministry of Economic Development issued a decree amending and updating the provision of two previous decrees issued on 20 July 2004 to promote greater efficiency in the end usage of energy, which outlined an increase in energy efficiency and, as a consequence, a reduction in primary energy consumption that each distributor of electric power and natural gas with more than 100,000 customers is required to achieve over the course of the period from 2005 to 2009. As of 31 December 2006, the minimum number of customers hooked up to a distributor's network has been decreased to 50,000, thereby increasing the number of distributors (which now includes Edison Distribuzione Gas) which are required to reduce energy consumption. In addition, AEEG issued Resolution No. 344/07 on 28 December 2007, as amended by Resolution EEN 13/09 on 1 September 2009, which sets forth the guidelines for determining the targets applicable to distributors of natural gas and electric power to whom the abovementioned requirement applies.
Green certificates
On 26 June 2008, the AEEG published Resolution ARG/elt No. 80/08 amending Resolution No. 113/06, which defined the criteria for refunding to operators of CIP 6/92 power plants green certificate costs incurred to comply with the obligation set forth in Article 11 of the Bersani Decree.
On 16 March 2009, the AEEG issued resolution ARG/elt 30/09, which provided that the value of each green certificate to be refunded pursuant to Resolution No. 113/06 will be equal to the following:
(i) 53.40 euro/MWh for surrendering green certificates relating to production in 2005;
(ii) 36.06 euro/MWh for surrendering green certificates relating to production in 2006; and
(iii) 38.17 euro/MWh for surrendering green certificates relating to production in 2007.
On 23 March 2010, the AEEG issued resolution ARG/elt 35/10, providing that, with reference to production in 2008, the value of each green certificate to be refunded pursuant to Resolution No. 113/06 will be equal to 60.10 euro/MWh.
For the sake of completeness, it is worth noting that Article 45 of Law Decree No. 78 of 31 May 2010, as amended by Law No. 122/2010, provides that, by 31 December 2010, the MED, acting in concert with the Ministry of the Economy and Finances and with the input of the AEEG, shall issue a Decree aimed at (i) reducing, starting from 2011, the total amount of the costs incurred by GSE in taking back unsold certificates during 2010 by 30% and (ii) procuring that at least 80% of that 30% will be obtained by containing the amount of green certificates‘ surplus.
Renewable energy sources
The 2008 Budget Law clarified the regulatory framework for the production of electric power from renewable sources. For the period from 2007 to 2012, the annual increase in the minimum quantity of this type of electric power that must be fed into the national grid was raised from 0.35 per cent. to 0.75 per cent. Moreover, a new incentive mechanism has been introduced alongside the green certificates system (applicable to facilities with an average annual rated capacity of more than 1 MW). This new mechanism, which is based on an all-inclusive tariff system (―Feed-in Tariffs System‖), applies to facilities with an average annual rated capacity of up to 1 MW and is available to facilities operators as an alternative to green certificates. Both the green certificates system and Feed-in Tariff System described above are valid for fifteen years.
Wholesale Market
Reimbursement of the Transmission Capacity Utilisation Fee
On 6 May 2007, the AEEG issued Resolution ARG/elt No. 53/08, which provides for the reimbursement of the ‖Transmission Capacity Utilisation Fee‖ (i.e., the fee to be paid by producers to Terna, as defined below, due to
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using the transmission capacity of the national electricity grid) paid to suppliers who were parties to bilateral contracts during the first four months of activity by the Italian power exchange (i.e. the Italian electricity market trading platform managed by Gestore dei Mercati Energetici S.p.A., and enabling producers, consumers and wholesale customers to enter into electricity purchase and sale contracts for the next day, ―Power Exchange‖), but only for the amounts, determined on an average basis, that exceeded the cap of Euro 2 per MWh and only for the period between April and July 2004, thereby applying a retroactive cap introduced by the AEEG with Resolution No. 137/04. In practice, this regulatory action nullified the reimbursement introduced by the Presidential Decree of 13 April 2007, pursuant to which Edison Trading S.p.A. asked Terna Rete Elettrica Nazionale S.p.A., the Italian electricity transmission system operator (―Terna‖), to return the amounts it had improperly collected from April to July 2004, which amounted to Euro 16.6 million.
Considering that the Council of State, under its Decision No. 1212/2010, has rejected the compensative mechanism provided for by Resolution ARG/elt No. 53/08 with relevant effects on the operators involved and consequently on the final customers, the AEEG has stated that it is necessary to discuss with all the relevant parties the criteria on which the new compensation mechanism should be arranged in compliance with the principles ruled by the Council of State by means of the above-mentioned Decision. Therefore, the parties involved have been invited to submit to the AEEG their observations and suggestions no later than 22 September 2010.
System safety units
Under Resolution ARG/elt No. 97/08 (―Urgent regulations concerning the operation of the dispatching services and start-up procedures in order to amend AEEG Resolution No. 111/06‖), the AEEG established the regulatory framework for ―must run‖ power plants (unità essenziali) and ordered Terna to include, as of 31 July 2008, in the list of units that are essential for the system's safety (must run units) all production units authorised to operate in the ‖Dispatching Services Market‖ (i.e., a venue of the Power Exchange where Terna procures the resources that it requires for managing, operating, monitoring and controlling the power system, including relief of intra-zonal congestions, creation of energy reserve and real-time balancing) that are connected to the electrical grid in Sicily and Sardinia.
Subsequently, pursuant to Law Decree No. 185/2008 (―Anti-Crisis regulations‖) converted into Law No. 2 of 28 January 2009 on 29 April 2009 (the ―Anti-Crisis Decree‖), the AEEG was empowered to adopt measures aimed at imposing on the owners of essential power plants the obligation to render capacity available in the market under economic terms fixed by the AEEG itself. Such essential power plants should be identified by the AEEG among those plants that are technically necessary for the avoidance of grid congestion and/or necessary for ensuring the safe operation of the transmission grid for a significant period of time. In compliance with the above mentioned provisions, on 29 April 2009, the AEEG issued Resolution ARG/elt No. 52/091, partially amending Resolution No. 111/06 and establishing the new rules and regulations concerning must run facilities in force starting from 1 January 2010, containing in particular:
(i) criteria for the identification of must-run power plants;
(ii) conditions on the basis of which the owners of the must-run power plants should offer capacity in the markets; and
(iii) mechanisms aimed at ensuring (a) the reduction of the consideration paid by users of the system in order to cover the costs incurred by Terna for the safety of the grid, (b) the reduction of the costs incurred by the system and, in particular, the production costs and (c) fair remuneration for the owners of the must run plants that offer capacity in the market.
Retail market
The principal resolutions concerning the retail market are reviewed below:
• Resolution ARG/elt No. 15/08, amending and supplementing AEEG Resolution No. 157/07, allows direct access to the databases of distributors by suppliers for sales offers to customers. This provision applies exclusively to residential customers and does not apply to customers connected to medium or
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high voltage lines and/or customers with annual consumption greater than 200,000 standard cubic meters. Sales offers can be made only by means of printed material and not through other means of communication (telemarketing or website). In September 2008, the AEEG issued Resolution ARG/com No. 134/08, by which it began the process of developing a single computerised platform that will contain a database with the profiles of each customer (including such information as non-payment and status of unresolved issues).
In March 2010, the AEEG issued DCO No. 3/10 approving ―Operating Instructions concerning Communication Standards between Distributors and Sellers of Electric Power‖, which was lastly followed by DCO No. 14/10 recommending both for the electric power and natural gas market the adoption of an integrated information system to manage transactions between operators, prioritising the switching process. Subsequently, on 19 August 2010, AEEG issued Resolution ARG/com No. 128/2010 providing that by 15 November 2010, Acquirente Unico S.p.A. must submit to AEEG for approval the technical documentation necessary for carrying out a public tender aimed at selecting the contractor for the software and hardware facilities‘ supply and for the technical assistance regarding the integrated information systems.
• As of 1 April 2008, pursuant to Resolution No. 278/07, as subsequently integrated and amended during 2008 and 2009, end customers whose electric power usage is not handled on an hourly basis will be billed in accordance with a load profiling based on hourly segmentation, according to which the procurement and dispatching costs of the electric power supplied to the end customer reflect more closely the consumption profile. The above-mentioned Resolution, as amended in 2008 by subsequent pronouncements, states that all very high voltage, high voltage, medium voltage and low voltage delivery points with available power greater than 55kW, if equipped with an hourly or electronic meter, must be billed based on hourly segmentation. Moreover, the AEEG issued consultation Documents No. DCO 28/08 and No. DCO 38/08 which were implemented by Resolution ARG/elt 107/09, as subsequently integrated and amended in 2009 and 2010, regulating physical and financial items concerning dispatching services that may arise as a result of late adjustments to metering data submitted by distributors after the deadline for the load profiling equalisation adjustment (10 May for the previous year). Regulatory activity carried out to encourage the market deregulation process included the issuance of additional resolutions concerning switching (Resolution ARG/elt No. 42/08, as subsequently supplemented and amended), the commercial quality of sales services (Resolutions ARG/com No. 164/08 and ARG/com No. 199/08, as subsequently supplemented and amended) and the promotion of a system to research sales offers (Resolution ARG/com No. 151/08).
Hydrocarbons rates
The AEEG issued Resolution ARG/gas No. 192/08 amending the criteria used to adjust the rates charged to supply natural gas to customers who enjoy protected status. In addition, this Resolution requires that distributors renegotiate existing sales contracts.
On 30 July 2009 the AEEG issued Resolution ARG/gas 106/09 aiming at overcoming the controversial implementation of Resolution ARG/gas No. 192/08 by fixing the field of application of the compensation of the so-called ―oneri non altrimenti recuperabili‖ (i.e. losses or additional losses suffered by the suppliers as a consequence of the application of Articles 1 and 2 of ARG/gas No. 192/08). For any further detail in this regard, refer to Resolution ARG/gas 106/09. By means of its Resolution ARG/gas No. 85/10 the AEEG provided for the sales companies to inform their natural gas customers of their right to, no later than 30 September 2010, to renegotiate the instalment plan for their gas bills, in compliance with an official interpretation of Article 10.6 of Resolution ARG/gas No. 229/01.
Lastly, on 18 June 2010, the AEEG issued Resolution ARG/gas No. 89/10 amending article 6, paragraph 6.2 of Annex A of Resolution ARG/gas No. 64/09 by reducing the value of the gas wholesale rate component (CCI) (i.e. reduction of the QE0 parameter) with effectiveness from 1 October 2010 to 30 September 2011.
Infrastructure
Storage
The AEEG issued Resolution ARG/gas No. 11/08 on 7 February 2008, which confirmed the criteria for the allocation of storage capacity and daily peak for the modulation service for the 2008-2009 thermal year, based on criteria currently in force. In order to determine the maximum demand for storage capacity, the Resolution
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also provided for the establishment of a working group (comprised of representatives of the principal operators of storage facilities, users of storage services and transportation and distribution companies) to resolve the issues raised by users with regard to the regulations proposed by the AEEG in this area in the consultation document published on 4 December 2007. By Resolution ARG/gas No. 64/08, the AEEG approved the Network Code prepared by Edison Stoccaggio S.p.A. in its capacity as transmission operator for a natural gas pipeline branch between Cavarzere-Minerbio, which will connect the offshore regassification terminal located off the Rovigo coast with the national network of natural gas pipelines. The AEEG published Resolution No. 116/07, as amended and supplemented by Resolution ARG/gas No. 13/09 and Resolution ARG/gas No. 58/08, approving Edison Stoccaggio's Storage Code which represents the whole of rules and regulations providing for the obligations of the parties in the execution of the storage service.
On 2 November 2009 the AEEG issued Resolution ARG/gas No. 165/09 concerning urgent interventions to review the rules and regulation and the balancing of the storage systems pursuant to Law No. 78/2009 and subsequently under Resolution ARG/gas No. 49/10, on 7 April 2010, it approved the updates proposed by Edison Stoccaggio S.p.A. to its Storage Code.
Subsequently, on 24 February 2010, the AEEG issued Resolution ARG/gas No. 21/10 which extended until 31 December 2010 the storage service rates originally provided for the 2009-2010 thermal year. On 5 August 2010, in application of the criteria established by DCO No. 8/10, the AEEG issued Resolution ARG/gas No. 119/10 fixing the storage service rates for the Third Regulatory Period from 2011 to 2014. Lastly, on 6 August 2010, the MED issued a Decree implementing Law No. 239/2004 (―Reorganisation of the energy sector‖) which sets out the terms and conditions according to which the operators setting-up new storage facilities or expanding existing ones are exempt from the obligation to grant third parties with access to the facilities realised. Consequently, the operators setting up new storage capacity have the right to directly exploit it by placing it at the disposal only of clients selected by the operators themselves, with a positive effect on the financing terms and conditions of the investments scheduled for the opening of new plants.
Transmission
The AEEG published Resolution ARG/gas No. 72/08 on 3 June 2008, which approves the regulations governing the Open Season Procedure (i.e. the procedure for the allocation to outsiders of incremental transmission capacity created for the Poseidon Italy-Greece natural gas pipeline beyond the capacity exempt from such requirement pursuant to Article 1, section 1, of the Ministerial Decree dated 21 June 2007). The first phase of the Open Season Procedure, ended on 19 September 2008, required Italian and international operators to file 17 non-binding indications of interest for the 10 lots of 100 million cubic meters available each year. In December 2008, the second part of the rules applying to the Open Season Procedure governing rate and contractual issues was submitted to the AEEG and the Greek gas regulatory authority for approval.
On 1 July 2009, the AEEG issued a consultation document No. 16/09 requesting operators to provide comments on terms and conditions aiming at implementing the Decree of Productive Activities of 28 April 2006 (ruling the access to the national natural gas grid as a consequence of the issuance of the exemption from the third party access in favour of new European interconnectors and new regasification terminals and acknowledgement of priority allocation of gas capacity). Under Resolution ARG/gas 2/10, on 21 January 2010 the AEEG defined the rules and regulations governing the access to the national natural gas grid according to the Decree of Ministry for Productive Activities (now MED) dated 28 April, 2006.
Distribution
By means of its Resolution ARG/gas No. 120/08 of 7 August 2008, as amended by Resolution ARG/gas No. 7/10, and its Resolution ARG/gas No. 159/08 of 6 November 2008, the AEEG issued the ―Uniform Regulations Concerning the Quality and Distribution Rates of Natural Gas for the four-year Period from 2009 to 2012‖, which sets out the regulatory principles applicable to service quality and which is effective as of 1 January 2009, together with the applicable rates for the regulatory period 2009-2012.
On 1 October 2009 the AEEG issued Resolution No. 141/09 providing for the ―Uniform Regulations Concerning the Quality and Distribution Rates of Natural Gas for the Period from 2010 to 2013‖ which has substituted Part I of the former Uniform Regulations, with effect from 1 January 2010.
In addition, Law Decree No. 159 of 1 October 2007 (―Urgent interventions concerning financial and economic matters‖) converted into Law No. 222 of 29 November 2007, provides a clearer interpretation of concessions for the distribution of natural gas, establishing the requirement that the criteria governing competitive bidding
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processes and the evaluation of bids be decided within three months from the effective date of the law converting the abovementioned decree into law. The decree extended the provisional duration of awards and concessions by two years, as set forth in article 15 of Legislative Decree No. 164/2000 (―Implementation of Directive No. 98/30/CE regulating the internal market of natural gas‖) (the ―Letta Decree‖), in exchange for an increase in the concession fees equal to an amount no greater than 10 per cent of the maximum allowed distribution revenues, where the existing fee is less than this amount and only for the duration of the extension.
In addressing an issue raised by the Italian antitrust authorities in a communication dated 13 November 2007, the 2008 Budget Law amended the regulations governing the holding of calls for tenders for the award concessions. Specifically, this new provision requires that calls for tenders be announced, for each optimum user population, within two years from the identification of the corresponding geographic region, which, in turn, must be completed within one year from the effective date of the law converting the decree. Consequently, from 1 January 2008, municipalities that are affected by new calls for tenders have the option of increasing the concession fee until a new award is made to an amount equal to not more than 10 per cent. of the maximum allowed distribution revenues and only for the duration of the extension.
Regassification
In 2008, the AEEG issued Resolution ARG/gas No. 92/08 setting the rate criteria applicable to the regassification service for the so-called ―third regulatory period‖ (i.e. from October 2008 until September 2012).
Issues affecting multiple business areas
Tax surcharge
Law Decree No. 112/2008 (―Urgent regulations for the economic development and the financial stabilization‖), converted into Law No. 133/2008, as amended by Law No. 99/2009, introduced a corporate income tax surcharge on the ordinary corporate income tax (IRES) rate as follows (i) 5.5 per cent. for the tax years from 2007 to 2009 and (ii) 6.5 per cent for the tax years from 2010 onwards (the ―Tax Surcharge‖). The Tax Surcharge applies to taxpayers who reported revenues higher than € 25 million during the previous tax period who engage in the production and distribution of hydrocarbons and electric power. Parties who produce electric power using primarily biomasses, solar-photovoltaic energy or wind energy are exempt from paying the surcharge.
The Italian Government has prohibited the onward transfer of the additional burden caused by the Tax Surcharge to energy consumers and has given the AEEG the task of enforcing this prohibition. Furthermore, AEEG issued Resolution ARG/com No. 91/08, by which it asked the operators who were subject to the Tax Surcharge to provide it with specific information (including their latest annual financial statements, quarterly and semi-annual financial statements, where available, budgets and disclosures showing the unit gross operating margins for the different products) by 31 July 2008. Even though it filed an appeal (ricorso) against this Resolution, Edison complied with this request by the required deadline. Subsequently, the AEEG began a consultation process to define the oversight criteria applicable to the abovementioned decree (DCO No. 31/08 of 25 September 2008) to which Edison responded by submitting its considerations. The AEEG then issued Resolution VIS No. 109/08 by which it officially determined the general procedures (so-called ―first level procedures‖) that it will implement to enforce the prohibition to pass on the Tax Surcharge, requiring that the operators subject to the Tax Surcharge submit a series of affidavits and data for the first and second half of 2007, 2008 and subsequent years. Last year, by means of its DCO No. 18/09 issued on July 6th, 2009, the AEEG requested all the relevant operators to submit within the deadline of August 27th, 2009 their suggestions and comments relating to the criteria and modalities to be adopted with reference to the possible ―second level‖ procedures ( i.e. procedures involving a closer examination in respect of those operators in relation to whom the first level procedures detected possible violations of the prohibition to pass on the tax surcharge).
Law No. 2/2009
The Anti-Crisis Decree was aimed at addressing the current economic crisis and included a restructuring of the Italian electric power market. The main changes introduced by the decree included: a) switching from the marginal price system for payment by tender in the day ahead market; b) establishing an intra-day energy market to replace the prior adjustment market, which took place after the close of the previous day's market and before the start of the dispatching services market, with the participation of all eligible users. In the intra-day market, the price of energy is determined on the basis of a continuous trading mechanism as required pursuant to Article 3 of the Anti-Crisis Decree. The MED issued the Ministerial Decree of 29 April 2009 providing for
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terms and conditions ruling the intra-day market, stating also that same intra-day market had to become operational starting from 31 October 2009; and c) reforming the dispatching services market, the management of which will be handled by the licensee of the transmission and dispatching service using a transparent and economically efficient pricing system. Dispatching services have to be provided by purchasing the necessary resources from eligible operators. In the dispatching services market, the price of energy is determined basing on the different prices offered through firm bids by each eligible user and accepted by the licensee of the dispatching services starting with the lowest prices and until the energy requirements are fully satisfied. The parties who own individual facilities or groups of facilities that are essential for the provision of dispatching services must submit market offers on terms established by the AEEG based on mechanisms specifically designed to minimise system costs and provide fair compensation for producers. Facilities that are technically and structurally indispensable to resolve grid congestion or maintain adequate levels of safety in the national electrical system for extended periods of time shall be deemed to be essential for the provision of dispatching services, limited to the period during which certain conditions described in the decree occur. According to Article 3, paragraph 12 of Law Anti-Crisis Decree, as passed in Law No. 2/2009, the MED, in agreement with the AEEG and the concession-holder of transmission and despatching services, may sub-divide the relevant grid in no more than three macro-zones.
Unbundling
AEEG Resolution No. 11/07, as subsequently amended, which came into force on 1 July 2008, governs unbundling. This resolution indicated, inter alia, that the guidelines for the development of a compliance programme would be defined in a subsequent resolution, which the AEEG issued on 23 September 2008 by Resolution ARG/com No. 132/08. In particular each company operating in the electricity and gas sectors and carrying out at least one of the following activities is subject to functional unbundling:
(i) transmission of electricity;
(ii) balancing of electricity (dispacciamento);
(iii) distribution of electricity;
(iv) metering of electricity;
(v) storage of natural gas;
(vi) regassification of liquefied natural gas;
(vii) transportation of natural gas;
(viii) dispatching of natural gas;
(ix) distribution of natural gas; and
(x) metering of natural gas.
The guidelines contained in Resolution ARG/com No.132/08 clarify the requirements of a compliance program to be drafted by each ‗Independent Operator‘ (i.e. a person to be appointed by companies subject to unbundling rules in order to manage and supervise the compliance of the company with the unbundling rules) and describe the compliance requirements and the compliance deadlines ruling unbundling.
In June 2008 the AEEG informally confirmed that the compliance programme adopted by Edison meets the unbundling requirements set forth under AEEG Resolution No. 11/07.
On 20 April 2010, AEEG amended Resolution ARG/com No. 11/2007 (including Annex A thereto) by issuing Resolution ARG/com 57/10 which implemented several 2009 Council of State‘s Decisions concerning unbundling regulation.
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Law Decree No. 78/2009
On 1 July 2009, the Law Decree No. 78 of 1 July 2009 entered into force, including provisions aimed at facing the current financial crisis and was converted into law on 3 August 2009 by Law No. 102 of 2 August 2009. In particular, the following provisions may have an impact on Edison's business:
(a) Article 3 of Law Decree No. 78/2009 governs the reduction of costs for energy for families and enterprises. In particular, this provision required the MED to issue (within 40 days from the effective date of Law Decree No. 78/2009) regulations that should apply to gas producers who have entered more than 40 per cent. of the whole amount of natural gas intended for the national gas market onto the national gas transportation grid during the 2007-2008 transportation thermal year. This was aimed at ensuring that such producers sell 5 billion cubic metres of natural gas on the virtual exchange point (punto di scambio virtuale or PSV), pursuant to competitive, transparent and non-discriminatory procedures and in compliance with terms and conditions to be established by the AEEG. In this respect, the MED, in execution of the provisions set forth under Article 3 of Law Decree No. 78/2009 (now Law 102/2009) has issued a Decree dated 7 August 2009, on the basis of which AEEG has issued its Resolution ARG/gas 114/09, on the same date (7 August 2009).
Pursuant to the Ministerial Decree dated 7 August 2009 and AEEG Resolution no. 114/09, all persons allowed to operate on the virtual exchange point (punto di scambio virtuale or PSV) are allowed to take part in the competitive procedure for the selling of natural gas on the wholesale market. The natural gas supply shall be apportioned in standard lots in compliance with the criteria set forth under article 5 of the AEEG Resolution No. 114/09. Such lots shall be assigned on the basis of the allocation criteria and within the terms set forth, respectively, by Articles 6 and 7 of the AEEG Resolution No. 114/09.
The price to be applied by companies subject to the gas release has to be calculated taking into account (i) the average prices of European relevant markets and (ii) the prices and procurement costs actually borne by the companies subject to the gas release.
Moreover, Law Decree No. 78/2009 provided that, within 90 days from its entering into force, the AEEG, in order to manage quantities of natural gas to be sold pursuant to the gas release rules, should: (i) issue regulations on transportation tariffs, (ii) accordingly amend the regulations on natural gas balancing and (iii) promote the offer of peak natural gas services as well as usage of storage systems for industrial and thermoelectric final users. On 2 November 2009, the AEEG issued the above- mentioned Resolution ARG/gas 165/09.
(b) Article 4 of Law Decree No. 78/2009 provides for the appointment of extraordinary officers in order to drive the intervention with reference to production, transmission and distribution of energy, to be mainly or wholly funded with private capitals. Such intervention, driven by specific urgency reasons, shall be identified by the Italian Government, upon an agreement with the regions and the relevant autonomous provinces.
Ministerial Decree of 18 March 2010
Ministerial Decree dated 18 March 2010 (―Modalities of offer and operators’ obligations with reference to trading platform for the negotiation of the quotas of imported natural gas‖) (i) provides for the terms and conditions pursuant to which importers shall comply with the obligation to offer quotas of imported natural gas to the regulated market pursuant to paragraph 2 of Article 11 of Law Decree 7/2007; and (ii) appoint the GME as the person in charge of organising and managing a trading platform for the negotiation of the above mentioned quotas of imported natural gas (P-GAS). The actual management and operation by GME of the quotas of imported natural gas owed to the State pursuant to article 11 of Law Decree 7/2007 shall be determined with a specific decree to be issued at a later stage.
The purpose of the Ministerial Decree is to simplify compliance with the requirements needed in order to offer import quotas, facilitate the matching of demand and supply, minimise transaction costs and increase price transparency.
The offer and delivery methods of the quotas of imported natural gas within the regulated market pursuant to Article 11, paragraph 2 of Law Decree 7/2007 are defined and regulated by AEEG in its Resolution ARG/gas No. 58/10. Such resolution and the provisions therein shall apply up to the date on which the GME shall assume the role of counterparty in the trading platform pursuant to Article 8, paragraph 2 of the Ministerial Decree dated
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18 March 2010. In this respect, the above mentioned Article 8 states that the GME shall assume such role by 1 October 2010.
Reform of the Natural Gas Market
On 23 April 2010, the Council of Ministers approved on a preliminary basis the outline of a legislative decree calling for measures to increase the competitiveness and flexibility of the natural gas market and transfer the resulting benefits to end users, in accordance with Article 30, paragraphs 6 and 7, of Law No. 99 of 23 July 2009.
On the basis of such scheme, Legislative Decree No. 130/2010 (―Measures aiming to a more competitive market of the natural gas and to the transfer of the resulting benefits to the end customers‖), aimed at making the supply of natural gas more dynamic and competitive and increase its flexibility, was enacted by the Italian Parliament on 8 August 2010. Inter alia, Legislative Decree No. 130/2010 provides for:
the obligation for operators injecting natural gas into the national gas network to attest, each year and in compliance with the provisions of article 3 of Legislative Decree No. 130/2010, the stake of wholesale market concerning natural gas transaction carried out directly or indirectly by controlled or controlling companies;
terms and conditions regulating the operators‘ obligation to take measures in order to develop and expanding storage infrastructures on the basis of a plan to be accepted by the MED;
the possibility, for end industrial customers, (i) to participate, as investors, to the above mentioned infrastructure developing projects in compliance with the terms and conditions set forth under article 6 of Legislative Decree No. 130/2010) and (ii) to benefit from right of utilisation of storage infrastructures under terms and conditions detailed under article 7 of Legislative Decree No. 130/2010.
Legislative Decree No. 85/2010
Legislative Decree No. 85 of 28 May 2010 (so-called ―Federalism in the Ownership of Government Assets‖) implementing Article 19 of Law No. 42 of 5 May 2009, which endows municipalities, provinces, metropolitan cities and regions with their own assets, was published on 11 June 2010 in issue No. 134 of the Official Gazette of the Republic of Italy. With specific reference to the energy sector, Legislative Decree No. 85/2010 contains the following relevant provisions:
• transfer to the regional administrations of government owned water resources, as defined in Articles 822, 942, 945, 946 and 947 of the Italian Civil Code and special industry laws;
• transfer to the provincial administrations of government owned water resources, as defined in Article 5, paragraph 1, letter b), limited to closed lakes without surface outlets located within the territory of a single Province, as well as mines, but not including oil and gas deposits and their appurtenances and natural gas storage sites and their appurtenances.
Law No. 129/2010
Law Decree No. 105 (―Urgent measures concerning energy‖) (the so-called ―Power Plant Unblocking Decree‖) of 8 July 2010, which was published on 9 July 2010 in the Official Gazette and which was converted into Law No. 129/2010 on 13 August, contains urgent measures concerning the transmission, distribution and production of electric power.
The government, acting in concert with the relevant regions and autonomous provinces, must identify urgent and non-postponable projects related to the transmission, distribution and production of energy that meet special urgency requirements, specifically with regard to socio-economic development, the implementation of which requires the deployment of extraordinary resources and means.
Law No. 129/2010 amending the original text of Law Decree No. 105/2010, has introduced, inter alia, several provisions aimed at solving some specific controversial issues relating to power plants fed by renewable sources (with reference, in particular, to their construction authorisation regime and their incentive regime).
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European energy policies
Climate energy package
On 23 January 2008, the European Commission presented the climate energy package with the objectives outlined by the European Council in March 2007, known as ―20-20-20 by 2020‖ which calls for a decrease of emissions by 20 per cent compared with the corresponding figure in 1990, an increase of 20 per cent in energy provided by renewable sources and an increase of 20 per cent in energy efficiency. The bill's approval process was completed on the first reading. On 20 October 2008, the Environment Council (i.e. council of the Ministers of environment of EU member states) reached an overall agreement and, owing in part to the general political consensus reached within the European Council on 12 December the climate energy package was approved by the European Parliament voting in plenary session on 17 December 2008. The climate energy package was formally adopted by the Council of Ministers at the meeting held on 17 June 2010, during the semester of the Czech Presidency.
Internal market
The existing framework of European legislation governing energy policies within the internal market was recently amended on 13 July 2009 by:
(i) two directives on rules for the internal electricity and gas markets, in particular the Electricity Directive 2009/72/CE replacing Directive 2003/54/CE and Gas Directive 2009/73/CE replacing Directive 2003/55/CE, both said directives being effective from 3 March 2011;
(ii) two regulations on conditions for markets access, in particular Regulation CE No. 714/2009 replacing Regulation CE No. 1228/2003 and Regulation CE No. 715/2009 replacing Regulation CE No. 1775/2005, both regulations entering into force on 15 August 2009; and
(iii) Regulation CE No. 713/2009 (effective as of 3 September 2009) establishing an agency for the co- operation of energy regulators within the European Union.
Law No. 96/2010
Law No. 96 (so-called ―2009 EU Law‖) of 4 June 2010 containing provisions to comply with requirements arising from Italy‘s membership of the European Union, which took effect on 10 July 2010, was published on 25 June 2010 in the Official Gazette. Such law incorporates into the Italian legal system EU directives concerning the energy market, natural gas infrastructures, renewables and a simplification of the permit issuance process for renewable energy facilities. Specifically, Law No. 96/2010 implements Directive No. 2009/73/CE, concerning the internal market for natural gas, Directive No. 2009/72/CE, concerning the internal market for electric power, and Directive No. 2009/28/CE, concerning the promotion of energy from renewables sources.
European Recovery Plan
The procedure for the allocation of funds earmarked for the development of electric power and natural gas interconnector systems is continuing, consistent with the adoption of the European Recovery Plan. In January 2010, the European Parliament voted to approve the Commission‘s decision and the final decisions for individual resource allocations are currently being finalised.
For further information on the main Italian laws and regulations relevant for the Edison‘s business activities see Edison‘s financial statements as at 31 December 2009 and Edison‘s semi-annual financial statement as at and for the year ended 30 June 2010 incorporated by reference hereto (see ―Information Incorporated by Reference‖).
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TAXATION
Italian Taxation
The statements herein regarding taxation summarise the principal Italian tax consequences of the purchase, the ownership, the redemption and the disposal of the Notes.
This is a general summary that does not apply to certain categories of investors and does not purport to be a comprehensive description of all the tax considerations which may be relevant to a decision to purchase, own or dispose of the Notes. It does not discuss every aspect of Italian taxation that may be relevant to a Noteholder if such Noteholder is subject to special circumstances or if such Noteholder is subject to special treatment under applicable law.
This summary also assumes that the Issuer is resident in the Republic of Italy for tax purposes, is structured and conducts its business in the manner outlined in this Base Prospectus. Changes in the Issuer’s organisational structure, tax residence or the manner in which it conducts its business may invalidate this summary. This summary also assumes that each transaction with respect to the Notes is at arm’s length.
Where in this summary English terms and expressions are used to refer to Italian concepts, the meaning attributed to such terms and expressions shall be the meaning given to the equivalent Italian concepts under Italian tax law.
The statements herein regarding taxation are based on the laws in force in the Republic of Italy as of the date of this Base Prospectus and are subject to any changes in law occurring after such date, which changes could be made on a retroactive basis. The Issuer will not update this summary to reflect changes in laws and if such a change occurs the information in this summary could become invalid.
Prospective purchasers of the Notes are advised to consult their own tax advisers concerning the overall tax consequences under Italian tax law, under the tax laws of the country in which they are resident for tax purposes and of any other jurisdiction potentially relevant to the acquiring, holding and disposing of the Notes and receiving payments of interest, principal and/or other amounts under the Notes, including in particular the effect of any state, regional or local tax laws.
Words and expressions defined in the "Terms and Conditions of the Notes" above or elsewhere in this Base Prospectus have the same meanings in this section.
Taxation of Interest on the Notes
Notes qualifying as bonds or securities similar to bonds having a maturity of at least 18 months
Decree 239 regulates the income tax treatment of interest, premium and other income (including any difference between the redemption amount and the issue price, hereinafter collectively referred to as "Interest") from notes having a maturity of eighteen months or more and issued, inter alia, by Italian resident companies listed in an Italian regulated market, falling within the category of bonds (obbligazioni) or securities similar to bonds (titoli similari alle obbligazioni).
For this purpose, securities similar to bonds are securities that incorporate an unconditional obligation to pay, at maturity, an amount not lower than their nominal value and that do not allow any direct or indirect participation either in the management of the issuer or in the business in connection with which they have been issued, nor any control on such management.
Italian resident Noteholders
Where an Italian resident Noteholder is (i) an individual not engaged in a business activity to which the Notes are effectively connected, (ii) a non-commercial partnership, (iii) a non-commercial private or public institution, or (iv) an investor exempt from Italian corporate income taxation, Interest payments relating to the Notes are subject to a substitutive tax, referred to as "imposta sostitutiva", levied at the rate of 12.5 per cent. (either when the Interest is paid by the Issuer, or when payment thereof is obtained by the Noteholder on a sale of the relevant Notes). The imposta sostitutiva may not be recovered by the Noteholder as a deduction from the income tax due.
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If the Notes are held by an investor engaged in a business activity and are effectively connected with the same business activity, the Interest is subject to the imposta sostitutiva and is included in the relevant income tax return. As a consequence, the Interest is subject to the ordinary income tax and the imposta sostitutiva may be recovered as a deduction from the income tax due.
Pursuant to the Decree 239, imposta sostitutiva is applied by banks, società di intermediazione mobiliare ("SIMs"), società di gestione del risparmio ("SGRs"), fiduciary companies, stock exchange agents and other entities identified by the relevant Decrees of the Ministry of Finance (the "Intermediaries").
An Intermediary must satisfy the following conditions:
(iv) it must be: (a) resident in Italy; or (b) a permanent establishment in Italy of an intermediary resident outside of Italy; or (c) an organisation or company non-resident in Italy, acting through a system of centralized administration of securities and directly connected with the Department of Revenue of the Ministry of Finance (which includes Euroclear and Clearstream, Luxembourg) having appointed an Italian representative for the purposes of Decree 239; and
(v) intervene, in any way, in the collection of Interest or in the transfer of the Notes. For the purpose of the application of imposta sostitutiva, a transfer of the Notes includes any assignment or other act, either with or without consideration, which results in a change of the ownership of the relevant Notes.
Where the Notes are not deposited with an Intermediary, imposta sostitutiva is applicable and withheld by any Italian bank or any Italian intermediary paying Interest to a Noteholder.
The imposta sostitutiva regime described above does not apply in cases where the Notes are held in a discretionary investment portfolio managed by an authorized intermediary pursuant to the so-called discretionary investment portfolio regime (the "Risparmio Gestito" regime as defined and described in "Capital Gains", below). In such a case, Interest is not subject to imposta sostitutiva but is taken into account in determining the annual net accrued result of the portfolio, which is subject to an ad-hoc substitutive tax of 12.5 per cent..
The imposta sostitutiva will not apply to the following entities, provided that the Notes and the relevant coupons are deposited in a timely manner, directly or indirectly, with an Intermediary:
(i) Corporate investors - Where an Italian resident Noteholder is a corporation or a similar commercial entity (including a permanent establishment in Italy of a foreign entity to which the Notes are effectively connected), Interest accrued on the Notes must be included in: (I) the relevant Noteholder‘s yearly taxable income for the purposes of corporate income tax ("IRES"), applied at the ordinary and current rate of 27.5 per cent. (certain surcharges may apply depending on the status of the Noteholder); and (II) in certain circumstances, depending on the status of the Noteholder, also in its net value of production for the purposes of regional tax on productive activities ("IRAP"), generally applied at the rate of 3.9 per cent. The IRAP rate can be increased under regional laws by up to 0.92 per cent. Such Interest is therefore subject to general Italian corporate taxation applied in accordance with the ordinary rules;
(ii) Investment funds - Italian investment funds (which includes Fondo Comune d’Investimento, or SICAV), as well as Luxembourg investment funds regulated by article 11-bis of Law Decree No. 512 of 30 September 1983 (collectively, the "Funds") are subject to a 12.5 per cent. substitutive tax on their annual net accrued result. Interest on the Notes is included in the calculation of said annual net accrued result;
(iii) Pension funds - Pension funds (subject to the tax regime set forth by Article 17 of Legislative Decree No. 252 of 5 December, 2005, the "Pension Funds") are subject to an 11 per cent. substitutive tax on their annual net accrued result. Interest on the Notes is included in the calculation of such annual net accrued result; and
(iv) Real estate investment funds – Interest payments in respect of the Notes to Italian resident real estate investment funds established pursuant to Article 37 of Legislative Decree No. 58 of 24 February 1998 (the ‗‗Real Estate Investment Funds‘‘) are generally subject neither to imposta sostitutiva nor to any other income tax in the hands of the same Real Estate Investment Funds.
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Please note that Law Decree No. 78 of 31 May 2010, converted into law, with amendments, by Law No. 122 of 30 July 2010, amended the definition of ―investment fund‖. Existing Real Estate Investment Funds, not fulfilling the requirements for being characterised as ―funds‖ according to the amended definition, would be obliged to pay an extraordinary substitutive tax 5% or 7% rate, depending on certain circumstances.
Non-Italian resident Noteholders
An exemption from imposta sostitutiva on Interest on the Notes is provided with respect to certain beneficial owners resident outside of Italy, not having a permanent establishment in Italy to which the Notes are effectively connected. In particular, pursuant to the Decree 239 the aforesaid exemption applies to any beneficial owner of an Interest payment relating to the Notes who:
(i) is resident, for tax purposes, in a country which allows for a satisfactory exchange of information with the Republic of Italy (as currently listed by Ministerial Decree dated 4 September 1996 and which will be included in a new list to be enacted by a ministerial decree to be issued pursuant to Law No. 244 of 24 December 2007 - a "White List Country"); or
(ii) is an international body or entity set up in accordance with international agreements which have entered into force in the Republic of Italy; or
(iii) is the Central Bank or an entity also authorised to manage the official reserves of a country; or
(iv) is an institutional investor which is established in a White List Country, even if it does not possess the status of taxpayer in its own country of establishment (each, a "Qualified Noteholder").
The exemption procedure for Noteholders who are non-resident in Italy and are resident in a White List Country identifies two categories of intermediaries:
(a) an Italian or foreign bank or financial institution (there is no requirement for the bank or financial institution to be EU resident) (the "First Level Bank"), acting as intermediary in the deposit of the Notes held, directly or indirectly, by the Noteholder with a Second Level Bank (as defined below); and
(b) an Italian resident bank or SIM, or a permanent establishment in Italy of a non-resident bank or SIM, acting as depositary or sub-depositary of the Notes appointed to maintain direct relationships, via electronic link, with the Italian tax authorities (the "Second Level Bank"). Organisations and companies non-resident in Italy, acting through a system of centralized administration of securities and directly connected with the Department of Revenue of the Ministry of Finance (which include Euroclear and Clearstream) are treated as Second Level Banks, provided that they appoint an Italian representative (an Italian resident bank or SIM, or permanent establishment in Italy of a non-resident bank or SIM, or a central depositary of financial instruments pursuant to Article 80 of Legislative Decree No. 58 of 24 February 1998) for the purposes of the application of Decree 239.
In the event that a non-Italian resident Noteholder deposits the Notes directly with a Second Level Bank, the latter shall be treated both as a First Level Bank and a Second Level Bank.
The exemption from the imposta sostitutiva for the Noteholders who are non-resident in Italy is conditional upon:
(a) the deposit of the Notes, either directly or indirectly, with an institution which qualifies as a Second Level Bank; and
(b) the submission to the First Level Bank or the Second Level Bank of a statement of the relevant Noteholder (autocertificazione), to be provided only once, in which it declares that it is eligible to benefit from the exemption from imposta sostitutiva. Such statement must comply with the requirements set forth by a Ministerial Decree dated 12 December 2001, is valid until withdrawn or revoked and needs not to be submitted where a certificate, declaration or other similar document for the same or equivalent purposes was previously submitted to the same
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depository. The above statement is not required for non-Italian resident investors that are international entities or organisations set up in accordance with international agreements entered into force in the Republic of Italy or Central Banks or entities which are also authorized to manage the official reserves of a State.
Should the above conditions not be met, Interest on the Notes received by non-Italian resident Noteholders not having a permanent establishment in Italy to which the Notes are effectively connected will be subject to imposta sostitutiva.
Early redemption
Notwithstanding the regime described above, if the Notes are subject to an early redemption within eighteen months from the issue date, an additional amount of tax is payable by the Issuer at the rate of 20 per cent. in respect of Interest accrued on the Notes up to the date of such early redemption, pursuant to Article 26, paragraph 1, of Presidential Decree No. 600 of 29 September 1973 as amended ("Decree No. 600/73"). According to one interpretation of Italian tax law, this 20 per cent. additional tax may also be due in the event of any purchase by the Issuer of Notes which are subsequently cancelled prior to eighteen-months from the date of issue.
Notes qualifying as bonds or securities similar to bonds having a maturity of less than 18 months
Pursuant to Article 26, paragraph 1, of Decree No. 600/73, Interest payments relating to the Notes qualifying as bonds or securities similar to bonds, issued with a maturity of less than 18 months, are subject to a withholding tax, levied at the rate of 27 per cent.
Where an Italian resident Noteholder is (i) an individual engaged in a business activity to which the Notes are effectively connected, (ii) a corporation or a similar Italian commercial entity (including a permanent establishment in Italy of a foreign entity to which the Notes are effectively connected) (iii) a commercial partnership, or (iv) a commercial private or public institution, such withholding tax is an advance withholding tax. In all other cases, the withholding tax is a final withholding tax.
In case of non-Italian resident Noteholders, not having a permanent establishment in Italy to which the Notes are effectively connected, the above-mentioned withholding tax rate may be reduced (generally to 10 per cent.) or eliminated under certain applicable tax treaties entered into by Italy, if more favourable, subject to timely filing of the required documentation.
Notes qualifying as atypical securities (titoli atipici)
Interest payments relating to Notes that are not deemed to fall within the category of bonds (obbligazioni) or securities similar to bonds (titoli similari alle obbligazioni) are subject to a withholding tax, levied at the rate of 27 per cent..
Where the Noteholder is (i) a non-Italian resident person, (ii) an Italian resident individual not holding the Notes for the purpose of carrying out a business activity, (iii) an Italian resident non-commercial partnership, (iv) an Italian resident non-commercial private or public institution, (v) a Fund, (vi) a Real Estate Investment Fund, (vii) a Pension Fund, (viii) an Italian resident investor exempt from Italian corporate income taxation, such withholding tax is a final withholding tax.
Where the Noteholder is (i) an Italian resident individual carrying out a business activity to which the Notes are effectively connected, (ii) an Italian resident corporation or a similar Italian commercial entity (including a permanent establishment in Italy of a foreign entity to which the Notes are effectively connected), such withholding tax is an advance withholding tax.
In case of non-Italian resident Noteholders, without a permanent establishment in Italy to which the Notes are effectively connected, the above-mentioned withholding tax rate may be reduced (generally to 10 per cent.) or eliminated under certain applicable tax treaties entered into by Italy, if more favourable, subject to timely filing of the required documentation.
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Capital Gains
Italian resident Noteholders
Pursuant to Legislative Decree No. 461 of 21 November 1997, as amended, ("Decree No. 461") a 12.5 per cent. capital gains tax ("CGT") is applicable to capital gains realised on any sale or transfer of the Notes for consideration by Italian resident individuals (not engaged in a business activity to which the Notes are effectively connected), regardless of whether the Notes are held outside of Italy.
For the purposes of determining the taxable capital gain, any Interest on the Notes accrued and unpaid up to the time of the purchase and the sale of the Notes must be deducted from the purchase price and the sale price, respectively.
Should the Notes qualify as atypical securities, based on a very restrictive interpretation, the aforesaid capital gains would be subject to the 27 per cent. final withholding tax mentioned above.
Taxpayers can opt for one of the three following regimes:
(a) Tax return regime ("Regime della Dichiarazione") - The Noteholder must assess the overall capital gains realised in a certain fiscal year, net of any incurred capital losses, in his annual income tax return and pay CGT together with the income tax due for the same fiscal year. Losses exceeding gains can be carried forward into following fiscal years up to the fourth following fiscal year. Since this regime constitutes the ordinary regime, the taxpayer must apply it to the extent that the same does not opt for any of the two other regimes;
(b) Non-discretionary investment portfolio regime ("Risparmio Amministrato") - The Noteholder may elect to pay CGT separately on capital gains realised on each sale or transfer of the Notes. Such separate taxation of capital gains is allowed subject to (i) the Notes being deposited with banks, SIMs or other authorized intermediaries and (ii) an express election for the Risparmio Amministrato regime being made in writing by the relevant Noteholder. The Risparmio Amministrato lasts for the entire fiscal year and unless revoked prior to the end of such year will be deemed valid also for the subsequent one. The intermediary is responsible for accounting for CGT in respect of capital gains realised on each sale or transfer of the Notes, as well as in respect of capital gains realised at the revocation of its mandate. The intermediary is required to pay the relevant amount to the Italian tax authorities by the 16th day of the second month following the month in which CGT is applied, by deducting a corresponding amount from the proceeds to be credited to the Noteholder. Where a particular sale or transfer of the Notes results in a net loss, the intermediary is entitled to deduct such loss from gains subsequently realised on assets held by the Noteholder with the same intermediary and within the same deposit relationship, in the same fiscal year or in the following fiscal years up to the fourth following fiscal year. The Noteholder is not required to declare the gains in his annual income tax return; and
(c) Discretionary investment portfolio regime ("Risparmio Gestito") - If the Notes are part of a portfolio managed by an Italian asset management company, capital gains are not subject to CGT, but contribute to determine the annual net accrued result of the portfolio. Such annual net accrued result of the portfolio, even if not realised, is subject to an ad-hoc 12.5 per cent. substitutive tax, which the asset management company is required to levy on behalf of the Noteholder. Any losses of the investment portfolio accrued at year end may be carried forward against net profits accrued in each of the following fiscal years, up to the fourth following fiscal year. Under such regime the Noteholder is not required to declare the gains in his annual income tax return.
The aforementioned regime does not apply to the following entities:
(A) Corporate investors - Capital gains realised on the Notes by Italian resident corporate entities (including a permanent establishment in Italy of a foreign entity to which the Notes are effectively connected) form part of their aggregate income subject to IRES (certain surcharges may apply depending on the status of the Noteholder). In certain cases, capital gains may also be included in the taxable net value of production of such entities for IRAP purposes. The
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capital gains are calculated as the difference between the sale price and the relevant tax basis of the Notes. Upon fulfilment of certain conditions, the gains may be taxed in equal instalments over up to five fiscal years both for IRES and for IRAP purposes.
(B) Funds - Capital gains realised by the Funds on the Notes contribute to determine their annual net accrued result, which is subject to a 12.5 per cent. substitutive tax (see "Taxation of Interest on the Notes" – "Italian Resident Noteholders", above).
(C) Pension Funds - Capital gains realised by Pension Funds on the Notes contribute to determine their annual net accrued result, which is subject to an 11 per cent. substitutive tax (see "Taxation of Interest on the Notes" – "Italian Resident Noteholders", above).
(D) Real Estate Investment Funds - Capital gains realised by Real Estate Investment Funds on the Notes are not taxable at the level of same Real Estate Investment Funds, unless the latter are subject to the 5% or 7% extraordinary substitutive tax enacted by Law Decree No. 78 of 31 May 2010 (see "Taxation of Interest on the Notes" – "Italian Resident Noteholders", above).
Non Italian resident Noteholders
Capital gains realised by non-resident Noteholders (not having permanent establishment in Italy to which the Notes are effectively connected) on the disposal of the Notes are not subject to tax in Italy, regardless of whether the Notes are held in Italy, subject to the condition that the Notes are listed in a regulated market in Italy or abroad (e.g. Luxembourg Stock Exchange).
Should the Notes not be listed in a regulated market as indicated above, the aforesaid capital gains would be subject to tax in Italy, if the Notes are held by the non-resident Noteholder therein. Pursuant to Article 5 of Decree No. 461, an exemption, however, would apply with respect to beneficial owners of the Notes, which are Qualified Noteholders.
In any event, non-Italian resident Noteholders without a permanent establishment in Italy to which the Notes are effectively connected that may benefit from a tax treaty with Italy providing that capital gains realised upon sale or transfer of Notes are taxed only in the country of tax residence of the recipient, will not be subject to tax in Italy on any capital gains realised upon any such sale or transfer.
Transfer Taxes
No stamp duty tax (tassa sui contratti di borsa) currently applies on transfers of the Notes, such tax having been repealed by Article 37 of Legislative Decree No. 248 of 31 December 2007 (converted, with amendments, by Law No. 31 of 28 February 2008), effective as of 31 December 2007.
Inheritance and Gift Tax
Inheritance and gift taxes apply on the overall net value of the relevant transferred assets, at the following rates, depending on the relationship between the testate (or donor) and the beneficiary (or donee):
(a) 4 per cent., if the beneficiary (or donee) is the spouse or a direct ascendant or descendant (such rate only applying on the net asset value exceeding, for each person, euro 1 million);
(c) 6 per cent. if the beneficiary (or donee) is a brother or sister (such rate only applying on the net asset value exceeding, for each person, euro 100,000);
(d) 6 per cent. if the beneficiary (or donee) is a relative within the fourth degree or a direct relative-in-law as well an indirect relative-in-law within the third degree;
(e) 8 per cent. if the beneficiary is a person, other those mentioned other (a), (b) and (c), above.
In case the beneficiary has a serious disability recognized by law, inheritance and gift taxes apply on its portion of the net asset value exceeding euro 1.5 million.
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Tax Monitoring
Pursuant to Law Decree No. 167 of 28 June 1990, converted by Law No. 227 of 4 August 1990, as amended, individuals resident in Italy who, at the end of the fiscal year, hold investments abroad or have financial activities abroad must, in certain circumstances, disclose the aforesaid and related transactions to the Italian tax authorities in their income tax return (or, in case the income tax return is not due, in a proper form that must be filed within the same time as prescribed for the income tax return). Such obligation is not provided if, inter alia, each of the overall value of the foreign investments or financial activities held at the end of the fiscal year, and the overall value of the related transfers carried out during the relevant fiscal year, does not exceed euro 10,000.
Luxembourg Taxation
The following is a general description of certain Luxembourg tax considerations relating to the Notes. It specifically contains information on taxes on the income from the Notes withheld at source and provides an indication as to whether the Issuer assumes responsibility for the withholding of taxes at the source. It does not purport to be a complete analysis of all tax considerations relating to the Notes, whether in Luxembourg or elsewhere. Prospective purchasers of the Notes should consult their own tax advisers as to which countries' tax laws could be relevant to acquiring, holding and disposing of the Notes payments of interest, principal and/or other amounts under the Notes and the consequences of such actions under the tax laws of Luxembourg. This summary is based upon the law as in effect on the date of this Base Prospectus. The information contained within this section is limited to withholding taxation issues, and prospective investors should not apply any information set out below to other areas, including (but not limited to) the legality of transactions involving the Notes.
All payments of interest and principal by the Luxembourg paying agent under the Notes can be made free and clear of any withholding or deduction for or on account of any taxes of whatsoever nature imposed, levied, withheld, or assessed by Luxembourg or any political subdivision or taxing authority thereof or therein, in accordance with the applicable Luxembourg law, subject however to:
(i) the application of the Luxembourg law of 21 June 2005 implementing the European Union Savings Directive (Council Directive 2003/48/EC) and providing for the possible application of a withholding tax (15% from 1 July 2005 to 30 June 2008, 20% from 1 July 2008 to 30 June 2011 and 35% from 1 July 2011) on interest paid to certain non Luxembourg resident investors (individuals and certain types of entities called "residual entities") in the event of the Issuer appointing a paying agent in Luxembourg within the meaning of the above-mentioned directive (see, paragraph "EU Savings Tax Directive" below );
(ii) the application as regards Luxembourg resident individuals of the Luxembourg law of 23 December 2005 which has introduced a 10% final withholding tax on savings income (i.e. with certain exemptions, savings income within the meaning of the Luxembourg law of 21 June 2005 implementing the European Union Savings Directive). This law should apply to savings income accrued as from 1 July 2005 and paid as from 1 January 2006.
Responsibility for the withholding of tax in application of the above-mentioned Luxembourg laws of 21 June 2005 and 23 December 2005 is assumed by the Luxembourg paying agent within the meaning of these laws and not by the Issuer.
EU Savings Directive
The European Union has adopted a Directive regarding the taxation of savings income in the form of interest payments (the EU Savings Directive). Under the EU Savings Directive, Member States are required from 1 July 2005 to provide to the tax authorities of other Member States details of payments of interest and other similar income paid by a person within its jurisdiction to an individual and certain other persons in another Member State, except that Luxembourg and Austria may instead impose a withholding system for a transitional period in relation to such payments, deducting tax at rates rising over time to 35 per cent. The transitional period will terminate at the end of the first fiscal year following agreement by certain non-EU countries to the exchange of information relating to such payments. Belgium, which was formerly entitled to apply the withholding tax, has replaced such system with the regime of exchange of information to the Member State of residence as from 1 January 2010.
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Also with effect from 1 July 2005, a number of non-EU countries, and certain dependent or associated territories of certain Member States, have agreed to adopt similar measures (either provision of information or transitional withholding) in relation to payments made by a person within their jurisdiction to, or collected by such a person for, an individual resident in a Member State. In addition, the Member States have entered into reciprocal provisions of information or transitional withholding arrangements with certain of those dependent or associated territories in relation to payments made by a paying agent in a Member State to, or collected by such a paying agent for, an individual resident in one of those territories.
The EU Savings Directive was implemented in Italy by Legislative Decree No. 84 of 18 April 2005. Pursuant to said decree Italian paying agents (e.g., banks, SIMs, SGRs, financial companies and fiduciary companies resident in Italy for tax purposes, permanent establishments in Italy of non-resident persons as well as any other person resident in Italy for tax purposes paying interest for professional or commercial reasons) shall report to the Italian tax authorities details of interest payments made from 1 July 2005 to individuals which qualify as beneficial owners thereof and are resident for tax purposes in another EU Member State. Such information will be transmitted by the Italian tax authorities to the competent authorities of the State of residence of the beneficial owner of the interest payment by 30th June of the fiscal year following the fiscal year in which said interest payment is made.
With reference to the definition of interest subject to the above described regime, Article 2, paragraph 1, lett. a, of mentioned Decree No. 84 of 18 April 2005, provides that it includes, inter alia: "interest paid or credited, on accounts arisen from receivables of whatever nature, secured or not by mortgage (…), in particular interest and any other proceed, arising from public bonds and other bonds".
Prospective investors resident in a Member State of the European Union should consult their own legal or tax advisers regarding the consequences of the EU Savings Directive in their particular circumstances.
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SUBSCRIPTION AND SALE
Notes may be sold from time to time by the Issuer to any one or more of Banca IMI S.p.A., BNP Paribas and UniCredit Bank AG (the "Arrangers") and Banco Bilbao Vizcaya Argentaria, S.A., Banco Santander, S.A., Barclays Bank PLC, Citigroup Global Markets Limited, Crédit Agricole Corporate and Investment Bank, Deutsche Bank AG, London Branch, HSBC Bank plc, J.P. Morgan Securities Ltd., Mediobanca - Banca di Credito Finanziario S.p.A., Merrill Lynch International, MPS Capital Services S.p.A., Natixis, The Royal Bank of Scotland plc and Société Générale (together with the Arrangers, the "Dealers"). The arrangements under which Notes may from time to time be agreed to be sold by the Issuer to, and purchased by, Dealers are set out in an amended and restated dealer agreement dated 1 October 2010 (the "Dealer Agreement") and made between the Issuer and the Dealers. Any such agreement will, inter alia, make provision for the form and terms and conditions of the relevant Notes, the price at which such Notes will be purchased by the Dealers and the commissions or other agreed deductibles (if any) payable or allowable by the Issuer in respect of such purchase. The Dealer Agreement makes provision for the resignation or termination of appointment of existing Dealers and for the appointment of additional or other Dealers either generally in respect of the Programme or in relation to a particular Tranche of Notes.
United States of America
Regulation S Category 2; TEFRA D or TEFRA C as specified in the relevant Final Terms or neither if TEFRA is specified as not applicable in the relevant Final Terms.
The Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions exempt from the registration requirements of the Securities Act. Terms used in this paragraph have the meanings given to them by Regulation S.
The Notes are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to a United States person, except in certain transactions permitted by U.S. tax regulations. Terms used in this paragraph have the meanings given to them by the United States Internal Revenue Code and regulations thereunder.
Each Dealer has agreed that, except as permitted by the Dealer Agreement, it will not offer, sell or deliver Notes, (i) as part of their distribution at any time or (ii) otherwise until 40 days after the completion of the distribution of the Notes comprising the relevant Tranche, as certified to the Fiscal Agent or the Issuer by such Dealer (or, in the case of a sale of a Tranche of Notes to or through more than one Dealer, by each of such Dealers as to the Notes of such Tranche purchased by or through it, in which case the Fiscal Agent or the Issuer shall notify each such Dealer when all such Dealers have so certified) within the United States or to, or for the account or benefit of, U.S. persons, and such Dealer will have sent to each dealer to which it sells Notes during the distribution compliance period relating thereto a confirmation or other notice setting forth the restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons.
In addition, until 40 days after the commencement of the offering of Notes comprising any Tranche, any offer or sale of Notes within the United States by any dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act.
Public Offer Selling Restriction under the Prospectus Directive
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State"), each Dealer has represented, warranted and agreed, and each further Dealer appointed under the Programme will be required to represent, warrant and agree, that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the "Relevant Implementation Date") it has not made and will not make an offer of Notes which are the subject of the offering contemplated by the Prospectus as completed by the Final Terms in relation thereto (or are the subject of the offering contemplated by a Drawdown Prospectus, as the case may be) to the public in that Relevant Member State except that it may, with effect from and including the Relevant Implementation Date, make an offer of such Notes to the public in that Relevant Member State:
(a) Authorised institutions: at any time to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to invest in securities;
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(b) Significant enterprises: at any time to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, all as shown in its last annual or consolidated accounts; or
(c) Fewer than 100 offerees: at any time to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the relevant Dealer or Dealers nominated by the Issuer for any such offer; or
(d) Denomination: at any time if the denomination per Note offered amounts to at least €50,000; or
(e) Other exempt offers: at any time in any other circumstances falling within Article 3(2) of the Prospectus Directive. provided that no such offer of Notes referred to in (a) to (e) above shall require the Issuer or any Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.
For the purposes of this provision, the expression an "offer of Notes to the public" in relation to any Notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression "Prospectus Directive" means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.
Italy
The offering of the Notes has not been registered pursuant to Italian securities legislation and, accordingly, each Dealer has represented and agreed that it has not offered or sold, and will not offer or sell, any Notes or distribute copies of this Base Prospectus or any other document relating to the Notes in the Republic of Italy in an offer to the public (except where an express exemption from compliance with public offer restrictions applies), and that sales of the Notes and the distribution of the relevant information documents in the Republic of Italy shall be effected in all circumstances in accordance with all Italian securities, tax and exchange control and other applicable laws and regulations.
Each of the Dealers has represented and agreed that it will not offer any Notes or distribute copies of this Base Prospectus or any other document relating to the Notes in the Republic of Italy except:
(a) to qualified investors (investitori qualificati) as defined in Article 34-ter, first paragraph, letter b) of CONSOB Regulation 11971 of 14 May 1999 (as amended) ("Regulation No. 11971") implementing Article 100 of Legislative Decree No. 58 of 24 February 1998, as amended ("Decree No. 58"); or
(b) in any other circumstances where an express exemption from compliance with public offer restrictions applies, as provided under Decree No. 58 or Regulation No. 11971.
Any such offer or any sale or delivery of the Notes or distribution of copies of this Base Prospectus or any other document relating to the Notes in the Republic of Italy must be made:
(a) by investment firms, banks or financial intermediaries permitted to conduct such activities in the Republic of Italy in accordance with Legislative Decree No. 385 of 1 September 1993, Decree No. 58 and CONSOB Regulation No. 16190 of 29 October 2007 (in each case, as amended) and any other applicable laws and regulations; and
(b) in compliance with any other applicable laws, regulations, requirement or limitation which may be imposed by CONSOB, the Bank of Italy or any other competent authority.
Limits on issuance of notes by Italian corporate issuers
Article 2412 of the Italian Civil Code imposes limits on the total principal amount of Notes that the Issuer may have outstanding from time to time. Under current legislation, an Italian company limited by shares (società per azioni) may issue Notes up to an aggregate amount representing double the sum of its paid up share capital, legal reserves and distributable reserves (the "Issuance Limit"). Notes which are issued by a third party but
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guaranteed by the company are taken into account for the purpose of calculating the aggregate amount of Notes issued by that company. However, the Issuance Limit does not apply, inter alia, to: (i) Notes issued by a company whose shares are listed on a regulated market of the European Union where such Notes have been or will be admitted to listing, either on the same or another regulated market of the European Union; or (ii) Notes issued above the Issuance Limit (the "Exceeding Notes") which are entirely subscribed for at the time of issue by professional investors that are subject to regulatory supervision (e.g. banks, investment firms, "SGRs" and "SICAVs") (each a "Primary Professional Investor"). In the latter case, if the Exceeding Notes are sold on the secondary market to a person who is not a professional investor, the relevant seller (whether a Primary Professional Investor or another category of professional investor) is liable to the purchaser of such Notes for the solvency of the Issuer.
Selling Restrictions Addressing Additional United Kingdom Securities Laws:
Each Dealer has represented, warranted and agreed that:
(a) No deposit taking: in relation to any Notes having a maturity of less than one year:
(i) it is a person whose ordinary activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business; and
(ii) it has not offered or sold and will not offer or sell any Notes other than to persons:
(A) whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses; or
(B) who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses,
where the issue of the Notes would otherwise constitute a contravention of Section 19 of the Financial Services and Markets Act 2000 ("FSMA") by the Issuer;
(b) Financial promotion: it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) received by it in connection with the issue or sale of any Notes in circumstances in which section 21(1) of the FSMA does not apply to the Issuer; and
(c) General compliance: it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any such Notes in, from or otherwise involving the United Kingdom.
Japan
The Notes have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended) and, accordingly, each Dealer has undertaken that it will not offer or sell any Notes directly or indirectly, in Japan or to, or for the benefit of, any Japanese Person or to others for re-offering or resale, directly or indirectly, in Japan or to any Japanese Person except under circumstances which will result in compliance with all applicable laws, regulations and guidelines promulgated by the relevant Japanese governmental and regulatory authorities and in effect at the relevant time. For the purposes of this paragraph, "Japanese Person" shall mean any person resident in Japan, including any corporation or other entity organised under the laws of Japan.
General
Each Dealer has represented, warranted and agreed that it has complied and will, to the best of its knowledge, comply with all applicable laws and regulations in each country or jurisdiction in or from which it purchases, offers, sells or delivers Notes or possesses, distributes or publishes this Base Prospectus or any Final Terms or any related offering material, in all cases at its own expense. Other persons into whose hands this Base Prospectus or any Final Terms comes are required by the Issuer and the Dealers to comply with all applicable laws and regulations in each country or jurisdiction in or from which they purchase, offer, sell or deliver Notes or possess, distribute or publish this Base Prospectus or any Final Terms or any related offering material, in all cases at their own expense.
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The Dealer Agreement provides that the Dealers shall not be bound by any of the restrictions relating to any specific jurisdiction (set out above) to the extent that such restrictions shall, as a result of change(s), or change(s) in official interpretation, after the date hereof, of applicable laws and regulations, no longer be applicable but without prejudice to the obligations of the Dealers described in the paragraph headed "General" above.
Selling restrictions may be supplemented or modified with the agreement of the Issuer. Any such supplement or modification will be set out in the relevant Final Terms (in the case of a supplement or modification relevant only to a particular Tranche of Notes) or (in any other case) in a supplement to this document.
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GENERAL INFORMATION
Listing and admission to trading
This Base Prospectus has been approved as a base prospectus issued in compliance with the Prospectus Directive by the CSSF in its capacity as competent authority in Luxembourg for the purposes of the Prospectus Directive. Application has been made for Notes issued under the Programme to be listed on the official list of the Luxembourg Stock Exchange and admitted to trading on the regulated market of the Luxembourg Stock Exchange.
However, Notes may be issued pursuant to the Programme which will be listed on or admitted to trading on such stock exchange as the Issuer and the relevant Dealer(s) may agree or which will not be listed on the official list of the Luxembourg Stock Exchange or admitted to trading on the Luxembourg Stock Exchange or any other stock exchange.
For the purposes of admitting Notes to trading on a regulated market in a member state of the European Economic Area other than Luxembourg, the CSSF may, at the request of the Issuer, send to the competent authority of another Member State of the European Economic Area: (i) a copy of this Base Prospectus; (ii) a certificate of approval attesting that this Base Prospectus has been drawn up in accordance with the Prospectus Directive; and (iii) if so required by the competent authority of such Member State, a translation into the official language(s) of such Member State of a summary of this Base Prospectus.
Authorisations
The establishment and the 2010 update of the Programme (including the increase in the Programme amount) were authorised by resolutions of the board of directors of the Issuer dated 25 June 2009 and 24 September 2010. The Issuer has obtained or will obtain from time to time all necessary consents, approvals and authorisations in connection with the issue and performance of the Notes.
Clearing of the Notes
The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg. The appropriate common code and the International Securities Identification Number in relation to the Notes of each Series will be specified in the Final Terms relating thereto. The relevant Final Terms shall specify any other clearing system as shall have accepted the relevant Notes for clearance together with any further appropriate information.
The address of Euroclear is 1 Boulevard du Roi Albert II, B-1210 Brussels and the address of Clearstream, Luxembourg is Clearstream Banking, 42 Avenue JF Kennedy, L-1 855 Luxembourg.
Use of proceeds
The net proceeds of the issue of each Tranche of Notes will be applied by the Issuer to meet part of its general financing requirements.
Potential conflicts of interest
The Dealers and their respective affiliates, including parent companies, engage and may in the future engage, in investment banking, commercial banking (including the provision of loan facilities) and other related transactions with the Issuer and its affiliates and may perform services for them, in each case in the ordinary course of business.
Legal and arbitration proceedings
Save as disclosed in this Base Prospectus, there are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened, of which the Issuer is aware), which may have, or have had, during the twelve months prior to the date of this Base Prospectus, a significant effect on the financial position or profitability of the Issuer or the Group.
No significant change/material adverse change
Save as disclosed in this Base Prospectus, there has been no significant change in the financial or trading position of the Issuer or the Group since 30 June 2010 (being the last day of the financial period in respect of
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which the most recent published unaudited financial statements of the Issuer have been prepared) and no material adverse change in the prospects of the Issuer since 31 December 2009 (being the last day of the financial period in respect of which the most recent published audited financial statements of the Issuer have been prepared).
Material contracts
Save as disclosed in this Base Prospectus, the Issuer has not entered into any contracts in the last two years outside the ordinary course of business that have been or may reasonably be expected to be material to their ability to meet its obligations to Noteholders.
Documents available for inspection
For so long as the Programme remains in effect or any Notes shall be outstanding, copies and, where appropriate, English translations of the following documents may be inspected (and, in the case of documents listed at (d) and (e) below, may be collected) during normal business hours at the specified office of the Fiscal Agent, namely:
(a) the Agency Agreement;
(b) the Deed of Covenant;
(c) the Dealer Agreement;
(d) the Programme Manual (which contains the forms of the Notes in global and definitive form);
(e) any Final Terms relating to Notes which are admitted to listing, trading and/or quotation by any listing authority, stock exchange and/or quotation system (save that, in the case of any Notes which are not admitted to listing, trading and/or quotation by any listing authority, stock exchange and/or quotation system, copies of the relevant Final Terms will only be available for inspection by the relevant Noteholders); and
(f) The by-laws (statuto) of the Issuer (with a translation into English where applicable).
Financial statements available
For so long as the Programme remains in effect or any Notes are outstanding, copies and, where appropriate, English translations of the following documents may be obtained during normal business hours at the specified office of the Fiscal Agent:
(a) the most recent publicly available annual report, including the audited consolidated and non- consolidated annual financial statements of the Issuer, beginning with such consolidated and non- consolidated financial statements as at and for the years ended 31 December 2009 and 2008; and
(b) the most recent publicly available unaudited consolidated interim financial statements of the Issuer, beginning with its half-yearly financial statements as at and for the six months ended 30 June 2010 and 2009.
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REGISTERED OFFICE OF THE ISSUER
Edison S.p.A. Foro Buonaparte 31 20121 Milan Italy
FISCAL AGENT
BNP Paribas Securities Services, Luxembourg Branch 33, rue de Gasperich, Howald – Hesperange L-2085 Luxembourg
LISTING AGENT
BNP Paribas Securities Services, Luxembourg Branch 33, rue de Gasperich, Howald – Hesperange L-2085 Luxembourg
DEALERS
Banca IMI S.p.A. Banco Bilbao Vizcaya Argentaria, S.A. Banco Santander, S.A. Largo Mattioli, 3 Via de los Poblados s/n Ciudad Grupo Santander 20121 Milan 28033 Madrid Edificio Encinar Italy Spain Avenida de Cantabria 28660, Boadilla del Monte Madrid Spain
Barclays Bank PLC BNP Paribas Citigroup Global Markets Limited 5 The North Colonnade 10 Harewood Avenue 25-33 Canada Square Canary Wharf London NW1 6AA Canary Wharf London E14 4BB United Kingdom London E14 5LB United Kingdom United Kingdom
Crédit Agricole Deutsche Bank AG, London Branch HSBC Bank plc Corporate and Investment Bank Winchester House 8 Canada Square 9 Quai du President Paul Doumer 1 Great Winchester Street London E14 5HQ 92920 Paris La Défense Cedex London EC2N 2DB United Kingdom France United Kingdom
J.P. Morgan Securities Ltd. Mediobanca - Banca di Credito Merrill Lynch International 125 London Wall Finanziario S.p.A. 2 King Edward Street London EC2Y 5AJ Piazzetta E. Cuccia, 1 London EC1A 1HQ United Kingdom 20121 Milan United Kingdom Italy
MPS Capital Services S.p.A. Natixis The Royal Bank of Scotland plc Viale Mazzini, 23 30 Avenue Pierre Mendès France 135 Bishopsgate 53100 Siena 75013 Paris London EC2M 3UR Italy France United Kingdom
Société Générale UniCredit Bank AG 29, Boulevard Haussmann Arabellastrasse 12 75009 Paris 81925 Munich France Germany
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LEGAL ADVISERS
To the Issuer as to Italian law Legance Studio Legale Associato Via Dante, 7 20123 Milan Italy
To the Dealers s to English and Italian law
Clifford Chance Studio Legale Associato Piazzetta M. Bossi, 3 20121 Milan Italy
AUDITORS TO THE ISSUER
PricewaterhouseCoopers S.p.A. Via Monte Rosa, 91 20149 Milan Italy
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