Separate financial statements

Sale of the equity investment in ISAB s.r.l.

The agreement underwritten with LUKOIL on 1 December 2008 gives ERG S.p.A. a put option for its 51% investment. The exercise price for rights to 100% of the assets transferred to ISAB S.r.l. (not including the minimum operating inventory) was the fair market value within a collar with a cap at EUR 2,750 million and a floor at EUR 2,000 million, reduced by EUR 15 million following the February 2009 agreement.

The put option was exercisable at ERG S.p.A.'s discretion, commencing in 2010 and within a four-year period, at an exercise price largely corresponding to the fair value of the shareholding at the exercise date. According to the agreement, the option was exercisable within 4 years in one or more steps, no more than once every 12 months, with the provisions set out below.

  • Sale of 11% of ISAB S.r.l. in 2011

On 31 January 2011, the Board of Directors of ERG S.p.A. approved the exercise of the put option for 11% of ISAB S.r.l. The value of the sale to LUKOIL of the 11% interest in ISAB (excluding inventory) was EUR 205 million; in accordance with the agreement clauses, the option was exercised at the floor price.

The transaction was closed on 1 April 2011, with the collection of a provisional price of EUR 241 million (including the value of inventory) and of a final adjustment of EUR 3.5 million on 26 October 2011, in view of which a gain of EUR 109 million was recognised; said gain is considered a non-recurring item.

  • Sale of 20% of ISAB S.r.l. in 2012

3 September 2012 was the closing date of the transaction related to the exercise of the put option by ERG for 20% of the share capital of ISAB S.r.l. LUKOIL paid ERG a provisional price of EUR 485 million, inclusive of the value of inventory, recognising in 2012 a gain of EUR 222 million net of tax effects.
On 31 January 2013, the balance of the definitive sale price, i.e. a positive amount of EUR 9 million, was collected, with the consequent recognition of a gain of the same amount in the current year.
As a result of the transaction, ERG's share decreased from 40% to 20% thus qualifying as a minority interest and no longer a joint control interest.
The aforesaid Income Statement impacts were considered among non recurring items.

  • Sale of 20% of ISAB S.r.l. in 2013

On 30 December 2013 the closing was conducted on the transaction pertaining to the exercise of the put option on the remaining share of 20% of the capital of ISAB S.r.l., approved by the Board of Directors of ERG S.p.A. on 9 October 2013. The transaction resulted in the provisional collection of EUR 426 million, which takes account of the value of inventory and the definition of several environmental issues relating to the refinery. As a result of this
transaction, LUKOIL holds 100% of the capital of ISAB S.r.l.

For a better understanding of data commented in these Financial Statements, the transaction's main impacts are pointed out below:

  • the write off of the interest in ISAB S.r.l., whose carrying value prior to the transfer amounted to EUR 220 million;
  • an improvement in net financial position by approximately EUR 426 million in relation to the collection of the sale price;
  • the recognition of the realised gain, amounting to EUR 199 million net of ancillary charges and related tax effects. The capital gain and the charges associated with the sale of the interest are deemed to be non-recurring items.

The impacts listed above refer to the provisional price collected on 30 December. This amount is subject to adjustment, which will be defined in the first half of 2014 and, therefore, is not reflected in these Financial Statements.

 

  • Accounting Treatment – IFRS 5

As the above transaction involved the equity investment in ISAB S.r.l. and the related business, which reflect the definition of "component of an entity" as per IFRS 5, the additional information required by said Standard was included in these Separate Financial Statements.
As a result of this additional information, for 2013 and, for comparative purposes, for 2012, the cost and revenue items relating to the coastal refining business, as well as the capital gain net of tax effects recognised following the fair value measurement of the disposal of discontinued operations, are classified under Net income from sold assets and liabilities.

 

ERG S.p.A. - Genova

Paolo Merli

Head of Corporate Finance & Investor Relations

0039 010 2401376

ERG S.p.A. - Genova

Matteo Bagnara

Investor Relations

0039 010 2401423

ir@erg.it


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