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Previous Year's Results
Financial results
In 2010, adjusted net profit was €2,558 million, down 12.3% from 2009 due to a sharply lower operating performance of the Marketing business as a result of shrinking marketing margins and volume losses in Italy. These lower results were partly offset by a robust operating performance delivered by the Regulated businesses in Italy.
Worldwide gas sales: considering risks associated with the natural gas market scenario in 2011 depending on the evolution of the Libyan crisis (see "Outlook" page 92), in the medium term Eni expects to increase natural gas sales in Italy and in European target markets with a 5% average annual growth rate. The achievement of this target will be supported by strengthening the Company's leadership on the European market, marketing actions intended to strengthen the customer base in the domestic market and renegotiating the Company's long-term gas supply contracts.
Return on average capital employed (ROACE) on an adjusted basis was 9.8% (12.3% in 2009).
Capital expenditures totaled €1.685 million and mainly related to the development and upgrading of Eni's transport and distribution networks in Italy, the upgrading of storage capacity and the ongoing plan for improving power generation efficiency standards.
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Operating results -
Main development projects
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Main R&D projects
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Key performance indicators
In 2010, sales of natural gas were 97.06 bcm, down 6.66 bcm or 6.4%, mainly due to unfavourable trends on the Italian market.
This decline was driven by lower sales recorded in the power generation business, as clients opted to directly purchase gas on the marketplace, while lower sales to industrial customers and wholesalers were caused by increased competitive pressure fuelled by oversupply and weak demand. These negatives were offset by organic growth in some European markets.
Electricity volumes sold were 39.54 TWh, increasing by 5.58 TWh, or 16.4%, from 2009.
Natural gas volumes transported on the Italian network were 83.32 bcm, up 8.3% from 2009.
On February 4, 2009, Eni has formally presented to the European Commission a set of structural remedies relating to certain international gas pipelines. With prior agreement from its partners, Eni has committed to dispose of its interests in the German TENP, in the Swiss Transitgas and in the Austrian TAG gas pipelines. The European Commission intends to submit these remedies to a market test. In case the Commission approves those remedies upon conclusion of the market test, Eni will be in the position to resolve an inquiry started in May 2006 for alleged infringements of the European antitrust regulations in the gas sector, which involved the main players in the European gas market. Eni received a statement of objections from the European Commission which alleged that during the 2000-2005 period Eni was responsible for limiting the access of third parties to the gas pipelines TAG, TENP and Transitgas, thus restricting gas availability in Italy. Given the strategic importance of the Austrian TAG pipeline, which transports gas from Russia to Italy, Eni has negotiated a solution with the Commission which calls for the transfer of its stake to an entity controlled by the Italian State. The remedies negotiated with the Commission do not affect Eni's contractual gas transport rights. For further details on this topic see note "Guarantees, commitments and risks" to the Consolidated Financial Statements.
In 2009, the mandatory tender offer on the minorities of Distrigas was finalized and Distrigas shares have been delisted from Euronext Brussels. Thanks to the achievement of synergies on integration, the Distrigas acquisition represented for Eni a remarkable result in strengthening its leadership in the European gas market.
Notwithstanding the unfavorable trends in natural gas demand, in 2009 Eni achieved organic growth outside Italy, increasing market shares in a number of European gas markets. This increase, coupled with the full contribution of Distrigas sales, determined a change in natural gas sales portfolio with international sales at 63.68 bcm representing 61% of total sales (49% in 2008).
Reorganization of regulated businesses in the Italian gas sector
In 2009 the reorganization of gas infrastructures was concluded through the sale of Italgas SpA and Stoccaggi Gas Italia SpA (Stogit) to Snam Rete Gas. The transaction is expected to create significant synergies in the segment of regulated businesses allowing Eni to maximize the value of both gas distribution and storage activities and to strengthen the financial soundness of the Group's capital structure.
Strategic partnership with Gazprom
The strategic partnership between Eni and Gazprom, leading world natural gas producer, celebrated its 40th year of activity in 2009. The partners plan to proceed with the joint development of projects in the sectors of upstream and natural gas markets. In particular, concerning the gas business, Eni and Gazprom have agreed upon a new scope of work in the development project of the South Stream pipeline, aimed at increasing its transport capacity from an original amount of 31 bcm/y to 63 bcm/y.
In order to strengthen its European leadership in the storage business, Eni continued pre-development activities for a project to build an offshore storage facility in the Hewett area, near the Bacton terminal (North Sea basin). Eni targets to develop storage capacity in order to support the seasonal swings of gas demand in the United Kingdom. The project sanction is expected at some point in 2010, with start up in 2015.
Natural gas
France
In December 2010, Eni increased its share in Altergaz, a company marketing natural gas in France to retail and middle market clients, to 55.2%, as founding partners of the company exercised a put option on a 15% stake. Eni now controls the entity.
Divestment of interest in Gas Brasiliano Distribuidora
On May 27, 2010, Eni signed a preliminary agreement to divest its 100% interest in Gas Brasiliano Distribuidora, a company that markets and distributes natural gas in Brazil, to Petrobras Gàs, a fully owned subsidiary of Petróleo Brasileiro ("Petrobras"). Total cash consideration is expected to amount to approximately $250 million. The completion of the transaction is subject to the approval of the relevant Brazilian authorities.
LNG
USA - Cameron In consideration of a changed demand outlook, on March 1, 2010, Eni renegotiated certain terms of the contract with US company Cameron LNG, relating to the farming out of a share of regasification capacity of the Cameron terminal that was started up in the third quarter of 2009. The new agreement provides that Eni will be entitled to a daily send-out of 572,000 mmbtu (approximately 5.7 bcm/y) and a dedicated storage capacity of 160 kcm, giving Eni more flexibility in managing seasonal swings in gas demand. Furthermore, on March 3, 2011 Eni USA Gas Marketing Llc obtained from the American Department of Energy the authorization to export the LNG previously imported in the USA. This authorization will enhance operation flexibility, and will enable the company to exploit price differentials between American and European gas markets.
Start-up of the Brass project (West Africa) for developing gas reserves to fuel the Cameron plant is expected in 2016.
South Stream
On June 18, 2010, Eni and Gazprom signed a Memorandum of Understanding to define terms and conditions for the French company EDF entering the South Stream project. As part of the agreement, EDF is expected to acquire an interest in the venture that is planning to build a new infrastructure to transport Russian gas across the Black Sea and Bulgaria to European markets.
Divestment of a 25% share capital interest in GreenStream BV
On April 27, 2010, Eni sold a 25% stake in the share capital of GreenStream BV to NOC (Libyan National Oil Corporation), the company owning and managing the gas pipeline for importing to Italy natural gas produced in Libya. Following the decrease of Eni's shareholding in the company to 50% and implementation of renewed shareholders arrangements, Eni no longer controls the company and it has therefore been excluded from consolidation as of May 1, 2010. In 2010, GreenStream transported approximately 9 bcm of natural gas.
GreenStream pipeline activity suspension
From February 22, 2011, in consideration of the current crisis in Libya, some oil&gas activities and supplies of natural gas through the GreenStream pipeline have been suspended. Assets were not damaged and the above-mentioned suspension does not affect Eni's ability to fulfill its supply obligations with customers.
In 2010 overall expenditure in R&D amounted to approximately €2 million, excluding general and administrative expenses. A total of 2 new patents applications were filed. Below are outlined the main R&D results achieved in 2010 with an impact on the Division's strategic results.
TPI – Intermediate Pressure Transport
Eni is examining the potential and maturity of this transport option (pressure over 100 bar high grade steel pipes). The TPI project was started in 2008 in cooperation with various partners, such as Centro Sviluppo Materiali (CSM). In 2009 welding and tests on a real scale simulating operating conditions have been started. The process continued in 2010 and a patent application has been filed on a new welding process.
Kassandra Meteo Project
Since 2009 the Gas & Power Division has been developing a new weather forecast process in cooperation with Centro Meteo Operations Italia (MOPI) to explore the trends of temperatures at regional scale and by seasons. The project can be applied to the Italian and European natural gas market where Eni operates. A patent application was filed in 2010 on this long-medium term weather forecasting method.
| Key performance/sustainability indicators | 2008 | 2009 | 2010 | |
| Employee injury frequency rate | (no. of accidents per million hours worked) | 5.30 | 3.85 | 3.74 |
| Net sales from operations(a) | (€ million) | 37,062 | 30,447 | 29,576 |
| Operating profit | 4,030 | 3,687 | 2,896 | |
| Adjusted operating profit | 3,564 | 3,901 | 3,119 | |
| - Market | 1,309 | 1,721 | 733 | |
| - Regulated businesses in Italy(b) | 1,732 | 1,796 | 2,043 | |
| - International transport | 523 | 384 | 343 | |
| Adjusted net profit | 2,648 | 2,916 | 2,558 | |
| EBITDA pro-forma adjusted | 4,310 | 4,403 | 3,853 | |
| - Market | 2,271 | 2,392 | 1,670 | |
| - Regulated businesses in Italy | 1,284 | 1,345 | 1,486 | |
| - International transport | 755 | 666 | 697 | |
| Capital expenditures | 2,058 | 1,686 | 1,685 | |
| Adjusted capital employed, net at year end | 22,273 | 25,024 | 27,270 | |
| Adjusted ROACE | (%) | 12.2 | 12.3 | 9.8 |
| Worldwide gas sales(c) | (bcm) | 104.23 | 103.72 | 97.06 |
| LNG sales(d) | 12.0 | 12.9 | 15.0 | |
| Customers in Italy | (million) | 6.63 | 6.88 | 6.88 |
| Gas volumes transported in Italy | (bcm) | 85.64 | 76.90 | 83.32 |
| Electricity sold | (TWh) | 29.93 | 33.96 | 39.54 |
| Employees at year end | (units) | 11,692 | 11,404 | 11,245 |
| Direct GHG emissions | (mmtonnes CO2eq) | 14.60 | 14.60 | 15.79 |
| Customer satisfaction index | (likert scale) | 7.3 | 7.8 | 7.7 |
(a) Before elimination of intragroup sales.
(b) From January 1, 2010, amortization and depreciation in the transportation business segment were determined taking into account an increase in the useful life of pipelines
(from 40 to 50 years), which was revised recently by the Authority for Electricity and Gas for tariff purposes. Taking into account the ways of recognizing tariff components
linked to new amortization and depreciation, the Company decided to adjust the useful life of these assets in line with the conventional tariff duration. The impact on operating
results in 2010 was €31 million.
(c) Includes volumes marketed by the Exploration & Production Division of 5.65 bcm (6.00 and 6.17 bcm in 2008 and 2009, respectively), of which 2.33 bcm in Europe (3.36
and 2.57 bcm in 2008 and 2009, respectively) and 3.32 bcm in the Gulf of Mexico (2.64 and 3.60 bcm in 2008 and 2009, respectively).
(d) Refers to LNG sales of the G&P Division (included in worldwide gas sales) and the E&P Division.
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