18 Investments

Investments accounted for using the equity method

In 2013, additions of €289 million mainly related to capital contributions to joint ventures and associates engaged in the realization of projects in the interest of Eni: Angola LNG Ltd (€98 million) which is currently building a liquefaction plant in order to monetize Eni’s gas reserves in that Country (Eni’s interest in the project being 13.6%); South Stream Transport BV (€44 million) which is engaged in the study of feasibility of the South Stream pipeline; PetroJunin SA (€43 million) which is developing gas and crude oil fields in Venezuela, and; Novamont SpA (€41 million) which is engaged in the “green chemistry” project at the Porto Torres plant.

Divestments and reimbursements of €12 million related to the sale of Est Reti Elettriche SpA.

Eni’s share of profit of equity-accounted investments and dividend decrease pertained to the following entities:

Eni’s share of losses of equity-accounted investments related to the following entities:

Losses at the equity-accounted investments in Angola LNG Ltd (€42 million) related to pre-production expenses and operating costs for commissioning a re-gasification plant.

Other changes of €312 million comprised the reclassification to assets held for sale of Artic Russia BV for €449 million and, as increase, the reclassification from other investments of Novamont SpA for €35 million and the revaluation of Caska Refinerska AS for €21 million. At the balance sheet date, Eni’s interest in Artic Russia was classified as an asset held for sale and measured at fair value due to the loss of joint control over the investee following the satisfaction, before year end, of all conditions precedent to the Sale Purchase Agreement signed with Gazprom in November 2013. The re-measurement at fair value recorded to profit amounted to €1,682 million. The consideration for the disposal was cashed in on January 15, 2014.

List of equity-accounted investments:

Carrying amounts of equity-accounted investments included differences between the purchase price of the interest acquired and the book value of the corresponding fraction of net equity amounting to €334 million, of which €195 million pertained to Unión Fenosa Gas SA (goodwill), €78 million to EnBW Eni Verwaltungsgesellschaft mbH (of which goodwill €16 million) and €43 million to Novamont SpA (goodwill).

The table below sets out the provisions for losses included in the provisions for contingencies of €165 million (€176 million at December 31, 2012), primarily related to the following equity-accounted investments:

Other investments

Investments in unconsolidated entities controlled by Eni and associates are stated at cost net of impairment losses. Other investments, for which fair value cannot be reliably determined, were recognized at cost and adjusted for impairment losses.

In 2013, divestments and reimbursements of other investments valued at fair value for €2,191 million are stated net of gains on disposals (€98 million) and related to the sale of an 11.69% in the share capital of Snam SpA for €1,392 million and an 8.19% in the share capital of Galp Energia SGPS SA for €799 million.

On May 9, 2013, Eni completed the sale of 395,253,345 shares equal to 11.69% of the share capital of Snam SpA. The offering, carried out through an accelerated bookbuilding aimed at qualified institutional investors, was priced at €3.69 per share for a total consideration amounting to €1,459 million. The gain amounted to €67 million. Following the placement, Eni holds 288,683,602 shares equal to 8.54% of the share capital of Snam which are underlying the €1,250 million convertible bond, issued on January 18, 2013, due on January 18, 2016. At December 31, 2013, the retained interest in Snam was stated at fair value for €1,174 million, which was determined at a market price of €4.07 per share.

On May 31, 2013, Eni completed the placement of 55,452,341 ordinary shares, corresponding to approximately 6.69% of the share capital of Galp Energia SGPS SA. The Offering, carried out through an accelerated bookbuilding procedure aimed at qualified institutional investors, was priced at €12.22 per share for a total consideration amounting to €678 million. The gain amounted to €26 million. Furthermore, during 2013, Eni executed private placements and spot sales of Galp’s shares equal to 1.50% of the share capital, for a total consideration of €152 million, at an average price of €12.21 per share, and a gain amounting to €5 million. At December 31, 2013, Eni holds 133,945,630 shares equal to 16.15% of Galp’s outstanding share capital, of which 8% underlies the exchangeable (approximately €1,028 million) bond issued on November 30, 2012 to be due on November 30, 2015 and 8.15% are subject to pre-emptive rights or options exercisable by Amorim Energia.

At December 31, 2013, the retained interest in Galp was stated at fair value for €1,596 million determined at a market price of €11.92 per share.

Fair value adjustment of €179 million related to Snam SpA and Galp Energia SGPS SA, of which €168 million were reported through profit as income from investments in application of the fair value option provided by IAS 39 in order to eliminate an accounting mismatch derived from the measurement at fair value through profit as a result of the options embedded in the convertible bonds.

In 2012, divestments of €516 million related for €358 million to the sale through an accelerated book-building procedure with institutional investors of 4% of the share capital of Galp Energia SGPS SA for a total consideration of €381 million and a gain on divestment of €23 million and to the sale of Interconnector (UK) Ltd for €136 million.

In 2012, adjustment at fair value of €2,528 million related to the initial recognition and subsequent measurement at market prices of the interests in Snam SpA (€1,465 million, of which €1,457 million recognized in the profit and loss account and €8 million in other comprehensive income) and Galp Energia SGPS SA (€1,063 million of which €930 million recognized in the profit and loss account and €133 million in other comprehensive income) that, as a consequence of the loss of control on Snam following the transaction with Cassa Depositi e Prestiti and the loss of significant influence on Galp following Eni’s exit from the shareholders’ pact, were stated as financial investment in the item “Other investments”.

The fair values were estimated on the basis of market quotations.

The net carrying amount of other investments of €3,027 million (€5,085 million at December 31, 2012) was related to the following entities:

Provisions for losses related to other investments, included within the provisions for contingencies, amounted to €12 million (€18 million at December 31, 2012).

Other information about investments

The following table summarizes key financial data, net to Eni, as disclosed in the latest available financial statements of unconsolidated entities controlled by Eni, joint ventures and associates:

Total assets and liabilities of unconsolidated controlled entities of €1,633 million and €1,533 million, respectively (€1,604 million and €1,497 million at December 31, 2012) pertained to entities acting as sole-operator in the management of oil and gas contracts for €1,283 million and €1,283 million (€1,249 million and €1,249 million at December 31, 2012). The residual amount pertained to not significant entities that were excluded from the scope of consolidation for the reasons described in Note 2 – Principles of consolidation.