2012 GSE annual Report and Financial Statements

2012

Report and FinancialStatements

Growth

For GSE financial growth can not be separated from the growth of a global responsibility in the issues of energy sustainability.

Volumes

In this respect, GSE is one of the leading Italian companies: the volume of electricitymanaged in 2012 is in line with the businessvolumes we have been assigned.

Objectives

With regard to the issues of renewable sources, GSE’s objectives are perfectly in line with the objectives of the whole country.

8 Report and Financial Statements 2012

Index

Corporate Boards of GSE S.p.A. 10

Powers of the Corporate Boards of GSE S.p.A. 11

Management of GSE S.p.A. 12

Assembly 13

Consolidated Financial Statements index 16

Report on Operations 19

Structure of the GSE Group 20Significant events of 2012 22Activities during the year 2012 24Investments 61Research and development 62Human resources, organization and industrial relations 63Control system 68Risks and uncertainty 70Related parties 72Information pursuant to the Civil Code 73Group economic and financial results 74Significant events after the closure of the fiscal year 80Outlook 81

Consolidated Financial Statements 87

Consolidated Balance Sheet Assets 88Consolidated Balance Sheet Liabilities 89Consolidated Income Statement 90

Notes to the Consolidated Financial Statements 93

Structure and content of the Financial Statements 94Evaluation criteria 95Balance Sheet - Assets 100Shareholders’ Equity and Liabilities 108Commitments and contingencies off the Balance Sheet 116Income Statement 120

Certification of the Consolidated Financial Statements pursuant to Article 26 of the bylaws 129

Independent Auditors’ Report 139

Statutory Auditors’ Report 143

Consolidated Financial Statements 2012 15

9Index

Financial Statements index 150


Summary of results 154Financial results of GSE S.p.A. 154Investments 161Relations with subsidiaries 162

Annual Financial Statements 165

Balance Sheet Assets 166Balance Sheet Liabilities 167Income Statement 168

Notes to the Financial Statements 171

Structure and content of the Financial Statements 173Evaluation criteria 174Balance Sheet - Assets 178Shareholders’ Equity and Liabilities 186Commitments and contingencies off the Balance Sheet 194Income Statement 198

Certification of the Financial Statements pursuant to Article 26 of the bylaws 209



Glossary 226

Financial Statements 2012 149


Corporate Boards of GSE S.p.A.

Board of Directors

Chairman and Chief Executive Officer

Dr. Nando Pasquali

Directors

Dr. Rosaria Fausta Romano

Dr. Domenico Iannotta

Board of Auditors

Chairman

Dr. Francesco Massicci

Statutory Auditors

Dr. Diego Confalonieri

Dr. Silvano Montaldo

Court of Auditors

Executive Magistrate

Dr. Alberto Avoli

Independent Auditors

Deloitte & Touche S.p.A.

11Corporate Boards of GSE S.p.A. | Powers of the Corporate Boards of GSE S.p.A.

Powers of the Corporate Boards of GSE S.p.A.

Board of DirectorsThe GSE S.p.A. Shareholders’ Meeting, in its Resolution on July 13, 2012, elected the new Board of Directorsof the company, which, in accordance with the provisions of Decree Law 95/12 converted by Law 135/12,is made up of three members, two of whom are government employees and holders of the participation ofthe powers of direction and supervision.The Board of Directors will remain in office until approval of the 2014 financial statements and is composedof Dr. Nando Pasquali, Chairman and Chief Executive Officer, by the Director Dr. Domenico Iannotta, Directorof the Ministry of Economy and Finance, and the Director Dr. Rosaria Fausta Romano, Director of the Ministryof Economic Development.The management is only the responsibility of the Directors, who perform the tasks necessary toimplement the firm.

Chairman and Chief Executive OfficerDr. Pasquali, as Chairman of the Board of Directors, by bylaws, has the corporate signature and the legalrepresentation of the company, which can also be given in court and with the power to sub-delegate; hepresides over the Assembly, convenes and chairs the Board of Directors and ensures that adequateinformation on the matters on the agenda is provided to all Directors and Statutory Auditors; he also verifiesthe implementation of resolutions of the Board.In his capacity as Chief Executive Officer, he is also vested with all the powers of management of theDirectors of the firm, except for those assigned by law, the bylaws or to the Board of Directors.He ensures that the organizational and accounting structure is appropriate to the nature and size of the firmand reports to the Board of Directors and the Statutory Auditors, at least once every three months, theoverall performance of the business and its prospects, as well as on the most significant operations, due totheir size or nature, carried out by the company and its subsidiaries.


Management of GSE S.p.A.

Operating DivisionMr. Gerardo Montanino

Sales Management and Regulatory Activities

Dr. Luca Barberis

Energy Management

Dr. Gennaro Niglio

Engineering

Mr. Luca Di Carlo

Management Studies, Statistics and Specialist Services

Mr. Costantino Lato

General Management and Coordination DivisionDr. Vinicio Vigilante

Administration, Finance and Control

Dr. Giorgio Anserini

Human Resources and General Services

Dr. Vinicio Vigilante

Management Information Systems

Mr. Erasmo Bitetti

Audit ManagementMr. Antonio Tomassi

13Management of GSE S.p.A. | Assembly

Assembly

The Shareholders’ Meeting of GSE S.p.A., convened with notice on June 26, 2013,

• examined the financial statements and consolidated financial statements as at December 31, 2012, aswell as the Report on Operations;

• seen the Board of Auditors’ reports;• seen the Independent Auditors’ reports;

resolved to

• approve the financial statements for the year ended on December 31, 2012;• allocate the profit for the year amounting to 19,229,614 euro as follows:

• 7,229,614 euro to reserves;• 12,000,000 euro as a dividend to the Ministry of Economy and Finance as the only shareholder.

The Shareholders’ Meeting was also presented the consolidated financial statements as at December 31, 2012.

Rome, June 26, 2013

2012

Consolidated Financial StatementsGSE Group

16 Consolidated Financial Statements 2012

Consolidated Financial Statements indexReport on Operations 19

Structure of the GSE Group 20

Significant events of 2012 22

Activities during the year 2012 24Gestore dei Servizi Energetici 24Acquirente Unico 50Gestore dei Mercati Energetici 56Ricerca sul Sistema Energetico 60

Investments 61Renewables and Gas Storage 61Energy markets 61Enhanced market and safeguard 62Research in the field of energy 62Property and pertaining equipment 62IT infrastructure 62

Research and development 62

Human resources, organization and industrial relations 63GSE 63AU 64GME 65RSE 65Sustainability 66

Control system 68Board of Directors 68Executive Magistrate of the Court of Auditors 68Auditors 68Statutory Audit 68Supervisory Board, Management and Organizational Model ex Legislative Decree 231/01 68Audit Management 69Manager responsible for preparing the corporate accounting documents 69

Risks and uncertainty 70Regulatory risk 70Liquidity risk 70Counterparty risk 71Price risk 72Information risk 72Litigation risk 72

Related parties 72

Information pursuant to the Civil Code 73

Group economic and financial results 74Pass-through items 75Marginal items 75

Significant events after the closure of the fiscal year 80GSE 80AU 80GME 81RSE 81

Outlook 81GSE 81AU 84GME 84RSE 84

17Index

Consolidated Financial Statements 87

Consolidate Balance Sheet Assets 88

Consolidated Balance Sheet Liabilities 89

Consolidated Income Statement 90

Notes to the Consolidated Financial Statements 93

Structure and content of the Financial Statements 94Scope of consolidation 94Criteria and procedures for consolidation 94

Evaluation criteria 95Intangible assets 95Tangible assets 95Financial assets 95Receivables and payables 96Cash and cash equivalents 96Prepayments and accrued income 96Provisions for risks and charges 96Pension premium for severance indemnities 96Memorandum accounts 96Capital grants 97Revenues and costs 97Hedging financial instruments 97Income taxes for the fiscal year 97

Balance Sheet - Assets 100Unpaid receivables from shareholders 100Fixed assets 100Current assets 103

Shareholders’ Equity and Liabilities 108Shareholders’ Equity 108Provisions for liabilities and charges 109Provision for severance indemnities 112Debts 112Accrued expenses and deferred income 114Guarantess and other accounts 114

Commitments and contingencies off the Balance Sheet 116Disputes 116Costs and revenues related to handling energy 118

Income Statement 120Value of production 120Production costs 121Financial income and expenses 124Extraordinary income and expenses 125Income taxes, current, deferred and deferred tax assets 125

Certification of the Consolidated Financial Statements pursuant to Article 26 of the bylaws 129



Report on OperationsGSE Group

19GSE Group Report on Operations


Structure of the GSE Group

Gestore dei Servizi Energetici - GSE S.p.AGestore dei Servizi Energetici - GSE S.p.A. (“GSE”) is a company wholly owned by the Ministry of Economyand Finance (“MEF”) to which numerous assignments of a public nature in the energy sector are assigned.The main activity is the promotion of electricity produced from renewable sources, including through theprovision of incentives. Since 2011, they also manage the measures aimed at encouraging greatercompetition in the natural gas market.GSE carries out its tasks in accordance with the strategic and operational guidelines defined by the Ministryof Economic Development (“MED”). The rights shall be exercised by agreement between the Ministry ofEconomy and Finance and the Ministry of Economic Development. GSE has the full participation of thethree subsidiaries Acquirente Unico S.p.A., Gestore dei Mercati Energetici S.p.A. and Ricerca sul SistemaEnergetico S.p.A.

Acquirente Unico S.p.A.Acquirente Unico S.p.A. (“AU”) caters to companies that perform the enhanced protection service for thebenefit of residential customers who have chosen not to withdraw from the existing supply contract.The company also manages the help desk for the consumer (“ATM for the Energy Consumer”) and selects,through competition proceedings, suppliers of electricity (“Service Protection”) and of natural gas (“Supplierof Last Resort”). It is established at AU, finally, that the integrated information system (“Integrated informationsystem” or “SIS”) for the management of information flows relating to the markets for electricity and gas.

Gestore dei Mercati Energetici S.p.A.Gestore dei Mercati Energetici S.p.A. (“GME”) is responsible for the organization and financial managementof the electricity market, the markets for the environment and the natural gas markets, according to thecriteria of neutrality, transparency and objectivity, as well as the management of the platform for theregistration of contracts for the sale of electricity concluded outside the market.

Ricerca sul Sistema Energetico - RSE S.p.A.Ricerca sul Sistema Energetico - RSE S.p.A. (“RSE”) develops research activities in the energy sector, withparticular reference to national projects of public interest, which are financed by the Fund for System Research.


MINISTRY OF ECONOMY AND FINANCE

100%

100% 100% 100%

SUMMARY OF RESULTS - GSE GROUP2010 2011 2012

Income Statement (in millions of euro)Value of production 25,823.8 30,437.6 35,086.9EBITDA 34.0 24.5 28.8Operating profit 25.0 6.9 10.8Group net profit 18.7 9.2 17.0

Balance Sheet (in millions of euro)Net fixed assets 100.4 109.4 113.4Net working capital (276.4) 113.8 174.9Sundry provisions (61.5) (63.0) (55.0)Shareholders’ Equity 161.3 158.4 163.5Net financial debt (cash) (398.8) 1.8 69.8

Operating DataInvestments (in millions of euro) 12.9 18.8 15.4Average number of staff 811 979 1,122Headcount at December 31 904 1,076 1,186ROE 11.6% 5.8% 10.4%


Significant events of 2012

The GSE Group companies have confirmed, in 2012, the capacity to act as reference stakeholders in theenergy sector, managing and developing new activities thanks to the skills and effectiveness demonstratedover the past years. In 2012, in fact, the completion of the regulatory mosaic dashed in part by LegislativeDecree 28/11 has expanded the powers of the GSE Group assigning relevant tasks in the field of promotionof renewable heat (MD December 28, 2012, the so-called “Thermal Account”), efficiency energy (MDDecember 28, 2012, “Energy Efficiency Certificates”) and biofuels (Decree Law 83 of 2012). At the sametime during the year they have gradually consolidated other activities, such as the storage of gas and thevirtual auction management for CO2 by the European Directive on Emissions Trading. Finally, and especiallyin light of the new ministerial decrees, which have significantly changed the incentive mechanisms ofphotovoltaic (MD July 5, 2012, the so-called “Fifth Energy Account”) and other renewable power sources(MD July 6, 2012), the company confirmed its role as a primary operator in Italian energy.The strong growth in volume of the activities of Gestore dei Servizi Energetici - GSE S.p.A. noted in recentyears, with particular reference to the period 2010-2011, was established in 2012. For example, the numberof photovoltaic systems managed has increased from about 326 thousand in 2011 to over 476 thousand in2012. It has gone from about 37 thousand conventions in 2011 managed for the retreat dedicated to over57 thousand in 2012. Moreover, the scheme of the metering involved the management of more than 370thousand business relations with many operators.

The number of customers in the protected market operated by Acquirente Unico S.p.A., at the end of 2012,is about 27.3 million, of which 22.8 million are households and 4.5 million are other customers. During 2012,the utilities present in the protected market, mainly due to the steps taken towards the free market,decreased by about 1.2 million. The year 2012 was also the year of consolidation of the branch office forthe consumer, which has proved to be a point of reference for electricity and gas consumers, and tools thatcan further assist in resolving disputes quickly and easily with retailers.Legislative Decree 249/12 finally attributed to the company, starting in 2013, the function of Italian CentralStockholding (“OCSIT”), a new body for the storage of oil stock security in our country.In 2012, Gestore dei Mercati Energetici S.p.A. has continued its efforts to ensure the organization andmanagement of the electricity market in accordance with the principles of neutrality, transparency, objectivityand competition between operators. Given the particular financial crisis facing the country and the impactthat this downturn is causing on the European banking systems, during the year urgent changes have beenmade to the consolidated market in the electricity sector on the regulation of the gas market that havedetermined, in effect starting January 26, 2012, the lowering of the minimum rating required by banks forsureties given by the operators for participation in the markets.Finally, with regard to Ricerca sul Sistema Energetico S.p.A., the activities carried out in the year concerned,consistent with the corporate mission, the System Research and funded research on both a European andnational level. The year 2012 was characterized by the new three-year plan for research on the electrical systemapproved by the MiSE by the Decree of November 9, 2012. The company, despite its uncertainty about thedefinition of new research topics, has pursued its primary objectives in advanced research in the field of electro-energy and the environment, deepening and developing the projected activities undertaken in previous years.

Activity Indicator 2010 2011 2012

Photovoltaic N. Plant FTV 155,918 326,927 476,904Metering N. Contracts managed 135,000 224,376 373,470Dedicated Withdrawal N. Contracts managed 9,275 37,580 57,780All-inclusive rate N. Contracts managed 638 1,128 1,728CIP6 N. Conventions managed 187 136 104Green Certificates TWh CV issued in previous year 20 24 25Qualification systems N. IAFR plants 632 792 957Photovoltaic system checks N. Checks 917 2,314 1,546Contact Center N. Contacts 480,000 1,127,755 1,081,524

N.B. The figures are provisional and relate to the information available at the date of preparation of the financial statements.


Activities during the year 2012

Gestore dei Servizi Energetici

Renewable sources in the European and Italian contextThe description of the progress made by our country in the field of renewable energy, including through theactivities conducted by GSE, can not be separated from an overall picture of the international scene andespecially from the description of the community. The European Union in recent years has stepped up itsefforts to promote an energy policy more sensitive to environmental issues, showing readiness to assumea leading role in the global fight against climate change. The European Commission has pointed out onseveral occasions that the development of renewable energy can be a viable opportunity for employment.Moreover, the trend in the prices of fossil fuels and the gas industry has consolidated the idea that investingin energy efficiency and renewable energy can be a winning strategy for economic growth.The climate and energy package, which was approved in March 2007 by the European Council, introduced,with a unique numerical occurrence which earned itself the nickname “20-20-20”, three objectives to beachieved within the EU by 2020: 20% of renewables in final energy consumption, 20% reduction in emissionsof greenhouse gases, and 20% energy savings. Directive 2009/28/EC has established a new framework forthe promotion of renewable energy sources, providing for the raising to 20% of the global share of renewableenergy in gross final consumption.However, the real change in strategy operated by the Directive consisted of addressing the energy issue ina global vision, that no longer merely provides targets for the electricity sector alone, or the transport sector,but embraces wider issues such as heating or cooling. The overall objective identified by the Communityprovisions declines in specific targets for each country. For Italy, the share of renewable energy in total finalenergy consumption is fixed at 17%.Legislative Decree 28/11, which transposes the EU Directive, defined the tools, incentive mechanisms andthe institutional, financial and legal framework necessary to achieve the objectives set for 2020. Thepercentage of renewable energy in gross final consumption in Italy has reached the value of 11.5%, wellabove the trajectory identified in the National Action Plan for achieving the 2020 target.The road taken by the European Union, with the climate and energy package and the EU Energy Roadmap2050, recently approved, outlines a real strategy for the de-carbonization of the entire European economy,a strategy that goes far beyond the targets for 2020. The implementation of these strategies requires anessential contribution for a consistent reduction in polluting emissions, not only in the energy sector, butalso in other relevant sectors of the economy, such as transport, construction and agriculture. Through theEnergy Roadmap, the Union has set itself the challenging goal of establishing a zero emissions energy policy,providing a target of 80% reduction of CO2 emissions by mid-century. To achieve this, an important role inthe energy mix will remain with renewable energy sources, along with increased energy efficiency and theadoption of techniques for the capture and storage of CO2.The evolution of the European energy sector and Italian, therefore, must necessarily plan to modernizeinfrastructure with the implementation of smart grids, energy storage systems and of cross-borderinterconnections, especially in the Mediterranean; looking at the question of energy with a global vision,GSE is a candidate, without doubt, to be a point of reference for the future development of the Italian context.


Mission and role of Gestore dei Servizi EnergeticiGSE plays a key role in the promotion of renewable energy sources within the legislative and policyframework defined at the European and national level, contributing significantly to the implementation ofthe energy policy of the country. It is being addressed more and more to a diversification of sources ofsupply. The company is, in fact, not only the implementing body of the incentive mechanisms of renewableenergy sources in the electricity sector, but also of those defined for the production of thermal energy andenergy efficiency, in the light of the new tasks assigned by recent ministerial decrees. GSE is responsible,ultimately, for the management of incentive mechanisms in the natural gas market with the aim of supportinga higher level of competitiveness.

Incentives and promotion of renewable energy

The incentives for the production of electricity from renewable sources in Italy is characterized by thepresence of several systems that include mechanisms from both the market and administered regime. Inthis context, the company is mainly engaged in the performance of four activities:• qualification systems;• incentive, sale and certification of energy;• system verification;• promotion, information and diffusion of renewable energy.

Qualification systems

GSE is responsible, as the implementing body, for ascertaining the requirements of photovoltaic systemsgoverned by the law for access to the incentives provided by the Energy Account. The company also hasthe task of qualifying production plants powered by renewable sources (“IAFR”) that are allowed access,under certain conditions, to the incentive mechanisms of green certificates (“Green Certificates” or “CV” )or the feed-in tariff (“feed-in tariff” or “TO”). It should be noted that the number of IAFR qualifications, as of2013, should gradually decrease as a result of the new incentive mechanism introduced by MD July 6, 2012and the related access mode.Finally, in this context, the company checked out requirements for the recognition of the operation of theplants in high efficiency cogeneration (“High Efficiency Cogeneration” or “CAR”).

ACTIVITY

• Photovoltaic • IAFR• CAR

• Energy Account • Green Certificates• White Certificates CAR• Withdrawal and Sale of Energy• Energy Certification

• Photovoltaic• IAFR• CAR• GOP 71/09• Other

QUALIFICATIONSYSTEMS

INCENTIVE MECHANISMS, SALES AND CERTIFICATION

VERIFICATION SYSTEMS

PROMOTION, INFORMATION AND DIFFUSION OF RENEWABLE ENERGY

VIRTUAL STORAGE GAS

ENERGY EFFICIENCY

Incentive andpromotion of renewableenergy

Gas

Energyefficiency


Incentive, sale and certification of energy

GSE promotes the production of energy from renewable sources by providing incentives provided forphotovoltaic systems as part of the Energy Account, the release of Green Certificates and specificcertifications of electricity production. It also deals with withdrawal and placing on the market of energyproduced from renewable sources that feed both types of systems that access the same fee for this service,such as CIP6/92 measure (“Measure Interministerial Committee 6/92” or “CIP6”) and the feed-in tariff, bothplants asking for the withdrawal of the energy fed into the grid come within the simplified arrangements foraccess to the market, such as the dedicated withdrawal (“Withdrawal Dedicated” or “RID”) and the exchangeon place (“Net Metering” or “SSP”).

System verification

GSE carries out monitoring through document review and/or inspection, the plants promoted, in order toverify the existence of the requirements provided by law for access to the incentive mechanisms.

Promotion, information and diffusion of renewable energy

GSE holds regular information and training activities to promote correct and conscious use of electricitythrough different tools and methods such as the promotion of information campaigns and events, thepublication of specialized guides, the management of the current portal and a specific contact center. Thestudies and statistics carried out in the international arena are included as well.

Virtual Storage gas

GSE holds an institutional role in the natural gas market through the management of the virtual storagemechanism with the goal of fostering greater market competition. In this context, it is also responsible forthe competitive procedures for the sale to the market of services as well as the benefits corresponding tothe storage capacity financed.

Energy efficiency

GSE, as of 2013, will be responsible for the management of the new support schemes for the production ofthermal energy from renewable sources and energy efficiency, as well as disciplined by the two MDDecember 28, 2012. The measures and actions to increase energy efficiency and renewable thermal energyproduction sources will be encouraged by some contributions out of the natural gas tariffs and through therelease of the Energy Efficiency Certificates (“White Certificates” or “TEE”).


Qualification systemsPhotovoltaic - Energy Account

The Energy Account is the mechanism that stimulates income, for a period of twenty years, by the electricityproduced by photovoltaic plants connected to the grid. The incentive system is currently regulated by MDJuly 5, 2012 (the “Fifth Energy Account”) issued to give continuity to the mechanism started with MD July28, 2005 (“First Energy Account”) and subsequently modified by MD February 19, 2007 (“Second EnergyAccount”), MD 6 August 2010 (“Third Energy Account”) and MD May 5, 2011 (“Fourth Energy Account”).The methods of incentives provided by MD July 5, 2012 were launched on August 27, 2012, following theachievement of an indicative cost cumulative annual shortfall of 6 billion euro.

The new incentive mechanism, unlike the previous ones, pays with a feed-in tariff for the share of net energyfed into the grid with a premium rate and the share of net energy consumed on site. The methods of accessto the incentive mechanism, determined according to the type and effective rated output of the plant, maybe subject to prior registration to specific records kept by GSE or for direct access, by sending a specificrequest to the company. GSE is responsible for ensuring the requirements of the plants and evaluating thatthe documentation received is in line with the normative provisions. The subjects that require the tariffs arerequired to pay a contribution to the ESO for the cost of inquiries, 3 euro for each kW of rated power, forsystems up to 20 kW, and 2 euro for every kW of power exceeding 20 kW. Starting on January 1, 2013 theDecree also states that, in order to cover operating expenses, audit and control in GSE, the responsibleparties are required to pay the company a fee of 0.05 euro/cent for every kWh of energy sales. The FifthEnergy Account will be applied until the date of achievement of the indicative annual cumulative cost of theincentives, the value of 6.7 billion euro.In 2012 more than 145 thousand plants came into operation with a total capacity of 3,438 MW. Photovoltaicsystems entered service by December 31, 2012 amounted to 476,904, with an installed capacity of 16,350 MW.In regard to the results of the ranking of the first register of the Fifth Energy Account, 3,620 plants were admittedwith a capacity of 967 MW at a cost equal to the indicative annual cumulative total of 90 million euro.

The following is a breakdown for the Energy Account of reference of the number of plants that came intooperation and their power.

First Energy Account

Second Energy Account

Third Energy Account

Fourth Energy Account

Fifth Energy Account

POWER OF PLANTS IN OPERATION (MW)

First Energy Account

Second Energy Account

Third Energy Account

Fourth Energy Account

Fifth Energy Account

NUMBER OF PLANTS IN OPERATION

43%

1%6%

42%

8%

1%3%

45%

9%

42%

TOTAL PLANTS IN OPERATION 476,904 POWER OF PLANTS IN OPERATION 16,350 MW


The following graphs show the trend in the number of photovoltaic systems and their power ratings, whichentered service in 2006-2012.

2006 2007 2008 2009 2010 2011 2012

NUMBER OF PLANTS IN OPERATION

Number of plants in operation Figures at 12.31.2012, prepared in February 2013.

2006 2007 2008 2009 2010 2011 2012

CUMULATIVE NUMBER OF PLANTS IN OPERATION

Cumulative number of plants in operation Figures at 12.31.2012, prepared in February 2013.

1,402

1,402 7,67531,747

71,110

155,728

331,184

476,904

6,273 24,072

39,363

84,618

175,456

145,720


2006 2007 2008 2009 2010 2011 2012

POWER OF PLANTS IN OPERATION (MW)

Power (MW) Figures at 12.31.2012, prepared in February 2013.

2006 2007 2008 2009 2010 2011 2012

CUMULATIVE POWER OF PLANTS IN OPERATION (MW)

Cumulative power (MW) Figures at 12.31.2012, prepared in February 2013.

9

9 79 4171,137

3,458

12,912

16,350

70 338720

2,321

9,454

3,438


Plants powered by renewable energy systems

The classification of a plant powered by renewable sources (IAFR), issued by GSE, is a technical recognitionrequired for admission to the incentive mechanism of green certificates or the feed-in tariff.The qualification activities of the plants has been steadily growing over time. Since the start of the activity,they have received about 7,750 applications, of which only 1,246 were in 2012. The IAFR qualificationsissued during the same year totaled 957, compared to the 792 issued in 2011.The plant owners are required to recognize, according to MD December 18, 2008, a contribution to coverthe costs of investigation incurred by GSE, the amount of which varies between 150 euro and 1,350 euro,depending on the average annual rated capacity of the plant. The following graph shows the annualcumulative numerical progression of the qualified IAFR plants.

At December 31, 2012, the number of qualified plants amounted to 5,322, of which 4,587 were in operation,with an installed capacity of 21,647 MW, and 735 in project, corresponding to a theoretical capacity of3,035 MW.The following graph represents the breakdown of energy sources for the qualified IAFR plants onDecember 31, 2012.

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

CUMULATIVE NUMBER OF QUALIFIED PLANTS

Qualified plants

109276

470676

9331,331

2,097

2,652

3,222

3,854

4,621

5,322


High Efficiency Cogeneration

Cogeneration is the combined production, in a single process, of electricity and heat. GSE is the entity incharge of recognizing annually and following the verification of the technical requirements established bylaw, that a cogeneration plant has worked in High Efficiency Cogeneration1. This production is exempt fromthe obligation to purchase green certificates and access to the support system, regulated by MD September5, 2011, which involves the release of White Certificates.Producers who wish to avail themselves of such benefits must submit an annual application for CARrecognition to GSE. In 2012, 713 requests were received by GSE for CAR recognition, 106 more than theprevious year, amounting to an installed capacity of about 16,000 MW, broken down according to electricitygeneration capacity in the graph below.

Of the 713 applications received, 200 have also requested the release of White Certificates in accordancewith MD September 5, 2011. During 2012, about 190 requests for access to the support system for generationin the years 2008, 2009 and 2010 were also received. Such requests for release were evaluated in 2012.

With regard to the qualification of cogeneration plants combined with district heating, out of a total of about183 requests received by GSE and analyzed over the period 2008-2012, 103 were accepted for a total powerof 2,500 MW.

36%

24%

QUALIFIED PLANTS AT DECEMBER 31, 2012 BY ENERGY SOURCE

21%

11%

8%Hydroelectric energy

Biogas energy

Wind power energy

Bioliquid energy

Other energy sources

60%

DISTRIBUTION SYSTEMS BY INSTALLED POWER

28%

12%Plants with power over 1 MW

Plants with power between 50 kW and 1 MW

Plants with power less than 50 kW

TOTAL QUALIFIED PLANTS IN OPERATION 5,322

TOTAL PLANTS 713

Note 1Legislative Decree 20/07 introduced the new concept of CAR, including new criteria for the recognition, in effect as from January 1, 2011.Since that date, in fact, the assessment of operation in cogeneration is performed on the basis of primary energy savings (“PES”), whichreplaces the energy saving index (“IRE”) and the thermal limit (“LT”), as established by Authority Resolution 42/02.


Incentive mechanisms, sale and certification of energy There were multiple incentive mechanisms and withdrawals of electricity managed by GSE in 2012 and theycan be briefly represented as shown in the following table.

Incentive mechanisms

Energy Account

Following the positive evaluation of the documentation submitted for the incentive request, GSE tells theResponsible Party the incentive rate recognized, which is followed by, as a necessary condition for the grantof incentives, the signing of an agreement. Only after the signing of the agreement, in fact, all the activitiesassociated with sending and verification of measures of electricity start, as well as the enhancement of theamounts to be paid to the Responsible Party.Given the ever-changing regulatory environment, the year 2012 was characterized by the simultaneousoperation of five different incentive regimes: First, Second, Third, Fourth, and Fifth Energy Account. Since theincentive mechanism of the Energy Account, the activity of GSE has grown exponentially. At the end of 2012,the agreements resulted to about 476 thousand, with a capacity of 16,341 MW, equivalent to 18,061 GWh ofenergy and incentive fees of 6,036 million euro. The following table shows the overall data (conventionsmanaged, subsidized energy and fees paid) relating to the management of the five Energy Accounts.

Type Incentive mechanism

Incentive period

Incentive Energyenhancement

Photovoltaic Photovoltaic Energy Account 20 years

Rates on the Energy Accountattributed to theenergy produced or placed

Free marketand consumption

Fixed Rate Feed-in1

Thermodynamic ThermodynamicEnergy Account 25 years

Rates on the EnergyAccount attributedto the energyproduced exclusivelyfor the solar

DedicatedWithdrawal2

Metering2

PlantsOf any size Green Certificates 8/12/15 years

Sale/Withdrawal CV attributed to the energyencouraged

Consumption and free market

DedicatedWithdrawal3

Metering4

Small size5 Feed-in rate 15 years Feed-in tariffs for the withdrawal of entered energy

Renewable energy systemsand/or equivalent CIP6/92 8 years (INC)

20 years (CEC/IEC) Withdrawal price CIP6

High EfficiencyCogeneration plants White Certificates Yearly

(on demand)

Delivery/Pick Certificates White or Exemption obligation CV

DedicatedWithdrawal

Metering

1) Plant accessing the Fifth Energy Account with power not exceeding 1 MW.2) They can not access the Net Metering and the Dedicated Withdrawal facilities accessing the Fifth Energy Account.3) Power plants less than 10 MVA or of any power in the case of non-programmable renewable sources.4) Power plants up to 200 kW.5) Power plants not exceeding 1 MW (200 kW for wind turbines).

Solar plants

With the aim to facilitate the financing of investments in the photovoltaic sector, GSE has provided the abilityto transfer the warranty claim arising from tariffs paid on the basis of the Energy Account. At December 31,2012, operators that made use of this instrument are about 23,800, more than double compared to 2011(about 8,500). This value, in parallel with the increase of the plants and affiliated with the forced entry intothe Fifth Energy Account, it is constantly growing; in fact, in the first quarter of 2013, there were 2,574additional sales.

Solar thermodynamic

The MiSE, in consultation with the Ministry for the Environment, Land and Sea (“MATT”), through MD April11, 2008, introduced the promotion of solar thermodynamic plants in Italy, or power plants where the heatused for the thermodynamic cycle is produced using solar energy as a source of heat at high temperatures.The tariffs provided exclusively remunerate the electricity due to solar power, produced by a plant or ahybrid, for a period of 25 years.GSE is the implementing entity, identified by Ministerial Decree, qualifying facilities, providing incentives andperforming verification activities, even if at December 31, 2012 no plant went into operation and no incentiverequest was received by the company.

Green Certificates

Green Certificates are securities allocated in proportion to the energy produced by plants powered byrenewable sources other than the photovoltaic and cogeneration plants combined with district heating. Theincentive mechanism, introduced by Legislative Decree 79/99 is based on the obligation for manufacturersand importers of energy, to enter each year in the national electricity system a volume of “green” energyequal to a share of non renewable energy produced or imported in the previous year. You can fulfill thisobligation by feeding renewable electricity into the grid or buying Green Certificates issued by GSE fromother producers; each certificate attests conventionally to the production of 1 MWh of renewable energy.The issue of the CV is generally carried out in the final balance on an annual basis, in using the net productionof electricity made by the plants in the previous year. For qualified plants already in operation, the issue ofthe CV can also be done prior to following the submission of a surety, on the basis of expected production

Energy Account Power Class Conventions Power Subsidized Incentivesmanaged energy

MW Number MW GWh Euro million

1 ≤ P ≤ 20 3,964 25 28 14First Energy Account 20 20 23,105 5,758 7,400 2,790

1 ≤ P ≤ 3 12,348 34 40 163 1,000 170 519 732 224

1 ≤ P ≤ 3 57,508 162 134 453 1,000 379 1,458 1,854 447

1 ≤ P ≤ 3 9,806 28 4 13 1,000 20 75 31 1

Total 475,581 16,341 18,061 6,036


for the current year or the following year. In this regard it should be noted that MD July 6, 2012 revised theterms of issue of the CVs for the productions over the years 2013 to 2015, providing that it takes place ona quarterly basis based on the output of the previous quarter and the measures are transmitted monthly bynetwork operators. The Decree regulates the ways in which plants will go into operation, as of 2016, by themechanism of CV to the new incentive mechanisms introduced by the same.

As of December 31, 2012, concerning the 2011 production, and on the basis of requests to final output sentby the producers qualified, about 25 million CVs (24 million in 2011) were issued. The following graph showsthe breakdown by source of these CVs.

Additionally, at December 31, 2012, with reference to the 2012 production and on the basis of requests forearly release or monthly budget, about 17 million CVs (12 million in 2011) were issued, relating to the energyproduced from renewable sources in 2012. The following graph shows the breakdown by source of these CVs.

Legislative Decree 28/11 expects that GSE annually retreats CVs issued for production from 2011 to 2015,possibly in excess of those needed to fulfill a quota obligation. The withdrawal price of these certificates isequal to 78% of the price resulting from the difference between 180 euro/MWh and the price of electricitysales in the previous year, defined by the Authority. GSE also issued the certificates to holders ofcogeneration plants combined with district heating in the same period.

51%

31%

CVs ISSUED PRIOR TO 2012 (INCLUDING MONTHLY PHASING)Breakdown by energy source

16%

1%1%Wind power energy

Biomass energy

Hydroelectric energy

Geothermal energy

Waste energy

38%

28%

TOTAL CVs ISSUED ON COSTSINCURRED 24,533,800

CVs ISSUED ON COSTS INCURRED IN 2012 IN RELATION TO THE ENERGY PRODUCED IN 2011Breakdown by energy source

21%

7%

6%Wind power energy


Biomass energy

District heating energy


TOTAL CVs ISSUED PRIOR16,910,735


During 2012, in application of the provisions of MD July 6, 2012, GSE withdrew CVs, issued for generationfrom renewable sources of year 2011, at a price of 82.12 euro/MWh for a total value of 1,422 million euro.The withdrawal price for green certificates issued for production in 2011 relative to cogeneration plantscombined with district heating was, however, equal to 84.34 euro/MWh.

White Certificates for co-generation

MD September 5, 2011 defined the terms and conditions of access of cogeneration units recognized CARto the new support system based on the economic system of the White Certificates. GSE determines,depending on the energy savings achieved during the year, the number of White Certificates entitled to theunits recognized CAR. The certificates issued annually by GSE remain at disposal of the manufacturer andthey can be traded on the appropriate markets or, upon request of the producers themselves, by GSE at aprice equal to that existing at the date of entry into operation of the unit. In application of the provisions ofthe Decree, the company requests from the manufacturer, by way of reimbursement of the costs ofinvestigation, the recognition of a 1% fee of the value of the White Certificates withdrawn. At the end of2012, the White Certificates had not yet been issued or withdrawn in respect to the requests for access tothe support received and evaluated.

Energy purchase

Transactions involving the purchase of energy carried by GSE are linked to the withdrawal of electricityproduced and fed into the grid by two categories of plants:• systems that access incentive mechanisms that provide for compensation in administered prices of energy

fed into the grid through its purchase by GSE; the capacity is under CIP6 or admitted to feed-in rates;• plants that, through the services of Dedicated Withdrawal and Net Metering, require the intermediation of

GSE for placing energy produced and fed into the grid on the market.

Energy remuneration administered prices

Energy incentive CIP6/92The Interministerial Committee Measure 6/92 introduced an incentive mechanism of energy produced fromrenewable and assimilated2, consisting of a form of energy fee for this service through an incentive ratewhose value is periodically updated. Currently, unless specific regulatory provisions, it is no longer possibleto access this incentive mechanism replaced in 2000 by the Green Certificate system. This incentivemechanism, however, continues to have effect in respect of those facilities that have signed the agreementduring the term of the measure.

In 2012, GSE withdrew CIP6 a volume of energy equal to 22.4 TWh, approximately 4.3 TWh less than in2011 (26.7 TWh in 2011) from the producers. At the end of 2012, 104 agreements resulted active (136 at the end of 2011) with a total capacity of 3 GW.During the year the active power agreement was equal to 3.6 GW. The reduction was due to the naturalexpiration of contracts. We also note that, in early 2012 and with effect from January 1, 2013, the anticipatedresolution was carried out in the early termination of two agreements for a total capacity of 0.4 GW.

The energy purchased in 2012 comes to 81.7% by plants from similar sources and 18.3% from plants usingrenewable sources.The table that follows is a comparison of the energy purchased by type of plant in the year 2012 comparedto the year 2011.

Note 2They are considered plants fueled by similar sources referred to in articles 20 and 22 of Law 9 of January 9, 1991: those in cogenerationmode; those using waste heat, exhaust fumes and other forms of energy recoverable in processes and systems, and those who useprocessing waste and/or processes and those that use fossil fuels produced only from minor isolated fields.


The average price of energy withdrawal was equal, in 2012, to 129.9 euro/MWh for a total cost of 2,914 millioneuro; such development includes the effect of the adjustment of the avoided cost of fuel (“COF”), followingthe publication of the Decrees MiSE November 20, 2012 and April 24, 2013.

Feed-in rateThe feed-in tariff system is an alternative mechanism to the Green Certificate, which can be accessed byqualified IAFR plants with power not exceeding 1 MW (200 kW for wind power), entered into service afterDecember 31, 2007. The mechanism consists of fixed rates of withdrawal of electricity fed into the grid,differentiated according to the renewable source, whose value includes both the incentive component andthe value of the energy produced. The fare is valid for a period of 15 years for all plants that began operatingbefore December 31, 2012. In order to protect investments nearing completion, MD July 6, 2012 expected,for plants entering into operation by April 30, 20133 the possibility to choose between access to thatmechanism and the new incentive scheme introduced by the Decree.At the end of 2012, 1,728 plants resulted (1,128 in 2011) for a total capacity of 957 MW (603 MW in 2011).The energy withdrawn in 2012 amounted to 4.1 TWh (2.5 TWh in 2011) for a total amount of 1,056 millioneuro (632 million euro in 2011).

The table that follows details the agreement divided by type of power plant.

Power source Number of plants Power EnergyMW TWh

Biogas 613 455 2.6Hydraulics 566 287 0.9Biomass 188 112 0.3Landfill gas 54 40 0.2Other power sources 307 63 0.1

Total 1,728 957 4.1

Energy purchases pursuant to article 3 2011 2012 Changeof Legislative Decree 79/99 by type of plantTWh

Fueled plants or process recycles or recovered energy 15.0 12.5 (2.5)Plants fueled by fossil fuels or hydrocarbons 6.9 5.8 (1.1)Similar sources 21.9 18.3 (3.6)

Percentage 82.1% 81.7%

Biomass power plants, biogas and waste 4.8 4.1 (0.7)Renewables 4.8 4.1 (0.7)

Percentage 17.9% 18.3%

Total 26.7 22.4 (4.3)

Note 3For plants fueled by waste, expiry date of commissioning is June 30, 2013.


Energy Withdrawal

Dedicated WithdrawalThe Dedicated Withdrawal regime, regulated by Resolution 280/07, is a simplified mode available tomanufacturers for the sale of electricity fed into the grid, alternative to bilateral contracts or direct sales onthe market. In summary, the scheme consists in the supply of electricity fed into the grid to GSE, which shallreward it by paying the producer a certain price per kWh withdrawn. In particular, the electricity fed into thegrid and retreated is valued at the average price of the time zone and, for nominal power plants up to 1 MW,at a guaranteed minimum price.All power plants less than 10 MVA are admitted to this scheme. To these the plants powered by renewablesources of any non-programmable power as well as installations using renewable sources of programmablepower even greater than 10 MVA provided that the ownership of power producers are added. It should benoted that plants that access to the new incentive mechanisms provided by MD July 5 and 6, 2012 no longerhave access to the Dedicated Withdrawal regime.

To cover the costs incurred by GSE for the provision of services, it is expected to load the manufacturer afee equal to 0.5% of the equivalent electricity withdrawn up to a maximum of 3,500 euro per year per plant.Please note that, starting in 2013, Resolutions 493/2012/R/efr and 281/2012/R/efr of the Authority introducedsome changes to the remuneration paid to GSE.

At the end of 2012, 57,780 conventions were managed for 19,364 MW of power contracted. The electricitywithdrawn in 2012 amounted to approximately 26 TWh (19 TWh in 2011) for a determined amount equalto 2,006 million euro (1,565 million euro in 2011) and a fee to cover the administrative costs of GSE equalto 7 million euro.The table and graph below provide a breakdown of the collected energy for plant typology.

Power source Number of plants Power Energy retreatedMW TWh

Solar 54,153 12,115 13.4Wind power 480 4,573 7.4Hydraulics 1,751 1,269 3.2Residual gases from sewage treatment landfill 186 217 0.6Fossil fuels 299 444 0.4Biogas 538 408 0.4Biomass and pure vegetable oils 198 184 0.3Waste 19 60 0.1Other sources 156 94 -

Total 57,780 19,364 25.8

52%

29%

12%

2% 3%2%Solar energy

Wind power energy


Energy from residual and landfill gas

Fossil fuel energy


ENERGY WITHDRAWN IN TWH BY ENERGY SOURCE Year 2012

TOTAL ENERGY WITHDRAWN 26 TWh


Net MeteringNet Metering is a service provided by GSE that allows the “producer/consumer”, who has the title or theavailability of a plant, the offset between the value associated with the electricity produced and fed into thegrid and the value associated with the electricity withdrawn and consumed in a period different from theone in which production takes place. The provision of such a complex service from GSE is achieved throughthe recognition of the Net Metering of a contribution related to the volume of energy input and taken in thecalendar year and their respective market values. Plants powered by renewable sources of power up to 20kW or up to 200 kW can access this service, if entered into operation after 2007, as well as those of HighEfficiency Cogeneration of power up to 200 kW. Please note that Net Metering is a mechanism that is notcompatible with the regimes of Dedicated Withdrawal and the feed-in tariff, and that the plants that haveaccess to the new incentive mechanisms provided by MD July 5 and 6, 2012 no longer have access to thatscheme. The producer who joins the service of Net Metering is required to contribute to the administrativecosts incurred by GSE paying an annual fee determined as a function of the power plant. With Resolution570/2012/R/efr, the Authority has finally introduced some changes to the technical and economic conditionsof the service, in effect as of the 2013 adjustment. These modifications have resulted in a simplification andstandardization of the methods for calculating the contribution itself, avoiding the involvement of thecompany’s sales.For the year 2012 approximately 373 thousand conventions were subscribed, for a nominal power of 3.5GW related almost totally to photovoltaic systems that take advantage of the Energy Account. In referenceto the same year, contributions were paid at an amount equal to 220 million euro (119 million euro in 2011),against which they were paid a subsidy to cover the administrative costs of 9 million euro.

Wind Energy Production FailureThe lack of wind generation (“Wind Energy Production Failure” or “MPE”) is the amount of electricityproduced by a wind turbine not due to the implementation of the orders of reduction or elimination of theproduction issued by Terna. GSE, in accordance with Resolution ARG/elt 5/10, has the task of determiningthe amount of electricity producible from wind power plants affiliated to the subsequent enhancement oflost production. The amounts recognized for producers to compensate the Wind Energy Production Failureshall be charged to the A3 component.In 2012 the Wind Energy Production Failure, for 129 production units with active agreement with the GSE,was approximately 140 GWh. Part of this energy not produced refers to units operating in the free marketin economic terms and therefore regulated directly by Terna. The value of lost production for the 90 units forwhich GSE was a member of dispatching in 2012 is 105 GWh, whose economic value, sold to Terna, was9.3 million euro. The contribution for the failure to produce wind power granted to operators holding unit ofproduction on the dispatching contract instead of GSE was approximately 9.3 million euro.

Energy sales

Retail market

GSE sells on the electricity market energy withdrawn by the producers, through participation in the day-ahead market (“Day-Ahead Market” or “MGP”) and the intra-day market (“Intraday Market” or “MI” is dividedinto two sessions, “MI1” and “MI2”), both included in the spot market (“Spot market” or “MP”). GSE is notparticipating in the market for ancillary services (“Ancillary Services Market” or “MSD”). Specifically, thecompany participates in the daily market by placing both the energy withdrawn from the manufacturers aspart of the CIP6 incentives or feed-in tariff, and that retreated from the producers allowed to use theDedicated Withdrawal or Net Metering.In 2012, the total energy placed on the national electricity market amounted to 51.2 TWh (39.2 TWh in 2011)for an amount of 3,861 million euro (2,898 million euro in 2011), of which 3,850 million euro was for energysold on the MGP amounting to 51 TWh, and 11 million euro for energy sold on MI, for 0.2 TWh. The energypurchased on the MI was 0.3 TWh for a total of 25.8 million euro (26 million euro in 2011).The difference between the energy purchased by GSE and the one placed on the MGP and MI is valued as partof the imbalance. The energy imbalance is equal to the difference between the actual production fed into thegrid and the electricity offered by GSE in the markets. Expense/revenue imbalance attributed to the units thatare part of GSE’s dispatching contract has effects on the A3 tariff component, except for the RID programmableunit to which the burden is reversed. In 2012, the hourly imbalance positions, enhanced by Terna, generated anet positive balance of 247 million euro and 3 million euro for units folded RID programmable for GSE. It isshown, finally, that, following the application of Resolution 281/2012/R/efr and the resulting increase in saleson the MGP of the relevant RID units, the amounts of imbalances relating to these units had an average monthlyreduction in the second half of 2012 amounting to approximately 85% compared to the first.


Forecasting and monitoring energy

Forecast for the placing of energyThe prediction of energy input to the unit to non-programmable renewable sources is performed by GSE tosupport both the development of the tenders on the markets for the unit dispatching contracts, and Ternain the process of optimization of the acquisition of resources for the dispatching, for non-relevant units whichare not part of the contract for GSE dispatching.In 2012 projections were provided to approximately 2,998 hydroelectric plants approximately 2.9 GW ofinstalled capacity, to 625 wind turbines approximately 3.9 GW of installed capacity, to more than 477,000photovoltaic plants a total installed capacity of approximately 15.8 GW and to 1,557 biogas installationsand/or landfill gas an installed capacity of 1.2 GW. Overall, the scope of prediction at the end of 2012 cameto about 482,500 plants of approximately 23.8 GW of installed capacity.The consideration for the correct prediction (“CCP”), introduced by Resolution ARG/elt 5/10, which paid forthe work carried out in 2012 to minimize the imbalance costs on non-programmable plants, was calculatedby Terna and is equal, for the CIP6 unit, to approximately 15 thousand euro.Finally, please note that as a result of changes introduced by Resolution 281/2012/R/efr on imbalances, asof July 2012, the GSE formula offered a sale for units affiliated RID based on their own forecasts. The averagemonthly payment for the units affiliated RID as a result of these changes increased from 16 thousand euroin the first half of 2012 to 42 thousand euro in the second.

Satellite monitoringThe Authority, by Resolution ARG/elt 4/10, in order to improve the reliability of the forecast input of electricityfrom plants using renewable non-programmable and non-significant sources, has entrusted GSE with thetask of identifying, directly by the plants, the production data and source. These data, detected through themetering satellite system, are made available to forecasting systems in order to improve reliability. Improvedforecast accuracy allows, in fact, to carry out a more effective market activity, minimizing the differencebetween what is offered and what is actually injected into the network, as well as support the functionsinvolved in the procurement and dispatchment more accurately. As of the second half of 2012, GSE, asrequired by Resolutions 280/07 and 281/12, has used its outlook for the formulation of offers to sell energymarkets for significant production units falling within its dispatching contract.As of December 31, 2012 about 2,411 installations, of which about 2,023 photovoltaic systems, 361 run-of-river hydroelectric plants, 23 wind farms and 4 biogas plants were carried out.

Management measures of electricity

During 2012, the processes of incentives and withdrawal of energy led to an exponential growth of manageddata and energy items determined by GSE. In particular, the company has handled approximately 14 milliondata relating to the measures of electricity plants with an agreement with GSE and more than 900 milliondata transmitted by network operators and businesses for sale, for the determination of more than 7 millionenergy items.

Certification of energy

GSE plays a leading role in carrying out activities related to the issuance of securities that certify the originof renewable sources used for the production of electricity, in order to ensure transparency in the market ofselling the energy and protect the consumer.

Guarantee of Origin

The Guarantee of Origin (“GO”), introduced by Legislative Decree 387/03, is a certification of the productionof electricity from renewable sources, issued by GSE at the request of the manufacturer, subject toqualification system (“IRGO”), which is intended to demonstrate the origin of “green” energy produced.MD July 6, 2012 updated procedures for the release of the GO in accordance with the provisions ofLegislative Decree 28/11 which provides that the license is an “electronic document to be used exclusivelyto show clients that a given quantity of energy was produced from renewable sources”. The Decree has infact eliminated from 2012 the exemption from the entry of renewable electricity for the holders of the GOissued abroad and associated with imported electricity. Therefore, starting from 2013, certification of originof the titles will be made exclusively by GO that will replace the CO-FER titles.


The GO may be subject to negotiation both in Italy, with the same procedures as the titles of CO-FER, andat the international level. In regards to the latter, in the light of the provisions of Directive 2009/28/EC, GSEwill, during 2013, ensure the Italian operators the opportunity to exchange titles through the connectionplatform of national registers of certified members, operated by Association of Issuing Bodies (“AIB”).In 2012, for electricity generated in 2011, Guarantees of Origin for a total of 3.5 TWh were issued.

Fuel mix disclosure and CO-FER certificates

MiSE Decree of July 31, 2009 has placed the obligation to provide information to end users on thecomposition of the energy mix used for the production of electricity sold and the environmental impactthereof, in the hands of businesses that operate in the sector of sale of electricity required to providecustomers with information on the composition of the final mix energy mix used for the production ofelectricity sold and the environmental impact of it. These data should be included in the billing documents,internet sites and promotional material provided to the client. GSE has a key role in the process of definingthe operational procedures for the release of the statement certifying the renewable origin of the sourcesused and the regulatory requirements for producers and sales companies. In particular, the company, at therequest of the producers, releases to plants powered by renewable energy sources ICO-FER qualification,preparatory to the request for the issuance of certificates of origin (“CO-FER”) assigned in equal numbersto the energy fed into the grid.The CO-FER are subject to negotiation between producers, traders and sales companies, the latter cancelsthe CO-FER to show final clients the share of renewable energy in its present mix of supply. Resolution ARG/elt 104/11 provides that the CO-FER (GO from 2013) can be freely traded on the platformsorganized by GME or awarded through competitive procedures organized by GSE. Such procedures shallconcern CO-FER held by GSE, namely those relating to installations using renewable energy sources underthe Net Metering, Dedicated Withdrawal and CIP6 as well as installations that access to the system of GreenCertificates and the feed-in rate that have not submitted an application for ICO-FER designation bySeptember 30 of each year.In 2012, the fees relating to the issuance and cancellation of CO-FER securities relative to the year 2011amounted to 574 thousand euro and 503 thousand euro.GSE, moreover, in 2012 organized three annual auctions for which have been recognized by GME paymentsof 7 thousand euro.In reference to disclosure, the producers for the year 2011 have notified GSE that the data for the initial energymix were 10,978 and production plants appear to be surveyed at a total of 16,360; sales companies which,for the same year of competence, have complied with the disclosure obligations have been 148. For the year2012 manufacturers and sales companies are expected to communicate their data by March 31, 2013.

Verification activities on green offer

With Resolution ARG/elt 104/11, the Authority stated that contracts for the sale of renewable energy aresupported by a number of CO-FER (GO as of 2013) equal to the amount of electricity sold as such. GSEreceives the information relating to offers of renewable energy from sales companies and verifies thecongruity with CO-FER (GO as of 2013) owned and canceled by the companies themselves, for the sameyear of expertise.

Renewable Energy Certificate System

The Renewable Energy Certificate System (“RECS”) is a voluntary system of certification of electricityproduced from renewable sources recognized as part of the standard system certification EECS – EuropeanEnergy Certificate System and managed by the Association of Issuing Bodies. GSE, as a member of AIB,issues RECS certificates, marketable securities separately from below, with a minimum size of 1 MWh, whichare valid until the request for annulment, or until such time as the holder uses them on the market.In light of the provisions of Directive 2009/28/EC for the promotion of renewable energy sources, it suggestsa natural and gradual transition from the RECS system to that of Guarantees of Origin. For these reasons,the certification activities at the national level have registered a sharp decline in terms of emissions fromapproximately 13 million certificates in 2011 to about 750 thousand in 2012. In regard to cancellations,however, there was no special difference compared to previous years.There was, finally, a decrease also in regard to the matter of participation of operators in the Italian marketrising from 57 in 2011 to 44 in 2012.

System verification In 2012 the verification of the plants in order to ascertain, through on-site survey and documentary evidence,the actual existence of the requirements for the granting of incentive tariffs or other benefits provided bylaw continued.

Checks on photovoltaic plants

In 2012, 1,546 inspections were carried out (2,314 in 2011) for a total capacity of about 884 MW. About35% of these audits focused on photovoltaic systems affiliated with the Second Energy Account, 3% offacilities affiliated with the Third Energy Account, 44% of installations fell under the Fourth and 5% of theplants under the Fifth Energy Account. The remaining 13% of the audits performed was carried out by meansof document checks, in most cases concerning measures of electricity generated and/or fed into the gridcommunicated by the products.The following table shows the number of inspections carried out in the years 2011 and 2012.

The reduction in the number of inspections carried out in 2012 compared to those in 2011 is attributableboth to the non-use of some extraordinary ways of performing the same, which has been used in pastyears, such as custody to third parties of the control activities and involvement of massive internalresources of the company, and to the continuation, in the first half of 2012, of the intense verificationactivities, which started in 2011, the photovoltaic system that required the benefits of Law 129/10. Forthe results of this activity, the majority of testing was successful. In cases where the checks on plantsshowed differences regarding, for example, the category of architectural integration, the negative controlhas resulted in the reduction of the incentive fee recognized. In severe cases, where problems areobserved in accordance with law, the revocation of the right was notified to the recognition of incentivesand, where appropriate, the recovery of amounts unduly received by the responsible parties. Please notethat, in the summary of its activities, it was found that 3% of the plants tested found the conditions forthe application of the provisions of articles 23 and 42 of Legislative Decree 28/11.

Checks and inspections on CIP6 and co-generation plant

GSE, in accordance with Resolution GOP 71/09 of the Authority, is responsible for the verification of theproduction facilities of electricity supplied from renewable sources, similar to renewable sources andcogeneration plants, previously carried out by the Electricity Equalization Fund in the Electricity Sector.In 2012, GSE completed 35 tests with a survey, of which 17 were of CIP6 plants, 16 of sections ofcogeneration plants and 2 of cogeneration plants at the same time benefitting from the benefits arisingfrom the operation CIP6/92. The total power of the plants verified amounted to 1,793 MW. The Authority,in Resolution 509/2012/E/com, renewed activity in availment for the period from January 1, 2013 toDecember 31, 2015.

Number of checks 2011 2012

Tests on 1 kW power plants 1 kW ≤ P ≤ 20 kW 733 413Tests on power plants 20 kW 50 kW 1,335 1,013Total plants subject to verification 2,314 1,546

Power in MW of plants subject to verification 1,032 884


Checks on plants qualified IAFR

In order to verify the requirements needed for the recognition of IAFR, GSE performs control activities throughaudits and inspections on plants producing electricity in operation or under construction, during thepreliminary investigation of qualification or already qualified. During 2012, a total of 97 tests were performed (46 in 2011) on the plant powered by renewables for a totalcapacity of 2,215 MW.

Checks on cogeneration plants combined with district heating

GSE verifies the existence of the requirements provided by law and necessary to achieve and/or maintainthe qualification for issuing Green Certificates for district heating (“CV-TLR”). Between 2008 and 2012 47facilities have been controlled, including 2 in 2012 for an electric power of about 31 MW.The limited number of checks carried out is due to the important efforts in verification activities onphotovoltaic systems.

Checks on renewable energy systems with RECS recognition

Control activities on renewable energy plants that have applied for approval of RECS certificates, in 2012,involved 10 plants (5 in 2011) with a capacity of about 401 MW. Among them, 6 had achieved the RECSand also the IAFR so that, for such systems, the control activities were carried out jointly.

Checks on wind power plants that are required of the wind energy production remuneration

In 2012, GSE carried out the inspection of 12 wind farms (26 in 2011) for which the remuneration of theproduction failure was requested for a total capacity of 287 MW. All the systems audited have also achievedIAFR, and for such plants joint audits have been carried out.

Checks on renewable energy systems with ICO-FER recognition

GSE in 2012 also initiated verification activities on the plants that have applied for ICO-FER approval (issuanceand management of certificates of origin). The facilities audited were 16 for a total power of 863 MW.

Promotion, studies and diffusion of renewable energyCommunication and promotion of renewable energy

Communication activities

Directive 2009/28/EC identified in information a key instrument for the achievement of the objectivescontained in the 2020 climate and energy package. Legislative Decree 28/11, in transposition of thisDirective, has awarded GSE, in consistency and continuity with the corporate mission, the task of creatinga portal dedicated to renewable energy and energy efficiency. In this context, the information section “Renew,Towards 2020” has been developed within the company website, which provides an account of the legalacts in the field of renewable energy sources, energy efficiency, climate, energy and gas markets. Throughthe portal you can also access the Italian System for Monitoring of Renewable Energy (“SIMERI”) that allowsyou to see the status of achievement of the national target for 2020.GSE is also engaged in the dissemination mechanisms and rules of incentivizing access. In this vein, in2012, in the light of MD July 6, 2012, the document “Rules of application for the approval of tariffs” waspublished, which describes the procedures, criteria and rules for the submission, evaluation andmanagement of the documentation to be sent to GSE. In 2012 the “Guide on photovoltaic systemsintegrated with innovative features” was also updated, which describes the procedures and criteria for therecognition of the architectural integration of systems made with special modules and components designedfor use in the photovoltaic building.


GSE finally implemented various campaigns and events with the aim of supporting worthwhile initiatives forthe development of renewable energy and energy efficiency. Among the various activities, the company haspromoted the Annual Energy Law Conference, a meeting between operators and experts in the energy sector.

Contact center

GSE, with the aim of providing a simple and customized access company, has activated a contact centerservice that, by offering support and assistance through several channels of contact, plays a role ofinterface with customers and the industry. The company has entered into a process of gradual evolutionof the model of the functioning of contact center obtaining the certification of all services provided inaccordance with UNI 11200 and EN 15838. It did, in fact, adopt an organizational model in accordancewith the provisions of this legislation, through the formalization of procedures and operating instructionsto regulate the services, the roles and responsibilities of personnel involved in the process. Theconformity of the organizational model, also obtained by adapting the workforce and infrastructure, hasallowed us to make a decisive contribution to the quality of the services provided, in order to optimallymanage the relationship and response time expectations of our stakeholders. In this regard, the modelprovides for the measurement of the quality of service provided through performance indicators fordifferent categories such as operators, customers, processes and quality of the answers provided. Thehigh average trend of annual contacts has been stable compared to 2011 data.

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

NUMBER OF CONTACTS

Average number of contacts - Year 2012

140,000

120,000

100,000

80,000

60,000

40,000

20,000

-


International activities

GSE, in an increasingly European and international energy context, has strengthened its involvement inprojects of international character. The main activities in this area can be summarized as follows:• membership of international organizations, such as:

• Association of Issuing Bodies (“AIB”), which promotes the international exchange of securitiescertification of electricity. In this body GSE is a member of both the General Meeting and of the Board;

• International Energy Agency (“IEA”), whose purpose is to promote the strengthening of energy securityand the diversification of sources of supply;

• Observatoire Méditerraneén de l’Energie (“OME”), which promotes interregional cooperation within theMediterranean Basin;

• participation in projects and international initiatives. In this context, the company participates in the PVParity project for the promotion of photovoltaic output in the pursuit of grid parity, and to projects suchas EPED/RE-DISS (Reliable Disclosure System), CA/RES (Concerted Action on Renewable Energy SourcesDirective), with the objective to provide support in the implementation of Directive 2009/28/EC. Finally,GSE is part of the International Partnership for Energy Efficiency Cooperation (“IPEEC”) for the promotionof energy efficiency in developing countries to provide development and support in the monitoring of MiSEEnergy Community Treaty.

Since December 2011, GSE has been actively involved, as a founding member, in the work programRES4MED (Renewable Energy Solutions for the Mediterranean), which works to promote dialogue withinstitutions and to develop solutions to promote energy investments of the main operators in theMediterranean.

European System for the Exchange of Emission Allowances (ETS)

The European Union Emissions Trading Scheme (“EU ETS”) is a scheme for trading greenhouse gasemissions in order to reduce CO2 emissions in energy-intensive sectors. The system, which involves about13,000 thermoelectric power plants and industrial plants in Europe, is the main instrument through whichthe European Union intends to achieve its targets for reducing CO2 emissions in 2020. Specifically, systemswith high volumes of emissions require a permit to emit a maximum quantity of CO2, certified emission rights(“shares”). Ownership of the shares, initially of the Member States, shall be forwarded to the Europeanoperators through public auctions or by free allocation. The shares can be bought and sold by marketparticipants in order to comply with its obligations offset the emissions of greenhouse gases and to coverits requirements for emissions.GSE is auctioneer of the rate of emission allowances in the Italian environment, and in that capacity it’scounterpart, for Italy, of the centralized platform at the European level where exchange takes place. In 2012,11,324,000 shares corresponding to the Italian percentage were placed on the platform through the auctionsystem. Auctioning the specified amount generated a total amount of 76.5 million euro in 2012. Suchpayments, with GSE as depositary, will be fully paid in a special bank account opened at the Treasury State,to be subsequently allocated to the relevant items of expenditure of the State budget for specific actions tocombat and adapt to climate change.

“Corrente” project

GSE, with the patronage of the MiSE as well as with other sectoral and institutional partners, has carriedout the “Corrente” project, with the goal to enhance, promote and internationalize the Italian chain ofrenewables and energy. It is a portal that serves as a channel of information and aggregation tool, on avoluntary basis and free of all operators belonging to the alternative energy sector who wish to develop andstrengthen its technological and commercial competitiveness, benefiting from various services and initiatives.Created in 2010, Corrente has increased the number of participating companies significantly, which inDecember 2012 reached 1,720 units, an increase of 15% compared to 2011. In addition, through this portal,cooperation between SMEs and research centers by creating opportunities for work network was favored.Through the collaboration of more than 20 national and international bodies, in fact, the project hascontributed to the growth of the Italian renewable energy in Italy and in the world, producing more than 25initiatives dedicated, more than 1,000 bilateral sectoral meetings, systems of international missions andnational events in the sector.


Research, statistics and support to Public Administration

Studies

In recent years, GSE has devoted a growing commitment to the deepening of studies and analyses relatedto renewable energy and energy efficiency, carried out both in support of the MiSE for outreach purposes,as well as for what is provided for by Legislative Decree 28/11 and reiterated more recently by MD July 6,2012. During 2012, studies and thematic observatories launched in previous years were developed, withparticular reference to the following aspects:• scenarios of development of renewable sources and evolution of incentive costs;• investment costs and energy production from renewable sources;• incentive policies for renewable energy at the international level;• assessment of economic, industrial, occupational and environmental consequences of the development

of renewable energy and energy efficiency;• national and regional authorization procedures.In 2013, moreover, particular emphasis will be put on the preparation of the first report on renewable energyin Italy, as for MD July 6, 2012, and the preparation for submission to the European Commission, the secondProgress Report of Italy on the state of implementation of the policies adopted and the results achievedtowards the target of 17% of energy from renewable sources by 2020, established in accordance withDirective 2009/28/EC.

Statistics

GSE participates with Terna to the recognition of the “Annual Statistics production and electricityconsumption”. In this context, the company provides data on photovoltaic systems and power plants fueledby other sources, renewable or otherwise, of power not exceeding 200 kW.During the year 2012, GSE published the “Statistical Report 2011 - Plants using renewable sources” andthe “Statistical Report 2011 - Solar PV,” and has participated in the elaboration of the “Statistical Report EU27 - Electric Power” 2010.GSE plays, finally, a leading role in the monitoring of statistics of national and regional targets for the use ofrenewable sources. All data are processed and managed within the Italian System for Monitoring ofRenewable Energy. The monitoring is currently undertaken at a national level, and will be extended to theregional level.

Support to Public Administration

During 2012, GSE continued its efforts of support and advisory services to public bodies and representativebodies of national importance, on the issues of energy efficiency and renewable energy sources. This supportaction takes place both through specialist power engineering, defined by memoranda of understanding andagreements, and through information campaigns/programs designed to develop a culture of energycompatible with environmental requirements and specific knowledge of the incentive mechanisms.

During the year, the specialized services related to the following aspects:• public support to central government and constitutional bodies in the preparation of public notice

regarding the production of electricity and heat from renewable sources and energy efficiency;• support to other Public Administrations for the analysis of energy consumption in buildings owned aimed

at limiting consumption;• specialist technical support to the MiSE in the context of the inter-regional operational program

“Renewable Energy and Energy Efficiency” 2007-2013;• information/training to the local Public Administrations through the provision of training courses in the

field of development of renewable energy, cogeneration and energy efficiency to the Regions andAutonomous Provinces.

Monitoring data

Resolution ARG/elt 115/08 and its subsequent amendments have defined procedures and criteria for theperformance by GSE, as well as GME and Terna, of the activities associated with the monitoring function ofthe electricity market and the market for dispatching service. To this end, according to criteria establishedby the Authority, GSE has developed a computerized database in 2012 and have continued activities toensure their development.


Tariff coverage and A3 component Management mechanisms for the promotion of renewable energy sources generates costs, resultingprimarily in encouraging and purchasing electricity and Green Certificates, and revenues, resulting largelyfrom the sale of the same on the market.The budget deficit resulting from the difference between the costs incurred by GSE for the encouragementand promotion of renewable sources and the related revenues is covered by the revenue from the tariff A3component, pursuant to Legislative Decree 79/99 and the “Consolidated text of the Authority for theprovision of electricity transmission, distribution and metering services” for the regulatory period 2012-2015.Specifically, the budget deficit is generated mainly by the costs incurred for:• the recognition of incentive rates of photovoltaic systems and associated charges;• the withdrawal of the Green Certificates;• the purchase of electricity from producers:

• CIP6 (including costs related to imbalances);• incentives through the feed-in tariff;• dedicated agreement for the withdrawal;• agreement for the Net Metering;

net of revenues resulting primarily from:• the sale of electricity:

• CIP6, feed-in tariff, Dedicated Withdrawal and Net Metering on the electricity market;• the sale of Green Certificates of ownership of GSE. For the year 2012, the deficit to be covered through the statement of comprehensive A3 component amountsto 9,767 million euro (7,204 million euro in 2011).

Since 2007, moreover, a portion of A3 was designed by the Authority to cover the operating costs of GSE.For the year 2012, in accordance with Resolution 171/2013/R/eel, that consideration was 37.6 million euro(33 million euro in 2011).

The A3 tariff component, finally, is intended to cover direct costs for external resources arising from theperformance of some tasks that are assigned to the responsibility of GSE pursuant to the Authority asrequired by specific resolutions such as those related to the use of third parties authorized to carry outaudits on photovoltaic systems, monitoring satellite and contact center.

Virtual Storage gasLegislative Decree 130 of August 13, 2010 was attributed to a primary role in the GSE storage gas services.The Decree has introduced specific measures to stimulate the establishment in Italy of a further 4 billioncubic meters of storage capacity to consumers and industrial thermoelectric producers. The objective is toincrease the competitiveness in the market of natural gas through the access of industrial customers tostorage services, transmitting the benefits of this opening to final consumers.The construction of new infrastructure or upgrading existing ones have been entrusted to the main marketplayer, Eni S.p.A., which will increase its market share to the threshold of 55% provided that the new storagecapacity is made available by March 31, 2015.The industrial investors in possession of certain requirements of gas consumption and selected by StogitS.p.A. with special competition proceedings have lodged a request for participation in the GSE storagemechanism that provides a virtual preview of benefits equivalent to those that subjects investors would haveif the storage capacity corresponding to the assigned quotas were immediately operational. GSE deliversindustrial investors in favor of the 34 members of the transitional financial and physical measures.

Transitional financial measures

For the storage years 2010-2011 and 2011-2012, GSE has disbursed amounts equal to the price difference inthe price of natural gas during the winter and in the summer of the same year, applied to the amount of storagecapacity allocated and has not yet come into operation. For the storage year 2010-2011 44 million euro werepaid, for the storage year 2011-2012 23 million euro were paid through 6 monthly installments were paid.


Transitional physical measures

Starting from the storage year 2012-2013, the industrial investors can deliver the gas in the summer andcollect the following winter, in the face of a fee set by the Authority and granted with respect to storagefees. In this way, you can then access the gas purchasing it during periods of increased availability andlower price (summer) and then use it in the winter season when the price is higher.For the provision of transitional measures to physical industrial investors, GSE, on an annual basis and onthe basis of the requests of the same subjects, makes use of virtual storage, or other persons authorized tooperate on the European gas markets and to withdraw gas in summer to return it during the winter. Thepeculiarity of the role played by GSE is the ability to aggregate the demands of industrial investors andmembers to organize competitive procedures for the selection of virtual storage and virtual storage provisionservices to those applicants at more competitive prices, with a resulting advantage over the system charges.Downstream from the selection of virtual stackers and the conclusion of the annual contract with the same,GSE provides each year to match them with the respective subject investors. With reference to the storageyear 2012-2013, the total quantity to be supplied, as required by industrial investors, amounted to about6.1 million MWh. 8 virtual stackers were selected for the purposes of providing the service and wereexpected to net expense in the amount of 23.5 million euro, net of proceeds from the industrial investors.

Assignment of services and services to the market

From the storage year 2012-2013 and on an annual basis, GSE manages and ensures the transfer marketservices and benefits relating to the storage capacity already come into operation through a specialprocedure market. For the 2012-2013 storage year, with reference to the auctions organized by GSE inMarch 2012, the capacity offered for sale by industrial investors was approximately 6.1 million GJ in theface of a request to purchase about 18 million GJ. The allocated capacity was approximately 3.6 million GJand the valuation price of the same amounted to 0.56 euro/GJ.

Obligation to offer for sale to the market

From the storage year 2012-2013 and on an annual basis, GSE verifies compliance with the obligation tooffer the sale of gas to the market leader in the industrial investors through access, during the winter, to thetrading platform for the exchange of natural gas (“P-GAS”) and/or the Day-Ahead Market for Gas (“MGP-GAS”), both managed by GME. This will provide a greater liquidity in the market. In order to ensure optimalmanagement of the supply of services referred to above, in accordance with local regulations, GSE hasentered into three agreements with the parties concerned. In particular:• GSE – Stogit: the Convention governs the relationship between GSE and Stogit about disclosure

obligations relating to transitional measures and procedures for the sale of services and benefits to themarket;

• GSE – GME: the Convention governs the relationship between GSE and GME with reference to themanagement of information flows between the parties, functional to allow GSE to verify that thoseinvestors comply with the obligation to offer the P-GAS and/or the MGP-GAS quantities made availableby the virtual stacker combined;

• GSE – Snam Rete Gas: the Convention governs the relationship between GSE and Snam Rete Gas forthe exchange of information flows related to transactions recorded at the Virtual Trading Point (“PSV”)and carried out by operators in the framework of transitional physical measures.

Tariff coverage and CVOS component

The expenses incurred by GSE for the provision of virtual gas storage services are charged to the “Accountstorage charges” through the tariff component CVOS. Resolution ARG/com 87/11 and the subsequent 130/11have set to October 1, 2011 the date of activation of the consideration CVOS and its exploitation is suppliedto the bill. GSE, in accordance with Resolution ARG/gas 29/11, must provide the CCSE, by October 31 ofeach year, the amount of the expenses incurred for the provision of transitional measures. For transitionalfinancial measures, the Electricity Equalization Fund, on the basis of the statement, acknowledged GSEwith an amount of 66.5 million euro of which 44 million euro for the storage year 2010-2011 and 22.5 millioneuro for the storage year 2011-2012.


Acquirente Unico

Acquirente Unico S.p.A. is now entrusted with the role of ensuring the supply of electricity to householdsand small businesses, in terms of affordability, continuity, security and efficiency of the service. The companybuys electricity at more favorable conditions in the market and gives the operators the enhanced protectionservice for domestic customers and small consumers who do not buy on the open market. The companyalso organizes the ATM for the consumer of energy, which provides information, assistance and protectionto final clients of electricity and gas and has a responsibility to carry out public procedures for theidentification of subjects supplier of last resort in the natural gas market. Law 129/10 set up, also, at the AUIntegrated Information System for the management of information flows relating to the markets for electricityand gas. Legislative Decree 249/12 finally attributed to AU, from 2013, the functions of Central Italian Stockholding.

Supply of electricityAcquirente Unico S.p.A. meets the demand of the enhanced protection market through a program of energysupply to meet the requirements of economy and transparency, compatible with the trend of the markets.In order to minimize the costs and risks of supply for customers in the most protected market, AU has acted,even in 2012, as a diversification of the types of procurement and hedging volatility risk for purchases onthe electricity market. The table below shows the breakdown of purchases of electricity for the enhancedprotection service 2012.

Type of supply 2011 2012 Change TWh % TWh % TWh %

A) Forward purchasesPhysical contracts:national 18.7 22.4% 1.5 1.9% (17.2) (92%)annual import 5.1 6.1% 3.2 4.1% (1.9) (37%)multi-year import 5.3 6.4% - - (5.3) (100%)MTE 7.7 9.2% 33.8 43.3% 26.1 339%A.1) Total physical contracts 36.8 44.1% 38.5 49.3% 1.7 5%

Financial contracts:virtual production capacity VPP contracts 1.8 2.2% 2.8 3.6% 1.0 56%two-way contracts for differences 0.2 0.2% 3.4 4.4% 3.2 1,600%A.2) Total financial contracts 2.0 2.4% 6.2 8.0% 4.2 210%

Total (A.1 + A.2) 38.8 46.5% 44.7 57.3% 5.9 15%

B) Purchases on MGPB.1) Purchases unhedged price risk* 45.9 55.0% 33,6 43.0% (12.3) (27%)B.2) Purchases with price hedging 2.1 2.5% 6.2 7.9% 4.1 197%Total purchases on MGP (B.1 + B.2) 48.0 57.5% 39.8 50.9% (8.2) (17%)

C) Imbalances (0.3) (0.4%) (0.2) (0.3%) 0.1 (33%)

D) Adjustments Terna* (1.0) (1.2%) - - 1.0 (100%)

Total purchases of energy (A.1+B+C+D) 83.5 100% 78.1 100% (5.4) (6%)

* That differs from the value shown in the table of the Annual Report 2011 for information received after.


Energy obtained through physical bilateral contracts

The energy supplied through physical bilateral contracts in 2012 amounted to 38.5 TWh and is dividedinto national contracts (1.5 TWh), annual imports (3.2 TWh) and purchases on the Forward ElectricityMarket (33.8 TWh).

National physical bilateral contracts

AU has held 47 auctions in order to select the counterparties for the national physical bilateral contractsnecessary to carry out the covers of 2012. All auctions were carried out online through a portal to ensuregreater competition among suppliers and transparency in the selection of contractors. The energy underlyingall physical bilateral contracts entered into for 2012 amounted to 1.5 TWh.

Annual import

The MiSE Decree of November 11, 2011 established the terms and conditions for the import of electricityfor the year 2012. On the basis of the provisions contained in Resolution ARG/elt 162/11, AU took part inauctions managed by Cross Border Services Company (“CASC”), finalized to the allocation of rights of useof transport capacity for the borders of the EU and to Switzerland. Also following the acquisition of suchrights on the borders of France and Switzerland, the company selected counterparties for the supply ofimported energy through its portals. Through these procedures, AU in 2012 imported a total of 3.2 TWh.

Electricity market forward

In the course of 2012, the recourse to the energy market substantially and consistently increased, that isthe market organized by GME for the trading of futures contracts for electricity. Through daily trading,products have been purchased monthly, quarterly and annually for a total of 33.8 TWh (30.5 TWh of baseloadand 3.3 TWh of peakload).

Energy obtained through the system of offers (electricity market)

AU operates daily on the electricity market, giving its bids on the Day-Ahead Market. The supply on theMGP is evaluated on the Single National Price (“SNP”) and corresponds to the share of physical needs notcovered by contracts. In 2012 the supply through open market purchases amounted to 39.8 TWh, of which6.2 TWh hedged against price through differentiated contracts.

Imbalances

Pursuant to Authority Resolution 111/06, in 2012 the time offsets between final and binding program (marketpurchases and physical contracts) to cover the energy needs of the protected market amounted to 0.2 TWh,equivalent to 0.3% of total supplies.


Differential and risk management contracts The company caters the MGP including through the conclusion of contracts of hedging price risk with theaim of stabilizing the price of electricity purchased. In 2012, AU has made use of financial instruments tohedge the price risk, such as contracts for difference with counterparties operating in the electricity sectorand contracts for the sale of virtual production capacity (“VPP”), respectively equal to 3.4 TWh and 2.8 TWh.

Differential contracts with electrical contractors working in the field

In 2012, AU has entered into contracts for differences, either at a fixed price or at an indexed price. Thecounterparties have been selected by the bidding mechanism, which has fostered competition among theparticipants. During the year, 13 auctions for the identification of suppliers of differential products were held.The type of differential contracts which the company makes use of the “two-way”. If the difference betweenthe market price and the price strike (multiplied by the quantities specified in the contract) is positive, thecounterparty agrees to match it to AU, otherwise the burden falls on AU.

Contract for sale of virtual capacity (VPP)

AU took part in the proceedings held by both Enel Produzione S.p.A. and by E.ON Produzione S.p.A. for thesale of virtual production capacity, by virtue of Resolution ARG/elt 115/09, winning in 2012, respectively, 192MW and 115 MW of capacity with fixed-price contracts. Also in the VPP auction carried out in 2009 by EnelProduzione S.p.A., covering the period 2010-2014, AU was awarded an additional 13 MW of virtual productioncapacity. This contract provides for a price indexed to the performance of brent and the exchange rate.

Costs of procurement of energy

In 2012, the cost of energy supply, including the effect of hedges, amounted to 7 million euro, of whichapproximately 6.2 million euro was for the purchase of electricity and the remaining 0.8 million euro for thecost of dispatching and other services.

Sale of electricity to the service operators of enhanced protection

The number of customers in the enhanced protection at the end of 2012 is approximately 27.3 million, ofwhich 22.8 million households and 4.5 million customers for other uses. The reduction in the number ofusers is essentially due to the effect of terminations, new connections, passages to the free market and iswithin the protected market.With regard to the companies providing the enhanced protection service, in 2012 their number was reducedfrom 125 to 123, following the sale of the asset or the incorporation of existing businesses.The Authority, with Resolution ARG/elt 208/10, approved amendments to the contract of sale between AUand merchants of the enhanced protection service, essentially in regard to guarantees that the operatorsmust provide to the company. In particular, in addition to the release of the surety, it is expected that thepossibility of establishing a deposit will be required for an amount equal to the amount of the guarantee itself.The sale price of electricity for companies serving the enhanced protection service is determined by thecriteria established by Resolution 156/07 and is equal to the sum of three components:• the weighted average unit costs from Acquirente Unico S.p.A. in the hours included in a given time period

(F1, F2, F3), to the respective amounts of electricity;• the unit cost incurred by AU, as a dispatching user for the enhanced protection service, in the hours

included in these bands; • the unitary recognized to AU for the activity of purchase and sale of electricity for the enhanced

protection market.


The table shows the performance of the sales price for each month of 2012.

From July 1, 2004, the monthly amount billed by AU to distribution companies are defined according to themethodology of the “Load Profiling”, as required by Resolution 118/03 and subsequent amendments. Inparticular, the removal of the residual area attributed to AU, communicated by the sales representative, shallbe distributed among all of the operators according to their respective shares of energy directed to theprotected market. During 2012, following the definition of adjustments by Terna with dispatching users, AUcarried out the adjustments to all operators on the enhanced protection service for the energy sold in 2011,as well as for the late adjustments for the years 2009 and leading up to 2006.

Entry procedures for the identification of operators of the service for the protection of electricity The proceedings that took place in 2010 affected the validity period of the years 2011-2013, so for 2012the Safeguarding Service has been rendered, for each geographical area, by operators assignees resultingin completion of the procedure in question.

Competition procedure for the allocation of service provision of last instance in natural gas market

Based on the guidelines of the MiSE Decree August 3, 2012 “Identification of suppliers of last resort for thethermal year 2012-2013” and the rules set by Authority Resolution 353/2012/R/gas, AU has played in themonth of September 2012 the insolvency procedure for the identification of the supplier of last resort fornatural gas for the thermal year 2012-2013.

ATM for energy consumers The first three years of managing the ATM for the Energy Consumer concluded at the end of 2012, asrequired by GOP Resolution 41/09 and subsequent updates. The results achieved in the three years led theAuthority to Resolution 323/2012/E/com, confirming the company in the management of the service inquestion for three further years. The operation procedures have been updated with Resolution548/2012/E/com which approved the new regulation.In the period just ended, the service, provided free of charge to end users and consumer organizations ofthe entire Italian territory, involved complaints and requests for information on the electricity market and gasin terms of billing, contracts, free market, prices, connections, bonuses, insurance and gas as of June 1,2012, contracts not required (Resolution 153/2012/R/com) and non-payment of fees by the end client(Resolution 99/2012/R/eel).

€/MWh July August September October November December

F1 95.200 91.013 93.370 89.089 94.780 94.500F2 99.104 111.868 97.805 92.298 89.340 88.850F3 85.178 86.288 80.830 77.786 73.090 77.640

Weighted average 92.54 94.94 90.18 86.36 85.71 86.09

€/MWh January February March April May June

F1 100.786 113.494 91.844 90.989 91.029 96.219F2 96.818 101.066 103.381 100.637 97.391 103.754F3 76.875 73.084 71.319 79.911 77.293 79.911

Weighted average 91.18 97.08 89.05 89.11 87.97 92.45


Call center

The call center provides information on the opportunities and rights of consumers in liberalized markets forelectricity and gas, the procedures for obtaining the social bonuses, on the conditions and status ofcomplaints submitted to the Authority, on the two-tier prices on insurance and gas.In 2012, the call center has handled approximately 409 thousand calls, a decrease of 31% compared to2011. This decrease is attributable to the downsizing of applications relating to bonuses which instead havecharacterized the previous two years.

Complaints

Complaints received by the ATM in 2012 recorded a decrease of 6% compared to 2011, primarily due to asignificant reduction in complaints regarding bonuses.

Settlement service for energy customers Legislative Decree 93/11 provides that the Authority, using AU, ensures the effective treatment of complaintsand conciliation procedures of end clients to the sellers and distributors of natural gas and electricity. Byimplementing this provision, the Authority has entrusted development of a project for the management ofservice conciliation approved by Resolution 476/2012/E/com, to AU. The project is expected to startoperating activities for April 1, 2013 and cover the related costs until December 2015.

Integrated Information System In 2012 the development activities of the Integrated Information System focused on the realization of theprojected infrastructure last year, as well as on the issuance of technical specifications necessary to theoperation of the first processes to manage.During the year, the technology infrastructure and the first functional systems, as well as the procedure forthe initial population of the Central Registry Officer (“RCU”) and the procedures for the normalization of dataacquired by distributors and the monthly update of the register were manufactured and tested. In the monthof July, the phase of accreditation of users of the SII has started. Almost all the distributors and sellers ofenhanced protection have been credited, as well as Terna and several dispatching customers, for a total ofmore than 300 operators.

Economic and financial dataThe subsidiary closed the fiscal year 2012 with a turnover of approximately 7,183 million euro (7,120 millioneuro in 2011), against the costs of production to 7,182 million euro (7,120 million euro in 2011). Net profitfor the year amounted to 1,329 thousand euro (698 thousand euro in 2011).


Gestore dei Mercati Energetici

The organization and management of the electricity market and the gas market is entrusted to GME. Thecompany also manages the platform of energy accounts (“Electricity Account Trading Platform” or “PCE”)for registration of contracts of sale and purchase of electricity concluded outside the organized market.GME, finally, organizes and manages markets for the environment (“Environmental Markets”), or the officesof trading of Green Certificates, the Energy Efficiency Certificates and certification of origin for plantspowered by renewable energy sources.

Electricity market and electricity account trading platformIn 2012, GME continued in its activities to ensure the organization and management of the electricity market,in accordance with the principles of neutrality, transparency, objectivity and competition between operators.With reference to the management of the Platform of Electricity Account, the Authority has approved, withResolution ARG/elt 189/11, the proposal of GME regarding the value of fees in 2012 for participating in thePCE. In particular, the Authority has established a fee of 0.012 euro per MWh subject of the transactionsrecorded on the same platform. As of January 1, 2013, however, under the provisions of Resolution558/2012/R/eel, this amount will be reduced to 0.008 euro/MWh. The Authority has also amounted to 13.2million euro the share of cumulative operating income attributable to the PCE for the years 2006-2012, inexcess of the fair return on capital employed, net attributable to the same PCE, net of fees paid to Terna. For that amount, the Authority has provided:• an additional payment of 6 million euro for Terna by January 31, 2013;• the provision for risks and charges remaining until part of a later decision of the same Authority.The excess of cumulative operating income, due to the PCE for the years 2006-2012, has been finallydetermined by GME at 13.7 million euro based on the 2012 final data transmitted to the Authority inaccordance with Resolution ARG/elt 44/11. In the light of this restatement the company has set aside anamount of 6 million euro, bringing the amount of the provision for risks and expenses, reduced by 6 millioneuro reclassified to dues to Terna, to 7.7 million euro, corresponding to a portion of extra PCE income forthe years 2006-2012.

Market trends and electric PCE

In 2012 the volume of electricity traded on the Day-Ahead Market totaled 225 TWh, an increase of 7.3 TWh(+3.4%) compared to the previous year. This growth, in the presence of a contraction (-2.8%) of the electricitydemand compared to 2011, was mainly due to greater use of the imbalance in the program by operatorsthat have concluded bilateral contracts. In 2012, in fact, the imbalance in energy input program in theaccounts increased by 32.6% compared to the previous year, while the annual energy accounts forwithdrawal recorded an increase of 22.3%. Intraday Market on the total volumes traded during 2012 totaled25.1 TWh, an increase of 3.2 TWh (+14.6%) compared to those traded in 2011 for effect of increasedflexibility resulting from the introduction of new market sessions that allow for better planning of the plantsand reduce the costs of imbalance.

The volume of transactions recorded on the Forward Electricity Account Trading Platform in 2012 amountedto 344.5 TWh, an increase of 43.4 TWh compared to the previous year (301.1 TWh). This increase is justified,on one hand, by the increase in volumes over the MTE (+26.6 TWh) and, on the other hand, by the increaseof turnover4 (from 1.58 in 2011 to 1.79 in 2012).

Note 4

Represents the ratio of the recorded transactions and the net position.


The volume of electricity traded on the MTE in 2012 amounted to 55 TWh, an increase of 21.6 TWhcompared to the previous year dues, as mentioned, to the significant increase in the negotiations, many ofwhich (over 18.9 TWh) are attributable to the procurement policy of AU.

The average purchase price of energy on the electricity market (PUN) in 2012 was equal to 75.5 euro/MWh,an increase from the previous year as was the case for the selling prices they have recorded, in all areas,rate growth of between 5.6% in the North and 1.9% in the South.

International projects

As part of the process of integration of wholesale electricity markets in the European Union, in 2012 GMEguaranteed, in collaboration with Terna, the operation of the market coupling project (“Market Coupling”),designed to combine the Italian spot market and the Slovenian one.In 2012, again with reference to the activities aimed at the creation of the single European market, thecompany continued with the development of the price coupling of regions project (“PCR”) operated inconjunction with the main European power exchanges (EPEX, OMIE, Nord Pool, APX-Endex and Belpex)and finalized the implementation of a mechanism for price coupling at a community level.As part of the regional initiatives, the new initiative Italian Borders Working Table (“IBWT”), whose purposeis to analyze and evaluate all operational activities of pre- and post-coupling, involving both powerexchanges and network operators, was launched in the second half of 2012, with the planned launch ofEuropean market coupling in 2014.

Natural gas marketIn 2012, GME has continued to carry out the activities in the management of the natural gas market (“M-GAS”). The volume of gas traded on the MGP-GAS and on the P-GAS in 2012 amounts respectively to 0.2TWh and 2.9 TWh and is in line with the number of shares traded during the year 2011. As part of the P-GAS, starting in May 2012, GME made a third operating segment, called “Legislative Decree 130/10”, withthe aim of allowing investors participating to fulfill their obligation offer for sale of the quantities of gas madeavailable by the virtual storage on the M-GAS and P-GAS.Instead, on the balance platform for the weekly natural gas (“PB-GAS”) which became operational inDecember 2011, more than 34.9 TWh were traded over the course of 2012.Finally, it should be noted that Legislative Decree 93/11 awarded GME management of the markets in termsof physical natural gas (“MT-GAS”), for which the Authority established, by Resolution 525/2012/R/gas,regulatory conditions which enable them to carry it.

Volume of energy traded and delivered 2011 2012 ChangeTWh TWh TWh %

MTE - Trading volume* 33.4 55.0 21.6 64.7%MTE - Delivered volume 8.0 38.3 30.3 378.8%

* Volume of electricity contracted in the period, regardless of the delivery period.

Volume of traded energy 2011 2012 ChangeTWh TWh TWh %

MGP* 217.7 225.0 7.3 3.4%MI 21.9 25.1 3.2 14.6%PCE** 301.1 344.5 43.4 14.4%

* Values are expressed inclusive of imbalances under article 43, paragraph 43.1 of the Amended Text of the Discipline of Market and electricity casesof non-compliance referred to in article 89, paragraph 89.5 b) of the same disciplines.

** The volumes shown refer to transactions recorded on the PCE.


Market for the environmentIn 2012 GME continued to perform the functions necessary to ensure the organization and management ofthe market of CV and TEE and, in its implementation of the provisions of Resolution ARG/elt 104/11, hasstarted Platform P-COFER.In general, the volume of securities traded on the Environmental Markets during 2012 totaled 43.5 million,an increase over the previous year of 8.3 million. The table below represents the volumes of the CV, theCOFER and TEE negotiations during the year compared with the previous year.

Green Certificates market

In 2012, GME guaranteed the ordinary management of the CV market and recording platform of bilateraltransactions. During the year 32.3 million CV were traded, an increase of 1.2 million (+3.9%) compared to2011. This growth is largely attributable to the increase in the percentage of obligation for manufacturersand importers of non-renewable electricity, from 6.8% in 2011 to 7.6% in 2012, partially offset by theprogressive dynamic cancellation of the requirement, sanctioned by Legislative Decree 28/11.The enactment of the Decree has produced effects on the dynamics of the price of the CVs. Starting in2012, in fact, GSE provides for the annual retreat of the CV, possibly in excess of those required to respectthe mandatory shares at a price equal to 78% of the one ex Law 244/07. This legislative measure hasresulted in a reduction of the weighted average price of the past by CV from 82.25 euro/MWh in 2011 to76.13 euro/MWh in 2012.

Market certificates of origin for systems powered by renewable energy

The year 2012 was characterized by the platform P-COFER consisting of the organized market for tradingof securities COFER (“M-COFER”) and the platform for transaction logging bilateral COFER (“PB-COFER”).The M-COFER ended in 2012 with a volume of 0.5 million shares traded, while on the PB-COFERapproximately 1.7 million shares were exchanged through bilateral contracts and 1.4 million throughcompetitive procedures managed by GSE, in accordance with Resolution ARG/elt 104/11.

Volume of securities traded on the Environmental Markets 2011 2012 ChangeMillions of titles %

Green Certificates CV volumes traded on the organized market 4.1 3.8 (0.3) (7.3%)CV volumes traded bilaterally 27.0 28.5 1.5 5.6%Volume of CV negotiations 31.1 32.3 1.2 3.9%

Certificates of Origin for Plants powered by Renewable Energy Sources (COFER)COFER volumes traded on the organized market - 0.5 - -COFER volumes traded bilaterally - 1.7 - -Volume of COFER assigned at auction - 1.4 - -Volume of COFER negotiations - 3.6 - -

Energy Efficiency CertificatesTEE volumes traded on the organized market 1.3 2.5 1.2 92.3%TEE volumes traded bilaterally 2.8 5.1 2.3 82.1%Volume of TEE negotiations 4.1 7.6 3.5 85.3%

Volume of EU trades* - - - -

Total volume traded on the Environmental Markets 35.2 43.5 4.7 13.4%

* Market inactive since December 1, 2010.


Securities market of energy efficiency

During 2012, GME guaranteed the ordinary management of the platforms for trading the TEE ensuring, atthe same time, the monitoring of the market. During the year, the company, in order to transpose theprovisions of Resolution 203/2012/R/efr, launched the activities of adaptation of rules of the market forenergy efficiency certificates and settlement of bilateral transactions in accordance with the provisions ofthe market by the relevant regulatory framework, which introduced new types of securities issued in respectto projects in transport and production from plants in cogeneration. Finally, the mechanism of TEE wasaffected by MD December 28, 2012 which set the national quantitative targets of energy savings to beachieved for the period 2013-2016.Overall, TEE traded on trading platforms totaled 7.6 million, an increase of 3.5 million over the previous year.This growth, greater than the obligation amount for the distributors of electricity and gas, reflects a policyof purchase of the obligated parties to secure a variety of titles for future years causing a shortage of supplyof the same, mainly due to the difficulty of building new energy-saving projects. In this regard, the Authority,with the aim of stimulating the supply, through Resolution EEN 9/11, introduced the coefficient of durabilitythat allows to adjust the useful life of the projects at their technical life.

Market unit of issue

The year 2012 was characterized by the inoperative Market Emissions Trading, suspended from December1, 2010 in consideration of the anomalous trends observed in the last two trading sessions market in themonth of November 2010 and to alleged irregular or illegal behavior recorded on the same.

Market monitoringGME carries out activities instrumental to the exercise by the Authority of the monitoring function of theelectricity market in implementation of Resolution ARG/elt 115/08 and its subsequent amendments. In 2012,the company has taken steps to complete the process of monitoring the implementation of the indexes ofwholesale electricity markets, and to share the data acquired with the Authority through the preparation andthe management of specific data warehouse. The coverage of costs incurred annually by GME for theconduct of these activities is provided by fees for participating in the PCE, under the impact of ResolutionARG/elt 189/11. As part of the gas markets, the company has continued its monitoring activities on theplatform PB-GAS, provided by Resolution ARG/gas 45/11, verifying the compliance of tenders users andtransmitting those submitted to the Authority and accepted.

Financial investmentsWith reference to the guaranteed capital obligation called “Momentum” held in the portfolio, GME is exposedto price risk, largely dependent on market interest rates and the pattern of the categories of financial instrumentsfor which it is composed. The title, in fact, signed on December 27, 2007 with a major international bank, withcurrent rating A3 by Moody’s scale, A by Standard & Poor’s scale and A+ by Fitch scale, has a term of tenyears and a guarantee of repayment of principal at maturity. GME has the right to request from the issuer theearly repayment of capital market conditions at the time of the request. The Board of Directors of GME approvedthe maintenance of security in the portfolio over middle to long term financing, until maturity. The variable returnon investment can be perceived in a measure and according to a timing perspective which is dependent on thebenchmark, and currently unable to be determined. The company, though it has adopted this strategy ofmaintenance of the investment in the portfolio, in any case makes a monthly monitoring of the market value ofthe same, which is transmitted promptly to the Parent Company GSE. At December 31, 2012 fair value wasequal to 96.33%. A possible valuation of the investment based on that value would have had as an impact,inclusive of tax, a reduction in earnings and Shareholders’ Equity at the end of period of 585 thousand euro.

Economic and financial dataThe subsidiary has closed the year 2012 with a turnover of 23,163 million euro (+21% compared to 2011)set against the costs of production of 23,152 million euro (+21% compared to 2011). Net profit for the yearamounted to 8,600 thousand euro.


Ricerca sul Sistema Energetico

RSE conducts system research and funded research on both the national and European level. The systemresearch, which is crucial for technological innovation in the electricity sector as a whole, plays an essentialrole in support of national policies aimed at sustainable development and improving competitiveness. Thecompany’s mission is therefore to carry out publicly funded programs nationally and internationally in thefield of energy and environment. RSE also provides for the dissemination of research results and leads, incollaboration with the industry, programs, verification and validation of the results.

System research on the national electricity systemOver the course of the year, RSE concluded the planned activities for the last year of the program (“ProgramAgreement”) 2009-2011 and initiated the activities planned for 2012-2014.Pending the publication of the Ministerial Decree of approval of the new three-year plan of system researchand the annual operating plan (“Annual Operating Plan”) 2012, the company, in accordance with instructionsreceived from MiSE, gave continuity to the program, preparing the projects according to the pattern of three-year plan approved by Resolution 276/2012/rds.

Annual Plan of Implementation 2011

In the first quarter of 2012, RSE has successfully completed the procedures for final verification of researchprojects related to the Program 2009-2011. The MiSE has admitted the projects of the Annual Plan ofImplementation (“PAR”) 2011 contributions to the fund for the financing of system research. The companyhas also taken steps to transmit the document to the competent institutions of a report on the technicaland economic activities for the realization of these projects. The costs incurred and the results achieved bythe company have been subject to verification by expert committees, the outcome of which has beenapproved by the Authority as a Committee of Experts to search for the Electric System (“CERSE”), byResolution 304/2012/rds. On July 24, 2012, finally, the CCSE made the payment of the balance.

Annual Plan of Implementation 2012

With reference to the research activities of the PAR 2012 carried out by RSE in 2012, the MiSE, with MDNovember 9, 2012, approved the annual plan of the National Electrical System Research, the AnnualOperating Plan 2012 and gave the company 32 million euro for the construction of the PAR 2012, whoseactivities will be completed in the first quarter of 2013.In March 2013 RSE sent to the Ministry, on the basis of information received from the same, the technicalannex needed to draw up the Program Agreement.

European researchConcerning the Seventh Framework Program (2007-2013) and other financing programs of the EU, projectswent on and 26 new proposals were presented in response to calls for different thematic research withparticular attention to the energy program and to the issues of electro-energy, confirming the efficientplacement of RSE and of the most important research organizations in the sector at the European level. Ofthese proposals, 12 have been awarded EU funding amounting to approximately 4 million euro. During 2012,the activities of the Seventh Framework Program of 5 projects started in 2008-2009 were also concluded.

National research

The company has carried out activities related to the 5 winning projects of “Industria 2015” of the MiSE. Inparticular, the project includes Efeso on the use of fuel cells, the Aladin project relating to intelligent streetlighting systems, the Scoop project on the photovoltaic concentration, and the Hydrostore project, on theaccumulation of hydrogen. Regarding the Geoma project, on off-shore wind, it provides for the issuance of


the Decree of grant by the Ministry, in the first half of 2013. During 2012, the company finally attended thepresentation of two proposals under the project called “Smart Cities and Communities”, launched by theMinistry of Education, University and Research (“MIUR”).

Economic and financial dataThe subsidiary has closed the year 2012 with a production value of 40 million euro, in line with 2011 results,offset by costs of production of 39 million euro (38 million euro in 2011). Net profit for the year amounted to126 thousand euro (94 thousand euro in 2011).

Investments

Investments for the year amounted to 15,397 thousand euro (18,776 thousand euro in 2011) as shown inthe following table.

Renewables and Gas StorageThe main investments made, in 2012, involved both the development of new applications, in order to fulfillthe provisions of MD July 5 and 6, 2012, both interventions to optimize those used for managingarrangements for the incentive. In this regard, some interventions were made to consolidate the applicationsneeded to manage conventions and administrative aspects related to the Dedicated Withdrawal and NetMetering schemes. During the year, some upgrades to both applications for the management of the virtualstorage of gas as well as those used in the preparation of forecasts of electricity produced from RES plantsand facilities for the programming of the systems were also made. Some new features of the applicationused to manage the activities relating to the High Efficiency Cogeneration were finally developed.

Energy marketsThe investments made in 2012, with reference to the electricity market, regarded the strengthening of thealgorithm for the solution of the MGP, as well as the modification of the trading platform of the spot marketin order to improve some features. Another project involved the integration of the trading platform MTE witha new portal.With reference to the market and platforms for the environment, the IT system for the management ofcompetitive procedures, in accordance with Resolution ARG/elt 104/11 designed to assign the CO-FER andto adapt trading platforms of TEE in the light of the renewed framework, was created at the request of GSE.

INVESTMENTS

Thousands of euro 2011 2012

Core business, of which: 3,468 6,042- Renewables and Gas Storage 2,146 3,713- Energy markets 334 841- Market of enhanced protection and safeguard 263 765- Energy research 725 723

Pertaining property and equipment 9,807 2,032IT infrastructure 5,501 7,323

Total 18,776 15,397


Enhanced market and safeguardIn 2012, some new features have been implemented on the platform “Energy Retail” used for the purchasesof electricity and for the management of the contracts. The most significant changes were related to theintegrated management of offers on the MTE platform and the strengthening of some modules used for themanagement of energy auctions. Finally, some evolutionary maintenance of the Customer RelationshipManagement (“CRM”) system has been carried out in order to improve the support to operators in theinternal management practices claim.

Research in the field of energyThe investments made in 2012 regard the acquisition of technical equipment and new licenses softwarespecialist/technical support of research on the energy sector.

Property and pertaining equipment The main investment items relates to the continuation of rehabilitation and adaptation of certain leasedspaces in the building in viale Maresciallo Pilsudski n. 124. Further restructuring investments have affectedthe property, owned by GSE, located in via Guidubaldo del Monte n. 45 and acquired new premises on thesixth floor of the building located in viale Tiziano n. 25.GME has also carried out a series of measures for the adjustment of the registered office and place ofbusiness, as well as purchases related to workstations.

IT infrastructureThe investments in information technology have focused mainly on the improvement and renewal ofequipment hardware and software basic function of the new application needs. At the same time, changeswere made to the upgrading of technology and information technology in order to increase applicationperformance and improve the level of safety of the corporate network. In addition, during the year, someinterventions for the management of monitoring services for public infrastructure consolidation aimed atcomputer security and for the preparation and activation of the new application architecture refers to theportal of RES Thermal took place.

Research and development

The GSE Group is active in the field of research and development mainly through the company RSE,consistent with the mission of the subsidiary. The activities carried out are therefore fully described in thesection devoted to the activities of RSE.


Human resources, organization and industrial relations

The staff of the GSE Group as at December 31, 2012 amounted to 1,186 employees (1,076 at December31, 2011) as follows.

The increase in the number of employees compared to 2011 is due to the significant increase in activity andvolumes managed by GSE and AU.

In the field of industrial relations, GSE, in 2012, and the trade unions national agreement with which newtargets were set for the promotion of labor productivity (so-called Corporate Performance Bonus), wereentered into. These objectives have been defined as the latest new method of incentives for productivity atwork introduced by union agreements, signed in 2011, for the years 2011-2013. The company has alsoinitiated the dialogue and interaction auditors for the renewal of the negotiable sector due to expire at theend of 2012, which ended with the signing of the agreement in early 2013.

GSEIn the year 2012, the number of employees has increased by 76 resources (85 new hires and 9 terminations),reaching, at December 31, 570 units.

Organization

The company, given the continuing development and widening of assigned tasks, continued in the analysisof business processes by identifying areas of improvement and optimization, with a view to cross-functionalintegration and greater control of the processes themselves.During 2012, in addition, work has begun on analysis and review of organizational tools in order to reachtheir redefinition as a meaning even more oriented to business performance.

Number of Group employees Consistency Consistency Change12.31.2011 12.31.2012

GSE 494 570 76AU 163 188 25GME 91 95 4RSE 328 333 5

Total 1,076 1,186 110

Personnel consistency - GSE Consistency Consistency Change12.31.2011 12.31.2012

Executives 21 19 (2)Managers 93 104 11Employees 380 447 67

Total 494 570 76


Development and training

The focus on professional growth and organizational human resources has resulted in the definition of specifictraining and development, including through periodic assessments of competence and of organizationalbehavior as well as possible areas for existing improvement. Concurrently with these policies, and in line withprevious years, in 2012 training courses were paid not only to newly hired employees, but also to professionalswith more work experience. In addition, as in previous years, and especially in view of the recent changes tothe law, the company has paid special attention to training programs on safety, both through actions aimedat providing a common corporate culture and through training programs on both structured and paid as afunction of specific roles and responsibilities of those involved. Particular attention, finally, is paid to youngresources for which a special training program called “Green Generation” is defined, directed at developingtransverse competences. Overall, in 2012 about 5 days of training for employees with an effective presencein the classroom by 83% were delivered.

AUIn 2012 the number of employees reported a net increase of 25 employees (29 hires and 4 terminations),reaching, at December 31, 188 units. The increase was mainly about the Consumer Counter and IntegratedInformation System.

Organization

2012 accounted for AU a year of consolidation and development of their areas of activity. In the context ofthe new organizational structure, the company has decided to complete a process of analysis and weighingof the positions held by its management in order to ensure greater internal pay equity. The rapid growth ofcontacts and subjects that characterizes the role of the Consumer Counter necessitated a timely adjustmentof the organizational structure that has gone from strength to strength in terms of managerial andprofessional skills.


In 2012, the company continued its commitment in education, especially functional to the consolidation ofexisting expertise. During the year, the project “FormAu” has also been initiated, the first floor of AU inter-funded formation. The project focused on a few topics of interest across the board, which is important forthe purposes of an individual and professional development, involving about 60 employees, for a total of 96hours of training.

Personnel consistency - AU Consistency Consistency Change12.31.2011 12.31.2012

Executives 8 8 -Managers 18 18 -Employees 137 162 25

Total 163 188 25


GMEIn 2012 the number of employees has increased by a net of 4 resources (11 hires and 7 terminations),reaching, at December 31, 95 units.

Organization

In terms of efficiency and organizational effectiveness, during 2012 GME continued to promote mechanismsfor retraining initiatives including through professional exchange between the companies of the Group. Thecompany offered its employees an opportunity to grow in line with their skills, ensuring and promotingcultural integration and a productive mechanism for exchange of expertise. This allowed, among otherthings, to reduce the use of the external market for covering organizational needs.


In 2012 staff participation was favored in GME training initiatives aimed at developing individuals andmanagement, the growth of specific skills in line with the role and increasing the linguistic ones also in viewof the greater involvement of GME in international projects. As the year continued, moreover, the trainingsessions organized at Group level aimed at raising awareness among staff on the administrative liability oflegal persons, pursuant to Legislative Decree 231/01.

RSEIn 2012 the number of employees reported a net decrease of 5 resources (14 hires and 9 terminations),reaching, at December 31, 333 units.


In 2012 the spread of courses relating to the application of safety standards that, as in the previous year,involved all the company personnel continued to spread. Other activities included training courses forparticular specializations or English courses, given the widespread presence of RSE on internationalscientific projects of interest. The total number of training days was equal to 729.

Personnel consistency - GME Consistency Consistency Change12.31.2011 12.31.2012

Executives 9 9 -Managers 29 30 1Employees 53 56 3

Total 91 95 4

Personnel consistency - RSE Consistency Consistency Change12.31.2011 12.31.2012

Executives 10 10 -Managers 129 129 -Employees 186 191 5Workers 3 3 -

Total 328 333 5


SustainabilityGSE works for the promotion of sustainable development in the belief that acting in compliance with theenvironmental and social values, in addition to the typical economic enterprise, in addition to being anethically correct approach, leads to the creation of lasting value, or development for the community, for theparties and for the company itself. In this perspective, the company develops its activities by reconcilingeconomic growth, employment and well-being, bearing in mind the protection of the environment, customersatisfaction and people. Energy efficiency, reduced environmental impacts, sustainable use of energy andmaterials are central objectives in carrying out activities and delivery of services, objectives to guide behaviornot only of the individual but also of the entire organization. According to this perspective, the contributionto sustainable development is one of the central elements of the corporate mission directing the strategicand operational decisions.

In this context, in 2012, the Sustainability Report was published, which represents the evolution of theprocess that began last year in order to foster a transparent dialogue with stakeholders based on trust andmutual cooperation. The reporting of these activities according to a perspective that tends to enhance theeconomic dimensions, social and environmental sustainability is, in fact, a tangible sign of the will of GSEto operate in a sustainable and responsible manner, in line with its institutional role and its mission. Thecompany’s commitment to sustainable development is also reflected in the documents in which corporatevalues have been formalized, or the Code of Ethics and the policy on sustainability. The latter, published inthe Sustainability Report, is a concrete sign of the desire to ensure a progressive integration of these valuesin the company business.

With the intention to eventually combine this vision with responsible management, last year the project“GSE. Social Energies” was started. Through this project, sponsored by the President of the Republic andthe Presidents of the House and Senate, other than being independent from the point of view of energycompanies operating in the social sector, GSE has helped give value to the expertise of the third sector,which represents a value and an asset to the growth of our country.


Control system

Board of Directors The Board of Directors plays a central role in the matters of internal control, defining the basic principles ofthe organization, administrative and accounting structure of the company. The CEO, in implementing theguidelines established by the Council, shall, as required by the bylaws, make sure that the organizationaland accounting structure is appropriate to the nature and size of the company. In execution of the powersdelegated by the Board, the CEO assigns individual tasks to the management, responsibilities and powersto ensure, among other things, the maintenance of an effective and efficient internal control in the exerciseof their activities and achieving related goals. The responsibility for implementing an effective system ofcontrols is then shared by all levels of the organizational structure of GSE; all staff of the company, in theirrespective functions and responsibilities, is engaged in designing and actively participating in the properfunctioning of the control system.

Executive Magistrate of the Court of Auditors GSE, as a company wholly owned by the Ministry of Economy and Finance, is subject to the supervision ofthe Executive Magistrate of the Court of Auditors pursuant to Article 12 of Law 259/58. The ExecutiveMagistrate of the Court of Auditors shall attend the meetings of the Board of Directors and the StatutoryAuditors. The Court of Auditors presents annually to the President of the Senate and the Presidency of theHouse of Representatives a report on the results of its audit.The functions of the CEO to control the financial management of the company were transferred to Dr. AlbertoAvoli from January 1, 2009.

AuditorsThe Ordinary Shareholders’ Meeting on August 18, 2011 appointed the members of the Board of Auditors ofGSE for the period 2011-2013 and will remain in office until approval of the financial statements for 2013.

Statutory AuditThe statutory audit, performed in accordance with the provisions of Legislative Decree 39/10, as well asthe formalities required by Law 244/07, concerning the tax liability of auditors, are entrusted to theindependent auditors, Deloitte & Touche S.p.A. The mandate given by the General Meeting of October 26,2010 relates to the period 2010-2012.

Supervisory Board, Management and Organizational Modelex Legislative Decree 231/01Legislative Decree 231/01 of June 8, 2001 introduced into the Italian legal system an administrative liabilityof companies for certain types of crimes committed by its Directors or employees in the interest or benefitof the company. The GSE Group, in line with the business goals set by Legislative Decree 79/99 andsubsequent legislation, believing paramount ensuring fairness and transparency in the conduct of businessto safeguard the institutional role exercised, have to be fully compliant with its policies and the adoption ofa compliance program in line with the provisions of Legislative Decree 231/01.The Board of Directors, by resolution on October 24, 2012, appointed the Supervisory Board with the taskof supervising the operation, effectiveness and compliance with the organizational model and its updating.In addition, by resolution on February 29, 2012, the Board of Directors of GSE approved the latest updateof organizational and management model in order to adapt to the changes made in Legislative Decree231/01. The Code of Ethics is an integral part of the organizational and management model, is given to allemployees and contractors of the company and is binding on the conduct of all employees of the Group,or of all those who, for whatever reason, and regardless of the type of relationship contract contribute tothe achievement of the goals and business objectives.


Audit Management The Auditors of GSE have the task of ensuring the proper conduct of the activities of monitoring andverification of compliance with regulations and company procedures in support of senior management, theSupervisory Board and the Manager responsible for preparing the corporate accounting documents(“Internal Control Officer”). The Management, at least semi-annually, reports the results of their activities tothe Board of Directors. In 2012, in addition to providing assistance and support to the Board of Auditors,the Executive Magistrate of the Court of Auditors and the Company’s independent auditors, the AuditManagement has carried out the following major activities:• checks of audit carried out in compliance with the 2012 work program approved by the Board of

Directors of GSE;• monitoring organization models ex Legislative Decree 231/01 adopted by the Group companies;• the inspections required by the managers responsible for the Group companies;• checks in regards to the legislation on safety and health in the workplace for companies in the Group.

Manager responsible for preparing the corporate accounting documents

Law 262/05 (the “Savings Law”) and its subsequent amendments have implemented regulations for theprotection of savings and the regulation of financial markets, requiring some changes to the bylaws of Italiancompanies listed on regulated markets. In particular, the Savings Law introduced the role of the manager incharge of preparing the corporate accounting documents, attributing some control functions, as regulatedby article 154 bis of the Consolidated Law on Financial Intermediation. The Ministry of Economy and Finance,exercising the prerogatives of shareholder, decided to embrace the principles of strengthening the internalcontrol system over financial reporting that have inspired the legislation in question, requiring theintroduction, using special clause laws, the role of the manager in charge also participates in the corporationeven though they are not listed. Following this indication, on June 20, 2007 the Shareholders’ Meeting ofGSE, in extraordinary session, introduced in its bylaws a manager in charge of preparing the corporateaccounting documents.The Board of Directors, at its meeting on October 16, 2012, confirmed the favorable opinion of the Board ofAuditors, the executive whose appointment will have lasted until the stay in charge of the Board of Directors,which approved the appointment. GSE, as the Parent Company and the expectations of the instructions ofthe Ministry of Economy and Finance, has asked each of the subsidiaries modification of the bylaws and theappointment of a Financial Reporting Manager. As a result of this request, the Boards of Directors of thesubsidiary companies have done so, with specific resolution, after hearing the opinion of the respectiveStatutory Auditors, the appointment of its Executive in charge. The appointment of the Manager in charge ofGME is by resolution of the Board of Directors of September 26, 2012, while that of the Officer in charge ofAU and RSE respectively with a resolution on October 2, 2012 and December 13, 2010.The Board of Directors of GSE, in accordance with the provisions of the bylaws and with the currentcorporate organizational model, has approved the guidelines on the “Role of the Manager in charge ofpreparing the corporate accounting documents in the field of GSE S.p.A.”, a document that regulates therole, powers and activities. Each of the three subsidiaries has its own guidelines based on those of theParent Company.


Risks and uncertainty

Regulatory risk The constant evolution of the legal and regulatory framework of reference for the Group companiesconstitutes a potential risk factor in the effects of which may have an impact on the operations of assetsunder management and services offered to operators. In particular, it refers to the manner of determiningthe fees for the operation of the Group companies.The measurement and regulation of fees for the remuneration of the activities by GSE and AU is approvedannually by the Authority.For GSE, in recent years, the amount of the fee, pending the introduction of incentive regulation based ona multi-year target, was determined by the Authority in order to ensure an adequate return on Shareholders’Equity less the value of investments in subsidiaries. In this regard, the Authority, with Resolutions140/2012/R/eel and 163/2013/R/com, expressed its intentions to introduce remuneration mechanisms ofGSE of incentive type in the coming years such as to induce a gradual recovery efficiency. In this perspective,as early as next year, they have asked the company for the accounting separation of the different activities,also in order to avoid cross-subsidies between them.As for AU, the consideration is recognized in the final balance to cover the costs attributable to the businessof buying and selling electricity and was determined, in recent years, based on efficiency considerationsinto account as financial income and other income. In this regard it is noted that the Authority, in Resolution94/2013/R/eel, has started the process for AU finalized to begin starting 2014 a regulation based on themulti-annual recovery efficiency. The costs relatively incurred for the Integrated Information System andConsumer Counter, the consideration is instead, recognized by the Authority according to periodic reportingprepared by the company.In the case of GME, however, the fees paid by operators for services rendered on the various platformson the market are closely linked to volumes, so any contractions of the like could be reflected in areduction in revenues and, consequently, on the sidelines of the company’s results. In this regard it isnoted that the structure and extent of the compensation requested for the services provided on thevarious platforms on the market are defined on an annual basis by GME in order to ensure the economicand financial equilibrium of the company. It should be noted that the Authority has estimated at 13.7million euro the portion of the cumulative operating income attributable to the PCE for the years 2006-2012, in excess of the fair return on capital employed, net attributable to the same PCE. The Authorityalso provided for the payment of 6 million euro to Terna and the allocation of the remainder, up to thenext measure.The return on assets attributable to RSE, finally, is closely related to and dependent on the three-year planof systems research and the three-year program agreement between the company and the Ministry ofEconomy and annual operating plans with which amounts of the fund for Research Systems to the societyare defined. The three-year plan of systems research 2012-2014 and the Annual Operating Plan 2012 wereapproved by the MiSE with Decree of November 9, 2012. The total resource allocation for the periodamounted to 221 million euro of which 170 million euro was allocated to the MiSE program agreements withRSE, ENEA and CNR. It is believed that the formalization of the new Program Agreement will be concludedin the first quarter of 2013 and that the admission of the projects of the 2012 Annual Plan of Implementationcan take place before the end of April 2013.

The Group companies carry out a constant dialogue with the competent bodies and the monitoring oflegislation aimed at identifying actions best suited to pursue its own institutional purposes, although it isstressed that any changes in the regulatory and legislative scenario could introduce changes in theInstitutional Group companies, the economic effects of which can not be, at present, evaluated.

Liquidity riskLiquidity risk is the risk that the financial resources available are not sufficient to cope with the financial andcommercial obligations under the terms and maturities. Any temporary financial insufficiency of A3 tariffcomponent, intended to cover the incentives of renewable energy sources, in the past has required the useof GSE to bank credit, thus incurring a considerable financial burden. Because of this possibility, the Authorityhas provided the specific recognition within the A3 component of net financial charges due to these temporalimbalances in the cash flows of GSE. In this regard it should be noted that during the year, especially in the


first half of 2012, coinciding with the worsening of the crisis on the financial markets, there was a reducedavailability of the banking system to provide credit. In this regards, however, and with the ready liquidity of the “Momentum” bond, it should be noted that thelike is ensured, in accordance with the provisions of the contract, the commitment to repurchase by theissuer at the request of GME.It should be noted, finally, that the liquidity of RSE, given the significance of the work involved in the systemresearch of the total corporate revenue, disbursement depends on the contributions provided by the annualplans as a result of audits by the Committee of Experts on the projects realized.The delay in paying the contributions, a historically recurring phenomenon, has determined and would beable to determine, if confirmed in the future, the continuous use of financial indebtedness, resulting in anincrease in financial expenses of the company. In July 2012, a loan agreement signed on January 26, 2011with two banks for a total amount of 20 million euro expired. To cover the general cash needs related tocorporate operations and waiting to find on the market a new loan during the year the Parent Companygranted RSE two detachments of credit for a total of 20 million euro, maturing on May 31, 2013. In January2013, on the basis of the needs communicated by the subsidiary, the amount paid has been increased bya further 10 million euro for a total of 30 million euro, with the simultaneous extension of the expiry of theentire trust to be on December 31, 2013.

Counterparty riskThe counterparty risk is the exposure to potential losses arising from default of the counterparty, in themanner or within the prescribed times from its contractual obligations.GSE as counterparties for the collection of debts owed on the sale of the energy markets, GME, and for theA3 tariff component, distributors and CCSE5.All debtors of GSE are high standing and the company believes that the risk of non-recovery of sums due,taken as a whole, are contained. A specific procedure was, however, put in place, for the management ofcredit which provides for the monitoring of receipts and the appropriate solicitation actions to recover sumsdue, including through legal action and, where necessary, to delays assisted by specific guarantees.It should be noted that the provision of incentives, in many cases, is through the payment of interim measuresdetermined on the basis of estimates which could therefore, in time, be subject to corrections andadjustments in favor of GSE. For these amounts there is therefore a risk of recovery of sums paid in timeagainst which GSE is defining specific modes of intervention.With regard to AU, the risk of non-recovery of trade receivables towards those providing enhanced protectionin all content, both for their nature, since it is certain, liquid and payable, be invoiced in accordance with theregulatory provisions in force, and for the legal nature of the debtors.The counterparty risk on the electricity market, on the PCE, the market for natural gas and for contractswith individuals and investors with the virtual storage of the gas is run through the issue by the operatorthat it intends to submit an offer, a guarantee in the form of a guarantee on first demand issued by banks,or in the form of an interest-bearing deposit in cash. Given the particular financial crisis facing the countryand the impact that this downturn is causing on the European banking systems, during the year, have beenlowered, as of January 2012, the minimum rating required by banks. In particular, it is required a level ofrating not less than BBB- by Standard & Poor’s or Fitch scales, or Baa3 by Moody’s Investor Service scale.This system is capable of providing guarantees to GME and GSE at a low risk perspective and adequatecapacity on the part of the operators to meet its financial commitments. With specific reference to theinvestment of GME in the bond guaranteed capital at maturity, called “Momentum”, it indicates that therating of the issuer is A3 by Moody’s scale, A by Standard & Poor’s scale and A+ by Fitch scale.The counterparts of RSE, however, are mainly represented by those who provide contributions to theactivities of national and international research (CCSE and the European Commission), which suggest thatthe risk of non-payment of the sums due is low.The excess liquidity of the Group companies are allocated with counterparties with elevated standing creditand whose solvency is constantly monitored.

Note 5

If revenues received from distributors and the sale of electricity on the market outweigh the costs covered by the tariff component, GSEpays the excess to the CCSE, in the case where the costs exceed the revenues, the Equalization Fund shall pay the difference to GSE inthe limits of the availability of the A3 account.


Price riskThe CIP6 purchase prices by GSE are related to the price of oil and its derivatives expressed in US dollars. Thecompany does not make shells on the volatility of the purchase prices and exchange rates, therefore anychanges, positive or negative, are reflected directly on the economic deficit to be covered by the A3 component.With reference to the sale of the energy put in by AU, the application of the legislation relating to the companyinvolves the realization of the economic balance of the related income and expenses, so any fluctuations inthe purchase price of energy is reversed entirely on the sale price of the same.

Information risk The activity of the Group is also developed through the use of complex computer systems. The Group istherefore exposed to possible risk of interruption caused by a malfunction of the systems. In order to limitthis risk, companies are equipped with specific procedures of disaster recovery and back up data to allowthe operation and ensure the level of service even in critical situations.

Litigation riskGSE is responsible for any disputes concerning the activities of transmission and dispatching until the disposalof the related business on October 31, 2005 in view of the provisions of the Prime Ministerial Decree May 11,2004 which excluded from the transfer to Terna any charges and the related appropriations to cover, nature ofliquidated damages and penalties for activities held prior to the effective date of the transfer. In addition, manydisputes concern the holders of PV systems and are largely attributed to non-recognition or at the lower of theincentive fee and the forfeiture of the same, following the verification of the requirements established by lawand site inspections. Finally, evaluations are pending regarding the dismissal and/or revocation of IAFRqualifications and those relating to cogeneration plants, in addition to disputes that arose following the issueof MD May 5, 2011 and MD July 6, 2012.For disclosure of details, please refer to the Explanatory Notes, paragraphs “Provisions for risks and charges”and “Commitments and contingencies off the Balance Sheet”.

Related parties

The Group companies have multiple relationships with companies controlled directly or indirectly by theMinistry of Economy and Finance. The main transactions are entertained with the major players in theenergy sector such as the Italian company Enel, Eni Group companies and Terna. There have beensignificant reports, detailed in the budget by specific items in the credit and debt on the Balance Sheet,with the Electricity Equalization Fund in the energy sector, a public non-economic entity, as a technicalbody of the accounting of energy systems, operates in the electricity and gas industry with expertise inthe areas of collection of the tariff components (including A3 to replenish the account for new plantsfrom renewable and assimilated sources, whose main target is GSE) and provision of grants to ensure,including by means of equalization, the operation of the systems in terms of competition, safety andreliability. Moreover, there is currently a convention with the Rete Ferroviaria Italiana - RFI S.p.A. (Ferroviedello Stato Group) under which GSE purchases, on behalf of the same, electricity in the MGP. Alltransactions with related parties are carried at market prices under the conditions that would apply toindependent counterparties.


Information pursuant to the Civil Code

With reference to the information referred to in paragraph 3, numbers 3 and 4, article 2428 of the Civil Code,it is noted that the companies of the Group do not have and have not purchased or sold during the year,either through trust companies or nominees, its own shares. The table below shows the locations in whichthe Group carries out its activities.

Pursuant to article 2497 bis of the Civil Code, we report that the company GSE is controlled by the Ministryof Economy and Finance, which holds the entire share capital. Under Legislative Decree 79/99 rights shallbe exercised in consultation between the MEF and the MiSE, the strategic and operational guidelines ofGSE are defined by the MiSE.The company, pursuant to the last paragraph of article 2364 of the Civil Code and as required by article11.2 of the bylaws, taking into account the time needed for the preparation of the final data of the subsidiariesand therefore the need to wait for approval of the financial statements of the same for the preparation ofconsolidated financial statements, convene the Annual General Meeting to approve the financial statementsfor the longer term within the statutory specified, or within 180 days from year end. It should be noted, finally, pursuant to article 2427 of the Civil Code, the non-existence of the following cases:• trade receivables and payables due after five years;• finance costs allocated during the year to the values entered in the Balance Sheet;• income from investments other than dividends;• issue of bonus shares, convertible bonds, similar securities or other financial instruments;• loans made by shareholders;• finance leases.

GSE AU GME RSE

Headquarter Viale Maresciallo Pilsudski, n. 92 Via Guidubaldo del Monte, Largo Giuseppe Tartini, Via Rubattino, n. 54Rome n. 45 - Rome n. 3/4 - Rome Milan

Operating Viale Tiziano, n. 25 Via Palmiano, n. 101 Via Nino Bixio, n. 39locations Rome Rome Piacenza

Viale Maresciallo Pilsudski, n.124 Località “Le Mose”Rome Piacenza

Viale Maresciallo Pilsudski, n.120 Via Pastrengo, n. 9Rome Seriate (BG)

Via Giacomo Matteotti, n. 105 - Brugherio (MI)


Group economic and financial results

The results of operations of the Group for the year 2012 is summarized in the table below, for a betterunderstanding of the economic and financial trend, through appropriate reclassifications, it is shownseparately at cost through energy items at Group level compared to those in the margin. The latter areformed by all those revenues intended to cover the costs of managing both the return on invested capitaland for which there is a surplus over costs.

CONSOLIDATED INCOME STATEMENT RESTATED

Thousands of euro 2011 2012 Change

Pass-through itemsRevenues Revenues from electricity sales and services 22,294,588 24,252,946 1,958,358CCSE Contributions 7,260,737 9,792,782 2,532,045Revenues from the sale of Green Certificates 341,766 297,745 (44,021)Revenues from Virtual Storage gas - 82,158 82,158Net contingent assets 166,502 209,953 43,451Total 30,063,593 34,635,584 4,571,991

CostsCosts of the purchase of energy and ancillary charges 24,378,298 26,792,950 2,414,652Costs of the purchase of Green Certificates 1,699,239 1,711,913 12,674Contributions for photovoltaic incentives 3,931,020 6,024,983 2,093,963Costs for Virtual Storage gas 55,036 105,738 50,702Total 30,063,593 34,635,584 4,571,991

Balance of pass-through items - - -

Marginal items Revenues Revenues from sales and services 60,529 68,683 8,154Contributions from CCSE 79,144 87,344 8,200Other revenues and income 12,904 14,533 1,629Total 152,577 170,560 17,983

Costs Cost of labor 70,207 78,718 8,511Other operating costs 57,022 62,275 5,253Contingent liabilities 807 732 (75)Total 128,036 141,725 13,689

EBITDA 24,541 28,835 4,294

Depreciation and impairment 9,893 11,805 1,912Provisions for risks and charges 7,739 6,231 (1,508)

Operating income 6,909 10,799 3,890

Financial income (expense) 13,064 12,144 (920)

Income before extraordinary items and taxes 19,973 22,943 2,970

Net extraordinary income (expense) (5,025) 378 5,403

Profit before tax 14,948 23,321 8,373

Taxes (5,764) (6,324) (560)

Profit for the period 9,184 16,997 7,813


Pass-through itemsTotal revenues amounted to 34,635,584 thousand euro, presenting an increase of 4,571,991 thousand euro,essentially due to the contribution of the Equalization Fund (2,532,045 thousand euro) and revenues fromelectricity sales (1,958,358 thousand euro).The amount of revenue from the sale of energy, amounting to 24,252,946 thousand euro mainly refers to:• sales to electric workers performed on the electricity market and ancillary revenues (16,402,744

thousand euro);• electricity sold to merchants of the enhanced protection service (7,156,703 thousand euro);• to a lesser extent, an inherent component of the Parent Company sales of energy and imbalances (693,499

thousand euro).The increase in contributions from CCSE was due to higher net charges relating to consignments of energyand those resulting from contributions to the promotion of photovoltaics, which are covering the A3component. A portion of the increase (23,580 thousand euro) is due to the contributions to the activities ofthe Parent Company as part of the Virtual Storage gas. Net contingent assets (209,953 thousand euro) include items related to the CIP6 energy (108,496 thousandeuro) and the imbalance (97,696 thousand euro), in addition to adjustments of estimates of GSE comparedto last year’s appropriations relating to contributions made to encourage the PV (52,433 thousand euro),partially offset by contingent liabilities related to Net Metering (26,378 thousand euro) and DedicatedWithdrawal (18,638 thousand euro).Similarly, the costs to be incurred amounted to 34,635,584 thousand euro, an increase of 4,571,991 thousandeuro compared to the previous year due to higher costs related to the encouragement of photovoltaic(2,093,963 thousand euro) and the purchase of energy (2,414,652 thousand euro). A part of the cost of a significant portion of energy is represented by those for energy purchased by GMEin the Day-Ahead Market and Intraday Market (18,973,900 thousand euro), which presents a significantincrease over the previous year (3,084,408 thousand euro) due to higher prices charged on the stockexchange in 2012. Also the same figure includes:• costs relating to the purchase of CIP6 energy for 3,772,916 thousand euro, posing a slight increase but

broadly in line with last year (19,872 thousand euro);• costs for the purchase of electricity generated by AU for which 1,140,539 thousand euro were down

compared to 2011 (1,675,384 thousand euro);• costs covered by the scheme of Dedicated Withdrawal and Net Metering for 3,320,121 thousand euro,

which underwent an increase (999,725 thousand euro).

Marginal itemsRevenues amounted to 170,560 thousand euro and consist of revenues from sales and services for 68,683thousand euro, from 87,344 thousand euro for contributions, and other revenues and income of 14,533thousand euro. Revenues from sales and services in turn are made up mainly:• by revenues from brokerage of energy of GME (35,351 thousand euro);• by revenues of AU from the sale of energy to exhibitors protection service (12,692 thousand euro);• by revenues to cover the costs of GSE for the management of the Dedicated Withdrawal and the Net

Metering (16,690 thousand euro), revenues from fee on foreign CO-FER and GO (1,125 thousand euro) andrevenues from RECS, qualifications and investigation IAFR and Fifth Energy Account (1,782 thousand euro);

• and finally, from the proceeds of RSE for technical-scientific (1,043 thousand euro).The contributions from CCSE essentially relate to the amounts paid to cover the operating costs of GSErecognized on the basis of Resolution 171/2013/R/eel (37,617 thousand euro), revenues from the ATM andthe Integrated Information System of AU (11,330 thousand euro) and operating grants disbursed to RSE forresearch activities (34,332 thousand euro).Other revenues and income, which amounts to 14,533 thousand euro, is an increase of 1,629 thousand eurocompared to last year. This item is composed mainly of GSE items attributable to contingent assets (6,324thousand euro) due to the release of the excess of existing funds to prior year related to the Net Metering(1,534 thousand euro) and the reversal of costs for seconded personnel by the Equalization Fund (2,839thousand euro). Also included in this item are revenues of RSE performance for scientific and technicalresearch (3,196 thousand euro), of which a significant portion (2,069 thousand euro) consists of contributionsthat the company receives from the European Commission.The cost of labor, equal to 78,718 thousand euro, increased by 8,511 thousand euro in the first place as aresult of the growth in the Group: at December 31, resources in force totaled 1,186 units compared to 1,076of the previous year. Part of the increase is also attributable to the increase in remuneration policies applied.Other operating expenses amounted to 62,275 thousand euro, up 5,253 thousand euro due to the moreintense operations related to the development of the Group’s activities.


The gross operating margin, which amounted to 28,835 thousand euro, resulted in an increase over theprevious year of 4,294 thousand euro. This variation is due to the increase in gross operating margins of allthe companies of the Group.The entry for depreciation and amortization is up due to the entry into operation of new investments.Provisions regarding the adequacy of funds made by GME (5,949 thousand euro) mainly due to the provisionof extra income relative to 2012 due to the PCE in relation to the provisions contained in AEEG Resolution558/2012/R/eel, inclusive of revaluation of previous provisions. The operating result due to depreciation andprovisions amounted to 10,799 thousand euro, with an increase compared to 2011 of 3,890 thousand euro.The financial management of the Group has net financial income amounting to 12,144 thousand euro, aslight decrease compared to 2011 (920 thousand euro) as a result of the reduction in income from interestincome earned on cash and cash equivalents of the controller (803 thousand euro).The extraordinary highlights, net (378 thousand euro), consisting primarily of proceeds related to the IRESrefund on IRAP deductible paid in prior years (1,705 thousand euro) as required by the provisions of DecreeLaw 201/11, which was partially offset by charges for the liquidation of additional IRES taxes of previousyears (1,112 thousand euro) of the subsidiary AU, and other minor charges.The income tax expense for the year amounted to 6,324 thousand euro, 7,557 thousand euro includescurrent tax, deferred tax liabilities and deferred tax assets of 1,373 thousand euro and deferred tax assetsamounting to 140 thousand euro.The tax rate of 2012 was 27% compared to that of 2011, amounting to 39%; the reduction is generalized inall Group companies, with particular emphasis in GME due to higher tax recoveries present in 2011.The operating result of the Group amounted to 16,997 thousand euro.

The Balance Sheet of the Group existing at December 31, 2012 is summarized below.

RESTATED CONSOLIDATED BALANCE SHEET

Thousands of euro 12.31.2011 12.31.2012 Change

Net fixed assets 109,433 113,413 3,980

Intangible assets 12,327 16,824 4,497Tangible assets 73,573 72,702 (871)

Financial fixed assetsOther securities 22,034 22,034 -Other receivables 1,499 1,853 354

Net working capital 113,819 174,850 61,031

Loans and advances to clients 5,172,985 5,039,663 (133,322)Net credit (debt) with CCSE 1,958,144 1,612,100 (346,044)Prepaid expenses and other receivables 25,422 16,423 (8,999)Inventories 333 543 210Dues to suppliers (6,765,351) (6,202,235) 563,116Accrued expenses and other payables (265,958) (278,045) (12,087)Dues to tax Authorities for VAT and other taxes (11,756) (13,599) (1,843)

Gross capital 223,252 288,263 65,011

Money (62,997) (54,969) 8,028

Net Invested Capital 160,255 233,294 73,039

Shareholders’ Equity 158,461 163,460 4,999

Net financial debt (cash) 1,794 69,834 68,040

Mid-long term dues to banks 20,533 19,067 (1,466)Short term dues to banks 194,713 332,060 137,347Cash and cash equivalents (213,452) (281,293) (67,841)

Cover 160,255 233,294 73,039


Intangible assets consist primarily of licenses software, from management systems for core tasks and thestructural adjustment operations to leased property, increased by 4,497 thousand euro as a result ofinvestment made during the year amounting to 10,320 thousand euro net of accumulated depreciation (5,601thousand euro), of impairment losses (221 thousand euro) and other minor changes (1 thousand euro). Tangible assets, primarily related to buildings which house the offices of all the companies of the Group, aswell as systems and infrastructure, underwent a slight decrease (871 thousand euro) for the combined effectof new investments (5,077 thousand euro), depreciation and amortization for the year (5,918 thousand euro),depreciation (28 thousand euro) and other changes in small claims (2 thousand euro).The investments mainly relate to renovation work carried out on the buildings owned by the Parent Company,and the purchase of furniture and computer equipment by GME and AU.Financial fixed assets are mainly related to the investment made by the subsidiary GME (22,034 thousandeuro) in a financial instrument with a ten-year capital guaranteed at maturity and carried at cost, includingany directly attributable expenses. Loans granted to employees are also included in this.Net working capital is positive, an increase over the previous year of 61,031 thousand euro, the change ismainly attributable to the reduction in trade receivables (133,322 thousand euro) and from the ElectricityEqualization Fund (346,044 thousand euro), offset by a similar reduction in accounts payable (563,116thousand euro).Other provisions are reduced (8,028 thousand euro) as a result of releases made by the Parent Company inrespect of positions prudently set aside in the past, but turned out to be no longer necessary, and of usesfor employee severance indemnities partially offset by provisions made by the subsidiaries.With regard to the media coverage, it revealed both the decrease in Shareholders’ Equity, as a result of netprofit, net of dividends paid to the shareholder of GSE, and the presence of an increase in net financial debtcompared to 2011.

The Cash Flow Statement at December 31, 2012 shows a negative financial position of 69,834 thousandeuro, represented in the following table.

With reference to the situation at December 31, 2012, it can be observed that the availability of cash flow ismainly driven by the change in net working capital (61,031 thousand euro).

CONSOLIDATED CASH FLOW STATEMENT

Thousands of euro 12.31.2011 12.31.2012

Starting net financial availability 398,794 (1,794)

Cash flow from (for) operating activitiesProfit for the year 9,184 16,997Depreciation and amortization 9,773 11,519Increase (Decrease) in provisions 2,432 (8,028)Total 21,389 20,488

Change in net working capital (391,131) (61,031)

Operating cash flow (369,742) (40,543)

Cash flow from (used in) investing activitiesDisposals (Investments) in intangible assets (5,545) (10,320)Disposals (Investments) in tangible assets (13,234) (5,077)Disposals (Investments) in financial assets (138) (354)Impairment losses and other changes in fixed assets 71 254Total (18,708) (15,497)

Cash flow from (used in) financing activitiesPayment of dividends (12,000) (12,000)Total (12,000) (12,000)

Cash flow for the period (400,588) (68,040)

Final net financial availability (1,794) (69,834)


Significant events after the closure of the fiscal year

The following is a summary of the significant events that occurred after the closure of the fiscal year foreach company.

GSEUpdate of tariff components - Resolution 581/2012/R/com

Resolution 581/2012/R/com updated the tariff components of the general system charges both in theelectricity sector and in the gas sector for the first quarter of 2013. In particular, the Authority, consistentwith the rate update for the fourth quarter of 2012, considered appropriate, also for the first quarter of2013, to provide for a gradual increase in the rate A3 component and programmed to compensate for thedeficit accumulated mainly in the years 2009-2011. However, the expected quarterly increases of the A3component will undergo a change different from that stated above due to the possible reduction of theincentive systems intended for CIP6/92 and assessments that provide lower costs for the DedicatedWithdrawal of energy. The increase in the A3 component will be roughly equivalent to a higher annualrevenue of about 600 million euro. In regard to gas, the resolution upwardly updates the components REand RET in order to start conservative fundraising to cover the future costs of incentives arising from theso-called Thermal Account Decree.

Fees to cover the cost of operations

Resolution 171/2013/R/eel of April 24, 2013 has defined, for the year 2012, the fee to cover the costsrecognized for the operation of GSE at 37.6 million euro (33 million euro in 2011) considering itappropriate, in line with the methodology adopted for the previous years, the value of the fee to coverthe operating costs of GSE for the year 2012 is such as to ensure a remuneration before taxes of 8.01%of Net Assets, less the value of investments in the subsidiaries of the same GSE and the value ofdividends paid during the year. In this remuneration the value of dividends paid by subsidiaries duringthe year must be added.It should be noted, finally, that the same Resolution defined the fee to cover the operating costs of GSEfor the year 2013, down payment and subject to adjustment, at 8.7 million euro, including the differencebetween the fee to cover the operating costs for 2012 and the amount paid as advance payment for thesame year.

AUFees to cover the cost of operations

Resolution 94/2013/R/eel quantified in 12.7 million euro the amount, recognized outright, to cover theoperating costs of AU for the year 2012. The same Resolution also quantified at 14 million euro the amountrecognized as an advance payment, to cover the operating costs of AU today expected for 2013. Thecompany will also have to put aside to cover the costs of 2013 operation, the difference between the pricepaid as an interim dividend in 2012 (equal to 13.9 million euro by Resolution 92/2012/R/eel) and theconsideration paid outright for the same year.


GMEMarkets and gas platforms

The MiSE with Decree March 6, 2013, after consultation with the Authority and the relevant parliamentarycommittees, approved the regulation of the natural gas market, which took over both the operating rules ofthe MT-GAS and those already in force relating to the M-GAS. With regard to the management of failure onthe part of the operators or by the institution granting the surety, the discipline in question provides,according to the regulatory framework established by the Authority, a system according to which GMEcontributes to the debts using the order:• resources accumulated through the payment by operators of a contribution to a fund set up at the CCSE. The

amount of the contribution is defined by the Authority on the proposal of GME and applied to MWh traded;• own means, for a maximum amount set each year by the MiSE proposal of GME;• the mutual mechanism defined by the Authority.

Petroleum products platform

Legislative Decree 249/12, in order to promote competition in the storage capacity of petroleum products,entrusted GME to the constitution, organization and management of a market platform for the logistics ofpetroleum oils and minerals. The Decree also provides for the assignment of GME of the constitution,organization and management of an additional platform for the wholesale market that facilitates the matchingof demand and supply of liquid petroleum products for vehicles.

RSEOn January 30, 2013 the Official Gazette on MD November 9, 2012 was published, in which the three-yearplan of the National Electric System Research 2012-2014 and the Annual Operating Plan 2012 wasapproved. The above-mentioned Decree provides for the conclusion of a three-year program agreementwith RSE and, for the 2012 plan, gives the company an amount of 32 million euro. The Authority, inResolution 19/2013/rds, proposed the adoption to the MiSE, as part of planning agreements having theactivities of research systems as their objective as well as new ways of reporting and criteria for thedefinition of eligible expenditure.

Outlook

GSEThe discipline of the support schemes for electricity produced from renewable sources and energy efficiencywas concerned, in 2012, with important changes in the law that will apply mainly starting in 2013. With therecent ministerial decrees, in fact, a number of measures aimed at the reorganization and strengthening ofthe system of incentives, adopting instruments to promote efficiency, simplification and stability over time,have been introduced. The company in the coming years will therefore be affected not only by the processmanagement incentive that still exists but also the implementation and management of those recentlyintroduced, which have considerably expanded the scope of action. These phenomena may result in a consequent and natural increase in cost to the different tariff components,albeit in a less than proportional way in regards to the volumes managed, as a result of policies that makethe consolidated services more efficient. It is possible then to predict, compared to the year 2012, lessimpact on the A3 tariff component of contributions to cover the running costs of the company resulting fromthe presence of specific fees charged to producers.It should be noted, finally, that the Authority with Resolutions 140/2012/R/eel and 163/2013/R/com hasindicated its intention to introduce in the coming years the mechanisms of regulation of the remuneration ofa GSE type of incentive, such as to induce a gradual recovery efficiency.The following provides a brief overview of the main legal provisions that will affect the future performanceof company operations.


Incentives for energy from renewable non photovoltaic sources

The MiSE, in consultation with the MATT and the Ministry of Agriculture, Food and Forestry (“MiPAAF”)regulates, with MD July 6, 2012, the new ways of encouraging the production of electricity from plants usingrenewable energy sources other than solar, with a power not exceeding 1 kW, come into operation as ofJanuary 1, 20136. The new Decree also regulates the manner in which the plants already in operation willpass, as of 2016, by the mechanism of CV to the new incentive mechanisms. In summary, there are twodistinct incentive mechanisms: a feed-in tariff (“feed-in tariff “or” TFO “) for power plants up to 1 MW, andan incentive equal to the difference between the base and the incentive rate zonal time price of energy forpower plants greater than 1 MW. The annual cumulative cost for all types of incentive may not exceed thethreshold of 5.8 billion euro. Access to these incentives, alternative to mechanisms of Net Metering andDedicated Withdrawal, could be done through enrollment in specific registers or computer auctions held byGSE as a function of the power plant. The call relative to the first record and the first auction was posted onSeptember 8, 2012. From 2013 onwards, GSE will publish, by March 31 of each year and thirty days beforethe opening of the registers and the auction, the notices bearing the words, the criteria and procedures forthe submission of applications for registration, and an indication of power quotas to be allocated.The Decree also expects the payment by producers of two fees: one to cover the costs of investigation andthe other, starting on January 1, 2013, to cover the expenses of management posts in GSE. Suchcompensation shall amount to 0.05 euro/cent per kWh of energy sales.

Withdrawal of electric power systems for accessing the incentive mechanisms through feed-in fixed ratesThe Authority, in Resolution 343/2012/R/efr, defined the modalities and terms for the withdrawal from GSEelectricity fed into the grid as part of the plants that access incentive schemes using fixed feed-in rates.The provisions of the Resolution apply to:• plants fed by renewable sources other than the photovoltaic power up to 1 MW, which fall within the scope

of application of MD July 6, 2012 and will come into operation from January 1, 2013;• the photovoltaic power plants up to 1 MW, which fall within the scope of application of MD July 5, 2012

and will come into operation on August 27, 2012;• photovoltaic systems of any power, which fall within the scope of application of MD May 5, 2011 (Fourth

Energy Account), which will come into operation on January 1, 2013.The withdrawal of TFO energy includes the obligation to transfer GSE’s entire amount of electricity producedand fed into the network with the recognition rates provided by MD May 5, 2011, July 5 and 6, 2012 and theapplication of the imbalance, for installations falling within the scope of application of MD July 5 and 6,2012, calculated in accordance with the provisions of Resolution 280/07. The retreated electric energy issold by GSE to the market as a dispatching user. The resources required by GSE for the withdrawal of TFOenergy, supplementary earnings from the sale of the same in the market, are charged to the A3 tariffcomponent.

Energy efficiency certificates - White Certificates

White Certificates are securities that attest to the energy savings in end-use of energy. The mechanism ofWhite Certificates is based on the obligation for companies distributing gas and / or electricity to more than50,000 end customers to achieve a pre-established annual target for energy savings. The MiSE, in agreementwith the MATT, with MD December 28, 2012, laid the foundation for the consolidation of this mechanismforcing for the period 2013-2016, the distribution companies to carry out measures and interventions thatcan reduce energy consumption. The Decree and the subsequent Resolution 1/2013/R/efr lay down thepassage by GSE of the management of such a mechanism, therefore, from the date of forced entry, January3, 2013, they will be responsible for the evaluation and certification of energy savings achieved, as well asthe verification of the correct technical implementation/administration of projects. The Decree, finally, inaddition to providing operational support of ENEA and RSE, provides for the recognition by the CCSE ofthe costs incurred for such activities and, in general, for all management activities and administrativeprovisions and not covered by other sources of funding or are dependent of tariffs for electricity and gas.The Authority ultimately will define the procedures for coverage of these charges on the bill for the promotionof energy efficiency in end uses.

Note 6

To safeguard investments nearing completion, the Decree provides that the prior authorization systems with title July 11, 2012, the date ofentry into force of the Decree, which will come into operation by April 30, 2013, and only plants fueled by waste, referred to in article 8,paragraph 4, letter c) entering into operation no later than June 30, 2013, may require access to incentives with the terms and conditionsestablished by the same Ministerial Decree.


Ancillary charges

The Authority, in Resolutions 281/2012/R/efr and 493/2012/R/efr, introduced the revision of the dispatchingservice for the production units powered by renewable sources, and programmable devices. In particular,the Resolutions provide, as from January 1, 2013, the attribution of the imbalance and the equivalentresulting from participation in the GSE Intraday Market to producers who adhere to the system of DedicatedWithdrawal, to fixed feed-in tariff according to MD July 5 and 6, 2012, and not incentivized electricityproduced by plants that benefit from the feed-in rates fixed according to MD December 18, 2008 and May5, 2011. The principle behind this provision is to be found in the desire to prevent the imbalance paymentsfrom being burdening the A3 tariff component. In addition, it has been attributed to GSE the responsibilityof defining the fees to cover the services of forecasting, planning and marketing of energy for producersunder the Dedicated Withdrawal. Such consideration was approved by the Authority in Resolution493/2012/R/efr.

Incentives for the production of thermal energy from renewable energy and energy efficiency of small dimensions - Thermal AccountThe MiSE, in consultation with the MATT and MiPAAF, regulates, MD December 28, 2012, the support systemfor the production of thermal energy from renewable sources and for interventions to increase energyefficiency of small size. The Decree, in addition to identifying GSE as the implementing body of the newsupport mechanisms, sets a ceiling of cumulative annual expenditure of 200 million euro, due to the actionstaken or to be made by the government, and 700 million euro for interventions by private entities. GSE,following the verification of compliance with the eligibility requirements prescribed by the regulations, willprovide incentives, measured as a percentage of the investment or as an enhancement of the thermal energyproduced through equal annual installments with a duration of 2 or 5 years, depending on the type ofintervention. For the performance of its activities, GSE, through the conclusion of appropriate agreements,may request the support of the CTI and ENEA. In order to cover the activities of GSE and ENEA, finally, theDecree provides for the payment of a fee equal to 1% of the value of the grant, with a maximum of 150 euro.

Biofuels and transport

Law 81/06 introduced in Italy, in line with European directives, the obligation for suppliers of petrol and dieselto enter the country annually a minimum proportion of biofuels (4.5% for 2012) determined on the basis ofthe calorific energy contained in petrol and diesel sold in the previous year. Compliance with this obligationentitles to receive certificates of release for consumption of biofuels, freely exchangeable between the partiesrequired. Legislative Decree 28/11 and 55/11 contain the main provisions on the subject, setting annualtargets in terms of the use of biofuels and other renewable fuels in the transport sector. Law 134/12transferred, in effect as of January 1, 2013, operational skills of the management of these certificates fromMiPAAF to MiSE, that exercises them using GSE. The management costs are to be borne by the partiesresponsible and their extent and the method of payment to GSE will be determined by a special Decree, asprovided by Law 134/12.MD February 13 and 14, 2013, finally, have introduced some increases for certain types of biofuels and haveupdated the list of requirements.

Model of accounting separation

The Authority, in its Resolution 163/2013/R/com, has required GSE, starting in 2013, the preparation of theseparate annual accounts (unbundling) with the aim to define the edge of the business activities whose costburden on users of the electricity sector via the A3 component and to avoid cross-subsidies between them.The Resolution defines the principles and rules of operation of the model, providing, in order to allow anadjustment of systems of GSE, a transitional period for the reporting of the first exercises. GSE, in the courseof 2012, started a specific project to transpose the requirements of the Authority.


AUIn the course of 2013, AU will continue actions aimed at achieving the objectives of covering the demand ofthe market’s protection equal to 73.9 TWh. The second term of the activities of the branch office to theconsumer of energy will also be launched. The Project 2013-2015 and the new rules approved by the Authorityhave greatly expanded and strengthened the company role. The ATM, in fact, will expand the services offeredto the management of complaints regarding prosumer (producer and consumer), for the fields of competenceof the Authority, and the conciliation procedures. Legislative Decree 249/12, finally attributed to the company,as of 2013, the functions and activities of the Central Italian Storage Body, the new body for the storage ofoil stock security of our country. Working with market criteria and not-for-profit organizations, the OCSIT hasthe task of holding specific stocks of petroleum products within the Italian territory, in addition to structure aservice of storage and transport of oil stock security and commercial applications.

GMEIn the course of 2013, GME will be engaged in the process of integration of the Italian electricity market withthe major European markets, in harmony with the development of projects Price Coupling of Regions andItalian Borders Working Table. The company also will proceed to develop the activities necessary toimplement the Electricity Market of natural gas, the launch of which, in accordance with MiSE Decree March6, 2013, will be determined on the proposal of GME with subsequent Ministerial Decree.GME, finally, taking into account the provisions of Legislative Decree 249/12, shall, as a result of thenecessary comparisons with institutions and associations of reference, implement the system for thecollection of data on the storage capacity of mineral oils, as well as carry out the preparatory activities forthe implementation of the logistics market of these oils and oil wholesale market of oil products for vehicles.

RSEIn the course of 2013, as part of projects funded by the European Commission, the activities of the projectswill continue and are still active in the Seventh Framework Programme awarded in the period 2007-2011and those of the 12 new projects winning in 2012 will start. The disbursement of subsidies relating toresearch projects of the Annual Plan of Implementation in 2012 will bring in the first half of 2013 a markedimprovement of the financial situation of the company. Finally, the expected reduction in the time taken toprovide contributions to the Annual Plan of Implementation in 2013 will bring, in the course of 2013, a furthereconomic and financial benefit to the company.

Consolidated Financial Statements GSE Group

87GSE Group Consolidated Financial Statements


CONSOLIDATED BALANCE SHEET ASSETS

Thousands of euro Partial Total Partial Total ChangeDecember 31, 2011 December 31, 2012

A) Unpaid receivables from shareholders - - -B) Fixed assets

I. Intangible assets3) Industrial patents and rights to use

intellectual property 6,221 9,869 3,6484) Concessions, licenses, trademarks

and similar rights 21 19 (2)6) Assets in progress 1,461 2,192 7317) Other 4,624 4,744 120

12,327 16,824 4,497

II. Property, plant and equipment1) Land and buildings 52,169 50,757 (1,412)2) Plants and machinery 8,924 8,782 (142)3) Industrial and commercial equipment 1,673 1,588 (85)4) Other assets 10,780 11,575 7955) Assets in progress 27 - (27)

73,573 72,702 (871)

III. Financial assets2) Credits Due Due

within within12 months 12 months

d) To others 40 1,499 292 1,853 3543) Other securities 22,034 22,034 -

23,533 23,887 354

Total Fixed Assets 109,433 113,413 3,980

C) Current assetsI. Inventory 333 543 210II. Credits Due Due

in over in over12 months 12 months

1) To clients 95 5,172,985 5,039,663 (133,322)4 bis) Tax credits 10,000 26,372 10,903 23,721 (2,651)4 ter) Deferred tax assets 577 3,414 3,214 (200)5) To others 225 20,321 11,823 (8,498)6) To Electricity

Equalization Fund 1,965,337 1,614,952 (350,385)7,188,429 6,693,373 (495,056)

III. Financial assets not held as fixed assets - - -

IV. Cash and cash equivalents1) Bank and postal deposits 213,418 281,254 67,8363) Cash and cash equivalents 34 39 5

213,452 281,293 67,841

Total Current Assets 7,402,214 6,975,209 (427,005)

D) Accrued expenses and deferred incomeAccrued income 30 38 8Prepaid assets 75 1,657 1,348 (309)Total accrued expenses and deferred income 1,687 1,386 (301)

Total Assets 7,513,334 7,090,008 (423,326)

89GSE Group Consolidated Financial Statements

CONSOLIDATED BALANCE SHEET LIABILITIES

Thousands of euro Partial Total Partial Total ChangeDecember 31, 2011 December 31, 2012

A) Shareholders’ EquityI. Capital 26,000 26,000 -IV. Legal reserve 5,200 5,200 -VII. Other reserves

1) Non-distributable reserve from revaluation of investments - - -

2) Consolidation reserve 80 80 -VIII.Retained earnings 117,997 115,183 (2,814)IX. Group profit 9,184 16,997 7,813

Consolidated Group Equity 158,461 163,460 4,999

B) Provisions for risks and charges1) For pension

and similar obligations 873 739 (134)2) For taxes, including deferred 5,431 3,770 (1,661)3) Other 41,882 36,518 (5,364)

Total Provisions for Risks and Charges 48,186 41,027 (7,159)

C) Indemnity severance pay 14,811 13,942 (869)

D) Debts Due Duein over in over

12 months 12 months

4) Bank duesMedium and long term funding 20,533 20,533 19,067 19,067 (1,466)

Short term funding 194,713 332,060 137,3476) Advances 14,783 4,807 (9,976)7) Dues to suppliers 6,765,351 6,202,235 (563,116)12) Dues to tax authorities 38,128 37,320 (808)13) Dues to Social Security

institutions and Social Security 3,724 4,214 49014) Other dues 196,787 228,506 31,71915) Dues to the Electricity

Equalization Fund 7,193 2,852 (4,341)Total Dues 7,241,212 6,831,061 (410,151)

E) Accrued expenses and deferred income

Accrued expenses 21 27 6Deferred income 1,530 50,643 40,491 (10,152)Total accrued expenses and deferred income 50,664 40,518 (10,146)

Total Liabilities 7,354,873 6,926,548 (428,325)

Total Equity and Liabilities 7,513,334 7,090,008 (423,326)

MemorandumGuarantees received 4,377,081 5,321,935 944,854Guarantees loaned 2,957 4,718 1,761Current value of contracts for differences and of Emissions Trading 39,801 (21,186) (60,987)Other Memorandum accounts 107,014,284 132,812,356 25,798,072

Total Memorandum accounts 111,434,123 138,117,823 26,683,700


CONSOLIDATED INCOME STATEMENT

Thousands of euro Partial Total Partial Total ChangeFinancial year 2011 Financial year 2012

A) Production values1) Revenues from sales and services 30,028,404 34,563,818 4,535,4143) Change in work in progress (51) 211 2624) Increases in fixed assets for internal works 16 114 985) Other revenues and income 409,182 522,750 113,568

Total Production values 30,437,551 35,086,893 4,649,342

B) Production costs6) Raw materials, consumables and goods 24,794,885 26,771,283 1,976,3987) Services 1,129,439 1,225,078 95,6398) Use of third party assets

of unconsolidated subsidiaries 58,445 6,147 (52,298)9) Personnel:

a) Wages and salaries 49,943 56,477 6,534b) Social security contributions 14,685 16,197 1,512c) Indemnities 3,736 4,128 392d) Provision for pensions and similar obligations 262 36 (226)e) Other costs 1,581 1,880 299

70,207 78,718 8,511

10) Depreciation and amortizationa) Amortization of intangible assets 4,641 5,601 960b) Depreciation of tangible fixed assets 5,133 5,918 785c) Other write-downs of fixed assets 58 248 190d) Write-downs of receivables included

in current assets 62 38 (24)9,894 11,805 1,911

12) Provisions for risks 7,739 6,231 (1,508)14) Other operating expenses 4,355,667 6,970,648 2,614,981

Total Production costs 30,426,276 35,069,910 4,643,634

Difference between Production values and costs (A-B) 11,275 16,983 5,708

C) Financial income and expenses16) Other financial income:

a) From long-term receivables 15 16 1b) From securities held as fixed assets

other than equity investments 306 306 -d) Other income:

other 14,897 13,281 (1,616)15,218 13,603 (1,615)

17) Interest and other financial expenses:other 6,520 7,644 1,124

17 bis) Gains and losses on exchange - (1) (1)6,520 7,643 1,123

Total income and financial expenses 8,698 5,960 (2,738)

D) Impairment of financial activitiesE) Extraordinary income and expenses

20) Income:various 53 1,690 1,637

53 1,690 1,637

21) Expenses:various 5,078 1,312 (3,766)

5,078 1,312 (3,766)

Total extraordinary income and expenses (5,025) 378 5,403

Profit before tax (A-B+C+D+E) 14,948 23,321 8,373

22) Current and deferred income taxes (5,764) (6,324) (560)

23) Group profit 9,184 16,997 7,813

93GSE Group Notes to the Consolidated Financial Statements

Notes to the Consolidated Financial StatementsGSE Group


Structure and content of the Financial Statements

The date of the consolidated financial statements, December 31, 2012, is for the Parent Company GSE. Allcompanies included in the consolidation have their financial fiscal year coinciding with the calendar fiscalyear. The financial statements used for the preparation of the consolidated financial statements are thoseprepared by the Board of Directors for the Shareholders’ Meetings, adjusted, where necessary, to align theaccounting policies adopted by the Group. The reconciliation between Shareholders’ Equity and theoperating result, as inferred from the financial statements of GSE, and the same values resulting from theconsolidation of the same date, is presented in the note to the consolidated equity.All amounts are expressed in thousands of euro.

Scope of consolidation The scope of consolidation includes the Parent Company and then the subsidiaries AU, GME and RSE of whichit owns the entire share capital and over which it exercises control through the totality of the voting rights.

Criteria and procedures for consolidationSubsidiaries are consolidated using the integral method. The most significant consolidation principles applied are as follows:• the value of the investment in consolidated subsidiaries is eliminated against the related Shareholders’

Equity of subsidiaries according to the integral method;• the debt and credit, income and expenses arising from transactions between Group companies are

eliminated. Any gains or losses arising from transactions between consolidated companies that are notcarried out by transactions with third parties are eliminated;

• dividends distributed between Group companies are eliminated from the Income Statement andreallocated to Shareholders’ Equity as retained earnings.

DESIGNATION

Thousands of euro Activity Headquarter Share % Share Capital Ownership

Acquirente Unico S.p.A. Electricity Sector Rome 7,500 100Gestore dei Mercati Energetici S.p.A. Electricity Sector Rome 7,500 100Ricerca sul Sistema Energetico - RSE S.p.A. System Research Milan 1,100 100


Evaluation criteria

For the preparation of the consolidated financial statements at December 31, 2012, the evaluation criteriaset out in article 2426 of the Civil Code was adopted, homogeneous with respect to the previous fiscal year,supplemented by the accounting standards prepared by the National Board of Certified Public Accountants,as well as modified by the Italian Accounting Board (“OIC”) in relation to the reform of company law and thedocuments issued by the OIC. The principles and criteria of significant accounting are illustrated below.

Intangible assetsIntangible assets are stated at cost of acquisition or production cost, including any directly attributable transactioncosts. The cost as defined above is written down in the event of impairment losses and restored (reduced by therelated amortization) to the absence of the assumptions underlying these assessments. Depreciation is calculatedon a straight-line basis and is determined based on the expected economic utility.The costs for the use of intellectual property rights are amortized over a period of the estimated useful life ofthree fiscal years.The marks refer to the costs incurred for their acquisition and are amortized over a period of 10 fiscal years.The voice of leasehold improvements includes costs incurred on property not owned by GSE, which are amortizedbetween the useful life of the costs incurred and the residual of the lease, taking into account any renewal period.

Tangible assetsTangible fixed assets are stated as the cost of acquisition or production cost, also including directlyattributable costs.Depreciation is calculated on the basis of depreciation rates reflecting the remaining useful life of the assetsthemselves. The cost, as defined above, is written down in the event of impairment losses and restored (reduced by therelated depreciation) if they are lower than the assumptions of the assessment.The main technical and economic depreciation rates are listed below.

The costs of ordinary maintenance of natural occurrences, as they are not amending the consistency or thepotential of fixed assets, are charged to the Income Statement for the fiscal year in which they are incurred,the maintenance costs, however, are attributed to the nature of the related assets and depreciated over theremaining useful life of the asset.

Financial assetsFinancial assets include loans to employees recorded at their nominal remaining value. This item includes,in addition, the bond signed by the company GME recorded at cost, including any directly attributableexpenses.

TECHNICAL AND ECONOMIC RATES

% 12.31.2012

Buildings 2.5Industrial and commercial equipment 6/10Workstations 20


Receivables and payablesReceivables are stated at their estimated realizable value and classified as financial fixed assets or currentassets in relation to their nature and purpose. The above values are the difference between the nominal values of trade receivables and the allowance fordoubtful accounts directly reducing the value of the corresponding asset item.Payables are stated at their nominal value, those for current taxes are recorded at the rates in force, appliedto a realistic estimate of taxable income. If taxes payable are less than tax credits, advances paid and taxeswithheld, the difference is a credit and is recorded in the Balance Sheet.

Cash and cash equivalentsCash and cash equivalents are stated at their nominal value.

Prepayments and accrued incomeInclude portions of revenues and expenses relating to several fiscal years depending on the principle ofaccruals.

Provisions for risks and chargesProvisions for risks and charges include costs and charges of a definite nature, whose existence is certainor probable, of which however, at the end of the financial fiscal year, have an undetermined amount or dateof occurrence.

Pensions and similar obligations

The indemnities in lieu of notice to the staff on duty that are entitled, pursuant to the Collective BargainingAgreement of labor and union agreements.

Other provisions for risks and charges

The appropriations of these funds in the financial statements reflect the best possible estimate – based onavailable information – in order to cover losses or liabilities of a specific nature, certain or probable, whichat the end have an undetermined amount or date of occurrence.

Pension premium for severance indemnitiesIt is allocated throughout the period of employment of employees in compliance with applicable laws andlabor contracts in force and reflects the accrued liability in respect to all employees at the Balance Sheetdate, net of advances made to them under the law, and the proportion allocated to pension funds. Followingthe entry into Law 296 of December 27, 2006 (2007 Finance Act), the TFR also reduced the sharestransferred to the Treasury Fund set up by INPS.

Memorandum accountsThe evaluation criteria and the contents of these accounts comply with OIC 22.


Capital grantsThe contributions and credits are entered in the accounts at the time when there is a formal authorizationfor disbursement by the granting body suspended in the Income Statement, through deferred income,pending the fiscal year’s passage of the asset to which they relate. At the time of this transition, they arerecorded as a deduction of the value of the same and are credited to the Income Statement due to theamortization of the asset.Receivables are stated at their estimated realizable value and classified as current assets in relation to theirnature and purpose.

Revenues and costsThey are recognized in accordance with the principle of prudence and accrual and are recognized net ofrebates and discounts.Revenues from other services and supplies of goods are recognized when the service is provided or at thetime of transfer of ownership of the assets.Revenues and expenses for the sale of electricity are integrated using estimates based on the applicationof the law, and of AEEG.In regard to the items of income and expense relating to the Green Certificates, it is reported that in February2013 the Italian Accounting Board specifically adjusted the matter with the issue of OIC 7. Therefore, inaccounting for amounts relating to this case, it is subject to the rules of this principle.

Hedging financial instrumentsIn order to manage the sale of energy, the subsidiary AU arranged derivative contracts to hedge the risk offluctuations in market prices. These contracts were entered into by carrying out the institutional structure ofthe company and in compliance with the rules established by specific Ministerial Decrees issued annually.The negative or positive price differentials are recorded on an accrual basis in the Income Statement,respectively, between the purchase costs and sales revenues.The price differentials, negative or positive, to hedge the risk of fluctuations in electricity prices are recordedon an accrual basis in the Income Statement between purchase costs and sales revenues. Pursuant to articles 2427 bis and 2428 of the Civil Code, relevant information relating to hedging contractsentered into by the Group companies have been reported in specific paragraphs of the Explanatory Notesand the management report. More specifically, it should be noted that in a specific section of the Notes information regarding each typeof differential contracts outstanding at the Balance Sheet date is summarized, on the evaluation to the fairvalue, calculated on the same date, as well as the relevant quantitative data (in underlying and notional terms).The fair value at December 31, 2012 of the differentiated contracts is registered as a separate item in thememorandum accounts.

Income taxes for the fiscal yearCurrent taxes on income are recorded as tax liabilities based on estimates of taxable income determined inaccordance with the provisions in force and taking into account the applicable benefits and tax credits.In accordance with OIC 25, if any assumptions exist, deferred taxes based on temporary differences betweenthe gross profit and taxable income are detected.If the recalculation shows a tax advance, it shall be entered in the Balance Sheet as deferred tax assets tothe extent that there is reasonable certainty of its future recovery.Deferred tax assets are recorded under deferred tax assets. Deferred tax liabilities are not recognized as deferred tax liabilities if it is unlikely that the debt arises.


Balance Sheet - Assets

Unpaid receivables from shareholders At December 31, 2012 there are no balances.

Fixed assets - 113,413 thousand euroFor tangible and intangible assets, the following statements show the movements for each item as requiredby article 2427 of the Civil Code.

Intangible assets - 16,824 thousand euro

The breakdown is as follows.

Industrial patent rights and rights to use intellectual property -9,869 thousand euro

The industrial patent rights and rights to use intellectual property compared to 2011 show an increase of7,493 thousand euro for investments related mainly to:• purchase of licenses software by the Parent Company (1,137 thousand euro) and AU (61 thousand euro);• investments in the Integrated Information System by AU (523 thousand euro);• upgrades to the development of the information system for managing and issuing Green Certificates (412

thousand euro) by the controller;• the evolutionary development of the applications Sole I and Sole II by the Parent Company (728

thousand euro);• implementation of applications for the management of Guarantees of Origin and CO-FER securities by

the Parent Company (276 thousand euro);• development of the BSM - Business Monitoring Control for the monitoring of services and applications in

use by the Parent Company (246 thousand euro);• developmental interventions aimed at increasing the capabilities of the platforms on Markets made by

GME (80 thousand euro).

Thousands of euro Industrial patent rights Concessions, Assets Other Totaland rights to use licenses, in progress

intellectual property trademarks and similar rights

Situation at 12.31.2011Original cost 33,251 122 1,461 11,676 46,510Accumulated depreciation (27,030) (101) - (7,052) (34,183)

Movements during the fiscal year 2012Investments 7,493 1 753 2,073 10,320Entry into service 16 - (22) 6 -Depreciation and amortization (3,861) (3) - (1,737) (5,601)Write-downs - - - (221) (221)Other changes - - - (1) (1)Balance on fiscal year 2012 3,648 (2) 731 120 4,497

Situation at 12.31.2012Original cost 40,760 123 2,192 13,533 56,608Accumulated depreciation (30,891) (104) - (8,789) (39,784)

Balance at 12.31.2012 9,869 19 2,192 4,744 16,824


They also began operating costs of 16 thousand euro, which they incurred in 2011 that related mainly tothe completion of development projects undertaken in support of the applications of the previous fiscal year.The decrease of 3,861 thousand euro is due to the amortization of the fiscal year.

Concessions, licenses, trademarks and similar rights - 19 thousand euro

The account decreased (3 thousand euro) as a result of the amortization of the fiscal year.

Assets in progress - 2,192 thousand euro

Assets under construction relate primarily to certain applications of GME (484 thousand euro) and the controller(135 thousand euro) in the course of completion at fiscal year-end 2012.

Other - 4,744 thousand euro

Other intangible assets during 2012 increased by 2,073 thousand euro.These increases of 815 thousand euro are due to the upgrading and structural adjustment of a property atGSE found accounting representation under “Leasehold improvements”, in accordance with OIC 24.They also made investments for the maintenance of some custom GSE applications (1,005 thousand euro),for upgrades to the merchants portal, which allows communication between the Consumer Counter andmerchants, as well as on other IT applications at AU (97 thousand euro).The decrease of 1,737 thousand euro is due to the amortization of the fiscal year and 221 thousand euro tothe depreciation of the improvements made in previous fiscal years on a property that was leased, andwhose contract was terminated in 2012.

Tangible fixed assets - 72,702 thousand euro

The movement of material goods of the Group and the changes during 2012 is shown in the following table.

Land and buildings - 50,757 thousand euro

This item refers to the buildings owned by GSE and, compared to the previous fiscal year, has increased asa result of new investments (168 thousand euro) related to the renovation of the buildings owned by the

Thousands of euro Land and Plant and Industrial and Other Assets Totalbuildings machinery commercial assets in progress

equipment

Situation at 12.31.2011Original costs 63,149 11,846 3,876 23,277 27 102,175Accumulated depreciation (10,980) (2,922) (2,203) (12,497) - (28,602)

Movements during the fiscal year 2012Investments 168 829 438 3,642 - 5,077Entry into service - - - - - -Depreciation and amortization (1,580) (971) (523) (2,844) - (5,918)Write-downs - - - (1) (27) (28)Other variations - - - (2) - (2)Balance on fiscal year 2012 (1,412) (142) (85) 795 (27) (871)

Situation at 12.31.2012Original costs 63,317 12,675 4,314 26,916 - 107,222Accumulated depreciation (12,560) (3,893) (2,726) (15,341) - (34,520)

Balance at 12.31.2012 50,757 8,782 1,588 11,575 - 72,702


company on viale Maresciallo Pilsudski n. 92 and via Guidubaldo del Monte n. 45.The decrease is attributable to depreciation for the fiscal year (1,580 thousand euro).

Plant and machinery - 8,782 thousand euro

This item refers almost exclusively to technology building base of the companies of the Group, an increaseof 829 thousand euro for investments related mainly to:• interventions on technological systems of the buildings owned by GSE for the restructuring and adaptation

of themselves (205 thousand euro); • plants used by RSE, the subsidiary, as part of its research activities (195 thousand euro);• implementation of the phone system using “VOIP” technology (173 thousand euro).The decrease relates to the amortization for the fiscal year (971 thousand euro).

Industrial and commercial equipment - 1,588 thousand euro

Facilities include mainly technical equipment for research activities conducted by RSE, with the increasedue to the purchase of an optical spectrometer, a climatic chamber and an air conditioning system forthermo-mechanical tests.

Other assets - 11,575 thousand euro

These items are mainly allocated to hardware and the company furniture, the fiscal year’s increase amountedto 3,642 thousand euro, which mainly relates to capitalized costs by GSE and is broken down as follows:• hardware for the technological upgrading of GSE IT systems (1,150 thousand euro), AU (204 thousand

euro), GME (202 thousand euro) and RSE (123 thousand euro);• Business Continuity Management, designed to ensure business continuity and service in the face of

potential obstacles (462 thousand euro);• technological upgrading of the network business infrastructure (250 thousand euro) and the strengthening

of security systems through the purchase of hardware and software used (220 thousand euro).The decrease of 2,844 thousand euro relates to the depreciation of the fiscal year (2,794 thousand euro)and scrapping made by the Parent Company (50 thousand euro).

Assets in progress and advance payments

There is no residual balance on this account for the change of the fiscal year of the investments that wereallocated on that account in the previous fiscal years.

With regards to the existing privileges on property owned, it should be noted that at December 31, 2012,the building site in via Guidubaldo del Monte n. 45 resulted encumbered by a first mortgage.

Long-term investments - 23,887 thousand euro

This item, which increased compared to 2011 by 354 thousand euro, includes:• the “bond” amounting to 22,034 thousand euro, recorded at cost, including any directly attributable

expenses. The title, signed by GME on December 27, 2007 with a major international bank (rating currentto A2 Moody’s scale, A Standard & Poor’s scale, A+ Fitch scale), has a duration of ten fiscal years and aguarantee of repayment of the principal at maturity. GME has the right to request the issuer the earlyrepayment of capital market conditions at the time of the request. It should be noted, finally, in compliancewith the provisions of the relevant accounting standards that:• the rating of the issuer today is to not recognize impairment losses;• the value of the security is monitored monthly: at December 31, 2012 fair value amounted to 96.33%.

A possible valuation of the investment based on that value would have had the impact of a decrease innet income and Shareholders’ Equity at end of period in the amount of 585 thousand euro;

• loans to employees (1,853 thousand euro), paid to the interest rates in line with current market rates,which have been granted for the purchase of a first home or for serious family needs and which shall berepaid by the employees on the basis of pre-amortization schedules.


Current assets - 6,975,209 thousand euroInventories - 543 thousand euro

Inventories relate exclusively to the work in progress of the subsidiary RSE at December 31, 2012, and arecarried out through specialized activities commissioned by third parties.

Credits - 6,693,373 thousand euro

The indication of amounts with an expiration date after five fiscal years is shown in the detailed statementupon completion of the review of assets.

Accounts receivable - 5,039,663 thousand euro

The composition of the balance is shown in the following table.

Receivables to clients recorded a slight decrease compared to 2011 data from the combined and contrastedeffects of the following factors:• a decrease in accounts receivable for the sale of electricity to the companies protection services (161,861

thousand euro); • a reduction in receivables from the sale of energy on the electricity market to spot and futures (136,670

thousand euro) due to the significant reduction in the average exchange price applied to the StockExchange recorded during the last two months of 2012 compared to the same period in the last fiscalyear, partially offset by higher volumes;

• an increase in receivables related to the A3 component determined by the increase in value of thecomponent to meet the needs of the controller (261,443 thousand euro);

• a positive change in receivables for the transitional measures of physical Virtual Storage gas (33,333thousand euro) not present in 2011.

This item also includes receivables from RSE customers, mainly related to high technical and scientificactivities commissioned by the electricity supply industry.The above receivables are netted from the existing allowance for doubtful accounts at December 31, 2012,which, compared to the previous fiscal year, had a decrease of 64 thousand euro and such variation wasdetermined by releases of 81 thousand euro, provisions of 38 thousand euro and the use of 21 thousand euro.

Tax receivables - 23,721 thousand euro

Tax credits are composed of the IRES and IRAP resulting from advances paid in the net of the estimatedtax calculated for the fiscal year 2012. The item in question also includes an amount claimed as a refundfrom the Parent Company (10,903 thousand euro).


Loans and advances to clients Receivables for the sale of energy on the electricity market 2,663,380 2,526,710 (136,670)Receivables from electricity sales to distributors 1,331,661 1,169,800 (161,861)Receivables for A3 and other minor components 839,038 1,100,481 261,443Fees receivable from dispatching and balancing 262,776 155,376 (107,400)Receivables for transitional measures on physical Virtual Storage gas - 33,333 33,333Other receivables 111,760 89,529 (22,231)Total loans to clients 5,208,615 5,075,229 (133,386)

Allowance for doubtful accounts (35,630) (35,566) 64

Total 5,172,985 5,039,663 (133,322)


Deferred tax assets - 3,214 thousand euro

The movement of deferred tax assets, calculated at the rates in force, is shown below.

This item shows a decrease compared to 2011; provisions made, lower when compared to the uses, concernthe subsidiaries GME and RSE and are attributable, in addition to profiles of deductibility of expenses andthe remuneration of Directors, to the following:• for 1,646 thousand euro to the credit risk provisions to cover potential costs arising from the effects of

AEEG Resolution 558/2012/R/eel made by GME;• 66 thousand euro relating to the handling of RSE funds for loss on funded activities.The amounts included in this item have been recorded by the company in compliance with the principle ofprudence, believing with reasonable certainty the presence of a large taxable income in the fiscal years inwhich the differences are. Moreover, the same have been determined on the basis of the IRES and IRAP(respectively 27.5% and 4.82% for GME and 27.5% and 3.9% for RSE) predictably applicable on the datethat will be reversed.

Other receivables - 11,823 thousand euro

These mainly relate to receivables:• of AU, attributable, for an amount of 6,324 thousand euro, to advances paid to the independent CASC.EU

for participation in the auctions for the purchase of interconnection capacity with neighboring countries;• of RSE (3,957 thousand euro), for contributions due for the activities.

Receivables to the Electricity Equalization Fund - 1,614,952 thousand euro

The amount shown is the credit from CCSE determined by the contributions of competence due to GSEunder “Integrated Text of the Authority for the supply of transition services, distribution and metering of electricenergy for the regulatory period 2012-2015” as well as subsequent amendments and additions. The itemalso includes a receivable claimed by AU (4,273 thousand euro) for costs associated with the activation andmanagement of the Consumer Counter and receivables to the Electricity Equalization Fund for the contributionto RSE (26,102 thousand euro). Compared to the previous item, a decrease of 350,385 thousand euroessentially due to the lower incidence of net charges that are covering the A3 component with respect to theproceeds of the same, is shown.

Cash - 281,293 thousand euro

The availability at December 31, 2012 is related to deposits of c/c. The increase over the previous fiscalyear (67,841 thousand euro) is essentially due to the increase in cash and cash equivalents of the controller.

Thousands of euro Deferred Uses 2012 Appropriations Deferred tax assets at tax assets at12.31.2011 12.31.2012

Deferred tax assets 3,414 (2,183) 1,983 3,214

Total 3,414 (2,183) 1,983 3,214


Bank deposits 213,418 281,254 67,836Cash and cash equivalents 34 39 5

Total 213,452 281,293 67,841


This increase reflected the proceeds of the shares of CO2 negotiated on the Central European platformwhere GSE acts as auctioneer on behalf of the Italian State. GSE, in this context, acts as a mere custodian of the funds, which shall be reversed to the Ministries of reference.

Accrued expenses and deferred income - 1,386 thousand euro

This item, amounting to 1,386 thousand euro, consists of prepaid expenses for the portion of costs relatedto different types of contracts (insurance premiums, services support and maintenance, etc.), which havenecessitated the recognition in the fiscal year-end accrual.

The following table shows the breakdown of credits in relation to their residual maturity.

It should be noted, with regard to the geographical breakdown of the Group’s credit, that they are mainlyreferred to the Italian territory, while, for an amount of 148,892 thousand euro, they are claimed within thecontext of the Member States of the European Union, and for 39,078 thousand euro in non-EU countries.

Thousands of euro By the next Over the next Past 5 Totalfiscal year 2-5 fiscal years fiscal years

Term receivablesOther receivables 292 552 1,009 1,853Total long term receivables 292 552 1,009 1,853

Current receivablesLoans and advances to customers 5,039,663 - - 5,039,663Tributary receivables 12,818 10,903 - 23,721Receivables for deferred tax assets 3,214 - - 3,214Other receivables 11,823 - - 11,823Receivables to Electricity Equalization Fund 1,614,952 - - 1,614,952Total current receivables 6,682,470 10,903 - 6,693,373

Accrued expenses and deferred income 1,349 37 - 1,386

Total 6,684,111 11,492 1,009 6,696,612


Shareholders’ Equity and Liabilities

Shareholders’ Equity - 163,460 thousand euroThe following table shows the composition of the entry.

Share capital - 26,000 thousand euro

The share capital of the Parent Company GSE is represented by n. 26,000,000 ordinary shares with a nominalvalue of one euro each.

Legal reserve - 5,200 thousand euro

It represents the legal reserve of the Parent Company amounting to 20% of the share capital.

Retained earnings - 115,183 thousand euro

This item includes, in addition to legal and extraordinary reserves of subsidiaries, the gains achieved inprevious fiscal years by the Group companies. It also includes the amount of 291 thousand euro in theParent Company due to a higher value relating to the business transferred by Enel S.p.A. as a result of thetransfer deed on August 2, 1999.

Reserve on RSE consolidation - 80 thousand euro

The entry at December 31, 2012 includes the amount resulting from the difference between the purchaseprice of the investment and the value of Shareholders’ Equity at the date of acquisition.

Group profit - 16,997 thousand euro

This item includes the result of the GSE Group for the fiscal year 2012.

Thousands of euro Share Legal Retained Reserve Profit (Loss) Totalcapital reserve earnings on RSE for the

consolidation fiscal year

Balance at 12.31.2011 26,000 5,200 117,997 80 9,184 158,461

Allocation 2011:To the legal reserve - - - - - -To retained earnings - - - - - -Dividend distribution of the controller - - (2,814) - (9,184) (12,000)

Net income for 2012Profit for the fiscal year - - - - 16,997 16,997

Balance at 12.31.2012 26,000 5,200 115,183 80 16,997 163,460


The following table shows a reconciliation of Shareholders’ Equity and profit of the Parent Company andthe consolidated data.

Provisions for liabilities and charges - 41,027 thousand euroThe consistency of the funds is summarized below.

Provisions for pensions and similar obligations - 739 thousand euro

The provision includes the indemnity in lieu of notice and additional monthly in favor of employees who haveacquired the right under the Collective Bargaining Agreement and union agreements.

Taxation, including liabilities - 3,770 thousand euro

The fund is decreased by 1,661 thousand euro mainly as a result of:• provisions made by RSE for contributions to System Research of the annual plan 2012, the taxation of

which is deferred to future fiscal years (8,786 thousand euro), the net of offsets deferred tax assets dueto residual IRES tax losses for the fiscal years 2006, 2008, 2010 and 2012 (716 thousand euro);

• uses, largely attributable to the subsidiary RSE (8,289 thousand euro) relating to the reversal of deferred taxcontributions for System Research pertaining to previous fiscal years, the taxation of which took place duringthe financial fiscal year. To a lesser extent, they relate to the subsidiary AU for the amount of default interestcollected during the fiscal year and for the recovery of charges only fiscally deducted in prior fiscal years.

Thousands of euro 12.31.2010 2011 2011 12.31.2011 2012 2012 12.31.2012

Equity Income Other Equity Income Other EquityStatement variations Statement variations

GSE S.p.A. values 127,264 18,960 (12,000) 134,224 19,230 (12,000) 141,454

Effect of subsidiary consolidation 33,933 3,328 (13,104) 24,157 10,055 (12,288) 21,926

Dividends from subsidiaries - (13,104) 13,104 - (12,288) 12,288 -

Elimination of unrealized intercompany profits, net of tax and other minor adjustments - - - - - - -

RSE S.p.A.consolidation reserve 80 - - 80 - - 80

Total Group 34,013 (9,776) - 24,237 (2,233) - 22,006

Net ConsolidatedEquity 161,277 9,184 (12,000) 158,461 16,997 (12,000) 163,460

Thousands of euro Value at Provisions Uses/Other Releases Value at12.31.2011 variations 12.31.2012

Provisions for pensions and similar obligations 873 49 (183) - 739Provisions for deferred taxes 5,431 8,150 (9,440) (371) 3,770

Other fundsProvisions for litigation and other contingencies 30,240 - (576) (4,363) 25,301Other funds 11,642 6,038 (6,463) - 11,217Total other funds 41,882 6,038 (7,039) (4,363) 36,518

Total 48,186 14,237 (16,662) (4,734) 41,027


Other funds - 36,518 thousand euro

Provisions for litigation and other contingencies - 25,301 thousand euro

The allowance at December 31, 2012 includes the potential charges arising from litigation in progress, asassessed on the basis of information coming from external lawyers of the company, all the estimates ofprobable sustainment, as well as charges that are expected to incur for the defense on the different organsof judgment, in addition to statutory interest.It was not taken into account that the disputes, on the basis of the indications of external counsel, could beresolved successfully. For disputes for which a negative outcome is not reasonably quantifiable, please refer to the note relatingto “Commitments and contingencies arising from the Balance Sheet”.The overall reduction (4,939 thousand euro) compared to 2011 was primarily due to releases of part of theprovision (4,363 thousand euro) due to the absence of the conditions of risk inherent in some cases linkedto the previous transmission and dispatching activities, and for a smaller amount (576 thousand euro), tocertain uses by the evolution of the pending cases.The fund is reported only in a small part in activities that GSE exerts today, as the most judgments aboutactivities previously carried out by GRTN and that GSE, as required by article 1, paragraph 1, letter c) ofDPCM May 11, 2004, still bears forward.

DispatchingThere are still pending litigations which target different disputes relating to amounts due (by the then GRTN)in regards to dispatching and the lack of recognition of related considerations by operators and by FinarvediS.p.A., Idreg Molise S.p.A. and Energia e Territorio S.p.A.

Compensation for the “black out”In regard to this type of litigation, it should be noted that, by letter on July 5, 2008, Enel Distribuzione S.p.A.,going on the assumption of its estrangement from the events that gave rise to the aforementioned blackout, GSE and other nine companies asked for restitution disbursements incurred by it, in regard to thejudgments in which it was agreed, that the subject was to get “what in the future will still be paid to thirdparties for the events of the national black out of 2003”. On May 3, 2013 a new statement in which EnelDistribuzione intended to stop the statute of limitations was issued.Value of the black out fund at December 31, 2012 was determined based on the following types of liabilities:• the claim made by Enel Distribuzione;• the coverage of defense costs arising from litigation in the first instance and on appeal, relating to

opposition at 850 injunctions issued by the Justice of the Peace of Serra San Bruno and regulationsconcerning the request for payment of a portion, plus legal fees, the charges for registration of second-level rulings relating to the black out;

• the registration fee of sentences;• the civil and administrative litigation.During the fiscal year 2012 for the black out litigation expenses of approximately 108 thousand eurohave incurred.

Plants fueled by renewable sources and cogeneration - CIP6Two judgments are pending in civil regulations concerning contractual issues relating to the properapplication of CIP6. In particular, in the adverse judgment to Linea Energia S.p.A. (formerly Sageter Energia S.p.A.), the Court ofBrescia had ruled partially to the detriment of GSE, having been accepted, though not entirely, the questionby the counterparty, and this had led to an outlay of 600 thousand euro, drawn from the fund. Currently, againstthe negative ruling of 2010, GSE has cross-appealed, challenging the lack of territorial jurisdiction and the lackof jurisdiction of the judge hearing the case, the lack of entitlement to Linea Energia S.p.A., as well as theerroneous judgment under appeal with particular regard the costs of CTU. The evolution of the risk profilelinked to this dispute in 2012 resulted in a reduction of petitum in the amount of 918 thousand euro.As for the other case pending before the Civil Court of Rome against the company SUM, the Court ruled onthe judgment and fully supports GSE, with charges to the counterparty.Some complaints are also pending against measures of GSE with which it has been denied the recognitionof the operation of certain high-efficiency cogeneration plants, because of the absence of specificrequirements by the relevant law.


Performance transmission and exchangeLitigation is pending against Consorzio Eneco, which notified GSE on February 2, 2010 of a summons forthe failure to comply with a Memorandum of Understanding signed in 1997 between the Consortium andEnel, which provided a discipline of exchange parameters and carriage of the most advantageous energyfor the partners.The Consortium believes that the then GRTN, which was superseded by GSE, should have put theagreement into effect since 1999 and therefore required GSE to pay the differential plus interest. The casewas sent for a decision, but the ruling has yet to be filed.

Electromagnetic fields GSE is still part of several proceedings about the payment of damages (capital, moral, etc.) feared as aresult of exposure to electromagnetic fields. Nothing new emerged, in 2012, for what concerns this line oflitigation, for which there is no apparent uniformity of judgment. If, in fact, in some cases there was afavorable judgment for GSE, it is reported that on February 19, 2008, however, the Court of Venicecondemned Enel and GSE, which replaced GRTN during the proceedings. Against that judgment, GSEappealed; also the appeal is pending for a different dispute whose first-instance judgment, in favor of GSE,was challenged by the other party.

InefficiencySome judgments relating to damages claimed by some companies in relation to alleged inefficiencies thatwould occur as a result of events that occurred on the national transmission network in the fiscal years priorto November 1, 2005, as, for example, the case brought by the company Euralluminia S.p.A. before theCourt of Cagliari, are still pending. In this case, the Court rejected all of the preliminary statements filed bythe opposing party and referred the case to discuss the conclusions of the hearing on March 26, 2013.

Net MeteringThere have been some disputes relating to the conventions of Net Metering, which arose as a result of theradical change in this discipline determined by AEEG Resolution 74/08, which took effect on January 1,2009. Disputes have arisen because of the failure or lack of understanding by the users of the Net Meteringin relation to the regulations introduced by the aforementioned Resolution, or for delays in the recognitionof adjustments, caused by the non-communication of measures by the competent authorities of the abovementioned subjects. These comments relate, in most cases, modest amounts for which jurisdiction shall bereferred to the Justices of the Peace.

Damages pursuant to article 30 of the C.P.A.Administrative appeals regulations concerning requests for damages pursuant to article 30 of the Code ofAdministrative Process were notified to GSE. This rule concerns the unfair damage resulting from theunlawful exercise of administrative activity or from the non-exercise of the mandatory one, therefore thecounterparties appealed the denial of admission to tariffs, contesting the administrative inertia in theproceedings of competence to GSE.


This item consists mainly of the subsidiary GME’s funds, set aside in relation to the extra operating incomeattributable to PCE and to a lesser extent to the early retirement fund incentives of the Parent GSE; theoverall increase, net of uses, is equal to 425 thousand euro. Provisions (6,038 thousand euro) relate for the most part to the excess of operating income attributable to PCEfor 2012 compared to the fair return on invested capital attributable to PCE themselves (5,985 thousand euro).The uses (6,463 thousand euro) relate primarily to the sum that GME granted to Terna in January 2013 incompliance with the provisions of the Authority, which, constituting no more than a case of risk of certaindebt, was reclassified as such within other payables (6,000 thousand euro).


Provision for severance indemnities - 13,942 thousand euro

The fund covers all the dues of severance indemnities accrued at December 31, 2012 by employees,required by law, and wiped of advances granted for loans for first time home purchases, advances in healthcare costs and for the purchase of shares in Enel S.p.A. (the latter granted on the occasion of the publicoffering of shares of Enel S.p.A. on November 2, 1999, when the company was still part of the Enel Group). The usage is represented by ordinary handling related to the termination of the employment relationship,buying a first home or advanced payments for health care costs.

Debts - 6,831,061 thousand euroThe indication of amounts falling due later than five fiscal years is shown in the detailed statement insertedto complete the review of the liabilities.

Dues to banks - 351,127 thousand euro

This item refers mainly to debt positions of the controller, and to a lesser extent of AU and RSE recorded atfiscal year-end (332,060 thousand euro) and loan (19,067 thousand euro) on the Parent Company for thepurchase of the building of via Guidubaldo del Monte n. 45 in Rome.The variation (135,881 thousand euro) compared to last fiscal year is mainly due to the use of lines of credit,which made it necessary to cope with the financial deficit generated by the insufficient revenue from the A3tariff component.

Advances - 4,807 thousand euro

This item refers only to payments received from RSE by the European Commission and the Italian Ministryfor Education, University and Research for research projects in progress at fiscal year end.

Trade payables - 6,202,235 thousand euro

The item includes payables related primarily to the purchase of energy in the electricity market by thesubsidiary GME (3,055,443 thousand euro), the amounts paid to encourage the production of photovoltaic(1,459,194 thousand euro), and other charges related to other forms of incentives. This item shows adecrease over the previous fiscal year (563,116 thousand euro) mainly due to lower grants, on photovoltaic(1,033,994 thousand euro), partially offset by the increase in liabilities arising from the early termination ofsome CIP6 contracts (354,538 thousand euro), by MD April 24, 2013 (339,118 thousand euro), from theDedicated Withdrawal and feed-in rate.

Thousands of euro

Balance at 12.31.2011 14,811

Provisions 4,128Uses for disbursements (1,276)Other movements (3,721)

Balance at 12.31.2012 13,942


Tax payables - 37,320 thousand euro

This item mainly includes the debt of the Parent Company to the tax authorities for VAT (19,365 thousandeuro) and withholding taxes as a substitute tax (16,443 thousand euro).

Payables to social security - 4,214 thousand euro

This item mainly consists of payables to social security, welfare and insurance relating to contributionspayable by the Group, is levied on wages paid and on burdens accrued and unpaid staff for holidays accruedbut not taken, as well as those relating to the deduction of employees. The increase compared to last fiscalyear is due to the increase of payables to INPS of the Parent GSE (314 thousand euro).

Other payables - 228,506 thousand euro

The breakdown is shown in the following table.

The positive change in the item compared to the previous fiscal year in the amount of 31,719 thousand eurois from the opposite side:• payables for amounts collected by GSE as auctioneer for the placement of CO2 allowances on the European

Platform, which will be fully discharged in a special bank account opened at the Treasury of State;• the reduction of deposits in the account money received from operators of the Environmental Markets

(24,671 thousand euro);• the reduction of deposits from operators in the electricity and gas market (21,692 thousand euro).

Dues to electricity equalization fund - 2,852 thousand euro

This item pertains entirely to the payment to be made by AU to CCSE, in accordance with ResolutionARG/elt 122/10, to the account for the equalization of the costs of purchasing and dispatching of electricityfor the enhanced protection services in respect to the balances of the economic items pertaining to thefiscal years before 2012.


Dues to INPS 2,602 2,916 314Other dues 1,122 1,298 176

Total 3,724 4,214 490


Deposits from workers in the electricity market and gas 127,731 106,039 (21,692)Amounts due to ETS - 76,593 76,593Sale price account deposits by workers in the market 50,552 25,881 (24,671)Dues to employees 8,702 8,764 62Deposits on differentiated contracts for bands CIP6 160 3,524 3,364Other dues 9,642 7,705 (1,937)

Total 196,787 228,506 31,719



They are composed as follows.

Deferred income related mainly to:• the suspension of some inherent items related to payments for the transport capacity (CCT - CCC - CCI),

so-called annuity interconnection (AEEG Resolution 162/99), and reconciliation for 2001 (37,583 thousandeuro), for which the company is still awaiting disposal;

• financial income received in previous fiscal years on the bond of the subsidiary GME deferred to futurefiscal years (1,529 thousand euro);

• the fixed annual fees paid by the operators of the Electricity Market to the following fiscal year of thesubsidiary GME.

The decrease compared to the previous fiscal year is the opposite effect of the following factors, all relatingto the consignments of GSE: • the reduction due to the enforcement of guarantees related to photovoltaic (7,994 thousand euro), relying

on the A3 component;• the reduction in revenues due to the reversal of the remaining contribution to cover the operating costs

of GSE paid on account in 2011, which due to Resolution 140/2012/R/eel is attributable to the fiscal year2012 (5,894 thousand euro);

• the increase due to revenues collected in 2012 but relating to future fiscal years that are attributed to thecosts of investigation of the FER register (524 thousand euro) and the cost of inquiries for the Fifth Account(1,926 thousand euro).

The following table shows the breakdown of the debt in relation to its residual maturity.

It should be noted that, in relation to the geographical breakdown of the Group’s debt, they are mainlyrelated to the Italian territory, while an amount of 299,963 thousand euro is attributed to the European Unioncountries, and finally 141,136 thousand euro to countries outside the EU.

Guarantees and other accounts - 138,117,823 thousand euro The memorandum accounts include the value of guarantees, commitments and risks and other items ofmemory, as shown below.


Accrued liabilities 21 27 6Deferred income 50,643 40,491 (10,152)

Total 50,664 40,518 (10,146)

Thousands of euro By next In the next 2-5 Past 5 Totalfiscal year fiscal years fiscal years

DebtsDues to banks 332,060 - 19,067 351,127Advances 4,807 - - 4,807Dues to suppliers 6,202,235 - - 6,202,235Dues to tax authorities 37,320 - - 37,320Payables to social security 4,214 - - 4,214Other dues 228,506 - - 228,506Dues to the Electricity Equalization Fund 2,852 - - 2,852Total dues 6,811,994 - 19,067 6,831,061

Accruals and deferred income 39,295 1,223 - 40,518

Total 6,851,289 1,223 19,067 6,871,579


The item that most determines the balance of the memorandum is that which relates to the fees to be paid,as the incentive to the photovoltaic plants, where the increase was due to growth of the conventions.The item “Commitments to suppliers for the purchase of electricity” refers mainly to the multi-annualagreements entered into with CIP6 producers.

Pursuant to the provisions of article 2427 bis of the Civil Code, and bearing in mind what is stated in theReport on Operations of the objectives and policies of the company in the management of risks and relatedhedging transactions, are analyzed as fair value and information on the extent of the financial instruments(in terms of quantity and underlying notional). At the end of 2012 contracts are in place to hedge the priceof fuel by AU. These contracts are not traded on regulated markets, which is why the fair value can not bedetermined using the official prices.The fair value is, therefore, estimated as provided in paragraph 3, point b) of article 2427 bis of the CivilCode by discounting the expected cash flows on the basis of econometric models of assessment that usethe forecasts of the underlying market prices, developed by the company. The data used are consistentwith the information available on the date of preparation of budget. It is clear, however, that it talks abouttheir nature which may differ from the actual data.It should also be noted that, in the vicinity of approval of the draft budget, the estimate was subject to audit,carried out by means of information, relative to the changes in market prices. The assessment that resultedfrom the process of updating the relevant variables did not provide significant changes compared to theestimate used for the budget. The following tables present information about the differentiated contracts and the enhancement of its fairvalue, that at December 31, 2012 shows a negative value equal to 21,853 thousand euro.


GuaranteesGuarantees received from other companies and third parties 4,377,081 5,321,935 944,854Guarantees given to other companies and to third parties 2,957 4,718 1,761

Current value of contracts for difference and emissions trading 39,801 (21,186) (60,987)

Other memorandum accountsCommitments to supply photovoltaic feed-in tariffs 77,462,050 108,596,400 31,134,350Commitments to suppliers for the purchase of electricity 29,501,080 24,166,280 (5,334,800)Commitments to suppliers for various supplies 49,262 47,870 (1,392)Commitments to staff 1,892 1,806 (86)

Total 111,434,123 138,117,823 26,683,700

AMOUNTS OF ENERGY (IN UNDERLYING AND NOTIONAL TERMS)

GWhHedging on Stock Exchange 12.31.2012

CFD two-way AU/Workers 3,109.8Total coverage 3,109.8

Total purchase on MGP 30,100.0

Coverage ratio 10.3%

MEASURE OF THE FAIR VALUE OF HEDGING CONTRACTS

Thousands of euroFair value 12.31.2012

CFD two-way AU/Workers (21,853)

Total (21,853)


Commitments and contingencies off the Balance Sheet

Below mention is made of the commitments and risks of the Parent Company that were not recorded in theBalance Sheet as the possible economic effects in future fiscal years are not, at present, to quantify objectively.

DisputesPhotovoltaic

Various proceedings are pending before the Administrative Judge of first and second degree, started forthe cancellation of GSE whose object is the lack of recognition or acknowledgment of a lower feed-in tarifffor photovoltaic energy production, in application of the rules of reference. Multiple disputes pertain to the request for cancellation of GSE which is denied, for lack of requirements,the most expected rate for the architectural integration of plants or measures with which, for the plants onagricultural land, has a reduced tariff granted in the first instance, following the verified avoidance of theprovision in article 12, paragraph 5 of MD May 5, 2011 (so-called standard anti-split).It should also be noted that, following the increase in the number of checks on site, in order to identify statematching realization of photovoltaic plants as stated (and sworn) in the process of applying for admissionto the benefits of Law 129/10, as well as in the process of registration to the Register of the Fourth and FifthEnergy Account and admission of underlying accounts, the litigation generated by the final measures of thisactivity or by the subsequent decadent measures by tariffs has increased substantially. Conversely, the dispute which arose following the entry into force of MD on May 5, 2011 (Fourth EnergyAccount), with which many companies have contested the legality of such a measure in several respects,including the violation of the principle of protection of legitimate expectations and the violation or misapplicationof the provisions of Legislative Decree 28/11, pending as of December 31, 2012, had a first outcome betweenJanuary and February 2013, with a number of judgments by the Administrative Court of Lazio that dismissedthe claims submitted by operators and confirmed, at first instance, the legality of the measure.It should be noted, with reference to the above, that some of the applicants had challenged even the“Technical rules for the application entry in the large register photovoltaic plants”, the implementation of theFourth Account and, more specifically, the measures are excluded from the lists on September 15, 2011and December 15, 2011, by which, according to the Decree, are initiated at the stage of admissionencouraging the owners of so-called “large plants”. However, despite these early pronouncements of the Lazio Regional Administrative Court in relation to theFourth Energy Account and other enforcement, measures have been favorable to GSE, pending terms ofappeal is not possible at the moment, to make an estimate of the risk arising from the negative outcome ofthe judgments at issue if the specified operators appealed, in that with any judgment in favor of theapplicants, the outcome of the appeal proceedings (yet to be proposed), could involve not only the obligationon the part of GSE, to encourage from then the production of related systems, but also compensation forthe damage, as of yet not quantified.The above also applies further litigation generated following the entry into force of MD July 5, 2012 (so-called Fifth Energy Account) and the publication of its first list, published on September 28, 2012.Two additional strands of litigation are finally reported, which developed over the course of 2012.A first line at the costs of tax referred to in article 2, paragraph 1, letter c) of MD August 6, 2010 (the ThirdEnergy Account), for which, according to the Customs Agency, they may be fulfilled only after the receipt ofthe relevant declaration by the Agency or production, as part of this, the provisional license fiscal year (seenote RU 30744 of April 5, 2011). Following this official interpretation, many plants that began operatingbetween April 30 and May 31, 2011 are not fit to have access to the incentive rates for the first four of theThird Energy Account, or, in absolute terms, the rates of this Decree and this has consequently resulted inthe appeal of some 60 measures to assign a different rate from that request or denial of admission to theThird Energy Account.The second front of dispute that arose in 2012 is about the decline of requests for access to the incentivesof the Fourth Energy Account for the plant which, though entered on the list in a good position, they did notcome into operation within 7 months from the date of publication of the same rankings. This fact has sometimes been declared by the same Persons Responsible (with or without the approval ofthe request for an extension based on an event which leads, in the opinion of the operator, in a case of great


force), sometimes was seen directly by GSE to be a result of tests on site. The violation of the indicatedterm decadent resulted in many cases the adoption of subsequent measures of decay and, therefore, theappeal of the same.For these last two strands, it is not possible to make an estimate of the risk arising from the negative outcomeof their independence, for the same reasons mentioned above.

IAFR and Ministerial Decree FER

Judgments are pending before the Administrative Judge of first and second degree for the cancelling ofGSE regulations concerning the denial of IAFR or revocation/cancellation of the qualification was issued.It has also developed an additional litigation as a result of the outcome of the verification activities performedon these facilities by GSE, where these differences have emerged between the findings made during theaudit and the statement by the producers concerned during their qualification. In particular, in this context,decision was appealed to cancel IAFR in self-defense and the consequent demand for recovery of thepreviously recognized CVs. Following the issue of MD July 6, 2012 (known as MD RES), several operators proposed the appeal againstthe predictions of the same, as well as the application procedures published by GSE on August 24, 2012and the Notice of participation in the auction procedures, published on September 8, 2012, primarilycontesting the lesion of custody of operators who had already started business ventures on the basis ofprevious legislation.It is not possible at the moment to make an estimate of the risk arising from the judgments in question,since any judgment in favor of the applicants may include an obligation to recognize GSE from then theplant as a renewable source system and consequently the obligation to encourage ex tunc the productionof electricity or, with regard to the FER Decree, the obligation to recognize the access to incentives asgoverned by previous legislation.

Enel pumping

In December 2010, Enel Produzione S.p.A. notified GSE of an action for the compliance of judgment n.1437/2006 of the Lombardy Regional Administrative Court, which annulled AEEG Resolution 104/05, bywhich GSE stood and was required to ascertain as erroneously paid by Enel themselves to purchase CVsfor 2001-2002 related to the energy required for feeding their pumping systems (erroneously considered bythe Administrative Judge as a single plant). Enel required not only a repetition of what was unduly paid, butclaimed to extend, through interpretation, the obligation to return the CVs for the productions of the fiscalyears after 2003. GSE was established in court, disputing that broad interpretation. The Lombardy RegionalAdministrative Court in its judgment of February 20, 2012 ruling on adherence, also ordered that the courtdecision n. 1437/2006 involving the right to recover, by Enel of the amount paid to GRTN only for the fiscalyears 2001-2002, the subject of the original application. Finally, in its judgment of January 21, 2013, theCouncil of State ruled definitively on the matter, confirming the earlier decision of the Lombardy RegionalAdministrative Court of July 12, 2012.

CIP6 and auxiliary services

Pursuant to AEEG Resolution 2/06 on the definition of energy absorbed by the plant auxiliary services, GSEhas, starting from the calculation of the CVs for that fiscal year 2010, to recalculate the energy absorbed bythese services according to the new directions of the Authority.This has resulted in a substantial reduction in CVs issued to various operators who, in some cases, decidedto oppose the administrative decisions taken by GSE. The above is the case also with reference to incentivesystems based on CIP6, with the difference that, in such cases, GSE implemented the recalculation of energyabsorbed by auxiliaries and only at the outcome of specific instructions issued in this regard by AEEG.


Also with regard to CIP6, following the examination carried out by the competent offices, further litigation onthe one hand rose, the decline occurred several operators, renounced under article 15 of Legislative Decree79/99, as modified by paragraphs 74 and 75 of article 1 of Law 239/04, and second, as a result of certainprovisions of GSE cancellation of the recognition granted or at the time of non-recognition scratch by theproducers, extension of the incentive period as a result of lost production due to great force not proven as such.It is not possible at the moment, to make an estimate of the risk arising from the judgments in question,since any judgment in favor of the applicants could result in an obligation on the part of GSE to recalculate,with different parameters, the magnitude of energy due and, therefore, the amounts to be recovered.

Cogeneration

In accordance with article 4 of Resolution 42/02 of the Authority, the holders of power who wish to availthemselves of the benefits provided for cogeneration plants are required to submit documentation annuallyto GSE in order to demonstrate that the plant complies with the same characteristic values (IRE and LT).Upon accurate completion of the assessment, GSE has in some cases rejected the existence of theconditions for CHP and the relevant qualifications. The dispute stems from its rejection of such measures.It is not possible, at the moment, to make an estimate of the risk arising from the negative outcome of thejudgments in question because any judgement in favor of the applicants could involve not only the obligation,by GSE, to encourage from then the production of related systems, but also compensation for damage, asof yet not quantified.Following the issuance of MD August 4 and September 5, 2011 an appeal was brought by certain operatorsagainst Resolution ARG/elt 181/11 on December 15, 2011, the Guidelines of the Ministry of EconomicDevelopment for the implementation of these decrees and the operating instructions of GSE on the subject,published on February 10 and March 22, 2012.

Black out

In relation to claims for the events of September 28, 2003, the civil litigation is pending in a limited numberof causes, for which you can reasonably foresee a declaration of lack of jurisdiction of the ordinary courtsin favor of the administrative judge, as the first organs courts before that incardinated the dispute expressed,accepting the thesis of the Manager and on the basis of the judgment of the United Sections of the SupremeCourt (order no. 1887/07). With regard to the administrative litigation, it should be noted that during 2012 further appeals were notnotified with respect to the three acts notified in 2009. Moreover, it should be noted that, over the course of the five fiscal year limitation period (September 28,2008), we excluded the possibility of seeing further evaluations promoted, with the exception of four subjectsstill on schedule, having interrupted the limitation period by a notice sent every fiscal year by ordinary letter,and all those who were confronted with a declaration of incompetence by the civil court and for which theterms of reinstatement before the administrative courts were not yet expired.With regard to the claims for compensation by Enel Distribuzione S.p.A. please refer to the comments inthe item provision for disputes and other risks.

Costs and revenues related to handling energyIn relation to certain Income Statement items of income and inherent expenses relating to electric energy,the accounting recognition proceeded on the basis of the best information available at the time of thepreparation of these financial statements. The method of recording the flows of energy, typical of the current electrical system, projects in fact in manycases the use of data based on estimates and self-certification of manufacturers, network operators andsale enterprises that could be subject to subsequent adjustments. The adoption of this information hasresulted, and could result in the budgets for future years, in the recognition of contingent assets and liabilities.These contingencies, on the basis of the regulatory framework in force, if not related to the specificcomponents of return on GSE, would pass-through on the results of future periods.


Income Statement

Value of production - 35,086,893 thousand euro

Sales of goods and services - 34,563,818 thousand euro

The composition of the balance on December 31, 2012 is shown below.

Compared to last fiscal year the item increased by 4,535,414 thousand euro due to the combined effect ofthe following factors: • increase in revenues from sales of electricity (2,007,197 thousand euro): this increase is due primarily to

increased sales of energy on the market made by GME (2,278,391 thousand euro), due to higher volumestraded on Electricity Market spot, the growth of prices on the Stock Exchange brokerage applied during2012, as well as higher volumes traded on the MTE. This increase was partially offset by a decrease inrevenues of the Parent Company (313,626 thousand euro), mainly due to a reduction of the balancing asa result of an improvement in the provisions;

• increase in contributions from CCSE (2,540,240 thousand euro), the item is essentially composed bycontributions that CCSE makes in favor of GSE to cover the costs incurred in relation to certain activitieswhich have risen by 2,536,923 thousand euro; an increase of these contributions is due to the higher costof GSE that have found coverage, referring to the incentives on photovoltaic, CIP6 and early terminationof CIP6. To a lesser extent, the item also includes contributions that CCSE makes in favor of RSE forresearch activities (34,322 thousand euro), and in favor of AU for the Consumer Counter and the IntegratedInformation System (11,330 thousand euro);

• increase in revenues for transitional measures for the Virtual Storage gas (82,158 thousand euro) notpresent in the past fiscal year;

• decrease in payments for transport activities (74,429 thousand euro), following Resolution ARG/elt 199/11which eliminated these fees on Dedicated Withdrawal transport from January 1, 2012;

• decrease in the sale of Green Certificates on the organized market (44,021 thousand euro).

Change in work in progress - 211 thousand euro

This item, which has a positive balance, refers exclusively to the work committed to research commissionedby the subsidiary RSE, whose activities are expected to be completed in 2013.

Increase in fixed assets for internal works - 114 thousand euro

The item includes capitalized costs for the construction, during the fiscal year, of software developed internally.


Revenues from energy sales 22,207,348 24,214,545 2,007,197Contributions from Electricity Equalization Fund 7,339,886 9,880,126 2,540,240Revenues from the sale of Green Certificates 341,766 297,745 (44,021)Revenues for transitional measures Virtual Storage gas - 82,158 82,158Revenues from technical-scientific performance 3,025 3,472 447Fees for transport activities 74,429 - (74,429)Other revenues related to energy 61,950 85,772 23,822

Total 30,028,404 34,563,818 4,535,414


Other revenues and income - 522,750 thousand euro

This item includes the following entries.

The values mainly refer to the prior inherent contingencies:• adjustment activity load profiling carried out by AU during the fiscal year for the items relating to energy

referring to the period 2005-2011 (227,546 thousand euro); • the revision of CIP6 prices for the fiscal year 2010 (108,496 thousand euro); • balancing CIP6 (97,696 thousand euro);• adjustments of contributions for photovoltaic recognized as expenses in previous fiscal years (52,433

thousand euro). As in past fiscal years, these contingencies must be considered jointly with the corresponding values ofcontingent liabilities, as they pertain to the same phenomena, and to the A3 tariff component.The item other contingent assets is related in part to the release of values allocated by the Parent Companyin the provision for litigation and other risks (4,363 thousand euro) due to the definition of some of the eventsfor which the court had made prudent provisions that in light of the positive results were not necessary, inpart resulting from the enforcement of revenues of guarantees of photovoltaic plants (7,994 thousand euro).The revenue from services includes various revenues from the application of Resolution ARG/elt 5/10 (9,550thousand euro), the penalties charged to CIP6 operators (6,232 thousand euro) and the recharging of thecost of GSE staff seconded to CCSE (2,842 thousand euro).

Production costs - 35,069,910 thousand euroIt includes the following items.

Raw materials, consumables and goods - 26,771,283 thousand euro

This item is characterized mainly by costs related to the purchase of energy represented as follows.


Contingent assetsEqualization charges load profiling 191,415 227,546 36,131Purchasing renewable energy sources (CIP6) 32,428 108,496 76,068Balancing CIP6 22,516 97,696 75,180Photovoltaic contribution incentives 110,639 52,433 (58,206)Adjustments for on-site exchange 27,858 477 (27,381)Other 8,935 14,551 5,616Total extraordinary income 393,791 501,199 107,408

Revenues from performance and other services 15,391 21,551 6,160

Total 409,182 522,750 113,568


Costs for the purchase of energyPurchase of energy MGP/MI 15,534,086 18,617,154 3,083,068Dedicated Withdrawal and feed-in rate 2,198,196 3,073,169 874,973Purchases of CIP6 energy 3,273,567 2,951,916 (321,651)Cost of the purchase of Green Certificates 1,699,239 1,730,122 30,883Import 731,674 194,100 (537,574)Purchases of energy for dispatching services and other 1,354,369 118,165 (1,236,204)Costs for physical measurements of Virtual Storage gas - 67,771 67,771Awards for CFD contracts 1,728 16,400 14,672Total costs for the purchase of energy 24,792,859 26,768,797 1,975,938

Costs for purchases other than energy 2,026 2,486 460

Total 24,794,885 26,771,283 1,976,398


As shown in the table, the costs are mainly related to:• the purchase of energy on MGP/MI by producers: these costs refer to the acceptance in part by GME of

offers to sell in the energy markets, the increase compared to the value of the previous fiscal year is dueto the price of brokerage and trading volumes on the Power Exchange;

• the regime of Dedicated Withdrawal and feed-in rates: in 2012, GSE continued covering purchases inDedicated Withdrawal and the feed-in rate, governed by AEEG Resolutions 280/07 and ARG/elt 01/09;

• CIP6 energy purchases, which are reduced due to the early termination of some contracts;• the purchase of Green Certificates: the item is related to the purchase of Green Certificates by the Parent

Company (1,422,073 thousand euro) in pursuance of the provisions contained in MD December 18, 2008by GME on the organized market (289,840 thousand euro), and AU (18,209 thousand euro);

• purchase of electricity from bilateral contracts: these are the costs incurred by AU for the purchase ofenergy from hedging contracts, which are offset in revenue by the same company. The balance betweenincome and expenses in 2012 was equal to 8,576 thousand euro;

• imports: is the transfer of energy from import contracts for the fiscal year; • premiums for CFD: refer to hedging contracts entered into by AU and aimed to reduce price fluctuations,

in 2012 the balance of income and expenses was equal to 10,274 thousand euro.Costs for various purchases of energy mainly includes costs incurred for the purchase of consumablesand stationery.

For services - 1,225,078 thousand euro

This caption relates to 1,174,290 thousand euro charges for dispatching and other services relating to energy,primarily charged by Terna to AU and GME, and the remainder, relating to costs for various services, isdetailed below.

The increase in costs for services not related to energy (5,030 thousand euro) is due to more intense activitiesof all Group companies. The fees and the share of contributions paid by the company for fees paid to members of the Board ofDirectors and the members of the Board of Statutory Auditors amounted to 1,947 thousand euro.The item other services consists mainly of costs for service administration work of all societies; it alsoincludes, for an amount of approximately 179 thousand euro, fees paid to the company in charge of thestatutory audit.


Costs for services relating to energy 1,083,681 1,174,290 90,609

Costs for other services not relating to energyProfessional services and consulting 12,899 13,215 316Performance for computing tasks 4,744 7,581 2,837Costs for the contact center in outsourcing 3,136 4,236 1,100Staff services 3,642 3,611 (31)Image and communication 3,131 2,604 (527)Maintenance and repairs 1,082 1,573 491Services of facility management 7,157 8,611 1,454Emoluments to Directors and Statutory Auditors 2,335 1,947 (388)Other services 7,632 7,410 (222)Total costs for other services not relating to energy 45,758 50,788 5,030

Total 1,129,439 1,225,078 95,639


For lease - 6,147 thousand euro

The item is shown in detail in the following table.

The values refer mainly to rental costs of real estate and rentals. The reduction compared to 2011 is entirelyattributable to the costs for the transportation fees related to network owners, who, with Resolution ARG/elt199/11, have failed.

For staff - 78,718 thousand euro

In the following table, the average number of employees in 2012 per category and punctually on December31 compared with the previous fiscal year is reported.

The increase in personnel costs compared to 2011 (8,511 thousand euro) is attributable to the increase inconsistency, as can be seen from the above table, as well as to the increase in remuneration policies applied.

Depreciation, amortization and write-downs - 11,805 thousand euro

The breakdown of depreciation and amortization is as follows.

Depreciation undergoes an increase following the entry into operation of new assets, primarily of theParent Company.

Provisions for risks - 6,231 thousand euro

The provisions relate to the adjustment provisions for risks in the first place, the amount refers to theappropriation made by the subsidiary GME (5,949 thousand euro) for the portion of the extra income due tothe PCE for 2012, exceeding the fair remuneration net invested capital in compliance with the provisions ofAEEG Resolution 558/2012/R/eel. For a smaller amount (259 thousand euro), the item related to the


Rent and leasing of real estate assets 4,507 4,985 478Rentals 1,097 1,162 65Transportation fee 52,841 - (52,841)

Total 58,445 6,147 (52,298)

Consistency Consistency Average Average 12.31.2011 12.31.2012 2011 2012

Executives 48 46 46 47Managers 269 281 269 276Employees 756 856 659 794Workers 3 3 5 5

Total 1,076 1,186 979 1,122


Amortization of intangible assets 4,641 5,601 960Depreciation of tangible assets 5,133 5,918 785Impairment of property 58 248 190Write-downs of receivables included in current assets 62 38 (24)

Total 9,894 11,805 1,911


adjustment by RSE of the provision created in previous fiscal years regarding the eligibility of costs incurredto be reported to the activities of RSE and subject to the evaluation of the adequacy by the Ministry ofEconomic Development on a proposal by the AEEG.

Other operating expenses - 6,970,648 thousand euro

The other operating expenses are presented in the following table.

The total increase in the item amounting to 2,614,981 thousand euro was mainly due to the followingchanges:• increase in grants awarded for the encouragement of photovoltaic (2,093,963 thousand euro), the increase

is due to the entry into operation of new plants;• increase in costs for the early termination of some CIP6 contracts (400,561 thousand euro);• increase in grants awarded to the participants admitted to the regime of the Net Metering (100,927

thousand euro).

Financial income and expenses - 5,960 thousand euroOther financial income - 13,603 thousand euro


Compared to the previous fiscal year, the decrease in interest income is relative to deposits and bankaccounts due to lower interest rates on the financial markets, which has more than offset the increase in theamount of cash and cash equivalents.


Contingent liabilitiesEqualization distributors 191,415 227,546 36,131Net Metering 251 26,378 26,127Dedicated Withdrawal 25,953 18,638 (7,315)Balance, exchange and dispatching 1,764 8,947 7,183Purchase of CIP6 energy 2,111 81 (2,030)Other 661 3,977 3,316Total contingent liabilities 222,155 285,567 63,412

Other operating expensesContributions incentive for photovoltaic 3,931,020 6,024,983 2,093,963Costs for early termination of CIP6 13,562 414,123 400,561Contributions for Net Metering 118,965 219,892 100,927Contributions incentive for Virtual Storage gas 55,036 11,459 (43,577)Other costs 14,929 14,624 (305)Total other operating expenses 4,133,512 6,685,081 2,551,569

Total 4,355,667 6,970,648 2,614,981


Interest income on deposits and bank c/c 13,360 12,027 (1,333)Interest on late payments 1,523 1,252 (271)Interest on loans to employees 13 15 2Other financial income 322 309 (13)

Total 15,218 13,603 (1,615)


Interest and other financial expenses - 7,643 thousand euro

The entry is as follows.

Compared to the previous fiscal year, the item increased by 1,123 thousand euro, as a result of interestexpenses for the settlement in 2012 of some CIP6 (1,815 thousand euro); this type of expense is coveredby the A3 tariff component. This increase was calmed by a reduction of all other types of financial expenses,as a result, primarily, of the reduction in interest rates on the financial markets.

Extraordinary income and expenses - 378 thousand euroExtraordinary management has a positive balance of 378 thousand euro and is given by extraordinaryincome of 1,690 thousand euro and extraordinary charges of 1,312 thousand euro.The proceeds are almost entirely related (1,600 thousand euro) to the IRES refund required by all companies inthe Group deductible for IRAP paid in 2007-2011, made possible by the recent provisions of Decree Law 201/11.Extraordinary expenses are attributable in a large part to the subsidiary AU (1,112 thousand euro) and relatesto the payment of higher IRES taxes relating to prior fiscal years.

Income taxes, current, deferred and deferred tax assets - (6,324 thousand euro)


Current taxes are income taxes payable for the fiscal year 2012 from the Group companies. Deferred tax assets contain allocations and repayments made during the fiscal year by the subsidiaries AU,GME and RSE. For handling and explanation of these entries refer to the information about it in thecomments on the Balance Sheet.


Interest on early termination of CIP6 and other energy items 4,367 6,182 1,815Interest on medium to long term financing 522 447 (75)Interest on short term financing 678 580 (98)Foreign exchange losses 10 1 (9)Other financial charges 943 433 (510)

Total 6,520 7,643 1,123


Current taxesIRES 5,541 5,288 (253)IRAP 2,218 2,269 51Total current taxes 7,759 7,557 (202)

Deferred taxes 18 (1,373) (1,391)

Deferred tax assets (2,013) 140 2,153

Total 5,764 6,324 560


The reconciliation between tax expenses and theoretical budget is shown in the tables below.

Temporary differences deductible in future fiscal years relate mainly to provisions for personnel costs andare recognized on an accrual but are not yet paid. The reversal of the temporary differences from previousfiscal years refers to the use of the funds provided in previous fiscal years, while the value of the differenceswill not be reversed in subsequent periods primarily due to the non-deductible portion of expenses andundeductible taxes.

Permanent differences are attributable to non-deductible costs for IRAP purposes primarily related topersonnel costs.

IRES RECONCILIATION

Thousands of euro Taxable income IRES

Operating result before taxes on current assets net of deferred tax 35,609Theoretical IRES 13,531Temporary differences taxable in future fiscal years (32,054)Temporary differences deductible in future fiscal years 10,260Reversal of temporary differences from previous fiscal years 16,029Differences that will not be reversed in future fiscal years (13,825)Ace 1,566Taxable income for IRES 17,585

Total IRES 5,288

IRAP RECONCILIATION

Thousands of euro Taxable income IRAP

Difference between production value and cost 49,435IRAP 2,383Permanent differences (1,149)Taxable income for IRAP 48,286

Provision for current IRAP for the fiscal year 2,269

Certification of the ConsolidatedFinancial Statements pursuant to Article 26 of the bylawsGSE Group

129GSE Group Certification of the Consolidated Financial Statements pursuant to Article 26 of the bylaws

Independent Auditors’ Report GSE Group

139GSE Group Independent Auditors’ Report

141GSE Group Independent Auditors’ Report

Statutory Auditors’ ReportGSE Group

143GSE Group Statutory Auditors’ Report

145GSE Group Statutory Auditors’ Report

2012

Financial StatementsGSE S.p.A.

150 Financial Statements 2012

Financial Statements index


Summary of results 154

Financial results of GSE S.p.A. 154Pass-through items 156Marginal items 156

Investments 161Renewable energy and natural gas storage 161Buildings and facilities of relevance 161IT infrastructure 161Other company applications 161

Relations with subsidiaries 162Reports on the energy items with AU 162Reports on the energy items with GME 162Reports on the energy items with RSE 162

Annual Financial Statements 165

Balance Sheet Assets 166Balance Sheet Liabilities 167Income Statement 168

Notes to the Financial Statements 171

Structure and content of the Financial Statements 173

Evaluation criteria 174Intangible assets 174Tangible assets 174Financial fixed assets 174Receivables and payables 175Cash and cash equivalents 175Prepayments and accrued income 175Provisions for risks and charges 175Pension premium for severance indemnities 175Memorandum accounts 175Capital grants 175Revenues and costs 176Dividends 176Income taxes for the year 176

151Index

Balance Sheet - Assets 178Receivables from shareholders for unpaid capital 178Fixed assets 178Current assets 181

Shareholders’ Equity and Liabilities 186Shareholders’ Equity 186Provisions for liabilities and charges 187Provision for severance indemnities 189Accounts payable 190Accrued expenses and deferred income 192Guarantees and other accounts 193

Commitments and contingencies off the Balance Sheet 194Disputes 194Costs and revenues related to handling energy 196

Income Statement 198Value of production 198Production costs 200Financial income and expenses 204Extraordinary income and expenses 205Income taxes, current and deferred 205

Certification of the Financial Statements pursuant to Article 26 of the bylaws 209



Report on Operations GSE S.p.A.

153GSE S.p.A. Report on Operations


Summary of results

With regard to the descriptive elements that characterize the management of GSE (for example: the activitiesof 2012, the events subsequent to year end, the particulars relating to human resources, the system ofcontrols and risks), please refer to the contents of the report on the financial statements of the Group. Thefollowing table shows a summary of the financial results of GSE, investments and transactions withsubsidiaries.

Financial results of GSE S.p.A.

The results of operations for 2012, compared to 2011, are summarized in the following table, obtained byreclassifying the Income Statement prepared for statutory purposes.For a better understanding of the economic and financial status of the company, in the financial statementwe gave separate evidence of the pass-through, of both the electric and gas sector, compared to those onthe sidelines, which are all the revenues intended for both covering the operating costs and remuneratingthe invested capital.

SUMMARY OF RESULTS - GSE S.P.A.2010 2011 2012

Income Statement (in millions of euro)Value of production 8,086.4 11,518.5 14,785.0EBITDA 12.8 6.5 8.4Operating profit 6.6 (0.9) (0.8)Net profit 18.2 19.0 19.2

Balance Sheet (in millions of euro)Net fixed assets 87.4 96.5 99.7Net working capital (151.0) 254.9 282.6Money (42.6) (38.0) (32.5)Shareholders’ Equity 127.2 134.2 141.5Net financial debt (cash) (233.4) 179.2 208.3

Operating DataInvestments (in millions of euros) 9.8 16.4 12.0Average number of staff 335 419 508Headcount at December 31 377 494 570ROE 14.3% 14.1% 13.6%


RECLASSIFIED INCOME STATEMENT


Pass-through itemsEnergy pass-through itemsRevenues Revenues from electricity sales and revenues 3,991,178 4,554,837 563,659CCSE and A3 contributions 7,204,253 9,767,398 2,563,145Revenues from sales of Green Certificates 2,380 7,905 5,525Net contingent assets 166,502 209,953 43,451Total 11,364,313 14,540,093 3,175,780

Costs Costs of the purchase of CIP6 energy and ancillary charges 3,753,044 3,772,916 19,872Costs of the purchase of RID, TO, SSP energy and ancillary charges 2,320,396 3,320,121 999,725Costs of the purchase of Green Certificates 1,359,853 1,422,073 62,220Contributions for photovoltaic incentives 3,931,020 6,024,983 2,093,963Total 11,364,313 14,540,093 3,175,780

Gas pass-through itemsRevenues Contributions from CCSE to cover Virtual Storage gas charges 55,036 23,580 (31,456)Revenues from physical transitional measures Virtual Storage gas - 82,158 82,158Total 55,036 105,738 50,702

Costs Costs for contributions for Virtual Storage gas 55,036 11,459 (43,577)Costs for physical transitional measures Virtual Storage gas - 94,279 94,279Total 55,036 105,738 50,702

Balance of pass-through items - - -

Economic pass-through itemsRevenues Revenues from sales and services 52,971 63,083 10,112

A3 contributions to cover GSE operating costs 33,006 37,617 4,611A3 contributions to cover direct costs 5,245 5,869 624Fee to cover administrative costs - Dedicated Withdrawal 5,511 7,244 1,733Fee to cover administrative costs - Net Metering 5,563 9,446 3,883Fees related to RECS 1,238 762 (476)Fees related to the costs of the Energy Account investigation - 446 446Consideration for IAFR qualification systems 381 574 193Fees related to foreign CO and GO-FER 2,027 1,125 (902)

Other revenues and income from performance and services 10,263 12,353 2,090Contingent assets 5,911 6,324 413Total 69,144 81,760 12,616

Costs Personnel cost 28,897 34,299 5,402Other operating costs 33,115 38,529 5,414Contingent liabilities 659 573 (86)Total 62,671 73,401 10,730

EBITDA 6,474 8,359 1,885

Depreciation and impairment 7,375 9,194 1,819

Operating income (901) (835) 66

Income from investments 13,104 12,288 (816)Net income (expense) 9,898 8,941 (957)

Income before extraordinary items and taxes 22,101 20,394 (1,707)

Extraordinary net income (expense) (570) 875 1,445

Income before taxes 21,531 21,269 (262)

Taxes (2,571) (2,039) 532

Net profit for the period 18,960 19,230 270


Pass-through itemsElectricity sector

Total revenues amounted to 14,540,093 thousand euro, with an increase of 3,175,780 thousand euro overthe previous year mainly due to higher contributions from CCSE (2,563,145 thousand euro) necessary inorder to compensate for the imbalance of economic items that are covered in the A3 component. Theincrease in energy sales (563,659 thousand euro) is due to the inherent component of the sale of electricityon the Power Exchange which increased due to higher volumes traded.The net period income (209,953 thousand euro) mainly includes the amounts allocated in the previous yearmore than disbursed for contributions relating to photovoltaic plants (52,433 thousand euro), as well asenergy-related CIP6 items (108,496 thousand euro) and the imbalances (97,696 thousand euro), partiallyoffset by contingent liabilities related to the Dedicated Withdrawal (18,638 thousand euro) and the NetMetering (26,378 thousand euro). Similarly, the costs to be incurred, amounting to 14,540,093 thousand euro, show an increase of 3,175,780thousand euro compared to the previous year, due to higher costs related to the encouragement ofphotovoltaic (2,093,963 thousand euro), as well as the lots relating to the system of Dedicated Withdrawaland Net Metering (999,725 thousand euro). This growth is due to the increase of photovoltaic systems undercontract and to the greatest amount of energy consumed. More moderate increases related to the costs ofthe Green Certificates (62,220 thousand euro) and to payables for purchases of CIP6 energy (19,872thousand euro).

Virtual Storage gas

The amount of 94,279 thousand euro relates to the charges against the stackers who provided the servicesof Virtual Storage of natural gas as part of the transitional measures provided for by Legislative Decree130/10. The amount of 11,459 thousand euro refers instead to the residual contributions paid to the financialinvestors as part of the transitional measures. These costs have been covered in both economicconsideration paid by investors as part of the physical transitional measures (82,158 thousand euro) and inthe specific tariff component to GSE by the CCSE (23,580 thousand euro).

Marginal itemsRevenues from sales and services increased by 10,112 thousand euro; the increase is primarily due to theincrease in contributions arising from the A3 tariff component to cover the operating costs of GSE (4,611thousand euro) and those related to covering direct costs incurred by GSE (624 thousand euro) for theprovision of services by specific resolutions issued by the Authority, including: the management of thecontact center; the improvement of the forecasts of electricity produced by plants using renewable non-programmable checks and inspections on site for the plants’ growth incentives. The growth in considerationof the Dedicated Withdrawal regime (3,883 thousand euro) and revenues, not present last year, linked to thefee for the costs of investigation of the Fifth Energy Account (446 thousand euro), and is partially offset bylower revenues for the CO-FER fee, foreign GO (902 thousand euro) and RECS (476 thousand euro).Other revenues and income from performance and other services recorded an increase (2,090 thousandeuro), mainly due to higher revenues from services provided to Group companies and third parties (2,099thousand euro), partially offset by a decrease in minor items. The increase in contingent assets (413 thousand euro) was attributable to higher fees arising from the NetMetering (1,349 thousand euro) relating to previous periods. This increase was offset by the lower amountof the partial release of some funds (4,367 thousand euro), compared to the previous year (5,058 thousandeuro), which affected the Litigation Fund and other risks to the definition in favor of the company of somedisputes mainly related to the cessation of transmission and dispatching activities. Labour costs increased by 5,402 thousand euro compared to the previous year, to be ascribed to theincrease of the average, increased from 419 people in 2011 to 508 in 2012.The other operating costs, which refer to the acquisition of external resources more specifically detailed inthe Notes, increased by 5,414 thousand euro as a result of more intense operations related to thedevelopment of the activities of GSE.The gross operating margin resulted positively with 8,359 thousand euro, an increase of 1,885 thousandeuro compared to the previous year.Depreciation and amortization increased by 1,819 thousand euro compared to 2011 for the entry into serviceof new investments in new IT application, increases or improvements to existing ones, as well as purchasesof plants and improvements pertaining to real estate owned.Provisions were not performed in 2012, except for those relating to the provision for early retirementincentives and recorded extraordinary charges. The operating result was a loss of 835 thousand euro.


The financial data indicate a slight reduction partly due to lower income from investments (816 thousandeuro). They also reduced other net income (957 thousand euro) due to the decrease in interest rates on thefinancial markets that were characterized in the fiscal year 2012.Extraordinary management has a positive balance of 875 thousand euro, an increase compared to last yearof 1,445 thousand euro and consisting mainly of extraordinary income for IRES refund on deductible IRAPpaid in previous years, in application of the rule in article 2, paragraph 1 quater of Decree Law 201/11 (903thousand euro). This value is partly offset by non-recurring criminal charges (90 thousand euro), and aprovision for early retirement incentives (31 thousand euro).Income taxes consist of current taxes for IRES and IRAP (1,175 thousand euro and 787 thousand euro), whichhave been compounded by the additional IRES, so-called Robin Tax, amounting to 449 thousand euro.Deferred taxes amounting to 372 thousand euro were also reduced due to the restructuring of the fund.Net profit for the fiscal year amounted to 19,230 thousand euro.

The synthesis of the capital structure compared to the previous year is shown in the following table.

RESTATED BALANCE SHEET


Net fixed assets 96,533 99,658 3,125

Intangible assets 8,652 12,342 3,690Tangible assets 70,352 69,469 (883)Financial assets:

Investments 16,488 16,488 -Other receivables 1,041 1,359 318

Net working capital 254,910 282,611 27,701

Net receivables (debt) from CSE 1,935,336 1,584,577 (350,759)Loans and advances to customers 1,116,132 1,276,371 160,239Net receivables (debt) from subsidiaries 450,018 521,476 71,458Prepaid expenses and other receivables 1,289 1,269 (20)Dues to suppliers (3,170,282) (2,956,020) 214,262Accrued expenses and other payables (56,240) (125,849) (69,609)Due to tax authorities for VAT and other taxes (21,343) (19,213) 2,130

Gross capital 351,443 382,269 30,826

Sundry provisions (37,973) (32,468) 5,505

Provision for deferred taxes (807) (435) 372Other provisions (33,270) (28,216) 5,054TFR (3,896) (3,817) 79

Net invested capital 313,470 349,801 36,331

Shareholders’ Equity 134,223 141,453 7,230

Share capital 26,000 26,000 -Legal reserve 5,200 5,200 -Other reserves 84,063 91,023 6,960Profit for the period 18,960 19,230 270

Net financial debt (cash) 179,247 208,348 29,101

Middle to long term dues to the bank 20,533 19,067 (1,466)Short-term dues to the bank 166,996 283,870 116,874Cash and cash equivalents (8,282) (94,589) (86,307)

Cover 313,470 349,801 36,331


Intangible assets amounted to 12,342 thousand euro, an increase of 3,690 thousand euro due to investmentsmade during the fiscal year that amounted to 8,067 thousand euro, net of amortization of 4,156 thousandeuro and other write-downs (221 thousand euro). The investments relate mainly to changes in the variouscomputer applications used (6,111 thousand euro) and the actions taken on third party property leased byGSE (815 thousand euro).Tangible fixed assets amounted to 69,469 thousand euro, showed a reduction of 883 thousand euro as aresult of new investments amounting to 3,934 thousand euro, of the net accumulated depreciation of 4,740thousand euro and other write-downs and changes of a modest amount (78 thousand euro); investmentsrefer to the purchase of hardware (3,113 thousand euro).Financial fixed assets relate mainly to investments in subsidiaries AU, GME and RSE, measured on thebasis of the cost (16,488 thousand euro); other receivables (1,359 thousand euro) refer instead to loansgranted to employees.Net working capital resulted positively with 282,611 thousand euro, broadly in line with the values of theprevious year. The positive change (27,701 thousand euro) is mainly attributable to the increase in trade payables (214,262thousand euro), due in a large part to items related to CIP6 energy based on the provisions of MD April 24,2013. A further increase is attributable to trade receivables (160,239 thousand euro) as a result of the dynamicsof year-end billing, and receivables from subsidiaries (71,458 thousand euro) mainly related to the Group VAT. This increase is partially absorbed by a contraction of net receivables to the CCSE (350,759 thousand euro)due to a lower incidence of net charges that are covering the A3 component compared to the same revenuethat occurred in 2012, as well as by an increase in accrued expenses, deferred income and other payables(69,609 thousand euro). The change in this item is due to the receipt of funds for the participation of GSE, asauctioneer on behalf of the Italian State, to the placement of CO2 emission at the European level, sums thatGSE holds as depositary for the subsequent reversal to the Italian State.The funds are reduced as a result of different uses and releases relating to positions prudently set aside inthe past, but turned out to be no longer needed.With regard to the media coverage, it is shown that on December 31, 2012, the Shareholders’ Equityincreased due to the result for the fiscal year and earnings before taken to the reserves, net of dividendspaid to the shareholders.The major short-term bank borrowings (116,874 thousand euro), which are accompanied by increased liquidity(86,307 thousand euro), jointly determine the incremental change in net debt. The positive change inavailability (76,593 thousand euro) is partly due to year end receipts of the amounts for the placement of CO2emission described above.

The complete picture of the reasons behind the different configuration of cash flows compared to 2011 isshown in the following statement of cash flows.


From the statement of cash flows, it can be observed that the net debt is more pronounced than thatrecorded at the end of 2011, which was essentially determined by the change in net working capital;commented on earlier.

STATEMENT OF CASH FLOWS Thousands of euro 12.31.2011 12.31.2012

Cash (Debt) at the beginning of the period 233,415 (179,247)

Cash flow from (used in) operating activitiesProfit for the year 18,960 19,230Depreciation and amortization 7,375 9,194Increases (Decreases) of the funds (4,626) (5,505)Total 21,709 22,919

Change in net working capital (405,877) (27,701)

Operating cash flow (384,168) (4,782)

Cash flow from (used in) investing activitiesDisposals (Investments) in intangible assets (4,065) (8,067)Disposals (Investments) in tangible assets (12,299) (3,934)Disposals (Investments) in financial assets (130) (318)Total (16,494) (12,319)

Cash flow from (used in) financing activitiesPayment of dividends (12,000) (12,000)Total (12,000) (12,000)

Cash flow for the period (412,662) (29,101)

Cash (Debt) at the end of the period (179,247) (208,348)


Investments

Investments for the fiscal year amounted to 12,001 thousand euro, as shown in the following table.

Renewable energy and natural gas storageThe investments made in 2012 related to the core business applications primarily concerned with:• the evolutionary maintenance of systems for administrative, technical and commercial photovoltaics

pursuant to the provisions of MD July 5, 2012;• the evolutionary maintenance of management systems of the Green Certificates, the management of the

recognition of the production plants in cogeneration and the management of the International Certificates;• the evolutionary maintenance of systems for the administrative, technical and commercial incentives for

the production of electricity from plants using renewable sources of energy other than photovoltaic,pursuant to the provisions of MD July 6, 2012;

• the development and adaptation of applications for improving the predictability of the emissions of theelectricity produced by plants using renewable non-programmable sources;

• the evolutionary maintenance of systems for the management and administrative and commercialmanagement of the Net Metering and the Dedicated Withdrawal;

• the development of application systems for the management of the Virtual Storage of gas.

Buildings and facilities of relevanceThe main item of investment concerns the restructuring, information upgrades and installation of new spacesin the building located in viale Maresciallo Pilsudski n. 124. Additional investments concerning the propertyowned by GSE located in via Guidubaldo del Monte n. 45, aimed to consolidate the technological systems,complete the construction of masonry for the completion and improvement of the spaces and purchase offurniture and furnishings. Finally, the interventions were carried out at the new premises acquired on the sixth floor of the buildinglocated in viale Tiziano n. 25 as well as unplanned maintenance of the property owned by GSE on vialeMaresciallo Pilsudski n. 92.

IT infrastructureThe investments relative to the computing infrastructure at GSE primarily concerned:• the upgrading of the hardware and software necessary for the management of new business activities;• the purchase of hardware equipment for the new server farm;• the consolidation of the Business Continuity Management plan to restore services in cases of emergency; • the adaptation of licenses and software products of general interest;• the upgrading of the infrastructure for the corporate LAN network connection across the GSE headquarters;• the implementation of the Business Service Monitoring system and the strengthening of systems of defense

and security.

Other company applicationsInvestments relating to other business applications mainly related to the development of the internet andintranet sites in the company, the implementation of some improvements to the accounting system and thedevelopment of the new Smart CDC application, which aims to increase the efficiency of the activities relatedto the planning and budget cycle.

INVESTMENTS


Renewables and gas storage 2,146 3.713 1,567Property and pertaining equipment 9,384 1,853 (7,531)IT infrastructure 4,008 5,410 1,402Other business applications 826 1,025 199

Total 16,364 12,001 (4,363)


Relations with subsidiaries

GSE, in addition to commercial transactions relating to the management of energy items, provides subsidiaryservices of various types to the company that are governed by specific contracts. In particular, it providesassistance and consulting services, utilization of furnished spaces, leasing and building services. In addition, costs related to the presence of seconded personnel from the Group companies should berecognized.

Reports on the energy items with AUIn 2012 there are no energy items of income or expense to the subsidiary AU.

Reports on the energy items with GME In 2012, GSE sold CIP6 energy, the Dedicated Withdrawal, the feed-in tariff and Net Metering to GME, andalso made purchases in the MGP in relation to the needs of supplies for the vesting in agreement with RFI.GSE, as operator of the electricity market, is obliged to pay the fees for each MWh traded on the same market.

Reports on the energy items with RSEIn 2012, there are no energy items of income or expense to the subsidiary RSE.

The results of the asset values of the subsidiaries are detailed in the Notes, and the table below shows theamounts posted for the fiscal year relating to items of revenue and costs associated with the trading ofenergy items, in addition to those relating to performance contracts.


REVENUES


Acquirente Unico S.p.A.Revenues from performance and services 3,423 4,935 1,512

Total 3,423 4,935 1,512

Gestore dei Mercati Energetici S.p.A.Revenues from the sale of energy on MGP and MI 2,915,356 3,861,338 945,982Revenues from performance and services 2,887 3,262 375

Total 2,918,243 3,864,600 946,357

Ricerca sul Sistema Energetico S.p.A..Revenues from services and other services 232 639 407

Total 232 639 407

COSTS


Acquirente Unico S.p.A.Costs for seconded personnel and other services 29 90 61

Total 29 90 61

Gestore dei Mercati Energetici S.p.A.Costs for the purchase of energy on MGP and MI 400,557 416,330 15,773Fees for each MWh traded on the market 1,452 1,811 359Costs for seconded personnel and other services 144 182 38

Total 402,153 418,323 16,170

Ricerca sul Sistema Energetico S.p.A.Costs for technical advice 1,448 1,717 269

Total 1,448 1,717 269

165GSE S.p.A. Annual Financial Statements

Annual Financial Statements GSE S.p.A.


BALANCE SHEET ASSETS

Euro Partial Total Partial Total ChangeDecember 31, 2011 December 31, 2012

A) Unpaid receivables from shareholders - - -B) Fixed

I. Intangible assets3) Industrial patents and rights to use

intellectual property 4,764,986 8,161,952 3,396,9664) Concessions, licenses, trademarks

and similar rights 12,892 12,134 (758)6) Assets in progress 22,039 135,303 113,2647) Other 3,852,333 4,032,452 180,119

8,652,250 12,341,841 3,689,591

II. Property, plant and equipment1) Land and buildings 52,169,136 50,756,793 (1,412,343)2) Plant and machinery 8,726,528 8,480,534 (245,994)3) Industrial and commercial equipment 132,486 130,250 (2,236)4) Other assets 9,297,354 10,100,975 803,6215) Assets in progress 26,780 - (26,780)

70,352,284 69,468,552 (883,732)

III. Financial assets1) Investments in:

a) subsidiaries 16,488,310 16,488,310 -Due within Due within12 months 12 months (thousand (thousand

euro) euro)

2) Credits:d) to others - 1,040,737 210 1,358,888 318,151

17,529,047 17,847,198 318,151

Total Fixed Assets 96,533,581 99,657,591 3,124,010

C) Current assetsI. Inventory - - -

Due in over Due in over12 months 12 months (thousand (thousand

euro) euro)

II. Credits1) To clients 1,116,132,440 1,276,370,871 160,238,4312) To subsidiaries 530,274,506 583,239,496 52,964,9904 bis) Tax credits 10,000 15,557,949 10,903 16,664,371 1,106,4225) To others 821,965 619,344 (202,621)6) To Electricity

Equalization Fund 1,935,336,497 1,584,577,356 (350,759,141)3,598,123,357 3,461,471,438 (136,651,919)

III. Financial assets not held as fixed assets - - -

IV. Cash and cash equivalents1) Bank and postal deposits 8,268,767 94,565,295 86,296,5283) Cash and cash equivalents 12,804 23,886 11,082

8,281,571 94,589,181 86,307,610

Total Current Assets 3,606,404,928 3,556,060,619 (50,344,309)

D) Accrued expenses and deferred incomeAccrued income - -Prepaid assets 467,272 650,444 183,172Total accrued expenses and deferred income 467,272 650,444 183,172

Total Assets 3,703,405,781 3,656,368,654 (47,037,127)

167GSE S.p.A. Annual Financial Statements

BALANCE SHEET LIABILITIES

Euro Partial Total Partial Total ChangeDecember 31, 2011 December 31, 2012

A) Shareholders’ EquityI. Capital 26,000,000 26,000,000 -IV. Legal reserve 5,200,000 5,200,000 -VII. Other reserves

Capital contribution reserve 291,393 291,393 -Available reserve 83,772,086 90,732,494 6,960,408Rounding reserve - - -

VIII.Profit (Loss) carried forward - - -IX. Profit for the period 18,960,408 19,229,614 269,206

Total Equity 134,223,887 141,453,501 7,229,614

B) Provisions for Risks and Expenses1) For pension

and similar obligations 643,435 527,000 (116,435)2) For taxes, including deferred 806,932 435,281 (371,651)3) Other 32,627,227 27,689,351 (4,937,876)

Total Provisions for Risks and Charges 34,077,594 28,651,632 (5,425,962)

C) Indemnity severance pay 3,895,510 3,817,328 (78,182)Due in over Due in over 12 months 12 months (thousand (thousand

euro) euro)

D) Debts4) Bank dues

Medium and long-termfunding 20,533 20,533,333 19,067 19,066,667 (1,466,666)

Short-term funding 166,996,011 283,870,213 116,874,2027) Dues to suppliers 3,170,281,521 2,956,020,465 (214,261,056)9) Dues to subsidiaries 80,257,266 61,763,277 (18,493,989)12) Dues to tax authorities 36,901,495 35,876,770 (1,024,725)13) Dues to Social Security

institutions and social security 1,396,484 1,622,131 225,64714) Other dues 7,336,914 86,363,106 79,026,192

Total dues 3,483,703,024 3,444,582,629 (39,120,395)

E) Accrued expenses and deferred income

Accrued expenses 13,802 14,405 603Deferred income 47,491,964 37,849,159 (9,642,805)Total accrued expenses and deferred income 47,505,766 37,863,564 (9,642,202)

Total Liabilities 3,569,181,894 3,514,915,153 (54,266,741)

Total Equity and Liabilities 3,703,405,781 3,656,368,654 (47,037,127)

MemorandumGuarantees received 301,112,771 377,863,519 76,750,748Guarantees loaned 469,043 469,043 -Owned shares held by third parties 8,988,000 1,100,000 (7,888,000)Commitments 107,014,219,834 132,812,292,513 25,798,072,679

Total Memorandum accounts 107,324,789,648 133,191,725,075 25,866,935,427


INCOME STATEMENT

Euro Partial Total Partial Total ChangeFinancial year 2011 Financial year 2012

A) Production values1) Revenues from sales and services 11,295,638,721 14,483,190,814 3,187,552,0935) Other revenues and income 222,818,816 301,798,328 78,979,512

Total Production values 11,518,457,537 14,784,989,142 3,266,531,605

B) Production costs6) Raw materials, consumables and goods 7,232,538,244 7,931,633,049 699,094,8057) Services 30,968,762 63,043,665 32,074,9038) Use of third party assets of unconsolidated subsidiaries 54,504,845 2,069,374 (52,435,471)9) Personnel

a) Wages and salaries 20,887,276 24,865,029 3,977,753b) Social security and contributions 5,839,918 6,934,717 1,094,799c) Indemnities 1,467,077 1,694,755 227,678d) Provision for pensions and similar obligations 92,970 (13,159) (106,129)e) Other costs 609,278 817,239 207,961

28,896,519 34,298,581 5,402,062

10) Depreciation and amortizationa) Amortization of intangible assets 3,377,610 4,154,789 777,179b) Depreciation of tangible fixed assets 3,997,342 4,790,462 793,120c) Other write-downs of fixed assets - 248,440 248,440

7,374,952 9,193,691 1,818,739

12) Provisions for risks - - -14) Other operating expenses 4,160,708,156 6,739,402,208 2,578,694,052

Total Production costs 11,514,991,478 14,779,640,568 3,264,649,090

Difference between Production values and costs (A-B) 3,466,059 5,348,574 1,882,515

C) Financial income and expenses15) Income from investments:

d) Other income:from subsidiaries 13,104,094 12,287,764 (816,330)

13,104,094 12,287,764 (816,330)

16) Other financial income:a) From long-term receivables:

other 9,564 11,331 1,767d) Other income:

other 10,894,986 9,750,115 (1,144,871)10,904,550 9,761,446 (1,143,104)

17) Interest and other financial charges:other 5,372,817 7,004,047 1,631,230

5,372,817 7,004,047 1,631,230

Total income and financial expenses 18,635,827 15,045,163 (3,590,664)

D) Impairment of financial assetsE) Extraordinary income and expenses

20) Income:various 5,958 995,736 989,778

5,958 995,736 989,778

21) Expenses:various 576,308 120,834 (455,474)

576,308 120,834 (455,474)

Total extraordinary income and expenses (570,350) 874,902 1,445,252

Profit before tax (A-B+C+D+E) 21,531,536 21,268,639 (262,897)

22) Current and deferred income taxes (2,571,128) (2,039,025) 532,103

23) Profit for the period 18,960,408 19,229,614 269,206

171GSE S.p.A. Notes to the Financial Statements

Notes to the Financial StatementsGSE S.p.A.


Structure and content of the Financial Statements

The financial statements for the year ended December 31, 2012 have been prepared in compliance with theregulations of the Civil Code and in accordance with the accounting standards prepared by the NationalCouncil of Chartered Accountants, as amended by the Organismo Italiano di Contabilità (“OIC”) inconnection with the reform of company law, and the documents issued by the OIC. Pursuant to article 2423, the financial statements consist of the Balance Sheet (prepared using the provisionsof articles 2424 and 2424 bis of the Civil Code), the Income Statement (prepared according to the schemeset forth in articles 2425 and 2425 bis of the Civil Code) and the Notes. As expected from article 2423,paragraph 5, of the Italian Civil Code, the Balance Sheet and the Income Statement have been prepared ineuro, without decimals, while the information of the Notes, commenting on the Balance Sheet and IncomeStatement, are expressed in thousands of euro. As provided in article 2423, paragraph 5, of the Italian Civil Code, all the assets, liabilities and IncomeStatement at December 31, 2012 are confronted with the corresponding amounts of the previous year. It should be noted that, in order to facilitate the reading of the Balance Sheet and Income Statement, itemshave been eliminated and preceded by Arabic numerals whose balance is zero, and, in accordance withthe recommendations by OIC 12, have been appropriately adjusted and added to the Balance Sheet asitems relating to receivables and payables in the Electricity Equalization Fund Sector. The Notes provide, in addition to the information required by article 2427 of the Civil Code and other laws,all other information considered necessary to give a true and fair view of the financial position of the companyand of the profit or loss, even if not provided for in specific legislation. For a better representation of the equity, financial and economic situation of the company, in support of theReport on Operations, the Balance Sheet and Income Statement in summary form, as well as the cash flowstatement, have been prepared. It is also noted that during the year there were no exceptional circumstances that would require the use ofthe exemptions provided for in article 2423, paragraph 4, of the Civil Code, therefore the evaluation ofBalance Sheet items was carried out in compliance with the provisions of article 2426 of the Civil Code.The following are the accounting policies adopted, conformed to the principles described in articles 2423and 2423 bis of the Civil Code, which set out the criteria used in the evaluation of the different budget items,in determining depreciation and provisions.


Evaluation criteria

In preparing the financial statements at December 31, 2012, the evaluation criteria set out in article 2426 ofthe Civil Code were adopted, homogeneous with respect to the previous year, supplemented by theaccounting standards prepared by the National Council of Chartered Accountants, as amended by OIC inrelation to the reform of company law and the documents issued by the OIC. The principles and criteria ofsignificant accounting are illustrated below.

Intangible assetsIntangible assets are stated at cost of acquisition or production cost, including transaction costs directlyattributable. The cost as defined above is written down in the event of impairment losses and restored(reduced by the related amortization) the absence of the assumptions underlying these assessments.Depreciation is calculated on a straight-line basis and is determined based on the expected economic utility.The costs for the use of intellectual property rights are amortized over a period of estimated useful life ofthree years.The marks refer to the costs incurred for their acquisition and are amortized over a period of 10 years.The voice of leasehold improvements includes costs incurred on property not owned by GSE and areamortized over the shorter of the useful life of the costs incurred and the residual of the lease, taking intoaccount any renewal period.

Tangible assetsTangible fixed assets are stated at cost of acquisition or production cost, including directly attributable costs.Depreciation is calculated on the basis of depreciation rates and reflect the remaining useful life of the assetsthemselves. The cost, as defined above, is written down in the event of impairment losses and restored (reduced by therelated depreciation) if they are less than the assumptions of the actual assessment. The main technicaland economic depreciation rates are listed below.

The costs of ordinary maintenance, as they don’t amend the consistency or the potential of the fixed assets,are charged to the Income Statement for the year in which they are incurred; the maintenance costs, however,are attributed to the nature of the related assets and depreciated over the remaining useful life of the asset.

Financial fixed assetsInvestments in subsidiaries, associated companies and other companies are stated at cost of purchaseor subscription.The cost of the investment is written down in the case where the investment achieve long-term losses andare not expected in future profits to be sufficient enough to absorb the losses themselves, if they are lessthan the reasons for the write-down, the original value is reinstated in subsequent years.The financial assets also include loans to employees for loans to employees recorded at their nominalremaining value.

DEPRECIATION RATES

% 12.31.2012

Buildings 2.5Industrial and commercial equipment 6/10Work stations 20PC 33.33


Receivables and payablesReceivables are stated at their estimated realizable value and classified as financial fixed assets or currentassets in relation to their nature and purpose. The above values are the difference between the nominal values of trade receivables and the allowance fordoubtful accounts which directly reduces the value of the corresponding asset item.Payables are stated at their nominal value, those for current taxes are recorded at the rates in force, appliedto a realistic estimate of taxable income. If taxes payable are less than tax credits, advances paid and taxeswithheld, the difference is a receivable recognized in the Balance Sheet.

Cash and cash equivalentsCash and cash equivalents are stated at their nominal value.

Prepayments and accrued incomeThey include portions of revenues and expenses relating to several years depending on the principle of accruals.

Provisions for risks and chargesProvisions for risks and charges include costs and charges of a definite nature, whose existence is certainor probable, but whose, at the end of the fiscal year, have an uncertain amount or date of occurrence.

Pensions and similar obligations

They include the indemnities in lieu of notice to staff in which they are entitled, pursuant to the CollectiveBargaining Agreement of labor and union agreements.

Other provisions for risks and charges

The appropriations of these funds in the financial statements reflect the best possible estimate – based onavailable information – in order to cover losses or liabilities of a specific certain or probable nature, but whichat the end have an undetermined amount or date of occurrence.

Pension premium for severance indemnitiesIt is allocated throughout the period of employment of employees in compliance with applicable laws andlabor contracts in force, and reflects the accrued liability in respect of all employees on the Balance Sheetdate, net of advance payments made in accordance with the law, and the proportion allocated to pensionfunds. Following the entry into force of Law 296/06 (Finance Act 2007), the TFR also reduces the sharestransferred to the Treasury Fund set up by INPS.

Memorandum accountsThe evaluation criteria and the contents of these accounts comply with OIC 22.

Capital grantsThe contributions and credits are entered in the accounts at the time when there is a formal authorizationfor disbursement by the granting body suspended in the Income Statement, through deferred, pending thepassage in exercise of the asset to which they relate. At the time of the passage in exercise of the asset towhich they relate they are recognized as a deduction of the value of the same and credited to the IncomeStatement due to the amortization of the asset.


Receivables are stated at their estimated realizable value and classified as current assets in relation to theirnature and purpose.

Revenues and costsThey are recognized in accordance with the principle of prudence and accrual and are recognized net ofrebates and discounts.Revenues from other services and supplies of goods are recognized when the service is provided or at thetime of transfer of ownership of the assets.Revenues and expenses for the sale of electricity are integrated using estimates based on the applicationof the law and of the AEEG.In regard to the items of income and expense relating to the Green Certificates, it is reported that in February2013, the OIC has regulated the matter specifically, with the issue of OIC 7 accounting principle. Therefore,in accounting for amounts relating to this case, it is subject to the rules of this principle, which also reflectthe method of accounting adopted by GSE in previous years.

DividendsDividends are recognized in the period in which the Shareholders’ Meeting decides on the distribution.

Income taxes for the yearCurrent taxes on income are recorded as tax liabilities based on estimates of taxable income determined inaccordance with the provisions in force and taking into account the applicable benefits and tax credits.In accordance with OIC 25, deferred taxes based on temporary differences between the gross profit andtaxable income assumptions are detected, if any exist.If the recalculation shows a tax in advance, it shall be entered in the Balance Sheet as deferred tax assetsto the extent that there is reasonable certainty of its future recovery.Deferred tax assets are recorded under deferred tax assets, deferred taxes in the provision for deferred taxes.Deferred taxes are not recognized in deferred tax liabilities if it is unlikely that the debt arises.


Balance Sheet - Assets

Receivables from shareholders for unpaid capitalAt December 31, 2012 on this item there are no balances.

Fixed assets - 99,658 thousand euroFor tangible and intangible assets, as required by article 2427 of the Civil Code, the following tables show,for each item, the following information: the original cost, depreciation, movements during the year(increments, disposals, impairment losses, other movements), and the final balance.The following table provides details of the movements in the 2012 fiscal year with a comment on thecomposition of existing balances at year end.

Intangible assets - 12,342 thousand euro

The movements during the year are set out below.

Industrial patent rights and rights to use intellectual property -8,162 thousand euro

The industrial patent rights and rights to use intellectual property consist mainly of licenses for software andIT applications compared to 2011 and an increase due to investments of 6,111 thousand euro. Theinvestments were mainly:• purchase of licenses software (1,137 thousand euro);• development and adaptation of custom IT applications (277 thousand euro);• evolutionary maintenance for internet and intranet sites (237 thousand euro);• evolutionary development of the applications Sole I and Sole II (728 thousand euro);• development of the BSM - Business Monitoring Control for the monitoring of services and applications in

use (246 thousand euro);• implementation of applications for the management of Guarantees of Origin and CO-FER securities (276

thousand euro);• evolutionary development of the information system for managing and issuing Green Certificates (412

thousand euro).

Thousands of euro Industrial patent rights Concessions, Assets Other Totaland rights to use licenses, in progress

intellectual property trademarks and similar rights

Situation at 12.31.2011Original cost 15,826 45 22 9,667 25,560Accumulated depreciation (11,061) (32) - (5,815) (16,908)

Movements during 2012Investments 6,111 1 135 1,820 8,067Entry into service 16 - (22) 6 -Depreciation and amortization (2,730) (2) - (1,423) (4,155)Write-downs - - - (221) (221)Other variations - - - (1) (1)Balance of movements during 2012 3,397 (1) 113 181 3,690

Situation at 12.31.2012Original cost 21,953 46 135 11,271 33,405Accumulated depreciation (13,791) (34) - (7,238) (21,063)

Balance at 12.31.2012 8,162 12 135 4,033 12,342


The decrease of 2,730 thousand euro is attributable to the amortization of the year.

Concessions, licenses, trademarks and similar rights - 12 thousand euro

This item consists mainly of costs incurred for the changes to the company’s brand.

Construction in progress and advances - 135 thousand euro

Assets under construction relate to some IT applications in the course of completion at year-end 2012.


Other intangible assets during the year have increased by 1,820 thousand euro, and mainly upgrading andstructural adjustment of rented property (815 thousand euro), these interventions, made necessary by businessneeds, have been recorded by GSE, as lessee, under “Leasehold improvements” in accordance with OIC 24.They also made investments in maintenance and evolution of some custom applications currently in use(1,005 thousand euro). The decrease of 1,423 thousand euro is due to the depreciation and 221 thousand euro to the devaluationof the improvements made in previous years on a rented property, whose contract was terminated in 2012.

Tangible fixed assets - 69,469 thousand euro

The consistency and changes for each category of fixed assets are shown in the following table.

The analysis of the movements during the year points out the following.

Land and buildings - 50,757 thousand euro

This item refers to the buildings of property and, compared to the previous year, has increased as a resultof new investments (168 thousand euro) related to the renovation of the buildings of the firm in vialeMaresciallo Pilsudski n. 92 and in via Guidubaldo del Monte n. 45.The decrease is attributable to depreciation for the year (1,580 thousand euro).

Thousands of euro Land and Plant and Industrial and Other Assets Totalbuildings machinery commercial assets in progress

equipment

Situation at 12.31.2011Original cost 63,149 11,210 296 15,979 27 90,661Accumulated depreciation (10,980) (2,483) (164) (6,682) - (20,309)

Movements during 2012Investments 168 634 19 3,113 - 3,934Entry into service - - - - - -Depreciation and amortization (1,580) (880) (22) (2,308) - (4,790)Write-downs - - - - (27) (27)Other variations - - 1 (1) - -Balance of movements during 2012 (1,412) (246) (2) 804 (27) (883)

Situation at 12.31.2012Original cost 63,317 11,844 316 19,091 - 94,568Accumulated depreciation (12,560) (3,363) (186) (8,990) - (25,099)

Balance at 12.31.2012 50,757 8,481 130 10,101 - 69,469


Plant and machinery - 8,481 thousand euro

This item refers to the technological systems of the buildings of the Group, an increase of 634 thousandeuro for investments related mainly to:• interventions on technological systems of the buildings owned by the restructuring and adaptation of the

same (205 thousand euro); • implementation of the phone system based on the “VOIP” (173 thousand euro);• consolidation of the system Interactive Voice Response “IVR” for the contact center (87 thousand euro).The decrease relates to the amortization for the year (880 thousand euro).

Industrial and commercial equipment - 130 thousand euro

The item mainly includes the allocations for the canteen and the bar in the company that have suffered anincrease of 19 thousand euro and a decrease in the amortization of the year amounting to 22 thousand euro.

Other assets - 10,101 thousand euro

This item allocations are related to hardware and the furniture of the company, the increase of the yearamounted to 3,113 thousand euro and relates mainly to:• the provision of hardware for the technological upgrading of IT systems (1,150 thousand euro);• implementation of the Business Continuity Management, designed to ensure business continuity and

service in the face of potential obstacles (462 thousand euro);• technological adaptation of the network infrastructure business (250 thousand euro);• strengthening of security systems through the purchase of hardware and software (220 thousand euro).The decrease of 2,309 thousand euro, relates only to the depreciation.

Assets in progress

This entry records a decrease of 27 thousand euro due to the absence of a project that was in progress inthe previous year.

With regard to the existing privileges on property owned, it should be noted that at December 31, 2012 thebuilding site in via Guidubaldo del Monte n. 45 was mortgaged.

Long-term investments - 17,847 thousand euro

They consist of investments in subsidiaries, and to a lesser extent by loans to staff and security deposits onleases. The increase of 318 thousand euro was due mainly to receivables for loans granted to employees.

Investments in subsidiaries - 16,488 thousand euro

These are stated at cost of purchase or subscription.

INVESTMENTS

Thousands of euro Head Capital at Heritage Profit for the % Share ValueOffice 12.31.2012 equity at year ended possession attributed

12.31.2012 12.31.2012

A. SubsidiariesAcquirente Unico S.p.A. Rome 7,500 12,717 1,329 100 7,500

Gestore dei Mercati Energetici S.p.A. Rome 7,500 23,799 8,600 100 7,500

Ricerca sul Sistema Energetico S.p.A. Milan 1,100 1,977 126 100 1,488


Acquirente Unico S.p.A.The investment amounts to 7,500 thousand euro, representing 100% of the share capital of the company.

Gestore dei Mercati Energetici S.p.A.The investment amounts to 7,500 thousand euro, representing 100% of the share capital of the company.

Ricerca sul Sistema Energetico S.p.A.The investment amounts to 1,488 thousand euro, representing 100% of the share capital of the company.

Other receivables - 1,359 thousand euro

This item mainly includes loans to employees, remunerated at the rates in line with current market rates,which have been granted for the purchase of a first home or for serious family needs and which shall berepaid by the employees on the basis of pre-amortization schedules.

The attached detailed table indicates receivables due later than five years.

Current assets - 3,556,061 thousand euroCredits - 3,461,471 thousand euro

The indication of the falling amounts due after the five year mark is shown in the detailed statement uponcompletion of the review of assets.

Accounts receivable - 1,276,371 thousand euro

The item relating to accounts receivable refers mainly to trade receivables and is related to amounts billedfor both financial items for the year but not yet invoiced in the course of 2012, there was an increase of160,239 thousand euro. The table below shows the details of the entry.

The increase compared with the previous year is due to two opposite effects: on one hand, the increase inreceivables of distribution companies on A3 component (255,051 thousand euro) is mainly due to a highermonthly value of the A3 component given the increasing need to cover the costs for the various forms ofincentives, and, on the other hand, the reduction of receivables relates to dispatching and balancing (119,051thousand euro) in respect to Terna for the improvement of forecasts. The allowance for doubtful accountsis calculated on the basis of appropriate analytical assessments, in relation to the age and the status of theaccount (ordinary, difficult recovery, etc). The decrease of 4 thousand euro is due to a release.


Loans and advances to customersReceivables and other A3 components 838,778 1,093,829 255,051Credit for dispatching and balancing 223,604 104,553 (119,051)Credit for other activities related to energy 82,095 69,904 (12,191)Credits for physical transitional measures Virtual Storage gas - 33,333 33,333Credit for CIP6 electricity 260 6,652 6,392Credit for foreign CO and GO-FER fees 2,421 180 (2,241)Receivables for goods and services other than energy 1,769 711 (1,058)Total loans to customers 1,148,927 1,309,162 160,235

Allowance for doubtful accounts (32,795) (32,791) 4

Total 1,116,132 1,276,371 160,239


Receivables from subsidiaries - 583,240 thousand euro

The item relating to receivables from GSE Group companies has increased by 52,965 thousand euro andturns out to be articulated as follows.

The increase is due to the net effect of:• positive changes, mainly attributable to two cases: an increase in sales of energy in the electricity market

(35,299 thousand euro), due to higher volumes traded with GME, only partly offset by a decline in PUNrecorded in the last two months of 2012 compared to 2011, and an increase in receivables for VATrepayment towards GME and RSE (24,537 thousand euro);

• decreases, due to the reversal of VAT in respect of AU through the mechanisms of liquidation of the Group.

Tax receivables - 16,664 thousand euro

Tax receivables consist mainly of: • refund requested in the tax return for 2008 in the amount of 10,000 thousand euro;• refund requested in 2013 on IRAP inferred from IRES for the tax years 2007-2011 in the amount of 903

thousand euro;• the balance of IRES credit resulting from the last statement of income, net of tax calculated for the year

2012 amounting to 5,764 thousand euro.The item at the end of 2012 showed an increase of 1,106 thousand euro mainly due to IRES and IRAPcalculated for the year and the request for reimbursement made in 2013.

Other receivables - 619 thousand euro

Other receivables at December 31, 2012 showed a decrease compared to last year of 203 thousand euro,and the details are shown in the table below.


Credits to Acquirente Unico S.p.A. 7,369 498 (6,871)

Credits for VAT reversal and other 7,369 498 (6,871)

Credits to Gestore dei Mercati Energetici S.p.A. 522,820 582,629 59,809

Receivables for sale of electricity on the electricity market 506,140 541,439 35,299Credits for VAT reversal and other 16,680 41,190 24,510

Credits to Ricerca sul Sistema Energetico S.p.A. 86 113 27

Credits for VAT reversal and other 86 113 27

Total 530,275 583,240 52,965


Advances to third parties 381 315 (66)Receivables from social security, insurance and others 1 3 2Other credits of a different nature 440 301 (139)

Total 822 619 (203)


Receivables due from Electricity Equalization Fund - 1,584,577 thousand euro

The amount is, for a share equal to 1,572,456 thousand euro, net credit against the CCSE by way of contributionsdue to GSE under “Integrated Text of the Authority for the provision of transmission services, distribution andelectric metering for the regulatory period 2012-2015” and subsequent amendments and additions. Theremainder of 12,122 thousand euro relates to receivables in respect of contributions to cover the costs arisingfrom the work done within the Virtual Storage of gas.Compared to the previous year, the item shows a decrease of 350,759 thousand euro due to a lower incidenceof net charges that are covering the A3 component compared to the same revenue that was recorded in 2012.

Cash - 94,589 thousand euro

The table below shows the breakdown of the item.

Cash and cash equivalents at December 31, 2012 relate to bank deposits. The increase compared with theprevious year is given mainly by the collection of the proceeds for the placement of CO2 emission on the centralplatform at European level where GSE acts as auctioneer on behalf of the Italian State (76,593 thousand euro).GSE, in this context, acts as a mere depository of funds, which, on the basis of the provisions of LegislativeDecree 30/13, in implementation of Directive 2009/29/EC, will be fully paid into a special account on StateTreasury, to be subsequently allocated to the relevant items of expenditure of the State budget for specificactions to combat and adapt to climate change.

Accrued expenses and accrued income - 650 thousand euro

In relation to the different types of contracts, the accrual at year end of prepaid expenses was necessary, aslight decrease compared to 2011.

The following table shows the breakdown of credits in relation to their residual maturity.

With regard to the geographical breakdown it is noted that all credits are claimed within the Italian territory.

Thousands of euro By the next Over the next After Totalyear 2-5 years 5 years

Term receivablesCash deposits with third parties 102 - - 102Loans to employees 109 415 733 1,257Total long-term receivables 211 415 733 1,359

Current receivablesLoans and advances to customers 1,276,371 - - 1,276,371Receivables from subsidiaries 583,240 - - 583,240Tax credits 5,761 10,903 - 16,664Other receivables 619 - - 619Receivables due from Electricity Equalization Fund 1,584,577 - - 1,584,577Total current receivables 3,450,568 10,903 - 3,461,471

Prepayments and accrued income 650 - - 650

Total 3,451,429 11,318 733 3,463,480


Bank deposits 8,269 94,565 86,296Cash and cash equivalents 13 24 11

Total 8,282 94,589 86,307


Shareholders’ Equity and Liabilities

Shareholders’ Equity - 141,453 thousand euroThe movements and uses occurred in previous years and in 2012 are shown below.

The following sets out an analytical origin, the possibility of use, for distribution and utilization ofShareholders’ Equity items.

Share capital - 26,000 thousand euro

The share capital is represented by n. 26,000,000 ordinary shares with a nominal value of one euro each,and is fully paid.

Legal reserve - 5,200 thousand euro

At December 31, 2012 it was 5,200 thousand euro, equal to 20% of the share capital in accordance witharticle 2430 of the Civil Code, reason why it was necessary a further allocation of the year.

Thousands of euro Share Legal Available Capital Profit for TotalCapital reserve reserves contribution the year

Balance at 12.31.2011 26,000 5,200 83,772 291 18,960 134,223

2011 AllocationsTo the legal reserve - - - - - -To the available reserve - - 6,960 - (6,960) -Distribution of the dividend - - - - (12,000) (12,000)

Profit for the 2012 fiscal yearBalance at 12.31.2012 - - - - 19,230 19,230

Balance on 12.31.2012 26,000 5,200 90,732 291 19,230 141,453

DESCRIPTION

Thousands of euro Amount Possibility Available of use amount

Capital 26,000 - -Legal reserve 5,200 B) -Other reservesCapital contribution reserve 291 A) B) C) 291Available reserve 90,732 A) B) C) 90,732

Total 122,223

Non-distributable share 31,200Remaining distributable share 91,023

Total 122,223

LegendA) for capital increaseB) to cover lossesC) for distribution to shareholders


Other reserves - 91,023 thousand euro

The item capital contribution reserve is reported at the amount of 291 thousand euro due to a higher valuerelating to the business transferred by Enel S.p.A. as a result of contribution of August 2, 1999.This item, available reserve, of 90,732 thousand euro, derives from the allocation of the profits earned in previousyears, net of the portion allocated to the legal reserve and the share of dividends distributed during the year 2012.There are no restrictions on the distribution of profits pursuant to article 2426, paragraph 1, no. 5 ofthe Civil Code.

Net income - 19,230 thousand euro

This item includes the results for the fiscal year 2012.

Provisions for liabilities and charges - 28,651 thousand euroThe number and movement of provisions is summarized below.

Provisions for retirement benefits and similar obligations - 527 thousand euro

The provision includes the indemnity in lieu of notice and additional monthly payments for personnel in service,who have become entitled under the Collective Bargaining Agreement of labor and union agreements.The utilization refers to donations made during the year.

Provision for deferred taxes - 435 thousand euro

The provision includes deferred taxes related to depreciation in excess of the depreciation rates for assetsacquired before the entry into force of Law 244/07, which repealed the possibility for companies to acceleratedepreciation. The fund was reduced by 372 thousand euro following a recalculation which takes into account the actualfuture disbursement.

Other funds - 27,689 thousand euro

Provision for litigation and other contingencies - 23,689 thousand euro

The allowance at December 31, 2012 includes the potential charges arising from litigation in progress, asassessed on the basis of information coming from external lawyers of the company, all the estimatedprobable incurred, as well as charges that are expected to incur for the defense on the different organs ofjudgment, plus statutory interest.

Thousands of euro Value at Provisions Uses Releases Value at 12.31.2011 12.31.2012

Provisions for retirement benefits and similar obligations 643 - (116) - 527Provisions for deferred taxes 807 - - (372) 435

Other provisionsProvisions for litigation and other contingencies 28,628 - (576) (4,363) 23,689Provisions for early retirement incentives 4,000 30 (30) - 4,000Total other provisions 32,628 30 (606) (4,363) 27,689

Total 34,078 30 (722) (4,735) 28,651


It did not take into account those disputes that, on the basis of the indications of external counsel, couldbe resolved successfully. For any disputes with negative outcomes that are not reasonably quantifiable, please refer to the note relatingto “Commitments and contingencies off the Balance Sheet”.The overall reduction (4,939 thousand euro) compared to 2011 was primarily due to releases of part of theprovision (4,363 thousand euro), due to the absence of the conditions of risk inherent in certain cases relatedto the previous transmission and dispatching activities and, for a smaller amount (576 thousand euro), tocertain uses by the evolution of the pending cases. The provision is reported only in a small part in activities that GSE exerts today, as the most judgmentsabout activities previously carried out by GRTN and that GSE, as required by article 1, paragraph 1, letterc) of DPCM May 11, 2004, still bears forward.

DispatchingLitigations which target different disputes relating to amounts due by the then GRTN with regard todispatching and the lack of recognition of related considerations by operators and, of these, by FinarvediS.p.A., Idreg Molise S.p.A. and Energia e Territorio S.p.A. are still pending.

Compensation for the “black out”In regards to this type of litigation, it should be noted that, by letter of July 5, 2008, Enel Distribuzione S.p.A.,going on the assumption of its estrangement from the events that gave rise to the aforementioned blackout, GSE and other nine companies asked for restitution disbursements incurred by it, in regard to thejudgments in which it was agreed, that the subject was to get “what in the future will still be paid to thirdparties for the events of the national black out of 2003”. On May 3, 2013 a new statement in which EnelDistribuzione intended to stop the statute of limitations was issued.Value of the black out provision at December 31, 2012 was determined based on the following types of liabilities:• the claim made by Enel Distribuzione;• the coverage of defense costs arising from litigation in the first instance and on appeal, relating to

opposition at 850 injunctions issued by the Justice of the Peace of Serra San Bruno and regulationsconcerning the request for payment of a portion, plus legal fees, of the charges for registration of second-level rulings relating to the black out;

• the registration fee of sentences;• the civil and administrative litigation.During the fiscal year 2012 for the black out litigation expenses of approximately 108 thousand euro haveincurred.

Plants fueled by renewable sources and cogeneration - CIP6Pending are two judgments in civil regulations concerning contractual issues relating to the properapplication of CIP6. In particular, with the adverse judgment to Linea Energia S.p.A. (formerly Sageter Energia S.p.A.), the Courtof Brescia had ruled partially to the detriment of GSE, having been accepted, though not entirely, thequestion by the counterparty, and this had led to an outlay of 600 thousand euro, drawn from the provision.Currently, against the negative ruling of 2010, GSE has cross-appealed, challenging the lack of territorialjurisdiction and the lack of jurisdiction of the judge hearing the case, the lack of entitlement to Linea EnergiaS.p.A., as well as the erroneous judgment under appeal with particular regard the costs of CTU. The evolutionof the risk profile linked to this dispute in 2012 resulted in a reduction of petitum in the amount of 918thousand euro.As for the other case pending before the Civil Court of Rome against the company SUM, the Court ruled onthe judgment and fully supports GSE, with charges to the counterparty.Pending are also some complaints against measures of GSE with which it has been denied the recognitionof the operation of certain high-efficiency cogeneration plants, because of the absence of specificrequirements by the relevant law.

Performance transmission and exchangeLitigation is pending against Consorzio Eneco, which notified GSE on February 2, 2010 of a summons forthe failure to comply with a Memorandum of Understanding signed in 1997 between the Consortium andEnel, which provided a discipline of exchange parameters and carriage of the most advantageous energyfor the partners.The Consortium believes that the then GRTN, which was superseded by the GSE, should have put theagreement into effect since 1999 and therefore required GSE to pay the differential plus interest. The casewas sent for a decision, but the ruling has yet to be filed.


Electromagnetic fields GSE is still part of several proceedings about the payment of damages (capital, moral, etc.) feared as a resultof exposure to electromagnetic fields. Nothing new emerged, in 2012, for what concerns this line of litigation,for which there is no apparent uniformity of judgment. If, in fact, in some cases there was a favorable judgmentfor GSE, it is reported that on February 19, 2008, however, the Court of Venice condemned Enel and GSE,which replaced GRTN during the proceedings. Against that judgment, GSE appealed; also the appeal is pendingfor a different dispute whose first-instance judgment, in favor of GSE, was challenged by the other party.

InefficiencySome judgments relating to damages claimed by some companies in relation to alleged inefficiencies thatwould occur as a result of events that occurred on the national transmission network in the fiscal years priorto November 1, 2005, as, for example, the case brought by the company Euralluminia S.p.A. before theCourt of Cagliari, are still pending. In this case, the Court rejected all of the preliminary statements filed bythe opposing party and referred the case to discuss the conclusions of the hearing on March 26, 2013.

Net MeteringThere have been some disputes relating to the conventions of Net Metering, which arose as a result of theradical change in this discipline determined by AEEG Resolution 74/08, which took effect on January 1,2009. Disputes have arisen because of the failure or lack of understanding by the users of the Net Meteringin relation to the regulations introduced by the aforementioned Resolution, or for delays in the recognitionof adjustments, caused by the non-communication of measures by the competent authorities of the abovementioned subjects. These comments relate, in most cases, to modest amounts for which jurisdiction shallbe referred to the Justices of the Peace.

Damages pursuant to article 30 of the C.P.A.Administrative appeals regulations concerning requests for damages pursuant to article 30 of the Code ofAdministrative Process were notified to GSE. This rule concerns the unfair damage resulting from theunlawful exercise of administrative activity or from the non-exercise of the mandatory one, therefore thecounterparties appealed the denial of admission to tariffs, contesting the administrative inertia in theproceedings of competence to GSE.

Provision for early retirement incentives - 4,000 thousand euro

The provision for retirement incentives includes the provision for extraordinary expenses aimed at voluntaryearly termination of the employment relationship.

Provision for severance indemnities - 3,817 thousand euroChanges to the balance during the year 2012 is represented as follows.

The provision covers all the dues of severance indemnities accrued at December 31, 2012 by employees,required by law, and wiped of advances granted for loans for first time home purchases, advances in healthcare costs.The usage is represented by ordinary handling related to the termination of the employment relationshipand advance payments for buying a first home or for medical expenses.This item includes other movements, in the amount of 1,582 thousand euro, the indemnities paid tosupplementary pension funds category (748 thousand euro) and the INPS treasury fund (696 thousand euro).

Thousands of euro

Balance at 12.31.2011 3,896

Provisions 1,695Uses for disbursements (192)Other movements (1,582)

Balance at 12.31.2012 3,817


Accounts payable - 3,444,583 thousand euroThe indication of the falling amounts, due after the five year mark, is shown in the detailed statement inserted,in order to complete the review of the liabilities.

Dues to banks - 302,937 thousand euro

This item refers mainly to the overdraft recorded at year-end for the payment of suppliers, in the amount of283,870 thousand euro, and mutual liabilities of 19,067 thousand euro on the purchase of the building in viaGuidubaldo del Monte n. 45 in Rome.The variation (115,408 thousand euro) compared to last year is due to the need to tackle the fiscal deficitgenerated by the insufficient revenue from the A3 tariff component.

Trade payables - 2,956,021 thousand euro

The item shows a decrease compared to last year, amounting to 214,261 thousand, attributed primarily toreduced debts for the payment of contributions on photovoltaic (1,033,994 thousand euro).This decrease was partially offset by an increase in:• accounts payable for the early termination of some CIP6 (354,538 thousand euro);• the liabilities deriving from the provisions of MD April 24, 2013 (339,118 thousand euro);• payables to suppliers admitted to the Dedicated Withdrawal schemes and feed-in tariff (35,658 thousand euro);• trade payables to non-energy suppliers (53,769 thousand euro).

Dues to subsidiaries - 61,763 thousand euro

This item shows a decrease compared to last year, amounting to 18,494 thousand euro, the composition ofthe item is as follows.

The decrease in amounts of the dues to GME amounts to 16,011 thousand euro and is mainly due to thereduction of the debts for the purchase of energy on the electricity market, as well as to the decrease inPUN in the last two months of 2012 and the volumes traded on the electricity market compared to the sameperiod last year. To the other subsidiaries AU and RSE there are only dues not related to energy items, but due to chargesrelated to seconded personnel and benefits of different kinds.


Debits to Acquirente Unico S.p.A.Payables for goods and services of a different nature 2,555 69 (2,486)

Debits to Gestore dei Mercati Energetici S.p.A.Dues for operations and fees on the Electricity Market 76,812 60,818 (15,994)Payables for goods and services of a different nature 35 18 (17)Total 76,847 60,836 (16,011)

Dues to Ricerca sul Sistema Energetico S.p.A.Payables for goods and services of different natures 855 858 3

Total 80,257 61,763 (18,494)


Tax payables - 35,877 thousand euro

The caption refers to amounts owed to the tax authorities for VAT and as a substitute for tax withheld on thepayment of contributions made in favor of owners of photovoltaic systems and the provision of self-employment and dependents. The composition at the end of 2012 and the comparison with the year 2011are summarized below.

Payables to social security - 1,622 thousand euro

The breakdown of this item is as follows.

This item consists mainly of borrowings related to contributions paid by the company, is levied on wagespaid on the income that accrued and unpaid staff for holidays accrued but not taken, and of the amountsdue for deductions from the salaries of the employees.

Other payables - 86,363 thousand euro

Results are as follows.

The increase compared to the value of 2011 (79,026 thousand euro) is mainly due to the debts for theamounts collected by GSE as auctioneer of the placement of CO2 allowances on the European Platform.Such payments, of which GSE is a mere depositary, will be fully paid in a special bank account opened onState Treasury, to be subsequently allocated to the relevant items of expenditure of the State budget forspecific actions to combat and adapt to climate change.


Withholding taxes as a substitute 21,335 16,444 (4,891)VAT payable 15,515 19,365 3,850Other tax payables 51 68 17

Total 36,901 35,877 (1,024)


Due to INPS 1,013 1,149 136Contributions accrued vacation 235 287 52Due to FOPEN and other social security and insurance 148 186 38

Total 1,396 1,622 226


Dues to others for ETS - 76,593 76,593Due to employees 3,811 4,043 232Security deposits Gas Storage and CIP6 160 3,524 3,364Payables of other nature 3,366 2,203 (1,163)

Total 7,337 86,363 79,026



They are composed as follows.

Deferred income related mainly to:• the suspension of some batches for fees for the transport capacity (CCT - CCC - CCI), so-called annuity

interconnection (AEEG Resolution 162/99) and reconciliation for 2001;• the contributions of CA-RES research and PV Parity, whose activity began in 2011.The overall decrease in this item compared to the previous year is the result of several changes:• the reduction in revenues due to the reversal of amounts arising from the enforcement of guarantees

relating to photovoltaic (7,994 thousand euro), which are valid under A3 component;• the reduction in revenues is due to the reversal of the remaining contribution from the CCSE erogation

down payment to cover the operating costs of GSE in regard to its definitive allocation for the fiscal year2011. Resolution 140/2012/R/eel, in fact, in setting the quota for 2012, established that it was inclusiveof such excess amount (5,894 thousand euro). Similarly, Resolution 171/2013/R/eel has determined thatthe excess of the contribution allocated for the year 2012 compared to the final (177 thousand euro) waspostponed to the following year, and was therefore included in deferred income;

• the increase due to the revenue collected in 2012 but relating to future periods related to the costs ofinvestigation of the FER register (524 thousand euro) and the Fifth Account (1,926 thousand euro).

The following table shows the breakdown of the debt in relation to their residual maturity.

It should be noted that, in relation to the geographical breakdown of the debts, they are mainly relating toItalian territory, while an amount equal to 57 thousand euro relates to EU countries.


Accrued liabilities 14 15 1Deferred income 47,491 37,849 (9,642)

Total 47,505 37,864 (9,641)

Thousands of euro By the next Over the next After Totalyear 2-5 years 5 year

Dues to banks 283,870 19,067 - 302,937Dues to suppliers 2,956,021 - - 2,956,021Payables to subsidiaries 61,763 - - 61,763Dues to tax authorities 35,877 - - 35,877Payables to social security 1,622 - - 1,622Other payables 86,363 - - 86,363Total 3,141,646 19,067 - 3,444,583

Accruals and deferred income 37,864 - - 37,864

Total 3,179,510 19,067 - 3,482,447


Guarantees and other accounts - 133,191,725 thousand euro The memorandum accounts include the value of guarantees, commitments and risks and other memoryitems as shown below.

The item that most determines the balance of the memorandum is that relating to fees to be paid as anincentive to photovoltaic systems, where the increase is due to the exponential growth of the conventions.The commitments made to suppliers for the purchase of electric energy relate mainly to the multiannualagreements entered into with CIP6 producers.


Guarantees Guarantees received from other companies and third parties 301,113 377,864 76,751Guarantees given to other companies and to third parties 469 469 -

Owned shares held by third parties 8,988 1,100 (7,888)

Other memorandum accountsCommitments to supply photovoltaic feed-in tariffs 77,462,050 108,596,400 31,134,350Commitments to suppliers for purchases of electricity 29,501,080 24,166,280 (5,334,800)Commitments to suppliers for various supplies 49,262 47,870 (1,392)Commitments to the personnel 1,828 1,742 (86)

Total 107,324,790 133,191,725 25,866,935


Commitments and contingenciesoff the Balance Sheet

Below mention is made of the commitments and risks of the Parent Company that were not recorded in theBalance Sheet as the possible economic effects in future fiscal years are not, at present, to quantify objectively.

DisputesPhotovoltaic

Various proceedings are pending before the Administrative Judge of first and second degree, started for thecancellation of GSE whose object is the lack of recognition or acknowledgment of a lower feed-in tariff forphotovoltaic energy production, in application of the rules of reference. Multiple disputes pertain to the request for cancellation of GSE which is denied, for lack of requirements, themost expected rate for the architectural integration of plants or measures with which, for the plants onagricultural land, has a reduced tariff granted in the first instance, following the verified avoidance of the provisionin article 12, paragraph 5 of MD May 5, 2011 (so-called standard anti-split).It should also be noted that, following the increase in the number of checks on site, in order to identify statematching realization of photovoltaic plants as stated (and sworn) in the process of applying for admission tothe benefits of Law 129/10, as well as in the process of registration to the Register of the Fourth and Fifth EnergyAccount and admission of underlying accounts, the litigation generated by the final measures of this activity orby the subsequent decadent measures by tariffs has increased substantially. Conversely, the dispute which arose following the entry into force of MD on May 5, 2011 (Fourth Energy Account),with which many companies have contested the legality of such a measure in several respects, including theviolation of the principle of protection of legitimate expectations and the violation or misapplication of theprovisions of Legislative Decree 28/11, pending as of December 31, 2012, had a first outcome between Januaryand February 2013, with a number of judgments by the Administrative Court of Lazio that dismissed the claimssubmitted by operators and confirmed, at first instance, the legality of the measure.It should be noted, with reference to the above, that some of the applicants had challenged even the “Technicalrules for the application entry in the large register photovoltaic plants”, the implementation of the Fourth Accountand, more specifically, the measures are excluded from the lists on September 15, 2011 and December 15,2011, by which, according to the Decree, are initiated at the stage of admission encouraging the owners of so-called “large plants”. However, despite these early pronouncements of the Lazio Regional Administrative Court in relation to theFourth Energy Account and other enforcement, measures have been favorable to GSE, pending terms of appealis not possible at the moment, to make an estimate of the risk arising from the negative outcome of thejudgments at issue if the specified operators appealed, in that with any judgment in favor of the applicants, theoutcome of the appeal proceedings (yet to be proposed), could involve not only the obligation on the part ofGSE, to encourage from then the production of related systems, but also compensation for the damage, as ofyet not quantified. The above also applies further litigation generated following the entry into force of MD July5, 2012 (so-called Fifth Energy Account) and the publication of its first list, published on September 28, 2012.Two additional strands of litigation are finally reported, which developed over the course of 2012.A first line at the costs of tax referred to in article 2, paragraph 1, letter c) of MD August 6, 2010 (the Third EnergyAccount), for which, according to the Customs Agency, they may be fulfilled only after the receipt of the relevantdeclaration by the Agency or production, as part of this, the provisional license fiscal year (see note RU 30744of April 5, 2011). Following this official interpretation, many plants that began operating between April 30 and May 31, 2011 arenot fit to have access to the incentive rates for the first four of the Third Energy Account, or, in absolute terms,the rates of this Decree and this has consequently resulted in the appeal of some 60 measures to assign adifferent rate from that request or denial of admission to the Third Energy Account. The second front of disputethat arose in 2012 is about the decline of requests for access to the incentives of the Fourth Energy Accountfor the plant which, though entered on the list in a good position, they did not come into operation within 7months from the date of publication of the same rankings. This fact has sometimes been declared by the same Persons Responsible (with or without the approval of therequest for an extension based on an event which leads, in the opinion of the operator, in a case of great force),sometimes was seen directly by GSE to be a result of tests on site. The violation of the indicated term decadent


resulted in many cases the adoption of subsequent measures of decay and, therefore, the appeal of the same.For these last two strands, it is not possible to make an estimate of the risk arising from the negative outcomeof their independence, for the same reasons mentioned above.

IAFR and Ministerial Decree FER

Judgments are pending before the Administrative Judge of first and second degree for the cancelling ofGSE regulations concerning the denial of IAFR or revocation/cancellation of the qualification was issued.It has also developed an additional litigation as a result of the outcome of the verification activities performedon these facilities by GSE, where these differences have emerged between the findings made during theaudit and the statement by the producers concerned during their qualification. In particular, in this context,decision was appealed to cancel IAFR in self-defense and the consequent demand for recovery of thepreviously recognized CVs. Following the issue of MD July 6, 2012 (known as MD RES), several operators proposed the appeal againstthe predictions of the same, as well as the application procedures published by GSE on August 24, 2012and the Notice of participation in the auction procedures, published on September 8, 2012, primarilycontesting the lesion of custody of operators who had already started business ventures on the basis ofprevious legislation.It is not possible at the moment to make an estimate of the risk arising from the judgments in question,since any judgment in favor of the applicants may include an obligation to recognize GSE from then theplant as a renewable source system and consequently the obligation to encourage ex tunc the productionof electricity or, with regard to the FER Decree, the obligation to recognize the access to incentives asgoverned by previous legislation.

Enel pumping

In December 2010, Enel Produzione S.p.A. notified GSE of an action for the compliance of judgment n.1437/2006 of the Lombardy Regional Administrative Court, which annulled AEEG Resolution 104/05, bywhich GSE stood and was required to ascertain as erroneously paid by Enel themselves to purchase CVsfor 2001-2002 related to the energy required for feeding their pumping systems (erroneously considered bythe Administrative Judge as a single plant). Enel required not only a repetition of what was unduly paid, butclaimed to extend, through interpretation, the obligation to return the CVs for the productions of the fiscalyears after 2003. GSE was established in court, disputing that broad interpretation. The Lombardy RegionalAdministrative Court in its judgment of February 20, 2012 ruling on adherence, also ordered that the courtdecision n. 1437/2006 involving the right to recover, by Enel of the amount paid to GRTN only for the fiscalyears 2001-2002, the subject of the original application. Finally, in its judgment of January 21, 2013, theCouncil of State ruled definitively on the matter, confirming the earlier decision of the Lombardy RegionalAdministrative Court of July 12, 2012.

CIP6 and auxiliary services

Pursuant to AEEG Resolution 2/06 on the definition of energy absorbed by the plant auxiliary services, GSEhas, starting from the calculation of the CVs for that fiscal year 2010, to recalculate the energy absorbed bythese services according to the new directions of the Authority.This has resulted in a substantial reduction in CVs issued to various operators who, in some cases,decided to oppose the administrative decisions taken by GSE. The above is the case also with referenceto incentive systems based on CIP6, with the difference that, in such cases, GSE implemented therecalculation of energy absorbed by auxiliaries and only at the outcome of specific instructions issued inthis regard by AEEG.Also with regard to CIP6, following the examination carried out by the competent offices, further litigationon the one hand rose, the decline occurred several operators, renounced under article 15 of LegislativeDecree 79/99, as modified by paragraphs 74 and 75 of article 1 of Law 239/04, and second, as a result ofcertain provisions of GSE cancellation of the recognition granted or at the time of non-recognition scratchby the producers, extension of the incentive period as a result of lost production due to great force notproven as such.It is not possible at the moment, to make an estimate of the risk arising from the judgments in question,since any judgment in favor of the applicants could result in an obligation on the part of GSE to recalculate,with different parameters, the magnitude of energy due and, therefore, the amounts to be recovered.


Cogeneration

In accordance with article 4 of Resolution 42/02 of the Authority, the holders of power who wish to availthemselves of the benefits provided for cogeneration plants are required to submit documentation annuallyto GSE in order to demonstrate that the plant complies with the same characteristic values (IRE and LT).Upon accurate completion of the assessment, GSE has in some cases rejected the existence of theconditions for CHP and the relevant qualifications. The dispute stems from its rejection of such measures.It is not possible, at the moment, to make an estimate of the risk arising from the negative outcome of thejudgments in question because any judgement in favor of the applicants could involve not only the obligation,by GSE, to encourage from then the production of related systems, but also compensation for damage, asof yet not quantified.Following the issuance of MD August 4 and September 5, 2011 an appeal was brought by certain operatorsagainst Resolution ARG/elt 181/11 on December 15, 2011, the Guidelines of the Ministry of EconomicDevelopment for the implementation of these decrees and the operating instructions of GSE on the subject,published on February 10 and March 22, 2012.

Black out

In relation to claims for the events of September 28, 2003, the civil litigation is pending in a limited numberof causes, for which you can reasonably foresee a declaration of lack of jurisdiction of the ordinary courtsin favor of the administrative judge, as the first organs courts before that incardinated the dispute expressed,accepting the thesis of the Manager and on the basis of the judgment of the United Sections of the SupremeCourt (order no. 1887/07). With regard to the administrative litigation, it should be noted that during 2012 further appeals were notnotified with respect to the three acts notified in 2009. Moreover, it should be noted that, over the course of the five fiscal year limitation period (September 28,2008), we excluded the possibility of seeing further evaluations promoted, with the exception of four subjectsstill on schedule, having interrupted the limitation period by a notice sent every fiscal year by ordinary letter,and all those who were confronted with a declaration of incompetence by the civil court and for which theterms of reinstatement before the administrative courts were not yet expired.With regard to the claims for compensation by Enel Distribuzione S.p.A. please refer to the comments inthe item provision for disputes and other risks.

Costs and revenues related to handling energyIn relation to certain Income Statement items of income and inherent expenses relating to electric energy,the accounting recognition proceeded on the basis of the best information available at the time of thepreparation of these financial statements. The method of recording the flows of energy, typical of the current electrical system, projects in fact in manycases the use of data based on estimates and self-certification of manufacturers, network operators andsale enterprises that could be subject to subsequent adjustments. The adoption of this information hasresulted, and could result in the budgets for future years, in the recognition of contingent assets and liabilities.These contingencies, on the basis of the regulatory framework in force, if not related to the specificcomponents of return on GSE, would pass-through on the results of future periods.


Income Statement

Value of production - 14,784,989 thousand euroSales of goods and services - 14,483,191 thousand euro

This item has a cumulative increase of 3,187,552 thousand euro; the composition and the changes comparedto the corresponding values of the previous year are outlined below.

Revenues from sales of electricity to its subsidiary GME undergo an increase of 945,982 thousand euro tobe ascribed to the higher volumes sold quantity in relation to the growing production of electricity fromphotovoltaic systems to the PUN recorded during the year. This increase was partially offset by lowerrevenues from the imbalance fees (329,772 thousand euro), whose reduction is attributable to a greateraccuracy of these estimates.Fees for the RID transport are not present at December 31, 2012, resulting in a negative change due to thefact that Resolution ARG/elt 199/11 eliminated them on January 1, 2012. This reduction was offset byrevenues of the transitional measures for the physical Virtual Storage gas, not present last year, whichamounted to 82,158 thousand euro.Other revenues increased by 10,543 thousand euro and this change is due to the fees to cover theadministrative costs paid by the parties admitted to the Dedicated Withdrawal and Net Metering scheme(5,616 thousand euro), and earnings from the sale of Green Certificates (5,525 thousand euro).


Revenues from electricity sales to Group companiesRevenues from GME energy sales on MGP/MI 2,915,356 3,861,338 945,982

Revenues from electricity sales to third partiesRevenues from RFI convention 374,372 390,674 16,302Revenues from imbalance fees 607,521 277,749 (329,772)Other revenues 9,320 9,165 (155)Total revenues from electricity sales 3,906,569 4,538,926 632,357

Transport fees to RID operators 74,429 - (74,429)

Revenues for physical transitional measures of Virtual Storage gas - 82,158 82,158

Other revenues Fees to cover administrative RID and SSP costs 11,074 16,690 5,616Revenues from the sale of Green Certificates 2,380 7,905 5,525Revenues for foreign CO-FER and GO fees 2,027 1,132 (895)Revenues from RECS 1,238 762 (476)Revenues from IAFR consideration qualification systems 381 574 193Revenue contribution for costs of investigation of the Fifth Account - 446 446Revenues from the sale of foreign GO - 134 134Total other revenues 17,100 27,643 10,543

Share of A3 component to cover the costs of GSE 33,006 37,617 4,611

Contributions to electricity incentive 7,209,499 9,773,267 2,563,768

Contributions to Virtual Storage gas incentive 55,036 23,580 (31,456)

Total 11,295,639 14,483,191 3,187,552


There has also been an increase in the contribution from CCSE (2,563,768 thousand euro) required to coverthe costs related to the sale of CIP6 energy not covered by the proceeds of those relating to the provisionof incentives for the photovoltaic systems, as well as of those originating from energy purchases coveredby the Dedicated Withdrawal and also those relating to the service of Net Metering, in addition to otherminor components of costs, are covered by AEEG Resolution 384/07. The amount of the CCSE contributionto cover the operating costs of GSE for the year 2012 increased by 4,611 thousand euro, and is such as toensure an adequate return to GSE of its Net Assets (Resolution 171/2013/R/eel).In the previous year the coverage of these costs amounted to 33,006 thousand euro (Resolution140/2012/R/eel).In addition to this contribution, GSE also received an amount of 23,580 thousand euro in 2012 to cover thesums paid for Virtual Storage gas.

Other revenues and income - 301,798 thousand euro

Other revenues and income appear to be structured as shown in the following table, an increase comparedto last year, amounting to 78,979 thousand euro.

Contingent assets relating to relationships with companies outside the GSE Group are the main componentof the item and as such substantially affect the performance. The increase compared to last year appears tobe driven by an increase contingent on the price revision of CIP6 year 2010 (76,068 thousand euro) and theCIP6 imbalance (75,180 thousand euro). This increase was partially offset by a reduction in prior yearadjustments related to costs for grants recognized in previous years as an incentive for photovoltaic (58,206thousand euro). The components mentioned are economically passing as they are offset by the A3component.The item other contingent assets essentially includes the release of the values allocated to the litigationprovision, following the favorable resolution of certain court events in which GSE was involved (4,363thousand euro).Revenues from services to various companies in the Group mainly concern the amount paid by thesubsidiaries for building services, information technology and other services provided by the controller. Thefee includes revenues from the application of Resolution ARG/elt 5/10 (9,550 thousand euro), the penaltiescharged to CIP6 operators (6,232 thousand euro) and the recharging of the cost of employees seconded tothe CCSE (2,842 thousand euro).


Contingent assetsDues to Group companies - 19 19Purchase of CIP6 energy 32,428 108,496 76,068CIP6 balancing 22,516 97,696 75,180PV incentive contributions 110,639 52,433 (58,206)Enforcement sureties - 7,994 7,994Net Metering 185 1,534 1,349Net Metering adjustments 27,858 477 (27,381)Dedicated Withdrawal 41 255 214Administrative costs of Dedicated Withdrawal 90 10 (80)Wind Energy Production failure 2,719 - (2,719)Other 5,900 4,758 (1,142)Total extraordinary income 202,376 273,672 71,296

Revenues from performance and other servicesDues to Group companies 6,517 8,622 2,105Dues to third parties 13,926 19,504 5,578Total revenues and other services 20,443 28,126 7,683

Total 222,819 301,798 78,979


Production costs - 14,779,641 thousand euroThey include the following items.

Raw materials, consumables and goods - 7,931,633 thousand euro

The item shows an increase of 699,095 thousand euro the detail and the changes compared to the year2011 are shown in the following table.

Costs for the purchase of energy from subsidiaries recorded an overall increase due to the growing coststo be paid to the subsidiary GME for purchases on the Spot Market (15,773 thousand euro) to an increasein average unit prices partially offset by lower volumes.The costs of purchase of energy from parties outside the Group recorded an overall increase of 596,126thousand euro, because of the combined effect of the cost of the Dedicated Withdrawal and the feed-intariff (874,973 thousand euro), due to increased quantities supplied, and the reduction of energy costs byCIP6 producers (321,620 thousand euro), which instead reveal a decrease in the amount due to the naturalexpiration of some contracts and for the early termination of certain purchase contracts. The costs for variouspurchases of energy from third parties consist of the costs of purchase of CVs, with a slight increasecompared to the previous year (62,220 thousand euro) and the costs of the transitional measures of physicalVirtual Storage gas (67,771 thousand euro) not present last year.


Costs for the purchase of energy from Group companiesCosts to GME for purchases of MGP/MI 400,557 416,330 15,773

Costs for the purchase of energy from third partiesCosts for energy Dedicated Withdrawal and feed-in tariff 2,198,196 3,073,169 874,973Costs for CIP6 and other charges 3,273,566 2,951,946 (321,620)Total costs for the purchase of energy 5,872,319 6,441,445 569,126

Costs for various purchases of energy from third partiesCosts for the purchase price revisions and CVs 1,359,853 1,422,073 62,220Costs for physical transitional measures of Virtual Storage gas - 67,771 67,771Costs for various supplies 366 344 (22)Total cost of goods different from the energy 1,360,219 1,490,188 129,969

Total 7,232,538 7,931,633 699.095


For services - 63,044 thousand euro

The cost of services increased compared to last year, amounting to 32,075 thousand euro, due primarily tothe costs recognized in respect of stackers for transitional measures for the natural Virtual Storage gas(26,510 thousand euro), not present last year. The item is highlighted in the table below.

With regard to services other than energy, the cost items show an overall increase (5,202 thousand euro) asa natural consequence of the development of business activities. The item professional services amounted to 11,940 thousand euro, and underwent an overall increase (676thousand euro). This item is composed mainly by the costs incurred to qualified organizations, such asuniversities and research centers, in charge of the verification of applications for admission to the incentive(5,326 thousand euro), the magnitude of these costs is related to the increasing number of photovoltaicplants, up from 326,927 in 2011 to 476,904 in 2012. This item also includes the fees paid to lawyers engagedin the management of litigation (3,560 thousand euro), related to the number of plants qualified and managedduring the year.The costs of activities (4,137 thousand euro) are primarily related to fees and software licenses andapplications used (2,847 thousand euro), and secondly to work on the computing infrastructure for theadaptation of business processes as a result of significant changes in the law relating to incentivemechanisms that the company is called upon to manage (1,179 thousand euro). This item shows an increase(1,285 thousand euro) due in part to the costs incurred for satellite monitoring, following the increase in thenumber of plants that make use of this technology (500 thousand euro), and in part to the interventions onworkstations work and the applications used (520 thousand euro).The costs incurred for the services performed by the contact center in support of operational processes(3,827 thousand euro) increased by 1,467 thousand euro as a result of the major services provided andmaintaining high quality standards.The costs for personnel services (2,548 thousand euro) consist of the costs for food stamps (1,456 thousandeuro), expenses (1,368 thousand euro) due to the increasing number of checks carried out on the systemssupported, and expenses incurred for the training of employees (669 thousand euro). They are substantiallyin line with the previous year (60 thousand euro).The costs for image and communication (1,870 thousand euro) include the costs incurred for the promotionof GSE, which, as a leading player in the renewable energy market participates in trade fairs, conferencesand seminars on these topics, a decrease from the previous year (499 thousand euro).The maintenance costs (1,570 thousand euro), mainly focused on computer applications in use (1,201thousand euro), also include the activities necessary for the preparation of GSE premises (237 thousandeuro). They showed an increase (493 thousand euro) due to higher computing infrastructure interventions(430 thousand euro).


Costs for services related to energy and gasCosts for physical transitional measures of Virtual Storage gas - 26,510 26,510Costs to GME for offers on the energy market 1,452 1,803 351Costs to GME for registration of CO-FER fee - 7 7Other costs 20 25 5Total costs for services related to energy and gas 1,472 28,345 26,873

Costs for services other than energy to the Group companies 157 292 135

Costs for services other than energy from third partiesProfessional services 11,264 11,940 676Performance for computing tasks 2,852 4,137 1,285Costs for contact center outsourcing 2,360 3,827 1,467Services for the personnel 2,488 2,548 60Image and communication 2,369 1,870 (499)Maintenance and repairs 1,077 1,570 493Services of facility management 4,945 6,343 1,398Emoluments to D irectors and Statutory Auditors 681 567 (114)Other services 1,304 1,605 301Total costs for services other than energy 29,497 34,699 5,202

Total 30,969 63,044 32,075


Costs for facility management services cover all the activities related to the management of the buildingsthat house the offices of the company, such as fees for switchboard services (1,509 thousand euro), cleaning(971 thousand euro), supervision (847 thousand euro), consumption of electricity (805 thousand euro) andpostal services (528 thousand euro). The item is on the rise (1,398 thousand euro) in tandem with the numberof locations used by the GSE Group.The Directors and Auditors fees underwent a decrease due to the reduction from 5 to 3 members of theBoard of Directors appointed by the Shareholders’ Meeting resolution on July 13, 2012 and the consequentattribution to a single member of the offices of the Chairman and Chief Executive Officer. For thedetermination of the remuneration of members with powers pursuant to article 2389, paragraph 3 of theCivil Code, the Board of Directors decided that he should stick to the maximum salary of the First Presidentof the Supreme Court by article 23 bis, paragraph 5 bis of Law Decree 201/11, converted into Law 214/2011and subsequent amendments. The item other services is mainly composed of postage (528 thousand euro), transport costs (389 thousandeuro) and for the service of labor supply (225 thousand euro). This item also included the fees paid to theindependent statutory audit (53 thousand euro) for activities.

For lease - 2,069 thousand euro

This item shows a decrease of 52,436 thousand euro, and is detailed below.

The decrease is mainly attributable to the fact that, as of January 1, 2012, the transport fee was no longerrecognized by RID manufacturers. These charges were covering the A3 component.

For staff - 34,299 thousand euro

Labor costs increased by 5,402 thousand euro compared to last year as a result of the increase in staff,evidenced by the data in the following table, which show the average number of employees, by category, in2012 and the consistency at December 31, 2012.

Depreciation, amortization and write-downs - 9,194 thousand euro

The item shows an increase of 1,819 thousand euro compared to the previous year, due to 1,571 thousandeuro in higher depreciation following the entry into service of new investments and 248 thousand euro tothe write-downs of improvements made on the premises in via Stephenson in Milan, whose lease wasterminated in 2012. The amount of the increases in depreciation and amortization relates to intangible assetsamounting to 777 thousand euro and those materials amounting to 793 thousand euro.


Rents and leases of real estate property 1,318 1,727 409Rentals 346 342 (4)Transportation fee 52,841 - (52,841)

Total 54,505 2,069 (52,436)

Consistency Consistency Average Average 12.31.2011 12.31.2012 consistency for the consistency for the

2011 fiscal year 2012 fiscal year

Executives 21 19 20 20Managers 93 104 92 99Employees 380 447 307 389

Total 494 570 419 508


Provisions for risks

At December 31, 2012 this item had no balances.

Other operating expenses - 6,739,402 thousand euro

The item other operating expenses showed an increase compared to last year, amounting to 2,578,694thousand euro, and is structured as follows.

Contingent liabilities rose by 27,280 thousand euro; this increase is due to higher expenses related to NetMetering (26,127 thousand euro) and the Wind Energy Production Failure (3,393 thousand euro), partiallyoffset by lower expenses related to the Dedicated Withdrawal (7,315 thousand euro). The aforementionedcosts of items are economically looped as found in the A3 component coverage.The item other operating expense is one that exerts a more marked influence on the total costs in question,and specifically the most significant increases are:• the contributions paid as an incentive for photovoltaic (2,093,963 thousand euro), it is the amount

recognized to responsible parties in relation to the accrual 2012. This charge, which is covered by the A3tariff component, is constantly growing due to the development of national energy source relative tophotovoltaics;

• report amounts paid to CIP6 producers as a result of MD December 2, 2009 and subsequent for the earlytermination of agreements relating to intended transfer (400,561 thousand euro), even this cost is coveredby the A3 tariff component;

• contributions made to the parties admitted to the regime of Net Metering (100,927 thousand euro).


Contingent liabilitiesNet Metering 251 26,378 26,127Dedicated Withdrawal 25,953 18,638 (7,315)Dispatching and transport 404 8,433 8,029Wind Energy Production Failure - 3,393 3,393CIP6 imbalance 1,360 514 (846)Purchase of CIP6 - Previous years 2,111 81 (2,030)Administrative costs of Dedicated Withdrawal 5 76 71Resolution ARG/elt 91/09 3 11 8RECS - 7 7Other 653 489 (164)Total contingent liabilities 30,740 58,020 27,280

Other operating expensesIncentive contributions for photovoltaic systems 3,931,020 6,024,983 2,093,963Early termination of CIP6 13,562 414,123 400,561Net Metering contributions 118,965 219,892 100,927Incentive contributions for Virtual Storage gas 55,036 11,459 (43,577)Contributions for Resolution ARG/elt 05/10 9,933 9,585 (348)Various contributions 167 165 (2)Other costs 1,285 1,175 (110)Total operating expenses 4,129,968 6,681,382 2,551,414

Total 4,160,708 6,739,402 2,578,694


Financial income and expenses - 15,045 thousand euroThe breakdown is as follows.

Income from investments - 12,288 thousand euro

Income from investments showed a limited reduction that is not indicative of the financial results of thesubsidiaries for the fiscal year 2011, as the dividends paid were paid in part through the use of available reserves.

Other income - 9,761 thousand euro

The item shows a decrease compared to the previous year of 1,144 thousand euro, due to a decrease ininterest income on deposits (803 thousand euro), due in turn to lower interest rates on the financial markets,which has more than offset the increase due to higher average annual availability of deposits. Also interestpayments on loans show a reduction (343 thousand euro).

Interest and other financial expenses - 7,004 thousand euro



Interest income on bank deposits 9,935 9,132 (803)Interest on overdue receivables 944 601 (343)Interest on loans to employees 10 11 1Other financial income 16 17 1

Total 10,905 9,761 (1,144)


Interest on early termination of CIP6 energy and other items 4,367 6,182 1,815Interest on mid-long term loans 522 447 (75)Interest on short-term loans 329 278 (51)Interest on late payments 153 1 (152)Foreign exchange losses 2 - (2)Other financial charges - 96 96

Total 5,373 7,004 1,631


Dividends from subsidiary - GME S.p.A. 12,132 8,734 (3,398)Dividends from subsidiary - AU S.p.A. 972 3,554 2,582

Total 13,104 12,288 (816)


Compared to the previous year, the item increased by 1,631 thousand euro, in the wake of the increase ininterest expense related to the early termination of CIP6 contracts and other items related to energy (1,815thousand euro), which are covering the A3 component.The interest on the short, medium and long term financing is reduced, however, through reduced interestrates on the financial markets.The item, other financial charges (96 thousand euro), is derived from interest accrued on the amountsdeposited with GSE to manage the auction of CO2 allowances; its amounts are to be paid to third parties.

Extraordinary income and expenses - 875 thousand euroThis item, which has a positive balance, consists of income at the amount of 996 thousand euro, of which 903thousand euro is related to the reimbursement IRES on deductible IRAP paid in 2007-2011, made possible bythe recent provisions of Decree Law 201/11.The charges amounted to 121 thousand euro, of which 90 thousand euro related to the penalty paid on earlytermination of a lease, economically through as recharged to the subsidiary GME, and the remaining allocationto the provision for termination benefits.

Income taxes, current and deferred - (2,039 thousand euro)The following table shows the composition of the entry.

Temporary differences arising from taxes recoverable in future years have not been recognized as deferredtax assets conservatively, since the assumptions of reasonable certainty of their recovery was through theachievement of taxable income in future years; it should be noted, however, that if there had been anyconditions for their registration, their amount would have been approximately 18,200 thousand euro.The change in deferred tax liabilities is due to the adjustment of the fund to account for a timely recalculationbased on the actual future disbursement. The reconciliation between tax expense and theoretical budget is shown in the table below.

IRES RECONCILIATION

Thousands of euro Taxable income IRES

Operating result before current taxes net of deferred tax 21,269Theoretical IRES (rate 38%) 8,082Temporary differences taxable in future years 183Temporary differences deductible in future years 3,155Reversal of temporary differences from previous years (6,247)Differences that will not reverse in subsequent years (13,879)Ace (209)Taxable income for IRES 4,273

Total IRES 1,624


Current taxesIRES 1,137 1,175 38Additional IRES (Robin Tax) 434 449 15IRAP 758 787 29Deferred taxes 242 (372) (614)

Total 2,571 2,039 (532)


Temporary differences deductible in future years relate mainly to provisions for personnel costs and arerecognized on an accrual but are not yet paid. The reversal of the temporary differences from previous yearsrefers to the use of the funds provided in previous years, while the value of the differences will not be reversedin subsequent periods and is primarily concerned with the portion of dividends received in the fiscal year,the share of non-deductible expenses representation and the non-deductible tax.

Permanent differences are attributable to non-deductible costs for IRAP purposes primarily related topersonnel costs.

As for the events that occurred after the Balance Sheet and outlook, see the Report on Operations.

IRAP RECONCILIATION

Thousands of euro Taxable income IRAP

Difference between the value and the cost of production 22,489IRAP (rate 4.82%) 1,084Permanent differences (6,159)Taxable income for IRAP 16,330

Provision for current IRAP for the fiscal year 787

209GSE S.p.A. Certification of the Financial Statements pursuant to Article 26 of the bylaws

Certification of the Financial Statementspursuant to Article 26 of the bylawsGSE S.p.A.

213GSE S.p.A. Independent Auditors’ Report

Independent Auditors’ Report GSE S.p.A.

215GSE S.p.A. Independent Auditors’ Report

217GSE S.p.A. Statutory Auditors’ Report

Statutory Auditors’ ReportGSE S.p.A.


Glossary

AIB Association of Issuing BodiesAU Acquirente UnicoCAR High Efficiency CogenerationCASC Cross Border Services CompanyCCP Consideration for the Correct Prediction CCSE Cassa Conguaglio del Settore ElettricoCEC Avoided Cost of FuelCERSE Comitato Esperti di Ricerca sul Sistema ElettricoCIP6 Agreement 06/92 of the Prices Interdepartmental CommitteeCO-FER Renewable Energy Certificate of OriginCRM Customer Relationship ManagementCV Green CertificatesCV-TLR Green Certificates for District HeatingEECS Standardized system of certification to receive RECSEU ETS European Union Emission Trading SchemeGME Gestore dei Mercati EnergeticiGO Guarantee of OriginGSE Gestore dei Servizi EnergeticiIAFR Plants fed by renewable sourcesIBWT Italian Borders Working TableICO-FER Qualification confirming the issue of CO-FERIEA Agenzia Internazionale dell’EnergiaIPEEC International Partnership for Energy Efficiency CooperationIRE Energy saving indexIRGO Technical identification of the plants to receive GOLT Thermal capacityM-COFER CO-FER MarketM-GAS Natural Gas MarketMATT Ministry for the Environment, Land and Sea MEF Ministry of Economy and FinanceMGP Day-Ahead MarketMGP-GAS Day-Ahead Gas MarketMI Intra-Day Market

227Glossary

MiPAAF Ministry of Agriculture, Food and Forestry MiSE Ministry of Economic DevelopmentMIUR Ministry of Education, University and Research MP Spot MarketMPE Wind Energy Production FailureMSD Ancillary Services MarketMT-GAS Market in terms of physical natural gas MTE Market in terms of energyOCSIT Organismo Centrale di Stoccaggio ItalianoOIC Organismo Italiano di ContabilitàOME Observatoire Méditerraneén de l’EnergieP-GAS Trading platform for the exchange of natural gas PAR Annual Plan of ImplementationPB-COFER CO-FER bilateral platformPB-GAS Natural gas balancing platformPCE Electricity Account Trading PlatformPCR Price Coupling of RegionsPES Primary Energy SavingPSV Virtual Trading PointPUN Price of energy on the electricity market RdS System researchRCU Central Registry Officer RECS Renewable Energy Certificate SystemRID Simplified Purchase and Resale Arrangements with Small ProducersRSE Ricerca sul Sistema EnergeticoSII Integrated Information SystemSIMERI Sistema Italiano di Monitoraggio delle Energie RinnovabiliSSP Net MeteringTEE White CertificatesTFO Fixed feed-in tariffTO Feed-in tariffVPP Virtual Production Capacity

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Edited by Divisione Gestione e Coordinamento Generale

We thank all colleagues who collaborated to the realization of this volume

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2012 GSE annual Report and Financial Statements

Economy & Finance

Transcript of 2012 GSE annual Report and Financial Statements