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2011SEPARATE AND CONSOLIDATED FINANCIAL STATEMENTS

Sogin is the State-owned companyresponsible for the decommissioningof Italian nuclear plants and the safemanagement of radioactive wasteproduced by the nuclear industry andby medical and research facilities, withthe aim of protecting the public andthe environment and safeguardingfuture generations.

Since 2010 Sogin has had the roleof locating, building andoperating the Technological Park,including the National Repositoryfor radioactive waste.

Wholly owned by theMinistry of the Economyand Finance, Sogin operatesin accordance with strategicguidelines drawn up by theItalian Government.

BOARD OF ADVISORS

BOARD OF STATUTORY AUDITORS

STANDING COURT AUDITOR

Chairman

Giancarlo Aragona

Chief Executive Officer

Giuseppe Nucci

Advisors

Bruno MangiatordiFrancesco MoroStefano Selli

President

Ersilia Militano

Standing StatutoryAuditors

Gerolamo GavazziGianfranco Pepponi

Substitute StatutoryAuditors

Domenico PatriziMaurizio Accarino

Ugo Montella

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CORPORATEOFFICERS

9DIRECTORS’ REPORT ONOPERATIONS9 Background21 Nuclear activities26 Risk management32 Corporate and other bodies of the Sogin Group35 Human resources40 Financial review of Sogin47 Consolidated financial review51 Subsequent events and outlook53 Other information about the Sogin Group

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55BALANCE SHEET ANDINCOME STATEMENT56 Assets57 Shareholders’ equity and liabilities58 Income statement

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103NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS103 Introduction104 Basis of consolidation104 Consolidation principles and methods104 Accounting policies108 Notes to the balance sheet110 Notes to the income statement114 Annexes

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97THE GROUP’S CONSOLIDATEDFINANCIAL STATEMENTS

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61NOTES TO THEFINANCIAL STATEMENTS61 Basis of presentation62 Accounting policies66 Notes to the balance sheet80 Memorandum accounts81 Notes to the income statement

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121REPORTS122 Attestation of the separate financial statements for the year

ended 31 December 2011123 Attestation of the consolidated financial statements for the year

ended 31 December 2011124 Report of the Board of Statutory Auditors to the General

Meeting of 11 July 2012128 Report of the Independent Auditors on the separate financial

statements for the year ended 31 December 2011130 Report of the Independent Auditors on the consolidated

financial statements for the year ended 31 December 2011

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DIRECTORS’ REPORT ON OPERATIONS

DIRECTORS’REPORTON OPERATIONS

Sogin is a public sector, limited liability company established for thedecontamination of nuclear sites in Italy and the management andsafe storage of radioactive waste produced as a by-product bymedical-health services, industry and research.

Fully owned by the Ministry of the Economy and Finance, theCompany is guided by strategic operating objectives fixed by theMinistry of Economic Development. As required by article 3 of Law75 of 26 May 2011, converting Law 34 of 31 March 2011, the Ministryof Economic Development, in agreement with the Ministry ofInfrastructure and Transport and the Ministry of the Environment andLand and Sea Protection, will propose a new business plan to theItalian Government. The new plan will set out the above objectivesfor implementation within twelve months of the approval of theconversion law.

Sogin, which commenced operations in 2001, became a Group in2004 through the acquisition of a 60% majority shareholding inNucleco SpA, the Italian company collecting, treating andtemporarily storing the radioactive waste and sources that are a by-product of medical-health services, as well as technological andscientific research.

Sogin is currently engaged in the largest site decontamination inItalian history to ensure the protection of residents, the environmentand future generations.

Decontamination of a nuclear site is the last phase of its life cycle.The work is classified as decommissioning, a collective term for theremoval of nuclear fuels, decontamination and dismantling ofstructures and the safe storage of radioactive waste awaiting removalto the National Repository. The objective of decontamination is thereinstatement of a site as “green field”, i.e., the removal of all

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BACKGROUND

The Sogin Group

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and/or its temporary on-site dry storage in purpose-builtcontainers at power stations and other nuclear facilities.

These guidelines were supplemented by the Ministry of EconomicDevelopment Decree of 10 August 2009, having regard to the returnto Italy of radioactive waste which was a by-product of thereprocessing in the United Kingdom of irradiated fuel that had beensent to the Sellafield facility. The guidelines specifically requiredSogin to come to an agreement with the NDA for the replacement ofmedium and low radioactive residual waste with a lower quantity ofhighly radioactive waste, in addition to revising the date of theirshipment to the National Repository. The necessary agreementshave been concluded and provide for the return to Italy of radioactivewaste by 31 December 2025 (shipments will start in 2020).

Changes in legislation

The following changes in legislation were introduced during the year:

− Legislative Decree 41 of 23 March 2011 and Law Decree 34 of 31March 2011, converted with amendments by Law 75 of 26 May2011, modifying the regulatory framework governing Sogin’soperations through amendment of Law 99 of 23 July 2009 andLegislative Decree 31 of 15 February 2010. The changes consisted primarily of the repeal of legislationpermitting the development of nuclear power stations with,however, no effect on the provisions having regard to the storageof irradiated fuels and radioactive waste and the associatedeconomic benefits.A list is provided below of the articles amending Legislative Decree31 of 15 February 2010:article 3 provides that guidelines for the management ofradioactive waste and the decommissioning of closed facilitiesare to be established no later than 28 May 2012 by Cabinet OfficeDecree, as recommended by the Ministry of EconomicDevelopment, which may consult with the Nuclear SafetyAgency, acting in concert with the Ministry of Infrastructure andTransport and the Ministry of the Environment and Land and SeaProtection;the third paragraph of article 25 provides that Sogin beresponsible for the establishment of the Technological Park,including the National Repository, and support facilities, usingfunds generated by the tariff component intended for suchpurposes, whilst paragraph 3 bis provides that Sogin’s researchand development relating to the Technological Park anddecommissioning and radioactive waste management activitiesbe financed by the tariff component pursuant to article 1,paragraph 1, letter a) of Law Decree 25 of 18 February 2003,converted into law with amendments by Law 83 of 17 April 2003;article 26 provides that Sogin is responsible and competent for

the management of facilities and the construction and operationof the National Repository - Technological Park;article 27 determines the procedure to obtain the omnibusconsent for construction and operation of the Technological Parkand eliminates the previous requirement for a StrategicEnvironmental Assessment of the criteria to be used for theidentification of potential sites;furthermore, the requirement has been repealed for theestablishment of a Technical Committee for Nuclear Health andSafety at the nuclear control authority (Istituto Superiore per laProtezione e la Ricerca Ambientale or “ISPRA”);

− Directive 2011/70/Euratom of 19 July 2011 establishing acommunity framework for the responsible and safe managementof spent nuclear fuel and radioactive waste. The Directive deems that each Member State is ultimatelyresponsible for the management of spent fuel and radioactivewaste and, consequently, provides that they be treated in the Statein which they arose unless, when shipped, there was anagreement with another Member State or a third country providingthat such waste be treated at a waste treatment facility conformingwith criteria set by the Commission.The Directive also requires that the European Commission must,by 23 August 2015, be provided with a National Programme forthe management of spent nuclear fuels and radioactive waste. TheProgramme must, among other things, include projects or plansand the technical solutions for the management of spent nuclearfuels and radioactive waste.Finally, the Directive also provides for a series of definitiverestrictions regarding the export of radioactive waste fortransposition into Italian law by 23 August 2013;

− Legislative Decree 185 of 19 October 2011 having regard to theimplementation of Directive 2009/71/Euratom, establishing aEuropean framework for the safety of nuclear plants.The Decree amends and expands Legislative Decree 230 of 17March 1995 and Law 99 of 23 July 2009 by introducing additionalsafety, staff and training requirements for the holders of operatinglicences by requiring them to operate using personnel, equipmentand funds pursuant to the laws as may be in effect from time totime;

− article 21, paragraph 13 of Law Decree 201 of 6 December 2011,converted into law with amendments by Law 214 of 22 December2011, disestablished the Nuclear Safety Agency, transferring itsactivities, financial resources and equipment to the Ministry ofEconomic Development, in agreement with the Ministry of theEnvironment and Land and Sea Protection. The work that was tobe performed by the Agency will now be temporarily performedby ISPRA.

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SEPARATE AND CONSOLIDATED FINANCIAL STATEMENTS 2011

encumbrances relating to radioactivity making the site fit forredevelopment.

In addition to the four nuclear power station sites at Trino, Caorso,Latina and Garigliano (formerly engaged in power generation) andthe Bosco Marengo site (formerly engaged in nuclear fuelproduction), Sogin also manages ENEA’s Saluggia, Casaccia andRotondella sites, where research into the nuclear fuel cycle wasconducted. The Company assures the highest degree of safety foreach phase of its work by using advanced technologies consistentwith the most demanding international standards.

The Group’s staff of approximately 900, selected and trained inconformity with standards of excellence, are the most importantrepository of professional excellence for the decontamination ofnuclear sites and the management of radioactive waste.

The new regulatory framework makes Sogin responsible for theidentification of a site for a Technological Park and the NationalRepository of radioactive waste and its subsequent construction andoperation. The Technological Park will be a centre of excellence withlaboratories dedicated to research in and training on thedecontamination of nuclear sites and the management of radioactivewaste.

A National Repository of a size commensurate with best internationalpractice will be located in the Park. The Repository will provide forthe safe storage of radioactive waste materials that are by-productsof the decontamination of nuclear sites in Italy and the day-to-dayoperations of nuclear medicine, as well as scientific andtechnological research, which currently give rise to approximately500 cubic metres of waste each year. The removal of waste to asingle facility ensures the highest degree of safety for residents andthe environment, and means that the process of decontaminationcan be brought successfully to an end, thus optimising time and costefficiency and eliminating the need for on-site waste storage. Itsdevelopment has, therefore, become a priority for Italy and the rightof all Italians.

The need for a National Repository has also been recognised by EUDirective 2011/70/Euratom of 19 July 2011, setting out the Europeanframework for the responsible and safe management of spent fuelsand radioactive waste.

Sogin’s expertise has also been recognised internationally so thatthe Company has been able to procure major contracts in countrieslike Russia, Armenia, Kazakhstan, Ukraine, China, France and theJoint Research Centre of the European Commission located in themunicipality of Ispra in the province of Varese. Since 2005 Sogin hasalso coordinated activities under the agreement between the ItalianGovernment and the Russian Federation as part of the GlobalPartnership programme, entailing the dismantling of obsolete

Russian nuclear submarines and the safe management of their fueland radioactive waste.

All of these activities have been undertaken in a responsible andsustainable fashion with stakeholder relationships being based ondialogue, shared objectives and transparency. Sogin is, in thisregard, developing a policy of close attention to its clients’ needsthrough the initiation and consolidation of a process of structuredinvolvement of national and local institutions, companies and localcommunities.

Sogin acquired a shareholding in Nucleco from Eni Ambiente SpAon 16 September 2004, in implementation of a resolution of Sogin’sBoard of Directors dated 23 June 2004. Nucleco’s other shareholderis ENEA.

Sogin’s programme of decommissioning nuclear facilities entails theoutput and management of significant quantities of radioactivewaste by-products. This was the reason for the decision to take upa major shareholding in Nucleco, thus benefiting from the synergieswith its operations and expertise.

Nucleco’s operations are subject to management and coordinationby Sogin. As last year, relations between the Parent Company andits subsidiary included the provision of support staff, particularly withrespect to legal, corporate and ICT matters, in addition toadministration and accounting.

Services provided by Sogin to Nucleco are remunerated at arm’slength to the mutual benefit of both parties.

Government guidelines

Sogin’s decommissioning activities are conducted in compliancewith the guidelines contained in the Ministry of EconomicDevelopment Decree of 2 December 2004, being:

− the treatment and conditioning of radioactive waste to transformthem into products certified suitable for removal to the NationalRepository;

− the acceleration of the unconditional radiological decontamination,to be completed within 20 years, of the sites on whichdecommissioned nuclear fuel cycle plants and power stations hadbeen located;

− fulfilment of all the conditions established in the reprocessingcontracts entered into with the former British Nuclear Fuels Ltd.,renamed the Nuclear Decommissioning Authority (NDA) inNovember 2008, as represented by the International NuclearService (INS);

− the option to reprocess remaining irradiated fuel outside Italy

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the National Repository for low to medium radioactive waste: thecornerstone of the project;temporary storage of highly radioactive waste;common facilities, i.e., the entrance and offices, lodgings,canteen, car parks, etc.;laboratories for technological research and development inconnection with decommissioning, radioactive waste managementand radio protection;an area for staff training, education and further education,scientific presentations and, in general, outreach;laboratories for industrial development and the transfer of newtechnologies to industrial and non-industrial uses;auditorium/conference hall;

− additional work on the detailed scale for local information;− estimating the national inventory of radioactive waste;− initial provision of information to stakeholders.

Business Plan

The 2011-2015 Business Plan was prepared in 2011. Incorporatingthe year’s changes in legislation, it repositioned Sogin’s strategicpolicies with respect to the decontamination of nuclear sites, the safestorage of radioactive waste and the National Repository andTechnological Park. The decontamination of nuclear sites anddefinitive safe storage of low and medium level radioactive wastesare dependent upon the opening of the National Repository.

The drivers and macro-measures needed to implement the BusinessPlan are:

− guarantee of the safety of Italians;− conclusion of agreements with the relevant organisations to fixschedules for decommissioning;

− dismantling of conventional structures to keep the programmemoving while awaiting “nuclear” consents;

− technological decisions for the dismantling of nuclear cores;− integration of Nucleco through the acquisition of ENEA’sshareholding to undertake decommissioning projects both in Italyand abroad;

− renewal of corporate know-how that has become impoverishedover time;

− development of the Technological Park and National Repository.

Sogin’s 2011-2015 Business Plan was approved by the Board ofDirectors on 14 July 2011.


one year. Also, the prohibition of shipping fuels will mean that thesite is designated as brown field, since it will still contain temporarydeposits of decommissioning waste awaiting shipment to theNational Repository.

Finally, it is planned to tighten safety precautions both on-site and athead office, as now required by the Department of Safety Informationand the Cabinet Office.

Technological Park and National Repository

Signs, in 2010, of a growing acceptance of the use of nuclear fuelsfor the generation of power were reversed by two major events: thedramatic earthquake at Fukushima that destroyed a nuclear powerstation in Japan and the outcome of the subsequent referendum inItaly relating to the repeal of the prohibition on new nuclear powerstations.

The consequence of the referendum was to repeal legislation thatwould have permitted the construction of new nuclear powerstations.

Legislative Decree 31 of 15 February 2010 for the dumping andstorage of Italian radioactive waste in a National Repository andTechnological Park has, on the other hand, been maintained withSogin designated as the party responsible for the identification of asite, its construction and operation.

In 2011 Sogin began to prepare for the corporate events required bythe legislation in force, which establishes that the first important stepis to organise a national seminar to publicise the following:

− the National Map of Potentially Suitable Areas to host the site; − the preliminary design for the National Repository andTechnological Park.

The criteria for selecting the potentially suitable areas by the NuclearSafety Agency, which never became operational and was abolishedby Law Decree 201/2011, have yet to be published, inevitablyslowing down the process.

In 2011 Sogin therefore only began the activities not requiring theprior definition of criteria, but necessary in order to respect the timingenvisaged by the legislation, once the criteria have been published.These regarded:

− a review of the preliminary design for the Park and the Repositoryin the light of the new situation. The principal components of theTechnological Park will be:

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Arrangements for the recognition of nuclear-relatedcosts, relationship with the Italian Electricity and GasAuthority and the Full Life Cycle Programme

2010 was the final year of the first three-year regulatory cycle.Through the approval of Resolution ARG/elt 109/2010 of 19 July2010, the Italian Electricity and Gas Authority (the Authority) initiatedthe process of establishing a mechanism for the recognition ofdecommissioning costs for the second regulatory cycle.

The process entailed the Authority’s publication, on 24 November2011, of Consultation Document 43/2011, setting out the Authority’sopinion on the mechanism for the recognition of nuclear-relatedcosts for the second regulatory cycle.

Taking the ongoing evolution of the institutional and regulatoryenvironment into account, together with the process of revising themedium- to long-term planning for nuclear-related activities, theAuthority included a proposal in the Consultation Document fortransitional arrangements to be introduced for 2011. This would entailprolongation of the validity of the criteria in effect for the firstregulatory cycle subject, however, to certain adjustments.

On 22 December 2011, Sogin submitted its observations to theAuthority on the Consultation Document. Sogin’s submission wasdivided into three sections. The first introductory section containsobservations of a general nature. The second and third sections, onthe other hand, contain observations on the proposed regulatoryarrangements for the 2011 transitional period and the new 2012-2014regulatory cycle.

As required by Resolution ARG/elt 195/2008, Sogin submitted itsestimated cash needs for full year 2011 to the Authority on 7 February2011 in order for the Electricity Equalisation Fund to be able to planthe cash disbursements required by the Authority.

On 29 July, as a result of the failure to finalise regulatoryarrangements and in recognition of the need to guarantee ongoingand safe decommissioning, Sogin submitted actual 2011 nuclear-related costs and forecast costs to the end of the year.

The 2011 Full Life Cycle Programme was submitted to the Authorityon 26 January 2012. It consists of a revision of the previous year’sversion in consequence of the new guidelines issued in conjunctionwith the 2011-2015 Business Plan. The new guidelines includedbringing forward conventional demolitions to minimise the effect ofthe difficulties with the authorisation process on the overall scheduleand to achieve time savings for the final part of the programme.

The concept of temporary, on-site storage of operating and legacywaste as well as waste arising on dismantling has been maintained.

They will be shipped to the National Repository as soon as it is ready.Sogin will condition and treat the waste it ships to the NationalRepository. This means that it will be necessary to provide wastemanagement facilities at all sites.

After the shipment of on-site stored waste to the National Repository,the temporary repositories will be demolished and other workperformed to leave the site in a green-field state, having eliminatedall radiological contamination.

The estimated nuclear-related charges included in the totaldecommissioning costs of the Avogadro Repository were includedin the Plan to the extent relating to the scope of nuclear-related costs.

Fuel costs exclude the additional costs incurred for the feasibilitystudy of an alternative to shipping fuels to France as a result of theprohibition of such shipments by the Italian authorities following thecommencement of construction of the high speed rail line in Val diSusa.

The quantities and costs of shipments to the National Repositorycontained in the 2010 Full Life Cycle Programme were againconfirmed in the 2011 Programme.

The estimated costs of the relevant activities were revised inaccordance with the results of more detailed projections as theybecame available and best international practice.

The dismantling cost estimates for the ENEA plants and schedulingwere revised based on detailed studies carried out by UKAEA Ltd. inorder to prepare the related decommissioning requests.

The total and accuracy of the cost estimates are consistent withinternational practice, allowing for the fact that the Italian regulatoryframework is more complex and the restrictions imposed byconsents are tighter than in other countries.

A higher degree of certainty, improved efficiency and potentialacceleration of the 2011 Full Life Cycle Programme have becomepossible as a result of revised regulations and practices that will lead to:

− a simplification of operational regulations and associatedprescriptive documentation having regard to significantdecommissioning programme milestones;

− conclusion by a date certain of the authorisation process, partlyand primarily because of the approval of regulations with a biasto administrative streamlining.

With reference to scheduling, all dates contained in the 2010 Full LifeCycle Programme have been maintained except for the Trino site,where the consent for decommissioning has been lengthened by

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joint venture, however, was not implemented due to the differinginterpretations of the concept of joint control.

There was, consequently, a slowdown in the procurement ofcontracts in early 2011.

In order to integrate Sogin and Nucleco, while at the same timerationalising the way in which Sogin manages Nucleco, acooperation agreement was signed with the Parent Company on 4May 2011, expiring on 31 December 2012. The agreement providesthat the two companies make their know-how and expertise availableto each other through the pursuit of common interests. This shouldresult in efficient cooperation in the performance of their corporatemissions.

The cooperation agreement was signed for the development of theparties’ collaboration and coordination of decommissioning andnuclear decontamination activities in the common interest of Soginand Nucleco and to improve the performance of both companies.

The objective of the agreement is to ensure the availability of highlyqualified staff through the improvement of their skills (also to be usedfor other activities once specialist know-how has been acquired),which, in Italy, can only be provided by Sogin. The agreementprovides for the secondment of Nucleco staff to Sogin and vice versa.

The cooperation agreement has already generated many jointprojects involving Sogin and Nucleco in work at various sites.

Integration continued during the year, above all with respect tohuman resources. ICT activities were all transferred to Sogin and arenow provided under a service contract, whereas discussions are nowbeing held with Nucleco with respect to human resourcesmanagement, entailing the application of the Parent Company’scollective employment contract.

Discussions between Nucleco and ENEA were resumed at thebeginning of the year to finalise plant licensing arrangements and arevision of the Agreement. The following were signed on 2 August2011 after a number of meetings:

− an Agreement incorporating new requirements, ApprovalIMP/37/0;

− Licence Agreement for the “ICS42” and “ITLD22” facilities at theCasaccia Research Centre, which had expired in September 2003;

− an addendum to the Lease of ENEA’s property to Nucleco.

It should be noted that Nucleco has an ongoing commitment tooccupational health and safety and environmental protection.

Services provided to Sogin and ENEA

Most of the services provided by Nucleco related to Sogin’sdecommissioning of nuclear power stations and fuel cycle plants. Theservices cover the characterisation, treatment, conditioning andstorage of radioactive materials and waste (only for the Casacciaplant), the decontamination of sites and areas of plants andoperational support services for plant decommissioning, includingdesign and safety maintenance. Similar radioactive wastemanagement and support services are provided to ENEA at itsCasaccia Research Centre.

Nucleco is the national operator designated in the Agreement withENEA2 covering the provision of the “Integrated Service” for thetreatment, conditioning and storage of medium and low levelradioactive waste and radioactive sources produced in Italy byindustry, research centres, hospitals and medical facilities.

The Integrated Service is coordinated by ENEA, which acquires titleto the conditioned waste and is, consequently, responsible for itsultimate safekeeping.

Nucleco was also authorised in accordance with article 31 ofLegislative Decree 230/1995 to collect radioactive waste arising inItaly in connection with the Integrated Service.

Nucleco is also responsible at national level for the safe storage ofradiferous preparations used for medicinal purposes and for thedecontamination of sites used for research or storage.

Transactions with its shareholders essentially regard the provision ofservices. They are conducted in the ordinary course of business onan arm’s length basis. All transactions entered into are conducted inthe interests of Nucleco.

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Market-related activities

Unlike other organisations engaged in the decommissioning ofnuclear facilities and fuel management, Sogin’s market-relatedactivities in 2011 generated a gross operating profit for the first timein four years, turning a loss of approximately €929,000 in 2010 to aprofit of approximately €789,000 in 2011. This was made possibleby the provision of nuclear advisory services to Italian andinternational clients.

In the Italian market, Sogin completed the contractual arrangementsin early 2011 with E.ON for the provision of nuclear facility sitingservices in Italy (direct consequence of the Italian Government’sstrategic decision to re-commence nuclear power generation).

Sogin began negotiations in 2011 with Enel Servizi for the renewalof a contract, which had expired in March 2009, for the completionof the decontamination of the CESI site in Segrate prior to itsunconditional release.

Technical and management support of the Ministry of EconomicDevelopment continued in 2011 in connection with the CooperationAgreement between the Italian and Russian Governments (Law165/2005) concluded in conjunction with the Global Partnership. Thework entails the dismantling of retired nuclear submarines and themanagement of radioactive waste and spent nuclear fuel. Technicalassistance was provided in 2011 for the construction of a treatmentplant and the temporary storage of radioactive waste at the AndreevaBay site, for which plans are being finalised for site preparationexpected to commence in 2012.

Sogin has completed work on three nuclear consultancy contractsin Russia and Ukraine funded by the European Commission as partof the INSC (Instrument for Nuclear Safety Cooperation) programme.Sogin worked together with certain European associates, Iberdrola,AREVA and CEA, thus reinforcing the relationships with thesecompanies and providing an opportunity to exchange technologies. These contracts related to the provision of advisory services for theimprovement of safety arrangements at the following three nuclearpower stations: Beloyarsk and Kola (Russian Federation), andKhmelnytskyi (Ukraine).

In 2011 a second contract for the provision of consultancy servicesto AREVA-Eurodif was also completed. It related to studies anddesigns for the decommissioning of Eurodif’s Georges Besse Iuranium enrichment plant located at Tricastin. That contract led tothe procurement of a third contract to be executed in 2012 and willfinally also lead to Sogin’s increased future involvement in thephysical dismantling of Eurodif’s Georges Besse I plant.

The subsidiary, Nucleco

Nucleco operates in radioactive waste management at plants ownedby ENEA, located at the Casaccia Research Centre at Santa Mariadi Galeria (Rome), and, using its own plant, equipment and systems,at the Centre or at temporary facilities created at its customers’ sites.

Nucleco SpA’s shareholders hold the following interests at 31December 2011:

− Sogin SpA: 60%;− ENEA: 40%.

Nucleco’s Articles of Association provide that the Board of StatutoryAuditors is responsible for the propriety of accounting systems, butSogin has independently retained Deloitte & Touche to auditNucleco’s financial statements.

Since Nucleco is subject to Sogin’s management and coordination,Sogin has expressly instructed Nucleco to provide documentationevidencing the consistency of its internal procedures with regulationsand the performance of an operational risk assessment, in additionto providing full support to the Manager Responsible for FinancialReporting, appointed pursuant to article 154 bis of Legislative Decree58/1998, as amended.

In addition to the provision of contractual services to Sogin, relationswith the Parent Company in 2011 also included support for stafffunctions, provided under a specific service contract.

Since its establishment in 19811, Nucleco has developed processesand technologies for the management of radioactive waste inrigorous compliance with safety and environmental standards andensuring maximum reliability.

Nucleco’s revenue for 2011 was €14.3 million (€16.2 million in 2010),with net income of €1.0 million (€0.2 million in 2010). Grossoperating income was €0.7 million (€1.2 million in 2010).

The 2011 financial statements were approved by the Board ofDirectors on 28 March 2012 and by the General Meeting ofshareholders held on 26 April 2012.

The decrease in net income was primarily a result of fewer contractshaving been awarded by the Parent Company.

An idea was explored at the beginning of the year to amend theArticles of Association to permit the direct management of Nuclecoby its two shareholders through the creation of a joint venture. The

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1 Nucleco was established by the CIPE Resolution of 11 July 1980 to createan operating organisation suitable for the provision of low to medium levelradioactive waste management services.

2 The Interministerial Economic Planning Committee (CIPE) Resolution of 1March 1985 assigned ENEA responsibility for collecting medium and low levelradioactive waste and for building and operating the related temporary repo-sitories. On 4 June 1986 ENEA’s Board of Directors approved the creation ofan Integrated Service to manage medium and low activity waste producedby hospitals and medical facilities, scientific and technological research andother non-electric operations. Under the Agreement of 15 June 1989, rene-wed on 2 August 2011 as approved on 15 April 2010, ENEA contracted Nu-cleco to carry out the activities involved in providing the Integrated Serviceto manage medium and low level radioactive waste produced by hospitalsand medical facilities, scientific and technological research and other non-electric activities. In addition, Legislative Decree 52 of 6 February 2007 im-plementing Directive 2003/122/EC/Euratom on the control of high level sealedradioactive sources and orphan sources, requires the Integrated Service tooversee all phases of the process of managing unused sources, such as theirpreparation for transport, their characterisation, any treatment or conditioningand their temporary storage. The Operator of the Service is ENEA.


however, prejudice to the treatment processes managed by theEngineering, Waste Management and Decommissioning Function.

All staff transfers have now been completed.

A member of staff was appointed to the position of Grade III QualifiedExpert from 1 January 2012 to replace an external consultant. Theindividual concerned was already engaged in physical surveillance.

Company finances

Cash on hand at 31 December 2011 was approximately €164 million,compared with approximately €143 million at 31 December 2010.

The cash needs of nuclear activities were funded by the Authoritybased on the financial plan submitted by Sogin, and subsequentlyrevised during the year. The Authority instructed the ElectricityIndustry Equalisation Fund to pay Sogin as follows:

– €40 million paid in January 2011, under Resolution ARG/elt236/2010;

– €20 million paid in April 2011 and €30 million in June 2011, underResolution ARG/elt 34/2011;

– €30 million paid in July 2011, under Resolution ARG/elt 87/2011;– €55 million paid in October 2011 and €10 million in November2011, under Resolution ARG/elt 130/2011.

All the above amounts have been received.

Furthermore, resolution ARG/elt 115/2012 was approved by theAuthority on 30 March 2012 instructing the Electricity IndustryEqualisation Fund to pay Sogin €75 million by 30 June 2012, €35million of which was received on 18 May 2012.

The cash requirements of activities relating to the Global Partnership,on the other hand, were met by a payment from the Ministry ofEconomic Development of €60.6 million.

Cash management generated approximately €3.9 million in interestincome in 2011 (€2.4 million in 2010), achieving an overall return of2.4% (1.6% in 2010), which was greater than the one-month Euriborrate of 1.2% (0.6% in 2010).

The “State treasury” services for unlisted companies wholly ownedby the Government (in accordance with article 18 of Law Decree78/2009, converted into law on 3 August 2009, and the implementingprovisions published in the Official Gazette on 1 April 2010)continued to entail ongoing monitoring of Sogin’s bank accounts bythe Ministry of the Economy and Finance.

Sogin entered into certain transactions during the year to hedge itsprincipal foreign currency commitments.

Corporate responsibility

Sogin released its first Sustainability Report in 2011 which, in linewith corporate policy for reporting and transparency to stakeholders,replaces the Social Report. The concept of sustainability hasconsequently been added to that of social responsibility toemphasise that Sogin’s operations are not only socially responsiblebut also sustainable, in that:

– safety is afforded to the population at large and local residents; – the environment is protected; – future generations are safeguarded.

The Sustainability Report is an official document approved by theBoard of Directors and certified by a firm of independent auditors. Itis published once a year on Sogin’s website for all interested parties.

The Report provides a comprehensive view of the organisation andcontains information on strategies, governance, risks andopportunities for the Company, linking them to Sogin’s economic,social and environmental performance indicators. The results for theyear ended 31 December 2010 and key information regarding thefirst half of 2011 are compared with the preceding two years. TheReport also contains qualitative and quantitative information on theconventional and radiological health and safety of employees andthe results of environmental radiological analyses for 2010 which, asin previous years, are well within statutory limits, there being onlynegligible traces of radioactivity.

The Report, furthermore, provides key data and informationpertaining to Nucleco SpA’s management of radioactive waste.

The Sustainability Report was prepared on the basis of the 2006version of the GRI-G33, guidelines and the March 2011 version, GRI-G3.1. The Report was graded B+ and conforms with the standardAA1000 AccountAbility Principles Standard 2008 (“AA1000APS -2008”), issued by AccountAbility (Institute of Social and EthicalAccountability).

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Services provided to customers other than its shareholders

Under a four-year agreement signed in 2010, and expiring in early2014, Nucleco provides laboratory services at the EuropeanCommission’s Joint Research Centre located in the Municipality ofIspra (Varese).

Within the scope of Integrated Service, Nucleco is responsible forthe safety maintenance of high-activity and orphan sources underLegislative Decree 52 of 6 February 2007. The company has enteredinto an agreement with ENEA governing the technical and financialaspects of a management service for major sources. Nucleco is, inany event, capable of offering the market alternative solutionsinvolving the transfer of such sources overseas.

Research and development

Nucleco’s radiological characterisation is also important for researchand development.

The measurement and assay methods used for characterisation,design and performance are those of NIWAS (Nucleco IntegratedWaste Assay System), based on an integrated system of NDA (NonDestructive Assay) and DA (Destructive Assay). Although widelyaccepted and recognised internationally, the methods are subject toongoing development to assure that they are fit to satisfy new marketrequirements so that they play an invaluable role in helping thecompany win new contracts. The following aspects of development are also of particularimportance for radiological characterisation:

– participation in the preparation of industry regulations for UNICEN,primarily regarding issues connected with NORM (NaturallyOccurring Radioactive Materials) and TENORM (TechnologicallyEnhanced Naturally Occurring Radioactive Materials), for whichNucleco is coordinator. The experience gained in this field hasbeen transferred as part of the development of Europeanguidelines;

– participation in international “intercomparison” activities; researchprojects that enable participating laboratories to compare theiranalytical methods and results so as to establish shared standards(NPL, the UK National Physical Laboratory and IRSN, the FrenchInstitut de Radioprotection et de Sûreté Nucléaire).

– the development of additional equipment for the characterisationlaboratories with the purchase of a tomographic gamma scanner,an alpha spectrometer and new gamma spectrometers for DA andNDA measurements;

– the development of methods for the qualification of the chemicallaboratory, particularly with respect to asbestos fibre analysis usingphase-contrast optical microscopy (PCOM);

– activities relating to the CARBOWASTE project (thecharacterisation and treatment of irradiated graphite), as part ofEuratom’s “FP7” project. The project lasts a total of four years,terminating in 2012, and is relevant to the decommissioning of theLatina plant;

– the development and perfection of new methods for extractingalpha-emitting radionuclides from various types of matrix.

Nucleco is also responsible for the qualification of concrete for theconditioning and encasement of radioactive waste, pursuant toTechnical Guideline 26 issued by the Control Authority, applying theresults as part of Sogin’s decommissioning activities, whilst at thesame time overseeing the technology used in a particularly importantphase of the conditioning process for radioactive waste.

Organisational structure

New level I and II organisational structures came into effect on 26May 2011 in accordance with organisational requirements, followingthe transfer to the Parent of two level I managers (the head of HumanResources and Organisation and the head of Engineering, WasteManagement and Decommissioning). The responsibilities of theHuman Resources and Organisation function have consequentlybeen modified through the allocation of certain of its duties to twonew functions: Safety, Quality and Administrative Responsibility andPersonnel Management and Administration. Responsibility for ICThave been transferred to the Parent Company through theconclusion of a service contract. A highly skilled technician has beenappointed to head Engineering, Waste Management andDecommissioning. The individual concerned has previously held keypositions in Nucleco and the Function’s duties and responsibilitieshave been revised. The certificate provided by the relevant attestationbody has also been revised by noting the appointment of the headof Engineering, Waste Management and Decommissioning astechnical director.

The appointment of a member of the Engineering and WorksSupervision area as consultant for the transport of dangerous goods(Legislative Decree 40/2000) was finalised on 31 August 2011.

The structure of the Business Functions was reorganised on 22December 2011 as a result of the transfer of the head of thechemicals laboratory to the Parent Company. Management of thequalification process and chemical laboratories was brought underone individual department and transferred to the Characterisation,Radioprotection and Environmental Surveillance Function.Furthermore, as required by the conditions of the clearance,compliance with which must be assured by the existing licenceholder, a Site Management Function has been established and maderesponsible for the operation of the Centre’s facilities without,

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3 The Global Reporting Initiative (GRI) is an international organisation foundedin 1997 with the key aim of providing a framework for reporting companies’economic, social and environmental performance and governance. Its mis-sion is to satisfy the need to provide a common vision of concepts, languageand standards to clearly and transparently communicate the sustainability ofindividual organisations, in recognition of the fact that the transparency ofenvironmental and economic impacts is a fundamental aspect of managingrelations with the public and stakeholders.


Sogin associated itself with Unindustria (Unione degli industriali diRoma, Frosinone, Rieti e Viterbo) through the conclusion of amemorandum of understanding on 18 October 2011. Unindustriaheld a meeting on 19 November 2011 for the Company to introduceitself to other members and to present its 2011-2015 Business Plan,new polices and new methods of procuring goods, services andworks.

Initial contact was made at the end of 2011 with Oice, which is anemployers’ association representing Italian engineering,architectural, technical economic consulting organisations, and withAssistal, an employer’s association of Italian plant constructors. Amemorandum of understanding was signed with Assistal in January2012.

Contact was made with all trade union organisations important to theconclusion of a memorandum of social responsibility. This entailedmeetings with the general secretaries of the Cgil, Cisl, Ugl and Uilunions.

The following events were important for industrial relations:

− hearing at the Chamber of Deputies VIII Committee (Environment,Land and Public Works) (September 2011);

− hearing at the United Committees: VIII (Environment, Land andPublic Works) and X (Industry, Trade and Tourism) (September2011);

− hearing at the cross-parliamentary Inquiry into illicit practices inconnection with waste recycling (October 2011);

− hearing at the Chamber of Deputies X Committee (Industry, Tradeand Tourism): Inquiry into the Role of Public Sector CompaniesParticularly in the Energy Sector (December 2011);

− transparency committee meetings with Piedmont RegionalAuthority (February 2011 and December 2011);

− transparency committee meeting with Campania RegionalAuthority (November 2011);

− control room with Basilicata Regional Authority (April 2011);− hearing at the Environmental Committee of Latina ProvincialAuthority (July 2011);

− periodic meetings with the Campania, Lazio, Piedmont, Emilia-Romagna and Basilicata regional authorities and the relevantprovincial and municipal authorities and regional environmentalprotection agencies;

− conclusion of an anti-Mafia protocol in March 2011 with relevantprefectures in order to widen and deepen the scope of measuresto prevent the infiltration of organised crime;

− conclusion of an agreement to become effective in February 2012with the branch of the Carabinieri responsible for EnvironmentalProtection, in order to develop a working relationship in all phasesof the management cycle of radioactive sources no longer in use,i.e., “orphan sources”.

Contract tenders and related regulations

A thorough reorganisation of the Company’s structure was startedwhen the current Board of Directors appointed on 13 October 2010took up office. The reorganisation also entailed a revision of theprocurement policy in order to increase the transparency andefficiency of procurement and contract tendering. It completelyoverturned past practice, which was necessary as a result of thesubstantial increase in the use of public tenders and a consequentreduction in so-called direct awards and related contracts.

Over 1,300 orders were placed in 2011, totalling approximately €148million and up 53% on 2010 (€96.8 million). €24.6 million related tointercompany orders, office rental and ENEA fees. The percentageof other contracts awarded by tender rose from 34% in 2010 to 80%in 2011.

In order to achieve the cited objectives of transparency,rationalisation and efficiency, a series of measures were introducedto harmonise and simplify tender documentation through theestablishment of company standards. These are intended toguarantee maximum traceability, starting from the selection ofsuppliers, and to provide for uniform selection procedures for eachsector, consequently increasing the number of enterprises involved.

Uniform standards for works, goods and services were issued,replacing the three previously used set of standards. The old contractterms and conditions were withdrawn and replaced by GeneralConditions of Contract for Works, Services and Goods and modelworks, service and supply contracts. Total transparency is providedby publishing all of the above-mentioned documents on Sogin’swebsite, where they are available to all visitors.

As a result of the entry into force of the new regulations implementingthe Code for Contracts embodied in Presidential Decree 207/2010,Sogin’s system of prequalification was completely revised inaccordance with the new statutory requirements.

This entailed the development of lists of providers in accordance witharticle 125 of Legislative Decree 163/2006 for works, services andsupply contracts amounting to less than €150,000. The lists are splitbetween head office and sites and include almost all types ofcontract awarded by Sogin and will remain in effect for three years.They are open to all providers with invitations to tender being senton a rota basis.

Acting on advice by Consip, it was announced at the same time thatthe goods and services register was to be closed.

Existing registers for “works” and “engineering services” were alsoclosed and replaced by other registers. These new systems providefor the streamlining and simplification of prequalification procedures.

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A questionnaire has been made available on Sogin’s website since2010. It can be downloaded by any interested parties wishing tocomment on the conformity of the Sustainability Report and thequality of information provided with the related requirements.

The questionnaire serves as a vehicle for suggesting clarificationsand improvements in the content of future editions of the Report.

Stakeholder engagement is a structured and ongoing process oforganisational involvement considered important for the propriety ofan institution’s operations. The process is typically adopted byorganisations involved in high value added economic, social andenvironmental activities, and is also recommended for internationalorganisations of relevance to the nuclear sector including the UN’sIAEA, the OECD’s NEA and the EU’s Euratom.

In developing engagement processes, these organisations identify amethod to thoroughly know the environment in which a companyoperates, thus simplifying understanding and management of therisks deriving from a mismatch between shared interests andexpectations, and maintaining the organisations’ reputations andleadership in a complex and rapidly changing environment.

Developing and maintaining Sogin’s reputation, based on its abilityto satisfy shared interests and its reliability, is strategic to theexpansion of operations, not only with respect to the improvementof the corporate policies and processes involved in and typical ofstakeholder relations, but also in terms of establishing and creatingthe climate of trust indispensable for the continuation of theenvironmental decontamination of nuclear sites. In 2011, Sogincontinued and consolidated the process of stakeholder involvementcommenced in 2010 through the involvement of local enterprisesand their regional representatives, in recognition of their strategicrole in Sogin’s mission as a result of their contribution the Company’soperations as providers of services and works, and as importantcomponents of the socio-economic fabric of the local community.

The main objectives of the process were:

− to develop new relations with local trade associations andbusinesses to enhance the Company’s socio-economic role in thecommunity, thus maximising the value it adds to the communityand increasing opportunities for local enterprises to work with theCompany;

− to improve the organisation’s economic-industrial performance bysupporting development of the prequalification system and theprocurement of goods, services and works;

− to support relations with local authorities, communicatinginformation based on actual facts.

Planned activities were implemented through the conclusion and

performance of 14 memoranda of understanding with an equalnumber of regional trade organisations associated withConfindustria, Ance, Confapi, League of Cooperatives andConfCooperative, and of the seven provinces where Sogin works.The memoranda of understanding were drawn up with reference toactual needs as communicated in meetings held in 2010. Theycontain a series of projects to be undertaken together with theassociations through engaging local business and institutions and,more generally, the local community.

Institutional activities and relations with localauthorities

Meetings of Sogin’s senior management, local trade associations,institutions and local business with the public were held in therelevant communities on the occasion of signing the memoranda ofunderstanding.

In implementation of the memoranda of understanding with localtrade associations, signed between May and July 2011, a road showof four meetings was subsequently held to present Sogin’s BusinessPlan to local communities.

Meetings were held as follows:

− 8 November in Trino;− 9 November in Caorso;− 10 November in Rotondella in the province of Matera;− 11 November in Latina.

In addition to local businesses and their regional associations, themeetings were attended by local institutions and local trade unionorganisations, including amalgamated unions operating at thevarious sites.

Sogin announced its intention at the meetings to engage in thestructured involvement of all trade union organisations in 2012 inorder to renew industrial relations.

The four meetings had a resounding effect on public opinion as aresult of local media coverage.

Projects were undertaken with the associations signing thememoranda of understanding with Sogin to promote associatedbusinesses, e.g., the List of Economic Operators and the Register ofSuppliers, training and assistance. Sogin’s new procurement policyfor goods, services and works and the 2011 half-year and annualresults were also announced both in a newsletter to local businessassociations and in specialist periodicals.

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Related party transactions

Transactions with the only subsidiary, Nucleco, were all conductedon an arm’s length basis and are summarised below:

− technical assessments carried out with ISPRA for the purposes ofapproval of the application for the decommissioning of the Trinoand Garigliano plants; the decrees approving thedecommissioning are expected to be issued by the end of 2012;

− the application to decommission Trisaia, which was based on thedecommissioning study prepared with the support of the Britishcompany, UKAEA Ltd., has been submitted to the relevantauthorities.

During the year, however, the following key approvals were issued:

Casaccia:– Ministerial Decree authorising work on the OPEC2 radioactivewaste repository (the only authorised category III repository in Italyfor unconditioned waste);

– ISPRA approval of the treatment and conditioning operating plan,for Nucleco facilities, of solid waste from the Plutonium plant.

Trisaia:– issuance of the licence by ISPRA for the transport of AREVA casksto Italy;

– environmental compatibility decree for the “finished product”;– ISPRA authorisation for overpack maintenance;– ISPRA clearance for the treatment of an additional three containerswith metal waste;

– ISPRA approval of the radioactive waste inspection and controlprogramme;

– ISPRA approval for the operation of the new 30 kVA uninterruptiblepower supply;

– local authorities authorisation for Trench 7.1 decontamination;– extension of commencement notice deadline for the operation ofthe compactor and the mobile concrete batching plant;

– clearance for the modification to the fire hydrant system (non-routine maintenance).

Garigliano:– documentation sent to ISPRA regarding complete revision of thedecommissioning plan;

– issuance of the ministerial decree for the upgrade of the powerstation water system;

– ISPRA authorisation for the site’s electrical system.

Latina:– 23 authorisations requested and received for the demolition of thejetty (first major conventional structure);

– environmental compatibility decree (Environmental ImpactAssessment) for the decommissioning of the Latina power stationissued by the Ministry of the Environment and Land and SeaProtection.

Finally, Sogin also trades under normal market conditions with EnelSpA, Enel Facility Management SpA, Enel Distribuzione SpA andEnel Servizi Srl, which, like Sogin, are controlled by the Ministry ofthe Economy and Finance, and with CESI SpA, in which Sogin hada 2% interest until November 2011. These entities do not qualify asrelated parties of the Company.

NUCLEAR ACTIVITIES

Approval procedures and relations with key institutions

Approval procedures during 2011 progressed substantially in linewith key objectives in the Company’s overall plans.

In general, despite the previously mentioned organisational changes,in 2011 the approval process saw the Company establish andmaintain a positive dialogue with key institutions regarding approvalpriorities and procedures. A lack of resources at the competentauthorities, particularly ISPRA and the Ministry of EconomicDevelopment, has led to significant delays despite their bestintentions.

The key authorisation processes focus on safety maintenance,organisational aspects of power stations and equipment, andproposed decommissioning; the status of the latter in 2011 isdescribed below:

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The categories of contract foreseen by the register are consistentwith those of the prequalification systems for public works. Therequirements for prequalifying for engineering have been changedby the standards applied to sectors like petrochemicals andpharmaceuticals in order to open the market up more for providers.

2011 was also characterised by the increased use of Consip’sservices in implementation of the provisions of article 3, paragraph15 of the 2008 Finance Act.

The introduction of this system led to the rationalisation andoptimisation of procurement processes through the use of e-commerce and the conclusion of contracts.

During 2011 the Consip platform was used for contracts totalling €41million (55 contracts), €30 million of which in connection with GlobalService Contracts for seven sites.

Finally, Sogin introduced a new eProcurement system, which iscurrently used to manage variable price contract tenders for amountsof €200,000 or less, thus simplifying procedures and improving thetraceability of procurement processes.

With regard to the requirements of Legislative Decree 163/2006,Sogin has unfailingly met its obligation to report to the Authority forthe Supervision of Public Contracts (see article 7, paragraph 8 ofLegislative Decree 163/2006, as amended). All the TenderIdentification Codes (Codici Identificativi Gara or CIG) for contracts

subject to financial traceability requirements introduced by Law136/2010, as amended, have also been allocated. General checksof entities awarded contracts by public tender are carried outsystematically for all contractors in accordance with the bestpractices of Italy’s main commissioning bodies.

In order to assure the propriety and efficacy of organised crimeprevention, an anti-Mafia protocol was signed in March 2011, in thepresence of Ambassador Giancarlo Aragona and the Chief ExecutiveOfficer, Giuseppe Nucci, by Sogin and the prefectures of the sevenprovinces where nuclear plants are being decommissioned(Alessandria, Caserta, Latina, Matera, Piacenza, Rome, Vercelli) inorder to provide for the propriety and timeliness of crime prevention.

The three-year protocol provides for the anti-Mafia controls of all firmsand suppliers working in nuclear plants managed by Sogin, includingcontracts with a value below the current EU minimum. The maximumfor uncontrolled contracts has been lowered from €5,000,000 to€250,000 for works and from €400,000 to €150,000 for services andsupplies. The protocol extends these controls to sub-contracts andfor works and labour and to the sub-contracting of services exposedto the risk of Mafia infiltration regardless of value. The procurementof Mafia prevention information has been extended to includeservices not classified as sub-contracts but deemed exposed toMafia infiltration, such as the transport of refuse, transport anddisposal of waste, supply and/or transport of soil, inert materials,concrete, wrought iron and equipment hire.

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(€) 2011 2010 Increase(Decrease)

Trade receivables due from subsidiaries 731,801 1,075,683 -343,882

Trade payables due to subsidiaries 4,884,556 4,580,121 304,435

Other revenues from subsidiaries 229,576 469,694 -240,118

Purchases from subsidiaries 1,445,000 - 1,445,000

Service costs payable to subsidiaries 9,007,891 9,925,089 -917,198


Trino power station

Work continued in 2011 on the effluent resin treatment plant usingwet oxidation technology. Medium to low level radioactive wastecontainers were procured and the installation of insulation valves forthe upgrade of the reactor building ventilation system required byISPRA was completed. Design work for the upgrade of temporaryrepositories for the storage of dismantling waste is being completed.The planning of contract award processes for dismantling of thenuclear core is at an advanced stage. Preparations for the shipmentof fuels have started. A tender will be announced in 2012 for thedismantling of the primary circuit (excluding vessels and internals).Further progress is almost entirely dependent on receipt of approvalof the general dismantling application.

Caorso power station

5,800 tonnes of components were removed during 2011 from theturbine building (5,500 tonnes more than originally estimated).Incidental dismantling work will be completed in 2012, as will thedecontamination and storage of dismantled components. Thereplacement of the batteries was completed and decontamination ofthe PCB transformers is in its final stages. Tender documents wereprepared for the dismantling of the off-gas building. Testing of thetreatment of low level radioactive waste at Studsvik in Sweden wascompleted and processing started. Most of the shipments have beenmade and are expected to be completed by June 2012. Plans havebeen completed for the effluent resin treatment plant using wetoxidation technology, but the contract has been held up whilstawaiting the results of testing of a similar system being developed atTrino. The design phase was started for the conversion of the turbinebuilding for use as a radioactive waste buffer, thus permitting therestructuring of the ERSMA and ERSBA repositories. Delivery hasbeen completed for the first order for medium to low level radioactivewaste containers. The updating of documents supporting theapplication to 31 December 2010 were prepared and forwarded atISPRA’s request. The following additional documents have also beenprepared and sent to ISPRA: draft new technical instructions,operating plan for the emptying of fuel pools, revision of the TechnicalRequirements for the new External Emergency Plan. There were alsofurther delays in the approval of dismantling at Caorso, which had adirect impact on operations.

Containers for low and medium activity radioactive wasteat power stations

Delivery of the order for 900 440 litre low to medium level radioactivewaste drums and 180 prismatic containers has been completed.

Casaccia plants (OPEC1, OPEC2, IPU)

Work has started and is nearing completion on the containmentsystem for the dismantling of the underground tanks for A&B waste.Article 28 of Legislative Decree 230/1995 authorisation was receivedin 2011, with conditions, for the upgrading of the OPEC2 buildingrepository. Designs were reviewed and the contract award processwas started in early 2012. Authorisation procedures are in processfor the dismantling of glove boxes and completion of the dismantlingof underground A&B waste tanks. The conditioning and treatment oflegacy waste and logistics arrangements are ongoing.

Trisaia plant (ITREC)

The treatment and storage of solid waste (SIRIS project) continuedin 2011, for which Nucleco’s super compactor was used. The generalapplication for dismantling was prepared and submitted in July 2011.The contract for the decontamination of the irreversible trench waswithdrawn due to irregularities at the awardee company and wassubsequently awarded to the runner up bidder. Work is expected tocommence at the site in mid-2012. The Detailed Designs Report forthe third phase of the decontamination of Trench 7.1 has been sentto ISPRA. A contract was terminated, out of court, for the constructionof a finished product solidification plant (a high-activityuranium/thorium solution). A new tender was announced with a basebid price below that of the old tender. The award was made in May2012. Logistics arrangements are under way (completion phase ofthe new power sub-station). The Detailed Designs Report for the drystorage of Elk River fuel has been submitted to ISPRA.

Saluggia plant (Eurex)

Work continued in 2011 on the radiological characterisation of wasteand the characterisation of the plant has commenced. Civil workscommenced on the temporary D2 radioactive waste repository earlierthan expected (ISPRA certification regime). Following the new tender,an invitation to bid was issued for the construction of a high-activityliquid waste cementation plant (base bid price approximately €10million less than the preceding tender). Contract award is expectedfor mid 2012.

Bosco Marengo plant

The treatment of materials from the dismantling of the productivecycle was completed in 2011 when the dismantling of auxiliarysystems, particularly the ventilation system, commenced. As a resultof an accident with a shot peening machine, work will be completedlater than planned in the second half of 2012. Work was alsocompleted on the conversion of BLD11 to a temporary buffer station

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Trino:– ministerial decree approving modification of the wet oxidationplant;

– clearance to commence preparations for the assay of fuelelements;

– verification of compliance with rule 9 of the DSA-DEC-2008-1733decree;

– assumption of third-party liability for the shipment of nuclearmaterials for the purposes of article 16 of Law 1860/1962;

– approval of operating regulations for the purposes of article 46 ofLegislative Decree 230/1995, as amended;

– verification of compliance with rule 3 of the DEC-VIA-1264 decree.

Caorso:– ISPRA approval for the replacement of smoke detectors;– ministerial decree revoking article 48 (reduction of the number ofpersonnel shifts);

– clearance for the removal of the security device for the Caorsostation transport interchange due to the ending of the emergency;

– application for renewal of the dumping authorisation (Law241/1990);

– verification of compliance (VO 299) with rule 3 of the DEC-VIA-1264 decree of 31 October 2011; Environment Impact Assessmentmeeting on 27 October 2011;

– integrated investigation of the Assessment Phase per article 12Regional Law 40/1998 and Incidence Assessment of the“Environmental and Landscape Redevelopment Project, includingexcavations at Brusaschetto Nuovo in the municipality of Camino(province of Alessandria)”, forwarding of Directors’ Resolution 465of 2 November 2011;

– assumption of third-party liability for the transportation of nuclearmaterials for the purposes of article 16 of Law 1860/1962;

– approval of operating regulations for the purposes of article 46 ofLegislative Decree 230/1995, as amended;

– opinion/notice approving the amendment of the authorisation toship increased quantities of radioactive waste;

– verification of compliance with rule 3 of the DEC-VIA-1264 decree.

Bosco Marengo:– approval of the site quality guarantee programme;– approval of the ventilation and auxiliary systems operating plan;– approval of procedures for the verification of the status of thesafekeeping of waste containers;

– approval of the timing of the issuance of characterisation reports;– approval of the operating plan for the management of wastelocated in BLD 8.

Saluggia:– Ministerial Decree of 18 January 2011 authorising the initialoperation of the new water supply system;

– approval of the operating plan for the “Characterisation, treatmentand conditioning of materials extracted from the decontamination

of the Eurex plant pools” - qualification process;– approval of the demolition of the 600/B building;– approval of the non-routine maintenance of building 2000 civilunits;

– approval of the treatment of major components/metallic wastearising on decontamination of fuel plant pools - pre-characterisation work;

– forwarding of the ministerial decree, authorising use of anadditional area for the storage of containers for the shipment ofirradiated nuclear fuel;

– authorisation for the unconditioned removal of waterproof roofmembranes;

– Fire Brigade approval of the D2 repository design.

Status of decommissioning

There was an increase in the volume of decommissioning in 2011compared with 2010.

A summary of the most important work carried out in 2011 isprovided below.

Latina power station

Work was started and completed on the early demolition of the jetty.Civil works were completed on the new temporary radioactive wasterepository. The erection of the technological facilities and thecompletion of the repository itself was delayed to 2012 due tooperating difficulties (repair of hairline cracks). Dismantling of theupper primary circuit pipes was completed and construction of theextraction and processing system for radioactive mud is at anadvanced stage of completion. Design and treatment of a new liquideffluent treatment plant is under way. The first containers forradioactive waste have been delivered. Work has resumed on thedesigns for the dismantling of the boilers.

Garigliano power station

The new temporary repository for radioactive waste has beencompleted. Work is nearing completion on the conversion of theformer diesel building into a repository and construction of thebuilding to be used for trench decontamination. Work has started onthe demolition of the old stack after delays because of problems withthe contractor. The contract award process and authorisation for thenew Radwaste plant has started.

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NDA reprocessing agreements

Pre-1977 contract for Garigliano fuelsThis fixed-price contract was signed on 25 November 1968 for thereprocessing of 44.3 tonnes of uranium (201 fuel elements). Thecontract only provided for the return of uranium and plutonium ratherthan radioactive waste reprocessing. The uranium and plutoniumextracted by the reprocessing of fuel of the first two campaignsshipped to the UK was recycled for the production of other fuels,whereas the quantities extracted from the reprocessing of the last13.6 tonnes of uranium are stored at the NDA plant in Sellafield.

Pre-1977 contract for Trino fuelsThe contract was signed on 23 October 1974 for the reprocessing of24.2 tonnes of uranium (78 fuel elements). This amount of fuel, whichat the time the contract was signed had already been shipped to theUK, will be reprocessed in 2014 according to plans drawn up by INS.The contract, which is fixed-price, only provides for the return of theuranium and plutonium content of the fuel, which may beprovisionally held at NDA’s facilities. There is, however, no provisionfor the return of radioactive waste extracted during the process.

Latina fuel agreementThe fuel covered by this contract (50,326 fuel elements, weighing573 tonnes) signed on 26 July 1979 has already been reprocessedand is currently being treated for radioactive waste. The section ofthe contract dealing with waste conditioning is cost-plus and isfunded with reference to annual cost estimates prepared by INS. Thecontract provides for the return of radioactive waste, which isextracted during the process (low, medium and high-activityradioactive waste), as certified by Lloyd’s Register, plus anyrecovered uranium and plutonium.

Negotiations are under way with the NDA with a view to convertingthe contract to a fixed price arrangement.

Service Agreement (SA) The contract was signed on 24 January 1980 for the reprocessing of105 tonnes of nuclear fuel uranium from the Trino and Gariglianopower stations. The contract, which is cost-plus, was signed by Eneltogether with other European and Japanese electric companies.Contract supervision is overseen by decision making technical-commercial committees. Out of the total of 105 tonnes foreseen, 51.7tonnes of uranium from the Trino fuel was shipped to Sellafield, UK,prior to 1993, with the remaining 53.3 tonnes of uranium from theGarigliano plant shipped to Sellafield between 2003 and 2005. Thecosts of the Service Agreement were funded annually with referenceto annual documented cost estimates prepared by BNFL. A risksharing agreement was concluded between BNFL, Sogin and otherpower companies in July 2003, following negotiations with BNFL in2002 for the conversion of the contract from cost-plus to fixed-price.

The risk sharing agreement entails the payment of a bonus forunexpected price increases in addition to cost increases alreadyagreed. The contract provides for the return of all radioactive wasteextracted during processing (low, medium and high-activity waste),in addition to the return of any recovered uranium and plutonium.

Optimisation of waste with volume reductionsIn order to reduce transport costs to the National Repository, an offerby NDA was evaluated for the replacement of low to mediumradioactive materials with lower, radiologically equivalent quantitiesof highly radioactive waste.

In August 2009, following the submission to the Ministry of EconomicDevelopment and the Electricity and Gas Authority of a technical andcommercial assessment of the offer, the Ministry of EconomicDevelopment issued a directive containing strategic and operationalguidelines for Sogin. These authorised the conclusion of anagreement with NDA for the replacement and minimisation of low tomedium activity radioactive waste with a lower quantity ofradiologically equivalent high activity radioactive waste. The directivealso requires that the return of vitrified waste from the UK should betimed to coincide with readiness of the National Repository forradioactive waste. Negotiations in this connection are under way withINS.

Additional services for the return of wasteSogin is currently negotiating a fixed price contract with NDA forservices, not yet arranged, in connection with the return of waste toItaly.

Dry storage of Elk River fuelWork is currently under way for the provision of metallic dual purposecasks for the dry storage and eventual shipment of fuel from ElkRiver.

Management of ENEA materials

Discussions are currently being held with the US Department ofEnergy (DoE) and the National Nuclear Security Administration(NNSA) to participate in the Global Threat Reduction Initiative (GTRI)for the return to the United States of batches of highly enricheduranium, plutonium and irradiated fuels containing highly enricheduranium. Characterisation, packing and shipping will follow thefeasibility study.

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for legacy and decommissioning waste. Work continued at the sametime on the B106 temporary repository for radioactive waste. Workalso started on preparations for waste treatment and storage.

Management of irradiated fuels and nuclear materials

Arrangements for irradiated fuels

Sogin’s nuclear-related work includes responsibility for the irradiatedfuels and nuclear materials:

– transferred from Enel as the operator of the four Italian nuclearpower stations currently being dismantled and the nuclear powerstation at Creys-Malville in France, which was 33% owned by Enel;

– transferred from ENEA’s fuel cycle plants.

The programmes for irradiated fuels from Italian power stationsinclude the completion of the reprocessing under contracts withBritish Nuclear Fuel Limited (BNFL). All of BNFL’s contracts havebeen transferred to the Nuclear Decommissioning Authority (NDA)in accordance with the 2004 Energy Act. NDA has appointedInternational Nuclear Service (INS) to perform the contracts. Thefuels reprocessed under these contracts have either already been orwill be treated at the Sellafield plant in the UK, which has beenoperated since 24 November 2008 by Nuclear Management PartnersLtd., a consortium set up by URS, AMEC and AREVA.

All remaining irradiated fuel was sent for reprocessing at the LaHague facility in France following the Lucca Intergovernmentalagreement of 24 November 2006 between France and Italy, and thesigning of the reprocessing agreement between Sogin and AREVA(27 April 2007).

The transport of fuel from the Caorso power station was completedin June 2010, meaning that a total of 190 tonnes has been sent toFrance.

The La Hague plant had completed the reprocessing of all the fuelelements from Caorso by the end of 2010, with the exception of 6individual fuel rods.

Shipment commenced in 2011 of irradiated fuel from the Avogadrorepository at Saluggia, with the removal of 36 cruciform elementsfrom the Trino plant in two separate shipments.

The Italian authorities, however, suspended shipments from May2011 as a result of the commencement of work on the high speedrail lines in Val di Susa and the resultant opposition.

Following the preliminary feasibility study of alternative routes, Sogin

is in the process of retaining AREVA to complete the technical andauthorisation processes for completion of the shipments.

As a result of exercising the option for the “virtual reprocessing” ofEnel fuels from the Creys-Malville power station, Sogin received anequal quantity of plutonium at the La Hague plant from EdF in 2008.

The €173 million cost of the first phase of virtual reprocessing hasbeen provisionally funded by the Electricity and Gas Authority byResolution ARG/elt 57/2009, pending the addition of these costs tonuclear expenditure pursuant to the Ministerial Decree of 26 January2000, in accordance with the Ministerial Directive of 28 March 2006.The costs, however, have not yet been included in the MinisterialDecree of 26 January 2000.

It should be noted that the following has been included in the recitalsof the resolution:

– the Ministerial Directive of 28 March 2006 requires that Sogin “haveirradiated nuclear fuels currently located at the following sitesreprocessed outside Italy in a country where such reprocessing istechnically feasible and cost efficient: a) the Italian nuclear powerstations at Caorso, Garigliano and Trino Vercellese, in addition tocertain quantities of fuel at nuclear fuel cycle plants and storagesites located in Italy, b) at the nuclear power station at Creys-Malville, France, in respect of amounts attributable to Sogin SpA";

– the requirements of the Ministerial Decree of 28 March 2006regarding the reprocessing of fuel from Creys-Malville must still beadded to the Decree of 26 January 2000, which is currently beingdrafted by the relevant ministries;

– the costs incurred by Sogin in connection with Creys-Malville fuelare, nevertheless, included in the commitments assumed prior tothe effectiveness of Legislative Decree 79/1999. Thesecommitments were originally transferred from Enel to Sogin onSogin’s incorporation in accordance with article 13, paragraph 3of the Legislative Decree.

When the plutonium was transferred by EdF, an agreement wassigned with AREVA for the management of plutonium at the LaHague facility. The agreement provided for the ability of each of thetwo parties to find operators interested in recycling the plutonium forproduction of mixed oxide fuels. The agreement provides that thequantity of plutonium not reused by 31 December 2021 be returnedto Italy by 31 December 2025. In April 2009, AREVA notified therecycling of 783 kg of fissile plutonium, title to which was transferredon 23 May 2011.

Furthermore, by Resolution 192/2012/R/eel of 18 May, the Authorityprovisionally recognised external costs totalling €37 million forclosure of the fuel cycle for the virtual reprocessing of fuel located atCreys-Malville, as reported in Sogin actual financial statements for2011.

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The Company’s Code of Ethics is an integral part of the Model. TheCode was drawn up and is constantly revised, in keeping with theparticular nature of the Company’s operations, to take account ofItalian and international principles on corporate social responsibilityand detailed studies of the related issues. The 2011 revisions reflectthe new activities assigned to the Company, concerning constructionand operation of the Technological Park and the National Repository,its new stakeholders and the need to take due account of Sogin’scorporate role as a public service provider.

These revisions were also initially approved by the Supervisory Boardand subsequently by the Board of Directors.

Sogin, in compliance with the instructions of its shareholder, theMinistry of the Economy and Finance, regarding the strengtheningof internal controls over financial reporting, as required by Law262/2005, voluntarily amended its Articles of Association (article 21bis) in 2008 to include the position of the Manager Responsible forFinancial Reporting.

The Manager Responsible for Financial Reporting has developedspecific administrative accounting procedures incorporating therequirements of the above law. Subsequent revisions aim to facilitateprocess controls and improve oversight of the preparation ofseparate and consolidated financial statements.

As in previous years, in 2011 the Manager Responsible for FinancialReporting performed certain tests to assess the sufficiency andeffectiveness of procedural controls and, more generally, the abilityof the system to provide a true and fair view of the Company’s resultsof operations, cash flows and financial position.

Industrial security

The Industrial Security Function was established in 2011 to beprimarily responsible for the following activities:

– passive physical security;– industrial security.

Given the nature of Sogin’s position in what is a strategic nationalsector and the importance of assuring the security of its facilities,Sogin introduced a series of measures in late 2010 to completelyrevise passive physical security, in compliance with laws andregulations regarding the protection of classified information, withinthe meaning of the Cabinet Office Decree of 3 February 2006, asamended, and implementing provisions PCM-ANS 1-3-4-5-6/2006.

A number of practices have, consequently, been introduced at allSogin and Nucleco premises regarding:

– the upgrade of all security posts and data processing centres tocomply with legislation and standards of physical security;

– the completion of security analyses and the consequentimplementation of all measures needed to correct weaknessesfound;

– standardisation and optimisation of rules of conduct forsupervisory personnel;

– revision and application of the corporate security policy.

Furthermore, to ensure the sound management and working orderof all systems, programmed inspections of Caorso, Trino, BoscoMarengo, Casaccia (OPEC and IPU) and Latina were started in thesecond half of 2011 by head office personnel (as required by theCabinet Office Decree of 2 February 2006).

In addition to the downgrading of the Caorso transport interchangeand the consequent removal and recovery of physical securitysystems, the prohibition of low level flights over all of Sogin’s facilitieswere, in certain cases, reiterated and in others instituted.

Measures for the protection of property and persons were improvedon orders of the Rome Prefecture by improving the security of SeniorManagement and Sogin’s head office.

A computer audit process was introduced for the head office alarmmanagement system, the “SoginNet” security system and theregulatory framework for automated data processing in accordancewith the cited Cabinet Office Decree. All information needed forinternal staff training was obtained from suppliers so that all ITdevelopment, management and technical support for automateddata processing could be brought in-house in 2012, with newservices being provided at reduced cost.

A project named “Security@Governance” was launched inSeptember 2011 to increase the security of certain industrial aspects,particularly industrial secrecy to provide for physical, software andreputational security. This was needed to protect human resourcesand company assets against the risk of a malicious, intentional oraccidental nature that could cause a breach of the law or regulations,economic damage, detriment or changes to the Company’sbusiness expertise, or cause environmental and/or social harm.

Industrial security has, consequently, been introduced into allcorporate processes in order to provide a number of guidelines forall company functions through the development of a policydocument. This has established the principles and methodologiesthat will enable Sogin to successfully manage the risks to itsreputation and operations.

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RISK MANAGEMENT

Internal control systems

The Company’s internal control systems consist of a combination ofrules, procedures, systems and organisational structures. Itsobjective is to assure the propriety of risk management partiallythrough risk identification, evaluation, monitoring.

Sogin has, for some time, had an all-encompassing system of rulesand procedures regarding various corporate processes for its coreand support operations, which is promptly revised in line withchanges in the law, the organisation and processes.

The Company’s organisation requires that the various corporatedivisions are fully responsible for the achievement of their objectivesthrough implementing line controls developed specifically for thatpurpose (first level controls).

Supervision of the monitoring of the achievement of objectives ismade through the use of management controls by project controllers(second level controls).

Additional non-line independent controls of all processes andcorporate units (third level controls) are provided by the Internal AuditFunction, which reports directly to the Board of Directors inaccordance with article 21 bis of the Articles of Association.

The Function prepares an audit plan at the end of each year for thefollowing year, based on information provided by risk analyses, pastaudit findings and information provided by middle and seniormanagement. The plan is approved by the Board of Directors withthe consent of the Supervisory Board.

The Internal Audit Function conducts planned audits in addition toany audits requested by Senior Management. Three times theaverage annual number of audits in previous years were performedin 2011 partially due to the increase in the Function’s number of staff.The internal control system is completed by the Supervisory Board,which is tasked with overseeing the functionality, effectiveness andcompliance of the Company’s Organisational, Management andControl Model (the “Model”), adopted in 2005 pursuant to LegislativeDecree 231/2001, in addition to the prompt and proper revision ofthe Model.

Suggestions for improvement of the Model in 2011 gave rise to thefollowing amendments:

– Special part A – Criminal offences in relations with the PublicAdministration: document amended through the addition of a table

of fines to which the Company is subject pursuant to LegislativeDecree 231/2001 in the event of any offences scheduled in theDecree;

– Special part B – Corporate crimes: document amended throughthe addition of a table of fines to which the Company is subjectpursuant to Legislative Decree 231/2001 in the event of anyoffences scheduled in the Decree;

– Special part C – Culpable homicide caused by infringement of lawsand regulations having regard to health and safety at theworkplace: document amended through the addition of a table offines to which the Company is subject pursuant to LegislativeDecree 231/2001 in the event of any offences scheduled in theDecree;

– Special part D – Environmental offences: this part has beencompletely revised with the technical support of theEnvironmental, Radioprotection, Safety and Quality Function;

– Special part E – Additional requirements pursuant to LegislativeDecree 231/2001: revision of the following paragraphs for eachoffence described:• description of the regulatory framework;• identification of sensitive activities;• relevant standards for specific corporate activities;• Supervisory Board requirements and audits.

The relevant function heads were requested to provide technicalsupport for Special part E with respect to the following offences towhich Sogin is particularly exposed as a result of the nature of itsoperations:

– computer crimes and unlawful data processing;– organised crime;– receiving, laundering or use of money, property or other valuablesderived from criminal activities;

– infringements of intellectual property legislation;– intimidation of witnesses either to withhold or to give falsetestimony.

As with the other Special parts, a table of fines was added to whichthe Company is subject pursuant to Legislative Decree 231/2001 withrespect to the crimes scheduled therein for the Company’s breachof its administrative responsibility.

The suggestions listed above were initially approved by theSupervisory Board and subsequently by the Board of Directors.

On conclusion of the general review of the Company’s procedures,the above Special parts will again be amended to reflect the controlprotocols in effect and any action plans, thus assuring full oversightof Sogin’s operations susceptible to the risk of the commission ofthose crimes pursuant to Legislative Decree 231/2001.

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Model required by the decree was formalised and approved in July2008 and revised in 2010 to accommodate the new requirementswhich became effective in 2009. The Model now also addressesoffences against the Public Administration, corporate crimes and allother classes of offence included in Legislative Decree 231/2001.

With the introduction of a certification requirement for the ManagerResponsible for Financial Reporting by Law 262/2005, Nucleco has,with the support of the Parent Company, also identified the principalprocesses and related risks affecting financial information and hasimplemented key controls for their mitigation. Specific administrative-accounting procedures have also been developed and implemented.

A risk assessment is currently under way for the revision and re-mapping of activities and processes exposed to the risk of “231offences”, particularly with respect to those relating to health andsafety at the workplace pursuant to Legislative Decree 81/2008, asamended, and the risk of environmental offences recently introducedby Legislative Decree 121/2011.

It is expected that the risk assessment will be completed by the firstquarter of 2012.

A summary of the main risks and uncertainties to which Sogin andNucleco are potentially exposed is set out below.

Risk of non-reimbursement of Sogin’s costs by the ItalianElectricity and Gas Authority

The Company is exposed to potential losses in the event theAuthority fails to reimburse actual costs.

As required by Resolution ARG/elt 103/2008 (the effectiveness ofwhich, after certain amendments, was extended to the end of 2011by Resolution 192/2012/R/eel), by February of each year, Soginsubmits all accumulated direct actual dismantling costs incurred inthe previous year to the Authority, justifying any deviations from theestimates submitted to the Authority in the previous year.

It is possible that such costs are not reimbursed if deviations fromestimates are not properly justified or if such costs have not beencorrectly computed.

These risks are controlled by continual monitoring of each projectand a general review of total costs on a monthly basis.

This enables the prompt recognition of any direct and indirect costvariations, thus reducing the risk of incorrect cost reporting and offailing to obtain reimbursement either in part or in full.

Any actual direct costs not previously included in the estimates may,nonetheless, be reimbursed if properly reported and explained, asexpressly provided for in the resolution.

Risk of delayed payment of funds by the Italian Electricityand Gas Authority

This risk could arise in the unlikely event of a failure to order paymentand/or insufficient/delayed orders by the Authority of thereimbursements due to Sogin from the Electricity IndustryEqualisation Fund.

This risk is mitigated by Sogin’s submission, at the beginning of eachyear, of a monthly finance plan, as required by Authority ResolutionARG/elt 195/2008. The plan is submitted to the Authority to determinethe payments needed to meet expected cash requirements, andensures that Sogin has an average cash balance of approximately€90 million. The plan is revised during the year in the event ofunexpected outflows of cash.

Past experience has shown that the Authority’s payments havealways been prompt.There has, consequently, been no shortfall of funds.Procedures will, however, be fully reviewed as part of the negotiationsfor the new payment systems.

Sogin’s investment risk

The investment risk associated with the Company’s cashmanagement, which could have a negative impact on earnings, hasbeen managed by investing in demand deposits, payment interestat agreed rates, at Italian banks and/or banking groups rated no lessthan BBB (Standard & Poor’s) or equivalent.

There was only one accumulating insurance policy of €5.3 million inplace with Axa-Mps vita at 31 December 2011, which was redeemedin March 2012.

Sogin’s industrial risk

The understanding of Sogin’s industrial risks entails an analysis offour specific areas:

– dismantling of nuclear power stations;– dismantling of other industrial research plants;– management of irradiated nuclear fuels;– development and operation of the Technological Park and NationalRepository.

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IT system software will be developed in 2012 to monitor the relevantaspects of Sogin’s operations through the use of a number ofindicators devised in consultation with all the Company’s functions.

Risks and uncertainties

The identification, assessment and management of risks to whichthe Company is exposed for the prevention, and, where possible, ofobstacles that could in any way adversely affect the Companyperformance, have been a focus of the Company for some time.

The first identification and description of all corporate processes andthe relevant risks and controls (risk assessment) was in 2004. Actionplans were subsequently developed to reduce residual risk, inaddition to establishing an audit plan designed to monitor significantrisks and steps taken to improve controls. These assessments thenformed the basis of the Organisational, Management and ControlModel required by Legislative Decree 231/2001.

Risk assessment was revised in 2009 to incorporate newdevelopments relating to corporate organisation and the regulatoryframework, such as the regulation of nuclear-related expenditurepursuant to Resolution ARG/elt 103/2008 of the Italian Electricity andGas Authority (the “Authority”), statutory requirements regarding theManager Responsible for Financial Reporting pursuant to LegislativeDecree 231/2001 and, finally, new regulations on health and safetyat the workplace.

The revision and increase in scope of risk assessment that wereinitiated in 2010 were completed in the first half of 2011. The aim wasprimarily to reflect the new activities assigned to Sogin by LegislativeDecree 31/2010, concerning construction and operation of theTechnological Park and the National Repository, and the need to takedue account of Sogin’s corporate role as a public service provider.

The methodology of the risk assessment incorporated internationalcontrol models (COSO-ERM), and the Company’s past experience.It also involved first lines and heads of operational processing.Individual interviews and group sessions were held for the transversalanalysis of the interrelationship of processes and organisational unitsinvolved. This resulted in the identification of the risks inherent ineach process and the subsequent assessment of relevance basedon the probability of occurrence and related consequences. Anassessment was then made of the extent to which existing internalcontrols mitigated each risk and, if the extent of residual riskremained greater than certain predetermined limits, measures weredeveloped to prevent and/or further mitigate such risks.

The risks to which Sogin is exposed were classified into the followingcategories:

– criminal offences pursuant to Legislative Decree 231/2001;– financial reporting risks pursuant to Law 262/2005;– regulatory compliance risk;– process or operational risk.

The assessment of risks has demonstrated that Sogin has effectivelymitigated its principal operating and compliance risks identified byCompany staff during their risk assessment and measurementexercise.

Analysis of the statistics of risks identified shows a significantincrease in their number since the preceding assessment: up from116 in 2009 to 165 in 2011.

The increase, however, does not represent a heightened degree ofrisk since it is primarily the result of the following three factors:

– new activities relating to the development of the TechnologicalPark and National Repository under Sogin’s control, which hasintroduced new risks;

– analysis and further examination of the risk of criminal offencespursuant to Legislative Decree 231/2001, particularly with respectto developments in recent years;

– the increased sensitivity of process owners to risk assessment,which has resulted in a higher degree of detail of the risks foundand the concomitant benefit of improving risk management.

Performance of risk assessments also made it necessary to obtaindetailed knowledge of environmental offences introduced byLegislative Decree 121 of 7 July 2011, implementing Directive2008/99/EC on the protection of the environment through criminallaw, and Directive 2009/123/EC amending Directive 2005/35/EC onship-shore pollution and on the introduction of penalties forinfringements. By introducing article 25 undecies into LegislativeDecree 231/2001, the decree increased the scope of administrativeresponsibility to include environmental offences, without prejudice tothe criminal responsibility of the natural persons committing theoffence.

It has been verified that the Company has addressed the criticalareas found as a result of the 2009 risk assessment through theimplementation of specific action plans to expand the scope ofprocess controls and organisational changes to overcome theweaknesses found. Certain areas for improvement were identifiedand suggestions given to process owners for risk mitigation.

Nucleco has also assessed the risks to which it is exposed in orderto identify activities/areas susceptible to offences listed in LegislativeDecree 231/2001. The Organisational, Management and Control

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further insight into and prioritise the various risks to which Sogin isexposed in support of decision making processes and measures.This is accomplished through meetings with management and plantinspections.

The second phase is focused on the adequacy of the systems usedfor financial risk mitigation (insurance vs. retention) and managementcontrol accomplished through assessment of the best methods oftransferring risk to the insurance market and the technical andadministrative management of the Company’s insurance cover.

This work is performed by the Company’s own personnel (legal,insurance and finance) and outside international brokers andtechnicians.

Nucleco’s technological and market risks

Technological and market risks arise in connection with the singlepurpose nature and obsolescence of the plants leased by ENEA toNucleco, under a contract renewed on 2 August 2011.

ISPRA has attached a condition to its latest clearance to operateENEA plants, requiring the conclusion of new agreements with ENEAfor the upgrade and development of the plants.

In the event of a failure to upgrade or develop new facilities, thecompetitive nature of the market would force the Company tooperate in sectors requiring a lower degree of expertise, thuspotentially reducing profitability, as was partially the case in 2011.

Nucleco’s credit risk

Credit risk is the exposure of Nucleco to losses as a result ofcounterparties’ non-payment of liabilities owing to Nucleco.Nucleco’s principal clients, however, are its shareholders, Sogin andENEA, in addition to other public and private sector operators suchas hospitals, institutions and industrial companies. The latterrepresent a small percentage of Nucleco’s receivables.

Nucleco’s liquidity risk

Liquidity risk relates to cash insufficient to settle debts as the fall due.The greatest part of Nucleco’s revenues currently arise fromoperations primarily under contracts with its shareholders.

The resultant operating cash flows and the Company’s financial andequity structure make it possible for cash to be managed in such away as to obviate the need for borrowing.

Nucleco’s industrial risk

The risk to Nucleco of an industrial accident is extremely serious dueto the possibility of the escape of radiation and is, consequently,constantly monitored through continual review of procedures andworking methods to assure their consistency with best internationalpractice in the sector and through ongoing dialogue with the ControlAuthority. Also, the license holder and the owner of the facility, ENEA,has arranged third party insurance cover.

Nucleco has also taken steps to ensure the physical security ofemployees and residents with respect to the conventional andionising radiation risks.

Nucleco’s regulatory risk

Regulatory risk relates to the potential for non-compliance with sectorand general regulations. Non-compliance with Italian and internationalsector regulations could have a material effect on operations, earningsand the Company’s financial soundness. Future changes in regulationscould have unforeseen effects on Nucleco’s operations and profitability.

General and sector-specific regulatory frameworks are constantlymonitored by Nucleco with the support of Sogin and ENEA’s technicaldivisions. Specific measures are taken in a timely manner in responseto all changes in regulations.

Various regulations of a general nature have been implemented inrecent years such as:

– Legislative Decree 231/2001, administrative corporate responsibility;– Legislative Decree 81/2008, as amended, health and safety at theworkplace;

– Legislative Decree 121/2011, environmental offences;– Law 262/2005, the Savings Law;– Legislative Decree 230/1995, as amended, ionising radiation.

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The realisation of risks in those areas could affect:

– physical security of the installations, occupational safety,radioprotection and protection of the environment;

– security of plant operations and their compliance with theapplicable regulations, operating licenses and technicalrequirements;

– flawed or incomplete designs potentially resulting in contractvariations and additional requirements by the control authority;

– failure to obtain consents either for decommissioning or for thebuilding and operation of the Technological Park and NationalRepository;

– potential failure to comply with programmes as a result of theabove two points.

The nature of the sector in which the Company operates imposeshigh standards of operational controls, which Sogin implementsthrough compliance with the technical requirements of the relevantsupervisory authorities, the adoption of suitable internal protocolsand procedures and constant monitoring of their application.

In terms of safety, the risk is also mitigated through changes to theorganisational structure, sharpening the focus on aspects relating tosafety, and through continuous specific training and awarenessraising initiatives covering both conventional and nuclear safety.

Sogin’s risk of a loss of know-how

This risk is associated with the loss of trained staff with technicalexpertise. Sogin continually monitors this risk through attentivehuman resource management and appropriate staff retentionmeasures. It is for this purpose that Sogin has adopted a structuredapproach to the management and professional development ofhuman resources, which, through mapping staff skills and staffdevelopment planning, enables the Company to fill any identifiedgaps in expertise and to make the best use of the informationobtained.

Sogin’s regulatory compliance risk

Sogin operates in a sector subject to strict legislative andadministrative regulations.

Failure to comply with industry specific and general regulatoryrequirements could result in Sogin’s violation of international nuclearregulations, Italian laws and the policies of the relevant authorities.

Non-compliance with regulations could have a material effect onoperations, earnings and the Company’s financial position.

Future changes in regulatory policy could have unforeseenconsequences on the existing regulatory framework and, therefore,on Sogin’s operations and results.

Sogin continually monitors the regulatory landscape with respect tospecific sector regulations as well as regulations of a general nature.The Company responds promptly to all changes in regulations bycarrying out specific reviews.

Sogin’s image and reputational risk

This risk relates to the loss of confidence in the Company by thepublic, influential persons and stakeholders, and the detriment thatcould arise from real or supposed adverse events. The public natureof a large part of Sogin’s operations means that it must enforce thehighest standards of transparency and disclosure, providingcomplete, truthful, timely and clear information, even in the event ofdifficult situations, in view of the nature of the Company, its role,functions and specific needs.

As also noted in the Code of Ethics, Sogin carefully mitigates thisrisk through close analysis and assessment of any externalcommunications and the adoption of specific policies governingrelations with the public, government bodies and the media. TheCompany also closely monitors all information coming into thepossession of the media and Parliament. The External Relationsdepartment authorises employees’ participation in national andinternational congresses and workshops as they arise.

Other risks for Sogin

The Company’s risk assessment and management system alsofocuses on other risks linked to the Company’s activities that are notdirectly or indirectly connected to those described above. Suchactivities also include action to correct shortcomings in the internalcontrol system.

Care is also taken to obtain specific contractual guarantees fromsuppliers and, where necessary, specific insurance cover is arrangedfor the Company’s assets and to protect the Company from any thirdparty liability arising from accidental damage, includingcontamination, caused by dismantling.

A two phase structured insurance risk management process hasbeen implemented for these purposes: risk assessment and risksolution.The first phase entails the active identification, analysis andmeasurement of the Company’s critical operational areas to gain

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Sogin’s Board of Statutory Auditors and the firmappointed by Sogin as independent auditors

Nine members of the Board of Statutory Auditors were appointed atthe Ordinary General Meeting of shareholders of 10 August 2011 forthe three-year period 2011-2013, with their mandate ending on thedate of the approval of the 2013 Financial Statements. Annualcompensation of the Board of Statutory Auditors was alsodetermined at the same Meeting.

The Board of Statutory Auditors appointed at the General Meeting of2 July 2008 for the three year period 2008-2010 tendered theirresignations with the approval of the 2010 Financial Statements, butremained in office pending the appointment of the new Board ofStatutory Auditors on 10 August 2011.

The Board of Statutory Auditors met nine times in 2011, four of whichwith the new members.

Shareholders at the General Meeting of 28 June 2011 resolved, onthe reasoned recommendation of the Board of Statutory Auditors, toretain the audit firm, Deloitte & Touche, as the Company’sindependent auditors for the three-year period 2011-2013.

Sogin’s Manager Responsible for Financial Reporting

At its meeting of 22 December 2010, the Board of Directors, inaccordance with article 22 bis of the Company’s Articles ofAssociation, appointed the Administration, Finance and ControlManager to the position of Manager Responsible for Sogin’sFinancial Reporting.

The Manager Responsible for Financial Reporting has keptadministrative accounting procedures up to date by incorporatingthe requirements of law. These procedures are required, whereapplicable, to be revised to facilitate process controls. A procedurehas been implemented for the preparation of Sogin’s separate andconsolidated financial statements. As in previous years, the ManagerResponsible for Financial Reporting requested Internal Audit tospecifically test the sufficiency and effectiveness of proceduralcontrols and, therefore, the ability of the system to provide a true andfair view of the Company’s results of operations, cash flows andfinancial position.

Sogin’s Remuneration Committee

At its meeting of 16 November 2010, the Board of Directors approvedthe establishment of a remuneration committee consisting of four

members, subsequently reduced to three as a result of theresignation of one of its members. Compensation of the Committee’smembers was also determined. The Committee’s duties entail theformulation of recommendations for the Chairman’s and ChiefExecutive Officer’s pay. Part of their compensation must be linked tothe Company’s performance and/or the achievement of specificobjectives. The Committee is also required to propose remunerationof the Company’s senior management in consultation with the ChiefExecutive Officer. The Committee’s term of office is coterminous withthe Board of Directors, unless the Board of Directors terminates itsmandate early, in which case the Remuneration Committee’s termwill immediately cease.

Sogin’s Supervisory Board

The Commissioner appointed the Supervisory Board on 15 February2010, confirming the continued appointment and remuneration of itsprevious members, whose term of office, however, expired with thetermination of the Commissioners’ appointment. Despite this, inaccordance with Sogin’s Organisational, Management and ControlModel pursuant to Legislative Decree 231/2001, the members of theBoard continued to perform their duties and, in particular, to conductordinary business, until the appointment of new members.

Following approval of the new organisational structure, on 15November 2010 the new Head of Internal Audit took the place of theprevious head as a member of the Supervisory Board. The Board ofDirectors subsequently appointed a new Supervisory Board at itsmeeting of 22 December 2010. The Board consists of the head ofthe Internal Audit function and two external members. Gross pay peryear and the reimbursement of out-of-pocket expenses were alsodetermined.

The Committee met nine times in 2011.

General Meeting of Nucleco shareholders

Nucleco’s shareholders are Sogin and ENEA, which respectivelyhold 60% and 40% of its share capital.

Nucleco's operations are subject to management and coordinationby Sogin.

There was only one General Meeting of shareholders in 2011.

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Nucleco’s reputational risk

This risk relates to the loss of confidence by the public and majorstakeholders, and the detriment that could arise from real orsupposed adverse events.

Nucleco mitigates this risk through a rigorous analysis andassessment of announcements and information releases to thepublic making use of Sogin’s public relations division and ENEA’stechnical divisions.

Nucleco’s administrative risk

The lack of structured information flows could result in inefficientdecision-making processes, resulting in increased costs and delays.

The introduction of Model 231/2001 resulted in Nucleco’s revision ofits principal administrative and management processes, with theissuance of an employee’s procedural manual and theimplementation of integrated information systems, facilitatingintegration with the Parent Company to strengthen internal controlsand mitigate administrative and compliance risks.

Risks linked to factors outside Nucleco’s control

These are risks which, even though outside Nucleco’s control, meritmention due to the effects they could have on the continuity of theCompany’s business:

– risk of saturation of temporary storage repositories managed byNucleco at the Casaccia Research Centre;

– risk to the continuity of activities as a consequence of areformulation of nuclear power plant and fuel cycle plantdecommissioning strategies.

The first of these risks is continually monitored in terms ofradiological activities and available capacity, so that it is possible todevelop alternative solutions in the event critical levels are exceeded.

Recent legislation regarding Sogin’s responsibilities in connectionwith the National Repository and Technological Park has resulted ina reduction in risk compared with past levels, since it has opened anew and important source of business for the Company.

CORPORATE AND OTHER BODIES OF THESOGIN GROUP

General Meeting of Sogin shareholders

Sogin is a sole shareholder company with the Ministry of theEconomy and Finance holding 100% of the share capital.

There were two General Meetings in 2011.

Sogin’s Board of Directors

Following the management of Sogin by Commissioners (August2009-September 2010), a Board of Directors consisting of fivemembers was appointed for the Company at the General Meeting of13 October 2010. Remuneration of board members was alsodetermined at the meeting.

The current Board of Directors will remain in office until the approvalof the 2012 Financial Statements.

In the following meeting of 20 October 2010 the Board of Directorsappointed a Chief Executive Officer, providing him with executivepowers.

At the General Meeting of 16 November 2010, shareholdersauthorised the Board of Directors to provide executive powers to theChairman, as permitted by the law.

At the Board of Directors’ meeting of the same date, the executivepowers provided to the Chief Executive Officer were withdrawn andreplaced by new powers and, at the same time, the executive powersapproved at the General Meeting were conferred on the Chairman.

At its meeting of 15 February 2011, the Board of Directors, havingexamined and accepted the recommendation of the RemunerationCommittee and obtained the favourable opinion of the Board ofStatutory Auditors, resolved the remuneration for the powersdelegated (article 2389, paragraph 3 of the Italian Civil Code) to bepaid to the Chairman and the Chief Executive Officer from 16November 2010 and 20 October 2010, respectively.

Following the resignation of a Director, shareholders at the GeneralMeeting of 28 June 2011 appointed a new Director as a replacement.The new Director will remain in office for a period coterminous withthat of other Directors, being the date of the approval of the 2012Financial Statements.

Nine meetings of the Board of Directors were held in 2011.

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HUMAN RESOURCES

Sogin’s organisational structure and workforce

The management of human resources and the Company’sorganisation reflected the continuing implementation of Sogin’s newoperating model and the new organisational structure resulting fromtermination of the Commissioners’ oversight.

Organisationally, there was a focus in 2011 on the improvement ofperformance of Business functions by an organisational changeintended to better sustain and develop site coordination andsupervision, through the creation of two Power Station and PlantDecommissioning functions by region (North and Central South).

The total number of staff at 31 December 2011 and at 31 December2010 is shown in the table below, by category:

the 32 at 31 December 2010. 79 Nucleco employees were workingat Sogin sites on 31 December 2011.

New recruits were primarily required for positions created by theoperating regulations, particularly with respect to safety maintenanceand site works, where there was a need to improve engineeringknow-how and to accelerate decommissioning plan implementation.The new recruits held technical diplomas (surveyors, mechanicaltechnicians and electricians) and degrees (primarily engineering).

Early retirement for 24 staff in 2011 and 1 staff in 2012 resulted in thepayment of additional charges and incentives totalling €2.9 millionin 2011 (compared with charges of €2.3 million in 2010). Theseincentives were paid in accordance with an analysis demonstratingtheir cost efficiency.

The number of staff employed by the Group, by job category, at 31December 2011 and 31 December 2010 is shown in the followingtable:

The workforce consequently increased by 32 during the year, whichwas the net of 88 new recruits and 56 terminations.

The average workforce rose from 659 in 2010 to 695 in 2011.

The figures for both years exclude staff retiring on 31 December.

The average age of the workforce was 43.5 (45 in 2010). Over 54%of employees at 31 December 2011 hold high-school diplomas and38% are graduates.

Sogin had 177 women under employ, which was 25% of the totalheadcount.

The number of staff shown in the table does not include 24employees on secondment from ENEA at 31 December 2011 and

35


Nucleco’s Board of Directors

At the General Meeting of 6 May 2010, Nucleco’s shareholdersappointed a new Board of Directors for the three year period 2010-2012, consisting of five members, three of whom were nominated bySogin and two by ENEA. Annual pay was also determined. Allmembers nominated by Sogin were from outside the Group.

The current Board of Directors will remain in office until approval ofthe 2012 Financial Statements.

Shareholders also appointed the Chairman of the Board of Directorsat the same General Meeting of 6 May 2010 and authorised theBoard to delegate executive powers as permitted by law and todetermine annual pay.

At the following meeting on 19 May 2010, the Board of Directorsdelegated executive powers to the Chairman, appointed a DeputyChairman and a Chief Executive Officer for the Company, delegatingthe same executive powers and approving compensation inaccordance with article 2389, paragraph 3 of the Italian Civil Code.

Nine meetings of Nucleco’s Board of Directors were held in 2011.

Nucleco’s Board of Statutory Auditors

Nucleco’s Board of Statutory Auditors consists of three standingauditors and two alternates.The Board of Statutory Auditors is required to audit the accounts byarticle 32 of the Articles of Association.

At the Ordinary General Meeting of 11 May 2011, shareholdersappointed a new Board of Statutory Auditors for 2011, 2012 and2013, whose term of office will end on approval of the 2013 FinancialStatements. Pay was also determined.

The Board of Statutory Auditors met six times in 2011, three of whichwith the new members.

Nucleco’s Supervisory Board

At its meeting of 27 July 2010, Nucleco’s Board of Directorsappointed and determined the pay of the Supervisory Board,consisting of only one member. The term of office will be coterminouswith that of the Board of Directors.

34

Sogin 31 Dec 2011 31 Dec 2010 Increase(Decrease)

Managers 29 28 1

Supervisors 208 197 11

Clerical staff 358 350 8

Blue-collar 112 100 12

TOTAL 707 675 32

Sogin Group 31 Dec 2011 31 Dec 2010 Increase(Decrease)

Managers 30 29 1

Supervisors 226 214 12

Clerical staff 468 434 34

Blue-collar 163 143 20

TOTAL 887 820 67

Sogin’s personnel costs

Personnel costs of €63.2 million in 2011 (€2.9 million of which forearly retirement incentives) are up €4.7 million on 2010 (€58.5million).

Personnel costs less early retirement incentives of €60.3 million areup by approximately €4.1 million compared with the previous year(€56.2 million), primarily due to the following:

– an increase in minimum wages, following negotiation of a new paypackage for electricity industry workers;

– automatic rises reflecting biannual increases linked to seniorityand others linked to promotions, according to contract, for newgraduates and recent school leavers hired by the Company;


People Care

Sogin introduced the People Care project in 2011 for theimprovement of organisational well-being and the work climatethrough the development of initiatives supporting families andsingles.

Approximately €41,000 was paid in total to 82 employees.

Sogin’s incentive plans

Performance-related bonus

In accordance with the National Collective Labour Contract, in 2011Sogin paid the performance-related bonuses for 2010 to supervisors,clerical staff and blue-collar workers.

During the year the objectives were also set for the payment, in 2012,of performance-related bonuses for 2011.

Incentives for supervisors

An individual incentive plan was developed in 2011 for line functionsupervisors who, although holding positions of importance, are notincluded in the 2011 Management by Objectives plan (2011 MbO).

A programme was developed for this staff, consisting of a structuredprocess involving all interested parties.

The scope of the 2011 MbO will encompass 81 employees (91 in2010) from Sogin’s senior and middle management. This isapproximately 11% of the total headcount.

The plan is based on two components: corporate and individual.

The corporate component rewards the achievement of quantitativeobjectives and is based on the progress of decommissioningactivities and the amount of external costs incurred in carrying outactivities not related to progress made in implementing the annualdecommissioning programme.

The individual component, on the other hand, rewards organisationaland managerial performance.

Sogin’s industrial relations

The Company reached an agreement in 2011 with the National TradeUnion Organisations regarding the payment of a performance-related award for 2010, but paid in 2011, in addition to a secondagreement determining the structure of the award, particularly withrespect to its computation for 2011-2013. The award will also be paidto Sogin supervisors not eligible either for MbO or supervisors’incentives. Agreements were also concluded with national tradeunion organisations having regard to:

– the experimental introduction to Sogin of teleworking;– the approval of the Fondimpresa training plan in preparation forthe establishment of a bilateral training commission;

– the offering of Metrebus season tickets to Rome office staff atreduced rates;

– tax relief on 2011 performance-related payments and corporateearnings and any other item important to the improvement of theCompany’s competitive standing.

An agreement was concluded in 2011 with the national trade unionorganisations regarding the working hours of Sogin’s supervisors.

Agreements were signed in 2011 with local trade union organisationsregarding the revision of the working hours of Sogin’s head officesupervisors and Sogin staff at Casaccia, Latina, Caorso and at theplant inspection division at Garigliano.

Trade union agreements were also concluded in 2011 withmanagement representatives regarding:

– an Assidai supplementary medical plan for managers;– new employer’s contributions to Fondenel;– rules for the assignment of company cars for personal use;– method of granting housing and family welfare loans;– amendment of the contractual terms and conditions for managershaving regard to notice.

Data protection at Sogin

Even though Decree Law 5 of 9 February 2012 (converted, withamendments, by Law 35 of 4 April 2012) has repealed therequirement to prepare and regularly revise a Security PlanningDocument, Sogin will continue to prepare that document in additionto the working plans for Information and Communication Technology(ICT) and Security, setting out its data protection measures.

37


– other automatic rises according to contract, including additionalmonthly payments and payments in lieu of notice, and an increasein the discount on electricity prices afforded to former employeesof Enel;

– an increase, linked to the achievement of Company and individualperformance targets, in the variable component of personnelcosts, resulting in a one-off impact in 2011;

– an increase in the average workforce.

Sogin’s staff development and training

As in previous years, staff development and training was linked tothe guidelines set out in the 2011-2015 Business Plan and to the aimof supporting organisational and management changes.

2011 guidelines for the development of human resources wereimplemented in accordance with the following:

– targeted technical training by occupation, with the aim ofeliminating gaps in technical and professional skills;

– the commencement of a general training programme to facilitatethe settling in of new recruits;

– the provision of training and management development courses,using the coaching approach.

The activities of the Radioprotection and Nuclear Safety School inCaorso during the period confirmed the Company’s commitment todeveloping, disseminating and reinforcing the culture ofradioprotection and nuclear safety within Sogin, through theexpansion of the range of training on offer by including courses inconventional safety as agreed with Inail.

Over 23,000 hours of training were provided in 2011 (21,600 hoursin 2010). The following table shows hours of training provided by jobcategory.

Out of all hours of training to Sogin staff, 9,137 related to nuclear andconventional safety, as shown below. Hours of internal trainingprovided in connection with nuclear safety increased from 5,978hours in 2010 to 7,111 in 2011.

36

Figures at 31 December 2011

Job category Hours of training provided

Executives 20

Managers 697

Supervisors 7,280

Clerical staff 12,334

Blue-collar 3,023

Staff seconded from ENEA 92

Consultants/Trainees 105

TOTAL 23,551

Figures at 31 December 2011

Type Hours of training provided

Radioprotection and nuclear safety 7,111

Conventional safety 2,026

TOTAL 9,137

The provision of online training to all staff continued, with Sogin’s“Learning Management System” currently offering two courses:

– work and safety: Legislative Decree 81/2008;– basic concepts of administrative responsibility: Legislative Decree231/2001.


One new graduate was hired with an apprenticeship contract andone senior graduate with a permanent contract to expand andreorganise head office technical staff.

In compliance with the requirement to offer employment pursuant toLaw 68/1999, a new staff member was employed in December incompliance with the existing agreement with the Rome EmploymentOffice.

There were 16 leavers in 2011 or 9% of employees, three of whichunder intercompany contracts for direct and immediate employmentby Sogin.

The average age of the Nucleco workforce at 31 December 2011 was36 compared with 37 at 31 December 2010. 67% of staff hold high-school diplomas and 19% are graduates.

Nucleco had 26 women under employ or around 15%. Staff islocated in the operating headquarters, the Casaccia Research Centreand at Sogin locations.

Nucleco’s personnel costs

Key details of the Company’s personnel costs are shown below andcompared with the previous year.

Nucleco’s industrial relations

Industrial relations entailed the conclusion of certain agreements inDecember, as described below:

– luncheon vouchers have been provided to Casaccia ResearchCentre staff since April 2012;

– an agreement was concluded on supervisory, clerical and blue-collar transfers effective 1 January 2012;

– site working hours were regulated for staff working at Sogin sitesin accordance with the organisational requirements for each siteand flexibility and monthly pay;

– management of accumulated hours: the scope of eligibility foraccumulated hours has been expanded.

Staff recruitment and selection at Nucleco

There were 17 new recruits during the year, selected from 48candidates.

Recruitment was carried out in compliance with the companyprocedures provided for in the Organisational Model adopted inaccordance with Legislative Decree 231/2001 and based on theprinciples of transparency, openness and impartiality required byarticle 18 of Law Decree 112/2008, converted into Law 133/2008.

Training at Nucleco

The most important topics covered were conventional and nuclearsafety, the Legislative Decree 231/2001 Organisational Model andcontinuing professional education in technical and managerialsubjects following changes in jobs or the use of new workingmethods or dangerous substances.

A total of 4,708 hours of training were provided in 2011, representinga 39% increase over 2010.

39


Staff recruitment and selection at Sogin

Sogin selects and recruits staff with professional profiles consistentwith:

– the Company’s annual human resources budget;– the objectives of the long-term business plan;– corporate policy for human resource development andmanagement.

Staff selection is regulated by operating instruction GE GG 0083 of30 March 2009, “Method of conducting staff searches, selection andrecruitment at Sogin SpA”. It is policy to fill vacancies through internalpromotion.

This policy is in compliance with the impartiality, openness andtransparency required by Decree Law 112/2008, converted into Law133/2008, and is also in conformity with the Legislative Decree231/2001 Organisational Model and the principles of loyalty, fairnessand diligence set out in the Code of Ethics.

Average workforce remained unchanged at 167.

The table demonstrates a high retention rate: 90% of the total havepermanent employment contracts partly because of the conversionof temporary to permanent contracts.

The employees who converted their contracts would, nevertheless,have reached the statutory maximum for temporary employment of36 months by 2012 thus resulting in mandatory conversion.Conversion was also required since Nucleco had to meet itsobligations under the cooperation agreement which provided for thesecondment to Sogin facilities of permanent staff pursuant to article30 of Legislative Decree 276/2003.

34 individuals were employed with at least one legacy employmentcontract (re-employment) and 17 new hires giving a total of 51.

74% of these held technical diplomas for the radioprotection servicewho have been assigned to various locations.

38

Staff 31 Dec 2011 31 Dec 2010

Managers 1 1

Supervisors 18 17

Clerical staff 100 55

Blue-collar 43 26

Total permanent staff 162 99

Fixed-term staff

- Clerical staff 10 29

- Blue-collar 8 17

Total fixed-term staff 18 46

TOTAL 180 145

2011 2010

Total cost (€) 8,053,606 8,061,254

Average workforce 167 167

Hours worked 268,357 271,187

Per capita hours worked 1,606 1,624

Per capita average cost (€) 48,221 48,269

Average cost per hour (€) 30.00 29.72

Staff costs were almost unchanged since last year. The figure iscomputed by netting the increase in contractual pay and thereduction in 2011 bonuses compared with the previous year.

There was no significant change in total hours worked during theyear.

Nucleco’s workforce

Nucleco’s permanent workforce increased during 2011 comparedwith 2010, as the following table, which provides a breakdown bycategory, shows.


Revenue from nuclear activities is based on the model ofremuneration established by the Authority with Resolution ARG/elt103/2008 (the effectiveness of which, after certain amendments, wasextended to the end of 2011 by Resolution 192/2012/R/eel).

Revenue from Sogin’s other activities (market activities) is up 24%compared with 2010, following completion of the main existingcontracts. These activities resulted in gross operating income (afterfour years of losses), after an improvement of approximately €1.78million on the previous year. The overall after-tax result from theseactivities was extremely positive, partly thanks to net financial andextraordinary income.

Sogin’s total cost of raw materials is up due to increased purchaseslinked to the greater volume of dismantling activity compared withthe previous year. The cost attributable to market activities isnegligible.

Service costs are also up, primarily due to the cost of fuel treatmentand reprocessing.

For 2011 Sogin’s personnel costs include early retirement incentivesof €2.9 million, compared with €2.3 million in 2010.

Total other operating costs are substantially in line with the previousyear.

Financial income generated by cash management is up despite thefailure to pay a dividend by the subsidiary, Nucleco. Financialexpenses are also up, reflecting both increased interest payable tothe Authority on net invested capital and interest payable to theMinistry of Economic Development for the Global Partnership funds.

41


FINANCIAL REVIEW OF SOGIN

Overview

As required by paragraph 1034 of Law 239 of 23 August 2004 andResolution ARG/elt 103 of 30 July 2008 (the effectiveness of which,after certain amendments, was extended to the end of 2011 byResolution 192/2012/R/eel) has been issued by the Italian Electricityand Gas Authority, these financial statements contain information onseparate income statements for the decommissioning of nuclearinstallations and the storage of nuclear fuels (Nuclear Activities) andSogin’s other activities (Market Activities).

It should be noted that this separation is made exclusively to complywith the above legislation and Authority Resolution and is not in anyway related to currently effective provisions of the Italian Civil Codehaving regard to financial statements for joint-stock companies.

Nuclear activities are regulated by specific legislation based onDecree 79/1999 on the liberalisation of the electricity market. Article3 (paragraphs 10 and 11) of that Decree specifies that expensesrelating to the dismantling of plants and closure of the fuel cycle areto be included among the electricity system’s general costs andcovered by a specific corresponding amount paid to the companythat manages Italy’s national grid, by customers who access andutilise the grid.

On the basis of that article, the costs incurred by Sogin for theseactivities are completely covered by the aforementionedcorresponding amount, taking account of the allowances receivedfrom Enel upon the transfer of nuclear activities (the so-called

“Nuclear allowances”, which ran out some time ago) and reclassifiedin Sogin’s financial statements as “Nuclear-related advances”.

The method of calculating these charges was determined by theInterministerial Decree of 26 January 2000, which was subsequentlyamended by the Interministerial Decree of 3 April 2006.

In implementation of these decrees, the Italian Electricity and GasAuthority approved the following resolutions relating to thedetermination of estimated and actual costs to be funded by theelectricity tariff:

– Resolution ARG/elt 245/2010, by which estimated 2011 costs werereimbursed under the procedure established by ResolutionARG/elt 103/2008 (the effectiveness of which, after certainamendments, was extended to the end of 2011 by Resolution192/2012/R/eel);

– Resolution 192/2012/R/eel, establishing the payments to be madewith respect to Sogin’s operations in 2010 in accordance with theprocedure pursuant to Resolution ARG/elt 103/2008.

Income statement classified by activity

The operating results for the year are broken down by activity, asshown below, and the totals compared with the previous year.Additional information on the separate income statement andbalance sheet will be contained in a separate document to beprovided to the Authority in accordance with Resolution ARG/elt103/2008 (the effectiveness of which, after certain amendments, wasextended to the end of 2011 by Resolution 192/2012/R/eel).

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INCOME STATEMENT

(€000) Institutional activities Market activities Repository Total

2011 2010 2011 2010 2011 2011 2010

Revenue 237,734 196,328 6,361 5,131 1,123 245,218 201,459

Cost of raw materials -16,211 -11,679 -14 -23 -7 -16,232 -11,702

Service costs -143,266 -108,623 -2,297 -2,035 -39 -145,602 -110,658

Gross margin 78,257 76,026 4,050 3,073 1,077 83,384 79,099

Leases and rentals -4,900 -5,218 -189 -220 -16 -5,105 -5,438

Personnel costs -59,417 -54,971 -2,657 -3,478 -1,096 -63,170 -58,449

Other operating costs -1,471 -1,489 -126 -88 -12 -1,609 -1,577

Gross operating income/(loss) 12,469 14,348 1,078 -713 -47 13,500 13,635

Amortisation, depreciation and provisions -7,240 -9,614 -289 -216 - -7,529 -9,830

Operating income/(loss) 5,229 4,734 789 -929 -47 5,971 3,805

Financial income 518 297 4,252 3,403 - 4,770 3,700

Financial expenses -518 -297 -964 -322 - -1,482 -619

Income/(Loss) from ordinary activities 5,229 4,734 4,077 2,152 -47 9,259 6,886

'+/- extraordinary income/(expenses) - - 2,112 - - 2,112 -

Income/(Loss) before taxes 5,229 4,734 6,189 2,152 -47 11,371 6,886

Income tax expense (payable by Sogin) -4,185 -3,767 -1,455 -732 -26 -5,666 -4,499

Net income/(loss) 1,044 967 4,734 1,420 -73 5,705 2,387

4 Paragraph 103 of Law 239 of 23 August 2004. In order to improve the ex-ploitation and use of the structures and skills it has developed, Sogin SpAshall engage in research, consultancy, assistance and services in all thosesectors relevant to the Company’s purposes, specifically including theenergy, nuclear and environmental sectors, either in Italy or abroad. TheCompany shall prepare separate accounts with respect to the activities pur-suant to this paragraph and including those performed as part of temporaryconsortia.


As the table shows, the positive margins of these activities relate to:

– “other net revenues and income”, which are not included innuclear-related advances, after deducting the 80% or 90% ofrevenues from the sale of materials and net contingent assets andliabilities relating to the progress of work to be handed over to theAuthority, since such amounts regard adjustments to costs andrevenues previously recognised by the Authority;

– greater efficiency during the year than that required by theAuthority in Resolution ARG/elt 103/2008 (the effectiveness ofwhich, after certain amendments, was extended to the end of 2011by the resolution recognising payments for 2011) relating toefficiency-sensitive costs, which do not vary directly with the rateof progress of dismantling;

– long-term costs, being the difference between the remunerationcriteria fixed by the Authority and the Company’s method ofdepreciation.

Negative margins relate to:

– dismantling costs, following the non-recognition of a portion of thecosts incurred which were, however, recognised as efficiency-sensitive costs;

– the recovery of 1/6 of the amount of early retirement incentivespaid to employees in 2011, in excess of the structural paymentsfor 2007, 2008, 2009 and 2010;

– provisions for risks and charges made during the year. Provisionsfor direct costs will eventually be reimbursed by the Authority asand when actually incurred;

– tax expense for the period payable by the Company at the flat rateof 32.17%, as established by the Authority, of total pre-tax income,as shown in the table.

Nuclear activities recorded a positive after-tax result, correspondingto the Company’s ordinary activities.

Balance sheet

The balance sheet at 31 December 2011 is summarised below andcompared with the balance sheet at 31 December 2010.

Tangible and intangible assets have decreased as depreciation andamortisation for the year exceeded additions.

The most significant item in amounts receivable from customers isthe sum due to the Company from the Government Commissionerresponsible for the emergency clean-up and conservation of waterresources in the Campania region and the GovernmentCommissioner for the waste emergency, again in the Campania

43


The return on equity has increased from 11% in 2010 to 15% for2011.

No costs were incurred for research and development during theyear.

In accordance with the procedure established by Resolution ARG/elt103/2008, Sogin provided the Authority with statements for theapproval of 2011 actual costs at the end of February 2012.

On 18 April 2012 the Authority requested clarification and additionalinformation with respect to the documents submitted, to which Soginreplied on 24 April 2012.

On 3 May 2012 the Authority asked for further additional informationregarding the actual costs for 2011, which was supplied to theAuthority on 11 May 2012.

The Authority authorised payment for 2011 operations on 18 May2012 with Resolution192/2012/R/eel.

With reference to the latter resolution, the statements submitted andthe articles of Resolution ARG/elt 103/2008 (the effectiveness ofwhich was extended, after certain amendments, to the end of 2011by the above resolution), the income and cost components areshown in the following table, together with the relevant margin foreach category.

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NUCLEAR ACTIVITIES 2011

(€) Ref. Resolution 103/2008 Income components Cost components Margin

Recognition of related external costs: Annex A - art. 3 133,996,492 134,810,078 -813,586

Dismantling 55,546,963 56,360,549 -813,586

Maintenance 4,343,582 4,343,582 -

Related project management - - -

Fuel 74,105,947 74,105,947 -

National Repository - - -

Payment for acceleration Annex A - art. 8, para. 9 - - - -

Other net revenues and income Annex A - art. 14, para. 2 1,589,916 - 1,589,916

Efficiency-sensitive costs Annex A - art. 5 89,607,911 87,679,974 1,927,937

Early retirement incentives Annex A - art. 9 1,717,074 2,774,714 -1,057,640

Long-term costs Annex A - art. 4, para. 3 7,132,387 6,591,044 541,343

Provisions Annex A - art. 2, para. 8 - 648,484 -648,484

Financial income/(expenses) Annex A - art. 4, para. 518,051 518,051 -

Total before taxes 234,561,831 233,022,344 1,539,486

Income tax expense Annex A - art. 2, para. 7 3,690,023 4,185,276 -495,253

Net income/(loss) for the year 238,251,854 237,207,620 1,044,233

BALANCE SHEET

(€000) 31 Dec 2011 31 Dec 2010 Increase(Decrease)

Fixed assets 34,140 37,619 -3,479

Intangible assets 9,180 10,020 -840

Tangible assets 22,306 24,552 -2,246

Financial assets 2,654 3,047 -393

Current assets 87,653 128,942 -41,289

Inventories 2 562 -560

Amounts receivable from customers (*) 27,000 27,000 -

Tax assets 43,813 73,987 -30,174

Other assets 16,838 27,393 -10,555

Cash and cash equivalents 164,375 143,018 21,357

Current financial assets 5,290 44,042 -38,752

Bank deposits, current accounts and cash 159,085 98,976 60,109

Total assets 286,168 309,579 -23,411

Current liabilities 147,311 126,299 21,012

Advances from customers 1 571 -570

Amounts payable to suppliers (**) 54,012 51,985 2,027

Social security payables 4,011 4,189 -178

Tax liabilities 1,543 1,016 527

Amount due to MED

for Global Partnership 69,869 49,447 20,422

Other liabilities 17,875 19,091 -1,216

Nuclear-related advances 81,170 130,031 -48,861

Provisions 17,959 19,226 -1,267

For employee termination indemnities 12,118 13,388 -1,270

For risks and charges 5,841 5,838 3

Shareholders’ equity 39,728 34,023 5,705

TOTAL LIABILITIES

AND SHAREHOLDERS’ EQUITY 286,168 309,579 -23,411

(*) Includes amounts receivable from subsidiaries.(**) Includes amounts payable to subsidiaries.


authorities on 7 July 2010 and filed with the Rome Provincial TaxCommission on 26 July 2010. The amount in question of €750,876(net of additional interest and collection fees of approximately €40thousand) has been withheld by the tax authorities from the 2005VAT refund claimed in 2006 and received in the first quarter of2010;

– on 29 December 2011 the tax authorities sent Sogin notice of taxcredit recovery TJBCR0200004/2011, amounting to €518,008.57,due to the late filing of its statutory declaration attesting to itsclassification as a “virtuous taxpayer” as defined by article 38 bis,paragraph 7, letter c) of Presidential Decree 633/1972, in order toqualify for the offset, as part of the Group’s VAT procedure, of theVAT liability of the subsidiary, Nucleco SpA (€1,244,554)transferred during year of assessment 2006 and offset againstSogin’s VAT credits (amounting to €10,911,938). On 17 February2012 the Company challenged the tax authorities’ decision, filingan appeal before the Rome Provincial Tax Commission on 29February 2012.

45


region. The Ordinary Court of Naples issued a sentence on 7 July2010 upholding Sogin’s claims in judgment RG 39828/2005 andordering the above Commissioners to pay Sogin most of the amountdue, totalling €13.4 million (plus the overdue interest due onpayment), out of a total claim of €14.9 million. The District StateAttorney in Naples notified the decision to appeal the above sentenceon 5 March 2011. The first hearing was held on 6 July 2011, at whichthe District Attorney applied for a precautionary injunction delayingexecution of the adverse sentence at first instance.

Ruling that “the size of the sum resulting from the sentence at firstinstance” to represent serious grounds, pursuant to the combinedprovisions of articles 283 and 351 of the Code of Civil Procedure, theNaples Appeal Court awarded the injunction. A new hearing forspecification of the pleadings was scheduled for 19 December 2012,after which further action will be taken to recover the remainingamount due.

This receivable is partly offset by the sum of €7.4 million payable toCESI SpA, which Sogin has expressly agreed to settle once theCompany has been paid.

The amount of refundable VAT has significantly decreased followingreceipt of the refunds for 2007, 2008 and 2009. This receivablereflects the fact that revenues from the A2 component of theelectricity tariff, which is not in the form of a trade payment, arereceived by Sogin net of VAT.

Other assets (amounts receivable from others) are down due to therecovery of advances paid to suppliers and service providers(primarily AREVA).

The Electricity Industry Equalisation Fund paid €185 million duringthe year, which was used to meet the current cash requirements ofnuclear activities.

The amount payable to the Ministry of Economic Development inconnection with the Global Partnership Fund increased by thedifference between use of the funds made available by the Ministryfor this project, net of accrued interest, and the additional loans of€60.6 million disbursed in 2011.

There was a net decrease in the amount of nuclear-related advances,which is the difference between funds received during the year andactual disbursements approved by the Authority through Resolution192/2012/R/eel, net of interest accrued on nuclear-related capitalinvested and other revenues and income used to cover the cost ofnuclear activities.

Employee termination indemnities have declined due to personnelleaving employment and the introduction of new legislation, which

from 2007 requires accrued provisions to be paid into pension funds.

Provisions for risks and charges are substantially in line with theamount for the previous year.

The Company is wholly owned by the Ministry of the Economy andFinance. No transactions involving the Company’s own shares werecarried out, either directly or indirectly, during the year.

The following information is provided with respect to potentialdisputes with the tax authorities:

– in relation to the Customs & Excise’s official tax audit report of 7May 2008 relating to year of assessment 2006 (relating to the claimfor a refund submitted in 2007), the tax authorities have held backthe sum of approximately €304 thousand to cover tax demandTJBCO0800041 sent to Sogin on 7 September 2010 in respect ofalleged irregularities in registering intra-community invoices. On 8October 2010 Sogin submitted its defence, stating that, amongother things, there was no correspondence between the damagecaused to the tax authorities (none in financial terms) and the finesimposed. This assumption is based on the consideration that suchcases regard transactions that have no impact on the computationof tax payable, reflecting their neutrality as a result of double-entrybookkeeping in the VAT registers. On 3 February 2011 Soginappealed against the tax authorities’ decision to hold back aportion of amount claimed as a VAT refund in 2007, partly due tothe fact that the tax authorities have yet to issue any formal noticeof a fine. On 6 October 2011 the tax authorities sent Sogin noticeof fine TJBIR0800010, against which the Company filed appeal on5 December 2011;

– Protocol 2009/125625 of 6 November 2009, relating to the re-examination of automated VAT declaration payments for year ofassessment 2006, regards a dispute over the impropriety ofoffsetting the receivable shown on the VAT declaration for year ofassessment 2005, which was made on 16 January 2006. The taxauthorities are of the view that the refund of payments made priorto joining the Group VAT scheme may not be offset, either by theParent Company or its subsidiaries, but must be transferred in fullto the group. The full amount of the 2005 receivable will, therefore,be transferred to the Group resulting in a payable of equal amountin the Parent Company’s books and an increase in the receivableby the same amount for the Group. The existence of the payableled to the notification of an irregularity due to the lower refund of€516,459, fines of €154,938 and interest of €46,110. TheCompany does not agree with the tax authorities’ opinion. In fact,it appears correct that the subsidiary’s VAT payable at 31December should be consolidated and used for “external” offsetsfrom the day after the end of the assessment period. On 10 May2010 Sogin received notice of assessment 097 2010 01103833 86relating to the above irregularity. An appeal was notified to the tax

44

Statement of cash flows

Cash flows generated in 2011 are shown in the following statementsof cash flows and compared with prior year amounts.

The first table shows cash flows broken down by category of debtorand creditor.

STATEMENT OF CASH FLOWS BROKEN DOWN BY CATEGORY OF

DEBTOR AND CREDITOR

(€000) 2011 2010

TOTAL CASH AT 1 JANUARY 143,018 138,658

CASH FLOWS FOR THE PERIOD

Cash provided

Electricity Equalisation Fund 185,000 185,000

Global Partnership deposit account 60,556 43,881

Banks and financial institutions 4,882 2,539

Customers 5,479 4,164

Other: 49,070 6,213

tax authorities (taxes and duties) 44,249 6,150

insurance companies 11 7

dividends receivable from Nucleco - -

personnel (various) 10 8

other 4,800 48

Total cash provided 304,987 241,797

Cash used

Personnel: 65,093 62,389

wages, salaries and employee

termination indemnities 30,322 29,794

social security and pension contributions 15,275 13,358

Irpef witholding tax 14,384 14,116

employee associations 4,226 3,676

sundry 886 1,445

Suppliers 175,012 142,369

Other: 43,525 32,679

tax authorities (taxes and duties) 4,634 5,710

insurance companies 211 510

banks and financial institutions 717 128

Global Partnership suppliers + MED, 36,654 24,728

other 1,309 1,603

Total cash used 283,630 237,437

TOTAL CASH FLOW FOR THE PERIOD 21,357 4,360

TOTAL CASH AT 31 DECEMBER 164,375 143,018


CONSOLIDATED FINANCIAL REVIEW

This section includes the reclassified consolidated income statement,balance sheet and statement of cash flows, accompanied by the re-lated analyses.

Consolidated income statement

The second analyses cash flows in relation to income statementitems and changes in balance sheet items.

Overall cash has increased with respect to the previous year, despitepayments received from the Electricity Industry Equalisation Fundremaining unchanged. The main increases regard:

– additional payments received from the Ministry of EconomicDevelopment in connection with the Global Partnership project,under the International Cooperation Agreement ratified by Law160/2005;

– the collection of tax rebates claimed in 2007, 2008 and 2009.

Outflows include:

– increased payments to suppliers due to the greater volume ofactivity compared with the previous year and a reduction inpayment terms to 30 and 60 days from the 90 and 120 daysapplied in previous years;

– tax payments, reflecting the reduction in taxable income for 2010compared with the previous year (prepayments for 2011 werebased on taxable income 2010);

– changing payments to the suppliers of goods and services inrelation to the Global Partnership, which primarily reflect thevolume of activity.

47


46

STATEMENT OF CASH FLOWS

BY FINANCIAL STATEMENT COMPONENT

(€000) 2011 2010

TOTAL CASH AT 1 JANUARY

Cash 15 8

Banks - Current accounts 98,961 96,057

Banks - Short-term deposit - -

Current financial assets 44,042 42,593

TOTAL CASH AT BEGINNING OF PERIOD 143,018 138,658

CASH FLOWS FOR THE PERIOD

Self-financin

Net income for the year 5,705 2,387

Depreciation of tangible fixed assets 4,006 4,161

Amortisation of intangible fixed assets 2,644 2,557

Net change in provisions for risks and charges 3 2,646

Net change in provisions for employee termination indemnities -1,270 -939

Total self-financing 11,088 10,812

Cash flows from (for) operating activities

Net investment in tangible assets -1,760 -3,016

Investment in intangible assets -1,804 -1,438

Net change in working capital 62,301 6,009

Total cash flows from (for) operating activities 58,737 1,555

Change in nuclear-related advances -48,861 -7,865

Financial requirements for the year 20,964 4,502

Change in non-current financial assets 393 -142

TOTAL CASH FLOWS FOR THE PERIOD 21,357 4,360

TOTAL CASH AT 31 DECEMBER

Cash 7 15

Banks - Current accounts 159,078 98,961

Banks - Short-term deposits - -

Current financial assets 5,290 44,042

TOTAL CASH AT END OF PERIOD 164,375 143,018

RECLASSIFIED CONSOLIDATED INCOME STATEMENT


Revenues from sales and services 239,193 198,066 41,127

Change in contract work in progress -559 168 -727

Capitalised internal work 1,121 237 884

Other revenues and income 10,569 8,840 1,729

Revenue from ordinary activities 250,324 207,311 43,013

Cost of materials and services -161,655 -123,457 -38,198

Gross margin 88,669 83,854 4,815

Personnel costs -71,223 -66,510 -4,713

Gross operating income 17,446 17,344 102

Amortisation and depreciation -7,347 -7,466 119

Other operating costs -1,704 -1,757 53

Other provisions -551 -397 -154

Provisions for risks and charges -410 -3,146 2,736

Operating income 7,434 4,578 2,856

Financial income/(expenses) 3,283 2,816 467

Adjustments of financial assets - - -

Income/(Loss) before extraordinary items and taxes 10,717 7,394 3,323

Extraordinary income/(expenses) 2,112 -5 2,117

Income/(Loss) before taxes 12,829 7,389 5,440

Income tax expense -6,345 -5,100 -1,245

Net income/(loss) for the year 6,484 2,290 4,195

of which: attributable to shareholders of the Parent Company 6,146 2,189 3,957

attributable to shareholders of the Parent Company 339 101 238


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48

Consolidated balance sheet

RECLASSIFIED CONSOLIDATED BALANCE SHEET


A. Fixed assets

Intangible assets 10,209 11,140 -931

Tangible assets 23,351 25,657 -2,306

Financial assets 454 847 -393

34,014 37,644 -3,630

B. Working capital

Inventories 153 2,234 -2,081

Receivables 89,718 132,087 -42,369

Other assets 414 267 147

Trade payables -52,018 -50,704 -1,314

Nuclear-related advances -81,170 -130,031 48,861

Provisions for risks and charges -7,213 -7,447 234

Other liabilities -94,829 -76,671 -18,158

-144,945 -130,265 -14,680

C. Invested capital,

less current liabilities (A+B) -110,931 -92,621 -18,310

D. Provisions for employee termination indemnities 12,626 13,911 -1,285

Invested capital

less current liabilities and provisions for ETI (C-D) -123,557 -106,532 -17,025

financed by

E. Shareholders’ equity

Share capital 15,100 15,100 -

Reserves and retained earnings 20,272 18,082 2,190

Net income/(loss) for the year 6,146 2,189 3,956

Minority interests 1,987 1,648 339

43,503 37,019 6,485

F. Net medium/long-term debt (net financial receivables) - - -

G. Net short-term debt (net cash and cash equivalents)

Current financial assets -5,290 -44,042 38,752

Cash on hand and current financial receivables -161,770 -99,509 -62,261

-167,060 -143,551 -23,509

H. Net funds (F+G) -167,060 -143,551 -23,509

TOTAL EQUITY AND DEBT (E+G) -123,557 -106,532 -17,025

The Group reports net income of €6,484 thousand, with €6,146thousand attributable to shareholders of the Parent Company and€339 thousand attributable to minority interests.

Revenue totals €250,324 thousand, compared with €207,311thousand in the previous year, and essentially breaks down into thefollowing components:

– revenue from nuclear activities of €234,379 thousand, derivingfrom decommissioning activities;

– revenue from other activities (including the change in inventoriesand capitalised internal work), totalling €11,131 thousand.

The cost of materials and services amounts to €161,655 thousand(€123,457 thousand in 2010), with materials, including the changein inventories, accounting for €16,036 thousand, service costs for€139,962 thousand and leases and rentals for €5,657 thousand.

As a result of the above, the gross margin amounts to €88,669thousand (€83,854 thousand in 2010).

Personnel costs of €71,223 thousand relate to the Group’s workforceat 31 December 2011, totalling 887.

Gross operating income thus amounts to €17,446 thousand(€17,344 thousand in 2010).

Amortisation and depreciation totals €7,347 thousand (€7,466thousand in 2010), represented by amortisation of intangible assetsof €2,734 thousand and of goodwill arising from consolidation of€78 thousand, and depreciation of tangible assets, totalling €4,613thousand.

Provisions for risks and charges and for doubtful accounts, totalling€961 thousand (€3,543 thousand in 2010), primarily regardadditional provisions made by the Parent Company for doubtfulaccounts and future charges.

Other operating costs total €1,704 thousand (€1,757 thousand in2010).

As a result of the above, operating income amounts to €7,434thousand (€4,578 thousand in 2010).

Net financial income of €3,283 thousand (€2,816 thousand in 2010)essentially regards income from investment of the Parent Company’sliquidity.

Net extraordinary income of €2,112 thousand regards income fromthe Parent Company’s sale of its investment in CESI SpA.

Income before taxes thus amounts to €12,829 thousand (€7,389thousand in 2010).

Income tax expense for the period totals €6,345 thousand (€5,100thousand in 2010).


51


Invested capital, less current liabilities and provisions for employeetermination indemnities, is a negative €123,557 thousand, havingincreased by €17,025 thousand since 31 December 2010.

Fixed assets of €34,014 thousand (€37,644 thousand at 31December 2010) are down €3,630 thousand. Details are provided inannexes 2 and 3 to the consolidated financial statements.

Negative working capital amounts to €144,945 thousand, markingan increase of €14,680 thousand compared with 2010. The mostsignificant components are as follows:

– inventories at the end of the year, totalling €153 thousand (€2,234thousand in 2010);

– receivables of €89,718 thousand (€132,087 thousand in 2010); – other assets of €414 thousand (€267 thousand in 2010), primarilyregarding accrued interest income on the investment of liquidity;

– trade payables of €52,018 thousand (€50,704 thousand in 2010)deriving from purchases of goods and services;

– advances of €81,170 thousand (€130,031 thousand in 2010), thereduction in which primarily reflects the funds disbursed by theElectricity Industry Equalisation Fund on the instruction of theAuthority;

– provisions for risks and charges of €7,213 thousand (€7,447thousand in 2010), which have decreased €234 thousand dueessentially to the use of provisions for legal disputes and for futurecharges;

– other liabilities of €94,829 thousand (€76,671 thousand in 2010),which are up €18,158 thousand, primarily due to the amountpayable by the Parent Company to the Ministry of EconomicDevelopment in relation to a loan made pursuant to thecooperation agreement concluded by the Governments of Italyand the Russian Federation, as ratified by Law 160/2005, and to areduction in tax liabilities following an increase in advancepayments in 2011.

Provisions for employee termination indemnities of €12,626thousand (€13,911 thousand in 2010) declined €1,285 thousand in2011. These provisions include amounts allocated in favour ofemployees to cover termination indemnities pursuant to existinglegislation, net of advances extended to employees pursuant to thelaw and net of amounts earmarked for the pension fund for managers(Fondenel), the pension fund for employees (Fopen), andcontributions paid to INPS as a result of Law 296 of 27 December2006. The reduction essentially reflects provisions for indemnitiesaccrued during the period (€3,841 thousand), less uses in the formof advances and termination indemnities paid (€5,126 thousand).

Shareholders’ equity of €43,503 thousand (€37,019 thousand in2010) includes equity attributable to shareholders of the Parent

Company, totalling €41,516 thousand, and equity attributable tominority interests (€1,987 thousand).

Cash and cash equivalents of €167,060 thousand (€143,551thousand in 2010) is up €23,509 thousand.

Consolidated statement of cash flows

50

CONSOLIDATED STATEMENT OF CASH FLOWS

(€000) 2011 2010

A. Cash at beginning of year (*)

(net short-term debt at beginning of year) 143,551 139,674

B. Cash flows from (for) operating activities

Net income for the year 6,484 2,290

Amortisation and depreciation 7,347 7,466

Change in working capital and other items 14,680 380

Net change in provisions

for employee termination indemnities -1,285 -1,263

27,226 8,872

C. Cash flows from (for) investing activities

in fixed assets

Intangible assets -1,803 -1,462

Tangible assets -2,307 -3,215

Financial assets 393 -144

-3,717 -4,821

D. Cash flows from (for) financing activities - -

E. Dividends paid - -

F. Other cash flows (dividends received from third parties) - -175

G. Cash flows for the period (B+C+D+E+F) 23,509 3,877

H. Cash at end of year (A+G) (*) 167,061 143,551

(*) Includes current securities.

SUBSEQUENT EVENTS AND OUTLOOK

Subsequent events

With regard to legislation, Law Decree 1, containing “Urgent measuresrelating to competition, infrastructure development andcompetitiveness”, was issued on 24 January 2012 and converted, withamendments, into Law 27 of 24 March 2012 (Official Gazette 71 of 24March 2012).

Article 24 of the new law introduces measures designed to speed upthe decommissioning and dismantling of nuclear sites, makingadditional resources available to Sogin in order to conduct the biggestever environmental clean-up in Italy’s history.

Above all, the new law aims to speed up the process ofdecommissioning and dismantling nuclear sites, providing certaintyregarding timing and the various players to be involved in the process.Currently pending authorisations for the decommissioning of sites inItaly must be issued rapidly and within certain deadlines. It also clearlysets out how construction and operation of the Technological Park andthe National Repository is to be financed through the A2 componentof the electricity tariff. It also introduces the obligation for all producersand holders of radioactive waste to transfer the waste to the NationalRepository, and sets deadlines within which Sogin must prepare theNational Map of Potentially Suitable Areas to host the TechnologicalPark.

The new provisions:

– establish deadlines within which the Ministry of EconomicDevelopment (the “MED”), ISPRA and the other relevant bodiesare required to authorise decommissioning projects submitted atleast 12 months before, requiring completion of the authorisationprocess within 180 days and, in the event of the need for aServices Conference, within 270 days from 24 January 2012(paragraphs 1 and 2);

– require Sogin to immediately send the MED and the other relevantauthorities a list of projects for which authorisation is priority (Soginsent the list on 23 March 2012). The above ministry, in consultationwith ISPRA, has 30 days to assess the proposed priorities and calla Services Conference. The procedure is to be completed within90 days of calling the Services Conference (paragraph 3);

– make it obligatory for municipal and regional authorities to issuea reasoned opinion prior to the issue of authorisations for thedismantling of infrastructure involving changes to plants, grantingregional authorities the option of promoting agreements betweenSogin and the interested local authorities with the aim ofestablishing environmental compensation and restorationmeasures. The law also establishes that authorisations fordecommissioning and changes to plants issued after 24 January

2012 are equivalent to declarations of public utility, non-deferabilityand urgency (paragraph 4);

– have, with respect to existing legislation, clarified the fact that theA2 tariff component will cover construction and operation of theTechnological Park, including the National Repository, and requirethat the funds used for activities not strictly related todecommissioning are to be used in the form of an advance, to besubsequently recovered from income generated by use of thefacilities forming part of the Park and Repository (paragraph 5);

– require all producers and holders of radioactive waste to transferthe waste to the National Repository, according to the deadlinesand procedures to be established by MED decree, in agreementwith the Ministry of the Environment and Land and Sea Protection(paragraph 6);

– require, finally, Sogin to draw up a proposed National Map ofPotentially Suitable Areas to host the Technological Park withinseven months of definition of the criteria recommended by theIAEA (International Atomic Energy Agency) and by the bodyresponsible for Italian nuclear safety (now ISPRA), thus providingcertainty regarding the timing of the start-up of work onconstruction of the Park and National Repository (paragraph 7).

On 26 January 2012 Sogin submitted the Full Life Cycle Programmefor 2011 and the Three-year Programme for 2012-2014 to theElectricity and Gas Authority.

The Financial Plan for 2012 was, on the other hand, submitted to theAuthority on 1 February 2012 in order to enable better planning ofthe cash disbursements required by the Authority. Cash needs tofund nuclear activities in 2012 are estimated at approximately €230million.

On 17 February 2012 the Company filed appeal against tax creditrecovery TJBCR0200004/2011, notified to Sogin by the taxauthorities on 29 December 2011 and described above.

On 28 February 2012 the Company sent the Authority the statementof 2011 actual costs relating to the progress of work and of long-termcosts incurred, in accordance with the reporting format in use duringthe first regulatory period. It was noted how in 2011 Sogin hadachieved its best ever result in terms of both volumes of activity andefficiency, thanks to the prevailing use of competitive tenders for theaward of contracts.

On 30 March 2012 the Authority issued Resolution ARG/elt 115/2012,instructing the Electricity Equalisation Fund to pay Sogin €75 millionby 30 June 2012. €35 million of this was collected by 18 May 2012.

On 18 April 2012 the Authority requested clarification and additionalinformation with respect to the documents submitted, to which Soginreplied on 24 April 2012.


On 3 May 2012 the Authority asked for further additional informationregarding the actual costs for 2011, which was supplied to theAuthority on 11 May 2012.

On 17 May 2012 the Company applied to the tax authorities (LazioRegional Office - Major Taxpayers unit) for exemption from theobligation to provide sureties pursuant to article 38 bis of PresidentialDecree 633/1972, in order to reduce the cost of the bank guaranteesbacking the VAT refunds collected.

The Authority authorised payment for 2011 operations on 18 May2012 with Resolution 192/2012/R/eel. Further details are provided inthe Notes.

The Company is engaged in ongoing talks with the Authorityregarding revision of the system for cost recognition (Sogin’sregulatory framework).

Outlook

In general, Sogin expects the following to take place in 2012:

– continued rationalisation of the use of spaces in the repositoriesto ensure optimum use of all the areas authorised to store thevarious types of waste;

– further progress in the treatment and conditioning of liquid wastein storage;

– in accordance with article 24 of the “Liberalisation” Law Decree,the possibility to obtain clearance for the decommissioning of theLatina, Trino, Caorso, Garigliano and Trisaia plants.

The most important activities to be carried out by Sogin in 2011 areas follows:

– Casaccia: the treatment and storage of legacy waste, completionof preliminary work on the dismantling of liquid waste tanks, thestart of the process of awarding the contract to provide buildingservices for the OPEC2 radioactive waste repository and the start-up, subject to authorisation, of the dismantling of the remainingglove boxes;

– Garigliano: ongoing construction of the building to be used indecontaminating the trenches, the start-up of work on constructionof the new unloading bay and on the demolition of the old stack;publication of the call for tenders for the dismantling of turbinebuilding components and other infrastructure (in preparation forthe dismantling of the primary circuit and the vessels);

– Latina: continuation of work on the system for treating radioactivemud, whilst construction of the new temporary repository forradioactive waste nears completion;

– Trisaia: the start-up of work on installation of the containment hoodin readiness for the subsequent excavation of the irreversible

trench. Talks are underway with a view to renewing the contractwith AREVA for the production of casks for the storage of irradiatedfuel from the Elk River plant;

– Trino: the start-up of collaboration with Nucleco on the supercompaction and conditioning of radioactive waste at the plant, andof the procurement process for demolition of the conventionalbuildings. Meanwhile, work on the wet oxidation plant to treatresins can begin once authorisation has been received fromISPRA; publication of the call for tenders for the dismantling of theprimary circuit (excluding the vessels and internals);

– Saluggia: the continuation of work on the D2 repository and onpreparations for the electricity sub-station. The treatment andconditioning of radioactive waste by Nucleco has begun. At thesame time the characterisation and conditioning of waste from theclean-up fuel pool is ongoing;

– Caorso: continuing treatment of low level waste and terminationof the transport of this material to Studsvik by the end of June.Dismantling of the turbine building systems and components willbe completed by June. In parallel, tenders have been called for inrelation to demolition of the off-gas building, with work expectedto begin as early as the summer. Publication of the call for tendersfor the dismantling of the primary circuit (excluding the vesselsand internals);

– Bosco Marengo: the continuation of work on dismantling and onthe treatment of waste;

– fuel: renewed transport of the irradiated fuel stored at theAvogadro repository in Saluggia to France.

In addition to the above activities, work will continue on constructionof the Technological Park referred to in Legislative Decree 31/2010,including the National Repository for radioactive waste to be builtwithin the Park.

Until the criteria for selecting the potentially suitable areas have beenpublished, work on the activities begun in 2011 will continue and/orbe completed; in particular:

– land surveys, carried out in collaboration with universities andnational research institutes responsible for managing this data(ISPRA difesa natura, ISPRA difesa suolo, Istituto Nazionale diGeofisica e Vulcanologia, Consiglio Nazionale delle Ricerche) willcontinue;

– the preliminary design for the Technological Park and theaccompanying National Repository will be completed, as will thatfor the area to be used for the provisional storage of high-activitywaste.

As soon as the above criteria have been published, work onpreparing the documentation necessary for the national seminar willbegin and the information and communication campaigns can start.With regard to market activities, the Company intends to focus solelyon the provision of technical and operational assistance to theMinistry of Economic Development in connection with the Global

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52

Partnership project, under the International Cooperation Agreementbetween the Italian and Russian Governments, ratified by Law165/2005. The work entails the dismantling of retired nuclearsubmarines and the management of radioactive waste and spentnuclear fuel.

Sogin intends to transfer its other market activities, primarily nuclearconsultancy, to the subsidiary, Nucleco.

With regard to the outlook for Nucleco, the subsidiary aims todevelop its business by promoting the “Nucleco” brand among themain national players in the sectors in which the Company hasdistinctive capabilities, and by entering into strategic partnerships forEuropean projects, above all in eastern Europe.

In the coming years the subsidiary plans to focus primarily, but notexclusively, on the activities carried out for Sogin and ENEA, withattractive opportunities available at the European Commission’s JointResearch Centre located in the municipality of Ispra (Varese) and atthe Eni group.

Nucleco plans to continue work on design, characterisation, thedismantling of sections of plants and the conditioning of radioactivewaste for Sogin.

The volume of business conducted with the Parent Company, Sogin,can only be increased significantly if the companies integrate moreclosely, enabling Nucleco to become Sogin’s operating arm, with allthe advantages in terms of efficiency and cost-effectiveness thatwould follow.

Nucleco will continue managing radioactive waste at ENEA’sCasaccia Research Centre (the Integrated Service). This will proceedin accordance with the programmes set out in the three-yearagreement for 2010-2012 between ENEA and Nucleco.

Turnover from provision of the Integrated Service, covering thetreatment of waste from hospitals and medical facilities, researchcentres and industrial sources, is, however, in line with the downwardtrend witnessed in previous years.

This trend reflects the entry into the market of other private integratedservice providers, offering the possibility to dispose of wasteoverseas.

A number of financially and strategically attractive initiatives havebeen entered into with the Eni group. In late 2011 the Company wascontacted by Syndial (the Eni group company responsible for findingsolutions for conventional and radioactive waste at national level)with regard to the disposal of waste at the Marghera site. At thebeginning of 2012 this led to the preparation of a contract tenderworth approximately €0.9 million.

The activities currently carried out by Nucleco at the Gela site, againfor Syndial, should increase significantly following the start-up ofdismantling of the Phosphoric Acid plant.

The Company is in talks with Eni Procurement in preparation formanaging disposal of the main source of Sr-90 currently stored atthe CISAM site in San Piero a Grado (Pisa).

Recently begun cooperation with Saipem offers interestingopportunities over the short to medium term. Starting with theprojects in Italy currently under development, the relationship couldextend to Nucleco’s participation in overseas projects in whichSaipem is involved.

The activities envisaged by the four-year agreement (2010-2014) forthe provision of laboratory services at the European Commission’sJoint Research Centre (in the municipality of Ispra) are continuing.

This should give rise to attractive opportunities in areas linked todecommissioning and the management of radioactive waste.

OTHER INFORMATION ABOUT THE SOGINGROUP

In compliance with the provisions of article 40 of Legislative Decree127/1991, the following information is provided:

– the Group carried out research and development during 2011 viathe subsidiary, Nucleco, with all the related costs expensed asincurred;

– during the year Nucleco did not hold shares in the ParentCompany, including through a trustee or proxy;

– to date there have not been any material factors or events resultingin substantial changes in the Group’s financial position or requiringdisclosures or adjustments in the consolidated financialstatements for the year ended 31 December 2011;

– the Parent Company does not have branch offices.

The Chief Executive Officer will propose the following appropriationof net income for the year of €5,705,162 to the General Meeting ofshareholders:

– €286,000 to be taken to the legal reserve;– the remainder, totalling €5,419,162, to be taken to retainedearnings.

BALANCE SHEET AND INCOME STATEMENT

BALANCE SHEETAND INCOMESTATEMENT

55


57


ASSETS

56

ASSETS(€) At 31 December 2011 At 31 December 2010

Sub-totals Totals Sub-totals Totals

B) FIXED ASSETS

I. Intangible assets4) Concessions, licences, trademarks and similar rights 1,778,978 1,678,1266) Intangible assets in progress and advances - - 7) Other 7,401,019 9,179,997 8,341,542 10,019,668

II. Tangible assets1) Land and building 7,743,822 7,896,4132) Plant and machinery 7,589,495 10,068,5843) Industrial and commercial equipment 2,265,501 2,876,9454) Other assets 1,204,188 1,509,8716) Tangible assets under construction and advances 3,502,653 22,305,659 2,200,603 24,552,416

III. Financial assets1) Equity investments in:

a) subsidiaries 2,200,000 2,200,000d) other companies - 387,885

2,200,000 2,587,8852) Receivables: Due within 12 months Due within 12 months

d) due from others 454,334 2,654,334 459,465 3,047,350

Total fixed assets (B) 34,139,990 37,619,434

C) CURRENT ASSETS Due after 12 months Due after 12 months

I. Inventories1) Raw, ancillary and consumable materials 2,436 2,7803) Contract work in progress - 2,436 559,510 562,290

II. Receivables1) Amounts receivable from customers 26,267,983 25,924,2622) Amounts receivable from subsidiaries 731,801 1,075,6824 bis) Tax assets 13,325,133 43,812,693 73,986,7294 ter) Deferred tax assets 3,883,772 3,458,9025) Amounts receivable from others 1,868,557 12,562,581 87,258,830 1,371,496 23,712,201 128,157,776

III. Current financial assets6) Other securities 5,289,748 5,289,748 44,041,666 44,041,666

IV. Cash and cash equivalents1) Bank and post office deposits 159,078,508 98,961,0763) Cash 7,093 159,085,601 14,935 98,976,011

Total current assets (C) 251,636,615 271,737,743

D) ACCRUED INCOME AND PREPAID EXPENSES

Accrued income - 250Prepaid expenses 391,139 391,139 221,503 221,753

Total accrued income and prepaid expenses (D) 391,139 221,753

TOTAL ASSETS 286,167,744 309,578,930

SHAREHOLDERS’ EQUITY AND LIABILITIES

BALANCE SHEET(€) At 31 December 2011 At 31 December 2011


A) SHAREHOLDERS’ EQUITY

I. Share capital 15,100,000 15,100,000IV. Legal reserve 1,488,000 1,368,440VIII. Retained earnings 17,435,241 15,167,261IX. Net income(+)/loss(-) for the year 5,705,162 2,387,540

Total shareholders’ equity (A) 39,728,403 34,023,241

B) PROVISIONS FOR RISKS AND CHARGES

1) Retirement and similar benefits 533,682 583,8612) Deferred tax liabilities 112,207 337,9763) Other 5,195,000 4,916,198

Total provisions for risks and charges (B) 5,840,889 5,838,035

C) PROVISIONS FOR EMPLOYEETERMINATION INDEMNITIES 12,118,006 13,387,931

D) PAYABLES Due after 12 months Due after 12 months

6) Advances received:a) nuclear-related advances 81,170,038 130,031,016b) advances for other activities 500 81,170,538 570,819 130,601,835

7) Amounts payable to supplier 49,127,655 47,404,6629) Amounts payable to subsidiaries 4,884,556 4,580,12112) Tax liabilities 1,542,617 1,015,61813) Social security payables 4,010,519 4,189,51214) Other payables 87,737,213 68,529,776

Total payables (D) 228,473,098 256,321,524

E) ACCRUED LIABILITIES AND DEFERRED INCOME

Accrued liabilities 7,348 8,199

Total accrued liabilities and deferred income (E) 7,348 8,199

TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 286,167,744 309,578,930

MEMORANDUM ACCOUNTS

Guarantees given 64,171,153 27,135,153Other memorandum accounts 389,756,768 453,927,921 461,941,033 489,076,186


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58

INCOME STATEMENT

(€) 2011 2010Sub-totals Totals Sub-totals Totals

A) REVENUE1) Revenues from sales and services

a) Revenues from nuclear activities 234,379,030 193,162,3733) Change in contract work in progress -559,510 -776,2134) Capitalised internal work 1,121,210 237,4395) Other revenues and income 10,277,055 8,835,795

Total revenue (A) 245,217,785 201,459,394

B) OPERATING COSTS6) Raw, ancillary and consumable materials and goods for resale 16,232,154 11,701,8047) Services 145,601,796 110,658,3578) Leases and rentals 5,105,151 5,438,4239) Personnel costs:

a) wages and salaries 43,166,639 40,284,877b) social security contributions 11,633,634 10,964,261c) employee termination indemnities 3,084,154 2,787,174d) retirement benefits and similar contributions 333,799 171,553e) other 4,951,269 63,169,495 4,241,496 58,449,361

10) Amortisation, depreciation and write-downs:a) amortisation of intangible assets 2,643,924 2,557,532b) depreciation of tangible assets 4,006,100 4,161,082d) provisions for doubtul accounts and cash and cash equivalents 378,184 7,028,208 - 6,718,614

11) Changes in inventories of raw, ancillary and consumable materials and goods for resale 344 -16412) Provisions for risks - 3,111,69713) Other provisions 500,000 - 14) Other operating costs 1,608,828 1,576,209

Total operating costs (B) 239,245,976 197,654,301

Operating income/(loss) (A-B) 5,971,809 3,805,093

C) FINANCIAL INCOME AND EXPENSES16) Other financial income:

a) from non-current receivables 23,894 286,213d) other 4,746,009 4,769,903 3,413,625 3,699,838

17) Interest expense and other charges 1,472,725 604,37517 bis) Foreign exchange gains and losses -9,684 -14,410

Total financial income/(expenses) (C) 3,287,494 3,081,053

E) EXTRAORDINARY ITEMS20) Income 2,112,115 -

Total extraordinary income/(expenses) (E) 2,112,115 -

Income/(Loss) for the year before taxes (A-B+C+D+E) 11,371,418 6,886,146

22) Income tax expense for the year, including current and deferred tax expense and benefits -5,666,256 -4,498,606

NET INCOME/(LOSS) FOR THE YEAR 5,705,162 2,387,540

NOTES TO THE FINANCIAL STATEMENTS

NOTES TOTHE FINANCIALSTATEMENTS

The form, content and classification of the balance sheet, incomestatement and notes to the financial statements are in conformity withLegislative Decree 127 of 9 April 1991, as subsequently amended,and the requirements of the Italian Civil Code, and are based on theaccounting principles promulgated by the Italian accountingprofession (the Consiglio Nazionale dei Dottori Commercialisti e deiRagionieri or CNDCR), as amended by the Italian AccountingStandards Setter (the Organismo Italiano di Contabilità or OIC). Thebalance sheet and income statement exclude accounts starting withArabic numerals for which there was a nil balance both this year andlast year.

The annual financial statements consist of the above-mentioneddocuments and are accompanied by a Report on Operations asrequired by article 2428 of the Italian Civil Code and LegislativeDecree 37/2007, to which reference should be made for details ofthe information provided in compliance with this article.

No exceptional circumstances arose during the year requiringapplication of the waiver permitted by of article 2423, paragraph 4 ofthe Italian Civil Code.

In addition to the disclosures required by article 2427 of the ItalianCivil Code and other statutes, these notes to the financial statementsprovide all complementary disclosures necessary to give a true andfair view of the Company’s financial position and results ofoperations, even though not required by specific legislation. Thestatement of cash flows is included in the Report on Operations.

The reporting standards used comply with those required by article2423 bis of the Italian Civil Code and, in particular, the measurementof financial statement items was made in accordance with theprudence and going-concern principles.

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BASIS OF PRESENTATION


Financial assets

Equity investments in subsidiaries, associates and other companiesare recorded at the cost of acquisition or subscription.

The cost of such equity investments is reduced in the event ofimpairment as a result of the investee company having incurredlosses, which, it is believed, are too great to be offset againstexpected future income in the immediate future. The original valueis reinstated in subsequent years in the event that the reasons givingrise to the write-down cease to exist.

Receivables

Receivables are recorded at their expected realisable value, obtainedby adjusting the nominal value of receivables by provisions fordoubtful accounts, and are classified under “Non-current financialassets” or “Current assets” according to their nature and purpose.Receivables include deferred tax assets if there is reasonablecertainty of their future recovery.

Fuel inventories

Nuclear fuel inventories are made up of irradiated fuel, plutonium anduranium.

Irradiated fuel to be reprocessed or placed in dry storage, plutoniumand uranium are valued by convention at €0.52 per unit ofmeasurement (kg).

Contract work in progress (market activities)

Contract work is valued in line with the value of the amountcompleted when accrued with reasonable certainty, according to thepercentage of completion method. This is determined on the basisof the costs so far incurred as a proportion of the total estimated costof the work to be carried out. The carrying amount of contract workin progress is adjusted by specific provision in the event of anycontract risks. Any potential losses on contracts, the value of whichmay be reasonably estimated, are fully expensed as they becomeknown.

Current financial assets

Current financial assets are valued at the lower of cost and theirestimated realisable value based on market trends.

Cash and cash equivalents

Cash and cash equivalents are recorded at face value and accountedfor at the date of the transaction.

Accruals and deferrals

Accruals and deferrals are recorded on an accruals basis.

Provisions for risks and charges

Provisions for retirement benefits

The provision for retirement benefits mainly includes remunerationaccrued for employees in lieu of notice in accordance with unionagreements and collective labour contracts in force.

Provisions for taxes

This refers to the recognition of deferred tax liabilities with respect totemporary differences between taxable and pre-tax profits.

Other provisions for risks and charges

These are accrued against known or probable losses and chargeswhose amount or timing cannot be determined at the balance sheetdate. Provisions are determined on the basis of the best estimatemade according to the information available.

63


All items reported as assets and liabilities and shareholders’ equityat 31 December 2011, as well as those presented in the incomestatement for the year ended 31 December 2011, are compared withthe corresponding items in the financial statements for the yearended 31 December 2010.

The balance sheet and income statement are stated in euro unitspursuant to article 2423, paragraph 5 of the Italian Civil Code.

Amounts reported in the notes to the balance sheet and incomestatement are stated in euros or thousands of euros.

The Parent Company, Sogin SpA, has prepared the Group’sconsolidated financial statements for the year ended 31 December2011. These statements are included in a separate document.

As required by Resolution ARG/elt 103/2008, Annex B, article 2.1 “forthe purposes of unbundling its annual financial statements, Soginhas divided its activities into: Nuclear Activities and Other Activities”.The term “institutional activities” as used in these financial statementsrefers to “nuclear activities”, whereas “market activities” refers to“other activities”.

ACCOUNTING POLICIES

The policies adopted in the preparation of the financial statementsfor the year ended 31 December 2011 are those provided for inarticle 2426 of the Italian Civil Code, supplemented by the accountingstandards established by the CNDCR, as amended by the OIC. Themost significant accounting policies adopted are described below.

Intangible assets

Intangible assets are recorded in the financial statements at purchaseor production cost, inclusive of all attributable incidental charges.Such assets are amortised each year.

Amortisation is calculated on a straight-line basis over the expecteduseful lives of the assets. Should there be a permanent impairmentin the above value of such assets at year end, the assets areaccordingly written down. The original value of the assets isreinstated in future years should the reasons for the write-downcease to apply.

In particular, leasehold improvements are amortised over theduration of property lease contracts. Intellectual property rights areamortised on a straight-line basis over three years.

The extraordinary contribution resulting from the winding up of theElectricity Industry Pension Fund, in compliance with Law 488 of 23December 1999 (the 2000 Finance Act) is amortised over a periodof 20 years, as expressly required by law.

Tangible assets

Tangible assets are recorded in the financial statements at purchaseor production cost inclusive of all directly attributable incidentalcharges. Tangible assets are depreciated on a straight-line basis inaccordance with the rates shown below, which are held to berepresentative of their expected useful lives. Should there be apermanent impairment in the above value of such assets at year end,the assets are accordingly written down. The original value of theassets is reinstated in future years should the reasons for the write-down cease to apply.

The rates applied are as follows:

Industrial buildings 3.5%÷4.5%Plant and machinery 10%Industrial equipment 10%Furniture and fixtures 12%IT equipment 20%Office equipment 20%Transport vehicles 25%Operating vehicles 20%

The rate of the depreciation is reduced by one half on all additionsduring the year thus averaging their usage over the year.

The cost of any routine maintenance modifying the capacity andefficiency of fixed assets is fully charged against income in the yearin which such costs are incurred. The cost of any maintenanceenhancing the value of an asset is allocated to the asset to whichthey relate and depreciated over the remaining useful life of thatasset.

The carrying amount of industrial buildings also includes the land onwhich they are sited.

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Income taxes

Current income taxes for the period are recorded among tax liabilitiesand calculated according to applicable regulations and tax rates.

Deferred tax assets and liabilities, deriving from temporary differen-ces between the book value of an asset or liability in the balancesheet and its tax base, are recorded on the basis of the tax rate ap-plicable at the moment the difference arises.

Deferred tax assets are recorded subject to verification of their reco-verability.

Deferred tax liabilities are not posted to provisions for taxes when itis unlikely that the payable will arise.

Translation of foreign currency items

Receivables and payables originally expressed in foreign currenciesare translated into euro on the basis of the exchange rate in force atthe time of the related transaction. Differences with closing exchangerates are recorded in the income statement as financial income andexpense. Differences (premiums or discounts) between spot and for-ward contracts relating to foreign exchange hedges are recognisedin income.

Financial income and expenses

Financial income and expenses are recognised on the basis of inte-rest accrued on the net value of the related financial assets and lia-bilities, using the effective interest rate.

Financial expenses also include accrued interest on excess capitalinvested in institutional activities, pursuant to article 4, paragraph 7,Annex A of Authority Resolution ARG/elt 103/2008.

These components are additional to other revenues and income,which does not result in an increase in nuclear-related advances.

Other revenues

Revenues relating to other services and the sale of goods are reco-gnised on completion of the service provided or the transfer of titleto goods. Revenues from market activities relating to long-term con-tract work is accrued in accordance with the terms and conditionsof the relevant contract.

Costs

Costs are reported in accordance with the accruals principle, inde-pendently of the date of payment.

65


Provisions for employee termination indemnities

Provisions for employee termination indemnities cover amounts dueto employees upon retirement in accordance with union agreementsand collective labour contracts in force, net of advances paidpursuant to the law, amounts allocated to pension funds, andprovisions paid to INPS in accordance with Law 296 of 27 December2006.

Payables

Payables are recorded at face value, deemed representative of theirredemption value.

Nuclear-related advances

These balances include the remaining nuclear-related advancestransferred by Enel SpA in accordance with Legislative Decree79/1999 and additional amounts required by the Italian Electricityand Gas Authority (the Authority). Since 2008 the use of such fundshas been regulated by Resolution ARG/elt 103/2008 (theeffectiveness of which, after certain amendments, was extended tothe end of 2011 by Resolution 192/2012/R/eel).

The advances are increased by:

– interest accrued on capital invested in excess of the amountrequired for the activities, as clarified by article 4, paragraph 7,Annex A of Resolution ARG/elt 103/2008;

– 80% of dismantling revenues from the sale of materials andequipment and 90% of revenues from the sale or revaluation ofland and buildings, as clarified by article 14, paragraph 2, AnnexA of Resolution ARG/elt 103/2008;

– contingent assets relating to direct costs included in actual costsapproved by the Authority.

Memorandum accounts

The nominal value of guarantees issued and commitments assumedare reported below the balance sheet and correspond to theenterprise’s actual commitment as required by OIC 22.

Revenues and work in progress deriving from nuclearactivities

Revenue is classified into the following categories as required byResolution ARG/elt 103/2008:

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INSTITUTIONAL ACTIVITIES Ref. Resolution 103/2008

Recognition of related external costs Annex A - art. 3

Payment for acceleration Annex A - art. 8, para. 9

Profit/(Loss) on sale of materials Annex A - art. 14, para. 2

Efficiency-sensitive costs Annex A - art. 5

Early retirement policies Annex A - art. 9

Long-term costs Annex A - art. 4, para. 3

Provisions Annex A - art. 2, para. 8

Financial income/(expenses) Annex A - art. 4, para. 7

Income tax expense Annex A - art. 2, para. 7


A challenge to INPS letter 15655/2007, spreading the totalcontribution of €401,287 over 2000, 2001 and 2002, was added tothe appeal in 2007. The date of the hearing has not yet been fixedby the Regional Administrative Court, despite a request for the caseto be fast-tracked. Should the appeals be rejected, Sogin could claimthe amounts paid to INPS from Enel, as stated in letter 12947/2008.This would be consistent with the terms of article 4, paragraph 4 ofthe Deed of Transfer of nuclear assets from Enel to Sogin.

As previously noted, further provisions of €401,287 were made in

2007 to cover an additional amount payable to INPS for the years2000, 2001 and 2002.

As expressly required by law, this item is amortised over a period of20 years.

Tangible assets€22,305,659 (€24,552,416 at 31 December 2010)

An analysis of this item is shown below:

The increase in “Concessions, licenses, trademarks and similarrights” refers to:

– upgrade of the Company’s integrated information system;– the purchase and installation of software for personal computers.

Amortisation is calculated over three years.

The item “Extraordinary pension contributions” refers to theextraordinary contribution made to the Electricity Industry Pension

Fund, paid in compliance with Law 488 of 23 December 1999 (the2000 Finance Act).

In 2001 Sogin filed an appeal, which is still pending before theRegional Administrative Court, challenging the payment of thesecontributions in three instalments. The Regional Administrative Courtsuspended the first instalment of €5,806,549, which is now carriedin the books as a payable. Payment of the second and thirdinstalments to INPS has been made under reserve.

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NOTES TO THE BALANCE SHEET

Fixed assets€34,139,990 (€37,619,434 at 31 December 2010)

Intangible assets€9,179,997 (€10,019,668 at 31 December 2010)


Other intangible assets

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INTANGIBLE ASSETS Intangible assets Concessions, Total

in progress and licenses, trademarks Extraordinary Leasehold

advances and similar rights pensions contributions improvements

Original cost - 10,117,185 18,109,068 8,352,960 36,579,213

Disposal of assets by Authority Resolution - - - -1,953,883 -1,953,883

Accumulated amortisation - -8,439,059 -9,805,801 -6,360,802 -24,605,662

Value at 1 January 2011 - 1,678,126 8,303,267 38,275 10,019,668

Changes during the period

Purchases/Increases - 1,809,887 - - 1,809,887

Assets entering service - - - - -

Disposals/Decreases - cost - -8,450 - - -8,450

Amortisation - -1,703,402 -921,384 -19,138 -2,643,924

Sales/Decreases - amortisation - 2,816 - - 2,816

Total changes - 100,851 -921,384 -19,138 -839,671

Balance at 31 December 2011

Original cost - 11,918,622 18,109,068 8,352,960 38,380,650

Disposal of assets by Authority Resolution - - - -1,953,883 -1,953,883

Accumulated amortisation - -10,139,645 -10,727,185 -6,379,940 -27,246,770

VALUE AT 31 DECEMBER 2011 - 1,778,977 7,381,883 19,137 9,179,997

TANGIBLE ASSET Tangible assets Land Industrial Other plant Industrial and Other assets Total

under construction buildings commercial

equipment

Original cost 2,200,603 5,887,900 3,602,900 31,874,771 12,750,747 9,561,038 65,877,959

Disposal of assets by Authority Resolution - -680,472 - -5,841,150 -3,411,937 -790,009 -10,723,568

Accumulated depreciation - - -913,916 -15,965,036 -6,461,865 -7,261,158 -30,601,975

Value at 1 January 2011 2,200,603 5,207,428 2,688,984 10,068,585 2,876,945 1,509,871 24,552,416

Changes during the period

Purchases/Increases - cost 1,302,050 - - 104,387 61,293 303,820 1,771,550

Disposals/Decreases - cost - - - - - -116,681 -116,681

Depreciation - - -152,590 -2,583,477 -672,737 -597,296 -4,006,100

Disposals/Decreases - depreciation - - - , - 104,474 104,474

Total changes 1,302,050 - -152,590 -2,479,090 -611,444 -305,683 -2,246,757

Balance at 31 December 2011

Original cost 3,502,653 5,887,900 3,602,900 31,979,158 12,812,040 9,748,177 67,532,828

Disposal of assets by Authority Resolution - -680,472 - -5,841,150 -3,411,937 -790,009 -10,723,568

Accumulated depreciation - - -1,066,506 -18,548,513 -7,134,602 -7,753,980 -34,503,601

VALUE AT 31 DECEMBER 2011 3,502,653 5,207,428 2,536,394 7,589,495 2,265,501 1,204,188 22,305,659

In relation to “Tangible assets under construction”, LegislativeDecree 31 of 15 February 2010 confirmed, among other things, theassignment to Sogin of responsibility for the location, constructionand operation of the National Repository and the TechnologicalPark.

In 2011 Sogin began to prepare for the corporate events required

by the legislation in force, which establishes that the first importantstep is to organise a national seminar to publicise the following:

– the National Map of Potentially Suitable Areas to host the site; – the preliminary design for the National Repository andTechnological Park.


Purchases of “Industrial and commercial equipment” refer to equip-ment used in ordinary operations and of limited unit value.

“Other assets” is made up of the following categories valued at ori-ginal cost:

The decreases in IT equipment were a result of donations made toschools (fully depreciated assets) and various associations and thesale of hardware to retiring employees.

Total depreciation of tangible assets for 2011 has been calculated byapplying rates that are deemed representative of the useful lives ofthe assets.

Accumulated depreciation at 31 December 2011 is 76.62% of thegross value of these assets.

69


The criteria for selecting the potentially suitable areas by the NuclearSafety Agency, which never became operational and was abolishedby Law Decree 201/2011, have yet to be published, inevitablyslowing down the process.

In 2011 Sogin therefore only began the activities not requiring theprior definition of criteria. These primarily regarded:

– a review of the preliminary design for the Park and the Repositoryin the light of the new situation (abandonment of the use of nuclearpower to produce electricity);

– additional work on the detailed scale for local information;– estimating the national inventory of radioactive waste.

The resolutions referred to in the item, “Disposal of assets byAuthority Resolution”, are Resolutions 103/2008 and 57/2009.

The carrying amount of “Other plant” rose in 2011, following anupgrade of the electricity network at Latina, amounting to €104,387.

The historical costs and locations of other plant are shown in thefollowing table:

68

OTHER PLANT Value at Increases Value at

1 January 2011 31 December 2011

Integrated safety system

Head office 936,677 - 936,677

Trino site 2,208,578 - 2,208,578

Caorso site 3,006,214 - 3,006,214

Caorso site - fuel storage area 180,184 - 180,184

Latina site 3,292,882 104,387 3,397,269

Garigliano site 1,227,260 - 1,227,260

Hot cells 3,152,926 - 3,152,926

Nucleco plant 1,744,816 - 1,744,816

Avogadro plant 1,136,174 - 1,136,174

Bosco Marengo plant 2,157,372 - 2,157,372

ITREC plant 3,488,446 - 3,488,446

Saluggia plant 2,645,488 - 2,645,488

Sub-total 25,177,017 104,387 25,281,404

Electrical and fire protection plant - Bosco Marengo 10,800 - 10,800

Satellite surveillance system - ITREC 758,577 - 758,577

Transfer point at Caorso railway station 997,320 - 997,320

Saluggia waste tanks 4,919,293 - 4,919,293

National safety network 11,764 - 11,764

TOTAL 31,874,771 104,387 31,979,158

OTHER ASSETS Value at Increases Decreases Value at


Furniture and fixtures 1,810,504 49,040 - 1,859,544

Operating equipment 1,345,531 - - 1,345,531

Vehicles 315,255 - - 315,255

Technical and administrative equipment 105,584 1,568 - 107,152

IT equipment 5,984,164 253,212 -116,681 6,120,695

TOTAL 9,561,038 303,820 -116,681 9,748,177

FINANCIAL ASSETS Value at Increases Decreases Value at


Equity investments 2,587,885 - -387,885 2,200,000

Receivables due from others:

sundry guarantee deposits 459,465 170 -5,301 454,333

Total 459,465 170 -5,301 454,333

TOTAL 3,047,350 170 -393,186 2,654,333

At the same date there were no mortgages, encumbrances orcharges of other kinds that limited rights with respect to the assetsreported in the above tables.

Non-current financial assets€2,654,334 (€3,047,350 at 31 December 2010)


Equity investments: €2,200,000 (€2,587,885 at 31 December 2010)The change during the year regards the sale of the investment in CESISpA (Centro Elettrotecnico Sperimentale Italiano), represented by68,400 shares equal to 2% of the share capital, with 1% sold to TernaSpA and 1% to Enel SpA for a total consideration of €2,500,000(€1,250,000 each).

The investment of €2,200,000 regards the purchase of 60,000 sharesin Nucleco SpA, representing 60% of the company’s share capital,from Eni Ambiente SpA on 16 September 2004, in accordance withthe Board of Directors’ resolution of 23 June 2004. The investmentis accounted for at cost, which corresponds to the price paid. Sogin’sinterest in Nucleco’s equity in 2011 (€2,894,444) is greater than thepurchase consideration of the shares.


On completion of the Court’s technical examination, which confirmedthe amount of the receivable, on 27 November 2009 the presidingJudge adjourned the hearing to a later date in order to consider theevidence.

On 11 June 2010 the proceedings were brought to a close with thefollowing outcomes:

1) the Government Commissioner for the clean-up and conservationof water resources in the Campania region was ordered to paythe sum of €12,022,787.20;

2) the Government Commissioner for the waste emergency in theCampania region was ordered to pay the sum of €1,380,031.75.

In both cases overdue interest will also be due on payment.

The District State Attorney in Naples notified the decision to appealthe above sentence on 5 March 2011. The first hearing was held on6 July 2011, at which the District Attorney applied for a precautionaryinjunction delaying execution of the adverse sentence at firstinstance.

Ruling that “the size of the sum resulting from the sentence at firstinstance” to represent serious grounds, pursuant to the combinedprovisions of articles 283 and 351 of the Code of Civil Procedure, theNaples Appeal Court awarded the injunction. A new hearing forspecification of the pleadings was scheduled for 19 December 2012,after which further action will be taken to recover the remainingamount due.

With due regard to prudence, all overdue interest on the receivable,estimated at 31 December 2011 to total €2,789,000, will berecognised in the financial statements for the accounting period inwhich they are collected. If the overdue interest had been recordedin these financial statements, there would have been no effect eitheron the income statement or the balance sheet, since the receivablewould have increased by the amount of the overdue interest andwould have then been written down by the same amount. Finally, itshould also be noted that there are no tax implications of thistreatment.

This receivable is partly offset by the sum of €7,435,873 payable toCESI SpA.

Given the fact that the debtor is a government body and that the debtis certain, due and payable, it was not considered necessary to writedown the receivable.

Total receivables are reported net of provisions for doubtful accounts.

A geographical breakdown of receivables has not been provided as

they regard activities carried out for legal entities registered withinthe EU.

Amounts due from customers break down as follows:

Receivables due from others:€454,334 (€459,465 at 31 December 2010)This item refers to various guarantee deposits paid to public andprivate bodies.

Current assets €251,636,615 (€271,737,743 at 31 December 2010)

Inventories: €2,436 (€562,290 at 31 December 2010)

Changes in this item are analysed below:

The following table summarises data regarding contract work inprogress at 31 December 2011, all relating to market activities.

71


The following table shows summary information for the Company’ssole equity investment at 31 December 2011.

70

(€m) Registred office Share capital Shareholders’ Income/(Loss) % Book

Name equity for the year interest value

Nucleco SpA Rome 0.5 4.8 1.0 60 2.2

INVENTORIES Value at Value at Increase

31 December 2011 31 December 2010 (Decrease)

Raw, ancillary

and consumable materials 2,436 2,780 -344

Contract work in progress - 559,510 -559,510

TOTAL 2,436 562,290 -559,854

CHANGE IN WORK Value at Value at Increase

IN PROGRESS 31 December 2011 31 December 2010 (Decrease)

Kola Nuovo - 91,819 -91,819

Est. OSA Khmelnytskyi - 192,248 -192,248

Erek - 9,098 -9,098

Beloyarsk 2009 - 252,702 -252,702

E.ON - 13,643 -13,643

TOTAL - 559,510 -559,510

AMOUNTS DUE FROM CUSTOMERS Value at Value at Increase

31 December 31 December (Decrease)

2011 2010

Amounts invoiced 19,312,483 18,301,717 1,010,766

Amounts to be invoiced 7,476,560 8,221,672 -745,112

Total 26,789,043 26,523,389 265,654

Provisions for doubtful accounts -521,060 -599,127 78,067

TOTAL AMOUNTS DUE FROM CUSTOMERS 26,267,983 25,924,262 343,721

AMOUNTS INVOICED Value at Value at Increase


2011 2010

Disputed receivables 15,770,402 17,078,030 -1,307,628

Amounts due at 31 Dec 2011 248,831 1,136,307 -887,476

Amounts yet to fall due 3,293,251 87,380 3,205,871

TOTAL AMOUNTS INVOICED 19,312,484 18,301,717 1,010,767

Receivables - €87,258,830 (€128,157,776 at 31 December2010)

These break down as follows.

Amounts receivable from customers: €26,267,983 (€25,924,262 at31 December 2010).The most important item is the €14,887,903 owed to the Companyby the Government Commissioner responsible for handling thewaste emergency and the clean-up and conservation of waterresources in the Campania region, €14,479,875 of which was forservices provided during the period August 2002-March 2005 undera specific contract between Sogin and the Commissioner, and€408,028 for interest on the assignment of the receivable.

Legal proceedings pending before civil section IV of the Court ofNaples were instituted against the Government Commissionerresponsible for handling the waste emergency and the clean-up andconservation of water resources to recover most (€13.4 million) ofthe amount receivable.

Receivables for amounts to be invoiced essentially relate to the sta-tements for 2010 (approximately €2,900,000) and 2011 (approxima-tely €4,031,000) for the Global Partnership project submitted to theMinistry of Economic Development for approval, which is still pen-ding, the invoice to be issued to Enel for decontamination of the for-mer CISE laboratories in Segrate (approximately €345,000) and theinvoice to be issued to the European Commission for activities car-ried out within the scope of the Beloyarsk project (approximately€200,000).

Changes during the year in provisions for doubtful accounts, on theother hand, regard:

– provisions to cover the write-off of the amount due from MartinelliRottami Srl, totalling €159,622;

– provisions to cover the further write-down of the amount receivable


partly due to the fact that the tax authorities have yet to issue anyformal notice of a fine. On 6 October 2011 the tax authorities sentSogin notice of fine TJBIR0800010, against which the Company filedappeal on 5 December 2011.

VAT payable by the subsidiary, Nucleco, totalling €1,976,587(€1,595,816 in 2010), was offset during the year, thus helping tocontain the increase in the ongoing VAT receivable. The increasewas a result of VAT-exempt payments by the Italian Electricity andGas Authority, since such payments are outside the scope of valueadded tax.

Deferred tax assets: €3,883,772 (€3,458,902 at 31 December 2010)This item regards taxes calculated on provisions and unpaid accruedcosts and revenues deductible from tax in future years. The relevantamounts are €3,768,029 for Ires and €115,743 for Irap.

The increase was mainly due to the difference between provisionsrelating to the variable portion of remuneration and the amount paid,and due to provisions made to fund training for staff hired in 2011.

Changes in this item are described in the note to the incomestatement on taxation.

Amounts receivable from others: €12,562,581 (€23,712,201 at 31December 2010)These receivables break down as follows at 31 December 2011:

The change in disputed receivables regards the settlement agreedwith Fabbricazioni Nucleari in order to resolve the outstanding di-spute, totalling €1,307,628.

The principal receivables due at 31 December 2011 (in part collectedin early 2012) regard:

– services rendered to ENEA (approximately €68,000);– Iberdrola (approximately €140,000).

Amounts receivable from subsidiaries: €731,801 (€1,075,682 at 31 December 2010)Changes in this item are shown below:

Amounts due from employees consist of home loans and other loansto meet family needs, in addition to various advances to employees,mainly for travel expenses, which are normally repaid in the followingaccounting period.

Other sundry amounts essentially regard:

– advance payments to Ansaldo Nucleare, totalling €472,314,essentially relating to work on the construction of prototype plantfor the treatment of spent radioactive resins produced by the TrinoVercellese plant;

– advance payments to Studsvik, totalling €1,069,372, in relation tothe transport, conditioning and treatment of radioactive waste fromCaorso;

– advance payments to ENEA, totalling €2,961,758, under theframework agreement for the secondment to Sogin of ENEApersonnel and the allocation of certain shared costs, for whichprepayments are made;

– the advance paid to AREVA, totalling €4,607,545, under the termsof a contract for the management, at the French plant at La Hague,of plutonium owned by Sogin and extracted from fuels elementsat the nuclear power station at Creys-Malville;

– advances on the remuneration due to the Commissioners, totalling€594,508.

Current financial assets€5,289,748 (€44,041,666 at 31 December 2010)

The reduction compared with the previous year is due to disposal ofan accumulating insurance policy with guaranteed minimum returns,which was readily redeemable.

Cash and cash equivalents€159,085,601 (€98,976,011 at 31 December 2010)

Cash and cash equivalents consists of bank current accountbalances of €159,078,508 and €7,093 in cash on hand at the headoffice, power stations and plants.

Financial assets

In 2011 the Electricity Industry Equalisation Fund made paymentstotalling €185 million, including: €40 million in January, €20 millionin April, €30 million in June, €30 million in July, €55 million inOctober and €10 million in November. These payments wereauthorised by Resolutions ARG/elt 236/2010, 34/2011, 87/2011 and130/2011.

The following VAT refunds and related interest were received in early2011:

– refund applied for in 2007 (€8,846,120 plus interest of €581,189);– refund applied for in 2008 (€7,710,224 plus interest of €453,794);– refund applied for in 2009 (€26,658,644 plus interest of €519,478).

In relation to the claim for a refund submitted in 2007, the taxauthorities have held back the sum of approximately €304,000 tocover tax demand TJBCO0800041 sent to Sogin on 7 September2010 in respect of alleged irregularities in registering intra-communityinvoices. On 8 October 2010 Sogin submitted its defence, statingthat, among other things, there was no correspondence between thedamage caused to the tax authorities (none in financial terms) andthe fines imposed. The tax authorities have yet to respond. On 3February 2011 Sogin appealed against the tax authorities’ decisionto hold back a portion of amount claimed as a VAT refund in 2007,

73


from the Ministry of the Environment, totalling €218,562, followingthe failure to reach agreement with the Ministry;

– use of provisions following the agreement reached with Fabbrica-zioni Nucleari SpA, totalling €456,250.

Disputed receivables regard the following customers:

The change essentially reflects:

– a reduction, compared with the previous year, in amounts recei-vable for services provided;

– collection, during the previous year, of a dividend for 2010 fromNucleco;

– an increase in the Group’s VAT credit;– repayment of advances paid to Nucleco following the completionof contracts.

Tax assets: €43,812,693 (€73,986,729 at 31 December 2010)Tax assets are analysed below:

72

Customer Amount due

Campania Regional Authority 14,887,903

Ministry of the Environment 722,877

Martinelli Rottami Srl 159,622

TOTAL DISPUTES RECEIVABLES 15,770,402

AMOUNTS RECEIVABLE Value at Value at Increase

FROM SUBSIDIARIES 31 December 31 December (Decrease)

2011 2010

Services provided 30,520 190,491 -159,971

Dividend - 262,310 -262,310

Group VAT offset 606,280 347,435 258,845

Advances 95,000 275,446 -180,446

TOTAL 731,801 1,075,682 -343,881

TAX ASSETS Value at Value at Increase


2011 2010

Refundable VAT

Current financial year 14,886,219 13,841,590 1,044,629

Previous financial years 28,294,160 58,184,017 -29,889,857

Interest 227,933 1,556,741 -1,328,808

Total refundable VAT 43,408,312 73,582,348 -30,174,036

Tax credit transferred from SICN Consortium 98,814 98,814 -

Ires rebate for deductible Irap 2004-2007 305,567 305,567 -

TOTAL 43,812,693 73,986,729 -30,174,036

AMOUNTS RECEIVABLE Value at Value at Increase

FROM OTHERS 31 December 31 December (Decrease)

2011 2010

Due from employees: 1,889,329 1,468,282 421,047

home loans 1,354,600 1,113,623 240,977

loans for family needs 375,757 168,513 207,244

extraordinary loans 138,604 148,941 -10,337

other 20,368 37,205 -16,837

Other sundry amounts 10,673,252 22,243,919 -11,570,667

TOTAL 12,562,581 23,712,201 -11,149,620


Shareholders’ equity€39,728,403 (€34,023,241 at 31 December 2010)

Changes during the last two years are shown below.

Share capital: €15,100,000 (€15,100,000 at 31 December2010)

The share capital consists of 15,100,000 fully paid ordinary shareswith a par value of €1 each, which are held by the Italian Ministry ofthe Economy and Finance.

Net income for 2010 was appropriated to the legal reserve(€119,560) and retained earnings (€2,267,980).

Tax assets relate to refundable VAT. The amount falling due withintwelve months relates to applications for refunds which have beenmade and which are now legally overdue or will become overdue inthe next twelve months. Once these receivables fall due, interest isaccrued at the rate determined by article 38 bis of PresidentialDecree 663/1972.

The portion falling due in between 2 and 5 years regards the VATcredit for 2010, which did not qualify for a refund application to bemade.

75


Authority Resolution ARG/elt 115/2012 instructed the ElectricityEqualisation Fund to pay Sogin €75 million (of which €35 millionalready collected).

The Ministry of Economic Development also paid Sogin the sum of€60.6 million during the year for services rendered under thecooperation agreement between Italy and the Russian Federation,relating to the dismantling of the Russian Navy’s retired nuclearsubmarines and the management of radioactive waste and spentnuclear fuel under the international Global Partnership agreement.

At 31 December 2011, financial assets total €164,375,349, as shownin detail in the financial statements.

Accrued income and prepaid expenses€391,139 (€221,753 at 31 December 2010)

Prepaid expenses of €391,139 essentially regard the deferment ofrecognition, until 2012 and beyond, of premiums paid in advance onsurety bonds entered into to guarantee the VAT refunds collectedand regarding the applications filed in 2008 and 2009.

Aging schedule for receivables

The table below shows the breakdown of receivables by maturity.

74

AGING SCHEDULE FOR RECEIVABLES Falling due Falling due between Falling due Total

within 12 months 2 and 5 years after 5 years

Non-current receivables

Sundry guarantee deposits - 454,334 - 454,334

Non-current receivables - 454,334 - 454,334

Current receivables

Amounts receivable for other activities 26,267,983 - - 26,267,983

Amounts receivable from subsidiaries 731,801 - - 731,801

Tax assets 30,487,560 13,325,133 - 43,812,693

Deferred tax assets 3,883,772 - - 3,883,772

Amounts receivable from employees 20,772 141,500 1,727,057 1,889,329

Other receivables 10,673,252 - - 10,673,252

Current receivables 72,065,140 13,466,633 1,727,057 87,258,830

TOTAL 72,065,140 13,920,967 1,727,057 87,713,164

SHAREHOLDERS' EQUITY Share Legal Other Retained earnings/ Net income/(loss) Total

capital reserve reserves (Accumulated losses) for the year

Value at 1 January 2010 15,100,000 1,029,982 - 8,736,549 6,769,170 31,635,701

Appropriation of net income for 2009 - 338,458 - 6,430,712 -6,769,170 -

Net income for 2010 - - - - 2,387,540 2,387,540

Value at 31 December 2010 15,100,000 1,368,440 - 15,167,261 2,387,540 34,023,241

Value at 1 January 2011 15,100,000 1,368,440 - 15,167,261 2,387,540 34,023,241

Appropriation of net income for 2010 - 119,560 - 2,267,980 -2,387,540 -

Net income for 2011 - - - - 5,705,162 5,705,162

VALUE AT 31 DECEMBER 2011 15,100,000 1,488,000 - 17,435,241 5,705,162 39,728,403

PROVISIONS FOR RISKS AND CHARGES Value at Provisions Uses Value at


Provisions for retirement benefits 583,861 333,799 -383,978 533,682

Provisions for deferred taxes 337,976 - -225,769 112,207

Other:

legal disputes 2,656,000 91,142 -209,142 2,538,000

sundry charges 2,260,198 - -103,198 2,157,000

training fund for newly hired staff - 500,000 - 500,000

Total other 4,916,198 591,142 -312,340 5,195,000

TOTAL 5,838,035 924,941 -922,087 5,840,889

Provisions for risks and charges€5,840,889 (€5,838,035 at 31 December 2010)

Provisions for risks and charges are analysed below:


Payables€228,473,098 (€256,321,524 at 31 December 2010)

This item is analysed below.

Advances: €81,170,538 (€130,601,835 at 31 December 2010)

Nuclear-related advances: €81,170,038 (€130,031,016 at 31December 2010)

As explained in the introduction of these notes in the section dealingwith accounting policies, nuclear-related advances are used to coverrevenues allowed by the Italian Electricity and Gas Authority for thisyear, pursuant to Resolution 192/2012/R/eel. Amounts payable underthe resolution, which are denominated in thousands of euro, havebeen restated in exact euro based on information received from theAuthority.

Changes during the period are shown in the following table:

77


Provisions for retirement benefits:€533,682 (€583,861 at 31 December 2010)

The provisions refer to the indemnity in lieu of notice for personnelin service, who are eligible pursuant to applicable collective contractsand labour union agreements.

Provisions for deferred tax liabilities: €112,207 (€337,976 at31 December 2010)

Changes in 2011 relate to Sogin’s deferred tax liabilities accrued forthe year on temporary differences between taxable income andincome before taxes shown in the financial statements and relateentirely to Ires.

The temporary differences are detailed in the relevant table in thenotes to the income statement.

Other provisions: €5,195,000 (€4,916,198 at 31 December2010)

Legal disputes: €2,538,000 (€2,656,000 at 31 December 2010)These provisions are accrued against potential risks deriving fromlitigation pending, estimated on the basis of the opinions of theCompany’s internal and external legal advisors. Such provisions donot take account of litigation which is expected to have a positiveoutcome, or litigation for which a negative outcome is only possibleor remote, or for which the amount of the liability is not reasonablyquantifiable. More specifically, the provisions include prudently andreasonably calculated amounts that the Company could be liable topay in the event of a negative outcome to ongoing disputes. Usesregard the settlement of litigation, essentially regarding labourdisputes.

Sundry charges: €2,157,000 (€2,260,198 at 31 December 2010)The provisions at 31 December 2011 include, among other things,potential liabilities in respect of suppliers relating todecommissioning contingencies and estimated payments toGovernment Commissioners.

The provisions for sundry charges consist of:

– €680,000 in estimated remuneration payable to the Commissionerand the two Deputy Commissioners;

– €131,802 to cover work in progress contingencies;– €145,198 to cover additional costs relating to urban developmentwork in the municipality of Latina linked to the construction ofbuildings for the conditioning of radioactive mud and a temporaryrepository for radioactive waste;

– €1,200,000 for charges likely to be incurred (contract penalties)as a result of moving head office.

Training of newly hired staff: €500,000 (€ - at 31 December 2010)These provisions have been made to cover the cost of providingmandatory training for staff hired in 2011.

Provisions for employee termination indemnities€12,118,006 (€13,387,931 at 31 December 2010)

Changes during 2011 are shown below:

76

EMPLOYEE TERMINATION

INDEMNITIES 2011 2010 Increase

(Decrease)

Value at 1 January 13,387,931 14,327,481 -939,550

Provisions 3,084,154 2,787,174 296,980

Uses -4,381,199 -3,726,724 -654,475

Other changes 27,120 - 27,120

VALUE AT 31 DECEMBER 12,118,006 13,387,931 -1,269,925

NUCLEAR-RELATED ADVANCES

Ref. Resolution 103/2008 Sub-totals Totals

Value at 1 January 2011 130,031,016

Disbursement of funds by Electricity Industry Equalisation Fund 185,000,000

Breakdown Resolution 192/2012:

external costs of decommissioning Annex A - art. 3 -59,890,545

external costs of closure of the fuel cycle Annex A - art. 3 -37,442,066

external costs of closure of the fuel cycle at Creys-Malville Annex A - art. 3 -36,663,880

payment for acceleration Annex A - art. 8, para. 9 -

efficiency-sensitive costs Art. 5 -89,607,911

early retirement incentives Annex A - art. 9 -1,717,074

long-term costs Annex A - art. 4, para. 3 -7,132,387

Total as per points 4 and 5 of the resolution -232,453,863

Taxation as per point 7 of the resolution Annex A - art. 2, para. 7 -3,690,023

Financial income/(expenses) as per point 8 of the resolution Annex A - art. 4, para. 7 518,051

Revenues from sale of materials as per point 9 of the resolution Annex A - art. 14, para. 2 1,752,475

Contingent assets/liabilities as per point 10 of the resolution 12,382

Total as per points 7 to 10 of the resolution -1,407,115

Total uses of nuclear-related advances -233,860,978

VALUE AT 31 DECEMBER 2011 81,170,038

The amount is comprised of provisions of the statutory payments toemployees on the termination of employment, less:

– advances to employees as required by law;– amounts payable to the Management Pension Fund (Fondenel)and the Employees’ Pension Fund (Fopen);

– payments to INPS in accordance with Law 296 of 27 December2006.

Advances for other activities: €500 (€570,819 at 31 December2010)

Amounts payable to suppliers €49,127,655 (€47,404,662 at 31 December 2010)

This item is analysed in the table.

AMOUNTS PAYABLE

TO SUPPLIERS Value at Value at Increase


Invoices received 38,084,638 28,955,448 9,129,190

Invoices to be received 11,043,017 18,449,214 -7,406,197

TOTAL 49,127,655 47,404,662 1,722,993


The amount payable to the Ministry of Economic Developmentrelates to a loan made pursuant to the cooperation agreementconcluded by the Governments of Italy and the Russian Federationand ratified by Law 160/2005. Changes during the year are shownbelow:

These payments relate to services provided under contractsguaranteed by the Ministry of Economic Development between theRussian beneficiary, pursuant to the Cooperation Agreement, and itssuppliers.Interest paid to the Ministry of Economic Development is equal tonet income from the Global Partnership contract.“Extraordinary pension contributions” is the first instalment ofcontributions to be made as a result of the winding-up of theElectricity Industry Pension Fund.

Accrued liabilities and deferred income€7,348 (€8,199 at 31 December 2010)

These items relate to the portion of financial expenses for the year inconnection with forward foreign exchange contracts which wereentered into for the purposes of hedging foreign currency liabilitiesand commitments.

Aging schedule for payables

The table below shows the breakdown of payables by maturity:

79


As previously noted, €7,435,873 of the invoices received, relating toan amount payable to CESI, have been offset against a receivabledue from Campania Regional Authority. Accrued payables forinvoices to be received relate to services rendered to Sogin prior to31 December 2011 but yet to be invoiced.

Amounts payable to subsidiaries €4,884,556 (€4,580,121 at 31 December 2010)

This item refers to a payable to Nucleco SpA for services invoiced(€4,671,083) and to be invoiced (€213,473) to Sogin.

Services provided by Nucleco, on an arm’s length basis, relate to thetreatment of Sogin’s radioactive waste.

Tax liabilities - €1,542,617 (€1,015,618 at 31 December 2010)

Tax liabilities are analysed below: Other payables: €87,737,213 (€68,529,776 at 31 December 2010)

Other payables break down as follows:

78

TAX LIABILITIES

Value at Value at Increase


Income tax expense

Current Ires liabilities 3,557,538 3,503,319 54,219

Current Irap liabilities 2,759,355 2,583,284 176,071

Withholding tax on interest income -711,062 -265,729 -445,333

Advance payments -5,791,807 -6,433,398 641,591

Tax expense/benefits -185,976 -612,524 426,548

Carry forward of tax expense -185,976 -612,524 426,548

Refuse tax 6,779 19,837 -13,058

Withholding tax payable 1,721,814 1,608,305 113,509

TOTAL 1,542,617 1,015,618 526,999

SOCIAL SECURITY PAYABLES



Social security institutions

for contributions on salaries 3,090,667 3,103,764 -13,097

Social security institutions for contributions

on holiday pay, suppressed holidays, etc. 398,940 469,036 -70,096

Insurance companies 209,554 179,407 30,147

Fopen - Inpgi - Fondenel pension funds 311,358 437,305 -125,947

TOTAL 4,010,519 4,189,512 -178,993

DUE TO MINISTRY OF ECONOMIC DEVELOPMENT

2011 2010 Increase

(Decrease)

Value at 1 January 49,447,205 29,847,420 19,599,785

Loans disbursed 60,555,660 43,880,660 16,675,000

Payments made -41,029,933 -24,529,586 -16,500,347

Interest for current year 895,816 248,711 647,105

TOTAL 69,868,748 49,447,205 20,421,543

Social security payables €4,010,519 (€4,189,512 at 31 December 2010)

Social security payables refer essentially to amounts owed to socialsecurity and insurance institutions payable by the Company on re-muneration both paid and accrued, but not paid, to personnel, forsuppressed holidays, remuneration for accrued leave, overtime andother entitlements.

OTHER PAYABLES



Amounts due to personnel:

termination indemnities

and salaries to be paid 912,890 463,085 449,805

holiday pay, suppressed holidays, overtime, etc. 1,890,030 1,990,260 -100,230

sundry (variable pay - early retirement incentives) 9,149,537 7,574,976 1,574,561

Total amounts due to personnel 11,952,457 10,028,321 1,924,136

Due to MED for Global Partnership loan 69,868,748 49,447,205 20,421,543

Extraordinary pension contributions 5,806,549 5,806,549 -

Due to third parties for amounts withheld on salaries 46,068 45,672 396

Other 63,391 3,202,029 -3,138,638

TOTAL 87,737,213 68,529,776 19,207,437

The increase in amounts payable to personnel for various reasonsessentially relates to early retirement payments and the variable paycomponent, the payment of which is subject to verification, early inthe following year, of the achievement of performance targets.

Payments made in 2011 primarily regard technical assistance linkedto activities relating to construction of a plant for the treatment andtemporary storage of radioactive waste at the Andreeva Bay site.

AGING SCHEDULE FOR PAYABLES Falling due Falling due Falling due Total

within 12 months between 2 and 5 years after 5 years

Nuclear-related advances 81,170,038 - - 81,170,038

Advances from third parties 500 - - 500

Amounts payable to suppliers 49,127,655 - - 49,127,655

Amounts payable to subsidiaries 4,884,556 - - 4,884,556

Tax liabilities 1,542,617 - - 1,542,617

Social security payables 4,010,519 - - 4,010,519

Other 87,737,213 - - 87,737,213

TOTAL 228,473,098 - - 228,473,098

Payables primarily include nuclear-related advances, which are thedouble entry of revenues recognised in the income statement.


NOTES TO THE INCOME STATEMENT

Revenue€245,217,785 (€201,459,394 in 2010)

The increase in revenue essentially reflects a rise in the volume ofactivity connected with the decommissioninmg of nuclear facilitiesand power stations.

Revenue, broken down by Sogin’s main activities, is as follows:

Amounts have been determined on the basis of closing exchangerates.

There are no guarantees and/or commitments relating to NuclecoSpA.

Forward currency purchase commitments to hedgeforeign exchange risk

The Company entered into certain contracts in 2011 to hedge foreignexchange risk, involving the forward purchase of foreign currenciesat a predetermined exchange rate to meet foreign currencyobligations in connection with contracts with foreign suppliers.

At 31 December 2011 the following hedges are outstanding to meetpayments on the following contracts with Studsvik Nuclear(approximately SEK39,513,000).

Pursuant to article 2427 bis of the Italian Civil Code, the fair value ofcontracts with financial counterparties (Monte dei Paschi di Siena)for the purchase of foreign currencies is €488,804 at 31 December2011.

All forward foreign exchange contracts were entered into for thepurposes of hedging foreign exchange risk.

81


MEMORANDUM ACCOUNTS

Memorandum accounts include guarantee deposits, guaranteesgiven and commitments, as shown in the table below:

80

MEMORANDUM ACCOUNTS


31December 2011 31December 2010 (Decrease)

Guarantees given

Guarantees given on behalf of third parties 64,171,153 27,135,153 37,036,000

Other memorandum accounts

Special vehicles on free loan 44,000 44,000 -

Commitments to suppliers for fuel

reprocessing, storage and transport 389,712,768 461,897,033 -72,184,265

Total other memorandum accounts 389,756,768 461,941,033 -72,184,265

TOTAL 453,927,921 489,076,186 -35,148,265

Period €

2012-2016 227,171,168

2017-2021 69,572,981

2022-2031 92,968,619

TOTAL 389,712,768

FORWARD HEDGES AT 31 DECEMBER 2011

Contract Amount Currency Hedging Fair value at

instrument 31 December

2011

(€)

Studsvik C0216S09 39,513,060.00 Swedish krona Forward 488,804.00

Some of the guarantees were issued to tax authorities with respectto VAT refunds (€62,936,000) and others to customers and publicentities (€1,235,153).

The amount reported in relation to reprocessing and fuel storagecommitments is in connection with contracts with AREVA, theNuclear Decommissioning Authority and the Avogadro Repository.

A breakdown of these commitments by maturity is shown in thefollowing table:

REVENUE

2011 2010 Increase

(Decrease)

Revenues from services linked to nuclear activities 234,379,030 193,162,373 41,216,657

Change in contract work in progress for market activities -559,510 -776,213 216,703

Capitalised internal work 1,121,210 237,439 883,771

Other revenues and income: 10,277,055 8,835,795 1,441,260

institutional activities 3,354,773 2,928,619 426,154

market activities 6,920,356 5,907,176 1,013,180

National Repository 1,926 - 1,926

TOTAL 245,217,785 201,459,394 43,758,391


Other revenues and income consist of the following:

Compared with the previous year, “Other revenues from institutionalactivities” do not include activities linked to construction of theNational Repository, as these are now shown separately.

Contingent assets principally regard the fact that the value of costsincurred in the previous year were lower than estimated, above all inrelation to the cost of services rendered by ENEA in 2010 within thescope of the framework agreement entered into for this purpose.

83


Institutional activities

Revenue from nuclear activities is based on the model ofremuneration established by the Electricity and Gas Authority withResolution ARG/elt 103/2008.

In accordance with the procedure established by that resolution,Sogin provided the Authority with statements for the approval of 2011actual costs at the end of February 2012. In April 2012 the Authority

82

REVENUES FROM INSTITUTIONAL ACTIVITIES

Ref. Resolution 103/2008 Income components Income components Increase

2011 2010 (Decrease)

Recognition of related external costs Annex A - art. 3 133,996,492 97,658,789 36,337,703

Dismantling 55,546,963 51,614,486 3,932,477

Maintenance 4,343,582 5,233,956 -890,374

Related project management - 408,987 -408,987

Fuel 74,105,947 40,401,360 33,704,587


Payment for acceleration Annex A - art. 8, para. 9 - 970,778 -970,778


Early retirement policies Annex A - art. 9 1,717,074 1,547,585 169,489


Total as per points 4 and 5 of the resolution 232,453,864 192,059,752 40,394,112

Reduced revenues from sale of materials as per point 9 of the resolution Annex A - art. 14, para. 2 -1,752,475 -769,736 -982,739

Reduced revenues from contingent assets/liabilities

as per point 10 of the resolution -12,382 -1,435,603 -1,423,221

Taxation as per point 7 of the resolution Annex A - art. 2, para. 7 3,690,023 3,307,961 382,062

TOTAL REVENUES AFTER FINANCIAL INCOME/(EXPENSES) 234,379,030 193,162,373 41,216,656

requested clarifications and additional information with respect to thedocuments submitted, to which Sogin responded in May 2012.

The Authority authorised payment for operations in 2012 on 18 May2012 with Resolution 192/2012/R/eel.

Income and cost components by category, pursuant to ResolutionARG/elt 103/2008, are shown in the table below:

The above totals were deducted from nuclear-related advances andare included with other revenues and income to form the revenue forthese activities.

OTHER REVENUES FROM INSTITUTIONAL ACTIVITIES

2011 2010 Increase

(Decrease)

Sale of scrap 2,190,594 962,170 1,228,424

Sundry services 194,773 909,024 -714,251

Reimbursements for damaged equipment 6,080 425 5,655

Reimbursements for release of personnel elected as Directors 32,330 20,260 12,070

Contingent assets 268,775 315,074 -46,299

Services provided to subsidiaries - 2,739 -2,739

Common service revenues 662,221 718,927 -56,706

Capitalised internal work (National Repository) - 237,439 -237,439

TOTAL OTHER REVENUES FROM OTHER ACTIVITIES 3,354,773 3,166,058 188,715

The amount shown under sundry services essentially refers torevenue from the services provided by Sogin to ENEA at the Saluggiaplant.

As explained in previous years, in connection with the separation ofthe institutional activities accounts from the accounts of Sogin’s otheractivities, a special account has been created entitled “Commonservice revenues”. This account is for revenues from servicesrendered to the subsidiary, Nucleco, and for contingent assets, partlyattributed to institutional activities.


The following table shows changes in margins compared with theprevious year:

85


The following table shows margins from institutional activities:

84

NUCLEAR ACTIVITIES 2011

Ref. Resolution 103/2008 Income components Cost components Margin

Recognition of related external costs Annex A - art. 3 133,996,492 134,810,078 -813,586

Dismantling 55,546,963 56,360,549 -813,586

Maintenance 4,343,582 4,343,582 -

Related project management - - -

Fuel 74,105,947 74,105,947 -


Payment for acceleration Annex A - art. 8, para. 9 - - -

Other net revenues Annex A - art. 14, para. 2 1,589,916 - 1,589,916


Early retirement incentives Annex A - art. 9 1,717,074 2,774,714 -1,057,640


Provisions Annex A - art. 2, para. 8 - 648,484 -648,484

Financial income/(expenses) Annex A - art. 4, para. 7 518,051 518,051 -

Total before taxes 234,561,831 233,022,344 1,539,486

Income tax expense Annex A - art. 2, para. 7 3,690,023 4,185,276 -495,253

NET INCOME/(LOSS) FOR THE YEAR 238,251,854 237,207,620 1,044,233

NUCLEAR ACTIVITIES

Ref. Resolution 103/2008 Margin 2011 Margin 2010 Increase

(Decrease)

Recognition of related external costs Annex A - art. 3 -813,586 -21,920 -791,666

Dismantling -813,586 - -813,586

Maintenance - - -

Related project management - -21,920 21,920

Fuel - - -


Payment for acceleration Annex A - art. 8, para. 9 - 970,778 -970,778

Other net revenues Annex A - art. 14, para. 2 1,589,916 960,718 629,197

Efficiency-sensitive costs Annex A - art. 5 1,927,937 2,988,158 -1,060,221

Early retirement incentives Annex A - art. 9 -1,057,640 -571,594 -486,046

Long-term costs Annex A - art. 4, para. 3 541,343 129,909 411,434

Provisions Annex A - art. 2, para. 8 -648,484 -3,029,698 2,381,214

Income tax expense Annex A - art. 2, para. 7 -495,253 -458,857 -36,396

Market activities

Total revenues for these activities are €6,360,846 (€5,130,963 in2010), which breaks down as follows:

REVENUES FROM MARKET ACTIVITIES

2011 2010 Increase

(Decrease)

Change in contract work in progress -559,510 -776,213 216,703

Other revenues and income 6,898,867 5,848,463 1,050,404

Services provided to subsidiaries - 29,538 -29,538

Other revenues and income from common services 21,489 29,175 -7,686

Total other revenues and income 6,920,356 5,907,176 1,013,180

TOTAL REVENUES 6,360,846 5,130,963 1,229,883

MARKET ACTIVITIES

2011 2010 Increase

(Decrease)

Nuclear services 1,805,495 1,949,208 -143,713

Environmental services 382,357 271,221 111,136

Global Partnership 4,172,994 2,910,534 1,262,460

TOTAL 6,360,846 5,130,963 1,229,883

Revenues classified by type of contract are as follows:


Services: €145,601,796 (€110,658,357 in 2010)

This item includes the following cost categories:

As shown in the table, the contract work listed above has beenterminated.

– ongoing characterisation and conditioning of waste resulting fromdecontamination of the pool at the Eurex plant at Saluggia;

– radiological characterisation of work involved in completing theremoval of asbestos from the reactor building at the Gariglianopower station;

– storage, safety maintenance and treatment of legacy waste fromthe Casaccia site;

The most important items and/or changes are as follows.

Services provided to Sogin by subsidiaries relate to servicesprovided by Nucleco SpA primarily for:

– the radiological characterisation of structures and systems in areaswith a radiological impact at all facilities and power stations;

– radiological monitoring at all Sogin sites;

87


Change in contract work in progress€-559,510 (€-776,213 in 2010)

This item breaks down as follows:

86

CHANGE IN CONTRACT WORK IN PROGRESS

2011 2010 Increase

(Decrease)

Kola Nuovo - 91,819 -91,819

Est. OSA Khmelnytskyi - 192,248 -192,248

Erek - 9,098 -9,098

Beloyarsk 2009 - 252,702 -252,702

E.ON - 13,643 -13,643

TOTAL - 559,510 -559,510

SERVICES

2011 2010 Increase

(Decrease)

Services provided by subsidiaries 6,878,770 9,925,089 -3,046,319

Services provided by personnel seconded from subsidiaries 2,129,121 - 2,129,121

Services provided by personnel seconded from agencies or companies 1,719,533 2,745,548 -1,026,015

Fuel treatment and reprocessing costs 70,911,022 36,327,578 34,583,444

Sundry service costs

Corporate services 26,066,793 24,188,766 1,878,027

Maintenance (and industrial cleaning) 6,449,481 6,163,743 285,738

Security 6,506,380 6,046,714 459,666

Cleaning 632,439 655,599 -23,160

Canteen services and similar 1,146,071 1,066,873 79,198

Utilities 4,360,999 4,227,878 133,121

Motor vehicles and additional services 453,950 535,265 -81,315

External consultants and professional services 3,576,771 3,466,104 110,667

External studies, research, design and advisors 8,843,457 10,883,667 -2,040,210

Remuneration of governance bodies 864,972 313,550 551,422

Travel expenses 1,678,593 1,530,516 148,077

Insurance 658,680 622,792 35,888

Staff training 409,888 401,190 8,698

Banking and financial services 465,615 123,500 342,115

Telecommunications and data transmission 734,698 726,715 7,983

Printing and translations 292,715 217,820 74,895

Advertising, printing, reproduction, etc. 219,832 214,967 4,865

Postage and telegrams 78,522 80,385 -1,863

Transport of freight and materials 523,494 194,098 329,396

Total sundry service costs 63,963,350 61,660,142 2,303,208

TOTAL 145,601,796 110,658,357 34,943,439

RAW, ANCILLARY AND CONSUMABLE MATERIALS AND GOODS

FOR RESALE

2011 2010 Increase

(Decrease)

Materials 15,147,383 10,588,573 4,558,810

Fuel for heating and vehicles 817,120 766,045 51,075

Stationery and printing 182,029 179,725 2,304

Clothing for employees 85,486 166,813 -81,327

Purchase of cellulare phones 136 648 -512

TOTAL 16,232,154 11,701,804 4,530,350

The increase in these costs compared with the previous yearessentially reflects increased purchases of materials.

These costs principally relate to the following purchases:

– steel containers for the storage and transport of low andmedium activity radioactive waste;

– supply of a mobile press for the Trisaia site;– construction of a repository for the temporary storage ofradioactive waste at the Eurex plant at Saluggia;

– installation of Lan networks and cabling for data networks at allfacilities and power stations;

– supply of a tomographic gamma scanner for the Casacciacentre;

– upgrade of an electricity sub-station and a new MV supplynetwork for the Trisaia plant;

– supply of thermoluminescent dosimeters and the relatedmeasuring devices at the Latina power station;

– supply of various individual protection devices, consumablesand maintenance equipment for all plants.

Operating costs€239,245,976 (€197,654,301 in 2010)

A breakdown of operating costs is provided below.

Raw, ancillary and consumable materials and goods forresale €16,232,154 (€11,701,804 in 2010)

Total costs break down as follows:


Personnel costs€63,169,495 (€58,449,361 in 2010)

Personnel costs break down as follows:

Personnel costs of €63.2 million in 2011 (€2.9 million of which forearly retirement incentives) are up €4.7 million on 2010.

Personnel costs less early retirement incentives of €60.3 million areup by approximately €4.1 million compared with the previous year(€56.2 million), primarily due to the following:

– an increase in minimum wages, following negotiation of a new paypackage for electricity industry workers;

– automatic rises reflecting biannual increases linked to seniorityand others linked to promotions, according to contract, for newgraduates and recent school leavers hired by the Company;

– other automatic rises according to contract, including additionalmonthly payments and payments in lieu of notice, and an increasein the discount on electricity prices afforded to former employeesof Enel;

– an increase, linked to the achievement of Company and individualperformance targets, in the variable component of personnelcosts, resulting in a one-off impact in 2011;

– an increase in the average workforce.

“Other personnel costs” comprise expenditure in accordance withcollective employment contracts and union agreements. The analysisbelow shows that the main changes compared to the previous yearrelate to an increase in early retirement incentives.

The cost of leases and rentals is down by over €330,000 comparedwith the previous year, primarily due to a reduction in fuel storagecharges.

89


– the emptying and treatment of five containers with the supercompaction and conditioning of waste at the Trisaia facility.

There was a sharp decrease in the cost of personnel seconded fromENEA, whilst the use of personnel seconded from Nucleco rose,partially offset by a reduction in the volume of services provided byNucleco.

Fuel treatment and reprocessing costs are significantly up on lastyear, essentially due to the contract with AREVA for management ofplutonium from Creys-Malville.

Corporate services, which increased, essentially relate to site workand also include the cost of services provided by ENEA foroperations at Saluggia, Trisaia and Casaccia. Corporate servicesprimarily entail:

– construction of buildings for the extraction and treatment of mudand of a repository for the temporary storage of radioactive wasteat the Latina power station;

– completion of work on construction of a repository for thetemporary storage of radioactive waste and of technical facilitiesat the Garigliano power station;

– the dismantling of systems and components used in the heat cyclein the Caorso turbine building.

Safety maintenance of plants and buildings was stepped up in 2011,with the related costs rising by approximately €286,000 comparedwith the previous year.

The most important items included in “External studies, research,design and advisors” are:

– an agreement with Ansaldo to cooperate on the treatment of resinsstored at the Trino Vercellese and Caorso power stations;

– IT consultancy and support;– designs for dismantling work;– audit of the financial statements.

The remuneration of governance bodies, including social securitycontributions, regards the fees paid to members of the Board ofDirectors (€779,940 in 2011 and €185,480 in 2010. Management ofthe Company by a Commissioner terminated in 2010. This meantthat the Board of Directors was in office for only two and a halfmonths). The fees paid to members of the Board of StatutoryAuditors were €85,031 in 2011 and €84,697 in 2010.Professional services also include Deloitte & Touche SpA’s audit feesof €130,000 for the statutory, consolidated and separate financial

statements. This amount also includes the audit of the statutoryfinancial statements of the subsidiary, Nucleco.

Leases and rentals €5,105,151 (€5,438,423 in 2010)

This item primarily consists of the following:

88

LEASES AND RENTALS

2011 2010 Increase

(Decrease)

Fuel storage charges 2,506,462 2,855,972 -349,510

Property leases 1,522,288 1,353,567 168,721

Motor vehicle hire costs 620,783 611,226 9,557

Water derivation contributions and fees 105,002 129,716 -24,714

Other hire charges and lease costs 350,616 487,942 -137,326

TOTAL 5,105,151 5,438,423 -333,272

PERSONNEL COSTS

2011 2010 Increase

(Decrease)

Wages, salaries and other compensation 43,166,639 40,284,877 2,881,762

Compulsory social security contributions 11,633,634 10,964,261 669,373

Employee termination indemnities 3,084,154 2,787,174 296,980

Retirement and similar benefits 333,799 171,553 162,246

Other 4,951,269 4,241,496 709,773

TOTAL 63,169,495 58,449,361 4,720,134

OTHER PERSONNEL COSTS

2011 2010 Increase

(Decrease)

Accident insurance 394,687 372,804 21,883

Supplementary payments

and early retirement incentives 2,924,628 2,264,000 660,628

ASEM/FISDE and ACEM/ARCA contributions 1,168,938 1,185,507 -16,569

Discounts on electricity 360,250 324,194 36,056

Loyalty, marriage bonuses, etc. 77,780 94,991 -17,211

Other 24,986 - 24,986

TOTAL 4,951,269 4,241,496 709,773

The following table shows the average number of employees by ca-tegory during the period, and a comparison of the figure at year-endwith the end of 2010.

Category Headcount at 31 Headcount at 31 Average

December 2011 December 2010 for period

Managers 29 28 28.75

Supervisors 208 197 208.58

Clerical staff 358 350 357.42

Blue-collar 112 100 100.58

TOTAL 707 675 695.33

The figures for both years do not include staff retiring on 31December.

The workforce consequently increased by 32 during the year,representing the balance of 88 new recruits and 56 terminations.

Early retirement for 24 staff resulted in the payment of additionalcharand incentives totalling €2.9 million in 2011 (compared withcharges of €2.3 million in 2010). These incentives were paidfollowing the results of a study showing how they would lead to costsavings.


Financial income and expenses€3,287,494 (€3,081,053 in 2010)

This item breaks down as follows:

On the money markets, the 1-month Euribor rate rose over the yearfrom a low of 0.8% to a high of 1.5%, with an average of 1.2%, whilsttreasury management resulted in an annual average return of 2.4%.

The increase in “Other net income and expenses” from a loss ofapproximately €0.1 million in 2010 to one of approximately €0.8million in 2011 is essentially due to an increase in interest payableto the Ministry of Economic Development on advances received fromthe Ministry under the Global Partnership project and payable to theElectricity and Gas Authority on net invested capital attributable tonuclear activities.

91


Amortisation, depreciation and write-downs €7,028,208 (€6,718,614 in 2010)

Amortisation and depreciation is substantially in line with the previousyear, whilst new provisions for doubtful accounts of €378,184 havebeen made as a result of the write-off of the amount due fromMartinelli Rottami and the write-down of 30% of the amount due fromthe Ministry of the Environment.

Change in inventories of raw, ancillary and consumablematerials and goods for resale €344 (-€164 in 2010)

The amount relates to changes in inventories of nuclear fuels.

Other provisions for risks and charges €500,000 (€3,111,697 in 2010)

These provisions have been made to cover the cost of providingmandatory training for 88 staff hired in 2011.

Other operating costs €1,608,828 (€1,576,209 in 2010)

Other operating costs consist of:

90

OTHER OPERATING COSTS

2011 2010 Increase

(Decrease)

Sundry duties and taxes 378,747 397,971 -19,224

Contingent liabilities 252,414 149,877 102,537

Sundry membership dues and fees 349,757 547,892 -198,135

Sundry general expenses 627,910 480,469 147,441

TOTAL 1,608,828 1,576,209 32,619

Other operating costs are substantially in line with the previous year.

Sundry duties and taxes primarily regard property and refuse taxes.

Contingent liabilities principally relate to the increase in costsincurred with respect to accrued amounts recorded during theprevious year.

FINANCIAL INCOME AND EXPENSES

2011 2010 Increase (Decrease)

Sub-totals Totals Sub-totals Totals Sub-totals Totals

Income from securities in portfolio:

interest income - 13,235 -13,235

net gains (+)/losses (-) - - - 13,235 - -13,235

Deposits with insurance companies:

interest income 1,248,092 1,448,179 -200,087

charges -10 1,248,082 - 1,448,179 -10 -200,097

Other interest:

interest income on bank current accounts 2,633,565 970,945 1,662,620

interest on loans to personnel 18,552 20,027 -1,475

other interest income 233,081 2,885,198 786,015 1,776,987 -552,934 1,108,211

Other net income and expenses:

dividends - 262,310 -262,310

foreign exchange gains on commercial transactions 411,349 107,453 303,896

income from exchange rate hedges 225,264 91,674 133,590

interest paid on Global Partnership funds -895,816 -248,711 -647,105

interest paid on invested capital in excess of institutional activities -518,051 -297,351 -220,700

foreign exchange losses on commercial transactions -54,307 -58,079 3,773

losses on exchange rate hedges -9,684 -14,410 4,727

net differences on other transactions -4,541 -845,786 -234 -157,348 -4,308 -688,438

TOTAL FINANCIAL INCOME/(EXPENSES) 3,287,494 3,081,053 206,441

Financial income is up from €3.2 million in 2010 to €4.1 million in2011 (€1.2 million from “Deposits with insurance companies” and€2.9 million in “Other interest”), including €3.9 million generated bytreasury management. The latter result is essentially represented by“Interest income on bank current accounts”, which is up as a resultof the decision to, as far as possible, make “very short-term”deposits, thus taking advantage of rises in the 1-month Euribor rateand continually renegotiating current account terms and conditions.

This strategy has minimised the portfolio’s overall risk exposure andenabled the Company to profit from the credit crunch in the markets.


Reconciliations of the statutory and effective Ires and Irap chargesare shown below:

93


Extraordinary income and expenses€2,112,115 (€ - in 2010)

During the year the equity investment in CESI SpA was sold to Eneland Terna, who each acquired equal interests. This resulted inextraordinary income of €2,112,115.

Income for the year before taxes€11,371,418 (€6,886,146 in 2010)

Changes in the various items that result in pre-tax income are shownbelow:

Income tax expense for the year, including current anddeferred tax expense and benefits€5,666,256 (€4,498,606 in 2010)

A breakdown of income tax expense is shown in the following table:

92

INCOME BEFORE TAXES

2011 2010 Increase

(Decrease)

Recognition of related external costs -813,586 -21,920 -791,666

Payment for acceleration - 970,778 -970,778

Other net revenues and income 1,589,916 960,718 629,197

Efficiency-sensitive costs 1,927,937 2,988,158 -1,060,221

Early retirement incentives -1,057,640 -571,594 -486,046

Long-term costs 541,343 129,909 411,434

Provisions -648,484 -3,029,698 2,381,214

Financial and extraordinary income/(expenses) 5,399,609 3,081,053 2,318,556

Income tax benefits 3,690,023 3,307,961 382,062

Market activities 789,144 -929,219 1,718,363

National Repository -46,844 - -46,844

INCOME BEFORE TAXES 11,371,418 6,886,146 4,485,272

INCOME TAX EXPENSES

2011 2010 Increase

(Decrease)

Current income taxes

Ires 3,557,538 3,503,319 54,219

Irap 2,759,355 2,583,284 176,071

Total current income taxes 6,316,893 6,086,603 230,290

Deferred tax income -1,617,763 -2,319,955 702,192

Reversal of deferred tax assets

from previous years 1,192,894 957,726 235,168

Total deferred tax income -424,869 -1,362,229 937,360

Deferred tax expense - - -

Reversal of deferred tax liabilities

from previous years -225,768 -225,768 -

Total deferred tax expense -225,768 -225,768 -

TOTAL 5,666,256 4,498,606 1,167,650

RECONCILIATION EFFECTIVE AND STATUTORY TAX CHARGE (IRES)Value Current Deferred Deferred tax

Ires tax income expanse at 27.5% at 27.5% at 27.5%

Income before taxesStatutory tax charge 11,371,418 -3,127,140 - -

Temporary differences taxable in future years - - - - Sub-total - - - -

Temporary differences deductible in future yearsUnpaid taxes for the year 28,168 -7,746 7,746 - Unpaid remuneration due to Directors 100,000 -27,500 27,500 - Statutory depreciation in excess of tax amounts 47,914 -13,176 13,176 - Write-downs of doubtful accounts 3,618 -995 995 - Provisions for mandatory training of newly hired staff 500,000 -137,500 137,500 -Provisions for mandatory training of newly hired staff 5,196,590 -1,429,062 1,429,062 - Sub-total 5,876,289 -1,615,980 1,615,980 -

Reversal of temporary differences recognised in previous yearsEntertainment expenses for previous years 7,333 2,017 - - Remuneration of Directors 126,466 34,778 - -Taxes for previous years paid during current year 18,372 5,052 - -Use of provisions for future charges/legal disputes in previous years 209,142 57,514 - - Use of provisions for productivity bonuses in previous years 3,946,357 1,085,248 - - Sub-total 4,307,670 1,184,609 -1,184,609 -

Reversal of taxable temporary differences recognised in previous yearsPortion of taxable gain 702,233 -193,114 - 193,114

Differences not reversible in future yearsIncreases:

motor vehicle expenses 703,040 -193,336 - -non-deductible entertainment expenses 5,003 -1,376 - -property tax 124,950 -34,361 - -non-deductible depreciation of land 31,742 -8,729 - - other non-deductible expenses 731,822 -201,251 - -

Sub-total 1,596,557 -439,053 - - Reductions:

non-taxable contingent assets 2,006,509 551,790 - - deductible 10% of Irap 224,192 61,653 - -allowance for corporate equity 71,626 19,697 - -

Sub-total 2,302,327 633,140 - -

Taxable income 12,936,500 - - -

Current Ires for the year - -3,557,538 - - Advance payment of Ires for the year - - 1,615,980 - Reversal of deferred tax assets for previous years - - -1,184,609 - Adjustment of deferred tax assets for previous years - - -21,466 - Adjustment of deferred tax liabilities for previous years - - - - Reversal of deferred tax liabilities for previous years - - - 193,114

-3,557,538 409,904 193,114

TOTAL IRES FOR THE YEAR -2,954,520


95


94

RECONCILIATION EFFECTIVE AND STATUTORY TAX CHARGE (IRAP)Value Current Deferred tax Deferred tax

Irap income expanse at 4.65% at 4.65% at 4.65%

Difference between revenues and costs 5,971,809 - - -

Costs not relevant for purposes of Irap:

personnel costs 63,169,495 - - -

provisions for doubtful accounts 378,184 - - -

Total 69,519,488 - - -Statutory tax charge (average rate of 4.65%) - -3,232,656 - -

Reversal of deductible temporary differences recognised in previous yearsEntertainment expenses for previous years 7,333 341 -341 -

Provisions for legal disputes 170,833 7,944 -7,944 -

Sub-total 178,166 8,285 -8,285 -

Reversal of taxable temporary differences recognised in previous yearsPortion of taxable gain 702,233 -32,654 - 32,654

Temporary differences deductible in future yearsProvisions for estimated cost of staff training 500,000 -23,250 23,250 -

Sub-total 500,000 -23,250 23,250 -

Differences not reversible in future yearsIncreases:

amortisation of contributions to Electricity Industry Pension Fund 921,385 -42,844 - -

depreciation of land 31,742 -1,476 - -

pay and contributions for fixed term and casual employees and trainees 1,831,641 -85,171 - -

financial components classified in items liable to Irap 449,638 -20,908 - -

seconded staff 3,848,655 -178,962 - -

personnel costs not relevant for purposes of Irap 23,505 -1,093 - -

property tax 124,950 -5,810 - -

regional taxes and duties attributable to extraordinary expenses 61,407 -2,855 - -

Sub-total 7,292,923 -339,121 - - Reductions:

seconded staff 109,483 5,091 - -

Sub-total 109,483 5,091 - - Irap deductions:

deductions for alternative employment

INAIL deduction 228,067 10,605 - -

deduction for disabled employees 2,896,417 134,683 - -

deductions for training contracts 1,345,202 62,552 - -

lump-sum deduction 3,106,842 144,468 - -

analytical deduction 10,809,491 502,641 - -

Sub-total 18,386,019 854,950 - -

Taxable income 59,340,976 - - - Current income tax expense for the year - -2,759,355 - - Advance payment of Irap for the year - - 23,250 -

Deferred Irap - - - -

Reversal of deferred tax assets for previous years - - -8,285 -

Reversal of deferred tax liabilities for previous years - - - 32,654

-2,759,355 14,965 32,654

TOTAL IRAP FOR THE YEAR -2,711,736

DEFERRED TAX ASSETS Value at 31 December 2010 Uses 2011 Provisions 2011 Adjustment Remainder at 31 December 2011

Ires Irap Ires Irap Ires Irap Ires Ires Irap

Breakdown of deductible temporary differences

Provisions for legal disputes and future charges 4,915,198 2,061,343 209,142 170,833 - - -11,056 4,695,000 1,890,509

Provisions for external training of newly hired staff - - - - 500,000 500,000 - 500,000 500,000

Entertainment expenses 7,334 7,334 7,334 7,334 - - - - -

Accelerated depreciation 242,305 98,564 - - 47,914 - - 290,219 98,564

Write-downs of doubtful accounts 414,572 - - - 3,618 - -31,075 387,115 -

Provisions for future charges (interest for 2007 payable

to Ministry of Economic Development) 460,625 - - - - - - 460,625 -

Provisions for productivity bonuses 5,979,714 - 3,946,357 - 5,196,590 - - 7,229,947 -

Unpaid municipal tax 35,924 - 18,372 - 28,168 - -6,704 39,016 -

Unpaid Directors’ remuneration 155,690 - 126,466 - 100,000 - -29,225 100,000 -

Sub-total 12,211,362 2,167,241 4,307,671 178,167 5,876,289 500,000 -78,060 13,701,921 2,489,073

DEFERRED TAX LIABILITIES Value at 31 December 2010 Uses 2011 Provisions 2011 Remainder at 31 December 2011

Ires Irap Ires Irap Ires Irap Ires Irap

Breakdown of taxable temporary differences

Capital gains 702,235 702,235 702,235 702,235 - - - -

Overdue interest due from Campania Regional Authority 408,028 - - - - - 408,028 -

Sub-total 1,110,263 702,235 702,235 702,235 - - 408,028 -

DEFERRED TAX ASSETS Value at 31 December 2010 Uses 2011 Provisions 2011 Adjustment Remainder at 31 December 2011

Deferred tax assets Reversal of deferred Deferred tax assetstax assets

Rate Ires 27.5% Irap 4.65% Ires 27.5% Irap 4.65% Ires 27.5% Irap 4.65% Ires 27.5% Ires 27.5% Irap 4.65%

Deferred tax assets on deductible temporary differences 3,358,125 100,777 -1,184,610 -8,285 1,615,980 23,250 -21,466 3,768,029 115,743

DEFERRED TAX LIABILITIES Value at 31 December 2010 Uses 2011 Provisions 2011 Remainder at 31 December 2011

Deferred tax liabilities Reversal of deferred Alignment 2011 Deferred tax liabilitiestax liabilities with new

tax rates

Rate Ires 27.5% Irap 4.65% Ires 27.5% Irap 4.65% Irap 4.65% Ires 27.5% Irap 4.65%

Provisions for deferred tax liabilities

on taxable temporary differences 305,322 32,654 -193,115 -32,654 - - 112,207 -

THE GROUP’S CONSOLIDATED FINANCIAL STATEMENTS


97

BALANCE SHEET AT 31 DECEMBER 2011

INCOME STATEMENT FOR THE YEAR


99


98

CONSOLIDATED BALANCE SHEET - ASSETS(€000) At 31 December 2011 At 31 December 2010


Unpaid share capital due from shareholders

FIXED ASSETS Intangible assets

Start-up and expansion costsResearch, development and advertising costsIndustrial patents and intellectual property rights Concessions, licenses, trademarks and similar rights Intangible assets in progressGoodwill arising from consolidation Other

Tangible assets Land and buildings Plant and machinery Industrial and commercial equipment Other assets Tangible assets under construction and advances

Financial assetsEquity investments in: associatesother companies

Receivables: amounts receivable from unconsolidated subsidiariesamounts receivable from associatesamounts receivable from parentsamounts receivable from others

Other securities

Total fixed assets

CURRENT ASSETS Inventories

Raw, ancillary and consumable materials Contract work in progress Advances

Receivables Amounts receivable from customers Amounts receivable from subsidiaries Amounts receivable from associatesAmounts receivable from parentsTax assets Deferred tax assets Amounts receivable from others

Current financial assetsInvestments in unconsolidated subsidiariesInvestments in associatesInvestments in other compainesOther securities

Cash and cash equivalents Bank and post office deposits Cash and notes on hand

Total current assets

ACCRUED INCOME AND PREPAID EXPENSES Accrued income and other prepaid expenses

TOTAL ASSETS

(*)

--

(**) 400

-

1,907 2,307

- -

20 1,779

- 1,009 7,401

7,744 7,899 3,001 1,204 3,503

- - -

---

454 454 -

153 - -

29,062 - - -

43,813 4,135 12,708

-- -

5,290

161,762 8

414

-

10,209

23,351

454

34,014

153

89,718

5,290

161,770

256,931

414

291,359

(*)

--

(**) 400

-

1,410 1,810

--

33 1,678

- 1,087 8,342

7,896 10,698 3,352 1,510 2,201

-388 388

---

459 459 -

360 1,874

-

30,212 262 - -

73,987 3,786 23,840

- --

44,042

99,493 16

267

-

11,140

25,657

847

37,644

2,234

132,087

44,042

99,509

277,872

267

315,783

(*) Amounts falling due within 12 months. (**) Amounts falling due after 12 months.

CONSOLIDATED BALANCE SHEET - LIABILITIES(€000) At 31 December 2011 At 31 December 2010


SHAREHOLDERS’ EQUITY Equity attributable to shareholders of the Parent Company

Share capital Legal reserve Other reserves Retained earnings/(accumulated losses) Net income/(loss) for the year

Minority interests Share capital and reserves Net income/(loss) for the year

PROVISIONS FOR RISKS AND CHARGES Retirement benefits Taxation Other

PROVISIONS FOR EMPLOYEE TERMINATION INDEMNITIES

PAYABLES BondsLoansBank borrowingsOther borrowingsNuclear-related advances Other advancesAmounts payable to suppliers Amounts payable to associatesAmounts payable to parentsTax liabilities Social security payables Other payables

ACCRUED EXPENSES AND DEFERRED INCOME Accrued liabilities and other deferred income

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

(*)

-

15,100 1,495 125

18,651 6,146

1,648 339

534 259

6,420

----

81,170 -

52,018 - -

1,869 4,348 88,558

54

41,516

1,987

43,503

7,213

12,626

227,963

54

291,359

(*)

-

15,100 1,375 125

16,583 2,189

1,547 101

584 574

6,289

----

130,031 1,594 50,704

--

1,203 4,485 69,135

254

35,371

1,648

37,019

7,447

13,911

257,152

254

315,783

(*) Amounts falling due after 12 months.


101


100

CONSOLIDATED INCOME STATEMENT(€000) At 31 December 2011 At 31 December 2010


REVENUERevenues from sales and services Change in inventories of work in progress, semi-finished and finished goodsChange in contract work in progressCapitalised internal workOther revenues and income:

revenue grantsother

OPERATING COSTS Raw, ancillary and consumable materials and goods for resaleServices Leases and rentals Personnel costs:

wages and salaries social security contributions employee termination indemnities retirement benefits and similar contributions other

Amortisation, depreciation and write-downs: amortisation of intangible assets depreciation of tangible assets other write-downs of fixed assets provisions for doubtful accounts

Changes in inventories of raw, ancillary and consumable materials and goods for resaleProvisions for risks Other provisions Other operating costs

Operating income/(loss)

FINANCIAL INCOME AND EXPENSES Income from equity investmentsOther financial income:

from non-current receivables from other securities from non-current securitiesother incomeinterest and commissions from others and sundry income

Interest expense and other charges: interest and commissions paid to others and sundry charges

Foreign exchange gains/(losses)

Total financial income/(expenses), net

ADJUSTMENTS OF FINANCIAL ASSETS

Total adjustments

EXTRAORDINARY INCOME AND EXPENSES Income:

contingent assets Expenses:

contingent liabilities other

Total extraordinary income/(expenses), net

INCOME/(LOSS) BEFORE TAXES

INCOME TAX EXPENSE

NET INCOME/(LOSS) FOR THE YEAR of which: attributable to shareholders of the Parent Company

attributable to minority interests

-10,569

48,827 13,394 3,460 334

5,208

2,734 4,613

- 410

-

- 24--

4,746

1,477

2,113

- -

239,193-

-5591,121

10,569250,324

15,829 139,962 5,657

71,223

7,757 207 -

551 1,704

242,890 7,434

4,770

-1,477 -10

3,283

-

2,113

-

2,113

12,830

-6,345

6,485 6,146339

-8,840

45,845 12,713 3,138 172

4,642

2,646 4,820

- 34

-

- 28--

3,413

611

-

5 -

198,066-

168237

8,840207,311

13,086 104,624 5,972

66,510

7,500 -225 3,112 397

1,757 202,733

4,578

3,441

-611 -14

2,816

- -

-

-5

-5

7,389

-5,100

2,290 2,189 101

CONSOLIDATED MEMORANDUM ACCOUNTS(€000) At 31 December 2011 At 31 December 2010


GUARANTEES GIVENGuarantees given on behalf of third parties

OTHER MEMORANDUM ACCOUNTSFuel storage and transport

TOTAL MEMORANDUM ACCOUNTS

66,594

389,757

456,351

29,849

461,941

491,790

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATEDFINANCIALSTATEMENTS

The consolidated financial statements for the year ended 31December 2011 have been prepared in compliance with LegislativeDecree 127/1991 and the subsequent amendments and additionsintroduced by Legislative Decrees 6/2003 and 37/2004 (Organicreform of the legislation governing joint-stock companies andcooperatives). The financial statements consist of the balance sheet,prepared in accordance with the format required by article 2424 ofthe Italian Civil Code, the income statement, prepared in accordancewith the format required by article 2425 of the Italian Civil Code, andthese notes, accompanied by a number of annexes that form anintegral part thereof, and have been prepared in accordance with theprovisions of article 2427 of the Italian Civil Code.

The financial statements and the information in the notes to thebalance sheet and income statement are stated in thousands ofeuros, as permitted by the regulations in force.

Disclosures regarding the Group’s activities, relations withsubsidiaries and subsequent events are included in the report onoperations.

The report on operations also includes the statement of cash flows.

No exceptional circumstances occurred during the year requiringapplication of the exemptions provided for by article 2423, paragraph4 of the Italian Civil Code. No capital or borrowings have beenallocated to a specific transaction.

These consolidated financial statements have been audited byDeloitte & Touche SpA, as part of their engagement to audit theGroup’s accounts in accordance with article 2409 bis of the ItalianCivil Code, as approved by the General Meeting of shareholders on28 June 2011.

103

INTRODUCTION


the Decree of the Ministry of Productive Activities of 2 December2004.

Tangible assets

Tangible assets are recorded in the financial statements at purchaseor production cost inclusive of all directly attributable incidentalcharges. Tangible assets are depreciated on a straight-line basis inaccordance with the rates shown below, which are held to berepresentative of their expected useful lives. Should there be apermanent impairment in the above value of such assets at year end,the assets are accordingly written down. The original value of theassets is reinstated in future years should the reasons for the write-down cease to apply.

The rates applied are as follows:

Land and buildings 3.5%-4.5%Plant and machinery 10%-12.5%-15.5%-20%Light weight constructions 10%Equipment 10%Furniture and fixtures 12%Office and IT equipment 20%Transport vehicles 25%Laboratory equipment and supplies 40%

The cost of any routine maintenance modifying the capacity andefficiency of fixed assets is fully charged against income in the yearin which such costs are incurred. The cost of any maintenanceenhancing the value of an asset is allocated to the asset to whichthey relate and depreciated over the remaining useful life of thatasset.

Financial assets

Investments in other companies are valued at purchase cost.

Financial receivables are accounted for at their nominal value.

Receivables

Receivables are recorded at their expected realisable value, obtainedby adjusting the nominal value of receivables by provisions fordoubtful accounts, and are classified under “Non-current financialassets” or “Current assets” according to their nature and purpose.Receivables include deferred tax assets if there is reasonablecertainty of their future recovery.

Inventories

Raw materials, consumables and finished products are recorded atthe lower of purchase or production costs and estimated marketvalue.

Nuclear fuel inventories are made up of irradiated fuel, plutonium anddepleted uranium.

Irradiated fuel to be reprocessed or placed in dry storage, plutoniumand depleted uranium are valued by convention at €0.52 per unit ofmeasurement (kg).

Contract work in progress

Contract work is valued in line with the value of the amountcompleted when accrued with reasonable certainty, according to thepercentage of completion method. This is determined on the basisof the costs so far incurred as a proportion of the total estimated costof the work to be carried out.

The carrying amount of contract work in progress is adjusted byspecific provision in the event of any contract risks.

Any potential losses on contracts, the value of which may bereasonably estimated, are fully expensed as they become known.


Cash and cash equivalents are recorded at face value and accountedfor at the date of the transaction.

105


BASIS OF CONSOLIDATION

The consolidated financial statements for the year ended 31December 2011, which is the balance sheet date used in Sogin’sseparate financial statements, include the financial statements at thesame date of the subsidiary, Nucleco, in accordance with article2359, paragraph 1.1 of the Italian Civil Code. The end of thiscompany’s financial year coincides with that of the Parent Company.Its financial statements have been approved by its Board of Directorsand audited prior to approval by the General Meeting of theCompany’s shareholders.

The consolidated company, Nucleco SpA, is a direct subsidiary ofSogin, which owns 60% of its shares, and operates in the field ofnuclear waste treatment.

The basis of consolidation has not changed compared with 2010.The list of consolidated companies, including information requiredby article 39 of Legislative Decree 127/1991, is shown in Annex 1.

CONSOLIDATION PRINCIPLES AND METHODS

The consolidation principles are applied as follows:

– all consolidated companies are consolidated on a line-by-linebasis;

– consolidated companies’ assets, liabilities, income and costs areincluded on a line-by-line basis in the consolidated financialstatements;

– the book value of equity investments in consolidated companiesis eliminated by offsetting it against the relevant equity accounts.Any positive differences between the purchase cost and thecorresponding share of equity at the acquisition date are, if notattributable to specific components of the assets or liabilities ofthe consolidated companies, allocated to “Goodwill arising fromconsolidation”. Any negative differences are recognised inliabilities in “Provisions for future risks and charges” or in the“Consolidation reserve” depending on whether they are due toforecast losses or otherwise;

– payables, receivables, costs and income and all transactions of asignificant amount between consolidated companies areeliminated, as are profits and losses deriving from intercompanytransactions yet to be realised on transactions with third parties.Should an intercompany profit give rise to taxation, the taxes aredeferred until the transaction with third parties has beencompleted;

– minority interests in consolidated companies’ equity and net

results for the year are reported separately in appropriate equityaccounts.

ACCOUNTING POLICIES

The policies adopted in the preparation of the consolidated financialstatements are those provided for in the Italian Civil Code, based onthe accruals, prudence, going-concern, consistency and substanceover form principles. These principles are interpreted and integratedby the accounting standards promulgated by the Italian accountingprofession (the Consiglio Nazionale dei Dottori Commercialisti e deiRagionieri or CNDCR) (as applied by the CONSOB) and the ItalianAccounting Standards Setter (the Organismo Italiano di Contabilitàor OIC).

The accounting policies used are described below and are the sameas those adopted in the preparation of the consolidated financialstatements for the previous year.

Intangible assets

Intangible assets are recorded in the financial statements at purchaseor production cost, inclusive of all attributable incidental charges.

Such assets are amortised each year.

Amortisation is calculated on a straight-line basis over the expecteduseful lives of the assets. Should there be a permanent impairmentin the above value of such assets at year end, the assets areaccordingly written down. The original value of the assets isreinstated in future years should the reasons for the write-downcease to apply.

In particular, leasehold improvements are amortised over theduration of property lease contracts. Intellectual property rights areamortised on a straight-line basis over three years.

The extraordinary contribution resulting from the winding up of theElectricity Industry Pension Fund, in compliance with Law 488 of 23December 1999 (the 2000 Finance Act) is amortised over a periodof 20 years, as expressly required by law.

Goodwill arising from consolidation is amortised over a period of 20years, which is the duration of the decommissioning programme ofnuclear power stations and closure of the fuel cycle as provided by

104


Revenues and work in progress deriving from nuclearactivities

Revenue is classified into the following categories as required byResolution ARG/elt 103/2008:

Costs

Costs are reported in accordance with the accruals principle,independently of the date of payment.

Income taxes

Current income taxes for the period are recorded among tax liabilitiesand calculated according to applicable regulations and tax rates.Deferred tax assets and liabilities, deriving from temporarydifferences between the book value of an asset or liability in thebalance sheet and its tax base, are recorded on the basis of the taxrate applicable at the moment the difference arises.

Deferred tax assets are recorded subject to verification of theirrecoverability.

Deferred tax liabilities are not posted to provisions for taxes when itis unlikely that the payable will arise.

Translation of foreign currency items

Receivables and payables originally expressed in foreign currenciesare translated into euro on the basis of the exchange rate in force atthe time of the related transaction. Differences with closing exchangerates are recorded in the income statement as financial income andexpense. Differences (premiums or discounts) between spot andforward contracts relating to foreign exchange hedges arerecognised in income.


Financial income and expenses are recognised on the basis ofinterest accrued on the net value of the related financial assets andliabilities, using the effective interest rate.

Financial expenses also include accrued interest on excess capitalinvested in institutional activities, pursuant to article 4, paragraph 7,Annex A of Authority Resolution ARG/elt 103/2008.

107


Accruals and deferrals

Pursuant to article 2424 bis of the Italian Civil Code, this item includesincome relating to one period but which will be received in asubsequent period and to payments made during the accountingperiod but relating to subsequent accounting periods. This item alsoincludes costs relating to the year that will only become payable insubsequent years and income received before the balance sheetdate but relating to subsequent years. Only those costs and incomerelating to two or more years, the amount of which varies over time,is recorded in these items.


Provisions for retirement benefits: the provisions for retirementbenefits mainly include remuneration accrued for employees in lieuof notice in accordance with union agreements and collective labourcontracts in force.

Other provisions for risks and charges: these provisions are accruedagainst known or probable losses and charges whose amount ortiming cannot be determined at the balance sheet date.

Provisions are determined on the basis of the best estimate madeaccording to the information available.


Provisions for employee termination indemnities cover amounts dueto employees upon retirement in accordance with union agreementsand collective labour contracts in force, net of advances paidpursuant to the law and amounts allocated to pension funds.

Payables

Payables are recorded at face value, deemed representative of theirredemption value.

Nuclear-related advances

These balances include the remaining nuclear-related advancestransferred by Enel SpA in accordance with Legislative Decree79/1999 and additional amounts required by the Italian Electricityand Gas Authority. The use of such funds has been regulated byResolution ARG/elt 103/2008 since 2008.

The advances are increased by:

– interest accrued on capital invested in excess of the amountrequired for the activities, as clarified by article 4, paragraph 7,Annex A of Resolution ARG/elt 103/2008;

– 80% of dismantling revenues from the sale of materials andequipment and 90% of revenues from the sale or revaluation ofland and buildings, as clarified by article 14, paragraph 2, AnnexA of Resolution ARG/elt 103/2008;

– contingent assets relating to direct costs included in actual costsapproved by the Authority.

Memorandum accounts

The nominal value of guarantees issued and commitments assumedare reported below the balance sheet and correspond to theenterprise’s actual commitment as required by OIC 22.

106

INSTITUTIONAL ACTIVITIES Ref. Resolution 103/2008

Recognition of related external costs Annex A - art. 3

Payment for acceleration Annex A - art. 8, para. 9

Profit/(Loss) on sale of materials (20%) Annex A - art. 14, para. 2

Margin on valuation of sites and infrastructure (10%) Annex A - art. 14, para. 2

Efficiency-sensitive costs Annex A - art. 5

Early retirement policies Annex A - art. 9

Long-term costs Annex A - art. 4, para. 3

Provisions Annex A - art. 2, para. 8

Income tax expense recognised Annex A - art. 2, para. 7

These components are additional to other revenues and income,which, unlike in previous years, does not result in an increase innuclear-related advances.

In this way the income statement for nuclear activities no longerreports an after-tax result equal to costs not recognised by theAuthority, but with a profit or loss for the year.

Other revenues

Revenues relating to other services and the sale of goods arerecognised on completion of the service provided or the transfer oftitle to goods. Revenues from market activities relating to long-termcontract work is accrued in accordance with the terms andconditions of the relevant contract.


Receivables

A breakdown of receivables and an aging schedule are shown inAnnex 4 at the end of these notes.

Receivables total €89,718 thousand (€132,087 thousand at 31December 2010) and consist of the following main items:

– amounts receivable from customers, totalling €29,062 thousand(€30,212 thousand at 31 December 2010): this essentially relatesto the amount owed to the Parent Company by the GovernmentCommissioner responsible for handling the waste emergency andthe clean-up and conservation of water resources in the Campaniaregion. The above amount is shown after deducting provisions fordoubtful accounts, which at 31 December 2011 total €850thousand (€1,086 thousand at 31 December 2010). Ageographical breakdown of receivables has not been provided asthe Group does not operate internationally and does not thereforeenter into relations with companies in countries subject tosovereign risk;

– tax assets, totalling €43,813 thousand (€73,987 thousand at 31December 2010), primarily regarding VAT refundable to the ParentCompany;

– deferred tax assets, totalling €4,135 thousand (€3,786 thousandat 31 December 2010), relating to deductible temporarydifferences, essentially deriving from provisions for risks andcharges deductible from tax in future years;

– amounts receivable from others, amounting to €12,708 thousand(€23,840 thousand at 31 December 2010), referring primarily tothe previously described amount payable to the Parent Company.


These assets total €5,290 thousand (€44,042 thousand at 31December 2010).

This relates to an accumulating insurance policy with guaranteedminimum returns, which was readily redeemable. The reductioncompared with the previous year is due to disposal of the policy,completed in 2012.


Cash and cash equivalents total €161,770 thousand (€99,509thousand at 31 December 2010) and represent the Group’s liquidityat the end of the year.

Accrued income and prepaid expenses

These items total €414 thousand (€267 thousand at 31 December2010) and primarily refer to advance payment, by the ParentCompany, of premiums on surety bonds.

Shareholders’ equity

At the end of the year shareholders’ equity totals €43,503 thousand(€37,019 thousand at 31 December 2010), with €41,516 thousandattributable to shareholders of the Parent Company and €1,987thousand attributable to minority interests.

The statement of changes in shareholders’ equity during the year isprovided in Annex 5, whilst the reconciliation of the net result for theyear and shareholders’ equity reported in the separate financialstatements and the consolidated amounts is shown in Annex 6.

The Parent Company’s share capital of €15,100 thousand isunchanged with respect to 31 December 2010, and consists of15,100,000 fully paid ordinary shares with a value of €1 each, all ofwhich are held by the Ministry of the Economy and Finance.

The share capital and reserves attributable to minority interestsregard the 40% of the subsidiary, Nucleco, owned by ENEA,amounting to €1,648 thousand.


Provisions total €7,213 thousand at the end of the year (€7,447thousand at 31 December 2010). Changes in the various categoriesof provision are shown in Annex 7. The provisions essentially consistof:

– provisions for retirement benefits, entirely attributable to the ParentCompany and amounting to €534 thousand (€584 thousand at31 December 2010), after uses of €384 thousand during the yearunder review and new provisions of €334 thousand. Theprovisions refer to the indemnity in lieu of notice for personnel inservice, who are eligible pursuant to applicable collective contractsand labour union agreements;

109


NOTES TO THE BALANCE SHEET

The most significant items in the balance sheet at 31 December 2011are analysed below, showing the comparative amount at 31December 2010.

Fixed assets

Fixed assets total €34,014 thousand (€37,644 thousand at 31December 2010).

Intangible assets

Intangible assets total €10,209 thousand (€11,140 thousand at 31December 2010). A breakdown of changes in the various assetcategories is provided in Annex 2. The main changes are describedbelow.

The increase in “Concessions, licences, trademarks and similarrights” refers to the Parent Company, as follows:

– upgrade of the Company’s integrated information system;– the purchase and installation of software for personal computers.

Amortisation is calculated over three years.

Goodwill arising from consolidation, amounting to €1,009 thousand(€1,087 thousand at 31 December 2010), has decreased due toamortisation for 2011, equal to a twentieth of historical cost (€78thousand).

Other intangible assets, amounting to €7,401 thousand (€8,342thousand at 31 December 2010) substantially refer to the ParentCompany’s extraordinary contributions on the winding-up of theElectricity Industry Pension Fund, after amortisation for the year of€940 thousand.

Tangible assets

Tangible assets total €23,351 thousand (€25,657 thousand at 31December 2010). A breakdown of changes in the various assetcategories is provided in Annex 3. The main changes are describedbelow.

Land and buildings, totalling €7,744 thousand (€7,896 thousand at31 December 2010), refer to Sogin’s nuclear facilities. The reductionis due to depreciation for the year.

The reduction in plant and machinery, totalling €7,899 thousand(€10,698 thousand at 31 December 2010) is primarily due todepreciation for the year (€2,632 thousand).

Industrial and commercial equipment totals €3,001 thousand(€3,352 thousand at 31 December 2010). Purchases of equipmentused in ordinary operations during the year amount to €607thousand.

Other assets, relating to electronic equipment, furniture, fittings, officeequipment and vehicles for civilian use, amounting to €1,204thousand (€1,510 thousand at 31 December 2010), reflectpurchases (€304 thousand) and disposals (€13 thousand) duringthe year, referring primarily to IT equipment.

In relation to “Tangible assets under construction and advances”,Legislative Decree 31 of 15 February 2010 confirmed, among otherthings, the assignment to Sogin of responsibility for the location,construction and operation of the National Repository and theTechnological Park. Work continued in 2011 and is still in progress.

Non-current financial assets

These assets amount to €454 thousand (€847 thousand at 31December 2010) and consist of the following main components.

Financial receivables, amounting to €454 thousand (€459 thousandat 31 December 2010), relate to various guarantee deposits paid topublic and private bodies.

Current assets

Inventories

This item amounts to €153 thousand (€2,234 thousand at 31December 2010) and essentially consists of stocks of raw materialsat the subsidiary, Nucleco.

108


of €559 thousand (an increase of €168 thousand in 2010), reflectsthe completion of contracts obtained by the Parent Company on theopen market.

The amount for capitalised internal work regards capitalisation of thecosts incurred by Sogin during the year in relation to construction ofthe National Repository, consisting of the cost of consultants. Otherexternal costs have been accounted for directly in “Tangible assetsunder construction”.

These increases, amounting to €1,121 thousand (€237 thousand in2010), regard the Parent Company and, in particular, the NationalRepository.

Other revenues and income, totalling €10,569 thousand (€8,840thousand in 2010), are primarily generated by services provided bythe Parent Company on the open market (€10,047 thousand).

Total revenue thus amounts to €250,324 thousand (€207,311thousand in 2010), marking an increase of €43,013 thousand.

Operating costs

Raw, ancillary and consumable materials and goods for resale,amounting to €15,829 thousand (€13,086 thousand in 2010),primarily relate to the purchase of materials used in the ParentCompany’s decommissioning activities.

Services, amounting to €139,962 thousand (€104,624 thousand in2010), primarily relate to services purchased by the Parent Companyin relation to its decommissioning activities, such as: fuel treatmentand reprocessing (€74,106 thousand), corporate services (€26,067thousand), maintenance (€6,449 thousand), site security (€6,506thousand), seconded personnel (€3,849 thousand) and professionalservices and external consultants (€12,420 thousand).

Leases and rentals, totalling €5,657 thousand (€5,972 thousand in2010), refer primarily to the Parent Company and relate to fuelstorage costs (€2,506 thousand), property rentals (€1,522 thousand)and other leases (€971 thousand). The portion attributable to thesubsidiary, Nucleco, regards property rentals (€222 thousand) andpayments for the use of ENEA’s facilities (€165 thousand).

Personnel costs total €71,223 thousand (€66,510 thousand in 2010).

Amortisation and depreciation amounts to €7,347 thousand (€7,466thousand in 2010).

The change in inventories of raw materials amounts to €207thousand (a reduction of €225 thousand in 2010).

Provisions for risks, other provisions and provisions for doubtfulaccounts total €961 thousand (€3,543 thousand in 2010). Thosemade by the subsidiary, Nucleco, regard estimated future costs forthe treatment and conditioning of radioactive waste removed fromplants (€51 thousand) and provisions for doubtful accounts (€378thousand for the Parent Company and €32 thousand for Nucleco),whilst the Parent Company made provisions (€500 thousand) tocover the cost of mandatory training for newly hired staff in 2011.

Other operating costs of €1,704 thousand (€1,757 thousand in2010) primarily regard the Parent Company and include sundryduties and taxes (€379 thousand), membership dues (€350thousand) and sundry general expenses (€627 thousand).


Net financial income amounts to €3,283 thousand (€2,816 thousandin 2010).

Extraordinary income and expenses

Net extraordinary income of €2,113 thousand (net expenses of €5thousand in 2010) refer entirely to the gain realised on the ParentCompany’s sale of its equity investment in CESI SpA.

Income tax expense for the year

Income tax expense totals €6,345 thousand (€5,100 thousand in2010) and includes current tax expense of €7,008 thousand (Irap of€3,024 thousand and Ires of €3,984 thousand), the recognition ofdeferred tax assets after recoveries, reducing tax expense by €349thousand, the recovery of deferred tax liabilities, reducing taxexpense by €314 thousand.

Deferred tax assets accounted for in assets at 31 December 2011essentially correspond to liabilities deriving from charges andprovisions that will be tax deductible (Irap and Ires) in future years.

111


– provisions for deferred tax liabilities, amounting to €259 thousand(€574 thousand at 31 December 2010), primarily regarding theParent Company. Changes in 2011 relate to deferred tax liabilitieson the tax benefit deriving from accounting for lease paymentsusing the balance sheet method (€88 thousand) and uses of theprovisions (€227 thousand);

– other provisions, totalling €6,420 thousand (€6,289 thousand at31 December 2010) after provisions for the year of €642 thousandand uses of €511 thousand. These provisions primarily regard€51 thousand to cover estimated future costs to be incurred bythe subsidiary, Nucleco, for the treatment and disposal ofradioactive waste removed from plants and already billed, and afurther €591 thousand attributable to the Parent Company to coverpotential liabilities (including provisions for mandatory training forthe Parent Company’s newly hired staff).


At the end of the year these provisions total €12,626 thousand(€13,911 thousand at 31 December 2010), reflecting provisions ofthe year of €3,460 thousand and uses in the form of advances andtermination indemnities paid, amounting to €4,745 thousand.

Payables

At 31 December 2011 payables amount to €227,963 thousand(€257,152 thousand at 31 December 2010), representing a reductionof €29,189 thousand.

An analysis of payables and the related maturities is provided inAnnex 8 at the end of these notes.

The main components are analysed below:

– the item “Advances” refers primarily to nuclear-related advancesreceived in order to finance decommissioning activities,amounting to €81,170 thousand (€130,031 thousand at 31December 2010);

– amounts due to suppliers, amounting to €52,018 thousand(€50,704 thousand at 31 December 2010) and relating to thesupply of goods and services;

– tax liabilities, totalling €1,869 thousand (€1,203 thousand at 31December 2010), including taxes withheld by the Company on

employees’ salaries and the balance of income tax payable afterdeducting advance payments;

– social security payables, amounting to €4,384 thousand (€4,485thousand at 31 December 2010);

– other payables of €88,558 thousand (€69,135 thousand at 31December 2010), and primarily regarding amounts due topersonnel, totalling €12,724 thousand, the amount of €69,869thousand payable to the Ministry of Economic Developmentrelating to a loan made pursuant to the cooperation agreementconcluded by the Governments of Italy and the RussianFederation (the so-called Global Partnership), and extraordinarypension contributions of €5,806 thousand.

Accrued liabilities and deferred income

These items total €54 thousand (€254 at 31 December 2010) andprimarily regard the subsidiary, Nucleco.

Consolidated memorandum accounts

At 31 December 2011 these items amount to €456,351 thousand(€491,790 thousand at 31 December 2010) and primarily regard theParent Company’s commitments in relation to the treatment ofnuclear fuel.

NOTES TO THE INCOME STATEMENT

Revenue

Revenues from sales and services, totalling €239,193 thousand(€198,066 thousand in 2010), includes €234,379 thousandgenerated by Sogin’s dismantling of nuclear facilities and €4,814thousand by Nucleco’s activities.

The increase essentially reflects the greater volume of nuclear fueltreatment and reprocessing carried out by the Parent Company.

The change in contract work in progress, amounting to a reduction

110


Net income for the year

Net income amounts to €6,485 thousand (€2,290 thousand in 2010).

Net income for the year includes €6,146 thousand attributable toshareholders of Sogin and €339 thousand attributable to minorityinterests, after amortisation of goodwill arising from consolidation,totalling €78 thousand and the positive impact (€184 thousand) ofapplying Italian Accounting Standard 17 governing finance leases.

112


115


114

ANNEX 1 - BASIS OF CONSOLIDATION 2011 COMPANIES CONSOLIDATED ON A LINE-BY-LINE BASIS

Name Registered Currency Share % interest % interest

office capital in results

Direct Indirect Direct Minorities

Nucleco SpA Rome € 516,000.00 60.00 - 60.00 -

ANNEX 2 - INTANGIBLE ASSETS

(€000) Start-up and Research, Ind. patents Concess. Extraordinary Leasehold Intangible Goodwill Total

expansion devel. and intell. licenses pension improvements assets in arising

and prop. and contribution progress from consol.

advertising rights trademarks

Original cost 17 186 180 10,119 18,109 4,763 - 1,554 34,928

Accumulated amortisation at beginning of year -17 -186 -147 -8,441 -9,806 -4,725 - -467 -23,789

Previous write-downs - - - - - - - - -

Net carrying amount at 31 December 2010 - - 33 1,678 8,303 38 - 1,087 11,139

Historical cost

Purchases during the year - - - 1,810 - - - - 1,810

Reclassifications - - - - - - - - -

Reduction due to Authority Resolution 103/2008 - - - - - - - - -

Write-downs during the year - - - - - - - - -

Accumulated amortisation

Amortisation for the year - - -13 -1,703 -921 -19 - -78 -2,734

Reduction in provisions due to disposals - - - -6 - - - - -6

Gross amount at 31 December 2011 17 186 180 11,929 18,109 4,763 - 1,554 36,738

Accumulated amortisation at 31 December 2011 -17 -186 -160 -10,150 -10,727 -4,744 - -545 -26,529

NET CARRYING AMOUNT AT 31 DECEMBER 2011 - - 20 1,779 7,382 19 - 1,009 10,209

Other intangible assets

ANNEX 3 - TANGIBLE ASSETS

(€000) Land and Plant and Ind. and comm. Other Fixed assets Total

buildings machinery equipment assets under construction

and advances

Original cost 8,812 30,319 12,283 8,905 2,201 62,520

Revaluations - - - - - -

Accumulated depreciation at beginning of year -916 -19,621 -8,931 -7,395 - -36,863

Previous write-downs - - - - - -

Net carrying amount at 31 December 2010 7,896 10,698 3,352 1,510 2,201 25,657

Historical cost

Purchases during the year - 105 607 304 1,302 2,318

Reclassifications - - - - - -

Leased assets - - - - - -

Disposals - -1,005 - -117 - -1,122

Write-downs during the year - - - - - -

Accumulated depreciation

Depreciation for the year -152 -2,632 -958 -597 - -4,339

Reclassifications of accumulated depreciation - 1,005 - 104 - 1,109

Increase in accumulated depreciation of leased assets - -272 - - - -272

Gross amount at 31 December 2011 8,812 29,419 12,890 9,092 3,503 63,716

Accumulated depreciation at 31 December 2011 -1,068 -21,520 -9,889 -7,888 - -40,365

NET CARRYING AMOUNT AT 31 DECEMBER 2011 7,744 7,899 3,001 1,204 3,503 23,351

ANNEXES


117


116

ANNEX 4 - AGING SCHEDULE FOR RECEIVABLES

(€000)

Falling due Falling due Falling due Total

within between after

12 months 2 and 5 years 5 years

Non-current receivables

Amounts receivable from others

Total

Other securities

Current receivables

Other financial receivables

Total

Trade receivables

Amounts receivable from customers

Total

Sundry receivables

Tax assets

Deferred tax assets

Other receivables

Total


Other securities

Total

TOTAL

454

454

-

-

-

28,662

28,662

43,813

4,135

10,801

58,749

5,290

5,290

93,155

-

-

-

-

-

400

400

-

-

1,907

1,907

-

-

2,307

-

-

-

-

-

-

-

-

-

-

-

-

-

-

454

454

-

-

-

29,062

29,062

43,813

4,135

12,708

60,656

5,290

5,290

95,462

Financial statements at 31 December 2011ANNEX 5 - CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY

(€000)

Share capital Reserves Net income/ Equity attributable Capital Net income/ Minority Total

and retained (loss) for to shareholders and reserves (loss) interests shareholders'

earnings the year of the Paren for the year equity

Company

Shareholders’ equity at 31 December 2009

Changes in 2010

Appropriation of result for 2009

Payment of dividends

Other changes/roundings

Net income/(loss) for the year

Shareholders’ equity at 31 December 2010

Changes in 2011

Appropriation of result for 2010

Payment of dividends

Other changes/roundings

Net income/(loss) for the year

SHAREHOLDERS’ EQUITY AT 31 DECEMBER 2011

1,161

551

-175

10

-

1,547

101

-

-

-

1,648

551

-551

-

-

101

101

-101

-

-

339

339

1,712

-

-175

10

101

1,648

-

-

-

339

1,987

11,453

6,641

-

-12

-

18,082

2,189

-

-

-

20,271

15,100

-

-

-

-

15,100

-

-

-

-

15,100

6,641

-6,641

-

-

2,189

2,189

-2,189

-

-

6,146

6,146

33,194

-

-

-12

2,189

35,371

-

-

-

6,146

41,517

34,906

-

-175

-2

2,290

37,019

-

-

-

6,485

43,503

Minority interestsEquity attributable to shareholders of the Parent Company

ANNEX 6 - RECONCILIATION OF NET INCOME/(LOSS) FOR THE YEAR AND SHAREHOLDERS' EQUITY IN THE SEPARATE FINANCIAL

STATEMENTS AND CONSOLIDATED AMOUNTS

(€000) Shareholders’ Net income Shareholders’

equity (loss) equity

for the year

Shareholders’ equity and net income/(loss) reported in the Parent Company’s financial statements

Consolidation adjustments

Subsidiary’s net income/(loss) attributable to shareholders of the Parent Company

Other adjustments

Adjustment for dividends paid to the Parent Company by the subsidiary

Shareholders’ equity and net income/(loss) reported in the consolidated financial statements

Minority interests

Dividends paid to minorities by the subsidiary

TOTAL (SHAREHOLDERS OF THE PARENT COMPANY+MINORITY INTERESTS)

39,728

-545

1,660

673

-

41,516

1,987

-

43,503

5,705

-78

36

482

-

6,146

339

-

6,485

34,023

-467

1,624

191

-

35,371

1,648

-

37,019

2011 2011 2010


119


118

ANNEX 7 - PROVISIONS FOR RISKS AND CHARGES

(€000) Balance at 31 Additions Adjustments Provisions Uses during Balance at 31

December 2010 for leases for the year the year December 2011

Pension and similar benefits

Taxation

Other

TOTAL PROVISIONS FOR RISKS AND CHARGES

-

-

-

-

334

-

642

976

384

315

511

1,210

584

574

6,289

7,447

-

-

-

-

534

259

6,420

7,213

ANNEX 8 - AGING SCHEDULE FOR PAYABLES

(€000)

Falling due Falling due Falling due Total

within between after

12 months 2 and 5 years 5 years

Medium/long-term financial liabilities

Total

Short-term financial liabilities

Total

Trade payables

Advances

Amounts payable to suppliers

Total

Sundry payables

Tax liabilities

Social security payables

Other payables

Total

TOTAL

-

-

81,170

52,018

133,188

1,869

4,348

88,558

94,775

227,963

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

81,170

52,018

133,188

1,869

4,348

88,558

94,775

227,963

Financial statements at 31 December 2011

REPORTS

REPORTS

121

REPORTS

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122

Attestation of the separate financial statements of Sogin SpA for the year ended31 December 2011, pursuant to article 21 bis of the Articles of Association

We, the undersigned, Giuseppe Nucci and Alberto Alatri, as Chief Executive Officerand the Manager Responsible for Financial Reporting, respectively, of Sogin SpA,hereby attest, pursuant to article 21 bis of the Articles of Association:

• to the adequacy, in relation to the nature of the Company, and• to the effective application

of the administrative and accounting procedures adopted in preparation of theseparate financial statements for 2011.

We also attest that:

• the separate financial statements, which report net income of €5,705,182 for theyear ended 31 December 2011 and shareholders’ equity of €39,728,403 at that date:

• are consistent with the underlying accounting books and records;

• have been prepared in compliance with Legislative Decree 127 of 9 April 1991 andthe requirements of the Italian Civil Code, and are based on the accountingprinciples promulgated by the Italian accounting profession (the ConsiglioNazionale dei Dottori Commercialisti e dei Ragionieri), as amended by the ItalianAccounting Standards Setter (the Organismo Italiano di Contabilità or OIC) and,as far as we are aware, give a true and fair view of the financial position and resultsof operations of Sogin SpA;

• the report on operations for 2011 contains a reliable analysis of the Company’soperating performance and operating result, together with a description of theprinciple risks and uncertainties to which it is exposed.

Rome, 8 June 2012

Manager Responsible for Chief Executive OfficerFinancial Reporting

Attestation of the consolidated financial statements of the Sogin Group for theyear ended 31 December 2011, pursuant to article 21 bis of the Articles of

Association of Sogin SpA

We, the undersigned, Giuseppe Nucci and Alberto Alatri, as Chief Executive Officerand the Manager Responsible for Financial Reporting, respectively, of Sogin SpA,hereby attest, pursuant to article 21 bis of the Articles of Association:

• to the adequacy, in relation to the nature of the Group, and• to the effective application

of the administrative and accounting procedures adopted in preparation of theconsolidated financial statements for 2011 of the Sogin Group, which includes SoginSpA and Nucleco SpA.

We also attest that:

• the consolidated financial statements, which report Group net income of €6,485thousand for the year ended 31 December 2011 and Group shareholders’ equityof €43,503 thousand at that date:

• are consistent with the underlying accounting books and records;

• have been prepared in compliance with Legislative Decree 127 of 9 April 1991 andthe requirements of the Italian Civil Code, and are based on the accountingprinciples promulgated by the Italian accounting profession (the ConsiglioNazionale dei Dottori Commercialisti e dei Ragionieri), as amended by the ItalianAccounting Standards Setter (the Organismo Italiano di Contabilità or OIC) and,as far as we are aware, give a true and fair view of the financial position and resultsof operations of the Sogin Group;

• the report on operations for 2011 contains a reliable analysis of the Group’soperating performance and operating result, together with a description of theprinciple risks and uncertainties to which it is exposed.

Rome, 8 June 2012

Manager Responsible for Chief Executive OfficerFinancial Reporting

This attestation has been translated into the English language solely for the convenience of internationalreaders.

This attestation has been translated into the English language solely for the convenience of internationalreaders.

REPORTS

125


124

REPORT OF THE BOARD OF STATUTORY AUDITORS TO THE ANNUALGENERAL MEETING OF SHAREHOLDERS, PREPARED PURSUANT TO

ARTICLE 2429, PARAGRAPH 2 OF THE ITALIAN CIVIL CODE

To the shareholders of S.O.G.I.N. SpA,

This Board of Statutory Auditors has examined the financial statements forthe year ended 31 December 2011, as prepared in accordance with the law,and the report on operations, submitted to us by the Board of Directors.

Before analysing the activities carried out by the Board of Statutory Auditorsin 2011, it should be noted that the Company is wholly owned by the Ministryof the Economy and Finance, and that no transactions involving theCompany’s own shares were carried out, either directly or indirectly, duringthe year. Sogin, which has been operating since 2001, became a Group in 2004following the acquisition of 60% of Nucleco SpA.

In November 2011, Sogin sold a 2% holding in C.E.S.I. (which did not qualifyas a related party). This transaction resulted in an extraordinary capital gain.

The Company’s current Board of Directors was elected by the General Meetingof 13 October 2010, in accordance with the provisions of article 7.23 of LawDecree 78 of 31 May 2010, converted into Law 122 of 30 July 2010.

The current members of the Board of Statutory Auditors were elected by theGeneral Meeting of 10 August 2011 for the three-year period 2011-2013, withtheir mandate thus ending on the date of the General Meeting held to approvethe 2013 financial statements.

• Audit activities

The Board of Statutory Auditors carried out the functions required by articles2403 et seq. of the Italian Civil Code, receiving ongoing updates on theCompany’s activities and the adequacy of the organisational structure fromthe Chief Executive Officer, as well as from management personnel. In carryingout our functions, the Board of Statutory Auditors followed therecommendations and guidelines established by law.

In particular, the Board of Statutory Auditors: • oversaw compliance with the law and the memorandum of association, and

the application of corporate governance principles; • held nine meetings in 2011, including four in its current composition, and

as a rule attended the Company’s General Meetings and Board of Directors’meetings;

• engaged in fruitful dialogue with management during periodic meetings,focusing on the operating performance, future plans and the mostsignificant business transactions, in terms of size or nature, entered into bythe Company;

• exchanged information with the independent auditors, Deloitte & ToucheSpA, verifying the ongoing nature of audit procedures during the year andnoting the declaration of the absence of censurable events; during thevarious meetings the independent auditors described the audit procedurescarried out, with specific regard to the checks carried out in preparation forthe issue of their opinion on the financial statements for 2011;

• held periodic meetings with the Company’s Supervisory Board, duringwhich we exchanged information and details of the outcomes of ourrespective controls;

• engaged in exchanges of information with the Board of Statutory Auditorsof the subsidiary, Nucleco SpA, regarding the activities carried out by thisbody;

• adjudged the equipment and use of tools, data, guidelines andmanagement controls (budgets and related forecast revisions) to beadequate and the risk control system to be efficient;

• verified adjustments to the organisational structure in order to comply withthe data protection requirements introduced by Legislative Decree 196/2003and the update of the IT procedures relating to the centralised computerarchive;

• monitored the Company’s administrative and accounting, Internal Auditand procurement systems and procedures, arriving at the reasonableconclusion that such systems and procedures are adequate and in generalfunction correctly;

• assessed and oversaw, within our area of competence, the adequacy of theadministrative and accounting system, and the reliability of this system inpresenting a fair view of operations, in part through direct consultation withthe Manager Responsible for Financial Reporting, and in part throughcontact with the heads of the various departments;

• checked the Organisational and Control Model pursuant to article 6 of

REPORTS

127


126

Legislative Decree 231/2001, verifying its application in consultation withthe Supervisory Board. We also verified the effective update of the Modelto reflect the new types of environmental offence introduced by the recentLegislative Decree 121 of 7 July 2011.

Our audit activities enabled us to ascertain the fact that the irregularities foundby the previous Board of Statutory Auditors, regarding the direct award ofcontracts rather than by tender, as required by the legislation in force, havebeen resolved. The percentage of contracts awarded by tender has risen from34% in 2010 to 80% in 2011. We have recommended that the Companycontinue with this approach so as, where possible, to ensure a greater cost-effectiveness of the Company’s operations, bearing in mind that it was ownedentirely by the State.

The management of human resources and the Company’s organisationreflected the continuing implementation of Sogin’s new operating model andthe new organisational structure resulting from termination of theCommissioners’ oversight. This has led to an increase in personnel costs,which we, however, recommend should be kept under control, for the samereasons as given above, including a review of the current incentive schemes.

We submitted records of our activities to the Magistrate from the Court ofAuditors appointed to audit the Company in accordance with article 12 of Law259/1958.

No petitions or complaints have been received pursuant to art. 2408 of theItalian Civil Code.

• Financial statements

We have examined the financial statements for the year ended 31 December2011, which were submitted to us within the deadline required by article 2429of the Italian Civil Code, and with regard to which we report the following.

In view of the fact that it is not our responsibility to audit the financialstatements, we checked the overall basis of presentation and generalcompliance with the laws relating to the preparation and structure of thefinancial statements, and have no particular observations to make in thisregard.

We verified compliance with the laws governing the preparation of the reporton operations and again have no particular observations to make in thisregard.

As far as we are aware, in preparing the financial statements, the Directors didnot apply any exemptions from application of the law pursuant to article 2423,paragraph 4 of the Italian Civil Code.

We acknowledge publication of the consolidated financial statements.

• Conclusions

Based also on the results of the audit procedures carried out by theindependent auditors, as reported on in their opinion on the financialstatements issued on 8 June 2012, which does not make mention of anyproblems regarding the fair presentation in the financial statements of relatedparty transactions (with subsidiaries), or in relation to the absence of a needto write-down receivables, even if subject to dispute, we recommend theGeneral Meeting’s approval of the financial statements for the year ended 31December 2011, as prepared by the Directors, and the proposed appropriationof net income for the year.

Rome, 8 June 2012

The Board of Statutory Auditors

Ersilia Militano

Gerolamo Gavazzi

Gianfranco Pepponi

This report has been translated into the English language solely for the convenience of internationalreaders.

REPORTS

129128


INDEPENDENT AUDITORS’ REPORT ON THE SEPARATE FINANCIALSTATEMENTS ISSUED PURSUANT TO ARTICLE 14 OF LEGISLATIVE

DECREE 39 OF 27 JANUARY 2010

To the Shareholders ofSO.G.I.N. SpA – SOCIETÀ GESTIONE IMPIANTI NUCLEARI

1. We have audited the financial statements of SO.G.I.N. SpA - SocietàGestione Impianti Nucleari (the Company) for the year ended 31 December2011. Preparation of the financial statements in accordance with theapplicable laws and accounting standards is the responsibility of theDirectors of the Company. Our responsibility is to express an opinion onthese financial statements based on our audit.

2. We conducted our audit in accordance with generally accepted auditingstandards. Those standards require that we plan and perform the audit toobtain the necessary assurance about whether the financial statements arefree of material misstatement and, taken as a whole, are presented fairly.An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates madeby the Directors. We believe that our audit provides a reasonable basis forour opinion.

For our opinion on the financial statements of the prior year, presented forcomparative purposes as required by law, reference should be made to ourreport issued on 10 June 2011.

3. In our opinion, the financial statements of SO.G.I.N. SpA - Società GestioneImpianti Nucleari for the year ended 31 December 2011 comply with theapplicable laws and accounting standards and give a true and fair view ofthe financial position and results of operation of the Company as at thatdate.

4. For a better understanding of the financial statements we draw yourattention to the following aspects, which are more fully described in theDirectors’ report on operations:

Electricity and Gas Authority Resolution 57 of 11 May 2009 andResolution 192 of 18 May 2012 provisionally recognised the costsincurred in 2008 and 2011 for fuel reprocessing at Creys-Malville,amounting to €173 million and €37 million, respectively, whilst awaitingan amendment to the decree originally issued by the Ministry ofIndustry, Trade and Crafts on 26 January 2000, as previously providedfor in a ministerial directive of 28 March 2006. The Company is awaitingamendment of the decree;

Electricity and Gas Authority Resolution 115 of 30 March 2012 orderedthe disbursement to the Company of €75 million by 30 June 2012,including €35 million already collected. Based on past experience, theDirectors do not envisage particular financial difficulties, as they believethat the Authority will promptly disburse any additional funds neededto meet the Company’s cash requirements.

5. Preparation of the Directors’ report on operations in compliance withapplicable legislation is the responsibility of the Directors of the Company.Our responsibility is to express an opinion on the consistency of theDirectors’ report on operations with the financial statements, as requiredby law. We have, therefore, carried out the procedures indicated in auditingstandard no. 001 issued by the Italian accounting profession. It is ouropinion that the Directors’ report on operations is consistent with thefinancial statements of SO.G.I.N. SpA - Societa’ Gestione Impianti Nuclearifor the year ended 31 December 2011.

DELOITTE & TOUCHE SpA

Domenico FalconePartner

Rome, Italy8 June 2012

•

•


REPORTS

131


130

INDEPENDENT AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIALSTATEMENTS ISSUED PURSUANT TO ARTICLE 14 OF LEGISLATIVE

DECREE 39 OF 27 JANUARY 2010

To the Shareholders ofSO.G.I.N. SpA – SOCIETÀ GESTIONE IMPIANTI NUCLEARI

1. We have audited the consolidated financial statements of SO.G.I.N. SpA -Società Gestione Impianti Nucleari (the Company) and its subsidiaries (theSogin Group) for the year ended 31 December 2011. Preparation of thefinancial statements in accordance with the applicable laws and accountingstandards is the responsibility of the Directors of the Company. Ourresponsibility is to express an opinion on these financial statements basedon our audit.

2. We conducted our audit in accordance with generally accepted auditingstandards. Those standards require that we plan and perform the audit toobtain the necessary assurance about whether the consolidated financialstatements are free of material misstatement and, taken as a whole, arepresented fairly. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the consolidated financialstatements. An audit also includes assessing the accounting principles usedand significant estimates made by the Directors. We believe that our auditprovides a reasonable basis for our opinion.

For our opinion on the consolidated financial statements of the prior year,presented for comparative purposes as required by law, reference shouldbe made to our report issued on 10 June 2011.

3. In our opinion, the consolidated financial statements of the Sogin Groupfor the year ended 31 December 2011 comply with the applicable laws andaccounting standards and give a true and fair view of the financial positionand results of operation of the Group as at that date.

4. For a better understanding of the consolidated financial statements we drawyour attention to the following aspects, which are more fully described inthe Directors’ report on operations:

Electricity and Gas Authority Resolution 57 of 11 May 2009 andResolution 192 of 18 May 2012 provisionally recognised the costsincurred in 2008 and 2011 for fuel reprocessing at Creys-Malville,amounting to €173 million and €37 million, respectively, whilst awaitingan amendment to the decree originally issued by the Ministry ofIndustry, Trade and Crafts on 26 January 2000, as previously providedfor in a ministerial directive of 28 March 2006. The Company is awaitingamendment of the decree;

Electricity and Gas Authority Resolution 115 of 30 March 2012 orderedthe disbursement to the Company of €75 million by 30 June 2012,including €35 million already collected. Based on past experience, theDirectors do not envisage particular financial difficulties, as they believethat the Authority will promptly disburse any additional funds neededto meet the Company’s cash requirements.

5. Preparation of the Directors’ report on operations in compliance withapplicable legislation is the responsibility of the Directors of the Company.Our responsibility is to express an opinion on the consistency of theDirectors’ report on operations with the consolidated financial statements,as required by law. We have, therefore, carried out the procedures indicatedin auditing standard no. 001 issued by the Italian accounting profession. Itis our opinion that the Directors’ report on operations is consistent with theconsolidated financial statements of the Sogin Group for the year ended 31December 2011.

DELOITTE & TOUCHE SpA

Domenico FalconePartner

Rome, Italy8 June 2012

•

•


produced by External Relations - Sogin

design byImaginali

typesetting and copyediting bypostScriptum di Paola Urbani

printed byNova Tiporom

printed inNovember 2012

This publication is not for sale

SO.G.I.N. - SpASocietà Gestione Impianti Nucleari per azioniRegistered office: Via Torino 6, 00184 RomeRome Companies’ RegisterTax Code and VAT number: 05779721009REA no. 922437 – Registered with the Court of Rome at no. 130223/99A Sole Shareholder CompanyShare capital: €15,100,000, fully paid-up

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