Cons olid ated Fina ncial Stat em en ts - Gruppo · PDF fileCons olid ated Fina ncial Stat em...

ConsolidatedFinancial

Statements december ,

76° Year

api - anonima petroli italiana s.p.a.Registered office: Via Salaria 1322 - 00138 Rome

Share Capital: Euro 115,425,000.00 fully paid inRome Chamber of Commerce and Economic Administrative Roster (R.E.A.) No. 103708

Tax Code and Companies’ Register of Rome No. 00441670585VAT Code 00893861005

A company managed and coordinated by api holding S.p.A.

Call for Annual General Meeting 5

api – anonima petroli italiana S.p.A. - Group organization chart 6

Board of Directors 7

1 Report of the Board of Directors as of 31 December 2009 9

api – anonima petroli italiana S.p.A. 11

The energy and oil scenario 13

Regulatory framework and relations with Institutional Bodies 15

Operations 17

Extraordinary transactions 24

Results from Operations 25

Financial management 30

Personnel 32

IT Systems 33

Activity of the Supervisory Body 33

Implementing the “privacy” regulation 33

Research & Development 33

Treasury Stocks and controlling company shares held 33

Relations with subsidiary and associated companies 34

Main events occurring after year end 35

2 Consolidated Financial Statements as of 31 December 2009 37

Consolidated Statement of Comprehensive Income 39

Consolidated Statement of Financial Position 40

Consolidated Cash Flow Statement 41

Changes in shareholders’ equity items 42

Accounting standards and explanatory notes 44

Explanatory notes to Consolidated Statement of Comprehensive Income 60

3 Report of the Board of Statutory Auditors 99

4 Independent Auditors’ Report 103

5 Statement of Consolidated Accounts 107

6 Summary of key financial data as of 31 December 2009 109

Balance Sheet IAS/IFRS 110

Income Statement IAS/IFRS 111

Summary

The shareholders of “api” – anonima petroli italiana S.p.A. are called to the

ordinary meeting which will be held at the company’s offices in Rome, Via Salaria 1322

at 11:30 on April 30, 2010 in first call, and if necessary, on May 5, 2010 in second

call, same place and time, to vote on the following

Agenda:

1. Approval of the Financial Statements at December, 31 2009;

related deliberations;

2. Conferral of assignment for accounting auditing; related deliberations;

3. Others

Shareholders are entitled to take part in the meeting provided they are recorded in

the Shareholder’s Register at least five business days before the date set for the mee-

ting and their shares have been deposited at the company’s registered office within

the abovementioned deadline.

Rome, 1 April 2010

api anonima petroli italiana S.p.A.

The Chairman of the Board of Directors

dott. Ugo Brachetti Peretti

Published on “Gazzetta Ufficiale”

Insertions’ Sheet no.44

On 13 April 2010 page 56

Call for Annual General Meeting

apimak Sh. pk.Macedonia

52%

100%

100%

50%

7.70%

98.84% 100% 99.99% 99.99%

50%

50% 100% 30% 10%

100% 100%

50% 4.70% 3.12% 2.33% 0.78%

apibenzin d.o.o.Croatia

Marina Fieradi Genova S.p.A.

GenoaImmobiloil S.r.l.

RomeCivita Servizi S.r.l.

RomeSGR S.p.A.

Rome

G.R.C. S.r.l.Rome

Festival S.p.A.Rome

Alpenoil S.r.l.Rome

apifin S.r.l.Rome

SACCNERete S.r.l.

Messinaapisem S.r.l.

LecceDialco S.r.l.

Bari

AbruzzoCostiero S.r.l.

PescaraPetroven S.r.l.

Marghera

api energia S.p.A.Falconara Mar.ma (AN)

Aerdorica S.p.A.Falconara Marittima (AN)

apisoiService S.p.A. in liq.Ancona

apioil ltdBermuda

api services ltdLondon

api anonima petroli italiana S.p.A.Rome

api raffineria di Ancona S.p.A.Falconara Marittima (AN)

BOARD OF DIRECTORS

Dott. Ugo Brachetti Peretti (Chairman)Cav. del Lav. Dott. Aldo Maria Brachetti Peretti (Director)Dott. Ferdinando Maria Brachetti Peretti (Vice Chairman)Dott. Umberto Scarimboli (Managing Director)Sig.ra Mila Peretti (Director)Dott. Claudio Eduardo Capizzi (Director)Avv. Ferdinando Carabba Tettamanti (Director)Dott. Pasquale De Vita (Director)Dott. Fabrizio Liberatori (Director)Dott. Carlo Salvatori (Director)Prof. Avv. Giuseppe Tinelli (Director)

BOARD OF STATUTORY AUDITORS

Prof. Claudio Bianchi (Chairman)Dott. Adolfo Cucinella (Statutory Auditor)Dott. Pier Andrea Frè Torelli Massini (Statutory Auditor)Dott. Mario Casini (Statutory Auditor)Dott. Fabrizio Scanu (Statutory Auditor)

EXECUTIVE COMMITTEE

Cav. del Lav. Dott. Aldo Maria Brachetti Peretti (Chairman) Dott. Ferdinando Maria Brachetti Peretti Dott. Ugo Brachetti PerettiDott. Umberto Scarimboli

INDEPENDENT AUDITORS

Reconta Ernst & Young S.p.A.

MANAGER IN CHARGE OF THE PREPARATIONOF ACCOUNTING DOCUMENTS

Dott. Stefano Cardello

11Report of the Board of Directors

as of 31 December 2009

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Introduction

The Consolidated Report at 31 December 2009 for api anonima petroli italiana S.p.A. has been prepared

in compliance with the International Financial Reporting Standards (IFRS) adopted by the European Union.

In relation to the accounting standards adopted for the preparation of the consolidated financial

statements it is pointed out that the company falls under the scope laid down by letter f) of Art. 2 of

Legislative Decree no. 38 of 28 February 2005, which regulates the exercising of the options provided

for by Art. 5 of Community Regulation no. 1606/2002 in relation to the International Financial

Reporting Standards (hereinafter also "IFRS") and therefore in accordance with Article 3, Paragraph 2

of the same decree, the Company has voluntarily exercised the right to apply the IFRSs adopted by the

European Union for the preparation of its consolidated financial statements, commencing from the

2005 financial year.

The report at 31 December 2009 has been approved by the Board of Directors of api spa on 31

March 2010.

Line-by-line consolidation area and business areas

The consolidated financial statements include the financial statements for the period at 31

December 2009 of api anonima petroli italiana S.p.A. and the following subsidiary companies held

directly or indirectly:

The equity investments in associated companies detailed below were valued under the equity method:

api – anonima petroli italiana S.p.A.

Company name Registered office Shareholders % held Share Capital(Euro/thousand

unless otherwise indicated)

“api Raffineria” di Ancona S.p.A.

(hereinafter referred to as “api Raffineria”) Ancona “api” 100 13,125

api energia S.p.A. Rome “api” 98.84 13,831

“third parties” 1.16

api services limited (United Kingdom) London “api” 99.99 GBP 10,000


apioil limited (Bermuda) Hamilton “api” 99.99

“third parties” 0.01 USD 2 million

Festival S.p.A. Rome “api” 100 560

Dialco S.r.l. Bari “api” 100 10

Alpenoil S.r.l. Rome “api” 100 100

G.R.C. S.r.l. Rome “api” 100 50

apifin S.r.l. Rome “api” 100 600

Company name Registered office Shareholders % held Share Capital(Euro/thousand


Associated companies:

apisoi Service S.p.A. Falconara (An) “api Raffineria” 50.00 260in liquidation “third parties” 50.00

apisem S.p.A. Lecce “api” 50.00 423


Abruzzo Costiero S.r.l. Pescara “api” 30.00 2,995


Saccne rete S.r.l. Messina “api” 50.00 2,200


Consolidated Financial Statements 2009 api - anonima petroli italiana S.p.A. 1111

Concerning the operations of rationalisation of the Group’s structure, refer to the paragraph

“Extraordinary transactions” of this Report.

Other equity investments and equity investments in associated companies regarding which, in the

company’s opinion, the company has no significant influence, are valued under the cost method.

The macroeconomic scenario

In macroeconomic terms, 2009 was marked by a serious crisis of the financial markets and real

economy, peaking with a deep recession that involved the entire global economy, especially in the first

half of the year.

It was only in the third quarter of 2009 that the economic cycle began to show the first signs of

recovery, although with different strengths and intensity in the various geographic areas, with greater

acceleration in emerging countries, Asia especially, and at a slower pace in developed economies.

More in detail, for the United States GDP estimates for 2009 foresee a negative growth equal to -

2.40% (compared to + 0.4% of the previous year); Europe foresees a negative variation in GDP equal

to 3.9%, (compared to + 0.5% of the previous year); initial signs of recovery are starting to be seen

also in Italy but at rate certainly slower than the other European economies. Italy's GDP expectations

for 2009 foresee a drop of almost 5%.

On a monetary front, the central banks also intervened to support markets, both with “traditional”

manoeuvres of expansive monetary policy, and through “unconventional” measures (quantitative

easing) of exceptional nature, the latter adopted particularly by the FED to guarantee liquidity in the

system, through the purchase of assets on the market (in particular treasury bonds) and “toxic

securities”.

Specifically, the ECB took, through four successive interventions, the interest rate reductions from

2.50% at the start of 2009, to 1 % in the meeting of 7 May, leading to a sharp drop in short-term

interest rates during all of 2009 and in particular in the first six months of the year; specifically the 3

month Euribor, the reference benchmark for financing transactions, fell from 2.859% at the start of

January to the minimum of 0.70% of last 30 December, a reduction of about 76%.

The American Central Bank, instead, maintained the FED FUNDS at minimum historical levels

between 0% and 0.25%, also repeating in the year end meetings that the rates will remain at

exceptionally low levels for a long time to come and that the initial manoeuvres will concern the

withdrawal of the liquidity (exit strategy) introduced in the system through unconventional policies.

This strategy, whose terms and extent are still unclear, will consist in a gradual “release” of the

assets previously acquired in a way to drain liquidity from the market. This manoeuvre should

correspond a progressive raising of interest rates.

In the currency markets in the first months of the year, an appreciation of the dollar compared to

the euro was witnessed until reaching the level of 1.2555 on 3 March, since the US currency was

considered as a “refuge currency” in a phase of strong aversion to risk after the failure of Lehman;

however, starting from April, the lower tension in the financial markets, accompanied by a return of

“risk appetite” led to an inversion of the trend, with the Euro/Dollar traded up to 1.5120 on 3

December last year (highlighting a depreciation of about 20% compared to the maximum levels of

March); this proves how during the year the currency markets were greatly influenced by the risk and

the performance of financial markets rather than the macro economic fundamentals, based on which

the Euro is certainly overvalued; the American economic cycle showed a faster recovery compared to

the European one during 2009, since the monetary policy and economic interventions implemented

api - anonima petroli italiana S.p.A. Consolidated Financial Statements 20091122

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were more incisive and intense compared to those adopted by the European Central Bank and the

Governments of the member countries.

Towards the end of the year, the difficult problems of public finance experienced by some countries

in the Euro zone, and particularly those under the PIGS acronym (Portugal, Ireland, Greece and Spain),

led to a new appreciation of the dollar, exchanged at 1.4276 last 23 December.

Concerning the commodities market, the price of the Brent BWave in the very first months of the

year held between 40 and 50 $/barrel, to then rise starting in May until the maximum level of 79.59

$/barrel on 18 November last year, thus appreciating by about 99% from the start of the year. This

increase reflected the strengthening in the demand of crude oil, especially from China.

Rising during the year was also the price of gold, which reached the average level of 974 $/ounce

(872$/ounce in 2008), with a peak of 1,215 $/ounce reached on 2 December 2009.

THE ENERGY AND OIL SCENARIO

The International Market

On average at the end of 2009 the Cif cost of crude oil imported in OECD countries

was expected at 60.3 $/barrel, against 97.2 of 2008 and 69.3 of 2007, down by 36.9 $/barrel. In

percentage terms, the decrease was about 38%.

In 2009 the total demand for oil recorded its second decline in the last twenty five years with 84.9

billion barrels/day, down 1.5% (1.3 million barrels/day) from 2008, compared to average growth of 1.3

million from 2000 to 2007.

The requirements of OECD countries were 45.5 million barrels/day, a 4.4% decrease compared to

2008, with a weight on the total of about 54% (versus 63% in 2000). Non-OECD countries’

requirements were 39.4 million barrels/day, a 2.0% growth with a weight on the total of 46%

(compared to 37% in 2000).

Asian countries continued to lead the demand from non-OECD countries (+4.6%) and China in

particular (+7.2%), while in the former Soviet Union consumption dropped significantly (-5.7%).

Growth in Asia did not, however, completely offset the decline in industrialised countries, led by the

United States, which declined 0.7 million barrels/day, or 4.0%.

The cut in supply by OPEC countries at the start of the year, to support prices, led to the total supply

in 2009 to reach 84.9 million barrels/day, -1.9% compared to 2008. Supporting the decrease were the

OPEC countries (especially Saudi Arabia), while the other countries responded with an increase of 0.5

million barrels/day.

International prices for products were also impacted by market tensions in 2009. Their performance

affected the price of crude oil, translating into a fall in refining margins.

The yearly average Platts quotations of gasoline stood at around 590 dollars/tonne compared to the

843 dollars/tonne of 2008, while the average prices of diesel were 542 dollars/tonne compared to the

954 dollars/tonne of 2008.

Starting from the first quarter of 2009, prices for both products rose. The fourth quarter saw an

increase of 41% for gasoline and 24% for diesel compared to the first quarter.



The Italian Market

In 2009 Italian energy consumption reached 175.7 million tonnes of oil equivalent (TOE), with a

drop of 6.1% versus 2008, in the presence of a GDP reduction of 4.9%. A similar energy consumption

to the one of 1998. The reduction especially concerned natural gas (-8.0%), oil (-6.6%) and coal (-

20%). The consumption of electricity recorded a drop of 6.4%, while net imports (+11%) and

renewables (+13.7%) rose.

Further increases in energy efficiency, already at the highest level in thirty years, were more the result

of the decline in industrial and transportation demand following the economic crisis than a

rationalisation in consumption, which is, however, occurring.

Coverage of the national requirement has been guaranteed to a level of 41.6% by oil, one

percentage point less than in 2008 (57% in 1990); 35.9% by gas; 9.2% by solid fuels. Renewables, the

weight of which on the total is presently 8.7%, due to growth in wind, photovoltaic and hydroelectric

production, grew by 8.6%.

Petroleum product consumption is estimated to have been 75.1 million tonnes, a decline of 6.6%,

or 5.3 million tonnes, with respect to 2008. Gasoline continued the decline that began in 2004,

dropping a further 442 thousand tonnes. The sum of gasoline and diesel shows a decrease of 2.8%

compared to 2008 value (gasoline –4.0%; diesel -2.3%). Fuel oil for thermoelectric use heavily lost

ground with minus 17.6% (-0.5 million tonnes). Heating diesel amounts to slightly less than 2 million

tonnes, posting a decrease by 2.4% .

In 2009, the refining system had an actual capacity of 106 million tonnes, following the review of

some existing plant engineering structures. In the aggregate, 82% of the plant’s capacity was used (as

far as crude oil and semi-finished products imported are concerned). Refining amounted to a total of

86.4 million tonnes (-8.7%). In terms of raw materials processed, both crude oil and semi-finished

products declined (-7.8% and -18.9%, respectively). Also product exports felt the crisis, with a drop of

2.5 million tonnes (-8.6%).

The energy bill from petroleum products in 2009 will settle at 20.5 billion Euro, approximately 1.2 billion

less than in previous year. The depreciation of the euro did not reflect the entire sharp re-dimensioning of

the quotations of the crude oil imported (-37.2%). In fact, had the exchange rate been the same as last

year’s, the bill would have been about 19.4 billion Euro, therefore lower by 1.1 billion Euro.

The energy bill is estimated to drop by approximately 18.4 billion Euro compared to 2008, close to

41.4 billion Euro (-30.7%). This corresponds to 2.7% of GDP (3.8% in 2008). Oil makes up 50% of the

total outlay, while gas represents 39.5% compared with 27% in 2000.

The industrial price of products over the year followed the fluctuations in international markets, with

the highest increases in the second and third quarters. The average price of gasoline was 0.385

Euro/litre in the first quarter (-33.4% with respect to the same period of 2008) and 0.502 in the third

quarter to then drop to 0.497 in the fourth quarter. In particular the growth from January 2009 to

December 2009 was 36.6%.

The same more or less applies to diesel, which rose from 0.447 Euro/litre in the first quarter to 0.494

(+10.5%) in the third. In particular, the difference reduced in comparison to gasoline, which in

December had almost nullified as compared to values at the beginning of the year, when it nearly

reached 10 cents. The short but constant rise also continued in the fourth quarter. The price of 0.504

in the fourth quarter was 13% higher than the first quarter.

For both gasoline and diesel the variations experienced in the industrial price for the entire year 2009

were in line than with those recorded in the corresponding Platts values in terms of Euro/litre and

showed reductions more than completely absorbed by the international prices.

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Globally, the average industrial price of gasoline showed a decrease of 0.126 Euro/litre with respect

to 2008, in line with Platts quotations, while diesel fuel showed a decrease of 0.221 Euro/litre faced

with a slight drop lower than Platts.

The average consumption price of gasoline was 0.149 Euro/litre lower than 2008, while diesel was

lower by 0.262.

Finally, the total inland revenue on mineral oils in 2008 was approximately Euro 33.6 billion, a drop

of 7.6% with respect to 2008. A result due to the sharp drop in VAT revenue caused by slashed prices.

These revenues were seriously affected by the reductions in tax revenue from excise taxes (-3%) caused

by drops in consumption, particularly gasoline (tax revenue down more than 4%).

REGULATORY FRAMEWORK AND RELATIONS WITH INSTITUTIONAL BODIES

Regulations on Co2 emissions

In implementing the National allocation plan of the CO2 quotas for the period 2008-2012 (PNA2),

api raffineria di ancona s.p.a. was assigned in 2009 free-of-cost a quota equal to 462,932 tonnes,

insufficient to cover its emissions.

The deficit was partially offset by recovery of quotas resulting from sale of liquefied carbon dioxide

to SOL, produced by the new CO2 recovery plant that began operations at the beginning of the year.

The difference (equal to 49,522 tonnes) will be met through quotas to be covered on the

international Emission Trading market.

For the IGCC plant the CO2 quota deficit for 2009, net of 181,847 tonnes freely assigned by the

National Plan to api Energia, was estimated at 1,255,606 tonnes. This quantity is definitely lower than

the emissions of 2008, due to the stoppage of the plant for inspection “C” of the Gas Turbine from 20

April to the beginning of June 2009. The quantities acquired, net of the surplus deriving from 2008

equal to 60,606 tonnes, were 1,195,100 (of which about 35,000 CER certificates).

The value of the CO2 emissions ascertained in 2009 and communicated by the DNV Certifying Body

was 1,423,227 tonnes and therefore there was a surplus for 2009 of about 15 thousand EUA. This

surplus will be carried forward to 2010.

In accordance with resolution 77/08 of the Authority for Electric Energy and Gas that sanctions, for

the CIP 6 plants, the reimbursement of the costs for the purchase of the additional emission quotas

compared to those assigned, in May 2009 a claim for reimbursement for 2008 was presented and

accepted by the AEEG on 19 October 2009, for a value of Euro 29,974,144, calculated on an average

price of 22.66 Euro/tonne for the EUAs and 16.82 Euro/tonne for the CERs, against a costs of Euro

29,799,073 including the transaction fees. The same procedure will be carried out for the claim of

reimbursement of the costs incurred in 2009.

Biofuels

In June, directive 2009/29/EC of the European Parliament and the Council was published in the

Official Journal of the European Union, which must be absorbed in the national law by 2010, providing

for the obligation to distribute energy from renewable sources in transportation by 2020, equal to at

least 10% of the consumption of gasoline and diesel for automotives in the European Union.



It should be underlined that for 2009 this obligation to use biofuel was 3% of the total gasoline and

diesel sold for carburation use; in addition, there is the possibility that from August (law no. 99 of 23

July 2009) diesel–biodiesel mixtures will be able to be made with a biodiesel content up to 7%.

Environment

During 2009, 4 directives (directives “20-20-20”) of the European Parliament and the Council were

published in the Official Journal of the European Union, which must be absorbed in the national law

between the end of 2010 and the end of 2012, concerning:

■ the already mentioned regulation on the mandatory use of biofuels at a minimum of 10% of the

national consumption of gasoline and diesel, as well as the promotion to use energy from renewable

sources with an obligation of 20% of energy deriving from renewable sources, over the total energy

consumption of the Community within 2020 (Directive 2009/28/EC);

■ the extension and perfecting of the community system for the exchange of greenhouse gas emission

quotas (Directive 2009/29/EC);

■ the modification of the specifications concerning gasoline, diesel fuel and diesel as well as the

introduction of a mechanism aiming to control and reduce the emission of greenhouse gases

(Directive 2009/30/EC);

■ the creation of the geological storage system for carbon dioxide (Directive 2009/31/EC).

Production of electricity

At the end of the year, in implementing art. 30, paragraph 20 of the above mentioned Law no. 99

of 23 July 2009, the Ministry for Economic Development revised, upon the proposal of the Authority

for electricity and gas, a decree that establishes the mechanisms for the early and voluntary resolution

of the so-called Cip 6 conventions, concerning the plants powered by process fuels , residues or energy

recovered and similar plants powered by fossil fuel. Checks are underway on the technical methods to

continue the production of electricity.

Provisions on tax matters

Law no. 99 of 23 July 2009 provided for the increase of the additional IRES (corporation tax) from

5.5 to 6.5% (so-called Robin Hood tax).

Decreed Law no. 135 of 25 September 2009 amends the consumption tax on lubricant oils. Starting

from 26 September 2009 the consumption tax on first distillation and regenerated lubricants is € 750

per 100/kg. Previously it amounted to € 842 per 1000/kg for first distillation oils and 50% of that

foreseen for first distillation oils for regenerated oils.

Consolidated Financial Statements 2009 api - anonima petroli italiana S.p.A.

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1177

Mandatory Oil Stocks

In the Official Journal of the European Union of 9 October 2009, the Directive 2009/119/EC of the

Council of 14 September 2009 was published, which must be absorbed in the national law by 31

December 2012, which establishes the obligation for the member states to maintain a minimum level

of stocks of crude oil and petroleum products. In this way the European Council believes to improve

the security of supply for the European Union by including, among other things, a review of the

mechanisms concerning the Union’s petroleum reserves, especially concerning availability in case of

crisis. This objective envisages a realignment between the community system (based on the valuation

of internal consumption) and that of the AIE (based on the valuation of net imports of crude oil and

petroleum products).

Fuel distribution network

Worth mentioning is the Government initiative aimed at restructuring the oil industry to involve all

the production phases from refining to distribution. Initially the proposal was designed as an

amendment to community law 2009. Subsequently, at the start of 2010, the Ministry for Economic

Development opted for a sharing approach with all the entities involved, giving rise to discussion groups

that will shortly formulate reform proposals.

OPERATIONS MANAGEMENT

INTEGRATED DOWNSTREAM

Supply

During 2009, 6,787,400 tonnes of raw material, semifinished and finished products were acquired

for refining, commercial and trading activities: a lower quantity compared to that purchased in 2008

(7,682,500 tonnes).

Raw materials from both forward and spot transactions were purchased totalling 2,851,400 tonnes

by our subsidiary apioil limited, operating in the trading industry (3,412,500 tonnes in 2008).

Industrial activity

The processing rate recorded in 2009 was 3,500,000 tonnes of raw material (3,335,400 of crude

oil, 57,000 of Straight Run and 107,600 of light distillates), lower by 183,100 tonnes compared to

2008.

Despite an availability of plants exceeding that of the previous year with a potential of about

3,870,000 tonnes, processing was conditioned by technical and economic issues such as the

international situation of the petroleum product prices and the cost of crude oil, which resulted in

negative refining margins for 2009 and suggested a reduction in processing in the second half of about

200,000 tonnes, compounded by the problems of the “gasoline circuit” occurring in the first quarter

of 2009, which caused about 170,000 tonnes not to be processed.


Concerning the activities on the Alma Refinery, in the period in question the crude oil processed

totalled 103,500 tonnes (vs. 132,000 in 2008), in line with the volumes extracted by the producer, and

105,900 of residual semifinished products (vs. 96,000 of the previous year).

The production parameters of the IGCC plant highlight a lower availability of the plants (for the

expected ten-year inspection) compared to 2008: 2009 records a total production of 2,030,430 MWh,

lower by 152,273 MWh to that of the previous year.

Logistics

The figures for 2009 show a slightly better market performance than the previous year, especially in

the second half when the signs of a recovery already felt in the second quarter were confirmed.

The bases of Marghera and Ravenna experienced a different trend, with the sales of diesel fuel on

the wholesale channel being limited with a view to safeguarding the profitability.

In terms of secondary logistics, despite the difficulties faced to limit the drop deriving from the

downturn in unit volumes per point of sale and the financial hardships experienced by customers, the

performance was in line with expectations and the consolidated figures of 2008 both in terms of cost

and operations.

Concerning mandatory stocks, the situation has improved in comparison to 2008 as a consequence

of the reduction in interest rates.

Commercial Activities

Retail Sector

In 2009 the Italian retail sector (gasoline and diesel) recorded a 1.09% drop over 2008. This

contraction is due to the negative trend in gasoline consumption (-3.76% compared to 2008), only

partially offset buy a slight increase in diesel (+0.86% compared to 2008).

Margins were under significant pressure throughout the year due to the prices of petroleum

products on international markets.

The main events for 2009 in the Italian retail sector were the following:

■ increased impact of discounts to the public;

■ greater competition regarding contract agreements;

■ increased number of stores set up by private entities that increasingly focus on selling their own

brand, so-called “white pumps”.

As regards the api-ip network, 2009 was characterised by a development of the re-branding process

started in 2008 with the creation of the new IP brand, with 1,610 rebranded stores and thus exceeding

the set objective of 1,430.

As significant was the policy of discounts to the public granted on our network via pricing initiatives

that placed our stores in a better competitive position. In this regard, worth mentioning is the

promotion for the month of August involving motorway stations “Fridays and Saturdays -11 cents”,

supported by a national communication campaign via radio, the press and internet.

In terms of overall volumes of the Fuel Cards, CartaMaxima contributed with record breaking

volumes, thus offsetting the loss of the ENI Multicard and the lower euroShell sales. In percentage

terms, the increase in volumes due to the Fuel Cards was 2% compared to 2008.


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The annual sales of gasoline and diesel fuel of the api-IP network were equal to 3,410 million litres,

i.e. 0.15% more than in 2008. The total for fuels (including LPG) was 3,526 million litres, equal to

+0.69% over 2008.

In 2009 the api Group recorded an overall performance better than the market (+1.24% for

gasoline and diesel), thus increasing its market share by 0.12% compared to 2008 (9.83% vs 9.71%).

The trend for lubricant sales in the Italian market over the year saw a notable decline following the

negative trend of past years and highlighting a serious crisis in this segment. The 2009 result was

–17.7% (9,300 tonnes compared to 11,400 tonnes of 2008), confirming the slowdown caused by

known and consolidated reasons (renewal of working car/truck fleet, engines upgrades, product

evolution, leasing fleets, etc.) and a related partial shift of volumes to garages and dealers, factors

which were all exacerbated by the economic crisis.

Sales of lubricants on the api-IP network in 2009 stood at 1,268 tonnes, down by 7.9% over 2008.

In a heavily decreasing market (-17.7% vs 2008), our share market moved from 12.2% to 13.6%.

The Marketing area began important initiatives during the year. These include the new campaign

Passioni & Regali (Passions and Prizes) and two short-term promotions (Bicchieri d’Italia in June and

Ippys in November) as part of Promotions and Loyalty.

Furthermore, the Business Training School in Falconara continued its activities and involved

approximately 600 operators, also by touring Italy.

Worth mentioning is also the project “electronic vouchers” (prepaid and non rechargeable fuel cards

with scalar consumption).

In the partners network sales organisation, activities continued to focus on renewing the

agreements, corresponding to 110 contracts, 416 stores and more than 293 million litres in terms of

volumes. During this period, 17 contracts, worth 44 million litres and concerning 97 stores were not

renewed. Finally, 31 new contract agreements were stipulated, corresponding to 184 stores for

approximately 190 million litres.

During the year, significant technical interventions were made on the network to create 11 new

stores and restructure 16 existing stores.

Following the awarding of tenders in 2008, the api group’s motorway network passes from 19 to

26 stations. Four more motorway stations will also be active in 2010 (Vesuvio, Ofanto, Ponte nelle Alpi

and Piscina Sud).

At 31 December 2009 the api group network consists of 4,205 stations, 26 of which on motorways,

1,222 owned and 2,957 under contract, 630 of which with Retitalia.

Non-oil sector

Restaurant services linked to the oil industry recorded downward consumption also in 2009. In terms

of development and turnover, the network grew by passing from 130 stores in 2008 to 142 at the end

of 2009. The sales of the Festival chain increased from Euro 11.2 million in 2008 to Euro 11.7 million

in 2009 (+4.35%).

With regard to the lines “ShopIn” and “Festival Express”, development activities continue by

improving the training of our operators via specific courses held at the Business Training School, in

addition to increasing the number of stores, particularly due to the recently acquired motorway stations

that are fitted to host these formats. We are also developing specific products for operators, thanks to

the assistance of specialised suppliers.


WHOLESALE SECTOR

DIESEL

The market as a whole, excluding the bunker channel, ends the year 2009 with a downturn

compared to 2008, with a drop in demand equal to 661,000 tonnes (4.69%), despite showing a

recovery in the last quarter, exclusively attributable to the automotive diesel fuel.

The negative effects of the credit and economic crisis under way in Italy were consolidated, despite

some early signs of recovery in the last part of the year. More in detail, a loss was recorded in the

automotive diesel fuel equal to 6.92% over 2008, with signs of recovery in the last quarter of the year,

in line with the aforementioned signs of growth in the industrial sector and more generally in heavy

road transport.

A negative value continued to be recorded for heating diesel fuel, -2.48%, substantially attributable

to the mild temperatures recorded until October, and overall positive values for agricultural diesel

(+1.76% yoy) and marine diesel (+7.02% yoy).

The prices of crude oil and finished products, though mitigated by the depreciation of the dollar,

which improved in the last part of the year, continued to steadily grow, producing a negative impact

on margins and non-performing financial positions.

In this context, api recorded an overall quantitative performance lower than the market (-6.80%),

implementing a policy aimed at defending margins, especially on the sales from logistic bases in the

north east, and containing financial exposures to protect the credit quality. Overall margins were lower

than the set budget objective.

Automotive diesel fuel and (-7.29%) agricultural diesel fuel (-9.65%) were negative, while heating

diesel fuel and (+2.08%) marine diesel fuel (+3.85%) increased.

The market share, net of bunkers, decreased slightly.

BITUMENS

In 2009 the market recorded an additional downturn in demand compared to 2008 for 136,000

tonnes, equal to -5.68%, thus confirming the negative trend already experienced during 2008

(234,000 tonnes less, equal to -8.98% vs. 2007). This negativity is to be found in the road section,

where public tenders did not take off, and in the industrial segment, which is directly linked to the real

estate market and particularly to the deadlock experienced in the construction industry.

On the contrary, api saw steadily increasing sales (+11.31%), also thanks to the increased use of

exports by some competitors, with a positive effect on the market share.

Margins exceeded expectations, thus confirming the better profitability of the segment as compared

to the carbon fuels segment.


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LUBRICANTS

The market confirmed a heavy drop equal to 20.09% over 2008, despite a mild recovery in the last

quarter, which is substantially attributable to the timid signs of recovery of the industrial segment and

retail businesses.

Customers continue to show signs of general financial distress, with a high credit risk for the entire sector.

For api sales decreased by 6.68% vs. 2008. The recovery means a significant increase in the market share.

Sales for apilube and IP went down compared to 2008 by 3.6% and 11.3% respectively; the drop

is substantially attributable to the destocking of large resellers occurred in the first part of the year and

the block of some major customers due to credit problems.

The objective of increasing the market share was pursued both by constantly searching for new

customers, especially in northern Italy, and by increasing sales to already acquired customers. In the

South, the goal was to optimise the customer portfolio by ending commercial relations with potentially

insolvent customers. The presence of sales agents was strengthened and rationalised in northern Italy,

with 9 more staff.

Exports improved by about 65% in comparison to 2008, due mainly to the increased sales to foreign

customers, the recovery of sales in the Greek market and the acquisition of a new customer in Bulgaria.

LPG

In 2009 the LPG combustion market recorded a drop in the combustion sector and a significant rise

in the automotive diesel fuel sector. In the first case the drop of 3.1% was affected by the economic

crisis in progress and the consequent drop in consumption and industrial production; while in the fuel

segment the increase was 9.5%, driven by government incentives and the low cost of gas compared

to other fuels, which led to a strong growth in the number of cars fuelled by LPG.

api sales in the “combustion” channel recorded a 4.5% increase compared to the previous year,

with a positive difference compared to the market of 7.9%. This market fall, despite the choice of

minimising development in the segment of large industrial plants of high supply level, heavily penalised

by the economic crisis and the uncertainty of return on investments, affected the expected results.

Although the cost of raw material began to rise continuously from the second half of 2009 compared

to the previous year, reaching the maximum records of 2008, a precise management of pricing in the

first months of the year allowed to overcome the set targets, both at a unit and overall level.

During the year, LPG sales to wholesalers basically respected the production cycles of the Refinery

and all the 44,833 tonnes available (30% less than 2008) were used.


ENERGY

Plant performance

The percentage of operating hours of the plant for 2009 was 86.8% of total hours.

Maintenance activities, carried out according to the programme, were characterised by the ten-year

general inspection and the type “C” inspection of the Gas Turbine. They were carried out between April

and May (20 April – 31 May), with 2 days ahead of schedule compared to the 45 planned.

During this stoppage, the General Revision of the Steam Turbine was performed, with significant

interventions on the compressors of the air fractioning plant and the replacement of the refractory in

both gassifiers and other changes aiming to improve the reliability of the plant.

In 2009, the plant produced electricity totalling 2,030,487 MWh (2,182,705 in 2008) and 423,107

tonnes of steam (of which 83,247 high pressure, 241,903 medium pressure and 95,957 low pressure).

Significant events

Among the main development projects, worth mentioning is the completion of the investment

concerning the new pre-heating system Refinery Tar with Steam HPS. This project began in January 2008

and consisted of the installation of a heat exchanger and related safety controls and systems with the

purpose of improving pre-heating efficiency and recovering the small portions of tar inflows to the IGCC

plant. Downstream of Inspection “C” (June 09) the new system was put into service.

The preparatory engineering activities to restore the storage tank of the ChargeOil (TK39) that had

began in March 2008 were completed.

Concerning the evolution of the regulations on the Avoided Fuel Cost (CEC), we report that at 30

September 2009 a ministerial decree was published for the determination of the CEC, with reference to

the calculation methods already mentioned within resolution no. 249/06, with some methodological

novelties.

The forecast CEC value, which was first indicated and applied by the AEGG at the start of the year,

is now updated by the Ministry of the Economic Development for each quarter (starting from 30

September) and its application is immediate for the entire subsequent quarter (October - December

2009). The content of the decree reflect what is established in resolution no. 249/06, while the next

resolution no. 154/08 is still to be judged by the State Council;

In January 2010 a new publication was expected of the value of the CEC by the Ministry for the

period January - March 2010; while waiting for this provision in agreement with the GSE the value of

the previous quarter was used.

Concerning the Green Certificates at the Falconara plant, a series of checks and inspections were

carried out by the Inspectorate for the Compensation Fund for the Electricity Sector (CCSE) concerning

the assessment of the compliance with cogeneration criteria and all the standards concerning the plants

included under legislation CIP6/92. The CCSE Inspectorate acknowledged the cogeneration for all the

years, excluding 2002 and 2003, on completion of the meetings with the AEEG and the presentation of

our explanatory reports. Therefore in the current state api energia must sell the green certificates

purchased in 2006, for an amount (net) of euro 5.4 million; purchase them for euro 3.6 million for the

years 2002/2003; ask the CCSE for a reimbursement for the years 2002/2003 of euro 2.2 million.

Finally, as regards the White Certificates, upon the approval by the GSE of the energy saving project

for the consumption of electricity through the use of the Syngas Expander, on 31 January 2009,


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apienergia presented the GSE a request to acknowledge the energy savings for the period 2007 - 2012.

During 2009, 6,126 white certificates were issued of which 5,486 repaid for an amount equalling

Euro 234,358 while 640 securities approved by the AEEG and still in the sales phase will mean an

estimated revenue of about Euro 43,000.

Still in the approval phase by the ENEA, (entrusted by the GSE) is the energy saving project due to the

use of the inverse pump (0.4 MW) in the Selexol unit.

Research & Development

Within the internal research and development activities, on 24 March 2009 some tests were carried

out on the IGCC plant in the presence of CESI and GSE with the aim of arranging an hourly budget for

the energy produced in co-gasification in a way to be able to calculate the energy production deriving

from renewable sources in the various hours of the day. Successful operation tests were performed with

mixed fuels (8% vegetable oil / 92% Tar) further showing that the IGCC plant can operate as a hybrid

plant.

On 5 June 2009 the GSE officially assigned our plant the “IAFR” qualification with the recognition of

Green Certificates for just 50% of the energy production deriving from the use of biofuel. This position

derives from the failure to recognise the start-up of our plant as a hybrid plant prior to the publication of

the decree of 18 December 2008.

api energia sent a communication to the GSE to ask it to reconsider its position so that 100% of the

Green Certificates can be recognised, having shown to already be a hybrid plant starting from January

2008 after the positive assessment of General Electric in December 2007. It also subsequently lodged an

appeal with the regional court of Lazio.

From a technical point of view, a detailed engineering study is being completed to define the

equipment necessary in the refinery to provide the Falconara site with the sea transport supply system

(landing stage or island) for vegetable oil, tank farms (refinery tank to be modified or updated).


EXTRAORDINARY TRANSACTIONS

During the year, with the purpose of rationalising the group’s structure, the following extraordinary

transactions were carried out:

■ with resolution of 18 March 2009 the Extraordinary Meeting of api raffineria s.p.a. approved the

merger by incorporation with the Luxemburg registered apioil international S.A. pursuant to

Legislative Decree no. 108 of 30/05/2008. The merger was stipulated on 10 September 2009, and

produced its juridical effects from 1 October 2009;

■ to complete the procedure started in January, on 28 July 2009 with notary deed drawn by notary

Marina Fanfani rep. 57647/16614, the merger by incorporation was perfected for the company

PANOIL S.r.l. single member company resolved on 31 March 2009 by the Board of Directors;

■ on 17 December 2009, with notary deed drawn up by notary Giacomo Spagnuolo rep. 2657/1416,

the merger by incorporation was perfected for the single member company Ca.l.gas., resolved on

23 September by the Board of Directors;

Worth mentioning is that the above mentioned transactions have not affected the Result for the

year or the consolidated shareholders’ equity.

Finally on 28 April 2009, the partial proportional spin-off, started in 2008 and approved by the

shareholders on 23 January 2009 was perfected, which transferred from the parent company to the

beneficiary, api real estate S.r.l., balance sheet elements in addition to those already transferred in the

partial proportional spin-off of 2005, creating strategic value in property management activities.

For details of the effects of this transaction on the consolidated net equity, refer to the Explanatory

Notes of these financial statements.


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RESULTS OF OPERATIONS1

Selected financial data and by business sector

Revenues from core operations

At 31 December the company showed revenues of Euro 2,841 million, lower than in the same

period of the previous year (Euro 3,924 million at 31 December 2008) due to the combined effect of

the decrease in prices and in volumes sold.

1 As a result of rounding into thousands or millions, the figures in the tables may not correspond to each other and the totals may correspondto the sums of the various components for some units (thousands or millions).

Euro/million 31.12.09 31.12.08

Total revenues (1) 2,841 3,924EBITDA 118 143EBIT 22 42

Total revenues from core operations:Refining and marketing (1) 2,682 3,744Energy 256 305Corporate 11 2Intersectorial revenues -107 -127TToottaall 22,,884411 33,,992244

EBITDA:Refining and marketing 53 69Energy 101 115Corporate -35 -41TToottaall 111188 114433

EBIT ex inventory and extraordinary expenses:Refining and marketing 9 169Energy 101 115Corporate -35 -41TToottaall 7744 224433

EBIT:Refining and marketing -8 1Energy 66 82Corporate -37 -41TToottaall 2222 4422

EBIT ex inventory and extraordinary expenses:Refining and marketing -51 102Energy 66 82Corporate -37 -41TToottaall --2222 114422

Net debt (2) 796 812

(1) net of excise tax and trading(2) net of cash at bank and in hand


EBITDA

At 31 December the company reported an EBITDA of Euro 118 million, Euro 25 million less than in

the same period of the previous year (Euro 143 million at 31 December 2008).

The decline compared to EBITDA in 2008 is mainly due to the combined effect of the following

extraordinary factors:

■ lower refining and sales margin due to a particularly unfavourable oil market scenario;

■ the variation in international prices for petroleum products which has led to an increase in the price

of crude oil and products in the warehouse resulting from application of the average weighted cost.

This increase, calculated as the difference between the valuation at the end of the financial year and

the valuation at the beginning of the financial year of the quantities still held in stock at the end of

the financial year, added to the provision to the warehouse write-down provision, resulted in

inventory profits of Euro 63.3 million (compared to losses of Euro 100.4 million at 31 December

2008);

■ extraordinary costs for the rebranding of points of sale equal to 19.5 million.

EBITDA in 2009, adjusted to take into account the inventory effect and the rebranding costs, is Euro

74 million, Euro 169 million lower than the rectified EBITDA of the same period of the previous year

(Euro 243 million as at 31 December 2008).

EBIT

At 31 December the company reported an EBIT of Euro 22 million, Euro 20 million less than in the

same period of the previous year (Euro 42 million at 31 December 2008).

The movement is due mainly to the reasons described above.

31.12.09 31.12.08

Investments Euro/million 71 78

Employees at period end No. 945 907

Supply & Trading tonnes 6,787,400 7,682,500

Refinery processing tonnes 3,709,000 3,911,000

Retail sales tonnes 2,713,000 2,695,000

Wholesale Sales tonnes 1,786,000 1,842,000

Other Sales (1) tonnes 256,000 323,000

Production MWh 2,030,487 2,182,705

Stocks of raw materials and products tonnes 743,002 874,110

(1) include sales to oil companies and export sales


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RESULT for the period net of taxation

The loss at 31 December, net of taxation, amounts to Euro 6.4 million, against Euro 18.4 million in

2008.

In the period under examination, the company showed taxation of Euro 3.7 million, consisting of

costs for current taxes of Euro 8.7 million (Euro 3.1 million of which for IRAP and 5.5 million for IRES),

revenue from the release of deferred tax provisions of Euro 4.5 million, as well as increases in prepaid

taxation of Euro 0.4 million.

IRES was calculated by applying, in addition to the ordinary rate of 27.5%, an additional 6.5% for oil

and energy sector business with revenues greater than Euro 25 million, pursuant to art. 81 of Legislative

Decree no. 112 of 25/06/2008, amended by art. 56, paragraph 3 of Law no. 99 of 23 July 2009.

BUSINESS SECTORS

Analysis of the trend for the year in detail by sector, with respect to the same period of 2008, shows

the following:

Refining and Marketing

Main results for the period

-

Refining

The api Group carries out refining activity through the Falconara Refinery and, for certain special

processing, through a processing account with the Alma Refinery, owned by third parties.

The overall refining capacity of the api Group totals around 4 million tonnes of crude oil per year.

Euro/million 31.12.09 31.12.08

Revenues from core operations 2,682 3,744

Intersectorial revenues -101 -119

Revenues from third parties 2,581 3,625

EBITDA 53 69

Amortisation and depreciation and write-downs -60 -68

Operating profit (loss) -8 1

Ex inventory results

Euro/million 31.12.09 31.12.08

EBITDA 9 169

Operating profit (loss) -51 102

31.12.09 31.12.08

Processing at api Refinery in Falconara tonnes 3,500,000 3,683,000

Processing at Alma Refinery in Ravenna tonnes 209,000 228,000

Refinery processing tonnes 3,709,000 3,911,000

api Refinery Processing margin $/barrel -1.7 6.5


At 31 December 2009 processing totalled 3,709 thousand tonnes, decreased as compared to the

processing of same period of the previous year (3,911 thousand tonnes at 31 December 2008).

Processing at the subsidiary api Raffineria di Ancona was lower than 2008, due to a particularly

unfavourable oil situation which led to reduced processing in the second half of the year and problems

in the gasoline circuit in the first quarter of 2009.

Processing at the Alma Refinery in Ravenna was slightly lower than 2008 due to limited availability

of Sarago crude oil.

At 31 December 2009 the refining margin was -1.7 $/per barrel, decidedly lower than the margin

for the previous year (6.5 $/per barrel at 31 December 2008) mainly as a result of the less favourable

industry scenario.

Marketing

The api Group markets petroleum products under the api and IP brands, both in the so-called Retail

channel, through points of sale, either owned or contracted, located on ordinary road and motorway

networks, and through the so-called Wholesale Channel, with sales to wholesalers and resellers, and

marginally, through export sales by ship (so-called cargo market) and to other oil companies.

The marketed volumes are reported below:

At 31 December 2009, a total of 4,755 thousand tonnes were sold, less than the prior year (4,860

thousand tonnes at 31 December 2008).

Retail sector

At 31 December 2009 retail sales were 2,713 thousand tonnes (of which 1,638 thousand tonnes

under the IP brand), up from the same period in the previous year (2,695 thousand tonnes at 31

December 2008, of which 1,453 thousand tonnes under the IP brand), despite negative market trends,

thanks to targeted marketing campaigns and the stipulation of new contract arrangements.

Unit margins for 2009 were lower than the same period of 2008, and were partially offset by greater

volumes in economic terms.

Wholesale

At 31 December 2009 wholesale sales were 1,786 thousand tonnes (of which 5 thousand tonnes

under the IP brand), down from the same period in the previous year (1,842 thousand tonnes at 31

December 2008, of which 6 thousand tonnes for IP), primarily due to tensions on sales margins.

31.12.09 31.12.08

Retail sales tonnes 2,713,000 2,695,000

Wholesale Sales tonnes 1,786,000 1,842,000

Other Sales (1) tonnes 256,000 323,000

TToottaall SSaalleess ttoonnnneess 44,,775555,,000000 44,,886600,,000000

* Include sales to oil companies and export sales


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At 31 December 2009 unit margins were lower than in the same period of 2008.

Al 31 dicembre 2009 i margini unitari sono stati inferiori a quelli dello stesso periodo del 2008.

Other sales

At 31 December 2009, other sales totalled 256 thousand tonnes, less than the prior year (323

thousand tonnes at 31 December 2008), mostly due to the lower production.

Crude oil and product inventory

Increase in value of crude oil and petroleum products in stock at the beginning of the year and still

existing at year end resulted in profits from inventory of Euro 63.3 million (losses for 100.4 million Euro

at 31 December 2008).

EnergyIn 2009 the percentage of operating hours of the plant was 86.8% of total hours.

Below, the production of electricity is reported:

Main results for the period

The result was negatively affected by the scheduled shutdown for ten-year maintenance and the

changes in the calculation of the CIP6 tariff.

Euro/million 31.12.09 31.12.08

Revenues from core operations 256 305

Intersectorial revenues -6 -8

Revenues from third parties 249 297

EBITDA 101 115

Amortisation and depreciation and write-downs -35 -33

Operating profit (loss) 66 82

31.12.09 31.12.08

Production MWh 2,030,487 2,182,705


FINANCIAL MANAGEMENT

Net debt

Last year was not non an easy one for the Italian and international banking system, which had to

face the effects of the extraordinarily negative impact of the crisis triggered by the bankruptcy of the

Lehman bank in September 2008, as well as the generalised reduction in revenues and profits due to

the drastic reduction of the spread between interest receivable and interest expense caused by the

constantly decreasing interest rates, as decided by the authority. The drop in interest margin combined

with the growing cost of credit and increased non-interest bearing investments caused by the economic

crisis, led the banking system to increase the spread on loans towards the majority of borrowers

throughout 2009.

As far as the api group is concerned, such a trend paradoxically translated into a greater cost of

loans granted to the parent company with maturity after one or two weeks (with a spread ranging

between 0.50% and 0.90%), compared to the existing ones and not subject to hedging contracts with

longer maturities (3 or 5 years) and spreads (generally around 45 basis points) that resulted from the

prevailing market conditions in the years before the credit crunch.

Despite increasing spreads, the combined effect of the drop in rates recorded during the year and

the choice of the banking counterparties offering the most advantageous conditions, allowed the

parent company to pay “finished” rates (i.e. inclusive of the spread) that are substantially lower than

the previous year, thus resulting in considerable savings in terms of financial charges.

The net debt of the group decreased for the second year in a row, down to Euro 795,887 thousand

at 31 December 2009 against Euro 812,324 thousand at the end of 2008. This positive trend is

attributable to the contained working capital and investments.

The increased liquidity is partially due to the considerable ability to generate cash shown by the

subsidiary api energia, which during the year also distributed dividends for approximately Euro 26.7

million, and an improved management of collections/payments of the parent company, to which the 5-

year factoring transaction concerning receivables and started in the summer of 2008 contributed.

Due to the special market conditions, new financing was not stipulated during the year,

consequently the reduction in medium/long term debt from Euro 686,573 thousand at the end of 2008

to Euro 604,569 thousand in 2009, of which Euro 408,429 thousand pertains to api spa and Euro

196,140 thousand to api Energia, is the result of the reimbursement of maturing loans and repayment

of project finance instalments.

Net debt(in Euro/thousand) 31.12.2009 31.12.2008

Cash at bank and in hand 128,345 111,614

Liquidity tied up in project finance 98,538 45,777

Medium to long term financial debt 604,569 686,573

Short term financial debt 436,601 253,063

NNeett ffiinnaanncciiaall ppoossiittiioonn 881144,,228877 778822,,224455

Loans to Controlling Companies/Other Group Companies 18,400

Financial debt to Controlling Companies/Other Group Companies 30,079

TToottaall 779955,,888877 881122,,332244


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At 31 December 2009, the residual nominal debt relating to the funding granted to api energia was

Euro 225,973 thousand. The residual debt was recalculated under the amortised cost at a rate of 2.6%

for a total of Euro 221,358 thousand.

None of the lines granted to api spa provides for costs in case of non use and none of the loans

taken out is burned by covenants of any kind. In all instances the company has the option to redeem

loans at any time before expiry without for this having to pay any penalties.

At the end of December 2009, the api group had credit facilities from the banking system, both in

Euro and in foreign currencies, of over Euro 2.2 billion. The utilisation percentage of such facilities was

47% compared to 45% of the previous year.

The Group’s average debt was covered during the year by recourse to the following sources of

financing:

As regards hedging strategies for interest rate risks, in consideration of the expected trend in interest

rates and the average residual duration of the loans not hedged against this risk, the parent company

decided not to enter into other hedging contracts during the year.

In reference to hedging the same risk by the subsidiary api energia, it is noted that 75% of the debt

originating from the project finance is hedged by three simple “plain vanilla” Interest Rate Collar

derivatives. In hedging terms, a minimum borrowing rate of 1.97% (Interest Rate Floor) and a maximum

lending rate of 6% (Interest rate Cap) are expected.

At year end, at a consolidated level, the percentage of medium/long term debt hedged against the

interest rate fluctuation risk was slightly lower than 50%.

At group level, the only company engaged in trading in exchange rates and, as such, exposed to the

exchange rate fluctuation risk is the parent company, api – anonima petroli italiana spa. To meet the

foreign currency needs arising from crude oil imports, in 2009 the company traded a record amount of

USD 1.639 billion through Italian and foreign bank counterparties operating in the exchange rate

market.

Net of exports total USD 85.4 million, the balance of dollars at risk was USD 1.5 billion in 2009,

compared to USD 2.48 billion in 2008.

The decrease in foreign currency transactions was a direct consequence of the heavy drop in the

prices of imported raw materials compared to the record figure of the previous year.

The exchange rate risk is managed by stipulating forward purchase agreements with an average

term of 15 days. These purchases, the amount of which is approximately 6.5 million dollars /day, are

made by benchmarking with the daily closures of the European Central Bank (ECB). During the year,

this management resulted in average accumulated savings of Euro 1.7 million, calculated as the

difference between the Euro/USD weighted average exchange rate from the ECB (1.4021) and the

weighted average purchase exchange rate obtained by api (1.4043) from bank counterparties.

(Euro/thousand)

- ordinary current accounts 78,580 average rate 1.95%

- operating loans 116,319 average rate 1.64%

- medium/long term financing 719,133 average rate 2.98%


PERSONNEL

The total number of employees of api anonima petroli italiana S.p.A. Group at 31.12.2009 was 945

(907 at 31.12.2008). The movement is mainly due to the incorporation of the company apiSoi Service

into api Raffineria di Ancona, partially offset by the rationalisation of the last year. No changes in the

employees of the other companies included in the consolidation are recorded.

The change in staff costs for 2009 compared to 2008 was influenced by above mentioned

incorporation of the Company which was previously not included in the consolidation as well as by a

tranche of contractual salary increase provided under the Energy and Oil Collective Labour Agreement,

the renewal of the supplementary contract of api anonima and the stipulation of that of api Energia.

With regard to trade unions activities in api anonima, the main events concerned the complex

renewal of the corporate supplements and the application of flexible working hours.

In api Raffineria in the first half of the year, a series of significant understandings were reached for

the renewal of the supplements of the Mare department and a series of reorganisation of various

internal activities. The second half of the year, on the other hand, was focused on reaching an

agreement with trade union organisations to define the five-year plan of reorganisation and

requalification of the personnel, with the primary objective of improving performance, decreasing

energy consumption and improving maintenance efficiency. At the end of a process that required a

great deal of constructive discussions, an agreement was signed on 23 December with National and

Local Trade Unions and RSU to identify a total of 92 people to become redundant for the site and for

whom early retirement plans will be arranged, encourage the dismissal of about 60 employees and

reallocated the others through internalisation projects. The plan will resort to a 4-year unemployment

benefit plan.

In 2009 training activities concerned the completion of managerial courses, the consolidations of

courses for new graduates in the group and some specific initiatives targeted for professionals and

executives. In api Raffineria training initiatives were focused on safety and the environment, the review

of procedures regarding the integrated management systems, the needs deriving from the operating

departments and the analysis of “near accident” events. HR development initiatives concerned the

assessment and development of the potential of younger talents and the creation of a similar course

for executives in the group.

In 2009, the Organisation function concentrated on reviewing the procedures of some Corporate

Staff Functions of the controlling company api spa, while a new procedure is about to be shared, which

governs relationships with the Public Administration in accordance with the provisions of Legislative

Decree 231.


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IT SYSTEMS

As regards IT systems, worth mentioning is the renewal of all the central systems, which were

updated and improved to offer services that satisfy the changing business needs, with energy savings

equal to about 30% while keeping the cost level in line with that recorded in the old facilities. In

January 2009 the machine room was moved to the new office in Via Salaria. This activity was carried

out without disrupting operations. The infrastructure of the new plant also features significant

improvements (such as switching to VOIP telephony).

In terms of applications, Sap was updated to the latest version available in combination with an

activity of re-documentation of the corporate processes that use this management system. The activity

of adjustment to ITGC (IT general controls) standard and creation of monitoring and control dashboards

already started during the year was continued as planned.

ACTIVITIES OF THE SUPERVISORY BODY

On 31 March 2009 the Board of Directors of the controlling company api anonima petroli italiana

s.p.a. approved the review of the Model of organisation, management and control of the company and

the redefinition of the risk map following the activities conducted in 2008; on the same date the Board

approved and implemented the review of the Code of Ethics common to all the group companies while

approving the appointment of the new Supervisory Body.

During the year the Supervisory Body verified the correct application of Legislative Decree 231/01 by

analysing the periodical information flows coming from corporate management and using the checks

made with the intervention of the Internal Audit function of api holding, from which no criticalities

emerged.

IMPLEMENTING THE “PRIVACY” REGULATION

Also this year the controlling company api s.p.a. updated the Programmatic Document on Safety

according to the provisions of Legislative Decree 196/2003, adopting the minimum safety measures

contained therein.

RESEARCH AND DEVELOPMENT ACTIVITY

We confirm that no cost was deemed to be capitalised as regards research and development

activities.

TRASURY STOCKS AND CONTROLLING COMPANY SHARES HELD

Pursuant to the special provisions of Article 2428, Paragraphs 3 and 4 of the Italian Civil Code, it is

confirmed that the company does not hold treasury stocks nor stocks or shares in controlling companies

either through trustee companies or third parties and that the foregoing categories of stocks or shares

have been neither purchased nor sold during the year.


RELATIONS WITH SUBSIDIARY AND ASSOCIATED COMPANIES

In reference to relationships with subsidiaries, the size of the most significant relationships over the

year, divided by sector, are reported below:

Sales turnover 2009 (to/from Parent Company)(in Euro/thousand)

RReeffiinniinngg

api raffineria s.p.a. to api 155,545

from api 40,806

EEnneerrggyy pprroodduuccttiioonn

api energia s.p.a. from api 67,071

OOiill ccoonnssuummppttiioonn

Dialco s.r.l. from api 17,084

to api 5

apisem s.r.l. to api 3,852

G.R.C. s.r.l. to api 774

from api 13

Alpenoil s.r.l. from api 4,562

to api 11

Abruzzo Costiero s.r.l. from api 30

to api 2,765

BBaarrss aanndd rreessttaauurraannttss

Festival s.p.a. from api 67

SSeerrvviicceess

api holding s.p.a. to api 4,810

from api 169

PPrrooppeerrttyy

api real estate s.r.l. to api 3,701

from api 70

OOiill TTrraaddiinngg

api services (servizi) tp api 215

apioil Limited to api 550,390


Repo

rt of

the

Boar

d of

Dire

ctor

s

3355

MAIN EVENTS OCCURRING AFTER YEAR END AND BUSINESS OUTLOOK

The company ROYAL OIL S.r.l. was set up on 19 January 2010 as a single-shareholder private limited

company (interest held by "api" anonima petroli italiana S.p.A.) through the conferment by the parent

company of a company branch comprising 10 service stations located in Sicily (with pertaining

uncovered areas and service buildings such as car wash machine, tool deposits and premises used as

service area and bar).

The early months of the year confirmed the climate of recovery of the economic cycle worldwide,

with the International Monetary Fund increasing the expected growth in global GDP from 3% to 3.9%

for 2010.

The recovery will be certainly remarkable in the United States rather than the Euro zone; the growth

for the US is estimated at 3% (compared to - 2.40% in 2009). As for Europe, GDP is expected to grow

by 1.20% (-3.9% in 2009); positive signs can be seen also for Italy where, after a particularly hard first

half of 2009, the recovery is estimated to cause GDP to rise by almost 1%.

Despite positive expectations, Central Banks continue to remain very cautious when defining

their policies while waiting for macroeconomic data to provide clear indications on the structural

growth and the expected level of inflation. In the last FOMC meeting of March, the FED reiterated

how the American economy is “strengthening slowly”, thus suggesting possible exit strategies to

be adopted in coming months already. The adoption of restrictive monetary policies, on the other

hand, is not considered as likely, especially until the unemployment rate remains on the current level

of more than 10%.

In the meeting of March the ECB also maintained interest rates at 1%. Seeing the economic

recovery in the Euro zone will be significantly slower than in America, the market believes that actions

aimed at increasing official discount rates are very unlikely to be taken before the FED intervenes in the

same direction. These rates are therefore expected to stay at 1 % throughout 2010.

As regards the currency market, in the first two months of the year the euro continued to depreciate

against the dollar, passing from 1.4563 of 13 January to 1.3489 at the end of February; a change in

trend started at the beginning of March as a result of some particularly disappointing macroeconomic

data for the USA area and a series of positive signs coming from Greece: right from the beginning of

the year this country had drawn negative attention due to the concerns regarding public finance, and

it now seems to be heading for a period of internal austerity and radical restructuring of the accounts.

The PSD (Payment Service Directive) came into force on 1 March. It implements also in Italy, as

already occurred in other European countries, a system aimed at making payments and collections

easier, more efficient and safer. The PSD is the basis for the creation of the Single Euro Payments Area

designed for greater European integrations without distinction between domestic and cross-border

transactions. The company, which had already predisposed the information and treasury systems

necessary to implement the directive, has already adopted the new standard.

We believe that, given the persisting economic crisis or due to the fragile recovery, in the next few

months concerns will re-emerge as to the sustainability of the debt of many countries in the monetary

union and the satisfaction of the targets regarding the deficit/GDP ratio planned at the beginning of

the year. Uncertainty is bound to characterise the European economic scenario and many observers

believe the analysis of the fundamental macroeconomic data will continue to show a strengthening of

the dollar, expected to reach 1.30 against the euro.

As regards brent BWAVE, the first months of the year saw a drop in prices from 81.51 $/barrel on

8 January to 70.01 $/barrel in early February; at the beginning of March an appreciation up to 82

$/barrel was recorded, as a direct consequence of the above mentioned depreciation of the dollar.


The recovery of economic activities expected in the next few months in the United States and, to a

lower extent, in Europe, combined with the strong signs of growth already recorded in China and the

emerging economies (India and Brazil first of all), suggests that crude oil will maintain its current level

(approx. $80) also for the months to come.

Concerning company operations, the refining scenario remains unfavourable although, in light of

the expected economic improvement, the signs of an increase in the average level of refining margins

compared to the previous year can be seen. In March refining processing was stopped for a month as

planned.

Concerning distribution, in the first months of 2010 the company showed a performance that is in

line with the last months of 2009, with a slight recovery of volumes compared to the same period of

the previous year and compared to the market which, as a whole continues to record decreasing

consumptions.

Rome, 31 March 2010

Board of Directors

The Chairman

Dott. Ugo Brachetti Peretti

Manager in charge of the preparation

of accounting documents

Dott. Stefano Cardello

22Consolidated Financial Statements


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9Group api anonima petroli italiana S.p.A Notes 31/12/09 31/12/08

Revenues 2,777,475,760 3,862,440,691

Other revenues 63,139,754 61,616,531

TToottaall 66 22,,884400,,661155,,551144 33,,992244,,005577,,222222

Costs for Raw Materials and Consumables 77 (2,218,951,056) (3,284,269,724)

Costs for Services 88 (325,176,835) (314,297,692)

Costs for Use of third party assets (28,943,400) (21,110,166)

Staff cost 99 (66,531,205) (65,877,993)

Amortisation and depreciation and write-downs 1100 (96,450,950) (101,152,948)

Provisions for Risks 1111 (9,158,234) (8,098,948)

Other operating costs 1111 (73,879,476) (87,706,938)

TToottaall ((22,,881199,,009911,,115566)) ((33,,888822,,551144,,440099))

OOPPEERRAATTIINNGG RREESSUULLTT 2211,,552244,,335588 4411,,554422,,881122

Financial income (charges) (24,121,764) (61,279,924)

Income (and charges) from valuation using the NE method 870,803 1,528,744

TToottaall 1122 ((2233,,225500,,996611)) ((5599,,775511,,118800))

RREESSUULLTT BBEEFFOORREE TTAAXXAATTIIOONN ((11,,772266,,660033)) ((1188,,220088,,336677))

Taxation for the period 1133 (3,675,995) 418,752

Change in Cash Flow Hedge Reserve (CFH) 1144 (982,729) (610,664)

RREESSUULLTT FFOORR TTHHEE PPEERRIIOODD NNEETT OOFF TTAAXXAATTIIOONN ((66,,338855,,332277)) ((1188,,440000,,227799))

Result for the Period – Group (6,750,743) (18,786,966)

Result for the Period – Minority Interests 365,416 386,687

BBaassiicc eeaarrnniinngg ppeerr sshhaarree 1155 --00..444488 --00..112299

DDiilluutteedd eeaarrnniinngg ppeerr sshhaarree 1155 --00..444488 --00..112299

DDiivviiddeenndd 1155 -- --

* In applying the amendment of IAS 1 (2007) in force from 1 January 2009, an additional row was entered to the income statement that includes the

components concerning the Cash Flow Hedge.

Consolidated Statement of comprehensive income*31 December 2009



Group api anonima petroli italiana S.p.ANotes 31/12/09 31/12/08

Fixed assets, Plant and Machinery 1166 933,516,108 964,765,781

Goodwill 1177 123,626,279 123,573,279

Intangible Fixed Assets 1188 129,184,781 132,004,110

Equity Investments 1199 13,569,908 14,023,906

Other assets 2200 25,709,397 25,418,713

Derivative instruments 2211 594,831 364,847

Prepaid Taxation 2222 100,229,038 100,824,569

NNoonn--CCuurrrreenntt AAsssseettss 11,,332266,,443300,,334422 11,,336600,,997755,,220055

Inventories 2233 322,642,079 310,582,721

Trade receivables and other debtors 2244 507,674,463 580,650,055

Loans to Controlling companies 2255 18,400,000

Other assets 2266 21,815,164 22,201,675

Tax receivables 2277 18,832,303 11,321,893

Liquidity tied up in Project Financing 2288 98,538,258 45,777,150

Cash at Bank and in hand and Cash Equivalents 2299 128,344,649 111,614,348

CCuurrrreenntt AAsssseettss 11,,111166,,224466,,991166 11,,008822,,114477,,884411

TTOOTTAALL AASSSSEETTSS 22,,444422,,667777,,225588 22,,444433,,112233,,004466

Share Capital 115,425,000 115,425,000

Legal Reserve 19,295,263 19,295,263

Other reserves 273,579,262 300,384,529

Profit /Loss for the year (6,750,743) (18,786,966)

TToottaall GGrroouupp sshhaarreehhoollddeerrss’’ eeqquuiittyy 3300 440011,,554488,,778822 441166,,331177,,882266

Minority Interests 1,577,220 1,514,611

SShhaarreehhoollddeerrss’’ eeqquuiittyy 440033,,112266,,000022 441177,,883322,,443377

Medium to long term debt 3311 604,568,767 686,572,538

Employee benefits 3322 15,131,322 15,290,621

Deferred taxation provision 3333 137,158,910 148,396,576

Provision for Risks and Charges 3344 51,554,959 63,299,441

NNoonn--CCuurrrreenntt LLiiaabbiilliittiieess 880088,,441133,,995588 991133,,555599,,117766

Trade and other payables 3355 392,845,011 416,920,602

Derivative instruments 3366 22,645,924 23,920,602

Short term debt 3377 436,601,490 254,663,037

Payables due to Controlling Companies 0 28,480,256

Other liabilities 3388 255,208,153 253,286,566

Payables due to taxation authorities 3399 123,836,720 135,039,596

CCuurrrreenntt lliiaabbiilliittiieess 11,,223311,,113377,,229988 11,,111111,,773311,,443333

TTOOTTAALL LLIIAABBIILLIITTIIEESS 22,,444422,,667777,,225588 22,,444433,,112233,,004466

* In applying the amendment of IAS 1 (2007) in force from 1 January 2009, the name was changed from Balance Sheet to Statement of financial position

Consolidated Statement of financial position*31 december 2009

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Group api anonima petroli italiana S.p.A 2009 2008

NNeett rreessuulltt ffoorr tthhee ffiinnaanncciiaall yyeeaarr ((66,,338855)) ((1188,,440000))

AAddjjuussttmmeennttss ffoorr::

Depreciation of Tangible Fixed Assets 94,787 99,171

Intangible Fixed Assets Amortisation and Impairment 1,664 1,982

Write-down on Third party network 2,756

Effects of Equity Evaluation of Equity Investments (871) (1,529)

Changes in Provisions (including Employee Severance Indemnity) 1,666 (9,088)

Neutralisation of non-monetary effects of Hedge Accounting 1,438 2,143

Reclassification of capital gain from sale of cylinder company branch as investments

Other non-monetary items (12,862) 40,484

Provision Variation (Asset) for Deferred (Prepaid) Taxation (9,774) (57,247)

Cash-flow from Operating Activities (prior to change in Working Capital) 69,663 60,272

Change in trade receivables 73,480 107,281

Change in inventory (12,059) 54,275

Change in trade payables (23,495) (33,669)

Change in other operating activities – net (86,543) 65,735

Effects of change in the exchange rates on consolidated foreign subsidiaries (630) 456

CCAASSHH--FFLLOOWW FFRROOMM OOPPEERRAATTIIOONNSS [[AA]] 2200,,441155 225544,,335500

Investments in intangible fixed assets (318) (234)

Investments in tangible fixed assets (71,685) (75,668)

Equity investments 821 (2,684)

Change in long term financial assets (18,691) (1,825)

CCAASSHH--FFLLOOWW FFRROOMM IINNVVEESSTTMMEENNTTSS [[BB]] ((7711,,447733)) ((8800,,441111))

Repayment/opening of medium/long term debt (82,174) (39,001)

Change in short term financial debts/receivables 150,277 (176,277)

Distribution of dividends (313)

CCAASSHH--FFLLOOWW FFRROOMM FFIINNAANNCCIINNGG AACCTTIIVVIITTYY [[CC]] 6677,,778899 ((221155,,227788))

Effect on cash resulting from exchange rate differences

Increase /(decrease) in cash and cash equivalents [a+b+c] 16,730 (41,340)

OOPPEENNIINNGG BBAALLAANNCCEE OOFF CCAASSHH AANNDD CCAASSHH EEQQUUIIVVAALLEENNTTSS 111111,,661144 115522,,995544

CCLLOOSSIINNGG BBAALLAANNCCEE OOFF CCAASSHH AANNDD CCAASSHH EEQQUUIIVVAALLEENNTTSS 112288,,334455 111111,,661144

Consolidated Cash Flow Statement31 December 2009


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1. COMPANY INFORMATION

Publication of the consolidated financial statements for the financial year ended 31 December 2009

for api, with registered office in Rome, Via Salaria 1322, has been authorised by Directors’ resolution

of 31 March 2010.

Consolidation area

The consolidated financial statements include the financial statements for the period at 31

December 2010 of api anonima petroli italiana S.p.A. and the following subsidiary companies held

directly or indirectly:

The equity investments in associated companies detailed below were valued under the equity method:


Company name Registered Shareholders % held Share Capitaloffice (Euro/thousand


“api Raffineria” di Ancona S.p.A.(hereinafter referred to as “api Raffineria”) Ancona “api” 100 13,125

api Energia S.p.A. Rome “api” 98.84 13,831


api services limited (United Kingdom) London “api” 99.99 GBP 10,000


apioil limited (Bermuda) Hamilton “api” 99.99 USD 2 million


Festival S.p.A. Rome “api” 100 560

Dialco S.r.l. Bari “api” 100 10

Alpenoil S.r.l. Rome “api” 100 100

G.R.C. S.r.l. Rome “api” 100 50

apifin S.r.l. Rome “api” 100 600

Accounting Standards and explanatory notes

Share CapitalCompany name Registered (Euro/thousand % held Shareholder

office unless otherwise indicated)

Società collegate:

apisoi Service S.p.A. Falconara (An) 260 50.00 “api Raffineria”

50.00 “third parties”

apisem S.p.A.. Lecce 423 50.00 “api”


Abruzzo Costiero S.r.l. Pescara 2,995 30.00 “api”


Saccne rete S.r.l. Messina 2,200 50.00 “api”


Cons

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Equity investments in associated companies in which the company considers it does not exert any

actual influence over and other equity investments are valued using the cost method.

The principal consolidated companies engage in the following business activities:

■ “api”: crude oils supply and distribution of petroleum products;

■ “api Energia”: management of a power generation plant based on integrated gasification and

combined cogeneration cycle;

■ “api Raffineria”: oil refining on account of the parent company;

■ apioil limited e api services Ltd.: respectively procurement brokerage and sale of petroleum products

and monitoring international petroleum product markets;

■ Festival S.p.A.: restaurant services management;

■ Apifin S.r.l.: credit card and financial services management.

The other consolidated companies, of lesser significance, engage in marketing in the oil industry and

services predominantly on behalf of Group companies.

Concerning the corporate operations carried out during the year on minority equity investments,

Civita Servizi, Aerdorica and SGR, refer to the paragraph concerning “Equity Investments” of these

Explanatory Notes.

Finally, concerning the transactions of rationalisation of the Group’s structure, refer to the paragraph

“Extraordinary transactions” of this Management Report.

2.1 PREPARATION CRITERIA

The consolidated financial statements have been prepared on the basis of the historical cost

principle, with the exception of derivative financial instruments which have been recorded at the fair

value. The book value of assets and liabilities recorded, which are subject to hedging transactions, and

which would otherwise be recorded at cost, are adjusted to take into account the changes in the fair

value attributable to the risks being hedged. The consolidated financial statements are presented in

Euro and all values are expressed in thousand Euro unless otherwise indicated.

Statement of compliance with IFRSs

The consolidated financial statements at 31 December 2009 for api anonima petroli have been

prepared in compliance with the International Financial Reporting Standards (IFRS) adopted by the

European Union.

In relation to the accounting standards adopted for the preparation of the consolidated financial

statements it is pointed out that the company falls under the scope laid down by letter f) of Art. 2 of

Legislative Decree no. 38 of 28 February 2005, which regulates the exercising of the options provided

for by Art. 5 of Community Regulation no. 1606/2002 in relation to the International Financial

Reporting Standards (hereinafter also “IFRS”) and therefore in accordance with Article 3, Paragraph 2

of the same decree, the Company has voluntarily exercised the right to apply the IFRSs adopted by the

European Union for the preparation of its consolidated financial statements, commencing from the

2005 financial year.


Consolidation principles

The consolidated financial statements include the financial statements for api anonima petroli

italiana and subsidiary companies prepared at 31 December 2009, adopting the same accounting

standards as the parent company at each year end.

All intercompany balances and transactions, including any profits and losses not realised resulting

from relations maintained between Group companies which are recognised under assets, are

completely written off.

Subsidiary companies are fully consolidated from the date of acquisition, or from the date on which

the Group acquired control, and cease to be consolidated on the date on which control is transferred

outside of the Group.

2.2 DISCRETIONARY VALUATIONS AND CONSIDERATIONS IN RELATION TO THE SEASONAL OR CYCLICAL NATURE OF INTERIM TRANSACTIONS

Uncertainty of estimates

Key assumptions made in relation to the future and other important sources of uncertainty of

estimates are presented below at the date of closure of the company accounts, which could give rise

to significant book value adjustments to assets and liabilities within the next financial year.

Goodwill impairment

Goodwill is tested for impairment on at least an annual basis; said test requires an estimate of the value

in use of the cash-generating unit to which the goodwill is attributed, in turn based on the cash flows

expected from the unit and discounting back on the basis of a suitable discount rate.

Please refer to Paragraph 17 of these Explanatory Notes for details of the book value for goodwill.

Other items

Estimates have been necessarily applied to calculate the following:

■ prepaid tax assets, with regard to the probability of their future reversing;

■ appropriations to the provision for doubtful debtors and provisions for risks and charges;

■ main assumptions applied to the actuarial recalculation of the provision for severance indemnity

(employee benefits), such as future turnover rate, inflation rate and discount rate.


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2.4 SUMMARY OF THE MAIN ACCOUNTING STANDARDS

Translation of entries in foreign currency

The consolidated financial statements at 31 December 2009 are presented in Euro, which is the

functional and presentation currency adopted by the Company. Each Group entity defines its own

functional currency, which is used to evaluate items included in the individual financial statements at

31 December. Transactions in foreign currency are initially recorded at the exchange rate (relative to the

functional currency) current at the date of the transaction. Monetary assets and liabilities, denominated

in foreign currency, are translated into the functional currency at the exchange rate current on the

closing date of the consolidated financial statements. All exchange rate differences are recorded in the

income statement, with the exception of differences deriving from financing in foreign currency

initiated to cover a net investment in a foreign company, which are recorded directly in shareholders’

equity until such time as the investment is disposed of, when it is recognised in the income statement.

Taxation and tax credits attributable to exchange rate differences on such financing are also charged

directly to the balance sheet. Non-monetary items in foreign currency valued at historical cost are

translated by using the exchange rate in force on the date of initial recognition of the transaction. Non-

monetary items recorded at the fair value in foreign currency are converted by using the exchange rate

at the date of determination of this value.

The operating currency used by apioil Limited Bermuda is the US Dollar, while for the company

apiservices Ltd London U.K. it is the British Pound. At the consolidated balance sheet date, the assets

and liabilities for these subsidiaries are converted into the presentation currency of api anonima petroli

italiana S.p.A. (Euro) at the exchange rate in force at that date, and the income statement is converted

using the average exchange rate for the period. The exchange rate differences resulting from the

translation are recorded directly in the balance sheet and are expressed separately in a special reserve

for the same. At the time of disposal of a foreign company, the cumulative exchange rate differences

recorded in shareholders’ equity in consideration of that particular foreign company are recorded in the

income statement.

Property, plant and machinery

Property, Plant and Machinery are recorded at the historical cost, net of ordinary maintenance costs, less

the relative depreciation provision and accumulated impairment losses. This cost includes the costs for

the replacement of part of the plant and machinery at the time that these were incurred if compliant

with recognition criteria. Depreciation is calculated using the straight line method on the basis of the

estimated useful life of the asset.

The book value of plant and machinery is subject to impairment tests when events or changes indicate

that the book value may not be recoverable.


The useful life of assets is estimated as indicated below:

Financial charges

Financial charges are recorded in the income statement as incurred.

Financial charges directly attributable to the purchase of plant (see the subsidiary company api

energia) have been capitalised as part of the cost of the asset they are relating to.

Property investments

Property investments are initially recognised at the historical cost, inclusive of ancillary negotiation

fees. The book value includes the cost contributing to the replacement of part of a property investment

at the time at which the cost is incurred, on the condition that recognition criteria are satisfied, and

excludes ordinary maintenance costs. Property investments are written off from the financial statements

when they are sold or when the investment is unusable over the long-term and there are no future

economic benefits to be gained from its sale. Any profits or losses resulting from the withdrawal or

disposal of property investment are recorded in the income statement in the financial year in which the

withdrawal or disposal occurs.

Reclassifications to property investment occur when, and only when, there is a change of use

evidenced by events such as: termination of direct use, commencement of an operating lease contract

with third parties or the completion of construction or property development works. Reclassifications

from property investment occur when, and only when, there is a change of use evidenced by events

such as: commencement of direct use or commencement of a development project with the prospect

of a future sale.


Rate % Useful life 31/12/2009 2008 31/12/2009 2008

Land

Industrial buildings 4% 4% 25 25

Pipeline tanks 5.55% 5.55% 18 18

Light constructions 10.00% 10.00% 10 10

Generic plants 5.55% 5.55% 18 18

Scantly corrosive plants 6.25% 6.25% 16 16

Highly corrosive plants 8.33% 8.33% 12 12

Point of sale sheltered buildings 5.00% 5.00% 20 20

Point of sale fittings 8.33% 8.33% 12 12

Tanks canisters cylinders 7.14% 7.14% 14 14

Formation expenses 6.66% 6.66% 15 15

LPG burners at third parties 25.00% 25.00% 4 4

Other fixtures, tools and equipment 25.00% 25.00% 4 4

Furniture 12.50% 12.50% 8 8

Electronic machines 20.00% 20.00% 5 5

Motor vehicles 25.00% 25.00% 4 4

UOP catalysers 33.33% 33.33% 3 3

AKZO catalysers 50.00% 50.00% 2 2

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When the assets used directly by the Group become a property investment, the Group records these

assets in compliance with the criteria indicated in the Property, plant and machinery item up until the

date of change of use.

Goodwill

Goodwill acquired by way of business combination is initially valued at cost, represented by the

surplus of the cost of the business combination with respect to the share pertaining to the Group in

the net fair value, relating to the identifiable values of the assets, liabilities and contingent liabilities.

After initial recognition, the goodwill is valued at cost, decreased by any accumulated impairment

losses. Goodwill is subjected to impairment tests with annual or greater frequency if events or changes

occur which may give rise to any impairment losses.

For the purposes of this test, the goodwill acquired through business combination is allocated, from

the date of acquisition, to each of the cash-generating units (or group of units) it is considered will

benefit from the synergistic effects of the merger, apart from the allocation of other assets and liabilities

to these same units (or groups of units). Each unit or group of units to which the goodwill is allocated:

■ represents the lowest level within the Group at which the goodwill is monitored for the purposes of

internal management;

■ is not larger than a segment as defined in the Group primary or secondary reporting schedule in

accordance with IAS 14 Segment Reporting.

The impairment loss is determined by defining the recoverable value of the cash-generating unit (or

group of units) to which the goodwill is allocated. When the recoverable value of the cash-generating

unit (or group of units) is less than the book value, an impairment loss is recorded. In cases where the

goodwill is attributed to a cash-generating unit (or group of units) whose asset is partially disposed of,

the goodwill associated with the asset sold is considered for the purpose of calculation of any capital

gain (loss) resulting from the transaction. In such circumstances, the goodwill transferred is measured

on the basis of the values relative to the asset disposed of with respect to the asset still held with

reference to the same unit.

Intangible fixed assets

The following categories of intangible fixed assets exist within the Group, the useful life of which is

defined as follows:

– trademark indefinite useful life

– owned network indefinite useful life

– third party network indefinite useful life

– licences indefinite useful life

– software finite useful life (contract duration)


Intangible fixed assets acquired separately are initially capitalised at cost, while those acquired by

way of business combination are capitalised at fair value at the date of acquisition. Following initial

recognition, the intangible fixed assets are recorded at cost, net of depreciation provisions and any

accumulated impairment losses. Intangible fixed assets generated internally are not capitalised and are

recorded in the income statement in the financial year in which they were incurred. The useful life of

intangible fixed assets is evaluated as defined or indefinite. Intangible fixed assets with finite life are

amortised over the period of their useful life and subjected to consistency tests each time that there are

indications of a possible impairment loss. The period and the method of amortisation applied to these

are reviewed at the end of each financial year or more frequently if necessary. Changes in expected

useful life or the methods with which the future economic benefits associated with the intangible fixed

assets are achieved by the Group are recorded by modifying the period or the method of amortisation,

as appropriate, and treated as modifications to the accounting estimates. The amortisation portions for

intangible fixed assets with finite life are recorded in the income statement in the cost category

consistent with the function of the intangible fixed asset.

Intangible fixed assets with an indefinite useful life are subjected to annual impairment tests at

individual level or at cash generating unit level. No amortisation is recorded for such assets. The useful

life of an intangible fixed asset with indefinite life is reviewed on an annual basis in order to ascertain

whether the conditions at the basis of such classification still exist. If not, the change in the useful life

from indefinite to finite is made on the basis of future use.

The profits or losses deriving from disposal of an intangible asset are measured as the difference

between the net sales revenue and the book value of the asset and are recorded in the income

statement at the time of disposal.

The CO2 emission rights, assigned by the Italian governing authorities for the five year period 2008

– 2012 are entered among the intangible fixed assets and among the other creditors; any deficit

concerning the assigned quotas, will be recognised in the item “provisions for risks and charges” and

shall be covered by market purchase. Any surplus of quotas accounted for at year-end will be recorded

in inventories. The Management believes that this accounting method provides a clearer and more

immediate representation of the real Group’s commitment with regard to the Emission Rights

regulation, by eliminating the overexposure of the asset and liability items involved in the previous

accounting method.

Equity investments in associated companies

Group equity investments in associated companies are valued using the equity method. An associate

is a company on which the Group exerts significant influence which cannot be classified as a subsidiary

or joint venture.

In accordance with the equity method, an equity investment in an associated company is recorded

in the balance sheet at cost, increased by the changes subsequent to acquisition for the share

pertaining to the group of the net assets of the associate. Goodwill pertaining to the associate is

included at the book value of the equity investment and is not subject to amortisation. After applying

the equity method, the Group determines whether it is necessary to record any additional impairment

losses with reference to the shareholders’ equity investment of the Group in the associate. The income

statement reflects the share pertaining to the Group of the financial year result for the associated

company. In the event that the associated company records adjustments which are directly attributed

to the shareholders’ equity, the Group records the share pertaining to it and presents this, where

applicable, in the statement of changes in shareholders’ equity.


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The accounting year-end for the associates coincides with the last accounts approved; the

accounting standards used comply with those used by the Group for transactions and events of the

same nature in similar circumstances.

Impairment losses

At each accounting year-end, the Group tests assets for impairment. In this case, or in cases where

annual impairment test is required, the Group makes an estimate of the recoverable value. The

recoverable value is the greater of the fair value of an asset or cash-generating unit net of the costs of

sale and its value in use and is calculated for each individual asset, except where this asset does not

generate cash flows, which are fully independent of those generated by other activities or groups of

assets. If the book value of an asset is greater than its recoverable value, this asset has suffered an

impairment loss and is consequently written down to bring it back to the recoverable value. In

determining the value in use, the Group discounts future estimated cash flows, using a pre-tax

discounting back rate which reflects the market valuations of value of money at the time and specific

risks of the asset. Impairment losses suffered by assets during the financial year are recorded in the

income statement in the cost categories consistent with the function of the asset which demonstrated

the impairment loss.

At each year end, the Group also evaluates any existence of indications of failure to occur (or the

reduction) of impairment losses previously recorded and, and if these indications exist, estimates the

recoverable value. The value of an asset previously written down can be restored only if there have been

changes in the estimates used to determine the recoverable value of the asset after the last recording

of an impairment loss. In this case, the book value of the asset is returned to the recoverable value,

without, however, the value increased in this way being able to exceed the value which would have

been calculated, net of depreciation, if no impairment losses had been recorded in previous years. Each

time the value is restored, it is recorded as income in the income statement, except where the asset is

recorded at a revalued amount, in which case restoring of the asset is treated as a revaluation. After a

value restoration has been recorded, the depreciation portion for the asset is adjusted in future periods,

in order to spread the modified book value, net of any residual value, using the straight line method

over the remaining life of the asset.


Inventories

Inventories are valued at the cost or the net estimated realisable value, whichever is lower.

Costs incurred for transporting to the actual location and warehousing are recorded as follows:

Raw materials – purchase cost based on the Weighted Average

Cost method;

Products for resale and – direct cost of materials and manufacturing plus a

semi-finished products portion of the general production expenses defined

on the basis of normal production capacity but not

considering financial charges.

The net estimated realisable value comprises the normal estimated sales price after deduction of the

estimated completion costs and estimated costs for realising the sale.

Trade and other debtors

Trade receivables are recorded at the nominal amount given in the invoice, net of the provision for

doubtful debtors. This provision is made in the presence of objective proof that the Group will not be

able to collect the receivables. Receivables which cannot be collected are written off at the time at which

they are identified.

Cash at bank and in hand and cash equivalents

Cash at bank and in hand and short term deposits in the balance sheet and include petty cash and

on demand and short term deposits, in the latter case with the original forecast due date of no more

than three months.

For the purpose of the consolidated cash flow statement, cash at bank and in hand and cash

equivalents are represented by the cash deposits as defined above, net of bank overdrafts.

Financing

All financing is initially recognised at the fair value for the payment received, net of any ancillary

costs for obtaining the loan.

After initial recording, the financing is valued under the amortised cost criterion using the actual

interest rate method.

Each profit or loss item is entered in the income statement when the liability is written off, as well

as through the depreciation process.


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Medium to long term provisions

Allocations to provisions for risks and charges are made when the Group has to meet a current

obligation (legal or implied) resulting from a past event, it is probable that resources will need to be

allocated to meet such an obligation and it is possible to make a reliable estimate of the amount. When

the Group considers that an allocation to the provision for risks and charges will be either wholly or

partially repaid, such as for example in the case of risks covered by insurance policies, the indemnity is

recorded in a distinct and separate manner in assets if, and only if, it is practically certain. In this case,

the costs of any relative allocation are presented in the income statement net of the amount recorded

for the indemnity. If the effect of discounting the monetary value is significant, the allocations are

discounted using a discount rate before tax which reflects, where appropriate, the specific risks of the

liability. When the discounting has been implemented, the increase in the allocation due to the passage

of time is recorded as a financial charge.

Employee benefits

Employee benefits granted subsequently to termination of the employment relationship (defined

benefit post-employment benefits) and other long term benefits are subject to actuarial assessment.

Liabilities recorded in the accounts are represented by the current value of the company obligation, net

of any plan assets.

We would like to point out that the company has decided not to use the “corridor approach” and

to record profits and losses resulting from changes to the actuarial calculations directly in the income

statement.

Supplementary severance indemnities are recorded as a liability and cost when the company is

committed to interrupting the employment relationship of an employee or group of employees prior to

normal retirement, or it has undertaken to make severance payments following a voluntary redundancy

proposal due to redundant staff.

Following the 2007 reform of the national regulation that governs – for those Companies with more

than 50 employees – the severance indemnity accruing as from 1 January 2007 can be defined as a

defined contribution plan, whose payments are directly booked to the income statement as costs, if

any. The severance indemnity accrued until 31 December 2006 is still considered as a defined benefit

plan, with no future contributions. For this reason, it is valued by independent actuaries, only based on

the expected residual average working life of employees, without taking into account the remuneration

received during a preset service period.

Therefore, the severance indemnity accrued before 1 January 2007 is calculated on a different basis,

due to the non-occurrence of the previous actuarial assumptions linked to salary increases. More

specifically, the liability linked to the “severance indemnity accrued” is currently valued at 1 January

2007, without pro-rata application (years of service rendered/total years of service), since employee

benefits at 31 December 2006 may be considered as almost entirely accrued (with the sole exception

of revaluation), pursuant to paragraph 67 (b) of IAS 19. As a consequence, with regard to this

calculation, the current service costs related to future working service of employees shall be considered

null, since they are represented by contribution payments to supplementary pension funds or to the

Treasury fund at the Italian National Social Security Institution (INPS).


Recognition of revenues

Revenues are recorded to the extent to which it is probable that the economic benefits will be

achieved by the Group and the relative amount can be determined in a reliable manner. The following

specific criteria for recognition of revenues must be met prior to being recorded in the income

statement:

Sale of goods

The revenue is recognised when the company has transferred all significant risks and benefits

associated with ownership of the asset to the purchaser. Part of group sales revenues is based on a sales

contract with GSE, regulated at the predetermined tariff by provision 6/1992 of the Inter-Ministerial

Prices Commission (CIP 6), which applies for 20 years and has already been authorised by the European

Community for the first 15 years. The provision provides for recognition of an incentive for the first

eight years of the contract.

This incentive component represents an advance in terms of time of contractually anticipated

revenues, which has been reformulated for the duration of the authorisation obtained from the

European Community: the incentive is therefore recognised as revenue in proportion to the quantity of

energy sold relating to this period.

Following the coming into force of the IFRIC 13 “Customer Loyalty Programmes” the part of the

revenue corresponding to the fair value of the prizes prospected in the loyalty campaign “Passione e

Regali” is recorded among other liabilities; this liability is booked to the income statement in the year

in which the prize is awarded or the related right expires.

Interest

This is recorded as financial income following ascertainment of the interest receivable for the period

(carried out using the actual interest method which is the rate which exactly discounts the expected

future cash flows on the basis of the expected life of the financial instrument at the net book value of

the investment).

Dividends

Revenues are recorded when shareholders obtain the right to receive payment.

Rent receivable

Rents resulting from property investments are entered in the accounts on a straight-line basis over

the duration of the leasing contracts in existence at the date of interim financial statements.


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Income tax

Current taxes

Current taxes are valued at the amount which it is expected will be recovered or paid to the tax

authorities.

The rates and tax regulations applied to calculate the amount are those current on the closing date

of accounts.

Deferred taxes

Deferred taxation is calculated by applying the liability method to the temporary differences

between the tax values for assets and liabilities taken as a reference and the values given in the financial

statements.

Deferred tax liabilities are recorded against all taxable temporary differences, except:

■ when the deferred tax liabilities result from initial recognition of goodwill or an asset or liability in a

transaction that is not a business combination merger and which, at the time of the same

transaction, does not have an effect either on the financial year profit calculated for accounting

purposes or for tax purposes;

■ with reference to temporary taxable differences associated with shareholdings in subsidiary and

associated companies, in the event that the reversal of the temporary differences can be controlled

and that it is probable that they will not occur in the foreseeable future.

Deferred tax assets are recorded against all temporary deductible differences and for tax assets and

liabilities carried forward, to the extent to which their recovery is probable.

The value of deferred tax assets to be reported in financial statements deferred tax assets is reviewed

at the end of each financial year.

Deferred tax assets and liabilities are measured on the basis of the tax rates which it is expected will

be applied to the financial year in which the asset is realised or the liability written off, considering the

rates in force and those being issued or already issued at the balance sheet date.

Taxation on income relative to items recorded directly in the shareholders’ equity is attributed directly

to the shareholders’ equity and not the income statement.

Deferred tax assets and liabilities are offset, if there is a legal right to offset current tax assets against

current tax liabilities and the deferred taxes make reference to the same taxation entity and the same

tax authority.

Value Added Tax

Revenues, costs and assets are recorded net of Value Added Tax with the exception of cases where:

■ the tax applied on the purchase of goods or services is non-deductible, in which case it is recorded

as part of the purchase cost of the asset or part of the cost item recorded in the income statement;

■ it relates to trade receivables and creditors presented including the value of the tax.

The net amount of indirect taxes on sales which can be recovered from or paid to the Inland

Revenue is included in the financial statements under trade receivables and payables depending on

whether it is a positive or negative balance.


Derivative financial instruments and hedging transactions

The Group uses derivative financial instruments including foreign currency forward contracts and

interest rate swap contracts to hedge the risks resulting mainly from interest and exchange rate

fluctuation. These derivative financial instruments are initially recognised at fair value at the date on

which they are stipulated, after which the fair value is periodically reviewed. They are recorded in the

accounts as assets when the fair value is positive and as liabilities when it is negative.

Any profits or losses resulting from changes in the fair value of derivatives which are not suitable for

hedge accounting are directly attributed to the income statement for the financial year.

The fair value for foreign currency forward contracts is calculated with reference to current forward

exchange rates for contracts with a similar expiry date. The fair value for swap contracts on interest

rates is determined with reference to the market value for similar instruments.

For the purposes of hedge accounting, hedges are classified as:

■ fair value hedge if they cover the risk of a change in the fair value of the underlying asset or liability;

■ cash flow hedge if they cover the risk of a change in cash flows resulting from existing assets and

liabilities or from future transactions;

■ net investment hedge in a foreign entity.

A hedge transaction to cover the exchange rate risk associated with an irrevocable commitment is

recorded in the accounts as a cash flow hedge.

On initiating a hedge transaction, the Group designates and formally documents the hedge

relationship to which it intends to apply hedge accounting, its own objectives in the management of

the risk and the strategy followed. The documentation includes identification of the hedge instrument,

the item or transaction that is the object of the hedge, the nature of the risk and the method by which

the entity intends to evaluate the hedge effectiveness in compensating for exposure to fair value

changes in the item or cash flows which can be traced back to the hedged risk.

It is expected that this hedging will be highly effective in compensating for the exposure of the

hedged element to changes in the fair value or cash flows attributable to the hedged risk; the

evaluation of the fact that these hedges are demonstrated to be highly effective is carried out on an

ongoing basis during the financial years to which they are designated.

Transactions which satisfy the criteria for hedge accounting are recorded in the accounts as follows:

Fair value hedge

The Group resorts to fair value hedge transactions to cover the exposure to changes in the fair value

of assets or liabilities in the financial statements or an irrevocable commitment not recorded in the

financial statements, as well as an identified part of such assets, liabilities or irrevocable commitment,

which can be attributed to a particular risk and which could have an impact on the income statement.

With regard to fair value hedges, the book value of the item which is the object of the hedge is adjusted

for the profits and losses attributable to the risk which is the object of the hedge; the derivative

instrument is recalculated at the fair value and the profits and losses from both of these are entered in

the income statement.

With regard to fair value hedges relative to items entered in the accounts in accordance with the

depreciated cost criteria, adjustment of the book value is depreciated in the income statement over the

remaining period until expiry. Any book value adjustments to a hedged financial instrument to which

the actual interest rate method is applied are depreciated in the income statement.


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The depreciation can commence as soon as there is an adjustment, but not after the date on which

the item subject to hedging ceases to be adjusted, due to changes in the fair value attributable to the

risk which is the object of the hedging.

When an irrevocable unrecorded commitment is designated as an item subject to hedging, the

subsequent accumulated changes in its fair value attributable to the hedged risk covered are entered

in the accounts as assets and liabilities and the corresponding profits or losses are recorded in the

income statement. Changes in the fair value of the hedge instruments are also entered in the Income

Statement.

An instrument is no longer recorded in the accounts as a fair value hedge contract when it expires

or is sold, written off or exercised, the hedge no longer meets the hedge accounting requirements, or

when the Group withdraws the designation. Any adjustments to the book value of a financial

instrument subject to hedging for which the effective interest rate method is used are depreciated in

the income statement. Depreciation may commence as soon as an adjustment occurs, but not after the

date on which an item subject to hedging ceases to be adjusted for changes in its fair value that can

be traced back to the risk which is the object of the hedging.

Cash flow hedge

Cash flow hedges are hedge transactions to cover the risk of variability of cash flows attributable to

a particular risk, associated with a recorded asset or liability or a highly probable future transaction

which could have an influence on the profit result. Profits or losses deriving from the hedge instrument

are entered in the shareholders’ equity for the effective part, while the remaining part (ineffective) is

entered in the income statement.

The profit or loss entered in the shareholders’ equity is reclassified to the income statement during

the period in which the transaction subject to the hedging influences the income statement (for

example when a financial charge or income is recorded or when an anticipated sale or purchase occurs).

When the item subject to hedging is the cost of a non-financial asset or liability, the amounts entered

in the shareholders’ equity are transferred at the initial book value of the asset or liability.

If it is considered that the anticipated transaction will no longer occur, the amounts initially recorded

in the shareholders’ equity are transferred to the income statement. If the hedge instrument expires or

is sold, cancelled or exercised without being replaced, or if its designation as hedging is withdrawn, the

amounts previously entered in the shareholders’ equity remain recorded therein until such time as the

anticipated transaction occurs. If it is considered that this will no longer occur, the amounts are

transferred to the income statement.


3. ACCOUNTING STANDARDS, AMENDMENTS AND INTERPRETATIONS APPLIED AT 1ST JANUARY

The consolidated financial statements of api anonima petroli italiana were modified compared to the

2008 edition following new standards and interpretations enforced from 1 January 2009, details of which

are attached hereto.

IAS 1 Presentation of the Financial Statements (Reviewed)

Updated version of IAS 1 – Presentation of the financial statements no longer allows the

presentation of the income components such as income and charges entered directly as shareholders’

equity in the Statement of changes in shareholders’ equity instead requiring a separate indication

compared to the changes generated by transactions with the shareholders. According to the new

version of the standard, all the changes generated by transactions other than from those created with

the shareholders, must be highlighted in a single separate statement that shows the performance for

the period (statement of comprehensive income) or in two separate statements (income statement and

statement of comprehensive income). These changes must be shown separately also in the Statement

of the changes in Shareholders’ equity. The group applied the updated version of the standard starting

from 1 January 2009 in a retrospective manner.

IFRIC 13 Customer Loyalty Programmes

This interpretation explains that the free or discounted assets or services (“prizes” or “prize points”)

assigned within a customer loyalty programme must be recorded as a separate component of the

related transaction and sale in which the points or prizes were awarded. A part of the fair value of the

sales amount must, therefore, be recorded to offset the item “Other liabilities”; this liability is booked

to the income statement in the year in which the customer uses the prize points or the right expires.

The application of IFRIC 13 implied the following changes in the Income statement for 2008 and

the balance sheet at 31 December 2008:

■ reduction in “Revenues” and “Other operating costs” for Euro 16,389 thousand;

■ reclassification of the item “Provisions for risks, charges and expenses” to “Other liabilities” of Euro

13,180 thousand.

Concerning the year 2009, the application of the standard in question implied the entry of

adjustments to revenues for Euro 13,700 thousand and “Other liabilities” for Euro 17,550 thousand,

as an estimate of sales forecasts, based on which customers will order advertising gifts, which will be

purchased and delivered in 2010.

4. SPIN-OFF OF A REAL ESTATE BRANCH

On 28 April 2009, the partial proportional spin-off, started in 2008 and approved by the

shareholders on 23 January 2009 was perfected, which transferred from the parent company api

anonima petroli Italian Spa to the beneficiary, api real estate S.r.l., balance sheet elements equal to Euro

8,147 thousand, in addition to those already transferred in the partial proportional spin-off of 2005,

conveying strategic value in property management activities.

The accounting effects of the spin-off transaction are summarised in the table below:


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5. REPORTING BY BUSINESS SECTOR

The statement is presented according to IFRS8 – Operating segments and the reporting statement

comprises the business sectors.


Description Liability reversal Asset reversal

Taxed Provision on reclamation of transferred land 390,000

Deferred taxation provision 1,208,000

Extraordinary reserve 7,138,000

Latent tax credits within 12 months 274,000

Transferred assets 8,147,000

api real estate srl 315,000

Total 8,736,000 8,736,000

Euro/million Refining Energy Corporate Groupand Marketing

3311..1122..22000099

Net revenues from core operations 2,682 256 11 2,948

Intersectorial revenues -101 -6 -107

RReevveennuueess ffrroomm tthhiirrdd ppaarrttiieess 22,,558811 224499 1111 22,,884411

EEBBIITTDDAA 5533 110011 --3355 111188

Amortisation/depreciation -60 -35 -1 -96

EEBBIITT --88 6666 --3377 2222

IInnvveessttmmeennttss iinn ffiixxeedd aasssseettss 6633 88 7711

3311..1122..22000088

Net revenues from core operations 3,744 305 2 4,052

Intersectorial revenues -119 -8 -127

RReevveennuueess ffrroomm tthhiirrdd ppaarrttiieess 33,,662255 229977 22 33,,992244

EEBBIITTDDAA 6699 111155 --4411 114433

Amortisation/depreciation -68 -33 -101

EEBBIITT 11 8822 --4411 4422

IInnvveessttmmeennttss iinn ffiixxeedd aasssseettss 5599 1199 7788

Euro/million Refining and Energy Financial and Elisions GroupMarketing not allocated

3311..1122..22000099

Fixed assets 877 421 97 -68 1,326

Business 758 82 288 -11 1,116

TToottaall aasssseettss 11,,663355 550022 338855 --8800 22,,444433

BBuussiinneessss lliiaabbiilliittiieess 663399 115555 11,,772288 --8800 22,,444433

3311..1122..22000088

Fixed assets 860 448 101 -68 1,340

Business 794 145 202 -38 1,103

TToottaall aasssseettss 11,,665544 559933 330033 --110077 22,,444433

BBuussiinneessss lliiaabbiilliittiieess 667799 220055 11,,666666 --110077 22,,444433

6. REVENUES AND OTHER REVENUES

Revenues from sales and services show a decrease, as compared to the same period in 2008, of Euro

1,083,441 thousand. This decrease was due to the combined effect of:

■ a price decrease, due to the decrease in the international quotations of petroleum products;

■ a reduction in refining and distribution margins;

The item “revenues from sales and services” includes the cost of the promotional campaign

“Passione e regali” attributed to non booked prizes, in application of IFRIC 13 entered into force on 1

January 2009, as mentioned in the section “Accounting standards, amendments and interpretations

applied at 1 January”.

The item “Other revenues” is summarised below:

The figure indicated for the “Royalties” item relates to fees for non-oil activities.

The item “Capital gains from property sales” – equal to Euro 824 thousand – referred to the capital

gain realised by the parent company due to the transfer of service stations.

“Income from plant and industrial fixtures and fittings”, totalling Euro 3,464 thousand, relates to

fees derived from company rental payments, hires, automatic car-washes and various equipment, up by

Euro 609 thousand compared to the previous year.

“Other revenue/Repayments”, totalling Euro 58,117 thousand, increased by Euro 1,917 thousand

and mainly includes:

■ Euro 16,348 thousand as reimbursement of the CO2 quotas purchased to cover the emissions of

the IGCC plant;

■ Euro 2,185 thousand as partial repayment of the green certificates that api energia must purchase

for 2002-2003, as the cogeneration plant qualification was not obtained;

■ Euro 3,087 thousand relative to revenues of api raffineria for mooring of tankers using the offshore

platform for the discharge of crude oil;

■ Euro 5,401 thousand relating to charge-back by the parent company to operators of part of the

costs incurred for the promotional campaign 2009;


Explanatory Notes to the Income Statement Items

Euro/thousand 31/12/09 31/12/08

Revenues 2,777,476 3,862,440

Other revenues 63,140 61,617

TToottaall 22,,884400,,661166 33,,992244,,005577

Euro/thousand 31/12/09 31/12/08

Royalties 735 1,098

Capital gains from the sale of property, plant and machinery 824 1,464

Income from plant and industrial fixtures and fittings 3,464 2,855

Other revenues /Repayments 58,117 56,200

TToottaall 6633,,114400 6611,,661177

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■ Euro 6,948 thousand for charge-back to our customers of logistics and product transport services

(Euro 2,432 thousand), maintenance services (Euro 788 thousand) and royalties on volumes sold

(Euro 3,728 thousand);

7. COSTS FOR RAW MATERIALS AND CONSUMABLES

The heading “Costs for raw materials and consumables” as at 31 December 2009 totalled Euro

2,218,951 thousand, showing a decrease, as compared to 31 December 2008, of Euro 1,065,319

thousand, mainly resulting from the reduction in the international quotations of petroleum products.

The total of the item “Costs for raw materials and consumables” includes the change in the stocks

of raw materials, semi-finished products and goods for resale valued both at 31 December 2009 and

at 31 December 2008 under the “Weighted Average Cost Method”. This change was equal to Euro -

10,122 thousand at 31 December 2009 and Euro -58,222 thousand at 31 December 2008.

The change of Euro 68,344 thousand (Euro -99,546 thousand at 31 December 2008) benefits from

a positive income component equal to Euro 63,264 thousand, calculated as a change of the valuation

at the end of the year of the quantities still held in stock at the end of the financial year, connected

with the decreasing price trend in 2009 compared to the previous year.

8. COSTS FOR SERVICES

The item costs for services, equal to Euro 325,177, is summarised below:

Costs for services show a decrease of Euro 10,978 thousand versus the previous year.

Item “Transport”, which covers costs incurred for road and sea transport, totals Euro 48,026

thousand and is essentially in line with last year.

The item “Maintenance” of Euro 71,241 thousand, covers the costs incurred for non-incremental

ordinary and extraordinary maintenance services, carried out at the Retail sales points, on refinery plant

and the IGCC plant. The increase is attributable to the “rebranding” activities being performed on the

parent company’s distribution network.

The “Contract service station fees” equal to Euro 89,430 thousand, refer to the fees paid to contract


Euro/thousand 31/12/09 31/12/08

Costs for raw materials and consumables 2,218,951 3,284,270

of which changes in stocks (10,218) 52,011

Euro/thousand 31/12/2009 31/12/2008

Transport 48,026 50,134

Maintenance 71,241 64,842

Service station fees 89,430 96,545

Advertising and communication costs 6,545 3,567

Commissions 4,237 3,917

Technical and administrative services 42,301 34,208

Other services 63,397 61,085

TToottaall 332255,,117777 331144,,229988

operators. The decrease compared to the previous year, equal to Euro 7,115 thousand, is mainly

attributable to the decreasing margin between the price list applied to contract operators and the Platts

price of the products.

The item “Advertising and promotion costs”, equal to Euro 6,545 thousand, represents the costs

incurred by the parent company for the advertising campaign during the qualification phase of the

Italian soccer team to the 2010 World Cup, as official sponsor.

Commissions of Euro 4,237 thousand, are relating to fees paid to third parties for sales of petroleum

products in the name and on behalf of api; the balance at 31 December 2009 includes discounting

back, in compliance with the provisions of IAS 37. The effects of discounting back were appraised by

applying the “projected unit credit method” as defined in IAS 19.

“Technical and administrative services” for Euro 42,301 is up by Euro 8,093 thousand compared to

the previous year, due to the greater use of technical collaborations for “rebranding” activities and the

signing of a service agreement between api anonima and api holding.

Under the “Other services” item totalling Euro 63,397 thousand, the following should be noted:

■ “Mandatory oil stocks and on consignment” totalling Euro 31,945 thousand, relating to both the

charge for the parent company (Euro 13,280 thousand) recognised to other oil companies for stocks

of product as “mandatory stocks”, as required under the current rules and regulations, and to

charges for storage at third parties of own product (Euro 18,665 thousand);

■ Euro 3,083 thousand for miscellaneous utility bills (Euro 3,818 thousand at 31.12.2008);

■ Euro 4,827 thousand relating to costs incurred for insurance policies (Euro 5,330 thousand in 2008);

■ Euro 857 thousand for surveillance and guardianship (Euro 951 thousand at 31.12.2008);

■ Euro 456 thousand for commercial paper expenses (Euro 567 thousand at 31.12.2008);

■ Euro 11,577 thousand relating to painting of points of sale (Euro 2,484 thousand at 31.12.2008).

The increase of Euro 9,093 thousand is due to the “rebranding” activities performed during the

year.


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9. STAFF COSTS

Staff costs, equal to Euro 66,531 thousand, are substantially in line with the previous year.

“Wages and salaries” increased by Euro 2,608 thousand compared to the previous year, mostly due

to the staff passing from the associated company Apisoi to the subsidiary api raffineria.

“Social security costs” for Euro 13,796 thousand are in line with the previous year.

“Staff pension costs and similar charges”, equal to Euro 8,470 thousand, mainly include:

■ the costs for rehearsal courses for Euro 347 thousand;

■ company canteen costs for Euro 745 thousand;

■ travelling expenses for employees for Euro 2,923 thousand;

■ charges for interim work and for the collaborators from group companies for a total of Euro 1,270

thousand;

It should be noted that “staff costs” cover, for an amount totalling Euro 261 thousand, the positive

effect of discounting the Employee Severance Indemnity at 31 December 2009. For details of this,

please refer to the liability item – non-current liabilities – Employee Severance Indemnity Provision.

10. AMORTISATION AND DEPRECIATION AND WRITE-DOWNS

Amortisation and depreciation decreased overall by Euro 4,702 thousand.

This decrease is mostly due to the completion of the amortisation plan of many assets of the parent

company.

Amortisation of intangible assets is substantially in line with the previous year.

During the year no effects were transferred to the income statement due to depreciation resulting

from the application of the Impairment Test on the tangible and intangible fixed assets of the group

according to IAS 36.


Euro/thousand 31/12/09 31/12/08

Wages and Salaries 44,265 41,657

Social security costs 13,796 13,147

Staff pensions costs and similar charges 8,470 11,074

TToottaall 6666,,553311 6655,,887788

Euro/thousand 31/12/09 31/12/08

Amortisation/write-down of intangible fixed assets 1,664 1,982

Depreciation of Tangible Fixed Assets 94,787 99,171

Write-downs for durable impairment losses 0 0

Recovery of provision from impairment Tangible fixed assets 0 0

TToottaall 9966,,445511 110011,,115533

11. RISK PROVISIONS, OTHER OPERATING COSTS

The “Risk Provisions” item totals Euro 9,158 thousand (Euro 8,099 thousand at 31 December 2008)

and can be attributed mainly to:

– Euro 7,426 thousand for appropriation by the parent company in relation to reclamation,

environmental restoration and securing of polluted sites. For more details see the item relative to

“Medium and long term provisions” in these Explanatory Notes;

– Euro 2,359 thousand for appropriation due to risk of depreciation of the trade receivables of the

parent company;

– Euro -1,631 thousand for the positive effect of the discounting of the Operator relationship

termination bonus, in compliance with the provisions of IAS 37. This effect has been valued by

applying the “projected unit credit method” as defined in IAS 19;

– Euro 354 thousand for api raffineria and api energia appropriation to the provision for disposal of

obsolete stock materials;

Finally, it should be underlined that the subsidiary api energia, unlike in 2008, has not allocated any

provisions for doubtful debtors in relation to the withdrawal by the Authority for Electricity of the green

certificates purchased by the company in 2007.

Other operating costs

* For better comparability with 2009, these 2008 financial statements’ items have been reclassified. Such reclassification had no

effects on the shareholders’ equity for 2008

The items “Consumables and maintenance” and “Operator relationship termination bonus” are in

line with the amounts recorded in the previous financial year.

“Various indemnities”, equal to Euro 14,258 thousand, decreased by Euro 1,157 thousand

compared to the same period of the previous year, mainly due to the effects below:

■ the charges of Euro 3,543 thousand incurred to purchase the green certificates by api energia for

the years 2002-2003, as the IGCC plant did not obtain the co generative certification;

■ additional costs of Euro 3,000 thousand compared to the previous year, incurred to sign the

agreement with the Municipality of Falconara M.ma for the settlement of all pending disputes and

for the legal charges connected with the settlement of the ICI (local property tax) dispute on the sea

facilities for past years (2003-2007);

■ the decrease in indemnities for goods spreading and loss, which went from Euro 9,081 thousand in

2008 to Euro 8,194 thousand in 2009 and in indemnities and expenses to public entities for Euro

453 thousand.


Euro/thousand 31/12/09 31/12/08

Consumables 2,176 1,798

Operator Relationship Termination Bonus 8,054 8,320*

Various indemnities 14,258 15,415

Duties and taxes 9,651 11,995

Other general costs 39,740 50,179*

TToottaall 7733,,887799 8877,,770077

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The item “Duties and taxes” decreased by Euro 2,344 thousand due to the lower local property tax

(ICI) paid by the refinery and api energia compared to 2008, for a total of Euro 988 thousand, and to

the fact that 2008 was negatively affected by the payment of the Substitute tax by api energia for the

cancellation of the availability constraint of shareholders’ equity reserves for Euro 752 thousand.

“Other general costs” equal to Euro 39,740 thousand mainly include:

■ Euro 3,821 thousand as costs incurred by the company for entering into the Euroshell circuit;

■ Euro 1,024 thousand for entertainment expenses;

■ Euro 8,074 thousand for special “lump-sum” payments for management of service stations to

contract operators;

■ Euro 2,156 thousand for capital losses from disposal of assets. Such amount is mainly relating to

failure to renew, by the parent company, agreements for 56 service stations, and transfer of 1

owned station;

■ Euro 16,926 thousand as cost incurred during the year for the purchase of Co2 quotas for the

emissions of the plant of api energia.

Finally, in the item “Other general costs” of 2008, the cost of the promotional campaign attributed

to non booked prices, was reclassified as a decrease for the item “Revenues”, following the coming

into force of IFRIC 13, as mentioned in section “Accounting standards, amendments and interpretations

applied at 1 January”.

12. FINANCIAL INCOME AND CHARGES

The negative balance in financial management, of Euro 23,236 thousand, comprises income of Euro

14,663 thousand, offset against charges of Euro 38,785 thousand, as well as value adjustments of Euro

886 thousand.

The table below provides a breakdown of financial income and charges net of value adjustments:


Euro/thousand 31/12/09 31/12/08

Financial income

Interest Credit Bank/Postal c/a 3,532 5,841

Income from equity investments 306 2,086

Other income 10,825 17,467*

Total financial income 14,663 25,394

Financial charges

Financing and bank account overdrafts (27,033) (61,022)

Other charges (11,752) (25,653)*

Total financial charges (38,785) (86,675)

FFiinnaanncciiaall IInnccoommee aanndd CChhaarrggeess bbaallaannccee ((2244,,112222)) ((6611,,228811))

* The item was reclassified in application of IAS 1. This reclassification did not affect the Result of the year and the Shareholders’

equity at 31.12.2008.

Bank interest receivable of Euro 3,532 thousand, can be mainly attributed to the amounts accrued

by the subsidiary api energia on the term current accounts according to the conditions set out in the

project finance agreement.

The decrease of Euro 2,309 thousand is attributable to the generalised decrease in remuneration for

the current account amounts granted by banks. In 2009, given an exceptionally low rate level,

remunerations were close to zero.

Income from equity investments, equal to Euro 306 thousand, include both income for Euro 56

thousand deriving from the partial distribution of reserves by SGR S.p.A. in liquidation, and the dividend

of Euro 250 thousand distributed by Petroven S.p.A..

“Other income”, of Euro 10,825 thousand, mainly includes:

■ Euro 2,504 thousand for positive exchange differences (Euro 5,382 at 31.12.2008);

■ Euro 6,583 thousand of income from fair value appraisal of derivatives owned by api energia (equal

to Euro 5,288 thousand) and the parent company (equal to Euro 1,295 thousand);

■ Euro 1,174 thousand regarding interest receivable granted by ANAS as a result of the agreement

reached on the dispute regarding the service station “La Pisana”, for which reference is made to the

paragraph regarding “Other current assets”.

Financial charges, equal to Euro 38,785 thousand, increased by Euro 47,890 thousand, attributable

for Euro 33,989 thousand to the item “Financing and bank account overdrafts”, and for Euro 13,901

thousand to “Other charges”.

The item “Financing and bank account overdrafts”, equal to Euro 27,033 thousand, mainly includes

the financial charges related to the company api spa for Euro 14,375 thousand, api energia for Euro

11,438 thousand and api raffineria for Euro 104 thousand, respectively. The balance includes the

financial charges deriving form the Transfer of receivables from customers for Euro 1,092 thousand,

incurred following the factoring transaction concluded with the controlling company.

For more details on the average debt and the interest rates applied for the various maturities,

reference should be made to the information contained in the Financial Management Report.

The item “other charges” mainly includes the costs for the fair value appraisal of the derivative

instruments held by api energia (equal to Euro 1,508 thousand) and the parent company (equal to Euro

2,452 thousand), the negative exchange rate differences for Euro 2,169 thousand, commission and

bank charges for Euro 1,572 thousand, the interests on the deferred payment of custom duties on oil

cargoes equal to Euro 398 thousand and the interest expense to the controlling company api holding

for an amount of Euro 177 thousand.

The item is affected by the reclassification due to the application of IAS 1, which requires the

separate indication (for the year examined and for the previous year) of the Cash Flow Hedge (CFH)

components released from “Other income” and the negative CFH components from “other charges”.


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13. TAXATION

The main components of income taxation at 31 December 2009 are given in the following table:

14. CASH FLOW HEDGE COMPONENTS

This item was created in compliance with the provisions of IAS 1, as better specified in “Accounting

standards, amendments and interpretations applied at 1 January 2009” and provides for a separate

indication of the income components such as income and charges, posted directly under the

shareholders’ equity; at 31 December 2009 the value equals Euro - 983 thousand. The value for 2008

was re-posted, equal to Euro -611 thousand.

15. PROFITS PER SHARE AND DIVIDENDS

The basic earnings per share are calculated by dividing the net profit for the period attributable to

the parent company’s ordinary shareholders by the weighted average number of ordinary shares

outstanding in the period.

The diluted earnings per share distributed do not show any difference with respect to the base

earnings per share as there are no convertible debentures or other financial instruments with dilution

effects. The income and information is given below on shares used for the purposes of calculation of

the earning profit per share:

No dividends were distributed during 2009.


Euro/thousand 31/12/09 31/12/08

Current taxes 8,654 50,929

Deferred taxes (4,537) (42,221)

Prepaid taxes (441) (9,127)

TToottaall TTaaxxeess 33,,667766 ((441199))

in Euro 31/12/2009 31/12/2008

Net profit attributable to Parent company’s ordinary shareholders -0.0448 -0.129

16. PROPERTY, PLANT AND MACHINERY

At 31 December 2009, this item totalled Euro 933,516 thousand.

The breakdown for the item in question is provided in the following table:

The net book value relates to the net effect resulting from the continuation of the investment plan

commenced by the Group in previous financial years, aimed both at the creation of new sales points

and the restructuring and improvement of existing sales points, as well as consolidating and increasing

the reliability of production plants and product output, in order to guarantee the quality and quantity

of products demanded by the market.

In addition, activities were accelerated aimed at reducing the impact of the Refinery complex on the

external environment and increasing its safety level in line with the various new environmental and

prevention directives, through refurbishment of sea terminals, environmental plants and underground

pipework.


Euro/thousand Land and Plant and Industrial and Assets Total Buildings machinery commercial under construction

fixtures and fittings and advances Other assets

At 1 January 2009 net of depreciation and impairment losses 145,923 587,084 186,314 45,445 964,766

Capitalisations for the period /works in progress 6,455 24,991 30,007 71,780 75,370

Decreases (247) (574) (2,413) (60,292) (5,663)

Change in the consolidation area 0 0 0 0 0

Accounting reclassifications (122) 680 159 (717) (0)

Other changes (3,123) (1,277) (44) (4,444)

Spin-off of api real estate (11,463) 0 (106) (0) (11,569)

Depreciation portions for the period (12,303) (54,014) (28,470) (94,787)

Impairment losses 0 0 0 0

Elimination of Provisions for spin-off of api real estate 3,348 73 3,421

Movements in the dep. prov. due to disposals or changes in the consolidation area 3,250 1,441 1,732 6,423

At 31 December 2009 net of depreciation and impairment losses 131,718 558,331 187,252 56,216 933,516

At 1 January 2009

Cost 199,356 931,760 407,438 45,445 1,583,999

Accumulated depreciation and impairment losses (53,433) (344,676) (221,124) 0 (619,233)

NNeett bbooookk vvaalluuee 114455,,992233 558877,,008844 118866,,331144 4455,,444455 996644,,776666

Cost at 31 December 2009 190,856 955,580 435,041 56,215 1,637,693

Accumulated depreciation and impairment losses at 31 December 2009 (59,138) (397,249) (247,789) 0 (704,176)

NNeett bbooookk vvaalluuee aatt 3311 DDeecceemmbbeerr 22000099 113311,,771188 555588,,333311 118877,,225522 5566,,221155 993333,,551166

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The item “Property, plant and machinery” covers:

“Land and Buildings” recorded at a value of Euro 190,856 thousand, Depreciation Provision of Euro

59,138 thousand, leaving a residual value of Euro 131,718 thousand, already net of write-down from

impairment in compliance with IAS 16, of Euro 89 thousand.

The item in question mainly relates to:

■ Land, Equipment Buildings and Buildings of Euro 159,829 thousand, Depreciation provision of Euro

48,083 thousand;

■ Land and buildings covered by service stations of Euro 31,027 thousand, Building Depreciation

Provision of Euro 11,055 thousand;

Increases in the period, equal to Euro 6,455 thousand, mainly refer to both the capitalisation by api

of works in progress for Euro 2,026 thousand relating to land and buildings covered by service stations,

and to the investments made by the subsidiary refinery, including the following:

■ for Euro 327 thousand, the reconstruction of the cliff and the improvement along the hydraulic

barrier;

■ the paving of some pipe ways for Euro 331 thousand;

■ for a total of Euro 678 thousand, the creation of new pipes for the water/foam system, for the

suction of steam and land transport;

■ extraordinary maintenance to improve the tanks for Euro 1,428 thousand;

■ the paving of the containment basins of the Tk14 tank for Euro 251 thousand.

The item “Other changes”, equal to Euro (3,123) thousand, represents the transfer account made

between the amortisation provision and the historical cost at the time of merging the company Calgas S.r.l.

The item in question decreased by Euro 8,115 thousand (Euro 11,463 thousand of the historical

costs net of Euro 3,348 of the amortisation fund) due to the proportional spin-off transaction made on

28 April 2009, with which the parent company transferred land and buildings covered by service

stations to the beneficiary api real estate S.r.l.

“Plant and Machinery” equal to Euro 955,580 thousand, Depreciation Provision of Euro 397,249

thousand, leaving a residual value of Euro 558,331 thousand.

The heading in question essentially includes refinery plant and machinery, the api energia IGCC

plant, plant and machinery relative to retail networks belonging to the parent company, as well as

general plants installed in national storage deposits in Rome and Barletta.

In this regard we consider it appropriate to point out that the item in question includes financial

charges capitalised by the subsidiary api Energia during the course of previous financial years relative to

interest due and instalments on the debt owing to the financing banks, sponsors and hedging banks,

up to the date of provisional acceptance of the plant (26 April 2001).

Financial charges in question capitalised during the course of previous financial years, up until

provisional acceptance of the plant, total Euro 117,883 thousand.

Purchases and capitalisations for the financial year, equal to Euro 24,991 thousand, relate mainly to:

■ maintenance and upgrading operations carried out during the “C Inspection” scheduled shutdown

of the IGCC plant of api energia, for Euro 8,965 thousand;

■ the replacement by the refinery of the desulphurisation plants and molecular sieves of the

isomerisation plant for Euro 3,250 thousand;

■ investments made by the refinery of Euro 781 thousand for revamping of the unifining aimed at

both increasing capacity and improving the quality of the LPG washing system with water;


■ the creation of hydrocarbon detectors on the refinery plant for Euro 607;

■ the restructuring of cabin “C” of the refinery for Euro 728 thousand;

■ activities concerning la reduction of noise levels of the refinery plants by replacing the fans and

motors of the refinery “air fins” for Euro 1,097 thousand;

■ the strengthening of the LPG loading and unloading system of the refinery for Euro 1,116 thousand;

■ the strengthening of the topping plant for Euro 1,049 thousand;

■ the activities carried out to upgrade the pump and motor fleet of the refinery for Euro 2,361

thousand;

■ the strengthening of the gasoline isomerisation plant of the refinery for Euro 400 thousand.

The decrease in the asset values of Euro 574 thousand is due mainly to the scrapping by api energia

of parts which following damage or obsolescence can no longer be used in the production process.

Finally, the item “Other changes”, equal to Euro (1,277) thousand, represents an accounting

reclassification between the amortisation provision and the historical cost at the time of merging the

company Calgas S.r.l.

“Industrial Fixtures and Fittings and Other Assets” equal to Euro 435,041 thousand, Depreciation

Provision of Euro 247,789 thousand, leaving a residual value of Euro 187,252 thousand. The item

mainly relates to:

■ Service station equipment for a value of Euro 361,773 thousand, Service Station equipment

depreciation provision of Euro 218,521 thousand;

■ LPG tanks and canisters totalling Euro 18,129 thousand, LPG tank and canister depreciation

provision of Euro 8,027 thousand;

■ Other fixtures, tools and equipment, electronic machines and furniture of Euro 55,139 thousand,

with respective depreciation provision of Euro 21,241 thousand, mainly relating to refinery

equipment and the IGCC plant of api energia, as well as to electronic equipment and group

company furniture and furnishings.

The increase for the financial year, totalling Euro 30,007 thousand, can essentially be attributed:

■ for Euro 27,605 thousand to capitalisation of works in progress relating to tanks, pumps, shelters,

booths and self-service equipment installed at the network’s points of sale;

■ the acquisition by api raffineria of laboratory equipment and an automation system for LPG loading,

for Euro 404 thousand and Euro 519 thousand respectively.

Balance sheet items underwent a reduction of Euro 2,413 thousand substantially due to the removal

of points of sale from the group network.

The item “Other changes”, equal to Euro (44) thousand, represents a reclassification between the

amortisation provision and the historical cost at the time of merging the company Calgas S.r.l..

The item in question decreased by Euro 33 thousand (Euro 106 thousand of the historical costs net

of Euro 73 thousand of the amortisation fund) due to the proportional spin-off transaction made on 28

April 2009, with which the parent company transferred land and buildings covered by service stations

to the beneficiary api real estate S.r.l., in addition to Service Station equipment, as already mentioned.


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“Fixed assets under construction and advances” at the end of the financial year totalled Euro

56,215 thousand and essentially relate to new constructions, restructuring, revamps, and extensions

of points of sale and non-oil plants, and purchase of important spare parts for the IGCC plant and

the refinery.

17. GOODWILL

A breakdown of the goodwill item is provided below:

The increase of Euro 53 thousand refers to the goodwill of a store purchased by the parent company

during the year.

We feel that it is appropriate to remind you that the Group has made accounting entries for

impairment write-downs in those cases in which the recoverable value of the assets subject to analysis

is lower than their book value, and the relative impairment loss is considered to be lasting by the

directors.

Calculation of the recoverable value, in accordance with IAS 36, has been carried out using the

higher of the assets’ value in use and their fair value, net of any charges resulting from the sale

transaction.

To calculate the value in use of the assets, the directors have considered, on the basis of the accepted

current practice, to adopt the UDCF (Unlevered Discounted Cash Flow) method, which involves the

discounting of operating cash flows, i.e. the flows available prior to the repayment of the financial debts

and remuneration of shareholders. On the basis of this criteria, the operating flows are discounted at a

rate equal to the weighted average of the cost of the debt and own capital (WACC or Weighted Average

Cost of Capital), for the purpose of obtaining the operating capital value which may be able to be

generated by the assets subject to analysis. The operating cash flows subject to discounting are those

produced by CGU Refining & Marketing and used for the preparation of the 2010-2014 Group Business

Plan. The year 2010 is based on budget data. With regard to the following years, internal forecasts for

the gross margin of the refining and the distribution business were used. Other costs/revenues were

obtained by applying 75% of the planned inflation rate (1.5%) to 2010 figures.


Euro/thousand Opening Increases Write-downs Closing balance for Impairment balance

Api Energia S.p.A. 16,488 0 0 16,488

Calgas S.r.L. 14,717 0 0 14,717

Bielpe S.p.A. 13,812 0 0 13,812

Petronoil S.r.L. 2,059 0 0 2,059

F Gas S.r.L. 680 0 0 680

Italiana Petroli S.p.a. 50,510 0 0 50,510

Di Car S.p.a. 14,298 0 0 14,298

Step S.p.A. 7,665 0 0 7,665

Gamma Petroli S.r.l. 1,079 0 0 1,079

Petrolgas S.r.L. 1,412 0 0 1,412

Elbagas S.r.L. 854 0 0 854

Third parties 0 53 0 53

TToottaall 112233,,557733 5533 00 112233,,662266

In line with the benchmark for the sector, the discount rate used was 8.1% over a 5-year period.

With regard to the calculation of the recoverable amount, a terminal value was also included, revalued

at a 1.5% rate.

For calculation of the fair value net of the charges resulting from the sales transactions, on the other

hand, reference is made to the most current criteria used by the market, which is that of estimating the

sales price using a multiple based on EBITDA.

18. INTANGIBLE FIXED ASSETS

Viene di seguito riportato il dettaglio della voce Immobilizzazioni immateriali:

The heading Intangible fixed assets totals Euro 129,185 thousand, showing a decrease of Euro

2,819 thousand and includes:

■ “Owned networks” and “Third party networks”, respectively equal to Euro 21,589 thousand and

46,307 thousand, representing the fair value of the intangible assets recorded at the time of

allocation of the price paid for the acquisition of IP. The decrease of Euro 114 thousand and of Euro

1,307 thousand, in owned and third parties’ networks respectively, is resulting from failure to renew

the agreements in place with 56 service stations, and transfer of one owned plant;

■ “Patent rights and rights to use the patents of others”, for a value of Euro 4,378 thousand,

essentially represented by the software usage rights of the parent company and api raffineria, as

well as the General Electric Energy patent right (formerly Texaco Development Corporation) relative

to the gasification process for the production of electricity by the subsidiary api energia.

■ “Concessions, licences, trademarks and similar rights”, of Euro 54,416 thousand, essentially

comprise the following:

– Euro 313 thousand, as the value for the trademark of the subsidiary Festival spa;

– Euro 51,883 thousand, as the fair value of the IP brand recorded in 2005 at the time of allocation

of the price paid for acquisition of the company;

– Concessions and licenses inherent in parent company sales points and bars for a value of Euro 2,220

thousand.


Euro/thousand Owned Third party Patent rights Licences concessions Assets under Other Totalnetworks networks and rights to use and brands construction intangible

the patent of others and similar rights and advances fixed assets

At 1 January 2009 net of depreciation provisions and impairment losses 21,702 47,614 5,015 54,901 3 2,769 132,004

Increases 263 2 265

Decreases (114) (1,307) (1,421)

Changes to consolidation area

Accounting reclassifications

Other changes

Extraordinary transactions

Amortisation (900) (487) (276) (1,663)

AAtt 3311 DDeecceemmbbeerr,, nneett ooff ddeepprreecciiaattiioonn aanndd iimmppaaiirrmmeenntt lloosssseess 2211,,558899 4466,,330077 44,,337788 5544,,441166 33 22,,449922 112299,,118855

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■ “Other intangible fixed assets”, of Euro 2,492 thousand, mainly consisting of the api energia

contribution for connecting to the ENEL national network, amortised at an annual rate of 5%

relating to the duration of the agreement stipulated with ENEL (now GSE).

19. EQUITY INVESTMENTS

The item equity investments of Euro 13,570 thousand, a breakdown of which is provided in the

table below, comprises an amount of Euro 12,925 thousand, of equity investments in associated

companies, and Euro 645 thousand of equity investments in other companies.

Other increases and decreases in value of equity investments in associated companies can be

attributed to the results in the companies valued using the net equity method.

As mentioned in the Management Report, with the Extraordinary Meeting of 24 October 2008, api

raffineria decided to voluntarily liquidate the associated company Apisoi Service S.p.A. starting from 1

January 2009. Consequently, business activities were initially reduced and subsequently discontinued to

start the liquidation procedure, which as of today is substantially completed, except for a pending

dispute with the Italian Inland Revenue. The decreased value of the equity investment results from the

result of the company valued under the equity method.

As far as equity investments in other companies are concerned, the following was observed:

■ the decision taken on 30 July by the refinery to exercise the sale option for the entire interest held

in Aerdorica SpA, equal to 503,598 shares; the sale of the shares to Fiduciaria Marche srl was

perfected on 9 February 2010 for Euro 504 thousand;

■ the participation, for Euro 60,000, by the parent company to a capital increase of Civita Servizi S.r.l.;

■ the decrease of Euro 14 thousand of the equity investment held in SGR S.p.A. in liquidation, as

partial distribution of company reserves.


Euro/thousand Book value Increases Decreases Book value % held % held31/12/08 31/12/09 31/12/09 31/12/08

Associated companies

Apisem spa 4,205 90 4,295 50.00% 50.00%

Abruzzo costiero srl 1,379 111 1,490 30.00% 30.00%

Apisoi spa 1,141 (165) 976 50.00% 50.00%

Saccne rete S.r.l. 6,507 (342) 6,165 50.00% 50.00%

Apibenzin 13 13

Associates write-down provision (13) (13)

TToottaall 1133,,223322 220011 ((550077)) 1122,,992255

Other companies

Aerdorica spa 503 (503) 0 7.78% 0.00%

Petroven srl 16 16 10.00% 10.00%

Immobiloil 50 50

Consorzio grandi reti 9 9 20.00% 20.00%

Other equity investments 524 60 (14) 570

Other group companies write-down provision (310) 310 0

TToottaall 779922 6600 ((220077)) 664455

TToottaall 1144,,002244 226611 ((771144)) 1133,,557700

20. OTHER NON-CURRENT ASSETS

The other non-current assets comprise:

At 31 December 2009, this item totalled Euro 25,709 thousand, in line with the previous year.

The balance for the item includes:

■ “Receivables from associated companies” of Euro 322 thousand covering loans and the relative

interest due, owed to the parent company by the associated company Abruzzo Costiero s.r.l.;

■ “Receivables from taxation authorities”, of Euro 3,021 thousand, relative mainly to tax

withholdings, advances, and interest on tax credits dating back to previous financial years, for which

the request has been made to pay this off by means of granting treasury bonds in accordance with

Legislative Decree no. 307 of 23 May 1994 converted into Law 457/94, as well as the advance tax

of Employee Severance Indemnity paid in accordance with Law no. 140 of 1997 and a credit for VAT

refund;

■ “other debtors”, equal to Euro 22,362 thousand, involving both prepayments of Euro 18,629

thousand with a duration of more than one year deriving from the payment by api of a contract

renewal lump sum for exclusive supplies (operator agreements), and for Euro 755 thousand,

prepayments mainly relating to leasing instalment costs paid in advance with respect to the period

which they cover, and fees paid to service providers;

■ “Investments” of Euro 4 thousand consist of treasury bonds owned by the parent company and

corresponding to the deposits received from consumers by way of guarantee on the LPG cylinders

in compliance with the provisions of Law 539/85.

21. DERIVATIVE INSTRUMENT ASSETS

The heading “Derivative instrument assets” of Euro 595 thousand (Euro 365 thousand at

31.12.2008) corresponds to the fair value appraisal of derivative contracts in place at the balance sheet

date, relating to hedging transactions for the hedging of the risk linked to interest rate fluctuation (Euro

205 thousand) and exchange rate (Euro 390 thousand).

The fair value has been determined using generally accepted valuation models and techniques,

based on the discounting of expected cash flows. Certain derivatives have been valued using the pricing

models for options. For this purpose, in addition to the contractual parameters for each derivative

market, parameters for the underlying risk factors have been used (Euribor and volatility yield curves)

which can be obtained from external info-providers (e.g. Bloomberg).

The Company verified on a quarterly basis the effectiveness of the hedging relationships in place.


Euro/thousand 31/12/09 31/12/08

M/L loans to associated companies 322 489

Tax receivables 3,021 2,687

Receivables from other parties 22,362 22,239

Investments 4 4

TToottaall 2255,,770099 2255,,441199

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At 31 December 2009, the application of hedge accounting produced the following effects on the

financial statements:

1) A worsening of the Fair Value of interest rate derivatives, mainly due to the reduction in rates during

the financial year;

2) The amount of the cash flow hedge reserve went from Euro - 810 thousand to Euro 9,802

thousand. The change is marginally due to the progressive depreciation of the dollar against the

euro occurred between the stipulation of the forward agreements and the end of the year, and

mostly to the fair value reduction related to interest rate derivatives.

Consequently, the income statement includes financial income for approximately Euro 1.2 million,

due to interest rate transactions of the parent company and the subsidiary api energia.

22. PREPAID TAXATION

Prepaid taxation as of 31 December 2009 totals Euro 100,229 thousand, compared with an amount

at 31 December 2008 of Euro 100,825 thousand.

The balance in question mainly includes credits generated from temporary differences on:

■ the value differences between tangible and intangible fixed assets, whose statutory amortisation is

greater than the fiscally deductible amounts, for a total of Euro 4,343 thousand;

■ exchange rate losses not realised by the subsidiary api energia for Euro 12,606 thousand;

■ non-deductible interests, pursuant to art. 96 of the Consolidation Act on Income Taxes (TUIR), for

Euro 11,144 thousand;

■ calculation of the deferred liability on CIP 6 rights for the subsidiary api energia of Euro 43,599

thousand;

■ transactions on derivative instruments for Euro 955 thousand;

■ the IRES tax loss of the refinery for Euro 7,651 thousand and api anonima for Euro 4,403 thousand;

■ the additional IRES (6.5%) on the fiscal loss of 2009 for Euro 2,850 thousand.


23. INVENTORIES

This item amounts to Euro 322,642 thousand at 31 December 2009 and shows an increase of Euro

12,059 thousand with respect to the corresponding balance at 31 December 2008.

The breakdown of the item is as follows:

The increase of Euro 12,059 thousand is due to the dual effect of:

■ an increase in the weighted cost compared to the market value of January 2009, which is the value

based on which the inventories were written down for Euro 99,546 by the parent company;

■ lower inventories compared to the previous year.

It is important to point out that the amounts given in the table are net of the relative write-down

provisions.

“Stocks and spare parts” of Euro 35,230 thousand are mainly relating to spare parts and

maintenance materials of the refinery and the IGCC plant, and to consumables and maintenance

materials for the distribution network of the parent company.

24. TRADE AND OTHER DEBTORS

Trade receivables and other debtors are made up as follows:

Trade receivables relative to wholesale activity are non-interest bearing and generally have an

average due date of 43 days.

Trade receivables relative to retail activities are on average collected at 3 days.

The provisions for doubtful debtors, equal to Euro 7,193 thousand, went up by Euro 1,660

thousand to reflect the negative effects of the credits and economic crisis under way in Italy.


Euro/thousand 31/12/09 31/12/08

Raw Materials 106,669 85,843

Products being processed 23,527 24,837

Finished products 157,216 166,515

Advances 0 0

Stocks and spare parts 35,230 33,388

TToottaall 332222,,664422 331100,,558833

Euro/thousand 31/12/09 31/12/08

Trade receivables 401,608 487,042

Provision for doubtful debtors (7,193) (5,533)

Receivables from other oil companies 64,270 59,745

Bills of exchange receivable 7,060 3,716

Receivables from associated companies due after 12 months 3,023 929

Receivables from controlling companies due within 12 months 38,785 34,525

Receivables from other group companies 122 226

TToottaall 550077,,667744 558800,,665500

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The item “Receivables from other oil companies” of Euro 64,270 thousand, shows an increase of

Euro 4,525 thousand. These receivables represent, in relation to the counter-entry item in the liabilities

section, the amount of receivables confirmed at the end of the period with respect to the other oil

companies in relation to sale and purchase contracts for goods entered into with the same.

“Bills of exchange receivable”, of Euro 7,060 thousand, has increased by Euro 3,334 thousand. The

variation is relating to the value of bills on hand and also of bills already presented subject to collection,

at the closing date of accounts.

“Receivables from associated companies” relate entirely to the credit granted by the parent

company towards the associated company Saccne rete S.r.l..

“Receivables from controlling companies”, equal to Euro 38,785 thousand, mainly comprise the

parent company credit toward api holding spa referred to the IRES credit of previous years, transferred

to the controlling company under art. 118, Para 3 of T.U.I.R. (Consolidated Tax Act) as well as the credit

transferred to the parent company by api holding for the VAT of December.

“Receivables from other group companies” mainly include credit granted by the group to the

companies apinòva energia, CER and the property company api real estate.

25. FINANCIAL CURRENT ASSETS

This item, equal to Euro 18,400 thousand, refers to the financial credit granted by api anonima to

the controlling company api holding s.p.a. at the 3 month Euribor rate + 140 basis points.

26. OTHER CURRENT ASSETS

“Other current assets” amount to Euro 21,815 thousand, decreasing by Euro 387 thousand with

respect to the previous year.

Among the most significant debtor relationships we would point out:

■ Regione Friuli-Venezia-Giulia, of Euro 2,570 thousand - in accordance with Art. 3 Paragraphs 16 and

17 of Law no. 549 of 28 December 1995 – for the recovery of discounts applied by api spa by way

of reduction of the pump price of gasoline to regional territory residents only;

■ Anas value recovery, of Euro 2,541 thousand in relation to amounts due from ANAS spa, inclusive

of interest in favour of api spa, for works on the "la Pisana" motorway service station carried out

on its behalf. Within the context of relations with the abovementioned company, additional relations

are also presented in the liabilities item “other creditors” within the main item “other liabilities”

relating to license payment instalments due on the same service station from 1990;

■ other relations with various parties for a total value of Euro 4,269 thousand, relating essentially to

amounts owed for advances on leasing instalments and other minor advances paid by the parent

company;

■ Mediofactoring, equal to Euro 6,438 thousand, relating to the credit – at 31 December 2009 – to

“Carta Maxima” fuel card customers, covered by the factoring company Mediofactoring SpA, to

which our credits were transferred with a guarantee without recourse;

■ Insurance companies for damage compensation of Euro 70 thousand for damage claimed from

insurance companies; (Euro 125 thousand at 31 December 2008);


27. TAX RECEIVABLES

The item “tax receivables” totals Euro 18,832 thousand, showing a decrease of Euro 7,517

thousand, and includes the IRES and IRAP credit and VAT credits for group companies.

28. LIQUIDITY TIED UP IN PROJECT FINANCE

The value as of 31 December 2009 totalled Euro 98,538 thousand recording an increase of Euro

52,761 thousand. The heading is entirely made up of api energia’s restricted cash at bank and in hand,

associated with current accounts opened with the Banca Nazionale del Lavoro in the name of the

Facility Agent, The Royal Bank of Scotland, respectively called “Revenues” for Euro 86,556 thousand,

(Euro 20,454 thousand at 31 December 2008), “Debt Service Reserve Account” of Euro 11,562

thousand (Euro 24,784 thousand at 31 December 2008), “Compensation” of Euro 305 thousand

(unchanged compared to 31 December 2008) and “Extra-maintenance” of Euro 115 thousand (Euro

234 thousand at 31 December 2008).

29. CASH AT BANK AND IN HAND AND CASH EQUIVALENTS

Cash at bank and in hand and cash equivalents comprise:

Short term bank deposits earn variable rate interest based on daily rates.

For the purposes of the consolidated cash flow statement, the item cash at bank and in hand and

cash equivalents at 31 December 2009 is made up as indicated above.

The balance is relating to higher payments due in the first few days of January.

Bank deposits decreased by Euro 10 thousand following the above mentioned proportional spin-off

transaction made by the parent company in favour of api real estate.

30. GROUP SHAREHOLDERS’ EQUITY

Share Capital

The share capital totalled Euro 115,425 thousand.

Legal Reserve

The “Legal reserve” amounts to Euro 19,295 thousand and is in line with the previous year.


Euro/thousand 31/12/09 31/12/08

Bank and post office deposit accounts 128,070 111,304

Ready cash and cheques 265 310

TToottaall 112288,,333355 111111,,661144

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Other Reserves

The heading “Other Reserves”, net of the Cash flow hedge reserve of Euro – 9,802 thousand, totals

Euro 283,381 thousand, with a decrease with respect to the previous year of Euro 17,813 thousand.

Cash flow hedge reserve

This heading totals Euro – 9,802 thousand and relates to the effective portion of the fair value of

contracts in derivative instruments in existence at 31 December 2009 to hedge the risk of exchange

rate and interest rate fluctuation.

31. MEDIUM TO LONG TERM DEBT

Medium and long term debt comprises:

The heading “Bank borrowings” shows a decrease of Euro 82,004 thousand compared to the

previous year. This reduction is due to the repayment of the principal amounts of amortising loans of

the parent company api spa for Euro 14,643 thousand, the reimbursement of loans maturing in June

and December 2010 respectively, by the parent company for Euro 41,000 thousand, and the residue

from the repayment of the “Project financing” debt instalments of the subsidiary api energia.

In the past year, thanks to a debt restructuring process carried out during 2007, the company did

not need to resort to additional medium to long term loans that, when considering the applied spreads,

would have jeopardised its ability to maintain the current cost of long term debt.


Share Legal Other Legal Profits Profit Shareholders’ Capital Profit Shareholders’ Shareholders’Capital Reserve Reserves C.F. Hedge carried (loss) for equity Reserves (loss) for equity equity

Reserve forward financial GROUP Minority financial Minority TOTALYear Interests Year Interests

Minority I.

BBaallaannccee aatt 11 JJaannuuaarryy 22000099 111155,,442255 1199,,229955 115588,,333333 ((880099)) 114422,,886611 ((1188,,778877)) 441166,,331188 11,,112288 338877 11,,551155 441177,,883333

Other profits (losses) recorded under shareholders’ equity

Distribution of dividends (313) (313) (313)

Effect of application of the equity method 3,332 (8,740) 5,408 0

Reclassifications from other reserves

Foreign Shareholdings Translation Reserve (628) (628) (3) (3) (631)

Effect of hedge accounting operations (252) (252) 13 13 (239)

Other changes in shareholders’ equity

Spin-off in favour of Api real estate (7,138) (7,138) (7,138)

Change in the consolidation area

Allocation of profit for year 2008 (18,787) 18,787 387 (387)

Profit for the financial year (6,751) (6,751) 365 365 (6,385)

BBaallaannccee aatt 3311 DDeecceemmbbeerr 22000099 111155,,442255 1199,,229955 115544,,552277 ((99,,880022)) 112288,,885544 ((66,,775511)) 440011,,554499 11,,221122 336655 11,,557777 440033,,112266

Euro/thousand 31/12/09 31/12/08

Bank borrowings beyond twelve months 604,569 686,573

TToottaall 660044,,556699 668866,,557733

The table below gives the composition of short and medium term financial debts in relation to the

rates applied:

* the actual rate includes costs relative to the spread applied and to any hedge transactions (IRS, collar etc.)

For more details on short term debt from banks see note 37.

32. EMPLOYEE BENEFITS (EMPLOYEE SEVERANCE INDEMNITY)

Valuation of Employee Severance indemnity at 31 December 2009 has been carried out in

accordance with the calculation methodology indicated in IAS 19.

The tables below summarise the components of the net costs recorded in the consolidated income

statement:

It should be underlined that, following application of the reform on the election on appropriation

of employee severance indemnity introduced by Law 296/2006 (Finance Act 2007), as from 1 January

2007 employees can elect to appropriate their accruing severance indemnity to industry complementary

pension schemes (Fondoenergia) or to INPS (National Social Security Institute). For this reason,

recalculation of the present value of provision for severance indemnity resulted in a positive effect for

the company on actuarial profits.


Euro/thousand 31/12/2009 31/12/2008

Euro Financing

- fixed rate 20,000 20,000

Subtotal Euro fixed rate financing 20,000 20,000

- floating rate

Financing at actual rate* < 1% 22,000

Financing at 1% < actual rate* < 2% 653,400

Financing at 2% < actual rate* < 3% 263,699 20,000




Subtotal Euro variable rate financing 1,021,170 949,716

TToottaall mmeeddiiuumm // lloonngg tteerrmm ddeebbttss 11,,004411,,117700 996699,,771166

OOff wwhhiicchh ccuurrrreenntt ppoorrttiioonn 443366,,660011 228833,,114433

OOff wwhhiicchh lloonngg tteerrmm ppoorrttiioonn 660044,,556699 668866,,557733

TToottaall 11,,004411,,117700 996699,,771166

Post-employment benefits 2009 2008

Opening liability 15,291 17,801

Service costs 41 44

Interest costs 945 1,110

Actual Gain/Loss (102) 206

Transfers

Services provided (1,044) (3,870)

NNeett ccoosstt ooff tthhee bbeenneeffiitt 1155,,113311 1155,,229911

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The following table includes the employee reconciliation as of 31 December 2009, with respect to

those of 31 December 2008, not considering resignations as of 31 December:

The assumptions adopted for the purposes of valuation of the severance indemnity can be

subdivided into two categories:

■ financial assumptions;

■ demographic assumptions.

More specifically the assumptions adopted are the following:

Financial assumptions

Demographic assumptions


EEmmppllooyyeeeess aatt 3311//1122//22000088 990077

New employees 33

Employees acquired 52

Resignations (47)

EEmmppllooyyeeeess aatt 3311//1122//22000099 994455

Executives Other employees

■■ Increase in the cost of living 2.0% per year 2.0% per year

■■ Discount rate 4.0% per year 4.0% per year

■■ Salary increase:

• less than or equal to 40 years of age 2.75% per year 2.5% per year

• over 40 years of age but less than

or equal to 55 years of age 2.5% per year 2.25% per year

• over 55 years of age 2.25% per year 2.0% per year

Executives Other employees

■■ Probability of:

• Death Mortality table RG 48 Mortality table RG 48

published by State published by State

General Accountancy General Accountancy

• Invalidity INPS table INPS table

according to age according to age

and sex and sex

• resignations:

– up to 50 years of age 4.0% 2.0%

in each year in each year

subsequently Nil Nil

retirements:

– on reaching 60 years of age 35% 60%

(100% for women) (100% for women)

– subsequently but up to less than 65 years of age 20% 10%

in each year in each year

– on turning 65 years of age 100% 100%

• receive an advance from the appropriated 3.0% 3.0%

severance indemnity reserve set aside at 70% in each year in each year

33. DEFERRED TAXATION PROVISION

Deferred taxation provision at 31 December 2009 stands at Euro 137,159 thousand, compared with

a value at 31 December 2008 of Euro 148,396 thousand. The amount relates essentially to:

■ Euro 64,695 thousand due to the differences between accounting and tax depreciation and

amortisation of tangible and intangible assets;

■ Euro 46,259 thousand for allocation of the higher value generated by acquisition of IP, occurred in

2005, to “Owned network”, “Third parties’ network”, “Trademarks”;

■ Euro 563 thousand due to the delayed payment of tax on the capital gain generated from the sale

of the LPG cylinder company branch, which took place during 2007;

■ Euro 1,847 thousand due to the non-accounting write-down of parent company trade receivables;

■ The recognition of past IRAP excess of api raffineria under tax payables for Euro 3,275 thousand.

34. PROVISIONS FOR RISKS AND CHARGES

The breakdown and movement in medium and long term provisions from 1 January 2009 to 31

December 2009 is as follows:

Retirement payments

This item totals Euro 22,852 thousand, and relates to:

– Euro 24,370 thousand for relations with service station operators by way of an operating

termination bonus, following the framework agreement of 18 November 1992; appropriation

for the period equals Euro 9,455 thousand and utilisation equals Euro 8,708 thousand;

– Euro 1,089 thousand for goodwill compensation with respect to agents for the termination of

relations; appropriation for the period equals Euro 163 thousand and utilisation equals Euro 182

thousand;

– finally, the value of Euro 1,610 thousand relates to the impact of discounting of the Operating

termination Bonus during the year, which has shown a positive effect of Euro 1,631 thousand,

and a negative effect due to goodwill compensation with respect to agents of Euro 21 thousand,

in compliance with the provisions of IAS 37. These effects were appraised by applying the

“projected unit credit method” as defined under IAS 19.


Euro/thousand Retirement Taxation Land Provision for Totalpayments and provision Reclamation risks charges and

similar obligations Provision other expenses

Opening balance 23,846 1,589 21,304 3,380 50,119

Incurred in the period 9,506 7,426 7,600 24,503

Utilisations (8,890) (1,005) (10,449) (752) (34,638)

Discounting (1,610) (1,610)

Reclassifications

Extraordinary transactions (390)

Other changes

CClloossiinngg bbaallaannccee ((2222,,885522)) ((558844)) ((1177,,889911)) ((1100,,222288)) ((5511,,555555))

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Provision for taxation

This item amounts to Euro 584 thousand and represents the potential risk relating to any minor

amounts which might be confirmed within the context of pending lawsuits which, to date, have not

yet been favourably concluded.

We would also mention that in 1998, api anonima was subjected to an inspection by the Italian Tax

Police, referring to the period between 1992 to 1997, the outcome of which resulted in an assessment

report, which gave rise to the following assessment and amendment notices:

– in December 1998 an assessment notice was served for the 1992 financial year (Corporate

Income Tax – IRPEG, Local Income Tax - ILOR), almost totally reversed in 2002 by the Rome

Regional Tax Commission; the Finance administration presented an appeal for Annulment of this

judgement. The hearing was held in January 2008. The Supreme Court – by means of judgment

no. 9497/08 filed on 11 April 2008 - accepted both the main appeal of the Italian Inland Revenue

and the interlocutory appeal of the Company and referred the case back to another section of

the Lazio Regional Tax Commission. On 21 December 2009, the Lazio Regional Tax Commission

filed the judgement no. 713/01/09, with which it accepted the appeal of the Company and

rejected the appeal of the Office. The time limits for the Italian Inland Revenue appealing to the

Supreme Court are still pending;

– during 1999, assessment notices were served for the 1993 year (Corporate Income Tax – IRPEG,

Local Income Tax - ILOR and VAT), which were appealed against in accordance with the Law. The

VAT appeal was judged in favour of the company, with a final judgement passed, while the

IRPEG-ILOR appeal was fully upheld by the Rome Provincial Tax Commission (PTC). The Lazio

Regional Tax Commission, having passed a judgement during 2004, almost entirely accepted the

Company’s reasoning, making use of an Official Technical Consultant who verified the

unfounded nature of the claims; the Finance Administration presented an appeal for Annulment

of this judgement. The hearing was held in January 2008. The Supreme Court – by means of

judgment no. 8773/08 filed on 4 April 2008 - accepted both the primary appeal of the Italian

Inland Revenue and the interlocutory appeal of the Company and referred the case back to

another section of the Lazio Regional Tax Commission. On 14 January 2010, the Lazio Regional

Tax Commission filed the judgement no. 7/01/10, with which it accepted the appeal of the

Company and rejected the appeal of the Office. The time limits for the Italian Inland Revenue

appealing to the Supreme Court are still pending;

– during 2001 assessment notices were served for 1994 (Corporate Income Tax – IRPEG, Local

Income Tax - ILOR, VAT), 1995 (Corporate Income Tax – IRPEG, Local Income Tax - ILOR, VAT),

and 1996 (VAT) which, also in this case, were appealed against in accordance with the Law. The

judgements passed to date, issued by the Lazio Tax Commission accept the Company’s reasoning

without exceptions, while the judgments related to 1994 and 1995 VAT notices have already had

a final judgement passed. The Finance Administration presented an appeal for annulment of the

judgements related to the disputes for 1994 (Corporate Income Tax – IRPEG, Local Income Tax –

ILOR), 1996 (VAT) and 1995 (Corporate Income Tax – IRPEG, Local Income Tax – ILOR); the

conciliation hearing has not year been set;

– during 2002, assessment notices were served for 1996 (Corporate Income Tax – IRPEG, Local

Income Tax – ILOR) and 1997 (VAT); also in this case appeals were presented in accordance with

the Law. Rome PTC accepted the appeal and annulled the notification concerning the Corporate

Income Tax - IRPEG and Local Income Tax - ILOR for 1996.


The Office has not lodged an appeal and the judgement has already had a final judgement

passed. With regard to the VAT notice for 1997, the Company appeal was fully upheld by the

judgement issued by the Rome Provincial Tax Commission. The Italian Inland Revenue presented

an appeal for annulment of this judgement, to which the Company objected according to the

terms provided by law. The negotiating hearing took place on 19 January 2010 and the ruling

has not yet been filed;

– during 2003, an assessment notice was served for the 1997 year (Corporate Income Tax – IRPEG,

Local Income Tax - ILOR); the appeal submitted by the company was fully upheld by the Rome

PTC. The Italian Inland Revenue appealed against this decision, against which the Company

appeared in accordance with the Law. The Lazio Regional Tax Commission rejected the appeal

submitted by the Italian Inland Revenue, thus confirming the provisions contained in the

judgement issued by the Rome Provincial Tax Commission. The Italian Inland Revenue appealed

against this decision, against which the Company appeared in accordance with the Law; the date

for the conciliation hearing has not yet been set.

On 9 September 2009, a general tax inspection was stated towards the Company. The inspections,

carried out by operators from the Control, Disputes and Collection Department – Ufficio Grandi

Contribuenti dell’Agenzia delle Entrate – Direzione Regionale del Lazio, examined the results of the year

ended 31 December 2007 for IRES, IRAP and VAT purposes.

At the end of the above mentioned operations, on 22 December 2009 the Tax Authority notified an

Official Tax Audit Report containing findings relating to IRES and IRAP, in relation to which the Company

promptly submitted the observations and requests pursuant to art. 12, last para, of law no. 212 of 27

July 2000. In light of the surveys made, the Company has decided not to make any provisions for

potential liabilities.

Decontamination provision for land and service station disposal

The amount of this provision at 31 December 2009 was equal to Euro 17,891 thousand. During the

year, an amount equal to Euro 7,426 thousand was set aside, while Euro 10,449 thousand were used.

This provision refers to the appropriation of costs made by the parent company for the

environmental damage concerning the refinery plant and the provincial network and deposits on the

network plants.

The amount - that was initially set aside in 1999 – corresponds to the current value of the estimated

costs that will be incurred by 2009 to meet the said obligation.

During the year the parent company reviewed the estimates and the assessments made to complete

the decontamination of open sites; the need has consequently emerged to adjust the provision for

2009 for a value equal to Euro 7,426 thousand.

During the year, the amount appropriated by the subsidiary api raffineria, which in the previous year

was equal to Euro 5,939 thousand, was entirely released since, in light of the interventions made in the

year, the activities planned to reclaim and secure the site according to the multi-year plan are considered

as completed.

Finally, in the year the provision was transferred to api Real Estate for Euro 390 thousand, following

the spin-off of land and buildings in favour of the above mentioned company, as specified in the these

notes.


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Provision for risks, charges and other costs

This item has a value as of 31 December of Euro 10,228 thousand.

The provision has increased during the period by Euro 7,600 thousand, for which we would

highlight the following main movements:

– the allocation of Euro 6,777 thousand as an estimate of the charges necessary to cover the

compulsory residual quota of release to the market of gasoline and diesel produced for 2009 by

using a minimum percentage of biofuel equal to 3%;

– Euro 376 thousand as provision for the CO2, quota deficit in the years 2008 – 2009, totalling

122,359 tonnes, valued at 31 December 2009 on the basis of the market price expressed by

“SENDECO2 – Italian CO2 Stock Exchange; - the provision of Euro 34 thousand by refinery for

the alleged loss of platinum expected to be recovered by catalyser I–8 while replacing the

isomerisation plant;

– the provision of Euro 200 thousand by the refinery as an estimate of the charges considered to

be associated to the dispute with the company Costantino Rozzi Spa.

A total of Euro 362 thousand of the provision has been utilised during the period, of which:

– Euro 177 thousand relating to works carried out on the bitumens storage area following the

casualty occurred on 8 September 2004;

– Euro 185 thousand in relation to the revaluation of the provision for CO2 quota deficit valued at

the market price of 31 December 2009.

35. TRADE AND OTHER PAYABLES

Trade and other payables comprise:

The trade payables showed a decrease compared to the previous year of Euro 23,495 thousand, and

are the results of the ordinary management of working capital.

“Payables due to other oil companies”, totalling Euro 125,916 thousand include, in relation to the

respective counter-item under assets, the amount of the actual amounts payable at year end to other

oil companies under goods purchase and sale agreements entered into with same.

Payables due to associated companies totalled Euro 503 thousand and mainly comprise payables of

the parent company due to the associated companies Abruzzo Costiero for Euro 194 thousand, Apisem

for Euro 192 thousand and Saccne Rete for Euro 118 thousand.

Payables to controlling companies, equal to Euro 10,435 thousand, refer to the transfer of the VAT

payables of api raffineria and the amounts to be paid by api anonima, refinery and energy to the

controlling company Api Holding S.p.A., for services provided to it, as well as the transfer of the taxable

income for IRES purposes of api energia to api holding, in application of the regulation on tax

consolidation regime.


Euro/thousand 31/12/09 31/12/08

Trade payables 255,990 274,773

Payables to other oil companies 125,916 105,201

Payables to associated companies 503 8,998

Payables to controlling companies 10,435 27,368

TToottaall 339922,,884455 441166,,334400

36. DERIVATIVE INSTRUMENTS LIABILITIES

The heading “Derivative instrument liabilities” of Euro 22,646 thousand (Euro 23,921 thousand at

31.12.2008) corresponds to the fair value appraisal of derivative contracts in place at the balance sheet

date, relating to hedging transactions of the parent company and api energia for the hedging of the

risk linked to interest rate and exchange rate fluctuations.

In the parent company, the negative hedge balance (referable to exchange rate derivatives for Euro

125 thousand and to interest rate derivatives for Euro 3,541 thousand) is attributable marginally to a

progressive depreciation of the dollar against the euro occurred between the stipulation of the forward

agreements and the end of the year, and mostly to the fair value reduction related to interest rate

derivatives, taking place during the year.

As regards the subsidiary api energia, there are 3 positions relating to derivative hedging

instruments, corresponding to interest rate collars for which api energia collects from the counterparty

any difference between the 6-month Euribor and 6% on a half-yearly basis, and pays to the

counterparty any difference included between 1.97% and the 6-month Euribor, again on a half-yearly

basis. These instruments were traded in order to neutralise the potential change in future project

financing-related financial charges linked to increases in the Euribor rate over 6% and below 1.97%.

Hedging was defined for a value equal to about 75% of the global risk exposure and for a duration

equal to the residual life of the loan. Only the intrinsic value component of the interest rate collar

instruments was designated as hedging (and the time value component is therefore excluded). In

previous years, no appropriations to the shareholders’ equity were made with regard to the hedging

relationship in place. The changes in the fair value recorded for these derivative contracts were only

attributable to the time value component and were recognised with an offsetting item recorded in the

Income statement.

37. SHORT TERM DEBT, PAYABLES DUE TO CONTROLLING COMPANIES

Short term debt comprises:

The increase in short-term debt, totalling Euro 153,458 thousand, is partially attributable to an

increased need by company operations, greater reimbursements due in the coming year for api spa,

equal to 55.6 million Euro compared to 18.2 in 2008, an increase in the project finance instalment

concerning the subsidiary api energia, equal to 26.3 million Euro from 19.7 in 2008, and the funding

activity carried out towards the controlling company. The parent company’s ability to cover financial

resources at competitive prices allowed the debt as at 31.12.2008 to be zeroed and the position within

the group to be turned from debtor to creditor, so much so that at the end of the year api spa claimed

a credit of 18,400 thousand towards the controlling company api Holding spa, details of which are in

paragraph “Other non-current assets” of these notes.


Euro/thousand 31/12/09 31/12/08

Bank borrowings 436,601 253,063

Payables due to Other Financiers

Payables due to Other Group Companies 0 1,600

Payables due to Controlling Companies 0 28,480

TToottaall 443366,,660011 228833,,114433

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38. OTHER LIABILITIES

Other Liabilities of Euro 255,208, recorded an increase of Euro 46,580 thousand and are made up

as follows:

* The item was reclassified by “Provision for risks, charges and other costs” in the application of IFRIC 13. This change did not

affect the Result for the year or the consolidated net equity.

The heading “Payables due to welfare institutions” of Euro 3,872 thousand, shows a decrease of

Euro 274 thousand and relates mainly to contributions due to the INPS, Inpdai and other Security

Institutions and are proportionate to salary payments for the month of December.

The item “Other creditors” mainly includes:

■ Euro 208,351 thousand as deferred income of the incentive component of the CIP6 tariff related to

the sales contract of Api Energia with the Electric Service Operator (GSE), which applies for 20 years

and provides for recognition of an incentive for the first eight years;

■ Euro 2,458 thousand, for amounts due to employees at 31.12.2009 for deferred indemnities and

bonuses;

■ Euro 9,591 thousand for amounts due as of 31.12.2009 in favour of third parties relative to service

station land lease rentals, public ground occupation tax and motorway license payment instalments;

■ Euro 568 thousand relating to the debt to operators for application of the lower rate on LPG.

■ Euro 17,550 thousand as an estimate on the sales forecasts based on which customers will order

advertising gifts concerning the campaign “Passione e regali”, which will be purchased and

delivered in 2010.

39. TAX PAYABLES

The balance of Euro 123,837 thousand at 31 December 2009 mainly comprises:

■ Euro 9,521 thousand for the “Robin Tax” appropriation;

■ Euro 103,988 thousand to customs relative to the excise applied to the origin of products carried

out in the month of December net of the advance paid in December 2009 for current payments

becoming due in the first few months of 2010.


Euro/thousand 31/12/09 31/12/08

Payables due to taxation authorities 123,837 135,040

TToottaall 112233,,883377 113355,,004400

Euro/thousand 31/12/09 31/12/08

Payables due to Welfare Institutions 3,872 4,146

Other creditors 251,336 262,322*

TToottaall 225555,,220088 226666,,446688

40. GUARANTEES AND COMMITMENTS

The total balance of the heading at 31 December 2009 totalled Euro 100,741 thousand (Euro 99,160

thousand at 31 December 2008) and mainly comprises the following guarantees and commitments:

■ guarantees provided by the company in favour of Public Entities in relation to the obligations

connected with the issue of licenses and/or concessions essentially totalling Euro 100,427 thousand.

■ api Energia insurance bonds, which have replaced bank bonds for an equal amount expired on 31

December 2001, subject to specific authorisation by the Facility Agent, issued as a guarantee for the

permit to use the stretch of water of 66,663 m2 at the Port of Ancona for a total amount of Euro

320 thousand;

41. LEGAL PROCEEDINGS AND ARBITRATION

During the period there were legal, administrative and arbitration proceedings pending of various

types involving the Issuer or api Group companies.

Among the most significant disputes the following are highlighted:

(i) the Oil Permit and Agreement Protocols have been contested before the Administrative Law Courts

of the Marche Regions by the Municipality of Falconara Marittima under the petition served on 1

August 2003. The petition was waived and therefore the dispute has ended.

(ii) during the Services Conference of 11 January 2005, the Minister for the Environment prescribed a

series of environmental mitigation measures relative to the site on which the Falconara Refinery is

located. Among these works, we would particularly highlight the request to create a physical

containment barrier for the area in order to isolate it and impede any diffusion of pollutants. With

appeal of 13 April 2005, api Raffineria contested the decisions of the Services Conference before

the Marche Administrative Law Court in that they were excessively onerous and difficult to realise

in practice, and the relative dispute is pending. To this is added the appeal against the Conference

decisions of the following March (2006). The appeals were set for discussion before the Marche

Region Administrative Law Court at the hearing of 4 April 2007; the hearing – that was initially put

back to 5 March 2008 – was put back again to 2 December 2009 and then again in view of a

settlement of the administrative procedure with the Minister for the Environment that overcomes

the issues raised with the appeal;

(iii) api Raffineria is subject to the Noise Classification Plan approved definitively by the Municipality of

Falconara Marittima on 31 March 2005 in accordance with Regional Law 28/2001, with particular

reference to the requirement to significantly reduce the environmental noise emission threshold in

the suburbs neighbouring the Falconara Refinery. The noise classification plan has been contested

by api Raffineria with an appeal on 15 June 2005 for the part in which it is requested to significantly

reduce the environmental noise emission levels in the area of the Falconara Refinery, and the

relative dispute is currently pending with the Marche Region Administrative Law Courts, with the

discussion hearing date not yet having been set.

This dispute could be abandoned, since a re-examination of the noise classification plan by the

Municipality of Falconara is underway regarding the request for change put forward by api

Raffineria;


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(iv) on 25 August 1999 an incident occurred at the Falconara Refinery resulting in the death of two api

Raffineria employees. Following this incident, criminal proceedings were opened, which were

settled with the acquittal of all the plaintiffs except a field operator. The criminal proceedings are

now in the pending appeal phase initiated by the State Attorney General, by the convicted

defendant and by api Raffineria as the party with third party liability. The discussion hearing date

has not been set yet. Among the plaintiffs claiming damages, the Municipality of Falconara did not

lodge an appeal and the claim for damages;

(v) following an accusation presented by a former employee of one of the two subcontractor

companies for monitoring activities and securing the environment for the reclamation procedure

commenced by api Raffineria, the works director and environmental manager for the Falconara

Refinery were subjected to legal proceedings for the crime of forgery of a public document and

failure to carry out reclamation activity, together with three employees and consultants, at the time

of the facts, of contractor and subcontractor companies. Both the Marche Region and the Province

of Ancona had been admitted as plaintiffs claiming damages, presenting unquantified claims. The

relative proceeding ended in 2007 with full acquittal of all the accused, and rejection of damage

claimed by plaintiffs put forward by the civil parties, among which the Municipality has in any case

withdrawn the appeal and claim for damages; The Public Prosecutor’s Office has already lodged an

appeal, the hearing date of which has still not been set;

(vi) the criminal proceeding, in relation to the incident which took place at the Falconara Refinery on 8

September 2004 ended with the acquittal of all defendants.

The term is still pending for the submission of the appeal;

(vii) during 2006 and 2007, four VAT audit notices were served to the company for 2000, 2001, 2002

and 2003, all resulting from an assessment report issued by the Italian Tax Police – Marche Regional

Division, following a tax audit conducted on the associated company apiSoi SpA. These deeds

contested the delayed invoicing by api raffineria spa to the associate apiSoi of materials withdrawn

by the same apiSoi from the api raffineria warehouse – based on a supply relationship pursuant to

art. 1559 of the Italian Civil Code – to carry out maintenance work at the refinery. The auditing

office has confirmed the material transfers within the context of the VAT regulation of asset

transfer, refusing to recognise the existence of a supply relationship. At the balance sheet date, the

Rome and Ancona Provincial Tax Commissions filed their judgements concerning the disputes for

2001 and 2003, as well as the Rome Provincial Tax Commission for 2000, which fully accepted the

Company’s reasoning. In consideration of the manifest unfounded nature of the claim by the

Taxation office and of the favourable judgements, the company has decided not to make any

provision for such potential liabilities as they are not considered probable.


42. FINANCIAL RISK MANAGEMENT: OBJECTIVES AND CRITERIA

The Group’s operating activities are financed predominantly by applying to the banking system,

through the use of current account overdrafts and financing, both short term - in Euro and to a limited

extent in foreign currency – and medium and long term. Within the context of ordinary management of

activities, api also uses other financial instruments such as trade debts and credits and operating hire

contracts.

As part of its ordinary operating activity, the parent company in particular is simultaneously exposed

to interest rate risk, exchange rate risk, commodity risk, liquidity risk and credit risk. To-date, the api policy

provides solely for hedging the risks connected to fluctuations in interest and exchange rates, substantially

implemented by entering into IRSs (Interest Rate Swap), collars and forwards; no trading of derivative

instruments for speculative purposes is provided.

Interest rate risk

In relation to the market risk due to interest rate variations, it is Group policy to hedge the relative

exposure relating to medium and long term indebtedness. In managing this risk, zero-cost hedging

structures are used such as Swap “cap” and “collar”. Slightly more structured transactions were carried

out in the past consisting of the combination of two simple derivatives.

It is the group policy that the depreciation plan for the hedging specularly follows, as far as due date

and notional amount are concerned, the depreciation plan for the underlying debt.

The current portion of exposure to the interest rate risk is approximately 28% of the total exposure

(in terms of face value of medium/long term financial liabilities hedged). The main sources of exposure

of the Company to interest rate risks relate to existing short, medium and long term loans and the fair

value of derivative instruments. In particular, the potential impact on the income statement for 2010

(2009 for comparison purposes) connected to the interest rate risk is as follows:

– potential variation in financial charges and interest pertaining to 2010;

– potential variation in the fair value of existing derivative instruments (other derivatives and

inefficient component of hedging derivatives).

Potential variations in the fair value of the effective component of existing hedging derivative

instruments produce an impact on the Shareholders’ equity.


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IINNTTEERREESSTT SSEENNSSIITTIIVVIITTYY

3311 DDeecceemmbbeerr 22000099 3311 DDeecceemmbbeerr 22000088

RReessiidduuaall EEssttiimmaatteedd IImmppaacctt IImmppaacctt RReessiidduuaall EEssttiimmaatteedd IImmppaacctt IImmppaaccttddeebbtt pprreesseenntt vvaalluuee oonn PP&&LL oonn PP&&LL ddeebbtt pprreesseenntt vvaalluuee oonn PP&&LL oonn PP&&LL

((€//000000)) ooff iinntteerreesstt AAccccoouunntt AAccccoouunntt ((€//000000)) ooff iinntteerreesstt AAccccoouunntt AAccccoouunnttffiinnaanncciiaall cchhaarrggeess 22001100 22001100 ffiinnaanncciiaall cchhaarrggeess 22000099 22000099

yyeeaarr 22001100 ++110000 bbppss --110000 bbppss yyeeaarr 22000099 ++110000 bbppss --110000 bbppss((€//000000)) ((€//000000)) ((€//000000)) ((€//000000)) ((€//000000)) ((€//000000))

aa bb cc dd aa bb cc dd

Loans receivable 18,400 426 167 (167)

Loans payables (1,045,785) (18,360) (7,698) 7,698 (974,161) (34,331) (6,722) 6,722

TToottaall LLooaannss ((11,,002277,,338855)) ((1177,,993344)) ((77,,553311)) 77,,553311 ((997744,,116611)) ((3344,,333311)) ((66,,772222)) 66,,772222

NNoottiioonnaall DDiiffffeerreennttiiaall IImmppaacctt IImmppaacctt NNoottiioonnaall DDiiffffeerreennttiiaall IImmppaacctt IImmppaacctt((€//000000)) pprreesseenntt vvaalluuee oonn PP&&LL oonn PP&&LL ((€//000000)) pprreesseenntt vvaalluuee oonn PP&&LL oonn PP&&LL

eessttiimmaatteedd AAccccoouunntt AAccccoouunntt eessttiimmaatteedd AAccccoouunntt AAccccoouunnttyyeeaarr 22001100 22001100 yyeeaarr 22000099 22000099

22001100 ++110000 bbppss --110000 bbppss 22000099 ++110000 bbppss --110000 bbppss((€//000000)) ((€//000000)) ((€//000000)) ((€//000000)) ((€//000000)) ((€//000000))

ii jj kk ll mm nn oo pp

Derivative instruments

hedging cash flows 296,194 (3,277) (181) (2,692) 312,379 (441) 486 (1,094)

Other derivatives instruments 241,883 (4,126) 1,138 (1,167) 304,191 (4,258) 1,210 (1,278)

TToottaall ddeerriivvaattiivveess 553388,,007788 ((77,,440033)) 995577 ((33,,885599)) 661166,,556699 ((44,,669999)) 11,,669977 ((22,,337722))

TToottaall ((2255,,333377)) ((66,,557744)) 33,,667722 ((3399,,004466)) ((55,,002211)) 44,,334466

SSEENNSSIITTIIVVIITTYY OOFF DDEERRIIVVAATTIIVVEE FFAAIIRR VVAALLUUEE

3311 DDeecceemmbbeerr 22000099

NNoottiioonnaall NNeett NNeett VVaarriiaattiioonn IImmppaacctt IImmppaacctt NNeett VVaarriiaattiioonn IImmppaacctt IImmppaacctt AAmmoouunntt FFaaiirr VVaalluuee FFaaiirr VVaalluuee iinn NNeett oonn PP&&LL oonn NNeett FFaaiirr VVaalluuee iinn NNeett oonn PP&&LL oonn NNeett

FFaaiirr VVaalluuee AAccccoouunntt EEqquuiittyy FFaaiirr VVaalluuee AAccccoouunntt EEqquuiittyy((€//000000)) ((€//000000)) ++110000 bbppss ++110000 bbppss ++110000 bbppss ++110000 bbppss --110000 bbppss --110000 bbppss --110000 bbppss --110000 bbppss

((€//000000)) ((€//000000)) 22000099 22000099 ((€//000000)) ((€//000000)) 22000099 22000099((€//000000)) ((€//000000)) ((€//000000))

aa bb cc dd==cc--bb ee==dd--ff ff gg hh==gg--bb ii==hh--jj jj

Derivative instruments hedging cash flows 296,194 (4,445) 792 5,237 3,520 1,717 (8,590) (4,145) (1,010) (3,135)

Other derivatives instruments 241,883 (17,871) (17,159) 712 712 (18,622) (751) (751)

TToottaall 553388,,007788 ((2222,,331166)) ((1166,,336677)) 55,,995500 44,,223322 11,,771177 ((2277,,221133)) ((44,,889966)) ((11,,776611)) ((33,,113355))


NNoottiioonnaall NNeett NNeett VVaarriiaattiioonn IImmppaacctt IImmppaacctt NNeett VVaarriiaattiioonn IImmppaacctt IImmppaacctt AAmmoouunntt FFaaiirr VVaalluuee FFaaiirr VVaalluuee iinn NNeett oonn PP&&LL oonn NNeett FFaaiirr VVaalluuee iinn NNeett oonn PP&&LL oonn NNeett

FFaaiirr VVaalluuee AAccccoouunntt EEqquuiittyy FFaaiirr VVaalluuee AAccccoouunntt EEqquuiittyy((€//000000)) ((€//000000)) ++110000 bbppss ++110000 bbppss ++110000 bbppss ++110000 bbppss --110000 bbppss --110000 bbppss --110000 bbppss --110000 bbppss

((€//000000)) ((€//000000)) 22000088 22000088 ((€//000000)) ((€//000000)) 22000088 22000088((€//000000)) ((€//000000)) ((€//000000))

aa bb cc dd==cc--bb ee==dd--ff ff gg hh==gg--bb ii==hh--jj jj


hedging cash flows 312,379 (2,399) 1,845 4,243 2,646 1,597 (7,000) (4,601) (1,452) (3,150

Other derivatives instruments 304,191 (21,062) (20,112) 950 950 (22,139) (1,077) (1,077))

TToottaall 661166,,556699 ((2233,,446611)) ((1188,,226677)) 55,,119933 33,,559966 11,,559977 ((2299,,113399)) ((55,,667788)) ((22,,552288)) ((33,,115500))

Derivative instruments (shift in rates)

The interest rate risk sensitivity was appraised using internal appraisal models, based on generally

accepted principles:

■ regarding financing, by estimating a parallel variation of +100 basis points (+1%) of the term

structure of rates, applied solely to cash flows to be settled in 2010 (2009 for comparison purposes);

■ regarding derivative instruments, by estimating a parallel variation of +/-100 basis points (+/-1%) of

the interest rate forward contract and an average variation in volatility of Euro rates of +/-5%.

The assumptions relating to the range of variations in market parameters used for shock simulation

purposes have been formulated on the basis of the analysis of the historical evolution in such

parameters with reference to a temporal horizon of 12 months.

Exchange rate risk

Both the main activity for supply of raw materials and marginal export activity, both expressed in

foreign currency, expose the Group to the risk of exchange rate changes in the Euro/dollar rate. The

policy applied provides for total hedging of the net risk – given by the value of the import and

subtracting the export component – through the systematic use of forwards. These forward contracts,

usually characterised by very short expiry dates (10 – 30 days), show a settlement currency which tends

to coincide with the currency used to pay the foreign supplier. Group policy provides for stipulation of

the forward contract solely in the presence of an irrevocable commitment.


SSEENNSSIITTIIVVIITTYY OOFF DDEERRIIVVAATTIIVVEE FFAAIIRR VVAALLUUEE


NNoottiioonnaall NNeett NNeett VVaarriiaattiioonn IImmppaacctt NNeett VVaarriiaattiioonn IImmppaacctt AAmmoouunntt FFaaiirr VVaalluuee FFaaiirr VVaalluuee iinn NNeett oonn PP&&LL FFaaiirr VVaalluuee iinn NNeett oonn PP&&LL

FFaaiirr VVaalluuee AAccccoouunntt FFaaiirr VVaalluuee AAccccoouunntt((€//000000)) ((€//000000)) ++55%% ++55%% ++55%% --55%% --55%% --55%%

vvoollaattiilliittyy vvoollaattiilliittyy vvoollaattiilliittyy vvoollaattiilliittyy vvoollaattiilliittyy vvoollaattiilliittyy((€//000000)) ((€//000000)) 22000099 ((€//000000)) ((€//000000)) 22000099

((€//000000)) ((€//000000))aa bb cc dd==cc--bb ee ff gg==ff--bb hh


hedging cash flows 296,194 (4,445) (3,296) 1,149 1,149 (3,857) 589 589

Other derivatives instruments 241,883 (17,871) (17,868) 3 3 (17,858) 13 13

TToottaall 553388,,007788 ((2222,,331166)) ((2211,,116644)) 11,,115522 11,,115522 ((2211,,771155)) 660011 660011


NNoottiioonnaall NNeett NNeett VVaarriiaattiioonn IImmppaacctt NNeett VVaarriiaattiioonn IImmppaacctt AAmmoouunntt FFaaiirr VVaalluuee FFaaiirr VVaalluuee iinn NNeett oonn PP&&LL FFaaiirr VVaalluuee iinn NNeett oonn PP&&LL

FFaaiirr VVaalluuee AAccccoouunntt FFaaiirr VVaalluuee AAccccoouunntt((€//000000)) ((€//000000)) ++55%% ++55%% ++55%% --55%% --55%% --55%%

vvoollaattiilliittyy vvoollaattiilliittyy vvoollaattiilliittyy vvoollaattiilliittyy vvoollaattiilliittyy vvoollaattiilliittyy((€//000000)) ((€//000000)) 22000088 ((€//000000)) ((€//000000)) 22000088

((€//000000)) ((€//000000))aa bb cc dd==cc--bb ee ff gg==ff--bb hh


hedging cash flows 312,379 (2,399) (2,202) 197 197 (2,474) (76) (76)

Other derivatives instruments 304,191 (21,062) (21,085) (23) (23) (21,057) 5 5

TToottaall 661166,,556699 ((2233,,446611)) ((2233,,228866)) 117744 117744 ((2233,,553311)) ((7700)) ((7700))

Derivative instruments (shift in volatility)

Cons

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Fin

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The translation exchange rate risk is not currently managed because individual purchase agreements

of currency are preceding the date of payment of invoices stated in US$.

The potential impact on the Income Statement for 2009 (2008 for comparison purposes) connected

to the exchange rate risk is as follows:

■ revaluation/devaluation of assets and liabilities items stated in foreign currencies;

■ variation in fair value of existing derivative instruments hedging assets and liabilities items stated in

foreign currencies;

■ variations in the fair value of the ineffective component of existing derivative instruments hedging

highly probable transactions in foreign currencies.

Potential variations in the fair value of the effective component of existing hedging derivative

instruments produce an impact on the Shareholders’ equity.

Foreign currency exposure

2009


EExxppoossuurree rreellaattiinngg AAsssseettss LLiiaabbiilliittiieess NNeett ∆∆ PP&&LL ∆∆ PP&&LL ttoo bbaallaannccee sshheeeett iitteemmss ((UUSSDD//000000)) ((UUSSDD//000000)) ((UUSSDD//000000)) AAccccoouunntt AAccccoouunntt

EEUURR//UUSSDD EEUURR//UUSSDD EExxcchhaannggee EExxcchhaannggeerraattee ++55%% rraattee --55%%

((€//000000)) ((€//000000))

Cash 14,822 - 14,822 (514) 514

Trade receivables - - - - -

Trade payable - (85,560) (85,560) 2,970 (2,970)

Financial debt - - - - -

TToottaall ggrroossss eexxppoossuurree

ooff bbaallaannccee sshheeeett iitteemmss 1144,,882222 ((8855,,556600)) ((7700,,773388)) 22,,445555 ((22,,445555))

FFoorrwwaarrdd ppuurrcchhaassee ((nnoottiioonnaall aammoouunntt)) -- 6677,,330000 6677,,330000 ((22,,333366)) 22,,333366

FFoorrwwaarrdd ssaalleess ((nnoottiioonnaall aammoouunntt)) -- -- -- -- --

TToottaall nneett eexxppoossuurree ooff bbaallaannccee sshheeeett iitteemmss 1144,,882222 ((1188,,226600)) ((33,,443388)) 111199 ((111199))

EExxppoossuurree ffrroomm FFuuttuurree FFuuttuurree NNeett ∆∆ PP&&LL ∆∆ PP&&LL ∆∆ SShhaarreehhoollddeerrss’’ ∆∆ SShhaarreehhoollddeerrss’’ hhiigghhllyy pprroobbaabbllee ccoolllleeccttiioonn ppaayymmeenntt ((UUSSDD//000000)) AAccccoouunntt AAccccoouunntt EEqquuiittyy EEqquuiittyyffuuttuurree ttrraannssaaccttiioonnss ffoorreeccaasstt ffoorreeccaasstt EEUURR//UUSSDD EEUURR//UUSSDD EEUURR//UUSSDD EEUURR//UUSSDD((ssuubbjjeecctt ttoo hheeddggee aaccccoouunnttiinngg oonnllyy)) ((UUSSDD//000000)) ((UUSSDD//000000)) EExxcchhaannggee EExxcchhaannggee EExxcchhaannggee EExxcchhaannggee

rraattee ++55%% rraattee --55%% rraattee ++55%% rraattee --55%%((€//000000)) ((€//000000)) ((€//000000)) ((€//000000))

Amount of future cash flows - (37,400) (37,400)

Forward purchase (notional amount) - 37,400 37,400 - - (1,298) 1,298

Forward sales (notional amount) - - - - - - -

Total future transaction

net exposure - - - - - (1,298) 1,298

TToottaall nneett eexxppoossuurree 1144,,882222 ((1188,,226600)) ((33,,443388)) 111199 ((111199)) ((11,,229988)) 11,,229988

2008

The assumptions on the magnitude of variations in market parameters used for simulating the

shocks were formulated on the basis of the historical evolution of these parameters with respect to a

time horizon of 30-45 days, consistent with the expected duration of exposures.

Warehouse commodity risk

The risk associated with the variation in the prices of raw materials is managed by the company

solely when accompanied by events of an extraordinary nature, predominantly associated with refinery

requirements. During the financial year no hedging transaction has been carried associated with this

type of risk.

Credit risk

The Group only deals with reliable clients. The balance of credits is monitored during the year as far

as outstanding and overdue amounts are concerned. It is Group policy to subject clients who require

delayed payment conditions to verification procedures on the relevant credit/solvency category.

The aggregate exposure of API Anonima to the credit risk, regarding 2009, is mainly associated with

trade receivables and amounts receivable from other Oil companies, mainly resulting from the core


EExxppoossuurree rreellaattiinngg AAsssseettss LLiiaabbiilliittiieess NNeett ∆∆ PP&&LL ∆∆ PP&&LL ttoo bbaallaannccee sshheeeett iitteemmss ((UUSSDD//000000)) ((UUSSDD//000000)) ((UUSSDD//000000)) AAccccoouunntt AAccccoouunntt

EEUURR//UUSSDD EEUURR//UUSSDD EExxcchhaannggee EExxcchhaannggeerraattee ++55%% rraattee --55%%

((€//000000)) ((€//000000))

Cash 1,183 - 1,183 (42) 42

Trade receivables - - - - -

Trade payable - (67,717) (67,717) 2,433 (2,433)

Financial debt - - - - -

TToottaall ggrroossss eexxppoossuurree

ooff bbaallaannccee sshheeeett iitteemmss 11,,118833 ((6677,,771177)) ((6666,,553344)) 22,,339900 ((22,,339900))

FFoorrwwaarrdd ppuurrcchhaassee ((nnoottiioonnaall aammoouunntt)) -- 3333,,990066 3333,,990066 ((11,,221188)) 11,,221188

FFoorrwwaarrdd ssaalleess ((nnoottiioonnaall aammoouunntt)) -- -- -- -- --

TToottaall nneett eexxppoossuurree ooff bbaallaannccee sshheeeett iitteemmss 11,,118833 ((3333,,881100)) ((3322,,662277)) 11,,117722 ((11,,117722))

EExxppoossuurree ffrroomm FFuuttuurree FFuuttuurree NNeett ∆∆ PP&&LL ∆∆ PP&&LL ∆∆ SShhaarreehhoollddeerrss’’ ∆∆ SShhaarreehhoollddeerrss’’ hhiigghhllyy pprroobbaabbllee ccoolllleeccttiioonn ppaayymmeenntt ((UUSSDD//000000)) AAccccoouunntt AAccccoouunntt EEqquuiittyy EEqquuiittyyffuuttuurree ttrraannssaaccttiioonnss ffoorreeccaasstt ffoorreeccaasstt EEUURR//UUSSDD EEUURR//UUSSDD EEUURR//UUSSDD EEUURR//UUSSDD((ssuubbjjeecctt ttoo hheeddggee aaccccoouunnttiinngg oonnllyy)) ((UUSSDD//000000)) ((UUSSDD//000000)) EExxcchhaannggee EExxcchhaannggee EExxcchhaannggee EExxcchhaannggee

rraattee ++55%% rraattee --55%% rraattee ++55%% rraattee --55%%((€//000000)) ((€//000000)) ((€//000000)) ((€//000000))

Amount of future cash flows - (19,300) (19,300)

Forward purchase (notional amount) - 19,300 19,300 - - (693) 693

Forward sales (notional amount) - - - - - - -

Total future transaction

net exposure - - - - - (693) 693

TToottaall nneett eexxppoossuurree 11,,118833 ((3333,,881100)) ((3322,,662277)) 11,,117722 ((11,,117722)) ((669933)) 669933

Cons

olid

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business of the Company (existing at 31 December 2008 for Euro 544.9 million and at 31 December

2007 for Euro 641.7 million). During 2008, api anonima carried out a factoring transaction with

IFITALIA (company of the BNL Group). With this transaction, api anonima transferred to IFITALIA a

portion (for a maximum amount of Euro 170 million) of its own trade receivables with wholesale

customers. This led to a reduction in credit risk exposure compared to the situation at the end of 2007.

There are no significant concentrations of credit risk exposure to be underlined towards single debtors.

All positions relating to financial receivables and trade receivables – both at the end of 2009 and 2008

– have an expiry date of less than 12 months.

Liquidity risk

The financial flexibility of the group is essentially guaranteed by the effect of continual and dynamic

recourse to very short term forms of financing (current account overdrafts, “hot money” etc.).

At 31 December 2009, the average exposure of the various short term forms of financing with

respect to the total debt was around 42%.

Debt due date 2009


TTRRAADDEE RREECCEEIIVVAABBLLEESS

UUnneexxppiirreedd RReecceeiivvaabblleess ppaasstt dduuee aanndd nnoott wwrriitttteenn ddoowwnn WWrriitttteenn ddoowwnn

TTyyppee <<3300 ddaayyss BBeettwweeeenn 3300 BBeettwweeeenn 6600 BBeettwweeeenn 9900 BBeettwweeeenn 112200 >>115500 ddaayyss TToottaall ppaasstt dduueeaanndd 6600 ddaayyss aanndd 9900 ddaayyss aanndd 112200 ddaayyss aanndd 115500 ddaayyss

Receivables from third parties 376,729,957 42,683,000 17,670,716 2,449,922 2,449,922 1,142,000 15,954,906 82,689,544 6,325,000

Receivables from Group Companies 52,333,411 - - - - - - - -

TToottaall 442299,,006633,,336688 4422,,668833,,000000 1177,,667700,,771166 22,,444499,,992222 22,,444499,,992222 11,,114422,,000000 1155,,995544,,990066 8822,,668899,,554444 66,,332255,,000000


FFiinnaanncciiaall DDeebbtt

DDuuee DDaattee CCaappiittaall IInntteerreesstt TTrraaddee DDeerriivvaattiivvee TToottaall((€//000000)) ((€//000000)) PPaayyaabblleess IInnssttrruummeennttss ((€//000000))

((€//000000)) ((€//000000))aa bb cc dd ee==aa++bb++cc++dd

Within 1 month - 460 123,023 -266 123,217

Between 1 and 3 months 357 3,097 258,734 522 262,710

Between 3 and 6 months 37,632 5,546 8,304 3,084 54,566

Between 6 and 12 months 399,711 10,463 2,327 3,035 415,537

Between 1 and 2 years 278,657 16,194 457 4,283 299,591

Between 2 and 3 years 149,500 10,782 - 3,336 163,617



After 10 years - - - - -

TToottaall 11,,004455,,778855 7755,,991166 339922,,884455 2222,,449988 11,,553377,,004444

Estimated future charges implicit in financing and expected future differentials implicit in derivative

instruments were determined on the basis of the forward structure of the Euro interest rate and of the

Euro/Dollar exchange rate current on the reference dates (31 December 2009 and 31 December

2008).

43. DERIVATIVE INSTRUMENTS

The fair value of existing interest and exchange rate derivative instruments is determined on the

basis of internal valuation models. These models are based on generally accepted principles. In

particular, regarding the calculation of the present value of future cash flows implicit in such derivative

instruments. These are estimated on the basis of market parameters on the forward structure of the

Euro and Dollar rates, their volatility and the Euro/Dollar exchange rate. Valuations made with internal

models are validated also by examining evidence from the counterparties to such derivative

instruments.

In particular, at 31 December 2009, there were 15 positions relating to derivative instruments

hedging the interest rate risk, 7 of which are interest rate swap and 8 interest rate cap and collar

instruments (of which 3 relate to “api energia interest rate collar” transactions). Regarding interest rate

swap hedging positions, the aim pursued by the Company is about neutralising the potential variations

in future financial charges associated to existing medium/long term debt regarding variations in the

euribor rate. Regarding interest rate cap and collar instruments positions, the aim pursued by the

Company is about limiting the potential variation in future financial charges associated to existing

medium/long term debt with respect to euribor rate variations within a preset corridor. For such

transactions, solely the intrinsic value component of interest rate collar instruments was designated for

hedging purposes (and the time value component is therefore excluded).

Also, there are 4 positions relating to interest rate derivative instruments (collars) traded for hedging

medium/long term financial liabilities prior to adoption of the international financial accounting

standard. These hedging contracts, although not speculative in nature, do not meet the criteria

indicated by the IFRS standards for cash flow hedge accounting.



FFiinnaanncciiaall DDeebbtt

DDuuee DDaattee CCaappiittaall IInntteerreesstt TTrraaddee DDeerriivvaattiivvee TToottaall((€//000000)) ((€//000000)) PPaayyaabblleess IInnssttrruummeennttss ((€//000000))

((€//000000)) ((€//000000))aa bb cc dd ee==aa++bb++cc++dd

Within 1 month - 1,214 189,786 2,426 193,426

Between 1 and 3 months 357 7,868 226,554 104 234,736

Between 3 and 6 months 21,466 9,876 - 2,344 33,686

Between 6 and 12 months 257,848 17,648 - 2,358 277,855





After 10 years - - - - -

TToottaall 997744,,116611 112200,,991188 441166,,334400 2277,,778844 11,,553344,,661111

Debt due date 2008

Cons

olid

ated

Fin

anci

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Also, at 31 December 2009, there existed 40 positions relating to forward purchase agreements of

dollars. These positions were traded to hedge against the exchange rate risk connected with 3 oil cargo

purchase transactions, with settlement expected for January 2010. For these transactions, solely the

component connected to variations in the spot exchange rate was designated for hedging purposes;

therefore, the interest component is excluded (connected to the variation in spot-forward differential).

Interest rate derivatives

Exchange rate derivatives

44. RELATED PARTIES TRANSACTIONS

Transactions entered into by the api Group with related parties essentially involve the exchange of

goods and the provision of services. All the transactions form part of ordinary management and are

generally regulated on market conditions, that is on the conditions that would have been applied between

two independent parties. All transactions put in place are concluded in the interest of the company.

Details are given below of transactions of a commercial, miscellaneous and financial nature put in place

with related parties in compliance with the provisions of IAS 24 in relation to financial statement

information on transactions with related parties.

We also present, broken down by type of activity, the economic entity of contractual relations entered

into with the controlling company and other group companies for 2009.


22000099 22000088 CCHHAANNGGEE

NNOOTTIIOONNAALL AASSSSEETT LLIIAABBIILLIITTIIEESS NNEETT NNOOTTIIOONNAALL AASSSSEETT LLIIAABBIILLIITTIIEESS NNEETT VVAARRIIAATTIIOONN IINN VVAALLUUEE FFAAIIRR VVAALLUUEE FFAAIIRR VVAALLUUEE FFAAIIRR VVAALLUUEE VVAALLUUEE FFAAIIRR VVAALLUUEE FFAAIIRR VVAALLUUEE FFAAIIRR VVAALLUUEE NNEETT FFAAIIRR VVAALLUUEE

((€//000000)) ((€//000000)) ((€//000000)) ((€//000000)) ((€//000000)) ((€//000000)) ((€//000000)) ((€//000000)) ((€//000000))dd ee ff == dd ++ ee aa bb cc == aa ++ bb gg == ff -- cc

Derivative instruments 296.194 205 (4.651) (4.445) 312.379 365 (2.763) (2.399) (2.046)

hedging cash flows

Other derivative

instruments 241.883 (17.871) (17.871) 304.191 (21.060) (21.060) 3.189

TTOOTTAALL 553388..007788 220055 ((2222..552222)) ((2222..331166)) 661166..556699 336655 ((2233..882244)) ((2233..445599)) ((11..114433))

22000099 22000088 CCHHAANNGGEE

NNOOTTIIOONNAALL AASSSSEETT LLIIAABBIILLIITTIIEESS NNEETT NNOOTTIIOONNAALL AASSSSEETT LLIIAABBIILLIITTIIEESS NNEETT VVAARRIIAATTIIOONN IINN VVAALLUUEE FFAAIIRR VVAALLUUEE FFAAIIRR VVAALLUUEE FFAAIIRR VVAALLUUEE VVAALLUUEE FFAAIIRR VVAALLUUEE FFAAIIRR VVAALLUUEE FFAAIIRR VVAALLUUEE NNEETT FFAAIIRR VVAALLUUEE

((€//000000)) ((€//000000)) ((€//000000)) ((€//000000)) ((€//000000)) ((€//000000)) ((€//000000)) ((€//000000)) ((€//000000))dd ee ff == dd ++ ee aa bb cc == aa ++ bb gg == ff -- cc

Derivative instruments 67,300 426 (151) 275 33,906 164 (2,550) (2,386) 2,661

hedging assets and

liabilities items stated

in foreign currencies

Derivative instruments 37,400 10 (21) (11) 19,300 101 (179) (78) 67

hedging highly

probable transactions

in foreign currencies

TTOOTTAALL EEXXCCHHAANNGGEE 110044,,770000 443366 ((117722)) 226644 5533,,220066 226655 ((22,,772299)) ((22,,446633)) 22,,772288 RRAATTEE DDEERRIIVVAATTIIVVEESS

Within the context of centralised cash management, we also provide details of financing flows with

respect to other Group companies, also indicating the relative financial charges.

Rome, 31 March 2010

api - anonima petroli italiana S.p.A.

The Chairman

Dr. Ugo Brachetti Peretti

The Chief Financial Officer

Dr. Stefano Cardello


at 31.12 2009 Share capital Interest

Api real estate ad api anonima 11

Api real estate ad api raffineria

api ad Abruzzo Costiero 310 12

Api holding ad api anonima 0 196

Api anonima ad api holding 18,400 404

Euro/thousand Revenues Costs

OOiill CCoonnssuummppttiioonn

Apisem 3,852

Abruzzo Costiero 30 2,765

PPrrooppeerrttyy

Api real estate 70 3,782

SSeerrvviicceess

Api Holding 5,185

33Report of the Board of Statutory Auditors

"api " anonima petroli italiana S.p.A.Registered office: Rome – Via Salaria 1322

Share Capital Euro 115,425,000.00.= fully paid up.

* * *

BOARD OF STATUTORY AUDITORS’ REPORTFOR THE SHAREHOLDERS’ MEETING

Shareholders,

during 2009 we have carried out our administration supervisory activity, as the task of auditing the cor-

porate accounts is entrusted with Reconta Ernst & Young spa.

Carrying out our work involved the Board of Statutory Auditors’ participation in the four Board of

Directors’ meetings during the financial year in question and the acquisition on a regular basis of the relevant

information pertaining to the course of operations from the Managing Director and the CFO.

Our Chairman participated in the activities performed by the Internal Audit Committee, and informed its

colleagues about the plans of such a Body and the level of execution achieved.

The Board of Statutory Auditors has always invited persons in charge of Internal Audit Committee,

Internal Audit, Budgeting and Organization Functions and Independent Auditors to take part to its meetings

in order to get a better coordination among all Controlling Bodies and to obtain synergies by a continuous

exchange of information during the above mentioned meetings. The Board gave evidence of such an activi-

ty in the minutes that were issued at the end of each meeting.

The Board points out that, carrying out our supervisory activity, no unusual transactions with related par-

ties have emerged and therefore deems the information provided by the Board of Directors in the Explanatory

Notes to be adequate.

In such a document Directors detail extraordinary transactions, including those occurring within the

Group, clarifying with no doubt as they were carried out to improve the organization and the profitability of

the Group itself.

As for the Individual Financial Statements of Your Company, we declare that, as far as our responsibility

is concerned, it appears to comply with the provisions set out by the international accounting standards (IFRS)

and is not in contrast with domestic legislation. We have maintained constant relations with the Company

in charge of auditing the corporate accounts, always achieving positive feedbacks on the matter. In particu-

lar, we last met representatives from Reconta Ernst & Young on April,12 2010 and from their scrutiny on indi-

vidual and consolidated accounts, we ascertained their final opinion would have not raised any remark on

both documents.

Individual accounts’ financial statements show a net profit of 10.7 millions of Euro, for the reasons fairly

explained by Directors, who submit any decision regarding profit distribution to Shareholder’s meeting.

In our opinion we consider the aforesaid document worth of being approved.

Within the scope of our competencies, we share our considerations to Consolidated Financial Statements,

which are submitted to You together with Individual of which we have previously reported.

It is worth reporting as the Internal Audit Committee has focussed its attention on the topics provided by

Legislative Decree 231/2001, introducing some procedural changes in the Organization, Management and

Control model to take into account risks’ expansion as pointed out by the Legislation.

Repo

rt of

the

Boar

d of

Sta

tuto

ry A

udito

rs



Finally, we have been monitoring the general tax inspection carried out by Tax Authority (Agenzia delle

Entrate – Direzione Regionale Lazio) whose outcome, not entirely shared by the relevant functions of your

company which have been following the tax inspection, is being examined by tax consultants in order to

choose the better strategy to adopt against it.

Rome April 12, 2010

The Board of Statutory Auditors

(Prof. Claudio Bianchi)

(Dr. Adolfo Cucinella)

(Dr. Pier Andrea Frè Torelli Massini)

44Independent Auditors’ Report

Inde

pend

ent A

udito

rs’ R

epor

t



55Statement of Consolidated Accounts


Statement on Consolidated Accounts pursuant to Article 81-ter of Consob Regulationsno. 11971 of 14 May 1999 and following amendments and integrations

1. The undersigned Ugo Maria Brachetti Peretti as Chairman and Stefano Cardello as the Manager in charge of the

preparation of api’s (anonima petroli italiana spa) accounting documents, hereby certify, having also taken into

consideration the provisions of Article 154-bis, paragraphs no. 3 and no. 4, of Legislative Decree no. 58 of 24

February 1998:

• the adequacy with respect to the company structure and

• the effective application of administrative and accounting procedures for the preparation of Consolidated

Financial Statements in the period 1 January 2009 - 31 December 2009.

2. The administrative and accounting procedures for the drafting of Financial Statements as of 31 December 2009

were defined and their suitability was assessed on the basis of the rules and methods defined by “api” anonima

petroli italiana S.p.A., consistently with the Internal Control – Integrated Framework model issued by the

Committee of Sponsoring Organizations of the Treadway Commission, representing the reference network for the

internal control system generally accepted internationally.

The effects on the group structure deriving from the merger by incorporation of the Luxemburg registered apioil

international S.A. pursuant to Legislative Decree no. 108 of 30/05/2008 which have not modified the internal

company’s procedures have been fully taken into considerations.

3. The undersigned also certify that:

3.1 the Consolidated Accounts:

a) have been prepared in accordance with International Financial Reporting Standards adopted by the European

Union as provided by rule (EC) no. 1606/2002 of the European Parliament and Council of 19 July 2002;

b) correspond to the results documented in the accounting records;

c) fairly and truly represent the financial and economic situation of the issuer and of all the companies included

in the consolidation area.

3.2 the report of the Board of directors encompasses not only an accurate analysis of the performance and result

of operations but also of the status of the issuer and of all the companies included in the consolidation area

together with a description of main risk and uncertainty exposure.

Rome 12 April 2010

signed by : signed by:

Ugo Brachetti Peretti Stefano Cardello

Chairman Manager in charge of the preparation

of accounting documents

66Summary of key financial data


api api raffineria api Energia anonima petroli di ancona S.p.A. S.p.A.italiana S.p.A.

Rome Rome Rome (euro) (euro) (euro)

Property, Plant and Machinery 215,445,827 303,658,720 414,725,111

Goodwill 109,203,647 0 0

Intangible Fixed Assets 120,831,880 398,991 3,674,537

Equity Investments 107,754,378 130,000 0

Other Assets 25,203,907 141,408 2,503,371

Derivative Instruments Assets 594,831 0

Prepaid Taxes 29,856,531 18,903,972 56,942,899

Non-Current Assets 608,891,001 323,233,091 477,845,917

Inventories 290,125,868 20,701,834 11,608,383

Trade and other debtors 442,460,937 13,316,397 57,577,126

Financial current assets 213,400,000 0 0

Other assets 17,825,789 1,594,737 101,486,191

Tax receivables 4,692,714 4,078,380 5,458,984

Cash & cash equivalents 117,777,172 846,725 1,009,425

Assets due to cease 0 0 0

Current Assets 1,086,282,480 40,538,073 177,140,109

TTOOTTAALL AASSSSEETTSS 11,,669955,,117733,,448811 336633,,777711,,116644 665544,,998866,,002266

Net Capital 256,608,562 76,665,836 136,096,609

Medium to long term debt 408,428,572 0 196,140,196

Employee Severance Indemnity 7,172,247 7,674,859 140,487

Deferred taxation provision 69,625,052 23,178,483 44,398,788

Medium to long term provisions 48,884,131 13,990,374 0

Other Liabilities 0 0 169.150.924

Non-Current Liabilities 534,110,002 44,843,716 409,830,394

Trade and miscellaneous creditors 337,206,255 34,165,107 18,209,182

Derivative Instruments Liabilities 3,666,459 0 18,979,465

Short term debt 406,207,832 199,507,976 25,218,173

Short term portion of m/l debt 0 0 0

Other Liabilities 42,094,493 4,421,440 46,652,203

Tax Payables 115,279,878 4,167,089 0

Short term portion of m/l term provisions 0 0 0

Payables due to assets due to cease 0 0 0

Current Liabilities 904,454,917 242,261,612 109,059,024

TTOOTTAALL LLIIAABBIILLIITTIIEESS 11,,669955,,117733,,448811 336633,,777711,,116644 665544,,998866,,002266

Balance sheet IAS/IFRSas of 31 December 2009


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api api raffineria api Energia anonima petroli di ancona S.p.A. S.p.A.italiana S.p.A.

Rome Rome Rome (euro) (euro) (euro)

AASSSSEETTSS DDUUEE TTOO CCOONNTTIINNUUEE

Revenues 2,365,838,973 97,377,345 236,190,234

Revenues from barters 0 0 0

Other Revenues 28,617,503 45,300,477 19,397,375

Increase in assets for internal works 0 0 0

Change in inventory 0 0 0

Extraordinary gains 0 0 0

TTOOTTAALL 22,,339944,,445566,,447766 114422,,667777,,882222 225555,,558877,,660099

Costs for raw materials and consumables (1,299,558,344) (47,619,504) (99,841,593)

Costs for barters (556,906,640) 0 0

Costs for services (405,711,581) (51,554,464) (37,543,314)

Costs for use of third parties goods (27,243,243) (1,118,690) (972,171)

Personnel Costs (35,320,584) (29,042,697) (1,400,426)

Depreciation and amortization (28,536,306) (32,648,504) (35,122,727)

Provisions for risk (8,153,922) (709,548) 0

Other operating costs (50,228,785) (2,184,497) (21,906,595)

Extraordinary expenses 0 0 0

TTOOTTAALL ((22,,441111,,665599,,440055)) ((116644,,887777,,990044)) ((119966,,778866,,882277))

PPRROOFFIITT ((1177,,220022,,992299)) ((2222,,220000,,008822)) 5588,,880000,,778822

FFIINNAANNCCIIAALL MMAANNAAGGEEMMEENNTT

Financial Income (Charge) 19,618,728 (6,426,175) (4,401,814)

Adjustments of investments 0

Income (charge) from application of NE method 0 0 0

TTOOTTAALL 1199,,661188,,772288 ((66,,442266,,117755)) ((44,,440011,,881144))

PPRROOFFIITT BBEEFFOORREE TTAAXX 22,,441155,,779999 ((2288,,662266,,225577)) 5544,,339988,,996688

TTAAXXEESS

Current Taxes 2,995,683 (78,589) (11,420,778)

Deferred Taxes 1,836,335 2,735,984 1,861,146

Prepaid Taxes 2,082,395 6,793,199 (11,024,979)

TTOOTTAALL 66,,991144,,441133 99,,445500,,559944 ((2200,,558844,,661111))

Change in Cash Flow Hedge Reserve 1,383,946 0 (2,366,675)

PPRROOFFIITT ((LLOOSSSS)) FFOORR TTHHEE PPEERRIIOODD NNEETT OOFF TTAAXX 1100,,771144,,115588 ((1199,,117755,,666633)) 3311,,444477,,668833

Income Statement IAS/IFRSas of 31 December 2009



apioil api services Alpenoillimited limited S.r.l.

Bermuda London Rome(USD) (Gbp) (Euro)

Property, Plant and Machinery 0 2,103 4,625

Goodwill 0 0 0

Intangible Fixed Assets 0 0 0

Equity Investments 0 0 0

Other Assets 0 0 0

Derivative Instruments Assets 0 0 0

Prepaid Taxes 0 0 0

Non-Current Assets 0 2,103 4,771

Inventories 0 143,465

Trade and other debtors 107,958,756 68,513 103,556

Financial current assets 0 0 0

Other assets 223 6,972 0

Tax receivables 0 0 37,060

Cash & cash equivalents 5,801,766 277,693 214,043

Assets due to cease 0 0

Current Assets 113,760,745 353,178 498,134

TTOOTTAALL AASSSSEETTSS 111133,,776600,,774455 335555,,228811 550022,,990055

Net Capital 5,867,955 319,372 102,279

Medium to long term debt 0 0 0

Employee Severance Indemnity 0 0 0

Deferred taxation provision 0 0 0

Medium to long term provisions 0 0 0

Other Liabilities 0 0 0

Non-Current Liabilities 107,892,790 8,468 397,061

Trade and miscellaneous creditors 0 0 0

Derivative Instruments Liabilities 0 0 0

Short term debt 0 0 0

Short term portion of m/l debt 0 14,336 0

Tax Payables 0 13,105 3,565

Short term portion of m/l term provisions 0 0 0

Payables due to assets due to cease 0 0 0

Current Liabilities 107,892,790 35,909 400,626

TTOOTTAALL LLIIAABBIILLIITTIIEESS 111133,,776600,,774455 335555,,228811 550022,,990055


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apioil api services Alpenoillimited limited S.r.l.

Bermuda London Rome(USD) (Gbp) (Euro)


Revenues 1,193,634,535 383,269 4,677,683


Other Revenues 0 0 23,870

Increase in assets for internal works 0 0 0

Change in inventory 0 0 0

Extraordinary gains 0 0 0

TTOOTTAALL 11,,119933,,663344,,553355 338833,,226699 44,,770011,,555533

Costs for raw materials and consumables (1,188,859,225) 0 (4,493,541)

Costs for barters 0 0 0

Costs for services (366,696) (106,653) (171,404)

Costs for use of third parties goods 0 (75,963) 0

Personnel Costs 0 (162,022) 0

Depreciation and amortization 0 (818) (375)

Provisions for risk 0 0 0

Other operating costs 0 (2,136) (28,239)

Extraordinary expenses 0 0 0

TTOOTTAALL ((11,,118899,,222255,,992211)) ((334477,,559922)) ((44,,669933,,555599))

PPRROOFFIITT 44,,440088,,661144 3355,,667777 77,,999944

FFIINNAANNCCIIAALL MMAANNAAGGEEMMEENNTT

Financial Income (Charge) (540,659) 2,446 (2)

Adjustments of investments 0 0

Income (charge) from application of NE method 0 0 0

TTOOTTAALL ((554400,,665599)) 22,,444466 ((22))

PPRROOFFIITT BBEEFFOORREE TTAAXX 33,,886677,,995555 3388,,112233 77,,999922

TTAAXXEESS

Current Taxes 0 (11,878) (911)

Deferred Taxes 0 0 0

Prepaid Taxes 0 0 0

TTOOTTAALL 00 ((1111,,887788)) ((991111))

Change in Cash Flow Hedge Reserve 0 0 0

PPRROOFFIITT ((LLOOSSSS)) FFOORR TTHHEE PPEERRIIOODD NNEETT OOFF TTAAXX 33,,886677,,995555 2266,,224455 77,,008811



Apifin Dialco S.r.l. Festival S.p.A. GRC S.r.l

Rome Bari Rome Rome(Euro) (Euro) (Euro) (Euro)

Property, Plant and Machinery 440 17,811 7,941

Goodwill 0 0 0 0

Intangible Fixed Assets 0 0 519,544 0

Equity Investments 0 0 0 0

Other Assets 0 0 1,833

Derivative Instruments Assets 0 0 0 0

Prepaid Taxes 0 224,166 9,677

Non-Current Assets 0 440 761,521 19,451

Inventories 96,478 0 0

Trade and other debtors 4,027,637 549,525 395,781

Financial current assets 0 0 0 0

Other assets 254 14,642 0

Tax receivables 799 60,357 42,547 0

Cash & cash equivalents 602,441 329,270 2,225 360,436

Assets due to cease 0 0 0 0

Current Assets 603,240 4,513,996 608,939 756,217

TTOOTTAALL AASSSSEETTSS 660033,,224400 44,,551144,,443366 11,,337700,,446600 777755,,666688

Net Capital 589,148 832,132 546,990 565,379

Medium to long term debt 0 0 0 0

Employee Severance Indemnity 39,776 22,500 96,272

Deferred taxation provision 0 0 19,098

Medium to long term provisions 1,490 0 0

Non-Current Liabilities 0 41,266 22,500 115,370

Trade and miscellaneous creditors 14,092 3,631,596 73,190 28,344

Derivative Instruments Liabilities 0 0 0 0

Short term debt 0 667,509 0

Short term portion of m/l debt 0 0 0

Other Liabilities 5,554 50,400 0

Tax Payables 3,888 9,871 66,575

Short term portion of m/l term provisions 0 0 0 0

Payables due to assets due to cease 0 0 0 0

Current Liabilities 14,092 3,641,038 800,970 94,919

TTOOTTAALL LLIIAABBIILLIITTIIEESS 660033,,224400 44,,551144,,443366 11,,337700,,446600 777755,,666688


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Apifin Dialco S.r.l. Festival S.p.A. GRC S.r.l

Rome Bari Rome Rome(Euro) (Euro) (Euro) (Euro)


Revenues 17,956,200 637,553 774,153


Other Revenues 1 5,858 67,765 464

Increase in assets for internal works 0 0 0 0

Change in inventory 0 0 0 0

Extraordinary gains 0 0 0 0

TTOOTTAALL 11 1177,,996622,,005588 770055,,331188 777744,,661177

Costs for raw materials and consumables 0 (17,061,748) (31,579) 0

Costs for barters 0 0 0 0

Costs for services (5,110) (677,498) (174,507) (158,028)

Costs for use of third parties goods 0 0 0 (35,882)

Personnel Costs 0 (70,602) (149,608) (414,739)

Depreciation and amortization 0 (399) (268,449) (3,479)

Provisions for risk 0 0 (40,693) 0

Other operating costs (412) (74,645) (67,609) (5,319)

Extraordinary expenses 0 0 0 0

TTOOTTAALL ((55,,552222)) ((1177,,888844,,889922)) ((773322,,444455)) ((661177,,444477))

PPRROOFFIITT ((55,,552211)) 7777,,116666 ((2277,,112277)) 115577,,117700

FFIINNAANNCCIIAALL MMAANNAAGGEEMMEENNTT 00 00 00 00

Financial Income (Charge) (231) 1,830 (12,835) 1,323

Adjustments of investments 0 0 0 0

Income (charge) from application of NE method 0 0 0 0

TTOOTTAALL ((223311)) 11,,883300 ((1122,,883355)) 11,,332233

PPRROOFFIITT BBEEFFOORREE TTAAXX ((55,,775522)) 7788,,999966 ((3399,,996622)) 115588,,449933

TTAAXXEESS

Current Taxes 0 (34,916) (41,684) (59,746)

Deferred Taxes 0 0 159,189 0

Prepaid Taxes 0 0 (11,148)

TTOOTTAALL 00 ((3344,,991166)) 111177,,550055 ((7700,,889944))

Change in Cash Flow Hedge Reserve 0 0 0 0

PPRROOFFIITT ((LLOOSSSS)) FFOORR TTHHEE PPEERRIIOODD NNEETT OOFF TTAAXX ((55,,775522)) 4444,,008800 7777,,554433 8877,,559999


ARTWORK, DESIGN AND PRINT BY

Marchesi Grafiche Editoriali S.p.A.

Via Flaminia, 995/997 - 00189 Rome

T +39 06 33216 1 - F +39 06 33216 420

www.marchesigrafiche.it

[email protected]

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