Information on ownership structure

in

Share capital structure (pursuant to Article 123-bis, paragraph 1, letter a) of the Consolidated Law on Finance)

The Company's share capital as of March 15, 2013 amounts to € 442,198,240.00 and comprises exclusively nominal ordinary shares, for a total of 2,009,992,000 ordinary Terna's shares with a nominal value of € 0.22 each. They are fully paid-up and bear voting rights at both the ordinary and extraordinary Shareholders’ Meetings. Ordinary shares grant further administrative and financial rights provided for by the Law regulating the shares with right to vote.

Since June 23, 2004, Terna shares have been listed on the Italian stock exchange organised and managed by Borsa Italiana S.p.A., in the Mercato Telematico Azionario ("MTA") - Large Cap (or Blue Chip) segment comprising the 40 businesses that are most capitalised with the greatest level of liquidity and belong to the Financial Times Stock Exchange - Milano Indice di Borsa (FTSE MIB).

Pursuant to Article 5.2 of the Company Bylaws, the Shareholders’ Meeting can approve capital increases through share issuance, also belonging to special categories, to be assigned free of charge pursuant to Article 2349 of the Italian Civil Code for employees, or rather as payment, and with the exclusion of the option right under Article 2441 of the Civil Code, in favour of subjects identified by shareholders.

In compliance with this provision of the Company Bylaws, the Shareholders' Meeting held on April 1, 2005 resolved only one share-based incentive plan that was utilized in full in 2011 and that included increasing the share capital according to g. the provisions in the subsequent paragraph “Powers to increase the share capital and authorizations for the purchase of treasury shares”.

The Company did not issue other financial tools granting the right to subscribe newly issued shares.

Terna did not issue shares that were not negotiated on regulated markets of a country in the EU.

Significant participating interests in share capital and shareholders agreements (pursuant to Article 123-bis, paragraph 1, letters c) and g) of the Consolidated Law on Finance)

On the basis of the shareholders’ book, communications received pursuant to CONSOB Resolution no. 11971/99 and available information, and with reference to the Company’s share capital as of March 15, 2013, equal to € 442,198,240.00 for a total of 2,009,992,000 ordinary Terna shares with a nominal value of € 0.22 each, the following investors hold a share of the capital in excess of the thresholds of relevance specified by Consob:

  • Cassa Depositi e Prestiti S.p.A. (public limited company in which the Italian Ministry for the Economy and Finance of the Italian Republic owns 70%), with 29.851% of the share capital;
  • Romano Minozzi (directly and indirectly) with 5.351% of the share capital.

BlackRock Inc. (with reference to the shares held through the management company of the BlackRock Group, by way of asset management), declared that it is applying the exemption established under Article 119-bis, paragraphs 7 and 8 of the Issuers Regulation, as amended by Consob Regulation no. 18214, which came into force on June 6, 2012. Therefore, as from June 6, 2012, BlackRock Inc.: (i) has asked that the investments declared previously in Terna, in excess of 2% and less than 5%, not be considered significant in terms of the disclosure obligations considered; (ii) has declared that it be kept beneath the new medio tempore threshold of relevance established by the coming into force of Consob changes; and (iii) holds (through the management company of the BlackRock Group, by way of asset management), as of November 8, 2012, a shareholding equal to 2.73% of the capital.

No other investors own more than the threshold of relevance indicated by Consob of Terna S.p.A.’s share capital and the Company is not aware of the existence of any shareholders’ agreement relating to the Company shares.

Powers to increase share capital and authorization for the purchase of treasury shares (pursuant to Article 123-bis, paragraph 1, letter m) of the Consolidated Law on Finance)

The power granted to the Board of Directors to increase the share capital resolved by the extraordinary Shareholders' Meeting held on April 1, 2005 was exercised through the adoption of a share-based incentive plan aimed at Terna Group's executives and in force from 2006 up to its complete exhaustion, which took place in 2011, with the exercising of all the Stock Options still in circulation.

The above-mentioned Stock Option plan brought about an increase in the share capital of € 2,198,240.00 through the issuance of 9,992,000 new ordinary Terna's shares, each with a nominal value of € 0.22.

It should be remembered that the extraordinary Shareholders' Meeting of April 1, 2005 had resolved the assignment of a five-year proxy to the Board of Directors for a share capital increase for maximum € 2,200,000 through the issuance of maximum 10,000,000 ordinary shares with a nominal value of € 0.22 each, on a dividend-right basis, to be offered for subscription to Terna Group's managers as payment with exclusion of the option right under the combined provisions of Article 2441, last paragraph, of the Civil Code and Article 134, paragraph 2 of the Consolidated Law on Finance, as provided for by Article 5.3 of the Company Bylaws.

Pursuant to the Shareholders’ Meeting resolution of April 1, 2005, on December 21, 2005, Terna’s Board of Directors adopted a share-based incentive plan. With reference to the adopted plan, the Board of Directors of March 21, 2007 partially exercised the above mentioned proxy, approving a share capital increase regarding the 2006 stock option plan up to maximum € 2,198,240.00 through the issuance of maximum 9,992,000 new ordinary Terna’s shares with a nominal value of € 0.22 each, at € 2.072 each, to be implemented in compliance with Article 5.4 of the Bylaws. Based on Meeting resolution dated April 22, 2009, the maximum date for the total subscription of the increase is March 31, 2013.

No other proxies to increase capital have been assigned, pursuant to Article 2443 of the Civil Code.

No resolution authorizing the purchase of treasury shares under Article 2357 and following of the Civil Code has been submitted to Terna's Shareholders' Meeting.

Terna does not own, nor has purchased or sold during the year, not even indirectly, treasury shares or shares of its parent company.

Employees' shareholdings: system to express the right to vote (pursuant to Article 123-bis, paragraph 1, letter e) of the Consolidated Law on Finance)

The system for expressing the right to vote during the Shareholders' Meeting through shareholding associations, including employee’s shareholding groups, is regulated based on the existing specific legal provisions on the subject.

Based on the provisions regarding the special legislation on listed companies, Terna's Bylaws introduced a special provision aimed at facilitating collecting voting proxies with its employees' shareholding groups as well as of its subsidiaries, encouraging in this way the relative involvement in the meeting decision-making processes (Article 11.1 of the Bylaws).

As of March 15, 2013 the Company had not received any notification of the establishment of employees' shareholding groups.

Change of control clauses (pursuant to Article 123-bis, paragraph 1, letter h) of the Consolidated Law on Finance) and statutory provisions in takeover bid matters (ex Article 104, paragraph 1-ter, and 104-bis, paragraph 1 of the Consolidated Law on Finance)

As regards significant agreements Terna or any of its subsidiaries are parties of and that come into effect, are amended or expire in the event of shareholding change within Terna, the following should be noted.

The loan contracts stipulated with the European Investment Bank (EIB) include mandatory advance repayment clauses in the event the Company proceeds to or is involved in a merger, a split or transfer of a Company branch. Should such events occur, the EIB will have the power of requesting, and the Company will have the obligation to inform the Bank, any information that the latter may reasonably require regarding the Company situation, in order to understand any changes and relative consequences in the Company's commitments towards the Bank. In such cases, should the EIB deem, according to its indisputable judgement, that these transactions may have negative consequences on the commitments undertaken by the Company, the bank itself will have the power to request the necessary changes in the loan contracts or alternative solutions that satisfy the Bank itself, such as early reimbursement of the loan.

With regard to takeover bids and public tender offers to exchange, the Company Bylaws do not provide for any derogation of the provisions in the Consolidated Law on Finance on the so-called passivity rule provided for by Article 104, paragraphs 1 and 1-bis of the Consolidated Law on Finance, nor are there neutralization rules as established Article 104-bis, of the Consolidated Law on Finance, without prejudice to - pursuant to Article 104-bis, paragraph 7 of the Consolidated Law on Finance - law and statutory provisions regarding special powers as provided for in Article 2 of Law Decree no. 332 dated May 31, 1994 converted with amendments by Law no. 474 dated July 30,1994, with subsequent modifications and amendments - the so-called "Law on Privatisation", and concerning limits on share possession and the right to vote pursuant to Article 3 of the same Law Decree.

Restrictions in share transfer and shares granting special powers (pursuant to Article 123-bis, paragraph 1, letters b) and d), of the Consolidated Law on Finance)

No limitations exist in the Company Bylaws to the availability of shares, except for the provisions stated by the Bylaws regarding rules for privatization based on the Law Decree no. 332 dated May 31, 1994 converted with amendments by Law no. 474 dated July 30, 1994 and subsequent changes - the so called "Privatisation Law".

In particular, pursuant to Italian regulations concerning privatizations, Terna's Bylaws provide for the possibility for the Government to exercise certain "special powers" and establishes a "maximum limit of shareholding" - equal to a direct and/or indirect ownership of Terna's shares for more than 5% of the share capital - for subjects other than the Italian Government, state-controlled companies and entities subject to either control: the implementation of those provisions, in some circumstances as indicated by the Bylaws, has effects also on the voting right.

"Special powers" (indicated by Article 6.3 of the Bylaws, in enactment of Article 2, paragraph 1 of the "Privatisation Law") can be exercised by the Italian Government, represented in this case by the Ministry for the Economy and Finance, notwithstanding the number of Terna shares potentially owned by the Ministry itself.

In particular, in implementation of the "Privatisation Law", the Ministry for Economy and Finance, as agreed with the Ministry of Productive Activities (now called Ministry for Economic Development), is assigned the following “special powers”:

 

  1. opposition to relevant ownership (that is equal or higher than 1/20th of Terna's share capital formed by shares bearing right to vote in Shareholders' Meetings) by entities subject to the ownership restriction presented above. The opposition must be expressed within 10 days from the date of the communication, which must be made by Directors at the request of subscription in the shareholders' book, only when this may jeopardize the vital public interest. In the meantime, the right to vote and non-financial rights related to shares representing the relevant ownership, are suspended;
  2. opposition to shareholder agreements under the Consolidated Law on Finance, in case at least 1/20th of Terna's share capital, including shares bearing right to vote at Shareholders' Meetings, is thereby represented.
    Opposition must be expressed within 10 days from the date of communication that must be made by CONSOB. In the meantime, the right to vote and non-financial rights related to shares of shareholders that are parties of the agreements, are suspended;
  3. veto, dutifully motivated, in relation to concrete jeopardy of the vital public interest, to the adoption of provisions for the winding-up of the Company, of transfer, merger, division, moving abroad of the registered offices, of Company Corporate purpose change, of amendments to the Bylaws suppressing or modifying powers indicated by the same Article 6.3 of the Bylaws;
  4. appointment of one director with no right to vote. In case of termination of the assignment of the appointed Director, the Ministry for the Economy and Finance, in agreement with the Ministry for Productive Activities (now called Ministry for Economic Development), will appoint the substitute.

The power of opposition pursuant to letters a) and b), in accordance with the provisions of Article 4, paragraph 228 of Italian Law no. 350 of December 24, 2003, can be exercised with reference to the individual operation. It can also be exercised when ownership, also through single purchase acts, records an increase which is equal or higher than expectations. Such power can also be exercised every time the need to protect mandatory public interest arises, within ten days from their actual occurrence. In this case, the act of exercising the State power must include explicit and motivated reference to the date such causes arose.

The special powers under letters a), b), c) and d) are exercised with respect of the criteria provided for by the Prime Minister’s Decree of June 10, 2004. 

The “maximum limit of shareholding” (provided for by Article 6.4 of the Bylaws and pursuant to Article 3 of the “Privatisation Law”) is calculated also considering total share ownership related to the Parent Company, natural person or legal entity or company; to all direct and indirect subsidiaries as well as the subsidiaries under the same controlling subject; to all associated subject as well as to natural persons bound by parental or affinity relationships up to second grade and by marriage, in the event that husband/wife are not legally separated. Control occurs, also with reference to subjects other than companies, in cases provided for by Article 2359, paragraphs 1 and 2, of the Italian Civil Code. Association occurs in cases under Article 2359, paragraph 3, of the Civil Code, as well as between subjects who, directly and indirectly, through subsidiaries other than those managing common investment funds, join, also with third parties, agreements related to the exercise of the right to vote or to the transfer of shares or portions of third companies or, anyway, to agreements or pacts as per Article 122 of the Consolidated Law on Finance, with reference to other companies, if these agreements or pacts refer to at least 10% of the share capital with right to vote, in case of listed companies, or 20% in case of non-listed companies. With reference to the calculation of the above-mentioned limit of share ownership (5%), shares owned through trustees and/or through a third person and, generally, through an intermediary person are also considered.

This limit established to share ownership in any case fails to apply where it is exceeded as a result of a public takeover bid, as long as the bidder, following the offer, holds a stake of at least seventy-five percent of the capital with voting rights in the resolutions regarding the appointment or revocation of directors.

The right to vote related to share ownership exceeding the above-mentioned maximum limit cannot be exercised and proportionally reduces the right to vote of each subject to whom the limit in share ownership refers to, except in the event of joint communications by the involved shareholders. In case of non-compliance, decision can be appealed under Article 2377 of the Civil Code if the requested majority would not be achieved without the votes exceeding the above-mentioned limit. Shares for which the right to vote cannot be exercised are calculated anyhow for the regular formation of the Shareholders' Meeting.

The described provisions on special powers, set out in the "Privatisation Law" have recently been subjected to a legislative change that is not yet in force, as it is awaiting enactment provisions currently being issued.

More specifically, with Italian Law Decree No. 21 of March 15, 2012, converted with amendments by Italian Law No. 56 of May 11, 2012 (the so-called "Golden Power Decree"), the legislator dictated new provisions on the special powers of the government "in relation to strategic activities in the energy, transport and communications industries", in order to standardise national legislation with the legislation of the European Union, assigning the Government powers of intervention to protect the lawful, essential and strategic interests of the country.

These provisions, set out under Articles 2 and 3 of the "Golden Power Decree" basically state:

the issue of specific regulations, to be updated at least once every three years, aimed at identifying "the grids and systems, including those needed to ensure the minimum provisioning and operations of essential public services, assets and reports of strategic relevance for the national interests in the fields of energy, transport and communication and the type of acts or operations within a single group to which the regulations of this Article do not apply";

the obligation to notify the Prime Minister’s Office - within 10 days and in any case before implementation - of resolutions, acts and operations adopted by a company holding one or more of the assets as identified above, which result in:

  • changes to the ownership, control or availability of the assets;
  • the change in their purpose, including resolutions of the Shareholders' Meeting or administrative bodies concerning the merger or spin-off of the company;
    • the transfer of the company offices abroad;
    • a change to the company object;
    • the company wind-up;
    • the amendment of any statutory clauses adopted in accordance with Article 2351, third paragraph of the Italian Civil Code, or introduced in accordance with Article 3, paragraph 1 of the "Privatisation Law", as most recently amended by Article 3 of the same Decree;
    • the transfer of the business or a business unit encompassing these assets;
    • the assignment of them by way of guarantee;
    and the obligation to notify resolutions passed by the Shareholders' Meeting or administrative bodies concerning the transfer of subsidiaries holding said assets;
  • the Prime Minister’s power to veto adopted - on the proposal of the Ministry for the Economy and Finance and on compliant resolution of the Council of Ministers - on resolutions, acts or operations notified that give rise "to an exceptional situation, not regulated by national and European segment legislation, of a threat for serious damages to the public interests concerning the safety and operation of the grids and systems and the continuity of provisioning". The power to veto can also be exercised in the form of the imposition of specific provisions or conditions where such suffices to ensure the protection of the public interests in relation to the safety and operation of the grids and plants and the continuity of provisions. The veto is notified within 15 days of communication; said terms may be suspended once only for a request for information and until receipt of such, which must be within 10 days.
    The resolutions, acts or operations adopted or implemented in breach of the obligations to notify the information or in breach of the conditions, provisions or veto established by the Government are null. The Government may also demand that the company and any counterparty restore the previous situation at its own expense. Anyone not complying with the provisions relating to notification and veto, without prejudice to where the fact is a crime, is subject to the administrative sanctions specified in the "Golden Power Decree";
  • the obligation to notify the Prime Minister’s Office - within 10 days - of the acquisitions by any title, by a subject,
  • whether natural person or legal entity, external to the European Union, or "which does not have residence, usual place of domicile, registered office or administration or main centre of business in a European Union Member State or of the European Economic Area or which is not in any case established therein" of majority shareholdings in companies holding the assets identified as strategic "of relevance such as to determine the permanent establishment of the buyer by virtue of the assumption of control of the company whose investment has been acquired". The notice is accompanied "by all information useful to providing a general description of the acquisition project, the buyer and its scope of operations". In calculating the significant shareholding, consideration is also taken of the investment held by third parties with which the buyer has stipulated shareholders' agreements;
  • the power of the Prime Minister, within 15 days from the notification of said acquisitions and to be exercised, at the request of the Ministry for the Economy and Finance, in accordance with paragraph 8 of said Article, and by compliant resolution of the Council of Ministers, sent at the same time to the appointed parliamentary commissions, to:
    • subject the effect of the acquisition to the assumption by the buyer of commitments intended to guarantee the protection of the essential interests of the Government "in relation to the safety and functioning of the grids and plants and the continuity of provisions" where the acquisition entails a threat of serious prejudice to said interests, or
    • oppose the acquisition, in exceptional cases of risk to the protection of the mentioned essential interests of the Government, which cannot be eliminated through the assumption of the above commitments.
    Once these terms have expired, the operation can be implemented.
    Until notification and expiry of the terms for the potential exercise of the special powers relating to the indicated acquisitions, voting rights and other non-capital rights connected with the shares representing the significant investment are suspended, just as such rights are suspended in the event of failure to comply with the commitments said as a condition of the admissibility of the acquisition, for the entire period for which the breach continues. Any resolutions passed with the determining vote of said shares or in any case resolutions or acts adopted in breach or infringement of the conditions set, are null. Any buyer failing to comply with the commitments required is also subject, without prejudice to where the facts constitute a crime, to the administrative sanctions specified in said "Golden Power Decree".
    In the event that the power of opposition is exercised, the buyer may not exercise voting rights and in any case those rights with a different content to that of the capital rights connected with shares, which represent the significant shareholding. Any meeting resolutions adopted with the determining vote of said shares are null. Shares must be sold within 1 year and, in the event of failure to comply, at the request of the Government, the court orders the sale of said shares.
    Without prejudice to the provisions commented on above, the acquisition, by any title, by a party outside the European Union is permitted at mutual conditions, in compliance with the international agreements signed by Italy or by the European Union;
  • the special powers of veto and opposition to acquisitions are exercised on the basis of objective criteria, such as:
    • the existence of connections between the operators involved and: (a) third party countries that do not recognise principles of democracy or a state of law, which do not comply with rules of international law, or which have behaved "riskily" with regard to the international community, given the nature of their alliances; or (b) criminal organisations or with subjects or entities in any case connected to them;
    • the suitability of the structure resulting from the legal act or the operation to guarantee: (a) the safety and continuity of provisions; (b) the maintenance, safety and operations of the grids and systems.

Until adoption of the provisions, which must specify the organisational methods by which to carry out the activities required prior to the exercise of special powers, the competences relating to the proposals for the exercise of special powers set out above are instead assigned to the Ministry for the Economy and Finance for the companies in which it holds an interest.

By virtue of the specified provisions of the "Golden Power Decree" and with regard to Terna, the following shall in any case therefore cease to have any effect as from the date on which the regulations for the identification of strategic assets come into effect:

  • the current legislation on special powers established by Article 2 of the "Privatisation Law" and the Prime Minister’s Decree of June 10, 2004 ("Definition of the criteria for the operation of special powers, pursuant to Article 2 of Italian Law Decree no. 332 of May 31, 1994, converted, with amendments, by Italian Law no. 474 of July 30, 1994" as subsequently amended and supplemented), the provisions of which are in any case abrogated as from the date on which the last of the regulations that will complete the identification of the energy, transport and communication industries, comes into effect;
  • the provisions assigning special powers contained in the Prime Minister’s Decree of September 17, 1999 ("Provisions for the assignment of special powers to the Ministry for the Treasury, Budgets and Economic planning on the disposal of shareholdings of ENEL S.p.A."), in the Decree by the Ministry for the Treasury, Budgets and Economic planning of September 17, 1999 ("Identification of the contents of statutory clauses to be included in the bylaws of ENEL S.p.A., ENEL Produzione S.p.A., Terna S.p.A. and ENEL Distribuzione S.p.A., which assign the Ministry for the Treasury, Budgets and Economic planning title of special powers in accordance with Article 2 of Italian Law Decree no. 332 of May, 31 1994, converted into Italian Law no. 474 of July 30, 1994") and in the decree of the Ministry for the Economy and Finance no. 32578 of April 1, 2005, which, by virtue of the changes made to the "Privatisation Law" by Article 4 of the Law no. 350 of December 24, 2003 had updated the content of the statutory clause on special powers already contained in Terna's Bylaws;
  • the current clauses on special powers in Terna's Bylaws, without prejudice to the provisions on the maximum limit of shareholding.

Voting Restrictions (pursuant to Article 123-bis, paragraph 1, letter f) of the Consolidated Law on Finance)

Pursuant to privatization regulations, restrictions exist (under Articles 6.3 and 6.4 of the Bylaws) to the right to vote related to the exercise of “special rights” of the Italian State and to the limits of share ownership as mentioned earlier.

Further restrictions are applied to operators of the electricity sector (as provided for by Article 3 of the Prime Minister’s Decree dated May 11, 2004 as regards “criteria, modalities and conditions for the unification of ownership and management of the National Transmission Grid”) for which a limit equal to 5% of the share capital was established for exercising the right to vote in case of Directors’ appointment (Article 14.3 letter e) of Company Bylaws).

From the date on which the regulations identifying the strategic assets came into force, pursuant to the provisions of the "Golden Power Decree" currently being issued - as already described in the previous title sub "Restrictions in share transfer and shares granting special powers" - restrictions to voting rights connected to the exercise of "special powers" of the Italian State shall cease all effect, as envisaged by the "Privatisation Law" and the Terna's Bylaws, whereas those envisaged on the matter by the "Golden Power Decree", in any case without prejudice to the provisions and restrictions to voting rights established by Terna's Bylaws, connected to the provisions on the maximum limit of shareholdings.

Appointment and substitution of Directors and amendments to the Bylaws (pursuant to Article 123-bis, paragraph 1, letter I) of the Consolidated Law on Finance)

Appointment, requirements and term of office of Directors

The terms for appointing the members of the Board of Directors are ruled by article 14 of the Bylaws.

As resolved upon by the Meeting, the Board of Directors is made up of seven to thirteen members who are appointed for a period not longer than three years (Article 14.1 of the Bylaws) and they may be reappointed at the end of their term (Article 14.2 of the Bylaws). In addition to this, there may be a Director without voting rights, whose potential appointment is reserved to the Italian government (Article 6.3, letter d) of the Bylaws) by virtue of the legislation on privatisation; up until now, this power of appointment has not been exercised by the Italian government and the provisions on the matter shall cease from the date on which the regulations for the identification of strategic assets come into force pursuant to the regulations of the "Golden Power Decree", currently being issued - as already described in the previous title sub "Restrictions in share transfer and shares granting special powers".

The Chairman is appointed by the Shareholders' Meeting among the members of the Board (Article 16.1 of Bylaws and Article 2380-bis, paragraph 5 of the Civil Code): in case of impossibility, by the Board itself. The Board can appoint a Deputy Chairman. In no case such positions can be held by the Director appointed by the Italian Government under said privatisation law (Article 16.1 of the Company Bylaws).

The appointment of the entire Board of Directors takes place – in compliance with the privatisation regulation, under Prime Minister’s Decree of May 11, 2004 and in compliance with the provisions of the Italian Law for listed companies – according to the mechanism of the “list voting”, governed by Article 14.3 of the Bylaws, aiming at guaranteeing the presence in the management body of members designated by minority shareholders equal to 3/10 of the Directors to be appointed with rounding, in case of lower fractional number to the unit, to the following unit.

In accordance with the provisions of Articles 4, paragraph 1-bis of the "Privatisation Law", of Article 147-ter of the Consolidated Law on Finance and the implementing regulations of the above-mentioned law provisions included in Articles 144-ter and following of the Issuer Regulations - establishes that the lists of candidates can be submitted by the outgoing Board of Directors or by shareholders who, alone or with other shareholders, represent at least 1 % of the share capital as provided for by the law - or a lower amount, as established by the law, of the shares with voting right in the Meeting. For this purpose CONSOB, implementing the provisions of Article 147-ter of the Consolidated Law on Finance and Article 144-septies of the Issuers Regulation, has established - with Resolution no. 18452 dated January 30, 2013 and for the year that ended on December 31, 2012 - the participation stake required for submitting candidate lists to be appointed in Terna's administration and control bodies at 1% of the share capital, taking into account the Company's capitalization, floating capital and owned assets and without prejudice to the lower stake included in the Bylaws.

The presentation, filing and publication of the lists are regulated by specific referral of the Bylaws, by applicable legislation and regulations.

More specifically, the presentation and filing of the lists must take place - in accordance with Article 147-ter, paragraph 1-bis of the Consolidated Law on Finance, at least 25 days prior to the date scheduled for the Shareholders’ Meeting called to resolve on the appointment of the members of the Board of Directors.

Ownership of the minimum stake required to submit lists shall be determined - in accordance with the provisions of Article 147-ter, paragraph 1-bis of the Consolidated Law on Finance - by taking into account the shares that are registered in the name of the Shareholder(s) on the day in which the lists are filed with the Company. In order to prove ownership of the number of shares necessary for presenting the lists, shareholders with rights must present and/or deliver the related certification or communication issued in accordance with Articles 144-sexies, paragraph 4-quater of the Issuers Regulation and 23 of the "Regulation enacting the regulation of the centralised management services, liquidation, guarantee systems and related management companies" (adopted by the Bank of Italy and Consob on February 22, 2008 and subsequently amended by deed of the Bank of Italy/Consob of December 24, 2010), also subsequently to filing the list, as long as, within the terms envisaged for the publication of the lists (i.e. at least 21 days prior to the date scheduled for the Shareholders’ Meeting called to resolve on the appointment of the administrative body).

Each Shareholder may present or assist in the presentation of one single list and each candidate may be on one list only or he will be considered ineligible.

The lists shall list candidates according to a progressive number (Article 14.3 of the Bylaws) and must specify which candidates meet the requirements of independence envisaged by the law and the Bylaws (Article 147-ter of the Consolidated Law on Finance) and all other information or declaration required by the regulations and legislation, applicable, and by the Bylaws for the respective offices.

Lists with three or more candidates must also include candidates of different gender, in accordance with the provisions of the notice convening the meeting, in order to enable a Board of Directors to be formed in compliance with current legislation on the balance of gender in the administrative and auditing bodies of companies with listed shares pursuant to Italian Law no. 120 of July 12, 2011 and Articles 147-ter, paragraph 1-ter and 148, paragraph 1-bis of the Consolidated Law on Finance.

If, upon completion of voting, the legislation on gender balance is not respected, Article 14.3, letter c-bis) of the Bylaws establishes the formation of a new decreasing hierarchy of all candidates who would be elected and the replacement of the candidate of the most represented gender coming lowest down in the hierarchy, with the first of the candidates of the least represented gender not elected, belonging to the same list as the candidate replaced; this is without prejudice to respect of the minimum number of independent directors established by the Bylaws. If ratios are equal, the replacement is taken from the list that has obtained the most votes, without prejudice to compliance with the minimum number of independent directors established by the Bylaws. If there is a lack of candidates from that list, we proceed with the legal majorities, respecting a proportional representation of the minorities in the Board of Directors. If it should be necessary to appoint more than one candidate of a gender different to that of the other candidates elected, the replacement procedure specified is carried out moving up the hierarchy from the bottom until the criteria laid down by the legislation is met.

Statutory provisions - introduced by the resolution of the Shareholders’ Meeting passed on May 16, 2012 - aimed at guaranteeing compliance with current legislation on gender balance, shall apply, in accordance with the provisions of Article 31.1 of the Bylaws, to the first three renewals of the Board of Directors subsequent to the coming into force and acquisition of efficacy of the provisions of Article 1 of Italian Law no. 120 of July 12, 2011, published in the Official Journal no. 174 of July 28, 2011 and in force as from August 12, 2011 without prejudice to any extensions envisaged by the law. Therefore, they shall first apply when renewing the company bodies expiring with the approval of the 2013 financial statements.

According to the provisions of Article 147-ter, paragraph 3 of the Consolidated Law on Finance, at least one of the members of the Board of Directors should be appointed by the minority list that has obtained the highest number of votes and is not connected in any way, not even indirectly, with the members who have submitted or voted the list that won for a number of votes. In this regard, please remember that if, upon completion of voting, the number of directors reserved to the minority lists has not been elected, and the minority director as established by Article 147-ter, paragraph 3 of the Consolidated Law on Finance, and the minimum number of independent directors in accordance with the Bylaws, Article 14.3 of the Bylaws, respectively letters b) and c), set outs:

  • that only seven tenths of the directors to be elected by rounding-down, in the case of a partial number of less than one, to the unit below;
  • that the candidate elected with the lowest ratio will be replaced, in progressive order, by the candidate meeting the requirements set out by the same list as the candidate replaced.

The lists must include declarations with which each candidate accepts his own candidacy and states, under his own responsibility, the non existence of ineligibility and incompatibility causes, and the the information required by Article 144-octies, paragraph 1 of the Issuers Regulation and all other information required by applicable law and regulations, and by the Bylaws. Shareholders presenting a "minority list" are addressees of the CONSOB communication no. DEM/9017893 of February 26, 2009 (concerning the "Appointment of the members of the administrative and auditing bodies"), which recommends that they file, together with the list, a declaration certifying the lack of any connection pursuant to Article 147-ter, paragraph 3 of the Consolidated Law on Finance, setting out the information listed in said Communication with regard to the election of the administrative body.

On the basis of a clause in the notice of call for the Meeting and considering the provisions of the Governance Code (Article 2 and Comment to Article 5), which Terna has explicitly adhered to, together with the lists, a detailed description of the candidates' personal and professional characteristics must be filed, accompanied by a statement indicating as to whether or not the candidates qualify as independent according to Article 3 of the Governance Code.

The lists, complete with information on the specific characteristics of the candidates and the additional declarations and information envisaged by Article 144-octies, paragraph 1 of the Issuers Regulation and CONSOB Communication no. DEM/9017893 of February 26, 2009, are made available to the public - in accordance with Article 147-ter, paragraph 1-bis of the Consolidated Law on Finance - at the company's headquarters, on the company's website and according to the methods set out by CONSOB, at least 21 days prior to the date of the Shareholders’ Meeting called to resolve on the appointment of the members of the Board of Directors, thereby guaranteeing a transparent procedure for the appointment of the Board of Directors. 

Finally, the Bylaws establish - in accordance with the requirements of Prime Ministerial Decree of May 11, 2004, the Bylaws envisages for operators of the electricity sector a limit equal to 5% of the share capital as regards the exercise of the voting right during the appointment of the Directors according to the abovementioned rules.

Any replacement of Directors will be carried out pursuant to Article 2386 of the Civil Code.

In any case, the replacement of Directors whose office has ended will be carried out by the Board of Directors guaranteeing the presence of the necessary number of directors in possession of the requirements of independence established by the Law and by Article 15.4 of the Bylaws and compliance with current legislation on gender balance.

If the majority of the Directors appointed by the Shareholders' Meeting is not reached, the entire Board of Directors is considered as having resigned and the Shareholders' Meeting must be called without delay by the Directors still in office for appointing a new Board.

The Director must meet the requirements of integrity, professionalism and independence.

The Company's Directors must meet certain integrity and professionalism requirements, similar to those required by the Statutory Auditors of listed companies (Article 15.2 of the Bylaws). The appointed Directors must communicate without hesitation the loss of requirement as per current regulations and according to the Bylaws to the Board of Directors, as well as any possible cause of ineligibility or incompatibility (Article 14.3 of the Bylaws).

As regards the requirements of professionalism, the Bylaws (Article 15.3) provide that those who have not accrued experience of at least three years cannot be appointed as Director and, if so, they must resign:

  • activities of administration, control or management in companies having a share capital not lower than € 2 million; or
  • professional activities or university teaching in legal, economic, financial and technical scientific subjects and closely related to the activities of the Company as defined in Article 26.1 of the Bylaws; or
  • managing roles in public bodies or public authorities in the finance and insurance fields or, however, in fields closely related to that of the Company, as defined by the Article 26.1 of the Bylaws (subjects such as business law, tax law, business economy and finance, as well as subjects linked to energy in general, the network communications and structures, are to be considered as closely related to the Company's scope of activities).

With stricter application compared to the provisions of Article 147-ter paragraph 4 of the Consolidated Law on Finance, at least 1/3 of the Directors in force must also be in possession of specific requirements of independence under Article 15.4 of the Bylaws that recalls the requirements of the Statutory Auditors indicated by Article 148, paragraph 3 of the Consolidated Law on Finance; furthermore, in line with the provisions of Article 3 of Prime Minister's Decree dated May 11, 2004, Executive Directors, taking into account the specific activity carried out by the Company, can be applied the independence requirements established by Article 10 of Directive 2003/54/EC as stemming from Article 15.5 of the Bylaws.

The presence of "Independent" Directors as provided for by the Governance Code becomes important in the composition of the Board Committees, as provided for by the Code itself and by the Committee for Related Party Transactions established within Terna for implementing the provisions of CONSOB Regulations that include provisions regarding related party transactions issued with Resolution no. 17221 dated March 12, 2010 and subsequently amended with Resolution no. 17389 dated June 23, 2010.

The Board of Directors assesses the presence of integrity, professionalism and independence requirements, for every one of its members and periodically assesses the presence of requirements of independence for every one of its non-executive members, on the basis of the information supplied by each member.

The Company is equipped with a specific internal procedure that defines the criteria for the assessment of independence of the non-executive members and for the assessment of the requirements necessary according to the Bylaws and the Corporate Governance Code (“Criteria of application and procedure for the assessment of independence of the directors pursuant to Article 3 of the Corporate Governance Code”). Such procedure, recently updated with the resolution of December 19, 2012, coherently with the new provisions of the Governance Code, provides for the assessment of requirements following the appointment, that is every time events take place that can interfere with the independence of a Director and however at least once a year (generally in the 30 days before the approval of the draft financial statements). To this end, Directors are asked for the information necessary to allow the Board to make its assessment. Additionally, considering that established by Article 5 of the Governance Code, it is established that non-executive directors who have declared their independence, undertake to maintain that requirement for the entire duration of the appointment, submitting the verification that the requirements remain met to a new appraisal by the Board of Directors that, if applicable, can also be carried out with reference to criteria that differs partially from that identified and disclosed in accordance with the requirements of the Governance Code (Article 3.C.4).

Succession Plans

Considering the ownership structures of Terna and the concentration of shareholders, the Board of Directors considered on March 20, 2012 - with reference to the provisions of paragraph VIII of the "Guidelines and transitional regime" which brought forward for issuers belonging to the FTSE-MIB index, to last year, the disclosure obligations with regard to the provisions of today's Article 5.C.2 of the Governance Code - not to proceed with an assessment of succession plans for the executive directors. 

Bylaws Amendments

With regard to regulations applicable to the amendments to the Bylaws, the extraordinary Shareholders' Meeting resolves on the matter with the majority envisaged by the Law.

The Bylaws (Article 21.2), according to Law provisions, attributes the Board of Directors the power to adopt any resolutions pertaining to the Shareholders' Meeting that can determine amendments to the Bylaws such as:

  1. the merger and the split, in cases envisaged by the Law;
  2. the establishment or elimination of other offices;
  3. stating which of the directors represent the Company;
  4. the reduction of the share capital in case one or more members withdraws;
  5. the amendment of the Bylaws according to regulations;
  6. the transfer of the Company headquarters in the national territory.

Article 6.3 of the Bylaws, in compliance with the regulations on privatization, attributes to the Italian Government, represented for this purpose by the Ministry for the Economy and Finance, the “special power” to veto, duly motivated with reference to effective detriment of the Government's vital interests, on the adoption of a series of resolutions adopted by the Shareholders' Meeting of significant impact on the Company, capable of amending the Bylaws, as previously described in “Restrictions in share transfer and shares bearing special powers”.

From the date on which the regulations identifying the strategic assets came into force, pursuant to the provisions of the "Golden Power Decree" currently being issued - as already described in the previous title sub "Restrictions in share transfer and shares bearing special powers" - the provisions regarding the "special power" of veto shall cease all effect, as envisaged by the "Privatisation Law" and in Terna's Bylaws, instead applying those envisaged on the matter by the "Golden Power Decree".

Furthermore, as provided for by Article 3 paragraph 3 of the "Privatisation Law" and Article 3, paragraph 2, letter c) of the Prime Minister’s Decree dated May 11, 2004, Terna’s Bylaws provides that the measures as per Article 6.4 of the Company Bylaws relative to the above-mentioned “maximum limit of shareholding” and in the previous title “restrictions in share transfer and shares granting special powers” and those included in the Bylaws that have the purpose to ensure protection of the share minorities, cannot be modified for a period of three years from the date of effectiveness of the transfer to Terna of the activities, functions, assets and obligations relative to the management of the National Transmission Grid as per Article 1, paragraph 1 of the Prime Minister’s Decree dated May 11, 2004 (November 1, 2005).

Indemnities for Directors in case of resignation, discharge or cessation of relation following a public take-over bid (pursuant to Article 123-bis, paragraph 1, letter i) of the Consolidated Law on Finance)

The information required by Article 123-bis, paragraph 1, letter i) of the Consolidated Law on Finance on the agreements between the Company and the Directors, which envisage indemnity in the case of redundancies or termination/revocation without just cause or if their employment ceases following a public take-over bid, are reported within the “Terna’s Annual Report on Remuneration”, published by Terna in compliance with the provisions of Art. 123-ter of the Consolidated Law on Finance and CONSOB Resolution no. 18049 of December 23, 2011 (published in the Official Journal no. 303 of December 30, 2011) which, amongst others, introduced Article 84-quater of the Issuers Regulation.

Management and coordination

Terna is subject to the de-facto control of Cassa Depositi e Prestiti S.p.A. with 29.851% of the share capital. The assessment, from which the existence of such control emerged, has been carried out by Cassa Depositi e Prestiti S.p.A. itself and made public on April 19, 2007. As of today, no managing and coordination activity has been officialized nor exercised; Terna carries out its activity either directly or through its subsidiaries under management and negotiation independence.

It is specified that the additional information on the Company’s Corporate Governance envisaged in Article 123-bis, paragraph 2 of the Consolidated Law on Finance and Article 144-decies of the Issuers Regulation, with regard to:

  • compliance, (pursuant to Article 123-bis, paragraph 2, letter a) of the Consolidated Law on Finance) are illustrated in the section of the Report specifically devoted thereto (section III);
  • the principal characteristics of existing risk management and existing internal control systems in relation to the financial informative note, also consolidated (pursuant to Article 123-bis, paragraph 2, letter b) of the Consolidated Law on Finance), and further relevant Corporate Governance practices (pursuant to Article 123-bis, paragraph 2, letter a) of the Consolidated Law on Finance) are illustrated in the section of the Report devoted to internal control and risk management system (section XI) and in Attachment 1 therein;
  • the Shareholders’ Meeting activity (pursuant to Article 123-bis, paragraph 2, letter c), of the Consolidated Law on Finance) in the section of the report devoted to the Shareholders’ Meeting (section XVI);
  • the composition and the role of the Board Members as well as those relative to the appointment and composition of the control body (pursuant to Article 123-bis, paragraph 2, letter d) of the Consolidated Law on Finance and 144-decies of the Issuers Regulations), are illustrated in the Report respectively in the section devoted to the Board of Directors (section IV) and in subsequent sections devoted to the Board Internal Committees (sections VI, VII, VIII and X) and in the sections devoted to the appointment and composition of the Board of Statutory Auditors (sections XIII and XIV).