Edison: arbitration proceedings for long-term gas supply contracts
On March 14, 2011 the Board of Directors reviewed an update of the Company’s operating performance and financial position for the current year, focusing on developments in the Price Review processes for long-term natural gas contracts. Insofar as the contracts with ENI are concerned, an agreement was reached recently for the gas from Norway, the terms of which were communicated to the market on February 11, 2011 and the Board of Directors was informed that arbitrations proceedings are currently under way for the gas from Libya. The Board of Directors agreed to file for arbitration proceedings with regard to RasGAS and the long-term contract for gas from Qatar.
The purpose of the arbitration proceedings is to enforce Edison’s right to earn reasonable margins that are commensurate with long-term commitments, while avoiding the need to pursue short-term fixes that could prove to have detrimental effects over the medium term. Considering the foreseeable length of the arbitration proceedings, which for some contracts will plausibly go through all 2011, and considering also the possibility that out-of-court settlements can be reached for other contracts, the Company informs the market that its 2011 EBITDA could be exposed to a negative impact that, based on currently available estimates, could be of 200 million euros. Current estimate is that 2011 EBITDA will be about 900 million euros. The company’s goal is to obtain in the next financial years a reasonable long term gas contracts profitability and also one-off effects for previous financial years, thus consequently recovering the negative impact mentioned above.
Edison: renegotiations of contract for the supply of natural gas from Norway
Edison, on February 2011, successfully completed the renegotiation with ENI for concerning the price for the long-term contract for the supply of natural gas from Norway expiring at the end of the year. The agreement negotiated generates significant cost savings compared with the contract previously in effect.
Edison as Operator in the Barents Sea, Norway
Edison, through its Edison International Spa subsidiary, was awarded three new hydrocarbon exploration licenses in the Norwegian Continental Shelf which had been put out for bids by the Norwegian Oil and Energy Ministry. The licenses include:
- in the Barents Sea and in the Norway Sea, with Edison as operator through a 60% stake in a joint venture with North Energy ASA (40%);
- in the southern North Sea, with Edison having a 10% stake in a joint venture with Talisman Energy (40%, operator), Det Norske ASA (20%), Skagen (10%) and Petoro AS (20%).
The agreements call for an exploration period of three years and the drilling of one well in the southern North Sea.
Milan, March 21, 2011
The Board of Directors
By Giuliano Zuccoli