Other economic effects

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EC9Terna’s economic impact does not end with the creation and distribution of value added. One must also consider, first of all, the economic repercussions of the electricity service: Terna ensures over time a service of general interest and thus contributes to Italy’s economic growth.

The Company’s grid development activity is of particular importance. The development of interconnections between bordering countries makes it possible to import electricity at prices that are more competitive than those of domestic production, to have an additional power reserve and to be more competitive in energy markets. The reduction of grid congestion improves the exploitation of generation resources for covering requirements and makes it possible to use the most competitive plants, with positive effects on competition in the generation segment and on end prices.

In compliance with the regulatory framework, all of Terna’s investments in grid development are examined from the technical and economic points of view by comparing the estimated cost of the work with the related benefits in terms of the reduction of the overall system expense in order to maximize the cost/benefit ratio. Consequently, every euro invested by Terna generates on average a multiple of savings for the users of the grid, as reflected ultimately on the end consumer. It is therefore significant that Terna’s investments (most of which for grid development) have constantly increased in the last few years.

Investments - Terna Group
  2011 2010 2009 2008 2007 2006 2005
Million euros 1,219.80 1,161.70 900.4 764.9 606 345.5 263.5

As for 2010, also in the 2011 financial period the number in the table regards only the Terna Group’s core investment in continuing activities; it does not include investments in non-traditional activities, which amounted to 9,4 million euro .

As decreed in the Ministry for Economic Development’s Directive of January 21, 2000, in determining possible development investments, the Company also pays the utmost attention to the need for service improvement in Southern Italy and other areas in which the electricity transmission system is less efficient in terms of reliability and continuity, also because in such areas the upgrading of the transmission grid can be decisive for social and economic development.

EC4In 2011, public contributions to the plant account – recorded directly to reduce the value of the plants – amounted to 2,316,994.17 euro (3,652,564.86 euro in 2010 and 5,843,139.83 in 2009).

Another aspect to consider is the creation of employment and the expense for procurement. As of December 31, 2011 Terna had 3,493 employees, of which 960 in Rome at the company's headoffice, the National Control Center (CNC) of the transmission grid and Rome’s Transmission Operating Area (AOT). The other employees (nearly 2,500) were uniformly distributed throughout Italy at the 7 other local operating areas of Turin, Milan, Padua, Florence, Naples, Palermo, and Cagliari – under which 32 Line Operating Groups (GOL) and 32 Station Operating Groups (GOS) work – 8 Distribution Centers (CR), and 3 Remote-Control Centers, which have offices throughout the country.

Through the construction and maintenance of power lines, in 2011, Terna indirectly determined the employment of labor by contractors and subcontractors totaling the equivalent of 2,076 full-time employees.

EC6In 2011, the economic value of Terna’s procurement of services, supplies, and works was equal to nearly 1.2 billion euro . Most of these were purchased from Italian suppliers, although the share of foreign suppliers is growing.

The predominance of Italian suppliers does not conflict with the Group’s policy, which excludes selecting suppliers on the basis of their location, and is due to the need for fast maintenance work on plants to ensure the utmost security of the electricity system. Furthermore, suppliers located nearby ensure greater competitive costs regarding the transportation of heavy and bulky supplies.

Terna S.p.A. makes most of its purchases from companies that are qualified pursuant to EU directives or through EU-wide tenders. Italian companies constitute a large majority of those that apply and qualify. However, it should be noted that a significant share of the sum spent on local purchases actually regards Italian branches of internationally significant industrial groups such as ABB, Siemens and Prysmian, which are predominant worldwide in the specific markets concerned.

The following table breaks down Terna’s total procurement expenditure in the period 2009-2011 (including non-traditional activities):

Purchases from local and foreign suppliers (Percentage of total procurement) (1)
  2011 2010 2009
Local suppliers 91 94 99
Foreign suppliers 9 6 1
(1) Data regarding Purchase percentages made with the Associazioni Temporanee di Imprese (ATI) (Temporary Business Associations), previously published, was reclassified among Italian and foreign suppliers according to the nationality of the purchasing agent.

The share of expenditures with foreign suppliers is equal to 9% of the total, increasing compared to the previous year (6%). This increase is mainly owed to the assignments made through European tenders for the supply of armored station equipment and HV cables by new Asian operators.

Other economic impacts connected with the resources that Terna dedicates to the support of charitable initiatives and in the artistic and cultural fields, are described in the section entitled “Community initiatives”.