Coverage of the Company’s pension plans

Terna offers its employees voluntary supplementary pension coverage with a defined contribution. Specifically, senior managers may join the Fondenel pension fund , which provides for contributions from both the manager and the Company. In both cases, the contribution varies according to the date of hiring and the date the manager first joined a supplementary pension fund. The other employees (blue-collar workers, white-collar workers, and junior managers) may join the Fopen pension fund. In addition to the pension plans, the employees of the Italian companies receive other payments that have the characteristics of defined benefits.

In particular:

  • while they are employed, contracts provide for all employees to receive a “loyalty bonus” upon completing their 25th and 35th years of service at the Company;
  • when their employment is terminated, all employees are entitled to receive a termination bonus (TFR). Senior managers hired or appointed before February 28, 1999 receive an allowance in lieu of notice (ISP) and production workers, office staff, and junior managers already employed as of July 24, 2001 receive an additional month’s pay (IMA);
  • when their employment is terminated, senior managers are entitled to supplementary health care (ASEM);
  • employees hired by June 30, 1996 are granted a discount on the electricity consumed for domestic use (electricity discount).

The composition of and changes during the period in the TFR and other employee-related provisions of the Parent Company, Terna, to which all employees refer, as of December 31, 2009 are shown in the following table:

In millions of euros Dec. 31, 2008 Provision Interest cost Utilisations and
other movements
Dec. 31, 2009
Benefits during employment            
Loyalty bonus 5.1 0.2 0.2 -0.6 4.9
Total 5.1 0.2 0.2 -0.6 4.9
Benefits due at termination          
of employment          
Termination bonus (TFR) 74.4 11.2 3.2 -17.3 71.5
Additional month’s pay (IMA) 7.4 0.4 0.4 -0.9 7.3
Allowances in lieu and similar benefits 3.5 0 0.1 -0.3 3.3
Total 85.3 11.6 3.7 -18.5 82.1
Benefits subsequent to employment          
Electricity discount 51.9 1.2 1.5 -27.9 26.7
ASEM (health care) 11.6 0 0.3 -0.5 11.4
Total 63.5 1.2 1.8 -28.4 38.1
Total 153.9 13 5.7 -47.5 125.1

Amounting to €125.1 million as of December 31, 2009 (€153.9 million as of December 31, 2008), this item recorded a decrease of €28.8 million with respect to the previous year, which was essentially due to the reversal from the electricity discount provision (€26.8 million, €19.4 million net of the tax effect) following the agreement with Enel Distribuzione, which re-determined the correct number of retirees entitled to the benefit.

The costs regarding liabilities for employee benefits recorded in the income statement break down as follows:

 In millions of euros    TFR   Indemnities in lieu
 and similar benefits
 IMA   Loyalty   ASEM   Electricity
 discount 
 Total 
 Dec. 31, 2008    74.4    3.5    7.4    5.1    11.6    51.9    153.9  
 Current cost   0.0    0.1    0.3    0.2    0.2    0.9    1.7  
 Amortisation of actuarial gains and losses    0.0    -0.3    0.1    0.0    -0.5    0.4    -0.3  
 Financial expense    3.2    0.1    0.4    0.2    0.3    1.5    5.7  
 Disbursements and transfers    -6.1    -0.1    -0.9    -0.6    -0.2    -1.2    -9.1  
 Reversal following agreement with Enel Distribuzione    0.0    0.0    0.0    0.0    0.0    -26.8    -26.8  
 Dec. 31, 2009    71.5    3.3    7.3    4.9    11.4    26.7    125.1  

The main assumptions made in the actuarial estimate of the employee benefit liabilities are the following:

Percentage figures 2009 2008
Discount rate  4.1% 4.8%
Rate of increase of personnel costs  2.0%-4.0% 2.0%-5.0%
Rate of increase of healthcare expense 3.0% 3.0%-4.0%