GUARANTEES AND COMMITMENTS

At December 31 2010 the position of guarantees and commitments was the following:

CIR and financial holding companies

In relation to the incentive plans for directors and employees, CIR, jointly with Verbund, has made the undertaking to buy back the shares of Sorgenia S.p.A. resulting from the exercise of options by employees who are beneficiaries of the stock option plans outstanding at December 31 2010.

Other guarantees and commitments of CIR are as follows:

-       Commitments for investment in private equity funds by CIR International for € 25 million;

-       An annual commitment to cover just the running costs of the company KTP Global Finance SCA, the holding company of the KTP group.

Sorgenia group

1.       Guarantees made

As collateral for loans obtained by subsidiaries, shares representing the capital of the companies being financed  have been pledged in favour of the lending banks for a total of € 437,769 thousand. The increase is mainly due to the guarantees made by the company Sorgenia E&P S.p.A.

Sorgenia E&P S.p.A issued a guarantee in favour of Nexen Petroleum UK for certain works commissioned by Sorgenia E&P UK in relation to a block in the United Kingdom. The amounts still outstanding at the end of the year relate to two success fees scheduled for 2011 and 2014 each for an amount of € 938 thousand.

Sorgenia E&P S.p.A has also signed a letter of credit in favour of  BBVA BOGOTA’ for an amount of USD 3,780 thousand to guarantee obligations resulting from the exploration contract signed on February 16 2009 maturing on February 28 2011. The company has also undertaken to guarantee the payables of its subsidiaries as follows:

-   for Sorgenia International B.V. up to a maximum of € 3,508 thousand for a period of one year and three months starting from financial year 2010 (until March 31 2011);

-   for Sorgenia E&P Colombia B.V. up to a maximum of € 12,942 thousand for a period of one year and three months starting from financial year 2010 (until March 31 2011);

-   for Sorgenia E&P UK up to a maximum of € 25,664 thousand for a period of one year and three months starting from financial year 2010 (until March 31 2011);

2.       Sureties and guarantees

Within the group guarantees have been granted to third parties for a total of € 369,546 thousand. These are mainly obligations issued to guarantee payment linked to the purchase and transmission of electricity and gas and also undertakings in favour of the Inland Revenue for IVA for which rebates have been requested. This category also includes guarantees required for the construction of power plants and the purchase of land.

3.       Commitments

Commitments outstanding as of the balance sheet date refer mainly to guarantees issued by

Sorgenia S.p.A. in favour of banks lending to Sorgenia Power S.p.A. for € 195,800 thousand for the Termoli power plant and € 660,000 thousand for the Aprilia and Bertonico-Turano  Lodigiano sites. Sorgenia S.p.A. has signed an undertaking to capitalize Sorgenia Power for up to € 140,951 thousand and to finance the same company for up to a maximum of € 15,508 thousand. There are also commitments to make a financial contribution to the associate GICA S.A. and to the subsidiary Noventi Ventures II LP of up to a maximum of € 15,000 thousand, of which € 125 thousand has already been paid leaving a remaining commitment of a € 14,875 thousand, and USD 30,000 thousand, of which USD 18,887 thousand have already been paid, respectively. The remaining commitment is for € 8,137 thousand.

Lastly, it should be noted that just for the natural gas business, the supply contract includes a take or pay clause which makes it obligatory for the purchaser to pay for any shortfall in the amount withdrawn compared to the minimum stipulated in the contract. As a guarantee for the parties, the same contract also has a clause that regulates the procedures for negotiating the price for the duration of the contract. Negotiations in progress at the close of the year, according to the said clause of the contract, did not have any impact on the financial statements.

Espresso Group

Apart from liens on printing plants and rotary presses set up by banks to cover loans made in 2005, at December 31 2010 the company had commitments outstanding for € 4,615 thousand in relation to contracts for the purchase of plants and other printing equipment (€ 529 thousand) mainly for the Padua and Livorno divisions of Finegil Editoriale and l’Editoriale Nuova Sardegna for the full-colour project.

Guarantees amounted to € 4,086 thousand and referred mainly to bank guarantees made by the Parent Company and the subsidiaries Elemedia and A. Manzoni & C. for the lease of their respective premises, and also to the payment obligation undertaken by the Parent Company to the Inland Revenue Department to guarantee excess credit positions created in the last three years.

Sogefi group

Operating leases

For accounting purposes, lease and hire contracts are classified as operating leases when the following conditions apply:

-       a significant part of the risks and benefits of ownership are maintained by the lessor;

-       there are no options giving the right to buy the leased property at a price that does not represent the presumed market value of the same at the close of the period;

-       the duration of the contract does not extend over most of the useful life of the property rented or hired.

The rental payments for operating leases are recognized to the income statement in line with the underlying contracts.

The main operating leases outstanding at December 31 2010 refer to the following subsidiaries:

-       Allevard Sogefi U.S.A. Inc. for the lease of the production site situated in Prichard (West Virginia). The contract terminates in March 2019 and the remaining instalments total USD 3,434 thousand, of which USD 444 thousand in up to one year.

Against this contract Sogefi S.p.A. has issued a guarantee for approximately 54% of the remaining lease instalments which is renewed at the end of each year on the basis of the remaining amount. There are no restrictions of any kind connected with this kind of leasing and at the end of the contract the US company will have the right to buy the property at a market price.

-       Allevard Federn GmbH for the lease of the production site located at Volklingen. At March 2010 the company renewed the lease until May 2020. The instalments remaining as of December 31 2010 amounted to € 3,574 of which € 367 due in up to one year. For this contract the group has not provided any guarantee.

Future lease payments in relation to the operating lease contracts of the Sogefi group at December 31 2010 are as follows:

Commitments for investments

At December 31 2010 there were commitments for investments for a total of € 4,266 thousand.

Guarantees issued

The detail of these guarantees is as follows:

Guarantees issued refer to operating lease contracts and guarantees given to certain clients and are recognized at the value of the commitment outstanding as of the balance sheet date.

The item “Other guarantees in favour of third parties” refers to the commitment of LPDN GmbH towards the employee pension fund of the two business divisions at the time of the acquisition made in 1996. This commitment is covered by contractual obligations on the part of the vendor, a prime German economic operator.

Collateral security refers exclusively to the Indian subsidiaries which for the loans obtained gave the banks liens on their tangible assets, inventory and trade receivables.

Other risks

At December 31 2010 the Sogefi group had assets belonging to third parties on the premises of its companies for a value of € 5,180 thousand.

Kos group

Below is the breakdown of the bank guarantees and other guarantees issued by the company Kos S.p.A. for a total of approximately € 2,421 thousand:

-       A guarantee in favour of the Sanremo Town Council as a security deposit for urbanization works for € 226 thousand;

-       A guarantee on behalf of Residenze Anni Azzurri S.r.l. for the lease of Santegidio S.r.l. (Scarnafigi) for € 100 thousand;

-       A guarantee on behalf of Residenze Anni Azzurri S.r.l. for the lease of the Rivarolo building for € 75 thousand;

-       A guarantee on behalf of Residenze Anni Azzurri S.r.l. for the lease of the Rivarolo business arm for € 35 thousand;

-       A guarantee on behalf of Residenze Anni Azzurri S.r.l. for the nursing home to be built at Montanaro to guarantee signing of the future lease agreement for € 550 thousand;

-       A guarantee on behalf of Residenze Anni Azzurri S.r.l. for the lease of the Peveragno building, for € 235 thousand;

-       A guarantee on behalf of Residenze Anni Azzurri S.r.l. for the lease of the Dorzano building, for € 121 thousand;

-       A guarantee on behalf of Residenze Anni Azzurri S.r.l. for the lease of the Dormelletto building, for € 200 thousand;

-       A guarantee on behalf of Residenze Anni Azzurri S.r.l. for the lease of a building, for € 180 thousand;

-       An omnibus guarantee on behalf of Medipass S.p.A. in its relations with the Venice Health Authority for € 700 thousand.

Bank guarantees made by other companies of the group for an amount of € 7,656 thousand which has the following breakdown:

-       A guarantee made by Residenze Anni Azzurri S.r.l. guaranteeing payment of the lease payments of the care-homes, for € 8,237 thousand;

-       A guarantee made by Residenze Anni Azzurri S.r.l. in favour of HSS Real Estate S.p.A. to guarantee the security deposit policy for the urbanization works of the care-home to be built in the local district of Monza, for an amount of € 184 thousand;

-       A guarantee made by Residenze Anni Azzurri S.r.l. in favour of the Modena Town Council accredited beds, for an amount of € 23 thousand;

-       Guarantee policies issued by the Suzzara Hospital in favour of F.lli Montecchi, for € 953 thousand.

At December 31 2010 the other commitments and risks amounted to € 4,949 thousand and mainly referred to the following:

-       goods distributed for use free of charge for an amount of € 2,030 thousand

-       commitments relating to the refurbishment of the Suzzara Hospital, for contracts already signed at December 31 2010, for an amount of € 1,967 thousand;

-       contractual obligations for technological adjustments to equipment, where this proves to be necessary, for approximately € 822 thousand. As the contracts are at present, there is no reason to suppose that there is any likelihood of this obligation taking place;

-       third party commitments to sell for approximately € 130 thousand.

The group carries out its business in owned properties and in leased properties. The lease contracts in particular have a duration of from 3 to 9 years and are generally renewable. Of the 37 care-homes in operation for the elderly, at the balance sheet date 5 properties were owned, while 12 of the 22 functional and psychiatric rehabilitation facilities were owned (including two nursing homes for the elderly). The remaining facilities (day hospitals, psychiatric treatment communities, diagnostic departments) are generally leased.

The chart below shows the lease payment maturities. The amounts given are net of IVA.

The change in the amounts due compared to December 31 2009 was mainly due to the change in the consolidation and in particular to the acquisition of the care-homes in Segrate and Cassina De’ Pecchi.