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Sustainability report 2009 - Edison Spa
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SUSTAINABILITYREPORT2009
Volturino
Vaglio
Piacenza* Sermide*
Chivasso*
San Filippo del Mela*
Brindisi*
Turbigo*
Mese (12 plants)**
Udine (8 plants)**
Val Meduna (5 plants)
Tusciano (8 c.li)**
Val Caffaro (4 plants)
Naide
Calipso
Tresauro
Golfo Aranci
Porto Botte
Pieve Vergonte
Battiggio
Campo
AlbanoVenina
Armisia
Minerbio
4 KHR plants(Edison 20%)
Rosignano
Sambuceto
Siracusa
Ripabottoni
Sella di Conza
* Edipower thermoelectric power plants** Edipower hydroelectric power plants
Compressor station
Head offices
Thermoelectric power plants
R&D Center
Hydroelectric power plants
Wind Farms
Gas field
Oil field
Storage concession
Planned LNG terminal
LNG terminal
Gas pipelinesin planning/under construction
GALSI
Volturara-Motta
Rome
Milan
Cologno Monzese
Lucito
Melissa - Strongoli
Mistretta
EDISON IN ITALY
IGI
FACILITIES AND INFRASTRUCTURES AT ITALYS SERVICE
* 2 storage centers in operation and 1 under development
* Installed capacity data include those of Edipower at 50%
HY
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28 thermoelectric power plants68 hydroelectric power plants3 mini hydro power plants
29 wind farms1 photovoltaic power plant1 biomass power plant
12,232 MW of installed capacity, including 2,104 MW incapacity from renewable sources*
58 concessions and exploration permits in Italy22 concessions and permits for natural gas and crude
oil exploration and production outside Italy
3 storage center concessions in Italy*56.1 billion m3 equiv. in hydrocarbon reserves3.71 thousand km of natural gas distribution networks
UK
Senegal
Norway
AlgeriaEgypt
Iran
Ivory Coast
Greece
Croatia
HungaryRomania
Bulgaria
Hydrocarbon concessions and permits
Electric power generation
Trading branches
EDISONS INTERNATIONAL PRESENCE
2 A LETTER TO OUR STAKEHOLDERS5 EDISONS SUSTAINABLE DEVELOPMENT POLICY
6 WHO WE ARE8 STRUCTURE OF THE GROUP9 BUSINESS ENVIRONMENT9 FUTURE STRATEGY AND CHALLENGES
10 MAIN COMPLETED PROJECTS12 OUR RESPONSIBILITY13 CORPORATE GOVERNANCE15 RISK MANAGEMENT18 EDISON AND ITS STAKEHOLDERS
20 ECONOMIC RESPONSIBILITY21 THE WEALTH WE CREATED21 RELATIONS WITH THE FINANCIAL COMMUNITY
24 ENVIRONMENTAL RESPONSIBILITY25 PROMOTING A SUSTAINABLE DEVELOPMENT29 EDISON AND CLIMATE CHANGE
34 SOCIAL RESPONSIBILITY35 OUR EMPLOYEES41 OUR CUSTOMERS45 OUR SUPPLIERS47 PUBLIC INSTITUTIONS48 OUR COMMUNITIES
54 A NOTE ON METHODOLOGY
62 CERTIFICATION OF CONFORMITY
GRI INDEX
Edison decided to renew its Sustainability Report, focusing on the main socio-environmental issues andemphasizing the results it achieved in these areas. Other corporate communication tools are available on thewww.edison.it website, to which we specifically ask you to refer for further information, in accordance with theGuidelines for Sustainability Reporting published by the Global Reporting Initiative (GRI) and the principlesof the U.N. Global Compact.
Many of the photographs that illustrate this Report were taken by Edison employees who participated in the 2008-209 editionsof the internal photographic context on sustainability.
Starting with this reporting year, this report includes the data and performances of Edison International, a company that operatesat the Abu Qir concession, in Egypt, and of AMG Gas Palermo, both having joined the Group in 2009.
SUSTAINABILITY REPORT2009
2In 2009, Edison intensified the process of making socialresponsibility an integral part of its business model. For Edison,corporate social responsibility is more than just charitablecontributions and sponsorships. It is something that it applies everyday to the management of its business operations, always keeping inmind the expectations of its stakeholders.
In 2008, Edison published its Sustainable Development Policysetting down four challenges regarding the fight against climatechange and environmental protection, occupational health andsafety, transparency and fairness in market transactions, andrelationships with its host communities.The Sustainable Development Policy provides a strategicframe of reference that enabled the Company to reach importantachievements in 2009 and serves as the benchmark for thefuture of Edison.Edison intends to address with determination the issue of climatechange and shares the vision presented in the European UnionsE,U, 2020 Program of a strategy based on new synergiesbetween the social, economic and industrial stakeholders for theachievement of more sustainable development. Besides,achieving the Programs objectives will prove to be difficult if theyare not framed within a global context in which other countriesmake concrete commitments towards greenhouse gas reduction.With such an approach, the Climate Package ceases to be apenalty for the countries of the European Union, providinginstead an opportunity to grow and reconvert the economicsystem. The Copenhagen Accord had the merit of uniting allparticipating countries in the political goal of preventingthe average global temperature from rising by more thantwo degrees centigrade. This was an important step forward, compared with the past, eventhough a binding and uniform agreement on specific CO2reduction targets and related mechanisms could not be reached.The current year will be a decisive year, as the requirement that allEuropean Union member countries define quantifiable CO2reduction targets will provide a measure of the true difficultiesposed by the adoption of the Copenhagen Accords guidelines.Also in 2010, the other countries (beginnig from USA and China)are expected to define their policies about their CO2 reduction.
Edisons commitment to fighting climate change is carried outconcretely in a number of ways: from the choice of the bestavailable technologies for the construction of new facilities to itscapital investment decisions, particularly concerning renewablesources; from the research and development of technologies witha low environmental impact to the promotion of sustainabledevelopment in emerging countries; from educational projects
A LETTER TO OUR STAKEHOLDERS
about energy conservation in the classroom and the musicalworld to energy efficiency services and the offer of green energyto customers. In 2009, there was a further reduction in CO2emissions (specific emissions 486 g/kWh) released by Edisonfacilities, confirming the positive trend of the past three years,and, on the other side, an increase in production from renewablesources (5,954 GWh). For our Group, energy efficiency is a business in the true sense ofthe word. Specifically, a unit created in 2009 helps Edisonscustomers adopt a rational approach to the use of energyresources, starting with optimization of energy utilization processes,through production with low environmental impact sources and,ultimately, offsetting the residual carbon footprint. Energyconservation must be become a profit motive for our Group andconsumers alike. The problem of climate change is closely linkedwith that of protecting biodiversity, because the preservation ofhealthy ecosystems helps mitigate the impact of the climate.Edison has chosen to adopt a clear approach in this area. In 2010,the International Biodiversity Year, it will define an action plan withrealistic objectives for the management and conservation ofbiodiversity in the areas where its activities are located.
The protection of health and safety in the workplace is acommitment that is constantly at the center of Edisons attention.The adoption of management systems that comply withinternational standards (BS OHSAS 18001) demonstrates theGroups determination to go beyond mere regulatory compliance,promoting a policy of continuous improvement with a beneficialimpact on the development of a culture of safety at all levels ofthe organization. For this reason, all employees are involved inthe pursuit of the Zero Risk objective. As part of this ongoingeffort, the MBO system now includes a safety target for all first-level managers. In 2009, following the significant improvementsachieved in recent years, the Groups occupational safetyperformance stabilized at levels of excellence both at the Italianand international level. This was especially true for employees ofcontractors (employee injury incidence rate of 3.04, down 5.6%),reflecting the positive impact of numerous educational andtraining programs about safety.
Edison maintains an ongoing dialog with the market and theshareholder community, providing them with the information theyneed to evaluate as effectively as possible the Company, its plansand its strategies. Despite a highly negative market environment,the Group succeeded in maintaining its profitability at a levelsubstantially in line with that of previous years. Continuouscommunications helped make the market aware of the strategiesdeployed by Edison to respond to the economic crisis.
3In 2009, Edison focused intensely on its end customers. Afterachieving in little more than a year a significant position in theresidential market for electric power and natural gas andimproving its customer service activities (specifically, the ElectricPower and Natural Gas Authority placed Edisons call centeramong the top performers in the Call Center Quality Rankings),Edison refined the tools it had been using to listen to and analyzethe needs of Italian consumers and thought it indispensable toopen new direct communication and collaboration channels withconsumer associations, through a series of projects and initiatives such as the Joint Conciliation Protocol that enable Edison tomonitor and continuously improve the level of customer service.
In 2009, the activities of the Edison Foundation gained evengreater prominence. The Foundation engages primarily in the studyof industrial clusters and small and medium-sized businesses,which are of critical importance in Italy. Through the publication ofpapers, books and news bulletins and the organization ofconventions, the Edison Foundation highlighted how, comparedwith the industrial systems of other countries, these strong pointshelped the Italian economy retain its extraordinary vitality andresiliency during the current crisis. The Foundations studies wereextremely well received by politicians, the media, Italys industrialcluster systems, the National Federation of Industry and individualbusinesses, and helped enliven the debate about the strengths andweaknesses of Italys industrial system. A concrete sign of theFoundations success is the steadily increasing number of newmembers, who appreciate and support its activities.
Edison is strongly committed to strengthening its ties with its hostcommunities. Discussion forums, an ongoing dialog with allparties involved and a lasting relationship with the localstakeholders are the tools of this process, of which Edison hasbeen a trailblazer in Italy, particularly in terms of its ability to listento and involve the host communities in the shared development ofnew projects. The Groups ambitious capital investment programwas carried out with this approach of dialoging with the hostcommunities, with excellent results. Two examples of projectsmentioned as best practices at the European level are the Rovigoregasification terminal and the Candela thermoelectric powerplant in Apulia, both of which were honored with the Pimby(Please in my backyard) award by local administrations that choseto build major sustainable projects in their areas.
Edison views partnering with non-profit associations as anintegral part of its corporate social responsibility strategy becausethese associations provide an effective tool to interact withsociety. In 2009, the Company established a Committee charged
with evaluating socially beneficial projects and address the needto develop specific guidelines, take a proactive approach in theidentification of socially beneficial projects and make the entireprocess transparent. As part of this effort, in selecting projects forthe areas where it operates, Edison decided to select projects thattarget young people and small children, focusing on such issuesas the promotion of sustainable development and energyefficiency, sports and culture.Specifically, in 2009, Edison co-financed the construction of awelcome center for disabled adolescents built entirely inaccordance with ecoefficiency criteria, it intensified its energyconservation effort with educational programs that included theKyoto anchio La scuola amica del clima contest for schoolsand Edison change the music, the first ever zero-impact musicalproject, winner of the Sodalitas Prize, and took up the challengeof introducing the inmates of the Beccaria juvenile detentioncenter in Milan to the discipline and values of rugby. Lastly, toencourage employees to identify with the Company and developteam spirit, Edison activated a series of programs to involve itsstaff in socially beneficial programs and supports them when theydecide on their own to promote humanitarian causes that areespecially meaningful to them.
Last, but not least, during its current phase of internationaldevelopment, Edison, in collaboration with the Italian network ofthe UN Global Compact, of which it is an active supporter,launched a strategic assessment of human rights issues,publishing a specific policy that will be integrated into theGroups business processes through the training of employeesand appropriate monitoring activities. Activities planned for 2010,in keeping with the renewed interest in this issue, include a majorproject for the protection of vulnerable children in Egypt.
Umberto QuadrinoEdisons Chief Executive Officer
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5The Environment
Help fight climate change and develop an energy systemwith a low environmental impact: Positioning ourselves among the energy companies with the
most efficient facilities and the lowest level of greenhouse gasemissions, pursuing objectives of continuous improvement aswe shift our energy mix towards sources with lower emissions;
Aiming to play a leadership role in the field of renewablesources in Italy;
Operating with the utmost respect for the environment andbiodiversity.
Our Employees
Foster the development of our employees by providinghealthy and safe work environments: Strengthening programs that empower our employees by
helping them develop competencies and finding an optimumwork-life balance;
Strengthening and improving our management system foroccupational health and safety prevention and monitoring(already one of the most advanced in Europe); attainingaccident levels that are among the lowest in our industry,while continuing to pursue a zero accidents objective.
Milan, February 11, 2009
Umberto QuadrinoChief Executive Officer
The Market
Be a transparent and fair player in the market in which weoperate to establish respectful and lasting relationshipswith our counterparties: Investing in research to develop new energy-saving solutions
for our customers, offering them services that are respectful ofthe environment and promoting an informed use of energy;
Developing dialog with our customers and consumer groupsto improve the services that we offer.
Local Communities
Consolidate our ties with public institutions and our localcommunities by listening to the legitimate expectations ofour stakeholders: Communicating our values, actions and achievements, while
listening to the expectations and changing needs of ourlocal communities and those of public institutions;
As responsible citizens, supporting social, educational andsports initiatives that benefit the community;
Establishing and maintaining stable, transparent andcollaborative relationships with our suppliers;
Maintaining an effective system of Corporate Governancecapable of steadily creating value for our shareholders.
Edisons Responsibility: 4 Challenges and 11 Commitments for Sustainable Development
Sustainability is a strategic element of Edisons businessmodel. The creation of value is based on the ability to pursueeconomic objectives while at the same time steadily reducingenvironmental impacts, consistent with a sustainabledevelopment approach, thereby meeting the expectations of all stakeholders.
The world is faced with the global challenge of climatechange, which can be successfully tackled only if we allget involved. As an electric utility, we have a greatresponsibility: we have to manage and mitigate ourenvironmental impact and help minimize the effects on climate,while delivering energy to all of our customers.We are convinced that the promotion of a culture of energyconservation, coupled with special services for our customersand the development of an energy system with a low
environmental impact, can help contain global warming andprovide growth opportunities in our markets.
Empowering our employees and providing them with ahealthy and safe work environment are core objectives forEdison, which views them as fundamental elements toguarantee the respect and integrity of all our associates. Wetreasure diversity and foster the professional development ofour employees by listening to their needs and expectations.
Edison is committed to strengthening its ties with its localcommunities by respecting the aspirations of the localpopulation and supporting growth in the areas where itoperates. We involve the communities in decisions that affectthem, we invest in cultural development and we promote social,educational and sports initiatives that benefit the community.
EDISONS SUSTAINABLE DEVELOPMENT POLICY
Chief Executive Officer
6WHO WE ARE
ENERGY PRODUCEDFROM RENEWABLESOURCES
2008 5,545 GWh2009 5,954 GWh
CO2 EMISSIONSAVOIDED USING RENEWABLE SOURCES
2008 3.27 mln t2009 3.32 mln t
SPECIFIC CO2EMISSIONS
2008 523 g/KWh2009 486 g/KWh
NUMBER OFEMPLOYEES
2008 2,9762009 3,923
EMPLOYEE INJURYINCIDENCE RATE
2008 3.222009 3.04
TOTAL TRAININGHOURS PER EMPLOYEE
2008 382009 32
SALES OFGREEN ENERGY
2008 176 GWh2009 106 GWh
CAPITAL EXPENDITURESAND EXPLORATIONINVESTMENTS
2008 644 mln euros2009 1,745 mln euros
DIVIDEND PAYOUT
2008 268 mln euros2009 228 mln euros
CHARITABLECONTRIBUTIONS ANDSPONSORSHIPS
2008 3.3 mln euros2009 3.9 mln euros
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Electric power 100%Hydrocarbons 89%
DIRECT ECONOMICVALUE GENERATED
200810,914 mln euros2009 9,529 mln euros
7Who We Are
in southeast Europe, Turkey and the Mediterranean Basin. In Italy,after recently entering the residential electric power market, Edisonlaunched in September 2009 a new integrated offer for householdsthat combines the supply of electric power and natural gas.
Respect for the environment, dialog with local communities, concernfor safety, delivery of high quality services, and transparency andethics in dealings with stakeholders: these are the foundations onwhich the Company builds its business. Edison is Italy's secondlargest electric power and natural gas operator.Between 2001 and 2008, the Groups electric power operationscompleted the most ambitious program of generating capacityexpansion carried out in Europe in the past 10 years, buildingcombine-cycle, cogenerating power plants fueled with natural gas,which is todays most efficient and environmentally friendlythermoelectric technology. Edisons distinctive characteristic is itssuccess in developing a well balanced portfolio of highly efficientfacilities that enables it to produce energy with an optimum mix,ranging from gas-fired, combined-cycle facilities to hydroelectricunits and other renewable sources. In the hydrocarbon area, Edisonhas an integrated presence, ranging from exploration to production,importation, distribution and sales.Edison is also developing infrastructural projects of strategicimportance for the Italian and European supply system that willimprove the energy mix and provide Italy with greaterindependence from individual hydrocarbon producing countries.Adriatic LNGs Rovigo regasification terminal, the first offshorefacility of this kind in the world, was commissioned in 2009. It willmake it possible to import 8 billion cubic meters of natural gas ayear, equal to 10% of Italys total supply needs.
In the international arena, Edison is working to further strengthen itspresence both in the electric power generation and hydrocarbonsectors. Since the first quarter of 2009, Edison is the operator of theAbu Qir concessions in Egypt, one of the largest hydrocarbon fieldsactive in the Mediterranean today. This concession will help meet partof Edisons natural gas needs, with the possibility of exporting LNGstarting in 2012. In the electric power area, Edison is present inGreece with ElpEdison, the second largest operator in that countryselectric power industry, and is seeking additional growth opportunities
For the second consecutive year, Edison was ranked first in Italy in the listing of the Worlds MostAdmired Companies published each year in the United States by Fortune magazine. In the globalrankings, Edison finished second overall in the Energy sector.This prestigious mention comes on the heels of Edisons achievements as the developer ofinternationally significant and strategic projects, such as the ITGI (Italy-Turkey-Greece natural gaspipeline) and the Rovigo regasification facility, the worlds first offshore LNG terminal.For more information: http://money.cnn.com/magazines/fortune/mostadmired/2010/intl/Italy.html
Fortune rewards Edisons reputation
CRUDE OIL SOURCES (thousands of barrels)2008* 2009 % change
Production in Italy 1,729 1,703 (1.5%)
Production outside Italy (1) - 957 n.s.
Total production 1,729 2,660 553,8%(1) Counting volumes withheld as production tax.
* The data for 2008 have been restated in accordance with the new classification criteria adopted.
NATURAL GAS SOURCES (millions of m3)2008* 2009 % change
Production in Italy 662 604 (8.8%)
Pipeline imports 7,554 8,678 14.9%
LNG imports - 1,682 n.s.
Domestic purchases and other (1) 5,281 2,246 (57.5%)
Total sources (Italy) (1) 13,497 13,210 (2.1%)
Production outside Italy (2) 352 1,231 n.s.(1) Includes changes in inventory and pipeline leaks.(2) Counting volumes withheld as production tax.
* The data for 2008 have been restated in accordance with the new classification criteria adopted.
ELECTRIC POWER SOURCES (GWh)*2008** 2009 % change
Net production of the Edison Group 50,151 41,601 (17.0%)
Thermoelectric power plants 44,606 35,646 (20.1%)
Hydroelectric power plants 5,021 5,397 7.5%
Wind farms and other renewables 524 558 6.4%
Other purchases (1) 15,040 18,771 24.8%
Total sources 65,191 60,732 (7.4%)
(1) Before line losses and excluding the trading portfolio.
* One GWh is equal to one million kWh; in terms of physical volumes.** The data for 2008 have been restated in accordance with the new classification criteria adopted.
8Who We Are
STRUCTURE OF THE GROUP
EDISON Spa
Edipower Spa Hydros Srl Dolomiti Edison
Energy Srl
Management ofthermoelectric andhydroelectric powerplants
Elpedison BV Elite Spa
Development andmanagement of interna-tional thermoelectricpower plants and inter-connection facilities
Edison EnergieSpeciali Spa
Management and develop-ment of wind farms andother facilities for powergeneration from renewablesources
Edison Trading Spa Edison Energia Spa
Dispatching and saleson the Power Exchangeand to wholesalers
Edison International Spa Abu Qir Petroleum Co
Edison Stoccaggio Spa (*)
Edison D.G. Spa (*)
HydrocarbonsOperationsHydrocarbon exploration andproduction; storage, transmis-sion and distribution of naturalgas in Italy and abroad
GasInternationalDevelopment of internationalnatural gas interconnectors
Gas Supply& LogisticsManagement of procurement,logistics and sales to whole-salers and thermoelectricpower plants
Marketing &Distribution
Sales of electric power and natural gas to endcustomers
Solutions for the use ofsustainable energy
Edisonpublishes its firstEnvironmentalReport.
1994
1881Giuseppe Colombofounds the Committee to Promote the Use ofElectric Power in Italy. TheCommittee will becomeSociet Generale Italianadi Elettricit SistemaEdison in 1884.
1993The EdisonResearch Centeropens inTrofarello (TO).
1990Under the new NationalEnergy Plan, businessesare again allowed tobuild new power plants,provided they use envi-ronmentally compatibletechnologies.
1963Italian electric utilitiesare nationalized.
1898The Bertini hyroelectricpower plant in PadernodAdda is commis-sioned. At that time, itwas the most powerfulpower plant in Europe.
Europes first power plantcapable of distributing acontinuous supply of elec-tric power begins to oper-ate at Milan SantaRadegonda.
1883
Edison begins tosupply natural gasto households inMilan.
1931
Merger withMontecatini; Montedison is born.
1966
Edison introducesto Italy the com-bined-cycle technol-ogy for powerplants fueled withnatural gas.
1992
Edison is structured to operate in all of the strategic areas ofthe electric power and natural gas businesses. The Group's corporate organization is based on an integratedbusiness model that reflects Edisons commitment to the energy
sector. The coordinated operations of different Group companiesenable Edison to generate electric power with a lowenvironmental impact, which it offers in the deregulated market atincreasingly competitive prices, for the benefit of its customers.
Itgi-Poseidon Sa Galsi Spa
EnergyEfficiency andSustainableDevelopment
Electric Power Business Unit Hydrocarbons Business Unit Main companies included in the scope of consolidation(*) Company subject to unbundling requirements.
Electric PowerOperations
PowerInternational
Renewablesources
EnergyManagement
9Who We Are
1996Edison commissions itsfirst wind farm. The farm islocated in CasoneRomano, in themunicipality ofCastelnuovo della Daunia,province of Foggia.
2008Publication of theSustainableDevelopment Policy. ASustainableDevelopment BusinessUnit is established.
2005Edison joins the U.N.Global Compact.
2002Edison Energie Speciali(wind power generation)is the first organization inItaly to receive multi-siteEMAS registration.
Edisons Bussi power plant is the first facilityin Italy to receive ISO 14001 environmentalcertification. The CET 3 power plant inTaranto is the first facility in the world to use,on an industrial scale, a combined-cyclesystem fueled with recycled gas from theneighboring steel mill complex.
1997
Ten years after publishingits first EnvironmentalReport, Edison publishesits first SustainabilityReport and approves the231 Organizational Model.
2004
A 400-MW turbogas power plant fueledwith a mixture that includes leannatural gas from local deposits iscommissioned in Candela (FG). Thesteam generated by the facility is usedto heat about 150 acres of greenhousesbuilt by a local floricultural business.
2007
A Corporate ResponsibilityDepartment is establishedand Edison publishes aHuman Rights Policy.Elpedison Power, Greecessecond largest electric poweroperator, is created.
2009
BUSINESS ENVIRONMENT
In 2009, demand for energy decreased due to the financial crisis,with reductions in the Italian market amounting to 6% for electricpower and 8% for natural gas. While the International Energy Agency (IEA) expects demand tostart growing again (by about 2.5%) during the 2010-2015 period,the effects of the financial crisis could have repercussions oncapital expenditures in the energy sector and, by discouraginginvestments in reduced-emissions technologies, hamper theachievement of CO2 emissions reduction targets.Moreover, lower investments in the energy industry couldconstrain the available supply sufficiently to produce priceincreases when demand bottoms out. These developments,when viewed in conjunction with long range forecasts calling fordemand to continue rising until 2030, could pose additionalchallenges, including international competition for the availableenergy resources.In such an environment, international and national institutionshave a fundamental role to play in addressing these challengesby acting quickly and forcefully to ensure that the market hassufficient energy resources to ensure its competitiveness.
The European Union Council has already taken action, adoptingthe European Recovery Plan (ERP) to support the Europeaneconomy as it deals with the crisis. In the energy sector, 2.3billion euros have been earmarked to support a series ofprojects for the development of electric power and natural gasinterconnector projects, including the ITGI and Galsi natural gaspipelines. Specifically, because the European energy market isheavily dependent on imports from sources outside theEuropean Union, one of the priorities that must be addressed isthe reliability of supply sources. The Southern corridor for thesupply of natural gas from the Middle East and the
Caspian Basins is now viewed as a top priority for Europesenergy security.
Insofar as the Italian regulatory framework is concerned, changesin 2009 included the enactment of several energy-relatedstatutes, including the provisions of the Development Lawconcerning the safety and development of the energy industry,energy efficiency industry regulations and the delegation ofpowers to the government in the nuclear area. Additionallegislation dealt with the governance of energy infrastructures,trading in environmental securities markets (green certificates,CO2 certificates, etc.) and regulating the electric power andnatural gas markets.
FUTURE STRATEGY ANDCHALLENGES
While the economic and financial crisis caused a slump in thedemand for energy, expectations call for the economic recoveryto get under way in 2010, producing a steady rise in globalenergy consumption. Specifically, according to projections,European installed electric power generating capacity will haveto increase by about 40%, compared with 2005 installedcapacity, to meet the new, higher demand for energy.Edison, which stood out among European operators for the highergrowth rate of its domestic market, intends to take up thechallenge posed by the market scenario by further expanding itsinternational operations. Such an approach will have the addedbenefit of diversifying the Groups risk portfolio, duplicating in newareas with a high growth potential the business model itsuccessfully applied in Italy.In Italy, Edison will continue to follow its strategic guidelines: Maintain a 15% share of national energy production, but with a
better balance between upstream and downstream operations;
10
Who We Are
Complete its natural gas transmission infrastructural projects,reaching full energy independence and accounting for 15% oftotal natural gas imports.
The Groups rate of growth will be modulated to make sure thatcapital expenditure levels are consistent with changes in energydemand trends. In addition, Edisons strong financial position willenable it to pick up the pace of capital investments, should theeconomic recovery begin sooner than anticipated.
Electric Power OperationsBesides Italy, the Groups main areas of interest include Greece,where the Group is already present with a commercial joint
Hydrocarbons OperationsOver the next 10 years, Europe and Italy will be faced with a verycomplex situation. Specifically, rising demand and dwindling NorthSea reserves will make it necessary to invest in new importationinfrastructures.In such a scenario, Italy can play a key role, thanks to its favorableposition with respect to Africa and the Middle East, and Edison hasbeen doing its part as the leader in two key projects: The Galsi (Algeria-Sardinia-Italy) pipeline, which will bring 8 billion
cubic meters of natural gas a year from Algeria to Italy; and The ITGI (Interconnector Turkey-Greece-Italy) pipeline, which
will link Italy with the Caspian Sea basin and deliver up to 10billion cubic meters of natural gas a year.
In January 2009, Edison International, an Edison subsidiary,signed a twenty-year agreement with Egyptian GeneralPetroleum Corporation (EGPC) for the exploration, productionand development rights of the Abu Qir offshore concession,located north of Alexandria, in Egypt.Operational since the 1980s, the Abu Qir fields produceabout 1.5 billion cubic meters of natural gas and 1.5 millionbarrels of liquids a year. The concessions reserves have beenestimated at about 70 billion cubic meters of natural gasequivalents, about 40% of which is attributable to Edison.EGPC and Edison plan to increase hydrocarbon productionabove the current level and develop the concessions highexploration potential. For Edison, this agreement represents amajor investment in the Egyptian oil and gas market that willsignificantly increase the Groups hydrocarbon reserves,adding 27 billion cubic meters of natural gas equivalents tothe existing reserves of 33.5 billion cubic meters. Abu Qir Petroleum has fewer than 800 employees working at
the Alexandria office and at the Meadia operating unit, wherethe staff directly manages the onshore and offshoreproduction facilities.In 2009, a team of Group employees was selected andseconded to Egypt to support the local staff in managing thelocal company.The presence of expatriate personnel at Abu Qir Petroleummerely broadens Edisons well established operations inEgypt, as the Group has been active in Cairo for about 10years with the stable organization of Edison InternationalsEgyptian Branch. In addition to Abu Qir, Edison has stakes in the Rosettaconcession, which is already operational, and is the operatorof the Sidi Abd el Rahman offshore concession and the WestWadi el Rayan on shore concession, where, recently, oilreserves that are currently being developed were discovered.About 20 employees have been internationally seconded tothe operations in Egypt.
EDISON IN EGYPT
venture and T-Powers 389-MW combined-cycle power plant,the Balkans, Turkey and the Mediterranean Basin. Edisonspursuit of its objectives in the international scenario will bedriven by an effective long-term strategy, implemented by theGroup with its proven management skills and broadtechnological knowhow.
In 2010, Edison will be working to achieve such challenging targetsas bringing on stream a new 412-MW power plant in Thisvi(Greece) and commissioning the 30-MW Mistretta wind farm, inItaly. Alongside the production and sale of electric power generatedfrom renewable sources, Edison will be increasingly involved in thedevelopment of new energy efficiency services provided by adedicated business unit established in 2009. In addition, greaterattention will be paid to customer relations, strengthening CustomerCare services and upgrading them to match the steady increase incustomer base experienced in recent years.
By building these infrastructures, Italy and Europe wil take a majorstep forward toward improving their energy security and creating theconditions for the development of a market that is more competitiveand less dependent on the traditional producing countries.
MAIN COMPLETED PROJECTS
Against the backdrop of the highly challenging economicenvironment outlined above, Edisons operations performedremarkably well in 2009, producing electric power andhydrocarbons in quantities equal to 15% and 7.3%, respectively,of the total Italian output. In addition, while sales volumes weredown overall, the Group successfully pursued a strategy ofincreasing sales in the end-customer segments, achievingimportant growth targets in both areas: +24.6% for electricpower sales and +12.4% for hydrocarbon sales.At the operational level, 2009 was marked by the startup of two
11
Who We Are
PROJECTS IN THEELECTRIC POWER AREA Construction of a 420-MW CCGT power plant in
Thisvi, in Greece;
Startup of the first unit of the Azotati power plant inPorto Marghera, Europes first LMS100 gas turbine;
Commissioning of the Melissa/Strongoli wind farm, inCalabria;
Commissioning of a new electric power infrastructurelinking Italy (Tirano) with Switzerland (Campocologno);
Development of projects for the use of renewablesources;
Commissioning of a power plant fueled with solidbiomass in Castellavazzo (BL);
Startup of a 3.3-MW pilot photovoltaic facility inAltomonte;
Entry into the residential market with a combined salesoffer for electric power and natural gas and expansionin the microbusiness segment;
Establishment of Elpedison Power (Greece), a jointventure with Hellenic Petroleum that operates Edisonspower plants in Greece and engages in the distributionof electric power and the provision of related services;
Commissioning of a photovoltaic system on the roof ofthe Foro Buonaparte headquarters, in Milan.
PROJECTS IN THEHYDROCARBON AREA Commissioning of the Adriatic LNG terminal in
Rovigo;
Start of operations and new hydrocarbon discovery atthe Abu Qir concession, in Egypt;
Beginning of importation of natural gas from Algeriavia pipeline;
Discovery of two natural gas fields in the Algeriandesert;
Resumption of crude oil production from the offshoreVega field, near Sicily;
Progress in the development of the projects for theconstruction of the IGI and Galsi infrastructures;
Signing of a Memorandum of Understanding byEdison, BEH (Bulgarian Energy Holding) and DEPA(Greek Public Gas Corporation) for the constructionof the IGB (Interconnector Greece-Bulgaria) pipeline;
Acquisition of an 80% stake in AMG Gas, a naturalgas distributor that operates in the Palermometropolitan area.
major endeavors in the hydrocarbon area: the commissioning ofthe Rovigo regasification terminal in the Adriatic Sea and thebeginning of hydrocarbon production at Abu Qir, in Egypt. Edison isalso engaged in exploration and production activities in Iran,Algeria, Senegal, Ivory Coast, Croatia, Great Britain, Qatar andNorway. In Norway, Edison recently qualified for operator status,which enables it to compete in public calls for tenders for theaward of exploration concessions.In the electric power area, significant achievements of 2009included bringing on stream the Lucito and Melissa/Strongoliwind farms and commissioning Italys first merchant line for theflow of electric power between Italy and Switzerland. Thisinfrastructure will increase the safety and reliability of the link
between Italy and Northern Europe. Other important resultsachieved in 2009 included the Groups expansion in the retailmarket, with the number of customers increasing from 215,000in 2008 to about 540,000 in 2009. Also in this area, Edisonstrengthened its sales organization, launched new sales offersand acquired new companies, such as AMG Gas, a natural gasdistributor in the Palermo metropolitan area with over 133,000customers and an annual sales volume of 80 million cubic metersof natural gas.A number of major investment projects were also carried out in2009, with about 2 billion euros used for the Groups corebusinesses and for acquisitions. Significant projects includeddevelopment of new production capacity from renewable sourcesin Italy (mainly hydroelectric and wind power), repowering andmaintenance of existing thermoelectric power plants andexpanding hydrocarbon exploration, production, storage anddistribution activities both in Italy and internationally.
12
Who We Are
OUR RESPONSIBILITY
Values and Business ConductEdisons fundamental principles of ethics, which are set forth inthe Groups Code of Ethics, provide the foundation for itscorporate culture and represent the standard of conduct that allGroup employees are required to follow.Edison supports the U.N. Global Compact, an initiative launchedby the United Nations by which companies agree to uphold andpublicize ten universal principles that cover human rights, laborstandards, environmental protection and anti-corruption.Since 2009, Edison has been a member of the Italian Network
of the U.N. Global Compact, which itsupports as a tangible sign of its activecommitment to the advancement of these issues.Edisons Mission, Code of Ethics,Company Values, SustainableDevelopment Policy and its new HumanRights Policy are the key elements thathelp define the Groups strategies andguide the daily conduct of all of its employees.
Edison believes that, even though the protection of human rightscontinues to be a key responsibility of governments, businesscan play an important role, within their context, in supporting andpromoting them and ensuring their respect. A proactive stancewith regard to human rights is what good business is all about.Moreover, companies have a long-term strategic interest infinding good governance and socially stable environments in theregions where their international operations are located.During the current phase of its international development andas part of the incorporation of social responsibility into itsbusiness model, Edison, in collaboration with the Italian
Network of the U.N. Global Compact, Edison launched astrategic assessment about the issue of human rights, the firstresult of which was the adoption of a specific policy. TheHuman Rights Policy, the implementation of which will bemonitored by the Human Resources Department, is based onthe ten principles of the U.N. Compact and is consistent withestablished guidelines and international conventions.Objectives for 2010 include employee training and thedevelopment of operational procedures to monitor potentialviolations of this policy, a copy of which is available online at:www.edison.it (http://www.edison.it/edison/site/en/csr).
EDISON AND HUMAN RIGHTS
EDISONS MISSION IS TO SUPPLY ITS CUSTOMERS WITH HIGH QUALITY ENERGY AND SERVICES, WORKING INPARTNERSHIP WITH ITS SUPPLIERS TO DEVELOP AND DEPLOY MORE EFFICIENT TECHNOLOGIES THAT ARE
COMPATIBLE WITH THE ENVIRONMENT AND INCREASE SAFETY.
INTEGRITY
RESPECT
INNOVATION
SPEED
EXCELLENCE
EdisonsValues, which
are rooted in itsCode of Ethics, guideus in the way we do
business andinteract with
others.
SERVICE
TEAM SPIRIT
ETHICS IN BUSINESS CONDUCT AND CORPORATE ACTIVITIES
Lawfulness Integrity
Confidentiality Commitment to improvement
Pro
fess
iona
lde
velo
pmen
t Absence ofconflicts
of interest
Equalopportunities
Occupational, health and safety
Respect for the dignity of individuals
Loya
lty
Transparency
COMMITMENT TOSUSTAINABLE DEVELOPMENT
AND RESPONSIBLE BEHAVIORTOWARD THE PUBLIC
Promotion ofsustainable development
Responsible behaviortoward the public
ETHICS IN EMPLOYMENT AND PROTECTIONAND EMPOWERMENT OF ASSOCIATES
13
Who We Are
CORPORATE GOVERNANCE
Edisons system of corporate governance is the set of standardsand behavior guidelines deployed by the Company to ensure that itsgovernance bodies and control systems are functioning efficientlyand transparently. In developing its governance structure, Edisonadopted the principles and implementation criteria recommended bythe Corporate Governance Code promoted by Borsa Italiana (2006version). This structure includes the following governance bodies: Shareholders Meeting; Board of Directors; Board of Statutory Auditors; Independent Auditors.Edisons governance structure also includes its system of internalcontrols, its Code of Ethics, its system of powers and proxies andits organizational structure.
The corporate governance system adopted by Edison definesand regulates a series of activities reserved for the Board ofDirectors, such as transactions with related parties,determination of Directors compensation and assessment oftheir performance, and provides procedures to prevent theoccurrence of conflicts of interest. More information is providedin the Report on Corporate Governance, which is availableonline at: www.edison.it.
In the performance of its tasks, the Board of Directors is assistedby the following three consulting committees: Strategy Committee; Compensation Committee; Audit Committee.
SHAREHOLDERS MEETING
Approves the financial statements, elects the Board of Directors and the Board of Statutory Auditors, appoints the Independent Auditors and approves amendments to the Bylaws
STRATEGY COMMITTEE
Develops, evaluates and recommends to the Board of Directors strategic options for Edison and the Group
COMPENSATIONCOMMITTEE
Makes recommendations aboutthe compensation of Directorswith special assignments andabout incentive and compensationplans for top management
AUDITCOMMITTEE
Helps the Board of Directorsassess the effectiveness ofthe system of internal controls,accounting principles andaudit plan MANAGEMENT ENTITIES
CONTROL ENTITIES
BOARD OFDIRECTORS
OVERSIGHT BOARD
Ensures that the 231 Model isfunctioning effectively and is regularly updated
BOARD OF STATUTORY AUDITORS
Ensures compliance with therelevant statutes and theBylaws and monitors theCompanys operatingperformance
INDEPENDENTAUDITORS
Audit the Companys financialstatements and performregular reviews of itsaccounting records
Defines the Companys overallstrategy and is responsible for overseeing its management
CORPORATE GOVERNANCE 2007 2008 2009
Total number of BoD (Board of Directors) members 12 13 13Number of Directors with executive authority on the BoD(1) 2 1 1
Number of independent Directors on the BoD 2 3 3
Number of women on the BoD - - -
Number of BoD meetings 9 8 8
Average percentage attendance of BoD meetings by Directors 92.6% 97.1% 96.1%
Average percentage attendance of BoD meetings by Statutory Auditors 85.2% 83.3% 83.3%
Number of Audit Committee meetings 5 6 5
Number of Compensation Committee meetings 5 4 7
Number of Strategy Committee meetings 5 4 6
Number of meetings of the Board of Statutory Auditors 8 11 11(1) The Chairman does not perform any function requiring executive authority.
14
Who We Are
System of Internal ControlsEdisons system of internal controls is a structured and organicset of rules and procedures and organizational structuresdesigned to prevent or minimize the impact of unexpected resultsand allow the Company to achieve its strategic, operating,statutory and regulatory compliance, and fair and transparentinternal and market disclosure objectives.Operational audits covered all of the Companys businesses,including issues with a social and environmental impact.Work carried out in this area in 2009 included six major auditengagements that concerned mainly customer relationshipmanagement, hydroelectric energy production activities andprojects for the development of renewable source facilities,wind farms in particular. In 2010, the Company plans toperform an equal number of audits focused mainly oncustomer relationship management, external relations and thedevelopment of renewable source projects.In addition, most audit engagements will include specific modulesto assess compliance with the Code of Ethics.In 2009, with regard to training concerning topics coveredby Legislative Decree No. 231/01 and concerning fraudprevention, 30 Edison Group employees attended trainingcourses that covered the updates made to theOrganizational Model.As for the specific occupational safety issues incorporated intothe Model in 2008, Edipower will develop a training program inthe first quarter of 2010 to bring all of the relevant parties up todate with regard to regulatory changes and the new model.
Sustainability GovernanceOver the years, Edison adopted the tools needed for an effectiveand efficient governance of its corporate social responsibility. In2009, the process of making CSR an integral part of the Group'sbusiness activities gained further ground, thanks to the adoptionof new policies and the launch of new projects in such areas ashuman rights and biodiversity.
A Corporate Responsibility function was officially established inSeptember 2009. This new function is responsible for managingand coordinating communication and reporting activitiesconcerning Corporate responsibility (CR) processes, specificallywith regard to the Group's Sustainability Report, and for providingspecialized support to the Group's Departments and BusinessUnits in the process of identifying and assessing environmentaland social responsibility issues suitable for integration in theirrespective operating programs.The manager of the CR function reports directly to the managerof the External Relations and Communications Department,which is a staff function of the Chief Executive Officer.At the end of 2009, the Company adopted a Human RightsPolicy that provides a more comprehensive and systemiccoverage of sustainability issues formerly addressed in part bythe Environment, Safety and Quality Policy and the Code ofEthics and by the Sustainable Development Policy.
In July 2004, Edison S.p.A. adopted the OrganizationalModel required pursuant to Legislative Decree No.231/2001. The Model is designed to prevent theperpetration of the unlawful acts referred to in theabovementioned Decree and, consequently, shield theCompany from administrative liability. The Model, whichwas adopted following a detailed analysis of theCompanys operations to identify activities with a riskpotential, includes a series of general principles, rules ofconduct, control tools, administrative procedures,training and information programs, and disciplinarysystems that are designed to prevent, as much aspossible, the occurrence of the abovementioned crimes.The Board of Directors also established an OversightBoard (OB), which is responsible for ensuring that theModel is functioning effectively and is kept up to date,and is required to report to the Board of Directors andthe Board of Statutory Auditors at least once every sixmonths. In 2005, the main subsidiaries adopted modelsbased on the amended guidelines used by the GroupsParent Company.The OB of Edison and its subsidiaries receiveinformation flows on a regular basis (every six months)from the individuals responsible for the Modelsimplementation (Unit Officers). The Model was updated in 2008 and the new Model wasapproved by the Board of Directors with a resolutiondated December 5, 2008. The Model had to be updatedto address the impact of new crimes introduced in the231 System (market abuse, money laundering,computer crimes, etc.) and in response to changes inEdisons business activities. In 2009, the Board ofDirectors approved a protocol for the management ofoccupational safety risks. For Model updating purposes,the OB used the same interdepartmental work group thatdeveloped the Model in 2004. The Model updating process for the main Groupsubsidiaries is currently in the completion phase.The members of the OB of Edison S.p.A. include anoutside professional (Umberto Tracanella), who servesas Chairman, and two independent Directors (GregorioGitti and Gian Maria Gros-Pietro). The OB met fivetimes in 2009 and once in February 2010. At thosemeetings, it reviewed the findings of audit engagementsand the information flows it received from the UnitOfficers, and received updates on the progress made bythe subsidiaries in adopting the Model. The OB reportedevery six months to the Board of Directors on theModels adequacy and effectiveness, submitting aspecific report.
MANAGEMENT TOOLS FORTHE PREVENTION OF CRIMES
15
Management Systems and Audit ProcessEdison addresses environmental and safety issues by means ofmanagement systems, which, thanks to their adoption at virtually allproduction facilities, enabled the Group to achieve levels ofexcellence with regard both to its ability to communicate andinteract with third parties who are affected by or involved in theperformance of its environmental activities and to its ability toactivate, motivate and maximize the contributions of all interestedparties within the organization. Edison was the first company inItaly to receive ISO 14001 and EMAS environmental certifications. Currently, 100% of the electric power operations locations havebeen certified and only two hydrocarbon locations lack certification.The objectives achieved in 2009 included the following: Completion of the certification process for the integrated
environmental and safety management system for the Sarago -Maria a Mare site and the Transportation Operational Unit ofEdison Stoccaggio (hydrocarbons operations).
Start by the Engineering Department of the process requiredto adopt a BSI OHSAS 18001 certified Health and SafetyManagement System. As part of this process, the Departmentsuccessfully completed the first level of the certification path.The safety management system is integrated with the qualitymanagement system, which is already certified.
Launch and completion by the Electric Power Business Unitof the renewal of the EMAS registration for its ThermoelectricDivisions 1, 2 and 3 and its Hydroelectric Division.
The steady increase in certified locations demonstrates the Companyscommitment and attention to environmental and safety issues. A toolin this area is provided by the internal auditing process, which isdesigned to bolster and improve the handling of operational practices.Compliance with relevant standards has reached outstanding levels,system activities have become common practice and operationalcompetency is growing and widespread. Consequently, as independentaudits have also shown, situations of statutory non-compliance arevirtually non-existent and the risk levels of field activities are keptunder control and managed in accordance with system rules.
RISK MANAGEMENT
Edison uses a centralized corporate function to control the risksthat arise in connection with the pursuit of its different businessactivities. This functions purpose is to maximize the efficiencyand effectiveness of the risk mitigation actions implemented bythe Company, while providing a significant tool to exploit the fullrange of development opportunities.The Groups system to control and manage corporate risksaddresses two main areas: Enterprise Risk Management, which isdesigned to identify, monitor and control risk in accordance withthe integrated management system model adopted by the Group,and Energy Risk Management. The latter is designed to managethe commodity market risk, which is the risk entailed by changesin the prices of energy raw materials in the financial and physicalmarkets in which the Company operates.
16
Enterprise Risk ManagementEdison has developed an integrated risk model based on theEnterprise Risk Management (ERM) international principles.ERMs main purpose is to adopt a systematic approach to theprocess of mapping the Companys most significant risks, assessin advance their potential negative effects and take appropriatemitigating action.For this purpose, Edison adopted a Corporate Risk Model thatcovers all types of risks inherent in the Groups businesses andapplies a risk scoring method that assigns a relevance index toeach risk, based on an assessment of its overall impact,probability of occurrence and level of control.The table above provides an overview of the risk model adoptedby Edison.Examples of risks related to the external environment includeregulatory issues, macroeconomic factors, the impact ofchanges in public opinion and social views, climate and weather
conditions and the effect of fluctuations in prices and rates. Inaddition to the risks inherent in the Groups core businesses,process risks include such risks as those related to ethics, socialresponsibility and environmental issues, human resourcemanagement and litigation.Examples of strategy risks include all risks related to theGroups business model, to the process of making strategicdecisions, to corporate governance tools and to performancemonitoring.The issue of respect for human rights, which recurs pervasivelythroughout the Groups diverse activities, affects transversally allof the risks in the Risk Model. For example, risks that are mostaffected by this issue include environmental responsibility, socialresponsibility in managing projects with regard both to the workperformed directly and the work of contractors, and themanagement of human resources, particularly with regard tooccupational health and safety.
ENTERPRISE RISK MANAGEMENT
Mapping of Group risks
Risk level = overall impact x probability of occurrence
Prioritizingactions
EDISON Spa
risk
leve
l
+
control level +
Type Risk Examplesof risk area
Institutions Image risks, regulatory risks, risks ofand society conflicts with host communities, etc.
Market Risks related to market prices, etc.
Weather events and Risks of business interruption,natural disasters unavailability of materials, etc.
Transversal Ethics, sustainable development, etc.
Core businesses Failure to achieve objectives, etc.
Human resources Risks related to occupational safety,losing qualified personnel, etc.
Finance Credit rating and financial credibility,liquidity, etc.
Other support Information systems, etc.processes
Strategy Business model, etc.
Management of Performance monitoring, etc.return on investment
Risks relatedto theexternalenvironment
Processrisks
Strategy andplanningrisks
Aggregation of risks of operating units
17
Lastly, a significance and priority analysis is applied to themapped risks to define the appropriate mitigation plans,consistent with an integrated risk management approach.
Identification of Relevant CSR IssuesThrough a process that included interviewing management,assessing the input of stakeholders and analyzing the mainsustainability issues that appear to be relevant to the energyindustry, as discussed in the main national and international media,Edison monitors social responsibility issues that it believes shouldbe analyzed for the purpose of developing future action plans.The approach used is based on a broader concept of significance,which defines the relevance of information relative to the impact ofthe Groups activities on economic, environmental and social issues.The issues that were deemed to be relevant and, consequently, arediscussed in this Report, were identified through the use of amatrix that included such variables as Edisons significant
economic, environmental and social impacts and the effects thatthese impacts have on the perceptions and decisions of itsstakeholders. The analysis was based on a scale with three levelsof assessment: low, medium and high.The analysis performed in 2009 showed that, compared with theprevious year, new issues that are deemed to be relevant areemerging both in the environmental and social arenas.
Insofar as the environment is concerned, nuclear energy has beena primary concern for stakeholders, due mainly to the launch of anew government program in this area. Other significant issuesincluded the reduction of environmental impacts and how newfacilities are sited within the territory, particularly in connectionwith the Rovigo regasification terminal and the development ofnew natural gas transmission projects, and, lastly, the topic ofenergy conservation. This issue, which Edison has been activelyaddressing with programs for public schools, collaborative projects
Low
Med
ium
Hig
h
Impa
ct o
n st
akeh
olde
rs
Low Medium High
Significant economic, social and environmental impacts of the Edison Group
RELEVANT ISSUES BY STAKEHOLDEREnvironment Climate change Nuclear energy development Renewable energy Energy efficiency Impact reduction Protection of
dbiodiversity
Shareholders Business integrity Economic performance
Customers Development of green products Fair contracts Transparent communications Customer satisfaction
Employees Health and safety Training Equal opportunities Employee satisfaction
Host communities How new facilities are sited
within the territory Support of communities Sports and culture Low-impact events
Suppliers Supply chain
monitoring Partnering and
fair dealing
Who We Are
with Lifegate and the establishment of the Energy Efficiency andSustainable Development Business Unit in 2009, receivedsignificant attention by the media. In the social area, the community and the institutions focusedmainly on socially beneficial activities (e.g., Rugby at theBeccaria), support for sports and culture, organization ofenvironmentally themed (Energy Festival) and low environmentalimpact (Edison Change the music) events. Lastly, with regard toemployees, the attention of stakeholders (the media, in particular)focused on such issues as equal opportunities and employeesatisfaction, particularly after Edison was honored with theFamily and Work prize.
Tools to Listen and Talk to Our StakeholdersDialoging with the various parties that for different reasonsinteract with Edison is an ongoing practice that occurs daily withdifferent modalities. The publication of the Sustainability Reportprovides each year an important opportunity to communicate withthe different categories of stakeholders and provides an overviewof the main activities carried out as part of the dialog andinvolvement process. These activities are the embodiment of ourcommitment to learn the opinions of our stakeholders andconduct an open, ongoing and constructive dialog with them.In preparation for the writing of this Report, a sample of
Empl
oyee
s
CustomersS
hareholders
Labo
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ons
SuppliersLocalcom
munities
Envir
onm
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lorg
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ns
Public Administration
InstitutionsFu
ture
gene
ratio
ns
MediaN
GO
Stakeholder Stakeholder engagementcategory activities
Employees Satisfaction survey concerning the Edison per te project
Employee questionnaires about theSustainability Report
Customers Customer satisfaction surveys Analysis of the needs of business customers Research on customer satisfaction
during the after-sale phase Focus groups with consumer associations
Shareholders Meetings with the financial community(investors and analysts)
Communities Annual survey performed by Eurisko, discussion panels, and NGO Energy efficiency conventions, Social Committee
(conventions on partnerships of companies and NGO)
Public Discussion panels, direct interaction with public entities,Administration focus groups
18
EDISON AND ITS STAKEHOLDERS
Consistent with Edward Freemans classic definition, Edisonidentifies as its stakeholders all individuals and cleary identifiablegroups that can affect or be affected by the activity of anorganization in terms of its products, policies and workprocesses.
As part of its responsible management path, Edison interactswith and involves all its counterparties both internally(employees and shareholders) and externally (customers,suppliers, financial community, public administration,competitors, community and the environment) and undertakesspecific commitments toward each one of them. The analysis ofthe level of impact of Edisons activities was used to develop amap that lists the main categories of stakeholders with whomthe Group interacts.
employees with a particularly keen interest in social responsibilityissues was surveyed about which significant subjects that shouldbe discussed in the Report. The main issues mentioned wereenergy efficiency, sustainable development and climate change,followed by health and safety, equal opportunities, diversity andrespect for human rights. In 2009, Edison established a committee responsible forevaluating social programs and developing specific guidelines.The Social Committee was born of the need for a clear andtransparent interface with the world of non-profit andinternational cooperation organizations and the desire to take aproactive stance in identifying and developing socially usefulprojects. In this area, Edison collaborated with a group ofBocconi University students in studying more in detail some ofthe issues raised at Committee meetings, and attended theFace-to-Face event (organized by a group of non-profitassociations), where it learned about the needs of the 50
19
associations present at the event. The results of these activities will be presented in 2010 in connection with thepublication of the Companys Policy and guidelines for theselection of social projects.Projects launched in 2010 included Eco-Generation YourSchool is the Climates Friend, a web community entirely devotedto the issues of sustainability and energy efficiency in schoolbuildings. The goal of this community, which is managed incollaboration with Legambiente, is to provide a venue where allmembers of the school community and anyone with an interest inclimate change can interact and exchange information.In 2009, in the area of customer relations, the Group carried out
two intra-annual flash surveys (in April and December) in additionto its traditional annual customer satisfaction survey.In addition, a survey conducted in collaboration with Eurisko toassess how Edisons activities are perceived outside the Groupand the quality of its relationships with customers, journalists,public institutions, suppliers and financial analysts wasrepeated in 2009.The survey, which showed that Edison is viewed favorably andthat its image is steadily improving, provided importantinformation about priority areas that stakeholders perceive asneeding improvement. In 2010, the Group will define a detailed plan for stakeholderinvolvement and the plans initial activities will be implemented.These initiatives are part of a broader and structured program ofactivities that Edison carries out with its stakeholders as part of adialog and involvement process. The table on the opposite pageprovides an overview of these actvities.
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ECONOMICRESPONSIBILITY
20
GROUP INTERESTIN NET PROFIT
2008 346 mln euros2009 240 mln euros
NET FINANCIALDEBT
2008 2,920 mln euros2009 3,858 mln euros
DEBT/EQUITYRATIO
2008 0.362009 0.47
SALES REVENUES
2008 10,064mln euros2009 8,867mln euros
EBITDA
2008 1,643 mln euros2009 1,471 mln euros
EBIT
2008 861 mln euros2009 699 mln euros
Operating expenses
Remuneration of lendersand shareholders
Charitable contributionsand sponsorship
Remuneration of employees
Remuneration of the public administrationEconomic value retained by the Group
8.48%
2.52%
5.58%
3.85%
0.04%
79.53%
VALUE ADDED DISTRIBUTED BY THE EDISON GROUP
Economic Responsibility
21
THE WEALTH WE CREATED
The incremental wealth that Edison creates through itsindustrial activities is computed by determining the EconomicValue that it generates and how it is distributed among its mainstakeholders.In 2009, the total Economic Value generated by the Groupamounted to 9,529 million euros. Edison retained only 8.5% ofthis amount and distributed the remaining 91.5% to itsstakeholders.A breakdown of the Economic Value distributed to thestakeholders is as follows:
ECONOMIC VALUE GENERATED AND DISTRIBUTED(in millions of euros)
2007 2008 2009
Economic value generated by the Group 9,040 10,914 9,529
Sales revenues (*) 8,859 10,729 9,384
Financial income 181 185 145
Economic value distributed by the Group 8,158 9,918 8,721
Operating expenses (**) 6,957 8,797 7,578
Remuneration of employees 219 223 240
Remuneration of lenders and shareholders 664 553 532
Remuneration of the public administration 316 338 367
Charitable contributions and sponsorships 2 3 4
Economic value from discontinued operations - 4 -
Economic value retained by the Group 882 996 808
Depreciation and amortization 709 782 772
Additions to provisions and reserves 173 214 36
RELATIONS WITH THEFINANCIAL COMMUNITYThrough its departments and representatives, Edison engages inan ongoing dialog with the market and its shareholdercommunity, while fully complying with the laws and regulationsgoverning the circulation of insider and confidential information.One of the goals of the Groups activities and procedures is toprovide equal access to information and safeguard the right ofevery investor to receive the accurate and timely informationrequired to make informed investment decisions. Edison hasestablished a department responsible for handling investor
For operating expenses (payments to suppliers, non-strategicinvestments, royalties and other paments), 7,578 million euros(79.53% of the total);
To employees (direct and indirect remuneration: wages and salaries,social security contributions and benefits, severance indemnities,bonuses, and professional development and supplemental trainingexpenses), 240 million euros (2.52% of the total);
To shareholders and lenders (remuneration of equitycapital and debt capital), 532 million euros (5.58% of thetotal);
To the Public Administration (income taxes for the year), 367million euros (3.85% of the total)
To the community (including non-commercial sponsorships,community programs and charitable contributions), 3.9 millioneuros (0.04% of the total).
relations. The manager of the Investor Relations Department isresponsible for managing relations with equity and fixed-incomeinstitutional investors and with the rating agencies.The shareholder chart shown on the following page provides abreakdown of Edisons shareholder base.
Transparency and Timeliness ofFinancial CommunicationsEdison's communication activities are designed to provide themarket with information that makes it increasingly simple toassess the Companys operating and financial performance andits growth outlook. They are carried out through an ongoingdialog both with buy-side counterparties one-on-one meetings,roadshows and conference calls and sell-side counterparties meetings with financial analysts to discuss corporate strategies and include the daily availability of the Investor Relations team.In managing communications with shareholders and investors,
(*) Sales revenues reflect a new presentation of trading activities that recognizes only the resulting"trading margin" (net presentation).
(**) Operating expenses do not include expenses attributable to trading activities, which are reflectedin "trading margin" (net presentation) included in "Total revenues."
22
A2A Spa ENIA Spa SEL Spa DOLOMITIENERGIA Spa
DELMI
TRANSALPINA DI ENERGIA
MARKETINVESTORS
WGRM
EDF
15%51% 10% 10% 14% 100%
50%
19.4%61.3%
9.3%
10.0%
50%
EDISONS SHAREHOLDERS
Tassara SpaGroup
*Updated at March 31, 2009, date of the last Annual Shareholders Meeting
FINANCIALINVESTOR
Economic Responsibility
23
the tool that reaches the widest audience is the Groups website,which has separate Governance, Investor Relations and PressRoom pages. On the occasion of the announcement of its annual, semiannualand quarterly results, the Company organizes special conferencecalls with institutional investors and financial analysts that arealso open to members of the financial press. All press releases,paid announcements published by the Company regarding theexercise of rights conveyed by its securities and documentsconcerning Shareholders and Bondholders Meetings are postedon the www.edison.it website. The Company encourages qualifiedjournalists and experts to attend its Shareholders Meetings.
and macroeconomic levels has an impact on its stock price,irrespective of the Companys results and growth plans. Other activities in this area included the interaction with the ratingagencies, which included conference calls and meetings with topmanagement.
Despite a highly negative market environment characterized byan unprecedented slump in demand and steadily decliningprices, the Company succeeded in maintaining its profitability ata level substantially in line with those of previous years, thanksmainly to a sales policy focused on end customers and a betterproduction mix. Continuous communications helped make the
Investor Relations Activitiesin a Year of Deep Economic CrisisThe main purpose of the activities of the Investor RelationsDepartment is to provide the market with the information it needsto assess most effectively the Companys performance and itsprojects an strategies. However, even transparent andcomprehensive communications are not always sufficient to valuethe Company correctly. Often, instability at the statutory/regulatory
market aware of the strategies deployed by Edison to respondto the economic crisis and achieve such positive results.Edison has never been a party to disputes with institutional investorsor common shareholders. However, a court decision in a civil actioninvolving savings shareholders was handed down in 2008.
In June 2009, the Company reached a settlement with thelargest plaintiff in these proceedings, permanently closing thisdispute.
ENVIRONMENTALRESPONSIBILITY
24
EFFLUENTSGENERATED
2008 3,723 mln m32009 2,790 mln m3
SPECIFIC EMISSIONSOF CO22
2008 523.6 g/kWh eqQ2009 486.0 G/KWH Eg/kWh eq
GAS DISTRIBUTIONNETWORK INSPECTED
2008 2,000 Km2009 2,111 Km
ENVIRONMENTALEXPENSES
2008 50.3 mln euros2009 41.7 mln euros
MINIMUM VITAL DOWN-STREAM WATER FLOW
2008 961.9 mln m32009 1,254.9 mln m3
ENERGY PRODUCEDFROM RENEWABLESOURCES
2008 11.1%2009 14.3%
ENERGY USED BY THE GROUP
2008 360.4 mln GJ2009 288.1 mln GJ
WATER RESOURCES USED
2008 4,978 mln m32009 3,657 mln m3
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WASTE GENERATED
2008 116.5 thou2009 110.9 thou
Environmental Responsibility
25
PROMOTING SUSTAINABLE DEVELOPMENT
For Edison, sustainability is based on the continuousimprovement of its performance.For this reason and thanks to a virtuous management model, itsenvironmental performance has reached levels of excellence.The promotion of sustainable development is pursued at allEdison production sites in Italy and abroad through: The adoption of certified environmental management systems
and the use of the best techniques available; Activities to protect air quality, climate, soil, subsoil,
nature and the surrounding landscape; Activities to minimize noise, vibrations and
electromagnetic fields; Management of surface effluents; Ongoing use of programs to train and increase the
awareness of employees and outside contractors; Research and development of new technologies and
new non-polluting energy sources.
Significant Environmental IssuesEnergy consumption, emissions into the atmosphere andwaste generation are the most significant environmentalissues faced by Edison in the course of regular activities atthe facilities it operates. The chart to the right shows theresources-impacts-mitigating actions correlation for every oneof Edisons areas of activity.In 2009, the Company opened and managed about 25construction sites in Italy and abroad, where it built newproduction facilities and infrastructures and revamped/repoweredpower plants with the support of numerous trusted contractorsselected over the years.In addition, it completed the construction of Europes first high-voltage merchant power line linking Italy and Switzerland.Because the entire line runs underground, it has no visual impacton the landscape and a portion of its track was used to buryexisting lines in Valtellina, in accordance with a plan that is beingimplemented to rationalize the power line grid.
Extraordinary Environmental EventsThe only extraordinary environmental event that occurred in 2009affected the Farigliano hydroelectric power plant. Due to an intense rain event, a portion of the hillside on the rightbank of the Tanaro River collapsed at a location near the ClavesanaDam, causing damage to some structures and equipmentappurtenant to the dam. Specifically, a relatively small double-linedgas oil tank used to fuel a generator was swept away and may havefallen into the Tanaro River. The Company immediately filed a report of the event with allrelevant authorities (Piedmont Regional Administration, ARPAPiedmont, Province of Cuneo, Cuneo Prefecture, Municipality ofClavesana) due to the potential risk of environmental contaminationunder Article 242, Section 1, and Article 304, Section 2, ofLegislative Decree No. 152/06. Subsequent tests showed that noenvironmental contamination attributable to this event had occurred.
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WIN
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S
RESOURCESUSED
Water Raw materials (fuel) Consumables (chemicals)
Emissions into the atmosphere Effluents Solid waste Noise
Use of natural gas and combined-cycle cogeneration
Use of DLN (Dry Low NOx emission)technology
Integrated environmental and safetymanagement systems
Water Raw materials (dielectric oil) Fuel for auxiliary services
Effluents Solid waste Noise Biodiversity
Minimum vital downstream water flow Installation of noise reduction
equipment and sound proofing Construction of fish ladders
SIGNIFICANTENVIRONMENTAL
IMPACTS
MITIGATINGACTIONS
TAKEN
RESOURCESUSED
SIGNIFICANTENVIRONMENTAL
IMPACTS
MITIGATINGACTIONS
TAKEN
Chemicals (dielectric oil and lubricants)
Noise Electromagnetic fields Visual impact Solid waste Biodiversity (impact on birds)
Use of low-noise wind turbines Installation of transformer stations
inside the wind turbine towers
Water Raw materials (fuel) Chemicals Electric power
Impact on soil and subsoil Noise Waste
Actions to secure the aquifer Restoration of areas disrupted by the
laying of the pipeline Use of sound proofing panels Use of scheduled maintenance
(wire-line)
Chemicals
Gas leaks released into theatmosphere
Continuos network monitoring Periodic replacement of
damaged pipes
RESOURCESUSED
SIGNIFICANTENVIRONMENTAL
IMPACTS
MITIGATINGACTIONS
TAKEN
RESOURCESUSED
SIGNIFICANTENVIRONMENTAL
IMPACTS
MITIGATINGACTIONS
TAKEN
RESOURCESUSED
SIGNIFICANTENVIRONMENTAL
IMPACTS
MITIGATINGACTIONS
TAKEN
Environmental Responsibility
26
Protecting BiodiversityEdisons commitment to conservation and the protection ofbiodiversity is carried out through a series of activities leading tothe gradual development of a Biodiversity Action Plan.The first step under this Plan is to develop a method to assessthe risk entailed by the potential impact of the Companysactivities on biodiversity.In 2009, consistent with this approach, Edison focused on creatinga tool for the macro-assessment of environmental impacts: thegoal of this project was to develop a software capable ofgenerating a biodiversity profile for each Company asset andmonitor the progress made over time. For each type of facility(wind farm, hydroelectric power plant, etc.), this tool takes intoaccount its potential macro-impact in the following categories: soil,water, climate and air, and flora and fauna. The control factors andmitigating actions deployed by the Company were then assessedand weighed against these impacts, taking into account thenumber of facilities and their specific characteristics. Downstreamof this input, the software generated an overall score for each typeof facility. The software was developed by an internal biodiversitywork team of the EDF Group. This work team included expertswith different professional profiles who are continuing to shareinformation and best practices regarding biodiversity issues evenafter the completion of the pilot project.The process of adopting a method to assess biodiversity impacts,of which the development of the analysis tool described above isjust a part, will be followed by the creation of a geo-referenceddatabank that will make it possible to focus on areas that aremore sensitive and potentially at greater risk, by identifying theenvironments in which the Company operates that arecharacterized by the highest level of biodiversity.The Action Plan also calls for defining clear and realisticobjectives for the management and preservation of biodiversity,which must include the gradual integration of this issue withinthe environmental management systems already in place atproduction sites. Edisons choice of applying a well-definedapproach to this issue is motivated by a strong determination tomake the handling of sustainable development issues an integralpart of its business processes and achieve operating excellencewhile fully respecting the environmental characteristics of theareas where it operates.
Remediation of Industrial SitesThe Group continued the remediation of some of its site, most ofwhich are within high profile industrial areas, potentially pollutedby activities carried out in previous years and designated asareas of national interest pursuant to law. In 2009, projects involving the characterization, remediation andsecuring of 11 industrial sites continued at the followinglocations: the Levante and Azotati power plants in PortoMarghera (VE); the Torviscosa (UD), Sesto San Giovanni (MI),Piombino (LI), Bussi sul Tirino (PE), Taranto and Milazzo (ME)power plants and the Sinigo (BZ) and San Giuseppe di Cairo(SV) electrical stations. In addition, the remediation of acircumscribed area within the Venina (SO) power plant wascompleted and certified by the Sondrio Provincial Administration.
500,000
400,000
300,000
200,000
100,000
02007
404,915
360,409
288,148
20092008
DIRECT ENERGY CONSUMPTION
5,000
4,000
3,000
2,000
1,000
02007
4,905 4,978
3,657
20092008
TOTAL WATER RESOURCES USED
140,000
120,000
100,000
80,000
60,000
40,000
20,000
02007
13,7018,089
6,593
20092008
108,544108,386
104,309
Recycled Disposed of
WASTE GENERATED BY DESTINATION
(thousands of GJ)
(millions of m3)
(t)
Environmental Responsibility
27
The Adriatic LNG Terminal, near Rovigo, has been designedto operate in a manner that fully respects the environment.The project received a favorable rating in four separateEnvironmental Impact Assessments, resulting in theadoption of over 100 specific environmental protectionmeasures and the implementation of a comprehensivemonitoring program. In January 2009, the terminal wasawarded an Integrated Environmental Permit, whichapproved the adoption of the environmental protectionprogram and allowed the terminal to begin operating. The goal of protecting the environment was a prioritythroughout the projects design, planning and developmentprocess: The terminals offshore placement was chosen to minimize
its impact on the environment and the local community;
The work required for laying the natural gas pipeline wasscheduled taking into account the timing of the transi ofmigratory birds who stop to rest in the Po River Delta;
To protect the most sensitive areas, the natural gaspipeline was built using sophisticated technologies,such as Controlled Horizontal Drilling, and temporarybarriers were installed to minimize noise and waterturbidity;
To minimize emissions of greenhouse gases, the gasturbines installed at the terminal are equiped with some of the most advanced emission control systems in theworld and comply with national regulatory requirements;
The terminal has been surrounded with artifical barriers that will eventually provide an ideal habitat for marine fauna.
THE ROVIGO TERMINAL: INNOVATION AND RESPECT FOR THE ENVIRONMENT
0.400
0.320
0.240
0.160
0.80
02007 20092008
0.2670.277
0.270
0.245 0.246
0.235
Specific NOx emissions - all power plants
Specific NOx emissions - thermoelectric plants
SPECIFIC NOX EMISSIONS
0.400
0.320
0.240
0.160
0.80
02007 20092008
0.2390.217
0.1560.219
0.192
0.136
Specific SOx emissions - all power plants
Specific SOx emissions - thermoelectric plants
SPECIFIC SOX EMISSIONS
60,000
50,000
40,000
30,000
20,000
10,000
02007
21,244
24,661
19,822
20092008
10,889 25,636 21,861
Operating expensens
Investments
ENVIRONMENTAL EXPENSES
0.050
0.040
0.030
0.020
0.010
02007 20092008
0.038 0.039 0.032
0.035 0.0340.028
Specific CO emissions - all power plants
Specific CO emissions - thermoelectric plants
SPECIFIC CO EMISSIONS
(thousands of euros)(g/Kwh equiv.)
(g/Kwh equiv.)(g/Kwh equiv.)
Environmental Responsibility
28
Emissions into the AtmosphereIn 2009, a reduction in demand resulted in an across-the-boarddecrease in the production of electric power. Consequently,emissions into the atmosphere were lower than in 2008 inabsolute terms. However, it is worth noting that, in percentage terms, thereduction in emissions was larger than the drop in demand forelectric power.This positive performance was achieved by using natural gas asa replacement for fuels with a high environmental impact (lowerSOx and Particulate emissions) and, more generally, by favoringenergy production from combined-cycle facilities with gasturbines and steam production over the output of facilitiespowered with a mix of fuels.More specifically, the SOx and Particulate emissions index wasdown about 30%, while the CO2 and CO emissions indicesdecreased by about 10%. Avoided CO2 emissions, computed based on Edisons specificCO2 emissions index (down compared with the previous year)and its production from renewable sources (up compared with2008) continued to show a positive trend, in line with the pastthree years.Lastly, the Electric Power Business Unit, which is responsible formanaging Edisons portfolio of thermoelectric power plants,completed the plan for the disposal of equipment contaminatedby PCBs, disposing of the last three transformers in 2009.
Innovation and Impact ReductionThe startup of the first GE LMS100 gas turbine installed at theMarghera Azotati power plant was completed in 2009, markingthe first phase of an invest