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Regulatory framework

Setting of new fees

The consultation process with airport users was formally launched in July 2017 for the setting of the new regulated fees for the year 2018. During the consultation, which also included two public hearings with Linate and Malpensa users in September, traffic trends, investment and service quality and environmental protection parameters - alongside all the other elements that contribute to the setting of new tariffs - were presented to users. No appeals with regard to the above fees were presented to ENAC (the Italian Civil Aviation Authority) on conclusion of the consultations.

In October 2017, ENAC published the new fee levels applicable from January 1, 2018, which indicate an average increase of 0.9% compared to those in effect in the year 2017 - under the forecast inflation rate (1.7%, as reported in the Update to the 2017 Economy and Finance Document published by the Ministry for the Economy and Finance in September 2017).

Revision of airport fee regulation models

On July 7, 2017, the Italian Transport Regulation Authority (ART) published the new airport fee regulation models. These models, which came into effect on publication, are the last act of a revision process that started with the "Call for input" in September 2016 and ended with the launch of the public consultation last April. The main changes contained in the new models drawn up by the ART at the end of the process and after having acquired the contributions of various stakeholders refer to: the representativeness and majority criteria within the consultation, operators and users’ disclosure obligations and the rate of return calculation method (WACC).

The ART also proposed the start of a new additional procedure for the definition of an Innovative Regulatory Model, scheduled for implementation from 2019, which may entail more significant changes: in particular, the main regulatory issues may be addressed with this procedure, including the assessment of Airport Operators’ market power, cost-efficiency factors and their elasticity levels, the determination of the rate of return on capital employed (WACC), the treatment of the margin of commercial activities and the development of the Operator/Users Negotiation Model.

SEA does not apply the ART’s regulation models since it is regulated by the Supplementary Regulatory Agreement entered into with ENAC in 2011, pursuant to Article 17, paragraph 34-bis of Decree-Law No. 78/2009, as converted with amendments by Law 102 of August 3, 2009.

New significant domestic and EU regulations

As regards the EU regulatory framework, in 2016 the European Commission - DG MOVE – initiated an assessment phase for Directive 2009/12/EC of the European Parliament and of the Council of March 11, 2009 on airport fees, in order to verify the consistency of the Directive’s application with its objectives and to consider whether the analysis requires the deployment of corrective measures.

As part of the Directive’s assessment initiatives, the Commission appointed a consultancy firm (Steer Davies Gleave) to measure the effectiveness and suitability of the applicable provisions. The consultancy firm began an open consultation with airports, airlines and national regulators on certain relevant topics (tariffs, consultations, regulatory authorities/bodies, etc.), by sending a questionnaire in March to all European airports with traffic exceeding 5 million passengers, airlines and national regulators. SEA received the questionnaire and submitted its position to Steer Davies Gleave.

In December, the Commission announced that the decision on the possible amendment of the Directive will be postponed to a later period after the end of the current Commission’s term (April 2019). In the meantime, it activated a new public consultation (Inception Impact Assessment - IIA), in view of the findings of Steer Davies Gleave’s study to gather additional evidence concerning the Directive. SEA also participated in this consultation by sending its position on the matter, which is published alongside the other contributions on the Commission’s website.

Pending the expected amendments to the Navigation Code for the full transposition of the provisions laid down by EU Regulation No. 139/2014, and Legislative Decree No. 173/2017, in force since December 20, 2017, it introduced a system of penalties for violations of EU Regulation No. 216/2008 and the related implementing rules, including Regulation 139. Therefore, any infringement of the obligations imposed by law will incur an administrative fine which will be determined by the Authority (ENAC) between a minimum and maximum amount established for the type of violation. Of particular interest for airport operators, Art. 10 concerns violations to the respective competences, linked both to the conditions of the Airport Certificate (in the case of expiry, suspension or revocation) and to infringements of other applicable provisions, such as regulatory provisions and/or requirements, and the procedures set out in the Airport Manual.

The company’s progress on compliance audits continues as part of EU Regulation No. 139/2014’s implementation in collaboration between the Legal and CMM (Compliance Monitoring Manager) Department, in view of the observations raised occasionally by the ENAC Inspection Team responsible for supervisory functions. In this regard, Airport Manuals are constantly updated, and SEA also introduced Airport Safety courses for third parties, specifically provided to all staff accessing airside areas.

New regulation concerning the takeover value at the end of the concession

Decree-Law No. 148 of October 16, 2017 (Decree Law on Tax), coordinated with converting Law No. 172 of December 4, 2017 and Law No. 205 of December 27, 2017 (Budget Law 2018) significantly innovated the regulation concerning the takeover value at the end of the concession, set at May 4, 2041 for SEA.

Prior to these measures, the takeover value was governed by two regulations, one of a general nature (Art. 703 of the Navigation Code – fifth paragraph) and one specifically related to SEA, the ENAC-SEA Agreement of 2001. The combined two regulations do not guarantee any reimbursement to SEA from the successor at the end of the concession as regards state-owned property forming part of the Linate and Malpensa airports or for works and the infrastructures that SEA built on them.

The above two December measures amended the fifth paragraph of Art. 703 of the Navigation Code, establishing the right of outgoing concession holders to obtain a takeover value from the incoming concession holder on the concession’s natural expiry. It also established its calculation methods.

In particular, the amendments in question defined the scope for calculating the takeover value (buildings and fixed installations standing on the airport grounds), the reimbursement’s valuation criteria (value of the works at the takeover date, net of depreciation and any public contributions resulting from regulatory cost accounting) and the requisites for inclusion in the calculation. In particular, assets attributable to regulated services must be included in the Regulatory Agreement and be approved by ENAC, while the construction or acquisition of assets destined for the provision of commercial activities, as such not subject to tariff regulation, must have been authorised by ENAC since they are functional to airport activities and the airport’s development.

The measures in question also regulate reimbursements in cases where the concession is terminated before the expiry date.

Assessments on the new legislation’s accounting impacts are currently being undertaken by the company.

SEA and SEA Energia’s request for qualification as Existing Systems Equivalent to Efficient Systems for Users (SEESEU)

On September 29, 2015, SEA and SEA Energia’s qualification as Existing Systems Equivalent to Efficient Systems for Users (SEESEU) was requested from GSE. Obtaining the SEU or SEESEU qualification entails maintaining favourable tariff conditions on self-produced electricity, with high efficiency and not drawn from the electricity grid and limited to the variable parts of the general system and network charges, as envisaged by Legislative Decree No. 115/08 and Article 25-bis of Decree-Law No. 91/14 converted with Law No.116/14.

In May 2017, the company received GSE’s acceptance of its application and was, therefore, granted this qualification. In this regard, it should be noted that with the conversion of Decree-Law 244/2016 (commonly known as the "Milleproroghe Decree"), converted into Law 19/2017, the legislature decided to postpone the application of system charges starting from January 1, 2018. The annual report recognises the positive effect of Euro 1,298 thousand resulting from the application of the new Decree, in relation to the provisioned amounts in the financial years 2015 and 2016.

Following the abovementioned Decree-Law, the legislature implemented a regulatory change that sees the considerable reduction of economic advantages linked to obtaining the SEESEU qualification; currently, a further change in the legal framework is expected for the SEA Group in relation to airport electricity grids, with the need to arrive at an assessment on the possibility of qualifying as a CDS (Closed Distribution System). This system, while maintaining and improving the benefits and reducing SEESEU qualification obligations, would make it possible to operate as a "Distributor", under a simplified regulation and qualifying as a sole referent entity for any future airport development in terms of electricity grids.

All aspects arising from this possible choice in legal, economic and organisational terms are being examined.

Furthermore, it should be noted that with Resolution 894/2017/R/EEL of December 21, 2017, the Regulatory Authority for Electricity, Gas and Water made changes to the definition of the Consumption Unit for simple production and consumption systems and closed distribution systems which, in the case of SEA, concern the SEESEU and CDS structure, respectively.

The measure clarifies that, if on the same site next to an activity for the production of goods and/or services intended as the main or “core business”, there are real estate units provided to third parties to carry out activities (secondary activities) primarily for the provision of goods or services to support the abovementioned main activity, it is possible to establish a single consumption unit that includes both the real estate units intended for the main activity and the real estate units intended for secondary activities, independently of the parties that manage them, notwithstanding the territorial proximity constraint. In these cases, the legal person performing the main activity is classified as the electricity end user and provides services, not electricity, to the parties performing the secondary activities: therefore, an internal activity for the sale of electricity cannot be classified and there may not be any billing for electricity consumption.

In view of the abovementioned legislation, the Group is considering which of the options envisaged by the legislation it will implement, despite having commenced the technical and economic activities necessary to adapt to both options.