2014 ANNUAL REPORT

Consolidated Financial Report |

DIRECTORS’ REPORT

2014 Annual Report

Prysmian Group

Prysmian Cavi e Sistemi S.r.l. has filed its objections and

presented its defence.

In Brazil, the local antitrust authority has started an investi-

gation into several cable manufacturers, including Prysmian,

that operate in the high voltage underground and submarine

cables market. Prysmian has presented its preliminary

defence, which has been rejected by the local competition au-

thorities in a statement issued during the month of February

2015. The preliminary stage of the proceedings will now

ensue, at the end of which the authorities will publish their

concluding observations, to which the parties may respond

with all their arguments in defence before a final decision

is taken. During the month of December 2013, ABB and one

of this company's senior managers signed an agreement

with the Brazilian antitrust authority, under which they

admitted the conduct alleged by the authority and pledged

to cooperate with it and to each pay an agreed fine.

On 2 April 2014, the European Commission adopted a decision

under which it found that, between 18 February 1999 and 28

January 2009, the world's largest cable producers, including

Prysmian Cavi e Sistemi S.r.l., adopted anti-competitive

practices in the European market for high voltage submarine

and underground power cables. The European Commission

held Prysmian Cavi e Sistemi S.r.l. jointly liable with Pirelli

& C. S.p.A. for the alleged infringement in the period from 18

February 1999 to 28 July 2005, sentencing them to pay a fine

of Euro 67.3 million, and it held Prysmian Cavi e Sistemi S.r.l.

jointly liable with Prysmian S.p.A. and the Goldman Sachs

Group Inc. for the alleged infringement in the period from

29 July 2005 to 28 January 2009, sentencing them to pay

a fine of Euro 37.3 million. Prysmian has appealed against

this decision to the General Court of the European Union and

has submitted an application to intervene in the appeals

respectively lodged by Pirelli & C. S.p.A. and the Goldman

Sachs Group Inc. against the same decision. Both Pirelli

& C. S.p.A. and the Goldman Sachs Group Inc. have in turn

submitted applications to intervene in the appeal brought

by Prysmian against the European Commission's decision.

Prysmian has not incurred any financial outlay as a result

of this decision having elected, pending the outcome of

the appeals, to provide bank guarantees as security against

payment of 50% of the fine imposed by the European Com-

PLANNING AND REPORTING RISKS

Planning and reporting risks are related to the adverse effects

that irrelevant, untimely or incorrect information might have

on the Group's strategic, operational and financial decisions.

mission (amounting to approximately Euro 52 million) for

the alleged infringement in both periods. As far as Prysmian

is aware, Pirelli & C. S.p.A. has provided or is nonetheless

preparing to provide the European Commission with a bank

guarantee for 50% of the value of the fine imposed for the

alleged infringement in the period 18 February 1999 - 28 July

2005. Pirelli & C. S.p.A. has also filed a civil action against

Prysmian Cavi e Sistemi S.r.l. in which it demands to be held

harmless for all claims made by the European Commission in

implementation of its decision and for any expenses related

to such implementation.

Prysmian Cavi e Sistemi S.r.l. started legal proceedings in

February 2015, requesting that the claims brought by Pirelli

& C. S.p.A. be rejected in full and that it should be Pirelli & C.

S.p.A. which holds harmless Prysmian Cavi e Sistemi S.r.l.,

with reference to the alleged infringement in the period

18 February 1999 - 28 July 2005, for all claims made by the

European Commission in implementation of its decision and

for any expenses related to such implementation.

Following a detailed and careful analysis of the European

Commission's ruling, and nonetheless considering this has

been appealed and so could be submitted to second-in-

stance judgement, as well as the fact that the investigations

initiated by the Canadian Antitrust Authority have ended

without any sanctions for Prysmian, it has been decided to

partially release the existing provision.

Prysmian has also learned from several sources, including

in the public domain, that some British utilities have filed

actions in the High Court in London against certain cable

manufacturers, including the Prysmian Group, to obtain

compensation for damages allegedly suffered as a result

of the alleged anti-competitive conduct condemned by the

European Commission in the decision adopted in April 2014.

As at 31 December 2014, the amount of the provision is ap-

proximately Euro 170 million. Despite the uncertainty of the

outcome of the investigations in progress and potential legal

action by customers as a result of the European Commis-

sion's decision, the amount of this provision is considered

to represent the best estimate of the liability based on the

information now available.

At present and in view of the reliability and effectiveness of

internal procedures for reporting and planning, these risks

are not considered to be relevant for the Group.