endesa12 light, gas, people

Transcription

1 endesa12 light, gas, people Activities report by the audit and compliance committee fiscal year 2012

2 Audit and Compliance Committee Report for Fiscal Year

3 CONTENTS I. Regulatory Framework II. Composition - Profile of the members of the Audit and Compliance Committee III. Work Undertaken During 2012 a. Consolidated Annual Financial Statements and Consolidated Management Report for the fiscal year ending December 31, 2011 b. Intermediate Semi-Annual Summary Consolidated Financial Statements and Quarterly Consolidated Financial Information c. Press Releases d. Internal Audit Work e. External Audit f. System of Internal Control Over Financial Reporting g. Corporate Governance 2

4 3

5 I. REGULATORY FRAMEWORK The Audit and Compliance Committee will comprise a minimum of four and a maximum of six members of the Board of Directors appointed with the favorable vote of the majority of the Board itself. Non-executive Directors must form a majority of its members. At least one of the members of the Audit and Compliance Committee shall be independent and shall be appointed in consideration of his or her knowledge and experience in the area of accounting, auditing or both. The Chairman of the Auditing and Compliance Committee shall be appointed by the Board of Directors from among the non-executive directors or members who do not hold management or executive duties at the entity, nor maintain a contractual relationship other than the condition by which they are appointed, with the favorable vote of the majority of the Board itself. The Chairman must be removed every four years and may be re-elected after one year after his removal has lapsed. In the Chairman's absence, the Committee member designated provisionally by the Board of Directors will substitute for him and, failing this, the oldest Committee member. The Audit and Compliance Committee will meet as often as convened by its Chairman, when so resolved by the majority of its members or at the request of the Board of Directors. Committee meetings will take place at the Company's registered offices or at such other venue as may be determined by the Chairman and stated in the meeting notice. Committee meetings will be validly assembled when the majority of the Committee members attend in person or by proxy. Resolutions must be adopted with the favorable vote of the majority of directors attending the meeting. In the case of a draw, the Chairman or the person replacing her/him shall have the casting vote. The Committee's Secretary shall be that of the Board of Directors. S/he will draft the Minutes of the adopted resolutions, reporting said Minutes to the Board of Directors. This Committee s main duty shall be to watch over the good corporate governance and transparency of the Company's every action within the scopes of economyfinance, external auditing and compliance and internal auditing. In any case, it will have the following duties: a) To report to the Stockholders' Meeting on the issues raised at the Meeting by stockholders in matters falling within its jurisdiction. b) Propose the auditors or audit firms to the Board of Directors who will refer this issue to the General Shareholders' Meeting, pursuant to Article 58 of the Company's Bylaws. c) Supervise the efficiency of the company s Internal Control System, internal auditing services and risk management systems, as well as discuss with the auditors or auditing companies the significant weaknesses of the internal control system detected in performing the audit. 4

6 d) Supervise the process for preparation and presentation of regulated financial reporting. e) Liaise with external auditors or audit firms in order to receive information on all matters which may place at risk their independence, and any others related to the procedures concerning the audit of the accounts, as well as those communications as provided by account auditing laws and technical auditing standards. In any case, the Audit and Compliance Committee shall receive annually from the auditors or auditing companies written confirmation of their independence vis-à-vis the Company and/or entities directly or indirectly related to the Company, as well as information on the additional services of any type rendered. f) Issue annually, prior to the issuance of the auditors report, a report which will express an opinion on the independence of the auditors or auditing companies. This report must in any case pronounce on the provision of the additional services referred to in the above section. These duties will be deemed to be without limitation and without prejudice to such other duties as may be entrusted to the Committee by the Board of Directors. The Board Regulations may develop the competencies of the Committee and its scheme of organization and operation. 5

7 II. COMPOSITION Position Members Appointment Date Nature Chairman Miquel Roca Junyent Independent External Director Directors Luigi Ferraris Shareholder external director Alejandro Echevarría Busquet Independent External Director Borja Prado Eulate Executive Secretary Salvador Montejo Velilla Profile of the members of the Audit and Compliance Committee ALEJANDRO ECHEVARRÍA BUSQUET Born in Bilbao (Spain) in University degree in Business Sciences from Deusto University. Career path Chief Executive Officer of Grupo Correo ( ); Chairman of AEDE (Spanish Publishers Association); Chairman of Associate Publishers for TEVISA; Chairman of the Circle of Basque Entrepreneurs ( ). Current position Chairman of Mediaset España Comunicación, S.A. Other Boards of Directors and Foundations Director of Consulnor Director of Sociedad Vascongada de Publicaciones, S.A. Director of CVNE Director of Editorial Cantabria, S.A. Director of Diario El Correo newspaper Other Activities Vice Chairman of Deusto Business School Trustee of Novia Salcedo, Plan España and FAD Foundations 6

8 LUIGI FERRARIS University Degree in Economics and Commerce from the University of Genova. Career path Director of Accounting, Planning and Control of Enel ( ); Group Controller ( ); Chief Financial Officer of Sales, Infrastructure and Network Division of Enel ( ); Chief Financial Officer of Eurogen, Elettrogen e Interpower (Enel) (1999); Director of Avisio Energia SpA, Deval, SpA, Enel Viesgo Generación, Electra de Viesgo Distribución, Enel Capital, SrL., Enel Energia SpA, Enel Energy Europe, SrL, Enel Rete Gas SpA, Enel.si, SrL, Enel Trade SpA, CISE SrL, WIND Spa, Sfera SrL, and Weather Investments SpA. Member of Supervisory Board of Slovenske Elektrarne, As, Enel Ingegneria e Innovazione SpA, Enel OGK-5 OJSC. Current position Director of Administration, Finance and Control of Enel Spa Chairman of Enel Servizi SrL Chairman of Enel Factor SpA Chairman of Enel Green Power SpA Other Boards of Directors of which he is a member Director, Enel Distribuzione Director, Enel Produzione Director of Enel Investment Holding Other Activities Professor of Business Strategies, Management control systems and Planning and Control of the University LUISS Guido Carli (Rome); and Director of the foundation Fondazione Enel SpA. BORJA PRADO EULATE Born in Madrid in He studied Law at the Autónoma University of Madrid. He furthered his education in the US, studying International Relations and Foreign Trade at New York University and at the Philip Brothers firm. Career path Chairman of Almagro Asesoramiento e Inversiones, S.A. (from 1987); Vice Chairman of Lazard Asesores Financieros, S.A. ( ); Director of Rothschild España ( ); Vice Chairman of UBS Spain ( ); Fomento de Comercio Exterior (Focoex) ( ). Current position Chairman of Endesa, S.A. Chairman of Mediobanca, Sucursal en España, for Iberia and South America Member of the Spanish Group of the Trilateral Commission Other Boards of Directors of which he is a member Director of Mediaset España Comunicación, S.A. Director of Enel Energy Europe, S.r.l. 7

9 MIQUEL ROCA JUNYENT Born in 1940, in Cauderau (France). Law degree from the University of Barcelona and Doctor Honoris Causa from the Universities of Long-Distance Education (UNED), León, Gerona and Cadiz. Career path Professor of Constitutional Law at Universidad Pompeu Fabra Barcelona; Deputy for Barcelona and Chairman of the Catalonian Parliamentary Group in the Congress of Deputies ( ). Member of the Panel that prepared the 1978 Constitution, as well as Of the Commission that drafted the Statute of Autonomy of Catalonia. Current position Practicing attorney since 1962: Partner-Chairman of the law firm of Roca Junyent, with offices in Barcelona, Madrid, Palma de Mallorca, Gerona, Lérida, Buenos Aires and Shanghai. Customer Ombudsman for Seguros Catalana Occidente since March Secretary/Non-Director of Banco de Sabadell (2000); of Abertis Infraestructuras, of TYPSA, and of Accesos de Madrid, S.A. Chairman of General Meeting of la Seda de Barcelona Other Boards of Directors Member of the Board of Directors of ACS Other Activities Chairman of Sociedad Económica Barcelonesa de Amigos del País Vice Chairman of Fundación Barcelona Cultura foundation Chairman of MNAC (Museo Nacional de Arte de Cataluña; National Museum of Art of Catalonia) Profile of the Secretary SALVADOR MONTEJO VELILLA Born in Madrid (Spain) in Law degree from the Universidad de Valencia; PhD in Law from the Universidad Complutense de Madrid; Bachelor s Degree in Economics by the Universidad de Valencia. Career path Congressional Attorney ( ); Director of Economic Affairs for the Spanish Congress ( ); Comptroller for the Spanish Congress ( ); Associate Professor of Finance and Tax Law. Complutense University of Madrid ( ); Practicing attorney and member of the Madrid Bar Association since Current position Secretary General of Endesa, S.A. and of the Endesa, S.A. Board of Directors. Secretary of the Board of Directors of Enel Energy Europe, S.R.L. Chairman of Endesa, S.A. Other activities Chairman of Asociación Emisores Españoles; Member of the Spanish Securities Market Commission (Comisión Nacional del Mercado de Valores; CNMV) Consulting Committee; Member of the Board of Trustees and of the Standing Committee of the Endesa Foundation; Member of the Board of Trustees of the Endesa Foundation 8

10 Seville; Member of the Executive Board of the Instituto de Estudios Económicos; Member of Advisory Board of Good Governance and Shareholder Forum and Chairman of Fundación para la promoción del Perú en España (Foundation for the promotion of Peru in Spain). III. WORK UNDERTAKEN DURING 2012 During fiscal year 2012, the Audit and Compliance Committee held nine meetings. Each meeting was attended by all of its members. The Audit and Compliance Committee, through its Chairman, has reported to the Board of Directors on the development of each and every one of the meetings held. a) Consolidated Annual Financial Statements and Consolidated Management Report for the fiscal year ending December 31, 2011 The Audit and Compliance Committee, at its meeting on February 27, 2012, analyzed with the participation of the Economic Adjunct Director General, the Consolidated Annual Financial Statements and Consolidated Management Report referring to the fiscal year ending December 31, 2011, prior to the drawing up thereof by the Board of Directors. Furthermore, the representatives of the external auditor Ernst & Young, S.L. presented a report on the scope of their audit work, as at December 31, 2011, and on the most relevant matters deriving therefrom. Ernst & Young, S.L. presented to the Audit and Compliance Committee a favorable draft auditors report both on the Consolidated Annual Financial Statements as well as the Annual Financial Statements of Endesa, S.A. In consideration of the above, the Audit and Compliance Committee reported favorably on the Consolidated Annual Financial Statements and Consolidated Management Report of Endesa, S.A. and Dependent Companies relating to the fiscal year ending December 31, 2011, as well as on the Annual Financial Statements and Management Report of Endesa, S.A. referring to the fiscal year ending on December 31, The Board of Directors, at its meeting on February 27, 2012, drew up the financial statements in accordance with the recommendation of the Audit and Compliance Committee. Finally, the Annual General Shareholders Meeting of Endesa, S.A. held on June 26, 2012, approved the Consolidated Annual Financial Statements and Consolidated Management Report of Endesa, S.A. and Dependent Companies referring to the fiscal year ending December 31, 2011, as well as the Annual Financial Statements and Management Report of Endesa, S.A. referring to the fiscal year ending on December 31, b) Intermediate Semi-Annual Summary Consolidated Financial Statements and Quarterly Consolidated Financial Information The Audit and Compliance Committee reported favorably to the Board of Directors on the financial information for fiscal year 2012 which, due to its status as a listed company, Endesa must make public periodically, ensuring that the Intermediate Summary Consolidated Financial Statements are prepared in following the same 9

11 bases for presentation and valuation rules as the Consolidated Annual Financial Statements. In this regard, at a meeting on May 7, 2012, the Audit and Compliance Committee reported on the results of Endesa, S.A. and Dependent Companies referring to the three-month period ending on March 31, The Economic Adjunct Director General presented the substantial aspects of the Quarterly Intermediate Declaration and the Intermediate Consolidated Management Report referring to the three-month period ending March 31, 2012, and the Chief Executive Officer presented the principal aspects of the presentation to analysts which would be disseminated. Finally, the Audit and Compliance Committee reported favorably on the Quarterly Intermediate Declaration and Consolidated Management Report referring to the three-month period ending March 31, 2012, as well as the presentation to analysts. At a meeting on July 24, 2012, the Economic Adjunct Director General presented to the Audit and Compliance Committee the fundamental aspects of the Intermediate Summary Consolidated Financial Statements and Intermediate Consolidated Management Report referring to the six-month period ending June 30, 2012, and the Semi-Annual Financial Report referring to that same period, and the Chief Executive Officer presented the principal aspects of the presentation to analysts that would be disseminated.. The representatives of the external auditor, Ernst & Young, S.L., reported to the Audit and Compliance Committee on the Limited Review performed of the Intermediate Summary Consolidated Financial Statements and Consolidated Management Report relating to the six-month period ending June 30, The Audit and Compliance Committee reported favorably on the Intermediate Summary Consolidated Financial Statements and Consolidated Management Report referring to the six-month period ending June 30, 2012, as well as the presentation to analysts. At a meeting on November 7, 2012, the Economic Adjunct Director General detailed to the Audit and Compliance Committee the principal aspects of the Quarterly Intermediate Declaration and Consolidated Management Report referring to the nine-month period ending September 30, 2012, and the Chief Executive Officer presented the principal aspects of the presentation to analysts that would be disseminated. Finally, the Audit and Compliance Committee reported favorably on the Quarterly Intermediate Declaration and Consolidated Management Report referring to the nine-month period ending September 30, 2012, as well as the presentation to analysts. c) Press Releases The Audit and Compliance Committee examined and approved each and every one of the press releases to be made public on the occasion of the publication of the Consolidated Financial Statements at the close of fiscal year 2011 and upon completion of each quarter in fiscal year 2012 and on the occasion of the Semi- 10

12 annual Financial Report, as well as the general lines of the presentations to analysts. d) Internal Audit Work Among the duties of the Audit and Compliance Committee is that of supervising the internal auditing services, receiving periodic information on their activities, proposing the budget for such service, supervising the mechanism which allows employees to communicate confidentially and, if deemed appropriate, anonymously, the irregularities of potential importance, especially financial and accounting irregularities and, in this regard: At a meeting on January 30, 2012, the Director General of Auditing reported on the functioning of the Ethical Channel in fiscal year 2011, indicating the proceedings denounced, proceedings with verified fraud and damaged parties via denouncement, inter alia. Furthermore, he reported on the 2011 Audit Plan, i.e. the monitoring of the internal audit work performed in the period January-December, 2011 and the valuation of the Endesa Group s internal control system. Furthermore, at said meeting, the Director General of Auditing presented the Criminal Risk prevention model. At a meeting on February 27, 2012, the Committee heard a report prepared jointly by Auditing and UCI on the adequacy and conformity of the system for internal control over Endesa s financial information to the Sarbanes Oxley Act and to Italian Law 262/05. At a meeting on March 26, 2012, the Director General of Internal Auditing presented the Audit Report for fiscal year 2011, the budget for fiscal year 2011, a monitoring report on on-going work and recommendations. In addition, he also reported on the denouncements presented in the ethical channel. At a meeting on May 28, 2012, the Director General of Auditing presented the follow-up on audit work in progress, detailed the activities carried out and presented a summary of the results. Furthermore, he reported on the follow-up on the recommendations. Finally, he detailed the denouncements presented through the Ethical Channel. At a meeting on July 24, 2012, the Director General of Internal Auditing detailed the changes implanted in the organizational scheme of the Division. Furthermore, he reported on the follow-up of work, the criminal risk prevention model and the functioning of the Ethical Channel. At a meeting on October 23, 2012, the Director General of Internal Auditing reported on the work in progress and on the work concluded, on the follow-up of the recommendations, the denouncements presented in the Ethical Channel and the conclusions obtained in this respect. e) External Audit The principal duty of the Audit and Compliance Committee is to monitor the good corporate governance and transparency in all economic-financial, external auditing, compliance and internal auditing aspects and, in any case, it shall have entrusted to 11

13 it, inter alia, the duty to bring before the Board the proposals for selection, appointment, re-election and substitution of the external auditor, as well as the conditions of such auditor s contracting; to regularly receive from the external auditor information on the audit plan and the results of its execution; and relate to the external auditors and, in particular, to ensure the independence of the external auditor and, for such purpose, to ensure that the company and the auditor observe the rules in force on the provision of non-auditing services, the limits on the concentration of the auditor s business and, in general, the other rules established to assure the independence of auditors. At a meeting of February 27, 2012, the representatives of the external auditor, Ernst & Young, S.L., presented a report on the scope of their auditing work as at December 31, 2011, and the results thereof. Furthermore, at a meeting on February 27, the External Auditor presented a draft report referring to the system for internal control over financial information. As a result of his work he anticipated that, of the procedures applied, no inconsistencies or incidents that could affect the financial information were revealed. For the purpose of ensuring the external auditor s independence, the Audit and Compliance Committee approved and reported to the Board of Directors, the provision of additional services by the auditing firms, together with their respective budgets, at its meetings of January 30, 2012, February 27, 2012, March 26, 2012, May 07, 2012, May 28, 2012, July 24, 2012 and October 23, At a meeting on July 24, 2012, the Committee invited the representatives of the external auditor, Ernst & Young, S.L. to present the limited review performed as at June 30, At a meeting on July 24, 2012, the Committee approved the appointments and fees of auditors for fiscal year 2012, at all Group companies. It should be indicated that ENDESA requires from the external auditor a certificate of independence for each one of the additional services to be rendered, prior to the approval thereof by the Audit and Compliance Committee, in which the auditor confirms that, to the best of its knowledge, the services comply with the pertinent rules of independence. In this regard, at a meeting on February 27, 2012, the Audit and Compliance Committee issued, prior to the issuance of the auditors report, and in accordance with Additional Provision Eighteen of Law 24/1988, of July 28, on the Securities Market, a report expressing the opinion on the independence of the auditor. The said report concludes that the additional services rendered by Ernst & Young, S.L. to Endesa, S.A. do not compromise, to the best of its knowledge, the independence of the said auditing company. Furthermore, the external auditor presented a letter expressing his independent status. Furthermore, ENDESA s System of Internal Control Over Financial Reporting contemplates among its management controls that the Audit and Compliance Committee will propose to the Board of Directors, for submission to the General Shareholders Meeting, the appointment of the external auditors. In addition, the Committee will approve the external auditors fees and will monitor the independence of the auditors. 12

14 f) System of Internal Control Over Financial Reporting Another duty of the Audit Committee is to ascertain and supervise the financial reporting process and the information systems and internal control of the company, including, inter alia, supervising the process of preparing and the integrity of the financial information related to the company and to periodically review the systems of internal control and risk management, in order that the principal risks may be identified, managed and adequately disclosed. At a meeting on January 30, 2012, the Director General of Auditing submitted to the consideration of the Audit Committee his evaluation on the suitability of the Internal Control System of the Endesa Group as at December 31, 2011, pointing out that the System operated adequately in the course of the year. At a meeting on February 27, 2012, the Committee examined a report prepared by the Economic Adjunct Directorate General on the internal control of ENDESA s financial information which concludes by allowing issuance of the certificate of internal control of the Endesa Group s financial information for fiscal year Furthermore, the Director General of Auditing presented the result of his report on the adequate conformity of the system for internal control of Endesa s financial information to the Sarbanes Oxley Act and to Italian Law 262/05. Furthermore, as at December 31, 2012, Ernst & Young, S.L., at the request of the Board of Directors of ENDESA, issued the Report entitled Internal Systems for Risk Control and Management in relation to the Process for Issuing Financial Information of the Endesa Group for fiscal year 2012, summarizing a description of the main characteristics of the internal systems for risk control and management in relation to the process for issuing financial information. At a meeting on July 24, 2012, the Economic-Financial Deputy Director General presented the report of the Economic-Financial Directorate General on the internal control system for financial reporting of Endesa. g) Corporate Governance At its meeting on February 27, 2012, the Committee took note of the company s Corporate Governance Report, which was reported on favorably. In another section, in accordance with the adherence to the Code of Good Tax Practices promoted by the Ministry of Economy and Finance and approved on July 20, 2010, the Committee reviewed the tax policies followed by the company during fiscal year 2011 and approved the tax policies in accordance with the provisions of the said Code. At its meeting on March 26, 2012, the Committee approved a revision of the System of powers of attorney for the Endesa Group. At its meeting on May 7, 2012, the Committee approved the operating rules of the Electronic Shareholder Forum and the Activities Report of the Audit and Compliance Committee pertaining to fiscal year