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Business Analysis

International economic performance during the first half of 2007 was sustained by the high pace of expansion of the emerging economies, particularly in Asia.
The sub-prime mortgage crisis that took place in the United States during the summer upset the international setting, generating great tension in the financial markets.
The U.S. and European central banks were forced to inject cash several times in an effort to bring the conditions on the financial markets back to normal.
On the other hand, the continuation of the turbulence and possible tightening of the criteria for the granting of credit could entail additional risks of an economic slowdown.
This is why the Federal Reserve has repeatedly cut the cost of money during 2007, as it has also done at the beginning of 2008.

On the European level, the positive trend triggered off in 2006 continued during the first six months, even if to a slightly lower extent.
The turbulence taking place on the financial markets and the tension in the oil prices had a negative impact on performance of the second half of the year. The growth rate for 2007 should settle at about 2.5%.
Following the U.S. summer mortgage crisis, the policy of raising rates adopted by the central bank since the end of 2005 came to a halt - at least temporarily.

In Italy, the economy in the first half of 2007 showed lower growth than the trend recorded at the end of 2005. The short-term slowdown during the second half of the year, however expected, in any case was stronger than what the forecasting models had predicted owing to the instability of the financial markets, the high price of raw materials and the weakness of the U.S. dollar, which affects Euro Zone exports.

Reference scenario

 20072006Change %
Price of Brent oil $/bbl72,5265,1411,30%
$/euro exchange rate1,371,268,70%
Oil price euro/bbl52,951,72,30%

With regard to exchange rates, throughout 2007 we witnessed a new gradual strengthening of the euro over the dollar. The average 2007 exchange rate was USD 1.37 per Euro, with an increase (+8.7%) over that recorded in 2006, which was 1.26.
Then as far as the oil market is concerned, the price of Brent crude oil in 2007 - which significantly affects both gas supply costs and thermoelectric production - was posted at average values definitely higher than those of 2006, leaping from $ 65.14 to $ 72.52 per barrel, with a peak of $ 92.62 per barrel in November 2007.

The causes of this price increase, the effects of which have however been lessened by the concurrent appreciation of the Euro compared to the U.S. dollar, are attributable to the reduction progressively recorded by U.S. reserves, despite the fact that the Organisation of the Petroleum Exporting Countries (OPEC) has announced a 500,000-barrel increase in production.

Crude oil trend


Crude Oil trend

In this context, with regard to gas, the average value of the energy rate (QE) in 2007 (calculated referring to the Authority for Electrical Energy and Gas (AEEG) resolution no. 134/06) was Euro 21.58 cents per cubic meter compared to an average value of Euro 23.45 cents per cubic meter in 2006 and an expected value of Euro 26.70 cents per cubic meter for 2008. As can be deduced from these data, the oil price increase recorded during the second half of 2007 has not yet entirely worked its way through to gas prices, and is destined to have repercussions mostly during 2008. This is naturally due to the effect of the delays associated with the formulas for updating gas prices.

QE trend

QE trend

As far as electricity was concerned, the average exchange sales price (PUN) in 2007 came to Euro 71.00/MWh, involving an increase of 5.1% when compared with the Euro 74.80/MWh in the previous year.
During November, the highest average price since the launch of the electricity exchange in April 2004 was recorded (average monthly PUN of Euro 90.82/MWh).

Electricity Exchange Trend

Electricity Exchange Trens