The exercise of options awarded under the Company's stock option plan, which is described in detail in the "Corporate Governance" section of the Report on Operations, resulted in the release of the corresponding portion of the reserve established in accordance with IFRS 2 to reflect the fair value of the stock option plan.
The fair value of stock options awarded under the 2003 and 2004 stock option plans that were still outstanding at December 31, 2005 amounts to 43,000 euros. This amount is always allocated over the vesting periods of the plans. The portion attributable to 2005 (7,000 euros) was included in Labor costs.
The Group adopted the IAS 39 standard as of January 1, 2005. A breakdown of the resulting 49-million-euro change in shareholders' equity is as follows:
  • 19 million euros generated by marking to market available-for-sale investments (22 million euros booked as of January 1, 2005, net of a decrease of 3 million euros in 2005);
  • 30 million euros from the valuation of derivatives and the use of the amortized cost method to value the financial liability represented by borrowings and bonds issues.
The table below provides a breakdown of the reserve for cash flow hedges:
Reserve for cash flow hedge transactions
(in millions of euros) Gross reserve Taxes Net reserve
- Reserve at December 31, 2004 (20) 7 (13)
- Changes in 2005 26 (10) 16
- Reserve at December 31, 2005 6 (3) 3
Minority Interest in Shareholders' Equity
Minority interest in shareholders' equity amounted to 159 million euros, compared with 469 million euros in 2004. The changes that occurred in 2005 are detailed below:
(in millions of euros) Minor. int. in share Minority interest in Minor. int. in
  capital and reserves profit (loss) shareholders' equity
Balance at December 31, 2003 600 84 684
- Appropriation of result for the year 8 (84) (76)
- Change in scope of consolidation (215) - (215)
- Other changes 8 - 8
- Result for the 2004 fiscal year - 68 68
Balance at December 31, 2004 401 68 469
- Appropriation of result for the year 58 (68) (10)
- Change in scope of consolidation (304) - (304)
- Other changes (2) - (2)
- Result for the 2005 fiscal year - 6 6
Balance at December 31, 2005 153 6 159
The change in the scope of consolidation is related to Finel (301 million euros). Specifically, it reflects the impact of the purchase of a 20% interest in Finel from EDF International and the recognition of the out option on the remaining 20%.
Non-current Liabilities
12. Provision for Employee Severance Indemnities and Provision
for Pensions
This reserve, which amounted to 74 million euros, reflects the accrued severance indemnities and other benefits owed to employees, computed in accordance with the actuarial guidelines provided in IAS 19. The operating and financial parameters used for valuation purposes are listed below:
- Technical annual discount rate min. 4.00%, max. 4.50%
- Annual inflation rate min. 1.90%, max. 2.00%
- Estimated annual increase of the provision for severance indemnities min. 2.00%, max. 2.95%
- Estimated annual increase of the wages used to compute the provision min. 2.00%, max. 3.50%
The computation process also resulted in the recognition of financial expense totaling 3 million euros.
A breakdown of this account shows that the provision for employee severance indemnities totaled 65 million euros, an amount roughly in line with the figure computed in accordance with Italian accounting principles. The provision for pensions totaled 9 million euros. The sale of the engineering operations caused the provision for employee severance indemnities to decrease by 14 million euros, compared with December 31, 2004.
(in millions of euros) Provision for sever. indemn. Provision for pensions Total
Balance at 12/31/04 (A) 79 9 88
Changes in 2005:      
- Additions 5 - 5
- Financial expense (+) 3   3
- Discounting gains (losses) (+/-) (1)   (1)
- Utilizations (-) (6) - (6)
- Decrease in scope of consolidation (-) (14)   (14)
- Other changes (1) - (1)
Total changes (B) (14) - (14)
Total for the Group at December 31, 2005 (A+B) 65 9 74
At December 31, 2005, the Group and the companies that are consolidated line by line or by the proportional method had 2,963 employees, or 1,573 less than at the end of 2004. The sale of the engineering operations accounts for most of the decrease.
A breakdown of the Group's payroll by type of business is as follows:
(number of employees) 2005 2004
Electric Power operations 1,992 1,996
Hydrocarbons operations 441 416
Corporate activities 526 539
Total core businesses 2,959 2,951
Water 4 7
Engineering - 1,578
Total for the Group 2,963 4,536