ACEA GROUP Quarterly Report for the three months ended 31 March 2008

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(1)ACEA GROUP Quarterly Report for the three months ended 31 March 2008. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. Board of Directors’ meeting of 12 May 2008.

(2) MANAGEMENT OF THE PARENT COMPANY, Acea SpA. Board of Directors Fabiano Fabiani Andrea Mangoni Marco Maria Bianconi Massimo Caputi Jean Louis Chaussade Dino Piero Giarda Jacques Hugè Luigi Spaventa Luisa Torchia. Chairman Chief Executive Officer Director Director Director Director Director Director Director. Board of Statutory Auditors Chairman Auditor Auditor Alternate Auditor Alternate Auditor. Consolidated quarterly report for the three months ended 31 March 2008. 2. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. Maurizio Lauri Roberto Pertile Francesco Lopomo Claudio Bianchi Claudio Valerio.

(3) Acea Group financial highlights. page. 4. Introduction. page. 6. Segment information. page 10. Operating review. page 12. Basis of presentation and consolidation. page 40. Results of operations. page 45. Financial position and cash flow. page 69. Other information. page 86. Declaration of the Executive Responsible for Financial Reporting. page 90. Operating and financial outlook. page 91. List of consolidated companies. page 93. Consolidated quarterly report for the three months ended 31 March 2008. 3. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. CONTENTS.

(4) ACEA GROUP FINANCIAL HIGHLIGHTS. Consolidated net revenue Staff costs. Q3 2008. Q3 2007. 759,397. 597,362. Increase/ % increase/ (Decrease) (decrease). 162,035. 27.1. 67,473. 56,969. 10,504. 18.4. Cost of materials and overheads. 552,674. 422,053. 130,621. 30.9. Consolidated operating costs. 620,148. 479,022. 141,126. 29.5. (1,074). (2,496). 1,422. 57.0. 138,175. 115,844. 22,331. 19.3. Operating profit/(loss). 79,748. 64,718. 15,030. 23.2. Finance (costs)/income. (18,407). (15,296). (3,112). 20.3. 108. 4,827. (4,719). (97.8). Profit/(loss) before tax. 61,448. 54,249. 7,199. 13.3. Net profit/(loss) from continuing operations. 35,575. 32,215. 3,359. 10.4. Net profit/(loss) from discontinued operations. 0. 0. 0. 0.0. 35,575. 32,215. 3,360. 10.4. Profit/(loss) attributable to minority interests. 1,560. 935. 625. 66.8. Net profit/(loss) attributable to the Group. 34,014. 31,280. 2,734. 8.7. basic. 0.1597. 0.1469. 0.0128. diluted. 0.1597. 0.1469. 0.0128. Fair value of commodity derivatives. Gross operating profit/(loss). Profit/(loss) on investments. Net profit/(loss) for the period. Earnings/(loss) per share (€). Consolidated quarterly report for the three months ended 31 March 2008. 4. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. €000.

(5) (€000). 31 Mar 2008 (A). 31 Dec 2007 (B). Increase/ (Decrease) (A-B). Net invested capital. 3,079,201. 2,762,256. 316,945. Shareholders’ equity. 1,465,006. 1,439,716. 25,291. Net debt. 1,614,195. 1,322,540. 291,655. Consolidated quarterly report for the three months ended 31 March 2008. 5. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. BALANCE SHEET.

(6) INTRODUCTION. The consolidated results of operations for the three months ended 31 March 2008 show: 1. consolidated net revenue up 27.7% 2. cost of materials and overheads up 31.2% 3. staff costs up 18.4% 4. gross operating profit up 19.3% 5. net profit for the period up 8.7%. The results for the period were influenced by the different method of consolidating Tirreno Power and Umbra Acque, the increase in the Group’s interest in GORI from July 2007, and the consolidation of Longano and Elga Sud, which were not consolidated in the consolidated quarterly report for the previous year. These changes contribute a total of 12 million euros to consolidated gross operating profit, including 10.4 million euros attributable to Tirreno Power. On a pro forma basis, enabling a like-for-like comparison of amounts with those of the previous year, gross operating profit for the first quarter of 2008 is 126.2 million euros, representing growth of 10.4 million euros.. The improvement reflects increases of: (i) 16.6 million euros in the gross margin and (ii) 7.1 million euros in staff costs, less capitalised costs. In terms of business segment: 9 water services recorded growth of 8.1 million euros in the gross margin, to which all 9 energy networks report a gross margin substantially in line with the figure for the previous year (73.7 million euros); 9 energy sales and generation saw the gross margin decline by 0.5 million euros due to (i) the substantially in-line performance (up 1 million euros) of generation, reflecting the complete shutdown of the Voghera plant throughout the quarter following a breakdown in November, and (ii) a loss of 1.5 million euros on sales, primarily reflecting commodity prices. The breakdown at the Voghera plant accounted for a decrease of approximately 3 million euros, after the insurance payout paid to date. The gross margin also rose as a result of the return of the 4.1 million euro fine imposed by the Antitrust Authority. This following the favourable judgement handed down by. Consolidated quarterly report for the three months ended 31 March 2008. 6. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. areas of operation contributed;.

(7) Lazio Regional Administrative Court on 7 May in response to the appeals filed by Acea and Suez.. Growth in staff costs reflects the 196 increase in the average headcount, the impact of contract renewals and increases in a number of other components such as holiday pay and a review of grades resulting in average rises due to company reorganisations. The rise in staff costs can be seen across all business segments, as follows: 9 Energy networks. up 2.3 million euros;. 9 Energy sales and generation. up 0.6 million euros;. 9 Italian water services. up 3.3 million euros, including 2.3 million euros. attributable to the Lazio and Campania-based companies; 9 Parent Company. up 0.6 million euros.. Amortisation and depreciation is up 8.2 million euros, including 3.5 million euros attributable to Tirreno Power and Umbra Acque. On a like-for-like basis, the increase is thus 4.7 million euros. 2.6 million euros of the increase regards completion and entry into service of the Roselectra and Leinì plants and changes to the useful lives of the hydroelectric plants (following the Constitutional Court sentence of January 2008), whilst 1.7 million euros regards the amount of investment carried out by Group companies during the current and previous years.. Net finance costs are up 3.1 million euros, with 2 million euros reflecting the change in the basis of consolidation. The result reflects both increased borrowing and rising interest. short- and medium/long-term borrowings. In contrast, there was a 1.6 million euro increase in interest on receivables due from end users.. The overall tax rate for the period, on a pro forma basis to enable like-for-like comparison with the first quarter of 2007, is around 37%, marking a reduction of 3.6% essentially due to changes to regulations introduced by the 2008 Finance Act. Tax expense for the period also reflects reversal of the accrued portion of tax assets accounted for in 2006 and 2007 (1.7 million euros), and the effects of the change in the method of consolidating Tirreno Power. The tax rate is thus 42.1%.. Consolidated quarterly report for the three months ended 31 March 2008. 7. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. rates, with the Parent Company recording a 3 million euro increase in finance costs on.

(8) Net invested capital is up 11.47% (up 317 million euros) on the end of the previous year, with the increase amounting to 5.70% (157.3 million euros) on a like-for-like basis. The rise reflects increases in net working capital (up 117 million euros or 61.80%, and up 95 million euros or 50.21% on a like-for-like basis) and in net non-current assets (up 199.9 million euros or 7.77%, and up 62.3 million euros or 2.42% on a like-for-like basis). The increase in net working capital is due to: (i) a 146.4 million euro rise in current receivables (103.1 million euros on a like-for-like basis), above all those due from customers (up 99.3 million euros and 56.6 million euros on a like-for-like basis), and (ii) a 39.4 million euro increase in other current assets (28.5 million euros on a like-for-like basis); partially offset by (i) an increase in other current liabilities (up 61.3 million euros and 51.6 million euros on a like-for-like basis), primarily reflecting tax expense for the period, and (ii) an increase in current payables (up 9.4 million euros), deriving from the greater amount payable to the Comune di Roma (up 8.3 million euros) and a rise in trade payables (up 2.9 million euros). On a like-for-like basis, current payables are down 21.7 million euros, reflecting an increase in amounts payable to the Comune di Roma, offset by a reduction in trade payables (down 28.2 million euros). At the end of the period the Group reports net receivables of 28.6 million euros due from the Comune di Roma, after an increase of 27.2 million euros with respect to 31 December 2007.. Investment during the period amounts to 92.9 million euros, marking an increase of 10.8 million euros compared with 31 March 2007 (up 6.9 million euros on a like-for-like basis). The movement reflects a 3.3 million euro reduction in investment in generation,. 13.7 million euros in investment by the Group’s electricity distribution and water companies.. Net debt of 1,614.2 million euros at 31 March 2008 is up 22.1% or 291.7 million euros on the end of 2007. The increase reflects: (i) the debt of companies for which the method of consolidation was changed during the quarter, accounting for 159.1 million euros (on a like-for-like basis net debt is 1,455.1 million euros, representing an increase of 10% or 132.6 million euro); (ii) growth in investment (up 10.8 million euros on 31 March 2007) and the mismatch between the cost of procuring electricity and income from its sale (which is. Consolidated quarterly report for the three months ended 31 March 2008. 8. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. following completion of the thermoelectric plants under construction, and an increase of.

(9) collected in subsequent periods), in addition to seasonal factors. Net debt at the end of the first three months of each year is higher than at the close of the previous financial year: at 31 March 2007 consolidated net debt of 1,305,7 million euros was 108.1 million euros up. Consolidated quarterly report for the three months ended 31 March 2008. 9. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. on 31 December 2006..

(10) SEGMENT INFORMATION. The following information is provided to facilitate understanding of the segment information below: -. the “Energy sales and generation” segment includes the companies in the AceaElectrabel Group, Eblacea and Tirreno Power;. -. distribution and public lighting are included in the “Energy networks” segment, which includes Acea Distribuzione, Acea RSE, Acea Luce and Ecogena;. -. analysis and research services are included in the “Engineering and laboratory services” segment, which includes Laboratori SpA;. -. the “Environment and energy” segment includes the TAD Group companies and Aquaser.. statement, as a result of application of IAS 18, in particular with regard to the distinction between gross and net revenue. This distinction cannot be applied when presenting the revenues and costs of individual segments.. Consolidated quarterly report for the three months ended 31 March 2008. 10. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. The figure for total revenue in the following table differs from the amount reported for consolidated net revenue in the consolidated income.

(11) SEGMENT INFORMATION Gross operating profit/(loss). Investment. Q1. Q1. Q1. Increase/ (Decrease). 2008. 2007. 55,528. 17,386. 5,660. 91,943. 2,201. 49,711. 471,891. 371,092. 100,799. 21,072. 24,134. 163,434. Overseas Analysis and research. Increase/ (Decrease). Increase/ (Decrease). 2008. 2007. 11,725. 8,000. 11,300. (3,300). 51,243. (1,532). 30,300. 30,600. (300). 3,784. 5,903. (2,119). 600. 1,100. (500). (3,062). 4,844. 5,725. (881). 3,000. 1,900. 1,100. 150,314. 13,120. 51,457. 45,430. 6,027. 46,300. 35,472. 10,828. 4,023. 3,374. 649. 1,995. 1,168. 828. 0. 0. 0. 5,433. 4,472. 961. 1,804. 1,429. 375. 100. 300. (200). Environment and energy. 16,229. 12,047. 4,182. 6,081. 3,520. 2,561. 2,400. 1,100. 1,300. Corporate. 23,942. 15,773. 8,169. 1,017. (3,852). 4,869. 2,200. 300. 1,900. 890,929. 708,383. 182,546. 138,080. 116,227. 21,853. 92,900. 82,072. 10,828. (123,975). (113,295). (10,679). 95. (383). 479. 766,955. 595,088. 171,867. 138,175. 115,844. 22,331. 2008. 2007. Generation. 90,761. 35,234. Distribution. 94,144. Retail Public lighting Italian water services. Total continuing operations. Eliminations and adjustments. TOTAL GROUP. Consolidated quarterly report for the three months ended 31 March 2008. 0. 92,900. 82,072. 10,828. 11. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. Revenue.

(12) OPERATING REVIEW. ENERGY NETWORKS. DISTRIBUTION OF ELECTRICITY ON THE REGULATED AND FREE MARKETS. 2008 represents the first year of application of the tariff structure defined by the Electricity and Gas Authority (the Authority) in the “Integrated text of the directives […] regarding the transmission, distribution and metering of electricity for the regulatory period 2008-2011”, contained in Annex A of Resolution 348/2007. The previous tariff structure (for the regulatory period 2004-2007) provided for contemporaneous introduction of two equalisation mechanisms, one “general” and the other “company-specific”, designed to recognise the specific conditions under which Italy’s various distribution companies operate. These mechanisms have been confirmed for the new regulatory period. The mechanisms are partly based on analysis of parametric costs (general equalisation, which is mandatory), and partly on company-specific analyses carried out by the Authority (company-specific equalisation, which is optional). The general equalisation mechanism is the result of the restriction created by the single national tariff, which envisages the need to define tariff parameters based on the average nature of end users and the geographical area served.. service are influenced by the specific characteristics of the customers served and by external factors beyond the company’s control. It is therefore necessary to safeguard the economic efficiency and profitability of companies via adoption of compensatory measures to cover the higher costs incurred with respect to the tariffs. The general equalisation mechanisms for the costs and revenues deriving from distribution and metering for the years 2008-2011, which take account of the innovations introduced by resolutions 18/2008 and 30/2008, are as follows: •. equalisation of distribution service revenues;. •. equalisation of revenues deriving from increased returns designed to provide incentives for investments in distribution networks;. Consolidated quarterly report for the three months ended 31 March 2008. 12. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. In reality, the costs effectively incurred by individual companies in order to provide the.

(13) •. equalisation of direct distribution costs on HV networks;. •. equalisation of direct HV/MV transformation costs;. •. equalisation of direct distribution costs on MV and LV networks;. •. equalisation of revenues from the supply of electricity to residential customers.. •. equalisation of revenues from the LV metering service;. •. equalisation of the marketing costs incurred by distribution companies in respect of LV customers;. •. equalisation of the cost of purchasing electricity used internally for transmission and distribution;. •. equalisation of the difference between effective and standard losses.. The equalisation mechanism designed to provide incentives for investments in distribution networks aims to offer distribution companies an increased return on invested capital. This measure aims to promote specific projects capable of developing distributed generation and improving voltage quality on the networks. When carrying out its annual review of distribution tariffs from 2010, the Authority has reserved the right to allocate a portion of the tariff components to cover these investments. This aims to ensure that the increased returns are only granted to companies who have effectively carried out such investments.. Resolution 30/2008 established the method for calculating the equalisation of revenues deriving from the LV metering service. The mechanism aims to guarantee that returns on investments in meters and electronic reading systems, and the right to depreciate retired. companies who have effectively carried out such investments. The equalisation mechanism also introduces penalties for distribution companies who do not comply with the obligation to install LV electronic meters set out in Resolution 292/2006. In the same resolution the Authority launched the new equalisation mechanism to cover the cost of marketing distribution services to LV customers, with a view to protecting the financial position of distribution companies. Two regimes are to be applied to distribution companies that have established a separate company to supply services subject to additional safeguards, and to those who have combined distribution services with the sale of electricity.. Consolidated quarterly report for the three months ended 31 March 2008. 13. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. electro-mechanical meters to be replaced by electronic meters, are granted to distribution.

(14) Resolution 18/2008 amended the “Integrated Text of the Electricity and Gas Authority’s provisions governing the sale of electricity to final customers requiring additional safeguards and protection (the “Retail Service Code”), in accordance with Legislative Decree 73 of 18 June 2007”, approved with Resolution 156/07. This new resolution has established equalisation mechanisms for the cost of procuring electricity incurred by each provider of services to final customers subject to additional safeguards. The regulation governing load profiling requires electricity for customers subject to additional safeguards to be quantified on a residual basis, and to thus also include electricity consumed by retailers themselves in the distribution and transmission and the difference between the effective losses and standard network losses of distribution companies. In this resolution, therefore, the Authority has established the method of calculating amounts for equalisation relating to the procurement of electricity used in transmission and distribution, and to the value of the difference between effective losses and standard network losses to be recognised to each distribution company.. The company-specific equalisation mechanism takes account of the difference between the specific costs incurred by a company and the national average, where this difference is not covered by the general mechanism. To this end, the Authority is required to carry out an assessment at the request of each individual company, with the aim of identifying external factors beyond the company’s control that give rise to costs that are higher than those reflected in the tariffs, and that are not compensated for by the general equalisation mechanism. The Authority’s Resolution 30/08: has updated the company-specific correction factor for the regulatory period 2008-2011, bringing the amount for company-specific equalisation for each individual company into line with its effective investment; •. has put a value on the permitted effective costs incurred by distribution companies included in company-specific equalisation, using methods in line with those adopted in the determination of tariffs for the regulatory period 2008-2011;. •. supports combinations of distribution companies, awarding companies involved in business combinations an amount for company-specific equalisation equal to the sum of the amounts recognised for the individual companies;. •. restricts participation in company-specific equalisation to companies qualifying for the equalisation regime in the regulatory period 2004-2007;. Consolidated quarterly report for the three months ended 31 March 2008. 14. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. •.

(15) •. has launched new investigations of individual companies, to be conducted by the Authority’s Tariff Department, to determine each company’s effective distribution costs for 2008;. •. requires the Electricity Industry Equalisation Fund to pay amounts for companyspecific equalisation for the years 2009, 2010 and 2011 based on the companyspecific correction factors updated pursuant to this resolution and permitted revenues subject to equalisation.. Further innovations introduced in the third regulatory period regard: •. determination of a mandatory tariff for the distribution service, to be fixed by the Authority and applied by each distribution company to its current and future counterparties. This arrangement thus replaces the system based on basic and special tariff options, as adopted for the distribution service during the second regulatory period and proposed by the various distribution companies;. •. a distinction between metering service costs with appropriate specific fees to be received by entities that install and maintain meters, collect meter readings and validate and record the readings;. •. definition of a dynamic mechanism for correcting permitted revenues to cover the cost of marketing the distribution service, with the aim of compensating for the existing imbalance between permitted costs and revenues deriving from movements in the volume of services provided;. •. the separation, from distribution revenues, of amounts resulting from application of fees for reactive energy offtake, now allocated to the cost of measures and. The new regulations have also changed the method of updating tariff components, meaning that: •. the portion of transmission and distribution tariffs covering operating costs is updated via the price-cap mechanism;. •. the part designed to provide a return on invested capital, will be updated on the basis of the gross fixed investment deflator, movements in the volume of services provided and the level of permitted investments, and the rate of variation linked to increased returns designed to provide incentives for investments in distribution networks;. Consolidated quarterly report for the three months ended 31 March 2008. 15. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. initiatives designed to promote energy efficiency among end users of electricity..

(16) •. the part designed to cover depreciation has been updated, using the gross fixed investment deflator, movements in the volume of services provided and the rate of variation linked to the reduction in gross invested capital.. With regard to connection fees and fixed charges, in the document “Economic conditions for delivery of the connection service”, attached to Resolution 348/2007 as Annex B, the Authority has: •. established the procedural and economic conditions for delivery, to final customers, of the service connecting consumers to LV electricity networks with the obligation of connecting third parties;. •. defined additional economic conditions with respect to those established in Resolution 281/2005;. •. determined the procedural and economic conditions for delivery of the network connection service to distribution companies with the obligation of connecting third parties;. •. established the procedural and economic conditions for delivery of specific services (the transfer of equipment requested by users, contract transfers,. Consolidated quarterly report for the three months ended 31 March 2008. 16. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. transfers of supply, disconnections, etc…)..

(17) Regulatory environment. 8 January 2008 – Electricity and Gas Authority Resolution 1/2008 regards adoption of the three-year strategic plan for the period 2008-2011. The general objectives set out in the document may be summarised as follows: •. to promote and develop competitive markets, including via harmonisation of the electricity and gas markets, containment of the power of dominant operators and support designed to ensure adequate supply;. •. to support and promote the efficiency and value for money of infrastructure services;. •. to protect energy consumers through the full deregulation of markets, on the demand side, and development of levels of service quality and security;. •. to promote rational use of energy and protect the environment by contributing to decisions regarding sustainable development;. •. to guarantee and implement regulations and oversee the correct application of regulations in respect of regulated entities;. •. to increase stakeholder dialogue and develop relations with the institutions by boosting consultation with operators and consumers;. •. to boost the Authority’s internal functionality and operating efficiency.. 14 January 2008 – Authority Resolution 1/2008 amended Annex A of Resolution 89/2007 regarding the technical/economic conditions for the connection of electricity. nominal voltage less than or equal to 1 kV. The amendments were necessary in order to replace references to Interministerial Economic Planning Committee Regulation 42/86 with those in Annex B to the Integrated Text for 2008-2011.. 21 January 2008 – Authority Resolution 4/2008 governs electricity dispatching and transport services (transmission, distribution and metering) in the event of consumers in arrears or of non-performance by retailers. The document sets out: •. to protect the credit rights of retailers in the event of non-payment by consumers, in accordance with the need to ensure the transparency of information and accurate information on the timing of payments, and the consequences of non-. Consolidated quarterly report for the three months ended 31 March 2008. 17. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. generating plants to electricity networks, with the obligation to connect third parties, with.

(18) payment, and in the event of the retailer’s non-performance in respect of Terna or another distribution company; •. to protect the credit rights of the suppliers of protected services from the potentially opportunistic behaviour of consumers, ensuring that they have the opportunity to transfer their receivables for bills issued and not paid by consumers to a new retailer taking their place;. •. to provide that in the case of consumers served until three months before by a supplier of protected services, the new retailer, together with the switching request, can make an irrevocable offer to acquire the above receivable, suspensively conditional on the retailer still being the provider of the consumer in arrears at the time the receivable exists;. •. to transitionally define specific rules governing the suspension of supply in the event of non-payment by consumers with LV connections and not equipped with electronic meters, imposing certain information requirements on distribution companies;. •. to prepare, and subsequently introduce, further measures aimed at identifying appropriate procedures in addition to the suspension of electricity supply, capable of reducing credit risk associated with consumers;. •. to define, and subsequently introduce, methods designed to cover, in accordance with incentive mechanisms, the costs incurred by suppliers of services subject to additional safeguards and the suppliers of protected services in respect of customers in arrears who cannot be cut off, in addition to measures designed to. 28 January 2008 – Authority Resolution 5/2008 launched a procedure to lay down measures concerning the criteria for defining and attributing sums arising from any delayed adjustments made at the load profiling equalisation stage. The Authority believes it necessary to analyse instances of delayed adjustments of meter readings, in order to identify the operators involved in such adjustments and the effects such adjustments would have on sums deriving from load profiling equalisation, also taking account of the outcome of the related investigation launched by Resolution 177/2007. The Authority thus plans to introduce incentives based on bonuses and penalties, in relation to compliance with the requirements governing the method of load profiling equalisation,. Consolidated quarterly report for the three months ended 31 March 2008. 18. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. limit such costs..

(19) and in line with a similar to those under examination for the review of the fees for the aggregation of readings, launched by Resolution 343/2007.. 7 February 2008 – Authority Resolution 10/2008 amended Annex A of Resolution 156/2007 (the “Retail Service Code”). The Authority believes it necessary: •. to provide for application of a fixed contribution if a new offtake point is activated or a previous one is disconnected, and also if a consumer requests disconnection, regardless of whether or not the supply is of a seasonal nature;. •. to provide for application of the same contribution to services relating to changes in the power supplied;. •. to correct material errors discovered after publication of resolutions 311/2007 and 349/2007.. 14 February 2008 – Authority Resolution 15/2008 amended and added to Resolution 157/2007 concerning access to the database for making commercial offers for the supply of electricity and/or natural gas. The main changes introduced include: •. the introduction of measures regarding coverage of the costs incurred by electricity and natural gas distributors in implementing rules concerning access to databases, and definition of limits and obligations, for retailers, regarding the correct use of databases;. •. definition of the databases and the timing of implementation of the preparations necessary before the exchange of data between distributors and retailers can be. •. the promotion and adoption, also jointly by several distributors, of dedicated telecommunications platforms, providing standardised tools for exchanging databases necessary in order to minimise the costs incurred by retailers and linked to each request for access to the data;. •. identification of an initial phase of implementation of the measures in this resolution, during which distributors must carry out investments and incur the operating costs necessary in order to adapt their information systems to enable them, from 1 October 2008, to manage retailers’ requests for access to databases;. •. identification of a phase of implementation of the measures in this resolution, following the transition period, during which distributors must carry out investments and incur the operating costs primarily needed to update and. Consolidated quarterly report for the three months ended 31 March 2008. 19. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. operative;.

(20) maintain their information systems, so that they are able to readily respond to requests for access to databases by retailers and transmit the continually updated data to them; •. recognition of operating costs linked to the distributor’s activities during the transition period, based on the average cost obtained via critical analysis of proposals provided by distributors;. •. coverage of the above operating costs through a specific tariff component to be applied to consumers to which the treatment of the databases relates;. •. coverage of the costs incurred by distributors, following the transition period, through ordinary annual tariff updates, to be applied only to consumers to which the treatment of the databases relates.. 20 February 2008 – Authority Resolution 16/2008 contained urgent measures concerning the publication of data on the change in residual area offtakes, following changes to the hourly treatment of offtake points (amendment of Annex A of Resolution 278/2007 – the Integrated Text of Load Profiling Regulations). With effect from 1 April 2008, the hourly load profiling regulations for the offtake of electricity, as defined by Resolution 118/2003, have been replaced by load profiling by time band, as defined by the Integrated Text of Load Profiling Regulations, extending hourly treatment to all LV offtake points with available capacity in excess of 55 kW and equipped with electronic meters “in service” (remote operation).. 21 February 2008 – Authority Resolution 18/2008 introduced equalisation of settlement mechanisms between the Single Buyer and suppliers of services subject to additional safeguards following quantification of the amounts relating to load profiling. The measure aims to complete the regulatory framework introduced by Resolution 156/2007 - “Integrated Text of the Electricity and Gas Authority’s provisions governing the sale of electricity to final customers requiring additional safeguards and protection (the “Retail Service Code”) – by defining equalisation mechanisms for electricity procurement costs incurred by each supplier of services subject to additional safeguards in serving consumers, and by regulating amounts, between suppliers of services subject to additional safeguards and distribution companies, for electricity used by the companies themselves in distribution and transmission and “differential losses”.. Consolidated quarterly report for the three months ended 31 March 2008. 20. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. electricity procurement costs for services subject to additional safeguards and defined.

(21) 26 February 2008 – Authority Resolution 7/2008 warned grid operators to comply with measures regarding the communication of electricity meter readings to calculate incentives for solar power plants.. 5 March 2008 – Authority Resolution 25/2008 introduced compensation of electricity marketing costs incurred by suppliers of services subject to additional safeguards in 2008. The mechanism is capable of settling any differences between revenues deriving from application of the sales and marketing revenues component (as defined by paragraph 9bis.1 of the Retail Service Code) and permitted marketing costs. The mechanism applies to all suppliers of services subject to additional safeguards, operating as separate companies (that is companies that, as provided for by the Law Decree of 18 June 2007, provide services subject to additional safeguards via a specific organisation, separate from the distribution company and operating in an area with more than 100,000 consumers).. 12 March 2008 – Authority Resolution 29/2008 introduced electricity offtake profile conventions for public lighting users not treated on an hourly basis. The Authority believed it necessary to introduce new profiling conventions, based on the proposals in consultation document 24/2007 of 18 June 2007. The new methods are to come into force at the same time as the procedure for profiling by time band set out in the Integrated Text of Load Profiling Regulations.. Text for 2008-2011 and introduced measures regarding the economic conditions of the grid connection service. The measures provide for: •. introduction of two distinct equalisation regimes for marketing costs, one to be applied to distribution companies that have established a separate company to supply services subject to additional safeguards, and one to those who have combined distribution services with the sale of electricity one the market subject to additional safeguards, with a view to protecting the financial position of distribution companies;. •. an equalisation mechanism for revenues deriving from the LV metering service. The mechanism aims to guarantee that returns on investments in meters and. Consolidated quarterly report for the three months ended 31 March 2008. 21. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. 13 March 2008 – Authority Resolution 30/2008 amended and added to the Integrated.

(22) electronic reading systems, regarding LV offtake points, and the right to depreciate electro-mechanical meters retired early to be replaced by electronic meters, are granted to distribution companies who have effectively carried out such investments; •. introduction of penalties for distribution companies who do not comply with the obligation to install LV electronic meters set out in Resolution 292/2006;. •. updating of the Special Tender Provisions for the period 2008-2011, bringing company-specific equalisation for each company into line with the effective level of its investments;. •. determination of the share of the unit V1 and D1 tariffs to cover direct HV distribution marketing costs, and direct costs of transformation from HV to MV, as defined by articles 36 and 37 of the Integrated Text for 2008-2011;. •. indexation of standard direct unit costs, confirming the relevant ratios, associated with the different types of plant, used in the second regulatory period.. 27 March 2008 – Authority Resolution 36/2008 contained urgent measures for the launch of hourly treatment for the purposes of dispatching for LV offtake points with available capacity in excess of 55 kW (amendments to Annex A of Resolution 278/2007 Integrated Text of Load Profiling Regulations). From 1 April 2008, the Integrated Text of Load Profiling Regulations has introduced load profiling by time band: all VHV, HV, MV and LV offtake points (in the latter case limited to points with available capacity in excess of 55 kW), if equipped with hourly or electronic meters, must be treated on an hourly basis (that is to say: reading and use of hourly offtake profiles for the appropriate. period following the entry into service of the meter with which they are equipped, or from the first day of the second subsequent conventional two-monthly period, where entry into service of the meters takes place during the last fifteen days of the month. The Authority believes it necessary to put off hourly treatment of LV offtake points with available capacity in excess of 55 kW, which are not subject to hourly treatment at 31 March 2008, by six months for dispatching purposes. It has done this while maintaining the obligation to record hourly offtakes for such points (according to the procedures and timing provided for in the Integrated Text of Load Profiling Regulations) and to make the data available, pursuant to the Retail Service Code and Resolution 111/2006.. Consolidated quarterly report for the three months ended 31 March 2008. 22. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. technical and commercial purposes) from the first day of the conventional two-monthly.

(23) 28 March 2008 – Authority Resolution 37/2008 updated the economic conditions for the sale of electricity on the protected market for the quarter April - June 2008.. 28 March 2008 – Authority Resolution 38/2008 updated the tariff components designed to cover general electricity system charges and additional components for the quarter April - June 2008, issuing measures regarding the Electricity Industry equalisation Fund.. 28 March 2008 – Authority Resolution 42/2008 introduced regulations for dispatching and transport (electricity transmission, distribution and metering) in the event of one dispatching user taking the place of another on the same active offtake point, or the attribution to a dispatching user of a new or previously disconnected offtake point (switching). This resolution holds it necessary: •. to define rules governing switching limited to certain essential profiles, in order to ensure application from 1 April 2008;. •. in accordance with the provisions of Resolution 118/2003, to ensure that switching takes effect from the first day of the second month after the one in which the request is received by the distribution company;. •. to require the outgoing dispatching user to communicate cancellation of the supply contract to the distribution company, also establishing the items of information to be communicated and the timing to be complied with by the distribution company, with regard to the reporting of material errors and communication to the outgoing dispatching user; to require suppliers of services subject to additional safeguards to communicate a customer’s non-compliance with the requirements for inclusion in the additional safeguards category pursuant to article 4 bis of the Retail Service Code;. •. to define specific procedures where switching involves a new or disconnected offtake point, requiring that the timing of inclusion of the offtake point for which requests have been received in the dispatching contract should coincide with the expected timing of the start-up of supply;. •. to provide for a transition period in order to allow distribution companies to finalise the appropriate IT procedures, putting of the obligation to make available historical meter readings until 1 October 2008.. Consolidated quarterly report for the three months ended 31 March 2008. 23. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. •.

(24) 31 March 2008 – Authority Resolution 43/2008 amended Annex A of Resolution 111/2006 concerning the launch of the standard determination of time bands for the purposes of the dispatching service. The Authority believes it necessary to update the resolution to take account of the measures introduced by the Integrated Text of Load Profiling Regulations and the Integrated Text, and the consequent repeal of Resolution 118/2003 and the associated Integrated Text for the previous regulatory period.. 28 March 2008 – Authority Resolution 45/2008 amended the time limit for submitting switching requests for offtake points owned by Rete Ferroviaria Italiana SpA. The term of 1 May 2008 established by paragraph 3.3 of Resolution ARG/elt 42/2008 was thus moved to 18 April 2008.. The performance of energy services During the first three months of 2008 Acea Distribuzione SpA injected 2,997 GWh of electricity into the grid, representing an increase of 4.15% on the same period of 2007.. GWh. Q1 2008. Q1 2007. Single Buyer. 1,319.7. 1,629.3. Overseas. 107.8. 106.6. Total regulated market. 1,427.5. 1,735.9. Free market. 1,569.3. 1,141.7. Overall total. 2,996.8. 2,877.6. Revenues from the supply of transport and metering services to regulated and free market customers amounted to 69 million euros, which is substantially in line with the same period of 2007. However, a breakdown of these revenues shows that the amount deriving from the transport of electricity for regulated customers is down, whilst the amount attributable to free market customers is up.. Consolidated quarterly report for the three months ended 31 March 2008. 24. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. The following table shows a breakdown..

(25) Finally, revenues from the supply of transport and metering services have been reduced by 1.8 million euros due to equalisation, which, in the period under review, had zero impact. This substantially reflects the update of tariffs introduced by the third tariff cycle that came into effect from 1 January 2008: this has introduced further equalisation components, such as the difference between losses through the distribution network and standard losses included in tariffs. Company-specific equalisation amounts to 8.1 million euros. This is down 0.3 million euros on the first three months of 2007 and was calculated on the basis of the rules applicable in the second tariff cycle, given the impossibility of updating the rules due to a lack of data and information. Variable costs total 11.5 million euros and are in line with the same period of 2007. The primary margin thus amounts to 65.6 million euros, recording an increase of 1.5 million euros compared with the same period of 2007.. Staff. Average number of staff Average at 31 March 2008 Average at 31 December 2007 Average at 30 September 2007 Average at 30 June 2007 Average at 31 March 2007. 1,603 1,616 1,619 1,621 1,620. by the public lighting business. Staff costs for the first three months of 2087, including capitalised costs, amount to 22.3 million euros, representing an increase of 1.8 million euros compared with the same period of 2007.. Consolidated quarterly report for the three months ended 31 March 2008. 25. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. The above table shows the average as a whole and thus takes account of staff employed.

(26) ENERGY SALES AND GENERATION. ELECTRICITY PRODUCTION (the financial results and quantities are shown on a non-proportionate basis). Performance of production During the first three months of 2008 the AceaElectrabel Produzione Group’s net production amounted to 1,176.5 GWh. This figure is 6.4% up on the same period of the previous year. With regard to the change in the method of consolidating Tirreno Power, this company’s net production is shown below and compares with a figure of zero for the. GWh. Q1 2008. Q1 2007. Increase/(Decrease). %. AEP – thermoelectric. 87.4. 136.6. (49.2). -36.0%. AEP – hydroelectric. 80.1. 74.0. 6.1. 8.3%. AEP – Leinì thermoelectric. 454.2. 0.0. 454.2. 100%. Total AEP. 621.7. 210.6. 411.1. 195.2%. Voghera. 0.0. 532.6. (532.6). -100%. Roselectra. 543.0. 513.6. 29.4. 5.7%. Longano – wind power. 11.9. 0.0. 11.9. 100%. Total net production - AEP Group. 1,176.5. 1,256.7. (80.2). -6.4%. Tirreno Power. 3,421. 0.0. (3,421). 100%. Total net production. 4,597.5. 1,256.7. 3,340.8. 265.8%. Consolidated quarterly report for the three months ended 31 March 2008. 26. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. first quarter of 2007. The table is as follows:.

(27) Results of operations The AceaElectrabel Produzione Group reports total revenue of 126.5 million euros for the period from the sale of electricity. Revenue growth of 7.9 million euros reflects increased revenue at Roselectra following its full entry into service (up 10.3 million euros) and a reduction in revenue reported by Voghera, which recorded revenue of 3.8 million euros in the first quarter of 2008 compared with 5.1 million euros in the same period of 2007. The result recorded by Voghera essentially reflects the plant’s shutdown due to a breakdown. This company’s revenues thus include an insurance payout of 4 million euros. Revenue from urban heating amounts to 1.6 million euros.. Fuel costs during the period amount to 71.3 million euros, including 38 million euros to meet the requirements of AceaElectrabel Produzione SpA and the Voghera plant, and 33.46 million euros for the Roselectra plant.. The AceaElectrabel Produzione Group’s gross operating profit amounts to 22.5 million euros, compared with 19.1 million euros for the first three months of 2007.. The operating performance was heavily influenced by the breakdown at the Voghera plant on 16 November 2007, with the primary margin recording a reduction of 8.4 million euros compared with the same period of 2007. The plant was shut down for the entire period and is expected to re-enter service in June of this year.. compared with fuel costs of 193.3 million euros. Compared with the previous year, the company increased its production by 444 GWh (15%) with respect to the previous year.. Staff AceaElectrabel Produzione SpA’s staff at 31 March 2008 total 182 (54 attributable to the Acea Group), whilst Tirreno Power’s staff amount to 617 (93 attributable to the Acea Group).. Consolidated quarterly report for the three months ended 31 March 2008. 27. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. Tirreno Power reports revenue from the sale of electricity of 356.4 million euros,.

(28) SALE OF ELECTRICITY ON THE REGULATED AND FREE MARKETS AND SALE OF GAS (the financial results and quantities are shown on a non-proportionate basis). Results of operations Revenue for the period totals 784.3 million euros, representing a 23% increase on the same period of the previous year due to the start-up of Elettria’s sales activities (in Tuscany). The cost of procuring electricity for the regulated market declined by 3% compared with the same period of 2007, after equalisation. This reflects the reduced volume purchased and market price trends. The Single Buyer, which replaced Enel Distribuzione SpA once trading on the Electricity Exchange began, determines sale prices on a monthly basis in view of the actual costs incurred and in accordance with the procedures established by the Authority. The purchase cost for the period is 125.3 million euros before equalisation. This item also includes estimated equalisation, designed to cover the differences between the purchase cost and sale price: this form of equalisation is mandatory for electricity sold on the regulated market. The positive amount of 7.8 million euros reduces procurement costs for the period and represents the best estimate of the above differences for the first three months of 2008: the definitive amount will only be determined at the end of the year and may differ from the estimate for the first three months as a result of market price movements.. 10.3 million euros for the first three months of 2007.. The average number of staff employed in the sale of electricity and gas amounts to 268 (154 attributable to the Group). At 31 March 2007 the figure was 242 (142 attributable to the Group).. Consolidated quarterly report for the three months ended 31 March 2008. 28. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. The retail companies report gross operating profit of 6.5 million euros, compared with.

(29) WATER SERVICES. LAZIO REGION Acea Ato2 SpA In accordance with the so-called Galli Law, Acea Ato2 SpA has provided integrated water services in Lazio Region’s ATO 2 Area since 1 January 2003, operating under a thirty-year concession. In accordance with the program approved by the Mayors’ Conference, management of the service will be taken over gradually before reaching a total of 3,600,000 people served. During the first quarter of 2008 the company acquired contracts to manage water services in the municipality of Cerveteri with effect from 1 February 2008. This adds to the contracts previously acquired over the years: 2003 – the municipalities of Rome, Monterotondo, Tivoli, Guidonia-Montecelio, Grottaferrata, Ciampino and Fiumicino, in addition to the Simbrivio Consortium, an aqueduct system that supplies water on a wholesale basis to 45 municipalities and 2 consortia; 2004 - the municipalities of Castel Madama, Mentana, Fonte Nuova, Marcellina, San Gregorio da Sassola, Ciciliano, Pisoniano, Rocca S.Stefano, Montelanico and Albano Laziale, as well as the agreement to take over the running of the aqueduct system from a consortium set up by the former Southern Italy Development Fund and previously managed by Lazio Regional Authority, which services Pomezia, Ardea and Lanuvio; 2005 - the municipalities of Casape, Carpineto Romeno, Sambuci, Affile, Arcinazzo Romeno – excluding the CO.RE.CALT. Consortium- , Gavignano, Gorga, Cervara di. Marinella; 2006 – the Doganella Consortium’s aqueduct system and sewerage and water treatment in 3 of the 8 municipalities in the Consortium (Frascati, Montecompatri, Monteporzio Catone, Zagarolo, Palestrina, San Cesareo and Colonna,), integrated water services in the municipalities of Fiano Romeno, Jenne, Nemi, Vejano, Segni, Saracinesco, Lariano, Lanuvio, Sacrofano, Tolfa, Allumiere, Pomezia (provisional management of sewerage and water treatment services), Sant’Oreste, Nazzano, Castelnuovo di Porto, Genzano, Velletri and Ariccia, sewerage and water treatment services for other municipalities in the Prenestino Ecological Consortium, such as Poli, Cave (acquired from 14 November 2006), Rocca di Cave, Genazzano, Capranica Prenestina (protected water services) and. Consolidated quarterly report for the three months ended 31 March 2008. 29. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. Rome, Subiaco, Castel Gandolfo, Vicovaro, Artena, Trevignano Romeno and Santa.

(30) Olevano Romano (protected water services), and integrated water services in the municipalities of San Vito Romano, Bellegra, Castel San Pietro Romano, Roiate and Gallicano, for which the Prenestino Ecological Consortium also manages water services. Integrated water services in the municipality of Filacciano were also assigned to the company in 2006. 2007 – the municipalities of Torrita Tiberina, Riano, Marino, Oriolo Roman and Ponzano Romano, water services in the municipalities of Rocca di Cave, Poli and Genazzano, thus completion the acquisition of all integrated water services in these municipalities, after the previous assignment of sewerage and water treatment services to the Prenestino Ecological Consortium.. The situation at 31 March 2008 is thus the following: •. Municipalities acquired: 75, equivalent to 3,401,170 people (source: ISTAT 2001), and representing over 94% of the total. This is in addition to the aqueduct systems of the Simbrivio Consortium, the former Southern Italy Development Fund, the Doganella Consortium and the above Nemi-Genzano and Prenestino Ecological consortia.. Moreover, at 31 December 2007 assessments for the following municipalities have been completed and the documentation needed for acquisition of the related contracts has been prepared: •. Northern Area: Capena, Civitella San Paolo and Rignano Flaminio;. •. Eastern Area: Agosta, Anticoli Corrado, Canterano, Cerreto Laziale, Filettino,. Vallepietra; •. Southern Area: Valmontone and Rocca di Papa;. •. Western Area: Anguillara Sabazia, Canale Monterano, Civitavecchia and Manziana.. A number of acquisitions are, however, on hold. In the Eastern Area, the authorities responsible for the municipalities of Vallepietra and Trevi nel Lazio, where assessments were completed some time ago, have raised a number of difficulties, whilst problems relating to the municipalities of Agosta, Marano Equo and Arsoli regard previous legal disputes.. Consolidated quarterly report for the three months ended 31 March 2008. 30. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. Gerano, Mandela, Rocca Canterano, San Polo dei Cavalieri, Trevi nel Lazio and.

(31) Moreover, the municipalities of Rio Freddo (in a note sent to Acea ATO2) and Sant’Angelo Romano and the Mignone Consortium (in an informal communication to the Technical and Operating Secretariat) have announced their unwillingness to adopt integrated water services. The Municipality of Filettino, pursuant to Legislative Decree 152/2006, has decided not to proceed with transfer of its integrated water services. In the Western Area, the Municipality of Bracciano has expressed its unwillingness to take part in technical assessments. Acquisition of the following municipalities forming part of the Aniene Mountain Community, for which adoption of integrated water services is optional pursuant to paragraph, 5 of art. 148 of Legislative Decree 152/06, is uncertain: Camerata Nuova, Cineto Romano, Licenza, Mandela, Percile and Rocca Giovine. Assessments (including those for the municipalities already acquired) have thus been completed in 101 municipalities, representing approximately 3,535,289 people (source ISTAT 2001) or around 98.2% of the total.. Tariffs The price for integrated water services was established on the basis approved by Resolution 4/2002 passed by the Mayors’ Conference on 10 December 2002. This envisages the progressive convergence of pre-existing water service prices in the municipalities acquired with the price set out in the Area Plan, at the latest within six years from 2003.. 34.5 million euros and is substantially in line with the figure for the comparative period (34.4 million euros for the first quarter of 2007).. Staff. Average number of staff Average at 31 March 2008 Average at 31 December 2007 Average at 30 September 2007 Average at 30 June 2007 Average at 31 March 2007. Consolidated quarterly report for the three months ended 31 March 2008. 1,546 1,546 1,548 1,457 1,537. 31. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. Acea Ato2 SpA’s gross operating profit for the first three months of 2008 amounts to.

(32) Acea Ato5 SpA Acea Ato5 SpA began operating in the last quarter of 2003 and, for the three months ended 31 March 2008 reports gross operating profit of 2.6 million euros, compared with 1.1 million euros for the same period of the previous year. The increase reflects the recognition of income linked to the adjustment of costs for previous years. The start-up of the management of integrated water services in ATO 5 has been completed, in full accordance with the operating plan for contract acquisitions agreed with the Technical and Operating Secretariat.. In February 2007 a tariff review carried out by the Area Authority came to a positive conclusion. This review, which was based on the experience acquired over the first four years of operation and the financial statements for 2003, 2004 and 2005, established the tariff for 2006 and future movements up to the end of the concession term (2032). Tariff movements take account of the operating costs and capital expenditure to be incurred in order to keep pace with volume growth, with the dual aim of achieving the quality and volume targets for integrated water services set down by the Area Authority and of safeguarding the operator’s stable financial position. The process also resulted in a settlement between the company and the Area Authority resolving the issue of higher operating costs incurred for the three-year period 2003-2005: the settlement contains a recognition of the higher costs less amounts relating to (i) the portion of the tariff – represented by depreciation and the return on invested capital after allowing for inflation – relating to investment provided for in the Area Plan and not carried out in the first three years, (ii) the accrued rate of inflation applicable to concession fees, and (iii) fines for. The amount due from the Area Authority as a result of the above settlement totals 10,700 thousand euros, and is to be paid by the Authority in three annual instalments to be paid by 31 December of each year. The first instalment (3.6 million euros) fell due on 31 December 2007 and may be collected by offsetting the sum due against the accrued concession fee payable at this date.. The average number of staff at 31 March 2008 stands at 237.. Consolidated quarterly report for the three months ended 31 March 2008. 32. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. breaches of contract in the three years..

(33) TUSCANY REGION Acque SpA and its subsidiaries The companies report total gross operating profit of 12 million euros for the period (45% amounts to 5 million euros). This marks an increase of 2 million euros compared with the previous year. The companies serve a total of around 720,000 people distributed across 57 municipalities in the provinces of Pisa, Florence, Siena, Pistoia and Lucca. The average number of staff employed by the Acque Group at 31 March 2008 stands at 502, of which 45% (226 staff) is included in the consolidated total. The subsidiary, Acque SpA, which is responsible for managing the area, has begun to use 255 million euros facility granted in October 2006 by a syndicate of banks and earmarked to finance planned investment of approximately 650 million euros.. Publiacqua In ATO 3 Medio Valdarno, the process of improving and reorganising the subsidiary, Publiacqua SpA, continued. Efforts focused on collecting receivables and changing the internal organisation so as to improve the quality of service and reduce operating costs. The General Meeting for the ATO 3 Medio Valdarno area, held in July 2007, approved the proposed changes to the Area Plan, calling for inclusion of the municipalities in the Chianti district in the ATO, as well as a tariff review so as to maintain a high level of investment in ATO 3. Thus the vast programme of infrastructure replacement, renewal and extension aimed at ensuring that all users enjoy an adequate level of integrated water services will continue. Details of the investments planned for the period 2007–2011 are. The Publiacqua Group contributes gross operating profit of 13.4 million euros to the Acea Group’s results (40% amounts to 5.4 million euros), marking an increase of 3.7 million euros on the same period of 2007. The average number of staff employed by the company at 31 March 2008 stands at 681, of which 40% (283 staff) is included in the consolidated total.. The Acea Group maintains a presence in ATO 1 Northern Tuscany via its subsidiary, CREA, which has interests in GEAL (the integrated water services operator in the town of Lucca), AZGA Nord and Lunigiana Acque.. Consolidated quarterly report for the three months ended 31 March 2008. 33. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. currently being worked out with the Area Authority and municipal authorities..

(34) The average number of staff employed by the company at 31 March 2008 stands at 50.. UMBRIA REGION UMBRA ACQUE In December 2007 Acea was finally selected by the Area Authority for ATO 1 Perugia as the private industrial shareholder to take a minority interest in Umbra Acque SpA. A stake in the company was acquired on 1 January 2008. The Ordinary General Meeting of the shareholders of Umbra Acque, called to re-elect the Board of Directors, four members of which are to be nominated by Acea, was held on 20 February 2008. Umbra Acque has been consolidated on a proportionate basis from 1 January 2008, based on the same percentage interest held since the beginning of the year. The company contributed gross operating profit of 3.2 million euros for the first quarter. The average number of staff employed by the company at 31 March 2008 stands at 327, of which 40% (131 staff) is included in the consolidated total.. CAMPANIA REGION GORI In July Sarnese Vesuviano acquired a further 9,266 shares in Gori, raising the Group’s interest to 37.03%. The company contributes gross operating profit of 11.4 million euros to the Acea Group’s results, marking a like-for-like increase of 134% on the 3.7 million euros of the same period of 2007. The average number of staff employed by GORI SpA amounts to 729 (the Group’s share. Consolidated quarterly report for the three months ended 31 March 2008. 34. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. being 270)..

(35) WASTE TO ENERGY. TEA Group The acquisition of the Tad Energia Ambiente Group in July 2006 has allowed Acea SpA to take on a significant role amongst waste to energy operators. Tad Energia Ambiente SpA operates two waste to energy plants with a combined installed power of 20 MW, a Refuse Derived Fuel (RDF) plant in Paliano and a disposal plant in Orvieto. A brief description of the activities carried out by the main companies in the Group is provide below.. TERNI EN.A. This company produces energy from renewable sources, above all in the form of biomass-fuelled waste to energy production, consisting of paper mill pulp which, in addition to green certificates, benefits from the incentives provided in the CIP6 1992 measure. The plant located in Terni ran regularly and smoothly throughout 2007, enabling total production of 78,912 MWh, with an average of 10.00 MWh/h, and the sale of 70,593 MWh of electricity. This result is in line with the improved production performance of biomass-fuelled waste to energy plants. The amount of waste to energy biomass produced amounted to 100,000 tonnes of pulp, thus marking the definitive replacement of wood, which began in 2006, and confirming the remarkably positive impact on the operating performance.. obtaining these excellent results. This consolidates the achievement of financial independence that began in 2006, thereby facilitating ordinary operations and extraordinary maintenance, as well as regular payment of project financing instalments and achievement of planned investment targets.. EALL The company has started up a Waste To Energy (WTE) plant at San Vittore del Lazio to produce electricity from renewable sources in full compliance with the EU’s greenhouse gas reduction targets, drawn up as a result of the Kyoto Agreement. These targets are described in the European Council’s “Common Position”, a document approved by the. Consolidated quarterly report for the three months ended 31 March 2008. 35. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. The smooth running of the plant and the parallel cost-cutting initiative contributed to.

(36) European Parliament. This contemplates requesting member states to simplify the related authorisation procedures in order to speed up plant construction. The plant in question, which was designed in accordance with Law 9/10 of 1991 and CIP6 of 1992, uses approximately 100,000 tonnes of RDF a year. In 2007 the plant produced 80,512.30 MWh of energy and reported sales totalling 71,665.22 MWh. The overall result was strongly affected by technical problems that occurred during the second half of the year, leading to a shortfall in saleable energy of 8,410.30 MWh compared with initial budget projections. The plant’s generating capacity was seriously affected by a reduction in the generating capacity of the steam turbine, which had an impact on the plant’s output. A “stopgap” technical measure carried out at the end of July, whilst enabling reactivation of power generation, did not bring production back to normal levels, resulting in loss of output of just over 10%, and a consequent shortfall in energy generated compared with budget projections. The company promptly implemented appropriate measures to bring the plant back into normal operation, including acquisition of replacement equipment that will be available by the end of the first half of 2008. On 17 January 2008 EALL registered a contract at the Rome Tax Office regarding execution of works to upgrade the existing waste to energy plant and increase its capacity to 20 MW. The contract was awarded to a temporary association of companies, including Termomeccanica Ecologica SpA and the Consorzio Cooperative di Produzione e Lavoro. The company also launched procedures for the third line. The project has been approved by the Lazio Regional Authority’s Technical Scientific Committee and in January 2008 it. also held in January 2008 with a view to issuing Integrated Environmental Authorisation.. SAO SAO owns the waste dump located in the municipality of Orvieto and manages urban refuse and special waste. Over recent years its activities have become progressively more regulated with the explicit aim of ensuring strong environmental safeguards and effective controls. During the first half of 2007 analysis and dialogue took place with authorities aimed at obtaining their approval for a tariff plan that would enable the company to cover operating costs and receive adequate remuneration.. Consolidated quarterly report for the three months ended 31 March 2008. 36. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. successfully passed an Environmental Impact Assessment. A Services Conference was.

(37) With Resolution 8 of 13 August 2007 the Mayors’ Conference of ATO 4 in the Umbria region approved the agreement that regulates the public service relating to the selection, treatment and disposal of municipal and assimilated waste in the municipalities of ATO 4 and special waste deriving from treatment of the latter. The Mayors’ Conference also approved the tariff plan regarding the transfer of this waste to treatment and disposal plants in Orvieto managed by SAO during the period 2007–2018, with effect as of 1 January 2007. In July 2007 work began on building the first operational section of the eighth tier of the rubbish dump in use. The first phase of these works was completed in November, and the entire operational section is nearing completion.. ENERCOMBUSTIBILI This company manages an RDF production plant in Castellaccio di Paliano (FR). The plant is authorised to treat dry waste deriving from urban solid waste and special waste, producing an annual total of up to 120,000 tonnes of high-calorie RDF in accordance with the law. The RDF produced is burnt entirely at EALL’s waste to energy plant. In February 2008 ENERCOMBUSTIBILI signed a contract with ENERGONUT, a Veolia Group company, regarding the treatment of 15,000 tonnes of RDF per year at the Pozzilli plant. This contract will enable the company to extend disposal of its RDF to plants other than those operated EALL.. The company was set up in 2001 in order to manage ancillary services associated with the integrated water cycle, especially sludge disposal activities for sludge produced both by agricultural activities and by composting centres. Aquaser’s unique activity has become increasingly strategic, so much so that in March 2007 Acea increased its stake and consequently acquired control of the company. In April 2007 Acea ATO 2 made the company responsible for the loading, transportation, and final disposal of biological sludge from the treatment plants located in ATO 2 – Central Lazio. The amount of sludge involved amounts to 40,000 tonnes a year and the contract is worth 7,520,000 euros.. Consolidated quarterly report for the three months ended 31 March 2008. 37. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. AQUASER.

(38) Aquaser plans to complete the disposal cycle independently and with notable cost reductions both for itself and for the Group’s water companies, via the acquisition of composting plants.. ECOMED The company (50:50 owned by Acea and AMA) came out of liquidation on 29 January 2007 in order to set up the CO.E.MA Consortium.. CONSORZIO ECOLOGICO MASSINETTA The COEMA Consortium, in which Acea SpA has an indirect 33.5% stake via Ecomed Srl, was set up in January 2007 together with Pontina Ambiente Srl. The consortium has submitted a request for authorisation (Integrated Environmental Authorisation) to build a. Consolidated quarterly report for the three months ended 31 March 2008. 38. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. 40 MWe heat treatment plant in the Lazio region, using gasified RDF..

(39) BASIS. OF. PRESENTATION. AND. CONSOLIDATION. FOR. THE. CONSOLIDATED QUARTERLY REPORT FOR THE THREE MONTHS ENDED 31 MARCH 2008. General information The Acea Group’s consolidated quarterly report for the three months ended 31 March 2008 was approved by the Board of Directors on 12 May 2008. The Parent Company, Acea SpA, is an Italian company whose shares are traded on the Milan stock exchange. The Acea Group’s principal areas of activity are described in the “Operating review”.. Compliance with IAS/IFRS The Acea Group’s consolidated quarterly report for the three months ended 31 March 2008 has been prepared in accordance with the provisions of art. 81 of the “Regulation for Issuers” no. 11971/1999 and subsequent amendments, and in conformity with IAS 34, which regulates interim financial reporting. The report has been prepared under the IFRS effective at the balance sheet date, including the IFRS recently adopted by the International Accounting Standards Board (IASB), International Accounting Standards (IAS) and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) and of the Standing Interpretations Committee (SIC). The Acea Group adopted International Financial Reporting Standards (IFRS) as of 2005, with the date of transition to IFRS established as 1 January 2004. The last consolidated financial statements prepared under Italian GAAP relate to 31 December 2004.. accounts have been prepared under IFRS.. Basis of presentation The consolidated quarterly report for the three months ended 31 March 2008 consists of the balance sheet, income statement, cash flow statement and statement of changes in shareholders’ equity, all of which have been prepared under IAS 1. The report also includes notes prepared under the IAS/IFRS currently in effect. The income statement is classified on the basis of the nature of expenses, whilst the cash flow statement is presented using the indirect method.. Consolidated quarterly report for the three months ended 31 March 2008. 39. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. The comparative amounts for the same period of 2007 shown in the consolidated.

(40) The consolidated quarterly report for the three months ended 31 March 2008 has been prepared in euros. Amounts in the income statement and balance sheet have been rounded off to the nearest thousand euros, whilst those in the notes have been rounded off to the nearest million euros.. Accounting standards and policies The most significant accounting standards and policies are described in the “Notes to the consolidated financial statements for the year ended 31 December 2007”. IFRIC 12, the interpretation governing the accounting treatment of service concession arrangements, which was approved at the end of 2006 and has yet to be endorsed, has not been applied in this report.. Use of estimates In application of IFRS, preparation of the consolidated quarterly report for the three months ended 31 March 2008 requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the balance sheet date. The actual amounts may differ from such estimates. Estimates are used in order to make provisions for credit risk, obsolescent inventories, asset write-downs, employee benefits, taxes and other provisions. The original estimates and assumptions are periodically reviewed and the impact of any change recognised in the income statement.. Consolidation policies and procedures The basis of consolidation includes the Parent Company, Acea SpA, and the companies over which it directly or indirectly exercises either control, via a majority of the voting rights, or dominant influence. The basis of consolidation also includes joint ventures. The accounts of subsidiaries are prepared for the same accounting period and using the same accounting standards as those adopted by the Parent Company. Consolidation adjustments are made to bring into line any dissimilar accounting policies that may exist. All intercompany balances and transactions, including any unrealised profits on intragroup transactions, are eliminated in full. Unrealised losses are eliminated unless costs cannot subsequently be recovered.. Consolidated quarterly report for the three months ended 31 March 2008. 40. WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9. The quarterly report is unaudited..