Condensed Interim Financial Statements 2008

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(1)GROUP. Condensed Interim Financial Statements 2008. Board of Directors’ meeting. The consolidated interim report 2008 have been translated from those issued in Italy, from the Italian into the English language, solely for the convenience of the international readers. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. of 30 July 2008.

(2) GROUP. CONTENTS. Management report on operations The Acea Group. 4. Governance bodies. 5. Acea Group financial highlights for the first half of 2008. 6. Group operating review. 6. Financial review. 34. Other information. 55. Significant subsequent events. 65. Outlook. 66. Income statement and balance sheet. 69. Cash flow statement. 73. Statement of changes in shareholders’ equity. 74. Basis of presentation and consolidation. 76. Financial highlights of companies consolidated on a proportionate basis. 81. Accounting standards and policies. 84. Financial risk management. 106. Segment information. 107. Notes to the consolidated income statement. 114. Notes to the consolidated balance sheet. 140. Service concession arrangements. 194. Related party transactions. 195. Update of major disputes and litigation. 200. Additional disclosures on financial instruments and risk management policies. 210. Commitments and contingencies. 226. Annexes. 232. Condensed Interim Financial Statements 2008. 2. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. Notes to the financial statements.

(3) GROUP. Condensed Interim Financial Statements 2008. 3. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. Management report on operations.

(4) GROUP. The Acea Group Acea SpA’s shareholder structure at 30 June 2008 is as follows:. 5%. 9%. 3%. 28%. 51% 4%. Comune di Roma Free float Schroders Inv. Ltd. Pictet Asset Management SA Suez Caltagirone. * The above chart only shows equity investments of more than 2%, as confirmed by CONSOB data.. Condensed Interim Financial Statements 2008. 4. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. At the same date, the Group structure comprises the following principal companies:.

(5) GROUP. Governance bodies Board of Directors Chairman Fabiano Fabiani. Chief Executive Officer Andrea Mangoni. Directors Marco Maria Bianconi Massimo Caputi Jean Louis Chaussade Dino Piero Giarda Jacques Hugè Luigi Spaventa Luisa Torchia. Board of Statutory Auditors Chairman Maurizio Lauri. Francesco Lopomo Roberto Pertile. Alternate Auditors Claudio Bianchi Claudio Valerio. Independent Auditors Ernst & Young S.p.A.. Condensed Interim Financial Statements 2008. 5. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. Auditors.

(6) GROUP. Acea Group financial highlights for the first half of 2008 FIRST. FIRST. HALF. HALF. 2008. 2007. 1,473.7. 1,192.3. +23.4. EBITDA. 294.1. 245.8. +19.7. EBIT. 174.4. 138.8. +25.6. 74.2. 69.9. +6.2. (€M) CONSOLIDATED REVENUE. NET PROFIT/(LOSS) ATTRIBUTABLE TO. % INCREASE/ (DECREASE). THE GROUP. Group operating review Energy networks Demand for electricity in Italy during the first six months of 2008 was up 3.1% compared with the same period of 2007. Peak demand on the national grid reported at noon on 26 June 2008 amounted to 55,292 MW, up approximately 961 MW (1.77%) on the peak reported in the first half of 2007 (54,331 MW, recorded at 11.00am on 26 June 2007). Domestic production met 87.8% of Italy’s requirements, whilst the remaining 12.2% was covered by imports. 71.7% of total production was from thermoelectric plants, 12.6% from. % increase/(decrease) 2008/2007. Electricity demand in Italy in the period 1 January -30 June 2008 [GWh] Gross production. [%]. % of total production [%]. 158.038. +3.1. (of which CIP 6 production – estimated). 26,154. -3.0. Hydroelectric (*). 21,461. +8.6. 12.6%. Thermoelectric (*). 130,655. +1.5. 71.7%. Geothermoelectric. 2,829. +1.7. 3.5%. Condensed Interim Financial Statements 2008. 6. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. hydroelectric sources and 3.5% was generated in the form of geothermal, wind and solar power..

(7) GROUP. Wind and solar power. 3,093. +59.7. Consumption for ancillary services. 6,193. +1.6. 151,845. -3.3. 3,711. -12.5. National production. 148,134. +3.3. 87.8%. Balance of imports. 20,493. -19.1. 12.2%. 168,627. -0.0. 100.00%. Net production Consumption for pumping systems. DEMAND FOR ELECTRICITY. (*) The percentages for the hydroelectric and thermoelectric components were calculated deducting consumption for ancillary services and pumping systems Source: Terna– preliminary figures.. .. Electricity transmission The overall amount of electricity injected into Acea Distribuzione’s network (from the national grid, from generating plants linked directly to Acea Distribuzione’s network and from ENEL Distribuzione’s interconnected network) was up an estimated 2.04% in the first half of 2008, compared with the first half of 2007. This was, on average, in line with the estimated figure of 2.00% in the budget for 2008. Peak demand on the national network amounted to 55,292 MW (up 1.77% on the peak figure for the previous first half), recorded at 11 a.m. on 26 June 2007. Peak demand on Acea Distribuzione’s network during the first half of 2008 amounted to 2,292 MW, which was recorded at 1.00pm on 30 June 2008. This is down around 12 MW (0.52%) on. The first six months of 2008 witnessed an average decline in temperature data records (TDR), which resulted in higher consumption in the period January-April and in reduced consumption in May and June. The following graph shows the trend for the monthly average difference in TDR between the first six months of 2008 and the first six months of 2007, as well as the TDR reported during the first six months of 2008.. Condensed Interim Financial Statements 2008. 7. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. the peak of 2,304 MW reported in the first half of 2007 at 1.00pm on 26 June 2007..

(8) GROUP. TDR trend vs. 2007. TDR 2008 25. 0.50. 20 -0.50 TDR 2008 Trend vs. 2007. 15. -1.50 10 -2.50 5. -3.50. January. February. March. April. May. June. TDR trend vs. 2007. -0.71. -1.62. -1.09. -1.71. 0.12. -1.13. TDR 2008. 9.01. 8.67. 11.08. 14.35. 18.72. 20.90. 0. The graph shows that average temperatures were lower in the first four months of 2008. In May the TDR was at the same levels as those reported in 2007 (up 0.12 °C), before again falling again in June (down 1.13 °C).. Service quality. 333/2007 regarding the third regulatory period from 2008 until 2011. Resolution 333/2007 introduces four different types of regulation, amending the two preexisting types and supplementing the current legislation, as follows: 1. Regulation of prolonged and extended outages; 2. Individual standards regarding the number of outages for MV customers; 3. Regulation of the total duration of outages without significant advance warning; 4. Regulation of the average number of long and short outages.. The regulation of prolonged and extended outages (which were already regulated by the previous Resolution 172/2007) includes the rules that distributors must observe regarding the. Condensed Interim Financial Statements 2008. 8. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. On 24 December 2007 the Electricity and Gas Authority (“the Authority”) issued Resolution.

(9) GROUP. registration and monitoring of electricity distribution service continuity data in the case of prolonged outages affecting end customers. The resolution provides for reimbursement of LV and MV customers affected by outages, deriving from any voltage level within the electricity network and for whatever reason, which last longer than fixed standard limits. In accordance with the timeline, from 1 January 2008 to 30 June 2008 distributors must monitor prolonged and extended outages on an experimental basis, without incurring any charges. From 1 July 2008 to 31 December 2009 prolonged and extended outages must be registered, but no payment of compensation to end customers is envisaged. However, the data gathered will be used in calculating the amount of provisions allocated for exceptional events (held by the Equalisation Fund). As of 1 January 2010, taking into account Acea Distribuzione’s intention to supply electronic meters that record LV customer service outages, the regulations will be fully applied. In addition to the provisions made for exceptional events, customers affected by prolonged and extended outages will automatically receive compensation.. Moreover, the regulator has made some changes to the current regulations regarding individual standards for the number of outages for MV customers. As of 1 January 2008, any penalties will be calculated on the basis of outages suffered by each MV customer regardless of their installed power (under the previous regulations the limit was 500 kW, and subsequently 100 kW, under a graduated regime introduced in 2006). In addition, the standard regarding the number of prolonged outages for MV customers, based. Regarding the existing regulations relating to the total duration of outages without significant advance warning, the Electricity and Gas Authority revised the limits for calculating compensation relating to inefficiency penalties, raising the cost of failing to meet the set targets. A new method of categorising breakdowns was also introduced, and has had a significant impact on the company’s IT systems.. Finally, the Electricity and Gas Authority introduced an incentive mechanism, based on penalties and rewards, including with respect to the average number of outages. Specifically, the new regulations take account of the total average number of prolonged and short outages, although the latter are not included in calculating the duration.. Condensed Interim Financial Statements 2008. 9. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. on area of concentration, has also been reduced..

(10) GROUP. The parameters set particularly high levels of compensation for the number of outages, and the targets are also very challenging.. As regards aspects of commercial quality, the main changes introduced by the above Resolution 333/07 for 2008 are the introduction of specific standards for certain services previously governed by a general standard (checks on metering groups and on voltage quality), and the introduction of specific standards for previously unregulated activities, such as power increases. From 2009, on the other hand, the punctuality range for appointments with customers is to be reduced from three to two hours and a new mechanism for calculating compensation has been introduced, with the amount rising in line with the delay in providing the service up to a maximum amount equal to three times the basic compensation. Compensation may also be cumulative for an end customer for a single service, should the service provider fail to meet both response and punctuality standards. This resolution has also extended the method of checking commercial quality used in the gas sector to the electricity sector. Above all, checks will be carried out during 2010 and will be made with reference to the figures for 2009. Any evidence of “invalid” and/or “non-compliant” figures will lead to application of the related penalties. A consultation process is currently underway with regard to the quality of commercial services involved in the sale of electricity and gas to end customers. This is expected to result in more stringent regulation of certain activities carried out by distributors. Operators are being asked for their views on the introduction, from 2009, of two new specific standards for response times in providing the following services: . management of a complaint regarding the metering or distribution service, with the. . verification of a meter reading, with the proposed standard being 5 working days.. Energy services, public lighting and the Digital Meters Project In the energy services sector, the activities of Acea RSE SpA, which has been operational since 1 April 2005, focus on four main lines of action: energy saving, solar power, cogeneration and the control of air quality (“Caldaia Sicura”, “Sanacaldaia” and “Bollino Blu” projects).. With regard to energy saving activities, in the first half of 2008 Acea Reti e Servizi Energetici SpA continued with the previously planned and launched implementation of initiatives relating to the distribution of CFLs (Compact Fluorescent Lights) and kits.. Condensed Interim Financial Statements 2008. 10. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. proposed standard being 15 working days;.

(11) GROUP. The company requested permission from the Authority to file a report on the distribution of high-efficiency lamps and water and energy saving kits, developed during the period with a number of the Group’s water companies operating in the Tuscany and Umbria regions. The project will enable the company to obtain around 53,000 Energy Efficiency Certificates (EECs) a year. The second phase of the project involving the distribution of high-efficiency lamps and water and energy saving kits in schools in the province of Naples was completed. This initiative, covering the distribution of 400,000 lamps and 200,000 kits, will earn the company approximately 9,400 EECs a year.. Acea Reti e Servizi Energetici SpA is responsible for coordinating the Group’s network management companies and for carrying out the activities linked to compliance with the energy saving regulations introduced by the ministerial decrees of 20 July 2004. It also provides consulting in the so-called Energy Service Company (ESCO) sector.. Regarding the solar power sector, following the Ministry of Economic Development’s issue of procedures for accessing the new “Energy Account” (the Ministerial Decree of 19 February 2007), solar power business activities were launched.. Design work for the installation of solar power plants at 39 of Acea Distribuzione’s primary substations, planned to provide total power of 537 kWp, went ahead during the first half and rollout of the panels began. 12 plants have so far been installed, supplying total power of 186. The 420 kW solar power plant commissioned by Terni E.NA., using flexible amorphous silicon, was also designed and completed. Finally, the plant located at Tivoli Middle School, financed by Lazio Regional Authority was completed and connected to the electricity network. Application for inclusion in the “energy account” procedure has been initiated.. The executive design for the plants commissioned by SAO, EnerCombustibili and ATO2 di Roma (located in the Monte Mario, Ottavia and Casilino areas) was carried out towards the end of the period. These plants are due to be built by the end of the current year.. Condensed Interim Financial Statements 2008. 11. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. kWp..

(12) GROUP. Turning to the cogeneration sector, Ecogena, the joint venture set up by Acea SpA and ASTRIM SpA, is in the process of acquiring the contract to develop an urban heating network for the Porta di Roma district, located in the Bufalotta area of the city, and a contract for a cogeneration plant for the Ferrarini Group. Two further contracts are being finalised for the installation of urban heating systems based on trigeneration serving the new Saxa Rubra district of Rome and the “Hotel Cappuccini” in Gubbio. The projects consist of a cogeneration system being added to the existing air conditioning system.. The contract to carry out air quality checks (“Caldaie Sicure” and “Sanacaldaia”) has been extended until July 2008 and proceeded as follows: . the “Caldaie Sicure” project, regarding the control of individual heating plants of less than 35 kW, met the related budget targets for the period;. . the current regulations governing the control of centralised thermal power plants above 35 kW no longer require blanket checks in the related area, but have made it obligatory for condominiums to report that maintenance work has been carried out. Revenues will thus be concentrated in the second half of 2008, in line with the timing for the relevant declarations.. The management of public lighting is governed by the new ten-year contract signed by Acea SpA and the Comune di Roma in February 2007. A subsequent agreement was signed between Acea SpA and Acea Distribuzione, contracting out public lighting services in the municipality. In line with the previous year, the activities of Acea Distribuzione’s Rome public lighting business unit were carried out in compliance with the contract signed with Acea SpA. The programme of work carried out during the first half of 2008 was heavily influenced by the Municipal Authority’s approval, on 30 January 2008, of a document calling for the upgrading of areas around railway and underground stations and bus terminuses. The Comune di Roma had made such a policy, otherwise known as the “Safety Pact”, a priority after the tragic events at the Tor di Quinto station in November 2007, when a woman was attacked and killed. The Municipal Authority’s decision committed Department XII and, on its behalf, Acea to carrying out the initiatives envisaged in the Pact at 25 sites, defined in the document as being priority, by 30 June 2008.. Condensed Interim Financial Statements 2008. 12. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. of Rome..

(13) GROUP. These activities, involving the installation of new systems or the upgrading of existing ones, covering a total of 560 lighting points, placed significant pressure on the organisation and its operations during the first half of 2008, given that it was also committed to completing the works previously agreed with Department XII for 2008 on schedule. The requested works were completed on time. In addition to the above, further programmes focused on the following principal areas: . the replacement of 2.7 kV circuits (with LV transformers) for 1,564 lighting points;. . network modernisation: 1,337 lighting points were upgraded during the period, a process that in some cases included repairs to the power supply network;. . plant repairs: this activity is directly linked to approval of the above long-term investment programme and envisages the inspection, extraordinary maintenance and, if necessary, the upgrading to Class II of lighting points managed on behalf of the Comune di Roma;. . plant maintenance: maintenance activities primarily took the form of planned, emergency and extraordinary maintenance;. . artistic maintenance: the first half of 2008 saw completion of the extraordinary maintenance works carried out at the Parco degli Aranci, Tiberina island, Piazza del Campidoglio and various fountains. Support was also provided for various street events (the Red Cross Event in Piazza del Popolo);. . new works: a total of 1,892 lighting points were installed in the municipality of Rome, with work carried out for Department XII, other departments (Parks and Gardens, Suburbs, Area Planning) and boroughs; districts: 10 new agreements with districts and “Art. 11 zones” were executed, and include maintenance contracts subject to the condition precedent that the related works must be completed. Moreover, following checks that began during the year, new maintenance contracts have been activated in place of previous contracts, where the obligations envisaged in the general terms of the agreement had not been complied with.. Regarding the contract to manage public lighting in the municipality of Naples, the operating performance has exceeded expectations regarding ordinary activities, due to the optimisation of materials costs. This has offset the reduction in the margin on extraordinary activities, primarily as a result of the suspension – in February and March – of all works in progress. This was. Condensed Interim Financial Statements 2008. 13. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. .

(14) GROUP. ordered by the Municipal Authority following the Carabinieri’s seizure of a site in Via Stazio. Since April, however, work has gradually resumed. On 22 April the Council of State turned down the various appeals filed by the companies that took part in the tender process regarding the contact to manage public lighting services in the municipality of Naples, thus confirming the previous sentence (no. 1774/2007) issued by Campania Regional Administrative Court. This sentence declared null and void the admission of the Temporary Consortium of Companies (TCC) comprising Acea, GRADED and ALFANO, to take part in the tender process regarding the contact to manage and carry out the regulatory upgrade of public lighting plants in the municipality of Naples. The ruling also annulled all the other decisions under appeal, including municipal directive 25 of 27 September 2006. This directive entrusted the service to the above TCC and led to the subsequent execution of the contract between Naples Municipal Authority and the Consortium on 9 February 2007. In execution of this sentence, the Bid Committee set up by the Municipality of Naples excluded the Consortium led by Acea from the tender process and provisionally awarding the public lighting contract to a TCC headed by Enel Sole. Following this, whilst examining the required self-certified documents, the Bid Committee established that Enel Sole had falsely declared that it met the requirements of articles 7 and 8 of the “Tender regulations”. As a result, the TCC led by Enel Sole was excluded from the tender process, which was declared null and void in application of article 9 of the “Tender regulations”, which state that “the contract … may be awarded if two valid bids have been submitted”. A decision is awaited from the Municipality of Naples regarding a new call for tenders for extraordinary plant maintenance, whilst the contracts for works already assigned to the Acea-. Finally, as regards the Digital Meters Project, work continued during the first half of 2008 on the large-scale introduction of a remote-controlled system for the MV and LV networks and remote control of the digital meters launched by Acea in October 2005, following approval by the Group’s management. The approved business plan envisages that work will be completed by the end of 2009. The timescale for the project, unless changes are necessitated by unforeseeable exceptional events, is as follows: •. 2008: installation of approximately 320,000 meters and 4,000 concentrators. Condensed Interim Financial Statements 2008. 14. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. Graded-Alfano TCC should be confirmed through to their completion..

(15) GROUP. •. 2009: completion of the project, with the installation of around 338,500 meters and around 1,000 concentrators.. Approximately 183,000 meters were installed during the first half of 2008, with 29,000 installed independently by local branches of the Network Division. The total number of meters installed since start-up is around 1,060,000. Around 1,890 concentrators were placed in secondary substations during the period, bringing the total number installed since the beginning of the project to around 10,300.. On the commercial front, a number of pilot projects have either been carried out or are in progress with ASM Terni and ASM Voghera. All of the projects could potentially result in the purchase of the entire system. Following signature of the related contract with Acea SpA in July 2007, last September the State Electricity company of San Marino began installation of the system throughout its network.. At international level, during the period meetings were stepped up with utility companies operating throughout the world that have expressed great interest in Acea’s project.. Energy sales and generation In the electricity generation market, domestic production met 87.8% of Italy’s requirements (71.7% of total production was from thermoelectric plants, 12.6% from hydroelectric sources. covered by imports. Domestic production was thus up 3.2%, whilst imports were down 16.3%. During the first six months of 2008 the AceaElectrabel Produzione Group’s production amounted to 2,172.7 GWh. This figure is 2.3% or 51.2 GWh down on the same period of the previous year.. Hydroelectric production, amounting to 184.4 GWh in the first half of 2008, was up 126.8 GWh (45.4%) on the figure for the same period of 2007. Thermoelectric production of 1,965.4 GWh for the first six months of 2008 registered a decline of 2,094.3 GWh (6.2%) on the same period of the previous year. This reduction was primarily. Condensed Interim Financial Statements 2008. 15. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. and 3.5% was geothermal or from other renewable sources), whilst the remaining 12.2% was.

(16) GROUP. due to the shutdown of the Voghera plant until the second half of June. The plant came back on stream again on 16 June 2008. The new generation 400 MW single-shaft, combined-cycle thermoelectric plant at Rosignano produced 812.5 GWh of power during the period. Operation of the plant constitutes is the responsibility of Roselectra SpA, in which AceaElectrabel Produzione SpA holds a 99.5% stake.. Wind power production amounted to 22.8 GWh in the first half of 2008. With regard to renewable electricity production, in 2007 the company completed work on the wind farms in Longano and Capracotta in the province of Isernia, providing installed power of 10.2 MW and 9.4 MW, respectively. Production totalled 22.8 GWh in the first half of 2008.. In the urban heating segment, in which AceaElectrabel Produzione operates via the Tor di Valle plant’s cogeneration unit, the company supplied 215 end users located in the Torrino Sud and Mostacciano districts (located in the southern part of Rome) with 41.8 GWht of heat.. An analysis of the figures for electricity sales reveals that the amount of electricity injected into the market subject to additional safeguards during the first half of 2008 was 19.4% lower than the figure for the former regulated market in the previous year. This essentially reflects the impact of customers migrating to the free market and the spin-off of the protected market. Customers falling within the scope of the protected market, who, as of 1 July 2007, were switched from the regulated to the protected market, are therefore managed in terms of supply, dispatching and transmission in the same way as free market customers. The remaining LV. additional safeguards, which has in fact taken the place of the supply service provided by the Single Buyer. In particular: . sales of electricity on the market subject to additional safeguards amount to 2,487 GWh, marking a reduction of 19.7% compared with the first half of 2007. The number of customers is 1,493,198;. . free market electricity sales amount to 6,1408 GWh, marking an increase of 43.4% on the first half of 2007, with sales recorded at 38,415 offtake points on Acea Distribuzione’s network and at 22,675 points hooked up to the networks of other distributors (mainly Enel Distribuzione). The number of customers is 21,760;. Condensed Interim Financial Statements 2008. 16. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. customers from the regulated market on the same date were switched to the market subject to.

(17) GROUP. . sales on the protected market amount to 218 GWh and regard customers who transferred from the regulated to the protected market between 1 January and 30 April 2008. The number of protected market customers amounts to 775;. . the volume of gas sold amounts to 96.6 million cubic meters, represented by end customers and wholesalers supplied by AceaElectrabel Trading.. With regard to the Electricity Exchange, during the first half of 2008 the Day-Ahead markets accounted for approximately 48.2% of IPEX (Italian Power Exchange) turnover. The first six months of the year saw rises in both trading volumes (up 3.8%) and purchases under bilateral contracts that eligible customers sign at the beginning of each year1 (up 2.0%). Consequently, in the period from January to June 2008 liquidity on the Day-Ahead Market (DAM), which is represented by the ratio between the amounts traded on the exchange and total amounts, rose to stand at an average of 67.2% (65.8% in 2007). The number of operators registered on the Italian Power Exchange has also risen. The price system introduced by the Italian Power Exchange is a radical departure from the previous administered regime under which a single production price was applied throughout Italy. Under the current market regime the production units deal with prices that evolve in their respective dispatching areas.. Power Exchange prices were substantially up in the first half of 2008 compared with the same period of 2007. The increase was in line with the performances of other European exchanges, where the prices registered were, however, lower. The rise in prices is primarily due to trends in international fuel markets where prices were substantially higher than in the same period of 2007. The average price of Brent at 30 June, is 109.5 US dollars a barrel, marking an increase of. 1. Producers and eligible customers are not only able to sell and buy electricity through the market organised by the Electricity Market Operator (EMO), but also by concluding contracts of sale outside the bidding system. In this case the planned injection and offtake of energy, as well as the price to be paid, are freely established by the parties.. Condensed Interim Financial Statements 2008. 17. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. 52% on 31 December 2007. The following tables show price trends..

(18) GROUP. Prezzi mensili delle principali borse elettriche europee* Ipex. euro/MWh. Omel. Nordpool. EEX. APX. Powernext. 105. 95. 85. 75. 65. 55. 45. 35. 25. 15 giu-07. lug-07. ago-07. set-07. ott-07. nov-07. dic-07. gen-08. feb-08. mar-08. apr-08. mag-08. giu-08. Fonte: El-da * Medie aritmetiche da giugno 2007 a giugno 2008; i prezzi medi comprendono le ore dei giorni da lunedi a venerdi. TITOLO DEL GRAFICO: “Monthly prices on the principal European electricity exchanges* Source: El-da * Average prices for June 2007 and June 2008 covering the hours of the days from Monday to Friday. IPEX: the Italian Power Exchange; OMEL: Compañía Operadora del Mercado Español de Electricidad, the Spanish Power Exchange; NordPool: the Scandinavian Power Exchange (Norway, Sweden, Denmark, Finland); EEX: European Energy Exchange, the German Power Exchange; APX: Amsterdam Power Exchange, the Dutch Power Exchange; PowerNext: the French Power Exchange.. Source: Italian Power Exchange – Monthly Trading Report – June 2008.. Condensed Interim Financial Statements 2008. 18. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. Liquidity on the DAM.

(19) GROUP. Purchase price (PUN). Source: Italian Power Exchange – Monthly Trading Report – June 2008.. Source: EMO figures based on Thomson Reuters data.. Condensed Interim Financial Statements 2008. 19. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. Brent and exchange rate.

(20) GROUP. High sulphur fuel oil Low sulphur fuel oil Crude Brent 0.2% diesel. BASKET OF FUELS – Prices in $ per tonne. Water services. Management of water services in Lazio and Campania. Acea Ato2 SpA During the first half of 2008 the company acquired a contract to manage water services in the municipality of San Polo dei Cavalieri and began providing integrated water services in the municipality of Cerveteri, as envisaged in the relevant concession agreement.. 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 serves Pomezia, Ardea and Lanuvio;. Condensed Interim Financial Statements 2008. 20. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. This adds to the contracts previously acquired over the years:.

(21) GROUP. 2005 - the municipalities of Casape, Carpineto Romeno, Sambuci, Affile, Arcinazzo Romeno – excluding the CO.RE.CALT. Consortium -, Gavignano, Gorga, Cervara di Rome, Subiaco, Castel Gandolfo, Vicovaro, Artena, Trevignano Romeno and Santa Marinella; 2006 – the Doganella Consortium’s aqueduct system and sewerage and water treatment in 7 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 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 completing 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. On 28 December an agreement was signed regarding the municipality of Cerveteri, which will become operational on 1 February 2008. 2008 - First half – the municipality of San Polo dei Cavalieri. •. Municipalities acquired: 75, equivalent to 3,372,920 people (source: ISTAT 2001), and representing approximately 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 30 June 2008 assessments of the plant and systems in the following municipalities have yet to be completed in readiness for preparing the documentation needed for acquisition of the related contracts: •. Northern Area: Capena, Civitella San Paolo and Rignano Flaminio;. Condensed Interim Financial Statements 2008. 21. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. The following situation thus exists at 30 June 2008:.

(22) GROUP. •. Eastern Area: Agosta, Anticoli Corrado, Canterano, Cerreto Laziale, Filettino, Gerano, Mandela, Rocca Canterano, San Polo dei Cavalieri, Trevi nel Lazio and Vallepietra;. •. Southern Area: Valmontone and Rocca di Papa;. •. Western Area: Anguillara Sabazia, Canale Monterano, Civitavecchia and Manziana.. During April 2008 Technical and Operating Secretariat for the ATO 2 area sent a letter to the municipal authorities in Bracciano, Cerreto Laziale, Civitavecchia, Rocca Priora, Roviano, Gerano, Ardea, Canterano, Rocca Canterano, Filettino, Camerata Nuova, Licenza, Mandela, Percile, Roccagiovine, Articoli Corrado, Marano Equo, Cineto Romano and Rifreddo solliciting a response in relation to their intentions regarding integrated water services. With regard to the remaining municipalities for which potential contracts may be acquired, based on the partial assessments carried out in the areas concerned, Acea ATO 2 has identified problems relating to the regulatory non-compliance of waste water systems and inadequacies at water treatment plants. As a result of this analysis, the municipal authorities concerned will be sent letters asking for information on the actions taken or to be taken in order to resolve the above problems, in preparation for the acquisition of contracts to manage integrated water services. The company will indicate, where relevant, the possibility of activating the procedure provided for in the joint memorandum prepared by Acea Ato2 and the Technical and Operating Secretariat for the ATO 2 area (File STO A.ATO2 no. 33 of 4 April 2003, Annex 2). 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.. Acea Ato2 SpA provides the full range of fresh water distribution services including collection and abstraction, as well as retail and wholesale distribution. With regard to the Roman abstraction system, in February syphon IV on the Acqua Marcia aqueduct was taken out of service due to unexpected damage. Thanks to swift adoption of alternative arrangements, it was possible to limit disruption to the service, which initially affected a wide number of end users in central and eastern Rome. In March the DN1000 abstraction pipe near Via Cristoforo Colombo was taken out of service to allow urbanisation work to be carried out in the EUR-Castellaccio district, as part of the “Europarco” project, without interrupting supplies to end users thanks to activation of an. Condensed Interim Financial Statements 2008. 22. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. Fresh water.

(23) GROUP. emergency connection. At the end of March there was an accidental failure of syphon I on the out-of-town section of the Acqua Marcia aqueduct. Due to unexpected damage, in mid-April it was necessary to take syphon VII on the Acqua Marcia aqueduct out of service. However, thanks to the web-like structure of the water network, disruption was limited. The DN 1100 pipe on the Acqua Marcia aqueduct, called siphon VIII, was taken out of service in May to allow construction of the “Graniti” train depot serving the underground system’s new “C” line. Finally, mid-June saw the DN900 Torrenova–Casilino abstraction pipe taken out of service in order for the “Alessandrino Station”, again serving the new “C” line, to be built. That same day two DN350 feed pipes were taken out of service to allow construction of a car park in Piazza Cavour, forming part of the Comune di Roma’s Urban Parking Plan. With regard to water quality, in the municipality of Allumiere Mayoral Ordinance 42 of 20 June 2008 has banned the use of water from the network in the La Bianca district for drinking purposes, given that the water contains more than the permitted amount of antimony. Acea Ato2 SpA is currently treating the water in order to ensure compliance with the related regulations. Checks on the quality of water from local sources and in the network have been carried out in the municipality of Cerveteri, with the levels of fluoride and arsenic observed to be higher than the amounts permitted by Legislative Decree 31/01. The water is distributed for drinking purposes under a Mayoral Ordinance and Acea Ato2 is preparing plans to restore compliance with the limits in order to request a derogation from Lazio Regional Authority. In the first half of 2008 Acea Ato2 also requested derogations from Lazio Regional Authority for the municipalities of Genzano (arsenic, fluoride and vanadium) on 15 May 2008 and Velletri. Following an increase in water consumption due to a rise in temperatures and a reduction in the volume of water available from sources feeding the Doganella aqueduct and from other local sources in the Colli Albani area, there was an emergency situation in a number of municipalities in ATO 2 from late June, including Monteporzio Catone, Montecompatri, San Cesareo, Zagarolo, Frascati, Colonna, Rocca Priora, Palestrina, Genzano di Roma, Albano Laziale, Castel Gandolfo, Velletri, Marino, Lariano, Grottaferrata and Artena. Acea Ato2 took immediate steps to head off the water crisis, implementing a range of measures designed to reduce disruption, such as opening up emergency connections to the Simbrivio aqueduct and preparing, in agreement with the relevant bodies, a plan for supplying water on a rotational basis. In many cases recourse was made to tankers and temporary tanks of drinking water in the. Condensed Interim Financial Statements 2008. 23. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. (arsenic and fluoride) on 27 May 2008..

(24) GROUP. worst hit areas. In order to rapidly resolve the crisis, Acea Ato2, Lazio Regional Authority, the Extraordinary Commissioner for the Simbrivio water emergency and the Technical Secretariat for ATO 2 agreed on the need to adopt emergency measures, to be implemented via ordinances issued by the Extraordinary Commissioner. The plan involves immediate action and initiatives to be taken over the short term (in 3-6 months), with a view to optimising network functionality, renovating and upgrading existing wells and bringing new wells into service. The increase in consumption also resulted in a water emergency to the west of Rome, above all in the municipalities of Tolfa, Allumiere and Santa Marinella, where serious shortages can only be resolved once local aqueducts and service concessions in the municipalities in the Western Area have been acquired. This will enable integrated management of services and implementation of major structural initiatives.. Sewerage and waste water treatment The sewerage service comprises a sewage network of 5,864 km (including approximately 3,980 km of network serving the municipality of Rome) and more than 300 km of collectors in the municipality of Rome. Acea Ato2 SpA manages the waste water treatment system and pumping stations that serve the network and sewage collectors. Some of them are quite large, with a throughput of more than 10 cubic meters per second, and in some cases they also provide flood protection. In the first half of 2008 the main waste water treatment plants handled 252.0 million cubic meters of water, an increase of around 3% compared with the previous first half. Sludge production from all managed plants totalled just over 60,000 tonnes, a decrease of around 15 % with respect to the previous first half.. 151 in the municipality of Rome, and a total of 176 waste water treatment plants, including 38 in the municipality of Rome. Compared with 31 December 2007, the number of waste water treatment plants increased by 2 and the number of sewage pumping stations by 11. Research and development In collaboration with LaboratoRI SpA, activities continued to recover water losses using district metering and via identification of leaks in pipes. Additional searches were conducted during the first half of 2008. Step testing was planned and carried out at Monterotondo Scalo, enabling the company to identify sections of the network with the biggest losses. The main characteristics of the distribution network serving Castel. Condensed Interim Financial Statements 2008. 24. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. At 30 June 2008 Acea Ato2 SpA manages a total of 433 sewage pumping stations, including.

(25) GROUP. Madama were reconstructed and monitoring points identified. This involved defining the altimetric heights using topographical readings. A new round of monitoring was launched in Grottaferrata, thanks to the points installed in early 2008. The main characteristics of the distribution network serving Fiano Romano were reconstructed and monitoring points identified. A series of readings and monitoring was conducted. Step testing will be carried out during the second half of 2008. New versions of network maps were prepared for the remaining municipalities (Albano, Ciampino, Castelgandolfo, Riano, Ariccia and Santa Marinella) in preparation for the installation of monitoring points. Initiatives designed to reduce water loss along the abstraction network continued, including controls of the accessibility of pipes and the functionality of pumping equipment. In the first half of 2008 Acea ATO2 SpA continued its programme of activities relating to water sources, which break down as follows. Water exploration: → identification of sites for new wells in the municipalities of Artena (a report was then issued containing a negative feasibility assessment) and Velletri (for which a strip of land has been set aside for the location of sites for wells to replace private wells); → capacity tests for the rehabilitation of the Cavallino well field (Pantano Borghese); → preparation of the hydrological report to be annexed to the application for the concession for the new Marcellina well. In-depth studies: → design and construction of a pluviometric network (the technical specifications for the. replenishment of aquifers, were issued and the related tender process is awaited); → a study relating to repair of the Collection Tunnel for the Peschiera sources (the system for geotechnical monitoring of the sources has been completed and rolled out); → support in “Monitoring the Hydrological Crisis” at the Albano and Nemi lakes. Numerical simulations and monitoring: → the “Hydrological Management and Source Quality” project is in its second year; → periodic measurement of capacity (monthly measurement of the capacities of the Peschiera, Acquoria, Valga delle Rosce, Cerreto and Ronci sources, and piezometric profiles in Pantano Borghese, Finocchio and Torre Angela); → management of certain measurements of water levels at wells and sources.. Condensed Interim Financial Statements 2008. 25. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. supply of a working weather and climate monitoring network, to be used in measuring the.

(26) GROUP. A project regarding the sewerage network is in progress, including: 9 graphic recording of overflow pipes, which illustrates the hydraulic function with sufficient engineering accuracy, supplemented with photographs; 9 determination of the amounts of water treated under dry weather conditions and the amounts of water treated and discharged into drains in wet weather; 9 construction of a remote control system for overflows in Acea Ato2 SpA’s control rooms, which can show the state of the drainage network; 9 the drawing up of “wet weather procedures” to be implemented by Acea Ato2 SpA’s various operating units subsequent to activation of alarms linked to rain gauges distributed throughout the municipality of Rome and level sensors placed at overflow points along the sewerage network, as well as inside collectors; → construction of an environmental operating room, which in addition to measurements regarding the potable water network, is designed to gather measurements from all the remote control points installed and being installed along the sewerage network, at waste water treatment plants, rain gauges and along the drainage network. In this regard, data is now available from the four automated control points installed by Acea (one on the Tiber at Grottarossa and three along the Aniene at Sant’Agnese di Tivoli, Ponte Lucano and Pratolungo), providing real-time, automated readings for the following chemical and physical parameters of the water in the various bodies of water: Temperature, Conductibility, Dissolved Oxygen, pH, Torpidity, Level, P-PO4, N-NH3, N-NO2, N-NO3, COD. In the environmental field, Acea Ato2 SpA has developed a project to map odours emitted by. calibrating and fine-tuning the reduction measures adopted. Given that the Protection Plan adopted by Lazio Regional Authority has rated the condition of, amongst others, the No. 20 lower Aniene, No. 14 lower Tiber and the No. 15 Tiber mouth reservoirs as “poor” or “very bad”, and taking into account that, pursuant to Legislative Decree 152/99 and subsequent implementation measures, these reservoirs should achieve a “satisfactory” rating by 2008 and a “good” rating by 2016, Acea Ato2 SpA has launched a study in collaboration with Rome’s “La Sapienza” University, in order to draw up measures to improve the quality of the Tiber river, based on prior determination of its hydraulic characteristics and water quality.. Condensed Interim Financial Statements 2008. 26. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. waste water treatment plants, with specific reference to the Rome South plant, aimed at.

(27) GROUP. 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. Based on the provisions of paragraph 4 of art. 12 of the Concession Agreement, tariffs were adjusted at the end of 2007 to take account of the difference between the target and real inflation rates for the period 2003-2006. As a result, the tariffs applied in 2007 were raised by 1.1%. Together with the Technical and Operating Secretariat for the ATO 2 area, the company is carrying out an assessment of the tariffs applied for the years 2003-2008 and the process of defining the new tariffs for the period 2009-2032, which, subject to approval by the Mayors’ Conference, will come into effect from 1 January 2009.. Acea Ato5 SpA Management of integrated water services in the ATO 5 Frosinone area covers a total of 86 municipalities (contracts for the municipalities of Atina, Paliano and Cassino Centro Urbano, solely in elation to fresh water services, have yet to be acquired) and a population of approximately 480,000. The number of end users is around 185,000. No new contracts were acquired during the first half of 2008 and technical management if currently divided into operating centres. The process of defining the transfer of services in the municipalities still not served by the company is underway in order to complete the planned acquisitions during 2008. The fresh water system consists of abstraction and distribution equipment and networks,. North, abstraction South). Smaller networks feed a number of local systems. Coverage of this service is approximately 92%. Despite the company’s efforts, the sewerage and waste water treatment systems continue to experience a higher breakage rate than in other areas of the country, forcing the company to carry out large-scale routine and extraordinary maintenance works. During the first half of 2008, however, the breakage rate appears to have stabilised due to the replacements and numerous repairs carried out over previous years. Electro-mechanical maintenance has, in contrast, increased, especially with regard to sewerage and waste water treatment, as a result of the upgrading/refunctioning of waste water treatment plants.. Condensed Interim Financial Statements 2008. 27. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. connected to 6 main sources supplying the same number of aqueduct systems (abstraction.

(28) GROUP. Municipalities are rarely in possession of the necessary technical documentation for waste water treatment plants to hand over to Acea Ato5 SpA, including updated maps, manuals and hydraulic plans, which are being drawn up as the company manages the plants. At 30 June 2008 approximately 3,970 maintenance works have been carried out on aqueducts and the fresh water network, whilst 160 interventions have regard electro-mechanical equipment and 324 the sewerage network.. Investment During the first half of 2008 Acea ATO5 SpA continued to invest in the construction of sewer networks in the municipalities of Fiuggi, Torre Cajetani and Trivigliano, in addition to renovating the treatment plant serving the municipality of Anagni.. Tariffs 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 tariffs for 2006 applied to end users in the municipalities in ATO5 were published in the. Management of water services in Tuscany and Umbria As regards acquisitions in Tuscany, in the first half of 2008 efforts continued to boost performance in line with the objectives set for ATO 2 Basso Valdarno. The subsidiary, Acque SpA, which is responsible for managing the area, has begun to use a 255 million euro facility granted in October 2006 by a syndicate of banks and earmarked to finance planned investment of approximately 650 million euros. At the end of the first half of 2008 actual drawdowns amounted to 135 million euros.. In ATO 3 Medio Valdarno, steps were taken to improve and reorganise the subsidiary, Publiacqua SpA. Efforts were focused on collecting receivables and changing the internal. Condensed Interim Financial Statements 2008. 28. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. Official Gazette no. 64 of 31 May 2008, part II..

(29) GROUP. organisation so as to improve the quality of service and reduce operating costs. Following approval of changes to the Area Plan, calling for inclusion of the municipalities in the Chianti district in the ATO (completed in December 2007 once resolutions were passed by the related municipal authorities) and a tariff review so as to maintain a high level of investment in ATO 3, the vast programme of infrastructure replacement, renewal and extension aimed at ensuring that all users enjoy an adequate level of integrated water services is continuing.. As regards ATO 6 Ombrone, during the first half of 2008 the subsidiary, Aquedotto del Fiora SpA, continued with a series of initiatives designed to collect receivables and to improve relations with users, via both changes in its internal organisation and the use of specialist companies. As part of this improvement programme, Aquedotto del Fiora SpA is also negotiating a loan to be put towards financing its investment plan, which is expected to be finalised during 2008.. 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.. With regard to investments in the Umbria region, 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 (40% of the shares) was acquired on 1 January 2008. During the first half Umbra Acque thus embarked on a wide-ranging review of its organisational model, focusing primarily on the commercial department and credit recovery,. the year.. In ATO 2 Terni the Group, via its subsidiary, ACEARieti, continues to manage Umbriadue scarl, which owns a minority shareholding in the integrated water services provider, SII scpa.. Environment and energy TEA GROUP. Condensed Interim Financial Statements 2008. 29. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. with the declared aim of drastically improving the company’s financial position by the end of.

(30) GROUP. A brief description of the activities carried out by the main companies in the Group is provided below. TERNI EN.A. This company produces energy from renewable sources, above all in the form of biomassfuelled waste to energy production, consisting of paper mill pulp which, in addition to green certificates, benefits from the incentives provided in the CIP6 measure. The plant located in Terni operated throughout the first half of 2008, with the volume of electricity sold amounting to 34,933 MWh. The plant was directly in operation for a total of 4,429 hours, compared with the budgeted amount of 4,200. The increase of 88 is essentially due to a reduction in planned downtime during the first half. The hourly volume of electricity produced totalled 9.9 MWh, compared with the budgeted amount of 10.6 MWh per hour. The reason for the shortfall in production was primarily due to problems with fuel quality (the high degree of humidity in the pulper), and the need to keep a regular check on chimney emissions.. 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. 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 Refuse Derived Fuel (RDF) a year. The San Vittore del Lazio plant was directly in operation for a total of 3,783 hours during the first half of 2008. During the period it was necessary to repair the furnace due to cracks in some of the pipes, which led to an unplanned shutdown of the plant for seven days. The failure to maximise the plant’s effective running time resulted in a reduction in the volume of electricity sold in the first half, which amounted to 1,892 MWh. Production during the period was 10.60 MWh per hour.. Condensed Interim Financial Statements 2008. 30. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. the European Council’s “Common Position”, a document approved by the European Parliament..

(31) GROUP. SAO SAO owns the waste dump located in the municipality of Orvieto and manages urban refuse and special waste. The operating performance (gross operating profit is up 1,951 thousand euros on the same period of the previous year) was heavily influenced by full application of the new transfer tariffs, as agreed in August 2007. From the beginning of the year the company began baling special waste, which has made a significant contribution to boosting revenues. There has also been a substantial increase in the volume of waste arriving at the dump, due essentially to the shutdown of the sorter in Terni. This has resulted in a significant rise in urban solid refuse, compared with so-called organic refuse that was handled by the sorter in Terni. Costs have remained substantially stable with respect to the previous year, despite the significant increase in waste handled. 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 RDF in accordance with the law. This is currently classified as high-calorie. The RDF produced is burnt entirely at EALL’s waste to energy plant. In February 2008 ENERCOMBUSTIBILI signed a contract with ENERGONUT from the Veolia Group regarding the transfer of 15,000 tonnes of RDF per year to the Pozzilli plant.. with the current processing capacity of local waste to energy plants.. Condensed Interim Financial Statements 2008. 31. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. During the first half of 2008 the company continued to see surplus production of RDF compared.

(32) GROUP. Financial review RESULTS OF OPERATIONS The consolidated results of operations are analysed below with reference to indicators providing a breakdown of the gross margin (representing the difference between revenue and the cost of materials and overheads). The following indicators are used: → the energy margin, representing the difference between revenues from the generation, distribution and metering, trading and sale of electricity and the variable costs attributable to these activities → the gas margin, representing the difference between revenues from the trading and sale of gas and the variable costs attributable to these activities → the water margin, representing the difference between revenues from the provision of integrated water services and the costs of concession fees and of acquiring water → the industrial margin, representing the difference between revenues and costs not included in the activities that result in the above margins.. The Acea Group’s results for the first half of 2008 represent a substantial improvement on the previous year. Net profit attributable to the Group is up 6%, whilst gross operating profit and operating profit are up 19.7% and 25.6%, respectively. These results reflect (i) an increase in the energy and gas margin (up 27.9 million euros) after the fair value measurement of commodity derivatives, (ii). margin (up 6.5 million euros), and (iv) a rise in staff costs after capitalised costs (up 20.2 million euros). The results for the period are influenced by changes in the method of consolidating Tirreno Power and Umbra Acque, and by the increased interest in Gori from July 2007. The comparison also reflects the effect on the results for the first half of 2007 of changes in legislation regarding staff termination benefits, following enactment of Law 296 of 27 December 2006 (“the 2007 Finance Act”). The change in the basis of consolidation accounts for 24.4 million euros of consolidated gross operating profit, including 20.4 million euros attributable to Tirreno Power. The impact of socalled is, on the other hand, 7.3 million euros.. Condensed Interim Financial Statements 2008. 32. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. an improvement in the water margin (up 34.2 million euros), (iii) an increase in the industrial.

(33) GROUP. On a pro forma basis, enabling a like-for-like comparison of amounts with those of the previous first half, gross operating profit for the first six months of 2008 is 269.7 million euros, representing growth of 31.2 million euros (up 13.1%). The change in the basis of consolidation has also resulted in a 7.2 million euro increase in staff costs. On a like-for-like basis, staff costs amount to 124.2 million euros, marking an increase of 5.7 million euros (up 4.8%). The 26.8 million euro increase in the energy margin, before consolidation adjustments and the fair value measurement of commodity derivatives, reflects (i) a 30 million euro contribution from generation, primarily due to the change in the method of consolidating Tirreno Power (which contributes 31.5 million euros to the margin), meaning that on a like-for-like basis the margin is down 1.5 million euros as a result of the shutdown of the Voghera plant (this plant reentered service on 13 June 2008) and reduced production from the Roselectra plant; (ii) a 0.6 million euro reduction in the margin from distribution and metering due to recognition, in the first half of 2007, of lower dispatching costs charged by Terna for 2004 and 2005; (iii) a 5.3 million euro decrease in the margin from trading, primarily as a result of greater procurement costs due to the shutdown of the generating plants; (iv) 2.6 million euros contributed by the good performance of electricity sales, thanks to an improvement in the margins from the market subject to additional safeguards and the protected market. The gas margin, before consolidation adjustments, amounts to 1.3 million euros and is down 3.7 million euros compared with the first half of 2007, essentially as a result of increased procurement costs. The increase in the water margin, before consolidation adjustments (up 33.2 million euros) is primarily due to: (i) a 19.9 million euro contribution from operations in the Lazio and Campania. performance of this area also benefited from the increased interest in Gori compared with the same period of 2007; (ii) a 13.3 million euro contribution from operations in Tuscany and Umbria, essentially due to the first-time consolidation of Umbra Acque (up 9.7 million euros), and improvements recorded by operations in the Florence and Pisa areas. The industrial margin reports a loss of 29.4 million euros, marking an improvement of 6.5 million euros on the first half of 2007. This represents the net effect of recognising 8.3 million euros deriving from cancellation of the fine imposed by the Antitrust Authority and greater costs resulting from the change in the basis of consolidation. The quantity of electricity produced during the first half of 2008 was 9 TWh, representing an increase of 305% on the first half of 2007. Electricity supplied to the regulated and free markets. Condensed Interim Financial Statements 2008. 33. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. regions, attributable to all the companies included in this area of business; the operating.

(34) GROUP. via the Roman distribution network totalled 5.8 TWh, marking an increase of 2% on the same period of the previous year. Sales of electricity on the market subject to additional safeguards amounted to 2.5 TWh, marking a decrease of 19.7%, whilst the average number of customers was also down (2.3%) at 1,493,198. Free and protected market sales of electricity amount to 6.4 TWh, representing a rise of 18.8% with respect to the previous first half. At 30 June 2008 the number of delivery points totals 61,090, compared with 44,453 in the first half of 2007.. Staff costs including capitalised costs are up 22.4 million euros, which, after excluding changes in the basis of consolidation and eliminating the impact of curtailment from the figure for the previous first half, falls to 5.5 million euros. This reflects contract renewals for electricity and water industry workers (2.6 million euros) and operational factors, which have resulted in an increase of 4.3 million euros (an increase in the average headcount, a reduction in overtime due to the adoption of new policies and the greater cost of incentive schemes). In relative terms, the impact of staff costs on the gross margin has decreased from 31.2% in the first half of 2007 (33.2% excluding the impact of curtailment) to 30.9% in the first half of 2008.. The contribution of the various areas of business to consolidated gross operating profit were as follows (before consolidation adjustments and the elimination of intercompany profits): −. energy networks: 113.0 million euros (down 5.1 million euros, and substantially unchanged if the effect of the change in staff termination benefits is excluded from the comparison);. −. energy sales and generation: 55.1 million euros (up 29.3 million euros or 29.6 million euros. basis of consolidation, without which the increase is 9.3 million euros (excluding the effect of the change in staff termination benefits) and represents the positive impact of the fair value measurement of derivatives, offset by the performance of the gas and energy margins; −. environment and energy (formerly waste to energy): 13.5 million euros (up 3.0 million euros). This reflects the greater volume of waste processed by SAO and an increase in the quantity of electricity produced by the Terni waste to energy plant;. −. water services (Italy and overseas): 118.2 million euros (up 16 million euros or 19.4 million euros without the effect of curtailment). This result derives from the first-time consolidation of Umbra Acque (2.4 million euros), the increased interest in Gori and growth in the number of municipalities served, in volumes and in tariffs;. Condensed Interim Financial Statements 2008. 34. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. without the effect of curtailment). The improvement is primarily due to the change in the.

(35) GROUP. −. Corporate: a loss of 2.5 million euros (an improvement of 7.2 million euros). This positive result reflects recognition of income deriving from cancellation of the fine imposed by the Antitrust Authority (8.3 million euros), after the Regional Administrative Court upheld Acea’s appeal.. The principal operating results, compared with those of the same period of 2007, are summarised below.. % Increase/ (Decrease). Increase/ (Decrease). H1 2008. H1 2007. 1,473,653. 1,192,376. 281,277. 23.6%. 131,356. 111,199. 20,157. 18.1%. Cost of materials and overheads. 1,048,164. 835,413. 212,751. 25.5%. Consolidated operating costs. 1,179,520. 946,612. 232,908. 24.6%. Gross operating profit. 294,133. 245,764. 48,369. 19.7%. Operating profit/(loss). 174,429. 138,838. 35,591. 25.6%. Finance costs/(income). (44,308). (33,216). (11,092). 33.4%. 2. 15,439. (15,437). -100.0%. 130,123. 121,062. 9,062. 7.5%. Net profit/(loss) from continuing operations. 77,008. 72,703. 4,306. 5.9%. Net profit/(loss) for the period. 77,008. 72,703. 4,306. 5.9%. Consolidated net revenue Staff costs. Profit/(loss) on investments. Profit/(loss) before tax. Profit/(loss) attributable to minority interests. 2,815. 2,716. 99. 3.7%. Net profit/(loss) attributable to the Group. 74,193. 69,987. 4,206. 6.0%. In analysing the operating result, it is important to note that amortisation and depreciation (totalling 101 million euros) is up 17.5 million euros, with 7.3 million euros attributable to the change in the basis of consolidation and 4.3 million euros to the generating plants, as a result of both the entry into service of new plants and increased depreciation following alterations to the useful lives of hydroelectric plants. The remaining difference derives from increased investment during the period and in previous periods. Provisions for liabilities are down 4.5 million euros, essentially due to provisions made for redundancy and early retirement schemes in the previous first half (4.6 million euros) and the. Condensed Interim Financial Statements 2008. 35. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. €000.

(36) GROUP. reduction in liabilities deriving from health insurance contributions, which resulted in the partial release of the provisions previously made (4.6 million euros). Tirreno Power contributes 1.2 million euros to this item. Provisions for impairment of receivables, amounting to 10.1 million euros, are substantially in line with the amount recorded at 30 June 2007.. Compared with the first half of 2007, net finance costs are up 11.1 million euros (7 million euros on a like-for-like basis). This primarily reflects the combined impact of (i) a 5.3 million euro increase in interest on medium/long-term borrowings due to the change in the basis of consolidation and new lines of credit obtained by Acea (i.e. 100 million euros from Cassa Depositi e Prestiti); (ii) a 7.1 million euro increase in interest on short-term borrowings due to both the change in the basis of consolidation and the growth in funding requirements to finance investment and in response to commodity price trends, reflecting the rise in the oil price, which has a negative impact on net finance costs and debt due to the timing difference between purchase and payment on the one hand and sale and collection on the other; (iii) a 2 million euro reduction deriving from the recognition of factoring fees in the first half of 2007 following the sale of amounts due for company-specific equalisation.. The average rate of interest paid by the Group on its medium/long-term borrowings at 30 June 2008 is 5.048%, compared with 5.060% at 30 June 2007. This indicator was calculated on the basis of the contractual conditions obtained during negotiation of each loan in the overall portfolio, taking account of all cash flows generated by the various instruments in the portfolio,. date.. The weighted average rate of interest payable on the Parent Company’s short-term borrowings is 4.59%, compared with the 3.9578% of the same period of the previous year.. The profit/(loss) on investments reflects the change in the method of consolidating Tirreno Power and Umbra Acque.. The Group’s tax expense is up 4.8 million euros and the tax rate for the period is 39%, representing a decline of 1% compared with the end of the first half of 2007.. Condensed Interim Financial Statements 2008. 36. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. and the overall outstanding debt (in nominal terms) and the interest rate payable at the valuation.

(37) GROUP. This tax rate is 1.8 percentage points higher due to the net effect of the reversal of a portion of tax assets recognised in 2006 and 2007, the changes introduced by Law Decree 112/2008 in relation to the Robin Hood Tax and the benefit deriving from the decision to take advantage of. Condensed Interim Financial Statements 2008. 37. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. the exemption provision introduced by the Finance Act for 2008..

(38) GROUP. FINANCIAL POSITION AND CASH FLOW ACEA GROUP 30 June 2008. (€000). 31 Dec 2007 Increase/(Decrease) Increase/(Decrease). (a). (b). (a) - (b). %. 199,140. 162,265. 36,875. 22.73%. Current receivables. 1,281,153. 1,203,905. 77,248. 6.42%. - due from end users and customers. 1,085,456. 1,019,833. 65,624. 6.43%. 166,223. 159,433. 6,791. 4.26%. 74,824. 67,078. 7,746. 11.55%. 215,089. 164,980. 50,110. 30.37%. Current payables. (912,604). (951,201). 38,597. (4.06%). - trade. (725,962). (774,560). 48,598. (6.27%). - due to the Comune di Roma. (173,019). (158,017). (15,002). 9.49%. Other current liabilities. (459,322). (322,496). (136,827). 42.43%. NON-CURRENT ASSETS/(LIABILITIES). 2,858,969. 2,599,991. 258,978. 9.96%. Property, plant and equipment and intangible assets. 3,222,582. 2,888,130. 334,452. 11.58%. 32,730. 99,579. (66,849). (67.13%). 206,000. 187,491. 18,509. 9.87%. Staff termination benefits and other defined-benefit obligations. (143,856). (137,912). (5,944). 4.31%. Provisions for liabilities and charges. (142,390). (150,140). 7,749. (5.16%). Other non-current liabilities. (316,095). (287,157). (28,938). 10.08%. 3,058,109. 2,762,256. 295,853. 10.71%. (1,682,322). (1,322,540). (359,782). 27.20%. 37,423. 36,182. 1,241. 3.43%. (1,382,341). (1,126,002). (256,339). 22.77%. Short-term loans and receivables. 254,067. 249,636. 4,431. 1.77%. Cash and cash equivalents. 180,519. 129,290. 51,229. 39.62%. (771,990). (611,647). (160,344). 26.22%. Total shareholders’ equity. (1,375,787). (1,439,716). 63,929. -4.44%. Balance of net debt and shareholders’ equity. (3,058,109). (2,762,256). (295,853). 10.71%. NET WORKING CAPITAL. - due from the Comune di Roma Inventories Other current assets. Investments Other non-current assets. INVESTED CAPITAL. NET DEBT Medium/long-term loans and receivables Medium/long-term borrowings. Short-term borrowings. The above balance sheet has been reclassified to show the components of invested capital and the corresponding funding.. Condensed Interim Financial Statements 2008. 38. WorldReginfo - 9da3f984-3c54-4ee6-97f4-0f71743cd4cd. BALANCE SHEET.