Interim Report on Operations of the ACEA Group at 30 September 2011

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(1)Interim Report on Operations of the ACEA Group. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. at 30 September 2011.

(2) Interim Report on Operations at 30 September 2011. Corporate bodies. page 3. Summary of results. page 4. Latest news on the Industrial Segment trends. page 5. Segment Information. page 13. Operating Review. page 16. Basis of Presentation and Consolidation. page 64. Consolidated Income Statement. page 75. Consolidated Comprehensive Income Statement. page 76. Quarterly Consolidated Income Statement. page 77. Quarterly Consolidated Comprehensive Income Statement. page 78. Consolidated Balance Sheet. page 79. Consolidated Cash Flow Statement. page 80. Statement of Changes in Consolidated shareholders’ equity. page 81. Notes to the Consolidated Income Statement. page 82. Notes to the Statement of Consolidated Financial Position. page 123. Acquisitions. page 139. Other Information. page 143. Declaration of the Executive Responsible for Financial Reporting. page 147. Operating and financial Outlook. page 148. List of consolidated companies. page 151. Contents. 2. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. Contents.

(3) Interim Report on Operations at 30 September 2011. Corporate bodies Board of Directors Giancarlo Cremonesi Marco Staderini Paolo Giorgio Bassi Francesco Caltagirone Jean Louis Chaussade Aldo Chiarini Paolo Di Benedetto Luigi Pelaggi Andrea Peruzy. Chairman Chief Executive Officer Director Director Director Director Director Director Director. General Manager Paolo Gallo. Board of Statutory Auditors Enrico Laghi Corrado Gatti Alberto Romano Gianluca Marini Leonardo Quagliata. Chairman Standing Auditor Standing Auditor Alternate Auditor Alternate Auditor. Giovanni Barberis. Corporate Bodies. 3. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. Executive Responsible for Financial Reporting.

(4) Interim Report on Operations at 30 September 2011. Summary of results (€ million). 30.09.11. 30.09.10. % change. Consolidated revenue. 2,483.3. 2,597.1. -4.4%. Consolidated operating costs. 2,011.5. 2,112.6. -4.8%. (1.7). 2.2. -177.5%. EBITDA. 470.1. 486.7. -3.4%. EBIT. 136.5. 256.3. -46.8%. Net profit/(loss). 68.9. 116.5. -40.9%. 5.5. 4.6. 17.9%. 63.4. 111.9. -43.4%. 44.3. 0.0. 100.0%. 30.09.11. 31.12.10. % change. Net invested capital. 3,748.1. 3,585.0. 4.6%. Net Debt. 2,399.5. 2,203.7. 8.2%. Consolidated Shareholders’ Equity. 1,348.6. 1,381.3. -2.4%. Profit. (loss). from. commodity. risk. management. Profit/(loss). attributable. to. minority. interests Net profit/(loss) attributable to the Group including: Net. profit/(loss). from. the. transfer. discontinued operations. (€ million). of. forth by IFRS 5.. Summary of results. 4. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. Please note that the data above do not take into account the classifications set.

(5) Interim Report on Operations at 30 September 2011. Latest news on the Industrial Segment trends Introduction The Organisational Order of 25 January 2011 changed the macrostructure of ACEA S.p.A. The main changes referring to the Industrial Segments are as follows: Energy Industrial Segment: the company Acea8cento, previously under the Personnel and Service Department, was placed under the responsibility of this segment, Water Industrial Segment: the water companies operating abroad and previously under the Development and Special Projects Department, were placed under the responsibility of this segment, Environment and Energy Industrial Segment: the name was changed to Environment Industrial Segment; the responsibilities referring to the managed businesses remained unchanged, Furthermore, worth mentioning is that the Development and Special Projects Department changed its name to Engineering and Services Department. With a subsequent order, the coordination of the company AceaGori Servizi was entrusted to the Water Industrial Segment. On 1 September 2011 and effective as of 1 January 2011, two mergers were carried out: ARIA with its subsidiaries EALL, Terni Ena, Enercombustibili and Ergo Ena CREA Gestioni with Crea Partecipazioni and AceaRieti. The operations and financial position by Industrial Segment as at 30 September 2011 was calculated on the basis of the above order, and that of the same period of the previous year was reclassified for the purposes of a homogeneous comparison. Since the economic data are strongly influenced by the change in the basis of consolidation, the tables below set forth the details of EBITDA changes by Segment.. Latest News on the Industrial Segment Trends. 5. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. .

(6) Interim Report on Operations at 30 September 2011. € millions. 30/09/2011. ENERGY NETWORKS. 30/09/2010 INCREASE/ (DECREASE). 186.3. 183.5. 2.8. 46.3 13.9 6.8 25.7. 91.3 56.7 16.5 18.1. (45.0) (42.9) (9.7) 7.6. ENGINEERING. 5.6. 5.2. 0.4. WATER: Overseas Lazio/Campania Tuscany/Umbria. 230.9 5.9 167.6 57.4. 214.1 4.1 170.5 39.6. 16.7 1.8 (2.9) 17.8. ENVIRONMENT. 17.2. 19.7. (2.5). (16.2). (27.2). 11.0. 470.1. 486.7. (16.6). ELECTRICITY Production Trading Sales. ACEA (structure) Total consolidated EBITDA. CHANGES IN THE BASIS OF CONSOLIDATION. € millions Consolidated EBITDA. 30/09/2011. 30/09/2010 INCREASE/ (DECREASE). 470.1. 486.7. (16.6). Energy:. 0.0. 29.4. (29.4). Production. 0.0. 27.1. (27.1). Trading. 0.0. 10.4. (10.4). Sales. 0.0. (8.1). 8.1. Water:. 8.0. 0.0. 8.0. Lazio/Campania. (0.1). 0.0. (0.1). Tuscany/Umbria. 8.1. 0.0. 8.1. (0.0). 0.0. (0.0). 7.9. 29.4. (21.4). 462.1. 457.3. 4.8. Environment. Total change in consolidation Pro-forma EBITDA of changes in basis of consolidation. Latest News on the Industrial Segment Trends. 6. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. Change in consolidation:.

(7) Interim Report on Operations at 30 September 2011. CHANGE IN EBITDA ON A LIKE-FOR-LIKE BASIS. € millions ENERGY NETWORKS. 30/09/2011. 30/09/2010 INCREASE/ (DECREASE). 186.3. 183.5. 2.8. 46.3 13.9 6.8 25.7. 62.0 29.6 6.1 26.2. (15.6) (15.8) 0.7 (0.5). 5.6. 5.2. 0.4. WATER:. 222.9. 214.1. 8.8. Overseas. 5.9. 4.1. 1.8. Lazio/Campania. 167.7. 170.5. (2.7). Tuscany/Umbria. 49.3. 39.6. 9.7. ENVIRONMENT. 17.2. 19.7. (2.5). (16.2). (27.2). 11.0. 462.1. 457.3. 4.8. ELECTRICITY Production Trading Sales ENGINEERING. ACEA (structure) Total on a like-for-like basis. Networks Industrial Segment The EBITDA of 30 September 2011 came out at 186.3 million euros, an overall increase of 2.8 million euros compared to 30 September 2010, due to the combination of macro-phenomena indicated hereafter by company. Concerning Arse, worth mentioning is an increase in the gross operating profit of 12.8 million euros, chiefly produced from the activities carried out in the PV gained in the period. ACEA Distribuzione recorded an increase of 3.1 million euros due to higher energy revenues offset by higher operating costs linked to distribution. The gross operating profit related to public lighting in the Municipality of Rome decreased by 5.3 million euro due to the review of the contract with Roma Capitale and the different trend of some cost items; furthermore, the contract was penalised for an amount of 8.2 million euros compared to 2010 due to different accounting of some items. In terms of staff, as at September, the average number of employees was 1,531, 55 less than the same period of the previous year, entirely attributable to ACEA Distribuzione.. Latest News on the Industrial Segment Trends. 7. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. business and referring to the marketing of "turnkey" plants and the energy account.

(8) Interim Report on Operations at 30 September 2011. Net debt for the period amounts to 932 million euros and is up by 147 million euros compared to the end of the previous year due to the combination of the following phenomena: increase in receivables due from Roma Capitale for the public lighting service, increase in amounts due from customers following the launch of the new technical and commercial management IT system for transmission users, increase in payments to suppliers for ACEA Distribuzione and increase in the requirement relative to Arse's photovoltaic business. Investments in the Segment stood at 87.7 million euros and decreased by 19.4 million euros due to the effect of the different treatment of investments linked to the Public Lighting contract in the Municipality of Rome compared to 2010 (-6.5 million euros) and the decrease in investments of ACEA Distribuzione (- 1.8 million euros) and Arse (-11.1 million euros). Energy Industrial Segment The comparison of the results of this Segment is affected by the dissolution performed on 31 March 2011. Consequently, the economic data of the companies in the Segment was accounted for under proportionate consolidation, based on the proportion effectively held in the first quarter, and with the line-by-line method for the second and third quarter; the economic data is therefore not immediately comparable with the data as at 30 September 2010. Thus the financial position and cash flow are not immediately comparable with the deconsolidation of the transferred companies and the consolidation of the financial position and cash flow related to the additional shares acquired by GDF SUEZ Energia Italia S.p.A. (excluding the greater intercompany eliminations made necessary). They consider the ownership structure after closing. The January-September period closed with an EBITDA at 46.3 million euros, a decrease of 15.6 million euros on a like-for-like basis. The change is completely due to the power generation segment as a result of the departure of Tirreno Power from the Group and the results of operations of the AceaElectrabel Produzione Group. Acea Produzione closed the April-September period with an EBITDA of 8.6 million euros.. Latest News on the Industrial Segment Trends. 8. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. data at 31 December 2010. The financial position and cash flow are affected by the.

(9) Interim Report on Operations at 30 September 2011. The EBITDA of the electricity sale companies came out at 25.7 million euros (including 25.2 million euros relative to Acea Energia) and - also on a like-for-like basis - it decreased by 0.5 million euros compared to 30 September 2010. The fair value on commodities had a negative impact of 1.7 million euros. The final number of employees in September was 488 resources, 11 less than at 30 September 2010. Net debt for the period amounts to 299 million euros and is down by 114 million euros compared to the end of the previous year, mainly due to the dissolution of the joint venture with GDF SUEZ Energia Italia, which involved an overall deconsolidation of 202 million euros, net of collections generated by the transaction. The Segment investments stand at 12.2 million euros and are down by 5.6 million euros, basically due to the deconsolidation of Tirreno Power. Water Industrial Segment (including therein the Engineering and Services Department) The Segment’s EBITDA came out at 236.5 million euros, an increase of 17.1 million •. Management of water services in Lazio and Campania -2.9 million euros. •. Management of water services in Tuscany and Umbria + 17.8 million euros. •. Management of overseas water services +1.8 million euros. •. Engineering and Services + 0.4 million euros. Revenues increased by 47.8 million euros, mainly as a result of the tariff increase in 2011, totalling 16.3 million euros (ACEA Ato2 + 7.7 million euros, Publiacqua + 5.4 million euros, Others + 3.2 million euros), the consolidation with the proportionate method for the first time of Acquedotto del Fiora (+ 22.1 million euros) and the contribution of Overseas Water Services (Aguazul Bogotà) due to the consolidation of Conazul and the stipulation of the new commercial management contract in Bogotà's zone 1 (+ 11.6 million euros). Operating costs increased by 22.5 million euros mainly as a result of (i) the consolidation of Acquedotto del Fiora with the proportionate method (+11.0 million euros), (ii) higher energy costs (3.5 million euros) in ACEA Ato2, due to the. Latest News on the Industrial Segment Trends. 9. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. euros since the same period last year. The increase is broken down as follows:.

(10) Interim Report on Operations at 30 September 2011. increase of both consumptions and of the average unit price, (iii) the increase in the service agreement with the Parent Company by 5.5 million euros, and (iv) the increase in concession fees in Publiacqua, coming out to 1.3 million euros, for the review set forth by the Area Plan. Staff costs, including capitalised costs, increased by 11.6 million euros mainly due to a higher number of staff caused by the change in the perimeter of Acquedotto del Fiora and Acea Servizi Acqua and the consolidation of Conazul; capitalised costs for the period increased by 3.3 million euros. The segment's average staff came out at 4,732, 872 resources more than the same period of the previous year due to the change in the basis of consolidation caused by Acquedotto del Fiora and Aguazul Bogotà. The Segment’s EBITDA came out at 153.7 million euros, an increase of 15.6 million euros since the same period last year. The increase is broken down as follows: •. Management of water services in Lazio and Campania +9.3 million euros. •. Management of water services in Tuscany and Umbria + 5.8 million euros. •. Management of overseas water services +0.4 million euros. •. Engineering and Services - 0.1 million euros. This increase is mainly due to ACEA Ato2 (+8.4 million euros) for new constructions on treatment plants and sewerage networks and for extraordinary maintenance on water networks, and the consolidation of Acquedotto del Fiora (+6.3 million euros).. million euros over the end of the previous year. The increase is broken down as follows: •. Management of water services in Lazio and Campania +87.4 million euros. •. Management of water services in Tuscany and Umbria + 48.1 million euros. •. Management of overseas water services - 0.6 million euros. •. Engineering and Services - 1.3 million euros. The increase is mainly due to ACEA Ato2, for 96.3 million euros (need generated by investments and distribution of dividends in 2010) and the consolidation of Acquedotto del Fiora for 37.5 million euros.. Latest News on the Industrial Segment Trends. 10. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. So, overall, the segment’s debt came out to 657.4 million euros and grew by 133.7.

(11) Interim Report on Operations at 30 September 2011. Environment Industrial Segment The January - September 2011 period closes with an EBITDA level at 17.2 million euros, a decrease of 2.5 million euros compared to the same period of the previous year, mainly due to the combined effect of the following factors: 1. with reference to the Terni plant, there was a decrease in electricity volumes produced. by. the. waste-to-energy. business,. which. is. currently. not. operational due to the plant revamping work being carried out since 6 August 2010 and which will continue for all of 2011; on the other hand, the photovoltaic plant installed on the site is operational and generated 387,577.20 kW of electricity during the reporting period, 2. in relation to the San Vittore del Lazio plant, there was a consistent increase in the quantity of electricity sold (+ 24.9 GWh, corresponding to 46%) thanks to the launch of operations of the second line (April 2011) and the third line (July 2011): the relative revenues amounted to 15.1 million euros, an increase of 3.3 million euros considering the reduction of the average price in the January- September 2011 period compared to the same period of 2010. The quantities provided to the plant also increased, so the correlated revenues also grew (+2 million euros). In relation to costs, higher quantities of gas consumed and waste and ash disposed of did not cause significantly increased costs thanks to the decrease of the average price, 3. for SAO, during the period there was a decrease in the quantity of waste delivered to the waste dump (-24,160 tons), which essentially caused a. The average staff for the period was 194 resources, an increase of 15 mainly as a result of the acquisition of the company ISA in April 2011. Investments for this Sector came to 16.1 million euros, a decrease of 16.9 million euros compared to the corresponding period of last year, essentially due to the completion of the second and third line of the San Vittore del Lazio plant.. Latest News on the Industrial Segment Trends. 11. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. worsening of the EBITDA by 0.9 million euros..

(12) Interim Report on Operations at 30 September 2011. Net debt for the Area amounts to 214.7 million euros and is up by 13.9 million euros compared to the end of the previous year, (200.8 million euros) mainly due to the need generated by the construction of the second and third line of the San Vittore plant, Terni Ena's requirement due to the continuation of the business without operating activities (the plant has not been operating since 6 August 2010).. Corporate ACEA closes the period in question with an EBITDA that was negative by 16.2 million euros (including the EBITDA of the public lighting contract in the municipality of Naples), recording an improvement, compared to 30 September 2010, of 11 million euros, basically due to the combined effect of the revenue increase for service agreements (+16.2 million euros) and the greater external costs incurred (+8.1 million euros). Gross staff costs increased by 4.1 million euros to 35.4 million euros, due to the increase in the average unit price and a staff increase. The average staff for the period was 547 resources, an increase of 11 compared to the same period of last year, essentially as a result of intercompany transfers. Net debt for the period amounts to 296.9 million euros, an increase compared to the end of the previous year of 15.9 million euros essentially due to both the operational management and the non-recurring events taking place during the period (dissolution of the joint venture for 8.2 million euros and the repayment of. Investments for the period came out to 5.5 million euros, a decrease of 3.2 million euros since 30 September 2010, mainly due to lower IT investments.. Latest News on the Industrial Segment Trends. 12. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. the debt for tax assessment for 3.5 million euros)..

(13) Interim Report on Operations at 30 September 2011. Segment Information Please note the following for a greater understanding of this section: -. generation,. trading. and. sales. refer. to. the. Energy. Industrial. Segment. responsible, in organisational terms, (i) until 31 March 2011 for AceaElectrabel Produzione, Roselectra, Voghera Energia, Longano, Eblacea and Tirreno Power, AceaElectrabel Trading (ii) until 6 May for Estra Elettricità and (iii) for the companies Acea Energia Holding, Acea Energia, Umbria Energy, Voghera Energia Vendite, Elga Sud and Acea Produzione, -. distribution, public lighting (Rome and Naples) and PV power are included in the Networks Industrial Segment which, under the organisation structure, includes ACEA Distribuzione, ARSE, Ecogena and Acea Illuminazione Pubblica,. -. analysis. and. research. services. refer. to. the. Engineering. and. Services. Department, responsible, under the organisation structure, for Laboratori S.p.A. and the research consortia, -. overseas water services refers to the Water Industrial Segment responsible, under the organisation structure, for water companies operating abroad,. -. Italian water management refers to the Water Industrial Segment, responsible, under the organisation structure, for water companies operating in Lazio, Campania, Tuscany and Umbria, and AceaGori Servizi,. -. environment refers to the Industrial Segment of the same name, responsible, under the organisation structure, for the Companies in the A.R.I.A. Group and. Please be advised that the total revenues shown in the following table differs from the amount reported for consolidated net revenues in the Consolidated Income Statement, as a result of the inclusion of the income from fair value deriving from the commodity risk management. Two tables are provided below:. . in the first, the economic elements referring to transferred companies are included in the reference segments (energy generation and trading). . in the second, the economic elements referring to transferred companies are shown on the dedicated line named Assets held for sale or transferred.. Segment Information. 13. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. the Aquaser Group..

(14) 55,832 69,381 70,062. Environment. PV power. Corporate. 2,495,960. GROUP TOTAL. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. Segment Information. Amounts in thousands of euros. (484,902). 0. Rounding and Adjustments. Assets held for sale or transferred. 2,980,862. 16,947. Analysis and research services. Total Continuing Operations. 26,947. 577,149. 52,159. 359,020. 1,349,812. 313,614. 89,938. Overseas. Italian water Services. Public Lighting. Trading. Sales. Distribution. Energy Generation. 2011. 2,615,151. (900,164). 0. 3,515,314. 59,485. 22,466. 62,577. 19,188. 14,894. 538,771. 51,084. 1,153,093. 1,020,458. 299,786. 273,512. (119,190). 415,262. 0. (534,452). 10,577. 46,915. (6,744). (2,241). 12,053. 38,378. 1,075. (794,073). 329,354. 13,828. (183,574). Increase/ (Decrease). (26,254). 6,624. 19,704. 5,315. 4,093. 209,921. 16,622. 16,518. 16,712. 159,963. 56,738. 2010. 754. 0. 470,090 486,709. (9). 0. 470,099 485,956. (16,691). 20,824. 17,192. 5,570. 5,876. 225,016. 8,193. 6,806. 25,726. 157,731. 13,856. 2011. (16,619). (762). 0. (15,856). 9,562. 14,200. (2,512). 255. 1,783. 15,095. (8,429). (9,712). 9,014. (2,231). (42,882). Increase/ (Decrease). III QUARTER. 2010. Gross Operating Profit. Revenues III QUARTER. 8,700. 25,300. 33,100. 400. 0. 137,750. 6,500. 0. 1,600. 75,200. 16,200. 2010. 0. 0. 275,180 304,750. 0. 0. 275,180 304,750. 5,488. 14,243. 16,085. 323. 443. 152,939. 0. 0. 5,659. 73,500. 6,500. 2011. 14. (29,570). 0. 0. (29,570). (3,212). (11,057). (17,015). (77). 443. 15,189. (6,500). 0. 4,059. (1,700). (9,700). Increase/ (Decrease). III QUARTER. Investments. Interim Report on Operations at 30 September 2011.

(15) 55,832 69,381 70,062. Environment and Energy. PV power. Corporate. 2,495,960. GROUP TOTAL. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. Segment Information. Amounts in thousands of euros. (484,902). 436,935. Rounding and Adjustments. Assets held for sale. 2,543,928. 16,947. Analysis and research services. Total Continuing Operations. 26,947. 577,149. 52,159. 0. 1,340,157. 313,614. 21,678. 2011. Overseas. Italian water Services. Public Lighting. Trading. Sales. Distribution. Energy Generation. IFRS5. Revenues. 2,615,151. (900,164). 1,437,138. 2,078,176. 59,485. 22,466. 62,577. 19,188. 14,894. 538,771. 51,084. 0. 997,026. 299,786. 12,898. 2010. (119,190). 415,262. (1,000,203). 465,752. 10,577. 46,915. (6,744). (2,241). 12,053. 38,378. 1,075. 0. 343,131. 13,828. 8,779. Increase/ (Decrease). III QUARTER. 470,090. (9). 9,777. 460,323. (16,691). 20,824. 17,192. 5,570. 5,876. 225,016. 8,193. 0. 25,667. 157,731. 10,945. 2011. 486,709. 754. 67,235. 418,721. (26,254). 6,624. 19,704. 5,315. 4,093. 209,921. 16,622. 0. 16,520. 159,963. 6,214. 2010. (16,619). (762). (57,458). 41,602. 9,562. 14,200. (2,512). 255. 1,783. 15,095. (8,429). 0. 9,147. (2,231). 4,732. Increase/ (Decrease). III QUARTER. Gross Operating Profit. 275,180. 0. 0. 275,180. 5,488. 14,243. 16,085. 323. 443. 152,939. 0. 0. 5,659. 73,500. 6,500. 2011. 304,750. 0. 14,298. 290,452. 8,700. 25,300. 33,100. 400. 0. 137,750. 6,500. 0. 1,600. 75,200. 1,902. 2010. 15. (29,570). 0. (14,298). (15,272). (3,212). (11,057). (17,015). (77). 443. 15,189. (6,500). 0. 4,059. (1,700). 4,598. Increase/ (Decrease). III QUARTER. Investments. Interim Report on Operations at 30 September 2011.

(16) Interim Report on Operations at 30 September 2011. Operating Review Reference context During the first nine months of 2011 the domestic electricity demand (250,463 GWh)1 rose by 1.7% compared to the same period of the previous year, remaining essentially unchanged also in non calendar terms. 87.2% of the need for electricity was covered by national production (65.4% by thermoelectric energy, 15.0% by hydroelectric sources and 6.8% by geothermal electricity production and other renewable sources) and imports from abroad covered the remaining portion of 12.8%. In that context, net national production (220,014 GWh) increased slightly, -1.9%, while the balance with abroad showed a slight decrease (- 4.5%). Except for hydroelectricity (- 8.0%), all of the sources of national production increased compared to the same period of the previous year. The significant increase in photovoltaic production is to be noted (+356.6%).. 1 ge n n aio ‐ 30 1 ge n n aio ‐ 30 V a r. % s e tte m b re 2011 s e tte m b re 2010 2011/ 2010. ‐ Id ro e le ttrica ‐ T e rm o e le ttrica ‐ G e o te rm o e le ttrica ‐Eo lica ‐F o to v o ltaica. 37.802 164.957 3.978 6.501 6.776. 41.104 163.544 3.735 6.133 1.484. ‐ 8,0 0,9 6,5 6,0 356,6. P ro d u zio n e N e tta T o ta le d i c u i p r o d u z io n e C I P 6. 220.014 20.469. 216.000 27.833. 1,9 ‐ 26,5. 33.477 1.256 3 2 .2 2 1. 35.003 1.261 3 3 .7 4 2. ‐ 4,4 ‐ 0,4 ‐ 4 ,5. 1.772 2 5 0 .4 6 3. 3.434 2 4 6 .3 0 8. ‐ 48,4 1 ,7. Im p o rta z io n e E s p o rta z io n e S a ld o E s te ro Co nsum o p om paggi R ich ie s ta d i E n e rg ia E le ttrica. Demand for electricity = net production + balance of imports – consumption for pumping systems gennaio settembre produzione netta idroelettrica. 1. January September net production hydroelectric. Source: Terna – September 2011, monthly report on the electricity system.. Operating Review. 16. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. P ro d u z io n e N e tta.

(17) Interim Report on Operations at 30 September 2011. termoelettrica geotermoelettrica eolica fotovoltaica produzione netta totale di cui produzione CIP 6 importazione esportazione saldo estero consumo pompaggi richiesta di energia elettrica var.. thermoelectric geothermal electricity wind photovoltaic total net production of which CIP 6 production import export overseas balance consumption for pumping systems electricity demand increase/(decrease). On the Electricity Exchange2 front, the average electricity purchase price in the electricity exchange (national single price) reached 81.31 €/MW, the highest level since February 2009. The increase over September 2010 is 14.76 €/MWh, equal to 22.2%. Volumes of electricity traded in the Italian System, totalling 26.1 million MWh, recorded an annual increase for the first time in 2011, although it was rather limited (0.3%). This tendential increase was affected both by the decrease in energy traded in the energy exchange, equalling 15.1 million MWh (-5.1%) and by the increase in OTC energy exchanges recorded on PCE, equalling 11 million MWh (+8.8%) in September.. gen mag giu lug ago set ott dic. 2. January May June July August September October December. Source: Electricity Market Operator – Monthly trading report – October 2011.. Operating Review. 17. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. Liquidity on the DAM.

(18) Interim Report on Operations at 30 September 2011. As indicated, the average energy purchase price in the electricity exchange (national standard price) increased by 22.2% compared to the same period of last year, confirming the trends that have been occurring since the beginning of 2011. After the all-time low reached in August (1.08), the ratio between the price during peak hours and base load went back up to 1.14. The sale prices still show a net gap between continental and island zones. In the former, prices are all tending to increase by about 20% to the highest levels since February 2009, and are all under 79 €/MWh; the lowest, as usual, are in the South, equal to 75.84 €/MWh. On the two islands, the sale price came out at 103.84 €/MWh in Sicily and 108.39 €/MWh in Sardinia. National Standard. variazione sullo stesso mese dell'anno precedente gen mag giu lug ago set ott dic. change compared to the same month of the previous year January May June July August September October December. Price on the European Power Exchanges (arithmetic mean €/MWh). Operating Review. 18. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. Price.

(19) Interim Report on Operations at 30 September 2011. Italy France Germany Spain Scandinavia January May June July August September October December. IPEX: the Italian Power Exchange; EEX: European Energy Exchange, the German Power Exchange; PowerNext: the French Power Exchange; OMEL: Compañía Operadora del Mercado Español de Electricidad, the Spanish Power Exchange; NordPool: the Scandinavian Power Exchange (Norway, Sweden, Denmark, Finland);. In Italy, there was a tendential decrease in the demand for gas (- 4%). That decrease mainly reflects the drop in thermoelectric consumption (- 4%) and civil consumption (- 6%), while the only increase was shown in the industrial sector (+ 3%). The recovery in consumption compared to September 2010 was also accompanied by a tendential increase in imports (+ 1%) and national production (+. Operating Review. 19. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. Italia Francia Germania Spagna Area scandinava gen mag giu lug ago set ott dic.

(20) Interim Report on Operations at 30 September 2011. 3%). The higher offer level compared to consumption caused an injection into storage of 1,041 million cubic metres, therefore bringing the overall gas stored to 9,634 cubic metres, the top value of the last two years, taking up 96% of the space granted by Stogit. The price recorded at the Virtual Trading Point (VTP) was 30.45 €/MWh, the top value of the last two years and an increase of 12% compared to one year ago. That increase is part of analogous increase in the main European hubs, although the Italian listing price is approximately 6/7 €/MWh above the average of the Continental European references. Italian Gas Market. January May June July August September October December Total withdrawn/injected. Regarding the European energy markets, September is characterised by an essential stability in listings of crude oil and the main European fuels, which reached the highest levels of the last three years. In the electricity markets, the growth already demonstrated in August was consolidated, causing the listings of Mediterranean stock markets to reach the maximum values reported since January 2009. September reinforces the phase of lower volatility in the Brent, which came out at 113.1 $/bbl, confirming the disconnect, which has been occurring since January, of its prices from those of the United States reference market, which are notably lower. European crude oil therefore shows a slight recovery compared to August, further consolidating its annual growth at just over 45%. As a result of this. Operating Review. 20. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. gen mag giu lug ago set ott dic Totale prelevato/immesso.

(21) Interim Report on Operations at 30 September 2011. robust trend, market expectations for the months to come appear to be moderately bearish, forecasting a return to 100 $/bbl in the Brent during 2012. In this environment, there is a brusque cyclical drop in the exchange rate, which dropped to 1.38 $/€, but is still above the parity between the two currencies which occurred in 2010. Those changes caused an increase in price listings expressed in EUR for all fuels compared to the previous month (+3/+7%), generating, on the other hand, only a weak decrease in increases reported on an annual basis (+ 27/+38%). Dated Brent price trend. gen mag giu lug ago set ott dic tasso di cambio. January May June July August September October December exchange rate. Electricity distribution Transport Service Tariffs The year 2011 represents the last year of application of the tariff structure defined by the Electricity and Gas Authority (the Authority) in the “Transmission, Distribution and Metering Code […] for the regulatory period 2008-2011”, contained in Annex A of Resolution 348/2007. It is recalled that 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.. Operating Review. 21. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. Networks Industrial Segment.

(22) Interim Report on Operations at 30 September 2011. These mechanisms are partly based on parametric/actual costs analyses (general equalisation: mandatory) and partly on company-specific analyses carried out by the Authority (company-specific equalisation: 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. In reality, the costs actually incurred by individual companies in order to provide the 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. For more information on the various forms of equalisation, please see the description in the 2010 consolidated financial statements and the 2011 Interim Condensed Consolidated Financial Statements. With Resolution ARG/elt 87/09, the Authority set out provisions concerning the advance payment of the company-specific equalisation amount for 2008, 2009, 2010 and 2011. In fact, the Authority requires that the electricity sector equalisation fund make advance payments, except for the adjustment, in relation to the company-specific equalisation for the years 2008, 2009, 2010 and 2011, to the distribution companies for which the Authority set the Csa factor for the year 2004. The prepayments for the year 2008 were determined as 80% of the companyspecific equalisation amounts recognised for the year 2006 and were paid to the beneficiary companies by 31 July 2009. For the years 2009, 2010 and 2011, they amounts that will have been recognised until the moment of payment. The payment to companies will be made on 30 June of the year following that to which the prepayment refers. Further innovations introduced in the third regulatory period regard: •. determining a mandatory tariff for distribution services, to be set by the Authority and applied by each distribution company to its current and future counterparts. This arrangement thus replaces the system based on basic and special tariff options, as adopted for distribution services during the second regulatory period, proposed by the various distribution companies;. Operating Review. 22. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. shall be calculated based on the most recent company-specific equalisation.

(23) Interim Report on Operations at 30 September 2011. •. distinguishing between metering service costs with appropriate specific fees to cover costs associated with installing and maintaining meters, taking meter readings and confirming and recording readings;. •. defining of a dynamic mechanism for adjusting 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;. •. separating the amounts resulting from application of fees for reactive energy withdrawal, now allocated to the “Cost of measures and initiatives designed to promote energy efficiency among end users of electricity” account, from distribution revenues.. The method of updating tariff components has also been changed, to the extent that: •. the portion of transmission and distribution tariffs covering operating expenses is updated via a price-cap mechanism;. •. the part intended 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;. •. the part intended 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.. conditions for delivery of the connection services”, attached to Resolution 348/2007 as Annex B, the Authority has: •. established the procedural and economic terms for delivery, of the service connecting consumers to LV grids to end customers, with an obligation to connect third parties;. Operating Review. 23. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. With regard to connection fees and fixed charges, in the document “Economic.

(24) Interim Report on Operations at 30 September 2011. •. defined additional economic terms with regard to those established in Resolution 281/2005;. •. determined the procedural and economic terms for delivery of network connection services to distribution companies, with an obligation of connecting third parties;. •. established the procedural and economic terms for the provision of specific services (the transfer of equipment requested by users, contract transfers, transfers of supply, disconnections, etc…).. By means of Resolution ARG/elt 6/11 of 31 January 2011, the Electricity and Gas Authority started up the procedure for creating measures related to the tariffs for the provision of electricity transmission, distribution and metering services of electricity and the economic conditions for delivery of the connection services, for the regulatory period 2012 -2015. The table below shows the quantities injected into ACEA Distribuzione's network; in relation to the reference period compared with the same period of 2010, the energy put into the network by market is shown with the additional detail of the contribution ensured by Acquirente Unico S.p.A. and by the import supply.. Market subject to additional safeguards. Underlying distributors. Total. Other Sources. GWh. GWh. GWh. GWh. GWh. 2011. 2,628.19. 323.35. 5,941.99. 2.07. 8,895.60. 2010 Actual Increase / Decrease Increase/ (Decrease) %. 3,062.20. 323.35. 5,536.12. 2.10. 8,923.76. (434.01). 0.00. 405.87. (0.03). (28.16). -14.17%. 0.00%. 7.33%. -1.24%. -0.32%. With regard to import supply, as from 1 January 2002 ACEA Distribuzione signed an agreement with the Vatican City State (that was renewed on 6 July 2006) in force from 1 January 2007 to 31 December 2011, for the optimised management of imported electricity assigned to it (established by Terna, in accordance with the indications provided by the Italian Authority for Electricity and Gas, based on the Decree issued by the Ministry for Productive Activities - now the Ministry of Economic Development - that sets out the assignment of transmission capacity shares to the interconnection with foreign countries for the Vatican City State and the Republic of San Marino).. Operating Review. 24. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. AU Source. Free market.

(25) Interim Report on Operations at 30 September 2011. In this context, the Company undertook to provide technical services linked to the management of underlying utilities to the above-mentioned State, as well as to rationalise and improve any related electricity network and plant. Service quality Technical Quality Reporting activities in 2010 were concluded within the deadlines established beforehand by the Regulator (by 31 March 2011). The results of the aforesaid reporting are still awaiting AEEG’s approval. Please note that, insofar as it is inherent to the data communicated to AEEG relative to the year 2010, ACEA Distribuzione was controlled by AEEG's inspection office with the supervision of the Italian Financial Police in force at the Special Market Protection Unit. The inspections were carried out on 12 and 13 July 2011 in accordance with AEEG resolution VIS 59/11 of 19 May 2011 and following AEEG's formalisation of the inspection, sent to ACEA Distribuzione by registered letter no. 0018066 of 05 July 2011. As of today, the report of the inspection's outcome has not yet arrived. Commercial Quality During 2011, ACEA Distribuzione is continuing its path of improvement undertaken in 2010, with a series of additional actions aimed at risk mitigation; in particular: •. bi-quarterly inspections of all operating units according to the procedure set. •. continuous process monitoring,. •. in the area of Lean Thinking activities carried out on commercial quality processes, which ended with a Kaizen week, some corrective actions were identified to eliminate paper documentation in favour of more use of IT (measure that improves the validity and compliance of practices),. •. intensification of training events.. Operating Review. 25. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. forth by AEEG (the methods are set forth in procedures),.

(26) Interim Report on Operations at 30 September 2011. The rules inherent to the management of non-payments remain unchanged while, following the issue of a new Code for active connections, some changes were made to the management of active connections. In relation to this last aspect, please note that ACEA Distribuzione was controlled by AEEG’s inspection office with the supervision of the Italian Financial Police in force at the Special Market Protection Unit. In accordance with AEEG resolution VIS 44/11 of 23 March 2011, the inspections were carried out on 17 and 18 May 2011 on a sample of commercial cases open for active connections since 1 January 2008. The outcome of the control was drawn up by AEEG in a report on 2 August 2011 and came out positive since no penalties were imposed. Regulatory Framework Please see the Interim Report on Operations as at 31 March 2011 and the Interim Condensed Consolidated Financial Statements 2011 for a description of the resolutions adopted by AEEG during the first and second quarters of 2011. The decisions made and consulting documents issued by AEEG during the third quarter of 2011 are listed below: 7 July 2011 - Consulting document DCO 25/11: Implementation of article 20 of the joint Decree of the Ministry of Economic Development and the Ministry for the Protection of the Environment, Land and Sea of 5 May 2011, in order to incentivise electricity generation by solar photovoltaic plants. the interministerial decree of 5 May 2011 (called the Fourth Energy Account), with particular reference to: •. the coverage of resources to provide incentives and manage activities defined by the decree, in particular as regards GSE's preparation of a single register of photovoltaic plants;. •. making network operators responsible for the service of metering energy produced;. Operating Review. 26. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. AEEG formulated its proposals to implement the measures pursuant to art. 20 of.

(27) Interim Report on Operations at 30 September 2011. •. remunerating activities for certifying the completion of works carried out by network operators.. 7 July 2011 - Consulting document DCO 26/11: Amendment of Annex A to AEEG resolution 11/07 of 18 January 2007, aimed at introducing measures to promote the fulfilment of functional and accounting unbundling obligations of parties operating in the electricity and gas sectors. AEEG proposed the introduction of the following penalties to be applied to distribution companies as a result of non-compliance in relation to functional and accounting unbundling: •. suspension of compensatory or incentivised disbursements by CCSE (electricity industry equalisation fund) and GSE if the obligatory notifications are not sent within the timeframes established in the (binding guidelines, report of measures implementing the programme, annual and long-term development plan and annual separated accounts);. •. application of an administrative penalty of 3,000 euros if annual separated accounts already sent as final versions are subsequently adjusted.. 13 July 2011 - Resolution ARG/elt 96/11: Selection of pilot projects for the public recharging of electric vehicles, pursuant to AEEG resolution ARG/elt 242/10 of 15 December 2010. AEEG chose the projects which, as part of experiments on the topic of the public recharging of electric vehicles, were allowed the recognition: •. of the coverage of costs incurred (disbursement by CCSE of 728.00 euros/year. •. of the economic incentive by defining a Tsmax payment (16.2299 euro cents/kWh) in excess compared to the transmission tariff (12.1826 euro /kWh).. The following projects were selected: •. 1 project for the distributor model (Enel Distribuzione SpA with Hera SpA);. •. 2 projects for the exclusive service provider model (A2A SpA and Municipality of Parma);. •. 2 projects for the competitive service provider model (Enel Energia SpA and Class NPOs).. Operating Review. 27. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. per recharging station until 31 December 2015);.

(28) Interim Report on Operations at 30 September 2011. The operators must submit a Half-yearly Report to AEEG on the activities carried out; the first report must be sent by 31 January 2012 (with reference to progress made as of 31 December 2011). 13 July 2011 - Resolution ARG/elt 97/11: Adjustments to Tables 1 and 2 of AEEG. resolution. ARG/elt. 74/11. of. 16. June. 2011,. relative. to. the. recalculation, as an adjustment, of amounts for the low-voltage metering service revenue equalisation for 2008. AEEG changed the adjustments referring to the metering equalisation for the year 2008 set by resolution ARG/elt 74/11. Compared to the previous decision, the amount in favour of ACEA Distribuzione was increased by 2,783 euros, since in the previous resolution the amount of the penalty was counted twice, so the amount of the 2008 adjustment is now 1,307,476 euros. 21 July 2011 - Consulting document DCO 29/11: Criteria for the definition of tariffs for providing electricity transmission, distribution and metering services for the 2012 - 2015 period. AEEG set forth its methodological guidelines on criteria for calculating costs recognised, as well as a general framework of the network service tariff procedure relative to the fourth regulatory period. In particular, given the essential confirmation of the general criteria for determining the invested capital recognised significant for regulatory purposes, AEEG proposes the introduction of a benchmark tariff per company for defining the restriction to criteria: •. parametric recognition - by identifying an implicit capital whose basis is the revenue equalised in 2010 - for the determination of invested capital and the depreciation of MV/LV infrastructures until 31 December 2007;. •. precise. recognition. of. invested. capital. and. depreciation. for. MV/LV. infrastructures (for 2008, 2009 and 2010) and for HV infrastructures and HV/MV transformation;. Operating Review. 28. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. revenue admitted for the distribution service, organised according to the following.

(29) Interim Report on Operations at 30 September 2011. •. an updating mechanism according to two alternatives (vector solution or graduated solution).. Additional proposals involve: •. confirming the rules for recognising operating costs as regards the mechanisms for efficiency recovery (X-factor) and for transferring higher efficiencies to end customers (profit sharing);. •. maintaining the equalisation for the LV measurement service;. •. changing the treatment of interconnection fees, setting forth that lump-sum payments are also deducted from invested capital, as is already the case for estimated payments;. •. incorporating costs incurred for investments in the tariff ahead of time, in the year n+1.5 (instead of n+2).. 21 July 2011 - Resolution ARG/gas 99/11: Provisions for the natural gas retail market: service of default, acquisition and loss of responsibility for withdrawals. and. approval. of. the. Gas. Non-payment. Code. (TIMG).. Amendments and supplements to the rules in force on limiting credit risk for the electricity retail sale market. AEEG introduced some provisions which amend the regulation on non-payment for the electricity sector (resolution ARG/elt 4/08); in detail: •. the criteria linked to defining the execution capacity (weekly and monthly) of the distributors in relation to suspensions resulting from non-payment referring to requests on PODs in LV not equipped with operational electronic meters were amended; the counting procedures for monitoring the commercial quality of standard times for executing suspensions as a result of non-payments were changed (utilisation of lawful days and not business days);. •. a notification was introduced whereby the seller informs the distributor of the resolution of a sales contract relative to a POD for which the suspension due to non-payment has been carried out.. 21 July 2011 - Resolution ARG/com 100/11: Extensions in relation to general equalisation pursuant to Part III, Title I, Section 1, of Annex A to resolution 348/07 of 29 December 2007 (Transport Code).. Operating Review. 29. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. •.

(30) Interim Report on Operations at 30 September 2011. Extensions relative to equalisation mechanisms pursuant to Title 7 of Annex A to resolution ARG/gas 159/08 of 6 November 2008. AEEG deferred the general equalisation deadlines for 2010, defining the following new deadlines: •. CCSE's notification of equalisation amounts to distributors and to AEEG by 31 October 2011 instead of 30 September;. •. distributors' payment of equalisation amounts due to CCSE by 30 November 2011 instead of 31 October;. •. CCSE's payment of equalisation amounts due to distributors by 31 December 2011 instead of 30 November.. 4 August 2011 - Consulting document DCO 32/11: Regulation regarding the functioning of the indemnity system pursuant to Annex B of AEEG resolution ARG/elt 191/09 of 11 December 2009. AEEG formulated some proposals to complete the indemnity system regulations, aimed particularly at protecting sellers - which are incoming sellers - from the credit risk generated by the acquisition, subsequent to switching, of an end customer from which it did not collect the CMOR indemnity fee that the end customer should have paid as a result of the confirmed non-payment to a previous seller (outgoing seller). Specifically, a repayment mechanism will be introduced, which the incoming seller may use to recognise the CMOR fee if particular conditions are satisfied (suspension or suspension request, deactivation or transfer). The theoretical mechanism involves the distributors in identifying and managing Manager of the indemnity system, CCSE). 4. August. 2011. -. Consulting. document. DCO. 33/11:. Regulation. of. connection, transmission, distribution, metering and dispatch services for simple production and consumption systems and private networks. AEEG submitted proposals meant to identify and divide responsibilities on the connection point to the public network (distribution and transmission) and network costs (distribution and metering tariff components, as well as connection fees), with reference to:. Operating Review. 30. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. information flows with other players involved (sellers, Acquirente Unico as the.

(31) Interim Report on Operations at 30 September 2011. •. Private Networks, a category which includes: o. end-user internal grids (RIU) already precisely identified in resolution ARG/elt 52/10;. o. other Private Networks, generally understood as those networks through which it is possible to access the Public Network, in order to guarantee the right of free access to the electricity system, in particular for the purposes of choosing an electricity provider.. •. Simple Production and Consumption Systems (SSPC), defined generally as those energy systems that have the simultaneous presence of one or more producers and/or one or more end customers characterised by the direct electricity connection between those users.. AEEG submits its proposals in relation to those network situations and system configurations, which refer particularly to: •. the identification of points and the commercial management for dispatch purposes;. •. provision of the metering service;. •. signing of supply contracts;. •. application and division of transmission tariff components.. Furthermore in DCO 33/11, AEEG proposes that each network manager create: •. a database containing a list of all simple production and consumption systems;. •. a database with a list of all Private Networks present on its networks.. According to the forecasts of AEEG, those databases would be then updated with an annual notification.. tariffs for providing electricity transmission, distribution and metering services for the 2012 - 2015 period. In. defining. the. criteria. and. mechanisms. for. incentivising. infrastructural. investments, AEEG expressed its intention to: •. confirm the recognition of the increase in the return of invested capital for investments in smart grids (+2% for 12 years);. •. continue incentivising electrical mobility.. Operating Review. 31. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. 4 August 2011 – Consulting document DCO 34/11: Criteria for defining.

(32) Interim Report on Operations at 30 September 2011. AEEG proposes the monitoring and development of mechanisms to incentivise those types of investment (at the moment only "pilot projects" are incentivised) by introducing an output based assessment methodology, which is based on the benefits contributed to the system by investments instead of on invested capital. The first assumptions in relation to the output based methodology set forth in DCO 34/11 largely review the approach adopted to assess smart grid pilot projects. Also, AEEG expects to extend the forms of increased returns for investments in: •. accumulation reservoirs in HV/MV transformation stations connected to the primary station MV bus-bar;. •. new technologies for the active management of demand and the metering of electricity (a USB port has been provided which will be applied to the electronic meter, allowing the end user to manage withdrawals on the basis of charges on the network, in exchange for a remuneration/decrease of the supply cost).. 15 September - Resolution ARG/elt 121/11: End of the waiver of the incentive pursuant to paragraph 12.5 of Annex A of resolution 292/06 of 18 December 2006, for distribution companies that use electronic meters and remote control systems to register LV customers involved in power outages as of 1 January 2011 and approval of the waivers of the distribution companies Società Elettrica Ponzese S.p.A. and Consorzio Elettrico Di Storo Soc. Coop. With reference to the goal of making 85% of electronic meters - which are able to precisely report LV customers subject to outages - at supply points which are active as of 31 December 2010 operative by the same date, 31 October 2011 was set as incentive for achieving that objective may waive it, by sending a written notification to the Authority's Consumer and Service Quality Department. 15 September 2011 - Consulting document DCO 35/11: Launch of the Integrated Information System (SII).. Operating Review. 32. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. the deadline by which the distribution companies that submitted petitions for the.

(33) Interim Report on Operations at 30 September 2011. AEEG set forth the SII implementation procedure and plan, particularly focusing on the various implementation phases of the procedure identified and the services offered by the SII in its initial phase (called phase 1). Specifically, DCO 35/11 indicates: •. the processes that the SII is expected to manage;. •. the role carried out by the SII Operator which, according to the Processes, will be: o. the official certification authority of information flows between operators (distribution companies, sellers and Terna);. o. responsible for carrying out specific activities, for which the distribution companies are currently responsible;. o. agent for centralised communications, if the data being sent in information flows through the SII is not included in the RCU, but the SII Operator is limited to tracking and retaining the data sent by third parties responsible for carrying out deeds through the SII.. •. the alternative SII development possibilities, particularly forecasting process development in parallel with the establishment of the database (the Official Central Register, RCU);. •. the implementation plan, for which the preparatory phase is expected to be completed (accreditation of operators, standardisation of the flows and populating of the RCU) and phase 1 is expected to begin within 9 months from the publication of the SII operating regulation (not yet issued).. 15 September 2011 - Consulting document DCO 36/11: Standardisation of AEEG submitted its own final guidelines on the topic of standard flows of metering data, together with the definition of amendments to the regulation regarding the provision of measurements by distribution companies. The expected amendments to the regulation will involve the introduction of the following additional obligations of the distribution companies in relation to sellers: •. sending metering data adjustments on a monthly basis, referring to the calendar year underway for non-timed supply points;. •. sending "late" metering data adjustments on an annual basis for non-timed supply points;. Operating Review. 33. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. flows of electricity withdrawal metering..

(34) Interim Report on Operations at 30 September 2011. •. sending metering data adjustments on a monthly basis for timed supply points, in addition to the half-yearly and annual adjustment notifications currently set forth by the regulation.. As regards communication flows, AEEG proposes the definition of "specialised" metering data transfer standards according to the type of delivery or the nature of the content. Furthermore, AEEG: •. requires distribution companies with more than 100,000 supply points to use the portal as a communication tool;. •. specifies that the solutions proposed are planned by taking into account that the function of providing electricity withdrawal measurements will be carried out in the future by the Integrated Information System.. 15 September 2011 - Consulting document DCO 37/11: Update to technical and economic conditions for connecting to power networks with the obligation of third-party connection to electricity production plants. AEEG reformulated the measures previously introduced with resolution ARG/elt 125/10 (Code for active connections) aimed at resolving critical issues linked to the virtual saturation of transmission capacity, in order to resolve the problems that had led to its suspension by the Regional Administrative Court. Specifically, AEEG proposes a solution based on the active connection applicant's voluntary participation in one of the following options, when accepting the estimate processed by the network operator: •. payment of an additional fee as a guarantee for obtaining the transmission. o. shall be enforced by the network operator if the production system is not developed;. o. shall be repaid to the applicant if the latter waives the connection within 2 years from acceptance of the estimate;. •. consolidation. of. the. transmission. capacity. reservation. only. when. the. authorisation to build and operate the plant is obtained. AEEG proposes that proposals regarding the transmission capacity reservation are valid:. Operating Review. 34. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. capacity, in the form of a deposit or bank guarantee. That guarantee:.

(35) Interim Report on Operations at 30 September 2011. •. only for connection requests in critical areas;. •. also for pending connection requests.. Furthermore, DCO 37/11 sets forth the following proposals for amending the active connection regulation: •. increasing indemnities in the event of payment delays;. •. tracking all requests for indemnification, and obligation to respond within 30 days of receipt.. 21 September 2011 - Resolution ARG/elt 125/11: Definition of procedures for identifying the protection service to which each non-domestic end customer that owns LV supply points is entitled. The procedures were defined for distribution companies to identify non-domestic LV end customers that are entitled to the protection service and, also, non-domestic LV customers entitled to additional safeguards. Specifically, in order to associate with the protection service, the distribution company must verify that the end customer is the owner of its own distribution network, also with MV and HV points. The distributor's additional verification procedures depend on the receipt of notifications from sellers. In this regard, the resolution in question added to preexisting notifications (from the operator subject to protection and the primary utility provider) a notification from free market sellers, which indicates that the end customer also owns MV and HV points served by the same seller and connected to the network of another distribution company.. In the Energy services sector, the activities of the company Arse, which has been operational since 1 April 2005, focus on four main lines of action: energy saving, photovoltaic power, cogeneration and the control of air quality (the “Caldaia Sicura” and “Sanacaldaia” projects). Regulatory Framework Please see the Interim Report on Operations as at 31 March 2011 for a description of the resolutions adopted by AEEG during the first quarter of 2011.. Operating Review. 35. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. Energy Services, Public Lighting and Digital Meters project.

(36) Interim Report on Operations at 30 September 2011. The decisions made and consulting documents issued by AEEG during the second and third quarters of 2011 are listed below: 06 April 2011 - DCO 9/ 11 Redefinition of minimum guaranteed prices for plants fuelled by renewable sources that generate up to 1 MW of electricity. The document proposes a new structure and new minimum guaranteed prices differentiated by source, to be applied in the context of dedicated withdrawal for hydroelectric plants with an average annual nominal power of up to 1 MW and for plants with an electrical nominal power of up to 1 MW fuelled by renewable sources, except for hybrid power plants, restricted to the first two million kWh withdrawn directly from each plant. 5 May 2011 - Resolution EEN 4/11 Approval with regard to white certificates of three new technical sheets for quantifying energy savings related to the construction of high-efficiency systems for lighting the main highway and nonurban tunnels, the construction of new high-efficiency lighting systems and the installation of high-efficiency luminaires in existing lighting systems on roads used for motorised traffic, and consequent updating of technical sheet no. 17* and withdrawal of technical sheet no. 18*. 5. May. 2011. -. Decree. of. the. Ministry. of. Economic. Development. Incentivisation of electricity generation from solar photovoltaic plants (Fourth Energy Account), which redefines and confirms the incentivisation of 31 May 2011 and 31 December 2016. 7 July 2011 - Resolution EEN 5/11 Adjustment of material errors in AEEG resolution EEN 4/11 of 5 May 2011. Refers to material errors in technical sheets no. 29 and no. 29b, in relation to reference lighting efficiency values. 28 July 2011 Resolution ARG/elt 104/11 Conditions for promoting the transparency of sales contracts for end customers of electricity generated by renewable sources.. Operating Review. 36. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. electricity generation from solar photovoltaic plants that become operative between.

(37) Interim Report on Operations at 30 September 2011. 4 August 2011 - Decree "Supplements to Law Decree no. 20 of 8 February 2007, implementing directive 2004/8/EC on the promotion of cogeneration based on a useful heat demand in the internal energy market and amending Directive 92/42/EC". 5 September 2011 - Decree "Definition of the new support system for highperformance cogeneration". 15 September 2011 - DCO 37/11 Update to technical and economic conditions for connecting to power networks with the obligation of third-party connection to electricity production plants. Expiry 17 October 2011. 15 September 2011 - Resolution EEN 7/11 Extension of the process launched with resolution EEN 19/10 of 24 November 2010, by calling a technical roundtable with the central administrations and operators concerned, on updating and reorganising the Energy Efficiency Guidelines, pursuant to resolution 103/03 of 18 September 2003 as amended and supplemented. The resolution regarded the consultation process for updating the Guidelines. Energy saving As pointed out in previous reports, there are still issues related to the lack of energy efficiency certificates on the market. The AEEG (Italian Authority for Electricity and Gas) proposed some amendments to the guidelines, through a consultation currently underway, which should lead to the obligations imposed by the decree on white certificates. As already previously highlighted, ACEA Distribuzione is not involved in this negative trend thanks to the availability of certificates due to energy savings initiatives undertaken with Arse. As a consequence, no projects of energy savings were therefore required, but it has been deemed more suited to focus on the monitoring of existing projects reporting, with special attention to projects with a final certification. In this regard, AEEG notified us that it approved the most recent final report of the project on the Rome metropolitan train station, while it requested additional information on the final report relative to the Anconella project (Publiacqua), for which a response was sent.. Operating Review. 37. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. improving the current condition of distribution companies delaying the fulfilment.

(38) Interim Report on Operations at 30 September 2011. On the regulatory level, we are still awaiting the new decree extending and supplementing the energy savings system through White Certificates, preannounced for the end of the year, and the 15 new standardised sheets prepared by Enea, as set forth in Law Decree no. 28 "Implementation of directive 2009/28/EC on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC", still being examined by the Ministry of Economic Development. PV power All plants connected as of today are regularly operating and their production forecast for this year is higher than expectations, also as a result of favourable climate conditions. In addition to the plants already connected, plants in Giuliano di Roma and Villa Latina were also connected in this period (for an overall power of about 5 MWp), for which the incentive tariff was requested. In the same period, works were completed (with the relative connection to the electricity network) on plants built with an EPC contract in Calabria, for an overall power of almost 12 MWp, broken down into 24 solar greenhouses. In general, as regards existing regulations and particularly the "Fourth Energy Account", one of the new elements presented is the introduction of a new procedure for recognising the incentive tariff for plants known as "large plants". A dedicated log managed by GSE has been established, where the energy account requests for that type of plant must be recorded. register this year, since the forecast cost threshold has already been reached. Therefore, it is necessary to wait for the opening of the register next year in order to begin operations in "Large Plants". Cogeneration Ecogena's activities continued. However, in general the continuation of the macroeconomic situation in the Euro area made its pursuit of goals more complex and difficult.. Operating Review. 38. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. As expected, GSE indicated that new deadlines will not be set for enrolling in the.

(39) Interim Report on Operations at 30 September 2011. The effects of the impact of Law Decree no. 28 of 3 March 2011- Implementation of directive 2009/28/EC on the promotion of energy from renewable sources, remain positive. This Decree extends the current comprehensive incentive tariff regime for plants with power of less than 1 MWe; as of today however the responsible ministries have not begun to define implementing provisions, which have been expected since September. The Roman Council's approval of Resolution 7 of 14 February 2011, which amends art. 48 of the Municipal Building Regulation (known as "New Resolution 48"), strategic in the near future, also had a positive impact. Furthermore, activities to build the cogeneration plant to serve the Europarco Complex continue, for which three leading companies, which are now included on a short list, were chosen for the supply of plant works through an internal restricted tender. The assignment should take place in October. The commission also launched the main excavation and restructuring works in the areas where the new "Laurentino" shopping centre will be built, for which the Company already obtained the contract to build the trigeneration plant to serve it. Amongst the negotiations underway and in the advanced stages of definition are three Fiorucci S.p.A. food plants, for which the Company was placed on the short list for assignment, and the Novartis S.p.A. pharmaceutical facility. Last month, in July, an energy services agreement was signed with Sogei, while a contract with Cinecittà Parchi should be signed by the end of this year. Those plants will contribute a total of 3.6 Mwe, entering into operations in spring 2012. assessments. began. for. further. developments. both. with. the. Auditorium della Musica in Rome, designed by Renzo Piano, and for a residentialcommercial project of approximately 400,000 cubic metres located in the municipality of Marino. Noting that the subsidiary EUR Power presented the EUR Smart Grid Energy Development Plan during the Municipality of Rome Stati Generali forum on 22 and 23 February, EUR Power initiated administrative procedures to obtain a permit to build the "Adenauer" Plant and for the concession of the ground to build the "Europa" Plant.. Operating Review. 39. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. Furthermore,.

(40) Interim Report on Operations at 30 September 2011. Italian Ministerial Decrees from the Ministry of Economic Development last August and September issued new instructions, aimed at recognising CAR [highperformance cogeneration] as well as quantifying and enhancing the Support System for them, favouring calculation procedures for obtaining energy efficiency certificates. Air quality The activities managed by the Air Quality sector "Sanacaldaia" and "Caldaie Sicure" were carried out in accordance with the contractual extension from 31 July 2007; the current extension covers the period from 30 June 2011 to 31 December 2011. The service was granted again under the same contractual terms and conditions as previously and using prevailing tariffs defined by the Directive Determination 1425 of 2006. Public Lighting As regards managing the Public Lighting service, on 15 March 2011, ACEA and Roma Capitale stipulated an adaptation to the Service Agreement which governs public lighting services; the salient points of the renegotiation are the lengthening of the contract until 2027, making it consistent with the Concession, as well as the revision of qualitative and quantitative parameters. The contract between ACEA and ACEA Distribuzione for the assignment of public lighting in the Municipality of Rome is currently being revised. During the period, the new constructions were mainly intended to continue the programme", pursuant to Resolution 256 of 3 August 2010, and the construction of plants in the "Centrone" area pursuant to Resolution 331 of November 2009, all activities commissioned by the current Department IX (formerly XVI). Most of the projects carried out are part of the "Piano della Luce" (Lighting Plan). In addition to the above, additional programmes were focused on a series of operating guidelines for replacing circuits (that is, replacing MV plants with LV plants), network modernisation, disposing of MV starters, cleaning up and maintaining plants, artistic maintenance, energy efficiency initiatives (the plan of installing LED technology covers on new plants continued) and new constructions.. Operating Review. 40. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. implementation of the "Suburbs Plan" and the "Extraordinary suburb lighting.

(41) Interim Report on Operations at 30 September 2011. Finally, as regards the "Digital Meters Project", the large-scale phase for the 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, is underway in 2011. The approved industrial plan envisages the completion of activities by 2011, with 95% coverage of active users (equal to roughly 1,540,000 meters), as set out by the Italian Authority for Electricity and Gas and other installations of concentrator cabinets for the management of new users. ACEA Distribuzione is in line with the objectives defined by AEEG in resolution. Operating Review. 41. WorldReginfo - 4b94eb2d-db3a-491c-87e1-7ffba2644813. 292/06 - annex A..