ACEA GROUP Interim Operations' Report at 30 September 2010

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(1)ACEA GROUP Interim Operations' Report at 30 September 2010. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. Board of Directors of 11 November 2010.

(2) MANAGEMENT OF THE PARENT COMPANY Board of Directors Giancarlo Cremonesi. Chairman. Marco Staderini. Chief Executive Officer. Paolo Bassi. Director. Francesco Caltagirone. Director. Jean Louis Chaussade. Director. Aldo Chiarini. Director. Paolo Di Benedetto. Director. Luigi Pelaggi. Director. Andrea Peruzy. Director. Enrico Laghi. Chairman. Corrado Gatti. Standing Auditor. Alberto Romano. Standing Auditor. Gianluca Marini. Alternate Auditor. Leonardo Quagliata. Alternate Auditor. Executive Responsible for Financial Reporting Giovanni Barberis. Interim Operations' Report at 30 September 2010. 2. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. Board of Statutory Auditors.

(3) ACEA Group Financial Highlights. page 4. Summary of results. page 13. Latest news on the Industrial Segment trends. page 14. Segment Information. page 17. Operating Review. page 19. Basis of Presentation and Consolidation. page 47. Results of operations. page 54. Financial Position and Cash Flow. page 81. Acquisitions. page 97. Other Information. page 98. Declaration of the Executive Responsible for Financial Reporting. page 101. Operating and Financial Outlook. page 102. List of consolidated companies. page 105. Interim Operations' Report at 30 September 2010. 3. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. CONTENTS.

(4) Consolidated Income Statement 30 Sept 2009 Restated. Revenue from sales and services Other revenues and proceeds Consolidated net revenue Staff costs. 2,403,498. Increase/ Increase / (Decrease) (Decrease) %. 2,134,667. 268,830. 12.6%. 47,155. 40,517. 6,638. 16.4%. 2,450,653. 2,175,184. 275,468. 12.7%. 201,174. 218,353. (17,179). -7.9%. Costs of materials and overheads. 1,764,979. 1,550,949. 214,030. 13.8%. Consolidated operating costs. 1,966,153. 1,769,302. 196,851. 11.1%. 2,209. (3,518). 5,727. -162.8%. Gross Operating Profit. 486,709. 402,365. 84,344. 21.0%. Amortisation, depreciation, provisions and impairment charges. 230,359. 200,714. 29,645. 14.8%. Operating profit/(loss). 256,350. 201,651. 54,699. 27.1%. (75,520). (62,614). (12,906). 20.6%. (75,520). (62,614). (12,906). 20.6%. Net income/(costs) from commodity risk management. Finance (costs)/income Ordinary finance (costs)/income Extraordinary finance (costs)/income. 0. 0. 0. 0.0%. 1,068. 429. 639. 149.0%. 181,898. 139,466. 42,432. 30.4%. 65,319. 140,273. (74,955). -53.4%. 116,579. (807). 117,387. -14544.9%. 0. 0. 0. 0.0%. 116,579. (807). 117,387. -14544.9%. 4,639. 4,830. (191). -4.0%. 111,940. (5,637). 117,577. -2085.7%. basic. 0.5256. -0.0265. 0.5521. diluted. 0.5256. -0.0265. 0.5521. Profit/(loss) on investments Profit/(loss) before tax Taxation Net profit/(loss) from continuing operations Net profit/(loss) from discontinued operations Net profit/(loss) for the period Profit/(loss) attributable to minority interests Net profit/(loss) attributable to the Group Earnings (loss) per share (€). Amounts in thousands of euros. Interim Operations' Report at 30 September 2010. 4. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. 30 Sept 2010.

(5) Consolidated Comprehensive Income Statement 30 Sept 2009 Restated. 30 Sept 2010 Net profit/(loss) for the period. Increase/ (Decrease). 116,579. (807). 117,387. (357). 895. (1,251). Profit/(Loss) From the Redetermination of Financial Assets Available for Sale. 0. 0. 0. Profit/(Loss) From the Effective Portion on Hedging Instruments. (29,293). 16,305. (45,598). Profit/(Loss) from Conversion of Foreign Financial Statements. Actuarial Profit/(Loss) on Defined Benefit Pension Plans Taxation. Total Consolidated Operating Profits Net of Tax. 0. 0. 8,647. (5,834). 14,481. 95,577. 10,559. 85,018. 4,322. 4,171. 150. 91,256. 6,388. 84,868. Consolidated Operating Profit/(Loss) Net of Tax attributable to: Third Parties Group. Interim Operations' Report at 30 September 2010. 5. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. Amounts in thousands of euros.

(6) Quarterly Consolidated Comprehensive Income Statement 3rd Quarter 2009. Increase/ (Decrease). Revenue from sales and services Other revenues and proceeds Consolidated net revenue. 848,606 20,658 869,265. 688,054 14,413 702,467. 160,552 6,246 166,798. Staff costs Costs of materials and overheads Consolidated operating costs. 61,745 634,239 695,984. 68,464 498,755 567,220. (6,719) 135,484 128,764. Net income/(costs) from commodity risk management. (7,635). (2,178). (5,457). Gross Operating Profit. 165,646. 133,069. 32,577. Amortisation, depreciation, provisions and impairment charges. 77,057. 66,575. 10,482. Operating profit/(loss). 88,589. 66,494. 22,095. Finance (costs)/income. (25,864) (25,864). (23,145) (23,145). 1,271. (517). (2,719) (2,719) 0 1,788. Profit/(loss) before tax. 63,996. 42,832. 21,164. Taxation. 33,791. 101,721. (67,929). Net profit/(loss) from continuing operations. 30,204. (58,889). 89,093. 30,204. (58,889). 89,093. 1,212. 1,226. (15). Net profit/(loss) attributable to the Group. 28,993. (60,115). 89,108. Earnings (loss) per share (€) basic diluted. 0.1361 0.1361. -0.2823 -0.2823. 0.4184 0.4184. Ordinary finance (costs)/income Extraordinary finance (costs)/income Profit/(loss) on investments. Net profit/(loss) from discontinued operations Net profit/(loss) for the period Profit/(loss) attributable to minority interests. Amounts in thousands of euros. Interim Operations' Report at 30 September 2010. 6. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. 3rd Quarter 2010.

(7) Quarterly Consolidated Comprehensive Income Statement 3rd Quarter 2009. 3rd Quarter 2010 Net profit/(loss) for the period Profit/(Loss) from Conversion of Foreign Financial Statements Profit/(Loss) From the Redetermination of Financial Assets Available for Sale Profit/(Loss) From the Effective Portion on Hedging Instruments Actuarial Profit/(Loss) on Defined Benefit Pension Plans Taxation. Total Consolidated Operating Profits Net of Tax. Increase/ (Decrease). 30,204. (58,889). 89,093. 949. 734. 215. 0. 0. 0. (12,673). 625. (13,297). 0. 0. 3,660. (420). 4,080. 22,140. (57,950). 80,090. 1,197. 703. 494. 20,943. (58,653). 79,596. Third Parties Group. Amounts in thousands of euros. Interim Operations' Report at 30 September 2010. 7. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. Consolidated Operating Profit/(Loss) Net of Tax attributable to:.

(8) Consolidated Income Statement– Assets. 30 Sept 2010. 31 December 2009. Property, plant and equipment Investment property Goodwill Concessions Other intangible assets Investments in subsidiaries and associates Other investments Deferred tax assets Financial assets Other assets NON-CURRENT ASSETS Non-current assets held for sale Inventories Trade receivables Other current assets Current financial assets Current tax assets Cash and cash equivalents CURRENT ASSETS. 2,215,458 3,347 79,202 1,355,561 78,011 34,353 5,097 273,509 22,297 28,692 4,095,526. 2,173,238 3,347 84,312 1,273,055 73,024 28,250 6,149 240,026 20,244 34,377 3,936,023. 42,219 0 (5,110) 82,505 4,987 6,102 (1,053) 33,483 2,053 (5,685) 159,503. 92,415 1,294,960 96,384 308,593 135,667 552,034 2,480,053. 66,437 1,207,881 128,231 373,888 101,996 102,258 1,980,692. 25,978 87,079 (31,846) (65,295) 33,671 449,776 499,361. TOTAL ASSETS. 6,575,579. 5,916,715. 658,864. ASSETS. Restated. Increase/ (Decrease). Interim Operations' Report at 30 September 2010. 8. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. Amounts in thousands of euros.

(9) Consolidated Income Statement- Liabilities. LIABILITIES. 30 Sept 2010. 31 December 2009. Restated. Increase/ (Decrease). Shareholders’ equity share capital legal reserve other reserves profit (loss) pertaining to previous years profit (loss) for the period Total Group shareholders’ equity Minority interests Total shareholders’ equity Staff termination benefits and other defined benefit plans Provision for liabilities and charges Borrowings and financial liabilities Other liabilities Provisions for deferred tax liabilities NON-CURRENT LIABILITIES Non-current liabilities held for sale Trade payables Other current liabilities Borrowings Tax payables CURRENT LIABILITIES. 1,098,899 111,703 (235,632) 221,189 111,940 1,308,100 71,523 1,379,623 116,829 156,358 2,522,821 232,428 97,561 3,125,998. 1,098,899 107,096 (242,224) 303,972 (53,983) 1,213,761 71,845 1,285,606 123,297 211,232 1,853,672 203,051 92,665 2,483,917. 1,052,137 255,502 567,201 195,117 2,069,958. 1,028,661 260,796 788,610 69,125 2,147,192. 0 4,606 6,592 (82,783) 165,923 94,339 (322) 94,017 (6,468) (54,874) 669,149 29,377 4,896 642,080 0 23,476 (5,293) (221,409) 125,993 (77,234). TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY. 6,575,579. 5,916,715. 658,864. Interim Operations' Report at 30 September 2010. 9. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. Amounts in thousands of euros.

(10) Consolidated Cash Flow Statement. 30 Sept 2010. Cash and cash equivalents at beginning of period. 30 Sept 2009 Increase/(Decrease). Restated. 102,258. 212,060. (109,802). Profit before taxes and net finance costs Amortisation/depreciation Revaluations/impairment charges Movement in provisions for liabilities Net movement in staff termination benefits Realised gains Income taxes paid. 257,418 174,500 37,056 (54,874) (6,468) 0 (11,677). 201,651 169,401 15,609 (41,206) (3,959) 0 (28,741). 55,767 5,099 21,446 (13,668) (2,509) 0 17,064. Cash generated by operations before movements in working capital. 395,956. 312,756. 83,200. Increase in current receivables Increase/decrease in current liabilities Increase/(decrease) in inventories. (125,202) 23,476 (25,978). (13,129) (122,371) (1,848). (112,073) 145,847 (24,130). Movement in working capital. (127,704). (137,347). 9,643. 51,062. (105,026). 156,088. 319,314. 70,383. 248,931. (152,325) (146,913) (3,982) 63,242 0 14,278 (225,700). (283,870) (18,653) (12,073) (66,295) 0 9,327 (371,564). 131,546 (128,259) 8,091 129,537 0 4,951 145,865. 0 (22,120) 672,099 (221,409) (70,629) (1,781) 356,161. 0 (8,727) 173,700 435,480 (81,018) (141,289) 378,146. 0 (13,392) 498,399 (656,889) 10,388 139,508 (21,985). Cash flows for the year. 449,775. 76,964. 372,811. Cash and cash equivalents at end of period. 552,034. 289,024. 263,009. Cash flow from operating activities. Changes in other assets/liabilities during the year TOTAL CASH FLOW FROM OPERATING ACTIVITIES. Cash flow from investing activities Purchase/sale of property, plant and equipment Purchase/sale of intangible assets Investments Proceeds/payments deriving from other investments Dividends received Interest income received TOTAL. Minority interests in capital increases by subsidiaries Repayment of mortgages and long-term borrowing Provision of mortgages/other medium/long-term borrowings Decrease/increase in other short-term borrowings Interest expenses paid Dividends paid TOTAL CASH FLOW. Amounts in thousands of euros. Interim Operations' Report at 30 September 2010. 10. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. Cash flow from financing activities.

(11) Statement of Changes in Consolidated Equity. Share Legal Other capital reserve reserves. Balances at 31 December 2008 restated 1,098,899. 98,762. Distribution of dividends Other reserves/retained profits. 8,334. Change in basis of consolidation. Total. Total Minority shareholders’ interests equity. (6,833). 186,285 1,377,113. 67,491. 1,444,604. (94,130). (45,513) (139,644). (1,645). (141,289). 668. 669. 132,438. (140,771). 719. Operating profit Total operating profit for cash flow hedging Total operating profit for translation reserve. Total profit (loss). Profit for the period. 1 719. 719. (53,983). (53,983). 5,612. (48,371). 29,439. 29,439. (281). 29,158. 116. 116. 8,334. 39,026. (24,427) (163,352). Balances at 31 December 2009 restated 1,098,899 107,096. 32,193. (24,427). 1,213,761. 116. 4,354. (158,998). 71,845. 1,285,606. Interim Operations' Report at 30 September 2010. 11. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. Amounts in thousands of euros.

(12) Statement of Changes in Consolidated Equity Profit for the period. Total. 32,193. (24,427). 1,213,761. 71,845. 1,285,606. (24,427). 24,427. 0. 402. 402. 38,381. 38,381. 1,841. 40,222. (14,003). (14,003). (290). (14,293). (651). (651). Balances at 31 December 2009 restated 1,098,899 107,096 Other reserves/retained profits Operating profit Total operating profit for cash flow hedging Total operating profit for translation reserve Balances as at 31March 2010. 1,098,899 107,096. 7,765. Distribution of dividends Other reserves/retained profits. 4,629. Change in basis of consolidation. (4,629). 23,727 1,237,487 0. 0. 0. 0. (698). Total Minority shareholders’ interests equity. (651) 73,798. 1,311,286. (1,399). (1,399) 0. (698). (3,091). (3,789). 44,567. 44,567. 1,586. 46,153. Total operating profit for cash flow hedging. 2,674. 2,674. (13). 2,660. Total operating profit for translation reserve. (654). (654). Operating profit. Balances at 30 June 2010. 1,098,899 111,725. 2,439. Distribution of dividends. 70,313 1,283,375 0. Other reserves/retained profits. (22). Change in basis of consolidation. (654) 70,882. 1,354,257. 0. 0. 22. 0 0. 0. 3,781. 3,781. (556). 3,225. Operating profit. 28,993. 28,993. 1,212. 30,204. Total operating profit for cash flow hedging. (8,998). (8,998). (14). (9,013). 949. 949. Total operating profit for translation reserve Balances as at 30 September 2010. 1,098,899. 111,703. 6,242. 91,256 1,308,100. 949 71,523. 1,379,622. Amounts in thousands of euros. Interim Operations' Report at 30 September 2010. 12. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. Share Legal Other capital reserve reserves.

(13) Summary of results. December 2009 Final (Restated). Value of production (M€) EBITDA (M€). 2,984. September 2009 Final (Restated). 2,191. September 2010 Final. Difference Sept. 2010 vs. Sept. 2009. 2,615. 425. 564. 402. 487. 84. Ebitda Margin. 18.9%. 18.4%. 18.6%. 0.2%. EBIT (M€). 186. 202. 256. 55. Ebit Margin. 6.2%. 9.2%. 9.8%. 0.6%. -47. -1. 117. 117. 6,687. 6,676. 6,657. -19. Investments (M€). 518. 311. 305. -6. Cash Flow (M€). -317. -282. 37. 319. December 2009 Final. September 2009 Final. September 2010 Final. Difference Sept. 2010 vs. Dec. 2009. Net profit (loss) for the period (M€) Staff. (Restated). (Restated). Invested Capital (M€). 3,432. 3,370. 3,587. 155. Equity (M€). 1,286. 1,314. 1,380. 94. Net Debt (M€). 2,146. 2,056. 2,207. 61. ROI. 5.4%. 6.0%. 7.1%. ROE. -3.7%. -0.1%. 8.5%. ROS. 6.2%. 9.2%. 9.8%. Turnover. 86.9%. 65.0%. 72.9%. D/E. 1.7. 1.6. 1.6. D/EBITDA. 3.8. 3.6. 3.4. Interim Operations' Report at 30 September 2010. 13. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. (Average as a % of consolidation).

(14) Latest news on the Industrial Segment trends Networks Industrial Segment For the first nine months of the year, EBITDA came to 173.5 million euros and grew by 9.1 million euros due to the growth of Arse in the area of the photovoltaic business, both with reference to the sale of panels and with reference to the energy account accrued during the period. Please also note the increase that ACEA Distribuzione recorded due to lower distribution operating costs and an improved energy margin. Instead, EBITDA in the public lighting area decreased as a result of higher operating costs. Net debt for the period amounted to 759 million euros and was down by 40 million euros compared to the end of the previous year: this period's performance is based on the increase in receivables from the Municipality of Rome for the public lighting service, which was absorbed by Arse's need to purchase photovoltaic panels. Segment investments amounted to 107 million euros, a 12 million euro reduction due to the postponement of Arse investments and lower investments in the ACEA Distribuzione network. The average staff size in September 2010 was 1,586 resources, 25 less than the same period last year.. Energy Industrial Segment The January - September period closes with EBITDA of 90 million euros, up by 45 million euros due to the increase in AceaElectrabel Trading's energy and gas profits (total of + 14.1 million euros) and the increase recorded by AceaElectrabel Elettricità, particularly due to the generation also increased by 6.9 million euros over the same period of last year. Net debt for the period amounts to 403 million euros and is up by 43 million euros compared to the end of the previous year: the growth is mainly due to the reduced working capital of AceaElectrabel Elettricità (+ 92 million euros) partly offset by the improved working capital of AceaElectrabel Trading (- 35 million euros). Segment investments came out to 17.8 million euros, a decrease of 2.5 million euros mainly due to the reduction in Tirreno Power's investments (- 7.5 million euros), partially offset by the increase in AceaElectrabel Produzione's investments, especially in the wind sector (+ 6.6 million euros). The segment's average staff was 325 resources (+ 6 compared to 30 September 2009).. Interim Operations' Report at 30 September 2010. 14. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. energy profit for free market sales (+ 14.2 million euros). The EBITDA for energy.

(15) Water Industrial Segment At 30 September 2010, EBITDA stands at 213.9 million euros, up 30 million euros due to lower operating costs and the higher tariffs: the shift is mainly due to ACEA Ato2 (+ 26.2 million euros) and Nuove Acque (1.7 million euros), consolidated for the first time on 1 October 2009. ACEA Ato5's EBITDA decrease (- 1.9 million), due to the matter of tariff legitimacy, was essentially balanced by positive results achieved by Acque e Publiacqua. Net debt for the period amounts to 548.7 million euros and is up by 12.1 million euros compared to the end of the previous year: the shift is mainly due to Acque (+ 7.8 million euros) and ACEA Ato2 (+ 7.5 million euros) for investments made that were partially offset by an improved net working capital. Segment investments stand at 137.8 million euros, a 20.9 million euro increase compared to 30 September 2009, mainly due to ACEA Ato2. The segment's average staff is 2,904 resources, 50 less than 30 September 2009: the shift is mainly due to ACEA Ato2 (- 65 resources) and ACEA Ato5 (-16 resources) because of the adoption of the mobility, retirement and hiring postponement plan. And this is despite the consolidation of 32 Nuove Acque resources.. Environment and Energy Industrial Segment The January - September 2010 period closes with a 19.7 million euro EBITDA level, which decreased by 3.6 million euros, mainly because of the reduction in electricity volumes sold and lower pulp quantities contributed by the Terni plant (- 5.4 million euros), which has been closed since 6 August for revamping. The Terni Ena EBITDA decrease and good performances of Kyklos and EALL partially offset (a total of + 2.2 million euros). compared to the end of the previous year, mainly due to the upgrade of the San Vittore facilities with the addition of the second and third lines. Segment investments came out to 33 million euros, a decrease of 9.4 million euros mainly due to the completion of the composting plant in Aprilia, which began operations in the second half of 2009. The average staff for the year increased by 5 resources compared to 30 September 2009, reaching 179 resources.. Interim Operations' Report at 30 September 2010. 15. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. Net debt for the period amounts to 183.4 million euros and is up by 49.3 million euros.

(16) Development and Special Projects At 30 September 2010, EBITDA stands at 9.4 million euros, an increase of 0.5 million euros mainly due to the financial performance of Laboratories and Aguazul Bogotà. The period's net debt was 14.2 million euros and increased by 6.9 million euros because of the launch by AceaGori Servizi and Aguazul Bogotà of a new project in the city of Lima. The average staff size was 956 resources, an increase of 35 resources compared to the quarterly report of 2009: the shift is due to Aguazul Bogotà for the launch of said new project. However, the increase in average staff had a minimal effect on the staff cost due to the low level of average unit costs.. Corporate and Services ACEA and Acea8cento close the reporting period with an EBITDA level that is negative by 26.6 million, a 2 million euro improvement over 30 September 2009, mainly caused by the recording of extraordinary positive and negative events in the last report for about 4 million euros and by the decrease in service contract compensations (- 2 million euros). Net debt for the period comes out to 298.7 million euros, a 41 million euro reduction compared to the end of the last year, essentially due to the effect of dividends distributed by subsidiaries, partially offset by the negative operating and financial result. Investments in the period stand at 8.7 million euros and are down by 1.8 million euros due. Interim Operations' Report at 30 September 2010. 16. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. to the postponement of certain IT projects..

(17) Segment Information Please note the following for a greater understanding of this section: -. generation and sales refers to the Industrial Energy Segment and covers, under the organisation structure, Companies in the AceaElectrabel Group, Eblacea and Tirreno Power. Due to operating and organisational changes in AceaElectrabel Trading's activities, these activities were separated into a dedicated segment; distribution and public lighting and photovoltaic refer to the Network Segment, which is responsible for the organisational aspects of ACEA Distribuzione, Arse and Ecogena analysis and research services refers to the Development and Special Projects Segment, responsible, under the organisation structure, for Laboratori S.p.A., AceaGori Servizi and the research consortiums.. -. overseas refers to the Development and Special Projects 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;. -. environment and energy 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 Aquaser, Kyklos and Solemme.. 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 cannot be applied when the income and expenditure of the individual segments is shown.. Interim Operations' Report at 30 September 2010. 17. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. result of application of IAS 18, and in particular of the Gross v. Net principle. This principle.

(18) Revenues. Gross Operating Profit. Investments. III QUARTER. III QUARTER. III QUARTER. 2010. Restated. Increase/ (Decrease). 2009. 2010. Increase/. Restated (Decrease). 2010. 2009. Increase/ (Decrease ). Energy Generation. 273,512. 252,389. 21,123. 56,738. 49,833. 6,906. 16,200. 17,300. (1,100). Distribution. 299,786. 301,047. (1,261). 159,963. 158,385. 1,577. 75,200. 81,100. (5,900). Sales. 1,020,458. 1,301,139. (280,681). 16,712. (4,860). 21,572. 1,600. 3,800. (2,200). Trading. 1,153,093. 0. 1,153,093. 16,518. 0. 16,518. 0. 0. 0. 51,084. 47,931. 3,154. 16,622. 19,378. (2,756). 6,500. 6,300. 200. 538,771. 523,428. 15,344. 209,921. 180,657. 29,264. 137,750. 116,900. 20,850. Overseas. 14,894. 10,482. 4,413. 4,093. 3,057. 1,037. 0. 100. (100). Analysis and research services. 19,188. 19,416. (228). 5,315. 5,838. (523). 400. 800. (400). Environment and Energy. 62,577. 69,414. (6,837). 19,704. 23,259. (3,555). 33,100. 42,500. (9,400). Solar power. 22,466. 0. 22,466. 6,624. 0. 6,624. 25,300. 32,400. (7,100). Corporate. 59,485. 59,397. 89. (26,254). (32,504). 6,250. 8,700. 10,400. (1,700). 3,515,314 2,584,642. 930,673. 485,956. 403,044. 82,912. 304,750. 311,600. (6,850). 0. 0. 0. 0. 0. 0. 0. 0. Rounding and Adjustments. (900,164) (394,072). (506,091). 754. (679). 1,432. 0. 0. 0. GROUP TOTAL. 2,615,151. 424,581. 486,709. 402,365. 84,344. 304,750. 311,600. (6,850). Public Lighting Italian water services. Total Continuing Operations. Assets held for sale. 0. 2,190,569. Amounts in thousands of euros. Interim Operations' Report at 30 September 2010. 18. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. 2009.

(19) Operating Review ENERGY NETWORKS Electricity distribution REGULATORY FRAMEWORK The main measures issued during the third quarter of 2010 are described below. 14 July 2010 - In resolution ARG/elt 106/10, the Authority introduced the regulation on sample controls at distribution companies which petitioned to receive the incentive for recording LV customer outages through remote control electronic meters. On the basis of art. 12.1 of resolution no. 292/06, the incentive shall be paid if the objective of installing and beginning operations for electronic meters for 85% of the total of LV supply points with 55 or less kW of available power is reached by: •. 31 December 2009 for distribution companies that confirmed the petition for the full incentive on 30 September 2010 (art. 12.3 of resolution no. 292/06);. •. 31 December 2010 for distribution companies that chose the option introduced by resolution ARG/elt 190/09 to receive a reduced incentive of 2/3 (art. 12.5 of resolution no. 292/06).. With this resolution, the Authority enacted the proposals of consulting document DCO 2/10, which introduced some controls aimed at verifying the distributor's effective execution. 26 July 2010 - In consulting document DCO 26/10, the Authority submitted proposals for completing the standard communication flows between sellers and distributors for the remaining commercial quality services governed by the Integrated Code to regulate the quality of electricity distribution, sales and measurement service (TIQE), in order to update the operating instructions previously issued after resolution ARG /elt 13/10. 4 August 2010 - In resolution ARG /elt 125/10, the Authority amended and supplemented the Code for active connections (hereinafter: TICA). This action had the general aim of streamlining the occupation of transport capacity, in order to reduce possible speculative phenomena which have occurred in some regions of southern Italy. For this purpose, an economic guarantee was introduced in the form of bank guarantee. Interim Operations' Report at 30 September 2010. 19. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. of these activities..

(20) or deposit, which the party requesting the connection must provide once the cost estimate is accepted. This guarantee must be paid for areas or lines identified as critical by the so-called "network maps", computerised tools made by network operators which, beginning from 30 June 2011, must provide for their creation, publication and updating every four months. While waiting for the maps to be defined, resolution ARG /elt 125/10 has defined a temporary rule, requiring that network operators report critical areas and lines by 15 October 2010, in order to require that the financial guarantee be submitted for current connection requests as well. 4 August 2010 - In resolution ARG /elt 126/10, the Authority modified the regulation about measuring electricity produced by generation plants by preparing a specification for the requirements of resolution no. 88/07, in the event of nominal power on a single connection point: . with more than one production plant;. . in the event that the measurement of electricity produced is based on correctly implementing the current regulation in this regard (unit of production possibly with different commercial treatments).. In these situations, it is provided that: . the producer is responsible for installing and maintaining the metering equipment, unless it is possible for the network operator to carry out this task;. . network operators are responsible for collecting, recording and validating.. For the new activity carried out by grid operators, they shall be paid the sum of the MIS1 [measurement costs] (RAC) and MIS1 (VER) tariff components set forth in the Transport Code, is metered. According to the measure, these amendments shall be valid beginning on 1 January 2011, and for already-existing system configurations, the grid operator must send a notice in order to implement the provision by 31 December 2011.. Interim Operations' Report at 30 September 2010. 20. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. with reference to the voltage level of the connection point at which the electricity produced.

(21) 4 August 2010 - In resolution ARG /elt 127/10, the Authority amended the regulation regarding production plants' access to commercial regimes, setting forth a specific procedure for production plants to enter into the GSE input despatching contract in relation to a dedicated withdrawal, exchange on site and withdrawal at a fixed tariff. Beginning on 1 January 2011, the GAUDI' system shall transmit a notice to the GSE when the production plant is commercially validated, including the desire expressed by the producer, when the connection request is made, to participate in one of the established commercial regimes, in order to enter the production plants into the GSE input despatching contract from the date that it becomes operative until the moment that the related conventions are activated. 4 August 2010 - In resolution ARG /com 128/10, the Authority issued provisions for developing the Integrated Information System (hereinafter SII) for the management of relations between different deregulated market operators. The SII, established by the law converting Decree-law 8 July 2010, no. 105, approved on 4 August 2010, was introduced to centralise the information contained in the databases of the various parties operating in the electricity and gas retail sale markets by preparing a database of the points and identifying data of end customers. 4 August 2010 - In resolution ARG /elt 129/10, the Authority addressed the regulation about combining electricity measurements for the purpose of the despatch service, first of all providing an extension for distribution companies to take advantage of the aggregation activity, which was going to expire on 31 December 2010, not specifying a new expiry but System (SII), established by resolution ARG/com 128/10. 2 September 2010 - In resolution EEN 12/10, the Authority verified that specific updated required energy savings objectives set for distributors in 2009, set forth by art. 5, paragraph 1 of Ministerial Decree 21 December 2007 and by resolution no. 98/06, had been reached. As regards ACEA Distribuzione, it prepared the issuance of a tariff contribution of 6.5 million euros, which shall be deposited by the Equalisation Fund within 30 days from the measure's notice date.. Interim Operations' Report at 30 September 2010. 21. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. implying that this responsibility could become part of the tasks of the Integrated Information.

(22) 2 September 2010 - In resolution ARG/elt 135/10, the Authority set forth the annulment of resolution ARG/elt 59/10, containing transitional provisions regarding payments for providing electricity transmission and distribution services for very high voltage end users with a nominal voltage among the phases over 220 kV. Therefore, since 1 January 2008, the Authority renewed the provisions of the Transport Code and resolution ARG/elt 188/08 (tariff update for 2009), in compliance with the Council of State declaration about the litigation launched by the company Arvedi S.p.A. With the measure, any adjustments of amounts billed in accordance with resolution ARG/elt 59/10 shall therefore be equalised. 2 September 2010 - In resolution ARG/elt 136/10, the Authority began the proceeding for creating measures about special provisions for providing transmission, distribution and metering services and the despatch service for the experimental regulation about the creation and management of infrastructures used to recharge electric vehicles in public places. The measures shall regard the pilot projects pursuant to resolution ARG/elt 39/10, submitted for admission to incentivised treatment for the development and promotion of smart grid technologies. The proceeding's conclusion is set for 15 November 2010, a deadline by which AEEG is expected to publish consulting and hearing documents. 6 September – By means of resolution ARG/elt 103/09, the Authority set out provisions concerning the integration of revenues to cover charges for discounts to electricity sector employees, pursuant to Article 44 of the Transport Code. In particular, the following were •. the exclusion from the revenues integration mechanism of discounts to electricity sector employee admitted to the tariff integration regime pursuant to art. 7 of Law no. 10/91, until any waiver of that right;. •. the distribution to entitled companies of the integration pursuant to art. 44 of the Transport Code, in particular allocating approximately 1 million euros to ACEA Distribuzione, which the company shall receive from CCSE (electricity industry equalisation fund) within 60 days from the entry into force of this measure (8 November 2010).. Interim Operations' Report at 30 September 2010. 22. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. established:.

(23) 6 September - In resolution ARG/elt 139/10, the Authority changed the reference regions for conservation service. Furthermore, in this resolution, the Authority expressed its intention to monitor the distribution companies' respect for the operator as regards the conservation of times set forth by resolution ARG/elt 4/08 for suspending electricity supplies due to end customer state of default, also evaluating the opportunity to review the automatic compensation system. 22 September 2010 - In resolution ARG/com 147/10, which supplemented and amended matters on the quality of distribution services and gas metering, the Authority also introduced amendments to the TIQE, aligning the gas sector and electricity sector to the requirement to disclose the duration of the cost estimate's validity in the estimate itself. 24 September 2010 - By means of resolution ARG/elt 148/10, the Authority extended the deadline for submitting pilot projects aimed at admission to incentivised treatment pursuant to paragraph 11.4, letter d) of the Transport Code, in relation to the promotion and development of smart grid technologies. 27 September 2010 - In resolution ARG/elt 149/10, the Authority started up the procedure for creating measures related to the quality of electricity transmission, distribution and metering services for the 2012 - 2015 regulatory period. Within the measure, the Authority expressed its intention to: •. improve the regulation, incentivising the quality of the transmission service and the. •. strengthen the levels of end customer protection for the next regulatory period, also by: o. extending specific standards on brief outages for MV customers;. o. adopting initiatives about power quality.. Interim Operations' Report at 30 September 2010. 23. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. improvement of the relief service, including a standard application for all NTGs;.

(24) 27 September 2010 - By means of Resolution ARG/com 151/10, the Authority updated the tariff components for the covering of general charges and additional charges for the electricity and gas sectors (A, UC and MCT tariff components) with reference to the 4th quarter of 2010 (October-December), specifically deciding to: •. increase the A3 tariff component, in consideration of the notable decrease of the correlated A3 account, caused mainly by costs for withdrawing unsold green certificates pursuant to article 15, paragraph 1, of Decree 18 December 2008 (the goal is to reach a tendential cancellation of the deficit accumulated on this account by the end of 2011);. •. increase the UC3 tariff component;. •. beginning from 1 October 2010, activate the UC7 component, expressed in euro cents/kWh, established by resolution ARG/elt 191/08, and aimed at covering costs deriving from measures and initiatives for promoting energy efficiency among end users of electricity, for the share of costs that may exceed the revenue guaranteed by tariff components on reactive energy withdrawals.. 30 September 2010 - In resolution ARG/elt 163/10, the Authority updated the value of the company-specific coefficient (CSA) for the year 2008, in order to apply the company-specific equalisation treatment pursuant to art. 49 of the Transport Code, aimed at covering variances of effective distribution costs from distribution costs recognised by the tariff restrictions not covered by general equalisation mechanisms. On the basis of those CSA values, the company-specific equalisation amounts shall be paid by cash. Among other companies, the measure regards ACEA Distribuzione, whose CSA factor was. Interim Operations' Report at 30 September 2010. 24. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. set at 0.2338 for the year 2008..

(25) TRANSPORT SERVICE TARIFFS The year 2010 represents the third 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 2004-2007 regulatory period) provided for contemporaneous introduction of two equalisation mechanisms, one “general” and the other “company-specific”, confirmed in this regulatory period and designed to recognise the specific conditions under which Italy’s various distribution companies operate. These mechanisms are partly based on parametric/actual costs analyses (general equalisation: mandatory) and partly on company-specific analyses carried out by the Authority (companyspecific 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. The general equalisation mechanisms for the costs and revenues deriving from distribution and metering for the years 2008-2011, which take account of the innovations introduced by •. equalisation of distribution service revenues;. •. equalisation of revenues deriving from increased returns designed to provide incentives for investments in distribution networks;. •. equalisation of direct distribution costs on HV networks;. •. equalisation of direct HV/MV transformation costs;. •. equalisation of direct distribution costs on MV and LV networks;. •. equalisation of revenues from the supply of electricity to residential customers;. •. equalisation of revenues from the LV metering service;. •. equalisation of the marketing costs incurred by distribution companies in respect of LV customers;. Interim Operations' Report at 30 September 2010. 25. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. Resolutions ARG/elt 18/08 and 30/08, are as follows:.

(26) •. equalisation of the cost of purchasing electricity used internally for transmission and distribution;. •. and, equalisation of the difference between actual and standard losses.. The equalisation mechanism designed to provide incentives for investments in distribution networks aims to offer distribution companies an increased return on invested capital. This measure aims to promote specific projects capable of developing distributed generation and improving voltage quality on the networks. When carrying out its annual review of distribution tariffs from 2010, the Authority has reserved the right to allocate a portion of the tariff components to cover these investments. This aims to ensure that the increased returns are only granted to companies who have actually carried out such investments. Resolution ARG/elt 30/08 established the method for calculating the equalisation of revenues deriving from the LV metering service. The mechanism aims at guaranteeing that returns on investments in meters and electronic meter reading systems, and the right to depreciate obsolete electro-mechanical meters to be replaced by electronic meters, are granted to distribution companies who have actually carried out such investments. With resolution ARG/elt 40/10, the Authority supplemented the provisions regarding the quantification of said costs. The equalisation mechanism also introduces penalties for distribution companies who do not comply with the obligation to install LV electronic meters set out in Resolution 292/2006. In the same resolution, the Authority launched the new equalisation mechanism to cover the cost of marketing distribution services to LV customers, with a view to protecting the companies that have established a separate company to supply services subject to additional safeguards, and to those who have combined distribution services with the sale of electricity. Resolution ARG/elt 18/08 amended the “Integrated Text of the Electricity and Gas Authority’s provisions governing the sale of electricity to end users requiring additional safeguards and protection (the “Retail Service Code”), in accordance with Legislative Decree 73/07”, approved with Resolution 156/07. This new resolution has established equalisation mechanisms for the cost of procuring electricity incurred by each provider of services to end users subject to additional safeguards. The regulation governing load profiling requires electricity for customers subject to additional safeguards to be quantified on a residual basis, and to thus also include electricity consumed by retailers themselves in the distribution and. Interim Operations' Report at 30 September 2010. 26. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. financial position of distribution companies. Two regimes are to be applied to distribution.

(27) transmission and the difference between the actual losses and standard network losses of distribution companies (Delta losses). In context of this resolution, therefore, the Authority has established the method of calculating amounts for equalisation relating to the procurement of electricity used in transmission and distribution, and to the value of the difference between “actual losses” and “standard losses” to be afforded to each distribution company. Moreover, according to the information reported by the main distribution operator concerning the unexpected and significant decrease in connection services due to the severe economic downturn for the 2010 – 2011 period, the Authority, by Resolution ARG/elt 203/09, provides for an optional equalisation mechanism to guarantee revenues from lumpsum connection fees, which can be adopted by each distribution company on specific request to the Authority by the final deadline of 30 September 2010. ACEA Distribuzione SpA submitted an application to adhere to the equalisation mechanism. The company-specific equalisation mechanism takes account of the difference between the specific costs incurred by a company and the national average, where this difference is not covered by the general mechanism. To this end, the Authority is required to carry out an assessment at the request of each individual company, with the aim of identifying external factors beyond the company’s control that give rise to costs that are higher than those reflected in the tariffs, and that are not compensated for by the general equalisation mechanism. By means of Resolution ARG/elt 30/08 the Authority has provided for: updating the company-specific adjustment factor (CSA), for the 2008-2011 regulatory period, with a view to bringing the amount for company-specific equalisation for each individual company into line with its actual investment; •. setting a value on the permitted actual costs incurred by distribution companies included in company-specific equalisation, using methods in line with those adopted in the determination of tariffs for the 2008-2011 regulatory period;. •. supporting combinations of distribution companies, awarding companies involved in business consortiums an amount for company-specific equalisation equal to the sum of the amounts recognised for the individual companies;. •. restricting participation in company-specific equalisation to companies qualifying for the equalisation regime in the 2004-2007 regulatory period;. Interim Operations' Report at 30 September 2010. 27. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. •.

(28) •. updating, for 2008, the actual costs allocated to distribution companies that take part in company-specific equalisation, based on investigations of individual companies conducted by the Tariff Department, in accordance with the criteria adopted tariffs for the 2008-2011 period. With resolution ARG/elt 163/10, the Authority communicated the value of the company-specific coefficient (CSA) for the year 2008, setting it at 23.38% of equalised revenues admitted;. •. providing that the Electricity Industry Equalisation Fund shall have the funds to pay amounts for company-specific equalisation for the years 2009, 2010 and 2011 based on updated company-specific correction factors in accordance with this resolution and permitted revenues subject to equalisation.. With resolution ARG/elt 87/09, the Authority issued provisions regarding the advance disbursement of the specific equalisation amount for the years 2008, 2009, 2010 and 2011. In fact, the Authority requires that the electricity sector Equalisation Fund make prepayments, 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 therefore determined as 80% of the company-specific equalisation amounts recognised for the year 2006 and they were paid to the beneficiary companies by 31 July 2009. For the years 2009, 2010 and 2011, they shall be calculated based on the most recent company-specific equalisation 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.. •. 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;. Interim Operations' Report at 30 September 2010. 28. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. Further innovations introduced in the third regulatory period regard:.

(29) •. 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 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 new regulations have also changed the method of updating tariff components, 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. Interim Operations' Report at 30 September 2010. 29. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. variation linked to the reduction in gross invested capital..

(30) ENERGY SERVICE PERFORMANCE At 30 September 2010 ACEA Distribuzione injected 8,923.8 GWh of electricity into the grid, representing a decrease of 1.06% on the same period in the previous accounting year.. GWh. 30 Sept 2010. 30 Sept 2009. Regulated market. 3,385.5. 3,696.5. Free market. 5,536.1. 5,321.3. Other distributors. 2.1. 1.9. Overall Total. 8,923.8. 9,019.7. Interim Operations' Report at 30 September 2010. 30. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. The following table shows a breakdown..

(31) Acea Energy Networks and Services REGULATORY FRAMEWORK The main measures issued during the third quarter of 2010 are described below. 7 July 2010 – DCO 22/2010 AEEG Consultative Document which proposes new technical sheets to quantify the primary energy savings arising from work under article 5, paragraph 1 of Ministerial Decrees of 20 July 2004 as amended. 14 July 2010 - DCO 23/2010 AEEG Consultative Document on checking sales of electrical energy from renewable resources to end user customers. 4 August 2010 - resolution ARG/elt 127/10 Amendments and supplements to Authority resolutions for electricity and gas 6 November 2007, no. 280 /07, 3 June 2008, ARG/elt 74/08 and 8 January 2009, ARG/elt 1/09 for the purpose of commercially validating the electricity production plants that participate in dedicated withdrawal, exchange on site and withdrawal at a fixed, comprehensive tariff. 4 August 2010 Resolution ARG/elt 125/10 Amendments and supplements to Italian Regulatory Authority for Energy and Gas resolution ARG/elt 99/08 regarding technical and economic conditions for connecting to networks with the obligation of third-party connection to production plants (TICA). 6 August 2010 - Notice to operators with clarifications on the most correct application. 24 August 2010 - Ministry of Economic Development decree published in the Official Gazette, which will regulate the incentivised tariffs to be recognised for the production of electricity obtained from photovoltaic plants that will enter into operation in 2011-2013. The 2007/2010 Energy Account shall be effective until the end of 2010 and - in accordance with recently approved law 129/2010 - it will also be applied at the conditions indicated by the law to plants built by the end of the year that will begin operations by 30 June 2011. 1 September 2010 - Notice regarding data transmission for calculating energy savings objectives for 2011. With resolution EEN 13/09 of 1 September 2009, the Authority defined new methods for transmitting the information required by article 3, paragraph 1, of. Interim Operations' Report at 30 September 2010. 31. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. procedures of technical sheets no.s 1-tris, 13b-bis, 13c-tris and 25a.

(32) resolution no. 344/07 for the purpose of determining the energy savings objectives for distributors subject to the obligations pursuant to Ministerial Decrees 20 July 2004 and Ministerial Decree 21 December 2007. 2 September 2010 – Resolution EEN 12/10 Assessment of the fulfilment of updated energy-saving objectives for liable distributors in 2009 and provisions to the Electricity Sector Equalisation Fund regarding the payment of the tariff contribution to those distributors that were fully or partially compliant. 3 September 2010 - Notice of Reopening consultation terms of DCO 22/10 "Proposal for new technical sheets to quantify the primary energy savings arising from work under article 5, paragraph 1 of Ministerial Decrees of 20 July 2004 as amended, limited to Part III "Methodological proposals for preparing the standardised technical sheets regarding work to make the building envelope more energy efficient" and Part IV "Methodological proposals for preparing standardised technical sheets regarding building high-efficiency systems for lighting vehicle traffic roads". The new deadline for submitting observations and proposals is set for 3 October 2010. The submission procedures remain the same. 10 September 2010 - Decree of 6 August 2010 published in Official Gazette no. 212, in which the Ministry of Economic Development establishes the terms and procedures for issuing funds to support renewable energies and energy savings in construction in the south of Italy. The Ministry has provided 300 million euros.. renewable sources were published in the Official Gazette. The decree regulates the procedure for authorising plants fuelled by renewable energy sources, to ensure their correct insertion into the landscape, with particular attention placed on wind power systems. ENERGY SAVINGS In the course of this year, no new initiatives for energy savings were launched, and Arse’s activity was limited to monitoring accounts on existing projects, and in particular regarding final certifications. The above has been dictated both by the unfavourable regulatory framework (new rules issued by the AEEG and a limited number of standard sheets issued) and by the volume of EECs currently available on the certificate accounts handled by Acea RSE. In fact, the. Interim Operations' Report at 30 September 2010. 32. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. 18 September 2010 - Regulatory guidelines for authorising plants fuelled by energy from.

(33) initiatives launched in the past have enabled certificates to be obtained in a decidedly higher number than was the target for Acea Distribuzione for the 2009 – 2012 period. Therefore it was considered advisable to focus attention on management of the certificates already held. To this end, a bilateral sales contract was stipulated with a leading distribution company subject to the obligations provided for in the decrees on the energy efficiency to be added to existing contracts. The amount of EECs object of this last agreement is around 130,000 units for the 2010 and 2011 objectives. PV POWER In this quarter, photovoltaic systems connected to the electricity network, and therefore operative, amount to 2.9 MWp, which, added to the 2.6 MWp connected in the previous half-year, equal around 5.5 MWp installed and connected during the year. All the plants connected as of today are operating normally and production is in line with expectations. The programme to build photovoltaic plants continued, with the identification of new sites with average sizes of at least approximately 1 MWp. The development of current constructions involves completion and connection of more than 19 MWp of plants by the end of the year. COGENERATION Since new projects did not begin during this quarter, Ecogena continued to manage those already operating as at 30 June 2010. At the same time, the activities aimed at acquiring new initiatives, especially in the real estate end of this year. AIR QUALITY The activities managed by the Air Quality sector "Sanacaldaia" and "Caldaie Sicure" were exercised in accordance with the contractual extension from 31 July 2007 to 31 October 2010. 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.. Interim Operations' Report at 30 September 2010. 33. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. and industrial field, continued; this activity should lead to entering into new contracts by the.

(34) ENERGY SEGMENT ELECTRICITY PRODUCTION (the financial quantities are shown on a non-proportionate basis and refer to 100% of the Company) During the period, the AceaElectrabel Produzione Group’s net production amounted to 4,069 GWh. This figure, compared with net production for the same period last year, shows an increase equal to 25.5%. The quantities of electrical power injected are analysed as follows:. GWh. 30 Sept 2010. 30 Sept 2009. Increase/ (Decrease). %. Thermoelectric. 3,638.0. 2,804.3. 833.7. 29.7%. Hydroelectric. 371.8. 383.9. (12.1). (3.2%). Wind Power. 59.2. 54.9. 4.3. 7.8%. AEP Group Total. 4,069.0. 3,243.1. 825.9. 25.5%. Compared to the same period of last year, Tirreno Power increased its energy production by. GWh. 30 Sept 2010. 30 Sept 2009. Increase/ (Decrease). Increase / (Decrease) %. Thermoelectric. 5,464.0. 5,504.0. (40.0). (0.7%). Hydroelectric. 155.0. 186.0. (31.0). (16.7%). Coal. 3,026.0. 2,040.0. 986.0. 48.3%. Total. 8,645.0. 7,730.0. 915.0. 11.8%. Interim Operations' Report at 30 September 2010. 34. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. GWh 915 (+ 11.8%), as shown in the table below..

(35) SALE OF ELECTRICITY ON THE REGULATED AND FREE MARKETS AND SALE OF GAS (the financial quantities are shown on a nonproportionate basis and refer to 100% of the Company) Over the first nine months of 2010, the sale of electricity on the market subject to additional safeguards was equal to 3,113 GWh, down 8.4% compared to 30 September 2009. There are 1,361,160 customers, a decrease from the same period of last year due to the opening of the market for the process of de-regulating the sector, which is now complete. Conversely, the sale of electricity on the free market was 8,738 GWh for AceaElectrabel Elettricità and 2,518 GWh for the sales JVs, for a total of 11,256 GWh, up 21.1% compared to 2009. There are 195,461 supply points in the first nine months of 2010. During the period, 10,972 users moved from the regulated market to the free market (socalled switching), and of those, around 70% were acquired from other wholesalers, while the remaining 30% remained within AceaElectrabel Elettricità's area of consolidation. Finally, as concerns trading-related activities, the company AceaElectrabel Trading sold a total volume of 16,668 GWh of electricity on the free market during the period, an increase of 4,056 GWh (+ 32.2% compared to the same period of 2009) following the increase in volumes sold to third-party customers. The sale of gas recorded a relevant increase in volumes sold, also due to gas supply contracts to electricity power plants of the joint venture, as well as to the supply of gas to the Tirreno The volumes sold totalled 2,962 million cubic metres, up by 1,982 million cubic metres. The increase is mainly due to the supply of gas to the AceaElectrabel Produzione and Tirreno Power plants as well as higher volumes sold to third-party customers.. Interim Operations' Report at 30 September 2010. 35. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. Power plants..

(36) WATER SEGMENT Management of water services in Lazio and Campania ACEA Ato2 The territory handled In accordance with the so-called Galli Law, integrated water services began in Lazio Region’s Water and Waste Regulatory Authorities Area 2 on 1 January 2003, operating under a thirtyyear concession. In accordance with the programme approved by the Mayors’ Conference, management of the service will be taken over gradually before reaching a total of 3,900,000 people served. Since 2007 the acquisition of contracts with the municipalities involved has slowed. This has been caused by local authorities’ natural political alternation and internal difficulties within the authorities themselves. Moreover, based on the assessments carried out, certain municipalities still have problems regarding the state of treatment plants and the related waste disposal authorisations. During the first nine months of 2010, new municipalities or consortiums were not acquired, but the preliminary work necessary to conclude the agreement with the Company Acque Potabili, expected to occur by the end of 2010, for the advance purchase of the potable water service in the municipalities of Canterano, Capranica Prenestina, Gerano, Olevano Romano, Rocca Canterano and Rocca di Papa continued. Therefore, the situation as at 30 September 2010 is shown below: 9 Municipalities acquired: 76 (for some, the entire SII was not acquired), for a total of addition are the Simbrivio, former development fund for the South of Italy, and Doganella Consortium aqueduct systems as well as those of the Nemi-Genzano, C.E.P. and Peschiera Consortiums, while for the acquisition of sewerage networks and sewage pumping stations still managed by the Co.R.Ec.Alt. Consortium, it will be necessary to wait for the completion of works to adapt the plants and supplement the networks (moreover already contracted out), which is necessary for them to be deemed compliant. 9 At 30 September 2010, assessments of the plant and systems in the following municipalities have yet to be completed in readiness for preparation of the documentation needed for acquisition of the related integrated water service contracts in the remaining municipalities:. Interim Operations' Report at 30 September 2010. 36. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. 3,315,611 residents (source: ISTAT 2001), amounting to around 92% of the total; in.

(37) •. Northern Area: Capena, Civitella San Paolo and Rignano Flaminio;. •. Eastern Area: Agosta, Anticoli Corrado, Canterano, Cerreto Laziale, Filettino, Gerano, Mandela, Rocca Canterano, Trevi nel Lazio and Vallepietra;. •. Southern Area: Valmontone and Rocca di Papa;. •. Western Area: Anguillara Sabazia, Canale Monterano, Civitavecchia and Manziana.. Tariffs The price for integrated water services was established on the basis approved by Resolution 5/08 passed by the Mayors’ Conference on 5 December 2008. 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 this resolution, a hypothetical Average Tariff was adjusted from 2009 until 2032 to take account of the difference between the target and real revenues achieved by the Management Body, and taking other parameters into account (planned inflation rates, planned and actual investments completed, project expenses and returns), and furthermore the percentage increases for changes in tariffs were defined according to the new guaranteed returns.. ACEA Ato5 The company manages the integrated water services in ATO 5 Southern Lazio–Frosinone, as set out in Regional Law no. 6 of 22 January 1996, under an agreement entered into with the Area Authority. The company is also responsible for all other related, resulting or associated activities. involves a total of 86 municipalities (management still remains to be surveyed for the municipalities of Atina, Paliano and Cassino Centro Urbano as regards water services only) for a total population of around 480,000 inhabitants, about 460,000 inhabitants supplied and a number of end users equal to around 188,000. No new acquisitions were formalised in the period. As regards the issue of the legitimacy of tariffs, please see the Interim Condensed Consolidated Financial Statements 2010.. GORI The Company manages all Municipalities (76) in the ATO 3 "Sarnese-Vesuviano".. Interim Operations' Report at 30 September 2010. 37. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. The management of the integrated water service on the territory of ATO 5 Frosinone.

(38) As regards tariff issues, please see what is set forth in the Interim Condensed Consolidated Financial Statements 2010.. Management of water services in Tuscany and Umbria On 28 December 2001, the subsidiary Acque S.p.A. signed a 20-year management agreement, which came into force on 1 January 2002. In accordance with that agreement, the Management Body took over the exclusive integrated water service of ATO 2, comprising all the public water collection, supply and distribution services for civil use, sewage systems and the treatment of urban waste water. The company pays a concession fee to all the municipalities, including the past liabilities incurred by previous management bodies, in exchange for taking over the service. The tariff revision was carried out based on the convention (approved by the general meeting of the Area Authority on 22 December 2008). During the revision, checks were performed on the actual volume of investments carried out, operating costs, revenues generated, the amounts billed and the technical and organisational standards achieved. As a result of these assessments, the missing 2005-2007 revenues were made up for (positive for the Management Body) as the 2005-2007 revenues were over 0.5% lower than those budgeted for in the Area Plan. Penalties were also applied during the review, as provided for in the Agreement, for the failure to achieve certain technical and organisational standards. During the second tariff review, the new Investment Plan was also defined, which was subsequently defined on a more detailed basis in the new POT for the 2008-2010 three-year In October 2006, the Management Body signed a contract with a syndicate of banks which provides for a total loan of 255 million euros to cover the financial needs of the investment plan of around 650 million euros. In ATO 3 Medio Valdarno, steps were taken to improve and reorganise the subsidiary Publiacqua S.p.A. During the first half of 2010, the discussion with the Area Authority continued on the amendment of contract deeds aimed at endowing higher stability to the regulatory system and therefore finding a solution to some issues that obstacle process of structuring a longterm loan stipulated by the Area Plan.. Interim Operations' Report at 30 September 2010. 38. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. period approved by the authorities in March 2009..

(39) The review that the company, together with the Area Authority, must perform to complete the three-year tariff process was already initiated at the end of 2009. This process requires extensive analysis and review of the Annexes to the Convention. The annexes currently being drawn up which will have a major impact on the company’s accounts comprise the new “Area Plan” which will contain the identification of the new investment levels to be achieved until 2021, but also a review of the critical areas of the service and the technical objectives to achieve through the work planned and the “Guide Lines on the costs and revenues of the Management Body included in the Integrated Water Service tariff”, which will mainly contain the rules for the accounting of the costs and revenues for the purpose of tariff reviews. This will form part of the process in place among other things, aimed at the acquisition of a structured loan that will make it possible to make the considerable amount of investments needed to improve the quality of the integrated water service in ATO 3 Medio Valdarno, with special reference to the purification sector and environmental protection. As the funding project has not been concluded yet, during 2010 the investment capacity will be limited to the self-financing capacity. As regards the ATO 6 Ombrone, the investee Acquedotto del Fiora S.p.A. has been making efforts for three years already in order to subscribe the so-called project financing to consolidate the current financial exposure and cover the remaining requirements to carry out the Investment Plan until the end of the concession. Awaiting the closing on the above-mentioned operation, in late May 2010, Monte dei Paschi di Siena granted the extension of the Bridge Loan for further 15 million euros, approving a. As regards the investments in the Umbria region, in December 2007 ACEA was definitively selected by the Area Authority for ATO 1 Perugia as the private industrial shareholder to take a minority interest in Umbra Acque S.p.A. A stake in the company (40% of the shares) was acquired on 1 January 2008.. Interim Operations' Report at 30 September 2010. 39. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. dedicated credit line, separate from the bridge loan but still due in September 2010..

(40) ENVIRONMENT AND ENERGY SEGMENT A.R.I.A. GROUP A summarised description of business carried out by the main Group companies is set out below. TERNI EN.A. The company operates in the production of electricity from renewable sources, and specifically the paper mill pulp waste-to-energy sector. During the period, the plant's performance was characterised by a decrease in quantities sold and pulp delivered; furthermore, as of 6 August, the plant has been stopped to launch revamping activities.. measurement unit. Sept 2009. Increase/ (Decrease). Sept 2010. Electricity produced. Mwh. 57,325.14. 45,466.00. - 11,859.14. Electricity sold. Mwh. 51,516.04. 40,564.19. - 10,951.84. Pulp delivered. Ton. 86,829.32. 61,401.38. - 25,427.94. Methane consumed. m3. 2,462,843. 3,303,325. 840,482. EALL The company operates in the sector of the production of energy from renewable sources and Decree of 5 February 1988 and by the subsequent Legislative Decree 152/2006 (Consolidated Environmental Law).. measurement unit. Sept 2009. Sept 2010. Increase/ (Decrease). Electricity produced. Mwh. 59,181.20. 61,356.70. 2,175.50. Electricity sold. Mwh. 52,297.62. 54,232.33. 1,934.71. RDF delivered. Ton. 58,296.70. 71,333.48. 13,036.78. Methane consumed. m3. 1,344,943. 1,374,705. 29,762. Interim Operations' Report at 30 September 2010. 40. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. especially that of waste-to-energy (WTE), whose features are defined by the Ministerial.

(41) SAO The company SAO owns the waste dump located in the Municipality of Orvieto and manages urban and special waste. The company’s work in the first half of 2010 was marked by the following events: . pursuant to provisions envisaged in the Integrated Environmental Authorisation issued by the Umbria Region with Directive Determination no. 210 of 19 January 2010, the transfers of special waste were further carried out also from areas outside the reference ATO;. . the tariff plan provided by the agreement between SAO and ATO 4 on 13 August 2007, which regulates the management of the public service of selecting, treating and disposing of urban waste and similar products from the ATO 4’s municipalities and the special waste resulting from the treatment of aforesaid urban waste;. It is recalled that works of the second functional section of the eighth step of the dump are in progress. These works consist of the building the front capping and the front road of the dump itself. These works will be carried out according to projects approved by the competent Authorities and are necessary to ensure the operational continuity of the dump, the continuation of the waste disposal public service and the fulfilment of provisions set out in the authorisation. As regards the economic regulation of the waste treatment and disposal service carried out by the Company, reference must be made to: . the principle of adequate remuneration for public service management, clearly indicated in the general regulations in art. 117 of Legislative Decree no. 267 of 2000. . the necessary coverage of the disposal plant operating costs pursuant to the provisions of art. 15 of Legislative Decree 36/2003, based on a specific economicfinancial plan.. On 19 January 2010, with Directive Determination no. 210, the Orvieto plant complex owned by the Company obtained the Integrated Environmental Authorisation (A.I.A.) pursuant to Legislative Decree 59/2005 from the Umbria Region. The issue of the abovementioned A.I.A. proves that the plant system, except for adjustments envisaged in the same resolution, is compliant with the requirements introduced by the new regulations and all measures necessary to achieve a high overall standard of environmental safeguards.. Interim Operations' Report at 30 September 2010. 41. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. (so-called Consolidated Local Entity Act), regarding service Tariffs;.

(42) On 16 and 17 June 2010, SAO deposited, for release purposes, the project of "Revamping of the waste treatment plant and enlargement of the dump for non–dangerous waste in Loc. 35/A - Orvieto". This project is based on and refers to the Waste Management Plan, approved with Resolution no. 301 of the Regional Council held on 5 May 2009, which is the current planning instrument for urban and special waste produced in the Umbria region. The project also contains all adjustment works indicated in the above-mentioned Integrated Environmental Authorisation. The abovementioned development project not only represents a guarantee instrument to carry out activities of the SAO company in the medium-long term, but is also a high profile solution of the ACEA Group, as reference partner of local administration authorities, to the need for waste recovery and disposal in the Umbria region. This averts the risk of discontinuity in the management of services, which may have relevant negative impacts. Lastly, the project under evaluation is a planned solution of environmental issues and therefore should be shared by local administration authorities as well to ensure the ordinary continuity in the integrated waste system management in the province of Terni. During the period, 123,834 ton of waste were input, and reduced to 1,722 tons. 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 volume of up to 120,000 tons of RDF in accordance with the law. This is currently classified as high calorific power. energy plants that can accept the combustible material produced at economically viable costs and in line with production cycle capacity. In such limited circumstances, the possibilities for Enercombustibili to produce RDF intended for the market were virtually nil.. Interim Operations' Report at 30 September 2010. 42. WorldReginfo - da32c738-4f46-4f12-85f1-629b851521ee. The management performance of Enercombustibili is influenced by the absence of waste to.