Interim Report on Operations

Texte intégral

(1)Interim Report on Operations of the ACEA Group. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. at 31 March 2011.

(2) Interim Report on Operations at 31 March 2010. Corporate bodies. page 3. Summary of results. page 4. Latest news on the Industrial Segment trends. page 5. Segment Information. page 10. Operating Review. page 12. Basis of Presentation and Consolidation. page 49. Consolidated Income Statement. page 55. Consolidated Comprehensive Income Statement. page 56. Consolidated Balance Sheet. page 57. Consolidated Cash Flow Statement. page 59. Statement of Changes in Consolidated Shareholders’ Equity. page 60. Notes to the Consolidated Income Statement. page 61. Notes to the Statement of Consolidated Financial Position. page 95. Acquisitions. page 110. Other Information. page 113. Declaration of the Executive Responsible for Financial Reporting. page 117. Operating and financial outlook. page 118. List of consolidated companies. page 121. Contents. 2. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. Contents.

(3) Interim Report on Operations at 31 March 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 - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. Executive Responsible for Financial Reporting.

(4) Interim Report on Operations at 31 March 2011. Summary of results. (€ million). 31.03.11. 31.03.10. %. Restated. change. Consolidated revenue. 827.9. 845.4. -2.1%. Consolidated operating costs. 684.9. 695.7. -1.6%. (1.7). 3.3. -152.6%. 141.4. 152.9. -7.6%. EBIT. 64.3. 86.1. -25.4%. Net profit/(loss). 35.1. 40.7. -13.8%. 2.1. 1.8. 13.9%. 33.0. 38.9. -15.2%. 37.4. 0.0. 100.0%. 70.3. 38.9. 81,1%. 31.03.11. 31.12.10. % change. Net invested capital. 3,605.0. 3,585.0. 0.6%. Net Debt. 2,125.6. 2,203.7. -3.5%. Consolidated Shareholders’ Equity. 1,479.4. 1,381.3. 7.1%. Profit. (loss). from. commodity. risk. management EBITDA. Profit/(loss). attributable. to. minority. interests Net profit/(loss) attributable to the Group. Net. profit/(loss). from. the. transfer. of. discontinued operations. Net profit/(loss) attributable to the Group. including. the. discontinued. (€ million). It should be noted that the figures shown above do not take into account the classifications required by IFRS 5, with the exception of the net profit (loss) from the transfer of discontinued operations.. Summary of results. 4. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. operations.

(5) Interim Report on Operations at 31 March 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. The operations and financial position by Industrial Segment of the first quarter of 2011 was calculated on the basis of the above order, and that of the first quarter 2010 was reclassified for the purposes of a homogeneous comparison.. The EBITDA of the first quarter of the year stood at 51.4 million euros and overall decreased by 5.8 million euros, mainly due to the application, effective from 1 January 2011, of the new clauses of the public lighting contract. Concerning Arse, worth mentioning is an increase in the gross operating profit of 4.3 million euros chiefly produced from the activities carried out in the PV business and referring to the marketing of panels and the energy account gained in the period. The decrease recorded by ACEA Distribuzione is due to the higher distribution operating costs and the lower user accessory revenues. Public lighting recorded a drop in the gross operating profit of 5.4 million euros deriving from higher operating costs. Net debt for the period amounts to 823 million euros and is up by 37 million euros compared to the end of the previous year: the performance of the period is related. Latest news on the Industrial Segment trends. 5. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. Networks Industrial Segment.

(6) Interim Report on Operations at 31 March 2010. to the increase in receivables from the Municipality of Rome for the public lighting service absorbed by the requirement concerning the purchase of Arse’s PV panels. Investments in the Segment stood at 29.3 million euros and decreased by 0.3 million euros due to the combined effect, on the one side of the different treatment of the investments linked to the Public Lighting contract in the Municipality of Rome compared to the first quarter of 2010 and, on the other, of the greater investments of ACEA Distribuzione (+1.2 million euros) and Arse (+0.6 million euros). In terms of staff, as at September 2010 the average number of employees was 1,544, 57 less than the same period of the previous year, entirely attributable to ACEA Distribuzione. 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 quarter; the economic data is therefore comparable with that of the first quarter 2010. Whereas the financial position and cash flow are affected by 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). It therefore considers the ownership structure after closing: please refer to the basis of consolidation for more details. Thus the financial position and cash flow are not. The period January – March closes with an EBITDA equal to 17.6 million euros, down by 11.8 million euros due to the worsening of the energy margin of Tirreno Power (-4.5 million euros), Roselectra (-1 million euros) and AceaElectrabel Produzione (-0.6 million euros). The impact of the fair value on the commodities also has a negative effect for 5 million euros. Net debt for the period amounts to 226 million euros and is down by 187 million euros compared to the end of the previous year, mainly due to the dissolution of the Joint Venture with GDF SUEZ Energia Italia. Overall the impact of the operation on the net financial position of the Segment at the closing date equals 223.7 million euros, including the cash-in provided for by. Latest news on the Industrial Segment trends. 6. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. immediately comparable with those at 31 December 2010..

(7) Interim Report on Operations at 31 March 2010. the Framework Agreement: this amount does not include all the effects from the adjustments, currently being defined, as well as non financial items subject to equalisation (other debt like). The Segment investments stand at 2 million euros and are down by 1.9 million euros, basically due to the deconsolidation of Tirreno Power. The average number of staff for the Segment stands at 488 (-3 compared to 31 March 2010). Water Industrial Segment Italy The EBITDA at 31 March 2011 stands at 75.7 million euros, growing by 10.2 million euros, mainly due to the tariff increase of ACEA Ato2 (+3.3 million euros), Publiacqua (+1.9 million euros) and Gori (+1.3 million euros). Acquedotto del Fiora (+3 million euros) contributed to the increase, accounted for, for the first time, under proportionate consolidation. Net debt for the period amounts to 553.1 million euros and is up by 33.4 million euros compared to the end of the previous year: the change is mainly due to the consolidation of Acquedotto del Fiora (+35.6 million euros). The Segment investments stand at 44.8 million euros and are up by 8.6 million euros compared to 31 March 2010, mainly due to ACEA Ato2 ( +6.1 million euros) and Acquedotto del Fiora ( +1.5 million euros). The average number of staff for the Segment stands at 3,084, 77 more than at 31 March 2010: the change is mainly due to the consolidation by Acquedotto del Fiora consequence of the adoption of the redundancy, retirement and recruitment postponement plan. Overseas: The EBITDA at 31 March 2011 stood at 1.4 million euros, an increase of 0.2 million euros basically linked to Agua Azul Bogotá as a consequence of the consolidation of Conazul and the stipulation of the new contract to manage commercial zone 1 Bogotá. Net debt for the period amounts to 1.9 million euros, an increase of 0.5 million euros attributable to the company Aguazul Bogotá for the loan stipulated for the projects for the commercial management of the zone 1 of Bogotá and the replacement of the meters for Lima, Peru.. Latest news on the Industrial Segment trends. 7. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. of 154 people, partially offset by ACEA Ato2 (-69) and ACEA Ato5 (-10) as a.

(8) Interim Report on Operations at 31 March 2010. No investments were carried out in the first quarter of 2011. The average number of staff for the Segment stands at 1,373 and is greater by 639 compared to 31 March 2010, mainly due to the expansion of Aguazul Bogotá’s business and the consolidation of Conazul. Environment Industrial Segment The period January – March 2011 closes with EBITDA of 0.8 million euros and is down 6.4 million euros mainly due to: (i) the reduced amount of electricity supplied and the lower quantity of pulp delivered by the Terni plant (-3.1 million euros), which has been shutdown for revamping since 6 August 2010, (ii) the reduction in the Eall electricity sale price following the application of a market tariff (no longer Cip 6) and (iii) the lower quantity of waste delivered to the SAO waste dump for 1 million euros. Net debt for the period amounts to 211 million euros and is up by 10 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 (5.2 million euros) and the greater financial requirement of SAO for 2.2 million euros. The Segment investments stand at 4.3 million euros and are down by 4.2 million euros, basically as a consequence of the imminent entry into operation of the waste-to-energy plant in San Vittore. The average number of staff grew by 2 compared to 31 March 2010, standing at 180. Engineering and Services mainly due to the financial performance of Laboratori. Net debt for the period improves by 3.7 million euros due to the higher collections received by the company Laboratori. The average number of staff stands at 147, an increase of 3 resources compared to the quarter of 2010: the change is due to Laboratori. Corporate ACEA closes the period in question with a negative EBITDA for 6.8 million euros, recording an improvement, compared to 31 March 2010, of 1.7 million euros, basically due to the combined effect of the revenue increase for service contracts (+4 million euros) and the greater external costs incurred (+2.3 million euros).. Latest news on the Industrial Segment trends. 8. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. EBITDA at 31 March 2011 stands at 1.4 million euros, up by 0.4 million euros.

(9) Interim Report on Operations at 31 March 2010. Net debt for the period amounts to 312 million euros, an increase compared to the end of the previous year of 31 million euros essentially due to both the operational management and the non-recurring events taking place during the first quarter (dissolution of the Joint Venture for 8.2 million euros and the repayment of the debt for tax assessment for 3.5 million euros).. Latest news on the Industrial Segment trends. 9. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. The investments of the period stand at 1.2 million euros in line with 31 March 2010..

(10) Interim Report on Operations at 31 March 2011. Segment Information Please note the following for a greater understanding of this section: -. generation, responsible,. trading. and. sales. refer. to. the. Energy. Industrial. Segment. in organisational terms, until 31 March 2011 for AceaElectrabel. Produzione, Roselectra, Voghera Energia, Longano, Eblacea and Tirreno Power, AceaElectrabel Trading as well as the companies Acea Energia Holding, Acea Energia, Umbria Energy, Estra Elettricità, Voghera Energia Vendite, Elga Sud and Acea Produzione;. -. distribution, public lighting and PV power are included in the Networks Industrial Segment which, under the organisation structure, includes ACEA Distribuzione, ARSE and Ecogena;. -. analysis and research services refer to the Engineering and Special Projects 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, 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.. Segment Information. 10. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. Aquaser, Kyklos and Solemme..

(11) Interim Report on Operations at 31 March 2010. Revenues. Gross Operating Profit. Investments. I QUARTER. I QUARTER. I QUARTER. 2010 Restated. Increase/ (Decrease). 2011. 2010 Increase/ Restated (Decrease). 72,247. 92,149. (19,903). 5,300. 16,760. 101,146. 99,241. 1,905. 50,484. 303,251. 335,254. (32,003). 359,020. 403,180. 24,300. Increase/ (Decrease). 2011. 2010. (11,460). 1,700. 3,724. (2,024). 52,493. (2,009). 25,400. 24,391. 1,009. 5,492. 6,194. (701). 286. 163. 123. (44,160). 6,806. 6,124. 682. 0. 0. 0. 15,265. 9,036. (1,370). 3,657. (5,027). 0. 1,864. (1,864). 190,175. 175,362. 14,813. 75,694. 65,562. 10,132. 44,790. 36,157. 8,633. Overseas. 8,519. 4,104. 4,414. 1,369. 1,117. 253. 0. 0. 0. Analysis and research services. 6,323. 5,563. 760. 1,386. 1,043. 343. 0. 65. (65). 11,841. 20,807. (8,966). 813. 7,229. (6,416). 4,300. 8,561. (4,261). PV power. 8,232. 1,072. 7,160. 2,272. 607. 1,665. 3,900. 3,369. 531. Corporate. 22,052. 17,446. 4,606. (6,852). (8,202). 1,350. 1,200. 1,074. 126. Total Continuing Operations. 1,107,106. 1,169,442. (62,337). 141,394. 152,583. (11,189). 81,576. 79,369. 2,208. Rounding and Adjustments. (266,492). (300,540). 34,049. (36). 338. (373). 0. 0. 0. 840,614. 868,902. (28,288). 141,358. 152,920. (11,562). 81,576. 79,430. 2,208. Generation. 1. Distribution Sales. 1. Trading. 1. Public Lighting Italian water Services. Environment. GROUP TOTAL Amounts in thousands of euros. 1. Revenues from the Generation, Sales and Trading segments include the income from commodity risk management for a total amount of 12,668 thousand euros in. the first quarter 2011 and 23,524 thousand euros in the first quarter 2010. Segment Information. 11. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. 2011.

(12) Interim Report on Operations at 31 March 2010. Operating Review Networks Industrial Segment ACEA Distribuzione Regulatory Framework 4 January 2011 – Resolution GOP 1/11: Adoption of the three-year strategic plan 2011-2013 of the Electricity and Gas Authority. The Electricity and Gas Authority adopted the three-year strategic plan 20112013 that defines the regulatory action to be carried out in the three-year period, based on the following general objectives: •. promote the development of competitive markets;. •. support and promote the efficiency and economic character of infrastructure services;. •. safeguard energy service customers;. •. promote the rational use of energy and contribute to environmental protection;. •. ensure the simplification and implementation of regulatory legislation;. •. increase contacts with system players;. •. increase the Electricity and Gas Authority’s internal operating efficiency.. 12 January 2011 – Consultation document DCO 1/11: Automatic compensation for reasons attributable to the distributor. The Electricity and Gas Authority proposed the introduction of compensation on the account of distribution companies in case the failure to provide metering data does not allow the seller to respect the billing frequency. The Electricity and Gas Authority proposes a limitation of the charges on the distributor’s account only to the cases of switching, with failure to provide the items below by the 20th day of the month related to the switching date: •. metering data defined by the regulation according to the treatment (hourly treatment, time period treatment or single time treatment);. •. historical measuring data referred to the period between the thirteenth and the second month before the switching date.. Operating Review. 12. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. for the seller’s failure to periodically issue invoices for electricity and natural gas.

(13) Interim Report on Operations at 31 March 2010. With reference to the effectiveness of the compensation on the distributors’ account, the Electricity and Gas Authority proposes a differentiation based on the billing frequency defined in contractual conditions, for the provision to be effective: •. from 1 September 2011 for final customers with a billing frequency of at least twice a month;. •. from 1 March 2012 for final customers with monthly billing.. 31 January 2011 – Resolution ARG/elt 6/11: Launch of procedure for setting up arrangements on the tariffs for the transmission, distribution and metering of electricity and the economic conditions for delivery of the connection services, for the regulatory period 2012 -2015. Aside from the application of a single national tariff, the resolution to launch the procedure of tariff regulation for the fourth regulatory period revealed the Electricity and Gas Authority’s intention to reconsider a tariff regulation by company for ascertained distribution costs. To this end, the Electricity and Gas Authority included among its objective the definition of provisions regarding: •. the check of the investment capitalisation and efficiency criteria;. •. the investment efficacy and indebtedness monitoring indicators.. Furthermore, the provision on the tariff will include issues relating to: •. the technical and economic regulation of reactive energy transports on transmission and distribution grids;. •. the increase in the power that can be taken in low load hours by domestic. •. the promotion and development of the smart grids under resolution ARG/elt 39/10;. •. the implementation of special provisions and the start of the pilot projects to recharge electric vehicles under resolution ARG/elt 242/10.. The Electricity and Gas Authority stated its intention to call auditions and make documents available for consultation to acquire useful knowledge for the creation and adoption of the provisions. 2 February 2011 – Resolution ARG/elt 9/11: Measures regarding the remuneration to book the grid capacity after the ordinances of 13 January 2011, no. 8-65, of the Lombardy Regional Administrative Court.. Operating Review. 13. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. users;.

(14) Interim Report on Operations at 31 March 2010. The Electricity and Gas Authority suspended the provisions regarding the payment of the economic guarantee by those requiring the connection, in case of requests presented on areas defined as “critical” by the grid operator. Furthermore, the Electricity and Gas Authority suspended the effectiveness: •. of the transitory regulation introduced to manage the economic guarantee, after the identification of the critical areas by the operators;. •. of resolution ARG/elt 173/10, with which Terna had identified the critical areas on its grid.. 7 February 2011 – Imposition of a fine pursuant to article 2, paragraph 20, letter c), of law no. 481 of 14 November 1995, towards A2A Reti Elettriche S.p.A (Resolution VIS 15/11), Terna – National Electricity Grid (Resolution VIS 16/11), Enel Distribuzione S.p.A. (Resolution VIS 17/11), Acea Distribuzione S.p.A (Resolution VIS 18/11) and Gelsia Reti S.r.l. (Resolution VIS 19/11). Following the investigation started with resolution VIS 171/09, the Electricity and Gas Authority imposed fines on some distribution companies, including Acea Distribuzione and Terna, for breaches that prevented the correct provision of the dispatching service in the years 2005, 2006 and 2007. For the distribution companies, the breaches concern: •. the management of supply points customer information;. •. the aggregation of withdrawal measurements for the dispatching service.. A fine was imposed on ACEA Distribuzione for 571 thousand euros. 8 February 2011 – Resolution ARG/com 11/11: Amendments and integrations December 2009. The. Electricity. and. Gas. Authority. clarified. some. aspects. regarding. the. recognition of tariff subsidies for those end customers that at 6 April 2009 were resident in the area of the L’Aquila province and the neighbouring areas hit by the earthquake. The subsidies recognised by the previous resolution ARG/com 185/09 also envisaged:. •. the suspended application of the transport tariff components for domestic customers;. •. the recognition also for those end customers that at the time of the earthquake were resident in the places affected but that have subsequently started a new contract also in another Municipality.. Operating Review. 14. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. to resolution ARG/com 185/09 by the Electricity and Gas Authority of 1.

(15) Interim Report on Operations at 31 March 2010. With resolution ARG/com 11/11, the Electricity and Gas Authority specified that the tariff subsidies on the transport components must be applied also if the supply point in the seismic area has not been deactivated, but the end customer was in any case forced to move and start a new contract. 8 February 2011 – Resolution ARG/elt 12/11: Measurement and ranking of the pilot projects regarding the active networks and smart grids, under resolution ARG/elt 39/10 by the Electricity and Gas Authority of 25 March 2010. The Electricity and Gas Authority identified the “pilot projects” inclusive of automation, protection and control systems for active MT networks (smart grids) connected with the incentive treatment, which for 12 years are guaranteed a 2% increase in the return on the invested capital in the tariff. ACEA Distribuzione presented a pilot project that was admitted to the incentive treatment, regarding a significant portion of its secondary distribution network, which envisages the predisposition of an accumulation system integrated with a recharge station for electric vehicles (corporate fleets) and features a solar power plant; in particular the project: •. ranked 2nd after the Enel Distribuzione project, for the indication of the expected benefits, scoring 73 points;. •. ranked 4th with reference to the priority indicator (ratio between expected benefits and cost of the pilot project), with 660 points.. In detail, the Electricity and Gas Authority assessed that the pilot project presented by ACEA Distribuzione is characterised by: •. a notable level of innovation, particularly with reference to the enhancement improvement of continuity levels and service quality;. •. fair feasibility times;. •. a high level of repeatability on a large scale.. 16 March 2011 – Consultation document DCO 4/11: Completion of the regulation concerning the execution of the electricity and natural gas sales contracts in case of supply/delivery points already active and of alignment of the data in the availability of the various operators. The Electricity and Gas Authority presented proposals referring to the electricity and gas sectors in order to define procedures that facilitate the subscription by an end. Operating Review. 15. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. of the automation and remote-control system, which will allow a significant.

(16) Interim Report on Operations at 31 March 2010. customer of a sales contract in case of change of the identification data on the supply point (so-called transfer). In particular, it proposes the introduction of the following provisions: •. request to subscribe a sales contract certifying the ownership of the POD through the indication to the seller of the registration details of the lease agreement and/or cadastral details of the property subject to supply;. •. withdrawal from a sales contract compulsorily associated to a POD deactivation request, except for the cases of change in supplier (to be treated as switching) or data of the end customer (to be treated as activation);. •. collection of the metering data for invoicing purposes, carried out by the distribution company with electronic meters or by the new seller through automatic reading of the customer who takes over the POD.. In addition, the Electricity and Gas Authority intends to start some actions to attain and maintain the alignment of the information contained in the master data of sellers and distributors, in a way to allow the correct population of the Integrated Information System (so-called SII). 16 March 2011 – Consultation document DCO 5/11: Final guidelines in relation to the hypothesis of increasing the power that can be taken for the domestic electricity users. The Electricity and Gas Authority made proposals to support the compulsory introduction of a double tariff, defining the tools and functional actions that allow the power to be exceeded in the F23 tariff slot. In particular, on the subject of increasing the power for residential domestic users •. a contractually limited power equal to 3.7 kW for the entire F23 slot, for an available power value equal to 4.07 kW (tolerance of 10%);. •. calculated on an integration interval for average power equal to 2 minutes.. DCO 5/11 indicates a series of technical constraints linked to the feasibility of the intervention, referring in particular to: •. the assessment of the number of risers on which the distribution companies must intervene;. •. the absorption capacity of the user branching off;. •. the time to reprogramme electronic meters and adjust commercial systems.. Operating Review. 16. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. with a contractually limited power equal to 3 kW, it proposes:.

(17) Interim Report on Operations at 31 March 2010. In addition, the Electricity and Gas Authority sets the approximate date for the entry into force of the measures proposed at 1 January 2013, and applies penalties to those distribution companies that will not grant the power increases. The Electricity and Gas Authority does not intend to include forms of increase the invested capital to cover the costs of the interventions deemed necessary to allow the power increases. 16 March 2011 – Resolution VIS 42/11: Start of an enquiry on the provision of the grid connection service for electricity production plants by the grid operators. The Electricity and Gas Authority started an enquiry aiming to examine the methods to manage grid connection applications from electricity production plants, particularly concerning the plants powered by renewable sources. The enquiry is necessary due to the claims and reports reaching the Electricity and Gas Authority, which highlight possible criticalities in performing the connection procedure in some areas, particularly for LV and MV connections by plant producing electricity from renewable sources. 16 March 2011 – Resolution VIS 43/11: Approval of the inspection programme regarding the electricity distribution companies that were granted the incentive under article 12, paragraph 12.1 of Attachment A upon the resolution no. 292/06 of the Electricity and Gas Authority of 18 December 2006, for the registration of customers connected in low voltage and concerned by electricity outages through the electronic meters and remote control systems. The. Electricity. and. Gas. Authority. approved. inspections. regarding. three. 31 December 2009 – the objectives of commissioning electronic meters featuring a function that records the outages of LV customers, according to the provisions of paragraph 12.1 of Attachment A to resolution no. 292/06 (so-called full incentive). The inspections will be carried out between 1 April 2011 and 31 December 2011. 23 March 2011 – Resolution VIS 44/11: Approval of the inspection programme towards two grid operators concerning the provision of the electricity grid connection service for production plants.. Operating Review. 17. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. distribution companies that had been granted the incentive after reaching – by.

(18) Interim Report on Operations at 31 March 2010. The Electricity and Gas Authority approved two inspections regarding two grid operators that provide the electricity grid connection service for production plants. The inspections – to be implemented by 31 December 2011 – aim to ascertain the correct application of the rules of the production plant connection service, with reference to the provisions under: •. resolution no. 281/05 for the MV and HV connection applications presented up until 31 December 2008;. •. resolution no. 89/07 for the LV connection applications submitted up until 31 December 2008;. •. resolution ARG/elt 99/08 (TICA) for the connection applications submitted from 1 January 2009 and up until 31 December 2010;. •. resolution ARG/elt 125/10 (amended TICA) for the connection applications submitted starting from 1 January 2011.. 23 March 2011 – Consultation document DCO 7/11: Update of the settlement rules. The Electricity and Gas Authority presented some proposals aiming, in particular, to the review of the following schedules:. •. reporting requirements concerning the annual settlements towards Terna of the physical and economic batches of the electricity despatching service (socalled settlement): advanced fulfilments on the account of the underlying distributors, already starting from the communications regarding the energy. •. provision of the metering data for the despatching of timed supply points: converged. despatching. of. the metering. data for. invoicing. and. the. despatching data into a single submission, thus aligning the deadline to the fifth business day of the month following the registration. 29 March 2011 – Resolution ARG/com 34/11: Updating, for the quarter 1 April – 30 June 2011, of the tariff components to cover general charges and additional components of the electricity sector and the gas sector and provisions to the equalisation fund for the electricity sector. The Electricity and Gas Authority arranged a significant increase in the A3 tariff component, with the aim of guaranteeing an increase in revenues on an annual basis, equal to about 1.75 billion euros, due to the greater requirement of the. Operating Review. 18. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. withdrawn in the year 2010;.

(19) Interim Report on Operations at 31 March 2010. “Account for new plants from renewable sources and similar plants”. The need to adjust and increase the A3 component is due to the elements below: •. the A3 Account closing in 2010 showed a deficit equal to more than 600 million euros;. •. the charges expected by GSE for the incentive of PV power plants more than doubled compared to the forecasts of the previous quarter, due to a number of incentive requests significantly higher than expected. In addition, the Electricity and Gas Authority authorised CCSE to carry out advances to the A3 Account, by using the stocks available at all the other management accounts, within the overall limit of 1 billion euros. With regard to other accounts, the following is noted: •. a decrease in the UC3 component;. •. the financing via the A2 component towards Sogin for the recognition of the charges consequent to the dismantling of nuclear plants.. 29 March 2011 – Resolution GOP 16/11: Suspended effectiveness of the Threeyear Strategic Plan 2011-2013 of the Electricity and Gas Authority GOP 1/11 resolved on 4 January 2011. Starting from 29 March 2011 and up until 31 July 2011, the effectiveness of the Three-year Strategic Plan 2011-2013 was suspended in a way to allow the new board, established on 16 February, to conclude the assessments concerning any. 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. 19. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. amendments or integrations to be made to the Plan..

(20) Interim Report on Operations at 31 March 2010. 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. The general equalisation mechanisms for the costs and revenues deriving from distribution and metering for the years 2008-2011, which take account of the innovations introduced by Resolutions ARG/elt 18/08 and 30/08, are as follows: •. 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. •. equalisation of revenues from the LV metering service;. •. equalisation of the marketing costs incurred by distribution companies in respect of LV customers;. •. equalisation of the cost of purchasing electricity used internally for transmission and distribution;. •. 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. Operating Review. 20. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. customers;.

(21) Interim Report on Operations at 31 March 2010. investments. This aims to ensure that the increased returns are only granted to companies who have actually carried out such investments. With resolution ARG/elt 12/11, the Electricity and Gas Authority identified the “pilot projects” inclusive of automation, protection and control systems for active MT networks (smart grids) connected with the incentive treatment, which for 12 years are guaranteed a 2% increase in the return on the invested capital. Acea Distribuzione presented a pilot project that was admitted to the incentive treatment. 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. 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. Resolution ARG/elt 228/10, which updates for the year 2011 the tariffs for the provision of electricity distribution, transmission and measurement services, transitorily suspended from 2010 the equalisation mechanism of the metering service under art. 40 of TIT, entrusting the Tariff Department with examining the issues on the application of the mechanism and proposing possible changes to be submitted to public consultation prior to their adoption. With resolution ARG/elt 30/08 the Authority introduced the new equalisation with a view to protecting the financial position of distribution companies. Two regimes are to be applied to distribution companies that have established a separate company to supply services subject to additional safeguards, and to those who have combined distribution services with the sale of electricity. With resolution ARG/elt 227/10, the Electricity and Gas Authority calculated the amount of the equalisation of the marketing costs incurred by distribution companies in respect of LV customers referring to the year 2008. 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 (TIV)”, approved with Resolution 156/07. This new. Operating Review. 21. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. mechanism to cover the cost of marketing distribution services to LV customers,.

(22) Interim Report on Operations at 31 March 2010. 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 transmission and the difference between the actual losses and standard network losses of distribution companies (Delta losses). In the same 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 lump-sum connection fees, which can be adopted by each distribution company on specific request to the Authority by the final deadline of 31 March 2010. Acea Distribuzione SpA filed in an adhesion application 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. 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 regulatory period 2008-2011, 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 regulatory period 2008-2011;. Operating Review. 22. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. To this end, the Authority is required to carry out an assessment at the request of.

(23) Interim Report on Operations at 31 March 2010. •. 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 regulatory period 2004-2007;. •. updating, for 2008, the actual costs allocated to the distribution companies that took part in the company-specific equalisation, based on investigations of individual companies conducted by the Authority’s Tariff Department, in accordance with the criteria adopted to determine the tariffs for the regulatory period 2008-2011. The Authority, with Resolution ARG/elt 163/10, communicated the value of the company-specific coefficient (Csa) for 2008, setting it at 23.38% of the revenues subject to equalisation;. •. 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. accordance. based. on. with. this. updated resolution. company-specific and. permitted. correction. factors. in. revenues. subject. to. equalisation. 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 payments, except for the adjustment, in relation to the company-specific equalisation for the years 2008, 2009, 2010 and 2011, to the 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 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. 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. Operating Review. 23. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. distribution companies for which the Authority set the Csa factor for the year 2004..

(24) Interim Report on Operations at 31 March 2010. 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; •. 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 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 variation linked to the reduction in gross invested capital.. With regard to connection fees and fixed charges, in the document “Economic conditions for delivery of the connection 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;. •. defined additional economic terms with regard to those established in Resolution 281/2005;. Operating Review. 24. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. •.

(25) Interim Report on Operations at 31 March 2010. •. 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. Energy Service Performance At 31 March 2011 ACEA Distribuzione injected 2,980.7 GWh of electricity into the grid, representing a decrease of 0.37% on the same period in the previous accounting year.. GWh. 31.03.2011. 31.03.2010. Increase/ (Decrease) %. Protected categories market. 1,139.53. 1,224.78. (6.96%). Free market. 1,840.40. 1,766.08. 4.21%. Other distributors. 0.77. 0.79. (3.01%). Overall Total. 2,980.70. 2,991.65. (0.37%). Operating Review. 25. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. The following table shows a breakdown..

(26) Interim Report on Operations at 31 March 2010. ARSE -Acea Reti e Servizi Energetici Regulatory Framework 20 January 2011 – Update of the minimum guaranteed prices for 2011 Based on the data published by Istat, the values of the minimum guaranteed prices for systems powered by renewable sources with a nominal electric potential of up to 1 MW, pursuant to article 7, paragraph 7.5, of the Authority resolution no. 280/07, updated for 2011 in accordance with the criteria provided by that paragraph equal: −. up to 500,000 kWh on an annual basis, 103.4 euros/MWh;. −. from over 500,000 kWh up to 1,000,000 kWh on an annual basis, 87.2 euros/MWh;. −. from over 1,000,000 kWh up to 2,000,000 kWh on an annual basis, 76.2 euros/MWh; 3 March 2011 – Legislative decree no. 28 for the implementation of Directive 2009/28/EC on promoting the use of energy from renewable sources. Among other, the decree concerns:. −. TITLE II – Section I – Authorisations and administrative procedures. −. TITLE V – Section II – Regimes supporting the production of electricity from renewable sources. −. TITLE V – Section III – Regimes supporting the production of heat energy from renewable sources for energy efficiency. 15, paragraphs 15.3 and 15.4, of resolution ARG/elt 5/10 of 25 January 2010 concerning conditions for the dispatching of the electricity produced from unprogrammable renewable sources. Energy saving As stated in the financial statements, the year 2010 ended with distribution companies facing clear difficulties in achieving the energy saving objectives set by regulations, mainly by reason of the inefficient quantity of EEB on the market. Within this framework, ACEA Distribuzione has been the only company able to fulfil its target achievement obligations thanks to the availability of bonds resulting from energy saving initiatives undergone with ARSE.. Operating Review. 26. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. 28 March 2011 – Resolution ARG/elt 27/11 Authentic interpretation of article.

(27) Interim Report on Operations at 31 March 2010. 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 light of Legislative Decree no. 28 "Implementation of directive 2009/28/EC on promoting the use of energy produced by renewable sources, amending and subsequently repealing directives 2001/77/EC and 2003/30/EC” and other existing regulations, the company is considering the possibility of developing this activity consistently with market opportunities and the saving obligations related to these regulations. The new decree provides for the activity of managing the certification mechanism for white certificates to be transferred to GSE, thus entrusting ENEA with preparing at least 15 new standardised certification sheets. Furthermore, the maturity period of white certificates is matched with the useful life of the measure, identifying methods to shorten times and reduce the fulfilments to obtain the certificates while establishing criteria to determine the tariff contributions for the costs incurred by the parties obliged to achieve primary energy savings objectives. PV power All the plants connected at 31 December 2010 are operating normally and their production is in line with expectations. The programme to build photovoltaic plants continued with the opening of the sites of Giuliano di Roma and Villa Latina. Some contracts stipulated at the end of 2010 are also being completed, such as the Montelupone and Prato plants and, at the others are being developed. In this first quarter, in addition to activating the procedure for the energy account with GSE for the plants connected at the end of 2010, the requests presented by GSE with regard to the PV plants inserted in the so-called “Salva Alcoa” were considered; commissioning is being done in line with the means available to the distribution companies involved for the connection to the electricity network. The promulgation of Legislative Decree no. 28, implementing Directive 2009/28/EC on promoting the use of energy produced by renewable sources, amended the tariff structure established by the third energy account from 1 January of this year, limiting its validity period to 31 May. The rules for the subsequent periods will be set by a subsequent implementation decree to be issued by 30 April.. Operating Review. 27. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. beginning of 2011, the solar greenhouses for the HFV fund of Scalea (CS), while.

(28) Interim Report on Operations at 31 March 2010. Following. protests. from. all. the. operators. and. category. associations,. the. Government undertook to accelerate the review process in order to restore a definitive framework to plan and finance the new initiatives. This situation created a climate of uncertainty in the sector and led to new investments being blocked, for which completion was planned beyond the above mentioned date; for ARSE in particular, the objectives set for commercial activities may be downsized in light of the current regulatory framework. Cogeneration In this period the subsidiary Ecogena continued to run the already constructed plants while pursuing the acquisition of new works. 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 31 October 2010 to 15 April 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. Operating Review. 28. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. of 2006..

(29) Interim Report on Operations at 31 March 2010. Energy Industrial Segment Reference context During the first quarter of 2011 the domestic electricity demand (83,259 GWh)2 rose by 1.1% compared to the same period of the previous year, remaining unchanged also in non calendar terms. Domestic production met 85.6% of Italy’s requirements (69.1% from thermoelectric plants, 11.7% from hydroelectric sources and 4.8% was generated from geothermal and other renewable energy sources) whilst the remaining 14.4% was covered by imports. In this context, net domestic production (71,911 GWh) decreased slightly by 0.2%, while the balance of imports increased by 2.5%. Except for thermoelectric (-8.4%) and wind power (-8.7%) production, all sources of domestic production reported an increase compared to the same period last year. The PV power production rose significantly (+136.3%).. 1 January ‐ 31 March 2011. 1 January ‐ 31 March 2010. % Change 2011/2010. ‐Hydroelectric ‐Thermoelectric ‐Geothermal ‐Wind ‐PV power. 9,775 58,117 1,323 2,225 471. 10,668 57,465 1,251 2,439 222. ‐8.4 1.1 5.8 ‐8.8 112.2. Total Net Production of which CIP 6 production. 71,911 7,327. 72,045 9,226. ‐0.2 ‐20.6. Imports Exports. 12,502 515 11,987. 12,217 526 11,691. 639 83,259. 1.351 82,385. Overseas balance. 2.3 ‐2.1 2.5. Consumption for pumping systems Demand for electricity. ‐52.7 1.1. Demand for electricity = net production + balance of imports – consumption for pumping systems. On the Electricity Exchange front, the first quarter saw a very high supply of electricity, though with decreasing exchanges compared to last year. The strong growth of Over the counter energy exchanges and the reduction in liquidity became. 2. Source: Terna – March 2011, monthly report on the electricity system.. Operating Review. 29. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. Net Production.

(30) Interim Report on Operations at 31 March 2010. consolidated. Domestic purchases, sales of production units and energy imports all decreased. Liquidity on the DAM. Key gen: January feb: February mar: March apr: April mag: May giu: June lug: July set: September ott: October nov: November dic: December. In the first quarter of 2011 the purchase price of energy on the Electricity Exchange, NSP, grew slowly but constantly to 68.18 euros/MWh, up compared to the same period of 2010 (+8.5%), thus confirming the trends emerged already at the beginning of 2011, with a very high supply of electricity in the Italian System, a. Operating Review. 30. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. ago: August.

(31) Interim Report on Operations at 31 March 2010. strong growth in OTC exchanges (+21.6%) accompanied with reduced market liquidity.. National Single Price. Key Variazione sullo stesso mese dell’anno precedente: Change on the same month of the previous year gen: January feb: February mar: March mag: May giu: June lug: July ago: August set: September ott: October nov: November dic: December Price on the European Power Exchanges (arithmetic mean €/MWh). Operating Review. 31. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. apr: April.

(32) Interim Report on Operations at 31 March 2010. Key gen: January feb: February mar: March apr: April mag: May giu: June lug: July ago: August set: September ott: October nov: November. Key gen: January feb: February mar: March apr: April mag: May. Operating Review. 32. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. dic: December.

(33) Interim Report on Operations at 31 March 2010. giu: June lug: July ago: August set: September ott: October nov: November dic: 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); Source: Electricity Market Operator – Monthly trading report – March 2011.. In March, the already marked growth of international price quotations of crude oil became even stronger consequently to the Japanese earthquake and the continuing social conflicts in place in some of the most important oil producing and oil exporting countries. In Europe the Brent totalled 114.6 dollars per barrel after the record values reached in the summer of 2008. This shows an increase of just more than 10% compared to February, reaching 45.3% in terms of trend.. Key: Brent (scale dx) : Brent (scale dx) : Iranian Light WTI tasso di cambio $/€ : $/€ exchange rate gen: January. Operating Review. 33. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. Dated Brent price trend.

(34) Interim Report on Operations at 31 March 2010. feb: February mar: March apr: April mag: May giu: June lug: July ago: August set: September ott: October nov: November dic: December Electricity production. 3. During the period, the net production of AceaElectrabel Produzione Group (now GdF Produzione Group) amounted to 1,523.6 GWh. This figure, compared with net production for the same period last year, shows a reduction equal to 4.8%, generated especially by the Roselectra power station, as regards thermoelectric plants (-21.9% compared to the first quarter of 2010).. 3. GWh. 31.03.2011. 31.03.2010. Increase/ (Decrease). Increase/ (Decrease) %. Thermoelectric. 1,371.6. 1,422.2. -50.6. -3.6%. Hydroelectric. 127.6. 152.0. -24.4. -16.1%. The financial quantities are shown on a non-proportionate basis and refer to 100% of the. Companies they refer to. Operating Review. 34. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. The quantities of electrical power injected are analysed as follows:.

(35) Interim Report on Operations at 31 March 2010. Wind Power. 24.4. 26.9. -2.5. -9.3%. AEP Group Total. 1,523.6. 1,601.1. -77.5. -4.8%. In the period, the plants transferred by spin-off into Acea Produzione produced energy for 133.1 GWh, down by 122.6 GWh compared to the first quarter of 2010. In the first quarter of 2011 Tirreno Power injected 2,392 GWh of energy into the grid, down by 562 GWh (-19%) compared to the same period of the previous year. This decreased concerned all types of plants and the Vado Ligure plant in particular (-637 GWh equal to 32.8%, of which – 438 GWh coal powered plants due to both price trends and shutdowns for maintenance). Against the trend was the production of the Torrevaldaliga plant (+76 GWh), which in the first quarter of 2010 has been concerned by significant maintenance activities, and the Naples plant (+17 GWh) due to the increased plant availability.. GWh. 31.03.2011. 31.03.2010. Increase/ (Decrease). Increase/ (Decrease) %. Thermoelectric. 1,766.0. 1,873.0. -107.0. -5.7%. Hydroelectric. 65.0. 82.0. -17.0. -20.7%. Coal. 561.0. 999.0. -438.0. -43.8%. Total. 2,392.0. 2,954.0. -562.0. -19.0%. Operating Review. 35. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. The quantities of electrical power injected are analysed as follows:.

(36) Interim Report on Operations at 31 March 2010. Sale of electricity on the protected categories and free markets and sale of gas. 4. Over the first three months of 2011, the sale of electricity on the protected categories market was equal to 1,124 GWh, down 0.13% compared to 31 March 2010. There are 1,266,741 customers, a decrease from the same period of last year of 114,479 customers, due to the opening of the market for the process of deregulating the sector, which is now complete. Conversely, the sale of electricity on the free market was 2,490 GWh for Acea Energia and 631 GWh for the sales JVs, for a total of 3,120 GWh, down 13.7% compared to the first quarter of 2010. Finally, as concerns trading-related activities, the company AceaElectrabel Trading sold a total volume of 3,527 GWh of electricity on the free market during the period, a decrease of 1,686 GWh (-32.3% compared to the same period of 2010). Total gas sales volumes reached 890 million cubic meters, decreasing by 184. 4. The financial quantities are shown on a non-proportionate basis and refer to 100% of the. Companies they refer to. Operating Review. 36. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. million cubic meters..

(37) Interim Report on Operations at 31 March 2010. Water Industrial Segment Management of water services in Lazio and Campania ACEA Ato2 The territory handled At 31 March 2011, 76 municipalities are totally managed by the integrated water service, equivalent to about 3,700,000 people (ISTAT source), equal to about 95.00% of the total; in 6 municipalities the integrated water service has been acquired only partially due to the presence of safeguarded parties, in addition to the municipalities of Agosta, Marano Equo, Roviano, Anticoli Corrado and Arsoli, for which only the waste water treatment was acquired, and the aqueduct systems of the Simbrivio Consortia, the former Cassa per il Mezzogiorno, the Doganella Consortium, the Acquedotto del Peschiera Consortium as well as the above mentioned Nemi-Genzano, C.E.P and Co.R.Ec.Alt. Consortia. Moreover, at 31 March 2011 assessments of the plant and systems in the following municipalities have yet to be completed in preparation of the documentation needed for acquisition of the related integrated water service contracts:. •. Northern Area: Capena, Civitella San Paolo and Rignano Flaminio;. •. Eastern Area: Anticoli Corrado, Camerata Nuova, Cerreto Laziale, Cineto. •. Southern Area: Colleferro, Labico and Valmontone;. •. Western Area: Bracciano, Canale Monterano, Civitavecchia and Manziana. Tariffs As already shown in the 2010 financial statements – to which reference is made for further information – the Mayors’ Conference of 14 December 2010 adopted a single tariff with regulation no. 6. The Mayors’ Conference in particular resolved: a) starting from 1 January 2011, to adopt, in the ATO 2 municipalities that on that date have transferred or will transfer the services to ACEA Ato2, the single tariff system with the application of the Average Tariff increase approved by the Mayors’ Conference. The adopted single tariff envisages a reduced tariff and three surpluses for domestic users, as well as a basic tariff and three surpluses for non-domestic users; there is also the cancellation of the minimum. Operating Review. 37. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. Romano, Mandela, Marano Equo, Percile, Roviano and Sant’Angelo Romano;.

(38) Interim Report on Operations at 31 March 2010. commitment for domestic users, with a consequent increase in the fixed amount and maintenance of the minimum commitment for non-domestic users; b) to adopt a governing implementation of the single tariff structure; c) to establish a division into instalments of the bills for the households from those Municipalities affected by an increase of more than 40% between the old and the new tariff, for specific consumption hypotheses; d) to apply a 10% discount (for the first year of adoption) on the bills of domestic users affected by an increase in annual expenses of more than 20%, given specific consumption hypotheses; e) to apply a single tariff to those Municipalities whose integrated water service will be transferred (entirely or partially) to ACEA Ato2, starting from 1 January 2011, from the time of the transfer taking place. In the same meeting the Mayors’ conference also approved to further increase investments by 45 million euros in the 2011 – 2013 three-year period; consequently, it resolved on the new level of revenues guaranteed in the same period. ACEA Ato5 The company manages the integrated water services in ATO 5 Southern LazioFrosinone, 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. The management of the integrated water service on the territory of ATO 5 – Southern Lazio - Frosinone involves a total of 85 municipalities (management still Urbano as regards water services only) for a total population of around 480,000 inhabitants, about 450,000 inhabitants supplied and a number of end users equal to around 188,900. 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 and paragraph “Other information” of this document.. Operating Review. 38. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. remains to be surveyed for the municipalities of Atina, Paliano and Cassino Centro.

(39) Interim Report on Operations at 31 March 2010. GORI The Company manages all Municipalities (76) in the ATO 3 "Sarnese-Vesuviano". In the period in question significant progress was made in the extraordinary review of the Area Plan in force, although additional surveys are still necessary. As already shown in the 2010 Consolidated Financial Statements, to which reference is made for further information, this review shall be completed as soon as possible, and a series of important issues will have to be tackled and defined; the new Area Plan in particular must be reviewed in a way to ensure its feasibility, i.e. the satisfaction of the banking system requirements that impose the existence of an adequate tariff system that, among other things, ensures that the project costs are fully covered. Furthermore, the abovementioned extraordinary review must settle the issue regarding the recovery of the tariff adjustments accumulated until 31 December 2010 (equal to 137 million euros, 50.8 million attributable to the Group) due to a tariff structure adopted by the Area Authority that proved to be unsuitable to ensure the average real tariff set year after year by the Area Plan, and thus the corresponding revenues guaranteed by the same Plan. The quarter saw an intensification of the activities aimed at finding a solution, even as an alternative, to the initial project financing operation, to restructure the bridge loan of 40 million euros expiring in June, turning it into an amortising long term loan.. Management of water services in Tuscany and Umbria 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. Operating Review. 39. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. On 28 December 2001, the subsidiary Acque S.p.A. signed a 20-year management.

(40) Interim Report on Operations at 31 March 2010. 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 revision, as provided for in the Agreement, for the failure to achieve certain technical and organisational standards. During the second tariff revision, the new Investment Plan was also defined, which was subsequently defined on a more detailed basis in the new POT for the 20082010 three-year period approved by the authorities in March 2009. 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. In the period, the resolution of the Board of Directors of the Area Authority was published (resolution no. 4 of 23 February 2011), which the Meeting that met on 17 December 2010 had entrusted by drawing up the new text of Chapter 6 of the Area Plan containing comments and details on the tariff profile approved as well as the additional tables regarding the economic-financial plant under art. 149, paragraph 4 of Legislative Decree 152/2006. With the mentioned resolution, the Board of Directors approved chapter 6 of the Area Plan containing comments to and the illustration of the tables regarding the tariff profile 2010 – 2021 and the preparatory tables to calculate the tariff, and decided to postpone the approval of the economic-financial plan under art. 149, In short: 9. the new Area Plan estimates 86 million cubic meters billed each year, as compared to 88.6 of the previous year;. 9. penalties charged to the manager for 2.7 million euros due to the failure to reach the set standards for the 2005 – 2009 period, as a reduction of the revenues from the tariff in the 2010-2012 three-year period;. 9. tariff adjustments for the 2002 - 2009 period for 26.9 million euros;. 9. non recognition of part of the new adjustments for the years 2002 -2003 (1.5 million euros), in application of the 6 year prescription of the new agreement;. 9. elimination of the new agreements on the application of a 0.5% excess on guaranteed revenues.. Operating Review. 40. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. paragraph 4 of Legislative Decree 152/2006 to a subsequent resolution..

(41) Interim Report on Operations at 31 March 2010. 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 for this operation to be completed, in September 2010, a new bridge financing transaction was carried out for 80 million euros, of which 45 million euros to be used to repay the bridge loan expiring in September. The expiry of this bridge loan is set for 5 March 2012. At the end of the first quarter the instrument was used for 65 million euros. The year 2010 marked the third year of management of the integrated water service and during 2011 the Area Authority will review the Area Plan in line with the principles of sustainability of the medium/long term economic-financial balance. In this context, AATO should eliminate the discrepancies still existing between the programming of the Manager (Economic-financial plant to obtain the Project Financing) and that of the Regulator (AATO economic-financial plan); this is facilitated by the review of the agreement signed on 30 November 2010 that made the necessary integrations and amendments to align the text with the requirements set by the advisors. Finally, as a consequence of the review of the shareholders’ agreements between the company’s public and private shareholders that strengthened the joint control over the company, starting from January 2011, Acquedotto del Fiora is accounted for under proportionate consolidation as opposed to the equity method used until. Regarding the holdings in the Umbria region, in December 2007, ACEA was awarded the tender called by the Territorial Authority of ATO 1 Perugia to choose a private industrial minority partner in Umbra Acque S.p.A. Entry into the share capital (with 40% of the shares) took effect on 1 January 2008. During the first quarter, Umbra Acque continued to increase its efficiency, with special commitment in the commercial area also with the aim of reducing the current payables to users. The implementation of the new CRM system and the consolidation of the internal call-centre allowed the company to drastically shorten waiting times at desks, enabling users to obtain all the services offered by the company also by phone (automatic reading, contracts, cancellations, takeovers,. Operating Review. 41. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. 31 December 2010..

(42) Interim Report on Operations at 31 March 2010. transfers, etc.). In operating terms, a three-year project was started to identify losses in order to offset the greater energy consumption deriving from the introduction of the new water treatment services for the areas of Todi, Castiglione del Lago and Perugia, thus avoiding an increase in operating costs that are not supported by the tariff. A pre-treatment plant became operational in Città di Castello, enabling Umbra Acque to treat the percolates coming from dumps and increase its margins deriving from extra-tariff activities. The Board of Directors that met on 30 March conferred the Chairman and the Chief Executive Officer a broad mandate for setting up a vehicle company to be in charge of all the activities which Umbra Acque intends to offer to the Umbrian market, in compliance with the obligations imposed by the implementation regulation of 23-bis. In February the Authority resolved to increase the tariff for 2011, in accordance with the Authority Plan, and the relevant tariff structure. On the contrary, the tariff review process started a while back has not yet been completed, also as a. Operating Review. 42. WorldReginfo - 1727b34f-7dc1-4e5d-9856-47c883b9b2c1. consequence of a certain inertia shown by the Authority..