A2A CompanyPresentation
Milan, 9 September 2014
Italian Infrastructure Dayat Borsa Italiana
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 2
Agenda
• Company profile
• Focus on Infrastructure
• Last release (H1’14)
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 3
A2A in a snapshot
Significant critical mass
Among domestic utilities A2A ranks
• 2nd largest in terms of renewable capacity• 4th largest in terms of overall electricity production• 1st in terms of heated volumes• 1st in terms of electricity production by WTE• 2nd in terms of distributed electricity• as one of the most diversified operators in terms
of business mix
• 4th in terms of EBITDA among domestic utilities• as the best performer in terms of debt reduction in
2013• 1st in terms of revenues and EBITDA among local
utilities
Progress in a challenging environment
• Rather stable operating results in spite of mostunfavourable scenario
• 2013-2015 Business Plan – focussed on consolidation,ahead of schedule in 2013
Shareholding structure
• Ongoing deleveraging and efficiency efforts in 2014
• New Business Plan in the first months of 2015
Born in 2008 by a merger of local utilities, A2A is jointly controlledby the cities of Brescia and Milan
Shift to a traditional corporate governance model in June 2014 –newly appointed Chairman and CEO with broad executive powers
(1) Group net income adjusted for the impact of extraordinary items: 2013 = 156€M; 2012 =116 €M; 2011 = 165 € M; 2010 = 243 €M
Source: CONSOB – updated at 30/06/2014
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 4
COGENERATION& DISTRICT HEATING
Cogenerationplants
Networks
89 M€ 8%
WASTE
Collection
Treatment
255 M€ 22%
NETWORKS(EPCG included)
Water
Electricity networks
Gas networks
268 M€ 23%
ENERGY(EPCG included)
Fuel sourcing
Powergeneration
Whole-sale &Trading
540 M€ 47%
PORTFOLIO MANAGEMENT
DisposalHeat/Electricitysale
Electricity/Gassale
Heat/Electricitysale
(1) Adjusted EBITDA, excluding costs of redundancy schemes (-25 €M), regulatory impacts (+24 €M) and EBITDA from “Other services & Corporate” (-18 €M)
Sources: AEEG and Company Annual Reports
A2A business portfolio
2013EBITDA(1)
About 50% of Group EBITDA from regulated activities/concessions orlong-term contracts
• Flexible business model which allows for optimizations both in the business units and across them
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
A2A asset portfolio
5
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
A2A 2013 Volumes
6
* without Intermediated Ipex volumes
As of June 2012 Edipower production includes 77% of production of the plants managed in tolling regime and 100% of production of the S. Filippo delMela, Turbigo (groups 1-2-3) and Brindisi thermoelectric plants and some hydroelectric and photovoltaic plants.As of November 2013 Tusciano and Turbigo productions are not included, while the quantities of the remaining Edipower plants are 100% of productionAs of January to May 2012, Edipower production includes 20% of production of the plants managed in tolling regime
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
A2A strengths and opportunities
7
CO
GEN
ER
ATIO
N&
DIS
TR
IC
TH
EA
TIN
GW
AS
TE
NETW
OR
KS
EN
ER
GY
• Diversified and well-balanced generation mix - to exploit market opportunities
and mitigate overall risk
• Flexible plant portfolio: almost 90% of hydro flexible reservoir/basin vs. run-of-
river; CCGT plants with a low minimum load
• Relevant market share in the Northern Zone
• CCGT plants are new or recently revamped, no contractual constraints (take or
pay gas), no demand constraints (heat-lead)
• Most widely used system in Europe to achieve energy efficiency targets
• Boost for local investments
• Clean and cutting-edge technology (e.g. heat pump)
• Environmental benefits: reduction of pollutant emissions in cities
• Diversified technology/fuel mix (cogeneration, biomass, etc.)
• No boiler requiring maintenance at user level
• Tariff customisation
• District cooling option
• Full integration along the value chain
• Higher value/technology for waste treatment and disposal (e.g. Waste to
Energy, Mechanical Biological Treatment)
• Expansion abroad by leveraging on innovative A2A systems and international
partners
• R&D (e.g., Ecoergite)
• Successful management of Acerra WTE plant
• High service quality
• Good continuity of electricity and gas distribution services
• Efficient customer care
• Focus on costs
• Focus on new technologies (e.g., smart grids)
• Development of environmental market efficiency projects
• Further enhancement of best in class perfomance in
customer relationship management
• CCGT portfolio restructuring
• Conversion of obsolete power plants
PROJECTS
• Development of high-margin treatment and disposal
(e.g., remediation)
• Organic waste collection in Milan
• Start of new Asti glass treatment plant
• New collection vehicles following the winning of Como
collection tender
• Opportunities in treatment and disposal in South Italy
• Development of district heating network interconnections
in Milan area, joined to heat production enhancement in
order to boost efficient heating system
• Development of energy efficiency projects in the
heating/facility management field
• Growth also by further integration with Wte
• Gas distribution tenders
• Development of new efficient public lighting system in
Milano and Brescia with LED technology and green
certificate production
• Geographical consolidation (e. g., water)
• Investment in the integrated water cycle of Brescia to
further improve the quality of water distributed (e.g.,
Chrome VI)
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 8
Agenda
• Company profile
• Focus on Infrastructure
• Last release (H1’14)
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 9
Infrastructure operations – Domestic Market Positioning
# Ranking
#5
#4listedutility
ELECTRICITY NETWORKSElectricity distributed (TWh)
WATERWater distributed (Mcm)
GAS NETWORKSGas Distributed (Mcm)
Infrastructure EBITDA represents around 30% of 2013 EBITDA
#1
DISTRICT HEATINGHeated volumes (Mcm)
EBITDA 2013:125 €M
EBITDA 2013:111 €M
EBITDA 2013:86 €M EBITDA 2013:
11 €M
#2
Sources: AEEGSI (electricity and gas networks), annual reports and other company information (district heating and water)
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Networks
10
CONCESSIONS
Power Networks Gas Networks Water
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Part of the heatgenerated by theGroup comes fromthe WTE plantsin Brescia, Milanand Bergamo(which account foran overall installedthermal capacityof approximately305MWt)
Cogeneration and District Heating
CONCESSIONSBUSINESS MODEL
Canavese
MI
BG
BS
VA
Famagosta
Tecnocity
NovateMilanese
Goltara
Lamarmora
Carnovali
VareseVia Rossi
Lombardy
11
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 12
Networks – Gas distribution tenders
95,3%
76,4%
65,9%
42,0% 41,7%
23,6%
11,8% 11,4% 10,3% 8,0% 6,1% 3,7%
37,1%
25,1%
18,3%
4,7%
17,8%
5,3%
68,5%
4,6%
25,8%
18,3%
61,3%
42,5%
2,7%
47,4%45,2%
27,9%
9,3%
14,6%
2,3%
0,7%
3,4%
16,9%
4,7%
7,2%
12,4%
41,5%9,2%
11,4%
2,7%
2,5% 2,4% 4,4% 8,1% 7,9% 6,5% 1,5%
30,0%
11,7%
41,5%
19,4%
1,8%
17,7%
2,5%
58,8%
45,3%
12,9%28,6%
16,7%
12,5%
23,9%
Milano 1 Brescia 3 Bergamo 4 Bergamo 2 Brescia 2 Bergamo 6 Brescia 1 Bergamo 1 Milano 4 Bergamo 3 Milano 3 Brescia 4 Bergamo 5 Varese 2
Gruppo a2a consorzio servizi valle camonica azienda servizi valtrompia unigas distribuzione
F2i condotte nord linea distribuzione erogasmet
gas plus reti italgas s.i .me. societa' impianti metano Altri
• The main outlines of gas distribution reform are under review• Tenders for the assignment of the gas distribution services have to be carried out only for ATEMs (Aree
Territoriali Minime), which are clusters of municipalities (177 in the whole national territory) established by theMinistry for Economic Development
• The first tenders are expected to start in 2015 and the last ones will probably take place in 2018• Each concession will be granted for 12 years
MARKET SHARE OF PLAYERS IN A2A POTENTIAL TARGET ATEMS
Sources: A2A internal elaboration based on MSE and Federutility data
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 13
(*) real pre-tax; (**) “X-Factor” does not include inflation rate
ELECTRICITY
4th Regulatory period: 2012-2015
•New tariff not linked to change in unit volumes consumption
•WACC*: in 2014-2015, 6.4% (distribution, metering) ; +1% for new investments
•Price cap**: 2.8% (distribution), 7.1%(metering)
•Parameters under interim reviews: risk free rate (2 years)
GAS
4th Regulatory period: 2014-2019 (6 years)
• Tariff not linked to volumes
• WACC*: 6.9% (distribution), 7.2% (metering).
• Price cap**: up to 2016 1.7% for distribution and 0% for metering
• Parameters under interim reviews: risk free rate (2 years), price cap (3 years)
• Tariff in ATEMs with reduced price cap (0% for two years)
1st Regulatory period: 2012-2015
2014-2015 - Final tariff method (MTI):- allowed revenues based on full recovery cost as at 2012- overall return equal to 6.8%*, with an additional 1% extra return for investments made from 2012- additional tariff component in case of relevant capex- inflation recognized to operating costs is set every year (2.1% in 2014)- working capital is covered by a specific component on unpaid bills
WATER
Regulatory Body: the Energy Authority (AEEGSI)
Networks – Tariffs
REGULATORY SCENARIO
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 14
Energy efficiency – Regulatory framework
White Certificates represent the main tool to achieve climate and energy objectives
Energy efficiency represents
- a source of growth for district heating – supported by incentives
- a source of optimization for networks (electricity and gas)
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
15
Research and innovation projects
• E-Moving project - Among the testing being promoted by theAEEGSI.
Promoted by A2A
Electric car
• Smart Domo Grid: smart grid solution withdemand/response functionality
Co-financed by the Ministry of Economic Development and ledby A2A with the Polytechnic University of Milan and Whirlpool
• IDE4L (Ideal Grid for All) mainly focuses on electricalfunctionalities
Co-financed by the EU within the 7th Framework Program
• Work Force Management (WFM) system• Distribution Management System (DMS)Both developed by A2A
• Completing the district heating offer with a district coolingservice
Pilot project developed by A2A
Network managementInnovative primary substations
Smart house
District Cooling
Most of A2A R&D budget is dedicated to infrastructure projects
• Two smart grid pilot projects in Milan and Brescia
Approved by AEEGSI, pursuant to Resolution ARG/elt 39/10
Grid automation and distributed generation
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 16
Agenda
• Company profile
• Focus on Infrastructure
• Last release (H1’14)
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 17
Main messages
H1 2014 – MAIN MESSAGES
H1 2014 Scenario was quite unfavourable and unexpected:
Energy markets scenario furtherly worsened
Weather conditions varied significantly against long term average
A2A diversified and flexible business mix limited the adverse impact onoperating results:
Positives: strong domestic hydro production; trading and environmentalmarkets; gas portfolio optimization; networks resiliency
Negatives: thermal generation volumes; EPCG hydro slump; waste incentiveexpiry; reduction of heat volumes
Ongoing company optimization yielded further achievements:
A sizeable debt reduction: more than 300 €M down in the period
Continued focus on cost cutting
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
-59
18
NET SALES
EBITDA
€M
EBIT
H1 2013
2,582
551
302
2,845
610
330
H1 2014 Change Change %
-9.7%
-263
-28
-9.2%
-8.5%
2013 H1 2014 Change
NET CAPITALEMPLOYED
EQUITY
7,222
3,348
-341
-39
TOTAL NFP 3,874 -302
6,881
3,572
3,309
NET INCOME 97133 -27.1%-36
H1 2014 - Main financial highlights
KEY FACTS
• Negative climate neteffect
• Negative marketprice/volume trend
• Positive OperatingEfficiency
• Continued Deleveraging
• Expiry of CIP 6 revenues
1
2
3
Detailed afterwards
4
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Climate effects
MILANDAILY DEGREES
Dail
yD
eg
rees
YTD ∆ vs 2013: -28,1%
EPCG HYDRAULICITY
HYDRAULICITY
∆ H1 ‘13 VS AVG 10 YRS
EPCGHYDRO PRODUCTION
GWh
+788
∆ H1 ‘14 VS AVG 10 YRS
-99
19
BRESCIADAILY DEGREES
Dail
yD
eg
rees
YTD ∆ vs 2013: -31,8%
A2A HYDRAULICITY
HYDRAULICITY
∆ H1 ‘13 VS AVG 10 YRS
A2AHYDRO PRODUCTION
GWh
~+300
∆ H1 ‘14 VS AVG 10 YRS
~+900
Previous Year Current Year
NegativeClimateeffects
PositiveClimateeffects
1
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Market price/volume trend
20
2
2004-2014 PUNEVOLUTION(€/MWh –half yearaverage)
INSTALLEDGENERATION
CAPACITY(GW) vs
ELECTRICITYCONSUMPTION
(TWh)
As of 2005, huge investments in thethermoelectric sector have beenplaced to increase the capacity after acritical under-capacity period
Additional renewable capacity,subsidized by the government, hasbeen rapidly developed starting from2009
The electricity consumptiondropped in late 2008 and, after ashort recovery up to 2010, continuedto fall reaching levels of 2001 inH1 2014
In H1 2014 PUN hit its historicalminimum
KEY POINTS
KEY POINTS
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
H1 2013
360
Other costs
-14
Change inperimeter
1
Net savings
-4
H1 2014
343
H1 2013
12,572
Change inperimeter
36
Net reduction
-244
H1 2014
12,364
Progressive efforts on Operating Efficiency
21
H1 2014 OPERATING EFFICIENCY
FTE (1)
LABOUR COSTS(€M)
OTHER FIXEDCOSTS (€M)
H1 2013
289
Change inperimeter
-7
Net savings
-17
H1 2014
265
• A2A -155 FTE
• EPCG -89 FTE
-24
-17
-208
3
(1) A2A Group’s Full Time Equivalent
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
31/12/12
4,372
31/3/13
4,238
30/6/13
4,074
30/9/13
4,048
31/12/13
3,874
31/3/14
3,721
30/6/14
3,572
-135-164
-26
-174-153
-149
ExtraordinaryOperations Metroweb disposal (61€M) Small Hydro disposal (38€M) Enel/A2A lawsuit settlement (90€M)
22
Continued Deleveraging
2012-2014 NFP EVOLUTION (€M)
4
-800
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
EBITDAH1 2013
EBITDAH12014
∆ vs 2013
A2A ELECTRICITY 197 190 -7
A2A GAS 49 59 10
EPCG ELECTRICITY 53 22 -31
ENERGY 299 271 -28
WASTE 128 115 -13
COGENERATION AND
DISTRICT HEATING60 39 -21
A2A NETWORKS 128 138 10
EPCG NETWORKS 3 8 5
NETWORKS 131 146 15
OTHER SERVICES AND
CORPORATE-10 -11 -1
TOTAL ADJUSTED EBITDA 608 560 -48
Costs of redundancy schemes -22 -9 13
AEEGSI OPINION 535/12 24 -24
TOTAL EBITDA 610 551 -59
KEY POINTS
Tariff increase (+3)
Lower hydraulicity (-31)
Gas portfolio optimization
Higher environmental markets margin (+4)
Network and customer development (+3)
Lower sales due to climate effect (-20)
Non current items (-6)
Exipiry of Cip6 revenues - Brescia WTE plant (-17)
Higher environmental markets (+32)
Trading portfolio margin (+6)
Industrial portfolio margin (-45)
Higher Electricity allowed revenues (+18, of which +6
related to current year and +12 related to previous years)
Lower Gas allowed revenues (-2)
M€
H1 2014 vs H1 2013 - EBITDA breakdown
23
(*) H1 2014 costs of redundancy schemes entirely related to Energy segment
*
(1) (2)
(1) of which 65€M Electricity Networks and 54€M Gas Networks
(2) of which 78€M Electricity Networks and 52€M Gas Networks
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 24
H1 2014 - From EBITDA to net income (1/2)
H12013 H12014Δ vs H1
2013Key points
EBITDA 610 551 -59
D&A, provisionsand write-downs
-280 -249 +31
Financial charges -116 -99 +17
Associates,JV and others
7 -2
EBIT 330 302
Result from non-recurring transactions -3 -
5
-28
+3
€M
Depreciation (+14)
• Bad debt provision (+16)
• Provisions (+1)
Epcg
Derivatives FV 28 -2 -30 Decrease in Forward interest rates
Acsm-Agam (-1)
Dolomiti Energia (-1)
Net financial charges (+11)
Other charges (-5)
Derivatives realized (+11)
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 25
H1 2014 - From EBITDA to net income (2/2)
H12013 H12014Δ vs H1
2013Key points
EBT 246 206 -40
MINORITIES -19 -8 +11
TAXES -94 -101 -7
€M
NET INCOME 133 97 -36
IFRS 5 - - -
Epcg
H1 2013 one-off (-9)
Deferred tax assets - Irap redefinition (-4)
Robin Tax (+4)
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
NFP31/12/2013
-3,874
Netprofit+D&A
+330
Changein
Assets/Liabilities
+198
Capex
-124
Dividends
-102
NFP30/06/2014
-3,572
26
H1 2014 - Net debt and cash flow
A2A GROUP NET FINANCIAL POSITION EVOLUTION 2013-H12014 (€M)
+302 €M
• +76€M decrease intrade Receivables/Payables net amount
• +90€M Enel/A2Alawsuit settlement
• +32€M other (mainlyfiscal receivables)
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
26%
74%
27%
67%
29%
14%
57%
27
H1 2014 - A2A Group debt structure
H1 2014 GROSS DEBT - 3.9 €B
DEBT BREAKDOWN
BY SOURCES
DEBT BREAKDOWN
BY INTEREST
Note: EPCG not included; gross debt financial data and breakdown, excluding accounting adjustments.(*) Average forward rate, based on interest rate curves as of 30/6/2014
H1 2014 KEY FACTS
AVERAGE RATE* (%) ~4.0%
LIQUIDITY POSITION
1.9 €B liquidity position, of which:
0.35 €B cash
1.55 €B undrawn revolving committed lines andloans, with maturities longer than the next 12months
~3.9%
FY 2013 H1 2014
AVERAGE MATURITY (yrs) 6.0 5.9
27
LoansBond VariableFixed Hedged
DEBT BREAKDOWN
BY MATURITY
Within 12 months
Beetwen 12 and 24 months
Beetwen 2 and 5 yrs
Over 5 yrs
3% 3%
CORPORATE CREDIT RATINGS
• Moody's: in May, changed A2A’s outlookto Stable, and confirmed Baa3 rating
• Standard & Poor’s: BBB/A-2, NegativeOutlook
• In March, signed a 115 €M 15yr-long loanagreement with the European InvestmentBank to finance integrated wastemanagement and hydropower investments
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Back-up
28
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Climate effects
EBITDA
H1 2013
EBITDA
H1 2014∆ vs 2013
ENERGY EPCG HYDRAULICITY 34 -4 -38
GAS,COGENERATIONAND DISTRICT
HEATING
TEMPERATURE EFFECT 6 -21 -27
SUBTOTAL 40 -25 -65
*
**
€M
Negative climate effects
EBITDA
H1 2013
EBITDA
H1 2014∆ vs 2013
ENERGY A2A HYDRAULICITY 26 63 37
66 38 -28
* vs ten-year average production**vs sales based on ten-year average temperature
Positive climate effects
Total climate effects
*
MILANDAILY DEGREES
Dail
yD
eg
rees
YTD
∆ vs 2013: -28,1%
EPCG HYDRAULICITY
HYDRAULICITY
∆ H1 ‘13 VS AVG 10 YRS
EPCGHYDROPROD.
GWh
+788
∆ H1 ‘14 VS AVG 10 YRS
-99
BRESCIADAILY DEGREES
∆ vs 2013: -31,8%
A2A HYDRAULICITY
HYDRAULICITY
∆ H1 ‘13 VS AVG 10 YRS
A2AHYDROPROD.
GWh
~+300
∆ H1 ‘14 VS AVG 10 YRS
~+900
29
Previous Year Current Year
Dail
yD
eg
rees
YTD
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 30
H1 2014 - Energy Scenario
(1) based on PBGAS daily settlement(2) hourly average(3) based on gas at virtual trading point with 54.7% efficiency; includes transport costs(4) 35% efficiency - includes cost spread on API2 and transport cost(5) load factor related to CCGT plants not subjected to dispatching constraints (i.e. CIP6)
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 31
*
* without Intermediated Ipex volumes
In 2013 Edipower production includes 77% of production of the plants managed in tolling regime and 100% of production of the S. Filippo delMela, Turbigo (groups 1-2-3) and Brindisi thermoelectric plants and some hydroelectric and photovoltaic plants.In 2014 Tusciano and Turbigo productions are not included, while the quantities of the remaining Edipower plants are 100% of production.
H1 2014 - A2A Volumes
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 32
DISCLAIMER - This document has been prepared by A2A solely for investors and analysts. This document does not constitute an offer or invitation to purchase or subscribe any shares or other securities and neither it nor anypart of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. Some information contained herein and other material discussed at the meetings may include forward-lookinginformation based on A2A’s current beliefs and expectations. These statements are based on current plans, estimates, projections, and projects and therefore you should not place undue reliance on them. Forward-lookingstatements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Such factorsinclude, but are not limited to: changes in global economic business, changes in the price of certain commodities including electricity, gas and coal, the competitive market and regulatory factors. Moreover, forward-lookingstatements are current only at the date they are made.
Contacts:
A2A Investor Relations Team
Mail: [email protected]
Phone: +39 02 77203974
http://www.a2a.eu/en/investor/