a2a strategic plan 2017 results & business plan … · 2018-07-11 · •project development...

A2A STRATEGIC PLAN• 2017 RESULTS & BUSINESS PLAN UPDATE• Q1 2018 RESULTS

June 2018

2017 RESULTSWHERE WE START FROM

2018-22 STRATEGIC PLAN

FINANCIALS

CLOSING REMARKS

Q1 2018 RESULTS

2017 RESULTS | WHERE WE START FROM | 2018-22 STRATEGIC PLAN | FINANCIALS | CLOSING REMARKS | Q1 2018 RESULTS 3

REVENUES EBITDA

GROUP NET INCOME

+16%

ORDINARY EBITDA

-2% +10%

NET FINANCIAL POSITIONGROUP ORDINARY NET INCOME

+26% +10% -226 €M+90 €M

€M

FY 2017 VS. FY 2016 RESULTS

CCGT PERFORMANCE

ORGANIC GROWTH IN NETWORKS & DH AND IN

ENERGY RETAIL

GAS MARGIN

LGH: STANDALONE AND FY CONSOLIDATION

HYDRO VOLUMES

FEED IN TARIFF/GREEN CERTIFICATES

SAN FILIPPO DEL MELA "MERCHANT” IN Q3 2016

NON-RECURRING YOY COMPARISON

EPCG PUT OPTION EFFECTS AND

DECONSOLIDATION SINCE JULY 2017

FY 2017 vs. FY 2016


+102-20

€M

EBITDA ORDINARY VS. RECURRING


* -86 €M, of which -60 €M D&A (EPCG write-off) and -26 €M EPCG put option discounting

€M

1,231 -435 372 2 -22 232-3 -154-83 -12056 --2402016 RESTATED

FROM EBITDA TO GROUP ORDINARY NET INCOME

+120 +36€M


MandatoryDevelopmentMaintenance

Note: EPCG and M&A projects excluded

€MBY ACTIVITY

+29% CAPEX 2017 vs 2016

Smart CityCorporateNetworks & District HeatingWasteEnergy RetailGeneration

CAPEX BREAKDOWN

BY BUSINESS


€M

(1) Funds from operations after working capital change; (2) EPCG CAPEX included (4 €M); (3) 2017: 206 €M EPCG deconsolidation; 110 €M M&A; 2016: M&A price and NFP at closing

1,231 10 780 -376 -517 -239-67 -133-168-93 -126 2782016

NET FREE CASH FLOW

2017 RESULTS

WHERE WE START FROM


FINANCIALS

CLOSING REMARKS

Q1 2018 RESULTS


RESHAPEPublic lighting, smart city, energy efficiency

• First-mover in consolidating energy efficiency sector

• +60% A2A Smart City EBITDA

• 120 K LED installed (+135%)

RELAUNCHConsistent industrial growthSelective external growth

• + 560 K customers(EE and Gas free market customer base)

+ 800 Kt waste treated+ 200 €M of RAB

• ~130 €M of operatingefficiency

• 14 M&A deals+ 105 €M EBITDA

• Largest territory aggregations (+1 in pipeline)

REGENERATIONActive role in the energy market transformation

• CCGT fleet active management:4x production vs. 2014

• Stable profitability (volatility <10%)

• Created PV platform (+35 MW)

• Pilot projects on innovative solutions (UVAP, drones…)

2017 vs. 2014 data

DELIVERED STRATEGIC VALUE SINCE 2014


Industrial targets achievedFinancial targets overdelivered

EBITDAHigher and more stable margin

NFP/EBITDACapital structure reinforced

CAPEXInvesting more withquality

DPSDividends growing steadily

+ 18%

- 18%

+ 60%

+ 61%€c/

share

€M

ROIGrowing, stable return >10%

+ 52%

%

Merchant High VolatilityMerchant Low VolatilityQuasi RegulatedRegulated

€M

+187

+168

DELIVERED FINANCIAL VALUE

Strategic framework | Transformation | Excellence | Community | Sustainability


Scarcity of natural resources and new technologies drive a deep industry transition, paving the way to a smarter planet

CIRCULAR ECONOMY ENERGY TRANSITION SMART SOLUTIONS

%Mt

GWM

toe

INSTALLED CAPACITY IN GER, FRA, SPA, UK, SWI

Source: A2A estimates Source: European Environment Agency

ENERGY CONSUMPTIONS EU 28LANDFILL DISPOSAL

Sources: Ispra (2010 and 2016), A2A estimates (2025)

• Landfills phase out• Acceleration in sorted collection• Waste system balance

and material recovery

• Decarbonization• Energy democracy• Reduction of PV and wind LCOE

• Energy efficiency• Smart services to citizen and

digitalization (IoT)• Green mobility

-47%

-23 Mtoe

-17 Mtoe

NuclearCoal

PrimaryFinal

-97 GW

MAIN INDUSTRIAL TRENDS



a2a T

2018 2022

TTransformation

a2a E

2018 2022

EExcellence

a2a C

2018 2022

CCommunity

Sustainability

business strengthening& change

agile organization, leader in operational

excellence

attract and empower people engage external ecosystem

Inspiring principle of enterprise development

NEW STRATEGIC FRAMEWORK



GENERATION MARKET WASTE NETWORK

Flexible and greener energy

More solutionsto involve customers

Value from endto beginning

Smarter and more reliable

TRANSFORMATION



• Further expansion of RES platform

• Conventional plants reconversion

• Leadership consolidation in flexible CCGT plants, optimizing risk/return ratio thanks to Capacity market

• Improvement of gas sourcing

• Match of growing need for peak capacity

• Exploration of innovative flexibility services

• ~170 MW of new RES (M&A + green-field)

• Project development for Brindisi, S. Filippoand Monfalcone

• +800 MW dispatched CCGTs vs. 2017

• CCGT results balanced mix of market(MGP/MSD) and Capacity

• LNG opportunities, better short/long term mix

• Evaluation of new peak plants (e.g. OCGT)

• Projects on UVAM, UVAP, storage, …

Flexible and greener energy

GREENERPORTFOLIO

LEADERSHIPIN GAS-FIREDGENERATION

ADEQUACY & FLEXIBILITYPROVIDER

MGP (Mercato del Giorno Prima) = day ahead market; MSD (Mercato dei Servizi di Dispacciamento) = ancillary services market; UVAP (unità virtuali abilitate di produzione) = aggregated production unit for ancillary services market; UVAM (unità virtuali abilitate miste) = joint unit for ancillary services market (production and consumption)

GENERATION A2A KEY ACTIONS



RATIONALES FOR NEW RES GROWTH:

• Align generation mix with global trends

• Accelerate decarbonization

• Achieve industrial synergies:- Integrated dispatching - Operating efficiencies- Overhead cost reduction - Service quality improvement

• Platform to position A2A in the new scenario:- Repowering utility-scale plants- Develop pipeline of green-field- Exploit synergies with B2B/B2C

• Focus on PV, open to opportunities in wind

A2A NEW RES CAPACITY

Depending on market opportunities and regulatory evolution

Potential switch in internal vs. external growth mix

~20-25 MWper year

M&A

Green-field

3rd party plants dispatched ~35 MW

per year

500+ €M total investments in RES

Potential further developmentsaccording to emerging opportunities

GENERATION FOCUS ON RES

MW



• Stable margins

• Possible upsides in "regulated" components

• CCGT fleet competitive in MSD

• Medium-term stability

• Steady load factor in a 20% range (lower than market average)

• Balanced mix of MGP and MSD

• ~25% regulated margins

• ~45% RES

PUN base load

Clean spark spread

ACTUALBP

+51

Capacity+Incentives

Green merchant

CCGT merchant

Traditional thermal

%

€/MWh

%

CCGT LOAD FACTOR

PLANTS CONTRIBUTION MARGIN

€M

PUN & SPREAD

GENERATION 2022 ASSUMPTIONS & TARGETS



CUSTOMER FOCUS

• Outstanding client service, with new multi-channel customer experience

• Preservation of excellent operations

• VAS in safety, comfort, energy-saving

• Energy advisor for SMEs and large enterprise

• Digitalization to enhance service/acquisition

• New CRM

• Growth in all customer segments, also including large clients

BOOSTIN NEW SERVICES

• New services: flexibility, DERs and storage

• New EPCs in energy efficiency services

• Organic growth in Public Lighting

• Expansion of electric mobility business

• New projects in flexibility and DERs

• 3x EPC contracts

• +150 k lights managed

• +500 new charging stations for EVs

MEDIUM-LONG TERM CHALLENGE

• Innovation & Digital to develop new services

• Unlocking IoT opportunities

• Further fiber network development (+2,000 km)

• Pilot projects on IoT

More solutions to involve customers

MARKET A2A KEY ACTIONS



‘000POD

‘000

FREE MARKET – EE&GAS (EOP)

LIGTHING POINTS

ANTICIPATE THE MARKET CURVE

OF EVS PENETRATION

#

CHARGING STATIONS FOR EVS

• Growth from Mass Market liberalization

• Stable customer base

• Expansion in new territories

• Organic growth

• Secure key territories

• Focus on key locations

€M

• Benefit from market liberalization • Roll-out of A2A Energy Solutions

+67

MARKET 2022 ASSUMPTIONS & TARGETS



FROM WASTE TO COMMODITY

END-TO-END PARTNER FOR URBAN SERVICES

CONTINUOUS TECHNICAL INNOVATION

• Become leader in recycling, selling high-quality secondary raw materials

• New WTE capacity to maintain safety of the Italian waste treatment system

• Enlarging geographic presence, leveraging on value chain integration

• Smart and innovative solutions for our territories

• Maintain plants at best available technology for environment sustainability

• Improve circularity with innovation

• +2 plastic treatment plants

• +4 organic treatment plants

• +155 Kt of new WTE capacity

• Secondary Recovered Fuel treatment plant EoW

• +2 ashes treatment plants EoW

• New tenders, also outside Lombardy

• 120 €M cumulated capex for waste collection

• Increased plant efficiency (e.g. flue gas treatment)

• Technical innovation projects in collaboration with suppliers and customers (e.g. Big Data on WTE, secondary plastic use)

Note: EoW = End of Waste

Value from end to beginning

WASTE A2A KEY ACTIONS



INHABITANTS SERVED BY A2A

M

€M

• +11% inhabitants

• New areas in Northern Italy

• Consistent with EU Circular Economy Pack• M&A pipeline not included• Positioned to be nationwide player

WASTE TREATED IN A2A WTE

WASTE TREATED IN A2A PLANTS

Mt

Mt

• +1.1 Mt treated

• 100% organic growth

• New WTE capacity

• Performance optimization of existing WTEs

WASTE 2022 ASSUMPTIONS & TARGETS



Smarter and more reliable

CROSS-BUSINESS SYNERGIES

SMART GRID AND QUALITY IMPROVEMENT

GASTENDERS

• Multi-business operation synergies (e.g. smart meters deployment, gas/ee integration in Unareti)

• Adoption of automated and digital solutions for asset and workforce management

• Achieve smart and resilient networks

• Improve energy efficiency of DH networks

• Develop water cycle performance

• Selective growth in high-priority ATEMs

• Focus on geographical consolidation

• Roll-out of new smart meters:

• ~250 K Gas meters

• ~300 K EE meters

• ~50 K Water meters

• Digital asset management platform fully-phased

• 2 new EE primary stations

• New heating storage

• 21 new water treatment stations

• -40% water losses

• Milano1 tender completed

• +10% POD

• -50% ATEM

NETWORKS A2A KEY ACTIONS



RAB 2017

Incremental RAB 2018-2022

€B

RAB GAS & EE

DH SALES

MPOD

GWht

• Asset base strengthening

• +11% EE Capex vs. previous Plan

• Consolidation in gas market

• Scale optimization

• DH networks extension

• +150 k clients served

• Synergies and new tech driveconsolidation & efficiencies

• Organic CAPEX to strengthen RAB• Steady development of DH

€M

POD GAS

ATEM

NETWORKS 2022 ASSUMPTIONS & TARGETS



INTEGRATEDMULTI-BUSINESS PORTFOLIO

EXECUTIONCAPABILITIES

URBAN SYSTEMINTEGRATOR

A2A unique business portfolio with a well balanced volatility/growth mix

Maximization of cross-BU synergies

Proven ability in CAPEX execution and in reacting to scenario changes

Possibility to replicate successful models (LGH, plants flexibilization, PV, …)

A2A positioned to lead urban circular economy and energy transformation

Deep multi-level infrastructural presence

Proven capability to attract and involve local players in key territories

GW

GENERATION

MARKET

WASTE

NETWORKS Hydro+RES

CCGT

Other

ACTIVE GENERATION CAPACITY

A2A UNIQUENESS



En&A project: 65% of target savings already achieved

En&A spun-off Mistral project, to focus operational excellence through:- Lean process redesign- Agile way of working

Digitalization and technologicalinnovation are key improvement levers

2015 2016 2017 2018 2019 2020 2021 2022

MISTRAL

En&A

47

82

130153

175201

219 227

€M

LOCKED IN

EXCELLENCE AGILE ORGANIZATION



More than 500 €M of cumulated CAPEX on D&T, Innovation projects, accounting for ~20% of total Group CAPEX in next 5 years

11

43 21

89

72

6

5

131

84

77

GENERATION MARKET WASTE NETWORKS

TECH INNOVATION

DIGITAL INNOVATION

€M

• Plants digitalization & flexibilization

• Energy efficiency improvement of plants

• Energy efficiency solutions

• E-moving

• Smart cities

• Smart bins

• WTE links to 3rd parties (wasted heat recovery)

• Smart meters gasdistribution

• Remote control empowerment

• 100% WFM coverage

• Digital renewal of workspaces

• Best of breed software and hardware

CORPORATE

5Y CUMULATED CAPEX

EXCELLENCE DIGITAL & TECH CAPEX



Adopted start-up approach to innovation based on rapid prototyping and market testing

Built an innovation engine to provide a constant flow of tested solutions ready to be deployed

Engaged external ecosystem with 70+ partners involved with (e.g. Universities, Associations, Start-up incubators, Suppliers, Customers, Technology Labs, Peer Companies, …)

Created internal innovation task force with dedicated budget and team

Activated open innovation process to test and accelerate projects with the external ecosystem

50

350

3,000

SCREENINGideas

concepts

projects

PROTOTYPING

COMMUNITY PEOPLE STRATEGY & EXTERNAL ECOSYSTEM

• Insourcing

• Work-school

• Talent

• Technical skills lab

DEVELOP PEOPLE

• Governance Playbook

• Work environment reshape

• Organizational health

COLLABORATE• Process redesign

• Lean – kaizen

• Contracts harmonization

SIMPLIFY

• Dynamic staffing

• Smart working

• Quality of execution

PROACTIVITY

From a hierarchic organization to a more inclusive managerial model



60+ core goals built on our 4 sustainability pillarsUpdate of sustainability plan and targets100% executives with sustainability MBOs

SMART GRIDAND SERVICES

CIRCULARECONOMY

DECARBONIZATION

PEOPLEINNOVATION

CO2 emissions reduction Energy efficiency projects

Green energy sold to Mass Market

Low-impact vehicles DH users

Dispersed heat recovery and DH non-fossil sources

% sorted collection

New recycling plants

Project on reduction/ reuse/recycle

Water network losses

Depurated waste water

Digital users

# LED lighting points

EV charging stations

Contact centre quality

Smart bins Smart meter

Service interruption

Smart grid

Smart city projects

Banco dell’Energia step 2

Roadwork siteinspections

SUSTAINABILITY PLAN PATH

Reduction of the accident rate

Environmental education



Integration of Sustainability Plan and Financial BP @2022In line with 2030 sustainability goals

SMART GRIDAND SERVICES

CIRCULARECONOMY

DECARBONIZATION PEOPLEINNOVATION

ONLINE MEMBERS OF A2A ENERGIA COMMUNITY

‘000

SMART WORKING% on total employees applicable

%

%

MATERIAL RECOVERY RATE IN GROUP’S PLANTSON TOTAL WASTE COLLECTED

CO2 /kWh CARBON INTENSITY

g/kWh

SUSTAINABILITY: KPI TARGET EXAMPLES


1,135

BYBU

BYMIX

NetworksWaste

MarketGeneration

Other


1,391€M

+256CAGR +4.1%

EBITDA 2017-22


€M

+189CAGR +10.5%

NET INCOME 2017-22


Note: EPCG and M&A projects excluded


MandatoryMaintenanceDevelopment

OtherMarketGenerationWasteNetworks

€M

CAPEX 2018-22


€M

(1) Funds from operations after working capital change; (2) M&A price and NFP at closing

-0.2

CASH FLOW GENERATION 2017-22


1,150 - 1,180 €M

(1) Incl. ~60 €M M&A; (2) Excluding change in perimeter

2018EBITDA

360 - 390 €MNET INCOME

600+ €MCAPEX(1)

0 - 100 €MNET FREE CASH FLOW(2)

GUIDANCE

GUIDANCE 2018

Plus 20 - 30 €M non recurring

REITERATED AFTERQ1 2018 RESULTS


EBITDA+180 €M of EBITDA

CAPEX2.8 €B cumulated CAPEX

+15%

+51% NFP/EBITDANFP/EBITDA down to 2.2x

-19%

€M


€M

ROIReturns consistently >11%

STABLE

+180

2022 TARGETS


Better dividends visibilitywith stronger capital structure

5.822% 2017

6.722% 2018

~7.522% 2019

min +5% yearlymin 24%

20202022

A2A DIVIDEND PER SHARE (€c)

FFO/NET DEBT

DIVIDENDS


UPSIDESOF ONGOING ACTIVITIES

EXTERNAL GROWTH

COMPLEXINDUSTRIALPROJECTS

FEASIBILITY PROJECT LIST EBITDA IMPACT

Operational excellence: further Mistral roll-outs

Gas networks: further growth through additional gas tender

Geographical growth in environmental business

New energy solutions additional development

Local aggregations

DER & RES acquisitions (mainly PV) with possible minority interests

Flexibility and ESCO

Public lighting & gas networks M&A

Potential development abroad

Extra investments for primary stations & “colonne montanti” (1)

Generation plants reconversion

Heat transportation backbone Cassano-Milano

Peak technologies development

Business adjacencies on economy of scarcity (food tech, …)

10-30

5-15

[NEW] tbd

[NEW] 5 - 10

70 - 90

20 - 40

[NEW] tbd

[NEW] tbd

10 - 20

5 - 8

5 - 10

50 - 60

[NEW] 5 - 15

[NEW] tbd

• • • •

• • • •

• • • •

• • • •

(1) Electrical connection from road level to user’s individual apartment [NEW] not included in last year’s

«additional projects list»

• • • •

• • • •

• • • •

• • • •

• • • •

• • • •

• • • •

• • • •

• • • •

• • • •

ADDITIONAL PROJECTS

€M


~60-70 €M net additional EBITDA fully consolidated

Almost complete coverage of Lombardy

Open to new aggregation opportunities

NORTHERN LOMBARDYMULTIUTILITYBenefits of industrial partnership:

• Sharing technical and management skills

• Optimization of industrialand financial position

Preservation of the identity of existing companies

Enhancement of investment capacity

Improvement of quality standardsand service level

ASPEMLARIO RETI HOLDING

AEVV

A2A

LGH

Industrial entities strongly rooted in our territory

ACSM-AGAM

ADDITIONAL PROJECTS: AGGREGATIONS


#smartcompanysmartplanet

Strategic view alignedto medium-long term trends

(looking forward to 2030)

A2A uniqueness: business natural hedging,

cross BU synergies, integration

Strong confidenceto deliver higher quality results

Potential for upsides,including local aggregations

KEY TAKEWAYS

39

CONSOLIDATED RESULTS: P&L AND BALANCE SHEET

FY 2017 VS FY 2016 RESULTS

€M€M

ANNEXES

40

COMMITTMENT TO CURB GLOBAL WARMING

RES MATURITY AND DERsSCALABLE TECHNOLOGY

GROWING RELEVANCEOF GAS-FIRED PLANTS

• Awareness about resource scarcity

• EU targets on energy efficiency and RES

• Ambitious Italian SEN targets

• Wind & PV LCOE close to grid parity

• Further storage cost reduction

• DERs included in balancing services

• CCGTs to offset intermittent RES

• Gas-fired plants as system backup

• Convergence of LNG global gas prices

Mtep

€/MWh

Mtpa

LCOE (LEVELIZED COST OF ELECTRICITY)

LNG SUPPLY BY COUNTRYEU RES PENETRATIONFinal energy consumptions covered by RES

SEN = Strategia Energetica NazionaleSources: EU Commission, IHS; World Energy Outlook; World Energy Council; Irena

GENERATIONMAIN INDUSTRY TRENDS

2016 2020 2025 20300

40

60

80

90

110

120

COAL high range

GAS high range

FV residential

GAS low range

COAL low range

WIND onshoreFV utility

EXPECTED GRID

PARITY

1.6x

ANNEXES

41

CUSTOMER EMPOWEREMENT

• Full retail liberalization from July 2019

• Demand for value-added services

• Stronger competition

ENERGY EFFICIENCY

• New technology and regulation boosting growth

• New prosumers with PV, CHP and storage

NEW ENERGY SOLUTIONS

• New retail flexibility market (DSR, DSM)

• Growing demand for electric mobility

SMART SERVICES

• Increase of connectivity

• Smarter management of urban services

• Commercial readiness of Low Power Wide Area

solutions (LoRa)

%POD

ARERA 2017

ITALIAN ELECTRIC ENERGY CONSUMERS

ITALIAN INVESTMENTS

SEN 2017 – ’21-30

€B

A2A internal forecast

CARS SOLD BY TECHNOLOGY (ITALY)

%sales

Ministry of Economic Development

BROADBAND > 100 MBPS COVERAGE IN ITALY

%

* BEV = battery electric vehicles; PHEV = plug-in hybrid electric vehicles

MARKETMAIN INDUSTRY TRENDS

ANNEXES

42

SHORTAGE OF CAPACITY

GROWTH OF SORTED WASTE

METROPOLITAN CITIES AS DRIVING FORCES

• Landfill expiration drives up prices(-2 Mt landfilled 2014-16)

• Italian WTEs capacity shortage (gap of ~6 Mt MSW + ~6 Mt Industrial)

• Italy sorted collection grew to 53%

• South lagging at 38% with structural treatment gap

• International trends increase instability of current waste export

• ~40% of Italian MSW due to 12 cities

• Urban ecosystem driver of circular economy

• Sharing of best practices among cities

€/ton

Mt %

PUSHING OTHER 11 METROPOLITAN CITIES TO REACH MILAN AREA %, INCREASE OF ~2 Mt OF SORTED WASTE

MSW DISPOSAL PRICE (NORTHERN ITALY) SORTED COLLECTION IN ITALY BY MAIN MATERIALS

% SORTED WASTE COLLECTED IN METROPOLITAN CITIES

Note: MSW = Municipal Solid Waste

Ispra 2017Ispra 2017A2A internal data

WASTEMAIN INDUSTRY TRENDS

ANNEXES

43

NETWORKS

MULTISERVICECONVERGENCE

ENVIRONMENT IMPACTAND ENERGY EFFICIENCY

GAS DISTRIBUTIONTENDERS

• Cross-business regulation patterns :

‐ Greater attention to service quality

‐ High capex need (also in water)

• Technological synergy across businesses

• Decarbonization of the sources

• Growing electrification

• Greater attention to sustainable heat generation

• Delays in gas tenders triggering M&A Deals

• High transaction prices due to tender postponements

HEATING DH SOURCES (ITALY) GAS TENDERS (ITALY)WATER SECTOR CAPEX (ITALY)

€B %

AIRU 2016 A2A INTERNAL DATABLUE BOOK 2017

Fossil boiler

Cogen.

Res

# kPOD+150%

MAIN INDUSTRY TRENDS

ANNEXES

44

2018B-2022 STRATEGIC PLANSCENARIO AND MAIN ASSUMPTIONS

UdM 2016 2017 2018 2019 2020 2021 2022

Exchange Rate €/$ €/$ 1,11 1,13 1,20 1,20 1,21 1,23 1,25

ICE Brent €/bbl 40,8 48,4 50,9 55,9 57,8 58,3 58,3

Coal API 2 €/tonn 54,0 74,8 72,0 67,9 63,3 61,0 57,0

CO2 EUA ETS €/tonn 5,4 5,8 7,4 7,7 8,5 9,5 11,0

AEGSSI Gas Tariff (Pfor) €c/mc 15,6 18,1 18,8 18,4 17,4 17,2 17,0

PSV €/MWh 15,6 19,7 19,4 19,0 18,0 17,8 17,6

TTF €/MWh 14,0 17,3 17,4 17,2 16,3 16,1 15,9

PUN Base Load €/MWh 42,7 54,0 51,0 49,7 48,6 48,6 48,4

PUN Peak Load €/MWh 48,2 61,8 58,2 55,7 54,6 54,6 54,4

CCGT Gas Cost (PSV) €/MWh 37,6 46,7 46,5 45,6 43,4 43,0 42,6

Peak Spark Spread €/MWh 10,5 15,1 11,7 10,1 11,2 11,6 11,8

Spark Spread (PSV) €/MWh 5,1 7,3 4,5 4,1 5,2 5,6 5,8

Clean Spark Spread (PSV) €/MWh 3,1 5,1 1,7 1,2 2,0 2,0 1,7

Dark Spread €/MWh 12,5 16,4 14,6 15,0 15,8 16,8 18,2

Clean Dark Spread €/MWh 7,2 10,7 7,5 7,5 7,5 7,5 7,5

White Certificates €/TEE 145,5 273,5 300,0 280,0 270,0 260,0 250,0

ANNEXES

45

67

* 2017 excluding one-off equal to 4€M

*

*

CAGR -0,2%

Breakdown by BU sub-segment

Breakdown by growth driver

2018B-2022 STRATEGIC PLAN

19

-61

€M

BU GENERATION

ANNEXES

46

PlantDispatching

Development Options

Business Plan AssumptionsDriver

2018B-2022 STRATEGIC PLANBU GENERATION – Drivers & Assumptions

• Acquisitions already concluded for 50MW installed

• +150MW in 2022 expected thanks to new developments and new acquisitions

• REN investment: 511M€ from 2019 to 2022

• Stable production level vs 2017 in Coal, CCGT and Hydro normalized

• PUN baseload 2022: 48 €/MWh

• Stable Clean Peak Spark Spread 2022: 8 €/MWh

Capacity & AncillaryMarkets

• Introduction of Capacity Market mechanism in H2 2018

• MSD margins in line with last 3-year average net of extraordinary events recorded in 2016 and 2017

ANNEXES

47

2017

ordinary

173

Power

Market

57

Gas

Market

50

Increase of

CtA and other

fixed costs

-40

New Energy

Solutions,

Smart City

and other

25

2022

265


Breakdown by growthdriver

CAGR+8.9%

*

*

2017

ordinary

173

Regulated

Mkt

-90

Free Mkt

growth

@ flat UM

224

Free Mkt

Unitary

margin

-27

Increase

of CtA and

other

fixed costs

-40

New Energy

Solutions,

Smart City

and other

25

2022

265

*2017 excluding one-off equal to 51€M

2018B-2022 STRATEGIC PLANBU MARKET

€M

ANNEXES

48

Free Market development

Unitary Margin

Fixed costs

Business Plan assumptionsDriver

• Significant step in Mass Market customer base due to market full liberalization (2.3M POD in 2022 vs 0.9M POD in 2017)

• Strong customer focus leveraging digitalization (new CRM), value-added services, excellent customer service

• Increase in B2B sales (+3TWh 2022 vs 2017)

• No growth from M&A in the plan

• Expected to reduce ~3% avg p.y. on growing competition(1)

• CtA, per unit, planned to grow ~5% avg p.y. on growing competition

• Steady Cost-to-Serve, per unit, thanks to strong focus on operating performance

New services

En

erg

y R

eta

il

• Expansion in in Public Lighting (+150K lights managed through organic growth), energy efficiency and e-mobility

• Smart Services

• New projects in flexibility, DERs and storage

(1) Mass Market unitary margin on raw material component

2018B-2022 STRATEGIC PLANBU MARKET – Growth Drivers

ANNEXES

49

CAGR +6.7%


Breakdown by growth driver

2018B-2022 STRATEGIC PLANBU WASTE

* 2017 excluding one-off equal to 10€M

*

€M

*

ANNEXES

50

Existing treatment

plants

• Volume increase on Milan and Parona WTE for refurbishment(+ 0,12Mtons); cost efficiencies and better flow management

• About +2% p.a. of price increases driven by structural shortfall of landfilland treatment plants

New treatment

plants

Business Plan assumptionsDriver

• ~0.8 Mtons of growing capacity on 12 new sites, mainly related to organicand plastic treatment and to one new WTE plant

• 70% of development (~600 kton) already authorized or in advanced stage

• Plant roll-outs spread through plan timespan

• Most of economic benefits from internal waste flows integration

• 1 M&A: due diligence already done; waiting for final closing expectedwithin 1H 2018

2018B-2022 STRATEGIC PLANBU WASTE – Drivers & Assumptions

ANNEXES

51

2018B-2022 STRATEGIC PLANBU WASTE – New treatment plants

# Plants Capacity (kton)2018 - 2022

Capex

Authorized 3 282 178

Authorization in advanced

stage 5 315 127

Authorization not

necessary 1 n.a. 10

M&A 2 240 18

Authorization to be

requested1 n.a. 60

TOTAL 12 837 393

€M

ANNEXES

52* 2017 excluding one-off equal to +4€M; 2017 in a like-for-like basis

*


Breakdown by growthdriver

2018B-2022 STRATEGIC PLANBU NETWORKS

*

CAGR +2.9%

HeatingNetworks

€M

ANNEXES

53

Gas tenders

• #PoD: ~+130k (+8%)

• #ATEMs: 10-15 (target @ 2022)

• Capex: +260€M

Commercial development

• DH development mainly in eastern Milan area (saturation of Silla 2 WTE plant thermal capacity)

• New connections: 30 MW/Yr average (vs. 60 MW/Yr average past 3 yrs)

Business Plan AssumptionsDriver

2018B-2022 STRATEGIC PLANBU NETWORKS – Drivers & Assumptions

Tariffs• Regulated revenues: in line with ARERA rules (for current regulatory periods)

• Current regulatory structure continuity until 2022 (no assumptions related to TOTEX/Standard costs regulations)

Cost Efficiency

• Mistral project included in the BP projections

ANNEXES

54

2018B-2022 STRATEGIC PLANEBITDA Cash Conversion

Average Cash Conversion in%

Business Plan

2018 - 2022

%

Historical

2015 - 2017

Cash Flow calculated asEBITDA – Δ Net Working Capital – Capex – Tax

(1) Excluding REN (EBITDA and Capex)

€M

319

232

305

420

183

12188 91

Generation Market Waste Networks

62% 43% 30% 15%370

163

237

372

230

70 71 55

Generation Market Waste Networks

AverageEBITDA(1)

2018-2022

AverageCash Flow(1)

2018-2022

AverageEBITDA

2018-2022

AverageCash Flow2018-2022

AverageEBITDA

2018-2022


AverageEBITDA

2018-2022


57% 52% 29% 22%

Generation NetworksWasteMarket

AverageEBITDA

2015-2017


AverageEBITDA

2015-2017


AverageEBITDA

2015-2017


AverageEBITDA

2015-2017


ANNEXES

2017 RESULTS

WHERE WE START FROM


FINANCIALS

CLOSING REMARKS

Q1 2018 RESULTS

56

Key Financial Indicators

REVENUES EBITDA

GROUP NET INCOME

NET FINANCIAL POSITION

€M

* Restated values refer to effects coming from LGH’s PPA and classification of EPCG’s economic values under IFRS 5

Highlights

CCGT AND HYDRO VOLUMES

CCGT PERFORMANCE ON MSD

ENVIRONMENTAL MARKETS

MOODY’S UPGRADES A2A’S RATING FROM

BAA3 TO BAA2

SCENARIO EFFECT

GAS MARGIN

Q1 2018 vs. Q1 2017

57

Analysis of results

Group EBITDA Overview

+14% -16% - -1%

€M

• Negative impact of growing gas price on clean spark spreads

• Production Volumes up 24%

• Strong MSD

• Green Certificates portfolio sold (~632 GWh)

• Customer base growth in line with plan

• Stable unitary margins

• Higher marketing costs

• Strong negative temporary items

• Collection: lower paper prices and higherdisposal costs

• Increasing disposal prices to treatment plants

• Waste Treatment: decrease in Grottaglielandfill disposal due to delay in authorization (authorized in April 2018)

• Lower regulated revenues on electricitynetworks

• District Heating: negative scenario effectspartially offset by higher DH volumes

• Higher IWC tariffs

GENERATION

WASTE

MARKET

NETWORKS

58

From EBITDA to Group Net Income

Analysis of results

Q1 2017Restated

393 (99) 258 4 (4) 1802 (27)(11) (78)-

€M

• D&A: 2017 CAPEX & REN acquisitions

• Net Financial Expenses: unwinding of derivatives (one off on REN)

• Tax rate: Q1/17 30%; Q1/18 32%;

59

Capex & Net Free Cash FlowAnalysis of results

(1) Funds from operations afterworking capital change

(2) Includes 1€M capex related to EPCG

393 (239) 171 (54) (8) 109

Q1 2017 Restated

(4) (45)(1)67 117(2)

€MBREAKDOWN BY ACTIVITY

BREAKDOWN BY BUSINESS

+23€M

201753€M

201876€M

€M

Net Free Cash Flow

408

-317

130

-5

0

-49

167

-76

91

-41

50+23€M

(+43%)

60

Business Units EBITDA Breakdown

Annexes

€M

Reported Ordinary Reported Ordinary

a2a 393 388 408 402 15 4% 14 4%

Generation 150 149 171 170 21 14% 21 14%Power Generation 122 121 160 159 38 31% 38 31%

Gas Margin 28 28 11 11 -18 -63% -18 -63%

Market 49 48 41 40 -8 -16% -8 -16%Energy Retail 44 44 38 37 -6 -15% -7 -15%

Public Lighting 4 4 2 2 -1 -32% -1 -32%

Energy Solutions 1 1 1 1 0 14% 0 14%

Waste 71 71 72 71 1 1% 0 0%Collection 20 20 15 14 -6 -28% -6 -29%

Urban Waste Treatment 49 49 53 52 4 7% 3 6%

Other Treatment Plants 2 2 5 5 4 197% 3 184%

Networks 128 125 126 124 -2 -2% -1 -1%Electricity Networks 35 33 30 31 -5 -14% -2 -6%

Gas Networks 30 30 32 31 2 7% 1 3%

Water Cycle 9 9 12 12 3 33% 3 33%

District Heating 54 53 52 50 -2 -4% -3 -6%

Smartcity 1 1 2 2 1 n.s. 1 n.s.

Other -6 -5 -4 -5 2 n.s. 1 n.s.

2017 Q1 2018 Q1 Delta

Reported Ordinary

61

P&L and Balance Sheet

Annexes – Q1 consolidated results

€M Q1 2017 Restated

Q1 2018 CHANGE %

Revenues 1,622 1,812 190 11.7%

EBITDA 393 408 15 3.8%

D&A (99) (108) (9) 9.1%

Provisions (11) (13) (2) 18.2%

EBIT 283 287 4 1.4%

Net Financial

Expenses(27) (30) (3) -11.1%

Associates & JV 2 1 (1) -50.0%

Result from non

recurr. Transactions0 0 0 n.a.

EBT 258 258 0 -

Taxes (78) (83) (5) 6.4%

Net Result from

disc. operations4 2 (2) -50.0%

Minorities (4) (4) 0 -

Group Net Income 180 173 (7) -3.9%

2017 FY Q1 2018 CHANGE %

Tangible Assets 4,606 4,592 (14) -0.3%

Intangible Assets 1,893 1,902 9 0.5%

Shareholdings and Other Non

Current Financial Assets71 71 0 -

Other Non Current

Assets/Liabilities(117) (129) (12) 10.3%

Deferred Tax Assets and

Liabilities301 295 (6) -2.0%

Provisions for Risks, Charges

and Liabilities for landfills(625) (626) (1) 0.2%

Employee Benefits (319) (315) 4 -1.3%

Net Fixed Capital 5,780 5,790 10 0.2%

Net Working Capital* 437 756 319 73.0%

Other Current

Asset / Liabilities*(305) (431) (126) 41.3%

Current Tax

Asset / Liabilities103 26 (77) -74.8%

Working Capital and Other

Current Assets/Liabilities235 351 116 49.4%

Non current Assets /Liabilities

held for sale224 226 2 0.9%

Total Capital Employed 6,239 6,367 128 2.1%

Equity 3,013 3,191 178 5.9%

Net Financial Position 3,226 3,176 (50) -1.5%

Total Sources 6,239 6,367 128 2.1%

€M

62

Average dataQ1

2017

Q1

2018

D % vs

2017

Brent $/bbl 54,7 67,2 23%

CO2 - EU ETS cost €/Tonn 5,2 9,8 90%

€/$ €/$ 1,1 1,2 15%

Brent € €/bbl 51,4 54,6 6%

PSV(1) €/MWh 20,4 21,9 7%

AEEGSI Gas Tariff (2) c€/mc 19,2 20,8 9%

Coal € (API2) €/Tonn 76,4 70,6 -8%

PUN baseload(3) €/MWh 57,4 54,3 -5%

PUN peak(3) €/MWh 66,4 62,6 -6%

PUN off-peak(3) €/MWh 52,4 49,6 -5%

CCGT gas cost(4) €/MWh 48,9 52,6 8%

Costo Coal €/MWh 38,5 35,8 -7%

Environmental costs (CCGT) €/MWh 2,0 3,7 90%

Environmental costs (Coal) €/MWh 5,0 9,5 90%

Spark Spread CCGT_PSV vs Baseload €/MWh 8,6 1,7 -80%

Spark Spread CCGT_PSV vs Peakload €/MWh 17,5 10,0 -43%

Spark Spread CCGT_PSV vs Off-Peak €/MWh 3,5 -3,0 n.s.

Clean Spark Spread vs Baseload €/MWh 6,6 -2,0 n.s.

Clean Spark Spread vs Peakload €/MWh 15,6 6,3 -60%

Clean Dark Spread vs Baseload(5) €/MWh 13,9 9,0 -36%

(1) Gas at virtual trading point

(2) Pfor 162/14 Oct 2014-Mar 2016.

(3) hourly average for each month

(4) based on gas at virtual trading point with 51% efficiency; includes transport costs

(5) 35% efficiency - includes cost spread on API2 and transport cost

(6) data subject to update by Terna

Energy Scenario

Annexes

63

• Acquisition of new PV plants from Impax (+15.7 MW)

GENERATION

WASTE

MARKET

NETWORKS

a2a T

2018 2022

TTransformation

EExcellence

a2a E

2018 2022

CCommunity

a2a C

2018 2022

• Cavaglià Plastic treatment plant construction finalized (to be tested)

• Brescia sorted collection rate up to 65% on march 2018

• Tender on collection in Rapallo won

• Public Lighting: +4K lighting points • Moody's upgrades A2A's ratings from Baa3 to Baa2 with stable outlook

• Q1 2018 CAPEX - over 13 €M in Digital and 3 €M in Tech Innovation

• INTERNAL Community:‒ Talent program pilot on BU Networks

‒ Contract harmonization BU Market completed

‒ Smart working pilot extended

‒ New policy on work environment reshape

• EXTERNAL Community: ‒ Innova2a workgroup project started

‒ First innovation initiative tested, in scale up mode across the whole organization

Sustainability

• Approved the updated Sustainability Plan integrated with the 2018-2022 Strategic Plan• Voluntary assessment on sustainability topics by an independent Rating Institution (Standard Ethics) • “Missione Terra” event to increase awareness of sustainability issues, + 800 students involved• New campaign on circular economy matters (Viaggio della Materia) on web, social and mass media

• Aggregations: Northern Lombardy Multiutility project approved by municipalities

• EPCG: agreement on accelerated put option execution with local government

Annexes

Update on Strategic Progress

• Boosted CAPEX execution (Unareti +30% vs 2017Q1)

• Val Trompia water treatment plant – project launched, work starting oct 18

• Heat storage project started


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 any part 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-looking information 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-looking statements 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 factors include, 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-looking statements are current only at the date on which they are made.

A2A Investor Relations Team

Mail: [email protected]

Phone: +39 02 7720 3974

http://www.a2a.eu/en/investor/

Annexes and data in excel format for modelling are available on A2A website at the following links:

https://www.a2a.eu/en/investors/presentations-conference

https://www.a2a.eu/en/investors/strategy

A2A 2018 Investor Guidebook kit: https://www.a2a.eu/en/investors/publications-services/investor-guidebook-kit

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