[PPT] - A2A STRATEGIC PLAN 2017 RESULTS & BUSINESS PLAN UPDATE H1 2018 PowerPoint Presentation

SLIDE 1

A2A STRATEGIC PLAN

2017 RESULTS & BUSINESS PLAN UPDATE
H1 2018 RESULTS

Italian Infrastructure Day: Borsa Italiana - Milan, 6 September 2018

SLIDE 2

2017 RESULTS

WHERE WE START FROM

2018-22 STRATEGIC PLAN

FINANCIALS

CLOSING REMARKS

H1 2018 RESULTS

SLIDE 3

3

REVENUES EBITDA GROUP NET INCOME

+16%

ORDINARY EBITDA

2%

+10%

NET FINANCIAL POSITION GROUP 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

SLIDE 4

4 +102

20

€M

EBITDA ORDINARY VS. RECURRING

SLIDE 5

5

* -86 €M, of which -60 €M D&A (EPCG write-

ff) and -26 €M EPCG put option discounting

€M

1,231

435

372 2

22

232

3
154
83
120

56

240

2016 RESTATED

FROM EBITDA TO GROUP ORDINARY NET INCOME

+120 +36

€M

SLIDE 6

6

Mandatory Development Maintenance

Note: EPCG and M&A projects excluded

€M

BY ACTIVITY +29% CAPEX 2017 vs 2016

Smart City Corporate Networks & District Heating Waste Energy Retail Generation

CAPEX BREAKDOWN

BY BUSINESS

SLIDE 7

7

€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

278

2016

NET FREE CASH FLOW

SLIDE 8

2017 RESULTS

WHERE WE START FROM

2018-22 STRATEGIC PLAN

FINANCIALS

CLOSING REMARKS

H1 2018 RESULTS

SLIDE 9

9

RESHAPE

Public lighting, smart city, energy efficiency

First-mover

in consolidating energy efficiency sector

+60% A2A Smart City

EBITDA

120 K LED installed

(+135%)

RELAUNCH

Consistent industrial growth Selective external growth

+ 560 K customers

(EE and Gas free market customer base)

+ 800 Kt waste treated + 200 €M of RAB

~130 €M of operating

efficiency

14 M&A deals

+ 105 €M EBITDA

Largest territory aggregations

(+1 in pipeline)

REGENERATION

Active 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

SLIDE 10

10

Industrial targets achieved Financial targets overdelivered EBITDA

Higher and more stable margin

NFP/EBITDA

Capital structure reinforced

CAPEX

Investing more with quality

DPS

Dividends growing steadily

+ 18%

18%

+ 60% + 61%

€c/ share €M

ROI

Growing, stable return >10%

+ 52%

%

Merchant High Volatility Merchant Low Volatility Quasi Regulated Regulated

€M

+187 +168

DELIVERED FINANCIAL VALUE

SLIDE 11

Strategic framework | Transformation | Excellence | Community | Sustainability

11

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 GW M toe INSTALLED CAPACITY IN GER, FRA, SPA, UK, SWI Source: A2A estimates Source: European Environment Agency ENERGY CONSUMPTIONS EU 28 LANDFILL DISPOSAL Sources: Ispra (2010 and 2016), A2A estimates (2025)

La

Land ndfills ph phase se ou

ut
Acceleration in sor
rted col
llection
Wast

ste system ba balance and mate terial recovery

Decarbonization
Energy de

democracy

Re

Reduction of PV and wind LCO LCOE

Energy efficiency
Sm

Smart services to citizen and digitalization (IoT)

Green mob
bility
47%
23 Mtoe
17 Mtoe

Nuclear Coal Primary Final

97 GW

MAIN INDUSTRIAL TRENDS

SLIDE 12

Strategic framework | Transformation | Excellence | Community | Sustainability

12

a2a T 2018 2022

T

Transformation

a2a E 2018 2022

E

Excellence

a2a C 2018 2022

C

Community 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

SLIDE 13

Strategic framework rk | Transformation | Excellence | Community | Sustainability

13

GENERATION MARKET WASTE NETWORK Flexible and greener energy More solutions to involve customers Value from end to beginning Smarter and more reliable

TRANSFORMATION

SLIDE 14

Strategic framework rk | Transformation | Excellence | Community | Sustainability

14

Further expansion of RES

RES pl platform

Conventional plants reconversi

sion

Le

Leadersh ship consolidation in flexible CCG CGT plants,

ptimizing risk/return ratio thanks to Capacity market
Improvement of gas

s sou

urcing
Match of growing ne

need for pe peak capacity

Exploration of inn

nnovative flexibility ty services

~1

~170 MW of

f ne

new RES RES (M&A + green-field)

Project de

development for Brindisi, S.

S. Filippo

and Mon

nfalcone
+8

+800 MW dispatched CCGTs vs. 2017

CCGT results ba

balanced mix mix of ma market (MGP/MSD) and Capacity

LN

LNG G op

pportuniti

ties, better sho hort/long term mix

Evaluation of new pe

peak pl plants s (e.g. OCGT)

Projects on UV

UVAM, UV UVAP, sto torage, …

Flexible and greener energy

GREENER PORTFOLIO LEADERSHIP IN GAS-FIRED GENERATION ADEQUACY & FLEXIBILITY PROVIDER

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

SLIDE 15

Strategic framework rk | Transformation | Excellence | Community | Sustainability

15

RAT RATIONALES FOR NEW RES RES GROW ROWTH:

Align generation mi

mix with global trends

Accelerate de

deca carbonization

Achieve ind

ndustrial synergies:

Inte

ntegrated di dispatching

Ope

perating effici cienci cies

Overhead cos
st re

redu ducti tion

Service

ce qu quality improvement

Pl

Platform to position A2A in the new scenario:

Re

Repowering utility-scale plants

Develop pi

pipeline of gree reen-field

Exploit synergies with B2B/

B/B2C

Focu
cus on
n PV

PV, , open to opp

pportu

tunities in wind A2A NEW RES CAPACITY

Depending on market

pportunities and

regulatory evolution Potential switch in internal vs. external growth mix ~20-25 MW per year

M&A Green-field 3rd party plants dispatched

~35 MW per year

500+ €M total investments in RES Potential further developments according to emerging opportunities

GENERATION FOCUS ON RES

MW

SLIDE 16

Strategic framework rk | Transformation | Excellence | Community | Sustainability

16

Stable margins
Possible upsides in "regulated" components
CCGT fleet competitive in MSD
Medium-term stab

ability

Stead

ady load ad fac actor

r in a 20% range

(lower than market average)

Balan

anced d mix of MGP and MSD

~25%

5% regul gulated ed margins

~45%

5% RES

PUN base load Clean spark spread ACTUAL BP

+51

Capacity+Incentives Green merchant CCGT merchant Traditional thermal % €/ MWh %

CCGT LOAD FACTOR PLANTS CONTRIBUTION MARGIN

€M

PUN & SPREAD

GENERATION 2022 ASSUMPTIONS & TARGETS

SLIDE 17

Strategic framework rk | Transformation | Excellence | Community | Sustainability

17

CUSTOMER FOCUS

Outs

tsta tanding client service, with new multi-channel customer experience

Preservation of exce

xcellent op

perations
VA

VAS in safety, comfort, t, ener nergy-saving

Energy adv

dvisor for SMEs and large enterprise

Digitalizati

tion to enhance service/acquisition

New CRM

RM

Growth in all custo

stomer segments, also including large clients

BOOST IN NEW SERVICES

New services: flexibility, DER

ERs and sto torage

New EPCs in ener

nergy efficiency services

Organic growth in Pub

ublic Li Lighting

Expansion of electric mo

mobility business

New projects in flexibility and

nd DER ERs

3x

x EPC contracts

+150 k

k lights managed

+5

+500 ne new charging sta tati tions for EVs

MEDIUM- LONG TERM CHALLENGE

Inn

nnovation & & Digital to develop new services

Un

Unlocking IoT

T opportunities
Further fiber

ber netw network development (+2,000 km)

Pilot projects on IoT
T

18

‘000 POD ‘000 FREE MARKET – EE&GAS (EOP) LIGTHING POINTS

ANTICIPATE THE MARKET CURVE OF EVS PENETRATION

# CHARGING STATIONS FOR EVS

Growth from Ma

Mass ss Ma Market et liber beral alizat ation

Stabl

ble cus ustom

mer base

se

Expansion in new

territories es

Organ

anic gr growt wth

Secur

ure key territories

Focus on key location
ns

€M

Benefit from market liberalization
Roll-out of A2A Energy Solutions

+67

MARKET 2022 ASSUMPTIONS & TARGETS

SLIDE 19

Strategic framework rk | Transformation | Excellence | Community | Sustainability

19

FROM WASTE TO COMMODITY END-TO-END PARTNER FOR URBAN SERVICES CONTINUOUS TECHNICAL INNOVATION

Become leader in

n recycling, selling high-quality secondary raw materials

New WTE capacity to maintain safety of the Italian

waste treatment system

Enlarging geographic pre

prese sence, leveraging on value chain integration

Sm

Smart and nd inn nnovative sol

lutions

s for our territories

Maintain plants at be

best st ava vailable technology for environment sustainability

Improve circularity with inn

nnovation

+2

+2 pl plast stic treatment plants

+4

+4 or

rganic treatment plants
+1

+155 Kt of new WTE capacity

Se

Secondary Re Recovered Fuel uel treatment plant EoW

+2

+2 ashes treatment plants EoW

New tenders, also outside Lombardy
120 €M cumulated capex for waste collection
Inc

ncreased pl plant efficiency (e.g. flue gas treatment)

Technical inn

nnovation 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

SLIDE 20

Strategic framework rk | Transformation | Excellence | Community | Sustainability

20

INHABITANTS SERVED BY A2A M €M

+11%

1% inha habitan ants s

New areas in No

Northe hern n Ital aly

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

1 Mt Mt treated

100%

0% organi ganic gr growth

Ne

New w WT WTE capacity

Perfor
rmanc

nce e optimizat ation

n
f existing WTEs

WASTE 2022 ASSUMPTIONS & TARGETS

SLIDE 21

Strategic framework rk | Transformation | Excellence | Community | Sustainability

21

Smarter and more reliable

CROSS- BUSINESS SYNERGIES SMART GRID AND QUALITY IMPROVEMENT GAS TENDERS

Multi

ulti-business op

peration syn

ynergies (e.g. smart meters de deployment, gas/ s/ee ee int ntegration in n Un Unareti)

Adoption of auto

tomated and di digital sol

lutions for
r asse

sset and nd workforce management

Achieve smart

t and resi silient t ne netw tworks

Improve ener

nergy efficiency of DH networks

Develop wate

ter cycl ycle pe performance

Se

Selective growth in high-priority ATEMs

Focus on geographical con
nsolidation
Roll-out of new smart meters:
~2

~250 K Gas meters

~3

~300 K EE meters

~5

~50 K Water meters

Digital asse

set t management platform fully-phased

2 new EE

E pri primary sta tations

New he

heating storage

21 new water treatment sta

tations

-40% wate

ter loss

sses
Milano1 tender completed
+10% POD
-50% ATEM

NETWORKS A2A KEY ACTIONS

SLIDE 22

Strategic framework rk | Transformation | Excellence | Community | Sustainability

22

RAB 2017 Incremental RAB 2018-2022

€B RAB GAS & EE DH SALES M POD

GWht

Asset

sset base streng engthen hening ng

+11%

1% EE Capex pex vs. previous Plan

Cons

nsol

lidat

ation n in gas market

Scal

ale e optimizat ation

DH networks extens

ension

n
+150

50 k client ents served

Synergies and new tech drive

consolidation & efficiencies

Organic CAPEX to strengthen RAB
Steady development of DH

€M POD GAS ATEM

NETWORKS 2022 ASSUMPTIONS & TARGETS

SLIDE 23

Strategic framework rk | Transformation | Excellence | Community | Sustainability

23

INTEGRATED MULTI-BUSINESS PORTFOLIO EXECUTION CAPABILITIES URBAN SYSTEM INTEGRATOR

A2A un unique bu business por portf tfolio with a well ba balanced volatility/growth mix Maximization of cros ross-BU synergies Pr Prov

ven abil

bility in n CAP APEX execu cution and in re react cting to scenario changes Possibility to re repl plicate succ uccessful mo models (LGH, plants flexibilization, PV, …) A2A positioned to lead ur urban ban circu rcular economy and energy transformation Deep mu multi-level inf nfrastruct ctural pr presence Proven capability to att ttract ct and inv nvolve loca

cal pl

players in key territories

GW

GENERATION MARKET WASTE NETWORKS

Hydro+RES CCGT Other

ACTIVE GENERATION CAPACITY

A2A UNIQUENESS

SLIDE 24

Strategic framework | Transformation | Excellence | Community | Sustainability

24

En& En&A pr proje

ject: 65% of target savings already achieved

En&A spun-off Mis istr tral l pr proje

ject, to focus operational

excelle lence through:

Le

Lean an process redesign

Agile

gile way of working Di Digit italiz izatio ion and te technolo logic ical inn nnovatio ion are key improvement levers 2015 2016 2017 2018 2019 2020 2021 2022

MISTRAL En&A

47 82 130 153 175 201 219 227

€M

LOCKED IN

EXCELLENCE AGILE ORGANIZATION

SLIDE 25

Strategic framework | Transformation | Excellence | Community | Sustainability

25

More than 500 €M of cumulated CAPEX on D&T, Innovation projects, accounting for ~20%

f 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 gas

distribution

Remote control

empowerment

100% WFM coverage
Digital renewal
f workspaces
Best of breed software

and hardware

CORPORATE

5Y CUMULATED CAPEX

EXCELLENCE DIGITAL & TECH CAPEX

SLIDE 26

Strategic framework | Transformation | Excellenc nce | Community | Sustainability

26

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

SCREENING

ideas 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

SLIDE 27

Strategic framework | Transformation | Excellenc nce | Communi nity ty | Sustainability

27

60+ core goals built on our 4 sustainability pillars Update of sustainability plan and targets 100% executives with sustainability MBOs

SMART GRID AND SERVICES CIRCULAR ECONOMY DECARBONIZATION PEOPLE INNOVATION

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 site inspections

SUSTAINABILITY PLAN PATH

Reduction of the accident rate Environmental education

SLIDE 28

Strategic framework | Transformation | Excellenc nce | Communi nity ty | Sustainability

28

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

SMART GRID AND SERVICES CIRCULAR ECONOMY DECARBONIZATION PEOPLE INNOVATION

ONLINE MEMBERS OF A2A ENERGIA COMMUNITY ‘000 SMART WORKING

% on total employees applicable

% % MATERIAL RECOVERY RATE IN GROUP’S PLANTS ON TOTAL WASTE COLLECTED CO2 /kWh CARBON INTENSITY g/ kWh

SUSTAINABILITY: KPI TARGET EXAMPLES

SLIDE 29

29

1,135

BY BU BY MIX

Networks Waste Market Generation Other Merchant High Volatility Merchant Low Volatility Quasi Regulated Regulated

1,391

€M

+256

CAGR +4.1%

EBITDA 2017-22

SLIDE 30

30

€M

+189

CAGR +10.5%

NET INCOME 2017-22

SLIDE 31

31

Note: EPCG and M&A projects excluded Merchant High Volatility Merchant Low Volatility Quasi Regulated Regulated Mandatory Maintenance Development Other Market Generation Waste Networks €M

CAPEX 2018-22

SLIDE 32

32

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

0.2

CASH FLOW GENERATION 2017-22

SLIDE 33

33

GUIDANCE 2018

1,150 - 1,180 €M

2018

EBITDA

~400 €M

NET INCOME CAPEX

100+ €M

NET FREE CASH FLOW

GUIDANCE

Plus 20 - 30 €M non recurring

Northern Lombardy Multiutility Consolidation(1)

~550 €M

(1) Guidance to be disclosed with Q3 results

UPDATED AFTER H1 2018 RESULTS

SLIDE 34

34

EBITDA

+180 €M of EBITDA

CAPEX

2.8 €B cumulated CAPEX

+15% +51%

NFP/EBITDA

NFP/EBITDA down to 2.2x

19%

€M Merchant High Volatility Merchant Low Volatility Quasi Regulated Regulated €M

ROI

Returns consistently >11%

STABLE

+180

2022 TARGETS

SLIDE 35

35

Better dividends visibility with stronger capital structure

5.8

22%

2017

6.7

22%

2018

~7.5

22%

2019

min +5% yearly

min 24%

2020 2022

A2A DIVIDEND PER SHARE (€c) FFO/NET DEBT

DIVIDENDS

SLIDE 36

36

UPSIDES OF ONGOING ACTIVITIES EXTERNAL GROWTH COMPLEX INDUSTRIAL PROJECTS

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

SLIDE 37

37

~60-70 €M net additional EBITDA fully consolidated Almost complete coverage of Lombardy Open to new aggregation opportunities

NORTHER ERN LOMBARDY MULTIUTILITY

Benefit its of f indu ndustrial l par partn tnership ip:

Sharing te

technic ical and man management sk skill ills

Optimization of indu

ndustria ial and financial l po positio tion Preservatio ion of the ide denti tity ty of existing companies Enh Enhan ancement of f investment t capacity Improvement of qual quality ity standards and service level

ASPEM LARIO RETI HOLDING AEVV

A2A LGH

Industrial entities strongly rooted in our territory

ACSM-AGAM

ADDITIONAL PROJECTS: AGGREGATIONS

Nor Northern Lomb Lombardy Mu Multiutil ilit ity con

nsol
lidated line-by

by-line as of

f 1st

st July

July 2018

SLIDE 38

38

#smartcompanysmartplanet

Strategic view aligned to medium-long term trends (looking forward to 2030) A2A uniqueness: business natural hedging, cross BU synergies, integration Strong confidence to deliver higher quality results Potential for upsides, including local aggregations

KEY TAKEWAYS

SLIDE 39

39

CONSOLIDATED RESULTS: P&L AND BALANCE SHEET

FY 2017 VS FY 2016 RESULTS

€M €M

ANNEXES

SLIDE 40

40

COMMITTMENT TO CURB GLOBAL WARMING RES MATURITY AND DERs SCALABLE TECHNOLOGY GROWING RELEVANCE OF 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

M tep €/ MWh M tpa

LCOE (LEVELIZED COST OF ELECTRICITY) LNG SUPPLY BY COUNTRY EU RES PENETRATION Final energy consumptions covered by RES SEN = Strategia Energetica Nazionale Sources: EU Commission, IHS; World Energy Outlook; World Energy Council; Irena

GENERATION

MAIN INDUSTRY TRENDS

2016 2020 2025 2030

40 60 80 90 110 120 COAL high range GAS high range FV residential GAS low range COAL low range WIND onshore FV utility

EXPECTED GRID PARITY

1.6x

ANNEXES

SLIDE 41

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
f urban services
Commercial readiness
f 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

MARKET

MAIN INDUSTRY TRENDS

ANNEXES

SLIDE 42

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 2017 Ispra 2017 A2A internal data

WASTE

MAIN INDUSTRY TRENDS

ANNEXES

SLIDE 43

43

NETWORKS

MULTISERVICE CONVERGENCE ENVIRONMENT IMPACT AND ENERGY EFFICIENCY GAS DISTRIBUTION TENDERS

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 DATA BLUE BOOK 2017 Fossil boiler Cogen. Res # kPOD

+150% MAIN INDUSTRY TRENDS

ANNEXES

SLIDE 44

44

2018B-2022 STRATEGIC PLAN

SCENARIO 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

SLIDE 45

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

SLIDE 46

46

Plant Dispatching Development Options

Business Plan Assumptions Driver

2018B-2022 STRATEGIC PLAN

BU 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 & Ancillary Markets

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

SLIDE 47

47

2017

rdinary

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 BU sub- segment Breakdown by growth driver

CAGR +8.9%

* *

2017

rdinary

173

Regulated Mkt

90

Free Mkt growth @ flat UM

224

Free Mkt Unitary margin

27

Increase

f CtA and
ther

fixed costs

40

New Energy Solutions, Smart City and other

25

2022

265

*2017 excluding one-off equal to 51€M

2018B-2022 STRATEGIC PLAN

BU MARKET

€M

ANNEXES

SLIDE 48

48

Free Market development Unitary Margin Fixed costs

Business Plan assumptions Driver

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 Energy Retail

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 PLAN

BU MARKET – Growth Drivers

ANNEXES

SLIDE 49

49

CAGR +6.7%

Breakdown by BU sub-segment Breakdown by growth driver

2018B-2022 STRATEGIC PLAN

BU WASTE

* 2017 excluding one-off equal to 10€M

*

€M

*

ANNEXES

SLIDE 50

50

Existing treatment plants

Volume

increase

n

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 landfill

and treatment plants

New treatment plants Business Plan assumptions Driver

~0.8 Mtons of growing capacity on 12 new sites, mainly related to organic

and 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 expected

within 1H 2018

2018B-2022 STRATEGIC PLAN

BU WASTE – Drivers & Assumptions

ANNEXES

SLIDE 51

51

2018B-2022 STRATEGIC PLAN

BU 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 requested

1 n.a. 60

TOTAL

12 837 393

€M

ANNEXES

SLIDE 52

52

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

*

Breakdown by BU sub- segment Breakdown by growth driver

2018B-2022 STRATEGIC PLAN

BU NETWORKS

* CAGR +2.9%

Heating Networks

€M

ANNEXES

SLIDE 53

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 Assumptions Driver

2018B-2022 STRATEGIC PLAN

BU 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

SLIDE 54

54

2018B-2022 STRATEGIC PLAN

EBITDA Cash Conversion

Average Cash Conversion in%

Business Plan 2018 - 2022

%

Historical 2015 - 2017

Cash Flow calculated as EBITDA – Δ Net Working Capital – Capex – Tax (1) Excluding REN (EBITDA and Capex)

€M

319 19 232 32 305 05 42 420 183 83 121 21 88 88 91 91

Generation Market Waste Networks

62% 43% 30% 15%

370 70 163 63 237 37 372 72 230 30 70 70 71 71 55 55

Generation Market Waste Networks

Average EBITDA(1) 2018-2022 Average Cash Flow(1) 2018-2022 Average EBITDA 2018-2022 Average Cash Flow 2018-2022 Average EBITDA 2018-2022 Average Cash Flow 2018-2022 Average EBITDA 2018-2022 Average Cash Flow 2018-2022

57% 52% 29% 22%

Generatio ion Netw Networks Was aste Mar arket

Average EBITDA 2015-2017 Average Cash Flow 2015-2017 Average EBITDA 2015-2017 Average Cash Flow 2015-2017 Average EBITDA 2015-2017 Average Cash Flow 2015-2017 Average EBITDA 2015-2017 Average Cash Flow 2015-2017

ANNEXES

SLIDE 55

2017 RESULTS

WHERE WE START FROM

2018-22 STRATEGIC PLAN

FINANCIALS CLOSING REMARKS H1 2018 RESULTS

SLIDE 56

56

Key Financial Indicators

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

Highlights

H1 2018 vs. H1 2017

REVENUES EBITDA Ordinary EBITDA Reported NET FINANCIAL POSITION GROUP NET INCOME

rdinary

GROUP NET INCOME

ENVIRONMENTAL MARKETS CCGT AND HYDRO VOLUMES CCGT PERFORMANCE ON MSD WASTE TREATMENT PRICES SPREAD CCGT GAS MARGIN PAPER PRICES LANDFILL

AUTHORIZATION DELAY

SLIDE 57

57

Analysis of results

Group EBITDA Overview

€M

Production +24%
Green Certificates: additional 21€M
Photovoltaic production: +8€M
Solid MSD performance
Gas price material increase negative on:
Clean Spark spreads
Gas portfolio
Increased free market customer base.

In line with plan

Stable unitary margins
Advertising costs up for ’18 campaign
Positive price effects on White Certificates
Collection: lower paper prices and

higher disposal costs

Increasing treatment prices
Grottaglie landfill re-started (in May)
Higher volumes (and prices) in the

industrial segment

EE networks: Lower RAB and regulated

revenues

GAS networks: significant quality incentives

from ARERA in 2017

District Heating: higher volumes, offset by

negative scenario effects (coal & Co2)

IWC: Higher tariffs

GENERATION WASTE MARKET NETWORKS

3637 87 13313-1

+18% +9% +1%

2%

SLIDE 58

58

From EBITDA to Group Net Income

Analysis of results

€M H1 2017

Restated 637 (196) 374 (94) (4) 157 4 (63) (8) (119)

SLIDE 59

59

(158)

Capex & Net Free Cash Flow

Analysis of results

(1) Funds from operations after working capital change (2) Includes EPCG put option 1st. tranche and M&A

H1 2017 Restated

(2)

€M

BREAKDOWN BY ACTIVITY BREAKDOWN BY BUSINESS

€M

657 4

8
54

523

187

156 40 196

+33€M (+21%)

+33€M

2017 154€M 2018 187€M

Net Free Cash Flow

76
180

637 (33) 413 (13) 89 (10) (53) (1) (127) 102 (153)

SLIDE 60

60

Business Units EBITDA Breakdown

€M

Reported Ordinary Reported Ordinary

a2a 637 592 657 631 +20 +3% +39 +7% Generation 186 185 225 218 +39 +21% +33 +18%

Power Generation 155 154 215 208 +60 +39% +54 +35% Gas Margin 32 32 2 2

30
94%
30
94%

Photovoltaic 8 8 +8 n.s. +8 n.s.

Market 122 87 111 95

11
9%

+8 +9%

Energy Retail 77 72 74 74

3
4%

+2 +3% Public Lighting 7 7 8 8 +1 +14% +1 +14% Energy Solutions 38 8 29 13

9
24%

+5 +63%

Waste 137 133 136 134

1
1%

+1 +1%

Collection 37 36 28 28

9
24%
8
22%

Urban Waste Treatment 95 92 98 96 +3 +3% +4 +4% Other Treatment Plants 5 5 9 9 +4 +80% +4 +80%

Networks 200 195 192 191

8
4%
4
2%

Electricity Networks 66 64 61 62

5
8%
2
3%

Gas Networks 65 63 61 60

4
6%
3
5%

Water Cycle 16 17 21 21 +5 +31% +4 +24% District Heating 53 51 49 48

4
8%
3
6%

Smartcity 3 3 4 4 +1 n.s. +1 n.s. Other

11
11
11
11

+0 n.s. 1 n.s.

1H 2017 1H 2018 Delta Reported Ordinary

Annexes

SLIDE 61

61

P&L and Balance Sheet

Annexes – H1 consolidated results

€M €M

SLIDE 62

62

Annexes

Energy Scenario

Average data 1H 2017 1H 2018 D % vs 2017 Brent $/bbl 52,8 71,1 35% CO2 - EU ETS cost €/Tonn 5,0 12,1 n.s. €/$ €/$ 1,1 1,2 12% Brent € €/bbl 48,9 58,8 20% PSV(1) €/MWh 19,3 22,4 16% AEEGSI Gas Tariff (2) c€/mc 19,1 19,4 2% Coal € (API2) €/Tonn 72,9 72,8 0% PUN baseload(3) €/MWh 51,2 53,8 5% PUN peak(3) €/MWh 57,4 60,5 5% PUN off-peak(3) €/MWh 47,7 50,1 5% CCGT gas cost(4) €/MWh 45,5 52,9 16% Spark Spread CCGT_PSV vs Baseload €/MWh 5,6 0,9

84%

Spark Spread CCGT_PSV vs Peakload €/MWh 11,8 7,5

36%

Spark Spread CCGT_PSV vs Off-Peak €/MWh 2,2

2,8

n.s. Clean Spark Spread vs Baseload €/MWh 3,8

3,7

n.s. Clean Spark Spread vs Peakload €/MWh 9,9 2,9

71%

Clean Dark Spread vs Baseload(5) €/MWh 9,3 5,9

37%

(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

SLIDE 63

63

Update on Strategic Progress

Annexes

Sermide CCGT restarted (Group 3 400

MW)

Electric rotor revamping of Premadio

hydro plant (Group 1)

Pilot project on UVAP* launched

GENERATION WASTE MARKET NETWORKS

a2a T 2018 2022

T

Transformation

E

Excellence

a2a E 2018 2022 C

Community

a2a C 2018 2022

Increased industrial waste plants

efficiencies and more valuable hazardous waste mix

MoU with Coldiretti, Bonifiche Ferraresi,

Snam and GSE to recover biomethane from waste

Investments in H1 18:

~ 40 €M in Digital and Tech innovation

2,000+ employees

involved in change management activities

n issues of operational

excellence

10 new initiatives of

process redesign completed with an agile approach

INTERNAL Community:

‒ 2nd wave smart working (800+ employees) ‒ Welfare Package introduction ‒ Go live new Performance Management process ‒ Talent Program extension on all BUs ‒ Pilot on new digital workplace (intranet)

EXTERNAL Community:

‒ Innova2a project: first Shark Tank completed ‒ 16 concepts analyzed  10 projects on-going

Sustainability

First Consolidated Disclosure of Non-Financial Information Report presented to Shareholders' Meeting
Submission of Science-Based Target Initiative commitment to set emissions reductions targets
“Action2art” event, in order to promote circular economy matters in the schools
Northern Lombardy multi-utility deal finalised (+ 250K customers

mass market EE & GAS, + 300K POD gas distribution, ..)

* UVAP (Unità Virtuali Abilitate di Produzione) = aggregated production unit for ancillary services market ** Personal Protective Equipment

+65 K new free market contracts
Set up 3 out of 5 stores SPAZIO A2A

with new technologies of remote interaction, trained 105 new sales consultants

E-mobility: tender won in Bergamo
CAPEX acceleration (+20 €M vs H1 17)
Innovative electric boiler for Canavese

cogeneration plant (first tech innovation in Italy)

Smart PPE** for workers

SLIDE 64

64

A2A Investor Relations Team Mail: ir@a2a.eu Phone: +39 02 7720 3974 http://www.a2a.eu/en/investor/

CONTACTS AND IR PRODUCTS

a2a 2017 Investor Guidebook

Investor Databook (excel file) Concise and thorough insight in the A2A Group in the form of a long presentation divided into three main parts: Our World, Our Results and Our

Responsibilities. The selected contents are all publicly available information,

which you may find spread across a large number of Company documents

Historical economic, financial and operational company data as of 2008 – on

annual and quarterly basis

Economic, financial and operational data useful for

building A2A earnings model – 2015 FY reported and 2016-20 BP forecast

Tables of the Investor Guidebook mainly relevant to a quantitative analysis

Periodic update service for investors and analysts

n

the significant steps of A2A Business Plan – such as relevant investments, new projects, achievements, contracts, agreements. If you wish to subscribe to the service, please visit A2A website at the following link http://www.a2a.eu/en/investor/overview /newsletter/ Brief and synthetic document that shows the highlights and the strengths of A2A business model Moreover A2A publishes the following documents in the Investor Library Section

n A2A website:
Documents prepared by the Market Analysis, Modeling and Pricing Unit of A2A
Overview of the Italian Energy Market (yearly basis)
Notes on energy and environmental markets (quarterly basis)
Documents prepared by Divisional Managers of A2A
A2A Environment BU
A2A Networks & Heat BU
Main Regulatory Issues for Investors

Newsletter Publications

The publications are available at the following link: http://www.a2a.eu/en/investor/guidebook/

a2a 2017 Company Profile

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

n 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

nly at the date on which they are made.