[PPT] - A2A STRATEGIC PLAN 2017 RESULTS & BUSINESS PLAN UPDATE 9M 2018 PowerPoint Presentation

SLIDE 1

A2A STRATEGIC PLAN

2017 RESULTS & BUSINESS PLAN UPDATE
9M 2018 RESULTS

November 2018

SLIDE 2

2017 RESULTS

WHERE WE START FROM

2018-22 STRATEGIC PLAN

FINANCIALS

CLOSING REMARKS

9M 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

€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 5

2017 RESULTS

WHERE WE START FROM

2018-22 STRATEGIC PLAN

FINANCIALS

CLOSING REMARKS

9M 2018 RESULTS

Presented on March 20th, 2018

SLIDE 6

6

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 7

7

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 8

Strategic framework | Transformation | Excellence | Community | Sustainability

8

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 9

Strategic framework | Transformation | Excellence | Community | Sustainability

9

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 10

Strategic framework rk | Transformation | Excellence | Community | Sustainability

10

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 11

Strategic framework rk | Transformation | Excellence | Community | Sustainability

11

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 12

Strategic framework rk | Transformation | Excellence | Community | Sustainability

12

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 13

Strategic framework rk | Transformation | Excellence | Community | Sustainability

13

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

14

‘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 15

Strategic framework rk | Transformation | Excellence | Community | Sustainability

15

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 16

Strategic framework rk | Transformation | Excellence | Community | Sustainability

16

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 17

Strategic framework rk | Transformation | Excellence | Community | Sustainability

17

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 18

Strategic framework rk | Transformation | Excellence | Community | Sustainability

18

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 19

Strategic framework rk | Transformation | Excellence | Community | Sustainability

19

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 20

Strategic framework | Transformation | Excellence | Community | Sustainability

20

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 21

Strategic framework | Transformation | Excellence | Community | Sustainability

21

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 22

Strategic framework | Transformation | Excellenc nce | Community | Sustainability

22

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 23

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

23

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 24

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

24

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 25

25

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 26

26

€M

+189

CAGR +10.5%

NET INCOME 2017-22

SLIDE 27

27

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 28

28

€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 29

29

GUIDANCE 2018 – UPDATED IN NOVEMBER 2018

1,200 - 1,240 €M

2018

EBITDA

>400 €M

NET INCOME CAPEX(1)

170-200€M

NET FREE CASH FLOW

GUIDANCE INCREASED

Incl. non recurring ~33€M
Incl. ACSM AGAM ~35€M

~550 €M

(1) Includes M&A

SLIDE 30

30

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 31

31

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 32

32

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 – FOCUS ON AGGREGATIONS

€M

NORTHERN LOMBARDY MULTIUTILITY consolidated line-by-line as of 1st July 2018

Benef nefits s of indu dustrial partner nershi hip: p:

Sharing techn

hnical al and mana nagem ement ent skills

Optimization of indu

dust strial and fina nancial pos

sition

Prese eservat ation

n of the ident

entity of existing companies Enha hancement nt of inves estment nt capacity Improvement of qual ality stan anda dards ds and service level

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

A2A LGH

LARIO RETI HOLDING AEVV ACSM-AGAM ASPEM

Industrial entities strongly rooted in our territory

SLIDE 33

33

#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 34

34

CONSOLIDATED RESULTS: P&L AND BALANCE SHEET

FY 2017 VS FY 2016 RESULTS

€M €M

ANNEXES

SLIDE 35

35

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 36

36

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 37

37

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 38

38

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 39

39

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 40

40

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 41

41

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 42

42

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 43

43

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 44

44

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 45

45

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 46

46

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 47

47

* 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 48

48

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 49

49

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 50

2017 RESULTS

WHERE WE START FROM

2018-22 STRATEGIC PLAN

FINANCIALS CLOSING REMARKS 9M 2018 RESULTS

SLIDE 51

51

Key Financial Indicators

Highlights

9M 2018 vs. 9M 2017

REVENUES EBITDA Ordinary EBITDA Reported NET FINANCIAL POSITION GROUP NET INCOME

rdinary

GROUP NET INCOME

SPREAD CCGT GAS MARGIN PAPER PRICES CCGT AND HYDRO VOLUMES WASTE TREATMENT PRICES ENVIRONMENTAL MARKETS PHV CONTRIBUTION ACSM AGAM FIRST CONSOLIDATION

SLIDE 52

52

Collection: lower paper prices and

higher disposal costs

Increasing treatment prices
Higher volumes (and prices) in the

industrial segment

First Treatment Plastic Plant opened in

November

Turnaround in EE RAB
GAS networks: above average quality

premium in 2017

District Heating: higher volumes, offset by

negative scenario (coal & Co2)

IWC: Higher tariffs
Free market customer base over 1M,

3x target achieved 1 year ahead

Higher retail unit margins
Strong advertising, marketing and sales

expenses in Q3

Material increase in gas price, affecting:
Gas Portfolio
Clean Spark spreads
Hydro Production +11.5%
Increasing contribution from PHV

Analysis of results

Group EBITDA Overview

€M

GENERATION WASTE MARKET NETWORKS

+2% +2% +2%

2%

SLIDE 53

53

From EBITDA to Group Net Income

Analysis of results

€M

9M 2017 Restated 876 (296) 473 (92) (2) 226 5 (91) (21) (153)

SLIDE 54

54

(245)

Capex & Net Free Cash Flow

Analysis of results

(1) Funds from operations after working capital change

9M 2017 Restated

€M

BREAKDOWN BY ACTIVITY BREAKDOWN BY BUSINESS

€M

875

10
11
19
59

788

304

304 75 349

+59 €M (+24%)

+59€M

2017 245 €M 2018 304 €M 12

180

876 (26) 54 (262) 116 (21) (62) (104) (119) 146 (153) Change in perimeter ACSM AGAM +8€M

30

SLIDE 55

55

Reported Ordinary Reported Ordinary

a2a 876 818 875 824

1
0%

+6 +1% Generation 255 252 265 257 +10 +4% +5 +2%

Power Generation 219 217 250 243 +31 +14% +26 +12% Gas Margin 35 35

1
1
36

n.s.

36

n.s. Photovoltaic 15 15 +15 n.s. +15 n.s. ACSM AGAM 1 1 +0 n.s. +0 n.s.

Market 166 124 152 126

14
8%

+2 +2%

Energy Retail 114 102 110 102

4
4%

+0 +0% Public Lighting 11 11 10 10

1
13%
1
13%

Energy Solutions 40 11 30 14

10
25%

+3 +33% ACSM AGAM 2 +2 n.s. +0 n.s.

Waste 195 190 197 194 +2 +1% +4 +2%

Collection 58 58 45 46

13
23%
12
21%

Urban Treatment 128 125 138 136 +10 +8% +11 +9% Industrial Treatment 5 5 12 12 +7 >100% +7 >100% International Project 2 2

2

n.s.

2

n.s. ACSM AGAM 1 2 +1 n.s. +0 n.s.

Networks 270 262 273 258 +3 +1%

4
2%

Electricity Networks 99 96 93 94

6
6%
2
2%

Gas Networks 97 94 94 93

2
2%
1
1%

Water Cycle 28 29 31 31 +3 +12% +2 +7% District Heating 45 43 41 40

4
10%
3
7%

ACSM AGAM 2 14 +12 n.s. +0 n.s.

Smartcity 4 4 6 6 +2 n.s. +2 n.s. Other

13
13
18
17
5

n.s. 1 n.s.

9M 2017 9M 2018 Change Reported Ordinary

Business Units EBITDA Breakdown

Annexes

€M

* * * *

* ACSM AGAM’s 2017 values refer to spin off (Aspem and mini idro)

SLIDE 56

56

P&L and Balance Sheet

Annexes – 9M consolidated results

€M €M

9M 2017

Restated

9M 2018 Delta vs 2017 Delta % vs 2017 Revenues 4,147 4,518 371 8.9% EBITDA 876 875 (1)

0.1%

D&A (296) (333) (37) 12.5% Provisions (21) 2 23 n.s. EBIT 559 544 (15)

2.7%

Net Financial Expenses (91) (86) 5

5.5%

Associates & JV 5 4 (1)

20.0%

Result from non

recurr. Transactions

6 6 n.s. EBT 473 468 (5)

1.1%

Taxes (153) (146) 7

4.6%

Net Result from

disc. operations

(92) 20 112 n.s. Minorities (2) (7) (5) n.s. Group Net Income 226 335 109 48.2%

The restated figures reflect the reclassification of the EPCG Group’s results in accordance with IFRS 5

30.09.2017 * 31.12.2017 30.09.2018 Delta 9M 2018 Vs FY 2017 Delta 9M 2018 Vs 9M 2017 Tangible Assets 4,516 4,606 4,632 26 116 Intangible Assets 1,782 1,863 2,129 266 347 Shareholdings and Other Non Current Financial Assets 73 71 25 (46) (48) Other Non Current Assets/Liabilities (84) (117) (133) (16) (49) Deferred Tax Assets and Liabilities 321 301 272 (29) (49) Provisions for Risks, Charges and Liabilities for landfills (622) (625) (595) 30 27 Employee Benefits (331) (319) (312) 7 19 Net Fixed Capital 5,655 5,780 6,018 238 363 Net Working Capital 569 437 493 56 (76) Other Current Asset / Liabilities (295) (305) (310) (5) (15) Current Tax Asset / Liabilities 48 103 (20) (123) (68) Working Capital and Other Current Assets/Liabilities 322 235 163 (72) (159) Non current Assets /Liabilities held for sale 217 224 109 (115) (108) Total Capital Employed 6,194 6,239 6,290 51 96 Equity 2,942 3,013 3,413 400 471 Net Financial Position 3,252 3,226 2,877 (349) (375) Total Sources 6,194 6,239 6,290 51 96 * Shareholding in EPCG valued at fair value, reclassified according to IFRS5

SLIDE 57

57

Scenario and Volumes

Annexes

(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 9M 2017 9M 2018 D % vs 2017 Brent $/bbl 52.6 72.7 38% CO2 - EU ETS cost €/Tonn 5.3 14.4 n.s. €/$ €/$ 1.1 1.2 7% Brent € €/bbl 47.4 61.0 29% PSV(1) €/MWh 18.8 23.6 26% AEEGSI Gas Tariff (2) c€/mc 18.3 20.7 13% Coal € (API2) €/Tonn 73.2 77.1 5% PUN baseload(3) €/MWh 51.3 58.9 15% PUN peak(3) €/MWh 57.5 64.9 13% PUN off-peak(3) €/MWh 47.8 55.5 16% CCGT gas cost(4) €/MWh 44.3 55.3 25% Costo Coal €/MWh 37.0 38.5 4% Environmental costs (CCGT) €/MWh 2.0 5.4 n.s. Environmental costs (Coal) €/MWh 5.2 14.0 n.s. Spark Spread CCGT_PSV vs Baseload €/MWh 7.0 3.6

49%

Spark Spread CCGT_PSV vs Peakload €/MWh 13.2 9.6

27%

Spark Spread CCGT_PSV vs Off-Peak €/MWh 3.5 0.2

94%

Clean Spark Spread vs Baseload €/MWh 5.0

1.9

n.s. Clean Spark Spread vs Peakload €/MWh 11.2 4.2

63%

Clean Dark Spread vs Baseload(5) €/MWh 9.1 6.4

30%

9M 2017 9M 2018 Δ vs 2017 Δ % vs 2017 A2A Group Thermal production GWh 8,205 9,558 1,352 16% CCGT production GWh 5,942 7,596 1,653 28% Coal production GWh 1,398 1,356

42
3%

Oil production GWh 865 606

259
30%

A2A Group Hydro production GWh 2,835 3,161 326 11% A2A Group Photovoltaic production GWh 2 53 52 3392% Wholesale electricity sales and Foreign Markets GWh 6,143 8,689 2,545 41% Ipex sales GWh 6,862 4,053

2,809
41%

Electricity sales GWh 6,132 7,977 1,846 30% Gas sales Mmc 1,056 1,192 136 13% Electricity distributed GWh 8,686 8,885 199 2% Gas distributed Mmc 1,601 1,716 115 7% Water distributed Mmc 52 52 1 1% Heat volumes sales GWht 1,677 1,775 99 6% Cogeneration electricity sales GWh 172 204 32 18% Collected waste Kton 1,189 1,231 42 4% Waste disposal Kton 2,548 2,611 63 2% WTE and other plants electricity production GWh 1,344 1,329

16
1%

WTE and other plants heat production GWht 871 906 35 4%

(1) Net of intermediated IPEX volumes

KPIs include ACSM-AGAM contribution

SLIDE 58

58

INTERNAL Community:

‒ Establishment of Young Talent Program ‒ New digital workplace on all employees

EXTERNAL Community:

‒ Innova2a project: second and third Shark Tank completed (200+ colleagues involved) ‒ 50+ initiatives in portfolio, of which 19 in execution and 5 in scale-up ‒ Enerchain: joined the

pen innovation project
n blockchain with

major players in the industry

Partnership with Fiera Milano for

the construction of the largest Rooftop solar panel in EU (10-14 MW)

6 MW of UVAP assigned, supplied

through thermal driven cogeneration + 1 MW UVAC

GENERATION WASTE MARKET NETWORKS

a2a T 2018 2022

T

Transformation

E

Excellence

a2a E 2018 2022 C

Community

a2a C 2018 2022

Opening of the 1st Plastic treatment

plant (Cavaglià) with innovative process for material recovery

Increasing of sorted waste

collection in Milan up to 60%

Awarding of collection tender in

Como province (8,000+ inhabitants)

5 processes

redesigned

Ongoing training on

Agile and Operational Excellence for the whole A2A management team

64 €M of

investments in Digital and Tech Ytd

Sustainability

Signature of the first credit line in Italy linked to the goals of the group's sustainability plan and the standard ethics rating
A2A included in the FTSE4Good Index Series
Public presentation of the 2017 A2A Integrated Report, 10th edition about group’s performances on sustainability
N. 5 Territorial Integrated Reports prepared and presented: Milan, Brescia, Bergamo, Sondrio and Friuli Venezia Giulia
Northern Lombardy multi-utility developments – Takeover
f A2A on ACSM-AGAM completed

Annexes

Update on Strategic Progress

+60 K new free market contracts
Digital campaign Member get Member
VAS: Casa Sicura commercial offer
Agreement for new EV charging

stations in Franciacorta and Cremona

Opening of new cogeneration

plant of Verziano, to support sewage treatment

Smart meter water cycle roll-out
Gas tender Milano 1 officially

awarded

SLIDE 59

59

Contacts and IR Products

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 –
n annual and quarterly basis
Economic, financial and operational data useful for

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

Tables
f the

Investor Guidebook mainly relevant to a quantitative analysis Periodic update service for investors and analysts on the significant steps

f

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/over view/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/

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

n 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: ir@a2a.eu Phone: +39 02 7720 3974 http://www.a2a.eu/en/investor/

SLIDE 60

60

A2A Investment Proposition

VALUE

FROM ASSET QUALITY, DIVERSIFICATION & SYNERGIES DISCIPLINED

GROWTH

OPEN TO SECTOR DYNAMICS

SUSTAINABILITY

AS A KEY PILLAR FOCUS ON

DIVIDENDS