A2A 2019-23 1 STRATEGIC PLAN - s3-eu-west-1.amazonaws.com 2019-23 Strategic Plan_.pdf · value...

1A2A 2019-23 STRATEGIC PLAN

Milan, April 3rd 2019

VALUE CREATION PILLARS

2019-23 FINANCIALS

CLOSING REMARKS

MAIN TRENDS & INDUSTRIAL MODEL

MAIN TRENDS & INDUSTRIAL MODEL | VALUE CREATION PILLARS | 2019-23 FINANCIALS | CLOSING REMARKS

3

2019-23 STRATEGIC PLAN KEY POINTS

• TEC framework confirmed

• Lower-risk profile

• Targets enhanced

• Higher focus on sustainable businesses

8• Improved and reliable dividend policy

€c

EBITDA@2023

NFP @2023

2019-23CAPEX

1€B

3.3 €B

4€B

.5

2.2 xNFP/

EBITDA @2023

min. DIVIDEND PER SHARE from 2020


4

MAIN INDUSTRIAL TRENDS

Notes: 1Ellen MacArthur Foundation (vs.2014); 2International Renewables Energy Agency (vs. 2016); 3 International Energy Agency; 4 Statista 2019; 5EU 2030 target

MARKET INSIGHTS 4x global annual plastic

production by 20501

Decrease of 54÷61% Li-ion

battery storage cost by 20302

From 3 to 125 million

EVs by 2030 driving the electrification3

2.3x GW of RES installed

by 2030 as target PNIEC

Replacement of imported gas by

biomethane from

organic waste

10% limit5 to

landfilling by 2030

Italian coal plant phase-out by 2025

3x connected products4

in the next seven years

32.5% improvement in energy efficiency5 by 2030

MACRO TRENDS

• Landfill 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 inhabitants

and digitalization (IoT)• Green mobility

CIRCULAR ECONOMY ENERGY TRANSITION SMART SOLUTIONS


5

A2A INDUSTRIAL MODEL

a2a T

2019 2023

TTransformation

a2a E

2019 2023

EExcellence

a2a C

2019 2023

CCommunity

Sustainability


6

A2A INDUSTRIAL MODEL – BP HIGHLIGHTS

NEW WORKING SPACES

INNOVATION WITH EXTERNAL ECOSYSTEM

LOCAL AGGREGATIONS

AGILE ORGANIZATION

DIGITAL & TECHNOLOGICAL INNOVATION

DE-RISKING

OPERATIONAL EXCELLENCE

MULTI-BUSINESS VALUE

GENERATION MARKET WASTE NETWORKS

T

C

E

+ 400 kt WTEs (up to 3.0 Mt) extended capacity

9 NEW waste treatment PLANTS

2.7 M CUSTOMERS Mass market free market power & gas

1,660+ CHARGING STATIONS

150+ MW OF NEW RES (up to ~280 MW, 2.2 GW including hydro)

REACTIVE POWER FOR GRID VOLTAGE REGULATION in Brindisi

35 PRIMARY STATIONS, supporting Milan and Brescia electrification

1.4+ M SMART METERS installed


7

A2A 2023 TARGETS

Note: Corporate contribution -14 €M EBITDA @2023; 97 €M CAPEX 2019-23

GENERATION MARKET WASTE NETWORKS

EBITDA@2023

CUMUL. CAPEX2019-23 582 402 943 1,963

MAIN KPI @2023

2.2 GW 6.4 MT 2.6 €BRES INSTALLED (incl. HYDRO)

FREE MARKET CUSTOMERS

WASTE TREATED ELECTRICITYAND GAS RAB

323 323 381 518

2.7 M

1,531

3,985

A2A GROUP€M


VALUE CREATION PILLARS2019-23 FINANCIALS

CLOSING REMARKS

T

Transformation | Excellence | Community | Sustainability


9

GENERATION A2A KEY ACTIONS

• Further expansion of RES platform

• Conventional plant reconversion

• Leadershipconsolidation in flexibleCCGT plants

• Match of growing need for peak capacity

• Exploration of innovativeflexibility services

GREENERPORTFOLIO

ADEQUACY & FLEXIBILITYPROVIDER

• Higher expected PUN

• Slightly lower clean spark spread

• Tougher regulatoryenvironment (planned)

• 50%+ RES @2023 (both merchant and incentives)

• Ongoing projects on UVAM, storage, …

PUN base load

Clean spark spread

Capacity + Incentives

Green merchant

CCGT merchant

Traditional thermal

€/MWh

%

PLANTS CONTRIBUTION MARGIN

PUN & SPREAD

Old PUN

Old clean spark spread

HIGHLIGHTS FROM PREVIOUS STRATEGIC PLAN STATUS & NEW TARGETS



10

GENERATION ACCELERATING TRANSFORMATION

RECONVERSION PROJECTS

Monfalcone

Brindisi

San Filippodel Mela

MARKET GROWING FLEXIBILITY NEED

PLANT RECONVERSION

• Acceleration of thermal plant reconversion, with a circular economy perspective designed according to local needs

RES GROWTH

• Enhanced 2022 PV growth target with reduced LCOE

• Development in RES driven by both selective M&A and grid parity green-field

FLEXIBILITY SOLUTIONS

• Supply of grid voltage regulation services in Brindisi (10 years)

• Gas peakers (5 projects under analysis), storage and hydro pumping to meet flexibility need

A2A NEW RES CAPACITY

MW

M&A

3rd party plants dispatched

Green-field

Additional projects(not included in BP numbers)

Demand

PVproduction

MWFlexibility sources• Hydro reservoir• CCGT• Hydro pumping• Storage• Gas peakers• Demand Response• Power to gas• …

Hours of the day

0 12 24



11

GENERATION 2023 ECONOMIC TARGETS

€M

EBITDA 2019-23 CUMULATED CAPEX EBITDA CASH CONVERSION

%+79

M&A and RES

CCGT

HYDRO+RES

COAL+OTHER

€M

Note: 1 Excluding M&A and RES

normalized1

Flexible and greener energy



12

MARKET A2A KEY ACTIONS

CUSTOMER FOCUS

• Outstanding client service, with multi-channel customer experience

• Preservation of excellent operations

• VAS in safety, comfort, energy-saving

• Digitalization to enhance service/acquisition

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

• +36% free market customers in 2018 also thanks to aggregations

• Target enhanced to 2.7+ M

• Growth from mass market liberalization (July 2020) within a stable totalcustomer base

• +22% lighting points in 1 year

• Target 2023 relaunched

• New projects in flexibility, DERs and PPA

kPOD

k

FREE MARKET MMK – POWER&GAS (EOP)

LIGHTING POINTS

NEW PLAN

OLD PLAN




13

A2A E-MOBILITY NETWORKS

• Boost in e-mobility CAPEX:~30 €M

• 1,660+ charging stations installed (2.5x vs. previous Plan)

• Exploiting full market potential in Lombardy

#

CHARGING STATIONS FOR EVs

MARKET ACCELERATING TRANSFORMATION

WIDEN POWER/GAS SEGMENTS

• Focusing on large clients

• Further opportunities in “Safeguard”1 leveraging excellent meter-to-cashmanagement

€M

ENERGY EFFICIENCY

• Strong boost of EPC projects with significant investments (8x vs. previous plan)

• Contracts for heat management of private buildings (~30 €M CAPEX)

5Y CAPEX

1 Safeguard awarded included in 2019 and 2020 only


NEW PLAN

OLD PLAN

TWh

ENERGY SALES

Large business

MMK and SME free market

Regulated

2 incl. charging stations for B2B and internal fleet (n. 50 in 2018)

2



14

MARKET 2023 ECONOMIC TARGETS

%€M

+95

EBITDA 2019-23 CUMULATED CAPEX EBITDA CASHCONVERSION

€M

Smart City

Public lighting

Energy Solutions

Retail

More solutions to involve customers



15

WASTE A2A KEY ACTIONS

FROM WASTE TO COMMODITY

END-TO-END PARTNER FOR URBAN SERVICES

• Reinforce leadership in recycling, selling high-quality secondary raw materials

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

• Enlarging geographic presence, leveraging value chain integration

• Smart and innovative solutions for our territories

• Improve circularity with innovation

COLLECTION - INHABITANTS SERVED

WASTE TREATED IN A2A PLANTS1

Mt

M

• New WTE capacity approved

• +1.2 Mt treated

• Leadership consolidation in Italian MSW market

• +11% inhabitants

• New areas in Northern Italy

NEW PLAN

OLD PLAN


Note: 1 total waste inflow in each A2A plant



16

WASTE ACCELERATING TRANSFORMATION

"CIRCULAR DIVIDE" REDUCTION

• New plants development to improve waste treatment and disposal

• Circular economy promoter in areas characterized by infrastructural gap

#

NEW PLANTS

%

SORTED COLLECTION

Mt

INDUSTRIAL WASTE

DOWNSTREAM INTEGRATION

• 2018 EU Circular Economy Package shift targets along value chain, from sorted collection to effective material recovery

• Synergic development of sortedcollection services

• Vertical integration downstream in order to support secondary raw materials, focusing on plastic/ paper

INDUSTRIAL WASTE

• Treatment of non- hazardous special waste, boosting innovation and new technologies (i.e. AI for robotic picking)

• Focus on agile collection and logistic dedicated to SMEs

• Entering in B2B environmental services, and partnership in hazardous waste


HIGH

LOW

Source: ISPRA



17

WASTE 2023 ECONOMIC TARGETS

€M

EBITDA

€M

2019-23 CUMULATED CAPEX EBITDA CASH CONVERSION

%

Other

Collection

Plants

Note: 1 average 2022-23

normalized1

Value from end to beginning



18

NETWORKS A2A KEY ACTIONS

SMART GRID AND QUALITY IMPROVEMENT

GASTENDERS

• Achieve smart and resilient networks

• Increase water cycle performance

• Multi-business operation synergies through automated and digital solutions

• Selective growth in high-priority ATEMs

• Focus on geographicalconsolidation

RAB 2018

Incremental RAB 2019-23

€B

RAB GAS & ELECTRICITY

MPOD

• Asset basestrengthening

• +41% electricity CAPEX vs. previous Plan

• Consolidation in gas market

• Scale optimization

POD GAS

ATEM

ACSM AGAM


46



19

NETWORKS ACCELERATING TRANSFORMATION

INSTALLED SMART METERS

K

BOOSTING SMART METERS

• Increased effort in roll-out of new smart meters:

‒ 420 K Gas (~100% digital

@2023)

‒ 850 K Electricity (~65% 2G

@2023)

‒ 143 K Water (~65% digital

@2023)

SUSTAINING ELECTRIFICATION

• Enhancement of electricity network to support growing electrification

• Investments on risers (electrical connection from road level to user's individual apartment)

DECARBONIZATION

• Decarbonization of DH sources, through further development of storage and waste heat recovery

• Phase-out of Lamarmora coal plant

GWh

PRIMARY STATIONS IN MILAN/BRESCIANEW SOURCES FOR DH IN BRESCIA BY 2023

#

115 €M CAPEX

Water

Electricity

Gas

Milan

Brescia




20

1963

NETWORKS 2023 ECONOMIC TARGETS

2964

NETWORKS 2023 ECONOMIC TARGETS

€M€M

EBITDA 2019-23 CUMULATED CAPEX EBITDA CASH CONVERSION

%

Water

Electricity

Gas

Gas Tenders

DH

Note: 1 excluding gas tenders

normalized1

Smarter and more reliable



CLOSING REMARKS

E



22

EXCELLENCE THROUGH MULTI-BUSINESS VALUE CREATION

Typical “multi-business“ benefitsscale synergies on financing, sharing of central unit costs, cost duplication avoidance, …

Vertical integration in each BU value chain: end-to-end results control, commodity prices natural hedging, certainty of supply/demand, …

Integrated interface vs. AuthoritiesCentralized supply chain

Integrated plant dispatchingFuel sourcing & commodities risk managementEngineering skill sharingPV self-consumption solutions for waste treatment plants

O&M skill sharingJoint plant reconversion projects

Demolitions and remediation

Electric fleet developmentIoT and tech solutions for smart bins

Joint commercial offers to clients

Heat supply for District HeatingSewage sludge disposal

Coordinated DH network planningFleet management enhancementWorkforce automation projects

WASTE BUSINESS: SOME EXAMPLES

THREE-FOLD BENEFIT FROM DIVERSIFICATION

Synergies inter adjacent businesses sharing of competence centers, natural hedging inter Bus,single regulation interface, …

1

2

3

50+ €M1 fromintercompany

businesstransactions,up to 70 €M

by 2023

Attractiveplatform for furtherindustrial

partnerships

1 PbT level



23

OPERATIONAL EXCELLENCE


Operational excellence projects up and running

2018 targets achieved and exceeded

Targets @2023 enhanced: ~90 €M of further cumulated savings in 5 years vs. previous Plan

Further projects under evaluation contributing up to 20 €M of additional EBITDA

+17 €M@2018

€M

~90 €Mfurther

cumulated savings



24

FIXED ASSETS

DE-RISKING: ASSET REBALANCING

€B +13%

RegulatedQuasi regulatedMerchant*

* Merchant includes High and Low Volatility

67%49%

73%

Invested capital reshape to a lower-risk profile



25

DIGITAL & TECH INNOVATION DEDICATED CAPEX

€M

680+ €M of cumulated CAPEX on Digital & Technology innovation in 2019-23

Smart meters

E-mobility

New Electric primary stations

New IT tools for trading activities

Advanced Analytics for predictive maintenance, route optimization, …

Robotic Process Automation

IoT for urban development

Artificial Intelligence

Inspections with drones



CLOSING REMARKS

C



27

COMMUNITY PEOPLE STRATEGY

SKILLS AND CHANGE MANAGEMENT

• Network Academy

• Improvement performance

OPERATIVE EXCELLENCE

PEOPLE CARINGDIGITALIZATION MULTIBUSINESS PORTFOLIO

PEOPLE DEVELOPMENT

• Junior/ Senior Talent

• Key people

• Performance management

PROCESS REDESIGN SAFE WORK ENVIRONMENT

• Welfare

• Employability program

• Worker interaction

• HSE core unit inside HR perimeter

• Work environment reshape

• Organizational Health

• DNA digital readiness

• New digital workplace

• Digitalization of HR processes

• Families/roles across BUs

• Intercompany contract

• Staff unit pooling

• Dynamic sizing

• Shared Service Center

• Reorganization

DIVERSITY MANAGEMENT

• Diversity programs

T E C

Enhancing an agile organizationto manage complexity



28

NEW WORKING SPACES FOR A2A COMMUNITY

Real estate optimization to re-design company culture

Full digitalworkplaces

Smart officesto foster collaboration, teamwork & cross synergies

Commuting reductionwith less travel and efficient smart offices

Building optimizationin Milan, Brescia and Bergamo

30+ €M net cash effectfrom net divestments

From 7 corporate buildings in Milan to 1 single hub

1,500 people in 20,000 square metersfor the new A2A hub by 2022



29

2018 2021

Events (eg. Futureland, B-Heroes, …)Idea Challenge (eg. Hackathon, Crowdsourcing, …)Employer Branding (University, Roundtables, …)Social Media Strategy

Internal innovation program 2.0Open Innovation (eg. Open Italy, …)PartnershipDealflow management

BE PART OF THE COMMUNITY

CROWD AS A PARTNER

Bottom-up innovation with dedicated instruments (innovation platform, Innoroom,…) I have/need an idea (internal challenge)

4Innovation committee screening sessions

4+ Innovation Managers

7+ Initiatives in scale-up

90+ A2A people for idea generation

200+ Start-ups met

KEEP INNOVATING

INNOVATION LEVERAGING EXTERNAL ECOSYSTEM

A2Aamong the

most innovative companies

listed on FTSE MIB by 2021

SUSTAINABILITY



CLOSING REMARKS



31

SUSTAINABILITY PLAN PATH

ONLINE MEMBERS OF A2A ENERGIA COMMUNITY

k

CO2 /kWh CARBON INTENSITY

g/kWh

%

SMART WORKING% on total employees applicable

Sustainability targets confirmed and further enhanced

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

Treated waste water

Digital users

# LED lighting points

EV charging stations

Contact center quality

Smart bins Smart meter

Service interruption

Smart grid

Smart city projects

Banco dell’Energia

Roadwork siteinspections

Reduction of the accident rate

Environmental education



32

SUSTAINABILITY ACCELERATING TRANSFORMATION

RES INSTALLED CAPACITY2.5x RES installed in the next 5 years thanks to new acquisitions and greenfield

SRF (Secondary Recovery Fuel) produced by A2A plants 4x SRF produced by A2A waste treatment plants

WOMEN MANAGERSIn 2023 20% of managerial positions will be covered by women

kt %MW

2.5x ~4x +50%


2019-23 FINANCIALSCLOSING REMARKS



34

EBITDA 2018-23

€M

1,192

BYBU

BYMIX

1,531

+339CAGR +5.1%

Merchant High VolatilityMerchant Low VolatilityQuasi RegulatedRegulated

NetworksWaste

MarketGeneration

Corporate & other



35

LARGER COMMUNITY THROUGH LOCAL AGGREGATIONA2A Community widening, consolidating new territories: ACSM-AGAM

#5 provincescovered

A2A

LGH

ACSM-AGAM

~900 k inhabitants served

EBITDA CAPEX

€M

+59 €M

Note: EBITDA and CAPEX shown according to A2A's Business Units; EBITDA corporate -5 €M @2019, -3€M @2023

Generation

Market

Waste

Networks

Corporate & other

Contribution of 120+ €M @2023

GROWTHKEY DRIVERS

Gas tendersCustomer base developmentWTE revampingWaste treatmentDH developmentPublic lighting


36

NET INCOME 2018-23

€M

DEPRECIATION

+116CAGR +6.1%


37

CAPEX 2019-23

Note: "Maintenance" includes mandatory CAPEX

Development

Maintenance

Increase in CAPEX due to ACSM-AGAM consolidation, RES refurbished plan and other organic growth developments

€M

• 568 €M: ACSM AGAM, of which 250 €M gas tenders

• -216 €M: M&A and RES, of which -116 €M achieved in 2018 and -100 €M thanks to reduced cash need

• 357 €M: other CAPEX for organic growth, mainly new waste plants and electricity networks

Other

Market

M&A and RES

Waste

Gas tenders

Networks

Generation


38

CASH FLOW GENERATION 2018-23

-0.1€B

2.2x2.5x NFP/EBITDA


39

GUIDANCE 2019

1,155 - 1,185 €MEBITDA

300 - 330 €MNET INCOME

700 €M CAPEX

-200 €M NET FREE CASH FLOW

Including non recurring 25 €M

~

~


2019-23 FINANCIALS

CLOSING REMARKS



41

Improved dividend policywith lower-risk business mix

7.025% 2018

7.7523% 2019

min +5% yearlymin 26%

20212023

A2A DIVIDEND PER SHARE (€c)

FFO/NET DEBT

DIVIDENDS

8.026% 2020


42

ADDITIONAL PROJECTS

UPSIDESOF ONGOING ACTIVITIES

EXTERNAL GROWTH

COMPLEXINDUSTRIALPROJECTS

FEASIBILITY PROJECT LIST EBITDA IMPACT

Peak generation technology development

Operational excellence: further Mistral roll-outs

New treatment and recovery waste plants

Further public retail tender gain (e.g. Safeguard)

DER & RES acquisitions with possible minority interests

Local aggregations

Waste M&A on material recovery plants

Market (power and gas retail, flexibility and ESCO)

Corporate Venture Capital

Potential development abroad

Extra investments for risers (1)

Generation plants reconversion

Vertical downstream integration on environment value chain

B2B services and hazardous waste segments

Roll-out of pilot innovation projects

10 - 30

10 - 20

[NEW] 60 - 80

[NEW] 5 - 10

20 - 40

60 - 70

[NEW] 10 - 15

[NEW] tbd

[NEW] tbd

10 - 20

5 - 10

5 - 10

[NEW] 5 - 10

[NEW] tbd

[NEW] tbd

• • • •

• • • •

• • • •

• • • •

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

• • • •

• • • •

• • • •

• • • •

• • • •

• • • •

• • • •

• • • •

• • • •

• • • •

• • • •

ADDITIONAL PROJECTS€M

Total potential EBITDA from additional projects is 200 – 300+ €M


43

CLOSING REMARKS

Integrated multi-business portfolio bringing a natural risk hedging and maximizing cross-BU synergies

Ambitious but achievable targets delivering a solid economic-financial growth

Significant upside potential from additional projects to mitigate external risk factors

Our path to long-term view is rooted on sustainable business

44This 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

www.a2a.eu/en/investor/

Annexes and data are available on A2A website at the following links:

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

www.a2a.eu/en/investors/strategy

CONTACTS

45

ANNEXES

46

SCENARIO AND MAIN ASSUMPTIONS2019-23 STRATEGIC PLAN

UdM 2017 2018 2019 2020 2021 2022 2023

Exchange rate €/$ €/$ 1.13 1.18 1.19 1.22 1.24 1.26 1.28

ICE Brent €/bbl 48.5 60.6 66.0 66.0 65.3 64.7 64.8

Coal API 2 €/tonn 74.8 78.0 80.2 68.0 65.3 64.3 64.1

CO2 EUA ETS €/tonn 5.8 15.9 21.5 21.5 21.8 22.2 22.9

ARERA Gas Tariff (Pfor) €c/mc 18.1 22.0 23.3 23.1 20.0 19.5 19.5

PSV €/MWh 19.6 24.2 23.5 23.4 20.5 20.0 20.0

TTF €/MWh 17.3 22.8 21.6 21.6 18.7 18.2 18.2

PUN Base Load €/MWh 53.9 61.3 65.8 63.6 58.2 57.5 58.1

PUN Peak Load €/MWh 61.8 68.0 74.7 69.6 64.2 63.5 64.1

CCGT Gas Cost (PSV) * €/MWh 46.4 56.7 55.7 55.5 49.2 48.1 48.1

Peak Spark Spread €/MWh 15.3 11.3 19.0 14.1 15.0 15.4 16.0

Spark Spread (PSV) €/MWh 7.5 4.6 10.1 8.1 9.0 9.4 10.0

Clean Spark Spread (PSV) €/MWh 5.3 -1.4 1.5 -0.5 0.3 0.5 0.8

Dark Spread €/MWh 16.3 22.4 26.0 28.3 24.1 23.9 24.6

Clean Dark Spread €/MWh 10.6 6.9 5.1 7.4 2.9 2.3 2.3

White certificates €/TEE 274.3 298.6 259.1 260.0 260.0 260.0 260.0

* CCGT efficiency: 51%

47

* 2018 excluding one-off equal to 11€M; 2018 in a like-for-like basis

*

*

Breakdown by BU sub-segment

Breakdown by growth driver

BU Generation & Trading

CAGR -2.1%€M

2019-23 STRATEGIC PLAN

67

48

Plant Dispatching• Stable production level vs 2018 in Coal, CCGT and Hydro normalized

• PUN baseload 2023: 58 €/MWh

• Stable Clean Peak Spark Spread 2023: 7 €/MWh

Capacity & Ancillary Markets

• Introduction of Capacity Market mechanism in Q4 2019

• MSD margins in line with last 3-year average net of extraordinary events recorded in 2016, 2017 and 2018

BUSINESS PLAN ASSUMPTIONSDRIVER

Photovoltaic & Development

Options

• Acquisitions already concluded for a total capacity installed ~100MW at the end of 2018

• ~ +155MW of new photovoltaic installed capacity in 2023 expected thanks to new developments and new acquisitions

• REN investment: 295 €M from 2019 to 2023

• +6M€ EBITDA expected in 2023 for Brindisi Sincrono plant (+22€M EBITDA cumulated from 2020 to 2023)

BU Generation & Trading – Driver&Assumptions2019-23 STRATEGIC PLAN

49


Breakdown by growthdriver

CAGR +11.5%

*

*

*2018 excluding one-off equal to 30 €M; 2018 in a like-for-like basis

+95

+95

€M

BU Market 2019-23 STRATEGIC PLAN

** Smart City, Energy Solution, Public Lighting, Value Added Services and ACSM AGAM (ex. Energy retail)

**

**

50

Free Market development

• Significant step in Mass Market customer base due to market full liberalization (2.7M POD in 2023 vs 1.2M POD in 2018)

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

• Increase in B2B sales (+2TWh and +0.5 Gas Bcm 2023 vs 2018)


Ene

rgy

Re

tail

Unitary Margin

Fixed costs

• 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

New services• Expansion in in public lighting (organic growth), energy efficiency and e-mobility

• Smart Services

BU Market – Driver&Assumptions2019-23 STRATEGIC PLAN

ACSM AGAM• 21M€ incremental Ebitda (2023 Vs 2019) with 101M€ of Capex, mostly in Public Lighting and

Energy Efficiency

51



* 2018 excluding one-off equal to -1€M; 2018 in a like-for-like basis

€M

BU Waste2019-23 STRATEGIC PLAN

*

*

CAGR +7.1%

52

Existing treatment

plants

New treatment

plants


BU Waste – Driver&Assumptions

• Price increase in electicity

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

• ~1,4 Mtons of growing capacity on 14 sites, mainly related to organic and plastic treatment and to two new WTE plant

• 62% of development (~900 kton) already authorized or in advanced stage

• Plant roll-outs spread through plan timespan

• Most of economic benefits from internal waste flows integration

2019-23 STRATEGIC PLAN

53

2019-23 STRATEGIC PLANBU Waste – Plants and projects details

# Plants / Upgrades Capacity (kton)2019 - 2023

Capex

In operation 1 45 0

Authorized 3 515 347

Authorization in advanced

stage6 327 133

SUB - TOTAL NEW PLANTS 10 887 480

Authorization not

necessary 2 300 6

Authorization to be

requested 2 250 80

TOTAL 14 1437 565

54

€M

BU Networks2019-23 STRATEGIC PLAN

* 2018 excluding one-off equal to +3€M; 2018 in a like-for-like basis

*

CAGR +5.0%

HeatingNetworks

*

55



55

Gas tenders• #PoD: ~+400k (+20%)

• #ATEMs: 18÷23 (target @ 2023)

• CAPEX: ~500€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. 55 MW/Yr average past 5 yrs)


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

• Current regulatory structure continuity until 2023 (no assumptions related to TOTEX/Standard costs regulations)

Cost Efficiency

• Mistral project included in the BP projections (ongoing projects and new initiatives)

BU Networks – Driver&Assumptions2019-23 STRATEGIC PLAN

56

2018 2023P∆ vs

2018

∆ % vs

2018

A2A Group Thermal production GWh 12.948 13.698 750 6%

of which

- CCGT production GWh 10.336 10.927 591 6%

- Coal production GWh 1.922 2.240 318 17%

- Oil production GWh 690 531 159- -23%

A2A Group Hydro production GWh 4.539 4.305 234- -5%

A2A Group Photovoltaic production GWh 64 266 202 317%

Wholesale electricity sales and Foreign Markets GWh 12.290 7.115 5.174- -42%

Ipex sales GWh 5.505 4.953 552- -10%

Electricity sales GWh 10.826 15.442 4.615 43%

- of which free market GWh 9.192 15.442 6.249 68%

Gas sales Mmc 1.925 3.022 1.097 57%

- of which free market Mmc 1.338 3.022 1.684 126%

Number of POD n°/000 1.135 1.187 53 5%

- of which free market n°/000 568 1.187 619 109%

Number of PDR n°/000 1.511 1.559 48 3%

- of which free market n°/000 634 1.559 926 146%

RAB M�€ 2.041 2.615 574 28%

- Electricity M�€ 646 824 178 28%

- Gas M�€ 1.395 1.791 396 28%

Water distributed Mmc 72 80 8 11%

Heat volumes sales GWht 2.768 3.196 428 15%

Cogeneration electricity sales GWh 317 214 103- -32%

Collected waste Kton 1.671 1.754 83 5%

Waste disposal Kton 3.547 4.347 799 23%

WTE and other plants electricity production GWh 1.807 2.113 306 17%

WTE and other plants heat production GWht 1.419 1.712 293 21%

KPI2019-23 STRATEGIC PLAN

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