2013 Investor Guidebook · • The business units of the company have a first class asset base -...

a2a2013

InvestorGuidebook

This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.

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DISCLAIMER - This document has been prepared by A2A solely for investors and analysts. This document does not constitute an offer or invitation to purchase or subscribe any shares or other securities and neither it nor anypart of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. Some information contained herein and other material discussed at the meetings may include forward-lookinginformation based on A2A’s current beliefs and expectations. These statements are based on current plans, estimates, projections, and projects and therefore you should not place undue reliance on them. Forward-lookingstatements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Such factorsinclude, but are not limited to: changes in global economic business, changes in the price of certain commodities including electricity, gas and coal, the competitive market and regulatory factors. Moreover, forward-lookingstatements are current only at the date they are made.

This symbol marks the pages where Exceldownloads are availableHistorical series available in the Annual andquarterly Databooks:http://www.a2a.eu/en/investor/tool/index.htmlor in dedicated sections

This symbol marks the pages which may besubject to updates during the year

Reference to more in-depth, updates anddocuments available in A2A website@

Resources:

Guidebook in excel: this file is part of

the Guidebook kit and contains all the tables inthe Guidebook in excel format

Our Worldp. 4 - 21

Our Resultsp. 22 - 37

Our Responsibilitiesp. 38 - 49

Welcome to A2A Investor Guidebook,prepared for investors and financialanalysts to get a thorough insight into theA2A Group.In order to get the most out of it we haveprovided the Resources section aside, whichrefers to additional material available in thecompany website: www.a2a.eu. You willfind further such references in the Indexpages.

We would like to get your feedback andsuggestions to improve this product.Please write to: [email protected]

A2A Investor Relations Team

The Guidebook starts with the Company Profile at page 3…

http://www.a2a.eu/en/investor/tool/index.html

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mailto:[email protected]


Company Profile

Our Results• In 2012, despite the worsening of the

economic scenario, A2A was able to post agrowing result at operating level. Netincome was boosted also by disposals in linewith the business plan guidelines

• A2A medium-term financial strategy is aimedat lengthening the average debt maturity,maintaining an adequate financial flexibilityand lowering the cost of debt to support theCompany rating

• A2A adopts a prudent energy risk policy,part of its Enterprise Risk Managementmodel, whose purpose is to further developand integrate risk management activitiesinto the business process

Our World• A2A is active in energy (electricity and gas),

cogeneration and district heating, waste anddistribution networks – a businessdiversification which spans from regulated tomarket exposure thus considerably loweringits economic risk profile

• Born in 2008 from the merger of AEM, ASMand AMSA, A2A operates throughout Italy,predominantly in Lombardy.

• The business units of the company have a firstclass asset base - both plants and networks.Long term concessions increase visibility

• A2A business model is very flexible. It allowsfor optimizations both in the business unitsand across them. The current strategy hasbeen set out in the 2013-2015 Business Plan.2012 has been a benchmark year for theexecution of A2A long term strategy and theonset of the new course set by the newBusiness Plan

• The strategic priority in the short term is thestrengthening of the company throughbalance sheet optimization and deleveraging,operating efficiency, capital discipline andindustrial projects (Edipower integration andA2A Ambiente). Long term, growth will be thepriority to be achieved in waste and districtheating

• At international level A2A mainly operates inMontenegro through EPCG (electricity)

Our Responsibilities• A2A asset portfolio is characterized by a

high weight of green component. Largescale renewable production (hydroelectric,WTE), high efficiency production(cogeneration with lower CO2 emissions)and innovative technologies to increaseenergy savings. Moreover, A2A mayleverage on a large and loyal customer baseas a natural hedge for its energy portfolio.These mark the Company commitment tosustainability, a yet untapped source ofvalue for investors

• Since its inception A2A has adopted thetwo- tier corporate governance

• Milan and Brescia cities are the majorshareholders with a joint control of 55%

3

A2A - The leading Italian multiutility

(1) Group net income adjusted for the impact of extraordinary items:2012 = 116 €M; 2011 = 165; 2010 = 243

Business units: top strengths

Energy

2 GW hydro installed capacity in Italy

Cogeneration and District Heating

first domestic operator

Wasten. 1 for waste disposal through WTE plants

Networks

incumbent in its 3 key gas areas


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Index

Our World Our Results Our Responsibilities

More in-depth, updates and documents available in the following website sections:• A2A Group: http://www.a2a.eu/en/company/• Assets and Activities: http://www.a2a.eu/en/plants_networks/• Major Transactions: http://www.a2a.eu/en/investor/overview/strategy/acquisition.html• Business Plan: http://www.a2a.eu/en/investor/conference/

@

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

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

http://www.a2a.eu/en/investor/overview/strategy/acquisition.html

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

This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 5

The A2A Group

Our WorldA2A Group

(1) Of which 0.38% held through A2A Reti Gas; (2) There are put options on an additional interest in the company’s share capital

Energy Waste Cogeneration and District Heating Networks Other Companies

Areas of activity


A2A in Europe

Our WorldA2A Group


A2A business portfolio

• Leading position in core markets

• About 50% of Group EBITDA from regulated activities/concessions or long-term contracts

#

(1) Industrial EBITDA, excluding regulatory impacts (-54 €M) and Ebitda from “Other services & Corporate” (-7 €M)Sources: AEEG and Company Annual Reports

Our WorldA2A Group

Rankingin Italy

2012EBITDA(1)


Sardinia

8

Hydro ~2 GW

Thermal ~8 GW

WTE 0.2 GW

Cogeneration 0.2 GW

A2A STRENGTHS

• Diversified and well-balanced generation mix, in order to exploitmarket opportunities and mitigate overall risk

• CCGT investment cycle completed - all plants are new or recentlyrevamped , highly efficient, with limited maintenance Capex needed,no contractual constraints(3) (take or pay gas), no demand constraints(heat-lead)

• Highly flexible plant portfolio: 70% of hydro flexible reservoir/basin vs.run-of-river; CCGT plants with a low minimum load

• Relevant market share in Northern Zone

(1) Turbigo and Tusciano plants not included; (2) net of 5 mini-hydro plants disposed of (~8 MW)

Northern

Central-Northern

Central-Southern

Southern

Sicily

Electricity marketzones

Energy generation portfolio

A2A presence

Our WorldAssets and activities

A2A GROUP GENERATION PORTFOLIO IN ITALY

(3) The procurement of gas is pursued through a set of contracts, diversified by duration (long term, yearly and spot), by counterparties (in orderto reduce the risk), by market place (regulated and OTC), by flexibility and by delivery point (foreign hubs, Italian border, PSV, end user).


A2A on the energy markets


(1) EUA (European Allowance Unit), CER (Certified Emissions Reduction,ERU (Emission Reductions Unit), EEUA (European Allowance Unit for Aviation)

IPEX (day-ahead, intraday, ancillary services): in 2012A2A #5 operator on the day-ahead market


Part of the heat generatedby the Group comes fromthe WTE plants in Brescia,Milan and Bergamo(which account for anoverall installed thermalcapacity of approximately305MWt)

Cogeneration and District Heating


A2A STRENGTHS

• High efficiency cogeneration and district heating are the mostwidely used system in Europe to achieve energy efficiency targets

• Boost for local investments• Clean and cutting-edge technology (e.g. heat pump)• Environmental benefits: reduction of pollutant emissions in

metropolitan areas (PM10, NOx, Sox, …)• Diversified technology/fuel mix (cogeneration, biomass, etc.)• No boiler requiring maintenance at user level• Tariff customisation• District cooling option

BUSINESS MODEL

Canavese

MI

BG

BS

VA

Famagosta

Tecnocity

NovateMilanese

Goltara

Lamarmora

Carnovali

VareseVia Rossi

Lombardy

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Waste


A2A STRENGTHS

• Full integration along the value chain• Higher value/technology for waste treatment and disposal (e.g.

Waste to Energy, Mechanical Biological Treatment)• Expansion abroad by leveraging on innovative A2A systems and

international partners

(1) MBT: Mechanical Biological Treatment; (2) of which, 3 closed landfills with biogas production

Near Naples A2A Group, through Partenope Ambiente, manages :- Acerra WTE plant- waste treatment plants in Caivano

• The duration of contract concession is equal to 15 years• Moreover, in Campania A2A owns a biogas plant

11


Networks


A2A STRENGTHS

• High service quality• Good continuity of electricity and gas distribution services• Efficient customer care• E-billing system• Focus on costs• Focus on new technologies

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Power Networks Gas Networks Water


ATEM’s attractiveness / concentration matrix*, 2010

ATEM interesting for A2A in adevelopment perspective - currently

under study the best strategy regardingthese areas

Strategic ATEM - whoseconsolidation is a key priority for

A2A. These are the largest in terms ofEbitda contribution

Non-strategic ATEM - which A2Awants to dispose

3 ATEMs10 ATEMs

14 ATEMs

ATEM: Area Territoriale Minima, i.e.Minimum Territorial Area

On 12 November 2011 the main outlines of gas distribution reform have been completed

Tenders for the assignment of the gas distribution services have to be carried out only forATEMs (Aree Territoriali Minime), which are clusters of municipalities (177 in the wholenational territory) established by the Ministry for Economic Development

The first tenders are expected to start in early 2014 and the last ones will probably takeplace in 2018

Each concession will be granted for 12 years

Focus on gas distribution tenders

* the index of attractiveness includes qualitative assessments related to contiguity of territories,geographical conformation, multi-service offer and contendibility; the concentration index refers to thecoverage of the resident population in the served municipalities compared to the population on aprovincial basis

NETWORKS - REGULATORY SCENARIO

(*) real pre-tax; (**) “X-Factor” does not include inflation rate

ELECTRICITY

4th Regulatory period: 2012-2015• New tariff not linked to change in unit volumes

consumption• WACC*: in 2012-2013, 7.6% (distribution, metering);

in 2014-2015, 6.4% (distribution, metering) ; +1% fornew investments

• Price cap**: 2.8% (distribution), 7.1%(metering)

GAS

3rd Regulatory period: 2009-2012 (through 2013)• Tariff not linked to volumes• WACC*: up to 2012, 7.6%; in 2013, 7.7% (distribution),

8.0% (metering)• Price cap**: progressively decreasing, from 3.0% in

2010 to 2.4% in 2013 (distribution); from 3.4% in 2010to 2.8% in 2013 (metering)

4th Regulatory period: 2014-2019 (6 years)• Tariff not linked to volumes• WACC*: 6.9% (distribution), 7.2% (metering).• Price cap**: up to 2016 1.7% for distribution and 0%

for metering• Parameters under interim reviews: risk free rate (2

years), price cap (3 years)

1st Regulatory period: 2012-2015• 2012-2013 - Transitory tariff method (MTT) based on full

recovery cost• 2014-2015 - Final tariff method (MTI):

- allowed revenues based on full recovery cost as at 2012- overall return equal to 6.8%*, with an additional 1%

extra return for investments made from 2012- additional tariff component in case of relevant capex- inflation recognized to operating costs is set every year

(2.1% in 2014)- working capital is covered by a specific component on

unpaid bills

WATER

Regulatory Body: the Energy Authority (AEEG)

Networks - regulatory framework



Concessions portfolio


(1) These concessions have been extended by a Decision of the Giunta Regionale No.X/575 of 2 August 2013, which declared the “Transitional continuation of theexploitation” until a new concession is awarded (provisionally, until 28/07/2014).

(2) These concessions have been extended by a Decree-of the Giunta Regionale No.1205 of 29 December 2010 of Regione Lombardia, which declared the “Transitionalcontinuation of the exploitation”, until a new concession is awarded.


Regulatory actions Description

REGULATORY FRAMEWORK OF HYDRO CONCESSIONS

DL 83/2012(the so-called“Development

decree”)

• The new "Development decree" sets:1) the criteria for the tenders of all large water concessions2) the value of the compensation due to the former

concession holders in exchange for any relevant assetstransferred where these lose the mandate

① Five years before the expiration of a large water concession,the competent authority shall launch a public tender for theassignment of itThe new concession shall last for a period of 20 years up toa maximum of 30 years, depending on the level ofinvestment offeredFor the concessions which either have already expired orare due to expire earlier than 31 December 2017, the newprovisions establish a transitional scheme

② The new winner of the concession shall pay to the outgoingconcessionaire a compensation for its assets, as follows:- "dry" assets: market value of tangible assets- "wet" assets (dams, etc.): revalued historical cost taking

into account both the ordinary deterioration and anypublic contribution received for the construction

Regulatory actions Description

REGULATION OF LOCAL PUBLIC SERVICES ANDEXPIRY OF CONCESSIONS

The Costitutional Court declared the regulatory framework oflocal public services introduced after June 2011 referendum (inparticular, art. 4 of the Law 148/2011) constitutionally unlawfulfor the following reasons:1) it reinstated the legislation repealed by the referendum2) it failed to comply with the segregation of responsibilities

between the State and the regions concerning theassignment and regulation of local public services.

As a consequence, the direct assignments business model (in-house providing) turned back to be an available option as analternative to tender.

Sentence 199of the Italian

ConstitutionalCourt

Jul 17th 2012

The government established that direct assignments in force atOctober 1, 2003 for publicly held companies already listed at thatdate and for its subsidiaries should cease• at the expiry date specified in the service agreement• if the expiry date is not specified, at December 31, 2020

(without the possibility for any extension and without theneed of a specific resolution by the municipalities)

Art.34DL 179/2012(the so-called

“Decreto

crescita 2.0”)

Concessions - regulatory framework

The new regulation introduces a strongerprotection: if A2A loses any public tender it wouldreceive a relevant compensation for both "wet"and "dry" assets


Recent developments in regulation underpin long-term visibility


Acquisitions & disposals - track record

Our WorldMajor Transactions


EPCG company overview

Our WorldMajor Transactions

PLJEVLJA

PIVA

PERUCICA

INSTALLED CAPACITY

Plant name TypeCapacity

(MW)Production(GWh; avg.)

PLJEVLJA Thermal 218 1,400

PIVA Hydro 360 800

PERUCICA Hydro 307 900

Other (7) Mini-hydro 7 10

Total 892 3,110

• EPCG is an integrated electricity Company (production, distribution, sales) and the only producerof electric energy in Montenegro

• EPCG distribution networks reach a total length of ~19,000 km. Served clients are 350.000• EPCG has 2,703 employees (of which 336 temporary)• A2A controls 43.7% of the company and appoints CEO and CFO

Investment rationale

Montenegro is located at the center of a dense network of interconnections between several Countriesof South-Eastern Europe, thus representing an important hub for the energy system of the area.Moreover, Terna is building a cable for the connection to Italy.

• WACC, equal to 6.8%, will be applied to netinvested capital (i.e. the value of the assets in useat the end of year t-1, stated less of anycontributions received and revalued for inflation)

• Invested capital will be updated annually on thebasis of investment plans approved by the Agency

• Depreciation will be charged over the useful lives• Operating costs will be calculated by applying a

profit-sharing logic

POWER GENERATION

ELECTRICITY DISTRIBUTION

In the planningperiod the CAGR ofthe average tariffs

for Distributionclients is 8%

Growth rate 8.4% 17.5% 6.3% 3.8% 5.0%

Networks regulatory scenario• On December 30, 2011 the Regulatory Agency

of Montenegro (RAE) adopted the newmethodology for tariff structure, introducingconcepts of cost reflective tariff, return oninvestments and price-cap regulation

• The first regulatory period started on August 1,2012 and has a three-year term


2008 - 2012 Track record

Our WorldBusiness Plan

From financial stakes to industrial assets

• Asset swap of the financial stake in Endesa Italia(20%) into power generation plants

• Swap of financial stake in TdE/Edison (17% dilutedshare) gaining control of Edipower

Disposals

• Sale of 5% financial stake in Alpiq (305 €M)

• Sale of Coriance (160 €M)

• Sale of Bergamo water cycle company (25 €M)

• Sale of other non-core assets (140 €M)

• Sale of 25.7% stake in Metroweb (60 €M)

A2A GROUP NET INVESTED CAPITAL (€M)

Of which:

- 2.5 €B Edipower

- 0.8 €B Endesaassets

Peripheral assets restructuring almost completed


Roadmap for strategy implementation2013-15 Business Plan (November 2012)

• Balance sheet optimization anddeleveraging

• Waste project

• Edipower integration

• Operating efficiency and capitaldiscipline

• Boost industrial growth through the financialstability achieved via consolidation

• Invest on key priority areas:

― Waste industrial plants

― Cogeneration and district heatingsystems

― Repowering of power productionplants

BUSINESS PLAN2013-2015

CONSOLIDATION

MEDIUM/LONG TERM

GROWTH

1.

2.

3.

4.

Significant achievements already obtainedin each priority area

New business plan update in progress:due in Spring 2014



Evolution of A2A EBITDA and NFPExpected evolution in 2012-2015

Note: Coriance not included in 2011 and 2012 results

2011

924

2012F Edipowerconsolidationadjustment

75

Efficiency

70

Organicgrowth

135

2015E

1,310

1,030

Net impact of Edipower fullyear consolidation (in 2012only 7 months) plus Iren exit

+280 €M

0

2

4

6

NFP2012F

4.4

4.6

Disposals

-0.5

Capex

1.2

OperatingCash Flow

-2.3

Dividends

0.3

NFP2015

3.2

Average net cash generated~370 €M per year

A2A GROUP NET FINANCIAL POSITION 2012-2015 (€B)

-1.4 €BAssumption of 60%payout on Group netordinary income

2012A NFPlower than

forecast

A2A EBITDA EVOLUTION 2012-2015 (€B)

2012A EBITDA 1,068 €M,38€M higher than forecast

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Main projects update2013-2015 Business plan

21

1. Balance sheetoptimization anddeleveraging

• Deleveraging:- >500 €M debt reduction from BP kick-off- ~800 €M debt reduction since the acquisition of Edipower

• Financial structure optimization:- 2 bonds for 1.25 B€, New 5-year revolving credit line of 600

€M, 1 tender offer for the partial purchase (~440 M€) of A2A500 €M notes due 2014 and 1 €B Notes due 2016

- Average debt maturity up to 5.1 years after the repayment of500 €M bond expired in October 2013

2. Waste project• A2A Ambiente established as of July• Integrated management of waste activities ongoing

3. Edipower integration

• As of 1st November:- Iren exit from Edipower's shareholding, with A2A managing

the entire company installed capacity- Integration of Edipower corporate structures in A2A

• Edipower cost efficiency plan ongoing

4. Operating efficiency andcapital discipline

• "AXE 80" (A2A per l'Efficienza) project launched, involving allcompany structures

• 2013 target widely achieved already in Q3

Main points Activities performed / in progress Progress

0% 100%

0% 100%

0% 100%

0% 100%



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Index

Our Results Our ResponsibilitiesOur World

More in-depth, updates and documents available in the following website sections• Operating and Consolidated results: http://www.a2a.eu/en/investor/reports/• Debt: http://www.a2a.eu/en/investor/debt/• Risk Management: http://www.a2a.eu/en/investor/risk_management/

@

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

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

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


Our ResultsOperating Results

DescriptionThe Energy Sector comprises the following activities:• Electricity generation: power plant management

through a generation pool of hydroelectric andthermoelectric plants;

• Energy Management: the purchase and sale ofelectricity and gaseous and non-gaseous fuels onnational and international wholesale markets; theprocurement of the fuels needed to cover therequirements of the thermoelectric plants andcustomers; planning, programming and dispatchingfor electricity generation plants;

• Sale of electricity and gas: marketing of electricity andgas to the eligible customer market. Also included isthe sale of electricity to customers eligible for “higherprotection”.

2012 ResultsThe Energy Business shows an EBITDA of 541 million euros, up by 205 million euros (+61%)compared to the previous year. Various factors positively contributed to the result: theintegrated management in A2A of the Edipower plants, consolidated as of June 2012, aswell as the good performance of EPCG, whose industrial result became positive again - upby 17 million euros compared to 2011. The industrial portfolio benefited from the carefulmanagement of the gas purchasing sources.

(1) As of June 2012, the share of electricityproduced by Edipower included in A2Aportfolio is equal to 77% (20% previously)

(2) Intermediated Ipex volumes included(3) Sleeve included

EnergyOperating Review

23


(1) A2A estimates on the basis of Terna data(2) The figures include biomass, biogas and bioliquids(3) Load factor of CCGT plants not subjected to dispatching constraints(4) The yearly figures refer to the thermal year(5) Italian National Price of the electricity(6) CCGT Gas Cost based on: EniMix formula for 2008-2009 (2008 gas cost: 35.34 c€/mc; 2009 gas

cost: 27.23 c€/mc), gas at virtual trading point (PSV) for 2010-2012(7) Spark spread net of environmental costs (GC + CO2)(8) Dark spread net of environmental costs (GC + CO2). The environmental costs for a coal plant

are equal to: -15.84 €/MWh (2010); -5.09 €/MWh (2011); 1.36 €/MWh (2012)

EnergyScenario


Prices and marginsOffer and Demand

Note: the electricity installed capacity figures refer to a gross capacitySources: Terna, GSE and Snam



DescriptionThe Cogeneration and District Heating Sector comprises the activities ofcogeneration, district heating and the sale of heat, as well as otheractivities relating to heat management and facility managementservices. The following is a short description of these activities:• Cogeneration and district heating: production, distribution and sale

of heat, production and sale of electricity, as well as operational andmaintenance activities on the cogeneration plants and districtheating networks;

• Heat and other services: management of heating plants owned bythird parties.

2012 ResultsThe Cogeneration and District Heating business shows an EBITDA, net ofthe effects deriving from the legislative changes, equal to 69 million euros,up by 2 million euros compared to the previous year. This trend, mainlyattributable to the greater volumes sold in the District Heating Sector, dueto the effect of the new connected volumes, was partially offset by thelower revenues connected to the sale of electricity produced by the co-generation plants.

(1) 2011 figures have been reclassified excluding Coriance Group, sold in September 2012(2) Intragroup(3) Includes the production of Lamarmora, Famagosta, Tecnocity and other plants(4) The item includes heat production of WTE plants and Cassano thermoelectric plant

Cogeneration and District HeatingOperating Review

25



DescriptionThe Waste Sector comprises the activities relating to the entire wastemanagement cycle. These activities are briefly described below:• Collection and street sweeping: street cleaning and the collection of

waste for transportation to its destination;• Treatment: an activity that is carried out in dedicated centers to

recover or convert the waste in order to make it suitable for therecovery of materials, waste to energy recovery or disposal inlandfills;

• Disposal: this involves the final disposal of urban and special waste incombustion plants or landfills, where possible recovering energythrough waste to energy or the use of biogas.

2012 ResultsThe Waste business shows an industrial EBITDA equal to 267 million euros.The reduction of the margin, equal to 20 million euros compared to theprevious year, is due to the expiry of the CIP 6 incentive of some of theGroup WTE plants (Corteolona, Bergamo, Filago, Milan) as well as the haltdue to extraordinary maintenance of the WTE plant in Bergamo.Moreover, the year 2012 incorporates the conservative allocation of lowerrevenues for 48 million euros relative to the recent legislative changes andguidelines of the Regulatory Authority for Electricity and Gas (MinisterialDecree 20 November 2012 and AEEG Opinion 535/12), which establish newmethods for calculating the price component of the withdrawal of energyunder an agreement CIP 6 (CEC).This value includes an amount equal to 11.5 million euros relative to theyears 2010 and 2011 and 4 million euros of lower revenues for heat salesfor the Cogeneration and District Heating Business.

(1) of which -4 million euros intragroup.

WasteOperating Review

26


DescriptionThe Networks Sector comprises the activities regulated by sectorauthorities, namely the management of the electricity and gas networksand the integrated water cycle. These activities are briefly describedbelow:• Electricity networks: the transmission and distribution of electricity;• Gas networks: the transport and distribution of natural gas;• Integrated water cycle: water captation, aqueduct management,

water distribution, sewerage and purification;• Other services: activities relating to public lighting, traffic regulation

systems, the management of votive lights and systems designservices.

2012 ResultsThe Netwoks business shows an industrial EBITDA equal to 252 millioneuros. The reduction of the margin compared to the year 2011 (-7 millioneuros) is essentially due to the effect of non-recurrent items of previousyears. In the Electricity Distribution sector, Deliberation 559/12 of theAEEG, changed, with retroactive effect, the methods of determining thedistribution losses. Lower revenues for 10 million euros were thereforeallocated, while awaiting the outcome of the administrative disputecurrently underway.

Our ResultsOperating ResultsNetworks

Operating Review

27



DescriptionThe following is a brief description of the activities carried out by thissector:• Corporate(1): direction, coordination and control activities, such as

business development, strategic direction, planning and control,financial management and coordination of the Group's activities;central services to support the business and operating activities (e.g.administrative and accounting services, legal services, procurement,personnel management, information technology, communicationservices, etc.) provided by the parent company under specificintercompany service agreements;

• Other services: activities relating to video-surveillance, datatransmission, telephony and internet access services.

2012 ResultsThe Other Services and Corporate business shows a EBITDA equal to -7million euros. The improvement of the margin over 2011 (+18 million euro)was mainly due to the effect of non-recurring income recognized in 2012and the lower costs of the Corporate Sector over the previous year.

(1) This includes the General Manager's Office (Corporate and Market Area), the GeneralManager's staff (Technical and Operations Area) and the staff of the Office of the Chairmanof the Management Board and of the Chairman of the Supervisory Board.

Other Services and CorporateOperating Review

28


Our ResultsConsolidated Results

Consolidated Income Statement

(1) The comparative figures for period January-December 2011 have been reclassified to reflect theimplementation of IFRS5 and remeasured to reflect application of Revised IAS 19 "Employee Benefits“

(2) The comparative figures for period January-December 2010 for Affiliates and Minorities have been reclassifiedto reflect the implementation of IFRS 5

Note: Group net income adjusted for the impact of extraordinary items: 2012 = 149 €M; 2011 = 165; 2010 = 243

• The Revenues of the A2A Group amounted to 6,480 million euros, up by5.7% compared to 2011.

• The ordinary operations show a Gross Operating Margin of 1,068 millioneuros, up by 144 million euros (+15.6%) compared to 2011. This positiveresult seems even more significant considering the difficultiescharacterizing the energy scenario as well as the effects caused by recentchanges to the legislative and regulatory framework, which had a negativeeffect on the performances of the Environment and Networks Businessesfor around 54 million euros.

• The Depreciation, amortization, provisions and write-downs amounted toa total of 567 million euros, down by 59 million euros compared to 31December 2011 despite the higher amortization and depreciations derivingfrom the consolidation of Edipower. The reduction, compared to theprevious year, can essentially be attributed to lower write-downs of assets.

• The Net financial charges amounted to 193 million euros, up compared tothe value recorded in the year 2011 (126 million euros) mainly due to thenegative effect of the fair values assessments of the financial derivatives,equal to 51 million euros (+9 million euros in 2011). The amounts statedabove were partially offset by the positive value of the realized amounts ofthe financial derivatives for 9 million euros (6 million euros in 2011), and bythe positive effect of posting a badwill following the first consolidation ofEdipower S.p.A. for 19 million euros.

• Affiliates were positive for 13 million euros. At 31 December 2011 thisvalue was negative for 132 million euros mainly due to the effect of thewrite-downs made on the shareholding in Edipower held at that date.

• The Extraordinary operations were also positive, which, in the year,provided a contribution of around 111 million euros to the profit due to thenet capital gains deriving from the disposal of the shareholdings inMetroweb, Coriance and e-Utile as well as extraordinary income of a fiscalnature (IRAP deductability recovery).

• The Net Profit for 2012 is therefore equal to 260 million euros, comparedwith the loss of 423 million euros of 2011 due to write-downs equal to 627million euros.

The annual report of the A2A Group at December 31, 2012 has been prepared in accordance withthe International Financial Reporting Standards (IAS/I FRS) issued by the International AccountingStandard Board (IASB) and approved by the European Union.

29



Capital Employed and Sources of Financing

(1) Net of balances included in net financial position

Scope of consolidationThe annual report of the A2A Group at 31 December 2012 includes the figures ofthe parent company A2A S.p.A. and those of its subsidiaries in which A2A S.p.A.,directly or indirectly, holds a majority of the voting rights that can be exercisedat ordinary shareholders’ meetings. Also consolidated, according to the equitymethod, are joint ventures and those companies over which the parentcompany exercises a considerable influence (associates).

Changes in the scope of consolidationFollowing the acquisition of 70% of Edipower by the subsidiary company DelmiS.p.A. and the related sale of a 50% of Transalpina di Energy S.r.l., a companythat had been consolidated at equity and classified among discontinuedoperations in accordance with IFRS 5, Edipower S.p.A. is now consolidatedconsolidated line by Line as of June 2012, whereas Transalpina di Energia S.r.l. isno longer a consolidated company. As a result of the sale of A2A Coriance S.a.s.- the parent company of the Coriance Group, this company, which had beenclassified as discontinued operations as at June 30, 2012, is no longer includedon the consolidated financial statements. Finally, after exercising the put optionon the 25.7% stake in Metroweb S.p.A., this company has also been removedfrom the scope of consolidation.

• The consolidated Net employed capital at 31 December 2012, cameto 8,069 million euros and was covered by the Net Equity for 3,697million euros and the net financial debt for 4,372 million euros.

• The Net working capital amounted to 823 million euros and showeda decrease of 27 million euros compared to 31 December 2011.

• The Net fixed assets, including the Assets/Liabilities held for sale,equalled 7,246 million euros, up by 482 million euros compared to31 December 2011 and mainly included the net effects of theconsolidation of Edipower S.p.A..

• The Net financial position, equal to 4,372 million euros (4,021million euros at 31 December 2011) was up by 351 million euros dueto the effects deriving from acquiring control of Edipower, equal to1,083 million euros, partially offset by the positive net cashgeneration of the period equal to 732 million euros, afterinvestments of 360 million euros and the payment of dividends for40 million euros.

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Consolidated Balance Sheet

(1) The comparative figures for period January-December 2011 have been remeasured to reflect application ofRevised IAS 19 "Employee Benefits"

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Consolidated Net Financial Position

• The generation of net cash flows was positive andamounted to 732 million euros, after investments of 360million euros and the payment of dividends for 40 millioneuros. This cash generation partially offset the effect ofthe consolidation of the shareholding in Edipower (for1,083 million euros) on the Net Financial Position which,at the end of 2012, thus amounted to 4,372 million euros(4,021 million at 31 December 2011).

• The Debt Ratio (Net Financial Position/EBITDA) was thusreduced from 4.4 (at 31 December 2011) to 4.1.

(1) The comparative figures for period January-December 2011 have been reclassified to reflect the implementation of IFRS5(2) Net of capital gains from shareholding disposals(3) Net of balances with contra-entry in equity

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External auditorsAuditing activities for the separate and consolidatedfinancial statements of A2A S.p.A. are currently carried outby PricewaterhouseCoopers S.p.A., whose appointmentwas made on 26 April 2007 and will expire on the date ofthe meeting called to deliberate the allocation of the profitsfor the year 2015.



2012 Quarterly Accounts

METHODOLOGICAL NOTE• Q1, Q2 and Q3 2012 figures have been restated according to IAS 19 revised "Employee Benefits“• Q1 2012 figures have been reclassified including Coriance in the IFRS5

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Financial StrategyOur Results

Debt

FLEXIBILITY • provide the Company with the right instruments to takepotential market opportunities, in a prompt and efficient way

DIVERSIFICATION• maintain diversify financial sources and assess/select any time

the most economical and/or best available

LIQUIDITY • maintain adequate committed lines as backup

RISK MANAGEMENT• manage in a proactive way the interest risk management with

the principal purpose to mitigate the effects of market volatility

1.

2.

3.

4.

A2A is focused on further increasing the duration of the debt, maintaining adeguate financialflexibility and diversified mix of funding sources, lowering the cost of debt

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Group debt structure

Note: EPCG not included

• Total gross debt: 4.8 €Bn• Average cost of debt: 3.5%• Average maturity: 4.6 yrs

• 2.3 €Bn liquidity position, of which:

- 0.5 €Bn cash- 1.8 €Bn undrawn committed lines

allowing to amply repay debt expiring up to 2015,excluding Group cash generation

STATISTICS RELATIVE TO DEBT AT 31 DECEMBER, 2012

CORPORATE CREDIT RATING

Standard & Poor’s

BBB/A-2

Outlook Negative

Moody’s

Baa3

Outlook Negative

Our ResultsDebt

DEBT BREAKDOWN (1) update at 31, December 2012

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Bonds and EMTN Programmes

(1) Date from which interest is paid; (2) Last date on which interest accrues

Our ResultsDebt

• On 19 September 2012 the Management Board of A2A approved the adoption of a Bond Issue Programme (Euro Medium Term NoteProgramme) for a maximum amount of 2 billion euro, listed on the Luxembourg Stock Exchange.

• On November 7, 2013 the Management Board approved a resolution authorizing the update of the Programme and the increase of itsamount up to a maximum amount of EUR 1,250 million

• The adoption of the EMTN is part of the A2A Group’s medium-term financial strategy, which is aimed at lengthening the average life ofthe Company’s outstanding debt and at maintaining an adequate financial flexibility in order to efficiently manage the future debtmaturities, to support the Company’s rating

• The bonds to be issued on the basis of the Programme are placed to institutional investors• Euro Bonds 2022, 2021 and 2019 and Private Placement 2023 were issued under EMTN Programme

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A2A Group Risk Management

The A2A Group has a risk assessment and reporting process based on the Enterprise Risk Management method of the Committee of Sponsoring Organizations of theTreadway Commission (COSO report), whose purpose is to make business risk management an integral and systematic part of management processes. A2A had alreadydefined a risk model in 2010 that takes account of the Group's characteristics, its multi-business vocation and the sector to which it belongs. The risk assessment process iscarried out on a periodic basis and by involving all the business structures. Set out below is a description of the main risks and uncertainties to which the Group is exposed.

Our ResultsRisk Management

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Index

Our Results Our ResponsibilitiesOur World

More in-depth, updates and documents available in the following website sections• Sustainability: http://www.a2a.eu/en/sustainability/• Corporate Governance: http://www.a2a.eu/en/governance/• Investors: http://www.a2a.eu/en/investor/shares/

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

@

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

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

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

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


(1) The reported figures have not consequence in order to fulfil the obligations set up by 2003/87Emissions Trading Deliberation

(2) The figures refer to Monfalcone plant, which was included in the environmental accountingsince 2010

(3) Including only CO2 deriving from the combustion of the not organic portion of waste(4) pursuant to Article 19 of Ministerial Decree of 18 December 2008, the biodegradable portion

of urban waste is equal to 51% of total production (49% not biodegradable)

Note: Edipower and EPCG not included

Main statistics and performancesEnvironment: emissions and energy performances

Our ResponsibilitiesSustainability

Sustainability tools- Sustainability Report (according to GRI)- Quality, Environment and Safety Policy- Organizational, management and control Model 231- Code of Ethics


(1) The figures refer only to main municipalities. The quantity collected and the index of urban waste collection for recycling was calculated on the basis of the Lombardy Region indications(2) Source: ISPRA. 2012 figures are preliminary

Main statistics and performancesEnvironment: waste



(1) Users may be a single residential unit in the case of independent heating or the whole building in the case of centralised heating

Legend: Frequency Rate = n°accidents x 1,000,000 : hours worked; Severity Index = n°days of absence x 1,000 : hours worked; Occurence Rate = n°accidents x 1,000 : workers

Source: Energy Observatory of the Databank-Cerved Group. 2008 and 2009 figures are not available

Main statistics and performancesSocial: customers - personnel



A2A sustainability equity story

Investing in A2A: sustainability as a valuation prospectA company that is attentive to its reference stakeholders, including its shareholders, should not consider the three dimensions of sustainability on their own,but rather also as being highly correlated amongst themselves, as A2A’s “Sustainability Chart” below shows. The chart shows A2A’s strengths on the basis ofsustainability criteria, which are also landmarks for the company: confirming the fact that to all effects A2A may be considered a sustainable investmentdecision.

In order to understand the effective creation ofvalue, an analysis from a sustainabilitystandpoint should be carried out by subdividingthe main strengths identified into 3 spheres:

1. Assets - a diversified business mix reducesthe risk profile and increases long-termsustainability

2. Management - optimization processes,innovative development projects and aneffective risk management model enable theavailable resources to be allocated in abetter way

3. Corporate Governance - Greater fluidity inthe decisional processes of the Boardscontributes to a clear definition of thestrategic priorities, encouraging theeffectiveness of the managerial approach



Long-term sustainability is a source of value for A2A share

The result points to new sources of value and further potential for the A2A share. The highlighted factorsassist in increasing A2A’s appeal not only for ethical investors but also for the entire investor universe.



Remuneration Committee• assists the Supervisory Board:

- in the definition of the compensation of theManagement Board and the SupervisoryBoard members invested with specialoffices

- in giving advice about incentivation andloyalty schemes of the Management Boardmembers, managers of the Group,employees and groups of employees

Internal Control Committee• Its roles are set by the legislative framework,

the Code of Conduct of the listed companies, thecompany By-Laws as well as companyregulations and/or Supervisory Boarddeliberations

• provides assistance in the internal controlsystem evaluation, with particular regard to thecontrol of risk , the information and accountingsystem and the Internal Audit. In particular theCommittee supports the Supervisory Board inthe control and auditing activities set by thelegislative framework and by the company by-Laws

• assists the Supervisory Board in the approval ofthe Annual Report, the Consolidated Financialstatement, the half-yearly financial report andevery interim report transmitted by theManagement Board

Community Committee• assists the Supervisory Board in the definition of

the guidelines for cultural and charitableactivities, in managing relations with the AEMand ASM foundations, in promoting the image ofthe company and the Group

• evaluates the impact of A2A’s business on thecommunities in which it operates and makesproposals concerning corporate social andenvironmental responsibility

Appointments Committee• assists the Supervisory Boards in the

appointment of the managing and controlbodies, as written in the company by-Laws

Dual Governance - Corporate bodiesOur Responsibilities

Corporate Governance

2012 Remuneration of the Supervisory BoardDuring 2012, the remuneration of the SupervisoryBoard members totalled 1,808,952 euros, of which1,136,258 came from emoluments for the positionand 672,694 from other remuneration.

2012 Remuneration of the Management BoardDuring 2012 the remuneration of the ManagementBoard members totalled 1,220,343 euros, of which1,168,362 came from emoluments for the position,51,981 from other remuneration.


Board members

(1) As per "Corporate Governance Code" by Borsa Italiana

Our ResponsibilitiesCorporate Governance


A2A SHAREHOLDING STRUCTURE

Istitutional investors: 15.2% of share capital

Geographic breakdown:

• Italy 46.2%

• France 15.7%

• UK 13.7%

• USA 9.1%

• Germany 6.7%

• Switzerland 2.4%

A2A shareholding structure

At December 31, 2012:

- Share capital: 3,132,905,277 shares with a par value of 0.52 euroeach

- Market cap: 1,370 €M

- Treasury shares: 26,917,609, equal to 0.86% of the share capital

All shares are voting shares, although - as laid down in art. 9 of by-laws -no individual shareholder other than the Municipality of Milan and theMunicipality of Brescia may hold an equity interest exceeding 5% of theshare capital. Should such ceiling be exceeded, the voting right attached tothe shares held in excess of 5% of the share capital may not be exercised.

Current shareholding pact between Milan and Brescia municipalities wassigned on 27 May 2011 and expires on 31 December 2013

Retail investors: 19.0% of the share capital

Geographic breakdown:

• Italy 99.7%

• Foreign: 0.3%

56.9% of retail investors are in Lombardy, the region where historically A2Ahas been more active. Investors from the provinces of Milan and Brescia ownrespectively 25.5% and 12.7% of the total retail shareholding

The above-mentioned data are based on the shareholders register updated at 21 June 2012 (dividend payment date). AlpiqAG shareholding, relevant until September 2012, is not included in the free float breakdown

Number of shareholders: about 114,000

Our ResponsibilitiesInvestors

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A2A in the stock exchange

A2A is also included in the 2012 CarbonDisclosure Leadership Index and the EthibelExcellence Investment Register

A2A stock is also traded on the followingplatforms: Chi-X, Turquoise, BATS, BOAT OTC,LSE Europe OTC

A2A vs FTSE MIBA2A in 2012(Prices 1st January 2012 = 100)

A2A 2012 figures (Borsa Italiana)

Market capitalisation at December 31, 2012: € 1,370 m

Average capitalisation: € 1,574 m

Average volumes: 22,859,256

Average price 0.503 €/share

Maximum price 0.793 €/share

Minimum price 0.289 €/share

Number of shares 3,132,905,277

A2A stock is also traded on the following platforms: Chi-X, Turquoise,BATS, BOAT OTC , LSE Europe OTC

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Dividends

(1) Pay-out calculated on ordinary income (net of non-recurrent items) (2) Dividend Yield calculated on annual average share price

Dividend PolicyThe dividend policy expressed in the Business Plan 2013-2015 is based on the assumption of a total dividend amount equal to about EUR 300millions in the three-year period.

Dividend taxationDividends no longer attract any tax credit and, depending on who the recipient is, they may be subject to withholding tax at source or, in part,contribute towards taxable income.

For the year 2012 the Shareholders’ Meeting approved a dividend distribution equal to 0.026 euros per ordinary share. Given the number of sharescurrently in circulation (3,105,987,668 shares, taking account of 26,917,609 treasury shares in portfolio), the distribution of the proposed ordinarydividend 2012 amounts in total to Euro 80,755,679.37, entirely taken from A2A S.p.A net income. the pay-out ratio on Group ordinary net incomeis equal to 55%.

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Shareholder information

Shareholders’ meetingsAs laid down in A2A by-laws, the company holds one compulsory Shareholders’General Meeting per year.The Annual General Meeting is called by the Management Board, afterconsulting the Chairman of the Supervisory Board, within 120 days (or 180 daysunder certain circumstances) of the end of the fiscal year.With reference to the procedures for the AGM call, please refer to A2A By-lawsand Corporate Governance section of the company website (i.e., Shareholders’Meetings).

American Depositary ReceiptsA2A American Depositary Receipts (ADRs) are traded on the US Over TheCounter market (OTC) under the symbol AEMMY. In 2008, Deutsche Bank andBNY Mellon launched two unsponsored ADR programs. In both cases, one ADRrepresents five A2A ordinary shares. Further details are available at websiteswww.adr.com and www.sec.gov.

A2A Investor Relations policy• Main goal: promote and support the correct knowledge and valuation of the

A2A stock by the financial community, through a communication which isactive, transparent, well-timed, constant, correct and not discriminatory

• Core activities:- hold regular meetings (one-to-one and group meetings) with the financial

community in Italy and abroad- arrange conference calls with the management at the time of the release of

the Group results- organize International roadshows with the top management for the

presentation of important strategic developments• Blackout period: during the 15 days before the release of the financial resultsThe IR department is not in charge neither of comments about the A2Aperformance in the Stock Exchange, nor of financial advice about the investmentin A2A.

DocumentationAnnual Reports, Quarterly andInterim Reports, SustainabilityReports and Corporate GovernanceReport are available on our website(www.a2a.eu ). They may also beobtained, on request, from theCompany Secretary at the company’sregistered office or through e-mail [email protected] .

Additional InformationAdditional information about A2A isavailable at our website at www.a2a.eu.Share price information, previousAnnual Reports and Interim Accounts,press releases and other relevantinformation can be found in the InvestorRelations section of that site. Commentsand suggestions are welcome (email:[email protected] ).


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http://www.a2a.eu/



2013 Investor Guidebook · • The business units of the company have a first class asset base -...

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