Acea — Interim / Quarterly Report 2018

Jul 31, 2018

Rome, 31 July 2018

Executive Summary

ONE YEAR ON FROM OUR FIRST MARKET PRESENTATION.......

RETURN TO ROLE OF INDUSTRIAL MULTIUTILITY

• Strategic guidelines 2018-2022: significant boost for infrastructure investment, breaking with the approach of recent years.
• Restructuring of operational processes and organisation.

..........IN THE LAST TWELVE MONTHS THE COMPANY HAS FACED MAJOR CHALLENGES

WATER EMERGENCY (August 2017)

• Since August 2017, we have recovered up to 2,300 litres of water per second, through intensive leak detection and repair programme.
• We have reduced volume of water lost to leaks to below 38% of amount fed into the system.

The Company's remains heavily committed, involving the use of innovative technologies.

BUSINESS PLAN 2018-2022 (November 2017)

• Approval of Business Plan 2018-2022, envisaging significant increase in infrastructure investment and based on the following pillars: industrial GROWTH, constant LOCAL FOCUS, development of technologies and INNOVATION, operational EFFICIENCY.
• Capex of €3bn.
• Average annual EBITDA growth of ~6%.
• Operating efficiencies with cost and capex savings of €300m in the period 2018-2022.
• Total dividends over the life of the Plan €0.7bn; Payout to remain above 50%.
• Net Debt/EBITDA down to 2.8x in 2022.

The Business Plan was a great success with investors and analysts, who judged it to be «CREDIBLE AND DELIVERABLE», above all welcoming the major investment to be carried out.

All analysts raised their targets price.

Executive Summary

.......... IN THE LAST TWELVE MONTHS THE COMPANY HAS FACED MAJOR CHALLENGES

AGREEMENTWITH OPEN FIBER (January 2018)

• Agreement with Open Fiber for the rollout of an ultrafast broadband communications network in the city of Rome.
• The project will involve the construction of a next generation fibre network, offering ultrafast connectivity to the inhabitants of Rome, in the next five years.

The network will enable a series of cultural, health and social services and the development of both businesses and the public sector.

BOND ISSUE (February 2018)

• Successful issue of bonds as part of the €1bn EMTN programme, divided into two tranches :
• €300m, maturing 8 February 2023 and paying coupon interest of 3-month Euribor +0.37%;
• €700m, maturing 8 June 2027 and paying a fixed rate of 1.5%.

The new all-in average cost of debt is 2.2% with an average term to maturity of 5.7 years.

Executive Summary H1 2018

FIRST-HALF RESULTS FOR 2018 ARE SOURCE OF GREAT SATISFACTION

The H1 2018 Results have exceeded expectations and have resulted in growth across all financial indicators:

• EBITDA €450m +9%
• EBIT €251m +29%
• Net profit €143m +38%
• Capex €282m +12%
• Net Debt/EBITDA LTM 2.9x
• Working capital performance reversed:
• a cash inflow of €20m from movements in working capital in the second quarter of the year
• a cash inflow of €11m from movements in working capital in the last twelve months

WATER: Big improvement in collections (ATO2 and ATO5), reduced water leaks, doubling of capacity of Peschiera source, launch of installation of smart meters, operating efficiency.

COMMERCIAL AND TRADING: major improvement in collections, Customer Centric approach, opening of 3 physical shops in progress.

ENERGY INFRASTRUCTURE: Growth in line with the Plan, operating efficiency, improved public lighting service.

ENVIRONMENT: Re-start of Aprilia and Sabaudia plants, optimisation of WTE maintenance plan.

GUIDANCE FOR 2018 UPDATED GUIDANCE FOR 2018

EBITDA +3%/+5% on 2017 > +5% on EBITDA for 2017 (€840m) CAPEX up on 2017 CONFIRMED Net debt €2.6-2.7bn TARGET ~€2.6bn

H1 2018 financial highlights

* EBIT and net profit to rise 17% and 21%, respectively, compared with the adjusted results for 2017 (after stripping out the negative impact – totalling €19m before tax – of the restored ownership of a property housing a car park and a reduction in the amounts due to Areti from GALA).

(€m)	30 June 2018 (a)	31 Dec 2017 (b)	30 June 2017 (c)	% change (a/b)	% change (a/c)	Net debt guidance 2018:
Net debt	2,570.3	2,421.5	2,401.4	+6.1%	+7.0%	€2.6-2.7bn
Invested capital	4,236.6	4,232.7	4,145.5	+0.1%	+2.2%
						TARGET ~ €2.6bn

ACEA Group EBITDA and quantitative data H1 2018 financial highlights

Acea ATO2: +€6.7m (quality bonus €15.7m)  Increased collections at ATO2 and ATO5 due Water Acea ATO5: +€4.0m to improved collection strategy  Extension of Acque's concession term to EBITDA main drivers Companies consolidated using equity method +€7.2m 2031	EBITDA GROWTH	KEY HIGHLIGHTS

(€m)	H1 2018 (a)	H1 2017 (b)	% change (a/b)	Quantitative data	H1 2018	H1 2017
EBITDA	192.3	172.4	+11.5%	Total volume of water sold	210	208
of which:				(Mm3)
Profit/(Loss) from
companies consolidated under IFRS 11	17.2	10.0	+72.0%
Capex	156.4	121.9	+28.3%
	H1 2018 (a)	H1 2017 (b)	Change (a-b)
Average workforce	1,794	1,774	+20

EBITDA and quantitative data H1 2018 financial highlights

Energy Infrastructure EBITDA main drivers

EBITDA GROWTH

Distribution up €19.3m

Generation +€3.3m - increased hydroelectric and thermoelectric production (completion of Tor di Valle plant)

Public Lighting (in 2017 LED plan effect)

KEY HIGHLIGHTS

Over 120 km of fibre infrastructure installed

(€m)	H1 2018 (a)	H1 2017 (b)	% change (a/b)	Quantitative data	H1 2018	H1 2017
EBITDA	178.6	160.0	+11.6%	(GWh) Total electricity distributed	4,845	4,842
- Distribution	155.1	135.8	+14.2%
- Generation	25.2	21.9	+15.1%	('000s) Number of customers	1,627	1,628
- Public Lighting	-1.7	2.2	n/s	(GWh) Total electricity produced	298	234
Capex	105.5	105.2	+0.3%
	H1 2018 (a)	H1 2017 (b)	Change (a-b)
Average workforce	1,386	1,362	+24

EBITDA and quantitative data H1 2018 financial highlights

Commercial and Trading EBITDA GROWTH

EBITDA main drivers

• Decline in enhanced protection market customer base partially offset by growth in free market
• Reduced inbound calls (-37%) reflecting improved customer experience

(€m)	H1 2018 (a)	H1 2017 (b)	% change (a/b)	Quantitative data	H1 2018	H1 2017
EBITDA	44.1	40.6	+8.6%	Total electricity sold (GWh)	3,086	3,408
				Enhanced Protection Market	1,234	1,316
				Free Market	1,852	2,092
Capex	5.5	7.9	-30.4%	No, of PODs for electricity ('000s)	1,190	1,229
	H1 2018	H1 2017	Change	Enhanced Protection Market	865	914
	(a)	(b)	(a-b)	Free Market	325	315
Average	465	476	-11	(Mm3) Total gas sold	73	57
workforce				('000s) No. of gas customers	169	166

EBITDA and quantitative data H1 2018 financial highlights

Environment
EBITDA main drivers

EBITDA SLIGHTLY UP

• WTE growth due to increase in inputs, gate fees and energy price
• Acea Ambiente: +€1.5m
• Iseco: +€0.2m
• Acque Industriali: +€0.2m
• Aquaser (sludge recovery): -€1.5m

KEY HIGHLIGHTS

• Re-start of Aprilia and Sabaudia plants
• Consents obtained for Orvieto landfill and Sabaudia composting plant

(€m)	H1 2018 (a)	H1 2017 (b)	% change (a/b)	Quantitative data	H1 2018	H1 2017
EBITDA	31.8	31.3	+1.6%	Treatment and disposal* (Ktonnes)	552	549
Capex	8.6	8.5	+1.2%	(GWh) WTE electricity produced	178	175
	H1 2018 (a)	H1 2017 (b)	Change (a-b)
Average workforce	360	350	+10

* Includes ash disposed of

ACEA Group EBITDA and quantitative data H1 2018 financial highlights

Average workforce	606	590	+16	Average workforce	272	314	-42
	H1 2018 (a)	H1 2017 (b)	Change (a-b)		H1 2018 (a)	H1 2017 (b)	Change (a-b)
Capex	2.2	2.5		Capex	0.5	0.4
EBITDA	7.3	6.7		EBITDA	7.5	8.8
(€m)	H1 2018	H1 2017		(€m)	H1 2018	H1 2017
Overseas				Engineering and Services

Holding
(€m)	H1 2018	H1 2017
EBITDA	(11.7)	(5.8)
Capex	3.1	5.9
	H1 2018 (a)	H1 2017 (b)	Change (a-b)
Average workforce	662	583	+79

Primarily due to transfer of Facility Management from Engineering and Services unit.

EBIT and net profit

Focus on cash flow (1/2)

( (€m)	H1 2018 A	H1 2017 B	Diff. A-B
EBITDA	450	414	36
Change in working capital	(82)	(209)	127
CAPEX	(282)	(252)	(31)
FREE CASH FLOW	85	(47)	132
Net finance income/(costs)	(42)	(31)	(12)
Change in provisions	(39)	(54)	15
Dividends	(134)	(132)	(2)
Other	(19)	(11)	(8)
TOTAL CASH FLOW	(149)	(274)	126

* Before provisions for bad debts

ACEA Group

ACEA Group Focus on cash flow (2/2)

• Q2 2018 CASH GENERATED: €20M INFLOW FROM WORKING CAPITAL
• H1 2018 LTM CASH GENERATED: €11M CASH INFLOW FROM WORKING CAPITAL

Increase in working capital needs in H1 2018 entirely due to trade payables as a result of seasonal factors

Change in working capital in H1 2018 due to receivables practically zero thanks to improvement in collections

OPTIMISATION OF COLLECTION STRATEGY IN WATER, RETAIL ENERGY AND ELECTRICITY DISTRIBUTION BUSINESSES:

• WATER (ATO2+ATO5): €60m increase in collections versus H1 2017, partly thanks to agreements with major debtors. ATO2's DSO cut by 3 days.
• RETAIL ENERGY: 5-day improvement in DSO.
• ELECTRICITY DISTRIBUTION: €50m increase in collections versus H1 2017.

ACEA Group Net debt

(€m)	30 June 2018 (a)	31 Dec 2017 (b)	30 June 2017 (c)	Change (a-b)	Change (a-c)
Net debt	2,570.3	2,421.5	2,401.4	148.8	168.9
Medium/Long-term	3,359.7	2,706.6	2,804.3	653.1	555.4
Short-term	(789.4)	(285.1)	(402.9)	(504.3)	(386.5)

NET DEBT / EQUITY	NET DEBT 30 JUNE 2018 /
30 JUNE 2018	EBITDA LTM
1.5x	2.9x

February 2018 – successful issue of bonds as part of the €1bn EMTN programme, divided into two tranches:

• €300m, 5 years, coupon 3-m Euribor +0.37%
• €700m, 9.4 years, fixed rate of 1.5%

Ratings
	BBB+	Baa2
	Stable Outlook	Stable Outlook

Acea Group H1 2018 Results

Rome, 31 July 2018

Q&A session

THIS PRESENTATION CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT REFLECT THE COMPANY'S MANAGEMENT'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL AND OPERATIONAL PERFORMANCE OF THE COMPANY AND ITS SUBSIDIARIES.

THESE FORWARD-LOOKING STATEMENTS ARE BASED ON ACEA S.P.A.'S CURRENT EXPECTATIONS AND PROJECTIONS ABOUT FUTURE EVENTS. BECAUSE THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES, ACTUAL FUTURE RESULTS OR PERFORMANCE MAY MATERIALLY DIFFER FROM THOSE EXPRESSED THEREIN OR IMPLIED THEREBY DUE TO ANY NUMBER OF DIFFERENT FACTORS, MANY OF WHICH ARE BEYOND THE ABILITY OF ACEA S.P.A. TO CONTROL OR ESTIMATE PRECISELY, INCLUDING CHANGES IN THE REGULATORY FRAMEWORK, FUTURE MARKET DEVELOPMENTS, FLUCTUATIONS IN THE PRICE AND AVAILABILITY OF FUEL AND OTHER RISKS.

YOU ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN, WHICH ARE MADE ONLY AS OF THE DATE OF THIS PRESENTATION. ACEA S.P.A. DOES NOT UNDERTAKE ANY OBLIGATION TO PUBLICLY RELEASE ANY UPDATES OR REVISIONS TO ANY FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE OF THIS PRESENTATION.

THIS PRESENTATION DOES NOT CONSTITUTE A RECOMMENDATION REGARDING THE SECURITIES OF THE COMPANY.

***

PURSUANT TO ART. 154-BIS, PAR. 2, OF THE LEGISLATIVE DECREE N. 58 OF FEBRUARY 24, 1998,THE EXECUTIVE IN CHARGE OF PREPARING THE CORPORATE ACCOUNTING DOCUMENTS AT ACEA, GIUSEPPE GOLA – CFO OF THE COMPANY - DECLARES THAT THE ACCOUNTING INFORMATION CONTAINED HEREIN CORRESPOND TO DOCUMENT RESULTS, BOOKS AND ACCOUNTING RECORDS.