a2a strategic plan 2016 results & business plan update · 2016 5,093 2015 1,048 2016 1,231 +3%...

A2A STRATEGIC PLAN 2016 RESULTS & BUSINESS PLAN UPDATE

April 3rd 2017

2

2016 CONSOLIDATED

RESULTS

2014-16, HOW WE DID IT

STRATEGIC PLAN

2017-2021

PEOPLE &

SUSTAINABILITY

FINANCIALS

3

2016

CONSOLIDATED

RESULTS

4

San Filippo del Mela “Merchant”

FY 2016 vs. FY 2015 Results

2016 Consolidated Results

2014-16, how we did it

Strategic plan 2017-2021

People & Sustainability

Financials

+ -

Retail Regulated Components

LGH acquisition Energy Scenario

San Filippo del Mela “Must Run”

Trading portfolio

Gas and Electricity allowed revenues

Fixed Costs reduction

Non-recurring items

Positive CCGT Ebitda

5

* Excluding extraordinary items equal to 205 €M in 2015 and 153 €M in 2016

2.8x 2.5x NFP / EBITDA

2015

73

2016

224

5,093

EBITDA REVENUES

GROUP NET INCOME

GROUP ORDINARY NET INCOME *

NET FINANCIAL POSITION

2015

4,921

2016

5,093

2015

1,048

2016

1,231

+3% +17%

+151

2015

278

2016

377

+36%

2015

2,897

2016 Adjusted

2,667

LGH price

and NFP at closing

469

2016

3,136

-230

+239






Financials

€M

6

2015

1,048

-26

2015

Ordinary

1,022

Waste

25 30

Networksand

DistrictHeating

-5

19

SmartCity

1 11

2016

Ordinary

1,103

128

2016

1,231

2015Non-recurring

ItemsEnergyRetail Generation & trading

EPCGand other

2016Non-recurring

Items

+81

+183 €M


Group EBITDA





Financials

7

1,048 - 404 - 350 - 79 - 1 - 4 - 134 76 - 133 130 73

2015 A

-

€M


From Group EBITDA to Group Net Income





Financials

8

+153 +36%

€M


From Group Net Income to Group Net Ordinary Income





Financials

9

BREAKDOWN BY NATURE BREAKDOWN BY BUSINESS

2015

57

133

154

344

2016

48

46

159

171

424

Maintenance

Development

Mandatory

M&A*

2015

59

52

64

129

344

2016

102

61

36

167

424

4

2 27

7

8

6 27

17

Generation &trading

Energy retail

Waste

Districtheating

Networks

Corporate

Smart city

Epcg

+80 +80

€M

*M&A Capex related to LGH not included


CAPEX





Financials

10

(1) Funds from operations after change in working capital

€M


Net Free Cash Flow





Financials

11

2014-16,

HOW WE DID IT

12

* From the appointment of the new Board of Directors, 17/06/2014, to 28/3/2017

VISION/STRATEGY

Achievements on key R3D points:

RESTRUCTURE Cost reduction, company simplification, flexibilization, capacity optimization

RELAUNCH

Consistent industrial growth Selective external growth

RESHAPE

Public lighting, smart city, energy efficiency

RESULTS

3 years of growing results exceeding plan

12 quarters with continuous debt reduction

Dividend (+50%) and stock price growth (+61%)*

82 €M savings vs. 2014 cost base

RESULTS AND STRATEGIC

GOALS DELIVERED






Financials

13

3M

305 337

314

6M

551 562 614

9M

783 814

872

12M

1,024 1,048

1,231

1,010

1,036

2014 2015 2016 TARGET

EBITDA €M

3 years of growing results exceeding plan





Financials

14

*Pro forma: 2.93 A2A 2016B + 0.47 LGH

A2A LGH TARGET

3.72

3.57

3.47

3.36

3.31

3.24

3.14

2.90

2.88

2.83

2.77

2.67

3.24

3.14 3.16

3.40*

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2014 2015 2016

…WITH HIGHER CAPEX AND STRONGER

DIVIDENDS

NFP €B

12 consecutive quarters of debt reduction…





Financials

15

+1.6 €B of market cap

+61%

3.30 3.63 4.10 4.92

DIVIDEND €c/share ~ +50%

Stock trend (100 = 17/06/14*)

Strong Total Shareholder Return





Financials

* Date of appointment of current top management

A2A

FTSE Italia All-Share Utilities +6%

FTSE MIB -7%

EURO STOXX Utilities -11%

16

47 82

2016 2015

50% of 2020 target already

achieved

400+ internal resources involved

200+ projects with analytical targets

Process optimization and design-to-cost

Strong cost savings

(En&A)





Financials

COST SAVINGS

€M

17

RESTRUCTURE

RELAUNCH

RESHAPE

18

CCGT FIXED COSTS

SIMPLE

CCGT EBITDA

CCGT FLEXIBILITY

2014

74

2016

59 54

Target

Actual

-28%

20 €M cost savings in CCGT plants in 2 years

A2A Energiefuture, thermal plant re-conversion

A2A gencogas, single vehicle for A2A CCGTs

Chivasso already best in class, other plants under way

Market/seasonal opportunities

Leadership in ancillary services

€M

€M

+164

MW/ min

2014

26

2016

5050

Target

Actual

+92%

Load gradient

Restructure





Financials

19

+8% waste treated

2014

2,594

2016

2,800

WASTE TREATED

MILAN DH NETWORKS

2014

264

2016

299

+13% DH network in Milan

ENERGY/GAS CUSTOMERS

2014

320

2016

694

+117% free market customers

WASTE COLLECTION

2014

2.7

2016

3.4

+26% inhabitants served

Ktons

‘000 POD

M inhab

Km

Relaunch Consistent industrial growth





Financials

20

Waste

5

Energy

Efficiency

2

RES

1

LGH

1

Total

9

NEW LOCAL AGGREGATION PARADIGM INTRODUCED

August 2016 Industrial partnership (51%)

signed with LGH: “Multi-utility of the territories”

9 DEALS COMPLETED IN 2 YEARS

Relaunch Selective external growth





Financials Aligned to Industrial Plan guidelines

Fully integrated along the value chain

21

PUBLIC LIGHTING

ENERGY EFFICIENCY

E-MOBILITY

SMART CITY

87

2016

196

2014

+125% LED relamping

1st Italian independent ESCo acquired

Set-up completed and first pilot projects

1st Italian Fast Charge public network

75%

recharges

‘000 LED

‘000

Reshape





Financials

22

DISCIPLINE

DIALOGUE

DIGITAL

23

DISCIPLINE DIALOGUE DIGITAL

+50% of DPS increase in three years

FFO/Debt, key rating indicator, improved up to 24%

Implementation of Enterprise Risk Management structure

15 Lean Thinking pilot projects

A2A's first sustainability plan & integrated report

4 multi-stakeholder forum and territorial sustainability reports

People and organization: Smart working, Organizational

Compass Project, Futura2a, ABC Project, Melograno, ...

New digital platform for customer base

Digitalization of networks processes

(WFM, IDMS, …)

Digitalization of CCGT Chivasso plant

New solar thermodynamic plant at San Filippo del Mela site

2014 2016

24

STRATEGIC PLAN

2017-2021

25

RESTRUCTURE RELAUNCH RESHAPE

Restructure of thermoelectric

power generation portfolio

Growth in environment, smart networks

and energy services

Buying options in smart city

and green economy

26

From "traditional" generator to active service provider

Efficient fleet to exploit market peaks

Contribution to market adequacy with A2A capacity


and energy services


and green economy


27

From "traditional" generator to active service provider

Efficient fleet to exploit market peaks

Contribution to market adequacy with A2A capacity


and energy services


and green economy


28

STRATEGY UPDATE

REGENERATION RESHAPE

Active role in the energy market transformation

Flexible fleet to serve shortening EU markets

Re-alignment with EU Winter Package

Development by adjacencies


and green economy

From pilot projects to market solutions

RELAUNCH


and energy services

Focus on low-risk businesses

FOCUS TRANSFORM ACCELERATE

29

ASSET DEVELOPMENT

Additional investments (+600 €M vs. previous plan) in core, growing, low-risk businesses

REGULATED

BUSINESS

WASTE

TREATMENT

DEVELOPMENT

COST REDUCTION

EFFICIENCY

AND

OPTIMIZATION

En&A project on track and launch of a new operational excellence program

MARKET GROWTH

Consistent growth in retail, waste collection and DH

ORGANIC

DEVELOPMENT

M&A AND

SYNERGIES

Prudent M&A targets

Conservative targeted synergies

Relaunch



Strategic plan 2017-2021 Relaunch Re-generation Reshape


Financials

30

(1) Including M&A and gas distribution tenders

0

20

40

60

80

100%

+50% CAPEX per year vs. average 2014-2016(1)

Almost 90% CAPEX in regulated/quasi-regulated markets

~70% of net invested capital in 2021 related to Regulated/ Quasi-Regulated assets

€M

Regulated business

Higher Capex in regulated/quasi-regulated


Relaunch

Re-generation

Reshape

Asset Development

Market Growth

Cost reduction

40% CAPEX in sustainability

31

Increase in Gas and Electricity distribution RAB

Gas and Electricity distribution tariffs stable over the period 2017–2021

Water distribution tariffs increase by 8.5% YoY according to Regulatory Framework 2016-2019

€B

Regulated business

RAB increase


Relaunch

Re-generation

Reshape

Asset Development

Market Growth

Cost reduction

EE & GAS RAB 2017

EE & GAS RAB 2021

2.0 1.8

32

Limited volume risk, mostly internal waste flows integration

Focus on A2A industrial sites in Northern Italy

* LGH, Rieco, Bedizzole full year contribution; public tenders excluded

860 Ktons/year

waste material recycling

Ktons treated

Waste treatment development


Relaunch

Re-generation

Reshape

Asset Development

Market Growth

Cost reduction

2014 2015 TARGET

2015 ACTUAL

2016 TARGET

2016 ACTUAL

FULL YEAR

CONSOLI- DATION*

NEW PLANTS 2021

2,594 2,626 2,558 2,634 2,800

687

500 155 4,249

Authorized/ authorizations

in progress

Authorizations to be

requested

ACHIEVABLE TARGET ACHIEVED

EXISTING PLANTS

UPGRADE

107

33

Note: Includes LGH

2021 target consistent with 2014-16 average organic growth

67% avg. sorted

collection

M inhabitants

Organic development

Waste collection


Relaunch

Re-generation

Reshape

Market Growth

Cost reduction 2014 2015

TARGET 2015

ACTUAL 2016

TARGET 2016

ACTUAL 2021 BP

2.70 2.81 2.80 2.90

3.38

3.94

~ +100K inhab./year ~ +300K

inhab./year


34

Growth planned in core geographical areas

Free market customer base in 2019 4x vs. 2014

Note: Includes LGH * Free market **Electricity mass market

Organic development

Energy and gas retail


Relaunch

Re-generation

Reshape

Market Growth

Cost reduction 2014 2015

TARGET 2015

ACTUAL 2016

TARGET 2016

ACTUAL 2021

TARGET

320 419 444

577 694

1,438

~ +180K POD/year

90% EE customers with green

energy sold**

POD* ‘000


~ +150K POD/year

35

>60% of M&A contribution to business plan already completed

Only new M&A deals in advanced stage included

M&A and synergies M&A


Relaunch

Re-generation

Reshape

Market Growth

Cost reduction

Note: LGH not included

2016 EBITDA OF ALREADY

CLOSED DEALS

ALREADY CLOSED

DEALS FULL POTENTIAL

NEW M&A DEALS UNDER

NEGOTIATION

SYNERGIES TOTAL INCREMENTAL

EBITDA

2

4

15

10 31 SYNERGIES

ENERGY EFFICIENCY

NETWORKS

WASTE


EBITDA €M

36

EBITDA synergies 12 €M (~16% of 2016 LGH EBITDA)

Further savings under assessment

€M

M&A and synergies LGH synergies


Relaunch

Re-generation

Reshape

Market Growth

Cost reduction

EBITDA SAVINGS

FINANCIAL SAVINGS

CAPEX SAVINGS

TOTAL SAVINGS @2020

12

7 2 21

37

EBITDA €M

Lean and 6 sigma initiatives, Business Process Modeling

Change management

Creation of an internal competence center devoted to continuous performance improvement

Plan impacts not included in the business plan (additional projects)

2017 NEW OPERATIONAL EXCELLENCE

PROGRAM

EN&A 2015-2021

Operating efficiency continuous journey

Cost reduction

Market Growth

12

2016 2021

82 +108

LGH

A2A 178

12

190


Relaunch

Re-generation

Reshape

38

Traditional thermal plant reconversions

Organic and inorganic growth in RES and in new market opportunities

VA

LU

E F

RO

M

DIV

ER

SIFIC

ATIO

N

5-year SFM plant must-run

Hydro and baseload stable production

MEDIUM

TERM

STABILITY

ACTIVE

MANAGEMENT

OF CCGT

GROWING

OPTIONS

RES/DERs NEW

SOURCES OF

GROWTH

Re-generation





Financials

Short-term market opportunities

Additional medium-term market space from European trends

Capacity market and generation margins upside

Possible moderate addressable demand increase

39

'13

532

'14

500

'15

469

'16

494

Avg.13-16

499

Avg.17-21

459

33 -401 -30 -5Delta vs. avg.

7% -8%0% -6% -1%Delta % vs. avg.

Thermal

Hydro incentives

Hydro market

PLANTS CONTRIBUTION MARGIN

DELTA vs. 13-16 AVG.

Historical ‘13- ‘16 volatility maximum

+/-7%

Natural hedging between hydro

and thermal

€M

33

33

Value from diversification


Relaunch

Re-generation

Reshape

Value from diversification

Medium-term stability

Active mgmt of CCGT

RES/DERs sources of growth

40

14 15 16 17 18 19 20 21

49

2,9

14 15 16 17 18 19 20 21

14 15 16 17 18 19 20 21

55

Conservative scenario assumptions, lower than previous plan

14 15 16 17 18 19 20 21

12,2

Clean spark spread

Clean dark spread

PUN Baseload

PUN Peak Load

16-20 BP

17-21 BP

€/ MWh



Relaunch

Re-generation

Reshape


Active mgmt of CCGT


2.9

12.2

41

Pl. 1

63%

Pl. 2

57%

Pl. 3

45%

Pl. 4

42%

Pl. 5

42%

Pl. 6

32%

A2A

25%

Pl. 7

17%

3.10.8 3.1 0.81.1 2.20.80.8GW

Slow growth in market demand

-30 baseload GW in Europe by ’21*

New RES not covering entire additional net demand

A2A CCGTs positioned to catch market opportunities

GROWING MARKET SPACE FOR A2A CCGTs

CAPACITY MARKET REVIEWED CONSERVATIVELY

* A2A elaboration based on GER, FRA, SPA, UK, SWI, BEL, AUT nuke/coal phase-out plans

** MGP load factor of Northern zone CCGTs in peak hours (2016)

K€/MW

LF %**

Active management of CCGT growing options

Capacity market and growing market space


Relaunch

Re-generation

Reshape

Active mgmt of CCGT


2 YEARS AGO FCST

23.5

15.7 13.3

1 YEARS AGO FCST

TODAY’S FCST

START-UP 2017 2018 2018

Average on A2A total

generation portfolio

Capacity auctions expected to set premium in a 18-20 k€ range

42

0.8

2.3

2.0

1.9

0.5

1.0

2021

0.8

3.6

1.9

0.5

1.0

Today

8.47.6

Must-run

Baseload

RES

Flexible CCGT

Standard CCGT

Demothballed (TSO

request)

Mothballing

Shut down/sold

Must run, baseload and hydro stable

~4 GW CCGTs running, 90% of which planned to be flexible

A2A CAPACITY

GW

Active management of CCGT growing options

A2A installed capacity evolution


Relaunch

Re-generation

Reshape

Active mgmt of CCGT


43

THERMAL PLANTS RE-

CONVERSION

Evolution into “integrated renewable poles”

Projects design in SFM, BR and Monfalcone

Solutions for environment/renewable synergies

Exploration of potential inorganic growth in PV/Wind

Potential new greenfield/brownfield developments

New developments as additional projects

DEVELOPMENT ON A2A SITES

RES PV development in Group industrial sites (SEU/SSP)

Hydro developments in Calabria

MARKET DEVELOPMENT

RES M&A and

GREENFIELD/BROWNFIELD

Storage systems development

Demand Response Management System

Innovative distributed energy services

DISTRIBUTED ENERGY

RESOURCES

RES/DERs new sources of growth


Relaunch

Re-generation

Reshape


44

SMART CITY

Strong pipeline of business development agreements

A2A SMART

CITY

MOBILITY

SOLUTIONS

Catching the key trends in the mobility evolution: green, shared and connected

ENERGY EFFICIENCY

Higher targets also thanks to selective M&A deals already ongoing

PUBLIC

LIGHTING

ESCo PROJECTS New M&A deals in pipeline

Reshape





Financials

45

New business development initiatives ongoing, both B2B and with public administration

# agreements

A2A smart city

Smart services growth


Relaunch

Re-generation

Reshape

Smart City

Energy Efficiency

8

17

19 44

TOTAL OPPORTU- NITIES

IN PROGRESS

SIGNED

INCLUDED IN PLAN

46

GATEWAY LORA

A2A smart city

Sharing Cities project


Relaunch

Re-generation

Reshape

Smart City

Energy Efficiency

NOISE SENSORS

SENSORS FOR

POLLUTION MONITORING

TRAKING OF

BICYCLES

SOS PUSH

TO TALK

WATER MANAGEMENT

SENSORS

OUTDOOR SENSORS FOR TEMPERATURE

OUTDOOR SENSORS FOR ATMOSPHERIC

PRESSURE

INFO FROM

OTHER DATA SUPPLIERS

WI-FI

Data transportation

Enabler of new services optimization

47

ENERGY

BIOMETHANE

Fast and quick charging stations to make Lombardy the best Italian city for electric vehicles

Becoming a key player in the forthcoming EV market

90,000 400,000

240 t 1.000 t

Lacchiarella, Bedizzole + another 2 plants in Northern Italy

Over 20 MSm3 year of bio-methane by 2020 as green fuel for transportation

#charges

PARKING SPACES

Traffic congestion reduction thanks to delivery platform, sensors and vertical solutions

Design and management of parking technology based on broad data and integrated with 3rd-party applications

kWh

MSm3

#

Mobility solutions

Building profitable mobility solutions


Relaunch

Re-generation

Reshape

Smart City

Energy Efficiency

48

E.E. Certificates (TEE)

LED relamping almost completed

Growth achieved with a mix of organic growth and selective M&A

Energy Efficiency

Analysis of M&A opportunities

in complementary segments

Palazzo della Loggia Brescia

RE

GU

LA

TE

D

/Q

UA

SI-R

EG

ULA

TE

D

FR

EE

MA

RK

ET

Lighting points District cooling plants Led public lighting

and ESCo projects


Relaunch

Re-generation

Reshape

Energy Efficiency

~2x

209

418

2016 2021

196

OTHER LED

Consultancy TEE Energy consumption analysis

Industrial Design & installation Monitoring Combined Heat & Power EPC

Horizon 2020 projects, Demand Side Management & Demand Response Metering

49

DISCIPLINE DIALOGUE DIGITAL

Operational excellence project adoption

Further deleveraging, with higher Capex and DPS

Dividend target of 7.5 €cent in 2019 confirmed

Extension of multi-stakeholder forum and territorial sustainability reports

Sustainability target in management MBO

People: ageing policy, welfare, managerial development,

talent management, employer branding

Further Business Units process digitalization

New HR ERP

Strong fiber development

New IT and digital services to municipality

Strong investments in automation

50

PEOPLE &

SUSTAINABILITY

51

30 actions by 2020

Piano Industriale 2015-2019

Piano di Sostenibilità

2014

GOALS and TARGETS 2030

ACTION and ENABLING DRIVERS - 2020

2030 10/17 goals

The sustainability policy and the 2030 commitments

SDG vs.

VALUE CHAIN

CIRCULAR ECONOMY

DECARBONIZATION SMART GRID AND

SERVICES PEOPLE

INNOVATION

OUR

2030 PATH

FROM TO





Financials

A2A 2030 sustainability policy

Develop a sustainable waste management

approach for the entire life cycle

Contribute to the achievement of the

national and European objectives to reduce

GHG emissions

Increase the reliability of grids and services by increasing

the investments in technological innovation

Actively contributing to community welfare and

improved working conditions

52

CIRCULAR ECONOMY

DECARBONIZATION

SMART GRID AND SERVICES

PEOPLE INNOVATION

2016 results 2020 goals

99.0%

67.0%

80.0%

56.2%

84%

98.86% Urban waste sent for recycling or energy recovery

Separated waste collection in the communities served

Impact of the recovery capacity of the material in the Group's plants on the urban waste collected

392.5

-234

1,260

Carbon intensity in electricity generation (gCO2/kWh)

CO2 avoided thanks to the extension of the district heating network (ktonnes/year)

Green electricity sold (GWh)

417

769

- 161

The CSI Total in “multi-client of reference” surveys (CERVED DataBank) with a value never below 90%

customers with online A2A Energia services 400,000

Million euro invested in the Smart City area 10

268,818

1.9

92.4%

regional workshops with 30 actions to be implemented

inspections/year at the roadwork sites of the A2A Group

Target employees involved in Smart Working projects

15

4,000

20%

2 workshop (11 actions)

1,406

5%

A2A 2020 sustainability plan goals





Financials

2020 goal already achieved

53

Employability Project

Labs of technical skills (hydro, networks, procurement), high-school/work experience

Talent management, employer branding

ABC Managerial Development, Melograno Project, Smart Working, HCM IT Platform, WE HR change management

Lean-Kaizen and operational

excellence projects

Welfare platform, working spaces

redesign

People strategy

Ageing management

1 2

3

4 5

6

Skills model

Talent management

Company Welfare

Continuous improvement

Cultural changes

and diversity

A2A people ready to face cultural and technical challenges of tomorrow

People Strategy drivers & projects





Financials

54

Who are the promoters?

A2A, with Fondazione AEM and ASM and in cooperation with Fondazione Cariplo

What is it?

It’s a non-profit organization created to support people and families with social fragilities

How does it work?

Through non-profit organizations selected by Banco dell’energia through tender process

Who are the donors ?

Employees, A2A’s household and business customers, companies, citizens, etc.

A project of social innovation born with a participatory approach

A2A is committed to doubling the amount donated by its household customers.

Fondazione Cariplo will double all the money received. Target: 2 million euros in 2017

Banco dell’Energia





Financials

55

FINANCIALS

56

1,120 – 1,150

~300

~0 – 100

EBITDA

2017F

NET INCOME

CAPEX

CASH FLOW

~550 – 600

1,120 – 1,150

* Central value of the range 1,120 €M – 1,150 €M considered as the reference value for EBITDA 2017

~ +3%

€M

EBITDA

2016 – 2017





Financials

57

1,135*

1,380 1,380

66

422

263

141

268

78 51 34

34 6 31 12

97

457

341

192

301

22%

13%

2017 WASTE ENERGY

RETAIL

NETWORKS

AND

DISTRICT

HEATING

GENERATION

& TRADING

SMART CITY

EPCG OTHER 2021 2021 REGULATED /

FREE MKT MIX

REGULATED

QUASI REGULATED

MERCHANT LOW VOLATILITY

MERCHANT HIGH VOLATILITY

OTHER

EPCG

NETWORKS

GENERATION & TRADING

WASTE

ENERGY RETAIL

SMART CITY

BY

BU

BY

MIX

+245

- 34 - 22

8

14

* Central value of the range 1,120 €M – 1,150 €M considered as the reference value for EBITDA 2017

€M





Financials

EBITDA

2017 – 2021

30%

35%

58

317

245

- 48

24

41

- 80 - 29

470

EBITDA D&A PROVISIONS NET FINANCIAL EXPENSES

TAXES

MINORITIES 2017

GROUP NET

INCOME

2021 GROUP

NET INCOME

+153

€M





Financials

Net Income

2017 – 2021

59

M&A

DEVELOPMENT

MAINTENANCE

MANDATORY

2017 - 2021 TOTAL CAPEX

2,750

3%

57%

36%

5%


2,750

9%

47%

25%

8%

6%

1%

2%

GEN.

& TRADING

RETAIL

WASTE

DISTRICT

HEATING

NETWORKS

CORPORATE EPCG

1% SMART CITY


2,750

12%

34%

1%

53%

MERCHANT

MERCHANT LOW

VOLATILITY

QUASI

REGULATED

REGULATED

€M





Financials

CAPEX

2017 – 2021

60

NFP

2016

3.1

Ebitda

-6.3

Change in

NWC& other asset/liab.

0.3

Use of

Funds

0.2

Tax

1.0

Net

FinancialExpenses

0.5

CAPEX

2.8

Dividends

& Other

0.9

NFP

2021

2.5

2.5x 1.8x

*Inclusive of net write-offs (256 €M). By excluding net write-offs, Return on Investments is equal to 11%

-0.6

€B

~7,1%* RETURN ON INVESTMENTS ~12%





Financials

Cash flow generation

2017 – 2021

61

(1) FFO = Ebitda – provisions for bad debt - net interest expense - current tax expense + dividends received Debt = gross financial debt net of surplus cash + employee benefits + liabilities for landfills





Financials

DPS and FFO/Debt

2017 – 2021

2013 2014 2015 2016 … 2019 2021

A2A

DIVIDEND

PER

SHARE

(€c)

3.3 3.6 4.1 4.92 ~ 7.5

Min 60%

pay-out ratio

FFO /

DEBT 1 17% 18% ~21% ~24% > 25% > 25%

CO

NF

IRM

ED

C

ON

FIR

ME

D

~ +50%

62

(1) Electrical connection from road level to user’s individual apartment

LOCAL AGGREGATIONS

HEAT TRANSPORTATION BACKBONE CASSANO-MILANO

POTENTIAL DEVELOPMENT ABROAD

DISTRIBUTED ENERGY RESOURCES (DER)

PLANT RECONVERSIONS

GAS NETWORKS: FURTHER GROWTH THROUGH GAS TENDER

OPERATIONAL EXCELLENCE

REHABILITATION OF “COLONNE MONTANTI” (1)

EPCG EXIT OPTION

FEASIBILITY

tbd

EBITDA

IMPACT

10-20

50-75

10-20

50-60

5-8

5-20

5-10

tbd

PROJECT LIST

135- 210

EBITDA EXIT PRICE





Financials

Additional projects

€M

63

WRAP UP

64

Waste, Retail and Networks to lead the growth More options for generation and a more conservative energy scenario Resilience of net income growth to commodity prices Dividend target of 7.5 €cent in 2019 confirmed Positive free cash flow generation with increasing Capex and dividends

Key takeaways

2017 – 2021

65

NO LONGER A GEN.CO.

Growth mainly driven by non-generation

businesses

Higher option value from generation assets

and Winter Package

Strong CAPEX increase in regulated/

quasi-regulated markets

Annual investments 50% higher than past three

years’ average

Further optimization from operational

excellence

Local aggregations, M&A, RES/DER

and other projects to strengthen A2A

positioning and to mitigate risk

Updated Project Pot

BOOST IN BUSINESSES WITH PROVEN TRACK RECORD

ROOM FOR UPSIDES

OUR FUTURE IS SUSTAINABLE, GREEN, OPEN, SMART

A2A: what kind of company going forward?

66 66

Word Cloud 2017 – 2021

67

Q&A

68

68

ANNEXES

FY 2016 vs. FY 2015

2017B-2021 STRATEGIC PLAN

69

69

Other Treatment Plants

Collection

Urban Waste Treatment Plants

International Projects

LGH

FY 2016 vs FY 2015 RESULTS BU WASTE

2015

36

132

69

210

2015 NonRecurring

Items/Redundancy

Schemes

-4

2015Ordinary

36

129

68

206 6-4

Internationalprojects

-2

LGH

11

2016Ordinary

12

143

74

231

2016 NonRecurring

Items/Redundancy

Schemes

2016

1112

151

75

240

Collection UrbanWaste

TreatmentPlants

14

OtherTreatment

Plants

9

+25 €M

+30

70

70

+42

+30

€M

FY 2016 vs FY 2015 RESULTS BU RETAIL

71

71

+56

+19

* Includes San Filippo del Mela merchant

€M

FY 2016 vs FY 2015 RESULTS BU GENERATION & TRADING

72

72

+44

-5

2015

12826

70

198

202

-271

2015 NonRecurring

Items

12926

69

198

205

-268

WaterCycle

2

ElectricityNetworks

-19

GasNetworks

-5

PublicLighting

-2

DistrictHeating

-11

Fix Costs

18

EBITDALGH

12

2016Ordinary

-250

186

193

7124

118

12

2016

-258

185

195

122

24

117

12

2015Ordinary

2016 NonRecurring

Items

35443

397353 6 359 354

43

397353 6 359

Gas Networks Contribution Margin

Electricity Networks Contribution Margin

Water Cycle Contribution Margin

Public Lighting Contribution Margin

Fixed Costs Heating Contribution Margin

Fixed Costs

€M

FY 2016 vs FY 2015 RESULTS BU NETWORKS AND DISTRICT HEATING

73

73

+1

€M

FY 2016 vs FY 2015 RESULTS BU SMART CITY

74

74

+16

2015

1

19

33

53

Generation and Retail

5

Distribution

11

2016

1

30

38

69

Energy

Other

Distribution

€M

FY 2016 vs FY 2015 RESULTS BU EPCG

75

75 *P&L includes 5 months (August-December 2016) of LGH consolidation

€M

FY 2016 vs FY 2015 RESULTS CONSOLIDATED RESULTS: P&L*

76

76

Intangible Assets

Shareholdings and Other Non Current Financial Assets

Other Non Current Assets/Liabilities

Deferred Tax Assets and Liabilities

Provisions for Risks, Charges and Liabilities for landfills

Employee Benefits

NET FIXED CAPITAL

Inventories

Trade receivables and other current Assets

FY 2015 FY 2016 %

Tangible Assets 5,067

Current tax Assets/Liabilities

WORKING CAPITAL

TOTAL CAPITAL EMPLOYED

Equity

Net Financial Position

TOTAL SOURCES

1,348

80

(66)

308

(576)

(332)

5,829

184

1,652

28

180

6,156

3,259

2,897

6,156

Trade payables and other current Liabilities (1,684)

Non current Assets /Liabilities held for sale 147

5,080 +0.3%

1,724 +27.9%

80 -

(85) +28.8%

363 +17.9%

(668)

(365) +9.9%

6,129 +5.1%

159 -13.6%

2,209 +33.7%

37 +32.1%

277 +53.9%

6,407 +4.1%

3,271 +0.4%

3,136 +8.2%

6,407 +4.1%

(2,128) +26.4%

+16.0%

1 n.a.

€M

FY 2016 vs FY 2015 RESULTS CONSOLIDATED RESULTS: BALANCE SHEET

77

77

-

-24

*Ordinary fixed costs, excluding change in perimeter and cost covered by revenues

€M

FY 2016 vs FY 2015 RESULTS CONSOLIDATED RESULTS: EXTERNAL COSTS

78

78

FTE(1)

LABOUR COSTS (€M)

(1) A2A Group’s Full Time Equivalent

2015 FY

12,230

Change in

perimeter

-306

2015 FY

excludingchange in perim.

11,923

Net

reduction

-132

2016 FY

excludingchange in perim.

11,791

1,539

2016 FY

13,330

Change inperimeter

2015 FY

657

-12 -5

640 2

-3 -4

2016 FYexclud.change

in perimeter

635 1141

2016 FY

687

Change inperimeter

Red.schemes

2015 FYexclud.change

in perimeter

Othercosts

FTEeffect

Costeffect

Red.schemes

Change inperimeter

+1,100

+30

-5

€M

€M

FY 2016 vs FY 2015 RESULTS CONSOLIDATED RESULTS: LABOUR COST

79

79

2017

309

309

2018

299

105

404

2019

568

105

673

2020

100

100

2021

430

101

531

2022

500

99

599

2023

300

92

392

2024

70

70

2025

300

62

362

2026

45

Beyond2026

98

179

277

45

Bonds

Loans

€M

FY 2016 vs FY 2015 RESULTS GROSS DEBT MATURITIES AS OF DECEMBER 31st, 2016

80

80

Average data 2015 FY 2016 FYD % vs

2015

Brent $/bbl 53,7 45,1 -16%

CO2 - EU ETS cost €/Tonn 7,7 5,4 -30%

Green Certificates €/MWh 98,3 49,8 -49%

€/$ €/$ 1,1 1,1 0%

Brent € €/bbl 48,4 40,8 -16%

PSV(1) €/MWh 22,0 15,6 -29%

AEEGSI Gas Tariff (2) c€/mc 22,9 15,6 -32%

Coal € (API2) €/Tonn 51,2 54,2 6%

PUN baseload(3) €/MWh 52,3 42,7 -18%

PUN peak(3) €/MWh 58,7 48,2 -18%

PUN off-peak(3) €/MWh 48,7 39,8 -18%

CCGT gas cost(4) €/MWh 49,8 37,6 -24%

Spark Spread CCGT_PSV vs Baseload €/MWh 2,5 5,1 n.a.

Spark Spread CCGT_PSV vs Peakload €/MWh 8,9 10,5 18%

Spark Spread CCGT_PSV vs Off-Peak €/MWh -1,1 2,1 n.a.

Clean Spark Spread vs Baseload €/MWh -0,4 3,1 n.a.

Clean Spark Spread vs Peakload €/MWh 6,0 8,5 42%

Clean Dark Spread vs Baseload(5) €/MWh 15,8 7,2 -54%

Italian electricity demand(6) TWh 316,9 310,3 -2%

Gas demand Bmc 66,9 70,4 5%

(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

FY 2016 vs FY 2015 RESULTS ENERGY SCENARIO

81

81

(1) FY2015 Hydro production includes 269 GWh related to Asta Cellina (2) Net of intermediated Ipex volumes

(1)

(2)

FY 2016 vs FY 2015 RESULTS VOLUMES

82

82

ANNEXES

FY 2016 vs. FY 2015

2017B-2021 STRATEGIC PLAN

83

83

UM 2015 2016 2017 2018 2019 2020 2021

Exchange rate €/$ €/$ 1.11 1.11 1.06 1.08 1.11 1.13 1.16

ICE Brent €/bbl 48.4 40.7 54.5 56.5 57.7 61.1 60.3

Coal API 2 €/tonn 51.2 54.0 65.0 60.2 56.8 55.8 54.3

CO2 (EUA ETS) €/tonn 7.7 5.4 5.3 5.6 6.4 7.2 8.0

AEEGSI Gas Tariff (Pfor) €c/mc 22.9 15.6 19.6 18.0 17.3 17.2 17.7

PSV €/MWh 22.0 15.6 19.8 18.5 18.4 18.3 18.2

TTF €/MWh 19.8 14.0 18.1 16.8 16.2 16.1 16.5

PUN Base Load €/MWh 52.3 42.7 46.9 47.6 48.2 49.2 49.2

PUN Peak Load €/MWh 58.7 48.2 50.9 53.6 54.2 55.2 55.2

CCGT Gas Cost (PSV) €/MWh 49.8 37.6 46.8 43.9 43.7 43.5 43.3

Peak Spark Spread €/MWh 8.9 10.5 4.1 9.7 10.5 11.7 11.9

Spark Spread (PSV) €/MWh 2.5 5.1 0.1 3.7 4.5 5.7 5.9

Clean Spark Spread (PSV) €/MWh -0.4 3.1 -1.8 1.6 2.1 3.0 2.9

Dark Spread €/MWh 23.3 12.5 13.1 15.8 17.9 19.3 20.0

White Certificates €/Toe 104.2 145.5 130.0 150.0 150.0 150.0 150.0

2017B-2021 STRATEGIC PLAN SCENARIO AND MAIN ASSUMPTIONS

84

84

2016

Ordinary

231

2017

262

Urban waste

treatment

72

Other treatment

and collection

7

2021

341

2016

Ordinary

231

2017

262

Collection

5

Existing treatment

plants(price and efficiency)

24

Volumes

of newtreatment plants

61

Costs

(mainly Labour)

-11

2021

341

*

* 2016 excluding one-off equal to 9€M and including LGH consolidated only for 5 months ** 2017 excluding one-off equal to 1€M

CAGR +6.8%

**

*

**

CAGR +8.1%

Breakdown by BU sub-segment

Breakdown by growth driver

2017B-2021 STRATEGIC PLAN BU WASTE

85

85

Existing treatment

plants

• Limited volume increase, cost efficiencies and better flow management

• Full exploitation of 2016 acquisition

• About +0.5% p.a. of price increases due to Italian lack of availability of landfills

New treatment

plants

Business Plan assumptions

Driver

• ~0.7 ktons of growing capacity on new sites, mainly related to organic and plastic treatment

• Administrative authorization on 500/700 ktons in progress

• Plant roll-outs spread through plan timespan

• Most of economic benefits from internal waste flows integration

2017B-2021 STRATEGIC PLAN BU WASTE – Drivers & Assumptions

86

86

2016

Ordinary

120

2017

135

Power

Market

44

Gas

Market

33

Fixed

costs

-27

Value

AddedServices

7

2021

192

*2016 excluding one-off equal to 24€M and including LGH consolidated only for 5 months ** 2017 excluding one-off equal to 6€M

*

**

CAGR +9.9%

CAGR +9.2%

* ** Breakdown by BU

sub-segment


2017B-2021 STRATEGIC PLAN BU RETAIL

Regulated market

87

87

Customer Base

• Free market customer base +150K avg p.a.(1) leveraging upon:

• Gradual territory expansion

• SME segment development (new dedicated sales force)

• Brand equity

• Proven track record (average past 2 yrs growth +120K. Incl. M&A: +180K)

• No growth from M&A in the plan

Unitary Margin • Expected to reduce ~3% avg p.a. on growing competition(2)

Fixed costs

• Cost-to-Acquire, per unit, planned to grow ~5% avg p.a. on growing competition

• Steady Cost-to-Serve, per unit, thanks to strong focus on operating performance

Business Plan Assumptions Driver

(1) Assuming current regulatory and market structure continuity (2) Mass market unitary margin – Residential and small business customers – excluding regulated components

2017B-2021 STRATEGIC PLAN BU RETAIL – Drivers & assumptions

88

88

2016Ordinary

285

69

354

2017Ordinary

309

90

399

Tariffs(Gas/El./Water)

10

Gas tender

30

PublicLighting

8

CommercialDevelopment

9

EnergyEfficiency

3

Scenario

-2

2021 P

357

100

457

Networks

District Heating

2016

Ordinary

117

124

33

69

354

2017

Ordinary

126

126

40

90

17

399

EE

-4

GAS

22

IWC

22

DH

10

PL

8

2021P

148

122

62

100

25

457

..

11

*

CAGR +6.6%

CAGR +5.2%

* 2016 excluding one-off equal to 43€M and including LGH consolidated only for 5 months ** 2017 excluding one-off equal to 23€M

**

Heating Networks

*

**



2017B-2021 STRATEGIC PLAN BU NETWORKS & HEATING

89

89

Gas tenders

Public Lighting

• #PoD: +180k (+12%)

• RAB: +200€M

• #ATEMs: 10-15 (target @ 2021)

• Capex: +320€M

• Lighting points 2x (over 400K)

• New Tenders

• 1 M&A transaction (H2 2017)

Commercial development

• DH development mainly in eastern Milan area (saturation of Silla 2 WTE plant thermal capacity)

• New connections: 44 MW/Yr (vs. 60 MW/Yr average past 3 yrs)

Energy Efficiency

• Full potential exploitation of 2016 acquisition

• Synergies between A2A technical skills and Consul System market leadership in “white certificate” origination


2017B-2021 STRATEGIC PLAN BU NETWORKS & HEATING – Drivers & Assumptions

90

90 * 2016 excluding one-off equal to 52€M and including LGH consolidated only for 5 months

** 2017 excluding one-off equal to 5€M

*

**

*

CAGR -3%

CAGR +2.8%

**

Ordinary



2017B-2021 STRATEGIC PLAN BU GENERATION & TRADING

€M

91

91

Hydro & Coal

• Production in line with 10-year average

• PUN baseload 2021: 49 €/MWh

• Achieved price vs. PUN BL same as historical average (6 €/MWh)

• Higher Dark Spread to 12 €/MWh

CCGT plants

• 2 TWh Increase in MGP production due to:

‒ Expected increase of “thermal” demand of ~10 TWh, to be supplied by CCGT

‒ Best positioned CCGT :

‒ Located in the North

‒ With spare capacity

Capacity & Ancillary Markets

• MSD in line with average historical margins

• Capacity market reduced to 13 €K/MW due to elimination of flexibility segment by EU


SFM • Contractualized as “must run” until to 2021

2017B-2021 STRATEGIC PLAN BU GENERATION & TRADING– Drivers & Assumptions

92

92

2016

38

30

69

2017

41

24

1

66

Generation and Retail

23

Distribution

8

2021

64

32

1

97

CAGR: 7,7%

CAGR: 10%

Energy

Other

Distribution



€M

2017B-2021 STRATEGIC PLAN BU EPCG

93

93

Tariffs

Cost saving

• 2018-2019 annual increase of 2.7% approved by the local authority. 2020 onward in line

• Voluntary Staff leave program (>200 hdc)

• Savings on current expenses (mainly maintenance materials and services – about 2 €M savings in the period 2013-2016)

Scenario

• Higher feed-in tariff

• Lower cost of coal


2017B-2021 STRATEGIC PLAN BU EPCG – Drivers & Assumptions

94

A2A Investor Relations Team

Mail: [email protected]

Phone: +39 02 7720 3974

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

Contacts

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 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.

Monthly update service for investors and analysts on the significant steps

of A2A Business Plan – such as relevant investments, new projects,

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If you wish to subscribe to the service, please visit A2A website at the

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