Financial Statements 2020 Cover: Santa Giustina’s lake and Caldes Castel Photo: Carlo Baroni, Atchive of Dolomiti Energia Group FINANCIAL STATEMENTS 2020 DOLOMITI ENERGIA HOLDING SpA Fully paid-up Share Capital 411,496,169 euro Via Manzoni 24 – Rovereto Trento Register of Companies No. – Taxpayer ID AND VAT NUMBER 01614640223 www.gruppodolomitienergia.it FINANCIAL STATEMENTS As at 31 December 2020 BOARD OF DIRECTORS Chairperson Massimo De Alessandri Deputy Chairperson Massimo Fedrizzi Chief Executive Officer Marco Merler Directors Rudi Oss Lino Benassi Laura Pedrotti Giorgio Franceschi Arianna Comencini Manuela Seraglio Forti Paolo Mattei Agostino Peroni Carlotta Baroldi BOARD OF STATUTORY AUDITORS Chairperson Massimiliano Caligiuri Standing auditors Michele Iori Barbara Caldera INDEPENDENT AUDITORS PricewaterhouseCoopers SpA Index Report on Operations 12 Dolomiti Energia Holdind SpA Financial statements as at 31 december 2020 66 Statement of Financial Position 67 Comprehensive Income Statement 68 Cash Flow Statement 69 Statement of changes in Shareholders’ Equity 70 Explanatory notes 71 Certification of the financial statements 134 Reports 136 Board of statutory Auditors’ Report 137 Independent Auditors’ Report 141 Dolomiti Energia Group Consolidated Financial Statements as at 31 december 2020 146 Consolidated Statement of Financial Position 147 Consolidated Comprehensive Income Statement 148 Consolidated Cash Flow Statement 149 Consolidated statement of changes in Shareholders’ Equity 150 Explanatory notes 152 The consolidated financial statements 219 Report on the Consolidated Financial Statement 220 Board of statutory Auditors’ Report 221 Independent Auditors’ Report 223 Letter to the shareholders Apple orchards Photo Carlo Baroni, Trentino Sviluppo spa Archive Dolomiti Energia Holding SpA 2020 Financial Statements 7 Dear Shareholders, The year just ended was impacted on global level by the effects of the health emergency, which placed a spotlight on the importance of the activities necessary for day-to-day life and helped us appreciate, through the lockdown, even aspects that we previously took for granted. Your Company implemented numerous measures to guarantee, in compliance with the limits imposed, the continuity of services and the protection of workers’ health. In particular, the Group activated remote working, which, in the most critical period, saw 64% of non-operational personnel working in this manner, in addition to a specific insurance coverage policy for all employees, to offer concrete support in the event of recovery from the virus. Employees were immediately given protective devices and instructions on be- haviour and good practices to adopt to protect their health and reduce the spread of the contagion, and a psychological help desk was set up. In the phase following the first lockdown, all employees were also given the chance to undergo an antibody test and rapid tests were introduced and also extended to contacts outside the employee’s bubble. It is important to take this opportunity to sing the praises of all workers of the Group, who responded to the critical context they had to operate in with an extreme sense of responsibility, flexibility and creativity. Important concrete actions of financial support were also put in place for customers, suppliers and the local community in general. To support small and medium-sized enterprises, the Group decided to make advanced payments on invoices due in April and May, eliminating the usual timeframes associated with payments and pouring over 9 million euro of cash into the local economic fabric. Help was provided to the local community and more vulnerable persons were supported through dedicated projects like Etika, the Cooperazione Trentina and Dolomiti Energia electricity and gas initiative which saw 250,000 euro allocated to the solidarity fund, through which food packages were donated to people in economic difficulty and psychological support was guaranteed to the most vulnerable. To mitigate the rise in daytime consumption costs connected with the lockdown, for free market residential customers with the two-part tariff the sales Company applied the night-time rate for entire day in March and April, helping over 175,000 customers in the process. 112,000 households and businesses were also given the opportunity to suspend their urban waste collection and water cycle payments without the application of any interest or penalties. The issuing of new bills for these services was also postponed. During the critical phase of the emergency, 250,000 euro was donated to UPIPA, the Association that brings together the nursing homes and public companies providing services to people in Trentino. The macroeconomic context Economic activity slowed down sharply from the second quarter of the year and, although there was a greater-than-expected recovery in the summer months, the resurgence of the pandemic led to a new slow- down in the last part of the year. The medium-long term prospects therefore appear to be linked to an exit from the health emergency, which in turn is dependent on the performance of the vaccination campaigns, the timing of which are, however, still uncertain and differentiated in the various countries. Among the main events of the year, the election of Joe Biden as President of the United States, led to a 8 radical global change in American policy with several significant decisions, among which it is worth men- tioning the re-entry of the U.S. into the Paris Climate Agreement, which, in addition to its symbolic value, also marks a strong discontinuity in U.S. environmental policies. In this context, estimates for 2020 are for a significant reduction in GDP in all the main world economies, except China, which is growing, albeit at a lower rate than in previous years. In order to enable a rapid re- covery of the economy, fiscal and monetary stimulus plans of unprecedented scale have been announced by all major states, which hopefully will enable GDP to grow again during 2021. Specifically, in the Eurozone, the European Central Bank confirmed and strengthened its bond purchase and long-term refinancing programmes and announced the broad financing programme Net Generation EU by the European Union to Member States for an amount of 750 billion euro. Thanks also to these meas- ures, analysts’ expectations are positive, with expected GDP growth of 3.9% in 2021, 4.2% in 2022 and 2.1% in 2023. Inflation is being affected by weak demand and sharp price declines in several sectors such as energy. The change in consumer prices at the end of the year is expected to be negative at 0.3%, even though medium- term inflation expectations appear to be rising slightly. Interest rates, both short and long term, remained low in all the main advanced economies. The simultaneous, violent and unprecedented demand and supply shock caused by the shutdown of op- erations imposed with the first lockdown reduced theItalian GDP by 13% in the second quarter. The return of most operations in the third quarter allowed for a significant recovery in the economy, though this was more limited for activities linked to services, specifically to commerce and tourism, as they were most im- pacted by the limitations following the health emergency. As in the rest of the Eurozone and for the global economy in general, uncertainty remains very high due to the resurgence of new pandemic waves that are still ongoing. In this context, the repercussions on the labour market were very strong, and, despite the legislative interventions aimed at suspending redundan- cies and the increase in the use of wage integration instruments, the downward trend in the unemployment rate that had been under way for some years was abruptly interrupted. There are extreme concerns about social cohesion as a result of the economic crisis. The energy market The energy market in 2020 recorded a collapse in oil prices, and negative price levels for the first time, fol- lowing a sharp drop in demand and the inability of individual producing countries to quickly reduce supply. In the electricity and natural gas markets, consumption by industrial customers was down sharply, offset by a slight increase in consumption by residential customers. Particularly during the lockdown period, elec- tricity consumption fell considerably, but then recovered slowly during the summer period and stabilised towards the end of the year. Electricity consumption in Italy stood at around 303 TWh, a decrease of 5.3% compared to 2019, recording the lowest level in the last 20 years. Net domestic production decreased by 3.8% compared to 2019. The rebalancing of prices in the various European countries led to a drop in the balance from abroad (imports minus exports) of 15.6% due to the decrease in imports (-9.5%) and the increase in exports (+30%). In 2020, 90% of Demand in Electricity in Italy was met by domestic production: 58% from thermal sources, 32% from other renewable sources and 10% from the balance from abroad. Among renewables, the great- est contribution was provided by hydroelectric, with 41.5% (48 TWh of production, in line with 2019 and the average production of the last ten years), followed by photovoltaic with 22.1% (which recorded a historic Dolomiti Energia Holding SpA 2020 Financial Statements 9 high since 2015 with production of 25.5 TWh), wind with 16% (18.5 TWh, down slightly on the previous year), biomass with 15.6% and geothermal, which maintained 5% of the total. On the whole, the production of electricity from thermal sources, including biomass, amounted to 175.4 TWh, 6.4% lower than 2019 and 7.4% lower than the average figure for the last ten years, of around 189 TWh. The consumption of natural gas in Italy in 2020 decreased by 5.4% compared to 2019, standing at about 70.3 billion Sm3, a slightly lower figure than the average for the previous ten years (71.5 billion Sm3). The sectors that recorded the most significant reductions were thermoelectric and industrial.