Half-Yearly Financial Report June 30, 2014

2014

Innovation

MARKET

Investments JOB Growth

4 SECTORS

Half-yearly financial report June 30, 2014

www.a2a.eu Half-yearly ﬁnancial report at June 30, 2014

Contents

3 Corporate boards

Key figures of the A2A Group 6 Areas of activity 7 Geographical areas of activity 8 Group structure 9 Financial highlights at June 30, 2014 11 Shareholdings 12 A2A S.p.A. on the Stock Exchange

Consolidated results and report on operations 16 Summary of results, assets and liabilities and financial position 23 Significant events during the period 1 28 Significant events after June 30, 2014 29 Outlook for operations

Consolidated financial statements 32 Consolidated balance sheet 34 Consolidated income statement 36 Consolidated statement of comprehensive income 37 Consolidated cash-flow statement 38 Statement of changes in Group equity 40 Balance sheet pursuant to Consob Resolution no. 17221 of March 12, 2010 42 Income statement pursuant to Consob Resolution no. 17221 of March 12, 2010

Notes to the Half-yearly financial report 44 General information on A2A S.p.A. 45 The Half-yearly financial report 46 Financial statements 47 Basis of preparation 48 Changes in international accounting standards 55 Scope of consolidation 56 Consolidation policies and procedures 65 Seasonal nature of the business 66 Results sector by sector 68 Notes to the balance sheet 85 Net debt 86 Notes to the income statement 93 Earnings per share 94 Note on related party transactions 98 Significant non-recurring events and transactions Half-yearly ﬁnancial report at June 30, 2014 Contents

99 Guarantees and commitments with third parties 100 Other information

Attachments to the notes to the Half-yearly financial report 148 1. Statement of changes in tangible assets 150 2. Statement of changes in intangible assets 152 3. List of companies included in the consolidated financial statements 154 4. List of shareholdings in companies carried at equity 156 5. List of companies held by A2A Ambiente S.p.A. 158 6. List of available-for-sale financial assets

Changes in legislation 162 Changes in legislation

Scenario and market 190 Macroeconomic scenario 2 192 Energy market trends

Analysis of main sectors of activity 198 Energy Sector 203 Environment Sector 206 Heat and Services Sector 209 Networks Sector 212 Other Services and Corporate

Risks and Uncertainties 216 Risks and uncertainties

Responsible management for sustainability 230 Human resources and industrial relations 234 Social responsibility and stakeholder relations 237 Environmental responsibility 239 Innovation, development and research

Certification of the condensed half-yearly financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98 244 Certification of the condensed half-yearly financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98

Indipendent Auditor’s report 246 Indipendent Auditor’s report

This is a translation of the Italian original “Relazione finanziaria semestrale al 30 giugno 2014” and has been prepared solely for the convenience of international readers. In the event of any ambiguity the Italian text will prevail. The Italian original is available on the website www.a2a.eu Half-yearly ﬁnancial report at June 30, 2014

Corporate Boards

BOARD OF DIRECTORS CHAIRMAN Giovanni Valotti DEPUTY CHAIRMAN Giovanni Comboni CHIEF EXECUTIVE OFFICER Luca Camerano DIRECTORS Antonio Bonomo 3 Stefano Cao Michaela Castelli Elisabetta Ceretti Mario Cocchi Luigi De Paoli Fausto Di Mezza Stefano Pareglio Secondina Giulia Ravera

BOARD OF STATUTORY AUDITORS CHAIRMAN Giacinto Gaetano Sarubbi STANDING AUDITORS Cristina Casadio Norberto Rosini SUBSTITUTE AUDITORS Onofrio Contu Paolo Prandi

INDEPENDENT AUDITORS PRICEWATERHOUSECOOPERS S.P.A.

Key figures of the A2A Group Half-yearly ﬁnancial report at June 30, 2014

Areas of activity

The A2A Group operates in the production, sale and distribution of gas and electricity, district heating, environmental services and the integrated water cycle. These activities in turn form part of the following sectors:

Sectors of the A2A Group

Energy Environment Heat and Networks Other Services 6 services and Corporate Thermoelectric Collection and Cogeneration Electricity Other and hydroelectric street sweeping plants networks services plants

Energy Treatment District heating Gas networks Corporate management networks services

Sale Disposal and Sale of heat Integrated water of electricity energy and other cycle and gas recovery services

This breakdown into sectors reflects the organization of financial reports regularly analyzed by management and the Board of Directors in order to manage and plan the Group’s business. Half-yearly ﬁnancial report at June 30, 2014

Geographical areas of activity

Updated through to June December 30, 2014 31, 2012

Hydroelectric plants Thermoelectric plants Cogeneration plants Waste treatment plants Technological partnerships Half-yearly ﬁnancial report at June 30, 2014

Group structure

A2A S.p.A.

70.95% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Edipower A2A Trading A2A Energia A2A Ambiente A2A Calore A2A Reti A2A Reti Gas Selene & Servizi Elettriche

100.00% 70.00% 100.00% 100.00% 60.00% 100.00% 100.00% 100.00% Abruzzoenergia A2A Alfa Aspem Amsa Proaris A2A Ciclo A2A Servizi alla A2A Logistica 8 Energia Idrico distribuzione

50.00% 50.00% 33.33% 100.00% 90.00% 91.60% 21.94% Ergosud Premiumgas Lumenergia Aprica Aspem (2) Retragas ACSM-AGAM

43.70% 50.00% 74.50% 7.91% EPCG Metamer Camuna Dolomiti Energia Energia

39.49% 49.15% Rudnik Uglja ASVT (1) ad Pljevlja

Areas of activity

Energy

Environment (1) Of which 0.38% held through A2A Reti Gas S.p.A.. Heat and Services (2) There are put options on an additional interest in the company’s share capital. Networks This chart shows the most significant shareholdings of the A2A Group. See attachments Other companies 3, 4, 5 and 6 for full details of shareholdings. Half-yearly ﬁnancial report at June 30, 2014

Financial highlights at June 30, 2014 (*)

Revenues ______2,582 million euro

Gross operating income ______551 million euro

Net profit ______97 million euro

Income statement figures 01 01 2014 01 01 2013 Millions of euro 06 30 2014 06 30 2013 (a) 9 Revenues 2,582 2,845 Operating expenses (1,701) (1,887) Labour costs (330) (348) Gross operating income 551 610 Depreciation, amortization, provisions and write-downs (249) (280) Net operating income 302 330 Result from non-recurring transactions – (3) Financial balance (96) (81) Result before taxes 206 246 Income taxes (101) (94) Net result from discontinued operations – – Minorities (8) (19) Group result of the period 97 133 Gross operating income/Revenues 21.3% 21.4%

(a) According to the new adopted Income Statement structure the comparative figures for the period January-June 2013 have been reclassified.

(*) The figures serve as performance indicators as required by CESRN/05/178/B. Half-yearly ﬁnancial report at June 30, 2014 Financial highlights at June 30, 2014

Balance sheet figures 06 30 2014 12 31 2013 Millions of euro

Net capital employed 6,881 7,222 Total equity attributable to the Group and minorities 3,309 3,348 Consolidated net financial position (3,572) (3,874) Consolidated net financial position/Equity attributable to the Group and minorities 1.08 1.16 Consolidated net financial position/Average market capitalisation 1.29 1.95

Financial data 01 01 2014 01 01 2013 Millions of euro 06 30 2014 06 30 2013

Net cash from operating activities 530 497 Net cash used in investing activities (123) (114) Free cash flow 407 383

Average market capitalization in 2014 ______2,759 millions of euro

10 Key figures of A2A S.p.A. 06 30 2014 12 31 2013

Share capital (euro) 1,629,110,744 1,629,110,744 Number of ordinary shares (par value 0.52 euro) 3,132,905,277 3,132,905,277 Number of treasury shares (par value 0.52 euro) 26,917,609 26,917,609

Key indicators 06 30 2014 06 30 2013

Average 6-month Euribor 0.395% 0.330% Average price of Brent crude (US$/bbl) 108.29 107.99 Average exchange rate euro/US$ (*) 1.37 1.31 Average price of Brent crude (euro/bbl) 79.00 82.20 Average price of coal (euro/tonne) 55.99 63.27

(*) Source: Italian Foreign Exchange Office Half-yearly ﬁnancial report at June 30, 2014

Shareholding (*)

Municipality of Milan 27.5% Market 40.5%

Municipality of Brescia 27.5% 11 UBS Group 2.0% Carlo Tassara 2.5%

(*) Stakes higher than 2% (updated at June 30, 2014) Source: CONSOB Half-yearly ﬁnancial report at June 30, 2014

A2A S.p.A. on the Stock Exchange

A2A in figures (Italian Stock Exchange)

Market capitalisation at June 30, 2014 (millions of euro) 2,639 Average capitalisation in the first half of 2014 (millions of euro) 2,759 Average volumes in the first half of 2014: 16,093,674 Average price in the first half of 2014 (*) 0.881 Maximum price in the first half of 2014 (*) 1.029 Minimum price in the first half of 2014 (*) 0.784 12 Number of shares 3,132,905,277

(*) Euro per share Source: Bloomberg

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

On June 26, 2014 A2A distributed a dividend equal to 0.033 euro per share. Half-yearly ﬁnancial report at June 30, 2014 A2A S.p.A. on the Stock Exchange

Rating Current M/L Term Rating BBB Standard & Poor’s Short Term Rating A–2 Outlook Negative M/L Term Rating Baa3 Moody’s Outlook Stable

Source: Rating Agencies

A2A forms part of the following indices

FTSE MIB STOXX Europe EURO STOXX WisdomTree S&P Developed Ex-US

13 Ethical Indices

ECPI Ethical Index EMU Axia Sustainable Index Solactive Climate Change Index FTSE ECPI Italia SRI Benchmark Standard Ethics Italian Index

Source: Bloomberg

Moreover, A2A has been included in the Ethibel Excellence Investment Register. Half-yearly ﬁnancial report at June 30, 2014 A2A S.p.A. on the Stock Exchange

A2A in the first half of 2014

1.10 140,000,000

120,000,000 1.00 100,000,000

80,000,000 0.90 Volumes €/share 1.10 140,000,00060,000,000

120,000,00040,000,000 0.80 1.00 100,000,00020,000,000

0.70 80,000,0000 0.90 jan -14 feb -14 mar -14 apr -14 may -14 jun -14 Volumes €/share 60,000,000

40,000,000 0.80 Volumes Price 20,000,000

0.70 0 A2A vs FTSEjan -14 MIBfeb -14 mar -14 apr -14 may -14 jun -14 (Price130 30th December 2013 = 100) 125 Volumes Price 14 120 Historical volatility in the 1st half of 2014: 115 A2A: 28.9% FTSE MIB: 20.0% 110 130 105 125 100 120 95115 90110 85105 80100 jan -14 feb -14 mar-14 apr-14 may-14 jun-14 95 90 85 A2A FTSE MIB 80 jan -14 feb -14 mar-14 apr-14 may-14 jun-14

A2A FTSE MIB

Fonte: Bloomberg Consolidated results and report on operations Half-yearly ﬁnancial report at June 30, 2014

Summary of results, assets and liabilities and the financial position

Results

The results for the first half of 2014 are not comparable with those for the corresponding period of the previous year as the figures for 2013 include a contribution of 77% arising from the production of the thermoelectric and hydroelectric plants of Edipower S.p.A. until October 2013. The production of the Turbigo thermoelectric plant and the Tusciano hydroelectric complex are not included from November 2013 onwards following the non- 16 proportional demerger from Edipower S.p.A. into Iren Energia S.p.A., while the other plants of Edipower S.p.A. made a full contribution.

Millions of euro 01 01 2014 01 01 2013 Change 06 30 2014 06 30 2013 (*)

Revenues 2,582 2,845 (263) of which: - Revenues from the sale of goods and services 2,475 2,739 (264) - Other operating income 107 106 1 Operating expenses (1,701) (1,887) 186 Labour costs (330) (348) 18 Gross operating income 551 610 (59) Depreciation, amortization and write-downs (229) (243) 14 Provisions (20) (37) 17 Net operating income 302 330 (28) Results from non-recurring transactions - (3) 3 Net financial charges (101) (88) (13) Affiliates 5 7 (2) Result before taxes 206 246 (40) Income taxes (101) (94) (7) Result after taxes from operating activities 105 152 (47) Net result from discontinued operations – – – Minorities (8) (19) 11 Group result of the period 97 133 (36) (*) The comparative figures for the period from January to June 2013 have been reclassified on the basis of the new income statement structure. Half-yearly ﬁnancial report at June 30, 2014 Summary of results, assets and liabilities and the ﬁnancial position

The A2A Group earned revenues of 2,582 million euro in the first half of 2014, a decrease of 263 million euro over the corresponding period of the previous year due mainly to a contraction in sales of energy for heating use resulting from the relatively high temperatures during the period.

Key quantitative data for the half year contributing to the formation of these revenues, with comparative figures for the corresponding period of 2013, are as follows:

06 30 2014 06 30 2013

Electricity sold to wholesale and retail customers (GWh) 13,634 11,178 Electricity sold on the Power Exchange (GWh) 6,420 6,377 Electricity sold on foreign markets (GWh) 6,855 4,930 Electricity sold - EPCG (GWh) 1,982 2,208 Gas sold (Mcm) 1,457 1,294 Heat sold (GWht) 1,149 1,471 Electricity distributed (GWh) 5,405 5,533 Electricity distributed - EPCG (GWh) 1,207 1,274 Gas distributed (Mcm) 1,020 1,227 17 Water distributed (Mcm) 30 32 Water purified (Mcm) 17 19 Waste disposed of (Ktonne) 1,276 1,284

Production details 06 30 2014 06 30 2013

Thermoelectric production (GWh) 2,657 3,518 Thermoelectric production - EPCG (GWh) 590 522 Hydroelectric production (GWh) 3,042 2,411 Hydroelectric production - EPCG (GWh) 870 1,760 Heat production (GWht) 1,154 1,474 Electricity produced by cogeneration (GWh) 153 191 Electricity sold coming from waste to energy and biogas plants (GWh) 557 557

“Gross operating income” of 551 million euro decreased by 59 million euro over the first half of 2013. Half-yearly ﬁnancial report at June 30, 2014 Summary of results, assets and liabilities and the ﬁnancial position

The following table provides an analysis of this figure by business sector:

Millions of euro 06 30 2014 06 30 2013

Energy Sector 262 293 Environment Sector 115 155 Heat and Services Sector 39 57 Networks Sector 146 121 Other Services and Corporate Sector (11) (16) Total EBITDA 551 610

The gross operating income of the Energy Sector, which amounted to 262 million euro, decreased by 31 million euro over the first half of the previous year. This decrease can be essentially attributed to the result of the subsidiary EPCG, which although positive and amounting to 22 million euro fell by 31 million euro in this segment over the first six months of the previous year, which benefited from higher hydroelectric production. Excluding this effect, the gross operating income of the Energy Sector was in line with that of 18 the first half of 2013, thanks to increased margins earned on the environmental certificates markets and the positive performance of trading activities.

The gross operating income of the Environment Sector amounted to 115 million euro, a decrease of 40 million euro over the first half of 2013. This difference is mainly due to income of 27 million euro recognized in the first half of 2013 relating to 2012 and regarding the sales price of electricity produced under the CIP 6 framework, and to the lower revenues arising from the expiry of the CIP 6 conventions for the waste-to-energy plant at Brescia. Excluding these items, the sector would have posted gross operating income in the first half of 2014 slightly higher than that earned in the first half of 2013, as the result of the margins earned by the industrial activity of waste disposal and the construction of treatment plants.

The gross operating income of the Heat and Services Sector totaled 39 million euro, a decrease of 18 million euro over the first half of 2013. This decrease, which regards both district heating and heat management, is essentially due to the unusual weather conditions, especially in the first quarter of 2014. Conversely temperatures were below historical averages in the first few months of 2013. This adverse effect was partially offset by the effective steps taken in commercial development and the increased margins earned from the sale of the white certificates granted for the management of the district heating service in Milan, Brescia and Bergamo.

The gross operating income of the Networks Sector closed at 146 million euro, a rise of 25 million euro over the first half of 2013. The result for the six months ended June 30, 2013, Half-yearly ﬁnancial report at June 30, 2014 Summary of results, assets and liabilities and the ﬁnancial position

however, included a provision of 10 million euro made for redundancy costs arising from the business restructuring plan. Excluding this effect, the sector’s gross operating income rose by 15 million euro over the corresponding period in 2013. This increase is mainly due to the electricity distribution subsector: the application of Resolution no. 258/14/R/eel issued by the AEEGSI in June led to an increase in the revenues approved for A2A Reti Elettriche for 2012, 2013 and 2014. The electricity distribution subsector of the EPCG Group made a positive contribution due to an increase in distribution tariffs.

“Depreciation, amortization, provisions and write-downs” amounted in total to 249 million euro (280 million euro for the six months ended June 30, 2013). The decrease of 31 million euro is essentially due to a lower charge for depreciation and amortization and reduced provisions for risks.

As a result of these changes “Net operating income” arrived at 302 million euro (330 million euro for the six months ended June 30, 2013).

“Net financial charges” amounted to 101 million euro (88 million euro in the first half of 2013). 19 Net interest decreased by 17 million euro over the corresponding period of the previous year, while losses of 30 million euro arose from the measurement of derivatives at fair value.

“Affilates” closed with a positive balance of 5 million euro (a positive balance of 7 million euro in the first half of 2013). This arises mainly from accounting for the shareholdings in Dolomiti Energia S.p.A. and ACSM-AGAM S.p.A. using the equity method.

“Income taxes” amounted to 101 million euro for the period. The charge of 94 million euro for the first half of 2013 was stated net of certain non-recurring benefits.

After deducting the result attributable to minorities, the “Group net result of the year” amounted to 97 million euro (133 million euro for the six months ended June 30, 2013). Half-yearly ﬁnancial report at June 30, 2014 Summary of results, assets and liabilities and the ﬁnancial position

The balance sheet and financial position

Consolidated “Capital employed” amounted to 6,881 million euro at June 30, 2014 and was funded by equity of 3,309 million euro and net debt of 3,572 million euro.

“Working capital” amounted to 404 million euro, a decrease of 337 million euro over December 31, 2013, mainly as the result of a reduction in trade receivables and other current assets.

“Net fixed capital”, which includes “Assets/liabilities held for sale”, amounted to 6,477 million euro, a decrease of 4 million euro over December 31, 2013.

The “Net financial position” of 3,572 million euro improved by 302 million euro over December 31, 2013 due to the generation of cash from operating activities, partially offset by cash of 124 million euro used in investing activities and the distribution of dividends of 102 million euro.

20 Half-yearly ﬁnancial report at June 30, 2014 Summary of results, assets and liabilities and the ﬁnancial position

Millions of euro 06 30 2014 12 31 2013 Change

CAPITAL EMPLOYED Net fixed capital 6,477 6,481 (4) - Tangible assets 5,828 5,930 (102) - Intangible assets 1,306 1,306 – - Shareholdings and other non-current financial assets (*) 200 196 4 - Other non-current assets/liabilities (*) (288) (379) 91 - Deferred tax assets/liabilities 359 372 (13) - Provisions for risks, charges and liabilities for landfills (568) (605) 37 - Employee benefits (360) (339) (21) of which with counter-entry to equity (287) (379) Working capital 404 741 (337) - Inventories 285 284 1 - Trade receivables and other current assets (*) 1,956 2,272 (316) - Trade payables and other current liabilities (*) (1,884) (1,872) (12) - Current tax assets/tax liabilities 47 57 (10) of which with counter-entry to equity (139) (8) Assets/liabilities held for sale (*) - - - 21 of which with counter-entry to equity - - TOTAL CAPITAL EMPLOYED 6,881 7,222 (341)

SOURCES OF FUNDS Equity 3,309 3,348 (39) Total financial position beyond one year 3,946 3,942 4 Total financial position within one year (374) (68) (306) Total net financial position 3,572 3,874 (302) of which with counter-entry to equity 33 31 TOTAL SOURCES 6,881 7,222 (341)

(*) Excluding balances included in the net financial position. Half-yearly ﬁnancial report at June 30, 2014 Summary of results, assets and liabilities and the ﬁnancial position

Millions of euro 01 01 2014 01 01 2013 06 30 2014 06 30 2013

NET FINANCIAL POSITION AT THE BEGINNING OF THE PERIOD (3,874) (4,372) Net result 105 152 Depreciation and amortization 229 241 Write-downs/disposals of tangible and intangible assets 1 5 Affiliates (5) (7) Net taxes paid (57) (29) Change in assets and liabilities (*) 257 135 Net cash from operating activities 530 497 Net cash used in investing activities (123) (114) Free cash flow 407 383 Cash flow from the distribution of dividends (103) (87) Changes in financial assets/liabilities with counter-entry to equity (2) 2 NET FINANCIAL POSITION AT THE END OF THE PERIOD (3,572) (4,074)

(*) Excluding balances with counter-entry to equity.

22 Half-yearly ﬁnancial report at June 30, 2014

Significant events during the period

The EIB provides financing of 115 million euro for A2A’s investment plan

The European Investment Bank (EIB) and A2A have entered an agreement for 15-year loan of 115 million euro for carrying out investments relating to integrated waste management and power generation.

23 Settlement of the dispute between A2A Reti Elettriche S.p.A. and ENEL

On March 18, 2014 the dispute between A2A Reti Elettriche S.p.A. and ENEL relating to the value of the electricity distribution business in the Municipalities of Milan and Rozzano came to a close, as described in further detail in the section “Other information”. This business was acquired in 2002 as part of the liberalization measures included in Legislative Decree no. 79/1999, and in the absence of an agreement on the price with the seller ENEL the amount to be paid was calculated by an arbitration panel.

The settlement agreement agreed by the parties requires ENEL to repay 89.5 million euro to A2A Reti Elettriche S.p.A..

Amsa S.p.A. and the Municipality of Milan sign an agreement for 2014- 2016

On April 3, 2014, Amsa S.p.A., a subsidiary of A2A S.p.A., entered a service agreement with the Municipality of Milan covering waste management, street and green area cleaning, special services and other services upon request (such as the removal of illegally dumped waste, reclamation and snow removal) for the period from January 1, 2014, to December 31, 2016. Half-yearly ﬁnancial report at June 30, 2014 Signiﬁcant events during the period

Moody’s upgrades its outlook to stable and keeps its rating for A2A S.p.A. unchanged at Baa3

Moody’s has upgraded its outlook for A2A from “negative” to “stable” and confirmed its long-term rating for the company at Baa3.

A2A S.p.A.: the Supervisory Board approves the 2013 financial statements

Meeting on April 29, 2014 under the chairmanship of Prof. Pippo Ranci Ortigosa, the Supervisory Board approved the separate and consolidated financial statements for the year ended December 31, 2013 prepared by the Management Board.

The Supervisory Board also approved the Management Board’s proposal for the payment of a dividend of 0.033 euro per ordinary share, to be paid as from June 26, 2014 (ex-dividend June 23, 2014) with record date June 25, 2014, for submission to the Shareholders’ Meeting 24 of June 13-16, 2014.

A2A S.p.A. and the trade unions sign an agreement for dealing with the crisis in the electricity production sector

On May 23, 2014 A2A S.p.A. and the electricity sector trade unions signed an important agreement at the offices of Assolombarda.

Given the critical situation on the electricity market, which deteriorated even further in the first quarter of 2014 (demand for electricity fell for the tenth consecutive quarter and has now reached 2002 levels), the objective was set to improve the competitiveness of the Group’s production plants while at the same time minimizing the effects on employment.

The agreement, together with the confirmation of a number of lay-off schemes and other schemes already used in 2013 whose aim is to maintain jobs (solidarity contracts and the state-subsidized “cassa integrazione ordinaria” scheme), envisages the early retirement of 120 workers and the start of a “mobilità” scheme to encourage the redeployment and retraining of the Group’s staff at a local level, including by way of transfer to business areas less affected by the crisis.

During the various meetings with the unions, the company also illustrated the progress made by the “Networks Area” reorganization project (regarding A2A Reti Elettriche S.p.A., A2A Reti Gas S.p.A. and A2A Servizi alla Distribuzione S.p.A.) agreed with the unions in July 2013. Half-yearly ﬁnancial report at June 30, 2014 Signiﬁcant events during the period

This project also has the aim of increasing the competitiveness of the companies involved through job retraining and the development of skills already to be found in the Group.

When fully implemented the project will create new job opportunities for around 50 people, who will partly be selected from within the Group and partly by hiring around 30 young graduates and high school leavers over the next two years.

This operation has led to the recognition of a lay-off provision of approximately 9 million euro at June 30, 2014.

A2A S.p.A.: lists submitted for the appointment of the Board of Directors and the Board of Statutory Auditors

The following lists of candidates were submitted on May 20, 2014:

For the Board of Directors: 25

The Municipality of Brescia and the Municipality of Milan put forward the names of the following people: Giovanni Valotti (as Chairman of the Board of Directors), Giovanni Comboni (as Deputy Chairman of the Board of Directors), Luca Camerano (jointly put forward as Chief Executive Officer by the Municipality of Milan and the Municipality of Brescia), Stefano Cao, Elisabetta Ceretti, Michaela Castelli, Fausto Di Mezza, Stefano Pareglio, Antonio Bonomo, Luciana Ravicini, Maria Elena Costanza Bruna Cappello, Marina Brogi and Enrico Corali.

Carlo Tassara S.p.A. put forward the names of the following people: Mario Cocchi and Giambattista Brivio.

The Municipality of Bergamo and the Municipality of Varese put forward the names of the following people: Marco Baga and Renzo Torchiani.

A group of asset management companies and institutional investors put forward the names of the following people: Luigi De Paoli, Dina Ravera and Vittorio Mongino.

For the Board of Statutory Auditors:

The Municipality of Brescia and the Municipality of Milan put forward the names of the following people: Norberto Rosini and Cristina Casadio as standing auditors and Paolo Prandi as substitute auditor. Half-yearly ﬁnancial report at June 30, 2014 Signiﬁcant events during the period

Carlo Tassara S.p.A. put forward the names of the following people: Franco Carlo Papa and Stefano Spiniello.

A group of asset management companies and institutional investors put forward the names of the following people: Giacinto Sarubbi and Onofrio Contu.

A2A S.p.A.: Shareholders’ Meeting

At a general meeting on June 13, 2014, the shareholders of A2A S.p.A.: 1) approved the proposed distribution of a dividend of 0.033 euro per ordinary share to be paid as from June 26, 2014 (ex-dividend (coupon no. 17) from June 23, 2014) with record date June 25, 2014; 2) voted in favor of the first part of the 2014 Report on remuneration; 3) authorized the Board of Directors to purchase and dispose of treasury shares (the maximum number of treasury shares that may be held is 313,290,527, taking into account

26 the shares already held by A2A S.p.A. and its subsidiaries, being one tenth of the shares making up the share capital); 4) approved the new bylaws which provide for the adoption of the “traditional” system of management and control; 5) appointed the following Board of Directors of 12 members for a term of three years using the voting list system: Giovanni Valotti – Chairman, Giovanni Comboni – Deputy Chairman, Luca Camerano, Stefano Cao, Elisabetta Ceretti, Michaela Castelli, Fausto Di Mezza, Stefano Pareglio and Antonio Bonomo (taken from the list jointly submitted by the Municipality of Brescia and the Municipality of Milan, owners of a total shareholding equal to 55.124% of share capital), Mario Cocchi (taken from the list submitted by the minority shareholder Carlo Tassara S.p.A., owner of a total shareholding equal to 2.512% of share capital), Luigi De Paoli and Dina Ravera (taken from the list jointly submitted by a group of asset management companies and institutional investors, owners of a total shareholding equal to 1.178% of share capital). All those appointed have declared that they meet the requisites of independence prescribed by article 148, paragraph 3 of Legislative Decree no. 58/98 and article 3 of the Corporate Governance Code; 6) established the annual compensation for each director at 80,000 euro; 7) appointed the following Board of Statutory Auditors of 3 standing members and 2 substitute members for a term of three years using the voting list system: Norberto Rosini – standing auditor, Cristina Casadio – standing auditor and Paolo Prandi – substitute auditor (taken from the list jointly submitted by the Municipality of Brescia and the Municipality of Milan, owners of a total shareholding equal to 55.124% of share capital), Giacinto Sarubbi – Chairman and Onofrio Contu – substitute auditor (taken from Half-yearly ﬁnancial report at June 30, 2014 Signiﬁcant events during the period

the list jointly submitted by a group of asset management companies and institutional investors, owners of a total shareholding equal to 1.178% of share capital); 8) established the annual compensation for the Chairman of the Board of Statutory Auditors and each standing auditor at 100,000 euro and 70,000 euro respectively.

A2A S.p.A.: Resolution of the Board of Directors

On June 17, 2014, A2A S.p.A.’s Board of Directors held its first meeting under the chairmanship of Giovanni Valotti. The Board appointed Luca Valerio Camerano as Chief Executive Officer, vesting him with broad powers for the Company’s ordinary operations. The Board assigned the Chairman specific responsibilities concerning relationships with shareholders, the institutions, regulatory authorities and the media and external relations, and, in conjunction with the Chief Executive Officer, with regard to drawing up proposals for extraordinary operations. The Board of Directors also appointed an Executive Committee made up of three members: the Chairman Giovanni Valotti, the Deputy Chairman without powers Giovanni Comboni and 27 the Chief Executive Officer Luca Valerio Camerano. The Committee mainly has functions of a consultative nature for coordinating the executive directors’ work and functions of a propositional nature for the Board of Directors. This detailed framework clearly defines responsibilities, facilitates effective and timely decision making, provides for a balance of powers and emphasizes the central role of the Board of Directors in managing the Group and, in particular, determining and pursuing its strategic objectives. As part of the meeting the Board also ascertained the existence of the independence requirements prescribed by article 148, paragraph 3 of the Consolidated Financial Act for all the directors and statutory auditors and the existence of the independence requirements prescribed by article 3 of the Corporate Governance Code for listed companies for the directors Giovanni Comboni – Deputy Chairman, Antonio Bonomo, Stefano Cao, Michaela Castelli, Elisabetta Ceretti, Mario Cocchi, Luigi De Paoli, Stefano Pareglio and Dina Ravera, and the statutory auditors Giacinto Sarubbi – Chairman, Cristina Casadio and Norberto Rosini. Finally, the Board of Directors set up the following three committees, in place of the previous four, appointing their members as follows: • Control and Risks Committee: Michaela Castelli – Chairman, Mario Cocchi – Deputy Chairman, Fausto Di Mezza and Dina Ravera; • Appointments and Compensation Committee: Giovanni Comboni – Chairman, Antonio Bonomo and Stefano Cao; • Committee for the Territory: Giovanni Valotti – Chairman, Stefano Pareglio – Deputy Chairman, Elisabetta Ceretti and Luigi De Paoli. Half-yearly ﬁnancial report at June 30, 2014

Significant events after June 30, 2014

Increase in share capital by EPCG

In addition to approving the 2013 financial statements, at their general meeting on July 17, 2014, EPCG’s shareholders resolved a share capital increase arising from the conversion of the company’s tax liability. In detail, this operation was carried out as follows: • 5,883,737 shares, each with a nominal value of 7.6482 euro, were issued in favor of the 28 State of Montenegro for a total of approximately 45 million euro as payment of past tax liabilities; • as a result, EPCG’s shareholding structure has changed slightly as follows, with no variations in A2A’s rights to manage the company as established in the agreements signed in 2009: – State of Montenegro: 57.02% – A2A: 41.75% – minority shareholders: approximately 1.23%. Half-yearly ﬁnancial report at June 30, 2014

Outlook for operations

In the second half of the year management will continue its work towards achieving a further reduction in the Group’s net financial position and on the operational efficiency plan, designed to mitigate the effects on results arising from the unfavorable meteorological conditions in the first few months of the year and the persistence of the economic crisis.

Consolidated financial statements Half-yearly ﬁnancial report at June 30, 2014

Consolidated balance sheet (1)

Assets

Millions of euro Note 06 30 2014 12 31 2013 06 30 2013

NON-CURRENT ASSETS Tangible assets 1 5,828 5,930 6,231 Intangible assets 2 1,306 1,306 1,384 Shareholdings carried according to equity method 3 191 187 217 Other non-current financial assets 3 51 53 54 32 Deferred tax assets 4 359 372 261 Other non-current assets 5 62 53 79 TOTAL NON-CURRENT ASSETS 7,797 7,901 8,226 CURRENT ASSETS Inventories 6 285 284 263 Trade receivables 7 1,651 1,889 1,849 Other current assets 8 305 383 473 Current financial assets 9 126 107 81 Current tax assets 10 50 70 49 Cash and cash equivalents 11 376 376 710 TOTAL CURRENT ASSETS 2,793 3,109 3,425 NON-CURRENT ASSETS HELD FOR SALE – – 346 TOTAL ASSETS 10,590 11,010 11,997

(1) As required by Consob Resolution no. 17221 of March 12, 2010 the effects of related party transactions on the consolidated financial statements are provided in the financial statements in section 0.2 and commented upon in Note 36. The effects of significant non-recurring events and transactions on the consolidated financial statements are presented in Note 37 as required by Consob Communication no. DEM/6064293 of July 28, 2006. Half-yearly ﬁnancial report at June 30, 2014 Consolidated balance sheet

Equity and liabilities

Millions of euro Note 06 30 2014 12 31 2013 06 30 2013

EQUITY Share capital 12 1,629 1,629 1,629 (Treasury shares) 13 (61) (61) (61) Reserves 14 1,078 1,161 1,189 Result of the year – 62 –

Result of the period 15 97 – 133 33 Equity pertaining to the Group 2,743 2,791 2,890 Minority interests 16 566 557 862 Total equity 3,309 3,348 3,752 LIABILITIES NON-CURRENT LIABILITIES Non-current financial liabilities 17 3,989 3,982 3,506 Employee benefits 18 360 339 321 Provisions for risks, charges and liabilities for landfills 19 568 605 597 Other non-current liabilities 20 349 436 407 Total non-current liabilities 5,266 5,362 4,831 CURRENT LIABILITIES Trade payables 21 1,145 1,306 1,158 Other current liabilities 21 739 566 732 Current financial liabilities 22 128 415 1,452 Tax liabilities 23 3 13 20 Total current liabilities 2,015 2,300 3,362 Total liabilities 7,281 7,662 8,193 LIABILITIES DIRECTLY ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE – – 52 TOTAL EQUITY AND LIABILITIES 10,590 11,010 11,997

Half-yearly ﬁnancial report at June 30, 2014

Consolidated income statement (1)

Millions of euro Note 01 01 2014 01 01 2013 01 01 2013 06 30 2014 06 30 2013 12 31 2013 (*)

Revenues Revenues from the sale of goods and services 2,475 2,739 5,389 Other operating income 107 106 215 Total Revenues 25 2,582 2,845 5,604 34 Operating expenses Expenses for raw materials and services 1,594 1,775 3,567 Other operating expenses 107 112 240 Total Operating expenses 26 1,701 1,887 3,807 Labour costs 27 330 348 664 Gross operating income - EBITDA 28 551 610 1,133 Depreciation, amortization, provisions and write-downs 29 249 280 876 Net operating income - EBIT 30 302 330 257 Result from non-recurring transactions 31 – (3) 75 Financial balance Financial income 12 30 80 Financial expense 113 118 263 Affiliates 5 7 (23) Result from disposal of other shareholdings (AFS) – – – Total financial balance 32 (96) (81) (206) Result before taxes 206 246 126

(1) As required by Consob Resolution no. 17221 of March 12, 2010 the effects of related party transactions on the consolidated financial statements are provided in the financial statements in section 0.2 and commented upon in Note 36. The effects of significant non-recurring events and transactions on the consolidated financial statements are presented in Note 37 as required by Consob Communication no. DEM/6064293 of July 28, 2006. (*) According to the new adopted Income Statement structure the comparative figures for the period January-June 2013 have been reclassified. Half-yearly ﬁnancial report at June 30, 2014 Consolidated income statement

Millions of euro Note 01 01 2014 01 01 2013 01 01 2013 06 30 2014 06 30 2013 12 31 2013 (*) Income taxes 33 101 94 51 Result after taxes from operating activities 105 152 75 Net result from discontinued operations – – – Net result 105 152 75 Minorities (8) (19) (13) 35 Group result of the period 34 97 133 62 Earnings (loss) per share (in euro): – basic 0.0311 0.0428 0.0201 – basic, from operating activities 0.0311 0.0428 0.0201 – basic, from activities held for sale – – – – diluted 0.0311 0.0428 0.0201 – diluted, from operating activities 0.0311 0.0428 0.0201 – diluted, from activities held for sale – – –

(*) According to the new adopted Income Statement structure the comparative figures for the period January-June 2013 have been reclassified. Half-yearly ﬁnancial report at June 30, 2014

Consolidated statement of comprehensive income

Millions of euro 06 30 2014 06 30 2013 12 31 2013

Net result (A) 105 152 75 Actuarial gains/(losses) on Employee's Benefits booked in the Net equity (22) 4 (20) Tax effect of other actuarial gains/(losses) 7 (1) 5 Total actuarial gains/(losses) net of the tax effect (B) (15) 3 (15) 36 Effective part of gains/(losses) on cash flow hedge (39) (16) (8) Tax effect of other gains/(losses) 14 6 3 Total other gains/(losses) net of the tax effect of companies consolidated on a line-by-line basis (C) (25) (10) (5) Other gains/(losses) of companies valued at equity net of the tax effect (D) – – – Total comprehensive result (A) + (B) + (C) + (D) 65 145 55 Total comprehensive result attributable to: Shareholders of the parent company 57 125 42 Minority interests 8 20 13

With the exception of the actuarial effects on employee benefits recognized in equity, the other effects stated above will be reclassified to profit or loss in subsequent years. Half-yearly ﬁnancial report at June 30, 2014

Consolidated cash-flow statement

Millions of euro 06 30 2014 12 31 2013 06 30 2013

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD/YEAR 376 553 553 Operating activities Net Result (**) 105 (9) 152 Tangible assets depreciation 200 420 210 Intangible assets amortization 29 66 31 Fixed assets write-downs/disposals 1 260 5 37 Result from affiliates (5) 23 (7) Net taxes paid (a) (57) (122) (29) Gross change in assets and liabilities (b) 257 141 135 Total change of assets and liabilities (a+b) (*) 200 19 106 Cash flow from operating activities 530 779 497 Investment activities Investments in tangible assets (93) (227) (89) Investments in intangible assets and goodwill (31) (57) (29) Investments in shareholdings and securities (*) – (3) (3) Disposal of fixed assets and shareholdings – 53 4 Dividends received 1 3 3 Cash flow from investment activities (123) (231) (114) FREE CASH FLOW 407 548 383 Financing activities Change in financial assets (*) (34) (96) (75) Change in financial liabilities (*) (224) (369) 10 Net financial interests paid (46) (173) (74) Dividends paid by the parent company (102) (81) (81) Dividends paid by the subsidiaries (1) (6) (6) Cash flow from financing activities (407) (725) (226) CHANGE IN CASH AND CASH EQUIVALENTS – (177) 157 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD/YEAR 376 376 710

(*) Cleared of balances in return of shareholders’ equity and other balance sheet items. (**) Net Result is exposed net of gains on shareholdings’ and fixed assets’ disposals. Half-yearly ﬁnancial report at June 30, 2014

Statement of changes in Group equity

Description Share Treasury Cash Flow Other Result Total Minority Total Net Millions of euro capital shares Hedge Reserves of the Equity interests shareholders and retained period/year pertaining to equity earnings the Group

Note 13 Note 14 Note 15 Note 15 Note 16 Note 17

Net equity at December 31, 2012 (**) 1,629 (61) (16) 1,034 260 2,846 851 3,697

38 Changes of the first half of 2013 2012 result allocation 260 (260) Distribution of dividends (81) (81) (6) (87) IAS 19 reserve (*) 3 3 3 IAS 32 and IAS 39 reserves (*) (11) (11) 1 (10) Put option on Edipower S.p.A. shares (3) (3) (3) Other changes 3 3 (3) Group and minorities result of the period 133 133 19 152 Net equity at June 30, 2013 1,629 (61) (27) 1,216 133 2,890 862 3,752

Changes of the second half of 2013 IAS 19 reserve (*) (18) (18) (18) IAS 32 and IAS 39 reserves (*) 6 6 (1) 5 Put option on Edipower S.p.A. shares (21) (21) (21) Effect from non-proportional Edipower S.p.A. demerger (297) (297) Other changes 5 5 (1) 4 Group and minorities result of the period (71) (71) (6) (77) Net equity at December 31, 2013 1,629 (61) (21) 1,182 62 2,791 557 3,348

Changes of the first half of 2014 2013 result allocation 62 (62) Distribution of dividends (102) (102) (102) IAS 19 reserve (*) (15) (15) (15) IAS 32 and IAS 39 reserves (*) (25) (25) (25) Other changes (3) (3) 1 (2) Group and minorities net result of the period 97 97 8 105

Net equity at June 30, 2014 1,629 (61) (46) 1,124 97 2,743 566 3,309 (*) These form part of the statement of comprehensive income. Half-yearly ﬁnancial report at June 30, 2014 Statement of changes in Group equity

Statement of changes in Group equity

Note 13 Note 14 Note 15 Note 15 Note 16 Note 17

Net equity at December 31, 2012 (**) 1,629 (61) (16) 1,034 260 2,846 851 3,697

Changes of the first half of 2013 39 2012 result allocation 260 (260) Distribution of dividends (81) (81) (6) (87) IAS 19 reserve (*) 3 3 3 IAS 32 and IAS 39 reserves (*) (11) (11) 1 (10) Put option on Edipower S.p.A. shares (3) (3) (3) Other changes 3 3 (3) Group and minorities result of the period 133 133 19 152 Net equity at June 30, 2013 1,629 (61) (27) 1,216 133 2,890 862 3,752

Net equity at June 30, 2014 1,629 (61) (46) 1,124 97 2,743 566 3,309 (*) These form part of the statement of comprehensive income. Half-yearly ﬁnancial report at June 30, 2014

Balance sheet pursuant to Consob Resolution no. 17221 of March 12, 2010 Assets

Millions of euro 06 30 2014 of which 12 31 2013 of which 06 30 2013 of which Related Related Related Parties Parties Parties (note n. 36) (note n. 36) (note n. 36)

NON-CURRENT ASSETS Tangible assets 5,828 5,930 6,231 Intangible assets 1,306 1,306 1,384

40 Shareholdings carried according to equity method 191 191 187 187 217 217 Other non-current financial assets 51 4 53 6 54 6 Deferred tax assets 359 372 261 Other non-current assets 62 53 79 TOTAL NON-CURRENT ASSETS 7,797 7,901 8,226 CURRENT ASSETS Inventories 285 284 263 Trade receivables 1,651 134 1,889 154 1,849 171 Other current assets 305 383 473 Current financial assets 126 107 81 3 Current tax assets 50 70 49 Cash and cash equivalents 376 376 710 TOTAL CURRENT ASSETS 2,793 3,109 3,425 NON-CURRENT ASSETS HELD FOR SALE – – 346 TOTAL ASSETS 10,590 11,010 11,997 Half-yearly ﬁnancial report at June 30, 2014 Balance sheet pursuant to Consob Resolution no. 17221 of March 12, 2010

Equity and liabilities

Millions of euro 06 30 2014 of which 12 31 2013 of which 06 30 2013 of which Related Related Related Parties Parties Parties (note n. 36) (note n. 36) (note n. 36)

EQUITY Share capital 1,629 1,629 1,629 (Treasury shares) (61) (61) (61)

Reserves 1,078 1,161 1,189 41 Result of the year – 62 – Result of the period 97 – 133 Equity pertaining to the Group 2,743 2,791 2,890 Minority interests 566 557 862 Total equity 3,309 3,348 3,752 LIABILITIES NON-CURRENT LIABILITIES Non-current financial liabilities 3,989 3,982 3,506 Employee benefits 360 339 321 Provisions for risks, charges and liabilities for landfills 568 1 605 1 597 1 Other non-current liabilities 349 436 407 Total non-current liabilities 5,266 5,362 4,831 CURRENT LIABILITIES Trade payables 1,145 32 1,306 38 1,158 39 Other current liabilities 739 8 566 8 732 9 Current financial liabilities 128 4 415 2 1,452 Tax liabilities 3 13 20 Total current liabilities 2,015 2,300 3,362 Total liabilities 7,281 7,662 8,193 LIABILITIES DIRECTLY ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE – – 52 TOTAL EQUITY AND LIABILITIES 10,590 11,010 11,997 Half-yearly ﬁnancial report at June 30, 2014

Income statement pursuant to Consob Resolution no. 17221 of March 12, 2010

Millions of euro 01 01 2014 of which 01 01 2013 of which 01 01 2013 of which 06 30 2014 Related 06 30 2013 Related 12 31 2013 Related Parties (*) Parties Parties (note n. 36) (note n. 36) (note n. 36)

Revenues Revenues from the sale of goods and services 2,475 223 2,739 259 5,389 515 Other operating income 107 106 215 42 Total Revenues 2,582 2,845 5,604 Operating expenses Expenses for raw materials and services 1,594 12 1,775 22 3,567 43 Other operating expenses 107 20 112 4 240 8 Total Operating expenses 1,701 1,887 3,807 Labour costs 330 348 2 664 3 Gross operating income - EBITDA 551 610 1,133 Depreciation, amortization, provisions and write-downs 249 1 280 876 1 Net operating income - EBIT 302 330 257 Result from non-recurring transactions – (3) 75 Financial balance Financial income 12 3 30 13 80 6 Financial expense 113 118 263 Affiliates 5 5 7 7 (23) (23) Result from disposal of other shareholdings (AFS) – – – Total financial balance (96) (81) (206) Result before taxes 206 246 126 Income taxes 101 94 51 Result after taxes from operating activities 105 152 75 Net result from discontinued operations – – – Net result 105 152 75 Minorities (8) (19) (13) GROUP RESULT OF THE PERIOD 97 133 62

(*) According to the new adopted Income Statement structure the comparative figures for the period January-June 2013 have been reclassified. Notes to the Half-yearly financial report Half-yearly ﬁnancial report at June 30, 2014

General information

A2A S.p.A. is a company incorporated under Italian law.

A2A S.p.A. and its subsidiaries (the “Group”) operate both in Italy and abroad, in particular following the acquisition in Montenegro which took place in 2009.

The A2A Group mainly operates in the following sectors: • the production, sale and distribution of electricity;

44 • the sale and distribution of gas; • the production, distribution and sale of heat through district heating networks; • waste management (from collection and sweeping to disposal) and the construction and management of integrated waste disposal plants and systems, also making these available for other operators; • integrated water cycle management. Half-yearly ﬁnancial report at June 30, 2014

The Half-yearly financial report

The Half-yearly financial report (in the following the “Half-yearly report”) of the A2A Group at June 30, 2014 is presented in millions of euro; the euro is also the functional currency of the economies in which the Group operates.

The Half-yearly report of the A2A Group at June 30, 2014 has been prepared: • in compliance with Legislative Decree no. 58/1998 (art. 154-ter) as amended and with the Issuers’ Regulations published by Consob; • in accordance with the International Financial Reporting Standards (IFRS) issued by the 45 International Accounting Standard Board (IASB) and adopted by the European Union and in particular IAS 34. IFRS means all the revised international accounting standards (IAS) and all the interpretations of the International Financial Reporting Interpretations Committee (IFRIC), formerly known as the Standing Interpretations Committee (SIC).

In preparing the Half-yearly report the Group has applied the same principles as those used in the preparation of the Annual financial report at December 31, 2013.

The principles and interpretations described in detail in the paragraph below “Changes in international accounting standards” were adopted for the first time on January 1, 2014.

This Half-yearly report at June 30, 2014 was approved on July 31, 2014 by the Board of Directors, which authorized publication. Half-yearly ﬁnancial report at June 30, 2014

Financial statements

The Group has adopted a format for the balance sheet which presents current and non- current assets and current and non-current liabilities as separate classifications, as required by paragraphs 60 and following of IAS 1 (Revised).

The income statement is presented by nature, a format which is considered more representative than a presentation by function. The selected format is in agreement with the presentation used by the Group’s major competitors and in line with international practice. 46 The cash flow statement has been prepared using the indirect method as permitted by IAS 7.

The statement of changes in equity has been prepared in accordance with IAS 1 (Revised).

The formats adopted for the financial statements are the same as those used to prepare the annual consolidated financial statements at December 31, 2013. Half-yearly ﬁnancial report at June 30, 2014

Basis of preparation

The Half-yearly report at June 30, 2014 has been prepared on a historical cost basis, with the exception of those items which under IFRS must be or can be measured at fair value, as discussed in further detail in the accounting policies.

The consolidation principles, the accounting principles, the accounting policies and the methods of measurement used in the preparation of the Half-yearly report are consistent with those used to prepare the annual consolidated financial statements at December 31, 2013. 47 Half-yearly ﬁnancial report at June 30, 2014

Changes in international accounting standards

The accounting principles adopted in the first half of 2014 are the same as those used in the prior year, with the exception of those discussed below in the paragraph “Accounting principles, amendments and interpretations applied by the Group from the current year”. A summary is provided in the following paragraph “Accounting principles, amendments and interpretations not yet adopted by the European Union” of the changes that will be adopted in future periods, stating the expected effects on the A2A Group’s Half-yearly report to the

48 extent this is possible.

Accounting principles, amendments and interpretations applied by the Group from the current year

A series of amendments introduced by international accounting standards and interpretations have been applied from January 1, 2014, none of which however has led to a significant effect on the Group’s financial statements. The main changes are described in the following: • IFRS 10 “Consolidated Financial Statements” was issued by the IASB on May 12, 2011 and is applicable from January 1, 2014. The new principle supplements the requirements of IAS 27 “Consolidated and Separate Financial Statements”, in which control is defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities, clarifying that an investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and when at the same time it has the ability to affect those returns through its power over the investee. An investor controls an investee if and only if the investor has all of the following: 1. the power to direct the relevant activities of the investee; 2. the exposure to future returns from the investee; 3. the ability to use its power over an investee to affect the investor’s returns. The power to direct activities that significantly affect the results of the subsidiary (relevant activities) may more easily be exercised through voting rights (including potential voting rights), but also through contractual arrangements. When control is exercised through Half-yearly ﬁnancial report at June 30, 2014 Changes in international accounting standards

voting rights, relevant activities are represented by operating activities (development, purchasing and product sales) and financial management activities (obtaining and negotiating loans, acquisitions and sales of financial assets). Future returns also include dividends and payment for services provided by the parent for the subsidiary’s activities. The third condition for establishing whether control exists regards the interaction between the first two conditions. In particular, in certain circumstances an entity may have an interest in a group of the subsidiary’s assets and liabilities as part of a legal or contractual condition. IFRS 10 establishes that to determine the existence of control, this group of assets and liabilities can only be considered a separate entity if it is economically separate from the entity as a whole, and is therefore a subsidiary for the purposes of the consolidated financial statements. Following the introduction of this standard, revised versions of IAS 27 “Separate Financial Statements”, which remains the main reference standard for separate financial statements, and IAS 28 “Investments in Associates and Joint Ventures” were issued. The

interpretation SIC 12 “Consolidation - Special Purpose Entities” has been superseded; 49 • IFRS 11 “Joint Arrangements” was issued by the IASB on May 12, 2011 and is effective from January 1, 2014. This standard establishes that in a joint arrangement two or more parties have joint control and decisions regarding relevant activities require the unanimous consent of the parties. IFRS 11 identifies two different types of joint arrangement: 1. joint operations; 2. joint ventures. The two types differ in the rights and obligations of each party to the joint arrangement. In a joint operation, the parties have rights to the assets and obligations for the liabilities of the arrangement, whereas in a joint venture the parties have rights linked to the net assets of the arrangement. IFRS 11 requires an entity to fully recognize the assets, liabilities, revenues and expenses relating to a joint operation on the basis of its interest, while it should account for a joint venture using the equity method, as required by IAS 28 “Investments in Associates and Joint Ventures”. Joint operations are recognized in the same way in both the separate and consolidated financial statements, with an entity recognizing the assets, liabilities, revenues and expenses on the basis of its interest; joint ventures and investments in subsidiaries and associates on the other hand may be recognized in the separate financial statements either at cost or on the basis of IFRS 9 “Financial Instruments” (and IAS 39 “Financial Instruments: Recognition and Measurement”), as also specified in IAS 27 “Separate Financial Statements”. As regards disclosures for the purpose of completeness, reference should be made to the new IFRS 12 “Disclosures of Interests in Other Entities”. Half-yearly ﬁnancial report at June 30, 2014 Changes in international accounting standards

• IFRS 12 “Disclosure of Interests in Other Entities” was issued by the IASB on May 12, 2011 and is applicable from January 1, 2014. This standard establishes the minimum disclosure requirements, combining them with those established by other standards, that entities must provide about all types of interests, including those in a subsidiary, a joint arrangement, an associate, a special-purpose entity or an unconsolidated vehicle; • IAS 27 (Revised) “Separated Financial Statements” was issued by the IASB on May 12, 2011 and is applicable from January 1, 2014; a revised version of IAS 27 was issued at the same time as IFRS 10 “Consolidated Financial Statements” was introduced, which retains its role as the general standard of reference for separate financial statements. This standard applies to the measurement of investments in subsidiaries, associates and joint ventures in the separate financial statements of the parent. Joint ventures, as is also the case for investments in subsidiaries and associates, may be recognized in the separate financial statements either at cost or on the basis of IFRS 9 “Financial Instruments” (and IAS 39 “Financial Instruments: Recognition and Measurement”). When, in accordance with IFRS 10 “Consolidated Financial Statements”, a parent elects

50 not to prepare consolidated financial statements, in its separate financial statements it must disclose information about its investments in subsidiaries, associates and joint ventures, their principal places of business (and their registered offices if different), their activities, the ownership interest in each individual investee and a description of the method used to account for the investment; • IAS 28 (Revised) “Investments in Associates and Joint Ventures” was issued by the IASB on May 12, 2011 and is applicable from January 1, 2014; a revised version of IAS 28 was issued at the same time as IFRS 10 “Consolidated Financial Statements” was introduced, whose scope is to prescribe the accounting for investments in associates and joint ventures. An entity that exercises joint control or has significant influence over another entity must account for its investment using the equity method; • IAS 32 “Financial Instruments: Presentation” was issued by the IASB on December 16, 2011 and is applicable retrospectively for annual periods beginning on or after January 1, 2014. This amendment clarifies the application of certain criteria for offsetting the financial assets and liabilities included in IAS 32; • IAS 36 “Impairment of Assets”: the amendments to IAS 36, which are applicable from January 1, 2014, were issued on May 29, 2013 and regard the disclosures required on recognizing impairment losses when the recoverable amount of impaired assets is based on fair value less costs of disposal. The amendments remove the requirement to disclose the recoverable amount of assets when the cash generating unit (CGU) includes goodwill or intangible assets with indefinite useful lives but the asset is not impaired. In addition, disclosures are required of the recoverable amount of an asset or CGU and the way in which fair value less costs of disposal has been calculated when an impairment loss has been recognized for the asset; Half-yearly ﬁnancial report at June 30, 2014 Changes in international accounting standards

• IAS 39 “Financial Instruments: Recognition and Measurement”: the amendments to this standard, issued on June 27, 2013, regard the accounting for derivatives which have been designated as hedging instruments if there is novation of the counterparty. Before the introduction of these amendments, in these circumstances IAS 39 required an interruption to cash flow hedge accounting on the assumption that the novation led to the conclusion and extinguishment of the pre-existing hedging instrument. These amendments are applicable retrospectively from January 1, 2014; • IFRS 10, IFRS 12 and IAS 27: the amendments to these standards, issued in October 2012, regard the exclusion from the consolidation scope of the majority of companies controlled by funds or similar bodies, requiring that these be measured at “fair value through profit or loss”. The amendments also regard IFRS 12 on the question of disclosures made by investment companies; • IFRIC 21 “Levies”: this interpretation of IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” was issued on May 20, 2013 and regards the accounting for levies imposed by governments which do not fall within the scope of IAS 12 “Income Taxes”.

IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” sets out criteria for the 51 recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (known as an obligating event). The interpretation clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the legislation that triggers the payment of the levy. The interpretation is applicable from January 1, 2014.

Accounting principles, amendments and interpretations not yet adopted by the European Union

The following standards, amendments and interpretations have not been applied, since at the present time the competent bodies of the European Union have still to complete their adoption process. • IFRS 11 “Joint Arrangements”: issued by the IASB in May 2014, the amendment to this standard provides guidance on how to account for the acquisition of an interest in a joint operation that is a business as defined by IFRS 3 “Business Combinations”. The amendment is applicable from January 1, 2016; • IAS 16 “Property, Plant and Equipment” and IAS 38 “Intangible Assets”: the amendment to these two standards, issued by the IASB in May 2014, clarifies that the use of revenue- based methods to calculate the depreciation of a tangible asset or the amortization of an intangible asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset; Half-yearly ﬁnancial report at June 30, 2014 Changes in international accounting standards

• IFRS 14 “Regulatory Deferral Accounts”; the new standard, issued by the IASB in January 2014, permits an entity which is a first-time adopter of IAS/IFRS to continue to account for “regulatory deferral account balances” in accordance with its previous accounting standards. The standard is applicable from January 1, 2016; • IFRS 15 “Revenue from Contracts with Customers”: the scope of the new standard, issued by the IASB on May 28, 2014, is to establish the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer. A contract with a customer falls within the scope of the standard if all the following conditions are met: i. the contract has been approved by the parties to the contract, who have undertaken to carry out their respective obligations; ii. each party’s rights in relation to the goods and services to be transferred can be identified and the payment terms have been identified; iii. the contract has commercial substance (the risks, the timing or the cash flows may

52 change as the result of the contract); iv. it is probable that the consideration to which the entity is entitled to in exchange for the goods or services will be collected. The new standard, which will replace IAS 18 “Revenues” and IAS 11 “Construction Contracts”, is applicable from January 1, 2017; • IFRS 9 “Financial Instruments”: this standard represents the first of a three-stage process whose scope is to fully replace IAS 39 “Financial Instruments: Recognition and Measurement” and introduces new criteria for classifying and measuring financial assets and liabilities. The main changes introduced by IFRS 9 may be summarized as follows: financial assets are classified into two categories alone - “at fair value” or “at amortized cost”. As a result, the categories “loans and receivables”, “available- for-sale financial assets” and “held-to-maturity investments” disappear. Classification within the two categories is carried out on the basis of an entity’s business model and the contractual cash flow characteristics of the financial asset. A financial asset is measured at amortized cost if both of the following requirements are met: the objective of the entity’s business model is to hold assets to collect contractual cash flows (and therefore in substance not to earn trading profits) and the characteristics of the cash flows of the asset are solely payments of principal and interest. A financial asset is measured at fair value if it is not measured at amortized cost. The rules for accounting for embedded derivatives have been simplified: separate accounting for the embedded derivative and the financial asset “hosting” it is no longer required. All equity instruments - listed or unlisted - must be measured at fair value (IAS 39 established on the other hand that unlisted equity instruments should be valued at cost if fair value could not be reliably measured). Half-yearly ﬁnancial report at June 30, 2014 Changes in international accounting standards

An entity has the option of presenting changes in the fair value of equity instruments that are not held for trading in equity; that option is not permitted for equity instruments that are held for trading. This designation is permitted on initial recognition, may be adopted for each individual instrument and is irrevocable. If an election is made for this option, changes in the fair value of these instruments may never be reclassified from equity to profit or loss. Dividends on the other hand continue to be recognized in profit or loss. IFRS 9 does not permit reclassifications between the two categories of financial asset except in the rare case of a change in an entity’s business model. In this case the effects of the reclassification are applied prospectively. The disclosures required to be made in the notes have been adjusted to the classification and measurements rules introduced by IFRS 9. On November 19, 2013 the IASB issued an amendment to this standard which mainly regards the following: i. bringing into effect a substantial overhaul of hedge accounting that will allow entities to better reflect their risk management activities in the financial statements;

ii. enabling entities to change the accounting of liabilities measure at fair value: in 53 particular the effects of a worsening of an entity’s own credit risk will no longer be recognized in profit or loss; iii. deferring the effective date of the standard, originally January 1, 2015. A new date has not yet been set. • IAS 19 Revised “Employee Benefits”: the amendments to this standard, issued by the IASB on November 21, 2013, regard contributions from employees or third parties to defined benefit plans. The objective of the amendments is to simplify the accounting for contributions that are independent of the number of years of employee service (for example employee contributions that are calculated according to a fixed percentage of salary). The amendments are effective from July 1, 2014.

On December 16, 2013 the IASB issued a series of amendments to certain accounting standards which may be summarized as follows: a) IFRS 2 “Share-based Payment”: the amendment clarifies the definition of “vesting condition” by separately defining a “performance condition” and a “service condition”; b) IFRS 3 “Business Combinations”: the amendment clarifies that the obligation to pay consideration in a business combination that meets the classification requirements for a financial instrument is classified in the financial statements as a financial liability on the basis of IAS 32 “Financial Instruments: Presentation”. The amendment also clarifies that the standard is not applicable to the joint ventures and joint arrangements regulated by IFRS 11 “Joint Arrangements”; c) IFRS 8 “Operating Segments”: the standard is amended in terms of the disclosures required when different operating segments having similar economic characteristics are aggregated; Half-yearly ﬁnancial report at June 30, 2014 Changes in international accounting standards

d) IFRS 13 “Fair Value Measurements”: the amendment clarifies that the exemption permitting an entity to measure the fair value of financial assets and liabilities on a net basis is applicable to all contracts, regardless of whether they meet the definition of financial assets or financial liabilities; e) IAS 16 “Property, Plant and Machinery” and IAS 38 “Intangible Assets”: both standards are amended to clarify how recoverable amounts and useful lives are treated when an entity carries out a revaluation; f) IAS 24 “Related Party Disclosures”: the standard is amended in order to include an entity providing key management personnel services as a related party; g) IAS 40 “Investment Property”: the amendment to the standard regards the interrelationship between IFRS 3 “Business Combinations” and IAS 40 “Investment Property” when the acquisition of a property can be identified as a business combination.

54 Half-yearly ﬁnancial report at June 30, 2014

Scope of consolidation

The Half-yearly report of the A2A Group at June 30, 2014 includes the figures of the parent A2A S.p.A. and those of the subsidiaries over which A2A S.p.A. exercises either direct or indirect control, even when the holding is less than 50%. In addition, companies in which the parent exercises joint control with other entities (joint ventures) and those over which it has a significant influence are consolidated using the equity method.

55 Half-yearly ﬁnancial report at June 30, 2014

Consolidation policies and procedures

Consolidation policies Subsidiaries

Subsidiaries are those companies over which the parent company, A2A S.p.A., exercises control and has the power, as defined by IFRS 10, to determine financial and operating policy, either directly or indirectly, in order to obtain returns from their activities. Subsidiaries are

56 consolidated from the date on which the Group effectively acquires control and cease to be consolidated on a line-by-line basis from the date on which control is transferred to a company outside the Group.

Associates, joint ventures and joint operations

Investments in associates, namely those in which the A2A Group has a considerable interest and is able to exercise significant influence are accounted for using the equity method. Gains and losses attributable to the Group are recognized in the financial statements from the date on which significant influence or joint control commences. In the event that the loss attributable to the Group exceeds the carrying amount of an investment, the carrying amount is reduced to zero and any excess loss is provided for to the extent that the Group has legal or constructive obligations to make good the associate’s losses or in any case to make payments on its behalf. With the adoption of IFRS 11, the Group must now classify investments in joint arrangements as either joint ventures (if the Group has rights to the net assets of the arrangement) or joint operations (if the Group has rights to the assets, and obligations for the liabilities, relating to the arrangement). The Group’s investments in joint ventures as defined by IFRS 11 are accounted for using the equity method, whereas for joint operations the standard requires that the Group recognize its portion of the assets, liabilities, revenues and expenses, rather than account for the investments using the equity method. Half-yearly ﬁnancial report at June 30, 2014 Consolidation policies and procedures

The A2A Group is not a party to any joint operations and accordingly the adoption of the new standard had no effect on the half-yearly report at June 30, 2014.

Potential voting rights

If the A2A Group holds call options on shares or other equity instruments that represent capital (warrants) that are convertible into ordinary shares or similar instruments having the potential, if exercised or converted, to give the Group voting rights or reduce the voting rights of third parties (“potential voting rights”), such potential voting rights are taken into consideration when assessing whether or not the Group has the power to govern or influence another company’s financial and operating policies.

Treatment of put options on the shares of subsidiaries

The Group has granted put options to minority shareholders which entitle them to require 57 the A2A Group to purchase the shares they own at a future date. Paragraph 23 of IAS 32 states that a contract that contains an obligation for an entity to purchase shares for cash or another financial asset gives rise to a financial liability for the present value of the exercise price of the option. As a result, therefore, if the Group does not have the unconditional right to avoid the delivery of cash or other financial instruments when a put option on the shares of subsidiaries is exercised, it must recognize a liability. In the absence of specific recommendations made by the accounting standards adopted, the A2A Group (i) considers that the shares that are the object of the put option have already been acquired, even in the case that the risks and rewards connected with the ownership of the shares remain with the minority shareholders and they continue to be exposed to equity risk; (ii) recognizes the liability arising from the obligation and any changes in the liability that do not depend on the simple passage of time (the unwinding of the discounting of the exercise price), with a counter-entry to equity; (iii) recognizes the latter in profit or loss.

Consolidation policies General procedure

The financial statements of the subsidiaries, associates and joint ventures consolidated by the A2A Group are prepared at the end of each reporting period using the same accounting policies as the parent. Any items recognized by using different accounting principles are Half-yearly ﬁnancial report at June 30, 2014 Consolidation policies and procedures

adjusted during the consolidation process to bring them into line with Group accounting policies. All intragroup balances and transactions, including any unrealized profits arising from transactions between Group companies, are fully eliminated.

In preparing the Half-yearly report the assets, liabilities, income and expenses of the companies being consolidated are included in their entirety on a line-by-line basis, with the portion of equity and net income for the period attributable to minority interests being stated separately in the balance sheet and income statement. The carrying amount of the investment in each subsidiary is eliminated against the corresponding share of its net equity, including any adjustments to fair value at the acquisition date; any differences arising are accounted for in accordance with IFRS 3. Transactions with minority interests which do not lead to the loss of control in consolidated companies are accounted for using the economic entity view approach.

Adoption of international accounting standard IFRS 12 “Disclosure of 58 Interests in Other Entities”

With effect from January 1, 2014 the A2A Group has among other things adopted international accounting standard IFRS 12 “Disclosure of Interests in Other Entities”, issued by the IASB in 2011 and adopted by the European Commission on December 11, 2012. On the basis of the requirements of paragraphs 7 and following of the standard the Group discloses information below about the significant judgments and assumptions it has made in determining: • that the parent company has control of another entity within the meaning of IFRS 10; • the type of joint arrangement (joint operation or joint venture) when the arrangement has been structured through a separate vehicle, in compliance with IFRS 11; • that the parent company has significant influence over another entity (shareholdings in associates).

Shareholding in EPCG (IFRS 10)

The A2A Group has established that the requirements of IFRS 10 exist for the consolidation of the shareholding in the Montenegro company EPCG whose business is the production, distribution and sale of electricity. More specifically, the Group consolidates EPCG, in whose share capital it has an interest of 43.7%, on a line-by-line basis. Although the parent company does not holding the majority of the votes that may be exercised at a shareholders’ meeting, the company is considered to be a subsidiary because Half-yearly ﬁnancial report at June 30, 2014 Consolidation policies and procedures

by being able to appoint the CEO and CFO the parent has de facto control, applying in practice the provisions of the purchase agreement, namely it is able to manage the company from a effective standpoint.

The adoption of IFRS 10 (superseding IAS 27 on the subject of consolidated financial statements) has had no effect on the way in which the shareholding in EPCG is consolidated, since A2A S.p.A. has control as “it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee”.

Shareholdings in joint ventures (IFRS 11): Ergosud S.p.A. and PremiumGas S.p.A.

IFRS identifies two types of arrangement, joint operations and joint ventures, on the basis of the rights and obligations of the parties, and governs the resulting accounting treatment to be adopted for the recognition of these arrangements in the financial statements.

The most significant effect of the new standard is the fact that a number of entities jointly 59 controlled by A2A, which up until now have been recognized using the equity method, could fall under the definition of joint operations on the basis of the requirements of IFRS 11. The accounting treatment for this type of joint arrangement requires the assets/liabilities and revenue/expenses connected with the arrangement to recognized on the basis of the rights/ obligations due to/assumed by A2A, regardless of the interest held. In the particular case of its shareholdings in two joint arrangements operating in the Energy Sector, Ergosud S.p.A. and PremiumGas S.p.A., the A2A Group considers that these fall under the category joint ventures as far as their legal form and the nature of the contractual agreements are concerned.

More specifically, for the shareholding in PremiumGas S.p.A. the Group holds rights exclusively connected with the company’s results; the company’s activities are not directed solely towards the sale of gas to Group companies, thereby ensuring its continuity independent of its commercial relationships with the Group.

For the shareholding in Ergosud S.p.A., despite the existence of a tolling agreement the investee can dispatch energy autonomously, thereby ensuring business continuity also at the end of the agreement. In addition, the Group does not appoint any of the company’s key management.

On the basis of the above considerations, the A2A Group has accounted for the shareholdings using the equity method, continuing the treatment used in previous years. Half-yearly ﬁnancial report at June 30, 2014 Consolidation policies and procedures

Procedure for the consolidation of assets and liabilities held for sale (IFRS 5)

In the case of particularly large amounts and in connection with non-current assets and liabilities held for sale, and only in this case, in accordance with IFRS 5 the relative intragroup financial receivables and payables are not eliminated in order to provide a clear presentation of the financial impact of a possible disposal.

a) Rights granted to the financial shareholders (Mediobanca, Fondazione CRT and Banca Popolare di Milano)

On May 24, 2012, A2A S.p.A., the other shareholders of Edipower S.p.A. (formerly Delmi S.p.A.) and Iren Energia S.p.A. (which is no longer a shareholder of Edipower S.p.A. from November 1, 2013) signed a framework agreement concerning the governance of Edipower S.p.A. and its operating model. This framework agreement has a duration of 5 years and renews automatically unless expressly terminated. 60 The framework agreement also includes provisions regarding the circulation of Edipower S.p.A. shares (e.g. lock-up, pre-emption, acceptance, right to joint sale and right to purchase clauses) and divestment from Edipower S.p.A..

On this final point, beginning on the date of the third anniversary of the merger the parties in the framework agreement are required to meet to verify, in good faith, if the necessary conditions exist for listing the shares in Edipower S.p.A., including by way of mergers with other listed companies. In the event of a listing, the financial shareholders of Edipower S.p.A., namely Mediobanca, Fondazione CRT and BPM, shall be entitled to place their own equity investments on the market with priority over the other parties to the framework agreement. Should the company not be listed within 48 months of the effective date of the Delmi/ Edipower merger, Mediobanca, Fondazione CRT and BPM shall each have the right to liquidate their entire equity interest in Edipower S.p.A. in exchange for payment of the fair value of said investment, to be paid in kind by assignment of a business unit to be selected by the board of directors of Edipower S.p.A.. Should this procedure not be completed for any reason within 50 months of the date of the merger, Mediobanca, Fondazione CRT and BPM shall each have a put option at fair value on their holding which can be exercised with the other shareholders of Edipower S.p.A. subsequent to the merger, in proportion to the equity interest each shareholder owns in Edipower S.p.A.. In this respect, as the result of the non-proportional demerger of Edipower S.p.A. effective from November 1, 2013, Iren S.p.A. and Iren Energia S.p.A. are no longer shareholders of Edipower S.p.A.. Half-yearly ﬁnancial report at June 30, 2014 Consolidation policies and procedures

The signing of the framework agreement and the rights consequently granted to the financial shareholders (Mediobanca, Fondazione CRT and BPM) have been deemed to be put options on non-controlling interests and have been recognized in accordance with paragraph 23 of IAS 32. This standard states that a contract that contains an obligation for an entity to purchase shares for cash or for another financial asset gives rise to a financial liability for the present value of the exercise price of the option.

The A2A Group therefore considers the shares involved in the put options to have already been purchased, even though the other shareholders maintain the risks and benefits connected with ownership of the shares and they continue to be exposed to the related equity risk, and has recognized the liability resulting from this obligation. Any subsequent changes in the liability that are not related to the mere unwinding of the present value of the exercise price will be recognized in Group equity.

b) Exchange agreement between A2A S.p.A. and Dolomiti Energia S.p.A.

On March 15, 2012, A2A S.p.A. and Dolomiti Energia S.p.A. signed an agreement which establishes 61 swap rights in favour of Dolomiti Energia S.p.A.. Specifically, this exchange agreement states that Dolomiti Energia S.p.A. shall have the right to exchange its shares in Edipower S.p.A. with the shares held by A2A S.p.A. in Dolomiti Energia S.p.A. and with certain assets of A2A S.p.A. which have yet to be determined. Should the fair value of the assets involved in the exchange be less than 16 million euro, there is to be a cash payment for the difference.

Dolomiti Energia S.p.A. may exercise this swap right at any time during the 180-day period beginning from the end of the 24th month subsequent to the date on which the exchange agreement was signed, unless this exercise date is moved forward in the event that A2A S.p.A. should exercise the right to acquire the shares in Edipower S.p.A. in accordance with shareholder agreements or the bylaws.

The signing of the exchange agreement and the consequent granting of rights to Dolomiti Energia S.p.A. have been considered to be a put option on a non-controlling interest and have been recognized for accounting purposes as described above.

c) Option agreement between A2A S.p.A. and Società Elettrica Altoatesina S.p.A. (SEL)

On May 24, 2012, A2A S.p.A. signed an option agreement with Società Elettrica Altoatesina (SEL) S.p.A. concerning a portion of the shares held in Edipower S.p.A. following the merger of the two companies; this merger became effective on January 1, 2013 based on the deed signed on December 18, 2012. Half-yearly ﬁnancial report at June 30, 2014 Consolidation policies and procedures

Following the merger SEL S.p.A. held a 6.75% equity interest in Edipower S.p.A.. After the non-proportional partial demerger of Edipower S.p.A. in favor of Iren Energia S.p.A. this interest has risen to 8.5%.

The option agreement states that SEL S.p.A. has a put option (the right to sell) and A2A S.p.A. has a call option (the right to buy) on the shares held by SEL S.p.A. in Edipower S.p.A..

SEL S.p.A. may exercise its put option during the three-month period prior to May 24, 2017, and A2A S.p.A. may exercise its call option during that same three-month period. The exercise price of these options is made up of a fixed portion and a variable portion to be based on the fair value of the shares involved in the options at the exercise date.

The signing of the option agreement and the consequent granting of rights to SEL S.p.A. have been considered to be a put option on a non-controlling interest and have been recognized for accounting purposes as described above.

* * *

62 As a result of the agreements described under points (a), (b) and (c) above, the Half-yearly report at June 30, 2014 includes a liability to Dolomiti Energia S.p.A., SEL S.p.A. and the financial shareholders of Edipower S.p.A. for the potential exercising of the put options on Edipower S.p.A. shares totaling approximately 325 million euro, and on the basis of the expected timing of the exercising of the options regarding Dolomiti Energia S.p.A. the Group has reclassified 92 million euro to “other current liabilities”. On the initial recognition of the put option at a carrying amount of 284 million, the counter-entry was recorded as a minority interest in equity. The subsequent increase of 41 million euro has been recorded with a counter-entry to equity pertaining to the Group. The change in value of the put option due to the passage of time has been recognized in profit or loss.

a) Option granted to the Municipality of Varese for the sale of 9.8% of Aspem S.p.A.

A2A S.p.A. holds 90% of the shares of Aspem S.p.A., a company that provides local public services in the city of Varese and in other towns in the province of Varese. Under the shareholders’ agreement of January 15, 2009 between A2A S.p.A. and the Municipality of Varese, at the end of a three-year period of non-transferability of the shares of Aspem S.p.A., starting from the date of the shareholders’ agreement, the Municipality of Varese has the right, but not the obligation, to sell (put option) 9.8% of the share capital of Aspem S.p.A. to A2A S.p.A..

In accordance with paragraph 23 of IAS 32, the Group has recognized as a liability the present value of the estimated outlay which it will not be able to avoid if the option is exercised, with a counter-entry to equity. Half-yearly ﬁnancial report at June 30, 2014 Consolidation policies and procedures

b) EPCG - Montenegro government options

As a result of the agreement signed in 2009 with A2A S.p.A. on the acquisition of the investment of 43.7% in the capital of EPCG by the Italian listed company, the Montenegro government holds a call option on this interest which, depending on whether certain quantitative targets or specific indicators are reached, may already be exercised from this year at a price higher than the carrying amount in the financial statements at June 30, 2014.

63 Half-yearly ﬁnancial report at June 30, 2014 Consolidation policies and procedures

Latest available summarized figures for joint ventures (consolidated at equity)

Millions of euro Companies PremiumGas Ergosud Metamer held by A2A Ambiente at 50% (*) 50% 50% 50% at June 30, at June 30, at December at December 2014 2014 31, 2013 31, 2013

INCOME STATEMENT Revenues from the sale of goods and services 4.5 3.2 33.5 13.2 Gross operating income 0.6 (0.3) 18.2 1.1 % of net revenues 0.13% (9.5%) 54.3% 8.0% Depreciation, amortization and write- downs 0.6 – 11.5 0.4 Net operating income (loss) – (0.3) 6.7 0.7 Result of the period – (0.4) 3.1 0.3 BALANCE SHEET Total assets 12.0 5.2 224.2 5.4 64 Net equity 0.8 2.7 85.1 1.5 Net (debt) (1.3) 0.5 (124.7) 0.9

(*) Bellisolina S.r.l., Bergamo Pulita S.r.l. and Sed S.r.l..

Millions of euro Companies PremiumGas Ergosud Metamer held by A2A Ambiente at 50% (*) 50% 50% 50% at June 30, at June 30, at December at December 2013 2013 31, 2012 31, 2012

INCOME STATEMENT Revenues from the sale of goods and services 5.0 – 33.2 12.8 Gross operating income 0.4 (0.4) 10.6 0.8 % of net revenues 7.6% n.s. 31.9% 6.3% Depreciation, amortization and write- downs 0.7 – 10.1 0.2 Net operating income (loss) (0.3) (0.4) 0.5 0.6 Result of the period (0.3) (0.3) (1.9) 0.4 BALANCE SHEET Total assets 13.5 5.6 251.8 6.0 Net equity 0.9 3.3 82.2 1.5 Net (debt) 2.0 1.0 (145.2) 1.7

(*) Bellisolina S.r.l., Bergamo Pulita S.r.l. and Sed S.r.l.. Half-yearly ﬁnancial report at June 30, 2014

Seasonal nature of the business

Given the nature of the Group’s ordinary activities, the interim results can vary as the result of the meteorological conditions during the period.

In this respect reference should be made to the comments on performance by sector presented below.

65 Half-yearly ﬁnancial report at June 30, 2014

Results sector by sector

Millions of euro Energy Environment Heat and Services Networks Other Services and Eliminations Total Group Corporate

01 01 14 01 01 13 01 01 14 01 01 13 01 01 14 01 01 13 01 01 14 01 01 13 01 01 14 01 01 13 01 01 14 01 01 13 01 01 14 01 01 13 06 30 14 06 30 13 06 30 14 06 30 13 06 30 14 06 30 13 06 30 14 06 30 13 06 30 14 06 30 13 06 30 14 06 30 13 06 30 14 06 30 13 (*)

Revenues 1,987 2,199 401 448 146 205 395 361 118 115 (465) (483) 2,582 2,845 - of which inter-sector 102 107 52 50 22 22 177 194 112 110 (465) (483) – – 66 Gross operating income 262 293 115 155 39 57 146 121 (11) (16) - - 551 610 % of revenues 13.2% 13.3% 28.7% 34.6% 26.7% 27.8% 37.0% 33.5% (9.3%) (13.9%) 21.3% 21.4% Depreciation, amortization, provisions and write-downs (141) (172) (40) (32) (15) (8) (51) (52) (2) (16) (249) (280) Net operating income 121 121 75 123 24 49 95 69 (13) (32) - - 302 330 % of revenues 6.1% 5.5% 18.7% 27.5% 16.4% 23.9% 24.1% 19.1% (11.0%) (27.8%) 11.7% 11.6% Result from non-recurring transactions (3) Financial balance (96) (81) Result before taxes 206 246 Income taxes (101) (94) Result after taxes from operating activities 105 152 Net result from discontinued operations Minorities (8) (19) Group result of the period 97 133 Gross investments (1) 23 31 21 18 25 13 50 50 5 6 - - 124 118

(1) See the items “Investments” in the schedules on tangible and intangible assets presented in Notes 1 and 2 to the balance sheet. (*) The comparitive figures for the period from January to March 2013 have been reclassified on the basis of the new income statement format.

Millions of euro Energy Environment Heat and Services Networks Other Services and Eliminations Total Group Corporate

06 30 14 12 31 13 06 30 14 12 31 13 06 30 14 12 31 13 06 30 14 12 31 13 06 30 14 12 31 13 06 30 14 12 31 13 06 30 14 12 31 13 Tangible assets 3,369 3,486 441 446 541 527 1,351 1,334 227 240 (101) (103) 5,828 5,930 Intangible assets 86 82 35 35 35 37 1,286 1,286 56 54 (192) (188) 1,306 1,306 Trade receivables and current financial assets 1,201 1,569 271 288 76 134 330 351 202 195 (303) (541) 1,777 1,996 Trade payables and current financial liabilities 928 1,247 220 229 57 107 196 225 165 445 (293) (532) 1,273 1,721 Half-yearly ﬁnancial report at June 30, 2014 Results sector by sector

Results sector by sector

Millions of euro Energy Environment Heat and Services Networks Other Services and Eliminations Total Group Corporate

Revenues 1,987 2,199 401 448 146 205 395 361 118 115 (465) (483) 2,582 2,845 - of which inter-sector 102 107 52 50 22 22 177 194 112 110 (465) (483) – – Gross operating income 262 293 115 155 39 57 146 121 (11) (16) - - 551 610 67 % of revenues 13.2% 13.3% 28.7% 34.6% 26.7% 27.8% 37.0% 33.5% (9.3%) (13.9%) 21.3% 21.4% Depreciation, amortization, provisions and write-downs (141) (172) (40) (32) (15) (8) (51) (52) (2) (16) (249) (280) Net operating income 121 121 75 123 24 49 95 69 (13) (32) - - 302 330 % of revenues 6.1% 5.5% 18.7% 27.5% 16.4% 23.9% 24.1% 19.1% (11.0%) (27.8%) 11.7% 11.6% Result from non-recurring transactions (3) Financial balance (96) (81) Result before taxes 206 246 Income taxes (101) (94) Result after taxes from operating activities 105 152 Net result from discontinued operations Minorities (8) (19) Group result of the period 97 133 Gross investments (1) 23 31 21 18 25 13 50 50 5 6 - - 124 118

Millions of euro Energy Environment Heat and Services Networks Other Services and Eliminations Total Group Corporate

Notes to the balance sheet

ASSETS Non-current assets 1) Tangible assets

Millions of euro Balance Changes during the period Balance at at 12 312013 Investm./ Other Disposals Write- Deprecia- Total 06 30 2014 68 Acquisit. changes and sales downs tion changes

Land 245 245 Buildings 986 1 (22) (21) 965 Plant and machinery 4,438 39 28 (164) (97) 4,341 Industrial and commercial equipment 40 2 (2) 40 Other assets 57 7 2 (8) 1 58 Landfills 27 4 (3) 1 28 Construction in progress and advances 107 41 (30) 11 118 Leasehold improvements 24 3 4 (1) 6 30 Leased assets 6 (3) (3) 3 Total 5,930 93 5 (200) (102) 5,828 of which: Historical cost 9,688 93 5 (3) 95 9,783 Accumulated depreciation (3,758) 3 (200) (197) (3,955)

“Tangible assets” amounted to 5,828 million euro at June 30, 2014 (5,930 million euro at December 31, 2013), representing a net decrease of 102 million euro.

The following changes took place during the period: • an increase of 93 million euro due to investments, as described in further detail below; • an increase of 5 million euro due to other changes, relating mainly to reclassifications from other balance sheet items; • a decrease of 200 million euro for the depreciation charge for the period. Half-yearly ﬁnancial report at June 30, 2014 Notes to the balance sheet

Investments may be analyzed as follows: • there was an increase of 20 million euro in the energy sector, of which 7 million euro regarded work carried out at the Monfalcone and Gissi power stations, 4 million euro regarded work carried out at the Calabria unit, 4 million euro regarded investments made by Edipower S.p.A. and 5 million euro regarded investments made by the EPCG Group; • investments of 25 million euro in the heat sector regarded the development of the district heating networks in the Milan, Brescia and Bergamo areas for 18 million euro and extraordinary maintenance and development work on the plants in the Milan, Brescia and Bergamo areas for 7 million euro; • investments of 21 million euro in the environment sector relate to 7 million euro incurred for the construction of the new glass treatment plant at Asti, 6 million euro mainly relating to work carried out the Corteolona, Brescia, Bergamo and Acerra plants, 6 million euro for the purchase of waste collection vehicles and 2 million euro for the purchase of equipment;

• investments in the networks sector amounted to 25 million euro (of which 6 million euro 69 made by the EPCG Group) and mainly related to development and maintenance work carried out on electricity distribution plants, the extension and refurbishment of the low and medium voltage network and the installation of new electronic meters; • investments in the services sector amounted to 2 million euro, of which 1 million euro incurred by the EPCG Group.

Tangible assets include “Leased assets” totaling 3 million euro, recognized in accordance with IAS 17, for which the outstanding payable to lessors at June 30, 2014 amounted to 3 million euro.

In connection with the performance of the Electricity Cash Generating Unit in the first half of 2014, current market curves and medium-long term forecasts, together with savings in part already realized as the result of a process of renegotiating supply agreements initiated by the Group, in particular those regarding plant maintenance, indicate that it is unlikely that any further impairment losses will be incurred in addition to those already recognized in the financial statements at December 31, 2013. Half-yearly ﬁnancial report at June 30, 2014 Notes to the balance sheet

2) Intangible assets

Millions of euro Balance Changes during the period Balance at at 12 31 2013 Invest- Reclass./ Disposals/ Amortiza- Total 06 30 2014 ments/ Other Sales tion changes Acquisi- changes tions

Industrial patents and industrial property rights 36 2 3 (8) (3) 33 Concesions, licences, trademarks and similar rights 748 22 2 (1) (20) 3 751 Assets in progress 21 7 (6) 1 22 Other intangible assets 19 (1) (1) 18 Goodwill 482 482 Total 1,306 31 (1) (1) (29) - 1,306

“Intangible assets” amounted to 1,306 million euro at June 30, 2014 (1,306 million euro at December 31, 2013).

Applying IFRIC 12, from 2010 intangible assets also include assets in concession relating to

70 gas distribution, the integrated water cycle and district heating distribution.

The following changes took place during the period: • an increase of 31 million euro arising from investments; • a decrease of 1 million euro due to other changes, arising mainly from reclassifications from other items; • a decrease of 1 million euro arising from disposals, net of accumulated amortization; • a decrease of 29 million euro for the amortization charge for the period.

More specifically, investments relate to the following: • an increase of 3 million euro in the energy sector relating mainly to the implementation of information systems; • investments of 25 million euro in the networks sector relating to development and maintenance work on the plants of the gas distribution segment and the replacement of low and medium pressure underground piping for 17 million euro, work on the water transport and distribution network, on the sewage networks and on the purification plants for 7 million euro and the implementation of information systems for 1 million euro; • investments of 3 million euro in the service sector mainly relate to the implementation of information systems.

“Other intangible assets” include customer lists arising on the acquisition of customer portfolios by Group companies. These balances are being amortized on the basis of the estimated benefits expected to be obtained in future years. More specifically, the outstanding Half-yearly ﬁnancial report at June 30, 2014 Notes to the balance sheet

balance of 4 million euro relates to the amount paid in previous years by subsidiaries regarding a portion of the networks and customers of the city and province of Brescia and the customer portfolio of the subsidiary Aspem Energia S.r.l..

Goodwill

Millions of euro Balance at Changes during the period Balance at 12 31 2013 06 30 2014 Invest- Other Write- Total ments changes downs changes

Goodwill 482 - 482 Total 482 - - - - 482

There has been no change in goodwill over the period.

“Goodwill” may be analyzed by CGU as follows at June 30, 2014:

CGU - Millions of euro 71 Electricity networks 184 Environment 232 Gas networks 38 Gas 7 Heat - Italy 21 Total goodwill at June 30, 2014 482

No indications of impairment were noted during the period which led to impairment losses. Goodwill is in any case tested for impairment at least annually.

3) Shareholdings and other non-current financial assets

Millions of euro Balance at Changes Balance at of which included in the NFP 12 31 2013 during the 06 30 2014 period 12 31 2013 06 30 2014

Shareholdings carried under the equity method 187 4 191 - - Other non-current financial assets 53 (2) 51 44 42 Total shareholdings and other non- current financial assets 240 2 242 44 42 Half-yearly ﬁnancial report at June 30, 2014 Notes to the balance sheet

“Shareholdings carried under the equity method” increased by 4 million euro over December 31, 2013.

The following table sets out details of the changes:

Shareholdings carried under the equity method - Millions of euro Total

Balance at December 31, 2013 187 Changes in the period: - acquistions and capital increases - valuations at equity 5 - write-downs - dividends received from shareholdings in companies carried at equity (1) - sales - other changes - reclassifications Total changes in the period 4 Balance at June 30, 2014 191

72 The increase of 4 million euro consists of an increase of 5 million euro arising from accounting for the shareholdings in Dolomiti Energia S.p.A. and ACSM-AGAM S.p.A. using the equity method and a decrease of 1 million euro due to the receipt of dividends.

“Other non-current financial assets” had a balance of 51 million euro at June 30, 2014, representing a decrease of 2 million euro over that at December 31, 2013.

4) Deferred tax assets

Millions of euro Balance at Changes Balance at 12 31 2013 during the 06 30 2014 period

Deferred tax assets 372 (13) 359

“Deferred tax assets” amounted to 359 million euro at June 30, 2014 (372 million euro at December 31, 2013). This item consists of the net balance of IRES and IRAP deferred tax assets and liabilities arising from changes and accruals made solely for fiscal purposes. The balance at June 30, 2014 is stated after being adjusted for the new IRAP rates, which led to the recognition of a charge in the income statement of 4 million euro.

The balance for deferred tax assets/liabilities at June 30, 2014 is presented net, after offsetting carried out in accordance with IAS 12. Half-yearly ﬁnancial report at June 30, 2014 Notes to the balance sheet

The main balances for deferred tax assets and liabilities are set out in the following table.

Detail of deferred tax assets and Consolid- Accruals Utilizations Rate Total IAS 39 to IAS 19 Other Consolidated liabilities ated (A) (B) changes (A+B+C) equity Revised to changes / financial financial (C) equity reclass/ statements statements mergers at at 12 31 2013 06 30 2014

Deferred tax liabilities Measurement differences for tangible assets 1,005 (27) (7) (34) 971 Application of the leasing standard (IAS 17) 8 – – 8 Application of the financial instrument standard (IAS 39) – – – Measurement differences for intangible assets 2 – – 2 Deferred capital gains – – – – – Employee leaving entitlement 4 – 4 Goodwill 96 1 1 – 97 Other deferred tax liabilities 66 (1) (1) – 65 Total deferred tax liabilities (A) 1,181 1 (28) (7) (34) – – – 1,147 73 Deferred tax assets Taxed provisions 127 11 (17) (10) (16) 3 114 Measurement differences for tangible assets 837 7 (23) (16) 1 822 Application of the financial instrument standard (IAS 39) 20 – 15 35 Bad debts provision 30 1 1 (3) 28 Grants 19 – – – 19 Goodwill 433 (24) (24) – 409 Other deferred tax assets 87 4 (16) (1) (13) 7 (2) 79 Total deferred tax assets (B) 1,553 23 (80) (11) (68) 15 7 (1) 1,506 NET DEFERRED TAX ASSETS/ LIABILITIES (B-A) 372 22 (52) (4) (34) 15 7 (1) 359 Half-yearly ﬁnancial report at June 30, 2014 Notes to the balance sheet

5) Other non-current assets

Millions of euro Balance at Changes Balance at of which included in the NFP 12 31 2013 during the 06 30 2014 period 12 31 2013 06 30 2014

Non-current derivatives 43 10 53 43 53 Other non-current assets 10 (1) 9 – – Total other non-current assets 53 9 62 43 53

“Other non-current assets” amounted to 62 million euro at June 30, 2014, an increase of 9 million euro over the balance at December 31, 2013, and consist of the following: • 53 million euro relating to “Derivatives” hedging non-current financial items consisting mainly of Interest Rate Swap (IRS) contracts hedging the risk of an adverse change in interest rates on bonds and long-term loans. The increase in this item compared to December 31, 2013 is due to the measurement at fair value at the end of the period; • 9 million euro for “Other non-current assets” principally relating to guarantee deposits and expenditure incurred but relating to future years.

Current assets 6) Inventories

Millions of euro Balance at Changes Balance at 12 31 2013 during the 06 30 2014 period

Inventories 284 1 285

“Inventories” amounted to 285 million euro at June 30, 2014 (284 million euro at December 31, 2013), net of the obsolescence provision, an increase of 1 million euro over the period, and may be analyzed as follows: • 12 million euro relating to a decrease in fuel stocks, which at the balance sheet date totaled 120 million euro compared to 132 million euro at December 31, 2013; • 13 million euro relating to an increase in other stocks, which amounted to 94 million euro at June 30, 2014 against 81 million euro at December 31, 2013; • 1 million euro arising from an increase in fuel at third parties, which amounted to 3 million euro at June 30, 2014 and 2 million euro at the end of the previous period; • 1 million euro relating to a decrease in materials stocks, which totaled 68 million euro compared to 69 million euro at December 31, 2013. Half-yearly ﬁnancial report at June 30, 2014 Notes to the balance sheet

7) Trade receivables

Millions of euro Balance at Changes Balance at 12 31 2013 during the 06 30 2014 period

Trade receivables 2,207 (235) 1,972 (Bad debt provision) (318) (3) (321) Total trade receivables 1,889 (238) 1,651

“Trade receivables” amounted to 1,651 million euro at June 30, 2014 (1,889 million euro at December 31, 2013), representing a net decrease of 238 million euro. In further detail: • 231 million euro due to a decrease in trade receivables from customers; this item had a balance of 1,544 million euro at the balance sheet date compared to 1,775 million euro at December 31, 2013; • 12 million euro due to a decrease in receivables from the Municipalities of Milan and Brescia. This item had a balance of 91 million euro at June 30, 2014 (103 million euro at the end of the previous year);

• 3 million euro due to an increase in receivables from associates; this item had a balance 75 of 10 million euro at the balance sheet date compared to 7 million euro at December 31, 2013; • 2 million euro due to an increase in contracts in progress, which in total amounted to 6 million euro (4 million euro at December 31, 2013).

In connection with the receivables of 45 thousand euro due to the subsidiary EPCG by an energy sector customer operating in Montenegro for the direct and indirect supply of electricity, agreements were drawn up by EPCG and the Montenegro government during the period which broadly allow for an offsetting of the amount to be accrued in the bad debt provision and the economic benefits resulting from the offset between a planned capital increase subscribed by the State of Montenegro against a cancellation of tax liabilities. The effect of this operation was already recognized in the financial statements at December 31, 2013. The agreements were finalized in July 2014.

The Group carries out spot sales of receivables on a non-recourse basis. At June 30, 2014 the receivables which had not yet fallen due, sold by the Group on a definitive basis and derecognized in accordance with the requirements of IAS 39, amounted to 113 million euro in total. These receivables amount to 40 million euro at the date of this Half-yearly financial report. The sales relate to trade balances. In addition, the Group has sold receivables on a with-recourse basis for 2 million euro.

The Group has no rotating factoring programs. Half-yearly ﬁnancial report at June 30, 2014 Notes to the balance sheet

The bad debt provision amounted to 321 million euro at June 30, 2014 (318 million euro at December 31, 2013). Accruals of 8 million euro were made during the period while utilizations and other changes amounted to 5 million euro.

8) Other current assets

Millions of euro Balance at Changes Balance at of which included in the NFP 12 31 2013 during the 06 30 2014 period 12 31 2013 06 30 2014

Current derivatives 31 29 60 – – Other current assets 352 (107) 245 – – Total other current assets 383 (78) 305 – –

“Other current assets” had a balance of 305 million euro at June 30, 2014 compared to 383 million euro at December 31, 2013, representing a decrease of 78 million euro which may be analyzed as follows:

76 • an increase of 29 million euro relating to “Current derivatives” arising from the increase in commodity derivatives due to the fair value measurement carried out at the end of the period; • a decrease of 64 million euro in VAT and duty receivables which at June 30, 2014 amounted to 32 million euro (96 million euro at December 31, 2013); • a decrease in other receivables of 117 million euro which totaled 73 million euro at June 30, 2014 (190 million euro at December 31, 2013), mainly arising from the decrease in the receivable from Enel in connection with the settlement of the outstanding dispute; • an increase of 4 million euro in advances from suppliers which amounted to 7 million euro at June 30, 2014 (3 million euro at December 31, 2013); • an increase of 50 million euro in receivables from the Electricity Sector Equalization Fund which at June 30, 2014 amounted to 98 million euro and at the end of the previous year totaled 48 million euro; • an increase of 20 million euro in balances relating to future years which accordingly amounted to 34 million euro at June 30, 2014 (14 million euro at December 31, 2013).

Balances due from personnel were unchanged over December 31, 2013. Half-yearly ﬁnancial report at June 30, 2014 Notes to the balance sheet

9) Current financial assets

Millions of euro Balance at Changes Balance at of which included in the NFP 12 31 2013 during the 06 30 2014 period 12 31 2013 06 30 2014

Other financial assets 106 20 126 106 126 Financial assets due from related parties 1 (1) – 1 – Total current financial assets 107 19 126 107 126

This item had a balance of 126 million euro at June 30, 2014 (107 million euro at December 31, 2013), mainly relating to interest-bearing bank deposits.

10) Current tax assets

Millions of euro Balance at Changes Balance at 12 31 2013 during the 06 30 2014 period

Current tax assets 70 (20) 50 77

“Current tax assets” amounted to 50 million euro at June 30, 2014 (70 million euro at December 31, 2013), representing a decrease of 20 million euro over the previous year-end.

11) Cash and cash equivalents

Millions of euro Balance at Changes Balance at of which included in the NFP 12 31 2013 during the 06 30 2014 period 12 31 2013 06 30 2014

Cash and cash equivalents 376 – 376 376 376

“Cash and cash equivalents” amounted to 376 million euro at June 30, 2014, unchanged over December 31, 2013.

Bank deposits include accrued interest although this had not yet been credited at the end of the period. Half-yearly ﬁnancial report at June 30, 2014 Notes to the balance sheet

EQUITY AND LIABILITIES

Equity

Equity, which amounted to 3,309 million euro at June 30, 2014 (3,348 million euro at December 31, 2013), is set out in the following table:

Millions of euro Balance at Changes Balance at 12 31 2013 during the 06 30 2014 period

Equity pertaining to the Group: Share capital 1,629 – 1,629 (Treasury shares) (61) – (61) Reserves 1,161 (83) 1,078 Group result of the period/year 62 35 97 Total equity pertaining to the Group 2,791 (48) 2,743 Minority interests 557 9 566 78 Total equity 3,348 (39) 3,309

The overall change in equity, a decrease of 39 million euro, is due to net profit of the period of 97 million euro, the measurements under IAS 32 and IAS 39 of cash flow hedge derivatives, changes in the IAS 19 Revised “Employee Benefits” reserve, the payment of the 2013 dividend and changes in minority interests.

A2A S.p.A. distributed a dividend of 0.033 euro per share on June 26, 2014.

12) Share capital

“Share capital” amounts to 1,629 million euro and consists of 3,132,905,277 ordinary shares each of nominal value 0.52 euro.

13) Treasury shares

“Treasury shares”, which amounted to 61 million euro at June 30, 2014, unchanged over December 31, 2013, consist of 26,917,609 own shares held by the parent company A2A S.p.A.. Half-yearly ﬁnancial report at June 30, 2014 Notes to the balance sheet

14) Reserves

Millions of euro Balance at Changes Balance at 12 31 2013 during the 06 30 2014 period

Reserves 1,161 (83) 1,078 of which: Changes in the fair value of cash flow hedge derivatives (32) (39) (71) Tax effect 11 14 25 Cash flow hedge reserve (21) (25) (46) Change in the IAS 19 Revised "Employee Benefits" reserve (45) (21) (66) Tax effect 13 6 19 IAS 19 Revised "Employee Benefits" reserve (32) (15) (47)

“Reserves”, which amounted to 1,078 million euro at June 30, 2014 (1,161 million euro at December 31, 2013), consist of the legal reserve, extraordinary reserves, reserves arising on consolidation and the retained earnings of subsidiaries.

This item also includes the negative cash flow hedge reserve of 46 million euro which regards 79 the measurement at period end of derivatives qualifying for hedge accounting.

The balance also includes negative reserves of 47 million euro arising from the early adoption of IAS 19 Revised “Employee Benefits” which requires actuarial profits and losses to be recognized directly in an equity reserve.

Reserves also include the effect of applying paragraph 23 of IAS 32 to the put options agreed between A2A S.p.A. and Società Elettrica Altoatesina S.p.A. (SEL) and the effects arising from the “Framework Agreement” and “Exchange Agreement” entered into by the parent A2A S.p.A. and the financial shareholders of Edipower S.p.A. (Mediobanca, Fondazione CRT and Banca Popolare di Milano) and Dolomiti Energia S.p.A., based on the shares of Edipower S.p.A.. As discussed in the section “Consolidation policies and procedures”, the difference between the present value of the exercise price for these put options and the carrying amount of minority interests is deducted from Group equity (if positive) or added to Group equity (if negative). The effects of the put options on Edipower S.p.A. shares had no effect on Group equity over the period.

15) Result of the period

This item consists of the profit for the period of 97 million euro. Half-yearly ﬁnancial report at June 30, 2014 Notes to the balance sheet

16) Minority interests

Millions of euro Balance at Changes Balance at 12 31 2013 during the 06 30 2014 period

Minority interests 557 9 566

“Minority interests” amounted to 566 million euro at June 30, 2014 (557 million euro at December 31, 2013) and represent the portion of capital, reserves and the net result pertaining to minority shareholders.

The increase for the period of 9 million euro mainly relates to the allocation of their share of the result for the period to the minorities of the EPCG Group.

LIABILITIES Non-current liabilities 80 17) Non-current financial liabilities

Millions of euro Balance at Changes Balance at of which included in the NFP 12 31 2013 during the 06 30 2014 period 12 31 2013 06 30 2014

Non-convertible bonds 2,967 59 3,026 2,967 3,026 Due to banks 1,013 (52) 961 1,013 961 Finance lease payables 2 – 2 2 2 Total non-current financial liabilities 3,982 7 3,989 3,982 3,989

“Non-current financial liabilities”, which amounted to 3,989 million euro at June 30, 2014 (3,982 million euro at December 31, 2013), increased by 7 million euro.

“Non-convertible bonds” regard the following issued bonds: • a thirty-year bond in yen issued on August 10, 2006 bearing interest at a fixed rate of 5.405% and having a carrying amount, measured at amortized cost, of 98 million euro; • a seven-year bond issued on November 2, 2009 bearing interest at a nominal fixed rate of 4.50% and having a carrying amount of 823 million euro. This bond was partially redeemed as a result of the early repurchase of 238 million euro carried out on July 11, 2013. The nominal value of this bond is currently 762 million euro. The accompanying derivative has been accounted for as a fair value hedge and accordingly the bond is measured at amortized cost adjusted for the change in fair value of the underlying derivative; • a seven-year bond having a nominal value of 750 million euro issued on November 28, 2012 bearing interest at a nominal fixed rate of 4.50% and having a carrying amount, measured at amortized cost, of 745 million euro at June 30, 2014; Half-yearly ﬁnancial report at June 30, 2014 Notes to the balance sheet

• a seven and a half year bond having a nominal value of 500 million euro issued on July 10, 2013 bearing interest at a nominal fixed rate of 4.375% and having a carrying amount, measured at amortized cost, of 494 million euro at June 30, 2014; • a ten-year bond having a nominal value of 300 million euro issued though a private placement on December 4, 2013 bearing interest at a nominal fixed rate of 4.00% and having a carrying amount, measured at amortized cost, of 299 million euro at June 30, 2014; • a bond with a term of eight years and one month having a nominal value of 500 million euro issued on December 13, 2013 bearing interest at a nominal fixed rate of 3.625% and having a carrying amount, measured at amortized cost, of 495 million euro at June 30, 2014.

The period end measurement of the non-convertible bonds at fair value and amortized cost led to an increase of 11 million euro in “Non-current financial liabilities”.

Interest of 72 million euro had accrued on the bonds at June 30, 2014.

Non-current amounts “Due to banks” decreased by 52 million euro over the period. This is mainly due to the reclassification of the portion falling due within twelve months to “Current financial liabilities”. 81

“Finance lease payables” amounted to 2 million euro (2 million euro at December 31, 2013).

18) Employee benefits

The balance on this item amounted to 360 million euro at June 30, 2014 (339 million euro at December 31, 2013) with changes as follows during the period:

Millions of euro Balance at Accruals Utiliza- Other Balance at 12 31 2013 tions changes 06 30 2014

Employee leaving entitlement 174 12 (5) 1 182 Employee benefits 165 - (4) 17 178 Total employee benefits 339 12 (9) 18 360 Half-yearly ﬁnancial report at June 30, 2014 Notes to the balance sheet

Technical valuations were carried out on the basis of the following assumptions:

06 30 2014 12 31 2013

Discount rate (*) from 0.56% to 2.36% from 0.86% to 3.17% Annual inflation rate 2.0% 2.0%

(*) The discount rate used by the Group varies from company to company on the basis of the average financial term of the obligation.

19) Provisions for risks, charges and liabilities for landfills

Millions of euro Balance at Accruals Utiliza- Other Balance at 12 31 2013 tions changes 06 30 2014

Provisions for risks, charges and liabilities for landfills 605 12 (57) 8 568

These provisions totaled 568 million euro at June 30, 2014 (605 million euro at the previous year end). Accruals had a net effect of 12 million euro, resulting from charges for the period 82 of 42 million euro less the release of provisions of 30 million euro recognized in previous years for certain disputes that no longer subsist. The utilizations of 57 million euro mainly refer to the amount of provisions used for payments made during the period.

20) Other non-current liabilities

Millions of euro Balance at Changes Balance at of which included in the NFP 12 31 2013 during the 06 30 2014 period 12 31 2013 06 30 2014

Other non-current liabilities 389 (92) 297 - - Non-current derivatives 47 5 52 47 52 Total other non-current liabilities 436 (87) 349 47 52

At June 30, 2014 this item had decreased by 87 million euro compared to the balance at the end of the previous year. “Other non-current liabilities” decreased by 92 million euro, due mainly to the reclassification to “Other current liabilities” of the portion expiring within 12 months of the liabilities to third parties arising from the measurement of the put options on the Edipower S.p.A. shares, while “Non-current derivatives” increased by 5 million euro principally as the result of measuring financial instruments at fair value. Half-yearly ﬁnancial report at June 30, 2014 Notes to the balance sheet

Current liabilities 21) Trade payables and other current liabilities

Millions of euro Balance at Changes Balance at of which included in the NFP 12 31 2013 during the 06 30 2014 period 12 31 2013 06 30 2014

Advances 8 6 14 - - Trade payables 1,298 (167) 1,131 - - Total trade payables 1,306 (161) 1,145 - - Payable to social security institutions 43 (4) 39 - - Other current liabilities 499 109 608 - - Current derivatives 24 68 92 - - Total other current liabilities 566 173 739 - - Total trade payables and other current liabilities 1,872 12 1,884 - -

“Trade payables and other current liabilities” amounted to 1,884 million euro at June 30, 2014 (1,872 million euro at December 31, 2013), representing an overall increase of 12 million euro which principally arises from an increase in “Other current liabilities” and “Current 83 derivatives” offset by a decrease in “Trade payables”. “Other current liabilities” mainly relate to amounts due to personnel, balances payable to the Electricity Sector Equalization Fund, amounts due to the tax authorities for VAT and withholding tax and the reclassification of the carrying amount of the put options on the Edipower S.p.A. shares expiring within 12 months amounting to 92 million euro.

22) Current financial liabilities

Millions of euro Balance at Changes Balance at of which included in the NFP 12 31 2013 during the 06 30 2014 period 12 31 2013 06 30 2014 Non-convertible bonds 308 (308) - 308 - Due to banks 105 18 123 105 123 Finance lease payables 1 – 1 1 1 Financial payables to related parties 1 3 4 1 4 Total current financial liabilities 415 (287) 128 415 128

“Current financial liabilities” amounted to 128 million euro at June 30, 2014, compared to 415 million euro at December 31, 2013. The decrease is mainly due to the redemption of the ten-year bond issued on May 28, 2004. Half-yearly ﬁnancial report at June 30, 2014 Notes to the balance sheet

23) Tax liabilities

Millions of euro Balance at Changes Balance at 12 31 2013 during the 06 30 2014 period

Tax liabilities 13 (10) 3

“Tax liabilities” amounted to 3 million euro at June 30, 2014 (13 million euro at December 31, 2013), representing a net decrease of 10 million euro.

84 Half-yearly ﬁnancial report at June 30, 2014

Net debt

24) NET DEBT (pursuant to CONSOB Communication no. DEM/6064293 of July 28, 2006)

The following table provides details of net debt.

Millions of euro Note 06 30 2014 12 31 2013

Bonds - non-current portion 17 3,026 2,967 Bank loans - non-current portion 17 961 1,013 85 Finance leases - non-current portion 17 2 2 Other non-current liabilities 20 52 47 Total medium/long-term debt 4,041 4,029 Non-current financial assets - related parties 3 (6) (6) Financial assets - non-current portion 3 (36) (38) Other non-current assets 5 (53) (43) Total medium/long-term financial receivables (95) (87) Total non-current net debt 3,946 3,942 Bonds - current portion 22 - 308 Bank loans - current portion 22 123 105 Finance leases - current portion 22 1 1 Current financial liabilities - related parties 22 4 1 Other current liabilities 21 - - Total short-term debt 128 415 Other current financial assets 9 (126) (106) Current financial assets - related parties 9 - (1) Other current assets 8 - - Total short-term financial receivables (126) (107) Cash and cash equivalents 11 (376) (376) Total current net debt (374) (68) Net debt 3,572 3,874 Half-yearly ﬁnancial report at June 30, 2014

Notes to the income statement

The new structure of the income statement used for the first time in the presentation of the consolidated annual report for the year ended December 31, 2013 led to the introduction of certain specific items having the purpose of identifying the results from non-recurring transactions in a clear and explicit manner, and the figures for the six months ended June 30, 2013 have been restated on the basis of this new structure.

86 25) Revenues

Revenues for the period totaled 2,582 million euro (2,845 million euro in the six months ended June 30, 2013), therefore decreasing by 263 million euro.

Details of the more significant items of this balance are as follows:

Revenues - Millions of euro 06 30 2014 06 30 2013

Revenues from the sale of goods 2,092 2,284 Revenues from services 374 453 Revenues from long-term contracts 9 2 Total revenues from the sale of goods and services 2,475 2,739 Other operating income 107 106 Total revenues 2,582 2,845

“Revenues from the sale of goods and services” amounted in total to 2,475 million euro (2,739 million euro in the corresponding period of the previous year), decreasing by 264 million euro. This decrease is due to lower sales revenues of 192 million euro, a decrease in service revenues of 79 million euro and an increase in long-term contract revenues of 7 million euro.

“Other operating income” amounted to 107 million euro, an increase of 1 million euro over the corresponding period of the previous year. Half-yearly ﬁnancial report at June 30, 2014 Notes to the income statement

Further details of the main items are as follows:

Millions of euro 06 30 2014 06 30 2013

Sale and distribution of electricity 1,422 1,499 Sale and distribution of gas 461 584 Sale of heat 90 120 Sale of materials 1 1 Sale of water 23 23 Sales of emission certificates and allowances 80 40 Connection contributions 15 17 Total revenues from the sale of goods 2,092 2,284 Services to customers 374 453 Total revenues from services 374 453 Revenues from long-term contracts 9 2 Total revenues from the sale of goods and services 2,475 2,739 Other operating income 107 106 Total revenues 2,582 2,845

Further details on trends in revenues can be found in the section “Results sector by sector”. 87

26) Operating expenses

“Operating expenses” amounted to 1,701 million euro (1,887 million euro in the corresponding period of the previous year), representing a decrease of 186 million euro.

The main components of this item are as follows:

Operating expenses - Millions of euro 06 30 2014 06 30 2013

Raw materials and consumables 1,218 1,376 Service costs 376 399 Total expenses for raw materials and services 1,594 1,775 Other operating expenses 107 112 Total operating expenses 1,701 1,887

“Total expenses for raw materials and services” amounted to 1,594 million euro (1,775 million euro in the six months ended June 30, 2013), decreasing by 181 million euro.

This decrease is due to the combined effect of the following factors: • a decrease of 23 million euro in costs for delivery, subcontracted work and services; • a decrease of 90 million euro in the change in stocks of fuels and materials. • a decrease of 68 million euro in the purchase of raw materials and consumables, due to a decrease of 62 million euro in costs for the purchase of power and fuel, a decrease of Half-yearly ﬁnancial report at June 30, 2014 Notes to the income statement

6 million euro in costs for the purchase of materials, a decrease of 1 million euro in costs relating to the purchase of emission certificates and allowances and a net increase of 1 million euro arising from hedging gains and losses on operating derivatives.

The following table sets out details of the more significant components:

Millions of euro 06 30 2014 06 30 2013

Purchases of power and fuel 1,139 1,201 Purchases of materials 35 41 Purchases of water 2 2 Hedging losses on operating derivatives 1 2 Hedging gains on operating derivatives (3) (5) Purchases of emission certificates and allowances 33 34 Total expenses for raw materials and consumables 1,207 1,275 Delivery, subcontracted work and services 376 399 Total service costs 376 399 Change in inventories of fuel and materials 11 101 Total expenses for raw materials and services 1,594 1,775 88 Other operating expenses 107 112 Total operating expenses 1,701 1,887

Trading margin

The following table sets out the results arising from the trading portfolio; these figures relate to trading in electricity, gas and environmental certificates.

Millions of euro Note 06 30 2014 06 30 2013

Trading margin Revenues 25 1,072 832 Operating expenses 26 (1,058) (824) Total trading margin 14 8 Half-yearly ﬁnancial report at June 30, 2014 Notes to the income statement

27) Labour costs

Net of capitalized expenses, labour costs for the six months ended June 30, 2014 amounted to 330 million euro (348 million euro in the six months ended June 30, 2013).

“Labour costs” may be analyzed as follows:

Labour costs - Millions of euro 06 30 2014 06 30 2013

Wages and salaries 212 216 Social security charges 81 80 Employee leaving entitlement (TFR) 12 14 Other costs 25 38 Total labour costs 330 348

The A2A Group had an average workforce of 12,270 in the six months ended June 30, 2014.

28) Gross operating income 89

As a result of the above movements, consolidated “Gross operating income” for the six months ended June 30, 2014 amounted to 551 million euro (610 million euro in the six months ended June 30, 2013).

Further details may be found in the section “Results sector by sector”.

29) Depreciation, amortization, provisions and write-downs

“Depreciation, amortization, provisions and write-downs” totaled 249 million euro in the six months ended June 30, 2014 (280 million euro in the six months ended June 30, 2013), representing a decrease of 31 million euro.

The following table provides details of the individual items:

Depreciation, amortization, provisions and write-downs - Millions of euro 06 30 2014 06 30 2013

Amortization of intangible assets 29 31 Depreciation of tangible assets 200 210 Total depreciation and amortization 229 241 Provisions for risks and charges 12 13 Bad debt provision (receivables recognized as current assets) 8 24 Other write-downs of fixed assets - 2 Total depreciation, amortization, provisions and write-downs 249 280 Half-yearly ﬁnancial report at June 30, 2014 Notes to the income statement

“Depreciation and amortization” totaled 229 million euro (241 million euro in the corresponding period of the previous year), a decrease of 12 million euro.

Regarding the transposition of the “Growth Decree” which lays down procedures for calculating the surrender value of the water system works used to supply water under concession to hydroelectric power plants (the “wet works”), the calculation criteria (revaluation coefficients and useful lives) needed to quantify the surrender value at the end of the relative concessions have not been set yet by the relevant authorities. In the absence of a regulatory framework, the A2A Group has carried out a series of simulations estimating the revaluations using ISTAT coefficients, which were found to be the only possible data objectively usable, and made its own estimates of the economic and technical lives of the assets. The results of these simulations led to a very wide variability range, confirming that it is currently impossible to make a reliable estimate of the surrender values at the end of the concessions. Nevertheless, the net carrying amount of the wet works for which concessions are close to expiry was significantly lower than the range of results obtained. As a result, therefore, since June 30, 2012 depreciation and amortization is no longer charged only for 90 those concessions nearing expiry, while the same valuation methods continue to be applied to the remaining concessions.

“Provisions for risks and charges” amounted to 12 million euro (13 million euro in the six months ended June 30, 2013) and relate to the provisions made in the period for disputes in course and pending litigation.

The “Bad debt provision” amounted to 8 million euro (24 million euro in the six months ended June 30, 2013). The decrease in the charge compared with the corresponding period of the previous year is due to the fact that the collectibility risk for certain customer receivables for which a provision had been made in previous years no longer exists.

There is a nil balance on “Other write-downs of fixed assets” (2 million euro in the six months ended June 30, 2013).

30) Net operating income

“Net operating income” amounted to 302 million euro (330 million euro in the six months ended June 30, 2013).

31) Result from non-recurring transactions

This item had a nil balance in the six months ended June 30, 2014 while it showed a loss of 3 million euro in the corresponding period of the previous year. Half-yearly ﬁnancial report at June 30, 2014 Notes to the income statement

32) Financial balance

The “Financial balance” closed with net expense of 96 million euro (net expense of 81 million euro in the six months ended June 30, 2013).

Details of the more significant items are as follows:

Financial balance - Millions of euro 06 30 2014 06 30 2013

Financial income 12 30 Financial expense (113) (118) Affiliates 5 7 TOTAL FINANCIAL BALANCE (96) (81)

“Financial income” amounted to 12 million euro (30 million euro in the corresponding period of the previous year) and may be analyzed as follows:

Financial income - Millions of euro 06 30 2014 06 30 2013

Bank income 7 12 91 Fair value of derivatives – 28 Realized gains on derivatives – (18) Other financial income 5 8 Total financial income 12 30

The difference over the two periods is mainly due to a decrease in bank income arising from a reduction in the average cash level for the period and changes in the fair value of and realized gains on derivatives.

“Financial expense”, which amounted to 113 million euro, decreased by 5 million euro over the balance for the six months ended June 30, 2013, and may be analyzed as follows:

Financial expense - Millions of euro 06 30 2014 06 30 2013

Interest on bond loans 70 68 Interest charged by banks 10 32 Interest on Cassa Depositi e Prestiti loans 4 2 Fair valueof derivatives 2 – Realized losses on derivatives 10 3 Decommissioning costs 2 1 Other financial expense 15 12 Total financial expense 113 118

Income of 5 million euro arose from the “Affiliates” (income of 7 million euro in the six months ended June 30, 2013), arising mainly from accounting for the shareholdings in Dolomiti Energia S.p.A. and ACSM-AGAM S.p.A. using the equity method. Half-yearly ﬁnancial report at June 30, 2014 Notes to the income statement

33) Income taxes

Income taxes - Millions of euro 06 30 2014 06 30 2013

Current taxes 67 83 Deferred tax assets 68 42 Deferred tax liabilities (34) (31) Total income taxes 101 94

“Income taxes” for the period amounted to 101 million euro (94 million euro in the six months ended June 30, 2013).

From fiscal 2014 the rate of the IRES corporate income tax surcharge (the “Robin Hood tax”) introduced by Decree Law no. 112/2008, converted into Law no. 133/2008, has been re- established in the amount of 6.5% following the natural expiry of the three-year transitional surcharge of 4 percentage points introduced by Decree Law no. 138/2011, converted into Law no. 148/2011 (the rate was in fact 10.5% for fiscal years 2011-2013).

92 In addition, Decree Law no. 66 (the “IRPEF decree”) became effective on April 24, 2014. This provides for a generalized reduction in IRAP regional production tax starting from fiscal 2014. More specifically, as the result of this legislation IRAP rates have been reduced by 0.4%, with the consequence that a general IRAP rate of 3.5% will now apply (compared to 3.9% in 2013), while the IRAP rate applicable to concessionaires will be 3.8% (compared to 4.2% in 2013). Given the reduction in the IRAP rate, the Group has recalculated its deferred tax assets and liabilities and this led to an additional tax charge of 4 million euro for the half year.

34) Group result of the period

The “Group result of the period”, stated after attributing a profit of 8 million euro to minority interests (a profit of 19 million euro attributed to minority interests in the six months ended June 30, 2013), amounted to 97 million euro (133 million euro in the six months ended June 30, 2013). Half-yearly ﬁnancial report at June 30, 2014

Earnings per share

35) Earnings per share

01 01 2014 01 01 2013 06 30 2014 06 30 2013

Earnings (loss) per share (euro) -basic 0.0311 0.0428 -basic from continuing operations 0.0311 0.0428 -basic from discontinued operations – – 93 -diluted 0.0311 0.0428 -diluted from continuing operations 0.0311 0.0428 -diluted from discontinued operations – – Weighted average number of outstanding shares for the calculation of earnings (loss) per share -basic 3,105,987,497 3,105,987,497 -diluted 3,105,987,497 3,105,987,497 Half-yearly ﬁnancial report at June 30, 2014

Note on related party transactions

36) Note on related party transactions

The definition of “related parties” is included in IAS 24 (revised), the international accounting standard describing the disclosures which must be made for related party transactions in financial statements.

94 Transactions with Parent companies and their subsidiaries

On October 5, 2007, the Municipalities of Milan and Brescia signed a shareholders’ agreement to regulate the ownership structure and governance of A2A S.p.A.; this gave the Municipalities joint control over the company. The merger took effect from January 1, 2008, and irrespective of the legal structure adopted, resulted in a joint venture under the joint control of the Municipality of Brescia and the Municipality of Milan, which each hold 27.5%. On June 13, 2014 shareholders changed the company’s corporate governance system from the original “dual” system, adopted in 2007, to a “traditional” system of management and control by appointing a Board of Directors, as discussed in the section “Significant events during the period” to which reference should be made for further details. Dealings between A2A Group companies and the Municipalities of Milan and Brescia are of a commercial nature, involving the supply of electricity, gas, heat and water and the management of the public illumination and traffic light systems, the management of water purification and sewage plants, public refuse collection and road sweeping and video surveillance systems. Likewise, the A2A Group companies have commercial relations with the companies controlled by the Municipalities of Milan and Brescia, such as Metropolitana Milanese S.p.A., Brescia Mobilità S.p.A., Brescia Trasporti S.p.A. and Centrale del Latte di Brescia S.p.A., supplying them with electrical energy, gas, heat, sewerage and purification services at the same market tariffs appropriate to the terms of the supply, and providing services as requested by these companies. It is emphasized that these companies are considered Half-yearly ﬁnancial report at June 30, 2014 Note on related party transactions

related parties in the summary schedules prepared in accordance with Consob Resolution 17221 of March 12, 2010. Dealings between the Municipalities of Milan and Brescia and the A2A Group relate to public illumination and traffic light services and the management and distribution of electricity, gas and heat, as well as sewer management and water purification, which are governed by special agreements and specific contracts.

All transactions with entities controlled by the Municipalities of Milan and Brescia relating to the supply of electricity are handled at normal market conditions.

On April 3, 2014, Amsa S.p.A., a subsidiary of A2A S.p.A., entered a service agreement with the Municipality of Milan covering waste management, street and green area cleaning, special services and other services upon request (such as the removal of illegally dumped waste, reclamation and snow removal) for the period from January 1, 2014, to December 31, 2016.

Transactions with subsidiaries and associates 95

The parent A2A S.p.A. provides centralized treasury services for all of its subsidiaries. Intragroup transactions are regulated through current accounts between the parent company and the subsidiaries; these balances bear interest at the 3-month Euribor rate increased for the creditor positions (of A2A S.p.A.) or reduced for the debtor positions by a margin in line with that applied by the financial market. In 2013, A2A S.p.A. and its subsidiaries again filed their VAT return on a group basis. For IRES purposes, A2A S.p.A. files for tax on a consolidated basis together with its main subsidiaries, in accordance with articles 117-129 of Presidential Decree no. 917/86. To this end, a contract has been stipulated with each of the subsidiaries involved in the Group tax return to regulate the tax benefits and charges transferred, with specific reference to current items. These contracts also govern the transfer of any excess gross operating income as provided in applicable legislation.

The parent company provides subsidiaries and associates with administrative, tax, legal, managerial and technical services in order to optimize the resources available within the company and to make the best use of existing know-how in the most economical way possible. These services are governed by specific service contracts stipulated annually. A2A S.p.A. also makes office space and operating areas at its own premises available to subsidiaries and associates, as well as the associated services. These are provided at market conditions. The parent company provides a power generation service to A2A Trading S.r.l. in exchange for a monthly fee based on the effective availability of the thermoelectric and hydroelectric plants. Half-yearly ﬁnancial report at June 30, 2014 Note on related party transactions

Telecommunication services are provided by the subsidiary Selene S.p.A..

Finally, in accordance with the Consob communication issued on September 24, 2010 laying down regulations for transactions with related parties within the meaning of Consob Resolution no. 17221 of March 12, 2010, as amended on November 11, 2010, after receiving the positive opinion of the Internal Control Committee the A2A S.p.A. Management Board approved a procedure to regulate activities with related parties which took effect on January 1, 2011; the purpose of this procedure is to assure the transparency and material and procedural propriety of operations with related parties undertaken by A2A S.p.A., either directly or indirectly via subsidiaries, as defined by IAS 24 (revised).

Summaries of balances and transactions with related parties are set out in the following tables pursuant to Consob Resolution no. 17221 of March 12, 2010:

Balance Total of which with related parties sheet 06 30 2014 Associa- Related Munici- Subsi- Munici- Subsi- Related Total % of the Millions of euro ted com- compa- pality of diaries pality of diaries indivi- related balance 96 panies nies Milan Munici- Brescia Munici- duals parties sheet pality of pality of item Milan Brescia

TOTAL ASSETS OF WHICH: 10,590 193 36 84 5 10 1 – 329 3.1% Non-current assets 7,797 189 3 – – 3 – – 195 2.5% Shareholdings 191 189 2 – – – – – 191 100.0% Other non-current financial assets 51 – 1 – – 3 – – 4 7.8% Current assets 2,793 4 33 84 5 7 1 – 134 4.8% Trade receivables 1,651 4 33 84 5 7 1 – 134 8.1% Current financial assets – ––––––––– TOTAL LIABILITIES OF WHICH: 10,590 12 15 7 1 10 – – 45 0.4% Non-current liabilities 5,266 – 1 – – – – – 1 0.0% Provisions for risks and charges 568 – 1 – – – – – 1 0.2% Current liabilities 2,015 12 14 7 1 10 – – 44 2.2% Trade payables 1,145 – 14 7 1 10 – – 32 2.8% Other current liabilities 739 8 – – – – – – 8 1.1% Current financial liabilities 128 4 – – – – – – 4 3.1% Half-yearly ﬁnancial report at June 30, 2014 Note on related party transactions

Income statement Total of which with related parties 06 30 2014 Millions of euro Associa- Related Munici- Subsi- Munici- Subsi- Related Total % of the ted com- compa- pality of diaries pality of diaries indivi- related income panies nies Milan Munici- Brescia Munici- duals parties state- pality of pality of ment Milan Brescia item

REVENUES 2,582 1 33 158 6 24 1 – 223 8.6% Revenues from the sale of goods and services 2,475 1 33 158 6 24 1 – 223 9.0% Other operating income 107 ––––––––– OPERATING EXPENSES 1,701 – 25 2 2 3 – – 32 1.9% Expenses for raw materials and services 1,594 – 11 – 1 – – – 12 0.8% Other operating expenses 107 – 14 2 1 3 – – 20 18.7% LABOUR COSTS 330 ––––––––– DEPRECIATION, AMORTIZATION AND WRITE-DOWNS 249 – 1 – – – – – 1 0.4% FINANCIAL BALANCE (96) 6 – – – 2 – – 8 (8.3%) Financial income 12 1 – – – 2 – – 3 25.0% 97 Financial expense (113) ––––––––– Affiliates 5 5 – – – – – – 5 100.0%

The complete financial statements are included in the section “Consolidated financial statements” of this report pursuant to Consob Resolution no. 17221 of March 12, 2010. Half-yearly ﬁnancial report at June 30, 2014

Significant non-recurring events and transactions

37) Consob Communication no. DEM/6064293 of July 29, 2006

The Group has recognized as a non-recurring transaction in the half year the total cost of approximately 9 million euro relating to the new business restructuring plan in respect of future leavers under redundancy schemes. Further details may be found in the section “Significant events during the period” of this Half-yearly financial report.

98 Half-yearly ﬁnancial report at June 30, 2014

Guarantees and commitments with third parties

Millions of euro 06.30.2014 12.31.2013 Guarantee deposits received 449 650 Guarantees given 1,382 1,764

Guarantee deposits received

Guarantees deposited by subcontractors and performance bonds issued by insurance 99 companies amount to 449 million euro (650 million euro at December 31, 2013).

Guarantees and commitments with third parties

These amount to 1,382 million euro (1,764 million euro at December 31, 2013) and relate to sureties issued and guarantee deposits given as security for commitments made to third parties.

***

Group companies hold third party assets under concession, relating mainly to the integrated water cycle, amounting to 66 million euro. Half-yearly ﬁnancial report at June 30, 2014

Other information

1) Significant events for the Group after June 30, 2014

Reference should be made to the specific section of this Half-yearly financial report for a description of subsequent events.

2) Information on treasury shares 100 At June 30, 2014 A2A S.p.A. held 26,917,609 treasury shares, being 0.859% of share capital which consists of 3,132,905,277 shares, unchanged from the end of the previous year. At June 30, 2014 no treasury shares were held through subsidiaries, finance companies or nominees.

2) Information on non-current assets held for sale and discontinued operations (IFRS 5)

The items “Non-current assets held for sale” and “Liabilities directly associated with non- current assets held for sale” had a nil balance at June 30, 2014.

4) Risk management

The A2A Group operates in the electricity, natural gas and district heating industry and is exposed to various financial risks in performing its activity: a) commodity risk; b) interest rate risk; c) currency risk not related to commodities; d) liquidity risk; e) credit risk; f) equity risk; g) default and covenant risk. Half-yearly ﬁnancial report at June 30, 2014 Other information

Commodity price risk is the risk linked to changes in the price of energy commodities (gas, electricity, fuel oil, coal etc) and environmental securities (EUA/ETS emission allowances, green certificates, white certificates, etc). This consists of the potentially adverse effects that a change in the market price of one or more commodities could have on the company’s cash flow and earnings prospects including the currency risk relating to the commodities themselves.

Interest rate risk is the risk of incurring additional financial costs as the result of an unfavorable change in interest rates.

Currency risk not related to commodities is the possibility of incurring losses because of an unfavorable change in exchange rates between currencies.

Liquidity risk is the risk that financial resources will not be sufficient to meet established financial and business obligations in a timely manner.

Credit risk is the exposure to potential losses deriving from non-performance of commitments by commercial, trading and financial counterparties. 101

Equity risk is the possibility of incurring losses due to an unfavorable change in the price of shares.

Default and covenant risk represent the possibility that loan agreements or bond regulations to which one or more Group companies are party contain provisions allowing the counterparties, banks or bondholders, to ask the debtor for immediate reimbursement of the amounts lent if certain events take place.

a. Commodity risk a.1) Commodity price risk and currency risk involved in commodity activities

The Group is exposed to price risk, including the related currency risk, on all of the energy commodities that it handles, namely electricity, natural gas, heat, coal, fuel oil and environmental certificates; the results of production, purchases and sales are similarly affected by fluctuations in the prices of such energy commodities. These fluctuations act both directly and indirectly, through formulas and indexing in the pricing structure.

In order to stabilize cash flows and to guarantee the Group’s economic and financial equilibrium, A2A has introduced an Energy Risk Policy which lays down clear guidelines for the management and control of the above risks. This also includes the recommendations of the Committee of Chief Risk Officers (“CCRO”) Organizational Independence and Governance Working Group and of Euroelectric’s Group on Risk Management. Reference Half-yearly ﬁnancial report at June 30, 2014 Other information

was also made to the Accords of the Basel Committee for Interbank Supervision approved in June 2004 (Basel 2) and the requirements of international accounting standards for the way in which any volatility in commodity prices and financial derivatives should be recognized in the balance sheet and in profit or loss.

In the A2A Group the assessment of this kind of risk is centralized at the parent company, which has set up a Risk Management Unit as part of the Administration, Finance and Control Department with the task of managing and monitoring market and commodity risk, elaborating and evaluating structured energy products, proposing financial hedging strategies for energy risk and supporting senior management and the Risk Management Committee in defining the Group’s Energy Risk Management policies.

Each year, A2A S.p.A. sets the Group’s commodity risk limits, while Risk Management supervises the situation to ensure compliance with these limits and proposes hedging strategies to senior management designed to bring risk within the set limits.

The activities that are subject to risk management include all of the positions on the physical 102 market for energy products, both purchasing/production and sales, and all of the positions in the energy derivatives market taken by Group companies.

For the purpose of monitoring risks, industrial and trading portfolios have been separated and are managed in different ways. The industrial portfolio consists of the physical and financial contracts directly relating to the Group’s industrial operations, namely where the objective is to enhance production capacity also through the wholesaling and retailing of gas, electricity and heat.

The trading portfolio comprises all contracts, both physical and financial, entered into to supplement the profits earned by industrial activities, namely all contracts which while being related to industrial operations are not strictly necessary for such.

In order to identify trading activity, the A2A Group follows the Capital Adequacy Directive and the definition of assets held for trading provided by international accounting standard IAS 39: namely assets held for the purpose of short-term profit taking on market prices or margins, without being for hedging purposes, and designed to create a high-turnover portfolio.

Given that they exist for different purposes, the two portfolios have been segregated and are monitored separately with specific tools and limits. More specifically, the trading portfolio is subject to particular risk control and management procedures as laid down in Deal Life Cycle documents.

Senior management is systematically updated on changes in the Group’s commodity risk by the Risk Management Unit, which controls the Group’s net exposure. This is calculated Half-yearly ﬁnancial report at June 30, 2014 Other information

centrally on the entire asset and contract portfolio and monitors the overall level of economic risk assumed by the industrial and trading portfolios (Profit at Risk - PaR, Value at Risk - VaR, Stop Loss).

a.2) Commodity derivatives, analysis of transactions

Derivatives of the industrial portfolio considered hedges

The hedging of price risk by means of derivatives focuses on protecting against the volatility of energy prices on the power exchange (IPEX), stabilizing electricity price margins on the wholesale market with particular attention being paid to fixed price energy sales and purchases and stabilizing price differences deriving from various indexing mechanisms for the pricing of gas and electricity. To that end, hedging contracts were executed during the year on electricity purchase and sale agreements and on contracts to hedge the fee for the use of electricity transport capacity between the areas of the IPEX market (CCC contracts) so as to protect sales margins and at the same time keep the risk profile to within the limits set by the Group’s energy risk policy. 103

As part of the optimization of the greenhouse gas emission rights portfolio (Directive 2003/87/EC), the A2A Group trades futures on the ICE ECX (European Climate Exchange). These are considered hedging transactions from an accounting point of view in the event of demonstrable surplus/deficit quotas.

Derivatives of the industrial portfolio not considered hedges

As part of its optimization of the portfolio of greenhouse gas emission allowances (see Directive 2003/87/EC), the A2A Group operates both on OTC markets for environmental certificates with swaps and forward contracts and on the ICE ECX (European Climate Exchange) with futures contracts.

As part of its optimization of the industrial portfolio, contracts have been entered to hedge the fee for the use of electricity transport capacity within the areas of the IPEX market (CCC contracts). These do not qualify as hedging transactions from an accounting point of view as they fail to meet the requirement set out in the accounting standards.

Derivatives of the trading portfolio

As part of its trading activity, the A2A Group has taken out future contracts on the main European energy exchanges (Idex, Powernext) and forward contracts on the price of Half-yearly ﬁnancial report at June 30, 2014 Other information

electricity with delivery in Italy and neighboring countries such as France, Germany and Switzerland. The Group has also signed interconnection contracts with operators in neighboring countries, which are considered purchases of options. Futures have been stipulated on the ICE ECX market price of EUA, CER and ERU environmental certificates, which permit delivery of the allowances at the contract price as well as cash settlement of the differential between the market price and the contract price. The Group has also taken out forward contracts on OTC markets on the price of environmental certificates that provide for the delivery of allowances at the contract price. As part of trading activities, future (Powernext) and forward contracts have also been stipulated for the gas exchange price (APX-Endex).

a.3) Energy derivatives, assessment of risks

PaR (Profit at Risk) (1) is used to assess the impact that fluctuations in the market price of the underlying have on the financial derivatives taken out by the A2A Group that are attributable

104 to the industrial portfolio. This is a tool that gives the positive or negative change in the value of a financial instrument portfolio within set probability assumptions as the result of a favorable or unfavorable shift in the market indices. The PaR is calculated using the Montecarlo Method (at least 10,000 trials) and a 99% confidence level. It simulates scenarios for each relevant price driver depending on the volatility and correlations associated with each one, using as the central level the forward market curves at the date of the Half- yearly report, if available. By means of this method, after having obtained a distribution of probability associated with changes in the result of outstanding financial contracts, it is possible to extrapolate the maximum change expected over a time horizon given by the accounting period at a set level of probability. Based on this methodology, over the time horizon of the accounting period and in the event of extreme market movements and at a 99% confidence level, the expected maximum change in financial derivatives outstanding at June 30, 2014 was 28.391 million euro (58.907 million euro at December 31, 2013).

(1) Profit at Risk: a statistical measurement of the maximum potential negative variation in the margin of a portfolio of assets in the event of unfavorable movements in the market with a given time horizon and confidence interval. Half-yearly ﬁnancial report at June 30, 2014 Other information

The following are the results of the simulation with the related maximum variances:

Millions of euro 06.30.2014 12.31.2013

Profit at Risk (PaR) Worst case Best case Worst case Best case

Confidence level 99% (28.391) 25.398 (58.907) 45.504

This means that with a 99% probability the A2A Group expects not to have changes in fair value exceeding 28.391 million euro in the fair value of its entire portfolio of financial instruments at June 30, 2014 due to commodity price fluctuations.

If there are any negative changes in the fair value of derivatives, these would be compensated by changes in the underlying as the result of changes in market prices.

VaR (Value at Risk) (2) is used to assess the impact that fluctuations in the market price of the underlying have on the financial derivatives taken out by the A2A Group that are attributable to the trading portfolio. VaR is the negative change in the value of a financial instruments portfolio within set probability assumptions as the result of an 105 unfavorable shift in the market indices. VaR is calculated using the RiskMetrics method with a holding period of 1 day and a confidence level of 99%. Alternative methods, such as stress test analysis, are used for contracts where it is not possible to perform a daily estimate of VaR.

Under this method, in the case of extreme market movements, with a confidence level of 99% and a holding period of 1 day, the maximum estimated loss on the derivatives in question was 0.69 million euro at June 30, 2014 (1.38 million euro at December 31, 2013).

(2) Value at Risk: statistical measurement of the maximum potential drop in the fair value of an asset portfolio in the event of unfavorable movements in the market with a given time horizon and confidence level. Half-yearly ﬁnancial report at June 30, 2014 Other information

b. Interest rate risk

The A2A Group’s exposure to interest rate risk arises mainly from the volatility of the interest expense arising from variable rate debt.

The Group’s policy for managing interest rate risk has the goal of limiting this volatility first and foremost by selecting a balanced mix of fixed and floating rate financing and by using hedging derivative instruments to limit fluctuations in interest rates.

Bank borrowings and other financing obtained by the A2A Group may be analyzed as follows at June 30, 2014:

Millions of euro June 30, 2014 December 31, 2013

Without With % with Without With % with derivatives derivatives derivatives derivatives derivatives derivatives

Fixed rate 3,108 3,489 85% 3,361 3,752 85% Floating rate 1,009 628 15% 1,036 645 15% 4,117 4,117 4,397 4,397 106 Half-yearly ﬁnancial report at June 30, 2014 Other information

The derivatives refer to the following loans:

Loan Derivative Accounting A2A loan with BEI, expiring in 2023, Collar due to run until November The loan is measured at amortized residual balance at June 30, 2014 2023; fair value at June 30, 2014 was cost. amounting to 181.0 million euro, at -19.4 million euro. The collar is a cash flow hedge, with floating rate interest. the effective portion of the hedge recognized in a specific equity reserve. A2A bond with a nominal value of IRS on the full nominal amount, Fair value hedge 761.6 million euro, maturing in 2016 same duration as the loan; fair value The valuation, based on the fair bearing fixed interest at 4.5%. at June 30, 2014 was 65.4 million value hedge of the bond, is equal to euro. the carrying amount of the financial liability (as required by IAS and relative doctrine), and includes the interest expense and a portion of the accrual relating to the premium and issue costs. The accumulated changes in the fair value of the risk being hedged, i.e. the interest flow differentials recognized in profit or loss, are added to this value. Collar on 261.6 million euro with The collar is measured at fair value duration equal to the loan; fair value through profit or loss. at June 30, 2014 was -12.7 million euro. 107 Collar on 350 million euro expiring The collar is measured at fair value in November 2016; fair value at June through profit or loss. 30, 2014 was -10.5 million euro. Collar with double cap on 150 The collar is measured at fair value million euro expiring in November through profit or loss. 2016; fair value at June 30, 2014 was -3.2 million euro. A2A loan with Cassa Depositi e Prestiti Collar with double cap with duration The loan is measured at amortized expiring in December 2025, residual until June 2017; fair value at June 30, cost. balance at June 30, 2014 of 200 2014 was -5.1 million euro. The collar is measured at fair value million euro, floating rate interest. through profit or loss.

An internal model has been developed to analyze and manage interest rate risk which enables the exposure to this risk to be calculated using the Montecarlo method by assessing the effect that fluctuations in interest rates have on future cash flows. Under this methodology at least ten thousand scenarios are simulated for each key variable on the basis of the associated volatilities and correlations, using market rate forward curves for future levels. In this way a probability distribution of the results is obtained from which the worst case scenario and best case scenario can be extrapolated using a 99% confidence level. Half-yearly ﬁnancial report at June 30, 2014 Other information

The following are the results of the simulation with the related maximum variances: (worst case and best case scenarios) for the 12 months after June 30, 2014 and a comparison with the previous 12 months (excluding EPCG):

Millions of euro 07 2014 - 06 2015 07 2013 - 06 2014 (base case: -139.091) (base case: -166.495)

Worst case Best case Worst case Best case

Changes in expected cash flows (including hedge flows) Confidence level of 99% (0.5) 0.3 (2.0) 1.1

A sensitivity analysis is provided relating to possible changes in the fair value of derivatives (excluding cross currency swaps) on shifting the forward rate curve by +50 bps and -50 bps:

Millions of euro 06 30 2014 12 31 2013 (base case: 14.4) (base case: 11)

-50 bps +50 bps -50 bps +50 bps Changes in the fair value of derivatives (6.7) 4.7 (5.7) 3.4 108 (of which cash flow hedge derivatives) (4.5) 4.2 (4.5) 4.2 (of which fair value hedge derivatives) 10.2 (10.1) 12.1 (11.9)

This sensitivity analysis is calculated to determine the effect of the change of the forward interest rate curve of the fair value of derivatives ignoring any impact of the adjustment due to counterparty risk – “Bilateral Credit Value Adjustment” (bCVA) – introduced in the calculation of fair value in accordance with international accounting standard IFRS 13.

c. Currency risk not related to commodities

A2A S.p.A. does not consider it necessary at the present time to take out any specific hedges against currency risk for sales, other than that arising from commodity prices, as the amounts involved are quite small and are paid or collected within a short period of time, and any imbalance is immediately offset by a sale or purchase of foreign currency. The only case of hedging currency risk that was not related to commodities is the fixed rate bullet bond of 14 billion yen with maturity 2036 issued in 2006. A cross currency swap contract was stipulated for the entire duration of this loan, which converts the principal and interest payments from yen into euro. This derivative is accounted for as a cash flow hedge, with the effective portion of the hedge being recognized in a specific equity reserve. Half-yearly ﬁnancial report at June 30, 2014 Other information

At June 30, 2014 the fair value of the hedge was -13.9 million euro. This fair value would improve by 16.7 million euro in the event of a 10% negative shift in the forward curve of the euro/yen exchange rate (appreciation of the yen) and would worsen by 13.7 million euro in the event of a 10% positive shift in the forward curve of the euro/yen exchange rate (depreciation of the yen).

In this case too the sensitivity analysis was performed with the aim of calculating the effect of changes in the forward curve of the euro/yen exchange rate on the fair value ignoring any impact on the adjustment due to the bCVA.

d. Liquidity risk

Liquidity risk concerns the Group’s capacity to meet its payment commitments by means of self-financing, funding from banks, recourse to the financial markets and cash in hand.

The Group places particular emphasis on constantly managing liquidity risk, thereby ensuring adequate funds are available to meet expected commitments over a given period 109 of time along with a liquidity buffer sufficient to meet any unexpected needs.

From this standpoint, the Group also follows a policy of diversifying the various deadlines for debt and other sources of financing. Of note in this regard is the use of the Euro Medium Term Note Programme for a total of up to 3 billion euro, approved by the Management Board on November 7, 2013. In addition, an agreement for a 15-year loan of 115 million euro was signed with the European Investment Bank in March 2014 which had not yet been used as of June 30, 2014. On April 1, 2014, EPCG entered an agreement with the European Bank for Reconstruction and Development (EBRD) for a further tranche of 30 million euro, which had not yet been used as of June 30, 2014, relating to investments for the installation of “smart meters”; this is an addition to the tranche of 35 million euro for which an agreement was signed in November 2010.

At June 30, 2014, the Group had unused revolving lines of committed credit in the amount of 1,430 million, contracted and unused medium and long-term financing for a total of 156 million euro and cash and cash equivalents totaling 376 million, 219 million of which held by the parent company.

The following table analyses the worst case for financial liabilities (including trade payables) in which the amounts shown are undiscounted future nominal cash flows determined on the basis of residual contractual maturities for both principal and interest (excluding EPCG for which the interest is not included); they also include the undiscounted nominal flows of derivative contracts on interest rates. Loans are generally included on the basis of Half-yearly ﬁnancial report at June 30, 2014 Other information

their contractual maturity for repayment, whereas revocable loans have been considered redeemable at sight.

06 30 2014 - Millions of euro 1-3 months 4-12 months After 12 months

Bonds 3 113 3,599 Payables and other financial liabilities 10 133 1,096 Total cash flows 13 246 4,695 Trade payables 300 106 2 Total trade payables 300 106 2

12 31 2013 - Millions of euro 1-3 months 4-12 months After 12 months

Bonds 14 385 3,649 Payables and other financial liabilities 10 114 1,192 Total cash flows 24 499 4,841 Trade payables 434 56 2 Total trade payables 434 56 2 110

e. Credit risk

The Group’s exposure to credit risk is principally linked to its sales activity. In order to control this risk, which is handled by the credit management function located centrally and relative departments in the operating companies, a credit policy has been implemented to regulate the assessment of customers’ credit standing and grant extended credit terms or exceptions if necessary, possibly backed by suitable guarantees. The credit terms granted to customers as a whole have a variety of deadlines, in accordance with applicable law and market practice. In cases of delayed payment, default interest is charged as explicitly prescribed by the underlying supply contracts or by current law (application of the default rate as per Legislative Decree no. 231/2002). Half-yearly ﬁnancial report at June 30, 2014 Other information

Trade receivables are stated in the balance sheet net of any write-downs; the amount shown is considered to be a correct reflection of the realizable value of the receivables portfolio. The situation can be understood better with the aid of the following analysis of gross trade receivables and the related bad debt provision.

Millions of euro 06 30 2014 12 31 2013

Trade receivables from third parties, gross 1,972 2,207 Bad debt provision (-) (321) (318) Trade receivables 1,651 1,889 Of which: Past due from 9 to 12 months 35 39 Past due by more than 12 months 382 362

Trade receivables past due by more than 12 months amount to 382 million euro. The bad debt provision represents the estimated amount of receivables that are difficult to collect.

f. Equity risk 111

A2A S.p.A. was not exposed to equity risk at June 30, 2014.

At June 30, 2014, A2A S.p.A. held 26,917,609 treasury shares, representing 0.859% of its share capital consisting of 3,132,905,277 shares.

As prescribed by IAS/IFRS, treasury shares do not constitute an equity risk as their purchase cost is deducted from equity, and even if they are sold any gain or loss on the purchase cost does not have any effect on profit or loss. Half-yearly ﬁnancial report at June 30, 2014 Other information

g. Default and covenant risk

The following table sets out for the A2A Group amounts relating to bank borrowings and amounts due to other providers of finance, excluding financial payables relating to derivatives:

Millions of euro Book Portion Portion Portion due by value due due 06 30 2014 within after 06 30 2016 06 30 2017 06 30 2018 06 30 2019 After 12 months 12 months

Bonds 3,026 – 3,026 – 846 – – 2,180 Finace lease payables 3 1 2 1 1 – – – Financial payables to related parties 4 4 – – – – – – Bank loans 1,084 123 961 118 107 109 102 525 TOTAL 4,117 128 3,989 119 954 109 102 2,705

At June 30, 2014 the parent company had issued bonds to the public for a total nominal value of 2,512 million euro as follows: 762 million euro maturing in November 2016; 750 112 million euro maturing in November 2019; 500 million euro maturing in January 2021; and 500 million euro maturing in January 2022. The bond issued in 2004 and partially repurchased in July 2013 was repaid on its maturity date of May 28, 2014. In addition, in December 2013 A2A issued a bond in the form of a private placement for 300 million euro, which matures in December 2023.

The terms and conditions of these bond issues are in line with the market standard for this type of financial instrument.

All the bonds issued by A2A as part of the EMTN Programme (amounting in total to 2,050 million euro including the private placement of 300 million euro maturing in 2023) contain a change of control put clause in favor of investors for changes in control which lead to a resulting downgrading of the rating to sub investment grade in the following 180 days. If the rating returns to investment grade within the 180-day period the put option is not exercisable.

The loan agreements entered into with the European Investment Bank contain a credit rating clause guarding against a rating of below BBB- or equivalent level. In addition, the loan agreements with the European Investment Bank for loans with original balances of 200 million euro expiring in 2025-2026, 95 million euro expiring in 2026, 70 million euro (56 million euro of which drawn down) expiring in 2027-2028 and 115 million euro (not yet drawn down) grant the bank the right, on providing notice to the company containing an explanation of the underlying reasons, to invoke early repayment of the loan in the event of a change in control of the parent company. Half-yearly ﬁnancial report at June 30, 2014 Other information

The agreement entered by the parent with UniCredit for a floating rate loan of 85 million euro expiring in June 2018, intermediated by the EIB, includes a credit rating clause that requires the company to maintain an investment grade rating throughout the duration of the loan. In the event of a breach of contract in this regard, there are, on an annual basis, a number of covenants to be respected based on the ratios of debt to equity, debt to gross operating income and gross operating income to interest expense.

There is also a credit rating clause in the agreements for the two loans from Cassa Depositi e Prestiti having original balances of 200 million euro and 95 million euro and expiring in 2025 and 2013 respectively protecting against the company’s rating falling below investment grade (BBB-).

In addition, the private bond issue in yen with a maturity of 2036 and the related cross- currency swap derivative include a put right clause in favor of the investor (and in favor of the financial counterparty in the derivative) in the event the rating should fall below BBB- (sub investment grade).

As mentioned above, the A2A Group has received various lines of revolving committed credit 113 from a number of financial institutions for a total of 1,430 million euro (fully contractualized by A2A S.p.A.) which are not subject to covenants, with the exception of the revolving line of credit (currently unused) granted to A2A S.p.A. in April 2013 in the amount of 600 million euro having a duration of 5 years, whose terms include the requirement to respect an NFP/ EBITDA covenant. The agreement for the credit line also includes a change of control clause which in the event of a change of control of the Company causing a material adverse effect allows the banks of the syndicate to request the facility to be extinguished and any amounts drawn down to be repaid.

The following can be found in the agreements for the bond loans, the loans mentioned above and the lines of revolving committed credit: (i) negative pledge clauses based on which the parent company undertakes not to set up, with exceptions, real guarantees on its assets and those of its direct subsidiaries over and above a certain threshold; (ii) cross default/acceleration clauses which entail immediate reimbursement of the bonds in the event of serious non-performance; (iii) clauses that provide for immediate repayment in the event of declared insolvency on the part of certain direct subsidiaries.

The loan to the subsidiary Abruzzoenergia S.p.A. is backed by a secured guarantee (mortgage) for a maximum of 264 million euro and the related agreement contains two covenants, NFP/ Shareholders’ funds and NFP/Gross operating income.

The agreement for a 35 million euro loan granted by the EBRD to the subsidiary EPCG, fully drawn down at June 30, 2014, includes a number of financial covenants and the same Half-yearly ﬁnancial report at June 30, 2014 Other information

covenants are included in the agreement entered by EPCG with the EBRD on April 1, 2014 for the new tranche of 30 million euro, not yet drawn down as of June 30, 2014; this is an addition to the tranche of 35 million euro for which an agreement was signed in November 2010.

As things currently stand no companies in the A2A Group have defaulted.

Analysis of forward transactions and derivatives

Tests were performed to determine whether these transactions qualify for hedge accounting in accordance with international accounting standard IAS 39.

More specifically: 1) transactions qualifying for hedge accounting under IAS 39 can be analyzed between transactions to hedge cash flows (cash flow hedges) and transactions to hedge assets and liabilities (fair value hedges). For cash flow hedges, the accrued result is included 114 in gross operating income when realized on commodity derivatives and in the financial balance for interest rate and currency derivatives, whereas the future value is shown in equity. For fair value hedges, the effects on profit or loss cancel each other in the same line item; 2) transactions not qualifying for hedge accounting under IAS 39 can be analyzed between: a. margin hedges: for all hedging transactions that meet internal risk policy compliance requirements, the accrued result and future value are included in gross operating income for commodity derivatives and in the financial balance for interest rate and currency derivatives; b. trading transactions: the accrued result and future value are recognized above gross operating income for commodities transactions and in financial income and expense for interest rate and currency transactions.

The use of financial derivatives is governed by a coordinated set of procedures (Energy Risk Policy, Deal Life Cycle) which are based on best industry practice and designed to limit the risk of the Group’s exposure to commodity price fluctuations, based on a cash flow hedging strategy.

Outstanding derivatives at June 30, 2014 are measured at fair value based on the forward market curve at the date of the Half-yearly report if the underlying of the derivative is traded on markets that have a forward pricing structure. In the absence of a forward market curve, fair value has been estimated internally using models based on best industry practice. Half-yearly ﬁnancial report at June 30, 2014 Other information

In determining fair value the A2A Group uses continuous discounting and for the discount rate uses a risk-free rate, identified as the Euro Overnight Index Average (Eonia) rate and represented in its forward structure by the Overnight Index Swap (OIS) curve. The fair value of cash flow hedges has been classified on the basis of the underlying derivative contracts in accordance with IAS 39.

In accordance with the requirements of international accounting standard IFRS 13, the fair value of an OTCX financial instrument is calculated by considering the non performance risk. In order to quantify the fair value adjustment due to that risk, consistent with best market practice A2A has developed a proprietary model called the “Bilateral Credit Value Adjustment” (bCVA) which measures the changes in the creditworthiness of the counterparty and changes in its own creditworthiness.

The bCVA consists of two items added together which are calculated by considering the probability of insolvency of both counterparties, namely the Credit Value Adjustment (CVA) and the Debit Value Adjustment (DVA):

• the CVA is a negative component and contemplates the probability that the counterparty 115 will default and at the same time that A2A has a receivable due from the counterparty; • the DVA is a positive component and contemplates the probability that A2A will default and at the same time that the counterparty has a receivable due from A2A.

The bCVA is therefore calculated with reference to the exposure, measured on the basis of the market value of the derivative at the time of the default, the probability of default (PD) and the loss given default (LGD). This latter item, which represents the non-recoverable portion of the receivable in the case of default, is measured on the basis of the IRB Foundation Methodology as stated in the Basel 2 accords, whereas the PD is measured on the basis of the rating of the counterparties (internal rating based where not available) and the historic probability of default associated with this and published annually by Standard & Poor’s.

Applying this methodology did not lead to any changes in the fair value measurements. Half-yearly ﬁnancial report at June 30, 2014 Other information

Outstanding instruments at June 30, 2014 A) On interest and exchange rates

Millions of euro Notional value (a) Notional value (a) Notional Balance Progressive due within one year due between 2 and 5 years value (a) sheet effect on due after carrying Income to receive to pay to receive to pay 5 years amount statements (b) at 06 30 2014 (c)

Interest rate risk management – hedging cash flows as per IAS 39 (cash flow hedges) – 19 – 76 86 (20) – – not qualifying as hedges under IAS 39 – 9 – 798 (d) – 34 (e) 34 (e) Total interest rate derivatives – 28 – 874 86 14 34 Currency risk management – qualifying as hedges under IAS 39 On commercial operations – – – – – – – On financial operations – – – – 98 (13) – – not qualifying as hedges under IAS 39 On commercial operations – – – – – – – 116 On financial operations – – – – – – – Total currency derivatives – – – – 98 (13) –

(a) This represents the sum of the notional values of the elementary contracts that derive from any dismantling of complex contracts. (b) This represents the net receivable (+) or payable (-) shown in the balance sheet/income statement after measuring the derivatives at fair value. (c) This represents the adjustment of derivatives to fair value recognized over time in profit or loss from stipulation of the contract to the present date. (d) Includes derivative instruments with underlying bond worth 762 million euro, maturing in 2016, and an IRS with notional value of 762 million euro, with no effect on profit or loss, as a result of the fair value measurement. Hedges and three collars with a notional value of 762 million euro, not qualifying as hedges under IAS 39. (e) Includes the effect on the collars, with overall notional value of 762 million euro, not qualifying as hedges under IAS 39. Half-yearly ﬁnancial report at June 30, 2014 Other information

B) On commodities

The following is an analysis of the commodity derivative contracts outstanding at the balance sheet date set up for the purpose of managing the risk of the fluctuations in the market prices of commodities.

Unit Notional Notional Notional Balance Progressive used for value due value due value due sheet effect on measuring within 1 within 2 within 5 carrying Income notional year years years amount (*) statement value (millions of (**) euro) (millions of euro) Energy product price risk management A. Cash flow hedges as per IAS 39 consisting of: (37.1) – – Electricity TWh 5.9 1.1 0.1 (37.1) – – Oil Bbl – – – Fuel oil Tonnes – – Millions of – Natural gas cm – – Millions of 117 – Exchange dollars – – – Emission rights Tonnes 35,000 2,000 – – B. Qualifying for fair value hedge accounting under IAS 39 – – C. Not qualifying as hedges under IAS 39 consisting of: 5.7 0.9 C.1 Margin cover 2.5 2.5 – Electricity TWh 2.1 2.5 2.5 – Oil Bbl – – – Fuel oil Tonnes – – Millions of – Natural gas cm –– – CO2 emission rights Tonnes 133,000 (0.1) (0.1) Millions of – Exchange dollars – – C.2 Trading operations 3.2 (1.5) – Electricity TWh 27.4 6.6 0.7 2.8 (2.9) Millions of – Natural gas cm 4.4 0.4 0.2 0.3 – CO2 emission rights Tonnes 1,624,000 64,000 0.1 1.0 – Environmental certificates MWh 15,800 0.1 – Total (31.4) 0.9

(*) Represents the net receivable (+) or payable (-) recognized in the balance sheet following the measurement of derivatives at fair value. (**) Represents the adjustment of derivatives to fair value recognized progressively over time in the Income statement from the stipulation of the contract to the present day. Half-yearly ﬁnancial report at June 30, 2014 Other information

Balance sheet and income statement effects of derivative trading at June 30, 2014

The following table sets out the balance sheet figures at June 30, 2014 arising from the management of derivatives.

Effect on the balance sheet

Millions of euro Note

ASSETS NON-CURRENT ASSETS 53 Other non-current assets - Derivatives 5 53 CURRENT ASSETS 60 Other current assets - Derivatives 8 60 TOTAL ASSETS 113

LIABILITIES 118 NON-CURRENT LIABILITIES 52 Other non-current liabilities - Derivatives 20 52 CURRENT LIABILITIES 92 Trade payables and other current liabilities - Derivatives 21 92 TOTAL LIABILITIES 144 Half-yearly ﬁnancial report at June 30, 2014 Other information

Effect on the income statement

The following table sets out the income statement figures for the period ended June 30, 2014 arising from the management of derivatives.

Millions of euro Note Realized during Change in fair Amounts the year value during the recognized in year comprehensive income

REVENUES 25 Revenues from the sale of goods Energy product price risk management and commodity currency risk management – qualifying for hedge accounting under IAS 39 – – – – not qualifying for hedge accounting under IAS 39 4 29 33 Total revenues from sales 4 29 33 OPERATING EXPENSES 26 Expenses for raw materials and services Energy product price risk management and commodity currency risk management – qualifying for hedge accounting under IAS 39 1 – 1 119 – not qualifying for hedge accounting under IAS 39 (4) (31) (35) Total expenses for raw materials and services (3) (31) (34) Total recognized in gross operating income (*) 1 (2) (1) FINANCIAL BALANCE 32 Financial income Interest rate risk management and equity risk management Gains on derivatives – qualifying for hedge accounting under IAS 39 – – – – not qualifying for hedge accounting under IAS 39 – – – Total – – – Total financial income – – – Financial expense Interest rate risk management and equity risk management Charges on derivatives – qualifying for hedge accounting under IAS 39 (3) – (3) – not qualifying for hedge accounting under IAS 39 (7) (2) (9) Total (10) (2) (12) Total financial expenses (10) (2) (12) Total recognized in the financial balance (10) (2) (12)

(*) These figures do not include the net presentation of the trading margin. Half-yearly ﬁnancial report at June 30, 2014 Other information

Classes of financial instruments

To complete the analyses required by IFRS 7 and IFRS 13, the following table sets out the various types of financial instrument that are to be found in the various balance sheet items, with an indication of the accounting policies used and, in the case of financial instruments measured at fair value, an indication of where changes are recognized (income statement or equity).

The last column of the table shows the fair value of the instrument at June 30, 2014, where applicable.

Millions of euro Accounting policies used to measure financial instruments in the financial statements Note Financial instruments Financial Unlisted Carrying Fair value measured instrumen- sharehol- amount at at fair value with ts mea- dings/ in the 06 30 2014 changes sured at Securities consolida- (*) recognized in amortized convertible ted balance cost into shares sheet at Income measured 06 30 2014 statement Equity at cost 120 (1) (2) (3) (4) (5)

ASSETS Other non-current financial assets Shareholdings/ securities convertible into shares available for sale, consisting of: – unlisted 9 9 n.a. – listed - - Held-to-maturity financial assets - - Other non-current financial assets 42 42 42 Total other non-current financial assets 3 51 Other non-current assets 5 53 9 62 62 Trade receivables 7 1,651 1,651 1,651 Other current assets 8 59 1 245 305 305 Current financial assets 9 126 126 126 Cash and cash equivalents 11 376 376 376 Assets held for sale LIABILITIES Financial liabilities Current and non-current bonds 17 e 22 846 2,180 3,026 3,026 Other current and non-current financial liabilities 17 e 22 1,091 1,091 1,091 Other non-current liabilities 20 19 33 297 349 349 Trade payables 21 1,145 1,145 1,145 Other current liabilities 21 54 38 647 739 739

(*) The fair value has not been calculated for receivables and payables not related to derivative contracts and loans as the corresponding carrying amount is a good approximation to this. (1) Financial assets and liabilities at fair value through income statement. (2) Hedging derivatives (cash flow hedges). (3) Available-for-sale financial assets measured at fair value through equity. (4) Loans and receivables and financial liabilities measured at amortized cost. (5) Available-for-sale financial assets consisting of unlisted shareholdings whose fair value is not reliably measurable are measured at the lower of cost less any impairment losses and fair value. Half-yearly ﬁnancial report at June 30, 2014 Other information

Fair Value hierarchy

IFRS 7 and IFRS 13 require the fair value classification of financial instruments to be based on the quality of the input source used to calculate the fair value.

In particular, IFRS 7 and IFRS 13 set out three levels of fair value: • Level 1: this level consists of financial assets and liabilities for which fair value is based on (unadjusted) prices for identical assets or liabilities quoted on active official or over-the- counter markets; • Level 2: this level consists of financial assets and liabilities for which fair value is based on inputs other than quoted prices included within level 1 that are observable for the asset or liability either directly or indirectly; • Level 3: this level consists of financial assets and liabilities for which fair value is based on unobservable market data. This level includes instruments measured on the basis of internal estimates made using proprietary methods based on best sector practice.

An analysis of the assets and liabilities included in the three fair value levels is set out in the following fair value hierarchy table. 121

Millions of euro Note Level 1 Level 2 Level 3 Total

Available-for-sale assets measured at fair value 3 – 9 – 9 Other non-current assets 5 – 53 – 53 Other current assets 8 57 – 3 60 TOTAL ASSETS 57 62 3 122 Non-current financial liabilities 17 – 846 – 846 Other non-current liabilities 20 – 52 – 52 Current financial liabilities 22 – – – – Other current liabilities 21 91 – 1 92 TOTAL LIABILITIES 91 898 1 990 Half-yearly ﬁnancial report at June 30, 2014 Other information

Sensitivity analysis for financial instruments included in level 3

As required by IFRS 13, the following table sets out the effects arising from changes in the unobservable parameters used in calculating fair value for financial instruments included in level 3 of the hierarchy.

Financial instrument Parameter Change in the Sensitivity parameter (Millions of euro)

Commodity derivatives Probability of default (PD) 1% – Commodity derivatives Loss given default (LGD) 25% – Commodity derivatives Volatility underlying foreign interconnection capacity 1% 0.07 Commodity derivatives Correlation underlying foreign interconnection capacity 1% – Commodity derivatives Underlying zonal Italy interconnection capacity 1% 0.05

122 5) Concessions

The following table sets out the main concessions obtained by the A2A Group:

Number

Hydroelectric concessions 76 District heating concessions 10 Electricity distribution concessions 48 Gas distribution concessions 209 Solid urban waste (“SUW”) concessions (*) 88 Water service management concessions (**) 114 Public lighting and traffic light network management agreements 13 Other concessions 12

(*) Agreements can relate to the disposal and treatment of SUW, the construction, running and safety of landfills or waste-to- energy. (**) Concessions may regard the sale and distribution of drinking water or water purification and sewage services. Half-yearly ﬁnancial report at June 30, 2014 Other information

6) Update of the main legal and fiscal disputes pending

Adequate provisions are provided where necessary for the disputes and litigation described below.

EU infringement procedure

On June 5, 2002, the European Commission published Decision no. 2003/193/EC stating that the three-year exemption from income tax provided by article 3.70 of Law no. 549/95 and article 66.14 of Decree Law no. 331/1993, converted into Law no. 427/93, is incompatible with community law, considering this to be “State aid” which is prohibited by article 87.1 of the EC Treaty.

The Company appealed against this decision before the community jurisdictions but these appeals were rejected. The Italian State went ahead with the recovery of the aid in three separate stages, issuing different orders for the various tax period concerned.

The process followed by the various community and national appeals was described in the 123 financial statements up until 2012 and in the quarterly reports up until the third quarter of 2013, to which reference is made for brevity.

All the amounts requested for the principal and interest have been settled to avoid any executive action.

The situation regarding pending matters is as follows: • Sentence regarding the “First recovery”. The verdict has been finalized following the sentence of the first instance rejecting the Company’s appeal. • Sentence regarding the “Second recovery”. Following the adverse sentence of the Regional Tax Commission the Company has filed an appeal with the Supreme Court. The case is awaiting discussion. • Sentence regarding the “Third recovery”. Following the adverse sentence of the Regional Tax Commission the Company filed an appeal with the Supreme Court. The appeal was discussed on November 14, 2013 before the Tax Section. By way of an ordinance published on February 13, 2014, the court suspended the case and ordered that the records be passed to the Court of Justice, raising a question of a preliminary ruling pursuant to article 267 of the Treaty of the Functioning of the European Union concerning the way in which the interest due on the recovery of the aid should be calculated. The related proceeding has been registered under number C-89/14 and is not expected to be resolved before mid-2015, assuming it reaches a court verdict, which appears likely. Half-yearly ﬁnancial report at June 30, 2014 Other information

As of today, therefore, the question concerning the quantification of the interest due on the amounts to be recovered is still pending (whether the interest is compound or simple interest). On this point an opinion has been requested of the EU Court of Justice and it is considered that the result of this will affect the proceedings on both the third and the second recovery. As all the amounts requested have been settled, it is believed that once the pending disputes are completed the Company should not have to bear any further costs for the recovery of State aid.

Consul Latina / BAS S.p.A. (now A2A S.p.A.)

The purchase by BAS S.p.A. of the investment in HISA was made through a local consultant, Consul Latina.

Given that the wording of the contract was not totally clear and the fact that BAS S.p.A. on its own did not buy 100% of HISA, BAS S.p.A. held that the contractual clause was not applicable and that the payment request made by Consul Latina was unjustified, and accordingly did 124 not pay the fee due to Consul Latina which in 1998 commenced legal action for payment.

Legal counsel has confirmed that the preliminary phase has been completed and that only the final sentence is awaited.

A2A S.p.A. has always instructed legal counsel to settle the case and has recently expressed its willingness to increase previous offers to cover the costs of the suit, although awaiting a specific figure that can then be assessed. Precise requests are still pending. Redengas, a subsidiary of HISA, the shares of which are subject to a lien by Consult Latina, has filed a new suit to call for the removal of the lien on the shares that remains in Consul Latina’s favor; legal counsel has advised that the legal counsel of Redengas has announced that it will file a counter suit against A2A S.p.A. and Consul Latina. On June 3, 2014 the court rejected the suit filed by A2A S.p.A. and Consul Latina to remove the sequestration ordered by the judge at the request of Consul Latina on the present and future shares of Redengas.

Investigation into gas metering devices

An investigation is pending at the Public Prosecutor’s Office in Trento concerning the way that gas consumption is accounted for. The investigation involves, among others, a number of A2A Group companies and some of their directors and managers The alleged offence is fraud, as well as other matters.

The investigation was initiated by the Milan Judicial Authority but then transferred to Brescia for a question of territorial jurisdiction. After notification of the “Notice of the Conclusion Half-yearly ﬁnancial report at June 30, 2014 Other information

of Preliminary Investigations - article 415-bis of the Italian Criminal Procedure Code” dated February 7, 2011, the “Notice of the Preliminary Hearing Date” was received on June 9, 2011 regarding the committal for trial presented by the Public Prosecutor. The preliminary hearing was held before the judge in charge of the preliminary investigations (Gip) on November 8, 2011. The defense for the accused raised a preliminary exception claiming that the notification of the decree containing the “Notice of the Preliminary Hearing Date” was null and void, given that it did not include the CD with the list of “indicted” meters indicated in the decree as an “attachment forming a material part of the charge”. The Gip upheld the exception and declared the notification null and void. As a result, the Public Prosecutor had to reissue the “Notification of the Conclusion of Preliminary Investigations - article 415-bis of the Italian Criminal Procedure Code” and return to the previous stage in the proceedings. On January 4-9, 2012, the “Notification of the Conclusion of Preliminary Investigations - article 415-bis of the Italian Criminal Procedure Code” was reissued, this time with the CD.

The preliminary hearing was held on October 18, 2012, at which the judge raised a preliminary exception pursuant to article 11 of the criminal procedure code noting that at least two magistrates, whose judicial offices are included within the district of the Brescia 125 Appeal Court, are “injured parties” in the proceeding and asked the judge in charge of the preliminary hearing (Gup), Dr. Napo, to declare that the Brescia judicial authority was acting beyond its jurisdiction. The defense agreed with the application. The Gup therefore declared that the case was beyond his jurisdiction and ordered the papers to be sent to the Public Prosecutor’s Office of Venice. As a result of this provision the proceeding has returned to the initial stage.

However, as A2A Reti Gas S.p.A. had to carry out maintenance on certain plants sequestered as part of the criminal proceeding in question, checks were carried out to identify the prosecuting magistrate in charge of the case at the Public Prosecutor’s Office of Venice. It was learned from this that without giving notice of such to any of the attorneys of the persons under investigation or to those persons themselves, in the meantime the proceeding had been transferred from the Public Prosecutor’s Office of Venice (which presumably recognized a similar case of lack of competence) to that of Trento, having territorial competence for the proceedings in which a magistrate from the Public Prosecutor’s Office of Venice assumes the role as the “injured party”. At the present stage the proceeding, filed as no. 838/2013, is being followed by the Trento prosecuting magistrate Dr. Pasquale Profiti. On June 10 and 23, 2014 the Prosecutor’s Office of Trento served notice that the preliminary investigations had been completed as per article 415-bis of the Italian Criminal Procedure Code. It is likely that the preliminary hearing will be held after the summer. Half-yearly ﬁnancial report at June 30, 2014 Other information

Arbitration initiated by S.F.C. S.A. and Eurosviluppo Industriale S.p.A. against A2A S.p.A. and E.ON Europa S.L. for alleged non-fulfillment of the private deed for the purchase of the shares of Eurosviluppo Industriale S.p.A. (now Ergosud S.p.A.)

On May 2 and May 3, 2011 respectively, the Milan Arbitration Chamber sent A2A S.p.A. (the holder of an interest of 50% in the share capital of Ergosud S.p.A.) and E.ON Europa S.L. a request for arbitration in which Société Financiere Cremonese S.A. in conjunction with Eurosviluppo Industriale S.p.A. initiated an arbitration procedure against such companies, requesting (i) ascertainment as to non-fulfillment by E.ON Europa S.L. and A2A S.p.A. of the obligations assumed in the agreements of December 16, 2004, October 15, 2004 and July 25, 2007 inter partes and (ii) by virtue of the effect, that they be ordered to pay the remaining part of the price for the sale of the shares making up the whole share capital of Ergosud S.p.A., amounting to 10,000,000 euro, as well as compensation for the damages suffered by Société Financière Cremonese S.A. and Eurosviluppo Industriale S.p.A. from the double standpoint of the consequential loss or damage and loss of profits in the amount of 126,496,496 euro, save better specification, plus damages for the stoppage at the worksite, 126 interest and revaluation.

E.ON Europa and A2A S.p.A. duly appeared before the court calling for the request to be rejected in full and by cross-claim calling for the counterparts to be condemned to pay compensation for the damages suffered by the defendants as the result of the numerous examples of contractual non-fulfillment, quantified initially in the amount of 30,500,000 euro, or alternatively the greater or lesser sum considered equitable, quantified also pursuant to article 1226 of the Italian civil code, plus interest, ex article 1283 of the Italian civil code and monetary revaluation, ex article 1284 of the Italian civil code.

On September 7, 2011, the Chamber of Arbitration officially suspended arbitration due to the non-payment of the legal expenses by the claimant.

Lawyers for A2A S.p.A and E.ON Europa S.L. verified whether arbitration can be continued only for the counter-claim without having to take responsibility for the payment of the claimant’s expenses.

With regard to payment of the legal fees by defendants A2A S.p.A. and E.ON Europa S.L., and the non-payment by claimants SFC S.A. and Eurosviluppo Industriale S.p.A., on December 2, 2011 the secretary of the Chamber of Arbitration communicated that the claimants’ applications had been dismissed and proceedings would continue only for the applications presented by A2A S.p.A. and E.ON Europa S.L.; in simultaneous letters, the secretary also advised that all documentation had been sent to the arbitrators to allow the proceedings to commence. Half-yearly ﬁnancial report at June 30, 2014 Other information

The Board consists of Giuseppe Portal (Chairman), Vincenzo Mariconda (arbitrator appointed by A2A S.p.A. and E.ON Europa S.L.) and Giovanni Frau (arbitrator appointed by SFC S.A. and Eurosviluppo Industriale S.p.A.).

On February 1, 2012 the first hearing was held after formalities had been completed regarding the setting up of the Board at which it was stated that the terms for the questions originally proposed by SFC S.A. and Eurosviluppo Industriale S.p.A. had lapsed. In addition, the parties were assigned the dates by which pleading and replies should be filed and items of evidence produced. In particular, having become claimants from a substantial standpoint (wishing to continue with the case by counter-claim following the above-mentioned lapse of the counter-party’s terms), E.ON Europa S.L. and A2A S.p.A. were invited to note their questions and indicate their evidence by March 15, 2012; the subsequent dates for filing pleading were set as April 16, 2012, May 8, 2012 and May 31, 2012.

The date of the hearing for the personal appearance of the parties was set for June 12, 2012 in order to make an attempt at reaching a settlement and for any informal questioning. At the hearing, adjourned to June 19, 2012, the Arbitration Board acknowledged the bankruptcy 127 of Eurosviluppo Industriale S.p.A. which had occurred and set a date of October 30, 2012 for the appointment of a receiver and a date of November 20, 2012 for the hearing for the attempt to reach a settlement and carry out any informal questioning of the parties.

In view of the intervening bankruptcy of Eurosviluppo Industriale and the process issues raised during such declaration, the Board issued a decision dated November 13, 2012 ordering that the hearing set for November 20, 2012 should not be devoted to an attempt at reaching a settlement and, therefore, would not include the presence of the parties. At the hearing on November 20, 2012, the Board set the deadline for filing the award as July 4, 2013; also, the deadlines for the parties to file briefs were set as December 20, 2012 and January 31, 2013, and February 20, 2013 was set for the hearing date for discussion, to be held at the office of the Chairman of the Board. At the hearing of February 22, 2013 (the hearing was adjourned from February 20 to February 22 due to a commitment of the Chairman of the Arbitration Board), the Board issued an order requesting A2A S.p.A. and E.ON Europa S.L. to add to their respective attorneys to remedy all possible defects by March 20, 2013, and set March 20, 2013 and April 5, 2013 as the new final dates for the filing of briefs and replies to clarify and explain their respective positions. Subsequent to these obligations, the Board reserved the right to issue an order. On June 5, 2013, the Board filed an order in which it set July 22, 2013 as the date of the hearing for an attempt to reach a settlement and for questioning by the parties; given the deadline of July 4, 2013 previously set for the filing of the decision, the Board made an application to the Chamber for the granting of a reasonable extension. Half-yearly ﬁnancial report at June 30, 2014 Other information

At the end of the hearing of July 22, 2013, in which the questioning by the parties took place and the absence of the conditions for reaching a settlement was confirmed, the Chamber set a deadline of September 30, 2013 for filing documents and drawing up preliminary motions and October 21, 2013 for any submissions in reply from the lawyers. On October 2, 2013 the Chamber of Arbitration noted that S.F.C. S.A. and the bankruptcies had not paid the contributions requested in July and as of today the proceeding is suspended. On October 23, 2013, S.F.C. S.A., in breach of the terms of the arbitration and the question raised by the Arbitration Board, filed an appraisal arranged on its behalf having technical content. In a decision on November 27, 2013, the Board ordered an expert witness to verify the cogeneration capabilities of the plant and appointed Prof. L. Guizzi as the expert witness. The company appointed Prof. Massardo as its own expert witness, with S.F.C. S.A. appointing Prof. Ambrogio and Mr. Lazzeri. After the hearing of January 22, 2014 for formalities relating to the appointment of the expert witnesses, the Board set a deadline of June 16, 2014 for the filing of the related report. The report was filed within the legal terms and contained confirmation of the arguments of A2A S.p.A. and E.ON Europa S.L.. The continuation of the

128 arbitration may be affected by the fact the S.F.C. S.A., Eurosviluppo Industriale S.p.A. and Consorzio Eurosviluppo S.c.a.r.l. have failed to pay the arbitration fees: the judgment of the Chamber of Arbitration is pending.

Consorzio Eurosviluppo Scarl / Ergosud S.p.A. + A2A S.p.A. – Civil Court of Rome

On May 27, 2011 Consorzio Euroviluppo Industriale S.c.a.r.l. served a writ on Ergosud S.p.A. and A2A S.p.A. with the following claims: (i) compensation for damages, of both a contractual and extra-contractual nature, jointly, or alternatively exclusively and separately, in the amount of 35,411,997 euro (of which 1,065,529 euro as the residual portion of their share of the expenses); (ii) compensation for damages for the stoppage at the worksite and the failure to return the areas of pertinence to the Consortium.

In the filing of appearance Ergosud S.p.A. and A2A S.p.A. called for the request to be rejected in full because it is unfounded in its merit and in its substance, and pointed out: (i) the lack of the right of the Consortium to institute proceedings as it is currently in a state of bankruptcy, (ii) the lack of the right of the Consortium to institute proceedings for the damages allegedly suffered by Fin Podella at the item “anticipation of program contract” for 6,153,437 euro and the damages allegedly suffered by Conservificio Laratta S.r.l. for 359,000 euro.

The first hearing was set for October 30, 2011. This judgment was assigned to the Second Civil Section of the Court. The first appearance hearing was set for November 30, 2011 and the judge deferred decision concerning the legitimacy of the failed Consortium to establish a case. Half-yearly ﬁnancial report at June 30, 2014 Other information

On this occasion Ergosud S.p.A. and A2A S.p.A. were not able to make any cross-claims as the competence for this lies with the bankruptcy judge.

S.F.C. S.A. filed a notice of joinder on November 8, 2011 pursuant to article 105 of the civil procedure code (which allows a third party to make a new, different request to the original judge, extending the argument) and called that Ergosud S.p.A. alone should be ordered to pay damages, in part similar to those claimed by the Consortium, quantified in 27,467,031 euro.

The legitimacy of S.F.C. S.A. is independent with respect to that of the Consortium, the original claimant, and should it be found that the request of the Consortium may not proceed further for lack of grounds (or because of the bankruptcy that has occurred), the judgment would continue between S.F.C. S.A. and Ergosud S.p.A.. In this scenario, A2A S.p.A. could ask to be excluded since no request would have been raised against the company, but for the purpose of simplicity the judge would probably remit the question to the final sentence.

Within the term set for the first hearing the lawyers formulated conclusions on behalf of 129 Ergosud S.p.A. in respect of the request made by S.F.C. S.A., then counter-claiming in a more complete manner in the subsequent preliminary pleading pursuant to article 183, section VI of the civil procedure code.

The judge found the bankruptcy was legitimate as S.F.C. S.A. and therefore set the end of the proceedings and the hearing for December 19, 2012, declaring the need to execute an expert opinion on a number of points, indicating the questions to put to the expert and setting May 23, 2013 as the date for the hearing to appoint the court’s expert witness. At that hearing the judge, changed in the meantime, confirmed the questions already formulated on December 19, 2012 and appointed the court experts Messrs. Pompili and Caroli, setting a term for the parties to appoint their own consultants. The start of the experts’ work was scheduled as June 18, 2013, with a deadline of 180 days after that date. A2A S.p.A. and Ergosud S.p.A. appointed Prof. Massardo and Mr. Gioffrè as their experts, persons who over the years have already drawn up reports on the matters to which the questions refer. The deadline for the expert’s filing was postponed. The court experts Messrs. Pompili and Caroli submitted their reports within the term set for their observations, confirming the defensive reasoning of Ergosud S.p.A. and A2A S.p.A.; the parties’ experts had until June 30, 2014 to submit their observations and their respective reports will be filed with the court by July 31, 2014. Half-yearly ﬁnancial report at June 30, 2014 Other information

CIP 6 auxiliary services

This matter regards the usage of electricity for auxiliary services. According to the Electricity, Gas and Water Authority (AEEGSI), the self-consumption by certain types of plant (waste- to-energy) should be considered in the same way as consumption for auxiliary services.

A2A Ambiente S.p.A. (formerly Amsa S.p.A.)

In the CIP 6 convention entered into by A2A Ambiente S.p.A. (formerly Amsa S.p.A.), which has now expired, electricity consumption for auxiliary plant services was set at a flat 5% of gross output. Under the convention this conventional value “can be revised ….. on the basis of jointly defined technical inspections”. A2A Ambiente S.p.A. (formerly Amsa S.p.A.) received an inspection from the Electricity Sector Equalization Fund (CCSE) at its Milan waste-to-energy plant on December 19, 2006. The visit led to a note issued by the CCSE (September 19, 2007) which disputed the consumption of electricity for auxiliary services higher than the flat rate of 5%, calculating this to be in a range between 16% and 23%. There are no further developments. 130 Although the CCSE inspection was known for some time, the possibility that this could create potential liabilities only emerged when it was learnt that the AEEGSI had taken measures against other companies.

In any event, it is deemed that the contingent liability cannot be reliably measured at present. Under a worst case scenario, the maximum liability could be as high as 40 million euro. Nevertheless, valid defensive objections could be raised to support the validity of the figure set in the convention, given the specific nature of the waste-to-energy plant in question, or in any case a figure close to this, with the consequent elimination of the estimated liability or at least a considerable decrease in it. Given the above arguments, the company believes that as of today the liability is possible but not probable. As a consequence, no amounts have been provided for this matter at December 31, 2013. As a secondary point, it is noted further that Amsa S.p.A. has joint responsibility due to the partial demerger of the business consisting of the plant in favor of A2A Ambiente S.p.A. and the possibility of being able to obtain partial compensation of any cost by way of contractual clauses.

In the case of requests of the kind that have been made to the companies of the former Ecodeco Group, it should be noted that Amsa S.p.A. will be able take action with the municipality to request the reimbursement of the portion of the fees for the urban hygiene service contract retained by the municipality contractor in application of the existing contract. In this respect in previous circumstances Amsa S.p.A. had already called for the activation of contractual clauses for requests for refunds, then effectively upheld by the municipality by calculating contractual settlement amounts in relation to reductions in electricity revenues arising from the avoided fuel cost component. Half-yearly ﬁnancial report at June 30, 2014 Other information

A2A Ambiente Group (formerly the Ecodeco Group)

Ecolombardia 4 S.p.A. received an inspection from the GSE (Energy Services Manager) in September 2011. A note dated January 4, 2012 followed, stating that the consumption of electricity produced by the plant and absorbed by its auxiliary services exceeded the agreed flat quantity. A dispute was raised against this note with the request for a review. On October 12, 2012, the AEEGSI disputed electricity usage as exceeding the flat quantity, with the conclusion that the CIP 6 incentives were paid for quantities of energy exceeding those put into the grid and that the excess should be recovered. The company filed an appeal with the Regional Administrative Court of Milan. The application for cautionary suspension was upheld. On January 22, 2014 the appeal was taken by the court under advisement. The appeal was then rejected. An appeal against this decision has been filed.

A2A Ambiente S.p.A. (formerly Ecodeco S.r.l.) received an inspection on its waste to energy plant and biogas plants at Corteolona (May 10-11, 2012 and July 5-6, 2012). The findings of the inspection team were the same as those noted for the Ecolombardia 4 S.p.A. plant, namely that the consumption attributable to the auxiliary plant services is higher than that indicated 131 in the CIP 6 convention. On June 21, 2013, the AEEGSI issued a notification similar to that received by Ecolombardia 4 S.p.A. which instructed the CCSE to take action against A2A Ambiente S.p.A. (formerly Ecodeco S.r.l.) for the recovery of the excess. The request from the CCSE then arrived. The company has appealed. The case was discussed at a hearing of January 14, 2014 and the appeal was taken by the court under advisement. The appeal was rejected. An appeal against this decision is currently being prepared.

The ruling of the Regional Administrative Court of Lombardy was issued in mid-April 2014 for both disputes. Although they are considering the possibility of filing appeals with the Council of State, both companies have made suitable provisions in their financial statements at December 31, 2013, commensurate with the estimated probable liability.

Union Temporal De Impresas vs. the Municipality of Calig (Spain)

This proceeding involves the Union Temporal De Impresas (UTE), set up by the company that is now A2A Ambiente S.p.A., Azhar and Teconma, to build and manage an ITS treatment and disposal plant and composting line in Castellon de la Plana (Spain) as the result of being awarded the tender called by Zone 1 Consortium of Castellon. The Municipality of Calig, neighboring with Castellon, has appealed against the amendment to the agreement between the consortium and the UTE which provided for an increase in the fee of 121 million euro and 140 million euro for adjusting the plants to the specifications required in the AIA, requesting that it be annulled. In the sentence of the court of the first instance of May 21, 2013, the Half-yearly ﬁnancial report at June 30, 2014 Other information

court upheld the appeal of the Municipality of Calig, additionally ordering, besides upholding the requests of the counterparty, the annulment of the original awarding of the tender to the UTE, with the resulting requirement for the consortium to find a new supplier.

Despite the fact that A2A Ambiente S.p.A. holds an interest of 1% in the UTE, under Spanish law, UTEs are characterized by the joint liability of their members.

The UTE, defended by the law firm Urìa Mendez, has filed an appeal against the court’s sentence of June 12, 2013.

The internal legal department believes the risk of the annulment of the original award of the tender to the UTE to be remote (it was not even one of the counterparty’s requests) and the risk of losing in the matter concerning the amendment of the agreement between the consortium and the UTE, which provided for an increase in the fee as above, to be possible. Losing the case would lead to a maximum potential risk for the UTE of 19 million euro. A2A Ambiente S.p.A., a member of the UTE with a 1% interest and jointly responsible, could be called to respond not only for its own interest but potentially also for a larger figure 132 if the other members are insolvent towards the bank (it should be remembered that the UTE obtained a loan to build the plant). The figure of 19 million euro could then be further revised in the light of the conclusions of the appeal filed by the UTE against this sentence of the Regional Administrative Court.

To complete this matter approximately trade and financial receivables of 3.6 million euro due from the UTE are included in the financial statements of A2A Ambiente S.p.A. at December 31, 2013, which in the case of losing could become uncollectable.

Monfalcone Plant investigation

In November 2011, the Trieste Judicial Authority took restrictive action against several individuals in the Veneto, Friuli Venezia Giulia and Lombardy regions, including an employee of the Monfalcone thermoelectric plant, for criminal association aimed at defrauding the state and private persons and conceptual falsity, as well as activities organized for illegal trafficking in waste.

This investigation was initiated with a report filed in March 2011 by the management of the A2A Group against A2A employees and third party businessmen suspected of being responsible for fraud carried out to the harm of the company itself, who - for the payment of conspicuous sums of money - guaranteed the disposal of special waste by illegal trafficking and the falsification of forms identifying the waste and certificates of analysis, in relation to the supply of biomasses and the certification of their calorific value. More specifically, Half-yearly ﬁnancial report at June 30, 2014 Other information

biomass quantities were recorded on entry at figures higher than the real ones, with the relative calorific values also being increased.

A2A S.p.A., the owner of the production site, ordered the precautionary suspension of the employee concerned and a freezing of the payments of the invoices issued by the biomass suppliers, which, to its knowledge, are involved in the investigations.

The investigation initiated by the Trieste Judicial Authority has not yet been completed and therefore the information needed to determine the effect of any illegal conduct has not yet been made available. Nevertheless the A2A Group, and in particular A2A Trading S.r.l. may incur damages, at their sole expense, arising from the qualitative and quantitative differences in the biomasses, since there is the risk for the latter, as toller and in charge of the plant’s dispatch, that on completion of the preliminary stage it may incur increased costs for the biomasses not delivered and increased costs for incorrectly stating the calorific value of the biomasses, delivered and not delivered.

To this should be added that the increased use of coal instead of biomasses could as a consequence have an increase in the environmental costs relating to the second half of 2009 133 and the whole of 2010, as well the need to reimburse the additional income or environmental allowances recognized with respect to the real income or allowances (reference here is to Green Certificates). In fact for 2009 and 2010 the company may have filed declarations generating environmental allowances that are greater than those actually produced, as the calculation may have been affected by considering a biomass energy to conventional source energy ratio that is mistakenly higher than the real figure.

If this were the case, the company would have to file corrections to the above-mentioned past declarations and reimburse the income relating to environmental allowances that may have additionally been recognized.

Further, in accordance with the procedures and modalities required, A2A Trading S.r.l. has filed a request with the GSE to obtain Green Certificates relating to 2011 in which the calculation has been made on the basis of the real quantities of biomasses delivered to the power station and, in agreement with the Public Prosecutor, by taking into account a possible false increase of 20% in the calorific values of such. Despite the fact that the GSE has acknowledged the correctness of the calculations made by A2A Trading S.r.l. for 2011, as of today the above-mentioned 2011 Green Certificates have not yet been issued.

As things currently stand, given that the investigations have not yet been completed and that there is still insufficient information relating to the alleged illegal conduct, it is impossible to estimate the potential liability. Half-yearly ﬁnancial report at June 30, 2014 Other information

In conclusion, as the aggrieved party the A2A Group will protect its interests in all the appropriate places, requesting compensation for any damages it may have suffered.

ASM Novara S.p.A. dispute

The shareholder Pessina Costruzioni and the outgoing directors Massimo Pessina and Guido Stefanelli served notice of the summons to have the court declare null the resolution of October 26, 2012 with which the Board of Directors of the company certified the existence of reasons to liquidate the company, pursuant to article 2484 of the Italian civil code, ordered publication of the resolution pursuant to article 2484 and issued a request to appoint the official receiver at the Court of Brescia pursuant to article 2487 of the Italian civil code.

The petition examines the motives illustrated in the memorandum of appearance in the civil action filed by Pessina Costruzioni and by its outgoing directors Massimo Pessina and Guido Stefanelli, noting the errors of irregularity in the composition of the Board of Directors passing the resolution and the errors in the certification of the causes of liquidation, which allegedly 134 did not exist.

The directors of ASM Novara S.p.A. and the shareholder A2A S.p.A. filed a petition at the Court of Brescia to appoint an official receiver after having certified with the resolution of October 26, 2012 the existence of the reasons for liquidating the company under article 2484 of the Italian civil code, section 1 no. 3) (inability of the shareholders’ meeting to function) and no. 4 (decrease below the minimum legal requirements of share capital due to losses).

After meeting in chambers on January 11, 2013, the Court of Brescia issued a decree in which it rejected the petition.

The directors of ASM Novara S.p.A. and the shareholder A2A S.p.A. filed a claim pursuant to article 739 of the Italian code of civil procedure to revoke the decree and seek certification of the reasons for the liquidation of the company, while determining with recourse the number of official receivers. The date of the hearing was set for March 20, 2013; at that hearing the Court of Appeal believed it appropriate to acquire the documents provided by the parties, adjourning the proceeding to the hearing of April 24, 2013. On April 24, 2013 in coming to its decision the Court of Appeal fully upheld the claim.

The Court therefore proceeded in accordance with article 2487, paragraph 2 of the Italian civil code, appointing the company’s receiver who has been granted all the powers required for ordinary and extraordinary administration.

On March 29, 2013 Pessina Costruzioni notified A2A S.p.A. of the appointment of the arbitrator and the deposition with the arbitrators to initiate the arbitration, in fulfillment Half-yearly ﬁnancial report at June 30, 2014 Other information

of the shareholders’ agreements signed in August 2007, with the scope of having A2A S.p.A. ordered to pay compensation for damages for the non-fulfillment of its obligations under the agreements.

A2A S.p.A. appointed its arbitrator within the established term of 20 days, rejecting the requests.

After discussion on the appointment, and after a request for the appointment of a sole arbitrator made by Pessina to the Court of Novara, the parties signed an agreement concerning the formation of the Arbitration Board.

At the formal appearance hearing on July 1, 2013 the Board discharged the requirements regarding its formation and the start of the proceedings, setting the deadlines for the submission of briefs and preliminary motions and the date of the first hearing. The dates set were October 15, 2013, December 20, 2013 and February 21, 2014 for the submission of briefs and March 5, 2014 for the first hearing. By way of an order of October 8, 2013, the Board deferred these deadlines to the following dates: November 19, 2013, January 21, 2014 and March 25, 2014 for briefs and April 10, 2014 for the first hearing. The location for the 135 arbitration was set as the offices of the President of the Arbitration Board in Milan. At the hearing of April 10, 2014, preceded by the submission of the parties’ briefs, the Board set three new deadlines for the briefs (May 20 for A2A S.p.A., June 17 for Pessina and June 26 for A2A S.p.A.) and set the date of the merit hearing as July 11, 2014. At that hearing, the Board reserved the right to decide on all the applications submitted by the parties.

Dispute over public water derivation fees

Derivation for industrial use for cooling the Sermide thermoelectric plant

The Lombardy Region requested Edipower S.p.A. to pay fees for the derivation of water for cooling the Sermide plant without recognizing the company the right to halve these fees as permitted by national legislation if the water that is withdrawn is then fully returned.

For each year in question the Region issued injunctions to obtain the sum not paid by Edison S.p.A. against its request for full payment.

For its part, Edipower S.p.A. filed appeals against those injunctions before the competent courts, one year after the next, in order to obtain its right to a halving of the fees.

Since 2011, under Regional Law no. 19/2010 the Lombardy Region has been demanding payment of the full amount of the fee on the basis of the modules accepted under concession, preventing any reduction of the fee up until that time challenged in the courts under national legislation. Half-yearly ﬁnancial report at June 30, 2014 Other information

In addition, from January 1, 2012, by way of Regional Law no. 22/2011, the Lombardy Region effectively doubled the fee for public water derivation for industrial use, taking this to 34,000 per module of water (to which the ISTAT inflation index is applied).

In terms of litigation, on August 8, 2012 the Supreme Court ruled as to the entitlement of Edipower S.p.A. to a halving of the fee for 2006 on a definitive basis.

On the basis of this jurisprudential precedent in the Supreme Court, the disputes relating to 2003 to 2007 (inclusive) are currently in the process of being dismissed. The Region has recognized the entitlement of Edipower S.p.A. to a halving of the fee, requiring it to pay solely “a settlement” of the amounts due on the basis of the increase in derivation modules over those granted (Edipower S.p.A. had actually used a different method of calculating the derivation modules).

The dispute continues for the years 2008 to 2013 (inclusive) for which the Region has already issued an injunction for payment.

136 For 2014, Edipower S.p.A. has paid an amount based on the criterion it considers to be correct (meaning with the recognition of the entitlement to a halved fee and without the increase in the cost of the module prescribed by Regional Law no. 22/2011). The Region has not yet issued an injunction for the payment of the difference.

By way of Regional Resolution no. 8/5775 of 2007, the Lombardy Region increased the fee due for the derivation, in reality incorporating an amount of a fiscal nature (the “regional surcharge”) in a “charge” (the derivation fee). As the result of the company’s failure to pay the amount, the tax collection agency Equitalia (on behalf of the Lombardy Region) issued a payment notice for the regional surcharge for 2007 for the Sermide plant; the regional payment notice was suspended for cautionary purposes by the Region and in any case an appeal was filed on a timely basis with the competent tax commission.

A similar dispute is also taking place in connection with the plants at Cassano d’Adda and Ponti sul Mincio.

Derivation of public water for the production of hydroelectricity

Mese plant

By way of Regional Law no. 22/2011 the Lombardy Region effectively doubled the fee for public water for use for hydroelectric purposes, without prejudice however to the ISTAT revisions for inflation (in particular the regional law provides that starting from 2012 the unit amount of the fee due to the Region for the use of large water derivations for hydroelectric use, as per paragraph 1, is set at 30 euro per Kilowatt of average annual nominal power). Half-yearly ﬁnancial report at June 30, 2014 Other information

Faced with the payment demands made by the Region for 2012 and 2013, Edipower S.p.A. considered the increase prescribed by law to be exorbitant and paid the fee considering solely the increase arising from the planned inflation rate as compared to the previous year.

As a consequence, for 2012 and 2013 the Region issued injunctions for the payment of the amount not paid by the company; Edipower S.p.A. appealed against these injunctions before the competent court.

Faced with the payment demand made by the Region for 2014, Edipower S.p.A. paid the fee considering solely the increase arising from the planned inflation rate as compared to the previous year. The Region has not yet issued an injunction for the payment of the difference.

For the Asta Liro plant, the Lombardy region has issued an injunction to pay the fees for derivations for hydroelectric use allegedly due for 2008 for Asta Liro and Fiume Mera. The company has filed an appeal against this injunction with the Milan Regional Court of Public Waters (hereafter the Milan TRAP); the Milan TRAP partially rejected this appeal in the section in which the company asked for a ruling stating that it has no obligation to pay the fee for hydroelectric use for the amount mistakenly calculated by the Region and that 137 the payment it has made is satisfactory. The sentence issued by the TRAP on the other hand partially upheld the request made by Edipower S.p.A. to rule as to its entitlement to settle the water use fee in an amount reduced by 10% by way of the non-applicability of the regional resolution introducing the regional surcharge. For the dispute in question the TRAP considered Regional Resolution no. 8/5775 of 2007 to be illegitimate, in that it simulated an increase in the fee due for the derivation by in reality incorporating an amount of a fiscal nature (the regional surcharge) in a “charge” (the derivation fee).

A similar dispute is also taking place for a number of plants in the Valtellina.

Surcharges for public water derivation

Mese plant

Edipower S.p.A. filed a petition before the competent court applying to establish the correct calculation of the surcharges on hydroelectric fees due pursuant to article 1 of Law no. 959/1953, by way of the non-applicability of the ministerial decrees that prescribed a revision to these fees on an annual basis (instead of every two years).

For the Mese plant, Edipower S.p.A. lost the cases it brought before the Milan TRAP opposing the payment demands for the above surcharges on the fees raised by the Province and the Consortium of Municipalities of the Mountain Catcment Basin (BIM) of Lake Como and the Half-yearly ﬁnancial report at June 30, 2014 Other information

rivers Brembo and Serio. The company has decided not to file an appeal against the TRAP’s sentences.

Udine plant

For the Udine plant, an appeal is currently pending before the High Court of Public Waters (hereafter the TSAP) filed by Edipower S.p.A. opposing the sentence of the Venice TRAP which rejected the appeal of Edipower S.p.A. against the payment demand raised by the Pordenone Livenza BIM.

An appeal is then pending before the TSAP opposing the sentence issued by the Venice

138 TRAP which rejected the appeal of Edipower S.p.A. against the payment demand raised by the Consortium of Tagliamento BIM Municipalities in the provinces of Udine and Pordenone.

Finally an appeal is pending before the TSAP opposing the sentence issued by the Venice TRAP which rejected the appeal of Edipower S.p.A. against the payment demand raised by the province of Udine.

Brindisi bunker

The investigations that led to the sequestration of the Brindisi bunker (owned by Enel) have been formally closed; the head of the Brindisi power station has been sent for trial amongst others. Having civil responsibility, Edipower S.p.A. has been implicated in the relative court case by the parties instituting the action. A release notice for the seized areas was notified on May 13, 2010 as part of the criminal proceeding. In a ruling of March 8, 2013, the court acquitted the head of Edipower S.p.A.’s power station for the offence with which he was charged “because there is no case to answer”.

On September 3, 2013 the public prosecutor at the Brindisi Court issued a notification that an appeal had been filed against the sentence of the Brindisi Court.

* * *

The following information is provided in connection with the main litigation of a fiscal nature. Half-yearly ﬁnancial report at June 30, 2014 Other information

A2A S.p.A. – General audit for IRES, IRAP and VAT purposes for fiscal 2010

On January 20, 2014 the Regional Department of the Lombardy Tax Revenue Office - Milan Large Taxpayers Section - initiated a general audit of A2A S.p.A. for IRES, IRAP and VAT purposes for fiscal 2010. This audit is currently in progress.

A2A Reti Elettriche S.p.A. - registration tax assessment for adjustments to the value of the sale of the “protected categories” business to A2A Energia S.p.A.

On February 16, 2010, the Milan 3 Office of the Tax Revenue Office served notice of the correction and settlement of registration tax due on the sale of the “protected categories” business from AEM Elettricità S.p.A. (now A2A Reti Elettriche S.p.A.) to AEM Energia S.p.A. (now A2A Energia S.p.A.) on February 1, 2008. In an assessment notice, the tax office contested the figure disclosed for “goodwill” and as a result the corresponding registration tax payable. The company attempted to reach a tax settlement but since no agreement was reached, challenged the notice served by filing an appeal. The Milan Provincial Tax Commission upheld the company’s appeal. The tax 139 office lodged an appeal against the sentence favorable to the company with the Regional Tax Commission which discussed it at its meeting of September 30, 2013 and found in the company’s favor. The tax office has not appealed to the Supreme Court and the sentence has accordingly become final.

A2A Reti Gas S.p.A. – COSAP Municipality of Milan for the years from 2003 to 2011

On December 27, 2011 the Municipality of Milan served payment notices for COSAP (a fee paid for occupying public spaces and areas) for the years 2003 to 2011. An application was filed for annulment of these notices by internal revocation, which the Municipality rejected. The company filed a summons with the Court of Milan against this rejection on July 11, 2012 and on September 25, 2012 filed an appeal with the regional administrative court. The date for the discussion before the Court of Milan has been deferred to October 23, 2014, while that for the discussion before the regional administrative court has not yet been set.

A2A Ambiente S.p.A. (formerly Aprica S.p.A.) - General IRES/IRAP/VAT audit for fiscal 2009

On January 24, 2013 the Finance Police - Brescia Unit commenced a general tax audit of Aprica S.p.A. (now A2A Ambiente S.p.A.) for IRES, IRAP and VAT purposes for fiscal 2009 and for fiscal 2010, an audit only to ensure that the requirements of Decree Law no. 78/2009 (the Half-yearly ﬁnancial report at June 30, 2014 Other information

“Tremonti ter”) had been fulfilled. The audit was completed on March 25, 2014. The findings that have emerged mainly regard violations relating to direct taxes.

A2A Ambiente S.p.A. (formerly Aprica S.p.A.) - Technical audit of the Brescia waste to energy plant

On March 7, 2013, the Brescia Customs Agency commenced a technical audit of the Brescia waste to energy plant owned by Aprica S.p.A. (now A2A Ambiente S.p.A.). The audit was completed on January 16, 2014 with the serving of a formal notice of assessment for the years from 2008 to 2011. For 2008 and 2009, the Customs Authority served payment notices on May 7 and 21, 2014 together with the respective penalties. The company appealed against these two demands in July 2014.

A2A S.p.A. (merging company of AMSA Holding S.p.A.) – Assessments for VAT purposes for fiscal years 2001 to 2005 140 In early 2006, the Italian Finance Police - Lombardy Regional Unit, Milan - carried out an audit of AMSA Holding S.p.A. (now A2A S.p.A.) for VAT purposes for fiscal years 2001 to 2005.

The audit ended with the issue of a final report contesting the legitimacy of the ordinary VAT rate, in place of the special rate applied by suppliers for waste disposal and plant maintenance, as well as the subsequent deduction made after the invoices issued for these services were duly paid.

The report was followed by formal notices of assessment from the Tax Revenue Office (Milan 3 Office) for each year audited; appeals were then filed with the Provincial Tax Commission within the term provided by law.

The appeals for 2001 and for 2004 and 2005 were discussed on January 25, 2010 and on February 17, 2010 respectively, with a favorable outcome for the company in all cases. The Tax Revenue Office appealed against the verdict of the first judges. The Regional Tax Commission rejected this appeal for all three years, 2001, 2004 and 2005.

For 2011 the Tax Revenue Office filed an appeal with the Supreme Court against which AMSA Holding S.p.A. filed a cross-appeal on November 9, 2012.

The outcomes of the 2002 and 2003 disputes were also favorable for the company but the Tax Revenue Office filed an appeal against both sentences. The appeal for 2002 was discussed on November 30, 2010, and on February 23, 2011 the Milan Regional Tax Commission issued its ruling, overturning the initial verdict and upholding the Tax Revenue Office’s appeal on Half-yearly ﬁnancial report at June 30, 2014 Other information

almost all counts with the exception of the hazardous waste category. The company filed an appeal with the Supreme Court for 2002. For 2003 the appeal made by the Tax Revenue Office was discussed on November 7, 2011 before the Regional Tax Commission which rejected it with a sentence filed on November 11, 2011.

The Tax Revenue Office has not appealed to the Supreme Court for 2003, 2004 and 2005 and the sentence has become final, thereby closing the litigation. For 2002, the date for the hearing for discussion before the Supreme Court has not yet been set.

Edipower S.p.A. - VAT audit for fiscal 2004 to 2007

In 2008 the Messina Customs Office performed a tax audit on the company to check the correctness for VAT purposes for fiscal years 2004 to 2007 of the commercial purchases by the tollers of the fuel that is used in the San Filippo del Mela thermoelectric power station for the production of electricity. More specifically, the aim of the audit was to check whether VAT was charged on the excise duty discharged by the tollers after the purchase of the fuel. In the tax audit report the Customs Office claimed additional tax amounting in total 141 to 5.57 million euro plus penalties of the same amount. Edipower S.p.A. filed its defensive arguments against the tax audit report with the Customs Office and the Tax Revenue Office having jurisdiction for the recovery of VAT.

By way of a notice served on December 29, 2009 relating to fiscal year 2004 the Milan Tax Revenue Office assessed VAT on excise duty and interest for a total of 1.98 million euro plus penalties of 2.6 million euro. After filing an application for annulment by internal revocation and, subsequently, an application for settlement, without receiving any positive response from the Tax Revenue Office, in 2010 Edipower S.p.A. filed an appeal against the assessment notice. The appeal was upheld by the Milan Provincial Tax Commission which ordered the assessment to be cancelled. The Tax Revenue Office has not appealed and accordingly the sentence in the company’s favor has become final.

On December 14, 2010 the Milan Tax Revenue Office served Edipower S.p.A. with a similar assessment notice for additional VAT on excise duty plus penalties relating to fiscal 2005, in which it made a demand for VAT and interest of 1.9 million euro, arguing the same reasons used in the assessment notice relating to 2004. In the same assessment, the Tax Revenue Office also provided notification of the result of the partial audit of fiscal 2005, claiming additional IRES and IRAP of 0.62 million euro plus accumulated penalties in both cases of 1.3 million euro.

The company filed an application for settlement against this assessment which was not accepted by the Tax Revenue Office; it accordingly filed an appeal, requesting the Tax Half-yearly ﬁnancial report at June 30, 2014 Other information

Commission to order the total cancellation of the notice. In October 2011 the Tax Revenue Office notified a provision by internal revocation partially cancelling the subject assessment, upholding certain of the defensive arguments used by Edipower S.p.A. in connection with the costs relating to 2005 and considerably reducing the additional amounts of IRES and IRAP claimed. The Milan Provincial Tax Commission fully upheld the company’s arguments concerning VAT on excise duty and partially upheld those regarding IRES and IRAP, ordering the partial cancellation of the assessment.

The Tax Revenue Office filed an appeal but only concerning IRES and IRAP; as a result, therefore, the dispute regarding VAT on excise duty for 2005 has been closed by means of internal revocation. The hearing for the appeal was held on December 3, 2013. The appeal court confirmed the sentence of the court of the first instance, partially favorable to the company.

Neither of the parties has filed an appeal with the Supreme Court within the terms required by law and accordingly the appeal sentence has become final.

142 Edipower S.p.A. - VAT assessments Green Certificates 2004 to 2010

On December 29, 2009 the Milan Tax Revenue Office served Edipower S.p.A. a VAT assessment notice regarding fiscal 2004 and having as its object the alleged sales of Green Certificates by tollers for the 2004 “green” requirements. This assessment notice was not preceded by an audit at the company’s premises; instead, the Tax Revenue Office’s information and assumptions were taken from the assessments carried out at the tollers’ premises in 2008 and 2009.

In particular, in the assessment in question the Tax Revenue Office sanctioned Edipower S.p.A. for not having used the reverse charge procedure given that invoices were not received for the alleged sales of the Green Certificates which in the Tax Revenue Office’s opinion the tollers had made in 2005 to meet their obligations for the previous year. The amount of the penalty inflicted was 6.5 billion euro.

Following opportune analyses which also included the tollers, it was considered that the Tax Revenue Office’s conclusions could not be accepted. In fact under the tolling arrangements the owners of the electricity produced by Edipower S.p.A. are “ab origine” the tollers, who are the owners of the fuel used. Under these arrangements each toller is responsible for the operational and economic cost of obtaining the Green Certificates that relate to that toller on the basis of the electricity produced according to its indications and production plans, handing them over to the Manager via Edipower S.p.A.. Under the tolling arrangements and the requirements of law there is no transfer of the ownership of the Green Certificates between the tollers and Edipower S.p.A. and no fee passes between the parties; accordingly Half-yearly ﬁnancial report at June 30, 2014 Other information

no transaction is carried out for VAT purposes. For this reason no provision has been made in the financial statements for this matter.

On December 14, 2010 the Tax Revenue Office served a further VAT assessment notice regarding fiscal 2005 having as its object the alleged sales of Green Certificates by tollers for the 2005 “green” requirements. The findings of the Tax Revenue Office were the same as those already notified in the assessment for 2004 and the penalty inflicted was 4.6 million euro.

In August 2011 the Milan Finance Police carried out an official tax audit of Edipower S.p.A. having as its object the alleged sales of Green Certificates from 2006 to 2010. This investigation was started as the result of a tax audit completed earlier at one of the tollers and was the continuation of the audits already started by the Tax Revenue Office for 2004 and 2005 described above.

In their tax audit report issued on the completion of the investigations on October 21, 2011, the officers stated their conviction that the Green Certificates handed over by the tollers to discharge their obligations represent remuneration for Edipower S.p.A. as an addition to the tolling fee. For this reason the auditors stated that Edipower S.p.A. should have used the 143 reverse charge procedure for the Green Certificates received from the tollers and should have recharged the costs incurred in this way on their behalf. For this double violation the Finance Police assessed unsettled VAT, for the years from 2006 to 2010, in the amount of 54.4 million euro and penalties of the same amount. Following the issue of the tax audit report, at the end of December 2011 the Milan Tax Revenue Office issued an assessment notice for 2006 containing a demand for VAT and related penalties for a total of 61.7 million euro and a penalty notice of 12.3 million euro.

On the basis of the reasons described in detail above, it is considered that the claims regarding VAT on excise duty and VAT on Green Certificates are unsubstantiated from a subjective standpoint and on the merits, and accordingly no provision has been made in the financial statements for this matter.

Edipower S.p.A. has made timely appeal to the appropriate authorities against all the notices served, requesting the total cancellation of the demands for taxes. The assessment notice for 2005 was discussed at the hearing of May 25, 2012, during which the judges upheld the company’s appeal; the Tax Revenue Office did not appeal and the favorable sentence of the court of the first instance has therefore become final. On November 26, 2012 a hearing was held to discuss the appeal relating to 2004; the court fully upheld the company’s appeal.

In August 2012 Equitalia served a payment notice for the recovery of one third of the VAT relating to 2006. The company filed an application for the suspension of payment against this demand and this request was upheld in the hearing of October 23, 2012. Half-yearly ﬁnancial report at June 30, 2014 Other information

On April 9, 2013 the hearing for the discussion of the appeal for 2006 was held (assessment notice for VAT and penalties). The Tax Revenue Office filed an application for the dismissal of the case for the lack of issues to dispute together with the records for the complete cancellation by internal revocation of the assessments served for 2006. As a result, the judge dismissed the case.

In April 2013, the Tax Revenue Office additionally served the company notice of the complete cancellation of the demand for penalties for 2006 by internal revocation. The company is currently waiting to receive formal notice from the court that the dispute has been annulled.

These steps confirm earlier statements made verbally by officials of the Tax Revenue Office to the company’s lawyers, concerning the fact that the administration had taken the decision to completely cancel all the VAT assessments served on tollers and tollees concerning Green Certificates.

A2A Trading S.r.l. - Assessments for VAT Green Certificates regarding 2004-2010 144 On December 23, 2009 the Milan Tax Revenue Office served A2A Trading S.r.l. with a VAT tax assessment regarding fiscal 2004. This notice cited the company’s failure to invoice taxable transactions and required the company to pay additional VAT as well as penalties and interest amounting to a total of 3.3 million euro.

In particular, under this assessment the Tax Revenue Office served a penalty on A2A Trading S.r.l. for not having invoiced the tollee (Edipower S.p.A.) for the Green Certificates allegedly transferred between the two.

After appropriate examination, which also included the other tollers, it was considered that the Tax Revenue Office’s conclusions could not be accepted. In fact under tolling arrangements tollers are on the one hand the owners of the raw materials, including fuel, that they supply to the tollees to produce electricity, and on the other are the “ab origine” owners of the electricity produced. The delivery of Green Certificates to tollees by tollers can in no way be considered to be the transfer of title of such.

A2A Trading S.r.l. has therefore not committed any breach of law and accordingly no provision has been made in the financial statements for this matter.

On December 16, 2010, the Milan Tax Revenue Office served notice of a VAT tax assessment regarding fiscal 2005 and on October 31, 2011 notice of a VAT tax assessment regarding tax year 2006 for the same reasons, with the resulting demands for additional value added tax plus penalties and interest totaling 5.2 million euro and 11.2 million euro respectively. As in Half-yearly ﬁnancial report at June 30, 2014 Other information

the case of 2004, A2A Trading S.r.l. has not committed any breach of law and accordingly no provision has been made in the financial statements for this matter.

A2A Trading S.r.l. has filed an appeal with the relevant bodies against both notices, requesting that the claim for additional taxes be fully annulled.

The Milan Provincial Tax Commission upheld the company’s appeals for all years under dispute.

On March 5, 2013 the Tax Revenue Office stated its acceptance, for 2006, of the sentence for the part relating to the dispute regarding the green certificates and filed an appeal with respect to the remaining findings. The Regional Tax Commission rejected the appeal and at the present moment the term for the Tax Revenue Office to appeal to the Supreme Court is still open. On May 6, 2013 the Tax Revenue Office notified that it was waiving its appeal and applying for a dismissal of the case for 2004 and 2005.

It should be noted that following the request for documentation relating to the Green

Certificates falling within the scope of the same tolling arrangement for fiscal 2007 to 2010, 145 on October 28, 2011 the Milan Unit of the Finance Police served a tax audit report containing the same violations of failure to invoice taxable transactions relating to 2007, 2008 and 2010. At the present date no formal assessment notice has been served.

7) Contingent assets

The Group had an excess of environmental certificates (Green Certificates and White Certificates) at June 30, 2014.

The application of Resolution no. 447/13 of the AEEGSI could lead to benefits for the Group in future years, although the amount is currently not quantifiable.

* * *

Consob Recommendation no. 61493 of July 18, 2013

In response to Consob Recommendation no. 61493 published in July 2013, the A2A Group has carried out detailed analyses which have led to the identification of the hydroelectric production sector as the area applicable to the Group.

The investments made in this sector during the period under review were of a marginal amount and related to ordinary maintenance. Half-yearly ﬁnancial report at June 30, 2014 Other information

In addition, the A2A Group plans to make investments in the hydroelectric sector in the coming years and in particular to incur expenditure for maintenance and for increasing the energy efficiency of plants located in Lombardy and Calabria.

* * *

The Company has availed itself of the possibility permitted by article 70, paragraph 8 and article 71, paragraph 1-bis of the Issuers’ Regulations, and hence of derogating from the requirement to publish an information document in the event of significant mergers, spin- offs, share capital increases by means of the contribution of assets in kind, acquisitions and disposals.

146 Attachments to the notes to the Half-yearly financial report Half-yearly ﬁnancial report at June 30, 2014

1 - Statement of changes in tangible assets

Tangible assets Residual Changes during the period Changes during the period Residual Millions of euro value value at 12 31 2013 Investments Category Other changes Write-downs Disposals/Sales Amortization Total at 06 30 2014 changes changes Gross Acc. Asset Acc. in the period value depreciation value depreciation

Land 245 245 Buildings 986 1 (22) (21) 965 148 Plant and machinery 4,438 39 23 5 (3) 3 (164) (97) 4,341 Industrial and commercial equipment 40 2 (2) 40 Other assets 57 7 2 (8) 1 58 Landfills 27 4 (3) 1 28 Construction in progress and advances 107 41 (28) (2) 11 118 Leasehold improvements 24 3 3 1 (1) 6 30 Leased assets 6 (3) (3) 3 Total tangible assets 5,930 93 – 5 – – (3) 3 (200) (102) 5,828

Tangible assets Residual Changes during the year Changes during the year Residual Millions of euro value value at 12 31 2012 Investments Category Other changes Write-downs Disposals/Sales Amortization Total at 12 31 2013 changes changes Gross Acc. Asset Acc. in the year value depreciation value depreciation

Land 249 (3) (1) (4) 245 Buildings 1,064 4 7 (1) (37) (7) 2 (46) (78) 986 Plant and machinery 4,816 77 113 4 (208) (28) 11 (347) (378) 4,438 Industrial and commercial equipment 40 5 (5) 40 Other assets 58 14 2 (12) 9 (3) 3 (14) (1) 57 Landfills 14 5 13 (5) 13 27 Construction in progress and advances 109 119 (122) 6 (4) (1) (2) 107 Leasehold improvements 13 3 21 (15) 4 (2) 11 24 Leased assets 7 (1) (1) 6 Total tangible assets 6,370 227 – 28 9 (250) (54) 20 (420) (440) 5,930 Half-yearly ﬁnancial report at June 30, 2014 1 - Statement of changes in tangible assets

1 - Statement of changes in tangible assets

Land 245 245 Buildings 986 1 (22) (21) 965 Plant and machinery 4,438 39 23 5 (3) 3 (164) (97) 4,341 149 Industrial and commercial equipment 40 2 (2) 40 Other assets 57 7 2 (8) 1 58 Landfills 27 4 (3) 1 28 Construction in progress and advances 107 41 (28) (2) 11 118 Leasehold improvements 24 3 3 1 (1) 6 30 Leased assets 6 (3) (3) 3 Total tangible assets 5,930 93 – 5 – – (3) 3 (200) (102) 5,828

2 - Statement of changes in intangible assets

Intangible assets Residual Changes during the period Changes during the period Residual Millions of euro value at value at 12 31 2013 Investments Category Reclassifications/other changes Disposals/Sales Write-downs Amortization Total 06 30 2014 changes changes Gross Acc. Gross Acc. in the period value amortization value amortization

Industrial patents and intellectual property rights 36 2 3 (8) (3) 33 Concessions, licences, trademarks and 150 similar rights 748 22 2 (2) 1 (20) 3 751 Goodwill 482 482 Assets in progress 21 7 (5) (1) 1 22 Other intangible assets 19 (1) (1) 18 Total intangible assets 1,306 31 – (1) – (2) 1 – (29) – 1,306

Intangible assets Residual Changes during the year Changes during the year Residual Millions of euro value at value at 12 31 2012 Investments Category Reclassifications/other changes Disposals/Sales Write-downs Amortization Total 12 31 2013 changes changes Gross Acc. Gross Acc. in the year value amortization value amortization

Industrial patents and intellectual property rights 35 6 11 13 9 20 1 36 Concessions, licences, trademarks and similar rights 752 38 5 (8) 4 (43) (4) 748 Goodwill 569 (87) (87) 482 Assets in progress 24 13 (16) (3) 21 Other intangible assets 13 9 (3) 6 19 Total intangible assets 1,393 57 – (65) (9) (8) 4 – (66) (87) 1,306 Half-yearly ﬁnancial report at June 30, 2014 2 - Statement of changes in intangible assets

2 - Statement of changes in intangible assets

Industrial patents and intellectual property rights 36 2 3 (8) (3) 33 Concessions, licences, trademarks and similar rights 748 22 2 (2) 1 (20) 3 751 151 Goodwill 482 482 Assets in progress 21 7 (5) (1) 1 22 Other intangible assets 19 (1) (1) 18 Total intangible assets 1,306 31 – (1) – (2) 1 – (29) – 1,306

3 - List of companies included in the consolidated financial statements

Company name Registered office Currency Share % Holding Shareholder Measurement method capital consolidated % (thousands) Group shareholding at 06 30 2014

Consolidation scope A2A Reti Gas S.p.A. Brescia Euro 445,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation 152 A2A Reti Elettriche S.p.A. Brescia Euro 520,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Calore & Servizi S.r.l. Brescia Euro 150,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation Selene S.p.A. Brescia Euro 3,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Servizi alla Distribuzione S.p.A. Brescia Euro 2,000 100.00% 100.00% A2A Reti Gas S.p.A. Line-by-line consolidation A2A Energia S.p.A. Milan Euro 2,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Trading S.r.l. Milan Euro 1,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Logistica S.p.A. Brescia Euro 250 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Ciclo Idrico S.p.A. Brescia Euro 70,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Ambiente S.p.A. Brescia Euro 220,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation Aspem Energia S.r.l. Varese Euro 2,000 100.00% 100.00% A2A Energia S.p.A. Line-by-line consolidation A2A Montenegro d.o.o. Podgorica (Montenegro) Euro 300 100.00% 100.00% A2A S.p.A. Line-by-line consolidation Mincio Trasmissione S.r.l. Brescia Euro 10 100.00% 100.00% A2A S.p.A. Line-by-line consolidation Assoenergia S.p.A. in liquidation Brescia Euro 126 97.76% 97.76% A2A S.p.A. Line-by-line consolidation Abruzzoenergia S.p.A. Gissi (Ch) Euro 130,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation Retragas S.r.l. Brescia Euro 34,495 91.60% 91.60% A2A S.p.A. (87.27%) A2A Reti Gas S.p.A. (4.33%) Line-by-line consolidation Aspem S.p.A. Varese Euro 174 90.00% 90.00% A2A S.p.A. Line-by-line consolidation Varese Risorse S.p.A. Varese Euro 3,624 100.00% 100.00% Aspem S.p.A. Line-by-line consolidation Ostros Energia S.r.l. in liquidation Brescia Euro 350 80.00% 80.00% A2A S.p.A. Line-by-line consolidation Camuna Energia S.r.l. Cedegolo (Bs) Euro 900 74.50% 74.50% A2A S.p.A. Line-by-line consolidation A2A Alfa S.r.l. Milan Euro 100 70.00% 70.00% A2A Trading S.r.l. Line-by-line consolidation Plurigas S.p.A. in liquidation Milan Euro 800 70.00% 70.00% A2A S.p.A. Line-by-line consolidation SEASM S.r.l. Brescia Euro 700 67.00% 67.00% A2A S.p.A. Line-by-line consolidation Proaris S.r.l. Milan Euro 1,875 60.00% 60.00% A2A S.p.A. Line-by-line consolidation Edipower S.p.A. (*) Milan Euro 1,139,312 70.95% 70.95% A2A S.p.A. Line-by-line consolidation Ecofert S.r.l. in liquidation S. Gervasio Bresciano (Bs) Euro 100 47.00% 47.00% A2A S.p.A. Line-by-line consolidation A3A S.r.l. Brescia Euro 10 100.00% 100.00% A2A S.p.A. Line-by-line consolidation Elektroprivreda Cnre Gore AD Niksic (EPCG) Niksic (Montenegro) Euro 958,666 43.70% 43.70% A2A S.p.A. Line-by-line consolidation EPCG d.o.o. Beograd Beograd (Serbia) Dinar RSD 35 100.00% 100.00% EPCG Line-by-line consolidation Zeta Energy d.o.o. Danilovgrad (Montenegro) Euro 12,240 57.86% 51.00% EPCG Line-by-line consolidation (*) The percentage does not take into account the put option. For shareholdings in the subsidiaries of the A2A Ambiente Group reference should be made to attachment 5. Half-yearly ﬁnancial report at June 30, 2014 3 - List of companies included in the consolidated ﬁnancial statements

3 - List of companies included in the consolidated financial statements

Company name Registered office Currency Share % Holding Shareholder Measurement method capital consolidated % (thousands) Group shareholding at 06 30 2014

Consolidation scope A2A Reti Gas S.p.A. Brescia Euro 445,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation 153 A2A Reti Elettriche S.p.A. Brescia Euro 520,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Calore & Servizi S.r.l. Brescia Euro 150,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation Selene S.p.A. Brescia Euro 3,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Servizi alla Distribuzione S.p.A. Brescia Euro 2,000 100.00% 100.00% A2A Reti Gas S.p.A. Line-by-line consolidation A2A Energia S.p.A. Milan Euro 2,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Trading S.r.l. Milan Euro 1,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Logistica S.p.A. Brescia Euro 250 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Ciclo Idrico S.p.A. Brescia Euro 70,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Ambiente S.p.A. Brescia Euro 220,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation Aspem Energia S.r.l. Varese Euro 2,000 100.00% 100.00% A2A Energia S.p.A. Line-by-line consolidation A2A Montenegro d.o.o. Podgorica (Montenegro) Euro 300 100.00% 100.00% A2A S.p.A. Line-by-line consolidation Mincio Trasmissione S.r.l. Brescia Euro 10 100.00% 100.00% A2A S.p.A. Line-by-line consolidation Assoenergia S.p.A. in liquidation Brescia Euro 126 97.76% 97.76% A2A S.p.A. Line-by-line consolidation Abruzzoenergia S.p.A. Gissi (Ch) Euro 130,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation Retragas S.r.l. Brescia Euro 34,495 91.60% 91.60% A2A S.p.A. (87.27%) A2A Reti Gas S.p.A. (4.33%) Line-by-line consolidation Aspem S.p.A. Varese Euro 174 90.00% 90.00% A2A S.p.A. Line-by-line consolidation Varese Risorse S.p.A. Varese Euro 3,624 100.00% 100.00% Aspem S.p.A. Line-by-line consolidation Ostros Energia S.r.l. in liquidation Brescia Euro 350 80.00% 80.00% A2A S.p.A. Line-by-line consolidation Camuna Energia S.r.l. Cedegolo (Bs) Euro 900 74.50% 74.50% A2A S.p.A. Line-by-line consolidation A2A Alfa S.r.l. Milan Euro 100 70.00% 70.00% A2A Trading S.r.l. Line-by-line consolidation Plurigas S.p.A. in liquidation Milan Euro 800 70.00% 70.00% A2A S.p.A. Line-by-line consolidation SEASM S.r.l. Brescia Euro 700 67.00% 67.00% A2A S.p.A. Line-by-line consolidation Proaris S.r.l. Milan Euro 1,875 60.00% 60.00% A2A S.p.A. Line-by-line consolidation Edipower S.p.A. (*) Milan Euro 1,139,312 70.95% 70.95% A2A S.p.A. Line-by-line consolidation Ecofert S.r.l. in liquidation S. Gervasio Bresciano (Bs) Euro 100 47.00% 47.00% A2A S.p.A. Line-by-line consolidation A3A S.r.l. Brescia Euro 10 100.00% 100.00% A2A S.p.A. Line-by-line consolidation Elektroprivreda Cnre Gore AD Niksic (EPCG) Niksic (Montenegro) Euro 958,666 43.70% 43.70% A2A S.p.A. Line-by-line consolidation EPCG d.o.o. Beograd Beograd (Serbia) Dinar RSD 35 100.00% 100.00% EPCG Line-by-line consolidation Zeta Energy d.o.o. Danilovgrad (Montenegro) Euro 12,240 57.86% 51.00% EPCG Line-by-line consolidation (*) The percentage does not take into account the put option. For shareholdings in the subsidiaries of the A2A Ambiente Group reference should be made to attachment 5. Half-yearly ﬁnancial report at June 30, 2014

4 - List of shareholdings in companies carried at equity

Company name Registered office Currency Share Holding Shareholder Carrying Measurement method capital % value at (thousands) 06 30 2014 (thousands)

Shareholdings in companies carried at equity PremiumGas S.p.A. Bergamo Euro 120 50.00% A2A Alfa S.r.l. 2,708 Equity Ergosud S.p.A. Rome Euro 81,448 50.00% A2A S.p.A. 54,219 Equity 154 Ergon Energia S.r.l. in liquidation Milan Euro 600 50.00% A2A S.p.A. Equity Metamer S.r.l. San Salvo (Ch) Euro 650 50.00% A2A Energia S.p.A. 1,542 Equity Bergamo Servizi S.r.l. Sarnico (Bg) Euro 10 50.00% Aprica S.p.A. 383 Equity SET S.p.A. Toscolano Maderno (Bs) Euro 104 49.00% A2A S.p.A. 738 Equity Azienda Servizi Valtrompia S.p.A. Gardone Val Trompia (Bs) Euro 6,000 49.15% A2A S.p.A. (48.77%) A2A Reti Gas S.p.A. (0.38%) 4,491 Equity Ge.S.I. S.r.l. Brescia Euro 1,000 44.50% A2A S.p.A. 1,878 Equity Centrale Termoelettrica del Mincio S.r.l. Ponti s/Mincio (Mn) Euro 11 45.00% A2A S.p.A. 4 Equity Serio Energia S.r.l. Concordia s/Secchia (Mo) Euro 1,000 40.00% A2A S.p.A. 759 Equity Visano Soc. Trattamento Reflui S.c.a.r.l. Brescia Euro 25 40.00% A2A S.p.A. 10 Equity LumEnergia S.p.A. Lumezzane (Bs) Euro 300 33.33% A2A Energia S.p.A. 214 Equity Sviluppo Turistico Lago d'Iseo S.p.A. Iseo (Bs) Euro 1,616 24.29% A2A S.p.A. 837 Equity ACSM-AGAM S.p.A. Monza Euro 76,619 21.94% A2A S.p.A. 33,541 Equity Futura S.r.l. Brescia Euro 2,500 20.00% A2A Calore & Servizi S.r.l. 638 Equity Prealpi Servizi S.r.l. Varese Euro 5,451 12.47% Aspem S.p.A. 955 Equity COSMO Società Consortile a Responsabilità Limitata Brescia Euro 100 52.00% A2A Calore & Servizi S.r.l. 69 Equity G.Eco S.r.l. Treviglio (Bg) Euro 500 40.00% Aprica S.p.A. 3,400 Equity Dolomiti Energia S.p.A. Rovereto (Tn) Euro 411,496 7.91% A2A S.p.A. 64,160 Equity Rudnik Uglja Ad Pljevlja Pljevlja (Montenegro) Euro 21,493 39.49% A2A S.p.A. 19,067 Equity Consolidation of the shareholdings of A2A Ambiente S.p.A. (1) 1,766 See attachment 5 Total shareholdings 191,379

(1) For shareholdings in the A2A Ambiente S.p.A. Group reference should be made to attachment 5. Half-yearly ﬁnancial report at June 30, 2014 4 - List of shareholdings in companies carried at equity

4 - List of shareholdings in companies carried at equity

Company name Registered office Currency Share Holding Shareholder Carrying Measurement method capital % value at (thousands) 06 30 2014 (thousands)

Shareholdings in companies carried at equity PremiumGas S.p.A. Bergamo Euro 120 50.00% A2A Alfa S.r.l. 2,708 Equity Ergosud S.p.A. Rome Euro 81,448 50.00% A2A S.p.A. 54,219 Equity 155 Ergon Energia S.r.l. in liquidation Milan Euro 600 50.00% A2A S.p.A. Equity Metamer S.r.l. San Salvo (Ch) Euro 650 50.00% A2A Energia S.p.A. 1,542 Equity Bergamo Servizi S.r.l. Sarnico (Bg) Euro 10 50.00% Aprica S.p.A. 383 Equity SET S.p.A. Toscolano Maderno (Bs) Euro 104 49.00% A2A S.p.A. 738 Equity Azienda Servizi Valtrompia S.p.A. Gardone Val Trompia (Bs) Euro 6,000 49.15% A2A S.p.A. (48.77%) A2A Reti Gas S.p.A. (0.38%) 4,491 Equity Ge.S.I. S.r.l. Brescia Euro 1,000 44.50% A2A S.p.A. 1,878 Equity Centrale Termoelettrica del Mincio S.r.l. Ponti s/Mincio (Mn) Euro 11 45.00% A2A S.p.A. 4 Equity Serio Energia S.r.l. Concordia s/Secchia (Mo) Euro 1,000 40.00% A2A S.p.A. 759 Equity Visano Soc. Trattamento Reflui S.c.a.r.l. Brescia Euro 25 40.00% A2A S.p.A. 10 Equity LumEnergia S.p.A. Lumezzane (Bs) Euro 300 33.33% A2A Energia S.p.A. 214 Equity Sviluppo Turistico Lago d'Iseo S.p.A. Iseo (Bs) Euro 1,616 24.29% A2A S.p.A. 837 Equity ACSM-AGAM S.p.A. Monza Euro 76,619 21.94% A2A S.p.A. 33,541 Equity Futura S.r.l. Brescia Euro 2,500 20.00% A2A Calore & Servizi S.r.l. 638 Equity Prealpi Servizi S.r.l. Varese Euro 5,451 12.47% Aspem S.p.A. 955 Equity COSMO Società Consortile a Responsabilità Limitata Brescia Euro 100 52.00% A2A Calore & Servizi S.r.l. 69 Equity G.Eco S.r.l. Treviglio (Bg) Euro 500 40.00% Aprica S.p.A. 3,400 Equity Dolomiti Energia S.p.A. Rovereto (Tn) Euro 411,496 7.91% A2A S.p.A. 64,160 Equity Rudnik Uglja Ad Pljevlja Pljevlja (Montenegro) Euro 21,493 39.49% A2A S.p.A. 19,067 Equity Consolidation of the shareholdings of A2A Ambiente S.p.A. (1) 1,766 See attachment 5 Total shareholdings 191,379

(1) For shareholdings in the A2A Ambiente S.p.A. Group reference should be made to attachment 5. Half-yearly ﬁnancial report at June 30, 2014

5 - List of companies held by A2A Ambiente S.p.A.

Company name Registered office Currency Share % Holding Shareholder Carrying Measurement method capital consolidated % value at (thousands) Group 06 30 2014 shareholding (thousands) at 06 30 2014

Consolidation scope A2A Ambiente S.p.A. Brescia Euro 220,000 Line-by-line consolidation 156 Ecodeco Hellas S.A. Athens Euro 60 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation Ecolombardia 18 S.r.l. Milan Euro 658 98.86% 98.86% A2A Ambiente S.p.A. Line-by-line consolidation Ecolombardia 4 S.p.A. Milan Euro 15,725 68.58% 68.58% A2A Ambiente S.p.A. Line-by-line consolidation Sicura S.r.l. Milan Euro 1,040 96.80% 96.80% A2A Ambiente S.p.A. Line-by-line consolidation Sistema Ecodeco UK Ltd Canvey Island Essex (UK) GBP 250 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation Vespia S.r.l. in liquidation Milan Euro 10 99.90% 99.90% A2A Ambiente S.p.A. Line-by-line consolidation A.S.R.A.B. S.p.A. Cavaglià (BI) Euro 2,582 70.00% 70.00% A2A Ambiente S.p.A. Line-by-line consolidation Nicosiambiente S.r.l. Milan Euro 50 99.90% 99.90% A2A Ambiente S.p.A. Line-by-line consolidation Ecoair S.r.l. Milan Euro 10 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation Bioase S.r.l. Sondrio Euro 677 70.00% 70.00% A2A Ambiente S.p.A. Line-by-line consolidation Montichiariambiente S.r.l. Brescia Euro 10 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation Aprica S.p.A. Brescia Euro 20,000 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation Amsa S.p.A. Milan Euro 10,000 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation

Shareholdings in companies carried at equity SED S.r.l. Robassomero (TO) Euro 1,250 50.00% A2A Ambiente S.p.A. 1,517 Equity Bergamo Pulita S.r.l. Bergamo Euro 10 50.00% A2A Ambiente S.p.A. - Equity Tecnoacque Cusio S.p.A. Omegna (VB) Euro 206 25.00% A2A Ambiente S.p.A. 249 Equity Bellisolina S.r.l. Montanaso (LO) Euro 10 50.00% A2A Ambiente S.p.A. - Equity

Total shareholdings 1,766 Half-yearly ﬁnancial report at June 30, 2014 5 - List of companies held by A2A Ambiente S.p.A.

5 - List of companies held by A2A Ambiente S.p.A.

Company name Registered office Currency Share % Holding Shareholder Carrying Measurement method capital consolidated % value at (thousands) Group 06 30 2014 shareholding (thousands) at 06 30 2014

Consolidation scope A2A Ambiente S.p.A. Brescia Euro 220,000 Line-by-line consolidation Ecodeco Hellas S.A. Athens Euro 60 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation 157 Ecolombardia 18 S.r.l. Milan Euro 658 98.86% 98.86% A2A Ambiente S.p.A. Line-by-line consolidation Ecolombardia 4 S.p.A. Milan Euro 15,725 68.58% 68.58% A2A Ambiente S.p.A. Line-by-line consolidation Sicura S.r.l. Milan Euro 1,040 96.80% 96.80% A2A Ambiente S.p.A. Line-by-line consolidation Sistema Ecodeco UK Ltd Canvey Island Essex (UK) GBP 250 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation Vespia S.r.l. in liquidation Milan Euro 10 99.90% 99.90% A2A Ambiente S.p.A. Line-by-line consolidation A.S.R.A.B. S.p.A. Cavaglià (BI) Euro 2,582 70.00% 70.00% A2A Ambiente S.p.A. Line-by-line consolidation Nicosiambiente S.r.l. Milan Euro 50 99.90% 99.90% A2A Ambiente S.p.A. Line-by-line consolidation Ecoair S.r.l. Milan Euro 10 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation Bioase S.r.l. Sondrio Euro 677 70.00% 70.00% A2A Ambiente S.p.A. Line-by-line consolidation Montichiariambiente S.r.l. Brescia Euro 10 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation Aprica S.p.A. Brescia Euro 20,000 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation Amsa S.p.A. Milan Euro 10,000 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation

Total shareholdings 1,766 Half-yearly ﬁnancial report at June 30, 2014

6 - List of available-for-sale financial assets

Company name Holding Shareholder Carrying % value at 06 30 2014 (thousands)

Available-for-sale financial assets (AFS) Infracom S.p.A. 0.44% A2A S.p.A. 155 Immobiliare-Fiera di Brescia S.p.A. 5.52% A2A S.p.A. 573 158 Azienda Energetica Valtellina e Valchiavenna S.p.A. (AEVV) 9.39% A2A S.p.A. 1,846

Other: Alesa S.r.l. 6.01% A2A Reti Gas S.p.A. AQM S.r.l. 7.52% A2A S.p.A. AvioValtellina S.p.A. 0.18% A2A S.p.A. Banca di Credito Cooperativo di Calcio e Covo Società Cooperativa n.s. A2A S.p.A. Brixia Expo-Fiera di Brescia S.p.A. 9.44% A2A S.p.A. Cavaglià Sud S.r.l. in liquidation 1.00% A2A Ambiente S.p.A. Consorzio DIX.IT in liquidation 14.28% A2A S.p.A. Consorzio Ecocarbon n.s. A2A Ambiente S.p.A. Consorzio Italiano Compostatori n.s. A2A Ambiente S.p.A. Consorzio L.E.A.P. 10.53% A2A S.p.A. Consorzio Milano Sistema in liquidation 10.00% A2A S.p.A. Consorzio Polieco n.s. A2A Ambiente S.p.A. CSEAB (previously Cramer S.c.a.r.l.) 6.67% A2A S.p.A. Emittenti Titoli S.p.A. 1.85% A2A S.p.A. E.M.I.T. S.r.l. in liquidation 10.00% A2A S.p.A. Guglionesi Ambiente S.c.a.r.l. 1.01% A2A Ambiente S.p.A. INN.TEC. S.r.l. in liquidation 11.45% A2A S.p.A. Isfor 2000 S.c.p.a. 4.94% A2A S.p.A. S.I.T. S.p.A. 0.26% Aprica S.p.A. Half-yearly ﬁnancial report at June 30, 2014 6 - List of available-for-sale ﬁnancial assets

Company name Holding Shareholder Carrying % value at 06 30 2014 (thousands)

Stradivaria S.p.A. n.s. A2A S.p.A. Tirreno Ambiente S.p.A. 3.00% A2A Ambiente S.p.A. Prva banka Crne Gore A.D. Podgorica (*) 19.76% EPCG DI.T.N.E. 1.45% Edipower S.p.A. Total other financial assets 6,142

Total available-for-sale financial assets 8,716

(*) Including the preference shares with no voting rights the shareholding in Prva banka Crne Gore A.D. Podgorica amounts to 24.10% of share capital. Note: A2A S.p.A. took part in the setting up of Società Cooperativa Polo dell’innovazione della Valtellina, subscribing 5 shares having a nominal value of 50 euro.

159

Changes in legislation Half-yearly ﬁnancial report at June 30, 2014

Changes in legislation

Energy sector Production

Legislative Decree no. 79/1999 (hereafter the Bersani decree) liberalized energy production: with the objective of encouraging competition in the market it prescribed that from January 2003 no producer may generate or directly or indirectly import more than 50% of the total 162 electricity produced and imported in Italy.

Incentives for the production of renewables

In addition, the Bersani decree set the requirement (then implemented by the Electricity, Gas and Water Authority) for the GRTN (now the GSE - the Energy Services Manager) to give priority to the use (dispatch priority) of electricity produced from renewable energy sources (in addition to that produced by cogeneration) when transmitting and dispatching electricity

The Bersani decree also set the requirement, with effect from 2001, for importers and entities in charge of plants which in any one year import or produce more than 100 GWh of electricity from non-renewable sources to put into the national electricity grid, in the following year, a proportion of electricity produced by renewable source plants, excluding cogeneration, self-consumption at the plant and exports, initially equal to 2% of the total produced/imported. These entities may also meet this requirement, wholly or in part, by buying the equivalent proportion or the relative allowances (Green Certificates, which attest the production of a specific quantity of electricity certified as produced from renewables) from other producers or from the GRTN (now the GSE).

By way of Legislative Decree no. 387/03, implementing Directive 2001/77/EC and relating to the encouragement of electricity produced from renewable energy sources in the internal electricity market, additional requirements were subsequently dictated, including: • regulation by the Electricity, Gas and Water Authority of local exchange services for plants fuelled by renewable sources having a power not exceeding 20 kW (the right to Half-yearly ﬁnancial report at June 30, 2014 Changes in legislation

the service was subsequently extended by Law no. 244/07 to plants having a power of up to 200 kW) and of dedicated services for the withdrawal (by the GSE) of the electricity produced by plants fuelled by renewable sources having a power of less than 10 MVA and by plants having any power fuelled by renewable wind, solar, geothermic, wave power, tidal power and hydraulic power sources, limited in the latter case to flowing water plants; • the introduction of specific measures to encourage the use of solar power (in the form of an incentive tariff of decreasing amount having a duration such as to ensure a fair remuneration of the investment and usage costs), which then led to the Energy Account.

In addition, by way of Law no. 244/07 (the 2008 Finance Law), an All-Inclusive Tariff was introduced which acts as an incentive mechanism, an alternative to Green Certificates, reserved for IAFR qualified plants (plants fuelled by renewable sources), having an average annual nominal power not exceeding 1 MW, or 0.2 MW for wind plants. This law also revised a number of provisions regarding Green Certificates. 163 Implementing the requirements of Directive 2009/28/EC, Legislative Decree no. 28/2011 governs the criteria for setting up incentive regimes designed to achieve the renewable production targets for the period up to 2020, then implemented by the Ministerial Decree of July 6, 2012. The provisions set out in the decree are applicable for electricity production plants fuelled by renewable sources other than photovoltaic plants, having a power of not less than 1 kW, to which incentive tariffs are recognized for which they have direct access for power levels below the thresholds set by the law, or as the result of tender procedures for power levels above these. The decree additionally grants a net production incentive for plants which produce electricity from renewable sources which began operations by December 31, 2012 and which have acquired the right to use Green Certificates for the entitlement period remaining after 2015.

Large hydroelectric derivation concessions

Changes in legislation over the past few years have in real terms led to the continuation by the present holders of the use of existing concessions even if they have formally expired, including certain of these held by A2A S.p.A., and have introduced a number of regulations to enable tenders to be held. More specifically, article 37, paragraph 4 (cf. Law no. 134/2012 converting Decree Law no. 83/2012, the “Growth Decree”) confirms the period of 5 years before the expiry of the concession as being the time limit within which a tender must be called and sets the term of future concessions in 20 years, extendible to 30 years depending on the size of the investments granted and the criteria that will be established by the ministerial decree being issued under article 12, paragraph 2 of Legislative Decree no. 79/99 Half-yearly ﬁnancial report at June 30, 2014 Changes in legislation

as amended, on a draft of which the Antitrust Authority expressed its opinion in October 2013. In addition, a special transitional regime is provided for calling tenders for concessions which have already expired or which expire on or before December 31, 2017 (those which are unable to comply with the 5 year period for calling the tender). These tenders must be called within 2 years of the effective date of the ministerial decree for implementation (as per article 12, paragraph 2 of Legislative Decree no. 79 of March 16, 1999). The new concession shall start at the end of the fifth year following the original expiry date and in any case not later than December 31, 2017.

In terms of the way in which the concession will pass from the outgoing to the incoming operator, the legislator has opted for the sale of the business unit used for the concession against the payment of a price which has been previously established and agreed between the outgoing operator and the granting administration before the offering stage, and which is published in the tender offer. The ministerial decree has the responsibility for determining the technical and economic parameters required for calculating the consideration and the amount due to the outgoing concessionaire, and should establish the detailed implementation 164 regulations for tenders, subject to the opinion of the Electricity, Gas and Water Authority (1). If no agreement can be reached between the outgoing concessionaire and the granting administration on the size of the consideration and the amount, an arbitration procedure is brought into play.

In September 2013, the European Commission initiated a fact-finding enquiry involving various member states on the conditions for allocating, extending and renewing concessions for water for hydroelectric use and additionally sent the Italian government a default notice stating that certain of the provisions just referred to (in particular the timing of the tender and the means by which the business should be transferred) and recently introduced by the Italian legislator (by way of Law no. 134/2012 converting Decree Law no. 83/2012 the “Development Law”), as well as certain rules in the legislation of the autonomous provinces of Trento and Bolzano, are inconsistent with the principles and laws of community law (freedom of establishment; article 12 of the “Bolkestein Directive” 2006/123/EC).

At the end of January the Italian government provided an initial response to the Commission’s enquiry.

At a regional legislative level, by way of article 14 of Law no. 19 of December 23, 2010, the Region of Lombardy amended Regional Law no. 26 of December 12, 2003, adding article

(1) Reference in this respect should be made to the comment in note 29 to the income statement. Half-yearly ﬁnancial report at June 30, 2014 Changes in legislation

53-bis which contains provisions on the temporary continuation of the exercising of the concessions and on the regulation of tenders for the reassignment of these, as well as the subsequent framework in this respect. Implementing these provisions, by way of Resolution no. 1205 of December 29, 2010 the Regional Council provided for the “temporary continuation” by A2A S.p.A. of the use of the derivations at Stazzona, Lovero and Grosotto which expired on December 31, 2010. The resolution additionally confirmed the requirement to pay the envisaged fees and additional fees and to carry out the ordinary and extraordinary maintenance work specified in article 53-bis; in addition, it deferred the calculation of an additional fee to be paid from January 1, 2011 to a subsequent resolution, not yet adopted as of today. A2A S.p.A. and other operators have filed an appeal against this resolution with the High Court of Public Waters (TSAP) and the verdict is still pending.

In the meantime, following the government’s challenge to certain provisions of Regional Law no. 19 of December 23, 2010, with Sentence no. 339/2011 the Constitutional Court ruled that the regional laws for governing tenders and the subsequent framework for the concessions are unconstitutional. Paragraphs 4 and 5 of article 53-bis, introduced by the above-mentioned law, which provide among other things for the possibility for the Regional Council to lay down 165 more severe conditions of use during that period, remain effective, also from an economic standpoint, although A2A S.p.A. has raised a question of constitutionality on the above verdict, on which the TSAP has not yet expressed its opinion. In addition, in August 2013, the Regional Council of Lombardy approved, pursuant to the same regulations, the temporary continuation by A2A S.p.A. until July 28, 2014 of the use of the hydroelectric concessions at San Giacomo, Premadio and Braulio which expired on July 29, 2013. A2A S.p.A. has also filed an appeal against this provision with the TSAP for various counts of illegitimacy, additionally raising the same questions of inconstitutionality as per the above-mentioned paragraphs 4 and 5, in that they fail to abide by the fundamental principle set forth in national law (article 12, paragraph 8-bis of Legislative Decree no. 79/99) whereby until the new entity awarded the concession takes over the existing holder should continue under unaltered conditions.

In conclusion, a decree of November 22, 2013 set the amount at which the additional BIM fees are to be paid by entities awarded hydroelectric derivation concessions for motive- power generation for the two-year period from January 1, 2014 to December 31, 2015. More specifically, for each kW of average nominal output granted or recognized pursuant to the Consolidated Text of legislative provisions on water and electricity plants (approved by Royal Decree no. 1775 of December 11, 1933 as amended), this amount is raised: • from 22.13 euro to 22.88 euro for motive-power generation with an average annual output exceeding 220 kW and up to 3000 kW; • from 29.40 euro to 30.40 euro for motive-power generation with an average annual output exceeding 3000 kW. Half-yearly ﬁnancial report at June 30, 2014 Changes in legislation

Lastly, the Constitutional Court handed down its judgment, with Sentence no. 25/2014, on the appeals brought by the Provinces of Trento and Bolzano concerning the alleged violation by the State of the privileges of the Autonomous Provinces laid down in constitutional provisions, as provided for in paragraphs 4 to 8 of article 37 of Decree Law no. 83 of June 22, 2012 (the “Growth Decree”), in relation to the tendering procedures for granting large hydroelectric diversion concessions and the procedures for determining the concession fees. The Court ruled that the rules on competition and public tendering procedures fall within the sole competence of national legislation (which therefore must also apply to the Autonomous Provinces) even more so - as the Court specified in the circumstances - if it is a question of regulations that “are designed to simplify access for economic operators to the energy market under uniform conditions across the country by regulating the relative published procedures with regard to the timing of the bids and the contents of the tenders”).

Remuneration of plants essential for the safety of the electricity

166 system

Terna has also confirmed for 2014 that the San Filippo del Mela 150 and 220 kV plants should be included as units essential for the working of the electricity market in 2014. Pursuant to the provisions of the Authority’s Resolution no. 635/2013/R/eel, both plants are admitted for the whole year to the cost reintegration framework (the application of the framework is extended to the first half of 2015 for the 150 kV plant).

As regards 2013, by way of Resolution no. 55/2014/R/eel the Authority determined the amounts on account of the fee for the reintegration of costs recognized to Edipower S.p.A. for managing the San Filippo del Mela 150 and 220 kV plants for the year to the extent required by the company with its specific request.

By way of Resolution no. 278/2014/R/eel the Authority adopted a number of calculations regarding the quantification of the cost reintegration fee for plants falling under the essential framework. The provision approves the typical technical parameters of the plants of Edipower S.p.A. falling under the reintegration framework for 2013 (being the same parameters applied for 2011 and 2012) and supplements the regulations on the effects of the imbalances on the reintegration charge, with retroactive effect starting from the 2013 annual fee (with a positive effect of approximately 1.2 million euro for Edipower on the fee for that year).

By way of Resolution no. 347/2014/R/eel the Authority established the balance for the reintegration fee for the costs recognized for Edipower for 2012. Half-yearly ﬁnancial report at June 30, 2014 Changes in legislation

Remuneration of production capacity availability

In its judgment in October 2013, the Regional Administrative Court (TAR) upheld the appeal filed by several operators, including A2A Trading S.r.l., to have AEEGSI Resolution no. ARG/elt 166/10 annulled in the section changing the means by which the additional fee for the remuneration of production capacity, prescribed by the transitional regulations, is calculated. By way of a sentence on June 17, the Council of State additionally rejected the appeal filed by the Authority to amend the above-mentioned sentence, confirming the validity of the position taken by the court of first instance.

Pending the settlement of the litigation, by way of Resolution no. 90/2014/R/eel the Authority had moreover provided to grant the operators concerned an advance on the additional fee for 2012 and 2013. In March 2014, Terna S.p.A. determined the amounts recognized for 2012, in accordance with the provisions of the resolution. The amounts for 2013 were determined in May for the portion due. The outstanding balance will be determined by August.

With regard to the adjustment of the standard remuneration system, by way of Resolution no. 375/2013/R/eel, the Authority verified the compliance with the regulatory scheme of the 167 new capacity market proposed by Terna S.p.A. pursuant to the provisions of Resolution ARG/ elt no. 98/11.

By way of Resolution no. 6/2014/R/eel the AEEGSI has moreover initiated a procedure for the integration of the rules of the production capacity remuneration mechanisms (both transitional and fully operational), in accordance with the provisions of the Finance Law, which came into force on January 1, 2014, which requires, based on a proposal of the Authority, that the Ministry of Economic Development (MED) should establish the conditions and means of setting up a production capacity remuneration system capable of “….. providing suitable flexibility services to the extent strictly necessary for ensuring the safety of the electricity system and the coverage of the requirements made by network managers, without any increases in electricity prices or tariffs for the end customer….. ”.

In this respect, the Authority intends to prepare a proposal which provides for: a) the setting up a market segment to supplement the capacity market outline sent by Terna to the Ministry of Economic Development, dedicated to negotiating a suitable production capacity to provide the flexibility of service needed to cover the long-term demand forecast by Terna S.p.A.; b) the remodulation of the transitory mechanism, in order to bring it into line with the objectives of the fully operational mechanism, meaning requiring the provision of “suitable flexible services, to the extent strictly necessary to ensure the security of the electricity system”. Half-yearly ﬁnancial report at June 30, 2014 Changes in legislation

Finally, given the requirements of the Finance Law, by way of a decree of June 30, 2014 the Ministry of Economic Development approved the proposal for the regulation of the system for remunerating the availability of production capacity received from Terna, which became effective at the same time, imposing a series of conditions designed to minimize the costs to be borne by the system and encourage efficiency.

By way of Resolution no. 320/2014/R/eel the Authority also extended a proposal to supplement the regulations for the transitional mechanism for remunerating electricity production capacity in order to meet the flexibility needs of the electricity system.

Remuneration of flexibility services

Paragraph 153 of article 1 of the 2014 Finance Law additionally repeals paragraph 7-bis of article 34 of Decree Law no. 83 of June 22, 2012, converted, with amendments, into Law no. 134 of August 7, 2012, which disposed in favor of the regulation, by the Electricity, Gas and

168 Water Authority, of the means of selecting, subject to an analysis of the requirements of the electricity system performed at a local level by the network manager, and remunerating the flexibility services assured by the qualified production plants, on the basis of the various offers formulated by those plants.

Primary frequency regulation

By way of Resolution no. 66/2014/R/eel, noting the technical difficulties reported by Terna S.p.A. to introduce the new rules on remuneration of the primary frequency regulation by the first of April, the Authority postponed it to the first of November, while authorizing the grid operator to implement a transitional regime, in order not to penalize those operators who had already sustained the investments needed to comply with the mechanism.

Green Certificates

By way of Resolution no. 20/2014/R/efr the AEEGSI set the average annual sales price for electricity for 2013, established to implement article 13, paragraph 3 of Legislative Decree no. 387/03 and calculated on the basis of the criteria specified in Resolution ARG/elt no. 24/08. The amount set was 65.54 €/MWh. Half-yearly ﬁnancial report at June 30, 2014 Changes in legislation

Therefore, as communicated by GSE to the operators: • the reference price for green certificates for 2014, pursuant to article 2, paragraph 148 of Law no. 244 of December 24, 2007, is 114.46 €/GC, excluding VAT, calculated as the difference between 180.00 €/MWh and the average annual sales price of electricity sold in 2013 as per article 13, paragraph 3 of Legislative Decree no. 387/03, as determined by the AEEGSI in the above-mentioned resolution; • the withdrawal price of green certificates issued for production from renewable sources in 2013 is 89.28 €/GC, excluding VAT; • the withdrawal price of green certificates issued production from cogeneration plants associated with district heating in 2013 is 84.34 €/MWh, excluding VAT.

Emissions Trading

In accordance with the current provisions on Emissions Trading, in order to fulfill the annual obligation to return CO2 emission allowances for CO2 emissions, for the second trading period (2008-2012) the maximum amount of CERs and ERUs (as an alternative to EUAs) 169 which may be used by plant operators is as follows: • 19.3% for thermoelectric plants; • 7.5% for district heating and other combustion plants of the allowances allocated free of charge.

In consideration of the fact that new entrants, in the absence of allocations, do not have the option to exchange the allowances allocated with CERs and ERUs, pursuant to the provisions of Decree no. 30/13, by way of Resolution no. 120/2014/R/efr the Authority has granted them, for the number of allowances due for each trading period considered, limited to a maximum of 19.3% or 7.5% of the allowances themselves depending on the type of plant, the difference between the unit value of the EUAs and the unit value of those which can be used as an alternative.

As far as the A2A Group is concerned, the following credits were granted to the plants considered as “new entrants” for the second trading period: • A2A Calore e Servizi: 111,616.41 euro for the Canavese plant and 5,733.48 euro for the Sesto San Giovanni plant; • Aprica: 377.52 euro for the Goltara plant; • Ergosud: 1,135,735.01 euro for Scandale turbogas; • Varese Risorse: 11,480.65 euro for the heating-cooling plant supplemented by cogeneration. Half-yearly ﬁnancial report at June 30, 2014 Changes in legislation

Withdrawal regime

By way of Resolution no. 618/2013/R/eel the Authority changed the minimum guaranteed price (lower than the previous values applied) for electricity production plants up to 1 MW fuelled by renewable sources, with effect from January 1, 2014.

To reduce the impact on the A3 component of the means by which electricity is sold, paragraph 2 of article 1 of Decree Law no. 145 of December 23, 2013 (“Destination Italy”), converted into Law no. 9/2014, also changed the withdrawal regime system, establishing that starting January 1, 2014 the withdrawal price for all renewable source plants accessing incentives for the electricity tariffs on energy produced will be equal to the hourly zone price (and not, as currently required by Resolution no. 280/07, only when the price is higher than the guaranteed minimum). This does not apply to energy produced by photovoltaic plants with a nominal peak power of up to 100 kW and hydroelectric plants of up to 500 kW.

By way of Resolution no. 179/2014/R/efr the Authority accordingly amended the provisions of Resolution no. 280/07 to introduce these requirements. 170

Economic conditions for the protected categories service

Article 1, paragraph 1 of Decree Law no. 145/2013 (“Destination Italy”), converted into Law no. 9/2014, establishes that the AEEGSI must update the criteria for determining the reference prices for supplies to end users not served by the open market within 90 days from the date when the decree becomes effective (December 24, 2013), taking account of the changes in the actual hourly price trend of electricity on the market.

By way of Resolution no. 170/2014/R/eel the AEEGSI also confirmed the criteria for determining the energy component of the economic conditions for greater protection and accordingly also the previously mentioned payment scheme, considering that it is too early to make structural changes as the dynamics in the setting of electricity market prices are still evolving.

Regulation of the electricity sector in Montenegro

Production

An increase in the use of renewable energy by the country is one of the Montenegro government’s energy policy objectives. More specifically, in September 2011 the government introduced an incentivizing tariff (by way of the “Decree on the Tariff System for the Half-yearly ﬁnancial report at June 30, 2014 Changes in legislation

Establishment of Preferential Prices of Electricity from Renewable Sources of Energy and Efficient Co-generations”) to support the production of energy from renewable sources. Power Purchase Agreements with the market operator CGES having a 12 year term are envisaged for purchasing the energy produced, at prices annually adjusted for inflation. With the approval of the implementation of Directive 2009/28/EC by the Energy Community, in October 2012 Montenegro also accepted the setting of a binding objective for producing energy from renewable sources, which must reach 33% by 2020.

Transmission and distribution tariffs/sales prices

At the end of 2011 the Energy Regulatory Agency (RAE), the autonomous and independent body having the function of regulating the energy sector, approved the method to be used for calculating electricity transmission and distribution tariffs, together with the means for establishing energy prices for sales to end customers.

The new method introduces regulatory elements into Montenegro law that are similar to 171 those in force in the principal European countries, such as the establishment of multi-year regulatory periods, the introduction of capital valuation methods and a remuneration rate and the means of making the sector more efficient through the use of price caps. The first regulatory period started on August 1, 2012 and has a three-year term. For the first year a WACC (weighted average cost of capital) of 6.8% is applied to net invested capital (meaning the value of the assets in use at the end of year t-1, stated less of any grants received and revalued for inflation). Capital is updated annually on the basis of investment plans approved by the Agency, while depreciation is charged over the useful lives included in the documents sent to the Agency on making the request for approval of the tariffs. Operating costs are calculated by applying a profit-sharing logic, starting from the figures sent by the company to the Agency.

At the present moment the tariffs calculated for the second year of the new regulatory period, which began on August 1, 2013 and will end on July 31, 2014, are in force.

At the end of December 2013, the RAE unexpectedly approved a provision to amend the current tariff methodology, impacting the method of calculating the fees for using the electricity transmission grid borne exclusively by the generation operators, for the period from January 1, 2014 to the end of July 2015. EPCG has filed an appeal for the annulment of this decision, which it believes is based on premises which are not in line with the principles of transparency and non-discrimination that should form the basis of the regulation, and which appear to be extremely detrimental to the economic and financial balance of the company. Half-yearly ﬁnancial report at June 30, 2014 Changes in legislation

Recent changes in legislation in the natural gas sector Upstream gas market

Criteria for the allocation of gas storage

By way of Decree of February 19, 2014 the Ministry of Economic Development defined the quantities and criteria for the allocation of storage capacity with reference to the period from April 2014 to March 2015, requiring that the storage capacity be allocated by means of a competitive auction.

Under this decree industrial customers in the regulated regime are allocated the capacity becoming available following the recalculation of the strategic storage volume for the regasification services to be supplied to industrial customers, and to establish the modulation storage space, which will be fully allocated by means of auction at first only to those entities that supply household customers (who will be allocated 50% of the total capacity, for a volume of up to that sold to these customers in 2013). The additional storage capacity made

172 available following the recalculation of the modulation storage space shall be allocated by means of an auction open to all applicants, also for services other than modulation.

The decree specifies the limits on capacity allocation, providing that, in all procedures no entity may obtain more than 35% of the total allocable capacity.

By way of Resolution 85/2014/R/gas, the Authority established the criteria and schedule for the gas storage auctions to be held in 2014/2015.

In order to remedy the considerable misalignment occurring for over two months between the prices at the TTF hub and the PSV, the Authority made an urgent intervention during the period when the allocations procedures were taking place, revising the way in which the storage auction reserve prices are determined. In fact this misalignment was leading to reserve prices which were excessively high for seasonal storage products compared to procurement strategies based on the Italian Virtual Trading Point (PSV) as reference for trading, with clear repercussions on the allocations and accordingly on the filling of the storage. To this end, the Authority established that this price should also be calculated by taking into consideration the forward prices listed on the PSV.

Gas exchange

Following approval by way of the Ministerial Decree of March 6, 2013, governing the functioning of the regulating the natural gas forward market (MT-GAS) established by the Half-yearly ﬁnancial report at June 30, 2014 Changes in legislation

GME, the starting date for this market was set as September 2, 2013, by way of the Decree of August 9, 2013.

The configuration of the gas market is therefore currently as follows: • Spot Gas market (MP-GAS), which started up in December 2011, consisting of the Gas Market for the Previous Day (MGP-GAS) and the Infra-daily Gas Market (MI-GAS); • Forward Gas market (MT-GAS).

To improve the liquidity in the forward gas market, Decree Law no. 145 of December 23, 2013, contains urgent measures to initiate the “Destination Italy” plan. According to paragraph 1.16 ter, each entity injecting natural gas into the national gas pipeline network, and whose wholesale market share exceeds the value of 10%, shall be subject, starting from January 1, 2004, to the obligation to offer to sell in the above-mentioned market a volume of natural gas equal to 5% of the total annual amount injected, with the simultaneous purchase offer for an equal amount, for a period of three years. A special provision will be prepared by the Electricity, Gas and Water Authority defining the procedures related to the offered sales and purchase price. 173

Balancing

With reference to the new market session G-1 (locational) introduced by way of Resolution 538/2012/R/gas, and in implementation of the subsequent provisions of the Authority, more types of flexible resources (interconnection points with other countries, Edison Stoccaggio storage sites, linepacks and unused capacity from Stogit) were introduced as part of the platform PB-Gas starting in February 2014.

On the basis of the provisions of Resolution no. 534/2013/R/gas, Snam Rete Gas is in the process of redetermining the balancing sessions for adjusting the 2013 balances. This redetermination, relating to the physical and economic items of the monthly balancing sessions in 2013 may also, in addition to the settlement of what is due with reference to the transport service, lead to a revision of the amounts paid for exceeding the capacities granted at the outlet points for the withdrawal areas of the transport network.

By way of Resolution no. 250/2013/R/gas, upholding the request of Snam Rete Gas, the AEEGSI postponed the first adjusting session as per the Consolidated Gas Settlement Text (TISG) from August 2014 to May 2015. Half-yearly ﬁnancial report at June 30, 2014 Changes in legislation

Environment sector

Recent changes in legislation in the environment sector Regulation of local public services and expiry of concessions

Local public services are now regulated not only by the relevant industry regulations (e.g. Legislative Decree no. 164/00 or Legislative Decree no. 152/06) but also by article 34, paragraphs 20-26 of Decree Law no. 179 of October 18, 2012 on “Further urgent measures for the country’s growth” (the “Growth Decree 2.0”), converted by Law no. 221 of December 17, 2012 and amended by Law no. 9/2014 and Law no. 15/14. In particular, this legislation requires that direct assignments agreed at October 1, 2003 for publicly held companies already listed at that date and for subsidiaries of these pursuant to article 2359 of the Italian civil code should cease at the expiry date specified in the service agreement or other documents governing the relationship. On the other hand assignments not having

174 an expiry date terminate on December 31, 2020, without the possibility for any extension and without the need for the body to adopt a specific resolution.

Consolidated Environment Law

Legislative Decree no. 152 of April 3, 2006 (“Regulations on environmental matters”) as subsequently amended, most recently by Legislative Decree no. 205/10 which dictates measures implementing Directive 2008/98/EC on waste, acts as the reference legislation for the environment sector.

TARES and TARI

Article 14 of Decree Law no. 201 of 2011 (the “Save Italy Decree”) introduced a new system of paying for urban waste disposal and inseparable services with effect from January 1, 2013, which went under the name of TARES.

As of January 1, 2014 TARES has been replaced by TARI, a part of the IUC, the Single Municipal Tax introduced by the Letta government in the 2014 Finance Law (Law no. 147 of December 27, 2013 on Provisions for the formation of the State’s annual and long- term budget). Half-yearly ﬁnancial report at June 30, 2014 Changes in legislation

Industrial emissions

Legislative Decree no. 46 of March 4, 2014 on provisions on industrial emissions implementing Directive 2010/75/EU, with amendments to parts II, III, IV and V of Legislative Decree no. 152/2006, has introduced new regulations having an effect on all industrial plants, with new limits to atmospheric emissions and increased and tighter controls. The decree additionally introduces the requirement to prepare a report at each start of activities and in any case whenever there are changes of an authorization nature which should photograph the situation of the effects on the environment and health of the activities in order to be able to assess the status of the production site before, after and at the end of activities.

Other measures of interest

By way of Decree Law no. 150 of December 30, 2013 (the “Thousand Extensions Decree”), a further extension to December 31, 2014 was introduced for the possibility of disposing of special urban waste with PCI > 13,000 kj/kg in a landfill. 175

Overview of the regulation of the CIP 6/92 conventions

By way of Provision no. 6 of 1992 the Interministerial Price Committee introduced incentives for the production of electricity from plants fuelled by renewable and similar sources. The provision guaranteed that ENEL would buy electricity (then the GRTN and now the GSE) at a price made up of the following two components: • incentive component (recognized only for the first eight years): based on an estimate of the additional costs for each individual technology; • avoided cost component (recognized for the whole term of the purchase agreement, up to 15 years): plant, usage and maintenance costs plus the cost of the purchase of fuel.

As is known, without prejudice to the existing situation, by way of the Finance Law for 2007 access to the incentive was restricted to plants fuelled by renewable sources. Law no. 310 of December 30, 2008 moreover returned to the subject, admitting the recognition of the incentive to plants fuelled by similar sources allowed to access to such for reasons connected with a situation of a waste emergency declared by the Prime Minister.

As the result of the expiry of the Snam/Confindustria agreement “Long-term agreement for the supply of gas for the production of electricity for sale to third parties”, the reference for updating the withdrawal price as far as the component covering avoided costs was concerned, the Electricity, Gas and Water Authority, as permitted by the legislator by article Half-yearly ﬁnancial report at June 30, 2014 Changes in legislation

2, paragraph 141 of Law no. 244/07 and article 30, paragraph 15 of Law no. 99/09, intervened on the subject with provisions no. 249/06 and ARG/elt no. 158/04 (the subject of litigation which continued for such a long period that at the end of 2013 this led the Authority to making a proposal to operators for the review of the means of calculating the component relating to the Avoided Fuel Cost applied for the electricity withdrawn in 2008) and finally with the publication of opinions sent to the Ministry concerning the most suitable means of updating the reference formula.

In this respect it is recalled that: • article 2, paragraph 141 of Law no. 244/07 states that “pursuant to article 3, paragraph 7 of Law no. 481 of November 14, 1995, starting from January 1, 2007 the average price of methane for the purpose of updating the Avoided Fuel Cost as per title II, point 7b) of provision no. 6 of the Interministerial Price Committee of April 29, 1992, published in the Official Journal no. 109 of May 12, 1992 as amended, shall be calculated by the Authority, taking into account the actual cost structure in the natural gas market”; • article 30, paragraph 15 of Law no. 99/09 states that “in compliance with the requirements 176 of article 2, paragraph 141 of Law no. 244 of December 24, 2007, starting from 2009, by way of a decree of the Ministry of Economic Development, on the proposal of the Electricity, Gas and Water Authority, the value of the Avoided Fuel Cost as per provision 6/92 of the Interministerial Price Committee of April 29, 1992, published in the Official Journal no. 109 of May 12, 1992, to be recognized on account until the annual settlement value is set, shall be updated on a quarterly basis. These revisions shall be carried out on the basis of the quarterly periods for the recording of the products in the basket of reference of the component as per the convention on the value of natural gas at point 3 of Resolution no. 154/08 of October 21, 2008 of the Electricity, Gas and Water Authority in order to take into account changes in oil product prices, also taking into account the evolution of the conversion efficiency and without prejudicing the criteria for calculating the Avoided Fuel Cost as per Resolution no. 249/06 of November 15, 2006 of such Authority”.

Changes in laws and regulations regarding the CIP 6/92 incentives

By way of Decree Law no. 69 of June 21, 2013 (the “Decreto del Fare”), converted by Law no. 98 of August 9, 2013, the government set the value of the CEC for 2013 and following years.

From 2014 the value of the CEC - as far as the gas CEC is concerned - must be updated quarterly on the basis of the procurement cost of natural gas on the wholesale markets, as determined in Deliberation no. 196/2013/R/GAS as amended. Half-yearly ﬁnancial report at June 30, 2014 Changes in legislation

As far as the waste management cycle is concerned, for waste-to-energy plants situated in emergency areas the value of the CEC will on the other hand be calculated on the basis of the basket as per Law no. 99/2009, with oil products having a weight of 60% until the completion of the eighth year of activities.

By way of Opinion no. 503/13/I/eel, the Authority reported to the Ministry of Economic Development the guidelines used to calculate the CEC for 2013 and subsequent years, implementing the provisions of the decree.

In compliance with the proposed decisions, the balance due for CEC in 2013 and the advance for the first quarter of 2014 were established by means of the decree of January 31, 2014.

Specifically, the decisions were found to be: • for 2013, more favorable for plants not located in waste crisis areas; • for the first quarter of 2014, more favorable for plants located in waste crisis areas (Acerra for the A2A Group) which were able to continue to benefit from an indexing applied to the Ptop. 177 The Ministry has also provided for the simplification of the procedure for establishing the relevant advance and settlement values for the operators included in the convention, leaving the Authority the task of calculating and publishing them on its website, subject to prior notification to the MED, starting from the second quarter of 2014.

Pursuant to the provisions of the decree, in a communication of 5 May the Electricity, Gas and Water Authority published the quantification of the Values of the CEC as per Section II point 2 of provision no. 6/92 of the CIP on account for the second quarter of 2014 for waste- to-energy plants that have been in service for not more than eight years and for plants situated in waste emergency areas, as well as for plants not falling in these categories, with reference to the period of relative entry into service.

Current regulations concerning other important incentives for the sector’s plants

In addition to the above, reference should also be made to the framework of laws and regulations set out in the premise to the information provided for the Energy Sector for matters concerning the production of electricity by biogas fuelled plants, and more specifically the provisions on Green Certificates. Half-yearly ﬁnancial report at June 30, 2014 Changes in legislation

Heat sector

Significant events during the period

The results of the fact-finding inquiry into district heating were published in March 2014. This inquiry was initiated by the Italian Antitrust Authority in December 2011 as a result of repeated reports concerning the level of tariffs, service connection constraints and the service management awarding procedures. The objective of this inquiry was to obtain an overview of the services from a legal standpoint and to check whether there were any critical issues in terms of competition in the sector, with regard to the methods for determining the price of heat, the incentives granted, the facilities for connection to the district heating network and difficulties with disconnection. This was performed to decide whether antitrust measures were necessary to restore a level playing field and, where appropriate, recommend legislative and/or regulatory measures to ensure better systemization of the service. 178 In the report on the results of the inquiry the Italian Antitrust Authority stated that it would be advantageous and appropriate to adopt legislation designed to provide a framework of rules within which the district heating network operators can operate and which, in particular, strengthens the conditions for effective ex ante competition between heating systems. Owing to the diversity that characterizes the different district heating systems in Italy, this legislation should not be based on a single model to apply to all situations but tailored to each situation. It should focus on the aspects related to the quality of the service offered.

Furthermore, the Italian Antitrust Authority stated that the legislation should identify the parties responsible for defining these provisions and monitoring compliance, without prejudice to its powers in cases where violations amount to an abuse of a dominant position.

Regulation of the service

At the end of June 2014, the Italian cabinet approved on a final basis the legislative decree implementing European Directive 2012/27/EU on energy efficiency which amends Directives 2009/125/EC and 2010/30/EU and repeals Directives 2004/8/EC and 2006/32/EC.

The aim of the decree is to reduce the European Union’s dependence on imported energy by exploiting energy efficiency and introducing measures aiming to stimulate the economy in its current state of crisis and oppose climate change. Half-yearly ﬁnancial report at June 30, 2014 Changes in legislation

Among the provisions adopted which have importance for the heat sector are a series of measures regulating the district heating service which require the AEEGSI to establish: • service quality, continuity and safety standards; • criteria for calculating user connection charges and the way in which users can exercise their disconnection rights; • the way in which prices for the supply of heat, connection, disconnection and accessory equipment should be publicized and disseminated; • reference conditions for connection to the networks; • heat cessation charges exclusively in the cases of new networks and if there is a connection requirement ratified by municipal or regional administrations.

179 Half-yearly ﬁnancial report at June 30, 2014 Changes in legislation

Networks sector

Recent changes in legislation in the transportation and distribution sector Transportation of natural gas

By way of Resolution no. 514/2013/R/gas the Authority approved the regulation for the tariff of the transportation service for the IV Regulatory Period (2014-2017). The most important points to be found in the new regulatory framework are the remuneration rate for fixed capital, set at 6.3% (with a regulatory lag of +1% for future investments), the reformulation of incentivized investments and the maintenance of a capacity and commodity tariff structure, but with the addition of an equalization mechanism for the variable part. More specifically, it provides for the phasing out of the regional fee reduction applied to points located within 15 km from the national network, introduced pursuant to Resolution ARG/gas no. 184/09.

180 Distribution of natural gas

Allocation and performance of the distribution service

In compliance with Law no. 99/2009, the “Development Law”, the Ministry of Economic Development completed the reform of the means of allocating the natural gas distribution service by establishing 177 “Minimum Territorial Ambits” (the Ministerial Decree of January 19, 2011 and the Ministerial Decree of October 18, 2011), for which tenders will be called and awarded for the allocation of the service in accordance with the requirements of the “tender regulation” (Ministerial Decree no. 226 of November 12, 2011). Regulations have also been adopted to protect the jobs of the employees of the operators involved in the restructuring of the sector (the Ministerial Decree of April 21, 2011).

Additions to the regulatory structure were been made by way of the “Decreto del fare” (Decree Law no. 69/14 of June 21, 2013), which sets peremptory deadlines for identifying the body in charge of the tender and for advertising the tender, introducing on the other hand simplified criteria for selecting this body. If the deadlines are not met, means are established for issuing penalties to the non-compliant entities and substitution powers are defined, firstly for the Region and secondly for the Ministry of Economic Development. Finally, the decree extended the deadlines set for the first two groupings of ambits by four months. Subsequently, with the “Destination Italy” decree (Decree Law no. 145 of December 23, 2013 converted into Law no. 9/2014: 1) Legislative Decree no. 164/00 has been supplemented to introduce reference to the Ministry of Economic Development’s guidelines for calculating Half-yearly ﬁnancial report at June 30, 2014 Changes in legislation

the amount to be reimbursed to the outgoing operator; 2) it has been made clear that, in any event, the private contributions relating to the local fixed assets, as valued according to the current tariff regulation methodology, shall be subtracted from the amount to be reimbursed; 3) the threshold relating to the difference between the redemption price and the value of the net fixed assets of the location calculated in accordance with the tariff regulation has been reduced to 10%, in addition to which an assessment by the AEEGSI is required; 4) the originally set deadlines have been further extended for the first two territorial areas for the activities concerning the publication of the notice, with a four month extension for those in the third group; 5) a provision was made that the outgoing operators shall pay in advance a one-off fee to the contracting authority to cover the cost of the tender. This advance will be reimbursed, inclusive of interest accrued, by the incoming concessionaire upon the awarding of the service, according to the methods defined by the AEEGSI in Resolution no. 326/204/R/gas.

Following these provisions, by way of the Ministerial Decree of May 22, 2014 guidelines have been approved relating to the criteria and means of application for the purpose of determining the reimbursement value of the natural gas distribution plants. 181

After, by way of Resolution no. 155/2014/R/gas, regulating the procedure for analyzing the tender documentation that the bodies in charge of the tender must send to the Authority, by way of Resolution no. 310/2014/R/gas, in compliance with the requirements of the “Destination Italy” decree, the Authority identified the procedure and the methodology for analyzing cases where there is a difference exceeding 10% between the plant reimbursement value and the value recognized for tariff purposes.

Distribution and metering tariffs and regulating gas quality – IV regulatory period

By way of Resolution no. 573/2013/R/gas and Resolution no. 574/2013/R/gas the Authority approved the regulation of the tariff and the quality of the service for the distribution and metering of gas for the IV regulatory period which will have a six year term (2014-2019). As in previous regulatory periods, the tariff system for the IV period also provides for tariff decoupling between the reference tariff, in order to determine the allowed revenues of the individual operator, and the mandatory tariff, actually applied to end users. The differences arising between the revenues admitted and those actually obtained are then eliminated through appropriate equalization mechanisms. The reference tariff is calculated in such a way as to ensure: 1) the remuneration of net invested capital; 2) the coverage of depreciation, calculated on the basis of the useful lives valid for regulatory purposes and 3) the coverage of operating costs, calculated on a parametric basis and updated through a price-cap method using an X-factor depending on the size of the company. The invested capital remuneration Half-yearly ﬁnancial report at June 30, 2014 Changes in legislation

rate for 2014-2015 is 6.9% for the distribution service and 7.2% for the metering service; these values will be updated at the end of 2015 for the two-year period 2016-2017 and at the end of 2017 for the two-year period 2018-2019, taking into consideration the performance of ten-year treasury bonds in the 12 months before updating. Furthermore, to minimize the time lag with which remuneration of the investments is recognized, the tariffs have been determined also bearing in mind the pre-closing value of the investments for the year t-1. The valuation of the invested capital, as well as the depreciation charge recognized in the tariff, is affected by the choice made by the operator between the two alternative frameworks for the treatment of the stock of grants existing at December 31, 2011, provided for by the regulator: in particular, “Method A” involves the treatment of the grants in continuation with past practice, does not entail their degradation, therefore, a full depreciation charge in the tariff; conversely, “Method B” involves the annual degradation of the stock of grants and the deduction of the annual degradation from the depreciation charge recognized in the tariff, along with appropriate graduality mechanisms. For the three-year period from 2014 to 2016 and for large-scale operators the X-Factor has been set as 1.7% for the distribution

182 service (2.4% in 2013) and as 0% for the metering service (2.8% in 2013); the X-factor for the subsequent three-year period (2017-2019) will be determined at the end of 2016 following a specific procedure. Unlike the previous regulatory period, the incentives for certain types of investment are recognized as part of the regulation of quality.

By way of Resolution no. 132/2014/R/gas, the Authority determined the provisional reference tariffs for the natural gas distribution and metering services for 2014. The final values will be approved by the end of the year, once the final asset values of the year t-1 are available.

Distribution default service

With its sentence of June 12, 2014 the Council of State upheld the appeals of the AEEGSI against the measures with which at the end of 2012 the Lombardy Regional Administrative Court annulled the regulation relating to the default service for the distribution of gas (the sentences in question had already been suspended for precautionary purposes at the beginning of 2013). In the meantime the Authority had supplemented the regulations on several occasions.

The Council of State accordingly upheld the regulator’s reasoning, noting that the default service leads back to the balancing service of which it forms a specific case.

As the result of the Council of State’s ruling, the AEEGSI returned as regulator of the sector. By way of Regulation no. 246/2014/R7gas it introduced provisions designed to make distribution companies responsible in order to bring the attempts to physically cut off the Half-yearly ﬁnancial report at June 30, 2014 Changes in legislation

delivery points to a successful completion. Finally, by way of Resolution no. 315/2014/R/gas, the AEEGSI adopted provisions aimed at enabling the regulations to be properly applied in the cases where the service has not been regularly provided with reference to the period between February 1 and May 31, 2014.

Electricity distribution

Distribution and metering service tariff framework

By way of Resolution ARG/elt no. 199/11 the AEEGSI adopted the Consolidated Text of provisions to regulate the transmission and distribution of electricity (TIT) and the Consolidated Text of provisions regulating the supply of the Electricity Metering Service (TIME) for the IV regulatory period (2012-2015).

In relation solely to the tariff adjustment for metering services, variations with respect to the previous regulatory period were included in the value of the X-factor (set at 7.1% per annum) and in revenue equalization for low voltage metering services. With reference to 183 the distribution service, many of the tariff regulation schemes already in force during the previous regulatory period were maintained, in particular: • the adoption of tariff decoupling, which requires a mandatory tariff to be applied to end users and a reference tariff for the definition of revenue restrictions, specific by operator calculated on the basis of the number of users (PoD); • the application of the profit-sharing method for the definition of initial operating cost levels to be recognized in the tariff; • the updating of the tariff quota covering operating costs through the price-cap method, setting the annual objective for increased productivity (X-factor) at 2.8% for distribution activities; • the evaluation of invested capital using the revalued historical cost method; • the definition of the rate of return on invested capital through WACC; • the calculation of depreciation on the basis of the useful lives valid for regulatory purposes.

By way of Resolution no. 607/2013/R/eel the Authority revised the capital remuneration rate, which for the 2014-2015 tariffs will be 6.4% (+1% for investments made after 2012 to cover the regulatory lag) compared to the present 7.6%. In addition, the same resolution amended the treatment of grants (in particular lump sum grants) which, unlike the past, will be deducted from the invested capital and not from the recognized operating costs. Lastly, the resolution introduced a new optional mechanism for integrating the revenue from lump sum connection grants for 2013, designed to cover the difference between revenues from Half-yearly ﬁnancial report at June 30, 2014 Changes in legislation

connection grants estimated by the Authority at the beginning of the regulatory period and considered in the calculation of the tariffs and the grants actually collected by the operators.

Concluding the further detailed investigations requested by A2A Reti Elettriche S.p.A. concerning the reference tariffs established by Resolution no. 122/2013/R/gas, by way of Resolution no. 258/2014/R/eel the Authority approved the reference tariffs for the electricity distribution and metering services for 2014 and remedied a material error that had been made in the calculation of the reference tariffs for 2013.

Loss equalization

By way of Resolution no. 559/2012/R/eel the Authority initiated a revision of the method of calculating the difference between actual and standard losses, initiating a project, currently in progress, designed to quantify low voltage network losses before setting up a new mechanism for calculating loss equalization on distribution networks.

184 In the same provision, pending the completion of the proceeding for revising the network loss equalization mechanism, the Authority also introduced a transitional equalization mechanism between companies, extended to 2013 (Resolution no. 608/2013/R/eel) and 2014 (Resolution no. 169/2014/R/eel). This mechanism provides for the recognition to distributors having losses lower than the standard level of only 50% of the amount due for 2012 and only 25% of that due for 2013 and 2014.

The Regional Administrative Court has upheld the appeal filed by A2A Reti Elettriche S.p.A. to annul the provisions relating to 2012 and 2013. The Authority has however filed an appeal against that sentence.

Provisions common to the two sectors (gas and electricity distribution) Energy saving and efficiency

Energy saving targets (2013 and 2014)

By way of Resolution no. 11/2013/R/efr, pursuant to the provisions of the Decree of December 28, 2012 the Authority has sent the MSE and the GSE the data needed to establish the specific primary energy saving objectives for distributors for 2013, to be achieved by the end of May 2014.

In consideration of the information made available by AEEGSI by way of Resolution 9/2013, as corrected by Determination no. 2/2014, the GSE has also informed obliged distributors Half-yearly ﬁnancial report at June 30, 2014 Changes in legislation

as to the national energy efficiency improvement quantitative targets for end users within their competence for 2014.

Tariff contribution

By way of Resolution no. 13/2014/R/efr the Authority has defined a new mechanism for determining the tariff contribution to cover the costs incurred by distributors subject to energy efficiency obligations, in force since obligatory year 2013, which entails the calculation of a preliminary unit tariff contribution and a final unit tariff contribution.

The final unit tariff contribution for the obligatory year ended and the preliminary unit tariff contribution for the obligatory year underway will be published by June 30 each year.

The preliminary unit tariff contribution for the obligatory year 2013 is set at 96.43 €/TEE. By way of the Determination of June 30, 2014, the Authority published the amounts of the final tariff contribution for the obligatory year 2013 and the preliminary tariff contribution for obligatory year 2014, calculated applying the criteria of article 3, paragraphs 1 and 2 of 185 Resolution no. 13/2014/R/eel.

The final tariff contribution for energy efficiency allowances for obligatory year 2013 is set at 110.27 €/TEE.

The final tariff contribution for energy efficiency allowances for obligatory year 2014 is set at 110.39 €/TEE.

Legislative Decree transposing the European Directive on energy efficiency

Among the measures adopted by the Legislative Decree implementing the above-mentioned European Directive 2012/27/EU on energy efficiency, the following matters are of particular importance for the networks sector: • the requirement to ensure that entities carrying out metering activities provide users with individual meters that accurately measure their actual consumption and provide information on actual time of use (“smart meters”); • provisions in favor of superseding the electricity tariff structure using a sliding scale based on consumption and adjustment of components to the cost of the actual service. Half-yearly ﬁnancial report at June 30, 2014 Changes in legislation

Integrated water service

Duration of existing allocations

Following the referendum which took place on June 12 and 13, 2011 the legislative provisions referred to in the referendum were repealed, including article 23-bis of Decree Law no. 112/2008 on the assignment of local public services of economic importance.

As concerns the existing management, as specified by article 34 of Decree Law no. 179/12, converted into Law no. 221/12, services allocated to in-house providing public companies which meet the requirements set by community jurisprudence (control over the operator the same as that carried out over internal bodies, performance of activities mostly for the administration or the administrations of shareholders, wholly publicly-held capital) remain active until their natural expiry date.

Tariff regime

186 By way of Resolution no. 643/2013/R/idr, in fulfillment of the provisions previously adopted for the first regulatory period 2012-2015, the Authority determined the Water Tariff Method (MTI) for 2014 and 2015 and established the means and timing of the approval of the tariffs for 2012 and 2013 for operators for which approval has not yet been formally resolved (which include the companies of the A2A Group) due to non-fulfillment on the part of the territorial entities.

The method exceeds the transitional logic of 2012–2013, which had two different tariff methods: • transitional tariff method for operators who used the normalized method or equivalent method; • ex CIPE transitional tariff method for operators who used the method provided in CIPE provisions.

To calculate the costs recognized in the tariff, a specific scheme (“regulatory scheme”) is provided in the MTI, which provides for four alternative methods of calculation (quadrants): • based on the ratio, for each operator, between investment needs for the period 2014 -2017 and the value of the existing infrastructures (in particular, “financial amortization” is recognized in the case where that ratio is less than the reference value (equal to 0.5); • depending on whether or not changes are made to the operator’s objectives or activities (higher coverage levels are recognized in case of changes in the scope of the activities managed). Half-yearly ﬁnancial report at June 30, 2014 Changes in legislation

By way of Resolution 163/2014/R/idr the Authority has also provided for returning to end users the integrated water service tariff component relating to the remuneration of capital, repealed through the public referendum which took place on June 12 and 13, 2011, with reference to the period from July 21, 2011 to December 31, 2011, in the first available billing, notifying the Authority within the following 30 days that the refund has been made.

On April 30, 2014, pursuant to article 5.5 of Resolution no. 643/2013/R/idr, the companies of the A2A Group provided the Authority with the information preliminary to the tariff revision for 2014 and 2015. On June 13, 2014, the Brescia Ambit Office resolved the application of the tariff revision for 2014 within the limit of the increase permitted, pending the initiation of the complete application by the Authority for a tariff update.

187

Scenario and market Half-yearly ﬁnancial report at June 30, 2014

Macroeconomic scenario

The recovery in the global economy is gaining impetus and the World Bank is estimating growth of 2.8%, driven mostly by the emerging countries. The body has reduced its estimate for 2014 over the forecast of 3.2% it made in January as the result of events that affected the first half of the year, and in particular the especially cold winter experienced in the United States (where GDP fell by 1% in the first quarter) and the crisis in the Ukraine.

Forecasts for the eurozone estimate a rise in real GDP of 0.3% in the second quarter of 2014 190 compared to the 0.2% for the first quarter (source: ISTAT). Germany continues to be the driver of the recovery in this area, supported by the countries of southern Europe including Spain which is finally beginning to reap the harvest of the severe reforms it introduced. It is expected that growth will stabilize in the second half of the year (estimates point to a rise of 0.3% in each of the third and fourth quarter of 2014) and that this will be more widespread across industries and countries than in 2013. Internal demand will be the main driving force while a slight increase is expected in net exports. The picture for unemployment painted by the OECD is still worrying: the rate in the eurozone is 11.7% (0.3 points lower than the previous year), and this will remain high and only fall slightly as the recovery in the eurozone economy will not be enough to reverse trends in the labor market. Inflation in the eurozone rose to 0.6% in the second quarter of 2014, a decrease from the 0.7% of the first quarter. The rate is expected to stabilize as the year progresses and increase slightly to 0.6% and 0.8% in the third and fourth quarters respectively (source: ISTAT). The factors contributing to keeping inflation at a low level are expectations of a weak domestic demand and persistently high unemployment.

As far as the performance of the Italian economy is concerned, it is expected that the change in the country’s GDP for the second quarter of 2014 over the first will lie in a range between -0.1% and +0.3%. This forecast has been revised down in terms of both the maximum level of expected growth (forecast at +0.4% in March 2014) and the minimum level (forecast at +0.1% in March 2014). ISTAT is therefore taking the minimum into negative territory, and the Half-yearly ﬁnancial report at June 30, 2014 Macroeconomic scenario

possibility of a fall in GDP in the second quarter, as well as the first, has begun to appear, with all that follows in terms of a technical recession (two successive quarterly falls). The way in which the economy will evolve in 2014 as a whole is conditioned by the high levels of uncertainty and the ever difficult conditions on the credit market, where it is considered that only a slight improvement has occurred. A positive sign is that expenditure on capital goods, the main driver for the recovery, could benefit from the improved conditions of business liquidity arising from the refinancing operations at subsidized interest rates announced by the Governing Council of the ECB at the beginning of June. As for unemployment, Italy with its 12.6% has one the worst rates in the eurozone after Spain, Portugal and Slovakia. ISTAT is stressing that the labor market is showing initial favorable signs, which do not however point to a clear reversal in the trend. According to ISTAT’s preliminary estimates the national retail price index (NIC) rose by 0.1% in June over the previous month and by 0.3% over June 2013. This is the lowest level since 2009, when Italy found itself in the midst of its worst recession for several years.

The exchange rate of the single currency with the US dollar was 1.37 in the second quarter of 2014, representing an increase of 5% over the second quarter of 2013 when it was worth 1.31 191 dollars. The ECB is forecasting an exchange rate of 1.36 €/$ between 2014 and 2016.

The governor of the European Central Bank, Mario Draghi, left the eurozone’s reference interest rate unchanged at the bank’s most recent meeting in July. The rate therefore still remains at its historic low of 0.15%, the level reached on June 5, 2014 when the European Central Bank announced the package of measures it intends to implement. Following the latest cut Euribor rates have fallen to their lowest ever levels. The monthly rate has fallen from 0.24% to 0.10% while the quarterly rate has dropped from 0.30% to 0.21%. The ECB has also stated that reference interest rates will remain as their present levels for an extended period of time, given the present prospects for inflation. Half-yearly ﬁnancial report at June 30, 2014

Energy market trends

The price of energy commodities was significantly affected in the first half of the year by the uncertainties in the world macroeconomic situation and the weakness of the basics of supply and demand on the markets.

The average price of Brent in the first half of 2014 was 108.8 $/bbl, representing an increase of around 1% over the average for the first half of 2013. This change was characterized by an increase in spot and forward prices, in particular in May and June (with amounts exceeding 192 115 $/bbl), due to the tension in the Middle East and the violent clashes which broke out in Iraq. The WTI also posted price increases as a result of the situation in Iraq: quotations rose by 3% on a short-term basis.

In its report of June 13, 2014, the International Energy Association left its demand forecast for 2014 practically unchanged compared with that in its previous report of March 13: expected growth will be wholly led by non-OECD countries, which during the present year represent around 50% of world demand. On the production side, the OPEC survey conducted by Thomson Reuters shows that growth in production by the Middle-Eastern countries (above all Iraq, Iran and Saudi Arabia) continued in the first four months of 2014, while conversely output was much lower than 2013 in countries such as Libya, Angola and Nigeria, which are at grips with a highly unstable political situation. For the moment Iraq has not seen any falls in production, which in fact it continues to rise at increasing rates. The IEA’s production forecast was revised slightly upwards for both the OPEC countries and those not belonging to the cartel. An overall level of 91.8 Mbbl/g is expected for this year, representing a rise of 1.7% over 2013. Leading the pick-up in production will above all be the OECD producing countries, the United States in particular, with an increase of 5.5% over 2013 and a rise of almost 4% in the share of demand covered by that production.

Coal is still suffering, feeling the effects of a demand structure that is still weak. The average price of coal with delivery at the ports of Amsterdam-Rotterdam-Antwerp (Coal Cif Ara) was 76.6 $/tonne for the period in question, a fall of around 8% over the first half of 2013. The slowdown in the emerging economies, in particular those in Asia, the mild spring and Half-yearly ﬁnancial report at June 30, 2014 Energy market trends

the abundance of supply kept prices low. The coal market at a world level is still very weak, above all due to the considerable competition with gas in the United States and the fears that in the medium term the emerging countries will not be able to sustain growth rates in line with those seen since the start of the first decade of this century.

Electricity

As far as the national electricity market scenario is concerned, there was a net requirement of 152,949 GWh (source: Terna) for electricity in Italy in the first half of 2014, a fall of 3% over the volumes of the corresponding period of the previous year. The figures for the half year were affected by a demand for electricity that is still very weak and relatively high temperatures, which further depressed the demand for electricity.

The reduced domestic demand led to a decrease of 4% in net production over the first half of 2013, which totaled 132,057 GWh. Conversely, imports rose by 3.1% over the corresponding period of the previous year. 193

National production, excluding pumping, covered 85.6% of the demand for energy, while net imports satisfied the remainder.

The first half of 2014 was characterized by exceptional hydraulicity, supporting production from hydroelectric sources which rose by 11.1% over the first half of 2013 to reach 30,351 GWh, a level not seen since 2006. Thermoelectric production fell by 10.1% to 78,989 GWh compared to 87,862 GWh in the corresponding period of 2013. Average working hours estimated at a national level for all the thermoelectric technologies for the first half of 2014 fell by 7% over the corresponding period of 2013.

Production from renewable sources rose, in particular that from photovoltaic sources, which increased by 8.6% to reach 11,781 GWh as the consequence of meteorological conditions characterized by greater solar radiation, and that from geo-thermal sources, which posted an increase of 4.7%. Conversely wind-farm production fell by 8.1% to 8,214 GWh.

The persistence of weak demand during the year, with the significant slowdown of activities in the industrial and service sectors, had a considerable effect on prices listed on the power exchange: the average baseload PUN (Single Average Price) for the half year settled at an average level of 49.5 €/MWh, representing a decrease of 18% over the figure of 60.6 €/MWh for the corresponding period of the previous year. Peak load prices also fell (-18% for peak load PUN to reach 56.8 €/MWh) as did off-peak prices (-18% for off-peak PUN to reach 45.6 €/MWh). Half-yearly ﬁnancial report at June 30, 2014 Energy market trends

At an area level there was a mismatching of prices between Sardinia and the Centre South. Sardinia posted several price peaks due to the extended unavailability of the Fiumesanto plant. The biggest differences occurred during off-peak hours, when the passage of energy in the cable that connects the two areas is reduced for safety reasons.

Natural gas

In the first half of 2014 the demand for natural gas fell by 14.4% over the corresponding period of the previous year, to close at 32,647 Mcm (Source: Snam Rete Gas). Imports represented approximately 89.5% of requirements excluding changes in stocks, while domestic production satisfied the remainder. In the first half year the thermoelectric sector fell by 16.2% over the corresponding period of the previous year. There was a decrease of 17.6% in the residential and commercial segment compared with the first half of 2013. Industrial usage also fell, but to a more limited extent, by around 1%.

194 On the supply side there was a fall in both domestic production (-7.5% compared to the first six months of 2013) and in imports of natural gas, which dropped by 4.7%. In May imports rose by 7%; this increase fell more into perspective in June as the crisis between Russia and the Ukraine deteriorated.

Prices in Europe continued to fall in line with the exceptionally mild temperatures. At the same time the spread between the price on the Italian Virtual Trading Point (PSV) market (the spot market for gas in Italy) and the Title Transfer Facility market (the TTF, the spot market for gas in Northern Europe) narrowed, with an average for the quarter of approximately 1.54 €/MWh.

In particular, the PSV gas price for the half year was 23.17 €/MWh, a fall of 16.5% over the first half of 2013, while the TTF gas price was 21.63 €/MWh, a drop of 20.1% over the corresponding period of the previous year. Analysis of main sectors of activity Half-yearly ﬁnancial report at June 30, 2014 Analisis of main sector of activity

The A2A Group operates in the following sectors:

Energy Sector

This sector’s activity is the sale of electricity and methane gas on wholesale and retail markets. Support for the marketing areas is assured by fuel procurement, electricity generation plant planning and dispatching, portfolio optimization and trading on domestic and foreign markets.

Environment Sector

This sector’s activity relates to the whole waste management cycle, which ranges from collection and street sweeping to the treatment, disposal and recovery of materials and energy. It includes the recovery of the energy content in waste by means of waste to energy

196 or biogas plants.

Heat and Services Sector

This sector’s activity is mainly the sale of heat and electricity produced by cogeneration plants (mostly owned by the Group). Cogenerated heat is sold through district heating networks. The sector also provides management services for heating plants owned by third parties (heat management services).

Networks Sector

This sector’s activity consists of the technical and operational management of networks for the transmission and distribution of electricity, the transport and distribution of natural gas and the management of the entire integrated water cycle (water captation, aqueduct management, water distribution, sewerage network management, purification). Also included are activities relating to public lighting, traffic regulation systems, the management of votive lights and systems design services. Half-yearly ﬁnancial report at June 30, 2014 Analisis of main sector of activity

Other Services and Corporate

Corporate services consist of the guidance, strategic direction, coordination and control of industrial operations, as well as business and operating activity support services (e.g. administrative and accounting services, legal services, procurement services, personnel management services, information technology services, telecommunications services, etc.). Other services include video-surveillance, data transmission, telephony and internet access services.

197 Half-yearly ﬁnancial report at June 30, 2014

Energy sector

The Energy Sector comprises the following activities: • Electricity generation: power plant management through a generation pool of hydroelectric and thermoelectric plants with installed power of 10.1 GW (1); • Energy management: the purchase and sale of electricity and gaseous and non-gaseous fuels on national and international wholesale markets; the procurement of the fuels needed to meet the requirements of the thermoelectric plants and customers; planning,

198 programming and dispatching for electricity generation plants; • Sale of electricity and gas: marketing of electricity and gas to the eligible customer market. Also included is the sale of electricity to customers eligible for “higher protection”.

In addition to the activities carried out directly by A2A S.p.A., the Energy Sector also includes the following companies:

Energy Consolidated companies of the A2A Group

Thermoelectric and • Abruzzoenergia • Plurigas in liquidation hydroelectric plants • A2A Energia • Aspem Energia Energy Management • A2A Trading • EPCG Sale of electricity and gas • Edipower

(1) Includes 100% of the Edipower S.p.A. plants and the EPCG plants. Half-yearly ﬁnancial report at June 30, 2014 Energy sector

The quantitative and economic figures for the first half of 2014 are not comparable with those for the corresponding period of the previous year as the results for 2013 include a contribution of 77% arising from the production of the thermoelectric and hydroelectric plants of Edipower S.p.A. until October 2013. The production of the Turbigo thermoelectric plant and the Tusciano hydroelectric complex are not included from November 2013 onwards following the non-proportional demerger from Edipower S.p.A. into Iren Energia S.p.A., while the other plants of Edipower S.p.A. made a full contribution.

Quantitative data - electricity sector

The following is a summary of the key quantitative data of the Energy Sector.

GWh 06 30 2014 06 30 2013 Change % 2014/2013

SOURCES Net production 5,701 5,930 (229) (3.9%) -thermoelectric production 2,657 3,518 (861) (24.5%) 199 -hydroelectric production 3,042 2,411 631 26.2% -photovoltaic production 2 1 1 100.0% Purchases 21,208 16,555 4,653 28.1% -single buyer 1,206 1,381 (175) (12.7%) -exchange 3,686 5,003 (1,317) (26.3%) -foreign markets 7,870 5,871 1,999 34.0% -other purchases 8,446 4,300 4,146 n.a. TOTAL SOURCES 26,909 22,485 4,424 19.7% USES Protected market sales 1,206 1,381 (175) (12.7%) Sales to eligible customers and wholesalers 12,428 9,797 2,631 26.9% Sales on the exchange 6,420 6,377 43 0.7% Sales on foreign markets 6,855 4,930 1,925 39.0% TOTAL USES 26,909 22,485 4,424 19.7%

Note: the sales figures are stated gross of any losses. The quantitative data relating to the EPCG Group are not included.

The Group’s electricity output in the first half of 2014 totaled 5,701GWh, to which should be added purchases of 21,208 GWh for a total availability of 26,909 GWh.

Production fell by 3.9% over the first six months of 2013. More specifically the decrease in thermoelectric production, due above all to the lower load factor of the combined cycle plants, was only partially offset by the increase of 26.2% in hydroelectric production arising from the extraordinary precipitation in the first half of 2014. Half-yearly ﬁnancial report at June 30, 2014 Energy sector

As a result of the reduction in production, purchases of electricity increased by 28.1% over the first half of 2013, from 16,555 GWh to 21,208 GWh, in order to deal with the increase in uses.

Sales of electricity on end markets and foreign markets rose by 26.9% and 39.0% respectively while sales on the IPEX markets were broadly in line with the first half of 2013 (+0.7%), whereas there was a fall in sales on the protected market (-12.7%). Taken as a whole electricity sales made by the energy sector reached a total of 26,909 GWh (22,485 GWh in the first half of 2013).

The following is a summary of the key quantitative data relating to the electricity sector of the EPCG Group:

GWh 06 30 2014 06 30 2013 Change % 2014/2013

SOURCES Production 1,460 2,282 (822) (36.0%) -thermoelectric production 590 522 68 13.0% 200 -hydroelectric production 870 1,760 (890) (50.6%) Import and other sources 522 (74) 596 n.a. -import 518 65 453 n.a. -other sources 4 4 – 0.0% EPS (Serbian Electricity Company) – (143) 143 (100.0%) TOTAL SOURCES 1,982 2,208 (226) (10.2%) USES Domestic market consumption 1,561 1,490 71 4.8% Network losses 61 80 (19) (23.8%) Other uses 18 63 (45) (71.4%) Export 342 451 (109) (24.2%) EPS (Serbian Electricity Company) – 124 (124) (100.0%) TOTAL USES 1,982 2,208 (226) (10.2%)

The total availability of the EPCG Group in the first half of 2014 was 1,982 GW (2,208 GW in the first half of 2013).

The EPCG Group produced a total of 1,460 GWh (-36.0% over the first half of 2013), of which 590 GWh from thermoelectric sources and 870 GWh from hydroelectric sources.

The decrease in production is essentially due to hydroelectric sources (-890 GWh), which in the first half of 2013 saw results higher than the historical average due to the exceptional rainfall. These changes, against a slight rise in domestic demand (+4.8%), led to an increase in the quantity of electricity imported (+453 GWh) and a decrease in the quantity of electricity exported. Half-yearly ﬁnancial report at June 30, 2014 Energy sector

The electricity trade exchange agreement with EPS (the Serbian Electricity Company) was terminated with effect from January 1, 2014. The relative electricity inflows and outflows were therefore zero in the first half of 2014.

Quantitative data - gas sector

Millions of cm 06 30 2014 06 30 2013 Change % 2014/2013

SOURCES Procurement 1,765 1,658 107 6.5% Withdrawals from stock 26 149 (123) (82.6%) Internal consumption/GNC (5) (5) – 0.0% TOTAL SOURCES 1,786 1,802 (16) (0.9%) USES End uses 674 868 (194) (22.4%) Thermoelectric uses 259 405 (146) (36.0%) Heat uses 60 84 (24) (28.6%) 201 Wholesalers 793 445 348 78.2% TOTAL USES 1,786 1,802 (16) (0.9%)

Quantities are stated at standard cm at an HCV of 38100 MJ on delivery

The volume of gas sold in the first half of 2014 amounted to 1,786 million cubic meters, broadly in line with the first half of the previous year (1,802 million cubic meters). The decrease of 36.0% in thermoelectric uses and 22.4% in sales to end customers, caused by the especially mild weather in the period, were partially offset by an increase in sales on the gas wholesale market (+348 million cubic meters over the first half of 2013).

Economic data

Millions of euro 01 01 2014 01 01 2013 Change 06 30 2014 06 30 2013

Revenues 1,987 2,199 (212) Gross operating income 262 293 (31) % of revenues 13.2% 13.3% Depreciation, amortizations, provisions and write-downs (141) (172) 31 Net operating income 121 121 – % of revenues 6.1% 5.5% Investments 23 31 (8)

Revenues in the Energy Sector totaled 1,987 million euro in the first half of 2014 (2,199 million euro in the first half of 2013). Half-yearly ﬁnancial report at June 30, 2014 Energy sector

Gross operating income, which amounted to 262 million euro, decreased by 31 million euro over the first half of the previous year. This decrease can be essentially attributed to the result of the subsidiary EPCG, which although positive and amounting to 22 million euro fell by 31 million euro in this area over the first six months of the previous year, which benefited from higher hydroelectric production. Excluding this effect, the gross operating income of the Energy Sector was in line with that of the first half of 2013, thanks to increased margins earned on the environmental allowances markets and the positive performance of trading activities.

Depreciation, amortization, provisions and write-downs totaled 141 million euro (172 million euro in the six months ended June 30, 2013). The decrease of 31 million euro in this item is due for 9 million euro to a lower depreciation and amortization charge and for 22 million euro to reduced provisions and write-downs compared with the first half of the previous year, when EPCG made higher accruals for bad debts.

As a result of the above changes the sector earned net operating income of 121 million euro

202 (121 million euro in the first half of 2013).

Capital expenditure for the period totaled 23 million euro, of which 5 million euro relating to the EPCG Group. This consisted mainly of extraordinary maintenance at the hydroelectric plants in Calabria and Udine for 6 million euro, at the coal thermoelectric plant at Monfalcone for 6 million euro and at the combined cycle thermoelectric plant at Gissa for 1 million euro. In addition, A2A Trading S.r.l. and A2A Energia S.p.A. made investments in information systems totaling 3 million euro.

The EPCG Group made investments which essentially related to extraordinary maintenance at the thermoelectric plant at Pljevlja (3.2 million euro) and the hydroelectric plants at Perucica (1.2 million euro) and Piva (0.6 million euro). Half-yearly ﬁnancial report at June 30, 2014

Environment sector

The Environment Sector comprises the activities relating to the entire waste management 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 waste in order to make it suitable for the recovery of materials, waste to energy recovery

or disposal in landfills; 203 • Disposal: this involves the final disposal of urban and special waste in combustion plants or landfills, where possible recovering energy through waste to energy or the use of biogas.

The following companies form part of the Environment Sector:

Environment Consolidated companies of the A2A Group

Collection and street • A2A Ambiente • Montichiariambiente sweeping • Amsa • Aspem S.p.A. Treatment • Aprica Disposal and energy recovery Half-yearly ﬁnancial report at June 30, 2014 Environment sector

The following is a summary of the key quantitative and economic data of the Environment Sector.

Quantitative data

06 30 2014 06 30 2013 Change % 2014/2013

Waste collected (Kton)* 465 460 5 1.1% Waste disposed of (Kton) 1,276 1,284 (8) (0.6%) Electricity sold (GWh) 557 557 – 0.0% Heat sold (GWht)** 564 646 (82) (12.7%)

(*) Waste collected in the municipalities of Milan, Brescia, Bergamo and Varese (**) Quantities at the plant entrance

There was an increase of 1.1% in the quantity of waste collected compared with the first half of 2013, essentially due to an increase in the quantities collected in the municipality of Milan.

204 On the other hand the quantity of waste disposed of fell slightly, by 0.6%, over the first six months of 2013, mainly as the result of the scheduled stoppage of the Milan waste-to-energy plant for maintenance in the second quarter of 2014 (in 2013 this stoppage took place in the third quarter). The production of heat by the waste-to-energy plants fell over the first half of 2013 (-82 thermal GWh) due to the decreased quantities required by the district heating sector. The quantity of electricity sold, 557 GWh, was in line with the first half of 2013.

Economic data

Millions of euro 01 01 2014 01 01 2013 Change 06 30 2014 06 30 2013

Revenues 401 448 (47) Gross operating income 115 155 (40) % of revenues 28.7% 34.6% Depreciation, amortizations, provisions and write-downs (40) (32) (8) Net operating income 75 123 (48) % of revenues 18.7% 27.5% Investments 21 18 3

The Environment Sector posted revenues of 401 million euro in the first half year (448 million euro in the first half of 2013). Half-yearly ﬁnancial report at June 30, 2014 Environment sector

Gross operating income amounted to 115 million euro, a decrease of 40 million euro over the first half of 2013.

This difference is mainly due to income of 27 million euro recognized in the first half of 2013 relating to 2012 and regarding the sales price of electricity produced under the CIP 6 framework, and to the lower revenues arising from the expiry of the CIP 6 conventions for the waste-to-energy plant at Brescia.

Excluding these items, the sector would have posted gross operating income in the first half of 2014 slightly higher than that earned in the first half of 2013, as the result of the margins earned by the industrial activity of waste disposal and the construction of treatment plants, as well as the expansion of collection and street sweeping services in the municipality of Como and a number of municipalities in the Milan hinterland.

Depreciation, amortization, provisions and write-downs amounted to 40 million euro, an increase of 8 million euro over the first half of the previous year. This difference is mainly due to increased provisions for risks made during the period for fiscal and legal disputes. 205 As a consequence of the above changes net operating income amounted to 75 million euro (123 million euro for the six months ended June 30, 2013).

Capital expenditure for the period totaled 21 million euro and mainly related to maintenance and development work on treatment plants and landfills (9 million euro) and on waste-to- energy plants (4 million euro) and the purchase of collection vehicles and containers (7 million euro). Half-yearly ﬁnancial report at June 30, 2014

Heat and services sector

The Heat and Services Sector comprises the activities of cogeneration, district heating and the sale of heat, as well as other activities relating to heat management and facility management services. 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 and maintenance activities on cogeneration plants and district heating networks;

206 • Heat and other services: management of heating plants owned by third parties.

The following companies form part of the Heat and Services Sector:

Heat and services Consolidated companies of the A2A Group

Cogeneration • A2A Calore & Servizi plants • Proaris District heating networks • Varese Risorse Sale of heat and other services Half-yearly ﬁnancial report at June 30, 2014 Heat and services sector

Quantitative data

GWht 06 30 2014 06 30 2013 Change % 2014/2013

SOURCES Plants at: 583 761 (178) (23.4%) - Lamarmora 224 320 (96) (30.0%) - Famagosta 75 92 (17) (18.5%) - Tecnocity 32 42 (10) (23.8%) - Other plants 252 307 (55) (17.9%) Purchased from: 566 710 (144) (20.3%) . Third parties 136 171 (35) (20.5%) . Other sectors 430 539 (109) (20.2%) TOTAL SOURCES 1,149 1,471 (322) (21.9%) USES Sales to end customers 1,149 1,471 (322) (21.9%) TOTAL USES 1,149 1,471 (322) (21.9%)

Notes: - The figures only refer to district heating. Sales relating to heat management are not included. - Purchases include the quantities of heat purchased from the Environment Sector. 207

There was a decrease of 21.9% in the sale of heat to end customers in the first half of 2014 compared with the corresponding period in 2013 mainly due to the high temperatures that characterized the first three months of the year. At a national level, in fact, the winter quarter 2013-2014 saw average seasonal temperatures higher by 2/3 °C than the average temperatures for the period for the past thirty years. As a consequence the production and purchase of heat fell in the half year by 178 thermal GWh and 144 thermal GWh respectively.

Economic data

Millions of euro 01 01 2014 01 01 2013 Change 06 30 2014 06 30 2013

Revenues 146 205 (59) Gross operating income 39 57 (18) % of revenues 26.7% 27.8% Depreciation, amortizations, provisions and write-downs (15) (8) (7) Net operating income 24 49 (25) % of revenues 16.4% 23.9% Investments 25 13 12

Revenues amounted to 146 million euro in the first half of 2014 (205 million euro in the first half of 2013). Half-yearly ﬁnancial report at June 30, 2014 Heat and services sector

Gross operating income totaled 39 million euro, a decrease of 18 million euro over the first half of 2013. As discussed above, this decrease, which regards both district heating and heat management, is essentially due to the unusual weather conditions, especially in the first quarter of 2014. Conversely temperatures were below historical averages in the first few months of 2013. This adverse effect was partially offset by the effective steps taken in commercial development and the increased margins earned from the sale of the white certificates granted for the management of the district heating service in Milan, Brescia and Bergamo.

Depreciation, amortization, provisions and write-downs amounted to 15 million euro, an increase of 7 million euro over the corresponding period of the previous year, due mainly to an increase in provisions for risks.

As a result of these changes net operating income totaled 24 million euro (49 million euro in the first half of 2013).

Capital expenditure for the period amounted to 25 million euro and related mainly to 208 maintenance and development work on district heating networks (18 million euro) and new cogeneration plants (5 million euro), mainly in the Milan, Brescia and Bergamo areas, and the installation of new sub-plants (2 million euro). Half-yearly ﬁnancial report at June 30, 2014

Networks sector

The Networks Sector comprises the activities regulated by sector authorities relating to the management of the electricity and gas networks and the integrated water cycle. These activities are briefly described below: • 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,

sewage and purification; 209 • Other services: activities relating to public lighting, traffic regulation systems, the management of votive lights and systems design services.

The following companies form part of the Networks Sector:

Networks Consolidated companies of the A2A Group

Electricity networks • A2A Reti Elettriche • Camuna Energia • A2A Reti Gas • Retragas Gas networks • A2A Ciclo Idrico • Seasm Integrated water cycle • EPCG • Aspem S.p.A. • Mincio Trasmissione • A2A Servizi alla distribuzione Half-yearly ﬁnancial report at June 30, 2014 Networks sector

The following is a summary of the key quantitative and economic data of the Networks Sector.

Quantitative data

06 30 2014 06 30 2013 Change % 2014/2013

Electricity distributed (GWh) 5,405 5,533 (128) (2.3%) Gas distributed (Mcm) 1,020 1,227 (207) (16.9%) Gas transported (Mcm) 190 234 (44) (18.8%) Water distributed (Mcm) 30 32 (2) (6.3%)

Electricity distributed in the first half of 2014 totaled 5,405 GWh, a decrease of 2.3% over the first half of 2013. The especially mild weather in the first three months of 2014 led to a decrease in the quantity of gas distributed and transported, which compared with the first half of the previous year 210 fell by 16.9% and 18.8% respectively. Water distributed amounted to 30 million cubic meters (32 million cubic meters in the first half of 2013).

The EPCG Group distributed electricity totaling 1,207 GWh on the low and medium voltage network in Montenegro (1,274 GWh in the first half of 2013).

EPCG 06 30 2014 06 30 2013 Change % 2014/2013

Electricity distributed (GWh) 1,207 1,274 (67) (5.3%)

Economic data

Millions of euro 01 01 2014 01 01 2013 Change 06 30 2014 06 30 2013 Revenues 395 361 34 Gross operating income 146 121 25 % of revenues 37.0% 33.5% Depreciation, amortizations, provisions and write-downs (51) (52) 1 Net operating income 95 69 26 % of revenues 24.1% 19.1% Investments 50 50 –

The Networks Sector had revenues of 395 million euro in the period, of which 38 million euro attributable to the EPCG Group (361 million euro in the first half of 2013, of which 35 million euro attributable to the EPCG Group). Half-yearly ﬁnancial report at June 30, 2014 Networks sector

Gross operating income for the Networks Sector closed at 146 million euro, a rise of 25 million euro over the first half of 2013. The result for the six months ended June 30, 2013, however, included a provision of 10 million euro made for redundancy costs arising from the business restructuring plan. Excluding this effect, the sector’s gross operating income rose by 15 million euro over the corresponding period in 2013.

Regarding the various subsectors: • the electricity distribution subsector increased its margin by 18 million euro. The positive effect of the application from June of Resolution no. 258/14/R/eel issued by the AEEGSI, which led to an increase in the revenues approved for A2A Reti Elettriche for 2012, 2013 and 2014, was only partially offset by the application of the regulation (Resolution no. 608/13 issued by the AEEGSI in December 2013) which amended the criteria for calculating network losses, with retroactive effect to 2013. The electricity distribution subsector of the EPCG Group made a positive contribution due to an increase in distribution tariffs; • there was a decrease in the gross operating margin of the gas distribution subsector (which ended the first half of 2014 with a gross operating loss of 2 million euro) compared with the first half of 2013, mainly due to the reduction in revenues approved 211 for distribution activities for 2014 (Resolution no. 132/14/R/gas issued by the AEEGSI), as well as lower revenues for connection contributions; • the water subsector earned a margin broadly in line with that for the first six months of 2013.

Depreciation, amortization, provisions and write-downs totaled 51 million euro, essentially in line with the first half of 2013.

As a result of the above changes, net operating income amounted to 95 million euro (69 million euro in the six months ended June 30, 2013). Capital expenditure for the period amounted to 44 million euro and regarded: • in the electricity distribution subsector, development and maintenance work on plants and in particular the connection of new users, maintenance work on secondary cabins, the extension and refurbishment of the medium and low voltage network and the maintenance and upgrading of primary plants (20 million euro); • in the gas distribution subsector, development and maintenance work on plants relating to the connection of new users and the replacement of medium and low pressure piping and gas meters (17 million euro); • in the integrated water cycle, work carried out on the water transportation and distribution network and the sewerage networks (7 million euro).

The capital expenditure incurred by the EPCG Group, amounting to 6 million euro, mainly regarded development and maintenance work carried out on the electricity distribution network (0.8 million euro) and work carried out to replace traditional meters with devices managed by remote control (4.8 million euro). Half-yearly ﬁnancial report at June 30, 2014

Other services and corporate

The following is a brief description of the activities carried out by this sector: • Corporate: 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 business and operating activities (e.g. administrative and accounting services, legal services, procurement, personnel management, information technology, communication services, etc.) provided by the

212 parent company under specific intercompany service agreements; • Other services: activities relating to video-surveillance, data transmission, telephony and internet access services.

In addition to the activities carried out directly by A2A S.p.A., this area also includes the following companies:

Other services and Consolidated companies of the A2A corporate Group

Other services • Selene • A2A Logistica • Aspem S.p.A. • EPCG Corporate Half-yearly ﬁnancial report at June 30, 2014 Other services and corporate

Economic data

Millions of euro 01 01 2014 01 01 2013 Change 06 30 2014 06 30 2013

Revenues 118 115 3 Gross operating income (11) (16) 5 % of revenues (9.3%) (13.9%) Depreciation, amortizations, provisions and write-downs (2) (16) 14 Net operating income (13) (32) 19 % of revenues (11.0%) (27.8%) Investments 5 6 (1)

The Other Services and Corporate Sector earned revenues of 118 million euro in the first half of 2014 (115 million euro in the six months ended June 30, 2013).

The sector closed with a loss of 11 million euro (a loss of 16 million euro in the six months ended June 30, 2013). The result for the first half of the previous year was affected by accruals made for a series of non-recurring items (redundancy costs and costs arising from the settlement of disputes). 213 In addition, a comparison with the first half of 2013 is affected by changes made to the economic levels of the intragroup agreements between the parent A2A S.p.A. and certain Group companies to whom ICT assets were sold in June 2013.

Depreciation, amortization, provisions and write-downs amounted to 2 million euro (16 million euro in the first half of 2013). The decrease is mainly due to the lower depreciation charge arising from the above-mentioned sale of ICT assets as well as the release to income of previously accrued provisions in the first quarter of 2014.

After depreciation, amortization, provisions and write-downs there was a net operating loss of 13 million euro (a net operating loss of 32 million euro in the six months ended June 30, 2013).

Capital expenditure for the period amounted to 5 million euro and mainly related to investments in information systems.

Risks and uncertainties Half-yearly ﬁnancial report at June 30, 2014

Risks and uncertainties

The A2A Group has a risk assessment and reporting process which is based on the Enterprise Risk Management method of the Committee of Sponsoring Organizations of the Treadway Commission (CoSO report) and best risk management practice and is in compliance with the Corporate Governance Code as updated by Consob in 2011 which states: “… Each issuer shall adopt an internal control and risk management system consisting of policies, procedures and organizational structures aimed at identifying, measuring, managing and monitoring the 216 main risks…”.

This process requires a risk model to be set up that takes account of the Group’s characteristics, its multi-business vocation and the sector to which it belongs. This model, operative since 2010, is not a static reference, it is subject to periodic revision consistent with the evolution of the Group and the context in which it operates. The methodology adopted is additionally characterized by the regular identification of the risks to which the Group is exposed. In this context an assessment process is carried out which, through the involvement of all its structures, allows the Group to identify the most important risks and establish the relative controls and mitigation plans. During this phase the involvement of the risk owners is essential through the use of operating methods that enable the risks regarding them, the relative causes and the way they should be managed to be clearly identified.

The Group continues with its long-term development plan, which leveraging on a modular approach and the fine-tuning of the experience gained and methods of analysis used, is on the one hand designed to develop the assessment methodology further with specific reference to the consolidation of the mitigation process and on the other to develop and integrate risk management activities in business processes. This process of evolution is carried out consistent with the gradual increase in the awareness of management and the business structures about risk management issues, achieved among other things through the use of specific training support provided by the risk management department.

Set out below is a description of the main risks and uncertainties to which the Group is exposed. Half-yearly ﬁnancial report at June 30, 2014 Risks and uncertainties

Financial risks Commodity price risk

Given the features of the sectors in which it operates, the Group is exposed to commodity price risk, namely the market risk arising from changes in the price of energy raw materials (electricity, natural gas, coal and fuel oil) and the exchange rates connected with these. The commodity risk limits for the Group, namely the maximum level of variability in the result arising from changes in energy commodity prices, are established on an annual basis. Compliance with these limits is ensured, consistent with the Group’s Energy Risk Policy, and where necessary hedging strategies designed to bring risk within the set limits are established. Market risk is managed by constantly monitoring the total net exposure of the Group’s portfolio and addressing the main factors affecting the trend. The objective of stabilizing the cash flows generated by the asset portfolio and outstanding contracts is pursued through the use of derivative financial instruments, thus contributing 217 to ensuring that there is economic and financial equilibrium in the Group.

Interest rate risk

The A2A Group’s interest rate risk mainly derives from the volatility of interest expense arising from floating rate debt.

The policy for managing interest rate risk has the objective of limiting that volatility first and foremost by selecting a balanced mix of fixed and floating rate loans and then additionally by using hedging derivative instruments which limit fluctuations in interest rates.

In order to analyze and manage the risks relating to interest rate risk the Group has developed an internal model enabling the exposure to this risk to be calculated using the Montecarlo method, assessing the effect that fluctuations in interest rates may have on future cash flows.

Liquidity risk

Liquidity risk regards the Group’s ability to meet its payment commitments through self- financing, funding on the banking and financial markets and available cash.

Taking into consideration the context in which it does business, which is characterized by potential situations of uncertainty on the financial markets, the Group places specific Half-yearly ﬁnancial report at June 30, 2014 Risks and uncertainties

emphasis on a constant control of liquidity risk, ensuring that adequate funds are always available to meet expected commitments for a specific time period as well as a liquidity buffer which is sufficient to meet unexpected commitments.

In this context the Group also has a policy of diversifying the due dates of its debt and other funding sources, and on November 7, 2013 the Management Board approved a revision to the Euro Medium Term Notes Programme, taking the ceiling to 3 billion euro. In addition, an agreement for a 15-year loan of 115 million euro was signed with the European Investment Bank in March 2014 which had not yet been used as of June 30, 2014. On April 1, 2014, EPCG entered an agreement with the European Bank for Reconstruction and Development (EBRD) for a further tranche of 30 million euro, which had not yet been used as of June 30, 2014, relating to investments for the installation of “smart meters”; this is an addition to the tranche of 35 million euro for which an agreement was signed in November 2010.

At June 30, 2014 the Group had unused revolving lines of committed credit amounting to 1,430 million euro, contracted and unused medium and long-term financing of 156 million

218 euro and cash and cash equivalents totaling 376 million euro, 219 million euro of which held by the parent company.

Default risks and covenants

At June 30, 2014 the parent company had issued bonds to the public for a total nominal value of 2,512 million euro as follows: 762 million euro maturing in November 2016; 750 million euro maturing in November 2019; 500 million euro maturing in January 2021; and 500 million euro maturing in January 2022. The bond issued in 2004 and partially repurchased in July 2013 was repaid on its maturity date of May 28, 2014. In addition, in December 2013 A2A issued a bond in the form of a private placement for 300 million euro, which matures in December 2023.

The terms and conditions of these bond issues are in line with the market standard for this type of financial instrument.

The agreement entered by the parent with UniCredit for a floating rate loan of 85 million euro expiring in June 2018, intermediated by the EIB, includes a credit rating clause that requires the company to maintain an investment grade rating throughout the duration of the loan. In the event of a breach of contract in this regard, there are a number of annual covenants to be respected based on the ratios of debt to equity, debt to gross operating income and gross operating income to interest expense.

There is also a credit rating clause in the agreements for the two loans from Cassa Depositi e 219 Prestiti having original balances of 200 million euro and 95 million euro and expiring in 2025 and 2013 respectively.

In addition, the private bond issue in yen maturing in 2036 and the related cross-currency swap derivative include a put right clause in favor of the investor (and in favor of the financial counterparty in the derivative) in the event that the rating should fall below BBB- (sub investment grade).

As mentioned above, the A2A Group has been granted various lines of revolving committed credit from a number of financial institutions for a total of 1,430 million euro (fully contractualized by A2A S.p.A.) which are not subject to covenants, with the exception of the revolving line of credit (currently unused) granted to A2A S.p.A. in April 2013 in the amount of 600 million euro, having a duration of 5 years, whose terms include the requirement to respect an NFP/EBITDA covenant. The agreement for the credit line also includes a change of control clause which in the event of a change of control of the Company causing a material adverse effect allows the banks of the syndicate to request the facility to be extinguished and any amounts drawn down to be repaid.

The following can be found in the agreements for the bond loans, the loans mentioned above and the lines of revolving committed credit: (i) negative pledge clauses based on which the parent company undertakes not to set up, with exceptions, real guarantees on its assets and those of its direct subsidiaries over and above a certain threshold; (ii) cross default/acceleration clauses which entail immediate reimbursement of the Half-yearly ﬁnancial report at June 30, 2014 Risks and uncertainties

bonds in the event of serious non-performance; (iii) clauses that provide for immediate repayment in the event of declared insolvency on the part of certain direct subsidiaries.

The agreement for a 35 million euro loan granted by the EBRD to the subsidiary EPCG, fully drawn down at June 30, 2014, includes a number of financial covenants and the same covenants are included in the agreement entered by EPCG with the EBRD on April 1, 2014 for the new tranche of 30 million euro, not yet drawn down as of June 30, 2014; this is an addition to the tranche of 35 million euro for which an agreement was signed in November 2010.

As things currently stand no companies in the A2A Group have defaulted.

220 Context risks Legislative and regulatory risk

The A2A Group operates in a highly regulated sector. As a consequence, one of the risk factors of the business is the constant and not always predictable evolution of the legislative and regulatory situation for the electricity and natural gas sectors, as well as for the sectors relating to the management of the water cycle and environmental services. In order to deal with these risk factors the Group has adopted a policy of monitoring and managing legislative risk by having various levels of control, in order to mitigate the impact of this to the greatest extent possible. This involves collaborative dialogue with the institutions and with the bodies which govern and regulate the sector, active participation in trade associations and the work groups set up at these entities and a detailed review of changes in legislation and the provisions issued by the sector Authority. It also involves constant dialogue with the business units affected by legislative changes in order to assess the potential effects in full. The main topics involved in current changes in legislation are as follows: • the rules governing the terms and conditions of large hydroelectric derivation concessions; • the regulations concerning the granting of concessions for the gas and electricity distribution service; • the reform of the integrated water service currently in progress; • the regulation of local public services of economic importance; Half-yearly ﬁnancial report at June 30, 2014 Risks and uncertainties

• the evolution of the rules of CIP 6/92 conventions; • the evolution of the rules for the Green Certificates market; • forecasts of economic conditions for the supply of gas for the protected service.

For the above matters reference should be made to the section on “Changes in legislation” of this Report, under the various sectors.

However as far as the regulations concerning the granting of concessions for the gas and electricity distribution service are concerned, in addition to the information provided it is also noted that there are potential risks arising from the uncertainty over the method of valuing the network owned by operators belonging to the Group that is put out to tender. As stated in the section “Changes in legislation”, the Ministry of Economic Development has adopted guidelines for calculating the residual industrial value which are critical as far as the field of application is concerned, which is broader than that prescribed by primary regulations, and also the method by which the plants must be valued. Still pending is the determination by the Authority of the regulation of the tariff applicable for area management, containing among other things the regulations relating to the recognition of the difference in the tariff 221 between the VIR (Industrial Residual Value) and the RAB (Regulatory Asset Base). With regard to this issue, the Electricity, Gas and Water Authority (AEEGSI) is in fact leaning towards not recognizing the difference between VIR and RAB in cases where the concession is reassigned to the incumbent operator, as stated in the consultation papers 359/2013/R/gas and 53/2014/R/gas.

However as far the forecasts of economic conditions for the supply of gas for the protected service are concerned, in addition to the information provided it is also noted that A2A S.p.A. has filed an appeal against Resolution no. 447/2013/R/gas with the Regional Administration Court regarding the excessively subjective nature of the mechanism. In addition, developments are still awaited in the dispute over Resolution no. ARG/gas89/10; with this resolution the AEEGSI amended the way in which the price of the supply of gas for the protected service is updated by applying a reduction coefficient “k” to the indexed component of the raw material quota (QE) (a variable fee covering procurement costs): the Regional Administrative Court issued a sentence favorable to the petitioners in March 2013, a sentence against which the Authority has filed an appeal with the Council of State.

Operating risks Business interruption risk

All of the Group’s sectors of activity involve managing production sites which are technologically and operationally complex (electric power stations, waste disposal plants, Half-yearly ﬁnancial report at June 30, 2014 Risks and uncertainties

cogeneration plants, distribution networks, etc.), where a breakdown or accidental damage could lead to a lack of availability and in turn to financial losses and possibly harm to the Group’s reputation due to the interruption of the services provided.

These risks are linked to a variety of factors which, in the case of certain plants, could what is more be accentuated by changes in the competitive context and in the reference markets. To the extent that the risk of unavailability of the plants may be considered an inherent part of the business and a risk that is impossible to eliminate entirely, the Group sets up preventive risk mitigation strategies in all of its sectors to reduce the probability of such risks occurring and action strategies aimed at limiting any impact.

Safeguarding the Group’s assets involves adopting and continuously updating procedures for scheduled maintenance, of both an ordinary and preventative nature, aimed at identifying and preventing potential critical situations, identified amongst other things on the basis of specific engineering analyses carried out by dedicated technical staff, all in line with best practice. It also involves periodically reviewing the plants and networks as well as providing specific

222 training courses for technical personnel. In addition, the A2A Group makes widespread use of instruments for the control and remote control of technical parameters for the monitoring and timely detection of any anomalies as well as having a back-up of the components needed to guarantee operational continuity, where possible. The integration process between the specialist engineering teams in the A2A Group and the technicians from Edipower S.p.A. has led to a strengthening of the skills relating to plant performance analyses.

In addition, the progressive adoption of advanced software and sensors is planned at all of the Group’s plants for calculating the actual yield of the plants, aimed at enabling an approach to be taken that is even more preventive compared to the past as far as the planning and performance of maintenance is concerned. The gradual adoption of the above controls is also envisaged in the case of the acquisition of new production sites, to facilitate their alignment to the Group’s standards.

Steps towards improvement, begun in previous years and designed to mitigate the risk of business interruption, continue. This process was characterized by investments regarding the Group’s assets, through targeted intervention on plants and networks. In order to manage potential sources of risk in a proactive manner the Group identifies and makes investments designed to constantly increase the reliability (preventative maintenance) of its plants, with particular reference to the prevention of situations where service interruptions may lead to potential damage to the Group’s image or the development of interconnections between transmission networks, including by constructing intermediate plants of a smaller size, in order to avoid congestion risks and permit satisfactory reliability levels also in situations where there is a high load demand. Half-yearly ﬁnancial report at June 30, 2014 Risks and uncertainties

From the standpoint of preventing any breakdowns, it is noted as an example that the plant modifications carried out at one of the Group’s plants following an episode of temporary down time caused by a design fault were extended to all of the turbogas groups, including those entering from Edipower S.p.A..

Due to the pooling approach to critical spare parts, the monitoring for any top-up spare parts required in the plant stores and the continuous updating of the procedural documentation supporting operations, the process for safely managing thermoelectric plants is well controlled as a whole. In this respect, with a view to constant improvement, a project for the creation of a “virtual” spare parts inventory is in progress, which through a suitable information system will enable the number and location of the spare parts available for all the Group’s power stations to be mapped and permit the use of standard maintenance contracts for all of its plants.

To control the risks arising from the present way in which the thermoelectric plants work, arising from trends in the energy market, a process for revising and fully updating the maintenance contracts for the whole of the Group’s fleet of turbogas equipment is currently 223 in progress.

In respect of the Environment Sector, specific activities are in place and monitoring tools have been installed to prevent any possible risk of interruption to the waste transportation and disposal service. In particular, specific controls have been set up to identify the presence of unsuitable substances in the waste to be taken to waste-to-energy plants. The sector is additionally introducing steps to optimize the management of certain sites in order to make the disposal process more efficient.

To mitigate any repercussions on the Group’s reputation due to a temporary impossibility to transport waste, mutual assistance exists between the Group’s plants and there is centralized coordination of planned stoppages for maintenance. Measures designed to ensure the continuity of the district heating service are also currently being assessed for situations in which there is a temporary interruption of the supply of heat to the network by the waste-to-energy plants, in order to guarantee the provision of a significant proportion of the heat required.

As far as the distribution networks are concerned, advanced remote operational controls exist to reduce the need for extraordinary maintenance or, if this is not completely avoidable, to limit the time needed to carry out the work, together with technical safety tools and contingency plans in the event of any particularly critical natural events such as for example earthquakes or severe weather.

The Group takes an active part in projects regarding the development of the electricity network from a “smart grid” standpoint, meaning by this a network with which it is possible Half-yearly ﬁnancial report at June 30, 2014 Risks and uncertainties

to exchange information on energy flows and manage demand peaks more efficiently, thus reducing the risk of interruption. In particular, a project is currently in progress which will enable remote control to be improved by increasing the effectiveness of communication systems. A wider project regards the development of telecommunications systems capable of handling exchanges of information between the producer and consumer of electricity, among other things to give the network a greater capacity for managing the increasing presence of plants fired by non-programmable renewable sources. These operations are supplemented, as part of the maintenance of the network, by continuous engineering analysis supporting interventions for repairs.

Operative means of regulating the customer’s consumption during specific time bands have been successfully tested in the district heating sector; these are designed to avoid excessive peaks in the use of installed power with the resulting possibility of critical matters arising regarding the optimal working of the networks. In addition, studies are taking place on measures to enhance the district heating network feeding plants which are used the most.

224 Finally, the Group takes out insurance cover against any direct and indirect damage which may arise from other types of risk. The contractual conditions that characterize these policies are currently being revised to align them to the way in which the plants work and to energy market conditions.

Environmental risk

The risks associated with events that impact the environment or the health of the population living in the areas affected by the Group’s activities (for example the disposal of production waste, emissions from production processes, waste collection and disposal management) are the object of increasingly close attention by public regulators and ever more stringent legislation.

The Group is significantly involved in preventing such risks and has adopted a policy document entitled “Policy for the Quality, Environment and Safety of the A2A Group” which is the tool which now sets out the Group’s approach to such questions. This document, which is widely distributed both internally and externally, explains the values which underlie the Group’s operations and which the Environment, Health and Safety Department is committed to disseminating and sharing as guidance for the day-to-day work of all concerned. The Environment, Health and Safety Department also supports senior management in establishing company policy in these areas, checking that this is implemented properly in compliance with the rules applicable in all areas and internal processes. The A2A Group is constantly committed to supporting dialogue aimed at a maximum collaboration with local bodies and communities on environmental issues. Half-yearly ﬁnancial report at June 30, 2014 Risks and uncertainties

The process of updating the Organizational and Management Model as per Legislative Decree no. 231/2001 for the introduction of environmental offenses is in progress, with specific emphasis on implementation at the individual Group companies. In addition, the Environment, Health and Safety Department has been rearranged from both an organizational and procedural standpoint as the first stage in a process of revising and updating the way in which the risk issues in question are managed, and this will involve all of the Group’s employees and business processes.

The Group carries out direct control of the way in which the risk issues in question are managed by having Environment, Health and Safety Department structures at the individual sites, providing the necessary support to employees, officers and management in running the HSE (Health Safety Environment) system.

The operational implementation of the policy is carried out through the use of an Environmental Management System (EMAS) by those operating entities of the Group which are more exposed to both direct and indirect potential environmental impact. This system provides for a program of progressive extension and upgrading to the standards of ISO14001 225 certification for the Group’s main activities having a greater impact on the environment, as well as for obtaining EMAS certification for the Group’s main plants. In order to arrive at a single model, a revision and updating process is currently taking place which will enable all the Group’s operating companies to refer to a single integrated Quality, Environment and Safety management system.

With the aim of achieving constant improvement in control and moving in line with best practice, the Group takes part through industry associations in discussion groups held to draft BREFs (Best Available Techniques Reference Documents) for LCPs (Large Combustion Plants) and waste management.

Organizational control units have been set up which among other things carry out periodic environmental analyses together with regular audits to detect and prevent any conduct that does not comply with the environmental procedures established for all of the Group’s operating companies. From the perspective of having a constant evolution of the systems controlling environmental risk, the Group has joined the ARPA (Regional Agency for the Protection of the Environment) Lombardy Project, whose purpose is to improve the efficiency of the system for controlling the more significant emissions, also in the light of technical developments in the sector, by connecting all the Emission Monitoring Systems (SMEs) to a single control center.

The A2A Group has taken out insurance cover against damage arising from both accidental and gradual pollution in order to cover any residual environmental risk, meaning against Half-yearly ﬁnancial report at June 30, 2014 Risks and uncertainties

events caused by a sudden and unpredictable fact and against the environmental damage inherent in continuing operations.

Each year the Group publishes a Sustainability Report which reports key data and information on the environmental and social aspects connected with the Group’s activities. The Sustainability Report conforms to standard GRI-G3.1 issued by the Global Reporting Initiative and since 2010 has been certified by the auditors.

Information technology risks

The activities of the A2A Group are managed through ICT systems which support the main business processes: operational, administrative and commercial. Potential risk factors include the inadequacy of such systems compared to business needs or the failure to keep these updated, possible “downtime” making the systems unavailable and the inadequate handling of the aspects linked to the integrity and confidentiality of information. These risk

226 factors are mitigated by controls governed by the Information & Communication Technology Function.

The process within the Group of integrating and consolidating its ICT systems, determined on the basis of the changes in corporate structures which have taken place in previous years, has led to a number of important milestones being reached. Following the integration of distribution support systems on a single platform, the program for the convergence of the main systems supporting commercial activities has also to a large extent been completed, and this continues as part of an overall integration of all the companies in the Group.

The process continues for updating the main management platform to further increase its level of reliability and integration. The Group will continue to develop its information system structure and improve its efficiency by drawing up a dedicated architectural strategic plan.

To mitigate the potential risks of the interruption of business activities on strategic processes, A2A makes use of technological back-up infrastructure which is able to ensure the continuity of the service in case of breakdowns or unexpected events. The Group has a disaster recovery system that ensures service and data continuity at an alternative ICT centre, and its efficiency is tested periodically. The Group has now completed the system for mutual recovery between the ICT centers in Milan and Brescia as a means of improving protection.

Considering the importance of the activities that are carried out every day on the Italian Power Exchange, particular attention is given to controlling the systems interfacing with the Half-yearly ﬁnancial report at June 30, 2014 Risks and uncertainties

market. These systems have in fact been duplicated and are subject to specific management and maintenance procedures designed to protect their stability. A specific control was developed in 2012, active round the clock, to support trading activities.

Data confidentiality and security are subject to specific controls by the Group through the use of internal policies and by means of tools to segregate access to information, as well as through specific contractual agreements with any third parties who may have to access the information handled. In order to improve the existing control further, work has begun on checking the alignment between the organizational role model and the segregation of duties technical role model implemented in the systems. Consistent with this work, it is planned to gradually adopt identity management and access control tools designed to ensure increasingly effective control over the processing of data critical for the business. A team has been set up to prevent and monitor any possible hacking into the Group’s information systems and specific applications solutions have been acquired to manage and control information security.

As a control of this specific risk issue the Group carries out annual vulnerability assessments, 227 both internally and externally. In conclusion, an organic ICT security plan will be drawn up and implemented and specific policies will be prepared on the use of mobile devices, which are increasingly used today for carrying out business activities.

Health and safety risk

The Group operates in a heterogeneous business environment characterized by a strong technology element and the presence of personnel at its plants and throughout its territory.

Certain Group activities are, by their nature, more exposed to the risk of “typically work- related” accidents linked to the operational services in the territory and the performance of technical services and activities at the plants.

The prevention measures adopted aim for a “zero risk” objective through the Quality, Environment and Safety Policy (which provides for a program to upgrade the personnel safety management system to comply with ISO 14001 and OHSAS 18001 standards), encouraging a constant rise in the level of safety in the workplace. In particular, in this respect, the use of additional models for measuring the Environment, Health and Safety risk at the level of single plant is being started.

A central Prevention and Protection Service has been set up as part of the Quality, Environment and Safety Department in order to harmonize the objectives of safety and protection in Group companies and to monitor that these standards are also being followed Half-yearly ﬁnancial report at June 30, 2014 Risks and uncertainties

by contractors at both the prequalification stage and the execution stage at worksites. In this sense the model for controlling contracts from a health and safety standpoint is currently being developed further.

A gradual enhancement of the organizational control structure is planned, which among other things carries out specific inspections to monitor compliance with legislation as well as personnel update training. In this respect specific training plans have been established for each business position and responsibility and a start has been made to these training courses.

A project to revise the present organizational model has been initiated which will be based on the determintaion of guidelines, methodologies, instruments and controls provided by the Environment, Health and Safety Department and assisted by the support of specific Environment, Health and Safety functions in each company and by the active involvement of the operating structures.

Finally, with the aim of constantly improving control, a process is planned to revise the 228 present model for managing employee health supervision performed by a team of doctors situated locally who perform regular health personnel assessments. As part of this revision process the Group plans to develop specific analysis and reporting tools regarding the results of the health supervision process.

A plan to refine the system of analyzing and controlling accidents and injuries has begun, in order to support the process of constant improvement in safety matters. This project provides for periodic reporting, which by means of increasingly detailed specific indices and information will provide support for identifying the causes of accidents and injuries and taking corrective and mitigating action.

Further information on the management of health and safety in the workplace may be found in the A2A Group’s annual Sustainability Report, together with performance indicators and additional details. Responsible management for sustainability Half-yearly ﬁnancial report at June 30, 2014

Human resources and industrial relations

At June 30, 2014 the Group had 12,211 employees, of whom 2,426 work for the EPCG Group, a decrease of 373, or 3%, over June 30, 2013.

These changes include the effects of certain extraordinary operations carried out during the period between July 1, 2013 and June 30, 2014 and in particular: • as a result of the non-proportional demerger of the business consisting of the two electricity generating plants at Turbigo and Tusciano by Edipower S.p.A. into Iren Energia 230 S.p.A., on November 1, 2013 the 133 employees working there left the perimeter of the A2A Group; • Amsa S.p.A. has been awarded the environmental services contract in Buccinasco and Cormano, acquiring a total of 45 employees, while 55 employees left the perimeter of the Group due to the loss of the environmental hygiene service in Rho; Aprica S.p.A. has been awarded the environmental services management contract in Como, acquiring 102 employees, and in Rudiano in the province of Brescia acquiring 3 employees.

Excluding these effects the workforce fell by 335 employees, or 2.7%, over that at June 30, 2013.

The average unit labor cost, excluding EPCG, rose by 0.6% over the figure for the first half of 2013; the effect of the rise resulting from automatic contractual increases fell (meaning from the national collective bargaining agreement and seniority increases) as the result of taking cost efficiency measures, in particular through the targeted use of a number of lay-off schemes and other schemes (such as “cassa integrazione guadagni” and solidarity contracts).

The main activities which took place in the first half of 2014 in the industrial relations sphere are described in the following.

In the Energy Sector an agreement was signed with the trade unions (on February 12, 2014) which provides for the use of the ordinary “cassa integrazione guadagni” lay-off scheme for the first time for a maximum of 13 employees at the specialized service unit at Sermide; in addition, specific agreements have been signed enabling the ordinary cassa integrazione guadagni lay-off scheme to continue to be used at the Cassano and Sermide thermoelectric plants on the basis of the framework agreements entered in 2013. Half-yearly ﬁnancial report at June 30, 2014 Human resources and industrial relations

At the Chivasso plant on the other hand a solidarity agreement was signed (on January 20, 2014) having a term of 24 months, which will involve up to 30 workers with working hours reduced by 50% of the contracted figure. The difficult situation in this sector has also made it necessary to establish a Trade Union Framework Agreement (signed on May 22, 2014), which identifies a series of measures designed to reduce production costs and gradually reach a plant work force whose size is consistent with the reduced production structure (including in particular the use of a “mobilità” lay-off scheme pursuant to Law no. 223/91 for up to 120 workers and the adoption of a mobilità scheme within the Group’s staff at a local level).

Implementation of the reorganization project (the “Networks Project”) continues in the Networks Sector.

In March 2014, as had already taken place in the other companies of the sector, a “mobilità” lay-off procedure was initiated pursuant to Law no. 223/91 involving a total of 17 workers of A2A Servizi alla Distribuzione S.p.A..

In addition, in May and June two important agreements were signed dealing with a new 231 definition of working hours.

More specifically: • on May 22, 2014 an agreement was signed with the trade unions for the reformulation during the summer period of working activities for the rostered staff running the Milan power stations of A2A Calore & Servizi S.r.l.; • on June 10, 2014, by way of an agreement reached with the trade unions, A2A Reti Gas S.p.A. established new working hours for the “End customer contract management” department providing for a remodulation and increase of the intervention time slots declared to the Electricity, Gas and Water Authority.

More transversely, an important Framework Agreement was signed on January 24, 2014 dealing with vacation leave, having the aim of creating an annual leave schedule (collective and individual), using up the vacation backlog and achieving flexibility and harmonization in the way the leave is taken.

In addition, the complex discussions with the national trade unions continued on the A2A Group’s National Industrial Relations Protocol and on the process of harmonizing the existing treatment in the Group’s various companies.

In conclusion, the following matters are noted as far as the National Collective Bargaining Agreement (CCNL) is concerned: • the signing (on January 14, 2014) of the CCNL for the gas-water sector, which involves around 1,400 of the Group’s employees; • the start-up of talks for the renewal of the Federambiente and FISE Assoambiente CCNLs, both of which expired on December 31, 2013, which involve around 4,800 employees. Half-yearly ﬁnancial report at June 30, 2014 Human resources and industrial relations

As far as training and development activities for Group employees are concerned (1), a total of approximately 73,900 hours of training were given in the six months ended June 30, 2014, with 16,170 attendances. More specifically, approximately 41,900 hours were dedicated to worker safety, approximately 11,690 hours to technical matters and approximately 9,500 hours to managerial matters. Managerial training was dedicated as follows: to the population of newly-hired personnel on the basis of existing institutional training and to the population of Edipower S.p.A. managers, consistent with the training provided in 2013 to all of the Group’s other executives, with the aim of supporting those managers involved in achieving the Group’s challenging objectives and finding a balance between “efficiency and development” in order to encourage a common vision of togetherness and a uniform managerial culture. “Ad hoc” managerial training courses were also provided for specific populations in the Group to support staff in achieving business objectives.

The “Skills Workshop” project was started up in the first quarter of the year, designed to assess professional competence, for the staff of the distribution companies (A2A Reti 232 Elettriche S.p.A., A2A Reti Gas S.p.A. and A2A Servizi alla distribuzione S.p.A.).

The aim of this project is to establish skill development paths, starting from the professionals in A2A, in order to foster the professional growth of staff as a means of preserving and developing the technical know-how and organizational conduct important for the business.

The project was developed by way of a partnership created between the Human Resources, Property and Facilities department and the heads of the functions involved in the project.

The Group’s performance management process was carried out, consistent with previous years, involving managers, middle managers and white collar workers. The supervisors involved as assessors have received appropriate training over the years in the model adopted by the Group, skill appraisal and feedback meetings.

The activities dedicated to young A2A professionals continued during the first half of 2014 with the objective of accompanying these staff members throughout their career in the Group and increasing their engagement. A total of 123 young people belonging to the various Group companies were involved in the several initiatives (induction, tutoring, development center meetings).

(1) The figures for training do not include the EPCG Group.

The Social Policies team continued its work within corporate personnel and resource Half-yearly ﬁnancial report at June 30, 2014 Human resources and industrial relations

development with the aim of designing and developing Group welfare activities to the benefit of employees, in conjunction with the Group’s other departments; this work enables staff to achieve a better work-life balance, and increases the sense of unity and belonging to the Group as well as integration throughout the local area.

In March 2014 the new A2A-Brescia Transport Convention was set up, which can be used by all of the Group’s employees for purchasing season tickets for local public transport, including the new metropolitan railway, at favorable conditions.

The 2014-2017 Convention between A2A and the not-for-profit cooperative that runs the Brescia Nursery and Infants School was revised with the aim of providing continuity to an initiative which represents business excellence in a family-work reconciliation sphere. In addition, the external communications plan set up to encourage local families to join the initiative continued. As of June 30, 2014, 21 employees’ children were registered with the scheme, of whom 6 with the Infants School.

The partnership with the Sodalitas Foundation continued as part of Corporate Social 233 Responsibility. Half-yearly ﬁnancial report at June 30, 2014

Social responsibility and stakeholder relations

In the A2A Group’s business model sustainability is a strategic element for seeking to achieve growth that is balanced from an economic, social and environmental standpoint.

The A2A Group published the sixth edition of its Sustainability Report in June 2014, which for the first time included the activities of Edipower S.p.A. which with its plants has taken A2A to becoming the second electricity operator in Italy with approximately 10 GW installed and a production mix geared towards renewable sources which sees hydroelectricity representing 234 42% of the energy generated.

The 2013 Sustainability Report confirmed the highest application level (A+) of the Global Reporting Initiative international standard (G3.1) thanks to the completeness and quality of the information included. This edition of the report extended the section discussing the way in which the Group listens to and involves its stakeholders (customers, investors, suppliers, local communities, institution, personnel). A “materiality matrix” is published for the first time which in accordance with GRI reporting guidelines provides a summary of the most important issues for A2A and its stakeholders. A2A identifies 37 issues in its materiality matrix, with priorities consisting of service quality and customer care, employment and air quality.

The following are the main events which occurred in the Corporate Social Responsibility sphere in the first six months of 2014: • A2A Ambiente S.p.A. has initiated the procedure required to obtain authorization for its new Ecoergite production plant at the Edipower power station in Brindisi. The new fuel will be used in co-combustion in the Bridisi power station, replacing 10% of the incoming coal in heat terms, in this way contributing to a further reduction in atmospheric emissions. A2A Ambiente S.p.A. plans to process a maximum incoming quantity of 95,000 tonnes of Secondary Solid Fuel (SSF) produced in Puglia, which thanks to the technology patented by the company will be transformed into approximately 75,000 tonnes of Ecoergite, all of which will be used by the Edipower plant. • A2A Calore & Servizi S.r.l. has published a “District Heating Quality Charter”. This establishes the principles and general criteria for running the district heating service, with the final objective being to ensure customer satisfaction. The Quality Charter has Half-yearly ﬁnancial report at June 30, 2014 Social responsibility and stakeholder relations

been agreed and prepared by the Consumers’ Associations recognized by the Lombardy Regional Committee for the Rights of Consumers and Users (CRCU) (ACU, Adiconsum, Adoc, Adusbef, Altroconsumo, Assoutenti, La Casa del Consumatore, Cittadinanzattiva, Codacons, Codici, Confconsumatori, Coniacut, Federconsumatori, Lega Consumatori, Movimento Consumatori, Movimento Difesa del Cittadino and Unione Nazionale Consumatori) and is addressed to the customers of all the areas in which A2A Calore & Servizi S.r.l. provides a district heating service. The aim of the charter is to explain the commitments tying the company to its customers in a clear and transparent manner. Details of the company’s service quality standards, the ways in which it listens to customers and the tools it has available to protect the user are all to be found in the document. The Quality Charter is free of charge and a copy can be obtained at the company’s counters open to the public or at the offices of the consumers’ associations. • Eighty five thousand copies were distributed of the pamphlet “Brescia’s water”, a publication dealing with the quality of the water supplied. In addition to the regulatory references relating to Italy, the European Union and the World Health Organization,

the pamphlet also contains precise figures, analyzed by city area, of the water analyses 235 carried out by A2A Ciclo Idrico S.p.A.. • One year after A2A Energia S.p.A. signed the Self-Regulation Protocol with the Consumers’ Associations setting up the Equivalent Committee, which has the duty of ensuring compliance with the rules contained in the Self-Regulation Protocol and checking that the commercial procedures carried out by the company are correct, it can be reported that during this first year of the Committee’s activities no unfair practices have been discovered in the activities performed by A2A Energia S.p.A. and its operators. The main issues which members of the Associations and A2A Energia S.p.A. checked and controlled were the following: a review of standard contracts with commercial partners; the training and quality of the work carried out by the personnel of A2A Energia S.p.A.’s commercial partners; an analysis of the key critical areas in the remote selling sector to prevent possible disputes. • At the end of January over 30 thousand brochures were distributed in Monfalcone and a number of neighboring municipalities discussing the Monfalcone thermoelectric plant, its development and the company’s decision to make a further investment of 25 million euro at the plant through the project to install a DeNOx system (a system for reducing the emission of nitrogen oxides). This is an important project that will lead to an ever increasing reduction of polluting atmospheric emissions. A communication campaign was also carried out in support of this initiative through the use of large posters and whole-page announcements in local daily newspapers. In May A2A obtained approval for the construction of the DeNOx system; in addition, thanks to technical work performed on the boilers, the Group undertook to immediately reduce nitrogen oxides by 65% as if the DeNOx system had already been installed. Half-yearly ﬁnancial report at June 30, 2014 Social responsibility and stakeholder relations

• “Milan is my future”, the communication campaign dedicated to the non-Italian communities resident in the city promoted by Amsa S.p.A. and the National Packaging Association CONAL, with the contribution of the Municipality of Milan, was launched in March 2014. The aim of this campaign is to make the new residents aware about the issues arising from differentiated collection, recycling and respect for the environment by involving the non-Italian communities most represented in the city: Philippine, Egyptian, Chinese, Peruvian, Sinhalese, Ecuadorian, Romanian, Moroccan and Ukrainian members of these communities will take on the task of distributing 180,000 guides on differentiated collection to their fellow citizens, explaining to them the contents and clarifying any doubts. “PULIamo”, the Amsa S.p.A. application for smartphones and tablets, has also been made available in the 9 languages other than Italian in which the communication campaign is being conducted. • The fourth and final stage of the extension of the wet waste collection service for domestic users in Milan began on 30 June, involving the north western area the city. Amsa has delivered around 13,700 brown condominium bins and 180,000 kits to

236 households for wet waste collection. The collection of wet waste is giving a strong boost to differentiated collection, which reached 50% in May after rising by 14 percentage points over the previous two years. In the first five months of 2004, 47,449 tonnes of wet refuse were collected, representing an increase of 80% over the corresponding period in 2013 when 26,340 tonnes of organic materials were collected. • A remote control room has been opened at the headquarters of Aprica S.p.A. in Brescia which enables the position of collection and street-sweeping vehicles and vehicles providing complementary services to be pinpointed in real time, while for statistical purposes it is also possible to obtain “historical” data on the operations of these vehicles as the work is performed. The activation of the remote control room completes the “Street-cleaning revision project” which started the beginning of 2014 and among other things has seen the entry of 18 new members of staff. • The Italian Ecolabel-Ecoaudit Committee awarded the 2014 EMAS Italia Prize to the Edipower plant in Sermide. This award is reserved for EMAS registered organizations that have best interpreted and applied the inspiring principles behind the assessment tool created by the European Union. The 2014 edition of the prize was dedicated to Eco-Innovation, meaning the ability of organizations to reduce environmental impact by developing new products, techniques, services, processes and business models that are able to create benefits for the environment. • The Acerra waste-to-energy plant, run by A2A Ambiente S.p.A., received the ABB Energy Efficiency Award for introducing advanced means of regulating the motors of the secondary air circuit ventilators and condensation extraction pumps that have enabled the plant’s consumption to be reduced and hence make a greater quantity of energy available for the grid. Half-yearly ﬁnancial report at June 30, 2014

Environmental responsibility

The Group’s Environmental Management System is based on the principles set out in its Quality, Environment and Safety Policy and in its sector Environmental Policies and has the aim of promoting a progressive and constant improvement in business performance in terms of effectiveness and efficiency in managing the environmental aspects connected with its activities. This system is adopted and implemented in a way that is integrated with the broader Business Management System, which also governs the other strategic matters regarding sustainability including those concerning quality and safety. 237

Proper implementation of the Environmental Management System is ensured by setting up various types of measures, such as the clear identification of principles, roles and responsibilities, the identification of activities whose management requires particular care, the assessment of areas where steps may be taken to seek improvement from an organizational or structural standpoint and the establishment of action strategies and the means of working and operational control.

Regular internal audits are planned and carried out in order to check the efficiency and effectiveness of the Management Systems and their ability to ensure that improvement objectives are reached and the adopted principles are being complied with. The adequacy of the systems is confirmed by the audits performed by independent third parties and is attested by the ISO 14001 certifications and the EMAS registration obtained by the Group’s main facilities.

At June 30, 2014, 22 of the A2A Group’s plants held EMAS registration, while the registration procedure is in progress for another three.

In particular, following the creation of A2A Ambiente S.p.A. on July 1, 2013, a request was made to the Ecolabel and Ecoaudit Committee to transfer the EMAS registrations referring to the plants currently in A2A Ambiente S.p.A.. Two Environmental Declarations were prepared for the site in Via Codignole in Brescia, one for the portion of the area remaining in Aprica S.p.A. and one for that transferred to A2A Ambiente S.p.A.. Half-yearly ﬁnancial report at June 30, 2014 Environmental responsibility

The EMAS registration procedure for the waste collection and transportation service managed by Aprica S.p.A. in Brescia, Bergamo and a number of municipalities in the provinces of Brescia, Bergamo and Milan was completed in the first half of 2014.

In addition, as of June 30, 2014 the EMAS registration procedure has also been completed for the Acerra waste-to-energy plant, which began the certification process for Management Systems in 2011.

Finally, EMAS registration was also obtained in the first half of 2014 for the whole of the production facility of Amsa S.p.A. in Via Lucio Cornelio Silla.

Following the extension of the scope of Legislative Decree no. 231/01 to environmental offences, the parent company has undertaken a review and revision of the Environmental Management System to align it to the new requirements. At the same time a revision of the way in which the activities connected with the risk that this type of offence may be committed are managed internally has been initiated, and this is currently in progress. The alignment of the Environmental Management System with the 231 Model is therefore at an 238 advanced stage of consolidation in several of the Group’s facilities. Half-yearly ﬁnancial report at June 30, 2014

Innovation, development and research

The A2A Group carries out research and innovation activities that are consistent with the development programs of its business sectors.

The Networks Sector has considerable involvement, given the stimuli deriving from the evolutionary thrust of technological innovation and service content which is consolidated in the expression Smart Grid and its derivatives and evolutions (Smart IP, Smart City and Smart Community, where the adjective “smart”, which identifies innovative digital technology, is an enabling tool for achieving greater “intelligence” in the product-service in order to adapt 239 it to the requirements of the regulator and make it more responsive to the expectations of customers who use web and IT services on a daily basis).

In particular, the Smart Domo Grid project, co-financed by the Ministry for Economic Development, is currently in progress; this sees A2A Reti Elettriche S.p.A. as project leader together with the Milan Polytechnic (Faculty of Energy) and Whirlpool as partners. The aim of this project is to “design”, create and introduce a Smart Grid solution with demand/ response functionality, meaning “to cause the distributor’s electricity network to interact intelligently with EMS (Energy Management Systems) devices controlling domestic equipment (intelligent household appliances, micro-generation equipment, electric cars, etc.) and distributed energy accumulation devices designed to improve the quality of the service and the voltage”. A pilot scheme is currently in progress in a quarter of the city of Brescia involving around twenty households.

The European ECCOFLOW Project has been completed. This project, co-financed by the European Commission, consists of the design, installation and field testing of Superconducting Fault Current Limiter (SFCL) devices for application in medium-voltage distribution networks. The aim of the installation being used in the A2A Reti Elettriche S.p.A. network is to assess the effectiveness and hence the applicative potentiality of this new class of power device, whose use encourages the development of distributed generation and enables the quality of the voltage to be improved.

Projects for AEEGSI Resolution no. ARG/elt 39/10 are in progress. A2A Reti Elettriche S.p.A. has obtained the AEEGSI’s approval to carry out two pilot projects. The first regards a Half-yearly ﬁnancial report at June 30, 2014 Innovation, development and research

primary cabin in Milan (Lambrate) and the second a primary cabin in Brescia (Gavardo) with different characteristics in the underlying network. Both set out to overcome the present limitations of the interface protection of generators connected to the medium-voltage grid, to introduce innovative voltage regulation functionalities and, potentially, to carry out local dispatch, only reporting summarized data to Terna for the production put into the medium- voltage grid. This will encourage the development of distributed generation and hence the use of renewable sources for the production of electricity.

The WFM and DMS projects are at the development stage. The objective in these cases is to improve network operating management processes through computer solutions which integrate physical asset management systems with the geographic information system, also using GPS technology for pinpointing plants and operating teams available throughout the area, equipped with mobile devices, in order to achieve a more effective and efficient management of the interventions made, and the supervisory and the remote control system of the electricity network, the central point for regulating Smart Grids.

240 Following the completion of the INTEGRIS project, the IDE4L project (Ideal Grid for All) has been started up. This project, co-financed by the EU as part of the FP7 research and innovation program, capitalizes on the experience gained in the previous INTEGRIS project and sets as its objective the development and demonstration of a complete automation system for managing the complete distributed energy resource (DER) active network, both in terms of real time (RT) management and medium-long term planning. The project concentrates on functionalities that are important for planning and running networks such as for example: • the research and automatic isolation of faulty sections for improved service quality; • the management of network congestion and optimal guidance for priority investments; • the integration of distributed output from renewable sources and its optimal management.

The Smart Living project (prepared in response to a tender called in 2013 by the Ministry of Education, the Universities and Research) is currently being started up. This project came first in the assessment listing and accordingly has obtained funding from the ministry.

The S.C.U.O.L.A. project (presented in 2013 in response to a tender called by the Lombardy Region) is currently in progress. This obtained first place in the assessment listing and as a result clearance for the funding

Both of these proposals, in the Smart City and Smart Grid field, regard the design and realization, in detailed situations for the composition of consumption and renewable generation profiles, of innovative energy efficiency solutions, user involvement and Half-yearly ﬁnancial report at June 30, 2014 Innovation, development and research

service management, with the first of the two projects being extended to operator safety environments and support for the less well off. In both projects A2A is project leader within partnerships which see the participation of large, small and medium businesses, universities and key research bodies strictly tied to the local areas in which A2A principally works.

In addition, testing continues in the Electrical Mobility field through the e-moving project which has enabled public recharging columns to be set up in Milan and Brescia and by supporting the creation of digital islands in the city of Milan in favor of car sharing electric mobility. Studies are taking place into the changes needed to the electricity recharging management systems, together with the implementation of these changes, to enable interoperability between different operators to be achieved, meaning allowing customers to recharge their car at any public column regardless of the contract they may have with the sales company. In particular, work is taking place with ENEL to set up the communication protocol to be used.

The following projects are also continuing in the environmental sector: Amsa S.p.A. continued to participate in 2013 as partner in the presentation of an innovative project for the collection 241 of WEEE materials in response to a tender called during the year by the Lombardy Region, a proposal which obtained financing in 2014. The project has already started.

Research work continues on the conversion of scrap ashes from the waste-to-energy plants and development is currently in progress for further collaboration with the University of Brescia.

A project is currently in course in the heating and district heating service sectors for testing new technical solutions for completing the offer with a district cooling service for the summer period.

In conclusion, all business sectors are seeking, and are involved in, the search for new solutions, both for optimizing processes and improving service quality and extending the offer. This involvement takes practical form through projects, in some cases funded by co-financing schemes, that are also triggered by the constant development and extension of relations with research bodies (RSE, ENEA,…) and universities, and by participation in initiatives and at conventions designed to gather needs and new ideas for grasping opportunities.

Certification of the condensed half-yearly financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98 Half-yearly ﬁnancial report at June 30, 2014

Certification of the condensed half-yearly financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98

1. The undersigned Luca Camerano, in the name of and on behalf of the entire Board of Directors of A2A S.p.A., and Patrizia Savi, the manager in charge of preparing the corporate accounting documents of A2A S.p.A., certify the following, taking into account the provisions of article 154-bis, paragraphs 3 and 4 of Legislative Decree no. 58 of February 24, 1998:

• the adequacy in relation to the characteristics of the business and 244 • the effective application

of the administrative and accounting procedures for the preparation of the condensed half-yearly financial statements during the first half of 2014.

2. We also certify that:

2.1 the condensed half-yearly financial statements: a) have been prepared in accordance with the international accounting standards approved by the European Community pursuant to Regulation (EC) no. 1606/2002 of the European Parliament and of the Council of July 19, 2002; b) agree with the balances on the books of account and the accounting entries; c) give a true and fair view of the financial position, results of operations and cash flows of the issuer and the companies included in the consolidation;

2.2 the interim report on operations includes a reliable analysis of the references to the key events that took place during the first six months of the year and their effect on the condensed half-yearly financial statements, together with a description of the main risks and uncertainties for the remaining six months of the year. The interim report on operations also includes a reliable analysis of the information on significant related party transactions.

Milan, July 31, 2014

Luca Camerano Patrizia Savi (on behalf of the Board of Directors) (Manager in charge of preparing the corporate accounting documents)

Indipendent Auditor’s report Half-yearly ﬁnancial report at June 30, 2014

Indipendent Auditor’s report

AUDITOR’S REPORT ON THE REVIEW OF THE CONDENSED CONSOLIDATE INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2014

T o the Shareholders of A2A SpA

1. W e have reviewed the condensed consolidated interim financial statements of A2A and its 246 subsidiaries (“ A2A Group” ) as of 30 June 2014, comprising the consolidated balance sheet, consolidated income statement, consolidated statement of comprehensive income, consolidated cash flow statement, statement of changes in eq uity and related ex planatory notes. T he board of directors of A2A SpA is responsible for the preparation of the condensed consolidated interim financial statements in compliance with the international financial reporting standard applicable to interim financial reporting (IAS 34) as adopted by the European Union. O ur responsibility is to issue this report based on our review.

2. O ur work was conducted in accordance with the criteria for a review recommended by the Italian stock ex change commission (CO N SO B) with R esolution N o. 108 6 7 of 31 July 19 9 7 . T he review consisted principally of inq uiries of company personnel about the information reported in the condensed consolidated interim financial statements and about the consistency of the accounting principles used therein as well as the application of analytical review procedures on the amount contained in the above- mentioned condensed consolidated interim financial statements. T he review ex cluded certain auditing procedures such as compliance testing and verification and validating tests of the assets and liabilities and was therefore substantially less in scope than an audit performed in accordance with generally accepted auditing standards. Accordingly, unlik e an audit of annual consolidated financial statements, we do not ex press an audit opinion on the condensed consolidated interim financial statements.

T he condensed consolidated interim financial statements show the figures of the previous year’ s consolidated financial statements and the previous year’ s condensed consolidated interim financial statements as comparatives. As stated in the notes to the condensed consolidated interim financial statements, the directors restated certain comparative amounts of the consolidated income statement of the condensed consolidated interim financial statements for the corresponding period of the previous year with respect to the figures previously reported and reviewed by us. As for the comparative amounts relating to the consolidated financial statements of the previous year and to the condensed consolidated interim financial statements for the corresponding period of the previous year, reference is made to our reports dated 4 April 2014 and 2 August 2013, respectively.

PricewaterhouseCoopers SpA

Sede legale e amministrativa: Milano 20149 V ia Monte R osa 9 1 T el. 027 7 8 5 1 F ax 027 7 8 5 240 Cap. Soc. Euro 6 .8 9 0.000,00 i.v., C .F . e P.IV A e R eg. Imp. Milano 129 7 9 8 8 015 5 Iscritta al n° 119 6 44 del R egistro dei R evisori L egali - Altri Uffici: Ancona 6 0131 V ia Sandro T otti 1 T el. 07 12132311 - Bari 7 0124 V ia D on L uigi Guanella 17 T el. 08 05 6 40211 - Bologna 40126 V ia Angelo F inelli 8 T el. 05 16 18 6 211 - Brescia 25 123 V ia Borgo Pietro W uhrer 23 T el. 03036 9 7 5 01 - Catania 9 5 129 Corso Italia 302 T el. 09 5 7 5 32311 - Firenze 5 0121 V iale Gramsci 15 T el. 05 5 248 28 11 - Genova 16 121 Piaz z a D ante 7 T el. 01029 041 - Napoli 8 0121 Piaz z a dei Martiri 5 8 T el. 08 136 18 1 - Padova 35 138 V ia V icenz a 4 T el. 049 8 7 348 1 - Palermo 9 0141 V ia Marchese Ugo 6 0 T el. 09 1349 7 37 - Parma 43100 V iale T anara 20/ A T el. 05 2127 5 9 11 - Roma 0015 4 L argo F ochetti 29 T el. 06 5 7 025 1 - Torino 10122 Corso Palestro 10 T el. 0115 5 6 7 7 1 - Trento 38 122 V ia Graz ioli 7 3 T el. 046 1237 004 - Treviso 31100 V iale F elissent 9 0 T el.04226 9 6 9 11- Trieste 34125 V ia Cesare Battisti 18 T el. 040348 07 8 1 - Udine 33100 V ia Poscolle 43 T el. 043225 7 8 9 - Verona 37 135 V ia F rancia 21/ C T el.045 8 26 3001

www.pwc.com/it Half-yearly ﬁnancial report at June 30, 2014 Indipendent Auditor’s report

3. Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial statements of the A2A Group as of 30 June 2014 have not been drawn up, in all material respects, in compliance with the international financial reporting standard applicable to interim financial reporting (IAS 34) as adopted by the European Union.

Milan, 1 August 2014

PricewaterhouseCoopers SpA 247

Signed by Giulio Grandi (Partner)

This report has been translated into English from the Italian original solely for the convenience of international readers.

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