ACEA GROUP

Quarterly Report for the three months ended

31 March 2008

Board of Directors’ meeting of 12 May 2008

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MANAGEMENT OF THE PARENT COMPANY, Acea SpA

Board of Directors

Fabiano Fabiani Chairman Andrea Mangoni Chief Executive Officer Marco Maria Bianconi Director Massimo Caputi Director Jean Louis Chaussade Director Dino Piero Giarda Director Jacques Hugè Director Luigi Spaventa Director Luisa Torchia Director

Board of Statutory Auditors

Maurizio Lauri Chairman Roberto Pertile Auditor Francesco Lopomo Auditor Claudio Bianchi Alternate Auditor Claudio Valerio Alternate Auditor

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CONTENTS

Acea Group financial highlights page 4

Introduction page 6

Segment information page 10

Operating review page 12

Basis of presentation and consolidation page 40

Results of operations page 45

Financial position and cash flow page 69

Other information page 86

Declaration of the Executive Responsible for Financial Reporting page 90

Operating and financial outlook page 91

List of consolidated companies page 93

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ACEA GROUP FINANCIAL HIGHLIGHTS

Increase/ % increase/ €000 Q3 2008 Q3 2007 (Decrease) (decrease)

Consolidated net revenue 759,397 597,362 162,035 27.1

Staff costs 67,473 56,969 10,504 18.4 Cost of materials and overheads 552,674 422,053 130,621 30.9 Consolidated operating costs 620,148 479,022 141,126 29.5

Fair value of commodity derivatives (1,074) (2,496) 1,422 57.0

Gross operating profit/(loss) 138,175 115,844 22,331 19.3

Operating profit/(loss) 79,748 64,718 15,030 23.2

Finance (costs)/income (18,407) (15,296) (3,112) 20.3 Profit/(loss) on investments 108 4,827 (4,719) (97.8)

Profit/(loss) before tax 61,448 54,249 7,199 13.3

Net profit/(loss) from continuing operations 35,575 32,215 3,359 10.4

Net profit/(loss) from discontinued operations 0 0 0 0.0

Net profit/(loss) for the period 35,575 32,215 3,360 10.4

Profit/(loss) attributable to minority interests 1,560 935 625 66.8

Net profit/(loss) attributable to the Group 34,014 31,280 2,734 8.7

Earnings/(loss) per share (€) basic 0.1597 0.1469 0.0128 diluted 0.1597 0.1469 0.0128

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Increase/ BALANCE SHEET 31 Mar 2008 31 Dec 2007 (Decrease)

(€000) (A) (B) (A-B)

Net invested capital 3,079,201 2,762,256 316,945 Shareholders’ equity 1,465,006 1,439,716 25,291

Net debt 1,614,195 1,322,540 291,655

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INTRODUCTION

The consolidated results of operations for the three months ended 31 March 2008 show: 1. consolidated net revenue up 27.7% 2. cost of materials and overheads up 31.2% 3. staff costs up 18.4% 4. gross operating profit up 19.3% 5. net profit for the period up 8.7%

The results for the period were influenced by the different method of consolidating Tirreno Power and Umbra Acque, the increase in the Group’s interest in GORI from July 2007, and the consolidation of Longano and Elga Sud, which were not consolidated in the consolidated quarterly report for the previous year. These changes contribute a total of 12 million euros to consolidated gross operating profit, including 10.4 million euros attributable to Tirreno Power. On a pro forma basis, enabling a like-for-like comparison of amounts with those of the previous year, gross operating profit for the first quarter of 2008 is 126.2 million euros, representing growth of 10.4 million euros.

The improvement reflects increases of: (i) 16.6 million euros in the gross margin and (ii) 7.1 million euros in staff costs, less capitalised costs. In terms of business segment: 9 water services recorded growth of 8.1 million euros in the gross margin, to which all areas of operation contributed; 9 energy networks report a gross margin substantially in line with the figure for the previous year (73.7 million euros); 9 energy sales and generation saw the gross margin decline by 0.5 million euros due to (i) the substantially in-line performance (up 1 million euros) of generation, reflecting the complete shutdown of the Voghera plant throughout the quarter following a breakdown in November, and (ii) a loss of 1.5 million euros on sales, primarily reflecting commodity prices. The breakdown at the Voghera plant accounted for a decrease of approximately 3 million euros, after the insurance payout paid to date. The gross margin also rose as a result of the return of the 4.1 million euro fine imposed by the Antitrust Authority. This following the favourable judgement handed down by

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Lazio Regional Administrative Court on 7 May in response to the appeals filed by Acea and Suez.

Growth in staff costs reflects the 196 increase in the average headcount, the impact of contract renewals and increases in a number of other components such as holiday pay and a review of grades resulting in average rises due to company reorganisations. The rise in staff costs can be seen across all business segments, as follows: 9 Energy networks up 2.3 million euros; 9 Energy sales and generation up 0.6 million euros; 9 Italian water services up 3.3 million euros, including 2.3 million euros attributable to the Lazio and Campania-based companies; 9 Parent Company up 0.6 million euros.

Amortisation and depreciation is up 8.2 million euros, including 3.5 million euros attributable to Tirreno Power and Umbra Acque. On a like-for-like basis, the increase is thus 4.7 million euros. 2.6 million euros of the increase regards completion and entry into service of the Roselectra and Leinì plants and changes to the useful lives of the hydroelectric plants (following the Constitutional Court sentence of January 2008), whilst 1.7 million euros regards the amount of investment carried out by Group companies during the current and previous years.

Net finance costs are up 3.1 million euros, with 2 million euros reflecting the change in the basis of consolidation. The result reflects both increased borrowing and rising interest rates, with the Parent Company recording a 3 million euro increase in finance costs on short- and medium/long-term borrowings. In contrast, there was a 1.6 million euro increase in interest on receivables due from end users.

The overall tax rate for the period, on a pro forma basis to enable like-for-like comparison with the first quarter of 2007, is around 37%, marking a reduction of 3.6% essentially due to changes to regulations introduced by the 2008 Finance Act. Tax expense for the period also reflects reversal of the accrued portion of tax assets accounted for in 2006 and 2007 (1.7 million euros), and the effects of the change in the method of consolidating Tirreno Power. The tax rate is thus 42.1%.

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Net invested capital is up 11.47% (up 317 million euros) on the end of the previous year, with the increase amounting to 5.70% (157.3 million euros) on a like-for-like basis. The rise reflects increases in net working capital (up 117 million euros or 61.80%, and up 95 million euros or 50.21% on a like-for-like basis) and in net non-current assets (up 199.9 million euros or 7.77%, and up 62.3 million euros or 2.42% on a like-for-like basis). The increase in net working capital is due to: (i) a 146.4 million euro rise in current receivables (103.1 million euros on a like-for-like basis), above all those due from customers (up 99.3 million euros and 56.6 million euros on a like-for-like basis), and (ii) a 39.4 million euro increase in other current assets (28.5 million euros on a like-for-like basis); partially offset by (i) an increase in other current liabilities (up 61.3 million euros and 51.6 million euros on a like-for-like basis), primarily reflecting tax expense for the period, and (ii) an increase in current payables (up 9.4 million euros), deriving from the greater amount payable to the Comune di Roma (up 8.3 million euros) and a rise in trade payables (up 2.9 million euros). On a like-for-like basis, current payables are down 21.7 million euros, reflecting an increase in amounts payable to the Comune di Roma, offset by a reduction in trade payables (down 28.2 million euros). At the end of the period the Group reports net receivables of 28.6 million euros due from the Comune di Roma, after an increase of 27.2 million euros with respect to 31 December 2007.

Investment during the period amounts to 92.9 million euros, marking an increase of 10.8 million euros compared with 31 March 2007 (up 6.9 million euros on a like-for-like basis). The movement reflects a 3.3 million euro reduction in investment in generation, following completion of the thermoelectric plants under construction, and an increase of 13.7 million euros in investment by the Group’s electricity distribution and water companies.

Net debt of 1,614.2 million euros at 31 March 2008 is up 22.1% or 291.7 million euros on the end of 2007. The increase reflects: (i) the debt of companies for which the method of consolidation was changed during the quarter, accounting for 159.1 million euros (on a like-for-like basis net debt is 1,455.1 million euros, representing an increase of 10% or 132.6 million euro); (ii) growth in investment (up 10.8 million euros on 31 March 2007) and the mismatch between the cost of procuring electricity and income from its sale (which is

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collected in subsequent periods), in addition to seasonal factors. Net debt at the end of the first three months of each year is higher than at the close of the previous financial year: at 31 March 2007 consolidated net debt of 1,305,7 million euros was 108.1 million euros up on 31 December 2006.

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SEGMENT INFORMATION

The following information is provided to facilitate understanding of the segment information below: - the “Energy sales and generation” segment includes the companies in the AceaElectrabel Group, Eblacea and Tirreno Power; - distribution and public lighting are included in the “Energy networks” segment, which includes Acea Distribuzione, Acea RSE, Acea Luce and Ecogena; - analysis and research services are included in the “Engineering and laboratory services” segment, which includes Laboratori SpA; - the “Environment and energy” segment includes the TAD Group companies and Aquaser.

The figure for total revenue in the following table differs from the amount reported for consolidated net revenue in the consolidated income statement, as a result of application of IAS 18, in particular with regard to the distinction between gross and net revenue. This distinction cannot be applied when presenting the revenues and costs of individual segments.

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SEGMENT INFORMATION

Revenue Gross operating profit/(loss) Investment

Q1 Q1 Q1 Increase/ Increase/ Increase/ 2008 2007 2008 2007 2008 2007 (Decrease) (Decrease) (Decrease)

Generation 90,761 35,234 55,528 17,386 5,660 11,725 8,000 11,300 (3,300)

Distribution 94,144 91,943 2,201 49,711 51,243 (1,532) 30,300 30,600 (300)

Retail 471,891 371,092 100,799 3,784 5,903 (2,119) 600 1,100 (500)

Public lighting 21,072 24,134 (3,062) 4,844 5,725 (881) 3,000 1,900 1,100

Italian water services 163,434 150,314 13,120 51,457 45,430 6,027 46,300 35,472 10,828

Overseas 4,023 3,374 649 1,995 1,168 828 0 0 0

Analysis and research 5,433 4,472 961 1,804 1,429 375 100 300 (200)

Environment and energy 16,229 12,047 4,182 6,081 3,520 2,561 2,400 1,100 1,300

Corporate 23,942 15,773 8,169 1,017 (3,852) 4,869 2,200 300 1,900

Total continuing operations 890,929 708,383 182,546 138,080 116,227 21,853 92,900 82,072 10,828

Eliminations and adjustments (123,975) (113,295) (10,679) 95 (383) 479 0

TOTAL GROUP 766,955 595,088 171,867 138,175 115,844 22,331 92,900 82,072 10,828

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OPERATING REVIEW

ENERGY NETWORKS

DISTRIBUTION OF ELECTRICITY ON THE REGULATED AND FREE MARKETS

2008 represents the first year of application of the tariff structure defined by the Electricity and Gas Authority (the Authority) in the “Integrated text of the directives […] regarding the transmission, distribution and metering of electricity for the regulatory period 2008-2011”, contained in Annex A of Resolution 348/2007. The previous tariff structure (for the regulatory period 2004-2007) provided for contemporaneous introduction of two equalisation mechanisms, one “general” and the other “company-specific”, designed to recognise the specific conditions under which ’s various distribution companies operate. These mechanisms have been confirmed for the new regulatory period. The mechanisms are partly based on analysis of parametric costs (general equalisation, which is mandatory), and partly on company-specific analyses carried out by the Authority (company-specific equalisation, which is optional). The general equalisation mechanism is the result of the restriction created by the single national tariff, which envisages the need to define tariff parameters based on the average nature of end users and the geographical area served. In reality, the costs effectively incurred by individual companies in order to provide the service are influenced by the specific characteristics of the customers served and by external factors beyond the company’s control. It is therefore necessary to safeguard the economic efficiency and profitability of companies via adoption of compensatory measures to cover the higher costs incurred with respect to the tariffs. The general equalisation mechanisms for the costs and revenues deriving from distribution and metering for the years 2008-2011, which take account of the innovations introduced by resolutions 18/2008 and 30/2008, are as follows: • equalisation of distribution service revenues; • equalisation of revenues deriving from increased returns designed to provide incentives for investments in distribution networks;

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• equalisation of direct distribution costs on HV networks; • equalisation of direct HV/MV transformation costs; • equalisation of direct distribution costs on MV and LV networks; • equalisation of revenues from the supply of electricity to residential customers. • equalisation of revenues from the LV metering service; • equalisation of the marketing costs incurred by distribution companies in respect of LV customers; • equalisation of the cost of purchasing electricity used internally for transmission and distribution; • equalisation of the difference between effective and standard losses.

The equalisation mechanism designed to provide incentives for investments in distribution networks aims to offer distribution companies an increased return on invested capital. This measure aims to promote specific projects capable of developing distributed generation and improving voltage quality on the networks. When carrying out its annual review of distribution tariffs from 2010, the Authority has reserved the right to allocate a portion of the tariff components to cover these investments. This aims to ensure that the increased returns are only granted to companies who have effectively carried out such investments.

Resolution 30/2008 established the method for calculating the equalisation of revenues deriving from the LV metering service. The mechanism aims to guarantee that returns on investments in meters and electronic reading systems, and the right to depreciate retired electro-mechanical meters to be replaced by electronic meters, are granted to distribution companies who have effectively carried out such investments. The equalisation mechanism also introduces penalties for distribution companies who do not comply with the obligation to install LV electronic meters set out in Resolution 292/2006. In the same resolution the Authority launched the new equalisation mechanism to cover the cost of marketing distribution services to LV customers, with a view to protecting the financial position of distribution companies. Two regimes are to be applied to distribution companies that have established a separate company to supply services subject to additional safeguards, and to those who have combined distribution services with the sale of electricity.

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Resolution 18/2008 amended the “Integrated Text of the Electricity and Gas Authority’s provisions governing the sale of electricity to final customers requiring additional safeguards and protection (the “Retail Service Code”), in accordance with Legislative Decree 73 of 18 June 2007”, approved with Resolution 156/07. This new resolution has established equalisation mechanisms for the cost of procuring electricity incurred by each provider of services to final customers subject to additional safeguards. The regulation governing load profiling requires electricity for customers subject to additional safeguards to be quantified on a residual basis, and to thus also include electricity consumed by retailers themselves in the distribution and transmission and the difference between the effective losses and standard network losses of distribution companies. In this resolution, therefore, the Authority has established the method of calculating amounts for equalisation relating to the procurement of electricity used in transmission and distribution, and to the value of the difference between effective losses and standard network losses to be recognised to each distribution company.

The company-specific equalisation mechanism takes account of the difference between the specific costs incurred by a company and the national average, where this difference is not covered by the general mechanism. To this end, the Authority is required to carry out an assessment at the request of each individual company, with the aim of identifying external factors beyond the company’s control that give rise to costs that are higher than those reflected in the tariffs, and that are not compensated for by the general equalisation mechanism. The Authority’s Resolution 30/08: • has updated the company-specific correction factor for the regulatory period 2008-2011, bringing the amount for company-specific equalisation for each individual company into line with its effective investment; • has put a value on the permitted effective costs incurred by distribution companies included in company-specific equalisation, using methods in line with those adopted in the determination of tariffs for the regulatory period 2008-2011; • supports combinations of distribution companies, awarding companies involved in business combinations an amount for company-specific equalisation equal to the sum of the amounts recognised for the individual companies; • restricts participation in company-specific equalisation to companies qualifying for the equalisation regime in the regulatory period 2004-2007;

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• has launched new investigations of individual companies, to be conducted by the Authority’s Tariff Department, to determine each company’s effective distribution costs for 2008; • requires the Electricity Industry Equalisation Fund to pay amounts for company- specific equalisation for the years 2009, 2010 and 2011 based on the company- specific correction factors updated pursuant to this resolution and permitted revenues subject to equalisation.

Further innovations introduced in the third regulatory period regard: • determination of a mandatory tariff for the distribution service, to be fixed by the Authority and applied by each distribution company to its current and future counterparties. This arrangement thus replaces the system based on basic and special tariff options, as adopted for the distribution service during the second regulatory period and proposed by the various distribution companies; • a distinction between metering service costs with appropriate specific fees to be received by entities that install and maintain meters, collect meter readings and validate and record the readings; • definition of a dynamic mechanism for correcting permitted revenues to cover the cost of marketing the distribution service, with the aim of compensating for the existing imbalance between permitted costs and revenues deriving from movements in the volume of services provided; • the separation, from distribution revenues, of amounts resulting from application of fees for reactive energy offtake, now allocated to the cost of measures and initiatives designed to promote energy efficiency among end users of electricity.

The new regulations have also changed the method of updating tariff components, meaning that: • the portion of transmission and distribution tariffs covering operating costs is updated via the price-cap mechanism; • the part designed to provide a return on invested capital, will be updated on the basis of the gross fixed investment deflator, movements in the volume of services provided and the level of permitted investments, and the rate of variation linked to increased returns designed to provide incentives for investments in distribution networks;

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• the part designed to cover depreciation has been updated, using the gross fixed investment deflator, movements in the volume of services provided and the rate of variation linked to the reduction in gross invested capital.

With regard to connection fees and fixed charges, in the document “Economic conditions for delivery of the connection service”, attached to Resolution 348/2007 as Annex B, the Authority has: • established the procedural and economic conditions for delivery, to final customers, of the service connecting consumers to LV electricity networks with the obligation of connecting third parties; • defined additional economic conditions with respect to those established in Resolution 281/2005; • determined the procedural and economic conditions for delivery of the network connection service to distribution companies with the obligation of connecting third parties; • established the procedural and economic conditions for delivery of specific services (the transfer of equipment requested by users, contract transfers, transfers of supply, disconnections, etc…).

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Regulatory environment

8 January 2008 – Electricity and Gas Authority Resolution 1/2008 regards adoption of the three-year strategic plan for the period 2008-2011. The general objectives set out in the document may be summarised as follows: • to promote and develop competitive markets, including via harmonisation of the electricity and gas markets, containment of the power of dominant operators and support designed to ensure adequate supply; • to support and promote the efficiency and value for money of infrastructure services; • to protect energy consumers through the full deregulation of markets, on the demand side, and development of levels of service quality and security; • to promote rational use of energy and protect the environment by contributing to decisions regarding sustainable development; • to guarantee and implement regulations and oversee the correct application of regulations in respect of regulated entities; • to increase stakeholder dialogue and develop relations with the institutions by boosting consultation with operators and consumers; • to boost the Authority’s internal functionality and operating efficiency.

14 January 2008 – Authority Resolution 1/2008 amended Annex A of Resolution 89/2007 regarding the technical/economic conditions for the connection of electricity generating plants to electricity networks, with the obligation to connect third parties, with nominal voltage less than or equal to 1 kV. The amendments were necessary in order to replace references to Interministerial Economic Planning Committee Regulation 42/86 with those in Annex B to the Integrated Text for 2008-2011.

21 January 2008 – Authority Resolution 4/2008 governs electricity dispatching and transport services (transmission, distribution and metering) in the event of consumers in arrears or of non-performance by retailers. The document sets out: • to protect the credit rights of retailers in the event of non-payment by consumers, in accordance with the need to ensure the transparency of information and accurate information on the timing of payments, and the consequences of non-

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payment, and in the event of the retailer’s non-performance in respect of Terna or another distribution company; • to protect the credit rights of the suppliers of protected services from the potentially opportunistic behaviour of consumers, ensuring that they have the opportunity to transfer their receivables for bills issued and not paid by consumers to a new retailer taking their place; • to provide that in the case of consumers served until three months before by a supplier of protected services, the new retailer, together with the switching request, can make an irrevocable offer to acquire the above receivable, suspensively conditional on the retailer still being the provider of the consumer in arrears at the time the receivable exists; • to transitionally define specific rules governing the suspension of supply in the event of non-payment by consumers with LV connections and not equipped with electronic meters, imposing certain information requirements on distribution companies; • to prepare, and subsequently introduce, further measures aimed at identifying appropriate procedures in addition to the suspension of electricity supply, capable of reducing credit risk associated with consumers; • to define, and subsequently introduce, methods designed to cover, in accordance with incentive mechanisms, the costs incurred by suppliers of services subject to additional safeguards and the suppliers of protected services in respect of customers in arrears who cannot be cut off, in addition to measures designed to limit such costs.

28 January 2008 – Authority Resolution 5/2008 launched a procedure to lay down measures concerning the criteria for defining and attributing sums arising from any delayed adjustments made at the load profiling equalisation stage. The Authority believes it necessary to analyse instances of delayed adjustments of meter readings, in order to identify the operators involved in such adjustments and the effects such adjustments would have on sums deriving from load profiling equalisation, also taking account of the outcome of the related investigation launched by Resolution 177/2007. The Authority thus plans to introduce incentives based on bonuses and penalties, in relation to compliance with the requirements governing the method of load profiling equalisation,

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and in line with a similar to those under examination for the review of the fees for the aggregation of readings, launched by Resolution 343/2007.

7 February 2008 – Authority Resolution 10/2008 amended Annex A of Resolution 156/2007 (the “Retail Service Code”). The Authority believes it necessary: • to provide for application of a fixed contribution if a new offtake point is activated or a previous one is disconnected, and also if a consumer requests disconnection, regardless of whether or not the supply is of a seasonal nature; • to provide for application of the same contribution to services relating to changes in the power supplied; • to correct material errors discovered after publication of resolutions 311/2007 and 349/2007.

14 February 2008 – Authority Resolution 15/2008 amended and added to Resolution 157/2007 concerning access to the database for making commercial offers for the supply of electricity and/or natural gas. The main changes introduced include: • the introduction of measures regarding coverage of the costs incurred by electricity and natural gas distributors in implementing rules concerning access to databases, and definition of limits and obligations, for retailers, regarding the correct use of databases; • definition of the databases and the timing of implementation of the preparations necessary before the exchange of data between distributors and retailers can be operative; • the promotion and adoption, also jointly by several distributors, of dedicated telecommunications platforms, providing standardised tools for exchanging databases necessary in order to minimise the costs incurred by retailers and linked to each request for access to the data; • identification of an initial phase of implementation of the measures in this resolution, during which distributors must carry out investments and incur the operating costs necessary in order to adapt their information systems to enable them, from 1 October 2008, to manage retailers’ requests for access to databases; • identification of a phase of implementation of the measures in this resolution, following the transition period, during which distributors must carry out investments and incur the operating costs primarily needed to update and

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maintain their information systems, so that they are able to readily respond to requests for access to databases by retailers and transmit the continually updated data to them; • recognition of operating costs linked to the distributor’s activities during the transition period, based on the average cost obtained via critical analysis of proposals provided by distributors; • coverage of the above operating costs through a specific tariff component to be applied to consumers to which the treatment of the databases relates; • coverage of the costs incurred by distributors, following the transition period, through ordinary annual tariff updates, to be applied only to consumers to which the treatment of the databases relates.

20 February 2008 – Authority Resolution 16/2008 contained urgent measures concerning the publication of data on the change in residual area offtakes, following changes to the hourly treatment of offtake points (amendment of Annex A of Resolution 278/2007 – the Integrated Text of Load Profiling Regulations). With effect from 1 April 2008, the hourly load profiling regulations for the offtake of electricity, as defined by Resolution 118/2003, have been replaced by load profiling by time band, as defined by the Integrated Text of Load Profiling Regulations, extending hourly treatment to all LV offtake points with available capacity in excess of 55 kW and equipped with electronic meters “in service” (remote operation).

21 February 2008 – Authority Resolution 18/2008 introduced equalisation of electricity procurement costs for services subject to additional safeguards and defined settlement mechanisms between the Single Buyer and suppliers of services subject to additional safeguards following quantification of the amounts relating to load profiling. The measure aims to complete the regulatory framework introduced by Resolution 156/2007 - “Integrated Text of the Electricity and Gas Authority’s provisions governing the sale of electricity to final customers requiring additional safeguards and protection (the “Retail Service Code”) – by defining equalisation mechanisms for electricity procurement costs incurred by each supplier of services subject to additional safeguards in serving consumers, and by regulating amounts, between suppliers of services subject to additional safeguards and distribution companies, for electricity used by the companies themselves in distribution and transmission and “differential losses”.

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26 February 2008 – Authority Resolution 7/2008 warned grid operators to comply with measures regarding the communication of electricity meter readings to calculate incentives for solar power plants.

5 March 2008 – Authority Resolution 25/2008 introduced compensation of electricity marketing costs incurred by suppliers of services subject to additional safeguards in 2008. The mechanism is capable of settling any differences between revenues deriving from application of the sales and marketing revenues component (as defined by paragraph 9- bis.1 of the Retail Service Code) and permitted marketing costs. The mechanism applies to all suppliers of services subject to additional safeguards, operating as separate companies (that is companies that, as provided for by the Law Decree of 18 June 2007, provide services subject to additional safeguards via a specific organisation, separate from the distribution company and operating in an area with more than 100,000 consumers).

12 March 2008 – Authority Resolution 29/2008 introduced electricity offtake profile conventions for public lighting users not treated on an hourly basis. The Authority believed it necessary to introduce new profiling conventions, based on the proposals in consultation document 24/2007 of 18 June 2007. The new methods are to come into force at the same time as the procedure for profiling by time band set out in the Integrated Text of Load Profiling Regulations.

13 March 2008 – Authority Resolution 30/2008 amended and added to the Integrated Text for 2008-2011 and introduced measures regarding the economic conditions of the grid connection service. The measures provide for: • introduction of two distinct equalisation regimes for marketing costs, one to be applied to distribution companies that have established a separate company to supply services subject to additional safeguards, and one to those who have combined distribution services with the sale of electricity one the market subject to additional safeguards, with a view to protecting the financial position of distribution companies; • an equalisation mechanism for revenues deriving from the LV metering service. The mechanism aims to guarantee that returns on investments in meters and

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electronic reading systems, regarding LV offtake points, and the right to depreciate electro-mechanical meters retired early to be replaced by electronic meters, are granted to distribution companies who have effectively carried out such investments; • introduction of penalties for distribution companies who do not comply with the obligation to install LV electronic meters set out in Resolution 292/2006; • updating of the Special Tender Provisions for the period 2008-2011, bringing company-specific equalisation for each company into line with the effective level of its investments; • determination of the share of the unit V1 and D1 tariffs to cover direct HV distribution marketing costs, and direct costs of transformation from HV to MV, as defined by articles 36 and 37 of the Integrated Text for 2008-2011; • indexation of standard direct unit costs, confirming the relevant ratios, associated with the different types of plant, used in the second regulatory period.

27 March 2008 – Authority Resolution 36/2008 contained urgent measures for the launch of hourly treatment for the purposes of dispatching for LV offtake points with available capacity in excess of 55 kW (amendments to Annex A of Resolution 278/2007 - Integrated Text of Load Profiling Regulations). From 1 April 2008, the Integrated Text of Load Profiling Regulations has introduced load profiling by time band: all VHV, HV, MV and LV offtake points (in the latter case limited to points with available capacity in excess of 55 kW), if equipped with hourly or electronic meters, must be treated on an hourly basis (that is to say: reading and use of hourly offtake profiles for the appropriate technical and commercial purposes) from the first day of the conventional two-monthly period following the entry into service of the meter with which they are equipped, or from the first day of the second subsequent conventional two-monthly period, where entry into service of the meters takes place during the last fifteen days of the month. The Authority believes it necessary to put off hourly treatment of LV offtake points with available capacity in excess of 55 kW, which are not subject to hourly treatment at 31 March 2008, by six months for dispatching purposes. It has done this while maintaining the obligation to record hourly offtakes for such points (according to the procedures and timing provided for in the Integrated Text of Load Profiling Regulations) and to make the data available, pursuant to the Retail Service Code and Resolution 111/2006.

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28 March 2008 – Authority Resolution 37/2008 updated the economic conditions for the sale of electricity on the protected market for the quarter April - June 2008.

28 March 2008 – Authority Resolution 38/2008 updated the tariff components designed to cover general electricity system charges and additional components for the quarter April - June 2008, issuing measures regarding the Electricity Industry equalisation Fund.

28 March 2008 – Authority Resolution 42/2008 introduced regulations for dispatching and transport (electricity transmission, distribution and metering) in the event of one dispatching user taking the place of another on the same active offtake point, or the attribution to a dispatching user of a new or previously disconnected offtake point (switching). This resolution holds it necessary: • to define rules governing switching limited to certain essential profiles, in order to ensure application from 1 April 2008; • in accordance with the provisions of Resolution 118/2003, to ensure that switching takes effect from the first day of the second month after the one in which the request is received by the distribution company; • to require the outgoing dispatching user to communicate cancellation of the supply contract to the distribution company, also establishing the items of information to be communicated and the timing to be complied with by the distribution company, with regard to the reporting of material errors and communication to the outgoing dispatching user; • to require suppliers of services subject to additional safeguards to communicate a customer’s non-compliance with the requirements for inclusion in the additional safeguards category pursuant to article 4 bis of the Retail Service Code; • to define specific procedures where switching involves a new or disconnected offtake point, requiring that the timing of inclusion of the offtake point for which requests have been received in the dispatching contract should coincide with the expected timing of the start-up of supply; • to provide for a transition period in order to allow distribution companies to finalise the appropriate IT procedures, putting of the obligation to make available historical meter readings until 1 October 2008.

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31 March 2008 – Authority Resolution 43/2008 amended Annex A of Resolution 111/2006 concerning the launch of the standard determination of time bands for the purposes of the dispatching service. The Authority believes it necessary to update the resolution to take account of the measures introduced by the Integrated Text of Load Profiling Regulations and the Integrated Text, and the consequent repeal of Resolution 118/2003 and the associated Integrated Text for the previous regulatory period.

28 March 2008 – Authority Resolution 45/2008 amended the time limit for submitting switching requests for offtake points owned by Rete Ferroviaria Italiana SpA. The term of 1 May 2008 established by paragraph 3.3 of Resolution ARG/elt 42/2008 was thus moved to 18 April 2008.

The performance of energy services During the first three months of 2008 Acea Distribuzione SpA injected 2,997 GWh of electricity into the grid, representing an increase of 4.15% on the same period of 2007.

The following table shows a breakdown.

GWh Q1 2008 Q1 2007

Single Buyer 1,319.7 1,629.3

Overseas 107.8 106.6

Total regulated market 1,427.5 1,735.9

Free market 1,569.3 1,141.7

Overall total 2,996.8 2,877.6

Revenues from the supply of transport and metering services to regulated and free market customers amounted to 69 million euros, which is substantially in line with the same period of 2007. However, a breakdown of these revenues shows that the amount deriving from the transport of electricity for regulated customers is down, whilst the amount attributable to free market customers is up.

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Finally, revenues from the supply of transport and metering services have been reduced by 1.8 million euros due to equalisation, which, in the period under review, had zero impact. This substantially reflects the update of tariffs introduced by the third tariff cycle that came into effect from 1 January 2008: this has introduced further equalisation components, such as the difference between losses through the distribution network and standard losses included in tariffs. Company-specific equalisation amounts to 8.1 million euros. This is down 0.3 million euros on the first three months of 2007 and was calculated on the basis of the rules applicable in the second tariff cycle, given the impossibility of updating the rules due to a lack of data and information. Variable costs total 11.5 million euros and are in line with the same period of 2007. The primary margin thus amounts to 65.6 million euros, recording an increase of 1.5 million euros compared with the same period of 2007.

Staff

Average number of staff

Average at 31 March 2008 1,603 Average at 31 December 2007 1,616 Average at 30 September 2007 1,619 Average at 30 June 2007 1,621 Average at 31 March 2007 1,620

The above table shows the average as a whole and thus takes account of staff employed by the public lighting business. Staff costs for the first three months of 2087, including capitalised costs, amount to 22.3 million euros, representing an increase of 1.8 million euros compared with the same period of 2007.

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ENERGY SALES AND GENERATION

ELECTRICITY PRODUCTION (the financial results and quantities are shown on a non-proportionate basis)

Performance of production During the first three months of 2008 the AceaElectrabel Produzione Group’s net production amounted to 1,176.5 GWh. This figure is 6.4% up on the same period of the previous year. With regard to the change in the method of consolidating Tirreno Power, this company’s net production is shown below and compares with a figure of zero for the first quarter of 2007. The table is as follows:

GWh Q1 2008 Q1 2007 Increase/(Decrease) %

AEP – thermoelectric 87.4 136.6 (49.2) -36.0%

AEP – hydroelectric 80.1 74.0 6.1 8.3%

AEP – Leinì 454.2 0.0 454.2 100% thermoelectric

Total AEP 621.7 210.6 411.1 195.2%

Voghera 0.0 532.6 (532.6) -100%

Roselectra 543.0 513.6 29.4 5.7%

Longano – wind 11.9 0.0 11.9 100% power

Total net production 1,176.5 1,256.7 (80.2) -6.4% - AEP Group

Tirreno Power 3,421 0.0 (3,421) 100%

Total net production 4,597.5 1,256.7 3,340.8 265.8%

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Results of operations The AceaElectrabel Produzione Group reports total revenue of 126.5 million euros for the period from the sale of electricity. Revenue growth of 7.9 million euros reflects increased revenue at Roselectra following its full entry into service (up 10.3 million euros) and a reduction in revenue reported by Voghera, which recorded revenue of 3.8 million euros in the first quarter of 2008 compared with 5.1 million euros in the same period of 2007. The result recorded by Voghera essentially reflects the plant’s shutdown due to a breakdown. This company’s revenues thus include an insurance payout of 4 million euros. Revenue from urban heating amounts to 1.6 million euros.

Fuel costs during the period amount to 71.3 million euros, including 38 million euros to meet the requirements of AceaElectrabel Produzione SpA and the Voghera plant, and 33.46 million euros for the Roselectra plant.

The AceaElectrabel Produzione Group’s gross operating profit amounts to 22.5 million euros, compared with 19.1 million euros for the first three months of 2007.

The operating performance was heavily influenced by the breakdown at the Voghera plant on 16 November 2007, with the primary margin recording a reduction of 8.4 million euros compared with the same period of 2007. The plant was shut down for the entire period and is expected to re-enter service in June of this year.

Tirreno Power reports revenue from the sale of electricity of 356.4 million euros, compared with fuel costs of 193.3 million euros. Compared with the previous year, the company increased its production by 444 GWh (15%) with respect to the previous year.

Staff AceaElectrabel Produzione SpA’s staff at 31 March 2008 total 182 (54 attributable to the Acea Group), whilst Tirreno Power’s staff amount to 617 (93 attributable to the Acea Group).

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SALE OF ELECTRICITY ON THE REGULATED AND FREE MARKETS AND SALE OF GAS (the financial results and quantities are shown on a non-proportionate basis)

Results of operations Revenue for the period totals 784.3 million euros, representing a 23% increase on the same period of the previous year due to the start-up of Elettria’s sales activities (in Tuscany). The cost of procuring electricity for the regulated market declined by 3% compared with the same period of 2007, after equalisation. This reflects the reduced volume purchased and market price trends. The Single Buyer, which replaced Enel Distribuzione SpA once trading on the Electricity Exchange began, determines sale prices on a monthly basis in view of the actual costs incurred and in accordance with the procedures established by the Authority. The purchase cost for the period is 125.3 million euros before equalisation. This item also includes estimated equalisation, designed to cover the differences between the purchase cost and sale price: this form of equalisation is mandatory for electricity sold on the regulated market. The positive amount of 7.8 million euros reduces procurement costs for the period and represents the best estimate of the above differences for the first three months of 2008: the definitive amount will only be determined at the end of the year and may differ from the estimate for the first three months as a result of market price movements.

The retail companies report gross operating profit of 6.5 million euros, compared with 10.3 million euros for the first three months of 2007.

The average number of staff employed in the sale of electricity and gas amounts to 268 (154 attributable to the Group). At 31 March 2007 the figure was 242 (142 attributable to the Group).

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WATER SERVICES

LAZIO REGION Acea Ato2 SpA In accordance with the so-called Galli Law, Acea Ato2 SpA has provided integrated water services in Lazio Region’s ATO 2 Area since 1 January 2003, operating under a thirty-year concession. In accordance with the program approved by the Mayors’ Conference, management of the service will be taken over gradually before reaching a total of 3,600,000 people served. During the first quarter of 2008 the company acquired contracts to manage water services in the municipality of with effect from 1 February 2008. This adds to the contracts previously acquired over the years: 2003 – the municipalities of , , Tivoli, Guidonia-Montecelio, , and , in addition to the Simbrivio Consortium, an aqueduct system that supplies water on a wholesale basis to 45 municipalities and 2 consortia; 2004 - the municipalities of , , , Marcellina, , , , Rocca S.Stefano, and , as well as the agreement to take over the running of the aqueduct system from a consortium set up by the former Southern Italy Development Fund and previously managed by Lazio Regional Authority, which services , Ardea and ; 2005 - the municipalities of , Carpineto Romeno, , , Arcinazzo Romeno – excluding the CO.RE.CALT. Consortium- , , Gorga, Cervara di Rome, Subiaco, , , , Trevignano Romeno and ; 2006 – the Doganella Consortium’s aqueduct system and sewerage and water treatment in 3 of the 8 municipalities in the Consortium (, Montecompatri, Monteporzio Catone, , , and Colonna,), integrated water services in the municipalities of Fiano Romeno, Jenne, , Vejano, , , , Lanuvio, , , , Pomezia (provisional management of sewerage and water treatment services), Sant’Oreste, , , Genzano, and , sewerage and water treatment services for other municipalities in the Prenestino Ecological Consortium, such as Poli, Cave (acquired from 14 November 2006), , , (protected water services) and

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Olevano Romano (protected water services), and integrated water services in the municipalities of , , , and Gallicano, for which the Prenestino Ecological Consortium also manages water services. Integrated water services in the municipality of were also assigned to the company in 2006. 2007 – the municipalities of , Riano, Marino, Oriolo Roman and , water services in the municipalities of Rocca di Cave, Poli and Genazzano, thus completion the acquisition of all integrated water services in these municipalities, after the previous assignment of sewerage and water treatment services to the Prenestino Ecological Consortium.

The situation at 31 March 2008 is thus the following: • Municipalities acquired: 75, equivalent to 3,401,170 people (source: ISTAT 2001), and representing over 94% of the total. This is in addition to the aqueduct systems of the Simbrivio Consortium, the former Southern Italy Development Fund, the Doganella Consortium and the above Nemi-Genzano and Prenestino Ecological consortia.

Moreover, at 31 December 2007 assessments for the following municipalities have been completed and the documentation needed for acquisition of the related contracts has been prepared: • Northern Area: , and ; • Eastern Area: Agosta, , , , Filettino, , Mandela, , , Trevi nel Lazio and ; • Southern Area: and ; • Western Area: , , and .

A number of acquisitions are, however, on hold. In the Eastern Area, the authorities responsible for the municipalities of Vallepietra and Trevi nel Lazio, where assessments were completed some time ago, have raised a number of difficulties, whilst problems relating to the municipalities of Agosta, and regard previous legal disputes.

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Moreover, the municipalities of Rio Freddo (in a note sent to Acea ATO2) and Sant’Angelo Romano and the Mignone Consortium (in an informal communication to the Technical and Operating Secretariat) have announced their unwillingness to adopt integrated water services. The Municipality of Filettino, pursuant to Legislative Decree 152/2006, has decided not to proceed with transfer of its integrated water services. In the Western Area, the Municipality of has expressed its unwillingness to take part in technical assessments. Acquisition of the following municipalities forming part of the Aniene Mountain Community, for which adoption of integrated water services is optional pursuant to paragraph, 5 of art. 148 of Legislative Decree 152/06, is uncertain: , , , Mandela, and Rocca Giovine. Assessments (including those for the municipalities already acquired) have thus been completed in 101 municipalities, representing approximately 3,535,289 people (source ISTAT 2001) or around 98.2% of the total.

Tariffs The price for integrated water services was established on the basis approved by Resolution 4/2002 passed by the Mayors’ Conference on 10 December 2002. This envisages the progressive convergence of pre-existing water service prices in the municipalities acquired with the price set out in the Area Plan, at the latest within six years from 2003.

Acea Ato2 SpA’s gross operating profit for the first three months of 2008 amounts to 34.5 million euros and is substantially in line with the figure for the comparative period (34.4 million euros for the first quarter of 2007).

Staff

Average number of staff

Average at 31 March 2008 1,546 Average at 31 December 2007 1,546 Average at 30 September 2007 1,548 Average at 30 June 2007 1,457 Average at 31 March 2007 1,537

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Acea Ato5 SpA Acea Ato5 SpA began operating in the last quarter of 2003 and, for the three months ended 31 March 2008 reports gross operating profit of 2.6 million euros, compared with 1.1 million euros for the same period of the previous year. The increase reflects the recognition of income linked to the adjustment of costs for previous years. The start-up of the management of integrated water services in ATO 5 has been completed, in full accordance with the operating plan for contract acquisitions agreed with the Technical and Operating Secretariat.

In February 2007 a tariff review carried out by the Area Authority came to a positive conclusion. This review, which was based on the experience acquired over the first four years of operation and the financial statements for 2003, 2004 and 2005, established the tariff for 2006 and future movements up to the end of the concession term (2032). Tariff movements take account of the operating costs and capital expenditure to be incurred in order to keep pace with volume growth, with the dual aim of achieving the quality and volume targets for integrated water services set down by the Area Authority and of safeguarding the operator’s stable financial position. The process also resulted in a settlement between the company and the Area Authority resolving the issue of higher operating costs incurred for the three-year period 2003-2005: the settlement contains a recognition of the higher costs less amounts relating to (i) the portion of the tariff – represented by depreciation and the return on invested capital after allowing for inflation – relating to investment provided for in the Area Plan and not carried out in the first three years, (ii) the accrued rate of inflation applicable to concession fees, and (iii) fines for breaches of contract in the three years. The amount due from the Area Authority as a result of the above settlement totals 10,700 thousand euros, and is to be paid by the Authority in three annual instalments to be paid by 31 December of each year. The first instalment (3.6 million euros) fell due on 31 December 2007 and may be collected by offsetting the sum due against the accrued concession fee payable at this date.

The average number of staff at 31 March 2008 stands at 237.

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TUSCANY REGION Acque SpA and its subsidiaries The companies report total gross operating profit of 12 million euros for the period (45% amounts to 5 million euros). This marks an increase of 2 million euros compared with the previous year. The companies serve a total of around 720,000 people distributed across 57 municipalities in the provinces of Pisa, Florence, Siena, Pistoia and Lucca. The average number of staff employed by the Acque Group at 31 March 2008 stands at 502, of which 45% (226 staff) is included in the consolidated total. The subsidiary, Acque SpA, which is responsible for managing the area, has begun to use 255 million euros facility granted in October 2006 by a syndicate of banks and earmarked to finance planned investment of approximately 650 million euros.

Publiacqua In ATO 3 Medio Valdarno, the process of improving and reorganising the subsidiary, Publiacqua SpA, continued. Efforts focused on collecting receivables and changing the internal organisation so as to improve the quality of service and reduce operating costs. The General Meeting for the ATO 3 Medio Valdarno area, held in July 2007, approved the proposed changes to the Area Plan, calling for inclusion of the municipalities in the Chianti district in the ATO, as well as a tariff review so as to maintain a high level of investment in ATO 3. Thus the vast programme of infrastructure replacement, renewal and extension aimed at ensuring that all users enjoy an adequate level of integrated water services will continue. Details of the investments planned for the period 2007–2011 are currently being worked out with the Area Authority and municipal authorities.

The Publiacqua Group contributes gross operating profit of 13.4 million euros to the Acea Group’s results (40% amounts to 5.4 million euros), marking an increase of 3.7 million euros on the same period of 2007. The average number of staff employed by the company at 31 March 2008 stands at 681, of which 40% (283 staff) is included in the consolidated total.

The Acea Group maintains a presence in ATO 1 Northern Tuscany via its subsidiary, CREA, which has interests in GEAL (the integrated water services operator in the town of Lucca), AZGA Nord and Lunigiana Acque.

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The average number of staff employed by the company at 31 March 2008 stands at 50.

UMBRIA REGION UMBRA ACQUE In December 2007 Acea was finally selected by the Area Authority for ATO 1 Perugia as the private industrial shareholder to take a minority interest in Umbra Acque SpA. A stake in the company was acquired on 1 January 2008. The Ordinary General Meeting of the shareholders of Umbra Acque, called to re-elect the Board of Directors, four members of which are to be nominated by Acea, was held on 20 February 2008. Umbra Acque has been consolidated on a proportionate basis from 1 January 2008, based on the same percentage interest held since the beginning of the year. The company contributed gross operating profit of 3.2 million euros for the first quarter. The average number of staff employed by the company at 31 March 2008 stands at 327, of which 40% (131 staff) is included in the consolidated total.

CAMPANIA REGION GORI In July Sarnese Vesuviano acquired a further 9,266 shares in Gori, raising the Group’s interest to 37.03%. The company contributes gross operating profit of 11.4 million euros to the Acea Group’s results, marking a like-for-like increase of 134% on the 3.7 million euros of the same period of 2007. The average number of staff employed by GORI SpA amounts to 729 (the Group’s share being 270).

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WASTE TO ENERGY

TEA Group The acquisition of the Tad Energia Ambiente Group in July 2006 has allowed Acea SpA to take on a significant role amongst waste to energy operators. Tad Energia Ambiente SpA operates two waste to energy plants with a combined installed power of 20 MW, a Refuse Derived Fuel (RDF) plant in Paliano and a disposal plant in Orvieto. A brief description of the activities carried out by the main companies in the Group is provide below.

TERNI EN.A. This company produces energy from renewable sources, above all in the form of biomass-fuelled waste to energy production, consisting of paper mill pulp which, in addition to green certificates, benefits from the incentives provided in the CIP6 1992 measure. The plant located in Terni ran regularly and smoothly throughout 2007, enabling total production of 78,912 MWh, with an average of 10.00 MWh/h, and the sale of 70,593 MWh of electricity. This result is in line with the improved production performance of biomass-fuelled waste to energy plants. The amount of waste to energy biomass produced amounted to 100,000 tonnes of pulp, thus marking the definitive replacement of wood, which began in 2006, and confirming the remarkably positive impact on the operating performance. The smooth running of the plant and the parallel cost-cutting initiative contributed to obtaining these excellent results. This consolidates the achievement of financial independence that began in 2006, thereby facilitating ordinary operations and extraordinary maintenance, as well as regular payment of project financing instalments and achievement of planned investment targets.

EALL The company has started up a Waste To Energy (WTE) plant at San Vittore del Lazio to produce electricity from renewable sources in full compliance with the EU’s greenhouse gas reduction targets, drawn up as a result of the Kyoto Agreement. These targets are described in the European Council’s “Common Position”, a document approved by the

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European Parliament. This contemplates requesting member states to simplify the related authorisation procedures in order to speed up plant construction. The plant in question, which was designed in accordance with Law 9/10 of 1991 and CIP6 of 1992, uses approximately 100,000 tonnes of RDF a year. In 2007 the plant produced 80,512.30 MWh of energy and reported sales totalling 71,665.22 MWh. The overall result was strongly affected by technical problems that occurred during the second half of the year, leading to a shortfall in saleable energy of 8,410.30 MWh compared with initial budget projections. The plant’s generating capacity was seriously affected by a reduction in the generating capacity of the steam turbine, which had an impact on the plant’s output. A “stopgap” technical measure carried out at the end of July, whilst enabling reactivation of power generation, did not bring production back to normal levels, resulting in loss of output of just over 10%, and a consequent shortfall in energy generated compared with budget projections. The company promptly implemented appropriate measures to bring the plant back into normal operation, including acquisition of replacement equipment that will be available by the end of the first half of 2008. On 17 January 2008 EALL registered a contract at the Rome Tax Office regarding execution of works to upgrade the existing waste to energy plant and increase its capacity to 20 MW. The contract was awarded to a temporary association of companies, including Termomeccanica Ecologica SpA and the Consorzio Cooperative di Produzione e Lavoro. The company also launched procedures for the third line. The project has been approved by the Lazio Regional Authority’s Technical Scientific Committee and in January 2008 it successfully passed an Environmental Impact Assessment. A Services Conference was also held in January 2008 with a view to issuing Integrated Environmental Authorisation.

SAO SAO owns the waste dump located in the municipality of Orvieto and manages urban refuse and special waste. Over recent years its activities have become progressively more regulated with the explicit aim of ensuring strong environmental safeguards and effective controls. During the first half of 2007 analysis and dialogue took place with authorities aimed at obtaining their approval for a tariff plan that would enable the company to cover operating costs and receive adequate remuneration.

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With Resolution 8 of 13 August 2007 the Mayors’ Conference of ATO 4 in the Umbria region approved the agreement that regulates the public service relating to the selection, treatment and disposal of municipal and assimilated waste in the municipalities of ATO 4 and special waste deriving from treatment of the latter. The Mayors’ Conference also approved the tariff plan regarding the transfer of this waste to treatment and disposal plants in Orvieto managed by SAO during the period 2007–2018, with effect as of 1 January 2007. In July 2007 work began on building the first operational section of the eighth tier of the rubbish dump in use. The first phase of these works was completed in November, and the entire operational section is nearing completion.

ENERCOMBUSTIBILI This company manages an RDF production plant in Castellaccio di Paliano (FR). The plant is authorised to treat dry waste deriving from urban solid waste and special waste, producing an annual total of up to 120,000 tonnes of high-calorie RDF in accordance with the law. The RDF produced is burnt entirely at EALL’s waste to energy plant. In February 2008 ENERCOMBUSTIBILI signed a contract with ENERGONUT, a Veolia Group company, regarding the treatment of 15,000 tonnes of RDF per year at the Pozzilli plant. This contract will enable the company to extend disposal of its RDF to plants other than those operated EALL.

AQUASER The company was set up in 2001 in order to manage ancillary services associated with the integrated water cycle, especially sludge disposal activities for sludge produced both by agricultural activities and by composting centres. Aquaser’s unique activity has become increasingly strategic, so much so that in March 2007 Acea increased its stake and consequently acquired control of the company. In April 2007 Acea ATO 2 made the company responsible for the loading, transportation, and final disposal of biological sludge from the treatment plants located in ATO 2 – Central Lazio. The amount of sludge involved amounts to 40,000 tonnes a year and the contract is worth 7,520,000 euros.

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Aquaser plans to complete the disposal cycle independently and with notable cost reductions both for itself and for the Group’s water companies, via the acquisition of composting plants.

ECOMED The company (50:50 owned by Acea and AMA) came out of liquidation on 29 January 2007 in order to set up the CO.E.MA Consortium.

CONSORZIO ECOLOGICO MASSINETTA The COEMA Consortium, in which Acea SpA has an indirect 33.5% stake via Ecomed Srl, was set up in January 2007 together with Pontina Ambiente Srl. The consortium has submitted a request for authorisation (Integrated Environmental Authorisation) to build a 40 MWe heat treatment plant in the Lazio region, using gasified RDF.

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BASIS OF PRESENTATION AND CONSOLIDATION FOR THE

CONSOLIDATED QUARTERLY REPORT FOR THE THREE MONTHS

ENDED 31 MARCH 2008

General information The Acea Group’s consolidated quarterly report for the three months ended 31 March 2008 was approved by the Board of Directors on 12 May 2008. The Parent Company, Acea SpA, is an Italian company whose shares are traded on the Milan stock exchange. The Acea Group’s principal areas of activity are described in the “Operating review”.

Compliance with IAS/IFRS The Acea Group’s consolidated quarterly report for the three months ended 31 March 2008 has been prepared in accordance with the provisions of art. 81 of the “Regulation for Issuers” no. 11971/1999 and subsequent amendments, and in conformity with IAS 34, which regulates interim financial reporting. The report has been prepared under the IFRS effective at the balance sheet date, including the IFRS recently adopted by the International Accounting Standards Board (IASB), International Accounting Standards (IAS) and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) and of the Standing Interpretations Committee (SIC). The Acea Group adopted International Financial Reporting Standards (IFRS) as of 2005, with the date of transition to IFRS established as 1 January 2004. The last consolidated financial statements prepared under Italian GAAP relate to 31 December 2004. The comparative amounts for the same period of 2007 shown in the consolidated accounts have been prepared under IFRS.

Basis of presentation The consolidated quarterly report for the three months ended 31 March 2008 consists of the balance sheet, income statement, cash flow statement and statement of changes in shareholders’ equity, all of which have been prepared under IAS 1. The report also includes notes prepared under the IAS/IFRS currently in effect. The income statement is classified on the basis of the nature of expenses, whilst the cash flow statement is presented using the indirect method.

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The consolidated quarterly report for the three months ended 31 March 2008 has been prepared in euros. Amounts in the income statement and balance sheet have been rounded off to the nearest thousand euros, whilst those in the notes have been rounded off to the nearest million euros.

Accounting standards and policies The most significant accounting standards and policies are described in the “Notes to the consolidated financial statements for the year ended 31 December 2007”. IFRIC 12, the interpretation governing the accounting treatment of service concession arrangements, which was approved at the end of 2006 and has yet to be endorsed, has not been applied in this report.

Use of estimates In application of IFRS, preparation of the consolidated quarterly report for the three months ended 31 March 2008 requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the balance sheet date. The actual amounts may differ from such estimates. Estimates are used in order to make provisions for credit risk, obsolescent inventories, asset write-downs, employee benefits, taxes and other provisions. The original estimates and assumptions are periodically reviewed and the impact of any change recognised in the income statement.

The quarterly report is unaudited.

Consolidation policies and procedures The basis of consolidation includes the Parent Company, Acea SpA, and the companies over which it directly or indirectly exercises either control, via a majority of the voting rights, or dominant influence. The basis of consolidation also includes joint ventures. The accounts of subsidiaries are prepared for the same accounting period and using the same accounting standards as those adopted by the Parent Company. Consolidation adjustments are made to bring into line any dissimilar accounting policies that may exist. All intercompany balances and transactions, including any unrealised profits on intra- group transactions, are eliminated in full. Unrealised losses are eliminated unless costs cannot subsequently be recovered.

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The carrying amount of investments in subsidiaries is eliminated against the corresponding share of the shareholders’ equity of each subsidiary, including any adjustments to reflect fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill, for the purposes of IFRS 3. Subsidiaries are consolidated from the date on which control is effectively transferred to the Group and are deconsolidated from the date on which control is transferred out of the Group. Where there is loss of control of a consolidated company, the consolidated financial statements include the results for the part of the reporting period during which the Acea Group has control.

The minority interest in the net assets of consolidated subsidiaries is shown separately with respect to shareholders’ equity attributable to the Group. The minority interest is determined on the basis of the minority’s proportion of the fair value of assets and liabilities at the date of acquisition and of any changes in shareholders’ equity after this date. Losses attributable to the minority interest in excess of the related share of shareholders’ equity are subsequently attributed to shareholders’ equity attributable to the Group, unless the minority has a binding obligation and is able to invest further in the company to cover the losses.

A list of consolidated companies is provided in an annex that forms an integral part of these notes.

During the period the basis of consolidation has not undergone changes compared to the end of the previous financial year, with the exception of the method of consolidating Eblacea, Tirreno Power and Umbra Acque (proportionate as opposed to the equity method). In the first two cases, this change reflects alterations to Eblacea’s shareholder agreements, whilst the treatment of Umbra Acque regards the changes in governance resulting from the acquisition of a further stake following the selection of an industrial partner at the end of 2007. The Ordinary General Meeting of the shareholders of Umbra Acque, called to re-elect the Board of Directors, four members of which are to be nominated by Acea, was held on 20

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February 2008. Umbra Acque has been consolidated on a proportionate basis from 1 January 2008, based on the same percentage interest held since the beginning of the year.

Compared with 31 March 2007, the basis of consolidation (i) includes Longano Eolica and Elga Sud, which were dormant in the first quarter of the previous year, and (ii) reflects the increased interest in Gori, which amounted to 29.084% in the first quarter of 2007 compared with 37.034% from the second half of 2007.

The following subsidiaries and associates have not been consolidated due to the insignificance of the amounts involved and/or because they are dormant: 1. Consorzio Energy Molise, 50% owned by AceaElectrabel Elettricità SpA; 2. Energy Lazio, 49% owned by AceaElectrabel SpA; 3. Consorzio Italiano Gestione Energia, 50% owned by AceaElectrabel Energia SpA and in liquidation; 4. Montenero Energia Srl, 50% owned by Acea and in liquidation. The company’s liquidation was completed in April 2008; 5. Dyna Green Srl, 33% owned by Acea; 6. Umbria Distribuzione Gas SpA, 15% owned by Acea; 7. Luce Napoli, 70% owned by Acea; 8. VoiNoi SpA, 100% owned by Acea and in liquidation; 9. Ecoenergie Srl, 64.8% owned by TAD Energia e Ambiente and 25.2% by Enercombustibili; 10. Enerdepurazioni Scarl, 99% owned by Enercombustibili and 1% by TAD Energia e Ambiente, and in liquidation; 11. Recupera Srl, 90% owned by Enercombustibili; 12. Sorepla Srl, 90% owned by Enercombustibili and in liquidation; 13. Tirana Acque Scarl, 40% owned by Acea and in liquidation; 14. Aguas de San Pedro SA, 31% owned by Acea 15. Umbriadue Servizi Scarl, 34% owned by AceaRieti. 16. Acea Ricerca Perdite Scarl, 67% owned by Laboratori; 17. Acea Ato5 Servizi Scarl, 60% owned by Laboratori.

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RESULTS OF OPERATIONS

Increase/ Note €000 Q1 2008 Q1 2007 (Decrease)

1 Consolidated net revenue 759,768 595,088 164,680 2 Consolidated operating costs 621,593 479,244 142,349

Gross operating profit 138,175 115,844 22,331

3 Amortisation, depreciation, provisions and impairment charges 58,427 51,126 7,301

Operating profit/(loss) 79,748 64,718 15,030

4 Finance (costs)/income (18,407) (15,296) (3,112) 5 Profit/(loss) on investments 108 4,827 (4,719)

Profit/(loss) before tax 61,448 54,249 7,199

6 Taxation 25,874 22,034 3,840

Net profit/(loss) from continuing operations 35,575 32,215 3,359

7 Net profit/(loss) from discontinued operations 0 0 0

Net profit/(loss) for the period 35,575 32,215 3,360

Profit/(loss) attributable to minority interests 1,560 935 625

Net profit/(loss) attributable to the Group 34,014 31,280 2,735

8 Earnings (loss) per share (€) basic 0.1597 0.1469 0.0128 diluted 0.1597 0.1469 0.0128

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NOTES TO THE CONSOLIDATED INCOME STATEMENT

1. Consolidated net revenue Consolidated net revenue for the three months ended 31 March 2008 amounts to 759.8 million euros, representing an increase of 164.7 million euros (27.7%) on the same period of the previous year. The change in the basis of consolidation accounts for 46.1 million euros of this item, primarily reflecting the change in the method of consolidating Eblacea, Tirreno Power and Umbra Acque, the increased interest in Gori, and the consolidation of Longano Eolica and Elga Sud, which were not consolidated in the report for the first quarter of 2007. Pro forma consolidated net revenue, calculated on a like-for-like basis, thus amounts to 713.6 million euros, marking an increase of 118.5 million euros or 19.9%. The increase essentially regards the following components: (i) revenues from the sale of electricity and gas, which are up 100.1 million euros due to an increase in the volumes sold, bearing in mind average price trends; (ii) revenues from integrated water services, which are up 9.5 million euros; and (iii) revenues from the biomass transfer and waste management, which have increased 3.7 million euros.

Consolidated net revenue breaks down as follows.

Increase/ % €m Q1 2008 Q1 2007 increase/ (Decrease) (decrease)

Electricity sales and services 458.3 369.8 88.5 23.9 Gas sales 76.6 27.6 48.9 177.3 Sale of certificates and rights 3.8 3.6 0.3 7.3 Integrated water services 151.5 134.3 17.2 12.8 Biomass transfer and waste management 7.5 3.8 3.7 96.1 Overseas 4.0 3.4 0.6 19.0 Services to customers 37.5 38.3 (0.8) (2.2) Connection fees 7.7 6.7 1.0 15.4 Other operating income 12.4 9.8 2.6 26.4 Fair value gains/(loses) on financial contracts 0.4 (2.3) 2.6 116.3

Consolidated net revenue 759.8 595.1 164.7 27.7

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Electricity sales and services essentially break down as follows: − 64 million euros from generation, with particular regard to all the AceaElectrabel Produzione Group’s thermoelectric, hydroelectric and wind power plants and those owned by Tirreno Power. This revenue category is up 42.1 million euros, essentially due to the new method of consolidating Tirreno Power (37.6 million euros), which in the first quarter of 2008 produced 3,421 GWh of electricity (up 444 GWh on the first quarter of 2007). The quantity produced by the AceaElectrabel Produzione Group amounts to 1,176.5 GWh, marking a reduction of 6.4% on the same period of the previous year. The decrease (92.8 GWH or 8.3%) is concentrated at the thermoelectric plants (total production of 1,084.5) GWh, with particular regard to the Voghera plant that had to be shut down for the entire period under review following the breakdown that occurred last November. The figure also reflects shutdowns of the Leinì plant for unscheduled repairs. In contrast, hydroelectric production was up on the first quarter of 2007, producing 80.1 GWh of electricity (up 6.1 GWh or 8.3%). The Group’s wind farms beat expectations with total production of 11.9 GWh; − 68.9 million euros (67.1 million euros in the first quarter of 2007) from the transport and metering of electricity for the market subject to additional safeguards and the free and protected markets: this revenue category reports an increase of 2.7%, essentially due to the combined effect of an increase in the amount distributed (up 4.2%), a different mix of customer categories, a higher number of end users and price movements. The movement is also influenced by attribution of the component relating to the commercialisation of transport to the distributor, unlike the first quarter of 2007 when this component was divided between the retailer and the distributor based on market data. General equalisation – which became obligatory from the second tariff period – is substantially equal to zero for the period, whilst reducing revenues for the first quarter of 2007 by 1.8 million euros. The difference primarily reflects the tariff changes introduced with the third tariff cycle from 1 January 2008: the changes have introduced further equalisation components such as the difference between losses through the distribution network and the standard losses covered by tariffs. In terms of the markets served, the free and protected markets witnessed a 37.1% rise in the amount distributed, which rose from 1,088 GWh in the first quarter of 2007 to 1,492.1 GWh in the same period of 2008.

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In contrast, the volume of electricity distributed to regulated customers and the market subject to additional safeguards (GWh 1,312.6) fell 18.1% compared with the same period of the previous year, essentially due to contraction of the market following liberalisation; - 8.1 million euros regarding the estimate of company-specific equalisation. This income is additional to tariff revenues, which do not allow the Group to cover the difference between the actual costs incurred and those recognised via tariffs, due to external factors beyond the operator’s control. This revenue item has decreased 0.3 million euros compared with the first three months of 2007 (when the figure was 8.4 million euros) and was calculated on the basis of the rules for the second tariff cycle, given the impossibility of updating the rules due to a lack of data and information; - 308.8 million euros (264.6 million euros for the first quarter of 2007) from the sale of electricity to regulated customers and the market subject to additional safeguards and to the free and protected markets: this area of the business also reports an increase of 44.2 million euros (up 16.7%), reflecting growth of the free and protected markets (up 59.8 million euros) and a reduction in sales to customers subject to additional safeguards (down 15.6 million euros). The volume sold on the free and protected markets amounted to 3,233 GWh, representing an increase of 601 GWh. The number of delivery points at the end of the period is 59,655 (up 18,882); − 0.5 million from the sale of urban heating, which is substantially unchanged compared with the same period of 2007.

The above revenues from metering and transport for the regulated and free markets, and those from sales on the regulated market, represent the maximum permitted revenues.

Electricity sales and services revenues include revenues deriving from the electricity produced by the plants owned by the TEA Group (Terni ENA and EALL), amounting to 8 million euros. These revenues essentially derive from the sale of electricity produced between January and March to the NGO, which is up 0.8 million euros. The amount produced throughout the period totals 42.0 GWh and is up 3.3 GWh (8.5%) on the same period of the previous year due to the greater number of hours the plant was in operation.

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Other revenues from this segment have been allocated to biomass transfer and waste management.

Gas sales (76.6 million euros) recorded an increase of 48.9 million euros, essentially due to the combined effect of (i) an increase in sales made by AceaElectrabel Trading SpA to customers outside the Group (up 36.1 million euros), and (ii) increased sales by the AceaElectrabel Elettricità Group (up 12.8 million euros), with particular regard to AceaElectrabel Elettricità, which earned revenues of 12.9 million euros from sales of gas during the first quarter of 2008 (0.3 million euros in the same period of 2007). AceaElectrabel Trading ended the period with revenues of 63.1 million euros, compared with 27 million euros for the same period of the previous year.

In the first quarter of 2008 revenues from the sale of certificates and rights amount to 3.8 million euros, marking an increase of 0.2 million euros compared with 2007. This revenue item include sales of (i) green certificates, totalling 0.8 million euros (down 1.4 million euros) and (ii) white certificates (Energy Efficiency Certificates) obtained via the implementation of energy saving projects, amounting to 3 million euros (up 1.6 million euros).

At 31 March 2008 fair value losses on financial contracts amount to 1.1 million euros (with 0.4 million euros allocated to consolidated net revenue and 1.4 million euros to operating costs). They regard the measurement of the financial contracts entered into by AceaElectrabel Trading, AceaElectrabel Elettricità and Tirreno Power under IAS 39. Further information about these contracts is provided in the section “Additional disclosures on financial instruments and risk management policies” in the consolidated financial statements for 2007. The total net effect of the fair value measurement of these contracts (to be recognised in subsequent quarters of 2008) amounts to 7.3 million euros.

Revenues from integrated water services are generated by water companies operating in Tuscany, Umbria, Lazio and Campania. These revenues amount to 151.5 million euros, representing an increase of 17.2 million euros (12.8%) compared with the same period of the previous year.

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On a like-for-like basis of consolidation, the rise is 7.1% (or 9.5 million euros). This essentially reflects service revenues in all regions, following increases in both the volumes sold and prices. The Lazio and Campania regions report total service revenues of 117 million euros (up 7.1 million euros), whilst Tuscany and Umbria ended the first quarter with revenues of 26.9 million euros (up 2.4 million euros). The change in the basis of consolidation thus resulted in additional revenues of 7.7 million euros.

Details of water segment revenues are given below.

Acea Ato 2 SpA reports revenues of 94.5 million euros for the first three months of 2008, marking an increase of 3.8 million euros on the same period of 2007. The improvement derives from the progressive extension of integrated water services to further municipalities and annual tariff movements.

Acea Ato5 SpA reports revenues of 11.7 million euros, which is 1.4 million euros up on the same period of 2007. The improvement is due to the natural increases in prices.

GORI report revenues of 11.3 million euros, marking an increase of 4.4 million euros on the first quarter of 2007 (which the figure was 6.9 million euros). The increase includes 2 million euros attributable to acquisitions during the second half of 2007 and 2.4 million euros to the increase in the Group’s stake from 29.08% to 37.03%.

The Sigesa Group reports revenues of 2.9 million euros, representing an increase of 0.5 million euros. A break down shows that: 9 1.3 million euros was generated by water companies operating in the Lazio and Campania regions; 9 1.6 million euros was generated by water companies operating in the Tuscany and Umbria regions.

Publiacqua and the Acque Group report revenues of 15.4 million euros and 9.9 million euros, respectively, having risen 0.9 million euros and 0.7 million euros on the same period of 2007.

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Revenues from overseas water companies amount to 4 million euros, representing an increase of 0.6 million euros on the first quarter of 2007 (3.4 million euros). These revenues were earned as follows: (i) 2.9 million euros by Agua Azul Bogotà (up 0.6 million euros), (ii) 0.6 million euros by Acea Dominicana (up 0.1 million euros), and (iii) 0.5 million euros by Consorcio Agua Azul.

Revenues from biomass transfer and waste management amount to 7.5 million euros, marking an increase of 3.7 million euros on the first quarter of 2007 (3.8 million euros). Aquaser and the TAD Group companies contribute to this item.

Revenues from services to customers amount to 37.5 million euros (38.3 million euros in the same period of 2007). A breakdown of this item by segment is provided below.

Public lighting Revenues for the first three months of 2008 amount to 20.4 million euros, with 18.8 million euros deriving from the Parent Company’s contracts in the municipalities of Rome and Naples. This represents an increase of 0.7 million euros compared with the same period of the previous year, reflecting opposing influences: a rise of 1.8 million euros in the Parent Company’s revenues, including 0.4 million euros regarding the cost of electricity passed on to the Municipality of Naples, whilst Acea Luce reports a 0.8 million euro decline following expiry of the contract with the Municipality of Fiumicino on 30 June 2007. With sentence no. 1774/2007 the Campania Regional Administrative Court declared null and void the admission of the Temporary Consortium of Companies (TCC) comprising ATI Acea, GRADED and ALFANO to take part in the call for tenders to manage and carry out the regulatory upgrade of public lighting plants in the municipality of Naples. It also annulled all the other decisions under appeal, including municipal directive no. 25 of 27 September 2006, which entrusted the service to the above TCC and led to the subsequent execution of the contract between the Municipality of Naples and the TCC on 9 February 2007. As a result, the Municipality’s Bid Committee has declared the tender process null and void due to the absence of valid bids. A decision is awaited from the Municipality of Naples.

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Distribution Revenues from distribution total 3.6 million euros (down 2.5 million euros on the first three months of 2007) and primarily break down as follows: − revenues deriving from cemetery lighting of 1.8 million euros, which are substantially unchanged with respect to the same period of 2007; − revenues from contract work, totalling 1.8 million euros, primarily earned on the basis of specific agreements with the developers of new urban development areas (4.3 million euros in the same period of 2007).

ACEA Ato2 This company’s revenues amount to 3.8 million euros (down 0.6 million euros compared with the same period of the previous year). These revenues essentially derive from contract work and services carried out for the Comune di Roma, including those rendered as part of the project to upgrade water and sewerage facilities in the suburbs of Rome, amounting to 1.7 million euros.

GORI This company’s revenues total 0.8 million euros, marking an increase on the first quarter of 2007, in part due to the increase in the Group’s interest.

Acque Group The Group’s revenues amount to 2.7 million euros and have increased by 0.6 million euros compared with the first three months of the previous year, when the figure was 2.1 million euros.

Sigesa – Crea Group This Group’s revenues total 0.4 million euros and are substantially unchanged.

Acea SpA The Parent Company contributes revenues of 2.4 million euros. They were primarily earned on service contracts with Group companies consolidated on a proportionate basis and on services supplied in response to specific requests.

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Connection fees amount to 7.7 million euros, representing an increase of 1 million euros, and were generated as follows: 9 free and regulated markets: 6.9 million euros (up 0.8 million euros on the first quarter of 2007); 9 water: 0.8 million euros (up 0.2 million euros on the same period of 2007), including 0.2 million euros generated by Umbra Acque. Acea Distribuzione’s connection fees have been treated in the same way as in 2007, whilst awaiting definition of the rules regarding the equalisation formulas resulting from tariff adjustments.

Other operating income amounts to 12.4 million euros, representing an increase of 2.6 million euros compared with the first three months of 2007. On a like-for-like basis of consolidation, the reduction amounts to 2.3 million euros.

A breakdown, compared with the same period of 2007, is as follows.

Increase/ €m Q1 2008 Q1 2007 (Decrease)

Property income 0.7 0.6 0.1

Income from end users 1.3 1.3 0.0

Bollino Blu (vehicle emission testing) 0.0 0.5 (0.5)

Heating system inspections 0.2 0.5 (0.3)

Contingent assets and other revenues 2.5 3.3 (0.8)

Return of Antitrust Authority fine 4.1 0 4.1

Damages, penalties and fines 1.1 1.0 0.1 Government grant 0.9 1.0 (0.1) (Prime Ministerial Decree of 23 April 2004) Regional grants 0.7 0.5 0.2

Seconded staff 0.7 0.6 0.1

Recharged cost of governance bodies 0.2 0.5 (0.3)

TOTAL 12.4 9.8 2.6

Contingent assets and other revenues include, among other items, excess provisions for estimated costs for previous years.

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This item also includes 4.1 million euros regarding return of the fine imposed by the Antitrust Authority in November 2007, which amounted to 8.3 million euros. Acea paid this fine last February. Acea appealed the Authority’s decision before Lazio Regional Administrative Court, with a hearing on the merits of the case held on 7 May 2008. The court found in Acea’s favour, quashing all aspects of the Authority’s ruling (and thus the alleged existence of an agreement) and, as a result, the fine. Whilst awaiting details of the sentence, the Directors believe it prudent to recognise the return of half the total amount.

2. Consolidated operating costs Consolidated operating costs amount to 621.6 million euros and include staff costs of 67.5 million euros (up 10.5 million euros on the same period of 2007), and the cost of materials and overheads totalling 554.1 million euros (up 131.8 million euros on the same period of 2007). The change in the basis of consolidation accounts for 29.5 million euros of this item, primarily reflecting the change in the method of consolidating Eblacea, Tirreno Power and Umbra Acque, the increased interest in Gori, and the consolidation of Longano Eolica and Elga Sud, which were not consolidated in the report for the first quarter of 2007. Pro forma consolidated operating costs, calculated on a like-for-like basis, thus amount to 588.8 million euros, marking an increase of 109.5 million euros or 22.9%, essentially due to the following: (i) a 7.1 million euro rise in staff costs; (ii) a 98.3 million euro increase in electricity, gas and fuel costs due to an increase in the volumes purchased, bearing in mind average price trends; and (ii) a 1.5 million euros increase in service costs.

Staff costs amount to 67.5 million euros for the first three months of 2008, representing an increase of 10.5 million euros compared with the same period of 2007. The increase resulting from changes in the basis of consolidation amounts to 3.4 million euros (3.7 million euros including capitalised costs).

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Increase/ % €m Q1 2008 Q1 2007 increase/ (Decrease) (decrease)

Staff costs including capitalised portion 74.1 66.2 7.8 11.8 Capitalised costs (10.0) (9.3) (0.7) 7.5 Staff costs on a like-for-like basis 64.1 57.0 7.1 12.6

Staff costs including capitalised portion 3.7 3.7 Capitalised costs (0.4) (0.4) Change in basis of consolidation 3.4 0.0 3.4 100.0

Staff costs 67.5 57.0 10.5 18.4

The increase in staff costs, including capitalised costs and on a like-for-like basis, is primarily due to: (i) Acea Ato2 and Acea Ato5 (up 2.7 million euros), essentially as a result of the acquisition of contracts with further municipalities and renewal of contracts; (ii) Acea Distribuzione (up 1.8 million euros) due to labour contract renewals and other aspects of operations (such as holiday pay); (iii) the Acque Group (up 0.9 million euros); (iv) the AceaElectrabel Group (up 0.6 million euros); and (v) Acea (up 0.9 million euros) due to labour contract renewals and other aspects of operations. Gross staff costs, including companies not consolidated in the previous first quarter, amount to 77.8 million euros and breakdown as follows by business segment: ◊ Energy networks 23.0 million euros (up 1.8 million euros) ◊ Energy sales and generation 5.0 million euros (up 2.3 million euros) ◊ Italian water services 37.4 million euros (up 6.2 million euros) ◊ Overseas water services 1.0 million euros (unchanged) ◊ Environment and energy 2.1 million euros (up 0.3 million euros) ◊ Parent Company – structure 9.3 million euros (up 0.9 million euros)

In terms of changes in the basis of consolidation, the following contribute to this item: (i) Tirreno Power (1.7 million euros); (ii) Umbra Acque (1.1 million euros); and (iv) GORI (0.5 million euros), resulting from the increase in the Group’s interest.

The following table shows the average number of staff by category, compared with the same period of 2007. The figure for the end of the period is also shown.

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Average number of employees

Q1 2008 Q1 2007 Increase/ 31 Mar 2008 (Decrease)

Senior managers 133 120 13 134 Middle managers 340 315 25 341 White-collar staff 3,427 3,110 317 3,423 Blue-collar staff 2,394 2,271 123 2,398

TOTAL 6,294 5,816 478 6,296

The cost of materials and overheads for the first quarter of 2008 amounts to 554.1 million euros (422.2 million euros in the same period of 2007), marking an increase of 131.8 million euros (31.2%) on the previous first quarter.

The change in the basis of consolidation accounts for 29.5 million euros of this item, essentially generated by the change in the method of consolidating Tirreno Power, Eblacea and Umbra Acque, and primarily allocated to electricity, gas and fuel costs (23.1 million euros) and service costs (4.8 million euros).

On a like-for-like basis of comparison, consolidated operating costs are up 102.4 million euros or approximately 24%, essentially due to an increase in the volumes of electricity and gas, bearing in mind average price trends. The increase in costs is correlated with the rise in revenue from water services as a result of expansion of the Group’s area of operation.

Increase/ % €m Q1 2008 Q1 2007 increase/ (Decrease) (decrease)

Electricity, gas and fuel 440.4 319.0 121.4 38.1 Materials 9.7 9.0 0.7 7.3 Services 77.5 71.2 6.3 8.9 Concession fees 14.1 13.2 0.9 6.7 Lease expense 5.2 4.8 0.5 9.8 Other operating costs 5.7 4.9 0.8 17.3 Fair value gains/(losses) on financial contracts 1.4 0.2 1.2 551.4

Consolidated cost of materials and overheads 554.1 422.3 131.8 31.2

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Electricity, gas and fuel costs essentially include: − the cost of procuring electricity for the regulated market and the market subject to additional safeguards and the related transport costs, totalling 80.5 million euros compared with the 88.8 million euros of the first quarter of 2007. The costs relating to the Single Buyer amount to 69.8 million euros after equalisation, which has reduced costs for the first three months of 2008 by 4.6 million euros; − the cost of procuring electricity for the free and protected markets and the related transport costs, totalling 218.4 million euros. In the same period of the previous year these costs amounted to 177.9 million euros and are thus up 22.8% due to increased sales and a change in the markets served; − the cost of procuring gas for resale (77.3 million euros, compared with 27.3 million euros in the first three months of 2007). The 50 million euro increase reflects increased costs incurred by AceaElectrabel Trading and AceaElectrabel Elettricità; − the cost of fuel used in electricity production (58 million euros). These costs have increased 37.9 million euros compared with the first three months of 2007, substantially as a result of the consolidation of Tirreno Power, which contributes 36.3 million euros to these costs. The AceaElectrabel Produzione Group ended the quarter with fuel costs of 21.2 million euros, representing an increase of 1.5 million euros on the same period of 2007. The movement reflects the shutdown of plants and fuel price trends. This item also includes the cost of purchasing green certificates and carbon rights (4.5 million euros, compared with 3 million euros in the same period of 2007) and other expenses linked to the purchase of electricity, gas and fuel (1.7 million euros). This item also includes the costs of the white certificates linked to energy saving projects (0.7 million euros). This item also reflects estimated equalisation, designed to cover the differences between the purchase cost and sale price: this form of equalisation is mandatory for electricity sold on the regulated market and the market subject to additional safeguards. The positive amount of 4.6 million euros (being the Group’s share of the amount recognised by AceaElectrabel Elettricità SpA) reduces procurement costs for the period and represents the best estimate of the above differences for the period between January and March 2008, based on the information available. This amount can only be definitively calculated at the end of the year and may be different from the estimate for the period under review due to market price movements.

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The amount calculated under the equalisation mechanism for the first three months of 2007 was a positive 0.3 million euros, which at the end of 2007 had increased to 11.7 million euros.

Fair value losses on financial contracts At 31 March 2008 these losses increase costs by 1.4 million euros and reflect movements in fair value compared with the end of the previous year.

The cost of materials amounts to 9.7 million euros and represents the cost of materials used during the period less costs capitalised as part of assets in the course of construction. A breakdown is as follows.

Increase/ €m Q1 2008 Q1 2007 (Decrease)

Materials 26.6 23.8 2.8 Change in inventories 0.5 (1.1) 1.6 Total 27.1 22.7 4.4

Capitalised costs (17.4) (13.7) (3.7)

TOTAL 9.7 9.0 0.7

The increase in the purchase of materials before capitalised costs (up 2.8 million euros) essentially reflects the increased volume of materials purchased by Acea Distribuzione due to greater investment (up 1.5 million euros). Other consolidated companies recorded the following trends: 9 Acque Group: up 1.2 million euros; 9 Gori: up 0.2 million euros; 9 Acea RSE: up 0.6 thousand euros. The increase in the change in inventories compared with the first quarter of 2007 is substantially attributable to Acea Distribuzione. Tirreno Power and Umbra Acque contribute 0.5 million euros to this item.

Service costs amount to 77.5 million euros, representing an increase of 6.3 million euros on the 71.2 million euros of the same period of 2007.

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The change in the method of consolidating Eblacea, Tirreno Power and Umbra Acque, and the increased interest in Gori account for 4.8 million euros, including 1 million euros attributable to Gori and the residue to the other companies mentioned. The item essentially includes: − contract work, totalling 20.1 million euros, which is substantially unchanged with respect to the first quarter of 2007; − electricity and water supplies totalling 11.8 million euros, which is substantially unchanged with respect to the first quarter of 2007; − intercompany services totalling 6.9 million euros. These costs regard the facility management services provided by Marco Polo SpA, amounting to 3.3 million euros. This item also includes the costs relating to the public lighting services provided by Luce Napoli, which manages public lighting under concession (1 million euros); − services for staff, totalling 3.7 million euros (up 0.6 million euros on the first three months of 2007); − telecommunications, printing, postage and bank charges, totalling 4.3 million euros, which are substantially unchanged with respect to the same period of 2007 (up 0.6 million euros); − disposal and transport of sludge, waste, ash and refuse, and cleaning and porterage totalling 10.7 million euros. The difference of 3.9 million euros includes 2 million euros relating to Aquaser; − insurance, totalling 2.9 million euros (up 0.2 million euros); − technical and administrative services (including consultants’ fees and the cost of freelance workers) amounting to 6.4 million euros; − internal use of electricity, totalling 1.5 million euros; − advertising and sponsorship, amounting to 0.8 million euros; − the cost of meter readings, totalling 0.9 million euros; − maintenance fees of 0.5 million euros; − staff seconded to unconsolidated Group companies and/or third-party companies (1 million euros). The item also includes the remuneration paid to the Group’s directors and statutory auditors, amounting to 1.3 million euros.

Concession fees amount to 14.1 million euros (up 0.9 million euros on the first three months of 2007) and regard fees paid by companies that manage integrated water services

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under concession in certain areas of Lazio, Tuscany and Campania. The above amount includes: − 7.7 million euros paid by Acea Ato2 (up 0.3 million euros); − 1.5 million euros paid by Acea Ato5 (up 0.2 million euros); − 1.5 million euros, representing the Acea Group’s share of the fees paid by the Acque Group, which is substantially in line with the figure for the same period of 2007; − 2.5 million euros paid by Publiacqua; − 0.3 million euros paid by GORI; − 0.4 million euros paid by Umbra Acque.

Lease expense amounts to 5.2 million euros, having increased 0.5 million euros. The change in the basis of consolidation accounts for an increase of 0.3 million euros. This item does not include lease rentals.

Other operating costs amount to 5.7 million euros, having risen 0.3 million euros with respect to the same period of the previous year (4.9 million euros), after taking account of the contribution of Tirreno Power and Umbra Acque (0.5 million euros).

3. Amortisation, depreciation, provisions and impairment charges

€m Q1 2008 Q1 2007 Increase/ (Decrease)

Amortisation of intangible assets 8.6 9 (0.4) Depreciation of property. plant and equipment 41.6 33 8.6 Provisions for impairment of receivables 4.4 3.8 0.6 Provisions for liabilities 3.9 5.3 (1.4)

TOTAL 58.4 51.1 7.3

The change in the basis of consolidation accounts for 3.5 million euros of this item (including 2.9 million euros relating to Tirreno Power and 0.6 million euros to Umbra Acque). On a like-for-like basis, the increase is 4.7 million euros.

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The increase includes 2.6 million euros deriving from completion and entry into service of the Roselectra and Leinì plants and modification of the useful lives of the hydroelectric plants (2,035 thousand euros), following the Constitutional Court sentence that substantially repealed the regulations that amended article 12 of the Bersani decree, introduced along with the 2006 Finance Act (sections 483, 485-488 and 492 of article 1), in respect of the part that extended hydroelectric concession terms by a further ten years (from 2010 in the Bersani decree to 2020), subject to the execution of appropriate expansion works, and the part requiring existing concessionaires to pay a so-called additional one-off fee (for the entire concession term) at a rate of 3,600 euros per MW of installed nominal power. This has resulted in a reduction in the depreciation period to 2010 and 2013, which follows on from the reduction applied in the consolidated financial statements for the year ended 31 December 2006, in response to approval of the 2006 Finance Act, which – in addition to the above – repealed the Bersani regulation regarding the right of preference granted to existing concessionaires. AceaElectrabel Produzione has made use of the procedures aimed at obtaining the extension provided for in the regulations held to be unconstitutional in relation to certain concessions it holds. Based on the above regulations, these procedures appear to have been concluded. It would, therefore, be reasonable to assume that they cannot be prejudiced by the above sentence. The increase compared with the previous year also reflects the volume of investment carried out by Group companies during current and previous years. The increase was above all contributed to by investments in water services in the Lazio and Campania regions (up 1.2 million euros) and in energy networks (up 0.5 million euros). This item includes amortisation of concessions accounted for following the attribution of a portion of purchased goodwill.

The increase in depreciation of property, plant and equipment, on a like-for-like basis, amounts to 5.4 million euros, broken down by business segment as follows: - Energy networks: depreciation totals 22.4 million euros, marking an increase of 0.5 million euros, entirely attributable to Acea Distribuzione; - Energy sales and generation: the companies in this segment report depreciation of 7.5 million euros. The 5.4 million euro increase essentially reflects (i) the start of depreciation of the Roselectra plant (1 million euros); (ii) the increases recorded by AceaElectrabel Produzione (1.5 million euros); and (iii) depreciation reported by the newly consolidated Tirreno Power (2.8 million euros);

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- Italian water services total 7.2 million euros (up 2.9 million euros): the increase essentially regards Acea Ato2 (0.7 million euros), GORI (0.2 million euros) and the Acque Group (1.5 million euros), where the increases are linked to investments envisaged in the various Area Plans, and the newly consolidated Umbra Acque (0.4 million euros); - Overseas water services, where depreciation is substantially unchanged with respect to the same period of 2007; - Environment and energy: down 0.4 million euros on the same period of 2007; - Parent Company – structure: up 0.1 thousand euros.

The 0.6 million euro increase in provisions for impairment of receivables reflects, on the one hand, increased provisions by companies with particular reference to (i) the AceaElectrabel Elettricità Group (up 0.7 million euros, reflecting the high volume of receivables deriving from the sale of electricity, above all on the regulated market), and (ii) Acea Ato2 (up 0.3 million euros), essentially to cover the risk of non-recoverability of receivables due from private customers. This is offset by a reduction in the impairments recorded by Acea Distribuzione at 31 March 2007 (down 0.5 million euros), reflecting the type of receivable in question, which represent amounts due from wholesalers who have issued guarantees.

Provisions for liabilities are essentially linked to issues relating to contributions and to provisions made for voluntary and compulsory redundancy schemes and early retirement. During the period the Group essentially made provisions for liabilities relating to: (i) staff, amounting to 2 million euros (including contingent liabilities regarding contributions); (ii) investee companies (0.4 million euros); (iii) connection fees and fixed charges (0.3 million euros), reflecting interpretation of the document “Financial conditions for provision of the connection service”, attached to Resolution 348/2007 as Annex B; (iv) litigation (0.4 million euros); and (v) potential liabilities deriving from contracts (0.5 million euros). Further information is provided in the section “Update on major disputes and litigation” in the consolidated financial statements for the year ended 31 December 2007. The reduction compared with 31 March 2007 is due to settlement of potential liabilities deriving from contracts for the purchase and sale of gas, partially offset by increased provisions of 0.7 million euros made by Acea Distribuzione and described above.

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4. Finance (costs) / income Net finance costs of 18.4 million euros are up 3.1 million euros. This increase essentially reflects (i) 2 million euros contributed by companies now consolidated using a different method, referring to Tirreno Power and Eblacea (1.7 million euros) and Umbra Acque (0.3 million euros); and (ii) 2.9 million euros representing a deterioration of the Parent Company’s net result due to interest accrued on its medium/long-term debt (up 0.9 million euros), essentially incurred on the loan from Banco Bilbao, and interest on short-term borrowings and rising interest rates (up 2.1 million euros), whilst these two factors were offset by 1.6 million euros deriving from increased interest on amounts due from end users recorded by Acea Ato2 .

Increase/ Q1 2008 Q1 2007 €000 (Decrease) (A) (B) (A-B)

Finance costs 26,515 21,100 5,415 Charges on interest rate swaps (69) 300 (369) Interest on bonds in issue 3,733 3,600 133 Interest on medium/long-term borrowings 13,048 10,500 2,548 Interest on short-term borrowings 7,927 3,900 4,027

Interest payable to end users 115 0 115

Interest costs less actuarial gains 1,247 1,500 (253)

Factoring fees 11 100 (89) Other 503 1,200 (697)

Finance income 8,108 5,800 2,308 Income on interest rate swaps 1,510 0 1,510 Interest on amounts due from customers 2,908 2,200 708 Interest on loans and receivables 2,309 1,900 409 Bank interest 754 700 54 Interest on other receivables 133 600 (467) Dividends 0 300 (300) Revaluations of staff termination benefits 10 0 10 Other 483 100 383

TOTAL 18,407 15,300 3,107

Net finance costs break down as follows by business segment: - Energy networks: 6 million euros, which is substantially in line with the same period of the previous year; - Energy sales and generation: the companies in this segment report net finance costs of 2.1 million euros (up 2.3 on the previous first quarter). The increase reflects: (i) net

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finance costs of 1.8 recorded by Tirreno Power; and (ii) net income on interest rate swaps of 1.5 million euros, essentially regarding the fair value measurement of Voghera Energia’s swaps, which offset increased interest payable following the entry into service of the Roselectra and Leini plants; - Italian water services: net finance costs of 0.9 million euros are down 1 million euros on the previous first quarter, essentially due to increased interest income from end users; - Overseas water services: substantially unchanged with respect to the same period of 2007; - Environment and energy: net finance costs are down 0.6 million euros due to termination of the project financing contracts (and the related derivative instruments) entered into by Terni Ena and Eall in the second half of 2007; - Acea: net finance costs of 9.6 million euros (up 2.9 million euros on the same period of 2007), with 5 million euros regarding short-term borrowings and 6.6 million euros long-term borrowings.

The increase in interest on short-, medium- and long-term borrowings reflects an increase in short-term borrowing by the Group’s larger companies and the execution of new medium/long-term loan agreements. Interest on loans and receivables consists of accrued interest payable to Acea on loans granted to associates and subsidiaries consolidated using the proportionate method.

5. Profit/(loss) on investments The positive balance of 0.1 million euros (compared with 4.9 million euros in the first three months of 2007) primarily derives from the measurement of Geal and CESAP using the equity method. The difference compared with the previous first quarter reflects the change in the method of consolidating Eblacea and Tirreno Power, which at 31 March 2007 were accounted for using the equity method (a positive impact of 4.8 million euros).

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6. Taxation Taxation amounts to 25.9 million euros (22 million euros for the same period of 2007) and breaks down as follows: o Current taxes: 29.3 million euros o Net deferred tax liabilities/(assets): (3.4 million euros) Current taxes include 21.9 million euros for IRES (income tax) and 7.4 million euros for IRAP (regional tax). The tax rate for the period – after the items described below – is 37%, which is thus approximately 3.6% down on 31 March 2007 (40.6%). This essentially reflects the changes introduced by the Finance Act for 2008. Taxation for the period includes the effect of the reversal of a portion of tax assets (1.7 million euros) recognised in 2006 and 2007, amounting to 33.9 million euros (further details are provided in the consolidated financial statements for the year ended 31 December 2007). This reversal translates into a 2.7 percentage point increase in the tax rate. The change in the method of consolidation also raises the tax rate by approximately 2 percentage points.

The following table provides a reconciliation of the expected and effective tax charges. Q1 2008 Q1 2007

€m % €m %

Profit before tax from continuing operations 61.4 54.2

Expected tax charge on profit before tax at statutory rate 16.9 27.5% 17.9 33.0%

Permanent differences 0.2 0.3% (3.4) - 6.2%

Current IRES 17.1 27.8% 14.5 26.8%

IRAP and other taxes 7.1 11.5% 7.5 13.8%

Tax charge before reversal of tax assets 24.2 39.4% 22.0 40.6%

Reversal of tax assets 1.7 2.7% 0.0 0.0%

Tax on continuing operations 25.9 42.1% 22.0 40.6%

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7. Net profit/(loss) from discontinued operations At 31 March 2008 the Acea Group does not report assets held for sale. At 31 March 2007 this item included the result of Consorcio Agua Azul. To ensure a like- for-like basis for comparison this company’s results for the first quarter of 2007 have been re-allocated to the related items.

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8. Earnings per share Earnings per share determined in accordance with IAS 33 is shown below:

Q1 2008 Q1 2007

Net profit attributable to the Group (€/000) 34,014 31,280

Net profit attributable to ordinary equity holders of the Parent Company 34,014 31,280 (€/000) (A)

Weighted average number of ordinary shares in issue for the purposes of determining earnings per share

- basic (B) 212,964,900 212,964,900 - diluted (C) 212,964,900 212,964,900

Earnings/(loss) per share (€)

- basic (A/B) 0.1597 0.1469 - diluted (A/C) 0.1597 0.1469

Consolidated quarterly report for the three months ended 31 March 2008 65 WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9

FINANCIAL POSITION AND CASH FLOW

ACEA GROUP Increase/ Increase/ BALANCE SHEET 31 Mar 2008 31 Dec 2007 (Decrease) (Decrease)

(€000) (a) (b) (a) - (b) %

NET WORKING CAPITAL 306,320 189,326 116,994 61.80%

Current receivables 1,350,357 1,203,905 146,452 12.16% - due from end users and customers 1,119,156 1,019,833 99,323 9.74% - due from the Comune di Roma 194,904 159,433 35,472 22.25% Inventories 68,836 67,078 1,758 2.62%

Other current assets 231,496 192,041 39,456 20.55%

Current payables (960,584) (951,201) (9,382) 0.99% - trade (777,684) (774,560) (3,124) 0.40% - due to the Comune di Roma (166,074) (158,017) (8,057) 5.10% Other current liabilities (383,786) (322,496) (61,290) 19.00%

NON-CURRENT ASSETS/(LIABILITIES) 2,772,881 2,572,930 199,951 7.77% Property, plant and equipment and intangible assets 3,171,578 2,888,130 283,448 9.81%

Investments 30,387 99,579 (69,192) (69.48%)

Other non-current assets 168,191 160,430 7,761 4.84%

Staff termination benefits and other defined-benefit obligations (142,472) (137,912) (4,560) 3.31%

Provisions for liabilities and charges (148,005) (150,140) 2,135 (1.42%)

Other non-current liabilities (306,798) (287,157) (19,641) 6.84%

INVESTED CAPITAL 3,079,201 2,762,256 316,945 11.47%

NET DEBT (1,614,195) (1,322,540) (291,655) 22.05% Medium/long-term loans and receivables 54,036 36,182 17,853 49.34%

Medium/long-term borrowings (1,385,390) (1,126,002) (259,388) 23.04%

Short-term loans and receivables 256,464 249,636 6,828 2.74%

Cash and cash equivalents 146,996 129,290 17,706 13.69%

Short-term borrowings (686,301) (611,647) (74,654) 12.21%

Total shareholders’ equity (1,465,006) (1,439,716) (25,291) 1.76%

BALANCE OF NET DEBT AND SHAREHOLDERS’ (3,079,201) (2,762,256) (316,945) 11.47% EQUITY

The above balance sheet has been reclassified to show the components of invested capital and the corresponding funding. The net carrying amounts of non-current assets and net working capital, consisting of current receivables, other receivables, inventories, current payables and the short-term portion of long-term debt, have been added together.

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The figure obtained for invested capital is then compared with the corresponding amounts for shareholders’ equity and net debt, thereby showing the proportions of equity and debt used.

The Acea Group’s balance sheet reports an increase in invested capital of 316.9 million euros (11.47) compared with 31 December 2007. This reflects increases in both net fixed assets and net working capital. The figures for the first quarter are significantly influenced by the change in the method of consolidating Tirreno Power, Eblacea and Umbra Acque. On a like-for-like basis, the increase in invested capital compared with 31 December 2007 would be 157.3 million euros (up 5.70%). The following pro forma balance sheet provides information on the components of invested capital and the corresponding funding on a like-for-like basis of consolidation:

PRO FORMA Increase/ BALANCE SHEET 31 Mar 2008 31 Dec 2007 (Decrease)

(€000) (a) (b) (a) - (b)

NET WORKING CAPITAL 284,385 189,326 95,059

Current receivables 1,307,029 1,203,905 103,125 - due from end users and customers 1,076,428 1,019,833 56,595 - due from the Comune di Roma 194,904 159,433 35,472 Inventories 60,456 67,078 (6,622)

Other current assets 220,517 192,041 28,476

Current payables (929,483) (951,201) 21,718 - trade (746,584) (774,560) 27,976 - due to the Comune di Roma (166,074) (158,017) (8,057) Other current liabilities (374,134) (322,496) (51,639)

NON-CURRENT ASSETS/(LIABILITIES) 2,635,230 2,572,930 62,299 Property, plant and equipment and intangible assets 2,932,098 2,888,130 43,968

Investments 103,626 99,579 4,047

Other non-current assets 166,370 160,430 5,940

Staff termination benefits and other defined-benefit obligations (136,986) (137,912) 925

Provisions for liabilities and charges (142,369) (150,140) 7,771

Other non-current liabilities (287,510) (287,157) (353)

INVESTED CAPITAL 2,919,614 2,762,256 157,358

NET DEBT (1,455,102) (1,322,540) (132,562) Medium/long-term loans and receivables 39,366 36,182 3,184

Medium/long-term borrowings (1,241,890) (1,126,002) (115,888)

Short-term loans and receivables 259,001 249,636 9,365

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Cash and cash equivalents 145,736 129,290 16,446

Short-term borrowings (657,316) (611,647) (45,669)

Total shareholders’ equity (1,464,512) (1,439,716) (24,796)

BALANCE OF NET DEBT AND SHAREHOLDERS’ (2,919,614) (2,762,256) (157,358) EQUITY

Tirreno Power and Umbra Acque thus contribute the following amounts to the Group’s balance sheet:

ACEA GROUP

BALANCE SHEET 31 Mar 2008 31 Mar 2008 31 Mar 2008 TIRRENO Total change in UMBRA (€000) POWER, basis of ACQUE EBLACEA consolidation NET WORKING CAPITAL 13,038 8,897 21,935

NON-CURRENT ASSETS AND LIABILITIES 122,244 15,408 137,652

INVESTED CAPITAL 135,282 24,305 159,587

NET DEBT (135,280) (23,812) (159,093)

Net non-current assets and liabilities have risen 199.9 million euros (7.76%) compared with the previous year due to: − a 283.4 million euro increase in property, plant and equipment and intangible assets, including 239.5 million euros representing the value of Tirreno Power’s assets, and 23.9 million euros regarding Umbra Acque’s assets. On a like-for-like basis with respect to 31 December 2007, the increase would thus be 44 million euros and would represent the balance of investment of 92.9 million euros (as the following table shows) and depreciation and amortisation for the period (50.2 million euros); − a decrease of 69.2 million euros in investments due to (i) the consolidation of Eblacea / Tirreno Power (down 61.9 million euros based on the value of the investment measured using the equity method at 31 December 2007); and (ii) the consolidation of Umbra Acque (down 6.5 million euros); − an increase in other non-current assets (up 7.8 million euros or 5.9 million euros on a like-for-like basis), primarily due to net deferred tax assets (up 6.5 million euros);

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− an increase in defined benefit plans (up 4.6 million euros), largely reflecting the value of the plans reported by Tirreno Power (3.7 million euros) and Umbra Acque (1.8 million euros); − a 2.1 million euro decrease in provisions for liabilities and charges reflects provisions less uses for the period. The reduction is due to payment of the provisions made at 31 December 2007 in relation to the fine imposed by the Antitrust Authority, partially offset by provisions attributable to Tirreno Power (up 5.6 million euros). In terms of composition, provisions include: (i) 22.5 million euros deriving from an estimate of legal risks (disputes, litigation, etc.); (ii) 39 million euros deriving from risks linked to investment (above all IPSE); (iii) 49.2 million for potential liabilities and charges relating to staff, including disputes over contributions; (iv) 5.7 million euros for regulatory risks, with particular reference to the electricity business; (v) 16 million euros essentially relating to land reclamation costs for the Orvieto waste dump operated by SAO; (vi) 4 million euros for liabilities relating to various municipalities included in the concessions Acea Ato2 plans to acquire; (vii) 4 million euros regarding recognition of the total borrowings that Gori is bound to repay municipalities in accordance with the Area Plan; (viii) 5 million euros pertaining to liabilities concerning companies in the Sigesa Group; and (ix) 4.7 million euros regarding various liabilities of Tirreno Power. Acea SpA’s Board of Directors believes, based on a present assessment of the likely outcomes of such disputes and the provisions recorded in the financial statements, that the disposition of such matters will not have a material adverse affect on the financial statements of the Group. The provisions represent the best estimate based on the available information.

Other non-current liabilities contribute 19.6 million euros to the decrease in net invested capital (up 0.3 million euros on a like-for-like basis), essentially due to two factors. The first regards movements in deferred tax liabilities, totalling 15.2 million euros, due essentially to increases in (i) Tirreno Power’s deferred tax liabilities (up 17.7 million euros) and (ii) in those of Umbra Acque (up 1.6 million euros), whilst (iii) Acea’s deferred tax liabilities have declined (down 6.3 million euros). The second regards the increase in deferred tax liabilities on connection fees for water services in Lazio and Campania (up 1 million euros) and in Tuscany and Umbria (up 2.3 million euros).

Consolidated quarterly report for the three months ended 31 March 2008 69 WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9

Investment during the period amounts to 92.9 million euros, marking an increase of 10.8 million euros compared with 31 March 2007, which totals 6.9 million euros on a like-for- like basis. The change essentially reflects an increase in investment in the water sector: (i) Acea Ato2’s investment rose 5.9 million euros; (ii) the Acque Group’s investment was up 1.6 million euros; (iii) Publiacqua’s investment was up 1.0 million euros; (iv) Umbra Acque’s investment was up 1.2 million euros; and (v) Acea’s was up 1.9 million euros. In contrast, companies in the AceaElectrabel Group report a reduction of 6.5 million euros, with investment by Roselectra and AceaElectrabel Produzione down 3.7 million euros and 2.3 million euros, respectively, following completion of the companies’ plants. Finally, Tirreno Power invested a total of 2.7 million euros.

The following table shows investment during the first three months of 2008, compared with the same period of 2007.

Increase/ €m Q1 2008 Q1 2007 (decrease)

Acea Distribuzione 30.2 30.6 (0.4)

Acea SpA – Public lighting 3.0 1.9 1.1 Energy networks Acea RSE 0.1 0.0 0.1

TOTAL 33.3 32.5 0.8

AceaElectrabel Produzione 5.1 7.4 (2.3)

Roselectra 0.2 3.9 (3.7)

Tirreno Power 2.7 0.0 2.7 Energy sales and generation AceaElectrabel Elettricità 0.6 0.2 0.4

AceaElectrabel Trading 0.0 0.9 (0.9)

TOTAL 8.6 12.4 (3.8)

Sao 0.4

Eall 0.3 1.1 1.3 Environment and energy Terni Ena 1.6

Enercombustibili 0.1

TOTAL 2.4 1.1 1.3

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Acea Ato2 28.7 22.8 5.9

ATO5 Frosinone 3.7 3.6 0.1

Lazio/Campania Gori 2.6 1.5 1.1

Minor entities 0.0 0.1 (0.1)

TOTAL 35.0 28.0 7.0

Acque 5.6 4.0 1.6

Publiacque 4.4 3.4 1.0

Tuscany/Umbria Ato1 Perugia 1.2 0.0 1.2

Minor entities 0.1 0.1 0.0

TOTAL 11.3 7.5 3.8

LaboratoRi 0.1 0.3 (0.2)

Corporate 2.2 0.3 1.9

TOTAL ACEA GROUP 92.9 82.1 10.8

The increase in invested capital derives from a 117 million euro (61.8%) rise in net working capital, which on a like-for-like basis amounts to 95 million euros (50.21%). This is the net result of, on the one hand, an increase in current receivables (up 146.4 million or 12.16%, and 103.1 million euros or 8.57% on a like-for-like basis), an increase in inventories (up 1.8 million euros, which becomes a reduction of 6.7 million euros on a like-for-like basis), an increase in other current assets (up 39.4 million euros or 20.55%, and 28.4 million euros or 14.83% on a like-for-like basis); and, on the other, an increase in current borrowings (up 9.4 million euros or 0.99%, and 21.7 million euros on a like- for-like basis) and an increase in other current liabilities (up 61.3 million euros or 19%, and 51.6 million euros on a like-for-like basis). The composition of current receivables reflects: (i) a 99.3 million euro increase (9.74%) in receivables due from end users and customers (56.6 million euros or 5.55% on a like-for- like basis) and (ii) a 35.5 million euro increase (22.25%) in receivables due from the Comune di Roma. The 1.8 million euro or 2.62% increase in inventories (down 6.6 million euros or 9.87% on a like-for-like basis) reflects a reduction of 5.8 million euros in natural gas stocks acquired by AceaElectrabel Trading and a 7.8 million euros increase in stocks following the consolidation of Tirreno Power. Other current assets are up 39.4 million euros (up 28.5 million euros on a like-for-like basis). This reflects: (i) recognition during the period of further amounts due for company-specific equalisation (up 8.1 million euros); (ii) the best possible estimate,

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based on the information currently available in accordance with the Authority’s measures regarding electricity equalisation (up 4.6 million euros); (iii) a reduction in receivables deriving from the fair value measurement of contracts for difference entered into by AceaElectrabel Trading and AceaElectrabel Elettricità (down 1.3 million euros); (iv) growth in accrued income and prepaid expenses (up 8.7 million euros), essentially reflecting insurance premiums paid during the first quarter but attributable to future quarters, (v) an increase in tax assets in the form of VAT credits (up 18 million euros); and (vi) the recognition of 4.1 million euros regarding return of the fine imposed by the Antitrust Authority in November 2007, which amounted to 8.3 million euros and was paid by Acea last February. Acea appealed the Authority’s decision before Lazio Regional Administrative Court, with a hearing on the merits of the case held on 7 May 2008. The court found in Acea’s favour, quashing all aspects of the Authority’s ruling (and thus the alleged existence of an agreement) and, as a result, the fine. Whilst awaiting details of the sentence, the Directors believe it prudent to recognise the return of half the total amount.

The movement in current payables reflects: (i) a 3.1 million euro increase in trade payables (down 28 million euros on a like-for-like basis), as shown in the following breakdown by business segment: - Energy networks: down 0.3 million euros; - Energy sales and generation: down 18.8 million euros; - Water services in Lazio and Campania: up 14.8 million euros; - Water services in Tuscany and Umbria: up 1.9 million euros; - Overseas: down 1.2 million euros; - Environment and energy: up 4.4 million euros; - Corporate: up 2.4 million euros. The energy sales and generation segment includes the balance of Tirreno Power’s trade payables, totalling 23.6 million euros. On a like-for-like basis, the reduction in this segment is thus 42.4 million euros, represented essentially by the lower amount payable to the Single Buyer (resulting from the reduced size of the regulated market) and other suppliers of gas; (ii) an increase in amounts payable to the Comune di Roma (up 8.1 million euros), essentially due to the greater amount owed by the Group in the form of municipal surtaxes (up 5.5 million euros);

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(iii) finally, an increase in other current liabilities of 61.3 million euros (51.6 million euros on a like-for-like basis). This reflects taxation for the period, totalling 22.8 million euros, increased amounts payable by the water companies to the various municipalities (11.7 million euros) and the greater amount payable to the Electricity Industry Equalisation Fund (4.7 million euros). Receivables due from end users and customers are up 99.3 million euros compared with the end of the previous year (up 56.6 million euros on a like-for-like basis). A breakdown by segment is provided below. Companies in the Energy networks business increased receivables by 0.5 million euros, with Acea Distribuzione and Acea Luce contributing 2.1 million euros to the increase, whilst Acea RSE reports a reduction of 2 million euros. Water companies in Lazio and Campania report an increase of 28.9 million euros, with 21.3 million euros generated by those operating in Lazio. In particular: Acea Ato2 reports an increase of 14.1 million euros, Acea Ato5 of 7.1 million euros and Gori of 7.7 million euros. Water companies in Tuscany and Umbria report an increase of 19.1 million euros (up 3.5 million euros on a like-for-like basis), with Umbra Acque reporting an increase of 15.6 million euros, the Acque Group of 4.3 million euros, the Publiacqua Group of 2.7 million euros, and Crea of 1.6 million euros (this movement is linked to the transfer of the Termoli and Valle Magna units by the former Sigesa, now in liquidation). The overseas water companies report an increase of 1.4 million euros. In terms of Energy sales and generation: 9 the companies that sell electricity report an overall reduction of 22.6 million euros, with, however, the balance reflecting a reduction in receivables reported by AceaElectrabel Trading (down 25.2 million euros) and an increase in those of AceaElectrabel Elettricità (up 42 million euros) and Elettria (up 6.1 million euros); 9 the generating companies report an increase of 25.9 million euros, essentially due to Tirreno Power (up 27.8 million euros). On a like-for-like basis, these companies recorded a decline of 1.9 million euros, relating essentially to a reduction in receivables at Roselectra (down 1.7 million euros) compared with the previous year. This breakdown is completed by the Environment and energy segment (up 7.6 million euros): this increase reflects increased receivables at SAO (up 3 million euros), at the waste to energy companies (Eall up 2.6 million euros, Terni Ena up 1.2 million euros) and at Aquaser (up 0.8 million euros).

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At 31 March 2008 the ratio of receivables (including bills to be issued) to revenues from end users is as follows:

Increase/ Energy segment 31 Mar 2008 31 Mar 2007 (Decrease) Receivables 350,316 288,127 16,322

Revenues 334,590 283,822 (82,834) Receivables/Revenues 104.7% 101.5% 3.2%

Increase/ Water segment 31 Mar 2008 31 Mar 2007 (Decrease) Receivables 473,026 385,256 87,771 Revenues 151,049 133,973 17,076 Receivables/Revenues 313.2% 287.6% 25.6%

Increase/ Group total 31 Mar 2008 31 Mar 2007 (Decrease) Receivables 823,342 673,383 104,092 Revenues 485,639 417,795 (65,758) Receivables/Revenues 169.5% 161.2% 8.4%

On the basis of the framework agreement, signed in June 2006, for the ongoing without- recourse factoring of bills issued to named public entities and due for payment, during the period the Group factored bills issued to and due for payment from named public entities worth a total of 16.1 million euros (the Group’s share). These bills regard AceaElectrabel Elettricità, Acea Luce and Acea Ato2. The fees paid to the factoring company totalled 0.6 million euros, corresponding to around 3.7%. The without-recourse factoring of receivables due from health authorities and hospitals has also been carried out. The factored receivables total 2.4 million euros (the Group’s share) and relate to AceaElectrabel Elettricità and Acea Ato2. The cost of this factoring transaction was around 4.1% (0.1 million euros).

The balance of receivables and payables due from and to the Comune di Roma (including financial items) reports net receivables of 26.6 million euros in favour of the Acea Group. At the end of the previous year the same balance reported net payables of 0.8 million euros for the Acea Group.

The following tables provide a breakdown of amounts due from and to the Comune di Roma by type.

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Amounts due from the Comune di Roma Increase/ 31 Mar 2008 31 Dec 2007 (€000) (Decrease)

Utilities 41,933 30,180 11,753

Contract work 27,990 27,680 310

Services 57,601 51,557 6,044

Other 1,771 928 843

Total services billed 129,294 110,344 18,950

Grants due 16,162 16,162 0

Total services requested 145,455 126,506 18,950

Total services to be billed 46,580 31,193 15,386

New regulations for street cables 2,869 1,734 1,135

Total 194,904 159,433 35,471

Amounts due to the Comune di Roma Increase/ 31 Mar 2008 31 Dec 2007 (€000) (Decrease)

Sewerage and water treatment fees 71,841 71,851 (10)

Vatican City disputed amounts 20,516 20,516 0

Electricity surtax 12,526 7,035 5,492

Other 3,188 1,471 1,717

New regulations for street cables 2,535 1,858 676

Charges for the occupation of public space 411 411 0

Concession fees 55,057 54,873 183

Total trade payables 166,074 158,017 8,057

Financial liabilities (including dividends) 2,213 2,213 0

Total 168,287 160,229 8,057

During the period administrative offsets with regard to amounts due from the Comune di Roma were carried out, primarily regarding Acea Ato2 (4.6 million euros). The offsets regarded receivables deriving from both contract work and services (1.2 million euros) and those deriving from sales of water and electricity (3.4 million euros). The payables offset regard water service concession fees.

Net debt is up 291.7 million euros from the 1,322.5 million euros reported at the end of 2007 to the 1,614.2 million euros reported at 31 March 2008. An analysis of net debt is shown below:

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Increase/ €000 31 Mar 2008 31 Dec 2007 (Decrease)

Non-current financial assets/(liabilities) 32,042 22,318 9,723

Intercompany non-current financial assets/(liabilities) 21,994 13,864 8,130

Non-current borrowings and financial liabilities (1,385,390) (1,126,002) (259,388)

Net medium-/long-term debt (1,331,354) (1,089,820) (241,534)

Cash and cash equivalents and securities 146,996 129,290 17,706

Short-term bank borrowings (554,527) (492,719) (61,808)

Current financial assets/(liabilities) (91,391) (33,042) (58,349)

Intercompany current financial assets/(liabilities) 209,582 156,860 52,722

Financial assets/(liabilities) deriving from valuation of derivative instruments 6,500 6,891 (391)

Net short-term debt (282,841) (232,721) (50,120)

Total net debt (1,614,195) (1,322,540) (291,655)

Net debt reflects the debt contributed by the newly consolidated companies, Tirreno Power, Eblacea and Umbra Acqua (using the proportionate method), amounting to 159.1 million euros. On a like-for-like basis compared with 31 December 2007, net debt is up 132.6 million euros to 1,455.1 million euros.

A pro forma analysis of net debt, excluding the newly consolidated companies, is provided below.

Increase/ €000 31 Mar 2008 31 Dec 2007 (Decrease)

Non-current financial assets/(liabilities) 22,318 22,318 (0)

Intercompany non-current financial assets/(liabilities) 17,047 13,864 3,184

Non-current borrowings and financial liabilities (1,241,890) (1,126,002) (115,888)

Net medium-/long-term debt (1,202,524) (1,089,820) (112,704)

Cash and cash equivalents and securities 145,736 129,290 16,446

Short-term bank borrowings (542,794) (492,719) (50,075)

Current financial assets/(liabilities) (75,005) (33,042) (41,963)

Intercompany current financial assets/(liabilities) 212,986 156,860 56,126

Financial assets/(liabilities) deriving from valuation of derivative 6,500 6,891 (391) instruments

Net short-term debt (252,578) (232,721) (19,857)

Pro forma total net debt (1,455,102) (1,322,540) (132,562)

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At the end of the first three months of each year, without taking extraordinary transactions into account, net debt is traditionally higher than at the end of the previous year. This also occurred at the end of the first quarter of 2007, when there was a 108.1 million euro increase. This can be seen in the table below:

(Increase)/Decrease on a €m Net debt (Increase)/Decrease like-for-like basis

At 31 December 2006 (1,197.6) At 31 March 2007 (1,305.7) (108.1) (108.1) At 31 December 2007 (1,322.5) At 31 March 2008 (1,614.2) (292.5) (132.5)

The increase also relates to trends in energy prices which, in addition to influencing the operating results, also lead to an increase in cost of purchasing the supplies needed to cover demand, with the resulting receivables naturally being collected in a different period with respect to payment of the related payables. Moreover, regulation of the market does not help retailers reduce their working capital requirements due to the timing of the calculation and related payment of both company- specific and general equalisation, above all as regards energy. At 31 March 2008 such receivables amounted to 69.7 million euros.

As provided in the analysis of invested capital, in order ensure a like-for-like basis for comparison the following analysis of net debt also shows amounts on a like-for-like basis with respect to 31 December 2007.

An analysis of net debt, in terms of the figure for the medium/long-term component, shows that: − the balance of “Non-current financial assets/(liabilities)” amounts to 32 million euros (up 9.7 million euros on 31 December 2007), whilst on a like-for-like basis the figure is unchanged with respect the previous year (22.3 million euros). The increase primarily regards VAT rebates applied for by Tirreno Power; − “Intercompany non-current financial assets/(liabilities)” are up from 13.9 million euros at 31 December 2007 to 22 million euros at 31 March 2008, marking an increase of 8.1 million euros (3.1 million euros on a like-for-like basis). This item

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regards loans issued to Group companies and the balance represents the differentials deriving from the different percentages applied on consolidation. The increase essentially regards the loans issued to AceaElectrabel Produzione to finance construction of the wind farm (up 3.7 million euros) and those issued by Eblacea to Tirreno Power (up 6.4 million euros) under the “Shareholders’ subordinated loan” agreement. These increases were partially offset by the reduction resulting from the consolidation of Eblacea, which eliminated the loan issued by the Parent Company (down 3.4 million euros); − the increase of 260.1 million euros in non-current payables and liabilities reflects an amount of 144 million euros reported by the newly consolidated companies. On a like-for-like basis the increase is 115.8 million euros, due to: (i) increased payments (reflecting the length of time involved) on bonds in issue (up 3.6 million euros); (ii) the disbursement of a new loan to Acea, amounting to 100 million euros, by Cassa Depositi e Prestiti; (iii) further drawdowns by Acque on the loan granted in 2006 (up 4.5 million euros) and by Voghera Energia (up 4.5 million euros); and (iv) further amounts disbursed by Electrabel to AceaElectrabel Produzione to finance the wind farm (up 3.7 million euros on 31 December 2007). The balance is made up by the borrowings of Umbria Acque, totalling 12.1 million euros, and Tirreno Power, totalling 131.4 million euros. This latter agreement with a syndicate of banks is divided into a Term Facility in two tranches, of which Tirreno Power has made use of only the first. The loan is to be repaid in the form of a bullet repayment on maturity (30 June 2014) and is subject to interest at a rate equal to Euribor plus a spread of 40 basis points (in the seventh year the spread becomes 45 basis points), and a Revolving Facility for general corporate purposes with repayment on 30 June 2014 and interest equal to Euribor plus a spread of 30 basis points. The agreement provides for an Interest Cover Ratio (EBITDA over finance costs) and a Leverage Cover Ratio (net debt over EBITDA). The conditions applicable to the loan of 100 million euros from Cassa Depositi e Prestiti provide for repayment on maturity on 21 December 2021, with interest equal to six- month Euribor plus a spread currently equal to 0.4% per annum and repayments to be made six-monthly. The agreement provides for an entry fee of 100 thousand euros and a commitment fee equal to 30% of the spread per annum. The spread may vary based on any changes to the ratings assigned to Acea. The principal is to be repaid in six-monthly instalments equal to 1/24 of the total amount from 30 June 2010.

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Information regarding the terms and conditions applicable to other medium/long-term borrowings is provided in the consolidated financial statements for the year ended 31 December 2007.

An analysis of short-term debt reveals that: − cash and cash equivalents and securities have increased by 17.7 million euros on 31 December 2007; on a like-for-like basis the figure is 16.5 million euro, due essentially to the Parent Company (up 17.3 million euros on 31 December 2007); − short-term bank borrowings have increased by 61.8 million euros, which falls to 50.1 million euros on a like-for-like basis. 47.3 million euros of this regards the Parent Company’s bank borrowings, reflecting the disbursement of new loans to the generating companies, an increased need for investment on the part of network companies and a deterioration in net working capital, especially as regards the increase in receivables due from customers, whilst 11.7 million euros regards the short-term borrowings of Umbra Acque; − the balance of current financial assets and liabilities has resulted in an increase in net debt of 58.3 million euros, amounting to 42 million euros on a like-for-like basis. This is essentially the combined result of (i) collection of the receivable posted in the consolidated financial statements for 2007 regarding the sale of the property on Via di Valleranello (52.5 million euros at 31 December 2007); (ii) the recognition of further amounts, totalling 4.3 million euros, relating to the loan disbursed to AceaElectrabel Produzione by Electrabel Italia to finance the Leinì plant; (iii) a reduction in amounts payable to factoring companies in order to return amounts collected on factored invoices (down 19.7 million euros); and (iv) the sum of 16.7 million euros regarding shareholder loans to Eblacea (10.2 million euros) and Tirreno Power (6.5 million euros); − the balance of net intercompany financial assets and liabilities reduces net debt by 52.7 million euros with respect to the end of the previous year. This change is essentially due to an increase in loans and receivables deriving from centralised treasury management transactions with companies consolidated using the proportionate method; − the net balance of financial assets and liabilities resulting from the measurement of derivatives amounts to 6.5 million euros, marking a decrease of 0.3 million euros compared with the previous year. 3 million euros relates to the revaluation of swaps

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hedging loans granted to Acque (4.6 million at 31 December 2007) and 3.5 million euros relates to the swap hedging the loan granted to Voghera Energia (2.2 million euros at 31 December 2007).

Cash and cash equivalents include: (i) the term current account (31.2 million euros) representing the cash collateral guaranteeing commitments linked to Atlanet/IPSE; (ii) the current account (3.9 million euros) reported in the financial statements of Voghera Energia which, in accordance with the loan agreement, is unavailable in that its purpose is to repay the loan granted; and (iii) the current account of 0.5 million euros accounted for in the financial statements of Longano Eolica.

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CASH FLOW STATEMENT

Increase/ €000 Q1 2008 Q1 2007 (Decrease) Cash and cash equivalents at beginning of period 129,290 125,210 4,080

Cash flows from operating activities Profit before tax and net finance costs 77,623 69,429 8,194 Amortisation and depreciation 50,190 41,939 8,251 Revaluations/Impairment charges 4,271 (1,056) 5,327 Movement in provisions for liabilities (9,865) 2,695 (12,560) Net movement in staff termination benefits (883) (1,404) 522 Realised gains 0 0 0 Income taxes paid 0 0 0

Cash generated by operations before movements in working capital 121,336 111,603 9,733

Increase in current receivables (71,708) (124,742) 53,034 Increase/(Decrease) in current liabilities (47,784) 16,197 (63,982) Increase/(Decrease) in inventories (1,758) 1,106 (2,864) 0 Movement in other operating assets/liabilities (6,908) (9,121) 2,212

Movement in working capital (128,159) (116,560) (11,600)

CASH FLOW FROM OPERATING ACTIVITIES (6,823) (4,956) (1,866)

Cash flows from investing activities Purchase/Sale of property, plant and equipment and intangible assets (82,193) (85,664) 3,471 Purchase/Sale of intangible assets (4,820) (5,105) 285 Investments (475) (571) 96 Purchase/Sale of investments in subsidiaries 0 (20) 20 Proceeds/Payments deriving from other investments (11,740) (20,196) 8,455 Dividends received 366 0 366 Interest received 3,625 3,785 (160) TOTAL (95,238) (107,771) 12,532

Cash flows from financing activities Minority interests in capital increases by subsidiaries (4,814) 0 (4,814) Decrease in long-term borrowings (7,677) 6,219 (13,896) Increase in medium- to long-term borrowings 107,948 2,462 105,485 Decrease/Increase in other short-term borrowings 46,799 196,124 (149,326) Interest paid (22,489) (15,812) (6,677) TOTAL 119,767 188,993 (69,227)

Dividends paid 0 0 0

Movements in shareholders’ equity before net profit 0 (0) 0

Net increase/(decrease) in cash and cash equivalents 17,706 76,267 (58,561)

Cash and cash equivalents at end of period 146,996 201,476 (54,481)

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STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

Net profit Total Share Legal Other Minority €000 for the Total shareholders’ capital reserve reserves interests period equity

Balances at 31 December 2007 1,098,899 85,699 21,704 167,386 1,373,688 66,028 1,439,716

Result for 2006 0 0

Dividends paid 0 0

Reserve for associates accounted for using (2,117) 2,117 0 0 equity method 0 0 Other reserves /Retained profits 5,721 163,101 (169,503) (681) (997) (1,678)

Cash flow hedge reserve (7,496) (7,496) (7,496)

Consolidation/Currency translation reserve (1,110) (1,110) (1,110)

Net profit for the period 34,014 34,014 1,560 35,575

Balances at 31 March 2008 1,098,899 91,420 174,082 34,014 1,398,415 66,591 1,465,006

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OTHER INFORMATION

Acea SpA share price performance

The performance of international financial markets during the first quarter of 2008 was influenced by: - the crisis in America’s financial sector and above all with regard to sub-prime mortgages; - the continued strengthening of the euro against the dollar; - the progressive increase in the price of oil (which rose to over 100 dollars a barrel); - the liquidity crisis that hit some of the biggest US banks (such as Bear Stearns).

At 31 March 2008 (compared with 31 December 2007) European bourses registered the following performances: Paris down 16.16%, London down 11.69% and Frankfurt down 18.56%.

The Italian stock market followed the other European indexes down, with the Mibtel losing 17.49%, the Midex 17.12% and the S&P/MIB 18.00%.

Against this backdrop, Acea’s share price stood at 12.40 euros at 31 March 2008 (capitalisation: 2,640.8 million euros), marking fall of 12.86% compared with 31 December 2007. Over the first three months of the current year the share price registered a peak of 14.55 euros on 9 January, whilst recording a low of 11.062 euros on 23 January. Average daily traded volumes during the period amounted to 422,206 (369,787 in the first quarter of 2007).

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17,0(€)

16.0

15.0 Acea

14.0

13.0

12.0

11.0

10.0

9.0 28/12/2007 14/01/2008 25/01/2008 07/02/2008 20/02/2008 04/03/2008 17/03/2008

The following graph shows re-based figures for Acea SpA’s share price compared with stock market indices and other comparable Italian blue chips.

(€)

17.0

16.0

15.0 Acea

14.0

13.0 Mibtel

12.0 Midex

11.0

10.0

9.0 28/12/2007 14/01/2008 25/01/2008 07/02/2008 20/02/2008 04/03/2008 17/03/2008

(re-based on the basis of Acea figures)

% change on 31 Mar 2008

(compared with 31 Dec 2007) Acea -12.86% Mibtel -17.49% Midex -17.12%

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(€)

17.0 16.5 16.0 15.5 Snam Rete Gas Acegas 15.0 Terna 14.5

14.0 Ascopiave 13.5 Hera Enia 13.0 Enel 12.5 12.0 Acea Iride 11.5 A2A 11.0 10.5 10.0 9.5 9.0 28/12/07 09/01/08 17/01/08 25/01/08 04/02/08 12/02/08 20/02/08 28/02/08 07/03/08 17/03/08 27/03/08

(re-based on the basis of Acea figures) % change on 31 Mar 2008 Company (compared with 31 Dec 2007) Acea -12.86% A2A* -25.81% Hera -17.16% Iride -21.43% Ascopiave -7.31% Acegas -17.57% Enel -17.39% Snam Rete Gas -7.83% Enìa -19.28% Terna -1.99% Average excluding Acea -15.09%

* Following the merger of Aem Milano and Asm Brescia, A2A was incorporated and has been listed on the Italian Stock Exchange since 2 January 2008.

22 analyst reports and/or notes on Acea SpA were published during the first three months of 2008.

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Declaration of the executive responsible for financial reporting pursuant to section 2 of art. 154-bis of Legislative Decree 58/98

The executive responsible for financial reporting, Roberta Neri, declares that, pursuant to section two of article 154 bis of the Consolidated Finance Act, the accounting information contained in this consolidated quarterly report for the three months ended 31 March 2008 is consistent with the underlying accounting documents, books and records.

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OPERATING AND FINANCIAL OUTLOOK

The result for the three months ended 31 March 2008 is in line with expectations.

Regarding management of the energy network segment, the Electricity and Gas Authority issued new regulations for the upcoming tariff cycle for 2008–2011. Taking into account the changes introduced, as well as the current regulations, the main actions to be taken regard investment, processes and organisation. In particular, reorganisation needs to take place in order to separate distribution and metering activities in line with the unbundling imposed by the Electricity and Gas Authority. The programme aimed at installing digital meters by 2009 is going ahead as planned. During 2008 the Group will embark on the development and construction of solar power plants, a process that will primarily involve Acea RSE.

In electricity generation, the return to operation of the Voghera plant, currently expected to take place in June, will be key to ensuring the availability of sufficient energy to meet customer demand. Development of wind farm projects is continuing in accordance with planned objectives aimed at achieving a modest increase in the amount of electricity generated from renewable sources (primarily deriving from existing hydroelectric plants), as well making a contribution in terms of green certificates to the generation sector as a whole.

Regarding the retail electricity market, the Company’s efforts will be increasingly focused on customer management and developing the portfolio in response to changes in the market which, following liberalisation of the residential market from 1 July 2007, require operators to provide a higher level of service to customers. The expected upturn in sales over the remainder of the year will enable consolidation of market shares, enabling us to strike a balance between retail energy requirements and overall available supply. The performance over the next nine months will depend on commodity price trends and regulatory developments, above all with regard to the formulas for equalisation introduced with the third tariff cycle.

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In the water services segment, the rest of 2008 will see a scaling down of the acquisitions programme regarding operators in the areas already acquired (except for Gori SpA, the operator of the Sarnese Vesuviano area, which is in the process of completing the transfer of activities from the municipalities that belong to the ATO pursuant to the concession agreement). Acea ATO2 will be involved in activities relating to the first tariff review, as required by the concession agreement.

In the waste to energy segment the Company will focus particular attention on the planned investment programme for 2008. Current initiatives are aimed at: a) developing existing waste to energy capacity; b) improving profitability; and c) extending disposal activities to include waste water treatment sludge.

Consolidated quarterly report for the three months ended 31 March 2008 88 WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9

LIST OF CONSOLIDATED COMPANIES

Method of Name Registered office Share capital % interest consolidation

Acea Distribuzione Piazzale Ostiense, 2 - Rome 345,000,000 100.00% Line-by-line

ACEA Ato2 Piazzale Ostiense, 2 - Rome 362,834,320 96.46% Line-by-line

Via di P.ta Lavernale, 26 – ACEA Luce 300,000 100.00% Line-by-line Rome

Acea Reti e Servizi Piazzale Ostiense, 2 - Rome 300,120,000 100.00% Line-by-line Energetici

Acque Blu Arno Basso Piazzale Ostiense, 2 - Rome 8,000,000 69.00% Line-by-line

Acque Blu Fiorentine Piazzale Ostiense, 2 - Rome 15,153,400 68.50% Line-by-line

Ombrone Piazzale Ostiense, 2 - Rome 6,500,000 79.57% Line-by-line

LaboratoRI Via Vitorchiano – Rome 2,444,000 95.00% Line-by-line

Via M. Tullio Cicerone, 152 - ACEA Ato5 10,330,000 93.58% Line-by-line Frosinone

Sarnese Vesuviano Piazzale Ostiense, 2 - Rome 6,735,053 95.79% Line-by-line

CREA SpA Piazzale Ostiense, 2 - Rome 13,520,000 100.00% Line-by-line

Gesesa Z.I. Pezzapiana - Benevento 519,341 59.67% Line-by-line

Via Nazionale 173/A – Aulla Lunigiana 750,000 95.79% Line-by-line (MS)

AceaRieti (formerly Via A. Comotti 11 - Rieti 200,000 100.00% Line-by-line Omnia)

Consolidated quarterly report for the three months ended 31 March 2008 89 WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9

Aguaazul Bogotà S.A. Esp Bogota - Colombia 1,516,174 51.00% Line-by-line

Acea Dominicana Santo Domingo 272,014 100.00% Line-by-line

Corso di Porta Nuova 13/15 - TAD Energia Ambiente 2,224,992 100.00% Line-by-line Milan

E.A.L.L. Via Giordano Bruno 7 - Terni 5,164,000 100.00% Line-by-line

Terni EN.A Via Giordano Bruno 7 - Terni 6,546,492 100.00% Line-by-line

Piazza del Commercio 21 - S.A.O. 7,524,400 100.00% Line-by-line Orvieto

Via Casilina Km 57.200 Enercombustibili 10,000 100.00% Line-by-line Località Castellaccio - Paliano

Via Marcello Mastroianni snc Ergo Ena 50,000 70.00% Line-by-line - Frosinine

Via S. Francesco d’Assisi, Ameatad 10,000 55.00% Line-by-line 15/C – Paliano (FR)

Via dei Sarti, 15 – Volterra Aquaser 50,000 57.00% Line-by-line (PI)

Consolidated quarterly report for the three months ended 31 March 2008 90 WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9

Share capital Method of Name Registered office % interest (€) consolidation

Acque Via Bellatalla, 1- Pisa 9,953,116 45.00%1 Proportionate

Acque Ingegneria Via Bellatalla, 1- Pisa 50,000 45.00%1 Proportionate

Acque Industriali Via Bellatalla, 1- Pisa 100,000 45.00%1 Proportionate

Acque Servizi Via Bellatalla, 1- Pisa 400,000 45.00%1 Proportionate Los Pinos 399 – 27 Lima - Consorcio Agua Azul 17,380,827 25.50% Proportionate Peru

AceaElectrabel Piazzale Ostiense, 2 - Rome 153,500,000 59.41% Proportionate

AceaElectrabel Elettricità Piazzale Ostiense, 2 - Rome 45,000,000 100.00%2 Proportionate

Via Flaminia, 133/137 - AceaElectrabel Trading 4,000,000 84.17%2 Proportionate Rome Via dell’Aeronautica, 7 – AceaElectrabel Produzione 102,100,000 50.00%2 Proportionate Rome

Umbria Energy Via B. Capponi, 100- Terni 250,000 50.00%3 Proportionate

Largo Toscanini, 5 – Voghera Voghera Energia Vendita 250,000 50.00%3 Proportionate (PV)

Elettria Via Panziera, 16 – Prato 250,000 49.00%3 Proportionate

Elga Sud Via Montegrappa, 6 – Trani 250,000 49.00%3 Proportionate

Ecogena Piazzale Ostiense, 2 - Rome 1,000,000 51.00% Proportionate

Ecomed Piazzale Ostiense, 2 - Rome 50,000 50.00% Proportionate

Voghera Energia Via Pozzoni, 2 Voghera 46,700,000 80.00%4 Proportionate

Roselectra Via Orazio, 31 – Rome 1,965,000 99.50%4 Proportionate

Longano Eolica Via Mazzola, 66 – Rome 2,100,000 51.00%4 Proportionate

Via Villamagna 90/c – Publiacqua SpA 150,280,000 40.00%5 Proportionate Florence Via Villamagna 90/c – Publiacqua Ingegneria Srl 50,000 40.00%5 Proportionate Florence Via Villamagna 90/c – Publiutenti Srl 50,000 40.00%5 Proportionate Florence

Eblacea SpA Via Orazio, 31 – Rome 44,460,000 30.00% Proportionate

Tirreno Power SpA Via Barberini, 47 – Rome 91,130,000 15.00% Proportionate

Umbra Acque SpA Via G. Benucci,162 (PG) 15,549,889 40.00% Proportionate

1 The percentages shown refer to the interest held by Acque Blu Arno Basso SpA 2 The percentages shown refer to the interest held by AceaElectrabel SpA 3 The percentages shown refer to the interest held by AceaElectrabel Elettricità SpA 4 The percentages shown refer to the interest held by AceaElectrabel Produzione SpA 5 The percentages shown refer to the interest held by Acque Blu Fiorentine SpA

Consolidated quarterly report for the three months ended 31 March 2008 91 WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9

Via Dante, 1 – Torre GORI SpA 17,994,000 37.03%6 Proportionate Annunziata

The percentage interests refer to interests held directly or indirectly by Acea SpA.

The following companies are consolidated using the equity method:

Share capital Name Registered office % interest (€)

SI(E)NERGIA (formerly Cesap) SpA Str. S.ta Lucia 1/ter – Perugina 132,000 42.08%

Cesap Vendita Gas SpA Str. S.ta Lucia 1/ter – Perugina 80,000 42.08%

P.zza Repubblica – Pontremoli Azga Nord SpA 217,500 49.00% (Massa Carrara)

Acquedotto del Fiora SpA Via Mameli,10 Grosseto 1,730,520 40.00%

Geal SpA Viale Leporini, 1348 - LUCCA 1,450,000 28.80%

Sogea SpA Via Mercatanti, 8 - RIETI 260,000 49.00%

6 The percentages shown refer to the interest held by Sarnese Vesuviano SpA

Consolidated quarterly report for the three months ended 31 March 2008 92 WorldReginfo - 6ec51342-0dff-47a6-914e-15fd24db7ca9