Financial Statements

RELAZIONE FINANZIARIA

SEMESTRALE AL

30 GIUGNO 2015

CONSOLIDATED HALF-YEAR FINANCIAL REPORT AS AT 30 th JUNE 2015

I. Introduction ...... 2

Corporate Bodies ...... 3

Activity, vision and mission of the LGH Group ...... 4

Group highlights and key financial indicators ...... 6

Structure and details of the companies in the Group ...... 8

IAS/IFRS accounting policies ...... 11

II. DIRECTORS’ BUSINESS REPORT ...... 12

Significant events occurring in the first half of 2015 ...... 13

Market scenario and main regulatory developments ...... 13

Overview of the Group’s Financial position and performance ...... 17

Workforce ...... 25

Corporate risk management ...... 26

Legal Claims ...... 34

Transactions with related parties ...... 36

Other information and significant events occurring after 30 th June 2015 ...... 36

Audit of the consolidated half-year financial statements ...... 37

III. CONSOLIDATED FINANCIAL STATEMENTS ...... 38

Financial Statements ...... 39

Notes to the Consolidated half-year Financial Statements as at 30/06/2015 ...... 45

Accounting Policy ...... 45

Explanatory notes ...... 55

I. INTRODUCTION

CORPORATE BODIES

Consiglio di Amministrazione

Presidente Alessandro Giuseppe Conter

Vice Presidente Claudio Tedesi

Amministratore Delegato Franco Mazzini

Consiglieri Giovanni Soffiantini

Giuseppe Demuro

Collegio Sindacale

Presidente Maoja

ACTIVITY , VISION AND MISSION OF THE LGH GROUP

The LGH Group is a multi-utility company established in October 2006 following the merger of five local utility companies. Its organisational structure is characterised by the concentration of corporate functions in the parent company, Linea Group Holding S.p.A. and by the management of the business units through dedicated companies or special-purpose companies.

LGH S.p.A. deals with all the Group’s strategic, development, co-ordination and control activities and policies.

The customer base accounts for over a million inhabitants in 250 municipalities in the provinces of Bergamo, Brescia, Cremona, Lodi and Pavia.

The companies in the Group mainly operate in the following business sectors:

The LGH Group’s vision is to grow, create value and remain a benchmark for its stakeholders.

The LGH Group’s mission is to maintain and develop activities and services of general economic interest by: offering customers quality services and meeting their needs as far as possible; optimising shareholders’ investments through time, by means of combinations or partnerships; encouraging employee involvement, empowerment and development; adapting the organisation to new technological and market challenges; operating to safeguard the environment, the local area, health and safety in the workplace and ethical values, based on a model of sustainable development, with particular emphasis on the production and use of energy from renewable resources.

The facilities run by the companies in the Group are mainly located in the municipalities holding a stake, in addition to the waste disposal facility in Apulia, and two biogas electricity production plants and a waste disposal facility in Sicily.

These are complemented by gas, electricity and district heating networks, most of which are located in Lombardy.

Group’s main plants Hydroelectric plant - Resio Hydroelectric plant - Mazzunno Hydroelectric plant - Darfo Hydroelectric plant - Lozio Hydroelectric plant - Corna AEM photovoltaic park Biogas plant - Provaglio d'Iseo Biogas plant - Rovato Biogas plant - Malagnino Biogas plant - Augusta Biogas plant - Castrezzato Biogas plant - Ragusa Wood biomass plant - Cremona Wood biomass plant - Rodengo Waste-to-energy plant - Parona Waste-to-energy plant - Cremona Waste treatment plant / landfills Co-generator plant - Cremona Co-generator plant - Rovato Co-generator plant - Lodi Co-generator plant - Rho (North) Co-generator plant - Rho (South)

GROUP HIGHLIGHTS AND KEY FINANCIAL INDICATORS

The tables below illustrate LGH Group’s key figures and indicators resulting from the financial statements, as well as quantitative data reflecting the business trend in the first half of the year.

1. OPERATING FIGURES

% on (€,000) % on revenues 30/06/2015 revenues 30/06/2014* Net revenues 283 ,874 100 .00% 317 ,218 100 .00% Gross operating margin - EBITDA 35 ,670 12 .57% 44 ,956 14 .17% Operating result - EBIT 11 ,726 4.13% 13 ,562 4.28% Pre-tax income 4,021 1.42% 3,590 1.13% Net result for the period -15 -0.01% 152 0.05% * 2014 figures have been restated; see subsection 2 in this Note for details.

It is important to note that revenues in the first-half of 2015 and 2014 include income from the resale of purchased gas, which is only necessary in relation to the contracts stipulated with the supplier. Therefore, when adjusting the revenue figures by €9 and €24 million, respectively, the EBITDA margin increases from 12.57% to 12.98% in the first six months of 2015 and from 14.17% to 15.33% in the first half of 2014.

2. EQUITY DATA

(€,000) 30/06/2015 31/12/2014 NIC (Net Invested Capital) 534 ,842 584 ,710 NFP (Net Financial Position) 340 ,709 352 ,562 GE (Group’s Equity) 197 ,636 200 ,751 MIE (Minority Interest’s Equity) 28 ,497 31 ,396 CE (Consolidated Equity) 226 ,133 232 ,147 CNR (Group’s Net Result) 2,291 1,549 MIR (Minority Interest’s Result) -2,306 -5,209 CNR (Consolidated Net Result) -15 -3,660

3. MAIN PERFORMANCE INDICATORS

30/06/2015 30/06/2014 ROE (Return On Equity) = RNG / PNG 1.16% 0.77% ROI (Return On Investment) = EBIT / CIN 2.01% 2.32% Indice di indebitamento = PFN / PN 1.52 1.46

4. KEY QUANTITATIVE DATA

30/06/20115 30/06/20114 % change Waste disposed of Tonnes 485 ,429 475 ,062 +2 .18% Gas distributed m3/1000 364 ,367 329 ,600 +10 .55% Gas sold m3/1000 203 ,270 189 ,740 +7 .13% Heat sold kWh/1000 116 ,377 100 ,780 +15 .48% Electricity produced kWh/1000 210 ,048 265 ,090 -20 .76% Low-voltage current distributed kWh/1000 215 ,357 216 ,230 -0.40% Electricity sold kWh/1000 341 ,905 312 ,670 9.35% The main assets of the Group are:

The main assets of the Group are:

• waste-to-energy plants in Parona (PV) and Cremona, with an overall potential of approximately 440,000 tonnes/year;

• 2 waste separation, sorting and treatment plants in Coccaglio (Brescia) and Fombio (Lodi);

• landfills in Rovato (Brescia), Malagnino (Cremona), Augusta (Siracusa) at the post-management stage and Grottaglie (Taranto);

• 99 gas networks in the provinces of Cremona, Rovato, Lodi and Pavia;

• hydroelectric power stations in Valle Camonica (Brescia), approximately 36 MW of installed power;

• biogas electricity production plants (Brescia, Cremona and Siracusa), approximately 11 MW of installed power;

• three cogeneration power stations and two district heating networks in the provinces of Cremona, Lodi and Milan;

• the Cremona electricity distribution network;

• a fleet of approximately 1,040 vehicles, of which 425 for urban hygiene services and the transport of waste, and 613 vehicles used for other technical and staff services;

With all these facilities, in the first six months of 2015, the LGH Group:

• handled 485,429 thousand tonnes of mainly urban and non-hazardous special waste, and ranks among the leading five operators in the sector at a national level, serving more than 150 local municipalities;

• produced approximately 210 GWh of electricity, exclusively from renewable and assimilated sources such as hydroelectric power, waste-to-energy processes, and the cogeneration of some biogas plants;

• distributed 364 million cubic metres of gas and sold 203 million cubic metres;

• produced and distributed 116 GWh of heat.

STRUCTURE AND DETAILS OF THE COMPANIES IN THE GROUP

The Group’s scope of consolidation as at 30 th June 2015, which varied compared to 31 st December 2014 following acquisition from ASM Mortara S.p.A. of 0.5% stake in Linea Distribuzione S.r.l., is illustrated in the highlighted section of the diagram below.

Below are some highlights of the Group’s main subsidiaries and associates.

Subsidiaries Stake held by % Share capital AEM Gestioni Srl LGH S.p.A. 100 11,649,196 Linea Gestioni Srl LGH S.p.A. 100 5,000,000 Linea Distribuzione Srl LGH S.p.A. 90 .85 23,980,952 Linea Più S.p.A. LGH S.p.A. 100 5,000,000 Linea Energia S.p.A. LGH S.p.A. 100 3,968,600 Linea Com Srl LGH S.p.A. 96 .17 5,832,761 Linea Ambiente Srl LGH S.p.A. 100 3,000,000 Astem Gestioni Srl LGH S.p.A. 100 1,290,319 MF Waste LGH S.p.A. 51 750,000 Greenambiente Srl LGH S.p.A. 80 50,000 Rovato Energia Scarl Linea Energia S.p.A. 95 15,000 Lomellina Energia SRL MF Waste Srl 80 160,000 S.Te.A.M. Srl Linea Più S.p.A. 99 .61 1,010,000

Associates Stake held by % Share capital

Bresciana Infrastrutture Gas S.r.l. Linea Distribuzione Srl 50 100,000 Blugas S.r.l. in liquidazione LGH S.p.A. 48 .22 1,000,000 Blugas Infrastrutture S.r.l. LGH S.p.A. 27 .51 14,300,000 Franciacorta Rinnovabili Linea Energia S.p.A. 45 100,000 Ecofert S.r.l. in liquidazione Linea Energia S.p.A. 48 100,000 Asm Codogno S.r.l. Linea piu' S.p.A. 49 1,897,600

- AEM Gestioni S.r.l. : a company with headquarters in Cremona, which manages public utility services such as the production and distribution of electricity and heating through the district heating network in the city of Cremona, the collection and disposal of solid urban and assimilated waste, through waste-to-energy processes, which are mostly sent to landfills in the city of Cremona and parts of the province, and other services, such as public lighting, road signs and parking bays;

- Linea Distribuzione S.r.l. : a company with headquarters in Lodi, which deals with methane gas distribution in the area covered by the Group for a total of 99 municipalities. During the first six months of 2015, the 0.5% stake was acquired from the minority shareholder ASM Mortara S.r.l., as detailed hereinafter in the Note;

- Linea Più S.p.A. : a company with headquarters in Pavia, which deals with the procurement, purchase and sale of raw materials and end customer management in the gas and electricity sectors;

- Linea Energia S.p.A. : an engineering company with headquarters in Rovato, Brescia, which specialises in developing and performing activities relating to energy, from design to implementation and management of energy production plants;

- Linea Com S.r.l. : a company with headquarters in Cremona, which supplies mobile and landline telephone and web services through broadband fibre optic and WiMAX networks in the cities of Cremona and Pavia and parts of the province. It also provides services and offer ICT technological support to LGH Group companies, information system service and management activities for the municipalities and deals with special projects for local authorities;

- Linea Ambiente S.r.l. : a company with headquarters in Rovato, Brescia, which manages urban and special waste collection, transportation, treatment and disposal activities. It carries out design activities to implement services and systems, and business management of the flows of waste generated and managed by all the companies belonging to the LGH Group.

- Linea Gestioni S.r.l. : a company with headquarters in Crema (Cremona) which manages Environmental health services for 133 municipalities in the city of Crema and other municipalities in the Franciacorta area and in the province of Lodi;

- Astem Gestioni S.r.l. : a company with headquarters in Lodi, which manages cogeneration plants and the district heating network of the city of Lodi, manages heat supply networks and carries out Environmental health activities for the city of Lodi and other neighbouring municipalities;

- MF Waste S.r.l. : a company with headquarters in Rovato, Brescia, which holds 80% stake in Lomellina Energia S.r.l.;

- Greenambiente S.r.l. : a company with headquarters in Priolo Gargallo, Siracusa, which owns and runs the waste disposal plant in Augusta, Siracusa;

- Lomellina Energia S.r.l. : a company with headquarters in Parona, Pavia, which manages the LGH Group's most important waste-to-energy plant;

- S.T.e.A.M. S.r.l. : company with headquarters in Rho, Milan, which manages the cogeneration plant and the district heating network for the city of Rho.

ASSOCIATES:

- Blugas S.p.A. : a company with headquarters in Mantua. Since 31.12.2010 it has been operated as an investment holding company with a 30.94% stake in the share capital of SINIT (now in liquidation). In 2014 the stake in SINIT was transferred directly to the shareholders of Blugas S.p.A. (a 14.92% stake acquired by Linea Group Holding) and the company was transformed into a private limited liability company (Srl) and put into liquidation;

- Blugas Infrastrutture S .r.l., a company, which has been operating in Mantua since December 2005 in the field of natural gas transportation and storage;

- Bresciana Infrastrutture Gas S.r.l. : a company with headquarters in Roncadelle, Brescia, which was set up in 2013 by Linea Distribuzione, which has a 50% interest, for the management of the gas distribution network of the city of Palazzolo sull’Oglio;

- Bresciana Infrastrutture Gas S.r.l. : a company, which has established its headquarters in Mantua since 2005, , for the management of the gas distribution network of the city of Palazzolo sull’Oglio;

- Ecofert in liquidazione S.r.l.: an associate operating in the field of the recovery and the preparation for recycling of urban and industrial solid waste and biomasses in San Gervasio Bresciano. The company was put into liquidation in 2012;

- Asm Codogno : a multi-service company based in Codogno operating in the field of the environment and energy;

- Franciacorta Rinnovabili S.r.l.: based in Rodengo Saiano, Brescia, this company produces electricity from wood biomasses.

IAS/IFRS ACCOUNTING POLICIES

The parent company has adopted the International Financial Reporting Standards (IFRS) in drawing up its financial statements since 31 st December 2009, in compliance with the procedure under art. 6 of EC Regulation no. 1606/2002 of the European Parliament and Council of 19 th July 2002 on the application of the IFRS.

Since the year ended on 31 st December 2014, the financial statements of most of the group subsidiaries and the holding company have been prepared in accordance with international accounting standards.

II. DIRECTORS’ BUSINESS REPORT

SIGNIFICANT EVENTS OCCURRING IN THE FIRST HALF OF 2015

The following facts of note, extraordinary transactions and business re-organisation took place during the first half of 2015:

- the acquisition from ASM Mortara S.r.l. of a 0.5% stake in Linea Distribuzione S.r.l. by paying a price of €733 thousand, of which €196 thousand related to goodwill;

- the implementation of agreements aimed at finalising combination transactions involving group enterprises dealing with waste collection and treatment, the sale of electricity and the management of district heating. Effective from 1 st July 2015;

- the signing of documents and payment of the price in connection with the acquisition of the stake in SCCA S.r.l. (a company dealing with district heating in Crema) and the customer base from Alma S.p.A. for the sale of gas. Both transactions will be effective from 1 st July 2015.

MARKET SCENARIO AND MAIN REGULATORY DEVELOPMENTS

ENVIRONMENT

The downward trend in the volumes of residual urban waste is confirmed by the approval of the Regional Waste Management Plan (PRGR), under which the municipalities are required to achieve 65% separate collection by 2020, but it is offset by extra-regional flows of dry fraction. In said PRGR the Lombardy Regional Authority also indicates the need for setting up new plants for the processing of at least 200,000 tonnes a year of municipal solid waste organic fraction (FORSU) (5 potential new units envisaged).

The urban hygiene business has been handled by Linea Gestioni since 1 st July 2015.

The urban waste collection market in Lombardy is characterised by a high number of operators, the increasing use of subcontractors through competitive awarding procedures and consequent downward pressure on prices.

PRODUCTION OF ELECTRICITY

The collapse of demand following the 2008 economic crisis seems to have come to an end and signs of recovery can now be seen. The average market prices are expected to increase as the result of a growth in demand, though it is difficult to assess how the situation will evolve due to complex market dynamics in the oil market. There is however the risk that the current overcapacity will be maintained in the medium term as well (Terna forecasts, in the absence of sustained economic recovery). The regulatory scenario seems to confirm the orientation to privilege the use of renewable energy sources over fossil fuels, while distributed production and self-consumption have been gradually discouraged.

LGH’s production capacity today is about 525 GWh, of which 200 GWh from hydroelectric sources, 220 GWh from waste-to-energy plants, 80 GWh from co-generation plants and 25 GWh from landfill biogas.

GAS RETAILING

Former incumbent small retailers are going to gradually disappear due to:

- harsh competitive pressure,

- less margins in the gas regulated market as the result of the tariff reform.

The strategies put in place by domestic market players and the reduced margins from sales under the current protected system urge for innovation at all levels, including the implementation of new commercial policies.

Linea Più is the 5 th largest gas operator in Lombardy with 235,000 customers.

DISTRICT HEATING

Over the last 10 years the district heating market has grown at a steady rate.

The Italian Regulatory Authority for electricity, gas and water (AEEGSI) has started to create a master data file for operators. A regulatory measure on connection costs, service quality levels and tariff publication is expected to be taken in the medium term.

Three district heating systems are currently included in the scope of consolidation of the Group: Cremona, Lodi and Rho, to which the Crema plant was included on 1 th July 2015, following the acquisition of SCCA.

ELECTRICITY DISTRIBUTION

A study is being conducted by the Italian Regulatory Authority for electricity, gas and water (AEEGSI) in view of setting up within 2019 cost recognition logics based on total spending (operating expenses and investment costs).

Aem Gestioni S.r.l. holds a licence granted by the Ministry of Production Activities for electricity distribution services in the city of Cremona, which will be effective until the end of 2029.

NATURAL GAS DISTRIBUTION

Under the rules for bidding in public tenders (so-called Gare d’Ambito ), which are forthcoming, despite they were postponed several times in the past, numerous operators are expected to exit the market (estimate of 180 out of 230), especially in Lombardy (the expected concentration in the sector after public tenders is of no more than 50 operators).

Local medium and small size operators (less than 50,000 delivery points) can only pursue the strategy of corporate alliance if they want to remain in the sector (temporary grouping of companies are not allowed, due to Antitrust constraints,).

Linea Distribuzione is the 9 th player in Italy, serving 99 municipalities and with about 266,000 delivery points.

Regulatory updates and tariffs By resolution 367/14/R/GAS, the AEEGSI set out the new tariff regulation for gas distribution and metering services for 2014-2019 (4 th Regulatory Period). The tariff system provides for the calculation of a mandatory tariff, actually applied to customers being billed, that produces actual revenues, and a reference tariff that determines the allowed revenues of the individual distribution operator (VRT) to cover the cost recognised, which reflects the actual revenues for the company. An equalisation mechanism is also provided to cover any differences between the revenues admitted and those actually obtained by applying the mandatory tariff. The reference tariff comprises: a) operating costs, consisting mainly of costs for outsourced services, personnel expenses and the cost of purchased materials;

b) the depreciation of fixed assets and the invested capital remuneration rate, calculated by multiplying the net invested capital (NIC) by the WACC (the invested capital remuneration rate for 2014-2015 has been set at 6.9% for the distribution service and 7.2% for the metering service).

OVERVIEW OF THE GROUP ’S FINANCIAL POSITION AND

PERFORMANCE

The LGH Group’s consolidated financial statements as at 30 th June 2015, which were drawn up according to the international financial reporting standards (IAS/IFRS), shows a net loss of €15 thousand (compared to €152 thousand profit as at 30th June 2014), net of €4,036 thousand taxes for the year and €23,944 thousand amortisation and depreciation. The profit pertaining to the Group amounts to €2,292 thousand.

5. FINANCIAL PERFORMANCE

(€,000) 2014 Consolidated Income Statement 2015 2014 Absolute change % change *restated Revenues from sales 276,486 307,965 307,965 -31,479 -10% Other revenues and gains 7,388 9,253 9,512 -1,865 -20% Total net revenues 283,874 317,218 317,477 -33,344 -11% Consumables and services -210,225 -234,438 -234,697 24,213 -10% Personnel expenses -34,150 -34,094 -34,094 -56 0% Other operating expenses -2,931 -3,166 -3,166 235 -7% Other net income (expenses) -898 -565 -1,303 -333 59% Gross operating margin (EBITDA) 35,670 44,956 44,218 -9,286 -21% Amort., depreciation and write-down -23,944 -31,393 -30,709 7,449 -24% Operating result (EBIT) 11,726 13,562 13,508 -1,836 -14% Net financial income (expenses) -7,624 -10,149 -10,149 2,525 -25% Portion pertaining to associates’ results 0 177 177 -177 -100% Gains (losses) on equity investments -81 0 0 -81 100% Pre-tax result for the year (EBT) 4,021 3,590 3,536 431 12% Income tax -4,036 -3,438 -3,421 -598 17%

Return on operating assets -15 152 115 -167 -110%

Return on assets being 0 0 0 0 0% decommissioned

Net result for the period -15 152 115 -167 -110% of which: Net result attributable to the group 2,291 1,519 1,482 772 51% Net result attributable to minority -2,306 -1,367 -1,367 -939 69% interests

* The 2014 figures were restated. See paragraph 2 of the Note to the Financial Statements for a detailed analysis.

Net revenues amounted to €276,486 thousand, down 10% on 2014.

Costs for raw materials, supplies, consumables and goods for sale, and for services amount to €210,225 thousand, down 10% on 2014.

Personnel expenses came to €34,150 thousand, virtually in line with the 2014 figure.

Costs under Other net income and charges totaled €898 thousand, down 59% on 2014. This item mainly includes extraordinary management. Amortisation, depreciation and write-down decreased from €31,393 thousand in 2014 to €23.944 thousand in 2015, down 24%. The decrease is mainly attributable to amortisation and depreciation of the plant managed by Lomellina Energia, which are strictly associated with the trend in incentives for the production of electricity.

The result of cash flow management (financial income and expenses) in the first half of 2015, which totals €-7,624 thousand, with an improvement of €2,525 thousand compared to the result as at 30 th June 2014, due mainly to the positive effect of the inclusion of greater default interest and the positive effect of the fair value assessment of derivatives.

The pre-tax result came to €4,021 thousand, 12% up compared to 2014.

The consolidated pre-tax result came to €4,036 thousand, with an increase of €598 thousand compared to 2014, as detailed in the explanatory notes to the financial statements.

The Net result of the period amounted to e-15 thousand, down €167 thousand compared to the 2014 result. Below is an analysis of the results of the individual business units for the first half of 2015. They are expressed net of structural costs that are directly or indirectly attributable to the business units themselves (full-cost configuration). (€,000) NATURAL GAS DISTRIBUTION 30/06/20115 30/06/20114 % change Revenues 19,584 19,585 0% Costs 11,264 10,145 11 .00% EBITDA 8,320 9,440 -11 .90%

Amortisation, depreciation and allocations 4,340 4,387 -1.10%

EBIT 3,980 5,053 -21 .20%

Total revenues are virtually unchanged as the result of fewer revenues from VRT 1 tariffs and accessory services (€-475 thousand), which are offset by extraordinary items under assets that are fully linked to fund release and gains from TEE 2 disposals (€+345 thousand).

1 VRT = Vincolo sui Ricavi Totale Total limitation on revenues admitted to cover network distribution costs

2 TEE = Titoli di Efficienza Energetica Energy Efficiency Certificates 18

It should be noted that, according to the tariff system envisaged by the Authority, revenues from VRT are independent from the volumes distributed (up 11%). Costs increased, with a consequent decline in margin, due to high guarantee-associated expenses (€+320 thousand) and sundry external costs, including contingent liabilities and the adjustment of rental fees to municipalities (€+182 thousand).

(€,000) NATURAL GAS SALES 30/06/20115 30/06/20114 % change Revenues 108,877 121,874 -10 .70% Costs 101,405 116,588 -13 .00% EBITDA 7,472 5,286 41 .40%

Amortisation, depreciation and allocations 953 2,472 -61 .50%

EBIT 6,519 2,814 131 .70%

The decrease in revenues and costs is attributable to the more limited gas reselling activity (€-14.8 million), as a consequence of the internationalisation of dispatching activities, which are no longer entrusted to the main supplier.

Morevoer, increased margin in the first half of 2015 compared to the same period in 2014 is mainly generated by:

- the new gas despatch/trading activity, which began in the second half of 2014 (€+1.2 million);

- improved gross margin of retail and corporate utilities (volume and price effect, €+3.4 million), limited by the effect of accruals (€-1.7 million) and higher operating costs.

Reduced appropriation to the provision for bad debts (€-1.1 million) also contributed to the increase in net operating margin.

(€,000)

ELECTRICITY PRODUCTION 30/06/20115 30/06/20114 % change

Revenues 11,205 17,885 -37 .30% Costs 8,682 12,419 -30 .10% EBITDA 2,523 5,466 -53.8%

Amortisation, depreciation and allocations 2,702 3,446 -21 .60%

EBIT -179 2,020 -108 .90%

The decline in overall margin in the first half of 2015, compared to the same period in 2014, is attributable to the hydroelectricity segment, which in the past year generated a record production due to frequent and heavy rainfalls, while in 2015 it was affected by unfavourable climate conditions; a lower volume of energy produced (48.3 GWh versus 101.1 GWh in the first half of 2014) combined with the end of the period of recognition of some green certificates contributed to an overall decrease in revenues by about €4.2 million (while costs remained basically fixed and unchanged).

At the same time, the margin was positively affected by the thermal power plants (€+637 thousand, mainly due to the transfer of energy efficiency certificates (TEE) and reduced raw material costs), the production of electricity from biomasses (around €+300 thousand due to reduced raw material costs and transition to self-consumption), as well as some positive extraordinary components (€+315 thousand).

(€,000)

ELECTRICITY DISTRIBUTION 30/06/20115 30/06/20114 % change

Revenues 5,757 6,596 -12 .70% Costs 3,652 3,956 -7.70% EBITDA 2,105 2,640 -20 .20%

Amortisation, depreciation and allocations 1,566 1,927 -18 .70%

EBIT 539 713 -24 .40%

EBITDA decreased due to the termination of the interconnection points of the State Railways and the effect of equalisation (€-300 thousand); the margin was affected also by the end of the release of a previously set aside provision (last instalment released in the first half of 2014 amounting to €140 thousand).

(€,000)

ELECTRICITY SOLD 30/06/20115 30/06/20114 % change

Revenues 71,990 73,872 -2.50% Costs 71,443 73,631 -3.00% EBITDA 547 241 -127 .50%

Amortisation, depreciation and allocations 707 940 -24 .70%

EBIT -160 -699 -77 .10%

The decrease in revenues is mainly attributable to trading activities (about €-1.5 million compared to the same period in 2014) and the decrease in the number of customers of the protected market (€-677 thousand); revenues from free-market customers increased (€+270 thousand) as the result of increased volumes (€+29 GWh), despite a decrease in prices.

The higher margin in the protected market (€+365 thousand) and trading (€+23 thousand) and fewer operating costs (€-70 thousand) contributed to the growth of EBITDA; conversely, the margin of free- market customers decreased (€-152 thousand).

(€,000) DISTRICT HEATING 30/06/20115 30/06/20114 % change Revenues 9,552 9,758 -2.10% Costs 7,925 7,541 -5.10% EBITDA 1,627 2,217 -26 .60%

Amortisation, depreciation and allocations 870 742 17 .30%

EBIT 757 1,475 -48 .70%

The results achieved by this Business Unit were mainly generated by the management of the district heating network in the cities of Cremona and Lodi, namely:

• the margin of the Cremona network decreased by €888 thousand, compared to 2014, reflecting the combined effect of a capital loss associated with the calculation of accrued network losses (€-1.3 million), a capital gain for the transfer of Energy Efficiency Certificates (TEE) (€+293 thousand), higher volumes sold (€+8.36 GWh) and less structural costs.

• The Lodi network contributed to margin growth by €+214 thousand, thanks to the combined effect of higher volumes sold (+20%) and new connections (+24% of installed power).

(€,000) ENVIRONMENT 30/06/20115 30/06/20114 % change Revenues 75,075 81,817 -8.20% Costs 62,334 63,275 -1.50% EBITDA 12,741 18,542 -31 .30%

Amortisation, depreciation and allocations 11,990 17,563 -31 .70%

EBIT 751 979 -23 .30%

The trend in the economic performance of the Environment BU is the result of a series of factors, namely:

• The end in March 2015 of the incentive period for the production of electricity at the second line of the waste-to-energy plant in Parona (PV), combined with a reduction in the CEC (avoided fuel cost) component of the electricity selling price (€-6.5 million overall over the same period in 2014), as well as lower revenues for €800 thousand, always for the same plant, due to some stops of the facility for maintenance. The concurrent reduction of costs associated with the start of some projects aimed at recovering operational efficiency (about €1.4 million) limited the decrease in overall margin to €5.9 million compared to the same period in 2014;

• The waste-to-energy plant in Cremona improved its margin by €610 thousand, despite a decrease in the conferral tariffs, thanks to extraordinary gains in 2015 relating to the transfer of energy efficiency certificates.

• The closure of the landfill in Augusta (SR) in June 2014, following depletion of the authorised capacity, entailed an interruption of incoming waste with consequent impact on margin (€-1 milion);

• The margin of the landfill in Grottaglie (TA) (€+1,8 million) improved thanks to the increase in incoming waste (136,506 tonnes, +20%) and an increase in unit prices;

• The urban hygiene segment shows an uptrend margin overall (€+156 thousand), despite a contraction in revenues (€-1 million), thanks to ongoing effort to improve operating efficiency.

(€,000) OTHER SERVICES AND ICT 30/06/20115 30/06/20114 % change Revenues 9,803 10,528 -6.90% Costs 9,471 9,846 -3.80% EBITDA 332 682 -51 .40%

Amortisation, depreciation and allocations 816 1,042 -21 .70%

EBIT -484 -360 -34 .50%

The contraction in EBITDA is mainly due to:

• the ICT segment, where the margin dropped by €181 thousand, as the result of lower revenues from third parties (€-196 thousand) and higher costs (€43 thousand), which were partly offset by higher captive revenues (€+58 thousand).

• the management of district heating plants of the city of Cremona, where the margin decreased by €182 thousand, attributable to a contingent liability that occurred in 2015.

6. FINANCIAL POSITION

The LGH Group’s financial position as at 30/06/2015, compared with that at 31/12/2014, is summarized in the table below.

LGH Group 30/06/2015 % 31/12/2014 % Balance Sheet Current assets 228,935 40 ,39% 255,873 43 .76% Current liabilities -175,299 -30 ,93% -179,887 -30 .77% Net working capital 53,636 9,46% 75,986 13 .00% Net non-current assets 623,581 110 ,01% 636,811 108 .91% Provisions for plant renovation and -88,739 -15 ,65% -88,797 -15 .19% contrib. Net fixed assets 534,842 94 ,35% 548,014 93 .72% Other net assets and liabilities -21,636 -3,82% -39,290 -6.72% NET INVESTED CAPITAL 566,842 100 ,00% 584,710 100 .00%

Short-term net financial position -85,381 -15 ,06% -68,728 -11 .75%

Medium/long-term net financial 426,090 75 ,17% 421,291 72 .05% position Total net financial position 340,709 60 ,11% 352,563 60 .30% Equity 226,133 39 ,89% 232,147 39 .70%

TOTAL SOURCES 566,842 100 ,00% 584,710 100 .00%

The balance sheet of the LGH Group, which was prepared in accordance with the pattern of sources and utilisations, shows a net invested capital of € 567 million.

Shareholders’ equity, which is one of the sources, presented a balance of €226 million, a decrease of around €6 million.

In line with the decrease in shareholders’ equity, the Net Financial Position decreased by about €12 million, therefore the incidence of the NFP on total sources remained just above 60%. The leverage ratio (debt-to-equity ratio) increased from 1.46 to 1.52.

Further details are provided in the cash flow statement and the equity movement statement.

WORKFORCE

7. NUMBER OF EMPLOYEES

As at 30 th June 2015 the Group employees totalled 1,271. A breakdown is given in the table below.

30.06.2015 30.06.2014

LGH Group 1,271 1,281

- of which LGH S.p.A. 142 137

- of which subsidiaries 1,129 1,144

The average number of group employees in the first half of 2015 was 1,268, compared to 1,275 in the first half of 2014, with a decrease of 0.55%.

The average number of group employees (excluding resources on leave and secondments in companies outside the Group) was 1,266 in the first half of 2015, compared to 1,273 in the first half of 2014, with the same decrease of 0.55%.

The average per capita cost of employees was €26,385, up 0.81% compared to the first half of 2014.

The decrease in the number of employees as at 30/06/2015 compared to 30/06/2014 is mainly linked to normal dynamics: 9 employees from Astem Gestioni, who were involved in side businesses (heating, tax management and billboard advertising) were transferred on 1/01/2015; 4 employees left Linea Gestioni due to changes in the management of an urban hygiene service, some resignations and retirements and new hiring at the beginning of 2015 of people employed previously under a staff lease contract.

CORPORATE RISK MANAGEMENT

The LGH Group has recently started to define and implement an integrated Enterprise Risk Management framework, which provides identification of the risk from source (internal or external to business processes) and takes into account the specific features of the business area in which the Group operates. The risk scenarios are evaluated with reference to the relevant sectors, according to four macro-classes – operational, strategic, compliance and financial.

The Integrated Enterprise Risk Management framework aims at achieving a thorough and complete view of the main corporate risks and arousing increased awareness with reference to the corporate internal risk control and management system throughout the Group.

Risks with an operational impact mainly refer to the achievement of certain levels of efficiency and effectiveness of corporate operations and, more in general, the Group’s ability to meet the short-term objectives it has set itself. Risks with a strategic impact refer to decisions of a higher level and relate to business choices over a longer period of time, such as the positioning on the market, strategies of response to technological innovation and the Group’s target markets, and the strengthening of relations with its stakeholders. Compliance entails acting in accordance with applicable regulations, including those specific to the business where the Group operates, which are defined at a national, regional and provincial level. The financial aspects relate to risk scenarios that can have an impact on the corporate assets in general.

Business interruption risk

The Group operates in reference businesses via the management of operationally and technologically complex production facilities. Any malfunction or service interruption due to accidental failures or external events could entail a significant impact on both operations, by causing economic losses, and corporate image. In order to mitigate the risk of failure of the plants, specific planned maintenance policies have been adopted to identify, monitor and prevent any criticalities. This is done by implementing a inventory restocking plan for strategic spare parts and/or by entering into contracts with external suppliers for maintenance activities. In the field of urban hygiene, the risk of service interruption, resulting in inconveniences to users, is mitigated by putting in place vehicle maintenance schedules, rental contracts and a centralised

management of the fleets of vehicles in agreement with the departments involved in the various operating companies. In the field of distribution activities, the Group monitors the levels of service, in accordance with the regulatory provisions issued by the Authority, and it has implemented remote control service stations and technical security instruments.

Market risk

The Group operates in sectors where a major process of deregulation and development of organized markets have occurred over the last few years. This has led to an increase in competitive pressure as the result of the need to confront with other national and international producers and traders.

The Group also operates in areas that are subject to a regulated tariff system, for which it is up to the Regulatory Authority for Electricity Gas and Water (AEEGSI) to establish a framework with direct impact on the profitability of the sector, which has repercussions on both operations and results.

The Group as a whole is also exposed, with reference to the characteristics of the sectors mentioned above, to the market risk associated with the loss of customers, changes in the prices of raw materials and selling volumes according to the economic market situation in general and the climate trend.

The risk of increasingly reduced margins is controlled via a structured comparison with organised markets. The Group has also established an Energy Risk Policy, wherebt it has set out its risk appetite and management and monitoring tools with reference to trading in the so-called energy markets. The Group also carries out an important activity in monitoring relations of the individual businesses with national and local authorities, with the support of independent consultants of proven experience, and confrontation with public institutions, trade associations and the Regulatory Authority for Electricity, Gas and Water (AEEGSI).

Regulatory risk

Among the risk factors of the parent company and its subsidiaries there is the constant evolution of the normative and regulatory framework, with the coexistence of national, regional and provincial rules. Some of issues of significance are listed below.

• The Group operates some services based on concessions or contracts, the duration of which may be affected by changes in the law, with the risk of possible, even unpredictable, changes over time.

• Urban hygiene and waste disposal: the Group is exposed to risks deriving from continually evolving environmental regulations, the Sistri regulation on waste tracking and regulations concerning the network of economically important public services. • Electricity distribution: tariff contributions to distributors subject to obligations regarding Energy Efficiency Certificates (EEC) still have to be determined, and stock-piling systems will be regulated to avoid imbalances in the networks. Distributors may also be subject to higher costs for determining functions and activities attributed by the Authority to the Integrated Information System, for activating automatic settlements (TIS) associated with the sending of measurements and, shortly, the data quality, and especially for extending the temporary arrangement for equalising network losses between distributors, which could cause uncertainty in allocating revenues and assessing investments. The Regulatory Authority is conducting consultations regarding the new regulatory period, effective from 1 st January 2016, which could have a significant regulatory impact, which should not be overlooked. • District heating: there may be cost increases when the meter inspection regulations come into force. • Information technology and telecommunications: the Group is exposed to risks associated with AGCOM (Italian Communication Authority) regulations and the privacy policy.

To mitigate the potential risk, the Group has put in place a policy of continuous monitoring of the reference laws in order to assess their implications and ensure proper implementation.

In various areas of activity, the Authorities are drawing up regulations covering the duration of concessions and the assignment procedures, which will have a certain impact on the Group.

Information technology risk

The Group is exposed to the risk of non-availability or malfunctioning of the computer systems. In conducting and managing its activities, the Group uses information systems that support key business processes of an operational, administrative and commercial nature. Information confidentiality and security are subject to specific controls through internal policies and segregation of access to information. To mitigate these risks, specific prevention and protection measures have been put in place, such as backup and recovery systems. Information policies on the use of computer systems are also adopted.

Environmental Risk

The Group is exposed to risks associated with external events and environmental risks, with particular reference to the sale of energy, ICT and waste brokerage/disposal, in addition to sectors involved in bidding processes (i.e. Urban Hygiene). Exposure to risks associated with external events and environmental risks is mitigated by taking out insurance policies and adopting risk prevention, protection and monitoring procedures.

The Group is exposed to risks associated with estimated end-year consumption, applicable tariffs and estimates concerning the application of uncertain provisions of law. The Group is also exposed to the risks associated with final coverage and post-closure management of waste landfill facilities, for which the companies concerned are committed to obtain a sworn appraisal drawn up by independent experts and verified at the end of each financial year.

Credit risk

Exposure to credit risk is predominantly related to the commercial activities carried out by the Group. In order to control this risk, the operational management of which is delegated to the credit management function located centrally and the corresponding functions of the operating companies, a credit-standing assessment activity has been implemented in recent years for certain types of customers.

The Group has currently no insurance policies covering the risk of insolvency of its trade receivables, as it considers the methods and procedures adopted for credit recovery make the insurance costs too high compared to the resulting economic benefits.

Credit exposure towards customers is therefore controlled by an improvement of the Group’s commercial and customer credit-granting policies and credit recovery, which in the previous years had led to a reduction of outstanding receivables. In some cases, customers are required to issue guarantees to cover the risk of default.

The Group also set up a dedicated provision for bad debts of an amount that is deemed adequate to cover potential future losses.

The credit risk associated with the Group’s other financial assets that include cash and cash equivalents and financial assets held for sale does not exceed the book value recognised for these assets in the event of default by the counterparty, which is generally a leading national and international bank.

Rate interest risk

The Group’s main financial instruments, other than derivatives, comprise short/medium/long-term bank loans, leases, and demand and bank deposits. The main aim of these financial instruments is to fund the Group’s operations.

The Group’s exposure to the interest rate risk mainly arises from the volatility of financial expenses related to debt bearing interest at a floating rate.

The management policy of the risk associated with interest rates aims at limiting their volatility, primarily through the identification of a balanced mix of fixed interest and floating rate loans, and also by using hedging instruments that mitigate the effects of interest rate fluctuations.

As at 30 th June 2015, the structure of loans and financial leases granted to the Group by banks and other lenders is illustrated in the table below.

as at 30/06/2015 (€,000)

Absolute value percentage Fixed rate loan 388,023 76.22% Floating rate loan with derivatives 92,754 18.22% Floating rate loan without derivatives 22,228 4.37% Financial leases 6,087 1.19% Total 509,092 100.00%

As at 30/06/2015 (€,000) Absolute value percentage

Bonds 303,017 59.52% Liabilities for financial lease 6,087 1.19% Loans and funding from correlated parties 3,794 0.75% Loans and funding from banks and other lenders 196,194 38.54% Total 509,092 100.00%

The Group has 6 interest rate swap contracts, which provide for a differential swap between a floating rate and one or more predetermined fixed rates applied to reference notional values “combined” with amortisation plans of the underlying loans.

These derivatives are valued at fair value, with changes recognised to the cash flow hedge reserve under shareholders’ equity.

Given the above-outlined debt structure, it is estimated that a rise of a percentage point in interest rates would produce, on an annual basis, an increase in interest expense of about €254 thousand, while a decrease of a percentage point in interest rates would produce a decrease in interest expense, always on an annual basis, of about €243 thousand.

Liquidity Risk

The liquidity risk is identified as the risk for the Group, due to difficulty in raising new funds or sell its assets on the market, to be unable to meet its payment obligations.

The objective is to ensure a level of liquidity that allows the Group to meet its contractual obligations, both in the normal course of business and in difficult economic conditions, by maintaining lines of credit, the liquidity and timely renegotiation of loans approaching expiration, and optimising the cost of funding in accordance with the current market conditions and prospects.

The table below shows the worst-case scenario, where current assets (cash and cash equivalents, loans receivables and trade receivables) are not taken into consideration, while financial liabilities, as a principal sum and interests, trade receivables and interest rate derivative contracts are reported. The financial credit lines subject to revocation are made repayable on demand, while the other loans are made repayable on the date on which they can be requested for repayment.

as at 30/06/2015

(€,000) expiry expiry expiry 1-3 m 3-12 m 1-2 yrs Bonds 0 11,625 11,625 Borrowings and other financial liabilities 953 44,911 33,322 Trade payables 120,726 0 0 Total 121,679 56,536 44,947

In order to ensure sufficient liquidity to cover financial commitments for at least the next two years (time horizon of the above worst-case scenario), as at 30 th June 2015, the Group had €129 million cash and cash equivalents, €15 million committed medium/long-term credit lines, €50 million revolving committed credit lines, and about €25 million uncommitted credit lines, all unused.

As at 30 th June 2015, the Group is characterised by a predominantly medium/long-term debt structure (over 89% of loans expiring after one year), of which about 60% is represented by Eurobonds repayable

at end of 2018. The average residual duration of loans is 4 years and 5 months, and about 8% of borrowings expire beyond 5 years.

Default risk and covenants

The risk lies in the possibility that executed financing contracts contain clauses that provide for the right of the lender to request early repayment of the loan when certain events occur, thus generating a potential liquidity risk.

The €300 million bonded loan is not secured by collateral and provides, for its duration, a set of clauses, in line with international practice, that impose certain prohibitions.

The main clauses provide for the Group’s commitment to equal treatment of debt issued with respect to its other unsecured debts ( pari passu ) and commitment towards the bondholders not to provide to other subsequent lenders of the same status better guarantees and/or privileges on its assets (negative pledge).

The “project loan” taken out by Lomellina Energia with a pool of banks, with Intesa San Paolo lead bank, is secured by collateral on the company’s real estate and equipment. At the end of June 2015, the company obtained specific “waiver” from lending institutions, for the renegotiation of the project loan, with the following effects:

- the postponement of the deadline from 30 th June 2022 to 31 st December 2024;

- the possibility of making new investments;

- the definition of a new amortisation plan with a reduction of €6.7 million of the short-term instalment;

- the introduction of a new model for the calculation of covenants, as early as 30 th June 2015;

The calculation of covenants according to the new model determines the fulfilment of the obligations therein.

The two current loans taken out by Linea Energia with Unicredit are secured by collateral on the company’s real estate and facilities. The loan regarding the hydroelectric power plants requires that for 2015 the ratio between the principal amount of the loan paid and not yet repaid and the treasury shares (including subordinated shareholder loans), calculated on the equity data of the company, be equal to or greater than 2.80. As at 30 th June 2015, this obligation was fulfilled.

The loan granted by the EIB (European investment bank) is partly secured by a bank guarantee issued by SACE and establishes, for the entire duration of the contract, full compliance with the following financial covenants, calculated on consolidated figures:

• NFP to EBITDA <4.50

• EBITDA to Net Financial Expenses >4.50

• NFP to Equity <1.75

All the above constraints and covenants were complied with as shown in the half-year consolidated financial statements closed on 30 th June 2015.

Commodity price risk and use of financial instruments

Some companies in the Group are exposed to the commodity price risk, namely the market risk linked to changes in the price of electricity due to transactions in the stock exchange market. To hedge this risk, the Group stipulates derivative contracts. On the market the Group operates using the services provided by third parties, which carry out procurement and trading transactions. A specific Risk Policy is also put in place to oversee trading activities, which involves the establishment of a dedicated Risk Committee and the appointment of a Risk Manager at Linea Più. The dynamic management adopted involves the use of spot, future and OTC contracts. Third parties’ activity is constantly monitored by the company’s organization through a complex reporting system set up of this purpose. Contracts with third parties involves a risk limit (stop-loss) for procurement and trading transactions.

LEGAL CLAIMS

At a Group level the following claims are in progress:

- Following the audit performed by the Electricity and Gas Authority in July 2012 at the Parona premises, the Authority issued a resolution, in which the actual amount of net incentivized energy was contested. The Company challenged this resolution at the Lombardy Regional Administrative Court and lodged an appeal that was rejected in April 2014. Despite a further appeal was filed with the Council of State, the decision issued in December 2014 confirmed the first-instance judgement.

Given the above resolution, in December 2013, the Electricity Equalisation Fund (CCSE) sent the Company formal notice to pay the claimed incentive received by the end of January 2014. The Company totally contested the decision issued by the Lombardy Regional Administrative Court decision. The next hearing to discuss the merits is scheduled for October 2015.

Given the fact that the main judicial case was completed, and that for the determination of the exact amount owed is still at the first-instance stage, the Company recognised €3.5 million to the risk provision, according to the requests made by the Electricity Equalisation Fund.

- In November 2011, Gestore Servizi Energetici S.p.A.(GSE) sent Lomellina Energia S.r.l. two communications concerning the two production lines, informing it, with no justification, that it had replaced the criterion for calculating discounted energy for the purpose of awarding green certificates, as provided by law, agreed on previously with the Company and applied as from 2007 production, with due issuance, collection and simultaneous payment of the green certificates requested by Lomellina Energia. This change in the criterion, applied prudentially by the Company as from 2011, led to a reduction in the number of green certificates due to it. Even the duration of the incentives for the non-biodegradable portion of line 1 waste declared by GSE in the aforesaid communications was shorter than that prescribed by law. In order to protect its rights, Lomellina Energia lodged an appeal with the Lazio Regional Administrative Court against GSE’s measures, the aim being to have them declared cancelled and receive payment of amounts due. The cautionary appeal for suspension of the measures was rejected by the Regional Administrative Court. Following the appeal against these orders, the Council of State referred the matter to the Lazio Regional Administrative Court to decide on the merits, and a hearing was held in February 2013. On 15 th April 2013 the Lazio Regional Administrative Court published its judgements on the two production lines, as follows:

• for line 1, the Court upheld Lomellina Energia’s right to receive incentives for the portion of production from non-biodegradable waste up until 19th January 2014;

• for line 2, the Court rejected the company’s requests.

Lomellina Energia sought the opinion of an independent consultant hired to defend it, who sustained that, despite the Court’s unfavourable decisions, the company’s well-founded reasons suggested that the assessment of the risk of losing the case could be considered “possible”. Therefore, like the previous year, the company made no allocation to the provision for contingencies and initiated proceedings for immediate recourse to the Council of State, since, as suggested by the legal advisor, there existed well-founded reasons for protecting the right of Lomellina Energia. Pending final settlement of the claim, the company has taken since 2011 the precaution of entering in the financial statements only green certificates relating to excess electricity fed into the grid from line 2. - Linea Gestioni joined prosecution as co-plaintiff in proceedings promoted before the Council of State by A.T.I. Aprica S.p.A. and Bi-Co Due S.r.l. against the judgements issued by the Brescian section of the Regional Administrative Court on final awarding of urban hygiene services in its favour by the municipalities of Rovato and Gambara, pending establishment of the date of the hearing on the merits. - By judgement issued in 2014, the Catania Regional Administrative Court (TAR) rejected the main appeal and the one regarding additional grounds to offset expenses, which was lodged by Greenambiente. After examining the case and the possibility of appealing against the judgement issued by the Catania TAR by 4 th June 2015, Greenambiente did not consider it appropriate to lodge an appeal against said ruling. Since that date, the tariff established by decree no. 888/2011 has become certain at €64.68, comprising €2 environmental contribution to be paid to the city of Augusta. The effects of this decision on the financial situation as at 30 th June 2015 are as follows: - the reversal of the amount set aside for invoices to be issued between December 2011 and 30 th June 2014, with a negative impact of €1,120 thousand on the income statement, covered by reserves linked to equity; - the classification among payables to the city of Augusta of the allowance already set aside in a specific provision for contingencies in 2014, relating to the environmental contribution to pay (€2/tonne), for the total amount of €1,513 thousand, without any impact on the income statement. After consultation with the solicitor entrusted with handling the case, on the basis of current regulations on default interests and in compliance with the repayment covenants and plans entered into with local government agencies, the company considered it could reasonably determine the balance of interests accrued on late payments. The amount so determined was recognized at the nominal value and measured at the estimated realizable value for €1,143 thousand.

The maximum possible residual risk for the Group amounts to €2,738 thousand for potential liabilities relating to the retrospective application of the new tariff set out by said decree, and is entirely covered by equity reserves.

TRANSACTIONS WITH RELATED PARTIES

Transactions between LGH S.p.A. and its related parties, subsidiaries and associates, are detailed in the notes to the consolidated financial statements (Explanatory Note 37).

OTHER INFORMATION AND SIGNIFICANT EVENTS

OCCURRING AFTER 30 TH JUNE 2015

Pursuant to art. 2428, subsections 3 and 4, of the Italian Civil Code, the Parent Company did not hold nor purchase or sell any shares or stakes in controlling companies through trust companies or nominees during the period.

As at the date of preparation of this report, the following events of significance have occurred since 30 th June 2015:

- extraordinary operations relating to the re-organisation of Group’s sectors have become effective, which involved the transfer of all electricity selling activities to Linea Più; urban hygiene activities to Linea Gestioni S.r.l. and district heating plant management activities to Linea Reti e Impianti S.r.l. (former AEM Gestioni S.r.l.). These transfers will have no impact at the consolidation level.

- the acquisition of the business unit related to the sale of gas from Alma Energy Trading S.p.A.;

- the acquisition of 100% of SCCA S.r.l., company dealing with district heating management in the city of Crema, by taking over ownership from Scs Servizi Locali S.r.l. and Cofely Reti Calore S.r.l.;

- the acquisition of full ownership of the company Franciacorta Rinnovabili S.r.l. following the purchase of 55% of the share capital from Paradello Ambiente S.r.l.

AUDIT OF THE CONSOLIDATED HALF -YEAR FINANCIAL

STATEMENTS

The Group’s consolidated half-year financial statements is subject to a limited review by independent auditors Reconta Ernst & Young S.p.A.

Cremona, 8 th September 2015

8. THE BOARD OF DIRECTORS

Chairman Alessandro Conter

Deputy Chairman Massimo Mustarelli

Chief Executive Officer Franco Mazzini

Boar Members Giovanni Soffiantini

Salvatore Nupieri

III. CONSOLIDATED FINANCIAL STATEMENTS

FINANCIAL STATEMENTS

(€,000)

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

related related ASSETS Notes parties 30/06/2015 parties 31/12/14 Non-current assets Intangible assets 1 206,895 208,596 Goodwill 2 85,210 85,014 Property, plant and equipment 3 331,476 332,846 Real estate investments 0 0 Investments in associates 4 9,862 9,862 Other equity investments 4 413 493 Deferred tax assets 7 34,139 35,894 Non-current financial assets 5 18,290 34,871 19,885 37,681 Other non-current assets 6 8,339 2,623 Total non-current assets 711,205 713,009

Current assets Inventories 8 23,396 28,062 Trade receivables 9 49,981 172,356 30,162 195,353 Derivative financial instruments - assets 10 1,545 2,891 Other current financial assets 11 5,784 9,733 4,190 7,904 Other current assets 12 33,183 32,458 Cash and short-term deposits 13 128,943 114,290 Total current assets 369,156 380,958

Assets held for sale 0 0

TOTAL ASSETS 1,080,361 1,093,967

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

SHAREHOLDERS’ EQUITY AND Notes correlated 30/06/2015 correlated 31/12/14 LIABILITIES parties parties Shareholders’ equity Share capital 189,494 189,494 Share premium reserve 0 0 Other reserves 7,846 8,461 Retained earnings -1,997 1,247 Net income for the period 2,292 1,549 Group shareholders’ equity 197,636 200,751 Minority interests 28,497 31,396 Total shareholders’ equity 14 226,133 232,147

Non-current liabilities Non-current loans and financial liabilities 16 454,253 450,110 Provisions for contingencies and charges 20 68,844 69,910 Provision for employee leaving indemnities 17-18-19 18,903 19,997 Derivatives-related liabilities 21 6,708 8,862 Other non-current financial liabilities 22 0 0 Other non-current liabilities 23 44,287 44,993 Deferred tax liabilities 7 31,094 31,705 Total non-current liabilities 624,089 625,577

Current liabilities Trade payables 24 23,787 120,726 17,105 156,547 Current loans and financial liabilities 15 54,840 51,356 Other current financial liabilities 26 0 5,000 Other current liabilities 25 49,777 22,640 Current tax liabilities 27 4,796 700 Total current liabilities 230,139 236,243

Liabilities held for sale 0 0

Total liabilities 854,228 861,820 TOTAL SHAREHOLDERS’ EQUITY 1,080,361 1,093,967 AND LIABILITIES

*restated 1/1 - 1/1 - 1/1 - INCOME STATEMENT Notes correlated correlated parties 30/06/2015 parties 30/06/2014 30/06/2014

Revenues from sales 28 30,415 276,486 39,461 307,965 307,965 Other revenues and gains 29 7,388 9,253 9,512 Total net revenues 283,874 317,218 317,477

Cost for raw materials and services 30 -8,907 -210,225 8,753 -234,438 -234,697 Personnel expenses 31 -34,150 -34,094 -34,094 Other operating expenses 32 -2,931 -3,166 -3,166 Other net income (expenses) 33 -898 -565 -1,303 Gross operating margin (EBITDA) 35,670 44,956 44,218

Amortisation, depreciation and write- 34 -23,944 -31,393 -30,709 down Operating result (EBIT) 11,726 13,562 13,508

Net financial income (expenses) 35 462 -7,624 -10,149 -10,149 Portion pertaining to associates’ results 0 177 177 Gains (losses) on equity investments 36 -81 0 0 Income before taxes 4,021 3,590 3,536

Income tax 7 -4,036 -3,438 -3,421 Income from continuing operations -15 152 115

Return on assets being divested 0 0 0

Net income for the period -15 152 115 of which: Attributable to the group 2,291 1,519 1,482 Attributable to minority interests -2,306 -1,367 -1,367 * The 2014 figures were also restated. See paragraph 2 of this Note.

COMPREHENSIVE INCOME Notes 1/1 - 31/12/14 1/1 - 30/06/2014 1/1 - 30/06/2014 STATEMENT *restated Income for the period (A) -15 152 115

Other comprehensive income statement components to be reclassified in a separate income statement:

Change in the cash flow hedge reserve 1,173 -1,520 -1,520 Tax impact on the cash flow hedge -296 480 480 reserve

Other comprehensive income statement components not to be reclassified in a separate income statement:

Change in IAS 19 reserve 949 -1132 -1132

Tax impact on change in IAS 19 reserve -177 368 368

Other comprehensive income statement 1,649 -1,804 1,385 components

Total comprehensive income for the 1,634 -1,652 4,973 period of which: Attributable to the group 3,651 -220 -257 Attributable to minority interest -2,017 -1,432 -1,432

* The 2014 figures were also restated. See paragraph 2 of this Note.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY as at 30 th June 2014 and 30 th June 2015

Minority Profit Minority Group’s interest MINORITY Share Legal Statutory FTA CFH IAS 19 Other (losses) GROUP’S interest TOTAL result for capital INTEREST capital reserve reserves reserve reserve reserve reserves brought EQUITY result of EQUITY the year and EQUITY forward the year reserves Balance as at 31/12/2013* restated 189,494 2,279 1,851 4,869 -1,362 -1,254 5,141 3,272 5,803 210,093 38,297 -2,675 35,622 245,715

Share capital increases 0 0 0 Allocation of previous years’ income 440 369 -809 0 2,675 -2,675 0 0 Distribution of dividends -2,546 -5,454 -8,000 -1,206 -1,206 -9,206 Change in the scope of consolidation 0 0 0 Other changes -334 -334 -3 -3 -337 2014 half-year operating result 1,519 1,519 -1,367 -1,367 152 Other comprehensive income/(losses) -732 -1,009 -1,741 -65 -65 -1,806 Total operating result -732 -1,009 1,519 -222 -65 -1,367 -1,432 -1,654 Balance as at 30/06/2014 189,494 2,719 1,851 4,869 -2,094 -2,263 5,510 392 1,059 201,537 39,698 -6,717 32,981 234,518

Profit Minority Minority Group’s MINORITY Share Legal Statutory FTA CFH IAS 19 Other (losses) GROUP’S interest interest TOTAL result for INTEREST capital reserve reserves reserve reserve reserve reserves brought EQUITY capital and result of EQUITY the year EQUITY forward reserves the year Balance as at 31/12/2014 189,494 2,719 2,284 4,869 -2,407 -3,014 5,054 202 1,549 200,750 36,606 -5,209 31,397 232,147

Share capital increases 0 0 0 Allocation of previous years’ 353 4 1,192 -1,549 0 -5,209 5,209 0 0 income Distribution of dividends -2,260 -4,440 -6,700 -412 -412 -7,112 Change in the scope of consolidation and other -1,141 -1,199 11 -75 2,340 -64 -472 -472 -536 changes 2015 half-year operating 2,291 2,291 -2,306 -2,306 -15 result Other comprehensive 615 744 1,359 290 290 1,649 income/(losses) Total operating result 0 615 744 0 0 2,291 3,650 290 -2,306 -2,016 1,634 Balance as at 30/06/2015 189,494 3,072 2,288 3,728 -2,991 -2,259 2,719 -706 2,291 197,636 30,803 -2,306 28,497 226,133 *The €536 thousand difference relates to the portion of capital paid to third parties for 0.5% pertaining to Linea Distribuzione S.r.l., and the other movements mainly relate to the reclassification from profit carried over to CFH reserve of pre-2015 effects on the derivative with Banca Intesa di Lomellina for exceeding the efficiency test.

CONSOLIDATED STATEMENTS OF CASH FLOWS 1st half 2015 1st half 2014* INCOME FROM CONTINUING OPERATIONS, AFTER TAX -15 152 Income from divested assets, after tax 0 0 Adjustments for reconciling net income with financial cash flows generated from operating activities: Depreciation and impairment of tangible assets 14,971 21,125 Amortisation and impairment of intangible assets 5,931 6,129 Working capital impairment 2,74 3,401 Net change in provisions for severance indemnity -1,094 1,686 Net change in provisions for risk and charges -767 494 Net change in deferred tax assets and liabilities 844 -3,094 Differences in current assets and liabilities: (Increase)/decrease in inventories 4,665 -688 (Increase)/decrease in trade receivables 20,257 55,373 (Increase)/decrease in direct tax assets (IRES and IRAP) 3,254 1,893 (Increase)/decrease in indirect tax assets (VAT and excise duties) 2,962 1,25 (Increase)/decrease in other non-financial assets -12,655 -1,454 Increase/(decrease) in trade payables -35,821 -67,994 Increase/(decrease) in direct tax assets (IRES and IRAP) 4,097 4,543 (Increase)/decrease in indirect tax assets (VAT and excise duties) 13,006 10,179 Increase/(decrease) in other non-financial liabilities 13,425 3,991 NET CASH FLOWS FROM OPERATING ACTIVITIES 35,801 36,988 Investment activities Acquisition of tangible assets -13,601 -10,444 Net investments in intangible assets -4,426 -5,134 Net investments/divestments in financial assets 81 5 NET CASH FLOWS FROM INVESTIMENT ACTIVITIES -17.947 -15.574 Financing activities (Increase)/decrease in financial receivables (including derivatives assets) 2,326 272 Increase/(decrease) of financial liabilities (including derivatives liabilities) 472 929 Dividends paid -7,112 -9,206 Other differences in equity and minority interests 1,113 -1,919 CASH FLOWS FROM FUNDING ACTIVITIES -3,201 -9,923 NET CHANGE IN CASH AND CASH EQUIVALENTS 14,654 11,491 Net cash and cash equivalents at the beginning of the period 114,29 66,464 Net cash and cash equivalents at end of period 128,944 77,955

ADDITIONAL INFORMATION 1st half 2015 1st half 2014* Interest received 630 1,479 Interest paid 3,008 3,673 Income tax paid 1,251 1,727 Dividends paid 1,272 3,378

* The 2014 figures were also restated. See paragraph 2 of this Note.

NOTES TO THE CONSOLIDATED HALF -YEAR

FINANCIAL STATEMENTS AS AT 30/06/2015

ACCOUNTING POLICY

1. GENERAL INFORMATION

Linea Group Holding S.p.A. is a multi-utility joint-stock company incorporated and domiciled in Italy.

The consolidated financial statements of Linea Group Holding S.p.A. (referred to herein as “the Company”) for the first half of 2015 was authorised by the Board of Directors on 8 th September 2015.

The Group’s operations are detailed in the directors’ business report.

2. BASIS OF PRESENTATION AND ACCOUNTING PRINCIPLES

The consolidated half-year financial statements as at 30 th June 2015 were drawn up in accordance with IAS 34 – Interim Financial Reporting. The consolidated half-year financial statements do not provide all the information required in drawing up the annual consolidated financial statements. It is therefore necessary to read the consolidated half-year financial statements in conjunction with the annual consolidated financial statements as at 31 st December 2014. The consolidated half-year financial statements as at 30 th June 2015 were drawn up on a going concern basis. The Group considers that, despite the current economic and financial scenario, there exists no uncertainty regarding the going concern, due, among other things, to measures already taken to face managerial problems and in consideration of the expected evolution of the regulatory and competitive scenario in the coming months. The acronym IFRS covers, in addition to all “International Financial Reporting Standards” (IFRS), all “International Accounting Standards” (IAS), and all the interpretations of the International Financial Reporting Interpretations Committee (IFRIC), formerly the Standing Interpretation Committee (SIC), implemented by the European Union on the date of approval of this consolidated half-year financial statements by the parent company’s board of directors and containing all the related EU regulations published up to that date.

The accounting principles adopted are consistent with those used in drawing up the financial statements as at 31 st December 2014, with the inclusion of the next paragraph entitled “Accounting principles, amendments and interpretations effective as from 1 st January 2015”. The consolidated half-year financial statements of the LGH Group, as approved by the Board of Directors of Linea Group Holding S.p.A. at the meeting held on 8th September 2015, were prepared on the basis of the accounting records updated as at 30 th June 2015, and comprises the directors’ report on the Group’s business trend and is subject to a limited review by independent auditors Reconta Ernst & Young S.p.A.

In relation to the consolidated financial statements, the following is highlighted:

- Consolidated Statements and Financial Position. The Group presents assets and liabilities divided into current and non-current, according to paragraph 60 et seq. of “IAS 1 revised ”;

- Consolidated Income Statement. The Group provides a classification of expenses by nature, which is deemed most representative of the Group’s mainly commercial and distribution activities and the income statement is thus named “Consolidated Statements of Comprehensive Income. The Group decided to present it in two statements: one containing the traditional income statement components and the result for the period, the other containing the same result for the period and a detailed list of the other components that had been previously reflected only in the Statements of changes in shareholders’ equity.

It should also be noted that it was decided to enter the item “Share of operating result of associates” after “Operating result” to better represent the contribution of the core businesses to the Group overall result.

- Consolidated Statements of Cash Flows. This was prepared using the indirect method, by adjusting the operating profit of non-monetary items, as permitted by IAS 7.

- Consolidated Statements of Changes in Shareholders’ Equity. It presents the opening and closing balance figures of each shareholders’ equity component, by reconciling with the operating profit or loss any transactions with the shareholders and other changes in shareholders’ equity.

Following the restatement of the consolidated financial statements as at 31 st December 2014, to which reference should be made for further details, the economic figures as at 30 th June 2014 were also restated to reflect the adjustments made, as shown in the table below.

30 th June 2014 30 th June 2014 Restatement restated Revenues 317,477 -259 317,218 Operating costs -273,260 997 -272,263 Gross operating margin 44,218 738 44,956 Amortisation and depreciation -30,709 -684 -31,393 Operating result 13,508 54 13,562 Financial expenses -9,972 0 -9,972 Income before tax 3,536 54 3,590 Taxes -3,421 -17 -3,438 Net result for the period 115 37 152

3. AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS

Accounting policies, changes and interpretations applicable to the Group effective for this financial year

Effective from 1 st January 2015, some additions were applied resulting from specific paragraphs of the international accounting standards already adopted by the Group in previous years, none of which produced a material effect on the financial statements of the Group.

The main changes are detailed below.

• On 12 th December 2013 IASB issued a series of amendments to some accounting principles, which can be summarised as follows: a) IFRS 2 – Share-based Payments : the amendment clarifies the definition of “vesting condition” and separately defines the “performance conditions” and the “service conditions”; b) IFRS 3 – Business Combinations : the amendment clarifies that an obligation to pay a consideration in a business combination that meets the requirements to be defined as a financial instrument is classified in the balance sheet as a financial liability according to the provisions of IAS 32 – Financial Instruments: Presentation - and measured at fair value with recognition in the income statement. It also clarifies that the principle in question does not apply to joint ventures and joint agreement regulated by IFRS 11;

c) IFRS 8 – Operating Segments: the principle has been amended following the introduction of a new disclosure obligation, requiring a brief description of the operating segments that have been combined and the economic indicators that have been used for said combination; d) IFRS 13 – Fair Value Measurement : the amendment clarifies that the exemption that allows an entity to measure groups of financial assets and liabilities at fair value applies to all contracts, including non-financial ones; e) IAS 16 – Property, Plant and Equipment – and IAS 38 – Intangible Assets: both principles are amended to clarify how the recoverable value and useful life are processed in the event that the entity makes a revaluation; f) IAS 24 – Disclosure of Related Party Transactions: the principle is amended to include, as a related party, an entity that provides services related to management control (the so-called management company); g) IAS 40 – Investment Property: the amendment relates to the interaction between the provisions of IFRS 3 – Business Combinations – and those of this principle in cases where the acquisition of a property can be identified as a business combination.

• IFRIC 21 – Tax: this interpretation of IAS 37 – Provisions, Contingent Liabilities and Contingent Assets: was issued on 20 th May 2013 and concerns the recording of taxes levied by government that do not fall within the scope of IAS 12 – Income Taxes. IAS 37 – Provisions, Contingent Liabilities and Contingent Assets - established the criteria for the recognition of a liability, one of which is the presence of an obligation for the entity as a result of a past event.

The interpretation in question clarifies that the obligation that causes a tax liability is the activity described in the legislation of the activity that generates payment of the tax.

Accounting policies, amendments and interpretations not yet endorsed by the European Union

On the date of these financial statements, the following standards, amendments and interpretations were not applied, since the relevant bodies of the European Union had not yet completed the approval process:

• IFRS 9 – Financial Instruments: this principle reflects the first part of a phased process that is intended to entirely replace IAS 39 – Financial Instruments: Recognition and Measurement , and introduces new criteria for the classification and measurement of financial assets and liabilities. The main changes introduced by IFRS 9 can be summarised as follows: financial assets can be classified into two categories – at “fair value” or at “amortised cost”. The categories of “loans and receivables”, financial assets held of sale and financial assets “held to maturity” disappear. The classification within the two categories is based on the entity’s business model and on the characteristics of the cash flows generated by the assets. Financial assets are measured at the amortised cost if both the following requirements are met: the entity’s business model envisages that financial

assets are held to collect the relevant cash flows (thus, substantially, not to make trading profits) and the characteristics of the cash flows generated by the asset only correspond to pay of principal and interest. Conversely, financial assets must be measured at fair value. The accounting rules for the embedded derivatives have been simplified: separate accounting of embedded derivatives and the financial assets hosting it is no longer required.

All equity instruments, either listed or unlisted, must be measured at fair value (IAS 39 stated instead that, if the fair value cannot be reliably determined, the unlisted equity instruments be measured at cost).

The entity has the option to present in shareholders’ equity any changes in the fair value of equity instruments that are not held for trading, for which this option is forbidden. This designation, which is permitted at the time of initial recognition, can be adopted for individual securities and is irrevocable. If this option is exercised, any changes in fair value of such instruments can never be reclassified from shareholders’ equity to income statement. Dividends instead continue to be recognised in the income statement.

IFRS 9 does not allow for reclassifications between the two categories of financial assets, except in rare cases where there is a change in the entity’s business model. In this case, the effects of the reclassification are applied prospectively.

The disclosure required in the notes has been adapted to the classification and measurement rules introduced by IFRS 9.

On 19 th November 2013, the IASB issued an amendment to the principle in question, which mainly deals with the following aspects:

(i) a substantial review of the so-called “Hedge Accounting”, which will enable companies to better reflect their risk management policy in the financial statements;

(ii) the change to the accounting treatment of liabilities measured at fair value is permitted: in particular, the effects of a deterioration in the credit risk of a company will no longer be recognised in the income statement;

(iii) the effective date of the principle in question, which was originally set on 1 st January 2015, has been adjourned.

In July 2014, a partial amendment to this principle was published. It envisaged, in the measurement of financial instrument classes, the introduction of a model based on the expected credit loss instead of an impairment model based on realised losses. The effective date is 1 st January 2018;

• IFRS 10 – Consolidated Financial Statements: the amendment to this principle, which was issued on 18 th December 2014, relates to the exemption from the presentation of the consolidated financial statements when parent companies hold a stake in investment entities that evaluate their subsidiaries at fair value. The effective date is 1 st January 2016;

• IFRS 11 – Joint Arrangements: issued by the IASB in May 2014, the amendment to this principle contains guidelines regarding the accounting method to adopt for the acquisition of interests in joint arrangements carrying out operations that come under the definition of “business”, as provided by IFRS 3 – Business Combinations . The amendment will be effective beginning 1 st January 2016. On 18 th December 2014, an amendment was issued to the principle in question on the exemption from the presentation of consolidated financial statements if the parent company has an interest in investment entities that measure their investment in subsidiaries at fair value;

• IFRS 14 –Referral Deferral Accounts: the new principle issued by the IASB in January 2014 is intended to allow entities to continue applying most of their existing policies for regulatory deferral account balances upon first-time adoption of IAS/IFRS. The effective date is 1st January 2016;

• IFRS 15 – Revenue from Contracts with Customers” : the purpose of this standard issued by the IASB on 28 th May 2014 is to establish the principles that an entity will apply to report useful information to users of financial statements about the nature, amount and uncertainty of revenue and cash flows arising from a contract with a customer. This standard applies when all of the following requirements are met:

(i) the parties have approved the contract and are committed to perform their respective obligations;

(ii) the entity can identify each party’s rights regarding the goods and services to be transferred and the payment terms;

(iii) the contract has commercial substance (i.e. the risk, timing or amount of the entity’s future cash flows are expected to change as a result of the contract);

(iv) it is probable that the entity will collect the consideration to which it will be entitled under the contract.

The new standard, which will replace IAS 18 – Revenue – and IAS 11 – Construction Contracts – is effective for annual periods beginning on or after 1 st January 2018;

• IAS 1 – Presentation of Financial Statements : issued by IASB on 18 th December 2014 and effective on 1 st January 2016, the amendment to this standard makes clear that non-significant disclosures are not required even when they are explicitly requested by a specific IFRS. In connection with the notes to the financial statements, there is no specific order and the entity may also decide to present the notes for each item, commenting the contents and changes occurring during the period and providing a description of the accounting policy applied for each item. The amendment also intended to provide clarification on the aggregation or disaggregation of items when their amount is relevant or “material”. In particular, according to the amended standard the entity is not required to aggregate information of balance sheet items with different characteristics or disaggregate ones that make information disclosure and reading difficult. With reference to the statement of financial position of an entity, the amendment clarifies the need to disaggregate some disclosures included in paragraphs 54 (Financial position) and 82 (Income Statement) of IAS 1;

• Annual amendments to IFRS 2012-2014: on 25 th September 2014, IASB published a number of amendments to certain international accounting standards, effective on 1 st January 2016.

The amendments concerned the following standards:

(i) IFRS 5 – Non-Current Assets Held for Sale and Discontinued Operations

(ii) IFRS 7 – Financial Instruments: Disclosures

(iii) IAS 19 – Employee Benefits ;

(iv) IAS 34 – Interim Financial Reporting

The amendment to the first standard states that an entity is not required to restate the figures in the financial statements when an asset or a group of assets available for sale is reclassified as “held for sale”, or vice versa.

The amendment to IFRS 7 states that if an entity transfers a financial asset on such terms as to allow the “de- recognition” of the asset, the entity is required to disclose the extent of its residual involvement in the asset so transferred where it has signed service contracts showing its interest in the future performance of the transferred financial asset.

The proposed amendment to IAS 19 makes it clear that, in determining the discount rate of liabilities arising following the termination of the employment relationship, the currency in which they are denominated is more important than the country in which they arise.

The proposed amendment to IAS 34 requires disclosure of cross-references between the figures included in the interim financial statements and the relevant information;

• IAS 16 – Property, Plant and Equipment – and IAS 38 – Intangible Assets : the amendment to these standards, which was issued by IASB in May 2014, makes it clear that a revenue-based depreciation process cannot be applied to items of property, plant and equipment, since this method is based on factors (e.g. volumes and selling prices) that do not represent the actual consumption of the economic benefits embodied in the asset. This ban was also included in IAS 38, according to which intangible assets can be amortised on a revenue basis only if it can be proven that the revenue and the consumption of the economic benefits embodied in the intangible asset are strictly correlated;

• IAS 27 Revised – Separate Financial Statements : the amendment to this standard, which was issued by IASB on 12 th August 2014 and is effective from 1 st January 2016, gives an entity the option to use the equity method to account for investments in subsidiaries, joint ventures and associates in separate financial statements.

• IAS 28 – Investments in Associates and Joint Ventures” : on 18th December 2014 this standard was amended in respect of interests held in investment entity associates or joint ventures. Such investments can be measured either at fair value or using the equity method. Effective date on 1 st January 2016.

4. CONSOLIDATION PRINCIPLES AND METHOD

The consolidated half-year financial statements comprise the financial statements of Linea Group holding S.p.A. and its subsidiaries as at 30 th June 2015. The accounts of the subsidiaries used for the consolidation have been drawn up using the same accounting principles as those adopted by the parent company.

In preparing the consolidated financial statements, assets and liabilities, revenues and expenses of the consolidated companies were taken as a whole line by line, attributing to the minority interests, in specific items under the balance sheet and income statements, the portion of equity and operating income pertaining to each of them. The carrying amount of the investment in each subsidiary is written off against the corresponding portion of equity, including any adjustments to the fair value of the related assets and liabilities on the acquisition date. Any remaining difference is allocated to difference on consolidation.

The portions of equity and operating income attributable to minority interests are shown separately in the consolidated balance sheet and income statements, respectively.

A list of group companies as at 30 th June 2015 is given below.

Share capital % of direct % of indirect Denomination Headquarters (in K€) holding holding

Linea Group Holding S.p.A. Cremona 189,494 Parent company Subsidiaries Linea Più S.p.A. Pavia 5,000 100 STEAM Srl Rho (MI) 1,010 99.61 Linea Ambiente Srl Rovato (CR) 3,000 100 Linea Energia S.p.A. Rovato (BS) 3,969 100 MF Waste Srl Rovato (BS) 750 51 Lomellina Energia Srl Parona (PV) 160 40.8 Rovato Energia Scarl Rovato (BS) 15 95 ASTEM Gestioni Srl Lodi 1,290 100 AEM Gestioni Srl Cremona 11,649 100 Linea Gestioni Srl Crema (CR) 5,000 100 Linea Distribuzione Srl Lodi 23,480 90.85 Linea Com S.r.l. Cremona 5,833 96.17 Greenambiente S.r.l. Priolo Gargallo (SR) 50 80 Associates Bresciana Infrastr. Gas S.r.l.(*) Roncadelle (BS) 100 50

Blugas S.r.l. in liquidazione (*) Mantua 10 48.22

Blugas Infrastrutture Srl (*) Cremona 14,300 27.51

Ecofert Srl (*) San Gervasio (BS) 100 48

ASM Codogno Srl (*) Codogno (LO) 1,898 49

Franciacorta Rinnovabili Srl (*) Rodengo Saiano (BS) 100 45

(*) companies measured using the equity method

It should be noted that in the first half of 2015 the scope of consolidation changed following the acquisition of 0.5% share of the subsidiary Linea Distribuzione S.r.l. from the minority shareholder ASM Mortara S.r.l., which involved the payment of €196 thousand share premium, which was charged to consolidation difference, as better explained further on.

5. DISCRETIONAL ASSESSMENTS AND SIGNIFICANT ACCOUNTING ESTIMATES

DISCRETIONAL ASSESSMENTS

In applying the Group’s accounting policies, the directors made decisions based on the following discretional assessments (excluding those that entail estimates) with a significant effect on the figures recognised in the financial statements.

ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with IFRS requires the management to make estimates and assumptions that have an impact on the values of assets and liabilities and on the disclosure of assets and liabilities on the date of reporting. The actual results might differ from such estimates, which are used to recognise some types of income, namely accrued consumption, amortisation and depreciation, impairment of receivables and inventories, recovery in investment values, employee benefits, taxes and provisions for contingencies and charges.

The estimates of the provisions for bad debts and inventory impairments are based on the Group’s expected losses. The perpetuation and worsening of the current economic and financial situation could further deteriorate the financial condition of the Group’s debtors compared to the deterioration that had been taken into account in these financial statements.

Estimates and assumptions are reviewed periodically and the effects of each change are reflected in the income statement in the period in which the estimate is revised. An analysis is also made to determine whether the revision affects only that period or any subsequent periods, the current or in subsequent years.

IMPAIRMENT LOSS ON GOODWILL

Goodwill is tested annually for possible impairment and when circumstances indicate the possibility of a reduction in its recoverable amount. This test requires an estimate of the value in use of the cash-generating unit to which the goodwill is attributed, which in turn is based on an estimate of the expected discounted cash flows from the unit, based on the current Industrial Plan, and its discounting, based on an appropriate discount rate. As at 30 th June 2015, the goodwill carrying amount is €85,210 thousand, with an increase of €196 thousand on 2014, as a result of the acquisition from third parties of 0.5% share in Linea Distribuzione S.r.l.

AMORTISATION AND DEPRECIATION (FOR ASSETS WITH DEFINITE USEFUL LIFE )

The residual useful life of assets is reviewed periodically for the purpose of determining amortisation and depreciation allowances.

6. BUSINESS COMBINATIONS

The Group did not make any business combinations during the first half of 2015.

EXPLANATORY NOTES

1. INTANGIBLE ASSETS

The two tables below summarise the changes in intangible assets occurred between 1 st January and 30 th June 2015.

Amortisation Transfers, Net value Net and Impairment reclass. and Net value Type of asset 31/12/2014 increase/decrease* impairment effect other 30/06/2015 (net of uses) changes Patents and intellectual 91 14 -26 0 79 property rights Concessions, licences, trademarks and similar 21,298 12 -1,146 0 20,164 rights Intangible work in 2,703 1,594 0 4,297 progress and advances

Other intangible assets 184,504 2,610 -4,759 0 182,355

Total intangible assets 208,596 4,230 -5,931 0 0 206,895

The item Patents and intellectual property rights includes expenses incurred for the acquisition of software and licences.

The item Concessions, licences, trademarks and similar rights refers to one-time expenses incurred by some group companies for the acquisition of concessions relating to the distribution of natural gas in some municipalities. These expenses are amortised over the contractual term specified in the agreements.

This item also includes costs for the purchase of CIP6 rights applied to the National Transmission Grid Operator on electricity tariffs and in connection with the starting of operation during the year of the second power station at Lomellina Energia S.r.l.

The item Other intangible assets mainly refers to the net carrying amount of assets (€179 million) given in concession to individual group companies by municipalities and public entities operating in the gas distribution and district heating segments.

The residual amount refers to the cost of software applications currently used by the group companies.

Intangible work in progress and advances, amounting to €4,297 thousand, include costs incurred during the preliminary stages of development initiatives in the environmental sector (€2,096 thousand), and the implementation of the new billing system, which is still pending (€1,046 thousand).

2. GOODWILL

Goodwill, amounting to €85,210 thousand, is an intangible asset with indefinite useful life and, therefore, subject to impairment test and not to amortisation.

IAS 36 states that goodwill, being an intangible asset with indefinite useful life, is not amortised but subject to review at least annually (so-called impairment test). Since goodwill does not generate independent cash flows, nor can it be sold independently, IAS 36 requires a review of its recoverable value on a residual basis, by determining the cash flows generated by a series of assets identifying the business complex to which it pertains, i.e. the so-called “Cash Generating Unit” (CGU).

The table below compares the 2015 and 20143 figures.

CGU as at 30/06/2015 as at 31/12/14 Linea Group Holding 3,196 3,196 Linea Più 6,038 6,038 Linea Ambiente 40,529 40,529 Astem Gestioni 1,764 1,764 Linea Gestioni 5,505 5,505 Linea Distribuzione 305 109 Linea Energia 16,581 16,581 Linea Com 1,658 1,658 Greenambiente 9,634 9,634 Total goodwill 85,210 85,014

The change compared to the corresponding value in 2014 relates to the higher value paid for the acquisition from third parties of 0.5% share in Linea Distribuzione, is not attributable to specific assets.

Goodwill underwent an impairment test in accordance with IAS 36 on the closing date of the 2014 financial statements and, since no significant changes have occurred subsequently in the Group business areas, and no signs of impairment have been noticed, it was not deemed necessary to conduct a new test as at 30 th June 2015.

3. PROPERTY , PLANT AND EQUIPMENT

The following two tables summarise the changes in tangible assets between 1 st January and 30 th June 2015:

Amortisation Transfers, Net value Net and Impairment reclass. Net value Type of asset 31/12/2014 increase/decrease* impairment effect and other 30/06/2015 (net of uses) changes Land and buildings 78,717 2,148 -2,060 0 0 78,805 Plant and equipment 223,411 669 -10,057 0 0 214,023 Industrial and commercial 8,095 249 -986 0 0 7,358 equipment Work in progress and advances 10,808 9,525 0 0 20,333 Other tangible assets 11,815 1,010 -1,868 0 0 10,957 Total tangible assets 332,846 13,601 -14,971 0 0 331,476

The value of capitalised costs for internally-developed property, plant and equipment amounted to €3,226 thousand as at 30 th June 2015, and consists of costs for raw materials, semi-finished products and personnel expenses for development activities and/or extraordinary maintenance on networks and equipment owned by the Group.

The net value of assets has followed the dynamics related to new investments in maintenance and development (€13,601 thousand overall) and depreciation (€14,971 thousand overall) of existing assets.

Investments in plant and equipment in the period refer to the purchase of equipment as part of the continuous modernisation process in view of increasing productivity and efficiency.

The increase in work in progress is due to investments, which were made during the first half of they year and are still in progress. Most of these investments will be completed by the end of the year and relate to the electricity distribution networks and plant and the district heating plants of the municipalities of Lodi and Cremona.

No significant sales or disposal of assets occurred in the period.

4. INVESTMENTS IN ASSOCIATES AND OTHER INTERESTS

The table below shows the interests held by the Group in its associates (valued using the equity method) and other minority interests as at 30 th June 2015.

Company name as at 30/06/2015 as at 31/12/14

Blugas S.r.l. in liquidazione 0 0 Blugas Infrastrutture S.p.A. 4,269 4,269 ASM Codogno Srl 3,540 3,540 Ecofert Srl in liquidazione 819 819 Franciacorta Rinnovabili Srl 1,074 1,074 Bresciana Infrastrutture Gas Srl 160 160 Total investments in associates 9,862 9,862 Inn.Tec. Srl 6 86 Camuna Energia Srl 130 130 Casalasca Servizi S.p.A. 121 121 Isfor 2000 S.p.A. 10 10 SABB S.p.A. 82 82 Gestione Multiservice Scarl 61 61 Cassa Padana Scarl 1 1 Crit 2 2 Idroenergia Scarl 0 0 Confidi Toscana Scarl 0 0 Total other investments 413 493 Total investments 10,275 10,355

Below is a summary of condensed financial figures referring to investments in associates, as reported in the last approved consolidated financial statements, i.e. those ended on 31 st December 2014, which were prepared according to Italian accounting principles.

Blugas ASM Franciacorta Blugas Ecofert Bresciana Gas infrastrutture Codogno Rinnovabili S.p.A. S.r.l. Infrastrutture S.r.l S.r.l. S.r.l. Portion of the associate’s balance 48.22% 27.51% 48.00% 49.00% 45.00% 50.00% sheet: Current assets 5,511 6,902 67 6,666 1,902 1,490 Non-current assets 2 24,556 1,829 6,567 8,370 5,447 Current liabilities -4,754 -15,532 -108 -4,537 -7,405 -5,609 Non-current liabilities -487 -857 -82 -1,471 -106 -1120 Net assets 272 15.069 1.706 7.225 2.761 208

Portion of the associate’s 48.22% 27.51% 48.00% 49.00% 45.00% 50.00% revenues and result for the year: Revenues 0 1,670 0 3,875 2706 533 Result for the year -321 35 0 311 6 80

5. NON -CURRENT FINANCIAL ASSETS

As at 30 th June 2015, non-current financial assets amounted to €34,871 thousand (€37,681 thousand in 2014). They mainly consisted of:

• the portion maturing after the following year, amounting to €9,719 thousand (portion maturing after 2014 amounting to €10,953), of shareholders’ loan at Seca S.p.A., originating from the exercise of the put option and the approval of the relevant repayment plan that is scheduled to expire in 2016;

• the portion maturing after the following year, amounting to €13,532 thousand (portion maturing after 2014 amounting to €14,532 thousand), of the loan repayment plan involving LGH and the shareholder AEM S.p.A. for the closing of open trade balances between the two groups. In connection with the loan repayment plan involving Linea Group Holding S.p.A. and the shareholders AEM S.p.A., it should be noted that as at 30 th June 2015, the loan was unchanged at €17,532 thousand compared to 2014 and that, a new agreement is being discussed, as part of a process of economic and financial restructuring at AEM S.p.A., in view of establishing the method for the repayment of the total loan;

• the portion maturing after the following year, amounting to €4,758 thousand) (portion maturing after 2014 amounting to €5,353 thousand) of the financial repayment plan involving LGH and the shareholder AEM S.p.A. for the closing of open trade balances between the two groups;

• the €5,520 thousand advances paid by Linea Più to Sinit in liquidazione S.r.l. intended to support its financial management during the liquidation proceedings, remained unchanged. The expiry is within the following 5 years;

• €1,342 thousand medium to long-term loans granted by some municipalities as part of agreements for the distribution of gas.

6. OTHER NON -CURRENT ASSETS

Receivables and other non-current assets, which came to €8,339 thousand, consist of non-financial receivables falling due at more than 12 months, including €3.9 million advance relating to 100% takeover of SCCA S.r.l. (the company that manages district heating in Crema) and €1.8 million advance paid for the acquisition of the gas sale business unit from Alma Energy Trading S.p.A. The remainder of the item comprises guarantee deposits and down payments of rentals to municipalities for €744 thousand and prepaid expenses for €1,872 thousand.

7. INCOME TAXES

DEFERRED TAXES

The table below shows a breakdown of deferred and prepaid taxes as at 30 th June 2015 and the corresponding economic effects.

Balance sheet as at oci Income statement DESCRIPTION 30/06/2015 31/12/2014 30/06/2015 30/06/2015 30/06/2014 Deferred tax liabilities: -31,094 -31,705 381 2,321 tangible assets -25,883 -27,141 1,258 955 financial assets -460 -158 -302 0 TFR and pension funds -436 -313 -123 356 derivatives, leases and loans -2013 -2105 92 320 provision for taxes, liabilities and charges -1387 -1,137 -250 754 dividends -282 -135 -147 -65 others -633 -486 -147 1 Deferred tax assets 34,139 35,894 -472 -1,283 108 tangible assets 7,105 9,476 -2,371 281 intangible assets and goodwill 261 659 -398 521 TFR and pension funds 1,295 1,464 -177 8 75 derivatives, leases and loans 3,446 3,231 -295 510 172 provisions for contingencies and charges 11,419 11,493 -74 -277 provisions for plant subsidies 6,865 6,891 -26 -255 others 374 598 -224 -1,084 Tax losses to be brought forward 3,374 2,082 1,292 675 TOTAL DEFERRED TAXES -472 -902 2,429

TAXES FOR THE PERIOD

Income taxes for the first half of 2015 and 2014 are divided as shown in the table below.

DESCRIPTION 30/06/2015 30/06/2014

Total current taxes -3,134 -5,867 IRES – Corporate income tax -2,237 -3,908 IRAP – Regional business tax -897 -1,959

Total deferred tax assets/liabilities -902 2,429 (relating to the occurrence and reversal of temporary differences) TOTAL -4,036 -3,438

The €2,733 thousand decrease in current taxes between 30 th June 2015 and 30 th June 2014 is due primarily to a reduction of the taxable base, secondarily to new regulations concerning the calculation of IRAP, which provide for the almost total deductibility of personnel expenses for tax purposes, and marginally to the elimination of the Robin 6.5% tax rate applied to part of the Group income, as provided by law.

In turn, the significant decrease in deferred and prepaid tax assets/liabilities is due to (temporary) recovery of taxable income, consolidation adjustments and the net effect of elimination of the Robin tax.

The reconciliation between the recognised and the theoretical income taxes resulting from the application of the average tax rate to profit before taxation as at 30th June 2015 and the same date in 2014 is given in the table below.

30/06/2015 30/06/2014 IRES/corporate income tax Amounts Rate Amounts Rate Applicable average tax rate 27.50% 35.00% ** Aggregate pre-tax income * 21,567 7,408 Theoretical tax liability 5,931 2,593 Total taxable amount -13,432 3,758 adjustments CURRENT IRES 2,237 10.37% 3,908 52.75% * Following the 2014 transition to the accounting policy in the financial statements of the individual companies, tax adjustments with an impact on consolidated deferred/prepaid taxes turned out into actual tax adjustments, thus determining a significant difference thereof.

30/06/2015 30/06/2014 IRAP/regional income tax Amounts Rate Amounts Rate 4.00% 4.00% Applicable average tax rate 14,510 53,219 Aggregate pre-tax income * Theoretical tax liability 580 2,129 Total taxable amount 7,915 -4,244 adjustments CURRENT IRAP 897 3.90% 1,959 3.68%

8. INVENTORIES

The table below provides a comparison of inventories as at 30 th June 2015 and 31 st December 2014.

30/06/2015 31/12/2014

Raw materials 11,907 11,723 Provision for obsolete raw material -261 -290 inventory Net raw materials 11,646 11,433 Semi-finished products and work in 500 215 progress Net semi-finished products 500 215 Green Certificates 11,250 16,414 Total inventory at the lower of the 23,396 28,062 cost and realisation value

The inventories in the Group are made up almost exclusively of materials purchased for the construction of plants or intended to be used for ordinary maintenance and repairs; those kept available as spare parts for existing plants have been reclassified as tangible assets and are subject to depreciation based on the useful life of the plants.

Inventories relating to work in progress as at 30 th June 2015 were values at the cost incurred up to that date.

The emission allowances and green certificates in possession and held during the year and referring to trading activities are recognised under inventories and accounted for at fair value.

9. TRADE RECEIVABLES

The following table presents a comparison of trade receivables as at 30 th June 2015 and 31 st December 2014.

30/06/2015 31/12/2014 Trade rec. from third parties for invoices issued 159,078 169,202 Trade rec. from third parties for invoices to issue 48,083 61,506 Trade receivables from shareholders 2,428 1,732 Trade receivables from associates 52 243 Total gross trade receivables 209,641 232,683 Provision for bad debts -37,285 -37,330 Total net trade receivables 172,356 195,353

A breakdown of amounts due from customers by maturity (before deduction of the provision for bad debts) is presented in the table below.

30/06/2015 31/12/2014 Receivables falling due 102,215 138,700 Receivables overdue since 180 days 48,570 34,099 Receivables overdue since 360 days 15,894 10,995 Receivables overdue over 360 days 42,962 48,889 Closing balance 209,641 232,683

Changes in the stratification of trade receivables are mainly due to the current difficult economic and financial situation, that makes it difficult for some customers of the Group to pay the sums owed at the agreed due date.

Despite an increase of about €13,4 million in receivables overdue from December 2014 to June 2015, the ageing of receivables and an analysis of the associated risk resulted in an allocation of €2 million for the period.

The table below shows the movements in the provision for bad debts.

30/06/2015 31/12/2014 Opening balance 37,329 34,103 Provisions 2,740 4,790 Utilisations -2,784 -1,564 Closing balance 37,285 37,329

More details on the terms and conditions relating to receivables from related parties are provided in the specific note.

Trade receivables are non-interest bearing and the average maturity is 100 days.

10. DERIVATIVE FINANCIAL INSTRUMENTS - ASSETS

This item represents the positive fair value of derivatives entered into by the Group as at 30 th June 2015 to hedge interest rate and electricity price risks.

31/12/2015 31/12/2014

Derivative hedging contracts: Interest rate swap 72 0 Commodity price swap 0 0 Derivative non-hedging contracts: Interest rate swap 0 0 Commodity price swap 1,473 2,891 Total assets for derivative instruments 1,545 2,891

The table below gives details of the nature and characteristics of derivative contracts in being to hedge interest rate risks.

Derivative to hedge INTEREST RATE-HEDGING DERIVATIVES Unicredit-Linea En. (2)

Date of execution 23/04/2015 Effective date 31/12/2015 Due date 28/03/2024 Instalment intervals Half-yearly Notional reference amount 6,437 Notional amount outstanding at 30/06/2015 6,437 Fixed interest rate (company) 0.576% Floating interest rate (bank) Euribor 3m/360 Mark-to-market value as at 30/06/2015 72

11. OTHER CURRENT FINANCIAL ASSETS

As at 30 th June 2015, current financial assets amount to €9,733 thousand, compared to €7,904 thousand as at 31 st December 2014, and consist of the following:

• €1,907 thousand shareholders’ loan to Seca S.p.A.’s shareholders for the short-term portion of the repayment plan concerning the put option on the shares acquired by LGH in 2010;

• €4,000 thousand relating to the short-term portion of the loan issued in favour of AEM S.p.A.;

• €1,784 thousand relating to the short-term portion of the loan issued in favour of Cogeme S.p.A.;

• €200 thousand relating to the loan issued in favour of the associate Franciacorta Rinnovabili S.r.l.;

• €50 thousand relating to the loan issued in favour of the associate Ecofert S.r.l.;

• €1,792 thousand relating to the short-term portion of the loan issued in favour of Bresciana Gas Infrastrutture S.r.l.

12. OTHER CURRENT ASSETS

The table below compares the figures for other current assets as at 30 th June 2015 and 31 st December 2014.

30/06/2015 31/12/2014 VAT, duties and other indirect taxes 5,752 18,381 IRES AND IRAP receivables 7,663 4,845 Advances and down payments 2,421 1,021 Non-financial receivables from associates 1,143 1,530 Accrued income and prepaid expenses 2,158 2,694 Other current receivables 14,046 3,987 Total other current assets 33,183 32,458

The change in direct tax asset is mainly due to a decrease in indirect tax assets as the result of a different period of comparison, an increase in tax assets relating to IRES and IRAP, following taxes paid in advance and the calculation of the provisional tax burden for the period, and an increase in sundry receivables, which at 30 th June consisted of €7 million, relating to amounts to be cashed in for green certificates already assigned.

This item also includes advances paid to suppliers for different utilities and supplies.

13. CASH AND SHORT -TERM DEPOSITS

Cash and cash equivalents amounted to €129 million and include bank deposit and postal current account deposits and cash on hand for the Group.

30/06/2015 31/12/2014 Bank and post-office current account deposits 128,916 114,273 Cheques 0 0 Cash on hand 27 17 Total cash and cash equivalents 128,943 114,290

Bank deposits earn interest at floating rates. The increase in cash and cash equivalents compared to 31 st December 2014 is the result of normal cash flow management of the Group.

14. SHAREHOLDERS ’ EQUITY

As at 30 th June 2015, the Group’s shareholders’ equity amounted to €226 million, down €6 million on 31 st December 2014, mainly due to the distribution of part of the reserves.

Minority interests, amounting to €28 million, decreased by €2.9 million compared to 31 st December 2014, primarily due to the distribution of part of the reserves available in 2014 and also as the result of the acquisition by the Group of 0.5% share in Linea Distribuzione S.r.l..

For further details, please refer to the movements in shareholders’ equity on page 43.

15. CURRENT LOANS AND BORROWINGS (MATURING WITHIN 12 MONTHS )

Original Current Current Maturity Beneficiary Lender amount Rate portion as portion as date (K€) at 30/06/15 at 31/12/14

LGH Group Sundry Overdrafts On notice Floating 13 2.032 Linea Group Holding Invest.istituzionali 300,000 28/11/2018 Fixed 3.875 11,426 11.191 Linea Group Holding Intesa S. Paolo 8,000 31/12/2015 Euribor 6m + 0.60/0.95 400 800 Linea Group Holding BCC Cremona 8,000 26/02/2019 Fixed 4.67 860 840 Linea Group Holding Cassa DDPP 5,164 31/12/2022 Fixed 5.25 288 281 Linea Group Holding Cassa DDPP 5,216 31/12/2022 Euribor 6m 261 261 Linea Group Holding Reg. Lombardia 765 30/06/2022 Nil 40 40 Linea Group Holding BEI 80,000 30/06/2020 Fixed 16,245 8.467 Lomellina Energia Pool di banche 215,000 30/06/2022 Euribor 6m + 0.80/1.40 2,650 15.641 Linea Energia Unicredit 114,500 30/05/2021 Euribor 6m + 0.70/1.95 4,671 4.170 Linea Energia Unicredit 6,800 31/03/2027 Euribor 3m + 2.65 624 539 AEM Gestioni BCC Crema 700 30/12/2015 Euribor 6m + 0.75 40 79 Steam Intesa S,Paolo 10,000 30/06/2019 Euribor 6m + 0.575 1,000 1.000 Steam BP Milano 800 30/06/2017 Euribor 3m + 1.00 113 110 Linea Ambiente Ex soci 32 31/12/2016 Nil 32 0 Linea Distribuzione UBI 13,000 30/12/2020 Euribor 6m + 0.585 991 969 Linea Distribuzione Cassa DDPP 70 31/12/2015 Fixed 7.5 4 9 Linea Distribuzione Cassa DDPP 620 31/12/2022 Euribor 6m 31 31 Linea Distribuzione Cassa DDPP 80 31/12/2017 Fixed 7.5 7 7 Linea Distribuzione Unicredit 6,000 31/12/2015 Euribor 3m + 1.10 6,000 Linea Com Sparkasse 2,000 31/03/2015 Euribor 3m + 2.40 0 107 Linea Com BP Emilia Rom, 3,000 31/10/2015 Euribor 3m + 1.85 300 600 Astem Gestioni BCC Laudense 225 31/12/2020 Euribor 3m+2.95 41 30 Astem Gestioni BCC Laudense 450 31/12/2023 Euribor 3m+2.96 63 40 LGH Rinnovabili Pool di banche 6,657 30/09/2028 Euribor 6m+5.00 4,000 0 Diversi Leasing 9,924 Various Sundry 946 915 Total bank borrowings and other loans 51,046 48,159 MF Waste Foster Wheeler 3,638 31/12/2015 Euribor 1m + 0.30 3,197 3.197 Steam Tesi 207 31/12/2015 Euribor 6m + 1.00 597 0 Total shareholders’ loans 3,794 3,197 TOTAL NON-CURRENT LOANS AND BORROWINGS 54,840 51,356

Bank borrowings falling due within the following year refer both to current account overdrafts (€13 thousand) and portions of medium/long-term loans falling due within the 1 st half of 2016 (€54,827 thousand).

16. NON -CURRENT LOANS AND BORROWINGS (MATURING AFTER 12 MONTHS )

Original Current Current Maturity Beneficiary Lender amount Rate portion as at portion as at date (K€) 30/06/15 31/12/14 Linea Group Holding Invest.istituzionali 300,000 28/11/2018 Fixed 3.875 291,591 285,605 Linea Group Holding BCC Cremona 8,000 26/02/2019 Fixed 4.67 2,581 3,017 Linea Group Holding Cassa DDPP 5,164 31/12/2022 Fixed 5.25 2,289 2,435 Linea Group Holding Cassa DDPP 5,216 31/12/2022 Euribor 6m 1,695 1,825 Linea Group Holding Reg.Lombardia 765 30/06/2022 Nil 242 282 Linea Group Holding BEI 80,000 30/06/2020 Fixed 62,720 70,318 Lomellina Energia Pool di banche 215,000 30/06/2022 Euribor 6m + 0.80/1.40 50,108 39,097 Linea Energia Unicredit 114,500 30/05/2021 Euribor 6m + 0.70/1.95 22,661 24,970 Linea Energia Unicredit 6,800 31/03/2027 Euribor 3m + 2.65 6,002 6,204 Steam Intesa S.Paolo 10,000 30/06/2019 Euribor 6m + 0.575 3,000 3,500 Steam BP Milano 800 30/06/2017 Euribor 3m + 1.00 119 176 Steam Reg.Lombardia 375 30/06/2025 Nil 375 375 Linea Ambiente Ex soci 32 31/12/2016 Nil 0 32 Linea Distribuzione UBI 13,000 30/12/2020 Euribor 6m + 0.585 5,047 5,548 Linea Distribuzione Cassa DDPP 620 31/12/2022 Euribor 6m 201 217 Linea Distribuzione Cassa DDPP 80 31/12/2017 Fixed 7.5 13 17 Astem Gestioni BCC-Piazzola Ec. 225 31/12/2020 Euribor 3m+2.95 140 166 Astem Gestioni BCC-Telerisc. 450 31/12/2023 Euribor 3m+2.96 328 371 Diversi Leasing 9,924 Various Sundry 5,141 5,358 Total bank borrowings and other loans 454,253 449,513 MF Waste Foster Wheeler 3,638 31/12/2015 Euribor 1m + 0,30 0 0 Steam Milano Energia 207 31/12/2015 Euribor 3m + 0,60 0 207 Steam Milano Energia 80 31/12/2015 Euribor 3m + 0,60 0 80 Steam Tesi 310 31/12/2015 Euribor 3m + 0,60 0 310 Total shareholders’ loans 0 597 TOTAL NON-CURRENT LOANS AND BORROWINGS 454,253 450,110

The following financial transactions of a certain significance occurring in the course of the first half of 2015:

a) negotiations with Unicredit of a €50 million new committed line of cash at 24 months, which became effective for all effects and purposes in January 2015, when the related contract was officially signed. The credit line is completely available;

b) an application filed by Lomellina Energia (April 2015) to obtain a special waiver from the syndicate of lenders (June 2015), with subsequent renegotiation of the project loan, based on the following main points: • possibility of making new investments • definition of a new amortisation plan • introduction of a new model for the calculation of financial covenants

Following the renegotiation, the outlay for the June 2015 instalment was about €9.3 million less than the original plan and, starting from the 2 nd half of 2015, an increase in margins under uncommitted lines of

credit for the amount of 100 b.p. up until the 2022 financial year and 125 b.p. for the next period and an extension of the amortisation period to 31 st December 2024 compared to the original period in June 2022.

The coverage of the connected interest rate risk is guaranteed by an additional interest rate swap (IRS), which brings the coverage up to 75% of the notional amount of the credit lines.

With regard to existing loans, it is worth noting that:

a) the project loan taken out by Lomellina Energia, which was renegotiated at the conditions specified above, provides for, among the cases of failure, the reduction in the Loan Life Coverage Ratio below the value of 1.1 (i.e. the ratio of the current net value of the expected cash flow to the outstanding amount of the loan);

b) the current loan taken out by Linea Energia with Unicredit Banca provides, among the cases of failure, the overcoming of 2.8:1 of the ratio between the residual value of the loan and equity;

c) the BEI loan granted in 2013 requires compliance with the following financial covenants for the entire contract duration:

• PFN / EBITDA < 4.50

• EBITDA / Net financial expenses > 4.50

• NFP / Equity < 1.75.

All the above-mentioned constraints and covenants were complied with in relation to the half-year financial statements as at 30 th June 2015.

Details of all existing loans are presented on the following page, with a temporal division of principal sums and interests accruing in the next five years.

<1 year >1<2 years >2<3 years >3<4 years >4<5 years >5 years Fixed rate principal interest principal interest principal interest principal interest principal interest principal Cassa DDPP loan – €5.16m 281 3 296 3 312 4 329 5 346 6 1,152 11 BCC CR loan – €8m 840 165 880 126 922 84 966 40 249 3 0 0 Cassa DDPP loan – €80 thousand 7 2 8 1 9 1 0 0 0 0 0 0 Cassa DDPP loan – €70 thousand 9 1 0 0 0 0 0 0 0 0 0 0 European Investment Bank loan - €95m 7,832 752 15,775 642 15,924 493 16,074 343 16,225 192 8,170 38 LGH Eurobond – €300m 0 11,625 0 11,625 0 11,625 300,000 11,625 0 0 0 0 <1 anno >1<2 >2<3 >3<4 >4<5 >5 Floating rate principal interest principal interest principal interest principal interest principal interest principal Cash on hand 128,943 Bank current account overdrafts 13 Intesa bank loan - €8m 400 2 0 0 0 0 0 0 0 0 0 0 UBI* bank loan - €13m 991 159 1,036 127 1,083 114 1,132 95 1,184 72 612 52 Cassa DDPP loan - €5.22m 261 2 261 3 261 6 261 8 261 9 651 14 Cassa DDPP loan - €620 thousand 31 0 31 0 31 1 31 1 31 1 77 2 Regional loan to LGH - €765 thousand 40 0 40 0 40 0 40 0 40 0 82 0 Unicredit loan - €4m 4,000 30 0 0 0 0 0 0 0 0 0 0 Unicredit loan - €6m 6,000 45 0 0 0 0 0 0 0 0 0 0 BPER loan - €3m 300 2 0 0 0 0 0 0 0 0 0 0 BCC Laudense bank loan – €225 thousand 31 5 32 4 33 3 34 2 35 1 16 0 BCC Laudense bank loan – €450 thousand 41 11 42 10 43 10 45 9 46 8 174 15 Unicreditbank loan - €114.5m* 4,002 809 4,266 733 4,550 595 4,807 448 5,103 293 5,420 129 Unicredit* loan - €6.8m 489 192 502 195 516 178 530 161 545 144 4,098 524 Lomelllina project loan - €215m* 2,650 1,279 4,496 1,272 6,780 1,224 7,878 1,126 5,078 1,018 26,582 2,697 BCC Crema bank loan- €700 thousand 40 0 0 0 0 0 0 0 0 0 0 0 Intesa bank loan - €10m 1,000 27 1,000 24 1,000 21 1,000 11 0 0 0 0 BPMI bank loan - €800 thousand 113 2 119 1 0 0 0 0 0 0 0 0 Steam regional loan - €375 thousand 0 0 75 11 75 2 75 1 75 1 75 0 MF Waste shareholders’ loan - €3.6m 3,197 8 0 0 0 0 0 0 0 0 0 0 Steam shareholders’ equity - €596 thousand 597 0 0 0 0 0 0 0 0 0 0 0 Other minor loans - €32 thousand 32 0 0 0 0 0 0 0 0 0 0 0 Factoring Financial leasing 946 261 969 221 932 183 867 146 602 192 1,771 126 *including instalments of derivatives

17. PENSION FUND LIABILITIES

30/06/2015 31/12/2014 difference Leaving indemnities for employees, collaborators and sales agents 15,927 16,834 -907 Provision for extra-month’s salary 1,291 1,312 -21 Provision for electricity discount 1,685 1,851 -166 Provision for employee leaving indemnities 18,903 19,997 -1,094

This item also includes €103 thousand (€80 thousand as at 31 st December 2014) supplementary customer indemnity for commission agents in the ICT and environmental sector.

18. PROVISION FOR EMPLOYEE LEAVING INDEMNITIES

The table below shows a breakdown of the Group’s provision for employees leaving indemnities.

30/06/2015 31/12/2014 Initial TFR 16,834 14,626 Current service cost 283 469 Financial expenses 153 459 Actuarial gains/losses -755 1,884 (benefits paid) -588 -604 Employee leaving indemnities 15,927 16,834

The provision for employee leaving indemnities is part of the Group’s definite benefit plans.

The Projected Unit Credit Cost (PUC) method was used to determine this liability. A projection was made, based on a series of financial assumptions (increase in the cost of living, salary increases, etc.) of possible future benefits that could be paid to each employee enrolled in the scheme in the event of retirement, death, disability or resignation.

The estimate of future benefits shall include any increases in the length of service accrued and the presumed increase in the salary level on the valuation date:

- the current average value for future benefits was calculated at the valuation date on the bases of the annual interest rate and the probability that each benefit has to be actually paid;

- the liability for the Company was calculated by identifying the portion of the current average value of future benefits referring to the service already accrued by the employee at the valuation date;

- the reserve recognised under IAS was identified on the basis of the liability determined as above and the provision recognised in the financial statements for Italian statutory purposes.

The assumptions adopted are detailed in the table below.

Demographic assumptions Executives Non-executives Mortality rate index for Italian Mortality rate index for Italian population published by the Mortality population published by the General General Accounting Office, Accounting Office, called RG48 called RG48 Separate indices by age and Separate indices by age and gender, Disability gender, adopted by the Italian adopted by the Italian Social Security

Social Security Institute (INPS) Institute (INPS) Turnover rate 2.00% each year 2.00% each year Early-retirement frequency 2.00% each year 2.00% each year

Financial assumptions Executives Non-executives Increase in the cost of living 1.32% annual 1.32% annual Discount rate 2.37% annual 2.37% annual 1.950% for 2015 1.950% for 2015 TFR increase 2.400% for 2016 2.400% for 2016 2.625% 2017 and 2018 2.625% 2017 and 2018 3.000% from 2019 onwards 3.000% from 2019 onwards Salary increase 1.00% annual 1.00% annual

19. OTHER EMPLOYEE BENEFITS

The categories of employee benefits that are regulated by IAS 19 comprise those paid after termination of the employment relationship, known as “Energy Discount” and “Extra month’s Salary”. Both benefits are regulated by the Collective Bargaining Agreement, which establishes the procedures for payment.

30/06/2015 31/12/2014 Opening provision for “Energy Discount” 1,851 1,433 Current service cost 16 23 Financial expenses 17 47 Actuarial gains/losses -163 417 (benefits paid) -36 -69 Closing provision for “Energy Discount” 1,685 1,851

The provision for “Energy Discount” envisages the supply of electricity for household use at a reduced rate for employees who have been hired prior to 8 th July 1996, have terminated their service and their surviving spouses. The Projected Unit Credit (PUC) method was used to calculate this liability and the assumptions set out in the table below were taken into consideration.

Demographic assumptions Demographic assumptions Mortality rate index for Italian population published by the Mortality General Accounting Office, called RG48 Disability INPS indices by age and gender Family data / remarriage / family leave INPS indices by age and gender Achievement of the first Retirement retirement requirements Turnover rate 1.00%

Financial assumptions Non-executives

Increase in the cost of living 2.37% annual

0.60% for 2015

Discount rate 1.20% for 2016

1.50% 2017 and 2018

2.0% form 2019 onwards

Actual change in energy cost 0.50% annual

30/05/2015 31/12/2014 Opening provision for “Extra month’s salary” 1,312 1,117 Current service cost 27 48 Financial expenses 8 31 Actuarial gains/losses -46 0 (benefits paid) -10 116 Closing provision for “Extra month’s salary” 1,291 1,312

Under this employee benefit plan, a sum equivalent to 4 or 5 months’ salary (in addition to the employees’ leaving indemnities) is paid in the event of termination of the employment relationship on reaching the retirement age or seniority in service.

The Projected Unit Credit (PUC) method was used to calculate this liability and the assumptions set out in the table below were taken into consideration.

Demographic assumptions Demographic assumptions Mortality rate index for Italian population Mortality published by the General Accounting Office, called RG48 Disability INPS indices by age and gender Retirement INPS indices by age and gender

Turnover rate Achievement of the first retirement requirements Mortality 1.00%

Financial assumptions Non-executives

Increase in the cost of living 1.82% annuo

0.60% for 2015

Discount rate 1.20% for 2016

1.50% 2017 and 2018

2.0% from 2019 onwards

Salary increase 1% annual

Sensitivity analysis As required by IAS 19R, the table below shows the sensitivity analysis for each end-of-year actuarial assumption, an indication of the contribution for the year, an indication of the average maturity of the obligation for defined benefit plans and disbursements under the plan.

Sensitivity analysis Change of assumptions 15,789 15,864 Turnover frequency 1% -1% 16.093 15.561 Inflation rate 1.40% -1.40% 15.439 16.224 Discount rate 1.40% -1.40% Service cost 2015 545 Plan duration 14.36 Expected disbursements (years) 2016 908 2017 942 2018 1,298 2019 697 2020 1,192

20. PROVISIONS FOR CONTINGENCIES AND CHARGES

The provisions for contingencies and charges set up to cover potential liabilities amount to €68.8 million, compared to €69.9 million in 2014. A breakdown in given in the table below.

30/06/2015 31/12/2014 delta Provision for asset dismantling and restoration costs 60,321 60,001 320 Provision to cover subsidiaries’ losses 265 265 0 Provision for claims with independent consultants 200 200 0 Provision for landfill royalties 0 1,513 -1,513 Electricity tariff equalisation fund 1,126 846 280 Provision for INPS legal cases and claims 210 210 0 Provision for energy efficiency bonds, green certificates and other contingencies 0 154 -154 Provision for AEEG self-consumed energy 3,500 3,500 0 Provision for gas distribution concession fees 1,320 1,320 0 Provision for guarantee deposits 581 566 15 Other provisions 1,321 1,335 -14 TOTAL PROVISIONS FOR CONTINGENCIES AND CHARGES 68,844 69,910 -1,066

a) The provision for asset dismantling and restoration, totalling €60,321 thousand, relates to the allocation of site dismantling and renovation costs recognised as direct increment of the assets to which they refer. This amount was calculated on the basis of specific appraisals conducted by independent experts. The type of activity carried out at the different sites and the cost of reclamation of the area where the plant is located were taken into consideration in the calculation of dismantling costs. The cost estimate was based on current market prices, land reclamation costs, the costs for demolishing and dismantling the plant and machinery and other related charges.

The increase on the previous year is due mainly to a decline (from 3.29% to 3.25%) in the discounting rate used to update the 2015 end-of-year value, corresponding to that of the latest issuance of 30-year treasury bonds.

b) The Provision to cover associates’ losses , totalling €265 thousand, relates to the amount set aside to reflect the presumable negative impact of the liquidation process involving the associate Sinit S.r.l. in liquidazione, as expressed in liquidator’s projections. This provision has remained unchanged over the previous year.

c) Provision for landfill royalties, amounting to €1,513 thousand as at 31 st December 2014, it was set aside to quantify the risk related to environmental contributions to pay to the city of Augusta for tariffs on landfill-processed material. In the first half of 2015, this amount was reclassified among liabilities following

the final court decision that rejected the main appeal, following which the Group decided not to file any appeal and converted the item in actual liability. d) In the tariff equalisation fund relating to electricity distribution and sales, the amount of €1,126 thousand as at 30 th June 2015, set aside by AEM Gestioni (€+280 thousand on 2014) relates to the following liabilities:

• a provision to cover liabilities related to electricity sales equalisation in the most protected market ( €589 thousand ). The Company set aside €280 thousand as an estimate of what the company is expected to pay in the 1 st half of 2015 to the Equalisation Fund as a result of timing misalignment between the sales tariffs calculated by the Authority and the unit cost of energy paid to Acquirente Unico.

• a provision to cover liabilities related to electricity distribution equalisation (€0 thousand ). The amount allocated for 2014 was used following definition of the actual recognised value, while for 2015 there was no negative impact regarding the distribution of electricity, as the invoiced amount was less than that recognised amount.

• a provision to cover electricity measurement equalisation (€537 thousand ). Following the decision issued by the Authority, it was necessary to set aside a provision to cover equalisation of charges related to measurements on electricity networks. The impact was estimated at around €537 thousand. e) The provision for INPS legal claims , equal to €210 thousand, was set up to cover costs arising from a pending claim with INPS for the payment of contributions to the unified family and maternity leave allowance fund (CUAF) from December 2001 to August 2002 (excluding February 2002), which were estimated at €210 thousand and had already been set aside in previous years. f) The provision for AEEG self-consumed energy, totalling €3.5 million. This provision was appropriated following the unfavourable outcome of a claim regarding the electricity tariff adjustment for the Lomellina plant, details of which are provided in the litigation section. It is the best estimate of the liability, taking account that the exact economic impact has not yet been defined. g) The provision for gas distribution concession charges , equal to €1,320 thousand, relates to contract commitments in the concession tender documents of some municipalities to build networks or plants with free transfer at the end of the concession. The calculation of this provision complies with IFRIC 12 requirements; h) The provision for guarantee deposits, totalling €581 thousand, includes appropriations to cover the interest expense on deposits from customers;

i) Other provisions for contingencies and charges mainly consists of €528 thousand appropriation relating to the inland revenue and local administrative authorities and referring to adjustments on urban hygiene contracts with the city of Crema for about €142 thousand, a provision related to disputes with employees for €237 thousand, and the remaining part of a lesser extent that were appropriated prudently to cover operational risks.

21. DERIVATIVES FINANCIAL INSTRUMENTS - LIABILITIES

This item represents the fair value of derivative contracts on interest rates and electricity prices relating to companies in the Group as at 30 th June 2015. These derivatives have all the requirements to be classified as hedging instruments under the reference principles. For these contracts, the change in fair value in the period is recognised directly in the cash flow hedge reserve under equity (a €877 thousand positive effect in H1/2015, net of taxes).

The fair value of these derivatives are summarised in the table below.

30/06/2015 31/12/2014 Derivative hedging contracts: Interest rate swaps -5,446 -4,259 Commodity price swaps -339 Derivative non-hedging contracts: Interest rate swaps -2,103 Commodity price swaps -1,262 -2,161 Total liabilities for derivative instruments -6,708 -8,862

A breakdown of derivative contracts in being as at 30 th June 2015 is given below. Hedging Hedging Hedging Hedging contract contract Hedging Hedging contract contract DERIVATIVES TO HEDGE for for contract contract for for BNL- for BNL- INTEREST RATE RISK Intesa- Intesa- for Unicredit-Linea Lomellina Lomellina Lomellina Lomellina UBI-LGH En. (1) (1) (2) (1) (2) Execution date 22/12/2005 29/06/2015 22/12/2005 29/06/2015 20/12/2011 15/02/2013 Effective date 22/12/2005 01/07/2015 31/12/2007 01/07/2015 01/07/2011 29/11/2013 Maturity date 30/06/2022 28/06/2024 30/06/2022 28/06/2024 31/12/2021 31/05/2021 Instalment frequency rate Semi-annual Semi-annual Semi-annual Semi-annual Semi-annual Semi-annual Reference notional value 48,822 4,337 48,822 4,337 9,946 33,706 Residual notional value as at 15,133 4,337 15,133 4,337 3,035 28,148 30/06/2014 from 1.05% to 3.8825% 1.045% 3.9125% 1.115% 4.690% Fixed interest rate (company) 1.85% Euribor Euribor Euribor Euribor Euribor Euribor 6m/360 Floating interest rate (bank) 6m/360 6m/360 6m/360 6m/360 6m/360 Mark-to-market value as at -1,748 -62 -1,764 -68 -436 -1,368 30/06/2015

Following the renegotiation of the Lomellina loan, the derivative with Banca Intesa passed the performance tests and therefore it is now considered as a hedging derivative.

22. OTHER NON -CURRENT FINANCIAL LIABILITIES

There are no non-current financial liabilities as at 30 th June 2015.

23. OTHER NON -CURRENT LIABILITIES

These mostly refer to contributions received for new connections as well as security deposits paid by customers for the supply of electricity, gas and water, and waste processing contracts, as shown in the table below.

30/06/2015 31/12/2014 delta Guarantee deposits for electricity services 3,473 3,729 -256 Guarantee deposits for gas services 5,902 5,191 711 Guarantee deposits for environment & waste management 101 679 -578 Guarantee deposits for district heating 98 184 -86 Long-term deferred income and contributions for plants 34,713 35,210 -497 Total other non-current liabilities 44,287 44,993 -706

It should be noted that long-term deferred income consist almost entirely of contributions relating to networks and systems paid by customers/users in accordance with the provisions in force concerning public services.

24. TRADE PAYABLES

A breakdown of trade payables as at 30 th June 2015, compared to 31 st December 2014, is shown in the table below.

30/06/2015 31/12/2014 delta Trade payables to third parties for invoices received 67,180 89,708 -22,528 Trade payables to third parties for invoices to the received 52,602 65,976 -13,374 Trade payables due to shareholders 944 863 81 Total trade payables 120,726 156,547 -35,821

This item comprises amounts of a commercial nature owed by the LGH Group to third parties and shareholders.

Refer to the specific section for details of the terms and conditions regarding transactions with related parties.

The change compared to the figure as at 31 st December 2014 is attributable to the different period of comparison as a consequence of seasonal fluctuations in the purchase, annual invoicing by suppliers and deliveries.

25. OTHER CURRENT LIABILITIES

30/06/2015 31/12/2014

Annual accrued expenses and deferred income 2,576 2,018 Payables to social security and welfare institutions 3,143 3,461 VAT and other tax liabilities 17,170 4,591 Non-financial liabilities due to shareholders 6,700 1,272 Payables to employees 7,018 5,990 Other current liabilities 13,170 5,308 Total current liabilities 49,777 22,640

Accrued expenses and deferred income, amounting to €544 thousand and €2,032 thousand, respectively, were allocated in compliance with the accrual principle and refer to portions of income and charges attributable to more than one period.

Other short-term liabilities, amounting to €13,170 thousand, include payables to customers for refunds and credit notes for €2,139 thousand, payables to CCSE (Energy Sector Equalisation Fund) for €6,780 thousand, payables to the equalisation fund for €1,710 thousand and other non-trade payables for €2,518 thousand. The change in the balance is due to the different seasonality in the two compared periods.

Payables due to shareholders mainly refer to accrued dividends not yet paid regarding the 2014 financial statements.

The change in tax liabilities for indirect taxes refers to the increased VAT to be paid in July, compared to the payment in December 2014 and the settlement of the revenue taxes on gas consumption.

26. OTHER CURRENT FINANCIAL LIABILITIES

The €5,000 thousand recognised in this section as at 31 st December 2014 relates to the liability towards the former minority shareholder of Ecolevante for the put & all option right on 15% of interest, which was exercised during 2014. This liability was paid off in the first half of 2015.

27. CURRENT TAX LIABILITIES

Current tax liabilities relating to amount due to the inland revenue for IRES and IRAP increased compared to 2014 (from €700 thousand to €4,796 thousand) as a consequence of the different time schedule in the fulfilment of the obligations.

28. REVENUES FROM SALES

30/06/2015 30/06/2014 % difference Revenues from electricity production, distribution & sales 88,145 95,737 -7.93% Revenues from gas distribution/sales 109,277 124,224 -12.03% Revenues from waste management & environmental hygiene 57,752 59,077 -2.24% Revenues from district heating 9,947 9,964 -0.17% Revenues from IT and telecommunication services 4,816 4,643 3.73% Other revenues 6,549 14,320 -54.27% Total revenues from sales 276,486 307,965 -10.22%

As can be seen from the table above, revenues from gas distribution and sale decreased by 12%, which was mainly due to the decline in natural gas reselling activities.

Revenues from electricity decreased by 7.93% overall, thanks to the combined effect of two opposing factors: a 21% increase in the volume of energy produced and a 9.35% decrease in the volumes sold, both associated with the thermal trend in the period.

Further details and analyses regarding revenues from sales are provided in the business report.

29. OTHER OPERATING REVENUES

30/06/2015 30/06/2014 % difference Contributions 3,771 3,931 -4.07% Leases and rentals 225 239 -5.86% Insurance indemnities 0 75 -100.00% Refunds, credit notes and expenses recovered 576 1,959 -70.60% Capital gains on assets 421 51 725.49% Contingent assets 641 1,115 -42.51% Other revenues and gains 1,754 1,883 -6.85% Total Other operating revenues 7,388 9,253 -20.16%

Contributions cover both the portion accrued in the period by users for new connections, and so-called “succession rights” paid on the transfer of existing contracts. This item also includes contributions paid for the production of electricity from renewable sources.

Contingent assets mainly consist of €165 thousand releases from the provision for contingent risks and charges and the remaining portion refers to the update of previous years’ estimates in favour of the Group.

Other revenues and gains include the refunding of costs for the connection of utilities, revenues auxiliary to environmental and telecommunication management.

30. CONSUMPTION OF MATERIALS AND SERVICES

30/06/2015 30/06/2014 % difference Goods in stock -3,390 -2,459 37.86% Electricity -36,871 -41,137 -10.37% Natural gas -76,934 -95,791 -19.69% Goods for resale -48 -432 -88.89% Fuels and lubricants -2,163 -2,342 -7.64% Stationary and printed materials -80 -186 -56.99% Other goods -5,742 -6,075 -5.48% Maintenance and repair services -7,707 -7,534 2.30% Banking services -1,690 -1,335 26.59% Insurance services -2,173 -2,626 -17.25% Postal and shipping services -722 -747 -3.35% Waste management services -19,919 -21,047 -5.36% Advisory services -1,896 -3,721 -49.05% Telephone, computer & IT services -1,350 -1,167 15.68% Electricity conveyance/transportation services -27,496 -25,902 6.15% Gas conveyance/transportation services -8,452 -5,409 56.26% Advertising and promotion services -294 -375 -21.60% Personnel services -848 -782 8.44% Services acquired on a contracted basis -539 -720 -25.14% Other outsourced services -4,693 -6,725 -30.22% Leases of municipally-owned companies -1,479 -1,598 -7.45% Fees and leases of municipality-owned assets -4,949 -4,987 -0.76% Fees and leases of third-party assets -4,521 -3,512 28.73% Change in stock 505 -3,177 -115.90% Internal increases due to capitalised assets 3,226 5,348 -39.68% Total consumption of materials and services -210,225 -234,438 -10.33%

As mentioned above, the considerable reduction in costs related to the purchase of gas is consistent with the decrease in the related revenues. Please refer to the business report for further details and analyses of costs of consumption of goods and services.

31. PERSONNEL EXPENSES

30/06/2015 30/06/2014 % difference wages and salaries -23,816 -23,869 0% social security and welfare contributions -7,810 -7,757 1% employees’ leaving indemnity -1,562 -1,691 -8% benefit pension and similar funds -41 -39 5% other personnel expenses -921 -738 25% Total personnel expenses -34,150 -34,094 0%

Overall personnel expenses in the first half of 2015 increased by only 0.16% compared to the same period in 2014. The following should be noted in this regard: 80

a decrease in the average number of employees, from 1,275 to 1,268 (-0.55%);

a 0.81% increase in the average per-capita labour cost: retirement incentives to high seniority personnel and other measures included in the 2015 budget contributed to limit the normal (over 2%) increase in labour costs associated with contract changes, seniority and variable factors.

It should be noted that the provision for employee leaving indemnities (TFR) and pension funds were determined using the actuarial method. The amount of employees’ benefits accrued during the year was recognised in the income statements under the relevant item, and the figurative financial charge the Company would sustain if it took out a loan on the market of an amount equal to the TFR was recognised in net financial income (expenses). Actuarial profit and losses that reflect the effects of changes in the actuarial assumptions adopted were recognised to shareholders’ equity, as shown in the income statements, taking into account the remaining average working life of the employees.

32. OTHER OPERATING EXPENSES

30/06/2015 30/06/2014 % difference Taxes and duties -1,116 -1,389 -19.65% Capital losses on assets -91 -13 600.00% Characteristic contingent liabilities -607 -692 -12.28% Compensation and indemnities to third parties -227 -263 -13.69% Other operating expenses -890 -809 10.01% Total other operating expenses -2,931 -3,166 -7.42%

The 19.65% decrease in taxes and duties is almost entirely due to the effect of the IMU property tax on the property owned by the Group.

The item “Other operating expenses” includes the administrative, legal and fiscal costs necessary for proper operation of the various group companies, as well as membership fees and donations.

33. OTHER NET INCOME (EXPENSES )

30/06/2015 30/06/2014 % difference Capital gains and other extraordinary income 300 187 60.43% Capital losses and other extraordinary charges -1198 -752 59.31% Total Other net income (expenses) -898 -565 58.94%

34. AMORTISATION , DEPRECIATION AND IMPAIRMENT

30/06/2015 30/06/2014 % difference Amortisation of intangible assets -5,931 -6,129 -3.23% Depreciation of tangible assets -14,971 -21,179 -29.31% Other impairments of assets -2,740 -3,351 -18.23% Inventory impairment 0 -50 -100.00% Impairment effect -302 -684 -55.85% Total amortisation, depreciation and impairment -23,944 -31,393 -23.73%

The decrease in amortisation and depreciation is mainly due to the portion related to the plants in Parona (Lomellina Energia) under the CIP 6/92 tariff incentives. Depreciation of the plants in question is related to the economic benefits and assumes a “step-down” trend with straight-line depreciation for each of the periods. The reduction is related to the incentive period for many of the plants in question.

Impairment of trade receivables took the following variables into account:

type and degree of suspensibility of underlying services (energy, gas and waste management, etc.);

type of underlying contracts (active, terminated, etc.)

age of receivables

credit status (in bonis, contested, subject to bankruptcy proceedings, etc.)

type of customer (individual, business, public authority, etc.)

35. NET FINANCIAL INCOME AND EXPENSES

2015 % 2014 difference (restated) received not received totals on 2014

Positive change in derivatives fair value 0 1,054 1,054 1,897 -44.44% Interest income for discounting 0 19 19 84 -77.38% Interest income on bank and postal account 397 0 397 486 -18.31% Overdue interest income 182 2491 2,673 287 831.36% Other interest income and financial income 51 491 542 673 -19.47% Total financial income 630 4,055 4,685 3,427 36.71% paid not paid totals Negative change in fair value of derivatives 0 -1,418 -1,418 -2,658 -46.65% Interest expense for discounting 0 -680 -680 -566 20.14% Interest expense and charges on bank overdraft -276 0 -276 -418 -33.97% Interest expense on medium/long-term loans* -2,267 -6,791 -9,058 -8,734 3.71% Interest expense on financial leases -151 0 -151 -293 -48.46% Interest expense on factoring -239 0 -239 -248 -3.63% Interest expense on customer guarantee deposits -13 -40 -53 -60 -11.67% Overdue interest expense -61 -103 -164 -217 -24.42% Other interest expense and financial expenses 0 -269 -269 -382 -29.58% Exchange losses -1 0 -1 0 0.00% Total financial expenses -3,008 -9,301 -12,309 -13,576 -9.33% Total Net financial income (expenses) -2,378 -5,246 -7,624 -10,149 -24.88% *including swap instalments

The overall result of financial management increased by €2,525 thousand (nearly 25%), compared to the first half of 2014, thanks to the combination of the following factors:

- €+2.386 thousand increase in overdue interest income, thanks exclusively to the allocation of invoices to be issued for amounts due by the municipalities in the province of Syracuse on outstanding receivables;

- €+397 thousand due to the effect of valuation at fair value of the derivatives classified as not of pure hedging and relating to the purchase of commodities only;

- €+53 thousand due to fewer overdue interest expense, as a result of more regular payments made to suppliers;

- €+142 thousand due to fewer financial expenses on bank accounts, following to the waiver of certain uncommitted lines of credit and the renegotiation of costs relating to others;

- €+142 thousand due to fewer interest expense on financial leases, as a result of the decision made by the Group at the beginning of 2015 to cease having recourse to this type funding;

- €-179 thousand as the result of the negative financial impact on the funds for the restatement of intangible assets and those relating the personnel, due in turn to a decrease in the discount rates;

- €-89 thousand due to fewer interest income on liquidity, as the result of a decrease in short-term interest rates compared to the 1 st half of 2014, which more than offset the increased average liquidity generated from the EIB loan;

- €-324 thousand due to increased interest expense on short and medium/long-term loans, due to the increase of around €57 million of their average value (€505 million, compared to €448 million in the first half of 2014), which was only partially offset by the decrease of about 8 bps in the average cost of borrowing.

- €-3 thousand for other financial income and expenses.

More details on interest rate expense and hedging instruments relating to existing loans are provided in the section on funding.

36. INCOME AND CHARGES FROM INVESTMENTS

The amount of €-81 thousand relates to the impairment loss of the investment in Inn.Tec S.r.l. in liquidazione.

37. RELATED PARTY DISCLOSURES

The table below lists the data relating to the Group’s main transactions with related parties in the first half of 2015:

LGH vs Related Parties (€,000) Receivables Payables Costs Revenues COGEME S.p.A. 12,167 2,661 1,154 3,094 Gandovere Depurazione Srl 212 - - 158 Cogeme Servizi Territoriali Locali Srl 582 - - 575 AOB2 Srl 3,018 184 54 2,625 AEM Cremona S.p.A. 33,238 864 964 4,021 KM S.p.A. 127 - - 120 Aem Service Srl 956 1,973 250 253 ASTEM Lodi S.p.A. 1,925 622 238 294 ASM Pavia S.p.A. 5,102 202 405 1,477 Line S.p.A. 51 - - 214 ASM Lavori Srl 14 128 279 32 Infracom Italia S.p.A. 2 76 112 4 ASM Codogno S.p.A. 156 91 37 160 ASM Isa S.p.A. 3,034 1,600 - 1,084 ASM Energia S.p.A. 59 1,618 879 846 ASM Vigevano e Lomellina S.p.A. - 8 - 1,048 AMEC Foster Wheeler Italiana Srl - 5,894 6 - SCRP S.p.A. 873 1,184 1,378 294 Padania Acque Gestioni spa 24 135 18 74 Comune di Cazzago 396 286 43 814 Comune di Crema 1,235 2,448 438 3,707 Comune di Cremona 5,833 524 1,457 5,018 Comune di Lodi 4,139 667 209 3,155 Comune di Pavia 11 1,823 554 13 Comune di Rovato 276 609 170 1,512 Ecofert Srl 50 - - - Franciacorta rinnovabili Srl 514 158 238 273 Topcom snc di Corsini Rafaele & C. (P.IVA 01357010170 ) - 1 2 - Legnoedilizia Srl 2 - - 1 BLS Consulting 4 31 22 7 Consorzio Informatica Territorio 55 - - 4 74,055 23,787 8,907 30,877

Transactions established by the Group, LGH S.p.A. and its subsidiaries with all the municipalities that are members of municipality-owned companies, which are identified as related parties, are mainly of a commercial nature and are defined and regulated on the basis of specific agreements or individual contracts that set out the conditions for the performance of different services by each company of the Group.

Disclosures regarding equity, economic and financial transactions are shown, where relevant, in the various items of the explanatory notes.

Relations with companies linked with some of the directors and executives of the Group are listed at the bottom of the table.

TERMS AND CONDITIONS OF RELATED PARTY TRANSACTIONS

Sales with related parties are carried out at the market price and conditions. The balances as at 30 th June 2015 are not secured by collateral nor they generate an interest or are settled in cash. No guarantees are given or received in relation to receivables and payables with related parties.

Cremona, 8 th September 2015

THE BOARD OF DIRECTORS

Chairman Alessandro Giuseppe Conter

Deputy Chairman Massimo Mustarelli

Chief Executive Officer Franco Mazzini

Board Members Giovanni Soffiantini

Salvatore Nupieri

Certification of the Consolidated Half-Year Financial Statements pursuant to art. 81-ter of Consob Regulation no. 11971 of 14/05/99 as amended.

1. We, the undersigned, Alessandro Giuseppe Conter, in my capacity as Chairman of the Board of Directors, and Claudio Benelli, in my capacity as Financial Reporting Officer of Group Holding S.p.A., hereby declare, in accordance with the provisions of art. 154-bis, subsections 3 and 4, of Italian Legislative Decree no. 58 of 24 February 1998:

• In relation to the administrative and accounting procedures for the preparation of the consolidated half- year financial statements for the 1 st half of 2015:

- the adequacy in relation to the business characteristics;

- due compliance with said procedures.

2. We also confirm that:

• the consolidated half-year financial statements:

- reflect the entries in the accounting books and records;

- were prepared in accordance with the international accounting standards adopted by the European Union under EC regulation no. 1606/2002 of the European Parliament and Council, of 19 July 2002;

- provide a true and fair representation of the financial position, the operating result and cash flows of the issuer and all the companies in the scope of consolidation.

• The interim business report contains a reliable description of the expected business development performance and financial position of the issuer and the entities in the scope of consolidation, along with the main risks and uncertainties to which they are exposed.

Cremona, 8 th September 2015

Alessandro Giuseppe Conter Claudio Benelli

Chairman of the Board of Directors Financial Reporting Officer