Nota Integrativa Sma Torino S

CONSOLIDATED FINANCIAL STATEMENT and FISCAL YEAR FINANCIAL STATEMENT XVII CONSOLIDATED FINANCIAL STATEMENTS 2020 XXI SUSTAINABILITY REPORT

2020

CONSOLIDATED FINANCIAL STATEMENTS

FISCAL YEAR FINANCIAL STATEMENTS

XVII CONSOLIDATED FINANCIAL STATEMENTS XXI CORPORATE SUSTAINABILITY REPORT

Approved by Ordinary Shareholders’ Meeting on June 28th, 2021

SOCIETÀ METROPOLITANA ACQUE TORINO

INTRODUCTION 7 Administration and control bodies and Company positions 7 The SMAT Group at 31 December 2020 8

A. SMAT GROUP DIRECTORS’ REPORT 10 A1. Introduction 10 A2. Summary of 2020 results in figures 10 A3. Main technical data and operating area 11 A4. General description of the activities 12 A5. Service agreement 13 A6. The Territorial Area Plan and the programme of interventions 13 A7. Applied research & development activities 14 A8. International projects 14 A9. SMA Torino S.p.A. Membership in National and European Associations 15

B. COMPOSITION OF THE SMAT GROUP 17 B1. Parent Company SMA Torino S.p.A. 17 B2. Own shares and shareholdings in subsidiaries 17 B3. Subsidiaries and associates included in the consolidation area 17 B4. Shareholdings in other companies 18

C. SMAT GROUP ECONOMIC TREND 21

D. INVESTMENTS BY SMA TORINO S.P.A. AND THE SMAT GROUP 23

E. FINANCIAL MANAGEMENT OF SMA TORINO S.P.A. AND THE SMAT GROUP 26

F. SIGNIFICANT EVENTS DURING FISCAL YEAR 2020 28 F1. Monitoring of impacts related to the COVID-19 emergency. 28 F2. Legal comparative study SMAT 29 F3. The Industrial Plan 4.0 29 F4. 2020 Rates 30 F5. Equalization rate components UI1-UI2-UI3-U4 32 F6. Fulfilment of the technical quality regulations (RQTI) 32 F7. New ARERA regulations 32 F8. Hiring of personnel 33 F9. Loan from the European Investment Bank 34 F10. Credit rating 34 F11. Legality ratings 34 F12. Legislative decree no. 175 of 19 August 2016 (Madia) 34

G. SIGNIFICANT EVENTS OCCURRING AFTER 31 DECEMBER 2020 AND BUSINESS OUTLOOK 35 G1. Acque potabili S.p.A. extraordinary operations 35 G2. Programme Agreement with ACEA 36 G3. Villar Focchiardo 37 G4. Hiring Programme 37 G5. Operational outlook and organisational set-up 37

H. ORGANIZATIONAL MODEL  SUPERVISION, ANTI-CORRUPTION AND TRANSPARENCY ENTITY 38 H1. Supervisory Body 38 H2. Anti-Corruption and Transparency 38 H3. Privacy - GDPR 39 H4. Certification of the health and safety management system for personnel and the workplace 39 H5. Certification of the environmental management system 39 H6. Certification of the quality management system 39 H7. List of SMAT Group branches 39

I. RELATIONSHIPS WITH RELATED PARTIES 40 I1. Relations with the City of Turin 40 I2. Relations with the subsidiaries and associates 40

CONSOLIDATED FINANCIAL STATEMENTS OF THE SMAT GROUP AT 12.31.2020 41

SMAT GROUP NOTES TO THE ACCOUNTS 48 Principles for preparation of the financial statements 48 Structure and contents of the financial statements 48 Consolidation criteria 49 Valuation criteria 50 Tangible fixed assets 50 Goodwill and other intangible fixed assets 51 Assets under concession 52 Shareholdings 52 Non-current financial assets 53 Inventory 53 Receivables 53 Financial assets and other current assets 53 Industry information 53 Cash and cash equivalents 54 Own shares 54 Provisions for risks contingencies and charges, benefits to the employees 54 Trade payables and other current liabilities 55 Costs and revenues 55 Grant for Plants 55 Financial income and expenses 55 Income tax for year 55 Impairment test 55 Conversion of assets/liabilities into foreign currency 56 Use of estimations 56 Other information 56

Corporate agreements outside the Statement of Assets and Liabilities 56 Amounts expressed in Notes to the Accounts 56 Accounting principles, IFRS amendments and interpretations adopted from 1 January 2020 56 Accounting principles, amendments and interpretations IFRS and IFRIC authorized by the European Union, not yet mandatory and not adopted in advance by the Company on 31 December 2020 58 Accounting principles, IFRS amendments and interpretations not yet certified by the European Union 58 Notes to the entries of the Statement of Assets and Liabilities 60 REPORT FOR OPERATIVE CATEGORIES 60 ASSETS 60 NET EQUITY AND LIABILITIES 70 Notes to the entries of the Income Statement 79 Revenues 79 Operating costs 80 Financial income and expenses 84 Other information 85

FINANCIAL STATEMENT FOR FISCAL YEAR SMAT S.P.A 89

SMA TORINO S.P.A. SUPPLEMENTARY NOTE 96 Application of IAS/IFRS and its effects 96 Structure and contents of the financial statements 96 Valuation criteria 97 Tangible fixed assets 97 Goodwill and other Intangible fixed assets 98 Assets under concession 98 Shareholdings 99 Non-current financial assets 99 Inventory 99 Receivables 99 Financial assets and other current assets 100 Industry information 100 Cash and cash equivalents 100 Own shares 100 Provisions for liabilities and charges, benefits to the employees 100 Trade payables and other current liabilities 101 Costs and revenues 101 Grant for Plants 101 Financial income and expenses 101 Income taxes for the year 101 Impairment test 102 Conversion of assets/liabilities into foreign currency 102 Use of estimations 102 Other information 103 Corporate agreements outside the Statement of Assets and Liabilities 103 Amounts expressed in Notes to the Accounts 103 Accounting principles, IFRS amendments and interpretations adopted from 1 January 2020 103 Accounting principles, amendments and interpretations IFRS and IFRIC authorized by the European Union, not yet mandatory and not adopted in advance by the Group on 31 December 2020 104 Accounting principles, IFRS amendments and interpretations not yet certified by the European Union 104 Notes to the entries of the Statement of Assets and Liabilities 106 Non-CURRENT ASSETS 106 CURRENT ASSETS 114 NET EQUITY AND LIABILITIES 117 Notes to the entries of the Income Statement 126 Revenues 126 Operating costs 127 Financial income and expenses 131

Other information 133 Proposals regarding the deliberations on SMAT S.p.A. fiscal year financial statements as at 31 December 2020 137

FINANCIAL STATEMENTS OF RISORSE IDRICHE S.P.A. . AS AT 31 DECEMBER 2020 139

FINANCIAL STATEMENTS OF AIDA AMBIENTE S.R.L. AS AT 31 DECEMBER 2020 145

BOARD OF AUDITORS’ REPORT 152

INDEPENDENT AUDITORS’ REPORT 160

ORDINARY SHAREHOLDERS’ MEETING – 22 JUNE 2021 170

SOCIETÀ METROPOLITANA ACQUE TORINO S.p.A. Legal offices in Turin, Corso XI Febbraio, 14 Share capital € 345,533,761.65 fully paid up Turin Business Registry no. 07937540016 Tax code and VAT code 07937540016

INTRODUCTION

Administration and control bodies and Company positions

. BOARD OF DIRECTORS The Board of Directors, appointed by the Ordinary Assembly in compliance with articles .2364-2449 of the Italian Civil Code and 18 of the Articles of Association, is composed by : • ROMANO Paolo Chairman • RANIERI Marco Managing Director • BISCOTTI Antonella until 15 July 2020 Director • TUMIATTI Cristina since 15 July 2020 Director • LANCIONE Serena Director • SESSA Fabio Director

. BOARD OF AUDITORS – INTERNAL CONTROL AND ACCOUNTING AUDITS The Board of Auditors, appointed by the Ordinary Assembly in compliance with articles 2364-2449 of the Italian Civil Code and 18 of the Articles of Association, is composed by : • VIETTI Pier Vittorio Chairman • CARRERA Ernesto Effective Auditor • NARDELLI Gabriella Effective Auditor • CACCIOLA Maurizio Substitute Auditor • GIORDANO Paola Lucia Substitute Auditor

. AUDITING FIRM Deloitte & Touche S.p.A.

. SUPERVISORY BODY The Board, which is appointed by the Board of Directors, is composed by: • BOCCHINO Umberto Chairman • CASSONE Cinzia Member • CAPUTO Miriam Member • GUARINI Fulvio Member

. CORRUPTION PREVENTION OFFICER Appointed by the Board of Directors FINO Luisa

. DATA PROTECTION OFFICER Appointed by the Board of Directors QUAZZO Armando

The SMAT Group at 31 December 2020

MANAGEMENT REPORT

A. SMAT GROUP DIRECTORS’ REPORT

Dear Shareholders, Fiscal year 2020 was characterised by the health emergency caused by the Coronavirus. While the consequences of the emergency are examined in greater detail hereunder, it should be noted that the adjustments made from the start to our operating and organisational modalities and the actions undertaken to contain costs so as to minimise the financial repercussions of the crisis, all contributed to achieve excellent operating results, bearing witness to the resilience of our company. The SMAT Group's operating results for the year show a substantial stability in performance with respect to the 4.0 Industrial Plan approved by the Shareholders’ Meeting held on 26 June 2020, as subsequently amended for FY 2020 by the Shareholders Meeting held on 25 September 2020. The results were determined by the activities performed during the year by the parent company Società Metropolitana Acque Torino S.p.A. (hereinafter also SMA Torino S.p.A. or SMAT S.p.A.) and its subsidiaries by virtue of the shareholdings held by SMA S.p.A. in its subsidiaries and associates.

A1. Introduction These financial statements of the Group and its parent company, SMA Torino S.p.A., illustrate the accounting data for FY 2020 compared to the previous year, presented pursuant to the International Financial Reporting Standards (IFRS) adopted by the European Union. At the meeting of 4 February 2021, the Board of Directors of the Company decided to postpone the convocation of the Meeting of Shareholders for approval of the financial statements as at 31 December 2020, availing itself of the extended term of 180 days after the end of the fiscal year as provided for in article 2364 of the Italian Civil Code and article 14(5) of the Company’s Articles of Association.

A2. Summary of 2020 results in figures

Consolidated Consolidated Financial Financial Financial Financial Absolute Absolute SMAT GROUP: SUMMARY OF THE Results IN FIGURES Variation % Statements Statements Variation % Statements Statements variation variation 2020 2019 2020 2019

ECONOMIC DATA Total Revenues 433,886 445,149 (11,263) -2.53% 432,046 442,953 (10,907) -2.46% Gross operating margin 122,567 134,984 (12,417) -9.20% 122,358 134,683 (12,325) -9.15% Gross operating margin/Total revenues 28.25% 30.32% -2.07 p.p. 28.32% 30.41% -2.09 p.p. Operating income (EBIT) 35,284 54,959 (19,675) -35.80% 35,136 54,695 (19,559) -35.76% Operating income (EBIT)/Total revenues 8.13% 12.35% -4.22 p.p. 8.13% 12.35% -4.22 p.p. Net profit (loss) 23,788 40,190 (16,402) -40.81% 23,684 40,102 (16,418) -40.94% Net profit (loss)/ Total Revenues 5.48% 9.03% -3.55 p.p. 5.48% 9.05% -3.57 p.p. EQUITY DATA Net fixed assets 885,704 845,008 40,696 4.82% 885,583 844,865 40,718 4.82% Net equity 661,883 646,282 15,601 2.41% 661,311 645,698 15,613 2.42% Gross financial debt (287,119) (286,701) (418) 0.15% (287,090) (286,631) (459) 0.16% Gross financial debt (249,201) (231,668) (17,533) 7.57% (249,892) (232,337) (17,555) 7.56%

OTHER DATA Investments 113,712 121,303 (7,591) -6.26% 113,673 121,279 (7,606) -6.27% Amortization 72,862 67,958 4,904 7.22% 72,801 67,899 4,902 7.22%

WORKFORCE1 1,010 1,037 (27) -2.60% 981 1,007 (26) -2.58%

ECONOMIC/EQUITY INDICATORS Gross Borrowing Need /Net Equity 0.43 0.44 (0.01) 0.43 0.44 (0.01) Gross Borrowing Need/GOM 2.34 2.12 0.22 2.35 2.13 0.22 EBITDA/Financial expense 2 27.93 27.23 0.70 27.96 27.29 0.67 ROI 2.97% 4.67% -1.7 p.p. 2.95% 4.65% -1.7 p.p. ROE 3.59% 6.22% -2.63 p.p. 3.58% 6.21% -2.63 p.p. Net financial Position/Net Equity ≤1 0.38 0.36 0.02 0.38 0.36 0.02 Net financial debt/ 2.30 1.88 0.42 2.32 1.90 0.42 GOM (EBIT3+Amortisation/Depreciation) ≤5 Gross financial debt/ 2.65 2.33 0.32 2.66 2.34 0.32 GOM (EBIT 3+Amortisation/Depreciation) ≤4,5 GOM (EBIT3+Amortisation/Depreciation)/Net Financial 85.93 (153.99) 239.92 86.68 (134.66) 221.34 expense>54 Net fixed assets/Gross financial debt ≥ 1,30 5 3.06 2.93 0.13 3.06 2.93 0.13 a1 Including outsourced work contracts and transfer contracts 2 Excluding the value adjustments of financial assets 3 EBITDA or GOM to be construed pursuant to the contractual declarations as EBIT + Amortization/Depreciation 4 For FY 2019 the GOM/financial charges ratio was negative, in that “net financial expense” was positive, income being greater than expense, and hence the convenant was complied with. 5Net fixed assets excluding goodwill.

A3. Main technical data and operating area At the end of the fiscal year, your Company supplied water services in 289 Municipalities, either directly or through Operational Services, besides water treatment services in the Municipalities of Burolo, Bruzolo and Villar Focchiardo.

Municipalities served as at 31 December 2020: 289 Drinking water plants: 94 Residents: 2,209,3726 Self‐produced energy: 30,678 MWh Surface area: 6,2922 Km2 Waterworks network in km: 12,699 % of the resident population served: 99.54 Sewer network in km: 9,990 Waterworks users contracts: 408,882 Water treatment plants 403 Water invoiced: 172,836,813 m3 Volumes treated: 339 mln m3

Taking into account the estimates for the accounting period, the volume of drinking water amounted to 172,836,813 m3, delivered to 408,882 users of whom 80% were domestic user contracts. The average per capita household use was 172 l/inhabitant/day with an average demand of 3,785 l/sec; the peak demand was 6,630 l/sec on 06/29/2020.

6 Source: ISTAT as at 31 December 2019

The water production capacity was used, within a general context where the lack of service does not virtually exist, obtaining resources from:

Sources 2020 Springs 15.00% Surface water 19.00% Water table 66.00% 100.00%

The urban wastewater treatment systems that are directly managed, divided by potential, are as follows:

Plants with potentialities of up to 2,000 p.e. 351 Plants between 2,000 p.e. and 10,000 p.e. 32 Plants between 10,000 p.e. and 100,000 p.e. 18 Plants between 100,000 p.e. and 2,000,000 p.e. 1 Plants over 2,000,000 p.e. 1 TOTAL 403

With regard to the drinking water treatment plant, in 2020 the treated volume amounted to 339 million m3, of which 3.7% represents the volume of industrial wastewater, and 22,629 tons of sludge, measured in terms of dried material, were produced. The data refers to plants that serve over 2,000 inhabitants equivalent (328 million m3 treated, of which 210 million m3 of the Castiglione Torinese plant), relative to the elimination of the effluent from pollutants and treatment yields, and shows a high index of efficiency and efficacy in the accounting period as in the percentage of reduction in the following indicators:

Breakdown pollutants Input Output Breakdown Breakdown % (Plants >=2,000 p.e.) t/year t/year Total suspended solids (SST) 63,819 2,184 61,635 97 Chemical oxygen demand (COD) 126,176 6,663 119,513 95 Biological oxygen demand (COD) 72,882 1,896 70,986 97

Total phosphorous (Ptot) 1,213 255 958 79

Total nitrogen (Ntot) 9,750 2,572 7,178 74

A4. General description of the activities Year 2020 corresponds to the 21st year in business of SMAT S.p.A. which continues management of the integrated water services in the plan of Turin Optimal Territorial Aea 3 (Ambito Territoriale Ottimale 3 Torinese - ATO3 Torinese), coordinated the Group activities and defined its strategic goals for a time frame extended until 2033. As is known, in view of the contingent liquidity needs that may arise from delayed payment or non-payment of Integrated Water Service (hereinafter “SII”) bills because of the economic crisis caused by the COVID-19 health emergency, on 26 June 2020 the Shareholders’ Meeting approved the Group’s Industrial Plan 4.0 (hereinafter, PI 4.0) and resolved to postpone the decision on the allocation of the dividend for 2019 to a Shareholders’ Meeting to be held by 30 September 2020. The meeting held on 25 September 2020 acknowledged the amendments to the PI 4.0 for 2020, as updated to take into account the economic-financial impact of the emergency period, and approved the allocation of the profit for 2019. The results achieved for the year were as predicted: Gross Operating Margin came to EUR 122 million, in accordance with the original PI 4.0, notwithstanding the reduction in revenue brought up by reduced consumption levels and the increase in operating costs due to the measures put in place to contain the spread of the Sars-Cov-2 virus.

Investments exceeded the amount specified in the Industrial Plan (EUR 107 million), and came to EUR 113.7 million, corresponding to 51.45 Euros per inhabitant. Operating results were accompanied by satisfactory financial data, which ensured compliance with the contractual covenants.

A5. Service agreement The management re-unification of Turin Territorial Area 3 (Ambito 3 Torinese) and the subsequent distribution of the service in compliance with the tariffs and action plan defined by the Local Regulator are exercised by your Company on the grounds of the following deeds: • The service agreement for the management of the integrated water service within Turin Territorial Aria 3 (ATO3) signed on 1 October 2004 in execution of resolution no. 173 adopted by the Turin Territorial Area 3 Conference on 27 May 2004; • Supplementary deed signed on 2 October 2009 for the assimilation of the periodical review of the 2008¬2023 Territorial Area Plan (Piano d’Ambito), approved by the Territorial Area Conference with resolution no. 349 on 27 March 27 2009; • Agreement signed with ACEA Pinerolese Industriale S.p.A. on 28 December 2007 for the implementation starting 1 July 2007 of the provisions set out in resolution no. 282 adopted by the Turin Water Territorial Area Conference on 14 June 2007, which confirmed SMAT’s role as Sole Provider of Integrated Water Services for the Turin Territorial Area and that of ACEA as safeguarded operational provider in the territory of historical reference, as revised by the parties on 29 November 2015; • With Resolution no. 598 of 29 April 2016, ATO3 approved the updated Territorial Area Plan (Piano d’Ambito) for 2016-2033, confirmed the choice of an in-house appointment, and the management role of SMAT S.p.A. until 31 December 2033, a term deemed sufficient to ensure the economic and financial sustainability of the investments required by the Plan; • On 8 August 2016, SMAT and ATO3 signed an addendum to the agreement, whose aim was to ensure conformity of the Service Agreement to the terms of the Standard Agreement approved by AEEGSI with resolution no. 656/2015/R/IDR of 23 December 2015, as submitted to the Shareholders’ Meeting on 14 October 2016. • On 6 December 2018 the Shareholder Meeting approved an amendment to the addendum to the Agreement implementing the two-yearly tariff adjustment provisions for 2018-2019 and the development of the economic plan for the 2018-2033 period, approved by ATO 3 with resolution no. 692 on 26 June 2018. • on 27 June and 11 July 2019, SMAT S.p.A. and ATO3 signed another addendum to the Agreement to implement the updated financial-economic plan approved by ATO with resolution no. 720 on 4 September 2019. • on 17 and 23 February 2021, SMAT S.p.A. and ATO3 signed another addendum to the Agreement to implement the updated financial-economic plan approved by ATO with resolution no. 774 on 12 October 2020.

A6. The Territorial Area Plan and the programme of interventions On 21 December 2015, with its resolution no. 587, Turin ATO3 updated the Territorial Area Plan for the 2016- 2033 period, providing for total investments of EUR 1,534,138,724, and sent it to the Regional Executive Council and to the Authority for Electricity, Gas and Water Systems (AEEGSI now ARERA) in fulfilment of the ensuing obligations.

On 29 April 2016, with resolution no. 598, Local Regulator 3 approved the updated Territorial Area Plan (2016¬2033), which adopted the amendments introduced during the Strategic Environmental Assessment.

On 26 June 2018, with resolution no. 692, “Two-Yearly tariff adjustment provisions for 2018-2019 and the development of the Economic Financial Plan for 2018-2033” Local Regulator 3 approved the Programme of Interventions (PdI) setting forth the objectives of the Territorial Area Plan, as well as the Technical Quality objectives.

On 23 July 2020 with resolution no. 759, the Local Regulator 3 approved the Programme of Interventions (PdI) for 2020-2023 e the Strategic Works Plan for 2020-2027 pursuant to resolution no. 580/2019/R/IDR adopted by ARERA on 27 December 2019.

A7. Applied research & development activities In 2020, the lead role was played by Sars-Cov-2, a virus that consists of a protein envelope enclosing about thirty genes, and that at present is the most extensively analysed virus in history. In such a difficult year, the scientific communities have taken centre stage in the eyes of the public, by virtue of the scientists networking capacity and the interdisciplinary efforts of those who realised the need to work together in order to try and eradicate the new coronavirus. The science is the tool to understand and improve the life of all human beings, and investing in research and development is an act of resilience and confidence in the future.

For years SMAT has devoted to research and innovation a sizeable share of its structures and resources: the SMAT Research Centre is a benchmark for the water cycle at national and international levels. Through its Evaluation Committee, SMAT selects and develops its projects from the perspective of sustainable development: the protection of people’s health and the preservation of water resources, and of environment in general, are the focus of all company activities.

SMAT’s new industrial plan, approved in 2020 when the pandemic was in full swing, confirmed the important of Research Centre activities to the growth of the company. From self-production of energy from renewable sources, to emission abatement plans or the studies on emerging pollutants and the impact of climate change on the complete water cycle, research activities did not lag behind: . 14 projects were completed; . 14 projects undertaken in previous years were carried on; . 9 new projects were started; . 1 project was deemed suitable for funding within the framework of the Horizon 2020 programme; . 18 scientific publications were completed; . 9 new collaboration agreements were entered into with public and private organisations; . 53 were the academic and industrial partners with whom SMAT collaborated.

The guidelines for the selection of the projects to be undertaken are defined by the Evaluation Committee headed by SMAT’s Chairman and – in addition to the Chairman – composed of the Managing Director, the General Manager, the Head of the Research Centre and the Head of Marketing & Development. As needed, the Chairman convenes the meetings, which are attended by all the members of the Evaluation Committee and R&D staff members to review, assess and approve the progress of the projects underway and the start of new ones.

A8. International projects In the course of 2020, SMAT developed – directly and through its Research Centre – several activities of international significant, many of them profiting from European funds granted within the framework of the Horizon 2020 program.

In particular, SMAT participated as a partner in two bids submitted in connection with a call for projects promoted by the Italian Agency for Development Cooperation “Promotion of Territorial Partnerships and territorial implementation of the 2030 Agenda” for cooperation projects in Ethiopia and Guatemala for a better management of water supply services.

Moreover, SMAT continued to collaborate with Aqua Publica Europea (APE) , an organisation that bring together Europe’s main Public Water Operators and includes among its members more than sixty publicly- owned water companies provided full water supply services to more than 80 million European citizens in Austria, Belgium, France, Germany, Greece, Hungary, Ireland, Italy, Montenegro, Portugal , Scotland, Spain and Switzerland.

Together with SWDE and Aguas del Huesna, SMAT coordinated working group “WG 4 Innovation“ in charge of research and innovation in the water supply sector, with meetings addressing the issue of Water Safety Plans, remote meter reading methods, Big Data and Artificial Intelligence (AI), the Internet of Things (IoT) and treatment plant mud treatments.

A9. SMA Torino S.p.A. Membership in National and European Associations In 2020, SMAT continued to collaborate actively with numerous associations working at different levels, from international to local level, with the aim to contribute to emerging service-related issues and to always stay updated in every technical, administrative and logistics field.

The most significant associations are described below, with indications of their operating range (W – World; E – Europe; N – National; L – Local).

N - Utilitalia is the National Federation that gathers more than 500 Companies operating in the local public services, amongst which the Integrated Water System, with approx. 90,000 operators and a production volume worth approx. 38 billion Euros. In particular, the Utilitalia Members provide the water service to approx. 80% of the national population. Within the largest Italian association, SMAT is represented in the Steering Committee, in the Executive Council and is present in several Commissions (Drinking Water, Wastewater, Regulation, In-house and SME).

L - Confservizi Piemonte and Valle d’Aosta is the service company confederation that represents the Members that operate in the SPLs of industrial application (Water, Gas, Energy, Environmental Hygiene and TPL). SMAT S.p.A. is represented by two members in the Executive Council.

E - Aqua Publica Europea is the European Association of Public Operators of the Water Sector based in Brussels; it includes public companies from 13 Countries serving more than 80 million inhabitants and generating an overall turnover of approx. 10 billion Euros per annum. In 2019 the European Public Water General Assembly elected the new Board of Directors and nominated a new Vice President, Engineer Paolo Romano – President of SMAT S.p.A. SMAT S.p.A is part of the APE Work Group and one of the coordinating companies for the Innovation & Research Group

L – The Utility Alliance of Piedmont is a network of fully state-owned companies that manage public utility services in the following areas: water supply (Water Alliance), energy (Energy Alliance) and environmental preservation (Environment Alliance). The Utility Alliance of Piemonte, which unites 14 Public Service Providers in the water, energy and environmental protection sectors, with in-house concessions in the Piemonte Region and serving over 3.5 million residents (approximately 80% of the population in Piemonte), with comprehensive turnover of more than 600 million Euros. SMAT holds a member within the Shared Management Committee.

W - IWA – International Water Association is a non-governmental and non-profit organisation with offices in London, which aims to cover all aspects of the integrated water cycle.

E - EUREAU is the European Association that gathers companies that operate in the sector of drinking water and of waste water treatment, serving over 400 million inhabitants of the European Union. Its members come from 29 different European Countries (26 EU, 2 EFTA and 1 observer). EurEau promotes the shared interests towards the European Institutions and pays special care to the pathway that generates the policies related to the water sector. SMAT represents Utilitalia in the Drinking Water Commission

E - WATER EUROPE is a technology platform for water supply and distribution, and for the end treatment of wastewater established by the European Commission in 2004; its aim is to enhance and improve the performance of water operators according to sustainable and inclusive criteria and contribute to address the global challenges the world faces in the field of water supply. Its goals are to develop research and take up the challenges of an integrated and sustainable management of water resources. SMAT is present with its Research Centre and as representative of Utilitalia.

N - SPRING – Sustainable Process and Resources for Innovation and National Growth is a non-profit association that involves innovative subjects dedicated to the development of the entire green chemistry supply chain, to approach a new economy (bio-economy). The objective is to contribute to the creation of the right conditions for developing context, and a dynamic, innovative, competitive industrial and academic framework, in constant growth. SMAT has a member in the governing council.

N - REF Ricerche is a research institute staffed by a team of economists offering analyses in the fields of integrated water service, energy policies, the labour market, public funding and international cooperation. SMAT takes an active part in the REF think-tank and provides support with the drafting of the institute’s numerous publications.

E - European House Ambrosetti: within this well-known organisation that analyses the economic context at national, European and world levels and prepares strategic scenario studies, SMAT is a partner in the Value of Water Community, a multi-stakeholder platform on the management of water resources as a competitiveness and development drivers.

B. COMPOSITION OF THE SMAT GROUP

B1. Parent Company SMA Torino S.p.A. The Capital Stock at the end of fiscal year 2020 is equal to € 345,533,761.65, fully paid and recorded to the Register of Enterprises of Turin in compliance with the law, and it is represented by 5,352,963 ordinary shares of the unit nominal value of € 64.55. The share register, updated to the date of the balance sheet, the Municipality of Turin directly holds 3,231,679 shares and - indirectly - through subsidiary Finanziaria Città di Torino Holding S.r.l., other 169,331 shares, for a total amount of 63.53% of the Share Capital. The Parent Company holds 492,965 (9.21 % of the Capital Stock) own shares that it purchased pursuant to art. 2357 of the Italian Civil Code. The remaining 1,458,988 shares (which represent 27.26% of the Capital Stock, equal to Euro 94,177,675.40) are distributed amongst 289 other Associates, 287 of which are Municipalities.

B2. Own shares and shareholdings in subsidiaries As at 12/31/2020 the number of own shares held by the parent company SMAT S.p.A. Amounts to 492,965 shares (representing 9.21% of the share capital for a total value of EUR 32,993,340.40) and corresponding to the relative negative Net Equity provision. The available reserves in the 2020 balance sheet, after purchasing owned shares in the previous years, are nearly totally exhausted. Within the SMAT Group, the subsidiaries do not hold any shares n the controlling company.

B3. Subsidiaries and associates included in the consolidation area

SUBSIDIARIES: - RISORSE IDRICHE S.p.A. with registered office in Turin To 31 December 2020, the Capital Stock of Euro 412,768.72 is held at 91.62% by the Parent Company and for the remaining part by Service and design companies that operate at local level. The company prevailingly operates in the engineering sector relevant to the Integrated Water Service and was transferred by the Parent Company - effective on 1 January 2005, the branch of activity relevant to the design services with the specific aim of maximizing the sistematicity, the quality, organizational efficiency, flexibility and design standardization of the Integrated Water Service with special reference to the territory water infrastructures connected to the Piano d’Ambito. Fiscal year 2020 closed with an operating income of EUR 20,533 and a net result of EUR 17,714. The activities of the subsidiary are fully focused to Parent Company SMAT, for which it developed the totality of the appointments for design and works management it received. Consequently, the Net Capital of the subsidiary at the end of 2020 amounts to Euro 687,061. Subsidiary Risorse Idriche S.p.A. has been consolidated by the Integral Consolidation method since fiscal year 2004.

- AIDA AMBIENTE S.r.l. with registered office in Pianezza On 1 August 2008, the Parent Company subscribed to 51% of the Capital Stock, namely EUR 100,000, of Company AIDA Ambiente S.r.l., established at the same date, since the remaining part was subscribed by Azienda Intercomunale Difesa Ambiente A.I.D.A. di Pianezza. Since the Company operates in a systematic, independent way within the group framework with the Parent Company, and is therefore subject to the management and coordination of the latter in compliance with articles 2359 and 2497 of the Civil Code, it is assigned to the management of segments of the integrated water cycle managed by the Parent Company as Sole Territorial Service Provider, as well as the management of liquid waste as defined by the law. The management evolution of the subsidiary generated and EBIT of Euro 71,319 and a positive Net Result of Euro 53,827 in the fiscal year 2020. Consequently, the Net Capital of the subsidiary at the end of 2020 amounts to Euro 690,008. The aforesaid company was consolidated by the Integral Consolidation method since fiscal year 2009.

COMPANIES SUBJECT TO JOINT EQUAL CONTROL (ASSOCIATES) - SAP S.p.A. with registered office in Turin Società Acque Potabili S.p.A. is an associate of SMAT holding an equal interest of 44.924% in IRETI S.p.A., with 3,429,125 shares, each with a nominal value of EUR 1.00. The ordinary shareholders’ meeting of SAP S.p.A. held on 29 April 2021 approve the financial statements as at 31 December 2020, which closed with a loss of EUR 3,042,000. At the end of 2020, net worth came to EUR 17,380,000 (IAS/IFRS criteria), whereas consolidated net worth as at 31 December 2019 amounted to EUR 22,053,000. For the purposes of the consolidated financial statements as at 31 December 2020, the shareholding in Acque Potabili S.p.A. was assessed with the Net Equity method, since there are the premises that define its equal joint control, together with IRETI, and it was classified amongst the shareholdings in associated companies with joint control. In the consolidated financial statements, the value of the shareholding was EUR 7,808,000 (it was EUR 9,907,000 in 31 December 2019). This value was confirmed by impairment test conducted by an independent expert. The evolution of the shareholding is described in paragraph G1 “Acque Potabili S.p.A. extraordinary operations”, where we learn that the last extraordinary shareholders’ meeting held by Società Acque Potabili on 29 April 2021 resolved on the cancellation of treasury shares without a reduction in share capital. On account of the number of shares owned (3,429,125) over a total number of shares of 7,212,157, the interest held by SMAT increased in 2021 from 44.92% to 47.55%, giving rise to a write-up of about EUR 455,000.

B4. Shareholdings in other companies - APS S.p.A. in Liquidation (now in bankruptcy) in Palermo Company Acque Potabili Siciliane S.p.A. (APS) was established on 27 February 2007 with an initial Share Capital of EUR 5,000,000, and it is held jointly for 9.83% by SMAT S.p.A. and Mediterranea of Acque S.p.A. The same company was established as a result of the tender called for awarding the Integrated Water Service in the territory of the 81 Municipalities of the Province of Palermo (Municipality of Palermo excluded) by ATO 1 of Palermo.

Arbitration On 25 June 2015, an articulated arbitration procedure started on 7 January 2010 by the submittal by APS and of the shareholders aimed at: • ascertaining that AATO 1 Palermo had become seriously noncompliant against the AAPS authority; • sentencing AATO 1 Palermo to full compliance with the Agreement and to restore the economic and financial balance of the concession; • sentencing AATO 1 Palermo to pay in any event the damages suffered by APS deriving from the ascertained and declared noncompliances. The final Award of the arbitration between Acque Potabili Siciliane in bankruptcy, Acque Potabili S.p.A. and AATO 1 Palermo was deposited on June 25th 2005.

The Award acknowledged in favor of Acque Potabili Siciliane in bankruptcy and against, the following amounts: • EUR 18,349,342.00 for the indemnity of the redemption bonuses • EUR 21,195,041.00 less revenue for non- collection of the set-off amount by AMAP; • Euro 5,923,000.00 reduced revenue for lower water volumes invoiced and different rates applied; • EUR 3,212,037.00 greater wholesale water costs; • EUR 773,000.00 less revenues resulting from arrears. Furthermore, the arbitration acknowledges some of the emerging damage assumptios affecting the shareholders, highlighting that they can enforce them against Acque Potabili Siciliane in bankrupcty also through claiming in the liabilities, i.e. : • Euro 6,600,681.00 for the engineering shareholders; • EUR 1,350,685.00 for the management shareholders (of which EUR 359,548 for SMAT) as related to the know-how project On the other hand, all the damage assumptions claimed by ’ATO (for an overall amount of Euro 200,000,000.00) were rejected and the only damage claim is the one regarding the Management

Agreement fee, for a total amount of EUR 23,815,000.00. Subsequently, the final Award grants damages to ’ATO for an overall amount of Euro 33,588,.786. On 9 February 2016, ’AATO 1 Palermo notified the summons to appear in court for an appeal with request of declaration of groundlessness, after with holding the effectiveness, of the Second, Non-Final Award of 29 October 2012, of the Third Non-Final Award of 24 February 2015 and of the Final Award of 25 June 2015, which were pronounced as related to the aforementioned arbitration. By an order filed on 28 July 2016, the Court of Appeal of Palermo ordered r the withholding of the effectiveness of the final award of June 25th 2015, upon condition that ’AATO 1 Palermo provides the appropriate surety policy. The Court of Appeal has also ordered to adjourn the proceedings for the clarification of the conclusions to the hearing of 7 November 2018. At the hearing on 7 November 2018 all the Parties presented their respective conclusions. Subsequently the Court assigned the terms for the closing arguments, which all the Parties compiled and deposited. With a ruling filed on 8 January 2021, the Court of Appeal of Palermo – First Civil Section – confirmed the non-definitive arbitration awards issued in 2012 and 2015 as well as the final arbitration award, of 25 June 2015, issued by the Arbitration Panel, and ordered AATO 1 Palermo to pay the costs of the proceedings. With reference to the aforementioned investment in Acque Potabili Siciliane S.p.A., until 28 October 2013, under Extraordinary Administration Procedure, now in Bankruptcy, was subjected to complete writedown in the previous fiscal years. Furthermore, already in fiscal year 2010, SMAT S.p.A. set up an ad hoc provision for liabilities and potential charges of EUR 650,000 and - in the financial statements as at 31 December 2013 - provided for the full extinction of all the payables accrued up to the end of the Extraordinary Administration Procedure period (28 October 2013). - SII S.p.A. with registered office in Vercelli 19.99 % shareholdings in Servizio Idrico Integrato del Biellese e Vercellese S.p.A. di Vercelli (Share Capital 131 thousand Euros – accounted cost and value 1,300,102 Euros). Furthermore, the Company features shareholdings by Municipalities of Ambito 2 Vercellese and - since the object is the management of the water service in the Associated Municipalities, it shows a remarkable synergy potential with other local entrepreneurial realities in the perspective of being entrusted the management of the Integrated Water Service of said Ambito. - NOS S.p.A. with registered office in Turin 10% Shareholding in Nord Ovest Servizi S.p.A. di Torino (Share capital EUR 7,800,000). Furthermore, the Company features a shareholding by Iren Acqua Gas S.p.A. of Genova, and by other public and private providers. “Nord Ovest Servizi S.p.A.” manages the 45% shareholding in Asti Servizi Pubblici S.p.A.”, which was purchased as a result of a public call of tender by a joint venture of the same shareholders in Nord Ovest Servizi. - Mondo Acqua S.p.A. with registered office in Mondovì 4.92% shareholding in Mondo Acqua S.p.A. of Mondovì (Share Capital 1,100 thousand Euros – accounted cost and value 18,204 Euros) Company with majority local public shareholding, held by the municipalities of Mondovì, Briglia, Villanova Mondovì, Roccaforte Mondovì and Vicoforte. The company purpose is the management of the water service in the territory of the shareholding Municipalities. - Environment Park S.p.A. with registered office in Turin 3.38% in Environment Park S.p.A. of Turin (Share Capital 11,407 thousand Euros - cost 463,565 and accounted value 385,440 Euros). Furthermore, the Company is also held by Public bodies, Service Companies and financial companies with local value and its purpose is the management of the environmental technological park appointed to research aimed at sustainable development. - Galatea S.c.a.r.l. with registered office in Alessandria 0.50% participating interest in Galatea S.c.a.r.l. Cooperative company of Alessandria (Share Capital 10,000 Euros - accounted cost and value 51 Euros) in divestment process, whose object is the building and management of the waste water treatment plant of the Municipality of S. Stefano Belbo. - Utility Alliance with registered office in Piemonte 7.14% shareholdings in Utility Alliance- del Piemonte with offices in Turin (70,000 Euros equity fund on the date of the financial Statements – accounted cost and value 5,000 Euros). Such network of public enterprises with in-house mandates was established by Notary Deed of 19 July 2016 among 11 water service companies of Piedmont, that have signed an ad hoc "network agreement" aimed at upgrading their

competitive capacity through the shared exercise of representing interests in institutional and associative stakeholders, as well as in the decision-making processes. After the entrance of the new "network partners" Alegas S.r.l. and S.I.I. S.p.A. – Servizio Idrico Integrato del Biellese e Vercellese in the course of fiscal year 2019, the number of water company members became 14. By notary deed dated 21/05/2019, the consortium of companies took on the new name “Utility Alliance del Piemonte”, expanding its operating area, adding the energy sector (Energy Alliance) to water services (Water Alliance), as well as environmental protection (Environmental Alliance), and opening up the possibility to join the network also for public service providers that manage public services and share the same goals as the business network. - Hydroaid – International School of Water Development 11.58% shareholdings in Hydroaid – International School of Water Development with offices in Turin (endowment € 259,000 - accounted cost and value 30,000 Euros), composed of permanent shareholders coming from the public and private sectors (Piemonte Region, Turin Municipality, San Paolo Company, Turin Chamber of Commerce, Hydrodata S.p.A., in addition to SMAT), working to support corporate business and actively contributing to the creation of numerous projects and initiatives.

C. SMAT GROUP ECONOMIC TREND

Consolidated Consolidated Financial Financial Financial Financial Absolute Absolute Amounts in ,000 Euros Variation % Statements Statements Variation % Statements Statements variation variation 2020 2019 2020 2019

Revenues 318,122 320,058 (1,936) -0.60% 318,174 320,117 (1,943) -0.61% Revenues for planning and construction activities 100,187 103,823 (3,636) -3.50% 100,187 103,823 (3,636) -3.50% Other revenues 15,577 21,268 (5,691) -26.76% 13,685 19,014 (5,329) -28.03% Total Revenues 433,886 445,149 (11,263) -2.53% 432,046 442,954 (10,908) -2.46% Consumption of raw materials and consumables (14,300) (13,812) (488) 3.53% (14,169) (13,713) (456) 3.33% Costs for leased assets and services (117,171) (110,410) (6,761) 6.12% (117,657) (110,845) (6,812) 6.15% Payroll costs (62,615) (63,568) 953 -1.50% (60,701) (61,551) 850 -1.38% Other operating expenses (21,456) (22,953) 1,497 -6.52% (21,384) (22,738) 1,354 -5.95% Costs for planning and construction activities (95,777) (99,423) 3,646 -3.67% (95,777) (99,423) 3,646 -3.67% Total operating expenses (311,319) (310,165) (1,154) 0.37% (309,688) (308,270) (1,418) 0.46% Gross operating margin 122,567 134,984 (12,417) -9.20% 122,358 134,684 (12,326) -9.15% Depreciation, provisions and writedowns (87,283) (80,025) (7,258) 9.07% (87,223) (79,989) (7,234) 9.04% Operating income (EBIT) 35,284 54,959 (19,675) -35.80% 35,136 54,695 (19,560) -35.76% Total financial management (1,258) 798 (2,056) -257.64% (1,245) 910 (2,155) -236.81% Result before taxes 34,026 55,758 (21,732) -38.98% 33,890 55,605 (21,715) -39.05% Income Taxes (10,238) (15,568) 5,330 -34.24% (10,206) (15,503) 5,297 -34.17% Net Profit/(loss) for the year 23,788 40,190 (16,402) -40.81% 23,684 40,102 (16,418) -40.94% Of which belonging to non-controlling interests 30 60 belonging to shareholders of the Parent Company 23,758 40,130

In 2020 the revenues recorded by the Parent Company decreased by about 0.61%, a decline that may be attributed to a contraction in the level of consumption for industrial and craftsmanship uses arising from the economic crisis already commented on in the report, offset by the application of tariffs 2.2% higher than the previous year. Also recorded was a reduction in accessory revenues from users (due, in particular, to the reduction in expenses charged with reference to the revision of the Integrated Water Servicer (SII) Regulation and the smaller quantity of formal requests for payment issued during the year on account of the suspension measures adopted during the emergency period), a drop in revenues due to the shutdown of water supply points due to the Covid emergency, and a reduction in sales of self-produced electricity following the reduction in collection fees; all this was mitigated by a relative increase in the activity of biomethane collection from the Castiglione plant and the turnover from leachate and biomass treatments.

A 28.03% decline in “Other revenues” was primarily due to a reduction in contingent assets and unsubstantiated liabilities over the previous year, where such entries had taken on a particularly significant value, as well as due to a reduction in grants for equipment and plant, and adjustments to the reserves.

The “Costs of raw and expendable materials” show a total 3.33% increase from the previous year, in particular resulting from the effect of the costs for materials for maintenance.

“Costs for leased assets and services” increase by 6.15% over 2019. This variation was mostly due to the increase in costs associated with the health emergency (intensification of cleaning and sanitising operations in office premises and water points, higher safety charges in connection with maintenance works), with electric energy (electricity consumption increased and so did the cost per kWh for the purchase of electric energy from renewable sources), with maintenance operations (also correlated with the management of the rainwater drainage infrastructure), sludge transport and disposal, contract work and meter reading services. Conversely, costs for services rendered by Operative Management Subjects decreased and so did gas consumption costs.

A 1.38% decrease in “Payroll costs” may be ascribed primarily to savings obtained from personnel transfers. All this was mitigated by changes in wages and salaries arising from the renewal of the National Labour Agreement and the implementation of the operational activities correlated with technical quality

“Other operating expenses” went down by 5.95% over the previous year mostly due to reduced capital losses on disposal of assets, reimbursements for indemnities due to users, contingent liabilities and unsubstantiated assets. Furthermore, costs decreased due to various factors, including the supplement bonus, contributions to the Mountain Communities, and taxes on public works tenders (following the suspension of the contributions requested for the Covid-19 emergency).

The item Amortization, depreciation and write-downs increased by 9.04%, for amortizations on investments concluded and implemented during the year and amortizations on leased goods, and the depreciation of the shareholding in SAP, explained in the proper paragraph. “Financial income” decreased by 46.46% over 2019 due to the reduction in late payment interests charged to users following the adoption by ARERA of the new “SII Late Payment Management provisions” and the measures put in place by ARERA in the months from March to May to support the users. Another factor accounting for the reduction in this entry was reduced Revenues from Related Parties. The financial charges, which include the actuarian assessment according to IFRS principle 16, are decreasing mainly due to lesser inerests and guarantee commissions on mortgages.

D. INVESTMENTS BY SMA TORINO S.P.A. AND THE SMAT GROUP

The framework of the technical investments developed by the Parent Company and its subsidiaries in the balance sheet period is reported in the following table:

Investments SMAT S.p.A. Investments Tangible fixed assets 12,129,757 Intangible fixed assets 1,356,291 Assets under concession 100,187,123 SMAT S.p.A.Total investments 113,673,171 Investments by AIDA Ambiente Tangible fixed assets 13,873 Intangible fixed assets 0 AIDA Ambiente Total investments 13,873 Investments by Risorse Idriche Tangible fixed assets 24,460 Intangible fixed assets 0 Total Investments by Risorse Idriche 24,460

SMAT Group Total investments 113,711,504

STATE OF PROGRESS OF LARGE INFRASTRUCTURE

The Valle Susa Aqueduct and Waterworks This allows the use of the drinking water of the Rochemolles dam through the development of a main duct of over 66 km that, thanks to another 40 km of feed pipelines, serves 30 Municipalities of the Valley, delivering 16 million m3/year of high-quality drinking water. The waterworks will be equipped with three hydro-electrical power plants that will exploit the altimetry difference between the drinking water plant in Bardonecchia and the Gravere reservoir and will generate electricity thanks to a multi-purpose use of the resources so as to make the entire system self-sufficient. Once on stream, it is expected to the problems that may arise from climate change, by compensating for rising temperatures and decreasing precipitation. November 2020 saw the completion of the works for the supply and installation of the power plant hydroelectric systems. In 2018 the installation of the main pipeline from Bardonecchia to Salbertrand was completed, together with a significant share of the relative completion piping and installation works to create the interconnections with the towns in the valley. A drinking water treatment plant to serve the City of Bardonecchia was inaugurated in 2019. All the pipelines were commissioned in 2020, with special regard to the one connecting Bussoleno and Salbertrand, including rail crossings and 90% of the dispatching lines. Particularly significant will be the installation of a new steel pipeline – 600 mm in diameter and over 5 km long – connecting Rosta, Buttigliera and Rivoli, worth over 10 million (partly funded by the National Waterworks Plan). Construction works are expected to be completed in 2022. The works completed as at 31 December 2020 were worth over EUR 127 million.

Reclamation of the water treatment system for the Ivrea District Construction works on the ultra-filtration system of the Plant in San Bernardo di Ivrea (proj. 445) and the installation of the first lot of manifolds on the right bank of the Dora River were completed in 2019. The contract for second lot of manifolds was awarded in 2020. The year also saw the completion of the works for the expansion of the sewage treatment plant in Torre Balfredo (East Ivrea), which resulted in the plant being upgraded from a secondary to a tertiary plant for the abatement of nutrients, thereby also completing the

23 treatment system for the left bank of the Dora Baltea River. The works completed as at 31 December 2020 were worth over EUR 21 million.

Mediano Main Sewer The enormous work is a main sewer of 3.2 m in diameter made with a depth of 20 m in underground crossing of the entire urban area of Turin from South to North for a total length of over 14 km. The work (project 3186) is a single sewage main sewer to be built in parallel to the existing one and to be used in alternative to it in cases of malfunction or maintenance. Another of its important functions is to serve as an accumulation tank for first rain waters to be sent for treatment in a differentiated way. Using the new main sewer, it will be possible to proceed with maintenance of the old canal and avoid the environmental consequences of subsiding. In 2018, SMAT drafted the preliminary advanced project, and then published a call for bids to contract the design and execution of the entire job. In 2019, after assessing all the received offers, the awarding commission identified the assigned group for the tender. The project presented on 4 December, 2019 includes that the works are carried out totally in the Municipality of Turin, for the purpose of improving management of rain water collected in the sewer system coming from 30 municipalities in the south-west area of the city, as well as storm water from the Municipality of Turin network. The objectives are: - to plan for the problems stemming from changes in climate, to alternate periods of drought with rainy periods, planning for future generations, - to increase system reliability, - to contribute to reducing environmental pollution. In the Strategic Works Plan, the cost of these works is said to be EUR 146 million and their completion is scheduled to take place during the 2021 operating year, following the approval of the final construction plan.

The Valle Orco Aqueduct and Waterworks This is the greatest and most extensive of the large infrastructure projects in the industrial plan of SMAT S.p.A. for the next few years. It will cover the current water deficits in terms of quantity as well as quality in the areas of Ivrea, Caluso and Canavese. The aqueduct will use the water from the reservoirs of Ceresole, Telessio and Angel situated at high altitude in the Parco del Gran Paradiso and today exploited by Iren Energia only for the production of hydroelectric power; the aqueduct will have a positive impact for agriculture, tourism ed other economic sectors.The infrastructure (project 3199) will consist of 140 km of pipeline, for sourcing and supplying that will serve over 50 municipalities directly and indirectly, from Rivarolo to Cuorgnè and from Castellamonte to Ivrea amounting to over 120,000 inhabitants. Over the course of 2018, the whole project was submitted to the assessment of EIA (Environmental Impact Assessment) liability at the Ministry of the Environment. On 6 February 2019, the project was deemed as screened for EIA. Following the tender process, the project for designing the water treatment plant and pipelines were assigned. The economic framework is EUR 186 million and the time needed to complete the work is scheduled in the Strategic Works Plan. In June 2019, the Agreement between Regione/ATO3/SMAT/IREN Energia for the use of water resources for drinking water needs was signed. In the course of 2021 it will be possible to conclude the service conference for the approval of the definitive project. With the development and the approval of the final construction project, the works should be completed by the end of 2022.

Revamping the Po drinking water treatment plant The modernization activities of the facilities for the drinking water treatment plants Po1, Po2 and Po3 introduced in the Po-La Loggia plant complex at the service of the drinking water network of the City of Turin proceed. The definitive project was completed over the course of 2018 and approved by ATO in January 2019. The integrated works contract was awarded on 21 September 2020. The final construction project will be developed during the year 2021. The final delivery will probably occur during the early months of 2022. Also nearing completion is the final construction project for the pipeline feeding the Valsalice reservoir and the Castello in Moncalieri reservoir. These works should also be completed in the early months of 2022. Their overall cost is believed to be EUR 125 million.

Biogas upgrading plant for the production biomethane Situated within the water treatment hub in Castiglione, the plant was completed and commissioned in 2020 with an investment of ca. EUR 5 million (project 12501) The biomethane production process consists of removing carbon dioxide and other undesired compounds (H2O, H2S, siloxanes, halogenated compounds, etc.) from the biogas so as to produce a gaseous mixture having a methane content similar to that of natural gas and suitable for pumping into the distribution network in lieu of gas from fossil sources, with undeniable benefits for the environment and a reduction in CO2eq emissions.

Thermal oxidation plant An environmental impact study is being conducted for this plant worth EUR 50 million (proj. 14396). It will be constructed at the SMAT treatment plant in Castiglione Torinese, the biggest water treatment plant in Italy and one of the biggest in Europe, in the service of 3 million equivalent inhabitants in the Turin metropolitan area. It will make it possible to recover energy from sludge.

E. FINANCIAL MANAGEMENT OF SMA TORINO S.P.A. AND THE SMAT GROUP

Consolidated Consolidated Financial Financial financial financial Amounts in ,000 Euros statements as of statements as at statements as of statements as at 12/31/2020 12/31/2019 12/31/2020 12/31/2019

A. Cash and cash equivalents 10 45 9 45 B. Other liquidity 37,908 54,988 37,188 54,249 C. Shares held for negotiation 0 0 0 0 D. Liquidity (A) + (B) + (C) 37,918 55,033 37,197 54,294 E. Current financial credits 0 0 0 0 F. Current bank debt (2,126) (2,135) (2,126) (2,135) G. Current part of non-current payables (45,619) (48,707) (45,619) (48,707) H. Other current financial debts (268) (1,092) (238) (1,049) I. Current financial payables (F)+(G)+(H) (48,013) (51,934) (47,983) (51,891) J. Net current financial payables (D) + (E) + (I) (10,095) 3,099 (10,786) 2,403 K. Non-current bank debts (104,399) (100,049) (104,399) (100,049) L. Issued bonds (134,311) (134,142) (134,311) (134,142) M. Other non-current debts (396) (576) (396) (549) N. Non-current financial payables (K) + (L) + (M) (239,106) (234,767) (239,106) (234,740) O. Net Financial Position (J) + (N) (249,201) (231,668) (249,892) (232,337)

The current net financial payables of the Parent Company as at 31 December 2020 presents a balance of EUR -10.786 million, versus EUR -2.403 million of the previous fiscal year. Net financial position as at 12/31/2020 amounted to EUR -249.892 million as opposed to EUR -250.941 million as at 12/31/2019. This variation is due to several factors: a new 50 million loan obtained to support the investments made in connection with the implementation of the Territorial Area Plan (Piano d’Ambito), principal payments relating to current loans, and a reduction in amortized cost for the debenture loan and mortgages. Total gross financial debt of the Parent Company as at 31 December 2020 amounted to EUR 287,089,000, of which EUR 47,983,000 due within the next fiscal year, and EUR 239,106,000 due after the next fiscal year For more details, see the Notes to the Accounts of the Parent Company SMAT S.p.A. The situation of the Group is substantially similar: the net financial position as to 31 December 2020 amounts to -249,201 kEuro versus the -231,668 kEuro of the previous fiscal year. The difference versus the results of the Parent Comany is mainly determined by the liquidity of subsidiary AIDA Ambiente.

FINANCIAL RISKS Below you will find comments regarding the financial risks to which the group business is exposed and the hedges provided where needed.

Liquidity risk The financial activity is, for the most part, managed separately by each company of the Group with autonomous management of the financial flows and current accounts in banks utilized for collection and payment operations, as well as negotiations with the banking system for collection and payment transactions. Starting in fiscal year 2015, a cash-pooling system was activated between the Parent Company and its subsidiary Risorse Idriche S.p.A. to optimize the liquid assets management and the associated financial charges through a greater integration of the control by the Parent Company. Starting in fiscal year 2015, a cash-pooling system was activated between the Parent Company and its subsidiary Risorse Idriche S.p.A. to optimize the liquid assets management and the associated financial charges through a greater integration of the control by the Parent Company.

Guarantees and covenants on the debt

The composition and conditions of the loans are itemized in the Notes to the Accounts in the comment on the financial liabilities. As at 12/31/2020 part of the financial position of the Group and of the Company is represented by loan agreements that involve clauses — in line with international procedures — that forbid some operations. Amongst them, the commitment to not grant future financiers any burden on any own assets (negative covenant) and the commitment to treat the obligations undertaken on equal terms with all other present and future obligations (equal pace). Financial covenants are provided, as better detailed in the Notes to the Consolidated Accounts and — in cases of noncompliance with even only one of the aforementioned financial parameters — the lending institutions have the right to terminate the agreement early.

Interest rate risk The Group is exposed to the risk of fluctuation of the interest rates deriving from the financial indebtedness, and it varies according to its composition as variable or fixed rate. To 31 December 2020 the medium to long term fundings are 21.6% at variable rate and 78.4% at fixed rate . The Parent Company adopted the strategy of limiting as much as possible the exposure to the risk of growing interest rates through the preferential access to EU fundings released by the European Bank for the investments with guarantee by a national Bank, in order to benefit of both the lower onerousness of the provisions and of the lower content of the guarantee, attaining medium to long term fundings at variable rate and agreeing on EURIBOR increases that are lower than the market standards. Furthermore, also in the perspective of limiting the exposure to the risk of rising rates, the Parent Company requested the granting of the loans obtained in the fiscal year being closed at a fixed rate and — in 2017 - it diversified the sources of financing through the issue of a fixed rate debenture loan.

Exchange rate risk The Group is not exposed to the exchange rate risk and — consequently – as at the date of 31 December 2020, does not detain any financial derivative instruments to cover the exchange rate risk.

Rating On 26 June 2015 Standard & Poor’s granted the Company the “BBB” rating level (“A+” for SMAT stand alone). Subsequently, Standard & Poor’s released the following Rating Actions: - On 28 June 2016, it confirmed Corporate Credit Rating “BBB” on the long term and the steady outlook; - On 13 February 2017, it confirmed Corporate Credit Rating “BBB” on the long term and the steady ’outlook , and it allocated preliminary rating “BBB” to the planned issue of bonds; - On 5 April 2017, it confirmed corporate credit rating “BBB” on the long term, revising the outlook from steady to negative, only as a function of the revision of the outlook on the Municipality of Turin, and it confirmed preliminary rating “BBB”to the planned issue of bonds; - On 11 April 2017, it confirmed rating “BBB” for the issue of bonds . - On 2 November 2017 it lowered the rating (Corporate Credit Rating and Senior Unsecured) to “BBB-” in relation to the uncertainties in the long-term regarding the uncertainties on the long term financial strategy caused by the proposal of the City of Turin to transform the company into a non-profit consortium, confirming the negative outlook and bringing the stand-alone credit profile to “bbb+”. - On 26 November 2018 the rating “BBB-” was confirmed; - On 27 November 2019 the rating “BBB-” was confirmed, the outlook shifted from negative to positive and the stand-alone credit profile stayed “bbb+”. On 24 November 2020, Standard & Poor’s raised the rating from “BBB-“to “BBB” with a “stable” outlook.

F. SIGNIFICANT EVENTS DURING FISCAL YEAR 2020

F1. Monitoring of impacts related to the COVID-19 emergency. Since the early months of 2020, the outbreak of the Coronavirus, which was declared a pandemic by the World Health Organisation on 11 March 2020, and the restrictive measures adopted by the public authorities to combat its spread, have caused the most severe economic downturn in recent history. SMAT did not suffer directly from the business interruption and spared no effort to adapt its organisational model so as to ensure normal levels in the supply of public utility services, showing resilience and focusing first and foremost on protecting the health of workers and users; to this end, the company put in place several measures, adapting them to changing conditions on a case-by-case basis, and namely:

- It set up a Committee for the implementation of and monitoring compliance with the national protocol, with the aim to verify the application of the general rules set out in the national protocol signed by the Government and the Social Partners. In the course of 2020, numerous Agreements were signed with the Trade Unions on measures to contain and combat the Covid-19 virus; - It created dedicated Intranet and messaging channels providing indications on the behaviour to be adopted to prevent contagion; to this end, the company also produced specific videos; - made available improved protective instruments for employees, limiting contact in the workplace through the creation of "closed groups" of employees dedicated to operations management activities that did not require contact; in this connection, where possible new work sites were activated; - reopened disused sites, made available internal spaces used for other purposes, created new locker rooms in prefabricated structures; - developed a new app, Costanza, that ensured constant control of worker safe distancing; - closed all user desks during highly critical periods, while keeping online services and toll-free numbers active and enhancing support activities via telematic channels so as to guarantee uninterrupted availability of services to customer; - protected minimum service levels, also in the most critical emergencies, where the water service operators were working around the clock to continue providing a useful public service, extremely valuable from a social and health standpoint; - to reconcile the primary need to protect public health with the ability to go on working, it limited to the extent feasible the number of people working on site, and whenever possible resorted to smart-working, thanks to the prompt preparation of the necessary connectivity infrastructure and enhanced computerisation of all company processes; - by bearing the relative costs, activated a Covid-19 insurance coverage in favour of all the employees infected by the virus and hospitalised; - intensified the cleaning and sanitising of company premises and water points, increased the availability of PPE and installed hand sanitizer dispensers at all company sites; - it offered local organisations technical support with installation of temporary healthcare structures and participated in the experimental project undertaken by Arpa and the National Superior Health Institute (ISS) for the detection of the Covid-19 virus in city sewers; - asked its suppliers to adopt the same measures for the protection of their employees and paid the ensuing additional charges.

The restrictions and emergency measures maintained for a year during lockdown periods causes production slowdowns and the shutdown of points of sale, which in its turn resulted in reduced consumption levels. The activities undertaken to combat the spread of the virus, as briefly described above, causes an increase of over EUR 1,600,000 in operating costs (net of the savings achieved), and, as foreseen in the periodic reports, affected the economic and financial results of the company, which, while it guaranteed the programmed investment level, experienced a drop in turnover compared to the previous years. Like other companies in the sector, SMAT has to cope with declining consumption and the combined effect of the suspension of credit recovery activities, with special regard to water supply service limitation and suspension, and bill rescheduling for users facing economic hardship, actions undertaken to the advantage of the territory and in compliance with ARERA provisions. The most critical variable for SMAT, in light of the business where it operates, could be future developments in users' behaviour when paying bills, during the emergency period as well as immediately following: but based on the data collected related to the 2020 FY there are significant impacts. To meet contingent liquidity needs

28 arisen in 2020 from delayed payments of integrated water service (SII) bills due to the economic crisis brought about by the COVID-19 health emergency, liquidity management required a continuous and careful management of payment flows.

F2. Legal comparative study SMAT The comparative study was presented to the ordinary Shareholders’ Meeting convened on 5 June 2020, which, due to the epidemic-related emergency, was held in the Great Turin stadium, where, account duly taken of: • the assessment that emerged in the comparative study between joint-stock companies and Special Consortium Companies, • that the main shareholder, the Municipality of Turin, proposed precise directions for the transformation of SMAT S.p.A. into a Special Consortium Company, • that the second shareholder CIDIU S.p.A. expressed the position of not participating in the corporate transformation of SMAT, activating a withdrawal procedure. The proposal for undertaking the transformation of SMAT S.p.A. into a Special Consortium Company was rejected.

F3. The Industrial Plan 4.0 The Shareholders’ Meeting held on 26 June 2020 approved the new Industrial Plan 4.0 (2020-2024) resolved on by the Board of Directors on 26 February 2020, prior to the outbreak of the health emergency. During the meeting, in view of the possible contingent liquidity needs arising from delayed payment of SII bills due to the economic crisis caused by the COVID-19 emergency measures, it was decided to postpone the allocation of the 2019 dividend to a subsequent meeting, to be held by 30 September 2020. To this end the economic and financial impact of the health emergency on the goals of Plan was quantified with a special focus on the effects on the results for FY 2020 to be expected after the end of the emergency period. On 14 September 2020, based on the data as at 30 June 2020 and the ensuing forecast of the results for the year as at 31 December 2020, the Board of Directors approved the changes to economic and financial results for 2020 envisaged in the Industrial Plan 4.0. The new Plan was presented to Shareholders’ Meeting held on 25 September 2020, which acknowledged it and approved the allocation of profit for 2019.

Focus on the deviations from the PI 4.0 The differences between the actual results and the forecast sin the Industrial Plan for 2020 may be summarised by looking at the company’s main economic and financial figures (expressed in ‘000 Euros) in the table below: NEW PLAN FOR 2020 2020 2020 Industrial Plan = Financial 4.0 Forecast for statements 2020 Average volumes 176.8 mio/m3 169.5 mio/m3 173.4 mio/m3 Revenues 324,740 310,000 318,174 Gross operating margin 120,540 110,580 122,358 Operating income (EBIT) 50,380 30,110 35,136 Net profit 35,790 21,030 23,684 Year-end liquidity 31,147 26,676 37,197 New loan 30,000 50,000 50,000 Net financial debt (243,514) (260,387) (249,892) Self-financing capacity (Net profit + Depreciation, amortizations and provisions) 102,450 93,700 96,485 Investments 106,942 106,942 113,673 Amortization 66,660 72,670 72,801 Compared to the Industrial Plan’s original forecasts for 2020, it can be seen that in 20209 the Covid-19 emergency period caused:  a decrease in revenue substantially ascribable to a contraction in consumption for industrial, craftsmanship and business uses, partially offset by an increase in domestic consumption values and 2.2% higher rates than in the previous year;  an increase in operating costs for the activities carried out to combat the spread of the virus;  an increase in the provision for bad debts in order to take into consideration in prospective analyses the drop in revenue observed in 2020 and the early months of 2021 compared to the previous years.

The company’s continuing effort made it possible to improve on investment forecasts, resulting in an increase in amortisation. Such effects can be seen in the net profit forecast given in the PI 4.0, albeit better than expected during the last shareholders’ meeting in 2020. In any case, the economic and financial indicators show value that confirm the stability of the Company are fully in line with the covenants imposed by existing loans.

F4. 2020 Rates Following the update of the Tariff Schedule (Manovra Tariffaria - MTI-3) for the 2020-2023 period as described below, the tariffs applied in 2020 were substantially in line with 2028 and corresponded to the communication from the Local Regular (Ente d’Ambito) received on 16 December 2020. For households in hardship conditions because of the persisting negative economic conditions, the tariff reduction is confirmed with the criteria and amounts defined by resolutions 897/2017/R/IDR of 12/21/2017. Furthermore, upon request of the Municipalities, on the grounds of the high social value represented by the municipal and provincial users, which concerns - amongst others - schools, canteens and public fountains, in 2020 a 50% reduction of the Integrated Water Service rate was applied to said users, so that they could continue delivering the aforementioned services and were also involved and encouraged to invest and pay greater attention and deploy resources in favor of the environmental policies, to safeguard of the territory and recover degraded areas. The subsequent lower rate revenues shall not be the subject of adjustment on the water service rate.

Tariff update By way of resolution on 28 December 2019 no. 580/2019/R/IDR ARERA approved the water tariff method, for the four-year period 2020-2023, with updating every 2 years, containing the definitions of the regulations for computing costs allowed by the rate plan for the third regulatory period (MTI-3), in alignment with the guiding criteria introduced in the previous periods. This is uniform but asymmetrical rate method, in consideration of local differences and programming decisions by governmental bodies, to surpass the Water Service Divide, generate more efficiency in operating costs and management costs, enhance environmental sustainability, also through the Plan for Strategic Works and incentives for consumption measuring instruments. With resolution 83/2021/R/IDR passed on 2 March 2021, ARERA announced that they were starting a procedure to update the integrated water service measurement rules, and were therefore planning to amend resolution 218/2016/R/IDR (TIMSII), asserting that the outputs of measuring operations were key elements not only for purposes of a more efficient measuring method, but also to fulfil the water conservation principle. The method places the sector squarely in the circular economy, also awarding energy efficiency and offering incentives for saving and reusing water. The Plan for Strategic Works (POS) is also introduced, an instrument through which the governmental body in the territory indicated infrastructural interventions dedicated to complex projects with useful lifespan exceeding 20 years, considered priorities for guaranteeing the quality of service for users. In the POS, which collects works planned for 2020 - 2027, the time lines must be included for the interventions, with any available public contributions. Better capacity to program and organise available coordinated financing will be, according to ARERA, the basis for future availability of water resources, also in respect to climate change. In keeping with the provisions of this resolution, with their proposed rate schedule for 2020-2023, approved with resolution no. 774 of 10 December 2020, following resolution no. 759 of 23/07/2020, the Local Regulator defined the regulatory Scheme, Strategic Works Plan for 2020-2027, and the goals to be pursued (based on the technical quality standards established with the regulation of technical quality for the integrated water service (RQTI) model and starting performance levels) and accepted the operator’s proposal concerning the interventions necessary to fulfil such goals, moreover it updated the programme of interventions, the economic-financial plan and the convention supplementary act, as mandatory documentation to the submitted to the national Authority, that has undertaken the relative approval process.

Integrated Text on Charges for Integrated Water Services (TICSI)

The pricing structure applied in 2020 was the same as was applied initially in 2018, as approved with resolution 704 adopted by the Territorial Area Conference 13 November 2018, implementing ARERA resolution 665/2017/R/IDR.

On 26 September 2017 the authority published resolution no. 665/2017/R/IDR “approving the Integrated text on charges for integrated water services (TICSI), and laying down the criteria for the differentiation of charges applied to the users”. This resolution defined the criteria for the differentiation of charges applied to the users of the integrated water service (SII) that the local regulators (or other bodies in charge) were called upon to follow in the reorganization of the tariff structure for the final users. The authority rationalized and standardized the tariff differentiation criteria by promoting the installation of differentiation meters that would at least separate the consumption volumes of household and non-household users. By 30 June 2018, the Local Regulator (Ente di Governo d’Ambito - EGA) will be responsible for defining, in particular, the tariff differentiation applied to resident household users, to be determined based on the capita criterion. The EGA will also have to define the new tariffs for the waste water collection treatment service or non-domestic users authorized to discharge their effluent and - industrial waste into public sewers (industrial fee). Finally, the EGA will have to verify compliance with limitations on the revenues of utility providers, adopting, through its own approval resolution, the fee structure to be applied to users of the integrated water service starting on 1 January 2018. In January and then again in December 2020 following approval by the Territorial Area Conference, the Local Regulator (EGA) communicated the tariff differentiation for civil uses of the integrated water service to come into effect 1 January 2020 and the collection and treatment fees for industrial wastewater discharged in the public sewer system.

Water bonus (TIBSI) On December 21 2017 the authority published resolution no. 897/2017/R/IDR declaring “Approval of the consolidated text for the application modalities of social water bonus for the supply of water to economically disadvantaged domestic uses”, amended by Resolution ARERA 7 May 2019 no. 165/2019/R/COM, in accordance with converted Legislative Decree 4/2019 (to Law 26/2019). With the TIBSI, the Authority Implemented the system for the compensation of expenses sustained for water supply by domestic users living in economic hardship. Adhering to the provisions already envisaged by the D.P.C.M. October 13th 2016, it therefore introduced the social water bonus, articulated according to the standard regulations on National territory. The Authority protected the improvement opportunities provided locally by allowing the application of the supplementary bonus. The admissibility procedure and dispensing of the supplementary water bonus are determined and approved by the Government of Piano d’Ambito Entities having territorial jurisdiction in consideration of various territorial specificities. Direct users are given in their water bill through the application of a compensatory rate component, while the indirect users are giving a one off contribution according to the procedures autonomously established by the utilities company. The Authority in Territory ATO3 Torinese maintained improved conditions for users with the introduction of the integrated water bonus, based on resolution ATO3 Torinese of 26 June 2018 no. 692 approving the rate proposal. The Decree by the President of the Territory Authority no. 3 Torinese on 23 July 2018 no. 169 changed the regulations for application of incentives to access the integrated water service based on the Equivalent Eco- nomic Situation (I.S.E.E.) and with resolution no. 697 on 6 November 2018 ratified the Regulations for application of the integrated water bonus. The social water bonus is paid for a period of 12 months (renewable). The applications for the bonus can be submitted starting on 1 July 2018, effective retroactively from 1 January 2018. ARERA by way of Resolution on 3 December 2019 no. 499/2019/R/COM updated the threshold ISEE value for accessing the social water bonus as of 1 January in accordance with the decree. The Torinese Territorial Authority no. 3 also confirmed the Supplmentary Bonus for users in economic difficulty for 2020. Implementing that set forth in the recent "fiscal decree" (Legislative Decree 124/2019), the Authority, by way of Resolution on 14 January 2020 no. 3/20/R/IDR, increased the value of the Bonus on water bills for families in difficulty, guaranteeing reduction not only for water consumption, but also extending to costs related to sewer and treatment services. Furthermore, as of 2020 people receiving social pensions and welfare also have the right to the water bonus, by presenting an application after 1 February.

F5. Equalization rate components UI1-UI2-UI3-U4 By deliberation 6/2013/R/COM of 16 January 2013, AEEGSI (now ARERA) established the UI1 rate component in favour of populations stricken by the earthquake, applied as an increase to the costs for water, sewers and waste water treatment starting from 1 January 2013 with a two-month payment by the provider to CSEA (Energy and Environmental Services Fund). Such component is 0.4 eurocents/mc for the service managed. The ARERA set up a UI2 rate component, in the amount of 0.9 €/m3 for each aqueduct, sewer and drinking water treatment service applicable starting on 1 January 2018 and mainly intended to promote the technical quality. The charge deriving from the payment of the social water bonus is guaranteed by establishing a new rate component called UI3 in the amount of 0.5 eurocents/m3 of the aqueduct service applicable starting on 1 January 2018, that is payable by the Local Community. As of 1 January 2020 it is applied to the three water, sewer and treatment services. Starting on 01/01/2020, in accordance with Resolution ARERA no. 580 on 27/12/2019, users of the water, sewer and treatment services are charged UI4 equalisation - in the amount 0.4 Euro/m3 – destined to supply and cover the costs of the Fund guaranteeing water works pursuant to article 58 of Law 221/2015. On 24 April 2020, in a report to the Government and the Parliament, ARERA proposed a number of regulatory provisions designed to mitigate hardship situations and difficulties experienced on account of the Covid-19 emergency by the end users of the services supplied. To support the most vulnerable sectors of the population, the Authority has already defined simplified methods for the renewal, upon their expiration, of energy, gas and water social bonuses. As an additional measure ARERA invited the Government and the Parliament to consider a measure providing for the automatic renewal for another twelve-month period (without interruption) of the bonuses to expire between 1 March and 31 December 2020. This would make it possible to assist the families entitled to the bonus until the coming into effect of the "automatic acknowledgement of the bonuses" (starting 2021 pursuant to legislative decree 124/2019), thereby relieving of administrative requirements both the persons concerned, with limited movement possibilities, and the administrative offices responsible for the granting of the bonuses.

F6. Fulfilment of the technical quality regulations (RQTI) By resolution no. 917/2017/R/IDR of 27 December 2017 issuing “Regulation of the technical quality of the integrated water service or each of the single services therein (RQTI)” are defined as the minimum levels and goals of technical quality of the integrated water service, by the introduction of prerequisites, general standards, associated with an incentivizing mechanism with bonuses/penalties, and specific standards, and noncompliance gives rise to the application of indemnities. The regulation came into effect in 1 January 2018. The utility companies are required to register all the values underlying the specific and general indicators for each of the ATOs in which they operate, and to keep such data for a period 10 years starting from 1 January of the year subsequent to the year of registration. The Territorial Governmental Entity, with resolution no. 720 on 9 April 2019, implemented the objectives approved in resolution ARERA no. 617/2018/R/IDR of aforesaid 27 November 2018. With resolution 46/2020/R/IDR of 18/02/2020 ARERA started the procedure for the quantitative assessment provided for by the mechanism incentivising the technical quality of the integrated water service as per Title 7 of Annex A to resolutions 917/2017/R/IDR (RQTI). With resolution 759 of 23 July 2020. Turin ATO 3 approved the quality goals for the 2020-2021 two-year period.

F7. New ARERA regulations Reconciliation (TICO) ARERA with resolution dated 16 April 2019 no. 142/2019/E/IDR established methods for implementation of the protection system for claims and disputes by final users in the water sector, which providers are required to participate in procedures voluntarily activated by users through the Reconciliation Service. In alignment with the corporate vision set forth in it Social Responsibilities and Code of Ethics, SMAT adheres to out-of-court resolution of disputes (ADR - Alternative Dispute Risolution) through reconciliation procedures.

National Waterworks Plan The Authority, after preliminary activities, by way of ARERA Resolution no. 252/2019/I/IDR on 20 June 2019, selected a preliminary list of interventions to be carried out for the years 2019 and 2020, including the project

32 to “Implement water connections in the Rivoli and Rosta plants” for an amount of 1,800,000 Euros, valued on each year of the two-year period. By way of ARERA Resolution on 23 October 2019 no. 425/2019/R/IDR, the methods for distributing resources for the realisation of the interventions contained in attachment 1 to the Decree by the President of the Council of Ministers on 1 August 2019 were set forth, citing “Adoption of the first phase of the national plan for interventions in the water sector – aqueducts section”, adopted in accordance with article 1, section 516, of Law 205/2017. By way of resolution on 3 December 2019 no. 512/2019/R/COM, the Energy and Environmental Services Fund (CSEA) was authorized to release the first financing amounts. For the purpose of monitoring the interventions (art. 5.3 of resolution 425/2019/R/IDR), every 6 months starting 25 October 2019, and with every request for funding instalments after the initial advance, the Local Regulator (EGA) informs ARERA and CSEA on the progress of the intervention funded and updates the technical and financial time schedule, pointing out any critical problem that may have occurred (delays in the implementation) or changes in the technical and/or financial aspects of a project. With resolutions 284/2020/R/IDR passed on, a procedure got underway to define a second list of necessary and urgent interventions for the water service sector, for the purposes of updating the National Waterworks Plan.

Delinquency (REMSI) ARERA intervened by way of Resolution 311/2019/R/IDR (REMSI) for containment of overdue payments in the integrated water service, with the measures that the Authority intends to implement to contain overdue payments in the integrated water service, in particular focused on the conditions for limitation and suspension of supply for domestic users with overdue payments, not from vulnerable groups, on the procedures for management and containment of over payments in the case of condominium users, as well as instalment payment plans and communications to users to be adopted in the case of overdue amounts. Subsequently, in December 2019 an update was approved in the Integrated Water Service Regulations to align with the new ARERA regulations. The provisions set out in Law 160/2019 were transposed in the course of 2020. Law no. 160 of 27 December 2019 entitled “National budget for financial year 2020 and multiannual budget for the 2020‐2022 three-year period” completed the regulatory framework in terms of both the two-year statute of limitation and several aspects of the management of late payments. Accordingly, with resolutions 186/2020, ARERA transposed the new provisions on the two-year statute of limitation, superseding the previous distinction, provided for in article 1(5) of the 2018 Budget Law 2018, between cases in which the delays in issuing invoices for consumption dating back to more that two years may be attributed to the operator and those in which the delay may presumably be ascribed to the end user. With resolution 221/2020, ARERA amended and supplemented the provisions introduce with the REMSI (SII Late Payment Management provisions), specifying in particular that 1) a friendly payment reminder must be sent to the end user exclusively with registered mail with advice receipt or via certified electronic mail, 2) the term by which end users are required to settle outstanding bills cannot be less that 40 calendar days as provided for by the applicable regulations, calculated from the day of receipt of the friendly reminder.

Adoption of urgent measures for the health emergency Resolution 235/2020/R/IDR introduced some derogations from the regulations on tariffs and service quality, whereby technical and contractual quality requirements will be considered cumulatively over the 2020-2021 two-year period. Moreover, for 2020 specific components were introduced to cover emergency related costs, including costs arising from the payment extensions and payments in instalments facilities granted during the emergency period, as well as from the possibility to postpone to later years the recovery of the share of charges eligible for preferential tariff treatment in 2020, with the correlated possibility of funding granted by the Energy and Environmental Services Fund (CSEA).

F8. Hiring of personnel In the course of 2020, 50 people were hired, as follows: 26 from existing eligible candidates lists to meet 2019 turnover needs as per Industrial Plan 3.0 (2016-2020), and 34 to convert temporary workers into permanent employees pursuant to the provisions of the Industrial Plan 4.0 (2020-2024).

Over 90% of the newly hired were assigned to the technical structures operating in the territory (network and plant management centres, wastewater treatment hubs.

F9. Loan from the European Investment Bank The European Investment Bank (EIB) approved a 1000 million Euros loan to support integrated water service infrastructural interventions to be implemented in the 2020-2024 period for a total amount of over EUR 500 million. At the first 50 million tranche with 13 years repayment period was received on 4 December 2020, the second tranche will be disbursed in 2021.

F10. Credit rating On 24 November 2020, Standard & Poor’s raised SMAT’s rating from “BBB-“ to “BBB” with stable outlook.

F11. Legality ratings In December 2019 the legality rating assigned by the Authority Guaranteeing Competition and the Market was renewed with a score of ★★++, expiring 10 December 2021.

F12. Legislative decree no. 175 of 19 August 2016 (Madia) In accordance with art. 26 section 5, the decree is not applied to companies with publicly owned shares that have issued financial instruments different from shares, traded on regulated markets.

G. SIGNIFICANT EVENTS OCCURRING AFTER 31 DECEMBER 2020 AND BUSINESS OUTLOOK

G1. Acque potabili S.p.A. extraordinary operations Summarizing the steps leading up to acquisition of co-control shares of the Società Acque Potabili di Torino, on 22 June 2005 SMAT and AMGA Genova (presently IRETI), following a public procedure acquired majority shares in Condotta di Acque Potabili S.p.A. (SAP) – a company founded in 1852 and the first Italian company in the water sector to be traded on the Milan stock exchange, from Italgas/ENI. SAP held, before the acquisition, the entirety of shares of Acquedotto Monferrato S.p.A., the company that manages the aqueduct services in the municipalities of Monferrato.

The intervention by SMAT with the acquisition of SAP, in addition to having significant industrial impact, represented an important signal at a local level, because it guaranteed occupational continuity to more than 200 workers in Turin and in many other Italian regions. SAP became the vehicle through which SMAT and AMGA intend to develop their presence at a national level: SAP also participated in the tender to become a service provider for the integrated water service in territory ATO1-Palermo, and in 2007 won the 20-year concession. This was the basis for the constitution of Acque Potabili Siciliane, the provider of water services to 55 of the 82 municipalities in the Palermo province. Following several vicissitudes, in 2010 Acque Potabili Siciliane was liquidated and commenced a drawn out arbitration procedure, at the end of which ATO 1-Palermo was judged to be the losing party, with the SMAT subsidiary awarded damages for over 32 million Euros (thwarted by the simultaneous administrative liquidation, which the Authority was recently subjected to).

The business model represented by SAP, based on multiple non-prevailing concessions, scattered through different territories throughout Italy following the referendum results of June 2011, abrogating article 23 bis of Law 6 August 2008, no. 133 and the judgement of the Constitutional Court 199/2012, meant that the company Acque Potabili progressively lost its capacity to function as an independent industrial entity.

In 2014 SMAT and IREN Acqua e Gas (taken over by AMGA) then decided to jointly promote - through Sviluppo Idrico S.p.A. (holding equal shares) – A Tender Offer for the acquisition of shares held by private shareholders and the delisting of the company from the Screen-Based Trading System Managed by the Italian Stock Exchange. The Tender Offer consolidated in the control of SMAT (and equally IREN Acqua e Gas) a share holding of just less than 45% and in 2015 – following an inverse merger – Acque Potabili was delisted.

This was the start of rationalisation and integration of business and concessions still controlled by SAP, with division of relative services locally and from a managerial standpoint: in 2015 the transfer of two branches of SAP to SMAT and IREN was concluded. On 1 July 2015, SMAT bgan directly managing 31 municipalities with the ATO3-Torinese territory, which were previously managed by SAP, serving a population of approximately 250,000 residents and transferring 60 employees to SMAT.

After the concession of the branch of the Turin company to SMAT and the Liguria company to IREN Acqua a Gas, Acque Potabili held 32% of the originally held concessions. Another step towards corporate rationalising was concluded in the end of 2016, with the transfer to IREN of a remaining 31 concessions (defined "performing" and located in the provinces of Alessandria, Asti, Aosta, Cuneo, Mantova, Novara, Vercelli, Brescia, Milan, Pavia, Piacenza and Verona), simultanousing transferring 47 employees to IRETI (which took over IREN Acqua e Gas in the meantime).

In the end of 2018, SAP had completed the process of ceding any remaining concessions ("non-performing") with the transfer of the concession in Adria (RO), and in 2019 all the price adjustment transactions for the Veneto transferee Acque Veronesi S.p.A. were completed.

SAP had no direct employees. Operations and adequate organizational frameworks were guaranteed by specific service contract stipulated with SMAT and IRETI.

In light of the aforesaid and in relation to the negative result of the case brought by the subsidiary company Acquedotto Monferrato S.p.A. with the Consortium for the Acquedotto del Monferrato, it was considered opportune to activate a series of corporate transactions for the purpose of: 1. incorporating the company Acquedotto Monferrato into Acque Potabili; 2. approving an amendment to the articles of association setting forth the right of shareholders to withdraw; 3. approving the liquidation of Acque Potabili on the occasion of the Shareholders Meeting, which was convened to approve the 2019 financial statements.

On 18 February 2020 the SMAT Board of Directors approved the aforesaid transactions. To carry on the Acque Potabili operation, on 24 February 2020, the company entered into an agreement with associate company IRETI whereby it was agreed that the joint ownership of the interest in Acque Potabili would be maintained after the shareholders’ withdrawal, and all decisions would be taken jointly, even after the liquidation of Acque Potabili.

The merger of Acquedotto Monferrato (owned 100%) into Acque Potabili, dictated by the possibility of limiting the liquidation to one subject and further reduce corporate costs, was completed by signing the merger deed on 10 November 2020. On that date, Acquedotto Monferrato S.p.A. ceased to exist. For civil code purposes the merger went into effect on 13 November 2020 and for accounting and tax purposes on 1 January 2020.

The amendment to the bylaws (art. 6) that activated the right of withdrawal and thereby the possibility of reducing the number of shareholders to below the number specified for widely held corporations, and hence be authorised to adopt simplified corporate procedures, was approved by the Extraordinary Meeting of the Shareholders of Acque Potabili held on 16 June 2020. The right of withdrawal was exercised for 426,111 shares, of which 5,172 were offered as an option and purchased by minority shareholders and 420,939 were bought back by Acque Potabili as treasury shares for a total of EUR 1,094,000. The solution adopted to cancel the treasury shares consisted of removing the nominal value of the shares from the company bylaws. This solution will make it possible to cancel the treasury shares without the contextual reduction in share capital, so that, in 2021, when the process has been completed, the total number of shares issued by SAP will be 7,212,157. Accordingly, the percentage of shares held by SMAT and IRETI in Acque Potabili will increase from 44.92% to 47.55%, while the overall number of shares held will remain the same and Acque Potabili will become an ordinary, not widely-held corporation. the Extraordinary Meeting of the Shareholders of Acque Potabili held on 29 April 2021 approved: 1) the proposal to amend article 5 of the Company bylaws, which made it possible to avoid reducing the share capital; 2) the proposal for an early dissolution and voluntary liquidation of the company pursuant to article 2484 para.1 number 6 of the Italian Civil Code; 3) the number, appointment and powers of the liquidators, and liquidation modalities.

G2. Programme Agreement with ACEA On 18 February 2021, in its capacity as sole operator, SMAT signed with ACEA a programme agreement that embodies their intention to share a gradual process of operational rationalisation and reorganisation designed to overcome the division of tasks currently existing in some municipalities, to reorganise the configuration of the service along the route of the Great Susa Valley Aqueduct, also with a view to prevent the wholesale supply and purchasing of water, and to encourage the municipalities to join the integrated water service structure pursuant to art. 148 of legislative decree 152/2006. Moreover, in consideration of the need to not dissipate the skills and professional expertise acquired, it was decided to meet the aforementioned requirements by separating the water branch from ACEA and making into a “Newco” under the tax ad accounting control of SMAT, while assigning ACEA a minority holding (possibly 49%) to enable ACEA to retain an active role in the territory of Pinerolo and enable the “Newco” to continue providing the services for the area based on an ad hoc service contract. This programme agreement sets up a technical committee in charge of defining the overall operational rationalisation and reorganisation so as to ensure that the aforementioned goals are met, account duly taken of the territorial proximity criterion to maximise the scale economies obtainable through the operational reorganisation of the services.

G3. Villar Focchiardo As of 15 February 2021 SMAT has resumed its operational management role in the aqueduct and sewer system segments of the Municipality of Villar Focchiardo.

G4. Hiring Programme As provided for Industrial Plan 4.0, new personnel hiring activities are underway to cover the turnover requirements envisaged up to 2021, as well as meet the needs arising from the acquisition of new businesses by hiring seconded personnel on a permanent basis. To this end, during the first four months of the year 62 people were hired from existing eligibility lists, and 82 more will be hired during the year through specific dedicated procedures. Based on the information currently available, it may prove necessary to hire additional resources on account of enhanced turnover anticipated for 2021, while respecting the replacement rate specified in the Plan and the total number of employees envisaged for the year end, of 1099 people.

G5. Operational outlook and organisational set-up 2021 will continue to be affected by the restrictions associated with the health emergency, but the situation appears less critical than it was in the early month of 2020. The company will continue to monitor the economic-financial indicators and to make innovative investments designed to ensure resilience to the effects of the pandemic and climate change. As of now no further effects resulting in deviations from the forecast set out in the ad hoc focus are expected, while the economic-financial analyses conducted so far ensure the sustainability of the investments planes and objectives pursued. No problems affecting business continuity have been experienced and the organisational structure is deemed appropriate.

H. ORGANIZATIONAL MODEL � SUPERVISION, ANTI-CORRUPTION AND TRANSPARENCY ENTITY

H1. Supervisory Body In 2003, SMAT set up a Supervisory Body (Organismo di Vigilanza - OdV), adopted an Organisation, Management and Control (OMC) model as provided for in Legislative Decree 231/2001, and approved its Code of Ethics. Initially composed of a single member, the OdV became a board in 2011. Together with the Code of Ethics and other elements of corporate governance (independent auditing, internal auditing, quality certification, laboratory accreditation, workers safety and health certification, environmental certification), the OMC model for the prevention of administrative offences constitutes an effective tool for awareness building and control of all the subjects operating on behalf of SMAT, so as to ensure that in carry out their tasks they adopt behaviours inspired by the ethics of responsibility and in keeping with the applicable regulations. The Company’s code of ethics is based on the belief that the behaviour of top management should reflect a veritable shared style in support of the proper functioning and development of the Company. The most important guarantee to be provided to the shareholders and other stakeholders, in fact, lies in the integrity and the ethical values of the persons who work in the organisation, the managers and those in charge of monitoring and control. Employees are given exhaustive information about the code of ethics, which has been distributed to all personnel and is handed over to the newly hired. Senior and junior managers and 7th/8th level employees are asked to sign a commitment to adhere to the rules and principles set out in the code. Also involved in this prevention process are external collaborators and partners: purchasing contracts and orders include a specific obligation to accept and implement the ethical principles contained in the code. The code of ethics can be found in the company website: www.smatorino.it. The OMC model and the Code of Ethics were updated by the Board of Directors on 26 November 2019, to adjust them according to legislative changes, in particular following the introduction of new crimes based on racism and xenophobia, and the introduction of “whistleblowing”, a key OMC model element for the purpose of protecting employees who report illicit acts, in connection with which the procedure for reporting issues or atypical behaviours was also approved, pursuant to Legislative Decree 231/2001, as can be read in the corporate website; the section on market abuse offences was also updated. The OMC model is currently being updated to reflect the latest amendments to legislative decree 231/2001, by introducing the crime of influence peddling, the provision on tax offences and other provisions associated with the company’s plan to obtain an integrated service certification: moreover, extraordinary measures have been adopted in connection with the heal emergency, especially in the Special Parts regarding safety and environmental issues.

H2. Anti-Corruption and Transparency On 14 February 2020, in order to fulfil the requirements set out in law 190/2012 (corruption prevention) and legislative decree 33/2013 (transparency), the Board of Directors appointed a new Transparency and Anti- Corruption Manager (RPCT) to remain in office until the approval of the financial statements for the year 2022. On 12/20/2018 the Board of Directors prepared and approved the “Whistle-blowing Procedure” published on the corporate website and provided to all employees through an internal Service Order. On 29 July 2019 the Board of Directors adopted the Consolidated regulations for governing the right of access to administrative documents and the right of access to documents, data and information, published on the corporate website and distributed to employees with a dedicated internal Service Order. The three-Year Plan for the Prevention of Corruption and Transparency 2020-2022 was prepared and approved by the Board of Directors on 30 January 2020, which was then published and transmitted to all the Directors and Managers of services involved. The “Transparent Company” section in the company website is continuously updated and developed. In 2020 a special training programme was implemented for the Transparency and Anti-Corruption Manager (RPCT) and the relative supporting structure, pursuant to the training requirements specified for such personnel. Training initiatives were undertaken in terms of general training for all employees and specific training for managers, with recovery sessions for the employees who could not attend the 2019 training days programme. The reports that arrived in 2020 to RPCT / OdV were analysed as required in the aforesaid procedures. No facts occurred that could be traced back to phenomenon/behaviours that could be qualified as corruption.

H3. Privacy - GDPR In compliance with Regulation (EU) 679/2016 (General Data Protection Regulation - GDPR), on 14 September 2020, the Board of Directors confirmed the appointment of the Data Protection Manager, to remain in office until the approval of the financial statements for operating year 2022. In the course of 2020, a company organisation chart in keeping with the data protection regulation was approved and the Data Controller appointed the data processors. The processing register as per art. 30 of the Regulation, the policy statements, the videosurveillance document and the relative attribution of tasks were updated and training sessions were organised for the employees.

H4. Certification of the health and safety management system for personnel and the workplace The company has continued the activities aimed at ensuring compliance with the law, regulations and standards related to safety and health at the workplace. Accordingly, with a view to pursue continuous improvement workers health and safety management goals, having obtained and periodically renewed since 2015 voluntary certification BS OHSAS 18001, on 24 October 2020, the company was certified for conformity to standard ISO 45001:2018. This certification defines the standards recognized at international level, in order to allow the organization to control its own risks and optimize its performance, defining policies and objectives that involve and motivate the personnel. In such perspective, the corporate activities will keep being submitted to periodical surveillance to ascertain the effectiveness and implementation of the system. In 2020, the company adopted a systematic, integrated certification approach by putting in place Quality, Safety and Environmental Management Systems. We hereby certify that - during the fiscal year that is the subject of these Financial Statements - no fatalities or charges due to occupational diseases or mobbing on employees entered on the sole job register have been recorded.

H5. Certification of the environmental management system SMAT has set up an Environmental Management System shared with the whole personnel for the safeguard of the environment from 2016, which allowed obtaining the UNI EN ISO 14001:2015 certification, updated on 24 October 2020. This is voluntary certification designed to ensure optimal environmental sustainability for company processes, adopting pollution prevention practices, reducing waste generation, and in any case ensuring that every effort is made in terms of proper disposal and recycling, while reducing energy use and materials consumed, and, in general, minimising the environmental impact of company activities and the activities that they company may affect. In the course of 2020, System 14001 saw a significant improvement with the transition to an integrated certification approach based on the adoption of Quality, Safety and Environmental Management Systems.

H6. Certification of the quality management system SMAT S.p.A. has a Quality Management System in place, which is shared among all personnel, allowing it to update its UNI EN ISO 9001:2015 certification, with the most recent issue date on 11 October 2020. In the course of 2020, they company adopted the integrated certification approach based on the adoption of Quality, Safety and Environmental Management Systems.

H7. List of SMAT Group branches Parent Company SMAT S.p.A. and the other subsidiaries exert their own activities in the respective registered offices and in local reference operations, no group branches ex-art. 2299 of the Italian Civil Code are entered.

I. RELATIONSHIPS WITH RELATED PARTIES As related to the relations developed with the related parties, as defined in art. 2428, paragraph 2, no. 2 of the Italian Civil Code, we highlight herein under the main operations Parent Company SMAT S.p.A. has developed with them.

I1. Relations with the City of Turin In relation to the City of Turin, regarding the shares held (directly or indirectly), in the amount of 63.53%, as at the date of this Financial Statements, the following relations exist, as a result of transactions operated in standard market conditions:

Receivables Trade Costs Revenues CITY OF TURIN 2,080,754 627,544 1,602,628 3,624,207

As related to the composition of the receivables from the City of Turin, the most significant items concern the supply of the Integrated Water Service (invoices issued or to be issued for approx. EUR 1.693 million), and other activities and services (invoices issued or to be issued for approx. EUR 388 thousands). As related to the composition of the payables to the City of Turin, the item mainly consists of the 2020 instalments of the Local Authority Fees deliberated by Ente d’Ambito n. 3 Torinese for the fiscal year that is being closed and for a total amount of approx. EUR 614,000. The evolution of the amounts receivable from and payable to the City of Turin is a consequence of the reciprocal payments made at the stipulated deadlines.

The revenues are reported at the net amount of EUR 3.059 million in reference to the 50% rate reduction established for public use users applied in 2020.

I2. Relations with the subsidiaries and associates As regards the companies of the Group which are to be considered as subsidiaries and/or associates in compliance with article 2359 c.c., as at the date of these Financial Statements there were the following relations, deriving from transactions operated in standard market conditions or by specific or general agreements to regulate the exchange of services between the parties:

Receivables Trade Costs Revenues RISORSE IDRICHE S.p.A. 1,811,543 3,877,461 2,437,484 173,914 AIDA AMBIENTE S.r.l. 55,382 289,119 1,324,725 60,480 SAP S.p.A. 100,053 15,657 0 63,097 Total 1,966,978 4,182,237 3,762,209 297,491

CONSOLIDATED FINANCIAL STATEMENTS OF THE SMAT GROUP CONSOLIDATEDAT 12.31.2020 FINANCIAL STATEMENT SMAT GROUP

IAS/IFRS FRAMEWORKS NOTES TO THE ACCOUNTS

CONSOLIDATED STATEMENT OF FINANCIAL POSITION Euro Remarks 31 December 2020 31 December 2019 ASSETS Non-current assets Tangible fixed assets 1 143,131,555 149,265,059 Goodwill 2 5,928,005 5,928,005 Other intangible assets 3 3,679,327 4,202,078 Assets under concession 4 732,964,877 685,613,165 Shareholdings 5 11,296,588 13,395,887 Deferred tax assets 6 16,845,400 15,565,728 Non-current financial assets 7 1,285,040 1,400,001 Other non-current assets 0 0 Total non-current assets 915,130,792 875,369,923

Current assets Inventory 8 8,353,679 8,623,844 Trade receivables 9 222,712,178 227,498,439 Current tax assets 10 560,780 6,499,452 Current financial assets 11 58,694 39,127 Other current assets 12 4,510,050 3,545,294 Cash and cash equivalents 13 37,917,602 55,033,557 Total current assets 274,112,983 301,239,713

Assets intended for sale 0 0

TOTAL ASSETS 1,189,243,775 1,176,609,636

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Euro Remarks 31 December 2020 31 December 2019 NET EQUITY AND LIABILITIES NET EQUITY Share capital 345,533,762 345,533,762 Legal reserve 22,914,362 20,909,251 Reserve restricted for PEF implementation 269,352,368 238,874,674 FTA reserve (2,845,993) (2,845,993) Other reserves and retained earnings 2,835,733 3,358,321 Operating profit due to Parent Company shareholders 23,757,505 40,129,756 TOTAL NET EQUITY OF THE PARENT COMPANY 661,547,737 645,959,771

Other reserves of Third Party Competence 305,617 262,707 Operating profit due to Third Party Competence 30,144 59,759 TOTAL NET EQUITY 335,761 322,466

TOTAL NET EQUITY 14 661,883,498 646,282,237

LIABILITIES Non-current liabilities Non-current financial liabilities 15 239,105,821 234,767,367 Provisions for employee benefits 16 15,602,130 16,605,147 Provisions for risks 17 17,155,742 19,959,092 Deferred tax liabilities 18 619,212 314,986 Other non-current liabilities 19 51,203,947 52,275,183 Total non-current liabilities 323,686,852 323,921,775

Current liabilities Current financial liabilities 15 48,012,748 51,933,990 Trade payables 20 79,368,917 78,720,031 Current tax liabilities 21 5,351,442 3,340,635 Other current liabilities 22 70,940,318 72,410,968 Other current financial liabilities 0 0 Total current liabilities 203,673,425 206,405,624

Liabilities intended for sale 0 0

TOTAL LIABILITIES 527,360,277 530,327,399 TOTAL NET EQUITY AND LIABILITIES 1,189,243,775 1,176,609,636

CONSOLIDATED INCOME STATEMENT Remarks 2020 2019

REVENUES Revenues 23 318,121,568 320,058,378 Revenues for planning and construction activities 24 100,187,122 103,822,716 Other revenues 25 15,576,824 21,268,069 Total revenues 433,885,514 445,149,163

COSTS Consumption of raw materials and consumables 26 14,299,576 13,811,573 Costs for leased assets and services 27 117,170,420 110,409,556 Payroll costs 28 62,615,240 63,568,346 Other operating expenses 29 21,455,958 22,952,778 Costs for planning and construction activities 30 95,777,281 99,422,784 Total operating costs 311,318,475 310,165,037

Gross operating margin 122,567,039 134,984,126

Depreciation, provisions and write-downs 31 (87,283,056) (80,024,772)

Operating income (EBIT) 35,283,983 54,959,354

Financial income 32 3,129,613 5,755,403 Financial expense 33 (4,388,086) (4,957,162) Total financial management (1,258,473) 798,241

Result before taxes 34,025,510 55,757,595 Income Taxes 34 (10,237,861) (15,568,080) PROFIT (LOSS) FOR THE YEAR 23,787,649 40,189,515 Of which belonging to non-controlling interests 30,144 59,759 Belonging to the parent company 23,757,505 40,129,756

COMPREHENSIVE CONSOLIDATED INCOME STATEMENT Remarks 2020 2019

A. Profit for the year 23,787,649 40,189,515 Current profit (loss) on Severance Fund (604,796) (649,881) Fiscal effect on Profits/(losses) that will not 0 0 later be reclassified in the Income Statement

B. Profits/(losses) entered directly under Net Equity and that (604,796) (649,881) will not later be reclassified in the Income Statement Share of other profits/(losses) by the Enterprises assessed by the 0 0 Net Equity method Fiscal effect on profits/(losses) that will later be reclassified in the Income Statement 0 0 when certain conditions will be met

Profits/(losses) entered directly under Net Equity that

Will not later be reclassified in the Income Statement 0 0

D. Total profit for the year (A + B + C) 23,182,853 39,539,634

Of which belonging to non-controlling interests 13,295 45,580 Belonging to the parent company 23,169,558 39,494,054

CONSOLIDATED CASH FLOW STATEMENT Euro Remarks 2020 2019

A Financial flows of operating assets 101,507,029 114,461,643

Net Profit (loss) for the year 23,787,649 40,189,515

Adjustments for non-monetary costs and revenues Amortization of intangible assets 1,771,255 2,052,762 Depreciation of tangible assets 17,911,455 17,441,913 Depreciation of assets under concession 53,179,731 48,463,115 Increase/(Decrease) of the provisions for contingencies and charges (2,803,350) (3,075,178) Increase/(Decrease)in provisions for employee benefits (1,003,017) (342,318) Change in advance deferred taxes (975,446) (213,997) Change in other non current assets/liabilities (956,275) 1,240,307

Change in Net Equity reserves Difference in conversion 0 0 Actuarial profit and loss 16,849 14,179 Other movements (621,640) (748,880)

Change in net working capital (Increase)/Decrease in trade receivables 4,786,261 16,077,144 (Increase)/Decrease in other assets 4,954,349 263,129 (Increase)/Decrease in inventory 270,165 (1,022,481) (Increase)/Decrease of the trade payables 648,886 (5,192,466) Increase/(Decrease) in other liabilities 540,157 (685,101)

B. Financial flows of investment assets (111,458,599) (122,848,472) Disinvestments /(investments) of intangible fixed assets (1,248,504) (2,687,493) Disinvestments/(investments) of tangible fixed assets (11,777,951) 2,524,016 Disinvestments /(investments) of assets under concession (100,531,443) (122,964,970) Changes in the investments 2,099,299 279,975 Changes in the consolidation area

C. Financial flows of financial assets (7,164,385) (56,923,861) Cash from the issue of share capital 0 0 (Purchase)/Release of shares 0 0 Change of the financial payables 426,310 (47,079,643) Other changes in financial liabilities (9,098) (27,022) (Dividends paid) (7,581,597) (9,817,196)

D. Net flow generated by the management (A ± B ± C) (17,115,955) (65,310,690)

E. Initial liquid assets 55,033,557 120,344,247

F. Final liquid assets (D ± E) 37,917,602 55,033,557

CONSOLIDATED CHANGES IN NET EQUITY

31 December Profit Distribution of Other Profit (losses) 31 December (Units in Euro) 2018 allocation Profit movements for the year 2019 Share capital 345,533,762 0 345,533,762 Legal reserve 18,319,415 2,589,836 20,909,251 Reserve restricted for PEF 199,509,171 39,365,503 238,874,674 implementation FTA reserve (2,845,993) 0 (2,845,993) Other reserves and retained earnings: • Optional reserve 34,342,562 0 34,342,562 • Consolidation reserve 5,026,588 0 5,026,588 • Severance actualization reserve 834,432 (14,179) (635,702) 184,551 • Negative reserve for own shares in (32,993,340) 0 (32,993,340) portfolio • Reserve for rounding up (5) (2) (7) • Retained earnings (3,317,250) 9,918,234 (9,817,196) 14,179 (3,202,033) Total other reserves and retained 3,892,987 9,918,234 (9,817,196) (2) (635,702) 3,358,321 earnings Operating income 51,873,573 (51,873,573) 40,129,756 40,129,756 TOTAL NET EQUITY OF THE GROUP 616,282,915 0 (9,817,196) (2) 39,494,054 645,959,771 Capital & reserves of non-controlling 271,810 89,893 (84,817) (14,179) 262,707 interests Non‐controlling interests 89,893 (89,893) 59,759 59,759 TOTAL EQUITY OF NON‐CONTROLLING 361,703 0 0 (84,817) 45,580 322,466 PARTIES TOTAL CONSOLIDATED NET EQUITY 616,644,618 0 (9,817,196) (84,819) 39,539,634 646,282,237

31 December Allocation of Distribution of Other Profit (losses) 31 December (Units in Euro) 2019 result Profit movements for the year 2020

Share capital 345,533,762 0 345,533,762 Legal reserve 20,909,251 2,005,111 22,914,362 Reserve restricted for PEF implementation 238,874,674 30,477,694 269,352,368 FTA reserve (2,845,993) 0 (2,845,993) Other reserves and retained earnings: • Optional reserve 34,342,562 0 34,342,562 • Consolidation reserve 5,026,588 0 5,026,588 • Severance actualization reserve 184,551 (16,849) (587,947) (420,245) • Negative reserve for own shares in portfolio (32,993,340) 0 (32,993,340) • Reserve for rounding up (7) 5 (2) • Retained earnings (3,202,033) 7,646,951 (7,581,597) 16,849 (3,119,830) Total other reserves and retained earnings 3,358,321 7,646,951 (7,581,597) 5 (587,947) 2,835,733 Operating income 40,129,756 (40,129,756) 23,757,505 23,757,505 TOTAL NET EQUITY OF THE GROUP 645,959,771 0 (7,581,597) 5 23,169,558 661,547,737

Capital & reserves of non-controlling interests 262,707 59,759 (16,849) 305,617 Non‐controlling interests 59,759 (59,759) 30,144 30,144 TOTAL EQUITY OF NON‐CONTROLLING PARTIES 322,466 0 0 0 13,295 335,761 TOTAL CONSOLIDATED NET EQUITY 646,282,237 0 (7,581,597) 5 23,182,853 661,883,498

SMAT GROUP NOTES TO THE ACCOUNTS

We report herein under the main criteria and accounting principles applied in setting and drafting the consolidated financial statements of the Group (the consolidated financial statements) Such accounting principles have been applied consistently for all the fiscal years reported in this document.

Principles for preparation of the financial statements European (CE) Regulations no. 1606/2002 of 19 July 2002 introduced the obligation, starting from fiscal year 2005, to apply the International Financial Reporting Standards (“IFRS”), as amended by the International Accounting Standards Board (“IASB”), and adopted by the European Union (“IFRS” or "International Accounting Principles”) for the drafting of the statements of account of the companies holding capital and/or debt shares quoted in one of the markets regulated by the European Community. On April 13th 2017, SMAT issued a bond loan for a rated amount of a Euro 135 million subscribed by institutional investors and it provided for quotation at the Irish Stock Exchange. In compliance with the aforementioned legislative provisions, SMAT is therefore supposed to draft the consolidated and fiscal year financial statements in compliance with the IFRS starting from the fiscal year closed on 31 December 2016.

The data of transition to IFRS (The "Transition Date") was therefore been identified as 1 January 2015. the Company had already drawn up the consolidated financial statements for the fiscal years closed at 31 December 2015 and 2014 in compliance with the accounting principles issued by Association of Chartered Accountants, as amended by the Italian Accounting Body.

This statement of account is therefore drafted in compliance with the IFRS in force at the date of its approval. IFRS means the new International Financial Reporting Standards, the reviewed international accounting principles (“IAS”), all the interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”), formerly named Standing Interpretations Committee (“SIC”), certified and adopted by the European Union.

The Financial Statements schedules and the accounting information reported in the Explanatory Notes comply with the book entries they directly derive from. The IFRS were applied in coherence to all the periods presented in this document.

The statement of account prospectus, as provided for in art. 2423-ter of the Civil Code reports by appropriate comparison the indication of the previous year values. Where required, the data of the previous fiscal year have been suitably adapted in order to ensure the appropriate comparison.

This statement of accounts has been set in the perspective of corporate continuity and on the bases of the contractual criteria of the historical cost, with the exception of some book entries, which are detected at the fair value, in compliance with the provisions contained in the International Accounting Principles.

Structure and contents of the financial statements The diagram used for the profit and loss account is in scale with the different items analyzed according to their type. We believe this presentation, which is aligned with international procedure, is the one that best represents the company results. The total Income Statement is presented, as allowed by the revised IAS 1, in a document separate from net equity, and distinguishes between the components that can be reclassified in the Income Statement and those that cannot. The other components of the total Income Statement are highlighted separately also in the schedule of the net equity changes. The diagram of the equity and financial positions highlights the separation between the current and non-current assets and liabilities. The financial reporting is drafted according to the indirect method, as allowed by IAS7. The general principle adopted in drawing up these financial statements is cost, with the exception of the financial assets and liabilities (including the derivative instruments) which are assessed at fair value. The preparation of the Financial Statements has required the use of estimates by the management; the main areas characterized by particularly significant assessments and assumptions, together with those that have remarkable effects on the situations presented, are reported in section "Use of Estimates”. All the accounting

prospects of the equity and financial status and of the Income Statement are expressed in Euro unit, whilst the data entered in the explanatory comments are expressed in thousand Euros, except when it is otherwise indicated.

Consolidation criteria The principles adopted the elaboraiton of these consolidated financial statements are described below.

1. CONSOLIDATION AREA AND REFERENCE DATA These consolidated financial statements includes - besides the Financial Statements of Parent Company SMAT S.p.A. - the statements of account of its Subsidiaries (such statements of accounts, approved by the respective Boards of Directors, have been amended/reclassified as appropriate in order to make them homogeneous to the financial statements drafting standards of the Parent Company and consistent to the drafting standards of the international accounting principles (IAS/IFRS). The control is in force when the parent company has the power to manage the activities relevant to the company and is exposed to the variability of the results. The statements of account are included in the consolidated financial statements starting from the date the control is taken until such control ceases to exist.

The joint control agreements can be classified as (i) “shareholding in joint ventures” if the Group has rights on the net assets of the agreement such as - for instance - in case of companies with their own legal personality, or (ii) “joint control activities" the Group has rights on the assets and obligations on the liabilities relevant to the agreements. The classification of the agreements is based upon the analysis of the same rights and obligations. The companies on which a "remarkable influence" is exerted have been assessed with the "net equity method"

Besides Parent Company SMAT S.p.A., the consolidation area includes: • Company Risorse Idriche S.p.A., where the Parent Company has direct control (91.62%) in compliance with article 2359 of the Civil Code; • Company AIDA Ambiente S.r.l., where the Parent Company has direct control (51.00%) in compliance with article 2359 of the Civil Code; There are no discrepancies in the closing dates of the Financial Statements of the enterprises the Group consists of.

The participating interest in SAP S.p.A., where the Parent Company exerts joint control together with company IRETI S.p.A, respectively at 44.92% , has been assessed with the Net Equity method.

2. CONSOLIDATION PRINCIPLES We represent hereinafter the criteria adopted by the Group for the definition of the consolidation area and of the relevant consolidation principles.

Integral consolidation Consolidation by the "integral method" essentially consists of taking up the assets and liabilities, costs and revenues of the consolidated companies, irrespectively on the size of the shareholding held and allocating the Third-party shareholders - in a purposely-allocated item of the Net Equity called "Equity and reserve of third parties" - the share of profit and reserves of their competence. Companies Risorse Idriche S.p.A. and AIDA Ambiente S.r.l. are consolidated through the full integration system. The asset and liability elements, as well as the revenues and charges of the aforementioned companies are taken in full (line by line).

Elision is applied to: a) shareholdings in subsidiaries and their corresponding fractions of Net Equity held by the Parent Company, allocating the different asset and liability elements the current value at the date control is acquired; any difference, if positive, is reported, if there are the conditions for it, in the "Goodwill" asset item and reported in the Income Statement if negative, b) receivables and payables between companies included in the consolidation area; c) profits and charges relevant to operations performed between said companies, 49

d) profits and charges resulting from operations performed between such companies and relevant to values included in the equity; e) charge off of the dividends cashed by consolidated companies.

In particular, the consolidation procedure required the elision of the charging values of the shareholdings and the corresponding shares of Net Equity in the subsidiaries. Such elision has been implemented in the accounting values referred to the date where the subsidiaries have been included for the first time in the consolidation (for Risorse Idriche S.p.A.at 31 December 2004, for AIDA Ambiente S.r.l. at 31 December 2009).

In past fiscal years, such elision determined for: • Risorse Idriche S.p.A. a greater value of the shareholding in 2004, which was computed into the consolidated financial statements - to the Net Equity - in an item denominated “Consolidation reserve" and amended in 2007, further to the increase in the control percentage (from 83.67% to 91.62%) with computing to the consolidated financial statements amongst the intangible assets in an item denominated “Consolidation Difference”; • AIDA Ambiente S.r.l. no difference.

The greater/lower price paid from the corresponding fraction of payment, deriving from the acquisition of further company shares is computed as reduction/increment of the net equity. The acquisitions of controlling shareholding that occur within the same Group (i.e. “business combinations under common control”) are calculated in value continuity .

Elimination of the intra-group profits/losses For the purposes of the consolidated financial statements, the economic result of the Group only derives from transactions involving third parties.

The profits/losses deriving from intra-group transactions - where existing - are eliminated within the consolidation process, sharing the adjustment proportionally between the share relevant to the Group and the one related to Third Parties, taking also into account the tax effects.

Evaluation of the shareholding through the Net Equity method The shareholding is initially detected at cost and the accounting value is increased or reduced to identify the share belonging the controlling company, of the profits and losses of the subsidiary that are achieved after the date of acquisition. Any goodwill included in the value of the participating interest is subject to “impairment test”. The cost of acquisition is allocated to the pro-rate of the assets and liabilities fair value, as they can be identified, of the related companies or joint ventures, and the difference to goodwill. The share of the fiscal year of the subsidiary of competence of the controlling company is identified in the profit and loss account of the latter, with the exception of the effects relevant to other variations in the subsidiary net equity, different from the operations with the shareholders, which are directly reflected in the total Income Statement of the Group. In case of any losses exceeding the loading value of the shareholding, the part in excess is identified in a purposely-allocated passive fund insofar the parent company is committed to comply with the legal obligations or in those that are implicit to the subsidiary or in any case to cover its losses. The dividends received by a subsidiary reduce the accounting value of the shareholding.

Valuation criteria Tangible fixed assets The tangible assets are identified at the purchase or production cost including the accessory charges, or at the value based on appraisals of the company equity, in case of acquisitions of companies, net to the relevant depreciation fund and to any losses of value. The production cost included the direct and indirect costs for the share that can be reasonably ascribed to the assets (e.g.: personnel costs, transport, customs duties, expenses for the preparation of the area of installation, testing costs, notary and land register expenses) The cost includes any professional fees and - for some goods, the financial charges capitalized up to the coming into service of the good. The cost includes any cost for site reclaiming, on which the tangible asset lays, complies with the provisions of IAS 37.

The expenses for the ordinary maintenance are fully charged to the Income Statement. The costs for improvements, modernization and transformation of incremental nature are computed to the capital assets. The accounting value of the tangible assets is submitted to verification to identify any losses of value, in particular when events or changes of condition identify that the charged value cannot be recovered. The tangible assets are entered gross to the system revenue grants which are identified in the Income Statement throughout the period of time required to refer them to the relevant costs; they are represented in the equity and financial status by reporting the grant as deferred revenue. The depreciation starts when the assets enter the production cycle and - for the new acquisitions – it is calculated at 50% of the full rate part, since it is considered as representative of the actual use of the goods. The current assets include the costs relevant to intangible assets whose economic utilization process has not started yet. The tangible assets are systematically depreciated every fiscal year based on economic and technical rate parts that are considered as representative of the residual potential of use of the assets. We report herein under the tables with the depreciation rate parts that have been taken into account for the depreciation of the assets. As required by IAS 16, the estimated useful lifespan of the tangible assets are reviewed every fiscal year, in order to assess the need of an overhaul. In case it is ascertained that the estimated useful lifespan does not represent as appropriate the future expected benefits, the relevant depreciation plans must be redefined based on the new assumptions. Such changes are reported in a prospect to the Income Statement. During the fiscal year that has been closed, no change was reported in the depreciation plans for any of the categories of tangible assets. The land is not depreciated, Pursuant to accounting principle IFRS 16 - Leases, since 1 January 2019, for leases previously classified as operational, the Group recognises: - financial liability, equal to the current value of future residual payments on the date of transition, implemented using the applicable incremental borrowing rate on the date of transition for each contract; - usage right equal to the value of financial liability on the date of the transition, net of any accruals and deferrals in the statement of assets and liabilities on the date of closure for this balance sheet. The profits or losses that derive from the alienation or dismissals of a tangible asset are identified as the difference between the sale revenue and the net accounting value of the asset and they are identified in the Income Statement at the moment the buyer is transferred the risks and benefits connected to the ownership of said asset. Goodwill and other intangible fixed assets The identifiable controllable intangible assets are identified in the accounting; their cost can be reliably determined provided that such activities generate economic benefits in the future. Such assets are identified at cost value in compliance with the criteria indicated for the tangible assets and - if their useful lifespan is defined - they are depreciated throughout the period of such estimated lifespan. The depreciation starts at the moment the asset is ready to be used or - in any case - it starts producing economic benefits for the enterprise. The current assets include the costs relevant to intangible assets for which the economic utilization process as not started yet.

The intangible assets with defined useful lifespan are systematically depreciated starting from when the asset is available for use throughout the period of expected usefulness. The intangible assets with defined useful lifespan are systematically depreciated starting from when the asset is available for use throughout the period of expected usefulness. The goodwill and the other activities whose useful lifespan is not defined are not subject to systematic depreciation, but they are subject to yearly verifications of recoverability (the so-called impairment test) rung at the level of the individual Cash Generating Unit (CGU) or groups of CGU's whose indefinite useful lifespan assets can be reasonably allocated. The test is described hereinafter in "Reduction of the value of the assets". Any write-down ascribed to goodwill cannot be subject to subsequent return to default values. The goodwill acquired against payment during the release of branches SAC (1 January 2014) and SAP (1 July 2015) is not depreciated, but it is submitted every year to the so-called impairment test.

The intangible assets identified as a result to an aggregation of companies are reported separately from the goodwill, if their fair value is reliably determined.

The profits or losses that derive from the alienation of an intangible asset are identified as the difference between the dismissal value and the loading value of the asset and they are identified in the Income Statement at the moment the buyer is transferred the risks and benefits connected to the ownership of said asset. Assets under concession The concessions mainly consist of rights relevant to networks, systems and other equipment relevant to the Integrated Water Service given under license to SMAT Spa and which are functional to the management of such service. Such licenses are classified in a purposely-allocated item according to the interpretation IFRIC 12 – Service Concession Arrangements. As far as the depreciation is concerned, IFRIC provides that the latter is calculated on the basis of what is stated in the agreement and - in particular - in a constant measure for the shorter period of time between the technical and economic lift of the assets given in license and the duration of the license itself, until the takeover value provided for in the license agreement is achieved. In particular, the value of the right of use of the public assets of the waterworks of the City of Turin and of C.I.A.C.T., which are defined in compliance with the expert appraisal of transfer, have been reported in this Financial Statements on the basis of the duration of the relevant agreement deed extended by Ente d’Ambito Torinese n. 3. The depreciation of the improvements made to said assets after the transfer date have been determined based on the estimated economic and technical useful lifespan. The depreciations on the improvements made to the well systems entrusted in direct management to the Company have been determined with reference to the estimated economic and technical useful life of the improvements made.

The extension of the waterworks system of the City of Turin, received under a license agreement and for which it was established in the previous license contract by the City of Turin to AAM Torino S.p.A. (now liquidated) to be devolved free of charge at the end of the license have been depreciated on the basis of the estimated economic and technical life of said extension.

The extension includes the rights on networks, systems and other equipment relevant to the Integrated Water Service and connected to services managed by SMAT S.p.A. The implementation of ’IFRIC 12 has required the application to the same infrastructures - of IAS 11, since, if the licensee builds or upgrades an infrastructure it does not control, the relevant services of building and upgrading developed on behalf of the licensor are considered as actual activities developed against purchase order. Since a large part of the activities is sub- contracted and that the margin of benefit acknowledged in the remuneration of the service rate cannot be identified separately on the building activities that were developed in-house, such infrastructures are identified based on the cost that was actually sustained. Shareholdings Shares in partner companies are accounted using the net equity method, starting from the date when significant impact begins and up to the moment when this significant impact ceases. Shares in other companies are valuated at fair value in accordance with the other components in the comprehensive financial statements. Shares held exclusively for the purpose of subsequent alienation are excluded from this approach, and their fair value is inserted in the profits (losses) of the fiscal year. The risk deriving from any losses exceeding accounting value of the shareholding is identified in a purposely-allocated fund insofar the parent company is committed to comply with the legal obligations or in those that are implicit to the subsidiary or in any case to cover its losses.

To ensure the correctness of the recorded value, the shares in partner companies and other companies were subjected to the impairment test. Operationally, for the purpose of this test, the accounted value of reference for these shares was determined and then compared with the recoverable value identified through valuation performed by an external independent expert. In case the share of competence of the Company of the losses in the participating interest exceeds the accounting value of the participating interest, the value of the participating interest is zeroed and the share of any further losses is identified as a liability fund in case the Company is obliged to respond to it.

The dividends received are recognized in the Income Statement once the right to receive the relevant payment is established. In case the related company has distributed dividends, also the following aspects are considered as potential indicators of loss of value: • The reported value of the participating interest exceeds the accounting value in the consolidated balance sheet of the net assets of the related company, including the relevant goodwill; 52

• The dividend exceeds the overall value of the profit and loss account in the period of time the dividend refers to.

The financial assets the Company intends to and can keep until the expiry are reported at the cost represented by the fair value of the initial amount given in exchange, incremented by the transaction cost. As a result of the initial identification, the financial assets are assessed through the criteria of depreciated cost, using the method of the actual interest rate. Non-current financial assets Such category includes those assets that are not represented by derivate instruments and are not quoted in an active market, of which fixed or identifiable payments are expected. Such assets are assessed at the depreciated cost based on the actual interest rate method. If there is objective evidence of the value loss indicators, the value of the assets is reduced in such a measure to result equal to the discounted value of the flows that can be obtained in the future: the losses of value determined through the impairment test are reported in the Income Statement. If the reasons of the previous write-downs no longer stand in subsequent periods, the value of the assets is resumed until it reaches the value that would derive from the application of the depreciated cost if the impairment had not been performed. Such assets are classified as current assets, except the shares whose expiry is longer than 1 month, which are included amongst the noncurrent assets. Inventory The inventory is assessed at the lowest value between the average weighed cost for the movement and the corresponding market value, in order to reflect any conditions of technical obsolescence or low turnover, as reported in the purposely-allocated Write-down Fund taken to direct reduction of the inventory to take the cost back to the value that is expected to be achieved. Receivables The credits are initially computed at the “fair value" and - then - at the depreciated cost, where it is significant, using the actual interest rate, reduced for losses of value. The losses of value of the credits are reported in the Income Statement when objective evidence is detected that the Group shall not be able to recover such credit. The amount of the write-down is measured as the difference between the accounting value and the current value of the expected future financial flows. The value of the credits is reported in the financial statements net of the credit write-down fund. With reference to the impairment model, the IFRS 9 principle – Financial Instruments: recognition and measurement - of the year 2018 requires that the estimate of the losses on credits is performed on the basis of the expected losses model (instead of on the model of the incurred losses utilized by IAS 39) using supportable information, available without charges or unreasonable efforts that required historical, current and perspective data; The principle foresees that the impairment model is applied to all financial instruments, or to financial activities valued at the amortized cost, to those valued at fair value , to credits derived from rental contracts and commercial credits. The Group has developed a credit analysis model whereby it also takes into account receivables not yet overdue in establishing the provision for bad debts, and determines the write-downs to be applied to the different types of receivables past due.

Financial assets and other current assets They are initially reported at the “fair value" (including the costs incurred for the acquisition/emission) at the date of the transaction. Then, they are assessed at the depreciated cost, using the actual interest rate criteria, wherever it is significant and assimilating any losses of value into the Income Statement. Industry information The information relevant to the sectors of activity was arranged in compliance with the provisions of IFRS 8 “Operational sectors”, which include the submittal of the information in compliance with the modes adopted by the management for the operational decision-making. Therefore, the identification of the sectors of operation and the information submitted are defined based on the internal reporting used by the management for the allocation of the resources to the different segments and for the analysis of the relevant performance. A sector of operations is defined by IFRS 8 as a component of a body that : I) undertakes entrepreneurial activities that generate cost and revenue (including the revenues and costs concerning operations with other

components of the same body ); II) whose operational results are regularly reviewed at the highest operational decision-making level of the body for the purposes of the adoption of decisions as related to the resources to be allocated to the sectors and of the assessment of the results; III) for which separate information is available in the financial statements. The management has identified only one operational sector, into which all the main services and products supplied to the customers flow, since the activity of the company consists of the management of the Integrated Water Service which is no further broken down at the level of the internal strategic reporting. Cash and cash equivalents The liquidity includes the cash on hand, also in the form of checks, and on demand bank deposits. The equivalent means consist of financial investments with a three-month expiry or lower (as from the date of their purchase), which can be promptly converted into liquidity and with an insignificant risk of variation in their value. Such items are calculated at fair value; profits or losses deriving from any changes in the fair value are reported in the Income Statement. Own shares The own shares are reported at their purchase price and - starting from the fiscal year which is being closed - are reported as a reduction of the Net Equity. Also the counter value deriving from their release is reported with net equity counterpart, with no computing into the Income Statement. Provisions for risks contingencies and charges, benefits to the employees The provisions for contingencies and charges concern charges of a determined nature and whose certain or likely existence that - at the date the Financial Statements is being closed - are undetermined as far as the amount or the date of occurrence are concerned. The provisions are identified when: The provisions are identified when: (i) the existence of a current, legal or implicit obligation deriving from a past event, is likely; (ii) the compliance with subject obligation is likely to be burdensome; (iii) the amount of the obligation can be reliably estimated. The provisions to the funds represent the best estimate of the costs required to face compliance at the date of the Financial Statements (assuming there are sufficient elements to run such estimate) and they are actualized when the effect is significant, and the required information is available. In such cases, the provisions are determined by actualizing the future cash flows at a discount rate before taxes that reflects the current market assessment and take into account the risks connected to the company activity. When the actualization is performed, the increment of the provisions due to time is reported in the financial charges. If the liabilities are due to material activities (e.g.: revamping of sites) the fund is reported in counterpart to the activity it refers to and the identification of the charge in the Income Statement is performed through the depreciation process of the tangible asset the charge refers to. In case of redefinition of the liabilities, the methods provided for by IFRIC 1 are applied. The explanatory notes also illustrate potential liabilities represented by; (i) potential - though not likely - obligations deriving from past events, whose existence shall only be confirmed upon occurrence of one or more uncertain future events that are not under the full control of the Company; (ii) current obligations deriving from past events, whose amount cannot be reliably estimated or whose compliance with is likely not to be onerous.

Bemefits to the employees (Severance pay) The liabilities relevant to the defined benefit programs (such as the Severance pay for the amount accrued before 1 January 2017 and the other benefits for the employees) are defined net to any activities at the service of the plan, on the basis of current assumptions and by competences, consistently with the working performance required to obtain such benefits; the assessment of the liabilities is performed with the support of independent actuaries. The value of the current profits and losses is reported into the other components of the total Income Statement. Further to Financial Law no 296 of 27 December 2006, for companies having more than 50 employees, as related to shares accrued starting from 1 January 2007, the Severance Pay is configured as a plan with defined contributions.

Trade payables and other current liabilities Trade payables and other debts are initially reported at fair value, net of the accessory costs of direct computing, and they are then detected at the depreciated cost, where significant, applying the criteria of the actual interest rate. The "Other current liabilities" item includes current “bound revenues" share ” determined by Ente d’Ambito Torinese no. 3 with Deliberation no. 483/2013 and reported to fiscal year 2012. Costs and revenues The costs and revenues are reported net of the amended items, i.e. returns, discounts, reductions and any estimate changes. They are identified at the moment the customer is transferred the risks and benefits relevant to the product sold, i.e. as related to the services, in the accounting period they are rendered. In particular, as far as the revenues are concerned: . The revenues for service performance are acknowledged at the date the performance is completed; . Revenues for the sale of water acknowledged and counted at the time of delivery, including the allocation for deliveries made, but not yet invoiced (estimated according to historical analyses determined in relation to past consumption); . Revenues for the sale of products are acknowledged at the moment the customer is transferred the risks and benefits relevant to the product sold, generally corresponding to the delivery or shipment of the goods. The costs are accounted for according to the accrual principle. Grant for Plants The grants for plants are reported in the accounts once there is the justification documentation of the imminent collection by the paying body. These concur to form the result of the fiscal year according to the rules of economic accrual, determined as related to the residual economic and technical lifespan of the assets they refer to. Financial income and expenses Financial proceeds and charges are calculated according to the accrual principle. The dividends of other companies are recorded in the Income Statement in the moment in which the right to receive payment has been established. Income tax for year Income tax for the year consists of the sum of current and deferred taxes. TIncome tax is based on profit for the year before taxes. Profit before taxes differs from the result entered in the Income Statement since it excludes positive and negative components that will be taxable or deductible in other fiscal years and - furthermore - it excludes items that will never be taxable or deductible. "Liabilities for current taxes" are calculated using the rates in force as at the date of the Financial Statements. In determining the income taxes, the Company has taken into due consideration the effects deriving from the last fiscal reform introduced by Law no. 244 of 24 December 2007 and - in particular - the strengthened principle of derivation established by art. 83 of TUIR, which requires the entity applying the international accounting principles to apply, even in exceptions to the provisions of the TUIR, “the criteria of qualification, temporary computing and classification of the Financial Statements according to said accounting principles”.

Deferred taxes are calculated as related to the temporary differences in the taxation and are entered under "Deferred tax liabilities". Deferred tax credits are calculated to the extent in which it is deemed probable the existence, in the fiscal years during which the relevant temporary differences will spill over, of a taxable income at least equal to the amount of the differences which will be annulled. The deferred and anticipated taxes are determined on the basis of the tax rates expected to be applicable in the fiscal year in which the tax credit will be realized or the tax debt will be extinguished, on the basis of the tax rates defined by measures in force or substantially in force as at the reference date of the financial statements. Such changes are entered under either the Income Statement or under net equity, as related to the computing made at the origin of the reference difference. Impairment test The accounting values of the Group activities are assessed at every reference date of the statement of account, in order to determine whether there are indications of value reductions, in case you proceed to the estimate 55

of the recoverable value of the activity A loss by value reduction (impairment) is recorded in the Income Statement when the accounting value of an asset or of a unit that generates financial flows exceeds the recoverable value. The recoverable value of the non-financial activities correspond to the greatest value between their "fair value" net to the sale cost and the value in present use. To determine the value in present use, the estimated future financial flows are actualized using a discount rate that reflects the market assessment of the money value and of the risks related to the type of activity. In case of activities that do not generate financial flows in input, that are widely independent, we proceed by calculating the recoverable value of the unit that generates financial flows to which the asset belongs. When, subsequently, a loss on assets other than goodwill and other assets of indefinite useful lifespan, no longer exists or is reduced, the accounting value of the asset and of the asset that generates financial flows is increased until the new estimate of the recoverable value is calculated, which cannot exceed the value that would be determined if no loss were detected by impairment. The recovery of an impairment is immediately recorded in the Income Statement. Conversion of assets/liabilities into foreign currency The functional and presentation currency adopted by Smat S.p.A. is Euro. The transactions in foreign currencies are initially identified at the exchange rate at the date of the operation. The assets and liabilities in currency - with the exception of the tangible assets - are reported in the reference exchange rate at the date the fiscal year is closed and the relevant profits and losses on the exchange rate are regularly computed to the Income Statement; the net profit - if any - that might arise is allocated to a purposely-created non-distributable reserve up to the date of use. Use of estimations The drafting of the statement of accounts and relevant explanatory notes requires the administration body to run estimates that impact the values of the balance sheet assets and liabilities and on the information relevant to the potential assets and liabilities to the date of the balance sheet.

The current status of generalized economic and financial crisis involves the need to make assumptions as related to the future trend, which can be characterized by uncertainty. Subsequently, we cannot exclude in the future different results from what has been estimated, that could therefore require amendments that cannot be estimated today or foresee them at the accounting value of the relevant balance sheet items.

The estimates are utilized in different areas, such as the credit write-down fund, the Risk Fund for Potential Liabilities, the depreciations, the assessment of the assets relevant to participating interest in related companies and subsidiaries, the sale revenues, the costs and changes relevant to the management of the Integrated Water Service, and the revenue taxes.

The estimates and assumptions are periodically reviewed by the Group on the basis of the better knowledge of the activity and of other factors that can be reasonably derived from the current circumstances, and the effects of any changes are immediately reflected in the Income Statement.

Amounts expressed in Notes to the Accounts Unless otherwise indicated, the amounts reported in the Notes to the Accounts are expressed in Euro units with rounding up to the upper unit for hundredths equal to or greater than 50 Accounting principles, IFRS amendments and interpretations adopted from 1 January 2020 The following IFRS accounting principles, amendments and interpretations were applied for the fist time by the group starting as of 1 January 2020:

• On 31 October 2018, IASB published the document “Definition of Material (Amendments to IAS 1 and IAS 8)”. The document introduced a change in the definition of “relevant” in the IAS 1 – Presentation of Financial Statements and IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors principles. This amendment has the objective to render the definition of "relevant" more specific and introduced the concept of “obscured information” alongside the concepts of omitted or erroneous information already present in the two principles in question. The amendment clarifies that information is “obscured” if it was described in a way that generates an effect at first reading in a balance sheet similar to what would be produced if the information was omitted or erroneous. The adoption of this amendment did not produce any effects on the consolidated financial statements of the Group.

• On 29 March 2018, IASB published an amendment to the “References to the Conceptual Framework in IFRS Standards”. The amendment is effective for periods starting from 1 January 2020 or later, but advance application is also allowed. The Conceptual Framework defines the fundamental concepts for financial information and guides the Board in developing IFRS standards. The document helps to guarantee that the standards are conceptually aligned and that similar transactions are handled in the same way, to provide useful information to investors, lenders and other credit institutions. The Conceptual Framework supports companies in the development of accounting principles when no IFRS standard is applicable to a specific transaction, and more in general, helps the involved subjects to understand and interpret the standards. The adoption of this amendment did not produce any effects on the consolidated financial statements of the Group.

• IASB, on 26 Sepember 2019, published an amendment called “Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform”. The same amendment changed IFRS 9 - Financial Instruments and IAS 39 - Financial Instruments: Recognition and Measurement as well as IFRS 7 - Financial Instruments: Disclosures. In particular, the amendment changes come requirements for application of hedge accounting, allowing for temporary derogations, in order to mitigate the impact derived from uncertainty about the IBOR reform on cash flows in the period previous to its completion. The amendment also requires companies to provide additional information in the financial statements about their coverages that are directly impacted by uncertainties generated by the reform and to which said derogations are applied. The adoption of this amendment did not produce any effects on the consolidated financial statements of the Group.

• On 22 October 2018, IASB published the document “Definition of a Business (Amendments to IFRS 3)”. The document provides clarifications about the definition of business for the correct application of the IFRS 3 principle. In particular, the amendment states that a business usually produces output, the presence of output is not strictly necessary for identifying a business in the presence of a group of integrated activities/processes and goods. Nevertheless, to satisfy the definition of business, an integrated group of activities/processes and goods must include, as a minimum, input and a substantial process that together contribute significantly to the capacity to create an output. For this purpose, IASB replaced the term "capacity to create output" with "capacity to contribute to the creation of output", to clarify that a business can exist also without the presence of all the input and processes necessary for creating output. The amendment also introduced an optional test ("concentration test") to exclude the presence of a business if the paid price is substantially referable to a single activity or group of activities. The changes are applied to all the business combinations and acquisitions of businesses after 1 January 2020, but advance application is also allowed. The adoption of this amendment did not produce any effects on the consolidated financial statements of the Group.

• On 28 May 2020, IASB published an amendment called “Covid-19 Related Rent Concessions (Amendment to IFRS 16)”. This amendment provided lessees with an exemption from assessing whether a COVID-19- related rent concession was a lease modification pursuant to IFRS 16. Accordingly, the lessees who avail themselves of this exemption can enter the effects of the reduction in lease payments directly in the income statement on the date the reduction comes into effect. This amendment applies to financial

statements for reporting periods beginning 1 June 2020. The adoption of this amendment did not have any effects on the consolidated financial statements of the Group. Accounting principles, amendments and interpretations IFRS and IFRIC authorized by the European Union, not yet mandatory and not adopted in advance by the Company on 31 December 2020 • On 28 May 2020, IASB published the amendment called “Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to IFRS 4)”. This amendment makes it possible to extend the provisional exemption from the application of IFRS 9 until 1 January 2023 for insurance purposes. It will come into effect o 1 January 2021. At present the administrators are assessing possible effects of introduction of this amendment into the financial statements of the Group.

• On 27 August 2020, in view of the reform of interbank interest rates such as IBOR, the International Accounting Standards Board (IASB) published “Interest Rate Benchmark Reform—Phase 2” a document amending the following standards: o IFRS 9 Financial Instruments; o IAS 39 Financial Instruments: Recognition and Measurement; o IFRS 7 Financial Instruments: Disclosures; o IFRS 4 Insurance Contracts; o IFRS 16 Leases. Such amendments will come into force on 1 January 2021. At present the directors are assessing the possible effects of applying the amendments to the financial statements of the Group. Accounting principles, IFRS amendments and interpretations not yet certified by the European Union To the date of reference of this document, the competent bodies of the European Union have not yet concluded the certification process required for the adoption of the amendments and principles described hereinunder. • On 18 May 2017, IASB published the principle IFRS 17 – Insurance Contracts which is destined to replace IFRS 4 – Insurance Contracts. The objective of the new principle is to guarantee that an entity provides pertinent information that faithfully represents the rights and obligations derived from issued insurance contracts. The IASB has developed a standard for elimination of existing incongruities and weaknesses in accounting policies, providing a single principle-based framework for taking into account all types of insurance contracts, including reinsurance contracts held by the insurer. The new principle also includes requirements for presentation and reporting to improve comparability among the entities in this sector. The new principle measures an insurance contract based on a General Model or a simplified version of the same, called the Premium Allocation Approach (“PAA”). The main characteristics of the General Model are: o the estimates and the hypotheses for future cash flows are always current; o the measurement reflects the temporal value of money; o the estimates foresee extensive use of observable information on the market; o there is current and explicit risk measurement; o the expected profile is differentiated and aggregated into groups of insurance contracts at the moment of initial reading; and, o the expected profit in the period of contractual coverage takes into account changes deriving from variations in the hypothesis relative to financial flows for each group of contracts.

The PAA approach includes measurement of liabilities for the residual coverage of a group of insurance contracts on the condition that, at the time of initial reading, the entity expects that this liability represents a reasonable approximation of the General Model. Contracts with a period of coverage of one year or less are automatically suitable for the PAA approach. Simplifications derived from the application of the PAA method are not applied to assessment of liability for claims in general, which are measured using the General Model. Nevertheless, it is not necessary to actualize those cash flows if it is expected that the balance to be paid or received is due within one year from the date of the claim. The entity must apply the new principle to issued insurance contracts, including issued reinsurance contracts, held reinsurance contracts and investment contracts with a discretionary participation feature (DPF). 58

The principle applies starting from 1 January 2023, but an advanced application is allowed, only for those companies which apply iFRS 9 - Financial Instruments - and IFRS 15 - Revenue from Contracts with Customers. The Board Members do not expect a significant effect in the consolidated balance sheet from the adoption of this principle.

On 23 January 2020, IASB published an amendment called “Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current”. This amendment aims to clarify how to meke the classification of current and long-term debts and liabilities. The changes will be applied starting from 1 January 2023, but advance application is also allowed. The Board Members do not expect a significant effect in the consolidated financial statements of the Group from the adoption of this amendment. • On 14 May 2020, the IASB published the following amendments: o Amendments to IFRS 3 Business Combinations: the amendment will update the reference contained in IFRS 3 to the Conceptual Framework in the revised version, without this entailing changes to the provisions set out in IFRS 3. o Amendments to IAS 16 Property, Plant and Equipment: it will no longer be possible to detract from the cost of tangible assets the amount obtained on disposal of assets during the testing stage of the asset itself. Such revenues from disposal and the relative costs will therefore be recorded in the income statement. o Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets: the amendment makes it clear that the charges that may arise from a contract must be estimated by taking into account all the costs directly attributable to the contract. Accordingly, besides incremental costs (e.g., the cost of direct materials processed), the evaluation of the possible charges associated with a contract must also take into account all the costs that they company cannot avoid on account of having signed the contract (e.g., the proportions of personnel cost and depreciation of the machinery used to perform the contract). o Annual Improvements 2018-2020: amendments were made to IFRS 1 First-time Adoption of International Financial Reporting Standards, IFRS 9 Financial Instruments, and IAS 41 Agriculture, and to the Illustrative Examples of IFRS 16 Leases. All the foregoing amendments will come into effect on 1 January 2022. The Board Members do not expect a significant effect in the consolidated financial statements of the Group from the adoption of these amendments.

Notes to the entries of the Statement of Assets and Liabilities REPORT FOR OPERATIVE CATEGORIES Identification of service types and the information pertaining to each was based on the elements that the management uses to make its own operative decisions. In particular, internal accounting is audited and used periodically by the top decision‐makers of the Group and its takes a single service type as a reference, and all the principal services supplied to customers converge within that service type inasmuch as the Company’s business consists of managing the Integrated Water Service. ASSETS

1. Tangible fixed assets € 143,131,555 The composition of the tangible fixed assets and the relevant movements occurring during the fiscal year are entered in the following table: Assets under Industrial construction 2019 Land and Plants and and Other Leased and Grand total Categories buildings machinery commercial assets assets payments equipment on account Historical cost as at 31 December 2018 94,189,344 308,576,890 13,738,120 16,430,486 0 29,588,533 462,523,373 Depreciation fund as at 31 December 2018 (32,355,450) (237,158,336) (9,584,288) (14,194,311) 0 0 (293,292,385) Net value as at 31 December 2018 61,833,894 71,418,554 4,153,832 2,236,175 0 29,588,533 169,230,988 Reclassifications 344,931 (155,395) 0 0 0 (20,035,041) (19,845,505) Works in progress completed in 2019 1,745,560 4,010,344 0 0 0 (5,755,904) 0 Disinvestments in the fiscal year 0 0 (245,516) (854,263) 0 0 (1,099,779) Adjustments (307,377) (61,792) 0 0 0 0 (369,169) Leasing increments 0 0 0 0 2,934,873 0 2,934,873 Increases in the fiscal year 1,110,772 3,387,723 2,408,804 2,562,615 0 5,332,616 14,802,530 Historical cost as at 31 December 2019 97,083,230 315,757,770 15,901,408 18,138,838 2,934,873 9,130,204 458,946,323 Reclassification/adjustment of amortization fund 0 3,885 0 0 0 0 3,885 Depreciation in the fiscal year (3,149,227) (11,291,788) (747,463) (975,483) (1,277,952) 0 (17,441,913) Use of funds 17,175 26,104 161,506 844,364 0 0 1,049,149 Depreciation fund as at 31 December 2019 (35,487,502) (248,420,135) (10,170,245) (14,325,430) (1,277,952) 0 (309,681,264) Net value as at 31 December 2019 61,595,728 67,337,635 5,731,163 3,813,408 1,656,921 9,130,204 149,265,059

Assets under Industrial construction 2020 Land and Plants and and Other Leased and Grand total Categories buildings machinery commercial assets assets payments on equipment account Historical cost as at 31 December 97,083,230 315,757,770 15,901,408 18,138,838 2,934,873 9,130,204 458,946,323 2019 Depreciation fund as at 31 December 2019 (35,487,502) (248,420,135) (10,170,245) (14,325,430) (1,277,952) 0 (309,681,264) Net value as at 31 December 2019 61,595,728 67,337,635 5,731,163 3,813,408 1,656,921 9,130,204 149,265,059 Reclassifications 2,630 (443,981) (441,351) Works in progress completed in 2020 1,761,641 110,076 265,314 1,778 (2,138,809) 0 Disinvestments in the fiscal year (25,603) (95,513) (1,418,777) (1,539,893) Adjustments 0 Leasing increments 80,642 80,642 Increases in the fiscal year 4,106,666 746,834 2,787,294 1,516,962 3,010,333 12,168,089 Historical cost as at 31 December 2020 102,951,537 316,614,680 18,931,043 19,562,065 1,596,738 9,557,747 469,213,810 Reclassification/adjustment of amortization fund 0 Depreciation in the fiscal year (3,452,368) (11,125,256) (993,707) (1,273,568) (1,066,556) (17,911,455) Use of funds 20,883 93,791 1,395,790 1,510,464 Depreciation fund as at 31 December 2020 (38,939,870) (259,545,391) (11,143,069) (15,505,207) (948,718) 0 (326,082,255) Net value as at 31 December 2020 64,011,667 57,069,289 7,787,974 4,056,858 648,020 9,557,747 143,131,555

No value adjustment has been operated to the cost of acquisition or production of the assets. As entered in the assessment criteria, the tangible assets also include the recording of the financial charges of direct computing relevant to the great works in progress.

The sources of income owned by the Group as property have been depreciated in the ordinary way in compliance with the assessment criteria detailed in these Notes to the Accounts as well as a function of representative rates of the relevant estimated residual potential for utilization as at the date of this Financial Statements. On the increments developed in the fiscal year, rate reduced by 50% have been applied.

“Land and buildings” includes the investments made during the year in buildings owned by the company.

“Plants and machinery” includes the cost of spare parts whose utility spreads over several years.

“Other tangible fixed assets” include furniture and furnishings, ordinary office equipment, electromechanical and electronic equipment, hardware, cars, motor vehicles for transport and other vehicles.

“Assets under construction and payments on account” includes the value in compliance with the progress status of the works that are being developed at the end of the fiscal year as well as of the prepayments paid to system suppliers, for a total amount of approx. EUR 9.6 million.

Subsequent to the application of IFRIC 12, “Service Concession Arrangements”, the revertible assets referred to the waterworks system of the City of Turin have been reclassified under intangible assets.

"Leased assets" include leased assets in the statement assets, in alignment with the nature of the same assets, following the adoption by the Group from 1 January 2019 of the new IFRS 16 principle Leases that introduced the new criteria for definition of lease contracts.

The following details transactions in the "Leased assets" category during the year:

Leasing – Leasing- Leasing – Leased Categories Rentals Rentals Rentals Land leases LEASED ASSETS Buildings Hardware Cars Other vehicles

Historical cost as at 31 December 25,704 314,520 1,621,287 671,049 302,313 2,934,873 2019

Depreciation fund as at 31 December (7,523) (167,829) (869,815) (199,195) (33,590) (1,277,952) 2019

Net value as as at 31 December 2019 18,181 146,691 751,472 471,854 268,723 1,656,921

Disinvestments in the fiscal year 0 (181,565) (1,237,212) 0 0 (1,418,777)

Leasing increments 0 0 26,209 35,298 19,135 80,642 Historical cost as at 31 December 2020 25,704 132,955 410,284 706,347 321,448 1,596,738

Depreciation in the fiscal year (7,523) (112,198) (706,448) (200,418) (39,969) (1,066,556)

Use of funds 0 180,420 1,215,370 0 0 1,395,790 Depreciation fund as at 31 December 2020 (15,046) (99,607) (360,893) (399,613) (73,559) (948,718)

Net value as at 31 December 2020 10,658 33,348 49,391 306,734 247,889 648,020

Intangible fixed assets € 742,572,209 The composition of the intangible assets and the relevant movements during the fiscal year are shown in the following table:

2019 Other assets account licenses, Goodwill

Categories Plant and Grand total ts intellectual & Concessions, similar rights payments on property rights trademarks and expansion costs expansion Industrial patent Development costs Development righ Assets under concession under Assets Totalintangible Other fixed Assets under construction and

H A B C D E F G I A+H+I (B+C+D+E+F+G)

Historical cost as at 31 December 2018 5,928,005 60,807 249,266 210,060 20,108,638 1,610,596 561,108 22,800,475 930,315,802 959,044,282 Depreciation fund as at 31 December 2018 0 (60,807) (249,266) (210,060) (18,532,914) 0 (180,081) (19,233,128) (319,204,492) (338,437,620) Net value as at 31 December 2018 5,928,005 0 0 0 1,575,724 1,610,596 381,027 3,567,347 611,111,310 620,606,662

Reclassifications 0 0 0 0 10,000 0 0 10,000 19,835,505 19,845,505

Works in progress completed in 2019 0 0 0 0 0 0 0 0 0 0 Disinvestments in the fiscal year 0 0 0 0 0 0 0 0 (18,683) (18,683)

Adjustments 0 0 0 0 0 0 0 0 (918,112) (918,112)

Increases in the fiscal year 0 0 0 0 2,627,106 50,387 0 2,677,493 103,822,716 106,500,209 Historical cost as at 31 December 2019 5,928,005 60,807 249,266 210,060 22,745,744 1,660,983 561,108 25,487,968 1,053,037,228 1,084,453,201 Reclassification/ adjustment of amortization fund 0 0 0 0 0 0 0 0 (4,474) (4,474) Depreciation in the fiscal year 0 0 0 0 (2,040,818) 0 (11,944) (2,052,762) (48,463,115) (50,515,877)

Use of funds 0 0 0 0 0 0 0 0 248,018 248,018

Depreciation fund as at 31 December 2019 0 (60,807) (249,266) (210,060) (20,573,732) 0 (192,025) (21,285,890) (367,424,063) (388,709,953) Net value as at 31 December 2019 5,928,005 0 0 0 2,172,012 1,660,983 369,083 4,202,078 685,613,165 695,743,248

2020 Other assets account licenses, Goodwill

Categories Plant and Grand total Concessions, similar rights payments on property rights expansion costs expansion trademarks and Industrial patent Development costs Development rights intellectua & Assets under concession under Assets Totalintangible Other fixed Assets under construction and

H A B C D E F G I A+H+I (B+C+D+E+F+G)

Historical cost as at 31 December 5,928,005 60,807 249,266 210,060 22,745,744 1,660,983 561,108 25,487,968 1,053,037,228 1,084,453,201 2019 Depreciation fund as at 31 0 (60,807) (249,266) (210,060) (20,573,732) 0 (192,025) (21,285,890) (367,424,063) (388,709,953) December 2019 Net value as at 31 December 5,928,005 0 0 0 2,172,012 1,660,983 369,083 4,202,078 685,613,165 695,743,248 2019

Reclassifications 106,531 (2,630) 103,901 337,450 441,351

Works in progress (193,078) (193,078) 193,078 0 completed in 2020 Disinvestments 0 (21,346) (21,346) in the fiscal year

Adjustments (18,612) (18,612) (267,353) (285,965)

Increases in the 1,292,471 63,822 1,356,293 100,187,123 101,543,416 fiscal year Historical cost as at 31 December 5,928,005 60,807 249,266 210,060 24,144,746 1,510,485 561,108 26,736,472 1,153,466,180 1,186,130,657 2020 Reclassification/ adjustment of 0 0 amortization fund Depreciation in 0 (1,759,311) (11,944) (1,771,255) (53,179,731) (54,950,986) the fiscal year

Use of funds 0 102,491 102,491

Depreciation fund as at 31 0 (60,807) (249,266) (210,060) (22,333,043) 0 (203,969) (23,057,145) (420,501,303) (443,558,448) December 2020 Net value as at 31 December 5,928,005 0 0 0 1,811,703 1,510,485 357,139 3,679,327 732,964,877 742,572,209 2020

2. Goodwill € 5,928,005 The value of the goodwill to 31 December 2020 can be ascribed to the acquisition of the SAC business unit (1 January 2014), amounting to EUR 96,000 and the SAP S.p.A. business unit (1 July 2015) regarding the Municipalities of ATO 3 Torinese amounting to EUR 5,832,005, entered under the intangible assets with the approval of the Board of Auditors.

Since 1 Januuary 2015, through the adoption of the international accounting principles, goodwill has no longer been subject to amortisation, but has undergone impairment tests in compliance with the provisions of IAS 36. Goodwill was allocated to the reference Cash Generating Unit (CGU) in compliance with IAS 36. and as such it is not subject to amortization, but to verification by impairment on a yearly basis, or more frequently, should an event or circumstances arise that may lead to the assumption of a value reduction. The

impairment test is developed through the comparison between the net accounting value and the recoverable value of the CGU the goodwill was allocated to, determined with reference to the greatest value between the fair value net of the costs of sale and the value of use of the CGU. The value used was determined by applying the synthetic income method, actualizing operating income net of taxes (Net operating profit after tax: Nopat) relative to the CGU in the Economic Financial Plan 2015-2033, approved by the Ordinary Shareholder Meeting on 29.06.2015. The Economic and Financial Plan also highlights the results expected for the whole duration of the license and - even though it is drafted on a time horizon longer than 5 years - it constitutes the representative document to identify the prospect cash flows Furthermore, since the license has a pre-defined useful life, the "terminal value" has not been defined.

The discount value utilized is represented by the WACC identified with reference to the sector the identified CGU operates within. The discount rate I(WACC) utilized reflects the market assessments on the cost of money and the specific risks of the sector of activities and of the reference geographic area. In particular, in determining the actualization rate, the following parameters have been utilized: • Risk-free rate at 1.09% • Risk premiums at 6.20% • Beta for the “water utilities” sector at 0.43; • Specific risk premiums at 3.47%; • Cost of debt at 2.69%. The discount rate used therefore was the weighted average cost of capital, estimated at 4.56%. With reference to fiscal years 2019 and 2020 , the impairment tests run do not show any value reductions in the goodwill entered. The results of the impairment tests have been submitted to a sensitivity analysis aimed at verifying their variability with the change of the main assumptions at the basis of the estimate. To this purpose, two different scenarios have been assumed as at 31 December 2020. • scenario 1: actualization rate = 6.76%, with a decrement of approx. 220 base points with respect to the base scenario; • scenario 2: actualization rate = 5.66%, with a decrement of approx. 110 base points with respect to the base scenario; The sensitivity analysis shows little sensitivity of the test with the change of assumptions at the basis of the estimate. More precisely, neither of the scenarios above would determine a loss of value of the goodwill.

3. Other intangible assets € 3,679,327 The intangible assets are entered amongst the statement of account assets, since they are part of the assets allocated to be durably used. No value adjustment has been applied to the cost of acquisition or production of the intangible assets. “Concessions, licenses, trademarks and similar rights” includes the cost incurred for the acquisition of software licenses depreciated in three fiscal years, and for the deposit of trademarks, which are depreciated in ten fiscal years. The value entered under “Assets under construction and payments on account” is based on studies currently underway. Furthermore, since 2014, the entry “Other” also includes the "Surface right" regarding the parking places at the “Palazzo" car park.

4. Concessions € 732,964,877

2019 Total

Categories by CIACT ts externalon aqueduct the City of Turin Revertible assets Revertible for the City of Turin on assets of external of assets on Usage rights granted assets in management Improvements on assets the aqueduct system for Usage rights constituting Assets under concession under Assets

on assets constituting the aqueducts in management aqueduct of the City of Turin Ongoing improvement works Ongoing improvement works constitutingthe aqueduct system Improvemen Historical cost as at 31 3,834,635 50,871,004 176,056,721 543,909,821 16,328,347 133,908,910 5,406,364 930,315,802 December 2018 Depreciation fund as at 31 (2,607,546) (35,707,531) (72,874,689) (203,508,543) 0 0 (4,506,183) (319,204,492) December 2018 Net value as at 31 Decembe 1,227,089 15,163,473 103,182,032 340,401,278 16,328,347 133,908,910 900,181 611,111,310 2018 Reclassifications 0 0 0 15,216,819 0 4,618,686 0 19,835,505 Works in progress 0 0 5,304,310 59,770,161 (5,304,310) (59,770,161) 0 0 completed in 2019 Disinvestments in the fiscal 0 0 0 (18,683) 0 0 0 (18,683) year Adjustments 0 0 (25,339) (787,760) 0 (105,013) 0 (918,112) Increases in the fiscal year 0 0 11,821,140 37,429,649 9,646,657 44,925,270 0 103,822,716 Historical cost as at 31 3,834,635 50,871,004 193,156,832 655,520,007 20,670,694 123,577,692 5,406,364 1,053,037,228 December 2019 Reclassification/adjustment 0 0 0 (4,474) 0 0 0 (4,474) of amortization fund Depreciation in the fiscal (81,939) (1,010,898) (8,875,649) (38,279,010) 0 0 (215,619) (48,463,115) year Use of funds 0 0 3,706 244,312 0 0 0 248,018 Depreciation fund as at 31 (2,689,485) (36,718,429) (81,746,632) (241,547,715) 0 0 (4,721,802) (367,424,063) December 2019 Net value as at 31 1,145,150 14,152,575 111,410,200 413,972,292 20,670,694 123,577,692 684,562 685,613,165 December 2019

2020 ity Turin of Total

Categories by CIACT under concession under

the City of Turin Revertible assets Revertible for the C on assets of external of assets on Usage rights granted assets in management Improvements on assets the aqueduct system for Usage rights constituting Assets

on assets constituting the aqueducts in management aqueduct of the City of Turin Ongoing improvement works Ongoing improvement works constitutingthe aqueduct system Improvements externalon aqueduct Historical cost as at 31 3,834,635 50,871,004 193,156,832 655,520,007 20,670,694 123,577,692 5,406,364 1,053,037,228 December 2019 Depreciation fund as at 31 (2,689,485) (36,718,429) (81,746,632) (241,547,715) 0 0 (4,721,802) (367,424,063) December 2019 Net value as at 31 1,145,150 14,152,575 111,410,200 413,972,292 20,670,694 123,577,692 684,562 685,613,165 December 2019 Reclassifications 0 0 0 337,450 0 0 0 337,450 Works in progress 0 0 2,993,590 50,495,923 (3,053,538) (50,242,897) 0 193,078 completed in 2020 Disinvestments in the fiscal 0 0 0 (21,346) 0 0 0 (21,346) year Adjustments 0 0 0 (264,048) 0 (3,305) 0 (267,353) Increases in the fiscal year 0 0 11,511,548 22,115,314 17,961,481 48,598,780 0 100,187,123 Historical cost as at 31 3,834,635 50,871,004 207,661,970 728,183,300 35,578,637 121,930,270 5,406,364 1,153,466,180 December 2020 Reclassification/adjustment 0 0 0 0 0 0 0 0 of amortization fund Depreciation in the fiscal (81,940) (1,010,899) (9,591,218) (42,280,055) 0 0 (215,619) (53,179,731) year Use of funds 0 0 0 102,491 0 0 0 102,491 Depreciation fund as at 31 (2,771,425) (37,729,328) (91,337,850) (283,725,279) 0 0 (4,937,421) (420,501,303) December 2020 Net value as at 31 1,063,210 13,141,676 116,324,120 444,458,021 35,578,637 121,930,270 468,943 732,964,877 December 2020

Subsequent to the adoption of IFRIC 12, such category includes the improvements for the enhancement of the assets received in use by the City of Turin as well as the system of the well water systems entrusted in direct management to the Company and depreciated on the basis of the estimated residual economic and technical lifespan This entry also refers to “Revertible assets” which show the values of the extensions, realized by the former Shareholder AAM Torino S.p.A., to add to the aqueduct system of the City of Turin and received by the same in provision, for which the constraint for free transmission at the end of the relative lease was stipulated. Moreover it includes the value of the “Right of use of the assets that constitute the waterworks system”, which is mandatory and already acknowledged by the City of Turin when they are given to the former Shareholder AAM Torino S.p.A. and then given by the latter to SMAT Torino S.p.A. The entry also includes the value of the right to use the waterworks system received in provision as at 1/01/2003 by the C.I.A.C.T. in liquidation. The values are represented in compliance with the expert appraisals drafted for the purposes of the conferrals and amortized as a function of the new expiration date of the pact between Ente d’Ambito n. 3 Torinese and SMAT S.p.A. The value of usage rights is amortized based on the relative agreement deed. Amortizations on improvements and revertible assets were determined with reference to the estimated economic-technical lifespan.

5. Investments € 11,296,588 In accordance with IAS 36, the value of the shares was the object of an impairment test by an independent consultant, which permitted verification of the durability of the accounting value for SMAT group shares.

Other Categories Associates Grand total enterprises Historical cost as at 31 December 2019 43,102,340 3,566,923 46,669,263 Value adjustment as at 31 December 2019 (33,195,250) (78,126) (33,273,376) Net value as at 31 December 2019 9,907,090 3,488,797 13,395,887 Increases in 2020 Decreases in 2020 Value adjustment in 2020 (2,099,299) (2,099,299) Net value in 2020 7,807,791 3,488,797 11,296,588 Historical cost as at 31 December 2020 43,102,340 3,566,923 46,669,263 Value adjustment as at 31 December 2020 (35,294,549) (78,126) (35,372,675) Net value as at 31 December 2020 7,807,791 3,488,797 11,296,588

The shareholding in Acque Potabili S.p.A. has been assessed to Euro 7.8 million as related to the fraction of Net Equity from Parent Company SMAT S.p.A., as already described in detail in the Management Report.

Pursuant to art. 2501-quarter(2) of the Italian Civil Code, on 13 July 2020, it was resolved to merge by incorporation subsidiary Acquedotto Monferrato S.p.A. into its sole owner, Acque Potabili S.p.A., based on a project registered, for both companies, at the Turin Trade Register on 2 March 2020. For civil code purposes the merger went into effect on 13 November 2020 and for accounting and tax purposes on 1 January 2020. For more details, see the Management Report.

The shareholding in Acque Potabili Siciliane S.p.A. after the filing of the Extraordinary Administration Procedure of 7 February 2012, in bankruptcy since 10 October 2013, has been reclassified as "Other companies” instead of shareholding in related companies, even though it was fully depreciated at the end of the reporting period. As it is better entered in the Management Report, it is completely out of SMAT Group consolidation area.

Pursuant to art. 2427, paragraph 1, no. 5 of the Italian Civil Code, the shareholding in subsidiaries, existing as at 31 December 2020, refers to: . Shareholding in Acque Potabili S.p.A., registered office in Turin, Corso XI Febbraio n. 22, with the following characteristics:

Shareholding in Acque Potabili S.p.A. a) Share capital of the investee € 7,633,096 b) Shares held Qty. 3,429,125 c) Nominal value per share € 1.00 d) Purchase cost € 43,102,341 e) Stake held % 44.92 f) Consolidated Book Value € 7,807,791 g) Consolidated Net Equity K/€ 17,380 h) Consolidated result of previous fiscal year K/€ (3,042)

The independent expert used the equity method to value companies Acque Potabili S.p.A., Nos S.p.A. and Environment Park S.p.A.; to value the other investees, the expert used the revenue method, based on the weighted average cost of capital, of 4.56%. The fair value valuation of the other shares determined a value that is substantially aligned with the cost of investment, already recorded on 31 December 2019, at 3.5 million Euros. Even though the profitability of some investees in the medium term results positive, the values were not changed because they were not considered significant.

6. Deferred tax assets € 16,845,400 This item (€15,565,728 in the previous fiscal year ) includes the credit deriving from the active deferred taxes calculated on the allocations for costs with future deductibility and on revenues for which taxes were paid in advance. The entry shows an increase of over EUR 1,280,000 from the previous fiscal year, due to the combined effect of: deductibility of costs accrued in the fiscal year in progress, future fiscal years and deduction of the costs recorded in previous fiscal years, in the present fiscal year.

These effects are itemized in the table below.

Aid to Losses Maintenance To provision for To Goodwill Interest Economic intragroup tax Multi-annual carried expense Description risk and write-downs of and brands receivable on Growth (ACE) effects TOTAL deferred income forward exceeding the charges receivables amort. ate payments carried deductible share forward

Taxable base as at 31.12.2019 10,710,797 16,275,371 32,719,574 17,333 293,267 6,675 3,822 10,867 220,642 60,258,348 Deferred tax credit as at 3,020,446 4,549,958 7,852,699 4,888 70,389 1,602 917 2,608 62,221 15,565,728 31.12.2019 Base uses 2020 (577,402) (4,523,674) (1,443,336) (98,349) (43,520) (6,686,281) Tax uses 2020 (162,827) (1,275,676) (346,401) (23,604) (12,142) (1,820,650) Base adjustments 2020 220,800 608,484 (6,675) (3,822) (4,624) 814,163 Tax adjustments 2020 93,417 146,036 (1,602) (917) (1,110) 235,824 Base allocation 2020 722,219 10,930,736 155,616 443 11,809,014 Tax provisions 2020 203,666 2,623,377 37,348 106 2,864,497 Taxable base as at 31.12.2020 10,133,395 12,694,716 42,815,458 17,333 350,534 0 0 6,686 177,122 66,195,244 Deferred tax provision as at 31 2,857,619 3,571,365 10,275,711 4,888 84,133 0 0 1,605 50,079 16,845,400 December 2020

7. Non-current financial assets € 1,285,040 31 December 2020 31 December 2019 − Receivable caution money € 1,139,863 1,220,228 − Customers 145,177 179,773 Total € 1,285,040 1,400,001

The non-current financial assets towards customers are represented by credits registered following the under-signing of the agreement for governing the use of land in the Municipalities of Scalenghe and Airasca, for the years 2011 - 2018 with a payable plan up to 2031. The receivables are recorded in the financial statements, as required by IFRS 9 – Financial Instruments, net of the amortized cost.

8. Inventory € 8,353,679 The item includes: 31 December 2020 31 December 2019 - Raw, subsidiary materials and consumables € 8,312,534 8,582,699 - Finished products and goods € 41,145 41,145 Total € 8,353,679 8,623,844

The total changes in inventory from the previous fiscal year amounted to € 270,165. The value of the inventory is adjusted by a depreciation fund regarding slow turnover materials for an amount of € 770,000, which has not changed from the previous year. The Inventory consists of materials whose use does not contain features of multi-year usefulness. It is assessed in the financial statements at the lowest price between the average weighted price and the market price. No financial charges were attributed to the inventory value.

9. Trade and other receivables € 222,712,178 The book value of the trade receivables breaks down as follows: 31 December 2020 31 December 2019 Due from customers • Bills and invoices issued € 199,472,182 193,435,434 • Bills and invoices to be issued € 58,916,498 55,827,875 • Provision for bad debts € (44,121,555) (34,586,580) Total due from customers € 214,267,125 214,676,729 Due from associates € 100,053 38,409 Due from parent companies € 2,080,754 2,275,952 Due from other € 6,264,246 10,507,349 Net book value € 222,712,178 227,498,439

DUE FROM CUSTOMERS € 214,267,125 The net value of receivables from customers shows a slight decrease over the previous year, of EUR 410,000. Receivables from users affected by the Covid-19 pandemic emergency period were carefully assessed for late or non payment risks. These receivables are entered at their estimated realizable value, taking into account a prudential write-down of approximately Euro 44.1 million, allocated in accordance with the provisions set forth in IFRS 9.

DUE FROM ASSOCIATES € 100,053 The item (€ 38,409 in the previous fiscal year) is represented by receivables due to SAP.

DUE FROM PARENT COMPANIES € 2,080,754 This item includes receivables from the City of Turin deriving from normal trade transactions executed at market conditions for water supply, rentals and accessory jobs. With respect to the previous year (Euro 2,275,952) the entry decreased slightly by approximately Euro 200,000

DUE FROM OTHERS € 6,264,246

These consist of residual trade receivables. The decrease over the pervious may be ascribed to variations in advances to suppliers on supply contracts due to the effects of art.35 of the Contraccts Code.

10. Current tax assets € 560,780 This item (EUR 6,499,452 the previous year) decreased appreciably following the use of tax credit accrued as at 31 December 2019 for the payment of IRES (corporate income tax) and IRAP (local production tax) advances. It mostly includes the tax credit recognised by the Revenue Agency for the purchase of protective equipment and for sanitising processes performed in the course of the year (art. 125 of legislative decree 34/2020) amounting to ca. EUR 29,000 and investments in capital goods pursuant to art. 1 (184/197) of law 160/2019, for ca. EUR 197,000.

11. Current financial assets € 58,694 31 December 2020 31 December 2019 - To customers € 58,694 39,127 Total € 58,694 39,127

The financial receivables due from customers refer to the share, expiring within 12 months, of the credit for which details are set forth in the comment of the specific section of non-current financial receivables.

12. Other current assets € 4,510,050 31 December 2020 31 December 2019 • Accrued income € 0 173,151 • Deferred charges € 994,400 620,254 • Other assets € 3,515,650 2,751,889 • Due from employees for amounts to be recovered through with 151,092 161,951 holding € • Due from others € 3,364,558 2,589,938 Total € 4,510,050 3,545,294

The item Other activities refers mainly to receivables from users with the right to the Water bonus for approximately 1,803 thousand Euros, due from GSE for incentive rates (formerly Green Certificates) for approximately 202 thousand Euros, due from other parties in the amount of approximately 567 thousand Euros for credit notes to be received and various receivables for approximately 793 thousand Euros. Other deferrals include accrued amounts of subsequent fiscal years of other costs liquidated in the fiscal year.

13. Cash and cash equivalents € 37,917,602 The liquid assets include: 31 December 2020 31 December 2019 - Bank and Post Office deposits € 37,907,615 9,988,232 - Short term deposits € 0 45,000,000 - Checks € 2,603 0 - Cash and cash equivalents € 7,384 45,325 Total € 37,917,602 55,033,557

The decrease over the previous years is due to the use of short-term deposits expiring January 2020. All the aforementioned remainders are liquid and fully available as at the date of the Financial Statements without any constraints whatsoever, except for the usual subject to collection clause on checks.

NET EQUITY AND LIABILITIES The value in the Net Equity takes into account the resolutions taken by the Ordinary Shareholders meetings held on 26 June 2020 and 25 September 2020 on the allocation of Parent Company results for fiscal year 2019.

14. Net Equity € 661,883,498

Net Equity belonging to the Group € 661,547,737 The book value takes into account the determinations assumed by the Ordinary Meeting of Shareholders held on 25 September 2020 on the allocation of the Parent Company results of fiscal year 2019.

SHARE CAPITAL € 345,533,762 The Share Capital is fully subscribed, paid and recorded in the Register of Enterprises in compliance with the law and is made, as at the date of the Financial Statements, of 5,352,963 ordinary shares of the nominal value of EUR 64,55 each, owned by the Associates. No movements regarding the shares and share capital have occurred during the fiscal year.

LEGAL RESERVE 22,914,362 The Legal reserve of EUR 20,909,251 as at 12/31/2019 increased by EUR 2,005,111 during the year as per the resolution of the Meeting of Shareholders of 06/26/2020.

RESERVE RESTRICTED TO IMPLEMENTATION PEF € 269,352,368 This reserve amounted to Euro a 238,874,674 as at 12/31/2019 and increased in the course of the fiscal year by EUR 30,477,694 deriving from the Resolution of the Ordinary Meeting of Shareholders held on 26 June 2020.

FTA RESERVE € (2,845,993) This reserve includes the effects to Net Equity of FTA resulting from adoption of the international accounting principles, whose comment is entered in the specific paragraph of the Directors’ Report.

OTHER RESERVE AND RETAINED EARNINGS € 2,835,733 Other Reserves include: 31 December 31 December

2020 2019 • Optional reserve € 34,342,562 34,342,562 • Consolidation reserve € 5,026,588 5,026,588 • Severance pay discount reserve € (420,245) 184,551 • Negative reserve of own shares in portfolio € (32,993,340) (32,993,340) • Reserve for rounding up € (2) (7) • Retained earnings € (3,119,830) (3,202,033) Total € 2,835,733 3,358,321

The reserve for the actualization of the Severance Pay includes the profits/losses for the Group that result from the actuarial assessments performed in application of IAS 19 to the Severance Pay and pensions accrued as at 12/31/2020. The negative Reserve for own shares in portfolio equal to € 32,993,340 refers to 492,965 own share purchased according to conforming authorization of the Ordinary Meeting of Shareholders The available reserves in the 2020 balance sheet, following acquisition of its own shares, are almost completely exhausted. Profits carried forward decreased in the fiscal year by EUR 82,203.

PROFIT FOR THE YEAR € 23,757,505 31 December 31 December 2020 2019 Profit for the year € 23,757,505 40,129,756

It corresponds to the balance of the Income Statement as the difference between the total revenues and costs and it has been fully submitted to ordinary and deferred taxation for IRES and IRAP purposes.

NET EQUITY BELONGING TO NON-CONTROLLING INTERESTS € 335,761 This item refers to non-controlling interests in the Net Equity in the subsidiaries in the consolidation and includes: 31 December 2020 31 December 2019 - Capital & reserves of non-controlling interests € 305,617 262,707 - Profit for the year € 30,144 59,759 Total € 335,761 322,466

SCHEDULE OF CORRELATION BETWEEN NET EQUITY AND OPREATING INCOME OF PARENT COMPANY AND CONSOLIDATED NET EQUITY AND PROFIT FOR THE YEAR 31 December 2020 31 December 2019

of which: of which: Net Net the Profit for the Profit for Equity Equity the year the year Net equity and Profit for the year as entered in the fiscal year statement of accounts of the Parent Company 661,311,032 23,684,331 645,697,947 40,102,229 From elimination of load value of the consolidated - Effect of consolidation operations 162,816 (965) 172,290 (87,282) Pro-quota results obtained from the investees 73,438 73,438 89,785 89,785 From net equity method evaluation of non‐consolidated companies: 451 701 (251) 25,024 Net equity and Profit for the year of the Group 661,547,737 23,757,505 645,959,771 40,129,756 Net equity and fiscal year results of competence of third parties 335,761 30,144 322,466 59,759 Net equity and Profit for the year as entered in the consolidated accounts 661,883,498 23,787,649 646,282,237 40,189,515

LIABILITIES € 527,360,277

15. Current and non-current fiscal liabilities € 287,118,569 Financial debts on 31.12.2020 are presented in detail by type in the following table: 31 December 31 December

2020 2019 Non-current financial liabilities Bonds 134,311,239 134,142,009 Payable loans 104,399,421 100,049,325 Debts for leased assets 395,161 576,033 Total 239,105,821 234,767,367 Current financial liabilities Short-term payable loans 45,618,808 48,706,799 Due to banks and accrued financial payables 2,126,144 2,135,242 Debts for short term leased assets 267,796 1,091,949 Total 48,012,748 51,933,990

Total financial liabilities 287,118,569 286,701,357

Total financial liabilities are made up of: • loans (bonds and mortgages) with total value amounting to Euro 284,329,468, net of the amortized residual cost of Euro 688,761 for the debenture loan of Euro 93,167 for payable loans. • the entry “Due to banks and financial charges” amounting to EUR 2,126,144 which includes other short term operations for EUR 74,660 and accrued financial charges amounting to EUR 2,051,484, which mainly refer to interest on the debenture loan in the accrued amount; • debts for leased assets, of which the total value amounts to 662,957 Euros, net of the residual amortized cost 39,608 Euros.

Movement of financial liabilities during the fiscal year is the following:

Bonds Amortized cost Total Balance as at 31 December 2019 € 134,142,009 148,756,124 282,898,133 New loans € 0 49,939,800 49,939,800 Amortized cost reduction € 169,230 29,104 194,334 Repayments in the period € 0 (48,706,799) (48,706,799) Balance as at 31 December 2020 € 134,311,239 150,018,229 284,329,468

The debt for medium to long term funding, gross to the depreciated cost, is detailed in the following table: Funding Amount due as 31 December 2020 Bonds € 135,000,000 Payable loans Intesa Sanpaolo € 1,290,179 European Investment Bank € 26,000,000 European Investment Bank € 21,730,000 Cassa Depositi e Prestiti € 12,500,000 European Investment Bank € 38,461,538 European Investment Bank € 50,000,000 Other7 € 129,679 Total Payable loans 150,111,396 Total € 285,111,396

The table below shows the liabilities broken down according to type as at 31 December 2020, with an indication of the instalments due within the next fiscal year, due between the 2nd and 5th year and due after the 5th year, gross of amortized cost.

Residual Due within next Due between the Due after the 5th Type amount fiscal year 2nd and 5th year year Bonds 135,000,000 135,000,000 Payable loans 150,111,396 45,618,808 60,048,144 44,444,444 Due to banks and accrued financial payables 2,126,144 2,126,144 Debts for leased assets 702,565 267,796 302,094 132,675 Total 287,940,105 48,012,748 195,350,238 44,577,119

Below are the major contractual conditions.

Line of credit Duration Funding Due date Instalment Rate value in years Ordinary non-convertible loans 135,000,000 7 13/04/2024 annual fixed Variable (Euribor 6m + Intesa Sanpaolo 36,125,000 15 30/06/2021 six months, constant equity spread) Variable (Euribor 6m + European Investment Bank 130,000,000 15 19/12/2022 six months, constant equity spread) Variable (Euribor 6m + European Investment Bank 80,000,000 14 30/12/2022 six months, constant equity spread) Variable (Euribor 6m + Cassa Depositi e Prestiti 50,000,000 15 30/06/2023 six months, constant equity spread)

European Investment Bank 100,000,000 9 30/06/2023 six months, constant equity fixed

European Investment Bank 50,000,000 13 14/12/2033 six months, constant equity fixed

fixed/Variable (Euribor Other 1,017,007 Other 2021-2022 six months constant/six months 6m + spread)

7 A total of three loans from Cassa Depositi e Prestiti 72

The ordinary nonconvertible debenture loan was issued on April 13th 2017. The bonds have a duration of 7 years, with 1.95% coupon, and are listed at the regulated Irish Stock Market (ISE); they are supported by the rating issued by Standard & Poor’s, that, on 24 November 2020, raised the Senior Unsecured rating from “BBB-“ to “BBB”(for details, see the Management Report). Activation of the loan from financial institutions, to finance the investments in expansion and upgrading of the networks, water production, distribution, collection and treatment plants envisaged in the Investment Plan of ATO3, did not require any guarantee by the shareholders and envisages for its entire duration maintenance of the following financial parameter calculated based on the data of the consolidated financial statements closed as of 12/31 of the previous year and according to the definitions in the contractual stipulations: • Net Financial Debt/EBITDA (EBIT+Depreciation/Amortisation): lower than or equal to 5.

The loan contracted with Intesa Sanpaolo (ex B.I.I.S.) is unsecured.

The loan taken with the European Investment Bank for the provision of the resources required by the investment plan introduced in the Territorial Area Plan, except the one started in 2020, are assisted by an appropriate guarantee issued by National Credit Institutions, third parties from EIB and by assignment of receivables, which can be claimed at the Ente d’Ambito and third parties as related to the award agreement for management of the Integrated Water System within Ambito 3 Torinese. Such credit lines have been fully utilized as a result of the progress of the activities, for which minimum portions of drawing have been stipulated. More specifically: - As related to the EUR 130 million loan taken for the development of the works of the investment plan for small and medium-sized infrastructures, the spread was agreed upon at each drawing and the guarantee released is remunerated by a commission calculated on the guaranteed amount. - As related to the EUR 80 million loan taken for the development of the works included in the investment plan for large infrastructures, the spread was agreed upon at each drawing and the guarantee contract includes the obligation of maintaining - throughout the duration of the loans - of the following parameters, which are calculated on the Company Statement of Accounts for the Fiscal Year closed on 31 December of last year according to the definitions included in the contract clauses: • Net Financial Debt/EBITDA (EBIT+Depreciation/Amortisation): lower than or equal to 5. • Net Financial Position/Net Equity: lower than or equal to 1. The commissions paid every year vary within a predefined range lower than 100 bps as related to the position of the aforementioned ratio between Net Financial Position/GOM (EBIT + Depreciation/Amortisation)- - As related to the EUR 100 million loan, taken for the development of works included in the investment plan for small and medium-sized infrastructures, the following financial parameters apply for the whole duration of the loans, calculated on the data of the Fiscal Year Statement of Accounts of the Company that was closed on 31 December of last year and in compliance with the definitions included in the contract agreements. • Net Financial Debt/GOM (EBIT+Depreciation/Amortisation): lower than or equal to 5. • Net Financial Debt/Net Equity: lower than or equal to 1. • EBITDA (EBIT+Depreciation/Amortisation)/Net financial expenses (excluding the value adjustment of financial assets) greater than 5; • Residual value/Gross Financial Debt ratio greater than or 1.30 where the residual value calculated on the net accounting value, star-up expenses excluded.

The guarantee released is remunerated by a commission calculated on the guaranteed amount. - For the EUR 50 million loan taken in 2020 for the construction of the works specified in the investment programme for 2020-2024, besides the financial parameters of the aforementioned EUR 200 million agreement, the following additional ratio has to be considered pursuant to the definitions included in the terms of the agreement: • Gross Financial Debt/GOM (EBIT+Depreciation/Amortisation): lower than or equal to 4.5.

the execution of the agreement that awards the management of the Integrated Water Service in Ambito 3 Torinese. Such loan involves the obligation to keep - throughout its duration - the following financial parameters, which are calculated on the data of the Company’s financial statements for the fiscal year closed as at 31 December of the previous year and in compliance with the definitions included in the contract provisions. • Net Financial Debt/EBITDA (EBIT+Depreciation/Amortisation): lower than or equal to 5. • Net Financial Position/Net Equity: lower than or equal to 1.

In cases of noncompliance with even only one of said financial parameters, the delivering institutions have the right to terminate the contract in advance. It is worth highlighting that - as at 31 December 2020 - all the aforementioned financial parameters are complied with. Other loans includes the mortgages received as a transfer and mainly stipulated with Cassa Depositi Prestiti.

16. Provisions for employee benefits € 15,602,130 The Provisions for employee benefits as at 31 December 2020 reflects the indemnity accrued by the employees up as at 31 December 2006, which will be exhausted by the payments to be made at the end of the work relations, or of any advance in compliance with the law. The movements of the fund (which is not influence by the shared accrued during the fiscal year in favor of the employees throughout the year) has been as follows:

Employee Severance Provision - Balance as at 31 December 2019 € 15,348,980 - Social security costs € 73,246 - Utilizations, adjustments, indemnities and advances paid out in the period € (1,756,170) - Interest cost deriving from IAS 19 € 111,600 - Profits (losses) actuarial € 539,836 Balance as at 31 December 2020 € 14,317,492

Other benefits refer to the estimated quantification of the seniority bonuses potentially due to employees that accrue the relevant requirements stipulated in in the company regulations entered below

Pension fund - Balance as at 31 December 2019 € 1,256,167 - Social security costs € 59,291 - Utilizations, adjustments, indemnities and advances paid out in the period € (105,048) - Interest cost deriving from IAS 19 € 9,268 - Profits (losses) actuarial € 64,960 Balance as at 31 December 2020 € 1,284,638

The following tables illustrate, respectively, the economic, financial and demographic assumptions made for the actuarial assessment of the liabilities in exam.

Economic-financial assumption - Yearly actualization rate (0.02%) - Yearly inflation rate 0.80% - Yearly Severance Provision increase rate 2.10%

Demographic assumptions - Mortality Tables RG 48 - Disability INPS tbles by age and sex - Retirement age Attainment of the requirements - % of advance payment frequency 1.50% - Turn-over 0.50%

17. Provisions for risks € 17,155,742 These provisions are made up of:

A) Provisions for litigations and charges € 10,181,194

The provisions for litigations and charges reflect the prudent assessment - on the basis of valuation elements available - of the potential additional liabilities due to judicial and extra-judicial litigations which are currently in progress, as well as of other charges of various kinds which are certain or likely to occur in the future.

The handling of such provisions has been as follows:

- Balance as at 31 December 2019 € 11,047,886 - Provisions of the fiscal year € 1,652,345 - Use in the fiscal year € (968,268) - Estimate adjustment € (1,550,769) Balance as at 31 December 2020 € 10,181,194

The balance of the provisions for litigations and charges as at 12/31/2020 is considered to be congruous to cover the following estimated potential liabilities:

B) Provisions for routine maintenance charges € 1,049,844

The amount allocated in 2020 represents a prudent adjustment of the provision.

- Balance as at 31 December 2019 € 959,844 - Provisions of the fiscal year € 90,000 - Use in the fiscal year € 0 Balance as at 31 December 2020 € 1,049,844

C) Allocations Regione Piemonte Law No. 61 of 12/29/2000 € 451,362

These reflect the destination of the administrative sanctions applied pursuant to art. 54 Legislative Decree 152/99 to be applied to fund the development of actions aimed at preventing and reducing the pollution of the bodies of water. The provisions for 2020 have not varied from the previous fiscal year, since it has been considered to be congruous:

- Balance as at 31 December 2019 € 451,362 - Provisions of the fiscal year € 0 Balance as at 31 December 2020 € 451,362

D) Provisions for Ambito management charges € 4,823,342

The amount reflects the best estimate of the charges and of the potential risks connected to the Ambito management activities. - Balance as at 31 December 2019 € 6,850,000 - Provisions of the fiscal year € 118,000 - Use in the fiscal year € (56,867) - Adjustment of estimate in the fiscal year € (2,087,791) Balance as at 31 December 2020 € 4,823,342

E) Provisions for charges to other companies € 650,000

- Balance as at 31 December 2019 € 650,000 - Provisions of the fiscal year € 0 - Adjustment of estimate in the fiscal year € 0 Balance as at 31 December 2020 € 650,000

18. Deferred tax liabilities € 619,212 The amount includes the deferred charges for income taxes (IRES and IRAP), which are computed at the rates in force on revenues with deferred taxation and on the advanced deduction costs. The entry (EUR 314,986 in the previous fiscal year) shows an increase from the previous fiscal year, due to the combined effect of de-taxation of significant taxable revenues in future fiscal years, taxation of revenues that were computed in previous fiscal years and taxed in the current fiscal year.

These effects are itemized in the table below:

Receivable interest in FTA financial liabilities Description Early depreciation TOTAL arrears depreciated cost

Taxable base as at 31.12.2019 553,054 600,514 62,071 1,215,639 Deferred tax as at 31.12.2019 155,966 144,123 14,897 314,986 Base uses 2020 (1,135) (150,867) (29,103) (181,105) Tax uses 2020 (320) (36,208) (6,985) (43,513) Base adjustments 2020 485,422 301 485,723 Tax adjustments 2020 136,884 72 136,956 Base allocation 2020 878,261 878,261 Tax provisions 2020 210,783 210,783 Taxable base as a 31.12.2020 1,037,341 1,328,209 32,968 2,398,518 Deferred tax provision as at 31.12.2020 292,530 318,770 7,912 619,212

19. Other non-current liabilities € 51,203,947 This item is made up as follows: 31 December 31 December 2019 2020 • Acquapoint caution money € 543,097 519,767 • Contributions to pay out € 20,747 20,747 • Multiannual deferred income € 50,640,103 51,734,669 Total € 51,203,947 52,275,183

In application of IAS 16, item “Multi-year unearned income” includes the contribution shares for systems which were cashed and computed to the fiscal years of competence, as related to the depreciation of the assets they refer to. “Multiannual deferred income” also includes the share of “tied up revenue” to be used for investments amounting to EUR 10,133,395, and the share carried forward of the contributions on capital goods recognised by the Revenue Agency pursuant to art. 1(184/197) of law 160/2019, amounting to EUR 184,594, once charged to the income statement in correlation with the amortisation of the items they refer to.

20. Trade and other payables € 79,368,917

PREPAYMENTS € 158,989 The entry (EUR 128,261 in the previous fiscal year) includes the amounts advanced by users for works still to be completed as at closing date of the financial statements.

DUE TO SUPPLIERS € 64,265,393 Due to suppliers refers to: 31 December 2020 31 December 2019 • Italian suppliers € 30,669,686 23,385,804 • Foreign suppliers € 9,235 10,018 • Invoices to be received € 33,586,472 33,498,882 Total € 64,265,393 56,894,704

All payables to suppliers fall due within the end of one year and in no case are they assisted by guarantees, in addition to the withholding amount of 0.5% on the jobs.

DUE TO ASSOCIATES € 15,657 31 December 31 December

2020 2019 • Due to associates € 15,657 15,657

The entry itemized in the section dedicated to it in the Directors’ Report, includes the payables to the SAP Company deriving from the residual trade transactions operated at normal market conditions.

DUE TO PARENT COMPANIES € 627,544 31 December 31 December

2020 2019 • due to parent companies € 627,544 1,504,860

The entry referred to the section dedicated to it in the Directors’ Report refers to trade payables to the City of Turin, and none of them is assisted by a real guarantee on the corporate assets.

PAYABLES TO OTHERS €14,301,334 31 December 31 December

2020 2019 • Due to others € 14,301,334 20,176,549

This item consists mainly of trade payables to the Operative Management Subjects for invoices to be received for contractual obligations undertaken with the same.

21. Current tax liabilities € 5,351,442 31 December 2020 31 December 2019 • Withholding taxes held from employees and third 1,829,884 1,844,307 parties as tax substitute according to the law € • VAT ACCOUNT FOR TAX AGENCY € 1,602,529 1,496,328 • IRAP/IRES € 1,919,029 0 Total € 5,351,442 3,340,635

These liabilities primarily consist of IRAP and IRES tax payables for the year and VAT payable by the parent company for the 4th quarter 2020, net of the advance paid. The tax due in application of the VAT split payment system extended to subsidiaries by Public Entities from 07/01/2017, has been paid regularly by the due date established by current law. Current fiscal liabilities are also entered under payables for Withholding tax held for employees and third parties in the amount of approximately EUR 1.8 million, this to paid on the due date.

22. Other current liabilities € 70,940,318 The other payables include: 31 December 2020 31 December 2019 • Due to Social Security Administration € 4,327,177 3,975,458 • Accrued charges € 0 0 • Deferred income € 137,250 151,933 • From other: € 66,475,891 68,283,577 • Local Authority fees € 4,397,468 5,254,925 • Contributions to Comunità Montane € 45,188,751 47,162,712 • Due to Municipalities for accessory services € 435,398 536,366 • Other payables to entities/municipalities for F/D and 2,731,082 2,748,983 equalising tariff components (UI) collected on behalf € • Accruals to liquidate to employees € 6,186,621 6,051,393 • Other payables € 7,536,571 6,529,198 Total € 70,940,318 72,410,968

Payables to social security institutions all accrue by the end of one year and in no case are they assisted by guarantee or encumbered with interest. At the time of drawing up the present financial statements these payables were paid on their due date.

As a whole, payables for Local Authority Fees and contributions to the Unioni Montane decreased by ca. EUR 2.8 million. In particular, Local Authority Fees primarily refer to the amounts due for 2020 based on the determinations made by Turin Local Regulator 3 during the early months of 2021. Pursuant to arts. 111 and 112 of law no. 27 of 24 April 2020, transposing legislative decree no. 18 of 17 March 2020 (the so-called Decreto Cura Italia), Cassa Depositi e Prestiti suspended the payment of principal instalments on mortgages transferred to the Ministry of Economy and Finance; such instalments were postponed to the year immediately following the expiry date of the contractual amortisation plan. With specific reference to the contributions to Mountain Communities, these are paid on the basis of ad hoc communications by the Ente d’Ambito.

Payables to Municipalities for accessory services represent the best estimate of the amounts due.

“Other payables to Entities and Municipalities” mostly consists of payables to CSEA for the equalising tariff components (UI), paid on a two-monthly basis. Residual payables to Entitles refer to sewage and waste treatment charges to be passed on to the operators.

Notes to the entries of the Income Statement

Revenues

23. Revenues € 318,121,568

Revenues are made up as follows: 2020 2019 − Aqueduct service € 131,121,506 135,446,135 − Sewer service € 44,772,146 43,876,731 − Water treatment service € 127,844,350 126,872,585 − Hydrants € 4,271,860 4,162,994 − Other revenues € 10,111,706 9,699,933 Total € 318,121,568 320,058,378

All the revenues inherent to corporate business were obtained in the reference territory ATO 3 Torinese, as determined by the Piemonte Regional Law no. 13 of 01/20/1997 and include the best estimate of revenues accrued in the fiscal year for aqueduct, sewers, water treatment services and hydrants provided in the 289 Municipalities acquired by effect of the reunification process. They arise from the application of the tariff differentiation scheme as received from the Turin Local Regulator in late December 2020 following the approval of the amendments to the Tariff Schedule for 2020 – 2023, which reflects the regulations for the new tariff period MTI-3 approved with resolution 774 on 10 December 2020. 2020 tariffs went up by 2.2% over the previous year, in line with 2018 values.

During the period considered, an analysis of aqueduct volumes reveals that, following the closures of businesses imposed by the restrictions due to the COVID epidemic, consumption by craftsmanship, commercial and industrial users declined by more than 14 % over 2019. Public use correlated users also recorded a reduction in consumption, albeit less significant, of 6.5%. Conversely, during the lockdowns, consumption by household users increased by 0.92%; this increase, combined with the 2.2% tariff increase, made it possible to offset the overall reduction in turnover, of ca. EUR 2 million over the previous year.

The revenues from the aqueduct, sewer and water treatment services are represented net of the 50% rate reduction for public municipal and provincial users for a total of Euro 4,951,593.85 .

"Other Revenues" mainly includes accessory revenues from users, industrial waterworks, those that are obtained for activities performed on behalf of users and third parties, in particular as related to changes to the water and sewerage networks, revenues from analysis and treatment, Punti Acqua, sale of energy and services for no-core activities performed on the free market. The positive variation over the previous year was determined by various factors, such as the new biomethane collection business, the increase in revenues from leachate and biomass treatment services, as well as the adjustments to the provision for risk and charges, which offset the significant drop in accessory revenues from users and the reduction in revenue from sales of electric energy.

24. Revenues for planning and construction activities € 100,187,122 2020 2019 − Revenues for planning and construction activities € 100,187,122 103,822,716

This item refers to the “planning and construction” of assets under concession, which, as envisaged by IFRIC 12, is entered under revenues; the corresponding costs, net of the capitalized costs for internal increases, are entered under the entry “Costs for planning and construction”.

25. Other revenues € 15,576,824 The other operational revenues are composed as follows: 79

2020 2019 − Grants for current expenses (A) € 3,939,973 3,859,273 − Other . Contribution shares in production facilities € 4,453,796 4,990,270 . Other revenues € 3,257,469 3,742,400 . Contingent assets and unsubstantiated liabilities € 1,222,026 5,267,631 . Adjustments/allocations to provisions for liabilities and other € 2,703,560 3,408,495 charges (B) € 11,636,851 17,408,796 Total other revenues (A+B) € 15,576,824 21,268,069

“Contribution shares in production facilities” primarily refers to the incentives for the production of energy from photovoltaic panels and for the production of biomethane, and the incentive rates formerly called Green Certificates. “Other” includes the economic accrual amount of contributions into the plants accounts, already commented on under the entry “ multiannual deferred income” have these notes to the accounts, in addition to the other revenues ( among which receivable lease payments, reimbursements for stamps and other reimbursements),contingent assets and non-existent liabilities in addition to the adjustments made to the provision of liabilities, as already commented in the dedicated section of Liabilities in these notes to the accounts. The overall variation over the previous year was due to reduced contributions for plants, a reduction in contingent assets and unsubstantiated liabilities and adjustments to the provision for risks. Operating costs

26. Consumption of raw materials and consumables € 14,299,576 This entry includes: 2020 2019 − Materials for maintenance net of changes in stock € 7,476,621 7,502,222 − Chemicals € 4,510,946 4,439,206 − Other materials € 2,468,110 2,021,235 − Increases for in-house jobs € (156,101) (151,090) Total € 14,299,576 13,811,573

This item shows a considerable increase over the previous year, primarily accounted for by the purchase of materials to deal with the health emergency due to the Covid-19 pandemic.

27. Costs for leased assets and services € 117,170,420 This entry includes: 2020 2019 - Electricity: (A) € 33,654,448 32,442,432 - Maintenance, works and services & industrial (B) € 61,238,485 55,600,545 - General services: . Services € 11,423,246 11,247,167 . Allocation to Provision for liabilities and other charges € 439,219 204,595 (C) € 11,862,465 11,451,762 - Rentals to local entities (D) € 6,288,399 7,603,831 - Rentals and payable concessions, leases and hires (E) € 4,126,623 3,310,986 Total costs for services and leased assets (A+B+C+D+E) € 117,170,420 110,409,556

Costs for the purchase of electric energy went up, in particular on account of the increase in consumption of energy from external networks and the higher cost per kWh for the purchase of energy generated from renewable sources. As regards the consumption of electricity, bear in mind that the energy recovery technologies operating at the water treatment plants have allowed an 8.79% total savings on consumption 80

The energy balance of the Parent company shows the following data: 2020 2019 MWh % MWh % - Heat . Self-produced by gas engines 10,462 26.48 18,525 49.64 . Self-produced by boilers 0 0 400 1.07 . Self-produced by DEMOSOFC plant 105 0.27 188 0.50 . Produced by methane 28,947 73.25 18,205 48.79 Total 39,514 100.00 37,318 100.00 - Electricity: . Self-produced by gas engines 11,886 5.16 21,490 9.07 . Self-produced by solar cells 1,166 0.51 1,294 0.55 . Self-produced by DEMOSOFC plant 125 0.05 216 0.09 . Total uptake from external suppliers 217,376 94.28 213,887 90.29 Total 230,553 100.00 236,887 100.00 Total consumption 270,067 100.00 274,205 100.00 Total recovery 23,744 8.79 42,113 15.36 Self-produced and sold electricity - 6,934 7,063 (Balme hydroelectric power station) Total self-production 30,678 49,176 Total self-produced electricity 20,111 30,063 Self-produced electricity in relation to total electricity - 8.72 12.69 consumed

The variation in costs for “Maintenance works and industrial services” was due primarily to the costs associated with the health emergency and the intensification of maintenance works correlated with the technical quality and the management of rain water disposal infrastructure, the costs of sludge transport and disposal, the cost of contract work and meter reading services. Conversely, the costs for services rendered by Management Operational Subjects (SOG) decreased and so did the costs for gas, telephone and remote heating services. As a whole, the costs of “Services” were in line with the values recorded the previous year, since the increase in costs incurred for cleaning and sanitising works and smart card insurance deductible costs were offset by the reduction in training, meal vouchers and other personnel expenses, maintenance fees and sponsorships and ads costs. Rentals to local entities recorded a reduction in relation to the update of amortization plans on mortgage contracts between Municipalities and communicated by ATO 3 Torinese. The increase in “lease and rental” costs may be ascribed to the increase in and rental costs and periodic user licence fees, partly attributable to the health emergency.

28. Payroll costs € 62,615,240 The payroll cost composition is the following: 2020 2019 − Wages and salaries € 42,231,865 43,260,240 − Social charges € 13,713,766 14,344,717 − Severance package € 2,757,582 2,817,478 − Pension and similar funds € 59,291 58,284 − Other costs € 3,852,736 3,087,627 Total € 62,615,240 63,568,346

Relative to the accounting period, the average staff was composed as follows: Top Middle Office Apprentices Laborers Total Managers Managers workers Staff as at 12/31/2019 9 33 588 314 47 991 Staff as at 12/31/2020 12 30 610 322 19 993 Change 3 -3 22 8 -28 2

Relative to the accounting period, the average staff was composed as follows:

- Top Managers 10 - Middle Managers 35 - Office workers 588 - Laborers 322 - Apprentices 25

This cost shows a decrease of ca. EUR 0.95 million over the previous year, mostly due to savings arising from personnel transfers and a reduction in overtime and holidays accrued during the year and not taken. All this was offset to some extent by the increase arising from the renewal of the national labour agreement (C.C.N.L.) and the implementation of activities correlated with technical quality.

29. Other operating expenses € 21,455,958 This entry includes: 2020 2019 − Other tax charges € 846,101 987,699 − Ambito fees € 17,226,899 17,364,237 − Other charges € 1,889,022 3,495,583 − Allocation to provisions for liabilities and € 1,331,126 669,437 charges − Integrated water bonus 162,810 435,822 Total € 21,455,958 22,952,778

“Other tax charges” mainly includes charges for stamp fees, IMU, government concession taxes and other local taxes.

The item “Territory fees” includes over 15.60 million Euros, the best estimate for the contributions to the Mountain Unions (calculated as indicated by the Territory Authority on revenues for the year 2018) and the operational costs of the Territory Authority and the contributions to the ARERA, depending on the resolutions passed and communications sent.

The item "Other fees" mainly includes fees for association dues, reimbursement of damages and indemnity, and contingent and non-existent assets.

“Allocations to Provisions for Liabilities and Charges” cover liabilities and costs involving taxation, administration and other that are certain or probable but whose exact amount or date of occurrence are not yet determinable at this moment.

The cost of the “Supplemental water bonus” introduced with ARERA resolution 897/2017/R/IDR and ATO resolution 697/2018 shows a decrease over the previous year, due to the smaller number of applications received .

30. Costs for planning and construction activities € 95,777,281 2020 2019 − Costs for planning and construction activities € 95,777,281 99,422,784

This item refers to “Costs for planning and construction” of assets under construction, net of capitalized costs for internal increases that, according to IFRIC 12, is entered under costs; the corresponding revenues are entered under the entry “Revenues for planning and construction”.

31. Amortization, depreciation and write-downs € 87,283,056 The composition of this entry is as follows: 2020 2019 − Depreciation tangible fixed assets € 17,911,455 17,441,913 − Depreciation other intangible fixed assets € 1,771,255 2,052,762 − Depreciation assets under concession € 53,179,731 48,463,115 − Credits write-downs € 12,231,316 11,757,006 − Other provisions € 2,189,299 309,976 Total € 87,283,056 80,024,772

Taking into account the presentation regarding valuation criteria, and the systematicity criterion, for calculating depreciation in the fiscal year the following ordinary rates were used:

Intangible fixed assets: Depending on the estimated technical economic- − Assets under concession (improvement of third-party’s assets and revertible profit life of various types assets) of reference assets As a function of the durations of the ATO3 and − Assets under concession (use rights) SMAT S.p.A. service convention (2033) − Software licenses of use 33.33% − Patents 50.00% − Expansion and development costs 20.00% − Trademarks 10 years As a function of the estimated profit life equivalent − Surface rights to the durations of the Company from the date of the Articles of Association Tangible fixed assets: − Buildings and fences 3.50% − Solar power plants 9.00% − Light constructions 10.00% − Specific plants and filtering plants 8.00% − Metering devices 10.00% − Laboratory and other equipment 10.00% − Furniture and furnishings 12.00% − Office equipments 12.00% • Electronic machinery 20.00% • Hardware 20.00% • Cars 25.00% • Motor vehicles for transport and other vehicles 20.00% • Carbon assets 20.00% • Polarite 11.00% − Tanks 4.00% − Fixed waterworks 2.50% − Sewers 5.00% − Water treatment plants 15.00% − Machinery 12.00% − Leased assets Based on the contract duration

To the Increases of 2020 of tangible fixed assets the rates applied amount to 50% of the ones shown above, representing with the best estimate average rates as a function of the months of use. The increase over 2019 is due to depreciation on the investments made and implemented during the year, including the great dispatching pipelines for the Susa Valley aqueduct, the upgrading of the biogas plant for the production of biomethane, and the reclamation of the Ivrea district wastewater treatment system. The entry also includes the allocations deriving from prudential valuations of the trade receivables. This allocation amounts to approximately 12.23 million Euros, with application of the IFRS 9 principle - Financial instruments and consequence of length of receivables towards users as already referenced in the dedicated item under Assets in this Supplementary Note. The item “Other allocations” reports the depreciation of shares in the partner SAP S.p.A., in consideration of the results of the year. The management depreciated for permanent impairment of value the aforesaid share by Euro 335,000 to align its value to the pro-rata of the Net Equity of SAP S.p.A. This depreciation is confirmed by the impairment test carried out by an independent consultant. 83

Financial income and expenses

32. Financial income € 3,129,613 This entry includes: 2020 2019 − Receivable interest and other proceeds € 3,129,613 5,755,403 Total € 3,129,613 5,755,403

“Receivable interests and other financial proceeds” include receivable interest on current accounts in banks and post offices, interest arrears and other financial proceeds and dividends from other companies. The decrease was mostly due to reduced interest receivable on late payments due to the introduction by ARERA with resolution 311/2019/R/IDR of the new “SII Late Payment Management provisions”. Another factor accounting for the reduction in this entry was the urgent measures adopted by ARERA to support the users during the COVID-19 epidemic.

33. Financial expense € 4,388,086 The entry includes: 2020 2019 − Payable interest and commissions on loans € 4,086,059 4,528,074 − Other receivable interests and charges € 302,027 429,088 Total € 4,388,086 4,957,162

“Interest payable and commissions on loans” includes charges on pre-existing mortgages and the new loan from the European Investment Bank, as well as the relevant share of interest payable on the debenture loan. The entry also includes adjustment of the charges as a function of the amortized cost method. The Other payable interests and charges include, on the other hand, the prudential count of interest on arrears for overdue debts (according to current law) and financial charges deriving from the actuarial valuation of the Severance Fund and other benefits to employees according to IAS 19, and those on leased assets following application of the IFRS 16 principle.

34. Income taxes € 10,237,861 This entry includes: 2020 2019 - IRAP € 2,069,852 2,745,152 - IRES € 9,299,866 13,347,244 - Taxes relative to previous fiscal year € (156,411) (310,319) - Change in payable deferred taxes € 304,226 (191,149) - Change in receivable deferred taxes € (1,279,672) (22,848) Total € 10,237,861 15,568,080

In the scope of current taxes, IRES and IRAP decreased following a decrease in the gross tax amount, as well as in the relative base taxable income. (Reduced) taxes for the previous financial year mostly refer to supplemental corporation income and IRAP tax returns for some previous tax periods for which some deductible costs were found to be greater than previously communicated.

Other information Below is the information regarding the commitments undertaken by the Company (I), to determine “Fair value” (II), to manage financial risks (III), to fees to the Directors and Auditors (IV), to the fees paid to the Auditing Firm (V), to the relationships with related parties (VI) and to the significant events occurring after 31 December 2020 (VII).

I. Commitments undertaken by the Group To carry on the extraordinary Acque Potabili operation, on 24 February 2020, the company entered into an agreement with associate company IRETI whereby it was agreed that the joint ownership of the interest in Acque Potabili would be maintained after the shareholders’ withdrawal, and all decisions would be taken jointly, even after the liquidation of Acque Potabili.

II. Determination of the “fair value”: supplementary information In regard to the valuation at fair value of the financial instruments in conformity with the requirements of IFRS7 we specify the following:

Assets Book value in financial statements is the “fair value” of the Non-current financial assets – receivables: - same Book value in financial statements is the “fair value” of the Cash and cash equivalents: - same Book value in financial statements is the “fair value” of the Shareholdings available for sale: - same

Liabilities Book value in financial statements is the “fair value” of the Loans at variable rate: - same Book value in financial statements is the “fair value” of the Trade payables: - same

III. Financial risk management In conformity with the aforesaid IFRS 7, we specify that SMAT S.p.A., in the ordinary development of own operating assets, is potentially exposed to financial liabilities already commented on in the Directors’ Report.

IV. Fees to Directors and Auditors Below is the itemization of fees to the Directors and Auditors of SMAT Torino S.p.A.: for the financial statements closed as at 31 December 2020 and 2019. 2020 2019 Directors € 278,833 276,826 Auditors € 124,904 124,904

The fees correspond to the amounts deliberated by the Meetings of Shareholders and the obligatory contribution.

V. Fees to the Auditing Firm The fees owed to the Auditing Firm Deloitte & Touche S.p.A. for its services of accounting audit of the financial statements and the consolidated financial statements as at 31 December 2020 amounts to Euro 78,000 for the legal review and Euro 8,000 for the Territorial Balance Sheet report for 2019.

VI. Operations with related parties The relations between the companies of the Group are regulated at market conditions. The relations between SMAT Torino S.p.A. and its subsidiaries and associates, and among these companies, are mainly of a business and financial nature. Below is the itemization of the capital and economic balances inherent to operations with related parties for the fiscal year closed as at 31 December 2020. 85

Fiscal year 2020 Trade Total Receivables payables and Total revenues operating and current other current costs assets other liabilities CITY OF TURIN 3,624,207 1,602,628 2,080,754 627,544 SAP SPA 63,097 - 100,053 15,657 Total related parties 3,687,304 1,602,628 2,180,807 643,201 Total balance position 433,885,514 311,318,475 227,222,228 150,309,235 Weight % on total balance position 0.85% 0.51% 0.96% 0.43%

VII. Contributions pursuant to Law 4 August 2017 no. 124, art. 1, section 125 Over the course of the fiscal year now concluding, SMAT collected the following contributions from Public Administrations, net of contributions for private hook-ups collected from users.

Grants for Collection Grant for Dispensing subject Memo Amount current data Plants expenses

24/01/2020 BIOWYSE BIOWYSE - EUROPEAN SCIENCE FOUNDATION 42,401 42,401

31/01/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION CASTIGLIONE 27,246 27,246

31/01/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION BALME 61,820 61,820

31/01/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION CASTIGLIONE 111,269 111,269

UNIVERSITA' DEGLI STUDI DI PERSEO - PERSONAL RADIATION SHIELDING FOR INTERPLANETARY 06/02/2020 6,596 6,596 PAVIA DEP. OF PHYSICS MISSIONS

28/02/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION BALME 56,560 56,560

28/02/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION CASTIGLIONE 133,136 133,136

02/03/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION CASTIGLIONE 27,246 27,246

02/03/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION CASTIGLIONE 43,416 43,416

06/03/2020 UNIVERSITY OF TURIN TRANSFER OF ACQUALITY PROJECT THIRD ADVANCE 23,286 23,286

31/03/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION CASTIGLIONE 26,954 26,954

31/03/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION BALME 46,089 46,089

31/03/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION CASTIGLIONE 137,017 137,017

CONTRIBUTION FOR CONVERSION OF TREATMENT PLANT FROM 09/04/2020 TERRITORY AUTHORITY No. 3 400,000 400,000 SECONDARY TO TERTIARY

30/04/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION BALME 41,446 41,446

30/04/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION CASTIGLIONE 140,285 140,285

30/04/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION CASTIGLIONE 26,954 26,954

CONTRIBUTION BY TURIN LOCAL REGULATOR 3 - MUNICIPALITY OF 04/05/2020 TERRITORY AUTHORITY No. 3 500,000 500,000 SAN MAURIZIO C.SE

29/05/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION BALME 36,840 36,840

29/05/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION CASTIGLIONE 136,190 136,190

TRAINING PLAN “TAX-COMPUTER SKILLS UPDATE PROGRAMME” 01/06/2020 FONSERVIZI 5,757 5,757 CFA CODE 132/2018 TRAINING PLAN "REMOTE OPERATION AND CONTROL OF 01/06/2020 FONSERVIZI 8,246 8,246 TECHNICAL PLANTS" CFA CODE 086/2019

01/06/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION CASTIGLIONE 26,954 26,954

TENDER COSTS FOR THE INSTALLATION OF THE SMAT WATER 10/06/2020 CITY OF ALMESE 1,600 1,600 POINT

30/06/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION BALME 62,846 62,846

30/06/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION CASTIGLIONE 144,438 144,438

30/06/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION CASTIGLIONE 26,558 26,558

TURIN LOCAL AUTHORITY 3 PAYMENT OF BALANCE ON IVREA 15/07/2020 TERRITORY AUTHORITY No. 3 31,580 31,580 INTERVENTION AS PER RES. 165 2020

31/07/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION BALME 75,546 75,546

31/07/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION CASTIGLIONE 141,458 141,458

31/07/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION CASTIGLIONE 26,558 26,558

31/08/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION BALME 74,507 74,507

31/08/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION CASTIGLIONE 86,501 86,501

31/08/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION CASTIGLIONE 26,558 26,558

TRAINING PLAN "DEVELOPMENT OF SPECIALISED COMPUTER 08/09/2020 FONSERVIZI 18,348 18,348 SKILLS" - CFA 057/2018 TRAINING PLAN "UPDATING OF SPECIALISED TECHNICAL KNOW- 08/09/2020 FONSERVIZI 3,808 3,808 HOW" - CFA 050/2019

23/09/2020 FINPIEMONTE COLLEGNO SITE - BIOGAS4ENERGY - BIOGAS CLEAN-UP 32,415 32,415

30/09/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION BALME 75,784 75,784

30/09/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION CASTIGLIONE 25,058 25,058

30/09/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION CASTIGLIONE 25,515 25,515

30/10/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION BALME 67,573 67,573

30/10/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION CASTIGLIONE 2,484 2,484

02/11/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION CASTIGLIONE 25,515 25,515

GIAVENO SITE WTP CONTRIBUTION- REACTIVATION OF WATER 10/11/2020 REGIONE PIEMONTE 35,600 35,600 INTAKE PLANT ON RIO TACHERI (90) GIAVENO SITE WTP CONTRIBUTION FOR REACTIVATION OF 10/11/2020 REGIONE PIEMONTE 3,000 3,000 MEINARDO WATER INTAKE SYSTEM AND ACCESS ROADS GIAVENO SITE WTP CONTRIBUTION- REACTIVATION OF WATER 10/11/2020 REGIONE PIEMONTE INTAKE PLANT ON PARK RIVER, ACCESS RESTORATION AND PIPE 5,000 5,000 PROTECTION TENDER COSTS FOR THE INSTALLATION OF THE SMAT WATER 26/11/2020 COMUNE DI FORNO CANAVESE 2,100 2,100 POINT TENDER COSTS FOR THE INSTALLATION OF THE SMAT WATER 30/11/2020 CITY OF BRUINO 1,300 1,300 POINT

30/11/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION CASTIGLIONE 16,082 16,082

30/11/2020 GSE INCENTIVE FOR SOLAR POWER PRODUCTION CASTIGLIONE 25,515 25,515

01/12/2020 CITY OF ROLETTO EXPENDITURE COMMITMENT FOR BORRACCETTE 320 320

MONCALIERI-CAMPO POZZI TETTI ROLLE- REPAIRS TO ACCESS 09/12/2020 REGIONE PIEMONTE 5,000 5,000 ROAD AND FENCE DAMAGED BY CHISOLA TORRENT FLOOD

SANGANO-WATER PLANT-RECONSTRUCTION OF SANGONE 09/12/2020 REGIONE PIEMONTE TORRENT EMBANKMENT FOR PROTECTION OF BARONIS & 60,000 60,000 SCARNASSO INTAKE PLANTS SANGANO-WATER PLANT - RECONSTRUCTION OF ROAD, CANALS AND BRIDGE AT EMBANKMENT TO BE REPAIRED AT SCARNASSO 09/12/2020 REGIONE PIEMONTE 24,500 24,500 INTAKE PLANT SANGONE TORRENT EMBANKMENT FOR PROTECTION OF BARONIS & SCARNASSO INTAKE PLANTS SANGANO-WATER PLANT-REPAIRS FOR LANDSLIDE AT BARONIS INTAKE ACCESS STRUCTURE AND REPAIRS TO DIV. DAM FOR 09/12/2020 REGIONE PIEMONTE 3,500 3,500 INTERNAL PLANT CHANNELLING AND REPAIRS TO STRUCTURE AT SANGANO SITE INTERNAL LAKE INTAKE PLANT CONTRIBUTION TO REMOVE BLOCKAGE FROM NORTH TURIN 09/12/2020 REGIONE PIEMONTE 680,850 680,850 MANIFOLD UNDER STURA TORRENT AFTER THE FLOOD CFA DEL TRAINING PLAN "DEVELOPMENT OF SPECIALISED 14/12/2020 FONSERVIZI 5,630 5,630 COMPUTER SKILLS" - CFA CODE 020/2019

17/12/2020 CITY OF OSASIO EXPENDITURE COMMITMENT FOR BORRACCETTE 100 100

TENDER COSTS FOR THE INSTALLATION OF THE SMAT WATER 17/12/2020 CITY OF RIVOLI 2,000 2,000 POINT

18/12/2020 CITY OF BOLLENGO EXPENDITURE COMMITMENT FOR BORRACCETTE 960 960

22/12/2020 REGIONE PIEMONTE REPAIR OF DAMAGES TO WTP CONSTRUCTION SITE 18,750 18,750

EXTRAORDINARY CLEAN-UP OF ZONES AND DISTRICTS HIT BY THE 22/12/2020 REGIONE PIEMONTE 24,000 24,000 FLOOD REPAIRS TO DISCHARGE PARTS OF WASTE TREATMENT PLANT IN 22/12/2020 REGIONE PIEMONTE 77,000 77,000 MULTISPORT ZONE SEWAGE LIFTING PLANT IN CHISOLA NIZZA-RESTORATION OF 22/12/2020 REGIONE PIEMONTE ACCESS ROAD AND RIGHT BANK EMBANKMENT OF CHISOLA 81,000 81,000 TORRENT REPAIRS TO FINAL LIFTING SYSTEM OF CENTRALISED CASTIGLIONE 22/12/2020 REGIONE PIEMONTE 84,000 84,000 PLANT SUPPLY AND INSTALLATION OF NEW TREATMENT PLANT IN 24/12/2020 REGIONE PIEMONTE 126,000 126,000 LOC.CAMPAMBIARDO WITH ION-EXCHANGE RESINS 31 December GSE INCENTIVE FOR SOLAR POWER PRODUCTION BALME 74,992 74,992 2020 31 December GSE INCENTIVE FOR SOLAR POWER PRODUCTION CASTIGLIONE 24,722 24,722 2020 31 December SERCO ITALIA S.P.A. CALLISTO PROJECT 77,458 77,458 2020

Total 4,499,735 2,307,539 2,192,196

During the year, the Group used the tax credit provided for in art. 125 of legislative decree no. 34 of 19 May 2020 in connection with the costs incurred for sanitising services and the purchase of protective equipment, to the extent provided for by the Revenue Agency with prot. 259854 of 10 July 2020, amounting to EUR 29,861, of which EUR 9,847 already used to offset taxes paid previously. The Group also profited from a tax credit of EUR 197,075 on investments in capital goods pursuant to art. 1(184–194) of law 160/2019.

VIII. Significant events occurring after 31 December 2020 Significant events occurring after 12/31/2020, are itemized in the dedicated section of the Directors’ Report.

COVID-19 emergency for a more detailed description of the measures enacted as a consequence of the health emergency caused by the international spread of Covid-19, which also involved our country starting in February 2020, refer to the Management Report.

FINANCIAL STATEMENT FOR FISCAL YEAR SMAT S.P.A

FINANCIAL STATEMENT FOR FISCAL YEAR SMAT S.P.A.

IAS/IFRS FRAMEWORKS SUPPLEMENTARY NOTE

STATEMENT OF FINANCIAL POSITION Euro Remarks 31 December 2020 31 December 2019 ASSETS Non-current assets Tangible fixed assets 1 143,015,852 149,127,257 Goodwill 2 5,928,005 5,928,005 Other intangible assets 3 3,674,642 4,196,595 Assets under concession 4 732,964,877 685,613,165 Shareholdings 5 11,715,845 13,815,845 Deferred tax assets 6 16,744,606 15,449,270 Non-current financial assets 7 1,285,040 1,400,001 Other non-current assets 0 0 Total non-current assets 915,328,867 875,530,138

Current assets Inventory 8 8,353,679 8,623,844 Trade receivables 9 222,916,095 227,725,387 Current tax assets 10 484,787 6,403,743 Current financial assets 11 1,663,394 632,828 Other current assets 12 4,433,970 3,498,729 Cash and cash equivalents 13 37,197,490 54,294,178 Total current assets 275,049,415 301,178,709

Assets intended for sale 0 0

TOTAL ASSETS 1,190,378,282 1,176,708,847

STATEMENT OF FINANCIAL POSITION Euro Remarks 31 December 2020 31 December 2019 NET EQUITY AND LIABILITIES NET EQUITY Share capital 345,533,762 345,533,762 Legal reserve 22,914,362 20,909,251 Reserve restricted for PEF implementation 269,352,368 238,874,674 FTA reserve (2,677,452) (2,677,452) Other reserves and retained earnings 2,503,661 2,955,483 Profit for the year 23,684,331 40,102,229 TOTAL NET EQUITY 14 661,311,032 645,697,947

LIABILITIES Non-current liabilities Non-current financial liabilities 15 239,106,427 234,740,335 Provisions for employee benefits 16 14,018,741 15,095,807 Provisions for risks 17 17,117,089 19,920,439 Deferred tax liabilities 18 619,212 314,986 Other non-current liabilities 19 51,201,771 52,275,183 Total non-current liabilities 322,063,240 322,346,750

Current liabilities Current financial liabilities 15 47,983,494 51,890,624 Trade payables 20 83,316,869 81,784,198 Current tax liabilities 21 5,281,549 3,267,035 Other current liabilities 22 70,422,098 71,722,293 Other current financial liabilities 0 0 Total current liabilities 207,004,010 208,664,150

Liabilities intended for sale 0 0

TOTAL LIABILITIES 529,067,250 531,010,900 TOTAL NET EQUITY AND LIABILITIES 1,190,378,282 1,176,708,847

INCOME STATEMENT Remarks 2020 2019

REVENUES Revenues 23 318,173,677 320,116,769 Revenues for planning and construction activities 24 100,187,122 103,822,716 Other revenues 25 13,684,783 19,013,910 Total revenues 432,045,582 442,953,395

COSTS Consumption of raw materials and consumables 26 14,169,218 13,712,693 Costs for leased assets and services 27 117,656,595 110,844,918 Payroll costs 28 60,700,787 61,551,383 Other operating expenses 29 21,383,465 22,738,158 Costs for planning and construction activities 30 95,777,281 99,422,784 Total operating costs 309,687,346 308,269,936

Gross operating margin 122,358,236 134,683,459

Depreciation, provisions and write-downs 31 (87,222,524) (79,988,948)

Operating income (EBIT) 35,135,712 54,694,511

Financial income 32 3,130,314 5,846,184 Financial expense 33 (4,375,578) (4,935,773) Total financial management (1,245,264) 910,411

Result before taxes 33,890,448 55,604,922 Income Taxes 34 (10,206,117) (15,502,693) PROFIT (LOSS) FOR THE YEAR 23,684,331 40,102,229

COMPREHENSIVE INCOME STATEMENT Remarks 2020 2019

A. Profit for the year 23,684,331 40,102,229 Current profit (loss) on Severance Fund (489,646) (561,863) Fiscal effect on Profits/(losses) that will not 0 0 later be reclassified in the Income Statement

B. Profits/(losses) entered directly under Net Equity and that (489,646) (561,863) will not later be reclassified in the Income Statement

Share of other profits/(losses) by the Enterprises assessed by the 0 0 Net Equity method

Fiscal effect on profits/(losses) that will later be reclassified in the Income Statement 0 0 when certain conditions will be met

Profits/(losses) entered directly under Net Equity that 0 0 Will not later be reclassified in the Income Statement

D. Total profit for the year (A + B + C) 23,194,685 39,540,366

CASH-FLOW STATEMENT FOR THE FISCAL YEAR Euro Remarks 2020 2019

A Financial flows of operating assets 101,445,509 114,172,452

Net Profit (loss) for the year 23,684,331 40,102,229

Adjustments for non-monetary costs and revenues Amortization of intangible assets 1,770,456 2,051,715 Depreciation of tangible assets 17,851,021 17,384,213 Depreciation of assets under concession 53,179,731 48,463,115 Change in provisions for liabilities and charges (2,803,350) (3,064,489) Change in provisions for benefits to employees (1,077,066) (518,568) Change in advance deferred taxes (991,110) (239,413) Change in other non current assets/liabilities (958,451) 1,239,667

Change in Net Equity reserves Difference in conversion 0 0 Actuarial profit and loss 0 0 Other movements (489,649) (561,865)

Change in net working capital (Increase)/Decrease in trade receivables 4,809,292 17,645,939 (Increase)/Decrease in other assets 3,953,149 2,117,959 (Increase)/Decrease in inventory 270,165 (1,022,481) (Increase)/Decrease of the trade payables 1,532,671 (8,615,116) Increase/(Decrease) in other liabilities 714,319 (810,453)

B. Financial flows of investment assets (111,419,562) (122,695,704) Disinvestments /(investments) of intangible fixed assets (1,248,503) (2,686,079) Disinvestments/(investments) of tangible fixed assets (11,739,616) 2,650,345 Disinvestments /(investments) of assets under concession (100,531,443) (122,964,970) Changes in the investments 2,100,000 305,000 Changes in the consolidation area

C. Financial flows of financial assets (7,122,635) (56,994,020) Cash from the issue of share capital 0 0 (Purchase)/Release of shares 0 0 Change of the financial payables 468,076 (47,149,818) Other changes in financial liabilities (9,114) (27,006) (Dividends paid) (7,581,597) (9,817,196)

D. Net flow generated by the management (A ± B ± C) (17,096,688) (65,517,272)

E. Initial liquid assets 54,294,178 119,811,450

F. Final liquid assets (D ± E) 37,197,490 54,294,178

CHANGES IN NET EQUITY

31 December Allocation of Distribution of Other Profit (losses) 31 December (Units in Euro) 2018 result dividends movements for the year 2019

Share capital 345,533,762 345,533,762 Legal reserve 18,319,415 2,589,836 20,909,251 Reserve restricted for PEF implementation 199,509,171 39,365,503 238,874,674 FTA reserve (2,677,452) 0 (2,677,452) Other reserves and retained earnings:

• Optional reserve 34,342,562 0 34,342,562

• Severance actualization reserve 791,182 0 (561,863) 229,319

• Negative reserve for own shares in portfolio (32,993,340) 0 (32,993,340)

• Reserve for rounding up (4) 0 (4)

• Retained earnings 1,352,768 9,841,375 (9,817,196) (1) 1,376,946 Total other reserves and retained earnings 3,493,168 9,841,375 (9,817,196) (1) (561,863) 2,955,483 Operating income 51,796,714 (51,796,714) 40,102,229 40,102,229 TOTAL NET EQUITY 615,974,778 0 (9,817,196) (1) 39,540,366 645,697,947

31 December Allocation of Distribution of Other Profit (losses) 31 December (Units in Euro) 2019 result dividends movements for the year 2020

Share capital 345,533,762 345,533,762 Legal reserve 20,909,251 2,005,111 22,914,362 Reserve restricted for PEF implementation 238,874,674 30,477,694 269,352,368 FTA reserve (2,677,452) 0 (2,677,452) Other reserves and retained earnings: • Optional reserve 34,342,562 0 34,342,562 • Severance actualization reserve 229,319 0 (489,646) (260,327) • Negative reserve for own shares in portfolio (32,993,340) 0 (32,993,340) • Reserve for rounding up (4) (3) (7) • Retained earnings 1,376,946 7,619,424 (7,581,597) 1,414,773 Total other reserves and retained earnings 2,955,483 7,619,424 (7,581,597) (3) (489,646) 2,503,661 Operating income 40,102,229 (40,102,229) 23,684,331 23,684,331 TOTAL NET EQUITY 645,697,947 0 (7,581,597) (3) 23,194,685 661,311,032

SMA TORINO S.P.A. SUPPLEMENTARY NOTE

Application of IAS/IFRS and its effects European (CE) Regulations no. 1606/2002 of 19 July 2002 introduced the obligation, starting from fiscal year 2005, to apply the International Financial Reporting Standards (“IFRS”), as amended by the International Accounting Standards Board (“IASB”), and adopted by the European Union (“IFRS” or "International Accounting Principles”) for the drafting of the statements of account of the companies holding capital and/or debt shares quoted in one of the markets regulated by the European Community. On April 13th 2017, SMAT issued a bond loan for a rated amount of a Euro 135 million subscribed by institutional investors and it provided for quotation at the Irish Stock Exchange. In compliance with the aforementioned legislative provisions, SMAT is therefore supposed to draft the consolidated and fiscal year financial statements in compliance with the IFRS starting from the fiscal year closed on 31 December 2016.

This Financial Statements has been set in the perspective of corporate continuity and on the bases of the contractual criteria of the historical cost, with the exception of some book entries, which are calculated at the fair value, in compliance with the provisions of the International Accounting Principles.

The statement of accounts diagrams report separately any costs ans revenues of non-recurrent nature.

The general principle adopted in setting up these financial statements is the cost one, with the exception of the financial assets and liabilities (including the derivative instruments) which are assessed at fair value. The preparation of the Financial Statements has required the use of estimates by the management; the main areas characterized by particularly significant assessments and assumptions, together with those that have remarkable effects on the situations presented, are reported in section "Use of Estimates”. All the accounting prospects of the equity and financial status and of the Income Statement are expressed in Euro unit, whilst the data entered in the explanatory comments are expressed in thousand Euros, except when it is otherwise indicated.

Valuation criteria The valuation of the financial sheet items was drawn up based on the general criteria of prudence and accrual, in the prospect of continuation of the business. For the purposes of accounting determinations, priority is given to the economic substance of operations rather than to the legal status. As regards the economic aspect, we specify that the costs and revenues shown include the figures of the end of the year that match the contra items of the Financial Position. In relation to this, profits are included only if realized by the date of closure in the fiscal year, while the risks and losses were taken into account even if known after that date. Tangible fixed assets The tangible assets are identified at the purchase or production cost including the accessory charges, or at the value based on appraisals of the company equity, in case of acquisitions of companies, net to the relevant depreciation fund and to any losses of value. The production cost included the direct and indirect costs for the share that can be reasonably ascribed to the assets (e.g.: personnel costs, transport, customs duties, expenses for the preparation of the area of installation, testing costs, notary and land register expenses) The cost includes any professional fees and - for some goods, the financial charges capitalized up to the coming into service of the good. The cost includes any cost for site reclaiming, on which the tangible asset lays, complies with the provisions of IAS 37.

The tangible assets are entered gross to the system revenue grants which are identified in the Income Statement throughout the period of time required to refer them to the relevant costs; they are represented in the equity and financial status by reporting the grant as deferred revenue.

The depreciation starts when the assets enter the production cycle and - for the new acquisitions – it is calculated at 50% of the full rate part, since it is considered as representative of the actual use of the goods. The current assets include the costs relevant to intangible assets whose economic utilization process has not started yet. The tangible assets are systematically depreciated every fiscal year based on economic and technical rate parts that are considered as representative of the residual potential of use of the assets. We report herein under the tables with the depreciation rate parts that have been taken into account for the depreciation of the assets.

As required by IAS 16, the estimated useful lifespan of the tangible assets are reviewed every fiscal year, in order to assess the need of an overhaul. In case it is ascertained that the estimated useful lifespan does not represent as appropriate the future expected benefits, the relevant depreciation plans must be redefined based on the new assumptions. Such changes are reported in a prospect to the Income Statement. During the fiscal year that has been closed, no change was entered under the depreciation plans for any of the categories of tangible assets. The land is not depreciated, Pursuant to accounting principle IFRS 16 Leases, since 1 January 2019, for leases previously classified as operational, the Group recognises - financial liability, equal to the current value of future residual payments on the date of transition, implemented using the applicable incremental borrowing rate on the date of transition for each contract; - usage right equal to the value of financial liability on the date of the transition, net of any accruals and deferrals in the statement of assets and liabilities on the date of closure for this balance sheet.

The profits or losses that derive from the alienation or dismissals of a tangible asset are identified as the difference between the sale revenue and the net accounting value of the asset and they are identified in the Income Statement at the moment the buyer is transferred the risks and benefits connected to the ownership of said asset.

Goodwill and other Intangible fixed assets The identifiable controllable intangible assets are identified in the accounting; their cost can be reliably determined provided that such activities generate economic benefits in the future. Such assets are identified at cost value in compliance with the criteria indicated for the tangible assets and - if their useful lifespan is defined - they are depreciated throughout the period of such estimated lifespan. The depreciation starts at the moment the asset is ready to be used or - in any case - it starts producing economic benefits for the enterprise. The current assets include the costs relevant to intangible assets for which the economic utilization process as not started yet.

The intangible assets identified as a result to an aggregation of companies are reported separately from the goodwill, if their fair value is reliably determined. The profits or losses that derive from the alienation of an intangible asset are identified as the difference between the dismissal value and the loading value of the asset and they are identified in the Income Statement at the moment the buyer is transferred the risks and benefits connected to the ownership of said asset. Assets under concession The concessions mainly consist of rights relevant to networks, systems and other equipment relevant to the Integrated Water Service given under license to SMAT Spa and which are functional to the management of such service. Such licenses are classified in a purposely-allocated item according to the interpretation IFRIC 12 – Service Concession Arrangements. As far as the depreciation is concerned, IFRIC provides that the latter is calculated on the basis of what is stated in the agreement and - in particular - in a constant measure for the shorter period of time between the technical and economic lift of the assets given in license and the duration of the license itself, until the takeover value provided for in the license agreement is achieved. In particular, the value of the right of use of the public assets of the waterworks of the City of Turin and of C.I.A.C.T., which are defined in compliance with the expert appraisal of transfer, have been reported in this Financial Statements on the basis of the duration of the relevant agreement deed extended by Ente d’Ambito Torinese n. 3. The depreciation of the improvements made to said assets after the transfer date have been determined based on the estimated economic and technical useful lifespan. The depreciations on the improvements made to the well systems entrusted in direct management to the Company have been determined with reference to the estimated economic and technical useful life of the improvements made.

Shareholdings The Investment in subsidiaries and related companies is identified at cost, adjusted in case of losses of value to adapt it to the relevant recoverable value, in compliance with the provisions of IAS 36 – Reduction of the asset value. When the losses no longer exist or reduces, the accounting value is incremented up to the new estimate of the recoverable values, which cannot in any case exceed the original cost. The resuming of the value is entered under the Income Statement. Shares in other companies are valuated at fair value in accordance with the other components in the comprehensive financial statements. Shares held exclusively for the purpose of subsequent alienation are excluded from this approach, and their fair value is inserted in the profits (losses) of the fiscal year. The risk deriving from any losses exceeding accounting value of the shareholding is identified in a purposely-allocated fund insofar the parent company is committed to comply with the legal obligations or in those that are implicit to the subsidiary or in any case to cover its losses.

value of the expected future financial flows. The value of the credits is reported in the financial statements net of the credit write-down fund. With reference to the impairment model, the IFRS 9 principle – Financial Instruments: recognition and measurement - of the year 2018 requires that the estimate of the losses on credits is performed on the basis of the expected losses model (instead of on the model of the incurred losses utilized by IAS 39) using supportable information, available without charges or unreasonable efforts that required historical, current and perspective data; The principle foresees that the impairment model is applied to all financial instruments, or to financial activities valued at the amortized cost, to those valued at fair value , to credits derived from rental contracts and commercial credits. The Company has developed a credit analysis model whereby it also takes into account receivables not yet overdue in establishing the provision for bad debts, and determines the write-downs to be applied to the different types of receivables past due. Financial assets and other current assets They are initially reported at the “fair value" (including the costs incurred for the acquisition/emission) at the date of the transaction. Then, they are assessed at the depreciated cost, using the actual interest rate criteria, wherever it is significant and assimilating any losses of value into the Income Statement. Industry information The information relevant to the sectors of activity was arranged in compliance with the provisions of IFRS 8 “Operational sectors”, which include the submittal of the information in compliance with the modes adopted by the management for the operational decision-making. Therefore, the identification of the sectors of operation and the information submitted are defined based on the internal reporting used by the management for the allocation of the resources to the different segments and for the analysis of the relevant performance. A sector of operations is defined by IFRS 8 as a component of a body that : I) undertakes entrepreneurial activities that generate cost and revenue (including the revenues and costs concerning operations with other components of the same body ); II) whose operational results are regularly reviewed at the highest operational decision-making level of the body for the purposes of the adoption of decisions as related to the resources to be allocated to the sectors and of the assessment of the results; III) for which separate information is available in the financial statements. The management has identified only one operational sector, into which all the main services and products supplied to the customers flow, since the activity of the company consists of the management of the Integrated Water Service which is no further broken down at the level of the internal strategic reporting. Cash and cash equivalents The liquidity includes the cash on hand, also in the form of checks, and on demand bank deposits. The equivalent means consist of financial investments with a three-month expiry or lower (as from the date of their purchase), which can be promptly converted into liquidity and with an insignificant risk of variation in their value. Such items are calculated at fair value; profits or losses deriving from any changes in the fair value are reported in the Income Statement. Own shares Own shares are entered as a reduction of the Net Equity. Also the counter value deriving from their release is reported with net equity counterpart, with no computing into the Income Statement. Provisions for liabilities and charges, benefits to the employees The provisions for contingencies and charges concern charges of a determined nature and whose certain or likely existence that – as at the date the Financial Statements are closed - are undetermined as far as the amount or the date of occurrence are concerned. The provisions are identified when: The provisions are identified when: (i) the existence of a current, legal or implicit obligation deriving from a past event, is likely; (ii) the compliance with subject obligation is likely to be burdensome; (iii) the amount of the obligation can be reliably estimated. The provisions to the funds represent the best estimate of the costs required to face compliance at the date of the Financial Statements (assuming there are sufficient elements to run such estimate) and they are actualized when the effect is significant, and the required information is available. In such cases, the provisions are determined by actualizing the future cash flows at a discount rate before taxes that reflects the current

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market assessment and take into account the risks connected to the company activity. When the actualization is performed, the increment of the provisions due to time is reported in the financial charges. If the liabilities are due to material activities (e.g.: revamping of sites) the fund is reported in counterpart to the activity it refers to and the identification of the charge in the Income Statement is performed through the depreciation process of the tangible asset the charge refers to. In case of redefinition of the liabilities, the methods provided for by IFRIC 1 are applied. The explanatory notes also illustrate potential liabilities represented by; (i) potential - though not likely - obligations deriving from past events, whose existence shall only be confirmed upon occurrence of one or more uncertain future events that are not under the full control of the Company; (ii) current obligations deriving from past events, whose amount cannot be reliably estimated or whose compliance with is likely not to be onerous.

Benefits to the employees (Severance pay) The liabilities relevant to the defined benefit programs (such as the Severance pay for the amount accrued before 1 January 2017 and the other benefits for the employees) are defined net to any activities at the service of the plan, on the basis of current assumptions and by competences, consistently with the working performance required to obtain such benefits; the assessment of the liabilities is performed with the support of independent actuaries. The value of the current profits and losses as required by JAS 19, is reported into the other components of the total Income Statement. Further to Financial Law no. 296 of 27 December 2006, for companies having more than 50 employees, as related to shares accrued starting from 1 January 2007, the Severance Pay is configured as a plan with defined contributions. Trade payables and other current liabilities Trade payables and other debts are initially reported at fair value, net of the accessory costs of direct computing, and they are then detected at the depreciated cost, where significant, applying the criteria of the actual interest rate.

The item includes current “bound revenues" share determined by Ente d’Ambito Torinese no. 3 with Deliberation no. 483/2013 and reported to fiscal year 2012. Costs and revenues The costs and revenues are recorded net of adjustments, or returns, discounts, allowances and possible variations in estimates, and assessed according to the principles of prudence and competence. In particular, as far as the revenues are concerned: - The revenues for service performance are acknowledged at the date the performance is completed; - Revenues for the sale of water acknowledged and counted at the time of delivery, including the allocation for deliveries made, but not yet invoiced (estimated according to historical analyses determined in relation to past consumption); - the revenues for the sale of products are recognized at the moment of the ownership takeover, which generally corresponds to the delivery or shipment of the goods. The costs are accounted for according to the accrual principle. Grant for Plants The grants for plants are reported in the accounts once there is the justification documentation of the imminent collection by the paying body. These concur to form the result of the fiscal year according to the rules of economic accrual, determined as related to the residual economic and technical lifespan of the assets they refer to. Financial income and expenses Financial proceeds and charges are calculated according to the accrual principle. The dividends of other companies are recorded in the Income Statement in the moment in which the right to receive payment has been established. Income taxes for the year Income tax for the year consists of the sum of current and deferred taxes. Income tax is based on profit for the year before taxes. Profit before taxes differs from the result entered in the Income Statement since it excludes positive and negative components that will be taxable or deductible in other fiscal years and - furthermore - it

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excludes items that will never be taxable or deductible. "Liabilities for current taxes" are calculated using the rates in force as at the date of the Financial Statements. In determining the income taxes, the Company has taken into due consideration the effects deriving from the last fiscal reform introduced by Law no. 244 of 24 December 2007 and - in particular - the strengthened principle of derivation established by art. 83 of TUIR, which requires the entity applying the international accounting principles to apply, even in exceptions to the provisions of the TUIR, “the criteria of qualification, temporary computing and classification of the Financial Statements according to said accounting principles”.

Deferred taxes are calculated as related to the temporary differences in the taxation and are entered under "Deferred tax liabilities". Deferred tax credits are calculated to the extent in which it is deemed probable the existence, in the fiscal years during which the relevant temporary differences will spill over, of a taxable income at least equal to the amount of the differences which will be annulled. The deferred and anticipated taxes are determined on the basis of the tax rates expected to be applicable in the fiscal year in which the tax credit will be realized or the tax debt will be extinguished, on the basis of the tax rates defined by measures in force or substantially in force as at the reference date of the financial statements. Such changes are entered under either the Income Statement or under net equity, as related to the computing made at the origin of the reference difference. Impairment test The accounting values of the Company assets are assessed at every reference data of the Financial Statements, in order to determine whether there are indications of impairment, in case you proceed to the estimate of the recoverable value of the asset. A loss by value reduction (impairment) is recorded in the Income Statement when the accounting value of an asset or of a unit that generates financial flows exceeds the recoverable value.

The recoverable value of the non-financial activities correspond to the greatest value between their "fair value" net to the sale cost and the value in present use. To determine the value in present use, the estimated future financial flows are actualized using a discount rate that reflects the market assessment of the money value and of the risks related to the type of activity. In case of activities that do not generate financial flows in input, that are widely independent, we proceed by calculating the recoverable value of the unit that generates financial flows to which the asset belongs.

When, subsequently, a loss on assets other than goodwill and other assets of indefinite useful lifespan, no longer exists or is reduced, the accounting value of the asset and of the asset that generates financial flows is increased until the new estimate of the recoverable value is calculated, which cannot exceed the value that would be determined if no loss were detected by impairment. The recovery of an impairment is immediately recorded in the Income Statement. Conversion of assets/liabilities into foreign currency The functional and presentation currency adopted by Smat S.p.A. is Euro. The transactions in foreign currencies are initially identified at the exchange rate at the date of the operation. The assets and liabilities in currency - with the exception of the tangible assets - are reported in the reference exchange rate at the date the fiscal year is closed and the relevant profits and losses on the exchange rate are regularly computed to the Income Statement; the net profit - if any - that might arise is allocated to a purposely-created non-distributable reserve up to the date of use. Use of estimations The drafting of the Financial Statements and relevant Notes to the Accounts requires the administration body to run estimates that influence the values of the balance sheet assets and liabilities and on the information regarding the potential assets and liabilities as at the date of the financial statements.

The status of generalized economic and financial crisis involves the need to make assumptions as related to the future trend, which can be characterized by uncertainty. Subsequently, we cannot exclude in the future different results from what has been estimated, that could therefore require amendments that cannot be estimated today or forecast at the accounting value of the relevant financial statement items.

Estimates are used in different areas, such as the credit depreciation Fund, the provisions for contingencies and charges, the depreciations, the assessment of the assets regarding shareholding in related companies and 102

subsidiaries the sale revenues, the cost and charges regarding the management of the Integrated Water Service and the income taxes. The estimates and assumptions are periodically reviewed by the Group based on the better knowledge of the activity and of other factors that can be reasonably derived from the current circumstances, and the effects of any changes are immediately reflected in the Income Statement.

Other information Corporate agreements outside the Statement of Assets and Liabilities Bear in mind there are no agreements resulting from the financial statements that can have a significant impact on the equity and financial status, or on the economic result of the Company. Amounts expressed in Notes to the Accounts Unless otherwise indicated, the amounts reported in the Notes to the Accounts are expressed in Euro units with rounding up to the upper unit for hundredths equal to or greater than 50 Accounting principles, IFRS amendments and interpretations adopted from 1 January 2020 The following IFRS accounting principles, amendments and interpretations were applied for the fist time by the Company starting as of 1 January 2020:

• IASB, on 26 Sepember 2019, published an amendment called “Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform”. The same amendment changed IFRS 9 - Financial Instruments and IAS 39 - Financial Instruments: Recognition and Measurement oltre che l’IFRS 7 - Financial Instruments: Disclosures. In particular, the amendment changes come requirements for application of hedge accounting, allowing for temporary derogations, in order to mitigate the impact derived from uncertainty about the IBOR reform on cash flows in the period previous to its completion. The amendment also requires companies to provide additional information in the financial statements about their coverages that are directly impacted by uncertainties generated by the reform and to which said derogations are applied. The adoption of this amendment did not produce any effects on the financial statements of the Company.

activities/processes and goods must include, as a minimum, input and a substantial process that together contribute significantly to the capacity to create an output. For this purpose, IASB replaced the term "capacity to create output" with "capacity to contribute to the creation of output", to clarify that a business can exist also without the presence of all the input and processes necessary for creating output. The amendment also introduced an optional test ("concentration test") to exclude the presence of a business if the paid price is substantially referable to a single activity or group of activities. The changes are applied to all the business combinations and acquisitions of businesses after 1 January 2020, but advance application is also allowed. The adoption of this amendment did not produce any effects on the financial statements of the Company.

• On 28 May 2020, IASB published the amendment called “Covid-19 Related Rent Concessions (Amendment to IFRS 16)”. This amendment provided lessees with an exemption from assessing whether a COVID-19- related rent concession was a lease modification pursuant to IFRS 16. Accordingly, the lessees who avail themselves of this exemption can enter the effects of the reduction in lease payments directly in the income statement on the date the reduction comes into effect. This amendment applies to financial statements for reporting periods beginning 1 June 2020. The adoption of this amendment did not have any effects on the consolidated financial statements of the Company. Accounting principles, amendments and interpretations IFRS and IFRIC authorized by the European Union, not yet mandatory and not adopted in advance by the Group on 31 December 2020 • On 28 May 2020, IASB published the amendment called “Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to IFRS 4)”. This amendment makes it possible to extend the provisional exemption from the application of IFRS 9 until 1 January 2023 for insurance purposes. It will come into effect on 1 January 2021. At present the administrators are assessing possible effects of introduction of this amendment into the financial statements of the company.

• On 18 May 2017, IASB published the principle IFRS 17 – Insurance Contracts which is destined to replace IFRS 4 – Insurance Contracts. The objective of the new principle is to guarantee that an entity provides pertinent information that faithfully represents the rights and obligations derived from issued insurance contracts. The IASB has developed a standard for elimination of existing incongruities and weaknesses in accounting policies, providing a single principle-based framework for taking into account all types of insurance contracts, including reinsurance contracts held by the insurer. The new principle also includes requirements for presentation and reporting to improve comparability among the entities in this sector. The new principle measures an insurance contract based on a General Model or a simplified version of the same, called the Premium Allocation Approach (“PAA”). The main characteristics of the General Model are: o the estimates and the hypotheses for future cash flows are always current; o the measurement reflects the temporal value of money; o the estimates foresee extensive use of observable information on the market; 104

o there is current and explicit risk measurement; o the expected profile is differentiated and aggregated into groups of insurance contracts at the moment of initial reading; o the expected profit in the period of contractual coverage takes into account changes deriving from variations in the hypothesis relative to financial flows for each group of contracts.

• On 23 January 2020, IASB published an amendment called “Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current”. This document aims to clarify how to classify payables and other short- or long-term liabilities. The changes will be applied starting from 1 January 2023, but advance application is also allowed. The Board Members do not expect a significant effect in the balance sheet of the company from the adoption of this amendment.

• On 14 May 2020, the IASB published the following amendments: o Amendments to IFRS 3 Business Combinations: the amendment will update the reference contained in IFRS 3 to the Conceptual Framework in the revised version, without this entailing changes to the provisions set out in IFRS 3. o Amendments to IAS 16 Property, Plant and Equipment: it will no longer be possible to detract from the cost of tangible assets the amount obtained on disposal of assets during the testing stage of the asset itself. Such revenues from disposal and the relative costs will therefore be recorded in the income statement. o Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets: the amendment makes it clear that the charges that may arise from a contract must be estimated by taking into account all the costs directly attributable to the contract. Accordingly, besides incremental costs (e.g., the cost of direct materials processed), the evaluation of the possible charges associated with a contract must also take into account all the costs that they company cannot avoid on account of having signed the contract (e.g., the proportions of personnel cost and depreciation of the machinery used to perform the contract). o Annual Improvements 2018-2020: amendments were made to IFRS 1 First-time Adoption of International Financial Reporting Standards, IFRS 9 Financial Instruments, and IAS 41 Agriculture, and to the Illustrative Examples of IFRS 16 Leases. All the foregoing amendments will come into effect on 1 January 2022. The Board Members do not expect a significant effect in the balance sheet of the company from the adoption of these amendments.

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Notes to the entries of the Statement of Assets and Liabilities Non-CURRENT ASSETS

1. Tangible fixed assets € 143,015,852 The composition of the tangible fixed assets and the relevant movements occurring during the fiscal year are entered in the following table: Assets under Commercial & 2019 Land and Plants and Leased assets construction and industrial Other assets Total Categories buildings machinery (see detail) payments on equipment account

Historical cost as at 31 December 94,185,025 308,567,895 13,533,034 16,258,937 0 29,588,533 462,133,424

Depreciation fund as at 31 December (32,351,131) (237,157,774) (9,426,410) (14,036,294) 0 0 (292,971,609)

Net value as at 31 December 2018 61,833,894 71,410,121 4,106,624 2,222,643 0 29,588,533 169,161,815 Reclassifications 344,931 (155,395) 0 0 0 (20,035,041) (19,845,505) Works in progress completed in 2019 1,745,560 4,010,344 0 0 0 (5,755,904) 0 Disinvestments in the fiscal year 0 0 (220,328) (846,231) 0 0 (1,066,559) Adjustments (307,377) (61,791) 0 0 0 0 (369,168) Leasing increments 0 0 0 0 2,820,967 0 2,820,967 Increases in the fiscal year 1,110,772 3,387,724 2,401,026 2,547,710 0 5,332,616 14,779,848 Historical cost as at 31 December 2019 97,078,911 315,748,777 15,713,732 17,960,416 2,820,967 9,130,204 458,453,007

Reclassification/adjustment 0 3,885 0 0 0 0 3,885 of amortization fund

Depreciation in the fiscal year (3,149,227) (11,291,564) (739,339) (969,412) (1,234,671) 0 (17,384,213) Use of funds 17,175 26,104 146,576 836,332 0 0 1,026,187 Depreciation fund as at (35,483,183) (248,419,349) (10,019,173) (14,169,374) (1,234,671) 0 (309,325,750)

Net value as at 31 December 2019 61,595,728 67,329,428 5,694,559 3,791,042 1,586,296 9,130,204 149,127,257

Assets under Commercial Leased 2020 Land and Plants and construction and & industrial Other assets assets Total Categories buildings machinery payments on equipment (see detail) account

Historical cost as at 31 December 2019 97,078,911 315,748,777 15,713,732 17,960,416 2,820,967 9,130,204 458,453,007

Depreciation fund as at 31 December 2019 (35,483,183) (248,419,349) (10,019,173) (14,169,374) (1,234,671) 0 (309,325,750)

Net value as at 31 December 2019 61,595,728 67,329,428 5,694,559 3,791,042 1,586,296 9,130,204 149,127,257

Reclassifications 0 0 2,630 0 0 (443,981) (441,351)

Works in progress completed in 2020 1,761,641 110,076 265,314 1,778 0 (2,138,809) 0

Disinvestments in the fiscal year 0 0 (25,603) (95,513) (1,418,777) 0 (1,539,893)

Adjustments 0 0 0 0 0 0 0

Leasing increments 0 0 0 0 80,642 0 80,642

Increases in the fiscal year 4,106,666 746,834 2,776,736 1,489,187 0 3,010,333 12,129,756

Historical cost as at 31 December 2020 102,947,218 316,605,687 18,732,809 19,355,868 1,482,832 9,557,747 468,682,161

Reclassification/adjustment of amortization fund 0 0 0 0 0 0 0

Depreciation in the fiscal year (3,452,368) (11,125,032) (985,628) (1,263,670) (1,024,323) 0 (17,851,021)

Use of funds 0 0 20,882 93,790 1,395,789 0 1,510,461

Depreciation fund as at 31 December 2020 (38,935,551) (259,544,380) (10,983,919) (15,339,254) (863,205) 0 (325,666,309)

Net value as at 31 December 2020 64,011,667 57,061,307 7,748,890 4,016,614 619,627 9,557,747 143,015,852

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As indicated in the valuation criteria, the tangible fixed assets also include the entry of the financial changes of direct imputation pertaining to large works in progress.

The sources of income owed by the Company as ownership have been amortized in the ordinary way in compliance with the criteria of itemized evaluation in the present Notes to the Accounts as well as a function of the rates representative of the estimated residual possibility of utilization as at the date of the present financial statement. On the increments developed in the fiscal year, rate reduced by 50% have been applied.

“Land and buildings” includes the investments made during the year in buildings owned by the company.

“Plants and machinery” includes the cost of spare parts whose utility spreads over several years.

“Assets under construction and payments on account” includes the value, according to the state of advancement, of works in progress to be realized at the end of the year, as well as the advances paid to plant suppliers for a total value of over EUR 9,6 million.

"Leased assets" include leased assets in the statement assets, in alignment with the nature of the same assets, following the adoption of the new IFRS 16 principle Leases started on 01.01.2019 that introduced the new criteria for definition of lease contracts.

The following details transactions in the "Leased assets" category:

Leasing - Leasing- Leasing – Leasing – Leasing - Land Categories Hardware Rentals Rentals Real estate LEASED ASSETS rentals rentals Cars Other vehicles rentals

Historical cost as at 31 December 2019 25,704 282,417 1,621,287 589,246 302,313 2,820,967 Depreciation fund as at 31 December 2019 (7,523) (151,816) (869,815) (171,927) (33,590) (1,234,671) Net value as at 31 December 2019 18,181 130,601 751,472 417,319 268,723 1,586,296 Works in progress completed in 2020 0 0 0 0 0 0 Disinvestments in the fiscal year 0 (181,565) (1,237,212) 0 0 (1,418,777) Leasing increments 0 0 26,209 35,298 19,135 80,642 Historical cost as at 31 December 2020 25,704 100,852 410,284 624,544 321,448 1,482,832 Depreciation in the fiscal year (7,523) (97,233) (706,448) (173,150) (39,969) (1,024,323) Use of funds 0 180,420 1,215,369 0 0 1,395,789 Depreciation fund as at 31 December 2020 (15,046) (68,629) (360,894) (345,077) (73,559) (863,205) Net value as at 31 December 2020 10,658 32,223 49,390 279,467 247,889 619,627

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Intangible fixed assets € 742,567,524

The intangible assets are summarized in the following table:

2019 ccount Other

Categories a Plant and Plant Goodwill concession Grand total similar rights similar payments on Assets under Assets property rights property expansion costs expansion Industrial patent Industrial Development costs Development rights & intellectual & rights (see detailed transactions) detailed (see Total Other intangible assets intangible Total Other Assets under construction and construction under Assets Concessions, licenses, trademarks and and trademarks licenses, Concessions,

H A B C D E F G I A+H+I (B+C+D+E+F+G)

Historical cost as at 31 December 5,928,005 39,142 249,266 154,000 20,086,927 1,610,596 510,210 22,650,141 930,315,802 958,893,948 2018

Depreciation fund as at 31 December 2018 0 (39,142) (249,266) (154,000) (18,511,762) 0 (133,740) (19,087,910) (319,204,492) (338,292,402)

Net value as at 31 December 2018 5,928,005 0 0 0 1,575,165 1,610,596 376,470 3,562,231 611,111,310 620,601,546

Reclassifications 0 0 0 0 10,000 0 0 10,000 19,835,505 19,845,505

Ongoing works 0 0 0 0 0 0 0 0 0 0 concluded in 2019

Disinvestments in 0 0 0 0 0 0 0 0 (18,683) (18,683) the fiscal year

Adjustments 0 0 0 0 0 0 0 0 (918,112) (918,112)

Increases in the 0 0 0 0 2,625,692 50,387 0 2,676,079 103,822,716 106,498,795 fiscal year

Historical cost as at 31 December 5,928,005 39,142 249,266 154,000 22,722,619 1,660,983 510,210 25,336,220 1,053,037,228 1,084,301,453 2019

Reclassification/ adjustment 0 0 0 0 0 0 0 0 (4,474) (4,474) of amortization fund

Depreciation in 0 0 0 0 (2,039,943) 0 (11,772) (2,051,715) (48,463,115) (50,514,830) the fiscal year

Use of funds 0 0 0 0 0 0 0 0 248,018 248,018

Depreciation fund as at 31 December 0 (39,142) (249,266) (154,000) (20,551,705) 0 (145,512) (21,139,625) (367,424,063) (388,563,688) 2019

Net value as at 31 5,928,005 0 0 0 2,170,914 1,660,983 364,698 4,196,595 685,613,165 695,737,765 December 2019

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2020 andt Other ncession

Categories account Plan Goodwill co Grand total payments on Assets under Assets property rights property expansion costs expansion Industrial patent Industrial and similar rights and similar Development costs Development rights & intellectual & rights (see detailed transactions) detailed (see Total Other intangible assets intangible Total Other Assets under construction and construction under Assets Concessions, licenses, trademarks trademarks licenses, Concessions,

H A B C D E F G I A+H+I (B+C+D+E+F+G)

Historical cost as at 31 December 5,928,005 39,142 249,266 154,000 22,722,619 1,660,983 510,210 25,336,220 1,053,037,228 1,084,301,453 2019

Depreciation fund as at 31 December 0 (39,142) (249,266) (154,000) (20,551,705) 0 (145,512) (21,139,625) (367,424,063) (388,563,688) 2019

Net value as at 31 December 2019 5,928,005 0 0 0 2,170,914 1,660,983 364,698 4,196,595 685,613,165 695,737,765

Reclassifications 0 0 0 0 106,531 (2,630) 0 103,901 337,450 441,351

Ongoing works 0 0 0 0 0 (193,078) 0 (193,078) 193,078 0 concluded in 2020

Disinvestments in 0 0 0 0 0 0 0 0 (21,346) (21,346) the fiscal year

Adjustments 0 0 0 0 0 (18,612) 0 (18,612) (267,353) (285,965)

Increases in the 0 0 0 0 1,292,470 63,822 0 1,356,292 100,187,123 101,543,415 fiscal year

Historical cost as at 31 December 5,928,005 39,142 249,266 154,000 24,121,620 1,510,485 510,210 26,584,723 1,153,466,180 1,185,978,908 2020

Reclassification/ad justment 0 0 0 0 0 0 0 0 0 0 of amortization fund

Depreciation in 0 0 0 0 (1,758,683) 0 (11,773) (1,770,456) (53,179,731) (54,950,187) the fiscal year

Use of funds 0 0 0 0 0 0 0 0 102,491 102,491

Depreciation fund as at 31 December 0 (39,142) (249,266) (154,000) (22,310,388) 0 (157,285) (22,910,081) (420,501,303) (443,411,384) 20

Net value as at 31 5,928,005 0 0 0 1,811,232 1,510,485 352,925 3,674,642 732,964,877 742,567,524 December 2020

For detailed transactions in the category “Assets under concession” refer to the section of reference.

2. Goodwill € 5,928,005 The value of the goodwill as at 31 December 2020 can be ascribed to the acquisition of the SAC business unit (1 January 2014), amounting to EUR 96,000 and the SAP S.p.A. business unit (1 July 2015) regarding the Municipalities of ATO 3 Torinese amounting to EUR 5,832,005, entered under the intangible assets with the approval of the Board of Auditors.

Starting on 1 Januuary 2015, through the adoption of the international accounting principles, the goodwill is no longer subject to amortisation, but submitted to impairment test, in compliance with the provisions of IAS 36.

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The goodwill was allocated to the reference Cash Generating Unit (CGU) in compliance with IAS 36 and as such it is not subject to amortization, but to verification by impairment on a yearly basis, or more frequently, should an event or circumstances arise that may lead to the assumption of a value reduction. The impairment test is developed through the comparison between the net accounting value and the recoverable value of the CGU the goodwill was allocated to, determined with reference to the greatest value between the fair value net of the costs of sale and the value of use of the CGU. The value used was determined by applying the synthetic income method, actualizing operating income net of taxes (Net operating profit after tax: Nopat) relative to the CGU in the Economic Plan 2015-2033, approved by the Ordinary Shareholder Meeting on 29.06.2015. The Economic and Financial Plan also highlights the results expected for the whole duration of the license and - even though it is drafted on a time horizon longer than 5 years - it constitutes the representative document to identify the prospect cash flows Furthermore, since the license has a pre-defined useful life, the "terminal value" has not been defined.

With reference to fiscal years 2019 and 2020 , the impairment tests run do not show any value reductions in the goodwill entered. The results of the impairment tests have been submitted to a sensitivity analysis aimed at verifying their variability with the change of the main assumptions at the basis of the estimate. To this purpose, two different scenarios have been assumed as at 31 December 2020. • scenario 1: actualization rate = 6.76%, with a decrement of approx. 220 base points with respect to the base scenario; • scenario 2: actualization rate = 5.66%, with a decrement of approx. 110 base points with respect to the base scenario;

The sensitivity analysis shows little sensitivity of the test with the change of assumptions at the basis of the estimate. More precisely, neither of the scenarios above would determine a loss of value of the goodwill.

3. Other Intangible assets € 3,674,642 The intangible assets are entered amongst the statement of account assets, since they are part of the assets allocated to be durably used. No value adjustment has been applied to the cost of acquisition or production of the intangible assets. “Concessions, licenses, trademarks and similar rights” includes the cost incurred for the acquisition of software licenses depreciated in three fiscal years, and for the deposit of trademarks, which are depreciated in ten fiscal years. The value entered under “Assets under construction and payments on account” is based on studies currently underway. Furthermore, since 2014, the entry “Other” also includes the "Surface right" regarding the parking places at the “Palazzo" car park.

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4. Concessions € 732,964,877 The item Assets under concession progressed as follows:

2019 rovement works rovement Turin Total

Categories of City Turin

aqueduct aqueduct Usage rights the Revertible assets for the City of Turin of City the for on assets of external of on assets assets in management assets in assets constituting the assets constituting Improvements on assets Improvements the aqueduct system for for system the aqueduct assets granted by CIACT by assets granted Usage rights constituting rights Usage Assets under concession under Assets

Improvements on external external on Improvements aqueducts in management in aqueducts Ongoing imp Ongoing aqueduct system for the City of the City for system aqueduct Ongoing improvement works on on works improvement Ongoing constituting the aqueduct system system aqueduct the constituting Historical cost as at 31 3,834,635 50,871,004 176,056,721 543,909,821 16,328,347 133,908,910 5,406,364 930,315,802 December 2018 Depreciation fund as at 31 (2,607,546) (35,707,531) (72,874,689) (203,508,543) 0 0 (4,506,183) (319,204,492) December 2018 Net value as at 31 December 1,227,089 15,163,473 103,182,032 340,401,278 16,328,347 133,908,910 900,181 611,111,310 2018 Reclassifications 0 0 0 15,216,819 0 4,618,686 0 19,835,505 Works in progress completed 0 0 5,304,310 59,770,161 (5,304,310) (59,770,161) 0 0 in 2019 Disinvestments in the fiscal 0 0 0 (18,683) 0 0 0 (18,683) year Adjustments 0 0 (25,339) (787,760) 0 (105,013) 0 (918,112) Increases in the fiscal year 0 0 11,821,140 37,429,649 9,646,657 44,925,270 0 103,822,716 Historical cost as at 31 3,834,635 50,871,004 193,156,832 655,520,007 20,670,694 123,577,692 5,406,364 1,053,037,228 December 2019 Reclassification/adjustment 0 0 0 (4,474) 0 0 0 (4,474) of amortization fund Amortization (81,939) (1,010,898) (8,875,649) (38,279,010) 0 0 (215,619) (48,463,115) in fiscal year Use of funds 0 0 3,706 244,312 0 0 0 248,018 Depreciation fund as at 31 (2,689,485) (36,718,429) (81,746,632) (241,547,715) 0 0 (4,721,802) (367,424,063) December 2019 Net value as at 31 December 1,145,150 14,152,575 111,410,200 413,972,292 20,670,694 123,577,692 684,562 685,613,165 2019

tituting

2020 Turin tem for the City of the City for tem Categories Total aqueduct aqueduct Usage rights the City of Turin of City the Revertible assets for the City of Turin of City the for on assets of external of on assets assets in management assets in assets constituting the assets constituting Improvements on assets Improvements the aqueduct system for for system the aqueduct assets granted by CIACT by assets granted Usage rights cons rights Usage Assets under concession under Assets

Improvements on external external on Improvements aqueducts in management in aqueducts Ongoing improvement works improvement Ongoing aqueduct sys aqueduct Ongoing improvement works on on works improvement Ongoing constituting the aqueduct system system aqueduct the constituting Historical cost as at 31 3,834,635 50,871,004 193,156,832 655,520,007 20,670,694 123,577,692 5,406,364 1,053,037,228 December 2019 Depreciation fund as at 31 (2,689,485) (36,718,429) (81,746,632) (241,547,715) 0 0 (4,721,802) (367,424,063) December 2019 Net value as at 31 December 1,145,150 14,152,575 111,410,200 413,972,292 20,670,694 123,577,692 684,562 685,613,165 2019 Reclassifications 0 0 0 337,450 0 0 0 337,450 Works in progress completed 0 0 2,993,590 50,495,923 (3,053,538) (50,242,897) 0 193,078 in 2020 Disinvestments in the fiscal 0 0 0 (21,346) 0 0 0 (21,346) year Adjustments 0 0 0 (264,048) 0 (3,305) 0 (267,353) Increases in the fiscal year 0 0 11,511,548 22,115,314 17,961,481 48,598,780 0 100,187,123 Historical cost as at 31 3,834,635 50,871,004 207,661,970 728,183,300 35,578,637 121,930,270 5,406,364 1,153,466,180 December 2020 Reclassification/adjustment 0 0 0 0 0 0 0 0 of amortization fund Amortization (81,940) (1,010,899) (9,591,218) (42,280,055) 0 0 (215,619) (53,179,731) in fiscal year Use of funds 0 0 0 102,491 0 0 0 102,491 Depreciation fund as at 31 (2,771,425) (37,729,328) (91,337,850) (283,725,279) 0 0 (4,937,421) (420,501,303) December 2020 Net value as at 31 December 1,063,210 13,141,676 116,324,120 444,458,021 35,578,637 121,930,270 468,943 732,964,877 2020

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This entry also refers to “Revertible assets” which show the values of the extensions, realized by the former Shareholder AAM Torino S.p.A., to add to the aqueduct system of the City of Turin and received by the same in provision, for which the constraint for free transmission at the end of the relative lease was stipulated.

Moreover it includes the value of the “Right of use of the assets that constitute the waterworks system”, which is mandatory and already acknowledged by the City of Turin when they are given to the former Shareholder AAM Torino S.p.A. and then given by the latter to SMAT Torino S.p.A. The item also includes the value of the right to use the the waterworks system transferred to 1 January 2003 by C.I.A.C.T. in liquidation. The values are represented in compliance with the expert appraisals drafter to transfer them and depreciated as a function of the new agreement between Ente d’Ambito n. 3 Torinese and SMAT S.p.A. the new agreement between Ente d’Ambito n. 3 Torinese and SMAT S.p.A..

The value of usage rights is amortized based on the relative agreement deed. Amortizations on improvements and revertible assets were determined with reference to the estimated economic-technical lifespan.

5. Investments € 11,715,845 In accordance with IAS 36, the value of the shares was the object of an impairment test by an independent consultant, which permitted verification of the durability of the accounting value for SMAT shares.

Other Categories Subsidiaries Associates Grand total enterprises Historical cost as at 31 December 2019 1,491,322 43,102,341 3,566,923 48,160,586 Value adjustment as at 31 December (1,071,615) (33,195,000) (78,126) (34,344,741) 2019 Net value as at 31 December 2019 419,707 9,907,341 3,488,797 13,815,845 Extraordinary Operations in 2020 Subscriptions/acquisitions in 2020 Payments in capital account 2020 Disposals/reductions in 2020 Value adjustment in 2020 (2,100,000) (2,100,000) Historical cost as at 31 December 2020 1,491,322 43,102,341 3,566,923 48,160,586 Value adjustment as at 31 December (1,071,615) (35,295,000) (78,126) (36,444,741) 2020 Net value as at 31 December 2020 419,707 7,807,341 3,488,797 11,715,845

In general terms, the statement of account values do not significantly exceed the ones that correspond to the fractions of Net Equity reported in the statements of account to 31 December 2020 of the related companies. The shareholding in Acque Potabili S.p.A. has been assessed to Euro 7.8 million as related to the fraction of Net Equity from Parent Company SMAT S.p.A., as already described in detail in the Management Report.

Pursuant to art. 2501-quarter(2) of the Italian Civil Code, on 13 July 2020, it was resolved to merge by incorporation subsidiary Acquedotto Monferrato S.p.A. into its sole owner, company Acque Potabili S.p.A., based on a project registered, for both companies, at the Turin Trade Register on 2 March 2020. For civil code purposes the merger went into effect on 13 November 2020 and for accounting and tax purposes on 1 January 2020. For more details, see the Management Report.

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In compliance with art. 2427, comma 1, no. 5 of the Italian Civil Code, the participating interest in subsidiaries related companies in force to 31 December 2020, respectively consists of: . Shareholding in Risorse Idriche S.p.A., having its registered office in Torino, Corso XI Febbraio 14 and having the following characteristics:

Shareholding in Risorse Idriche S.p.A. a) Share capital of the investee (€) 412,769 b) Shares held (Qty.) 727,305 c) Nominal value per share (€) 0.52 d) Purchase cost (€) 1,440,322 e) Stake held (%) 91.62 f) Book value (€) 368,707 g) Net Equity of the investee (€) 687,061 h) Result of previous fiscal year (€) 17,714 . Shareholding in AIDA Ambiente S.r.l.., having its registered office in Pianezza, via Collegno 60, and having the following characteristics:

Shareholdinh in AIDA Ambiente S.r.l. a) Share capital of the investee (€) 100,000 b) Shares held (Qty.) N/A c) Nominal value per share (€) N/A d) Purchase cost (€) 51,000 e) Stake held (%) 51.00 f) Book value (€) 51,000 g) Net Equity of the investee (€) 690,008 h) Result of previous fiscal year (€) 53,827

. Shareholding in Acque Potabili S.p.A., having its registered office in Torino, Corso XI Febbraio 22, and having the following characteristics:

Shareholding in Acque Potabili S.p.A. a) Share capital of the investee (€) 7,633,096 b) Shares held (Qty.) 3,429,125 c) Nominal value per share (€) 1.00 d) Purchase cost (€) 43,102,341 e) Stake held (%) 44.92 f) Book value (€) 7,807,341 g) Net Equity of the investee K/€ 17,380 h) Result of previous fiscal year K/€ (3,042)

The fair value valuation of the other shares determined a value that is substantially aligned with the cost of investment, already recorded on 31 December 2019, at 3.5 million Euros. Even though the profitability of some investees in the medium term results positive, the values were not changed because they were not considered significant.

On 19 July 2016, a specific Notary Deed defined the establishment of the Water Alliance – Acque del Piemonte (now Utility Alliance del Piemonte) network of enterprise, whose registered office is in Turin– Viale Maestri del Lavoro n. 4. As at 31 December 2020 the Equity Fund amounted to Euro 70,000 in which SMAT holds a 7.14% interest. This network of enterprises as at 12.31.2020 is established by 12 Piedmontese water service companies, that signed a "network agreement" aimed at upgrading their competitive capacity through a shared representation

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of interests on behalf of institutional stakeholders and associations, as well as shared decision-making processes.

6. Deferred tax assets € 16,744,606 This item (EUR 15,449,270 the previous year) includes the credit deriving from the active deferred taxes mainly calculated on the provisions for costs to be deduced in the future and t the revenues for anticipated taxation . The entry shows an increase of over EUR 1,295,000 from the previous fiscal year, due to the combined effect of: deductibility of costs accrued in the fiscal year in progress, future fiscal years and deduction of the costs recorded in previous fiscal years, in the present fiscal year.

Such effects are reported in the following detail table:

Interest To provision To Goodwill Multiannual receivable Description for risk and write-downs of and brands TOTAL deferred income on late charges receivables amort. payments Taxable base as at 31.12.2019 10,710,797 16,071,933 32,718,407 17,333 293,267 59,811,737 Deferred tax credit as at 31.12.2019 3,020,446 4,501,133 7,852,419 4,888 70,384 15,449,270 Base uses 2020 (577,402) (4,523,674) (1,443,336) (98,349) (6,642,761) Tax uses 2020 (162,827) (1,275,676) (346,401) (23,604) (1,808,508) Base adjustments 2020 220,800 608,484 829,284 Tax adjustments 2020 93,417 146,036 239,454 Base allocation 2020 722,219 10,930,736 155,616 11,808,571 Tax provisions 2020 203,666 2,623,377 37,348 2,864,390 Taxable base as at 31.12.2020 10,133,395 12,491,278 42,814,291 17,333 350,534 65,806,831 Deferred tax credit as at 31 December 2020 2,857,619 3,522,540 10,275,431 4,888 84,128 16,744,606

7. Non-current financial assets € 1,285,040 31 December 2020 31 December 2019 • Receivable caution money € 1,139,863 1,220,228 • Customers € 145,177 179,773 Total € 1,285,040 1,400,001

The non-current financial assets towards customers are represented by credits registered following the under- signing of the agreement for governing the use of land in the Municipalities of Scalenghe and Airasca, for the years 2011 - 2018 with a payable plan up to 2031. The receivables are recorded in the financial statements, as required by IFRS 9 – Financial Instruments, net of the amortized cost.

CURRENT ASSETS

8. Inventory € 8,353,679 The item includes: 31 December 2020 31 December 2019 • Raw, subsidiary materials and consumables € 8,312,534 8,582,699 • Finished products and goods € 41,145 41,145 Total € 8,353,679 8,623,844

The total changes in inventory from the previous fiscal year amounted to € 270,165. The value of the inventory is adjusted by a depreciation fund regarding slow turnover materials for an amount of € 770.000, which has not changed from the previous year. The Inventory consists of materials whose use does not contain features of multi-year usefulness. It is assessed in the financial statements at the lowest price between the average weighted price and the market price. No financial charges were attributed to the inventory value.

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9. Trade and other receivables € 222,916,095 The book value of the trade receivables breaks down as follows: 31 December 2020 31 December 2019 Due from customers • Bills and invoices issued € 199,410,597 193,323,792 • Bills and invoices to be issued € 58,913,091 55,824,079 • Provision for bad debts € (44,114,871) (34,579,490) Total due from customers € 214,208,817 214,568,381 Due from subsidiaries € 262,225 335,296 Due from associates € 100,053 38,409 Due from holding companies € 2,080,754 2,275,952 Due from other € 6,264,246 10,507,349 Net book value € 222,916,095 227,725,387

DUE FROM CUSTOMERS € 214,208,817 Net value of receivables from customers shows a slight decrease, of EUR 360,000 over the previous year. Receivables from users affected by the Covid-19 pandemic emergency period were carefully assessed for late or non payment risks. These receivables are entered at their estimated realizable value, taking into account a prudential write-down of approximately Euro 44.1 million, allocated in accordance with the provisions set forth in IFRS 9.

DUE FROM SUBSIDIARIES € 262,225 The item (€ 335,296 in the previous fiscal year) is represented by payables from subsidiaries Risorse Idriche S.p.A.and AIDA Ambiente S.r.l as highlighted in the present note .

DUE FROM ASSOCIATES € 100,053 The item (€ 38,409 in the previous fiscal year) is represented by receivables due to SAP.

DUE FROM HOLDING COMPANIES € 2,080,754 This item includes receivables from the City of Turin deriving from normal trade transactions executed at market conditions for water supply, rentals and accessory jobs. With respect to the previous year (Euro 2,275,952) the entry decreased slightly by approximately Euro 200,000

DUE FROM OTHER € 6,264,246 These consist of residual trade receivables Il decremento rispetto all’esercizio precedente è correlato alla variazione degli anticipi ai fornitori erogati per appalti per effetto dell’art. 35 del codice appalti.

10. Current tax assets € 484,787 This item (EUR 6,403,743 the previous year) decreased appreciably following the use of tax credit accrued as at 31 December 2019 for the payment of IRES (corporate income tax) and IRAP (local production tax) advances. It mostly includes the tax credit recognised by the Revenue Agency for the purchase of protective equipment and for sanitising processes performed in the course of the year (art. 125 of legislative decree 34/2020) amounting to ca. EUR 28,000 and investments in capital goods pursuant to art. 1(184/197) of law 160/2019, for ca. EUR 194,000.

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11. Current financial assets € 1,663,394 31 December 2020 31 December 2019 • Towards clients € 58,694 39,127 • Due from subsidiaries € 1,604,700 593,701 Total € 1,663,394 632,828

The receivables due from subsidiaries represent amounts due to Risorse Idriche S.p.A., based on cash pooling contracts stipulated between the parent company and the subsidiary on 30.01.2015 to optimise financial demands. The appreciable increase is due to changes in financial flows between the two companies.

12. Other current assets € 4,433,970 The credits to others refer to: 31 December 31 December

2020 2019 • Accrued income € 0 173,151 • Deferred charges € 945,305 603,060 • Other assets € 3,488,665 2,722,518 • Due from employees for amounts to be recovered through with holding € 150,420 160,540 • Due from other € 3,338,245 2,561,978 Total € 4,433,970 3,498,729

Other assets refers mainly to receivables from users with the right to the Water bonus for approximately 1,803 thousand Euros, due from GSE for incentive rates (formerly Green Certificates) for approximately 202 thousand Euros, due from other parties in the amount of approximately 561 thousand Euros for credit notes to be received and various receivables for approximately 772 thousand Euros. Other deferrals include accrued amounts of subsequent fiscal years of other costs liquidated in the fiscal year.

13. Cash and cash equivalents € 37,197,490 The liquid assets include: 31 December 2020 31 December 2019 • Bank and Post Office deposits € 37,188,251 9,249,413 • Short term deposits € 0 45,000,000 • Checks € 2,603 0 • Cash and cash equivalents € 6,636 44,765 Total € 37,197,490 54,294,178

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NET EQUITY AND LIABILITIES

14. Net Equity € 661,311,032 The value in the Net Equity takes into account the resolutions taken by the Ordinary Shareholders of 26 June 2020 and of September 25th 2020 as related to the destination of the Parent Company results of fiscal year 2019.

COMPOSITION OF THE NET EQUITY POSSIBILITY OF Nature/Description 31 December 2020 AVAILABLE AMOUNT UTILIZATION Share capital 345,533,762 Legal reserve 22,914,362 X Reserve restricted for PEF implementation 269,352,368 FTA reserve (2,677,452) Other reserves and retained earnings: • Optional reserve 34,342,562 X (1,328,230) • Severance actualization reserve (260,327) • Negative reserve for own shares in portfolio (32,993,340) • Reserve for rounding up (7) • Retained earnings 1,414,773 X 1,414,773 Total other Reserves and retained earnings 2,503,661 Operating income 23,684,331 Total Net Equity 661,311,032 86,543

SHARE CAPITAL € 345,533,762 The Share Capital is fully subscribed, paid and recorded in the Register of Enterprises in compliance with the law and is made, as at the date of the Financial Statements, of 5,352,963 ordinary shares of the nominal value of EUR 64.55 each, owned by the Associates. No movements regarding the shares and share capital have occurred during the fiscal year.

LEGAL RESERVE € 22.914.362 The Legal reserve of EUR 20,909,251 as at 12/31/2019 increased by EUR 2,005,111 during the year as per the resolution of the Meeting of Shareholders of 06/26/2020.

RESERVE RESTRICTED TO IMPLEMENTATION PEF € 269,352,368 This reserve of Euro 238,874,674 as of 12/31/2019, was increased in the fiscal year by Euro 30,477,694 as per Resolution by the Shareholders Meeting on 06/26/2020.

FTA RESERVE € (2.677.452) This reserve includes the effects of FTA on the Net Equity deriving from the adoption of the international accounting principles.

OTHER RESERVE AND RETAINED EARNINGS € 2,503,661 Other Reserves include: 31 December 31 December

2020 2019 • Optional reserve € 34,342,562 34,342,562 • Severance pay discount reserve € (260,327) 229,319 • Negative reserve of own shares in portfolio € (32,993,340) (32,993,340) • Reserve for rounding up € (7) (4) • Retained earnings € 1,414,773 1,376,946 Total € 2,503,661 2,955,483

The reserve for the actualization of the Severance Pay includes the profits/losses that result from the actuarial assessments performed in application of IAS 19 to the Severance Pay and pensions accrued as at 12/31/2020. The negative reserve for own shares in portfolio as at 12/31/2020 equal to € 32,993,340 refers to 492,965 own share purchased according to conforming authorization of the Ordinary Meeting of Shareholders 117

The available reserves in the financial statements for 2020 amount to EUR 86,543 Profits carried forward were increased in the fiscal year by EUR 37,827, as per resolution of the Meeting of Shareholders of 09/25/2020, by effect of destination of the result to the fiscal year 2019.

PROFIT FOR THE YEAR € 23,684,331 31 December 31 December 2020 2019 Profit for the year € 23,684,331 40,102,229

LIABILITIES € 529,067,250

15. Current and non-current fiscal liabilities € 287,089,921 Financial debts on 31.12.2020 are presented in detail by type in the following table:

31 December 2020 31 December 2019 Non-current financial liabilities Bonds 134,311,239 134,142,009 Payable loans 104,399,421 100,049,325 Debts for leased assets 395,767 549,001 Total 239,106,427 234,740,335

Current financial liabilities Short-term payable loans 45,618,808 48,706,799 Due to banks and accrued financial payables 2,125,905 2,135,019 Debts for short term leased assets 238,781 1,048,806 Total 47,983,494 51,890,624

Total financial liabilities 287,089,921 286,630,959

Total financial liabilities are made up of: • loans (bonds and mortgages) with total value amounting to Euro 284,329,468, net of the amortized residual cost of Euro 688,761 for the debenture loan of Euro 93,167 for payable loans; • the entry “Due to banks and financial charges” amounting to EUR 2,125,905 which includes other short term operations for EUR 74,421 and accrued financial charges amounting to EUR 2,051,484, which mainly refer to interest on the debenture loan in the accrued amount; • debts for leased assets, of which the total value amounts to 634,548 Euros, net of the residual amortized cost 39,002 Euros.

Movement of financial liabilities during the fiscal year is the following: Bonds Amortized cost Total Balance as at 31 December 2019 € 134,142,009 148,756,124 282,898,133 New loans € 0 49,939,800 49,939,800 Amortized cost reduction € 169,230 29,104 194,334 Repayments in the period € 0 (48,706,799) (48,706,799) Balance as at 31 December 2020 € 134,311,239 150,018,229 284,329,468

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The debt for medium to long term funding, gross to the depreciated cost, is detailed in the following table: Amount due as 31 Funding December 2020 Bonds € 135,000,000

Payable loans Intesa Sanpaolo € 1,290,179 European Investment Bank € 26,000,000 European Investment Bank € 21,730,000 Cassa Depositi e Prestiti € 12,500,000 European Investment Bank € 38,461,538 European Investment Bank € 50,000,000 Others € 129,679 Total Payable loans 150,111,396 Total € 285,111,396

Due within Due between the Due after the Type Residual amount next fiscal 2nd and 5th year 5th year year Bonds 135,000,000 135,000,000 Payable loans 150,111,396 45,618,808 60,048,144 44,444,444 Due to banks and accrued financial payables 2,125,905 2,125,905 Debts for leased assets 673,550 238,781 302,094 132,675 Total 287,910,851 47,983,494 195,350,238 44,577,119

Below are the major contractual conditions.

Value Dura- Funding line of tion in Due date Instalment Rate credit years Ordinary non-convertible loans 135,000,000 7 13/04/2024 Annual fixed Variable (Euribor 6m + Intesa Sanpaolo 36,125,000 15 30/06/2021 six months, constant equity spread) Variable (Euribor 6m + European Investment Bank 130,000,000 15 19/12/2022 six months, constant equity spread) Variable (Euribor 6m + European Investment Bank 80,000,000 14 30/12/2022 six months, constant equity spread) Variable (Euribor 6m + Cassa Depositi e Prestiti 50,000,000 15 30/06/2023 six months, constant equity spread)

European Investment Bank 100,000,000 9 30/06/2023 six months, constant equity fixed

European Investment Bank 50,000,000 13 14/12/2033 six months, constant equity fixed

fixed/Variable (Euribor Other 1,017,007 Other 2021-2022 six months constant/six months 6m + spread)

The ordinary nonconvertible debenture loan was issued on April 13th 2017. The bonds have a duration of 7 years, with 1.95% coupon, and are listed at the regulated Irish Stock Market (ISE). They are supported by the rating issued by Standard & Poor’s, that, on 24 November 2020, raised the Senior Unsecured rating from “BBB-“ to “BBB”(for details, see the Management Report). Activation of the loan from financial institutions, to finance the investments in expansion and upgrading of the networks, water production, distribution, collection and treatment plants envisaged in the Investment Plan of ATO3, did not require any guarantee by the shareholders and envisages for its entire duration maintenance of the following financial parameter calculated based on the data of the consolidated financial statements for the previous year and according to the definitions in the contractual stipulations:

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• Net Financial Debt/EBITDA (EBIT+Depreciation/Amortization): lower than or equal to 5. The loan contracted with Intesa Sanpaolo (ex B.I.I.S.) is unsecured.

The loan taken with the European Investment Bank for the provision of the resources required by the investment plan introduced in the Ambito Plan, except the one started in 2020, are assisted by an appropriate guarantee issued by National Credit Institutions, third parties from EIB and by assignment of receivables, which can be claimed at the Ente d’Ambito and third parties as related to the award agreement for management of the Integrated Water System within Ambito 3 Torinese. Such credit lines have been fully utilized as a result of the progress of the activities, for which minimum portions of drawing have been stipulated. More specifically: - As related to the EUR 130 million loan taken for the development of the works of the investment plan for small and medium-sized infrastructures, the spread was agreed upon at each drawing and the guarantee released is remunerated by a commission calculated on the guaranteed amount. - As related to the EUR 80 million loan taken for the development of the works included in the investment plan for large infrastructures, the spread was agreed upon at each drawing and the guarantee contract includes the obligation of maintaining - throughout the duration of the loans - of the following parameters, which are calculated on the Company Statement of Accounts for the Fiscal Year closed on 31 December of last year according to the definitions included in the contract clauses: • Net Financial Debt/EBITDA (EBIT+Depreciation/Amortization): lower than or equal to 5. • Net Financial Position/Net Equity: lower than or equal to 1. The commissions paid every year vary within a predefined range lower than 100 bps as related to the position of the aforementioned ratio between Net Financial Position/GOM (EBIT+ Depreciation/Amortisation)- - As related to the EUR 100 million loan, taken for the development of works included in the investment plan for small and medium-sized infrastructures, the following financial parameters apply for the whole duration of the loans, calculated on the data of the Fiscal Year Statement of Accounts of the Company that was closed on 31 December of last year and in compliance with the definitions included in the contract agreements. • Net Financial Debt/GOM (EBIT+Depreciation/Amortisation): lower than or equal to 5. • Net Financial Debt/Net Equity: lower than or equal to 1. • EBITDA (EBIT+Depreciation/Amortisation)/Net financial expenses (excluding the value adjustment of financial assets) greater than 5; • Residual value/Gross Financial Debt ratio greater than or 1.30 where the residual value calculated on the net accounting value, star-up expenses excluded.

The loan taken with Cassa Depositi and Prestiti S.p.A for the provision of EUR 50 million, as an integration of the aforementioned EIB loan for the total coverage of the needs connected to large infrastructures, is assisted by the assignment of receivables that can be claimed at the Ente d’Ambito and the third parties as related to the execution of the agreement that awards the management of the Integrated Water Service in Ambito 3 Torinese. Such loan involves the obligation to keep - throughout its duration - the following financial parameters, which are calculated on the data of the Company’s Financial Statements for the fiscal year ended 31 December of the previous year and in compliance with the definitions included in the contract provisions. • Net Financial Debt/EBITDA (EBIT+Depreciation/Amortisation): lower than or equal to 5. • Net Financial Position/Net Equity: lower than or equal to 1.

In cases of noncompliance with even only one of said financial parameters, the delivering institutions have the right to terminate the contract in advance.

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It is worth highlighting that - as at 31 December 2020 - all the aforementioned financial parameters are complied with. Other loans includes the mortgages received as a transfer and mainly stipulated with Cassa Depositi e Prestiti.

16. Provisions for employee benefits € 14,018,741 The Provisions for employee benefits as at 31 December 2020 reflects the indemnity accrued by the employees up as at 31 December 2006, which will be exhausted by the payments to be made at the end of the work relations, or of any advance in compliance with the law. The movements of the fund (which is not influence by the shared accrued during the fiscal year in favour of the employees throughout the year) has been as follows:

Employee Severance Provision - Balance as at 31 December 2019 € 13,885,420 - Social security costs € 0 - Utilizations, adjustments, indemnities and advances paid out in the period € (1,630,537) - Interest cost deriving from IAS 19 € 100,814 - Actuarial Profits/losses € 427,157 Balance as at 31 December 2020 € 12,782,854

Other benefits refer to the estimated quantification of the seniority bonuses potentially due to employees that accrue the relevant requirements stipulated in in the company regulations entered below

Pension fund - Balance as at 31 December 2019 € 1,210,387 - Social security costs € 57,276 - Utilizations, adjustments, indemnities and advances paid out in the period € (103,188) - Interest cost deriving from IAS 19 € 8,923 - Actuarial Profits/losses € 62,489 Balance as at 31 December 2020 € 1,235,887

The following tables illustrate, respectively, the economic, financial and demographic assumptions made for the actuarial assessment of the liabilities in exam.

Economic-financial assumption - Yearly actualization rate (0.02%) - Yearly inflation rate 0.80% - Yearly Severance Provision increase rate 2.10%

Demographic assumptions - Mortality Tables RG 48 - Disability INPS tables by age and sex - Retirement age Attainment of the requirements - % of advance payment frequency 1.50% - Turn-over 0.50% 17. Provisions for risks € 17,117,089 These provisions are made up of:

A) Provisions for litigations and charges € 10,142,541

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The handling of such provisions has been as follows: - Balance as at 31 December 2019 € 11,009,233 - Provisions of the fiscal year € 1,652,345 - Use in the fiscal year € (968,268) - Estimate adjustment € (1,550,769) Balance as at 31 December 2020 € 10,142,541

The balance of the allocations for litigations and charges as at 12/31/2020 is considered consistent for covering the following estimated potential liabilities.

B) Provisions for routine maintenance charges € 1,049,844

The provisions for charges of routine maintenance reflects the valuation of the charge that was technically accrued but not yet liquidated as at the date of the Financial Statements because of the routine maintenance programs repeated over several years. Such programmes cannot be planned with certainty since they concern systems in continuous production cycle. The amount allocated in 2020 represents a prudent adjustment of the provision. - Balance as at 31 December 2019 € 959,844 - Provisions of the fiscal year € 90,000 - Use in the fiscal year € 0 Balance as at 31 December 2020 € 1,049,844

C) Allocations Regione Piemonte Law No. 61 of 12/29/2000 € 451,362

These reflect the destination of the administrative sanctions applied pursuant to art. 54 Legislative Decree 152/99 to be applied to fund the development of actions aimed at preventing and reducing the pollution of the bodies of water. The movements, which has been computed to the Profit & Loss Account in the fiscal year has been as follows: - Balance as at 31 December 2019 € 451,362 - Provisions of the fiscal year € 0 Balance as at 31 December 2020 € 451,362

D) Provisions for Ambito management charges € 4,823,342

E) Provisions for charges to other companies € 650,000

The provisions reflect the potential charges deriving from the commitments made by the shareholders for patronage of the Dexia-BIIS loan to APS S.p.A. in bankruptcy since 2013. The provisions were not subject to any movements during the current fiscal year, - Balance as at 31 December 2019 € 650,000 - Provisions of the fiscal year € 0 - Adjustment of estimate in the fiscal year € 0 Balance as at 31 December 2020 € 650,000

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The entry (EUR 314,986 n the previous fiscal year) shows an increase from the previous fiscal year, due to the combined effect of de-taxation of significant taxable revenues in future fiscal years, taxation of revenues that were computed in previous fiscal years and taxed in the current fiscal year. SThese effects are itemized in the table below:

FTA financial Advanced Receivable Description liabilities TOTAL Depreciation interest in arrears depreciated cost

Taxable base as at 31.12.2019 553,054 600,514 62,071 1,215,639 Deferred tax credit as at 31.12.2019 155,966 144,123 14,897 314,986 Base uses 2020 (1,135) (150,867) (29,103) (181,105) Tax uses 2020 (320) (36,208) (6,985) (43,513) Base adjustments 2020 485,422 301 485,723 Tax adjustments 2020 136,884 72 136,956 Base allocation 2020 878,261 878,261 Tax provisions 2020 210,783 210,783 Taxable base as at 31.12.2020 1,037,341 1,328,209 32,968 2,398,518 Deferred tax provision as at 31 December 2020 292,530 318,770 7,912 619,212

19. Other non-current liabilities € 51,201,771 This item is made up as follows: 31 December 2020 31 December 2019 • Acquapoint caution money € 543,097 519,767 • Contributions to pay out € 20,747 20,747 • Multiannual deferred income € 50,637,927 51,734,669 Total € 51,201,771 52,275,183

Besides the contributions for current investments, “Multiannual deferred income” also includes the share of “revenue tied up” to be used for investments amounting to EUR 10,133,395, and the share carried forward of the contribution on capital goods recognised by the Revenue Agency pursuant to art. 1(184/197) of law 160/2019, amounting to EUR 182.417, after charging it to the income statement in correlation with the amortisation of the items it refers to.

20. Trade and other payables € 83,316,869

PREPAYMENTS € 158,989 The entry (EUR 128,261 in the previous fiscal year) includes the amounts advanced by users for works still to be completed as at closing date of the financial statements.

DUE TO SUPPLIERS € 64,046,765 Due to suppliers refers to: 31 December 2020 31 December 2019 • Italian suppliers € 30,568,251 23,285,971 • Foreign suppliers € 9,235 10,018 • Invoices to be received € 33,469,279 33,392,376 Total € 64,046,765 56,688,365

All payables to suppliers fall due within the end of one year and in no case are they assisted by guarantees, in addition to the withholding amount of 0.5% on the jobs.

DUE TO SUBSIDIARIES € 4,166,580 31 December 2020 31 December 2019 • Due to subsidiaries € 4,166,580 3,270,518

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The itemized entry in the dedicated section of the directors report includes the payables to the subsidiaries Risorse Idriche S.p.A. and AIDA Ambiente S.r.l. and in particular includes the payables for invoices and N.C. to be received in the amount of EUR 3,692,530 (EUR 2,966,888 in the previous fiscal year).

DUE TO ASSOCIATES € 15,657 31 December 2020 31 December 2019 • Due to associates € 15,657 15,657

The entry itemized in the section dedicated to it in the Directors’ Report, includes the payables to the SAP Group deriving from the residual trade transactions operated at normal market conditions.

DUE TO HOLDING COMPANIES € 627,544 31 December 2020 31 December 2019 • DUE TO HOLDING COMPANIES € 627,544 1,504,860

The entry referred to the section dedicated to it in the Directors’ Report refers to trade payables to the City of Turin, and none of them is assisted by a real guarantee on the corporate assets.

DUE TO OTHER € 14,301,334 31 December 2020 31 December 2019 • Due to others € 14,301,334 20,176,537 This item consists mainly of trade payables to the Operative Management Subjects for invoices to be received for contractual obligations undertaken with the same.

21. Current tax liabilities € 5,281,549 These liabilities primarily consist of IRAP and IRES year-end tax payables, withholding taxes on the income of employees already paid according to the established deadlines in the following FY, and VAT payable for the 4th quarter 2020, net of the advance paid. The tax due in application of the VAT split payment system extended to subsidiaries by Public Entities from 07/01/2017, was paid regularly by the due date established by the applicable regulations. Current fiscal liabilities are also entered under payables for Withholding tax held for employees and third parties in the amount of approximately EUR 1.8 million, this to paid on the due date.

22. Other current liabilities € 70,422,098 The other payables include: 31 December 2020 31 December 2019 • Due to Social Security Administration € 4,147,594 3,788,933 • Deferred income € 137,250 151,933 • From other: € 66,137,254 67,781,427 • Local Authority fees € 4,397,468 5,254,925 • Contributions to Comunità Montane € 45,188,751 47,162,712 • Due to Municipalities for accessory services € 421,391 524,847 • Other payables to entities/municipalities for F/D and equalising tariff components (UI) collected on behalf € 2,731,082 2,748,983 • Accruals to liquidate to employees € 5,954,547 5,818,826 • Other payables € 7,444,015 6,271,134 Total € 70,422,098 71,722,293

As a whole, payables for Local Authority Fees and contributions to the Unioni Montane decreased by ca. EUR 2.8 million.

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In particular, Local Authority Fees primarily refer to the amounts due for 2020 based on the determinations made by Turin Local Regulator 3 during the early months of 2021. Pursuant to arts. 111 and 112 of law no. 27 of 24 April 2020, transposing legislative decree no. 18 of 17 March 2020 (the so-called Decreto Cura Italia), Cassa Depositi e Prestiti suspended the payment of principal instalments on mortgages transferred to the Ministry of Economy and Finance; such instalments were postponed to the year immediately following the expiry date of the contractual amortisation plan. With specific reference to the contributions to the Community Montana, these are paid on the basis of ad hoc communications by the Enter d’Ambito.

Payables to Municipalities for accessory services represent the best estimate of the amounts due. Other payables to Entities and Municipalities mostly consists of payables to CSEA for the equalising tariff components (UI), paid on a two-monthly basis. Residual payables to Entitles refer to sewage and waste treatment charges to be passed on to the operators.

Other payables primarily include payables to users for cautionary deposits and indemnities and smart card charges to be passed on to the insurance company, as well as payables for the water and supplemental social bonus. In particular the Local Entity Rentals refer mainly to the amounts due for 2020 as required by Ente d’Ambito n. 3 Torinese only during the first few months of fiscal year 2021 and in amounts referring to past periods, for some of which it was requested to pay with the corresponding receivables.

Payables to SOG and Municipalities for accessory services represent the best estimate of the fees due — based on the volumetries that will be determined by the billing processes and jobs assigned — to the SOG which is charged with special service contracts for operations on their given territory.

The amount of Other Payables to Entities and Municipalities includes payables to Entities for UI equalizing components, rentals and contributions, payables for sewer and water treatment fees due to Provider Entities for the periods preceding direct assumption of the corresponding services resulting from the collection times of the fees from the users affected, as established by the current law and by specific conventional agreements.

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Notes to the entries of the Income Statement

Revenues

23. Revenues € 318,173,677

Revenues are made up as follows: 2020 2019 − Aqueduct service € 131,125,945 135,447,791 − Sewer service € 44,772,146 43,876,731 − Water treatment service € 127,844,350 126,872,585 − Hydrants € 4,271,860 4,162,994 − Other revenues € 10,159,376 9,756,668 Total € 318,173,677 320,116,769

All the revenues inherent to corporate business were obtained in the reference territory ATO 3 Torinese, as determined by the Piemonte Regional Law no. 13 of 01/20/1997 and include the best estimate of revenues accrued in the fiscal year for aqueduct, sewers, water treatment services and hydrants provided in the 289 Municipalities acquired by effect of the reunification process. They arise from the application of the tariff differentiation scheme as received from the Turin Local Regulator in late December 2020 following the approval of the amendments to the Tariff Schedule for 2020 – 2023, which reflects the regulations for the new tariff period MTI-3 approved with resolution 774 on 10 December 2020. In 2020 tariffs went up by 2.2% over the previous year, back in line with 2018 values.

During the period considered, an analysis of aqueduct volumes reveals that, following the closures of businesses imposed by the restrictions due to the COVID epidemic, consumption by craftsmanship, commercial and industrial users declined by more than 14% over 2019. Public use correlated users also recorded a reduction in consumption, albeit less significant, of 6.5%. Conversely, during the lockdowns, consumption by household users increased by 0.92%; this increase, combined with the 2.2% tariff increase, made it possible to offset the overall reduction in turnover, of ca. EUR 2 million over the previous year.

The revenues from the aqueduct, sewer and water treatment services are represented net of the 50% tariff reduction for public municipal and provincial users for a total of Euro 4,951,593.85 .

"Other Revenues" mainly includes accessory revenues from users, industrial waterworks, revenue from works performed on behalf of users and third parties, in particular as related to changes to water and sewer networks, revenues from leachate and biomass analyses and treatment services, Punti Acqua, sales of energy and services for non-core activities on the free market, and adjustments to provisions. The positive variation over the previous year was determined by various factors, such as the new biomethane collection business, the increase in revenues from leachate and biomass treatment services, as well as adjustments to the provision for risk and charges, which offset the significant drop in accessory revenues from users and the reduction in revenue from sales of electric energy.

24. Revenues for planning and construction activities € 100,187,122 2020 2019 − Revenues for planning and construction activities € 100,187,122 103,822,716

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25. Other revenues € 13,684,783 The other operational revenues are composed as follows: 2020 2019 − Grants for current expenses (A) € 3,938,409 3,858,137 − Others 0 . Contribution shares in production € 4,453,595 4,990,270 facilities . Other revenues € 1,385,046 1,442,902 . Contingent assets and unsubstantiated liabilities € 1,204,173 5,314,106 . Adjustment to provisions for liabilities and other € 2,703,560 3,408,495 charges (B) € 9,746,374 15,155,773 Total other revenues (A+B) € 13,684,783 19,013,910

“Contribution shares in production facilities” primarily refers to the incentives for the production of energy from photovoltaic panels and for the production of biomethane, and the incentive rates formerly called Green Certificates. “Others” includes the economic accrual amount of contributions into the plants accounts, already commented on under the entry “ multiannual deferred income” have these notes to the accounts, in addition to the other revenues ( among which receivable lease payments, reimbursements for stamps and other reimbursements),contingent assets and non-existent liabilities in addition to the adjustments made to the provision of liabilities, as already commented in the dedicated section of Liabilities in these notes to the accounts. The overall variation over the previous year was due to reduced contributions for plants, a reduction in contingent assets and unsubstantiated liabilities and adjustments to the provision for risks.

Operating costs

26. Consumption of raw materials and consumables € 14,169,218 This entry includes: 2020 2019 • Materials for maintenance net of changes in stock € 7,456,244 7,499,673 • Chemicals € 4,421,412 4,383,131 • Other materials € 2,447,663 1,980,979 • Increases for in-house jobs € (156,101) (151,090) Total € 14,169,218 13,712,693

This item shows a considerable increase over the previous year, primarily accounted for by the purchase of materials to deal with the health emergency due to the Covid-19 pandemic.

27. Costs for leased assets and services € 117,656,595 This entry includes: 2020 2019 • Electricity: (A) € 33,429,970 32,223,051 • Maintenance, works and services & industrial (B) € 62,411,444 56,695,734 • General services: . Services € 10,998,857 10,844,513 . Allocation to Provision for liabilities and other charges € 439,219 204,595 (C) € 11,438,076 11,049,108 • Rentals to local entities (D) € 6,288,399 7,603,831 • Rentals and payable concessions, leases and hires (E) € 4,088,706 3,273,194 Total costs for leased assets and services (A+B+C+D+E) € 117,656,595 110,844,918

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The energy balance is demonstrated as follows: 2020 2019 MWh % MWh % - Heat . Self-produced by gas engines 10,462 26.48 18,525 49.64 . Self-produced by boilers 0 0 400 1.07 . Self-produced by DEMOSOFC plant 105 0.27 188 0.50 . Produced by methane 28,947 73.25 18,205 48.79 Total 39,514 100.00 37,318 100.00 - Electricity: . Self-produced by gas engines 11,886 5.16 21,490 9.07 . Self-produced by solar cells 1,166 0.51 1,294 0.55 . Self-produced by DEMOSOFC plant 125 0.05 216 0.09 . Total uptake from external suppliers 217,376 94.28 213,887 90.29 Total 230,553 100.00 236,887 100.00 Total consumption 270,067 100.00 274,205 100.00 Total recovery 23,744 8.79 42,113 15.36 Self-produced and sold electricity - 6,934 7,063 (Balme hydroelectric power station) Total self-production 30,678 49,176 Total self-produced electricity 20,111 30,063 Self-produced electricity in relation to total electricity - 8.72 12.69 consumed

The variation in costs of “Maintenance works and industrial services” was due primarily to the costs associated with the health emergency and the intensification of maintenance works correlated with the technical quality and the management of rain water disposal infrastructure, the costs of sludge transport and disposal, the cost of contract work and meter reading services. Conversely, costs for services rendered by Management Operational Subjects (SOG) decreased and so did the costs for gas, telephone and remote heating services. As a whole, the costs of “Services” were in line with the values recorded the previous year, since the increase in costs incurred for cleaning and sanitising operations and smart card insurance deductible costs were offset by the reduction in training, meal vouchers and other personnel expenses, in maintenance fees and sponsorships and ads expenditure. Rentals to local entities recorded a reduction in relation to the update of amortization plans on mortgage contracts between Municipalities and communicated by ATO 3 Torinese. The increase in “Lease and rental” costs may be ascribed to the increase in vehicle hire and rental costs and periodic user licence fees, partly attributable to the health emergency.

28. Payroll costs € 60,700,787 The payroll cost composition is the following: 2020 2019 − Wages and salaries € 40,575,834 41,588,883 − Social charges € 13,156,320 13,779,724 − Severance package € 2,640,494 2,705,303 − Pension and similar funds € 57,276 56,268 − Other costs € 4,270,863 3,421,205 Total € 60,700,787 61,551,383

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Relative to the accounting period, the average staff was composed as follows: Top Middle Office Laborers Apprentices Total Managers Managers workers Staff as at 12/31/2019 9 28 563 310 45 955 Staff as at 12/31/2020 12 26 583 318 19 958 Change 3 -2 20 8 -26 3

Relative to the accounting period, the average staff was composed as follows: - Top Managers 10 - Middle Managers 30 - Office workers 562 - Laborers 318 - Apprentices 25

This cost shows a decrease of ca. EUR 0.85 million over the previous year, mostly due to savings arising from personnel transfers and a reduction in overtime and holidays accrued during the year and not taken. All this was offset to some extent by the increase arising from the renewal of the national labour agreement (C.C.N.L.) and the implementation of activities correlated with technical quality.

Total Staff as at 12/31/2019 955 Terminations -57 Hires 60 Staff as at 12/31/2020 958

Many temporary employees were hired on a permanent basis so that temporary employment contracts decreased from 46 as at 31 December 2019 to 17 as at 31 December 2020. The relative costs had an overall incidence for the year of EUR 1,995,202. The transfer contracts, amounts at 6 as at 12/31/2020 (from the subsidiaries Risorse Idriche S.p.A. and Aida Ambiente S.r.l.) and there costs weighed in the amount of EUR 446,313.

29. Other operating expenses € 21,383,465 This entry includes: 2020 2019 − Other tax charges € 839,866 981,355 − Ambito fees € 17,226,899 17,364,237 − Other charges € 1,822,764 3,287,307 − Allocation to provisions for liabilities and € 1,331,126 669,437 charges − Integrated water bonus € 162,810 435,822 Total € 21,383,465 22,738,158

“Other tax charges” mainly includes charges for stamp fees, IMU, government concession taxes and other local taxes. The item “Territory fees” includes over 15.60 million Euros, the best estimate for the contributions to the Mountain Unions (calculated as indicated by the Territory Authority on revenues for the year 2018) and the operational costs of the Territory Authority and the contributions to the ARERA, depending on the resolutions passed and communications sent. The item "Other fees" mainly includes fees for association dues, reimbursement of damages and indemnity, and contingent and non-existent assets. “Allocations to Provisions for Liabilities and Charges” cover liabilities and costs involving taxation, administration and other that are certain or probable but whose exact amount or date of occurrence are not yet determinable at this moment. The cost of the “Supplemental water bonus” introduced with ARERA resolution 897/2017/R/IDR and ATO resolution 697/2018 shows a decrease over the previous year, due to the smaller number of applications received. 129

30. Costs for planning and construction activities € 95,777,281 2020 2019 − Costs for planning and construction activities € 95,777,281 99,422,784

31. Amortization, depreciation and write-downs € 87,222,524 The composition of this entry is as follows: 2020 2019 − Depreciation tangible fixed assets € 17,851,021 17,384,213 − Depreciation other intangible fixed assets € 1,770,456 2,051,715 − Depreciation assets under concession € 53,179,731 48,463,115 − Credits write-downs € 12,231,316 11,754,905 − Other provisions € 2,190,000 335,000 Total € 87,222,524 79,988,948

Taking into account the presentation regarding valuation criteria, and the systematicity criterion, for calculating depreciation in the fiscal year the following ordinary rates were used:

Intangible fixed assets: Depending on the estimated technical economic- − Assets under concession (improvement of third-party’s assets and revertible profit life of various types assets) of reference assets Based on the duration of the service − Assets under concession (use rights) agreement ATO 3 and SMAT S.p.A. (2033) − Software licenses of use 33.33% − Patents 50.00% − Expansion and development costs 20.00% − Trademarks 10 years As a function of the estimated profit life equivalent − Surface rights to the durations of the Company from the date of the Articles of Association Tangible fixed assets: − Buildings and fences 3.50% − Solar power plants 9.00% − Light constructions 10.00% − Specific plants and filtering plants 8.00% − Metering devices 10.00% − Laboratory and other equipment 10.00% − Furniture and furnishings 12.00% − Office equipments 12.00% • Electronic machinery 20.00% • Hardware 20.00% • Cars 25.00% • Motor vehicles for transport and other vehicles 20.00% • Carbon assets 20.00% • Polarite 11.00% − Tanks 4.00% − Fixed waterworks 2.50% − Sewers 5.00% − Water treatment plants 15.00% − Machinery 12.00% − Leased assets Based on the contract duration

To the Increases of 2020 of tangible fixed assets the rates applied amount to 50% of the ones shown above, representing with the best estimate average rates as a function of the months of use.

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The increase over 2019 is due to depreciation on the investments made and implemented during the year, including the great dispatching pipelines for the Susa Valley aqueduct, the upgrading of the biogas plant for the production of biomethane, and the reclamation of the Ivrea district wastewater treatment system.

The entry also includes the allocations deriving from prudential valuations of the trade receivables. This allocation amounts to approximately 12.23 million Euros, with application of the IFRS 9 principle - Financial instruments and consequence of length of receivables towards users as already referenced in the dedicated item under Assets in this Supplementary Note. The item “Other allocations” reports the depreciation of shares in the partner SAP S.p.A., in consideration of the results of the year. The management depreciated for permanent impairment of value the aforesaid share by Euro 335,000 to align its value to the pro-rata of the Net Equity of SAP S.p.A. This depreciation is confirmed by the impairment test carried out by the independent consultant. Financial income and expenses

32. Financial income € 3,130,314 This entry includes: 2020 2019 − Receivables from related parties € 763 90,841 − Receivable interest and other proceeds € 3,129,551 5,755,343 Total € 3,130,314 5,846,184

Unlike the previous year, “Receivables from correlated parties” consisted soling of interest on cash pooling with associate company Risorse Idriche. The decrease is due to fewer dividends received. “Receivable interests and other financial proceeds” include receivable interest on current accounts in banks and post offices, interest arrears and other financial proceeds and dividends from other companies. The decrease was mostly due to reduced interest receivable on late payments due to the introduction by ARERA with resolution 311/2019/R/IDR of the new “SII Late Payment Management provisions”. Another factor accounting for the reduction in this entry was the urgent measures adopted by ARERA to support the users during the COVID-19 epidemic.

33. Financial expense € 4,375,578 This entry includes: 2020 2019 − Payable interest and commissions on loans € 4,086,059 4,528,074 − Other receivable interests and charges € 289,519 407,699 Total € 4,375,578 4,935,773

34. Taxes This entry includes: 2020 2019 - IRAP € 2,065,167 2,734,599 - IRES € 9,285,275 13,306,601 - Taxes relative to previous fiscal year € (153,215) (299,094) - Change in payable deferred taxes € 304,226 (22,848) - Change in receivable deferred taxes € (1,295,336) (216,565) Total € 10,206,117 15,502,693

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The reconciliation between the ordinary rate and the actual rate is shown in the following schedule:

2020 2019 - Result before taxes € 33,890,448 55,604,922 - Applicable theoretical rate % 24 24 - Theoretical IRES € 8,133,708 13,345,181

Effects of the variations in increase (diminution) versus the theoretical rates

- IRES on nondeductible costs € 4,253,815 3,835,325 - IRES on other permanet differences € (2,484,805) (3,871,762) - Total effect of changes (increase/decrease) in revenue € 1,769,010 (36,437) - IRES detraction (2,143) (2,143) - Current IRES (theoretical IRES + IRES on revenue changes) € 9,900,575 13,306,601 - Deferred IRES € (937,885) (532,944) - Current + deferred IRES (total actual) € 8,962,690 12,773,656 Actual rates % 26.45 22.97

In consideration of the special nature of the correlated taxable basis, no consideration was given to IRAP as for the purposes of the previous table, which refers only to IRES.

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I. Commitments undertaken by the Company To carry on the extraordinary Acque Potabili operation, on 24 February 2020, the company entered into an agreement with associate company IRETI whereby it was agreed that the joint ownership of the interest in Acque Potabili would be maintained after the shareholders’ withdrawal, and all decisions would be taken jointly, even after the liquidation of Acque Potabili.

Liabilities - Loans at variable rate: Book value in financial statements is the “fair value” of the same - Trade payables: Book value in financial statements is the “fair value” of the same

IV. Fees to Directors and Auditors Below is the itemization of fees to the Directors and Auditors of SMAT Torino S.p.A.: for the financial statements closed as at 31 December 2020 and 2019.

2020 2019 Directors € 255,731 253,474 Auditors € 98,800 98,800

The fees for the amounts deliberated by the Meeting of Shareholders in addition to the obligatory contribution.

V. Fees to the Auditing Firm The fees owed to the Auditing Firm Deloitte & Touche S.p.A. for its services of accounting audit of the financial statements and the consolidated financial statements as at 31 December 2020 amounts to Euro 58,000 for the legal review and Euro 8,000 for the Territorial Balance Sheet report for 2018.

VI. Relationships with “related parties” The operations developed with the related parties have been performed at standard market conditions and are based on rules that ensure their transparency and well as their substantial procedural fairness. Below is the itemization of the equity and economic balances inherent to operations with related parties for fiscal year ending as at 31 December 2020

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Fiscal year 2020

Commercial Trade payables Total Current Financial receivables and other Total revenues operating financial proceeds and other current current costs assets assets liabilities

CITY OF TURIN 3,624,207 1,602,628 - 2,080,754 627,544 - RISORSE IDRICHE 173,150 2,437,484 763 206,843 3,877,461 1,604,700 AIDA AMBIENTE 60,480 1,324,725 55,382 289,119 - SAP SPA 63,097 - - 100,053 15,657 - Total related parties 3,921,698 5,364,837 763 2,443,032 4,809,781 1,604,700 Total items of the state of 432,045,582 309,687,349 3,130,314 227,350,065 153,738,967 1,663,394 account % impact on total 0.91% 1.73% 0.02% 1.07% 3.13% 96.47% book items