NOT FOR DISTRIBUTION IN THE UNITED STATES

Tea S.p.A. (incorporated as a joint stock company (società per azioni) under the laws of the Republic of Italy) €30,000,000 2.30% Senior Unsecured Amortising Fixed Rate Notes due 7 June 2024 The issue price of the €30,000,000 2.30% Senior Unsecured Amortising Fixed Rate Notes due 7 June 2024 (the “Notes”) of Tea S.p.A. (the “Issuer” or the “Company”) is 100 per cent. of their principal amount. The Notes constitute obbligazioni pursuant to Articles 2410 et seq. of the Italian Civil Code. The Notes will bear interest from and including the Issue Date (as defined below) at the rate of 2.30 per cent. per annum, payable in arrear on 7 June in each year, commencing on 7 June 2018, all as fully described in “Terms and Conditions of the Notes—Interest”. Interest payments to certain Noteholders may be subject to Italian substitute tax (imposta sostitutiva) as fully described in “Terms and Conditions of the Notes—Taxation” and “Taxation—Italian Taxation”. Unless previously redeemed or purchased and cancelled, the Notes will be redeemed in instalments on each Amortisation Date in the relevant Amortisation Amount (each term as defined in the Terms and Conditions of the Notes (the “Conditions”)) with the final Amortisation Date on 7 June 2024 (the “Maturity Date”). The Notes may be redeemed, in whole but not in part, at 100 per cent. of their principal amount outstanding plus interest, if any, to the date fixed for redemption at the option of the Issuer in the event of certain changes affecting taxation in the Republic of Italy. See Condition 8 (Redemption and Purchase). Noteholders will be entitled, following the occurrence of a Change of Control (as defined in the Conditions) to request the Issuer to redeem or repurchase such Notes at 100 per cent. of their principal amount outstanding together with any accrued and unpaid interest (if any), all as fully described in Condition 8.3 (Redemption and Purchase— Redemption at the Option of the Noteholders). Upon the occurrence of the Concession Event, the Issuer will redeem in part the Notes (including the relevant part of the principal amount outstanding, and any accrued and unpaid interest on such part of the principal amount outstanding until the date of such redemption) in an amount equal to the Mandatory Redemption Amount, provided that, the Mandatory Redemption Date falls prior to 7 June 2023 (each term as defined in the Conditions), all as fully described in Condition 8.4 (Redemption and Purchase— Mandatory Redemption in case of Concession Event). This prospectus (the “Prospectus”) constitutes a prospectus for the purpose of Directive 2003/71/EC, as amended (including by Directive 2010/73/EU) (the “Prospectus Directive”). The Prospectus has been approved by the Central Bank of Ireland (the “Central Bank”), as competent authority under the Prospectus Directive. The Central Bank only approves this Prospectus as meeting the requirements imposed under Irish and EU law pursuant to the Prospectus Directive. Such approval relates only to the Notes which are to be admitted to trading on the regulated market of the Irish Stock Exchange or other regulated markets for the purposes of Directive 2004/39/EC or which are to be offered to the public in any member state of the European Economic Area. Application has been made to the Irish Stock Exchange plc (the “Irish Stock Exchange”) for the Notes to be admitted to its official list (the “Official List”) and trading on its regulated market. This Prospectus is available for viewing on the website of the Irish Stock Exchange. Investing in the Notes involves risks. For a discussion of these risks, see “Risk Factors” beginning on page 4. The Notes have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), or any U.S. State securities laws and are subject to United States tax law requirements. The Notes are being offered only outside the United States by the Placement Agent (as defined herein) in accordance with Regulation S under the Securities Act (“Regulation S”), and may not be offered, sold or delivered within the United States or to, or for the account or benefit of, “U.S. persons” (as defined in Regulation S), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. For a description of further restrictions on offers and sales of the Securities, see “Subscription and Sale”. The Notes will be in bearer form and in denominations of €100,000 and integral multiples of €1,000 in excess thereof up to and including €199,000 and will initially be in the form of a temporary global note (the “Temporary Global Note”), without interest coupons, which will be deposited on or around 7 June 2017 (the “Issue Date”) with a common safekeeper (the “Common Safekeeper”) for Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking S.A. (“Clearstream, Luxembourg” and, together with Euroclear, the “Clearing Systems”). Interests in the Temporary Global Note will be exchangeable for interests in a permanent global note (the “Permanent Global Note”), without interest coupons, not earlier than 40 days after the Issue Date upon certification as to non-U.S. beneficial ownership. Interest payments in respect of the Notes cannot be collected without such certification of non- U.S. beneficial ownership. The Temporary Global Note and the Permanent Global Note (each a “Global Note”) will be issued in new global note (“NGN”) form. Ownership of the beneficial interests in the Notes will be shown on, and transfers thereof will be effected through, records maintained in book-entry form by the Clearing Systems and their respective participants. The Permanent Global Note will be exchangeable in certain limited circumstances in whole, but not in part, for Notes in definitive form in the denomination of €100,000 and integral multiples of €1,000 in excess thereof up to and including €199,000 with instalment receipts and interest coupons attached. See “Summary of Provisions Relating to the Notes in Global Form”. Subject to the provisions contained in this Prospectus, the Notes are freely transferable. Placement Agent Banca IMI The date of this Prospectus is 31 May 2017

NOTICE TO INVESTORS

The Issuer has confirmed that this Prospectus contains all information regarding the Issuer and its subsidiaries (together with the Issuer, the “Group”) and the Notes which is material; such information is true and accurate in all material respects and is not misleading in any material respect; any opinions, predictions or intentions expressed in this Prospectus on the part of the Issuer are honestly held or made and are not misleading in any material respect; this Prospectus does not omit to state any material fact necessary to make any information contained herein not misleading in any material respect. The Issuer accepts responsibility for the information contained in this Prospectus and declares that, having taken all reasonable care to ensure that such is the case, the information contained in this Prospectus to the best of its knowledge is in accordance with the facts and contains no omission likely to affect its import. The Issuer has not authorised the making or provision of any representation or information regarding the Issuer or the Notes other than as contained in this Prospectus or as approved for such purpose by the Issuer. Any such representation or information should not be relied upon as having been authorised by the Issuer or Banca IMI S.p.A. (the “Placement Agent”). None of the Issuer and the Placement Agent have authorised, nor do they authorise, the making of any offer of the Notes through any financial intermediary, other than offers made by the Placement Agent which constitute the final placement of the Notes contemplated in this Prospectus. This Prospectus has not been submitted to the clearance procedure of CONSOB and may not be used in connection with the offering of the Notes in the Republic of Italy, its territories and possessions and any areas subject to its jurisdictions other than in accordance with applicable Italian securities laws and regulations, as fully set out under “Subscription and Sale”. The distribution of this Prospectus and the offering, sale and delivery of the Notes in certain jurisdictions may be restricted by law. Persons into whose possession this Prospectus comes are required by the Issuer and the Placement Agent to inform themselves about and to observe any such restrictions. This Prospectus may only be used for the purposes for which it has been published. For a description of certain restrictions on offers, sales and deliveries of the Notes and on distribution of this Prospectus and other offering material relating to the Notes, see “Subscription and Sale”. In particular, the Notes have not been and will not be registered under the Securities Act and are subject to United States tax law requirements. Subject to certain exceptions, the Notes may not be offered, sold or delivered in the United States or to U.S. persons. The Notes are subject to restrictions on transferability and resale and may not be transferred or resold in the United States or to, or for the account or benefit of, U.S. persons except as permitted under applicable U.S. federal and state securities laws pursuant to a registration statement or an exemption from registration. Neither the delivery of this Prospectus nor the offering, sale or delivery of any Note shall in any circumstances create any implication that there has been no adverse change, or any event reasonably likely to involve any adverse change, in the condition (financial or otherwise) of the Issuer or the Group since the date of this Prospectus. This Prospectus is to be read and construed in conjunction with all documents which are deemed to be incorporated herein by reference. This Prospectus shall, save as specified herein, be read and construed on the basis that such documents are so incorporated and form part of this Prospectus. See “Information Incorporated by Reference”. The Placement Agent does not make any representation or warranty, expressed or implied, or accepts any responsibility, with respect to the accuracy or completeness of any of the information in this Prospectus. This Prospectus is not intended to provide the basis of any credit or other evaluation and should not be considered as a recommendation by the Issuer or the Placement Agent that any recipient of this Prospectus should purchase the Notes. In making an investment decision, prospective investors must rely on their own examination of the Issuer’s business and the terms of the offering. Prospective investors should not consider any information contained in this Prospectus to be investment, legal, business or tax advice. Each prospective investor should consult its own counsel, business adviser, accountant, tax adviser and other advisers for legal, financial, business, tax and related advice regarding an investment in the Notes.

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The information set out in the sections of this Prospectus describing clearing arrangements is subject to any change or reinterpretation of the rules, regulations and procedures of Euroclear and Clearstream, Luxembourg, in each case as currently in effect. If prospective investors wish to use the facilities of any of the Clearing Systems, they should confirm the continued applicability of the rules, regulations and procedures of the relevant Clearing System. The Issuer will not be responsible or liable for any aspect of the records relating to, or payments made on account of, book-entry interests held through the facilities of any Clearing System or for maintaining, supervising or reviewing any records relating to such book-entry interests. The language of this Prospectus is English. Certain legislative references and technical terms have been cited in their original language in order that the correct technical meaning may be ascribed to them under applicable law. Certain figures included in this Prospectus have been subject to rounding adjustments; accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them.

MARKET SHARE INFORMATION AND STATISTICS

This Prospectus contains statements regarding the Issuer’s industry and its relative competitive position in the industry that are not based on published statistical data or information obtained from independent third parties, but are based on the Issuer’s experience and its own investigation of market conditions, including its own elaborations of such published statistical or third-party data. Although the Issuer’s estimates are based on information obtained from its customers, sales force, trade and business organisations, market survey agencies and consultants, government authorities and associations in our industry which we believe to be reliable, there is no assurance that any of these assumptions are accurate or correctly reflect the Issuer’s position in the industry. None of the Issuer's internal surveys or information have been verified by independent sources. While the Issuer has compiled, extracted and, to the best of its knowledge, correctly reproduced market or other industry data from external sources, including third parties or industry or general publications, the Issuer has not independently verified such data. The Issuer cannot assure investors of the accuracy and completeness of, and takes no responsibility for, such data other than the responsibility for the correct and accurate reproduction thereof. The Issuer confirms that this information has been accurately reproduced, and so far as the Issuer is aware and is able to ascertain from information available from such external sources, no facts have been omitted which would render the reproduced information inaccurate or misleading.

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PRESENTATION OF FINANCIAL INFORMATION

Financial information included in the Prospectus IFRS financial information This Prospectus includes the audited consolidated financial statements of the Issuer as of and for the years ended 31 December, 2016, prepared in accordance with International Financial Reporting Standards as endorsed by the European Union (“IFRS”) (the “Restated IFRS Consolidated Financial Statements”). The Restated IFRS Consolidated Financial Statements have been audited by Deloitte & Touche S.p.A. The Restated IFRS Consolidated Financial Statements, which are attached as Appendix 1 to this Prospectus, should be read in conjunction with the relevant notes thereto. In making an investment decision, investors must rely upon examination of the Group and the financial statements and information included elsewhere in this Prospectus and should consult their own professional advisors for an understanding of the impact that future additions to, or amendment of IFRS may have on the Group’s results of operations and/or financial condition and on the comparability of prior periods. Italian GAAP financial information In addition, this Prospectus includes financial information extracted or derived from the audited consolidated financial statements of the Issuer as of and for the years ended 31 December, 2016 and 2015, prepared in accordance with Italian laws governing the preparation of consolidated financial statements, as interpreted and integrated by the accounting principles established by the Organismo Italiano di Contabilità — OIC (“Italian GAAP”) (the “Italian GAAP Audited Consolidated Financial Statements”). Italian GAAP differs in certain respects from IFRS. For a discussion of the differences between Italian GAAP and IFRS applicable to the Group and particularly a reconciliation of Italian GAAP and IFRS consolidated statement of financial position, consolidated income statement and consolidated equity as of and for the year ended 31 December 2015, see note 27 to the Restated IFRS Consolidated Financial Statements. The Italian GAAP Audited Consolidated Financial Statements have been audited by Deloitte & Touche S.p.A. Except where otherwise indicated, financial information relating to the Issuer included in this Prospectus has been prepared in accordance with IFRS. Non-GAAP Measures This Prospectus contains certain financial indicators and Non-GAAP measures, including EBITDA, Net Financial Indebtedness and Adjusted Net Financial Indebtedness, which are not recognised as measures of financial performance and liquidity under IFRS. Investors should not place any undue reliance on these Non- GAAP measures and financial indicators and should not consider these measures as: (i) an alternative to operating income or net income as determined in accordance with generally accepted accounting principles, or as measures of operating performance; (ii) an alternative to cash flows from operating, investing or financing activities (as determined in accordance with generally accepted accounting principles), or as a measure of the Group’s ability to meet cash needs; or (iii) an alternative to any other measures of performance under generally accepted accounting principles. These measures are not indicative of the Group’s historical operating results, nor are they meant to be predictive of future results. These measures are used by the Issuer’s management to monitor the underlying performance of the business and the operations. Since all companies do not calculate these measures in an identical manner, the Group’s presentation may not be consistent with similar measures used by other companies. Therefore, investors should not place undue reliance on this data.

In the footnotes to the “Selected Financial Information” a more detailed explanation of each of the financial indicators and Non-GAAP measures, together with relevant reconciliations, is provided.

Certain numerical figures set out in this Prospectus have been subject to rounding adjustments. Therefore, discrepancies in tables between totals and the sums of the amounts listed may occur due to such rounding.

(iii)

FORWARD LOOKING STATEMENTS This Prospectus may contain certain statements that are, or may be deemed to be, forward-looking, including statements with respect to the Issuer’s and the Group’s business strategies, expansion of operations, trends in their business and their competitive advantage, information on technological and regulatory changes and information on exchange rate risk and generally includes all statements preceded by, followed by or that include the words “believe”, “expect”, “project”, “anticipate”, “seek”, “estimate”, “aim”, “intend”, “plan”, “continue” or similar expressions. By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those in the forward-looking statements as a result of various factors. Potential investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. Any forward-looking statements are only made as of the date of this Prospectus, and the Issuer does not intend, and does not assume any obligation, to update forward-looking statements set forth in this Prospectus. Many factors may cause the Issuer’s or the Group’s results of operations, financial condition, liquidity and the development of the industries in which they compete to differ materially from those expressed or implied by the forward-looking statements contained in this Prospectus. The risks described under “Risk Factors” in this Prospectus are not exhaustive. Other sections of this Prospectus describe additional factors that could adversely affect the Issuer’s and the Group’s results of operations, financial condition, liquidity and the development of the industries in which they operate. New risks can emerge from time to time, and it is not possible for the Issuer to predict all such risks, nor can the Issuer assess the impact of all such risks on its business or the extent to which any risks, or combination of risks and other factors, may cause actual results to differ materially from those contained in any forward- looking statements. Given these risks and uncertainties, investors should not rely on forward-looking statements as a prediction of actual results.

(iv)

CERTAIN DEFINED TERMS References to the “Issuer”, the “Company” or “Tea” are to Tea S.p.A.; references to the “Group” are to the Issuer and its consolidated subsidiaries. References to the “Placement Agent” are to Banca IMI S.p.A. References to “€” or “Euro” are to the single currency introduced at the start of the third stage of the European Economic and Monetary Union pursuant to the Treaty on the functioning of the European Union, as amended. References to “billions” are to thousands of millions. References to the “Conditions” are to the terms and conditions relating to the Notes set out in this Prospectus in the section “Terms and Conditions of the Notes” and any reference to a numbered “Condition” is to the correspondingly numbered provision of the Conditions. References to “IFRS” in this Prospectus are to International Financial Reporting Standards as adopted by the European Commission, which are those required to be used by companies listed on regulated markets in the European Union. References to “Italian GAAP” in this Prospectus are to the Italian laws and regulations governing the preparation of financial statements, as interpreted and integrated by the accounting principles established by the Organismo Italiano di Contabilità (the Italian accounting profession organisation).

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TABLE OF CONTENTS

FORWARD LOOKING STATEMENTS ...... iv CERTAIN DEFINED TERMS ...... v OVERVIEW ...... 1 RISK FACTORS ...... 4 INFORMATION INCORPORATED BY REFERENCE ...... 26 USE OF PROCEEDS ...... 27 SELECTED FINANCIAL INFORMATION ...... 28 DESCRIPTION OF THE ISSUER ...... 34 REGULATION ...... 62 TERMS AND CONDITIONS OF THE NOTES ...... 92 SUMMARY OF PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM ...... 113 TAXATION ...... 117 SUBSCRIPTION AND SALE ...... 123 GENERAL INFORMATION ...... 126 APPENDIX 1 ...... 130

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OVERVIEW The overview below describes the principal terms of the Notes. Certain of the terms and conditions described below are subject to important limitations and exceptions. The “Terms and Conditions of the Notes” section of this Prospectus contains a more detailed description of the terms and conditions of the Notes, including the definitions of certain terms used in this summary. Words and expressions defined in “Terms and Conditions of the Notes” or elsewhere in this Prospectus have the same meaning in this section, unless otherwise noted. Issuer ...... Tea S.p.A., a joint stock company (società per azioni) organised under the laws of the Republic of Italy (the “Issuer”). Notes Offered ...... €30,000,000 aggregate principal amount of 100 per cent. Senior Unsecured Amortising Fixed Rate Notes due 7 June 2024. Maturity Date ...... The Notes will mature on 7 June 2024 (the “Maturity Date”). Unless previously redeemed or purchased and cancelled, the Issuer will redeem the Notes on each amortisation date indicated in Condition 8.1 (each an “Amortisation Date” with the final Amortisation Date being the Maturity Date) in an aggregate amount equal to the principal payment set out in Condition 8.1 (each, an “Amortisation Amount”). The principal aggregate amount outstanding of the Notes shall be reduced, pro rata with respect to each outstanding Note, by the Amortisation Amount for all purposes with effect from the relevant Amortisation Date such that the aggregate principal amount outstanding of the Notes following such reduction shall be the amount set out in Condition 8.1 (Redemption by Amortisation and Final Redemption). Interest ...... The Notes will bear fixed rate interest at a rate of 2.30 per cent. per annum. Issue Price ...... 100 per cent. of the principal amount of the Notes Interest Payment Date ...... Interest on the Notes will be payable annually in arrear on 7 June in each year, beginning on 7 June 2018. Ranking ...... The Notes, the Receipts and the Coupons constitute direct, unconditional, unsubordinated and (subject to Condition 3 (Negative Pledge)) unsecured obligations of the Issuer and rank and will rank pari passu, without any preference among themselves. The payment obligations of the Issuer under the Notes, the Receipts and the Coupons shall, save for such exceptions as may be provided by applicable law and subject to Condition 3 (Negative Pledge), at all times rank at least equally with its other from time to time outstanding unsecured and unsubordinated obligations. See “Terms and Conditions of the Notes”. Tax Redemption ...... The Issuer may redeem the Notes, in whole but not in part, at a redemption price of 100 per cent. of the principal amount outstanding, plus accrued and unpaid interest to but excluding the relevant date of redemption, if the Issuer would become obligated to pay certain additional amounts as a result of certain changes in specified tax laws or certain other circumstances. See “Terms and Conditions of the Notes—Redemption and Purchase—Redemption for Taxation Reasons”.

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Redemption at the Option of the Upon the occurrence of a Change of Control (as defined in the Noteholders ...... Conditions) at any time, the Issuer will have to offer to Noteholders to redeem all the Notes at a price equal to 100 per cent. of the principal amount outstanding thereof plus accrued and unpaid interest, to but excluding the relevant date of redemption. See “Terms and Conditions of the Notes - Redemption and Purchase - Redemption at the Option of the Noteholders”. Mandatory Redemption in case of Upon the occurrence of the Concession Event, the Issuer will Concession Event redeem in part the Notes (including the relevant part of the principal amount outstanding, and any accrued and unpaid interest on such part of the principal amount outstanding until the date of such redemption) in an amount equal to the Mandatory Redemption Amount, provided that, the Mandatory Redemption Date falls prior to 7 June 2023 (each term as defined in the Conditions). See “Terms and Conditions of the Notes - Redemption and Purchase - Mandatory Redemption in case of Concession Event). Covenants ...... The Terms and Conditions provide for certain covenants for the Issuer concerning:  Information to be provided;  Compliance with specified (i) Net Financial Debt- Shareholders’ Equity Ratio and (ii) Net Financial Debt- Consolidated EBITDA Ratio;  Listing;  Accounting policies; and  Termination Value Payment(s) Account.

See “Terms and Conditions of the Notes—Covenants”.

Use of Proceeds ...... The net proceeds of the issue of the Notes will be used by the Issuer for general corporate purposes of the Group, to fund the planned development strategy and to provide financial support to the Issuer’s Subsidiaries. Forms and Denomination ...... The Issuer will issue the Notes on the Issue Date in global form in minimum denominations of €100,000 and integral multiples of €1,000 in excess thereof up to and including €199,000 maintained in book-entry form. Notes in denominations of less than €100,000 will not be available. Transfer Restrictions; Absence of a Public Market for the Notes ...... The Notes have not been registered under the U.S. Securities Act and thus are subject to restrictions on transferability and resale. The Issuer cannot assure investors that a market for the Notes will develop or that, if a market develops, the market will be a liquid market. The Placement Agent has advised the Issuer that it currently intends to make a market in the Notes. However, the Placement Agent is not obligated to do so and any market making with respect to the Notes may be discontinued without notice. See “Subscription and Sale”.

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Listing ...... Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and trading on its regulated market. Fiscal Agent and Paying Agent ...... The Bank of New York Mellon, London Branch Listing Agent ...... Walkers Listing Services Limited Governing Law of the Notes ...... English law

Risk Factors

Investing in the Notes involves substantial risks. Please see the “Risk Factors” section for a description of certain of the risks you should carefully consider before investing in the Notes. Additional Information

The Issuer’s registered offices are located at Via Taliercio, 3, 46100 Mantova - Italy. Its telephone number is +00390376/4121 and fax number is +39 0376412129.

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RISK FACTORS The Issuer believes that the following factors may affect its ability to fulfil its obligations under the Notes. Most of these factors are contingencies which may or may not occur and the Issuer is not in a position to express a view on the likelihood of the occurrence of any such contingency. In addition, factors which are material for the purpose of assessing the market risks associated with the Notes are also described below. The Issuer believes that the factors described below represent the principal risks inherent in investing in the Notes, but the inability of the Issuer to pay interest, principal or other amounts on or in connection with the Notes may occur for other reasons which may not be considered significant risks by the Issuer based on information currently available to it or which it may not currently be able to anticipate. In addition, the order in which the risk factors are presented below is not intended to be indicative either of the relative likelihood that each risk will materialise or of the magnitude of their potential impact on the business, financial condition and results of operations of the Issuer. Prospective investors should also read the detailed information set out elsewhere in this Prospectus and consider carefully whether an investment in the Notes is suitable for them in light of the information contained in this Prospectus and their personal circumstances, based upon their own judgment and upon the advice from such financial, legal and tax advisers as they may deem necessary. Words and expressions defined in “Terms and Conditions of the Notes” or elsewhere in this Prospectus have the same meaning in this section, unless otherwise noted. References to a “Condition” is to such numbered condition in the Terms and Conditions of the Notes. Prospective investors should read the whole of this Prospectus, including the information incorporated by reference. Factors affecting the Issuer's ability to fulfil its obligations under the Notes 1. Factors that may affect the issuer's ability to fulfil its obligations under the Notes 1.1. The Issuer is a holding company and depends on its operating subsidiaries for funds The Issuer’s position within the Group is that of a holding company, whereby it provides miscellaneous corporate and administrative services to the Group as a whole. The Group’s revenue-generating operations, on the other hand, are carried out through its subsidiaries and, as a result, the Issuer depends to a significant extent on the earnings, cash flows and distribution of funds from its subsidiaries to meet its debt obligations, including its obligations with respect to the Notes. The Issuer’s subsidiaries have no obligation, contingent or otherwise, to pay any amounts due under the Notes or to make funds available to the Issuer to enable it to pay any amounts due under the Notes. Those subsidiaries may at any time have other liabilities, actual or contingent, including indebtedness owing to trade creditors or to secured and unsecured lenders or to the beneficiaries of guarantees given by those subsidiaries. In the event of any winding-up of any such subsidiary, those liabilities would need to be satisfied before any amounts could be distributed to the subsidiaries’ shareholder (i.e. to the Issuer or its liquidator).

As a result, to the extent that it is necessary to satisfy the Issuer’s obligations in respect of the Notes by realising the assets of the Issuer’s directly or indirectly owned subsidiaries, those obligations will effectively be subordinated to the prior payment of all the debts and other liabilities of those subsidiaries (regardless of whether the relevant creditors are secured or unsecured), including the rights of trade and financial creditors, as well as contingent liabilities, all of which could have a substantial impact on the Issuer’s ability to meet its payment obligations under the Notes.

1.2. Evolution in legislative and regulatory framework for the electricity, natural gas, waste, district heating and water sectors The Issuer and the Group operate in a heavily regulated environment, in accordance with, among other things, the rules issued by the Italian Regulatory Authority for Electricity, Gas and Water (Autorità per l'Energia Elettrica il Gas e il Sistema Idrico, or "AEEGSI"), which in turn operates in accordance with Italian and European laws, regulations and guidelines. Any changes to the applicable

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legislation and regulations, whether at a national or European level, or in their interpretation could negatively affect the Group's revenues and operations. Such changes could relate to tax rates, the procedure for awarding and/or renewing concessions, the tariffs charged by the Group for its services, the determination of any indemnities or compensation due to the Group in the event of termination or loss of concessions, and environmental, safety or other workplace laws. Public policies relating to energy, energy efficiency, water, waste and/or air emissions might also affect the market and, in particular, the regulated sectors in which the Group operates. Any substantial changes to existing laws, regulations, guidelines or standards or any substantial change in their interpretation, could adversely affect the business, results of operations and financial condition of the Group and, as a result, the Issuer's ability to pay any amounts due under the Notes. Other business areas in which the Group operates, in particular the business related to the heating services, have also been affected by the introduction of a number of significant legislative measures aimed at, among other things, a further liberalisation of the market. It is not possible to predict how recent changes to the laws and regulations affecting the Group's business sectors will affect the Group. In addition, new legislative measures may be introduced aimed at a further liberalisation of the market, in particular with respect to the district heating sector, which could facilitate the entry of new competitors into the market, and which may affect the duration of the Group's concessions or render more onerous carrying out the business. Any additional costs incurred and investments made by the Group in order for it to comply with any applicable law and regulation, as well as any loss of potential business opportunities, could adversely affect the business, results of operations and financial condition of the Group and, as a result, the Issuer's ability to pay any amounts due under the Notes. 1.3. The Group is dependent on concessions from local authorities For the financial year ended 31 December 2016, the Group's activities dependent on concessions1 accounted for around half of the Group's EBITDA. Most of the Group’s activities are dependent on concessions from local authorities (in the case of water, hydroelectric energy production, district heating, gas distribution, waste management, cemetery services and public lighting) and from national authorities that vary in duration across the Group's business areas. In addition, legislation in Italy could affect the expiry date of certain concession and there can be no assurance that this will not happen in the near future. In particular, legislation in recent years providing for the early expiry of concessions for local public services has given rise to concerns as to how it will affect the business of operators in the sector such as the Issuer. Article 23-bis of Law Decree No. 112 of 25 June 2008 (as amended) provided for the automatic early expiry of concessions in certain sectors that had not originally been awarded on the basis of a public tender unless the shareholding of public entities in the concession holder was reduced to certain thresholds, eventually coming down to 30 per cent. However, a referendum in June 2011 revoked Article 23-bis and subsequent legislation fell foul of the Constitutional Court in July 2012, as it was held to be an attempt to introduce provisions that were analogous to those that had already been barred by the referendum. According to the current applicable legal framework, the expiry of concessions affected by Article 23-bis will occur on their contractual expiry date or, for those granted for an indefinite period, not later than the end of 2020. Each concession is governed by agreements with the relevant grantor requiring the relevant concession holder to comply with certain obligations (including performing regular maintenance) and is subject to penalties or sanctions for the non-performance or default under the relevant concession. Failure by a concession holder to fulfil its material obligations under a concession can, if such failure is left unremedied, lead to early termination by the grantor of the concession. Furthermore, in accordance with general principles of Italian law, a concession can be subject to early termination for reasons of public interest. Finally, the AEEGSI is entitled to carry out inspections in relation to regulated activities such as those carried out by the Issuer and has power to levy significant fines in the event of non-compliance.

1 Such activities include: gas distribution, integrated water services, public lighting management and, urban waste management, district heating and cemetery services.

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No assurance can be given that the Group will be successful in renewing its existing concessions or in obtaining concessions to permit it to carry on its business once its existing concessions expire, or that any new concessions entered into or renewals of existing concessions will be on terms similar to those of its current concessions. If the Group loses a concession, although it may be entitled to compensation, termination of the concession may lead to mandatory prepayment, in whole or in part, under certain of the loan agreements of the Group. See “Description of the Issuer – Financing Arrangements”. In addition, the loss, or the award, of a concession may result in litigation in connection with the determination of the compensation to be paid by the incoming concession holder. Both in the case of expiry of a concession at its stated expiry date and in the case of early termination for any reason whatsoever, each concession holder must continue to operate a concession until it is replaced by the incoming concession holder. In addition, the outgoing concession holder may be required to transfer all of the assets relating to the operation of the concession to the grantor or to the incoming concession holder. Although the outgoing concession holder is normally entitled to compensation based on the residual value of investments made by it on the concession, partly due to uncertainties in the legislative framework, neither the availability nor the amount nor the date of payment of any such compensation is easily predictable. All of the above factors could adversely affect the business, financial condition and results of operations of the Group and, as a result, the Issuer’s ability to pay any amounts due under the Notes. 1.4. Regulation of the natural gas distribution business and expiry of concessions Gas distribution services, where the Group is active are carried out pursuant to concessions issued by individual municipalities. As of 31 December 2016, the above-mentioned concessions, which are held by SEI – Servizi Energetici Integrati S.r.l. (“SEI”) come to a total of 10. The average remaining life of the concessions still in force is equal to around 4,1 years. Should the Group not obtain the re- awarding of some of the expired concessions, it being understood that, in such a case, a reimbursement value would be paid, the Group may incur in a risk of potential loss of revenues and, consequently, of margins. The gas market is regulated by Legislative Decree No. 164 of 23 May 2000 (the "Letta Decree"), as amended, pursuant to which the distribution of natural gas in certain municipalities and areas, including the areas in which SEI operates, must be carried out by operators which are chosen through a public tender process. In addition, where a concession holder is replaced by a new operator, compensation must be paid to the outgoing concession holder for the assets which will become available to the new concession holder. Several recent laws and regulations have affected the tender process and the determination of compensation payable to an outgoing concession holder. See “Regulation – Gas distribution”. There is still considerable uncertainty with regard to how the concession system will work and how the authorities granting the concessions and the Italian courts will interpret such legislation. From 2011, Ministerial Decree No. 226 of 12 November 2011, as amended by Ministerial Decree no. 20 May 2015, sets out that the gas distribution service could only be conducted based on tender processes announced exclusively for ATEMs (“ATEM” - Minimum Territorial Areas), predominantly of a provincial size. For this purpose, the Italian territory has been sub-divided into 177 ATEMs. Each ATEM is made up of a combination of Municipalities served by distribution plants that must be managed by a single concession holder, a beneficiary of the service identified following the tender. The maximum duration of the commitment is up to 12 years. As of the date of this Prospectus the Issuer intends to compete in the ATEM Mantova 1 and ATEM Mantova 2 tender processes. Given the complexity of the regulations governing the expiration of the concessions held by the Group, this could give rise to judicial and/or arbitral disputes between concession-holders, including SEI, with possible negative effects on the operations, results, balance sheet and cash flow of the Group and, as a result, the Issuer’s ability to pay any amounts due under the Notes. 1.5. Regulation of the water business and expiry of concessions

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The integrated water service (IWS) is a public service of primary importance, heavily regulated both at European, national and regional level. For all the aspects of the integrated water service management (e.g. assignment of the integrated water services, conditions for the operation, quality standards as well as tariff calculation and revision), the Group must comply with the applicable regulations (including those set out by the AEEGSI) as well as with the provisions contained in the relevant concession agreements. The Group, as of the date of this Prospectus, with regard to the IWS, holds two concessions, according to the two concession agreements entered into on 28 June 2007 between TEA Acque S.r.l. and Autorità d’Ambito Territoriale Ottimale di Mantova" (“ATO of Mantova”), which will expire on 2025 (the "Mantua IWS Concession"), and the concession agreement entered into on 10 September 2007 between Indecast S.r.l. and the Sub-Area of the Area Omogenea 1 of Castiglione delle Stiviere which will expire on 2025 (the "Castiglione delle Stiviere IWS Concession"). Tea Acque is also the holder of a concession for the road and road signs maintenance in the municipality of Mantova, entrusted in 2002 according to the "in-house providing" model then in force. As at the date of this Prospectus, Tea Acque does not meet the requirements for being entrusted with concessions according to the "in-house providing" mechanism and therefore it temporarily manages such road and road signs maintenance in the municipality of Mantova, until the public tender procedure relating to such concession will be announced by the municipality of Mantova; as a consequence, following the public tender procedure, the Group may lose such concession. Although the entire regulatory framework is designed to give stability to the IWS sector, it cannot be excluded that - given also the long-lasting duration of the Mantua IWS Concession and of the Castiglione delle Stiviere IWS Concession - changes in applicable laws and regulations, whether at a regional, national or European level, and the manner in which they are interpreted, could positively or negatively affect the Group's earnings and current operations. Such changes could include changes in tax rates, tariff calculation method, legislation and policies as well as changes in environmental, safety or other workplace laws. Public policies related to water, energy, energy efficiency and/or air emissions may also have an impact on the IWS sector. Furthermore, the Group operates the IWS business in a certain political, legal, and social context and, therefore, even different decisions of the Municipality served in the ATO of Mantova, as well as the municipality of Castiglione delle Stiviere, may prejudice the Group's revenues and results of operations. Any new or substantially altered rules and standards may adversely affect the Group's business, financial condition and results of operations and, as a result, the Issuer’s ability to pay any amounts due under the Notes. 1.6. Risks related to sewer flooding The Group's combined sewerage systems can, during prolonged heavy rainfall, reach their hydraulic capacity, which would result in flooding. As it is not possible to forecast accurately the occurrence and effects of sewer flooding, forward planning and setting adequate provisions to face or alleviate the risk of sewer flooding is difficult. The financial costs of measures necessary to address sewer flooding, or to alleviate the risk of sewer flooding to properties at risk may be higher than anticipated, which could have a material adverse effect on the Group's business, financial condition and results of operations and, as a result, the Issuer's ability to meet its payment obligations under the Notes.

1.7. Risks related to water shortages Water shortages may be caused by natural disasters, floods and prolonged droughts, below average rainfall or increases in demand or by environmental factors such as climate change, which may exacerbate seasonal fluctuations in the availability and supply of water. However, the Issuer believes that the occurrence of these events in the Mantua area could be considered very remote, due to the climate, the geographical features of its territory and the historical abundance of water resources. In the event of water shortages, additional costs may be incurred by the Issuer in order to provide emergency reinforcement to supplies in areas of shortage which may adversely affect its business, results of operations, profitability or financial condition. In addition, restrictions or interruptions on the use or supply of water may adversely affect the Group's turnover and potentially result in significant payments to affected customers as compensation, all of which could have a material adverse effect on the Group's business, financial condition and results of operations and, as a result, the Issuer's ability to meet its payment obligations under the Notes.

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1.8. Risks related to weather and atmospheric conditions The Group’s business includes hydroelectric generation and, accordingly, it is dependent upon rainfall in the areas where its hydroelectric generation facilities are located. If there is a drought, the output of the Group’s hydroelectric plants is depleted. At the same time, the electrical business is affected by atmospheric conditions such as average temperatures, which influence consumption. Significant changes in weather conditions from year to year may affect demand for natural gas and electricity, as in colder years the demand is normally higher. Accordingly, the results of operations of the gas and electricity segments and, to a lesser extent, the comparability of results over different periods, may be affected by such changes in weather conditions. Furthermore, power plants and natural gas fields are exposed to extreme weather phenomena that can result in material disruption to the Group’s operations and consequent loss or damage to properties and facilities and, as a result, it could adversely affect the Issuer’s ability to pay any amounts due under the Notes. 1.9. Regulation of the waste business As regards the waste sector, the Group conducts its business within a strict environmental regime, holding up to date around 55 waste concessions, and therefore it may be exposed to potential liabilities and increased compliance costs. It is subject to increasingly stringent laws and regulations exercised through an extensive body of EU and Italian national legislation relating to environmental protection and the handling, treatment and disposal of waste, the rationale of which is to devote increasing efforts to waste prevention and to consider landfilling as the last resort. The Group incurs, and expects to continue to incur, in costs to comply with environmental laws and regulations. These laws may provide for strict liability for damage caused to natural resources or threats to public health and safety. Strict liability can render a party liable for environmental damage whether or not negligence or fault on the part of that party can be shown. The introduction of new laws and regulations or the imposition of new or increased regulatory requirements, applicable also to plants that have already been authorised, could require the Group to incur additional costs, become the basis of new or increased liabilities that could reduce earnings and cash available for operations or significantly impact the waste management markets, each of which could adversely affect the Group's business, financial condition or results of operations, and, as a result, the Issuer’s ability to meet its payment obligations under the Notes. Overall it cannot be excluded that changes in applicable laws and regulations, whether at a regional, national or European level, and the manner in which they are interpreted, could positively or negatively affect the Issuer's earnings and current operations. 1.10. The Group may not be successful in expanding the permitted capacity of its current or future landfills, which could restrict its growth, increase its disposal costs and reduce its operating margins. The Group’s ability to meet its growth objectives depends in part on its ability to expand landfill capacity, whether by acquisition or expansion. Diminished permitted capacity at its landfill sites could restrict its growth and reduce its financial performance in the market served by those landfills, since the Group would be forced to dispose of collected waste at more-distant landfills or at landfills operated by its competitors, thereby increasing its waste disposal expenses. Obtaining the required permits and approvals to expand landfills has become increasingly burdensome and expensive, requiring numerous hearings and compliance with various zoning, environmental and regulatory laws and drawing resistance from citizens and environmental or other groups. In 2016 the Group has increased the capacity of the landfill placed in 2,500,000 ton. and, on the other hand, the door to door waste collection has proved to be a growing business which could lead to reduce the amount of collected waste to be disposed in the landfill. Even where permits to open new landfills or expand existing landfills are granted, such authorisations may contain burdensome terms and conditions or the timing required to successfully open or expand a landfill may be extensive and could affect the remaining permitted capacity at the landfill. In spite of the increasing of the capacity of the landfill and the door to door waste collection, in the event of delays or denials in authorisations

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to open new landfills or expand existing landfills, the Group may be required to reduce the rate of its collection and treatment activities until it is able to secure such permits, which could have an adverse effect on the Group’s business, financial condition or results of operations, and, as a result, the Issuer’s ability to meet its payment obligations under the Notes. 1.11. Risks relating to changes in tariff levels The Group operates in the water, waste, natural gas and energy sectors and is exposed to a risk of variation in the tariffs applied to end users. With regard to the distribution of gas, under the current tariff system, the revenues of the Group are reviewed annually on the basis of criteria set by the AEEGSI which factor in the rate of annual growth of natural gas volumes introduced into the transport networks. These volumes depend on factors outside of the Group's control, such as the price of natural gas compared to other fuels, economic growth, climate change, environmental laws, availability of natural gas imported from foreign countries and the availability of sufficient transport capacity on import pipelines. If such volumes were lower than the rate of annual growth factored into the above-mentioned criteria, this could adversely affect the business, results of operations and financial condition of the Group and, as a result, the Issuer's ability to meet its payments under the Notes . Tariffs also apply to a portion of the Group's sales of natural gas. As regards the IWS, Group's revenues received for the management of the IWS are for the largest part represented by the tariff, which is quantified by the ATO of Mantova and approved by the AEEGSI, in accordance with the provisions of the IWS Mantua Concession and the IWS Castiglione delle Stiviere Concession, the AEEGSI regulations as well as Art. 154 of the Environmental Code as defined in section “Regulation”, paragraph “Water tariff mechanism”. The overall IWS tariff calculation method, as well as its revision at the end of each four-year regulatory period, is laid down in accordance with the "full cost recovery" principle under Art. 9 of Directive 2000/60/EC (establishing a framework for Community action in the field of water policy), as better detailed in the Communication from the Commission to the Council, the European Parliament and the Economic and Social Committee (Pricing policies for enhancing the sustainability of water resources - COM/2000/0477). However, notwithstanding the principle set out under the Directive 2000/60/EC, the full recovery cost principle is not entirely applied in respect of costs incurred for the implementation of efficiency measures so that the Group may not be able to fully cover such operational costs. This may result in possible losses which may affect the revenues of the Group with regard to the IWS concessions. In addition, there can be no assurance that any future revision of tariffs for the Group's regulated activities will keep them at a level that satisfies the Group's expectations or requirements, and they may be significantly reduced, possibly in response to political or public pressure. Should any such changes result in decreases in tariffs or in repayments to customers, these could have a material adverse effect on the Group's financial condition and results of operations and, as a result, the Issuer’s ability to meet its payment obligations under the Notes. 1.12. The Group may be unable to maintain or obtain the required licences, permits, approvals or consents The Group's activities entail exposure to regulatory, technical, commercial, economic and financial risks related to the obtaining of relevant permits and approvals from regulatory, legal, administrative, tax and other authorities and agencies. The processes for obtaining these permits and approvals are often lengthy, complex, unpredictable and costly. If any of the companies of the Group is unable to maintain or obtain the relevant permits and approvals, its ability to achieve its strategic objectives could be impaired, which could have a material adverse effect on the Group's business, financial condition and results of operations as well as the Issuer's ability to meet its payment obligations under the Notes. 1.13. Risks related to competition The markets in which the Group operates are subject to increasing competition in Italy. In particular, the Group faces increasing competition in its domestic natural gas business from both national and international natural gas suppliers. Increasingly high levels of competition in the Italian natural gas market could result in reduced natural gas sales margins for the Group. Furthermore, a number of

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national gas producers from countries with large gas reserves have started selling natural gas directly to end users in Italy, which could threaten the market position of the Group as it resells gas purchased from producing countries to end users. The Group also faces competition in its domestic electricity business, in which it competes with other producers and traders from Italy and outside of Italy, who sell electricity in the Italian market to industrial, commercial and residential customers. This could have an impact on the prices paid and/or received in the Group's electricity sales activities. All of these developments could adversely affect the business, results of operations and financial condition of the Group and, as a result, the Issuer's ability to meet its payment obligations under the Notes. 1.14. Risks related to the demand for natural gas and electrical energy Risks relating to the business of natural gas and electrical energy may derive either from a contraction in consumption or from a peak of demand. Trends in electrical energy and gas consumption are generally related to gross domestic product. The recent global economic and financial crisis, characterised by a deterioration of the macroeconomic conditions, has led to a contraction in consumption and industrial production worldwide. Together with mild temperatures, this resulted in a huge decrease in domestic energy consumption in 2014. Subsequently, in 2015 the demand for electrical energy in Italy experienced a small increase by 2 per cent. compared to 2014 (from 309,000 GWh to 315,200 GWh) and, on the basis of currently available data, primary energy demand increased by around 9 per cent. compared to 2014 (from 61.4 billion cubic metres to around 67 billion cubic metres). The increase of the energy demand for the year 2016 is estimated in a +0.2% in respect of the year 2015 (as of the date of this Prospectus, the data on energy demand for the year 2016 are still not available). However, notwithstanding the recent increase in demand for energy, the energy market is still undergoing a crisis and pressure has been put on sales margins, partly also due to greater competition, particularly in the natural gas sector. Under these conditions, without corresponding adjustments in the margins achieved by its sales or without an increase in market shares, the Group's revenues could be reduced and future growth prospects would be limited, which could have a material adverse effect on the Group’s business, financial condition and result of operations and, as a result, the Issuer’s ability to meet its payment obligations under the Notes. In addition to the above, peak demand periods may coincide with times when there is a shortage of natural gas and electricity. Moreover, the Group could experience problems in acquiring natural gas and electricity due to an interruption of the operation of the natural gas transport network or the national electricity transmission network. Should the Group encounter these issues, it could be forced to limit or suspend its business. Furthermore, a large part of the natural gas transported in the Italian national transportation system is imported from or transits through countries that have already experienced and may continue to experience political, social and economic instability. The import of natural gas from, or its transit through, such countries, are therefore subject to certain risks inherent in such countries including high inflation, volatile exchange rates, weak insolvency and creditor protection laws, social unrest, limitations on investments and on the import and export of assets, increases in taxes and excise duties, enforced contract renegotiations, nationalisation or renationalisation of assets, changes to commercial policies, monetary restrictions and loss or damage owing to political upheaval and/or conflict. All of the above risks could adversely affect the business, results of operations and financial condition of the Group and, as a result, the Issuer's ability to meet its payment obligations under the Notes. 1.15. The Group's operations are subject to extensive environmental statutes, rules and regulations which regulate, among other things, air emissions, water discharges and the management of hazardous and solid waste Compliance with requirements of law regulating the different business sectors in which the Group operates requires it to incur in significant costs relating to environmental monitoring, installation of pollution control equipment, fees and sanctions for emissions, maintenance and upgrading of facilities and taking remedial action. The costs of compliance with existing environmental legal

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requirements or those not yet adopted may increase in the future. An increase in such costs, unless promptly recovered, could have an adverse impact on the Group's business, results of operations and financial condition and, as a result, the Issuer’s ability to meet its payment obligations under the Notes. The Group has accrued risk provisions to manage its existing environmental liabilities whereby an obligation has arisen to perform a clean-up or other remedial actions and the associated costs can be reliably estimated. The accrued amount represents management's best estimates of the future environmental expenses to be incurred. Notwithstanding this, the management believes that it is possible that in the future the Group may incur in significant environmental expenses and liabilities in addition to the amounts already accrued owing to: (i) unknown contamination; (ii) the results of on-going surveys or surveys that will be carried out in future on the environmental status of certain of the Group’s industrial sites as required by applicable law and (iii) possible disputes in relation to such matters. Such liabilities could have an adverse impact on the Group’s business, results of operations and financial condition and, as a result, the Issuer’s ability to meet its payment obligations under the Notes. 1.16. Risks relating to white certificates Under the applicable legislation, the Group must achieve certain annual targets for energy saving, as determined by the decree of the Ministry of Economic Development for the four years from 2017 to 2020. For this purpose, the Group invests in the improvement of the energy efficiency of the technology and equipment it uses, in order to be granted so called "white certificates". If the Group is unable to obtain a sufficient number of "white certificates" to achieve the relevant annual target, it will need to purchase them on the market. Furthermore, if it then fails to deliver the required number of "white certificates" to the AEEGSI, it will be subject to a penalty imposed by the AEEGSI, in addition to having to purchase the missing number of "white certificates". In recent months, the market price of "white certificates" has significantly increased. In order to comply with its energy saving obligations, the Group intends to produce "white certificates" directly or to buy them on the market to meet the annual target. If the number of "white certificates" directly produced by the Group are lower than expected and/or if the price of "white certificates" continues to increase in the future, the Group will incur higher costs, which could adversely affect the business, results of operations and financial condition of the Group and, as a result, the Issuer's ability to meet its payment obligations under the Notes. In addition, during the past year, as a result of a change in interpretation of the relevant legislative provisions, a number of measures have been taken by the GSE (Gestore dei Servizi Energetici or Energy Services Operator), which is the public authority responsible for granting "white certificates", that have included: (i) blocking the granting of "white certificates" for projects already approved; (ii) annulling projects approved months or years before (on the basis that those projects did not comply with applicable legislation); and (iii) annulling "white certificates" as a result of unfavourable findings following inspections (only for "white certificates" bought on the market and not for those directly produced). The Group has not yet been at the receiving end of any of these measures but it cannot be ruled out that this will occur in future. 1.17. Risks relating to the implementation of the Group's strategic objectives The Group intends to pursue a strategic plan of growth and development, in particular in the natural gas sale and distribution, the electricity sale sectors, the waste collection, the district heating sector and the integrated water services. The strategic plan contains, and was prepared on the basis of, a number of critical assumptions and estimates relating to future trends and events that may affect the sectors in which the Group operates, such as estimates of customers' demand and changes to the applicable regulatory framework. There can be no assurance that the Group will achieve the objectives under its strategic plan. For example, if any of the events and circumstances taken into account in preparing the strategic plan do not occur, the future business, financial condition, cash flow and/or results of operations of the Group could be different from those envisaged and the Group may not achieve its strategic plan, or do so within the expected timeframe, which could adversely affect the business, results of operations and financial condition of the Group and, as a result, the Issuer's ability to meet its payment obligations under the Notes. 1.18. Risks relating to joint ventures and partnerships

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In recent years, the Group has entered into various partnerships. The Group may enter into further joint ventures or partnerships in the future with the same or other parties. The possible benefits or expected returns from such joint ventures and partnerships may be difficult to achieve or may prove to be less valuable than the Group currently estimates. Furthermore, such investments are inherently risky as the Group may not be in a position to exercise full influence over the management of the joint venture company or partnership and the business decisions taken by it. In addition, joint ventures and partnerships bear the risk of difficulties that may arise when integrating people, operations, technologies and products. All of the above circumstances could have a material adverse effect on the Group's business, financial condition and results of operations. Although the Group aims to participate only in ventures in which its interests are aligned with those of its partners, it cannot guarantee that its interests will remain so aligned. Although strategic joint ventures are intended to be stable operational structures, contracts governing such projects typically include provisions for terminating the venture or resolving deadlock. The dissolution of business ventures can be both lengthy and costly and the Group cannot give any assurance that any strategic alliances will endure for a period of time compatible with its strategy. 1.19. Risks relating to the Group's investments In order to strengthen its competitive position on the market and expand its customer base, the Group has invested and continues to invest in the natural gas and electricity sale sectors, the distribution networks which it owns or operates under concession agreements, the IWS, the district heating sector, the waste collection and disposal and the public lighting sector. In particular the Group has made significant investments on the distribution network relating to the district heating sector and the IWS sector. There is no assurance that the investment strategies implemented by the Group will be successful, as they may be interrupted or delayed due to difficulties in obtaining environmental and/or administrative authorisations or opposition from political groups or other organisations, or may be influenced by changes being made to the price of equipment, materials and labour and the political or regulatory framework or the Group becoming unable to raise funds at acceptable interest rates. Such delays could affect the ability of the Group to meet regulatory and other environmental performance standards and could adversely affect the business, financial condition and results of operations of the Group and, as a result, the Issuer's ability to meet its payment obligations under the Notes. Moreover, with reference to investments made in the district heating sector and the IWS sector, in case the percentage of population connecting to its grids for such sectors should fall below the estimates made by the Group with regard to the relevant investments, the revenues of the Group could be adversely affected. 1.20. Risks relating to legal proceedings or investigations by the authorities From time to time the Group is involved in claims arising in the ordinary conduct of its business, including civil, labour, governmental, administrative, antitrust and tax proceedings. The Issuer made provision in its IFRS Annual Consolidated Financial Statements for legal proceedings which amounted to € 390,000 as of 31 December 2016. The Group may from time to time be subject to further litigation and investigations by taxation, antitrust and other authorities. The Group is not able to predict the ultimate outcome of any of the claims currently pending against it or future claims or investigations that may be brought against it. In addition, the Group may in future years incur in significant losses, over and above the amounts already provisioned in its financial statements, from pending or future legal claims and proceedings owing to: (i) uncertainty regarding the final outcome of such proceedings, claims or investigations; (ii) the occurrence of new developments that management could not take into consideration when evaluating the likely outcome of such proceedings, claims or investigations; (iii) the emergence of new evidence and information; and (iv) the underestimation of likely future losses. Adverse outcomes in existing or future proceedings, claims or investigations could have an adverse effect on the business, financial condition and results of operations of the Group and, as a result, the Issuer’s ability to meet its payment obligations under the Notes.

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1.21. Risks relating to potential disputes with employees Disputes with the Group's employees may arise both in the ordinary course of the Group's business or from one-off events, such as mergers and acquisitions or as a result of employees moving to an incoming concession holder upon the expiry or termination of a concession held by the Group. Any material dispute could give rise to difficulties in supplying customers and maintaining its networks, which could in turn lead to a loss of revenues and prevent the Group from implementing its business strategy. This could adversely affect the business, results of operations and financial condition of the Group and, as a result, the Issuer's ability to repay the Notes. 1.22. SIEM S.p.A. has mandated the management of its landfills to Mantova Ambiente S.r.l. a subsidiary of the Issuer SIEM S.p.A. (“SIEM”), a company entirely controlled by local public entities and shareholder of Mantova Ambiente S.r.l. (“Mantova Ambiente”), a Subsidiary of the Issuer, is the owner of several landfills and plants for waste disposal and treatment, which were built in previous decades when less stringent environmental regulations were applicable. In 2010, SIEM has mandated the management and maintenance of its real estate assets, plants and landfills to Mantova Ambiente, which is controlled by the Issuer. The Issuer cannot guarantee that, following the strengthening and tightening of the national and European environmental legislations over the past few years, SIEM has carried out all the necessary structural and technical improvements needed on its landfills in order to comply with the new applicable legislation, considering that recently some directors of SIEM have been involved in certain judicial proceedings. The Issuer cannot exclude that, in the future, SIEM, as owner of the plants and landfills and Mantova Ambiente, as the entity entrusted with the management and maintenance of the such plants and landfills, could be charged for possible environmental damages or environmental responsibility due to the failure to comply with the applicable legislation. The above may have an impact on the Group’s activities and its financial condition or results of operations and, as a consequence, the Issuer’s ability to pay any amounts due under the Notes.

1.23. The Group is exposed to a number of different tax uncertainties, which would have an impact on its tax results The Group determines the taxation it is required to pay based on its interpretation of applicable tax laws and regulations. As a result, it may face unfavourable changes in those tax laws and regulations to which it is subject. Such interpretation may, inter alia, lead to litigation with the Tax Authorities. Therefore, the business, revenues, results of operations and financial condition of the Issuer and the Group, the market value of the Notes and/or on the Issuer’s ability to fulfil its obligations under the Notes may be adversely affected by new laws or changes in the interpretation of existing laws. 1.24. Risks relating to insurance coverage The Group maintains insurance coverage in an amount it believes appropriate to protect itself against a variety of exposures and risks, such as property damage, environmental risks, business interruption and personal injury claims. However, there can be no assurance that: (i) the Group will be able to maintain the same insurance cover in the future (on acceptable terms or at all); (ii) claims will not exceed the amount of cover or fall outside the scope of the risks insured under the relevant policy; (iii) insurers will at all times be willing and able to meet their obligations; or (iv) the Group's provisions for uninsured or uncovered losses will be sufficient to cover the full amount of any liabilities ultimately incurred. 1.25. Risks relating to skills and expertise of the Group's employees The Group's ability to operate its business effectively depends on the skills and expertise of its employees. If the Group loses any of its key personnel or is unable to recruit, retain and/or replace sufficiently qualified and skilled personnel, it may be unable to implement its business strategy, which could in turn adversely affect the business, results of operations and financial condition of the Group and, as a result, the Issuer's ability to meet its payment obligations under the Notes. 1.26. Risks relating to potential breach of laws and regulations by employees and operational risk

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There is a risk that the Group's employees may breach anti-bribery legislation, the Group's internal policies or governance regulations. In addition, the Issuer and the Group are exposed to different types of operational risk, including the risk of fraud by employees and third parties, the risk of unauthorised transactions performed by employees or the risk of operational errors, including those resulting from defects or malfunctions of computer or telecommunications systems or penetration of IT systems by outsiders intent on extracting or corrupting information or disrupting business processes. The systems adopted for operational risk management are designed to ensure that the risks related to the Group's activities are kept under adequate control. Any inconvenience or defect of such systems could adversely affect the business, results of operations and financial condition of the Group and, as a result, the Issuer’s ability to meet its payment obligations under the Notes. These factors, particularly in times of economic and financial crisis, could lead the Issuer or the Group to incur losses, increases in financing costs and/or reductions in the value of their assets, with a potential negative impact on the business, results of operations and financial condition of the Group and, as a result, the Issuer’s ability to meet its payment obligations under the Notes. 1.27. Risk relating to any breaches of the organisation and management model The Group’s risk management system is designed to assist with the assessment, avoidance and reduction of risks which jeopardise its business. The Group’s operating risks primarily include production, distribution Waste management and IWS. There are, however, inherent limitations on the effectiveness of any risk management system. These limitations include the possibility of human error and the circumvention or overriding of the system. Accordingly, any such system can provide only reasonable assurances, and not absolute assurances, of achieving the desired objectives. For example, risks include possible instances of manipulation (acceptance or giving of advantages, fraud, deception, corruption or other infringements of the law). Italian Legislative Decree No. 231/2001 ("Decree 231/2001") imposes direct liability on a company for certain unlawful actions taken by its executives, directors, agents and/or employees. The list of offences under Decree 231/2001 currently covers, among other things, bribery, theft of public funds, unlawful influence of public officials, corporate crimes (such as false accounting), fraudulent acts and market abuse, as well as health and safety and environmental hazards. In order to reduce the risk of liability arising under Decree 231/2001, the Group has adopted an organisation, management and supervision model (the "Model") to ensure the fairness and transparency of its business operations and corporate activities and provide guidelines to its management and employees to prevent them from committing offences. The Group has also appointed a supervisory body (“Organismo di Vigilanza”) to oversee the functioning and updating of, and compliance with, the Model. Notwithstanding the adoption of these measures, the Group could still be found liable for the unlawful actions of its officers or employees if, in the relevant authority's opinion, Decree 231/2001 has not been complied with. This could lead to a suspension or revocation of concessions currently held by the Group, a ban from participating in future tenders and/or an imposition of fines and other penalties, all of which could adversely affect the business, results of operations and financial condition of the Group and, as a result, the Issuer's ability to meet its payment obligations under the Notes. 1.28. Risks relating to management control systems The Group has a periodic reporting system in place which produces the reports the management team requires to carry out its activities and take strategic and operational decisions. The Group believes that this reporting system is currently adequate to allow its management team to make informed assessments of the Group's financial position and prospects. Nonetheless, the Group intends to continue improving the reporting system in order to achieve better integration and automation of the reports produced by it, reduce the risk of error and increase the speed of the flow of information. If the Group fails to implement the reporting system successfully, it may face the risk of data entry errors, which could mean that its management team is not properly informed of any issues which require prompt intervention, adversely affecting the business, results of operations and financial condition of the Group and, as a result, the Issuer's ability to meet its payment obligations under the Notes.

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1.29. Funding and liquidity risks The Issuer's and the Group ability to borrow from banks or in the capital markets to meet its financial requirements is dependent on favourable market conditions. Borrowing requirements of the Group's companies are coordinated by the Group's central finance department in order to achieve consistency between financial resources and management plans, to manage net trade positions and maintain the level of risk exposure within the Group's prescribed limits. The Group's approach toward funding risk is aimed at securing competitive financing and ensuring a balance between average maturity of funding, flexibility and diversification of sources. However, these measures may not be sufficient to protect the Group fully from such risk and, in addition to the impact of market conditions, the ability of the Group to obtain new sources of funding may be affected by contractual provisions of existing financings, such as: • change of control clauses, requiring the Group to remain under the control of local authorities; • clauses such as negative pledges that restrict the security that can be given to other lenders; and • financial covenants restricting the amount of indebtedness that the Group may incur. If insufficient sources of financing are available in the future for any reason, the Group may be unable to meet its funding requirements, which could materially and adversely affect its financial condition and results of operations, and, as a result, the Issuer’s ability to meet its payment obligation under the Notes. 1.30. Risks relating to interest rate fluctuation The Group is exposed to the risk of interest rate fluctuation, in particular arising under its financial indebtedness. This varies according to the fixed or floating interest rate structure in place. As of 31 December 2016, 1% of the Group's medium-long term financial debt (consisting of bank loans, shareholders' loans and payables to leasing companies) carried a fixed rate of interest whereas 99% of the Group's medium-long term financial debt carried a floating rate of interest. This could adversely affect the business, results of operations and financial condition of the Group and, as a result, the Issuer's ability to meet its payment obligations under the Notes. 1.31. Risks relating to credit management The Group is exposed to the risk that its receivables will not be paid by customers as they fall due, in particular in the water, waste collection, natural gas and electricity sales business. As of 31 December 2016 and 2015, the Group's current trade receivables amounted to approximately € 83,900,000 and € 78,465,000, respectively. The Group has a central credit policy in place for assessing customers' and other financial counterparties' credit standing related to non-regulated businesses, monitoring predicted credit collection flows, issuing payment reminders, extending payment deadlines in certain circumstances, requesting bank or insurance guarantees, assigning credits to credit management companies and implementing suitable recovery steps (including legal proceedings). In addition, allowance for doubtful receivables to cover the potential non-payment of the Group's trade receivables amounted to € 19,592 thousand as of 31 December 2016 and € 18,724 thousand as of 31 December 2015. Notwithstanding the existence of an indemnification mechanism in case of customers’ non-payments of the due amounts and even though the Group has therefore allocated the relevant provisions, there can be no assurance that the steps taken by the Group to manage and monitor credit risks are effective to limit the Group's exposure to losses, which could adversely affect the business, results of operations and financial condition of the Group and, as a result, the Issuer’s ability to meet its payment obligations under the Notes. 1.32. Risks relating to fluctuations in the prices of energy commodities The Group is exposed to the risk of fluctuations in the prices of the energy commodities it handles, in particular electricity and natural gas. In the case of an increase in the price of natural gas and electricity, the Group could be exposed to the risk of a decrease of the profit margin in relation to the

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quantities of gas and electricity sold and to the risk of an increase of the amounts paid by the Group for its own consumption of electricity and gas. These fluctuations may also directly and indirectly affect the Group's results through indexing mechanisms contained in pricing formulas. Moreover, because some of the above-mentioned commodity prices are quoted in U.S. dollars, the Group is also exposed to the risk of exchange rates. In order to manage its exposure to the energy markets, the Group implements appropriate hedging activities to stabilise cash flows generated by the global portfolio of assets and contracts and to protect the Group's operating margin from fluctuations attributable to market risk and foreign exchange risk inherent in the commodities in which it trades. Stabilisation of cash flows also serves the purpose of protecting the value of assets and of avoiding the need for write-downs caused by excessive market-price volatility. The Group gives no assurance that the measures adopted by it to manage the price fluctuation of the commodities it handles are adequate, or that in the future it will be able to continue to rely on hedging arrangements. If those measures prove to be inadequate or cease to be available, this could adversely affect the business, results of operations and financial condition of the Group and, as a result, the Issuer's ability to meet its payment obligations under the Notes. 1.33. The loan agreements entered into by the Issuer and companies belonging to the Group contain restrictive covenants As of the date of this Prospectus, a significant portion of the Group’s net borrowings including loan agreements providing for, in line with market practice, certain restrictive covenants, such as, inter alia, “pari passu” ranking clauses, “negative pledge” clauses, “change of control” clauses and provisions limiting extraordinary transactions and the incurrence of any additional indebtedness exceeding specified thresholds in such loan agreements (in this respect see also the following risk factor). See “Description of the Issuer – Financing Arrangements”. . In addition, covenants such as the “negative pledge” and “change of control” clauses and covenants requiring the maintenance of particular financial ratios, may limit the Group’s ability to acquire or dispose of assets or incur new financial indebtedness. Should market conditions deteriorate or fail to improve, or the Group’s operating results decrease in the future, the Issuer may have to request amendments or waivers to its covenants and restrictions. However, there can be no assurance that the Issuer will be able to obtain such relief. A breach of any of these covenants or restrictions could result in a default and acceleration that would, subject to certain thresholds, permit its creditors to declare all amounts borrowed to be due and payable, together with accrued and unpaid interest and the commitments of the relevant lenders to make further extensions of credit could be terminated. The Issuer and the Group’s future ability to comply with financial covenants and other conditions, make scheduled payments of principal and interest, or refinance existing borrowings depends on future business performance that is subject to economic, financial, competitive and other factors. The foregoing could have a negative impact on the business results of operations and financial condition of the Group and, as a result, the Issuer's ability to meet its payment obligation under the Notes. 1.34. Risks relating to changes in the original terms and conditions of long-term contracts The initial circumstances or conditions under which the Issuer or the companies belonging to the Group may enter into a long-term contract may change over time and this, in turn, may result in adverse economic consequences. Such changes vary in nature and may or may not be readily foreseeable. The longer the term of the contracts, the more these constraints on the Issuer or the companies belonging to the Group are exacerbated. Failure to react successfully, rapidly and appropriately to new situations by reflecting such changes in the original conditions of the long-term contracts could have a negative impact on the business results of operations and financial condition of the Group and, as a result, the Issuer’s ability to meet its payment obligations under the Notes. 1.35. The Issuer is exposed to operational risks through its ownership and management of power stations, waste treatment, water collection, purification and treatment, distribution networks and plants The main operational risk to which the Group is exposed is linked to the ownership and management of power stations, waste treatment facilities, water treatment plants, crematoriums, district heating networks and distribution networks and plants. These plants and networks are exposed to risks that

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can cause significant damage to the assets themselves or to the environment and, in more serious cases, production capacity may be compromised. These risks, which result from events outside of the Group's control, include extreme weather phenomena, damages to people’s health, natural disasters, fire, terrorist attacks, polluting emissions (gas, dust etc.), mechanical breakdown of or damage to equipment or processes, accidents and labour disputes. In particular, the Group's production and distribution networks are exposed to malfunctioning and service interruption risks which are beyond its control and may result in increased costs, regulated repayments (automatic compensation) to users, as well as exceeding pollution limits could lead to penalties or even to the obligation of reducing or blocking the whole activity of the crematorium for a specific period. The Group's insurance coverage may prove insufficient to fully compensate for such losses. The Issuer believes that the Group’s systems of prevention and protection within each operating area, which act according to the frequency and gravity of the particular events, the ongoing maintenance plans, the availability of strategic spare parts and the use of tools for transferring risk to the insurance market enable the Group to mitigate the economic consequences of potentially adverse events that might be suffered by any of its owned or managed plants or networks. However, there can be no guarantee that maintenance and spare part costs will not rise, that insurance products will continue to be available on reasonable terms or that any one event or series of events affecting any one or more plants or networks will not have an adverse impact on the business of the Group and, as a result, on the Issuer's ability to meet its payment obligations under the Notes. 1.36. The Group’s operations into hazardous waste activities. The Group’s activities relating to disposal of waste involve only few categories of hazardous waste, such as, inter alia, clinical waste and waste found and collected through the activity of excavation of contaminated soils. A governmental waste tracking control procedure in Italy (Sistema di controllo della tracciabilità dei rifiuti, or ''SISTRI'') is currently applicable to the Group’s activities relating to disposal of hazardous waste and is expected to be expanded to apply to non-hazardous waste in the future. This system will be managed by the Carabinieri's Environmental Protection Unit and it is currently envisaged that it would require the computerisation of special non-hazardous waste management collection, treatment and disposal in Italy at a national level, enabling all non-hazardous waste produced in Italy to be traced from the point of collection to the point of disposal. If SISTRI is implemented to apply to non-hazardous waste and the Group’s tracing systems were to fail, the Group may be forced to interrupt its services, provide for remedies in connection with such failure and could become vulnerable to legal repercussions. In addition, a failure in the Group’s tracing system could damage its reputation and materially adversely affect its business. In addition, if the Group were to enter into the market for the collection, sorting or treatment of hazardous waste, it could encounter regulatory barriers or operative difficulties that are not known to the Group now or that may not before seen at the time of a possible expansion. In connection with the authorisations to operate landfills that the Group has received and legislation aimed to regulate the disposal of waste, the Group is required to test waste that it collects and to subsequently conduct periodical tests to ensure compliance with the authorisations and relevant regulations. In addition, the Group is subject to testing requirements linked to environmental certificates which it has voluntarily acquired. A risk exists that a sample tested may not be representative of the entirety of the waste that will be collected. If such sample were not contaminated whereas the waste itself was, an entire landfill could become contaminated, thereby requiring the closure of the all or part of the landfill until the clean-up is complete. This would cause substantial disruption to the Group’s business and would increase its costs, including the cost of finding and using alternative landfill sites for its disposal activities. This could also have reputational ramifications for both the Group and its customers, which in turn could affect the Group’s business, results of operations and financial condition and, as a result, on the Issuer’s ability to meet its payment obligations under the Notes. 1.37. Risks relating to quality standards The Group is required to comply with certain quality standards for the sale of natural gas, electricity and district heating and for the provision of the integrated water services to end-users, as set out under AEEGSI Resolution No. 655/2015/R/idr. Failure to comply with these standards may result in the application to the Group of penalties and/or sanctions as well as in the obligation to indemnify the end-users. Although the Group believes that it currently complies with the applicable quality

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standards, any future breach of these standards, including as a result of the standards becoming more stringent, could have a material adverse effect on the Group's business, results of operations and financial condition and, as a result, on the Issuer's ability to meet its payment obligations under the Notes. 1.38. Group’s future business performance is partly dependent on its ability to win new contracts and to renew and extend existing contracts. With regard to the business in which the Group operates in competition, the Group’s success depends on its ability to retain and renew existing customers and contracts, to maintain volumes under existing contracts and to obtain and successfully negotiate new or expanded customer contracts. The Group's current and prospective customers may move to competitors, cease operations, terminate contracts with the Group or increase pricing pressure as a result of a merger or acquisition, changes in strategy or product offerings, financial or operational constraints, or for strategic reasons cease to require waste management or other services. The Group's material customer contracts generally expire after one year and contain termination provisions that allow customers to terminate their agreement with the Group for a number of reasons including an event of force majeure that prevents the Group from providing services or its customers from requiring services; a failure to perform to benchmark service levels; or a material breach of contract not remedied within a certain period or that is incapable of remedy. In case of termination of these contracts, there could be a material adverse effect on the Group's business, financial condition and results of operations and, as a result, on the Issuer's ability to meet its payment obligations under the Notes. 1.39. Risks relating to IT systems The Group's operations are supported by complex IT systems. Risks could arise if the Group were no longer able to ensure the availability or adequacy of these systems and the integrity and confidentiality of data and information and there can be no assurance that serious system failures, network disruptions or breaches in security will not occur. Any such failure, disruption or breach could adversely affect the business, results of operations and financial condition of the Group and, as a result, the Issuer's ability to meet its payment obligations under the Notes. 2. Risks relating to the market in general 2.1. Risks relating to conditions in the global financial markets and the economy in general Although a global economic recovery has been recorded in recent years, various concerns remain regarding the ability of certain EU member states and other countries to service their sovereign debt obligations. The significant economic stagnation in certain countries in the Eurozone, especially Greece, Italy, Portugal, Spain, Slovenia and Cyprus, in part due to the effects of the sovereign debt crisis and corresponding austerity measures in these markets, has added to these concerns. The measures so far implemented to reduce public debt and fiscal deficits have already resulted in lower or negative GDP growth and high unemployment rates in these countries. If the fiscal obligations of these or other countries continue to exceed their fiscal revenue, taking into account the reactions of the credit and swap markets, or if their banking systems further destabilise, the ability of such countries to service their debt in a cost efficient manner could be impaired. The continued uncertainty over the outcome of various international financial support programmes, the possibility that other countries might experience similar financial pressures, investor concerns about inadequate liquidity or unfavourable volatility in the capital markets, lower consumer spending, higher inflation or political instability could further disrupt the global financial markets and might adversely affect the economy in general. In addition, the risk remains that a default of one or more countries in the Eurozone, the extent and precise nature of which are impossible to predict, could lead to the expulsion or voluntary withdrawal of one or more countries from the Eurozone or a disorderly break-up of the Eurozone, either of which could significantly disrupt financial markets and possibly trigger another global recession. All of these risks could adversely affect the business, results of operations and financial condition of the Group, and, as a result, the Issuer's ability to pay any amounts due under the Notes.

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2.2. Changes to the overall economy in the Group's principal markets could have a significant adverse effect on the Group's businesses and profitability. The economy in Italy, the Group's principal market, was adversely affected in 2009 by a significant slowdown, with a direct impact on consumption. On a countrywide level, for example, 2009 saw the first reduction in demand for electric power and in demand for special waste services since 1981. It is expected that, for the near future, demand for energy will be substantially below the level achieved before the economic crisis. In addition, the decrease in demand for energy has put pressure on sales margins due also to greater competition, particularly in the natural gas sector. If demands continue to be sluggish or if there is another reversal in demand without corresponding adjustments in the margins charged by the Group on its sales or without increase in its market share, then the Group's revenues (other than those arising from the gas distribution service, which based on the current tariff mechanism would not be affected by the foregoing) would be reduced and future growth prospects would be limited. This could adversely affect Group's business, results of operations and financial condition, with a consequent adverse impact on the market value of the Notes and Issuer's ability to fulfil its obligations under the Notes. 2.3. Market and political uncertainty regarding UK's exit from the European Union Since the second half of 2007, turmoil in the global financial system has caused increasingly difficult conditions in the financial markets. These conditions have led to a reduction in liquidity and greater volatility on global financial markets, and continue to impact the functioning of the financial markets and the global economy. Some governments, international and supranational organisations and monetary authorities have recently adopted measures aimed at increasing the liquidity of the financial markets, in order to give global GDP (gross domestic product) a boost and mitigate the risk of the sovereign debt of certain European countries. However, it is difficult to predict what the impact of such measures on the economy and the financial system as well as the duration will be. Therefore, such measures or possible modifications may have a negative impact on the ability of the Group to access the capital and debt markets or to refinance the existing debt to meet their liquidity requirements. In addition to the above, the British referendum held on 23 June 2016, in which the majority of citizens of the United Kingdom expressed their desire to leave the European Union (“Brexit”), could cause an increase in volatility in the financial markets, a worsening in the terms of financing, especially in the so-called “peripheral” countries, including Italy, and a possible consequent economic slowdown. The effects of Brexit will depend on any agreements the United Kingdom makes to retain access to European Union markets, either during a transitional period or more permanently. Brexit could adversely affect European or worldwide economic or market conditions and could contribute to instability in global financial and foreign exchange markets, including volatility in the value of the euro. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determines which European Union laws to replace or replicate. Any of these effects of Brexit, as well as others that cannot currently be anticipated, could adversely affect the business, results of operations and financial condition of the Group, and, as a result, the Issuer's ability to meet its payment obligations under the Notes. 2.4. The Group faces market liberalisation and increasing competition in the markets in which it operates The markets in which the Group operates are undergoing a process of gradual liberalisation at both a European and an Italian level, which is being implemented in different ways and following different timetables in each country within the European Union. As a result of the process of liberalisation, new competitors may enter many of the markets in which the Group operates. It cannot be excluded that the process of liberalisation in the markets in which the Group operates might continue in the future and, therefore, the Group’s ability to develop its businesses and improve its financial results may be constrained by such new competition. Competition in Italy is increasing particularly in the electricity business, in which the Group competes with other producers and traders within Italy and from outside of Italy who sell electricity in the Italian market

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to industrial, commercial and residential customers. This could have an impact on the prices paid or received in the Group’s electricity production and trading activities. Moreover, the Group may be unable to offset the financial effects of decreases in production and sales of electricity through efficiency improvements, or expansion into new business areas or markets. Furthermore, the Group faces increasing competition in its domestic natural gas business from both national and international natural gas suppliers. Increasingly high levels of competition in the Italian natural gas market could result in reduced natural gas sales margins for the Group. A number of international gas producers from countries with large gas reserves have started selling natural gas directly to end users in Italy, which could threaten the market position of the Group as it resells gas purchased from producing countries to end users. These developments could, overtime, have a negative impact on the business prospects, revenues, results of operations and financial conditions of the Group and, as a result, the Issuer’s ability to meet its payment obligations under the Notes. 3. Risk Factors Relating to the Notes 3.1. The Notes are fixed-rate securities and are vulnerable to fluctuations in market interest rates The Notes will bear interest at a fixed rate. A holder of a security with a fixed interest rate is exposed to the risk that the price of such security falls as a result of changes in the current interest rate on the capital markets (“Market Interest Rate”). While the nominal interest rate of a security with a fixed interest rate is fixed during the life of such security or during a certain period of time, the Market Interest Rate typically changes on a daily basis. As the Market Interest Rate changes, the price of such security changes in the opposite direction. If the Market Interest Rate increases, the price of such security typically falls, until the yield of such security is approximately equal to the Market Interest Rate. Conversely, if the Market Interest Rate falls, the price of a security with a fixed interest rate typically increases, until the yield of such security is approximately equal to the Market Interest Rate. Investors should be aware that movements of the Market Interest Rate could adversely affect the market price of the Notes. 3.2. The Notes may not be a suitable investment for all investors Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor must consider, either on its own or with the help of its financial and other professional advisers, whether it: (i) has sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained or incorporated by reference in this Prospectus or any applicable supplement; (ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact such investment will have on its overall investment portfolio; (iii) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including where the currency for principal or interest payments is different from the potential investor's currency; (iv) understand thoroughly the terms of the Notes and be familiar with the behavior of financial markets; and (v) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks. A potential investor should not invest in the Notes, unless the potential investor has the expertise (either alone or with a financial adviser) to evaluate how the Notes will perform under changing

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conditions, the resulting effects on the value of the Notes and the impact this investment will have on the potential investor’s overall investment portfolio. 3.3. The Notes are unsecured The Notes constitute unsecured obligations of the Issuer and, save as provided in Condition 3 (Negative Pledge), do not contain any restriction on the giving of security by the Issuer and the Issuer’s other Subsidiaries over present and future indebtedness. Where security has been granted over assets of the Issuer to secure indebtedness, in the event of any insolvency or winding-up of the Issuer, such indebtedness will, in respect of such assets, rank in priority over the Notes and the other unsecured indebtedness of the Issuer. 3.4. The claims of Noteholders are structurally subordinated with respect to the Issuer’s subsidiaries A significant part of the operations of the Group is conducted through subsidiaries of the Issuer. Noteholders will not have a claim against any subsidiaries of the Issuer and the assets of those subsidiaries will be subject to prior claims by their creditors, regardless of whether such creditors are secured or unsecured. 3.5. Redemption prior to maturity for tax reasons In the event that the Issuer would be obliged to increase the amounts payable in respect of the Notes due to any change in or amendment to the laws or regulations of the Republic of Italy or any political subdivision thereof or of any authority therein or thereof having the power to tax or in the interpretation or administration thereof, the Issuer may redeem all outstanding Notes in accordance with the Conditions of the Notes. If this occurs, there can be no assurance that it will be possible to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Notes. 3.6. The Issuer may not have sufficient funds at the time of occurrence of a Change of Control to redeem outstanding Notes Upon the occurrence of certain events relating to the Issuer as set out in “Terms and Conditions of the Notes - Redemption and Purchase - Redemption at the Option of the Noteholders”, the Noteholders will have the right to require the Issuer to redeem their outstanding Notes at their principal amount outstanding plus accrued and unpaid interest, if any, to the date of redemption. However, it is possible that the Issuer will not have sufficient funds at the time of occurrence of such events to make the required redemption or repurchase of Notes. In addition, except as specifically set out in “Terms and Conditions of the Notes - Redemption and Purchase - Redemption at the Option of the Noteholders”, the Notes do not contain provisions that provide a right to Noteholders to require the Issuer to purchase or redeem the Notes in any other circumstances. 3.7. The Mandatory Redemption in case of Concession Event may adversely affect the Issuer’s financial position Upon the occurrence of certain events relating to the Issuer, as set out in Condition 8.4 (Mandatory Redemption in case of Concession Event) the Issuer will redeem in part the Notes (including the relevant part of the principal amount outstanding, and any accrued and unpaid interest on such part of the principal amount outstanding until the date of such redemption) in an amount equal to the Mandatory Redemption Amount. However, it is possible that the Issuer will not have sufficient funds at the time of the Concession Event to make the required redemption of Notes. If there are not sufficient funds for the redemption, Noteholders may receive less than the Mandatory Redemption Amount. Furthermore, the partial redemption of the Notes in case of a Concession Event might adversely affect the Issuer’s financial position. In addition, if the Notes are partially redeemed in case of a Concession Event, there can be no assurance that it will be possible to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Notes.

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3.8. Decisions at Noteholders’ meetings bind all Noteholders Provisions relating to the meetings of Noteholders are contained in Schedule 5 to the Fiscal Agency Agreement and are summarised in Condition 14.1 (Meeting of Noteholders, Noteholders’ Representative, Modification – Meetings of Noteholders). Noteholders’ meetings may be called to consider matters affecting Noteholders’ interests generally, including modifications to the terms and conditions relating to the Notes. These provisions permit defined majorities to bind all Noteholders, including those who did not attend and vote at the relevant meeting or who voted against the majority. Any such modifications to the Notes (which may include, without limitation, lowering the ranking of the Notes, reducing the amount of principal and interest payable on the Notes, changing the time and manner of payment, changing provisions relating to redemption, limiting remedies on the Notes and changing the amendment provisions) may have an adverse impact on Noteholders’ rights and the market value of the Notes. 3.9. Noteholders’ meeting provisions may change by operation of law or because of changes in the Issuer’s circumstances As mentioned in “– Change of law or administrative practice” below, the provisions relating to Noteholders’ meetings (including quorums and voting majorities) are subject to compliance with certain mandatory provisions of Italian law, which may change during the life of the Notes. In addition, as currently drafted, the rules concerning Noteholders’ meetings are intended to follow mandatory provisions of Italian law that apply to Noteholders’ meetings where the issuer is an Italian unlisted company. As of the date of this Prospectus, the Issuer is an unlisted company but, if its shares were listed on a securities market while the Notes are still outstanding, then the mandatory provisions of Italian law that apply to Noteholders’ meetings would be different (particularly in relation to the rules relating to the calling of meetings, participation by Noteholders at meetings, quorums and voting majorities). In addition, certain Noteholders’ meeting provisions could change as a result of amendments to the Issuer’s By-laws. Accordingly, Noteholders should not assume that the provisions relating to Noteholders’ meetings contained in the Fiscal Agency Agreement and summarised in the Conditions will correctly reflect mandatory provisions of Italian law applicable to Noteholders’ meetings at any future date during the life of the Notes. 3.10. Payments in respect of the Notes may in certain circumstances be made subject to withholding or deduction of tax All payments in respect of the Notes will be made free and clear of withholding or deduction of Italian taxation, unless the withholding or deduction is required by law. In that event, the Issuer will pay such additional amounts as will result in the Noteholders receiving such amounts as they would have received in respect of such Notes had no such withholding or deduction been required. The Issuer’s obligation to gross up is, however, subject to a number of exceptions, including withholding or deduction of Italian substitute tax (imposta sostitutiva), pursuant to Italian Legislative Decree No. 239 of 1 April 1996 (“Decree No. 239/1996”). See “Terms and Conditions of the Notes—Taxation”. Prospective purchasers of Notes should consult their tax advisers as to the overall tax consequences of acquiring, holding and disposing of Notes and receiving payments of interest, principal and/or other amounts under the Notes, including, in particular, the effect of any state, regional or local tax laws of any country or territory. See also “Taxation”. 3.11. Risks relating to change of law or administrative practices The conditions of the Notes are based on English law in effect as of the date of this Prospectus, although certain provisions relating to the Notes are subject to compliance with certain mandatory provisions of Italian law, such as those applicable to Noteholders’ meetings and to the appointment and role of the Noteholders’ representative (rappresentante comune). No assurance can be given as to the impact of any possible judicial decision or change to English or Italian law or administrative practice after the date of this Prospectus. See also “– Noteholders’ meeting provisions may change by operation of law or because of changes in the Issuer’s circumstances” above. 3.12. Investors must rely on the procedures of the clearing systems

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The Notes will be deposited with a common safekeeper for Euroclear and Clearstream, Luxembourg (together, the “ICSDs”). Except in the circumstances described in the relevant Global Note, investors will not be entitled to receive in definitive form ("Definitive Notes”). While the Notes are represented by one or more Global Notes, the ICSDs will maintain records of the beneficial interests in the Global Notes and investors will be able to trade their beneficial interests only through the ICSDs. Similarly, the Issuer will discharge its payment obligations under the Notes by making payments to the ICSDs for distribution to their accountholders and has no responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in the Global Notes. A holder of a beneficial interest in a Global Note must therefore rely on the procedures of the ICSDs to receive payments under the relevant Notes. In addition, holders of beneficial interests in the Global Notes will not have a direct right to vote in respect of the relevant Notes. Instead, such holders will be permitted to act only to the extent that they are enabled by the ICSDs to appoint appropriate proxies. 3.13. Minimum Denomination The Notes are issued in denominations of €100,000 or higher amounts which are integral multiples of €1,000, up to a maximum of €199,000. Although Notes may not be traded in amounts of less than €100,000, it is possible that they will be traded in amounts that are not integral multiples of €100,000. In such case, a Noteholder who, as a result of trading such amounts, holds a principal amount of less than €100,000 may not receive a Definitive Note in respect of such holding (should Definitive Notes be printed) and would need to purchase a principal amount of Notes such that its holding amounts to the minimum denomination. If Definitive Notes are issued, holders should be aware that Definitive Notes which have a denomination that is not an integral multiple of €100,000 may be illiquid and difficult to trade. 3.14. Insolvency laws applicable to the Issuer may not be as favourable to the Noteholders as bankruptcy laws in other jurisdictions The Issuer is incorporated in the Republic of Italy. The Issuer and its Italian subsidiaries (as well as any of its subsidiaries whose centre of interests is deemed to be the Republic of Italy) will be subject to Italian insolvency laws. The Italian insolvency laws may not be as favourable to Noteholders’ interests as creditors as the laws of other jurisdictions with which the Noteholders may be familiar. For instance, if the Issuer becomes subject to certain bankruptcy proceedings, payments made by the Issuer in favour of the Noteholders prior to the commencement of the relevant proceeding may be liable to claw-back by the relevant trustee. In particular, in a bankruptcy proceeding (fallimento), Italian law provides for a standard claw-back period of up to one year (six (6) months in some circumstances), although in certain circumstances such term can be up to two (2) years. In this regard, Article 65 of the Italian Royal Decree No. 267 of 16 March 1942, as subsequently amended, may be interpreted as to provide for a claw back period for two years applicable to any payment by the Issuer pursuant to an early redemption at the option of the Issuer if the stated maturity of the Notes falls on or after the date of declaration of bankruptcy of the Issuer. Furthermore, under Italian law, holders of the Notes do not have any right to vote at any shareholders’ meetings of the Issuer. Consequently, Noteholders cannot influence any decisions by the Board of Directors of the Issuer or any decisions by shareholders concerning the Issuer’s capital structure, including the declaration of dividends in respect of the Issuer’s ordinary shares. 3.15. Risk Factors Relating to Markets Generally Set out below is a brief description of the principal market risks that may be relevant in connection with an investment in the Notes. 3.16. There is no active trading market for the Notes and one cannot be assured Application has been made for the Notes to be listed on the Official List of the Irish Stock Exchange and admitted to trading on the regulated market of the Irish Stock Exchange. However, there can be no assurance that the Notes will be accepted for listing or, if listed, will remain listed. The Notes are

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new securities for which there is currently no market. There can be no assurance as to the liquidity of any market that may develop for the Notes, the ability of Noteholders to sell such Notes or the price at which the Notes may be sold. The liquidity of any market for the Notes will depend on the number of holders of the Notes, prevailing interest rates, the market for similar securities and other factors, including general economic conditions, and the Issuer’s financial condition, performance and prospects. In an illiquid market, the Noteholders might not be able to sell their Notes at any time at fair market prices. There can be no assurance that an active trading market for the Notes will develop or, if one does develop, that it will be maintained. If an active trading market does not develop or cannot be maintained, this could have a material adverse effect on the liquidity and trading prices for the Notes. Prospective investors should understand that they may have to bear the financial risks of their investment for an indefinite period of time. 3.17. Transfers of the Notes may be restricted, which may adversely affect the secondary market liquidity and/or trading prices of the Notes Subject to applicable Italian laws and regulations, the ability to transfer the Notes may also be restricted by securities laws or regulations of certain countries or regulatory bodies. See “Subscription and Sale”. The Notes have not been, and will not be, registered under the Securities Act or any U.S. State securities laws or the securities laws of any other jurisdiction. Noteholders may not offer the Notes in the United States or for the account or benefit of a U.S. person, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable U.S. State securities laws. It is the obligation of each Noteholder to ensure that offers and sales of Notes comply with all applicable securities laws. In addition, transfers to certain persons in certain other jurisdictions may be limited by law, or may result in the imposition of penalties or liability. For a description of restrictions which may be applicable to transfers of the Notes, see “Subscription and Sale”. 3.18. The Notes are not rated and credit ratings may not reflect all risks Neither the Notes nor the long-term debt of the Issuer are rated. To the extent that any credit rating agencies assign credit ratings to the Notes or any other senior unsecured indebtedness of the Issuer at any future date, such ratings may not reflect the potential impact of all risks related to structure, market, additional factors discussed above and other factors that may affect the value of the Notes. A credit rating or the absence of a rating is not a recommendation to buy, sell or hold Notes and may be revised or withdrawn by the rating agency at any time. 3.19. The Notes may be delisted in the future Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and admitted to trading on its regulated market. The Notes may subsequently be delisted despite the best efforts of the Issuer to maintain such listing and, although no assurance is made as to the liquidity of the Notes as a result of listing, any delisting of the Notes may have a material effect on a Noteholder’s ability to resell the Notes on the secondary market. 3.20. Legal investment considerations may restrict certain investments The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (i) Notes are legal investments for it, (ii) Notes can be used as collateral for various types of borrowing, and (iii) other restrictions apply to the purchase or pledge of any Notes. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of Notes under any applicable risk-based capital or similar rules. 3.21. Exchange rate risks and exchange controls

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The Issuer will pay principal and interest on the Notes in Euro. This presents certain risks relating to currency conversions if an investor’s financial activities are denominated principally in a currency or currency unit (“Investor’s Currency”) other than euro. These include the risk that exchange rates may change significantly (including changes due to devaluation of the euro or revaluation of the Investor’s Currency) and the risk that authorities with jurisdiction over the Investor’s Currency may impose or modify exchange controls. An appreciation in the value of the Investor’s Currency relative to the euro would decrease (i) the Investor’s Currency equivalent yield on the Notes, (ii) the Investor’s Currency-equivalent value of the principal payable on the Notes, and (iii) the Investor’s Currency-equivalent market value of the Notes. In addition, government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal.

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INFORMATION INCORPORATED BY REFERENCE The following documents, which have previously been published or are published simultaneously with this Prospectus and have been filed with the Central Bank and the Irish Stock Exchange shall be incorporated in, and form part of, this Prospectus: i. the audited consolidated financial statements of the Issuer as of and for the year ended 31 December 2015 prepared in accordance with Italian GAAP, which can be found at http://www.teaspa.it/Consolidated2015.pdf :

Consolidated Balance Sheet Pages 20 to 26 Consolidated Income Statement Pages 27 to 29 Explanatory notes Pages 30 to 65 Report by the independent auditor Pages 66 to 68

ii. the audited consolidated financial statements of the Issuer as of and for the year ended 31 December 2016 prepared in accordance with Italian GAAP, which can be found at http://www.teaspa.it/Consolidated2016.pdf :

Consolidated Balance Sheet Pages 17 to 22 Consolidated Income Statement Pages 23 to 27 Explanatory notes Pages 29 to 68 Report by the independent auditor Pages 80 to 82

The page references indicated above correspond to the page references of the PDF document format. The information incorporated by reference that is not included in the cross-reference lists above is considered as additional information and is not required by the relevant schedules of the Prospectus Regulation. Copies of documents incorporated by reference in this Prospectus will be available for inspection at the registered office of the Issuer and will be published on the website of the Issuer (www.teaspa.it). Any documents themselves incorporated by reference in the documents incorporated by reference in this Prospectus shall not form part of this Prospectus.

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USE OF PROCEEDS The net proceeds of the issue of the Notes will be used by the Issuer for general corporate purposes of the Group, to fund the planned development strategy and to provide financial support to the Issuer’s Subsidiaries.

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SELECTED FINANCIAL INFORMATION The following tables set forth selected financial information of the Group as of and for the periods indicated. IFRS financial information IFRS selected financial data as of and for the years ended 31 December 2016 has been derived from the Restated IFRS Consolidated Financial Statements on which Deloitte & Touche S.p.A. has issued their special purpose independent auditor’s report on 23 May, 2017. The selected financial data in the tables below should be read together with the Restated IFRS Consolidated Financial Statements including the notes thereto, which are attached as Appendix 1 to this Prospectus. See also “Presentation of Financial Information”. Restated IFRS Consolidated Income Statement Data

Year ended 31 December (in Euro thousands) 2016 2015

Revenue 262,528 260,265 Other income 5,005 3,706 Raw materials and consumables (61,359) (76,397) Service cost (129,382) (116,570) Personnel cost (27,096) (24,988) Other operating expenses (10,439) (9,810) Share of profit (loss) of equity investment 63 806 Amortization, depreciation and impairment (17,818) (17,273) Operating income 21,502 19,739 Finance income 2,055 1,942 Finance expense (1,589) (2,051) Profit before income tax 21,968 19,630 Income tax (6,934) (6,910) Net profit 15,034 12,720

Profit attributable to the Group 13,130 11,258 Profit attributable to the Non controlling interest 1,904 1,462

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Restated IFRS Consolidated Statement of Financial Position Data

As of 31 December (in Euro thousands) 2016 2015 Intangible assets 109,120 92,252 Tangible assets 108,889 113,363 Investments measured using the equity method 6,424 6,175 Deferred tax assets 793 792 Other non current assets 35,082 30,037 Total non current assets 260,308 242,619 Inventory 2,391 2,619 Current trade receivables 83,900 78,465 Income tax asset 1,160 1,483 Other current assets 19,431 17,592 Cash and cash equivalents 4,334 7,709 Assets held for sale - - Total current assets 111,216 107,868 Total assets 371,524 350,487 Share capital 73,403 71,942 Share premium 4,127 1,872 Other reserves 53,688 52,138 Retained earnings 13,835 6,666 Total Group equity 145,053 132,618 Non controlling interest 10,351 9,413 Total equity 155,404 142,031 Non current borrowings 58,950 64,719 Employee benefits 7,725 7,312 Non current provisions 37,350 33,563 Deferred tax liabilities - - Other non current liabilities 4,778 6,970 Total non current liabilities 108,803 112,564 Current borrowings 14,427 13,456 Trade payables 81,894 69,952 Income tax liability 157 446 Other current liabilities 10,839 12,038 Total current liabilities 107,317 95,892 Total liabilities 216,120 208,456 Total equity and liabilities 371,524 350,487

Restated IFRS Consolidated Cash Flow Statement Data

Year ended 31 December (in Euro thousands) 2016 2015

Net Cash Inflow from operating activities 37,396 37,307 Net cash outflow from investing activities (26,808) (28,506) Net cash outflow from financing activities (13,963) (9,293) Net increase (decrease) in cash and cash (3,375) (492) equivalents

Cash and cash equivalents at the beginning of the year 7,709 8,201 Cash and cash equivalents at the end of the year 4,334 7,709

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IFRS selected Other Financial Indicators The Group has calculated Net Financial Indebtedness as the sum of current and non current borrowings less the sum of cash and cash equivalents and current financial receivables. The Group has calculated Adjusted Net Financial Indebtedness as Net Financial Indebtedness less non current financial receivables.

As of 31 December (in Euro thousands) 2016 2015

Cash and cash equivalents (4,334) (7,709) Finance lease receivable current (628) (250) Current portion long term financing to third parties (84) (85) Total current financial receivables (712) (335) Current borrowings 14,427 13,456 Current financial indebtedness 9,381 5,412 Non current borrowings 58,950 64,719 Net Financial Indebtedness 68,331 70,131 Non current public lightening financial receivable (8,056) (4,268) Long term financing to related parties (5,466) (3,996) Long term financing to third parties (1,909) (447) Bonds (1,000) (1,000) Finance lease receivable non current (422) (418) Total non current financial receivables (16,853) (10,129) Adjusted Net Financial Indebtedness 51,478 60,002

EBITDA is defined as net profit before income tax, finance expense, finance income, depreciation and amortization. Adjusted EBITDA is defined as net profit before income tax, finance expense, finance income, depreciation, amortization, impairment and provisions. The following table provides a reconciliation of net income to EBITDA and Adjusted EBITDA for each of the periods indicated.

Year ended 31 December (in Euro thousands) 2016 2015

Net profit 15,034 12,720 Income tax 6,934 6,910 Finance expense 1,589 2,051 Finance income (2,055) (1,942) Amortization and depreciation 17,722 17,273 EBITDA 39,224 37,012 Impairment 96 - Provisions2 3,788 2,458 Adjusted EBITDA 43,108 37,012

2 Accruals for provisions, which are included into other operating expenses line.

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Italian GAAP financial information Italian GAAP selected financial data as of and for the years ended 31 December 2016 and 2015 has been derived from the Italian GAAP Audited Consolidated Financial Statements on which Deloitte & Touche S.p.A. has issued their audit report on 23 March 2017. The selected financial data in the tables below should be read together with the Italian GAAP Audited Consolidated Financial Statements including the notes thereto, which are incorporated by reference in the Prospectus. See also “Presentation of Financial Information”. Italian GAAP selected Consolidated Income Statement Data

Year ended 31 December (in Euro thousand) 2016 2015 Restated3

Value of Production 251.558 254.341 Cost of Production (231.932) (236.010) Difference between value and cost of production 19.626 18.331 Financial income and expenses 3.101 2.775 Writedowns of investments (2.000) (2.000) Profit before taxation 20.727 19.106 Taxes on income for the year: (6.540) (7.061) Profit for year 14.187 12.045 of which: Profit attributable to the Group 12.587 10.758 Profit attributable to the Non controlling interest 1.600 1.287

3 "2015 Restated” refers to the restatement of the 2015 figures included in the Italian GAAP Audited Consolidated Financial Statements of the Issuer as of and for the years ended 31 December, 2015 to reflect changes in Italian GAAP measures introduced during 2015.

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Italian GAAP selected Consolidated Statement of Financial Position Data (in Euro thousand) As of 31 December 2016 2015 Restated4 Non-current assets Intangible assets 14.317 14.397 Tangible assets 199.872 180.963 Financial assets 26.840 27.111 Total non-current assets 241.029 222.471 Current assets Inventory 2.391 2.619 1) trade accounts 84.868 78.973 3) from associated companies/current 1.394 1.487 4) from parent companies/current 2.257 1.131 5) from companies controlled by parent company 103 150 5-bis) tax receivables/current 6.976 10.517 5-ter) deferred tax assets/current 9.218 8.669 5-quater) from others 7.833 6.475 Receivables 112.649 107.402 Financial assets 4.084 1.389 Cash and cash equivalents 4.334 7.709 Total current assets 123.458 119.119 Prepaid expenses and accrued income 2.756 2.701 Total assets 367.243 344.291 Liabilities and shareholders’ equity Consolidated shareholders' equity Share capital 73.403 71.942 Share premium reserve 4.127 1.872 Revaluation reserves 2.592 2.592 Legal reserve 3.443 2.945 Extraordinary reserve 30.314 27.254 Voluntary contribution reserve 1 1 Merger reserve 23 23 Reserve for surplus earnings 5 4 Other reserves 30.343 27.282 Reserve for expected cash flow hedging 726 (148) Retained earnings (accumulated losses) (90) (2.181) Profit (loss) for the year 12.587 10.759 Negative reserve for treasury shares (416) (416) Consolidated shareholders’ equity – group 126.715 114.647 Share capital and reserves – minority interests 8.245 7.849 Profit for the year – minority interests 1.600 1.286 Consolidated shareholders’ equity – minority interests 9.845 9.135 Total consolidated shareholders’ equity 136.560 123.782 Provisions for risks and charges 45.688 41.407 Employee severance indemnity - TFR 7.025 6.975 Debt Payables to bank 72.801 77.497 Payables to other lenders 326 355 Payments on account - - Trade payables 65.037 53.359 Payables to associated companies 439 533 Payables to parent companies 17.390 16.903 Tax payables 1.654 4.058 Payables to social security and pensions institutions 1.550 1.571 Other payables 6.806 5.805 Total Debt 166.003 160.081 Accrued expenses and deferred income 11.967 12.046 Total Liabilities and Equity 367.243 344.291

4 "2015 Restated” refers to the restatement of the 2015 figures included in the Italian GAAP Audited Consolidated Financial Statements of the Issuer as of and for the years ended 31 December, 2015 to reflect changes in Italian GAAP measures introduced during 2015.

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Italian GAAP Change In December 2016 revised OIC were issued which were to be applied for periods beginning on or after 1 January 2016. The amendments, included in the revised OIC, in certain instances are to be applied retrospectively, whilst in other instances the Issuer can choose to apply these changes only from 1 January 2016, without restating the comparative information as of and for the years ended 31 December 2015. The most significant changes to Italian GAAP, applicable to the Issuer, are as follows:  Extraordinary items—Italian GAAP no longer allows for the separate line item ‘‘extraordinary items’’ to be disclosed on the income statement. Extraordinary items must be classified on the income statement according to their nature. In the preparation of the Italian GAAP Audited Consolidated Financial Statements, items which had previously been classified as ‘‘extraordinary’’ in 2015 have been classified in the income statement according to their nature;  Amortized cost—Italian GAAP no longer allows for measurement of non-current financial assets, receivables and payables at their nominal values. Non-current financial assets, receivables and payables must be valued at amortized cost using the effective interest rate method;  Derivative financial instruments—Italian GAAP requires the recognition and measurement of derivative financial instruments at their fair value. If certain criteria are met, the fair value changes of cash flow hedge derivative financial instruments are recorded in a specific reserve in equity. In the preparation of the Italian GAAP Audited Consolidated Financial Statements derivative financial instruments as of 31 December 2015 were recorded at their fair value in the balance sheet and their fair value change was included in a specific reserve in total equity.  Memorandum accounts—memorandum accounts are no longer presented after the balance sheet and information relating to off balance sheet arrangements and contractual obligations are now required to be disclosed within the explanatory notes to the Italian GAAP Audited Consolidated Financial Statements; and  Explanatory notes—the revised OIC require certain additional information to be included in the explanatory notes.

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DESCRIPTION OF THE ISSUER Overview TEA S.p.A. (the “Issuer” or “TEA”) is a company limited by shares (società per azioni) incorporated in Italy according to the provisions of the Italian Civil Code. Its shareholders are public entities (60 municipalities). The Issuer was incorporated on 19 June 1996 with a duration until 31 December 2057 and is registered with the Registry of the Chamber of Commerce of Mantova, registration number 01838280202. Its registered office is at Via Taliercio 3, 46100 Mantova, Italy. The Issuer may be contacted by telephone on +39 03764121 and by email at the following certified email address (posta elettronica certificata): [email protected]. Pursuant to its by-laws the Issuer’s term of incorporation (i.e. 31 December 2057) may be extended or reduced by a shareholders’ extraordinary resolution. The Issuer is an Italian multi-utility provider and it mainly operates in the province of Mantova. The core businesses of the Issuer are conducted through its consolidated subsidiaries (the Issuer, together with it consolidated subsidiaries, “Group”) and are conducted in the following sectors: (i) electricity (production and sale), (ii) heating (production and sale), (iii) gas (distribution and sale), (iv) integrated water services and (v) waste management services (collection and disposal of waste). The Group also provides other public utility services which include public lighting, funeral services, cemetery services management, road maintenance, snow removal and green areas maintenance. The businesses of the Group include both regulated activities managed under licensed concessionary regimes (such as integrated water services, urban waste management, distribution of gas, district heating, public lighting management and cemetery services), and businesses managed under ‘‘free competition’’ regimes (the sale of gas and electricity, special waste management, heat management services, electricity production from renewable sources, funeral services and steam and power production from cogeneration plants). The following table shows the main financial indicators derived from the Restated IFRS Consolidated Financial Statements.

For the year ended and as of 31 December (in Euro thousand) 2016 2015 Revenues 262,528 260,265 EBITDA 39,224 37,012 Net Profit 15,034 12,720 Total Equity 155,404 142,031 Net Financial Indebtedness 68,331 70,131 Adjusted Net Financial Indebtedness 51,478 60,002 Adjusted Net Financial Indebtedness / EBITDA 1.3x 1.6x Adjusted Net Financial Indebtedness / Equity 0.3x 0.4x Dividend paid (5.857) (4.656)

The Issuer’s management believes that the complementary nature of the businesses creates expansion opportunities and makes it possible for the Group to achieve cost synergies and efficiencies and also to cross- sell utility services to its customers. In addition, the Issuer’s management believes that the business of the Group is diversified in terms of the contribution to EBITDA from regulated activities (such as gas distribution, integrated water services, public lighting management, urban waste management, district heating and cemetery services) and deregulated activities (such as gas and electricity production and sale, funeral services, management of special waste and other services), which respectively accounted for around half of the Group’s EBITDA for the year ended on 31 December 2016. History TEA was incorporated as a result of the transformation of the Azienda Servizi Municipalizzati di Mantova into a limited liability company, with 60 municipalities as shareholders. The key events in the Group’s history may be summarized as follows:

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1903 Law No. 103/1903 (Legge Giolitti) on the municipalisation of the public services; 1908 incorporation of the Azienda Municipalizzata del Gas di Mantova, as a result of the municipalisation of “Officina del Gas”; 1948 Azienda Municipalizzata del Gas di Mantova becomes Azienda Autonoma Municipalizzata Gas-Acqua, by incorporating the Mantova municipal aqueduct in 1908 and aggregating the Mantova waste collection service in 1970; 1973 Azienda Autonoma Municipalizzata Gas-Acqua is renamed as Azienda Servizi Municipalizzati; 1978-1984 Azienda Servizi Municipalizzati expands its business activity to the sector of district heating and to the production of heat and electricity; 1989-1995 Azienda Servizi Municipalizzati expands its business activity through the acquisition of the services of purification of urban waste water, street lighting, cemetery and funeral services; 1994 Azienda Servizi Municipalizzati becomes a special agency (azienda speciale) under the Law No. 241/1990; 1996-1998 the waste collection service, the street lighting service and sewerage service come into operation; 1998 the Issuer is incorporated; 2002 the road maintenance service and the management services of the public green areas come into operation; 2005 Tea Onoranze Funebri S.r.l. and Tea Energia S.r.l. are incorporated; 2006 Tea Acque S.r.l. is incorporated; 2007 Mantova Ambiente S.r.l. and Sei Servizi Energetici Integrati S.r.l. are incorporated; 2011 Electrotea S.r.l. is incorporated; 2013 Tea Reteluce S.r.l. and G.F.S. S.r.l. are incorporated; 2016 AqA Mantova S.r.l. is incorporated; 1998 - Present Following the incorporation of the Issuer, the Group has consolidated its own business activity, by increasing the number of shareholders and the services provided. Nowadays the Issuer is the parent company of the Group and operates either directly or through the subsidiaries on a wide provincial area, by providing environmental, energy, water and funeral services. Strategy The Group's aim is to continue its growth process and, in order to do so, it focuses its strategy on the following pillars:  "Customer-focus" to be considered as the main driver for all Group’s activities in order to create value and develop the reputation of the brand and the level of offered services;  preserve the current corporate identity, which is the result of the close relationship with the reference territories and that has contributed to the growth of the Group;  carry out projects able to promptly respond to changes, local community needs and difficulties;

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 maintain the current Group structure which allows each company of the Group to take autonomous strategies based on how the management of the single service is awarded or entrusted, the size of the relevant market and possible partnerships with third parties;  prefer the model of institutionalised public-private partnership (modello del partenariato pubblico- privato istituzionalizzato) (the “PPPI”) for carrying out local public services and the consequent pursuit of a services execution process aimed at retaining within the Group the service execution control and the know how while out-sourcing all "labor intensive" operations;  pursue policies allowing the stability of the employment level, the training and professional development of all employees;  continue the important technological innovation strategy launched in recent years in order to become a multi-utility company with a developed and integrated IT system.

Group Structure and Subsidiaries The following chart shows the Group structure as of the date of this Prospectus.

The Issuer The Issuer is a company limited by shares (società per azioni) and it has the role of parent company of the Group; it owns the main assets of the Group (as described below) and it also holds the control over all the operating companies.

The Group’s development strategies are based on an organisational and business model, divided into an industrial holding company and operating companies responsible for supervising the businesses. TEA, as parent company of the Group, is responsible for establishing the strategic guidelines and management policies, allocating resources and coordinating the Group’s business areas. Each of the subsidiaries, is responsible for the management and development of its business line and acts in its market sector either directly or through its own subsidiaries or companies in which it holds minority shareholdings. The Group’s organizational model adopted is aimed at coordinating the business activities, applying the strategic guidelines, the business plan and the targets set for each area of operation.

The Issuer owns the brand of the Group, the headquarters and other offices, the “data center”, the “logistic center”, the main plants (please refer to paragraph “Property, plants and equipment” below) and technological networks for the integrated water cycle and the gas distribution (such assets are not freely transferable since they were conferred by the municipalities - in their role of shareholders - before the liberalization of the markets), the district heating network and plants for the municipality of Mantova, the landfill of Mariana Mantovana and the waste treatment facility of Ceresara.

The Issuer also provides its subsidiaries with all “staff services”, including the treasury and the cash pooling services, as well as all technical, engineering and information technology services.

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The Issuer receives from Mantova Ambiente, SEI and Tea Acque annual fees for the utilization and management of its assets and plants. In addition, the Issuer also receives rents from all its Subsidiaries for the lease of offices and buildings. Both the annual fees and the rents are paid to the Issuer on the basis of intercompany contracts.

Furthermore, the Issuer provides all of its Subsidiaries with management services such as treasury services, cash pooling, information technology and engineering and technical services. All the above mentioned services are provided by the Issuer on the basis of intercompany contracts, whose terms and conditions are in line with the best market practices and are periodically verified by the Issuer’s management.

TEA strictly exercises management and coordination functions over its subsidiaries through:

 all rights and powers granted to it as major shareholder according to the by-laws of the relevant subsidiary;

 a complete set of rules, such as the “Regulation on Steering and Control of the Group” and the “Groups’ Guide on the Integrated System of Quality and Environment UNI EN ISO 9001 and 14001”;

 a system of powers of attorney that each chief executive officer of the relevant subsidiary releases to the general manager of the Issuer;

 the exercise of the function of employer of all the managers of its subsidiaries. All operational services are directly managed by the Issuer’s subsidiaries, except for the cemetery services which are directly managed by the Issuer through a concession granted by the Municipalities of Mantova and Suzzara.

The cemetery services according to the relevant concession, mainly include the following activities:

 operating and maintenance;  cremation services (only with regard to the cemetery of Mantova)  cemetery areas management for the construction of private tombs;  votive lighting.

Subsidiaries The main subsidiaries of the Issuer as of the date of this Prospectus are described below. Sei Servizi Energetici Integrati S.r.l. (“SEI”) SEI, a 100% owned subsidiary of the Issuer, is a limited liability company with a sole quotaholder (società a responsabilità limitata con socio unico) with a share capital of Euro 1,000,000, incorporated and operating under Italian law. SEI was incorporated on 31 October 2006 with a duration until 31 December 2050 and is registered with the Registry of the Chamber of Commerce of Mantova, registration number 02169270200. Its registered office is at Via Taliercio 3, 46100 Mantova, Italy. See also “Sei Servizi Energetici Integrati S.r.l. - Business”.

Tea Energia S.r.l. (“Tea Energia”) Tea Energia, a 100% owned subsidiary of the Issuer, is a limited liability company with a sole quotaholder (società a responsabilità limitata con socio unico) with a share capital of Euro 2,000,000, incorporated and operating under Italian law. Tea Energia was incorporated on 30 August 2005 with a duration until 31 December 2050 and is registered with the Registry of the Chamber of Commerce of Mantova, registration number 02125710208. Its registered office is at Via Taliercio 3, 46100 Mantova, Italy.

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See also “Tea Energia S.r.l. - Business”. Tea Reteluce S.r.l. (“Tea Reteluce”) Tea Reteluce, a 60% owned subsidiary of the Issuer, is a limited liability company (società a responsabilità limitata) with a share capital of Euro 100,000, incorporated and operating under Italian law. Tea Reteluce was incorporated on 19 April 2013 with a duration until 31 December 2050 and is registered with the Registry of the Chamber of Commerce of Mantova, registration number 02399890207. Its registered office is at Via Taliercio 3, 46100 Mantova, Italy. See also “Tea Reteluce S.r.l. - Business”. Mantova Ambiente S.r.l. (“Mantova Ambiente”) Mantova Ambiente, a 40.48% owned subsidiary of the Issuer, is a limited liability company (società a responsabilità limitata) with a share capital of Euro 227,270, incorporated and operating under Italian law. Mantova Ambiente was incorporated on 31 October 2006 with a duration until 31 December 2050 and is registered with the Registry of the Chamber of Commerce of Mantova, registration number 02169280209. Its registered office is at Via Taliercio 3, 46100 Mantova, Italy. See also “Mantova Ambiente S.r.l. - Business”. Tea Acque S.r.l. (“Tea Acque”) Tea Acque, a 60% owned subsidiary of the Issuer, is a limited liability company (società a responsabilità limitata) with a share capital of Euro 3,050,000, incorporated and operating under Italian law. Tea Acque was incorporated on 14 June 2005 with a duration until 31 December 2056 and is registered with the Registry of the Chamber of Commerce of Mantova, registration number 02119870208. Its registered office is at Via Taliercio 3, 46100 Mantova, Italy. See also “Tea Acque S.r.l. - Business”. AqA Mantova S.r.l. (“AqA Mantova”) AqA Mantova, a 100% owned subsidiary of the Issuer, is a limited liability company with a sole quotaholder (società a responsabilità limitata con socio unico) with a share capital of Euro 1,000,000, incorporated and operating under Italian law. Aqa Mantova was incorporated on 20 January 2016 with a duration until 31 December 2050 and is registered with the Registry of the Chamber of Commerce of Mantova, registration number 02484440207. Its registered office is at Via Taliercio 3, 46100 Mantova, Italy. See also “AqA Mantova S.r.l. - Business”. Tea Onoranze Funebri S.r.l. (“Tea On. Funebri”) Tea On. Funebri, a 100% owned subsidiary of the Issuer, is a limited liability company with a sole quotaholder (società a responsabilità limitata con socio unico) with a share capital of Euro 100,000, incorporated and operating under Italian law. Tea Onoranze Funebri was incorporated on 18 January 2005 with a duration until 31 December 2050 and is registered with the Registry of the Chamber of Commerce of Mantova, registration number 02102760200. Its registered office is at Via Taliercio 3, 46100 Mantova, Italy. See also “Tea Onoranze Funebri S.r.l. - Business”. Electrotea S.r.l. (“ElectroTea”) ElectroTea, a 60% indirectly owned subsidiary of the Issuer (through SEI), is a limited liability company (società a responsabilità limitata) with a share capital of Euro 50,000, incorporated and operating under Italian law. ElectroTea was incorporated on 23 December 2010 with a duration until 31 December 2050 and is registered with the Registry of the Chamber of Commerce of Mantova, registration number 02323890208. Its registered office is at Via Taliercio 3, 46100 Mantova, Italy. See also “Electrotea S.r.l. - Business”. Global Funeral Service S.r.l. (“G.F.S.”) G.F.S., a 100% indirectly owned subsidiary of the Issuer (through Tea On. Funebri), is a limited liability company with a sole quotaholder (società a responsabilità limitata con socio unico) with a share capital of Euro 51,000, incorporated and operating under Italian law. Global Funeral Service was incorporated on 19

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December 2013 with a duration until 31 December 2050 and is registered with the Registry of the Chamber of Commerce of Mantova, registration number 02418270209. Its registered office is at Via Taliercio 3, 46100 Mantova, Italy. See also “Global Funeral Service S.r.l. - Business”.

**** **** **** **** **** **** **** **** **** **** **** **** Business Overview The Group performs the following activities as represented in table below:

The Issuer’s management believes that these different but complementary businesses may help the Group to deal with changing market conditions, since adverse changes in one sector will not necessarily be reflected in the other sectors at the same time and has a potential positive impact on the Group’s revenue-generating capacities.

The Group carries out the above business activities through the following companies: (i) gas distribution, district heating production and distribution through SEI; (ii) sale of electricity, natural gas and district heating through Tea Energia; (iii) waste collection (including differentiated and special waste collection), waste disposal, treatment plants and management of public green areas through Mantova Ambiente; (iv) management of integrated water cycle through Tea Acque and Aqa Mantova; (v) management of public lighting service through Tea Reteluce; (vi) cemetery services management through TEA and (vii) funeral services through Tea Onoranze Funebri and G.F.S.

Sei Servizi Energetici Integrati S.r.l. – Business

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General Description The Municipality of Mantova, according to resolutions no. 201/97 and no. 133/1999 and the service contract dated 30.12.1999, has entrusted the Issuer with the gas distribution service in accordance with the "in house providing" mechanism, pursuant to laws and regulations at that time applicable; subsequently, the evolution of the Italian regulatory framework has provided for (i) the termination by law (ope legis) of the concessions for the gas distribution service which had not been entrusted by means of a public tender procedure, and (ii) the extension (proroga) of the management of the concessions by the same operators which were previously awarded with such concessions, until new concessions will be awarded through public tender procedures managed by the relevant ATEM (for further information please see section "Regulations", paragraph “Gas distribution”). On 23 December 2006, the Issuer conferred its gas distribution service business unit, including the relevant concessions, in TEA SEI S.r.l. (subsequently renamed as Sei Servizi Energetici Integrati S.r.l.). As at the date of this Prospectus, SEI manages all activities relating to the distribution of gas for all purposes, the management of the networks for the natural gas, the district heating and the heating systems; SEI also operates in the sector of the development of renewable energy (please refer to section “Regulation”, paragraph “Natural Gas”, sub-paragraph “Gas distribution” and paragraph “District heating”) for more details in relation to the laws regulating these businesses). Distribution of Natural Gas SEI operates in the natural gas distribution sector and it manages over 869 km of natural gas network infrastructure and mostly operates in the area of the province of Mantova under the concessions awarded by the following Municipalities:  Asola, Gas Service Contract dated 11 June 2007; expiry date 31 January 2020;  Borgo Virgilio, Gas Service Contract dated 23 December 2008; expiry date 1 January 2021;  Bozzolo, Gas Service Contract dated 31 May 2007; expiry date 1 February 2020;  Curtatone, Gas Service Contract dated 5 April 2011; expiry date 5 April 2023;  Mantova. The relevant service contract is dated 30 December 1999; expiry date: the earlier of (i) 30 December 2039 and (ii) the date on which the entity awarded with the gas distribution concession in the ATEM Mantova 1 will commence its operational services;  Porto Mantovano, Gas Service Contract dated 16 September 2010; expiry date 1 October 2023;  San Benedetto Po. The relevant service contract is dated 12 April 2005. The service contract related to the municipality of San Benedetto Po has expired in February 2017 and is deemed to be extended until the tender relating to the awaiting for the tender relating to the gas distribution concession in the ATEM Mantova 2. The service contract will expire on the date on which the entity awarded with the gas distribution concession in the ATEM Mantova 2 will commence its operational services;  San Giorgio di Mantova, Gas Service Contract dated 16 September 2010; expiry date 1 October 2023;  San Martino d’Argine, Gas Service Contract dated 17 September 2007; expiry date 10 March 2020;  Suzzara, Gas Service Contract dated 8 November 2011; expiry date 8 November 2023. The tender procedure for the awarding of the gas distribution in the minimum independent geographic area (Ambito Territoriale Minimo) encompassing, inter alia, the municipalities of Mantova, Porto Mantovano, San Giorgio di Mantova, Borgo Virgilio, Curtatone, Bozzolo, Asola and San Martino d’Argine (“ATEM Mantova 1”) is expected to start before 11 February 2019 (source: “Annex 1 to the Ministerial Decree No 226/2011, as updated by the Law Decree No. 210/2015) after such term the Region may intervene to start the tender procedure. Considering that the aggregate value of the assets managed by the Issuer or its Subsidiaries, as the case may be, within the concessions comprised in the ATEM Mantova 1, exceeds Euro 20,000,000.00, should such concessions be awarded to entities other than the Issuer or its Subsidiaries following the tender procedure, the aggregate Termination Value Payment (as defined in the section “Terms and Condition of the Notes”) due and payable to the Issuer or any Subsidiary pursuant to the relevant service contract, will be in excess of Euro 20,000,000.00.

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The tender procedure for the awarding of the gas distribution in the minimum independent geographic area (Ambito Territoriale Minimo) encompassing, inter alia, the municipalities of Suzzara and San Benedetto Po (“ATEM Mantova 2”) is expected to start before 11 March 2019 (source: “Annex 1 to the Ministerial Decree No 226/2011, as updated by the Law Decree No. 210/2015) after such term the Region may intervene to start the tender procedure. Please also refer to section “Regulation”, paragraph “Natural Gas”) for more details in relation new tender procedures relating to the awarding of the gas distribution.In 2016, SEI distributed more than 120 million cubic metres of natural gas on behalf of companies authorised to carry out the sale of gas to end users and operated 65,387 delivery points. As of the date of this Prospectus, SEI holds 10 concessions for the distribution of natural gas. Managed network description

2015 2016 PDR (No.) 65,512 65,387

Gas Network Managed (km) 868.55 869.12

m³ gas distributed 120,000,000 120,000,000

Natural gas distribution is carried out in the following stages: (i) natural gas is taken to the delivery points of the national transport network, which operates at high pressure. Filtration, preheating, reduction of pressure, measurement and odorisation are performed in decompression stations of SEI (reception cabins); (ii) once the natural gas has entered the distribution network, through pipelines managed at a medium operating pressure, it reaches the reduction units of SEI, where the pressure is reduced from medium to low pressure; (iii) the natural gas enters the final distribution network and, through pipelines managed at a low operating pressure, it reaches end users where SEI performs quantification and metering through the customers' systems; (iv) the medium pressure and low pressure networks, managed by SEI, are fed, through apposite stations for the reduction of pressure, by the high pressure network managed by Snam S.p.A.; (v) SEI takes care of the gas distribution to the final customer and is in charge for the management of the gas metering, including the activities relating to the meter reading. SEI constantly monitors the distribution network, using a remote control system that allows it to promptly carry out any necessary maintenance works. In 2016, SEI was recognised as one of the top Italian operators in terms of safety of its networks and distribution systems by the Autorità per l’Energia Elettrica, il Gas e il Sistema Idrico (i.e. the National Authority for Electrical Energy, Gas and Water Supply, the “AEEGSI”), which accordingly granted to it incentives amounting to about €0.18 million. SEI is constantly developing its gas distribution network, both through the construction of new facilities and network segments and the creation of new service connections. SEI spent approximately €3 million during 2016 in investments and improvements to its natural gas distribution networks and other infrastructures. District Heating SEI manages district heating networks in the municipality of Mantova, pursuant to a concession awarded by the municipality of Mantova through a “service contract” dated 30 December 1999 with expiry date on 30 December 2039. District heating is a service involving the production and distribution of heated water to be used for customers’ home heating and domestic hot water needs. It is an alternative system to traditional boilers, which allows to concentrate the production of heat in few centralised installations that are more efficient and better controlled than home boilers. From these centralised installations, the heat is distributed through a network of insulated pipelines to the customers’ houses in the form of hot water. The heat then fuels the domestic heating system using non-polluting heat exchangers. District heating provides a solution to air pollution problems

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through the replacement of home boilers (frequently fuelled with gasoil or methane) and allows heat generation from high-efficiency production methods, renewable energy or energy recovered from other production processes. In order to produce the necessary heat, the power plants can be operated by various fuels. With reference to the district heating for the municipality of Mantova, the heat that feeds the network derives for the most part from the recovery of the industrial heat of the EniPower Mantova power plant. In case of operating anomalies or in case of exceptional cold peaks, SEI has emergency boilers fueled by natural gas. Despite the limited size of Mantova, the ratio between the volumetry connected and the number of inhabitants brings the city among the top ten in Italy, boasting a service started almost forty years ago (source: “Annuario AIRU 2016 dati 2015”). In particular, the district heating, for the production of the necessary heat, draws steam that would otherwise be emitted into the atmosphere, and in this way it contributes for more than 42% to satisfy the heat demand of the city. This is a primacy that few cities of similar size can boast (source: “Annuario AIRU 2016 dati 2015”).

Managed network description

2015 2016 PDC (No.) Equivalent inhabitants 55,218 56,660 Managed Network (km) 63.64 65.20 Connected volumetry m3 6,329,219 6,488,000

Production of electrical energy from renewable sources SEI is also active in the production of electrical energy from renewable sources through various projects focusing mainly on the photovoltaic, hydroelectric and liquid biomass sectors (please refer to section “Regulation”, paragraph “Hydroelectric incentives regime”, “Photovoltaic power plants”, “Photovoltaic incentives regime” for more details in relation to the laws regulating these businesses). See also “Property, plants and equipment” below. With specific reference to the photovoltaic, hydroelectric and liquid biomass sectors, SEI manages respectively:  photovoltaic: 2 rooftop plants in the municipality of Suzzara and 6 plants in the municipality of Curtatone (for a total power of about 160 kW and a 2016 production of 154,000 kWh);  hydroelectric: 2 plants located respectively in the municipality of Goito (“Marenghello”) and Mantova (“Vasarina”) (for a total power of about 1,000 kW and a 2016 production of 4,292,180 kWh); the Marenghello plant is owned by ElectroTea while the Vasarina plant is owned by SEI.  liquid biomass: 1 cogeneration turbine plant (fueled with animal fat) located in the municipality of Pegognaga (4,670 kWe – 3,960 kWt – 2016 electrical production: about 35,000,000 kWh).

ElectroTea S.r.l.– Business Network and Plant Maintenance ElectroTea is a subsidiary of SEI and is the company through which SEI conducts its operation and maintenance activities on the hydroelectric plants located in the province of Mantova. The corporate purpose of ElectroTea is the research, design, construction, carrying out of the maintenance of plants and machineries, also on behalf of third parties, for the exploitation of the energy in the hydroelectric sector in the province of Mantova.

Tea Energia S.r.l. – Business

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General Description Tea Energia sells electric energy, methane gas and heat. It promotes renewable energy generated by the Group (please refer to section “Regulation”, paragraph “Electricity”, sub-paragraph “Sale” and paragraph “Natural Gas”, sub-paragraph “Natural Gas Sale” and paragraph “District Heating” for more details in relation to the laws regulating these businesses). Sale of Electricity Tea Energia operates in the electricity sales business for industrial, commercial and retail consumption by customers (including public bodies) in the free market. The company offers to all market segments an offer which combines the sale of electricity and gas. Moreover, the widespread presence of points of sale in the reference territories allows to reach an important customer base, especially for the sale of electrical energy that is still mostly managed by the ex-monopolist historical supplier. Tea Energia not only offers economic conditions based on the needs of the relevant customer, but it also offers an advisory service for supporting the customer with his decision in the energy sector. This leads to the new energy efficiency projects, dynamic purchases’ management activities to better support customers, periodic regulatory updates in order to meet the needs of the more demanding customers who choose the certification of their energy consumption from renewable sources. During 2016, Tea Energia sold over 427 GwH to customers mainly located in the province of Mantova for a turnover of about Euro 67 million, compared to the about Euro 63 million of the 2015. The number of point of delivery electricity sales (“POD”) amounted to 24,119 and 18,841, respectively, for the years ended on 31 December 2016 and 31 December 2015. As the electricity market is liberalised, consumers can freely choose their suppliers of electricity, assess the quality of the services and select the offers which are more tailored to their needs. Retail customers are able to combine the supply of electricity with the supply of natural gas by opting for the dual fuel service. Tea Energia has continued the growth and improvement path traced by the industrial plan for its sale and purchase processes, with a growth on the number of customers in all segments. In particular, retail customers have had a significant increase (more than 21% compared with 2015 – in this respect please see figures inserted in the table below) which consolidates the structural trend of growth of the last years. The table below summarises the main indicators relating to the energy business carried out by Tea Energia during years 2016 and 2015:

Tea Energia 2015 2016

Electric energy customers (N° P.O.D.) 18,841 24,119

Electric energy sold (MWh) 385,026 427,452

Electric energy sold wholesale (MWh) 13,000 32,000

Electric energy produced by renewable sources (MWh) 21,000 10,200

Sale of Natural Gas Tea Energia operates in the gas sales business for industrial, commercial and retail customers (including public entities) in the free market (please refer to section “Regulation”, paragraph “Natural Gas” and sub- paragraphs “Natural Gas Sale” and “Gas Distribution” for more details in relation to the laws regulating these businesses).

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During 2016, Tea Energia sold over 108,601,994 cubic metres of gas (with an increase of 9% in respect of the 99,701,767 cubic metres of gas sold in 2015) to 54,240 redelivery points (“PDR”) (punti di riconsegna) (with an increase of over 1,000 PDR in respect of 2015). In particular, 4 million cubic metres of gas were sold to wholesale end users while 104 million cubic metres of gas were sold to retail customers. There are two types of market within the domestic portfolio: the first type where the price of raw materials is determined by AEEGSI (protected area) and the second type where there is a free market in which the economic conditions are established by the free negotiation between the parties and are based on the choice that each customer makes by evaluating offers from different suppliers. The current portfolio of Tea Energia is composed by 70% of customers under free market conditions. The table below summarises the main indicators relating to the gas business carried out by Tea Energia during years 2016 and 2015:

Tea Energia 2015 2016

Gas customers (N° P.D.R.) 53,056 54,240

Sold Gas (m3) 99,701,767 108,601,994

Sale of District Heating Tea Energia manages heat sales to customers receiving district heating in the municipality of Mantova. The heating sold to customers and the control and management of substations powering the heating systems in buildings served by the network is supplied by SEI under economic conditions that guarantee adequate remuneration. In Mantova the heat distribution network (which is owned by the Issuer and which distributes the heat produced by the steam of the combined cycle cogeneration plant located in Mantova) significantly contributes to the reduction of air pollution. The district heating (i.e. the centralized production of the heat transmitted to dwellings in the form of hot water through an underground network of insulated pipes) allows the switching off of the domestic heating boilers which are diffuse sources of pollution. For the description of the district heating services, please see “Sei Servizi Energetici Integrati S.r.l. – Business – District Heating”. Power & Gas Trading Tea Energia has carried out its natural gas and electricity trading business on wholesale markets since 2006. It has structured a team able to monitor the markets for seizing all opportunities to optimize the supply of such gas and electricity in order to achieve more favourable purchase and supply conditions and greater profitability of the Group natural gas and electricity sales business. In order to maintain its industrial customers, who buy large volumes claiming even more competitive prices, Tea Energia has developed the purchase of gas on the “spot” market. By observing in real time the markets movement it is possible to formulate prices and tailor-made offers, allowing the full adherence with the best conditions available. Tea Reteluce S.r.l. – Business General Description Tea Reteluce, has been awarded (i) by means of a PPPI procedure one contract for the, management, design and requalification of the public lighting network of 28 municipalities in the province of Mantova, and (ii) by means of public tender procedures three contracts in the following Municipalities: Carbonara di Po which shall expire on 30 June 2027, Gazzuolo which shall expire on 31 May 2032 and Magnacavallo which shall expire on 28 June 2032, for the management, design and requalification of the public lighting in such

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Municipalities. Tea Reteluce provides its services to all such Municipalities with the aim of offering costs reduction to public administrations by improving the efficiency of the network, the reduction of energy consumption and light pollution (please refer to section “Regulation”, paragraph “Water, Waste and Public Lighting Services” for more details in relation to the laws regulating these businesses). Public lighting Tea Reteluce also offers additional services (design and construction) for the development of the “smart cities” which are not comprised in the relevant contracts, such as the electric mobility, public wi-fi, digital information panels capable of providing information on viability, environmental aspects and public service communications, video surveillance for the security on the territory, to fight illegal activities and control the accesses and the road-traffic in the city, and which may be requested and paid through an increase of the fees due according to the relevant contracts. As of 31 December 2016, Tea Reteluce manages 56,533 light points, with a consumption of about 19 MWh, and it has obtained an energy saving of 35% since the beginning of the entrustment of the service by requalifying 64% of luminaires with the LED technology. By 2017 the operation of energy requalification of all the managed light points will be completed and it will also include urban furnishings with an energy savings of over 60%. With regard to the electric mobility, Tea Reteluce has installed 20 charging stations on the provincial territory of Mantova with an estimate to reach 30 charging stations installed within the first half of 2017: these stations are accessible through an “app” that allows users to choose their preferred electricity supplier as long as the relevant supplier is agreed upon the payment circuit provided. This system shall make available a European network of more than 18,000 charging points for the users. Mantova Ambiente S.r.l. – Business General Description As of the date of this Prospectus, Mantova Ambiente operates in 50 municipalities of the province of Mantova under the relevant concessions awarded through a PPPI procedure which will expire on 31 December 2026 and in other 2 municipalities under 2 concessions awarded through public tender. Mantova Ambiente provides the urban waste management services which, among others, comprise (i) waste collection and transport, (ii) the differentiated waste collection and the collection of dangerous and special waste, (iii) the management of the waste treatment and disposal plants. Mantova Ambiente, through an extension of the concessions awarded under the PPPI procedure, also operates in the sector of, snow removal in 4 Municipalities (Mantova, Marcaria, Roverbella and Pegognaga) as well as other Municipalities and private areas where it operates through annual contracts. The management of public green areas is carried out by Mantova Ambiente in 4 Municipalities (Bagnolo San Vito, Mantova, Marcaria and Mariana Mantovana) through an extension of the contract awarded with the PPPI procedure which will expire on 31 December 2026. Mantova Ambiente manages the public green areas also for the Municipality of Suzzara with a specific contract which will expire on 31 December 2017. Treatment and disposal plants managed by Mantova Ambiente Mantova Ambiente manages the following three systems: (1) the composting plant on site of Pieve di Coriano (capacity of 20,000 tons per year) for organic waste (2) the mechanical biological treatment plant for the production of secondary solid fuel (“CSS”) and bio-stabilised waste on site of Ceresara (capacity of 110,000 tons per year) for non-recyclable waste and (3) the landfill on site of Mariana Mantovana (capacity of 120,000 tons per year) for municipal and special waste. The landfill is used for the disposal of all the rejects produced by the treatment plants managed by Mantova Ambiente, and for the disposal of non-hazardous special waste produced or collected by private companies in the Northern Italy areas. The operation of the three plants has been authorized by the competent authorities (i.e. the Lombardy Region and the Province of Mantova) through the release of the relevant Integrated Environmental Authorization (Autorizzazione integrata ambientale).

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The management of the plants of Pieve di Coriano and Ceresara has been originally granted to SIEM S.p.A. according to two agreements entered into between SIEM S.p.A. and respectively the municipality of Pieve di Coriano and Ceresara. Subsequently, the management of the plants has been conferred by SIEM S.p.A. to SIEM Gestione S.r.l. which, thereafter, has been incorporated by Mantova Ambiente. The management of the plant of Mariana Mantovana has been originally granted to the Issuer according to an agreement entered into between the Issuer and the municipality of Mariana Mantovana. Subsequently, the Issuer entrusted the management of such plant of Mariana Mantovana to Mantova Ambiente by means of an inter-company agreement. Waste Collection The activities carried out by Mantova Ambiente in the general waste sector can be summarized as follows (please refer to section “Regulation”, paragraph “Waste Business”, “Waste Directive” and “Water, Waste and Public Lighting Services” for more details in relation to the laws regulating these businesses):  Waste collection and the cleaning of the public areas: differentiated refuse collection and transportation organized for single separate fractions as paper, plastic, glass, and non-recyclable waste; management of ecological areas, sweeping and cleaning in urban areas; during 2016, Mantova Ambiente served 65 municipalities and 396,288 inhabitants and the waste collected amounted to 203,707 tons;  Treatment: as the recovery, from the collected waste, of reusable raw materials in the production cycle, and for limited quantities, energy recovery;  Disposal: the final waste destination includes combustion as CSS into specific power plants from renewable sources and landfill for reject of CSS production plants.

Differentiated waste Separate collection of waste fractions is performed with three different modes: (i) by public points of dumping named “ecological platforms”; (ii) with bins and containers placed on the public areas (traditional method); (iii) through collection of waste deposited by the families in front of their house door in the scheduled days and times (new system called "door to door") The quantities of waste collected in 2016 amount to 203,707 tons of which 159,405 tons were differentiated (paper, glass, aluminum, wet, plastic, etc.) by achieving an average percentage of differentiated waste collection of 81.5%. All the municipalities served by Mantova Ambiente, except one, have opted for the "door to door" new system of waste collection or for a mixed system with similar results. With such methods higher percentage of differentiated collection (in respect of the traditional methods) are reached (even over 90%) (source: “Ufficio Ambiente dell’Amministrazione Provinciale di Mantova”). The outcomes achieved with the differentiated collection system leads the Province of Mantova to the top at national and regional level (source: www.ricicloni.it/classifica-comuni, a website maintained by the association Onlus Legambiente). The differentiated waste are sent, after a specific selection, to the national consortia or to the relevant transforming plants, while the undifferentiated waste are sent to the treatment plant located in the municipality of Ceresara and named “Fabbrica Verde”. With reference to Mantova Ambiente, the per capita annual production of waste and the outcomes of the differentiated waste collection are set out in table below (source: “Ufficio Ambiente dell’Amministrazione Provinciale di Mantova”):

U/M Domestic Annual per capita waste production Kg/ab 514 Annual per capita undifferentiated production Kg/ab 64,68

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The table below summarizes the main indicators relating to the waste collection business carried out by Mantova Ambiente during years 2016 and 2015:

Mantova Ambiente 2015 2016 Municipalities served 65 65 Door to door differentiated collection (average among 79,70 81,51 the municipalities served) Active collection centers (No.) 47 47 Total collected waste (tons) 197.565 203.707

Special waste Mantova Ambiente’s activities in the special waste sector are principally aimed at the treatment and disposal of hazardous and non-hazardous special waste. Special waste is a deregulated business, which involves few major national players and a large number of minor players (i.e. single plant players). As of 31 December 2016 Mantova Ambiente had collected 174 tons hazardous and 6,879 tons of non- hazardous special waste. Management of public green areas Mantova Ambiente, as described above (“General Description”), carries out the ordinary and extraordinary management of the green areas in the municipalities of Bagnolo San Vito, Mantova, Marcaria and Mariana Mantovana on the basis of council resolutions adopted by the abovementioned municipalities (and the service contracts that will be thereafter entered into accordingly). Mantova Ambiente carries also out the management of the green areas in the municipality of Suzzara according to a public tender procedure, as detailed in the table below. The green areas managed by Mantova Ambiente amount to around 2,75 square kilometers with around 22,900 plants and trees managed.

Green Areas Trees Managed(N.) 2 Type of Expiry Managed (KM ) Municipality Procedure Date 2015 2016 2015 2016

Bagnolo San PPPI 31/12/2026 -- 0.26 -- 1,400 Vito

Mantova PPPI 31/12/2026 1.716 1.716 16,356 16,204

Marcaria PPPI 31/12/2026 -- 0.311 -- 1,000

Mariana PPPI 31/12/2026 0.053 0.053 350 350 Mantovana

Suzzara Public 31/12/2017 0.410 0.410 4,000 4,000

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Tender

With reference to the 5 municipalities mentioned above, Mantova Ambiente also provides services related to the design and requalification of green areas, restoration of historical sites, environmental monitoring. The company “Società Organismo di Attestazione” (SOA) granted to Mantova Ambiente the “Attestato SOA”, being a requirement for the execution of public works. Tea Acque S.r.l. – Business Since 2006, Tea Acque has been awarded through a PPPI procedure to manage the integrated water service (“Water Services”) in a wide area of the Province of Mantova on the basis of the concession dated 18 November 2005 granted by the Authority of the Optimal Territorial Area of Mantova (“AATO”). According to the concession, the agreements for the supply of the water services and the management of the water networks, covering municipalities with about 280,000 inhabitants, have been entered into on 28 June 2007 and will expire on 28 November 2025. The activities carried out by Tea Acque in the Water Services sector can be summarized as follows (please refer to section “Regulation”, paragraph “Water Business” and “Water, Waste and Public Lighting Services” for more details in relation to the laws regulating these businesses):  Aqueduct. Includes the management of water supply, water treatment, water distribution to clients, wells management;  Sewage. Includes the sewage network management, the collection of industrial and household wastewater and the collection and management of urban tunnelled rivers and channels; and  Purification. Includes the direct purification plant management, the monitoring of purification activities performed by third parties, sludge drying and final special waste disposal. Tea Acque also performs the following activities in the context of the Water Services:  Customer Management activities, mainly consisting of: (i) billing and commercial activities, (ii) customer connection and metering and (iii) customer relationship management;  Laboratory testing and controls, related to water quality control and laboratory chemical analyses, as well as waste water and purification plant controls. Aqueduct

Water supply and distribution

In the context of the Water Services, Tea Acque manages a total of 86,408 customer points, serving a resident population of about 280,000 inhabitants. Water supply is guaranteed by a system of 54 wells pumping groundwater to tanks. The extraction of water from wells reached approximately 17,500,000 cubic meters in 2016. Raw water is then treated in order to be safe for drinking and then 17 pumping stations feed the system for a total final supply to users of around 13,500,000 cubic meters per year.

Water treatment

Before being distributed to customers and final users, water is subjected to specific treatment in order to reduce or eliminate compounds and substances exceeding the limits permitted under applicable law. At each of the pumping stations raw water from wells is treated in function of the specific-site characteristics and disinfected in order to eliminate viruses and bacteria.

In order to ensure drinking water quality, Tea Acque performs a high number of laboratory controls in its laboratories and onsite, both at plants and stations and along the distribution network. In 2016, Tea Acque’s laboratories analyzed 3,924 samples, for a total of 47,556 parameters, including chemical, physical and micro- biological indicators.

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Sewage services

Sewage network management

Tea Acque operates in the sector of urban waste water in the “Area Omogenea 2” of the “Optimal Territorial District” (“Ambiti Territoriali Ottimali” or “ATO”. The Tea Acque’s sewage network covers 67% of the area of Mantova, serving a resident population of about 277,000 inhabitants and an equivalent population (including estimated city users) of about 260,000 users. The waste water collected by Tea Acque's sewage network service can be classified as follows:  domestic or non-industrial waste water produced by households and small offices and containing both organic substances and substances derived from products used for domestic cleaning and personal hygiene (sometimes referred to as black waste water);  industrial waste water, released during production processes and typically containing a high concentration of pollutants; and  environmental waste water produced by climatic conditions (i.e. rainwater, floods etc.) collected from road drains and gutters (sometimes referred to as white waste water). Maintenance of sewage network

Sewage systems require regular ordinary maintenance operations, such as monitoring the efficiency of the elevation plants, removing sediment and obstacles that may obstruct water flows and maintaining public manholes. Extraordinary maintenance operations include renovation, restructuring or repairs to improve operating conditions, hydraulic efficiency and the safety of the network.

Purification services

Purification service management

Tea Acque’s integrated water cycle is completed by water purification service operations. The purification service includes the construction, management and maintenance operations related to urban waste water (domestic and industrial) treatment plants connected to sewage networks, in order to restore treated water quality to the appropriate level for the final user; the purification activity includes sludge treatment. Tea Acque has the overall responsibility of ensuring the purification service for 42 municipalities. Thus, it supervises purification activities for all of the 75 purification plants with specific quality control programs. Total purification of the plants treatment is 315,000 population equivalent (“PE”). The table below summarizes the main indicators relating to the services provided by Tea Acque during the years 2016 and 2015:

Tea Acque 2015 2016

Drinking water customers (No.) 85,631 86,408 Waste waters customers (No.) 109,722 110,472 Drinking water sold (m3) 13,669,591 13,570,236 Wells managed (No.) 54 54 Sewage treatment plants (No.) 75 75 Water network - actual losses 22% 22% Purified water (m3) 23,213,793 22,903,885

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Road Maintenance The municipality of Mantova, with the council resolution no. 51 dated 7 June 2002, entrusted the Issuer with the road and road signs maintenance in accordance with the "in house providing" mechanism, pursuant to the laws and regulations at that time applicable; the services have been regulated through a specific agreement signed on 12 August 2002 between the Issuer and the Municipality of Mantova; on 23 December 2006 the Issuer conferred to its subsidiary Tea Acque the road and road signs maintenance business unit, including the service contract with the Municipality of Mantova mentioned above. As at the date of this Prospectus, Tea Acque manages the street maintenance services in relation to a street network of 130 km (as of 31 December 2016). In particular, the services provided are, inter alia: sealing of the road cracks with hot bituminous mastic and sealing of porphyry floors made with polyurethane resin. The company “Società Organismo di Attestazione” (SOA) granted to Tea Acque the “Attestato SOA”, being a requirement for the execution of public works. AqA Mantova S.r.l. – Business On 18 November 2005 the Conference of Mayors (Conferenza dei Sindaci) of the Optimal Territorial Area of Mantova, in its capacity as Authority entitled to grant concessions relating to the integrated water cycle, resolved to entrust Indecast S.r.l., a company having the municipality of Castiglione delle Stiviere as its sole quotaholder, with the management of the network and the supply of the integrated water services in the municipality of Castiglione delle Stiviere (MN); the concession to Indecast S.r.l. was granted in accordance with the "in house providing" mechanism, pursuant to the laws and regulations at that time applicable; on 2 March 2016 the municipality of Castiglione delle Stiviere subscribed the share capital increase (aumento di capitale riservato) of the Issuer reserved to it by conferring 100% of the shares of Acque Castiglionesi S.r.l. (subsequently renamed as AqA Mantova S.r.l.), a company into which the municipality of Castiglione delle Stiviere had previously conferred the business unit of Indecast S.r.l. relating to the integrated water cycle, following an authorization obtained from the Authority of the Optimal Territorial Area of Mantova. As at the date of this Prospectus, AqA Mantova manages, until 2025, the Water Services in the municipalities of Castiglione delle Stiviere (please refer to section “Regulation”, paragraph “Water Business” and “Water, Waste and Public Lighting Services” for more details in relation to the laws regulating these businesses). Water supply and distribution In the context of the Water Services, AqA Mantova manages a total of 10,990 customer points, serving a resident population of about 23,200 inhabitants. Water supply is guaranteed by a system of 7 wells pumping groundwater to tanks. The extraction of water from wells reached approximately 3,621,000 cubic meters. Raw water is then treated in order to be safe to drink and then 7 pumping stations feed the system for a total final supply to users of around 2,100,000 cubic meters per year. Water treatment For the description of the water treatment services, please see “Tea Acque S.r.l. – Business – Aqueduct – Water treatment”. In 2016, AqA Mantova’s laboratories analyzed 180 samples, for a total of 2,679 parameters, including chemical, physical and micro-biological indicators. Sewage services Sewage network management AqA Mantova operates in the sector of urban waste water in Castiglione delle Stiviere. The AqA Mantova’s sewage network covers 95% of the area of the municipality of Castiglione delle Stiviere, serving a resident population of about 23,200 inhabitants and an equivalent population (including estimated city users) of about 21,519 users. For the description of the sewage network management, please see “Tea Acque S.r.l. – Business – Sewage services – Sewage network management”. Maintenance of sewage network

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For the description of the maintenance of the sewage network, please see “Tea Acque S.r.l. – Business – Sewage services – Maintenance of the sewage network”. Purification services Purification service management For the description of the purification service management, please see “Tea Acque S.r.l. – Business – Purification services – Purification service management”. AqA Mantova has the overall responsibility of ensuring the purification service for Castiglione delle Stiviere. Thus it supervises purification activities for all of the 2 purification plants with specific quality control programs. Each of the purification plants has a treatment capacity of 70,200 PE. The table below summarizes the main indicators relating to the services provided by AqA Mantova during the years 2016:

AqA Mantova 2016

Drinking water customers (No.) 10,990

Waste waters customers (No.) 9,200

Drinking water sold (m3) 2,026,899

Wells managed (No.) 7

Sewage treatment plants (No.) 2

Water network - actual losses 2%

Purified water 3,621,000

Tea Onoranze Funebri S.r.l. and Global Funeral Services S.r.l.– Business Tea On. Funebri and G.F.S. manage the funeral services and the other linked services, while, as described above in the paragraph “the Issuer”, TEA carries out the cemetery services. In particular, Tea On. Funebri and G.F.S. provide a complete range of funeral and cremation services including planning and coordinating personalised disposal, removal and preparation of remains, conducting memorial services, performing interment and transportation services. Tea On. Funebri and G.F.S. also merchandise and sell products such as caskets, urns, burial vaults, cemetery interment rights and monuments and markers. Tea On. Funebri is responsible for the marketing of funeral services for users who need to organize a funeral ceremony for their beloved. In particular, Tea On. Funebri organizes funeral ceremonies, funeral transports and burial in the cemetery requested by the family. Moreover, Tea On. Funebri commercializes funeral coffins, urns, floral decorations, funeral posters, photos and obituaries on newspapers. G.F.S. provides tailor-made services and solutions to enterprises operating in the funeral service sector. In particular, G.F.S. operates as “funeral services center” for supporting funeral sector enterprises. In addition to the funeral service provided in line with the market qualitative standards, G.F.S. offers several other activities which include: thanatopraxis (tanatoprassi), corpses transfer, burial chambers’ rental and staging, rental of coolers for corpses, mortal remains transport, withdrawal and delivery of the cinerary urns.

Financing Arrangements

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The Group's Net Financial Indebtedness as of 31 December 2016 amounted to € 68,331,000, which was split between Current Financial Indebtedness € 9,381,000 and Non-current Borrowings € 58,950,000. The table below sets out details of the Group's principal financing contracts as of 31 December 2016.

Principal outstanding Description and Maturity Borrower Interest Rate as of 31 Guarantees original loan amount Date December 2016 (Euro) Integrated water cycle Floating Euribor 1 Tea Acque 38,577,811 2025 None (up to €68,000,000) m + 42 bps

Energy and district heating Floating Euribor 6 Issuer 14,000,000 2019 None (€ 20,000,000) m + 195 bps

Energy and district heating Floating Euribor 3 Issuer 5,170,712 2019 None (€ 10,000,000) m + 170 bps

Stake in Enipower Mantova S.p.A. Floating Euribor 6 Issuer 3,214,286 2018 None (€ 15,000,000) m + 45 bps

Facility waste disposal Mantova Floating Euribor 6 (Ceresara plant) 2,000,000 2018 None Ambiente m + 125 bps (€ 4,000,000)

Headquarter purchase Mortgage Floating Euribor 6 on the (Via Taliercio) Issuer 1,661,390 2027 m + 20 bps headquarter (€ 3,460,262) building Hidropower plant

(mini hydro Floating Euribor 3 Patronage ElectroTea 1,304,933 2019 Marenghello) m + 350 bps of SEI (€ 2,186,000)

Facility waste disposal Mantova Floating Euribor 3 (Ceresara plant) 1,064,392 2017 None Ambiente m + 200 bps (€ 4,000,000)

Integrated water cycle AqA Floating Euribor 6 747,074 2020 None (€ 2,000,000) Mantova m + 145 bps

Integrated water cycle AqA Floating Euribor 3 677,105 2019 None (€ 2,000,000) Mantova m + 150 bps

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Integrated water cycle AqA Floating Euribor 6 665,475 2018 None (€ 1,000,000) Mantova m + 275 bps

Funeral vehicles purchase G.F.S. Fixed rate 1,55% 450,000 2021 None (€ 500,000)

Offices of Tea On. Funebri and cemetery Mortgage service of TEA (Via Floating Euribor 6 Issuer 424,606 2027 on the Nenni) m + 20 bps building (€ 877,977)

Integrated water cycle AqA Floating Euribor 3 412,378 2020 None (€ 800,000) Mantova m + 150 bps

Integrated water cycle Floating Euribor 6 Issuer 372,854 2018 None (€ 2,330,000) m + 70 bps

Integrated water cycle

(Municipality of San N/A (no interest Tea Acque 324,923 2027 None Benedetto) rate applicable) (€ 417,244)

Funeral vehicles purchase Floating Euribor 6 G.F.S. 200,000 2020 None (€ 200,000) m + 102 bps

Integrated water cycle

(Aqueduct Ostiglia) Issuer Fixed rate 6% 74,747 2018 None (€ 464,811)

Integrated water cycle

(Aqueduct Ostiglia) Issuer Fixed rate 4,85% 62,819 2019 None (€ 289,216)

Fiber optic network Floating Euribor 6 Issuer 55,771 2017 None (€ 1,000,000) m + 85 bps

Liquidity during 12 months G.F.S. Fixed rate 1,01% 50,000 2017 None

Operating centre Floating Euribor 3 G.F.S. 49,000 2020 None (€ 70,000) m + 300 bps

Guarantees

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As of 31 December 2016, Issuer and its consolidated subsidiaries or associated companies guaranteed € 27,413,287 of indebtedness of parties (including companies of the Group) (compared to € 25,124,343 as of 31 December 2015), comprising € 15,350,984 of guarantees issued on behalf of associated companies and € 12,062,303 of guarantees granted in the interests of other non-associated companies. Below is a list of guarantees:

Amount (€) Guaranteed Guarantor

1,725,000 TNet Servizi S.r.l. Issuer

2,036,800 Sinergie Italiane S.r.l. (former Blugas S.p.A.) Issuer

2,088,236 Sinergie Italiane S.r.l. (former Blugas S.p.A.) Issuer

1,500,000 Tea Reteluce Issuer

3,750,000 UniTEA S.r.l. Issuer

1,550,000 UniTEA S.r.l. Issuer

2,967,207 UniTEA S.r.l. Issuer

1,000,000 Tea Energia Issuer

2,755,201 Blugas Infrastrutture S.r.l. Issuer

2,640,721 Blugas Infrastrutture S.r.l. Issuer

816,345 Blugas Infrastrutture S.r.l. Issuer

2,315,886 Tea Acque Issuer

81,891 ElectroTea Issuer

2,186,000 ElectroTea SEI

27,413,287

Environmental Matters The Group's business is subject to environmental regulation. In the Issuer's opinion, the Group operates in accordance with any applicable environmental regulation and authorisation. See the Risk Factor "The Group's operations are subject to extensive environmental statutes, rules and regulations which regulate, among other things, air emissions, water discharges and the management of hazardous and solid waste". During the year ended 31 December 2016, in order to achieve its objectives of quality control, environmental compliance and safety, the Group carried out training pursuant to the requirements of Italian laws. Property, plants and equipment As of the date of this Prospectus, the Group’s main property, plant and equipment are:  plants for waste treatment and recovery, located in Ceresara (owned by TEA);  landfill in Mariana Mantovana (owned by TEA);  hydroelectric power plant in Vasarina (owned by SEI);  primary thermal power plants for the district heating in Mantova (Viale Fiume, Viale Montegrappa and Lunetta) (owned by TEA);  secondary thermal power plants for the district heating and the thermal conversion for cooling systems in Mantova (districts (quartieri) of Borgochiesanuova, Borgonuovo and Lunetta) (owned by TEA);

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 laboratory for chemical, natural and biological analysis, located in Mantova (Via Taliercio) (owned by TEA);  headquarters building located in Mantova (Via Taliercio) (owned by TEA);  logistic center located in Mantova (with washing, sanitizing and maintenance systems for the vehicles used for the urban hygiene) (owned by TEA). Share Capital and Shareholders Share capital As of the 31 December 2016, the Issuer had a share capital of €73,402,672, fully paid up and consisting of no. 283,408 ordinary shares with a nominal value of € 259.00 each. There have been no changes to the Issuer's share capital since 31 December 2016. The Issuer’s shares are unlisted. Shareholders The Issuer is directly owned by Municipality of Mantova (71.39%), Municipality of Suzzara (10.25%), Municipality of Borgo Virgilio (4.7%), Municipality of Curtatone (3.11%), Municipality of Castiglione Delle Stiviere (2%), Municipality of Ostiglia (1.2%), Municipality of Marmirolo (0.96%), Municipality of Castel D'ario (0.86%), Municipality of Gonzaga (0.8%), Municipality of Bagnolo San Vito (0.75%), Municipality of Marcaria (0.73%), Municipality of San Giorgio di Mantova (0.67), Municipality of Bigarello (0.57%), Municipality of Pegognaga (0.56%), Tea S.P.A. (0.54%), Municipality of Bozzolo (0.49%), Municipality of Porto Mantovano (0.14%), Municipality of Mariana Mantovana (0.04%), Municipality of Roverbella (0.04%), Municipality of Motteggiana (0.04%), Municipality of Settimo Milanese (0.02%), Municipality of Villa Poma (0.01%), Municipality of Monzambano (0.01%), Municipality of Viadana (0.01%), Municipality of Castelbelforte (0.01%), Municipality of Acquanegra Sul Chiese (0.01%), Municipality of Sustinente (0.01%), Municipality of Serravalle A Po (0.01%), Municipality of Sermide (0.01%), Municipality of Sabbioneta (0.01%), Municipality of Volta Mantovana (< 0.01%), Municipality of Ponti sul Mincio (< 0.005%), Municipality of Schivenoglia (< 0.005%), Municipality of Asola (< 0.005%), Municipality of Goito (< 0.005%), Municipality of Roncoferraro (0.005%), Municipality of Rodigo (< 0.005%), Municipality of Poggio Rusco (< 0.005%), Municipality of Guidizzolo (< 0.005%), Municipality of Moglia (<005%), Municipality of Castellucchio (< 0.005%), Municipality of Dosolo (< 0.005%), Municipality of Carbonara di Po (< 0.005%), Municipality of Quingentole (< 0.005%), Municipality of Pomponesco (< 0.005%), Municipality of Felonica (< 0.005%), Municipality of Gazzuolo (< 0.005%), Municipality of Rivarolo Mantovano (< 0.005%), Municipality of Magnacavallo (< 0.005%), Municipality of Gazoldo degli Ippoliti (< 0.005%), Municipality of Revere (< 0.005%), Municipality of Casalmoro (< 0.005%), Municipality of Casaloldo (< 0.005%), Municipality of San Martino dall'Argine (< 0.005%), Municipality of San Giacomo delle Segnate (< 0.005%), Municipality of Commessaggio (< 0.005%), Municipality of San Giovanni del Dosso (< 0.005%), Municipality of Pieve di Coriano (< 0.005%), Municipality of Piubega (< 0.005%), Municipality of Redondesco (< 0.005%) and Municipality of Borgofranco sul Po (< 0.005%). The Issuer is not subject to direction and coordination (direzione e coordinamento) by any entity pursuant to Article 2497 of the Italian Civil Code and, accordingly, the Issuer has no abuse of control measures in place in order to ensure that its direction and coordination is not abused with respect to shareholders. Management Board of Directors The Issuer's board of directors is composed of the following five directors, whose appointment is due to expire on the date of the shareholders' meeting which will be held to approve the financial statements as of and for the year ending 31 December 2018.

Name Position Main activities outside of Group Liquidator of: Chairman of Bismantova di Mercanti Giuliano & C. - S.A.S.; Massimiliano o the Board of Cooperativa Ideal Service in Liquidazione; Ghizzi o Directors o C.D. Consulenti di Direzione Società Cooperativa-in Liquidazione - in Liquidazione Coatta Amministrativa.

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Chairman of The Statutory Auditors of: o Mitech S.P.A. in Liquidazione; o Azienda Pubblici Autoservizi Mantova S.P.A. in Abbreviato "Apam S.P.A."; o Apam Esercizio S.P.A.; o Ku Distribution S.R.L.; o Sinedil S.P.A. in Liquidazione; o Unika S.P.A. Auditor of: o Azienda Lombarda per L'edilizia Residenziale di Brescia- Cremona-Mantova in Sigla Aler Brescia-Cremona-Mantova; o Progetto Immobiliare S.R.L. in Liquidazione; o Predari Vetri S.P.A.; o Quadra S.R.L. Substitute Auditor of: o Bioservice - S.P.A - in Liquidazione. Court Commissioner of: o Borghi - S.R.L. in Liquidazione; o Fantini S.R.L.; o Stai Prefabbricati S.R.L. in Liquidazione; Court Liquidator of: o Industria Macellazione Ghinzelli Marino - S.P.A. - Società in Liquidazione Director of: o Unitea S.R.L. Insolvency Administrator of: Estro Costruzioni S.R.L.; Vice-President o Enrico Walrosa S.R.L.; of the Board of o Voceri Pitentino S.R.L. in Liquidazione; Directors o o Lorenzi Luisa. Liquidator of: o Brendolan Prosciutti S.P.A.- in Liquidazione - in Concordato Preventivo; Chairman of The Statutory Auditors of: o Mazzola & Bignardi S.P.A.; o Replica Sistemi S.P.A.; o Arpa S.P.A.; o Hydro-Mec S.P.A.; Managing Partner of: o Selmini & Associati di Giorgio Menani & C. S.N.C. Statutory Auditor of: o Hp Hydraulic S.P.A. o Fira S.P.A. o Tecnomek S.P.A. o Sanithad Servizi Sociali Società Cooperativa Sociale O.N.L.U.S. o Dinoil S.P.A. Substitute Auditor of: Elisa Ferrari Board Member o Leonardi Tubi Trafilati S.P.A. o Finsuge - S.P.A. o Omicron's S.R.L. o Bondioli & Pavesi S.P.A. o Gielfel S.P.A. o Bondioli & Pavesi Sales and Logistics S.P.A. o Mobirolo S.P.A. o Esasem S.P.A.

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Alessandra Special Attorney of: Board Member Breschi o Messaggerie Del Garda S.P.A. Chairman of The Board of Directors of: Andrea Società Cooperativa Agricola Campapo Board Member o Bassoli Signatory: o Ab Assileasing Finanziari di Bassoli Andrea The business address of each member of the Board of Directors is the Issuer's registered office. Board of Statutory Auditors The board of statutory auditors is composed of three auditors and two alternate auditors. The Issuer's board of statutory auditors is composed of the following five members, who were appointed by the Issuer's shareholders' meeting on 11 July 2016 for a period expiring on the date of the shareholders' meeting which will be held to approve the financial statements as of and for the year ending 31 December 2018.

Name Position Main activities outside of Group Accountant professional Substitute Auditor of: o Meda - Vita S.P.A. Auditor of: o Holdclean S.P.A. o Towerclean S.P.A. o Ghibli & Wirbel S.P.A. o Trafimet Group S.P.A. Chairman of Minor S.P.A. Z.G.Z. S.P.A. Giovanni o the Board of P.L.U.S. Srl Unipersonale Saccenti o Statutory Chairman of The Statutory Auditors: Auditors o F.Lli Cressoni S.P.A. o Veronavet S.P.A. Substitute Auditor of: o Pompea S.P.A. o Riello Industries S.R.L. Director of: o C.D.S. Immobiliare S.R.L. o C.D.S. Consulting S.R.L. Cedrik Pasetti Auditor Lawyer - no other relevant position Accountant professional Maria Grazia Auditor Substitute Auditor of: Tambalo o Blugas Infrastrutture SRL Accountant professional Chairman of the Statutory Auditors: o Teknoice S.R.L. Substitute Auditor of: o Impresa Bottoli Arturo - S.P.A. o Valdaro S.P.A. in Liquidazione Giorgia Alternate Auditor of: Salardi Auditor o Replica Sistemi S.P.A. Court Liquidator of: o Carnevali Pompeo e Giorgio di Virgili Carla e C. S.A.S.; o Gonzagarredi Società Cooperativa in Liquidazione; o Spezia Costruzioni dell'ing. Giovanni Spezia & C. S.N.C. Limited Partner of: o Si.Ge.Sa. di Salardi Franco e C. S.A.S.

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Accountant professional Sole Director: o Gandellini S.R.L. o Hq S.R.L. Court Commissioner of: o Manifattura Tessile Ballasina S.R.L. in Liquidazione o Isolmantova di Lia Daniele & Fausto S.N.C. o Salumificio Cascine Mantovane S.R.L. Insolvency Administrator of: o Confezioni Jolie di Ferrarini Renzo E C. S.A.S. o Versilia Fiori S.R.L. o P.M. Il Serramento Srl in Liquidazione o Ri.Ma.Plast S.R.L. o Barillari Trasporti S.R.L. in Liquidazione o Md S.R.L. o Silcazerodue S.R.L. Michele Alternate o Mc Impianti Tecnologici S.R.L. Ballasini Auditor o Masaniello Di Meo Alessandro Liquidator of: o Agriservice Mantova S.R.L. in Liquidazione. Chairman of the Board of Directors: o Altea Servizi S.R.L. Chairman of The Statutory Auditors: o Auto 2000 S.R.L. in Liquidazione Auditor of: o I.T.A.S. - Industria Trafileria Applicazioni Speciali S.P.A. - in Liquidazione o Ferramenta Padana S.P.A. o Giovannoni S.R.L. o S.T.A. Società Trattamento Acque S.R.L. o Gal Terre del Po Società' Consortile A Responsabilità Limitata Substitute Auditor of: o Litocartotecnica Ival - S.P.A. o Kosme S.R.L. The business address of each member of the board of statutory auditors is the Issuer's registered office. Management The table below sets out the current members of the management of the Issuer:

Name Position Main activities outside of Group

Lara Marchiani General Manager No other relevant position

The business address of each member of the management is the Issuer's registered office. Conflicts of interest None of the Issuer's directors, statutory auditors or senior managers has any private interest and/or other duty which conflicts with their obligations deriving from their office. Employees As of 31 December 2016, the Issuer employed 163 people while the Group employed 591 people, of whom 27 were managers, 280 were office workers and 284 were factory workers.

Middle Office Factory Company Management Total Management Workers Workers

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Issuer 10 8 128 17 163

Tea On. Funebri 1 5 6

Tea Energia 1 12 13

Tea Acque 2 40 33 75

Mantova Ambiente 3 69 181 253

SEI 1 2 21 22 46

Tea Reteluce 4 1 5

AqA Mantova 3 3 6

G.F.S. 2 22 24

Total 11 16 280 284 591

Legal Proceedings From time to time the Group is involved in claims arising in the ordinary conduct of its business, including civil, labour, governmental, administrative, antitrust and tax proceedings. Related Party Transactions The Issuer carries out transactions with related parties (including its subsidiaries), in particular by paying the remuneration to members of the relevant board of directors, providing administrative services, buying and selling services to subsidiaries and jointly-controlled companies. In particular, below is a list of the type of commercial relationship currently in force:

Remuneration Subsidiary to the Supply of administrative Purchase of services from the Sale of services to Company members of services subsidiaries the subsidiaries the BoD

EniPower Mantova X S.p.A.

Blugas X Infrastrutture S.r.l.

TNet Servizi S.r.l. X X

Tea Energia S.r.l. X X X X

Mantova Ambiente X X X X S.r.l.

Sei S.r.l. X X X X

Tea Acque S.r.l. X X X

Tea Onoranze X X Funebri S.r.l.

Electrotea S.r.l. X

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Tea Reteluce S.r.l. X X

Global Funeral X X X Service S.r.l.

AqA Mantova X X X S.r.l.

The following tables set forth balances and transactions between the Issuer and its subsidiaries as of and for the year ended 31 December 2016. These balances and transactions have been eliminated for consolidation purposes and therefore are not reflected in the Italian GAAP Audited Consolidated Financial Statement and the Restated IFRS Consolidated Financial Statements:

Operating AqA G.F.S. revenue Mantova Tea Mantova Tea On. Tea and SEI Tea Acque ElectroTea Energia Ambiente Funebri Reteluce financial income

From the Issuer to 3,206,233 11,700,017 7,095,470 6,585,160 346,647 59,668 401,202 338,914 30,008 …

Operating costs and Mantova Tea On. Tea AqA Tea Energia SEI Tea Acque ElectroTea G.F.S. financial Ambiente Funebri Reteluce Mantova expenses

To the Issuer from 593,539 787,568 247,564 433,978 1,300 0 10,851 6,087 400 …

Below are the tables summarizing the amounts of receivables and payables of the Issuer to each of its subsidiaries:

Tea Mantova Tea Tea On. Tea Rete AqA SEI ElectroTea G.F.S. Energia Ambiente Acque Funebri Luce Mantova

From the -3,984,880 13,356,001 10,538,373 2,284,967 135,062 1,210,146 6,002,241 2,250,904 17,002 Issuer to …

Commercial 941,216 6,796,286 1,655,096 1,854,883 77,287 23,723 180,256 171,814 17,202 credits

Financial 0 6,943,236 8,837,000 0 68,162 1,170,799 6,388,571 2,085,174 0 Other 2,466,435 0 559,823 1,215,341 7,883 15,624 0 5 0 credits Total 3,407,651 13,739,522 11,051,919 3,070,224 153,332 1,210,146 6,568,827 2,256,993 17,202 credits Commercial -147,233 -303,975 -443,825 -200,217 -1,603 0 -52,591 -6,089 -200 debts borrowings -7,209,877 0 0 0 0 0 0 0 0

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other -35,421 -79,546 -69,721 -585,040 -16,667 0 -513,995 0 0 payables

Total debts -7,392,531 -383,521 -513,546 -785,257 -18,270 0 -566,586 -6,089 -200

In addition to the relationship described above, the Issuer also carries out other transactions with related parties, in particular by granting loans to, and guarantees on behalf of, unconsolidated subsidiaries and jointly- controlled companies. As of 31 December 2016, the Issuer has short-term payables to its shareholders, particularly with regard to the Municipality of Mantova for business invoices and dividends to be paid, which amounted to € 17,400,000 and € 16,900,000, respectively, for the years ended 31 December 2016 and 2015. Recent Developments Following the conclusion of the tender procedure convened by the three public shareholders of Mantova Ambiente, a new private shareholder, namely Progetto Mantova, has been selected. Progetto Mantova will hold a stake equal to 20% in the Mantova Ambiente share capital and will replace the outgoing shareholders SER.I.T. (11%) and LOMB.RI.CA. (9%). The municipalities shareholders of AIMAG S.p.A. (whose registered office is in Mirandola (MO)) have announced, in 2015, a public procedure for identifying an industrial partner for AIMAG S.p.A.. The Issuer has submitted (i) in October 2015, a declaration of interest with attached an industrial proposal for the aggregation between the Issuer and AIMAG and (ii) in January 2016, an integration of its declaration; the Issuer’s proposal is still under evaluation by the municipalities shareholders of AIMAG S.p.A. simultaneously with the proposals submitted by other competitors. On 20 April 2017 SEI has subscribed a proposal for purchasing the business unit belonging to the company Goito Energia S.r.l. (whose registered office is in Goito (MN)). The Goito Energia S.r.l. business unit is composed of the authorizations and concessions relating to a small hydroelectric plant which is connected to the mini hydro plant of Marenghello, built and managed by ElectroTea.

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REGULATION

EU and Italian laws heavily regulate the Group’s businesses and may affect the Group’s operating profit or the way it conducts business. The principal legislative and regulatory measures applicable to the Group’s businesses are summarised below. Although this summary contains the principal information that the Issuer considers material in the context of the issue of the Notes, it is not an exhaustive account of all applicable laws and regulations. Prospective investors and/or their advisers should make their own analysis and assessment of the legislation and regulations affecting the Group and of the impact it may have on an investment in the Notes and should not rely on this summary only.

General framework

Regulations applicable to the supply of public services The supply of local public services in Italy has been regulated through several provisions. Almost all such provisions have been repealed after a referendum held on 12 and 13 June 2011 (the “Referendum”).

As of today (following the Referendum, the re-introduction of provisions analogous to those repealed by the Referendum and the consequent repeal of such new provisions by the Constitutional Court with judgement No. 199/2012) public services shall be awarded according to EU law principles. Therefore, local Authorities can arrange public services through: (i) third parties selected by public procurement procedures and (ii) by direct or in- house provision, whenever the market is unable to meet the needs of the community and making use of entities fully controlled by the local authority and exclusively engaged in the relevant activity. More precisely, according to EU law, there are three accepted forms of public services awards:

(a) public tender for the selection of public service providers;

(b) direct granting of public services to a public private partnership (PPP), a cooperative venture between public authorities and private enterprise, where private partner is chosen by a public tender procedure;

(c) the so called in house providing, which is direct granting of public services to fully-public companies on the following conditions: (i) companies are 100% controlled by the awarding public entities, which shall exercise a similar control as the one exercised over their own departments (i.e., “controllo analogo”); and (ii) companies shall provide their main activity in favour of the awarding public entities (i.e. attività prevalente).

Competitors allowed to enter into such procurement procedures and entitled to become public services managers, are:

(1) “private operators”, who may be selected to operate the service through a public tender procedure aimed at entrusting the whole public service; in this case, private operators take the form of joint-stock companies and are incorporated under Italian law;

(2) “private operators”, who can also be in charge of the management of the service by purchasing shares in a public company and becoming a private partner of the latter. Even in this case, the alienation of the shares will take place through public tenders (whereas the service will be granted directly to the public/private enterprise set up once the private partner has been chosen through a public tender); in this regard, private operators in the procurement procedure must demonstrate their economic and financial standing, their suitability to pursue the professional activity in question and their technical and/or professional ability; actually,

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the percentage share of the company to be granted through public tender is established at discretion of the Public Administration;

(3) “public companies”, wholly owned by public entities can be granted public services through the in- house providing. This procedure excludes private operators and competitors.

On 20 October 2012 Law Decree No. 179/2012 entered into force (the so-called “Growth Decree 2”) which, however, does not apply to, inter alia, (i) gas distribution and (ii) distribution of electricity, but applies to water and waste services. However, the terms of effectiveness of the competitiveness measures contained in the Legislative Decree No. 179/2012 have been postponed until 31 December 2016, by means of Law Decree No. 210/2015, converted into Law No. 21/2016 (for further details see paragraph Water, Waste and Public Lightning Services below).

New consolidated act on companies in which public entities have a shareholding (so-called "Madia Decree") Legislative Decree 19 August 2016 no. 175 introduces a consolidated act regulating companies with public shareholders (Testo unico in materia di societa a partecipazione pubblica - "Madia Decree"). The Madia Decree has been published on the Italian Official Gazette (Gazzetta Ufficiale) on 8 September 2016 and has entered into force on 23 September 2016. According to article 1, paragraph 5 of the Madia Decree, the same decree does not apply to "listed companies" (as defined under article 2, letter p)), save where expressly provided. Such definition of "listed companies" includes, among other things, also companies with public shareholders that have issued financial instruments listed on regulated markets, on or before 31 December 2015.

In addition, article 26, paragraph 5 of the Madia Decree provides that in the 12 months following the entry into force of the Madia Decree (i.e. until September 2017) such decree does not apply to companies with public shareholders which, within 30 June 2016, have adopted acts which are aimed at issuing financial instruments (other than shares) to be listed on regulated markets. The aforesaid acts are communicated by the issuer to the Court of Auditors (Corte dei Conti) within 60 days form the entry into force of such decree. In case the listing procedure is concluded by the aforesaid term of 12 months, the Madia Decree continues not to apply to the relevant issuer. The Madia Decree provides a consolidated regulation with reference to the incorporation of companies by public entities as well as the acquisition, the maintenance and the management of the stakes in companies which are, totally or partially, directly or indirectly, owned by public entities.

More in details, the Madia Decree provides a list of corporate purposes for which a company with public shareholders can be incorporated and maintained (which includes, among other things, also the realization and management of public works and/or the organization and management of general-interest services). Moreover, the Madia Decree provides, among other things, certain general principles on the organization and management of companies with public shareholders as well as specific rules, limitations and restrictions for the incorporation, acquisition, management and sale of such type of companies. The Madia Decree also contains provisions relating to corporate bodies, including their responsibility, remunerations and control. Furthermore, specific rules are provided both for in-house companies and public-private companies (societa miste).

By decision of the Constitutional Court No. 251/2016, the Law No. 124 of 7 August 2015 (by means of which the Italian Government was delegated to issue the Madia Decree), was partly declared unconstitutional whereby it provided that the Madia Decree was subject to the mere consultation with the Regions instead of their prior agreement to be reached through the Conferenza Unificata pursuant to Legislative Decree No. 281 of 28 August 1997. However, such decision should not have a direct and automatic impact on the Madia Decree as well as on the issue of the Notes. In fact the decision of the Constitutional Court expressly states that the

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legitimacy of any provision of the legislative decree issued on the basis of the Law 124/2015 (including the Madia Decree) needs to be verified on a case by case basis, upon specific challenge, taking into account the remedies that the Italian Government will put in place in order to ensure the involvement of the Regions on the subject matters falling within their competence. The Madia Decree was also directly challenged by the Veneto Region before the Constitutional Court (lawsuit register No. 76/2016). However, even in case of upholding of the above lawsuit and consequent decision of the Constitutional Court against the legitimacy of the Madia Decree, this should not have any negative impact on the issue of the Notes.

EU energy regulation: the Third Energy Package

The European Union is active in energy regulation by means of its legislative powers, as well as investigations and other actions carried out by the European Commission. In 2009, the European institutions adopted the EU Directive 2009/37/EC (the so- called “Third Energy Package”), which includes several directives and regulations aimed at completing the liberalisation of both electricity and gas markets. In particular, the Third Energy Package provides for the separation of supply and production activities from transmission network operations. To achieve this goal, Member States of the European Union have to choose between the following three options:

 full ownership unbundling. Under this option, vertically integrated operators have to sell their gas and electricity grids to an independent operator, which will carry out all network operations;

 Independent System Operator ( “ISO”). Under this option, vertically integrated operators maintain the ownership of the gas and electricity grids, but they are obliged to designate an independent operator for the management of all network operations; and

 Independent Transmission Operator ("ITO"). This option is a variant of the ISO option under which vertically integrated operators do not have to designate an ISO, but need to abide by strict rules ensuring separation between supply and transmission.

The Third Energy Package also contains several measures aimed at enhancing consumers’ rights, such as the right to: (i) change supplier within three weeks and free of charge; (ii) obtain compensation if quality targets are not met; (iii) receive information on supply terms through bills and company websites; and (iv) see complaints dealt with in an efficient and independent manner. The Third Energy Package also strengthens protection for small businesses and residential customers , while rules are introduced to ensure that liberalisation does not cause detriment to vulnerable energy consumers. Finally, the Third Energy Package provides for the creation of a European Union agency (subsequently established with EU Regulation n. 713/2009)for the coordination of national energy regulators, which will issue non-binding framework guidelines for the national agencies. It is expected that this will result in more harmonised rules on energy regulation across the European Union.

As envisaged in the Third Energy Package, in March 2011 the Agency for the Cooperation of Energy Regulators (“ACER”) began operations. ACER replaces and strengthens the European Regulators Group for Electricity and Gas (“ERGEG”). ACER coordinates the actions of the national regulatory authorities in the energy sector and its main responsibilities are:

 establishing and regulating the rules governing European electricity and gas networks;

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 establishing and regulating the terms and conditions for access to (and operational security for) cross- border infrastructures where national authorities are in disagreement; and  implementing the “Ten-Year Network Development Plan”.

In Italy, the principles s e t ou t in the Third Energy Package (in particular, EU Directives 2009/72/EC, 2009/73/EC and 2008/92/EC), have been implemented by means of Legislative Decree 93/2011 and also by means of several resolutions adopted by the Italian Regulatory for Electricity Gas and Water (the “AEEGSI”).

The main provisions of Legislative Decree 93/2011 include:

(i) unbundling of the ISO, in order to prevent possible market abuses. In the electricity sector, the unbundling between grid ownership and production activity has been confirmed and the ISO is expressly prohibited from operating electricity production plants. For the gas sector, an ITO model has been adopted which, though maintaining a vertically integrated ownership structure, provides for more stringent functional separation rules and wider control and approval powers assigned to the AEEGSI; (ii) more efficient integration of renewable energy sources production into the electrical system; and (iii) confirmation of the exemption from the third party access obligation (“TPA”) in respect of new interconnection infrastructure.

With reference to the electricity sector, the duration of the exemption from the TPA obligation will be set on a case-by-case basis and the exemption will elapse if the relevant works are not started or the relevant infrastructure has not entered into operation within the time limits set out in the relevant exemption measure. With reference to the gas sector, in addition to the time limit set out in the relevant exemption measure, the new rules provide for a 25 years cap for the duration of the exemption and for the activation of an open season procedure in order to assess the interest of third parties in the relevant infrastructure notwithstanding the TPA exemption.

Electricity

On 1 April 1999, Legislative Decree No. 79 dated 16 March 1999 (the "Bersani Decree") implementing Directive 96/92/EC, started the transformation process of the electricity sector from a highly monopolistic industry to one in which energy prices charged by producers are determined by competitive bidding and provided for a gradual liberalisation of the electricity market so that all customers (now defined “Eligible Customers”), are now able to contract freely with producers, wholesalers or distributors to purchase electricity.

The Bersani Decree established a general regulatory framework for the Italian electricity market that gradually introduced competition with respect to electricity production and sales to Eligible Customers, while maintaining a monopolized structure with respect to electricity transmission and distribution to non-Eligible Customers. In particular, the Bersani Decree and the subsequent implementing regulations:

 as of 1 April 1999, liberalised the activities of electricity production, import, export, purchase and sale;

 as of 1 January 2003, provided that no company shall be allowed to produce or import, directly or indirectly, more than 50 per cent of the total electricity produced in and imported into Italy, in order to increase competition in the electricity market;

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 provided for the establishment of the Acquirente Unico (the “Single Buyer”), a company which must enter into and operate supply contracts in order to guarantee the availability of the necessary production capacity and supply of electricity and the continuity, security and efficiency of service of the entire system, as well as equality of treatment, including tariff treatment;

 provided for the creation of the “Power Exchange”, a virtual platform in which producers, importers, wholesalers, distributors, the operator of the national transmission grid, the Single Buyer and other participants in the free market, buy and sell electricity at prices determined through a competitive bidding process (the “Power Exchange”);

 provided for the creation of the entity that manages the Power Exchange (i.e. GME S.p.A., the “Energy Market Operator” or “GME”); and

 provided that, also pursuant to MED Decree of 20 April 2005 (as subsequently amended by MED Decree of 15 December 2010), transmission and dispatching activities are assigned to Terna S.p.A. (“Terna”) as owner and independent operator of the national transmission grid, in accordance with the applicable regulatory regime set forth by the AEEGSI. Terna is a listed company whose largest shareholder is Cassa Depositi e Prestiti S.p.A., a state-owned financial institution. Terna must connect to the national transmission grid all parties who request connection, in accordance with the rules set out under the code for transmission, dispatching, development and security of the grid which was approved under AEEGSI Resolution no. 79 of 29 April 2005 and AEEGSI Resolution no. 49 of 3 March 2006 (the so- called “Grid Code”).

In addition, Law No. 290 of 27 October 2003 required the reunification of ownership and management of the transmission grid. Law No. 239 of 23 August 2004 (the “Marzano Law”) reorganised certain aspects of the electricity market regulatory framework, including the limitation of the “protected market” to households pursuant to Directive 2003/54/EC concerning common rules for the internal market in electricity and repealing Directive 96/92/EC.

Sale Pursuant to Section 1, paragraph 2 of the Marzano Law, no governmental licence, consent or permit is required to carry out electricity sale and purchase activities. The sale activity can be split into wholesale and retail

Pursuant to Law Decree no. 73 of 18 June 2007, as of 1 July 2007, retail end users have the right to withdraw from existing electricity supply contracts, in accordance with the procedures established by the AEEGSI, and to select a different electricity supplier. For end users which have opted for free market conditions, the terms and conditions - including the price - of electricity supply contracts may be agreed between the supplier and the relevant end user. For end users that have not opted for free market conditions, the regulated tariffs apply, as set out under the “Testo integrato delle disposizioni dell’autorità per l’energia elettrica e il gas per l’erogazione dei servizi di vendita dell’energia elettrica di maggior tutela e di salvaguardia ai clienti finali ai sensi del decreto legge 18 giugno 2007, n. 73/07” (as subsequently amended and integrated, the “TIV”). The TIV provides as follows:

(i) households and small businesses that have fewer than 50 employees, a turnover lower than Euro 10 million and low levels of electricity consumption may access the so-called “servizio di maggior tutela”

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regulated market, for which the electricity tariffs are set by the AEEGSI. Ultimately, the responsibility for the supply of electricity to such customers is on the Single Buyer. The regulated tariff is composed of different cost elements relating to the specific services provided (i.e. transport, distribution, marketing activities). Invoices to end users must show a breakdown of such costs; (ii) end users not falling under paragraph (i) above only have access to the “safeguarded service” (so-called “servizio di salvaguardia”), under which electricity is provided at higher rates than the market rate in order to incentivise customers to access the free market; and

(iii) for customers falling under paragraphs (i) and (ii) above, the applicable rates and standard terms and conditions of supply are set out under AEEGSI resolutions (the most recent are AEEGSI Resolution no. 633/2016/R/EEL dated 4 November 2016 which completes the reform of market mechanisms for the protection of the price for domestic customers and non-domestic electricity, by modifying the conditions for the delivery of the so-called “servizio di maggior tutela” and AEEGSI Resolution no. 818/2016/R/EEL dated 29 December 2016 which set out the revised tariffs for the “servizio di maggior tutela” for the period January- March 2017).

Pursuant to Law Decree of 23 December 2013, No.145 (“Destinazione Italia Decree”), as enacted into law through Law no. 9 dated 21 February 2014, on the basis of the hourly energy trends on the free market, the AEEGSI determined by means of Resolution no. 170/2014/R/EEL dated 10 April 2014, the parameters for the calculation of the prices for electricity supply to end users who do not buy electricity on the free market.

In addition to the above, further legislative measures for the complete liberalization of the electricity supply market are under evaluation by the Parliament. Draft Legislation S. 2085 (“Disegno di Legge S. 2085”) approved by the Italian Senate during August 2016 provides for the complete liberalization of the electricity (and gas) market starting from 1 July 2018. In light of this possible deadline, the AEEGSI by means of Decision no. 369/2016/R/EEL dated 7 July 2016, establishes a new regulated regime for “protected customers” (the so-called “tutela simile”) which will be effective from 1 January 2017 and thereafter will replace the “servizio di maggior tutela”. The “tutela simile” contracts will be offered only by electricity suppliers which meet the financial and dimensional requirements set out under AEEGSI Decision no. 369/2016/R/EEL. The characteristics of the “tutela simile” contracts will not be freely determined by each electricity supplier, but will have to be consistent with the predefined AEEGSI principles concerning duration, payments and termination. The suppliers must in any case offer to the potential clients the “tutela simile” offer, as possible alternative to free market conditions. The price of the electricity supply will be substantially in line with that under the “servizio di maggior tutela” (save for a one-off bonus which will be quantified by the supply company in favour of the end user on the first invoice).

In addition, for retail transactions supply contracts are entered into directly with end customers and, therefore, the contract rules for the safeguard of consumer rights also apply (i.e. Legislative Decree of 6 September 2005, no. 206), together with the safeguard regulation and rules approved by the AEEGSI. With regard to wholesale transactions, these may be carried out over the counter or on the Power Exchange market, or may consist of purchases by the Single Buyer.

Electricity production

Article 8 of the Bersani Decree liberalised the regime for electricity production. In order to increase the level of competition in the market, the Bersani Decree provided that, as of 1 January 2003, no single electricity production company shall be allowed to produce or import, directly or indirectly, more than

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50 per cent. of the total electricity produced and imported into Italy. Any operator which exceeds such threshold will incur severe fines imposed by the AGCM pursuant to article 15 of Decree Law No. 287 of 10 October 1990. Authorization procedure for plants powered by renewable sources Pursuant to Legislative Decree no. 387/2003 (the “LD 387/2003”), implementing EU Directive 2001/77/CE, photovoltaic, hydroelectric and other plants fuelled by renewable sources are authorized through the so called “autorizzazione unica” (hereinafter defined as the “AU”) granted by the Regions (or, as the case may be, by the relevant Province as entrusted by the relevant Region). The AU is issued following the convening of a local authorities meeting (the so called “Conferenza dei Servizi”), in order for all the competent authorities to examine contextually the various public interests involved in the relevant proceeding. The AU substitutes all the authorizations, permits and way of leave required to construct, alter, increase the capacity of, totally or partially renovate and/or re-commission plants powered by renewable sources, as well as all relating works and the infrastructures indispensable for constructing and running such plants (including the relevant interconnection facilities). Once the AU is achieved, no further approval is needed (provided that however the AU holder fully complies in all respects with all the prescriptions and requirements set forth in such AU and in the permits and authorizations issued in the context of the Conferenza dei Servizi). More specifically, art. 12 of LD 387/2003 provides that (i) solar plants on ground with a capacity not exceeding 20 kW and (ii) wind farm with a capacity not exceeding 60 kW, could be authorized by means of a simplified authorization procedure, namely the “denuncia di inizio attività” (hereinafter, the “DIA”), instead of the more complex AU procedure. It is worth highlighting that according to D.P.R. no. 380/2001 the DIA is a self-certification process whereby the applicant declares that the project in question complies with all relevant requirements and conditions. The competent authority can raise objections against the DIA within 30 days of receipt of the same DIA; should the objection not be raised within the 30-day term - which is mandatory - the authorization shall be deemed granted and the applicant is allowed to start the works (provided that all the authorizations, nihil obstat required in respect to the plant have been attained, e.g. landscape authorization). Both in the case of the AU and DIA procedures, continuing validity of the authorizations is subject to compliance with the prescriptions and requirements imposed therein and/or contained in permits/way of leaves issued by the various competent authorities involved in the authorization procedure (e.g. landscape authorizations, hydrogeological way of leave and so on). Hydroelectric production Pursuant to Sections 822 and 823 of the Italian Civil Code, sea, beaches, ports, rivers, lakes and the other forms of water are Italian state property (“demanio pubblico”). The Italian legislative framework on the use and exploitation of public waters has been set forth by Royal Decree no. 1775, dated 11 December 1933 (as subsequently amended and integrated, the “Consolidated Act on Public Waters” or “Testo Unico delle Acque”). Pursuant to Article 2 of the Consolidated Act on Public Waters, only operators that have obtained a regular public concession (concessione di derivazione idroelettrica) can exploit public waters. According to art 6 of the Consolidated Act on Public Waters, the use of public waters are divided into large and small exploitations, both subject to public concessions. The Hydroelectric plant producing less than 3 MW falls within the scope of small exploitation regulation, whilst those with an average nominal power higher than 3 MW are considered as “large”. Pursuant to Art. 12 of the Bersani Decree, the granting of concessions for large scale water exploitations for hydroelectric power plants is subject to a public tender procedure. The Bersani Decree transferred the competence of management of the public property waters from State level to each one of the Regions of Italy.

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By way of Law Decree No. 83 of 22 June 2012, as enacted into law through Law no. 134/2012 (the “Development Decree”), the Italian government issued certain regulations which affect the way in which tenders are carried out. More specifically, Article 37 of the Development Decree, by amending art. 12 of the Bersani Decree, provides that five years prior to the expiration of a large water concession, the competent authority shall launch a public tender for the assignment, subject to the payment of consideration, of such large water concession, in accordance with local regulations and the fundamental principles of competition protection, freedom of establishment, transparency and non- discrimination. Such new concession shall be granted for a period of 20 years, up to a maximum of 30 years, depending on the required level of investment.

In addition, in relation to large water concessions which either have already expired or are due to expire earlier than 31 December 2017 (in relation to which the aforementioned five-year limit would not be applicable), the new provisions have established a special transitional regime, under which the relevant tenders must be called within 2 years of the effective date of a ministerial decree which should implement such new regime by establishing: (i) the financial and organization participation requirement to the concession public tender; (ii) the criteria for the restatement of the duration of the future concession; (iii) the economic parameters for the determination of the consideration to be paid to the out-going concession holder. Such ministerial decree should have been jointly issued by the MED and the Ministry of Environment within 30 April 2012, but it has not yet been published. In any case, the new concessions should be awarded and start no later than 31 December 2017.

Article 37 of the Development Decree, by amending art. 12 of the Bersani Decree, further establishes that the out-going concession holder has to transfer to the new concession holder the relevant plants and facilities related to the water concession. The consideration to be paid to the out-going concession holder shall consist of an amount agreed between the out-going concession holder and the relevant authority, to be expressly indicated in the tender notice. In order to reimburse the out-going concession holder for any investments made on the plants, such amount has to be calculated taking into account (i) in respect of dams, penstocks, drains and pipes, the re-valued historical cost, reduced to take into account any public contribution received by the concession holder for the construction of such assets and the ordinary wear and tear, and (ii) in respect of any other assets of the plant, the market value, intended as the value of the new construction of the assets reduced to take into account ordinary wear and tear. If no agreement on the amount of the consideration is reached between the out-going concessionaire and the granting administration, such amount shall be established by means of an arbitration procedure. In addition, pursuant to Article 25 of the Consolidated Act on Public Water, at the end of the concession, all water collection and regulation plants, and all drainage canals (so called “wet plants” or “freely transferable plants”) are freely and automatically transferred to the state property (demanio), whereas the transfer of all other buildings, machineries and plants related to the concession (so called “dry plants” or “not freely transferable plants”) is subject to the payment of a consideration equal to the value of the dry plants at the moment of the transfer. Likewise, if no agreement can be reached between the out- going concession holder and the granting administration on the amount of the consideration, such amount shall be established by means of an arbitration procedure.

Authorisation procedure for the construction of hydro power plants

Article 12 of LD 387/2003 sets out the rules for the authorisation procedures to be followed to obtain the permits to build and operate renewable energy plants.

Furthermore ministerial decree dated 10 September 2010 (which establishes national guidelines on authorisations for plants fed with renewable resources, the “Guidelines”) provides for a series of

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procedural simplifications for the realization of hydroelectric plants of small size. The table A attached to Article 12 of LD 387/2003 (the statute which supports the Guidelines), prescribes that hydroelectric plants having a power higher than 100 kW must be authorized through a single procedure (procedimento unico) (see sub-paragraph “Photovoltaic power plants” for further details). On the contrary, the PAS (Procedura abilitativa semplificata) is required for hydroelectric having less than 100 kW. This procedure is also confirmed by the regional guidelines adopted by Lombardy Region through the Decision no. 3298/2012, published in the Official Bulletin of Lombardy Region, ordinary series, 17/2012.

Hydroelectric incentives regime

With particular reference to the promotion of electricity generated by renewable sources, in Italy the first incentive mechanism promoting electricity production through non-conventional sources was introduced, in 1992, by means of the so called CIP-6 Regulation, issued by the Inter-ministerial Price Committee, an Italian governmental committee. As a consequence of the coming into effect of the Bersani Decree, pursuant to Law 244/2007, by Ministerial Decree 18 December 2008, the Italian government introduced the incentive regime based on the so- called- green certificate mechanism (“Green Certificates”), applicable to all renewable plants, except solar plants (for which specific incentive regime is provided).

Furthermore, pursuant to the provisions of Legislative Decree No. 28/2011 (the “Renewable Decree”), implementing EU Directive 2009/28/EC5, the incentive regime based on Green Certificates is being phased out in favour of an incentive scheme based on feed-in tariffs /premiums and competitive processes for the awarding of incentives to renewable energy plants.

As far as the hydroelectric sector is concerned, the current method of promotion of electricity production from hydroelectric plants is contained under Ministerial Decree 6 July 2012 which regulates the granting of incentives to electricity produced by plants fed by renewable sources (other than photovoltaic plants), having a nominal power not lower than 1 kW. The incentives apply to newly built plants and plants that are fully reconstructed, re- activated, upgraded/repowered or renovated and that commence operations after 1 January 2013.

Moreover, pursuant to the Destinazione Italia Decree, the plants (and therefore the operators) which have been granted with the Tariffe Onnicomprensive or the Green Certificates may opt for a longer incentivisation period in exchange for a reduced yearly tariff, or, instead, may keep their current incentives but in this case, for the ten years following the end of the incentive period, no more incentives of any kind (e.g. ritiro dedicato and scambio sul posto) will be granted to any plant built on the same site. Lombardy Regional Framework applicable to hydro power plants The Regional Law n. 26 of 12 December 2003 of the Lombardy Region ("RL 26/2003"), which regulates local services of general economic interest, waste management, energy, use of subsoil and water resources, delegates to a regional regulation the discipline of surface and underground water. In this respect, the Lombardy Region has adopted the regional regulation n. 2/2006 (the “Regional Regulation n. 2/2006”). Art. 7 and following of Regional Regulation n. 2/2006 set forth the procedure for the granting of public water concessions in the Lombardy Region. In particular, art. 7 confers jurisdiction on licensing small exploitation to the provinces. Within the meaning of art. 21 of the Consolidated Act on Public Waters, the concession has a thirty years duration and is therefore temporary. However, there is the possibility to renew it upon expiry. Environmental regulations applicable to renewable energy plants

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Pursuant to Legislative Decree no. 152/2006 (“Environmental Code”) renewable sourced plants may be subject to a two-stage environmental evaluation, depending on the type and the nominal power thereof:  a mandatory stage (“Environmental Screening”) which is aimed to assess the impact the project may have on the environment. Should this impact be deemed significant, the project will need to pursue the second stage below5;  an eventual stage (“Environmental Impact Assessment - EIA”) which amounts to a full environmental assessment of the project, to be pursued in case the project is likely to have significant impact on the environment6. It follows that the outcome of the first stage may be either the exclusion from the EIA of the project or the decision that the latter has to pursue the second stage above (i.e. EIA). On September 10, 2010 the Minister for the Economic Development issued the decree which outlines the national guidelines for the authorization of power plants fuelled by renewable energy sources (“National Guidelines”) aimed to provide the detailed standard discipline of the AU procedure at a national level, in order to harmonize the different procedures be adopted by each of the Italian Regions. Moreover, the National Guidelines also empower the Regions to identify the areas wherein the installation of power projects is banned, based on certain landscape and zoning general criteria detailed thereon. On March 3, 2011, the Italian Government issued the Renewable Decree on the implementation of Directive no. 2009/28/EC on the promotion of the use of energy from renewable sources. The Renewable Decree implemented, inter alia, the provisions relating to the administrative procedures governing the construction and operation of installations producing energy from renewable sources. In particular, the Renewable Decree introduced a simplified authorization procedure (the so-called “Procedura Abilitativa Semplificata”, hereinafter the “PAS”) applicable to, inter alia (i) solar plants on ground with a capacity not exceeding 20 kW and (ii) wind farm with a capacity not exceeding 60 kW, granting the Regions to increase the thresholds in question up to 1 MW. The Renewable Decree also implemented the new procedures for incentivizing the growth of energy produced by installations fuelled by renewable sources (inter alia, solar and wind), in respect to which see below.

Photovoltaic incentives regime Photovoltaic solar plants had benefited in the last years from a feed-in premium tariff on top of the price of the electricity produced (the so called "Conto Energia"). The Conto Energia has been regulated in previous years by several ministerial decrees (so-called "First, Second, Third, Fourth and Fifth Conto Energia"). The feed-in tariffs set forth under the Fifth Conto Energia have a comprehensive nature, including both the incentive component and the remuneration of the electricity produced.

GSE S.p.A. (a state- owned company which promotes and supports renewable energy sources in Italy, the “GSE”) is entitled to conduct inspections on the plants and to revoke incentives in case of discrepancy between the documentation and designs submitted to the GSE in the context of the application for incentives and the works realised as well as in case of false statements rendered by the operator to the GSE in order to achieve the incentives. In particular, photovoltaic plants are subject, on the basis of the size and nominal power capacity, are subject to different authorization procedures, which have to be complied with. Otherwise, the incentives granted to a plant lacking the relevant applicable authorization might be unilaterally (“in via di autotutela”) revoked by the GSE.

5 In this respect, the Environmental Code sets the threshold for the mandatory Environmental Screening of renewable sourced plants having a capacity higher than 1 MW (and sometimes distinguishing among the renewable sources), save where the project is located within environmentally-restricted areas 6 Please note that the EIA is mandatory should the project fall within environmental restricted areas.

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On 6th July 2013 the maximum threshold for incentives provided under the Fifth Conto Energia was reached and, as a consequence, this incentive scheme for photovoltaic plants is no longer available. For the time being, no further incentives are granted to new photovoltaic plants.

With regard to photovoltaic plants, Law Decree No. 91 dated 24 June 2014 (“Spalma-Incentivi Decree”) and its implementing acts issued by the Ministry of economic development, provided three options that had to be chosen by solar electricity producers, having effect from 1 January 2015:

 an extension of the incentivized period;

 the reshaping of the feed-in tariff with initial decrease of payments and subsequent compensation;

 the flat reduction of a percentage of the feed-in tariff.

Several claims have been filed with the Lazio Administrative Tribunal to challenge the provisions of the Ministerial Decrees implementing the Spalma-Incentivi Decree as the claimants deemed that the provisions thereunder were to be considered as having an unjustified “retroactive” effect on rights that has already been fully acquired. In June 2015 the Lazio Administrative Tribunal filed for a constitutional scrutiny, regarding article 26 paragraph. 3, to the Italian Constitutional Court. On 24 January 2017 the Constitutional Court has declared as “not grounded” the query on the constitutional legitimacy of art. 26 paragraph 3 Spalma-Incentivi Decree.

Electricity Distribution Distribution service concerns the medium and low voltage networks, which provide electricity to end users (mainly for housing needs and small production needs). The Bersani Decree provides that distribution services shall be performed on the basis of concessions issued by the Ministry of Industry (now the MED). The operators holding concessions have de facto authority to manage the service on a monopolistic basis in their area of competence. Pursuant to article 9 of the Bersani Decree, concessions granted within 31 March 2001 to distributors operating at the date of enactment of the same Bersani Decree shall be in force until 31 December 2030; starting from 31/12/2030 new concessions shall be granted through public tenders.

The distribution companies are required to connect to their networks all parties who request connection, without compromising the continuity of the service and in compliance with the applicable technical regulations and provisions. In this regard, the AEEGSI and Terna have published and approved a standard distribution code (“Codice di Rete”) which shall be applied and used by local distribution companies and regulate their relationship with the users of the medium and low voltage networks.

Moreover, the AEEGSI set a strict regulation concerning functional unbundling in order to guarantee the independence between the separated activities.

New tariff structure for transmission, distribution and metering

The AEEGSI established a tariff regime that came into effect on 1 January 2000. This regime replaced the “cost-plus” system for tariffs with a new “price-cap” tariff methodology. The price-cap mechanism sets a limit on annual tariff increases corresponding to the difference between the target inflation rate and the increased productivity attainable by the service provider, along with any other factors allowed for in the tariff, such as quality improvements. Under the price-cap methodology, tariffs

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will be reduced by a fixed percentage each year encouraging regulated operators to improve efficiency and gradually passing savings onto end users.

By way of Resolution ARG/elt No. 199/11, the AEEGSI adopted the consolidated text of provisions to regulate the transmission and distribution of electricity ("TIT") and the consolidated text of provisions regulating the supply of the Electricity Metering Service ("TIME") for the fourth regulatory period (2012-2015). The second version of the TIT for the period (2016-2019) has been approved by the AEEGSI by means of Resolution n. 654/2015/R/EEL dated 23 December 2015 and further amended by means of Resolution n. 39/2016/R/EEL and n. 404/2016/R/EFR.

Natural Gas

Italian regulations enacted in May 2000, by means of the Legislative Decree No. 164/2000 (the “Letta Decree”) - implementing EU directives on gas sector liberalisation (Directive 1998/30/EC) - introduced competition into the Italian natural gas market through the liberalisation of the import, export, transport, dispatching, and sale of gas. The liberalisation process was successively strengthened by Directive 2003/55/EC, which introduced, on the one hand, stricter unbundling obligations on companies operating in the gas transport, distribution and sale sectors and, on the other hand, incentives for new import infrastructure. The authorities responsible for turning this regulation into practice are the MED and the AEEGSI.

Natural gas sale

The Letta Decree distinguishes between wholesale activity and retail sale activity. Since 1 January 2002, only companies that are not engaged in any other activity in the natural gas sector, other than as importers, drillers or wholesalers, have been entitled to sell gas to retail customers.

Pursuant to article 17 of the Letta Decree companies that intend to sell gas to end users must obtain a licence from the MED. Such authorisation is issued on the basis of criteria set by the MED, provided that the company meets certain requirements (e.g. appropriate technical and financial capacity) and may only be refused on objective and non-discriminatory grounds. A list of all companies authorised to sell gas to end users is published by the MED on its website. Since 1 January 2003, retail customers have been able to choose between supplies of natural gas carried out on a free market basis or on a regulated basis. In the free market, the terms and conditions - including the price - of gas supply contracts are agreed between the supplier and the relevant end customer. Conversely, regulated tariffs (“servizio di maggior tutela”) are set out under the “Testo integrato delle attività di vendita al dettaglio di gas naturale e gas diversi dal gas naturale e distribuiti a mezzo di reti urbane” (the “TIVG”), as amended by AEEGSI Resolution no. 672/2014/r/gas. Pursuant to the TIVG, regulated tariffs apply to retail customers who do not opt for free market tariffs as well as to households where gas consumption does not exceed 200,000 Smc/year. The regulated tariff is composed of different cost elements relating to the specific services provided (i.e. transport, distribution, metering, marketing activities). Invoices to end customers must show the breakdown of such costs. In addition to the TIVG, transactions involving retail customers are also subject to rules for the safeguard of consumer rights (i.e. Legislative Decree of 6 September 2005, no. 206). Moreover, companies which sell gas to retail customers must comply with the “Gas Distribution Network Code” (see “General Framework – Distribution” for further details).

Since 2002 operators have been able to freely sell and purchase on a wholesale basis any quantity of natural gas on the “PSV” (punto di scambio virtuale), which is an electronic platform operated by Snam Rete Gas S.p.A. Moreover, Law of 23 July 2009, no. 99 (“Law 99/2009”) provided for the establishment of

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a market exchange platform for the supply and sale of natural gas. Under Law 99/2009, GME was designated as manager of the natural gas exchange market, in compliance with the principles of transparency, competition and non-discrimination. MED Decree of 18 March 2010 established a trading platform for the exchange of gas imports (P-Gas), managed by the Energy Market Operator. The gas exchange started in October 2010, with the Energy Market Operator acting as central counterparty ((A) the M-Gas platform, formed of: (i) day ahead market - MGP-Gas, and (ii) intraday market - MI-Gas, and (B) the forward gas market – MT Gas). The gas balancing market on the PB-Gas platform started in December 2011, which was managed by the Energy Market Operator, with Snam Rete Gas S.p.A. acting as central counterparty. On the gas balancing market, an ex-post gas exchange session takes place which is aimed at balancing the whole gas system and shipper positions (the part of the supply chain in which gas is produced or imported or bought from domestic producers or other shippers) through the purchase and sale of stored gas. On the PB-Gas platform, which is accessible to all operators, operators may acquire, on the basis of economic merit, the necessary resources to balance their positions and ensure the constant balance of the network, for the purposes of ensuring system security.

Natural gas dispatching and transportation

Pursuant to Article 9 of the Letta Decree, natural gas transport and dispatching are considered activities of public interest and are regulated accordingly. By means of Ministerial Decree of 22 December 2000, the MED implemented Article 9 of the Letta Decree and identified the “national gas transmission network” (opposed to the local gas network” (rete di distribuzione) as set out under AEEGSI Resolution No. 120 dated 30 May 2001). This Ministerial Decree contains a detailed list of the pipelines, their length, characteristics and owner, which is updated on a yearly basis. Approximately 96% of such pipelines are owned and operated by Snam Rete Gas (“Network Operator” or “Transmission Company”).

By means of AEEGSI resolution No. 75, dated 1 July 2003, as subsequently amended, AEEGSI issued the “SNAM Gas Grid Code” (“Codice di rete SNAM”), which provides for detailed rules and procedures concerning the dispatching and balancing services in order to ensure the efficiency of the gas transmission grid. Most important, the companies which provide transport and dispatching services may not refuse to connect to the gas distribution network users who are compliant with the AEEGSI rules. In particular, access may be refused for one of the three following reasons: (i) lack of capacity or interconnection, (ii) when granting access would prevent the undertaking from carrying out the public-service obligations assigned pursuant to the applicable law and regulations, and (iii) in case of serious economic and financial difficulties related to take-or-pay contracts entered into by the undertaking before the Letta Decree.

Gas distribution

Pursuant to the Letta Decree, distribution activity is considered as a public service and may be carried out only by companies which do not already provide other services in the gas sector, as sale, dispatching or storage activities.

The AEEGSI approved and published under Resolution of 6 June 2006 no. 108 the standard “Gas Distribution Network Code” to be adopted by all natural gas distribution companies. The Gas Distribution Network Code regulates the relationship between distribution companies, on one side, and gas sellers and retail customers, on the other side. The Gas Distribution Network Code sets out the various distribution services and the required levels of performance. Among these: acceptance of the gas delivered by the seller entitled to introduce gas into the distribution facility, transportation of the accepted gas to the delivery points, measurement of the accepted and transported gas, connection of the end customer to the gas

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network and maintenance of the network. Most important, distribution companies must grant access to the distribution network to any requesting seller who fulfils the technical requirements detailed under the Gas Distribution Network Code and under the relevant AEEGSI Resolutions.

Such service has been opened to competition through gradual steps. In particular, starting from 1 January 2003, local public authorities (mainly municipalities) were obliged to convert into private companies the local public entities which were at the time the only concessionaires of the distribution service. However, for the first two years after the transformation the local public government could still be the only shareholder of these new companies, therefore maintaining direct public control on the distribution activity. The Letta Decree provides that concessions concerning the distribution service must be awarded by local authorities on the basis of public tenders for a maximum period of 12 years. In 2011, the applicable legislative framework in the field of gas distribution has been redefined. Ministerial Decree dated 19 January 2011 set out the minimum independent geographic areas (known as “Ambiti Territoriali Minimi” – “ATEM”) each of which is assigned under concession to a distribution company by the relevant local authority unless neighbouring ATEM decide to form a larger concession area and carry out a joint tender procedure. The Italian territory has been divided into 177 ATEM, with the aim of increasing competition, efficiency and independence of concession holders from local authorities. The tender criteria decree, adopted by the MED in conjunction with the Ministry for Regional Relations and National Cohesion (Ministro per i Rapporti con le Regioni e per la Coesione Territoriale) on 12 November 2011 and published in the Italian Official Gazzette on 27 January 2012 (the “Tender Criteria Decree”), contains provisions regarding the requirements for participation, bid evaluation criteria, the compensation figure to pay to the outgoing operator, as well as the types of tender procedures. The amount of payment to holders of concessions and licences, when the applicable transition period expires, will be calculated on the basis of what has been established in the agreements or, if this cannot be done, based on the criteria in Royal Decree No. 2578/1925 (industrial value criterion). In case of a dispute, the outgoing operator will be paid the higher value between the value of net fixed assets of locality (“immobilizzazioni nette di località”) of the distribution service, including construction in progress, net of public or private contributions, calculated using the methodology of the current tariff adjustment and on the basis of the consistency of the plants at the time of their transfer and the value estimated by the local authority, with possible adjustments after the dispute has been resolved. The incoming operator will acquire ownership of the system by paying the outgoing operator the redemption value, with the exception of any assets owned by the local municipality. Tenders will be awarded based on the most economically advantageous offer with regard to the following criteria:

 economic conditions;

 security of the service;

 quality of service; and  development of the distribution system.

As a consequence of the above mentioned law provisions, the tender procedures for the awarding of new gas distribution concessions should commence once certain conditions provided by the Tender Criteria Decree have been met and within the time period (which differ from ATEM to ATEM) set out in Annex 1 of the Tender criteria decree.

By a Ministerial Decree dated 5 February 2013 a master service agreement for the distribution of natural gas was approved in compliance with the provisions of article 14 of Legislative Decree n. 164 of 23 May 2000.

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In particular, such master service agreement covers in detail all aspects of the concessionary regime, the mutual obligations of the parties, the duration of the agreement – established in a maximum of twelve years, the termination provisions, and provides that the outgoing operator transfers the ownership of its plants to the incoming operator upon payment by this latter of the compensation figure provided for under article 14, paragraph 8 of the Letta Decree. Article 4 of Legislative Decree No. 69 of 21 June 2013, (“Decreto del Fare”) contains, among other things, provisions regarding concessions for gas distribution. It provides that the time limits introduced by Article 3 of the Tender Criteria Decree regarding selection of a body tasked with overseeing the tender process and the issue of tender bids are definitive and, if they are not met, the relevant Region (Regione) must launch the tender bid by nominating a so-called “commissario ad acta”. If the region fails to act, the Ministry of Economic Development shall do so and shall nominate a commissario ad acta. In addition, the local body in breach of the relevant regulations can be given a fine and other sanctions described in the decree. The Decreto del Fare also contains provisions regarding valuation of the compensation figure for gas distribution network and plant and provides that the Ministry of Economic Development may issue specific guidelines regarding the methods and criteria of such valuation. The tender process became mandatory from 1 January 2006 for concessions held by local public entities and awarded without a tender process before the Letta Decree came into force: such concessions terminated on 1 January 2006 notwithstanding their original duration and a tender process was subsequently required in order to award such concessions. For concessions awarded through a tender process before the Letta Decree came into force, the maximum 12 year period applied. In the event that, on expiry of a concession, the outgoing operator is entitled to compensation for transferring the legal title to the distribution facilities to the incoming operator, the incoming operator must pay to the outgoing operator such compensation, calculated on the basis of the criteria set out in the concession or, if the relevant concession does not set out such criteria, pursuant to the MED’s guidelines issued on 22 May 2014. In particular, Destinazione Italia Decree introduced a dual methodology enhancement of networks (i) RAB (“Regulatory Asset Base”) value that is recognized by AEEGSI for the calculation of capital costs in the rates (ii) Industrial Residual Value (VIR) to be calculated by the method of enhancement of the forward net of the physical-technical degradation of the reconstruction cost of the facilities, net of government grants. The amount of the VIR must be inserted in the call for tenders as defined by the municipalities grantors. If the VIR value is 10% higher than the RAB, the local authority must provide detailed feedback to AEEGSI before publication of the notice. With the Law 21/2016 has been decided the further extension of the period for publication of the contract notice. Currently several ATEMs are publishing their tender notices. This reform provides for the publication of 74 invitations to tender in 2016, 98 in 2017 and five in 2018 and 2019. As of today, on the basis of the calendar set forth with Law 21/2016, 82 ATEM invitations to tender should have been published; further 14 ATEM invitations to tender should have been published by 11 March 2017 and further 17 by 11 April 2017, for a total of 103. Actually only 14 invitations to tender have already been published, and they either have been challenged before the competent TAR or extended by the relevant contracting authorities.

From the tariff point of view, the Resolution No. 367/2014/R/gas defined the applicable tariffs for distribution and metering for the regulatory period 2014-2019. The AEEGSI each year sets the relevant tariffs for the distribution service, which must be applied by the distribution companies to the clients. AEEGSI Resolutions No 173/2016, dated 7 April 2016, has determined the provisional reference rates for distribution services and gas metering for the year 2016, on the basis of the pre-final financial figures for the year 2015. The resolution related to 2017 has not been published yet by the AEEGSI.

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Recently, AEEGSI has published the consultation document No. 456/2016 relevant to the criteria for the recognition of costs related to investments in the natural gas distribution networks, starting from 2018 through the standard cost mechanism. In the consultation document, AEEGSI has expressed the orientation of establishing a technical round table between the distribution companies, also through trade associations, and the offices of the AEEGSI for the purpose of defining a pricelist for the recognition of costs related to the investments in the networks for the distribution of natural gas from the investment which will be made in 2018. With resolution n.704/2016/R/GAS the round table has been set up. Natural gas distribution companies (together with electricity distribution companies) are required under the Bersani Decree to implement energy efficiency measures for end users and deliver to the AEEGSI by May 31 of each year a certain number of TEE (“White Certificates”). Distribution companies may also buy TEEs from third parties.

District Heating

Until year 2014 district heating activities were not subject to specific regulation in Italy. District heating supply agreements were only subject to the general provisions of the Italian Civil Code.

Through the European Directive 2012/27/EU dated 25 October 2012 (hereinafter the “Directive 2012/27/EU”), the European Commission has introduced new provisions in order to contain and make more efficient the consumptions for heating, air conditioning and for the supply of hot domestic water (“HDW”) in civil buildings. In Italy the Directive 2012/27/UE has been implemented by the Legislative Decree No. 102, dated 4 July 2014 (hereinafter the “Legislative Decree 102/2014”), that entrusted the AEEGSI to implement the provisions of the Directive 2012/27/UE.

Articles 10, paragraphs 17 and 18 and various paragraphs of Article 9 of the Legislative Decree 102/2014 gave to the AEEGSI specific functions in the matter of district heating and district air conditioning. Pursuant to Law 481 dated 14 November 1995, AEEGSI is also entitled with inspection, sanction and control functions and, according to article 16 of the Legislative Decree 102/2014, the AEEGSI is also entitled with other sanctioning functions.

The principles and the goal of the regulatory activity of the AEEGSI in the years 2015-2018 have been listed in a document, called “strategic framework (“quadro strategico per il quadriennio 2015-2018”), approved after the consultation of the relevant stakeholders by the AEEGSI with the Decision 3/2015/A dated 15 January 2015. The goal of the AEEGSI was to show that the relevant principles in the district heating sector are common with the principles of the other regulated energetic sectors.

The consultation had the goal of identifying the case law and legislative framework and the issues in relation to the regulatory functions attributed to the AEEGSI. The results of that consultation allow the AEEGSI to identify the priority action lines in the regulatory process of the AEEGSI. The new regulations that shall be implemented by AEEGSI in the following years, as established by the Decision of the AEEGSI 19/2015/R/TLR dated 29 January 2015, will concern:

 the definition of the relevant standard of technical and commercial quality, continuity, safety, of the district heating service, of the plant and of the energy counting systems;

 the criteria and the modalities of the supply of the meters to the end users as well the modalities by which the end user can assign the supply of the service to another retail company;

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 the tariff of the heat assignment pursuant to the Legislative Decree 102/2014, the criteria for the determination of the connection to the district heating network fees and the modalities of the disconnection to the district heating network;

 non-discriminatory conditions for the connection to the network of new cogeneration plants;

 the measurement, the calculation, and invoicing of the energetic consumption to end users and their right to access to relevant invoicing documentation;

 “census” of the relevant stakeholders of the district heating sector, of the network’s infrastructures and of the plants; and

 the transparency in relation to the price and the contractual conditions of the district heating service.

The consultation process started with the Decision 411/2014/R/COM of the AEEGSI dated 7 August 2014 and should have had a duration of 24 months from the entry into force of the Legislative Decree 102/2014. In the period January 2015 – March 2016, according to the “strategic framework”, especially in the second semester of the year 2015, began the following regulatory processes of the AEEGSI:

 the definition of the informational obligations subject operating in the district heating sector and the registration obligation of the infrastructural grids to the “district heating and district air conditioning territorial register” (“Anagrafica Territoriale Teleriscaldamento e Teleraffrescamento”), as specified in Decision of the AEEGSI 339/2015/R/TLR and amended by Decision of the AEEGSI 425/2015/R/TLR;

 the collection of information on the price invoiced to end users, began in November 2015 pursuant to the Decision of the AEEGSI 578/2015/R/TLR dated 26 November 2015 (as subsequently amended with Decision 643/2015/R/TLR), and directed to build an informative basis on the modalities for the determination and adjournment of the price and fees in this sector as well as on their publicity and availability to the public; and

 the beginning of the regulatory activities in the field of the measurement of the heat, thanks to a research project, developed in collaboration between the University of Cassino, the offices of the European Commission and the Italian MED.

As a consequence the AEEGSI i s e x p e c t e d to issue a new decision on the topics provided by art. 9 of Legislative Decree 102/2014 and in the near future, having the given deadline already expired.

Water, Waste and Public Lighting Services The integrated water service, the integrated waste management service and the public lighting service are economic local public services (“servizi pubblici di rilevanza economica”). Legislation regulating economic local public services was affected by the outcome of the “Referendum”, which repealed Article 23-bis of Decree No. 112/2008.

Following the Referendum results, a new regulation on the matter was adopted (Article 4 of Law Decree No. 138 of 13 August 2011, converted into Law No. 148 of 14 September 2011, as subsequently amended)

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which was however declared unconstitutional by the Constitutional Court, with judgment No. 199 of 17-20 July 2012.

Subsequently "Growth Decree 2" (as defined above) ent er ed into for ce, which, however, does not apply to (i) gas distribution and (ii) distribution of electricity, but applies to water and waste services. Article 34 of this decree, as modified by Laws No. 15/2014 and No. 111/2015 and by Legislative Decree 50/2016, with regard to local public services, provides that:

 public entities, before granting the concessions, shall publish on their websites a report clarifying the type of the award of the concession they have chosen (i.e. public bidding procedure for selecting a private company, public bidding procedure for selecting the private partner of a public-private company, direct award to wholly-owned public companies), its compliance with European Law on concessions’ awarding procedures (in particular, the Treaty on the Functioning of the European Union and Directive 2004/18/EC) 7, and the relevant reasons underlying the choice;

 with reference to the concessions existing as of the date of entering into force of the decree (i.e. 20 October 2012) which do not comply with the requirements set forth by the European legislation, these concessions must be adjusted to such requirements by 31 December 2013 and the aforementioned report has to be published by 31 December 2013; should the awarding authority fail in complying with this obligation, the relevant concessions shall cease at 31 December 2013. In this regard, Law No. 15/2014 provided an exception aimed at ensuring the service’s continuity. If the public entity has already started the concession awarding procedure, the subject entrusted with the public service can continue to operate until its replacement with the new concessionaire and, however, before 31 December 2014;

 with reference to those concessions which do not provide for an expiry date, the competent awarding authority shall integrate the concession agreement with an expiry date; should the awarding authority fail in providing an expiry date, the relevant concession shall cease at 31 December 2013.

As to the procedures for the assignment of local public services, Decree No. 179/2012 does not contain any specific provisions, except for the general principle according to which the local public service must be assigned on a homogeneous territorial basis (ambiti territoriali ottimali e omogenei). Therefore, considering that:

(i) Article 23-bis of Law Decree No. 112 of 25 June 2008, (converted with amendments into Law no. 133 of 6 August 2008) has been repealed by the Referendum; and

(ii) Article 113 of Decree 267/2000, for the part abrogated by Article 23-bis, cannot be revived, for the time being, public entities shall apply the principles and regulations provided for by the EU Treaty on the Functioning of the European Union and, in general terms, by EU Law and relevant case law. In this respect, the relevant authority shall alternatively award the new concession:

(1) to private companies, selected by means of a public bidding procedure;

7 On 15 January 2014 the European Parliament approved the text of a new Directive regulating procedures for awarding concessions. The Directive comes into force 20 days after publication in the Official Journal of the European Union and must be implemented by Member States within 24 months

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(2) directly to public-private companies. In this case, the private partner must be selected through a public bidding procedure having as its object (i) the award of the position as shareholder of the public-private company and, at the same time, (ii) the award to the private shareholder of operational tasks connected to the management of the service. The abovementioned Article 23- bis forbade the participation of the public-private companies already awarded with the local public service to different procurement procedures for the awarding of such services from other authorities. Due to the abrogation of this provision, this prohibition has lost efficacy; and

(3) directly to companies wholly-owned by public entities (so called "in-house" providing). In case 107/98, the European Court of Justice held that a public body could bypass the EU procurement rules and directly enter into a contract with a service provider so long as (i) the public body controls the service provider in question as if it was that public body’s own department (known as the “similar control” test); and (ii) the service provider in question carries out the essential part of its activities with the contracting authority which controls that entity.

In regard to the regulation of economic local public services (“servizi pubblici di rilevanza economica”), a Legislative Decree proposal has been under the examination of the Italian Parliament. The Legislative Decree has not yet been approved.

Water Business

The national and regional framework applicable to the IWS

The IWS is the comprehensive public services that relate to water collection, uptake and distribution of water for civil uses as well as the disposal and treatment of sewage water. The IWS is a public service, which is to be managed in accordance with the general principles of efficiency and cost-effectiveness as well as in compliance with national and European legislation. The first comprehensive set of legal provisions enacted to regulate the water sector was contained in Law No. 36 of 5 January 1994 (the "Galli Law") which has then been reinstated by the Environmental Code (as defined below) under Part III, Section III, Title II, art. 147 and following. With specific reference to the regulation of IWS at a Regional level, the Lombardy Region has issued Regional Law n. 26 of 12 December 2003 (RL 26/2003, as defined above), which sets out under article 47 and following the rules applicable to the water sector. The main objectives of national and regional laws include: (i) the appointment of a single operator for the management of the IWS within each ATO (as defined below); (ii) the identification of a tariff that allows the operator of the IWS to cover both the costs for the provision of the service and the cost to carry out the investments necessary to ensure an adequate level of service; and (iii) the separation of the competence for planning and control of the service from the management of the IWS. Pursuant to Law Decree No. 201 of 6 December 2011 (converted into Law by Law No. 214 of 22 December 2011) the AEEGSI is the regulator in charge, inter alia, of the regulation and surveillance of the IWS and the approval of the tariffs.

The regulation of water sector under the Environmental Code

Legislative Decree No. 152 of 3 April 2006 (the "Environmental Code") contains integrated provisions for all environmental businesses. In particular, pursuant to articles 147 – 158 bis of the Environmental Code, the sector of water services is based on the following principles:

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 establishing a sole integrated system for the management of the entire cycle of the water resources (integrated water service or "servizio idrico integrato"), including the abstraction, transportation and distribution of water for non-industrial purposes, water drainage and purification of waste water;

 identification, by the Italian Regions and within each of them, of "Optimal Territorial Districts" ("Ambiti Territoriali Ottimali" or "ATOs" and each an “ATO”), within which the integrated water services are to be managed. The boundaries of ATOs are defined on the basis of: (i) consistency with hydrological conditions and logistical considerations; (ii) the goal of achieving industry consolidation; and (iii) the potential for economics of scale and operational efficiencies;

 institution, by means of Regional Law, of a “Governing Body” for each ATO ("Ente di governo") participated by the local authorities of the area included in the relevant ATO. These Governing Bodies are responsible for: (i) organising integrated water services, by means of an integrated water district plan which, inter alia, sets out an investments policy and management plan relating to the relevant district (Piano d'Ambito); (ii) identifying and overseeing an operator of integrated water services; (iii) determining the tariffs applicable to users; (iv) monitoring and supervising the service and the activities carried out by the selected operator, in order to ensure the correct application of the tariffs and the achievement of the objectives and quality levels set out in the district plan.

The organisation of the integrated water services relies on a clear distinction in the division of tasks among the various authorities involved. The State and regional authorities carry out general planning activities. The ATOs’ Governing Bodies supervise, organise and control the integrated water services but these activities are managed and operated on a day-to-day basis by (public or private) service operators.

Pursuant to Article 149 bis of the Environmental Code, as recently modified by Law no. 164/2014, the integrated water system has to be awarded by the Governing Body, for each ATO, by means of one of the procedures allowed under EU law (i.e. public bidding procedure, direct procurement to public- private companies and in-house providing). In this regard, please refer to the procedures described in the previous paragraph with reference to the economic local public services (“servizi pubblici di rilevanza economica”) in general.

Water tariff mechanism

Law Decree No. 201 of 6 December 2011 (converted into Law No. 214 of 22 December 211) granted to the AEEGSI the regulatory functions concerning the integrated water service. In particular, the AEEGSI sets forth the cost components to be used by ATOs’ Governing Body to determine the tariffs for the integrated water service (in compliance with the criteria and goals defined by the Environmental Ministry and the principles outlined in Article 154 of the Environmental Code). Subsequently, AEEGSI approves the tariffs of the integrated water service within 90 days from the proposal.

Tariff method for the years 2012 and 2013

On 28 December 2012, by Resolution No. 585/2012/R/idr, the AEEGSI approved a temporary tariff method for the transition period 2012 - 2013. The temporary method anticipates the general outline of the definitive methodology expected to apply beginning in 2014.

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The tariff method for the years 2012 and 2013 has not been determined by using forward-looking information, as was the case under the previous tariff method, but only on the basis of the investment and operating costs incurred by the operators.

The tariff is composed of two terms in addition to the pass through costs (electricity, wholesalers, rents / mortgages, adjustments):

 Opex: operating costs (excluding pass through costs); and

 Capex: capital costs, i.e. depreciation, financial expenses, taxes (excluding taxes loops).

The AEEGSI has developed a mechanism of sliding scale for the years 2012-2013 intended to limit the tariff increases or decreases. Such sliding scale is based on the comparison between the tariff constraints:

 Tariff by the "Piano d'Ambito" = Operating Costs by Area Plan + Cost of capital by the Area Plan or VRP = Op + Cp

 Tariff by Transient Method = Method of Transient Operating costs + capital costs by Transient Method or VRT = Ott + Ctt

The tariff for the years 2012 and 2013 recognises the following components:

(a) Net capital employed:

 all investments completed by 31 December 2011, re-evaluated using a deflator;

 working capital equal to 60/365 for the debts and 90/365 for the credits of the 2011 turnover;

 construction in progress at 31 December 2011, net of those with balances unchanged for more than five years;

 economic and monetary revaluations and other intangibles are not recognised in the capital value of goodwill;

 the non-repayable investments are not recognised

 the amount of some provisions (e.g.: retirement allowance reserve, provisions for risks, provision for tariff components to be refunded to users) are deducted from the net capital employed calculated as above.

(b) Depreciation:

 quotas for the reference on the basis of the regulatory lives of the assets will be recognised for each year;

 investment grant amortization expense is recognised with no financial burden. A specific provision aimed at promoting the conservation and development of infrastructure is required.

(c) Operating costs:

 the costs incurred in 2011 will be used as reference, minus certain items and a portion of the revenues received for other services related to the water service (i.e.: connections, industrial waste, loot);

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 the cost will be increased with the rate of inflation and decreased on the basis of the mechanism of efficiency recognition of the value of credit losses up to the amount of use of the provision;

 energy costs and the wholesale supply of water will be determined according to a specific methodology and will not be subject to efficiency;

 recognition of the Regional Tax on Productive Activities ("IRAP").

(d) Financial charges:

 recognition of a financial interest standard post taxes on capital employed (based on equity and debt);

 recognition of a flat rate for Corporate Income Tax ("IRES").

On 1 February 2013, the AEEGSI also approved a specific provision for the definition of the criteria for the calculation of the amounts to be repaid to end users, corresponding to the return on invested capital and paid in the water bills in the post-referendum period from 21 July until 31 December 2011. These criteria were confirmed by the opinion n. 267/2013 issued by the Council of State (Consiglio di Stato) which affirmed that the reimbursement to end users must comply with the principle of full cost recovery.

Tariff method for the years 2014 and 2015

On 27 December 2013, with Resolution No. 643/2013/R/idr, the AEEGSI approved the tariff structure for the period 2014 - 2015. On this basis, the new tariffs have been proposed by each ATO by 31 March 2014 and approved by AEEGSI.

In particular, Article 2 of Resolution No. 643/2013/R/idr defines the following service costs as components for determine the new tariff:

 investments costs, including borrowings, taxes and depreciation charges;  operative costs, including costs related to the electricity, wholesale supplies, costs related to the loans and other various components;  any additional advance payment for new investments;  environmental costs and of resource; and  component relating to levelling.

In addition, Article 3 of the same Resolution provides that, after the AEEGSI’s approval, all water service operators will have to apply the tariff relating to the year 2012 multiplied for a coefficient Teta (2014)8 determined by AEEGSI.

Tariff method for the period 2016 – 2019

On 15 January 2015, by means of Resolution No. 6/2015/R/idr, the AEEGSI started the administrative procedure aimed at determining the new tariff method to be applied in the period 2016 – 2019.

8 Teta is a coefficient which represents the tariff’s increase. It is defined by Annex A to AEEGSI Resolution No. 643/2013/R/idr on the basis of the relationship between the costs and the volumes related to the activities of two years before (a – 2), appreciated with regard to the tariffs set at the beginning of year 2012.

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A consultation document has been published by AEEGSI through Resolution No. 406/2015/R/idr dated 30 July 2015, which outlined the principles of the new tariff method and the possible amendment to the existing method applied for the period 2014 – 2015. The public consultation period ended on 21 September 2015. A second consultation document has been published by AEEGSI through Resolution No. 577/2015/R/idr dated 26 November 2015, which outlined the final orientations of the Authority as to the period 2016-2019. In particular, the document presented some proposals concerning the calculation of the costs admitted to tariff recognition, as well as the identification of reference parameters in relation with both macroeconomic aspects and factors concerning the allocation of risks in the integrated water service.

Finally, on 28 December 2015, the new tariff method has been issued by means of Resolution No. 664/2015/R/idr.

In particular, Article 2 of the Resolution No. 664/2015/R/idr (exactly like Resolution No. 643/2013/R/idr did for the period 2014-2015) defined the service costs outlined above as components to determine the new tariff. In particular, it referred to:

 investments costs, including borrowings, taxes and depreciation charges;

 operative costs, including costs related to the electricity, wholesale supplies, costs related to the loans and other various components;

 any additional advance payment for new investments;

 environmental costs and of resource; and

 component relating to levelling.

Moreover, following the same structure of Resolution No. 643/2013/R/idr, Article 3 defined the tariff coefficient Teta as to period 2016-2019. In fact, the multiplier for every year “a” is determined in accordance with the relation between the costs and the valorisation of water volumes as to the year “a-2”.

Attached to the Resolution, the regulatory schemes as to 2016-2019 tariff period can be found. The so- called “MTI2” tariff method states that:  the real capital and fiscal (Ires) return is 5.4%;

 the recognition of operating costs is in line with the previous regulatory period;  the maximum level of tariff increase depends on the level of investments needed and the ratio between operating costs and number of population served in each ATO:

 incentives to enhance contractual quality are introduced.

Waste Business

European Union Directives The EU legislation on waste and landfills is set forth under Directive 2008/98/EC, as subsequently amended (the ‘‘Waste Framework Directive’’) and Directive 1999/31/EC, as subsequently amended (the ‘‘Landfills Directive’’) respectively.

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Waste Directive

The Waste Framework Directive The Waste Framework Directive abrogates the preceding Directive 2006/12/EC on waste and Directives 75/439/EEC and 91/689/EEC regarding waste oils and hazardous waste, respectively. The revised Waste Framework Directive, in force as of December 12, 2010, introduces new provisions in order to boost waste prevention and recycling and clarifies key concepts, namely the definitions of waste, recovery and disposal and sets forth the appropriate procedures applicable to by-products and waste. In general, the Waste Framework Directive sets objectives with deadlines regarding the minimum proportion of waste to be prepared for re-use and recycling. These guidelines for waste management are meant to prevent waste generation, to encourage re-use and to ensure safe disposal by establishing a new “waste hierarchy” for the treatment of waste. In addition, the authorization process for landfill site management proposes stringent technical requirements for waste disposed in landfills, aimed to reduce waste amounts disposed of in landfill.

The EU approach to waste

The Waste Framework Directive provides the following waste treatment hierarchy, which applies as a priority order in waste management and legislation:  disposal prevention;  preparing for re-use;  recycling;  other recovery (such as, e.g. energy recovery); and  disposal. Member States are required to implement legislative measures in order to reinforce the above, described waste treatment hierarchy, based on the following principles:

 waste management responsibility: Member States are required to take necessary measures to ensure that (i) any original waste producer or other holder carries out the treatment of waste itself or has the treatment handled by a dealer or an establishment or undertaking that carries out waste treatment operations under a permit issued by the competent authority and (ii) establishments or undertakings which collect or transport waste on a professional basis deliver the collected waste to appropriate treatment installations.  extended producer’s responsibility: Member States may take legislative or non-legislative measures to ensure that any person who professionally develops, manufactures, processes, treats, sells or imports products has extended producer responsibility, such as an acceptance of returned products.  self-sufficiency: Member States are required to take appropriate measures, in cooperation with other Member States where this is necessary or advisable, to establish an integrated and adequate network of waste disposal installations and of installations for the recovery of mixed municipal waste collected from private households.  proximity: the above network shall enable waste to be disposed of or recovered in one of the nearest appropriate installations, by means of the most appropriate methods and technologies, in order to ensure a high level of protection for the environment and public health.  “polluter pays’’: the costs of disposing of waste must be borne by the holder of waste, by previous holders or by the producers of the product from which the waste came.

Definition and Types of Waste

According to the Waste Framework Directive, waste is defined as ‘‘any substance or object, which the holder discards, or intends or is required to discard.’’ Waste not covered by the Waste Directive includes, among

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other things, gaseous effluents dispersed into the atmosphere, radioactive waste, decommissioned explosive and other substances or objects, such as wastewater, animal by-products and waste resulting from prospecting, extraction, treatment and storage of mineral resources and the working of quarries, to the extent they are covered by other EU legislation. Waste classification is based on the European List of Waste (Commission Decision 2000/532/EC) and Annex III to the Waste Directive, and relies on the distinctions between municipal and special waste, and hazardous and non-hazardous waste.

Waste Management

Even if different rules apply depending on the type of waste, in general, any producer or holder of waste must carry out the treatment themselves or have treatment carried out by a duly authorized broker, establishment or undertaking. Hazardous waste must be stored and treated in conditions that ensure the protection of health and the environment and must not be mixed with other dangerous waste and must be packaged or labeled in line with international or EU regulations.

Permits

The Waste Framework Directive requires that any establishment or undertaking intending to carry out waste treatment obtains a permit from the competent authority, which may be granted for a limited period and may be renewable. The permits specify:  the types and quantities of waste that may be treated;  for each type of operation permitted, the technical and any other requirements relevant to the site concerned;  the safety and precautionary measures to be taken;  the method to be used for each type of operation;  such monitoring and control operations as may be necessary; and  such closure and after-care provisions as may be necessary. The Waste Framework Directive was implemented in Italy by Legislative Decree No. 205 on December 3, 2010.

Landfills Directive

The Landfills Directive aims to prevent and reduce the negative effects on the environment caused by landfills and, in particular, on surface water, phreatic water, ground soil, the atmosphere, global environment and human health. The Landfills Directive applies to all landfills, defined as ‘‘a waste disposal site for the deposit of the waste onto or into land (i.e. underground)’’. Under the Landfills Directive, landfills are divided into three different types (hazardous waste landfills, non-hazardous waste landfill and landfills for inert materials) and a uniform procedure for the deposit of waste is provided for. Implementing the Landfills Directive, the Italian regulatory framework classifies landfills into the following three categories: 1. Landfills for hazardous waste, i.e. products which pose substantial or potential threats to public human health or to environment; 2. Landfills for non-hazardous waste with their sub-categories: (i) inorganic waste with low organic content or biodegradability (e.g. plastic products), (ii) organic waste with high organic content or biodegradability (e.g. food and garden waste), (iii) mixed non-hazardous waste containing of both organic and inorganic components; and

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3. Landfills for inert waste for the treatment of products which are neither chemically nor biologically reactive and will not decompose. The Landfills Directive also sets forth a procedure for the issuance of authorization for the management of landfills and requires Member States to verify that the managers of landfills and their personnel have received appropriate professional training. Member States are required to adopt measures to ensure that all landfill management costs are covered by the fees applied by the landfill operator for the disposal of waste. The Landfills Directive has been implemented in Italy by Legislative Decree No. 36 of January 13, 2003 (‘‘Decree No. 36’’).

The Environmental Code

The Italian legal framework governing the Group’s operations is mainly set forth under the Environmental Code, which governs, among other things, the management of waste in general and the granting of the permits for the opening and management of treatment plants and landfills in particular.

Environmental Code Approach to Waste

Consistent with the approach of the Waste Framework Directive, among the actions that are required to be performed the Environmental Code gives priority to prevention of waste. Each of the steps making up the Waste Framework Directive has a specific technical meaning: this ranges from actions that make it possible to reuse the product that has become waste without any processing, such as “preparation for reuse” (“operations associated with inspection, cleaning, disassembly and repair through which products and components of products that have become waste are prepared so that they can be reused without any other pre-treatment”; such as washing of glass bottles: Article 183(q), Environmental Code), and “reuse” (“any operation through which products or components that are not waste are reused for the same purpose for which they have been designed”; such as the use of glass bottles: Article 183(r), Environmental Code), to operations that entail processing such as “recycling” (in this case, the waste is treated to obtain products, materials and substances to be used for the original function: Article 183(u), Environmental Code) and “recovery” (“any operation where the principal outcome is to enable waste to perform a useful role, replacing other materials that would otherwise be used to perform a particular function or to prepare them to perform that function, within the plant or the economy in general”; such as use as fuel or as other means of producing energy, composting, recovery of metals and regeneration of oils; Article 183(t), Environmental Code).

Definition and Types of Waste

In line with the definition provided under the Waste Framework Directive, “waste” is defined as “any substance or object that the owner discards or has the intention or the obligation to discard” (Article 183, paragraph 1(a) of the Environmental Code). Waste is divided, according to its origin, into municipal waste and special waste and, according to its characteristics, into hazardous and non-hazardous waste. The classification of waste is especially important as the rules applicable to waste management vary depending on the type of waste.

Principles of Waste Management

The Environmental Code requires the producers or holders of waste to carry out the treatment of waste themselves or to have the treatment handled by an authorized dealer or arranged by a public collector under a special convention. The original producer or holder retains responsibility when the waste is transferred for complete recovery even if the waste is transferred from it to another entity for preliminary treatment.

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Responsibility ends upon receipt by the waste producer or holder of confirmation that the waste is accepted by the final recovery or disposal plant. As from March 2014, a Waste Tracking Control System (Sistema di Controllo della Tracciabilità dei Rifiuti, or in “SISTRI”) has been implemented, replacing (for certain categories of waste producers, for the holders and for treatment plants) the former system based on entries in the waste log and on annual consolidated environmental reports to be filed with the chamber of commerce. The new system provides for data on waste produced, handled or received for treatment to be entered into a nation-wide database, run by the Ministry of the Environment.

Permits

Article 208 of the Environmental Code provides that the realization and operations of new waste disposal or recovery installations as well as their substantial modifications are subject to a permit issued by the competent Region, after verification of the environmental and territorial compatibility of the project. The authorization is issued or denied within 150 days of the application. The permit has a ten-year duration and may be renewed upon filing of the relevant application at least 180 days prior to the expiration. Less stringent requirements apply, among other things, to mobile recovery or disposal installations, to the collection and transportation of waste as well as to the operation of disposal and recovery installations owned by third parties, which are either issued a permanent permit or are allowed to be carried out after registration with the National Register for Environmental Operators (Albo Nazionale dei Gestori Ambientali). On the other hand, installation which are subject to an IPPC permit pursuant to Article 29 ff. of the Environmental Code (i.e., landfills that receive more than one tonne of waste per day or with a total capacity exceeding 2500 tonnes, with an exception for landfill for inert waste) need not be issued a permit under Article 208 of the Environmental Code. The IPPC is issued in the framework of a procedure that requires, inter alia, the participation and consultation of the public, the application of Best Available Techniques (“BAT”) to the installations emissions (including substances, vibrations, heat and noise) and specific monitoring requirements for the latter. The IPPC is generally issued for a ten-year period.

Management of Municipal Waste

Article 200 of the Environmental Code provides for the organization of the municipal waste management system at a local level based on identification, by the Italian Regions and within each of them, of "Optimal Territorial Districts" ("Ambiti Territoriali Ottimali" or "ATOs" and each an “ATO”), within which the waste services are to be managed. The system (which includes the collection, transportation, treatment and disposal of waste, including street cleaning and the control of the former activities), was managed by a public authority especially set up (“Autorità d’Ambito”) and entrusted to the entity that is awarded the tender called for by the competent ATO. That provision has been repealed from the Environmental Code by art. 186 bis of Law n. 191/2009. With regards to Lombardy Region, ATOs have not been established, as Lombardy Region opted for the exemption provided by art. 200, paragraph 7 of the Environmental Code (the “Exemption”). The Exemption sets forth that Regions can adopt alternative schemes, provided that the latter are compliant with competition and liberalization principles, pursuant to RL n. 26/2003 (as defined below) as subsequently amended. In this respect, as of today, each relevant municipality of Lombardy Region acts as contracting authority with reference to the award of the management of the waste services. Pursuant to Article 238 of the Environmental Code, whoever holds, at any title, premises where municipal waste is generated, must pay a forfeit fee as a consideration for the service, in the amount determined by the competent Municipality on the basis on the average quantity of waste produced by each square meter of surfaces of the same type and use.

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Provisions on Landfills

In relation to the disposal of waste in landfills, the Environment Code refers to the provisions set out in Legislative Decree No. 36 of January 13, 2003, which were adopted to implement Directive 1999/31/CE (Decree 36/2003), which sets out the operating and technical requisites for waste and landfills, measurements, procedures and guidelines aimed at preventing or reducing possible negative effects on the environment. Decree No. 36 classifies landfills into the following categories: (i) landfills for inert materials; (ii) landfills for non-hazardous waste; and (iii) landfills for hazardous waste. Urban waste and non-hazardous waste of any other origin that meet the waste admission criteria set forth in the applicable regulations, may be disposed of in landfills for non-hazardous waste. As for landfills for hazardous waste, only hazardous waste meeting the criteria imposed by applicable regulations may be disposed of in the same. In general, waste may be disposed of in landfills only after having been processed in treatment facilities, with the exception of inert waste and waste with respect to which treatment does not contribute toward reducing its quantity or risk to human health and the environment, and is deemed to be disposable if necessary for purposes of compliance with the limits imposed under applicable provisions of law. Decree No. 36 requires all entities managing landfills to comply with the terms, procedures, criteria and requirements imposed by the authorization and by the operating management’s plans, post-closure management plans and plans for environmental restoration and decontamination. They also must comply with regulations on waste management, wastewater and the protection of water, atmospheric emissions, noise emissions, health and safety in the workplace, and fire prevention. The managing entity must also ensure that ordinary and extraordinary maintenance is carried out in all the facilities and equipment pertaining to the landfill. Pursuant to Article 12 of Decree No. 36, closure of a landfill may be ordered following a procedure brought: (i) under the terms and conditions of the authorization; (ii) where the service provider requests and obtains an authorization from the regional authority; and (iii) pursuant to a specific order by the competent authority based upon just cause consisting of damages or potential damages to the environment and human health. The landfill closure procedure may be implemented only following morphological verifications of the landfill. A landfill, or a part of it, is considered to be definitively closed only upon the notification of approval by the competent authority. Following the final closure of a landfill, the landfill manager must maintain, supervise and control of the landfill during the post-closure phase, which covers the entire period in which the landfill could cause risks to the environment. Maintenance, supervision and control of the landfill must continue during the post-closure phase, until such time as the competent authorities determines that the landfill no longer generates risks for the environment. In order to ensure the activation and operating management of the landfill, including the closure procedures, the landfill operator must provide an appropriate financial guarantee which ensures the fulfillment of the requirements set forth in the authorization. The guarantee must be in an amount sufficient to cover the authorized capacity of the landfill and its classification. The guarantee for post-closure management operations provides an assurance that the post-closure procedures will be carried out, and is in an amount sufficient to cover the cost of such operations. This guarantee must be kept in place for the entire period necessary for the operating activities and post- closure activities, and subject to extensions ordered by the competent authority if deemed necessary due to possible environmental risks. In particular: (i) the guarantee for the activation and operating management is to be maintained for at least two years from the date on which the landfill closure is notified; (ii) the guarantee for post-closure activities is to be maintained for at least 30 years from the date on which the landfill closure is notified. The management of landfills, or of other waste disposal equipment, is related to the matter of environmental pollution and the restoration of contaminated sites. These matters are governed by Articles 239 et seq. of the

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Environment Code, which imposes upon the party responsible for the contamination the obligation to take restoration or safety measures, which may be for operating purposes or permanently, and, where necessary, to adopt further environmental restoration measures in order to eliminate, minimize, or reduce to acceptable levels the risks deriving from the contamination of the site.

Regional Provisions

The Environment Code sets forth in detail the duties and responsibilities of the state, regions, provinces and municipalities, on the various matters governed by the same. In particular, the regional authority governs the management of waste in its territory under its own laws and through the regional waste plan in conjunction with other regional planning instruments. The management of the measures is assigned to the provinces and municipalities in accordance with their specific duties and responsibilities. The Region also sets forth the general waste management guidelines to be followed within the territory. The national laws apply in conjunction with regional provisions. The regional law for Lombardy is Regional Law No. 26 of December 12, 2003 as subsequently amended (RL 26/2003, as defined above). With respect to Lombardy, RL 26/2003 (i) states that the integrated system of waste management of the region of Lombardy intends to guarantee the regional self-sufficiency for waste disposal, (ii) delegates to the province the adoption of provincial waste management plans on the basis of the regional waste management plans, (iii) allocates the issuance of authorizations for the construction of waste recovery and disposal facilities and for engaging in waste recovery and disposal activities between the region and the province and (iv) delegates the duty of awarding urban waste management services through public bidding procedures or procedures compatible with national and EU competition laws to municipalities. The municipalities are responsible for determining the term of the service supply agreements so that the service provider may amortize the assets constructed during the term of the agreement, thus ensuring that such assets are transferred on a gratuitous basis to the local authorities upon the expiry of the agreement.

Integrated waste operator

The Environmental Code regulated the award of tenders for operating the integrated waste management service made in favour of a sole operator for each ATO to be organised by the District Authority. Such entity is responsible, inter alia, to award the management of the waste services in compliance with the European principles on public tender procedures, following the repeal of Article 23-bis of Decree No. 112/2008 by means of the Referendum held on 12 and 13 June 2011 and in compliance with the legislation subsequently adopted. The Group provides waste services based on agreements concluded with some municipalities of the Mantua area. In fact, with regards to Lombardy Region, ATOs have not been established, as Lombardy Region opted for the Exemption (for further details see paragraph Management of Municipal Waste). In this respect, as of today, each relevant municipality of Lombardy Region acts as contracting authority with reference to the award of the management of the waste services.

Waste tariff mechanism

Article 14 of Law Decree 201/2011, converted into Law No. 214 of 22 December 2011 established a tax (so called TARES or waste services tax) in all municipalities, effective as of 1 January 2013, to cover the costs of urban and similar waste disposal services and the costs relating to the municipalities’ indivisible services (such as public lighting, local police, etc). Consequently, as of 1 January 2013, all withdrawals relating to the management of urban waste previously applicable (so called TIA1, TIA2 and TARSU) were eliminated. The tax is due from anyone who owns or occupies in any capacity an enclosed or open space

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which may entail waste production. Consequently, the tax must be proportionate to the average quantities and qualities of waste produced in a surface unit.

Pursuant to Presidential Decree No. 158 of 27 April 1999, TARES consists of:  a portion calculated in relation to the essential components of the service costs, which mainly involve investments for works and related depreciation; and

 a portion dependent on the quantity of waste handled, the service provided and the extent of operating expense, so as to ensure total coverage of the investment and operating costs9.

In addition, the tax is increased by €0.30 for each square metre in order to cover the costs incurred by municipalities for the indivisible services10. Besides, the Municipalities which have realised system to measure the quantity of waste conferred to the waste management service may provide for the application of a tariff instead of the above mentioned tax. The tax must be paid to the Municipality.

However, the Municipalities may assign, up until 31 December 2013, the management of the tax (or of the tariff, if applicable) to entities that, as of 31 December 2012, perform, including separately, the waste management service and assessment and collection of TARSU, TIA 1 or TIA 2.

On 1 January 2014, Law No. 147 of 27 December 2013 (the so-called “Legge di Stabilità” or Stability Law) further modified the above mentioned model, introducing a new comprehensive tax known as Imposta Unica Comunale (“UIC”), consisting of three components:

 a portion calculated in relation to the local government tax known as Imposta Municipale Unica (IMU), depending on the asset of each municipality;

 a portion depending on the indivisible services (“TASI”);

 a portion depending on the new tax on waste disposal services (“TARI”), repealing the above- mentioned TARES.

TARI is imposed on anyone who owns or occupies in any capacity an enclosed or open space which may entail waste production, and is assessed according to the property’s surface area.

9 Article 10 of Law Decree No. 35/2013 sets out specific regulations of the amount, method and deadlines for payment of TARES for the year 2013 only. 10 Municipalities may also increase the tax by up to Euro 0.40 for each square metre, depending on the type of property and the area where it is located.

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TERMS AND CONDITIONS OF THE NOTES

The following is the text of the terms and conditions of the Notes, which (subject to completion and amendment) will be endorsed on each Note in definitive form. The terms and conditions applicable to any Note in global form will differ from those terms and conditions which would apply to Notes in definitive form to the extent described in the section of this Prospectus entitled “Summary of Provisions relating to the Notes in Global Form”.

The €30,000,000 2.30% Senior Unsecured Amortising Fixed Rate Notes due 7 June 2024 (the “Notes”, which expression shall in these Conditions, unless the context otherwise requires, include any further notes issued pursuant to Condition 16 (Further Issues) and forming a single series with the Notes) of Tea S.p.A. (the “Issuer”) are issued subject to and with the benefit of a fiscal agency agreement dated 7 June 2017 (such agreement as amended and/or supplemented and/or restated from time to time, the “Fiscal Agency Agreement”) made between the Issuer and The Bank of New York Mellon, London Branch as fiscal agent (the “Fiscal Agent” which expression includes any successor fiscal agent appointed from time to time in connection with the Notes) and as paying agent (in such capacity, the “Paying Agent” and, together with the Fiscal Agent, the “Paying Agents”, which expression includes any successor or additional paying agents appointed from time to time in connection with the Notes).

Certain provisions of these Conditions include summaries of, and are subject to, the detailed provisions of and definitions in the Fiscal Agency Agreement. The holders of the Notes (the “Noteholders”) the holders of the related instalment receipts (the “Receipts”) appertaining to the Notes in definitive form (whether or not attached to the relevant Notes) (the “Receiptholders”) and the holders of the related interest coupons (the “Coupons”) appertaining to the Notes in definitive form (whether or not attached to the relevant Notes) (the “Couponholders”) are bound by, and are deemed to have notice of, all the provisions of the Fiscal Agency Agreement applicable to them. Copies of the Fiscal Agency Agreement are available for inspection during normal business hours by the Noteholders, Receiptholders and Couponholders at the Specified Offices (as defined in the Fiscal Agency Agreement) of each of the Paying Agents.

1. FORM, DENOMINATION AND TITLE

1.1 Form and denomination

The Notes are in bearer form, serially numbered and in the denominations of €100,000 and integral multiples of €1,000 in excess thereof up to and including €199,000, with Receipts and Coupons attached on issue.

1.2 Title

Title to the Notes, the Receipts and the Coupons passes by delivery. The holder of any Note, Receipt or Coupon will (except as required by law) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any interest in it, any writing on it, or its theft or loss) and no person will be liable for so treating the holder.

2. STATUS

The Notes, the Receipts and the Coupons constitute direct, unconditional, unsubordinated and (subject to Condition 3 (Negative Pledge)) unsecured obligations of the Issuer and rank and will rank pari passu, without any preference among themselves. The payment obligations of the Issuer under the Notes, the Receipts and the Coupons shall, save for such exceptions as may be provided by applicable law and subject to Condition 3 (Negative Pledge), at all times rank at least equally with its other outstanding unsecured and unsubordinated obligations from time to time.

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3. NEGATIVE PLEDGE

So long as any Note or Coupon remains outstanding (as defined in the Fiscal Agency Agreement), the Issuer will not, and procures that none of its Subsidiaries (other than Tea Acque S.r.l. and AqA Mantova S.r.l.) will, create or permit to subsist any Security Interest (other than a Permitted Security Interest) upon the whole or any part of its present or future undertaking, assets or revenues (including uncalled capital) to secure (i) any Indebtedness (as defined below) or (ii) any guarantee and/or indemnity in relation to any Indebtedness, without (a) at the same time or prior thereto securing the Notes, the Receipts and the Coupons equally and rateably therewith or (b) providing such other security for the Notes, the Receipts and the Coupons as may be approved by an Extraordinary Resolution (as defined in the Fiscal Agency Agreement) of the Noteholders.

4. DEFINITIONS For the purposes of these Conditions:

“ATEM Mantova 1” means the minimum independent geographic area (Ambito Territoriale Minimo) encompassing, inter alia, the municipalities of Mantova, Porto Mantovano, San Giorgio di Mantova, Borgo Virgilio, Curtatone, Bozzolo, Asola and San Martino d’Argine.

“Authorised Signatories” and each an “Authorised Signatory” means any person who is a director (amministratore), the general manager (direttore generale) or any attorney to whom a special power of attorney has been granted by any of the foregoing persons.

“Business Day” means:

(i) for the purposes of Conditions 8.3 and 8.4, any day on which the TARGET System is open; and

(ii) for any other purpose:

(a) in relation to any place, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in that place; or

(b) in the case of payment by credit or transfer to a Euro account, a TARGET Settlement Day.

“Calculation Amount” means €1,000.

“Certification Date” means a date falling not later than 45 calendar days after the approval by the Issuer’s board of directors (or equivalent body) of the relevant consolidated financial statements and, in any event, no later than six months after the end of the Relevant Period.

“Compliance Certificate” means a certificate of the Issuer duly signed by two Authorised Signatories, substantially in the form annexed to the Fiscal Agency Agreement, confirming as of the Certification Date:

(i) that its audited IFRS consolidated financial statements in respect of the last Relevant Period give a true and fair view of the consolidated financial position of the Issuer and the Group as of the end of such Relevant Period and of the results of its operations during such period;

(ii) that it is in compliance with the covenants contained in Condition 5.2 (Financial Covenants), setting out the amount of the Group’s Net Financial Debt and Shareholders’ Equity as of the Determination Date and its Consolidated EBITDA for the Relevant Period;

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(iii) to the best of the Issuer’s knowledge, having made all due enquiry, that there have been no Change of Control or Concession Event as of the date of the relevant Compliance Certificate;

(iv) that, to the best of the Issuer’s knowledge, having made all due enquiries, there have been no events, developments or circumstances that would reasonably be expected to materially affect its ability to certify such compliance on the basis of the Issuer’s or (if applicable) the Group’s financial condition as of the Certification Date and its results of operations since the Determination Date.

“Consolidated EBITDA” means, in respect of any Relevant Period, the relevant entity’s consolidated profit for the year before income tax, finance expense, finance income and amortization, depreciation and impairment and provisions in respect of that Relevant Period, each as shown in, or determined by reference to, such entity’s latest audited consolidated financial statements

“Consolidated Total Assets” means, at any time, in respect of any Relevant Period, the total consolidated assets of the relevant entity as shown in, or determined by reference to, its latest audited consolidated financial statements.

“Determination Date” means 31 December in each year.

“EBITDA” means, in respect of any Relevant Period, the profit for the year of the relevant entity before income tax, finance expense, finance income and amortization, depreciation and impairment and provisions each as shown in, or determined by reference to, such entity’s latest audited financial statements.

“Euro” or “euro” or “€” means the currency introduced at the start of the third stage of the European economic and monetary union, and as defined in Article 2 of Council Regulation (EC) No. 974/98 of 3 May 1998 on the introduction of the euro, as amended.

“Event of Default” has the meaning given to that term in Condition 12 (Events of Default).

“Group” means the Issuer and its Subsidiaries from time to time (if any).

“Indebtedness” means any present or future indebtedness (whether principal or interest) for money borrowed or raised including (without limitation) any indebtedness for or in respect of:

(i) amounts raised by acceptance under any acceptance credit facility;

(ii) amounts raised under any note purchase facility or the issue of bonds, notes, debentures, loan stock or similar instruments;

(iii) the amount of any liability in respect of leases or hire purchase contracts which would, in accordance with applicable law and generally accepted accounting principles, be treated as finance or capital leases;

(iv) the amount of any liability in respect of any purchase price for assets or services the payment of which is deferred for a period in excess of 90 calendar days;

(v) amounts raised under any other transaction (including, without limitation, any forward sale or purchase agreement) having the commercial effect of a borrowing; and

(vi) the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs (i) to (v) above.

“Interest Payment Date” means 7 June in each year.

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“Interest Period” means the period beginning on the Issue Date and ending on the first Interest Payment Date and each successive period beginning on an Interest Payment Date and ending on the next succeeding Interest Payment Date up to the Maturity Date.

“Italian Civil Code” means the Italian civil code, enacted by Royal Decree No. 262 of 16 March 1942, as subsequently amended and supplemented.

“IWS Concessions” means the concessions awarded on 18 November 2005 by the Authority of the ATO of the Province of Mantova (“Autorità dell’Ambito Territoriale Ottimale della Provincia di Mantova”) relating to the management of the integrated water services operated by Tea Acque S.r.l. and AqA Mantova S.r.l.

“Mantova Gas Concessions” means the concessions relating to distribution of gas in the ATEM Mantova 1 and in particular the concessions awarded by the following municipalities:

 Asola;

 Borgo Virgilio

 Bozzolo;

 Curtatone;

 Mantova;

 Porto Mantovano;

 San Giorgio di Mantova;

 San Martino d’Argine.

“Mantova Gas Service Contracts” means the following service contracts entered into with the following municipalities and relating to the Mantova Gas Concessions:

 Asola, Gas Service Contract dated 11 June 2007; expiry date 31 January 2020;

 Borgo Virgilio, Gas Service Contract dated 23 December 2008; expiry date 1 January 2021;

 Bozzolo, Gas Service Contract dated 31 May 2007; expiry date 1 February 2020;

 Curtatone, Gas Service Contract dated 5 April 2011; expiry date 5 April 2023;

 Mantova Gas Service Contract dated 30 December 1999; expiry date: the earlier of (i) 30 December 2039 and (ii) the date on which the entity awarded with the gas distribution concession in the ATEM Mantova 1 will commence its operational services;

 Porto Mantovano, Gas Service Contract dated 16 September 2010; expiry date 1 October 2023;

 San Giorgio di Mantova, Gas Service Contract dated 16 September 2010; expiry date 1 October 2023;

 San Martino d’Argine, Gas Service Contract dated 17 September 2007; expiry date 10 March 2020;

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“Material Adverse Effect” means any event, circumstance or matter which has or is reasonably likely to have a material adverse effect on:

(i) the business, assets or financial condition of the Issuer and/or the Group (taken as a whole); or

(ii) the ability of the Issuer to perform its payment or other obligations under the Notes; or

(iii) the validity and enforceability of the Notes.

“Material Subsidiary” means (i) SEI – Servizi Energetici Integrati S.r.l. and (ii) at any time, any Subsidiary of the Issuer which in terms of EBITDA or Consolidated EBITDA (if such Subsidiary has its own consolidated Subsidiaries) accounts for 10 per cent. or more of the Issuer’s Consolidated EBITDA or, in terms of Total Assets or Consolidated Total Assets (if such Subsidiary has its own consolidated Subsidiaries) 10 per cent. of the Issuer’s Consolidated Total Assets and, for these purposes:

(i) the Issuer’s Consolidated EBITDA and Consolidated Total Assets will be determined by reference to its then latest annual audited consolidated financial statements (the “Relevant Consolidated Financial Statements”); and

(ii) the EBITDA or Consolidated EBITDA and Total Assets or Consolidated Total Assets of each Subsidiary will be determined by reference to the annual financial statements (whether or not audited) of such Subsidiary, in each case upon which the Relevant Consolidated Financial Statements have been based, provided that: (a) if a Person has become a Subsidiary of the Issuer after the date on which the Relevant Consolidated Financial Statements have been prepared, the EBITDA or Consolidated EBITDA and Total Assets or Consolidated Total Assets of that Subsidiary will be determined by reference to its latest annual financial statements (whether or not audited); (b) the Relevant Consolidated Financial Statements and the corresponding financial statements of each relevant Subsidiary will be adjusted (where appropriate) to reflect fairly the EBITDA or Consolidated EBITDA and Total Assets or Consolidated Total Assets of, or represented by, any Person, business or assets subsequently acquired or disposed of; and (c) where a Subsidiary (the “Intermediate Holding Company”) has one or more Subsidiaries at least one of which, under this definition, is a Material Subsidiary, then such Intermediate Holding Company will be deemed to be a Material Subsidiary.

“Maturity Date” means 7 June 2024.

“Net Financial Debt” means the sum of the following items:

(i) total non-current financial liabilities; plus

(ii) total current financial liabilities; plus

(iii) total financial liabilities for leases; plus

(iv) the amount (being the amount financed) under factoring or securitisation programmes over trade receivables on a pro solvendo (with recourse) basis; less

(v) available cash (disponibilità finanziarie) and cash equivalents (where “cash equivalents” means cash at banks and all assets that can be liquidated within one month); less

(vi) other marketable debt obligations issued or guaranteed by the government of the Republic of Italy, the United States of America, the United Kingdom, any member state of the European Union or by an instrumentality or agency of any of them in each case having an investment grade rating; less

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(vii) liabilities under shareholders loans, provided that such liabilities are subordinated to the Notes, in each case, as shown in, or determined by reference to, the Issuer’s latest audited annual financial statements (consolidated, if available).

“Net Financial Debt – Consolidated EBITDA Ratio” means the ratio of (i) Net Financial Debt as of the Determination Date to (ii) Consolidated EBITDA for the Relevant Period.

“Net Financial Debt – Shareholders’ Equity Ratio” means the ratio of (i) Net Financial Debt as of the Determination Date to (ii) Shareholders’ Equity as of the Determination Date.

“Net Proceeds” means the net proceeds of the issuance and offering of the Notes.

“No Default Certificate” means the certificate to be delivered on each Reporting Date and duly signed by two Authorised Signatories of the Issuer, certifying that no Event of Default has occurred during that Relevant Period and/or is continuing as of the date of the relevant certificate or (if an Event of Default is continuing) the steps, if any, being taken to remedy it.

“Permitted Concession Handover” means (i) any cessation of business by the Issuer or any Material Subsidiary relating to any Relevant Concession operated by it, whereby such Relevant Concession expires and, following a competitive tender process in which the Issuer or such Material Subsidiary has participated in good faith, is awarded to a third party or (ii) any cessation of business by Tea Acque S.r.l. and / or AqA Mantova S.r.l. relating to any of the IWS Concessions operated by such entities, as a consequence, inter alia, of any new guidelines or regulations issued by the local regulatory authorities requiring a corporate reorganization or restructuring, provided that such IWS Concessions are transferred to and managed by an entity under the Control of the Issuer.

“Permitted Security Interest” means:

(i) any Security Interest arising by operation of law in the ordinary course of business of the Issuer or a Subsidiary, provided that such Security Interest is not (and does not become capable of being) enforced; or

(ii) any Security Interest created by a Person which becomes a Subsidiary after the Issue Date, where such Security Interest already exists at the time that Person becomes a Subsidiary provided that (A) such Security Interest was not created in connection with or in contemplation of that Person becoming a Subsidiary, (B) the aggregate principal amount of Indebtedness secured by such Security Interest is not increased and no additional assets become subject to such Security Interest, in both cases either in connection with or in contemplation of that Person becoming a Subsidiary or at any time thereafter; or

(iii) any Security Interest (a “New Security Interest”) created in substitution for any existing Security Interest permitted under paragraph (ii) above (an “Existing Security Interest”), provided that (A) the principal amount secured by the New Security Interest does not at any time exceed the principal amount secured by the Existing Security Interest, and (B) other than by reason of general market trends beyond the control of the Issuer or the relevant Subsidiary, the value of the assets over which the New Security Interest subsists does not at any time exceed the value of the assets over which the Existing Security Interest subsisted; or

(iv) any Security Interest securing Project Finance Indebtedness; or

(v) any Security Interest which is created in connection with, or pursuant to, a securitisation or like arrangement whereby (i) the payment obligations in respect of the instruments representing the Indebtedness secured by the relevant Security Interest are to be discharged solely from the revenues generated by the assets over which such Security Interest is created

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(including, without limitation, receivables) and (ii) the holders of such instruments have no recourse in relation to such Indebtedness against any assets of any member of the Group; or

(vi) any Security Interest not falling within paragraphs (i) to (v) above, provided that the aggregate principal amount of Indebtedness secured by such Security Interest does not exceed an amount equal to 7.5 per cent. of the Issuer’s Consolidated Total Assets.

“Person” means any individual, company, corporation, firm, partnership, joint venture, association, organisation, state or agency of a state or other entity, whether or not having separate legal personality.

"Project" means the ownership, acquisition (in each case, in whole or in part), development, restructuring, leasing, maintenance and/or operation of an asset or assets, and the equity participations in a company holding such asset or assets.

"Project Finance Indebtedness" means any present or future Indebtedness assumed by a Person (the “relevant debtor”) to finance or refinance a Project, whereby (A) the claims of the creditors under such Indebtedness (the “relevant creditors”) against the relevant debtor are limited to (i) the amount of cash flow or net cash flow generated by and through the Project during the tenor of such Indebtedness and/or (ii) the amount of proceeds deriving from the enforcement of any Security Interest given by the relevant debtor over the Project to secure such Indebtedness and (B) the relevant creditors have no recourse whatsoever against any assets of any member of the Group other than the Project and such Security Interest.

“Relevant Concession” means any concession, licence, franchise or similar rights awarded directly or indirectly by any local, provincial, regional, national or other government entity for the distribution of gas in the Republic of Italy.

“Relevant Date” means whichever is the later of (A) the date on which a payment first becomes due and (B) if the full amount payable has not been received in by the Fiscal Agent on or prior to such due date, the date on which, the full amount having been so received, notice to that effect shall have been given to the Noteholders and Couponholders in accordance with Condition 13 (Notices).

“Relevant Jurisdiction” means the Republic of Italy or any political subdivision or any authority thereof or therein having power to tax or any other jurisdiction or any political subdivision or any authority thereof or therein having power to tax to which the Issuer becomes subject by reason of its tax residence or a permanent establishment maintained therein in respect of payments made by it of principal and interest on the Notes, the Receipts or the Coupons.

“Relevant Period” means a 12-month period ending on (and including) a Determination Date.

“Reporting Date” means a date falling no later than forty five (45) days after the approval by the Board of Directors of the Issuer’s annual IFRS consolidated financial statements with respect to that Relevant Period.

“Security Interest” means any mortgage, charge, pledge, lien, other encumbrance or other form of security interest including, without limitation, anything substantially analogous to any of the foregoing under the laws of any jurisdiction.

“Shareholders’ Equity” means the shareholders’ equity of the Issuer, as shown in the Issuer’s latest audited annual financial statements (consolidated, if available), less any dividends paid, declared, recommended or approved.

“Subsidiary” means, in respect of the Issuer at any particular time, any società controllata, as defined in Article 2359 of the Italian Civil Code.

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“Substantial Part” means business or (as the case may be) assets representing the following percentages of the Issuer’s Consolidated EBITDA or Consolidated Total Assets:

(i) in the case of Condition 12(e) (Cessation of business), 20 per cent. or more; or

(ii) in all other cases, 16.5 per cent. or more,

in each case determined at any particular time by reference to the Issuer’s then latest audited consolidated annual financial statements.

“TARGET Settlement Day” means any day on which the TARGET System is open for the settlement of payments in euro.

“TARGET System” means the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET2) system.

"Termination Payment Event" means:

(i) the receipt by or on behalf of the Issuer or any Subsidiary as the case may be, of one or more Termination Value Payment(s), provided that such Termination Value Payment(s) are in an aggregate overall amount in excess of Euro 15,000,000; or

(ii) the occurrence of the Termination Value Payment(s) Account Trigger Event.

“Termination Value Payment(s)” means, at any time, the payment of the termination value(s) due to the Issuer or any Subsidiary as the case may be, pursuant to the relevant Mantova Gas Service Contract, as well as in accordance with the relevant regulation from time to time applicable (i) upon the termination, forfeiture, revocation, resolution or expiry (decadenza, risoluzione, revoca, recesso or scadenza) (whether in advance of the stated maturity or at such stated maturity) of the Mantova Gas Concessions under the terms of the Mantova Gas Service Contracts or as a result of the Issuer or any Subsidiary exercising its rights of withdrawal (recesso) under the Mantova Gas Service Contracts; or (ii) in any other circumstances where the Issuer or any Subsidiary is substituted by another entity (which is not part of the Group or which is not any temporary association of companies (associazione temporanea di imprese) where the Issuer or any Subsidiary is a participant) in managing the Mantova Gas Concessions and the payment of the termination value(s) is to be made by such other entity in accordance with the relevant Mantova Gas Service Contract.

“Termination Value Payment(s) Account” means a bank account held with Intesa Sanpaolo S.p.A. and opened by the Issuer in accordance with, and subject to, Condition 5.5 (Termination Value Payment(s) Account).

“Termination Value Payment(s) Account Trigger Event” means the circumstance where the amount held in the Termination Value Payment(s) Account is equal to or in excess of Euro 15,000,000.

“Total Assets” means, at any time, in respect of any Relevant Period, the total assets of a relevant entity as shown in, or determined by reference to, its then latest audited separate financial statements.

Save as the context otherwise provides, any reference in these Conditions to a provision of law, decree or regulation is a reference to that provision as amended or re-enacted.

5. COVENANTS

5.1 Information covenants

For so long as any Notes remain outstanding, the Issuer will:

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(a) inform the Noteholders immediately by means of a notice given in accordance with Condition 13 (Notices) of the occurrence of any Event of Default;

(b) deliver the No Default Certificate to the Fiscal Agent on each Reporting Date;

(c) inform the Noteholders immediately by means of a notice given in accordance with Condition 13 (Notices) of the receipt of any Termination Value Payment due to the Issuer or any Subsidiary, as the case may be, pursuant to the relevant Mantova Gas Service Contract;

(d) no later than the Certification Date, deliver to the Fiscal Agent an electronic copy of the Issuer’s annual IFRS consolidated financial statements translated into English. The Issuer shall ensure that each set of such annual IFRS consolidated financial statements is:

(a) audited by independent auditors; and

(b) accompanied by a Compliance Certificate.

So long as any of the Notes remains outstanding, the Issuer shall make such IFRS audited consolidated financial statements and the accompanying Compliance Certificate for the relevant Relevant Period available for inspection free of charge by any Noteholder on its website (www.teaspa.it), at its own registered office and at the Specified Office of the Fiscal Agent.

5.2 Financial Covenants

So long as any Note remains outstanding, the Issuer shall ensure that, as of each Determination Date:

(i) its Net Financial Debt - Shareholders’ Equity Ratio is no more than 1.5; and

(ii) its Net Financial Debt – Consolidated EBITDA Ratio is no more than 4.6.

The financial ratios set out in this Condition 5.2 shall be tested as of each Determination Date following approval by the Issuer’s shareholders’ meeting (or equivalent body) of the Issuer’s annual financial statements (consolidated, if available), so that the financial ratios will be tested once in each financial year based on the previous Relevant Period, as evidenced by the Compliance Certificate in relation to such Relevant Period delivered pursuant to Condition 5.1 (d) above and for the first time in respect of the 12-month period ending on (and including) 31 December 2017.

5.3 Listing

The Issuer shall, for so long as any Notes remain outstanding, use all reasonable endeavours to maintain a listing of the Notes on the regulated market of the Irish Stock Exchange or another regulated market on a stock exchange in the European Economic Area provided, however, that, if it is impracticable or unduly burdensome to maintain such admission, the Issuer shall use all reasonable endeavours to procure and maintain admission to trading of the Notes on a major securities market which is either a regulated market or a multilateral trading platform for the purposes of the Markets in Financial Instruments Directive 2004/39/EC situated or operating in the European Economic Area.

5.4 Accounting policies

The Issuer shall ensure that each set of IFRS consolidated financial statements delivered pursuant to Condition 5.1 is prepared using accounting policies, practices and procedures consistent with those applied in the preparation of the immediately preceding annual consolidated financial statements of the Issuer unless, in relation to any such set of consolidated financial statements, the Issuer provides the Fiscal Agent, for inspection by the Noteholders, with: (i) a description of any material changes in accounting policies, practices and procedures; (ii) sufficient information to make an accurate

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comparison between such consolidated financial statements and the previous consolidated financial statements; and (iii) sufficient information to enable Noteholders to determine whether Condition 5.2 (Financial Covenants) has been complied with.

5.5 Termination Value Payment(s) Account

(a) If the Issuer receives any Termination Value Payment which is less than Euro 15,000,000, the Issuer shall immediately open the Termination Value Payment(s) Account and deposit such Termination Value Payment on such account, which shall have the following characteristics: (i) the interest payable on such account shall not be less than the average rate of interest generally payable to Intesa Sanpaolo S.p.A.’s accountholders for escrow deposits (depositi vincolati) of equivalent amounts; and (ii) the Issuer may not withdraw or transfer any amounts out of such account until the occurrence of a Termination Value Payment(s) Account Trigger Event and a payment is made in accordance with paragraph (c) below.

(b) Following the receipt of the initial Termination Value Payment and the opening of the Termination Value Payment(s) Account in accordance with paragraph (a) above, the Issuer (i) shall credit all subsequent Termination Value Payment(s) received on the Termination Value Payment(s) Account and (ii) may make any additional payments (different from Termination Value Payment(s)) into the Termination Value Payment(s) Account in order to procure the occurrence of a Termination Value Payment(s) Account Trigger Event.

(c) Following the occurrence of a Termination Value Payment(s) Account Trigger Event, the Issuer shall utilise all the funds credited on the Termination Value Payment(s) Account exclusively for the purpose of making a payment to the Paying Agent for the purpose of the early redemption of the Notes in accordance with Condition 8.4 (Mandatory Redemption in case of Concession Event).

6. INTEREST

6.1 Interest Rate and Interest Payment Dates

The Notes bear interest on their principal amount outstanding from and including the Issue Date at the rate of 2.30 per cent. per annum, payable annually in arrear on each Interest Payment Date, subject as provided in Condition 7 (Payments). The first payment (representing a full year’s interest) shall be made on 7 June 2018.

Interest in respect of any Note shall be calculated per Calculation Amount. The amount of interest payable per Calculation Amount for any Interest Period shall be equal to the product of 2.30 per cent. and the Calculation Amount.

6.2 Interest Accrual

Each Note will cease to bear interest from and including its due date for final redemption unless, upon due presentation, payment of the principal in respect of the Note is improperly withheld or refused or unless default is otherwise made in respect of payment. In such events, it shall continue to bear interest at the rate specified in Condition 6.1 (both before and after judgment) until whichever is the earlier of:

(a) the date on which all amounts due in respect of such Note are received by or on behalf of the relevant Noteholder; and

(b) the day falling seven calendar days after the Fiscal Agent has notified the Noteholders of receipt of all sums due in respect all Notes up to that seventh calendar day (except to the extent that there is any subsequent default in payment in accordance with these Conditions) in accordance with Condition 13 (Notices).

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6.3 Calculation of Broken Interest

When interest is required to be calculated in respect of a period which is equal to or shorter than an Interest Period, the day-count fraction used will be the actual number of days in the relevant period from and including the date from which interest begins to accrue to but excluding the date on which it falls due divided by (b) the actual number of days in the Interest Period in which the relevant period falls (including the first such day but excluding the last).

7. PAYMENTS

7.1 Payments in respect of Notes

Payments of principal and interest in respect of each Note, Receipt or Coupon will be made against presentation and surrender (or, in the case of a partial payment, endorsement) of Notes or the appropriate Receipt or the appropriate Coupons (as the case may be) at the Specified Office of any Paying Agent by credit or transfer to a Euro account (or any other account to which Euro may be credited or transferred) maintained by the payee with a bank in a city in which banks have access to the TARGET System. Payments of principal or interest due in respect of any Note other than on presentation and surrender of matured Receipts or Coupons shall be made only against presentation and either surrender or endorsement (as appropriate) of the relevant Note.

7.2 Payments subject to applicable laws

All payments in respect of principal and interest on the Notes made in accordance with these Conditions shall be subject to (i) any fiscal or other laws and regulations applicable thereto in the place of payment, but without prejudice to the provisions of Condition 9 (Taxation) and (ii) any withholding or deduction required pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue Code of 1986 (the “Code”) or otherwise imposed pursuant to Sections 1471 through 1474 of the Code, any regulations or agreements thereunder, any official interpretations thereof, or (without prejudice to the provisions of Condition 9 (Taxation)) any law implementing an intergovernmental approach thereto.

7.3 Surrender of unmatured Receipts and Coupons

Each Note should be presented for redemption together with all unmatured Receipts and Coupons relating to it, failing which the amount of any such missing unmatured Receipts and/or Coupon (or, in the case of payment not being made in full, that proportion of the amount of such missing unmatured Receipts and/or Coupon which the sum of principal so paid bears to the total principal amount due) will be deducted from the sum due for payment. Each amount so deducted will be paid in the manner mentioned above against surrender (or, in the case of part payment only, endorsement) of the relevant missing Receipts and/or Coupon at any time before the expiry of ten years after the Relevant Date in respect of the relevant Note (whether or not the relevant Receipts or Coupon would otherwise have become void pursuant to Condition 10 (Prescription)) or, if later, five years after the date on which the relevant Receipts or Coupon would have become due, but not thereafter.

7.4 Payments on a Business Day

A Note, Receipt or Coupon may only be presented for payment on a day which is a Business Day in the place of presentation (and, in the case of transfer to a Euro account, in a city in which banks have access to the TARGET System). If the due date for payment of any amount in respect of any Note, Receipt or Coupon is not a Business Day, the holder shall not be entitled to payment of the amount due until the next succeeding Business Day and no further interest or other payment will be made as a consequence of the day on which the relevant Note, Receipt or Coupon may be presented for payment under this Condition 7 falling after the due date.

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7.5 Paying Agents

The initial Paying Agents and their initial Specified Offices are listed below. The Issuer reserves the right at any time to vary or terminate the appointment of any Paying Agent, appoint additional or other Paying Agents and appoint a successor fiscal agent, provided it will at all times maintain:

(a) a Fiscal Agent; and

(b) for so long as the Notes are listed on any stock exchange or admitted to trading by any relevant authority, a Paying Agent (which may be the Fiscal Agent) having its Specified Office in such place as may be required by applicable laws and regulations or the rules and regulations of the relevant stock exchange.

Notice of any change in the Paying Agents or their Specified Offices will promptly be given to the Noteholders in accordance with Condition 13 (Notices).

7.6 Partial Payments

If a Paying Agent makes a partial payment in respect of any Note, Receipt or Coupon presented to it for payment, such Paying Agent will endorse thereon a statement indicating the amount and date of such payment.

8. REDEMPTION AND PURCHASE

8.1 Redemption by Amortisation and Final Redemption

Unless previously redeemed, or purchased and cancelled as provided below, the Notes will be redeemed by the Issuer on each amortisation date specified in column A below (each an “Amortisation Date”, with the final Amortisation Date being the Maturity Date) in an aggregate principal amount equal to the amount specified in column B below (each an “Amortisation Amount”), subject as provided in Condition 7 (Payments).

The principal aggregate amount outstanding of the Notes shall be reduced, pro rata with respect to each outstanding Note, by the Amortisation Amount for all purposes with effect from the relevant Amortisation Date such that the aggregate principal amount outstanding of the Notes following such reduction shall be as specified in column C below, unless, upon due presentation of the relevant Note or Receipt, the payment of the relevant Amortisation Amount is improperly withheld or refused or unless default is otherwise made in respect of payment. In such events, Condition 6.2 (Interest Accrual) will apply. For the avoidance of doubt, any Amortisation Amount indicated in the table below shall be reduced pro rata by any amount of the Notes which is redeemed in accordance with Condition 8.3 (Redemption at the Option of the Noteholders).

Amortisation Date Amortisation Amount (euro Aggregate Principal

millions) Amount Outstanding of the Notes thereafter (euro millions)

7 June 2020 3 27

7 June 2021 5 22

7 June 2022 5 17

7 June 2023 5 12

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7 June 2024 12 0

In these Conditions, references to “principal” shall, unless the context requires otherwise, be deemed to include any Amortisation Amount, references to the “due date” for payment shall, unless the context requires otherwise, be deemed to include any Amortisation Date and references to the “principal amount outstanding” of a Note on any date shall be to its original principal amount less (i) the aggregate of all principal payments made in respect of such Note in accordance with this Condition 8.1.

8.2 Redemption for Taxation Reasons

If:

(a) as a result of any change in, or amendment to, the laws or regulations of a Relevant Jurisdiction, or any change in the application or official interpretation of the laws or regulations of a Relevant Jurisdiction, which change or amendment becomes effective after 31 May 2017, on the next Interest Payment Date the Issuer would be required to pay additional amounts as provided or referred to in Condition 9 (Taxation); and

(b) such obligation cannot be avoided by the Issuer taking reasonable measures available to it,

the Issuer may at its option, having given not less than 30 nor more than 60 days’ notice to the Noteholders in accordance with Condition 13 (Notices) (which notice shall be irrevocable), redeem all the Notes, but not some only, at any time at their principal amount outstanding together with interest accrued to but excluding the relevant date of redemption, provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be obliged to pay such additional amounts, were a payment in respect of the Notes then due.

Prior to the publication of any notice of redemption pursuant to this Condition 8.2, the Issuer shall deliver to the Fiscal Agent to make available at its Specified Office to the Noteholders (i) a certificate signed by two Authorised Signatories of the Issuer stating the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer so to redeem as described in this Condition 8.2 have occurred and (ii) an opinion of independent legal advisers of recognised standing to the effect that the Issuer has or will become obliged to pay such additional amounts as a result of the change or amendment.

8.3 Redemption at the Option of the Noteholders

If a Change of Control occurs, then the Noteholders shall have the option (a “Change of Control Put Option”) within 30 calendar days of a Change of Control Notice (as defined below) being given to the Noteholders (the “Exercise Period”) to give to the Issuer through a Paying Agent a Put Notice (as defined below) requiring the Issuer to redeem or purchase Notes held by such Noteholder on the Put Event Redemption Date (as defined below). The Issuer will, on such Put Event Redemption Date, redeem or repurchase at their principal amount outstanding, all, but not part only, of the Notes which are the subject of the Put Notice, together with interest accrued and unpaid to but excluding the Put Event Redemption Date.

Promptly (and in any event within 20 Business Days) upon the Issuer becoming aware that a Change of Control has occurred, the Issuer shall give notice (a “Change of Control Notice”) to the Noteholders in accordance with Condition 13 (Notices), which notice shall (i) refer specifically to this Condition 8.3, (ii) describe in reasonable detail the event or circumstances resulting in the Change of Control, (iii) specify the Put Event Redemption Date and (iv) offer to redeem or purchase, on the Put Event Redemption Date, all Notes at their principal amount together with interest accrued thereon to the Put Event Redemption Date. For so long as the Notes are listed on the regulated market of the Irish Stock Exchange and the rules of such exchange so require, the Issuer shall also notify the Irish

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Stock Exchange promptly of any Change of Control. The Issuer shall redeem or purchase on the Put Event Redemption Date all of the Notes held by Noteholders that require the redemption at the price specified above. If any Noteholder does not require early redemption during the Exercise Period, such Noteholder shall be deemed to have waived its rights under this Condition 8.3 to require early redemption of all Notes held by such Noteholder in respect of such Change of Control but not in respect of any subsequent Change of Control.

To exercise the Change of Control Put Option provided in this Condition 8.3, the holder of the Notes must deliver at the Specified Office of any Paying Agent, on any Business Day during the Exercise Period, a duly signed and completed notice of exercise in the form (for the time being current and which may, if such Notes are held in a clearing system, be in any form acceptable to such clearing system and may be delivered in any manner acceptable to such clearing system) obtainable from the Specified Office of any Paying Agent (a “Put Notice”) and in which the holder must specify a bank account to which payment is to be made under this Condition 8.3 accompanied by such Notes or evidence satisfactory to the Paying Agent concerned that such Notes will, following the delivery of the Put Notice, be held to its order or under its control. Upon delivery of a Put Notice and up to and including the Put Event Redemption Date, no transfer of title to the Notes for which the Change of Control Put Option has been delivered will be allowed. A Put Notice given by a holder of any Note shall be irrevocable except where, prior to the Put Event Redemption Date, an Event of Default has occurred and is continuing in which event such holder, at its option, may elect by notice to the Issuer to withdraw the Put Notice.

8.4 Mandatory Redemption in case of Concession Event

Unless previously redeemed, or purchased and cancelled as provided in this Condition 8, upon the occurrence of the Concession Event, the Issuer will redeem in part the Notes (including the relevant part of the principal amount outstanding, and any accrued and unpaid interest on such part of the principal amount outstanding until the date of such redemption) in an amount equal to the Mandatory Redemption Amount, on a Business Day which falls no later than 20 Business Days after the occurrence of such a Concession Event (the “Mandatory Redemption Date”), in accordance with the provisions of Condition 7 (Payments), provided that, such Mandatory Redemption Date falls prior to 7 June 2023.

Immediately upon occurrence of the Concession Event, the Issuer shall give notice thereof to the Noteholders in accordance with Condition 13 (Notices), which notice shall (i) refer specifically to this Condition 8.4 and (ii) specify the Mandatory Redemption Date pursuant to this Condition 8.4.

In the case of a partial redemption of Notes provided for in this Condition 8.4 (Mandatory Redemption in case of Concession Event) the Notes to be redeemed ("Redeemed Notes") will be drawn by lot by the Fiscal Agent not more than 10 Business Days prior to the Mandatory Redemption Date (the "Selection Date").

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A list of the serial numbers of such Redeemed Notes will be published in accordance with Condition 13 (Notices) not less than 5 Business Days prior to the Mandatory Redemption Date. The aggregate nominal amount of Redeemed Notes represented by Definitive Notes shall bear the same proportion to the aggregate nominal amount of all Redeemed Notes as the aggregate nominal amount of Definitive Notes outstanding bears to the aggregate nominal amount of the Notes outstanding, in each case on the Selection Date, provided that such first mentioned nominal amount shall, if necessary, be rounded downwards to the nearest integral multiple of the minimum denomination of the Notes, and the aggregate nominal amount of Redeemed Notes represented by a Global Note shall be equal to the balance of the Redeemed Notes. No exchange of the relevant Global Note will be permitted during the period from (and including) the Selection Date to (and including) the Mandatory Redemption Date and notice to that effect shall be given by the Issuer to the Noteholders in accordance with Condition 13 (Notices) at least five Business Days prior to the Selection Date. For the purposes of these Conditions:

“Change of Control” means the occurrence of any event or circumstance in which any Person or Persons acting in concert (in each case, other than one or more Permitted Holders), together with any of their Affiliates, has or gains control of the Issuer.

“Concession Event” means the occurrence of each of the following events:

(i) the Mantova Gas Concessions are awarded to Persons different from the Issuer or any of its Subsidiaries following a competitive tender process; and

(ii) a Termination Payment Event occurs.

“Control” means the power to (i) appoint or remove a majority of the directors of the Issuer or (ii) exercise more than 50% of the voting rights normally exercisable at the Issuer’s ordinary and extraordinary shareholders’ meetings.

“Mandatory Redemption Amount” means €15,000,000.

“Permitted Holder(s)” means either (a) a Public Entity or (b) any Person who, either directly or indirectly through one or more intermediate Persons, is under the Control of one or more Public Entities at any time.

“Public Entity” means any municipality, province or consortium incorporated pursuant to Article 31 of Legislative Decree No. 267 of 18 August 2000, as amended which, on the Issue Date, either directly or indirectly through one or more intermediate Persons, holds an equity interest in the share capital of the Issuer.

“Put Event Redemption Date” means the date specified in the Put Event Notice, being a date not less than 30 nor more than 60 calendar days after the expiry of the Exercise Period.

8.5 No other redemption

The Issuer shall not be entitled to redeem the Notes otherwise than as provided in Conditions 8.1 to 8.4 above.

8.6 Purchases

The Issuer or any of its Subsidiaries may at any time purchase Notes in any manner and at any price, provided that all unmatured Receipts and Coupons appertaining to the Notes are purchased with such Notes).

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8.7 Cancellations

All Notes which are (i) purchased by the Issuer or (ii) redeemed and any unmatured Receipts and Coupons attached to or surrendered with them shall be cancelled and may not be reissued or resold. Any Notes so purchased, while held by or on behalf of the Issuer or any of its Subsidiaries, shall not entitle the holder to vote at any meeting of Noteholders.

8.8 Final Notices

Upon the expiry of any notice as is referred in Conditions 8.2 and 8.3, the Issuer shall be bound to redeem the Notes to which the notice refers in accordance with the terms of such Conditions. If a notice of redemption is given by the Issuer pursuant to these Conditions and a Noteholder delivers a Put Notice pursuant to Condition 8.3, the first in time of such notices shall prevail.

9. TAXATION

9.1 Payment without Withholding

All payments of principal and interest in respect of the Notes, the Receipts and the Coupons by or on behalf of the Issuer shall be made free and clear of, and without withholding or deduction for or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature (“Taxes”) imposed or levied by or on behalf of the Relevant Jurisdiction, unless the withholding or deduction of the Taxes is required by law. In that event, the Issuer will pay such additional amounts as may be necessary in order that the net amounts received by the Noteholders, the Receiptholders and Couponholders after such withholding or deduction shall equal the respective amounts of principal and interest which would have been received in respect of the Notes, the Receipts or the Coupons in the absence of such withholding or deduction; except that no additional amounts shall be payable in respect of any Note, Receipt or Coupon:

(a) presented for payment by, or by a third party on behalf of, the holder who is liable to such Taxes in respect of such Note, Receipt or Coupon by reason of it having some connection with the Relevant Jurisdiction other than a mere holding of the Note, the Receipt or the Coupon; or

(b) presented for payment in the Relevant Jurisdiction; or

(c) presented for payment by or on behalf of a holder of Notes, Receipts or Coupons who would have been able to avoid such withholding or deduction by making a declaration or any other statement, including but not limited to, a declaration of residence or non-residence, but fails to do so; or

(d) requested more than 30 days after the Relevant Date except to the extent that a holder of such Note, Receipt or Coupon would have been entitled to such additional amounts on presenting such payment Note, Receipt or Coupon for payment on the last day of the period of 30 days; or

(e) in relation to any payment or deduction on principal, interest or other proceeds of any Note on account of imposta sostitutiva pursuant to Italian Legislative Decree No. 239 of 1 April 1996 (the “Decree No. 239”) or future similar law and any related implementing regulations (each as amended or supplemented from time to time); or

(f) in circumstances in which the formalities to obtain an exemption from imposta sostitutiva under Decree No. 239 have not been complied with, except where such formalities have not been complied with due to the actions or omissions of the Issuer or its agents; or

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(g) in the event of payment to a non-Italian resident legal entity or a non-Italian resident individual, to the extent that interest or other amounts are paid to a non-Italian resident legal entity or a non-Italian resident individual which is resident in a country which does not allow for a satisfactory exchange of information with the Italian tax authorities.

9.2 Additional Amounts

Any reference in these Conditions to any amounts of principal and interest in respect of the Notes, the Receipts and the Coupons shall be deemed also to refer to any additional amounts which may be payable under this Condition 9.

10. PRESCRIPTION

Claims in respect of principal and interest will become void unless presentation for payment is made as required by Condition 7 (Payments) within a period of ten years in the case of principal and five years in the case of interest from the appropriate Relevant Date, subject to provisions of Condition 7 (Payments).

11. REPLACEMENT OF NOTES, RECEIPTS AND COUPONS

If any Note, Receipt or Coupon is lost, stolen, mutilated, defaced or destroyed it may be replaced at the Specified Office of the Fiscal Agent, subject to all applicable laws and stock exchange or other relevant authority requirements, upon payment by the claimant of the expenses incurred in connection with such replacement and on such terms as to evidence, security, indemnity and otherwise as the Issuer may require (provided that the requirement is reasonable in the light of prevailing market practice). Mutilated or defaced Notes, Receipts or Coupons must be surrendered before replacements will be issued.

12. EVENTS OF DEFAULT

If any of the following events occurs:

(a) Non-payment: if default is made in the payment of any principal or interest due in respect of the Notes or any of them and the default continues for a period of 5 Business Days in the case of principal or 7 Business Days in the case of interest; or

(b) Breach of other obligations: if the Issuer fails to perform or observe any of its other obligations or undertakings under these Conditions and (except in any case where the failure is incapable of remedy, when no continuation or notice as is hereinafter mentioned will be required) the failure continues for the period of 30 calendar days following the service by any Noteholder, either to the Issuer or to the Specified Office of the Fiscal Agent, of written notice addressed to the Issuer requiring the same to be remedied; or

(c) Cross-default: if (a) any Indebtedness of the Issuer or any of its Subsidiaries is declared (or is capable of being declared) to be due and repayable prior to its stated maturity by reason of any actual event of default (however described); or (b) the Issuer or any of its Subsidiaries fails to make any payment in respect of any Indebtedness on the due date for payment as extended by any applicable grace period; or (c) any Security Interest given by the Issuer or any of its Subsidiaries for any Indebtedness is (or becomes capable of being) enforced; provided that the aggregate amount of the Indebtedness, in respect of which one or more of the events mentioned in this paragraph (iii) have occurred individually or in the aggregate equals or exceeds Euro 7,000,000 (or its equivalent in any other currency); or

(d) Winding up, etc.: if an order is made by any competent court or an effective resolution is passed for the winding up, liquidation or dissolution of the Issuer or any of its Material Subsidiaries save for the purposes of (a) a solvent reconstruction, amalgamation,

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reorganisation, merger or consolidation on terms previously approved by an Extraordinary Resolution of the Noteholders, or (b) or pursuant to a Permitted Reorganisation; or

(e) Cessation of business: if the Issuer or any of its Subsidiaries ceases or announces that is shall cease to carry on all or a Substantial Part of its business, otherwise than for the purposes of, or pursuant to, a Permitted Concession Handover or a Permitted Reorganisation; or

(f) Insolvency/Composition: if the Issuer or any of its Material Subsidiaries:

(i) is (or is, or could be, deemed by law or a court to be) insolvent or bankrupt or unable to pay its debts as they fall due; or

(ii) stops or suspends (or threatens to stop or suspend) payment of all or a part of, or admits in writing its inability to, its debts; or

(iii) becomes subject to any liquidation, insolvency, composition, reorganisation or other similar proceedings or application is made for the appointment of an administrative or other receiver, administrator, liquidator or other similar official or an administrative or other receiver, administrator, liquidator or other similar official is appointed in relation to the Issuer or any of its Material Subsidiaries or, as the case may be, in relation to the whole or a Substantial Part of the undertaking or assets of any of them, or an encumbrancer takes possession of the whole or a Substantial Part of the undertaking or assets of any of them; or

(iv) proposes or makes any agreement for the deferral, rescheduling or other readjustment of all of (or of a particular type of) its debts (or of any part which it will or it might otherwise be unable to pay when due); or

(v) proposes or makes or enters into a general assignment or an arrangement or composition with or for the benefit of its creditors in respect of any of such debts, or a moratorium is agreed or declared or comes into effect in respect of or affecting all or any part of (or of a particular type of) the debts of the Issuer or any of its Material Subsidiaries; or

(g) Enforcement proceedings: if a distress, attachment, execution or other legal process is levied or enforced on or against all or a Substantial Part of the property, assets or revenues of the Issuer or any of its Material Subsidiaries and is not discharged or stayed within 90 calendar days; or

(h) Unsatisfied judgment: if one or more judgment(s) or order(s) for the payment of any amount in excess of Euro 7,000,000 million (or its equivalent in other currencies), whether individually or in aggregate, is rendered against the Issuer or any of its Subsidiaries, becomes enforceable in a jurisdiction where the Issuer or any of its Subsidiaries are incorporated and continue(s) unsatisfied and unstayed for a period of 45 calendar days after the date(s) thereof or, if later, the date therein specified for payment; or

(i) Unlawfulness: if it is or will become unlawful for the Issuer to perform or comply with any of its obligations under or in respect of the Notes or any such obligations cease or will cease to be legal, valid, binding and enforceable; or

(j) Material litigation: if any litigation, arbitration, administrative or regulatory proceeding or action or labour claim is commenced by or against the Issuer or any of its Subsidiaries or any of their respective assets which, if adversely determined, has or would be expected to have a Material Adverse Effect; or

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(k) Analogous event: if any event occurs which under the laws of any relevant jurisdiction has an analogous effect to any of the events referred to in this Condition;

then any Note may, by written notice addressed by the holder thereof to the Issuer and delivered to the Issuer or to the Specified Office of the Fiscal Agent, be declared immediately due and payable, whereupon it shall become immediately due and payable at its principal amount together with accrued interest without further action or formality.

In these Conditions:

“Permitted Reorganisation” means,

(i) in the case of any Subsidiary, any reorganisation, amalgamation, merger, demerger, consolidation, contribution in kind or restructuring or other similar transaction, in each case whilst solvent whereby a Substantial Part of the assets and undertaking of such Subsidiary are transferred, sold, contributed, assigned or otherwise vested in the Issuer and/or another Subsidiary of the Issuer; or

(ii) in the case of the Issuer, any reorganisation, amalgamation, merger, demerger, consolidation, contribution in kind or restructuring or other similar transaction, in each case whilst solvent whereby all or substantially all of the Issuer’s assets and undertaking are transferred, sold, contributed, assigned or otherwise vested in a body corporate that is in good standing, validly organised and existing under the laws of the Republic of Italy, and such body corporate (A) assumes as principal debtor in respect of the Notes and (B) continues to carry on all or substantially all of the business of the Issuer; or

(iii) any reorganisation, amalgamation, merger, demerger, consolidation, contribution in kind or restructuring whilst solvent or other similar arrangement on terms previously approved by an Extraordinary Resolution.

13. NOTICES

Notices to Noteholders will be valid if published in a reputable leading English language daily newspaper published in London with an international circulation (which is expected to be the Financial Times) and (so long as the Notes are listed on a securities market of the Irish Stock Exchange and it is a requirement of applicable laws and regulations or the rules of the Irish Stock Exchange) a leading newspaper having general circulation in the Republic of Ireland or on the website of the Irish Stock Exchange (www.ise.ie) or, if such publication shall not be practicable, in an leading English language daily newspaper of general circulation in Europe (which is expected to be the Financial Times). Any such notice shall be deemed to have been given on the date of such publication or, if published more than once or on different dates, the first date on which publication is made. Receiptholders and Couponholders will be deemed for all purposes to have notice of the contents of any notice given to the Noteholders in accordance with this Condition 13.

14. MEETING OF NOTEHOLDERS, NOTEHOLDERS’ REPRESENTATIVE; MODIFICATION

14.1 Meetings of Noteholders

Subject to compliance with mandatory provisions of Italian law applicable from time to time, the Fiscal Agency Agreement contains provisions for convening meetings of Noteholders to consider any matters affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of the Notes, Receipts or Coupons.

All meetings of the Noteholders will be held in accordance with applicable provisions of Italian law in force at the time. The Issuer (through its board of directors (consiglio di amministrazione) or, as the case may be, its management boards (consiglio di gestione)) or the Noteholders’ Representative may

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convene a meeting of Noteholders at any time at their discretion and the Issuer and the Noteholders’ Representative shall be obliged to do so upon request in writing of the Noteholders holding at least one-twentieth of the aggregate principal amount of the Notes for the time being outstanding.

A meeting of Noteholders will be validly held (i) in case of initial meeting, if there are one or more eligible voters present that hold or represent holders of at least 60 per cent. of the aggregate principal amount of the outstanding Notes, and (ii) in case of any adjourned meeting, if there are one or more eligible voters present that hold or represent holders of at least 51 per cent. of the aggregate principal amount of the outstanding Notes; provided, however, that the Issuer’s by-laws may provide for different (including higher) quorums (to the extent permitted under Italian law). Unless a different majority is required pursuant to the Issuer's by laws, as in force from time to time, and the relevant Italian laws and regulation, including Articles 2415, 2369, paragraph 3 of the Italian Civil Code, as in force and interpreted from time to time, the majority required to pass a resolution will be: (i) in case of initial meeting, one or more eligible voters that hold or represent holders of at least 60 per cent. of the aggregate principal amount of the outstanding Notes, and (ii) in case of any adjourned meeting, one or more eligible voters that hold or represent holders of at least 51 per cent. of the aggregate principal amount of the outstanding Notes.

Certain proposals listed in the Fiscal Agency Agreement (including modifying the date of maturity of the Notes or any date for payment of interest thereon, reducing or cancelling the amount of principal or the rate of interest payable in respect of the Notes or altering the currency of payment of the Notes or the Coupons) may only be sanctioned by a resolution passed at a meeting (including adjourned meetings as provided under Article 2415 of the Italian Civil Code) of Noteholders by one or more persons holding or representing not less than one half of the aggregate principal amount of the Notes for the time being outstanding (or the different majority provided by the relevant Italian laws governing the passing of such proposals in force from time to time), in case the Issuer's by laws, as in force from time to time, provides for lower majorities.

Officers and statutory auditors of the Issuer shall be entitled to attend the Noteholders’ meetings but not participate or vote with reference to the Notes held by the Issuer. Any resolution duly passed at any such meeting shall be binding on all the Noteholders and on all Receiptholders and Couponholders, whether or not they are present at the meeting or voted in favour or against the resolution.

14.2 Noteholders’ Representative

Pursuant to Articles 2415 and 2417 of the Italian Civil Code, a representative of the Noteholders (rappresentante comune or the “Noteholders’ Representative”) may be appointed, inter alia, to represent the interests of Noteholders, such appointment to be made by an Extraordinary Resolution or by an order of a competent court at the request of one or more Noteholders or the Issuer. Each such Noteholders’ Representative shall have the powers and duties set out in Article 2418 of the Italian Civil Code.

14.3 Modification

The Notes, the Receipts, the Coupons and these Conditions may be amended without the consent of the Noteholders, the Receiptholders or the Couponholders to correct a manifest error. In addition, the parties to the Fiscal Agency Agreement may agree to modify any provision thereof, but the Issuer shall not agree, without the consent of the Noteholders, to any such modification unless it is of a formal, minor or technical nature, it is made to correct a manifest error and it is not materially prejudicial to the interests of the Noteholders. In addition, the parties to the Fiscal Agency Agreement may agree, without the consent of the Noteholders, to modify any provision thereof in order to comply with mandatory laws, legislation, rules and regulations of the Republic of Italy applicable to the convening of meetings, quorums and the majorities required to pass an Extraordinary Resolution.

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15. ROUNDING

For the purposes of any calculations referred to in these Conditions (unless otherwise specified in these Conditions), all figures resulting from such calculations will be rounded, if necessary, to the nearest euro cent (with half a euro cent being rounded upwards).

16. FURTHER ISSUES

The Issuer may from time to time, provided that the Noteholders provide their consent pursuant to an Extraordinary Resolution and in accordance with the Fiscal Agency Agreement, create and issue further notes having the same terms and conditions as those of the Notes in all respects (or in all respects except for the first payment of interest on them) and so that such further issue shall be consolidated and form a single series with the outstanding Notes, or upon such terms as the Issuer may determine at the time of their issue.

17. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

No person shall have any right to enforce any term or condition of the Notes under the Contracts (Rights of Third Parties) Act 1999.

18. GOVERNING LAW AND SUBMISSION TO JURISDICTION

18.1 Governing Law

The Fiscal Agency Agreement, the Deed of Covenant, the Notes, the Receipts and the Coupons and any non-contractual obligations arising out of or in connection with the Fiscal Agency Agreement, the Deed of Covenant, the Notes, the Receipts and the Coupons are governed by, and construed in accordance with, English law. Condition 14 (Meetings of Noteholders, Noteholders’ Representative; Modification) and the provisions of the Fiscal Agency Agreement concerning the meetings of Noteholders are subject to compliance with mandatory provisions of Italian law.

18.2 Submission to Jurisdiction

The courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with the Notes, the Receipts or the Coupons and accordingly any legal action or proceedings arising out of or in connection with the Notes, the Receipts or the Coupons (“Proceedings”) may be brought in such courts. The Issuer irrevocably submits to the jurisdiction of such courts and waives any objection to Proceedings in such courts whether on the ground of venue or on the ground that the Proceedings have been brought in an inconvenient forum. This Condition 18.2 is for the benefit of each of the Noteholders, Receiptholders and Couponholders and shall not limit the right of any of them, to the extent this is allowed by law, to take Proceedings in any other court of competent jurisdiction nor shall the taking of Proceedings in one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction (whether concurrently or not).

18.3 Agent for Service of Process

The Issuer irrevocably appoints Law Debenture Corporate Services Limited, whose registered office is at 100 Wood Street, London EC2V 7EX, as its agent in England to receive service of process in any Proceedings in England based on any of the Notes, the Receipts or the Coupons. If for any reason the Issuer does not have such an agent in England, it will promptly appoint a substitute process agent and notify the Noteholders of such appointment in accordance with Condition 13 (Notices). The Issuer agrees that failure by a process agent to notify it of any process will not invalidate service. Nothing herein shall affect the right to serve process in any other manner permitted by law.

There will appear at the foot of the Conditions endorsed on each Note in definitive form the names and Specified Offices of the Paying Agents as set out at the end of this Prospectus.

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SUMMARY OF PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM The Temporary Global Note and the Permanent Global Note contain provisions which apply to the Notes while they are in global form, some of which modify the effect of the Conditions of the Notes set out in this Prospectus. Beneficial interests in the Global Notes will be shown on, and transfers thereof will be effected only through, records maintained in book-entry form by Euroclear and/or Clearstream, Luxembourg. The Global Notes will be issued in NGN form. On 13 June 2006, the European Central Bank (the “ECB”) announced that notes in NGN form are in compliance with the “Standards for the use of EU securities settlement systems in ESCB credit operations” of the central banking system for the euro (the “Eurosystem”), provided that certain other criteria are fulfilled. At the same time, the ECB also announced that arrangements for notes in NGN form will be offered by Euroclear and Clearstream, Luxembourg as of 30 June 2006, and that debt securities in global bearer form issued through Euroclear and Clearstream, Luxembourg after 31 December 2006, will only be eligible as collateral for Eurosystem operations if the NGN form is used. The following is a summary of certain of those provisions: Exchange for Permanent Global Note and Definitive Notes (i) The Temporary Global Note will be exchangeable, in whole or in part, for the Permanent Global Note not earlier than 40 days after the Issue Date (the “Exchange Date”) upon certification as to non-U.S. beneficial ownership. (ii) The Permanent Global Note is exchangeable in whole, but not in part, for Definitive Notes in the denomination of €100,000 each and integral multiples of €1,000 in excess thereof, up to and including €199,000 each, only if (a) it is held on behalf of Euroclear or Clearstream, Luxembourg, and any such Clearing System is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention to permanently cease business or does in fact do so; or (b) an Event of Default (as defined in Condition 12 (Events of Default)) occurs. Whenever a Permanent Global Note is to be exchanged for Definitive Notes, the Issuer shall procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly authenticated and with the relevant Receipts and Coupons attached, in an aggregate principal amount equal to the principal amount of the Permanent Global Note to the bearer of such Permanent Global Note against the surrender of such Permanent Global Note to or to the order of the Fiscal Agent within 30 days of the bearer requesting such exchange. If: (i) Definitive Notes have not been delivered by 5.00 p.m. (London time) on the thirtieth day after the bearer has duly requested exchange of a Permanent Global Notes for Definitive Notes; or (ii) a Permanent Global Notes (or any part of it) has become due and payable in accordance with the relevant terms and conditions or the date for final redemption of the relevant Notes has occurred and, in either case, payment in full of the amount of principal falling due with all accrued interest thereon has not been made to the bearer in accordance with the terms of the relevant Permanent Global Notes on the due date for payment, then such Permanent Global Note (including the obligation to deliver Definitive Notes) will become void at 5.00 p.m. (London time) on such thirtieth day (in the case of (i) above) or at 5.00 p.m. (London time) on such due date (in the case of (ii) above) and the bearer of such Permanent Global Note will have no further rights thereunder (but without prejudice to the rights which the bearer of such Permanent Global Note or others may have under a deed of covenant relating to the relevant Notes dated 7 June 2017 (the “Deed of Covenant”) executed by the Issuer). Under the Deed of Covenant, persons shown in the records of Euroclear and/or Clearstream, Luxembourg as being entitled to an interest in such Permanent Global Note will acquire directly against the Issuer all those rights to which they would have been entitled if, immediately before such Permanent Global Note became void, they had been the holders of Definitive Notes in an aggregate principal amount equal to the principal amount of Notes they were shown as holding in the records of Euroclear and/or (as the case may be) Clearstream, Luxembourg.

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Payments No payment will be made on the Temporary Global Note on or after the Exchange Date unless exchange for an interest in the Permanent Global Note is improperly withheld or refused, provided that, in the case of an improper withholding of, or refusal to exchange, an interest in the Permanent Global Note, a certificate of non-U.S. beneficial ownership has been properly provided. Payments of principal and interest in respect of Notes represented by the Permanent Global Note will be made against presentation for endorsement and, if no further payment fails to be made in respect of the Notes, surrender of the Permanent Global Note to or to the order of any Paying Agent as shall have been notified to the Noteholders for such purpose, and may be made, at the direction of the holder of the Permanent Global Note, to the relevant Clearing Systems for credit to the account or accounts of the accountholder or accountholders appearing in the records of the relevant Clearing System as having Notes credited to them. The Issuer shall procure that a record of each payment made in respect of the Permanent Global Note shall be made by the relevant Clearing Systems. Payments on Business Days In the case of all payments made in respect of the Temporary Global Note and the Permanent Global Note, “business day” means any day on which the TARGET System is open. Notices Notices shall be given as provided in Condition 13 (Notices), save that so long as the Notes are represented by the Temporary Global Note or Permanent Global Note and the Temporary Global Note or Permanent Global Note is held on behalf of a Clearing System, notices to Noteholders may be given by delivery of the relevant notice to the relevant Clearing System for communication to the relevant Accountholders (as defined below) rather than by publication as required by Condition 13 (Notices), provided, however, that so long as the Notes are admitted to trading on the Irish Stock Exchange and the rules of the Irish Stock Exchange so require, such notices will also be published in a leading newspaper having general circulation in the Republic of Ireland or be published on the website of the Irish Stock Exchange (www.ise.ie). Any notice delivered to Euroclear and/or Clearstream, Luxembourg shall be deemed to have been given to Noteholders on the date on which such notice is delivered to the relevant Clearing System. Purchase and Cancellation Cancellation of any Note to be cancelled following its purchase by the Issuer will be effected by a reduction in the principal amount of the relevant Global Note. Prescription Claims against the Issuer in respect of principal, premium and interest on the Notes while the Notes are represented by the Permanent Global Note will become void unless it is presented for payment within a period of 10 years (in the case of principal) and 5 years (in the case of interest) from the appropriate Relevant Date (as defined in Condition 4 (Definitions)). Redemption at the Option of the Noteholders The Noteholders’ option in Condition 8.3 (Redemption at the Option of the Noteholders) may be exercised by the holder of the Permanent Global Note giving notice to the Fiscal Agent in respect of the principal amount of Notes in respect of which the option is exercised within the time limits specified in Condition 8.3 (Redemption at the Option of the Noteholders). Redemption for Taxation Reasons The option of the Issuer provided for in Condition 8.2 (Redemption for Taxation Reasons) shall be exercised by the Issuer giving notice to the Noteholders and the relevant central securities depositories (“ICSDs”) within the time limits set out in, and containing the information required by, the relevant Condition. Mandatory Redemption in case of Concession Event

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In the case of a partial redemption of Notes provided for in Condition 8.4 (Mandatory Redemption in case of Concession Event), the Notes to be redeemed ("Redeemed Notes") will be selected in accordance with the rules of Euroclear and/or Clearstream, Luxembourg, (to be reflected in the records of the ICSDs as either a pool factor or a reduction in nominal amount, at their discretion) in the case of Redeemed Notes represented by a Global Note, not more than 10 Business Days prior to the date fixed for redemption according to Condition 8.4 (Mandatory Redemption in case of Concession Event) (the “Mandatory Redemption Date”) (such date of selection being hereinafter called the "Selection Date"). The aggregate nominal amount of Redeemed Notes represented by Definitive Notes shall bear the same proportion to the aggregate nominal amount of all Redeemed Notes as the aggregate nominal amount of Definitive Notes outstanding bears to the aggregate nominal amount of the Notes outstanding, in each case on the Selection Date, provided that such first mentioned nominal amount shall, if necessary, be rounded downwards to the nearest integral multiple of the minimum denomination of the Notes, and the aggregate nominal amount of Redeemed Notes represented by a Global Note shall be equal to the balance of the Redeemed Notes. No exchange of the relevant Global Note will be permitted during the period from (and including) the Selection Date to (and including) the Mandatory Redemption Date and notice to that effect shall be given by the Issuer to the Noteholders in accordance with Condition 13 at least five Business Days prior to the Selection Date.

In the case of a partial redemption of Notes provided for in Condition 8.4 (Mandatory Redemption in case of Concession Event) in accordance with the rules of Euroclear and/or Clearstream, Luxembourg indicated above, any Amortisation Amount indicated in Condition 8.1 (Redemption by Amortisation and Final Redemption) shall be reduced pro rata by any amount of the Notes which is redeemed in accordance with Condition 8.4 (Mandatory Redemption in case of Concession Event). In addition, any references in the Conditions to “principal” shall, unless the context requires otherwise, references to the “principal amount outstanding” of a Note on any date shall be to its original principal amount less (i) the aggregate of all principal payments made in respect of such Note in accordance with Condition 8.1 (Redemption by Amortisation and Final Redemption) and (ii) the aggregate amount of all redemptions made in respect of such Note pursuant to Condition 8.4 (Mandatory Redemption in case of Concession Event).

Authentication and Effectuation Neither the Temporary Global Note nor the Permanent Global Note shall become valid or enforceable for any purpose unless and until it has been authenticated by or on behalf of the Fiscal Agent and effectuated by the entity appointed as Common Safekeeper by Euroclear and/or Clearstream, Luxembourg. Accountholders For so long as any of the Notes is represented by the Permanent Global Note or by the Permanent Global Note and Temporary Global Note and such Global Note(s) is/are held on behalf of the relevant Clearing Systems, each person (other than a relevant Clearing System) who is, for the time, being shown in the records of a relevant Clearing System as the holder of a particular principal amount of Notes (each an “Accountholder”) (in which regard any certificate or other document issued by a relevant Clearing System as to the principal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes) shall be treated as the holder of that principal amount for all purposes (including but not limited to, for the purposes of any quorum requirements of, or the right to demand a poll at, meetings of the Noteholders and giving notice to the Issuer pursuant to Condition 8.3 (Redemption at the Option of the Noteholders) and Condition 12 (Events of Default)) other than with respect to the payment of principal and interest on the Notes, the right to which shall be vested, as against the Issuer, solely in the bearer of the Permanent Global Note in accordance with and subject to its terms. Each Accountholder must look solely to the relevant Clearing Systems for its share of each payment made to the bearer of the Permanent Global Note. Eligibility of the Notes for Eurosystem Monetary Policy The Notes are intended to be held in a manner which will allow Eurosystem eligibility. This means that the Notes are upon issue deposited with one of the ICSDs as Common Safekeeper and does not necessarily mean that the Notes will be recognised as eligible collateral for Eurosystem monetary policy and intra-day credit operations by the Eurosystem (Eurosystem Eligible Collateral) either upon issue, or at any or all times during their life. Such recognition will depend upon satisfaction of the Eurosystem eligibility criteria and other

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obligations (including the provision of further information) as specified by the ECB from time to time. As of the date of this Prospectus, one of the Eurosystem eligibility criteria for debt securities is an investment grade rating and, accordingly, as the Notes are unrated, they are not currently expected to satisfy the requirements for Eurosystem eligibility.

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TAXATION

The following is a summary of current Italian law and practice relating to the taxation of the Notes. The statements herein regarding taxation are based on the laws in force in Italy as of the date of this Prospectus and are subject to any changes in law occurring after such date, which changes could be made on a retroactive basis.

Prospective purchasers should be aware that tax treatment depends on the individual circumstances of each Noteholder: as a consequence they should consult their tax advisers as to the consequences under Italian tax law and under the tax laws of the country in which they are resident for tax purposes and of any other potentially relevant jurisdiction of acquiring, holding and disposing of Notes and receiving payments of interest, principal and/or other amounts under the Notes, including in particular the effect of any state, regional or local tax laws.

The following summary does not purport to be a comprehensive description of all the tax considerations which may be relevant to a decision to subscribe for, purchase, own or dispose of the Notes and does not purport to deal with the tax consequences applicable to all categories of investors, some of which (such as dealers in securities or commodities) may be subject to special rules. Prospective purchasers of the Notes are advised to consult their own tax advisers concerning the overall tax consequences of their ownership of the Notes. This summary does not describe the tax consequences for an investor with respect to Notes that provide payout linked to the profits of the Issuer, profits of other company of the group or profits of the business in relation to which they are issued.

Interest and other proceeds from Notes that qualify as bonds or instruments similar to bonds

Legislative Decree No. 239 of 1 April 1996, as subsequently amended (Decree No. 239), provides for the applicable regime with respect to the tax treatment of interest, premium and other income (including the difference between the redemption amount and the issue price) from notes, falling within the category of bonds (obbligazioni) or debentures similar to bonds (titoli similari alle obbligazioni), issued, inter alia, by Italian companies with shares not traded on a regulated market or multilateral trading facility of an EU or EEA Member State which exchanges information with the Italian tax authority, where the Notes themselves are traded on the mentioned regulated markets or multilateral trading facilities. For these purposes, debentures similar to bonds are defined as securities that incorporate an unconditional obligation to pay, at redemption, an amount not lower than their nominal value and which do not grant to the holder any direct or indirect right of participation to (or control of) the management of the issuer.

Italian resident Noteholders

Where an Italian resident Noteholder is (a) an individual not engaged in an entrepreneurial activity to which the Notes are connected (unless he has opted for the application of the "risparmio gestito" regime – see "Capital Gains Tax" below), (b) a non-commercial partnership, pursuant to article 5 of the Italian Income Consolidated Code (TUIR) (with the exception of general partnership, limited partnership and similar entities) (c) a non commercial private or public institution, or (d) an investor exempt from Italian corporate income taxation, interest, premium and other income (other than capital gains) (Interest) relating to the Notes, accrued during the relevant holding period, are subject to a withholding tax, referred to as imposta sostitutiva, levied at the rate of 26%. In the event that the Noteholders described under (a) and (c) above are engaged in an entrepreneurial activity to which the Notes are connected, the imposta sostitutiva applies as a provisional tax.

Subject to certain limitations and requirements (including a minimum holding period), Italian resident individuals not acting in connection with an entrepreneurial activity may be exempt from any income taxation, including the imposta sostitutiva, on interest, premium and other income relating to the Notes if the Notes are included in a long-term savings account (piano di risparmio a lungo termine) that meets the requirements set forth in Article 1(100-114) of Law No. 232 of 11 December 2016 (the Finance Act 2017).

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Where an Italian resident Noteholder is a company or similar commercial entity or a permanent establishment in Italy of a foreign company to which the Notes are effectively connected and the Notes are deposited with an authorised intermediary, Interest from the Notes will not be subject to imposta sostitutiva, but must be included in the relevant Noteholder's annual income tax return and are therefore subject to general Italian corporate taxation (IRES) and, in certain circumstances, subject to the "status" of the Noteholder, also to regional tax on productive activities (IRAP).

Under the current regime provided by Law Decree No. 351 of 25 September 2001, converted into Law No. 410 of 23 November 2001 (Decree 351), Law Decree No. 78 of 31 May 2010, converted into Law No. 122 of 30 July 2010 and Legislative Decree No. 44 of 4 March 2014, all as amended, Italian real estate investment funds created under Article 37 of Legislative Decree No. 58 of 24 February 1998, as amended and supplemented, and Article 14-bis of Law No. 86 of 25 January 1994 and Italian real estate SICAFs (the Real Estate SICAFs) are subject neither to imposta sostitutiva nor to any other income tax in the hands of the real estate investment fund or the Real Estate SICAF.

If the investor is resident in Italy and is an open-ended or closed-ended investment fund, a SICAF (an Italian investment company with fixed share capital) or a SICAV (an investment company with variable capital) established in Italy (the Fund) and either (i) the Fund or (ii) its manager is subject to the supervision of a regulatory authority, and the relevant Notes are held by an authorised intermediary, interest, premium and other income accrued during the holding period on such Notes will not be subject to imposta sostitutiva, but must be included in the management results of the Fund. The Fund will not be subject to taxation on such results but a withholding or a withholding tax of 26 per cent. will apply, in certain circumstances, to distributions made in favour of unitholders or shareholders (the Collective Investment Fund Tax).

Where an Italian resident Noteholder is a pension fund (subject to the regime provided for by Article 17 of Legislative Decree No. 252 of 5 December 2005) and the Notes are deposited with an authorised intermediary, Interest relating to the Notes and accrued during the holding period will not be subject to imposta sostitutiva, but must be included in the results of the relevant portfolio accrued at the end of the tax period, to be subject to a 20% substitute tax.

Pursuant to Decree No. 239, imposta sostitutiva is applied by banks, Società di intermediazione mobiliare (SIMs), fiduciary companies, Società di gestione del risparmio (SGRs), stockbrokers and other entities identified by a decree of the Ministry of Economics and Finance (each an Intermediary) as subsequently amended and integrated.

An Intermediary to be entitled to apply the imposta sostitutiva, it must (i) be (a) resident in Italy or (b) resident outside Italy, with a permanent establishment in Italy or (c) an entity or a company not resident in Italy, acting through a system of centralised administration of notes and directly connected with the Department of Revenue of the Italian Ministry of Finance having appointed an Italian representative for the purposes of Decree No. 239; and (ii) intervene, in any way, in the collection of interest or in the transfer of the Notes. For the purpose of the application of the imposta sostitutiva, a transfer of Notes includes any assignment or other act, either with or without consideration, which results in a change in ownership of the relevant Notes or in a change of the Intermediary with which the Notes are deposited.

Where the Notes are not deposited with an Intermediary, the imposta sostitutiva is applied and withheld by any entity paying interest to a Noteholder. If Interest on the Notes are not collected through an Intermediary or any entity paying interest and as such no imposta sostitutiva is levied, the Italian resident beneficial owners listed above under (a) to (d) will be required to include Interest in their yearly income tax return and subject them to a final substitute tax at a rate of 26%.

Non-Italian resident Noteholders

Where the Noteholder is a non-Italian resident, without a permanent establishment in Italy to which the Notes are effectively connected, an exemption from imposta sostitutiva applies provided that the non-Italian resident beneficial owner is either (a) resident, for tax purposes, in a country which allows for a satisfactory exchange of information with Italy, as listed in the Italian Ministerial Decree of 4 September 1996, as amended by

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Ministerial Decree of 9 August 2016 and possibly further amended by future decree issued pursuant to Article 11(4)(c) of Decree 239 (as amended by Legislative Decree No.147 of 14 September 2015) (the White List); or (b) an institutional investor that is resident in a country included in the White List, even if it does not possess the status of a taxpayer in its own country of residence; or, independently by the relevant country of tax residence, (c) an international body or entity set up in accordance with international agreements which have entered into force in Italy; or (d) a Central Bank or an entity which manages, inter alia, the official reserves of a foreign State.

The imposta sostitutiva will be applicable at the rate of 26% to Interest accrued during the holding period, when the Noteholders are resident, for tax purposes, in countries which do not allow for a satisfactory exchange of information with Italy. The imposta sostitutiva may be reduced by applicable double tax treaty, if any.

In order to ensure gross payment, non-Italian resident investors must be the beneficial owners of the payments of interest, premium or other proceeds and (a) deposit, directly or indirectly, the Notes or the coupons with a resident bank or SIM or a permanent establishment in Italy of a non-Italian resident bank or SIM or with a non-resident operator of a clearing system having appointed as its agent in Italy for the purposes of Decree 239 an Italian resident bank or SIM or a permanent establishment in Italy of a non-Italian resident bank or SIM or a non-Italian resident bank or SIM which are in contact via computer with the Ministry of Economy and Finance and (b) file with the relevant depository, prior to or concurrently with the deposit of the Notes, a statement of the relevant Noteholder, which remains valid until withdrawn or revoked, in which the Noteholder declares to be eligible to benefit from the applicable exemption from imposta sostitutiva. Such statement, which is not requested for international bodies or entities set up in accordance with international agreements which have entered into force in Italy nor in the case of foreign Central Banks or entities which manage, inter alia, the official reserves of a foreign State, must comply with the requirements set out by Ministerial Decree of 12 December 2001.

Capital Gains Tax

Any gain obtained from the sale or redemption of the Notes would be treated as part of the taxable income (and, in certain circumstances, depending on the "status" of the Noteholder, also as part of the net value of the production for IRAP purposes) if realised by an Italian company or a similar commercial entity (including the Italian permanent establishment of foreign entities to which the Notes are connected) or Italian resident individuals engaged in an entrepreneurial activity to which the Notes are connected.

Where an Italian resident Noteholder is an individual not holding the Notes in connection with an entrepreneurial activity and certain other persons, any capital gain realised by such Noteholder from the sale or redemption of the Notes would be subject to an imposta sostitutiva, levied at the rate of 26%. Under some conditions and limitations, Noteholders may set off losses with gains. In respect of the application of the imposta sostitutiva, taxpayers may opt for one of the three regimes described below:

(a) Under the tax declaration regime (regime della dichiarazione), which is the default regime for taxation of capital gains realised by Italian resident individuals not engaged in entrepreneurial activities to which the Notes are connected, the imposta sostitutiva on capital gains will be chargeable, on a yearly cumulative basis, on all capital gains, net of any offsettable capital loss, realised by the Italian resident individual Noteholder holding the Notes not in connection with an entrepreneurial activity pursuant to all sales or redemptions of the Notes carried out during any given tax year. Italian resident individuals holding the Notes not in connection with an entrepreneurial activity must indicate the overall capital gains realised in any tax year, net of any relevant incurred capital loss, in their annual tax return and pay imposta sostitutiva on such gains together with any balance income tax due for such year. Capital losses in excess of capital gains may be carried forward against capital gains realised in any of the four succeeding tax years.

(b) As an alternative to the tax declaration regime, Italian resident individual Noteholders holding the Notes not in connection with an entrepreneurial activity may elect to pay the imposta sostitutiva

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separately on capital gains realised on each sale or redemption of the Notes (the risparmio amministrato regime provided for by Article 6 of the Legislative Decree No. 461 of 21 November 1997, as a subsequently amended, the Decree No. 461). Such separate taxation of capital gains is allowed subject to (a) the Notes being deposited with Italian banks, SIMs or certain authorised financial intermediaries and (b) an express election for the risparmio amministrato regime being made timely in writing by the relevant Noteholder. The depository is responsible for accounting for imposta sostitutiva in respect of capital gains realised on each sale or redemption of the Notes, net of any incurred capital loss, and is required to pay the relevant amount to the Italian tax authorities on behalf of the taxpayer, deducting a corresponding amount from the proceeds to be credited to the Noteholder or using funds provided by the Noteholder for this purpose. Under the risparmio amministrato regime, where a sale or redemption of the Notes results in a capital loss, such loss may be deducted from capital gains subsequently realised, within the same securities management, in the same tax year or in the following tax years up to the fourth. Under the risparmio amministrato regime, the Noteholder is not required to declare the capital gains in the annual tax return.

(c) Any capital gains realised or accrued by Italian resident individuals holding the Notes not in connection with entrepreneurial activity who have entrusted the management of their financial assets, including the Notes, to an authorised intermediary and have opted for the so-called risparmio gestito regime (regime provided by Article 7 of Decree No. 461) will be included in the computation of the annual increase in value of the managed assets accrued, even if not realised, at year end, subject to a 26% substitute tax, to be paid by the managing authorised intermediary. Under this risparmio gestito regime, any depreciation of the managed assets accrued at year end may be carried forward against increase in value of the managed assets accrued in any of the four succeeding tax years. Under the risparmio gestito regime, the Noteholder is not required to declare the capital gains realised in the annual tax return.

Subject to certain limitations and requirements (including a minimum holding period), Italian resident individuals not engaged in an entrepreneurial activity may be exempt from Italian capital gain taxes, including the imposta sostitutiva, on capital gains realised upon sale or redemption of the Notes if the Notes are included in a long-term savings account (piano di risparmio a lungo termine) that meets the requirements set forth in Article 1(100-114) of Finance Act 2017.

Any capital gains realised by a Noteholder who is an Italian real estate fund to which the provisions of Decree 351, Law Decree No. 78 of 31 May 2010, converted into Law No. 122 of 30 July 2010 and Legislative Decree No. 44 of 4 March 2014, all as amended, apply or a Real Estate SICAF will be subject neither to imposta sostitutiva nor to any other income tax at the level of the real estate investment fund or the Real Estate SICAF.

Any capital gains realised by a Noteholder which is a Fund will be included in the results of the relevant portfolio accrued at the end of the tax period. The Fund will not be subject to taxation on such result, but the Collective Investment Fund Tax, will apply, in certain circumstances, to distributions made in favour of unitholders or shareholders.

Any capital gains realised by a Noteholder who is an Italian pension fund (subject to the regime provided for by Article 17 of the Legislative Decree No. 252 of 5 December 2005) will be included in the result of the relevant portfolio accrued at the end of the tax period, to be subject to the 20% substitute tax.

Capital gains realised by non-Italian resident Noteholders without a permanent establishment in Italy to which the Notes are effectively connected, from the sale or redemption of Notes issued by an Italian resident Issuer are not subject to Italian taxation, provided that the Notes are transferred on regulated markets.

Capital gains realised by non-Italian resident Noteholders from the sale or redemption of Notes not transferred on regulated markets are not subject to the imposta sostitutiva, provided that the effective beneficiary: (a) is resident in a country included in the White List; or (b) is an international entity or body set up in accordance with international agreements which have entered into force in Italy; or (c) is a Central Bank or an entity

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which manages, inter alia, the official reserves of a foreign State; or (d) is an institutional investor which is resident in a country included in the White List, even if it does not possess the status of a taxpayer in its own country of residence.

If none of the conditions above are met, capital gains realised by non-Italian resident Noteholders from the sale or redemption of Notes issued by an Italian resident issuer are subject to the imposta sostitutiva at the current rate of 26%.

In any event, non-Italian resident individuals or entities without a permanent establishment in Italy to which the Notes are connected, who may benefit from a double taxation treaty with Italy providing that capital gains realised upon the sale or redemption of Notes are to be taxed only in the country of tax residence of the recipient, will not be subject to imposta sostitutiva in Italy on any capital gains realised upon the sale or redemption of Notes.

Inheritance and gift taxes

Pursuant to Law Decree No. 262 of 3 October 2006, converted into Law No. 286 of 24 November 2006, as subsequently amended, the transfers of any valuable asset (including shares, bonds or other securities) as a result of death or donation are taxed as follows:

(a) transfers in favour of spouses and direct descendants or direct ancestors are subject to an inheritance and gift tax applied at a rate of 4% on the value of the inheritance or the gift exceeding, for each beneficiary, €1,000,000;

(b) transfers in favour of relatives to the fourth degree or relatives-in-law of a direct lineage or after relatives-in-law of a collated lineage up to the third degree are subject to an inheritance and gift tax applied at a rate of 6% on the entire value of the inheritance or the gift. Transfers in favour of brothers/sisters are subject to the 6% inheritance and gift tax on the value of the inheritance or the gift exceeding, for each beneficiary, €100,000; and

(c) any other transfer, in principle, is subject to an inheritance and gift tax applied at a rate of 8% on the entire value of the inheritance or the gift.

If the transfer is made in favour of persons with severe disabilities, the tax is levied at the rate mentioned above in (a), (b) and (c) on the value exceeding, for each beneficiary, Euro 1,500,000.

Transfer tax

Contracts relating to the transfer of securities are subject to the registration tax as follows: (a) public deeds and notarized deeds are subject to fixed registration tax at rate of €200; (b) private deeds are subject to registration tax only in case of voluntary registration or if the so-called "caso d'uso" or "enunciazione" occurs.

Stamp duty

Pursuant to Article 19(1) of Decree No. 201 of 6 December 2011 (Decree No. 201), a proportional stamp duty applies on an annual basis to the periodic reporting communications sent by financial intermediaries to their clients for the Notes deposited in Italy. The stamp duty applies at a rate of 0.2 per cent. and cannot exceed €14,000, for taxpayers different from individuals; this stamp duty is determined on the basis of the market value or - if no market value figure is available - the nominal value or redemption amount of the Notes held.

Based on the wording of the law and the implementing decree issued by the Italian Ministry of Economy on 24 May 2012, the stamp duty applies to any investor who is a client (as defined in the regulations issued by the Bank of Italy on 20 June 2012) of an entity that exercises in any form a banking, financial or insurance activity within the Italian territory. The communication is deemed to be sent to the customers at least once a year, even for instruments for which it is not mandatory.

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Wealth Tax on securities deposited abroad

Pursuant to Article 19(18) of Decree 201, Italian resident individuals holding the securities outside the Italian territory are required to pay an additional tax at a rate of 0.20% for each year. This tax is calculated on the market value of the securities at the end of the relevant year or – if no market value figure is available – the nominal value or the redemption value of such financial assets held outside the Italian territory. Taxpayers are entitled to an Italian tax credit equivalent to the amount of wealth taxes paid in the State where the financial assets are held (up to an amount equal to the Italian wealth tax due).

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SUBSCRIPTION AND SALE The Placement Agent has, in a mandate letter dated 29 December 2016 (the “Mandate Letter”) and made between the Issuer and the Placement Agent, upon the terms and subject to the conditions contained therein, agreed to use its reasonable endeavours to procure purchasers who will subscribe and pay for the Notes at their issue price of 100 per cent. of their principal amount. The Issuer has agreed to pay the Placement Agent certain commissions and to reimburse the Placement Agent for certain of its expenses incurred in connection with the placement of the Notes. The Placement Agent is entitled in certain circumstances to be released and discharged from its obligations under the Placement Agreement prior to the closing of the issue of the Notes. General No action has been or will be taken in any jurisdiction by the Issuer or the Placement Agent that would, or is intended to, permit a public offering of the Notes, or possession or distribution of this Prospectus or any other offering material, in any country or jurisdiction where action for that purpose is required. Persons into whose hands this Prospectus comes are required by the Issuer and the Placement Agent to comply with all applicable laws and regulations in each country or jurisdiction in which they purchase, offer, sell or deliver Notes or have in their possession, distribute or publish this Prospectus or any other offering material relating to the Notes, in all cases at their own expense. The Placement Agent has represented, warranted and agreed that it will, to the best of its knowledge and belief, comply with all the relevant laws and regulations in each jurisdiction in which it purchases, offers, sells or delivers Notes or has in its possession or distributes the Prospectus or any other offering material. United States of America The Notes have not been and will not be registered under the Securities Act or any U.S. State securities laws in the United States. The Notes are being offered only outside the United States by the Placement Agent to persons who are not “U.S. persons” in offshore transactions in reliance on Regulation S, and may not be offered, sold or delivered within the United States or to, or for the account or benefit of, “U.S. persons”, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Terms used in this paragraph have the meaning given to them by Regulation S. The Placement Agent has represented and warranted that it has not offered and sold the Notes, and that it will not offer and sell the Notes, (a) as part of its own distribution at any time, or (b) otherwise until forty (40) days after the later of the commencement of the offering and the Issue Date, except in accordance with Rule 903 of Regulation S. Accordingly, neither the Placement Agent, any of its Affiliates (as defined in Rule 405 of the Securities Act) nor any person acting on its or their behalf has engaged or will engage in any directed selling efforts with respect to the Notes, and the Placement Agent has represented and agreed that they have complied and will comply with the offering restrictions requirement of Regulation S. The Placement Agent has agreed that, at or prior to confirmation of sale of the Notes, it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases the Notes from it during the distribution compliance period a confirmation or notice to substantially the following effect: “The securities covered hereby have not been registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold within the United States or to, or for the account or benefit of, “U.S. persons” (i) as part of their distribution at any time or, (ii) otherwise, until forty (40) days after the later of the commencement of the offering and the Issue Date, except pursuant to an exemption from, or in a transaction not subject to, the regulation requirements of the Securities Act. Terms used above have the meanings given to them by Regulation S.” Terms used in the above paragraph have the meanings given to them by Regulation S. The Placement Agent has represented, warranted and agreed with the Issuer that: (i) except to the extent permitted under U.S. Treasury Regulation §1.163 5(c)(2)(i)(D) (or any successor U.S. Treasury Regulation Section including, without limitation, regulations issued in accordance with

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U.S. Internal Revenue Service Notice 2012-20 or otherwise in connection with the U.S. Hiring Incentives to Restore Employment Act of 2010) (the “D Rules”): (a) it has not offered or sold, and during the forty (40) day restricted period will not offer or sell, Notes to a person who is within the United States or its possessions or to a United States person; and (b) it has not delivered, and during the forty (40) day restricted period will not deliver, Notes in definitive form within the United States or its possessions; (ii) it has, and throughout the restricted period will have, in effect, procedures reasonably designed to ensure that its employees or agents who are directly engaged in selling Notes are aware that such Notes may not be offered or sold during the restricted period to a person who is within the United States or its possessions or to a United States person, except as permitted by the D Rules; (iii) if it is a United States person, (a) it is acquiring the Notes for the purposes of resale in connection with their original issue and (b) if it retains Notes for its own account, it will only do so in accordance with the requirements of U.S. Treasury Regulation §1.163 5(c)(2)(i)(D)(6) (or any successor U.S. Treasury Regulation Section including, without limitation, regulations issued in accordance with U.S. Internal Revenue Service Notice 2012-20 or otherwise in connection with the U.S. Hiring Incentives to Restore Employment Act of 2010); (iv) it will not transfer Notes to a trust, company or other entity that issues notes, certificates or other securities whose payment characteristics are determined in whole or in part by reference to the Notes unless such trust, company or other entity represents, covenants and agrees that such notes, certificates or other securities will be issued in compliance with the D Rules; and (v) with respect to each Affiliate (as defined in Rule 405 of the Securities Act) of the Placement Agent or any distributor (within the meaning of U.S. Treasury Regulation §1.163-5(c)(2)(i)(D)(4) (or any successor U.S. Treasury Regulation Section including, without limitation, regulations issued in accordance with U.S. Internal Revenue Service Notice 2012-20 or otherwise in connection with the U.S. Hiring Incentives to Restore Employment Act of 2010)), in each case that acquires Notes from the Placement Agent for the purpose of offering or selling such Notes during the restricted period, the Placement Agent undertakes to the Issuer that it will either (a) repeat and confirm the representations and agreements contained in sub-paragraphs (i), (ii) (iii) and (iv) above on its behalf, or (b) obtain from such Affiliate or distributor for the benefit of the Issuer the representations and undertakings contained in sub-paragraphs (i), (ii), (iii) and (iv) above. Terms used in the above paragraph have the meaning given to them by the Internal Revenue Code of 1986 and the Treasury regulations thereunder, including the D Rules. In addition, until forty (40) days after the commencement of the offering, an offer or sale of Notes within the United States by a dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act. Republic of Italy The offering of the Notes has not been cleared by CONSOB pursuant to Italian securities legislation. Accordingly, no Notes may be offered, sold or delivered, directly or indirectly, nor may copies of the Prospectus or of any other document relating to the Notes be distributed in the Republic of Italy, except: (i) to qualified investors (investitori qualificati), as defined under Article 100 of the Legislative Decree No. 58 of 24 February 1998, as amended (the “Italian Financial Act”), as implemented by Article 26, paragraph 1(d) of CONSOB Regulation No. 16190 of 29 October 2007, as amended (“CONSOB Regulation No. 16190”), pursuant to Article 34-ter, first paragraph, letter b), of CONSOB Regulation No. 11971 of 14 May 1999, as amended from time to time (“CONSOB Regulation No. 11971”); or (ii) in other circumstances which are exempted from the rules on public offerings pursuant to Article 100 of the Italian Financial Act and its implementing of CONSOB Regulations including CONSOB Regulation No. 11971.

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Any such offer, sale or delivery of the Notes or distribution of copies of the Prospectus or any other document relating to the Notes in the Republic of Italy must be in compliance with the selling restriction under (i) and (ii) above and: (a) be made by an investment firm, bank or financial intermediary permitted to conduct such activities in the Republic of Italy in accordance with the relevant provisions of the Italian Financial Act, CONSOB Regulation No. 16190, Legislative Decree No. 385 of 1 September 1993, as amended (the “Banking Act”) and any other applicable laws or regulation; (b) in compliance with Article 129 of the Banking Act and the implementing guidelines of the Bank of Italy, as amended, with regard, inter alia, to the reporting obligations required; and (c) in compliance with any other applicable laws and regulations or requirement imposed by CONSOB or the Bank of Italy or any other Italian authority. United Kingdom The Placement Agent has represented, warranted and agreed that: (a) it has only communicated or caused to be communicated, and will only communicate or cause to be communicated, an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000, as amended (the “FSMA”)) received by it in connection with the issue or sale of the Notes in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer; and (b) it has complied and will comply with all applicable provisions of the FSMA and the regulations adopted thereunder with respect to anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom.

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GENERAL INFORMATION 1. Listing and Admission to Trading Application has been made for the Notes to be listed on the Official List of the Irish Stock Exchange and admitted to trading on the regulated market of the Irish Stock Exchange. Admission is expected to take effect on or about the Issue Date. 2. Authorisation The Issuer has obtained all necessary consents, approvals and authorisations in connection with the issue and performance of its obligations under the Notes. The creation and issue of the Notes has been authorised by a resolutions of the Board of Directors of the Issuer dated 29 May 2017 and 30 May 2017. 3. Expenses Related to Admission to Trading The total expenses related to admission to trading are estimated at €14,540 including all fees payable to maturity. 4. Legal and Arbitration Proceedings Neither the Issuer nor any other member of the Group is or has been involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuer is aware) in the 12 months preceding the date of this document which may have or have in such period had a significant effect on the financial position or profitability of the Issuer or the Group. 5. Auditors The financial statements of the Issuer as of and for the years ended 31 December 2015 and 2016 have been prepared by management in accordance with Italian GAAP and have been audited by Deloitte & Touche S.p.A. Deloitte & Touche S.p.A. with registered office at Via Tortona 25, Milan, Italy, is registered under No. 132587 in the Single Register of Legal Auditors at the Ministry of the Economy and Finance (Registro Unico dei Revisori Legali presso il Ministero dell’Economia e delle Finanze), State General Accounting (Ragioneria Generale dello Stato). Deloitte & Touche S.p.A. has issued an Auditors’ Report, under ISA 805 (“Special consideration- audits of single financial statements and specific elements, accounts or items of a financial statements”), with respect to the consolidated financial information of the Issuer as of and for the year ended 31 December 2016 restated in accordance with IFRS (the “2016 IFRS Report”), which is shown at the end of the Appendix 1 to this Prospectus (Restated Audited IFRS Consolidated Financial Statements). The report of Deloitte & Touche S.p.A. is included in this Prospectus, in the form and context in which it is included, at the request of the Issuer and with the consent of Deloitte & Touche S.p.A. Deloitte & Touche S.p.A. accepts responsibility for the 2016 IFRS Report and declares that, having taken all reasonable care to ensure that such is the case, the information contained in the 2016 IFRS Report, to the best of its knowledge, is in accordance with the facts and contains no omission likely to affect its import. 6. Significant Material Change Since 31 December 2016 there has been no material adverse change in the prospects of the Issuer and no significant change in the financial or trading position of the Issuer.

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7. Documents on Display For so long as any of the Notes are outstanding, copies of the following documents may be inspected in electronic format during normal business hours at the specified office of each Paying Agent: (a) the deed of incorporation and the by-laws of the Issuer; (b) the Fiscal Agency Agreement; (c) the Deed of Covenant; (d) the audited consolidated Financial Statements for the years ended 31 December 2016 and 2015; (e) the IFRS audited consolidated Financial Statements as at 31 December 2016; and (f) the most recently published audited annual financial statements of the Issuer. A copy of this Prospectus will also be electronically available for viewing on the website of the Irish Stock Exchange (www.ise.ie). A copy of the documents incorporated by reference in this Prospectus will be electronically available for viewing on the Issuer’s website (www.teaspa.it). 8. Legend for any U.S. Person The Notes and any Coupons appertaining thereto will bear a legend to the following effect: “Any United States person who holds this obligation will be subject to limitations under the United States income tax laws, including the limitations provided in Sections 165(j) and 1287(a) of the Internal Revenue Code”. 9. ISIN and Common Code The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg. The International Securities Identification Number for the Notes is XS1608363690 and the Common Code is 160836369. The address of Euroclear is 1 Boulevard du Roi Albert II, B 1210 Brussels, Belgium and the address of Clearstream, Luxembourg is 42 Avenue J.F. Kennedy, L 1855 Luxembourg, Grand Duchy of Luxembourg. 10. Yield Based on the issue price of 100 per cent. of the principal amount of the Notes, the yield on the Notes is 2.30 per cent. on an annual basis. The yield is calculated at the Issue Date on the basis of the Issue Price. It is not an indication of future yield. 11. Potential Conflicts of Interest In the ordinary course of business, the Placement Agent, belonging to the Intesa Sanpaolo Group, has engaged, and may in the future engage, in lending, in investment banking and/or commercial banking transactions with, and may perform services for, the Issuer and its affiliates and with companies involved directly or indirectly in the sectors in which the Issuer and its affiliates operate and/or competitors of the Issuer interested in carrying out transactions of a similar nature. In addition, in the ordinary course of their business activities, the Placement Agent and its affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of the Issuer or its affiliates or any entity related to the Notes. The Placement Agent or its affiliates that have a lending relationship with the Issuer routinely hedge their credit exposure to the Issuer consistently with their customary risk management policies. Typically, the Placement Agent and its affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in the Issuer’s securities, including potentially the Notes offered hereby. Any such short positions could adversely affect future trading prices of the Notes. The Placement Agent and its affiliates may also make investment

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recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments. For the purpose of this paragraph, the word “affiliates” also includes parent companies. Furthermore, one or more of the companies of the Intesa Sanpaolo Group: • are one of the main financial lenders and have granted significant financing to the Issuer and its parent and group companies; • will subscribe and pay for the Notes. 12. Irish Listing Agent Walkers Listing Service Limited is acting in solely in its capacity as listing agent for the Issuer in relation to the Notes and is not itself seeking admission to the Official List or trading on the regulated market of the Irish Stock Exchange for the purposes of the Prospectus Directive.

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REGISTERED OFFICE OF THE ISSUER Tea S.p.A. Via Taliercio, 3 46100 Mantova Italy

FISCAL AGENT The Bank of New York Mellon, London Branch

One Canada Square London E14 5AL United Kingdom

PLACEMENT AGENT Banca IMI S.p.A. Largo Mattioli 3 20121 Milan Italy

LEGAL ADVISERS

To the Issuer as to Italian and English law: Orrick, Herrington & Sutcliffe

Piazza della Croce Rossa, 2 Corso Matteotti, 10 00161 Rome 20121 Milan Italy Italy

To the Placement Agent as to Italian and English law: Simmons & Simmons Via Tommaso Grossi, 2 Citypoint 20121 Milan One Ropemaker Street Italy London EC2Y 9SS United Kingdom

AUDITORS TO THE ISSUER

Deloitte & Touche S.p.A. Via Tortona 25, 20144 Milan Italy

LISTING AGENT

Walkers Listing Services Limited The Anchorage 17/19 Sir John Rogerson’s Quay Dublin 2 Ireland

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APPENDIX 1 IFRS CONSOLIDATED FINANCIAL STATEMENTS

Index to Consolidated Financial Statements Page CONSOLIDATED INCOME STATEMENT 2 CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME 3 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 4 CONSOLIDATED CASH FLOWS STATEMENT 5 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 6 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 7-62 SPECIAL PURPOSE INDEPENDENT AUDITORS’ REPORT 63-64

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TEA GROUP

IFRS RESTATED CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2016 These Restated IFRS Consolidated Financial Statements have been prepared on a voluntary basis in connection with the planned bond offering to institutional investors outside the United States of America in offshore transactions in reliance upon Regulation S under the Securities Act and for other corporate purposes

Tea Group

CONSOLIDATED INCOME STATEMENT

Year ended 31 December Note (in Euro thousands) 2016 2015

Revenue 6 262,528 260,265 Other income 5,005 3,706 Raw materials and consumables 7 (61,359) (76,397) Service cost 8 (129,382) (116,570) Personnel cost 9 (27,096) (24,988) Other operating expenses 10 (10,439) (9,810) Share of profit (loss) of equity investment 11 63 806 Amortization, depreciation and impairment 12 (17,818) (17,273) Operating income 21,502 19,739 Finance income 13 2,055 1,942 Finance expense 13 (1,589) (2,051) Profit before income tax 21,968 19,630 Income tax 14 (6,934) (6,910) Net profit 15,034 12,720 of which: Profit attributable to the Group 13,130 11,258 Profit attributable to the non controlling interest 1,904 1,462

The above consolidated income statement should be read in conjunction with the accompanying notes.

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CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

Year ended 31 December Note (in Euro thousands) 2016 2015

Net profit 15,034 12,720

Cash flow hedges 18, 25 874 (148) Cash flow hedges - tax impact 14 (249) 46 Items that may be reclassified to profit or loss 21 625 (102) Profit/(Loss) from post-employment benefit obligations 23 (286) 393 Profit/(Loss) from post-employment benefit obligations - tax impact 14 78 (104) Items that will not be reclassified to profit or loss 21 (208) 289 Total other comprehensive income 417 187 Net other comprehensive income 15,451 12,907 of which:

Other comprehensive income attributable to the Group 13,623 11,357 Other comprehensive income attributable to the non controlling interest 1,828 1,550

The above consolidated statement of other comprehensive income should be read in conjunction with the accompanying notes.

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As of 31 December As of 1 January Note (in Euro thousands) 2016 2015 2015

Intangible assets 15 109,120 92,252 83,606 Tangible assets 16 108,889 113,363 101,066 Investments measured using the equity method 11 6,424 6,175 5,769 Deferred tax assets 14 793 792 752 Other non current assets 18 35,082 30,037 32,867 Total non current assets 260,308 242,619 224,060 Inventory 19 2,391 2,619 1,887 Current trade receivables 17 83,900 78,465 84,726 Income tax asset 1,160 1,483 1,220 Other current assets 18 19,431 17,592 19,829 Cash and cash equivalents 20 4,334 7,709 8,201 Total current assets 111,216 107,868 115,863 Total assets 371,524 350,487 339,923 Share capital 73,403 71,942 71,942 Share premium 4,127 1,872 1,872 Other reserves 53,688 52,138 45,965 Retained earnings 13,835 6,666 5,543 Total Group equity 145,053 132,618 125,322 Non controlling interest 10,351 9,413 8,458 Total equity 21 155,404 142,031 133,780 Non current borrowings 22 58,950 64,719 69,559 Employee benefits 23 7,725 7,312 7,467 Non current provisions 24 37,350 33,563 26,316 Other non current liabilities 25 4,778 6,970 7,983 Total non current liabilities 108,803 112,564 111,325 Current borrowings 22 14,427 13,456 12,820 Trade payables 81,894 69,952 69,657 Income tax liability 157 446 1,503 Other current liabilities 25 10,839 12,038 10,838 Total current liabilities 107,317 95,892 94,818 Total liabilities 216,120 208,456 206,143 Total equity and liabilities 371,524 350,487 339,923

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

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CONSOLIDATED CASH FLOW STATEMENT

Year ended 31 December Note (in Euro thousand) 2016 2015

Profit for the year 15,034 12,720 Adjustments

Amortization, depreciation and impairment 12 17,818 17,273 Provisions and other charges 10 7,876 7,368 Finance income/(expenses) - net 13 1,756 2,069 Other non cash items 197 (879) Cash flow from operating activities 42,681 38,551 Changes in inventory 19 343 (676) Changes in trade receivables 17 (9,483) 1,454 Changes in trade payables 11,942 295

Changes in other assets/liabilities (447) 5,082 Payments for employee benefits 23 (316) (62) Interest paid (692) (1,142) Income tax paid (6,632) (6,195) Net cash inflow from operating activities 37,396 37,307 Investments in property, plant and equipment 16 (7,607) (19,053) Investments in intangible assets 15 (17,035) (11,145) Proceeds from disposal of fixed and intangible assets 15, 16 1,322 1,309 Business acquisitions net of cash acquired 5 - (3,987) Investments in associates 11 (258) - Financing provided 18 (7,418) (1,668) Financing reimbursed 18 318 67 Dividends received 11, 3 2,988 5,052 Interest received 882 919 Net cash outflow from investing activities (26,808) (28,506) Issuance of long term financing 22, 3 4,663 7,394 Reimbursement of long term financing 22, 3 (12,927) (10,170) Change in short term financing 22, 3 148 (1,861) Contribution in kind 10 - Dividends paid (5,857) (4,656) Net cash outflow from financing activities (13,963) (9,293) Net increase (decrease) in cash and cash equivalents (3,375) (492) Cash and cash equivalents at the beginning of the year 7,709 8,201 Cash and cash equivalents at end of the year 4,334 7,709

The above consolidated cash flow statement should be read in conjunction with the accompanying notes.

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Total Non Share Share Other Retained Group controlling Total (in Euro thousands) capital premium reserves Earnings equity interest Equity As of 1 January 2015 71,942 1,872 45,965 5,543 125,322 8,458 133,780 Net profit - - - 11,258 11,258 1,462 12,720 Cash flow hedges - - (102) - (102) - (102) Associates ------Actuarial loss for post -employment benefit obligations - - - 201 201 88 289 Total net comprehensive income - - (102) 11,459 11,357 1,550 12,907 Reclassification - - 3,775 (3,775) - - Dividends paid - - 2,500 (6,561) (4,061) (595) (4,656) As of 31 December 2015 71,942 1,872 52,138 6,666 132,618 9,413 142,031 Net profit - - - 13,130 13,130 1,904 15,034 Cash flow hedges - - 625 - 625 - 625 Actuarial loss for post -employment benefit obligations - - - (132) (132) (76) (208) Total net comprehensive income - - 625 12,998 13,623 1,828 15,451 Reclassification - - 925 (925) - - - Contribution in kind 1,461 2,255 - - 3,716 - 3,716 Dividends paid - - - (4,967) (4,967) (890) (5,857) Other movements - - - 63 63 - 63 As of 31 December 2016 73,403 4,127 53,688 13,835 145,053 10,351 155,404

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 General information

Tea S.p.A. (the “ Company ” and together with its subsidiaries “ Group ”), a multi-utility provider established and domiciled in Italy is organized and governed under the laws of the Republic of Italy. The registered offices of the Company are located in Via Taliercio, Mantova. The Company is controlled by the Municipality of Mantova. All of the Company’s shareholders are public entities.

The Group, also through its subsidiaries operates in (1) Infrastructure, (2) Energy, (3) Waste management, treatment and disposal (4) Integrated water services (sale and distribution of water, water treatment and sewerage), (5) Public lighting and (6) Funeral services.

These consolidated financial statements, which were approved by the Board of Directors on 17 May 2017 were prepared on a voluntary basis in connection with the planned Bond Offering of the Company to institutional investors outside the United States of America in offshore transactions in reliance upon Regulation S under the Securities Act and for other corporate purposes.

The consolidated financial statements were audited by Deloitte & Touche SpA, who was appointed as independent auditor of the Company and its most significant subsidiaries.

2 Accounting policies

This note provides a list of the significant accounting policies adopted in the preparation of these consolidated financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the Group consisting of Tea S.p.A. and its subsidiaries.

2.1 Basis of Preparation The restated IFRS consolidated financial statements as of and for the years ended 31 December 2016 (“ Consolidated Financial Statements ”), approved by the Company’s Board of Directors on May 17, 2017, have been prepared on a going concern basis. The approach adopted by the Group for the management of financial risks is discussed in note 3 “Management of financial risks” below.

These Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“ IFRS ”). The designation IFRS also includes International Accounting Standards (“IAS”) as well as all the interpretations of the International Financial Reporting Interpretations Committee (“IFRIC” and “SIC”).

The Consolidated Financial Statements have been prepared and presented in Euro. Unless otherwise indicated, all amounts included in this document are stated in thousands of Euro.

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Financial statement formats and related classification criteria adopted by the Group, in accordance with IAS 1 – Presentation of Financial Statements, are as follows:

• the consolidated statement of financial position classifies assets and liabilities using the “current/non-current” criterion; • the consolidated income statement classifies operating costs by nature; • the consolidated statement of comprehensive income includes income and costs not reported in the income statement for the year, as required or allowed by IFRS, such as gains/losses from cash flow hedges and remeasurement of employee benefit obligations; and • the consolidated statement of cash flows presents the cash flows generated by operating activities using the “indirect method”.

The Consolidated Financial Statements have been prepared under the historical cost convention, except with regard to the measurement of financial assets and liabilities, where application of the fair value criterion is required.

2.2 Principles of consolidation and equity accounting The entities included within the scope of consolidation as of 31 December 2016 and 2015 and 1 January 2015 are listed in appendix 1.

(i) Subsidiaries Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The acquisition method of accounting is used to account for business combinations by the Group (refer to note 5).

Intercompany transactions, balances and unrealized gains on transactions between Group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income statement, statement of other comprehensive income, statement of changes in equity and statement of financial position respectively.

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(ii) Associates Associates are all entities over which the Group has significant influence but not control or joint control. This is generally the case where the Group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting, after initially being recognized at cost.

Under the equity method of accounting, the investments are initially recognized at cost and adjusted thereafter to recognize the Group’s share of the post-acquisition profits or losses of the investee in profit or loss, and the Group’s share of movements in other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates are recognized as a reduction in the carrying amount of the investment.

When the Group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the other entity.

Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in these entities. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of equity accounted investees have been changed where necessary to ensure consistency with the policies adopted by the Group.

The carrying amount of equity-accounted investments is tested for impairment in accordance with the policy described in note 2.3(xv) Impairment of assets.

(iii) Changes in ownership interests The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognized in a separate reserve within equity attributable to owners of the Company.

When the Group ceases to consolidate or equity account for an investment because of a loss of control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognized in profit or loss. This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to the income statement.

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If the ownership interest in an associate is reduced significant influence is retained, only a proportionate share of the amounts previously recognized in other comprehensive income are reclassified to the income statement where appropriate.

(iv) Business combinations The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the:

• fair values of the assets transferred • liabilities incurred to the former owners of the acquired business • equity interests issued by the Group • fair value of any asset or liability resulting from a contingent consideration arrangement, and • fair value of any pre-existing equity interest in the subsidiary.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognizes any non-controlling interest in the acquired entity at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets.

Acquisition-related costs are expensed as incurred.

The excess of the (a) consideration transferred, (b) amount of any non-controlling interest in the acquired entity, and (c) acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognized directly in profit or loss as a bargain purchase.

2.3 Other accounting policies A brief description is provided below of the accounting policies and principles adopted in preparing the Consolidated Financial Statements

(i) Foreign currency translations Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The Consolidated Financial Statements are presented in Euro, which is the Company’s functional and presentation currency.

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Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognized in profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges.

(ii) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of discounts and tariff adjustments. The Group recognizes revenue from the sale of goods when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and risks and rewards of ownership of the goods were transferred to the buyer. The Group recognizes revenue from services when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity the stage of completion of the transaction at the reporting date can be measured reliably. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

(iii) Government grants Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Grants related to assets are recognized as a reduction of tangible assets and systematically taken as a reduction of depreciation over the useful life of the asset to which they refer.

(iv) Income tax The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in Italy and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

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Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.

The Group recognizes deferred tax liabilities associated with the existence of a subsidiary’s undistributed profits, except when it is able to control the timing of the reversal of the temporary difference; and it is probable that this temporary difference will not reverse in the foreseeable future. The Group recognizes deferred tax assets associated with the deductible temporary differences on investments in subsidiaries only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.

Deferred tax assets are recognized only if it is probable that future taxable amounts will be available to utilize those temporary differences and losses.

(v) Leases Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the lease’s inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in current or non current borrowings. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the asset’s useful life or the lease term if there is no reasonable certainty that the group will obtain ownership at the end of the lease term.

Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease.

Lease income from operating leases where the Group is a lessor is recognized in income on a straight- line basis over the lease term. The respective leased assets are included in the balance sheet based on their nature.

Lease in which a significant portion of the risks and rewards of ownership are transferred to another entity where the Group is a lessor, the interest income is recognized using the amortized cost as part of finance income.

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(vi) Cash and cash equivalents Cash and cash equivalents include cash on hand, demand deposits with financial institutions, other short-term and highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(vii) Trade receivables Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment.

(viii) Financial instruments Derivative financial instruments are used for economic hedging purposes, in order to reduce commodity risks. In accordance with IAS 39, derivative financial instruments qualify for hedge accounting only when at the inception of the hedge there is formal designation and documentation of the hedging relationship, the hedge is expected to be highly effective, its effectiveness can be reliably measured and it is highly effective throughout the financial reporting periods for which it is designated.

All derivative financial instruments are measured at fair value.

When derivative financial instruments qualify for hedge accounting, the following accounting treatments apply:

Cash flow hedges - Where a derivative financial instrument is designated as a hedge of the exposure to variability in future cash flows of a recognized asset or liability or a highly probable forecasted transaction and could affect the consolidated income statement, the effective portion of any gain or loss on the derivative financial instrument is recognized directly in other comprehensive income/(loss). The cumulative gain or loss is reclassified from other comprehensive income/(loss) to the consolidated income statement at the same time as the economic effect arising from the hedged item affects the consolidated income statement. The gain or loss associated with a hedge or part of a hedge that has become ineffective is recognized in the consolidated income statement immediately within finance income/(expense). When a hedging instrument or hedge relationship is terminated but the hedged transaction is still expected to occur, the cumulative gain or loss realized to the point of termination remains in other comprehensive income/(loss) and is recognized in the consolidated income statement at the same time as the underlying transaction occurs. If the hedged transaction is no longer probable, the cumulative unrealized gain or loss held in other comprehensive income/(loss) is recognized in the consolidated income statement immediately.

The Group did not use fair value hedges or hedges of a net investment in the period covered by these Consolidated Financial Statements.

If hedge accounting cannot be applied, the gains or losses from the fair value measurement of derivative financial instruments are recognized immediately in the consolidated income statement within net finance income/(expenses).

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Equity investments are measure at fair value through profit and loss. Equity investments whose fair value cannot be determined reliably, are measured at acquisition cost. Assessments are made regularly as to whether there is any objective evidence that a financial asset may be impaired. If any such evidence exists, an impairment loss is recorded in the consolidated income statement for the period within finance expense.

(ix) Inventories Raw materials and stores, work in progress and finished goods

Raw materials and work in progress are stated at the lower of cost and net realizable value. Cost comprises direct materials and direct labor. Costs are assigned to individual items of inventory on the basis of weighted average costs. Costs of purchased inventory are determined after deducting rebates and discounts. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

(x) Non current assets (or disposal groups) held for sale and discontinued operations Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell.

An impairment loss is recognized for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognized for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognized. A gain or loss not previously recognized by the date of the sale of the non- current asset (or disposal group) is recognized at the date of derecognition.

Non-current assets (including those that are part of a disposal group) are not depreciated or amortized while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognized.

Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the balance sheet. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the balance sheet.

(xi) Property, plant and equipment Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component

14 of 64 Tea Group accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Tangible assets are amortized on straight line basis over their useful life as follows:

Useful life in Class of tangible assets percentage

Buildings 3% Plants and machinery 2% - 12.5% Industrial and commercial equipment 10%-20% Other tangible assets 2% - 25%

(xii) Service concession arrangements The Group applies IFRIC 12 to agreements between public and private sectors related to integrated water services, public lighting, gas distribution and funeral services. In particular, should the grantor control the infrastructure by regulating and controlling the characteristics of the services supplied and the applicable prices, as well as by maintaining a residual interest in the activity, the operator will purchase either the right to use said infrastructure, or the financial asset, or both, based on the agreements made. Therefore, the operators that are included in the above cases cannot recognize the assets dedicated to the supply of the service as property, plant and equipment in the consolidated statement of financial position under tangible assets, regardless of the acknowledgement of ownership in favor of the same operators included in the service concession arrangements.

In particular, the operator purchases a financial asset to the extent that it has an unconditioned contractual right to payment or another financial asset from, or upon instruction of, the grantor with reference to the building services. The purchased financial asset is subject to provisions set forth in IAS 32, IAS 39 and IFRS 7.

The operator purchases an intangible asset to the extent that it has a right to receive payments from users of the public service. The right to receive payments from users is not an unconditional right to receive payments as the amounts depend on how much the public service is used. The intangible asset recognized is subject to the provisions of IAS 38.

Public lighting concessions are considered a financial assets while all other concession arrangements are classified as intangible assets (integrated water services, gas distribution and funeral services).

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With reference to the grants received on non-current assets, included in the application of IFRIC 12, these grants are recorded as a reduction of the non-current assets.

(xiii) Intangible assets Goodwill

Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortized but it is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. The units or groups of units are identified at the lowest level at which goodwill is monitored for internal management purposes.

Amortization methods and periods

Intangible assets are amortized on straight line basis over their useful life as follows:

Useful life in Class of intangible assets percentage

Concessions Concession duration Licenses 20% Other intangible assets 9%-20%

(xiv) Service concessions The concessions mainly comprise the rights associated with networks and other facilities related to gas distribution and integrated water cycle services managed by the Group and are instrumental to the management of these services.

These concessions were listed as intangible assets even before the IFRIC 12 - Agreements for concession services interpretation was first applied.

(xv) Impairment of assets Goodwill and intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The

16 of 64 Tea Group recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

(xvi) Trade payables and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year, which are unpaid. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognized initially at their fair value and subsequently measured at amortized cost using the effective interest method.

(xvii) Borrowings Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in profit or loss over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

(xviii) Provisions Provisions for legal claims, service warranties and make good obligations are recognized when the group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognized for future operating losses.

Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognized as interest expense.

(xix) Employee benefits Short-term obligations

Liabilities for wages and salaries, including bonuses that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognized in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.

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Post employment obligations

Italian employee severance indemnity “ Trattamento di fine rapporto " or “TFR” relates to the amounts that employees in Italy are entitled to receive when they leave the company and is calculated based on the period of employment and the taxable earnings of each employee. Under certain conditions the entitlement may be partially advanced to an employee during the employee’s working life.

The Italian legislation regarding this scheme was amended in 2006. Under these amendments, companies with at least 50 employees are obliged to transfer the TFR to the “Treasury fund” managed by the Italian state-owned social security body (“INPS”) or to supplementary pension funds. Prior to the amendments, accruing TFR for employees of all Italian companies could be managed by the company itself. Consequently, the Italian companies’ obligation to INPS and the contributions to supplementary pension funds take the form, under IAS 19 revised, of “Defined contribution plans” whereas the amounts recorded in the provision for employee severance pay retain the nature of “Defined benefit plans”. Accordingly, the provision for employee severance indemnity in Italy consists of the residual obligation for TFR until 31 December 2006. This is an unfunded defined benefit plan as the benefits have already been almost entirely earned, with the sole exception of future revaluations. Since 2007 the scheme has been classified as a defined contribution plan, and the Group recognizes the associated cost, being the required contributions to the pension funds, over the period in which the employee renders service.

The liability recognized for defined benefit plans corresponds to the present value of the obligation at the reporting date. The obligations under defined benefit plans are determined each year by an independent actuary, using the projected unit credit method. The present value of defined benefit plans is determined by discounting the future cash flows using an interest rate based on that of high-quality corporate bonds issued in Euro that takes into account the duration of the pension plan concerned. The actuarial gains and losses deriving from adjustments in the total liability and the effect of changes in the actuarial assumptions are recognized in other comprehensive income.

(xx) Equity Ordinary shares are classified as equity.

Where any Group company purchases the company’s equity instruments, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the owners of TEA Group as treasury shares until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the owners of TEA Group.

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(xxi) Dividends Dividends payable by the Group are reported as a change in equity in the period in which they are approved by shareholders.

(xxii) Segment reporting The Group has determined that it has one reportable segment based on the information reviewed by its Chief Operating Decision Maker in making decisions regarding allocation of resources and to assess performance.

(xxiii) Rounding of amounts All amounts disclosed in the Consolidated Financial Statements and notes have been rounded off to the nearest thousand currency units unless otherwise stated.

2.4 Recently-Issued Accounting Standards The following standards and interpretations apply for the first time to financial reporting periods commencing on or after 1 January 2016:

• The Group adopted the amendments to IFRS 11 - Joint Arrangements, which clarify the accounting for acquisitions of interests in a joint operation that constitutes a business. There was no effect from the adoption of these amendments. • The Group adopted the amendments to IAS 16 - Property, Plant and Equipment and to IAS 38 - Intangible Assets, which clarify that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. The amendments also clarify that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. This presumption, however, can be rebutted in certain limited circumstances. There was no effect from the adoption of these amendments. • The Group adopted the Annual Improvements to IFRSs 2012-2014 Cycle, a series of amendments to IFRS in response to issues raised mainly on, among others, the changes of method of disposal in IFRS 5 - Non-Current Assets Held for Sale and Discontinued Operations, on servicing contracts in IFRS 7 - Financial Instruments: Disclosures, and on the discount rate determination in IAS 19 - Employee Benefits. There was no effect from the adoption of these amendments. • The Group adopted the amendments to IAS 1 - Presentation of Financial Statements as part of its major initiative to improve presentation and disclosure in financial reports. The amendments make clear that materiality applies to the whole of financial statements and that the inclusion of immaterial information can inhibit the usefulness of financial disclosures. Furthermore, the amendments clarify that companies should use professional judgment in determining where and

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in what order information is presented in the financial disclosures. There was no effect from the adoption of these amendments.

The following standards and interpretations issued by the International Accounting Standards Board (“IASB”) that will have mandatory application in 2017 or subsequent years are listed below:

In May 2014, the IASB issued IFRS 15 - Revenue from Contracts with Customers. The standard requires a company to recognize revenue upon transfer of control of goods or services to a customer at an amount that reflects the consideration it expects to receive. This new revenue recognition model defines a five step process to achieve this objective. The updated guidance also requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. In April 2016, the IASB issued amendments to the standard which do not change the underlying principles of the standard, but clarify how those principles should be applied. The amendments clarify how to identify a performance obligation in a contract, determine whether a company is a principal or an agent and determine whether the revenue from granting a license should be recognized at a point in time or over time. The amendments also provide two additional reliefs to reduce cost and complexity. The standard and amendments are effective for annual periods beginning on or after 1 January 2018, with earlier adoption permitted. The Group is currently quantifying the impact of adoption, on its Consolidated Financial Statements from the adoption of this standard and related amendments.

In July 2014 the IASB issued IFRS 9 - Financial Instruments. The improvements introduced by the new standard includes a logical approach for classification and measurement of financial instruments driven by cash flow characteristics and the business model in which an asset is held, a single “expected loss” impairment model for financial assets and a substantially reformed approach for hedge accounting. The standard is effective, retrospectively with limited exceptions, for annual periods beginning on or after 1 January 2018 with earlier application permitted. The Group is currently evaluating the method of implementation and impact of adoption on its Consolidated Financial Statements.

In January 2016, the IASB issued IFRS 16 - Leases which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract and replaces the previous leases standard, IAS 17 - Leases. IFRS 16, which is not applicable to service contracts, but only applicable to leases or lease components of a contract, defines a lease as a contract that conveys to the customer (lessee) the right to use an asset for a period of time in exchange for consideration. IFRS 16 eliminates the classification of leases for the lessee as either operating leases or finance leases as required by IAS 17 and, instead, introduces a single lessee accounting model whereby a lessee is required to recognize assets and liabilities for all leases with a term that is greater than 12 months, unless the underlying asset is of low value, and to recognize depreciation of leases assets separately from interest on lease liabilities in the income statement. As IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17, a lessor will continue to classify its leases as operating leases

20 of 64 Tea Group or finance leases and to account for those two types of leases differently. IFRS 16 is effective from 1 January 2019 with early adoption allowed only if IFRS 15 - Revenue from Contracts with Customers is also applied. The Group is currently evaluating the method of implementation and impact of adoption on its Consolidated Financial Statements.

In January 2016, the IASB issued amendments to IAS 12 - Income Taxes. The amendments clarify how to account for deferred tax assets related to debt instruments measured at fair value. Specifically, the amendments clarify the requirements on recognition of deferred tax assets for unrealized losses in order to address diversity in practice. The amendments are effective for annual periods beginning on or after 1 January 2017 with early application permitted. The Group does not expect a material impact on its Consolidated Financial Statements from the adoption of these amendments.

In January 2016, the IASB issued amendments to IAS 7 - Statement of Cash Flows, which will require companies to provide information about changes in their financing liabilities. The amendments are aimed at improving disclosures so that users of financial statements are better able to understand the changes in a company’s debt, including changes from cash flows and non-cash changes. The amendments are effective for annual periods beginning on or after 1 January 2017 with early application permitted. The Group does not expect a material impact on its Consolidated Financial Statements from the adoption of these amendments.

In June 2016, the IASB issued amendments to IFRS 2 - Share-Based Payment, which provide requirements on the accounting for (i) the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments; (ii) share-based payment transactions with a net settlement feature for withholding tax obligations; and (iii) a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity- settled. The amendments are effective for annual periods beginning on or after 1 January 2018, with early application is permitted. The Group does not expect an impact on its Consolidated Financial Statements from the adoption of these amendments.

In December 2016, the IASB issued Annual Improvements to IFRSs 2014 - 2016 Cycle, which has amendments to three Standards: IFRS 12 - Disclosure of Interests in Other Entities (effective date of 1 January 2017), IFRS 1- First-time Adoption of International Financial Reporting Standards (effective date of 1 January 2018) and IAS 28 - Investments in Associates and Joint Ventures (effective date of 1 January 2018). The amendments clarify, correct or remove redundant wording in the related IFRS Standard and are not expected to have a material impact to the Consolidated Financial Statements of the Group or disclosures upon adoption of the amendments.

In December 2016, the IASB issued IFRIC Interpretation 22 - Foreign Currency Transactions and Advance Consideration which addresses the exchange rate to use in transactions that involve advance consideration paid or received in a foreign currency. The interpretation is effective 1 January 2018. The

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Group is currently evaluating the method of implementation and impact of adoption on its Financial Statements.

3 Management of Financial Risks

The activities of the Group are exposed to the following risks: market risk (including in particular, commodity risk and interest rate risk), credit risk, liquidity risk, and capital risk.

The Group’s risk management strategy focuses on minimizing potential adverse effects on the Group’s financial performance. Certain types of risk are mitigated by using derivative instruments. Risk management is centralized with Group management who identifies, assesses and hedges financial risks in close cooperation with the Group’s operating units. Group management provides instructions for monitoring the management of risks, as well as instructions for specific areas concerning commodity risk, and the use of derivative and non-derivative instruments.

Market risk

The Group is exposed to market risks associated with commodities and interest rates.

Commodity risk

The Group is exposed to commodity price risk as a results of its commodity trading activity (mainly natural gas and electricity) because the value of its trading assets and liabilities is impacted by changes in market prices for commodities directly or through indexing formulas.

In 2016, the carrying value of commodity derivative contracts entered into as an energy portfolio hedge corresponds to a total notional amount of 101.2 GWh (38.9 GWh 2015). The fair value of agreements as of 31 December 2016 and 2015 amounts to Euro 618 thousand (net assets) and Euro 32 thousand (net liabilities), respectively.

The carrying value of commodity derivative contracts entered into as a gas portfolio hedge corresponds to a total notional amount of 38.9 (32.7 GWh 2015). The fair value of agreements as of 31 December 2016 and 2015 amounts to Euro 109 thousand (net assets) and Euro116 thousand (net liabilities), respectively.

The Group procures commodities through a mixture of operations involving trading of physical and financial contracts on the electrical energy market and financial contracts directly on the underlying commodities.

It is Group policy to use derivatives only for economic hedging purposes and not as speculative investments.

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Derivatives are designated as hedging instruments and its relationship to a recognized asset or liability is measured at fair value, determined on the basis of market values or, if unavailable, according to an internal measurement technique.

Interest rate risk

In the normal course of its operations, the Group borrows to finance its operations (medium-long term borrowings and credit lines). Any change in market interest rates has an impact on the financial costs associated with different types of financing, affecting then both the Group's cash flows and finance expense. The Group’s policy is to manage the interest rate risk on its long term borrowings ensuring a mixed exposure to different transactions with fixed and floating interest rate financial instruments.

The Group’s exposure to variable interest rate risk represents 98.5% and 99.3% of total borrowings as of 31 December 2016 and 2015, respectively. The remaining borrowings are at fixed rates. An increase or reduction of 10 basis points in the interest rates of the borrowings would result in an increase/decrease of finance expense of Euro 72 thousand in 2016 (Euro 78 thousand in 2015).

Considering the low interest rate environment and the financial indebtedness profile of the Group, management decided not to use any hedging financial instrument.

Exchange rate risk

The Group is not significantly exposed to exchange rate risk.

Credit risk

The Group’s credit risk represents the exposure of the group to potential losses due to counterparty inability to discharge the obligations undertaken. This exposure relates almost exclusively to trade receivables deriving from the sale of electricity, district heating, gas, the provision of water and waste services.

The credit risk is considered low because receivables exposure is spread over a large number of counterparties, belonging to non-uniform customer categories (retail, industries, corporates and public entities). In ordinary course of the business, the Group faces the risk that receivables may not be paid on the due date leading then to an increase in their age and in insolvency. This risk is strongly related to the current unfavorable economic and financial situation in Italy.

In order to mitigate the credit risk associated with its counterparties, Group management constantly reviews its credit exposure and monitors the collection of receivables on the contractually agreed due

23 of 64 Tea Group dates and introduced new recovery methods for managing legal disputes. Creditworthiness assessment differs according to the different categories of customers and types of services provided.

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The assets are reported gross of impairment losses calculated on the basis of the default risk of the counterparties, taking into account the information available on solvency as well as historical data.

As of December 31, (in Euro thousands) 2016 2015 Not yet overdue 47,148 41,848 Overdue 30 - 90 days 15,705 16,303 Overdue 91 - 180 days 5,219 3,072 Overdue by more than 180 days 35,419 35,965 Provision for doubtful receivables (19,592) (18,724) Total 83,900 78,465

Liquidity risk

Liquidity risk takes place when the Group does not have enough financial resources available to meet the company financial obligations and commitments when due. In this case, the Group faces significant movements in its liquidity position mainly related to both the seasonal nature of the businesses and to the margin cash arrangements of certain wholesale commodity contracts.

The Group’s management of liquidity risk in the ordinary course of business involves maintaining a sufficient level of cash to maximize the efficiency of management of financial resources and ensuring the availability of funds through adequate lines of credit.

The Group lines of credit can be considered as more than sufficient to meet its future financial needs.

In particular, as of 31 December 2016 the amount related to unused lines of credit corresponded to approximately Euro 162 million.

Cash flows required to settle other financial liabilities, other than those to lenders, do not differ significantly from the recognized carrying amount. In this regard, it is noted that: • various sources of finance are available from different banks; • there is no significant concentration of liquidity risk, either in relation to financial assets or in relation to the sources of finance due to short-term period

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The following tables set forth the expected future cash flows related to financial liabilities outstanding as of 31 December 2016 and 2015.

As of 31 December 2016 Carrying Between 1 and Over 5 Within 12 months (in Euro thousands) amount 5 years years Long term financing 71,558 13,252 19,322 39,848 Lease liability 254 79 185 - Bank overdrafts 1,565 1,565 - - Trade payables 81,894 81,894 - - Client deposits 1,091 1,091 - - Equalisation funds 1,312 1,312 - - Liability due to parent 863 863 - - Liability due to associates 118 118 - - Withholding in connection with public television services 212 212 - - Other short term liabilities 1,228 1,228 - - Total 160,095 101,614 19,507 39,848

As of 31 December 2015 Carrying Between 1 and Over 5 Within 12 months (in Euro thousands) amount 5 years years Long term financing 76,434 13,506 29,670 36,258 Lease liability 324 79 264 - Bank overdrafts 1,417 1,417 - - Trade payables 69,952 69,952 - - Derivative financial instruments 177 177 - - Client deposits 1,013 1,013 - - Equalisation funds 1,381 1,381 - - Liability due to parent 863 863 - - Other short term liabilities 646 646 - - Total 152,207 89,034 29,934 36,258

As of 1 January 2015 Carrying Between 1 and Over 5 Within 12 months (in Euro thousands) amount 5 years years Long term financing 79,101 11,111 35,919 35,022 Current bank borrowing 3,000 3,000 - - Bank overdrafts 278 278 - - Trade payables 69,657 69,657 - - Client deposits 639 639 - - Equalisation funds 1,140 1,140 - - Liability due to parent 863 863 - - Other short term liabilities 586 586 - - Total 155,264 87,274 35,919 35,022

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Capital risk

Group management set up procedures to mitigate capital risk aimed to ensure business continuity so to guarantee returns and benefits to shareholders. The Group aims to maintain an optimal capital structure so to reduce the indebtedness level.

Measurement of financial instruments

The following tables show financial instruments recognized on the face of the consolidated statement of financial position and their measurement:

Financial Cash flow Non As of 31 December 2016 instruments at Total Loans and hedge financial fair value receivables derivative assets / through profit instruments liabilities (in Euro thousands) and loss Assets

Current trade receivables 83,900 - - - 83,900 Other current and non current assets 27,677 15,393 726 10,717 54,513 Cash and cash equivalents - 4,334 - - 4,334 Total assets 111,577 19,727 726 10,717 142,747 Liabilities

Current and non current borrowings 73,377 - - - 73,377 Trade payables 81,894 - - - 81,894 Other current and non current liabilities 3,733 - - 11,884 15,617 Total liabilities 159,004 - - 11,884 170,888

Financial Cash flow Non instruments at As of 31 December 2015 Loans and hedge financial fair value Total receivables derivative assets / through profit instruments liabilities (in Euro thousands) and loss Assets

Current trade receivables 78,465 - - - 78,465 Other current and non current assets 17,259 17,136 30 13,204 47,629 Cash and cash equivalents - 7,709 - - 7,709 Total assets 95,724 24,845 30 13,204 133,803 Liabilities

Current and non current borrowings 78,175 - - - 78,175 Trade payables 69,952 - - - 69,952 Other current and non current liabilities 2,890 - 177 15,941 19,008 Total liabilities 151,017 - 177 15,941 167,135

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Financial Cash flow Non As of 1 January 2015 instruments at Loans and hedge financial fair value Total receivables derivative assets / through profit (in Euro thousands) instruments liabilities and loss Assets

Current trade receivables 84,726 - - - 84,726 Other current and non current assets 17,092 20,765 - 14,839 52,696 Cash and cash equivalents - 8,201 - - 8,201 Total assets 101,818 28,966 - 14,839 145,623 Liabilities

Current and non current borrowings 82,379 - - - 82,379 Trade payables 69,657 - - - 69,657 Other current and non current liabilities 2,589 - - 16,232 18,821 Total liabilities 154,625 - - 16,232 170,857

Fair value

Fair value is determined as the sum of estimated future cash flows in relation to assets or liabilities, including the related financial income or expense discounted at year end. The present value of future flows is determined by applying the curve of forward interest rates at the reporting date.

Fair value hierarchy

The fair value of financial instruments listed in an active market is based on their market prices at the reporting date. The fair value of financial instruments not listed in an active market is determined using measurement techniques based on a series of methods and assumptions linked to market conditions at the reporting date. The various levels were defined as shown below:

Level 1: Fair value is determined with reference to the (unadjusted) listed prices in active markets of identical financial instruments. Level 2: Fair value is determined using measurement techniques based on inputs observable in active markets. Level 3: Fair value is determined using measurement techniques based on inputs that are not observable.

In 2016 and 2015, there were no transfers between levels in the fair value hierarchy.

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The following tables show financial instruments recognized at fair value, based on the measurement technique used:

Level 1 Level 2 Level 3 Total (in Euro thousands)

As of 31 December 2016

Other current assets - 726 - 726 Cash and cash equivalents 4,334 - - 4,334 Other non current assets - - 15,393 15,393 Total 4,334 726 15,393 20,453 As of 31 December 2015

Other current assets - 30 - 30 Cash and cash equivalents 7,709 - - 7,709 Other non current assets - - 17,136 17,136 Other current liabilities - (177) - (177) Total 7,709 (147) 17,136 24,698 As of 1 January 2015

Cash and cash equivalents 8,201 - - 8,201 Other non current assets - - 20,765 20,765 Total 8,201 - 20,765 28,966

The fair value of other current and non current assets and current liabilities is related to derivative financial instruments and equity investments, which are measured by taking into consideration market parameters at the balance sheet date, using valuation techniques widely accepted in the financial business environment.

In particular, the fair value of commodity forward contracts is determined by taking the prevailing commodity forward curves and interest rates at the balance sheet date. The fair value of non-listed equity investments is determined using the expected future cash flow and discounted using a base WACC.

The par value of cash and cash equivalents usually approximates fair value due to the short maturity of these instruments, which consist primarily of bank current accounts.

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The following table provides a reconciliation from the opening balances to the closing balances for fair value measurements categorized in level 3 in 2016 and 2015:

Level 3 (in Euro thousands)

As of 1 January 2015 20,765 Gain (loss) recognized in consolidated income statement 1,023 Issue /(settlement) (4,652) As of 31 December 2015 17,136 Gain (loss) recognized in consolidated income statement 1,173 Issue /(settlement) (2,916) As of 31 December 2016 15,393

4 Use and Estimate assumptions

The preparation of financial statements requires that management apply accounting standards and methods, which in certain cases depend on subjective measurements and estimates based on past experience as well as assumptions which, on a case-by-case basis, are considered reasonable and realistic in the specific circumstances. The use of such estimates and assumptions influences the amounts reported in the statement of financial position, the income statement, the statement of comprehensive income, the statement of cash flows and the explanatory notes. Actual results for such items may differ from the amounts reported in the financial statements due to the uncertainties that characterize the assumptions and conditions on which such estimates were made.

The following paragraphs provide brief descriptions of those areas, which, more than others, require subjective judgment on the part of management when making estimates, and for which a change in the conditions underlying the assumptions used could have a significant impact on the financial information reported.

5 Business Combinations

This section summarizes the principal business combinations that occurred during the years under examination.

2015 Acquisition of ASEP - water and gas branches

As of January 30, 2015, the Company acquired A.SE.P branches related to water integrated cycle services in the Municipality of Porto Mantovano and San Giorgio and gas distribution services in the Municipality of Porto Mantovano. Particularly, the Group acquired 10,277 new clients and an increase in sales volume of 1.5 million of cubic meters of water. The consideration paid was based on an independent appraisal.

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Fair (in Euro thousands) value Intangible assets 2,640 Inventory 96 Current trade receivables 63 Other assets 289 Employee benefits (238) Other current liabilities (11) Net identifiable assets 2,839

Consideration 3,678 Goodwill 839

2015 Acquisition of Global Funeral Services

At the end of 2015, the Group has acquired the whole investment in Global Funeral Services (GFS) Srl becoming single shareholder of the company (previously held 30% of the shares) for an amount of Euro 325 thousand.

2016 Acquisition of AqA

The company was registered on January 2016 following the partial spin-off of the water and sewage business of Indecast S.r.l. with the constitution of a new company called “Acque Castiglionesi S.r.l.” wholly owned by the Municipality of Castiglione delle Stiviere. On February 29, 2016 Tea S.p.A. shareholders’ general meeting approved a share issue of 5,640 ordinary shares of Tea SpA reserved for the Municipality of Castiglione delle Stiviere and to be subscribed by the contribution in kind at fair value based on an external appraisal of Acque Castiglionesi S.r.l. afterwards, the name of the company was changed into AqA Mantova Srl.

Fair value (in Euro thousands) Intangible assets 6,693 Inventory 155 Other assets 360 Cash and cash equivalents 10 Borrowings (3,270) Employee benefits (183) Other current liabilities (49) Net identifiable assets 3,716

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6 Revenue

The Group has determined that it has one reportable segment based on the information reviewed by its Chief Operating Decision Maker, defined as the Board of Directors of the Company, in making decisions regarding allocation of resources and to assess performance.

The following table sets for the a breakdown of revenue by nature of activity:

Year ended 31 December (in Euro thousands) 2016 2015 Energy 116,513 124,128 Waste management 69,379 69,669 Integrated water services 45,051 40,520 Infrastructure 17,115 15,568 Public lighting 11,710 8,622 Funeral services 2,760 1,758 Total 262,528 260,265

7 Raw materials and consumables

The following table sets forth a breakdown of Raw materials and consumables income:

Year ended 31 December (in Euro thousands) 2016 2015 Gas 25,029 40,853 Energy 22,604 23,742 Heat 2,549 2,633 Fuel 1,218 1,384 Other raw materials and consumables 9,919 7,745 Accrual for obsolete inventories 40 40 Total 61,359 76,397

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8 Service costs

The following table sets forth a breakdown of Service costs:

Year ended 31 December (in Euro thousands) 2016 2015 Transport of electricity 36,983 33,652 Disposal and transport of sludge, slag, ash and waste 24,579 24,504 Expenses due to municipalities 9,544 9,588 Maintenance fees 8,469 7,759 Electricity dispatch services 8,029 4,525 Contract work 6,384 6,052 Gas distribution 5,194 4,077 Public lighting service agreement 2,901 2,823 Technical and administrative services 3,490 2,823 Advertising and commercial expenses 1,829 1,708 Costs of leased assets 1,214 1,320 Insurance costs 1,223 1,148 Printing costs and postal expenses 1,085 1,042 Bank charges 791 652 Cleaning, transport and porterage 707 684 Meter readings 382 295 Other service costs 16,578 13,918 Total 129,382 116,570

9 Personnel costs

The following table sets forth a breakdown of personnel costs:

Year ended 31 December (in Euro thousands) 2016 2015 Wages and salaries 19,122 17,121 Social security contributions 6,510 6,481 Severance payment 1,404 1,322 Other personnel expense 60 64 Total 27,096 24,988

The following table shows the average number of employees for the years ended 31 December 2016 and the number of employees as of 31 December 2015:

As of 31 December 2016 2015 Managers 11 9 Middle Management 16 16 Office Workers 280 278 Factory Workers 284 269 Total number of employees 591 572

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10 Other operating expenses

The following table sets forth a breakdown of other operating costs:

Year ended 31 December (in Euro thousands) 2016 2015 Accruals for provisions 3,788 2,458 Doubtful receivable accrual 4,048 4,870 Waste management compensation 894 905 Taxes and duties 716 441 Other miscellaneous expenses 993 1,136 Total 10,439 9,810

11 Share of profit (loss) of equity investment

The following table sets forth the movement of investments measured using equity method:

(in Euro thousands) Associates As of 1 January 2015 5,769 Share of profit (loss) of equity investment 806 Dividend distribution (400) As of 31 December 2015 6,175 Share of profit (loss) of equity investment 63 Dividend distribution (72) Capital contribution 258 As of 31 December 2016 6,424

The following table sets forth the assets, liabilities, revenues and net profit of investments measured using equity method:

Net profit (in Euro thousands) % holding Asset Liabilities Revenues (loss)

31 December 2016 Blugas Infrastrutture Srl 28.7% 34,877 20,122 2,132 133 Unitea Srl 50.0% 15,769 13,068 8,503 50

31 December 2015 Blugas Infrastrutture Srl 28.7% 32,615 17,992 1,086 (448) Unitea Srl 50.0% 14,185 11,535 9,800 1,790 Tnet Servizi Srl 25.0% 4,217 3,848 647 (287) Biociclo Srl 24.0% 4,751 2,414 2,480 465

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12 Amortization, Depreciation and Impairment

The following table sets forth a breakdown of Amortization, Depreciation and Impairment:

Year ended 31 December (in Euro thousands) 2016 2015 Amortization 6,459 5,577 Depreciation 11,263 11,696 Impairment of intangible assets 96 - Total 17,818 17,273

13 Finance income and costs

The following table sets forth a breakdown of finance income and costs: Year ended 31 December (in Euro thousands) 2016 2015 Change in fair value of investments 1,173 1,023 Interest income on public lightening receivable 75 33 Other financial income 807 886 Finance income 2,055 1,942 Discounting of provisions 773 823 Interest expense on employee benefits 124 86 Finance expense on borrowings 677 1,116 Other finance expense 15 26 Finance expense 1,589 2,051 Net finance expenses (466) 109

14 Income tax expenses

The following table sets forth a breakdown of income tax expenses:

Year ended 31 December (in Euro thousands) 2016 2015 Current year income tax 7,077 7,005 Deferred income tax (143) (95) Total 6,934 6,910

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The following table sets forth a reconciliation between the income tax expense recorded in the Consolidated Financial Statements and the theoretical tax charge, calculated on the basis of the theoretical tax rate:

Year ended 31 December (in Euro) 2016 2015

Theoretical income tax (27,5%) 6,041 5,398

IRAP 1,104 1,095 Changes in income tax rate 168 778 Other permanent differences (379) (361)

Effective income tax 6,934 6,910

Theoretical income tax has been calculated at a rate of 27.5 percent, which was the corporate income tax rate in Italy for each of the years ended 31 December 2016 and 2015. During 2015 a change in Italian tax law approved a reduction in the corporate income tax rate from 27.5 percent to 24.0 percent, effective from 2017. As a result, deferred tax assets and liabilities expected to reverse in and subsequent to 2017 have been adjusted to reflect the reduction in the corporate income tax rate.

In order to facilitate the understanding of the tax rate reconciliation presented above, income tax expense has been presented net of Italian Regional Income Tax (“IRAP”). IRAP is calculated on a measure of income defined by the Italian Civil Code as the difference between operating revenues and costs, before financial income and expense, and in particular before the cost of fixed-term employees, credit losses and any interest included in lease payments. IRAP is applied on the tax base at 3.9 percent for each of the years ended 31 December 2016 and 2015.

The analysis of deferred tax assets and deferred tax liabilities as of 31 December 2016 and 2015, is as follows:

As of 31 December (in Euro thousands) 2016 2015

Deferred tax assets To be recovered within 12 months 19 68 to be recovered beyond 12 months 9,368 8,819 9,387 8,887 Deferred tax liabilities To be recovered within 12 months 203 - to be recovered beyond 12 months 8,391 8,095 8,594 8,095 Net deferred tax assets 793 792

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The movements in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances, are as follows:

Deferred tax assets

Tangible and Financial Provisions TFR Other intangible instruments (in Euro thousands) assets Total As of 1 January 2015 1,133 7,557 263 196 37 9,186 Change in scope of consolidation - - - - 3 3 Recognized in the income statement (200) 158 (161) (23) (18) (244) Recognized in other comprehensive income - - 46 (104) - (58) As of 31 December 2015 933 7,715 148 69 22 8,887 Change in scope of consolidation - 29 - - - 29 Recognized in the income statement 339 185 (148) 20 (3) 393 Recognized in other comprehensive income - - - 78 - 78 As of 31 December 2016 1,272 7,929 - 167 19 9,387

Deferred tax liabilities

Tangible and Service Landfill Financial Associates Other intangible concessions waste instruments assets (in Euro thousands) Total As of 1 January 2015 37 16 7,951 - 393 37 8,434 Change in scope of consolidation ------Recognized in the income statement 22 843 (1,259) - 72 (17) (339) Recognized in other comprehensive income ------As of 31 December 2015 59 859 6,692 - 465 20 8,095 Change in scope of consolidation ------Recognized in the income statement 63 369 (100) (64) (3) (15) 250 Recognized in other comprehensive income - - - 249 - - 249 As of 31 December 2016 122 1,228 6,592 185 462 5 8,594

Deferred tax assets relate mainly to the provisions recorded for obsolescence, doubtful accounts and other charges that will only become deductible for tax purposes when the respective losses become certain. Deferred tax liabilities relate mainly to intangible assets and property, plant and equipment that have lower deductible values for tax purposes than the related carrying amounts.

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15 Intangible Assets

The following table sets forth the movements in intangible assets for the years ended 31 December 2016 and 2015:

Other intangible (in Euro thousands) Goodwill Licenses Concessions assets Total As of 1 January 2015 65 2,272 72,023 9,246 83,606 Of which: - historical cost 454 3,127 138,144 22,622 164,347 - accumulated depreciation (389) (855) (66,121) (13,376) (80,741) Additions - - 11,145 - 11,145 Change in scope of consolidation 839 - 2,640 157 3,636 Disposals - (154) - (404) (558) Amortization - (322) (3,918) (1,337) (5,577) As of 31 December 2015 904 1,796 81,890 7,662 92,252 Of which: - historical cost 1,293 2,973 152,346 22,394 179,006 - accumulated depreciation (389) (1,177) (70,456) (14,732) (86,754) Additions - - 15,785 1,250 17,035 Change in scope of consolidation - - 6,688 5 6,693 Disposals - (237) - (68) (305) Impairment - - - (96) (96) Amortization - (272) (4,884) (1,303) (6,459) As of 31 December 2016 904 1,287 99,479 7,450 109,120 Of which: - historical cost 1,293 2,609 174,819 23,756 202,477 - accumulated depreciation (389) (1,322) (75,340) (16,306) (93,357)

"Goodwill” mainly refers to the acquisition of A.SE.P gas and water branches and to the acquisition of LGH Energy brand.

"Concessions", amounting to Euro 99,479 thousand as of 31 December 2016, consists of the goods related to the activities of gas distribution, integrated water management and funeral services provided through contracts with the respective public bodies. These concession relationships and associated assets involved in carrying out the activities for which the Group holds the use rights, are accounted for by applying the intangible asset model as set forth by IFRIC interpretation 12.

"Other intangible assets", amounting to Euro 7,450 thousand as of 31 December 2016, essentially comprises investments in the new “Polo logistico” in Via Taliercio.

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As of 31 December 2016, goodwill amounted to Euro 904 thousand (Euro 904 thousand as of December 2015) and it is allocated to the following cash generating units as presented below:

Integrated water Energy Infrastructure Total (in Euro thousands) services As of 1 January 2015 65 - - 65 Acquisitions - 671 168 839 Impairments/reversals - - - - As of 31 December 2015 65 671 168 904 Acquisitions - - - - Impairments/reversals - - - - As of 31 December 2016 65 671 168 904

In accordance with IAS 36, goodwill is not amortized and is tested for impairment annually, or more frequently if facts or circumstances indicate that the asset may be impaired. Impairment testing is performed by comparing the carrying amount and the recoverable amount of the Cash Generating Unit (“CGU”). The recoverable amount of the CGU is the higher of its fair value less costs to sell and its value in use.

The assumption used in this process represent management’s best estimate for the period under consideration. The estimate of the value in use of CGU for purposes of performing the annual impairment test was based on the following assumptions:

• The expected future cash flow covering the period from 2017 through 2021 have been derived from the Group’s business plan. In particular, the estimate considers expected EBITDA adjusted to reflect the expected capital expenditures. These cash flows relate to the CGU in its condition when preparing the financial statements and exclude the estimate cash flows that might arise from restructuring plans or other structural changes. Volumes and sales mix used for estimating the future cash flows are based on assumptions that are considered reasonable and sustainable and represent the best estimate of expected conditions regarding market trends for the CGU over the period considered. • The expected future cash flow include a normalized terminal period used to estimate the residual value at the end of the concession or the results beyond the time period explicitly considered, which were calculated by using the specific medium/long-term growth rate for the sectors equal to 2.0 percent. • The expected future cash flow have been estimated in Euro and discounted using a WACC of 6.95 percent (7.03 percent in 2015). The WACC used reflects the current market assessment of the time value of money for the period being considered and the risks specific to the CGUs under consideration.

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The recoverable amount of the CGUs was higher than its carrying amounts. Furthermore, its historical profitability and its future earning prospects indicate that the carrying amount of the goodwill will continue to be recoverable.

16 Tangible assets

The following table sets forth the movements in tangible assets for the years ended 31 December 2016 and 2015.

Tangible assets mainly related to the landfill of Mariana Mantovana and to plants related to district heating, gas, water and generic plants not accounted for under IFRIC 12 – Service concession arrangements.

Plant and Land and Other tangible Waste disposal (in Euro thousands) equipment buildings assets Total As of 1 January 2015 46,992 19,116 25,596 9,362 101,066 Of which: - historical cost 85,980 27,044 50,011 19,138 182,173 - accumulated depreciation (38,988) (7,928) (24,415) (9,776) (81,107) Additions 8,597 7,415 5,555 2,740 24,307 Change in scope of consolidation 437 - - - 437 Disposals - (159) - (592) (751) Depreciation (6,461) (784) (2,885) (1,566) (11,696) As of 31 December 2015 49,565 25,588 28,266 9,944 113,363 Of which:

- historical cost 93,129 34,322 55,567 21,145 204,163 - accumulated depreciation (43,564) (8,734) (27,301) (11,201) (90,800) Additions 1,400 2,703 1,961 1,742 7,806 Disposals (905) - - (112) (1,017) Depreciation (7,022) (874) (1,521) (1,846) (11,263) As of 31 December 2016 43,038 27,417 28,706 9,728 108,889 Of which:

- historical cost 95,014 37,358 57,528 23,138 213,038 - accumulated depreciation (51,976) (9,941) (28,822) (13,410) (104,149)

The following table sets for a breakdown of internal costs capitalized during 2015 and 2016, mainly relating to investments in relation to service concession arrangements classified within intangible assets:

Year ended 31 December (in Euro thousands) 2016 2015 Materials and consumables 2,474 4,729 Services 12,359 9,161 Personnel expense 3,637 4,957 Total 18,470 18,847

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The following table sets forth a breakdown of assets under finance lease classified within other tangible assets:

As of 31 December As of 1 January

(in Euro thousands) 2016 2015 2015 Historical cost 337 337 - Accumulated depreciation (77) - - Net book value of finance lease asset 260 337 -

17 Current trade receivables

The following table sets forth a breakdown of current trade receivables:

As of 31 December As of 1 January (in Euro thousands) 2016 2015 2015 Receivables from customers for bills issued 79,547 71,581 75,710 Receivables from customers for bills to be issued 23,945 25,608 26,103 Provision for doubtful customer receivables (19,592) (18,724) (17,087) Total 83,900 78,465 84,726

The following table sets forth a breakdown for provision for doubtful customer receivables movements:

Provision for doubtful (in Euro thousands) customer receivables As of 1 January 2015 17,087 Accrual 4,870 Use (3,233) As of 31 December 2015 18,724 Accrual 4,048 Use (3,180) As of 31 December 2016 19,592

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18 Other current and non – current assets

The following table sets forth a breakdown of other current and non-current assets:

Other current assets

As of 31 December As of 1 January (in Euro thousands) 2016 2015 2015 Other current receivables 4,185 2,668 3,509 White certificates 3,916 1,701 1,694 VAT receivable 2,820 2,939 855 Gas consumption tax 2,241 1,928 6,358 Advances to suppliers and others 1,716 1,037 779 Social bonus receivable 794 840 727 Commodity derivatives 726 30 - Electric energy production tax 685 4,114 3,972 Finance lease receivable current 628 250 - Other receivables due to equalization fund 593 971 1,499 Current deferred cost 403 429 351 Dividend receivables 300 300 - Renewable energy incentive 340 300 - Current portion long term financing to third parties 84 85 85 Total 19,431 17,592 19,829

Other non current assets

As of 31 December As of 1 January (in Euro thousands) 2016 2015 2015 Investments 15,518 17,261 20,964 Non current public lightening financial receivable 8,056 4,268 2,768 Long term financing to related parties 5,466 3,996 3,160 Long term financing to third parties 1,909 447 514 Bonds 1,000 1,000 1,000 Finance lease receivable non current 422 418 - Guarantee deposits 324 315 2,136 Non current deferred cost and other 2,387 2,332 2,325 Total 35,082 30,037 32,867

Investments mainly refer to the Company’s investment in 13.5% of Enipower Mantova Spa’s share capital.

The fair value of the investment in Enipower Mantova Spa is based on the management’s best estimate of future expected cash flows deriving from this investment. Such estimated cash flows are discounted to the balance sheet date. Therefore, the fair value is classified as a level 3 fair value in the fair value hierarchy, due to the use of significant unobservable inputs, including the discount rate applied (WACC).

Assets relating to derivative contracts reflect the valuation of derivative financial instruments, which had a positive fair value at the reporting date. See Note 3 - “Fair value” for further details.

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The following table sets forth a breakdown of finance lease receivables:

As of 31 December (in Euro thousands) 2016 2015

Contractual cash flows Within 12 months 274 274 Between 1 and 5 years 823 439 Subtotal 1,097 713 Future finance income (47) (45) Finance lease receivable 1,050 668 of which current 628 250 of which non current 422 418

These finance lease receivables refer to the planning and realization of a heating infrastructure for Belleli in charge of TEA. Total amount estimated for the process starting as of 1 January 2016 amounts to Euro 1,350 thousands of which Euros 830 thousands in charge of Belleli will be anticipated by TEA.

19 Inventory

The following table sets forth a breakdown of inventories:

As of 31 December As of 1 January (in Euro thousands) 2016 2015 2015 Raw materials 1.939 2.091 1.254 Work in progress 612 648 713 Allowances for obsolete inventories (160) (120) (80) Total 2.391 2.619 1.887

Inventories amount to Euro 2,391 thousand and Euro 2,619 thousand as of 31 December 2016 and 2015 respectively. Provisions recorded in the years ended 31 December 2016 and 2015 amounted to Euro 40 thousand.

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The following table sets forth a breakdown for allowances for obsolete inventories movements:

Allowances for (in Euro thousands) obsolete inventories As of January 1 2015 80 Release Accrual 40 As of December 31 2015 120 Release Accrual 40 As of December 31 2016 160

20 Cash and Cash equivalents

The following table sets forth a breakdown of cash and cash equivalents:

As of December 31 As of January 1 (in Euro thousand) 2016 2015 2015 Cash at bank and in hand 21 18 14 Bank Deposits 4.313 7.691 8.187 Total 4.334 7.709 8.201

21 Equity

Share Capital

As of 31 December 2016, issued and fully paid share capital of the Company amounted to Euro 73,403 thousand (Euro 71,942 thousand as of 31 December 2015 and Euro 71,942 as of 1 January 2015) and relates to 283.408 outstanding ordinary shares (276,236 outstanding ordinary shares already net of 1,532 treasury shares as of 31 December 2015 and 1 January 2016) with a nominal value of Euro 259 each.

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Other reserves

Cash flow (in Euro thousands) Actuarial reserve hedge

As of January 1, 2015 - - Gain /(loss) on cash flow hedge instruments (148) - Gain /(loss) on cash flow hedge instruments -tax 46 - Actuarial gain / (loss) for post -employment benefit obligations - 393 Actuarial gain / (loss) for post -employment benefit obligations - tax - (104) Other comprehensive income for the period (102) 289

As of 31 December 2015 (102) 289 Gain /(loss) on cash flow hedge instruments 874 - Gain /(loss) on cash flow hedge instruments -tax (249) - Actuarial gain / (loss) for post -employment benefit obligations - (286) Actuarial gain / (loss) for post -employment benefit obligations - tax - 78 Other comprehensive income for the period 625 (208)

As of 31 December 2016 523 81

Cash flow hedge reserve as of 31 December 2015 was recycled to the income statement during 2016.

Other reserve include a legal reserve amounting to Euro 3,443 thousand as of 31 December 2016 (Euro 2,321 thousand as of 31 December 2015 and Euro 2,031 thousand as of 1 January 2015).

22 Current and non-current borrowings

The following tables set forth a breakdown of current and non-current borrowings as of 31 December 2016 and 2015 and as of January 1, 2015:

As of December 31 As of January 1 (in Euro thousand) 2016 2015 2015 Long term financing 58.769 64.466 69.559 Lease liability 181 253 - Non current borrowings 58.950 64.719 69.559

Current portion of long term financing 12.789 11.968 9.542 Current portion of lease liability 73 71 - Current bank borrowing - - 3.000 Bank overdrafts 1.565 1.417 278 Current borrowings 14.427 13.456 12.820

Total borrowings 73.377 78.175 82.379

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The following tables set forth a breakdown of the maturity dates of current and non-current borrowings as of 31 December 2016 and 2015 and as of January 1, 2015:

Between 1 and Within 12 months Over 5 years Total (in Euro thousands) 5 years

As of 31 December 2016 Long term financing 12,789 18,929 39,840 71,558 Lease liability 73 181 - 254 Bank overdrafts 1,565 - - 1,565

As of 31 December 2015 Long term financing 11,968 28,287 36,179 76,434 Lease liability 71 253 - 324 Bank overdrafts 1,417 - - 1,417

As of 1 January 2015 Long term financing 9,542 34,604 34,955 79,101 Lease liability - - - - Current bank borrowing 3,000 - - 3,000 Bank overdrafts 278 - - 278

Long-term borrowings

The following table provides details of the main long-term borrowings in place:

(in Euro thousands) As of 31 December As of 1 January Notional of which of which of which Financial institution Interest rate 2016 2015 2015 amount current current current BISP 15,000 Euribor 6M 3,214 2,143 5,357 2,143 7,500 2,143 BNL 68,000 Euribor 1M 38,578 - 34,665 - 31,271 - Cariparma 5,000 Euribor 3M - - 259 259 1,288 1,029 Banca Popolare di Mantova 4,000 Euribor 3M 1,064 1,064 2,085 1,020 3,063 978 Banca di Brescia 10,000 Euribor 3M 5,171 2,255 7,358 2,255 9,480 2,122 BISP 20,000 Euribor 6M 14,000 4,000 18,000 4,000 20,000 2,000 MPS 4,000 Euribor 6M 2,000 1,333 3,333 1,333 - - Other 20,776 variable & fixed 7,531 1,994 5,377 958 6,499 1,270 Total 146,776 71,558 12,789 76,434 11,968 79,101 9,542 of which fixed interest rate 838 191 256 of which variable interest rate 70,722 76,244 78,845

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In accordance with international practice, the Group’s loan contracts during the periods under examination require compliance with certain operational covenants and financial covenants, which had been complied with at 31 December 2016 and 2015.

Financial covenants : such clauses require the Group to comply with certain target financial ratios (such as ratio of net indebtedness to profitability, profitability to finance charges and net debt to equity) and may result in changes to interest rates if certain conditions arise. If financial covenants are breached, the Group may be required to repay the loan immediately;

- negative pledges : such clauses allow financial institutions to require early repayment of loans and set limits to the Group’s rights to use Group assets as collateral or security in favor of third parties or to vary controlling shareholdings without the express consent of the financial institution; - cross-defaults : such clauses foresee that in the case in which a breach of a requirement is declared in relation to contracts other than the loan contracts, such breach constitutes a breach of the loan contracts.

As of 31 December 2016, a portion of the long-term borrowings was covered by loan agreements containing a number of covenants that place some restrictions. There are few covenants on the debt, including those, which require the company to have a specified level of PFN/EBITDA and PFN/Equity.

Finance Lease Liabilities

The following table provides details of finance lease liabilities in place:

As of 31 December (in Euro thousands) 2016 2015

Contractual cash flows Within 12 months 79 79 Between 1 and 5 years 187 265 Subtotal 266 344 Future finance expense (12) (20) Finance lease receivable 254 324 of which current 73 71 of which non current 181 253

Finance lease liabilities represents the recording of liabilities arising from accounting for leasing transactions of automobiles for funeral services using the financial method.

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23 Employee benefits

Employee benefits include the provision for termination indemnities (TFR) for employees of Group entities. The following table sets forth a breakdown of the movements in Employee benefits:

(in Euro thousands) TFR As of 1 January 2015 7,467 Service cost (159) Interest expense on employee benefits 86 Change in scope of consolidation 373 Utilizations and advances (62) Actuarial (gain) / loss (393) As of 31 December 2015 7,312 Service cost 136 Interest expense on employee benefits 124 Change in scope of consolidation 183 Utilizations and advances (316) Actuarial (gain) / loss 286 As of 31 December 2016 7,725

Assumptions regarding disability of employees are set based on actuarial advice in accordance with published statistics and experience of the insurance sector, distinguishing sex and age. Assumptions regarding retiring age are based on qualification and type of employment contract.

The following table sets forth principal assumptions underlying the actuarial calculation of the provision for termination indemnities (TFR):

As of 31 December As of 1 January (in Euro thousands) 2016 2015 2015

Principal assumptions Inflation rate 1.50% 1.50% 1.50% Discount rate 1.07% 1.76% 1.15% Salary growth rate 1.88% 2.00% 2.00% Turnover rate – executives 1.00% 2.00% 2.00% Turnover rate - staff 2.00% 2.00% 2.00%

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24 Non-current provisions

The following table sets forth a breakdown of other non-current provisions:

Changes As of 31 in As of December Accruals Release estimated Utilization December 2015 cash 2016 (in Euro thousands) flows Landfill waste decommissioning 25,438 773 - 199 (176) 26,234 Risks relating to gas and power business 2,250 1,750 - - (300) 3,700 Risks relating to water business 1,439 1,125 - - (350) 2,214 Sinit liquidation risk 1,625 - - - - 1,625 Tnet guarantees 1,760 - - - - 1,760 Other provisions 1,051 944 (31) - (147) 1,817 Total 33,563 4,592 (31) 199 (973) 37,350

Landfill waste decommissioning

These are mainly provisions for future expense for environmental recovery of landfill waste, which include costs for post-operating management until the site involved has been completely converted to green areas. The provisions are determined using an independent expert appraisal. Accruals and decreases for the period were performed to adjust existing provisions to the estimated future costs to be borne as of the reporting date. Decreases also refer to the utilization of the provision for expenses incurred during the period (related to closed lots of plants still active), as well as to the aggregate expense borne in the post-operating phase until the mineralization of waste and the conversion of landfills into green areas are completed.

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25 Other current and non-current liabilities

The following table sets forth a breakdown of other current and non-current liabilities:

As of 31 December As of 1 January (in Euro thousands) 2016 2015 2015 Deferred income 4,778 6,970 7,983 Other non current liabilities 4,778 6,970 7,983

Social security payables 1,550 1,571 1,462 Regional waste tax 2,026 1,798 1,838 Employee payables 1,000 968 830 Other tax payables 1,278 755 630 Equalisation funds 1,312 1,381 1,140 Client deposits 1,091 1,013 639 Liability due to parent 863 863 863 Energy consumption tax 18 2,866 2,850 Derivative financial instruments - 177 - Withholding in connection with public television serivces 212 - - Deferred grants current 143 - - Liability due to associates 118 - - Other short term liabilities 1,228 646 586 Other current liabilities 10,839 12,038 10,838

Total other liabilities 15,617 19,008 18,821

26 Related party transactions

Related parties are recognized in accordance with IAS 24. Related party transactions are mainly of a commercial and financial nature and are conducted under normal market terms and conditions; there is, however, no guarantee that had similar transactions been entered into between or with third parties, such third parties would have negotiated or entered into the contracts under the same conditions or in the same manner. The transactions with related parties described below result in:

As of 1 January 2015

Blugas Comune di Infrastrutture Tnet servizi UniTea (in Euro thousands) Mantova ASTER srl ASPEF srl Biociclo srl srl srl srl Trade receivables 1.234 4 37 4 560 299 77 Other non current assets 2.125 967 Other receivables Trade payables 11.694 235 Borrowings Other payables 4.953 - -

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As of 31 December 2015

Blugas Comune di Infrastrutture Tnet UniTea (in Euro thousands) Mantova ASTER srl ASPEF srl Biociclo srl srl servizi srl srl Trade receivables 1.635 30 61 7 700 501 25 Other non current assets 3.081 868 Other receivables 300 Trade payables 9.032 463 Borrowings Other payables 7.927

For year ended 31 December 2015

Comune di Blugas Tnet (in Euro thousands) Mantova ASTER srl ASPEF srl Biociclo srl Infrastrutture srl servizi srl UniTea srl Revenue 6.271 175 568 404 47 166 238 Operating costs 3.081 3 1.367 Finance income (expenses) 88 - 425

As of 31 December 2016

Blugas Comune di Infrastrutture Tnet (in Euro thousands) Mantova ASTER srl ASPEF srl Biociclo srl srl servizi srl UniTea srl Trade receivables 2.257 7 96 38 1.068 280 240 Other non current assets - - - 3.82 4 1.658 Other receivables - - - 300 Trade payables 10.752 - - 315 Borrowings - - Other payables 6.637 - -

For year ended 31 December 2016

Blugas Comune di Infrastrutture Tnet (in Euro thousands) Mantova ASTER srl ASPEF srl Biociclo srl srl servizi srl UniTea srl Revenue 7.179 157 395 131 46 39 296 Operating costs 2.960 6 - 1.044 110 Finance income (expenses) - - - 317 51

Key management is considered the Board of Directors of the Company. Remuneration of Key management amounted to Euro 95 thousand in 2016 (Euro 114 thousand in 2015).

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The following tables set forth balances and transactions between Tea spa and its subsidiaries, eliminated for consolidation purposes and therefore not reflected in the consolidated statement of financial position and consolidated income statement as of and for year ended 31 December 2016:

As of 31 December 2016

Mantova Tea Tea Global (in Euro Tea Tea Acque ElectroTea Ambiente Sei Srl Onoranze Reteluce AqA Srl Funeral Energia Srl Srl Srl thousands) Srl Funebri Srl Srl Service Srl Trade 941 6.796 1.655 1.855 77 24 180 172 17 receivables Other non - 6.943 8.837 - 68 1.171 6.389 2.085 - current assets Other 2.466 - 560 1.215 8 16 - - - receivables Trade payables 147 304 444 200 2 - 53 6 - Borrowings 7.210 ------Other payables 35 80 70 585 17 - 514 - -

For year ended 31 December 2016 Mantova Tea Tea Global (in Euro Tea Tea Acque ElectroTea Ambiente Sei Srl Onoranze Reteluce AqA Srl Funeral thousands) Energia Srl Srl Srl Srl Funebri Srl Srl Service Srl

Revenue 3.206 11.538 6.942 6.585 347 27 315 337 30

Operating costs 503 788 248 434 1 - 11 6 -

Finance income (90) 162 154 - - 33 86 2 - (expenses)

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27 First time application of IFRS

Set out below are the applicable IFRS 1 exemptions and exceptions applied in the conversion from Italian GAAP to IFRS.

IFRS mandatory exemptions

Set out below are the applicable mandatory exemptions in IFRS 1 applied in the conversion from Italian GAAP to IFRS.

Estimates

IFRS estimates as of January 1 2015 are consistent with the estimates as of the same date made in conformity with Italian GAAP.

IFRS optional exemptions

The Group has made use of the following exemptions permitted by IFRS 1:

Business combination

In accordance with IFRS transitional provisions, the Group elected to apply IFRS relating to business combinations prospectively from January 1, 2015. As such, Italian GAAP balances relating to business combinations entered into before that date, including goodwill, have been carried forward without adjustment.

Employee benefits

In accordance with IFRS transitional provisions, on first time recognition of employee benefits under IFRS, the Group has elected to recognize cumulative actuarial gains and losses as of the Transition Date in the “Reserve for first-time adoption of IFRS”.

Tangible assets

In accordance with IFRS transitional provisions, the Group elected to apply IFRS relating to tangible assets prospectively from January 1, 2015. As such, Italian GAAP balances relating to tangible assets have been considered its deemed cost and carried forward without adjustment.

Reconciliations of Italian GAAP to IFRS

IFRS 1 requires an entity to reconcile equity and comprehensive income for prior periods. The following tables represent the reconciliations from Italian GAAP to IFRS for the respective periods noted for equity, earnings and comprehensive income.

Cash and cash equivalents were not impacted by the IFRS transition. As a result the cash flow statement under IFRS is substantially in line with the cash flow presented under Italian GAAP, except for certain reclassifications of the statement of financial position as described below.

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Reconciliation of the statement of financial position as of 1 January 2015

Italian (in Euro thousands) Note Reclassification Adjustments IFRS GAAP Intangible assets a 12,172 - 71,434 83,606 Tangible assets a, e, f 165,080 - (64,014) 101,066 Investments measured using the equity method b, h - 4,527 1,242 5,769 Deferred tax assets a, b, c, e, f, h 8,725 (37) (7,936) 752 Other non current assets a, h 35,227 (4,946) 2,586 32,867 Total non current assets 221,204 (456) 3,312 224,060 Inventory 1,887 - - 1,887 Current trade receivables a 87,312 - (2,586) 84,726 Income tax asset h 12,467 (11,247) - 1,220 Other current assets h 8,498 11,246 85 19,829 Cash and cash equivalents 8,201 - - 8,201 Assets held for sale - - - - Total current assets 118,365 (1) (2,501) 115,863 Total assets 339,569 (457) 811 339,923 Share capital 71,942 - - 71,942 Share premium 1,278 594 - 1,872 Other reserves a, b, c, e, f, g 29,156 (420) 17,229 45,965 Retained earnings 6,137 (594) - 5,543 Total Group equity 108,513 (420) 17,229 125,322 Non controlling interest 8,443 - 15 8,458 Total equity 116,956 (420) 17,244 133,780 Non current borrowings 69,559 - - 69,559 Employee benefits c 6,754 - 713 7,467 Non current provisions e 38,531 - (12,215) 26,316 Deferred tax liabilities h 37 (37) - - Other non current liabilities f 13,553 (639) (4,931) 7,983 Total non current liabilities 128,434 (676) (16,433) 111,325 Current borrowings 12,820 - - 12,820 Trade payables 69,657 - - 69,657 Income tax liability h 4,973 (3,470) - 1,503 Other current liabilities h 6,729 4,109 - 10,838 Total current liabilities 94,179 639 - 94,818 Total liabilities 222,613 (37) (16,433) 206,143 Total equity and liabilities 339,569 (457) 811 339,923

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Reconciliation of the statement of financial position as of 31 December 2015

Italian (in Euro thousands) Note Reclassification Adjustments IFRS GAAP Intangible assets a 14,397 - 77,855 92,252 Tangible assets a, e, f 180,963 - (67,600) 113,363 Investments measured using the equity method b, h - 4,526 1,649 6,175 Deferred tax assets a, b, c, d, e, f, h 8,668 (33) (7,843) 792 Other non current assets a, h 30,163 (4,942) 4,816 30,037 Total non current assets 234,191 (449) 8,877 242,619 Inventory 2,619 - - 2,619 Current trade receivables a 81,432 - (2,967) 78,465 Income tax asset h 10,518 (9,035) - 1,483 Other current assets d, h 8,207 9,035 350 17,592 Cash and cash equivalents 7,709 - - 7,709 Assets held for sale - - - - Total current assets 110,485 - (2,617) 107,868 Total assets 344,676 (449) 6,260 350,487 Share capital 71,942 - - 71,942 Share premium 1,278 594 - 1,872 Other reserves a, b, c, e, f, g 35,426 (415) 17,127 52,138 Retained earnings 6,558 (594) 702 6,666 Total Group equity 115,204 (415) 17,829 132,618 Non controlling interest 9,136 - 277 9,413 Total equity 124,340 (415) 18,106 142,031 Non current borrowings 64,467 - 252 64,719 Employee benefits c 6,975 - 337 7,312 Non current provisions e 41,197 - (7,634) 33,563 Deferred tax liabilities 33 (33) - - Other non current liabilities f 13,035 (1,014) (5,051) 6,970 Total non current liabilities 125,707 (1,047) (12,096) 112,564 Current borrowings 13,385 - 71 13,456 Trade payables 69,939 13 - 69,952 Income tax liability h 4,058 (3,612) - 446 Other current liabilities d, h 7,247 4,612 179 12,038 Total current liabilities 94,629 1,013 250 95,892 Total liabilities 220,336 (34) (11,846) 208,456 Total equity and liabilities 344,676 (449) 6,260 350,487

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Reconciliation of the income statements for the year ended 31 December 2015

Italian (in Euro thousands) Note Reclassification Adjustments IFRS GAAP Revenue a 245,102 (345) 15,508 260,265 Other income f 4,405 (525) (174) 3,706 Raw materials and consumables a, h (72,733) 806 (4,470) (76,397) Service cost a (106,368) (1,033) (9,169) (116,570) Personnel cost a, c, h (28,415) 4,158 (731) (24,988) Other operating expenses a, e (12,825) 1,562 1,453 (9,810) Share of profit (loss) of equity investment b - 400 406 806 Capitalized costs h 4,954 (4,954) - - Amortization, depreciation and impairment a, e, f (15,457) - (1,816) (17,273) Operating income 18,663 69 1,007 19,739 Finance income h 3,918 (2,400) 424 1,942 Finance expense c, e, h (3,141) 2,000 (910) (2,051) Extraordinary items (216) 216 - - Profit before income tax 19,224 (115) 521 19,630 Income tax a, b, c, e (7,178) 115 153 (6,910) Net profit 12,046 - 674 12,720 of which: Profit attributable to the Group 10,760 - 498 11,258 Profit attributable to the non controlling interest 1,286 - 176 1,462

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Reconciliation of the income statement for the year ended 31 December 2015

Year ended 31 December Note (in Euro thousands) 2015 Net profit in accordance with Italian GAAP 12,046 Service concessions a 310 Landfill waste decommissioning e (117) Post employment benefit obligations c (40) Associates measured using the equity method b 334 Other minor 187 Total equity in accordance with IFRS 12,720

Reconciliation of the statement of other comprehensive income for the year ended 31 December 2015

Italian (in Euro thousands) Note Reclassification Adjustments IFRS GAAP Net profit 12,046 - 674 12,720 Cash flow hedge reserve d - - (102) (102) Items that may be reclassified to profit or loss - - (102) (102) Post employment benefit obligation c - - 289 289 Items that will not be reclassified to profit or loss - - 289 289 Total other comprehensive income - - 187 187 Net other comprehensive income 12,046 - 861 12,907 of which: Profit attributable to the Group 10,760 - 597 11,357 Profit attributable to the non controlling interest 1,286 - 264 1,550

Reconciliation of total equity as of 1 January 2015 and 31 December 2015

As of 31 December Note As of 1 January 2015 (in Euro thousands) 2015 Total equity in accordance with Italian GAAP 124,340 116,956 Treasury shares g (415) (420) Service concessions a 345 34 Derivatives d (101) - Landfill waste decommissioning e 17,254 17,371 Post employment benefit obligations c (268) (517) Associates measured using the equity method b 1,193 857 Other minor (317) (501) Total equity in accordance with IFRS 142,031 133,780

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Explanatory notes to IFRS transition

a) Service concessions

Service concession assets that were treated as tangible assets in Italian GAAP, have been accounted for as intangible assets or financial receivables (depending on the type of concession) in accordance with IFRIC 12 under IFRS.

• as of the Transition Date, the increase in intangible assets and other non-current assets amount to Euro 71.7 million and Euro 2.8 million, the decrease in tangible assets, current trend receivables and other non-current liabilities amount to Euro 75.2 million, Euro 2.0 million and Euro 2.7 million, respectively; • as of December 31, 2015, the increase in intangible assets and other non-current assets amount to Euro 80.4 million and Euro 4.3 million, the decrease in tangible assets, current trend receivables, deferred tax assets and other non-current liabilities amount to Euro 84.1 million, Euro 2.4 million, Euro 0.9 million and Euro 3.0 million, respectively; and • for the year ended December 31, 2015, the increase in revenue and income tax amount to Euro 15.5 million and Euro 0.8 million, respectively, the decrease in raw materials, consumables and service cost and personnel cost amount to Euro 4.5 million, Euro 9.2 million and Euro 0.8 million, respectively, the increase in finance expense amounts to Euro 0.8 million and the decrease in income tax amounts to Euro 1.3 million.

b) Associates measured using the equity method

Italian GAAP allows to measure associates at cost if the difference is not material in terms of providing a true and fair representation of the financial position and results of the Group. Such option is not allow under IFRS and therefore, in preparing the consolidated financial statements, the Group has applied the equity method to measure its investment. As a result of applying the equity method:

• as of the Transition Date, the increase in equity amounts to Euro 1.2 million before the income tax effect of Euro 0.4 million; • a of December 31, 2015, the increase in equity amounts to Euro 1.7 million before the income tax effect of Euro 0.5 million; and • for the year ended December 31, 2015, the increase in profit before income tax amounts to Euro 0.4 million and income tax expense amounts to Euro 0.1 million.

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c) Post-employment benefit obligations

Under Italian GAAP, the provision for termination indemnities due to employees (TFR) is calculated in accordance with relevant Italian legislation and labor contracts using the full liability method. Under IFRS, TFR earned until December 31, 2006 is considered a defined benefit plan and must therefore be measured based on actuarial calculations. TFR earned since January 1, 2007 is considered a defined contribution plan. Specifically, the adoption of IFRS has determined:

• as of the Transition Date, the decrease in equity amounts to Euro 0.7 million before the income tax effect of Euro 0.2 million; • as of December 31, 2015, the increase in equity amounts to Euro 0.3 million before the income tax effect of Euro 0.1 million; and • for the year ended December 31, 2015, the decrease in personnel cost amounts to Euro 0.1 million and increase in finance expense amounts to Euro 0.1 million.

d) Derivatives

Under Italian GAAP, derivatives were treated off-balance sheet. Under IFRS, derivative instruments are measured at fair value and if qualify for cash flow hedge accounting to hedge the exposure to variability in future cash flows, the effective portion of any gain or loss on the derivative financial instrument is recognized directly in other comprehensive income/(loss). The cumulative gain or loss is reclassified from other comprehensive income/(loss) to the consolidated income statement at the same time as the economic effect arising from the hedged item affects the consolidated income statement.

• as of the Transition Date, no derivative instruments were in place; • as of December 31, 2015, the decrease in equity amounts to Euro 0.2 million before the income tax effect of Euro 0.1 million; and • for the year ended December 31, 2015, the decrease in net other comprehensive income amounts to Euro 0.1 million.

e) Landfill waste decommissioning

Under Italian GAAP, decommissioning provision for future expense for environmental recovery of landfill waste, which include costs for post-operating management until the site involved has been completely converted to green areas were recorded based on the percentage of utilization of the site using an independent expert appraisal. Under IFRS, the estimated future costs to be borne are discounted to the reporting date. At the transition Date, the Group measured the provision in accordance with IAS 37 and estimated the amount that would have been included in the cost of the related asset when the liability first arose.

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• as of the Transition Date, the increase in tangible assets amount to Euro 13.4 million, the decrease in deferred tax assets amount to Euro 7.9 million and the decrease in provisions amount to Euro 11.9 million; • as of December 31, 2015, the increase in tangible assets amount to Euro 16.6 million, the decrease in deferred tax assets amount to Euro 6.7 million and the decrease in provisions amount to Euro 7.4 million; and • for the year ended December 31, 2015, the decrease in other operating expense amounts to Euro 1.7 million, the increase in depreciation expense amounts to Euro 2.3 million, the increase in finance expense amounts to Euro 0.8 million and the decrease in income tax amounts to Euro 1.3 million.

f) Grant

Under Italian GAAP, capital grants received from public administration not related to IFRIC 12 assets were recorded as deferred income and release to income statement to off-set the depreciation of the related assets. Under IFRS, capital grants were off-set against the related assets.

• as of the Transition Date, the decrease in tangible assets and other non-current liabilities amount to Euro 2.2 million; • as of December 31, 2015, the decrease in tangible assets and other non-current liabilities amount to Euro 2.0 million; and • for the year ended December 31, 2015, there was no impact.

g) Treasury share

Under Italian GAAP, treasury shares are considered financial assets while under IFRS are treated as a reduction of equity.

• as of the Transition Date, the decrease in equity amounts to Euro 0.4 million; • as of December 31, 2015, the decrease in equity amounts to Euro 0.4 million; and • for the year ended December 31, 2015, there was no impact.

h) Reclassifications

The adoption of IFRS has required certain reclassifications that have had no effect on either the consolidated result for the year or consolidated equity. Such reclassifications mainly relate to:

• the net presentation of deferred tax assets and liabilities, if a legal right to offset exists and they are due to the same tax authority; • the separate classification of current income tax payables and receivables respect of other indirect taxes, classified in other current assets and liabilities for IFRS purposes; • the separate classification of associates in “Investments measured using the equity method”; • the reclassification of capitalized expenses to raw materials and consumables and personnel cost;

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• the net exposure of the changes in the investment value of financial assets recorded at fair value.

28 Subsequent events

The Group has evaluated subsequent events through 17 May 2017, which is the date these financial statements were authorized for issuance.

On 7 April 2017, the Annual General Meeting of Shareholders approved the Board of Directors proposal to distribute dividends of Euro 16.76 per ordinary share, corresponding to a dividend distribution to shareholders of approximately Euro 4,724 thousand.

Following the conclusion of the tender procedure convened by the three public shareholders of Mantova Ambiente srl, a new private shareholder, Progetto Mantova, has been selected. Progetto Mantova with a 20% shareholding, will replace the outgoing shareholders SER.I.T. (11%) and LOMB.RI.CA. (9%) of Mantova Ambiente srl.

On 20 April 2017 Sei srl has signed a proposal for purchasing a business unit of Goito Energia Srl (MN) relating to the authorizations and concessions of a small hydroelectric plant. Such plant is connected to the mini hydro plant of Marenghello, which is managed by Electrotea srl.

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Apprendix 1 – List of Companies included in the Consolidated Financial Statements:

Share Capital Percentage held as of Reporting Currency Company Location date Amount (000) 31 December 2016 31 December 2015 1 January 2015 Tea spa * Mantova December 31 EUR 73,40 3 Tea Energia srl Mantova December 31 EUR 2,000 100% 100% 100% Mantova Ambiente srl Mantova December 31 EUR 227 40% 40% 40% Sei srl Mantova December 31 EUR 1,000 100% 100% 100% Tea Acque srl Mantova December 31 EUR 3,050 60% 60% 60% Tea Onoranze Funebri srl Mantova December 31 EUR 100 100% 100% 100% Electrotea srl Mantova December 31 EUR 50 60%** 60%** 60%** Tea Reteluce Srl Mantova December 31 EUR 100 60% 60% 60% Global Funeral Service Srl Mantova December 31 EUR 51 100%*** 100%*** - AqA Mantova Srl Mantova December 31 EUR 1,000 100% - -

* Share capital changed compared to 31 December 2015 (Euro 71.94 2 thousand) ** Electrotea is controlled by Sei srl *** Global Funeral Service Srl is controlled by Tea Onoranze Funebri srl

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