A2A S p A : , Results at june 30, 2021

A2A, RESULTS AT JUNE 30, 2021

Strong growth in margins and investments continued

• Revenues at 4,060 million euro: +28% compared to the first half of 2020
• EBITDA at 690 million euro, up by more than 130 million euro (+23%) vs June 30, 2020 (559 million euro) thanks to significant organic growth and M&A transactions
• Net profit of 340 million euro, +121% compared to last year (154 million euro in the first half of 2020), thanks to the positive non-recurring effects of Legislative Decree 104/2020 (the "Decreto Agosto") and organic growth of over 30%
• Capex for 413 million euro, +65% compared to the same period of the previous year
• Net Financial Position of 3,745 million euro, up by 273 million euro compared to December 31, 2020. Net of changes in the scope of consolidation and the impact of the new ESMA guidelines (totalling 437 million euro), the NFP was down by 164 million euro to 3,308 million euro
• Significant acceleration of Sustainable Finance: inaugural issuance of a Sustainability-Linked bond in July 2021 for 500 million euro; subscription of a 500 million euro Sustainability-Linked credit line with donation mechanism to Banco dell'Energia Onlus and first Share Buyback programme with social implications.
• Sustainability indicators improvement compared to the first half of 2020:
• • +15% of waste recovered as material or energy and consequently not landfilled
  • +16% of net production of electricity from renewable sources

The Board of Directors of A2A S.p.A. has examined and approved the half year financial

report at June 30, 2021

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Milan, 30 July 2021 - At today's meeting of the Board of Directors of A2A S.p.A., chaired by Marco Patuano, the Board examined and approved the Half year financial report at 30 June 2021.

"The results for the first six months of 2021 are excellent in every respect and consolidate the positive trend of the first quarter. The strength and quality of our people and our assets have enabled us to achieve a double-digit growth in revenues and gross operating income, and an unprecedentednet profit" - commented Renato Mazzoncini, Chief Executive Officer of A2A - "We are continuing in the direction outlined in our Strategic Plan: the significant capex made during the period (over 410 million euro, +65% compared to the first half of 2020) and the latest acquisitions made in the field of renewables and environment are concrete evidence of our commitment to energy transition and circular economy. It is a crucial moment for the development of the Country and we want to contribute."

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The excellent economic and financial results recorded in the first half of 2021 have been achieved thanks to a sustained organic growth of all the Group's Business Units and to the M&A transactions concluded in both previous year and current year.

Moreover, in the first half of 2021, A2A operated in a context of a recovery in consumption and a strongly bullish energy scenario, unlike the first half of 2020 which was earmarked, due to the Covid- 19 epidemic, by a sharp fall in demand and a collapse in gas and energy prices. The different scenario, including the hedging adopted by the Group, had a major impact on some economic variables under review.

Prices of energy commodities grew up, with the PUN (Single National Price), PSV gas and CO2 prices doubling. During the first six months of 2021, the PUN (Single National Price) increased by +107.6% compared to the first half of 2020, reaching 66.9€/MWh as a result of the rise in gas and CO2 costs. The average price of gas to the PSV in the period under review amounted to 21.8€/MWh, up by 137.9% compared to the same period the previous year. CO2 quotations stood at an average price of 43.8€/tonne in H1 2021 (22€/tonne in H1 2020, +99%).

Rising prices and quantities, an excellent performance by all the Group's Business Units and the contribution of newly acquired companies brought to:

• substantial increase in turnover (+28%);
• significant growth in operating margins (+24%).

A strong acceleration was given to capex, with an increase of +65% compared to the same period in 2020, reaching more than 400 million euro. In particular, in line with A2A's strategic model based on circular economy and energy transition, development works has been carried out for over 250 million euro (+91% compared to the first half of 2020), aimed at recovering energy and materials, upgrading the distribution networks, water and sewage networks, purification plants, photovoltaic plants and digitalisation.

The acquisitions carried out in the first half of the year also demonstrate the Group's commitment to contribute to sustainable development, enabling, for example, a strengthening in the field of bioenergy and the increase in installed capacity from renewable sources by 173MW, which is added to the 111MW already held by A2A and the 8.2MW of wind power capacity acquired at the end of 2020 (Flabrum). At June 30, 2021, the Group has a total installed capacity from renewable sources (hydroelectric, photovoltaic and wind) of 2,235MW, an increase of 14% compared to the corresponding period in 2020.

The main indicators here below:

Millions of euro	H1 2021	H1 2020		Δ%
Revenues	4,060	3,181	+879	+27.6%
Gross Operating Margin -	690	559	+131	+23.4%
EBITDA
Net Operating Income - EBIT	355	281	+74	+26.3%
Net profit	340	154	+186	+120.8%

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In the first half of 2021, Revenues of A2A Group amounted to 4,060 million euro, up by 27.6% compared to the first half of the previous year.

The increase mainly occurred in the wholesale energy markets and electricity in particular, due to both higher prices and higher volumes sold and brokered. Revenues in the retail market were also up thanks to higher unit prices and higher quantities sold to customers in the deregulated gas and electricity market. Finally, new companies acquired in 2020 (AEB group, consolidated on a line-byline basis from November 2020, Agritre and Flabrum) and in 2021 (Octopus and Agripower) contributed for around 17% to the aforementioned positive change.

EBITDA reached 690 million euro, an increase of 131 million euro compared to the first half of 2020 (+23.4%).

Net of non-recurring items (+4 million during the first half of 2021; +6 million euro in the corresponding period of 2020), the ordinary gross operating margin increased by 133 million euro. Furthermore excluding the contribution deriving from the consolidation of AEB and the other companies acquired (approximately 33 million euro), growth amounted to 100 million euro (+18%)

EBIT, amounting to 355 million euro, was up by +74 million euro compared to the first six months of 2020 (281 million euro). The change was due to the following:

• increase in EBITDA, as described above (+131 million euro);
• increase in depreciation and amortisation (59 million euro) mainly related to investments made by all BUs in the period July 2020 - June 2021, the 1G electricity meter replacement plan and the amortisation/depreciation of the assets of the companies acquired described previously;
• decrease of 2 million euro in additions to provisions, net of reversals of excess provisions for risks and receivables.

Group Net Profit in the first half of 2021 amounted to 340 million euro, up 120.8% compared to the corresponding period of 2020.

In addition to the increase in the Net Operating Result, this positive change of 186 million euro is due to:

• lower taxes recognised this year compared with the previous year, for a total of 119 million euro, resulting from the following factors:
  o 145 million euro, downward, related to the effects of the implementation of Decree Law no. 104/2020. A2A, in application of the above legislation, has realigned for some Group subsidiaries the differences between the higher book value and lower tax-base value of tangible and intangible assets: the net economic effects on the year of this operation amounted to 145 million euro, determined by the payment of a substitutive tax of approximately 23 million euro and the associated benefit of one-off reversal of deferred tax liabilities recognised in the financial statements on the book/tax-base value differences, amounting to 168 million euro.
  o 26 million euro in higher taxes as a result of improved earnings before taxes.
• the decrease of 10 million euro in net financial expense, due mainly to the improved conditions in the capital markets when refinancing maturing bonds;
• the increase of 21 million euro in the minority interest in net income, due in part to the consolidation of the AEB Group.

Excluding extraordinary items affecting the current year (reversal of deferred tax liabilities net of substitute tax and minority interests' profit on the realignment of AEB and ACSM AGAM's assets), ordinary Group net income for the first six months of the year amounts to 202 million euro, representing an organic increase of 48 million euro (+31%) compared with the same period of the previous year.

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Consolidated Net Financial Position at June 30, 2021 amounted to 3,745 million euro (3,472 million euro as at December 31, 2020). Excluding changes in scope in the first 6 months of 2021 and the application of the new ESMA guidelines, NFP amounted to 3,308 million euro, recording cash generation of 164 million euro, after total capex of 413 million euro and dividends for 248 million euro.

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A2A Group - Results by Business Unit

The following table shows the composition of the Gross Operating Margin by Business Unit:

Millions of euro	06.30.2021	06.30.2020	Change	Change %
Generation and Trading	150	98	52	53.1%
Market	126	111	15	13.5%
Waste	164	143	21	14.7%
Networks	260	220	40	18.2%
Corporate	-10	-13	3	-23.1%
Total	690	559	131	23.4%

Generation and Trading

Revenues amounted to 2,378 million euro, up by 620 million euro (+35.3%) compared to the same period of the previous year. The change was caused by a significant increase in the prices of electricity and natural gas and by higher volumes sold and intermediated, in particular on the electricity market.

EBITDA amounted to 150 million euro, an increase of 52 million euro compared to the same period of the previous year. Net of the non-recurring items in the two periods considered (+2 million euro in 2021 and +8 million in 2020), the Ordinary EBITDA increased by 58 million euro.

The change was mainly due to the following:

• a sharp increase in the PUN, compared with the low levels of the previous year (more than double). This impact on the Group's margins was partially mitigated by the hedging transactions executed in previous months;
• higher volumes of hydroelectric production;
• contribution of newly acquired photovoltaic and wind power plants.
• excellent performance achieved in the ancillary services market (MSD), amounting to 99 million euro (+ +21 million euro compared to 2020).

These positive effects were partially offset by higher operating costs incurred during the first half of the year compared with the same period last year (hydroelectric licence fees and scheduled maintenance costs) and by the negative contribution of the natural gas portfolio.

Capex totalled approximately 37 million euro, including 16 million euro for developments (including upgrades of gas turbines and work on photovoltaic systems) and about 20 million euro for extraordinary maintenance at the Group's thermoelectric power plants and hydroelectric power plants.

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Market Business Unit

Revenues amounted to 1,524 million euro (1,244 million euro at June 30, 2020), up 22.5% following the consolidation of the AEB Group and the increase in unit prices of the electricity segment and greater quantities sold of both gas and electricity.

EBITDA equalled 126 million euro (111 million euro at June 30, 2020).

The change of 15 million euro (+14%) is due to a significant increase in margins recorded in the retail segment for:

• the consolidation of the AEB group (10 million euro);
• the increase in the number of mass-market customers;
• higher volumes of sales to large customers;
• higher unit margins on sales in the free gas market.

The growth was reduced by a fall in unit margins on sales on the free electricity market and higher operating costs than those incurred last year due to a slowdown in activities following the introduction of COVID - 19.

In H1 2021, the Market Business Unit capex amounted to 39 million euro. These investments concerned:

• 26 million euro for the energy retail segment, mainly relating to ICT activities aimed at acquiring new customers and supporting billing and marketing activities;
• 7 million for energy efficiency and e-moving projects.
• 6 million allocated to the public lighting sector for the launch of projects in new municipalities.

Waste Business Unit

During the first half of 2021, the Waste Business Unit recorded revenues of 612 million euro, up 14.4% compared to the corresponding period of the previous year (535 million euro at June 30, 2020) mainly due to higher revenues from material recovery (in particular paper sales), to the sale of electricity and urban waste disposal in the Group's waste-to-energy plants, as well as to the contribution of the companies acquired in the previous year (Agritre consolidated since March 2020 and AEB since November 2020) and this year (Agripower consolidated since April 2021).

The Ebitda of the Waste Business Unit equalled 164 million euro (143 million euro at 30 June 2020), up 21 million euro compared to the previous year.

Both the municipal waste treatment segment (+20 million euro on the first half of 2020) and the industrial waste segment (+4 million euro on the first half of 2020) made a positive contribution, thanks to:

• greater quantities of electricity produced and waste disposed of;
• positive trend in prices for the sale of electricity and the delivery of waste, in particular waste similar to urban waste;
• increase in revenues from paper sales, mainly due to the sharp increase in the price of this material from the first lockdown (spring 2020) due to high demand on the European market;
• incremental contribution of the biomass and biogas generating plants acquired in the previous year (Agritre) and in the current year (Agripower).

These positive effects more than offset the reduction in margins recorded in the Collection segment, despite the contribution of the AEB Group..

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