815600B7FD80E48C18962022-01-012022-12-31815600B7FD80E48C18962022-12-31815600B7FD80E48C18962021-12-31815600B7FD80E48C18962021-01-012021-12-31815600B7FD80E48C18962020-12-31815600B7FD80E48C18962020-12-31ifrs-full:IssuedCapitalMember815600B7FD80E48C18962020-12-31ifrs-full:TreasurySharesMember815600B7FD80E48C18962020-12-31ifrs-full:ReserveOfCashFlowHedgesMember815600B7FD80E48C18962020-12-31ext:OtherReservesAndRetainedEarningsMember815600B7FD80E48C18962020-12-31ext:ProfitLossAttributableToOwnersOfParentMember815600B7FD80E48C18962020-12-31ifrs-full:EquityAttributableToOwnersOfParentMember815600B7FD80E48C18962020-12-31ifrs-full:NoncontrollingInterestsMember815600B7FD80E48C18962021-01-012021-12-31ext:OtherReservesAndRetainedEarningsMember815600B7FD80E48C18962021-01-012021-12-31ext:ProfitLossAttributableToOwnersOfParentMember815600B7FD80E48C18962021-01-012021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember815600B7FD80E48C18962021-01-012021-12-31ifrs-full:NoncontrollingInterestsMember815600B7FD80E48C18962021-01-012021-12-31ifrs-full:ReserveOfCashFlowHedgesMember815600B7FD80E48C18962021-01-012021-12-31ifrs-full:TreasurySharesMember815600B7FD80E48C18962021-12-31ifrs-full:IssuedCapitalMember815600B7FD80E48C18962021-12-31ifrs-full:TreasurySharesMember815600B7FD80E48C18962021-12-31ifrs-full:ReserveOfCashFlowHedgesMember815600B7FD80E48C18962021-12-31ext:OtherReservesAndRetainedEarningsMember815600B7FD80E48C18962021-12-31ext:ProfitLossAttributableToOwnersOfParentMember815600B7FD80E48C18962021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember815600B7FD80E48C18962021-12-31ifrs-full:NoncontrollingInterestsMember815600B7FD80E48C18962022-01-012022-12-31ext:OtherReservesAndRetainedEarningsMember815600B7FD80E48C18962022-01-012022-12-31ext:ProfitLossAttributableToOwnersOfParentMember815600B7FD80E48C18962022-01-012022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember815600B7FD80E48C18962022-01-012022-12-31ifrs-full:NoncontrollingInterestsMember815600B7FD80E48C18962022-01-012022-12-31ifrs-full:ReserveOfCashFlowHedgesMember815600B7FD80E48C18962022-12-31ifrs-full:IssuedCapitalMember815600B7FD80E48C18962022-12-31ifrs-full:TreasurySharesMember815600B7FD80E48C18962022-12-31ifrs-full:ReserveOfCashFlowHedgesMember815600B7FD80E48C18962022-12-31ext:OtherReservesAndRetainedEarningsMember815600B7FD80E48C18962022-12-31ext:ProfitLossAttributableToOwnersOfParentMember815600B7FD80E48C18962022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember815600B7FD80E48C18962022-12-31ifrs-full:NoncontrollingInterestsMemberiso4217:EURiso4217:EURxbrli:shares Report on Operations 2022 these Financial Statements are available at the website gruppoa2a.it 2 A2A Report on Operations 2022 Business Units 10 Geographical areas of activity 12 Group structure 14 Financial highlights at December 31, 2022 15 Shareholdings 18 A2A S.p.A. on the Stock Exchange 19 Alternative Performance Indicators (APM) 21 7 Macroeconomic scenario 34 Energy market trends 36 Contents 1 Key figures of the A2A Group 3 Scenario and Market Corporate boards Responsible sustainability management and sustainable finance 28 2 Responsible sustainability management and sustainable finance 4 Letter to Shareholders and Stakeholders This is a translation of the Italian original “Relazione sulla Gestione 2022” and has been prepared solely for the convenience of international readers. In the event of any ambiguity the Italian text will prevail. The Italian original is available at the website gruppoa2a.it 2022 Report on Operations A2A 3 4 Consolidated results and report on operations 5 Analysis of main sectors of activities Risks and uncertainties 140 Other information 150 7 Risks and uncertainties 8 Other information 6 Evolution of the regulation and impacts on the Business Units of the A2A Group Generation and Trading Business Unit 95 Market Business Unit 100 Waste Business Unit 108 Smart Infrastructures Business Unit 119 Summary of results, assets and liabilitiesand financial position 40 Significant events during the year 49 Significant events after December 31, 2022 55 Impacts of the Russia-Ukraine conflict 56 Climate change 59 Taxonomy 62 Outlook for operations 63 Proposal for the allocation of net profit for the year ended December 31, 2022 and the distribution of a dividend 64 Summary of results sector by sector 68 Results sector by sector 72 Generation and Trading Business Unit 74 Market Business Unit 77 Waste Business Unit 80 Smart Infrastructures Business Unit 83 Corporate 87 Letter to Shareholders and Stakeholders The letter to stakeholders is a time for our Group to take stock and plan. Once again this year, we had to face an emergency context and learn important lessons, achieving a new vantage point from which to look at our more distant goals. In a world recovering from a two-year pandemic, a war has arrived in the heart of Europe, bringing uncertainty and instability. The geopolitical events of 2022 highlighted the EU’s energy dependency and raised inflationary pressures, fuelling the risk of a global recession. The energy sector was one of the hardest hit; right after a global, cross-cutting emergency like the pandemic, we found ourselves at the centre of a crisis strongly focused on our business. Faced with this phenomenon that poses crucial challenges for our business \- from the development of new energies, to the cost of raw materials, to customer relations \- we have chosen to focus on the essentials, on what really counts for a company with the identity of a Life Company: trust and consistency. Credibility with customers, loyalty with partners, reliability with shareholders, and respect for communities have been our cornerstones. In the urgency of difficult times, it is necessary to be able to recognise which aspects are important to protect. The relationship of trust with our stakeholders, strong because it is cultivated daily, has been a priority in dealing with market volatility and geopolitical changes. We have chosen to be consistent with our commitments to achieve the sustainability targets set out in our Strategic Plan with 16 billion in planned investments to 2030 and, in November 2022, we updated the path to adapt it to the new external conditions, without losing sight of the goal and safeguarding the targets we have set ourselves. On the Circular Economy front, we invested over 1 billion euro in ‘21-’22, confirming the soundness of our Plan and focusing on closing the waste cycle, recovering materials, energy and heat, and developing bioenergy. In 2022, we inaugurated two plants for the treatment of the organic fraction of municipal solid waste (MSWOF) in Lacchiarella and Cavaglià, for the production of 13 million cubic metres per year of biomethane. The material treatment and recovery plants produced more than 392 thousand tonnes of secondary raw material to be put back on the market. Separate waste collection in the municipalities served contracted in 2022 (-6% of municipal waste collected compared to 2021). However, the proportion recovered as material or energy remained unchanged, respectively 70% the former and 30% the latter. In the context of the Energy Transition, in which 11 billion euro are being invested in the ‘21-’30 Plan, 2022 will surely go down in history as the black swan of the path towards sustainability of the national energy system. In this context, the decarbonization process undertaken by the Group (such as the closure of the Monfalcone coal-fired power plant in 2020) clashed with the need to ensure a stable and constant supply of energy to the country; for this reason, in 2022, we had to reactivate the San Filippo del Mela and Monfalcone plants. This obviously led to an increase in direct emissions generated by the Group (+21% compared to 2021), while indirect emissions related to energy purchases were almost zero, thanks to the confirmation of renewable energy purchase contracts at Group sites. Despite this context, we wanted to reaffirm in the latest Strategic Plan update our commitment to the ecological transition by declaring our intention to achieve Net Zero for Scope 1 and Scope 2 emissions by 2040 and initiated an internal working group focused on identifying strategic and technological solutions to achieve this goal. In particular, during 2022, we consolidated our position among the leading operators in the generation of electricity from renewable sources in Italy through the acquisition of new wind and photovoltaic portfolios, located in Puglia, Sicily and Sardinia, and in Spain. Also in this area, we continued to invest in supporting the electrification of consumption, which will see, by 2030, the construction of 16 new primary substations and the laying of 2,500 km of new grids. We also wanted to emphasise in the Strategic Plan how crucial it is to pursue a transition that is not only ecological, but also fair and shared. More than 1,500 people have joined our Group, 41% of whom are under 30, giving many young people the chance of a secure job (more than 97% of contracts are permanent) with a net increase of 307 new colleagues. Involvement was at the heart of employee relations in 2022: the first Group Engagement Survey was carried out to measure the level of well-being and involvement of A2A employees, and the Group’s first ‘physical’ Convention was held, a fundamental moment of sharing. We also launched our second Corporate Intrapreneurship initiative: the Call For Sustainability, which saw the spontaneous participation of over 3,000 colleagues and the submission of 342 innovative ideas for the ecological transition. 4 A2A Report on Operations 2022 Letter to Shareholders and Stakeholders Bearing in mind the complex macroeconomic context, we have tried throughout 2022 to support our customers by not only offering different solutions according to the type of customer and the service rendered, but also by actively engaging with them, including being the first to produce communication campaigns aimed at raising awareness of good practices and responsible behaviour in terms of energy efficiency and resource conservation. We have also strengthened the involvement of the main stakeholders in the territories in which we operate by holding 9 listening forums; moments of discussion with our local stakeholders organized with the aim of creating synergies on the actions necessary for ecological transition. The meetings, in 6 regions, resulted in 30 project proposals, contributing to the development of shared value ideas and initiatives in line with the Group’s objectives. We are the first utility in Italy to achieve ISO 22301 certification in 2022 on the ability to invest in continuous improvement of business resilience and business processes. Consistency, combined with strategic thinking, has guided us in the decisions to be taken during the complex times that the energy sector has faced during the past year, and like every year, this document allows us to analyse and recount the results, both positive and negative, achieved by our Group, but above all it allows us to highlight the commitment that all our colleagues and we put into making the Life Company every day. To them, to the citizens, to the customers, to our shareholders, to the institutions, from our side and on behalf of the entire Board of A2A, our most sincere thanks. Letter to Shareholders and Stakeholders 2022 Report on Operations A2A 5 General Manager Renato Mazzoncini Chairman of the Board of Directors Marco Patuano Letter to Shareholders and Stakeholders Corporate boards Board of Directors Chairman Marco Emilio Angelo Patuano Deputy Chairman Giovanni Comboni Chief Executive Officer and General Manager Renato Mazzoncini Directors Stefania Bariatti Vincenzo Cariello Federico Maurizio d’Andrea Luigi De Paoli Gaudiana Giusti Fabio Lavini Christine Perrotti Secondina Giulia Ravera Maria Grazia Speranza Board of Statutory Auditors Chairman Giacinto Gaetano Sarubbi Statutory Auditors Maurizio Leonardo Lombardi Chiara Segala Alternate Auditors Antonio Passantino Patrizia Tettamanzi Independent Auditors EY S.p.A. Corporate boards 2022 Report on Operations A2A 7 Corporate boards 10 A2A Report on Operations 2022 Key figures of the A2A Group 1.1 Business Units The A2A Group operates in the production, sale and distribution of gas and electricity, district heating, environmental services and the integrated water cycle. These sectors are in turn attributable to the “Business Units” specified in the following scheme identified following the reorganization made by management: Generation and Trading • Thermoelectric, hydroelectric and other renewable plants • Energy Management Market • Sale of Electricity and Gas • Energy efficiency • Electric mobility Waste • Waste collection and street sweeping • Treatment • Disposal and energy recovery Smart Infrastructures • Electricity networks • Gas networks • Integrated water cycle • District Heating services • Heat management services • Development and management of technological infrastructures for integrated digital services • Public lighting Corporate • Corporate services This breakdown into Business Units reflects the organization of financial reports regularly analyzed by management and the Board of Directors in order to manage and plan the Group’s business. Key figures of the A2A Group 2022 Report on Operations A2A 11 1 Key figures of the A2A Group 1.1 Business Units 1.2 Geographical areas of activity 1.3 Group structure 1.4 Financial highlights at December 31, 2022 1.5 Shareholdings 1.6 A2A S.p.A. on the Stock Exchange 1.7 Alternative Performance Indicators (APM) 12 A2A Report on Operations 2022 Key figures of the A2A Group 1.2 Geographical areas of activity Thermoelectric plant Hydroelectric plant Photovoltaic plant Wind plant Biomass plant District heating plant Waste treatment plant Technological partnerships plant Updated at 12.31.2022 Pavia Monza Mantova Brescia Varese Lecco Lodi Sondrio Bergamo Cremona Como Milano Lombardia Key figures of the A2A Group 2022 Report on Operations A2A 13 1 Key figures of the A2A Group 1.1 Business Units 1.2 Geographical areas of activity 1.3 Group structure 1.4 Financial highlights at December 31, 2022 1.5 Shareholdings 1.6 A2A S.p.A. on the Stock Exchange 1.7 Alternative Performance Indicators (APM) 14 A2A Report on Operations 2022 Key figures of the A2A Group 1.3 Group structure Generation and Trading Market Waste Smart Infrasctructures Other companies 1 35.70% held through Linea Ambiente S.r.l.. 2 Il 30% held through A2A Integrambiente S.r.l.. This chart shows the most significant shareholdings of the A2A Group. Reference is made to annexes 3, 4 and 5 of the file of the Consolidated Financial Statements for a complete detail of shareholdings. 100% A2A gencogas 100% A2A Energiefuture 100% A2A Rinnovabili 100% A2A Energia 100% A2A Energy Solutions 41.34% Acinque 33.52% AEB 100% A2A Ambiente 100% Linea Green 100% A2A Ciclo Idrico 100% A2A Calore & Servizi 100% A2A Smart City 100% Unareti 95.60% LD Reti 91.60% Retragas 89% Camuna Energia 74.80% ASVT 50% Ergosud 94.72% LumEnergia 50% Metamer 100% Amsa 100% Aprica 100% AGRIPOWER 100% Linea Ambiente 100% Linea Gestioni 100% Lomellina Energia(1) 100% TecnoA 99.75% Acinque Energia 100% Acinque Ambiente 100% Lereti 100% Acinque Tecnologie 100% Gelsia 100% Gelsia Ambiente(2) 100% A2A Illuminazione Pubblica 100% RetiPiù 100% A2A Airport Energy Key figures of the A2A Group 2022 Report on Operations A2A 15 1.4 Financial highlights at December 31, 2022 (**) Income statement figures millions of euro 01 01 2022 12 31 2022 01 01 2021 12 31 2021 Revenues 23,166 11,549 Operating expenses (20,896) (9,400) Labour costs (765) (721) Gross Operating Income \- EBITDA 1,505 1,428 Depreciation, amortization, provisions and write-downs (818) (768) Net Operating Income \- EBIT 687 660 Result from non-recurring transactions 157 \- Financial balance (88) (70) Result before taxes 756 590 Income taxes (344) (36) Net result from discontinued operations 36 (4) Minorities (47) (46) Group result of the year 401 504 Gross Operating Income/Revenues 6.5% 12.4% 23,166 mln € Revenues 1,505 mln € Gross Operating Income 0.0904 € per share Dividend 401 mln € Result of the year (**) The figures serve as performance indicators as required by CESRN/05/178/B. 1 Key figures of the A2A Group 1.1 Business Units 1.2 Geographical areas of activity 1.3 Group structure 1.4 Financial highlights at December 31, 2022 1.5 Shareholdings 1.6 A2A S.p.A. on the Stock Exchange 1.7 Alternative Performance Indicators (APM) 16 A2A Report on Operations 2022 Key figures of the A2A Group Balance sheet figures millions of euro 12 31 2022 12 31 2021 Net capital employed 8,725 8,416 Equity attributable to the Group and minorities 4,467 4,303 Consolidated net financial position (4,258) (4,113) Consolidated net financial position/Equity attributable to the Group and minorities 0.95 0.96 Consolidated net financial position / EBITDA 2.8 2.9 Financial data millions of euro 01 01 2022 12 31 2022 01 01 2021 12 31 2021 Net cash flows from operating activities 1,260 1,135 Net cash used in investing activities (1,142) (1,595) Free cash flow (Cash Flow Statement figure) 118 (460) Energy scenario 12 31 2022 12 31 2021 Average of the PUN (Single Nationwide Price) Base load (Euro/MWh) 303.1 125.0 Average of the PUN (Single Nationwide Price) Peak load (Euro/MWh) 333.6 139.8 Average price of gas to the PSV* (Euro/MWh) 121.9 45.8 Average price of emission certificates EU ETS** (Euro/tonne) 81.3 53.4 (*) Price of gas of reference for the Italian market. (**) EU Emissions Trading System. Key figures of the A2A Group 2022 Report on Operations A2A 17 Group’s key operational indicators 12 31 2022 12 31 2021 Generation and Trading Thermoelectric production (GWh) 15,636 14,078 Hydroelectric production (GWh) 2,729 4,231 Wind production (GWh) 251 22 Photovoltaic production (GWh) 387 291 Electricity sold to wholesale customers (GWh) 14,791 14,043 Electricity sold on the Power Exchange (GWh) 18,726 18,909 Market Electricity sold to retail customers (GWh) 20,737 18,426 POD Electricity (#/1000) 1,491 1,368 of which POD Electricity Free Market 1,128 923 Gas sold to retail customers (Mcm) 2,677 2,711 PDR Gas (#/1000) 1,579 1,567 of which PDR Gas Free Market 1,043 929 Waste Waste collected (Kton) 1,785 1,861 Residents served (#/1000) 3,965 4,065 Waste disposed of (Kton) 3,368 3,423 Electricity sold by waste-to-energy (GWh) 2,121 2,082 Smart Infrastructures Electricity distributed (GWh) 11,238 11,422 Gas distributed (Mcm) 2,726 3,132 Water distributed (Mcm) 75 76 RAB Electricity (M€) 827 753 RAB Gas (M€) 1,482 1,466 RAB Water Cycle (M€) 511 411 Heat sales (GWht) 2,877 3,178 Cogeneration production (GWh) 429 297 1 Key figures of the A2A Group 1.1 Business Units 1.2 Geographical areas of activity 1.3 Group structure 1.4 Financial highlights at December 31, 2022 1.5 Shareholdings 1.6 A2A S.p.A. on the Stock Exchange 1.7 Alternative Performance Indicators (APM) 18 A2A Report on Operations 2022 Key figures of the A2A Group 1.5 Shareholding (*) 25 Municipality of Brescia 25 Municipality of Milan Market 45.4 Other municipalities 4.6 Key figures of A2A S.p.A. 12 31 2022 12 31 2021 Share Capital (euro) 1,629,110,744 1,629,110,744 Number of ordinary shares (par value 0.52 euro) 3,132,905,277 3,132,905,277 Number of treasury shares (par value 0.52 euro) - - % (*) Sources: Shareholders’ Register updated at dividend payment date (25 May 2022) and communications received in accordance with Art. 120 of Legislative Decree February 24, 1998, no. 58 (“TUF”). Key figures of the A2A Group 2022 Report on Operations A2A 19 1.6 A2A S.p.A. on the Stock Exchange A2A S.p.A. in figures (Italian Stock Exchange) Market capitalisation at December 30, 2022 (millions of euro): 3,900 Share capital at December 30, 2022 (shares): 3,132,905,277 Price at December 30, 2022 (€/share) 1.25 2022 Average market cap (millions of euro) 4,292 Average daily volumes (shares) 9,966,105 Average price (€/share) 1.37 Maximum price (€/share) 1.74 Minimum price (€/share) 0.95 Source: Bloomberg. A2A stock is also traded on the following platforms: Aquis, BlockMatch, CBOE, Chi-X, ITG Posit, Tradegate, Turquoise, UBS MTF. On May 25, 2022 A2A distributed a dividend equal to 0.0904 euro per share. A2A forms part of the following indices FTSE MIB STOXX Europe 600 STOXX Europe 600 Utilities EURO STOXX EURO STOXX Utilities MSCI Europe Small Cap WisdomTree International Equity S&P Global Mid Small Cap ESG Indices MIB ESG FTSE4Good ECPI Indices Ethibel Sustainability Index Excellence Europe EURO STOXX Sustainability Euronext Vigeo Index: Eurozone 120 Standard Ethics Italian Index Bloomberg Gender Equality Index Solactive Climate and Energy Transition Index Source: Bloomberg and company information. In 2022 A2A obtained the following ESG ratings: Assessment Rating ESG CDP Climate Change A- CDP Water A- FTSE ESG Rating 3.7/5 ISS ESG B- MSCI BB Refinitiv B+ Standard Ethics EE+ S&P CSA 77/100 Sustainalytics 21.0/40 Vigeo 64/100 Debt Rating Current Standard & Poor’s M/L Term Rating BBB Short Term Rating A-2 Outlook Negative Moody’s M/L Term Rating Baa2 Outlook Negative Source: Rating Agencies. Moreover, A2A has been included in the Ethibel Excellence Investment Register and in the Ethibel Pioneer Investment Register. 1 Key figures of the A2A Group 1.1 Business Units 1.2 Geographical areas of activity 1.3 Group structure 1.4 Financial highlights at December 31, 2022 1.5 Shareholdings 1.6 A2A S.p.A. on the Stock Exchange 1.7 Alternative Performance Indicators (APM) 20 A2A Report on Operations 2022 Key figures of the A2A Group A2A: price and volumes Source: Bloomberg. A2A vs FTSE MIB and EURO STOXX UTILITIES (Price December 30, 2021 = 100) In 2022, global equity markets were heavily penalized by the outbreak of the conflict between Russia and Ukraine and the significant rise in inflation, mainly driven by increases in energy prices, which prompted central banks to adopt repeated restrictive monetary policies: in particular, the ECB raised rates in July for the first time since 2011 to the current 2.5%, while the FED increased its benchmark rate to 4.25% with seven consecutive hikes. The FTSE MIB lost 13.3%, making it one of the worst in Europe. Very heavy declines also for the American stock exchange (Nasdaq -33% and S&P 500 -20%) and the Chinese stock exchange (-14% also impacted by the anti-Covid policy). A positive exception was the UK stock exchange (+1%), where the weight of the oil & gas and mining sectors, the sectors with the best annual performance in Europe (+24% and +4% respectively), is significant. The performance of companies in the utilities sector was affected by the rising interest rate environment and was heavily penalized by the high volatility of commodity prices, as well as by government interventions to mitigate high energy prices. A2A (-27.6%) underperformed the FTSE MIB index, but recorded the best performance among Italian multi-utilities, thanks to a significant recovery in the last months of the year supported by corporate results and the update of the Strategic Plan. Historical volatility in 2022 A2A: 30.2% FTSE MIB: 24.2% Key figures of the A2A Group 2022 Report on Operations A2A 21 1.7 Alternative Performance Indicators (APM) Dividend euro per share Dividend Yield Earnings per share euro per share 1 Key figures of the A2A Group 1.1 Business Units 1.2 Geographical areas of activity 1.3 Group structure 1.4 Financial highlights at December 31, 2022 1.5 Shareholdings 1.6 A2A S.p.A. on the Stock Exchange 1.7 Alternative Performance Indicators (APM) 22 A2A Report on Operations 2022 Key figures of the A2A Group Gross Operating Income millions of euro Net Financial Position/EBITDA millions of euro ROE Net Investments millions of euro ROI Net Financial Position millions of euro Key figures of the A2A Group 2022 Report on Operations A2A 23 Alternative Performance Measures (APM) In this Report on Operations, a number of Alternative Performance Measures (APM) have been used that are different from the financial indicators expressly provided for by the international accounting standards IFRS-EU adopted by the Group. These alternative measures are used by the A2A Group in order to more effectively submit information on the profitability of the business in which it operates as well as on the financial situation, useful to improve the overall capacity to assess financial and equity performance. These indicators are shown in the “Summary of results and financial position of the A2A Group”. For the Income Statement and the Balance Sheet, the comparative values refer to December 31, 2021. With reference to alternative indicators, on December 3, 2015, Consob issued Communication no. 92543/15, which transposes the Guidelines on the use and presentation of Alternative Performance Measures as part of regulated financial information, issued on October 3, 2015 by the European Securities and Markets Authority (ESMA). These Guidelines \- which have updated the CESR Recommendation on Alternative Performance Measures (CESR/05 \- 178b) \- are intended to promote the usefulness and transparency of alternative indicators to improve their comparability, reliability and understanding. On July 15, 2020, ESMA also published a new version of its Guidelines on disclosure requirements pursuant to the prospectus regulation (ESMA/31-62-1426), applicable from May 5, 2021 and updating the previous CESR Recommendations (ESMA/2013/319), with the aim of providing issuers with indications relating to the assessment of relevant information to be included in the financial disclosure. In accordance with the Guidelines, the descriptions, content and bases of calculation used for the construction of the Alternative Performance Measures adopted by the Group are described below. Gross Operating Margin Gross Operating Margin is an alternative indicator of operating performance, calculated as the sum of “Net operating income” plus “Depreciation, amortization, provisions and write-downs”. This APM is used by the A2A Group as financial target in presentations both within the Group (Business Plans) and external (presentations to financial analysts and investors) and represents a useful measure to assess the operating performance of the Group (both as a whole and in terms of individual Business Unit), also through a comparison between the operating results of the reporting period with those relating to previous periods or years. This indicator also allows conducting analyses on operational trends and measure performance in terms of operational efficiency over time. Result from non-recurring transactions The Result from non-recurring transactions is an alternative performance measure designed to highlight the capital gains/losses arising from the valuation at fair value of non-current assets sold and the results from the sale of equity investments in unconsolidated subsidiaries and associated companies and other non-operating income/expenses. This measure is positioned between net operating income and the financial balance. In this way net operating income is not affected by non-recurring operations, making it easier to measure the effective performance of the Group’s ordinary operating activities. Net fixed capital Net fixed capital is determined as the algebraic sum of: • tangible assets; • intangible assets; • capex accounted for using the equity method and other non-current financial assets; • other non-current assets and liabilities; • deferred tax assets and deferred tax liabilities; • provisions for risks, charges and liabilities for landfills; • employee benefits. This APM is used by the A2A Group as financial target in presentations both within the Group (Business Plans) and external (presentations to financial analysts and investors) and represents a useful measure of the net fixed assets of the Group as a whole, also through the comparison between the reporting period with those relating to previous periods or years. This indicator also allows conducting analyses on operational trends and measure performance in terms of operational efficiency over time. 1 Key figures of the A2A Group 1.1 Business Units 1.2 Geographical areas of activity 1.3 Group structure 1.4 Financial highlights at December 31, 2022 1.5 Shareholdings 1.6 A2A S.p.A. on the Stock Exchange 1.7 Alternative Performance Indicators (APM) 24 A2A Report on Operations 2022 Key figures of the A2A Group Net Working Capital and Other Current Assets/Liabilities Net Working Capital is determined as the algebraic sum of: • inventories; • trade receivables • trade payables; Other current assets/liabilities include: • other current assets; • other current liabilities; • current tax assets/tax liabilities. This APM is used by the A2A Group as financial target in presentations both within the Group (Business Plans) and external (presentations to financial analysts and investors) and represents a useful measure of the ability to generate cash flow from operations within a period of twelve months, also through the comparison between the reporting period with those relating to previous periods or years. This indicator also allows conducting analyses on operational trends and measure performance in terms of operational efficiency over time. Invested capital/Net invested capital Invested capital/Net invested capital is calculated as the sum of Net fixed capital, Net working capital and Assets/Liabilities held for sale. This APM is used by the A2A Group as the financial target in presentations both within the Group (Business Plans) and external (presentations to financial analysts and investors); it represents a useful measure for the evaluation of total net assets, both current and fixed. Sources of funds Sources of funds are calculated by adding “Shareholders’ Equity” and “Total Net Financial Position”. This APM is used by the A2A Group as financial target in presentations both within the Group (Business Plans) and external (presentations to financial analysts and investors) and represents the various sources by means of which the A2A Group is financed and the degree of autonomy that the A2A Group has in comparison with third party capital. This indicator also allows measuring the financial strength of the A2A Group. Net financial position/Net debt Net financial position/Net debt is an indicator of the financial structure, calculated as the sum of net financial position beyond one year and net financial position within one year. Specifically, total net financial position beyond one year is obtained from the algebraic sum of: • Total medium and long-term debt: the item includes the non-current portion of bonds, bank loans, financial leasing and other non-current liabilities; Pursuant to the new ESMA recommendations, this item should also include the non-current portion of trade payables and other non-interest-bearing payables with a significant implicit financing component (payables with maturities of over 12 months); • Total medium and long-term financial receivables: this item includes Non-current financial assets (including those with related parties) and Other non-current assets. The net financial position within one year is derived from the algebraic sum of: • Total short-term debt: this item includes the portion due within twelve months of bonds, bank loans, financial leasing, current financial liabilities to related parties and other current liabilities; • Total short-term financial receivables: this item includes Other current financial assets (including to related parties) and Other current assets; • Cash and cash equivalents and Cash and cash equivalents included in assets held for sale. This APM is used by the A2A Group as financial target in presentations both within the Group (Business Plans) and external (presentations to financial analysts and investors) and is useful for the purposes of measuring the Group’s financial debt, also through the comparison between the reporting period with those relating to previous periods or years. The A2A Group’s net financial position is calculated in accordance with Recommendations ESMA/31-62-1426 of July 15, 2020. Key figures of the A2A Group 2022 Report on Operations A2A 25 Capex in tangible and intangible assets Capex in tangible and intangible assets are extrapolated from the information contained in the Notes of the Balance Sheet. This APM is used by the A2A Group as financial target in presentations both within the Group (Business Plans) and external (presentations to financial analysts and investors) and is a useful measure of the resources used in the maintenance and development of the investments of the A2A Group (as a whole and in terms of individual Business Unit), also through the comparison between the reporting period with those relating to previous periods or years. This allows the A2A Group to conduct analyses on investment trends and measure performance in terms of operational efficiency over time. Investors should not place undue reliance on these APM and should not consider all APM as: (i) an alternative to operating or net profit as calculated in accordance with IFRS; (ii) an assessment of the Group’s ability to meet cash needs alternative to as deduced from the cash flow from operating, investing or financing activities (as determined in accordance with IFRS); or (iii) an alternative to any other performance measure provided by IFRS. These Alternative Performance Measures derive from the historical financial information of the A2A Group and are not intended to provide indications relating to future financial performance, financial position or cash flow of the Group. Moreover, these APM were calculated uniformly for all periods. Special Items Special Items are non-recurring events that occurred during the year and had an effect on the consolidated income statement. Ordinary Net Result (Ordinary Net Profit) The Ordinary Net Result is calculated by excluding the impact of Special Items from each item in the Income Statement. ROI ROI, or return on net invested capital, is the ratio of net operating margin to net invested capital. It aims to measure the ability to generate wealth through operations and thus to remunerate equity and debt capital. ROE ROE, i.e. return on equity, is the ratio of ordinary net result to equity. It is intended to measure the profitability obtained by risk investors. 1 Key figures of the A2A Group 1.1 Business Units 1.2 Geographical areas of activity 1.3 Group structure 1.4 Financial highlights at December 31, 2022 1.5 Shareholdings 1.6 A2A S.p.A. on the Stock Exchange 1.7 Alternative Performance Indicators (APM) 28 A2A Report on Operations 2022 Responsible sustainability management and sustainable finance In a year of strong economic, geopolitical and social contrasts, A2A has kept sustainability and its purpose as a Life Company at the center of its strategy and daily operations. On April 28, 2022, the sixth Group Integrated Report was presented to the A2A Shareholders’ Meeting, which for the fifth year, is also the Non-Financial Statement pursuant to Legislative Decree 254/16. This document continues to be drawn up according to rigorous and internationally shared standards and methodologies, in particular the Integrated Reporting Framework (IR Framework) and the international standards of the Global Reporting Initiative (GRI). In this edition, in line with the new Strategy, the long-term Sustainability Plan \- 2021-2030 \- was updated, which, in addition to incorporating the sustainability objectives contained in the Strategic Plan, includes more specific objectives linked to its “enabling levers”, i.e.: Digital, People and Governance. In addition, for the second year, a new section has been included dedicated to the management of financial risks connected with climate change, in line with the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD), with the aim of providing the world of finance with all the information it needs to properly assess A2A’s strategy for managing climate-related risks and opportunities. The Integrated Report 2021 was awarded the Oscar di Bilancio for Integrated Reporting with the following reason: “An accomplished and mature integrated report that also testifies to the company’s continuous improvement efforts in this field. Comprehensive, rich in information, but with great readability and ease of linking, including hypertext. The connectivity between the different layers of indicators is enhanced within the document, including through the adoption of an integrated approach, an accompanying document and multimedia and interactive tools, thus creating a dialogue between information in the report and online. The focus on illustrating strategies, risks and opportunities should also be emphasised. Pleasant graphic choices.” Environmental In 2022, energy production was characterized and influenced by the strong macroeconomic imbalances resulting from the post-pandemic economic crisis and the beginning of the war in Ukraine. In this context, the decarbonization process undertaken by A2A for its own plants (such as the closure of the Monfalcone coal-fired power plant in 2020) clashed with the need to ensure a stable and constant supply of energy to the country; for this reason, the San Filippo del Mela and Monfalcone plants, fuelled by fuel oil and coal respectively, resumed operations in 2022\. As a result, direct CO2 emissions \- Scope 1 emissions \- related to energy production increased. Despite the contingent situation, the Group wished to reaffirm its commitment to the decarbonization pathway and on November 22, 2022 A2A approved the update to the 2021-2030 Strategic Plan, which confirmed the target of zero direct and indirect emissions (Scope 1 and 2) generated by the Group to 2040\. Through the further development of renewable energies, carbon capture solutions and the phase-down of carbon-intensive businesses, the Group will be able to achieve the ambitious Net Zero target of 2040 10 years ahead of EU targets. In 2022, in fact, the Group started working on the definition of a specific roadmap to achieve this goal and on the testing of carbon capture technologies. A2A Ambiente and A2A S.p.A. were awarded Hercules funding under the European Horizon research funding schemes. This project involves the small-scale realisation of an experimental prototype for CO2 capture using calcium oxide (CaO) at the Silla 2 waste-to-energy plant in Milan. The Group has also published a commitment document to support the decarbonization of its entire value chain in which the four thematic areas outlining the pathway to Net Zero are made explicit. Specifically: • Accelerating the energy transition (increasing production from RES, optimizing existing energy production facilities); • Invest responsibly (research and development geared towards CCS \- Carbon Capture and Storage \- projects or low environmental impact investments); • Promote positive-impact engagement (use admissions criteria for suppliers based on the possibility of guaranteeing environmentally friendly products and services in tenders); • Implement sustainable business practices (replacement of company fleet or promotion of low-impact transport solutions in the home-work commute of employees). Social In 2022, a path of dialogue with the main stakeholders of the territories in which A2A operates has been set up, enriching the programme with 3 new geographical areas in southern Italy (Apulia, Sicily and Calabria) together with the 6 ‘historical’ appointments (Bergamo, Brescia, Sondrio, Milan, Friuli Venezia-Giulia and Piedmont). The 2022 activity led to the identification, based on the results of the first cycle in 2021, of the main barriers to ecological transition in each territory and to the proposal of shared, concrete and ‘tailor-made’ territorial solutions to overcome them. Furthermore, in December 2022, A2A organized the national forum ‘In the interest of future generations’, an event dedicated to the reform of Article 9 of the Constitution. At the event, the paper prepared by Francesco Clementi, Professor of Comparative Public Law at the Sapienza University of Rome, on the introduction of the new paragraph to protect the environment, biodiversity and ecosystems, in the interest of future generations, was presented. The conference created an important opportunity for reflection and debate on the implications and importance of this reform, promoting a space for dialogue and confrontation between young people, institutions and business. A2A has included Generation Z in all these engagement programmes but has also realized a targeted and concrete 2.1 Responsible sustainability managementand sustainable finance Responsible sustainability management and sustainable finance 2022 Report on Operations A2A 29 project for the participation of young people in the sustainability debate: the drafting of the Group’s first Sustainability Report dedicated to young people. The report, covering data from the year 2021, was written and produced together with a selection of Gen Z talents who were immersed in the sustainable reality of A2A for a week. The selected talents, with the support of Giffoni Innovation Hub and Deloitte, were accompanied on a path to understanding A2A’s Integrated Report 2021 with the unprecedented task of reinterpreting it in their own language and making it as usable as possible for their peers. The results of this experience were recounted during the Giffoni Film Festival 2022 in a listening and debate space dedicated entirely to the new generations. Also presented at the Giffoni Film Festival was ‘In viaggio con Azzurra’, a short film dedicated to children and safeguarding the planet. The protagonists are some teenagers and Azzurra, the comic-strip character born from an idea of A2A and icon of a generation sensitive to environmental issues. She tells the story of the “sustainable journey” of four young people who decide to reach a concert on foot and wants to emphasise the importance of individual behaviour for the benefit of the whole community. Throughout the year 2022, as far as educational activities were concerned, schools were provided with a content-rich educational offer that also met the new digital needs of the school world. April and May saw the completion of two educational projects aimed at schools throughout Italy: “Sustainability Olympics” and “Ecogame A2A \- Energy Transition”. Webinars for teachers continued and 26 Intercultura scholarships were made available for deserving young people for STEAM language study programmes abroad. Educational visits to A2A plants were attended by 2,740 students and teachers. In addition, a 40-hour certified PCTO (Percorsi per Competenze Trasversali e per l’Orientamento) was launched, involving 15,303 high school students to learn the new skills needed for professions in the energy sector. Finally, in 2022, following the reform of the third sector and the entry into force of the RUNTS (Registro Unico Nazionale del Terzo Settore), Banco dell’Energia was transformed from a non-profit committee to a Foundation Philanthropic Body. In 2022, the Bank consolidated its commitment to continue promoting the “Together to Fight Energy Poverty” Manifesto. In the last months of 2022, the engagement activities started at the end of 2021 were followed up, which led to new stakeholders joining, reaching 60 signatories. The year 2022 was full of new projects for the Bank: the “Energy in the Suburbs” initiative was followed up in other Italian territories (Rome and Reggio Calabria). Finally, in December 2022, the project “Conscious and sustainable access to energy” was presented in collaboration with the Italian Red Cross, which will affect more than 400 beneficiaries living in six different Italian cities, and the project “Condomini Solidali” to support the Social Housing structures dedicated to the elderly of the Community of Sant’Egidio in Rome. At December 31, 2022, Banco dell’Energia has collected and donated more than 6.5 million euro and helped more than 10,000 families. Governance/finance In 2022, the company has also been confirmed in nine ESG ethical indices (MIB ESG, FTSE4Good Index, ECPI ESG Equity, Ethibel Sustainability Index Excellence Europe, EURO STOXX Sustainability Index, Euronext Vigeo Index, Eurozone 120, Standard Ethics Italian Index, Solactive Climate Change Index, Bloomber Gender Equality Index). In June 2022, Standard Ethics, an independent rating agency that measures corporate sustainability, announced that it has raised A2A’s Corporate Rating to ‘EE+’ from the previous ‘EE’ with a ‘Positive’ outlook, positioning A2A as the company in its sector with the highest rating. This important achievement won us the Best ESG rating Award from Milano Finanza at the ESG Awards ceremony. In 2022, A2A gave further impetus to the development of Sustainable Finance products. In February, the updated Sustainable Finance Framework was published, incorporating the more ambitious sustainability targets of the 2021-2030 Strategic Plan. The Sustainable Finance Framework, which represents the set of guidelines that strengthen the link between the Group’s financial strategy and sustainable strategy, combines two approaches: the Green Use of Proceeds, which allows utmost transparency regarding the use of proceeds for specific projects, and the Sustainability-Linked component, which allows an overall reading of the Group’s longer-term strategy, linking debt instruments to one or more of the Group’s sustainability objectives. The Sustainable Finance Framework, which covers any type of financial instrument, has been prepared in compliance with the Green Bond Principles (2021) and Sustainability-Linked Bond Principles (2020) published by the International Capital Market Association (ICMA), and the Green Loan Principles (2021) and Sustainability-Linked Loan Principles (2021) published by the Loan Market Association (LMA). Vigeo Eiris, one of the leading international ESG rating agencies, issued a Second Party Opinion confirming the robustness of the Sustainable Finance Framework and attesting its alignment with ICMA and LMA principles. The agency also highlighted A2A’s 2 Responsible sustainability management and sustainable finance 2.1 Responsible sustainability management and sustainable finance 30 A2A Report on Operations 2022 Responsible sustainability management and sustainable finance commitment to the development of sustainable finance and its “Advance” position as an issuer. As part of the new Sustainable Finance Framework, three important funding transactions were concluded for the Group: • a new Sustainability-Linked Bond (amount of 500 million euro and duration of 6 years), linked to the achievement of the target for installed capacity from renewable sources. This important goal contributes to the achievement of UN SDGs 7 and 13, and • two new Green Bonds (600 million euro and duration of 4 years the first, 650 million euro and duration of 8 years the second) the net proceeds of which will go to finance strategic circular economy and energy transition projects aligned with the European Taxonomy (in particular the "climate change mitigation" objective). As a result of these operations, the share of ESG debt in total gross debt at December 31, 2022 was 58%. In addition, on June 30, 2022, A2A entered into a new revolving credit facility (RCF) Sustainability-Linked, amounting to 410 million euro and with a duration of 3 years, linked to the achievement of three objectives in the areas of Social and Governance (reduction of the accident frequency index, increase in the percentage of the order to suppliers assessed with ESG indicators and reduction of the wage gap between men and women). The line provides for a mechanism for adjusting the interest margin both if A2A reaches the set targets (step down) and if A2A does not reach said targets (step up). The amounts related to the potential savings or higher costs will be donated by A2A to the Banco dell'Energia Onlus and will therefore benefit the community. Finally, A2A has further expanded its range of sustainable tools, also extending it to the insurance world, with the creation of a Civil and General Liability insurance solution linked to the achievement of five sustainability objectives \- which concern workplace health and safety \- and built around the “Social factor” of ESG criteria (Environmental, Social, Governance). Among these: inspection visits to the A2A Group’s construction sites; access to the health training initiatives proposed by A2A and to the safety training aimed at its employees; percentage of orders placed to suppliers evaluated with ESG indicators; verification of the maintenance of the number of ISO45001 certified Group companies. Responsible sustainability management and sustainable finance 2022 Report on Operations A2A 31 34 A2A Report on Operations 2022 Scenario and Market Overview During 2022, global economic activity was affected by several factors that dampened its growth pace, especially in the second half of the year. Russia’s war on Ukraine has destabilized energy commodity markets and fomented uncertainty about food security especially in emerging economies. In conjunction with the conflict in Ukraine, the closure measures taken in China with the zero-Covid strategy have also put pressure on global supply chains. The combined effect of the above and tensions in the commodity markets fuelled inflation. Commodity prices proved volatile and prone to supply-side risks, while financial conditions deteriorated, reflecting the global tightening of monetary policy and rising yields. According to the World Bank’s preliminary estimate, estimated world GDP growth is expected to average 2.9% in 2022 compared to a growth of 5.9% in the previous year. In advanced economies, conditions deteriorated sharply due to declining confidence, high inflation and the rapid tightening of monetary policy. In the US, which is undergoing one of the most aggressive rounds of monetary policy tightening in recent history, growth has slowed to 1.9% in 2022\. In the UK, high consumer inflation, rising mortgage costs and tight financial conditions are exerting a strong drag on private consumption and investment, which has led to a contraction of GDP since Q3. In China, a number of factors negatively impacted economic activity such as the drastic mobility restrictions implemented as part of the zero-Covid strategy as well as the continuing weakness in the residential construction sector. GDP growth in 2022 stood at 3.0% (8.1% in 2021), which is the lowest level in more than 40 years and significantly below the authorities’ target of 5.5%. In Russia, the economy has entered a severe recession with GDP 2022 expected to be -5.5%. Economic activity in the Eurozone, after strong growth in the first half of the year, slowed down sharply in the third quarter and is expected to continue in the fourth quarter. High inflation and tighter financing conditions curbed spending and production by reducing households’ real incomes and pushed up costs for businesses. Macroeconomic projections for the Eurozone, formulated by Eurosystem experts in December, forecast annual GDP growth in real terms of 3.4% in 2022\. As far as Italy is concerned, GDP showed an increase in the first three quarters of the year. According to the Bank of Italy’s estimates, economic activity weakened in the fourth quarter compared to the previous period; this was due to the effects of persistently high energy prices and the dampening of the recovery in the sectors most affected by the pandemic, such as trade, transport and accommodation services. By 2022 as a whole, GDP is expected to have increased by almost 4%. According to the estimate released by Eurostat, inflation in the Eurozone stood at +9.2% in December, the highest level since the creation of the Economic and Monetary Union, compared to +10.1% in the previous month and +5.0% in the corresponding month of the previous year. In December, the largest contribution to inflation came from food, alcohol and tobacco (+2.79%), followed by the energy component (+1.83%). The average inflation for the year is equal to +8.4%. In Italy, inflation reached new highs in the autumn months, driven by the energy component, which continues to spread to other commodity sectors in both goods and services. According to ISTAT estimates, inflation stood at +11.6% year-on-year in December (up from +11.8% in the previous month). In the average year, the inflation assumption for 2022 is +8.2%. At its meetings in October and December, the Governing Council of the ECB further raised key interest rates, by 0.75 and 0.5 percentage points respectively, bringing the overall increase started in July to 2.5 percentage points; it announced that rates would still have to rise significantly and at a steady pace to support a timely return of inflation to the medium-term target while ensuring price stability. At its December meeting, the Council also announced the criteria according to which it will normalize the Eurosystem holdings of securities for monetary policy purposes. At its last two meetings in November and December, the Federal Reserve raised the target federal funds rate by 75 and 50 basis points to between 4.25 and 4.5%. The year 2022 saw the single currency progressively weaken against the dollar, due to the monetary policy divergence between the European Central Bank and the Federal Reserve, with the EUR/USD exchange rate starting from average values of 1.13 in January and February and reaching a low of 0.98 in October, before returning to 1.06 in December. On average for 2022, the EUR/USD exchange rate was 1.05 dollars, down 11.0% from the previous year. Outlook In the World Bank’s January forecast, the outlook for the global economy deteriorated in the face of heightened geopolitical uncertainty, high and steadily rising inflation, and strained financial conditions. The deterioration is generalized and per capita income growth will be slower than during the previous decade. Global growth is expected to slow abruptly in 2023 to 1.7% (1.3 percentage points below previous forecasts), making it the weakest in almost three decades after the recessions of 2009 and 2020, before recovering to 2.7% in 2024\. The US, Europe and China are experiencing a period of marked weakness and the resulting fallout is exacerbating adverse situations in emerging markets and developing economies. Further negative shocks such as higher inflation, more restrictive policies, financial tensions, greater weakness in major economies or increasing geopolitical tensions could push the global economy into recession. The US economy is expected to slow down further over the next two years as the Federal Reserve monetary policy moves into restrictive territory, holding back growth to +0.5% in 2023 and +1.6% in 2024, according to the latest World Bank forecast. The latter, as far as China is concerned, expects growth to rise to 3.1 Macroeconomic scenario Scenario and Market 2022 Report on Operations A2A 35 4.3% in 2023 and 5.0% in 2024: this is 0.9 percentage points below previous forecasts mainly due to longer-than-expected pandemic-related disruptions in production cycles, weaker external demand and prolonged weakness in the real estate sector. The outlook for the Eurozone deteriorated slightly and signalled weaker growth than previously projected. Eurosystem experts expect a short and mild recession at the turn of the year. In a context where the war in Ukraine continues to produce economic consequences fuelling strong inflationary pressures, consumer and business confidence remains subdued, real disposable income is being eroded, and sharply increased cost pressures are reducing output, particularly in energy-intensive sectors, the rate of real GDP growth is expected to fall sharply from 3.4% in 2022 to 0.5% in 2023 and then rise again to 1.9% in 2024\. Compared to the September projections, the outlook for GDP was revised downwards by 0.4 percentage points for 2023 while it remains unchanged for 2024. As regards Italy, according to the Bank of Italy, economic activity, sustained for most of 2022 by the robust dynamics of consumption and investments, weakened in the last months of the year and will remain weak also in the current quarter to gradually recover from the spring; growth should gain momentum from 2024 as inflationary pressures and uncertainty diminish. On average for the year, GDP is expected to increase by 0.6% in 2023 and 1.2% in 2024\. The unemployment rate is expected to decline gradually from 8.2% on average in 2023 to 7.9% in 2024. Against a backdrop of exceptional uncertainty, Eurosystem experts significantly revised upwards their inflation projections for the Eurozone from an average of 8.4% in 2022 to 6.3% in 2023, and then downwards to 3.4% in 2024\. The decline in inflation over the time horizon reflects the effects of declines related to the energy component, the gradual impact of the normalization of the ECB monetary policy, the weaker outlook for growth and lower food commodity prices. As far as Italy is concerned, the consumer price index of 8.2% in 2022 is expected to stand at 6.5% in 2023, before falling to 2.6% in 2024\. This descent is strongly dependent on the assumption of a progressive decline in commodity prices, the effects of which would only be partly offset by the acceleration of wages. The Governing Council of the European Central Bank (ECB), after raising key interest rates by 2.5 percentage points during 2022, assessed that they will still have to rise significantly and at a steady pace to support a timely return of inflation to the medium-term target. However, future rate decisions will continue to be made on the basis of the evolution of the inflation and growth outlook. The Council also decided to relax the conditions applied to the targeted longer-term refinancing operations (TLTRO3). The portfolio of the financial asset purchase program (FPA) will be reduced at a measured and predictable pace, averaging 15 billion euro per month from the beginning of March until the end of the second quarter of 2023\. In contrast, the reinvestment of maturing bonds under the Pandemic Emergency Program (PEPP) will continue at least until the end of 2024 and will be conducted in a flexible manner. After raising the target range on federal funds to between 4.25% and 4.5%, the Federal Reserve also specified that interest rates would rise to a higher level than previously planned in order to bring inflation back to a level compatible with the 2% target. Macroeconomic projections by leading analysts point to a EUR/USD exchange rate fluctuating in a range between 1.05-1.15 in the two-year period 2023-24 in an environment characterized by a particularly restrictive monetary policy in both the United States and Europe and providing support for the respective currencies. 3 Scenario and Market 3.1 Macroeconomic scenario 3.2 Energy market trends 36 A2A Report on Operations 2022 Scenario and Market Electricity As far as the national electricity market is concerned, in Italy in 2022 there was a net requirement of 316,827 GWh, down 1.0% compared to the 2021 requirement (source: Terna); in seasonally adjusted terms, and corrected for calendar and temperature, the change is equal to -1.5%. The above requirements were met 55.3% from non-renewable sources, 31.1% from renewable sources and the remainder from imports. In 2022, there was an increase in exports (+16.4%) compared to 2021. Net energy production in 2022 was 276,373 GWh, down 1.3% compared to the previous year. In 2022, production from Renewable Energy Sources (RES) decreased 13.1% year-on-year to 98.4 TWh. Specifically, the photovoltaic source is up 11.8%, while wind (-1.8%) and geothermal (-1.6%) are down; the hydroelectric source is down -37.7% due to the low hydraulicity of the period. Thermoelectric production increased, showing +6.1% compared to 2021 and stood at 193,287 GWh. National production, excluding pumping, accounted for 87.2% of the demand for electricity, while net imports satisfied the remainder. The average value of the PUN Base Load in 2022 shows an increase of +142.5% compared to 2021, reaching 303.1 €/MWh. The dynamic is mainly driven by a significant rise in gas costs, to which the price of energy is correlated, exacerbated by the Russia-Ukraine conflict; low levels of domestic supply, particularly hydroelectricity in the North, also support the PUN growth. The PUN in January 2022 stood at 224.5 €/MWh, reaching a high of 543.2 €/MWh in August, as tensions related to the reduction in Russian gas supplies escalated. The progressive reduction in gas prices in the subsequent period led to a PUN of 294.9 €/MWh in December. Average prices on the rise also for the price in the hours of high load (PUN Peak Load) with a value that stood at 333.6 €/MWh (+138.7% compared to 2021). The average price during off-peak hours (PUN Off-Peak) was 286.3 €/MWh, up +145.4% compared with the previous year. For all of 2023, forward curves indicate Base Load PUN prices with average values close to 171.9 €/MWh. Natural Gas The dynamics observed in the Italian gas market in 2022 are part of the scenario marked by the Russia-Ukraine conflict, reflecting the direct and indirect effects produced on international demand, flows and raw material prices. In 2022, Italy’s natural gas consumption fell to 68,959 million cubic metres (-9.5%), falling below the levels of 2020, which was characterized by the start of the Covid-19 health emergency. The downturn affected the entire year, being more pronounced in the last four months when the recessionary effects triggered by the Russian-Ukrainian crisis were compounded by mild weather conditions (source: Snam Rete Gas). Consumption in the industrial and civil sectors decreased, with volumes of 11,921 million cubic metres (-15.2% on 2021) and 28,770 million cubic metres (-13.6%) respectively. Consumption also decreased in the thermoelectric sector, more moderately, to 25,103 million cubic metres (-3.4%). On the supply side, in correspondence with lower demand and a substantially unchanged national production, there was a drop in natural gas imports, down to 68,658 million cubic metres (-4.2%), which accounted for 95.7% of national demand net of storage trends. Domestic production, which satisfied the remainder, stood at 3,107 million cubic metres (-0.5%). Regarding prices, the average price of gas to the PSV for 2022 rose to record levels and stands at 121.9 €/MWh, up +165.9% compared to 2021\. The PSV, with a value of 86.0 €/MWh in January 2022, continues the upward trend that began in the last quarter of 2021 and has characterized a good part of the year; in August, the highest value of the year was recorded at 233.5 €/MWh. Prices then decreased in October, due to full storage and mild temperatures, to the previous year’s levels and recovered in December to a value of 116.6 €/MWh. The price dynamics on the main European hubs were similar: the average price of gas to the TTF for 2022 amounted to 120.5 €/MWh, up +163.7% compared to 2021. The trend in the respective prices resulted in a PSV-TTF differential of 1.41 €/MWh for the reporting period, a significant increase compared to the differential of 2021 (0.15 €/MWh). Gas prices on the main European markets are expected to decrease in 2023, with an expected average price of gas to the TTF of 60.6 €/MWh and to the PSV of 61.9 €/MWh; the respective forward curves show a positive PSV-TTF differential around 1.35 €/MWh. Oil and coal In 2022, oil prices had an average value of 98.8 $/bbl, up +39.6% compared to the previous year. The upward momentum is concentrated in the first half of the year, reaching in June 2022 the highest level since 2012 and standing at 117.4 $/bbl. Starting in July, the trend reversed to reach an annual low of 81.4 $/bbl in December. In 2022 the upward dynamic of prices expressed in €/bbl (+56.6%) is emphasised by the depreciation of the euro against the dollar, down 11.0% compared to 2021 (1.05 USD/EUR). For the year 2023, oil forward curves indicate prices with average values close to 84.7 $/bbl. The Energy Information Administration (EIA) reported that global oil demand in 2022 averaged 99.4 million barrels per day. The EIA expects global oil demand to increase by about 1.1 million barrels per day to 100.5 million barrels per day in 2023\. Global oil demand is then expected to grow further to 102.2 million barrels per day in 2024 driven mainly by growth in non-OECD countries, especially India and China. However, these predictions are subject to many uncertainties including 3.2 Energy market trends Scenario and Market 2022 Report on Operations A2A 37 future global economic development trends, continuing geopolitical tensions, and how the effects of the pandemic are still being managed in various countries including China. OPEC crude production of member countries averaged 26.7 million barrels per day in 2022\. The EIA predicts that OPEC crude production will reach 28.9 million barrels per day in 2023 and will rise further to 29.5 million barrels per day in 2024\. US crude oil production averaged 11.9 million barrels per day in 2022; increased production in the Permian region drives the projected growth in US production with the EIA estimating an average of 12.4 million barrels per day in 2023 and 12.8 million barrels per day in 2024: the highest US crude oil production ever recorded. Given Russia’s role in global crude oil production, forecasts regarding production volumes and the possible use of strategic reserves could undergo significant variations in relation to the evolution the crisis in Ukraine. Coal also accelerated its growth, starting from January prices of 170.5 $/ton, peaking in July at 395.1 $/ton and then falling back and closing in December at 227.7 $/ton. The average price for the year 2022 was 292.8 $/ton, up 137.4% compared to the previous year (123.3 $/ton). The depreciation of the euro against the dollar increases the upward trend in prices expressed in euro (+166.6%). For 2023, forward curves indicate prices with average values close to 144.9 $/ton. 3 Scenario and Market 3.1 Macroeconomic scenario 3.2 Energy market trends 40 A2A Report on Operations 2022 Consolidated results and report on operations 4.1 Summary of results, assets and liabilities and financial position Results It is noted that the consolidation scope at 31 December 2022 changed compared to 31 December 2021 for to the following operations: • acquisition by A2A Rinnovabili S.p.A. of 100% of Volta Green Energy S.r.l. and 60% of R2R S.r.l., companies operating in the photovoltaic and wind power sectors, resulting in the line-by-line consolidation of seven companies; • sale of the shareholding in Seasm S.r.l., previously consolidated on a line-by-line basis; • acquisition by A2A Rinnovabili S.p.A. of 100% of 4New S.r.l. and 3 New & Partners S.r.l., companies operating in the photovoltaic and wind power sectors, resulting in the line-by-line consolidation of eleven companies. A2A Rinnovabili S.p.A. also acquired, through its subsidiary 3 New & Partners S.r.l., 100% of 3 New & Partners Rinnovabili S.r.l. (a company incorporated in November 2022) resulting in the line-by-line consolidation of Daunia Calvello S.r.l. and Daunia Serracapriola S.r.l., companies that hold a portfolio of wind farms in Italy; • acquisition and line-by-line consolidation by A2A Calore & Servizi S.r.l. of 100% of A2A Airport Energy S.p.A., a company engaged in the production and sale of electricity, heat and cooling. Moreover, the economic figures at December 31, 2022 are not consistent with the previous year due to the following extraordinary transactions in 2021: • acquisition by A2A Ambiente S.p.A. and line-by-line consolidation of 100% of TecnoA S.r.l., a company operating in the treatment of special waste in December 2021; • acquisition and line-by-line consolidation by LGH S.p.A. (now merged into A2A S.p.A.) of 100% of the shares in Agripower S.p.A., a company specialising in the development and management of power generation plants from biogas, as of April 2021; • acquisition by A2A Rinnovabili S.p.A. and line-by-line consolidation of 15 companies with 17 plants and 173 MW of installed photovoltaic capacity, previously managed by Octopus Renewables, as of April 2021; • acquisition and line-by-line consolidation by A2A Rinnovabili S.p.A. of Gash 1 S.r.l. and Gash 2 S.r.l., two project companies with authorization to build two photovoltaic plants, as of April 2021; The results of the A2A Group at December 31, 2022 are set out below together with comparative figures for the previous year. millions of euro 01 01 2022 12 31 2022 01 01 2021 12 31 2021 Change % 2022/2021 Revenues 23,166 11,549 11,617 100.6% of which: \- Revenues from the sale of goods and services 22,946 11,352 11,594 102.1% \- Other operating income 220 197 23 11.7% Operating expenses (20,896) (9,400) (11,496) 122.3% Labour costs (765) (721) (44) 6.1% Gross Operating Income \- EBITDA 1,505 1,428 77 5.4% Depreciation, amortization and write-downs (726) (679) (47) 6.9% Provisions (92) (89) (3) 3.4% Net Operating Income \- EBIT 687 660 27 4.1% Result from non-recurring transactions 157 - 157 n.s. Net financial balance (90) (72) (18) 25.0% Affiliates 2 2 - n.s. Result before taxes 756 590 166 28.1% Income taxes (344) (36) (308) n.s. Result after taxes from operating activities 412 554 (142) (25.6%) Net result from discontinued operations 36 (4) 40 n.s. Minorities (47) (46) (1) 2.2% Group result of the year 401 504 (103) (20.4%) Consolidated results and report on operations 2022 Report on Operations A2A 41 In 2022, the Revenues of the Group amounted to 23,166 million euro, up 101% compared to the previous year. The change is mainly related to the bullish dynamics of commodity prices that characterized the current year and is attributable to: • nearly 60% to the wholesale energy markets, in particular electricity price increases; the contribution related to the growth of sold and intermediated volumes is residual; • more than 40% to retail markets mainly due to higher electricity, gas and heat unit prices. Operating expenses amounted to 20,896 million euro, up 122.3%. The change, mirroring the increase in revenue, is almost entirely due to the increase in raw material procurement costs as a result of higher commodity prices. Labour costs came to 765 million euro (721 million euro in 2021). The increase is partly due to higher FTE (+291 FTE compared to the previous year) and partly due to higher unit costs for collective agreement renewals, remuneration policy (merit increases, category transitions and change of accounting criterion for one-off individual bonuses paid) and lower capitalization of costs. The Gross Operating Income equalled 1,505 million euro, a rise of 77 million euro compared to the previous year. Net of non-recurring items (+3 million in 2022, +31 million euro in 2021), the Ordinary Gross Operating Margin increased by 105 million euro (+8%): the decrease in margins recorded in the Market and Smart Businesses Infrastructures was more than offset by the results of the Generation & Trading and Waste Business Units. The following table highlights the composition by Business Unit: millions of euro 12 31 2022 12 31 2021 Change % 2022/2021 Generation and Trading 554 368 186 50.5% Market 125 214 (89) (41.6%) Waste 359 341 18 5.3% Smart Infrastructures 519 538 (19) (3.5%) Corporate (52) (33) (19) 57.6% Total 1,505 1,428 77 5.4% The Gross Operating Income of the Generation & Trading Business Unit amounted to 554 million euro, an increase of 186 million euro compared to December 31, 2021 (+50.5%). Net of the non-recurring items recorded in the two comparison periods, equal to -17 million euro in 2022 and +10 million euro in 2021, ordinary Gross Operating Margin increased by 213 million euro, equal to +59%. The positive change is mainly attributable to: • remuneration of the capacity market for 130 million euro, thanks to the award of production capacity in auctions held by Terna to ensure the security of the system with resources that are always available; • operation of the Monfalcone plant on the PGM market reactivated at the request of the government to tackle the ongoing energy crisis, for 60 million euro; • positive performance of the Trading portfolio by 55 million euro (81 million euro in 2022; 26 million euro in 2021); • opportunities gained on the ancillary services market (“MSD”) in the amount of 49 million euro (+15% compared to 2021), as a result of Terna’s requests for critical grid issues that characterized the year under review; • 40 million euro contribution from the photovoltaic and wind power plants of the newly acquired companies. Production from wind and photovoltaic sources, thanks to the contribution of the companies acquired in 2021 and 2022 (Octopus, 3New and 4New) grew significantly, reaching 251 GWh and 387 GWh, respectively. The positive impacts were partly offset by: • lower hydroelectric production (-36%) for -96 million euro, due to the severe drought during the year; • higher hydroelectric fees for -10 million euro. Market Business Unit EBITDA amounted to a positive 125 million euro (214 million euro at December 31, 2021). Net of the non-recurring items recorded in the two comparison years, equal to +2 million euro in 2022 and +14 million euro in 2021, ordinary Gross Operating Margin decreased by 77 million euro, equal to -39%. 4 Consolidated results and report on operations 4.1 Summary of results, assets and liabilities and financial position 4.2 Significant events during the year 4.3 Significant events after December 31, 2022 4.4 Impacts of the Russia-Ukraine conflict 4.5 Climate change 4.6 Taxonomy 4.7 Outlook for operations 4.8 Proposal for the allocation of net profit for the year ended December 31, 2022 and the distribution of a dividend 42 A2A Report on Operations 2022 Consolidated results and report on operations The reduction was concentrated in the first half of the year and is attributable to the decline in unit margins in the energy retail segment, both electricity and gas, due to: • different time distribution of the marginality of fixed-price contracts compared to the previous year, with the same overall contractual margin; • impacts related to end-customer consumption, which differ from the contracted profiles; • imbalances emphasized by the year’s energy price level. Ordinary EBITDA in the second half of the year improved compared to the same period of the previous year (+36 million euro), as a result of a partial re-absorption of the above-mentioned negative impacts, particularly in the electricity sector. The positive contribution of business development also continued in the second half of the year, both in terms of increase in customers and volumes served. The Gross Operating Margin of the EPCG Business Unit equalled 359 million euro (341 million euro at December 31, 2021), up 18 million euro compared to the previous year. Net of the non-recurring items recorded in the two comparison periods (+9 million euro in 2022 and +8 million euro in 2021), ordinary Gross Operating Margin increased by 17 million euro, equal to +5%. The municipal waste treatment segment made the contribution to the period result (+30 million euro compared to 2021), thanks to: • a positive trend in electricity and heat transfer prices of waste-to-energy plants for a total of 39 million euro. The economic effect of the smaller quantities processed is negligible; • the increase in prices for the delivery of waste comparable with municipal waste, which offset by smaller quantities treated (+3 million euro). In fact, the quantities destined for energy recovery decreased due to the reduced availability of the Parona waste-to-energy plant; • margins of biomass-fuelled plants (+6 million euro) due to both higher electricity prices and the incremental contribution of Agripower, consolidated from April 2021\. This significant contribution was partly reabsorbed by rising costs, particularly for biomass, as a result of the upward price dynamic that affected the sector in the year under review; • higher costs for disposal of dust, raw materials and reagents (14 million euro). This result was partly offset by the lower marginality of the waste collection segment (-12 million euro), which was significantly penalized by the increase recorded during the year in the cost of fuel consumed by the vehicles used and only to a limited extent by the loss of the concession of some municipalities, in particular Varese. The Gross Operating Margin of the Smart Infrastructures Business Unit in 2022 was 519 million euro (538 million euro at December 31, 2021). Net of non-recurring items (+18 million euro in 2022; +7 million euro in the previous year), the Business Unit’s ordinary Gross Operating Margin was 501 million euro, down 30 million euro, equal to -6% compared to 2021. The change in margins is distributed as follows: • electricity distribution networks (-14 million euro): decrease linked to lower revenues admitted for regulatory purposes following the resolutions of the sector Authority (ARERA) regarding the remuneration of capital, the equalization of electricity losses, higher operating costs (penalties for continuity of service, software maintenance and disposals) and higher personnel costs for the year compared to the previous year; • gas distribution networks (-33 million euro): decrease linked to lower revenues admitted for regulatory purposes following the resolutions of the sector Authority (ARERA) regarding the remuneration of capital and higher operating costs for the year compared to previous year (mainly charges for updating the gas fee relating to ATEM Milano 1 and energy costs); • district heating: +25 million euro, mainly due to higher unit margins on electricity sales and the contribution of the newly acquired company A2A Airport Energy. The drop in the marginality of district heating sales, due in part to the lower volumes of heat sold (-9.5% year-on-year), was neutralized by the benefits of the tax credits for non-energy-intensive and non-gas-intensive companies under the Aid Decrees; • water cycle: -18 million euro for higher operating costs, in particular electricity; • public lighting: +9 million euro attributable to the adjustment of rents following the increase in energy costs. “Depreciation, amortization, provisions and write-downs” totalled 818 million euro (768 million euro at December 31, 2021), representing an increase of 50 million euro. “Depreciation, amortization and write-downs” amounted to 726 million euro (679 million euro as at December 31, 2021). Amortization of intangible assets amounted to 233 million euro (201 million euro at December 31, 2021). Depreciation and amortization increased by 32 million euro, of which 13 million euro related to the implementation of information systems, 5 million euro to the integrated water service and gas distribution and metering, 5 million euro related to the new customer lists of the companies Yada Energia and A2A Energia, and 9 million euro to changes in the scope of consolidation. Consolidated results and report on operations 2022 Report on Operations A2A 43 Depreciation of tangible assets, which amounted to 491 million euro, increased by 26 million euro compared to December 31, 2021 and mainly related to increases in investments and changes in the scope of consolidation. In particular: • higher depreciation of 17 million euro resulting from the first consolidation of the companies acquired in 2022 and 2021; • higher depreciation of 2 million euro for rights of use; • higher depreciation of 3 million euro related to the photovoltaic panel divestment plan of the Sermide and Chivasso plants; • higher depreciation of 10 million euro, mainly relating to the investments which went into production after December 31, 2021; • higher depreciation of 2 million euro following the resumption of depreciation calculations on the wet works of the Valtellina core; • lower depreciation of 2 million euro related to the disinvestment plan for the assets of the Linea 1 waste-to-energy treatment and storage plant in Parona; • lower depreciation of 3 million euro following the change of the useful life of the San Filippo del Mela plant to 2025; • lower depreciation of 3 million euro related to the increase in discount rates on the closure/post closure provisions for landfills and decommissioning. Write-downs for the year amounted to 2 million euro and referred for 1 million euro to the write-down on the Rovato plant and for 1 million euro to the abandonment of projects no longer in the company’s core business (13 million euro at December 31, 2021). “Provisions for risks” had a net effect of 2 million euro (net effect of 56 million euro at December 31, 2021) due to accruals for the year of 61 million euro relating to the accrual for public water derivation fees of 43 million euro, accruals for closure and post-closure costs of landfills of 3 million euro, accruals to tax provisions of 2 million euro, other accruals for pending litigation of 2 million euro and other accruals of 11 million euro, adjusted, for 59 million euro, by the release of provisions for closure and post-closure expenses on landfills for 44 million euro, the release of provisions for hydroelectric derivation surcharges for 6 million euro, the release of provisions for litigation and tax disputes for 7 million euro and other releases for 2 million euro. The “Provision for bad debts” amounted to 90 million euro (33 million euro at December 31, 2021), of which 88 million euro related to the provision for the year for risks on trade receivables and 2 million euro to the provision for risks on other receivables. As a result of these changes “Net operating income” amounted to 687 million euro (660 million euro for the year ended December 31, 2021). The “Result from non-recurring transactions” amounted to 157 million euro (no value at December 31, 2021) and is related to the gain deriving from the sale of the three properties located in Milan in February 2022. “Net financial charges” amounted to 90 million euro (72 million euro at December 31, 2021), representing an increase of 18 million euro. The increase mainly relates to the increase in interest on bonds and loans of 22 million euro. The “Affiliates” was 2 million euro (2 million euro at December 31, 2021), and is mainly attributable to the positive valuation of the shareholdings held in some associated companies. “Income taxes” for the year amounted to 344 million euro (36 million euro at December 31, 2021). The increase in taxes compared to the previous year is attributable to the Extraordinary Solidarity Contribution provided for the year 2023, determined pursuant to Article 1, paragraphs 115-119 of Law No. 197 of December 29, 2022 (Budget Law 2023) in the total amount of 117 million euro, as well as the Extraordinary Contribution under Decree Law No. 21 of March 21, 2022, converted into Law No. 51 of May 20, 2022 (Price Cut Decree) in the total amount of 5 million euro. The financial year 2021 included the release of deferred tax liabilities following the realignment option pursuant to LD 104/2020, exercised by some Group companies, which allowed the realignment of the differences between higher statutory values and lower values for tax purposes on tangible assets and the consequent deduction of higher tax amortization starting from the current year, as well as the release of a part of deferred IRAP tax assets as the Group considered their recoverability to be unreasonable. The impact of the release of deferred tax assets/ 4 Consolidated results and report on operations 4.1 Summary of results, assets and liabilities and financial position 4.2 Significant events during the year 4.3 Significant events after December 31, 2022 4.4 Impacts of the Russia-Ukraine conflict 4.5 Climate change 4.6 Taxonomy 4.7 Outlook for operations 4.8 Proposal for the allocation of net profit for the year ended December 31, 2022 and the distribution of a dividend 44 A2A Report on Operations 2022 Consolidated results and report on operations liabilities had amounted to 168 million euro, while the recognition of a substitute tax following the realignment option pursuant to LD 104/2020 had amounted to 23 million euro. Net of the effect of special items, as shown below, the tax rate was 29%, compared to 30.6% for the previous year. The “Net result from discontinued operations” is equal to 36 million euro (negative and equal to 4 million euro at December 31, 2021) and refers mainly to the gain related to the sale of some assets concerning gas distribution referring to ATEMs considered non-strategic for the Group. The “Group result of the year”, after the minorities of 47 million euro were deducted, was positive and amounted to 401 million euro (positive for 504 million euro at December 31, 2021). Below is the income statement table with evidence of the special items that influenced both the result for the FY2022 and the result for the previous year, thus enabling a clearer representation of the performance of the core business. millions of euro 01 01 2022 12 31 2022 01 01 2021 12 31 2021 Change % 2022/2021 Revenues 23,166 11,549 11,617 100.6% Operating expenses (20,896) (9,400) (11,496) 122.3% Labour costs (765) (721) (44) 6.1% Gross Operating Income \- EBITDA 1,505 1,428 77 5.4% Depreciation, amortization and write-downs (726) (672) (54) 8.0% Provisions for risks (2) (56) 54 (96.4%) Provisions for credit risks (90) (33) (57) 172.7% Net Operating Result 687 667 20 3.0% Net financial charges (90) (72) (18) 25.0% Net result companies measured at equity 2 2 \- 0.0% Result before taxes 599 597 2 0.3% Income taxes (174) (183) 9 (4.9%) Net result from discontinued operations 2 (4) 6 (150.0%) Minorities (47) (39) (8) 20.5% Ordinary Group Net Profit 380 371 9 2.4% Special Items 21 133 (112) (84.2%) Group result of the year 401 504 (103) (20.4%) The special items for FY2022 of 21 million euro refer to the net effect of capital gains generated by the sale of certain assets (sale of real estate and gas ATEMs deemed non-strategic) in the amount of 143 million euro net of the tax effect, partially offset by charges for extraordinary contributions on the economic results of energy companies provided for by legislative measures (Price Cut Decree as per LD 21/2022 and Solidarity Contribution as per L.197/2022) in the amount of 122 million euro. In the previous year, special items amounted to 133 million euro and mainly related to the effects of the release of deferred tax liabilities as a result of the realignment option under LD 104/2020, exercised by certain Group companies net of the substitute tax in the amount of 138 million euro, partially offset by the write-down of certain assets in the amount of 5 million euro. Consolidated results and report on operations 2022 Report on Operations A2A 45 Balance sheet and financial position For changes in the scope of consolidation at December 31, 2022, reference should be made to the section “Income statement” in this Summary of the A2A Group’s financial position, results of operations and cash flows. Sources/uses statement millions of euro 12 31 2022 12 31 2021 Change Capital employed Net fixed capital 8,849 8,026 823 \- Tangible assets 6,162 5,588 574 \- Intangible assets 3,515 3,125 390 \- Shareholdings and other non-current financial assets (*) 82 73 9 \- Other non-current assets/liabilities (*) (296) (93) (203) \- Deferred tax assets/liabilities 363 424 (61) \- Provisions for risks, charges and liabilities for landfills (729) (797) 68 \- Employee benefits (248) (294) 46 of which with counter-entry to equity (112) (134) Net Working Capital and Other Current Assets/Liabilities (124) 243 (367) Net Working Capital (308) 601 (909) \- Inventories 536 204 332 \- Trade receivables 4,680 3,291 1,389 \- Trade payables (5,524) (2,894) (2,630) Other current assets/liabilities 184 (358) 542 \- Other current assets/liabilities (*) 283 (405) 688 \- Current tax assets/tax liabilities (99) 47 (146) of which with counter-entry to equity 27 46 Assets/liabilities held for sale (*) - 147 (147) of which with counter-entry to equity - \- Total Capital employed 8,725 8,416 309 Sources of funds Equity 4,467 4,303 164 Total financial position after one year 5,834 4,309 1,525 Total financial position within one year (1,576) (196) (1,380) Total Net Financial Position 4,258 4,113 145 of which with counter-entry to equity (10) 20 Total Sources 8,725 8,416 309 (*) Excluding balances included in the net financial position. Net fixed capital The “Net fixed capital” amounted to 8,849 million euro, up 823 million euro compared to 31 December 2021. Changes are detailed below: • Tangible assets showed an overall net increase of 574 million euro due to: investments made for 856 million euro due to interventions on waste treatment and waste-to-energy plants, on thermoelectric and hydroelectric plants and on renewable source energy plants for 498 million euro, to the development and maintenance of electricity distribution plants, the expansion and reconstruction of the medium and low voltage network, and the installation of new electronic meters for 181 million euro, the development of district heating networks for 82 million euro, the purchase of movable means to collect waste and other equipment for 26 million euro, for 16 million euro the efficiency plan with new LED technology light 4 Consolidated results and report on operations 4.1 Summary of results, assets and liabilities and financial position 4.2 Significant events during the year 4.3 Significant events after December 31, 2022 4.4 Impacts of the Russia-Ukraine conflict 4.5 Climate change 4.6 Taxonomy 4.7 Outlook for operations 4.8 Proposal for the allocation of net profit for the year ended December 31, 2022 and the distribution of a dividend 46 A2A Report on Operations 2022 Consolidated results and report on operations sources, interventions on the fiber optic and gas transport network for 14 million euro, for investments aimed at developing the energy efficiency plan for 10 million euro and for 5 million euro interventions on the electric vehicle charging network, as well as interventions on buildings for 18 million euro and the implementation of telecommunications equipment for 6 million euro; first-time consolidation of acquisitions in the year, accounting for an increase of 226 million euro; decrease of 491 million euro for the depreciation charge for the year; net decrease for other changes of 11 million euro due to decreases in the provision for decommissioning and landfill closure and post-closure expenses of 53 million euro, a decrease due to the recognition of the tax credit of 6 million euro for investments in new capital assets provided for by Law no.178/2020, art.1 paragraph 1051 for the development of the new Cavaglià CSS plant and the heat storage plant at the Lamarmora Nord power station, a decrease due to reclassification to other items of the financial statements in the amount of 3 million euro, as well as an increase in rights of use in accordance with IFRS 16 in the amount of 51 million euro; decrease of 5 million euro arising from disposals in the year, net of accumulated depreciation; decrease of 1 million euro due to write-downs in the year; • Intangible assets showed an overall net increase of 390 million euro on December 31, 2021, due to: capex for 384 million euro related to the implementation of computer systems for 130 million euro, plant development and maintenance work in the gas distribution area for 126 million euro, works on the water transport and distribution network, sewers and purification plants for 99 million euro, new acquisitions and maintenance of the customer portfolio for 23 million euro and other residual investments for 6 million euro; first-time consolidation of acquisitions in the year, accounting for an increase of 231 million euro; a net increase of 12 million euro for other changes due to the 24 million euro increase following the Purchase Price Allocation of TecnoA S.r.l. partly offset by a 1 million euro decrease in environmental certificates for the industrial portfolio, a 2 million euro reclassification to assets held for sale of certain gas distribution network assets deemed non-strategic for the Group, the sale of which was completed in the second quarter, a 6 million euro decrease due to reclassifications to other items of the financial statements, a 2 million euro decrease due to the recognition of grants on investments from previous years, a 1 million euro decrease for a tax credit for investments in new capital goods pursuant to Law no.178/2020, Article 1, Section 1051 for the development of the new IDMS system; decrease of 233 million euro for the amortization charge for the year; decrease of 3 million euro arising from disposals in the year, net of accumulated amortization; decrease of 1 million euro due to write-downs in the year; • Equity investments and other non-current financial assets, at 82 million euro, up by 9 million euro compared to 31 December 2021; The change is due for 1 million euro to the payment to the Court of Taranto, following the request for deposit in a specific account, of the amounts seized as part of the proceedings underway against the subsidiary Linea Ambiente S.r.l.; for 3 million euro referred to investments made in innovative start-ups through Corporate Venture Capital projects; for 4 million euro to advances paid on shareholdings for future projects for the development of plants for the production of electricity from renewable sources, as well as the effects arising from the first-time consolidations amounting to 1 million euro; • Other non-current assets and liabilities, negative by 296 million euro, showed a net increase of 203 million euro, mainly due to an increase in security deposits from customers of 249 million euro, partly offset by higher security deposits receivable of 10 million euro, higher receivables from the tax authorities for tax benefits under building bonuses due after one year of 13 million euro, higher receivables for prior-period items related to revenues for water services of 12 million euro, and other decreases of 11 million euro; • Prepaid tax assets amounted to 363 million euro (424 million euro at December 31, 2021) and showed a decrease of 61 million euro. The change mainly includes the effects deriving from the recognition of deferred taxes recognized as a result of the completion of the Purchase Price Allocation of TecnoA S.r.l. for 24 million euro, as well as the effects attributable to the recognition in A2A S.p.A. of deferred taxes of 36 million euro arising from the capital gain on the sale of real estate located in Milan in February 2022; • Provisions for risks, charges and liabilities for landfills showed an overall net decrease of 68 million euro. The change for the year was due to other negative changes and releases of 101 million euro, mainly due to the updating of appraisals and discount rates used to estimate future decommissioning and site and landfill restoration costs, and utilisations of 36 million euro, of which 21 million euro related to the incurrence of decommissioning and landfill costs and 15 million euro to the settlement of certain disputes with third parties. Furthermore, provisions for the period amounted to 61 million euro, mainly attributable to higher hydroelectric derivation fees, and the contribution of the first-time consolidations for 8 million euro; • Employee benefits decreased by 46 million euro, due to disbursements during the year and payments to pension funds and actuarial valuations, net of allocations during the year. Consolidated results and report on operations 2022 Report on Operations A2A 47 Net Working Capital and Other Current Assets/Liabilities The “Net Working Capital”, defined as the algebraic sum of trade receivables, closing inventories and trade payables, was negative for 308 million euro, down by 909 million euro compared to December 31, 2021\. Comments on the main items are given below: • “Inventories” amounted to 536 million euro (204 million euro at December 31, 2021), net of the related obsolescence provision for 23 million euro, up 332 million euro compared to December 31, 2021\. The change is attributable to a 313 million euro increase in fuel (gas and diesel) inventories, reflecting both price and quantity increases, a 18 million euro increase in materials inventories including provisions for material obsolescence, a 2 million euro increase in fuels held by third parties relating to coal at the Koper warehouse, and other decreases of 1 million euro; • “Trade receivables” amounted to 4,680 million euro (3,291 million euro at December 31, 2021), with an increase of 1,389 million euro, of which 59 million euro due to the first-time consolidation effects of the year.The change in trade receivables is primarily due to the increase in tariffs for the sale of electricity and gas in the year, which in turn was caused by the rise in commodity prices and the instalments granted to electricity, gas and district heating customers, which more than offset the reduction due to seasonality.The “Bad debts provision”, calculated in compliance with IFRS 9, amounted to 192 million euro and showed a net increase of 59 million euro compared to December 31, 2021; • “Trade payables” amounted to 5,524 million euro, with an increase of 2,630 million euro, of which 43 million euro due to the first-time consolidation effects of the year. The increase is mainly attributable to higher energy commodity prices related to the volatility of the reference scenario, as well as higher purchases of environmental certificates and to an efficient net working capital management policy; • “Other current assets/liabilities” amounted to 184 million euro (-358 million euro at December 31, 2021) and showed a net increase in assets of 542 million euro due to: a net increase in derivative assets of 271 million euro, as a result of the change in overall volumes traded and the high volatility of energy commodity prices with an impact on the differentials between subscription prices and forward prices; net increase in receivables from Cassa per i Servizi Energetici e Ambientali for 105 million euro; net increase in current tax payables for 146 million euro; net increase of 75 million euro in tax receivables for VAT, excise duties and other indirect taxes; decrease of 276 million euro in payables due to early collection of electricity and gas futures contracts the economic manifestation of which was in the year; decrease in advances to suppliers by 32 million euro; decrease in receivables for security deposits for 25 million euro; increase in deferred expenses of 8 million euro; other increases in current assets of 10 million euro. “Assets/liabilities held for sale” have no value at December 31, 2022, while at December 31, 2021 they had a net asset value of 147 million euro and referred for 102 million euro to the reclassification of assets and liabilities pertaining to gas distribution referring to ATEMs deemed non-strategic for the Group sold in April 2022 and for 45 million euro to the reclassification of assets owned by the parent company A2A S.p.A. referring to three properties located in Milan sold in February 2022\. Consolidated “Capital employed” at December 31, 2022 amounted to 8,725 million euro and was financed by Equity for 4,467 million euro and the Net Financial Position for 4,258 million euro. Equity and Net Financial Position “Equity” amounted to 4,467 million euro and showed a positive change for a total of 164 million euro. The positive change was partly due to the year result for 448 million euro (401 million euro pertaining to the Group and 47 million euro to minorities), offset by the distribution of dividends for 283 million euro. There was also a positive valuation of cash flow hedge derivatives and IAS 19 reserves for a total of 24 million euro, as well as other decreases for a total of 25 million euro mainly relating to the decrease in minority interests. The “Consolidated net financial position” at December 31, 2022 amounted to 4,258 million euro (4,113 million euro at end 2021). The gross debt amounted to 6,889 million euro, up by 1,790 million euro compared to 31 December 2021\. Cash and cash equivalents amounted to 2,584 million euro, up by 1,620 million euro. The other net financial assets/liabilities showed an active balance of 47 million euro with a net increase of 25 million euro as compared with December 31, 2021. 4 Consolidated results and report on operations 4.1 Summary of results, assets and liabilities and financial position 4.2 Significant events during the year 4.3 Significant events after December 31, 2022 4.4 Impacts of the Russia-Ukraine conflict 4.5 Climate change 4.6 Taxonomy 4.7 Outlook for operations 4.8 Proposal for the allocation of net profit for the year ended December 31, 2022 and the distribution of a dividend 48 A2A Report on Operations 2022 Consolidated results and report on operations Change Consolidated Net Financial Position The following table summarizes the changes in the Net Financial Position. millions of euro 12 31 2022 12 31 2021 EBITDA 1,505 1,428 Changes Net Working Capital 909 16 Changes in Other assets/liabilities (614) 258 Utilization of provisions, net taxes and net financial charges (312) (274) Operating cash flow 1,488 1,428 Investments (1,240) (1,074) Property disposals 221 - Cash flow before dividend payment 469 354 Dividends (283) (248) Net free cash flow 186 106 Change in scope (331) (716) Application of ESMA Directive - (31) Change in Net Financial Position (145) (641) During the year, the generation of net cash amounted to 186 million euro. Operating cash flow was positive at 1,488 million euro, capital expenditure absorbed cash of 1,240 million euro, partly offset by proceeds from the sale of real estate in the amount of 221 million euro. These changes, also taking into account the positive cash inflow from working capital more than offset by the payment of financial expenses and taxes, generated a cash flow of 469 million euro, which made it possible to cover dividend payments of 283 million euro. Specifically, changes in working capital refer to: • Net Working Capital generated an improvement of 909 million euro in the Net Financial Position due to the increase of 2,630 million euro in trade payables, partly offset by the increase in trade receivables for 1,389 million euro and the increase in inventories for 332 million euro; • the negative change of 614 million euro in Other assets/liabilities mainly refers to the increase in the net fair value of commodity derivatives with a balancing entry in the income statement, the net increase in receivables due from Cassa per i Servizi Energetici e Ambientali, the reduction in payables related to advance receipts of electricity and gas futures contracts the economic manifestation of which was in the year, the increase in caution deposit liabilities from customers, the increase in receivables for energy requalification and efficiency works at condominiums and third parties, for which they will benefit from tax benefits provided by building bonuses and the increase in receivables for tariff items related to the integrated water service; • the payment of net financial charges, taxes and provisions absorbed cash of 312 million euro. Consolidated results and report on operations 2022 Report on Operations A2A 49 4.2 Significant events during the year A2A and Ardian sign binding agreements for the acquisition of wind and photovoltaic portfolios On January 22, 2022, A2A and Ardian, the world’s leading private investment company, signed a binding agreement pursuant to which A2A would have acquired interests in 3 New & Partners, Daunia Calvello and Daunia Serracapriola, companies that comprise a portfolio of wind farms in Italy with a total capacity of 335 MW (195 MW pro-rata with respect to the interest held by Ardian in this portfolio), for an equity value of 265 million euro. The two parties have also signed a second binding agreement for a further portfolio, 4NEW, wholly owned by a fund managed by Ardian, consisting of wind and photovoltaic plants for a total of 157 MW of which 117 MW located in Italy and the remaining 40 MW in Spain: the acquisition by A2A provides for an equity value of 187 million euro. On June 7, 2022, A2A’s acquisition of Ardian’s wind and photovoltaic portfolios was finalized in accordance with the contracts signed and announced on January 22, 2022. Business plan update On January 27, 2022, the Board of Directors of A2A, chaired by Marco Patuano, examined and approved the update of the 2021-2030 Business Plan, which reinforces the commitment to decarbonization, ahead of the targets set by COP26, with a further two billion euro of investment. Circular economy and energy transition are confirmed as the two pillars of the Plan that encapsulate the Group’s concrete actions, to which all Business Units contribute. The main new elements of the Plan Update are in line with global carbon footprint reduction goals. To encourage the adoption of this model of sustainable mobility, A2A has quadrupled the installation of planned infrastructure compared with the last Plan: 24 thousand electric recharging points by 2030 with a focus on low power (up to 7kW) and high power (over 50 kW), to encourage both a slow (e.g. overnight) and fast (similar to traditional refuelling stations) delivery mode. For mobility segments the evolution of which is not foreseen towards electricity, A2A wants to make available green solutions such as green hydrogen and bio-LNG. The Group plans to develop more than 60 biomethane plants, at least 5 of which with liquefaction to obtain bio-LNG, while for the production of hydrogen it will be possible to exploit continuously produced energy sources such as waste-to-energy plants, with a decentralized business model based on local ecosystems serving industry and heavy transport. On November 22, 2022, the A2A Board of Directors examined and approved a further update of the 2021-2030 Strategic Plan which renews the Group’s commitment to decarbonization, ahead of the community objectives. The 2021-2030 Plan update again confirms Circular Economy and Energy Transition as pillars of the A2A strategy. The investment targets of the first 10-year plan presented in January 2021 remain unchanged, with their reshaping focused on development in the distinctive domestic market businesses mainly through organic growth. In the first two years of the 10-year plan, infrastructure investments of 3.5 billion euro were made for the country. As part of the Circular Economy, the Group has finalized strategic investments in plants for the treatment of organic waste and agro-food waste, for the treatment of sludge, for purification and in the conversion of the Biofor plant. In the M&A field, two major transactions were finalized. In the industrial waste sector, the acquisition of TecnoA, a leading energy recovery company in central and southern Italy, was completed. In heat recovery, the acquisition of Sea Energia, a company that supplies electric and thermal energy to the Milan Linate and Milan Malpensa airports, was finalized, with the aim of fostering their decarbonization process. To support the energy transition, in the first phase of the Plan implementation, portfolios of green generation plants with a nominal capacity of 436 MW were acquired through the acquisitions of the Octopus portfolio and the Ardian wind and photovoltaic portfolios. 4 Consolidated results and report on operations 4.1 Summary of results, assets and liabilities and financial position 4.2 Significant events during the year 4.3 Significant events after December 31, 2022 4.4 Impacts of the Russia-Ukraine conflict 4.5 Climate change 4.6 Taxonomy 4.7 Outlook for operations 4.8 Proposal for the allocation of net profit for the year ended December 31, 2022 and the distribution of a dividend 50 A2A Report on Operations 2022 Consolidated results and report on operations A2A awarded 5.4 GW in the third capacity market auction called by Terna On February 23, 2022, A2A, in the third capacity market auction called by Terna for the delivery year 2024, was awarded a total of 5.4 GW of capacity at national level which, with a mix of technological solutions including gas-fired plants, electrochemical storage and renewable source plants (hydroelectric and photovoltaic), contributes to ensuring the flexibility and decarbonization of the Italian electricity system, in line with the objectives of the A2A Business Plan. For existing capacity, the annual contract has an award price of 33,000 euro/MW/year. The new capacity provides for a 15-year contract with an award price of 70,000 euro/MW/year for capacity already authorized, of 48,110 euro/MW/year for that yet to be authorized. A new Sustainability-Linked Bond and two new Green Bonds issued Although in a complex context, dictated by the serious crisis unleashed on financial markets by the war in Ukraine, on March 9, 2022, the company placed a senior unsecured bond maturing in March 2028. A maximum amount of 500 million euro has been set for the bond, which has an expected rating of Baa2 from Moody’s and BBB from S&P. This is a sustainable bond tied to installed capacity from renewable sources. Orders received reached 3.5 billion, which is seven times the supply. The securities, intended for institutional investors, were issued at a price of 99.30% of nominal value and will have an annual yield of 1.622% and a coupon of 1.5% with a spread of 100 basis points over mid-swap. A2A also successfully placed two new Green Bonds during the year, with the aim of financing Green Projects aligned to the EU Taxonomy. These bonds, intended for institutional investors and issued under the Euro Medium Term Notes Program, are based on the Group’s Sustainable Finance Framework, the set of guidelines that reinforce the link between financial strategy and sustainable strategy. The first Green Bond was placed on June 8, 2022 for an amount of 600 million euro with a duration of 4 years at an issue price of 99.580% and will have an annual yield of 2.612% and a coupon of 2.500%, with a spread of 93 basis points over the mid-swap reference rate. The issue recorded orders for over 1.7 billion euro, about 3 times the amount. The second Green Bond was placed on September 12, 2022 for an amount of 650 million euro with a duration of 8 years at an issue price of 99.677% and will have an annual yield of 4.549% and a coupon of 4.500%, with a spread of 215 basis points over the mid-swap reference rate. The issue recorded orders for over 1.7 billion euro, about 2.6 times the amount. The net proceeds from the issue will go to finance the Eligible Green Projects: strategic projects of circular economy and energy transition related to the development of renewables and to the environmental sector, defined within the Sustainable Finance Framework of A2A. The Group verified the alignment between these green projects and the European Taxonomy \- the EU regulation that lists the economic activities that can be considered sustainable \- in particular the one related to the “climate change mitigation” and “climate change adaptation” objectives. A2A undertakes to indicate, as part of the reporting of the allocation of the proceeds of the Green Bond prepared in accordance with the Sustainable Finance Framework, also the actual amount of investments aligned to the European Taxonomy that will be financed. A2A announces the termination of negotiations with Ardian on the creation of the energy generation and supply partnership On June 8, 2021, A2A and Ardian signed a non-binding termsheet concerning the creation of a partnership in the power generation and supply sectors in Italy. The termsheet stipulated that the parties would negotiate the terms of the partnership and related agreements until the end of 2021, a deadline later extended to March 31, 2022. On March 17, 2022, negotiations with Ardian were interrupted, partly due to the escalation of international tensions and the significant consequences on the volatility of energy markets in Europe. 2021 results approved On March 17, 2022, the Board of Directors of A2A S.p.A. approved the drafts of the financial statements and of the consolidated annual financial report at December 31, 2021. Gross operating margin stood at 1,428 million euro, an increase of 19% over 2020 (1,200 million euro). The net profit amounted to 504 million euro (364 million euro at December 31, 2020). Capex rose sharply to 1,074 million euro, up 46% from the previous year. The Net Financial Position amounted to 4,113 million euro (3,472 million euro at December 31, 2020). The Board of Directors proposed to the Shareholders’ Meeting a dividend of 0.09 euro per share. Energy efficiency: A2A and Assimpredil Ance sign memorandum of understanding to provide incentives for upgrading buildings On March 31, 2022 A2A, through its subsidiary A2A Energy Solutions, and Assimpredil Ance, the Association of Building Constructors of Milan, Lodi and Monza Brianza, renewed the memorandum of understanding, which updates the one already signed in 2019, to promote energy efficiency measures on buildings. The objective of the agreement is to promote the upgrading and energy efficiency of homes in the Metropolitan City of Milan by intervening on buildings to ensure their better thermal insulation. In addition to the benefits, in terms of energy savings and avoided emissions, these activities also ensure a reduction in heating costs, an important objective also in light of the heavy repercussions on gas prices caused by the ongoing international tensions. Consolidated results and report on operations 2022 Report on Operations A2A 51 Sale of non-strategic natural gas distribution assets finalized On April 1, 2022, A2A and ACSM-AGAM, together with other companies controlled by them, finalized the closing of the sale of certain assets deemed non-strategic to the sellers. The perimeter of activities covered by the operation, overall for both Groups, includes approximately 157 thousand users, distributed in 8 Italian Regions, belonging to 24 ATEMs, for about 2,800 km of network. The economic value of the sale in terms of Enterprise Value is 125.4 million euro (of which ACSM-AGAM Group 40.6 million euro) against a total RAB of 102 million euro (of which ACSM-AGAM Group 25.5 million euro). A2A with EcoVadis for a sustainable supply chain On April 13, 2022, A2A started a collaboration with EcoVadis \- a leading company in corporate sustainability assessments \- to promote the improvement of the sustainability performance of its suppliers. Through this agreement, A2A continues on the path to increase a sustainable supply chain and foster social and environmental responsibility practices among supplier companies, which stimulate the improvement of ESG performance throughout the supply chain. This new platform will also help promote eco-innovations within the Group’s procurement process and improve the reliability of information. For A2A, this partnership is in line with the ESG objectives integrated in the Group’s strategy: in the recent update of the 2030 Business Plan, in fact, challenging goals were also implemented in the social and governance area in which the A2A Group operates. Ordinary Shareholders’ Meeting of A2A S.p.A. On April 28, 2022, the Ordinary Shareholders’ Meeting of A2A S.p.A. was held to approve the company’s financial statements for the year 2021 and the distribution of the dividend proposed by the Board of Directors of 0.09 euro per share. The shareholders also voted in favour with a binding vote on the first section of the 2022 Report on Remuneration and with an advisory, non-binding vote on the second section of the 2022 Report on Remuneration. The Shareholders’ Meeting also authorized and defined the terms within which the Board of Directors may purchase and dispose of treasury shares. Ratings Assessment and Outlook On May 13, 2022, S&P confirmed A2A’s long-term and short-term rating at BBB/A-2 and revised the Outlook from “Stable” to “Negative”. The Outlook revision reflects the expectation of a natural dilution over the next 18 to 24 months of the pure regulated share in the A2A business mix. For the purposes of this assessment, S&P considers electricity grids, gas grids, water cycle, urban collection and treatment plants subject to ARERA regulation as pure regulated businesses. The share of regulated, quasi-regulated and contracted business in each case remains above 50% of Group EBITDA. A2A confirms its commitment to maintaining its current rating, if necessary also reshaping its future investment plans, relying on its sound financial policy that has allowed the Group to grow steadily over the years while respecting its economic and equity balance, with a strong focus on sustainable finance. On June 13, 2022, Standard Ethics, an independent rating agency that measures corporate sustainability, raised the A2A Corporate Rating to “EE+” from the previous “EE” with a “Positive” Outlook. With this rating, A2A becomes the Italian company with the highest rating in its sector. According to Standard Ethics, A2A has long adopted ESG (Environmental, Social and Governance) reporting aligned with international best practice. Sustainability issues are continuously addressed through corporate policies that are updated to UN, OECD and EU guidelines and recently reinforced by the reorganization of some corporate functions. 4 Consolidated results and report on operations 4.1 Summary of results, assets and liabilities and financial position 4.2 Significant events during the year 4.3 Significant events after December 31, 2022 4.4 Impacts of the Russia-Ukraine conflict 4.5 Climate change 4.6 Taxonomy 4.7 Outlook for operations 4.8 Proposal for the allocation of net profit for the year ended December 31, 2022 and the distribution of a dividend 52 A2A Report on Operations 2022 Consolidated results and report on operations New Sustainability-Linked credit line with ESG objectives A2A signed a new 410 million euro three-year Sustainability-Linked revolving credit line, linked to the achievement of three objectives in the areas of Social and Governance, which the group defined in the strategic plan update presented last January. The first target concerns the issue of health and safety and in particular the reduction of the accident frequency index; the second is related to Sustainable Procurement policies, specifically the increase in the percentage of orders to suppliers assessed with ESG indicator; finally, the third target concerns equal opportunities with the reduction of the gender pay gap. The line provides for a mechanism for adjusting the margin both if A2A reaches the set targets (step down) and if the Group does not reach said sustainability targets (step up). The savings due to the achievement of the targets or the potential penalty caused by non-achievement will benefit the community: the amount will be donated to the Banco dell’Energia Onlus, a non-profit organization promoted by A2A and the AEM, ASM and LGH Foundations, set up to support those who find themselves in situations of economic and social fragility, with particular attention to energy poverty. This donation will not replace but will be in addition to the Group’s traditional support of Banco dell’Energia. A2A and BTS Biogas together for the development of new plants for the circular economy and decarbonization On July 15, 2022, A2A and BTS Biogas, technological leader in the construction of biogas and biomethane plants, signed a letter of intent aimed at defining a joint venture with the objective of building new plants and converting existing infrastructures that will be fuelled by animal and vegetable waste. For A2A, the initiative is in line with the 2030 Business Plan, focused on energy transition and circular economy: biomethane is in fact one of the key factors for growth in the bioenergy sector, strategic for the contribution that the A2A Group wants to make to the sustainable development and decarbonization of the country. Renewal in the period 2023-2026 of the Milan-Brescia shareholders’ agreements on 42% of the capital On August 2, 2022, the shareholders’ agreements between the Municipality of Milan and the Municipality of Brescia on 42% of A2A were renewed for a further three years. The agreements originally signed on February 1, 2017, and already tacitly renewed three years later, are thus extended by a further three years with effect from February 1, 2023. The shareholders’ agreements bind 42% of the Lombard multiutility, equally divided between the municipalities of Milan and Brescia. The two administrations hold 25% plus one share each, of which 4% is therefore ‘free’ from the covenant, and a total of 50% plus two shares. ACSM-AGAM: changes to Acinque from October 1 On September 21, 2022, as resolved by the Shareholders’ Meeting, as of October 1, ACSM-AGAM and the Group companies have a new brand: Acinque. SEA Energia acquisition On September 30, 2022, A2A, through A2A Calore & Servizi, has acquired SEA Energia, the company wholly owned by SEA that supplies electricity and heat to the two airports of Milan Linate and Milan Malpensa. With this transaction, A2A allows to consolidate a source of supply for the district heating network in East Milan, which is considered strategic, by dedicating the two new plants \- which today have an installed thermal power of 100 MW \- to the supply of new users. The agreement is consistent with the objectives of the Group’s Strategic Plan, which envisages investments in the development of new grid and new generation plants and growth in thermal energy sold from 2.8 to 4.1 TWht by 2030. Inauguration of new plants in Cavaglià and Lacchiarella On October 7, 2022, the new plant for the treatment and recovery of the organic fraction of municipal waste was inaugurated at the Cavaglià site in the province of Biella. Built by A2A Ambiente \- a company of the A2A Group \- the infrastructure will enable the production of biomethane and compost through the recovery and treatment of waste from the separate collection of wet and green waste. All this with a clear objective: to respond to the urgent need to exploit the potential of waste, returning valuable resources to the local community. From the activities of the integrated plant \- anaerobic digestion and composting \- it will be possible to obtain 5 million cubic metres of biomethane and 12,000 tons of certified compost to be reused in agriculture each year. The use of biomethane as an alternative to natural gas also makes it possible to eliminate non-biogenic CO2 emissions and reduce dependence on fossil fuels. On October 14, 2022, the new plant for the treatment and recovery of the organic fraction of municipal waste was inaugurated at the Giussago \- Lacchiarella site. Built by A2A Ambiente, the infrastructure will allow organic waste to be treated appropriately, in full compliance with the principles of the circular economy. From the activities of the integrated plant \- anaerobic digestion and composting \- it will be possible to obtain 8 million cubic metres of biomethane and 20 thousand tons of certified compost for agriculture each year. The plant, which can treat 100,000 tons of wet and urban green annually, helps reduce dependence on fossil fuels, and, thanks to the natural fertilizer produced that will be made available to farmers, will minimize the use of chemical fertilizers. Consolidated results and report on operations 2022 Report on Operations A2A 53 Agreement with Margherita for the reorganization of the Daunia Wind Group On October 14, 2022, A2A and Margherita, a company dedicated to the construction and management of plants for the production of electricity from renewable sources, signed an agreement for the overall reorganization of the group headed by Daunia Wind, a company equally owned by both and which manages a portfolio of wind farms in Italy with a total capacity of 312 MW. Through this transaction, A2A comes to have exclusive ownership and control of the companies Daunia Calvello and Daunia Serracapriola (and the relevant wind farms, with a total capacity of 83 MW), while Margherita comes to have exclusive ownership and control of Daunia Wind and the other companies it controls other than Daunia Calvello and Daunia Serracapriola. The reorganization entails the demerger in favor of A2A of the shareholdings held by Daunia Wind in Daunia Calvello and Daunia Serracapriola and of Daunia Wind’s liquid assets in the amount of 50 million euro. The shareholding in Daunia Wind that will remain with A2A after the demerger will be sold to Margherita for a consideration of 61.22 million euro. As a result of this reorganization, A2A consolidates its position among the leading operators in the generation of electricity from renewable sources in Italy, exclusively managing 550 MW of operating plants, of which 305 MW of photovoltaic and 245 MW of wind power, in addition to the production of the Group’s hydroelectric plants. On November 23, 2022, the reorganization was completed. A2A Ciclo Idrico and Impresa Pizzarotti & C \- Together for the efficiency of the Italian water cycle On October 20, 2022, A2A Ciclo Idrico and Impresa Pizzarotti & C signed a cooperation agreement for the development of initiatives related to the integrated water cycle. The two leading companies in the infrastructure and energy sectors have started a joint commercial activity to identify, evaluate and proceed with the study and award of contracts for water networks for leakage reduction, revamping and upgrading of purification plants, and the installation of sensors for leakage monitoring. Inauguration of the Val Trompia purification plant On December 13, 2022, the Val Trompia district purification plant was inaugurated. Hitachi Rail and A2A in partnership for energy transition and consumption optimization On December 15, 2022, Hitachi Rail and A2A signed a 20-year agreement under the Virtual PPA (Power Purchase Agreement) formula, which envisages the construction of new photovoltaic plants for the production of renewable energy at Hitachi sites in Reggio Calabria, Naples and Pistoia. Specifically, A2A \- through its subsidiary A2A Energy Solutions \- will install more than 40,000 solar panels over the next two years both on land and on the roofs of its production plants, covering a total of more than 100,000 square metres. A2A will support the initial investment and the ordinary and extraordinary maintenance for the entire 20-year contract period, during which Hitachi Rail commits to purchase the green energy produced at agreed prices. The initiative foresees the construction by A2A of state-of-the-art plants capable of producing around 19 GWh/year of energy, equal to 60% of the average annual needs of Hitachi Rail’s six Italian sites (31 GWh/year). The aim is to supply green energy for self-consumption to the production areas that will host the photovoltaic panels and to the Hitachi Rail sites in Genoa, Tito Scalo and Turin via the national electricity grid with a Virtual PPA. Koelliker and A2A: together to accelerate the spread of electric mobility On December 19, 2022 a partnership was signed between A2A E-Mobility and Koelliker, a leading Italian group in the import and sale of cars, with the aim of promoting the spread of electric mobility throughout Italy. The agreement envisages proposing to companies and private users vehicles distributed by the Koelliker Group \- electric, commercial and passenger transport vehicles \- together with A2A products and services for recharging and supplying electricity, through an integrated offer for employees that can be used directly from home, in the company and on the road. 4 Consolidated results and report on operations 4.1 Summary of results, assets and liabilities and financial position 4.2 Significant events during the year 4.3 Significant events after December 31, 2022 4.4 Impacts of the Russia-Ukraine conflict 4.5 Climate change 4.6 Taxonomy 4.7 Outlook for operations 4.8 Proposal for the allocation of net profit for the year ended December 31, 2022 and the distribution of a dividend 54 A2A Report on Operations 2022 Consolidated results and report on operations Growth in renewables: agreement signed for the construction of a 59.1 MWp photovoltaic plant On December 23, 2022 the A2A Group and Volta Gestione Energie signed an agreement that provides for AEB, a subsidiary of the A2A Group, to take a majority stake in VGE05 S.r.l., a company that has obtained authorization to build and operate a photovoltaic plant in the municipalities of Santa Maria la Longa and Pavia di Udine, in the province of Udine. Once completed, the infrastructure will have an installed capacity of 59.1 MWp and will produce more than 85 GWh per year, reducing the annual consumption of natural gas by about 16 million cubic metres and avoiding the emission of about 36,000 tons of CO2, thus contributing to the country’s path towards energy transition. Completion of the operation, which was also made possible thanks to the active collaboration with local authorities and institutions, is scheduled for the first half of 2023. Consolidated results and report on operations 2022 Report on Operations A2A 55 4.3 Significant events after December 31, 2022 A2A joins the Nasdaq Sustainable Bond Network On January 24, 2023, A2A joined the Nasdaq Sustainable Bond Network, a platform on Sustainable Finance that brings together investors, issuers, investment banks and specialist organizations. Membership will enable the Group to get in touch with a wide network of potential international investors attentive to sustainability issues. 500 Million Green Bond Issued On January 27, 2023, A2A successfully placed a new 500 million euro Green Bond with a duration of 11 years, with the aim of financing projects in the field of energy transition and the circular economy eligible for the European Taxonomy and envisaged by the Business Plan. The bond, intended for institutional investors and issued under the Euro Medium Term Notes Program, is based on the Group’s Sustainable Finance Framework, the set of guidelines that reinforce the link between financial strategy and sustainable strategy. The bond was placed at an issue price of 98.824% and will have an annual yield of 4.513% and a coupon of 4.375%, with a spread of 167 basis points over the mid-swap reference rate. The issue attracted a lot of interest, receiving orders for about 2.2 billion euro, more than about 4 times the amount offered. 4 Consolidated results and report on operations 4.1 Summary of results, assets and liabilities and financial position 4.2 Significant events during the year 4.3 Significant events after December 31, 2022 4.4 Impacts of the Russia-Ukraine conflict 4.5 Climate change 4.6 Taxonomy 4.7 Outlook for operations 4.8 Proposal for the allocation of net profit for the year ended December 31, 2022 and the distribution of a dividend 56 A2A Report on Operations 2022 Consolidated results and report on operations 4.4 Impacts of the Russia-Ukraine conflict The ongoing conflict between Russia and Ukraine has exacerbated an energy market crisis that had already been ongoing since 2021, linked to the post-pandemic recovery and the severe shortage of raw materials, leading to a further increase in energy commodity prices and their volatility. In addition to the direct impacts on the production and sale of electricity and gas, such a price increase has led to a general increase in inflation with particular reference to the prices of oil derivatives and foodstuffs, as well as tensions on financial markets, on the solvency of certain counterparts and the security of the computer infrastructure to address a possible increase in cyber-attacks, for which the Group is equipped with processes in line with the best market standards. The average value of the PUN Base Load in 2022 showed an increase of 142.5% compared to 2021, reaching 303.1 €/MWh. The dynamics were mainly driven by a significant rise in gas costs, mainly related to the tensions generated by the Russia-Ukraine conflict, as well as the low supply levels of hydroelectricity, to which the energy price is correlated. The PUN in January 2022 stood at 224.5 €/MWh, reaching a high of 543.2 €/MWh in August, as tensions related to the reduction in Russian gas supplies escalated. The progressive reduction in gas prices in the subsequent period led to a PUN of 294.9 €/MWh in December. As regards gas prices, the average price at the PSV in 2022 reached record levels and stood at 121.9 €/MWh, an increase of +165.9% compared to 2021\. In January 2022, the value of the PSV was 86.0 €/MWh and the upward trend that had already started in the last quarter of 2021 continued throughout the year, with the highest value of 233.5 €/MWh being recorded in August. Prices then decreased in October, due to the effect of full storage and mild temperatures, to then settle in December at a value of 116.6 €/MWh. This context created margining increases (cash collaterals) by clearing houses to secure commodity derivatives transactions, the effects of which were promptly mitigated by the Group’s strong liquidity position. In addition, the government measures issued in 2022 have introduced extraordinary contributions on the economic results of energy companies (e.g. Support Ter Decree Law, Price Cut Decree Law, Aid Decree Law, 2023 Budget Law) allocating them, in particular, to financing interventions in support of national companies and households. This context is constantly evolving, with impacts on the A2A Group’s margins also in the first half of 2023, and further extensions of these measures cannot be ruled out. Economic Impacts in Business Units The extraordinary increase in energy prices, mitigated by the effects of hedging, determined a positive impact on the margins of the industrial and trading portfolios of the Generation and Trading Business Unit, contributed to the increase in the margins of the Waste Business Unit in relation to the sale of electricity and heat from waste-to-energy plants and the Smart Infrastructures Business Unit in the Heat segment. On the other hand, volatility and rising prices contributed negatively to the Market Business Unit’s margins, both for gas and electricity. In addition to this, there are indirect impacts and, essentially, related to the reduction in GDP and the rise in inflation. Risks and uncertainties related to commodities and scenario developments The A2A Group, as part of its industrial activity of generating energy carriers and marketing them on a wholesale basis, managed the growing volatility of the price of gas both by monitoring the limits of exposure to commodity risk and credit risk and by optimizing its buying and selling strategies. The Group pursues a prudent hedging policy by operating mainly on platforms. The current availability of gas is very high compared to the expectations of the last months of 2022, mainly due to a particularly mild climate situation in addition to the energy-saving measures implemented. Another factor that certainly contributed to the easing of price tension was the slowdown of the Chinese economy compared to forecasts: population decline, lack of immigration and the worsening health emergency negatively impacted Chinese gas demand. At present, therefore, the national supply situation seems to be less critical, given the state of filling of national and European storages, as well as the fact that a new regasification terminal is expected to contribute during the coming summer season. To protect itself in the event that the situation should become critical again, A2A will, as in the past, equip itself with gas storage space, which it will fill in such a way as to hold forms of flexibility to reduce the impact of any stress on gas imports into Italy. A2A’s gas portfolio is currently balanced: gas volumes used by thermoelectric power plants that have not already been purchased in advance by hedging the spark spread are purchased daily on the market. The stipulated contracts do not provide for a force majeure clause on the part of suppliers in the event of an interruption of Russian supplies, but the possibility that parties in difficulty, Consolidated results and report on operations 2022 Report on Operations A2A 57 today considered reliable both financially and in terms of assets, might not make the planned deliveries is not excluded. In such an event, A2A would find itself buying more volumes every day on the balancing market, with the need to pay further attention to the financial resources required to meet the payments and the consequent request to increase the related guarantees. The Group has been called upon to maximise electricity production from fuels other than natural gas for most of 2023. Impact on Net Working Capital With reference to the solvency of some counterparties, the increase in the price of commodities determines \- as observed in most of the months of 2022 \- an increase in credit exposures to customers (even in the hypothesis of constant volumes): prudentially and in line with this increase, the bad debt provision was adjusted to 152 million euro (value referring to the Market Business Unit). Credit risk is managed through a Credit Policy with the objective of managing counterparty risk both in the acquisition phase through preliminary checks and requests for guarantees, and in management through the definition of payment terms and/or repayment plans with the application of interest. As at December 31, 2022, for example, A2A Energia showed an increase in corporate credit of 66% compared to the same month of 2021 strongly influenced by the increase in issued credit (+51% compared to December 2021). This increased exposure generates a higher risk due to both the possible default of more energy-intensive counterparties and payment delays. It should be noted, however, that it is mainly overdue credit (62%) that fuel credit. The increase in overdue credit (38%) can also be attributed to the increase in instalment requests, which in terms of amount have reached values 5 times higher than in 2021 and 9 times higher than in the pre-pandemic period. At December 31, 2022, 84% of the still open credit subject to instalment was related to contracts with active supplies. Impacts on the Net Financial Position The Net Financial Position felt the effects of the crisis in the energy markets: the increase in commodity prices combined with higher demand for instalment plans from customers led to a higher cash absorption. This growth was more than offset by a proactive management of net working capital, mainly due to the management of commodity procurement and a general realignment of collection and payment times. To date, there have been no significant deteriorations related to the increase in credit delinquency, in continuity with what was observed in previous months. Excluding the changes in the scope of consolidation that occurred during the year under review, which amounted to 331 million euro, the Net Financial Position amounted to 3,927 million euro (4,113 million euro at December 31, 2021), a decrease of 186 million euro: this reduction was due to the effective optimization of net working capital. With reference to possible tensions on the financial markets, it should be noted that the Group’s solid liquidity position (at December 31, 2022 equal to 4.9 billion euro), also supported by both committed and uncommitted back-up lines, made it possible to manage transactions in derivatives on the commodities market, temporary increases in working capital due to the rise in prices and installment plans granted to customers and requests for margins (cash collateral) by clearing houses. During the year, A2A successfully placed three ESG bonds for a total of 1.75 billion euro, thus partially anticipating its 2023 funding needs. In addition, medium-term bilateral credit lines were signed for 500 million euro, as well as a total of 560 million euro in revolving credit lines for back-up purposes, all confirming the Group’s ability to access capital and banking markets. This strengthening of the Group’s liquidity position continued in the first months of 2023: A2A first placed a new Green Bond for 500 million euro to support the investments envisaged in the new Business Plan, and subsequently increased its committed credit lines with a new 100 million euro bilateral transaction. Other Information With reference to the generalized increase in inflation, the A2A Group recorded in the year cost increases in the performance of operating activities (for example, for the cost of asphalting in excavation activities rather than the generalized cost of transporting waste to destination plants, and for the cost of reagents in waste treatment processes) and difficulties in obtaining certain materials within the ordinary time frame. To deal with this situation, it has adjusted, where possible, the price lists, increased the inventories of materials that are more difficult to find and increased the supplier portfolio. Exposure to cyber attacks In relation to the high level of alertness for cyber attacks, the Group activated a channel with the top management of National Security to exchange information, accelerating the program to secure endpoints with advanced malware protection tools; an analysis of the main hacker attack techniques was also conducted and an IT Security assessment 4 Consolidated results and report on operations 4.1 Summary of results, assets and liabilities and financial position 4.2 Significant events during the year 4.3 Significant events after December 31, 2022 4.4 Impacts of the Russia-Ukraine conflict 4.5 Climate change 4.6 Taxonomy 4.7 Outlook for operations 4.8 Proposal for the allocation of net profit for the year ended December 31, 2022 and the distribution of a dividend 58 A2A Report on Operations 2022 Consolidated results and report on operations was carried out to determine the degree of vulnerability of A2A’s services; this activity led to the preparation of a detailed technical report and the identification of specific actions to strengthen IT security levels, which were taken up by Information Technology and A2A Smartcity. In the course of 2022 A2A S.p.A. obtained ISO 27001 certification on IT Security, proving that the company’s top management is aware of the relevance of Cyber Security issues and that it is enhancing the tools to guard against the relative risk. Consolidated results and report on operations 2022 Report on Operations A2A 59 4.5 Climate change The actions implemented by the A2A Group to combat climate change are an important part of its development strategy. In this regard, the update of the 2021-2030 Business Plan published in November 2022, includes some actions aimed at mitigating the effects of climate change. The pillars of development for the Group are, in fact, the Circular Economy and the Energy Transition: the Group will increase its waste treatment and valorization capacity by consolidating its leading role in Waste-to-Energy and a significant position in the biomethane market segment, and will further focus on the development of renewable energies, flexibility and electrification of consumption. The Group is strongly committed to meeting the decarbonization target, confirming the reduction trajectory validated by the SBT and envisaging net zero, i.e. a 90%-95% reduction in emissions compared to baseline values and using carbon removals to neutralize the remaining 5%-10%, by 2040, 10 years ahead of EU targets. Significant risks for the Group related to climate change From the analyses performed, the following risks relevant to the Group were identified: Business Event Probability* Econimic impact on EBITDA** Electricity Grids Resilience of electricity distribution networks Possible Low Retail gas Thermal energy demand Possible Low Heat Thermal energy demand Possible Low Electricity \- Hydro and Renewables Precipitation and water resource use Possible High Electricity CCGT \+ Monfalcone \+ San Filippo del Mela Plant cooling Unlikely Low Waste Revision of the ETS Directive Possible High Transversal Extreme weather phenomena Possible Low * Unlikely: <10%; Possible: >=10%; =<50%; Probable: >50% ** Low: <5M€; Medium: >=5M€; =<20M€; High: >20M€ In particular, for electricity grids, the resilience of distribution networks is linked to three possible risks: • interruption of service related to possible peaks in demand due to increased temperatures; • flooding of underground cabins caused by heavy rain; • increased demand for energy related to the electrification of consumption. The 2021-2030 Business Plan includes an investment plan of around 2.1 billion euro for the maintenance and development of the electricity grid, enabling both the adaptation to physical climate risks and the progressive electrification of energy services by improving their efficiency and reducing CO2 emissions. In this regard, the plan includes interventions to upgrade and rationalize the networks, secondary substations, primary substations and an extension of the remote management of assets. As electricity distribution is a regulated business, these investments are remunerated at a rate defined by ARERA and updated according to a regulatory period of 8 years. In addition, ARERA offers the possibility of joining a bonus mechanism to encourage the implementation of specific interventions to increase the resilience of electricity grids. The Retail Gas and Heat businesses could suffer a unfavorable trend resulting from • higher than expected winter temperatures; • the occurrence of climatic conditions at the end of the year that are very different (exceptional/minimum temperature) from those used at the planning stage. The business plan includes investments in the Heat business of approximately 0.9 billion euro, part of which is aimed at the development of district heating networks and strategies to increase the number of customers. Furthermore, there are projects for the recovery of “thermal waste” and the revamping of existing plants, to optimize energy costs and maintain the competitiveness of the assets. These capex, in addition to mitigating risk, are aimed at developing the district heating business. For estimating the amount of heat sold, the median of the degree days observed over the last 8 years was taken into account in order to adequately account climate change. 4 Consolidated results and report on operations 4.1 Summary of results, assets and liabilities and financial position 4.2 Significant events during the year 4.3 Significant events after December 31, 2022 4.4 Impacts of the Russia-Ukraine conflict 4.5 Climate change 4.6 Taxonomy 4.7 Outlook for operations 4.8 Proposal for the allocation of net profit for the year ended December 31, 2022 and the distribution of a dividend 60 A2A Report on Operations 2022 Consolidated results and report on operations Electricity production from renewable sources could be impacted by several exogenous phenomena: • change in the precipitation regime; • competition on water use. The business plan update envisages investments of around 3.9 billion euro in the period 2021-2030 for the development of renewable energy sources. The change in the precipitation regime could lead to a change in the water availability for the Group’s main hydroelectric auctions. The Business Plan includes investments to optimize the use of the derived water resource for hydroelectric purposes (e.g., pumping). In addition, the Group is engaged in the development of tools to improve rainfall and run-off forecasts as well as in the development of engineering analyses and models to support the planning of hydroelectric plants in both the medium and short term. The Group’s hydroelectric production estimate is based on an 8-year historical average, including 2022, which experienced an exceptional drought. Competition for the use of water resources could lead to an increase in the share of water that hydroelectric plants will be forced to release to make it available for irrigation and drinking. Production from thermoelectric plants could be impacted by rising temperatures due to the risk of plant operation limitations caused by difficulties in adequately cooling the thermoelectric cycle when summer temperatures rise. To mitigate these risks, the Group constantly monitors the temperature of the cooling water, as well as, at some plants, the temperature of the watercourse downstream of the discharge. Furthermore, the Group has active all-risk insurance coverage, which also covers direct and indirect damage caused by natural phenomena. The investments associated with these facilities amount to approximately 1.4 billion euro in the period 2021-2030. The Revision of the ETS Directive could impact the Waste Business Unit. In particular, waste-to-energy plants could be included in the Emissions Trading Scheme following the revision of the EU directive. The Group is constantly engaged in monitoring legislation and assessing possible impacts. In addition, this could push the Group to experiment with new technologies for capturing and sequestering CO2 emitted by waste-to-energy plants. The A2A Group monitors any extreme weather phenomena (e.g. floods, landslides, water bombs, tornadoes, etc.), which could be a risk to the Group’s assets and business continuity. To cover against such events, the Group has active insurance contracts with coverage extended to include damage caused by natural phenomena. In addition, there are procedures in place to manage any acute weather phenomena in an optimal and timely manner. Finally, with a view to prevention, the design and construction of installations (e.g. wind and photovoltaic) takes into account the characteristics of the territory and local climatology (e.g. slope stability, windiness, etc.). Macroeconomic context The A2A Group’s activities are sensitive to economic cycles and general economic conditions in the countries in which it operates. The current context of the energy markets in which A2A operates shows signs of consolidation of the economic recovery underway, partly as a result of the gradual easing of the restrictive measures adopted at national and international level to deal with the COVID-19 emergency. For the years to come, macroeconomic projections foresee a continuation of the recovery of international trade and a moderate expansion of domestic demand, which should allow the gradual recovery of GDP and the alignment of values, also with reference to prices and margins, to A2A’s Business Plan. Given the features of the sectors in which it operates, the Group is exposed to energy scenario risk, namely the risk linked to changes in the price of energy raw materials (electricity, natural gas), and the prices of CO2 emissions allowances (EUA). Market risk is mitigated by constantly monitoring the total net exposure of the Group’s portfolio and addressing the main factors affecting the trend. Appropriate hedging strategies are defined, where necessary, designed to maintain this risk within the established limits, typically through hedging at 12 and 24 months. Impact of scenario and climate change on items of the financial statements Impairment test Consistent with IAS 36, the Group periodically monitors CGUs for impairment indicators, including those related to risks associated with climate change (regulatory or consumption changes, changes in temperature and rainfall, etc.) and the energy scenario. As described in the previous section, the 2021-2030 business plan update published in November 2022 and the related scenario updates, on which the impairment test is based, natively includes climate change-related effects not only in the capex projections but also in the economic projections in order to also reflect recent events in terms of, for example, temperature and rainfall. The Weighted Average Cost of Capital (WACC) used for discounting cash flows is determined as the weighted average of the cost of equity and the cost of debt capital, net of tax effects. This value is updated annually to reflect current volatility and risk perceptions, thus including expectations on growth and exposure to climate risks that the stock market recognizes for each sector. No positive growth rates are expected beyond the explicit Plan horizon. The reference energy scenario was estimated by considering long-term supply and demand trends, taking into account numerous variables including population growth, the development and adoption of new green technologies, consumer choices and political ambition to stimulate the transition. As a result, a gradual reduction in the consumption of oil products is expected in the coming years, while the natural Consolidated results and report on operations 2022 Report on Operations A2A 61 gas market sees a substantial consolidation of demand in Italy until 2030, as a result of the resilience of the thermoelectric sector, and thereafter, also due to the increasing penetration of energy efficiency and electrification policies, a decisive acceleration in the drop in demand for methane. The demand for electricity is seen growing, supported by new forms of electrification (electric vehicles, heat pumps, electrolysers). It should be noted that the only coal-fired plant (Monfalcone) was fully written down in previous years. Provisions, contingent liabilities and assets The risk of climate change did not give rise to the need to recognize additional contingent liabilities as the A2A Group, as required by the standard, reviews risks annually, estimating the present value of the amounts required to meet future contingent obligations (e.g. decommissioning provisions on landfills or thermoelectric plants). This estimate is the result of the methodology used by the Group in previous years, which takes into account the macroeconomic scenario. Employee benefits In the area of employee benefits, in accordance with the methodology set forth in the relevant accounting standard (IAS 19 Revised), actuarial assumptions are updated annually on the basis of market rates, inflation, salary growth forecasts and future commodity trends. For analyses and details on the actuarial assumptions used and sensitivity, please refer to the corresponding section of the Notes to the Consolidated Annual Financial Report. Revenues from contracts with customers Among sales contracts, which are accounted for in accordance with the accounting standards, the A2A Group, consistently with what has been done in previous years, evaluates from time to time the possible estimation of a specific provision for contracts classifiable as onerous pursuant to IAS 37. Financial instruments In line with the methodology already used in previous years, the A2A Group adopts a Credit Policy with the aim of managing counterparty risk both in the customer acquisition phase through preliminary checks and requests for guarantees, and in the management phase through the definition of payment terms and/or repayment plans with the application of interest. The changed macroeconomic scenario during 2022 led to an increase in credit exposures to customers and a higher risk with respect to both possible counterparty default and late payment. These aspects were considered by the A2A Group in determining the expected credit losses for the purpose of quantifying the bad debt provision for the year 2022. 4 Consolidated results and report on operations 4.1 Summary of results, assets and liabilities and financial position 4.2 Significant events during the year 4.3 Significant events after December 31, 2022 4.4 Impacts of the Russia-Ukraine conflict 4.5 Climate change 4.6 Taxonomy 4.7 Outlook for operations 4.8 Proposal for the allocation of net profit for the year ended December 31, 2022 and the distribution of a dividend 62 A2A Report on Operations 2022 Consolidated results and report on operations 4.6 Taxonomy In June 2021, the European Commission formally adopted the first Technical Delegated Act of EU Regulation 2020/852 (so-called Taxonomy) that defines the list of economic sectors and activities currently included in the Taxonomy and the related technical screening criteria for whether they contribute substantially to the achievement of the environmental objectives of climate change mitigation and adaptation. Additional Technical Delegated Acts on the remaining environmental objectives are expected to be published during 2023\. In order to ensure compliance with the requirements of EU Regulation 2020/852, the A2A Group has implemented a specific project aimed at identifying “eligible” activities in accordance with the Regulation itself. This process has led to the identification of “eligible” activities for the Group under the Taxonomy for Environmental Objectives for Climate Change Mitigation and Adaptation; with reference to these activities, A2A has reported revenues, capital expenditure and/or operating expenditure in the year 2022, which are reported in Group’s Consolidated Non-Financial Disclosure (CNFD) 2022. Starting this year, as required by the regulations, the analyses have been further refined in order to identify those economic activities that are considered truly eco-sustainable (so-called ‘taxonomy-aligned’ economic activities), i.e. those activities that: a) contribute substantially to the achievement of one or more of the environmental objectives by meeting the technical screening criteria defined in the Climate Delegated Act; b) do not cause significant harm to any of the other environmental objectives (so-called DNSH); and c) are carried out in compliance with minimum safeguards1. 1 According to Article 18 of EU Regulation 2020/852, minimum safeguards are “procedures implemented by an enterprise engaged in an economic activity in order to ensure that it is in line with the OECD Guidelines for Multinational Enterprises and the United Nations Guiding Principles on Business and Human Rights, including the principles and rights set out in the eight core conventions identified in the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work and the International Bill of Human Rights.” Consolidated results and report on operations 2022 Report on Operations A2A 63 Forecasts for 2023 Strategic Plan envisage Ebitda of between 1.60 and 1.64 billion euro and Group Net Income, net of non-recurring items, between 380 and 390 million euro. High levels of volatility in the energy markets, exceptionally low water levels and new regulatory measures are risks that could generate impacts on the Group that are difficult to quantify to date. The A2A Group constantly monitors the evolution of the context and, as done in other situations of volatility, promptly identifies possible mitigating actions, aimed at greater protection of the economic and financial position. With reference to possible tensions on the financial markets, it should be noted that the solid liquidity position of the Group (at December 31, 2022 equal to 4.9 billion euro, made up of cash of 2.58 billion euro and committed and uncommitted credit lines for 2.35 billion euro) made it possible to manage derivative transactions on the commodity market, the temporary increases in working capital due to the rise in prices and the installment plans granted to customers and the requests for margins (cash collateral) by of clearing houses. The strengthening of the Group’s liquidity position continued in the first months of 2023: A2A first placed a new Green Bond for 500 million euro to support the investments envisaged in the new Business Plan, and subsequently increased its committed credit lines with a new 100 million euro bilateral transaction. 4.7 Outlook for operations 4 Consolidated results and report on operations 4.1 Summary of results, assets and liabilities and financial position 4.2 Significant events during the year 4.3 Significant events after December 31, 2022 4.4 Impacts of the Russia-Ukraine conflict 4.5 Climate change 4.6 Taxonomy 4.7 Outlook for operations 4.8 Proposal for the allocation of net profit for the year ended December 31, 2022 and the distribution of a dividend 64 A2A Report on Operations 2022 Consolidated results and report on operations 4.8 Proposal for the allocation of net profit for the year ended December 31, 2022 and the distribution of a dividend The annual financial statements of A2A S.p.A. for the year ended December 31, 2022 show a net profit of 545,581,220.00 euro. If you are in agreement with the criteria used to prepare the financial statements, with the accounting principles and methods used in those statements and with the measurement criteria adopted, we invite you to approve: the allocation of the net profit for the year of 545,581,220.00 euro as follows: • 27,279,061.00 euro to the legal reserve; • 283,214,637.00 euro as an ordinary dividend payable to shareholders to ensure a remuneration of 0.0904 euro for each outstanding ordinary share; • 235,087,522.00 euro to the extraordinary reserve. By way of information, we bring to your attention that the number of shares currently outstanding is equal to 3,132,905,277 shares. The dividend will be paid from May 24, 2023, with ex-dividend date May 22, 2023 and record date May 23, 2023. The Board of Directors Consolidated results and report on operations 2022 Report on Operations A2A 65 68 A2A Report on Operations 2022 Analysis of main sectors of activities 5.1 Summary of results sector by sector millions of euro Generation and Trading Market Waste Smart Infrastructures Corporate Eliminations Income statement 01 01 2022 12 31 2022 01 01 2021 12 31 2021 01 01 2022 12 31 2022 01 01 2021 12 31 2021 01 01 2022 12 31 2022 01 01 2021 12 31 2021 01 01 2022 12 31 2022 01 01 2021 12 31 2021 01 01 2022 12 31 2022 01 01 2021 12 31 2021 01 01 2022 12 31 2022 01 01 2021 12 31 2021 01 01 2022 12 31 2022 01 01 2021 12 31 2021 Revenues 19,605 8,095 8,798 3,885 1,422 1,260 1,539 1,280 320 301 (8,518) (3,272) 23,166 11,549 \- of which inter-sector 7,144 2,263 358 152 348 229 374 367 294 261 (8,518) (3,272) Operating expenses (18,960) (7,642) (8,615) (3,618) (710) (582) (908) (637) (221) (193) 8,518 3,272 (20,896) (9,400) \- of which inter-sector (558) (332) (7,320) (2,559) (113) (97) (473) (251) (54) (33) 8,518 3,272 Labour costs (91) (85) (58) (53) (353) (337) (112) (105) (151) (141) (765) (721) Gross operating income \- EBITDA 554 368 125 214 359 341 519 538 (52) (33) 1,505 1,428 % of Revenues 2.8% 4.5% 1.4% 5.5% 25.2% 27.1% 33.7% 42.0% (16.3%) (11.0%) 6.5% 12.4% Depreciation of tangible assets and amortization of intangible assets (206) (190) (53) (41) (149) (131) (260) (256) (56) (48) (724) (666) Net write-downs of fixed assets (1) - - - - (1) (1) (11) - (1) (2) (13) Provisions for risks (30) (17) 1 (3) 32 (28) (3) (5) (2) (3) (2) (56) Provisions for credit risks - (1) (88) (32) 1 1 (2) (2) (1) 1 (90) (33) Net operating income \- EBIT 317 160 (15) 138 243 182 253 264 (111) (84) 687 660 % of Revenues 1.6% 2.0% (0.2%) 3.6% 17.1% 14.4% 16.4% 20.6% (34.7%) (27.9%) 3.0% 5.7% Result from non-recurring transactions 157 - Financial balance (88) (70) Result before taxes 756 590 Income taxes (344) (36) Result after taxes from operating activities 412 554 Net result from discontinued operations 36 (4) Minorities (47) (46) Group result of the year 401 504 Gross capex (1) 272 144 71 73 264 273 560 516 73 77 - (9) 1,240 1,074 (1) See the items “Capex” in the schedules on tangible and intangible assets presented in Notes 1 and 2 to the balance sheet. Analysis of main sectors of activities 2022 Report on Operations A2A 69 millions of euro Generation and Trading Market Waste Smart Infrastructures Corporate Eliminations Income statement 01 01 2022 12 31 2022 01 01 2021 12 31 2021 01 01 2022 12 31 2022 01 01 2021 12 31 2021 01 01 2022 12 31 2022 01 01 2021 12 31 2021 01 01 2022 12 31 2022 01 01 2021 12 31 2021 01 01 2022 12 31 2022 01 01 2021 12 31 2021 01 01 2022 12 31 2022 01 01 2021 12 31 2021 01 01 2022 12 31 2022 01 01 2021 12 31 2021 Revenues 19,605 8,095 8,798 3,885 1,422 1,260 1,539 1,280 320 301 (8,518) (3,272) 23,166 11,549 \- of which inter-sector 7,144 2,263 358 152 348 229 374 367 294 261 (8,518) (3,272) Operating expenses (18,960) (7,642) (8,615) (3,618) (710) (582) (908) (637) (221) (193) 8,518 3,272 (20,896) (9,400) \- of which inter-sector (558) (332) (7,320) (2,559) (113) (97) (473) (251) (54) (33) 8,518 3,272 Labour costs (91) (85) (58) (53) (353) (337) (112) (105) (151) (141) (765) (721) Gross operating income \- EBITDA 554 368 125 214 359 341 519 538 (52) (33) 1,505 1,428 % of Revenues 2.8% 4.5% 1.4% 5.5% 25.2% 27.1% 33.7% 42.0% (16.3%) (11.0%) 6.5% 12.4% Depreciation of tangible assets and amortization of intangible assets (206) (190) (53) (41) (149) (131) (260) (256) (56) (48) (724) (666) Net write-downs of fixed assets (1) - - - - (1) (1) (11) - (1) (2) (13) Provisions for risks (30) (17) 1 (3) 32 (28) (3) (5) (2) (3) (2) (56) Provisions for credit risks - (1) (88) (32) 1 1 (2) (2) (1) 1 (90) (33) Net operating income \- EBIT 317 160 (15) 138 243 182 253 264 (111) (84) 687 660 % of Revenues 1.6% 2.0% (0.2%) 3.6% 17.1% 14.4% 16.4% 20.6% (34.7%) (27.9%) 3.0% 5.7% Result from non-recurring transactions 157 - Financial balance (88) (70) Result before taxes 756 590 Income taxes (344) (36) Result after taxes from operating activities 412 554 Net result from discontinued operations 36 (4) Minorities (47) (46) Group result of the year 401 504 Gross capex (1) 272 144 71 73 264 273 560 516 73 77 - (9) 1,240 1,074 (1) See the items “Capex” in the schedules on tangible and intangible assets presented in Notes 1 and 2 to the balance sheet. 5.1 Summary of results sector by sector 5.2 Results sector by sector 5.3 Generation and Trading Business Unit 5.4 Market Business Unit 5.5 Waste Business Unit 5.6 Smart Infrastructures Business Unit 5.7 Corporate 5 Analysis of main sectors of activities 70 A2A Report on Operations 2022 Analysis of main sectors of activities millions of euro Generation and Trading Market Waste Smart Infrastructures Corporate Eliminations and adjustments Total Group 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 Capital employed Net fixed capital 2,549 2,122 108 269 1,582 1,388 4,354 3,978 4,125 4,301 (3,869) (4,032) 8,849 8,026 \- Tangible assets 2,369 2,165 49 43 1,257 1,122 2,294 2,109 217 195 (24) (46) 6,162 5,588 \- Intangible assets 379 154 368 276 620 609 2,049 1,925 99 204 \- (43) 3,515 3,125 \- Shareholdings and other non-current financial assets 4 \- 21 36 29 12 1 4 3,873 3,977 (3,846) (3,956) 82 73 \- Other non-current assets/liabilities 12 8 (306) (44) - 14 (15) (54) 13 (4) \- (13) (296) (93) \- Deferred tax assets/liabilities 133 166 9 (8) 36 50 117 95 67 65 1 56 363 424 \- Provisions for risks, charges and liabilities for landfills (325) (345) (25) (25) (312) (359) (46) (44) (21) (22) \- (2) (729) (797) \- Employee benefits (23) (26) (8) (9) (48) (60) (46) (57) (123) (114) \- (28) (248) (294) Net Working Capital and Other Current Assets/Liabilities (668) (130) 741 366 (113) 12 102 27 (180) (26) (6) (6) (124) 243 Net Working Capital (917) 30 700 428 (66) 56 (28) 139 (65) (68) 68 16 (308) 601 \- Inventories 445 129 \- \- 40 34 49 38 2 2 \- 1 536 204 \- Trade receivables 3,106 1,862 2,119 1,394 295 322 491 473 71 65 (1,402) (825) 4,680 3,291 \- Trade payables (4,468) (1,961) (1,419) (966) (401) (300) (568) (372) (138) (135) 1,470 840 (5,524) (2,894) Other current assets/liabilities 249 (160) 41 (62) (47) (44) 130 (112) (115) 42 (74) (22) 184 (358) \- Other current assets/liabilities 250 (156) 38 (62) (47) (40) 129 (111) (13) (5) (74) (31) 283 (405) \- Current tax assets/tax liabilities (1) (4) 3 \- - (4) 1 (1) (102) 47 \- 9 (99) 47 Assets/Liabilities held for sale \- \- \- \- \- \- \- 102 \- 45 \- \- \- 147 Total capital employed 1,881 1,992 849 635 1,469 1,400 4,456 4,107 3,945 4,320 (3,875) (4,038) 8,725 8,416 Analysis of main sectors of activities 2022 Report on Operations A2A 71 millions of euro Generation and Trading Market Waste Smart Infrastructures Corporate Eliminations and adjustments Total Group 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 Capital employed Net fixed capital 2,549 2,122 108 269 1,582 1,388 4,354 3,978 4,125 4,301 (3,869) (4,032) 8,849 8,026 \- Tangible assets 2,369 2,165 49 43 1,257 1,122 2,294 2,109 217 195 (24) (46) 6,162 5,588 \- Intangible assets 379 154 368 276 620 609 2,049 1,925 99 204 \- (43) 3,515 3,125 \- Shareholdings and other non-current financial assets 4 \- 21 36 29 12 1 4 3,873 3,977 (3,846) (3,956) 82 73 \- Other non-current assets/liabilities 12 8 (306) (44) - 14 (15) (54) 13 (4) \- (13) (296) (93) \- Deferred tax assets/liabilities 133 166 9 (8) 36 50 117 95 67 65 1 56 363 424 \- Provisions for risks, charges and liabilities for landfills (325) (345) (25) (25) (312) (359) (46) (44) (21) (22) \- (2) (729) (797) \- Employee benefits (23) (26) (8) (9) (48) (60) (46) (57) (123) (114) \- (28) (248) (294) Net Working Capital and Other Current Assets/Liabilities (668) (130) 741 366 (113) 12 102 27 (180) (26) (6) (6) (124) 243 Net Working Capital (917) 30 700 428 (66) 56 (28) 139 (65) (68) 68 16 (308) 601 \- Inventories 445 129 \- \- 40 34 49 38 2 2 \- 1 536 204 \- Trade receivables 3,106 1,862 2,119 1,394 295 322 491 473 71 65 (1,402) (825) 4,680 3,291 \- Trade payables (4,468) (1,961) (1,419) (966) (401) (300) (568) (372) (138) (135) 1,470 840 (5,524) (2,894) Other current assets/liabilities 249 (160) 41 (62) (47) (44) 130 (112) (115) 42 (74) (22) 184 (358) \- Other current assets/liabilities 250 (156) 38 (62) (47) (40) 129 (111) (13) (5) (74) (31) 283 (405) \- Current tax assets/tax liabilities (1) (4) 3 \- - (4) 1 (1) (102) 47 \- 9 (99) 47 Assets/Liabilities held for sale \- \- \- \- \- \- \- 102 \- 45 \- \- \- 147 Total capital employed 1,881 1,992 849 635 1,469 1,400 4,456 4,107 3,945 4,320 (3,875) (4,038) 8,725 8,416 5.1 Summary of results sector by sector 5.2 Results sector by sector 5.3 Generation and Trading Business Unit 5.4 Market Business Unit 5.5 Waste Business Unit 5.6 Smart Infrastructures Business Unit 5.7 Corporate 5 Analysis of main sectors of activities 72 A2A Report on Operations 2022 Analysis of main sectors of activities Generation and Trading Business Unit The activity of the Generation and Trading Business Unit is related to the management of the generation plants portfolio1 of the Group with the dual purpose of maximizing the availability and efficiency of the plants, minimizing operating and maintenance costs (O&M) and maximizing the profit deriving from the management of the energy portfolio through the purchase and sale of electricity and fuels (gaseous and non-gaseous) and environmental certificated on domestic and international wholesale markets. This Business Unit also includes the activity of trading on domestic and foreign markets of all energy commodities (gas, electricity, environmental certificates). Market Business Unit The activities of the Market Business Unit are aimed at the retail sale of electricity and natural gas to customers in the free market and sale to customers served under protection scheme. Furthermore, it deals with providing energy efficiency and electric mobility services. Waste Business Unit The activities of the Waste Business Unit relates to the management of the integrated waste cycle, which ranges from collection and street sweeping to the treatment, disposal and recovery of materials and energy. In particular, collection and street sweeping mainly refers to street cleaning and the collection of waste for transportation to its destination. Instead, waste treatment is an activity that is carried out in dedicated centers to convert waste in order to make it suitable for the recovery of materials. Disposal of urban and special waste in combustion plants or landfills ensures the possible recovery of energy through waste-to-energy or the use of biogas. The Waste Business Unit includes the activities carried out abroad for the provision of know-how and technologies for the realization of waste pre-treatment plants. Smart Infrastructures Business Unit The Smart Infrastructures Business Unit develops and manages the infrastructures functional to the wide range of services provided by the Group, focusing on technology and innovation. In particular, the Business Unit’s activity mainly concerns the development and technical-operational management of electricity distribution networks, natural gas transport and distribution networks and the related metering service, characterized by important technological evolutions thanks to the use of smart meters. It manages the entire integrated water cycle (water collection, aqueduct management, water distribution, sewerage management, purification). The activity is also aimed at the sale of heat and electricity produced by cogeneration plants (mostly owned by the Group), through district heating networks and ensures the operation and maintenance of cogeneration plants and district heating networks. Also included are the activities related to the management services for heating plants owned by third parties (heat management services). The Smart Infrastructures Business Unit also develops infrastructures in the field of telecommunications, designs solutions and applications aimed at creating new models of cities and territories and improving the quality of life of citizens. It should be noted that from January 2021, the Business Unit develops and manages public lighting and traffic regulation systems; finally, it builds and manages a network of recharging infrastructures functional to the electrification of transport. Corporate Corporate services include the activities of guidance, strategic direction, coordination and control of industrial operations, as well as services to support the business and operating activities (e.g. administrative and accounting services, legal services, procurement, personnel management, information technology, communications, landline and mobile telephone service etc.) whose costs, net of amounts recovered from accrual to individual Business Units based on services rendered, remain the responsibility of the Corporate. 1 Total installed capacity of 9.5 GW. 5.2 Results sector by sector Analysis of main sectors of activities 2022 Report on Operations A2A 73 The following is a summary of the main economic data by sector: Results by sector 2022 millions of euro Generation and Trading Market Waste Smart Infrastructures Corporate Eliminations and adjustments Total Revenues from the sale of goods and services 19,544 8,758 1,378 1,465 291 (8,490) 22,946 Other operating income 61 40 44 74 29 (28) 220 Total revenues 19,605 8,798 1,422 1,539 320 (8,518) 23,166 Operating expenses 18,960 8,615 710 908 221 (8,518) 20,896 Labour costs 91 58 353 112 151 - 765 Gross Operating Margin \- EBITDA 554 125 359 519 (52) - 1,505 Depreciation, amortization and write-downs of assets (207) (53) (149) (261) (56) - (726) Provisions for risks and receivables (30) (87) 33 (5) (3) - (92) Net Operating Income \- EBIT 317 (15) 243 253 (111) - 1,597 Capex 272 71 264 560 73 - 1,240 Results by sector 2021 millions of euro Generation and Trading Market Waste Smart Infrastructures Corporate Eliminations and adjustments Total Revenues from the sale of goods and services 8,006 3,849 1,207 1,248 284 (3,242) 11,352 Other revenue and income 89 36 53 32 17 (30) 197 Total revenues 8,095 3,885 1,260 1,280 301 (3,272) 11,549 Operating expenses 7,642 3,618 582 637 193 (3,272) 9,400 Labour costs 85 53 337 105 141 - 721 Gross Operating Margin \- EBITDA 368 214 341 538 (33) - 1,428 Depreciation, amortization and write-downs of assets (190) (41) (132) (267) (49) - (679) Provisions for risks and receivables (18) (35) (27) (7) (2) - (89) Net Operating Income \- EBIT 386 249 368 545 (31) - 1,517 Capex 144 73 273 516 77 (9) 1,074 5.1 Summary of results sector by sector 5.2 Results sector by sector 5.3 Generation and Trading Business Unit 5.4 Market Business Unit 5.5 Waste Business Unit 5.6 Smart Infrastructures Business Unit 5.7 Corporate 5 Analysis of main sectors of activities 5.3 Generation and Trading Business Unit 554 mln € Ebidta +50.5% compared to 2021 272 mln € Capex 144 mln in 2021 (+88.9%) 303.1 €/MWh Single National Price (125 €/MWh in 2021) +1.9 €/MWh Clean spark spread (0.6 €/MWh in 2021) 663 GWh Production of coal-fired plants (157 GWh in 2021) 14,973 GWh Thermoelectric production from other facilities (+7.6% vs 2021) 638 GWh Photovoltaic and wind power production (313 GWh in 2021) 2,729 GWh Hydroelectric production (-35.5% vs 2021) The following is a summary of the main quantitative and economic data relating to the Generation and Trading Business Unit: 74 A2A Report on Operations 2022 Analysis of main sectors of activities Analysis of main sectors of activities 2022 Report on Operations A2A 75 Operating figures Net electricity production GWh 12 31 2022 12 31 2021 Change % 2022/2021 Net thermoelectric production 15,636 14,078 1,558 11.1% \- CCGT 12,836 12,459 377 3.0% \- Oil 2,137 1,462 675 46.2% \- Coal 663 157 506 n.s. Net production from Renewable Sources 3,367 4,544 (1,177) (25.9%) \- Hydroelectric 2,729 4,231 (1,502) (35.5%) \- Photovoltaic 387 291 96 33.0% \- Wind 251 22 229 n.s. Total net production 19,003 18,622 381 2.0% Economic figures millions of euro 01 01 2022 12 31 2022 01 01 2021 12 31 2021 Change % 2022/2021 Revenues 19,605 8,095 11,510 142.2% Operating expenses 18,960 7,642 11,318 148.1% Labour costs 91 85 6 7.1% Gross Operating Margin \- EBITDA 554 368 186 50.5% % of Revenues 2.8% 4.5% Depreciation, amortization and write-downs of assets (207) (190) (17) 8.9% Provisions for risks and receivables (30) (18) (12) 66.7% Depreciation, amortization, provisions and write-downs (237) (208) (29) 13.9% Net Operating Result 317 160 157 98.1% % of Revenues 1.6% 2.0% Capex 272 144 128 88.9% FTE 1,072 1,051 21 2.0% Revenues in 2022 amounted to 19,605 million euro, an increase of 11,510 million euro (+142%) compared to the previous year. The significant change was mainly caused by the extraordinary increase in the prices of electricity and gas recorded in the year; the higher volumes sold and brokered made a marginal contribution. Operating expenses in 2022 amounted to 18,960 million euro, an increase of 11,318 million euro compared to 2021, mainly due to higher procurement costs for energy raw materials. To a lesser extent, the increase in hydroelectric fees also had an impact. Labour costs amounted to 91 million euro, up 6 million euro compared to 2021 (7%). Approximately 50% of this change was due to salary increases provided for by national collective labour agreements and remuneration policy actions, and the remainder to changes in the scope of consolidation, and the expansion of structures for the development and management of renewable energies. In 2022, FTEs stood at 1,072 units (1,051 FTEs at December 31, 2021). The Gross Operating Margin of the Generation and Trading Business Unit amounted to 554 million euro, an increase of 186 million euro compared to December 31, 2021 (+50.5%). Net of the non-recurring items recorded in the two comparison periods, equal to -17 million euro in 2022 and +10 million euro in 2021, ordinary Gross Operating Margin increased by 213 million euro. The positive change is mainly attributable to: • remuneration of the capacity market for 130 million euro, thanks to the award of production capacity in auctions held by Terna to ensure the security of the system with resources that are always available; 5.1 Summary of results sector by sector 5.2 Results sector by sector 5.3 Generation and Trading Business Unit 5.4 Market Business Unit 5.5 Waste Business Unit 5.6 Smart Infrastructures Business Unit 5.7 Corporate 5 Analysis of main sectors of activities 76 A2A Report on Operations 2022 Analysis of main sectors of activities • operation of the Monfalcone plant on the PGM market reactivated at the request of the government to tackle the ongoing energy crisis, for 60 million euro; • positive performance of the Trading portfolio by 55 million euro (81 million euro in 2022; 26 million euro in 2021); • opportunities gained on the ancillary services market (“MSD”) in the amount of 49 million euro (+15% compared to 2021), as a result of Terna’s requests for critical grid issues that characterized the year under review; • 40 million euro contribution from the photovoltaic and wind power plants of the newly acquired companies. Production from wind and photovoltaic sources, thanks to the contribution of the companies acquired in 2021 and 2022 (Octopus, 3New and 4New) grew significantly, reaching 251 GWh and 387 GWh, respectively. The positive impacts were partly offset by: • lower hydroelectric production (-36%) for -96 million euro, due to the severe drought during the year; • higher hydroelectric fees for 10 million euro. Depreciation, amortization, provisions and write-downs totalled 237 million euro (208 million euro at December 31, 2021). The change is related for 16 million euro to higher depreciation and amortization, mainly due to the consolidation of newly acquired companies in the renewables segment, and for 13 million euro to higher provisions for risks. As a result of the above changes, Net Operating Income amounted to 317 million euro (160 million euro at December 31, 2021). Capex in the year under review amounted to 272 million euro and included extraordinary maintenance work and adaptation to regulations of 85 million euro, of which 53 million euro at thermoelectric plants and 26 million euro at the Group’s hydroelectric plants and 1 million euro at the photovoltaic plants. Development work totalling 187 million euro was also carried out, of which 151 million euro was for investments in thermoelectric plants: gas turbine upgrades of combined-cycle plants in Cassano, Chivasso, Sermide and Piacenza, projects for endothermic engines in Cassano, and new combined-cycle plants in Monfalcone and Cassano. These interventions, aimed at ensuring flexibility, peak demand coverage and balancing the energy needs of the electricity grid, contribute to the adequacy and security of the national electricity system. Finally, capex were made in wind and photovoltaic plants for 33 million euro, aimed at accelerating the growth of the Group’s renewable sources. 5.4 Market Business Unit 125 mln € Ebidta -41.6% compared to 2021 20,737 GWh Electricity Sales (+12.5% vs 2021) 1,491 (#/1000) POD Retail market ele customers free market: 1,128 POD (+22.2% vs 2021) 71 mln € Capex 73 mln in 2021 2,677 Mmc Gas Sales (-1.3% vs 2021) 1,579 (#/1000) PDR Retail market gas customers free market: 1,043 PDR (+12.3% vs 2021) The following is a summary of the main quantitative and economic data relating to the Market Business Unit: Analysis of main sectors of activities 2022 Report on Operations A2A 77 78 A2A Report on Operations 2022 Analysis of main sectors of activities Operating figures Electricity 12 31 2022 12 31 2021 Change % 2022/2021 Electricity Sales Electricity Sales Free Market (GWh) 18,423 15,968 2,455 15.4% Electricity Sales under Greater Protection Scheme (GWh) 732 983 (251) (25.5%) Electricity Sales Safeguard Market (GWh) 1,582 1,475 107 7.3% Total Electricity Sales (GWh) 20,737 18,426 2,311 12.5% POD Electricity POD Electricity Free Market (#/1000) 1,128 923 205 22.2% POD Electricity under Greater Protection Scheme (#/1000) 323 382 (59) (15.4%) POD Electricity under Safeguarding Scheme (#/1000) 40 63 (23) (36.5%) Total POD Electricity (#/1000) 1,491 1,368 123 9.0% Gas 12 31 2022 12 31 2021 Change % 2022/2021 Gas Sales Gas Sales Free Market (Mcm) 2,282 2,146 136 6.3% Gas Sales under Protection Scheme (Mcm) 395 565 (170) (30.1%) Total Gas Sales (Mcm) 2,677 2,711 (34) (1.3%) PDR Gas PDR Gas Free Market (#/1000) 1,043 929 114 12.3% PDR Gas under Greater Protection Scheme (#/1000) 536 638 (102) (16.0%) Total PDR Gas (#/1000) 1,579 1,567 12 0.8% The quantities are stated gross of losses. The data related to the POD and PDR does not include the numbers relating to large customers. Economic figures millions of euro 01 01 2022 12 31 2022 01 01 2021 12 31 2021 Change % 2022/2021 Revenues 8,798 3,885 4,913 126.5% Operating expenses 8,615 3,618 4,997 138.1% Labour costs 58 53 5 9.4% Gross Operating Margin \- EBIDTA 125 214 (89) (41.6%) % of Revenues 1.4% 5.5% Depreciation, amortization and write-downs of assets (53) (41) (12) 29.3% Provisions for risks and receivables (87) (35) (52) 148.6% Depreciation, amortization, provisions and write-downs (140) (76) (64) 84.2% Net Operating Result (15) 138 (153) (110.9%) % of Revenues (0.2%) 3.6% Capex 71 73 (2) (2.7%) FTE 951 907 44 4.9% The revenues amounted to 8,798 million euro (3,885 million euro at December 31, 2021). The growth recorded is mainly attributable to higher unit prices for both electricity and gas, and to a more limited extent to higher quantities of electricity sold. Operating expenses in 2022 amounted to 8,615 million euro, an increase of 4,997 million euro compared to 2021, mainly due to higher procurement costs for energy raw materials. Analysis of main sectors of activities 2022 Report on Operations A2A 79 To a lesser extent, the increase in costs incurred in support of business development, in particular ICT and customer acquisition costs, also had an impact. With particular reference to the mass market segment (electricity and gas), the number of supply points served during the year exceeded 3 million units, of which more than 2 million related to the free market, which recorded an increase of about 319 thousand units. Overall in the year, gross acquisitions (before terminations) of new Mass Market customers in the free market of the Group’s main sales company amounted to 393 thousand units, corresponding to an increase of 28%, mainly in the electricity sector. Staff costs amounted to 58 million euro (53 million euro in 2021), mainly as a result of the increase in FTEs to 951 (907 FTEs at December 31, 2021). Of the change, 80% is due to increased recruitment in the year under review for the strengthening of traditional and innovative business areas, in line with development objectives. Market Business Unit EBITDA amounted to a positive 125 million euro (214 million euro as at December 31, 2021). Net of non-recurring items (+2 million euro in 2022 and +14 million euro in 2021), Ordinary EBITDA decreased by 77 million euro. The reduction was concentrated in the first half of the year and is attributable to the decline in unit margins in the energy retail segment, both electricity and gas, due to: • different time distribution of the marginality of fixed-price contracts compared to the previous year, with the same overall contractual margin; • impacts related to end-customer consumption, which differ from the contracted profiles; • imbalances emphasised by the year’s energy price level. Ordinary EBITDA in the second half of the year improved compared to the same period of the previous year (+36 million euro), as a result of a partial re-absorption of the above-mentioned negative impacts, particularly in the electricity sector. The positive contribution of business development also continued in the second half of the year, both in terms of increase in customers and volumes served, as outlined above. Depreciation, amortization, provisions and write-downs totalled 140 million euro (76 million euro at December 31, 2021): the main change is attributable to higher provisions for bad debts (56 million euro) related to credit exposure to customers, also due to the increase in turnover. However, the credit delinquency indicators did not change, confirming the soundness of the customer portfolio. Depreciation and amortization for the period, amounting to 53 million euro, increased due to ongoing digitalization projects. As a result of the above changes, net operating income amounted to negative 15 million euro (138 million euro at December 31, 2021). In 2022, the Market Business Unit capex amounted to 71 million euro, involving: • 61 million to the energy retail segment for evolutionary maintenance and development work on hardware and software platforms, aimed at supporting billing and customer management activities, and to the full-digital company NEN, as well as capitalized charges for the acquisition of new customers; • 10 million for the Energy Solutions segment for energy efficiency projects. 5.1 Summary of results sector by sector 5.2 Results sector by sector 5.3 Generation and Trading Business Unit 5.4 Market Business Unit 5.5 Waste Business Unit 5.6 Smart Infrastructures Business Unit 5.7 Corporate 5 Analysis of main sectors of activities 5.5 Waste Business Unit The following is a summary of the main quantitative and economic data relating to the Waste Business Unit: 80 A2A Report on Operations 2022 Analysis of main sectors of activities 359 mln € Ebidta +5.3% compared to 2021 1,487 GWht Heat sold (-9.3% vs 2021) 994 Kton Material recovery disposals (+0.6% vs 2021) 3,368 Kton Waste disposed of (-1.6% vs 2021) of which: 264 mln € Capex 273 mln in 2021 (-3.3%) 2,121 GWh Electricity sold (+1.9% vs 2021) 1,436 Kton Energy recovery disposals (-3% vs 2021) Analysis of main sectors of activities 2022 Report on Operations A2A 81 Operating figures 12 31 2022 12 31 2021 Change % 2022/2021 Waste collected (Kton) 1,785 1,861 (76) (4.1%) Residents served (#/1000) 3,965 4,065 (100) (2.5%) Electricity sold (GWh) 2,121 2,082 39 1.9% Heat sold (GWht)* 1,487 1,640 (153) (9.3%) (*) Quantities at the plant entrance. Rifiuti smaltiti (Kton) 12 31 2022 12 31 2021 Change % 2022/2021 Energy recovery 1,436 1,481 (45) (3.0%) Material recovery 994 988 6 0.6% Other 938 953 (15) (1.6%) Total 3,368 3,423 (55) (1.6%) The quantities reported are net of intra-group disposals. Economic figures millions of euro 01 01 2022 12 31 2022 01 01 2021 12 31 2021 Change % 2022/2021 Revenues 1,422 1,260 162 12.9% Operating expenses 710 582 128 22.0% Labour costs 353 337 16 4.7% Gross Operating Margin \- EBITDA 359 341 18 5.3% % of Revenues 25.2% 27.1% Depreciation, amortization and write-downs of assets (149) (131) (18) 13.7% Provisions for risks and receivables 33 (28) 61 n.s. Depreciation, amortization, provisions and write-downs (116) (159) 43 (27.0%) Net Operating Result 243 182 61 33.5% % of Revenues 17.1% 14.4% Capex 264 273 (9) (3.3%) FTE 6,577 6,470 107 1.7% In 2022, the Waste Business Unit recorded revenue of 1,422 million euro, up 12.9% compared to the same period in 2021 (1,260 million euro at December 31, 2021) mainly due to higher revenue from the sale of electricity and the sale of heat. Higher revenues from waste disposal due to higher unit prices and the contribution of the companies acquired during 2021 also contributed to the increase. Operating expenses amounted to 710 million euro, up 128 million euro compared to the corresponding figure for 2021, mainly due to higher energy, consumption, spare parts and maintenance costs, in line with the general increase in prices. Changes in the scope of consolidation also contributed to the increase (Agripower consolidated from April 2021, TecnoA consolidated from December 2021). Labour costs stood at 353 million euro, up 16 million euro compared to 2021, equal to 4.7%. Of this change, 40% was due to an increase in FTEs (6,577 FTEs in 2022 compared to 6,470 FTEs in the previous year) as a result of hires made to strengthen certain services in the Collection and Treatment segment. The increase related to the application of national labour contracts and remuneration policies amounted to a total of about 5 million euro, or 30% of the change. 5.1 Summary of results sector by sector 5.2 Results sector by sector 5.3 Generation and Trading Business Unit 5.4 Market Business Unit 5.5 Waste Business Unit 5.6 Smart Infrastructures Business Unit 5.7 Corporate 5 Analysis of main sectors of activities 82 A2A Report on Operations 2022 Analysis of main sectors of activities The Gross Operating Margin of Waste Business Unit equalled 359 million euro (341 million euro at December 31, 2021), up 18 million euro compared to the previous year. Net of the non-recurring items recorded in the two comparison periods (+9 million euro in 2022 and +8 million euro in 2021), ordinary Gross Operating Margin increased by 17 million euro. The municipal waste treatment segment made the contribution to the period result (+30 million euro compared to 2021), thanks to: • a positive trend in electricity and heat transfer prices of waste-to-energy plants for a total of 39 million euro. The economic effect of the smaller quantities processed is negligible: electricity volumes increased compared to the previous year due to the higher productivity of the Silla2 waste-to-energy plant, which partly offset the lower availability of the Parona waste-to-energy plant due to the decommissioning of a line. The volumes of heat required by the district heating sector decreased by 9.3% as a result of the mild temperatures during the year under review; • the increase in prices for the delivery of waste comparable with municipal waste, which offset by smaller quantities treated (+3 million euro). In fact, the quantities destined for energy recovery decreased due to the reduced availability of the Parona waste-to-energy plant; • margins of biomass-fuelled plants (+6 million euro) due to both higher electricity prices and the incremental contribution of Agripower, consolidated from April 2021\. This significant contribution was partly reabsorbed by rising costs, particularly for biomass, as a result of the upward price dynamic that affected the sector in the year under review; • higher costs for disposal of dust, raw materials and reagents (14 million euro). This result was partly offset by the lower marginality of the waste collection segment (-12 million euro), which was significantly penalized by the increase recorded during the year in the cost of fuel consumed by the vehicles used and only to a limited extent by the loss of the concession of some municipalities, in particular Varese, which led to a decrease in quantities of -4.1% compared to the previous year. Depreciation, amortization, provisions and write-downs amounted to 116 million euro (159 million euro in 2021). The negative change is the combined effect of higher depreciation and amortization (18 million euro) related to investments made during 2022, and companies acquired during 2021\. Lower provisions for risks and the release of excess provisions, due to the increase in discount rates, contributed 60 million euro. As a result of these changes, Net Operating Income totalled 243 million euro (182 million euro at December 31, 2021). Capex in 2022 amounted to 264 million euro and concerned: • development work for 197 million euro, of which 113 million euro relating to the waste-to-energy plants (in particular 60 million euro for the construction of the new waste-to-energy plant in Parona and 42 million euro for the fume purification line of the waste-to-energy plant in Brescia), 52 million euro to the MSWDF plants of Lacchiarella and Cavaglià and 27 million euro to the other treatment and recovery plants (in particular 6 million euro for the new sludge plant in Parona) and 3 million to the collection sector; • maintenance work for 67 million euro relating to waste-to-energy plants (30 million euro, biomass plants (5 million euro), treatment and recovery plants (10 million euro) and the collection sector (19 million euro). 5.6 Smart Infrastructures Business Unit The following is a summary of the main quantitative and economic data relating to the Smart Infrastructures Business Unit. Analysis of main sectors of activities 2022 Report on Operations A2A 83 519 mln € Ebidta -3.5% compared to 2021 1,482 mln € RAB Gas (+1.1% vs 2021) 511 mln € RAB Water Services (+24.3% vs 2021) 560 mln € Capex 516 mln in 2021 (+8.5%) 827 mln € RAB Electricity (+9.8% vs 2021) 2,877 GWht Heat sold (-9.5% vs 2021) 84 A2A Report on Operations 2022 Analysis of main sectors of activities Operating figures Networks 12 31 2022 12 31 2021 Change % 2022/2021 Electricity distributed (GWh) 11,238 11,422 (184) (1.6%) Gas distributed (Mcm) 2,726 3,132 (406) (13.0%) Water distributed (Mcm) 75 76 (1) (1.3%) RAB Electricity (M€) (*) 827 753 74 9.8% RAB Gas (M€) (*) 1,482 1,466 16 1.1% RAB Water (M€) (*) 511 411 100 24.3% (*) Provisional figures, underlying the calculation of allowed revenues for the period. Heat GWht 12 31 2022 12 31 2021 Change % 2022/2021 SOURCES Plants in: 1,392 1,554 (162) (10.4%) \- Lamarmora 330 385 (55) (14.3%) \- Famagosta 61 95 (34) (35.8%) \- Tecnocity 59 72 (13) (18.1%) \- Other plants 942 1,002 (60) (6.0%) Purchases from: 1,911 2,137 (226) (10.6%) \- third parties 373 473 (100) (21.1%) \- other Business Units 1,538 1,664 (126) (7.6%) Total Sources 3,303 3,691 (388) (10.5%) USES Sales to end customers 2,877 3,178 (301) (9.5%) Distribution losses 426 513 (87) (17.0%) Total Uses 3,303 3,691 (388) (10.5%) Electricity from cogeneration 429 297 132 44.4% Notes: \- The figures only refer to district heating and include cold sales. Sales relating to heat management are not included. \- Purchases include the quantities of heat purchased from the Waste Business Unit. Economic figures millions of euro 01 01 2022 12 31 2022 01 01 2021 12 31 2021 Change % 2022/2021 Revenues 1,539 1,280 259 20.2% Operating expenses 908 637 271 42.5% Labour costs 112 105 7 6.7% Gross Operating Margin \- EBITDA 519 538 (19) (3.5%) % of Revenues 33.7% 42.0% Depreciation, amortization and write-downs of assets (261) (267) 6 (2.2%) Provisions for risks and receivables (5) (7) 2 (28.6%) Depreciation, amortization, provisions and write-downs (266) (274) 8 (2.9%) Net Operating Result 253 264 (11) (4.2%) % of Revenues 16.4% 20.6% Capex 560 516 44 8.5% FTE 3,075 3,052 23 0.8% Analysis of main sectors of activities 2022 Report on Operations A2A 85 The Smart Infrastructures Business Unit’s revenue for the period amounted to 1,539 million euro (1,280 million euro at December 31, 2021, +20%). The change is related to higher revenues in the heat segment (+268 million euro) due to the dynamics of district heating and electricity unit prices and the contribution of A2A Airport Energy acquired in September 2022, to revenues related to activities functional to obtaining energy savings (Superbonus) and to the public lighting segment (+23 million euro). With regard to the electricity and gas segments, on the other hand, there was a contraction in revenues admitted due to the reduction of the regulatory WACC by 0.7% and the equalization of electricity losses (-17 million euro) following the change in calculation methods by ARERA. Operating costs increased by 271 million euro, of which 239 million euro, mirroring the revenue trend, was attributable to the heat segment as a result of higher raw material procurement costs (gas and heat). However, the increase in energy costs was also the main driver of cost growth for the Gas, Water Cycle and Public Lighting networks. On the Gas Network, there was also an increase in the fee for ATEM Milan following the award of the tender. Labour costs amounted to 112 million euro (105 million euro in the previous year). Approximately 80% of the change is attributable to the increase in unit costs as a result of increases in collective agreements and remuneration policies, and the remainder to the increase in FTEs. In 2022, in fact, FTEs stood at 3,075, with a change of 23 units attributable to new investment projects and recruitment, net of the effect of the sale of non-strategic gas ATEMs. The Gross Operating Margin of the Smart Infrastructures Business Unit in 2022 was 519 million euro (538 million euro at December 31, 2021). Net of non-recurring items (+18 million euro in 2022; +7 million euro in the previous year), the Business Unit’s ordinary Gross Operating Margin was 501 million euro, down 30 million euro (-6%) compared to 2021. It should be noted that non-recurring items in the current year include 15.3 million euro for past tariff items related to the 2010/2011 years of the water cycle of the Acinque Group. The change in margins is distributed as follows: • electricity distribution networks (-14 million euro): decrease linked to lower revenues admitted for regulatory purposes following the resolutions of the sector Authority (ARERA) regarding the remuneration of capital, the equalization of electricity losses, higher operating costs (penalties for continuity of service, software maintenance and disposals) and higher personnel costs for the year compared to the previous year; • gas distribution networks (-33 million euro): decrease linked to lower revenues admitted for regulatory purposes following the resolutions of the sector Authority (ARERA) regarding the remuneration of capital and higher operating costs for the year compared to previous year (mainly charges for updating the gas fee relating to ATEM Milano 1 and energy costs); • district heating: +25 million euro, mainly due to higher unit margins on electricity sales and the contribution of the newly acquired company A2A Airport Energy. The drop in the marginality of district heating sales, due in part to the lower volumes of heat sold (-9.5% year-on-year), was neutralized by the benefits of the tax credits for non-energy-intensive and non-gas-intensive companies under the Aid Decrees; • water cycle: -18 million euro for higher operating costs, in particular electricity; • public lighting: +9 million euro attributable to the adjustment of rents following the increase in energy costs. Depreciation, amortization, provisions and write-downs equalled 266 million euro (274 million euro at December 31, 2021). The change is attributable to lower write-downs compared to the previous year. As a result of the above changes, Net Operating Income amounted to 253 million euro (264 million euro at December 31, 2021). Capex in the period in question amounted to 560 million euro and regarded: • in the electricity distribution segment, development and maintenance work on plants and in particular the connection of new users, maintenance work on secondary cabins, the extension of remote control, the refurbishment of the medium and low voltage network, the maintenance and upgrading of primary plants and capex in the launch of the 2G smart meter project (203 million euro); • in the gas distribution subsector, development and maintenance work on plants relating to the connection of new users and the replacement of medium and low pressure piping and smart gas meters (131 million euro); 5.1 Summary of results sector by sector 5.2 Results sector by sector 5.3 Generation and Trading Business Unit 5.4 Market Business Unit 5.5 Waste Business Unit 5.6 Smart Infrastructures Business Unit 5.7 Corporate 5 Analysis of main sectors of activities 86 A2A Report on Operations 2022 Analysis of main sectors of activities • in the integrated water cycle sector, maintenance and development work carried out on the water transport and distribution network, as well as works and restoration works on the sewer networks and purification plants (104 million euro); • district heating and heat management segment: development and maintenance of plants and networks for a total of 86 million euro. • in the public lighting sector for new projects (17 million euro); • in the Smart City segment, mainly laying fibre optics, radio frequencies and data centres (14 million euro); • in the e-mobility sector for the installation of new electric energy recharging stations (5 million euro). Analysis of main sectors of activities 2022 Report on Operations A2A 87 5.7 Corporate Economic figures millions of euro 01 01 2022 12 31 2022 01 01 2021 12 31 2021 Change % 2022/2021 Revenues 320 301 19 6.3% Operating expenses 221 193 28 14.5% Labour costs 151 141 10 7.1% Gross Operating Margin \- EBITDA (52) (33) (19) 57.6% % of Revenues (16.3%) (11.0%) Depreciation, amortization and write-downs of assets (56) (49) (7) 14.3% Provisions for risks and receivables (3) (2) (1) 50.0% Depreciation, amortization, provisions and write-downs (59) (51) (8) 15.7% Net Operating Result (111) (84) (27) 32.1% % of Revenues (34.7%) (27.9%) Capex 73 77 (4) (5.2%) FTE 1,637 1,541 96 6.2% Operating costs increased mainly due to higher expenses for digitalization and innovation of the Group and higher external communication costs. Personnel costs increased due to the higher FTE, which amounted to 1,637 employees in 2022, recording a positive change of 96 employees compared to the previous year, linked to additions for the strengthening of certain business areas, consistent with the Group’s development needs and objectives. The Gross Operating Margin, corresponding to the Corporate structure costs not charged back to the various Group companies in the period under review, amounted to -52 million euro (-33 million in 2021). Net of non-recurring items (-9 million euro in 2022; -8 million euro in the previous year), the Corporate ordinary Gross Operating Margin was -43 million euro, down -18 million euro compared to 2021. The negative change in margins is attributable to higher costs not charged back compared to the previous year. Depreciation, amortization, provisions and write-downs equalled 59 million euro (51 million euro at December 31, 2021). After depreciation, amortization, provisions and write-downs there was a Net operating loss of 111 million euro (a net operating loss of 84 million euro at December 31, 2021). Capex in 2022 amounted to a total of 73 million euro, of which 47 million euro relating to interventions on IT systems, 14 million euro relating to investments in buildings and 6 million euro for interventions on telecommunications systems. 5.1 Summary of results sector by sector 5.2 Results sector by sector 5.3 Generation and Trading Business Unit 5.4 Market Business Unit 5.5 Waste Business Unit 5.6 Smart Infrastructures Business Unit 5.7 Corporate 5 Analysis of main sectors of activities 90 A2A Report on Operations 2022 Evolution of the regulation and impacts on the Business Units of the A2A Group In 2022, there has been a very tense and volatile situation in the energy markets at EU and national level, which was exacerbated at the end of February following the Russian-Ukrainian armed conflict. In order to cope with this situation of exceptional instability and in order to contain the impact of prices on end customers, protecting in particular those in an uncomfortable condition, the Government has intervened on several occasions with a series of emergency initiatives and with a gross allocation of expenditure for the year 2022 for measures directly aimed at reducing the impact of the increase in electricity and gas prices on end customers, amounting in total to approximately 38.7 billion euro. Law no. 234 of December 30, 2021 (Budget Law 2022) In order to contain ‘high energy prices’, the Law provided for the first quarter of 2022 to: • cancel the general system charges for domestic and non-domestic users with power up to 16.5 kW and reduce the general system charge rates for the gas sector; • derogate from the provisions of Presidential Decree no. 633 of October 26, 1972, providing for VAT reduced to 5% for the consumption of methane gas for combustion for civil and industrial uses; • redetermine the benefits granted to economically disadvantaged and physically challenged customers, introducing a supplementary compensation (supplementary bonus \- CCI) for the supply of natural gas and electricity. Article 1, paragraph 509, stipulated that in the event of default by domestic customers for bills issued between January 1 and April 30, 2022, sellers and operators of greater protection are obliged to offer bills in installments for a period of 10 months. ARERA Resolution 636/2021/R/com defined the implementing rules, stipulating that sellers are required to notify customers by means of a reminder or default letter. Law Decree no. 4 of January 27, 2022, converted into Law no. 25 of March 28, 2022 (LD Sostegni ter) In support of businesses, the following were provided: • extend the provisions of the Budget Law 2022 with regard to the cancellation of general system charges, providing that as of January 1, 2022 also for all users with available power equal to or greater than 16.5 kW, including those connected in medium and high/very high voltage or for public lighting or electric vehicle recharging in places accessible to the public, the reduction of the rates will be ordered, entrusting ARERA with the task of implementing this provision retroactively; • recognize to companies with high electricity consumption (referred to in the MISE Ministerial Decree of December 21, 2017), whose costs per kWh of the electricity component increased by more than 30% compared to the same period of 2019, an extraordinary contribution to partially offset the higher costs incurred, in the form of a tax credit, of 20% of the expenses incurred for the energy component purchased and actually used in Q1 2022. Article 15 bis provided for an initial intervention to collect the so-called “extra-profits”, introducing a two-way compensation mechanism on the price of electricity fed in by certain types of renewable plants (photovoltaic plants with a capacity above 20 kW eligible for fixed premiums not dependent on market prices, deriving from the Conto Energia mechanism, and solar, hydro, geothermal and wind power plants with a power output greater than 20 kW that do not have access to incentive mechanisms, which entered into operation prior to January 1, 2010, including plants in dedicated withdrawal and on-site exchange). The mechanism establishes the economic regulation with the GSE of the differences, in the period February 1, 2022 \- December 31, 2022, between a reference price defined by the Law Decree itself per market zone and, for hydroelectric basin plants, the monthly average zonal price, for the remaining plants, the hourly zonal price. The rule provides for the exclusion of energy from supply contracts concluded before January 27, 2022, provided that they are not linked to spot market trends and were not concluded at an average price 10% higher than the reference value (‘threshold value’). ARERA Resolution no. 266/2022/R/eel established the procedures for implementing the mechanism by providing, in particular: (i) the determination of the share of energy injected pertaining to supply contracts entered into before January 27, 2022, by comparing the total energy actually injected by all the plants pertaining to the contract/s over the reference time horizon and the total contractual volumes for the same period ii) the communication, accompanied by a certificate issued by an auditing firm, of a single average price for the contracts (this price is taken into account in the economic regulation if the contract is connected to the spot market or the price is higher than the threshold value); iii) the identification of the date of entry into operation for plants subject to refurbishment with the date of activation of the connection following the intervention; iv) the exclusion from the mechanism of the portion of hydroelectric energy subject to free transfers to the Regions. The operators concerned should have sent the necessary information to the GSE by August 10, a deadline that was extended to September 20 for vertically integrated entities due to Article 11 of LD Aiuti bis, which clarified that, for the purposes of applying the rule, in the case of corporate groups, contracts with end customers or companies outside the group are relevant, and not intra-group contracts. The economic adjustment took place from October for the months of February-August and was scheduled to continue by the end of the second month following the month to which the production refers for the remaining months of the reference period; however, as a result of the Lombardy Regional Administrative Court’s Sentence No. 02675 of December 1 annulling ARERA Resolution 266/2022/R/eel, the GSE suspended billing. The impact of the measure for the A2A Group, net of the effects of the aforementioned ruling, the reasons for which are not yet known, is approximately 6.3 million euro. Evolution of the regulation and impacts on the Business Units of the A2A Group 2022 Report on Operations A2A 91 Law Decree no. 14 of February 25, 2022, converted into Law no. 28 of April 5, 2022 (LD Ukraine) In relation to the thermoelectric sector, the decree established the possibility of implementing a program to maximize the use of coal- and fuel-oil-fired plants, giving ARERA the task of establishing the fees to reimburse any higher costs incurred by the operators. Pursuant to the subsequent Deed of Address of the Minister of Ecological Transition of September 1, 2022, Terna published the list of plants affected by the measure (including the San Filippo del Mela fuel oil plant and the Monfalcone coal plant of A2A Energiefuture S.p.A.) and ARERA established, with Resolution 430/2022/R/eel, the criteria for the formulation of offers on the electricity market and the remuneration of the plants concerned. The measure is currently effective from September 19, 2022 to March 31, 2023. In addition, the decree, in order to provide greater support to domestic customers affected by the increase in energy costs, broadened the perimeter of social bonus recipients by raising the ISEE threshold to 12,000 euro (previously set at 8,265 euro) for the period April-December 2022 and extended, from April 30 to June 30, 2022, the provisions set out in the Budget Law 2022 concerning the obligation for sellers to grant domestic customers bill installments. Law Decree no. 17 of March 1, 2022, converted into Law no. 34 of April 27, 2022 (LD Energy) The following were also confirmed for Q2 2022: • the cancellation, for the electricity sector, of the general system charges for all domestic and non-domestic users, and likewise the reduction of the general system charges for the gas sector, as well as the extension of the reduced VAT rate to 5% for invoices accounting for consumption of gas for civil and industrial use; • the redetermination of the benefits granted to economically disadvantaged and physically challenged customers through the confirmation of the introduction of the supplementary bonus (CCI) for the supply of natural gas and electricity; • to energy-intensive businesses, whose costs per kWh of the electricity component have increased by more than 30% compared to the same period in 2019, the extraordinary contribution to partially offset the higher costs incurred, in the form of a tax credit, of 20% of the costs incurred for the energy component purchased and actually used in Q1 2022; Article 18 bis amended the law establishing the ARERA, introducing the principle that the tariff ARERA is established and updated not only in relation to market trends, but also on the basis of the real cost of raw material procurement. In relation to renewable energy plants, the LD introduced: • in Article 16-bis a mechanism, on voluntary participation, whereby the GSE sells, at a price of 210 €/MWh, the renewable electricity withdrawn through the signing of contracts to two-way differences with a duration of at least three years. The MiTE Ministerial Decree of September 16, 2022 (Electricity Release Decree) governed the modalities for the release of energy (about 16 TWh the quota for 2023), providing for its allocation to end customers falling into certain categories (industrial end customers, SMEs, end customers located in Sicily and Sardinia and participating in the island instantaneous interruptibility and curtailment service, energy-intensive end customers located in Sicily and Sardinia, and end customers in aggregate form). The allocation procedure took place on the GME PPA notice board and the award was made on the basis of the quantity offered (which had as a maximum limit 3% of the quota and, in any case, 30% of the average consumption of the last 3 years and as a minimum limit 1 GWh/year) with the pro-quota provision in the event of an excess offer according to priority criteria. The aggregate made up of A2A Calore e Servizi S.r.l., Unareti S.p.A., Retragas S.r.l. and LD Reti S.r.l. was awarded about 32 GWh/year, against a demand of about 40 GWh/year. With reference to the Acinque Group, Lereti S.p.A. was awarded approximately 4.5 GWh/year (requested 10.8 GWh/year) while Acinque Tecnologie S.p.A. was awarded 1.6 GWh/year (requested 3.8 GWh/year); • in relation to permitting, the LD extended the definition of a de facto eligible area (pending identification by the Regions) to new photovoltaic plants built, also in agricultural areas, at a maximum distance of 500 metres from industrial areas and 300 metres from the motorway network (so-called solar belt), as well as liberalizing the construction of photovoltaic plants on the roofs of buildings. Further actions concerned the definition of authorization procedures in eligible areas and the simplification of photovoltaic repowering. With reference to gas storage, the LD set a target of filling 90%, starting from the storage year 2022-2023, and provided that the modulation service to end customers (civil and non-civil with consumption of no more than 50,000 cubic metres per year) should be ensured primarily through the use of storage. Article 12bis expands the list of agricultural and agro-industrial by-product matrices that can be used in biomethane production plants in addition to those listed in Annex IX of the Ministerial Decree of February 2016 (e.g. by-products of first processing of cereals, fruit, vegetables, etc.). 6 Evolution of the regulation and impacts on the Business Units of the A2A Group 6.1 Generation and Trading Business Unit 6.2 Market Business Unit 6.3 Waste Business Unit 6.4 Smart Infrastructures Business Unit 92 A2A Report on Operations 2022 Evolution of the regulation and impacts on the Business Units of the A2A Group Law Decree no. 21 of March 21, 2022, converted into Law no. 51 of May 20, 2022 (LD Taglia Prezzi) To support businesses, the following was introduced: • an extraordinary contribution to: companies with meters with an power of 16.5 kW or more, other than those with high electricity consumption, in the form of a tax credit equal to 12% of the expenditure incurred for the purchase of the energy component, actually used in Q2 2022, if the price has increased by more than 30% of the average price per kWh for the same quarter of 2019; companies other than those with a high consumption of natural gas to partially compensate for the higher charges incurred for the purchase of gas in the form of a tax credit equal to 20% of the expenditure incurred for the purchase of gas consumed in Q2 2022, for uses other than thermoelectric ones, if the reference price, calculated as the average, referring to Q1 2022, of the reference prices of the Intraday Market (MI-GAS), has increased by more than 30% of the corresponding average price referring to the same quarter of 2019; • the possibility for companies to pay in installments the amounts due for energy consumption for the months of May and June 2022 for a maximum number of monthly installments not exceeding 24 months. To support the specific liquidity needs generated by the granting of installment plans by suppliers, SACE will be required to issue its own guarantees in favor of banks, national and international financial institutions and other entities authorized to exercise credit in Italy, up to a maximum limit of 9 billion euro. Article 37 introduced for a second measure to levy the so-called “extra-profits” by providing an extraordinary contribution of 10% (increased by the subsequent LD Aiuti to 25%) to be borne by entities that carry out in the Italian territory, for the subsequent sale of goods, the activity of electricity production, methane gas production or natural gas extraction, entities reselling electricity, methane gas and natural gas, and entities that carry out the activity of production, distribution and trade of oil products. The taxable base of the contribution is the increase in the balance between active and passive transactions, referring to the period from October 1, 2021 to March 31, 2022 (period extended by LD Aiuti to April 30, 2022), compared to the balance of the corresponding period of 2020-2021. The contribution is due in cases where the above-mentioned increase exceeds 5 million euro and is not due if the increase is less than 10%. The contribution is not deductible for income tax and regional business tax purposes. The companies subject to the subsidy filed for reimbursement with the Revenue Agency. The Budget Law 2023, in paragraphs 120 and 121, subsequently provided to limit the application of the measure to companies whose turnover in 2021 is derived at least 75% from the activities listed above and to exclude from the determination of the totals of asset and liability transactions the sale and purchase of shares bonds or other securities not representing goods and company shares between the persons subject to the measure, as well as asset transactions that are not subject to VAT due to the lack of the territorial prerequisite if and to the extent that the purchases relating to them are not territorially relevant for VAT purposes. If, as a result of the innovations envisaged, the amount already paid is higher than the amount due, the higher amount may be used as of March 31, 2023 to offset unitary payments of taxes, contributions due to INPS and other sums due to the State, regions and social security institutions. For the Group, the overall impact of the measure amounts to 41 million euro. Law Decree no. 36 of April 30, 2022, converted into Law no. 79 of June 29, 2022 (LD PNRR2) In relation to the production of hydrogen from renewable sources, an exemption from the payment of general system charges is envisaged for the consumption of electricity from renewable sources in electrolysis plants also in the event that the energy is taken from the grid with the obligation to connect third parties. The Mite Ministerial Decree of September 21, 2022 outlined the requirements and conditions for access to the exemption from variable components of general system charges, defining green hydrogen as hydrogen with less than 3 tCO2eq/tH2 emissions. ARERA Resolution 557/2022/R/eel established the operating procedures. However, the application of the measure is suspended until positive verification of compatibility with EU State Aid rules. LD no. 50 of May 17, 2022, converted into Law no. 91 of July 15 (LD Aiuti) The following were also confirmed for Q3: (i) the supplementary bonus (CCI) for the supply of gas and electricity to support customers who are economically disadvantaged (ISEE threshold higher than the pre-crisis situation) and in physical distress, and (ii) the cancellation, for the electricity sector, of general system charges for domestic and non-domestic users, and likewise the rates relating to general system charges for the gas sector were reduced as well as the extension of the reduced VAT rate to 5% for consumption of natural gas for civil and industrial uses. In relation to the tax credit facilities, the percentage granted to companies was increased (from 20% to 25% for high-consumption electricity and gas companies, and from 12% to 15% for electricity companies that are not high-consumption but have a power exceeding 16.5 kW). In relation to gas storage, in order to meet the liquidity needs attributable to the market context, the LD provided that SACE guarantees also apply to market operators. In addition, it is established that the GSE will provide a filling service of last resort through the purchase, up to a countervalue of 4 billion euro, of gas with subsequent sale by December 31, 2022, a deadline extended to March 31, 2023 by LD Aiuti quater. This filling service of last resort is regulated by MD MiTE of July 20, 2022. With reference to permitting renewable energy plants, the LD established as de facto suitable areas (pending identification by the Regions) for the installation of all renewable energy plants the areas that are not subject to constraints under Legislative Decree January 22, 2004, no. 42, stipulating a minimum distance to be respected from areas subject to the protection of cultural heritage of 7 km for wind power plants and 1 km for photovoltaic plants. Evolution of the regulation and impacts on the Business Units of the A2A Group 2022 Report on Operations A2A 93 Law Decree no. 115 of August 9, 2022, converted into Law no. 142 of September 21, 2022 (LD Aiuti bis) The following were also confirmed for Q4: • (i) the supplementary bonus (CCI) for the supply of natural gas and electricity to support customers who are economically disadvantaged (ISEE threshold higher than the pre-crisis situation) and in physical distress, and (ii) the cancellation, for the electricity sector, of general system charges for domestic and non-domestic users, and likewise the rates relating to general system charges for the gas sector were reduced as well as the extension of the reduced VAT rate to 5% for consumption of natural gas for civil and industrial uses; • the relief in the form of a tax credit calculated, if certain price increase conditions are met, on energy expenditure for both energy-intensive and gas-intensive companies (25%) and for those other than these and, with reference to electricity, equipped with meters with an available power of 16.5 kW or more (15%). Instead, Art. 3 provided for the suspension until April 30, 2023 (deadline extended to June 30, 2023 by the so-called LD Milleproroghe) the effectiveness of any contractual clause that allows the electricity and natural gas supplier to unilaterally modify the general terms and conditions of the contract relating to the definition of the price, even if the counterparty’s right of withdrawal is contractually recognized. Consequently, the ineffectiveness of notices given for the aforementioned purposes before August 10, 2022 (date of entry into force of the Law Decree) has also been provided for, unless the contractual amendments have already been finalized. Subsequently, Article 11, paragraph 8, of the Milleproroghe Decree clarified that the updating of contractual economic conditions upon expiry is excluded from the scope of the provision. The LD also defined, for the natural gas sector, the new perimeter of vulnerable customers, which includes, in addition to persons in economically disadvantaged conditions, with disabilities, holders of utilities on non-interconnected minor islands or in emergency housing facilities following calamitous events, also persons over 75 years of age. For these subjects, the Authority will have to define special economic and contractual supply conditions. With Art. 11, in connection with Art. 15 bis of Decree-Law Sostegni ter, in addition to specifying the application of the mechanism in relation to contracts concluded by companies of vertically integrated groups, it provided for its extension to June 30, 2023, stating that with reference to the year 2023, forward contracts concluded by August 5, 2022 are relevant. Law Decree no. 144 of September 23, 2022, converted into Law no. 175 of November 17, 2022 (LD Aiuti ter) The relief in the form of a tax credit calculated, if certain price increase conditions are met, on energy expenditure for both energy-intensive and gas-intensive companies (increased to 40%) and for those other than these and, with reference to electricity, equipped with meters with an available power of 4.5 kW or more (30% EE and 40% Gas) is confirmed for the months of October and November. Provisions have also been introduced to support the liquidity needs of businesses to meet the payment of energy consumption bills issued in October, November and December 2022, consisting, in particular, in the provision, free of charge, of guarantees by SACE of loans granted, at certain cost and amount conditions, by entities authorized to provide credit to businesses. LD November 18, 2022, no. 176 (LD Aiuti quater) With reference to customer protection interventions: • the relief in the form of a tax credit calculated, if certain price increase conditions are met, on energy expenditure for both energy-intensive and gas-intensive companies (40%) and for those other than these and, with reference to electricity, equipped with meters with an available power of 4.5 kW or more (30% EE and 40% Gas) was confirmed for December 2022; • the possibility has been introduced for end customers to request the payment in instalments of the amounts relating to the raw material component (both electricity and natural gas) for consumption from October 1, 2022 to March 31, 2023 and invoiced by September 30, 2023, limited to the portion exceeding the average reference value calculated with reference to 2021\. The supplier is obliged to accept any application from its end customer and to submit an instalment proposal if the applicant has obtained an insurance guarantee for the claims arising from the instalment. In order to further strengthen support to companies, SACE is authorized to provide guarantees for 90% of the indemnities generated by any default by the guarantee applicant, and the State guarantee is placed on any obligations arising therefrom. Electricity and natural gas sellers may also apply for bank loans backed by a public guarantee to meet liquidity needs related to the instalments granted. However, the latter is granted if certain conditions are met, including in particular the non-distribution of dividends. The deadline for the end of the protection service for domestic gas customers is extended from January 6 Evolution of the regulation and impacts on the Business Units of the A2A Group 6.1 Generation and Trading Business Unit 6.2 Market Business Unit 6.3 Waste Business Unit 6.4 Smart Infrastructures Business Unit 94 A2A Report on Operations 2022 Evolution of the regulation and impacts on the Business Units of the A2A Group 1, 2023 to January 10, 2024, in line with what has already been foreseen for the end of the greater protection service for domestic electricity customers. Measures to increase natural gas production were also introduced, including the so-called “gas release” with the provision for the GSE to enter into contracts for long-term differences (10 years) with the holders of hydrocarbon production concessions at a price that guarantees coverage of the actual total costs, including tax and transport charges, as well as fair remuneration and, in any case, within a cap of 100 €/MWh and a floor of 50 €/MWh. Law No. 197 of December 29, 2022 (Budget Law 2023) The following were confirmed for Q1 2023: • the relief in the form of a tax credit calculated, if certain price increase conditions are met, on energy expenditure for both energy-intensive and gas-intensive companies (increased from 40% to 45%) and for those other than the latter and, with reference to electricity, equipped with meters with an available power of 4.5 kW or more (increased from 30% to 35% EE and from 40% to 45% Gas); • the cancellation, for the electricity sector, of general system charges for all domestic and non-domestic, low-voltage users with available power up to 16.5 kW, while medium- and high-voltage users and low-voltage users with available power above 16.5 kW remain excluded. In addition, general charges relating to nuclear decommissioning were transferred to general taxation; • the zeroing of the general system charges rates for the gas sector and the provision for the negative valuation of the UG2 component. In addition, the reduced VAT rate of 5% is also confirmed for invoices accounting for consumption of natural gas for civil and industrial use; compared to the past, this rate is also applicable to the supply of district heating services; • the enhancement of the bonus for the supply of natural gas and electricity to support economically disadvantaged and physically challenged customers, the scope of which was extended to households with an ISEE of 15,000 euro (previous threshold 12,000 euro). Article 1, paragraphs 30-38, implementing EU Regulation 2022/1854, provided for, as of December 1, 2022 and until June 30, 2023, the application of a cap on market revenues obtained from the production of electricity from renewable energy sources not falling within the scope of Article 15-bis of LD Sostegni ter and from additional plants fuelled by non-renewable sources (including waste-to-energy plants). This is a one-way compensation mechanism where the cap is 180 €/MWh (for sources with higher costs than will be established by ARERA) while the comparison value is equal to: • the monthly mean of the hourly zonal market price weighted for the individual plant profile in the case of non-programmable plants; • the monthly arithmetic mean of the hourly zonal market price in the case of programmable plants; • at the price indicated in contracts concluded by January 1, 2023 if higher than the reference price or indexed to the spot price. Excluded from the application of the cap are, inter alia, plants with a capacity of up to 20 kW, plants affected by the measures to maximize fuels other than gas, energy subject to supply contracts concluded before December 1, 2022 provided that they are not linked to the price trend of the energy spot markets and that, in any case, they are not stipulated at an average price higher than the cap, energy subject to withdrawal by the GSE pursuant to art. 16 bis of LD Energia, energy subject to two-way incentive mechanisms, all-inclusive tariff and subject to sharing in energy communities and self-consumption of renewable energy. The application of the rule in relation to contracts concluded by companies belonging to vertically integrated groups is confirmed. ARERA will establish the implementation modalities of the mechanism in continuity with the provisions of Resolution 266/2022/R/eel. The impact of the measure on December 2022 was approximately 2 million euro. Finally, Article 1, paragraphs 115-119, in implementation of EU Regulation 2022/1854, introduced a new solidarity contribution in the form of a rate equal to 50% on the amount of the portion of total income determined for corporate income tax purposes for the tax year 2022 that exceeds by at least 10% the average total income determined for income tax purposes earned in the period 2018-2021 (in an amount, however, not exceeding 25% of the value of the net assets as of the closing date of the financial year 2021). The contribution is payable by subjects exercising in Italy, for the subsequent sale of goods, the activity of producing electricity, subjects exercising the activity of producing methane gas or extracting natural gas, subjects reselling electricity, methane gas and natural gas, and subjects exercising the activity of producing, distributing and trading in petroleum products. The contribution is also payable by subjects who permanently import electricity, natural gas or methane gas or petroleum products for subsequent resale, or who bring such goods into Italy from other EU States. The contribution, which is due if at least 75% of the revenues of the 2022 tax year are attributable to the activities listed above, is paid by June 30, 2023 and is not deductible. The estimated impact for the A2A Group is approximately 117 million euro. Evolution of the regulation and impacts on the Business Units of the A2A Group 2022 Report on Operations A2A 95 6.1 Generation and Trading Business Unit Remuneration of the availability of production capacity: start of capacity market from 2022 Legislative Decree no. 379 of 2003 provided for a transitional measure of remuneration for the availability of capacity aimed at guaranteeing the adequacy of the electricity system (capacity payment in force in the period 2004-2021) and a regime measure based on a market mechanism (capacity market). The precise criteria for defining this market were set out by ARERA Resolution ARG/elt 98/11 and by Terna S.p.A. through the “Discipline of the remuneration system for the availability of electricity production capacity”, the related Annexes and the “Technical Operating Provisions”: it technically consists of a one-way contract for differences entered into with Terna S.p.A. and awarded following an auction in which producers acquire the right to receive a premium (in €/MW/year) with respect to the obligation to offer all the capacity committed in the Previous Day Market and the capacity not accepted as a result of the energy markets on MSD, returning to Terna S.p.A. the difference \- if positive \- between the market benchmark prices and a strike price (in €/MWh). In relation to the auctions for the delivery years 2022 and 2023, the mechanism was approved by MD MiSE June 28, 2019, after endorsement by the EU Commission. During these auctions, A2A S.p.A. was awarded all the capacity offered, namely around 5 GW/year for approximately 340 million euro in total premium (gross value net of possible penalties for unavailability). Approximately 0.12 GW for 2022 and 0.24 GW for 2023 are related to new capacity. The award price in both auctions was 33,000 €/MW/year for existing capacity and 75,000 €/MW/year for 15 years for new capacity (i.e. both awards were at cap). Some operators and Associazione Italia Solare filed an appeal for the annulment of the Ministry of Economic Development Decree of June 28, 2019 and related acts of ARERA and Terna S.p.A., also proposing an appeal to the EU Court of Justice. The EU General Court dismissed the appeal in a ruling filed on September 7, 2022; the hearing on the merits by the TAR, which was postponed pending the decision of the EU General Court, is expected to take place during 2023\. With reference to the 2022 and 2023 deliveries, Terna S.p.A., jointly with the MiTE (Ministry of Ecological Transition), intervened granting extensions to the deadlines for submitting authorization certificates in the case of new non-authorized capacity and for the deadlines for the start of the delivery period for new capacity. In the latter case, the final term of the contract was also extended by a period equal to the extension granted for the start of the delivery period. The new deadlines have been set as follows: • presentation of the authorization certificates for the new non-authorized capacity: by December 31, 2020 (for delivery 2022) and by October 31, 2021 (for delivery 2023); • start of delivery for new capacity (subject to reasoned request): July 1, 2022 (for delivery 2022) and July 1, 2023 (for delivery 2023). A2A S.p.A. has obtained the authorizations for all the new unauthorized capacity awarded: • 2022 delivery: repowering of the combined-cycle plants of Cassano and Chivasso; For the delivery year 2022, the contractual start of the commitments for the new capacity of the repowering was postponed to July 1, 2022 following a reasoned request to Terna S.p.A.; • 2023 delivery: repowering of the combined-cycle plants of Piacenza and Sermide and for the Cassano engines. For the delivery year 2023, the contractual start of the new capacity commitments was extended to July 1, 2023 following a reasoned request to Terna S.p.A. in connection with the Cassano motors only. The MD MiTE October 28, 2021 approved the capacity market mechanism with reference to the years 2024 and 2025\. Compared to the current regulations, the most significant changes concerned the possibility of bidding in relation to non-relevant new units, the introduction of more details for the participation of storages, the possibility for successful bidders of new unauthorized capacity to obtain authorization titles up to 6 months before the delivery date, the possibility for new or repowered capacity to extend the start of the delivery period until December of the first year of delivery, with a corresponding postponement of the final term of the contract (and application of a penalty for each month of delay), as well as the right to fully assign the contract subject to Terna S.p.A. consent. Moreover, again in relation to the delivery years 2024 and 2025, with reference to the economic parameters, ARERA Resolution 399/2021/R/eel provided: • a premium cap of 70,000 €/MW/year for new capacity (down from 75,000 €/MW/year planned 6 Evolution of the regulation and impacts on the Business Units of the A2A Group 6.1 Generation and Trading Business Unit 6.2 Market Business Unit 6.3 Waste Business Unit 6.4 Smart Infrastructures Business Unit 96 A2A Report on Operations 2022 Evolution of the regulation and impacts on the Business Units of the A2A Group for 2022-2023 deliveries) and 33,000 €/MW/year for existing capacity (value confirmed and coincident with as planned for foreign capacity); • for the purposes of calculating the strike price, equal to the variable cost of an open cycle gas turbine fuelled by natural gas (with yield defined by ARERA), the element covering the cost of gas supply was initially confirmed for each month using the forward prices recorded at the TTF hub in the previous month. The price risk mitigation mechanism in the event of a declaration of a state of gas emergency by the MiTE was also confirmed. However, starting from March 5, due to the extreme volatility of gas prices, which led to a significant and systematic misalignment between the spot price and the forward price, thus making the strike price unrepresentative of the variable cost of the leading technology, ARERA Resolution 83/2022/R/eel set the value of the component covering the cost of natural gas equal to SAP (weighted average of the prices of the offers accepted at MGAS). On February 21, 2022, the auction for the 2024 delivery took place, where A2A S.p.A. was awarded about 5.4 GW of total capacity, of which 1.3 GW of new construction (combined cycles, photovoltaic plants, electrochemical storage), for a total award of about 199 million euro: • 4,096 MW of existing CDP1 (tender price 33,000 €/MW/year); • 20 MW of newly authorized CDP (tender price 70,000 €/MW/year); • 1,311 MW of new unlicensed CDP (tender price 48,110 €/MW/year). Authorization procedures are currently underway for the construction of the new combined cycles in Cassano and Monfalcone. With reference to subsequent years, further use of the production capacity remuneration system will be determined on the basis of adequacy assessments for the three consecutive years. Remuneration of plants essential for the safety of the electricity system The San Filippo del Mela plant owned by A2A Energiefuture S.p.A. was included in the list of Terna S.p.A.’s essential plants also for 2022, and ARERA Resolution no. 269/2020/R/eel admitted it to the cost reintegration scheme (groups 2, 5, and 6). ARERA Resolution 563/2021/R/eel accepted the company’s request to provide for a percentage of 2.5% on both sides from 2022 for the purposes of calculating the component covering the imbalance fee (as an exception to the previous values of 1.3% for positive imbalances and 1.4% for negative imbalances). ARERA Resolution no. 667/2022/R/eel ordered the payment of 16 million euro as the first 2022 advance payment of the consideration, while with ARERA Resolution no. 661/2022/R/eel, the company paid Terna S.p.A. the amount of 4.2 million euro as the second 2021 advance payment. Also for 2023, the San Filippo del Mela plant was confirmed in the list of essential plants, and ARERA Resolution 741/2022/R/eel admitted it (in the same plant configuration as in previous years) to cost recovery. Finally, as of September 19, 2022 and until March 31, 2023, the plant is subject to the non-gas production maximization regime pursuant to Article 5bis of LD Ukraine in conjunction with the Guideline Act of the Minister of Ecological Transition of September 1, 2022. Forward procurement of resources for voltage regulation in the Brindisi area The supply of reactive energy is necessary in the Brindisi area not only to maintain the stability of voltage, compromised by the presence of intermittent renewable sources, but also to reduce dispatching costs. Resolution 675/2018/R/eel approved the Regulations and the Draft Contract proposed by Terna S.p.A. for the forward procurement of resources for voltage regulation in the Brindisi area. Following the auction on February 20, 2019, A2A Energiefuture S.p.A. was awarded a 10-year supply of 286 MVAr of reactive energy at a weighted average price of 28,098 €/MVAr/year. The contract provides for the supply of continuous and automatic voltage regulation, without active energy input, for a value no lower than the contracted power (net of scheduled maintenance and periods of accidental unavailability subject to deductibles). The remuneration is composed of a fixed part (to cover the investment and equal to the product between the capacity committed and the price offered) and a variable part (to cover the costs related to the withdrawal of electricity necessary for the operation of the device). The total for 2022 amount is approximately 17.6 million euro. 1 CDP: Capacity Available in Probability. Evolution of the regulation and impacts on the Business Units of the A2A Group 2022 Report on Operations A2A 97 Gas Storage: measures to ensure security of supply In light of the situation of geopolitical instability arising from the Russian-Ukrainian conflict and in order to guarantee the supply of natural gas during the 2022-2023 TA, the MiTE, together with ARERA, has intervened through repeated measures to ensure the achievement of the target of filling of 90% of storage, in line with the provisions of the LD Energia. In the absence of stimulus measures, gas injection into storage would have been unattractive due to unfavorable spreads between the injection and delivery phase. In addition, capacity booking is disincentivized due to the high financial burden of storing gas. In order to overcome these critical issues, MiTE and ARERA issued the following measures: • the MiTE Ministerial Decree of March 14, 2022, in addition to the customary specification of the storage companies’ disbursement profiles, has: provided that the reserve prices set by ARERA for each auction and service may be set in the zero range; stipulated that the gas stocks in the storages as at March 31, 2022 remain allocated to their holders; allowed technical injection profiles involving dynamic well pressures even higher than the original static reservoir pressure for extended periods of time (within safety limits); • this Ministerial Decree was followed by ARERA Resolution 110/2022/R/gas, which provided for zero reserve prices for all capacity allocation procedures for modulation storage services and the non-application of costs related to the technical consumption of compression and treatment plants. The same Resolution provided that, in the event of failure to meet the minimum stock by the end of October 2022, a penalty of 1.15 €/MWh would be applied and that, in relation to gas stocks on April 1, a zero charge would be applied; • in light of the low allocations as a result of the storage auctions held in March, the MiTE MD of April 1, 2022 has: established the holding of auctions on a weekly basis (in the period from April 1, 2022 to 31 October 2022) for the allocation of monthly injection products with a zero reserve price, coupled with two-way contracts for differences to cover the price spread between injection \- disbursement; provision for storage companies to allow the injection of gas volumes in excess of the allocated space capacities through the implicit allocation of the relevant space and winter supply; established that Snam Rete Gas S.p.A. shall procure storage capacity (uniform service with injection in April) to cover the gas volumes for system operation (CNG, consumption, losses and delta IN-OUT of DSOs) for the period November 2022 to March 2023 and the management of technical consumption of storage companies; • as a result, Resolution 165/2022/R/gas introduced the recognition of a premium (so-called “storage premium”) equal to 5 €/MWh (in first application) for the volumes in storage at the end of the injection phase and resulting from the injection of seasonal/monthly products as well as from the implicit injection of space for April injections exceeding the awarded products. The premium is paid by Snam Rete Gas S.p.A. to storage users at the end of the injection period. The same Resolution provided for the procurement of gas volumes for system operation and for the management of technical consumption of storage companies in the AGS market segment at a price equal to the average price of the transactions recorded, on the day of offer, in the continuous trading market for the day of delivery, increased by 30 €/MWh (in purchase) for gas for system operation and 7 €/MWh for technical consumption and decreased by 30 €/MWh or set equal to zero (if the difference is negative) in sale; • Resolution 189/2022/R/gas defined the contract outline for two-way differentials to cover the injection-delivery spread and specified that the storage premium is applied not only for seasonal products but also for monthly products and implicit allocations with injection in May; • in view of the trend in storage injection and the consequent risk of not reaching the 90% filling target, the MiTE Ministerial Decrees of June 22 and July 20, 2022 entrusted the balancing manager and the GSE, respectively, with the task of speeding up the filling of national storage through the so-called “filling service of last resort storage”; • Resolution No. 274/2022/R/gas defined the procurement by Snam Rete Gas S.p.A. of the volumes identified by the MiTE in the AGS segment at a price equal to the average price of the transactions recorded on the continuous trading market for the day of delivery, increased by 7 €/MWh. ARERA recognizes of a storage premium, which varies according to the summer/winter spread for implicit allocations from June 24, 2022 until the end of the thermal year; • Resolution 614/2022/R/gas defined the methods by which the GSE and Snam Rete Gas S.p.A. allocate spot products on the market in relation to the gas injected into storage as part of the service of last resort, following the MASE directive of November 16, 2022, which established that the quantities of gas procured through storage of last resort should be made available for the most part (≥60% of total volumes) through the sale of forward products and for the remainder through spot products. The latter are sold by Snam Rete Gas S.p.A, also on behalf of the GSE, in the AGS segment of the day-ahead and intraday markets at a sale price set equal to the higher of: i) the price of gas with delivery to the PSV in the summer semester 2023, decreased by 10 6 Evolution of the regulation and impacts on the Business Units of the A2A Group 6.1 Generation and Trading Business Unit 6.2 Market Business Unit 6.3 Waste Business Unit 6.4 Smart Infrastructures Business Unit 98 A2A Report on Operations 2022 Evolution of the regulation and impacts on the Business Units of the A2A Group €/MWh; ii) the price of gas with delivery to the PSV expressed, at the time of the offer, by the markets in continuous trading relative to the day of delivery, decreased by 7 €/MWh; iii) the price of gas with delivery to the TTF expressed, at the time of the offer, by the markets in continuous trading relative to the day of delivery. The forward products were allocated through procedures already concluded by the GSE \- which, on November 30, offered for sale 1.3 billion of the 1.6 billion cubic metres procured, allocating approximately 450 million cubic metres \- and by Snam Rete Gas S.p.A., which, on December 22, offered for sale 816 million of the 1.3 billion cubic metres procured, allocating the entire quantity. In both procedures, the quantities were offered at a premium to the PSV day-ahead reference price. In light of the legal and regulatory framework outlined, A2A S.p.A.: • allocated storage capacity \- seasonal product and implicit allocation with recognition of the premium in relation to the gas in stock at the end of the injection period in the amount of 21 million euro \- in line with the quantities procured in previous years and with the objective of guaranteeing the modulation service to A2A Energia S.p.A.’s civil and non-civil customers; • was awarded 6 lots of about 20 million Smc in relation to each procedure for the forward allocation of gas in storage within the last resort service of both GSE and Snam Rete Gas S.p.A. (in the latter case, the option to supply gas for 1 lot in the TA 2023-2024 was exercised). Incentives for production from renewable sources: implementation of the EU RED II Directive With the approval of Legislative Decree no. 199 of 2021, which implements EU Directive 2018/2001 (so-called RED II), Italy has redefined the framework of incentive schemes for the production of energy from renewable sources necessary to achieve the decarbonization targets by 2030\. This new measure modifies the previous regulatory framework regarding incentives for renewable sources (Legislative Decree March 3, 2011, no. 28) and requires that by 2030, at least 30% of gross final consumption be supplied by renewable sources, outlining the characteristics of the new support mechanisms. In particular, with regard to the production of electricity, the new Legislative Decree provides for: • pending definition of the new incentives, the extension of the current mechanism (RES MD 2019) until the unallocated quotas are exhausted. In this regard, the GSE launched the eighth, ninth and tenth auction procedures (closed in October 2022); • for plants close to economic competitiveness (firstly, photovoltaic and wind power), a new incentive MD is expected, characterized by a five-year planning horizon. Plants with a capacity of over 1 MW will continue to have access to incentives through competitive procedures (auctions), with quotas divided by geographical areas and bonuses for the use of storage systems, while those of a smaller size will have direct access to the support mechanism (abolition of registers); • in order to facilitate the authorization procedures, a special MD MASE is expected (initially foreseen for mid-2022) that will identify the criteria for the definition of the areas suitable (and not suitable) for the installation of renewable source plants: the Regions will have 180 days from the date of publication of the Ministerial Decree to proceed with the identification of these areas to the extent of reaching at least the installation targets foreseen by the PNIEC to 2030\. In eligible areas, the landscape opinion will not be binding for the purposes of obtaining authorization and the time limit for obtaining authorization will be reduced by one-third. At December 31, 2022, the incentives paid by the GSE to the A2A Group’s plants powered by renewable sources amounted to 52.3 millions of euro. GSE incentive type millions of euro Feed in tariff 12.3 TO and RID 9.7 Energy account (FV) 30.3 Total 52.3 Large hydroelectric derivation concessions Article 11-quater of Law no. 12/2019 partly amended the rules on large derivation hydroelectric concessions (plants with nominal power greater than 3 MW). The new rules provide that the Regions regulate with their own laws the methods, procedures and criteria for the allocation of concessions, which may be entrusted to economic operators identified through a tender, or to public/private joint ventures with selection of the private partner through a tender, or through forms of partnership under Legislative Decree 50/2016. Pursuant to article 7 of Law no. 118 of August 5, 2022 (so-called Annual Law for the Market and Competition 2021), the procedure for awarding the contract must be started within 2 years of the entry into force of the Regional Laws and, in any case, no later than December 31, 2023. The Regions may also require concession holders to provide 220 kWh a year free of charge for each kW of average nominal power of the concession and may require the payment of an additional fee for expired concessions operated on a temporary basis. In terms of compensation to outgoing operators, the new rule prescribes: • for wet works: the transfer without compensation of ownership to the Regions, except for the compensation only of investments not yet amortized; • for dry works: the recognition of a residual value derived from accounting records or certified appraisal. In the event of non-inclusion in the project of the incoming concessionaire, Evolution of the regulation and impacts on the Business Units of the A2A Group 2022 Report on Operations A2A 99 removal and disposal of movable property is envisaged at the expense of the proposer, while immovable property remains the property of the entitled parties. On April 8, 2020, Lombardy enacted Regional Law no. 5/2020 (amended with Regional Law no. 19/2021), which governs the methods and procedures for awarding concessions for large-scale hydroelectric derivations and determines the related state fee. The new state fee has a fixed part related to the concession power and a variable part as a percentage of the revenues from the sale of energy fed into the grid by the plant, net of energy supplied free of charge to the Region. Lombardy Regional Law no. 23/2019 imposed on concessionaires, starting in 2020, the obligation to provide free electricity to the Region (220 kWh for each kW of concession power), providing for the possibility of monetizing. For concessions under the so-called temporary continuation, there is an additional annual fee determined on a reconnaissance basis at 20 euro/kW. Most of A2A S.p.A. large-scale derivation concessions in Valtellina (for a nominal concession power of around 200 MW) have expired2 and exercised under temporary continuation regime, most recently in accordance with Regional Council Resolution of December 28, 2022, no. XI/7717, of the Lombardy Region. The Linea Green S.p.A. concession of Resio also expired on December 31, 2010, for which the temporary continuation was sanctioned by effect of the Regional Council Resolution mentioned above. Other A2A S.p.A. hydroelectric concessions (plants in Mese, Udine and Calabria with total nominal power of about 345 MW) expire in 2029\. Also added are the large-scale derivations not yet expired of Linea Green S.p.A. (Mazzuno and Darfo), as well as the concession of Gravedona of Acinque S.p.A. (formerly ACSM-AGAM S.p.A.) with expiry 2029. Acquisition of sole control of 3New & Partners S.r.l. and 4New S.r.l. On March 16, 2022, A2A S.p.A. notified the AGCM, pursuant to Article 16(1) of Law No. 287/90, of a merger transaction involving the acquisition of sole control of the companies 3New & Partners S.r.l. (and, indirectly, its subsidiaries, some jointly and some exclusively) and 4New S.r.l. (and, indirectly, its subsidiaries), both of which operate in the renewable energy sector as producers and developers of wind and photovoltaic power plants with a total capacity of 353 MW, located mainly in Italy and partly in Spain. By Provision no. 30103 of April 5, 2022, the AGCM decided not to initiate the preliminary investigation pursuant to Article 16, paragraph 4, of Law no. 287/90, since the notified transaction does not entail the creation or strengthening of a dominant position in the markets concerned (of the production and wholesale supply of electricity and the production and marketing of certificates of origin) such as to eliminate or substantially and permanently reduce competition. The operation was finalized on June 7, 2022\. 2 The concessions of Grosotto, Lovero and Stazzona expired December 31, 2010 while the one of Premadio 1 at July 28, 2013 (Premadio 2 has validity until December 31,2043). The Grosio concession expired on 15/11/2016. 6 Evolution of the regulation and impacts on the Business Units of the A2A Group 6.1 Generation and Trading Business Unit 6.2 Market Business Unit 6.3 Waste Business Unit 6.4 Smart Infrastructures Business Unit 100 A2A Report on Operations 2022 Evolution of the regulation and impacts on the Business Units of the A2A Group 6.2 Market Business Unit 2017 Competition Law and removal of price protections for electricity and gas The Law August 4, 2017, no. 124 (Competition Law 2017) contains provisions aimed at removing regulatory barriers to the opening of markets, promoting the development of competition and guaranteeing the protection of consumers. Article 1, paragraphs 59-85, introduces relevant provisions relating to the energy market, providing, inter alia, for the end of price protection schemes from January 1, 2021, for small electricity businesses and from January 1, 2023, for micro electricity businesses3, according to the methods and criteria defined by the MiTE aimed at guaranteeing an aware transition in the free market. As regards protection services for domestic customers, following a number of legislative interventions4, the deadline was postponed to January 10, 2024, without prejudice to the introduction of the obligation for sellers to offer so-called vulnerable and energy-poor customers a price reflecting the cost of energy and gas on the wholesale markets and defined by ARERA with subsequent provisions. Resolution 491/2020/R/eel defined the Gradual Protection Service (STG), activate as from January 1, 2021 for small electricity businesses, without a supplier on the free market5. For the period from January 1 to June 30, 2021 (provisional regime) the TSG was supplied by the current operators for greater protection under almost unchanged economic and contractual conditions while, from July 1, 2021 (definitive regime) and for a period of three years, the TSG is supplied by operators selected by means of an auction organized by Acquirente Unico S.p.A. in which A2A Energia S.p.A. was awarded 3 lots (Lazio; Lombardy with the exception of Milan; Veneto, Liguria and Trentino-Alto Adige), for a total of around 80,000 POD and approximately 1.8 TWh/year consumption. Similarly to what has been established for small businesses, ARERA Resolution 208/2022/R/eel defined the rules for the assignment of the TSG of electricity micro-companies with power up to 15 kW without a supplier on the free market (about 2 million POD for about 5 TWh/year of consumption), requiring that the service be provided for 4 years. The deadline for the activation of the service set for January 1, 2023 was subsequently postponed to April 1, 20236 by Resolution 586/2022/R/eel because, following a hacker attack on the IT systems of Acquirente Unico S.p.A. in September, the organization of the competition procedures was significantly delayed. During the awards, in which only the operators7 who had served at least 100,000 POD/PdR on December 31, 2021 were allowed to participate, 12 customer lots were allocated on the basis of the lowest price offered, expressed in €/POD/year, to cover the marketing and imbalance costs not already recognized by ARERA. A2A Energia S.p.A. was awarded the maximum ceiling of the areas that could be awarded (4 lots), equal to 35% of the total volumes, i.e. about 500,000 POD for about 1.2 TWh/year of consumption: Lot no. Provinces/Regions Award price c€/POD Lot 3 Abruzzo, Marche, Umbria, Forlì-Cesena, Ferrara, Ravenna, Rimini 1,500.00 Lot 8 Molise, Frosinone, Grosseto, Livorno, Lucca, Massa-Carrara, Pisa, Pistoia, Municipality of Rome 2,500.00 Lot 10 Sardinia, Caserta, Naples excluded municipality 10,500.00 Lot 12 Sicilia 5,300.00 At the end of the TSG supply period, customers who have not yet chosen an offer on the free market will continue to be supplied by A2A Energia S.p.A. with the application of the most convenient offer, as established by MD MiTE August 31, 2022, no. 325\. The contractual conditions applied, as for the TSG of small businesses, are those provided for the PLACET Offers while the economic conditions, defined by ARERA, provide for the introduction of a “single national fee” to be paid by customers and determined as a weighting of prices offered by operators at auction in the various areas. In implementation of the provisions of the Competition Law, on November 2, 2022, the MiTE Ministerial Decree August 25, 2022, no. 164 was published, establishing the Vendors List in the electricity sector and defining the conditions, criteria, methods and technical, financial and honourableness requirements for the registration, permanence and exclusion of entities from the List. As a transitional measure, it has been established that companies registered as commercial counterparties of end customers in the Integrated Information System (SII) are automatically accredited in the List, except for the need to formalize the registration by submitting a self-declaration of possession of the technical and integrity requirements within 90 days from the adoption by the MiTE of the directorial decree containing the forms for submitting the application for registration and the required documents. 3 According to the EU definition, micro-electrical enterprises have fewer than 10 employees and an annual turnover not exceeding 2 million euro. 4 Decree Law no. 152 of November 6, 2021 (LD Recovery) postponed the end of the greater protection of electricity to January 10, 2024, and subsequently also for domestic gas customers, LD Aiuti Quater provided for the same deadline. 5 The perimeter of this first lot covered about 230,000 subjects between small businesses (number of employees between 10 and 50 and/or annual turnover between 2 and 10 million euro) owners of LV withdrawal points and micro-businesses owners of at least one point of withdrawal with contractually committed power greater than 15 kW that, at December 31, 2020, had not yet chosen supply in the free market. 6 Until April 1, 2023, companies will continue to be supplied by the same operators as for the greater protection. 7 Only one operator per corporate group. Evolution of the regulation and impacts on the Business Units of the A2A Group 2022 Report on Operations A2A 101 Interventions on the economic conditions of gas and electricity protection The Authority, in order to contain the increase in bills for customers still supplied in the protection services, intervened with: • Resolution 374/2022/R/gas revising, as of October 1, 2022, the methodology for calculating the gas component (Cmem), for the determination of which the wholesale market forward quotations (TTF) are no longer used, but the monthly average of the PSV day-ahead price recorded by ICIS Heren. This resulted in a reduction on the bill as the average price in Q4 2022 with the new calculation methodology was approximately 25% lower; • Resolution 463/2022/R/eel, which, when updating the tariffs for Q4 2022, postponed the recovery of the differential between the costs incurred by Acquirente Unico S.p.A. for the purchase of electricity and the revenues earned as a result of the application of the tariffs generated in Q3 2022 in order to contain the increases in bills. Prescription of electricity and natural gas consumption dating back more than two years The 2018 Budget Law, in article 1, paragraphs 4-10, introduced the statute of limitations in electricity and gas supply contracts with reference to consumption dating back more than two years, with significant impacts in the relationships between customers and sellers, between distributors and sellers and in those with the transmission operator and with the other subjects of the supply chain. The effective date of this provision has been differentiated: from March 1, 2018 for the electricity sector and from January 1, 2019 for the gas sector. The Law initially provided that the prescription not be recognized to the customer in the event that the missed or erroneous collection of consumption data was attributable to the customer; however, paragraph 295 of article 1 of the Budget Law 2020 removed this case, providing for the recognition of the prescription period even in cases of ascertained liability of the customer, and in fact, introducing an objective responsibility for operators of the supply chain, especially those responsible for metering, even in the absence of a specific assessment of faults or inefficiencies in their operations8. Starting in 2018, ARERA intervened with numerous measures in order to implement the legislative provision (in particular Resolutions 603/2021/R/com and 604/2021/R/com, which will come into force from 2022). On the one hand, in compliance with the Sentences of June 14, 2021, no. 1441, 1444 and 1449 of the Lombardy Regional Administrative Court, it amended Resolution 569/2018/R/com, and, on the other hand, defined the methods of compensation of settlement items arising from exceptions to the two-year statute of limitations raised by the end customer and the seller, giving the CSEA the role of compensating party vis-à-vis the seller and, with specific reference to the electricity sector, promoting the quality of the metering service of distributors, through greater responsibility on their part, in order to reduce the adjustments made available with delays of more than two years. Resolution 603/2021/R/com was subsequently challenged by Italgas Reti S.p.A. and 2i Rete Gas S.p.A., which contested the introduction of specific obligations for distributors, which provide for the sending to sellers of all necessary information, also with documented evidence, aimed at ascertaining the presence of causes hindering the acceptance of the prescription. On January 2, 2023, the Lombardy Regional Administrative Court, upholding the appeals filed, partially annulled Resolutions 603/2021/R/com and 604/2021/R/com insofar as it held that ARERA did not have the power to amend the general rules on prescription and the related evidentiary mechanisms. 8 In this regard, mention should be made of the closure in January 2021 of the investigative proceedings initiated by the AGCM against certain sales companies with the imposition of a total fine of 12.5 million euro. The Antitrust Authority has, in fact, ascertained the unjustified rejection of the two-year statute of prescription requests submitted by users, due to the late billing of electricity and gas consumption, in the absence of evidence that the delay was due to the responsibility of consumers. 6 Evolution of the regulation and impacts on the Business Units of the A2A Group 6.1 Generation and Trading Business Unit 6.2 Market Business Unit 6.3 Waste Business Unit 6.4 Smart Infrastructures Business Unit 102 A2A Report on Operations 2022 Evolution of the regulation and impacts on the Business Units of the A2A Group Components to cover marketing costs on the electricity protected market, on the free electricity market and on gas protection For the year 2022, as provided for in Resolutions 401/2021/R/gas and 402/2021/R/eel, the updating of the RCV and PCV components (to cover the marketing costs of electricity, respectively, on the greater protection and free market) and QVD (to cover the marketing costs of gas at retail level) was postponed to Q2, following ARERA’s need to carry out in-depth studies related to the evolution of the retail market structure and to align the remuneration methods of the various regulated entities. The new values will be valid for the period from April 1, 2022 to March 31, 2023 (as per Resolutions 146/2020/R/eel and 147/2020/R/gas). Compared to the previously published values, there was a substantial increase in the components due to the delayed update to January 1, 2022. PCV euro/POD/year 2021 JANUARY 1, 2022 MARCH 31, 2022 APRIL 1, 2022 MARCH 31, 2023 Single national Single national Single national Domestic POD 65.44 65.44 69.88 Various use POD 124.71 124.71 113.09 euro/POD/year 2021 JANUARY 1, 2022 MARCH 31, 2022 APRIL 1, 2022 MARCH 31, 2023 C-North C-South C-North C-South C-North C-South RCV Domestic POD 24.42 26.67 24.42 26.67 30.14 34.06 Various use POD 47.42 65.83 47.42 65.83 48.74 71.40 RCVsm* Domestic POD 41.19 42.66 41.19 42.66 44.73 48.31 Various use POD 72.00 107.73 72.00 107.73 69.72 129.29 RCVi Domestic POD 19.54 21.34 19.54 21.34 24.11 27.25 Various use POD 37.93 52.67 37.93 52.67 38.99 57.12 (*) Minor separate companies (≤ 10 MIO POD). QVD euro/PDR/year 2021 JANUARY 1, 2022 MARCH 31, 2022 APRIL 1, 2022 MARCH 31, 2023 €/PDR/year c€/mc €/PDR/year c€/mc €/PDR/year c€/mc Domestic PDR 62.74 0.7946 62.74 0.7946 67.32 0.7946 PDR condominium home use <200,000 82.39 0.7946 82.39 0.7946 88.41 0.7946 The estimated impact for the A2A Group is approximately 4.8 million euro. Additional mechanisms to cover efficient costs on the protected market With reference to the additional cost compensation mechanisms for the electricity greater protection service as per the TIV, the following is noted: • in May 2022, A2A Energia S.p.A. submitted a request for access to the mechanism regarding the exit of customers from the greater protection service, aimed at recognising the additional fixed cost connected to a customer exit rate towards the free market greater than that implicitly recognized in the definition of the RCV component, for an amount equal to 220,000 euro, which was paid in the 2nd half of 2022 (PUC 2021); • in April 2022, A2A Energia S.p.A. submitted a request for access to the mechanism to compensate for arrears of end customers, aimed at recognizing any charges related Evolution of the regulation and impacts on the Business Units of the A2A Group 2022 Report on Operations A2A 103 to arrears exceeding the unpaid ratio already considered within the RCV component (COMP 2021), for an amount equal to about 490,000 euro, which was in the 2nd half of 2022; • in August 2022, A2A Energia S.p.A. filed an application for access to the incentive mechanism for greater dissemination of bills in dematerialized format, aimed at recognizing the costs incurred for the recognition of the discount on bills to customers who jointly activate an automatic debit method and the dematerialized sending of bills. The mechanism was revised by Resolution 477/2021/R/com and in the first recognition session (2022), the possibility was allowed for operators to file a retroactive application and request offsets with reference also to the intervening years from 2016 to 2021\. CSEA recognized and paid A2A Energia S.p.A. an amount of 2.5 million euro. Interventions in the electricity sector on load profiling/settlement In the course of 2022, the Authority intervened several times on the settlement mechanism of electricity batches between the various dispatching users, including Acquirente Unico S.p.A. (which today in the retail market acts as a residual dispatching user for customers supplied in the higher protection service). In particular, the lines of intervention can be differentiated as follows: • interventions aimed at overcoming the inadequacies of the previous settlement mechanism with respect to the increase in POD equipped with hourly meters for settlement purposes caused by the advancement of the 2G Smart Metering Systems (PMS2) Commissioning Plans prepared by distribution companies: this includes the provisions contained in Resolution 570/2021/R/eel, which provided, starting in 2022, for a greater frequency (from annual to four-monthly) of updating, as well as a refinement of the calculation method, of the parameters representing the percentage share of Residual Area Withdrawal (PRA) attributable to each POD not hourly metered (CRPP and CRPU) and used for the settlement process. These measures were fine-tuned by Resolution 698/2922/R/eel, which, as of September 2023, provided for a further increase in the frequency of calculation of the previously mentioned parameters (from quarterly to monthly) and a change in the provisions concerning the transition to hourly treatment of 2G meters, which will start from the second month after installation (or third, if this occurs after the 15th day of the month) and no longer after twelve months; • interventions to deal with the financial items that arose during the first half of 2022 as part of the settlement process due to the combined effect of the regulatory framework applicable for that period in respect of load profiling (see previous point) and the significant increase in energy prices on the wholesale markets: Dispatching Users for end customers served in the free market had accumulated a significant debt, while the Acquirente Unico S.p.A. (in its capacity as dispatching user for end customers served in the greater protection area) and, through this entity, the greater protection operators had accumulated a corresponding credit. Therefore, ARERA Resolution 473/2022/R/eel established that an extraordinary load profiling settlement session would be held in December 2022 (which would otherwise have been settled in July 2023), accommodating the needs of dispatching users other than Acquirente Unico S.p.A. and providing that these parties could request Terna S.p.A. (in its capacity as the entity in charge of managing, also financially, the settlement mechanism) the deferment of the payments to be made by it from December 31, 2022 to January 24, 2023\. A2A Energia S.p.A. adhered to this possibility by requesting a deferred payment of approximately 55 million euro. Compensation mechanism for general system charges not collected from final customers Resolution 32/2021/R/eel introduced a mechanism for the recognition of General System Overheads (GSO) not collected from defaulting end customers, however already paid to the distributors by the selling companies. The mechanism will apply until the adoption of specific interventions, including legislative ones, aimed at a different management of the GSO collection chain and the related guarantee system. Transport users may participate, including on behalf of their commercial counterparts, choosing annually between: • an ordinary regime: in which there is granting of uncollected GSO for which invoices have been due for more than 12 months and the appropriate credit protection procedures have been activated, and GSO waived as a result of settlement, assignment or credit restructuring agreements; • a simplified scheme: under which only a share of the amount of uncollected GSO is recognised, which is obtained by using estimates; this share is equal to 75% of the estimate of the Declared Uncollected GSO (i.e. the estimated amount) made with respect to the values found in the company’s accounting situation as set out in the mandatory unbundling communications (TIUC) and in the approved financial statements. 6 Evolution of the regulation and impacts on the Business Units of the A2A Group 6.1 Generation and Trading Business Unit 6.2 Market Business Unit 6.3 Waste Business Unit 6.4 Smart Infrastructures Business Unit 104 A2A Report on Operations 2022 Evolution of the regulation and impacts on the Business Units of the A2A Group Prescriptive and sanctioning measures for non-diligent scheduling strategies within the electricity dispatching service (i.e. imbalances) Resolution no. 111/06 defines the rules for the calculation of imbalance prices to be applied to the differences between the feed-in and consumption plans and the actual production and withdrawals. Proper scheduling is desirable because it allows for more effective system safety management and promotes cost reduction. For these reasons, the discipline of these imbalances has been the subject of several amendments by the Authority in order to align the regulation to the need for an efficient market configuration, pushing operators to make increasingly better production and consumption forecasts, and avoiding arbitrage between prices on different markets9. In 2016, given the significant increase in dispatching costs, ARERA launched a fact-finding investigation from which numerous prescriptive and/or asymmetric regulation and sanctioning measures were derived towards some operators for their “non-diligent” scheduling strategies. These proceedings have not yet been concluded due to the numerous litigation generated. As regards the A2A Group, the adoption of prescriptive measures concerned: • Linea Più S.p.A. (now A2A Energia S.p.A.): the measure imposed returning approximately 3.9 million euro to Terna S.p.A.; • Enercity S.r.l. (then Suncity Energy S.r.l. and now A2A S.p.A.): the measure imposer returning approximately 737 thousand euro to Terna S.p.A.; • Gelsia S.r.l.: the measure imposed returning approximately 8 thousand euro to Terna S.p.A.. The same companies were also subject to sanctions for violation of article 14.6 of ARERA Resolution 111/06 (“diligent planning”). In particular: • Linea Più S.p.A. (now A2A Energia S.p.A.) was imposed a fine of approximately 1.5 million euro (Resolution 164/2018/S/eel); • for Enercity S.r.l. (then Suncity Energy S.r.l. and now A2A S.p.A.) and Gelsia S.r.l. the proceedings (commenced respectively with Determinations DSAI/81/2017/eel and DSAI/86/2017/eel) were concluded with filing by ARERA respectively with Resolutions 650/2022/S/eel and 537/2022/S/eel, in light of the case law developments concerning the cancellation of the measures of similar proceedings due to the late conclusion thereof. Linea Più S.p.A. (now A2A Energia S.p.A.) appealed against both the prescriptive measure and the penalty measure. Enercity S.r.l. (then Suncity Energy S.r.l. and now A2A S.p.A.) and Gelsia S.r.l. also appealed against the prescription. A2A Energia S.p.A., Suncity Energy S.r.l. (now A2A S.p.A.) and Gelsia S.r.l. settled in 2019, the amounts of the prescriptive measure to Terna S.p.A. and A2A Energia S.p.A. also the amounts of the fine to ARERA. Between 2020 and 2021, the Council of State \- for A2A Energia S.p.A. and Suncity Energy S.r.l. (now A2A S.p.A.) \- and the Lombardy Regional Administrative Court \- for Gelsia S.r.l. \- upheld the respective appeals against the prescriptive measures, and Terna S.p.A. offset the relevant amounts. In light of the Authority’s power of review, Resolutions 217/2021/E/eel and 419/2021/E/eel, in compliance with the rulings of the Council of State, have launched new procedures aimed at reviewing, or possibly confirming the aforementioned prescriptive measures. The supplementary investigation was concluded in relation to A2A Energia S.p.A. with Resolution 503/2022/E/eel, and the company paid Terna S.p.A. the amount of about 3.3 million euro in November 2022\. With reference to Suncity Energy S.r.l. (now A2A S.p.A.) and Gelsia S.r.l. the term of the proceedings was set by Resolution 249/2022/E/eel at June 30, 2023\. By virtue of the review of the prescriptive proceedings, the companies have maintained or made the necessary provisions in the financial statements. The sanctioning measure against A2A Energia S.p.A. was initially annulled by the Council of State and the company was paid the relevant amounts (in two instalments: 450 thousand euro in December 2021 and 1.06 million euro in May 2022). Subsequently, on the basis of the possibility of the re-exercise of the Authority’s sanctioning power provided for by the Council of State, the proceeding was restarted by Resolution 8/2022/S/eel and the measure was re-issued by Resolution 6/2023/S/eel for an amount of 1.36 million euro (already subject to provision). The amount was settled by the company in February 2023. New fee on the bill to cover the net cost of procurement of available production capacity by Terna S.p.A. Resolution 365/2019/R/eel introduced a new fee to be collected through the electricity bill aimed at covering the costs related to the operation of the capacity market. As of January 1, 2022, the new fee is applied to users of withdrawal dispatching and is divided into two unit fees: the first to be applied during the peak hours of the electricity system and the second to be applied during the remaining off-peak hours. The fees are appropriate to cover 70% and 30%, respectively, of the net charges arising from the mechanism. 9 ARERA intervened with Resolution 523/2021/R/eel, which implements the reform of the regulation of imbalances, in implementation of the European regulatory framework. The main additions include the extension, as of April 1, 2022, of the single price mechanism for the valuation of the imbalances of all units, without distinctions based on characteristics, and the introduction of additional fees for the failure to comply with dispatching orders for qualified units. Evolution of the regulation and impacts on the Business Units of the A2A Group 2022 Report on Operations A2A 105 These values are established, together with the indication of the peak and off-peak hours, by Terna S.p.A. and in the first definition were set for peak hours equal to 39.799 €/MWh (annual update) and for off-peak hours (quarterly update) equal to 1.296 €/MWh for Q1 2022, 1.305 €/MWh for Q2 2022, 1.886 €/MWh for Q3 2022 and 0.496 €/MWh for Q4 2022\. Resolution 566/2021/R/eel also defined the methods for transferring the charge to end customers, establishing that for customers in the free market, in compliance with the principle of price negotiation between the parties, sellers may independently define the methods of application. On the other hand, with regard to services of last resort and PLACET offers, ARERA has provided that for customers: • in the higher protection service: the fee is included in the PD element (dispatching price) that makes up the tariff; • in the STG: a one-off fee published by ARERA before the start of each quarter and for each month of the quarter is applied. This fee will be included in the Cdisp (dispatching fee) that forms the price charged to customers; • for the safeguard service: a one-rate fee is applied, differentiated for each month of application, defined by Terna S.p.A. on a quarterly basis; • with PLACET offers: the one-rate fee defined for customers served in the STG is applied. Award of Safeguard Service for the years 2021-2022 and for the years 2023-2024 The Law no. 125/07 of August 3, 2007 established a safeguard service for all companies and public bodies without an electricity supplier and that have at least one medium or high voltage supply point or only low voltage points with more than 50 employees or an annual turnover of more than 10 million euro. A2A Energia S.p.A. was selected, through a public tender procedure, for the period January 1, 2021 \- December 31, 2022, as the electricity supplier for the safeguard service in lot 2 (Lombardy) and lot 4 (Marche, Tuscany and Sardinia), for about 650 GWh. The prices charged are determined in accordance with the Authority’s rules and the calculation methods laid down by the MiSE and include wholesale electricity costs, dispatching and commercialization costs. In particular, A2A Energia S.p.A. applies to the energy supplied and the related grid losses a consideration equal to the average monthly purchase prices on the GME market, differentiated by time slot and increased by the omega parameter (Ω) equal to 10.17 €/MWh for lot 2 and equal to 13.57 €/MWh for lot 4. In November, A2A Energia S.p.A. also took part in the competitive procedure for the assignment of the protection service for the two-year period 2023-2024, once again winning lot 2 (Lombardy) and lot 4 (Marche, Tuscany and Sardinia) and also acquiring lot 1 (Liguria, Piedmont, Valle d’Aosta, Trentino-Alto Adige) and lot 3 (Veneto, Emilia-Romagna, Friuli-Venezia-Giulia), for approximately 33,700 points and about 2.15 TWh. The award value, omega parameter (Ω), was higher than in previous procedures: 29.97 €/MWh for lot 1, 15.90 €/MWh for lot 2, 24.97 €/MWh for lot 3 and 21.95 €/MWh for lot 4. 6 Evolution of the regulation and impacts on the Business Units of the A2A Group 6.1 Generation and Trading Business Unit 6.2 Market Business Unit 6.3 Waste Business Unit 6.4 Smart Infrastructures Business Unit 106 A2A Report on Operations 2022 Evolution of the regulation and impacts on the Business Units of the A2A Group Interventions to increase consumer awareness The Authority, in order to support the exit path of customers from the protection regime towards the free market, has put in place a series of interventions in 2022 aimed at ensuring greater transparency of billing documents as well as new tools to increase the comparability of offers on the market. Specifically: • Resolution 135/2022/R/com introduced the standardized offer code with the aim of providing customers with information on the type of offer they intend to subscribe to. This code must be stated in the contractual material and invoicing documents; • revised the rules of Bill 2.0, introducing with Resolution 209/2022/R/com the information on annual consumption, understood as the difference between two readings/self-readings, covering a period of 12 consecutive months, and the estimate of the annual expenditure incurred net of any items not related to the supply of energy (e.g. RAI licence fee, indemnities, etc.). The Authority, in application of Legislative Decree 210/2021, has also provided for the inclusion in the bill of an Internet address prepared by ARERA through which the end customer will be able to jointly access the “protection” tools made available by the legislation, such as the “Offers Portal”, the “Energy and Environment Consumer Desk” and the “Consumption Portal”. Resolution 637/2022/R/com introduced the obligation for sellers to make available to customers in dematerialized format the detailed elements of the bill, which will have to be modified by unbundling the display of the components of the general system charges (ASOS and ARIM). The Resolution also provided for the systematization of all communications from the Authority and the creation of a special space in the bill. A2A Group’s initiatives to support its customers to cope with the energy crisis In order to combat rising energy bills, the A2A Group, in cooperation with the main Consumer Associations, has implemented a number of actions to support its domestic customers: • extended the scope of Resolution 636/2021/R/com, which required installment for sellers for a period of 10 months of overdue electricity and gas invoices issued between January 1, 2022 and April 30, 2022, providing for the granting of customized installment plans at the customer’s request also in a period prior to the due date of the invoice, with the extension of the application to district heating residential customers; • recognized a one-off billing bonus of 435 euro, for a total of 260,000 euro, to all Ukrainian customers of A2A Energia S.p.A. who are hosting compatriots fleeing from the territories of the Russian-Ukrainian conflict and have expressly requested it. For this initiative, the Group received the special “Friend of the Consumer 2022” award that Codacons has given to organizations that have taken action to provide aid and solidarity to the Ukrainian people. Closure of the investigation by the AGCM against A2A Energia S.p.A. for the application of the costs of the online payment service by credit card (PS 10728) With measure dated September 20, 2017, the AGCM imposed a fine of 220,000 euro to A2A Energia S.p.A. for violation of the provisions of article 62 of the Consumer Code on the application of surcharges for the use of the credit card for the payment of bills via the website. The company filed an appeal before the Lazio Regional Administrative Court stating that the surcharge requested was not due to the use of the payment instrument, but to the provision of a service that brings with it an objective added value (considering that since January 1, 2017, the company has discontinued the function of collection at the physical counters). In addition, in order to protect the opposing needs for the protection of users and the creation of a competitive market, in which the economic and financial equilibrium of operators is safeguarded, article 19 of Directive 2011/83/EU (Consumer Rights Directive), implemented by the rule in article 62 of the Consumer Code, provides that Member States prohibit professionals to impose on consumers, in relation to the use of certain payment instruments, fees that exceed those incurred by the professional for the use of such instruments thus legitimizing, in our opinion, the conduct of A2A Energia S.p.A.. The Council of State subsequently accepted the appeal filed by Automobile Club d’Italia against the decision of the Lazio Regional Administrative Court, which had confirmed the validity of the measure by means of which AGCM had sanctioned the operator for violation of the aforementioned provision of the Consumer Code. Request for information from the AGCM with respect to A2A Energia S.p.A. concerning the use of the so-called “green claim” (PS12263) On April 7, 2022, AGCM received a request for information from A2A Energia S.p.A. aimed at ascertaining that the company does not engage in unfair commercial practices in violation of the Consumer Code. AGCM asked to certify the truthfulness and sustainability of some of the claims used in the promotion of electricity and natural gas offers by the seller (and which appear, for example, on the website as well as being used in other distribution channels), which could unlawfully influence the economic behavior of the end customer if they were omissive or misleading. Part of the information provided in the reply \- dated April 29, 2022 \- concerns the Guarantees of Origin mechanism, which for 100% Green electricity offers allows the seller to certify the feeding into the grid from plants fuelled by renewable sources Evolution of the regulation and impacts on the Business Units of the A2A Group 2022 Report on Operations A2A 107 of a quantity of electricity at least equal to that consumed by the end customer subscribing to the offer. Regarding other, more general propositions, evidence was provided of the commitment made over the years in pursuit of sustainability goals and reduction of environmental impacts, which integrate the Group’s values, as outlined in the Business Plans, recalling the results achieved also with reference to the information published in the integrated sustainability reports. Request for information and subsequent initiation of preliminary investigation proceedings (with the adoption of a precautionary measure at the same time) with a further request for information from the AGCM with respect to A2A Energia S.p.A. as to the manner in which the provisions of Article 3 of LD Aiuti bis were implemented (PS12470) On October 18, 2022, AGCM received an initial request for information from A2A Energia S.p.A. aimed at ascertaining whether the company had implemented conduct that did not comply with the provisions of Article 3 of Legislative Decree Aiuti bis, converted into Law No. 142 of September 21, 2022, concerning the “Suspension of unilateral amendments to electricity and natural gas supply contracts”, which could constitute unfair commercial practices in violation of the Consumer Code. The request is part of 4 preliminary proceedings initiated against Iren Mercato S.p.A., Dolomiti Energia S.p.A., Iberdrola Clienti Italia S.r.l. and E.ON Energia S.p.A., which are alleged to have violated Article 3 of LD Aiuti bis, following numerous reports from consumers. In addition to A2A Energia S.p.A., the request for information was sent to 24 other supplier companies active on the free market. On November 7, 2022, the company responded to the Authority’s request by pointing out that it had always kept faith with the contractual commitments it had undertaken with its customers, not availing itself of the faculties provided for by the regulatory provisions for cases of supervening excessive onerousness/impossibility, nor activating the clauses that would have allowed the unilateral variation of the agreed economic conditions. A2A Energia S.p.A. clarified that this commercial strategy was perpetrated despite the dramatic context that the market is experiencing and that the prohibition under Article 3 did not consequently have any impact on its commitment to continue to offer services, limiting its actions to only the physiological renewal of the economic conditions applied, at the expiry of their period of validity, in accordance with the contracts signed with end customers. Following the findings of the reply to the request for information previously sent to the AGCM (PS12455) and the orders of the Lazio Regional Administrative Court on the precautionary appeals of Iren Mercato S.p.A. and Dolomiti Energia S.p.A. (which confirmed the AGCM precautionary measures addressed to them), the Authority, on December 13: initiated an investigation procedure (PS12470), with the simultaneous adoption of precautionary measures, against A2A Energia S.p.A. for alleged variations in the price of electricity and natural gas supplies in breach of Article 3 of Legislative Decree Aiuti bis; notified the company of a request for information to be provided, with documentation, within 20 days of receipt of the notice. The company promptly notified the AGCM of a compliance report in which it undertook to take the most appropriate steps to comply with the measures referred to in the precautionary measure. It also filed a procedural memorandum. On December 30, 2022, however, the Authority notified the company that it had fully revoked the precautionary measure, justifying its decision with reference to the principles expressed by the order of the Council of State on December 22, 2022 (which upheld the request for suspension submitted by Iren Mercato S.p.A.) as well as to what emerged from the procedural memorandum, the compliance report and the company’s communication of response to the requests for information of October 18, 2022 (PS12455). In particular, the Authority indicates that it must consider that the assumptions that justified the adoption of the precautionary measure do not exist, since, prima facie, the conduct alleged against the company appears to constitute variations in the economic conditions actually expiring of open-ended contracts. Therefore, the risk of the impact of the precautionary measures themselves is removed, while the proceedings, which are expected to be closed by the first half of 2023, remain open. 6 Evolution of the regulation and impacts on the Business Units of the A2A Group 6.1 Generation and Trading Business Unit 6.2 Market Business Unit 6.3 Waste Business Unit 6.4 Smart Infrastructures Business Unit 108 A2A Report on Operations 2022 Evolution of the regulation and impacts on the Business Units of the A2A Group Waste Pricing Method for the second regulatory period 2022-2025 (MTR-2) ARERA Resolution 363/2021/R/rif defined the criteria for recognition of the efficient operating costs for the regulatory period 2022-2025 (MTR-2), confirming the general approach that distinguished the first method and establishing the criteria for defining the access tariffs to the undifferentiated waste and MSWOF treatment plants. With reference to the municipal sanitation service, ARERA introduces some new elements mainly attributable to the need to: • envisage a multi-year economic and financial plan (PEF) with the possibility of spreading the extra cap costs over the regulatory period and, for balances, even beyond 2025; • strengthen incentives for the development of activities for the valorization of recovered materials and/or energy; • configure appropriate corrective mechanisms in light of the regulatory changes introduced by Legislative Decree no. 116/2020; • take into account the objectives of compliance with the obligations and quality standards introduced as from 2023, and the simultaneous need to guarantee coverage of the additional costs attributable to them. In the second half of 2022, the A2A Group’s municipal sanitation companies finalized the raw 2022-2025 PEF for each individual concession in accordance with the new methodology with submission to the municipalities for subsequent integration activities (as managers of tariff activities and relations with users) and validation as the Territorially Competent Entity (ETC). In this regard, it should be noted that the approval of the TARI resolutions (PEF-regulation-tariffs) has recently been aligned by article 43, paragraph 11, of Law Decree 50/2022 with the budget approval deadlines, if the latter are set after April 30 of each year. The approval date of the 2022-2025 PEF was extended to July 31, 2022, during the extraordinary meeting of the State City and Local Government Conference on June 28, 2022. The table below shows the 2022-2025 approvals by ARERA. PEF tariff revenue (values in millions of euro) ARERA Resolution no. Municipality Operator 2022 2023 2024 2025 544/2022/R/rif Milan Amsa S.p.A. 303.3 306.1 306.1 306.1 731/2022/R/rif Brescia Aprica S.p.A. 35.3 35.9 36.7 37.2 In most cases, in continuity with 2020-2021 and in the presence of assignments obtained after competitive tendering procedures, ETC is expected to avail itself of article 4.6 of the MTR-2, preserving any efficiencies and thus applying the value envisaged by the previous contracts (if lower than the maximum value of the MTR-2) subject to compliance with the economic-financial balance of operations. With reference to treatment, ARERA introduces an asymmetric tariff regulation, to be determined taking into account regional governance, the degree of integration of the operator and the location of the plant with respect to the waste hierarchy. In particular, the Authority has established, as a prerequisite for the identification of regulated tariff plants \- so-called “minimum” plants \- the presence of a rigid market with a strong and stable excess of demand, in addition to the following alternative conditions: i) having committed capacity for flows guaranteed by sector scheduling; ii) having been identified as “minimum” during scheduling by the competent parties. The identification of regulated plants must be carried out as part of the ETC scheduling activities (in Lombardy by the Regional Government) “in time for the determination of tariff revenues”, the submission of which to ARERA was set for April 30, 2022 (ordinatory term). For plants that are not subject to tariff regulation, so-called “additional”, on the other hand, publication of the “main criteria on which the fees are based” is envisaged on the Manager’s website. Resolution 68/2022/R/rif updated the WACC to be used for the 2022-2025 regulatory period, based on the TIWACC criteria set out in Resolution 614/2021/R/com. • for the municipal sanitation service, without prejudice to the provisional values included in the 2022-2025 PEF subject to adjustment during the biennial update, ARERA set a WACC equal to 5.6%. The ETC may, however, consider updating the 2022-2025 PEF with the newly published WACC; • for treatment, with reference to “minimum” cycle closure plants \- i.e. “intermediate” plants from which flows derive indicated as entering “minimum” cycle closure plants \- ARERA set a WACC equal to 6%. The Lombardy Region, with Council Resolution no. 5777/2021 of December 21, 2021 complied with the provisions of article 6 of Resolution 363/2021/R/rif, declaring all the undifferentiated and MSWOF treatment plants as “additional”, taking into account that Lombardy is not in market conditions with structural rigidity either for the municipal waste chain or for MSWOF and is, on the contrary, characterized by plant self-sufficiency and competitive gate prices. The Region has strengthened the monitoring obligations of plant operators, reserving the possibility of revising this provision during the biennial updating of tariffs following any changes in market conditions and the adoption of the National Waste Management Plan. 6.3 Waste Business Unit Evolution of the regulation and impacts on the Business Units of the A2A Group 2022 Report on Operations A2A 109 The Piedmont Region has identified the Villafalletto landfill and, consequently, also the adjacent Villafalletto treatment plant of A2A Ambiente S.p.A. among the ‘minimum’ plants for closing the cycle, defining the ‘minimum’ flows entering the aforementioned plants for the years 2022-2023. During the first half of 2022, the company, as operator of the above-mentioned plants, prepared the multi-year PEF as per MTR-2 and submitted it to the ETC for subsequent validation activities. Since the existing contracts with the transferors have lower gate fees than the ARERA tariff carp, no significant impact on the prevailing tariffs is expected. With Executive Decree no. 694/2022, the Piedmont Region approved the 2022-2025 PEF as perMTR-2 for the Villafalletto plant, managed by A2A Ambiente S.p.A.. The Campania Region with Government Resolution no. 190/2022 identified the Acerra waste-to-energy plant and the Caivano mechanical biological treatment plant as ‘minimum’ cycle closure plants and ‘intermediate’ plants, from which flows indicated as entering ‘minimum’ cycle closure plants originate. By way of Executive Decree no. 235/2022, the Campania Region approved the 2022-2025 PEF for the Acerra plant, which is managed by A2A Ambiente S.p.A. by means of a service contract “in the form of management operation”. Quality regulation of the municipal waste management service (2023-2025) Resolution 15/2022/R/rif approved the “Consolidated text for the regulation of the quality of the municipal waste management service” (TQRIF), with the introduction from January 1, 2023 of a set of minimum and homogeneous contractual and technical quality obligations for all managements (regardless of how the service is entrusted), alongside quality indicators and related general standards differentiated by regulatory schemes, identified in relation to the actual starting quality level guaranteed to users, determined by the ETC on the basis of the services provided for in the Service Contract(s) and/or in the Quality Charter(s) in force. The set of obligations and quality standards introduced by Resolution 15/2022/R/rif is broken down as follows: • contractual quality: a) management of requests for activation, change and termination of service; b) management of complaints, requests for information and correction of amounts charged; c) points of contact with the user; d) methods and frequency of payment, installments and refunds of amounts not due; e) collection of waste on call; f) disruption and repair of equipment for home collection; • technical quality: a) continuity and regularity of service; b) security service. When approving the 2022-2025 multi-annual PEF, ETCs are required to identify the positioning of the individual management in the “Matrix of reference schemes”, determining the regulatory scheme and the related obligations applicable to the management, to be valued in the definition of the forecast costs associated with compliance with the quality obligations provided by the TQRIF in the PEF 2022- 2025\. Furthermore, ETCs may, on the basis of a justified proposal by the Managers, define any qualitative standards that improve or go beyond those laid down in the TQRIF. Provision of obligations and control instruments for technical quality (continuity, regularity and security of the service) Technical quality = NO Technical quality = YES Provision of contract quality obligations Quality contractual = NO SCHEME I Minimum quality level SCHEME III Intermediate quality level Quality contractual = YES SCHEME II Intermediate quality level SCHEME IV Advanced quality level As far as 2022 is concerned, the Municipality of Milan, as ETC, positioned the operator AMSA S.r.l. within the I Scheme. From a prudential perspective, positioning within the same Scheme has occurred for most of the municipalities managed by Group companies. Resolution 15/2022/R/rif also introduces the obligation to adopt a single “Quality Charter for the integrated municipal waste management service” in accordance with the provisions of the TQRIF for each award, indicating the reference regulatory scheme, the service obligations, the indicators and related contractual and technical quality standards provided for by the Authority, as well as the additional or improved standards provided for by the ETC. As things stand, the collection and municipal sanitation operating companies have shared with the municipalities a template of the new Service Charter, 6 Evolution of the regulation and impacts on the Business Units of the A2A Group 6.1 Generation and Trading Business Unit 6.2 Market Business Unit 6.3 Waste Business Unit 6.4 Smart Infrastructures Business Unit 110 A2A Report on Operations 2022 Evolution of the regulation and impacts on the Business Units of the A2A Group which incorporates the new regulatory framework and shows the positioning of management in the quality matrix defined by the TQRIF, with the related obligations and performance standards, differentiated according to the starting quality level identified by the ETC. With regard to the involvement of Consumer Associations, the sharing of the new Service Charters took place in a differentiated manner on the basis of the specificities of the managed assignments, either by participating in dedicated meetings (as in the case of the Municipality of Milan) or by sending an information note containing the legal and regulatory prerequisites of the update. Finally, the Managers are required to report \- through the preparation of an electronic performance register \- and communicate the data relating to the quality indicators to the Authority and the ETC (obligation valid for assignments that fall under Schemes II-III-IV), as well as publishing the following information on their website: the positioning of management within the matrix of regulatory schemes, the quality standards for which they are responsible and the results achieved in terms of compliance with these standards (from 2024), the average tariff applied to households, the breakdown of the fees applied to households and non-household users. The Authority may also proceed to publish the aforementioned information with a view to said regulation. Incentive framework for biomethane production from MSWOF Until December 31, 2022, the biomethane incentive framework was regulated by the MiSE MD March 2, 2018 (so-called MD 2018) that provides for the recognition of a premium in the form of Consumption Input Certificates (CICs) for producers who feed biomethane into the grid exclusively for the transportation sector. For producers of biomethane and advanced biofuels (including those derived from MSW) there is a mechanism for withdrawal by the GSE of both the CICs due (with a fixed value of 375 €/CIC for 10 years) and the production of biomethane. As provided for in Legislative Decree 199/2021, a new incentive mechanism for biomethane production was introduced by MiTE Decree of September 15, 2022, which will cover the period 2022-2024. The new instrument is characterized by incentivizable quotas and competitive procedures referenced from the MDs of incentives for renewable electricity sources: the subject of the auctions will be a contract for two-way differences that will consider the difference between the tariff as a result of competitive procedures and the average monthly price of methane (including the value of the guarantee of origin). The projects that win the competitive procedures will also receive a capital contribution up to 40% of the eligible costs (relating to the expenses for the construction of the plants), thus also allocating the resources earmarked by the PNRR for the development of biomethane plants. Projects for the reconversion of existing agricultural biogas plants and the construction of new capacity from agricultural matrix or organic waste fall within the scope (for the latter, the tariff is significantly reduced compared to the 2018 MD). The first competitive procedure was scheduled for 2022: the GSE is awaiting the publication of the application procedures to launch the first call for tenders. The MiTE Ministerial Decree of August 5, 2022 also introduced an extension that allows projects authorized by August 19, 2022, and which have been qualified as a project by the GSE by December 31, 2022, to benefit from the incentives under the 2018 Ministerial Decree by postponing the start-up deadline to December 31, 2023. During 2022, A2A Ambiente S.p.A. obtained the pre-qualification from the GSE for 4 biomethane production plants from organic waste that will be incentivized with the CIC mechanism provided for by the MD 2018\. Two plants (Lacchiarella and Cavaglià) came into operation in 2022, while the other two (Corteolona and Castelleone) benefit from the extension of the Ministerial Decree of August 5, 2022 and will come into operation during 2023 (benefiting from the incentives of the 2018 Ministerial Decree). EU Circular Economy Package On June 14, 2018, the EU Circular Economy Package was published consisting of: • 4 Waste Directives (Directive 2018/849 on end-of-life vehicles/waste batteries/WEEE, Directive 2018/850 on landfills, Directive 2018/851 on waste, Directive 2018/852 on packaging); • 1 Regulation on the approval and market surveillance of vehicles. The measures are aimed at promoting the application of the waste hierarchy (prevention, reuse, recycling, energy recovery, landfill) also through appropriate legislative and financial instruments, and in this context, some common objectives are set for the European Union: • recycling of at least 55% of municipal waste by 2025\. This portion is destined to rise to 60% by 2030 and to 65% by 2035; • recycling of 65% of packaging waste by 2025 (70% by 2030) with material-specific targets. The Directives also introduced the obligation to collect organic waste separately or ensure recycling from the end of 2023 and set a binding target of reducing landfill disposal: Member States will have to ensure that recyclable waste is no longer transferred to landfills in 2030 and that as of 2035, the total portion of municipal waste destined for landfills does not exceed 10%. Central to the application of the waste hierarchy is the strengthening of Extended Producer Responsibility (EPR), by means of which producers are called upon to participate in the organizational and financial management of the life cycle phase in which the product becomes waste, contributing at least to 80% of the costs of collection, recovery and disposal of packaging placed on the market. Evolution of the regulation and impacts on the Business Units of the A2A Group 2022 Report on Operations A2A 111 Among the main acts transposing the Directives, particular mention should be made of the following: • Legislative Decree September 3, 2020, no. 116, on “Implementation of Directive (EU) 2018/851 amending Directive 2008/98/EC on waste and implementation of Directive (EU) 2018/852 amending Directive 1994/62/EC on packaging and packaging waste”; • Legislative Decree September 3, 2020, no. 121, on “Implementation of Directive (EU) 2018/850, amending Directive 1999/31/EC on waste landfills”. Legislative Decree September 3, 2020, no. 116, implementing Directive (EU) 2018/851 amending Directive 2008/98/EC on waste and implementing Directive (EU) 2018/852 amending Directive 1994/62/EC on packaging and packaging waste Legislative Decree 116/2020 implements two Directives of the EU Circular Economy Package, substantially amending part IV of Legislative Decree 152/2006 (TUA), in particular: • Title I Waste management \- Chapter I General provisions • Title I Waste management \- Chapter III Integrated waste management service • Title II \- Packaging management • Title VI Penalty system and final provisions \- Chapter I Penalties. The measure brought forward to December 31, 2021 the obligation to separately collect organic waste or ensure its recycling. The amendments made effectively eliminate the category of “assimilated waste”, referring to the domestic perimeter both the flows in the municipal waste categories (specified in article 183, paragraph 1, letter b-ter of the TUA) and the “waste similar in nature and composition” based on the type (Annex L-quater of the TUA) and the activities (Annex L-quinquies of the TUA) that generate them. The achievement of the recovery obligations introduced by the Directive is calculated on the basis of these flows. This intervention, which could contribute to overcoming the lack of homogeneity in the definition of urban flows among the various territorial areas, seems however to require further operational clarification regarding categories that cannot be univocally classified (e.g. waste from construction and demolition, from canteens and offices located in industrial buildings) and a possible integration of the current perimeter of municipal privatizations. Special waste is instead listed in article 184, paragraph 3, of the TUA and, in continuity with the past, also include waste from recovery and disposal activities. A number of relevant definitions have also changed, including “waste management”, “recovery of material”, “temporary storage prior to collection”, and the provisions relating to temporary storage, classification, and criteria for admissibility of waste in landfills have been amended. A revision of the regulations on waste traceability is also planned, with the advent of the RENTRI. The new traceability system will be integrated into the National Electronic Register established following the conversion of Law Decree 135/2018 and will be managed by the National Register of Environmental Managers. Furthermore, the Extended Producer Responsibility (EPR) is carefully regulated, reinforcing the institution (one of the cardinal principles of the reform) and with a view to progressively opening up consortium systems to competition. Under the new provisions, the EPR systems will have to cover at least 80% of the total cost of managing the waste released for consumption, without prejudice to the definition, after consulting ARERA and therefore in line with the MTR, of the permissible “efficient cost” level. Legislative Decree 116/2020 finally entrusted to the Ministry of the Environment (today MASE), with the technical support of ISPRA, the definition of a “National Waste Management Program” (PNGR) that will have to define the criteria and strategic guidelines to be followed by the Regions and Autonomous Provinces in drawing up regional waste management plans. 6 Evolution of the regulation and impacts on the Business Units of the A2A Group 6.1 Generation and Trading Business Unit 6.2 Market Business Unit 6.3 Waste Business Unit 6.4 Smart Infrastructures Business Unit 112 A2A Report on Operations 2022 Evolution of the regulation and impacts on the Business Units of the A2A Group Legislative Decree September 3, 2020, no. 121, implementing Directive (EU) 2018/850, amending Directive 1999/31/EC on waste landfills Legislative Decree 121/2020 implements another of the Directives of the EU Circular Economy Package and introduces new organic regulations on the landfilling of waste, making amendments to Legislative Decree January 13, 2003, no. 36 on topics such as: • landfill acceptance criteria for certain classes of waste; • basic characterisation and acceptance procedures, including arrangements for on-site verification and waste sampling and analysis; • construction and management criteria for landfill facilities. Legislative Decree provides for a gradual reduction in the amount of waste sent to landfills (no more than 10% by weight of municipal waste by 2035) and introduces a ban on the landfilling of separately collected waste intended for recycling or preparation for reuse. The landfilling of all waste suitable for recycling or other recovery, in particular municipal waste, will also be banned from 2030, except for waste for which landfilling produces the best environmental outcome. Piedmont DCR no. 200 \- 5472 of March 15, 2022: approval of the Regional Environmental Energy Plan (PEAR) The Piedmont Region has approved the PEAR, which is divided into four macro-areas, each of which contains guidelines for achieving certain objectives. In particular, the following are noted: • photovoltaic: the PEAR guidelines state a preference for plants that do not involve land consumption, with the exception of those involving the reuse of areas at least temporarily encumbered by land use constraints, such as post-mortem waste landfills, as well as for systems on roofs and roofing accompanied by remediation actions with respect to the presence of asbestos. With regard to ground plants, in anticipation of a forthcoming sharp increase in applications for authorizations, the Plan guidelines tend to favor solutions that valorize already sealed surfaces that are abandoned and not otherwise usable, such as the yards of disused industrial areas; • biomethane: preference for biomethane production in plants fuelled by MSWOF. The PEAR also emphasizes the need to promote the simultaneous material and energy recovery achievable through the integration of anaerobic digestion and composting plants, thus respecting the waste hierarchy. In agriculture, the production of biomethane in plants fed primarily with vegetable waste, crop residues, by-products and livestock manure is to be preferred; • areas and sites that are unsuitable for the installation of plants for the production of electricity from renewable sources: defines unsuitable and attention areas for the location of wind power plants, biomass-fuelled electricity production plants, hydroelectric plants and ground photovoltaic plants. Regional Law (Lombardy) no.8 of May 20, 2022: first legislative revision law 2022 The Region of Lombardy has issued the first law revising the regulations in force, amending article 27, referring to sanctions in the area of civil thermal plants, of Regional Law 24/2006- Rules for the prevention and reduction of emissions into the atmosphere to protect health and the environment. In particular, the act provides that: 1\. failure to comply with the obligation of the person in charge of the plant to keep the plant logbook shall entail the application of a pecuniary administrative sanction ranging from 100 euro to 600 euro; 2\. the administrator of a condominium served by a centralized heating system and, where delegated, the third-party responsible, each within the scope of related competence, who fail to inform the municipality or the province of the appointment, on the basis of the powers provided for respectively in articles 27(1)(d) and 28(1)(c) of Regional Law no. 26/2003, shall incur an administrative penalty of between 100.00 euro and 600.00 euro; 3\. failure to comply with the obligations of the installer or maintenance technician concerning the registration of the heating system shall result in the application of a pecuniary administrative sanction ranging from 50.00 euro to 300.00 euro; 4\. failure to comply with the obligations of the installer or maintenance technician concerning the sending of the declaration of maintenance of the heating systems or even of the registration of the systems shall result in the application of a pecuniary administrative sanction ranging from 10.00 euro to 100.00 euro. The same sanction shall be increased, in the minimum and maximum amounts, by 50%, if sent more than 30 days after the due date and, in the minimum and maximum amounts, by 100%, if sent more than 90 days after the due date. Evolution of the regulation and impacts on the Business Units of the A2A Group 2022 Report on Operations A2A 113 Lombardy Regional Law no. 9 of May 20, 2022: Simplification Law 2022 With a view to simplification, the Lombardy Region has enacted this law stipulating that: • in the context of landfills excluded from the location criteria set forth in article 8, paragraph 7, of Regional Law no. 12 of July 12, 2007, permanent safety measures must be implemented consistently with the environmental protection objectives set forth in Legislative Decree 36/2003; • in case of non-compliance with the obligation to compile ORSO data, the sanctions are lowered from 100.00 euro to 1,000.00 euro (previously from 1,000.00 euro to 10,000.00 euro). Lombardy Regional Council Resolution no. XI/6408 of May 23, 2022, approving the update of the Regional Waste Management Program (PRGR), including the Regional Program for the Remediation of Polluted Areas (PRB) and the related documents envisaged by the Strategic Environmental Assessment (SEA) «Plan Towards a Circular Economy» With this DGR, Lombardy approved the update of the PRGR including the PRB. The PRGR contains development scenarios up to 2027 for both municipal waste and special waste, defining specific targets and implementation tools, which aim to favor effective recycling processes and limit the construction of new landfill volumes. It is envisaged that the Provinces and the Metropolitan City of Milan will identify suitable and unsuitable areas for the location of municipal and special waste recovery and disposal plants. The PRGR is also accompanied by the location criteria to be applied for new plants and modifications of existing plants, to be applied to requests submitted after May 27, 2022\. The PRGR also includes a chapter dedicated to the specific competences attributed to ARERA on municipal and assimilated waste as of 2018. One addition concerns the power of the competent authorities following the identification of areas with an exclusionary criterion. They may check, during renewal or review for renewal purposes, existing permits that provide for the management of waste recovery/disposal plants located in these areas, following a certain procedure. The following are subject to locational criteria: 1\. landfills \- (operations: D1, D5); 2\. incineration plants \- (operations: D10, R1); 3\. waste treatment plants (operations: D2, D3, D4, D6, D7, D8, D9, D12, D13, D14, R2, R3, R4, R5, R6, R7, R8, R9, R11, R12); 4\. storage (R13), preliminary storage (D15), volumetric adjustment without change of EER codes. The following are instead not subject (non-exhaustive list): 1\. municipal waste separate collection centres; 2\. storage (R13), preliminary storage (D15), volumetric adjustment without modification of the EER codes functional to the prevailing industrial and commercial activities, operated within the same settlement, to be assessed on a case-by-case basis by the competent authority; 3\. within the perimeter of municipal waste water treatment plants, the treatment of sludge, waste from the treatment of municipal waste water, waste from the treatment of municipal waste water treatment sludge (including ash), liquid waste and biodegradable organic waste; 4\. extensions of existing recovery plants for an area not exceeding 10% of the surface area of the plant being extended, exclusively for activities aimed at improving recovery activities in the perspective of the circular economy and only once during the period of validity of this plan update; 5\. new waste recovery plants, in the perspective of the circular economy, on the perimeter or in areas adjacent to existing production or waste treatment plants, dedicated exclusively to the final recovery (operations R1 to R11) of the waste decaying from these plants, for a surface area of no more than 50% of the adjacent plant and, in any case, no more than 50,000 square metres. The PRB aims to outline an updated overview of the critical issues present in the regional territory and to propose a set of actions to be implemented, in the short and medium term, aimed at guaranteeing and improving the performance of reclamation procedures and at pursuing more effectively the general objective of eliminating, containing or reducing polluting substances so as to prevent and limit the risks to health and the environment connected with soil contamination, restoring to new uses and functions portions of the territory that are currently compromised. 6 Evolution of the regulation and impacts on the Business Units of the A2A Group 6.1 Generation and Trading Business Unit 6.2 Market Business Unit 6.3 Waste Business Unit 6.4 Smart Infrastructures Business Unit 114 A2A Report on Operations 2022 Evolution of the regulation and impacts on the Business Units of the A2A Group Ministerial Decree no. 257 of June 24, 2022: adoption of the National Waste Management Program (PNGR) The PNGR, which is part of the reforms envisaged in the PNRR and approved on June 24, 2022 by Ministerial Decree no. 257, defines the macro-objectives, criteria and strategic lines to be followed by the regions when approving the Regional Plans. Among the most important elements: 1\. national plant recognition by type of plant and by region; 2\. criteria for identifying macro-areas that allow rationalization of plants from a location point of view. The macro-areas are characterized by: • proximity, understood as territorial contiguity; • infrastructure and logistical organization to minimize impacts related to waste transport; • benefits or economies of scale in the management of generated waste flows; • waste production basin that justifies the construction of an integrated network of plants; • integrated network of plants, distributed within the territory of the macro-area so that the location of plants does not fall on only a few specific areas, enabling all phases of the cycle to be managed until closure; • quantifiable contribution to decarbonization in terms of CO2 reduction; • endowment of treatment facilities to make a substantial contribution to the achievement of the EU targets for all relevant flows. The general criteria to be taken into account for the identification of macro-areas are: 1\. progressive socio-economic rebalancing between areas of the national territory; 2\. efficiency, sustainability, including the protection of cultural and landscape heritage, effectiveness and economy of the waste management system; 3\. implementation of a modern, integrated waste management system; 4\. contribution to the prevention/resolution of EU litigation. Each region will have to guarantee full autonomy for the management of non-differentiated municipal waste and for the fraction of waste from the treatment of municipal waste destined for disposal. As regards the circulation of organic waste, the option of defining macro-area agreements identified by the PNGR would, however, not affect the free circulation of this fraction pursuant to article 181(5) of Legislative Decree 152/06 (TUA). This approach is, moreover, endorsed by the AGCM itself, in its recent Report AS1875, concerning the identification of ‘minimum’ cycle closure plants in Emilia-Romagna and Friuli-Venezia Giulia. The PNGR has a time horizon of six years (2022-2028) and is designed to guide public policies and stimulate private initiatives for the development of a sustainable and circular economy, benefiting society and the quality of the environment. Resolution by the Reg. Council Lombardy July 11, 2022, no. XI/6659: regional guidelines for the implementation of Commission Implementing Decision (EU) 2019/2010 of November 12, 2019 laying down Best Available Techniques (BAT) conclusions for the incineration of waste The Lombardy Region has approved guidelines on the application of Best Available Techniques (‘BAT’) for incineration plants in order to provide clarification for their application. They are addressed to the operators and authorities responsible for the renewal of authorizations. The deed impacts the installations under regional and provincial jurisdiction referred to in point 5.2 of Annex VIII to Part II of Legislative Decree 152/2006, i.e. disposal or recovery of waste in waste incineration plants or waste co-incineration plants. As provided for in article 29-octies of Legislative Decree 152/2006, when new EU ‘BAT’ relating to a particular sector are issued, within four years of publication the competent authority must review the Integrated Environmental Authorizations (IEA) and, if necessary, update them in line with the new features, in particular in relation to emission limit values. In this case, the date by which to proceed with the review is December 3, 2023\. Evolution of the regulation and impacts on the Business Units of the A2A Group 2022 Report on Operations A2A 115 Law No. 91 of July 15, 2022: conversion into law, with amendments, of Decree-Law No. 50 of May 17, 2022, containing urgent measures on national energy policies, business productivity and investment attraction, as well as on social policies and the Ukrainian crisis This law converts LD 50/2022 (LD Aiuti), introducing urgent measures on national energy policies, business productivity and investment attraction, as well as on social policies and the Ukrainian crisis. The following articles, relating to HSE-relevant topics, have been significantly amended during conversion: Art. 6 \- Provisions on authorization procedures for plants producing energy from renewable sources; Art. 7 \- Simplification of authorization procedures for plants producing electricity from renewable sources; Art. 7 bis \- Extension of the temporal effectiveness of the building permit; Art. 10 \- Provisions on EIA; Art. 12 \- Provisions on integrated environmental authorization of plants producing energy from fossil fuels. Lombardy Decree no. 11240 of July 28, 2022: Start of the overall review procedures of the Integrated Environmental Authorization (IEA) for the incineration plants under regional jurisdiction pursuant to article 17, paragraph 1, of Regional Law 26/2003 The Region of Lombardy started the BAT review proceedings of the waste-to-energy plants under regional jurisdiction. For the A2A Group, the following plants are included: 1\. A2A Ambiente \- waste-to-energy plant Brescia 2\. A2A Ambiente \- waste-to-energy plant Silla 2 3\. Acinque Ambiente \- waste-to-energy plant Como 4\. Linea Ambiente \- waste-to-energy plant Cremona 5\. Lomellina Energia \- waste-to-energy plant Parona Going into the specifics of the determination, the text refers to Annexes, in particular: • Annex with detailed procedure for conducting the review, including timetable with deadlines for submission of review documentation (30-day extension possible); • Annex with outline for evaluation on the application of BAT; • Annex with spreadsheet for submitting energy data for yield calculation. LD no. 115/2022 (so-called LD Aiuti bis): urgent measures on energy, water emergency, social and industrial policies LD Aiuti bis introduces further provisions on energy, water emergency, social and industrial policies. In the HSE sphere, the following is noted: • article 32, which introduces areas of national strategic interest. These are areas appropriately created for the implementation of plans and programs in which investments of no less than 400 million euro are proposed by public or private entities in certain sectors. Once formalized, these areas are considered to be of public utility. At the moment, the sectors of strategic importance indicated by this article are microelectronics and semiconductors, batteries, supercomputing and high-performance computing, cyber security, Internet of Things (IoT), low-carbon manufacturing, connected, autonomous and low-emission vehicles, digital and smart healthcare and hydrogen; • article 33, which implements a new authorization procedure called ‘Procedimento autorizzatorio unico accelerato regionale per settori di rilevanza strategica (PAUAR)’ (Regional Single Accelerated authorization Procedure for Sectors of Strategic Significance), adding the new Article 27-ter to Legislative Decree 152/2006. This procedure is, in fact, an EIA procedure of regional competence, but accelerated (the total duration is less than 160 days). However, it can only be used for the realization of projects within national strategic areas. 6 Evolution of the regulation and impacts on the Business Units of the A2A Group 6.1 Generation and Trading Business Unit 6.2 Market Business Unit 6.3 Waste Business Unit 6.4 Smart Infrastructures Business Unit 116 A2A Report on Operations 2022 Evolution of the regulation and impacts on the Business Units of the A2A Group LD September 23, 2022, no. 144: further urgent measures on national energy policy, business productivity, social policies and for the implementation of the PNRR The LD aims to introduce rules to regulate national energy policy, business productivity, social policies and the implementation of the PNRR. The following is noted: • art. 16: inserts a reduction of deadlines in the case of the installation of photovoltaic systems or solar thermal systems on the roofs and façades of buildings serving activities subject to fire prevention controls. If, as a result of the installation of these systems, a fire protection project assessment is required, the deadlines laid down in Art. 3, paragraph 3, of Presidential Decree 151/2011 are reduced, until December 31, 2024, from 60 to 30 days after submission of the complete documentation; • art. 22: states that the works, plants and infrastructures necessary for the plant requirements identified by the PNGR constitute public utility works that cannot be postponed and are urgent. In the authorization procedures for these works, plants, infrastructures, where the competent authority does not act on the application for authorization within the time limits provided for by the legislation in force, the President of the Council of Ministers, on the proposal of the MiTE, assigns that authority a time limit not exceeding 15 days to act. In the event of continued inactivity, on the proposal of the Minister for Ecological Transition, after consulting the competent authority, the Council of Ministers appoints a commissioner ad acta, who is vested with the power to adopt the necessary acts and measures. D.D.g. Region of Sicily no. 1008 of September 27, 2022: approval of practices for the issuance of authorizations for waste disposal and recovery plants, pursuant to Articles 208 and 211 of Legislative Decree 152/2006, as amended and supplemented In light of the simplification activities envisaged in the PNRR, the Region of Sicily provided technical-operational support for the procedures for issuing: single authorization for waste disposal and recovery plants provided for in Article 208 of Legislative Decree 152/2006; authorization for research and experimentation plants pursuant to Art. 211 of Legislative Decree 152/2006; substantial and non-substantial variants of already authorized plants; renewal; company variations. For all types of proceedings, forms have been drawn up for submission and can be found in the D.D.g. 1007/2022 of September 27\. Finally, a clarification on the Environmental Impact Assessment for existing plants, which stipulates that for plants for which an EIA application has never been submitted, specifies that they must undergo it: on the occasion of the first useful renewal; when applying for changes to the authorization issued; on request. DGR (Regional Council Resolution) Lazio no. 884 of October 18, 2022: Operational provisions for carrying out Environmental Impact Assessment procedures In order to address the need to adapt the regional operational modalities to the latest changes in Legislative Decree 152/2006, the Lazio Region issued this D.G.R., containing provisions on the performance of the following administrative procedures: • preliminary assessment of the procedure to be initiated; • verification of subjectivity to the EIA; • consultation of the environmental impact study (EIS); • EIA and PAUR; • verification of compliance with environmental conditions and monitoring; • prior consultation with the competent authority for the definition of the level of detail of the project documents required at the EIA stage. It is specified that the provisions on the procedures regulated by the Regional Government Decree under analysis reflect for the most part the provisions of Legislative Decree 152/2006. Concerning the competent authority for EIA and EIA subjectability procedures, the regulation refers to Annex B of Regional Regulation no. 1 of 2022, which identifies the Regional Environment Directorate of the Lazio Region. Regional Law (Lombardy) no. 28 of December 13, 2022: second legislative revision law 2022 With the second revision law of the year 2022, the Lombardy Region updated the provisions concerning the Regional EIA, contained in the L.R. 5/2010. Article 10 of the standard introduces three new features: • on PAUR, modifies Article 5-bis on the preliminary phase. Specifically, it provides: 1\. the formal start of the procedure with the publication of the submitted documentation on the portal of the Sistema Informativo Lombardo per la Valutazione di Impatto Ambientale (SILVIA); 2\. the convening of the preliminary services conference provided for by Legislative Decree 152/2006; Evolution of the regulation and impacts on the Business Units of the A2A Group 2022 Report on Operations A2A 117 • the new Art. 6-bis, concerning the preliminary assessment, identifies the competent authority for requests for technical modifications, extensions or adaptations and design variants, in the same authority that has expressed its opinion on the project already authorized in the environmental assessment; • Annex B, number 7, letter z.b), excludes the application of the EIA to mobile plants for the recovery of non-hazardous waste used for a maximum of 30 days. In the case of successive campaigns of activity on the same site and with treated quantities of more than 1,000 m3/day, the EIA verification procedure will be applied. D.G.R. no. 7553 of December 15, 2022: approval of the Regional Program for Energy, Environment and Climate (PREEC) and related documents for the Strategic Environmental Assessment (SEA) The new PREEC proposes several objectives, such as the reduction of consumption and climate-changing gas emissions, the development of local renewable sources and the circular economy, and the financing of research and innovation. Photovoltaic development The Plan envisages a target of installing 10 GW of new photovoltaic systems by 2030, with preference given to the installation of systems on the roofs of residential, manufacturing and tertiary buildings. On-ground plants are also promoted, giving priority to degraded areas, such as quarries, reclaimed sites, depleted landfills, and agri-voltaic plants. Realization of RES plants in Protected Areas Annex 13 of PREEC sets out the measures relating to Protected Areas and consists of the following points: • the solar belt provision in the applied regulatory context (page 1): construction and installation of photovoltaic systems at a maximum distance of 500 metres from the industrial centre; • the list of Protected Areas (page 3); • the three levels of feasibility of a RES plant in a Protected Area: feasible plant, feasible with criticality or technically difficult to realize (page 5); • the classification of types of RES plants, including agri-voltaics, on the basis of technological, constructional and installation characteristics (page 6-14); • the locational criteria for each type of RES plant mentioned above and their technical elements, aimed at verifying their level of feasibility in a given area (page 15-129); • technical elements to be considered when designing RES plants (page 130-138). District heating PREEC confirms growth in this sector of up to 20%. The need for the Region’s coordination and guiding activity in permitting is highlighted, so as to have a simplified framework and an increase in the realization of these plants. Bioenergy development The biomethane market presents itself as an excellent means to achieve the decarbonization of the region. The act promotes the conversion of biogas plants to biomethane and, in the case of plants of a size not suitable for refining, the construction of new plants. Conversion will be possible for plants with an output of more than 300 kW and the remaining plants will be able to continue with their current biogas production. Circular Economy Measures PREEC emphasises the importance of developing the circular economy, through material recovery, biogas and biomethane production. It also highlights the potential of CSS and RDF as substitutes for coal and methane, having positive implications not only in the energy and waste sector, but also in the cement industry. Hydrogen chain The Region is committed to stimulating research and promoting several pilot projects on the use of hydrogen for its key role in the final phase of decarbonization. The Plan prioritizes the use of hydrogen in rail and road transport, identifying the need to provide suitable areas for refuelling, through the installation of 700 bar hydrogen dispensers for each type of vehicle in easily accessible areas and close to production points. 6 Evolution of the regulation and impacts on the Business Units of the A2A Group 6.1 Generation and Trading Business Unit 6.2 Market Business Unit 6.3 Waste Business Unit 6.4 Smart Infrastructures Business Unit 118 A2A Report on Operations 2022 Evolution of the regulation and impacts on the Business Units of the A2A Group Council Regulation (EU) 2022/2577 of December 22, 2022 establishing the framework for accelerating the deployment of renewable energies Given the current energy emergency, the Regulation introduces temporary provisions to speed up authorization procedures and the deployment of renewable energy projects. The rule will apply to all authorization procedures started between December 30, 2022 and June 30, 2024, leaving the possibility for the Member State to adopt the framework also for procedures already started and awaiting a final decision on December 30, 2022, provided that there is an effective acceleration of the timeframe. The act has abbreviated terms, in particular: • for the installation of solar energy equipment, the authorization procedure shall last for a maximum of 3 months, only if the purpose of the facility in which they are located is not the production of solar energy (Art. 4); • for the revision of the capacity of existing RES plants, the procedure shall last no longer than 6 months, including the time required for the EIA (Art. 5); • for connections to the transmission/distribution network, the procedure must be completed within 3 months, provided that the increase in plant capacity does not exceed 15% (Art. 5); • for heat pumps with an electrical capacity of less than 50 MW, the procedure shall not exceed 1 month (Art. 7); • for geothermal heat pumps, the procedure must be completed within 3 months (Art. 7). In order to accelerate the deployment of renewable energy projects, the regulation presents two simplifications: • for solar energy equipment with a capacity of up to 50 kW, which does not exceed the existing capacity of the grid connection, the authorization shall be deemed to have been granted if one month has elapsed since the application was submitted and no reply has been received from the competent authority. Member States may reduce this capacity to a maximum of 10.8 kW for the application of this provision (Art. 4); • the application for authorization for connections to the transmission/distribution network for heat pumps with electrical capacity of up to 12 kW and for heat pumps installed by a self-consumer of renewable energy with electrical capacity of up to 50 kW is waived, provided that the total capacity of the system is at least 60% of the heat pump capacity. In this case, notification to the competent authority will be sufficient (Art. 7). The regulation also provides for exemptions in the field of EIA. In Article 5, it is stipulated that any screening for availability to EIA for the revision of RES plants will be limited to the assessment of potential significant effects compared to the initial project. In addition, an exemption from the EIA procedure is introduced for this case, if the projects respect the environmental mitigation measures of the initial installation and do not involve the use of additional space. Finally, Article 6 provides the possibility for the Member State to exempt renewable energy projects located in a dedicated RES area, previously subject to SEA, from EIA and VINCA. Evolution of the regulation and impacts on the Business Units of the A2A Group 2022 Report on Operations A2A 119 Starting in 2022, update WACC for infrastructure services in the electricity and gas sectors Resolution 614/2021/R/com defined the criteria for updating the WACC for electricity and gas infrastructure services in the period 2022-2027, confirming the main characteristics of the regulation in place (real pre-tax WACC, regulatory period of 6 years divided into two three-year sub-periods, calculation formula based on the Capital Asset Pricing Model). However, significant additions are introduced in the methods for both updating and definition of the individual elements that make it up: i. trigger mechanism in the first three years: annual update, should there be a change in the WACC, for at least one service, equal to or greater than 50 bps compared with the value in force, considering certain specific market parameters (ref. nominal Risk Free parameters, isr inflation incorporated in the Risk Free, SPREAD and iBoxx BBB index). In this case, the WACC value would be updated for all services; ii. ke (cost of equity): elimination of the currently existing floor (0.5%) for risk-free assets and the introduction of corrective measures aimed at intercepting actual market conditions (CP \- Convenience Premium; FP \- Forward Premium and UP \- Uncertainty Premium) with a forward-looking and financial approach; iii. kd (cost of debt capital): a shift was made from industry benchmarks (i.e., collection and analysis of the actual cost of debt of Italian operators) to market benchmarks (i.e., iBoxx indices representing the yield of bonds issued by BBB-rated companies), including a weighting between the cost of existing debt (85%) and that of new debt (15%). A gradual mechanism was also introduced, whereby the new method of calculating Kd is given a weight of 33.3% in the first three-year period 2022-2024 and 66.6% in the second three-year period 2025-2027. iv. decrease in the cost recognized to cover taxation, by reducing the tax parameter T from the current 31% to 29.5%. The Authority confirmed the gearing values while for the ßasset (parameter that measures the riskiness of the specific sector), it introduced an extraordinary update in force in the three-year period 2022-2024 only for infrastructural services that currently have a value lower than 0.4. WACC 2022 WACC 2021 ßasset coefficient Weight of equity and debt capital (gearing) Rate of return on equity (Ke) Rate of return on debt capital (Kd) Correction factor (F) Rate of return on invested capital (WACC) Rate of return on invested capital (WACC) Electricity transmission 0.370 0.50 5.08% 1.86% 0.41% 5.0% 5.6% Electricity distribution and metering 0.400 0.50 5.39% 0.41% 5.2% 5.9% Storage 0.506 0.50 6.49% 0.41% 6.0% 6.7% Regasification 0.524 0.50 6.67% 0.41% 6.1% 6.8% Gas transport 0.384 0.50 5.23% 0.41% 5.1% 5.7% Gas distribution and metering 0.439 0.44 5.40% 0.45% 5.6% 6.3% With reference to the trigger mechanism for the annual update of the WACC, ARERA Resolution 654/2022/R/Com disclosed the results of the trigger check for 2023: since the change in the WACC, for each infrastructure service, was less than 50 bps with respect to the current value, the WACC values in force in 2022 are confirmed for 202310. 10 The analysis included updating the parameters RFnominal, isr inflation, SPREAD, iBoxxspot on an annual (October 2021-September 2022) and ten-year iBoxx10Y (October 2012-September 2022) basis. 6.4 Smart Infrastructures Business Unit 6 Evolution of the regulation and impacts on the Business Units of the A2A Group 6.1 Generation and Trading Business Unit 6.2 Market Business Unit 6.3 Waste Business Unit 6.4 Smart Infrastructures Business Unit 120 A2A Report on Operations 2022 Evolution of the regulation and impacts on the Business Units of the A2A Group New infrastructure tariff regulation criteria based on total expenditure (ROSS) Resolution no. 271/2021/R/com initiated a procedure aimed at defining a new method for calculating costs recognized to energy networks that goes beyond the current hybrid approach of rate of return for capital costs and price cap for operating costs, adopting one based on total expenditure that considers both operating and capital costs together. The new approach (defined as Regulation by Expenditure and Service Objectives \- ROSS) has the following main objectives: • realignment of efficiency incentives so that they extend to total efficiency and are no longer limited to operating costs; • use of capitalization rates set by the regulator, differentiated for each service, to be applied to the total recognized expenditure so as to determine both the recognized capital expenditure (which increases the invested capital) and the recognized operating costs; • provision of mechanisms to monitor returns on investment in order to assess the extent to which actual returns achieved deviate from those determined by the regulator; • homogenize the criteria for regulating various infrastructure services, avoiding misalignments in returns on invested capital caused by differences in the treatment of specific operating and capital cost items. In this context, the profiles relating to the definition of the length of the regulatory period will be assessed, taking into account the overlaps between the specific periods of each service and the WACC regulatory periods. 2021 final and 2022 provisional reference tariffs for the distribution and metering of natural gas Resolution 194/2022/R/gas approved the 2022 provisional reference tariffs for natural gas distribution and metering activities, while Resolution 154/2022/R/gas approved the 2021 final reference tariffs, subsequently subject to redetermination \- for some tariff locations \- with Resolution 679/2022/R/gas. In line with the provisions of Resolution 559/2021/R/gas, the above measures recognized, within the depreciation quota of the measure, the second and third of the five installments relating to the amounts to recover lost depreciation of mechanical meters decommissioned and replaced with electronic meters (IRMA). Value of GAS RAB underlying provisional reference tariffs 2022 millions of euro Unareti (1) ASVT LD Reti (1) Reti Più Acinque Group (1)(2) Total Centralized cap. 45 1 10 12 9 77 RAB Distribution 773 11 160 129 143 1,216 RAB Metering 122 2 23 36 27 210 Total 940 14 193 177 179 1,503 (1) The RAB values of Unareti S.p.A., LD Reti S.r.l. and the Acinque Group are affected by the sale, in Q1 2022, of numerous locations, as well as of Serenissima Gas S.p.A., to Romeo Gas S.p.A.. (2) Includes Lereti S.p.A. and Reti Valtellina Valchiavenna S.r.l.. The RAB values of Lereti S.p.A. are expressed net of the 4 locations (Varese, Brizio, Casciago and Lozza) where the assets are owned by the municipalities. The 2022 provisional tariffs are affected by the reduction in the WACC compared to 2021 (5.6% vs. 6.3%), as well as by the activation, as part of the price-cap mechanism for updating the recognized operating costs and effective \- retroactively \- in 2021, of the so-called Y-Factor (+0.9%) in order to cover the source charge caused by the introduction of the so-called Single fee replacing TOSAP/COSAP. With reference to the DCVER component to cover operating costs relating to metrological verifications, zeroed as from 2018, as from 2020, the Authority has provided for a specific mechanism of advance payment with a subsequent balance to be made once the net costs actually incurred have been defined. The issue of the relevant resolution by the Authority is currently awaited. Similarly, operating costs not already covered by tariffs relating to remote management/remote metering and concentrators of electronic gas meters will continue to be recognized on an ex post basis until 2022, within a decreasing annual limit (2020: 4.24 euro/PdRsmart; 2021: 3.74 euro/PdRsmart; 2022: 3.24 euro/ PdRsmart) and net of a flat-rate deduction for the portion of remote metering/remote management operating costs already included in the reference tariff of metering (as of 2020 0.53 €/PdR). We are currently awaiting the start of data collection for applications for the recognition of costs pertaining to the year 2021\. Unareti S.p.A.’s provisional 2022 tariffs do not take into account the switch to ATEM-based management of the Milan 1 area that took place as of March 1, 2022 and, consequently, are calculated using the tariff criteria applicable to municipal management. However, the admitted revenues actually recognized under the 2022 equalization mechanism (at the end of 2023 and downstream of the 2022 RAB GAS data collection in which the operations necessary for the purposes of the transition to tariff management on a scope basis of the localities falling within ATEM Milano 1 were carried out) will be equal to the average, weighted for the days of each management, of the revenues calculated using the municipal criteria and those calculated using the scope criteria. Evolution of the regulation and impacts on the Business Units of the A2A Group 2022 Report on Operations A2A 121 Determination of the Amounts for the Recovery of the Lost Depreciations of the mechanical meters decommissioned and replaced with electronic meters (so-called IRMA) Resolution 559/2021/R/gas closed a lengthy procedure aimed at identifying the method of valuing IRMA, generated by a discrepancy in the useful lives used to calculate the residual depreciation of mechanical G4/G6 gauge meters decommissioned as they were replaced with electronic meters in compliance with the provisions dictated by the Authority. Resolution 287/2021/R/gas and the subsequent Determination 3/2021 DIEU establish: • that the disposals of traditional meters replaced by electronic ones should be represented in the RAB GAS tariff collections using the FIFO method applied to gross historical values and that, as a result, it would be necessary to re-acquire the 2014-2019 disposals data previously reported so as to ensure the uniformity of application of this criterion among operators; • the technical modalities, the re-acquisition of data and the formulas for calculating IRMA on the entire fleet of G4/G6 mechanical meters existing as of December 31, 2019 and for meters decommissioned in the period 2014-2019. . As a result of the specific data collection for the re-acquisition of the 2014-2019 disposals, the IRMA recognized to the A2A Group’s distributors amounted to approximately 6 million euro and will be paid in 5 installments included in the allowed revenues for the years 2020 to 2024, of which the first 3 installments have already been recognized in the tariffs 2020, 2021 and 2022. Again with reference to the depreciation quotas of traditional meters decommissioned because they have been replaced with electronic meters, Resolution 679/2022/R/gas has, among other things, redetermined the definitive 2020 and 2021 reference tariffs in order to exclude from the calculation of allowed revenues the depreciation quotas of traditional meters of a calibre greater than G6 replaced with electronic ones after the year 2018, the deadline for completing the roll-out of these metering instruments. Tariff regulation for the natural gas distribution and metering service 2020-2025 Resolution 570/2019/R/gas approved the RTDG 2020-2025, which defines the regulatory framework for gas distribution and metering service tariffs for the years 2020-2025 (5th regulatory period). Although the characteristics of the previous regulation are confirmed, the main amendments can be summarized as follows: • operating costs recognized: update of operating costs recognized from 2020 using the average (50:50) between the actual costs of 2018 and the costs recognized in the same year as the basis of calculation. The update was carried out using the price cap method taking into account, in addition to the inflation, also an X-Factor differentiated by activity (distribution, marketing and metering) and, limited to distribution, operator size (large, medium, small). Compared to the previous period, there has been a considerable decrease in recognized operating costs and an increase in X-Factors relating to distribution and marketing, while the previous level is confirmed for metering; • capital costs: revision of the ß parameter in the calculation of the WACC of metering in order to align the recognized return with that in force for distribution (5.6% for 2022). For calculating the invested capital subject to remuneration, as well as the related amortization, a specific mechanism is defined for the gradual release, over a long period of time that goes beyond the individual regulatory period, of the amount of contributions existing at December 31, 2011, which was not considered in defining tariffs. Unareti S.p.A. challenged Resolution 570/2019/R/gas with the Regional Administrative Court highlighting the lack of investigation and the significant impact, unforeseen and not adequately justified, on the economic-financial balance. Within the framework of the aforementioned appeal, the verification activity, requested by the claimants (including Unareti S.p.A.), was concluded on March 30, 2022 with the filing of the Report containing the results of the analyses carried out by the Verifiers. Following this, hearings of the cases before the Regional Administrative Court took place between April and June. However, the rulings are not yet available. Resolution 737/2022/R/gas provided for the infra-period update 2023 \- 2025 but did not significantly change the regulatory framework, limiting itself to operationally outlining some measures already provided for, such as the parametric recognition of the costs of remote management/remote metering systems and concentrators, and updating some parameters, such as the standard cost of gas smart meters and the unit value of the down payment to cover the costs incurred for metrological checks. The main introduction, which has also been called for by operators, is the mechanism to mitigate the negative impacts of reductions in active PdR \- 6 Evolution of the regulation and impacts on the Business Units of the A2A Group 6.1 Generation and Trading Business Unit 6.2 Market Business Unit 6.3 Waste Business Unit 6.4 Smart Infrastructures Business Unit 122 A2A Report on Operations 2022 Evolution of the regulation and impacts on the Business Units of the A2A Group and thus of the parametric share of revenues allowed to cover the operating costs of locations for the distribution service, against which some fixed costs associated with non-active points remain \- as a result of the increasing electrification of consumption. This mechanism, to be managed within the framework of equalization from 2023 revenues, is based on trigger logics to be activated when certain conditions occur11. Reform of the regulation of the natural gas metering service Resolution 269/2022/R/gas reformed the regulation applicable to the gas metering service, intervening on the provisions regarding obligations and timing for the commissioning of gas smart meters, the frequency of metering data collection at PdR equipped with gas smart meters and the timing for making them available to the Integrated Information System (SII), and compensation to end customers and distribution users in the event of failure to meet the performance levels set by ARERA. In particular, the regulation establishes a fixed time limit (90 days) beyond which the gas smart meter installed is considered in service and, therefore, able to be remotely metered and remotely managed and, therefore, covered by the obligations, made more stringent, of reading frequency, now monthly also for PdR equipped with G4/G6 gauges (with respect to gauges > G6 there is no daily detail and the data can be collected by the third day following the last gas day of the reference month), and sending the data thus collected to the SII (by the 7th day of the month). The Resolution introduces a structured system of indemnifications in favor of both end customers, in the event of failure to collect metering data for a given number of months, differentiated on the basis of the customer’s annual consumption, and distribution users for whom, in addition to the mechanisms previously in force, automatic indemnities have been introduced in the event of non-compliance, with reference to PdR equipped with meters of gauge > G6, with the performance targets regarding the provision of metering data and the quality of the latter (understood as % of actual metering data relating to individual readings with daily detail). When fully operational, verification of compliance with the obligations will be entrusted to the SII, and mechanisms are provided for mitigating the burden borne by distribution companies for the recognition of these incentives, aimed at taking into account \- dynamically \- the actual technical limitations of the remote reading and remote management systems used. The provisions came into force partly in October 2022 (new compensation mechanisms) and partly in April 2023 (commissioning, frequency of metering data collection, making them available to the SII). Mechanism for empowering distribution companies in delta in-out management Resolution 386/2022/R/gas defined a simplified mechanism for making natural gas distribution companies responsible for managing the in-out delta (i.e. the difference between the gas entering the distribution network measured at the Re.Mi cabin or even city gate and the outgoing gas measured at the users’ PdR/interconnection points with other networks), consisting solely of penalties, structured in such a way as to intercept the situations of most manifest and macroscopic inefficiency of the distribution company and also considering the localized losses and fraudulent withdrawals detected in each year. The mechanism, operationally managed by Snam Rete Gas S.p.A. as Balancing Manager (BM) and financially by CSEA, is based on the comparison, for each city gate, between the minimum and maximum admissible reference values of the delta in-out calculated for homogeneous groups \- by size and geographic location \- of plants and the value of the actual delta in-out of the specific city gate and on the consequent valorization of the result through a unitary reference value of gas, so as to determine the penalty for the distributor owning this city gate. The penalty is assessed only if the value of the actual delta in-out falls outside the ‘deductible band’ determined by the minimum and maximum permissible values; moreover, the quantities of gas related to localized losses and fraudulent withdrawals detected by distributors and communicated to the BM are excluded from the calculation, so as to give the latter an incentive to detect and quantify them correctly. The first application of the mechanism will be made with reference to the three-year period 2020-2022, and the outcomes of the annual adjustment session covering 2022 and those of the multi-year adjustment session covering 2021 and 2020 to be held in 2023 will be used. Finally, with reference to localized leaks and fraudulent withdrawals, the Resolution introduces specific provisions aimed at overcoming the well-known uncertainty of the applicable regulatory framework concerning the ownership, and thus the liability, of gas quantities related to localized leaks or fraudulent withdrawals. In particular, ARERA assimilates these quantities to the natural gas necessary to guarantee the balancing of the networks, including the distribution networks, and assigns the responsibility to the territorially competent distributor who is required to quantify, also by means of specific CIG guidelines currently being drafted, these quantities and to take the necessary actions, including legal actions, to recover the value of the gas from the subject who made the fraudulent withdrawal or caused the loss; in return for this and through the submission of a specific certified petition, it may withhold a share of the recovered amount. 11 See Resolution 737/2022/R/Gas, Annex A (RTDG), Art. 45.2. Evolution of the regulation and impacts on the Business Units of the A2A Group 2022 Report on Operations A2A 123 Security and quality regulation for the natural gas distribution and metering service 2020-2025 Resolution 569/2019/R/gas approved the RQDG 2020-2025, which defines the regulatory framework regarding technical and commercial quality, of the gas distribution and metering service for the years 2020-2025 (5th regulatory period). In general, the characteristics of the regulation in force were confirmed, including the premium mechanisms for the incentive of security recoveries, for which the Authority, with Resolution no. 463/2020/R/gas, fixed the new levels and introduced some further refinements aimed at monitoring and stimulating the improvement of some specific aspects, such as the pressure and cathodic protection of the networks, the average residual life of the network and the timely elimination of dispersions within the timing established by the technical standards in force (which have become a new service obligation). As far as commercial quality is concerned, the only significant difference concerns the way in which the supply pressure check is carried out at the request of the user. During 2022, the Authority, together with the Special Unit of the Guardia di Finanza, carried out 2 inspections on the safety of the natural gas distribution service at Retipiù S.r.l. and Azienda Servizi Valtrompia S.p.A.. The inspections focused on compliance with the regulatory provisions on Gas Emergency Assistance and Gas Emergency Assistance Switchboard for the year 2020\. Following these inspections, the Sanctions and Commitments Department of the Authority adopted Determinations 24/2022 DSAI and 28/2022 DSAI whereby, in respect of certain contested violations, the potential penalties that may be imposed on Retipiù S.r.l. and Azienda Servizi Valtrompia S.p.A. are quantified, at the same time providing for the possibility of a simplified closure of the sanctioning procedure, which envisages, in exchange for the fulfilment of the obligations set forth in the contested breaches, the payment of the penalty to the extent of one-third of the amount potentially payable. The companies took up this option by paying 9,100 euro and 20,850 euro respectively. Resolution 383/2022/R/gas determined the bonuses and penalties relating to the safety recoveries of the natural gas distribution service for the year 2019, the amounts of which, net of the advance payments fixed by Resolution 171/2022/R/gas and received by CSEA in May 2022, were disbursed in October 2022\. The A2A Group received approximately 3.2 million euro. Start of management of natural gas distribution service in the Milan 1 area On December 16, 2021, Unareti S.p.A. signed the service contract for the management of the natural gas distribution and metering service in the Milan 1 \- City and Plant area of Milan, following the award of the tender issued by the competent Contracting Authority (Municipality of Milan). The area management started on March 1, 2022 and from that date, the improved conditions offered by the Company in the tender will also be applicable to the end customers of the area. The transition to area-based management also entails the application of new and specific tariff rules for the calculation of the allowed revenues of the localities included in the area. The main differences with respect to the tariff rules applicable to locations managed on a municipal basis are (i) the increase in the useful life of distribution assets and (ii) the reduction to zero of the X-Factor for 2 annual updates of the parametric unit fee to cover operating costs. As part of the RAB GAS 2022 data collection, the necessary operations were carried out for the transition to tariff management on an area basis for the localities falling within ATEM Milan 1. Pilot projects for optimizing the management and innovative use of natural gas infrastructure Resolution 404/2022/R/gas approved the Regulation on incentives for pilot projects to optimize the management and innovative use of infrastructures in the natural gas sector, providing for a maximum duration of three years for experiments and outlining the following project areas: 1\. methods and tools for optimized network management aimed in particular at increasing the possibility of injection along transport and distribution networks of gas of renewable origin and the development of methods and solutions to reduce fugitive gas emissions; 2\. innovative uses of existing infrastructures, including initiatives focused on testing the capacity of regulated natural gas infrastructures to accommodate and handle renewable (especially hydrogen) but also non-renewable gases, where situations can be simulated that will prospectively see the predominant use of renewable gases; 3\. innovation interventions on the regulated infrastructures of the natural gas supply chain aimed not only at increasing energy efficiency but also at digitalizing the networks. 6 Evolution of the regulation and impacts on the Business Units of the A2A Group 6.1 Generation and Trading Business Unit 6.2 Market Business Unit 6.3 Waste Business Unit 6.4 Smart Infrastructures Business Unit 124 A2A Report on Operations 2022 Evolution of the regulation and impacts on the Business Units of the A2A Group The Authority has set a ceiling of 35 million euro on the revenue to finance the mechanism, also stipulating that at least one project per project area must be admitted, and that the maximum amount that can be disbursed for a single project is 5 million euro for initiatives related to project areas 1 and 2 and 2.5 million euro for those related to project area 3\. Determination 9/2022 DIEU defined the format and minimum contents of the applications to be submitted to ARERA between January 15 and April 15, 2023, as well as the reporting tools and criteria for recognizing the costs incurred in the experiments. Measures for small end customers to cope with the sharp increase in natural gas prices In order to cope with the sharp increase in natural gas prices that occurred in 2022, the Authority adopted, initially with Resolution 148/2022/R/gas and then \- also following discussions with Parliament \- confirmed with the subsequent resolutions for the quarterly update of the Gas System Charges, a mechanism aimed at containing the cost of gas for end customers up to an annual consumption of 5,000 smc consisting in the negative valuation, in the part expressed in €/Smc, of the additional component of the UG2 distribution tariff. This component is applied by distributors as part of the billing of the service to sellers and by them to end customers, while the CSEA reimburses distributors for the advance payment made. The intervention described made it necessary for the Authority and the CSEA to take further action to minimize the timing for reinstatement (in particular in December) and, therefore, the financial burdens borne by distributors, as well as to better clarify the provisions on the payment of invoices issued to sellers which, due to the provisions introduced and the sharp increase in the amounts of the social gas bonus, should be negative. Tariff regulation for the natural gas transport and metering service 2020-2023 Resolution 114/2019/R/gas approved the rules applicable to natural gas transport tariffs for the period 2020-2023 (5th regulatory period \- new RTTG). The main introductions are: • definition of eligible revenues: the method adopted, similar to the previous one, provides for the calculation of eligible revenues as the sum of the (i) return on net invested capital (WACC 2021: 5.7%), (ii) portion of amortization (useful lives substantially unchanged) and (iii) operating costs (calculated from the individual operator’s actual costs as presented in the 2017 separate annual accounts). For admission to the tariff recognition of investments relating to specific interventions on the transport network, the provisions of Annex A to Resolution 468/2018/R/gas and subsequent amendments and integrations are valid, as well as compliance with criteria of cost-effectiveness and efficiency in their implementation. Incentive mechanisms for infrastructure development are also foreseen; • recognition of costs relating to network losses, self-consumption and gas not accounted for (GNC): the current method of recognition in kind of these items is exceeded, moving to monetary recognition based on the weighted average price of forward products with delivery to the PSV in the reference tariff year. In addition, Resolution 569/2020/R/gas introduced a mechanism for the partial adjustment of discrepancies between the quantities of GNC recognized and the actual quantities recorded in a given year; • equalization mechanisms: in addition to the pre-existing mechanisms relating to the equalization of revenues relating to the regional network (between TSO and CSEA) and the variable unit fee (between TSO), a new monthly flow from transport companies other than Snam Rete Gas S.p.A. is introduced for the latter for the equalization of national network revenues relating to the revenues associated with the exit fees, aimed at transferring the share of revenues pertaining to the national network from the transport companies that collect the revenues deriving from the CPu fee to the companies that carry out the transport activity on the national network. The new RTTG has provided for a new way of managing the Corrective Factors (FC) of the eligible revenues, i.e. elements that ensure, annually and for each operator, equality between the eligible revenues and the revenues actually obtained from the application of the tariffs. Until 2019, these amounts were accrued in 4 annual installments where the amount for a single year was then subtracted directly from the allowable revenues for that year. Beginning in the Fifth Regulatory Period, accrual is eliminated and the management of these differences is assigned to CSEA in the year following the reporting year where allowable revenues are not netted by that amount. Based on the criteria set out in the RTTG, ARERA Resolution 233/2022/R/gas approved the recognized revenues and the tariff payments for the natural gas transport and metering activity for 2023, while those of 2022 had been approved by Resolution 230/2021/R/gas; in both cases, the approved tariffs are affected by the reduction in the WACC (from 5.7% to 5.1%). Evolution of the regulation and impacts on the Business Units of the A2A Group 2022 Report on Operations A2A 125 RAB value of Retragas S.r.l. underlying 2022 final tariffs and 2023 provisional tariffs millions of euro 2023 Tariffs 2022 Tariffs RAB Transport 52.4 45.9 RAB Metering 1.6 1.6 Total RAB 54.0 47.5 With regard to the evaluation of the 2021 and 2022 Ten-Year Network Development Plans prepared by the operators and submitted to the Authority, Determination 3/2022 DIEU identified the list of verifiers in charge of carrying out the independent analysis of the interventions. For Retragas S.p.A., the intervention aimed at methanizing some areas of the Autonomous Province of Trento was audited, for which the consistency of the cost-benefit analysis (CBA) conducted by the company was confirmed with the regulatory provisions of Resolution 468/2018/R/gas. The Authority, however, with Resolution 696/2022/R/gas evaluating the 2021 and 2022 Plans, highlighted the persistence of the criticality relating to the coordination, both functional and temporal, between the developments of the transportation networks proposed by Retragas S.p.A. and the developments of the distribution networks, to which is added the risk of total or partial overlapping between some sections of the gas transportation networks envisaged in the Plans of Retragas S.p.A. and Gasdotti Alpini S.r.l.. Consequently, the Authority pointed out the opportunity to initiate appropriate forms of cooperation and dialogue between the parties, also with the participation of the Autonomous Province of Trento, in order to define a single coordinated intervention for the development of the natural gas transportation network in the Trento area to be subsequently included in the Network Development Plans and to be recognized for tariff purposes. In view of the end of the current regulatory period and taking into account the timing required by European legislation, Resolution no. 617/2021/R/gas initiated the procedure for the formation of measures regarding rates and quality of the natural gas transport and metering service for the Sixth Regulatory Period, starting from 2024, and which will have to take into account the guidelines regarding “Regulation by Expenditure and Service Objectives \- ROSS” (see specific paragraph). Finally, Resolution 723/2022/R/gas introduced a specific mechanism to incentivize the maintenance in operation of fully depreciated natural gas transmission networks and identified the modalities for the application of the related asset health methodology. Reorganization of gas metering activities at entry and exit points of the natural gas transport network Resolution 512/2021/R/gas concludes the procedure aimed at reorganizing the activity of gas metering at the entry and exit points of the transport network, approving the new text containing the “Regulation of the metering service on the natural gas transport network (RMTG)”, which defines the responsibilities and scope of metering and meter reading activities, minimum and optimal requirements of a plant, performance and maintenance nature, and quality levels. The new regulation is aimed at increasing the responsibility of the various parties involved in the supply chain, defining their roles and introducing an articulated system of penalties and compensation imposed, against specific monitoring by the TSOs, on those responsible for metering activities (i.e. owners of the metering plant) and/or meter reading (TSOs to which the metering plant is connected) in order to provide them with an adequate price signal for non-compliance with certain service quality levels (in some cases, distinguished between minimum and optimal) and thus stimulating interventions aimed at adapting the metering plants, with consequent improvement of their performance, to guarantee higher quality metering data. In 2022, a coordination activity was carried out between the transporters to proceed with the census of the measurement plants in order to start, from 2023, the performance monitoring phase (and related reporting, also to the Authority) and, from 2024 the incentive system. In addition, Snam Rete Gas S.p.A., in its capacity as a major transportation company, drew up and consulted on specific amendments to the Network Code to incorporate these provisions and identify the operating procedures for their application in relations with stakeholders; these amendments were then approved by the Authority with Resolution 600/2022/R/gas. 6 Evolution of the regulation and impacts on the Business Units of the A2A Group 6.1 Generation and Trading Business Unit 6.2 Market Business Unit 6.3 Waste Business Unit 6.4 Smart Infrastructures Business Unit 126 A2A Report on Operations 2022 Evolution of the regulation and impacts on the Business Units of the A2A Group 2021 final and 2022 provisional reference tariffs for the distribution and metering of electricity Resolution 193/2022/R/eel approved the 2022 provisional reference tariffs for electricity distribution and metering service for companies serving more than 25,000 PODs, while Resolution 153/2022/R/eel approved the 2021 final reference tariffs. Value of the ELECTRIC RAB underlying the provisional tariffs 2022 millions of euro Unareti * LD Reti RetiPiù Reti Valtellina Valchiavenna Total RAB Distribution 693 55 23 15 786 RAB Metering 80 2 1 2 85 Total 773 57 24 17 871 * The RAB Measure of Unareti S.p.A. includes approximately 42 million euro of gross investments in 2G meters relating to 2021 as a preliminary balance that will be managed using the so-called fixed rate (i.e. Amortization and Remuneration Portion together and fixed for the entire useful life of the 2G assets and equal to 15 years), which, compared to the normal method of tariff recognition of investments, results in a different allocation of the recognition over time. The 2022 provisional tariffs are affected by the reduction in the WACC (5.2% vs. 5.9%), as well as by the activation, as part of the price-cap mechanism for updating the recognized operating costs and effective \- retroactively \- in 2021, of the so-called Y-Factor (+0.9%) in order to cover the source charge caused by the introduction of the so-called Single fee replacing TOSAP/COSAP. With regard to distributors up to 25,000 POD, Resolution 237/2018/R/eel defined the criteria for the recognition of operating and capital costs. In particular, tariffs for distribution activities are calculated using a parametric method, effective from 2018, which provides for the application of a graduation mechanism12. According to this methodology, the recognized opex and capex are set taking into account certain relevant quantities such as distributed energy and user density (opex) and, together with the above, the age of the networks (capex), while those for metering activities take into account a conventional profile for the installation of LV electronic meters, an average unit cost of 126 €/meter (2014 values) and an investment turnover factor set at 2% (to be applied from 2015). The last tariffs approved to date are those for the years 2016 and 2017 (see Resolutions 104/2021/R/eel and 187/2021/R/eel). As of July 1, 2021, in order to remove obstacles to the dissemination of electric mobility, residential users with an installed capacity of up to 4.5 kW and wallboxes with certain characteristics may participate in the tariff experimentation mentioned in Resolution 541/2020/R/eel, which will enable them to withdraw up to 6 kW at night, without any additional cost to their bills. Infra-period updating of tariff regulation of electricity transmission, distribution and metering services 2020-2023 Resolution 568/2019/R/eel approved the tariff regulation for electricity transmission, distribution and metering services for the 2020-2023 (NPR2) half-period and the related TIT, TIME and TIC13 integrated texts. The measure, substantially in line with the criteria adopted in the first half-period 2016-2019 (NPR1), defines in particular: • the initial levels, referring to 2020, of the cost recognized to cover operating costs, a profit sharing with symmetric distribution (50:50) between distribution companies and end users of any increased efficiencies achieved in the previous NPR1 and the productivity recovery rate (X-Factor) for the annual update. The new X-Factor applicable to electricity distribution activities is 1.3% (1.9% in the previous half-period), while the X-Factor applicable to metering activities is 0.7% (1% in the previous half-period); • a mechanism for distributing net revenues from the joint use of electricity infrastructures for purposes other than those subject to tariff recognition (i.e., use by TELCO), which may be activated only if the amount is greater than 0.5% of the revenue allowed to cover the costs of the distribution service and managed under the equalization mechanisms already provided for by the regulation; • incentives for aggregations between distribution companies, giving priority to smaller ones, with the possibility of using the instrument of the “Network Contract”; • a mechanism for the recovery of bad debts not otherwise recoverable relating to network tariffs access to which by distributors is subject to the fulfilment of specific conditions (refer to the specific paragraph); • a revision of the tariff regulation for withdrawals and injections of reactive energy (refer to the specific paragraph). 12 The graduation mechanism is based on the weighted average (weight of the parametric method equal to 10% in 2018; 20% in 2019; 30% in 2020; yet to be defined for the period 2021-2023) between the individual tariff scheme and the parametric one. 13 TIT (Provisions for transmission and distribution services), TIME (Provisions for the metering service), TIC (Economic Conditions for the connection service). Evolution of the regulation and impacts on the Business Units of the A2A Group 2022 Report on Operations A2A 127 Electricity quality \- TIQE 2020-2023: special regulation and regulation for experiments Resolution 566/2019/R/eel has updated for the 2020-2023 regulatory semi-period the TIQE \- Integrated text of output-based regulation of electricity distribution and metering services, introducing specific measures aimed at reducing the gaps in service continuity between the various areas of the country. In particular, a special regulation on a voluntary basis has been defined for the areas with the highest number of interruptions which envisages: • the payment of a premium at the end of the period (2023), if the target level set by ARERA is reached and a penalty (equal to 1/3 of the premium) if it is not reached; • the possibility of requesting to postpone the target year from 2023 to 2025, upon presentation by the distributor of a specific Technical Report proving the reasons in consideration of the presence of structural criticalities; if the request is accepted, the trends would be recalculated at the same time. Resolution 431/2020/R/eel approved Unareti S.p.A.’s application to participate in the special regulation for the Milan territorial area \- Very High Concentration, with the recalculation of trends. Moreover, with particular reference to the number and duration of interruptions, the Authority has also ordered the start of a regulation for experiments, mutually exclusive with the special regulation, in areas identified by distributors. Without prejudice to the achievement of the target level set for 2023, the distributor has the opportunity to propose an improvement path different from that defined by the ordinary regulation, presenting innovative solutions from a technological point of view for the improvement of service quality. Also in this case it is foreseen to recalculate the trends, deactivated in the years of experimentation. In light of this framework and on the basis of the data transmitted by the operators by March 2022, the Authority calculated the bonuses and penalties relating to output-based regulation (i.e. service continuity in terms of number and duration of interruptions). This calculation takes into account, among other things, the special regulation provisions. In particular, the A2A Group received a total net premium of 0.34 million euro; this amount benefits from the participation of Unareti S.p.A. in the special regulation for the Milan area \- Very High Concentration for the indicator relating to the number of interruptions, which thus falls within the applicable deductible band. Electricity quality \- TIQE 2020-2023: resilience plans for the electricity grid Title 10 of the TIQE defines the scope of the electricity grid resilience obligations, the content and timing of the implementation of the action plan, and appropriate incentive mechanisms. In detail, all the main distribution companies14 must prepare, and periodically communicate to the Authority, three-year resilience plans, integrating them through a special section in their Electricity Network Development Plan, according to modalities and timetables differentiated according to size class. These Plans must also be published on the distributor’s website by June 30 each year. A premium/penalty type economic incentive is also provided for resilience enhancement interventions based on: • specific criteria aimed at identifying which interventions can be considered eligible for the incentive mechanism; • a method of calculating bonuses and penalties, respectively at a percentage share of the net benefit of the individual intervention carried out within the established time frame and of the net present value of the actual costs based on the extent of the delay. In addition to the ceiling already in force for the total net premiums of each distributor, equal to 25% of the net present value of the sum of the expected costs of all interventions, a maximum limit is expected to be applied to the premium of a single intervention, making it equal to the cost of the same in order to avoid the recognition of over-remuneration higher than the cost of the intervention already covered in RAB. Finally, with reference to the methods and timing of payment of the premiums15 and penalties, the TIQE (article 79 quinquies.3) provides that, by December 31 of each year from 2020 to 2025, the Authority shall determine the premiums and penalties to be paid into the CSEA account “Quality of electrical services” relating to eligible interventions, with date of actual completion in the previous year. 14 The “main distribution companies” are those with: i) more than 300,000 users; ii) more than 100,000 users; iii) less than 100,000 users directly connected to the National Transmission Grid. 15 Resolution 566/2019/R/eel subsequently established that premiums for increasing the resilience of distribution networks will be financed by the MV Users Fund. 6 Evolution of the regulation and impacts on the Business Units of the A2A Group 6.1 Generation and Trading Business Unit 6.2 Market Business Unit 6.3 Waste Business Unit 6.4 Smart Infrastructures Business Unit 128 A2A Report on Operations 2022 Evolution of the regulation and impacts on the Business Units of the A2A Group At the moment, the obligations to develop the resilience plans refer only to the aspect of the validity of distribution networks to mechanical stress (i.e. to specific critical risk factors such as floods, fall of out-of-band trees, ice sleeves and heat waves), while for that relating to the timeliness of the restoration of the supply, please refer to subsequent measures. Following the publication by the MiTE of the Public Notice of June 20, for the submission of intervention proposals aimed at improving the resilience of the electricity distribution network to be financed under the PNRR, Resolution 283/2022/R/eel was adopted, which postponed to September 30, 2022 the submission to ARERA and the simultaneous publication by the distributor of the 2022-2024 Resilience Plan including the new interventions. Therefore, by June 30, 2022, Unareti S.p.A. only sent the final statement of the progress of the interventions already admitted by the Authority to the premium/penalty incentive mechanism for increasing resilience, for both the interventions concluded in 2021 and for those being realized. Instead, at the end of September, the company notified ARERA with the update of the 2022-2024 Plan of the 4 interventions included in the Plan for the first time for the purpose of verifying the bonus/penalty eligibility mechanism. Resolution 722/2022/R/eel announced the preliminary findings of the examination of the 2022 Resilience Plans submitted by electricity distributors at the end of June for: • the determination of bonuses/penalties for interventions to increase the resilience of the distribution network concluded by December 31, 2021; • the relevant three-year balance of the net effective premium for the year 2021\. With specific reference to Unareti S.p.A., the Authority, in consideration of the cap on net premiums for the three-year period 2019-2021 calculated at approximately 3.1 million euro and the fact that no penalties were applied to the company, set at 1.74 million euro the three-year net balance 2019-2021 of bonuses and penalties to be paid by December 31, 2022\. Pursuant to art. 79 septies.2 of the TIQE, LD Reti S.r.l. and RetiPiù S.r.l., although obliged from 2020 to publish the section dedicated to the Resilience Plan on their website, have opted for deferred participation in the rewards/penalties mechanism, which will therefore take effect from 2022. Remediation of the old riser columns of the electricity distribution network in condominiums Resolution 467/2019/R/eel defined an experimental regulation for the period January 1, 2020 \- June 30, 2023 regarding the modernization of the old risers of the electricity distribution network in condominiums (with or without centralization of the meters) to which all distributors are required, regardless of their size in terms of POD served. Once the census of the upright columns has been carried out, the distributors propose the plan of interventions to the condominiums: in order to overcome any reluctance on the part of the condominiums to carry out the works (which can create inconveniences within the buildings), the Authority has defined a ‘Standard Contract’ and has provided for an incentive mechanism whereby the distributor: • will have to pay the condominium an amount to cover the costs incurred by the latter in relation to the demolition/restoration works (and possibly electrical works in the case of centralization) in an amount equal to the lesser of the amount actually spent and a parametric amount calculated on the basis of the number of users and the level of value of the building; • this amount will be recognised under the tariff mechanisms, subject to completion by March 31, 2023 of the obligatory census of its old riser columns. Unareti S.p.A. carried out most of the interventions in the Milan area, the most critical due to the higher number of “single users” connected to the network through a riser owned by the distributor: the following are estimated, in particular, 9,500 condominium buildings with pre-1970 risers, most of which are composed of a large number of buildings that leads to quantify the presence of about 23,500 buildings with old risers in service. In Brescia, however, approximately 1,900 condominiums are estimated for approximately 2,100 buildings concerned. In terms of inspections, the company has also defined and carried out a general schedule that envisages approximately 550 inspections per month in Milan, and about 290 in Brescia, taking into account that the deadline set by ARERA for the conclusion of the census is March 31, 2023\. To date, the inspections have been completed, having been conducted with a slightly earlier deadline than the one set by ARERA. Regarding the modernizations, in 2021-22 contracts were stipulated with 23 condominiums (all with centralized meters), of which 10 modernizations were completed and reported with total contributions paid equal to 239,860 euro, while there were 7 for which Unareti S.p.A. completed the works but is waiting for the finishing activities to be finalized by the condominium and the subsequent reporting. The latter will involve the disbursement of total contributions of 152,400 euro in 2023\. Evolution of the regulation and impacts on the Business Units of the A2A Group 2022 Report on Operations A2A 129 Development of electricity distribution networks: access to PNRR funds MiTE Ministerial Decrees no. 146 of April 6, 2022 and no. 150 of April 7, 2022 defined the criteria for the allocation of the PNRR resources earmarked for the increase, respectively of: I. the grid capacity to integrate additional distributed generation from renewable sources (so-called Hosting Capacity) and to increase the power available to utilities in order to promote the electrification of energy consumption (Scope Strengthening Smart Grid \- M2C2.2.1); II. resilience of the electricity distribution network (Scope Interventions to increase the resilience of the electricity network \- M2C2.2.2). The budget made available for the strengthening of smart grids amounted to 3.61 billion euro, of which 1 billion euro was earmarked for measures to increase hosting capacity and 2.61 billion euro for measures to electrify consumption, while 350 million euro was set aside for increasing resilience. The call for project selection opened on June 20 and the process was concluded on December 23, with the allocation of all the resources required for the projects submitted by the A2A Group companies. In particular: • Unareti S.p.A. was the winner in the Smart Grid Strengthening area with two projects: the first one related to the development and upgrading of Primary Cabins (financed amount 141.1 million euro) and the second one related to the installation of STATCOM devices for reactive energy compensation (financed amount 17.9 million euro), with a total financed value of 137.96 euro/POD; • Reti Valtellina e Valchiavenna S.r.l. was the winner in the area of Increasing the resilience of the electricity grid with a project for the expansion of medium-voltage electricity distribution plants related to the Milan-Cortina 2026 Olympic Games (financed amount 1.46 million euro), with a total financed value of 56.51 euro/POD. 2G Smart Metering Systems for the metering of low voltage electrical energy and approval of PMS2 by Unareti S.p.A. Resolution 87/2016/R/eel intervened on the subject of second-generation (2G) smart metering systems in low voltage, defining the functional requirements and applicable performance levels and, with Resolutions 646/2016/R/eel, 306/2019/R/eel and, most recently, Resolution 724/2022/R/eel the specific methods for recognizing the costs incurred by electricity distribution companies > 100,000 POD and the applicable bonus/penalty mechanisms (failure to proceed with the laying plan, under-performance with respect to the pre-established performance levels), while the simplified provisions on tariffs and incentive systems applicable to operators < 100,000 POD were adopted with Resolution 106/2021/R/eel. Within the regulatory framework applicable to larger operators, Unareti S.p.A. submitted for approval to the Authority its plan for the commissioning of a 2G smart metering system, which, following extensive discussions with the Offices, was approved with Resolution 278/2020/R/eel; this plan calls for the replacement of approximately 1.3 million meters with a massive phase planned for the 2020-2024 period that is currently underway (the Brescia area was completed in 2021 and the installation is now concerning the Milan area). In 2022, 2G smart metering regulation was the subject of intervention on two levels: • contingent: to address the critical issues that have arisen due to the so-called semiconductor crisis in China, where the 2G smart meter production chains are located. To this end, Resolution 601/2022/R/eel introduced a number of transitional changes to the regulation, including the suspension of any penalties in the event of failure to meet the plan target for 2022 and the sterilization of the quantities set for 2022 also for subsequent years; • structural: update for the three-year period 2023-2025 of the provisions on the recognition of costs incurred. In particular, Resolution 724/2022/R/eel confirmed the overall structure of the previous regulation, refining certain aspects of it, such as, for example, the management of requests to update, also due to exceptional events (e.g. corporate transactions) of the plans already approved, modifying others, including the penalty mechanism in the event of under-performance with respect to the pre-established performance levels, the effective date of which was postponed from the 4th to the 5th year of the plan, and introducing new mechanisms and, specifically, a bonus mechanism in the event of an acceleration of the plan speed in the presence of certain conditions, including the obtaining of public grants. 6 Evolution of the regulation and impacts on the Business Units of the A2A Group 6.1 Generation and Trading Business Unit 6.2 Market Business Unit 6.3 Waste Business Unit 6.4 Smart Infrastructures Business Unit 130 A2A Report on Operations 2022 Evolution of the regulation and impacts on the Business Units of the A2A Group Tariff regulation of withdrawals and injections of reactive energy Resolution 568/2019/R/eel16 intervened on the regulation of reactive energy flows on the grids, making significant changes: In particular, minimum levels of the power factor have been defined for both withdrawals and reactive inputs, in excess of which penalties calculated on the basis of specific unit fees must be paid, to be applied to both HV and HHV end customers and to distribution companies directly connected to the National Transmission Grid, and to MV end customers and LV non-domestic customers with available power greater than 16.5 KW, and to exchange points between MV and LV distribution networks. In the course of 2022, an intense consultation process took place, and at the end of November, Terna S.p.A. sent the Authority a Report with the results of the application of the methodology prepared in cooperation with the Politecnico University of Milan, for the purpose of identifying and clustering in homogeneous areas the nodes of the relevant grid characterized by the same impact of reactive energy exchanges (input or withdrawal). Resolution 232/2022/R/eel postponed to April 1, 2023 the application of the tariff fees for reactive energy injected in the F3 band for LV non-domestic end customers with power greater than 16.5 kW and for MV non-domestic end customers, as well as to the interconnections between MV and LV networks, while it provided that the distribution companies should directly contact up to 10% of MV end customers with greater reactive energy injections into the grid by February 28, 2023 to identify the technical actions necessary to mitigate this phenomenon. Resolution 281/2022/R/eel, however, extended to December 31, 2022 the existing tariff charges for excessive withdrawals of reactive energy applicable to end customers and interconnection points between high-voltage and extra-high-voltage grids, which were not dealt with in previous Resolution 232/2022/R/eel. The last stage of this process led to Resolution 712/2022/R/eel, which introduces the fees for reactive energy injected into HV and VHV as of April 1, 2023, and also provides for subsequent functional actions for this regulation: the measure stipulated that the fees for reactive energy injected by end customers and distribution networks in high and very high voltage shall be equal to 0 euro/Mvarh for the period January 1, 2023 \- March 31, 2023 and that from April 1, 2023 the following shall apply: I. a unit fee of 1.44 euro/Mvarh for excessive withdrawals in the F1 and F2 bands and for reactive energy inputs in the F3 band; II. a surcharge of 0.56 euro/Mvarh over the unit fee referred to in the previous point to the withdrawal and interconnection points between grids located in homogeneous areas characterized by a greater impact of reactive energy exchanges on grid voltages and voltage control costs. Finally, the aforementioned Resolution, for the purpose of defining temporary derogations and in relation to an initial time window between June 1, 2023 and July 31, 2023, envisaged that Terna S.p.A., by April 30, 2023, should submit an application to ARERA for the application of different thresholds for the withdrawal or input of reactive energy or, due to local specificities. Instruments to protect distributors’ credit: general system overheads and network overheads Since 2016, ARERA, as a result of the insolvencies accounted for by some sales companies and the litigation involving the Standard Network Code for the transport of electricity (i.e. CTTE) on the issue of financial guarantees to be submitted to cover General System Charges (OGS), has undertaken several initiatives aimed at strengthening the credit protection of distributors, in particular, by introducing mechanisms for the reinstatement of credits not otherwise recoverable related to OGS. Subsequently, the Authority, also in order to improve the efficiency of these mechanisms and to move from extraordinary mechanisms to an ordinary mechanism, with Resolution 119/2022/R/eel established a single mechanism aimed at guaranteeing the reinstatement of credits not otherwise recoverable relating to both the OGS and network charges. This mechanism provides for the possibility of applying for participation on an annual basis, contains criteria for the eligibility of claims that are quite similar to those under the previous mechanisms, but also specifies the eligibility of claims relating to transport contracts that have not been terminated due to the regulatory provisions applicable in cases of corporate crisis. In addition, with specific reference to network charges, there is an exemption (equal to 10%) and a minimum threshold (0.25% of the allowed revenues relating to the distribution and measurement of electricity) to the amounts of which the reinstatement must be requested annually. Energy efficiency certificates and tariff contribution recognized to distributors Energy Efficiency Certificates (TEE) or White Certificates (WC) are negotiable certificates issued by the GSE that certify the achievement of energy savings in final uses through the realization of energy efficiency interventions. The system was introduced by Ministerial Decrees July 20, 2004 as amended, and provides for electricity and natural gas distributors to reach annual quantitative targets for primary energy savings, expressed in tonnes of oil equivalent (TOE) saved. A TEE/WC is equivalent to 1 TOE. 16 As amended by Resolution 395/2020/R/eel, which moved by 1 year, i.e. to January 1, 2022, the entry into force of the provisions set forth in Resolution 568/2019/R/eel in light of the emergency from COVID-19. This date was further postponed to December 31, 2022 as a result of Resolution 282/2022/R/eel. Evolution of the regulation and impacts on the Business Units of the A2A Group 2022 Report on Operations A2A 131 Distributors can fulfil the obligation by directly realizing energy efficiency projects that entitle the issue of WC or by purchasing the certificates from other entities that generate them on the market (typically from Energy Service Companies – ESCO). The Authority defines the methods for determining and paying the tariff contribution to be paid to distributors and the revenue is collected through fees applied to electricity and gas bills. The following table shows the energy saving targets defined by the MiSE MD May 21, 2021. Targets for electricity distributors (1) Targets for gas distributors (1) Minimum Target (2) Period to compensate the residual obligatory portion (2) Millions of WC Millions of WC (%) (no. years) Ministerial Decree January 11, 2017 2020 3.17 3.92 60% 2 Ministerial Decree May 21, 2021 2020 1.27 1.57 60% 2 2021 0.45 0.55 60% 2 2022 0.75 0.93 60% 2 2023 1.05 1.3 60% 2 2024 1.08 1.34 60% 2 (1) Obliged entities: electricity and gas distributors with more than 50,000 final customers. (2) Minimum target and compensation period: the obliged entity that achieves an obligation portion of less than 100% but still at least the minimum target set by the Ministerial Decree (60%) may offset the residual portion in the following two-year period (n+2) without incurring penalties. MD May 21, 2021 amended MiSE MD January 11, 2017 (as updated by MD May 10, 2018), by providing: • a significant reduction in 2020 obligations, the postponement of the 2020 obligation year deadline to July 16, 2021, and the definition of obligations for the 2021-2024 regulatory period; • the establishment of a cap for the tariff contribution defined by ARERA, taking into account the trend of WC prices on the market and those recorded in bilateral trades; • the issuance of WC to the overrun by the GSE to distributors that request it at a value equal to the difference between 260 €/WC and the value of the tariff contribution for the year of obligation, up to a maximum delta of 15 €/WC and setting a floor of 10 €/WC. The obliged parties can request the WC to the overrun until the minimum obligation is reached and to cover the residual amounts of obligation expiring, provided they are already in possession of a WC amount of at least 20% of the minimum obligation on their ownership account. For the cancellation of these WC, the tariff contribution will not be recognized. Distributors can then redeem all or part of the amount paid for the purchase of WC from the GSE for delivery of WC generated by projects or bought on the market. The redemption takes place from the first WC and is possible only if the obliged party holds a number of WC exceeding the minimum obligation for the current obligation year, and within two years following the expiry of the obligation. However, it is not possible to proceed with the redemption in the same obligation year in which the WC were issued. WC cancelled in lieu of the GSE ones are paid the current year’s tariff contribution and the refund of the amount paid to the GSE is made through tariff contribution adjustment. The new MD also introduces a system of incentives for savings through downward auction procedures, which were expected to be defined by MiTE MD by December 31, 2021\. The publication of this Decree is expected in 2023. The obligation year 2021 ended on May 31, 2022\. After years in which the scarcity of TEE conditioned market outcomes by pushing up quotations, the reduction of obligations introduced with the Ministerial Decree of May 21, 2021 rebalanced supply and demand. The table shows the obligations of the companies of the A2A Group for the year 2021, all of which had been fulfilled by the end of May 2022, and the new 2022 obligations set by ARERA with Determination DMRT/EFC/7/2022. TEE obligation year 2021 TEE obligation year 2022 Unareti S.p.A. 46,979 78,986 Le Reti S.p.A. 10,449 17,624 LD Reti S.r.l. 12,411 19,649 RetiPiù S.r.l. 6,205 14,133 Total 76,044 130,392 6 Evolution of the regulation and impacts on the Business Units of the A2A Group 6.1 Generation and Trading Business Unit 6.2 Market Business Unit 6.3 Waste Business Unit 6.4 Smart Infrastructures Business Unit 132 A2A Report on Operations 2022 Evolution of the regulation and impacts on the Business Units of the A2A Group Resolution 292/2022/R/efr set the tariff contribution for the 2021 compulsory year: the unit tariff contribution is 250 €/TEE while the additional unit fee is 3.44 €/TEE, totalling 253.44 €/TEE. As provided for in the Ministerial Decree of May 21, 2021, the MiTE Directorial Decree of May 3, 2022 adopted the new guidelines for interventions accessing the WC mechanism. In summary, the number of interventions that will be eligible for TEE is extended, and new forms are provided for final projects (among which there is a form dedicated to the connection of new users to efficient district heating systems17) and some interpretative doubts on certain types of intervention are clarified (including the installation of turbo-expanders on gas transport and distribution networks). Charging infrastructure for electric mobility The Ministry of Infrastructure and Transport is currently reviewing the PNIRE (National Infrastructure Plan for the Recharge of Electric Vehicles), which defines the guidelines for the development of recharging infrastructures (IdR) for electric vehicles in Italy. Given their increasing deployment (the PNIEC estimates 6 million vehicles by 2030) and the consequent increase in IdR, not only will the energy required increase but, through IdR, electric vehicles will be able to provide services to the grids as the batteries have the ability to deliver both feed-in and absorption quickly. With reference to recharging in the private sector, Resolution 541/2020/R/eel provided for the possibility for domestic users (or other LV users) with contractually committed power between 2 kW and 4.5 kW, connected to a recharging system for electric vehicles, to withdraw up to 6 kW at night, on Sundays and on all public holidays, without additional fees related to the increase in power. This trial was granted for the period July 1, 2021 through December 31, 2023. In April 2021, the Authority published a clarification, in which it regulates the possibility that, in the same real estate unit, POD intended for the recharging of electric vehicles may be installed in the name of third parties \- such as CPO, Charging Point Operators \- with respect to the owner of the main POD. Operators are therefore allowed to intercept several end customers through a single POD, exploiting the savings deriving therefrom (sharing of fixed components, synergies on maximum power and connection costs). Legislative Decree no. 199/2021 introduced some changes regarding publicly accessible IdRs: • some interventions have been provided to simplify the authorization process; • the possibility was introduced for municipalities to provide for the installation of at least 1 recharging point for every 6 electric vehicles registered; • the provision was amended of Law Decree of July 16, 2020 (so-called “Simplification Decree”) relating to the definition of ad hoc tariffs for electric recharging by ARERA which, within six months of the coming into force of the above- mentioned Legislative Decree, would have had to define tariff measures applicable to IdR accessible to the public in order to encourage the spread of electric vehicles. These measures should also provide for a discount on the components covering general system charges, on condition that they are compatible with EU regulations on state aid, are of a transitional nature and that the entire tariff benefit is passed on to the end customer.. The MiTE Ministerial Decree of August 25, 2021 concerning the “Granting of contributions for the installation of infrastructures for the recharging of electric vehicles carried out by individuals in the exercise of business, arts and professions, as well as by persons liable to corporate income tax (IRES)” governs the granting and disbursement of capital contributions aimed at supporting the purchase and installation of IdR carried out by companies and professionals (i.e. amount of 90 million euro). With Resolution 130/2022, the Transport Regulatory Authority (ART) concluded the procedure for defining the outline of the calls for tenders for the assignment of the electric recharging service at filling stations and rest areas on motorways by motorway concessionaires. The measure affects both new and existing concessions and provides for the construction of high-power charging infrastructures and the entrusting of the service to at least two CPO per rest area. The resolution was challenged before the Piedmont Regional Administrative Court by the Italian Association of Motorway and Tunnel Concessionaires (AISCAT). In May 2022, the MiTE placed for consultation the outline of the MD on the allocation of PNRR funds for the development of IdR in order to allocate the 741 million euro earmarked for the development of ultra-fast columns in suburban areas (250 kW, 7,500 IdR) and fast columns in urban areas (100 kW, 13,755 IdR). The resources will be allocated through competitive procedures (one per year in the period 2023-2024), with the first call to open in 2023\. There will be a separate contingent for the allocation of the remaining resources (around 20 million euro) earmarked for the construction of IdR with a high degree of innovation (primarily the use of storage systems). 17 On July 1, A2A Calore & Servizi S.r.l. filed an appeal with the Regional Administrative Court of Lazio for the annulment of the Executive Decree of May 3, 2022, contesting the unlawful exclusion of co-generated heat from the formula that calculates energy savings for the purpose of issuing WC and believing that, in this way, the provision of the Ministerial Decree of May 21, 2021, which would incentivize the connection of new users to TLR networks, was weakened. For the company, in fact, co-generated heat is the predominant component compared to other types of heat production. Evolution of the regulation and impacts on the Business Units of the A2A Group 2022 Report on Operations A2A 133 Activities of ARERA in the regulation and control of the Integrated Water Service (SII) Approval of the Water Tariff Method for the third regulatory period 2020-2023 (MTI-3) Resolution 580/2019/R/idr approved the Water Tariff Method (MTI-3) for the third regulatory period (2020-2023), defining the rules for calculating the costs eligible for recognition, as well as the limits to the applicable tariff increases (reduced compared to the maximum levels provided for in the previous regulatory period). The subsequent Resolution 639/2021/R/idr defined the rules for the two-yearly update between 2022 and 2023: in particular, the component covering the cost of financial and tax expense fell to 4.8% (vs 5.4% previously in force). Resolution 229/2022/R/idr revised certain criteria for the 2022-2023 update in compliance with certain orders of the Lombardy Regional Administrative Court concerning the recognition of electricity costs. The tariff method provides for the recognition in year “n” of the costs incurred for the purchase of electricity in year “n-2”: this is not a mere footnote however, verification takes place against a cap calculated by ARERA taking into account an average sector cost of electricity. This cap is 0.1543 €/kWh for 2020 (2022 tariffs) and 0.1618 €/kWh for 2021 (2023 tariffs). The main impacts related to the extraordinary magnitude of energy costs for A2A Group operators are as follows: • A2A Ciclo Idrico S.p.A. requested with a specific request the recognition in the tariff of the component amounting to 4.5 million euro for both years 2022-2023; • Lereti S.p.A. for the year 2021 (tariffs 2023) requested with a specific request the recognition of the component costs for systemic variations for the occurrence of exceptional events in compliance with the principle of full cost recovery and the maintenance of economic-financial equilibrium. The quantifications for both managed areas are as follows: ATO Varese 0.81 million euro and ATO Como 0.42 million euro. As already introduced by Resolution 580/2019/R/idr remains confirmed. It had provided: • modification of the recognition of financial charges on work in progress (WIP): excluding from recognition in the tariff WIPs with balances unchanged for more than 4 years and application to WIPs of a lower rate than for assets that have already entered service and decreasing over time; • the drafting, in addition to the Plan of Interventions, of a Plan for Strategic Works (PSW) 2020-2027 that contains the infrastructural interventions dedicated to complex works with a useful life greater than/ equal to 20 years priority for the quality of service. The WIP of the works contained in the POS benefit from full (and not decreasing) tariff recognition; • the modification of the regulatory useful lives, for assets that came into operation in 2020, dividing the assets between aqueduct, sewerage, purification and common activities and associating them with the relative macro-indicator of technical and commercial quality; • the introduction of an incentive for the measures put in place by the operator to make users more aware of their consumption and to encourage the procedures for limitation in case of default and selective disconnection of supply; • the separation, in the calculation of the adjustments of the other water activities, the activities linked to energy and environmental sustainability objectives, for which the operator is granted a sharing equal to 75% of the difference between revenues and costs incurred. The benefits of this “incentive” will apply in the tariffs 2022 (a+2); • the application to ordinary WIP, for the years 2020 and 2021, of the rate recognized for fixed assets relating to works contained in the PSW. Below is the status of the 2022-2023 tariff updates: • A2A Ciclo Idrico S.p.A.: ARERA, considering EGA’s failure to send the tariff update by April 30, 2022, on October 28 issued a warning to comply with the submission of the data within 30 days. On November 25, the company submitted to ARERA and EGA the 2022-2023 tariff proposal drafted in the hypothesis of Acque Bresciane S.r.l. taking over the aggregated and expired managements upon payment of the VR as of December 31, 2021 with subsequent cost adjustment. The submitted tariff approvals, which include the following changes, are now being examined by the Authority: -0.14% for 2022 and +1.15% for 2023; • Azienda Servizi Valtrompia S.p.A. (ASVT S.p.A.): the recognized costs will be included in the 2022-2023 tariff proposal of Acque Bresciane S.r.l.. The operator is applying the same tariffs for 2022 as those approved for 2021; • Lereti S.p.A.: as resolved by the competent EGAs, will apply the following tariff increases: Varese Area: \+ 5.5% for 2022 and \+ 4.93% for 2023 (EGA Board Resolution No. 78/2022); Como Area: \+ 8.45% for 2022 and \+ 8.45% for 2023 (EGA Board Resolution No. 3/2023). 6 Evolution of the regulation and impacts on the Business Units of the A2A Group 6.1 Generation and Trading Business Unit 6.2 Market Business Unit 6.3 Waste Business Unit 6.4 Smart Infrastructures Business Unit 134 A2A Report on Operations 2022 Evolution of the regulation and impacts on the Business Units of the A2A Group millions of euro Constraint to Operator Revenues (VRG) Year 2022 RAB 2020 (net residual) (underlying 2022 tariffs) A2A Ciclo Idrico S.p.A.* 81 (net of 26 municipalities) 341.2 (full perimeter) Lereti S.p.A. \- COMO 17.9 48.3 Lereti S.p.A. \- VARESE 31.5 44.9 * Provisional VRG and RAB values pending 2022-2023 tariff approvals. Lastly, Resolution 52 of the Board of Directors of the Como EGA of December 21, 2021 recognized to Lereti S.p.A. an amount of 15.3 euro million for prior year items relating to the 2010-2011 period to cover the failure to recognize the tariffs, which had been protracted over time, for part of the infrastructures built by the company prior to 2012, but did not accept the same recognition request submitted for the 2001-2009 period. With a subsequent resolution of July 5, the EGA Board of Directors adopted the Guidelines containing the billing methods for the past items that will be charged over 5 years, starting from 2022, in order to graduate their impact on users (to be concluded by 2026, the date of expiry of the service concession with the Municipality of Como). Appeals toward approvals of 2020-2023 tariff proposals A2A Ciclo Idrico S.p.A. has lodged an appeal with the Brescia Regional Administrative Court (TAR) for the annulment of the MTI-3 tariff arrangement approved by the Provincial Council in 2021, contesting the scope of the costs (capital and operating) recognized in that not all of the municipalities managed by the company were included. With regard to the Como area, Lereti S.p.A. submitted an appeal to the Regional Administrative Court (TAR) on March 23, 2021 due to the failure to complete the preliminary investigation into prior year items. A similar appeal was prepared against Resolution 52 of the EGA Board of Directors of December 21, 2021, in order to obtain full recognition of all amounts due under the heading of prior year items, including those for the period 2001-2009. The subsequent Resolution approving the Billing Guidelines was also challenged. To date, we are awaiting the publication of the judgment, following the discussion of the appeal on January 11, 2023. Transfer of the aggregated and expired management of A2A Ciclo Idrico S.p.A. and ASVT S.p.A. to Acque Bresciane S.r.l. Pursuant to the regulatory framework defined by ARERA18 in the cases of the transfer of the SII assignments, following the request made by the Brescia EGA regarding the process of transferring the aggregated and expired managements by A2A Ciclo Idrico S.p.A. and ASVT S.p.A. to Acque Bresciane S.r.l, the two companies sent the proposed quantification of the Residual Value (RV) to the EGA on May 13 for validation and subsequent submission to ARERA. The EGA validated the proposals (Resolution no. 16/2022 for A2A Ciclo Idrico S.p.A. and no. 17/2022 for ASVT S.p.A.) and on June 17 submitted the reports containing the RV quantified at December 31, 2021 to ARERA for approval. These values will be updated after a subsequent investigation on December 31, 2022. COMPANY NO. MUNICIPALITIES RV (millions of euro) A2A Ciclo Idrico S.p.A. 21: Aggregate Management* 63.7 5: Expired Management** ASVT S.p.A. 15: Expired Management** 42.2 * EGA Resolution no. 4 of December 21, 2007 had approved the guidelines that allowed municipalities with economic management to aggregate the SII to the operator operating in the sub-area of reference, i.e. A2A Ciclo Idrico S.p.A.. ** Concessions also expired after December 31, 2021. On August 3, ARERA communicated that the approval of the RV will take place at the time of the 2022-2023 tariff update, since only at that time will the Authority have full knowledge of the economic impacts of the management and its effects on users. On October 28, since the deadline of April 30, 2022 for EGA to send the tariff update to ARERA pursuant to Resolution 580/2019/R/idr had expired, and since the notifications of the update request had not been received from the operators, ARERA proceeded to send a warning to comply with the submission of the data within the next 30 days. On November 25, 2022, the companies of the A2A Group proactively submitted the 2022-2023 tariff proposals to ARERA and the EGA, in accordance with the takeover values as of December 31, 2021 set forth above, subject to adjustment of the economic and equity components for the period of management due to the ceasing party up to the date of management takeover. On January 4, 2023, the Brescia Area Office took note of the postponement of the take-over deadline, ordering that: • the updating of the tariff arrangement is subject to the formal approval of the takeovers and the related company agreements; • all operations related to the takeover of the management must take place and be completed by December 31, 2023; • during 2023, the Area Office will start activities to update the takeover value, taking into account the investments made in 2022 by A2A and ASVT and the additional activity that will be carried out until the actual transfer of the ownership of the management. 18 Resolution 656/2015/R/idr \- Annex A defines the take-over procedure and, pursuant to article 12.1, explicitly states that such discipline applies only to safeguarded SII operators that have exercised the service “on the basis of an assignment in accordance with article 172, paragraph 2, of Legislative Decree 152/06” while Resolution 580/2019/R/idr indicates the criteria for the quantification of the residual value. The take-over procedure consists of the following steps: • at least 18 months before the expiry of the concession, the EGA initiates the takeover procedures and verifies the full compliance of the capital assets and their appurtenances; • within 60 days of the start of the EGA procedure, the operator makes a proposal for the quantification of the residual value; • within 60 days of receipt of the operator’s proposal, the EGA decides on the final value of the VR; • within 60 days of receipt of EGA’s proposal, ARERA approves the residual value; • before 90 days from the takeover date, the incoming operator pays the residual value to the outgoing operator and, after payment, the transfer of assets takes place. Evolution of the regulation and impacts on the Business Units of the A2A Group 2022 Report on Operations A2A 135 Transfer of the expired management of the Municipality of Cernobbio by Lereti S.p.A. to Como Acqua S.p.A. Lereti S.p.A., pursuant to Resolution 656/2015/R/idr and following the request of the EGA of Como concerning the transfer of the Municipality of Cernobbio to Como Acqua S.p.A., submitted the proposal of quantification of the RV to the EGA for validation and subsequent submission to ARERA. Resolution no. 73 of December 20, 2022 of the Como EGA concluded the preliminary investigation process concerning the determination of the RV of Cernobbio, quantifying it at 2.5 million euro as of December 31, 2021 and sending it to ARERA for final approval. Pursuant to the agreement signed between the parties, Como Acqua S.p.A. took over from Lereti S.p.A. in the management of the Cernobbio aqueduct service as from January 1, 2023, subject to the presentation of a bank guarantee and with subsequent settlement of the RV deferred to February 28, 2023\. With the final approval of the RV and of the adjustments relating to the updatable and equalizable costs by ARERA, Como Acqua S.p.A. shall pay this value to Lereti S.p.A.. Integration of the contractual quality discipline of the SII (TIMSII) Resolution 609/2021/R/idr updated the regulation of the measurement of the SII (TIMSII), providing for the introduction of protection obligations for users affected by problems of hidden losses (also taking into account the potential contribution that could derive from the use of new metering instruments equipped with water smart metering devices), the strengthening of provisions regarding the collection of metering data and remote reading, as well as the promotion of measures to allow the owners of residential units (so-called “indirect users” underlying condominium users) to have individual consumption data and information. Specifically, the measure established: • from January 1, 2022: the introduction of “Metering service effectiveness” indicators, supplementing the M1 indicator of Resolution 917/2017/R/idr (RQTI) and the related obligation to monitor and report to the Authority; • from January 1, 2023: the introduction of “specific standards” to strengthen the protection of users with regard to the metering service; • from January 1, 2022: the definition of “hidden losses” as those water losses downstream of the meter on user-responsibility plants. These are losses that are not surfaced and cannot be traced with the normal diligence required of the user to control its assets, and minimum user protections are in place nationally for such cases; • by June 30, 2022: in order to increase awareness of consumption in the case of grouped (condominium) users, Managers are required to: communicate to indirect users at least once a year, information on how to contact their Manager and the approved tariff structure (with indication of how to communicate the size of the household); make available to the condominium user or the condominium administrator a calculation tool for the distribution of the single condominium bill on the basis of the property units and their consumption (actual or estimated); formally request from the condominium administrator or the contact person of the grouped users the actual number of members of the household (exclusively in cases where the Manager has not been able to obtain the information even after a formal request, the residential household tariff shall be calculated on the basis of the standard per capita criterion); • by December 31, 2023: the Manager is required to assign a unique, geolocated identification code to each user contracted. Application of the technical quality incentive mechanism (RQTI): final results 2018-2019 Resolution 183/2022/R/Idr approved the results of the first application of the incentive mechanism of the rewards and penalties related to the technical quality of the SII (RQTI) for the years 2018-2019. The system, launched in 2018 by ARERA, has made it possible to codify the results achieved in recent years by 203 operators covering a total of 84% of the national population. By analysing the data, the Authority was able to assign a premium to those who achieved, maintained and improved their targets and a penalty in other cases. The amount of resources dedicated to bonuses is collected in the bill by means of the UI2 component (intended for the promotion of the quality of water, sewerage and purification services), which for 2018 totalled about 63.2 million euro and for 2019 about 72.16 million euro. The penalties amounted to 3.9 million euro for 2018 and 5.9 million euro for 2019. Regarding the application modalities: • bonuses were provided by the CSEA; • the penalties, imposed in the event of failure to improve or achieve the objectives, result in amounts that must be set aside and used for the achievement of the established objectives, in accordance with paragraph 29.1 of the RQTI. 6 Evolution of the regulation and impacts on the Business Units of the A2A Group 6.1 Generation and Trading Business Unit 6.2 Market Business Unit 6.3 Waste Business Unit 6.4 Smart Infrastructures Business Unit 136 A2A Report on Operations 2022 Evolution of the regulation and impacts on the Business Units of the A2A Group The table shows the results of the A2A Group companies: thousands of euro BONUSES (2018-2019) PENALTIES (2018-2019) A2A Ciclo Idrico S.p.A. 357 428 ASVT S.p.A. 1,367 43 Lereti S.p.A. \- COMO N.A.* N.A.* Lereti S.p.A. \- VARESE 413 2 * ARERA excluded Lereti S.p.A. in the Como ATO from the incentive mechanism due to the delay in sending the technical quality data of the base year (2016-2017), to be carried out pursuant to Resolution 918/2017/R/idr, within the infra-period update of the 2018/2019 tariff preparation. Public financing of investments in the SII: Budget Law 2018 and PNRR Funds Article 1, paragraph 516, of Budget Law 2018 requires, for the purpose of implementing the measures necessary to mitigate the damage related to the drought and to promote the strengthening and adaptation of water infrastructures, with a specific Prime Ministerial Decree adoption of the “National Plan of Action in the Water Sector”, divided into two sections: “aqueducts” section and “reservoirs” section. The measures are reported by the EGAs to the ARERA and are financed with public resources. The DPCM of August 1, 2019 bearing the following title “Adoption of the first draft of the National Plan of interventions in the water sector \- aqueducts section” approved 26 interventions for a total amount of 80 million euro for the two years 2019 and 2020: among the interventions also included is that relating to the construction of the aqueduct, sewerage and purification network for the Municipality of Calvisano (BS) managed by A2A Ciclo Idrico S.p.A. for an amount equal to 7.6 million euro. Against a contribution collected in 2021 of 5.3 million euro, ARERA Resolution 582/2021/R/idr authorized the CSEA to disburse a portion of financing equal to 1.17 million euro collected in 2022 (the portion of financing still to be disbursed is about 1.1 million euro). MIMS Ministerial Decree no. 517 of December 16, 2021 allocated PNRR resources to enhance, complete, and carry out extraordinary maintenance of water derivation, storage, and primary water supply infrastructures throughout the country, so as to improve water quality and ensure continuity of supply in important urban and large irrigated areas. Azienda Servizi Valtrompia S.p.A. was awarded 27 million euro out of a total budget of 2 billion euro for a project to build the district aqueduct in the Upper and Middle Trompia Valley. Article 14 of LD Aiuti bis on strengthening the governance of the SII in Southern Italy In consideration of the critical state of the SII in some regions of southern Italy, ARERA has signalled to the Government and Parliament the need for regulatory interventions to modify the current legislative provisions in order to accelerate the entrusting of management in these areas in order also to be compliant with the reforms necessary to obtain PNRR funds (ARERA Report 331/2021/I/idr). In these areas, in fact, significant criticalities remain confirming the persistence of the water service divide precisely where the infrastructural deficit is greater (areas in which the EGAs are not even constituted or, if constituted, are not operative, areas with the presence of unit-based small municipal management or in house managers to whom the service has been awarded, however who show planning and operational difficulties in the realization of the infrastructures). Article 14 of LD Aiuti bis incorporates the contents of the ARERA Report: in particular, the legislator has provided for an intervention aimed at setting a peremptory deadline for the conclusion of the assignment processes (February 6, 2023) and in the event of persistent inertia, upon the proposal of the Prime Minister or the MASE, the Council of Ministers shall adopt the necessary measures, also entrusting a wholly-public entity (Invitalia) with the assignment of the management of the SII on a transitional basis for a maximum period of 4 years (renewable). Invitalia will be able to call for tenders from subjects with industrial and management experience with a view to relaunching the sector. Activities of ARERA in the regulation and control of the district heating/cooling sector Articles 9, 10 and 16 of Legislative Decree no. 102/2014, which transposes Directive 2012/27/EC on energy efficiency, granted the Authority specific powers to regulate and control, including in the district heating/cooling sector, even if on specific aspects, since this is not a real tariff regulation. The powers concern, in fact, the preparation of measures on connection and disconnection from the networks, withdrawal rights, commercial and technical quality of service, the way in which operators make public the prices of the supply of heat. The Authority is also entrusted with the task of implementing the provisions on metering, billing, access to consumer data in order to increase customer awareness and change consumer behaviour. Resolution 548/2019/R/tlr defined, for the period January 1, 2021 \- December 31, 2023, the regulation of the technical quality (RQTT) with reference to the safety and continuity of the service, introducing obligations on emergency response, the management of interruptions (with a specific general quality standard) and dispersions as well as obligations to record information relating to safety and quality for annual communications to the Authority. The aim is to guarantee a greater degree of protection for users and to encourage the spread of the service through a progressive increase in the performance of the sector with the definition of minimum standards at national level. Evolution of the regulation and impacts on the Business Units of the A2A Group 2022 Report on Operations A2A 137 Resolution 478/2020/R/tlr defined the regulation of metering (TIMT) for the period January 1, 2022 \- December 31, 2024, introducing service obligations and quality standards for the metering of energy supplied to users by defining minimum reading frequencies, obligations for the communication of readings by Operators, obligation to self-read, the definition of calculation methods for estimating and reconstructing consumption and rules for archiving data. Resolution 537/2020/R/tlr extended, from July 1, 2021, also to the district heating sector the system of protections for the handling of complaints and the out-of-court settlement of disputes with end users already in place in the other regulated sectors. Two levels of protection have been introduced: a basic level that provides for the extension of the contact center service of the Energy and Environment Consumer Desk to district heating, and a second level that allows users to activate a conciliation procedure before the Authority’s Conciliation Service. Annex A of Resolution 463/2021/R/tlr updated for the period from January 1, 2022 to December 31, 2025 the regulation on the criteria for determining connection fees and procedures for exercising the right of withdrawal (TUAR). The Authority has rationalized and harmonized the contents of the various integrated texts (TITT, RQTT and TIMT) in force from January 1, 2022\. Annex B to the same Resolution approves the Consolidated Text for the size classification of service operators for the period January 1, 2022 \- December 31, 2025 (TUD), defining different obligations based on the size thresholds, which remain unchanged but are determined only by conventional power. The classification of the user (relevant for the payment of compensation or exclusion from regulation) will take place, on the other hand, on the basis of contractual power. Finally, all the data collections to be sent to ARERA regarding the contractual relationship with the user (including metering) and prices are combined into a single deadline of June 30, while the data collection on technical quality is moved to September 30 of each year. Resolution 526/2021/R/tlr updated for the period January 1, 2022 \- December 31, 2025 the provisions regarding the commercial quality (RQCT). In order to rationalize the regulations, the provisions regarding the estimate for connection, the obligation to inform the user in the event of a request for deactivation or disconnection have been transferred to the RQCT, while the definitions of emergency intervention have been inserted in the RQTT and the TITT. The minimum elements to be recorded for works estimates have been supplemented, including the start and end dates of any suspensions for activities (authorizations or works) by the applicant and the dates on which the authorizations were requested and obtained, also in order to reduce possible disputes regarding compliance with the quality standard. Finally, the application of a specific standard to “disconnections” and “execution of complex work” with related automatic compensation and escalation mechanism has been envisaged. Resolution 80/2022/R/tlr initiated a fact-finding investigation into the development of district heating prices and costs for the period from January 1, 2020 to March 31, 2022. The aim of the investigation was to acquire information useful for assessing the pricing methodologies applied by operators (based on the avoided cost or cost-plus criterion) and evaluating the appropriateness of introducing ex-ante tariff regulation. . Resolution 547/2022/R/tlr closed the fact-finding investigation, from which it emerged in particular that: • natural gas accounts for 69% of the mix of energy sources used in production systems; • in 83% of the bids, the price is determined by reference to the avoided cost of a gas boiler (with wide discretion on the definition of efficiency, which in many cases led to district heating price levels higher than the corresponding alternative service); • the increase in gas prices caused a directly proportional increase in revenues in the district heating sector as well, because operators use indexations linked to the development of gas prices. However, this growth in supply prices also characterized networks using energy sources with low variable costs (waste and geothermal) without a corresponding increase in variable production costs. The discrepancy between the level of costs and revenues led to an increase in margins for return on capital; • the functioning of the market is characterized by two macro-criticisms (ex ante and ex post): the difficulty for the user to compare the price of the district heating service with the price of alternative air conditioning services and the possible presence of significant switching costs. Following these findings with the subsequent Report 568/2022/I/tlr the Authority brought to the attention of Government and Parliament the opportunity to change the regulatory framework in the sector by proposing to: • introduce cost-reflective price regulation; • define the general criteria for determining tariffs, including how capital and operating costs are to be recovered, as well as the accounting separation criteria for the allocation of costs common to several activities. The guarantee for operators to recover the costs incurred and to obtain an adequate rate of return on invested capital could, in the Authority’s opinion, 6 Evolution of the regulation and impacts on the Business Units of the A2A Group 6.1 Generation and Trading Business Unit 6.2 Market Business Unit 6.3 Waste Business Unit 6.4 Smart Infrastructures Business Unit 138 A2A Report on Operations 2022 Evolution of the regulation and impacts on the Business Units of the A2A Group ensure a favorable context for further development of the sector, even in the presence of a reduction in service prices. To limit the impact of price increases on users, the Authority also proposed to: • apply to the district heating sector, on a transitional basis, a reduced VAT rate of 5%, by analogy with what is envisaged for the natural gas sector19; • extend to the sector the application of the social bonus rules, without the need to submit a special application, to households that are ‘economically vulnerable’ on the basis of ISEE. Resolution 710/2022/R/tlr establishes the minimum requirements for meters and modifies the perimeter of the reading obligations by including remote meters with proximity reading (so-called walk-by) but postpones until the first half of 2023 the completion of the regulation on the minimum requirements for meters on the basis of a cost-benefit analysis. As part of these analyses, further proposals for action will be considered, including the replacement of existing meters and the introduction of mandatory remote management of utility substations. Procedures for the qualification of efficient district heating and cooling systems under Legislative Decree 199/2021 published by the GSE in July in order to define rules and procedures to qualify efficient district heating networks under the provisions of Legislative Decree no. 102/2014. Access to PNNR funds: the MiTE Ministerial Decree of June 30, 2022 defined the criteria for the allocation of PNRR resources for the development of efficient district heating and cooling networks (200 million euro). The proceedings ended on December 23 with a claim of 567 million euro. A2A Calore e Servizi S.r.l. was awarded a project relating to the district heating network in Bergamo (3.8 million euro), while Acinque Energy Greenway S.r.l. was awarded resources amounting to 11.9 million euro. Sanctioning measure of the AGCM against certain operators active in the water meters market (I835) On October 29, 2019, the AGCM commenced preliminary investigation proceedings against the companies G2 S.r.l., Itron Italia S.p.A., Maddalena S.p.A. and WaterTech S.p.A. (subsequently extended to Sensus Italia S.r.l.) to ascertain an alleged agreement restricting competition, implemented in connection with public tenders for the supply of water meters to SII operators in violation of article 2 of Law 287/90 and article 101 of the Treaty on the Functioning of the European Union (TFEU). In particular, it was alleged that there was a sharing arrangement between these companies (which, at least since 2015, would have limited competition between them) through the concerted definition of the modalities of participation in public procedures. The proceeding ended on February 1, 2022 with the ascertainment and sanctioning of the conduct charged against the companies (single, complex and continuous horizontal secret cartel and per object), which allegedly conditioned a substantial number of tenders called between 2011 and 2019 by various SII operators active in Italy, including A2A Ciclo Idrico S.p.A. which immediately took steps to put in place the most appropriate measures to protect its interests. Against this decision of AGCM, the sanctioned parties brought an appeal before the Lazio Regional Administrative Court. Acquisition of control of SEA Energia S.p.A. by A2A Calore & Servizi S.r.l. On May 31, 2022, the AGCM was notified of the merger involving the acquisition by A2A Calore & Servizi S.r.l. of the entire share capital of SEA Energia S.p.A., by virtue of which SEA Energia S.p.A. will be entrusted with the supply contracts to SEA S.p.A. (awarded to A2A Calore & Servizi S.r.l. following a tender) of the heating and cooling energy and electricity produced by the power plants located at the Milan Linate and Malpensa airports. AGCM, on June 21, 2022, with the adoption of provision no. 30208, resolved not to proceed with the opening of the investigation on the transaction as it does not give rise to the creation or strengthening of a dominant position, such as to eliminate or reduce competition in a substantial and lasting manner. The transaction was finalized on September 28, 2022 and the acquired company took the name A2A Airport Energy S.p.A.. 19 The proposal for a reduced VAT rate was accepted in the Budget Law 2023 for Q1 2023 7 Risks and uncertainties 140 A2A Report on Operations 2022 Risks and uncertainties The A2A Group has a risk assessment and reporting process which is based on the Enterprise Risk Management method of the Committee of Sponsoring Organizations of the Treadway Commission (CoSO report) and best risk management practice and is in compliance with the Corporate Governance Code by Consob, which states: “…Each issuer shall adopt an internal control and risk management system consisting of policies, procedures and organizational structures aimed at identifying, measuring, managing and monitoring the main risks.... ”. The Group has also adopted a specific procedure that defines in detail the roles, responsibilities and methodologies for the Enterprise Risk Management (ERM) process. This process requires a risk model to be set up that takes account of the Group’s characteristics, its multi-business vocation and the sector to which it belongs. This model is subject to periodic revision consistent with the evolution of the Group, and the context in which it operates. The methodology adopted is characterized by the regular identification of the risks to which the Group is exposed. In this context, an assessment process is carried out which, through the involvement of all its structures, allows the Group to identify the most important risks and establish the relative controls and mitigation plans. At this stage, the involvement of risk owners is essential as responsible for the identification, assessment and update of risk scenarios (specific events in which risk can materialize) related to activities of its competence and Focal Points that facilitate the continuous monitoring of risks, guaranteeing a timely flow of information to Risk Management. This phase is carried out with the support and coordination of the Group Risk Management organizational structure through operating methods that allow clearly identifying risks, the related causes and management methods. The methodology adopted is modular and leverages on the fine-tuning of the experience gained and methods of analysis used: on the one hand, it aims to develop the risk assessment further with specific reference to the consolidation of the mitigation process and on the other to develop and integrate risk management activities in business processes. This evolution is carried out consistent with the gradual increase in the awareness of management and the business structures about risk management issues, achieved among other things through the use of specific training support provided by Group Risk Management. The ERM process also supports the ISO 9001 certification on Quality, ISO 14001 on Environment and ISO 45001 on Occupational Health and Safety of Group companies. Set out below is a description of the main risks and uncertainties to which the Group is exposed. The geo-political tensions related to the crisis between Russia and Ukraine and the health emergency, having possible repercussions on more than one type of risk, are discussed in this opening section. Impacts of the Russia-Ukraine conflict The ongoing conflict between Russia and Ukraine has exacerbated an energy market crisis already underway in 2021, linked to the post-pandemic recovery and severe commodity shortages, leading to a further increase in energy commodity prices and their volatility. In addition to the direct impacts on the production and sale of electricity and gas, such a price increase has led to a general increase in inflation with particular reference to the prices of oil derivatives and foodstuffs, as well as tensions on financial markets, on the solvency of certain counterparts and the security of the computer infrastructure to address a possible increase in cyber-attacks. In addition, recent government measures have introduced extraordinary subsidies on the economic results of energy companies, earmarking them, in particular, to finance measures to protect domestic companies and households. It cannot be ruled out that these measures, which are entirely extemporaneous for 2022 and the first months of 2023, may be further extended. The A2A Group, as part of its industrial activity of generating energy carriers and marketing them on a wholesale basis, is managing the volatility of the price of gas and electricity both by monitoring the limits of exposure to commodity risk and by optimizing its buying and selling strategies. It should also be noted that the Group, in its gas procurement activities, operates mainly on platforms. The A2A Group has also activated joint analyses with the electricity grid operator to define possible ways to maximise electricity production from fuels other than natural gas, and has equipped itself with gas storage space in accordance with the coverage strategy defined at the national level. With reference to the generalized increase in inflation, the A2A Group is experiencing cost increases in the performance of its operating activities (e.g. site costs, waste transport costs, waste treatment process costs); it is also noteworthy that some materials are difficult to obtain within the ordinary timeframe. In order to cope with this situation, automatic price list adjustments are being made where possible, stocks of materials that are more difficult to obtain are being increased and the supplier portfolio is being expanded. With reference to the solvency of certain counterparties, the increase in commodity prices led to an increase in credit exposures to customers (even assuming constant volumes): credit risk is managed through a Credit Policy that provides for preliminary checks, insurance coverage, requests for guarantees, waivers as well as the management of payment terms, interest and repayment plans. The Net Financial Position felt the effects of the conflict: the increase in commodity prices coupled with higher demand for installment plans from customers led to an increase in Net Working Capital, particularly in the Market BU. This growth was calmed by proactive management. To date, no deterioration related to the increase in credit delinquency has been reported. As regards possible tension on the financial markets, it should be noted that the Group’s solid liquidity position, also supported by committed and uncommitted back-up lines (at December 31, 2022 equal to 2.4 billion euro), allowed for managing positions on the commodities market, temporary increases in working capital due to price increases and instalment plans granted 7.1 Risks and uncertainties Risks and uncertainties 2022 Report on Operations A2A 141 to customers and requests for cash collateral by clearing houses by way of a guarantee of operations in commodity derivatives. During the year, A2A successfully placed three ESG bonds for a total of 1.75 billion euro, thus partially anticipating its 2023 funding needs. In addition, medium-term bilateral credit lines were signed for 500 million euro, as well as a total of 560 million euro in revolving credit lines for back-up purposes, all confirming the Group’s ability to access capital and banking markets. This strengthening of the Group’s liquidity position continued in the first months of 2023: A2A first placed a new Green Bond for 500 million euro to support the investments envisaged in the new Business Plan, and subsequently increased its committed credit lines with a new 100 million euro bilateral transaction. Lastly, in relation to the high level of alertness for cyber attacks, the Group has activated a channel with the top management of the National Security Agency to exchange information, accelerating the program to secure endpoints with advanced malware protection tools; an assessment was also conducted to determine the degree of vulnerability of A2A’s services exposed on the Internet and the degree of exposure to the attack techniques and tactics of criminal groups and hackers. The repercussions of this context and possible developments were taken into account in the risk assessment both in the identification of specific risk issues and in the increase and evolution of the most impacted risk factors. Health emergency COVID-19 virus With reference to the Coronavirus emergency, it should be noted that crisis management measures have been implemented, as well as the identification of appropriate prospective mitigations linked to the risk of temporal extension of the emergency. Since 2018, the A2A Group has had a Group crisis plan that identifies the organizational system, activities and procedures necessary to deal with the events that led to the declaration of crisis, with the aim of protecting human resources inside and outside the A2A Group, containing material and immaterial damage and guaranteeing the correct management of communication flows externally and the continuity of the services offered, quickly organizing normal operating conditions and safeguarding the company’s reputation. Achievement of the objectives defined in the business plan Reference is made to the risks connected with failure to achieve or partial achievement of the development and profitability objectives outlined in the Business Plan, which could have both an economic and financial impact as a result of lower growth in the Group’s margins and a reputational impact as a result of failing to meet the expectations of stakeholders with regard to sustainability commitments. The recent release of the Business Plan confirms the ambitious growth targets set in previous years, mainly in terms of the circular economy (recovery of materials and energy, exploitation of heat otherwise dispersed, preservation of water resources) and energy transition (support for growth in renewable energy sources, exploitation of the electricity generation of combined cycle plants, increase in the customer base, support for the electrification of consumption). The main risk factors affecting the various areas of development include: possible critical issues related to authorizations and adverse territorial contexts, the presence of major competitors capable of hindering the achievement of market shares in domestic and foreign markets, uncertainties on the legislative and regulatory evolution related to the deregulation of domestic energy markets, and commercial risks related to the targets defined in the Plan adopted to increase the customer base. In addition, the ongoing geopolitical tensions and the concomitant inflationary phase have led to a twofold phenomenon: on the one hand, there are difficulties in the procurement of certain materials that are used both in the ordinary operation of the plants as well as in maintenance, and at the construction sites of the development initiatives; on the other hand, there has been a significant and generalized increase in the prices of materials, equipment, machinery and supplies. At the same time, the suppliers of these materials require Group companies to adjust their existing contracts with upward revision of the relevant prices. To support the realization of development initiatives, mainly organizational measures are highlighted, with corporate structures focused on the analysis of the markets and development areas covered by the Plan, on the management of technical and engineering aspects, on the maintenance of relations based on transparency and collaboration with the territories, bodies and institutions involved, as well as commercial development initiatives that also envisage the use of innovative communication channels and methods. Of note is the ongoing recruitment of professionals with strong scientific-technological (STEM) skills. To support the path of sustainable growth, training activities are underway and focal points have been identified to support the process of increasing integration of sustainability principles in business processes, contribute to the definition of the objectives of the Sustainability Plan, promote and enhance new sustainability projects and encourage the circulation of information on these issues. On the procurement front, we operate through careful planning of requirements that takes into account the lengthening of acquisition lead times, the contracting of backup suppliers, the increase of inventories of strategic materials when possible and, for certain product categories, an automatic updating of price lists to ISTAT indices. 7.1 Risks and uncertainties 7 Risks and uncertainties 142 A2A Report on Operations 2022 Risks and uncertainties Legislative and regulatory risks The A2A Group operates in highly regulated sectors whether they are managed under natural monopoly (such as infrastructure for the distribution and transport of electricity and gas, the integrated water cycle and district heating) or under free market regime (such as the sale of energy commodities, wholesale and retail, and other services to customers). In addition, as of 2018, the Energy Networks and Environment Regulatory Authority (ARERA) has been assigned responsibility for the waste cycle. Considering the contribution of regulated activities to margins, the Group has adopted a regulatory risk monitoring and management policy in order to mitigate, as far as possible, the effects through a multi-level supervision, which primarily provides for collaborative dialogue with the institutions (ARERA, the Competition and Market Authority, the Communications Authority, the Transport Regulation Authority, the Ministry of the Environment and Energy Security) and with the technical bodies/entities of the sector (Gestore dei Servizi Energetici S.p.A., Gestore dei Mercati Energetici S.p.A., Terna S.p.A. and Snam S.p.A.) as well as active participation in trade associations. To this end, the specific Regulatory Affairs and Competition organizational structure was set up, which works in close liaison with the Business Units and implemented constantly updated monitoring and control tools (including the Regulatory Review produced every six months or the Regulatory Agenda drawn up at the time of the Budget/Plan), in order to consider the potential impacts of the regulation on various companies. The organizational structure also oversees regulatory risk for the Acinque and AEB Groups in order to manage its impact in a coordinated manner. The main topics involved in current changes in regulations and legislation, with major potential effects on the Group, are as follows: • the rules governing large-scale diversion of hydroelectric concessions following Law no. 12/2019 which, in article 11-quater, provided for an overall reorganization of the subject, giving the Regions an increasingly important role (for the Lombardy Region, reference is made to the Regional Law no. 5/2020 as amended by subsequent Regional Law no. 19/2021); • the outcome of the appeals filed by some operators and a trade association for the annulment of the Ministerial Decree MiSE of June 28, 2019 and all related acts of ARERA and Terna S.p.A. that implemented the capacity market regulations. These appeals were rejected at the European level and a ruling by the Lombardy Regional Administrative Court is expected in 2023; • the annual renewal of the essentiality regime with reinstatement of costs for the San Filippo del Mela power plant, which does not allow a medium-term vision of the site’s future; • concerning the granting of concessions for the gas distribution service; • the termination of the water service concessions and their transfer for consideration to the Single Area Operator (with particular reference in the immediate term to the municipalities that have expired and/or are being managed on a transitional basis by A2A Ciclo Idrico S.p.A. and to the concessions of Azienda Servizi Valtrompia S.p.A. in the province of Brescia); • the certification of energy savings and the consequent issue of White Certificates by Gestore dei Servizi Energetici S.p.A.; • the impacts on the development of district heating due to the lack of a specific incentive instrument and the potential launch of a more stringent regulation of the sector by ARERA following the Report sent to Government and Parliament in November 2022; • the provisions of the 2017 Competition Law regarding the termination of price protection regimes for domestic customers in the electricity and gas sectors, the end date of which has been further extended to January 10, 2024; • the investigative proceeding PS12470 initiated by the AGCM against A2A Energia S.p.A. on December 13, 2022 for alleged unilateral changes in the price of electricity and natural gas supply in breach of Article 3 of the Aiuti bis LD on the suspension of unilateral changes to electricity and gas contracts. Finally, with regard to the mechanisms for extracting the alleged ‘extra profits’ to be borne by energy operators activated by the Government in the course of 2022 in order to find resources to cover the many measures introduced to protect end customers in order to tackle the ‘high energy price’, the following should be noted: • a) Art. 15 bis of DL Sostegni ter, which provided for a two-way refund mechanism on the price of electricity fed in from certain types of renewable plants (including existing hydro), initially from February 1, 2022 to December 31, 2022 and subsequently extended to June 30, 2023; • b) Art. 37 of the Taglia-Prezzi LD, which introduced a tax of 25% on the increase in the balance between active and passive transactions, referring to the period from October 1, 2021 to April 30, 2022, compared to the balance of the corresponding period of the previous year for entities engaged in the production of electricity, extraction of methane gas and sale of energy carriers. The Budget Law 2023 specified that the contribution is due if at least 75% of the turnover in 2021 derives from the activities indicated therein; • c) the Budget Law 2023, which, in implementation of EU Regulation 2022/1854, provided for a solidarity contribution in the form of an extraordinary tax on 2022 profits for entities producing, importing, distributing or selling electricity, natural gas or oil products, in the event that 75% of 2022 revenues are derived from such activities. The rate is 50% and is calculated on the amount of the portion of the total income determined for corporate income tax purposes for the tax year 2022 that exceeds the average of the total income determined for income tax purposes from 2018 to 2021 by at least 10%; • d) the Budget Law 2023 which, implementing EU Regulation 2022/1854, provided for the application of a cap on market revenues obtained from the production of electricity from renewable energy sources not falling within the scope of Article 15-bis of LD Sostegni ter and from additional plants fuelled by non-renewable sources (including waste treatment plants). This is a one-way compensation mechanism, with a cap set at 180 €/MWh, effective from December 1, 2022 to June 30, 2023. It cannot be ruled out that these measures, which are entirely extemporaneous for 2022, could also be extended for the whole of 2023. Risks and uncertainties 2022 Report on Operations A2A 143 Finally, it should be noted that in view of the numerous interventions of the AGCM on the sectors in which the A2A Group operates (in terms of initiating investigations for abuse of a dominant position and agreements, as well as fact-finding investigations, requests for information and moral suasion, particularly on the consumer protection side for alleged unfair commercial practices in the retail sale of electricity and gas, also in view of the completion of deregulation) the Board of Directors of A2A S.p.A. approved in 2019 the adoption of the Antitrust Compliance Programme with the consequent appointment of a Person Responsible for its implementation. In 2020, the Antitrust Code of Conduct and an Antitrust Guideline were adopted, which regulates the rules of conduct that Group employees must observe in order to avoid antitrust violations (document available on the company Intranet). In the meantime, training sessions continued for the personnel of the various Business Units, and a specific training tool was activated and disseminated to all Group personnel on an e-learning platform. For a more detailed discussion of these risks, reference should be made to the section “Regulatory developments and impacts on the Business Units of the A2A Group”. Financial risks Liquidity risks Liquidity risk relates to the Group’s ability to meet its financial and commercial obligations within the agreed terms and deadlines. To hedge this risk, the Group ensures the maintenance of adequate financial resources, as well as a liquidity buffer sufficient to meet unexpected commitments over a determined time frame. At December 31, 2022, the Group had cash resources equivalents totalling 2,584 million euro, as well as committed and unused credit lines totalling 1,662 million euro. The management of liquidity risk is pursued by the Group also by means of a Bond Issue Program (Euro Medium Term Note Programme) sufficiently large as to enable the Group to timely resort to the Capital market. At December 31, 2022, this program amounts to 6 billion euro, of which 1,150 million euro still available. The Group’s ability to obtain loans in the banking or financial markets depends, among other things, on prevailing market conditions and the Group’s rating at the time of the need for financing. There is no guarantee that the Group will be able to access financing on equal or better terms than it currently has. Risks associated with compliance with debt Covenants This risk exists if the loan agreements provide for the option by the lender, upon the occurrence of certain events, to request early repayment of the loan, thus entailing a potential liquidity risk for the Group. The section “Other Information/Covenants Compliance Risk” of the consolidated Financial Report illustrates in detail these risks related to the A2A Group. The same section also lists the loans that contain financial covenants. At December 31, 2022, there was no situation of non-compliance with the covenants on the part of the A2A Group companies. Interest rate risks Interest rate risk is related to the uncertainty associated with the trend in interest rates, changes in which can result in, given a certain amount and composition of debt, an increase in net financial expenses. The risk exposure relates both to the portion of existing variable-rate debt and to the possible incurrence of new debt. The volatility of financial expenses associated to the performance of interest rates is therefore monitored and mitigated through a policy of interest rate risk management aimed at identifying a balanced mix of fixed-rate and floating rate loans and the use of derivatives that limit the effects of fluctuations in interest rates. To provide a better understanding of the risks of interest rate fluctuations to which the Group is subjected every six month at December 31 and June 30, a sensitivity analysis was conducted of net financial expenses and valuation items of derivative financial contracts as a result of interest rate fluctuations. The section “Other Information/Interest Rate Risk” of the consolidated Financial Report illustrates the effects on the change in financial charges and in the fair value of derivatives resulting from a change in the forward curve of interest rates of +/- 50 bps. Risks associated with industrial and business activities Macroeconomic context risks The Group’s activities are sensitive to economic cycles and general economic conditions in the countries in which it operates. A slowing economy could determine, for example, a drop in consumption and/or of industrial production, having as a result a negative effect on the demand for electricity and of other carriers offered by the Group, thereby affecting the results and prospects and preventing the implementation of planned development strategies. The whole of 2022 was strongly impacted by the economic consequences of the conflict between Ukraine and Russia, with a generalized increase in commodity prices, inflation and tensions in the financial markets, credit and the supply chain; 7.1 Risks and uncertainties 7 Risks and uncertainties 144 A2A Report on Operations 2022 Risks and uncertainties this situation led to a significant worsening of conditions in the advanced economies later in the year due to declining confidence, high inflation and the rapid tightening of monetary policy globally. Added to this is the negative effect on global supply chains caused by the closure measures adopted in China with the zero-Covid strategy. For the years to come, macroeconomic projections foresee a generalized deterioration in the face of persistent geopolitical uncertainties, high and steadily rising inflation, and restrictive financial conditions: tensions related to the reduction or interruption of gas and oil supplies from Russia, linked to the conflict with Ukraine, may negatively affect the post-pandemic recovery path of economies, with particular impact on western economies. The more or less pronounced effects will depend on the intensity and duration of the crisis. Risks related to commodity and energy prices Given the features of the sectors in which it operates, the Group is exposed to energy scenario risk, namely the risk linked to changes in the price of energy raw materials (electricity, natural gas), and the prices of CO2 emissions allowances (EUA). Significant, unexpected and/or structural changes in commodity prices, especially in the medium term, may result in a reduction in the Group’s operating margins and cash flows. To mitigate these risks, the Group has approved an Energy Risk Policy that regulates the procedures by which commodity risk is monitored and managed, or the highest level of variability to which the result is exposed with reference to the trend of prices of energy commodities. Consistent with the provisions of the Policy, the commodity risk limits of the Group are defined and approved annually by the Board of Directors. Market risk is mitigated by constantly monitoring the total net exposure of the Group’s portfolio and addressing the main factors affecting the trend. Appropriate hedging strategies are defined, where necessary, designed to maintain this risk within the established limits, typically through hedging at 12 and 24 months. The objective of stabilizing the cash flows generated by the asset portfolio and outstanding contracts is thus pursued through the management of physical contracts and derivative financial instruments, limiting to the extent possible, the volatility of the Group’s economic and financial results following changes in commodity prices. Social-environmental context risk Possible opposition (the so-called “Not In My Back Yard” phenomenon) to the presence of plants promoted by certain stakeholders and amplified through the use of social networks, due to a negative perception of certain activities (such as waste recovery and disposal or the installation of photovoltaic and wind farms) in the areas served, could hinder the regular operation of existing plants as well as the authorization process for new plants and therefore, the growth planned by the Group in some business areas. To mitigate this risk, the Group has set up organizational structures dedicated to monitoring institutional relations, with local communities and the territory, in order to establish and maintain collaborative dialogue with the various stakeholders. Within this framework, the Group, in order to build consensus around its initiatives, participates in technical round tables with institutional counterparts, especially at local level, as well as through the organization of multi-Stakeholder forums designed to promote dialogue with the local community. The forum was established with the aim of identifying solutions that can respond in a targeted and effective manner to the needs and expectations of stakeholders and that allow promoting the environmental, economic and social sustainability activities carried out by the Company and the Group and services provided in the territory. For the management of this risk, the Group has also adopted an IT platform for stakeholder and relationship mapping, which is useful for carrying out a gap analysis and supporting the planning of Stakeholder Engagement and improvement activities. Risks related to climate change The A2A Group has a system in place for identifying, assessing and managing climate change risks that is integrated into the Group’s Enterprise Risk Management process. Climate risks and opportunities are identified on the basis of three time horizons: short-term, corresponding to the current and next year and medium-term and long-term, until 2030 and beyond. The choice of these horizons was based on the analysis of the climatic, economic, energy and regulatory reference context. The climate risks identified for the A2A Group are the result of a materiality analysis carried out considering the risk categories outlined by the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), and the businesses operated and the services offered by the Group. The Disclosure in accordance with the Recommendations of the TCFD, including the economic-financial assessment, is published in detail in the Integrated Financial Statements. A qualitative summary of the main risks is presented below. For physical climate risks (both chronic and acute), the A2A Group refers to the European Union’s Climate-related Hazards Framework issued as part of the EU Taxonomy of Green Investments (Appendix A of the Delegated Regulation (EU) supplementing Regulation EU 2020/852 of the European Parliament and of the Council). Hazards related to temperature regimes, wind, precipitation and solid masses can generate impacts for Group companies in connection with the reduction or suspension of services and damage to company assets and/or persons. Chronic climatic risks The Group’s hydroelectric and thermoelectric energy production and the continuity of the distribution services of drinking water provided by the Group may be affected by unfavorable variations in the rainfall regime both with regard to the total annual amount of rainfall and with regard to its distribution throughout the year. Reductions in the availability of water resources can also lead to conflicts between various stakeholders as well as restrictions on the operation of hydroelectric plants. Unfavorable winter rainfall patterns and rising temperatures also impact the availability of high-altitude water resources. Sales of gas and heat for autumn/winter heating can be affected by particularly mild temperatures in the autumn and winter seasons. Risks and uncertainties 2022 Report on Operations A2A 145 These factors can have an unfavourable impact on the Group’s production, sales and reputation and, consequently, have negative economic-financial impacts. Several actions are underway to mitigate these risks: • to ensure optimum exploitation of water resources available for energy, the Group has established organizational structure dedicated to the development of analyses and engineering models to support the programming, both medium and short-term, of hydroelectric plants; moreover, investments are planned both to optimize the use of the available and derived water resources for hydroelectric purposes (pumping); • with reference to the reduction of thermal energy demand by end users compared to what was planned, the Group, through the Business Plan, implements the following risk reduction strategies: a) development of district heating networks and increase in the number of customers; b) optimization of energy costs with thermal waste recovery projects and revamping of existing plants. In addition, the Group monitors investment support policies for the development and extension of TLR networks, including in the area of efficient district heating, carries out studies on technological alternatives for heating, and participates in round tables with local authorities on environmental objectives; • in order to guarantee, even in the long term, the supply of drinking water on an ongoing basis, the A2A Group monitors and maps leaks from the water network in order to identify the priority of investments to contain them and is studying the interconnection of aqueducts and the search for new sources of water supply. Acute climatic risks As part of the operating activities of the electricity grids, the issue of continuity of service during periods of violent and concentrated heat waves and/or precipitation, affecting the areas served, generating reputational risks as a result of prolonged interruptions in the provision of the service. In order to mitigate this risk, in addition to the usual maintenance activities, the Group planned and launched the strengthening of the interventions to rationalize the meshing of the grids, the construction and commissioning of new primary substations, a three-year plan to increase the resilience of the grid in agreement with ARERA. There are also remote operational controls, advanced technical safety tools, emergency intervention teams as well as specific safeguards for infrastructure, which are more exposed to risks of interruption in the delivery of services. Periods of drought, such as the one that occurred in 2022, especially if in conjunction with heat waves, can lead to limitations in the operation of thermal power plants due to the possible lack of sufficient or sufficiently cool water to cool production cycles. Heat waves can also lead to a reduction in production for air-cooled plants as well as those cooled with seawater if there is a rise in sea temperature. Extreme weather phenomena such as floods and landslides can have a negative impact on the Group’s assets (such as canals, dams, plants) as well as on third-party infrastructures necessary for the continuity of the Group’s activities (e.g. electricity transmission lines). These factors can result in direct damage to assets and/or indirect damage due to the interruption of production activities. To mitigate this risk, the Group implemented emergency management plans and procedures. In addition, insurance policies have been taken out to cover direct and indirect damage caused by natural phenomena. Climate change and health, safety and environment The Group also takes into account the possible effects of climate change on people as well as the environment and land. Collection and urban hygiene activities, those for network services and at plants and construction sites involve workers being outdoors, who are particularly exposed to heat waves. The Group has identified this risk, which can affect both individual well-being and the risk of accidents, and has put in place measures to mitigate it and inform its employees. Acute phenomena such as heavy rainfall and ‘water bombs’ can lead to flooding in plants and/or overflowing of containment tanks placed to protect any spills, with the risk of potential pollution of the soil or water bodies in the vicinity. To mitigate this risk, the Group modified the capacity of the containment systems in the most critical situations. Transition risks Finally, the Group is exposed to the risks associated with the transition to a low-carbon economy, which is expressed through regulatory amendments, possible conflicts for the use of resources, technological innovation, changes in consumption styles and stakeholder expectations. If these factors were not sufficiently taken into account in the definition of the Group’s strategic choices, they could lead to economic and financial impacts due, for example, to the depreciation of industrial assets and possible reputation impacts. Changes in the regulatory framework of the Emission Trading Scheme (EUAs) and the possible inclusion of activities currently excluded in the mechanism could have an unfavourable impact on the Group. Uncertainties in the prices of CO2 emission permits (EUAs) may give rise to unfavorable or favorable impacts on the profitability of power plants. To contribute to the decarbonization process, the Group has undertaken to reduce its CO2 emissions: the Business Plan laid the foundations for achieving zero direct and indirect (both Scope 1 and Scope 2) emissions generated by the Group by 2040 7.1 Risks and uncertainties 7 Risks and uncertainties 146 A2A Report on Operations 2022 Risks and uncertainties and strengthened the businesses that can contribute to the country’s ecological transition. This virtuous path envisages the improvement of the Group’s emission factor to 2030 compared to the target approved by the Science Based Targes initiative \- SBTi (216 gCO2/kWh in the current Plan vs 230 gCO2/kWh certified SBTi). The implementation of the decarbonization plan and the achievement of its goals cannot be separated from the strategic energy choices made at government level to manage the energy crisis induced by the Russia-Ukraine conflict. Operating risks due to the ownership and operation of electricity generation, cogeneration, waste treatment and recovery plants and distribution networks and plants The Group manages production sites, infrastructure and services that are operationally and technologically complex (power plants, dams, waste recovery and disposal plants, cogeneration plants, electricity, gas and heat distribution networks, waste collection and urban hygiene services, integrated drinking water supply service, etc.). Accidental mechanical and/or electrical failures, structural failures, fires, terrorist attacks, and labour unrest could result in damage to assets and, in the worst cases, compromise the Group’s production capacity, as well as the possibility of guaranteeing the continuity of services provided. Added to this, with specific reference to the current context, is the potential difficulty in procuring materials and supplies for routine maintenance of plants and infrastructure. To cope with this difficulty, a management of material stocks and supplier fleets is implemented to ensure the availability of the necessary supplies. All these factors can also lead to cost increases, damage to third parties, as well as penalties imposed by the competent authorities. In order to mitigate these risks, the Group realizes preventive management strategies aimed at reducing the probability of their occurrence and/or mitigating their impact. In addition, the Group has investments in place to ensure constant technological updating and adequate levels of plant maintenance, emergency management plans and procedures and a Crisis Plan that provides for the establishment of interdisciplinary management committees, organized at both Group and Business Unit level and coordinated among them. It should be noted that, to date, no critical points have been found in the provision of services in connection with the persistence of the health emergency. The Group takes out insurance cover against any direct and indirect damage which may arise from other types of risk. As part of the insurance contract, inspections are carried out periodically on the plants and measures to improve the safety of assets and loss prevention are recommended/verified. Information technology and operational technology risks The A2A Group’s activities are managed through IT (Information Technology) and OT (Operational Technology) systems and networks that support the main business processes, whether operational, administrative or commercial. In particular, the Group uses IT systems to record, process and summarize financial information and results of operations for internal reporting purposes and to comply with regulatory, legal and tax requirements. In addition, the Group collects and stores at Data Centers, sensitive data, including intellectual property, business information and personal information of customers, service providers and employees. The functioning of these information and technology systems and networks, as well as the processing and storage capacity of this data in a secure manner, are fundamental to the Group’s activities. Increased threats to the security of information infrastructure, including from the use of personal tools as a result of the remoteness of work, and increasingly sophisticated forms of cybercrime pose a risk to the security of the Group’s systems and networks and to the confidentiality, availability and integrity of its data. A security breach could expose the Group, its customers, service providers and employees to risks of misuse of information or systems, compromise of confidential information, loss of financial resources, data manipulation and destruction and operational disruption. All of these factors could adversely affect the Group’s reputation, competitive position, business and results; safety violations could also result in litigation, fines and disqualification penalties, as well as operational and other costs. In order to mitigate this risk, numerous actions are in place within the Group: internal policies and procedures, tools for segregating access to information, specific policies on the use of mobile devices, assessments of the vulnerability of systems and applications, specific software for detecting malware, training activities to increase employee awareness, periodic IT Security risk assessment activities to identify the most critical applications. In addition, corporate reorganizations were implemented to ensure, among other things, integrated and holistic management of corporate security for all assets, both physical and digital; continuous enhancement of the Security Operations centre to increase the effectiveness of threat monitoring; and specific interventions to mitigate emerging risks, also as a result of the substantial use of remote working modes. In 2022, the company achieved ISO 27001 certification, the international information security standard. Any inadequacies, fragmentations, unavailability and/or malfunctioning of the applications could compromise the Group’s ability to operate within the set times and methods. These factors could result in a loss of reputation with customers as well as economic and financial impacts. In order to mitigate this risk, activities are underway to renew existing platforms or to rationalize the applications in use, particularly for Customer Relationship Management and billing platforms supporting commercial activities. In particular, an assessment was carried out to identify obsolete but modernizable and recoverable applications and platforms to be replaced in order to rationalize the “ICT Enterprise Architecture”. There is also the risk of possible relevant and prolonged interruptions to information systems and company infrastructures as a result of potential events (natural or otherwise) affecting them, with potentially even critical consequences on the Group’s ability to maintain the continuity of its systems. To mitigate this risk, the Group has recently finalized its Disaster Recovery (DR) plan, which provides for the recovery of the most critical applications and related enablers within specific time frames, back-up and duplication of data. The DR plan can now count on the presence of two Data Centers, equipped with high levels of security in terms of service continuity, and a Group cloud strategy is being implemented Risks and uncertainties 2022 Report on Operations A2A 147 to make the company’s information systems more usable and resilient. Finally, the project aimed at having a Business Continuity Plan was completed: on the basis of the Business Impact Analysis, critical processes were identified and a Business Continuity Management System \- SGCO was prepared. Thanks also to the above-mentioned Disaster Recovery Plan, the company obtained ISO 22301 (Business Continuity Management) certification for A2A S.p.A.. In the coming years, the certification scope will be extended to other Group subsidiaries. Health and safety risks The occurrence of such risks may occur both in the event of accidents or serious or very serious injuries affecting employees and workers of contractors and/or third parties and in the event of occupational illnesses. These risks are related to the Group’s activities such as, for example, those related to operational services in the territory and the performance of operating and maintenance processes at the plants. The occurrence of such risks may lead to loss of reputation, as well as criminal, civil and/or administrative proceedings for violations of regulations, and/or sanctions, costs for compensation and/or increase in insurance premiums and, in the worst cases, interruption of plant operations, with consequent negative economic and financial impacts for the Group. In order to mitigate these risks, the Group has set up organizational structures dedicated to the management of Health and Safety aspects at the parent company as well as at the Business Units, the individual companies and the main plants. The Group also maintains Health and Safety Management Systems certified in accordance with ISO 45001 for the parent company A2A and most of its Subsidiaries. The group’s main companies operating in the municipal collection and hygiene sector, which are particularly exposed to the risk of road accidents, are certified according to the ISO 39001 standard on road safety. In addition to specific compulsory training plans for each role and company assignment, Leadership in Health and Safety – LiHS training programs have been implemented and progressively extended also to all Business Units, which envisage at all levels emotional involvement on the issue of security and the dissemination of security culture through leaders identified within the operating areas. In relation to the COVID-19 pandemic, given the current regulatory framework, the Group adopts the requirements and protocols laid down in the current regulations and the guidelines issued by the competent bodies. Environmental risks The emergence of such risks may occur as a result of accidents in production processes and of the particular characteristics of the business carried out by the Group, which may lead to reactions by the public opinion about presumed repercussions on the environment and/or on the health of resident populations. These risks are related, for example, to the disposal of production residues, emissions from production processes, the management of waste collection, storage, treatment and disposal activities, water purification, the management of the emptying and maintenance of water reservoirs for electricity production, etc. All these factors can potentially lead to loss of reputation, criminal, civil and administrative proceedings, penalties, environmental reclamation and restoration costs and, in the worst cases, interruption of plant operations with consequent negative economic and financial impacts for the Group. It is also noted that any amendments to the existing legislation could entail costs and investments to ensure compliance with the new requirements as well as operational and/or profitability impacts on certain industrial activities. In order to mitigate these risks, the Group, in addition to implementing technical and technological systems for the prevention and reduction of pollution at the various industrial sites in compliance with sector regulations and in accordance with the best available techniques, has set up organizational structures dedicated to the management of environmental aspects at the parent company as well as at the Business Units, individual companies and the main plants. The Group also keeps the Environmental Management Systems certified according to the ISO 14001 standard active for the parent company A2A and for the main companies. For some sites, there are also registrations under the European EMAS Regulation. With specific reference to the management of the Group’s landfills, including those under post-operational management, it should be noted that monitoring of the values of pollutants in the water table is carried out on a regular basis and summary reports are sent to the relevant bodies. There are frequent checks carried out by as well as the execution of internal audits and by external certifiers for the maintenance, among others, of compliance with the UNI EN ISO 14001 standard. The A2A Group has taken out insurance cover against damage arising from both accidental and gradual pollution in order to cover any residual environmental risk, i.e. against events caused by a sudden and unpredictable fact, and against the environmental damage inherent in continuing operations. The Group is also active in monitoring the regulations in progress (in particular, a working group has been set up to monitor the regulatory provisions relating to the European Green Deal) and is also present on the technical panels set up by the associations in order to highlight any critical issues related to regulatory developments. 7.1 Risks and uncertainties 7 Risks and uncertainties 8 Other information 150 A2A Report on Operations 2022 Other information 8.1 Other information Audit of the financial statements and disclosures pursuant to article 149-duodecies of the Consob Issuers’ Regulations The annual financial statements of A2A S.p.A. have been subject to a full audit by EY S.p.A. on the basis of their appointment for financial years 2016 to 2024 by shareholders in general meeting. The following table provides a summary of the fees paid for audit work performed within the Group during 2022, analyzed between the leading auditor EY S.p.A. and other auditors. Description thousands of euro Leading Auditor Other auditors A2A S.p.A. Audit of annual financial statements 190 Audit of consolidated financial statements 43 Periodic tests of accounting 23 Review of half-yearly report 86 Audit of the separate annual accounts for ARERA 20 Total 362 - Subsidiaries Audit of annual financial statements 1,335 114 Periodic tests of accounting 258 Review of half-yearly report 241 Audit of the separate annual accounts for ARERA 101 Other consolidated groups (Acinque, AEB) 400 Total 2,335 114 Associates and joint ventures Audit of the information sent to shareholders for the consolidation 38 Total 38 - Total A2A Group 2,735 114 In addition to the above audit work, companies belonging to the EY network also performed other engagements in 2022 for fees amounting in total to 224 thousand euro, which mainly related to activities as the Company’s legal auditor as specified by current legislation. Treasury shares “Treasury shares” had no value at December 31, 2022. Secondary locations The company does not have secondary offices. Related parties and tax consolidation Details of related party transactions are provided in note 39 to the consolidated financial statements and note 35 to the separate financial statements. Other information 2022 Report on Operations A2A 151 * * * The information on corporate governance and ownership structures required by article 123-bis of Legislative Decree no. 58/1998, as amended, is contained in a separate document “Report on Corporate Governance and Ownership Structures for the year ended December 31, 2022”, which forms an integral part of the financial statements documentation. In compliance with the requirements of the “Regulation on provisions relating to related party transactions” adopted by Consob with Resolution no. 17221 of March 12, 2010 and subsequently amended by Resolution no. 17389 of June 23, 2010, by way of a resolution of November 11, 2010 the Management Board approved, following the favorable opinion of the Internal Control Committee, the prescribed procedure for identifying the rules and controls designed to ensure the transparency and substantial and procedural correctness of the related party transactions carried out by A2A S.p.A. directly or through its subsidiaries. The aforementioned Procedure was applied effective January 1, 2011 and subsequently amended on August 1, 2012, November 7 and December 18, 2013 and June 22, 2015. Following a periodic review, the Procedure was subsequently amended/supplemented and approved by the Board of Directors on June 20, 2016, subject to the favourable opinion of the Audit and Risks Committee and then updated on June 22, 2017, in view of Consob Resolution no. 19925 of March 22, 2017 and on December 16, 2019, in view of the amendments to art. 192-quinquies of Legislative Decree February 24, 1998, no. 58 (“TUF”) (art. 4 of Legislative Decree May 10, 2019, no. 49). Lastly, by resolution of the Board of Directors on June 25, 2021, subject to the favourable opinion of the Related Parties Committee established by board resolution of May 13, 2021, the Procedure was amended \- effective as of July 1, 2021 \- to comply with the Related Parties Regulation, as amended by Consob Resolution no. 21624 of December 10, 2020, in implementation of the so-called “Shareholders’ Rights II” Directive. The aforementioned Procedure can be found on the website gruppoa2a.it. The company has availed itself of the possibility permitted by article 70, paragraph 8 and article 71, paragraph 1-bis of the Issuers’ Regulations, and hence of derogating from the requirement to make an information document available to public in the event of significant mergers, spin-offs, share capital increases by means of the contribution of assets in kind, acquisitions and disposals. 8.1 Other information 8 Other information Consolidated financial statements 2022 these Financial Statements are available at the website gruppoa2a.it 2 Consolidated financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010 Consolidated balance sheet pursuant to Consob Resolution no. 17221 of March 12, 2010 20 Consolidated income statement pursuant to Consob Resolution no. 17221 of March 12, 2010 22 Consolidated balance sheet 6 Consolidated income statement 8 Consolidated statement of comprehensive income 9 Consolidated cash-flow statement 10 Statement of changes in Group equity 13 Breakdown of the balance sheet with evidence of the effect of the first consolidation of the 2022 acquisitions 14 Breakdown of the economic effect of the consolidation of new acquisitions 2022 16 1 Consolidated financial statements 3 Notes to the Consolidated annual report General information 24 Consolidated annual report 25 Financial statements 26 Basis of preparation 27 Changes in international accounting standards 28 Scope of consolidation 30 Consolidation policies and procedures 31 Accounting standards and policies 35 Business Units 47 Results sector by sector 48 Notes to the balance sheet 52 Net debt 79 Notes to the income statement 81 Earnings per share 90 Note on related party transactions 91 Consob Communication no. DEM/6064293 of July 28, 2006 95 Guarantees and commitments with third parties 97 Other information 98 2 A2A Consolidated financial statements 2022 Contents 151 5 Independent Auditors’ Report 4 Attachments to the notes to the Consolidated annual report 1\. Statement of changes in tangible assets 134 2\. Statement of changes in intangible assets 136 3\. List of companies included in the consolidated annual report 138 4\. List of shareholdings in companies carried at equity 146 5\. List of holdings in other companies 149 Certification of the consolidated financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98 150 2022 Consolidated financial statements A2A 3 This is a translation of the Italian original “Relazione finanziaria annuale consolidata 2022” and has been prepared solely for the convenience of international readers. In the event of any ambiguity the Italian text will prevail. The Italian original is available at the website gruppoa2a.it 1 Consolidated financial statements 6 A2A Consolidated financial statements 2022 Consolidated financial statements 1.1 Consolidated balance sheet (1-2) Assets millions of euro Note 12 31 2022 12 31 2021 Non-current assets Tangible assets 1 6,162 5,588 Intangible assets 2 3,515 3,125 Shareholdings carried according to equity method 3 33 33 Other non-current financial assets 3 70 64 Deferred tax assets 4 363 424 Other non-current assets 5 86 25 Total non-current assets 10,229 9,259 Current assets Inventories 6 536 204 Trade receivables 7 4,680 3,291 Other current assets 8 3,289 4,051 Current financial assets 9 14 9 Current tax assets 10 35 68 Cash and cash equivalents 11 2,584 964 Total current assets 11,138 8,587 Non-current assets held for sale 12 - 162 Total assets 21,367 18,008 (1) As required by Consob Resolution no. 17221 of March 12, 2010, the effects of related party transactions on the consolidated financial statements are provided in the statements and discussed in Note 39. (2) Significant non-recurring events and transactions in the consolidated financial statements are provided in Note 40 as required by Consob Communication DEM/6064293 of July 28, 2006. Consolidated financial statements 2022 Consolidated financial statements A2A 7 Equity and liabilities millions of euro Note 12 31 2022 12 31 2021 Equity Share capital 13 1,629 1,629 Reserves 14 1,869 1,627 Result of the year 15 401 504 Equity pertaining to the Group 3,899 3,760 Minority interests 16 568 543 Total Equity 4,467 4,303 Liabilities Non-current liabilities Non-current financial liabilities 17 5,867 4,322 Employee benefits 18 248 294 Provisions for risks, charges and liabilities for landfills 19 729 797 Other non-current liabilities 20 370 129 Total non-current liabilities 7,214 5,542 Current liabilities Trade payables 21 5,524 2,894 Other current liabilities 21 3,006 4,487 Current financial liabilities 22 1,022 746 Tax liabilities 23 134 21 Total current liabilities 9,686 8,148 Total liabilities 16,900 13,690 Liabilities directly associated with non-current assets held for sale 24 - 15 Total equity and liabilities 21,367 18,008 1 Consolidated financial statements 1.1 Consolidated balance sheet 1.2 Consolidated income statement 1.3 Consolidated statement of comprehensive income 1.4 Consolidated cash-flow statement 1.5 Statement of changes in Group equity 1.6 Breakdown of the balance sheet with evidence of the effect of the first consolidation of the 2022 acquisitions 1.7 Breakdown of the economic effect of the consolidation of new acquisitions 2022 1.2 Consolidated income statement (1-2) millions of euro Note 01 01 2022 12 31 2022 01 01 2021 12 31 2021 Revenues Revenues from the sale of goods and services 22,946 11,352 Other operating income 220 197 Total Revenues 26 23,166 11,549 Operating expenses Expenses for raw materials and services 20,502 9,088 Other operating expenses 394 312 Total Operating expenses 27 20,896 9,400 Labour costs 28 765 721 Gross operating income \- EBITDA 29 1,505 1,428 Depreciation, amortization, provisions and write-downs 30 818 768 Net operating income \- EBIT 31 687 660 Result from non-recurring transactions 32 157 - Financial balance Financial income 35 17 Financial expenses 125 89 Affiliates 2 2 Result from disposal of other shareholdings - - Total financial balance 33 (88) (70) Result before taxes 756 590 Income taxes 34 344 36 Result after taxes from operating activities 412 554 Net result from discontinued operations 35 36 (4) Net result 448 550 Minorities 36 (47) (46) Group result of the year 37 401 504 Result per share (in euro): \- basic 0.1281 0.1639 \- basic from continuing operations 0.1167 0.1651 \- basic from assets held for sale 0.0114 (0.0012) \- diluted 0.1281 0.1639 \- diluted from continuing operations 0.1167 0.1651 \- diluted from assets held for sale 0.0114 (0.0012) (1) As required by Consob Resolution no. 17221 of March 12, 2010, the effects of related party transactions on the consolidated financial statements are provided in the statements and discussed in Note 39. (2) Significant non-recurring events and transactions in the consolidated financial statements are provided in Note 40 as required by Consob Communication DEM/6064293 of July 28, 2006. 8 A2A Consolidated financial statements 2022 Consolidated financial statements 1.3 Consolidated statement of comprehensiveincome millions of euro 12 31 2022 12 31 2021 Net result of the year (A) 448 550 Actuarial gains/(losses) on Employee’s Benefits booked in the Net equity 31 (38) Tax effect of other actuarial gains/(losses) (9) 11 Total actuarial gains/(losses) net of the tax effect (B) 22 (27) Effective part of gains/(losses) on cash flow hedge (1) 47 Tax effect of other gains/(losses) - (13) Total other gains/(losses) net of the tax effect of companies consolidated on a line-by-line basis (C) (1) 34 Other gains/(losses) of companies valued at equity net of the tax effect (D) - - Total comprehensive result (A)+(B)+(C)+(D) 469 557 Total comprehensive result attributable to: Shareholders of the parent company 422 511 Minority interests (47) (46) With the exception of the actuarial effects on employee benefits recognized in equity, the other effects stated above will be reclassified to the Income Statement in subsequent years. Consolidated financial statements 2022 Consolidated financial statements A2A 9 1 Consolidated financial statements 1.1 Consolidated balance sheet 1.2 Consolidated income statement 1.3 Consolidated statement of comprehensive income 1.4 Consolidated cash-flow statement 1.5 Statement of changes in Group equity 1.6 Breakdown of the balance sheet with evidence of the effect of the first consolidation of the 2022 acquisitions 1.7 Breakdown of the economic effect of the consolidation of new acquisitions 2022 1.4 Consolidated cash-flow statement millions of euro 12 31 2022 12 31 2021 Cash and cash equivalents at the beginning of the year 964 1,012 Operating activities Net Result 448 550 Net income taxes 344 36 Net financial interests 90 72 Capital gains/expenses (191) - Tangible assets depreciation 491 465 Intangible assets amortization 233 201 Fixed assets write-downs/disposals 10 19 Net provisions 92 89 Result from affiliates (2) (2) Net financial interests paid (75) (80) Net taxes paid (201) (165) Dividends paid (302) (263) Change in trade receivables (1,420) (1,285) Change in trade payable 2,587 1,329 Change in inventories (332) (56) Other changes (512) 225 Cash flow from operating activities 1,260 1,135 Investment activities Investments in tangible assets (856) (714) Investments in intangible assets and goodwill (384) (360) Investments in shareholdings and securities (*) (497) (444) Cash and cash equivalents from first consolidations asset 180 27 Disposal of fixed assets and shareholdings 413 5 Dividends paid by equity investments and other investments 2 - Purchase of Treasury shares - (109) Cash flow from investment activities (1,142) (1,595) Free Cash Flow 118 (460) (*) Cleared of balances in return of shareholders’ equity and other balance sheet items. 10 A2A Consolidated financial statements 2022 Consolidated financial statements millions of euro 12 31 2022 12 31 2021 Financing activities Changes in financial assets Issuance of loans - (6) Proceeds from loans (3) 5 Other changes 2 2 Total changes in financial assets (*) (1) 1 Changes in financial liabilities Borrowings/bonds issued 4,339 1,147 Repayment of borrowings/bond (2,779) (725) Lease payments (11) (2) Other changes (46) (9) Total changes in financial liabilities (*) 1,503 411 Cash flow from financing activities 1,502 412 Change in cash and cash equivalents 1,620 (48) Cash and cash equivalents at the end of the year 2,584 964 Consolidated financial statements 2022 Consolidated financial statements A2A 11 1 Consolidated financial statements 1.1 Consolidated balance sheet 1.2 Consolidated income statement 1.3 Consolidated statement of comprehensive income 1.4 Consolidated cash-flow statement 1.5 Statement of changes in Group equity 1.6 Breakdown of the balance sheet with evidence of the effect of the first consolidation of the 2022 acquisitions 1.7 Breakdown of the economic effect of the consolidation of new acquisitions 2022 1.5 Statement of changes in Group equity Changes from January 1, 2021 to December 31, 2021 millions of euro Share capital Treasury shares Cash Flow Hedge Other Reserves and retained earnings Result of the year Total Equity pertaining to the Group Minority interests Total Net shareholders equity Net equity at December 31, 2020 1,629 (54) (6) 1,604 364 3,537 579 4,116 Result allocation 364 (364) - - Distribution of dividends (248) (248) (15) (263) IAS 19 reserves (*) (27) (27) (27) Cash flow hedge reserves (*) 34 34 34 Other changes 54 (94) (40) (67) (107) Group and minorities result of the year 504 504 46 550 Net equity at December 31, 2021 1,629 - 28 1,599 504 3,760 543 4,303 (*) These form part of the statement of comprehensive income. Changes from January 1, 2022 to December 31, 2022 millions of euro Share capital Treasury shares Cash Flow Hedge Other Reserves and retained earnings Result of the year Total Equity pertaining to the Group Minority interests Total Net shareholders equity Net equity at December 31, 2021 1,629 - 28 1,599 504 3,760 543 4,303 Result allocation 504 (504) - - Distribution of dividends (283) (283) (19) (302) IAS 19 reserves (*) 22 22 22 Cash flow hedge reserves (*) (1) (1) (1) Change in scope 3 (3) - (3) (3) Other changes - - Group and minorities result of the year 401 401 47 448 Net equity at December 31, 2022 1,629 - 30 1,839 401 3,899 568 4,467 (*) These form part of the statement of comprehensive income. Consolidated financial statements 2022 Consolidated financial statements A2A 13 1 Consolidated financial statements 1.1 Consolidated balance sheet 1.2 Consolidated income statement 1.3 Consolidated statement of comprehensive income 1.4 Consolidated cash-flow statement 1.5 Statement of changes in Group equity 1.6 Breakdown of the balance sheet with evidence of the effect of the first consolidation of the 2022 acquisitions 1.7 Breakdown of the economic effect of the consolidation of new acquisitions 2022 1.6 Breakdown of the balance sheet with evidence of the effect of the first consolidation of the 2022 acquisitions (NO GAAP MEASURES) millions of euro Note Consolidated at 12 31 2021 A2A Rinnovabili Group A2A AIRPORT ENERGY Total effect first consolidation acquisitions 2022 Changes Consolidated at 12 31 2022 Assets Non-current assets Tangible assets 1 5,588 170 56 226 348 6,162 Intangible assets 2 3,125 231 - 231 159 3,515 Shareholdings carried according to equity method 3 33 235 - 235 (235) 33 Other non-current financial assets 3 64 1 - 1 5 70 Deferred tax assets 4 424 22 3 25 (86) 363 Other non-current assets 5 25 4 2 6 55 86 Total non-current assets 9,259 663 61 724 246 10,229 Current assets Inventories 6 204 - - - 332 536 Trade receivables 7 3,291 13 46 59 1,330 4,680 Other current assets 8 4,051 14 1 15 (777) 3,289 Current financial assets 9 9 - - - 5 14 Current tax assets 10 68 10 1 11 (44) 35 Cash and cash equivalents 11 964 160 20 180 1,440 2,584 Total current assets 8,587 197 68 265 2,286 11,138 Non-current assets held for sale 12 162 - - - (162) Total assets 18,008 860 129 989 2,370 21,367 Liabilities Non-current liabilities Non-current financial liabilities 17 4,322 127 7 134 1,411 5,867 Deferred tax liabilities - 20 20 (20) - Employee benefits 18 294 - 1 1 (47) 248 Provisions for risks, charges and liabilities for landfills 19 797 8 - 8 (76) 729 Other non-current liabilities 20 129 9 - 9 232 370 Total non-current liabilities 5,542 164 8 172 1,500 7,214 Current liabilities Trade payables 21 2,894 6 37 43 2,587 5,524 Other current liabilities 21 4,487 26 - 26 (1,507) 3,006 Current financial liabilities 22 746 23 51 74 202 1,022 Tax liabilities 23 21 10 1 11 102 134 Total current liabilities 8,148 65 89 154 1,384 9,686 Total liabilities 13,690 229 97 326 2,884 16,900 Liabilities directly associated with non-current assets held for sale 24 15 - - - (15) - Liabilities 13,705 229 97 326 2,869 16,900 14 A2A Consolidated financial statements 2022 Consolidated financial statements millions of euro Note Consolidated at 12 31 2021 A2A Rinnovabili Group A2A AIRPORT ENERGY Total effect first consolidation acquisitions 2022 Changes Consolidated at 12 31 2022 Assets Non-current assets Tangible assets 1 5,588 170 56 226 348 6,162 Intangible assets 2 3,125 231 - 231 159 3,515 Shareholdings carried according to equity method 3 33 235 - 235 (235) 33 Other non-current financial assets 3 64 1 - 1 5 70 Deferred tax assets 4 424 22 3 25 (86) 363 Other non-current assets 5 25 4 2 6 55 86 Total non-current assets 9,259 663 61 724 246 10,229 Current assets Inventories 6 204 - - - 332 536 Trade receivables 7 3,291 13 46 59 1,330 4,680 Other current assets 8 4,051 14 1 15 (777) 3,289 Current financial assets 9 9 - - - 5 14 Current tax assets 10 68 10 1 11 (44) 35 Cash and cash equivalents 11 964 160 20 180 1,440 2,584 Total current assets 8,587 197 68 265 2,286 11,138 Non-current assets held for sale 12 162 - - - (162) Total assets 18,008 860 129 989 2,370 21,367 Liabilities Non-current liabilities Non-current financial liabilities 17 4,322 127 7 134 1,411 5,867 Deferred tax liabilities - 20 20 (20) - Employee benefits 18 294 - 1 1 (47) 248 Provisions for risks, charges and liabilities for landfills 19 797 8 - 8 (76) 729 Other non-current liabilities 20 129 9 - 9 232 370 Total non-current liabilities 5,542 164 8 172 1,500 7,214 Current liabilities Trade payables 21 2,894 6 37 43 2,587 5,524 Other current liabilities 21 4,487 26 - 26 (1,507) 3,006 Current financial liabilities 22 746 23 51 74 202 1,022 Tax liabilities 23 21 10 1 11 102 134 Total current liabilities 8,148 65 89 154 1,384 9,686 Total liabilities 13,690 229 97 326 2,884 16,900 Liabilities directly associated with non-current assets held for sale 24 15 - - - (15) - Liabilities 13,705 229 97 326 2,869 16,900 Consolidated financial statements 2022 Consolidated financial statements A2A 15 1 Consolidated financial statements 1.1 Consolidated balance sheet 1.2 Consolidated income statement 1.3 Consolidated statement of comprehensive income 1.4 Consolidated cash-flow statement 1.5 Statement of changes in Group equity 1.6 Breakdown of the balance sheet with evidence of the effect of the first consolidation of the 2022 acquisitions 1.7 Breakdown of the economic effect of the consolidation of new acquisitions 2022 1.7 Breakdown of the economic effectof the consolidation of new acquisitions 2022 (NO GAAP MEASURES) millions of euro Note A2A Rinnovabili Group A2A AIRPORT ENERGY Total effect consolidation new acquisitions 2022 Old perimeter at 12 31 2022 Consolidated at 12 31 2022 Consolidated at 12 31 2021 Revenues Revenues from the sale of goods and services 40 41 81 22,865 22,946 11,352 Other operating income 11 \- 11 209 220 197 Total Revenues 26 51 41 92 23,074 23,166 11,549 Operating expenses Expenses for raw materials and services 13 34 47 20,455 20,502 9,088 Other operating expenses \- \- - 394 394 312 Total Operating expenses 27 13 34 47 20,849 20,896 9,400 Labour costs 28 2 \- 2 763 765 721 Gross operating income \- EBITDA 29 36 7 43 1,462 1,505 1,428 Depreciation, amortization, provisions and write-downs 30 15 1 16 802 818 768 Net operating income \- EBIT 31 21 6 27 660 687 660 Result from non-recurring transactions 32 157 157 Financial balance Financial income 2 \- 2 33 35 17 Financial expenses 3 \- 3 122 125 89 Affiliates \- 2 2 2 Result from disposal of other shareholdings \- \- Total financial balance 33 (1) \- (1) (87) (88) (70) Result before taxes 20 6 26 730 756 590 Income taxes 34 24 \- 24 320 344 36 Result after taxes from operating activities (4) 6 2 410 412 554 Net result from discontinued operations 35 36 36 (4) Net result (4) 6 2 446 448 550 Minorities 36 \- (47) (47) (46) Group result of the year 37 (4) 6 2 399 401 504 16 A2A Consolidated financial statements 2022 Consolidated financial statements millions of euro Note A2A Rinnovabili Group A2A AIRPORT ENERGY Total effect consolidation new acquisitions 2022 Old perimeter at 12 31 2022 Consolidated at 12 31 2022 Consolidated at 12 31 2021 Revenues Revenues from the sale of goods and services 40 41 81 22,865 22,946 11,352 Other operating income 11 \- 11 209 220 197 Total Revenues 26 51 41 92 23,074 23,166 11,549 Operating expenses Expenses for raw materials and services 13 34 47 20,455 20,502 9,088 Other operating expenses \- \- - 394 394 312 Total Operating expenses 27 13 34 47 20,849 20,896 9,400 Labour costs 28 2 \- 2 763 765 721 Gross operating income \- EBITDA 29 36 7 43 1,462 1,505 1,428 Depreciation, amortization, provisions and write-downs 30 15 1 16 802 818 768 Net operating income \- EBIT 31 21 6 27 660 687 660 Result from non-recurring transactions 32 157 157 Financial balance Financial income 2 \- 2 33 35 17 Financial expenses 3 \- 3 122 125 89 Affiliates \- 2 2 2 Result from disposal of other shareholdings \- \- Total financial balance 33 (1) \- (1) (87) (88) (70) Result before taxes 20 6 26 730 756 590 Income taxes 34 24 \- 24 320 344 36 Result after taxes from operating activities (4) 6 2 410 412 554 Net result from discontinued operations 35 36 36 (4) Net result (4) 6 2 446 448 550 Minorities 36 \- (47) (47) (46) Group result of the year 37 (4) 6 2 399 401 504 Consolidated financial statements 2022 Consolidated financial statements A2A 17 1 Consolidated financial statements 1.1 Consolidated balance sheet 1.2 Consolidated income statement 1.3 Consolidated statement of comprehensive income 1.4 Consolidated cash-flow statement 1.5 Statement of changes in Group equity 1.6 Breakdown of the balance sheet with evidence of the effect of the first consolidation of the 2022 acquisitions 1.7 Breakdown of the economic effect of the consolidation of new acquisitions 2022 2 Consolidated financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010 2.1 Consolidated balance sheet pursuant to Consob Resolution no. 17221 of March 12, 2010 Assets 20 A2A Consolidated financial statements 2022 Consolidated financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010 millions of euro 12 31 2022 of which Related Parties (note 39) 12 31 2021 of which Related Parties (note 39) Non-current assets Tangible assets 6,162 5,588 Intangible assets 3,515 3,125 Shareholdings carried according to equity method 33 33 33 33 Other non-current financial assets 70 14 64 14 Deferred tax assets 363 424 Other non-current assets 86 25 Total non-current assets 10,229 9,259 Current assets Inventories 536 204 Trade receivables 4,680 157 3,291 142 Other current assets 3,289 4,051 1 Current financial assets 14 10 9 1 Current tax assets 35 68 Cash and cash equivalents 2,584 964 Total current assets 11,138 8,587 Non-current assets held for sale - 162 Total assets 21,367 18,008 Equity and liabilities Consolidated financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010 2022 Consolidated financial statements A2A 21 millions of euro 12 31 2022 of which Related Parties (note 39) 12 31 2021 of which Related Parties (note 39) Equity Share capital 1,629 1,629 Reserves 1,869 1,627 Result of the year 401 504 Equity pertaining to the Group 3,899 3,760 Minority interests 568 543 Total Equity 4,467 4,303 Liabilities Non-current liabilities Non-current financial liabilities 5,867 4,322 Employee benefits 248 294 Provisions for risks, charges and liabilities for landfills 729 797 Other non-current liabilities 370 129 Total non-current liabilities 7,214 5,542 Current liabilities Trade payables 5,524 79 2,894 76 Other current liabilities 3,006 6 4,487 7 Current financial liabilities 1,022 746 Tax liabilities 134 21 Total current liabilities 9,686 8,148 Total liabilities 16,900 13,690 Liabilities directly associated with non-current assets held for sale - 15 Total equity and liabilities 21,367 18,008 2 Consolidated financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010 2.1 Consolidated balance sheet pursuant to Consob Resolution no. 17221 of March 12, 2010 2.2 Consolidated income statement pursuant to Consob Resolution no. 17221 of March 12, 2010 2.2 Consolidated income statement pursuant to Consob Resolution no. 17221 of March 12, 2010 millions of euro 01 01 2022 12 31 2022 of which Related Parties (note 39) 01 01 2021 12 31 2021 of which Related Parties (note 39) Revenues Revenues from the sale of goods and services 22,946 597 11,352 478 Other operating income 220 197 Total Revenues 23,166 11,549 Operating expenses Expenses for raw materials and services 20,502 16 9,088 13 Other operating expenses 394 82 312 74 Total Operating expenses 20,896 9,400 Labour costs 765 2 721 2 Gross operating income \- EBITDA 1,505 1,428 Depreciation, amortization, provisions and write-downs 818 768 Net operating income \- EBIT 687 660 Result from non-recurring transactions 157 - Financial balance Financial income 35 11 17 6 Financial expenses 125 89 7 Affiliates 2 2 2 2 Result from disposal of other shareholdings - - Total financial balance (88) (70) Result before taxes 756 590 Income taxes 344 36 Result after taxes from operating activities 412 554 Net result from discontinued operations 36 (4) Net result 448 550 Minorities (47) (46) Group result of the year 401 504 22 A2A Consolidated financial statements 2022 Consolidated financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010 3 Notes to the Consolidated annual report 24 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report A2A S.p.A. is a company with legal personality organized under the laws of the Italian Republic which operates, also through its subsidiaries ("Group"), both in Italy and abroad. The A2A Group mainly operates in the following sectors: • the production, sale and distribution of electricity even from renewable resources; • the sale and distribution of gas; • the production, distribution and sale of heat through district heating networks; • waste management (from collection and sweeping to disposal) and the construction and management of integrated waste disposal plants and systems, also making these available for other operators; • integrated water cycle management; • technical consultancy relating to energy efficiency certificates. 3.1 General information Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 25 The Consolidated annual report (hereafter referred to as the “Annual report”) of the A2A Group at December 31, 2022, is presented in millions of euro; the euro is also the functional currency of the economies in which the Group operates. The Annual report of the A2A Group at December 31, 2022 has been prepared: • in compliance with Legislative Decree 58/1998 (art. 154-ter) as amended and with the Issuers’ Regulations published by Consob; • in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standard Board (IASB) and approved by the European Union. IFRS means all the revised international accounting standards (IAS) and all the interpretations of the International Financial Reporting Interpretations Committee (IFRIC), formerly known as the Standing Interpretations Committee (SIC). In preparing the Annual report, the same principles used in the preparation of the consolidated annual financial report at December 31, 2021 were applied, other than the principles and interpretations described in detail in the paragraph below “Changes in accounting principles” adopted for the first time on January 1, 2022. In this file, use has been made of some Alternative Performance Measures (APM) that are different from the financial indicators expressly provided for by the IAS/IFRS international accounting standards adopted by the Group; for details of these indicators, please see the specific paragraph Alternative Performance Measures (APM) in the file of the Report on Operations. This Annual report at December 31, 2022 was approved on March 16, 2023 by the Board of Directors, which authorized publication, and has been audited by EY S.p.A. in accordance with their appointment by the Shareholders’ Meeting of June 11, 2015 for the nine years from 2016 to 2024. 3.2 Consolidated annual report 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 26 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report The Group has adopted a format for the balance sheet which presents current and non-current assets and current and non-current liabilities as separate classifications, as required by paragraphs 60 and following of IAS 1. The “Income statement” is presented by nature, a format which is considered more representative than a presentation by function. The selected format is in agreement with the presentation used by the Group’s major competitors and in line with international practice. The specific line items “Result from non-recurring transactions” and “Result from disposal of other shareholdings” are in the format of the Income statement in order to provide clear and immediate identification of the results arising from non-recurring transactions forming part of continuing operations, separating these from the results from discontinued operations. In particular, it should be noted that the item "Result from non-recurring transactions" is intended to include the results from the sale of investments in subsidiaries and associates and other non-operating expenses/income. This item is presented between net operating income and the financial balance. In this way net operating income is not affected by non-recurring operations, making it easier to measure the effective performance of the Group’s ordinary operating activities. The “Cash Flow Statement” is prepared using the indirect method, as permitted by "IAS 7" and includes the disclosure amendments introduced by the integration to "IAS 7" approved on November 9, 2017. The “Statement of changes in equity” has been prepared in accordance with IAS 1. The formats adopted for the financial statements are the same as those used to prepare the annual consolidated financial statements at December 31, 2021. 3.3 Financial statements Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 27 The consolidated annual financial report at December 31, 2022 has been prepared on a historical cost basis, with the exception of those items which under IFRS must or can be measured at fair value. The consolidation principles, the accounting standards, the accounting policies and the methods of measurement used in the preparation of the Annual financial report are consistent with those used to prepare the consolidated annual financial report at December 31, 2021, except as specified below regarding newly enacted standards. 3.4 Basis of preparation 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 28 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report Pursuant to IAS 8, the subsequent paragraph “Accounting standards, amendments and interpretations applicable by the company as of the current year” indicates and briefly illustrates the amendments in force as of January 1, 2022. The following paragraph, “Accounting standards, amendments and interpretations approved by the European Union” instead detail the accounting standards and interpretations already issued, not yet approved by the European Union and therefore not applicable for the preparation of the financial statements at December 31, 2022, any impacts of which will then be transposed as of the financial statements of the following years. Accounting standards, amendments and interpretations applicable as of the current year As from January 1, 2022, applicable to the Group are the following additions to specific paragraphs of the international accounting standards already adopted by the Group companies in previous years: • IFRS 3 “Business Combination”: issued by the IASB on May 14, 2020 and approved on July 2, 2021, the integration introduces an exception to the valuation standards of IFRS 3 to avoid the risk of potential “day-after” losses or gains arising from liabilities and contingent liabilities that would fall within the scope of IAS 37 or IFRIC 21, if contracted separately.The amendment also added a new paragraph to IFRS 3 to clarify that contingent assets do not qualify as recognizable assets at the acquisition date. The integration did not have any impact on the Group's financial position, as no contingent assets, liabilities and contingent liabilities were recognized for the purpose of these amendments. • IAS 16 “Property, plant and equipment”: issued by the IASB on May 14, 2020 and approved on July 2, 2021, the integration prohibits the deduction from the carrying amount of a fixed asset of any revenue from the sale achieved during the preparation of the fixed asset. These revenues must be recognized in the income statement. The integration did not have any impact on the Group's financial position as no sales related to these fixed assets were realized, before they entered operation before or after the beginning of the previous comparative period. • IAS 37 “Provisions, liabilities and contingent liabilities”: issued by the IASB on May 14, 2020 and endorsed on July 2, 2021, the integration further specifies which costs should be considered in the definition of an onerous contract. An onerous contract is a contract in which the non-discretionary costs (i.e., the costs that the Group cannot avoid because it is a party to a contract) necessary to fulfil its obligations exceed the economic benefits that are supposed to be obtainable from the contract. The amendment specifies that in determining whether a contract is onerous or loss-making, an entity must consider costs directly related to the contract for the provision of goods or services that include both incremental costs (i.e., the cost of direct labour and materials) and costs directly attributable to contractual activities (i.e., depreciation of equipment used to perform the contract as well as costs for managing and supervising the contract). General and administrative expenses are not directly related to a contract and are excluded unless they are explicitly chargeable to the other party under the contract. The integration did not have any impact on the Group's economic and financial situation. • IFRS 1 "First-time Adoption of International Financial Reporting Standards": issued by the IASB on May 14, 2020 and endorsed on July 2, 2021, this amendment allows a subsidiary that elects to apply paragraph D16(a) of IFRS 1 to account for cumulative translation differences based on the amounts recognized by the parent company, considering the date of transition to IFRSs by the parent company. This amendment also applies to associates or joint ventures that elect to apply paragraph D16(a) of IFRS 1\. The integration did not have any impact on the Group's economic and financial situation as the Group is not a first-time adopter. • IFRS 9 "Financial Instruments": issued by the IASB on May 14, 2020 and endorsed on July 2, 2021, this amendment clarifies what fees an entity includes in determining whether the terms and conditions of a new or amended financial liability are materially different from the terms and conditions of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by the borrower or lender on behalf of others. No such amendment has been proposed with regard to IAS 39 Financial Instruments: Recognition and Measurement. The integration did not have any impact on the Group's economic and financial situation. • IAS 41 "Agriculture": issued by the IASB on May 14, 2020 and endorsed on July 2, 2021, this amendment removes the requirements in paragraph 22 of IAS 41 relating to the exclusion of cash flows for taxes when measuring the fair value of an asset within the scope of IAS 41\. The integration did not have any impact on the Group's economic and financial position as the Group did not have any assets within the scope of IAS 41 at the reporting date. 3.5 Changes in international accounting standards Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 29 Accounting standards, amendments and interpretations approved this year and applicable as of subsequent years • IFRS 17 “Insurance contracts”: issued by the IASB on May 18, 2017 and approved November 19, 2021, will be applicable to companies that issue insurance contracts from the financial statements closed as of January 1, 2023\. No impacts are expected on the Group's economic and financial situation. • IAS 1 "Presentation of the Financial Statements": issued by the IASB on February 12, 2021 and endorsed on March 2, 2022, which provides guidance and examples to help entities apply materiality judgements to disclosures on accounting standards. The amendments are intended to help entities provide more useful accounting standard disclosures by replacing the requirement for entities to provide their "significant" accounting standards with a requirement to provide disclosures about their "material" accounting standards; in addition, guidance is added on how entities apply the concept of materiality in making accounting standard disclosure decisions. The integration will be applicable to the financial statements closed as from January 1, 2023 and is not expected to have a significant impact on the disclosure of the accounting policies since an analysis by nature and not only by significance is already carried out. • IAS 8 "Accounting Policies, Changes in Accounting Estimates and Errors": issued by the IASB on February 12, 2021 and endorsed on March 2, 2022\. The amendments clarify the distinction between changes in accounting estimates and changes in accounting standards and error correction. They also clarify how entities use measurement techniques and inputs to develop accounting estimates. The integration will be applicable to financial statements for the period beginning January 1, 2023 and is not expected to have significant impacts on the Group's economic and financial situation. • IAS 12 "Income Taxes": issued by the IASB on May 7, 2021 and endorsed on August 11, 2022 in which it clarifies how to account for deferred taxes on transactions such as leases and decommissioning provisions. In particular, the option, previously provided for, not to calculate deferred taxation upon initial recognition of assets and liabilities deriving from lease contracts and/or decommissioning provisions is eliminated. This addition clarifies, therefore, that all companies are required to recognize deferred taxation on the transactions in question. The Group is currently assessing the impacts of these amendments. • IFRS 17 "Insurance Contracts": issued by the IASB on December 9, 2021 and endorsed on September 8, 2022 in which it adds a transition option relating to comparative information presented on first-time application of IFRS 17 and IFRS 9\. The amendment aims to help entities avoid temporary accounting mismatches between financial assets and liabilities of insurance contracts, and therefore at improving the usefulness of comparative information of the financial statements. The integration will be applicable to financial statements for the period beginning January 1, 2023 and is not expected to have an impact on the Group's economic and financial situation. Accounting standards, amendments and interpretations not yet approved by the European Union • On January 23, 2020, July 15, 2020 and October 31, 2022, the IASB issued three additions to IAS 1 "Presentation of Financial Statements" that aim to better define the concept of liabilities and the related classification between short and medium/long-term.Specifically, emphasis is placed on the temporal concept of transferring money or other resources to the counterparty to settle the liability. The following aspects are also clarified: what is meant by a subordination right; that the subordination right must exist at the end of the reporting period; classification is not impacted by the probability that the entity will exercise its subordination right; only if a derivative embedded in a convertible liability is itself an equity instrument does the maturity of the liability not impact its classification.Furthermore, the latest amendment specifies that only covenants that an entity must meet by the reporting date will affect the classification of a liability as current or non-current.These additions will be applicable to financial statements closed on or after January 1, 2024\. The Group is currently assessing the impacts of these amendments. • On September 22, 2022, the IASB issued a supplement to IFRS 16 "Leases" clarifying how to account for a sale and leaseback transaction that provides for variable payments based on the performance or use of the asset subject to the transaction.The integration will be applicable to financial statements for the period beginning January 1, 2024 and no impacts are expected on the Group's economic and financial situation. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 30 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report The Consolidated annual report of the A2A Group at December 31, 2022 includes the figures of the parent A2A S.p.A. and those of the subsidiaries over which A2A S.p.A. exercises either direct or indirect control. In addition, companies in which the parent exercises joint control with other entities (joint ventures) and those over which it has a significant influence are consolidated using the equity method. The following changes to the scope of consolidation of the A2A Group are reported: • acquisition by A2A Rinnovabili S.p.A. of 100% of Volta Green Energy S.r.l. and 60% of R2R S.r.l., companies operating in the photovoltaic and wind power sectors, resulting in the line-by-line consolidation of seven companies; • sale of the shareholding in Seasm S.r.l., previously consolidated on a line-by-line basis; • acquisition by A2A Rinnovabili S.p.A. of 100% of 4New S.r.l. and 3 New & Partners S.r.l., companies operating in the photovoltaic and wind power sectors, resulting in the line-by-line consolidation of eleven companies. A2A Rinnovabili S.p.A. also acquired, through its subsidiary 3 New & Partners S.r.l., 100% of 3 New & Partners Rinnovabili S.r.l. (a company incorporated in November 2022) resulting in the line-by-line consolidation of Daunia Calvello S.r.l. and Daunia Serracapriola S.r.l., companies that hold a portfolio of wind farms in Italy; • the acquisition and line-by-line consolidation by A2A Calore & Servizi S.r.l. of 100% of A2A Airport Energy S.p.A., a company engaged in the production and sale of electricity, heat and cooling. For further details on the activities of the Purchase Price Allocation required by IFRS 3, reference is made to the paragraph “Other information” of this report. 3.6 Scope of consolidation Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 31 Consolidation policies Subsidiaries Subsidiaries are those companies over which the parent company, A2A S.p.A., exercises control, also by virtue of shareholders' agreements, and has the power, as defined by IFRS 10, to determine financial and operating policy, either directly or indirectly, in order to obtain returns from their activities. Subsidiaries are consolidated from the date on which the Group effectively acquires control and cease to be consolidated on a line-by-line basis from the date on which control is transferred to a company outside the Group. Associates, joint ventures and joint operations Shareholdings in associates, namely those in which the A2A Group has a considerable interest and is able to exercise significant influence are accounted for using the equity method. Gains and losses attributable to the Group are recognized in the financial statements from the date on which significant influence or joint control commences. In the event that the loss attributable to the Group exceeds the carrying amount of an investment, the carrying amount is reduced to zero and any excess loss is provided for to the extent that the Group has legal or constructive obligations to make good the associate’s losses or in any case to make payments on its behalf. With the adoption of IFRS 11, the Group must now classify investments in joint arrangements as either joint ventures (if the Group has rights to the net assets of the arrangement) or joint operations (if the Group has rights to the assets, and obligations for the liabilities, relating to the arrangement). Potential voting rights If the A2A Group holds call options on shares or other equity instruments that represent capital (warrants) that are convertible into ordinary shares or similar instruments having the potential, if exercised or converted, to give the Group voting rights or reduce the voting rights of third parties (“potential voting rights”), such potential voting rights are taken into consideration when assessing whether or not the Group has the power to govern or influence another company’s financial and operating policies. Treatment of put options on the shares of subsidiaries In general, paragraph 23 of IAS 32 states that a contract that contains an obligation for an entity to purchase shares for cash or another financial asset gives rise to a financial liability for the present value of the exercise price of the option. As a result, therefore, if the Group does not have the unconditional right to avoid the delivery of cash or other financial instruments when a put option on the shares of subsidiaries is exercised, it must recognize a liability. In the absence of specific instructions in the related accounting standards, the A2A Group: (i) considers the shares involving put options to have already been purchased, including in cases in which the risks and rewards connected with ownership of the shares remain with the minority shareholders and they remain exposed to equity risk; (ii) records a corresponding entry among equity reserves for the liability resulting from the obligation and any subsequent changes that are not related to the mere unwinding of the present value of the strike price; (iii) and recognises such changes through the Income Statement. Effect on the consolidation procedures of certain agreements involving the shares or quotas of Group companies a) Earn-in on the purchase price of A2A Recycling S.r.l. (former RI.ECO-RESMAL Group) The contractual agreements governing the acquisition of A2A Recycling S.r.l. (former RI.ECO-RESMAL Group) envisage, among other things, an earn-in clause in favour of A2A Ambiente S.p.A., linked both to an eventual non-renewal of the concession of the Cernusco plant for reasons not attributable to A2A Ambiente S.p.A., and to any disbursements and expenses incurred to obtain renewal of the concession. This clause will have an eventual effect from the third year and no later than the fifth year after the closing of the transaction. In accordance with paragraphs 65B, 65C and 65D of IFRS 3, the Group considered the amount paid by way of earn-in as the investment value since said adjustments are not considered probable and reliably determined at the acquisition date. 3.7 Consolidation policies and procedures 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 32 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report b) Earn-out on the purchase of the equity investments made by A2A Rinnovabili S.p.A. With reference to the acquisitions of equity investments made by A2A Rinnovabili S.p.A. between 2017 and 2021, by contract, there are price and earn-out adjustments of non-significant amounts both in favour of the seller and in favour of the buyer upon the occurrence of certain conditions. Given the uncertainty and insignificance of the amounts, the Group has not recorded the corresponding payables. There are also contractual earn-out clauses for the acquisitions made during 2022, for which the conditions for their recognition do not currently exist and therefore the corresponding payables have not been recognized. c) Options on the shares of Suncity Group S.r.l. On April 16, 2019, the incorporation of Suncity Group S.r.l., a holding company of energy efficiency companies, was completed, with a simultaneous capital increase of 26%. The transaction was completed by the subsidiary A2A Energy Solutions S.r.l., ESCo (Energy Service Company) of the A2A Group, for a value of 1.3 million euro, entirely settled in cash at closing. The initial agreements established that, within 30 days of the deadline for approval of the financial statements at December 31, 2022, A2A Energy Solutions S.r.l. would have had the right to exercise the option to purchase the remaining 74% of the share capital of the incorporated NewCo. The right to exercise the 74% put option by Suncity Partner to A2A Energy Solutions S.r.l. under the same conditions was also provided for. These agreements in the course of 2022 were extended until the approval of the 2023 financial statements with the previous conditions remaining unchanged. Therefore, in accordance with paragraph 23 of IAS 32, the Group has recognized as a liability the present value of the estimated outlay of 4.9 million euro which it will not be able to avoid if the option is exercised. d) Options on the shares of Electrometal S.p.A. On December 20, 2019, A2A Ambiente S.p.A. acquired 90% of Electrometal S.r.l.. As a result of point 9) of the shareholding purchase agreement, a call option is provided on the part of A2A Ambiente S.p.A. and a put option on the part of GAE S.r.l. (the seller) of the remaining 10%, exercisable from January 1, 2025 until December 31, 2025. In 2020, a payment of 0.5 million euro was made as price adjustment on the net financial position. The valuation of this option is proportional to the final value of 90% of the shares of Electrometal S.r.l.. Therefore, in accordance with paragraph 23 of IAS 32, the Group has recognized as a liability the present value of the estimated outlay of 2.1 million euro which it will not be able to avoid if the option is exercised. e) F.lli Omini price adjustment On October 28, 2021, A2A Ambiente S.p.A. acquired 30% of F.lli Omini S.p.A.. The agreement was reached on the basis of 4.5 million euro plus a price adjustment linked to the value of the Net Financial Position and the Net Working Capital at the date of acquisition; paid in 2022 and equal to 0.6 million euro. There are no earn-in/out clauses on the value of the shares. f) TecnoA price adjustment On December 12, 2021, A2A Ambiente S.p.A. acquired 100% of TecnoA S.r.l.. The agreement was reached for a transaction value of 276 million euro. The price adjustment, which was defined between the parties in January 2023, did not change the countervalue of the transaction. For further information on the Purchase Price Allocation process, please refer to the "Other information" section of this disclosure. There are no earn-in/out clauses on the value of the shares. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 33 Consolidation procedures General procedure The financial statements of the subsidiaries, associates and joint ventures consolidated by the A2A Group are prepared at the end of each reporting period using the same accounting policies as the parent. Any items recognized by using different accounting standards are adjusted during the consolidation process to bring them into line with Group accounting policies. All intra-group balances and transactions, including any unrealized profits arising from transactions between Group companies, are fully eliminated. In preparing the Report the assets, liabilities, income and expenses of the companies being consolidated are included in their entirety on a line-by-line basis, with the portion of equity and net income for the period attributable to minority interests being stated separately in the balance sheet and income statement. The carrying amount of the investment in each subsidiary is eliminated against the corresponding share of its net equity, including any adjustments to fair value at the acquisition date; any differences arising are accounted for in accordance with IFRS 3. Transactions with minority interests which do not lead to the loss of control in consolidated companies are accounted for using the economic entity view approach. Adoption of international accounting standard IFRS 12 “Disclosure of Interests in Other Entities” With effect from January 1, 2014, the A2A Group has among other things adopted international accounting standard IFRS 12 “Disclosure of Interests in Other Entities”, issued by the IASB in 2011 and adopted by the European Commission on December 11, 2012. On the basis of the requirements of paragraphs 7 and following of the standard the Group discloses information below about the significant judgements and assumptions it has made in determining: i. that the parent company has control of another entity within the meaning of IFRS 10; ii. the type of joint arrangement (joint operation or joint venture) when the arrangement has been structured through a separate vehicle, in compliance with IFRS 11; iii. that the parent company has significant influence over another entity (shareholdings in associates). Shareholdings in joint ventures (IFRS 11) IFRS 11 identifies two types of arrangement, joint operations and joint ventures, on the basis of the rights and obligations of the parties, and governs the resulting accounting treatment to be adopted for the recognition of these arrangements in the financial statements. The most significant effect of the standard is the fact that a number of entities jointly controlled by A2A, which up until now have been recognized using the equity method, could fall under the definition of joint operations on the basis of the requirements of IFRS 11\. The accounting treatment for this type of joint arrangement requires the assets/liabilities and revenue/expenses connected with the arrangement to be recognized on the basis of the rights/obligations due to/assumed by A2A, regardless of the interest held. In the particular case of its shareholdings in two joint arrangements operating in the Generation and Trading Business Unit, Ergosud S.p.A. and PremiumGas S.p.A., the A2A Group considers that these fall under the category joint ventures as far as their legal form and the nature of the contractual agreements are concerned. In particular, as regards the shareholding in PremiumGas S.p.A., the Group has rights exclusively linked to the results achieved by the company. On September 26, 2018, PremiumGas S.p.A. was placed in voluntary liquidation. For the shareholding in Ergosud S.p.A., despite the existence of a tolling agreement the investee could dispatch energy autonomously, thereby ensuring business continuity also at the end of the agreement. In addition, the A2A Group does not appoint any of the company’s key management. On the basis of the above considerations, the A2A Group has accounted for the shareholdings using the equity method, continuing the treatment used in previous years. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 34 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report Latest available summarized figures for joint ventures (consolidated at equity) Key figures at December 31, 2022 millions of euro Bergamo Pulita 50% PremiumGas 50% (figures at 12 31 2021) (*) Metamer 50% (figures at 12 31 2021) (*) Ergosud 50% (figures at 12 31 2021) (*) Income statement Revenues 0.05 0.06 24.4 40.9 Gross Operating Income (0.25) 0.02 1.1 7.7 % of net revenues n.s. n.s. 4.5% 18.8% Depreciation, amortization and write-downs \- \- 0.3 10.3 Net Operating Income (0.25) 0.02 0.8 (2.6) Result of the year (0.25) 0.03 0.5 (2.5) Balance sheet Total assets 2.40 4.2 10.4 155.0 Net equity (0.17) 1.5 2.8 68.5 Net (debt) 2.13 0.7 2.3 39.7 (*) Figures of the last financial statements available. Key figures at December 31, 2021 millions of euro Bergamo Pulita 50% PremiumGas 50% Metamer 50% (figures at 12 31 2020) (*) Ergosud 50% (figures at 12 31 2020) (*) Income statement Revenues 0.04 0.06 20.0 29.5 Gross Operating Income 0.00 0.02 0.9 11.0 % of net revenues n.s. n.s. 4.4% 37.3% Depreciation, amortization and write-downs \- \- 0.3 10.4 Net Operating Income 0.00 0.02 0.6 0.6 Result of the year 0.00 0.03 0.5 (0.3) Balance sheet Total assets 2.55 4.2 8.9 154.0 Net equity 0.09 1.5 2.5 71.0 Net (debt) 1.20 0.7 (1.1) (48.6) (*) Figures of the last financial statements available. Procedure for the consolidation of assets and liabilities held for sale (IFRS 5) In the case of particularly large amounts and in connection with non-current assets and liabilities held for sale, and only in this case, in accordance with IFRS 5 the relative intra-group financial receivables and payables are eliminated in order to provide a clear presentation of the financial impact of a possible disposal. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 35 Translation of foreign currency items The consolidated financial statements of the A2A Group are presented in euro; this is also the functional currency of the economies in which the Group operates. Transactions in other currencies are initially recognized at the exchange rates at the date of the transaction. Monetary assets and liabilities denominated in foreign currency are translated into euro at the exchange rates at the balance sheet date. Non-monetary items measured at historical cost in foreign currency are translated at the exchange rates at the date of the transaction. Non-monetary items measured at fair value are translated at the exchange rates at the date when the fair value was determined. Tangible assets Assets for business use are classified as Tangible assets, while non-business assets are classified as investment property. Tangible assets are measured at cost, including any additional charges directly attributable to bringing the asset into an operating condition (e.g. transport, customs duty, installation and testing costs, notary and land registry fees and any non-deductible VAT), increased when material and where there are obligations by the present value of the estimated cost of restoring the location from an environmental point of view or dismantling the asset. Borrowing costs, where directly attributable to the purchase or construction of an asset, are capitalized as part of the cost of the asset if the type of asset so warrants. If important components of tangible assets have different useful lives, they are accounted for separately using the “component approach”, assigning to each component its own useful life for the purpose of calculating depreciation (the component approach). Land, whether occupied by residential or industrial buildings or devoid of construction, is not depreciated as it has an unlimited useful life, except for land used in production activities that is subject to deterioration over time (e.g. landfills, quarries). Ordinary maintenance costs are fully expensed to the income statement in the year they are incurred. Costs for maintenance carried out at regular intervals are attributed to the assets to which they refer and are depreciated over the specific residual possibility of use of such. Tangible assets are stated net of accumulated depreciation and any write-downs. Depreciation is charged from the year in which the individual asset enters service on a straight-line basis over the estimated useful life of the asset for the business. The estimated realizable value which is deemed to be recoverable at the end of an asset’s useful life is not depreciated. The useful life of each asset is reviewed annually and any changes, if needed, are made with a view to showing the correct value of the asset. Landfills are depreciated on the basis of the percentage filled, which is calculated as the ratio between the volume occupied at the end of the period and the total volume authorized. The main depreciation rates used are as follows: \- buildings .....................................................................................................................................................................................................0.1% \- 30.4% \- land ...............................................................................................................................................................................................................3.6% \- 10.0% \- production plants ..................................................................................................................................................................................0.1% \- 50.0% \- transport lines .........................................................................................................................................................................................2.2% \- 10.8% \- transformation stations .....................................................................................................................................................................2.5% \- 20.2% \- distribution networks ...........................................................................................................................................................................0.1% \- 50.8% \- fiber-optic networks ...............................................................................................................................................................................1.6%-20.0% \- miscellaneous equipment ................................................................................................................................................................2.5% \- 35.7% \- mobile phones .......................................................................................................................................................................................................100% \- furniture and fittings .............................................................................................................................................................................1.3% \- 35.7% \- electric and electronic office machines ...................................................................................................................................0.8% \- 33.3% \- vehicles......................................................................................................................................................................................................2.8% \- 33.0% \- e-moving ....................................................................................................................................................................................................5.3% \- 70.0% 3.8 Accounting standards and policies 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 36 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report \- capital goods of less than 516 euro ...........................................................................................................................................................................................................100% \- leasehold improvements ....................................................................................................................................................................................................................0.4% \- 100% \- leased assets .............................................................................................................................................................................................................................................1.7% \- 15.0% Tangible assets are subjected to impairment testing if there is any indication that an asset may be impaired in accordance with the paragraph below “Impairment of assets”; write-downs may be reversed in subsequent periods if the reasons for which they were recognized no longer apply. When an asset is disposed of or if future economic benefits are no longer expected from using an asset, it is removed from the balance sheet and any gain or loss (being the difference between the disposal proceeds and the carrying amount) is recognized in the income statement in the year of the derecognition. Leasing Assets for rights of use are recognized on the start date of the lease, i.e. the date on which the underlying asset is available for use. Rights to use assets are measured at cost, net of accumulated depreciation and impairment losses, and adjusted for any restatement of lease liabilities. The cost of assets for rights of use includes the amount of lease liabilities recognized and lease payments made on or before the commencement of the lease. Assets for right of use are depreciated on a straight-line basis from the effective date to the end of the useful life of the asset consisting of the right of use or at the end of the lease term, whichever is earlier. If the lease transfers ownership of the underlying asset to the lessee at the end of the term of the contract or if the cost of the asset consisting of the right of use reflects the fact that the lessee will exercise the purchase option, the asset consisting of the right of use is depreciated from the effective date until the end of the useful life of the underlying asset. Lease liabilities are recognized at the present value of lease payments not yet paid at the reporting date. Lease payments also include the exercise price of a purchase option if it is reasonably certain that the option will be exercised. Intangible assets Intangible assets are identifiable non-monetary assets without physical substance which are controlled by the enterprise and able to produce future economic benefits, and include goodwill when acquired for consideration. The fact of being identifiable distinguishes an intangible asset that has been acquired from goodwill; this requirement is normally met when: (i) the intangible asset is attributable to a legal or contractual right, or (ii) the asset is separable, in other words it can be sold, transferred, rented or exchanged individually or as an integral part of other assets. Control by the enterprise consists of the right to enjoy the future economic benefits flowing from the asset and to restrict the access of others to those benefits. Intangible assets are stated at purchase or production cost, including ancillary charges, determined in the same way as for tangible assets. Intangible fixed assets produced internally are not capitalized but recognized in the income statement in the year in which the costs are incurred. Intangible assets with a definite useful life are reported in the financial statements net of the related accumulated amortization and impairments in the same way as for tangible assets. Changes in the expected useful life or in the ways in which the future economic benefits of an intangible asset are achieved by the Company are accounted for by suitably adjusting the period or method of amortization, treating them as changes in accounting estimates. The amortization of intangible fixed assets with a definite useful life is charged to income statement in the cost category that reflects the function of the intangible asset concerned. Intangible assets are subjected to impairment testing if there are specific indications that they may be impaired, in accordance with the paragraph below “Impairment of assets”; impairment losses may be reversed in subsequent periods if the reasons for which they were recognized no longer apply. Intangible assets with an indefinite useful life and those that are not yet available for use are subjected to impairment testing on an annual basis, whether or not there are any specific indications that they may be impaired, in accordance with the paragraph below “Impairment of assets”. Impairment losses recognized for goodwill are not reversed. Gains or losses on the disposal of an intangible asset are calculated as the difference between the disposal proceeds and the carrying amount of the asset and recognized in the Income Statement at the time of the disposal. The following amortization rates are applied to intangible assets with a definite useful life: \- industrial patents and intellectual property rights ...........................................................................................................................................................2.0% \- 100.0% \- concessions. licenses. trademarks and similar rights........................................................................................................................................................0.1% \- 50.0% \- other intangible assets .....................................................................................................................................................................................................................2.1% \- 100.0% Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 37 Service concession arrangements IFRIC 12 states that, based on the characteristics of the concession arrangement, the infrastructures used in the provision of public services under concession are to be recognized as intangible assets if the operator has the right to receive a payment from the customer for the service provided, and/or as a financial asset if the operator has the right to receive payment from the public sector entity. Impairment/Reversal of tangible and intangible fixed assets Tangible and intangible assets are subjected to impairment testing if there is any specific indication that there may be an impairment loss. Goodwill, other intangible assets with an indefinite useful life and assets not available for use are tested for impairment at least annually or more frequently if there is any specific indication that they may be impaired. Impairment testing consists of comparing the carrying amount of an asset with its recoverable amount. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. To determine an asset’s value in use, the entity calculates the present value of the estimated future cash flows on the basis of business plans prepared by management, before tax, applying a pre-tax discount rate which reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset is lower than its carrying amount, a loss is recognized in the Income Statement. If a loss recognized for an asset other than goodwill no longer exists or is reduced, the carrying amount of the asset or cash-generating unit is increased to the new estimate of recoverable value, which may not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset. Reversals of impairment losses are immediately recognized in the income statement. When the recoverable amount of the individual asset cannot be estimated, it is based on the cash generating unit (CGU) or group of CGUs that the asset belongs to and/or to which it may be reasonably allocated. CGUs are identified on the basis of the company’s organizational and business structure as homogeneous aggregations that generate independent cash inflows deriving from the continuous use of the assets allocated to them. Environmental certificates: emission quotas and White Certificates Different accounting policies are applied to quotas or certificates held for own use in the “Industrial Portfolio” and those held for trading purposes in the “Trading Portfolio”. Surplus quotas or certificates held for own use in the “Industrial Portfolio” which are in excess of the Group's requirements in relation to the obligations accruing at year end are recognized as other intangible assets at the actual cost incurred. Quotas or certificates assigned free of charge are recognized at a zero carrying amount. Given that they are assets for instant use, they are not amortized but subjected to impairment testing. The recoverable amount is the higher of value in use and market value. If, on the other hand, there is a deficit because the requirement exceeds the quotas or certificates in portfolio at the balance sheet date, a provision is recognized for the amount needed to meet the residual obligation, estimated on the basis of any purchase contracts, spot or forward, already signed at the balance sheet date; otherwise on the basis of market prices. Quotas or certificates held for trading in the “Trading Portfolio” are recognized in inventories and measured at the lower of purchase cost and estimated realizable value based on market trends. Quotas or certificates assigned free of charge are recognized at a zero carrying amount. Market value is established on the basis of any sales contracts, spot or forward, already signed at the balance sheet date; otherwise on the basis of market prices. Shareholdings in subsidiaries, associates and joint ventures Subsidiaries are companies in which the parent company “is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee”, as defined by IFRS 10\. Control is generally assumed to exist when a company holds either directly or indirectly more than half of the exercisable voting rights at an ordinary shareholders' meeting, also considering potential voting rights, meaning voting rights deriving from convertible financial instruments. Subsidiaries are consolidated on a line-by-line basis. Associates are companies in which the parent has a significant influence over strategic decisions, despite not having control, also considering potential voting rights, meaning voting rights deriving from convertible financial instruments; significant influence is assumed to exist when A2A S.p.A. holds, either directly or indirectly, more than 20% of voting rights exercisable at an ordinary shareholders' meeting. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 38 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report A joint venture is a contractual agreement whereby two or more parties undertake an income generating activity subject to joint control. Shareholdings in associates and joint ventures are accounted for in the consolidated financial statements using the equity method. Long term construction contracts in progress Construction contracts with durations exceeding one year in progress are valued in accordance with IFRS 15\. In particular, over-the-time revenues are recognized if it can be demonstrated that: a) the customer simultaneously receives and consumes the benefits of the contract in force at the same time as the service is provided b) the service provided improves. Construction contracts currently in progress are measured on the basis of the contractual fees that have accrued with reasonable certainty on the basis of the stage of completion, using the “cost to cost” method, so as to allocate the revenues and net result of the contract to the individual periods to which they belong in proportion to the progress being made on the project. Any difference, positive or negative, between the value of the contracts and advances received is recognized as an asset or a liability respectively. In addition to the contractual fees, contract revenues include variants, price revisions and incentive awards to the extent that it is probable that they represent actual revenues that can be reliably determined. Ascertained losses are recognized independently of the stage of completion of contracts. Inventories Inventories of materials and fuel are measured at the lower of weighted average cost and market value at the balance sheet date. Weighted average cost is determined for the period of reference for each inventory code. Weighted average cost includes any additional costs (such as sea freight, customers charges, insurance and lay or demurrage days in the purchase of fuel). Inventories are constantly monitored and, where necessary, obsolete stocks are written down with a charge to the Income Statement. Gas inventories held for trading purposes, stored in separate facilities with respect to gas used for industrial purposes, are measured at fair value at the reporting date as required by IAS 2 par. 3 letter b. Financial instruments They include shareholdings (excluding shareholdings in subsidiaries, joint ventures and associates) held for trading (so-called trading shareholdings) or available for sale, non-current receivables and loans and other non-current financial assets, trade and other receivables deriving from company operations and other current financial assets such as cash and cash equivalents. The latter consist of bank and postal deposits, readily negotiable securities used as temporary investments of surplus cash and financial receivables due within three months. Financial instruments also include financial payables (bank loans and bonds), trade payables, other payables and other financial liabilities and derivatives. Financial assets and liabilities are recognized at the time that the contractual rights and obligations forming part of the instrument arise. Financial assets and liabilities are accounted for in accordance with IFRS 9 “Financial Instruments”. Financial assets Initial recognition Financial assets are classified into two categories alone \- “at fair value” or “at amortized cost”. Classification within the two categories is carried out on the basis of an entity’s business model and the contractual cash flow characteristics of the financial asset. A financial asset is measured at amortized cost if both of the following requirements are met: the objective of the entity’s business model is to hold assets to collect contractual cash flows (and therefore in substance not to earn trading profits) and the characteristics of the cash flows of the asset are solely payments of principal and interest. A financial asset is measured at fair value if it is not measured at amortized cost. All equity instruments both listed and unlisted – must be measured at fair value. An entity has the option of presenting changes in the fair value of equity instruments that are not held for trading in equity; that option is not permitted for equity instruments that are held for trading. This designation is permitted on initial recognition, may be adopted for each individual instrument and is irrevocable. If an election is made for this option, changes in the fair value of these instruments may never be reclassified from equity to the income statement. Dividends on the other hand continue to be recognized in the income statement. In addition, the method of expected credit losses is modified, moving to an impairment model that leads to the early recognition of forward-looking losses. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 39 Subsequent valuation Measurement subsequent to initial recognition depends on which of the following categories the financial instrument falls into: • Financial assets at amortized cost (debt instruments); • Financial assets at fair value in the Income Statement with reclassification of cumulative gains and losses (debt instruments); • Financial assets at fair value in the Income Statement without reversal of cumulative gains and losses at the time of derecognition (equity instruments); • Financial assets at fair value in the Income Statement. Financial assets at amortized cost These are valued using the effective interest method and are subject to impairment. Gains and losses are recognized in the income statement when the asset is derecognized, modified or revalued. Investments in equity instruments On initial recognition, the Group may irrevocably choose to classify its equity investments as equity instruments recognized at fair value through profit and loss when they meet the definition of equity instruments pursuant to IAS 32 "Financial instruments: Presentation" and are not held for trading. The classification is determined for each individual instrument. Gains and losses on these financial assets are never reclassified to the income statement. Dividends are recognized as other income in the income statement when the right to payment has been approved, except when the Group benefits from such income as a recovery of part of the cost of the financial asset, in which case such profits are recognized in OCI. Equity instruments recognized at fair value through OCI are not subject to impairment testing. Financial assets measured at fair value through the Income statement This category includes assets held for trading, assets designated at the time of initial recognition as financial assets at fair value with changes recognized in the Income Statement, or financial assets that must be measured at fair value. Assets held for trading are all those assets acquired for sale or repurchase in the short term. Derivatives, including those separated, are classified as financial instruments held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that are not represented solely by principal and interest payments are classified and measured at fair value in the Income Statement, regardless of the business model. Notwithstanding the criteria for debt instruments to be classified at amortized cost or at fair value through OCI, as described above, debt instruments may be recognized at fair value in the Income Statement upon initial recognition if this results in the elimination or significant reduction of an accounting mismatch. Financial instruments at fair value with changes recognized in the Income Statement are recognized in the statement of financial position at fair value and net changes in fair value are recognized in profit/(loss) for the year. This category includes derivative instruments and listed equity investments that the Group has not irrevocably chosen to classify at fair value through OCI. Dividends on listed equity investments are also recognized as other income in the statement of profit/(loss) for the year when the right to payment is established. The embedded derivative contained in a non-derivative hybrid contract, in a financial liability or in a principal non-financial contract, is separated from the principal contract and accounted for as a separate derivative, if: its economic characteristics and the risks associated with it are not closely correlated with those of the principal contract; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the hybrid contract is not measured at fair value in the Income Statement. Embedded derivatives are measured at fair value, with changes in fair value recognized in the Income Statement. A restatement occurs only when there is a change in the terms of the contract that significantly changes the cash flows otherwise expected or a reclassification of a financial asset to a category other than fair value in the Income Statement. An embedded derivative included in a hybrid contract that contains a financial asset is not separated from the host contract. The financial asset together with the embedded derivative is classified entirely as a financial asset at fair value in the Income Statement. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 40 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report Derecognition A financial asset is derecognized when: • the rights to receive cash flows from the asset no longer apply; • the company has transferred to a third party the right to receive cash flows from the asset or has assumed a contractual obligation to transfer them. In substance, the transfer is completed when: the company has transferred all the risks and rewards of ownership of the asset or has transferred control of the asset while maintaining the related risks and rewards. In cases where the company has transferred the rights to receive cash flows from an asset or signed an agreement under which it retains the contractual rights to receive the cash flows from the financial asset but assumes a contractual obligation to pay the cash flows to one or more beneficiaries (pass-through), it assesses whether and to what extent it has retained the risks and rewards of ownership. In the cases in which it has neither transferred nor retained substantially all of the risks and rewards or has not lost control of the asset, it continues to be recognized in the financial statements of the Group to the extent of its continuing involvement in the asset. In this case, the Group also recognizes an associated liability. The transferred asset and the associated liability are valued to reflect the rights and obligations that remain with the Group. When the entity's continuing involvement is a guarantee of the transferred asset, involvement is measured on the basis of the lower of the amount of the asset and the maximum amount of consideration received that the entity might have to repay. Financial liabilities Financial liabilities are classified, at the time of initial recognition, at fair value in the Income Statement, as mortgages and loans or as derivatives designated as hedges. Directly attributable transaction costs are added to the valuation. The Group's financial liabilities include trade payables and other payables, mortgages and loans, including current account overdrafts and derivative financial instruments. The subsequent evaluation depends on the classification of the main instrument: • financial liabilities at fair value in the Income Statement, typically of a trading nature (settlement and transfer in the short term). This category includes financial derivatives held for trading (speculative); • loans and receivables: valued at amortized cost using the effective interest method. Gains and losses are recognized in the Income Statement when the liability is settled, as well as through amortization. A financial liability is derecognized when the obligation underlying the liability is settled or cancelled. Derivative financial instruments and hedge accounting These are initially recognized at fair value on the date the contract is signed and the subsequent measurement is also at fair value. To classify a derivative as a hedge, the company formally designates and documents the hedging relationship, its risk management objectives and the strategy pursued. From January 1, 2018, the following must be identified: a) the hedging instrument b) the nature of the risk being hedged c) the way in which the company will assess the effectiveness of the hedge. The hedging relationship is effective if: • there is an economic relationship between the hedged item and the hedging instrument; • the effect of the credit risk does not prevail over the changes in value resulting from the aforementioned economic relationship; • the hedging ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges and the quantity of the hedging instrument that the Group actually uses to hedge this quantity of hedged item. Transactions that meet the above criteria are accounted for as follows: Fair value hedging If a derivative financial instrument is designated as a hedge against exposure to changes in the fair value of an asset or liability attributable to a specific risk, the gain or loss resulting from subsequent changes in fair value of the hedging instrument is recognized in the Income Statement. The profit or loss deriving from the adjustment to fair value of the item hedged, for the part attributable to the hedged risk, changes the book value of this item and is recognized in the Income Statement. Cash flow hedge \- If a derivative financial instrument is designated to hedge the exposure to the variability of the cash flows of an asset or a liability recognized in the Financial Statements or of a highly probable transaction, the effective portion of the resulting profits or losses deriving from the fair value adjustment of the derivative instrument is recognized in a specific equity reserve. The cumulative profit or loss is reversed from the equity reserve and recorded in the Income Statement in the same years in which the effects of the hedged transaction are recognized Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 41 in the Income Statement. The gain or loss associated with that part of the ineffective hedge is recognised in the Income Statement immediately. If the hedged transaction is no longer considered probable, the unrealized gains or losses recognized in the equity reserve are immediately recognized in the Income Statement. Cash flow hedges The portion of gain or loss on the hedged instrument relating to the effective portion of the hedge is recognized in other comprehensive income in the cash flow hedge reserve, while the ineffective portion is recognized directly in the Income Statement. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging instrument and the cumulative change in the fair value of the hedged item. Amounts accumulated under other components of the comprehensive income statement are recorded, depending on the nature of the underlying hedged transaction. If the hedged transaction subsequently results in the recognition of a non-financial component, the accumulated amount in equity is removed from the separate component of equity and included in the cost or other carrying amount of the asset or liability hedged. This is not considered a reclassification of the items recognized in OCI for the period. This also applies in the case of a hedged forecast transaction of a non-financial asset or a non-financial liability that subsequently becomes an irrevocable commitment to which fair value hedge accounting is applied. For any other cash flow hedge, the amount accumulated in OCI is reclassified in the Income Statement as a reclassification adjustment in the same period or periods during which the hedged cash flows impact profit or loss. If the cash flow hedge accounting is discontinued, the accumulated amount in OCI must remain so if the hedged future cash flows are expected to occur. Otherwise, the amount shall be immediately reclassified to profit or loss for the period as a reclassification adjustment. After suspension, once the hedged cash flow occurs, any accumulated amount remaining in OCI must be accounted for depending on the nature of the underlying transaction as described above. Non-current assets held for sale, disposal groups and discontinued operations – IFRS 5 Non-current assets held for sale, disposal groups and discontinued operations whose carrying amount will be recovered principally through sale rather than continuous use are measured at the lower of their carrying amount and fair value less costs to sell. A disposal group is a group of assets to be disposed of together as a group in a single transaction together with the liabilities directly associated with those assets that will be transferred in that transaction. Discontinued operations on the other hand consist of a significant component of the Group such as a separate major line of business or a geographical area of operations or a subsidiary acquired exclusively with a view to resale. In accordance with IFRSs, the figures for non-current assets held for sale, disposal groups and discontinued operations are shown on two specific lines in the balance sheet: non-current assets held for sale and liabilities directly associated with non-current assets held for sale. Non-current assets held for sale are not depreciated or amortized and are measured at the lower of carrying amount and fair value less costs to sell; any difference between carrying amount and fair value less costs to sell is recognized in the income statement as a write-down.The net economic results arising from discontinued operations, and only discontinued operations, pending the disposal process, any gains or losses on disposal and the corresponding comparative figures for the previous year or period are recognized in a specific line of the Income Statement: “Net result from discontinued operations”. On the other hand any gains or losses recognized as the result of measuring non-current assets (or disposal groups), classified as held for sale within the meaning of IFRS 5, at fair value less costs to sell are presented in a specific line item of the income statement “Result from non-recurring transactions”, as discussed further in the previous section “Format of financial statements”. Employee benefits The employees’ leaving entitlement (TFR) and pension provisions are determined using actuarial methods; the rights accrued by employees during the year are recognized in the Income Statement as “labour costs”, whereas the figurative financial cost that the company would have to bear if it were to ask the market for a loan of the same amount as the TFR is recognized as part of the “financial balance”. Actuarial gains and losses arising from changes in actuarial assumptions are recognized in income statement taking into account the residual average working life of the employees. Following the introduction of Finance Law no. 296 of December 27, 2006, only the portion of accrued employees’ leaving entitlement that remained in the company has been measured in accordance with IAS 19, as amounts are now paid over to a separate entity as they accrue (either to a supplementary pension scheme or to funds held by INPS). As a result of these payments the company no longer has any obligations in connection with the services employees may render in the future. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 42 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report Guaranteed employee benefits paid on or after the termination of employment through defined benefit plans (energy discount, health care or other benefits) or long-term benefits (loyalty bonuses) are recognized in the period when the right vests. The liability for defined benefit plans, net of any plan assets, is determined by independent actuaries on the basis of actuarial assumptions and recognized on an accrual basis in line with the work performed to obtain the benefits. Gains and losses arising from actuarial calculations are recognized in a specific equity reserve. Reverse factoring The Group entered into factoring agreements, typically in the technical form of reverse factoring. On the basis of the contractual structures in place, the supplier has the possibility to sell at its discretion, the receivables from the company to a lending institution. In some cases, the payment terms indicated in the invoice are the subject of further deferments agreed between the supplier and the Group; these deferments can be both burdensome and not burdensome. In the event of extensions, a quantitative analysis is carried out to verify whether or not the contractual terms have been amended. In this context, the relations, for which the primary obligation is maintained with the supplier and the possible deferment, if granted, does not involve a substantial change in payment terms, retain their nature and are therefore classified as trading liabilities. Provisions for risks, charges and liabilities for landfills Provisions for risks and charges regard costs of a determinate nature and of certain or probable existence which at year-end are uncertain in terms of timing or amount. Provisions are recognized when there is a legal or constructive present obligation arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits, and it is possible to make a reasonable estimate of the obligation. Provisions are recognized at the best estimate of the amount that the company would have to pay to settle the liability or to transfer it to third parties at the balance sheet date. If the effect of discounting is significant, provisions are calculated by discounting expected future cash flows at a pre-tax discount rate that reflects the current market assessment of the time value of money. If discounting is used the increase in the provision due to the passage of time is recognized as financial expense. If the liability relates to tangible assets (such as the dismantling and reclamation of industrial sites), the initial provision is recognized as a counter-entry to the assets to which it refers; expense is then charged to income statement as the asset in question is depreciated. Treasury shares Treasury shares are accounted for as a deduction from equity. In particular, treasury shares are recognized as a negative equity reserve. Grants Grants, both from public entities and from third party private entities, are measured at fair value when there is the reasonable certainty that they will be received and that the Group will be able to comply with the terms and conditions for obtaining them. Grants received to provide support for the cost of specific assets are recognized as a direct deduction from the assets concerned and credited to the income statement over the life of the depreciable asset to which they refer. Revenue grants (given to provide the company with immediate financial support or as compensation for expenses or losses incurred in a previous accounting period) are recognized in their entirety in the income statement as soon as the conditions for recognizing the grants are met. Revenues and costs The recognition of revenues is based on the following five steps: (i) identification of the contract with the customer; (ii) identification of the performance obligations, represented by the contractual promises to transfer goods and/or services to a customer; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations identified on the basis of the stand-alone sale price of each good or service; (v) recognition of the revenue when the relative performance obligation is satisfied, i.e. when the promised good or service is transferred to the customer; the transfer is considered completed when the customer obtains control of the good or service, which can occur continuously over time diluted and extended or at a point in time. Depending on the type of transaction, revenues are recognized on the basis of the following specific criteria: • revenues for the sale and transport of electricity and gas are recognized at the time that the energy is supplied or the service rendered, even if invoicing has not yet taken place, and are determined by adding estimates of consumption to amounts resulting from pre- established meter-reading schedules. Where applicable, these revenues are based on the tariffs and related tariff restrictions in force during the year prescribed by the law and the Italian Regulation Authority for Energy Networks and Environment and similar foreign bodies; • connection contributions paid by users, if not for costs incurred to extend the network, are recognized in the income statement on collection and presented as “revenues from services”; • the revenues billed to users for an extension of the gas network are accounted for as a reduction in the carrying amount of tangible assets and are recognized in the income statement as a reduction in the depreciation charged over the useful life of the cost capitalized to extend the network; Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 43 • the revenues and costs involved in withdrawing quantities that are higher or lower than the Group’s share are measured at the prices envisaged in the related purchase or sale contract; • revenues from the provision of services are recognized according to the stage of completion based on the same criteria as for contract work in progress. If it is impossible to calculate revenues on a reliable basis they are recognized up to the amount of the costs incurred providing they are expected to be recovered; • revenues from the sale of certificates are recognized at the time of sale. Revenues are stated net of returns, discounts, allowances and rebates, as well as directly related taxes. Expenses relate to goods or services sold or consumed during the year or as a result of systematic allocation; if no future use is envisaged they are recognized directly in the income statement. Result from non-recurring transactions The item "Result from non-recurring transactions" is intended to include the results from the sale of investments in subsidiaries and associates and other non-operating expenses/income. Financial income and expenses Financial income is recognized when interest income arises using the effective interest method, i.e. at the rate that exactly discounts expected future cash flows over the expected life of the financial instrument. Financial expense is recognized in the Income Statement on an accrual basis on the basis of the effective interest. Dividends Dividend income is recognized when it is established that the shareholders have a right to receive payment, and is recognized as financial income in the Income Statement. Income taxes Current taxes Current income taxes are based on an estimate of taxable income in compliance with tax regulations in force or substantially approved at the balance sheet date, bearing in mind any exemptions or tax credits due. Account is also taken of the fact that the Group now files for tax on a consolidated basis. Deferred tax assets and liabilities Deferred tax assets and liabilities are calculated on the temporary differences between the carrying amount of assets and liabilities in the balance sheet and their tax bases, with the exception of goodwill which is not deductible for tax purposes and any differences resulting from investments in subsidiaries which are not expected to reverse in the foreseeable future. The tax rates used are those expected to apply to the period when the temporary differences reverse. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the tax benefit will be realized. The measurement of deferred tax assets takes account of the period for which business plans are available. When transactions are recognized directly in equity, any related current or deferred tax effects are also recognized directly in equity. Deferred taxes on the undistributed profits of Group companies are only provided for if there is the real intention to distribute such profits and, in any case, if the taxation is not offset as the result of filing a Group tax return. Deferred tax assets and liabilities are classified as non-current assets and liabilities. Taxes are only offset when they are levied by the same tax authority, when there is the legal right of set-off and when settlement of the net balance is expected. Use of estimates Preparing the financial statements and notes requires the use of estimates and assumptions in determining certain assets and liabilities and measuring contingent assets and liabilities. The actual results after the event could differ from such estimates. Estimates have been used in assessing the recoverability of assets, to determine certain sales revenues, in provisions for risks and charges, in provisions for receivables and other write-downs, amortization and depreciation, the valuation of derivatives, employee benefits and taxes. The underlying estimates and assumptions are regularly reviewed and the effect of any change is immediately recognized in the income statement. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 44 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report The following are the key assumptions made by management as part of the process of making these accounting estimates. The inherently critical element of such estimates comes from using assumptions or professional opinions on matters that are by their very nature uncertain. Changes in the conditions underlying the assumptions and opinions used could have a material impact on subsequent results. Impairment Test The carrying amount of non-current assets (including goodwill and other intangible assets) and of assets held for sale is reviewed periodically and whenever circumstances or events require a more frequent assessment. If it is considered that the book value of a group of fixed assets has had an impairment loss, it is subject to the application of professional judgement by management and is based on assumptions that include: the identification of the Cash Generating Units, the estimate of the future operating cash flows associated with these CGUs during the reference period of the 2021-2030 business plan updated and approved on 22 November 2022, the estimate of the cash flows subsequent to this time horizon, the cash flow deriving from the disposal at the end of useful life of the assets, discount rates used ("Wacc"). These assumptions are complex due to their nature and imply recourse to the opinion of the directors, who are also sensitive to future trends in energy markets, macroeconomic scenarios, and the resolutions of ARERA. For the purpose of preparing the impairment test, the company avails itself of the support of an independent expert, external to the A2A Group. In the hypothesis in which the recoverable value is lower than the carrying amount, the latter is written down to the extent applicable. Management is of the opinion that the estimates of such recoverable amounts are reasonable, albeit subject to changes in the factors underlying the estimates on which these recoverable amounts have been calculated could produce different measurements. For further details on the way in which impairment testing was carried out and the results of such testing, reference is made to the specific paragraph. Revenue recognition Revenues from sales include the estimate of accrued revenues related to gas and electricity consumed by customers and not yet subject to periodic reading at December 31, 2022 and the estimate of revenues accrued for gas and electricity consumed by customers and not yet billed at December 31, 2021, in addition to the revenues already billed to customers based on the periodic consumption readings made during the year. The processes and methods for evaluating and determining these estimates are based on sometimes complex assumptions that by their nature imply recourse to the opinion of the directors, in particular with regard to recognition of accrued revenues, as the methods used by the A2A Group to estimate the quantities of consumption between the date of the last reading and December 31, and therefore to value the revenues accrued during the year, are based on assumptions and complex calculation algorithms that concern various information systems. Furthermore, the estimate of consumption not subject to periodic reading is made by taking as reference the historical profile of each user, adjusted on the basis of climatic correction factors provided by the Regulatory Authority for Energy, Networks and the Environment (also "ARERA"), to incorporate other variables that can have an impact on consumption. Provisions for risks and charges In certain circumstances it is not easy to identify whether a legal or constructive present obligation exists. The directors assess these situations case by case, together with an estimate of the economic resources required to settle the obligation. Estimating such provisions is the result of a complex process that involves subjective judgements on the part of company management. When the directors are of the opinion that it is only possible that a liability could arise, the risks are disclosed in the section on commitments and contingent liabilities without making any provision. Liabilities for landfills The liabilities for landfills provision represents the amount set aside to meet the costs which will be incurred for the management of the period of closure and post-closure of landfills currently in use. The future outlays, calculated for each landfill by a specific appraisal updated annually, were discounted in accordance with the provisions of IAS 37\. Bad debts provision The entry into force of IFRS 9 on January 1, 2018 has led to a change in the recognition of credit losses for the Group. The approach adopted is a forward-looking one, focusing on the probability of future losses on receivables, even in the absence of events that would suggest the need to write-down a credit position (Expected Losses). Although the provision is considered adequate, the use of different assumptions or changes in prevailing economic conditions, even more so in this period of recession, could give rise to adjustments to the bad debts provision. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 45 Amortization Depreciation and amortization charges are a significant cost for the company. Non-current assets are depreciated or amortized on a straight-line basis over the useful lives of the assets. The useful lives of the company's non-current assets are established by the directors, with the assistance of expert appraisers, when they are purchased. The company periodically reviews technological and sector changes, dismantling/closure charges and the recovery amount of assets to update their residual useful lives. This periodic update could lead to a change in the period of depreciation or amortization and hence also in the depreciation or amortization charge in future years. Measurement of derivative instruments The derivatives used are measured at fair value based on the forward market curve at the balance sheet date, if the underlying of the derivative is traded on markets that provide official, liquid forward prices. If the market does not provide forward prices, forecast price curves are used based on simulation models developed by Group companies internally. However, the actual results of derivatives could differ from the measurements made. The serious turbulence on markets for the energy commodities traded by the company, as well the fluctuations in exchange and interest rates, could lead to greater volatility in cash flows and in expected results. Employee benefits The calculations of expenses and the related liabilities, estimated by independent experts, are based on actuarial assumptions. The full effects of any changes in these actuarial assumptions are recognized in a specific equity reserve. Business combinations Accounting for business combinations entails allocating the difference between purchase cost and net carrying amount to the assets and liabilities of the acquired business. For the majority of assets and liabilities this difference is allocated by recognizing the assets and liabilities at fair value. If positive, the unallocated portion is recognized as goodwill. If negative, it is recognized in the income statement. A2A S.p.A. bases its allocations on available information and, for the more significant business combinations, on external appraisals. Current taxes and future recovery of deferred tax assets The uncertainties that exist regarding the way of applying certain tax regulations have led the company to taking an interpretative stance when providing for current taxes in the financial statements; such interpretations could be overturned by official clarifications on the part of the tax authorities. Deferred tax assets are accounted for on the basis of the taxable profit expected to be available in future years. Assessing the expected taxable profit for the purpose of accounting for deferred taxation depends on factors that can vary over time, and may lead to significant effects on the measurement of deferred tax assets. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 47 3.9 Business Units The A2A Group operates in the production, sale and distribution of gas and electricity, district heating, environmental services and the integrated water cycle. These sectors are in turn attributable to the “Business Units” specified in the following scheme identified following the reorganization made by management: Generation and Trading • Thermoelectric, hydroelectric and other renewable plants • Energy Management Market • Sale of Electricity and Gas • Energy efficiency • Electric mobility Waste • Waste collection and street sweeping • Treatment • Disposal and energy recovery Smart Infrastructures • Electricity networks • Gas networks • Integrated water cycle • District Heating services • Heat management services • Development and management of technological infrastructures for integrated digital services • Public lighting Corporate • Corporate services This breakdown into Business Units reflects the organization of financial reports regularly analyzed by management and the Board of Directors in order to manage and plan the Group’s business. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 48 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report 3.10 Results sector by sector millions of euro Generation and Trading Market Waste Smart Infrastructures Corporate Eliminations Income statement 01 01 2022 12 31 2022 01 01 2021 12 31 2021 01 01 2022 12 31 2022 01 01 2021 12 31 2021 01 01 2022 12 31 2022 01 01 2021 12 31 2021 01 01 2022 12 31 2022 01 01 2021 12 31 2021 01 01 2022 12 31 2022 01 01 2021 12 31 2021 01 01 2022 12 31 2022 01 01 2021 12 31 2021 01 01 2022 12 31 2022 01 01 2021 12 31 2021 Revenues 19,605 8,095 8,798 3,885 1,422 1,260 1,539 1,280 320 301 (8,518) (3,272) 23,166 11,549 \- of which inter-sector 7,144 2,263 358 152 348 229 374 367 294 261 (8,518) (3,272) Operating expenses (18,960) (7,642) (8,615) (3,618) (710) (582) (908) (637) (221) (193) 8,518 3,272 (20,896) (9,400) \- of which inter-sector (558) (332) (7,320) (2,559) (113) (97) (473) (251) (54) (33) 8,518 3,272 Labour costs (91) (85) (58) (53) (353) (337) (112) (105) (151) (141) (765) (721) Gross operating income \- EBITDA 554 368 125 214 359 341 519 538 (52) (33) 1,505 1,428 % of Revenues 2.8% 4.5% 1.4% 5.5% 25.2% 27.1% 33.7% 42.0% (16.3%) (11.0%) 6.5% 12.4% Depreciation of tangible assets and amortization of intangible assets (206) (190) (53) (41) (149) (131) (260) (256) (56) (48) (724) (666) Net write-downs of fixed assets (1) - - - - (1) (1) (11) - (1) (2) (13) Provisions for risks (30) (17) 1 (3) 32 (28) (3) (5) (2) (3) (2) (56) Provisions for credit risks - (1) (88) (32) 1 1 (2) (2) (1) 1 (90) (33) Net operating income \- EBIT 317 160 (15) 138 243 182 253 264 (111) (84) 687 660 % of Revenues 1.6% 2.0% (0.2%) 3.6% 17.1% 14.4% 16.4% 20.6% (34.7%) (27.9%) 3.0% 5.7% Result from non-recurring transactions 157 - Financial balance (88) (70) Result before taxes 756 590 Income taxes (344) (36) Result after taxes from operating activities 412 554 Net result from discontinued operations 36 (4) Minorities (47) (46) Group result of the year 401 504 Gross capex (1) 272 144 71 73 264 273 560 516 73 77 - (9) 1,240 1,074 (1) See the items “Capex” in the schedules on tangible and intangible assets presented in Notes 1 and 2 to the balance sheet. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 49 millions of euro Generation and Trading Market Waste Smart Infrastructures Corporate Eliminations Income statement 01 01 2022 12 31 2022 01 01 2021 12 31 2021 01 01 2022 12 31 2022 01 01 2021 12 31 2021 01 01 2022 12 31 2022 01 01 2021 12 31 2021 01 01 2022 12 31 2022 01 01 2021 12 31 2021 01 01 2022 12 31 2022 01 01 2021 12 31 2021 01 01 2022 12 31 2022 01 01 2021 12 31 2021 01 01 2022 12 31 2022 01 01 2021 12 31 2021 Revenues 19,605 8,095 8,798 3,885 1,422 1,260 1,539 1,280 320 301 (8,518) (3,272) 23,166 11,549 \- of which inter-sector 7,144 2,263 358 152 348 229 374 367 294 261 (8,518) (3,272) Operating expenses (18,960) (7,642) (8,615) (3,618) (710) (582) (908) (637) (221) (193) 8,518 3,272 (20,896) (9,400) \- of which inter-sector (558) (332) (7,320) (2,559) (113) (97) (473) (251) (54) (33) 8,518 3,272 Labour costs (91) (85) (58) (53) (353) (337) (112) (105) (151) (141) (765) (721) Gross operating income \- EBITDA 554 368 125 214 359 341 519 538 (52) (33) 1,505 1,428 % of Revenues 2.8% 4.5% 1.4% 5.5% 25.2% 27.1% 33.7% 42.0% (16.3%) (11.0%) 6.5% 12.4% Depreciation of tangible assets and amortization of intangible assets (206) (190) (53) (41) (149) (131) (260) (256) (56) (48) (724) (666) Net write-downs of fixed assets (1) - - - - (1) (1) (11) - (1) (2) (13) Provisions for risks (30) (17) 1 (3) 32 (28) (3) (5) (2) (3) (2) (56) Provisions for credit risks - (1) (88) (32) 1 1 (2) (2) (1) 1 (90) (33) Net operating income \- EBIT 317 160 (15) 138 243 182 253 264 (111) (84) 687 660 % of Revenues 1.6% 2.0% (0.2%) 3.6% 17.1% 14.4% 16.4% 20.6% (34.7%) (27.9%) 3.0% 5.7% Result from non-recurring transactions 157 - Financial balance (88) (70) Result before taxes 756 590 Income taxes (344) (36) Result after taxes from operating activities 412 554 Net result from discontinued operations 36 (4) Minorities (47) (46) Group result of the year 401 504 Gross capex (1) 272 144 71 73 264 273 560 516 73 77 - (9) 1,240 1,074 (1) See the items “Capex” in the schedules on tangible and intangible assets presented in Notes 1 and 2 to the balance sheet. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 50 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report millions of euro Generation and Trading Market Waste Smart Infrastructures Corporate Eliminations and adjustments Total Group 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 Capital employed Net fixed capital 2,549 2,122 108 269 1,582 1,388 4,354 3,978 4,125 4,301 (3,869) (4,032) 8,849 8,026 \- Tangible assets 2,369 2,165 49 43 1,257 1,122 2,294 2,109 217 195 (24) (46) 6,162 5,588 \- Intangible assets 379 154 368 276 620 609 2,049 1,925 99 204 \- (43) 3,515 3,125 \- Shareholdings and other non-current financial assets 4 \- 21 36 29 12 1 4 3,873 3,977 (3,846) (3,956) 82 73 \- Other non-current assets/liabilities 12 8 (306) (44) - 14 (15) (54) 13 (4) \- (13) (296) (93) \- Deferred tax assets/liabilities 133 166 9 (8) 36 50 117 95 67 65 1 56 363 424 \- Provisions for risks, charges and liabilities for landfills (325) (345) (25) (25) (312) (359) (46) (44) (21) (22) \- (2) (729) (797) \- Employee benefits (23) (26) (8) (9) (48) (60) (46) (57) (123) (114) \- (28) (248) (294) Net Working Capital and Other Current Assets/Liabilities (668) (130) 741 366 (113) 12 102 27 (180) (26) (6) (6) (124) 243 Net Working Capital (917) 30 700 428 (66) 56 (28) 139 (65) (68) 68 16 (308) 601 \- Inventories 445 129 \- \- 40 34 49 38 2 2 \- 1 536 204 \- Trade receivables 3,106 1,862 2,119 1,394 295 322 491 473 71 65 (1,402) (825) 4,680 3,291 \- Trade payables (4,468) (1,961) (1,419) (966) (401) (300) (568) (372) (138) (135) 1,470 840 (5,524) (2,894) Other current assets/liabilities 249 (160) 41 (62) (47) (44) 130 (112) (115) 42 (74) (22) 184 (358) \- Other current assets/liabilities 250 (156) 38 (62) (47) (40) 129 (111) (13) (5) (74) (31) 283 (405) \- Current tax assets/tax liabilities (1) (4) 3 \- - (4) 1 (1) (102) 47 \- 9 (99) 47 Assets/Liabilities held for sale \- \- \- \- \- \- \- 102 \- 45 \- \- \- 147 Total capital employed 1,881 1,992 849 635 1,469 1,400 4,456 4,107 3,945 4,320 (3,875) (4,038) 8,725 8,416 Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 51 millions of euro Generation and Trading Market Waste Smart Infrastructures Corporate Eliminations and adjustments Total Group 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 Capital employed Net fixed capital 2,549 2,122 108 269 1,582 1,388 4,354 3,978 4,125 4,301 (3,869) (4,032) 8,849 8,026 \- Tangible assets 2,369 2,165 49 43 1,257 1,122 2,294 2,109 217 195 (24) (46) 6,162 5,588 \- Intangible assets 379 154 368 276 620 609 2,049 1,925 99 204 \- (43) 3,515 3,125 \- Shareholdings and other non-current financial assets 4 \- 21 36 29 12 1 4 3,873 3,977 (3,846) (3,956) 82 73 \- Other non-current assets/liabilities 12 8 (306) (44) - 14 (15) (54) 13 (4) \- (13) (296) (93) \- Deferred tax assets/liabilities 133 166 9 (8) 36 50 117 95 67 65 1 56 363 424 \- Provisions for risks, charges and liabilities for landfills (325) (345) (25) (25) (312) (359) (46) (44) (21) (22) \- (2) (729) (797) \- Employee benefits (23) (26) (8) (9) (48) (60) (46) (57) (123) (114) \- (28) (248) (294) Net Working Capital and Other Current Assets/Liabilities (668) (130) 741 366 (113) 12 102 27 (180) (26) (6) (6) (124) 243 Net Working Capital (917) 30 700 428 (66) 56 (28) 139 (65) (68) 68 16 (308) 601 \- Inventories 445 129 \- \- 40 34 49 38 2 2 \- 1 536 204 \- Trade receivables 3,106 1,862 2,119 1,394 295 322 491 473 71 65 (1,402) (825) 4,680 3,291 \- Trade payables (4,468) (1,961) (1,419) (966) (401) (300) (568) (372) (138) (135) 1,470 840 (5,524) (2,894) Other current assets/liabilities 249 (160) 41 (62) (47) (44) 130 (112) (115) 42 (74) (22) 184 (358) \- Other current assets/liabilities 250 (156) 38 (62) (47) (40) 129 (111) (13) (5) (74) (31) 283 (405) \- Current tax assets/tax liabilities (1) (4) 3 \- - (4) 1 (1) (102) 47 \- 9 (99) 47 Assets/Liabilities held for sale \- \- \- \- \- \- \- 102 \- 45 \- \- \- 147 Total capital employed 1,881 1,992 849 635 1,469 1,400 4,456 4,107 3,945 4,320 (3,875) (4,038) 8,725 8,416 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 52 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report 3.11 Notes to the balance sheet It is noted that the consolidation scope at December 31, 2022 changed compared to December 31, 2021 due to the following operations: • acquisition by A2A Rinnovabili S.p.A. of 100% of Volta Green Energy S.r.l. and 60% of R2R S.r.l., companies operating in the photovoltaic and wind power sectors, resulting in the line-by-line consolidation of seven companies; • sale of the shareholding in Seasm S.r.l., previously consolidated on a line-by-line basis; • acquisition by A2A Rinnovabili S.p.A. of 100% of 4New S.r.l. and 3 New & Partners S.r.l., companies operating in the photovoltaic and wind power sectors, resulting in the line-by-line consolidation of eleven companies. A2A Rinnovabili S.p.A. also acquired, through its subsidiary 3 New & Partners S.r.l., 100% of 3 New & Partners Rinnovabili S.r.l. (a company incorporated in November 2022) resulting in the line-by-line consolidation of Daunia Calvello S.r.l. and Daunia Serracapriola S.r.l., companies that hold a portfolio of wind farms in Italy; • acquisition and line-by-line consolidation by A2A Calore & Servizi S.r.l. of 100% of A2A Airport Energy S.p.A., a company engaged in the production and sale of electricity, heat and cooling. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 53 Assets Non-current assets 1) Tangible assets millions of euro Balance at 12 31 2021 First-time consolid. effect Changes Balance at 12 31 2022 Invest. Other changes Disposals and sales Write-downs/Reversal Depr. Total changes Land 141 2 7 4 (1) 10 153 Buildings 544 12 17 33 (32) 18 574 Plant and machinery 3,908 189 222 162 (2) (1) (353) 28 4,125 Industrial and commercial equipment 55 13 1 (1) (11) 2 57 Other assets 132 33 11 (2) (32) 10 142 Landfills 25 (3) (8) (11) 14 Construction in progress and advances 544 3 528 (275) 253 800 Leasehold improvements 124 36 5 (23) 18 142 Assets for rights of use 115 20 51 (31) 20 155 Total 5,588 226 856 (11) (5) (1) (491) 348 6,162 of which: Historical cost 12,703 226 856 443 (116) 1,183 14,112 Accumulated depreciation (6,281) (454) 111 (491) (834) (7,115) Write-downs (834) (1) (1) (835) “Tangible assets” amounted to 6,162 million euro at December 31, 2022 (5,588 million euro at December 31, 2021) and include the first-time consolidation effect of 226 million euro. The changes for the period, net of the above effect, recorded an increase of 348 million euro as follows: • increase of 856 million euro for capex in the year as further described below; • decrease of 491 million euro for the depreciation charge for the year; • net decrease for other changes of 11 million euro due to decreases in the provision for decommissioning and landfill closure and post-closure expenses of 53 million euro, a decrease due to the recognition of the tax credit of 6 million euro for investments in new capital assets provided for by Law no.178/2020, art.1 paragraph 1051 for the development of the new Cavaglià CSS plant and the heat storage plant at the Lamarmora Nord power station, a decrease due to reclassification to other items of the financial statements in the amount of 3 million euro, as well as an increase in rights of use in accordance with IFRS 16 in the amount of 51 million euro; • decrease of 5 million euro arising from disposals in the year, net of accumulated depreciation; • decrease of 1 million euro due to write-downs in the year. Capex for 856 million euro are broken down as follows: • capex in the Smart Infrastructures Business Unit totalled 297 million euro and concerned: 181 million euro for the development and maintenance of electricity distribution plants, the extension and reconstruction of the medium and low-voltage network and the installation of new electronic meters; 82 million euro for the development of district heating networks; 8 million euro for work on the fiber optic network and equipment; 6 million euro for interventions on the gas transport network; 16 million euro for the Efficiency plan with new LED technology light sources, as well as 4 million euro for interventions on the electric vehicle recharging network; 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 54 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report • for the Waste Business Unit, capex amounted to 262 million euro and refer: for 235 million euro to work on the Group’s waste treatment and disposal plants; for 17 million euro to the purchase and fitting out of mobile waste collection vehicles; for 9 million euro to the acquisition of collection equipment and for 1 million euro to interventions on biogas production plants; • capex in the Generation and Trading Business Unit increased 262 million euro and concerned: 206 million euro capex on thermoelectric plants, 25 million euro capex on hydroelectric plants, and 31 million euro capex on renewable energy plants; • for the Corporate Business Unit capex, amounting to 25 million euro, mainly included 18 million euro for works on buildings in the Milan, Brescia, Como and Rome areas, 6 million euro for the implementation of telecommunications equipment, and 1 million euro for works on the electric vehicle recharging network; • for the Market Business Unit, the increase was 10 million euro, mainly due to the energy efficiency plan at customers. The Group is continuing to analyse the impact of regulatory amendments and confirms, to date, that the amounts recognized in the financial statements for dry and wet works related to hydroelectric concessions are prudent and recoverable also in accordance with the new regulations. “Tangible assets” include “Assets for rights of use” totalling 155 million euro (115 million euro at December 31, 2021), recognized in accordance with IFRS16 and for which the outstanding payable to lessors at December 31, 2022 amounted to 152 million euro (106 million euro at December 31, 2021). Below is a breakdown of “Assets for rights of use” deriving from operating and financial leases at December 31, 2022: Assets consisting of rights of use millions of euro Balance at 12 31 2021 First-time consolid. effect 2022 Changes Balance at 12 31 2022 Other changes Depr. Total changes Land 19 13 4 (5) (1) 31 Buildings 49 11 (10) 1 50 Plant and machinery 8 (3) (2) (5) 3 Industrial, commercial equipment and other goods 27 7 6 (5) 1 35 Vehicles 12 33 (9) 24 36 Total 115 20 51 (31) 20 155 It is specified that the Group has made use of the option provided for in paragraph 6 of the standard not to apply the provisions of paragraphs 22 to 49 of the standard to the following categories: a) Short-term leases; b) Leases whose underlying assets are of low value. 2) Intangible assets millions of euro Balance at 12 31 2021 First-time consolid. effect Changes Balance at 12 31 2022 Invest. Reclass./ Other changes Disposals/ Sales Write-downs Amort. Total changes Industrial patents and industrial property rights 52 19 7 (27) (1) 51 Concessions, licences, trademarks and similar rights 1,881 5 254 28 (3) (156) 123 2,009 Goodwill 746 161 (63) (63) 844 Assets in progress 119 3 85 (51) (1) 33 155 Other intangible assets 327 62 26 91 (50) 67 456 Total 3,125 231 384 12 (3) (1) (233) 159 3,515 “Intangible assets” amounted to 3,515 million euro at December 31, 2022 (3,125 million euro at December 31, 2021) and include the first-time consolidation effect of 231 million euro. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 55 Through the application of IFRIC 12, from financial year 2010 intangible assets also include assets in concession, which relate to gas distribution. The changes for the year, net of the above effect, recorded an overall increase of 159 million euro as follows: • increase of 384 million euro for capex in the year as further described below; • decrease of 233 million euro for the amortization charge for the year; • net increase of 12 million euro for other changes, due to the decrease in environmental certificates of the industrial portfolio for 1 million euro, to the reclassification among assets held for sale of some assets relating to gas distribution networks considered non-strategic for the Group for 2 million euro, the sale of which was completed during the second quarter, a decrease of 6 million euro following reclassifications to other items of the financial statements, a decrease of 2 million euro due to the recording of grants on investments from previous years, a decrease for tax credit of 1 million euro for investments in new capital goods envisaged by Law no.178/2020, art.1 paragraph 1051 for the development of the new IDMS system, as well as the increase of 24 million euro following the Purchase Price Allocation of TecnoA S.r.l.; • decrease of 3 million euro arising from disposals in the year, net of accumulated amortization; • decrease of 1 million euro due to write-downs in the year. Capex for 384 million euro are broken down as follows: • capex in the Smart Infrastructures Business Unit of 263 million euro are for: development and maintenance work on the gas distribution plants and the replacement of low and medium pressure underground piping for 126 million euro; work on the water transport and distribution network, on the sewage networks and on the purification plants for 99 million euro; contracting costs for the Heat Plants of the Milan, Brescia and Bergamo areas for 3 million euro, concession fees for the use of optical fiber for 3 million euro, and the implementation of information systems for 32 million euro; • for the Market Business Unit, the increase was 61 million euro due to: the implementation of information systems for 38 million euro; 23 million euro to costs incurred in connection with the acquisition of new customers capitalised in accordance with IFRS 15; • for the Corporate Business Unit, the increase was 48 million euro mainly due to the implementation of information systems; • for the Generation and Trading Business Unit, the increase was 10 million euro and concerned the implementation of information systems; • for the Waste Business Unit, capex amounted to 2 million euro and refer to the implementation of information systems. The item “Other intangible assets” amounted to 456 million euro at December 31, 2022 (327 million euro at December 31, 2021) and includes: • 300 million euro for Customer lists related to the acquisition of customer portfolios by Group companies. These values are amortized based on an estimate of the benefits that will arise in future years, taking into account indicators such as the retention rate and churn rate relating to specific types of customers. In particular, the amount shown in the financial statements is attributable for 90 million euro to the Acinque Group, for 37 million euro to the AEB Group, for 84 million euro to the company TecnoA S.r.l., for 50 million euro to the company A2A Energia S.p.A., for 12 million euro to the company A2A Recycling S.r.l., for 10 million euro to Electrometal S.r.l., for 8 million euro to Asm Energia S.p.A., for 6 million euro to the company Yada Energia S.r.l. and for 3 million euro to A2A S.p.A., Aprica S.p.A., Azienda Servizi Valtrompia S.p.A. and LumEnergia S.p.A.; • 101 million mainly related to the Renewables Business Unit companies: the increase in value is linked to the existing agreement with the Energy Services Manager, which allows the affiliated companies to benefit from incentive tariffs for a period of 20 years, which are considerably higher than those existing on the market; • 31 million euro relating mainly to deferred charges and costs and surface rights and/or easements; • 14 million euro for Environmental Certificates: emission quotas and White Certificates (Industrial portfolio); • 10 million mainly related to Agripower Group companies: the increase in value is linked to the existing agreement with the Energy Services Manager, which allows the affiliated companies to benefit from incentive tariffs, which are considerably higher than those existing on the market. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 56 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report Impairment testing in accordance with IAS 36 on the carrying amount of goodwill and tangible and intangible assets The objective of the impairment test required by IAS 36 is to ensure that the carrying amount of assets does not exceed their recoverable value. Impairment testing is carried out whenever there is an indication that an asset may be impaired, while goodwill, which is not amortized on a systematic basis, must be tested for impairment at least on an annual basis, regardless of whether there is any indication of impairment. A Cash Generating Unit (CGU) is defined as the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The definition of a CGU depends essentially on the type of activity carried out by the CGU, the business sector in which it operates and a company’s organizational structure. The impairment test consists of comparing the carrying amount of an asset/cash generating unit (or group of Cash Generating Units) with an estimate of the recoverable value of that asset/cash generating unit (or group of Cash Generating Units). The recoverable value of an asset/Cash Generating Unit (or group of Cash Generating Units) is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell of an asset/cash generating unit (or group of Cash Generating Units) is the amount obtainable from the sale of an asset or Cash Generating Unit in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal. The value in use of an asset/Cash Generating Unit (or group of Cash Generating Units) is the present value of the future cash flows expected to be derived from the continuing use of an asset or Cash Generating Unit and from its ultimate disposal. Value in use has been calculated using the discounted cash flow method, which is based on estimating future cash flows and discounting these by applying the appropriate discount rate. Management made a projection of the future cash flows deriving from each asset/Cash Generating Unit (or group of Cash Generating Units) on the basis of reasonable and supportable assumptions which reflect the value of the asset/Cash Generating Unit (or group of Cash Generating Units) in its present condition and with a view to maintaining the normal conditions of business activities. On November 22, 2022, the A2A Board of Directors approved a long-term plan, which represents an update of the 2021-2030 plan and the strategy already shown to the markets last year. In particular, the Plan is based on two main trends, Circular Economy and Energy Transition, to which all the Group’s business units contribute: in the coming years, objectives will be pursued mainly aimed at recovering waste heat, closing the waste cycle, decarbonization and electrification of consumption. The main targets identified in the Strategic Plan are: • about 16 billion euro capex over 10 years, of which about 5 billion euro for the Circular Economy and about 11 billion euro for Energy Transition; • about 85% of capex in line with the UN Sustainable Development Goals; • EBITDA of about 2.6 billion euro at the end of the plan; • net profit growth of about 6% on average per year (CAGR 2021-2030); • minimum dividends expected to rise steadily; • ESG debt over 90% of the total by 2030; • confirmed reduction of the Group’s emission factor; • strong increase in installed capacity from renewable sources, +2.5GW compared to 2022; • upgrading and enhancing of gas-fired electricity generation, including through the start-up of a new high-efficiency hydrogen-ready CCGT plant; • increased material and energy recovery; • 16 new primary electrical stations by 2030; • strong commitment to the production of biomethane; • development of customer base also outside the historical perimeter thanks to auctions and commercial development. For the sole purpose of the impairment test, the 2021-2030 Strategic Plan, in line with the provisions of IAS 36, paragraph 331, has been 1 Which requires “b) basing cash flow projections on the most recent budget/forecast approved by management, however excluding any future cash inflows or outflows estimated to arise from future restructuring or improvements or optimizations in business performance. Projections based on these budgets/forecasts must cover a maximum period of five years, unless a longer time frame can be justified”. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 57 appropriately amended to exclude the impact of future improvements and optimizations, as described in more detail below. In particular, the calculation of value in use excludes the amounts of EBITDA and CAPEX relating to extraordinary transactions/M&A and developments in the planning stage, such as, for example, the construction of new waste treatment plants, the increase in installed renewable capacity. With regard to the CGUs most sensitive to scenario trends and with reduced headroom (Generazione Termoelettrica CGU, Calore CGU, Monfalcone CGU), cash flows were updated to incorporate the most recent effects of the reference energy scenario.An independent expert was engaged to carry out the impairment testing; among other things, the expert analysed the components and key assumptions included in the economic and financial projections prepared by the Group’s management, performed comparisons and tests as to the correctness of the sources and assumptions used and developed the assumptions about the growth rate beyond the plan’s horizon to be used for calculating normalized flows through to the end of the useful lives of the plants. Consistently with the indications of IAS 36, the management team will continue to monitor the evolution of the macro-economic and geo-political conditions and all other impairment indicators, promptly incorporating changes in value of the CGUs or assets, as, moreover, has been done in recent years. Finally, the independent expert estimated the discount rate consistent with the cash flows considered, i.e. post-tax weighted average cost of capital (WACC). In detail, the WACC rate used was estimated according to the criteria widely used in valuation practice and in line with last year’s impairment exercise in order to reflect current market valuations with reference to the current value of money, country risk and the specific risks associated with the activity. Goodwill At December 31, 2022, goodwill amounted to 844 million euro: millions of euro Balance at 12 31 2021 Changes Balance at 12 31 2022 First-time consolid.acquisitions 2022 PPA Effect Reclass./ Other changes Write-downs Total changes CGU: A2A Ambiente 269 204 204 473 A2A Reti Gas 41 - 41 A2A Gas 74 - 74 A2A Calore 22 - 22 A2A Vendita Energia Elettrica 7 - 7 A2A Generazione Rinnovabili 66 161 161 227 Total 479 - 365 - - 365 844 First-time consolidation effect Volta Green Energy S.r.l. and R2R S.r.l. 20 (20) - - 3 New & Partners S.r.l. 107 (107) - - 4 New S.r.l. 77 (77) - - TecnoA S.r.l. 267 (204) (63) (267) - Total 267 204 (408) (63) - (267) - Total goodwill 746 204 (43) (63) - 98 844 During the year 2022, the A2A Group completed the following transactions: • acquisition (in March 2022) of Volta Green Energy S.r.l. and R2R S.r.l., companies operating in the photovoltaic and wind power sectors with seven companies consolidated on a line-by-line basis, which also own projects (amounting to 800 MW) for the construction of new wind power and photovoltaic plants with different authorization status, which resulted in the recognition of provisional goodwill of 20 million euro. This goodwill was restated (in accordance with IFRS 3) through the Purchase Price Allocation process, which at the conclusion of the analysis allocated 4 million euro to intangible assets and 17 million euro to the Generazione Rinnovabili CGU; 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 58 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report • acquisition (in May 2022) of 4New S.r.l., a company operating in the photovoltaic and wind power sectors with eight companies consolidated on a line-by-line basis, which resulted in the recognition of provisional goodwill in the amount of 77 million euro. This goodwill was restated at the conclusion of the Purchase Price Allocation process and was allocated for 50 million euro to intangible assets and for 41 million euro to the Generazione Rinnovabili CGU; • acquisition of 3New & Partners S.r.l., a company operating in the wind power sector with 4 companies consolidated line-by-line. The transaction was finalized through an initial share purchase agreement signed in May 2022, with the line-by-line consolidation of one company and the consolidation at equity of three companies, which resulted in provisional goodwill of 4 million euro. In November 2022, a subsequent agreement was entered into that allowed the A2A Group to hold 100% of the shareholdings of the companies Daunia Calvello and Daunia Serracapriola, which redetermined the value of the provisional goodwill at 107 million euro. At the conclusion of the Purchase Price Allocation process, this goodwill was restated and allocated for 5 million euro to intangible assets and for 103 million euro to the Generazione Rinnovabili CGU. Reference is made to the paragraph “Other information” for further details on acquisitions regulated by IFRS 3 and Purchase Price Allocation processes. In relation to the provisions of IFRS 3, the Group completed the Purchase Price Allocation process with reference to the previous year acquisition of 100% of TecnoA, a leading company in central and southern Italy in the treatment of industrial waste. Goodwill was restated and allocated for 88 million euro to intangible assets and for 204 million euro to the A2A Ambiente CGU, as better described in the section “Other information” 3) IFRS 3 Revised Transactions. Since goodwill does not generate independent cash flows and cannot be sold separately, the impairment testing of recognized goodwill is carried out in a residual manner by referring to the Cash Generating Unit (or group of Cash Generating Units) to which it may be reasonably allocated. The following table sets out the goodwill allocated to each individual Cash Generating Unit, specifying for each the recoverable value and the discount and growth rates used with comparative figures of the previous year. The goodwill generated in the Generazione e Rinnovabili CGU, amounting to 161 million euro, was not subject to an impairment test because the acquisitions were made in the financial year 2022. CGU with Goodwill Value in millions of euro at 12 31 2022 Recoverable Value WACC 2022 post-tax (1) Growth rate g 2022 Balance scenario (2) WACC of reference (3) Growth rate g A2A Ambiente 473 Use value 6.8% 0.0% 10.1% 0.0% A2A Reti Gas 41 Use value 5.2% 0.0% 6.6% 0.0% A2A Gas 74 Use value 6.7% 0.0% 8.6% 0.0% A2A Generazione Rinnovabili 66 Use value 6.7% 0.0% 12.9% 0.0% A2A Calore 22 Use value 6.2% 0.0% 6.3% 0.0% A2A Vendita Energia Elettrica 7 Use value 6.7% 0.0% 8.2% 0.0% Total 683 (1) Nominal post-tax discount rate applied to future cash flows. (2) Rates resulting from the sensitivity assessment made by the expert in order to achieve balance between the use values and carrying amounts subjected to impairment testing. (3) The simulation was performed on the WACC rate of reference, with the simultaneous adjustment of the terminal flow rate (if applicable). CGU with Goodwill Value in millions of euro at 12 31 2021 Recoverable Value WACC 2021 post-tax (1) Growth rate g 2021 Balance scenario (2) WACC of reference (3) Growth rate g A2A Ambiente 269 Use value 5.3% 0.0% 10.6% 0.0% A2A Reti gas 41 Use value 5.2% 0.0% 5.3% 0.0% A2A Gas 74 Use value 5.4% 0.0% 22.8% 0.0% A2A Generazione Rinnovabili 66 Use value 5.6% 0.0% 10.9% 0.0% A2A Calore 22 Use value 4.6% 0.0% 4.6% 0.0% A2A Vendita Energia Elettrica 7 Use value 5.4% 0.0% 12.9% 0.0% Total 479 (1) Nominal post-tax discount rate applied to future cash flows. (2) Rates resulting from the sensitivity assessment made by the expert in order to achieve balance between the use values and carrying amounts subjected to impairment testing. (3) The simulation was performed on the WACC rate of reference, with the simultaneous adjustment of the terminal flow rate (if applicable). Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 59 With reference to the CGUs with Goodwill included in the scope of consolidation of the A2A Group at December 31, 2022, and precisely “A2A Calore” CGU, “A2A Reti Gas” CGU, “A2A Ambiente” CGU, “A2A Gas” CGU, “Vendita Energia Elettrica” CGU and “Generazione Rinnovabili” CGU, the analysis conducted allowed achieving the estimated recoverable value at December 31, 2022 calculated using the financial method. In particular, the analysis regarding the maintenance of the value of the CGUs was carried out as follows: • for the “A2A Calore” and “A2A Ambiente” CGUs, it was conducted by comparing the recoverable value determined as fair-weighted average of the values in use of the definite useful life scenario (consistent with the average duration of the concessions in place) and the indefinite useful life scenario; • for the “A2A Reti Gas” CGU, the analysis was conducted by comparing the recoverable value for the definite useful life scenario only; • for the “A2A Gas” CGU, the “Generazione Rinnovabili” CGU and the “Vendita Energia Elettrica” CGU, the analysis was conducted by comparing the recoverable value for the indefinite useful life scenario only. Further analyses and sensitivity analyses were conducted considering the potential effects of the changes in the reference parameters of the WACC, which showed no particular criticality for all the CGUs subject to impairment testing. “A2A Ambiente” Cash Generating Unit The “A2A Ambiente” Cash Generating Unit operates in the solid urban waste segment and in the special and hazardous waste segment, performs collection and street sweeping activities in the municipalities of Milan, Brescia, Bergamo, Lodi and Como and in a number of municipalities of the relative provinces, is the owner of waste-to-energy and industrial plants (in the municipalities of Milan, Brescia, Bergamo, Filago, Corteolona, Cremona, Parona and Como) and manages the Acerra waste-to-energy plant. It also has several waste treatment plants and a number of landfills. The A2A Group’s Consolidated Financial Statements at December 31, 2022 include goodwill of 473 million euro associated with this CGU, which has been impairment tested as required by IAS 36\. Of this goodwill, 227 million euro arises from the acquisition of the Ecodeco Group between 2005 and 2008 (the former Ecodeco Cash Generating Unit), 5 million euro from the merger between ASM Brescia S.p.A. (subsequently incorporated into AEM S.p.A., with simultaneous change of its name into A2A S.p.A.) and BAS S.p.A., 30 million euro as the residual value of the goodwill of the former LGH Group at the end of the PPA process for the acquisition of 51% of the Group, 2 million euro from the allocation to the CGU in 2019 of a residual portion of the goodwill recorded following the consolidation of the Acinque Group, 5 million euro as residual goodwill at the conclusion of the PPA activity for the acquisition of the company Electrometal S.r.l., and 204 million euro as goodwill recorded at the conclusion of the PPA process for the acquisition of the company TecnoA. In determining the value in use, an average of a scenario with indefinite useful life and one with definite useful life was considered, the time horizon of which was calculated on the residual useful life of the plants. No impairment loss was noted during the impairment testing as the recoverable value exceeds the net capital employed including the value of goodwill recorded. The sensitivity analyses carried out have shown that, all other factors being equal, an increase of 0.1% in WACC confirms recoverable values that are higher than carrying amounts, and therefore do not show impairment losses as defined by IAS 36. “A2A Reti Gas” Cash Generating Unit The “A2A Reti Gas” CGU includes the Group’s gas distribution and metering activities. In particular, it deals with the design and construction of gas networks, their operation and maintenance, as well as the management of requests for connection and quality control and continuity of service. The goodwill of 41 million euro associated to the “A2A Reti Gas” CGU arises mainly from various acquisitions made by A2A Reti Gas S.p.A. (now Unareti S.p.A.) over the last few years, relating to companies operating as gas distributors in about 200 Italian municipalities (the activity is mainly concentrated in Lombardy and Piedmont) for 38 million euro as well as 3 million euro from the allocation to the CGU in 2019 of a portion of the goodwill recorded following the consolidation of the Acinque Group. The recoverable value of goodwill attributed to the “A2A Reti Gas” Cash Generating Unit was calculated by referring to its value in use. In determining the value in use, an average between a scenario based on the RAB as of December 31, 2022 and a scenario with a time horizon corresponding to the weighted average useful life of the existing concessions was considered. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 60 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report No impairment loss was noted during the impairment testing as the recoverable value exceeds the net capital employed including the value of goodwill recorded. The sensitivity analyses carried out have shown that, all other factors being equal, a 0.1% increase in WACC does not indicate impairment. “A2A Gas” Cash Generating Unit The goodwill arising from the consolidation of the “A2A Gas” Business Unit, amounting to 74 million euro, refers to the area involved in selling gas to end customers (residential and business) and wholesalers and was impairment tested. It should be noted that the “A2A Gas” Cash Generating Unit consists of the portion of goodwill arising from the merger between BAS S.p.A. and A2A S.p.A. for 7 million euro, for 24 million euro of the allocation to the CGU in 2019 of a portion of the goodwill recorded following the consolidation of the Acinque Group, and for 43 million euro of a portion of goodwill allocated to the CGU following the consolidation of the AEB Group. The recoverable value of the goodwill attributed to the CGU during the impairment test, was determined by considering an indefinite useful life scenario. No impairment loss was noted during the impairment testing as the recoverable value exceeds the net capital employed including the value of goodwill recorded. The sensitivity analyses carried out have shown that, all other factors being equal, an increase of 0.1% in WACC confirms recoverable values that are higher than carrying amounts, and therefore do not show impairment losses as defined by IAS 36. “A2A Calore” Cash Generating Unit The goodwill arising from the consolidation of the “A2A Calore” Business Unit, amounting to 22 million euro, is held by a number of companies of the A2A Group active in the production, distribution and sale of district heating. In particular, the CGU in question includes 18 million euro, a part of the goodwill arising from the merger between BAS S.p.A. and A2A S.p.A., and 1 million euro for the allocation to the CGU in 2019 of a portion of the goodwill recorded following the consolidation of the Acinque Group. The recoverable value of the goodwill attributed to the “A2A Calore” CGU during the impairment test was determined as the average of a scenario with indefinite useful life and definite useful life the time horizon of which was calculated over the remaining useful life of the plants. No impairment loss was noted during the impairment testing as the recoverable value exceeds the net capital employed including the value of goodwill recorded. The sensitivity analyses carried out have shown that, all other factors being equal, a 0.1% increase in WACC does not indicate significant impairment. “Generazione Rinnovabili’’ Cash Generating Unit The activity of the “Generazione Rinnovabili’’ Cash Generating Unit relates to the management of the Group’s hydroelectric, photovoltaic and wind power plants and the consequent production of electricity. The total installed capacity is about 2.2 GW. The goodwill arising from the consolidation of the “Generazione Rinnovabili’’ Cash Generating Unit, amounting to 227 million euro, refers for 66 million euro to the allocation of goodwill generated from the acquisition (in the previous year) of the Octopus Renewables portfolio, for 17 million euro to the allocation of goodwill, upon completion of the PPA process, for the acquisition of the Rovere portfolio, for 144 million euro to the goodwill allocated for the acquisition of the Ellisse portfolio (these acquisitions are not subject to an Impairment test as the transactions were finalized during 2022), and for the remaining part to the allocation to the CGU of a portion of the goodwill recognized as a result of the consolidation of the Acinque Group, carried out in the 2019 financial year. The recoverable value of the goodwill attributed to the CGU during the impairment test, was determined by considering an indefinite useful life scenario. No impairment loss was noted during the impairment testing as the recoverable value exceeds the net capital employed including the value of goodwill recorded. The sensitivity analyses carried out have shown that, all other factors being equal, an increase of 0.1% in WACC confirms recoverable values that are higher than carrying amounts, and therefore do not show impairment losses as defined by IAS 36. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 61 “Vendita Energia Elettrica” Cash Generating Unit The “Vendita Energia Elettrica” Cash Generating Unit is active in the retail sale of electricity to customers in the free market and does not include the activities of the Greater Protection service2. The goodwill arising from the consolidation of the “Vendita Energia Elettrica” Cash Generating Unit, amounting to 7 million euro, refers to the allocation to the CGU of a portion of the goodwill recorded following the consolidation of the AEB Group, the results of which were consolidated in 2020. The recoverable value of the goodwill attributed to the CGU during the impairment test, was determined by considering an indefinite useful life scenario. No impairment loss was noted during the impairment testing as the recoverable value exceeds the net capital employed including the value of goodwill recorded. The sensitivity analyses carried out have shown that, all other factors being equal, a 0.1% increase in WACC does not result in impairment. CGU without Goodwill CGU without Goodwill 12 31 2022 Recoverable Value WACC 2022 post-tax (1) Balance scenario (2) WACC of reference (3) Reti Elettriche CGU Use value 4.9% 5.0% Generazione Termoelettrica CGU Use value 7.1% 7.1% Monfalcone CGU Use value 7.1% n.s. San Filippo del Mela CGU Use value 7.1% 7.1% CGU without Goodwill 12 31 2021 Recoverable Value WACC 2021 post-tax (1) Balance scenario (2) WACC of reference (3) Reti Elettriche CGU Use value 4.9% 4.9% Generazione Termoelettrica CGU Use value 5.9% 5.9% Monfalcone CGU Use value 5.9% n.s. San Filippo del Mela CGU Use value 5.9% 5.9% (1) Nominal post-tax discount rate applied to future cash flows. (2) Rates resulting from the sensitivity assessment made by the expert in order to achieve balance between the use values and carrying amounts subjected to impairment testing. (3) The simulation was performed on the WACC rate of reference, with the simultaneous adjustment of the terminal flow rate (if applicable). “A2A Reti Elettriche” Cash Generating Unit The “A2A Reti Elettriche” CGU includes the Group’s electricity distribution and metering activities. In particular, it deals with the design and construction of electricity networks, their operation and maintenance, as well as the management of requests for connection and quality control and continuity of service. The value in use of this CGU was determined as the average of the values in use obtained from two scenarios: one based on an estimate of definite useful life (equal to the expiration of the existing concession) and the other based on an estimate of indefinite useful life (i.e., assuming that the concession would be renewed in perpetuity). No impairment loss was identified during the impairment test as the recoverable value is higher than the net capital employed. The sensitivity analyses carried out have shown that, all other factors being equal, a 0.1% increase in WACC did not result in significant impairment. 2 The Greater Protection service applies to customers with low-voltage domestic utilities, utilities for other non-domestic uses and public lighting (in other words, small businesses connected to a low voltage supply, with less than 50 employees and annual turnover < 10 million euro). This category includes all users who selected the so-called Free Market and ended up without a supplier. The Greater Protection service guarantees the supply of electricity at prices established by ARERA (Regulation Authority for Energy Networks and Environment). 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 62 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report “Generazione Termoelettrica” Cash Generating Unit The activity of the “Generazione Termoelettrica” Cash Generating Unit is aimed at the production of electricity from gas-fired thermoelectric power plants (CCGT). The A2A Group operates CCGT plants with a total installed capacity of 5,356 MW. The value in use of this CGU was determined from a single indefinite useful life scenario. For the purposes of the impairment test on the carrying amount of tangible assets relating to the Generazione Termoelettrica CGU, the Enterprise Value of the assets (Value in Use) was compared with the relative Carrying Amount at December 31, 2022. No impairment loss was identified during the impairment test as the difference between the recoverable value and the net invested capital is not material. The sensitivity analyses carried out have shown that, all other factors being equal, a 0.1% increase in WACC did not result in significant impairment. “Monfalcone” Cash Generating Unit The Monfalcone CGU includes the Monfalcone coal-fired power plant. The value in use of this CGU was determined on the basis of a definite useful life scenario, the time horizon of which was set equal to the expiry of the existing AIA and the expected coal phase-out. No further impairment loss was found during the impairment test. “San Filippo del Mela” Cash Generating Unit The power plant in San Filippo del Mela includes two plants: SFM 150 kV (group 1) and SFM 220 kV (groups 2, 5 and 6). Also for 2023, the San Filippo del Mela plant was confirmed in the list of essential plants, and ARERA Resolution 741/2022/R/eel admitted it (in the same plant configuration as in previous years) to cost recovery. The value in use of this CGU was determined on the basis of a definite useful life scenario, the time horizon of which was set equal to the expiry of the existing AIA. No impairment loss was identified during the impairment test as the recoverable value is in line with the net capital employed. 3) Shareholdings and other non-current financial assets millions of euro Balance at 12 31 2021 First-time consolidation effect acquisitions 2022 Changes Balance at 12 31 2022 of which included in the NFP 12 31 2021 12 31 2022 Shareholdings carried according to equity method 33 235 (235) 33 \- \- Other non-current financial assets 64 1 5 70 24 21 Total shareholdings and other non-current financial assets 97 236 (230) 103 24 21 Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 63 The following table provides details of the changes in the value of “Shareholdings carried according to equity method”: Shareholdings carried according to equity method millions of euro Total Balance at December 31, 2021 33 First-time consolidation effect acquisitions 2022 235 Changes: \- acquisitions and capital increases \- valuations at equity 2 \- write-downs \- reversals \- dividends received from shareholdings in companies carried at equity (2) \- sales and decreases (195) \- other changes \- reclassifications (40) Total changes \- Balance at December 31, 2022 33 The value of “Shareholdings carried according to equity method” amounted to 33 million euro, unchanged compared to the previous year. During the year, this item saw the recognition, for an amount of 235 million euro, of the first-time consolidations related to the acquisition (which took place in May 2022) of the shareholdings in Daunia Wind S.r.l., Daunia Calvello S.r.l. and Daunia Serracapriola S.r.l.. Subsequently, in November 2022, as a result of a new contractual agreement, the A2A Group sold its shareholding in Daunia Wind S.r.l. and, at the same time, acquired 100% of the shareholdings in Daunia Calvello S.r.l. and Daunia Serracapriola S.r.l., which were therefore recognized as investments in subsidiaries. Other changes include the increase in equity-accounted shareholdings of 2 million euro, and the collection of dividends in the amount of 2 million euro. The details of the shareholdings are provided in annex no. 4 “List of shareholdings carried according to equity method”. “Other non-current financial assets” showed a balance of 70 million euro at December 31, 2022, an increase of 6 million euro compared to the figure at December 31, 2021, of which 1 million euro related to the effects arising from the first-time consolidations, 3 million euro to investments made in innovative start-ups through Corporate Venture Capital projects, 1 million euro to the payment to the Court of Taranto, following the request to deposit in a specific current account, of the amounts seized as part of the proceedings underway against the subsidiary Linea Ambiente S.r.l., 4 million euro to advances paid on equity investments for future projects for the development of plants for the production of electricity from renewable sources, a 2 million euro reduction in equity investments in other companies as a result of disposals made during the year, and, residually, a 1 million euro reduction in other financial assets. At December 31, 2022, “Other non-current financial assets” include, in addition to the above, 21 million euro in medium/long-term financial receivables, of which 10 million euro relating to loans to third parties, 4 million euro from the Municipality of Brescia, relating to the management of public lighting in application of IFRIC 12, 6 million euro deriving from the management of the Cedrasco biocube plant by the subsidiary Bioase in application of IFRIC 12 and 1 million euro in other financial assets. The item also includes 6 million euro for equity investments in other companies, details of which are provided in annex 5 “List of equity investments in other companies”. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 64 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report 4) Deferred tax assets millions of euro Balance at 12 31 2021 First-time consolidation effect acquisitions 2022 Net changes of the year Balance at 12 31 2022 Deferred tax assets 424 5 (66) 363 “Deferred tax assets” amounted to 363 million euro (424 million euro at December 31, 2021) and decreased by 61 million euro as a result of the effects of first-time consolidations in the amount of 5 million euro and negative changes for the year of 66 million euro. The item includes the net effect, as detailed in the table below to which reference is made, of deferred tax liabilities and deferred tax assets for IRES and IRAP on changes and provisions made solely for tax purposes. The recoverability of “Deferred tax assets” recorded in the financial statements is considered likely, as the future plans envisage taxable income sufficient to use the deferred tax assets. At December 31, 2022, the amounts relative to deferred tax assets/deferred tax liabilities have been expressed as net (“offsetting”) as per IAS 12 standards. The following table sets out the main deferred tax assets and liabilities. Detail of deferred tax assets/liabilities Consolidated financial statements 12 31 2021 First-time consolid. effect Provisions (A) Uses (B) Adjustment Rates (C) Other (D) TOTAL (A+B+C+D) IFRS 9 to Equity IAS 19 Revised to Equity Consolidated financial statements 12 31 2022 Deferred tax liabilities Value differences of tangible assets 310 0 43 (31) (5) 7 14 0 0 324 Application of the finance lease standard (IFRS 16) 0 0 0 0 0 0 0 0 0 Application of the financial instrument standard (IFRS 9) 0 0 0 0 0 0 0 0 0 0 Value differences of intangible assets 63 20 0 (9) 0 24 15 0 0 98 Deferred capital gains 0 0 0 0 0 0 0 Employee leaving entitlement (TFR) 2 0 0 0 0 0 0 2 Goodwill 6 0 0 0 0 0 0 0 6 Other deferred tax liabilities 8 0 11 (1) 0 10 0 0 18 Total deferred tax liabilities (A) 389 20 54 (41) (5) 31 39 0 0 448 Deferred tax assets Taxed risk provisions 121 0 22 (16) 0 8 14 (2) 0 133 Value differences of tangible assets 478 0 7 (38) (5) (4) (40) 0 0 438 Application of the financial instrument standard (IFRS 9) (19) 0 0 0 0 0 0 (3) 0 (22) Bad debts provision 21 0 18 (3) 0 1 16 0 0 37 Value differences of intangible assets 8 0 0 0 0 0 0 8 Grants 16 0 0 0 0 0 0 16 Goodwill 175 0 (15) 0 (15) 0 0 160 Other deferred tax assets 13 25 4 (6) 0 2 0 3 0 41 Total deferred tax assets (B) 813 25 51 (78) (5) 7 (25) (2) 0 811 NET EFFECT DEFERRED TAX ASSETS/LIABILITIES (B-A) 424 5 (3) (37) - (24) (64) (2) 0 363 Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 65 5) Other non-current assets millions of euro Balance at 12 31 2021 First-time consolidation effect acquisitions 2022 Changes Balance at 12 31 2022 of which included in the NFP 12 31 2021 12 31 2022 Other non-current assets 25 2 47 74 \- \- Non-current derivatives - 4 8 12 12 \- Total other non-current assets 25 6 55 86 12 \- “Other non-current assets” were up by 49 million euro compared to December 31, 2021\. This change is mainly attributable for 2 million euro to the effects of first-time consolidations, for 10 million euro to the payment of security deposits, for 13 million euro to receivables from the tax authorities for tax benefits under the building bonus scheme due beyond the next financial year, and for 12 million euro to the recognition of receivables for prior-year items related to revenues for water services. “Non-current derivatives” amounted to 12 million euro and resulted from the effects of first-time consolidations for 4 million euro, and the fair value measurement of financial instruments at December 31, 2022 for 8 million euro against the interest rate risk on variable-rate mortgages. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 66 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report Current assets 6) Inventories millions of euro Balance at 12 31 2021 First-time consolidation effect acquisitions 2022 Changes of the year Balance at 12 31 2022 \- Materials 96 \- 19 115 \- Material obsolescence provision (22) (1) (23) Total materials 74 \- 18 92 \- Fuel 122 313 435 \- Others 8 (1) 7 Raw and ancillary materials and consumables 204 \- 330 534 Third-party fuel - 2 2 Total inventories 204 \- 332 536 “Inventories” amounted to 536 million euro (204 million euro at December 31, 2021), net of the related obsolescence provision for 23 million euro (22 million euro at December 31, 2021). Inventories showed a total increase of 332 million euro, as detailed below: • 313 million euro related to the increase in inventories of fuels, which reflects both the price trend of the same (stocks include the inventories of fuels for the production of electricity, as well as the gas inventories for the sale and storage thereof) and the increase in quantities; • 2 million euro for third-party fuel related to coal at the warehouse in Koper not yet cleared through customs in Italy; • 18 million euro related to the increase in inventories of materials, including the allocation to the material obsolescence provision; • other decreases amounting to 1 million euro. 7) Trade receivables millions of euro Balance at 12 31 2021 First-time consolidation effect acquisitions 2022 Changes of the year Balance at 12 31 2022 Trade receivables – invoices issued 1,124 42 238 1,404 Trade receivables – invoices to be issued 2,300 17 1,151 3,468 (Bad debts provision) (133) (59) (192) Total trade receivables 3,291 59 1,330 4,680 As of December 31, 2022, “Trade receivables” amounted to 4,680 million euro (3,291 million euro at December 31, 2021), with an increase of 1,389 million euro. In detail, the changes were as follows: • for 1,374 million euro, the increase in trade receivables from customers (related for 59 million euro to the effects of the first-time consolidations), which at December 31, 2022 had a balance of 4,549 million euro (3,164 million euro at December 31, 2021); • for 4 million euro, the increase in receivables from associates, which had a balance of 55 million euro (51 million euro at the end of the previous year); • receivables from the municipalities of Milan and Brescia did not change and amounted to 76 million euro at year-end. The change in trade receivables is primarily due to the increase in tariffs for the sale of electricity and gas in the year, which in turn was caused by the rise in commodity prices and the instalments granted to electricity, gas and district heating customers, which more than offset the reduction due to seasonality. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 67 It should be noted that the Group occasionally assigns receivables without recourse and has no revolving factoring programmes in place. At December 31, 2022, the receivables assigned by the Group outright and written-off from the assets in compliance with the requirements of IFRS 9, amounted to a total of 112 million euro (no assignment at December 31, 2021). At the date of publication of the Consolidated Financial Statements, these receivables were zero. The “Bad debts provision”, calculated in compliance with IFRS 9, amounted to 192 million euro and showed a net increase of 59 million euro compared to December 31, 2021\. This provision is considered adequate to cover the risks to which it relates. The changes in the Bad debts provision are outlined in the following table: millions of euro Balance at 12 31 2021 First-time consolidation effect acquisitions 2022 Provisions Uses Other changes Balance at 12 31 2022 Bad debts provision 133 - 88 (29) - 192 Provisions for the period amounted to 88 million euro, an increase of 55 million euro compared to the previous year. The increase over the previous year was mainly due to a price effect that led to a higher credit exposure to customers during the year, which was correlated to the trend in the energy scenario. In this context, it should be noted that the Group, taking into account the impacts relating to the dynamics of the increase in tariffs starting from the third quarter of 2021 and continued in the 2022 financial year, when assessing the risks of expected credit losses at December 31, 2022, as required by IFRS 9, has prudentially deemed it appropriate to maintain the corrective factor of “expected credit losses” equal to 12 million euro. This adjustment, unchanged from the previous year, was maintained in view of the continued uncertainty that has characterized the energy market in recent years, initially caused by the Covid-19 pandemic and subsequently exacerbated by the ongoing conflict between Russia and Ukraine. Given the high quality of customers, largely subject to credit check-in during the contract activation phase, and the significant proportion of bills paid by direct debit, amounting to 61.3% of the total, despite the increase in trade receivables, at December 31, 2022, to date, there has been no significant deterioration in payment performance on the part of customers. However, the increase in the value of past due amounts, as well as the increase in instalment requests from customers and, consequently, the slight extension of the collection time recognized in the year, led to the above-mentioned correction factor being maintained also at December 31, 2022. The following is the aging of trade receivables: millions of euro 12 31 2021 12 31 2022 Trade receivables of which: 3,291 4,680 Current 840 978 Past due of which: 284 426 \- Past due up to 30 days 90 60 \- Past due from 31 to 180 days 69 198 \- Past due from 181 to 365 days 32 73 \- Past due over 365 days 93 95 Invoices to be issued 2,300 3,468 Bad debts provision (133) (192) 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 68 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report 8) Other current assets millions of euro Balance at 12 31 2021 First-time consolidation effect acquisitions 2022 Changes Balance at 12 31 2022 of which included in the NFP 12 31 2021 12 31 2022 Current derivatives (commodity derivatives) 3,737 (876) 2,861 \- \- Other current assets of which: 314 15 99 428 \- receivables from Cassa per i Servizi Energetici e Ambientali 95 45 140 \- advances to suppliers 42 (32) 10 \- receivables from employees 1 \- 1 \- tax receivables 52 4 83 139 \- receivables related to future years/periods 26 8 \- 34 \- receivables from Ergosud 2 (2) 0 \- receivables from social security entities 2 1 3 \- Stamp office 1 \- 1 \- receivables for damage compensation 3 (2) 1 \- receivables for COSAP advances 1 \- 1 \- receivables for security deposits 37 (25) 12 \- receivables for RAI fee 3 \- 3 \- credit transfer Gesi 2 \- 2 \- other sundry receivables 47 3 31 81 Total other current assets 4,051 15 (777) 3,289 \- \- “Other current assets” showed a balance of 3,289 million euro compared to 4,051 million euro at December 31, 2021, highlighting, net of the first-time consolidations of 15 million euro, a decrease of 777 million euro. “Current derivatives” showed a decrease of 876 million euro related to a reduction in the overall volumes traded and the high volatility of the prices of energy commodities with repercussions on the differentials between subscription prices and forward prices. Receivables from Cassa per i Servizi Energetici e Ambientali, amounting to 140 million euro (95 million euro at December 31, 2021), mainly refer to receivables for equalizations pertaining to both 2022 and to outstanding receivables for equalizations pertaining to previous years and receivables for tariff components, net of collections made in the current year. Tax receivables, equal to 139 million euro, mainly refer to receivables from the tax authorities for withholding taxes (mainly referring to tax credits for Ecobonus) and excise duties. Receivables related to future years amounted to 34 million euro (26 million euro at December 31, 2021) and mainly refer to the advance payment of water derivation fees and insurance premiums. The increase of 8 million euro relates to the effect of the first-time consolidations. Other sundry receivables include 51 million euro (21 million euro as at December 31, 2021) in receivables for works to upgrade and improve energy efficiency in condominiums and third parties, for which tax benefits will be available under the building bonus scheme. 9) Current financial assets millions of euro Balance at 12 31 2021 First-time consolidation effect acquisitions 2022 Changes Balance at 12 31 2022 of which included in the NFP 12 31 2021 12 31 2022 Other financial assets 9 \- 5 14 9 14 Total current financial assets 9 - 5 14 9 14 “Current financial assets” amounted to 14 million euro (9 million euro at December 31, 2021). This item mainly refers to financial receivables from minority shareholders and third parties. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 69 10) Current tax assets millions of euro Balance at 12 31 2021 First-time consolidation effect acquisitions 2022 Changes of the year Balance at 12 31 2022 Current tax assets 68 11 (44) 35 At December 31, 2022, this item amounted to 35 million euro (68 million euro at December 31, 2021) and refers to IRES and IRAP receivables for amounts requested for reimbursement on payments of previous years, and to the remaining credit for Robin Tax paid in previous years and that will be recovered in subsequent years. 11) Cash and cash equivalents millions of euro Balance at 12 31 2021 First-time consolidation effect acquisitions 2022 Changes Balance at 12 31 2022 of which included in the NFP 12 31 2021 12 31 2022 Cash and cash equivalents 964 180 1,440 2,584 964 2,584 “Cash and cash equivalents” at December 31, 2022 represent the sum of the Group’s bank and postal asset balances. The increase related to the effect of the first-time consolidation of acquisitions in 2022 amounted to 180 million euro. The increase in the year of 1,440 million euro derives in part from the September 2022 bond issue of 650 million euro, in Green Bond format, which served the purpose of pre-funding the Group’s future investments and in part as back-up to hedge the risk of increased margin calls for commodities derivatives. This item includes term current accounts, in the amount of 625 million euro, related to trading on commodity derivative platforms. Bank deposits include interest accrued even if it was not credited by the end of the financial year under review. 12) Non-current assets held for sale millions of euro Balance at 12 31 2021 First-time consolidation effect acquisitions 2022 Changes Balance at 12 31 2022 of which included in the NFP 12 31 2021 12 31 2022 Non-current assets held for sale 162 (162) \- - - At December 31, 2022, “Non-current assets held for sale” had no value as a result of the sale of three properties located in Milan (classified in the item in question at December 31, 2021 for a value of 45 million euro), which took place in February and the sale, on April 1, of some assets relating to gas distribution referring to ATEMs considered non-strategic for the Group whose value at the end of the previous year was equal to 117 million euro. Please refer to the sections “Result from non-recurring transactions” and “Net result from operating assets sold/held for sale” in the Income Statement for more details on the gains generated. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 70 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report Equity and liabilities Equity Equity, which amounted to 4,467 million euro at December 31, 2022 (4,303 million euro at December 31, 2021), is set out in the following table: millions of euro Balance at 12 31 2021 Changes Balance at 12 31 2022 Equity pertaining to the Group: Share capital 1,629 \- 1,629 (Treasury shares) \- - - Reserves 1,627 242 1,869 Result of the year 504 (103) 401 Total equity pertaining to the Group 3,760 139 3,899 Minority interests 543 25 568 Total equity 4,303 164 4,467 The change of the Shareholders’ equity was overall positive for 164 million euro. The net profit for the year generated a positive effect of 401 million euro, offset by the distribution of 283 million euro in dividends. Lastly, the net fair value gain of cash flow hedge derivatives and the IAS 19 reserves for a total of 24 million euro and the net increase in minority interests for 25 million euro also affected shareholders’ equity. 13) Share capital “Share capital” amounted to 1,629 million euro and consists of 3,132,905,277 ordinary shares each of nominal value 0.52 euro. 14) Reserves millions of euro Balance at 12 31 2021 Changes Balance at 12 31 2022 Reserves 1,627 242 1,869 of which: Change in the fair value of cash flow hedge derivatives and Bond fair value 40 2 42 Tax effect (12) - (12) Cash flow hedge reserves 28 2 30 Change in the IAS 19 Revised reserve \- Employee Benefits (104) 31 (73) Tax effect 28 (9) 19 IAS 19 Revised reserve \- Employee Benefits (76) 22 (54) “Reserves”, which amounted to 1,869 million euro (1,627 million euro at December 31, 2021), consist of the legal reserve, extraordinary reserves, and the retained earnings of subsidiaries. This item also includes the cash flow hedge reserve, positive for 30 million euro, which refers to the period-end measurement of derivatives qualifying for hedge accounting, and the fair value measurement of the Bonds in foreign currency net of the tax effect. The balance also includes negative reserves of 54 million euro arising from the adoption of IAS 19 Revised “Employee Benefits”, which requires actuarial profits and losses to be recognized directly in an equity reserve. The item includes the equity reserve deriving from the first application of IFRS 9 equal to 32 million euro, and in particular the impairment of trade receivables according to the expected losses model. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 71 Reconciliation between A2A S.p.A. net income and the net income of the Group millions of euro 12 31 2022 12 31 2021 Result of the year of A2A S.p.A. 545 485 Intra-group dividends eliminated from the consolidated financial statements (463) (444) Net income (loss) of subsidiaries, associates and joint ventures not included in the financial statements of A2A S.p.A. 343 532 Reversal of impairment of subsidiary shareholdings in the financial statements of A2A S.p.A. - 2 Other consolidation adjustments (24) (71) Group result of the year 401 504 Reconciliation between the equity of A2A S.p.A. and equity pertaining to the Group millions of euro 12 31 2022 12 31 2021 Equity pertaining to A2A S.p.A. 3,603 3,332 \- Elimination of the portion of the equity reserve resulting from profit on intra-group operations for the transfer of business units (370) (378) \- Retained earnings/(accumulated losses) 510 579 \- Intra-group dividends eliminated from the consolidated financial statements (463) (444) \- Result of subsidiaries not included in the financial statements of A2A S.p.A. 343 532 \- Reversal of impairment of subsidiary shareholdings in the financial statements of A2A S.p.A. - 2 \- Other consolidation adjustments 276 137 Equity pertaining to the Group 3,899 3,760 15) Result of the year Positive result for 401 million euro. 16) Minority interests millions of euro Balance at 12 31 2021 Changes Balance at 12 31 2022 Minority interests 543 25 568 “Minority interests” amounted to 568 million euro (543 million euro at December 31, 2021) and mainly represent the portions of capital, reserves and result pertaining to minority shareholders related to third-party shareholders. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 72 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report Liabilities Non-current liabilities 17) Non-current financial liabilities millions of euro Balance at 12 31 2021 First-time consolidation effect acquisitions 2022 Changes Balance at 12 31 2022 of which included in the NFP 12 31 2021 12 31 2022 Non-convertible bonds 3,180 - 1,432 4,612 3,180 4,612 Payables to banks 851 115 (44) 922 851 922 Non-current financial payables for rights of use 89 19 24 132 89 132 Payables to other lenders 202 \- (1) 201 202 201 Total non-current financial liabilities 4,322 134 1,411 5,867 4,322 5,867 “Non-current financial liabilities” amounted to 5,867 million euro (4,322 million euro at December 31, 2021), with an increase of 1,411 million euro, net of the first-time consolidation effect of the year for 134 million euro. “Non-convertible bonds” amounting to 4,612 million euro (3,180 million euro at December 31, 2021) relate to the following bonds, which are accounted for at amortized cost: • 300 million euro, Private Placement maturing in March 2024 and coupon of 1.25%, the nominal value of which is equal to 300 million euro; • 299 million euro, maturing in February 2025 and coupon of 1.75%, the nominal value of which is equal to 300 million euro; • 297 million euro, maturing in October 2027 and coupon of 1.625%, the nominal value of which is equal to 300 million euro; • 99 million euro, Private Placement in yen maturing in August 2036 and fixed rate of 5.405%, the nominal value of which is equal to 14 billion yen; • 396 million euro, maturing in July 2029 and coupon of 1.00%, the nominal value of which is equal to 400 million euro; • 494 million euro, maturing in October 2032 and coupon of 0.625%, the nominal value of which is equal to 500 million euro; • 496 million euro, maturing in July 2031 and coupon of 0.625%, the nominal value of which is equal to 500 million euro; • 495 million euro, maturing in November 2033 and coupon of 1%, the nominal value of which is equal to 500 million euro; • 495 million euro, maturing in March 2028 and coupon of 1.5%, the nominal value of which is equal to 500 million euro; • 596 million euro, maturing in June 2026 and coupon of 2.5%, the nominal value of which is equal to 600 million euro; • 645 million euro, maturing in September 2030 and coupon of 4.5%, the nominal value of which is equal to 650 million euro. The increase in the non-current component of “Non-convertible bonds” of 1,432 million euro compared to December 31, 2021 was due to the counter effect of the subscription of the three new bonds maturing in 2026, 2028 and 2030 (respectively with nominal value 600 million euro, 500 million euro and 650 million euro, recorded in the financial statements net of amortized cost), partly offset by the reclassification to “Current financial liabilities” of the bond maturing in 2023 (300 million euro) and the decrease in the ECB exchange rate applied to the yen bond. “Payables to banks” amounted to 922 million euro. This item recognized the principal portion of loans granted by the European Investment Bank in the amount of 620 million euro and by various credit institutions in the amount of 303 million euro, net of the adjustment for amortized cost valuation in the amount of 1 million euro. The effect of the first-time consolidations led to an increase of 115 million euro. The additional decrease of 44 million euro at year-end was attributable to the decrease due to the reclassification to current liabilities of principal portions maturing in 2023 in the amount of 216 million euro, partly offset by the increase related to new loan agreements in the amount of 172 million euro. Non-current “Financial payables for rights of use” amounted to 132 million euro. This item increased by 24 million euro compared to the previous year, net of the first-time consolidations of 19 million euro, due to new rental and lease agreements signed during the year. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 73 “Payables to other lenders”, which include a loan granted by Cassa Depositi e Prestiti in the amount of 200 million euro and payables to others in the amount of 1 million euro, decreased by 1 million euro as a result of the reclassification to Current financial liabilities of the portions of principal due within one year. For an analysis of the maturity dates of each item of these payables, please refer to the special detailed table in the “Other Information” section in chapter 6) Financial Risk Management in paragraph d. Liquidity risk, while for further analysis of the division between fixed-rate and variable-rate payables, please refer to the special detailed table in paragraph b. Interest rate risk. The following table shows the comparison, for each long-term debt category, between the book value and the fair value, as well as the portion maturing in the following 12 months, as better described in note 22) Current financial liabilities. For listed debt instruments, the fair value is determined using stock prices, while for unlisted securities the fair value is determined using valuation models for each category of financial instrument and using market data relating to the closing date of the financial year, including the credit spreads of the A2A Group. Please note that this table does not contain the valuation of financial payables for rights of use. millions of euro Nominal value Book value Current portion Non-current portion Fair Value Bonds 4,948 4,950 338 4,612 4,250 Loans from banks and other lenders 1,774 1,776 653 1,123 1,612 Total 6,722 6,726 991 5,735 5,862 18) Employee benefits At December 31, 2022, the balance of this item amounted to 248 million euro (294 million euro at December 31, 2021) with changes as follows: millions of euro Balance at 12 31 2021 First-time consolidation effect acquisitions 2022 Provisions Uses Other changes Balance at 12 31 2022 Employee leaving entitlement (TFR) 136 1 37 (15) (49) 110 Employee benefits 158 - - (9) (11) 138 Total employee benefits 294 1 37 (24) (60) 248 The change during the year is attributable for 37 million euro to provisions for the year, for 24 million euro to the decrease due to disbursements and for 34 million euro to the net decrease related to payments to pension funds. In addition, the actuarial valuations for the year include the decrease resulting from actuarial gains/losses for a total of 26 million euro, mainly as a result of the increase in discount rates. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 74 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report Technical valuations were carried out on the basis of the following assumptions: millions of euro 2021 2022 Discount rate from -0.17% to 0.98% from 3.34% to 3.77% Annual inflation rate 1.75% 2.30% Annual seniority bonus increase rate 2.0% 2.0% Annual additional months increase rate 0.0% 0.0% Annual cost of electricity increase rate 2.0% 2.0% Annual cost of gas increase rate 0.0% 0.0% Annual salary increase rate 1.0% 1.0% Annual TFR increase rate 2.8% 3.2% Average annual increase rate of supplementary pensions 1.1% 1.1% Annual turnover frequencies from 2.0% to 5.0% from 2.0% to 5.0% Annual TFR advance frequencies from 2.0% to 2.5% from 2.0% to 2.5% It is noted that: • the annual discount rate used to determine the present value of the bond has been derived, in line with paragraph 83 of IAS 19, from the Iboxx Corporate AA index recognized at the measurement date. For this purpose, the yield with duration comparable to the duration of the work group evaluated was chosen; • the annual rate of salary increase applied exclusively to companies with fewer than 50 employees on average in 2006 was determined on the basis of the reference data communicated by Group companies; • the annual rate of TFR increase, according to art. 2120 of the Civil Code, is equal to 75% of inflation plus 1.5 percentage points; • the annual advance and turnover frequencies are derived from historical experiences of the Group and the frequencies arising from the experience of the Actuary on a significant number of similar companies; • for the demographic technical bases, it is noted that: for “death”, the tables TG62 (Premungas), AS62 (Electricity and gas discount) and RG48 (other plans) were used; for “inability”, the INPS tables divided by age and gender were used; for “retirement”, the 100% parameter was used upon reaching the requirements of AGO (Obligatory General Insurance) in accordance with LD no. 04/2019; for the “probability of leaving the family”, the table in the INPS model was used for projections to 2010 updated; for the “frequency of the various structures of surviving nuclei and average age of members”, the table in the INPS model was used for projections to 2010. 19) Provisions for risks, charges and liabilities for landfills millions of euro Balance at 12 31 2021 First-time consolidation effect acquisitions 2022 Provisions Releases Uses Other changes Balance at 12 31 2022 Decommissioning provisions 327 1 - (10) (14) (43) 261 Landfill closing and post-closing expense provisions 213 - 3 (34) (7) - 175 Tax provisions 54 - 2 (1) - (1) 54 Personnel lawsuits and disputes provisions 52 1 2 (6) (8) (1) 40 Other risk provisions 151 6 54 (8) (7) 3 199 Provisions for risks, charges and liabilities for landfills 797 8 61 (59) (36) (42) 729 Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 75 At December 31, 2022, provisions for risks, charges and liabilities for landfills amounted to 729 million euro and showed an overall decrease of 68 million euro. “Decommissioning provisions”, which amounted to 261 million euro, include charges for costs of dismantling and recovery of production sites mainly related to thermoelectric plants and waste-to-energy plants. The changes for the year concerned uses for 14 million euro, to cover the expenses incurred during the reporting year, excess amounts for 10 million euro and other decreases for 43 million euro, due to the update of the discount rates used to estimate the future costs of dismantling and recovery of the sites having “Tangible assets” as balancing entry and the update of the appraisals. The first-time consolidation effects amounted to 1 million euro. The “Landfill closing and post-closing expense provisions”, which amounted to 175 million euro, refer to all the costs that will have to be incurred in the future for the sealing of the landfills in cultivation at the reporting date and for the subsequent post-operative management, as required by current regulations. The changes during the year concerned uses for 7 million euro, which represent the actual disbursements in the period in question, net surpluses for 31 million euro relating to the adjustments to the provisions for landfills following the update of the appraisals, inflation rates and discounting. “Tax provisions”, which amounted to 54 million euro, refer to provisions for pending or potential litigation with the tax authorities or territorial entities for direct and indirect taxes, levies and excises. “Personnel lawsuits and disputes provisions”, which totalled 40 million euro, refer to litigation with third parties for 34 million euro and employees for 2 million euro to cover liabilities that may arise from pending litigation, and lawsuits with Social Security Institutions for 4 million euro related to social security contributions that the Group believes it will not be required to pay and are the subject of specific disputes. “Other risk provisions”, which amounted to 199 million euro, refer to provisions relating to public water derivation fees for 88 million euro, to the mobility provision for the costs arising from the corporate restructuring plan for 2 million euro, as well as other provisions for 109 million euro, which also include the provision related to the dispute over the Grottaglie landfill. The main components of these provisions are net allocations of 46 million euro, of which 36 million euro related to additional charges for hydroelectric derivation surcharges, uses of 7 million euro and other increases of 3 million euro. The first-time consolidation effects amounted to 6 million euro. 20) Other non-current liabilities millions of euro Balance at 12 31 2021 First-time consolidation effect acquisitions 2022 Changes Balance at 12 31 2022 of which included in the NFP 12 31 2021 12 31 2022 Other non-current liabilities 118 8 244 370 - - Non-current derivatives 11 1 (12) \- 11 - Total other non-current liabilities 129 9 232 370 11 - At December 31, 2022, the item in question showed an increase of 232 million euro compared to the previous year, net of the effects deriving from the first-time consolidations equal to 9 million euro. “Other non-current liabilities”, which showed a balance of 370 million euro, refer to security deposits from customers, for 341 million euro, the increase of which mainly relates to security deposits to large B2B customers to guarantee energy and gas supplies, reflecting the need to contain the risks connected to the energy scenario, to liabilities pertaining to future years for 13 million euro, to medium/long-term payables to suppliers for 3 million euro, as well as other non-current liabilities for 13 million euro. “Non-current derivatives” amounted to zero million euro and showed, net of the effects deriving from the first-time consolidations equal to 1 million euro, a negative change of 12 million euro, deriving from the fair value measurement of financial instruments at the end of the current year. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 76 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report Current liabilities 21) Trade payables and other current liabilities millions of euro Balance at 12 31 2021 First-time consolidation effect acquisitions 2022 Changes Balance at 12 31 2022 of which included in the NFP 12 31 2021 12 31 2022 Advances 8 35 43 Payables to suppliers 2,886 43 2,552 5,481 Total trade payables 2,894 43 2,587 5,524 \- \- Payables to social security institutions 46 3 49 Current derivatives (commodity derivatives) 3,708 (1,147) 2,561 Other current liabilities of which: 733 26 (363) 396 Payables to personnel 93 1 (1) 93 Payables to Cassa per i Servizi Energetici e Ambientali 143 (60) 83 Tax payables 84 2 12 98 Payables for tax transparency 7 (2) 5 Payables for A.T.O. 2 - 2 Payables to customers for work to be performed 18 19 37 Payables to customers for interest on security deposits 2 - 2 Payables to third-party shareholders 1 - 1 Payables for the purchase of equity investments 31 (31) \- Payables for liabilities of competence of following years 276 5 (281) \- Payables for auxiliary services 17 (17) \- Payables for collections to be allocated 15 (1) 14 Payables to insurance companies 4 (1) 3 Payables for environmental compensation 4 (1) 3 Payables for RAI fee 7 1 8 Sundry payables 29 18 - 47 Total other current liabilities 4,487 26 (1,507) 3,006 \- \- Total trade payables and other current liabilities 7,381 69 1,080 8,530 \- - “Trade payables and other current liabilities” amounted to 8,530 million euro (7,381 million euro at December 31, 2021), an increase of 1,080 million euro, net of the effects deriving from the first-time consolidations in the period amounting to 69 million euro. “Trade receivables” amounted to 5,524 million euro and, compared to the closing of the previous year, represented an increase of 2,587 million euro, excluding the first-time consolidation effects of the period for 43 million euro. The increase is mainly attributable to higher energy commodity prices related to the volatility of the reference scenario, as well as higher purchases of environmental certificates and to an efficient net working capital management policy. “Payables to social security institutions” amounted to 49 million euro, up 3 million euro compared to December 31, 2021 and relate to the Group’s debt position with social security and pension institutions. “Current derivatives” amounted to 2,561 million euro (3,708 million euro at December 31, 2021) and refer to the fair value valuation of commodity derivatives. The decrease was mainly attributable to a reduction in overall volumes traded and the high volatility of energy commodity prices, which had an impact on the differentials between subscription prices and forward prices. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 77 “Other current liabilities” mainly refer to: • payables to personnel for 93 million euro (93 million euro at December 31, 2021), relating to payables to employees for the productivity bonus accrued during the period, as well as the expense for holidays accrued but not taken at December 31, 2022; • payables to Cassa per i Servizi Energetici e Ambientali for 83 million euro (143 million euro at December 31, 2021), regarding the payable for the tariff components, invoiced and not yet paid, as well as the payable for equalization liabilities related both to prior years and the year in question; • tax payables for 98 million euro (84 million euro at December 31, 2021) related to payables to the tax authorities for excise, withholding taxes and VAT; • payables to customers for work to be performed during the next financial year in the amount of 37 million euro (18 million euro at December 31, 2021). 22) Current financial liabilities millions of euro Balance at 12 31 2021 First-time consolidation effect acquisitions 2022 Changes Balance at 12 31 2022 of which included in the NFP 12 31 2021 12 31 2022 Non-convertible bonds 533 (195) 338 533 338 Payables to banks 189 22 440 651 189 651 Current financial payables for rights of use 23 1 7 31 23 31 Payables to other lenders 1 51 (50) 2 1 2 Total current financial liabilities 746 74 202 1,022 746 1,022 “Current financial liabilities” amounted to 1,022 million euro (746 million euro at December 31, 2021) and, net of the first-time consolidation effects of 74 million euro in the year, showed an increase of 202 million euro. “Non-convertible bonds” amounted to 338 million euro and showed a decrease of 195 million euro, as the net effect of the decrease for the principal repaid for a bond that matured in January 2022 and the reclassification from “Non-current financial liabilities” of the bond maturing in 2023. Current “Payables to banks”, which amounted to 651 million euro, comprises the principal portion of loans granted by the European Investment Bank, in the amount of 82 million euro, by various credit institutions, in the amount of 459 million euro, by utilisation of revolving credit lines and “Hot money”, in the amount of 107 million euro, and accrued interest net of amortized cost, in the amount of 3 million euro. The year-on-year increase of 440 million euro, already net of first-time consolidations of 22 million euro, is related to new bank loans obtained, in the amount of 391 million euro, higher utilisation of revolving credit lines and “Hot money”, in the amount of 36 million euro, and the reclassification from “Non-current financial liabilities” of residual loans due in 2023, net of the portions repaid during the year, in the amount of 13 million euro. Current “Financial payables for rights of use” amounted to 31 million euro. This item showed an increase of 7 million euro over the previous year, net of the first-time consolidation of 1 million euro, as a result of new rental and lease agreements. Current “Payables to other lenders”, which amounted to 2 million euro, were affected during the year by increases due to first-time consolidations of 51 million euro and decreases due to repayments of 50 million euro. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 78 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report 23) Tax liabilities millions of euro Balance at 12 31 2021 First-time consolidation effect acquisitions 2022 Changes Balance at 12 31 2022 Tax liabilities 21 11 102 134 “Tax liabilities” amounted to 134 million euro (21 million euro at December 31, 2021), an increase of 102 million euro compared to the previous year-end, excluding the first-time consolidation effect of the year equal to 11 million euro. This item includes, net of the amounts paid during the year, the payables for 117 million euro relating to the Extraordinary Solidarity Contribution determined pursuant to article 1, paragraphs 115-119 of Law no. 197 of December 29, 2022 (Budget Law 2023), to the recognition of the current IRAP for the 2022 financial year, as well as to the still unpaid portion of the substitute tax recognized in the 2021 financial year following the realignment pursuant to L.D. 104/2020. 24) Liabilities directly associated with non-current assets held for sale millions of euro Balance at 12 31 2021 First-time consolidation effect acquisitions 2022 Changes Balance at 12 31 2022 of which included in the NFP 12 31 2021 12 31 2022 Liabilities directly associated with non-current assets held for sale 15 - (15) \- - - At December 31, 2022, “Liabilities directly associated with non-current assets held for sale” showed no value (15 million euro at December 31, 2021). The item at December 31, 2021 referred to the reclassification of some liabilities related to the gas distribution networks business unit referring to ATEMs considered non-strategic for the Group. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 79 3.12 Net debt 25) Net debt (pursuant to Communication ESMA/31-62-1426) The following table provides details of net financial debt: millions of euro Note 12 31 2021 First-time consolidation effect acquisitions 2022 12 31 2022 Bonds \- non-current portion 17 3,180 4,612 Bank loans \- non-current portion 17 851 115 922 Non-current payables to other lenders 17 202 201 Non-current financial payables for rights of use 17 89 19 132 Other non-current liabilities 20 11 1 - Total medium/long-term debt 4,333 135 5,867 Non-current financial assets \- related parties 3 (5) (5) Non-current financial assets 3 (19) (1) (16) Other non-current assets 5 - (4) (12) Total medium/long-term financial receivables (24) (5) (33) Total non-current net debt 4,309 130 5,834 Bonds \- current portion 22 533 338 Bank loans \- current portion 22 189 22 651 Current payables to other lenders 22 1 51 2 Current financial payables for rights of use 22 23 1 31 Other current liabilities 21 31 - Total short-term debt 777 74 1,022 Other current financial assets 9 (8) (12) Financial assets – related parties 9 (1) (2) Total short-term financial receivables (9) (14) Cash and cash equivalents 11 (964) (180) (2,584) Total current net debt (196) (106) (1,576) Net debt 4,113 24 4,258 The Group net financial position was 4,258 million euro. Insofar as the disclosure about indirect financial debt is concerned, the Group has identified financial commitments due within one year in connection with employee benefits, decommissioning provisions and liabilities for landfills, tax disputes and reverse factoring, amounting to about 80 million euro. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 80 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report Pursuant to IAS 7 “Cash Flow Statement”, the following are the changes in financial assets and liabilities: millions of euro 12 31 2021 Cash flow Non-cash flow 12 31 2022 First-time consolidation effect acquisitions 2022 Change in fair value Other changes Bonds 3,713 1,256 - (7) (12) 4,950 Financial payables 1,355 304 208 - 72 1,939 Other liabilities 42 (31) 1 (12) - - Financial assets (33) (3) (1) - 2 (35) Other activities - - (4) (8) - (12) Net liabilities deriving from financing activities 5,077 1,526 204 (27) 62 6,842 Cash and cash equivalents (964) (1,440) (180) - - (2,584) Net debt 4,113 86 24 (27) 62 4,258 Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 81 3.13 Notes to the income statement For changes in the scope of consolidation as at December 31, 2022, please refer to the “Notes to the Balance Sheet” section. Moreover, the economic figures at December 31, 2022 are not consistent with the previous year due to the following extraordinary transactions in 2021: • acquisition by A2A Ambiente S.p.A. and line-by-line consolidation of 100% of TecnoA S.r.l., a company operating in the treatment of special waste in December 2021; • acquisition and line-by-line consolidation by LGH S.p.A. (now merged into A2A S.p.A.) of 100% of the shares in Agripower S.p.A., a company specialising in the development and management of power generation plants from biogas, as of April 2021; • acquisition by A2A Rinnovabili S.p.A. and line-by-line consolidation of 15 companies with 17 plants and 173 MW of installed photovoltaic capacity, previously managed by Octopus Renewables, as of April 2021; • acquisition and line-by-line consolidation by A2A Rinnovabili S.p.A. of Gash 1 S.r.l. and Gash 2 S.r.l., two project companies with authorization to build two photovoltaic plants, as of April 2021. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 82 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report 26) Revenues Revenues for the year totalled 23,166 million euro (11,549 million euro at December 31, 2021), therefore increasing by 11,617 million euro. Details of the more significant items are as follows: millions of euro 12 31 2022 12 31 2021 Change % 2022/2021 Revenues from the sale of goods 21,604 10,129 11,475 n.s Revenues from services 1,342 1,223 119 9.7% Total revenues from the sale of goods and services 22,946 11,352 11,594 n.s Other operating income 220 197 23 11.7% Total revenues 23,166 11,549 11,617 n.s The change is mainly related to the bullish dynamics of commodity prices that characterized the current year and is attributable to: • nearly 60% to the wholesale energy markets, in particular electricity price increases; the contribution related to the growth of sold and intermediated volumes is residual; • more than 40% to retail markets mainly due to higher electricity, gas and heat unit prices. Further details of the main items are as follows: millions of euro 12 31 2022 12 31 2021 Change % 2022/2021 Sale and distribution of electricity 14,839 6,572 8,267 n.s Sale and distribution of gas 6,076 2,814 3,262 n.s Sale of heat 340 220 120 54.5% Sale of materials 81 75 6 8.0% Sale of water 83 90 (7) (7.8%) Sales of environmental certificates 153 323 (170) (52.6%) Connection contributions 32 35 (3) (8.6%) Total revenues from the sale of goods 21,604 10,129 11,475 n.s. Services to customers 1,342 1,223 119 9.7% Total revenues from services 1,342 1,223 119 9.7% Total revenues from the sale of goods and services 22,946 11,352 11,594 n.s. Reintegration of costs – S. Filippo del Mela plant (Essential Unit plant) \- 15 (15) (100.0%) Damage compensation 14 9 5 55.6% Contributions \- Cassa Servizi Energetici ed Ambientali 6 8 (2) (25.0%) Rents receivable 4 4 \- 0.0% Contingent assets 36 50 (14) (28.0%) Incentives for production from renewable sources (feed-in tariff) 44 74 (30) (40.5%) Other revenues 116 37 79 n.s Other operating income 220 197 23 11.7% Total revenues 23,166 11,549 11,617 n.s. Revenue from heat sales increased by 120 million euro mainly as a result of higher prices in the year under review compared to 2021. The item “Other operating revenues” increased by 23 million euro mainly due to higher other revenues related to the contribution in the form of a tax credit for the purchase of energy and/or natural gas (Law 21/2022, art. 3_4 ele and gas) for 40 million euro, and the reimbursement of water items in the past for 15 million euro partially offset by lower revenues related to incentives on net production from renewable sources for 30 million euro. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 83 Further details on the reasons for the performance of revenues relating to the various Business Units can be found in the paragraph “Result by sector”. 27) Operating expenses “Operating expenses” amounted to 20,896 million euro (9,400 million euro at December 31, 2021), therefore representing an increase of 11,496 million euro. The main components of this item are as follows: millions of euro 12 31 2022 12 31 2021 Change % 2022/2021 Costs for raw materials and consumables 18,634 7,563 11,071 n.s. Costs for services 1,868 1,525 343 22.5% Total costs for raw materials and services 20,502 9,088 11,414 n.s. Other operating expenses 394 312 82 26.3% Total operating expenses 20,896 9,400 11,496 n.s. “Total costs for raw materials and services” amounted to 20,502 million euro (9,088 million euro at December 31, 2021), increasing by 11,414 million euro. This increase was due to the combined effect of the following factors: • an increase of 11,317 million euro in the purchase of raw materials and consumables, due to an increase in costs for the purchase of power and fuel of 11,138 million euro, an increase in the costs relating to the purchase of environmental certificates of 153 million euro, an increase in purchase of materials of 38 million euro and a net decrease of 12 million euro arising from hedging gains and losses on operating derivatives; • an increase of 343 million euro in costs for delivery, subcontracted work and services; • the decrease in inventories of fuel and materials for 246 million euro. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 84 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report For further information, the following table sets out details of the more significant components: millions of euro 12 31 2022 12 31 2021 Change % 2022/2021 Purchases of power and fuel 18,007 6,869 11,138 n.s. Purchases of materials 196 158 38 24.1% Purchases of water 3 3 \- 0.0% Hedging losses on operating derivatives 14 4 10 n.s. Hedging gains on operating derivatives (34) (12) (22) n.s. Purchases of emission certificates and allowances 749 596 153 25.7% Total expenses for raw materials and consumables 18,935 7,618 11,317 n.s. Delivery and transmission expenses 990 808 182 22.5% Maintenance and repairs 221 203 18 8.9% Other services 657 514 143 27.8% Total expenses for services 1,868 1,525 343 22.5% Change in inventories of fuel and materials (301) (55) (246) n.s. Total expenses for raw materials and services 20,502 9,088 11,414 n.s. Leasehold improvements 133 118 15 12.7% Concession fees 119 102 17 16.7% Contributions to territorial entities, consortia and ARERA 13 12 1 8.3% Taxes and duties 74 36 38 n.s. Damages and penalties 4 5 (1) (20.0%) Contingent liabilities 34 19 15 78.9% Other expenses 17 20 (3) (15.0%) Other operating expenses 394 312 82 26.3% Total operating expenses 20,896 9,400 11,496 n.s. The item “Other services” totalling 657 million euro includes, among others, communication costs of 33 million euro (in the previous year, they amounted to 32 million euro). Trading margin The following table sets out the results arising from the Trading Portfolio, including the effect of changes in derivative instruments; these figures relate to trading in electricity, gas and environmental certificates. millions of euro 12 31 2022 12 31 2021 Change Revenues 13,374 247 13,127 Operating expenses (13,293) (221) (13,072) Total trading margin 81 26 55 The trading margin was positive for 81 million euro, an increase of 55 million euro compared to December 31, 2021. During the financial year 2022, there were multiple values of European electricity and gas prices compared to the values recorded on average during 2021\. In addition to the extraordinary levels of commodity prices, the persistence of exceptional volatility coupled with decreasing market liquidity contributed to the widening of absolute market bid/ask values while forcing traders to execute trades quickly. The concomitant gradual rise in prices was accompanied by a drastic drop in demand with a reduction in natural gas consumption, while the impact of the mild winter was additionally felt in the latter part of the year. The combination of these contingencies led to an uncertainty in the balance between supply and demand. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 85 In continuity with what was done in the first half of 2022, it was therefore possible to continue to trade profitably by exploiting opportunities characterised by very narrow execution time windows to the benefit of trading, flow intermediation, price quotation and market making activities. 28) Labour costs Net of capitalized expenses, labour costs at December 31, 2022 amounted to 765 million euro (721 million euro at December 31, 2021). “Labour costs” may be analysed as follows: millions of euro 12 31 2022 12 31 2021 Change % 2022/2021 Wages and salaries 589 562 27 4.8% Social security charges 196 189 7 3.7% Employee leaving entitlement (TFR) 37 35 2 5.7% Other costs 48 35 13 37.1% Total labour costs before capitalizations 870 821 49 6.0% Capitalized labour costs (105) (100) (5) 5.0% Total labour costs 765 721 44 6.1% The table below shows the average number of employees by category: 12 31 2022 12 31 2021 Change Managers 200 206 (6) Middle Managers 828 786 42 White-collar workers 5,980 5,729 251 Blue-collar workers 6,447 6,455 (8) Total 13,455 13,176 279 At December 31, 2022, the average labour cost per capita amounted to 56.86 thousand euro, up 3.9% from the previous year (when it was 54.72 thousand euro). The increase is mainly attributable to the increase in the existing workforce, the salary increases provided for by national collective labour agreements, and remuneration policy actions. At December 31, 2022, the Group had 13,655 employees. At December 31, 2021, the Group had 13,267 employees. Other labour costs include less than 1 million euro (value less than 1 million euro at December 31, 2021) costs relating to the total cost of the company’s restructuring plan related to future staff leaving for redundancy. 29) Gross operating income As a result of the above changes, consolidated “Gross operating income” at December 31, 2022 amounted to 1,505 million euro (1,428 million euro at December 31, 2021). For further information, please refer to the description in the paragraph “Analysis of the main business sectors” in the Report on Operations. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 86 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report 30) Depreciation, amortization, provisions and write-downs “Depreciation, amortization, provisions and write-downs” totalled 818 million euro (768 million euro at December 31, 2021), representing an increase of 50 million euro. The following table provides details of the individual items: millions of euro 12 31 2022 12 31 2021 Change % 2022/2021 Amortization of intangible assets 233 201 32 15.9% Depreciation of tangible assets 491 465 26 5.6% Net write-downs of fixed assets 2 13 (11) (84.6%) Total amortization, depreciation and write-downs 726 679 47 6.9% Provisions for risks 2 56 (54) (96.4%) Bad debt provision on receivables recognized as current assets 90 33 57 n.s Total depreciation, amortization, provisions and write-downs 818 768 50 6.5% “Depreciation, amortization and write-downs” amounted to 726 million euro (679 million euro as at December 31, 2021). Amortization of intangible assets amounted to 233 million euro (201 million euro at December 31, 2021). The item increased by 32 million euro, of which 13 million euro related to the implementation of information systems, 5 million euro to the integrated water service and gas distribution and metering, 5 million euro related to the new customer lists of the companies Yada Energia and A2A Energia, and 9 million euro to changes in the scope of consolidation. Depreciation of tangible assets showed an increase of 26 million euro compared to December 31, 2021 and includes: • higher depreciation of 17 million euro resulting from the first-time consolidations of the companies acquired in 2022 and 2021; • higher depreciation of 2 million euro for rights of use; • higher depreciation of 3 million euro related to the photovoltaic panel divestment plan of the Sermide and Chivasso plants; • higher depreciation of 10 million euro, mainly relating to the investments, which went into production after December 31, 2021; • higher depreciation of 2 million euro following the resumption of depreciation calculations on the wet works of the Valtellina Unit; • lower depreciation of 2 million euro related to the disinvestment plan for the assets of the Linea 1 waste-to-energy treatment and storage plant in Parona; • lower depreciation of 3 million euro following the change of the useful life of the San Filippo del Mela plant to 2025; • lower depreciation of 3 million euro related to the increase in discount rates on the closure/post closure provisions for landfills and decommissioning. Write-downs for the year amounted to 2 million euro and referred for 1 million euro to the write-down on the Rovato plant and for 1 million euro to the abandonment of projects no longer in the company’s core business (13 million euro at December 31, 2021). “Provisions for risks” had a net effect of 2 million euro (net effect of 56 million euro at December 31, 2021) due to accruals for the year of 61 million euro relating to the accrual for public water derivation fees of 43 million euro, accruals for closure and post-closure expenses on landfills of 3 million euro, accruals to tax provisions of 2 million euro, accruals for pending litigation of 2 million euro and other accruals of 11 million euro, adjusted, for 59 million euro, by the release of provisions for closure and post-closure expenses on landfills for 44 million euro, the release of provisions for hydroelectric derivation surcharges for 6 million euro, the release of provisions for litigation and tax disputes for 7 million euro, and other releases for 2 million euro. For further information, reference is made to note 19) Provisions for risks, charges and liabilities for landfills. The “Bad debt provision” amounted to 90 million euro (33 million euro at December 31, 2021), of which 88 million euro related to the provision for the year for risks on trade receivables and 2 million euro to the provision for risks on other receivables. 31) Net operating income “Net operating income” amounted to 687 million euro (660 million euro at December 31, 2021). Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 87 32) Result from non-recurring transactions The “Result from non-recurring transactions” amounted to 157 million euro (no value at December 31, 2021) and is related to the gain deriving from the sale of the three properties located in Milan in February 2022. 33) Financial balance The “Financial balance” closed with net expense of 88 million euro (net expense of 70 million euro at December 31, 2021). Details of the more significant items are as follows: millions of euro 12 31 2022 12 31 2021 Change % 2022/2021 Financial income 35 17 18 n.s. Financial expenses (125) (89) (36) 40.4% Portion of income and expenses when shareholdings are carried at equity 2 2 \- - Total financial balance (88) (70) (18) 25.7% “Financial income” amounted to 35 million euro (17 million euro at December 31, 2021) and may be analysed as follows: Financial income millions of euro 12 31 2022 12 31 2021 Change % 2022/2021 Bank income 3 \- 3 n.s. Realized on financial derivatives 2 \- 2 n.s. Gains on disposals of financial assets 4 2 2 100.0% Other financial income of which: 26 15 11 73.3% Financial income from the Municipality of Brescia (IFRIC 12) 10 6 4 66.7% Foreign exchange gains 5 3 2 66.7% Other income 11 6 5 83.3% Total financial income 35 17 18 n.s. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 88 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report “Financial expenses”, which amounted to 125 million euro, increased by 36 million euro over the year ended December 31, 2021, and may be analysed as follows: Financial expenses millions of euro 12 31 2022 12 31 2021 Change % 2022/2021 Interest on bond loans 74 63 11 17.5% Interest charged by banks 15 4 11 n.s. Interest on Cassa Depositi e Prestiti loans 1 \- 1 n.s. Realized on financial derivatives 1 3 (2) (66.7%) Decommissioning costs 9 2 7 n.s. Other financial expenses of which: 25 17 8 47.1% Discounting charges 11 3 8 n.s. Financial expenses (IFRS 16) 2 1 1 100.0% Financial expenses (IFRIC 12) 4 2 2 100.0% Foreign exchange losses 3 2 1 50.0% Other expenses 5 9 (4) (44.4%) Total financial expenses before capitalizations 125 89 36 40.4% Capitalized financial expenses \- - - 0.0% Total financial expenses 125 89 36 40.4% The increase in interests on bond loans in the amount of 11 million euro is mainly attributable to the issuance of three new Bonds during the financial year, totalling 1,750 million euro, partially offset by the redemption of matured bonds in the amount of 500 million euro. The increase in financial expenses to credit institutions, amounting to 11 million euro, is attributable to both the Euribor curve trend, which led to higher expenses of 7 million euro on variable-rate loans, and to the new loans taken out and the utilisation, during the year, of short-term credit lines for liquidity needs related to margining for commodity derivatives, totalling 4 million euro. The Equity method valuation of shareholdings was positive for 2 million euro (2 million euro at December 31, 2021), mainly attributable to the positive valuation of the shareholdings held in some associated companies. 34) Income taxes millions of euro 12 31 2022 12 31 2021 Change % 2022/2021 Current IRES 150 166 (16) (9.6%) Current IRAP 42 35 7 20.0% Effect of differences \- taxes of previous years (5) (5) - 0.0% Total current taxes 187 196 (9) (4.6%) Deferred tax assets 35 22 13 59.1% Deferred tax liabilities - (182) 182 n.s. Solidarity contribution L. 197/2022 117 - 117 n.s. Contribution L.D. no. 21 of March 21, 2022 5 - 5 n.s. Total income taxes 344 36 308 n.s. “Income taxes” for the year amounted to 344 million euro (36 million euro at December 31, 2021) and the breakdown is as follows: • for 150 million euro current Ires for the year; • for 42 million euro current Irap for the year; • for -5 million euro taxes of previous years; • for 35 million euro deferred tax assets; Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 89 • for 117 million euro Extraordinary Solidarity Contribution planned for the year 2023, determined pursuant to article 1, paragraphs 115-119 of Law no. 197 of December 29, 2022 (Budget Law 2023); • for 5 million euro Extraordinary Contribution pursuant to L.D. no. 21 of March 21, 2022, converted into Law no. 51 of May 20, 2022 (L.D. Taglia Prezzi). The parent A2A has determined the IRAP taxes for 2022 on the basis of the application of art. 5 of Legislative Decree no. 446 of December 15, 1997\. The parent A2A has determined IRAP at an average rate of 4.24% since, pursuant to art. 162-bis of Presidential Decree no. 917 of December 22, 1986, in 2022 it did not qualify as a so-called “industrial holding”. It is noted that the previous year, in which the item for income taxes was 36 million euro, reflected the release of deferred tax liabilities as a result of the realignment option pursuant to L.D. 104/2020, exercised by some Group companies, which allowed the realignment of the differences between higher statutory values and lower values for tax purposes on tangible assets and the consequent deduction of higher tax amortization starting from the current year. The reconciliation between the tax burden posted in the Consolidated Financial Statements and theoretical tax liabilities, calculated on the basis of theoretical rates applicable in Italy, is as follows: Reconciliation between the tax burden posted in the financial statements and theoretical tax liabilities millions of euro 2022 2021 Pre-tax result 756 590 Net write-downs of fixed assets 2 13 Pre-tax result adjusted by write-downs and the result of assets held for sale 758 603 Theoretical rates based on applicable tax rates (1) 182 145 Tax effect of write-downs - (3) Adjustment of prior year taxes (11) (5) Reversal of deferred tax liabilities/assets - (168) Substitute tax for realignment - 23 Permanent differences 9 9 Contribution L.D. no. 21 of March 21, 2022 5 - Solidarity contribution L. 197/2022 117 - Total taxes charged to Income statement (excluding IRAP) 302 1 CURRENT IRAP 42 35 Total taxes charged to Income statement 344 36 (1) Taxes have been calculated considering a theoretical IRES rate of 24%. 35) Net result from discontinued operations The “Net result from discontinued operations” was equal to 36 million euro (negative and equal to 4 million euro at December 31, 2021) and referred mainly to the gain related to the sale of some assets concerning gas distribution referring to ATEMs considered non-strategic for the Group. 36) Result of minorities The “Result of minorities” was negative for the Group for 47 million euro and mainly included the portion attributable to minority interests of the Acinque Group and the AEB Group. In the previous year, the item showed a negative balance for the Group for 46 million euro. 37) Group result of the year The “Group result of the year” was positive for 401 million euro (positive for 504 million euro at December 31, 2021). 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 90 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report 38) Earnings per share 01 01 2022 12 31 2022 01 01 2021 12 31 2021 Earnings (loss) per share (in euro) \- basic 0.1281 0.1639 \- basic, from continuing operations 0.1167 0.1651 \- basic, from assets held for sale 0.0114 (0.0012) \- diluted 0.1281 0.1639 \- diluted, from continuing operations 0.1167 0.1651 \- diluted, from assets held for sale 0.0114 (0.0012) Weighted average number of outstanding shares for the calculation of earnings (loss) per share \- basic 3,073,686,277 3,073,686,277 \- diluted 3,073,686,277 3,073,686,277 3.14 Earnings per share Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 91 3.15 Note on related party transactions 39) Note on related party transactions The definition of “related parties” is included in the international accounting standard describing the disclosures, which must be made for related party transactions in financial statements (revised IAS 24). Relationships with parent companies and their subsidiaries On October 5, 2007, the Municipalities of Milan and Brescia signed a Shareholders’ Agreement to regulate the ownership structure of A2A S.p.A.; this gave the Municipalities joint control over the company. Specifically, the merger effective January 1, 2008, regardless of the legal structure established, was considered a joint venture, whose joint control was exercised by the Municipalities of Milan and Brescia, each of which owned a share equal to 27.5%. On June 13, 2014, the Shareholders’ Meeting modified the company’s governance system, passing from the original two-tier system, adopted in 2007, to a “traditional” system of management and control through the appointment of the Board of Directors. In December 2014, the Municipalities of Milan and Brescia sold a total shareholding of 0.51% of A2A S.p.A., while in the first two months of 2015, the Municipalities of Milan and Brescia sold an additional shareholding of 4.5% of A2A S.p.A.. On October 4, 2016, the Municipalities of Milan and Brescia renewed for another three years, with effect from January 1, 2017, the Shareholders’ Agreement signed on December 30, 2013, concerning 1,566,452,642 ordinary shares representing 50% plus two shares of the share capital of A2A S.p.A.. On May 20, 2016, the two Municipalities had proceeded to sign an appendix to the Agreement, which envisaged reducing from six months to three months the term of the agreement, during which it is possible to terminate the same. On October 26, 2016, the Municipality of Milan received from the Municipality of Brescia the proposal, approved by the Council of said Municipality on October 25, 2016, to partially amend the shareholders’ agreement relating to A2A S.p.A. existing between the two Municipalities. In particular, said proposal requires the commitment of the two Municipalities to maintain syndicated and bound, in the new agreement, a number of shares held by them in equal measure, equal to 42% of the share capital of A2A S.p.A.. On November 4, 2016, the Council of the Municipality of Milan, after having favourably examined the proposal of the Municipality of Brescia of a partial amendment to the shareholders’ agreement, submitted to the Municipal Council the proposal of the new shareholders’ agreement for the final determinations of competence. On January 23, 2017, the Milan City Council approved the new Shareholders’ Agreement between the Municipality of Milan and the Municipality of Brescia regarding the shareholding in A2A S.p.A. and has undertaken the commitment not to proceed with the disposal of any shares owned by the Municipality of Milan. On August 2, 2019, the Municipality of Milan, also on behalf of the Municipality of Brescia, announced that the aforementioned Shareholders’ Agreement was not subject to termination. Consequently, the agreement is to be considered renewed with effect from February 1, 2020 to January 31, 2023. On August 2, 2022, the Municipality of Milan, also on behalf of the Municipality of Brescia, announced that the aforementioned Shareholders’ Agreement was not subject to termination. Consequently, the agreement is to be considered renewed with effect from February 1, 2023 to January 31, 2026\. At the date of approval of these Separate Financial Statements at December 31, 2022, each of the two shareholders had a 25% shareholding of the share capital plus one share (overall equal to 50% plus two shares), which allows the two municipalities to maintain control over the Company. The A2A Group companies and the Municipalities of Milan and Brescia routinely entertain commercial relationships related to the supply of electricity, gas, heat, and potable water, management of public lighting systems and street lights, management of water purification and sewers, garbage collection and street sweeping and video surveillance. Similarly, the A2A Group companies entertain commercial relationships with the companies controlled directly and indirectly by the Municipalities of Milan and Brescia, for example, Metropolitana Milanese S.p.A., ATM S.p.A., Brescia Mobilità S.p.A., Brescia Trasporti S.p.A. and Centrale del Latte di Brescia S.p.A., supplying them with electrical energy, gas, heat, water purification and sewer service at market rates appropriate to the supply conditions and providing the services required. Note that these companies are considered related parties in the preparation of the financial statement schedules pursuant to Consob Resolution 17221 of March 12, 2010. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 92 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report The relationships between the Municipalities of Milan and Brescia and the A2A Group, in relation to granting the services associated with public lighting, street lights, management and supply of electricity, gas, heat, and water purification and sewer service are regulated by special conventions and specific contracts. The relationships between the companies controlled by the Municipalities of Milan and Brescia, which refer to the supply of electricity, are at arm’s length conditions. On April 12, 2017, Amsa S.p.A., a subsidiary of A2A S.p.A., in execution of the original assignment ordered in 2001, signed a contract with the Municipality of Milan for the management of services aimed at environmental protection for the period from January 1, 2017 to February 8, 2021; following the publication of the first tender cancelled by the Municipality in consideration of the appeals notified and the second tender still in progress, the assignment was extended until April 30, 2023\. The tender now in progress was published on December 30, 2021; it is a European open procedure tender for the contracting of the municipal waste management service with reduced environmental impact from a life-cycle perspective, pursuant to the action plan for the environmental sustainability of consumption in the public administration sector (PAN GPP) and the Decree of the Ministry of the Environment and Protection of Land and Sea of February 13, 2014\. The bid submission date, originally set for July 11, 2022, has been set for October 31, 2022\. Two operators notified an appeal against the call for tenders to the Regional Administrative Court of Milan, which in the hearing of November 9, 2022 ordered a verification, appointing ARERA. The next hearing is set for March 8, 2023\. However, it could be postponed if the verification requires additional time. In the context of the same appeals in the second instance, the Council of State ordered the Municipality not to make any award until the conclusion of the judgments on the merits. Amsa submitted a bid. The Municipality of Milan has arranged for technical extensions to ensure the continuity of the service; a new technical extension to December 31, 2023 is being resolved. Relationships with subsidiaries and associates The parent company A2A S.p.A., operates like a centralized treasury for the majority of the subsidiaries. Relations between the companies are regulated through current accounts between the parent company and the subsidiaries, on which rates are applied, at market conditions, based on variable Euribor, with specific spreads for companies. Also for the financial year 2022, A2A S.p.A. and its subsidiaries have adopted the VAT procedure of the Group. Note that for IRES purposes, A2A S.p.A. files for tax on a consolidated basis, together with its main subsidiaries, in accordance with arts. 117-129 of Presidential Decree no. 917/86. To this end, with each of the subsidiaries joining, a special contract was drawn up to regulate the tax advantages/disadvantages transferred, with specific reference to the current entries. These contracts also govern the transfer of any excess of ROL as set forth by prevailing legislation. The parent company provides the subsidiaries and associates with administrative, fiscal, legal, management and technical services in order to optimize the resources available in the company and to use the existing expertise in terms of economic convenience. These services are governed by specific service contracts stipulated annually. A2A S.p.A. also makes office space and operating areas at its own premises available to subsidiaries and associates, as well as associated services. These are provided at market conditions. The companies A2A gencogas S.p.A. and A2A Energiefuture S.p.A., for a monthly fee related to the actual availability of the thermoelectric plants, provide to the Parent Company the power generation service. As of July 1, 2018, the Acinque (formerly ACSM-AGAM) Group’s related-party transactions with related parties of the A2A Group are shown as related parties. As of November 1, 2020, the AEB Group’s related-party transactions with related parties of the A2A Group are shown as related parties. Lastly, in compliance with the requirements of the “Regulation on provisions relating to related party transactions” adopted by Consob with Resolution no. 17221 of March 12, 2010 and subsequently amended by Resolution no. 17389 of June 23, 2010, by way of a resolution of November 11, 2010 the Management Board approved, following the favorable opinion of the Internal Control Committee, the prescribed procedure for identifying the rules and controls designed to ensure the transparency and substantial and procedural correctness of the related party transactions carried out by A2A S.p.A. directly or through its subsidiaries. The aforementioned Procedure was applied effective January 1, 2011 and subsequently amended on August 1, 2012, November 7 and December 18, 2013 and June 22, 2015. Following a periodic review, the Procedure was subsequently amended/supplemented and approved by the Board of Directors on June 20, 2016, subject to the favourable opinion of the Audit and Risks Committee and then updated on June 22, 2017, in view of Consob Resolution no. 19925 of March 22, 2017 and on December 16, 2019, in view of the amendments to art. 192-quinquies of Legislative Decree no. 58 of February 24, 1998 (“TUF”) (art. 4 of Legislative Decree no. 49 of May 10, 2019). Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 93 Lastly, by resolution of the Board of Directors on June 25, 2021, subject to the favourable opinion of the Related Parties Committee established by board resolution of May 13, 2021, the Procedure was amended \- effective as of July 1, 2021 \- to comply with the Related Parties Regulation, as amended by Consob Resolution no. 21624 of December 10, 2020, in implementation of the so-called “Shareholders’ Rights II” Directive. The aforementioned Procedure can be found on the website gruppoa2a.it. Below are the tables with detail of the related party transactions, in accordance with the Consob Resolution no. 17221 of March 12, 2010: Balance sheet millions of euro Total 12 31 2022 Associated companies and subsidiaries of associates Related companies Municipality of Milan Companies controlled directly and indirectly Municipality of Milan Municipality of Brescia Companies controlled directly and indirectly unicipality of Brescia Related parties individuals Total related parties % effect on the balance sheet item Total assets of which: 21,367 51 55 63 25 20 \- \- 214 1.0% Non-current assets 10,229 2 41 \- \- 4 \- \- 47 0.5% Shareholdings 33 2 31 - - - - - 33 100.0% Other non-current financial assets 70 - 10 - - 4 - - 14 20.0% Current assets 11,138 49 14 63 25 16 \- \- 167 1.5% Trade receivables 4,680 49 6 63 25 14 \- \- 157 3.4% Current financial assets 14 - 8 - - 2 - - 10 71.4% Total liabilities of which: 16,900 70 6 1 1 7 \- \- 85 0.5% Current liabilities 9,686 70 6 1 1 7 \- \- 85 0.9% Trade payables 5,524 65 5 1 1 7 \- \- 79 1.4% Other current liabilities 3,006 5 1 - - - - - 6 0.2% 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 94 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report Income statement millions of euro Total 12 31 2022 Associated companies and subsidiaries of associates Related companies Municipality of Milan Companies controlled directly and indirectly Municipality of Milan Municipality of Brescia Companies controlled directly and indirectly unicipality of Brescia Related parties individuals Total related parties % effect on the balance sheet item Revenues 23,166 65 45 334 108 42 3 \- 597 2.6% Revenues from the sale of goods and services 22,946 65 45 334 108 42 3 597 2.6% Operating expenses 20,896 70 9 7 4 8 \- \- 98 0.5% Expenses for raw materials and services 20,502 3 9 \- 4 \- \- \- 16 0.1% Other operating expenses 394 67 \- 7 \- 8 \- \- 82 20.8% Labour costs 765 \- \- \- \- \- \- 2 2 0.3% Financial balance (88) \- 2 \- - 11 - - 13 (14.8%) Financial income 35 - \- - 11 - - 11 31.4% Affiliates 2 - 2 - - - - - 2 100.0% The complete financial statements are included in the section “Consolidated financial statements” of this report pursuant to Consob Resolution no. 17221 of March 12, 2010. It should be noted that during the year, A2A S.p.A. made grants totalling 4 million euro to foundations that have been included on a voluntary basis among related parties. Specifically, these involve: Fondazione AEM, Fondazione ASM, Fondazione LGH E.T.S., Comitato Banco dell’Energia Onlus, Fondazione Teatro alla Scala, Fondazione Brescia Musei and Associazione Centro Teatrale Bresciano. * * * With regard to the compensation paid to the corporate governance bodies, reference shall be made to the document “Remuneration Report – 2022” available on the website gruppoa2a.it. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 95 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 40) Consob Communication no. DEM/6064293 of July 28, 2006 During the month of February, the sale of three buildings located in Milan was concluded for 49 million euro. The sale took place for a monetary value, gross of the tax effect, of 221 million euro and generated an impact on the income statement of 157 million euro recorded under the item “Result from non-recurring transactions”, which also takes into account the recognition of net payables for rights of use equal to 15 million euro. In April, the Group finalized the closing of the sale of certain gas distribution assets related to ATEMs deemed non-strategic. The perimeter of activities covered by the operation includes approximately 157 thousand users, distributed in 8 Italian Regions, belonging to 24 ATEMs, for about 2,800 km of network. The sale took place for a monetary value of 119 million euro against net assets sold for 85 million euro and generated an impact on the income statement of 34 million euro recognized under the item “Net result from discontinued operations”. The A2A Group recognized as taxes for the year 5 million euro by way of Extraordinary Contribution based on L.D. no. 21 of March 21, 2022, converted into Law no. 51 of May 20, 2022 (L.D. Taglia Prezzi), and 117 million euro by way of Extraordinary Solidarity Contribution provided for the year 2023, determined pursuant to article 1, paragraphs 115-119 of Law no. 197 of December 29, 2022 (Budget Law 2023). 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 97 millions of euro 12 31 2022 12 31 2021 Guarantees received 950 966 Guarantees provided 2,505 1,509 Guarantees received Guarantees received amounted to 950 million euro (966 million euro at December 31, 2021) and included 641 million euro for sureties and security deposits issued by subcontractors to guarantee the proper execution of the work assigned and 234 million euro for sureties and security deposits received from customers to guarantee the regularity of payments and guarantees received by the ACINQUE Group for 61 million euro and guarantees received by the AEB Group for 14 million euro. Guarantees provided and commitments with third parties Guarantees provided amounted to 2,505 million euro (1,509 million euro at December 31, 2021), of which for obligations undertaken in the loan agreements of 43 million euro. These guarantees have been issued by banks for 1,592 million euro, insurance companies for 43 million euro and the parent company A2A S.p.A., as parent company guarantee, for 731 million euro and guarantees provided by the ACINQUE Group for 82 million euro and guarantees provided by the AEB Group for 57 million euro. * * * Group companies hold third party assets under concession, relating mainly to the integrated water cycle, amounting to 66 million euro. 3.17 Guarantees and commitments with third parties 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 98 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report 1) Significant events for the group after December 31, 2022 For a description, reference is made to the paragraph "Significant events after December 31, 2022" of the Report on operations. 2) Information on treasury shares At December 31, 2022, A2A S.p.A. had no treasury shares. At December 31, 2022, no treasury shares were held through subsidiaries, finance companies or nominees. 3) Transactions as per IFRS 3 revised In 2022, the A2A Group completed the following acquisitions of investments, which fall within the provisions of IFRS 3: • acquisition by A2A Rinnovabili S.p.A. of 100% of Volta Green Energy S.r.l. and 60% of R2R S.r.l., companies operating in the photovoltaic and wind power sectors, resulting in the line-by-line consolidation of seven companies; • acquisition by A2A Rinnovabili S.p.A. of 100% of 4New S.r.l. and 3 New & Partners S.r.l., companies operating in the photovoltaic and wind power sectors, resulting in the line-by-line consolidation of eleven companies. A2A Rinnovabili S.p.A. also acquired, through its subsidiary 3 New & Partners S.r.l., 100% of 3 New & Partners Rinnovabili S.r.l. (a company incorporated in November 2022) resulting in the line-by-line consolidation of Daunia Calvello S.r.l. and Daunia Serracapriola S.r.l., companies that hold a portfolio of wind farms in Italy; • the acquisition and line-by-line consolidation by A2A Calore & Servizi S.r.l. of 100% of A2A Airport Energy S.p.A., a company engaged in the production and sale of electricity, heat and cooling. The transactions summarized above are classified as business combinations in accordance with international standard IFRS 3 "Business Combinations"; the Group fully consolidated the companies through the application of the acquisition method prescribed by IFRS 3, by virtue of the control obtained on the entities acquired. IFRS 3 requires all business combinations to be accounted for using the acquisition method within twelve months from acquisition. The acquirer must therefore recognize all the identifiable assets, liabilities and contingent liabilities relating to the acquisition at their fair values at the acquisition date and highlight the eventual recognition of goodwill. The fee transferred in a business combination is determined at the date of acquisition of control and is equal to the fair value of assets transferred, liabilities incurred, and any equity instruments issued by the acquirer. Costs directly attributable to the transaction are recognized in the income statement when incurred. At the date of acquisition of control, the net equity of the investee companies is determined by attributing to individual assets and liabilities their fair value, except in cases where the IFRS provisions provide a different valuation criterion. Any residual difference with respect to the purchase cost, if positive, is recognized under the item "Goodwill" (hereinafter also goodwill); if negative, it is recognized in the income statement. Business combinations Rinnovabili Group Group Volta Green Energy S.r.l. and R2R S.r.l. In March 2022, A2A Rinnovabili S.p.A. completed the acquisition of 100% of Gruppo Volta Green Energy S.r.l. and 60% of R2R S.r.l.. The acquisition transaction was concluded for a value of 23 million euro for the purchase of shareholdings, generating goodwill of 20 million euro, which was allocated with the Purchase Price Allocation process as required by IFRS 3\. This process was completed with the allocation of the higher value to intangible assets amounting to 4 million euro, goodwill amounting to 17 million euro, and deferred taxes amounting to 1 million euro. Group 4NEW S.r.l. and 3 New & Partners S.r.l. In June 2022, A2A Rinnovabili completed the acquisition of 100% of 4NEW S.r.l. and 3 New & Partners S.r.l.. With regard to the acquisition of 4 New S.r.l., the acquisition transaction was concluded for a value of 167 million euro for the purchase of shareholdings, generating goodwill of 77 million euro, which was allocated with the Purchase Price Allocation process as required by IFRS 3\. This process was completed with the allocation of the higher value to intangible assets amounting to 50 million euro, goodwill amounting to 41 million euro, and deferred taxes amounting to 14 million euro. With regard to the acquisition of 3 New & Partners S.r.l., the acquisition transaction was concluded for a value of 261 million euro for the purchase of shareholdings, generating goodwill of 107 million euro, which was allocated with the Purchase Price Allocation process as required by IFRS 3\. This process was completed with the allocation of the higher value to intangible assets amounting to 5 million euro, goodwill amounting to 103 million euro, and deferred taxes amounting to 1.5 million euro. 3.18 Other information Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 99 Business combination A2A Airport Energy S.p.A. On September 29, 2022, A2A Calore e Servizi S.r.l., a company wholly owned by A2A S.p.A., acquired 100% of the equity investment in SEA Energia S.p.A., a company previously wholly owned by SEA that manages two cogeneration plants at the two airports of Milan Linate and Milan Malpensa for the production of thermal energy and electricity to supply SEA, A2A Calore & Servizi S.r.l. itself and third-party customers. The acquired company changed its name to A2A Airport Energy S.p.A.. The agreement was reached for a value, fully paid at transaction closing, equal to 29 million euro. Business combination TecnoA S.r.l. On December 12, 2021, A2A Ambiente S.p.A., a company wholly owned by A2A S.p.A., acquired 100% of the investment in TecnoA S.r.l., a special waste processing company. The agreement was reached for a value, fully paid at transaction closing, equal to 276 million euro. The transaction generated goodwill of 267 million euro, which, in accordance with IFRS 3, was restated via the Purchase Price Allocation process. This process was completed with the allocation of the higher value to intangible assets amounting to 291 million euro, of which 204 million euro to goodwill, as well as the recognition of deferred taxes amounting to 24 million euro. 4) Information on non-current assets and liabilities held for sale and discontinued operations (IFRS 5) The items “Non-current assets held for sale” and “Liabilities directly associated with non-current assets held for sale” at December 31, 2022 had no value while at December 31, 2021, they amounted respectively to 162 million euro and 15 million euro and included the reclassification of certain assets and the associated liabilities relating to gas distribution referring to ATEM considered non-strategic for the Group, the reclassification of assets owned by the parent A2A S.p.A. referring to three properties located in Milan that were sold in February 2022 and the reclassification of the shareholding in Sviluppo Turistico Lago Iseo S.p.A.. 5) Rules on public funding (Compliance with art. 1, paragraphs 125 et seq. of Law 124/17) Pursuant to art. 1, paragraphs 125 et seq. of Law 124/17, considering that the Group companies have not received "subsidies, grants, advantages, contributions or aid, whether in cash or in kind, not general and with no consideration, remuneration or compensation", this note is negative. It is understood that other information is (also in line with the principle set out in art. 18 of Law 241/1990) available elsewhere, including the State Aid Register, also under the criterion set out in paragraph 127 of the same art. 1 of Law 124/17, which prescribes to “avoid the accumulation of irrelevant information”. It should also be noted that the companies of the A2A Group operate (for the most part) in regulated sectors. Therefore, some sums are recognized by public bodies, but not as subsidies/contributions, but as recognition of the activities they provide or as forms of compensation for costs incurred to meet specific regulatory obligations and in any case by virtue of a general regime (e.g. energy incentives). Also all these forms of payment have not been indicated: also in compliance with both the literal aspect of the regulations and with the interpretation criteria that the Group companies have identified (see above). 6) Financial risk management The A2A Group operates in the electricity, natural gas and district heating industry and is exposed to various financial risks in performing its activity: a) commodity risk; b) interest rate risk; c) exchange rate risk not related to commodities; d) liquidity risk; e) credit risk; f) equity risk; g) default and covenant non-compliance risk. The commodity price risk, related to the volatility of energy commodity prices (gas, electricity, fuel oil, coal, etc.) and prices of environmental securities (EUA/ETS emission rights, green certificates, white certificates, etc.), consists of the possible negative effects that a change in the market price of one or more commodities may have on the cash flows and income prospects of the company, including the exchange rate risk related to the same commodities. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 100 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report Interest rate risk is the risk of additional financial costs as the result of an unfavourable change in interest rates. Currency risk not related to commodities is the risk of higher costs or lower revenues because of an unfavourable change in exchange rates between currencies. Liquidity risk is the risk that financial resources will not be sufficient to meet established financial and business obligations in a timely manner. Credit risk is the exposure to potential losses deriving from non-performance of commitments by commercial, trading and financial counterparties. Equity risk is the possibility of incurring losses due to an unfavourable change in the price of shares. Default and covenant non-compliance risk represent the possibility that loan agreements or bond regulations to which one or more Group companies are party contain provisions allowing the counterparties, banks or bondholders, to ask the debtor for immediate reimbursement of the amounts lent if certain events take place. Details on the risks to which the A2A Group is exposed are provided below. a. Commodity risk a.1) Commodity price risk and exchange rate risk involved in commodity activities The Group is exposed to price risk, including the related currency risk, on all of the energy commodities that it handles, namely electricity, natural gas, heat, coal, fuel oil and environmental certificates; the results of production, purchases and sales are similarly affected by fluctuations in the prices of such energy commodities. These fluctuations act both directly and indirectly, through formulas and indexing in the pricing structure. To stabilize cash flows and to assure the Group’s economic and financial stability, A2A S.p.A. has an Energy Risk Policy that sets out clear guidelines to manage and control the above risks, based on guidance by the Committee of Chief Risk Officers Organizational Independence and Governance Working Group (CCRO) and the Group on Risk Management of Eurelectric. Reference was also made to the Accords of the Basel Committee on bank supervision and the requirements laid down in international accounting standards on how to recognize the volatility of commodity price and financial derivatives in the income statement and balance sheet. In the A2A Group, assessment of this kind of risk is centralized at the holding company, which has established a Group Risk Management Organizational Unit as part of the Planning, Finance and Control Organizational Unit. This unit has the task to manage and monitor market and commodity risks, to create and evaluate structured products, to propose financial energy risk hedging strategies, and to support senior management in defining the Group’s energy risk management policies. Each year, the Board of Directors of A2A S.p.A. sets the Group’s commodity risk limits approving the PaR and VaR proposed (prepared in the Risk Committee) in conjunction with approval of the Budget/Business Plan; Group Risk Management supervises the situation to ensure compliance with these limits and proposes to senior management the hedging strategies designed to bring risk within the set limits, if exceeded. The activities that are subject to risk management include all of the positions on the physical market for energy products, both purchasing/production and sales, and all of the positions in the energy derivatives market taken by Group companies. For the purpose of monitoring risks, industrial and trading portfolios have been separated and are managed in different ways. The industrial portfolio consists of the physical and financial contracts directly relating to the Group’s industrial operations, namely where the objective is to enhance production capacity also through the wholesaling and retailing of gas, electricity and heat. The trading portfolio comprises all contracts, both physical and financial, entered into to supplement the profits made from the industrial activities, i.e. all contracts that are ancillary though not strictly necessary to the industrial activity. In order to identify trading activity, the A2A Group follows the Capital Adequacy Directive and the definition of assets held for trading provided by International Accounting Standard (IFRS) 9: namely assets held for the purpose of short-term profit taking on market prices or margins, without being for hedging purposes, and designed to create a high-turnover portfolio. Given that they exist for different purposes, the two portfolios have been segregated and are monitored separately with specific tools and limits. More specifically, the trading portfolio is subject to particular risk control and management procedures as laid down in Deal Life Cycle documents. Senior management is systematically updated on changes in the Group’s commodity risk by the Group Risk Management Unit, which controls the Group’s net exposure. This is calculated centrally on the entire asset and contract portfolio and monitors the overall level of economic risk assumed by the industrial and trading portfolios (Profit at Risk \- PaR, Value at Risk \- VaR, Stop Loss). a.2) Commodity derivatives, analysis of transactions Derivatives of the industrial portfolio considered hedges The hedging of price risk by means of derivatives focuses on protecting against the volatility of energy prices on the power exchange (IPEX-EEX), stabilizing electricity price margins on the wholesale market with particular attention being paid to fixed price energy sales and purchases and stabilizing price differences deriving from various indexing mechanisms for the pricing of gas and electricity. To that end, hedging contracts were executed during the year on electricity purchase and sale agreements and on contracts to hedge the Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 101 fee for the use of electricity transport capacity between the areas of the IPEX market (CCC contracts); hedging contracts were also concluded for the purchase and sale of gas so as to protect sales margins and at the same time keep the risk profile to within the limits set by the Group’s Energy Risk Policy. As part of the optimization of the portfolio of greenhouse gas emission allowances (see Directive 2003/87/EC), the A2A Group has stipulated Future contracts on the ICE ECX (European Climate Exchange) price. These are considered hedging transactions from an accounting point of view in the event of demonstrable surplus/deficit quotas. The fair value at December 31, 2022 was 32.4 million euro (60.1 million euro at December 31, 2021). Derivatives of the industrial portfolio not considered hedges Again with a view to optimising the Industrial Portfolio, Future contracts have been entered into on the ICE ECX (European Climate Exchange) stock exchange price. These do not qualify as hedging transactions from an accounting point of view as they fail to meet the requirement set out in the accounting standards. The fair value at December 31, 2022 was 0.2 million euro (0.3 million euro at December 31, 2021). Derivatives of the Trading Portfolio As part of its trading activity, the A2A Group has taken out Future contracts on major European energy stock exchanges (EEX, ICE) and Forward and Option contracts on the price of electricity with delivery in Italy and neighboring countries such as France, Germany and Switzerland. The Group has also stipulated Future contracts on the ICE ECX (European Climate Exchange) stock exchange price. Also as part of trading activities, both Future and Forward contracts were also stipulated for the market price of gas (ICE-Endex CEGH, PEGAS). The fair value at December 31, 2022 was 268.1 million euro (-31.6 million euro at December 31, 2021). a.3) Energy Derivatives, risk assessment of Industrial Portfolio derivatives PaR1 or Profit at Risk, is used to assess the impact that fluctuations in the market price of the underlying have on the financial derivatives taken out by the A2A Group that are attributable to the industrial portfolio. It is the change in the value of a financial instruments portfolio within set probability assumptions as the result of a shift in the market indices. The PaR is calculated using the Montecarlo Method (at least 10,000 trials) and a 99% confidence level. It simulates scenarios for each relevant price driver depending on the volatility and correlations associated with each one, using as the central level the forward market curves at the balance sheet date, if available. By means of this method, after having obtained a distribution of probability associated with changes in the result of outstanding financial contracts, it is possible to extrapolate the maximum change expected over a time horizon given by the accounting period at a set level of probability. Based on this method, over the time horizon of the accounting period and in the event of extreme market movements and at a 99% confidence level, the expected maximum negative change in financial derivatives outstanding at December 31, 2022 was 192.226 million euro (310.036 million euro at December 31, 2021). The following are the results of the simulation with the related maximum variances: millions of euro 12 31 2022 12 31 2021 Profit at Risk (PaR) Worst case Best case Worst case Best case Confidence level 99% (192.226) 299.227 (310.036) 468.517 The A2A Group therefore expects, with a 99% probability, not to have changes compared to the fair value at December 31, 2022 exceeding 192.226 million euro of its entire portfolio of financial instruments due to unfavourable commodity price fluctuations in the 12 months following. If there are any negative changes in the fair value of hedge derivatives, these would be compensated by changes in the underlying physical. a.4) Energy Derivatives, risk assessment of Trading Portfolio derivatives VaR2 (Value at Risk) is used to assess the impact that fluctuations in the market price of the underlying have on the financial derivatives taken out by the A2A Group that are attributable to the trading portfolio. It is the negative change in the value of a financial instruments portfolio within set probability assumptions as the result of an unfavourable shift in the market indices. VaR is calculated using the RiskMetrics method with a holding period of 3 days and a confidence level of 99%. Alternative methods are used for contracts where it is not possible to perform a daily estimate of VaR such as stress test analysis 1 Profit at Risk: statistical measurement of the maximum potential negative deviation of the margin of an asset portfolio in case of unfavourable market changes over a given time horizon and with a defined confidence interval. 2 Value at Risk: statistical measurement of the maximum potential drop in the fair value of an asset portfolio in the event of unfavourable movements in the market with a given time horizon and confidence level. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 102 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report Based on this method, in the case of extreme market movements, with a confidence level of 99% and a holding period of 3 days, the maximum estimated loss on the derivatives in question was 2.948 million euro at December 31, 2022 (1.673 million at December 31, 2021). In order to ensure closer monitoring of activities, VaR and Stop Loss (the sum of VaR, P&L Realized and P&L Unrealized) limits are also set. The following are the results of the assessments: millions of euro 12 31 2022 12 31 2021 Value at Risk (VaR) VaR Stop Loss VaR Stop Loss Confidence level 99%, holding period 3 days (2.948) (2.948) (1.673) (1.673) b. Interest rate risk The Group is exposed to the risk that changes in the interest rate curve result in changes in economic results, cash flows and the value of assets and liabilities measured at fair value. The volatility of financial expenses associated to the performance of interest rates is monitored and mitigated through a policy of interest rate risk management aimed at identifying a balanced mix of fixed-rate and variable rate loans and the use of derivatives that limit the effects of fluctuations in interest rates. The book value and type of gross debt at December 31, 2022 are shown in the table below: millions of euro 12 31 2022 12 31 2021 Before hedging After hedging % after hedging Before hedging After hedging % after hedging Fixed rate 5,168 5,332 77% 3,844 4,005 79% Variable rate 1,721 1,557 23% 1,255 1,094 21% Total 6,889 6,889 100% 5,099 5,099 100% At December 31, 2022, the following are the hedging instruments for interest rate risk: millions of euro 12 31 2022 12 31 2021 Hedging instrument Hedged asset Fair value Notional Fair value Notional Collar Floating rate loan A2A (0.1) 19.0 (1.6) 38.1 IRS Floating rate loan subsidiaries 4.4 43.9 (0.1) 13.8 Total 4.3 62.9 (1.7) 51.9 Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 103 With reference to the accounting treatment, hedging derivatives for interest rate risk can be classified as follows: millions of euro Accounting treatment Type of derivatives Financial assets Financial liabilities Notional at: Fair value at: Notional at: Fair value at: 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 Cash flow hedge Collar - - - - 19.0 38.1 (0.1) (1.6) Cash flow hedge IRS - - - - 43.9 13.8 4.4 (0.1) Total - - - - 62.9 51.9 4.3 (1.7) Derivatives on interest rates at December 31, 2022 in cash flow hedge refer to the following loans: The Group performs sensitivity analysis by estimating the effects on the value of financial statement items relating to the portfolio of financial instruments deriving from changes in the level of interest rates. Loan Derivative Accounting A2A S.p.A. variable rate bank loan, maturity November 2023, residual debt at December 31, 2022 of 19.0 million euro. Collar on 100% of the amount of the loan until maturity thereof. At December 31, 2022, the fair value was negative for 0.1 million euro. The loan is measured at amortized cost. The collar is a cash flow hedge, with 100% recognized in a specific equity reserve. A5 variable rate bank loan, maturity December 2025, residual debt at December 31, 2022 of 6.7 million euro. IRS on 100% of the amount of the loan until maturity thereof. At December 31, 2022, the fair value was positive for 0.4 million euro. The loan is measured at amortized cost. The IRS is a cash flow hedge, with 100% recognized in a specific equity reserve. A5 variable rate bank loan, maturity June 2023, residual debt at December 31, 2022 of 1.0 million euro. IRS on 100% of the amount of the loan until maturity thereof. At December 31, 2022, the fair value was 0.0 million euro. The loan is measured at amortized cost. The IRS is a cash flow hedge, with 100% recognized in a specific equity reserve. VOLTA GREEN ENERGY variable rate bank loan, maturity December 2026, residual debt at December 31, 2022 of 1.0 million euro. IRS on 100% of the amount of the loan until maturity thereof. At December 31, 2022, the fair value was positive for 0.1 million euro. The loan is measured at amortized cost. The IRS is a cash flow hedge, with 100% recognized in a specific equity reserve. LA CASTILLEJA ENERGIA variable rate bank loan, maturity December 2034, residual debt at December 31, 2034 of 29.2 million euro. IRS on 75% of the amount of the loan until December 2030. At December 31, 2022, the fair value was positive for 3.3 million euro. The loan is measured at amortized cost. The IRS is a cash flow hedge, with 100% recognized in a specific equity reserve. SISTEMES ENERGETICS CONESA I variable rate bank loan, maturity June 2030, residual debt at December 31, 2030 of 17.7 million euro. IRS on 75% of the amount of the loan until maturity thereof. At December 31, 2022, the fair value was positive for 0.6 million euro. The loan is measured at amortized cost. The IRS is a cash flow hedge, with 100% recognized in a specific equity reserve. In particular, the sensitivity analysis measures the potential impact on the Income Statement and shareholders' equity of different market scenarios that would determine the change in fair value of derivative financial instruments and the change in financial expenses related to the portion of gross debt not hedged. These market scenarios are obtained by shifting the reference interest rate curve at the reporting date up and down in parallel. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 104 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report Keeping all other variables constant, the pre-tax result would be influenced by changes in the level of interest rates as follows: millions of euro Effect on the Income Statement (before tax) Effect on Equity (before tax) -50 bps +50 bps -50 bps +50 bps Change in financial expenses on gross variable-rate debt after hedging 3.2 (5.1) - - Change in fair value of derivative financial instruments classified as non-hedge - - - - Change in fair value of derivative financial instruments classified as hedge (excluding BCVA as per IFRS 13): Cash flow hedge - - (0.7) 0.7 Fair value hedge - - - - c. Exchange rate risk not related to commodities The Group is exposed to the risk that changes in exchange rates with respect to the currency of account may lead to changes in its results of operations and cash flows. In relation to exchange rate risk other than that included in the price of commodities, the hedging instrument at December 31, 2022 is as follows: millions of euro 12 31 2022 12 31 2021 Hedging instrument Hedged asset Fair value Notional Fair value Notional Cross Currency IRS Fixed rate bond in foreign currency 7.2 98.0 (9.0) 98.0 Total 7.2 98.0 (9.0) 98.0 With regard to the accounting treatment, it is specified that the hedging derivative above is in cash flow hedge with full recognition in the equity reserve. In particular, the underlying of the Cross Currency IRS derivative refers to the bond at fixed rate of 14 billion yen with maturity 2036 bullet issued in 2006. A cross currency swap contract was stipulated for the entire duration of this loan, which converts the principal and interest payments from yen into euro. At December 31, 2022, the fair value of the hedge was positive for 7.2 million euro. The fair value and, as a consequence, the effect on equity, would improve by 14.3 million euro in the event of a 10% increase in the forward curve of the euro/yen exchange rate with an appreciation of the yen, while it would worsen by 4.4 million euro in the event of a 10% drop in the forward curve of the euro/yen exchange rate with a depreciation of the yen. This sensitivity analysis was performed with the aim of calculating the effect of changes in the forward curve of the euro/yen exchange rate on the fair value ignoring any impact on the adjustment due to the bCVA. d. Liquidity risk Liquidity risk is the risk that the Group is unable to meet its obligations in a timely manner or that it is able to do so under unfavourable economic conditions due to situations of tension or systemic crisis or to the changed perception of its riskiness by the market. This risk includes: i) the risk related to the company's inability to raise new funds (Funding Risk) and, ii) the risk related to the company's inability to liquidate assets on the market in a timely manner and at market conditions (Liquidity Market Risk). One of the main factors influencing the market's perceived riskiness is the creditworthiness of A2A assigned by rating agencies. This judgement plays a very important role because it influences the ability of A2A to access sources of financing as well as the related costs. A deterioration in creditworthiness could lead to a limitation of access to the capital market and/or financing costs with a negative impact on the economic, financial and equity situation. A2A has a medium- and long-term rating of BBB (negative outlook) with S&P and Baa2 (negative outlook) with Moody's. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 105 The profile of the Group's gross debt maturities is as follows: The risk management policy is realized through (i) a debt management strategy diversified by funding sources and maturities, and (ii) maintenance of financial resources sufficient to meet scheduled and unexpected commitments over a given time horizon. millions of euro Accounting balance 12 31 2022 Portions maturing within 12 months Portions maturing beyond 12 months Portions maturing by 12 31 2023 12 31 2024 12 31 2025 12 31 2026 After Bonds 4,950 338 4,612 300 299 596 297 3,120 Financial payables for rights of use* 163 31 132 26 18 16 14 58 Loans from banks and other lenders 1,776 653 1,123 233 90 74 371 355 Total 6,889 1,022 5,867 559 407 686 682 3,533 (*) including finance leases At December 31, 2022, the Group had a total of 4,246 million euro, as follows: (i) committed revolving credit lines of 1,660 million euro, of which 600 million euro maturing in 2023, 560 million euro maturing in 2025 and 500 million euro maturing in 2026, unused; (ii) unused long-term EIB loans for a total of 2.5 million euro maturing in 2024; (iii) cash and cash equivalents totaling 2,584 million euro, including 2,339 million euro at the Parent Company level. A2A also maintains a Bond Issue Program (Euro Medium Term Note Programme) of 6 billion euro, of which 1,150 million euro available at December 31, 2022. Over the years, A2A has embarked on a path of issues with ESG characteristics, in the form of Green Bonds and Sustainability-Linked Bonds. For A2A, the failure to meet certain sustainability KPI (ESG) targets may lead to an increase in the financing costs of the debt instruments to which these KPIs are linked. Similarly, failure to realize investments financed with Green Bonds may result in a risk of lack of access to certain sources of financing. The following table analyzes the worst case for financial liabilities (excluding payables for rights of use and including trade payables), in which all of the amounts shown are non-discounted future nominal cash flows determined on the basis of residual contractual maturities for both principal and interest. The undiscounted nominal flows of derivative contracts on interest rates are also included. Finally, any revocable financial lines used and current accounts payable are due within the next financial year. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 106 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report 12 31 2022 millions of euro 1-3 MONTHS 4-12 MONTHS BEYOND 12 MONTHS Bonds 19 379 5,165 Loans from banks and other lenders 176 520 1,278 Total financial flows 195 899 6,443 Payables to suppliers 1,082 26 9 Total trade flows 1,082 26 9 12 31 2021 millions of euro 1-3 MONTHS 4-12 MONTHS BEYOND 12 MONTHS Bonds 530 35 3,474 Loans from banks and other lenders 77 148 1,096 Total financial flows 607 183 4,570 Payables to suppliers 567 28 8 Total trade flows 567 28 8 e. Credit risk Credit risk relates to the possibility that a counterparty, commercial or trading, may be in default, or fail to respect its commitment in the manner and timing provided by contract. This type of risk is managed by the Group through specific procedures (Credit Policy, Energy Risk Management procedure) and appropriate mitigation actions. This risk is overseen by both the Credit Management function allocated centrally (and the corresponding functions of the operating companies) and the Group Risk Management Organizational Unit responsible for supporting the Group companies with reference to both commercial and trading activities. Risk mitigation is through the prior assessment of the creditworthiness of the counterparty and the constant verification of compliance with exposure limit as well as through the request for adequate guarantees. The credit terms granted to customers as a whole have a variety of deadlines, in accordance with applicable law and market practice. In cases of delayed payment, default interest is charged as explicitly prescribed by the underlying supply contracts or by current law (application of the default rate as per Legislative Decree 231/2002). Trade receivables are stated in the balance sheet net of any write-downs; the amount shown is considered to be a correct reflection of the realizable value of the receivables portfolio. For the aging of trade receivables, reference is made to note "Trade receivables". f. Equity risk At December 31, 2022, the A2A Group was not exposed to equity risk. In particular, it should be noted that the parent company A2A S.p.A. did not hold any treasury shares at December 31, 2022. As prescribed by IAS/IFRS, treasury shares do not constitute an equity risk as their purchase cost is deducted from equity, and even if they are sold any gain or loss on the purchase cost does not have any effect on income statement. g. Covenants non-compliance risk Bonds, loans, leases and committed revolving bank lines present terms and conditions in line with market practice for each type of instrument. In particular, they envisage: (i) negative pledge clauses as a result of which the parent company undertakes not to constitute collateral on its assets and those of its relevant subsidiaries (as defined from time to time in the related documentation), with the provision of some exceptions and a threshold maximum permitted specifically identified; (ii) cross default/acceleration clauses that entail the obligation of immediate repayment of bonds and loans in the event of serious defaults; (iii) clauses that provide for the obligation of immediate repayment of bonds and loans in the event of insolvency or other insolvency proceedings of the parent company or its relevant subsidiaries. The bonds include (i) senior unsecured bonds for a nominal amount of 4,850 million euro (book value at December 31, 2022 equal to 4,848 million euro) issued as part of the EMTN Programme, which provide to investors a Change of Control Put option in the event of a change of control of the parent company resulting in a consequent downgrade of the rating to sub-investment grade level in the following 180 days (if within these 180 days, the company's rating returns to investment grade, the option may not be exercised); (ii) a bond in yen placed privately with a maturity in 2036 for a nominal amount of 98 million euro (book value at December 31, 2022 equal to 101 million euro), which provides to the investor a Put option in the event that the rating of the parent company is lower at BBB- or equivalent level (sub-investment grade). Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 107 The loans stipulated with the European Investment Bank (EIB), for a total nominal debt of 605 million euro and a book value of 606 million euro, of which 262 million have a maturity of more than five years, include (i) a credit rating clause (if rated lower than BBB- or equivalent sub-investment grade) that provides for the obligation of A2A to inform EIB in the event of a rating downgrade and, in such circumstance, the right of EIB to request additional guarantees from A2A and, where such guarantees are not provided or are not satisfactory to EIB, the right to request early repayment of the loan, and ii) a change of control clause of the parent company, with the right for the bank to invoke, subject to notice to the company containing the reasons, early repayment of the loan. A loan of the subsidiary Fragea, whose residual debt at December 31, 2022 was 2.2 million euro, is secured by collateral on the property and plant financed. Some ACINQUE, SISTEMES ENERGETICS CONESA and LA CASTILLEJA ENERGIA bank loans include financial covenants, as shown in the relevant table below. The committed revolving bank lines of A2A, for a total of 1,660 million euro, provide a Change of Control clause which, in the event of a change of control of the parent company causing a Material Adverse Effect, allows the majority of banks lending the line to request the line to be extinguished and any amounts drawn down to be repaid. As at December 31, 2022, there was no non-compliance with the above-mentioned covenants by A2A or its relevant subsidiaries. A2A Group – Financial covenants at December 31, 2022 Company Lender Level of reference Level recognized Date of recognition ACINQUE BEI Available cash flow/ net financial debt >= 14.0% Financial debt/equity <= 75.0% Net financial debt/Ebitda <= 3.0 27.7% 49.5% 2.50 12/31/22 12/31/22 12/31/22 ACINQUE Unicredit Debt Service Coverage Ratio <=3 Gearing <=1 2.50 0.50 12/31/22 12/31/22 SISTEMES ENERGETICS CONESA Banco Santander / Banco De Sabadell Debt Service Coverage Ratio >= 1.05x Senior Debt / Equity ratio <= 85% 4.36x 62% 12/31/22 12/31/22 LA CASTILLEJA ENERGIA CaixaBank Debt Service Coverage Ratio >= 1.05x Senior Debt / Equity ratio <= 85% 2.46x 85% 12/31/22 12/31/22 Analysis of forward transactions and derivatives Tests were performed to determine whether these transactions qualify for hedge accounting in accordance with International Accounting Standard IFRS 9\. In particular: 1) transactions qualifying for hedge accounting under IFRS 9: can be analyzed between transactions to hedge cash flows (cash flow hedges) and transactions to hedge fair value of assets and liabilities (fair value hedges). For the cash flow hedges, the accrued result is included in gross operating margin when realized on commodity derivatives and in the financial balance for interest rate and currency derivatives, whereas the future value is shown in equity. For fair value hedge transactions, the impacts in the Income Statement are recorded within the same line of the financial statements. 2) transactions not considered as hedges for the purposes of IFRS 9, can be: a. margin hedges: for all hedging transactions of cash flows or the market value in line with internal risk policies, the accrued result and future value are included in gross operating margin for commodity derivatives and in the financial balance for interest rate and currency derivatives; b. trading transactions: the accrued result and future value are recognized above gross operating margin for commodities transactions and in financial income and expense for interest rate and currency transactions. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 108 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report The use of derivatives in the A2A Group is governed by a coordinated set of procedures (Energy Risk Policy, Deal Life Cycle) which are based on industry best practices and designed to limit the risk of the Group being exposed to commodity price fluctuations, based on a cash flow hedging strategy. The derivatives are measured at fair value based on the forward market curve at the balance sheet date, if the asset underlying the derivative is traded on markets with a forward pricing structure. In the absence of a forward market curve, fair value is measured on the basis of internal estimates using models that refer to industry best practices. The A2A Group uses “continuous-time” discounting to measure fair value. As a discount factor, it uses the interest rate for risk-free assets, identified in the Euro Overnight Index Average (EONIA) rate and represented in its forward structure by the Overnight Index Swap (OIS) curve. The fair value of the cash flow hedges has been classified on the basis of the underlying derivative contracts in accordance with IFRS 9. In compliance with the provisions of IFRS 13, the fair value of an over-the-counter (OTC) financial instrument is determined taking into account the non-performance risk. To quantify the fair value adjustment attributable to this risk, A2A has, in line with best market practices, developed a proprietary model called the “bilateral Credit Value Adjustment” (bCVA), which takes into account changes in the creditworthiness of the counterpart as well as the changes in its own creditworthiness. The bCVA has two addends, calculated by considering the possibility that both counterparties go bankrupt, known as the Credit Value Adjustment (CVA) and the Debit Value Adjustment (DVA): • the CVA is a negative component and contemplates the probability that the counterparty will default and at the same time that A2A has a receivable due from the counterparty; • the DVA is a positive component and contemplates the probability that A2A will default and at the same time that the counterparty has a receivable due from A2A. The bCVA is therefore calculated with reference to the exposure, measured on the basis of the market value of the derivative at the time of the default, the Probability of Default (PD) and the Loss Given Default (LGD). This latter item, which represents the non- recoverable portion of the receivable in the case of default, is measured on the basis of the IRB Foundation Methodology as stated in the Basel 2 accords, whereas the PD is measured on the basis of the rating of the counterparties (internal rating based where not available) and the historic probability of default associated with this and published annually by Standard & Poor’s. Applying the above method did not result in significant changes in fair value measurements. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 109 Instruments Outstanding at December 31, 2022 A) On interest and exchange rates The following analyses show the notional amounts of derivative contracts stipulated and not expired at the reporting date, by maturity: millions of euro Notional value (a) Balance sheet value (b) Progressive effect to Income statement (c) Due within 1 year Due in 1 to 5 years Due over 5 years to be received to be paid to be received to be paid to be received to be paid Interest rate risk management cash flow hedges as per IFRS 9 26.9 19.9 17.2 4.4 - not considered hedges as per IFRS 9 Total derivatives on interest rates - 26.9 - 19.9 - 17.2 4.4 - Exchange rate risk management considered hedges as per IFRS 9 \- on commercial transactions \- on non-commercial transactions 98.0 7.2 not considered hedges as per IFRS 9 \- on commercial transactions \- on non-commercial transactions Total derivatives on exchange rates - - - - - 98.0 7.2 - (a) Represents the sum of the notional value of the elementary contracts that derive from any dismantling of complex contracts. (b) Represents the net receivable (+) or payable (-) recognized in the balance sheet following the measurement of derivatives at fair value. (c) Represents the adjustment of derivatives to fair value recognized progressively over time in the Income Statement from stipulation of the contract until the current date. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 110 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report B) On commodities The following is an analysis of the commodity derivative contracts outstanding at the balance sheet date set up for the purpose of managing the risk of the fluctuations in the market prices of commodities. Volume by Maturity Notional Value Fair value Due within 1 year Due within two years Due within five years Balance sheet Value (*) Progressive effect to Income statement (**) Energy product price risk management Unit of measurement Quantity Millions of euro Millions of euro Millions of euro A. Cash flow hedges as per IFRS 9, including: 32.4 \- \- Electricity TWh 0.6 0.2 0.1 126.6 48.2 \- Oil Bbl \- Coal Tonnes 70,000 15.7 (3.1) \- Natural Gas TWh 0.4 0.2 58.3 (11.6) \- Natural Gas Millions of cubic metres \- Exchange rate Millions of dollars \- Emission rights Tonnes 535,000 452,000 84.5 (1.1) B. considered fair value hedges as per IFRS 9 - - C. not considered hedges as per IFRS 9 of which 268.3 299.7 C.1 hedge margin 0.2 (0.0) \- Electricity TWh \- Oil Bbl \- Natural Gas Degrees day \- Natural Gas TWh \- CO2 emission rights Tonnes 120,000 10.8 0.2 (0.0) \- Exchange rate Millions of dollars C.2 trading transactions 268.1 299.7 \- Electricity TWh 13.5 3.9 0.2 4,034.5 90.4 92 \- Natural Gas TWh 86.1 13.3 0.4 9,239.8 177.4 207.9 \- CO2 emission rights Tonnes 1,161,000 252,000 118.2 0.3 0.7 \- Environmental Certificates MWh \- Environmental Certificates Tep Total 303.7 302.5 (*) Represents the net receivable (+) or payable (-) recognized in the balance sheet following the measurement of derivatives at fair value. (**) Represents the adjustment of derivatives to fair value recognized over time in the Income Statement from stipulation of the contract to the present date. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 111 Financial and operating effects for derivative transactions in 2022 Effects on the balance sheet The following table shows the balance sheet figures at December 31, 2022, for derivative transactions. millions of euro Note Total Assets Non-current assets 12 Other non-current assets \- Derivatives 5 12 Current assets 2,861 Other current assets \- Derivatives 8 2,861 Total assets 2,873 Liabilities Non-current liabilities - Other non-current liabilities \- Derivatives 20 - Current liabilities 2,561 Trade payables and other current liabilities \- Derivatives 21 2,561 Total liabilities 2,561 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 112 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report Effect on the income statement The following table sets out the income statement figures at December 31, 2022 arising from the management of derivatives. millions of euro Note Realised during the year Change in fair value during the year Amounts recognized in the income statement Revenues 26 Revenues from the sale of goods Energy product price risk management and exchange rate risk management on commodities \- considered hedges as per IFRS 9 782 - 782 \- not considered hedges as per IFRS 9 916 3,718 4,634 Total revenues from the sale of goods 1,698 3,718 5,416 Operating expenses 27 Expenses for raw materials and services Energy product price risk management and exchange rate risk management on commodities \- considered hedges as per IFRS 9 (123) - (123) \- not considered hedges as per IFRS 9 (958) (3,419) (4,377) Total costs for raw materials and services (1,081) (3,419) (4,500) Total recognized in Gross operating income (*) 617 299 916 Financial balance 33 Financial income Interest rate risk management and equity risk management Income on derivatives \- considered hedges as per IFRS 9 2 - 2 \- not considered hedges as per IFRS 9 - - - Total 2 - 2 Total financial income 2 - 2 Financial expenses Interest rate risk management and equity risk management Expenses on derivatives \- considered hedges as per IFRS 9 (1) - (1) \- not considered hedges as per IFRS 9 - - - Total (1) - (1) Total Financial expenses (1) - (1) Total recognized in financial balance 1 - 1 (*) The figures do not include the effect of the net presentation of the negotiation margin of trading activities. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 113 Classes of financial instruments To complete the analyses required by IFRS 7 and IFRS 13, the following table sets out the various types of financial instrument that are to be found in the various balance sheet items, with an indication of the accounting policies used and, in the case of financial instruments measured at fair value, an indication of where changes are recognized (income statement or equity). The last column of the table shows the fair value of the instrument at December 31, 2022, where applicable. Criteria to measure the reported amount of financial instruments thousands of euro Note Financial instruments measured at fair value with changes recognized in: Financial instruments measured at amortized cost Amount as stated in the consolidated balance sheet Fair value Income statement Equity (1) (2) (3) (4) Assets Other non-current financial assets Financial assets measured at fair value of which: \- unlisted 6 6 n,d, \- listed - - Financial assets held to maturity - - - Other non-current financial assets 64 64 64 Total other non-current financial assets 3 70 Other non-current assets 5 12 74 86 86 Trade receivables 7 4,680 4,680 4,680 Other current assets 8 2,801 60 428 3,289 3,289 Current financial assets 9 14 14 14 Cash and cash equivalents 11 2,584 2,584 2,584 Liabilities Financial liabilities Non-current and current bonds 17 and 22 99 4,851 4,950 4,950 Other non-current and current financial liabilities 17 and 22 1,939 1,939 1,939 Other non-current liabilities 20 - 370 370 370 Trade payables 21 5,524 5,524 5,524 Other current liabilities 21 2,533 28 445 3,006 3,006 (*) The fair value has not been calculated for receivables and payables not related to derivative contracts and loans as the corresponding carrying amount is a good approximation to this. (1) Financial assets and liabilities measured at fair value with the changes in fair value recognized in the Income Statement (2) Cash flow hedges (3) Financial assets available for sale measured at fair value with profit/loss recognized in equity (4) Loans and receivables and financial liabilities measured at amortized cost 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 114 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report Fair value hierarchy IFRS 7 and IFRS 13 require that fair value classification of financial instruments to be based on the quality of the input source used to calculate the fair value. In particular, IFRS 7 and IFRS 13 set out three levels of fair value: • level 1: this level consists of financial assets and liabilities for which fair value is based on (unadjusted) prices for identical assets or liabilities quoted on active official or over-the-counter markets; • level 2: this level consists of financial assets and liabilities for which fair value is based on inputs other than quoted prices included within level 1 that are observable for the asset or liability either directly or indirectly; • level 3: this level consists of financial assets and liabilities for which fair value is based on unobservable market data. This level includes instruments measured on the basis of internal estimates made using proprietary methods based on best sector practice. An analysis of the assets and liabilities included in the three fair value levels is set out in the following fair value hierarchy table. millions of euro Note Level 1 Level 2 Level 3 Total Assets measured at fair value 3 2 4 6 Other non-current assets 12 12 Other current assets 8 2,861 2,861 Total assets 2,861 14 4 2,879 Non-current financial liabilities 17 99 99 Other non-current liabilities 20 - Other current liabilities 21 2,538 11 12 2,561 Total liabilities 2,637 11 12 2,660 Sensitivity analysis for financial instruments included in level 3 As required by IFRS 13, the following table sets out the effects arising from changes in the unobservable parameters used in calculating fair value for financial instruments included in level 3 of the hierarchy. Financial instrument Parameter Parameter change Sensitivity (millions of euro) Commodity Derivatives Probability of Default (PD) 1% 0.10 Commodity Derivatives Loss Given Default (LGD) 25% 0.04 Commodity Derivatives Underlying interconnection capacity zonal Italy (CCC) 1% 0.05 Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 115 7) Main regulatory provisions regarding concessions and agreements in the sectors of activity in which the A2A Group operates Large hydroelectric derivation concessions The national discipline on large derivation hydroelectric concessions (i.e. plants with a nominal power greater than or equal to 3 MW) was originally dictated by R.D. December 11, 1933, no. 1775, which was based on the issuance of concessions by the State on a long-term basis. This regulatory framework was subsequently superseded first by electricity sector nationalization Law no. 1643/1962, which resulted in Enel taking over the majority3 of hydroelectric concessions with the relative recognition of an unlimited duration, and then by the liberalization of the market as a result of Legislative Decree no. 79/1999 (implementing Directive 96/92/EC), which introduced with art. 12 (and subsequent amendments) the principles of: • the temporariness of the concessions, establishing a validity period (2029) for concessions without expiration because they are owned by Enel and assigning the term of December 31, 2010 for concessions that have already expired or are expiring by that date; • contestability of concessions in the event of expiration, forfeiture or renunciation, providing, no later than 5 years before the expiration, the call for tenders by the competent administration (i.e. the Region) for the allocation of the same for consideration. Pending the reallocation of concessions, Legislative Decree 79/1999 (article 12, paragraph 8bis) provides that the outgoing concession holder is to continue to operate the concession under the same conditions as those laid down in the regulations and specifications in force. In this stalemate, some Regions have enacted laws aimed at regulating the "temporary continuation of operations" for expired concessions, also providing for the imposition of an additional fee. Article 11-quater of Law no. 12/2019 has, in part, further amended the rules governing large derivation hydroelectric concessions. The new rules provide that the Regions regulate with their own laws the methods, procedures and criteria for the allocation of concessions, which may be entrusted to economic operators identified through a tender, or to public/private joint ventures with selection of the private partner through a tender, or through forms of partnership under Legislative Decree 50/2016. Article 7 of Law no. 118 of August 5, 2022 (Annual Law for the Market and Competition 2021) established that the procedure for awarding the contract must be started within 2 years of the entry into force of the individual Regional Laws and, in any case, no later than December 31, 2023. The duration of the new concessions will be between 20 and 40 years, with the possibility of extending the maximum period by a further 10 years depending on the complexity of the project proposal and the amount of investment. The new rule provides that a specific regional measure (after consulting ARERA) will define: • a State fee to be paid on a six-monthly basis to the Regions, comprising a fixed component linked to the average nominal power of the concession and a variable calculated as a percentage of normalized revenues; • the possible obligation for the concessionaires to supply annually and free of charge 220 kWh per kW of concession power for at least 50% destined to public services of the provincial territories involved in the derivation. Concessions that have expired or are due to expire before December 31, 2024 may be exercised in temporary continuation for no longer than three years from the date of entry into force of the Annual Law for the Market and Competition 2021 (i.e. until August 27, 2025), subject to payment of an additional fee. In terms of compensation to outgoing operators, the rule prescribes: • for wet works: the transfer without compensation of ownership to the Regions, except for the compensation only of investments not yet amortized; • for dry works: the recognition of a residual value derived from accounting records or certified appraisal. In the event of non-inclusion in the project of the incoming concessionaire, removal and disposal of movable property is envisaged at the expense of the proposer, while immovable property remains the property of the entitled parties. In compliance with the provisions of the legislative framework and in line with the provisions of ARERA Resolution 490/2019/I/eel (“Guidelines for the issue of non-binding opinions on draft regional laws on state fees”4), the 3 With the exception of derivations in the ownership of self-producers, municipal companies and local authorities. 4 The variable component of the fee should be equal to a percentage, in any case defined by the Regions, of the sum of the products between the hourly quantity of electricity fed into the grid and the corresponding hourly zonal price recorded on the Day-Ahead Market (MGP), while the fixed component should derive from environmental and/or water-use-related assessments that are outside the Authority's competence. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 116 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report Lombardy Region, with article 31 of R.L. 23/2019 di Assestamento al Bilancio (Budget Reconciliation) 2020-22, has defined, starting from 2020, the obligation to supply free energy to the Region by all holders of concessions of large derivation (220 kWh for each kW of concession power), whether they are exercised before or after expiry, providing both the physical delivery and its monetization (even in full) to be calculated on the basis of an average hourly zonal price weighted on the quantity of electricity fed into the grid by the plant.In April 2020, the Lombardy Region approved Regional Law no. 5/2020 (amended with Regional Law no. 19/2021), which regulates the procedures for assigning concessions for large hydroelectric derivations and determines the state fee based on the new two-component structure5, in addition to the additional fee payable by the outgoing concessionaire for the temporary continuation of expired concessions until the award procedures are completed (and, in any case, no later than July 31, 2024), determined on a reconnaissance basis at 20 €/kW. The Law also defines the criteria for the acquisition of assets pertaining to the concession (see "dry works" and "wet works") by the Region and the reconnaissance activity aimed at the subsequent putting out to tender. The large-scale derivation hydroelectric concessions held by A2A S.p.A. located in Valtellina (with a nominal concession capacity of about 215 MW) have for the most part expired: the Lombardy Region with Regional Council Resolution (D.G.R.) no. X/7717 of December 28, 2022 allowed the temporary continuation of the year until December 31, 2023, confirming the payment of an additional fee and the non-application of the partial exemption from the state fee on the Premadio 1, Grosio, Lovero and Stazzona plants. Other A2A S.p.A. concessions (plants in Mese, Udine and Calabria with a total nominal concession capacity of about 345 MW), originally owned by Enel, expire in 2029\. The three large-scale derivations of Linea Green S.p.A. (Resio, expired and under temporary continuation until December 31, 2023 due to the aforementioned DGR, Mazzuno and Darfo not yet expired), as well as the concession of Gravedona of Acinque Innovazione S.r.l. (Acinque Group) with an expiry date of 2029. Concessions for thermoelectric power plants As far as concessions for thermoelectric power plants are concerned, the relevant regulations have evolved in a very heterogeneous manner. For example, with reference to concessions for the derivation of public water for industrial use, the discipline was initially defined by Law no. 2644 of August 10, 1884 and by Royal Decree 1775/1933 to subsequently have an outline on a more local basis also through agreements with specific consortia of reclamation and irrigation. The granting bodies may be identified alternatively in the Region and in the Province for concessions for the derivation of public water and for those relating to the occupation of state-owned areas and in the Port Authorities for concessions relating to the occupation of maritime state-owned areas. A2A Energiefuture S.p.A. and A2A gencogas S.p.A. hold the following types of concessions for the operation of their own thermoelectric power plants: • concessions for the derivation of public water: (i) for the cooling of thermoelectric power plants; (ii) for industrial use; (iii) for other uses; • concessions for the occupation of: (i) state-owned areas; (ii) maritime state-owned areas. Natural gas distribution and metering service The regulations governing concessions for the distribution of natural gas through local networks, initially contained in the deeds of award stipulated with the municipalities in implementation of laws of principle dated back to the early 1900s, have been revised by articles 14 and 15 of Legislative Decree 164/2000 (transposing Directive 98/30/EC), which defined the criteria for standardizing the sector. Specifically, it was determined: In particular, (i) a maximum duration of 12 years for concessions at full capacity was established, (ii) the award of the service by local authorities through a public tender and (iii) the relationship with the operator is regulated by a specific standard contract approved by ministerial decree containing, in particular, the procedures for performing the service, the quality objectives, the economic aspects and the conditions for early termination of the company for failure by the operator. Subsequently, in implementation of Law Decree 159/2007, according to which the tenders for the award of the gas distribution service must no longer be carried out by individual municipalities but by Minimum Territorial Areas (ATEM), the Ministerial Decree MiSE of January 19, 2011 identified 177 ATEM, while the subsequent Ministerial Decree of October 18, 2011 defined the municipalities belonging to each ATEM. The reform process was completed with the entry into force of Ministerial Decree 226 of November 12, 2011, which over the years has been subject to numerous innovations extended also to Legislative Decree 164/2000, which defined the tender criteria and procedures, as well as the methods for determining the residual industrial value of existing plants dedicated to providing the service. Ministerial Decree 226/2011 also indicated for each ATEM the terms within which the Contracting Authority has the obligation to start the tender procedure. The Municipality acts as the granting body of the concession, which continues even if it ceases as a result of the aforementioned early termination, until the full performance of the tenders for ATEM6. 5 With reference to the fixed component, Council Resolution no. XI/6142 of March 21, 2022 updated the 2021 tariff of 35 euro/kW following the application of the annual variation of the ISTAT index on the industrial price for the production, transport and distribution of electricity, setting it at 46.13 euro/kW for 2022. 6 When the ATEM tenders will be completed, the granting body can be identified alternatively in: 1) provincial capital (in the case of ATEM with capital), 2) most populous municipality (in the case of ATEM without capital), 3) network asset company (in the case of ATEM whose municipalities have decided to set it up). Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 117 Also in consideration of the slowdown in sector tenders recorded in recent years, the 2021 Annual Market and Competition Law has envisaged rules aimed at increasing the level of competitiveness in the sector and, at the same time, speeding up the procedures for carrying out of the tenders themselves. By way of example only, the following is envisaged: i. the valorisation at VIR of the distribution and metering networks and plants owned by the local authority or one of its asset companies that wishes to sell these assets at the time of the tenders; ii. the possibility for the operator, in the tender offer, to pay the local authorities the amount equal to the value of the energy efficiency certificates corresponding to the energy efficiency measures envisaged in the tender and offered in the manner defined in the model tender specifications. As far as the A2A Group is concerned, the natural gas distribution concessions are held by Unareti S.p.A., Azienda Servizi Valtrompia S.p.A., LD Reti S.r.l., Lereti S.p.A.7 and Reti Valtellina Valchiavenna S.r.l. (two companies of the Acinque Group) and RetiPiù S.r.l.8 (AEB Group). The main contracts9 relate to the ATEM of Milan 1 (in which Unareti S.p.A., assignee of the service following a tender launched pursuant to Ministerial Decree 226/2011, started the management of the area, starting from March 2022) and the provincial capitals of Brescia, Bergamo, Varese, Cremona, Lodi, Lecco, Sondrio and Monza-Brianza (as well as numerous municipalities, located mainly in the provinces of Brescia, Bergamo, Como, Cremona, Lecco, Lodi, Monza-Brianza, Pavia, Varese). Concession for the distribution and metering of electricity service Electricity distribution activities are carried out under a thirty-year concession granted by the Ministry of Economic Development for each municipal area, pursuant to art. 9 of Legislative Decree 79/1999. As far as the A2A Group is concerned, the electricity distribution and metering concessions all expire in 2030 and are held by Unareti S.p.A., Camuna Energia S.r.l., LD Reti S.r.l., Reti Valtellina Valchiavenna S.r.l. (Acinque Group) and RetiPiù S.r.l. (AEB Group) and concern the municipalities of Milan, Rozzano, Brescia, Cremona, Sondrio and Seregno, in addition to numerous municipalities in the province of Brescia and Sondrio. Integrated Water Service (SII) In accordance with the provisions of Legislative Decree 152/2006, the SII is organized on the basis of Optimal Territorial Ambits (ATO) defined by the Regions and, as a rule, coinciding with the provincial territory. In compliance with the scope plan and the principle of a single management, the Ambit Government Entity (EGA) decides on the form of management (award by tender, mixed public-private company and in house providing) and, consequently, provides for the award, for 30 years, of the SII in compliance with national regulations on the organization of local public services to networks of economic importance. The direct award may be made to entirely public companies that meet the requirements of European law and are in any case owned by the local authorities covered by the ATO. LD 201/2011 (so-called 'Salva Italia') entrusted ARERA with the regulatory and control competences in the SII. Over the years, the Authority has introduced significant innovations in the sector, providing for Consolidated Texts on tariff preparation, technical quality, contractual quality, user fee structure, arrears, social bonus and metering rules.The SII is applied art. 34 of Law Decree 179/12 supplemented by Law no. 115 of July 29, 2015, art. 8, paragraph 1, which establishes mandatory principles for local authorities for the award of services and regulates the transitional period of pre-existing awards validly absent. In particular, it is envisaged that the award of services provided by listed companies and subsidiaries of listed companies (such as those held by subsidiaries of A2A S.p.A.) will cease upon expiry of the service contract or other acts governing the relationship. LD 133/2014 (Unlock Italy Decree) provided that, at the time of first application, the AGE, in order to ensure the achievement of the principle of single management within the OTA, provide for the award to the single manager of the area at the end of the existing management, operating on the basis of an award approved in accordance with the legislation pro tempore in force and not declared ceased pursuant to law. The legislator provided for certain exceptions to the establishment of the single operator by the EGA: in particular, in the event that the ATO coincides with the regional territory, it is allowed to award the SII in territorial areas, however, not less than the territory corresponding to the provinces or metropolitan cities. In view of the critical state of the SII in some regions of southern Italy, Article 14 of LD 115/2022 provided for an intervention aimed at accelerating the process of entrusting the single operator in the event of persistent inertia 7 The company was created on January 1, 2020 from the merger between Acsm Agam Reti Gas Acqua S.p.A. and Lario Reti Gas S.r.l. 8 Following the industrial integration with the A2A Group, the municipalities present in the ATEMs of Milan 4, Bergamo 1, Bergamo 2, Bergamo 3 and Bergamo 5 (around 78,000 PdR) were sold by Unareti S.p.A. to RetiPiù S.r.l., with effect from November 1, 2020. 9 It should be noted that in March 2022, the extraordinary transaction with the company Romeo Gas S.p.A. took effect, which led to the sale of some localities previously managed by Unareti S.p.A. and LD Reti S.r.l. and all of Serenissima Gas S.p.A. (an Acinque Group company). 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 118 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report on the part of the EGA or the competent bodies, including by entrusting Invitalia10 with the management of the SII on a transitional basis for a maximum period of four years (renewable). The A2A Group carries out the SII, through its subsidiaries and safeguarded in accordance with Legislative Decree 152/2006, in Brescia and in several municipalities of the province by mean of A2A Ciclo Idrico S.p.A. and Azienda Servizi Valtrompia S.p.A. And by mean of Le Reti S.p.A. (Acinque Group) in Varese and Como and their provinces. District heating In Italy, there is no comprehensive legislative framework defining the way in which the district heating service is to be awarded, since neither the national legislator nor the administrative case-law in its rulings have unambiguously considered district heating as a local public service. In Lombardy, an initial discipline is dictated by Regional Law 26/2003. In such a poorly defined regulatory context, the local authority that considers this service as a local public service regulates it using licensing schemes and, in previous years, also authorizing schemes. In other cases, the municipalities do not assume district heating as a public service and, therefore, regulate different aspects such as the use of the subsoil. In cases where district heating is used as a public service, the relationship between the municipality and the operator is governed by agreements or service contracts with which the granting body has awarded the management within the municipality, providing for a fee and certain rules for the provision of the service, for a period that is ordinarily long in view of the underlying investments, also conferring exclusive management. ARERA, in implementation of Legislative Decree 102/14, has been carrying out regulation and control tasks in the sector since 2015, even though the supply price is freely defined by each operator on the basis of the characteristics of its system, the user and the territory served, since the heat supply tariff can only be set by ARERA if there is an obligation to connect by municipalities or regions. The Authority intervened, regulating several areas of the service, including: i. price transparency through the definition of minimum contents of supply contracts and the introduction of information obligations for operators; ii. commercial quality by introducing specific obligations for operators (compliance with specific and general levels, compensation); iii. technical quality in relation to security and continuity and the quality of metering, introducing service obligations and quality standards for the metering of energy supplied to users. As regards the A2A Group, the service is managed by A2A Calore e Servizi S.r.l., ComoCalor S.p.A., Acinque Tecnologie S.p.A., Acinque Energy Greenway S.r.l. (Acinque Group) and Gelsia S.r.l (AEB Group) in Bergamo, Brescia, Milan, Cremona (as well as in some municipalities in the relevant provinces), Lodi, Varese, Como, Lecco and in the relative municipalities of Valmadrera and Malgrate11, Monza, Seregno and Giussano. Public lighting The public lighting service includes the management of systems (operation, maintenance and periodic checks) as well as the supply of electricity to supply the lighting points, as well as the implementation of modernization and energy requalification interventions. Even for public lighting, as for district heating, there is no detailed regulatory framework. Local authorities that also identify this service as a local public service of economic importance must comply with art. 34 of LD 179/2012 and subsequent amendments and, therefore, award the service in accordance with EU principles. As highlighted by the Annex to Ministerial Decree of March 28, 2018 that disciplines the “Minimum environmental criteria of public lighting services” (CAM), in implementation of a general principle of the law, the duration of the service to be awarded must be commensurate with the activities included in the contract, the degree of economic exposure envisaged and, therefore, the time needed to amortize the investment plan. The A2A Group manages the public lighting service12 through A2A Illuminazione Pubblica S.p.A. (AEB Group), in Milan and in thirteen municipalities of its province, in Brescia and in Bergamo, in addition to the municipalities of Bisignano, Busto Arsizio, Carbonara al Ticino, Casalmaggiore, Cassano Magnago, Castelletto sopra Ticino, Crevoladossola, Fiorenzuola d'Arda, Isola d’Asti, Melissano, San Gregorio Magno, Sant'Arsenio, Stradella, Villanova D'Ardenghi, Villanterio and Volpiano. Through a number of Acinque Group companies, the service is managed in the municipalities of Bovisio Masciago, Cantello, Castiglione Olona, Costa Masnaga, Melzo, Nova Milanese, Pero, Robbiate, Zibido San Giacomo and Messina (Acinque Tecnologie S.p.A.), as well as in the municipalities of Sernio, Sondrio, Tirano and Valdisotto (Reti Valtellina Valchiavenna S.r.l.). In addition, RetiPiù S.r.l. (AEB Group) operates the public lighting service concession in the municipality of Seregno. 10 Invitalia, a national development agency owned by the Ministry of the Economy, aims to boost the country's economic growth, focusing on strategic sectors for development and employment and relaunching crisis areas, especially in the south of Italy. 11 The design, development, and management of district heating in the municipalities of Lecco, Malgrate, and Valmadrera will be carried out by Acinque Energy Greenway S.r.l., a company owned by Varese Risorse S.p.A. (70%) and Silea S.p.A. (30%). 12 Inclusive for some municipalities of the management of traffic lights and votive lamps. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 119 Management of the municipal hygiene service Environmental services are related to the case of local public services of economic importance and the procedures for awarding them are governed by art. 202 of Legislative Decree 152/2006 and by art. 34 of Law Decree 179/2012. The services of collection, transport, sweeping and washing of roads, recovery and disposal of waste are regulated by a specific service contract with the granting Municipality aimed at defining the essential elements of the award including the duration of management, the economic aspects of the contractual relationship as well as the organizational and management methods of the service and the quantitative and qualitative levels of the services provided. In defining the concessionary relationship, the Granting Body takes into account the achievement of objectives of efficiency, effectiveness and cost-effectiveness of the service. Budget Law 2018 entrusted ARERA with the regulatory and control powers in the waste sector, including differentiated, urban and assimilated waste: Resolution 363/2021/R/rif defined the criteria for the recognition of the efficient operating and investment costs of the integrated waste service for the regulatory period 2022-2025 (MTR-2), setting the criteria for defining the access tariffs to the treatment plants of undifferentiated and MSWOF. In addition, Resolution 15/2022/R/rif introduced the Consolidated Text for the regulation of the quality of municipal waste management for the regulatory period 2023-2025, providing for a set of contractual and technical quality obligations, minimum and homogeneous for all management, flanked by quality indicators and related general standards differentiated by regulatory Schemes, identified in relation to the actual starting quality level guaranteed to users in the various management schemes. It is noted that Lombardy Region has organized integrated waste management using the provisions of art. 200, paragraph 7, of Legislative Decree 152/2006, i.e. without the establishment of any Ambito Territoriale Ottimale (Optimal Territorial Area); while the competences for entrusting the service have been placed directly in the hands of the municipalities, which exercise them individually or in associated form. In addition, with Council Resolution no. 5777/2021 of December 21, 2021, the Region complied with the provisions of Article 6 of ARERA Resolution 363/2021/R/rif, declaring all the undifferentiated and MSWOF treatment plants as "additional" (i.e. whose access tariffs will not be determined by ARERA), taking into account that Lombardy is not in market conditions with structural rigidity either for the entire municipal waste chain or for MSWOF and is, on the contrary, characterized by plant self-sufficiency and competitive gate prices. The Region has, therefore, strengthened the monitoring obligations of plant operators, reserving the possibility of revising this provision during the biennial updating of tariffs and following any changes in market conditions and the adoption of the National Waste Management Plan. In Lombardy, the urban hygiene service is provided by Amsa S.p.A., Aprica S.p.A., Linea Gestioni S.p.A. (controlled by A2A Ambiente S.p.A.), by Acinque Ambiente S.r.l. (Acinque Group) and by Gelsia Ambiente S.r.l. (AEB Group). (AEB Group); the main awards concern the municipalities of Milan, Brescia, Bergamo, Varese, Como, Cremona and Lodi with different deadlines based on the deeds governing the relationship with the individual municipalities. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 120 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report 8) Update of the main legal and tax disputes still pending Adequate provisions are provided where necessary for the disputes and litigation described below. It is noted that if there is no explicit reference to the presence of a provision, the Group assessed the corresponding risk as possible without appropriating provisions in the financial statements. It should be noted that certain disputes illustrated in previous financial statements and still pending are not further reported due to the absence of updates or the modification of the previous risk situation. A2A S.p.A. Reorganization of Edison \- compensation cases Carlo Tassara: first lawsuit for damages against EDF and A2A S.p.A. On March 24, 2015, Carlo Tassara S.p.A. notified A2A, Electricité de France (EDF) and Edison a summons requesting the Court of Milan to condemn A2A and EDF to compensation for damages allegedly suffered by Carlo Tassara, in its capacity as minority shareholder of Edison, in relation to the mandatory tender offer launched by EDF on Edison shares consequently to the transaction by which, in 2012, A2A sold its indirect shareholding in Edison to EDF and simultaneously acquired 70% of the capital of Edipower from Edison and Alpiq. In the summons notified, Carlo Tassara complained that, in the transaction, EDF and A2A agreed on a mutual “discount” on the price paid by EDF for the purchase of Edison shares, on the one hand, and on the price paid by A2A for the purchase of 70% of Edipower, on the other. This discount was expected to be the result of abusive conduct by EDF and A2A as shareholders of Edison and the violation, among other things, of the regulations on transactions with related parties. This \- according to Carlo Tassara \- was expected to allow maintaining artificially low the price of the Edison shares paid to A2A and consequently the tender offer price paid to minorities of Edison (which by law was expected to be equal to that paid to A2A). The writ of summons did not quantify the damage allegedly suffered by Carlo Tassara as a result of such transactions. However, with brief on February 20, 2017, Carlo Tassara requested the judge (who rejected the preliminary request) to have an expert witness to calculate the damages (specifying that they should have been quantified in the alleged difference between the tender offer price and the market value that the Edison shares had previously). Carlo Tassara also filed an appraisal in which such damages were quantified in a total amount between 197 and 232 million euro, amount to calculate the compensation due from each of the companies that will be considered responsible by the judge. After several postponements justified also by modifications of the judge, on October 17, 2018, the judge rejected the requests for investigation of the plaintiffs, setting March 19, 2019 as the hearing for clarification of conclusions. On September 8, 2021, the Milan Business Court filed Sentence 7859 rejecting all of the claims made by Carlo Tassara S.p.A., without accepting the reconstruction according to which the shareholders acted to cause an undervaluation of Edison and Edipower. According to the Business Court of First Instance, in the case submitted, the conditions for assessing management and coordination are not met. The Court also found that the price of Edison shares, at which EDF purchased its shares during the tender offer, was not subject to review because it was the price defined by Consob pursuant to article 106 of the TUF; the sentence also highlights the difference between the price of Edison shares and the value of the Edipower subsidiary and, more importantly, the price at which the latter was sold to A2A. Carlo Tassara S.p.A. served a writ of summons on the appeal and A2A S.p.A. entered an appearance requesting that the Tassara S.p.A. appeal be declared inadmissible as well as groundless, and re-proposed the exceptions, defenses and requests raised in the first level of judgement for full protection. At the first hearing on March 2, 2022, the judge adjourned the case to July 12, 2023 for clarification of conclusions. Carlo Tassara: second lawsuit for damages against Transalpina dell'Energia and A2A S.p.A. On April 14, 2022, Carlo Tassara S.p.A. served a new summons on the Court of Milan, requesting that Transalpina Di Energia and A2A be ordered, jointly and severally with each other, to pay Carlo Tassara S.p.A. the damages that will be quantified in the course of the proceedings, after ascertaining and declaring the liability of the two companies for the breach of article 106 TUF (Total Tender Offer). In the writ of summons, Carlo Tassara S.p.A. quantifies the damage caused by the write-down of the value of its equity investment in Edison at 316,843,562.97 euro, figure resulting from the theoretical value of the tender offer calculated by Carlo Tassara S.p.A. on the basis of: a) Value of Edison shares recorded in the financial statements by TDE and A2A (1.5003 euro/share); b) Value assigned by Edison in fair value appraisals (1.3 euro/share); c) Highest edict value identified by Consob (0.95 euro/share); d) Market value to be defined by the Court. The writ of summons provides a description of the facts related to the extraordinary transaction to be ascertained: (i) the avoidance and violation of article 106 of the TUF and (ii) the demonstration of the existence of an alleged pact between the two defendants to depress Edison's value, prior to launching a takeover bid \- with the consequent violation of the rule protecting minority shareholders of listed companies and non-achievement of the latter of: (i) control price and (ii) market price of the Edison shares held by Carlo Tassara S.p.A.. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 121 In anticipation of the first hearing set for January 11, 2023, A2A entered an appearance and illustrated the grounds for the rejection of the appeal; at the hearing, the judge declared the default of TDE (which did not enter an appearance and did not appear at the hearing) and, on January 12, 2023, with an order outside the hearing, adjourned the case for the definition of the conclusions to July 4, 2023, in order to allow the panel, before considering the merits of the deeded claims, to examine the procedural objections raised by A2A. Class Action notified by ordinary shareholder On May 4, 2022, a natural person shareholder, owner \- at the date of the reorganization transactions of Edison S.p.A. \- of 1,250,000 ordinary shares of Edison S.p.A. (equal to 0.025% of the share capital of Edison S.p.A.), served a summons pursuant to article 140-bis of Legislative Decree September 6, 2005, no. 206 of the Consumer Code for a class action before the Business Court of Milan, seeking an order that Transalpina Di Energia and A2A, jointly and severally with each other, pay to itself, and to all class members who joined the action within the terms that may be set by the Court after declaring the admissibility of the action, compensation for damages to be quantified in the course of the proceedings, after ascertaining and declaring the liability of the two companies for the breach of article 106 TUF (Total Tender Offer). The factual reconstruction proposed by the plaintiff and the alleged liability of the two defendant companies retrace the contents of the writ of summons served a few weeks earlier by Carlo Tassara S.p.A. (reference is therefore made to the statement of this position). The hearing was held on November 24, 2022 and on January 12, 2023, the Court filed an order in which it declared the class action request inadmissible, accepting the objections and defences of A2A and sentencing the plaintiff to pay A2A legal expenses and to publish the operative part of the order in "Il Sole 24 Ore" within the following 30 days, the term in which the order may be appealed to the Court of Appeal, called to set hearing and term for notification. On March 1, 2023, the original applicant served the complaint filed in the Court of Appeal and the order setting the hearing for May 10, 2023. The Group, having fulfilled the requirements of the regulations in force, does not consider likely the risk for which it has not allocated any provisions. Derivations of public water for the production of hydroelectricity in Lombardy A number of appeals are still pending in which A2A and Linea Green have challenged the measures issued by the Lombardy Region to regulate the continuation of water derivation for hydroelectric use even after the expiry of their respective concessions. In particular, D.G.R. (Regional Council Resolution) of Lombardy no. 5130/2016 ordered, by implementing paragraph 5 of art. 53-bis of Regional Law 26/2003 introduced by Regional Law 19/2010, the subjection of the Lombardy hydroelectric concessions already expired to an "additional fee" established "provisionally" at 20 €/kW of nominal power of concession, and reserved the request for settlement at the outcome of the assessments by the regional offices regarding the profitability of expired concessions. The additional fee was imposed retroactively from the original expiry of each concession; therefore, for the Grosotto, Lovero and Stazzona concessions, it would be effective from January 1, 2011, for the Premadio 1 concession from July 29, 2013, for the Grosio concession from November 15, 2016 and for the Resio concession from December 31, 2010. A2A and Linea Green, which, like other operators, have always contested, also in the courts, the legitimacy, also constitutional, of article 53-bis, paragraph 5, of Regional Law 26/2003, have challenged before the Superior Court of Public Waters and, sometimes, where the Superior Court of Public Waters has ruled on the appeals of the companies, before the Court of Cassation and other competent instances the D.G.R. 5130/2016 and the related and consequent measures that governed the conditions for the temporary continuation of each concession, and which, where provided for, ordered the revocation of the exemption of part of the State fee. A2A has also more recently challenged the orders whereby the Lombardy Region ordered the company to pay the amount allegedly due for the operation of the large derivations of Grosio, Cancano-Premadio 1, Lovero and Stazzona due to the company's failure to pay that part of the state fee that is exempt pursuant to article 73 of Royal Decree 1775/1933, a benefit allegedly revoked by some of the resolutions that governed the provisional continuation of the concession after its expiry. This and other related litigation are still ongoing. The case brought by A2A in order to obtain the cancellation of the regional resolutions that governed the temporary continuation of the Cancano-Premadio 1 concession ended with the rejection sentence issued by the Joint Sections of the Supreme Court no. 15990/2020 and the judgement brought by A2A in order to obtain the cancellation of the regional resolutions that governed the temporary continuation of the Grosotto, Lovero and Stazzona concessions ended with the rejection sentence issued by the Joint Sections of the Supreme Court, no. 1043/2021. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 122 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report The provisions of the Regions concerning the temporary continuation of expired or expiring concessions could, as from 2019, be justified by the provisions introduced by the Conversion Law no. 12/2019 of Legislative Decree no. 135/2018, the constitutional compatibility of which is nevertheless controversial. In this last regard, it should be pointed out that A2A and Linea Green appealed before the TSAP for the annulment of General Director Decree (D.D.G.) no. 10544/2019 by means of which the Lombardy Region ascertained and determined the amounts allegedly owed by the concessionaires as additional fees for 2019, disputes subsequently integrated with reference to the additional fee for the years 2020 and 2021, and with these appeals, they also requested referral to the Constitutional Court of a matter of constitutional legitimacy in relation to the aforementioned provisions introduced by the law converting Decree Law Simplifications with regard to hydroelectric concessions. Also Regional Law 5/20 issued by the Lombardy Region in implementation of Law 12/2019 was submitted to the judgement of constitutionality by the Government, which, however, by Resolution of the Council of Ministers of November 24, 2021 after the amendments resulting from the entry into force of Regional Law no.19 November 4, 2021, waived the appeal. With reference to hydroelectric concessions, national Law 12/2019 also established that regions may introduce an obligation for concessionaires to provide 220 kWh annually and free of charge to the same regions for each kW of average nominal capacity of the concession. Availing itself of this faculty, with art. 31 Regional Law L.R. 23/2019 and, therefore, with Regional Council Resolution D.G.R. 3347/2020, the Lombardy Region regulated the obligation of free transfer of electricity with effect from the year 2020 for expired and unexpired derivation concessions. By Regional Council Resolution D.G.R. no. 191 of 02/11/2022, the Friuli-Venezia Giulia Region also regulated this obligation for expired and unexpired derivation concessions. The aforementioned regional implementation measures were challenged by A2A and Linea Green under various profiles before the TSAP and, at times, before the Court of Cassation. Finally, the same Law 12/2019 stipulated that concessionaires pay the regions a fee every six months, determined by a regional law, consisting of a fixed component and a variable component. A2A and Linea Green have challenged the Lombardy regional measures on various grounds. For disputes relating to public water derivation fees, the Company allocated adequate provisions for risks on a prudent basis, the quantification of which also takes into account the payments \- subject to any subsequent repayment upon the final outcome of the respective legal proceedings \- of certain positions, for the sole purpose of preventing additional costs. A2A Energiefuture S.p.A. Monfalcone Plant Investigation (RNR 195/17 Public Prosecutor of Gorizia) On March 8 and 9, 2017, following orders of the Public Prosecutor of Gorizia, the Monfalcone Plant of A2A Energiefuture S.p.A. was inspected during which surveys and samplings were performed (on coal in stock, on the ashes, on fume treatment residues, emissions from the chimney) and documentary acquisitions (on the servers of the emissions monitoring system, on fuel analysis forms, etc.). On the same date, the guarantee information has been notified to three employees, regarding an investigation for the offences referred to in Article 452 bis of the Italian Criminal Code. Environmental pollution. The suspect employees appointed trusted defenders. Subsequently, between December 2017 and January 2018, and then in December 2018 and July 2020, the Public Prosecutor of Gorizia proceeded with the acquisition of additional documentation at the plant. On May 6, 2021 (and subsequently on June 4, 2021), the defenders of the former head of the plant (but not the other two employees who had received information of guarantee) were notified of the conclusion of the preliminary investigation pursuant to article 415 bis of the code of criminal procedure in relation to the crime of environmental disaster pursuant to article 452 quater, paragraph 1, no. 2 and paragraph 2 of the Criminal Code. From the same notification, it emerges that the company is charged with the offence referred to in article 25 undecies, paragraph 1, letter b), in relation to article 5, paragraph 1, letter a) of Legislative Decree 231/01. In said notice of conclusion of the investigations, it is contested that the seabed in the area in front of the power plant quay has been compromised by coal run-off, the air has been compromised by emissions from the power plant and the balance of the ecosystem has been altered by contamination with heavy metals. A similar notice was served on May 10, 2021 at the Monfalcone power plant. On July 29, 2021, the defense attorney of the former head of the plant was served with a decree scheduling a preliminary hearing for November 24, 2021 before the Preliminary Investigation Judge (GIP) of Gorizia. At the hearing of November 24, 2021, the Company's lawyer raised a preliminary objection of the nullity of the notice pursuant to article 415-bis of the Code of Criminal Procedure of the conclusion of the preliminary investigations since not duly notified. The exception was upheld by the Judge who referred the case back to the Public Prosecutor's Office so that it could serve a new notice of conclusion of the preliminary investigations. As a result of this decision, the trial regressed to the preliminary investigation stage. On July 1, 2022, a new notice pursuant to article 415 bis of the Code of Criminal Procedure of the conclusion of preliminary investigations was served on the defence counsel of the former head of the plant and on the defence counsel of the company. The new notice no longer contemplates the offence referred to in article 452 quater of the Criminal Code, i.e. environmental disaster, but rather that referred to in articles 452 bis and 452 quinquies of the Criminal Code, i.e. environmental pollution/unintentional crimes against the environment. Consequently, by virtue of the new and different predicate offences referred to by the Public Prosecutor, the charge against the company in relation to administrative liability has also been amended, which now concerns the offence referred to in article 25 undecies, paragraph 1(a) and (c) of Legislative Decree 231/01. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 123 The defence counsels will acquire a copy of the file for examination of the documentation and subsequent evaluations. The Public Prosecutor's Office will request the setting of a new preliminary hearing before the preliminary investigation judge (GIP) of Gorizia and, consequently, a new decree setting the hearing before the GIP will be served on the defence lawyers. Linea Ambiente S.r.l. – Grottaglie landfill Court of Taranto \- Criminal Proceeding RGNR 2785/18 On March 14, 2019, an employee of A2A Ambiente S.p.A., seconded to Linea Ambiente S.r.l. as the company's Chief Operating Officer, was remanded in custody as part of investigations into the offences referred to in articles 319 and 321 of the Italian Criminal Code with reference to an alleged bribery connected with the issue of Executive Decision no. 45 dated April 5, 2018 by the Province of Taranto for the orographic optimization of the Linea Ambiente S.r.l.’s Grottaglie landfill. On August 1, 2019, the Court of Taranto \- Office of the Judge for Preliminary Investigation \- at the request of the Prosecutor's Office, ordered the immediate trial, i.e. without a preliminary hearing being held, of the defendants subject to pre-trial custody, including the employee of A2A Ambiente, against whom the measure of pre-trial custody in prison was replaced by house arrest and, subsequently, with the obligation to stay in the municipality of residence and, finally, with the prohibition of residence in the province of Taranto (even this last measure was later revoked by order of January 24, 2022), setting the first hearing for this purpose on November 4, 2019\. The trial ended with the reading of the verdict at the hearing on November 16, 2022; the grounds for the verdict will be filed in the next one hundred and eighty days. The A2A Ambiente employee was sentenced to eight years plus disqualification penalties. The operative part of the judgment does not give any evidence of a decision on the confiscation of the alleged profit. The Municipality of Grottaglie, if it wishes to insist on the claim for damages, will have to bring a new action of ordinary cognizance before the civil court. Court of Taranto no. 5400/19 R.G. Administrative Responsibility Precautionary measures On May 7, 2020, the Guardia di Finanza notified Linea Ambiente S.r.l. of a preventive seizure order issued by the GIP of Taranto on March 12, 2020 in the context of Proceedings no. 2785/18 R.G.N.R. and 5400/19 R.G. Admin. Resp. and deed of execution of preventive seizure pursuant to art. 53 of Legislative Decree 231/01, also valid as guarantee information pursuant to art. 369 of the Italian Criminal Code. For the first time, Linea Ambiente was informed of the existence of Criminal Proceedings no. 5400/19 R.G. Admin. Resp. of Entities for bribery offences pursuant to article 25, paragraph 2, of Legislative Decree 231/01. The preventive seizure, on May 7, 2020, was arranged up to the amount of 26,273,298 euro (equal to the presumed profit of the offence). On May 13, 2020 was the notification of appointment of a judicial administrator of the assets seized, including company shares and receivables. On May 21, 2020, Linea Ambiente proposed a request for review of the seizure order, which was discussed in the Council Chamber on June 9, 2020, and rejected. The cautionary requests have been confirmed. On June 11, 2020, a decree releasing the Linea Ambiente portions was notified. On September 10, 2020, the company was notified of the conclusion of the preliminary investigations pursuant to article 415-bis of the Code of Criminal Procedure. The notification was repeated, with partial changes, on January 21, 2021\. On January 21, 2021, the Taranto Public Prosecutor's Office notified the defense lawyer of Linea Ambiente of an order to release and return 95.004% of the shares in Lomellina Energia held by Linea Ambiente and already placed under preventive seizure. This was done on the basis of a new estimate of the value of the shares made by the judicial administrator and on the fact that after the seizures made by the Guardia di Finanza there remained sums equal to about 5% the value of said shares. On May 18, 2021, the Taranto Preliminary Investigation Judge (GIP), following the annulment by the Supreme Court of the preventive seizure order notified on May 7, 2020, issued a new preventive seizure order recalculating the "profit from the crime" as 20,304,974.88 euro (compared to the previous amount of 26,273,298.13 euro) by subtracting the "out-of-pocket costs" incurred by Linea Ambiente and quantified as 5,968,323.25 euro. In fact, the Supreme Court found that the original determination was erroneous of the alleged profit, identified by the Judge for Preliminary Investigation in the gross revenue that Linea Ambiente would have derived as a result of the landfill contributions made in the period April 2018 \- February 2019, for a total amount of 26,273,398.13 euro. Consequently, the Supreme Court ordered the annulment of the decree and the return of the acts to the GIP of Taranto to comply with the principles of law dictated by the Supreme Court, according to which the profit is only the advantage of immediate and direct causal derivation of the crime. In the new seizure order notified on May 18, 2021, however, according to the Linea Ambiente defense, this principle was again disregarded and therefore on May 27, 2021, an appeal was filed with the Supreme Court against the same, requesting its cancellation. At the 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 124 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report hearing on November 10, 2021, the Court declared the appeal inadmissible due to lack of standing because, according to the Court of Cassation, Linea Ambiente should not have been considered as a party to the committal proceedings opened with the sentence of annulment pronounced by the Court of Cassation on the appeal brought by the company's former Operating Director (in other words, according to the Court of Cassation, the judge of the Taranto Magistrate's Court, as judge of the committal, could have ruled only against the original appellant, i.e. the former Operating Director, and not also against the other parties affected by the original decree). On June 29, 2021, the Linea Ambiente counsel was re-notified of the preventive seizure order issued on May 18, 2021 by the GIP and the minutes of the execution of the same by which it was ordered to release and return to Linea Ambiente 3.352% of the shares held by it in the company Lomellina Energia for an estimated value (by the Judicial Administrator) of 1,617,284.96 euro. In May 2021, the Group complied with the request of the Judicial Administrator to pay the amounts seized up to the amount of 14 million euro. Subsequently, with a measure notified on March 14, 2022, granting the petition filed by the company, the GIP of Taranto ordered that the preventive seizure of Linea Ambiente's shareholding in Lomellina Energia still under seizure (1.644 %) be transferred to the corresponding sum of money (equal to 793,164.55 euro) to be paid to the indicated account. Once this payment had been made, in execution of the said decree, on May 17, 2022 the Guardia di Finanza released from seizure and returned to Linea Ambiente the 1.644 % of the shares it held in Lomellina Energia that had already been seized. The proceedings of merit On March 18, 2021, the Linea Ambiente S.r.l. counsel was served with the notice of the preliminary hearing scheduled for June 10, 2021 before the Taranto Preliminary Hearings Judge. In this preliminary hearing, the Municipality of Grottaglie filed a request to join the civil action. At the subsequent hearing on July 22, 2021, the defense of Linea Ambiente S.r.l. objected to the inadmissibility of the civil action of the Municipality of Grottaglie against Linea Ambiente S.r.l. The Preliminary Hearings Judge (GUP) accepted the objection and consequently declared the inadmissibility of the constitution of a civil party of the Municipality of Grottaglie, also rejecting the request of the latter, carried out in the alternative, to authorize the summons of the company as civil liable party, postponing the proceeding to November 11, 2021 for the continuation of the preliminary hearing. At this hearing, the defense raised a number of preliminary issues and the Judge granted time to respond and adjourned the hearing until January 20, 2022\. At the hearing on January 20, 2022, the judge rejected the preliminary objections and adjourned the hearing on March 31, 2022, then to May 31, 2022, for a decision on the preliminary motions; at that hearing, due to the impediment of the Magistrate's Court judge, an adjournment to September 29, 2022 was ordered; at the subsequent hearing on November 17, 2022, the parties requested an adjournment to acquire the conclusions of the proceedings against the natural persons and a new schedule was set. At the hearing of December 22, 2022, the Public Prosecutor delivered their conclusions with a request for committal for trial against the entity, setting the subsequent hearings for the conclusions of the other parties for January 19 and 26 and February 2, 2023; a new hearing was then set for March 30, 2023 for the Public Prosecutor's replies and possible taking of decisions on jurisdiction by the Judge. At present, the company believes that the risk of confiscation is possible and has not made a provision for the amount of the seizure in view of the multiple concomitant factors, namely: i) the as yet preliminary phase of Proceedings no. 5400/19 R.G. Admin. Liability; ii) the exorbitant amount determined by the preventive seizure decree as profit deriving from the hypothetical predicate crime in respect of what is presently considered possible for a future effective confiscation order; iii) the fact that the time, considered to be in the fairly distant future, when such seizure may be ordered, cannot yet be determined, given the need of the definitive nature of any conviction judgement. Linea Ambiente vs. Provincia di Taranto – Grottaglie Landfill In January 2021 (with reiteration in February 2022), the Province of Taranto sent a warning notice for the removal of the waste dumped during the period of validity of DD 45/18, which also constitutes a response to the requests that the company had made in previous years regarding the procedures for fulfilling the obligations resulting from the Sentence of the Council of State no. 5985/2019, which had annulled the substantial variation no. 45/2018. The Province, according to as stated in the meagre communication of 2021, which does not give evidence of the provincial inquiry, does not open the required authorization procedure and indicates to the company: (i) to remove the waste delivered in excess of the authorized quantities, (ii) to restore the landfill profiles in accordance with authorization 426/08 and (iii) to activate the closure activities. On February 9, 2021, Linea Ambiente met with the Province, expressly reserving the right to challenge the warning, in order to outline a technical path necessary to take appropriate action; in particular, the company illustrated a preliminary investigation path from which all possible solutions could emerge, including a new request for a substantial variant of the current authorization in line with Council of State Sentence 5986/2019. The uncertainty of the technical solutions available and the unpredictability of the measures of the competent authorities, which have not carried out any technical investigation, make it impossible to predict the duration of the authorization process and the type of measure that will be issued to allow the company to resolve the current impasse. In view of the flaws in the deed, the company appealed to the Apulia Regional Administrative Court to have the warning cancelled and notified additional grounds against the February 2022 communication; a hearing on the merits has not yet been scheduled. The Group has set aside an adequate provision to cover any risk. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 125 Lecce Public Prosecutor’s Office \- Criminal Proceeding no. 6369/2019 R.G.N.R. On February 26, 2020, at the Rovato headquarters of Linea Ambiente S.r.l., the Brescia Finance Police executed the "Search and Seizure Warrant" issued on February 5, 2020 by the Lecce Public Prosecutor's Office (Public Prosecutor Mignone) in relation to criminal proceedings no. 6369/2019 R.G.N.R.. The Finance Police then acquired a copy of the company's Organisational Model and the deeds and documents relating to the information flows destined for the Linea Ambiente S.r.l. Supervisory Body from November 2014 to January 2019. The criminal proceedings have been filed against the company Linea Ambiente S.r.l. and the legal representative pro tempore for the offences referred to in articles 452 quaterdecies of the Italian Criminal Code (activities organised for the illicit waste trafficking) and 256 and paragraphs 1 and 3 of Legislative Decree 152/2006 (respectively waste collection, transport and disposal activities in the absence of the prescribed authorization/registration and the construction and management of unauthorized landfills) from which the company's administrative liability derives pursuant to articles 24 and 25 undecies of Legislative Decree 231/2001 and this \- the said measure states \- "in order to have, with several operations and through the setting up of continuous and organized means and activities, managed and illegally disposed of large quantities of urban waste, creating an illegal landfill, in order to obtain an unfair profit". These alleged offences were supposedly committed in "Rome and Grottaglie from November 1, 2014 to January 28, 2019 with permanence". Together with the "Search and Seizure Warrant", the Finance Police notified the company “Guarantee and on the right of defence information”, from which it emerges that the company AMA S.p.A. of Rome, "owner of the TMB Rocca Cencia and Salario plants in Rome", was also entered in the same proceedings. The company has been informed that individuals who are legal representatives or directors of Linea Ambiente S.r.l. and AMA S.p.A. during the interested period have received only a first request to extend the preliminary investigations in the same proceedings. Amsa S.p.A. Milan Public Prosecutor’s Office \- Criminal Proceeding no. 33490/16 R.G.N.R. On May 7, 2019, the Carabinieri investigative unit of Monza showed up at the Amsa S.p.A. headquarters to notify an order for the exhibition of documents issued by the Milan Public Prosecutor's Office, relating to the documentation concerning three tenders launched by Amsa S.p.A. in 2017-2018, as well as the supplies made to it by a specific supplier. In relation to these proceedings, the Company's Chief Operating Officer and other employees were investigated, as well as three members of a tender judging committee issued by Amsa S.p.A.. No dispute has been raised against Amsa S.p.A. on the basis of the regulations on the administrative liability of legal persons, as Amsa S.p.A. considers itself to be an "injured party" and, in fact, has filed a complaint with the Public Prosecutor's Office through a trusted lawyer. On December 23, 2019, lawyer of Amsa \- as the injured party \- was served notice for the setting of the preliminary hearing on February 17, 2020\. As a result of this hearing, the Judge for Preliminary Investigation adjourned the hearing to May 25, 2020, setting a provisional schedule for its continuation. The measure in question does not cover the members of the tender committee, whose position has been withdrawn and closed. Filed as civil parties were Amsa S.p.A. and A2A Calore & Servizi S.r.l., as it was found to be an injured party in the same proceedings in relation to agreements made to its detriment by some companies competing in the district heating installation tenders, which tended to distort free competition. On January 18, 2021, the lawyer of Amsa S.p.A. was served notice of the setting of the preliminary hearing relating to the second line of investigation, registered under number 34213/19 R.G.N.R. \- 21296/19 R.G.I.P. connected to the first. The preliminary hearing of this second matter was set for March 19, 2021 for the joining of the proceedings. Amsa also filed as civil party against some of the defendants and in respect of certain allegations in connection with this additional matter. The trial underwent a series of postponements and the discussion of the preliminary hearing ended at the hearing on July 15, 2021 in which the defendants were sent for trial and the first hearing was set for November 18, 2021\. At the hearing of July 8, 2021, at the conclusion of the reconnaissance on the requests for alternative rites, the Judge also set the calendar for the treatment of alternative rites, scheduling numerous hearings between September and October 2021\. At the hearing of October 21, 2021, set for the decision on alternative procedures, the Judge, as regards the positions of interest to AMSA, accepted the plea bargains requested by pronouncing a sentence of application of the penalty, while for a defendant who had requested an abbreviated trial, it pronounced a sentence of acquittal. At the hearing on November 18, 2021, the preliminary issues raised by the defense of the defendants on remand were discussed; at the end of the hearing, the Court reserved its decision and adjourned the proceedings until the hearing on December 10, 2021\. At this hearing the Court, in order to withdraw its reservation, rejected 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 126 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report the objections raised by the defense and then opened the hearing, inviting the parties to formulate their preliminary requests, on which it reserved the right to decide, adjourning the hearing until January 14, 2022\. At this hearing, the Court granted the preliminary investigations, admitted the testimonial and documentary evidence requested and ordered the transcription of telephone and environmental interceptions. The case was postponed to March 14, 2022 for the commencement of the pre-trial investigation, and several hearings for the hearing of witnesses were scheduled until March 27, 2023. Linea Green S.p.A. Brescia Public Prosecutor’s Office \- Criminal Proceeding no. 3891/2020 R.G.N.R. On September 22, 2020, the person in charge of the technical and operational management of the Isola hydroelectric plant on the Grigna stream in Barzio Inferiore was notified of a request for an extension of the preliminary investigation. The interested party thus learned of the existence of investigations involving the latter in relation to an alleged crime of environmental pollution in conjunction with the legal representative of the company that owns the plant, which does not belong to Linea Green, but to a third company with which Linea Green has signed a management contract. Subsequently, on March 26, 2021, the Carabinieri from the Forestry Department appeared at the Linea Green offices to acquire documentation and, on that occasion, invited the company's legal representative to appoint a lawyer for the company, since, as shown in the report notified, it was "under investigation for the administrative offence depending on the crime referred to in article 25 undecies paragraph 1 letter a) of Legislative Decree 231/01", i.e. in relation to the offence of environmental pollution referred to in article 452 bis of the Criminal Code. Unareti S.p.A. 2i Rete Gas S.r.l./Unareti S.p.A. \- tender gas distribution service Atem Milano 1 In 2018, 2iRete Gas S.r.l. notified to the Milan Regional Administrative Court an appeal against the award of the gas distribution service ordered by the Municipality of Milan in favour of Unareti S.p.A., requesting the cautionary suspension of the award provision and formulating an investigative request, announcing the right to notify additional reasons as a result of the satisfaction of the request for access to the documents. After the delivery of the part of the offer documents not covered by omissis, 2i Rete Gas S.r.l. notified additional reasons and further detailed some of the reasons for the illegitimacy of the measure already stated in the initial appeal. The Council of State rejected the requests for investigation. The defects of the award could be classified under three categories of topics: reasons for excluding Unareti, reasons for re-establishing the commission and reasons for redefining the ranking. Within the terms, Unareti notified an incidental appeal in which 2i Rete Gas filed an argument with further critical aspects of the proceedings. After the Council Chamber of November 22, 2018, in which, at the joint request of the parties, the Regional Administrative Court adjourned the hearing on the merits, subsequently to November 21, 2019, the Regional Administrative Court issued Sentence no. 2598 on December 5, 2019 in which it upheld three grounds of appeal by 2i Rete Gas and one ground for the cross-appeal filed by Unareti ordering the annulment of the award unless the Administration ordered it. 2i Rete Gas S.r.l. notified the sentence on January 17, 2020 and all parties notified the appeal to the Council of State; 2i Rete Gas S.r.l. and Unareti S.p.A. appealed the grounds absorbed and not examined at first instance. The Municipality of Milan and 2i Rete Gas S.r.l. also requested cautionary suspension of the sentence, which was then waived; therefore, following the Council Chamber set for April 2, all three appeals were discussed at the only hearing on the merits set for July 9, 2020\. On September 7, 2020, the Council of State filed Sentence no. 5370, which upheld the appeal by Unareti, thus confirming the legitimacy of the award of the tender to Unareti. The Council of State, reforming the first instance ruling, also found that the reliance on the requirements of 2iRG S.p.A. in favour of 2iRG complied with the law, with the result that the first instance ruling was erroneous insofar as it excluded 2iRG from the tender. The Council of State also examined and ruled on the rejection or inadmissibility of all the other grounds of appeal of 2iRG and Unareti at first instance. On February 18, 2021, 2i Rete Gas S.r.l. filed an appeal with the Supreme Court pursuant to article 111 of the Italian Constitution, article 362, paragraph 1 of the Italian Code of Criminal Procedure and Article 110 of the Italian Code of Civil Procedure to ask the Supreme Court, which will have to decide in Joint Sections, to ascertain the lack of jurisdiction of the Council of State when it issued Sentence no. 5370 on September 7, 2020\. The Company and the Municipality of Milan have entered an appearance by lodging a counter-appeal. The hearing was held on May 24, 2022 and Order 27904 was filed on September 23, 2022, rejecting 2i Rete Gas' appeal. On December 16, 2021, Unareti and the Municipality of Milan signed the service agreement, with ATEM management to begin on March 1, 2022. Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 127 Acinque S.p.A. (formerly ACSM-AGAM S.p.A.) Acinque S.p.A. (formerly ACSM-AGAM S.p.A.) and Acinque Ambiente S.r.l. (formerly Acsm Agam Ambiente S.r.l.): lawsuit for damages against the Municipality of Varese regarding the municipal sanitation concession Acinque S.p.A. (formerly ACSM-AGAM S.p.A.) and Acinque Ambiente S.r.l. (formerly ACSM-AGAM S.p.A.), in 2020, filed a lawsuit with the Special Business Court of Milan seeking a declaration of contractual and non-contractual non-fulfilment by the Municipality of Varese, with a consequent order for damages. The Municipality of Varese caused direct damage to the assets of the Acinque Group (formerly ACSM-AGAM) by ordering the early termination of the service contract signed with Acinque Ambiente S.r.l. (formerly Acsm Agam Ambiente S.r.l.). Acinque Ambiente S.r.l. (formerly Acsm Agam Ambiente S.r.l.) in fact reduced the income flows connected to the contract and bore unforeseen and otherwise avoidable charges for the transitory continuation of the contract at more onerous conditions and Acinque S.p.A. (formerly ACSM-AGAM S.p.A.) suffered a significant reduction in the value of the subsidiary's equity investment, despite and after the signing of the Framework Agreement that characterized the extraordinary transaction in 2018\. After the order of the Court of Milan of January 20, 2022 declaring the lack of jurisdiction of the Court of Milan and the jurisdiction of the ordinary Court of Varese, the Companies resumed the proceedings before the Court of Varese. Following the first hearing on September 20, 2022, the Company requested the admission of witness evidence, a request to which the Municipality of Varese objected. The judge reserved the decision and as of today the ruling has not yet been announced. AEB S.p.A. Judgments on the integration transaction between A2A and AEB S.p.A. With two initial appeals with cautionary request (R.G. 971/2020 submitted by CST Centro Servizi Termici (Thermal Service Center), DE.CA.BO. S.r.l. and Lombardy Regional Councillor Marco Fumagalli; R.G. 983/2020 submitted by Seregno Municipal Councillor Tiziano Mariani) filed with the Milan Regional Administrative Court, the resolution of the Seregno Municipal Council approving the merger between A2A and AEB was challenged; this resolution was suspended by Ordinances no. 868/2020 and no. 869/2020 by which the Regional Administrative Court accepted the precautionary requests submitted by the appellants and set the merit hearing for December 2, 2020\. On December 2, 2020, the third appeal was also discussed (R.G. 1095/2020 submitted by Idrotech and Ecoterm S.r.l.s.). A2A, the Municipality of Seregno and AEB have filed separate cautionary appeals before the Council of State to obtain the annulment and/or reform of the ordinances. The Council of State, at the outcome of the Council Chamber set for August 27, 2020, on August 28, 2020, upheld the appeals «due to the clear lack of legitimacy and interest of the claimants at first instance and the consequent clear lack of the assumption of direct and immediate harm involving the same claimants from the contested deeds, in view of the nature of the corporate change and the inapplicability of the transaction subject to the appeal at first instance». The resolution of the Municipality of Seregno, therefore, also took effect for the purposes of the corporate deeds that were in fact carried out. The company has evaluated the content of the Council of State’s ordinances and the appeals and, also in light of the position of the appointed lawyers, performed the company transaction, considering the prevalence of the principles of legal certainty and market confidence given the performance of corporate acts. On February 15, 2021, the Milan Regional Administrative Court published the judgments upholding the three appeals filed respectively by (i) CST Centro Servizi Termici di Calzolari Maurizio, Depositi Carboni Bovisa DE.CA.BO. S.r.l. and Marco Fumagalli (Councillor Lombardy Region) Sentence no. 412/21, (ii) Tiziano Mariani (Councillor Municipality of Seregno) Sentence no. 413/21 and (iii) Idrotech di Corno Irwin Maria Sentence no. 414/21. In order to enforce Sentence 413/21, Municipal Councillor Mariani has also appealed to the Milan TAR for a judgement of compliance. On March 2, 2021, the Regional Administrative Court, at the claimant’s request, issued a precautionary decree in which it denied single-court precautionary measures, but set a Council Chamber for March 24, 2021\. Following the hearing on the merits on April 28, 2021, with Sentence no. 1248 of May 20, 2021, the Regional Administrative Court rejected the appeal for compliance, on the grounds that delivery by AEB of the due diligence of the transaction to Councillor Mariani constituted full compliance with Sentence 413/21. In the same sentence, the Lombardy Regional Administrative Court (TAR) also specified that «not included in the compliance effect» of the ruling for which compliance was requested (i.e. of Sentence no. 413/21) are «the validity and effectiveness of the corporate deeds adopted as a consequence of the contested resolution, for which the administrative judge does not have jurisdiction (Civil Cassation, Joint Sections, Ordinance January 23, 2014, no. 1237; Sentence December 30, 2011, no. 30167; Council of State, Plenary Meeting, Sentence June 3, 2011 , no. 10)», thus confirming that the acceptance of the appeal proposed by the Director Mariani did not produce immediate effects on the company deeds that have occurred in the meantime. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 128 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report AEB and the Municipality of Seregno have filed an appeal with the Council of State requesting a suspension of the effects of Sentence 413/21. On March 22, 2021, the Council of State denied the suspension because it found that the ruling did not jeopardize the stability of the corporate integration transaction and, given the peculiarity and delicacy of the matter, scheduled a merit hearing as early as July 1, 2021\. A similar appeal has been filed \- without a request for precautionary measures \- by A2A. The TAR 412/2021 Sentences (CST and others) and 414/2021 (Idrotech and others) qualify the business combination as a transformation of AEB S.p.A. into a mixed company carried out in alleged violation of art. 17 Legislative Decree 175/16 and art. 3 Legislative Decree 50/16 and consider that the conditions do not exist for exemption from the procedures dictated by art. 10 of the same Legislative Decree no. 175/16. A2A, as well as AEB and the Municipality of Seregno, has notified appeal to the Council of State to request the annulment of the sentences. The public hearing to discuss the merits of the appeals was held on July 1, 2021, with the sole exception of the appeal notified by A2A against Sentence 413/21 not yet discussed. On September 1, 2021, the Council of State filed Sentence 6143 dismissing the appeals served by the Municipality and AEB against Sentence 413/21 (Director Mariani). A2A was also notified of the sentence on September 2\. On September 1, 2021, the Council of State also filed Sentence 6142 by which it rejected the appeals notified by the Municipality, AEB and A2A against Sentence 414 of February 15, 2021 (which had upheld the appeals notified by Idrotech and Eco Term); and on September 6, 2021, the Council of State also filed Sentence 6213 by which it rejected the appeals notified by the Municipality, AEB and A2A against Sentence 412 of February 15, 2021 (which had upheld the appeal notified by Regional Councillor Fumagalli, CST and DE.CA.BO.). Also in these two cases, therefore, the annulment of the resolution passed by the Seregno City Council on April 20,2020 with number 17 was confirmed. Moreover, on September 3, 2021, the legal counsel of the appellants, Idrotech and Ecoterm, asked the Municipality, AEB and A2A to provide compensation for the damages suffered by the companies as a result of the illegitimate transaction carried out, announcing possible legal action in the event of inactivity. The Municipality replied, fulfilling its obligations to respond to the companies. A2A and AEB have appealed the sentences both before the Council of State by way of revocation and appeal by cassation. In its appeals for revocation, A2A claimed that the Council of State had made a factual error in two respects: on the one hand, in that it mistakenly deemed the companies claiming at first instance to be “operators in the sector” and, as such, legitimated to act against the merger between A2A and AEB; on the other, in that it mistakenly qualified the merger as a public-private partnership aimed at obtaining public assignments, without appreciating the fact that it was objectively unsuitable. In its appeals to the Supreme Court, A2A claimed both absolute lack of jurisdiction on the part of the administrative judge (since it decided on appeals lodged by parties without legitimacy) and excess of jurisdictional power due to exceeding the limits of administrative jurisdiction (since the Council of State’s pronouncements invaded the sphere of regulatory production reserved for the legislator, introducing an obligation to tender in corporate transactions with public companies that is not provided for by the law). The disputes were settled out of court with the original plaintiff companies with the settlement of the compensation claims made, without any acknowledgement of liability, and the consequent waiver by them of the appeals filed in first instance, the Regional Administrative Court rulings and their effects, and the Council of State rulings and their effects, and the waiver by A2A and AEB of the appeals for revocation and cassation. Following the opposition filed by BEA, in the revocation proceedings, in connection with these waivers, the Council of State set the hearing for October 6, 2022, at which the Council ordered an ex officio adjournment to November 3, 2022 to assess preliminary procedural issues. On March 1, 2023, the Council of State filed its rulings on the conclusion of the judgments filed by A2A, which it declared inadmissible, as a result of which it did not ascertain the inadmissibility due to the supervening lack of interest following the settlement and waiver of the first instance appeals by the original appellant companies. The judgments do not rule on the validity of the settlement and the previously ordered corporate actions. The Court of Cassation set the hearing for November 22, 2022 and filed its final orders: (i) Ordinance 219 of January 5, 2023 dismissed the AEB appeal against Sentence 6143/21 (Director Mariani) due to an interpretation of the lack of jurisdiction and the failure of the Municipal Councillor to abandon the original appeal and the resulting sentence, (ii) Ordinances 300 (CST and DE.CA.BO position) and (iii) 301 (Idrotec and Ecoterm position) of January 9, 2023 declared the appeals inadmissible in the Court of Cassation, given the waiver by the four original appellant companies of the appeal and the first and second instance rulings with the consequent lack of interest in the appeals. Monza Public Prosecutor’s Office \- Criminal Proceeding no. 1931/2021 R.G.N.R. On July 5, 2021, officers and agents of the Guardia di Finanza of Seregno showed up at the headquarters of AEB S.p.A. in Seregno to execute “personal and local search orders” and “request for delivery \- local search order”. The proceedings, which in the initial phase were against unknown persons, originated from two complaints submitted to the Prosecutor’s Office on November 25, 2019 and on February 10, 2020 by Tiziano Mariani, Municipal Councillor of the Municipality of Seregno, who also notified an appeal to the TAR in the terms referred to above. The “personal and local search decree” concerns the Chair of the Board of Directors of AEB S.p.A and is also valid as “information of guarantee” pursuant to art. 369 of the Italian Code of Criminal Procedure for the person under investigation. On the basis of this decree, the Chair of AEB is being investigated, in conjunction with others (art. 110 of the Criminal Code), who have not been named, for the Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 129 offences referred to in art. 353 bis Criminal Code (disturbance of the freedom of the procedure for choosing a contractor), 319 Criminal Code (bribery for an act contrary to the duties of office), 321 Criminal Code (penalties for the briber), committed between “October 2019 and in present permanency.” At the same time, AEB was served with a “request for delivery and a local search decree” with which the Monza Public Prosecutor’s Office ordered the acquisition of documentation concerning the transaction. Subsequently, on September 24, 2021, the Finance Police of Seregno, at the request of the Monza Public Prosecutor’s Office, appeared at the A2A Milan headquarters to serve, as part of Procedure no. 1931/2021 R.G.N.R. relating to the merger between the A2A and AEB Groups, a notice of non-repeatable technical checks on the IT supports already previously seized, with the appointment on October 8, 2021 of a consultant appointed by the Public Prosecutor’s Office to make the forensic copy. The deed in question was notified to persons, other than the current directors of A2A S.p.A., who in A2A S.p.A., Unareti S.p.A. and A2A Illuminazione Pubblica S.r.l. had positions of responsibility, or considered such, for various reasons in the project in question and also contains information about the guarantee and the right of defense in relation to the investigation concerning the hypotheses of crime pursuant to articles 110 of the Italian Criminal Code (conspiracy), 353 bis Criminal Code (disturbance of the freedom of the procedure for choosing a contractor), 319 Criminal Code (bribery for an act contrary to the duties of office), 321 Criminal Code (penalties for the corruptor). A2A Ambiente S.p.A. Busto Arsizio Public Prosecutor’s Office \- Criminal Proceeding no. 9079/2021 R.G.N.R. (formerly no. 24/2017 R.G.N.R.) On February 18, 2021, the Carabinieri \- forestry department showed up at the Gerenzano landfill site in execution of investigation activities delegated by the Public Prosecutor’s Office of Busto Arsizio within the framework of criminal proceeding no. 24/2017 R.G.N.R. Form 44 (i.e. against unknown persons), to acquire documentation on the plant, then notifying the person in charge of the plant and the head of A2A Ambiente’s “Impianti Lombardia” organizational structure of the proceedings for the alleged offences under articles 81 paragraph 2 (continuation), 110 (conspiracy), 452 quater (environmental disaster), 452 septies (obstruction of control) of the Italian Criminal Code. Gerenzano is a former quarry, later converted into a landfill, located in the territory of the municipality of the same name, which owns it, with an area of about 80 hectares. It is divided into two lots Gerenzano 1 and Gerenzano 2. Gerenzano 1 is the original unit, dating back to the mid-1960s when waste disposal activities began. At the end of the 1970s, 200 municipalities, including Milan, delivered waste there. In July 1980, the Municipality of Gerenzano and the municipal company of the Municipality of Milan (then AMNU) signed an agreement whereby AMNU exclusively took over the management of the landfill of waste from the Municipality of Milan and 69 other municipalities. AMNU then built a new controlled landfill and carried out environmental remediation and restoration works (with regional contributions). The cultivation of Gerenzano 1 by AMNU, later to become AMSA, continued until its final closure in 1988\. A new area was then identified where Gerenzano 2 was built and managed by AMSA from 1989 to 1991, the year in which conferring ceased. In the context of the obligations taken on with the management of the landfill for environmental recovery, AMSA carried out a series of interventions including the impermeable cover, the biogas collection and combustion plant, weir wells and groundwater purging, the treatment plant for emitted groundwater, leachate collection works, a leachate purifier, and environmental recovery interventions. The operation of the plants in application of the authorization measures will have to continue until the waste is mineralized, as far as biogas is concerned, and until the water table is back in good condition, as far as purging wells are concerned. As regards the latter activity, AMSA took responsibility for a situation of degradation and pollution that existed prior to its taking over the management of the area, in relation to which it had no responsibility. In 2013, as part of the reorganization of the A2A Group’s environmental chain, A2A Ambiente took over from AMSA in the management of the Gerenzano landfill and in the service contract still in force as a result of technical extensions with the Municipality of Milan for the post-mortem management service of the landfill. On July 1, 2022, the conclusion of the preliminary investigations pursuant to article 415-bis of the Code of Criminal Procedure was notified. In the notice, the person in charge (at the time of the contested facts, i.e. from May 29, 2015 to November 13, 2020) of the Gerenzano Hub and the person in charge of the “Lombardy Plants” structure (the latter in current permanence) are charged with having caused an environmental disaster in the management of the plant (article 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 130 A2A Consolidated financial statements 2022 Notes to the Consolidated annual report 452 quater of the Criminal Code) by means of an unlawful dysfunction of the purification plant of the groundwater emitted by means of a hydraulic barrier so as not to carry out the containment of the contamination of the water table and by means of an unlawful dysfunction of the purification plant for the treatment of the polluting fluids before their discharge into the Bozzente stream and of having obstructed and eluded the environmental supervision and control activities by ARPA (article 452 septies Criminal Code from May 29, 2015 permanently for the person in charge of the facility and from November 21, 2016 for the person in charge of the Hub). No charges against the company under Legislative Decree 231/01 appear in the notice of conclusion of investigations. On November 10, 2022, the decree was served setting March 2, 2023 as the date of the preliminary hearing. In January 2023, the judicial police on behalf of the Public Prosecutor carried out investigative activities against A2A Ambiente S.p.A.. * * * The following information is provided in connection with the main litigation of a fiscal nature: A2A gencogas S.p.A. (formerly Abruzzoenergia S.p.A.) \- General IRES/IRAP/VAT audit for fiscal years 2014 and 2015 On January 19, 2016, the Finance Police \- Chieti Unit commenced a general audit of A2A gencogas S.p.A. (formerly Abruzzoenergia S.p.A.) for fiscal years 2014 and 2015 for IRES, IREP and VAT purposes. This audit was completed on May 25, 2016\. The company submitted comments to the formal notice of assessment by the inspectors. In December 2016, the Revenue Agency of Chieti issued notices of assessment for IRES, IRAP and VAT for the years 2011 and 2012 and, in August 2017, served notices of assessment for IRES, IRAP and VAT for the years 2013 and 2014\. The company has proposed a timely appeal against all the deeds notified. The Provincial Tax Commission of Chieti and the Regional Tax Commission of Pescara issued unfavourable rulings for IRES and IRAP. The appeals against the VAT assessment notices for the years 2011-2014 were rejected by the Provincial Tax Commission of Chieti and upheld by the Regional Tax Commission of Pescara. On May 8, 2019, the Company filed an appeal with the Supreme Court for IRES 2011 and 2012\. In February 2020, the Company filed an appeal with the Supreme Court for IRES 2013 and 2014 and IRAP 2011-2014 and a counter-appeal with the Supreme Court for VAT 2011 and 2012\. On May 5, 2020, the Company filed a counter-appeal with the Supreme Court for 2013-2014 VAT. A risk provision of 2 million euro has been recognized. A2A S.p.A. \- Registration tax for transfer of business unit and sale of the investment Chi.na.co. S.r.l. On April 4, 2016, the Provincial Directorate I of Milan \- Regional Office of Milan 1 \- notified the invitation to appear to provide clarifications on a business transfer in the company Chi.na.co. S.r.l. and the subsequent sale of the investment held in it under control for registration tax purposes. The invitation was followed by a contradictory with the Office and subsequent notification by the latter of the notice of liquidation to the acquiring counterparty, which filed an appeal on September 28, 2016\. The Provincial Tax Commission of Milan rejected the appeal with sentence filed on July 7, 2017\. On February 13, 2018, the acquiring company filed an appeal, which was rejected by the Milan Regional Administrative Court. On April 8, 2019, the Company filed an appeal with the Supreme Court. On February 21, 2020, the Office filed a counter-appeal and a cross-appeal with the Supreme Court. The risks provision recognized for 1.4 million euro was fully used for the payment of the amounts requested with the liquidation notice. A2A S.p.A. (merging company of AMSA Holding S.p.A.) \- VAT Tax assessments for tax years from 2001 to 2005 In early 2006, the Italian Finance Police – Lombardy Regional Unit, Milan – carried out a tax audit of AMSA Holding S.p.A. (now A2A S.p.A.) for VAT purposes for tax years 2001 to 2005. The audit ended with the issue of a final report contesting the legitimacy of the ordinary VAT rate, in place of the special rate applied by suppliers for waste disposal and plant maintenance, as well as the subsequent deduction made after the invoices issued for these services were duly paid. The report was followed by formal notices of assessment from the Tax Revenue Office (Milan 3 Office) for each year audited; appeals were then filed with the Provincial Tax Commission within the term provided by law. The appeals for 2001 and for 2004 and 2005 were discussed on January 25, 2010 and on February 17, 2010 respectively, with a favourable outcome for the company in all cases. The Tax Revenue Office appealed against the verdict of the first court. The Regional Tax Commission rejected this appeal for all three years, 2001, 2004 and 2005. For 2001, the Tax Revenue Office filed an appeal with the Supreme Court against which AMSA Holding S.p.A. (now A2A S.p.A.), filed a cross-appeal on November 9, 2012\. At the hearing on December 12, 2018, the Company requested that the case be suspended in order to assess the facilitated settlement of the dispute. On May 24, 2019, the company filed an application for a facilitated settlement of pending tax disputes and definitively settled its tax claim. The outcomes of the 2002 and 2003 disputes were also favourable for the company but the Tax Revenue Office filed an appeal against both sentences. The appeal for 2002 was discussed on November 30, 2010, and by way of a sentence lodged on February 2, 2011 the Milan Regional Tax Commission overturned the sentence of the first court, upholding the Tax Revenue Office’s appeal on almost all counts with the exception of the hazardous waste category. The Company filed an appeal with the Supreme Court for 2002\. The hearing was held on December 12, 2018 and the appeal was upheld and the judgement was adjourned to the Regional Technical Committee (CTR). On December 23, 2019, the Company filed an appeal for reinstatement in CTR and an appeal for revocation with the Supreme Court. For 2003 the appeal made by the Tax Revenue Office was discussed on November 7, 2011 before the Regional Tax Commission which rejected it with a sentence filed on November 11, 2011\. The Tax Revenue Office has not appealed to the Supreme Notes to the Consolidated annual report 2022 Consolidated financial statements A2A 131 Court for 2003, 2004 and 2005 and the sentence has become final, thereby closing the litigation. No provisions for risks have been recognized. A2A Ciclo Idrico S.p.A. – IMU assessment notices of Municipality of Montichiari for the years 2013-2018 On December 4, 2019, the Municipality of Montichiari (BS) issued notices of assessment for IMU purposes for the years from 2013 to 2018 regarding the purification plant located in the territory of the same municipality. On January 29, 2020, the Company filed an appeal with the Provincial Tax Commission, which rejected the appeal. The Company is assessing the action to be taken. A risk provision of 0.7 million euro has been recognized. A2A Energia S.p.A. merging company of Linea Più S.p.A. \- General IRES/IRAP/VAT audit for fiscal years 2013 and 2014 On September 17, 2019 the Lombardy Regional Department \- Large Taxpayers Section \- opened in respect of A2A Energia S.p.A. (merging company of Linea Più S.p.A.) a general audit for IRES, IRAP and VAT purposes for tax periods 2013 and 2014\. This audit was completed on October 22, 2019\. On December 24, 2019, the Lombardy Regional Department issued notices of assessment for IRES, ROBIN TAX, IRAP and VAT purposes for the tax periods verified. On July 24, 2020, the Company appealed against all the assessments to the Provincial Tax Commission. At the hearing on May 11, 2021, the Milan Provincial Tax Commission upheld the company’s appeals. On September 24, 2021, the Office filed an appeal and, on November 19, 2021, the Company filed a counter-claim to the appeal that was discussed at the hearing on June 10, 2022 and the outcome of which is not yet known. A risk provision of 10.3 million euro has been recognized. A2A Ambiente S.p.A. \- Tax audit on sulphur dioxide and nitrogen oxides SO2 NOx emissions for the 2014 and 2019 tax periods On October 24, 2019, the Naples Customs Agency 2 \- Excise Department for Audits and Controls \- opened against A2A Ambiente S.p.A. an administrative technical audit of the Acerra waste-to-energy plant for the recovery of the tax on emissions of sulphur dioxide and nitrogen oxides for the years 2014-2019. The audit was completed on February 27, 2020\. On April 24, 2020, the Company submitted its observations regarding the notice of assessment prepared by the inspectors. On December 11, 2020, the Naples Customs Agency served notice of payment and imposition of penalties for the years 2015-2019. In March 2021, the Company filed an appeal with the Naples Provincial Tax Commission. The company is assessing the action to be taken. A risk provision of 0.5 million euro has been recognized. Linea Ambiente S.r.l. \- General IRES/IRAP/VAT audit for fiscal years 2017-2019 On October 13, 2022, the Guardia di Finanza \- Brescia Economic-Financial Police Unit \- opened a general audit for IRES and IRAP purposes against the company Linea Ambiente S.r.l. for the tax periods 2017-2019. This audit was completed on October 28, 2022\. The tax audit report disputed the deductibility of certain costs incurred by the company during the period audited. No assessment notices have yet been notified. A risk provision of 0.326 million euro has been recognized. 3 Notes to the Consolidated annual report 3.1 General information 3.2 Consolidated annual report 3.3 Financial statements 3.4 Basis of preparation 3.5 Changes in international accounting standards 3.6 Scope of consolidation 3.7 Consolidation policies and procedures 3.8 Accounting standards and policies 3.9 Business Units 3.10 Results sector by sector 3.11 Notes to the balance sheet 3.12 Net debt 3.13 Notes to the income statement 3.14 Earnings per share 3.15 Note on related party transactions 3.16 Consob Communication no. DEM/6064293 of July 28, 2006 3.17 Guarantees and commitments with third parties 3.18 Other information 4 Attachments to the notes to the Consolidated annual report 134 A2A Consolidated financial statements 2022 Attachments to the notes to the Consolidated annual report 4.1 1\. Statement of changes in tangible assets Tangible assets millions of euro Balance at 12 31 2021 First Consolidation Changes Changes Balance at 12 31 2022 Investments Changes in category Reclassifications/Other changes Disposals/Sales Write-downs Depreciation Total changes Gross value Accumulated depreciation Gross value Accumulated depreciation Land 141 2 7 1 4 (1) (1) 10 153 Buildings 544 12 17 31 36 (34) (32) 18 574 Plant and machinery 3,908 189 222 219 358 (415) (94) 92 (1) (353) 28 4,125 Industrial and commercial equipment 55 13 1 5 (5) (4) 3 (11) 2 57 Other assets 132 33 11 18 (18) (18) 16 (32) 10 142 Landfills 25 3 (6) (8) (11) 14 Construction in progress and advances 544 3 528 (273) (2) 253 800 Leasehold improvements 124 36 6 (2) 1 (23) 18 142 Assets for rights of use 115 20 33 18 (31) 20 155 Total tangible assets 5,588 226 856 (1) 444 (454) (116) 111 (1) (491) 348 6,162 Tangible assets millions of euro Balance at 12 31 2020 First Consolidation Changes Changes Balance at 12 31 2021 Investments Changes in category Reclassifications/Other changes Disposals/Sales Write-downs Depreciation Total changes Gross value Accumulated depreciation Gross value Accumulated depreciation Land 127 14 4 (4) - 141 Buildings 597 5 11 8 (105) 60 (3) 1 (30) (58) 544 Plant and machinery 3,788 146 214 100 209 (199) (73) 71 (8) (340) (26) 3,908 Industrial and commercial equipment 50 17 6 (9) (1) 1 (9) 5 55 Other assets 122 27 13 26 (25) (12) 12 (31) 10 132 Landfills 26 2 17 (13) (7) (1) 25 Construction in progress and advances 226 34 411 (128) 3 (2) 284 544 Leasehold improvements 113 2 30 2 (3) (20) 9 124 Assets for rights of use 113 16 11 3 (2) 2 (28) (14) 115 Total tangible assets 5,162 217 714 (3) 163 (186) (91) 87 (10) (465) 209 5,588 Attachments to the notes to the Consolidated annual report 2022 Consolidated financial statements A2A 135 Tangible assets millions of euro Balance at 12 31 2021 First Consolidation Changes Changes Balance at 12 31 2022 Investments Changes in category Reclassifications/Other changes Disposals/Sales Write-downs Depreciation Total changes Gross value Accumulated depreciation Gross value Accumulated depreciation Land 141 2 7 1 4 (1) (1) 10 153 Buildings 544 12 17 31 36 (34) (32) 18 574 Plant and machinery 3,908 189 222 219 358 (415) (94) 92 (1) (353) 28 4,125 Industrial and commercial equipment 55 13 1 5 (5) (4) 3 (11) 2 57 Other assets 132 33 11 18 (18) (18) 16 (32) 10 142 Landfills 25 3 (6) (8) (11) 14 Construction in progress and advances 544 3 528 (273) (2) 253 800 Leasehold improvements 124 36 6 (2) 1 (23) 18 142 Assets for rights of use 115 20 33 18 (31) 20 155 Total tangible assets 5,588 226 856 (1) 444 (454) (116) 111 (1) (491) 348 6,162 Tangible assets millions of euro Balance at 12 31 2020 First Consolidation Changes Changes Balance at 12 31 2021 Investments Changes in category Reclassifications/Other changes Disposals/Sales Write-downs Depreciation Total changes Gross value Accumulated depreciation Gross value Accumulated depreciation Land 127 14 4 (4) - 141 Buildings 597 5 11 8 (105) 60 (3) 1 (30) (58) 544 Plant and machinery 3,788 146 214 100 209 (199) (73) 71 (8) (340) (26) 3,908 Industrial and commercial equipment 50 17 6 (9) (1) 1 (9) 5 55 Other assets 122 27 13 26 (25) (12) 12 (31) 10 132 Landfills 26 2 17 (13) (7) (1) 25 Construction in progress and advances 226 34 411 (128) 3 (2) 284 544 Leasehold improvements 113 2 30 2 (3) (20) 9 124 Assets for rights of use 113 16 11 3 (2) 2 (28) (14) 115 Total tangible assets 5,162 217 714 (3) 163 (186) (91) 87 (10) (465) 209 5,588 4 Attachments to the notes to the Consolidated annual report 4.1 1\. Statement of changes in tangible assets 4.2 2\. Statement of changes in intangible assets 4.3 3\. List of companies included in the consolidated annual report 4.4 4\. List of shareholdings in companies carried at equity 4.5 5\. List of holdings in other companies 4.6 Certification of the consolidated financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98 136 A2A Consolidated financial statements 2022 Attachments to the notes to the Consolidated annual report 4.2 2\. Statement of changes in intangible assets Intangible assets millions of euro Balance at 12 31 2021 First Consolidation Changes Changes Balance at 12 31 2022 Acquisitions Changes in category Reclassifications/Other changes Disposals/Sales Impairment/Reversal Amortization Total changes Gross value Accumulated amortization Gross value Accumulated amortization Industrial patent and intellectual property rights 52 19 8 (1) (27) (1) 51 Concessions, licences, trademarks and similar rights 1,881 5 254 37 245 (254) (17) 14 (156) 123 2,009 Goodwill 746 161 (53) (10) (63) 844 Assets in progress 119 3 85 (48) (3) (1) 33 155 Other intangible assets 327 62 26 4 93 (6) (50) 67 456 Total intangible assets 3,125 231 384 1 281 (270) (17) 14 (1) (233) 159 3,515 Intangible assets millions of euro Balance at 12 31 2020 First Consolidation Changes Changes Balance at 12 31 2021 Acquisitions Changes in category Reclassifications/Other changes Disposals/Sales Impairment/Reversal Amortization Total changes Gross value Accumulated amortization Gross value Accumulated amortization Industrial patent and intellectual property rights 40 21 10 3 (22) 12 52 Concessions, licences, trademarks and similar rights 1,876 237 26 (104) (6) (19) 17 (2) (144) 5 1,881 Goodwill 426 331 2 6 (19) (11) 746 Assets in progress 74 83 (35) (2) (1) 45 119 Other intangible assets 321 20 17 2 9 (7) (35) (14) 327 Total intangible assets 2,737 351 360 3 (88) (32) (19) 17 (3) (201) 37 3,125 Attachments to the notes to the Consolidated annual report 2022 Consolidated financial statements A2A 137 Intangible assets millions of euro Balance at 12 31 2021 First Consolidation Changes Changes Balance at 12 31 2022 Acquisitions Changes in category Reclassifications/Other changes Disposals/Sales Impairment/Reversal Amortization Total changes Gross value Accumulated amortization Gross value Accumulated amortization Industrial patent and intellectual property rights 52 19 8 (1) (27) (1) 51 Concessions, licences, trademarks and similar rights 1,881 5 254 37 245 (254) (17) 14 (156) 123 2,009 Goodwill 746 161 (53) (10) (63) 844 Assets in progress 119 3 85 (48) (3) (1) 33 155 Other intangible assets 327 62 26 4 93 (6) (50) 67 456 Total intangible assets 3,125 231 384 1 281 (270) (17) 14 (1) (233) 159 3,515 Intangible assets millions of euro Balance at 12 31 2020 First Consolidation Changes Changes Balance at 12 31 2021 Acquisitions Changes in category Reclassifications/Other changes Disposals/Sales Impairment/Reversal Amortization Total changes Gross value Accumulated amortization Gross value Accumulated amortization Industrial patent and intellectual property rights 40 21 10 3 (22) 12 52 Concessions, licences, trademarks and similar rights 1,876 237 26 (104) (6) (19) 17 (2) (144) 5 1,881 Goodwill 426 331 2 6 (19) (11) 746 Assets in progress 74 83 (35) (2) (1) 45 119 Other intangible assets 321 20 17 2 9 (7) (35) (14) 327 Total intangible assets 2,737 351 360 3 (88) (32) (19) 17 (3) (201) 37 3,125 4 Attachments to the notes to the Consolidated annual report 4.1 1\. Statement of changes in tangible assets 4.2 2\. Statement of changes in intangible assets 4.3 3\. List of companies included in the consolidated annual report 4.4 4\. List of shareholdings in companies carried at equity 4.5 5\. List of holdings in other companies 4.6 Certification of the consolidated financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98 138 A2A Consolidated financial statements 2022 Attachments to the notes to the Consolidated annual report 4.3 3\. List of companies included in the consolidated annual report Company name Registered office Currency Share capital (thousands) % of shareholding consolidated by Group at 12 31 2022 Shareholding % Shareholder Valuation method Scope of consolidation Unareti S.p.A. Brescia Euro 965,250 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Calore & Servizi S.r.l. Brescia Euro 150,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Smart City S.p.A. Brescia Euro 3,448 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Energia S.p.A. Milan Euro 3,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Ciclo Idrico S.p.A. Brescia Euro 70,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Ambiente S.p.A. Brescia Euro 250,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Montenegro d.o.o. Podgorica (Montenegro) Euro 100 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Energiefuture S.p.A. Milan Euro 50,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A gencogas S.p.A. Milan Euro 450,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Airport Energy S.p.A. Milan Euro 5,200 100.00% 100.00% A2A Calore&Servizi S.r.l. Line-by-line consolidation Retragas S.r.l. Brescia Euro 34,495 91.60% 91.60% A2A S.p.A. (87.27%) Unareti S.p.A. (4.33%) Line-by-line consolidation Camuna Energia S.r.l. Cedegolo (BS) Euro 900 89.00% 89.00% A2A S.p.A. (74.50%) Linea Green S.p.A. (14.50%) Line-by-line consolidation A2A Alfa S.r.l. in liquidation Milan Euro 100 70.00% 70.00% A2A S.p.A. Line-by-line consolidation Proaris S.r.l. in liquidation Milan Euro 1,875 60.00% 60.00% A2A S.p.A. Line-by-line consolidation Azienda Servizi Valtrompia S.p.A. Gardone Val Trompia (BS) Euro 8,939 74.80% 74.80% A2A S.p.A. (74.55%) Unareti S.p.A. (0.25%) Line-by-line consolidation Yada Energia S.r.l. Milan Euro 4,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation LaboRAEE S.r.l. Milan Euro 90 100.00% 100.00% Amsa S.p.A. Line-by-line consolidation Ecodeco Hellas S.A. in liquidation Atene (Grecia) Euro 60 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation Ecolombardia 4 S.p.A. Milan Euro 13,515 68.78% 68.78% A2A Ambiente S.p.A. Line-by-line consolidation Sicura S.r.l. Milan Euro 1,040 96.80% 96.80% A2A Ambiente S.p.A. Line-by-line consolidation Sistema Ecodeco UK Ltd Canvey Island Essex (UK) GBP 250 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation A.S.R.A.B. S.p.A. Cavaglià (BI) Euro 2,582 70.00% 70.00% A2A Ambiente S.p.A. Line-by-line consolidation Nicosiambiente S.r.l. Milan Euro 50 99.90% 99.90% A2A Ambiente S.p.A. Line-by-line consolidation Bioase S.r.l. Sondrio Euro 677 70.00% 70.00% A2A Ambiente S.p.A. Line-by-line consolidation Aprica S.p.A. Brescia Euro 10,000 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation Amsa S.p.A. Milan Euro 10,000 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation SED S.r.l. Robassomero (TO) Euro 1,250 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation TecnoA S.r.l. Brescia Euro 3,000 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation Bergamo Servizi S.r.l. Brescia Euro 10 100.00% 100.00% Aprica S.p.A. Line-by-line consolidation A2A Recycling S.r.l. Novate Milanese (MI) Euro 5,000 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation A2A Integrambiente S.r.l. Brescia Euro 10 100.00% 100.00% A2A Ambiente S.p.A. (74%) Aprica S.p.A. (1%) Amsa S.p.A. (25%) Line-by-line consolidation Electrometal S.r.l Castegnato (BS) Euro 200 90.00% 90.00% A2A Ambiente S.p.A. Line-by-line consolidation Areslab S.r.l. Brescia Euro 10 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation Attachments to the notes to the Consolidated annual report 2022 Consolidated financial statements A2A 139 Company name Registered office Currency Share capital (thousands) % of shareholding consolidated by Group at 12 31 2022 Shareholding % Shareholder Valuation method Scope of consolidation Unareti S.p.A. Brescia Euro 965,250 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Calore & Servizi S.r.l. Brescia Euro 150,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Smart City S.p.A. Brescia Euro 3,448 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Energia S.p.A. Milan Euro 3,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Ciclo Idrico S.p.A. Brescia Euro 70,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Ambiente S.p.A. Brescia Euro 250,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Montenegro d.o.o. Podgorica (Montenegro) Euro 100 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Energiefuture S.p.A. Milan Euro 50,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A gencogas S.p.A. Milan Euro 450,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation A2A Airport Energy S.p.A. Milan Euro 5,200 100.00% 100.00% A2A Calore&Servizi S.r.l. Line-by-line consolidation Retragas S.r.l. Brescia Euro 34,495 91.60% 91.60% A2A S.p.A. (87.27%) Unareti S.p.A. (4.33%) Line-by-line consolidation Camuna Energia S.r.l. Cedegolo (BS) Euro 900 89.00% 89.00% A2A S.p.A. (74.50%) Linea Green S.p.A. (14.50%) Line-by-line consolidation A2A Alfa S.r.l. in liquidation Milan Euro 100 70.00% 70.00% A2A S.p.A. Line-by-line consolidation Proaris S.r.l. in liquidation Milan Euro 1,875 60.00% 60.00% A2A S.p.A. Line-by-line consolidation Azienda Servizi Valtrompia S.p.A. Gardone Val Trompia (BS) Euro 8,939 74.80% 74.80% A2A S.p.A. (74.55%) Unareti S.p.A. (0.25%) Line-by-line consolidation Yada Energia S.r.l. Milan Euro 4,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation LaboRAEE S.r.l. Milan Euro 90 100.00% 100.00% Amsa S.p.A. Line-by-line consolidation Ecodeco Hellas S.A. in liquidation Atene (Grecia) Euro 60 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation Ecolombardia 4 S.p.A. Milan Euro 13,515 68.78% 68.78% A2A Ambiente S.p.A. Line-by-line consolidation Sicura S.r.l. Milan Euro 1,040 96.80% 96.80% A2A Ambiente S.p.A. Line-by-line consolidation Sistema Ecodeco UK Ltd Canvey Island Essex (UK) GBP 250 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation A.S.R.A.B. S.p.A. Cavaglià (BI) Euro 2,582 70.00% 70.00% A2A Ambiente S.p.A. Line-by-line consolidation Nicosiambiente S.r.l. Milan Euro 50 99.90% 99.90% A2A Ambiente S.p.A. Line-by-line consolidation Bioase S.r.l. Sondrio Euro 677 70.00% 70.00% A2A Ambiente S.p.A. Line-by-line consolidation Aprica S.p.A. Brescia Euro 10,000 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation Amsa S.p.A. Milan Euro 10,000 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation SED S.r.l. Robassomero (TO) Euro 1,250 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation TecnoA S.r.l. Brescia Euro 3,000 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation Bergamo Servizi S.r.l. Brescia Euro 10 100.00% 100.00% Aprica S.p.A. Line-by-line consolidation A2A Recycling S.r.l. Novate Milanese (MI) Euro 5,000 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation A2A Integrambiente S.r.l. Brescia Euro 10 100.00% 100.00% A2A Ambiente S.p.A. (74%) Aprica S.p.A. (1%) Amsa S.p.A. (25%) Line-by-line consolidation Electrometal S.r.l Castegnato (BS) Euro 200 90.00% 90.00% A2A Ambiente S.p.A. Line-by-line consolidation Areslab S.r.l. Brescia Euro 10 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation 4 Attachments to the notes to the Consolidated annual report 4.1 1\. Statement of changes in tangible assets 4.2 2\. Statement of changes in intangible assets 4.3 3\. List of companies included in the consolidated annual report 4.4 4\. List of shareholdings in companies carried at equity 4.5 5\. List of holdings in other companies 4.6 Certification of the consolidated financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98 140 A2A Consolidated financial statements 2022 Attachments to the notes to the Consolidated annual report Company name Registered office Currency Share capital (thousands) % of shareholding consolidated by Group at 12 31 2022 Shareholding % Shareholder Valuation method A2A Security S.c.p.a. Milan Euro 52 99.81% 99.81% A2A S.p.A. (45.96%) Unareti S.p.A. (18.37%) A2A Ciclo Idrico S.p.A. (10.49%) Amsa S.p.A. (9.14%) A2A gencogas S.p.A. (3.95%) A2A Ambiente S.p.A. (3.95%) A2A Calore & Servizi S.r.l. (2.60%) A2A Energiefuture S.p.A. (1.93%) A2A Energia S.p.A. (0.19%) A2A Energy Solutions S.r.l. (0.19%) Linea Green S.p.A. (0.19%) Linea Gestioni S.r.l. (0.19%) LD Reti S.r.l. (0.19%) Linea Ambiente S.r.l. (0.19%) A2A Recycling S.r.l. (0.19%) A2A Smart City S.p.A. (0.19%) Acinque S.p.A. (0.19%) Aprica S.p.A. (0.19%) Lomellina Energia S.r.l. (0.19%) Retragas S.r.l. (0.19%) Lereti S.p.A. (0.19%) Azienda Servizi Valtrompia S.p.A. (0.19%) Acinque Energia S.r.l. (0.19%) Acinque Tecnologie S.p.A. (0.19%) Reti Valtellina Valchiavenna S.r.l. (0.19%) Acinque Farmacie S.r.l. (0.19%) Line-by-line consolidation BIOENERGIA GUALDO S.r.l. Gualdo Tadino (PG) Euro 10 80.00% 80.00% A2A Ambiente S.p.A. Line-by-line consolidation WALDUM TADINUM ENERGIA S.r.l. Gualdo Tadino (PG) Euro 10 90.00% 90.00% A2A Ambiente S.p.A. Line-by-line consolidation ENERGIA ANAGNI S.r.l. Anagni (FR) Euro 10 55.00% 55.00% A2A Ambiente S.p.A. Line-by-line consolidation BIOENERGIA ROCCASECCA S.r.l. San Vito (FR) Euro 10 55.00% 100.00% Energia Anagni S.r.l. Line-by-line consolidation LumEnergia S.p.A. Villa Carcina (BS) Euro 300 94.72% 94.72% A2A Energia S.p.A. Line-by-line consolidation A2A Energy Solutions S.r.l. Milan Euro 4,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation ES Energy S.r.l. Jesi (AN) Euro 10 50.00% 50.00% A2A S.p.A. Line-by-line consolidation A2A Rinnovabili S.p.A. Milan Euro 50 100.00% 100.00% A2A S.p.A. Line-by-line consolidation INTHE 2 S.r.l. Milan Euro 210 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Fair Renew S.r.l. Milan Euro 10 60.00% 60.00% A2A Rinnovabili S.p.A. Line-by-line consolidation renewA21 S.r.l. Milan Euro 20 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation renewA22 S.r.l. Milan Euro 220 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation renewA23 S.r.l. Milan Euro 20 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation renewA24 S.r.l. Milan Euro 20 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation renewA25 S.r.l. Milan Euro 20 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Des Energia Tredici S.r.l. Milan Euro 10 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation CS Solar2 S.r.l. Milan Euro 15 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Flabrum S.r.l. Milan Euro 100 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Solar italy V S.r.l. Milan Euro 10 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Cilea Energia S.r.l. Milan Euro - 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Tosti Energia S.r.l. Milan Euro - 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Albinoni Energia S.r.l. Milan Euro - 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Bellini Energia S.r.l. Milan Euro - 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Corelli Energia S.r.l. Milan Euro - 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Leoncavallo Energia S.r.l. Milan Euro - 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Monteverdi Energia S.r.l. Milan Euro - 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Tartini Energia S.r.l. Milan Euro - 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Trovaioli Energia S.r.l. Milan Euro - 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Attachments to the notes to the Consolidated annual report 2022 Consolidated financial statements A2A 141 Company name Registered office Currency Share capital (thousands) % of shareholding consolidated by Group at 12 31 2022 Shareholding % Shareholder Valuation method A2A Security S.c.p.a. Milan Euro 52 99.81% 99.81% A2A S.p.A. (45.96%) Unareti S.p.A. (18.37%) A2A Ciclo Idrico S.p.A. (10.49%) Amsa S.p.A. (9.14%) A2A gencogas S.p.A. (3.95%) A2A Ambiente S.p.A. (3.95%) A2A Calore & Servizi S.r.l. (2.60%) A2A Energiefuture S.p.A. (1.93%) A2A Energia S.p.A. (0.19%) A2A Energy Solutions S.r.l. (0.19%) Linea Green S.p.A. (0.19%) Linea Gestioni S.r.l. (0.19%) LD Reti S.r.l. (0.19%) Linea Ambiente S.r.l. (0.19%) A2A Recycling S.r.l. (0.19%) A2A Smart City S.p.A. (0.19%) Acinque S.p.A. (0.19%) Aprica S.p.A. (0.19%) Lomellina Energia S.r.l. (0.19%) Retragas S.r.l. (0.19%) Lereti S.p.A. (0.19%) Azienda Servizi Valtrompia S.p.A. (0.19%) Acinque Energia S.r.l. (0.19%) Acinque Tecnologie S.p.A. (0.19%) Reti Valtellina Valchiavenna S.r.l. (0.19%) Acinque Farmacie S.r.l. (0.19%) Line-by-line consolidation BIOENERGIA GUALDO S.r.l. Gualdo Tadino (PG) Euro 10 80.00% 80.00% A2A Ambiente S.p.A. Line-by-line consolidation WALDUM TADINUM ENERGIA S.r.l. Gualdo Tadino (PG) Euro 10 90.00% 90.00% A2A Ambiente S.p.A. Line-by-line consolidation ENERGIA ANAGNI S.r.l. Anagni (FR) Euro 10 55.00% 55.00% A2A Ambiente S.p.A. Line-by-line consolidation BIOENERGIA ROCCASECCA S.r.l. San Vito (FR) Euro 10 55.00% 100.00% Energia Anagni S.r.l. Line-by-line consolidation LumEnergia S.p.A. Villa Carcina (BS) Euro 300 94.72% 94.72% A2A Energia S.p.A. Line-by-line consolidation A2A Energy Solutions S.r.l. Milan Euro 4,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation ES Energy S.r.l. Jesi (AN) Euro 10 50.00% 50.00% A2A S.p.A. Line-by-line consolidation A2A Rinnovabili S.p.A. Milan Euro 50 100.00% 100.00% A2A S.p.A. Line-by-line consolidation INTHE 2 S.r.l. Milan Euro 210 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Fair Renew S.r.l. Milan Euro 10 60.00% 60.00% A2A Rinnovabili S.p.A. Line-by-line consolidation renewA21 S.r.l. Milan Euro 20 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation renewA22 S.r.l. Milan Euro 220 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation renewA23 S.r.l. Milan Euro 20 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation renewA24 S.r.l. Milan Euro 20 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation renewA25 S.r.l. Milan Euro 20 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Des Energia Tredici S.r.l. Milan Euro 10 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation CS Solar2 S.r.l. Milan Euro 15 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Flabrum S.r.l. Milan Euro 100 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Solar italy V S.r.l. Milan Euro 10 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Cilea Energia S.r.l. Milan Euro - 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Tosti Energia S.r.l. Milan Euro - 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Albinoni Energia S.r.l. Milan Euro - 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Bellini Energia S.r.l. Milan Euro - 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Corelli Energia S.r.l. Milan Euro - 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Leoncavallo Energia S.r.l. Milan Euro - 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Monteverdi Energia S.r.l. Milan Euro - 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Tartini Energia S.r.l. Milan Euro - 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Trovaioli Energia S.r.l. Milan Euro - 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation 4 Attachments to the notes to the Consolidated annual report 4.1 1\. Statement of changes in tangible assets 4.2 2\. Statement of changes in intangible assets 4.3 3\. List of companies included in the consolidated annual report 4.4 4\. List of shareholdings in companies carried at equity 4.5 5\. List of holdings in other companies 4.6 Certification of the consolidated financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98 142 A2A Consolidated financial statements 2022 Attachments to the notes to the Consolidated annual report Company name Registered office Currency Share capital (thousands) % of shareholding consolidated by Group at 12 31 2022 Shareholding % Shareholder Valuation method Gash 1 S.r.l. Milan Euro 10 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Gash 2 S.r.l. Milan Euro 10 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Volta Green Energy S.r.l. Rovereto (TN) Euro 10 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation VGE 01 S.r.l. Rovereto (TN) Euro 10 70.00% 70.00% Volta Green Energy S.r.l. Line-by-line consolidation VGE 02 S.r.l. Rovereto (TN) Euro 10 100.00% 100.00% Volta Green Energy S.r.l. Line-by-line consolidation VGE 03 S.r.l. Rovereto (TN) Euro 10 100.00% 100.00% Volta Green Energy S.r.l. Line-by-line consolidation VGE 04 S.r.l. Rovereto (TN) Euro 10 100.00% 100.00% Volta Green Energy S.r.l. Line-by-line consolidation VGE 06 S.r.l. Rovereto (TN) Euro 10 100.00% 100.00% Volta Green Energy S.r.l. Line-by-line consolidation R2R S.r.l. Rovereto (TN) Euro 10 60.00% 60.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Linea Gestioni S.r.l. Crema (CR) Euro 6,000 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation LD Reti S.r.l. Lodi Euro 32,976 95.60% 95.60% A2A S.p.A. Line-by-line consolidation Linea Green S.p.A. Cremona Euro 48,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation Linea Ambiente S.r.l. Rovato (BS) Euro 19,000 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation Fragea S.r.l. società agricola Sesto ed Uniti (CR) Euro 20,000 100.00% 100.00% AGRIPOWER S.p.A. Line-by-line consolidation AGRIPOWER S.p.A. Milan Euro 600 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation DONNA RICCA BIOENERGIA S.R.L. SOCIETA' AGRICOLA Milan Euro 10 51.00% 51.00% AGRIPOWER S.p.A. Line-by-line consolidation IUMAGAS BIOENERGY SOCIETA' AGRICOLA A.R.L. Milan Euro 50 51.00% 51.00% AGRIPOWER S.p.A. Line-by-line consolidation MARSICA AGROENERGIA S.R.L. Milan Euro 60 54.02% 54.02% AGRIPOWER S.p.A. Line-by-line consolidation PONZANO BIOENERGIA SOCIETA' AGRICOLA A.R.L. Milan Euro 40 51.00% 51.00% AGRIPOWER S.p.A. Line-by-line consolidation PRATI BIOENERGIA SOCIETA' AGRICOLA A.R.L. Bologna Euro 40 51.00% 51.00% AGRIPOWER S.p.A. Line-by-line consolidation ROBERTA BIOENERGIA S.R.L. Milan Euro 10 51.00% 51.00% AGRIPOWER S.p.A. Line-by-line consolidation SAN QUIRICO BIOENERGIA SOCIETA' AGRICOLA A.R.L. Milan Euro 160 93.75% 93.75% AGRIPOWER S.p.A. Line-by-line consolidation SCALENGHE BIOGAS SOCIETA' AGRICOLA S.R.L. Milan Euro 10 82.00% 82.00% AGRIPOWER S.p.A. Line-by-line consolidation STROVINA BIOENERGIA SOCIETA' AGRICOLA A.R.L. Milan Euro 40 51.00% 51.00% AGRIPOWER S.p.A. Line-by-line consolidation TORRE ZUINA SOCIETA' AGRICOLA A.R.L. Milan Euro 10 51.00% 51.00% AGRIPOWER S.p.A. Line-by-line consolidation TULA BIOENERGIA SOCIETA' AGRICOLA A.R.L. Milan Euro 40 51.00% 51.00% AGRIPOWER S.p.A. Line-by-line consolidation VITTORIA BIOENERGIA S.R.L. Milan Euro 50 75.00% 75.00% AGRIPOWER S.p.A. Line-by-line consolidation CONSORZIO UMBRIA BIOENERGIA Zola Predosa (BO) Euro 1 90.92% 90.92% AGRIPOWER S.p.A. Line-by-line consolidation Lomellina Energia S.r.l. Parona (PV) Euro 358 100.00% 100.00% A2A Ambiente S.p.A. (64.30%) Linea Ambiente S.r.l. (35.70%) Line-by-line consolidation Asm Energia S.p.A. Vigevano (PV) Euro 2,511 45.00% 45.00% A2A Energia S.p.A. Line-by-line consolidation Acinque S.p.A. Monza Euro 197,344 41.34% 41.34% A2A S.p.A. Line-by-line consolidation Lereti S.p.A. Como Euro 86,450 100.00% 100.00% Acinque S.p.A. Line-by-line consolidation ComoCalor S.p.A. Como Euro 3,516 51.00% 51.00% Acinque S.p.A. Line-by-line consolidation Reti Valtellina Valchiavenna S.r.l. Sondrio Euro 2,000 100.00% 100.00% Acinque S.p.A. Line-by-line consolidation Acinque Energia S.r.l. Lecco Euro 17,100 99.75% 99.75% Acinque S.p.A. Line-by-line consolidation Acinque Ambiente S.r.l. Varese Euro 4,500 100.00% 100.00% Acinque S.p.A. Line-by-line consolidation Acinque Tecnologie S.p.A. Monza Euro 6,000 100.00% 100.00% Acinque S.p.A. Line-by-line consolidation Acinque Innovazione S.r.l. Monza Euro 21,800 100.00% 100.00% Acinque S.p.A. Line-by-line consolidation Acinque Farmacie S.r.l. Sondrio Euro 100 100.00% 100.00% Acinque S.p.A. Line-by-line consolidation Acinque Energy Greenway S.r.l. Monza Euro 8,464 70.00% 70.00% Acinque Tecnologie S.p.A. Line-by-line consolidation A2A E-MOBILITY S.r.l. Milan Euro 1,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation Ambiente Energia Brianza S.p.A. Seregno (MB) Euro 119,496 33.52% 33.52% A2A S.p.A. Line-by-line consolidation A2A Illuminazione Pubblica S.r.l. Brescia Euro 19,000 100.00% 100.00% Ambiente Energia Brianza S.p.A. Line-by-line consolidation Attachments to the notes to the Consolidated annual report 2022 Consolidated financial statements A2A 143 Company name Registered office Currency Share capital (thousands) % of shareholding consolidated by Group at 12 31 2022 Shareholding % Shareholder Valuation method Gash 1 S.r.l. Milan Euro 10 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Gash 2 S.r.l. Milan Euro 10 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Volta Green Energy S.r.l. Rovereto (TN) Euro 10 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation VGE 01 S.r.l. Rovereto (TN) Euro 10 70.00% 70.00% Volta Green Energy S.r.l. Line-by-line consolidation VGE 02 S.r.l. Rovereto (TN) Euro 10 100.00% 100.00% Volta Green Energy S.r.l. Line-by-line consolidation VGE 03 S.r.l. Rovereto (TN) Euro 10 100.00% 100.00% Volta Green Energy S.r.l. Line-by-line consolidation VGE 04 S.r.l. Rovereto (TN) Euro 10 100.00% 100.00% Volta Green Energy S.r.l. Line-by-line consolidation VGE 06 S.r.l. Rovereto (TN) Euro 10 100.00% 100.00% Volta Green Energy S.r.l. Line-by-line consolidation R2R S.r.l. Rovereto (TN) Euro 10 60.00% 60.00% A2A Rinnovabili S.p.A. Line-by-line consolidation Linea Gestioni S.r.l. Crema (CR) Euro 6,000 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation LD Reti S.r.l. Lodi Euro 32,976 95.60% 95.60% A2A S.p.A. Line-by-line consolidation Linea Green S.p.A. Cremona Euro 48,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation Linea Ambiente S.r.l. Rovato (BS) Euro 19,000 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation Fragea S.r.l. società agricola Sesto ed Uniti (CR) Euro 20,000 100.00% 100.00% AGRIPOWER S.p.A. Line-by-line consolidation AGRIPOWER S.p.A. Milan Euro 600 100.00% 100.00% A2A Ambiente S.p.A. Line-by-line consolidation DONNA RICCA BIOENERGIA S.R.L. SOCIETA' AGRICOLA Milan Euro 10 51.00% 51.00% AGRIPOWER S.p.A. Line-by-line consolidation IUMAGAS BIOENERGY SOCIETA' AGRICOLA A.R.L. Milan Euro 50 51.00% 51.00% AGRIPOWER S.p.A. Line-by-line consolidation MARSICA AGROENERGIA S.R.L. Milan Euro 60 54.02% 54.02% AGRIPOWER S.p.A. Line-by-line consolidation PONZANO BIOENERGIA SOCIETA' AGRICOLA A.R.L. Milan Euro 40 51.00% 51.00% AGRIPOWER S.p.A. Line-by-line consolidation PRATI BIOENERGIA SOCIETA' AGRICOLA A.R.L. Bologna Euro 40 51.00% 51.00% AGRIPOWER S.p.A. Line-by-line consolidation ROBERTA BIOENERGIA S.R.L. Milan Euro 10 51.00% 51.00% AGRIPOWER S.p.A. Line-by-line consolidation SAN QUIRICO BIOENERGIA SOCIETA' AGRICOLA A.R.L. Milan Euro 160 93.75% 93.75% AGRIPOWER S.p.A. Line-by-line consolidation SCALENGHE BIOGAS SOCIETA' AGRICOLA S.R.L. Milan Euro 10 82.00% 82.00% AGRIPOWER S.p.A. Line-by-line consolidation STROVINA BIOENERGIA SOCIETA' AGRICOLA A.R.L. Milan Euro 40 51.00% 51.00% AGRIPOWER S.p.A. Line-by-line consolidation TORRE ZUINA SOCIETA' AGRICOLA A.R.L. Milan Euro 10 51.00% 51.00% AGRIPOWER S.p.A. Line-by-line consolidation TULA BIOENERGIA SOCIETA' AGRICOLA A.R.L. Milan Euro 40 51.00% 51.00% AGRIPOWER S.p.A. Line-by-line consolidation VITTORIA BIOENERGIA S.R.L. Milan Euro 50 75.00% 75.00% AGRIPOWER S.p.A. Line-by-line consolidation CONSORZIO UMBRIA BIOENERGIA Zola Predosa (BO) Euro 1 90.92% 90.92% AGRIPOWER S.p.A. Line-by-line consolidation Lomellina Energia S.r.l. Parona (PV) Euro 358 100.00% 100.00% A2A Ambiente S.p.A. (64.30%) Linea Ambiente S.r.l. (35.70%) Line-by-line consolidation Asm Energia S.p.A. Vigevano (PV) Euro 2,511 45.00% 45.00% A2A Energia S.p.A. Line-by-line consolidation Acinque S.p.A. Monza Euro 197,344 41.34% 41.34% A2A S.p.A. Line-by-line consolidation Lereti S.p.A. Como Euro 86,450 100.00% 100.00% Acinque S.p.A. Line-by-line consolidation ComoCalor S.p.A. Como Euro 3,516 51.00% 51.00% Acinque S.p.A. Line-by-line consolidation Reti Valtellina Valchiavenna S.r.l. Sondrio Euro 2,000 100.00% 100.00% Acinque S.p.A. Line-by-line consolidation Acinque Energia S.r.l. Lecco Euro 17,100 99.75% 99.75% Acinque S.p.A. Line-by-line consolidation Acinque Ambiente S.r.l. Varese Euro 4,500 100.00% 100.00% Acinque S.p.A. Line-by-line consolidation Acinque Tecnologie S.p.A. Monza Euro 6,000 100.00% 100.00% Acinque S.p.A. Line-by-line consolidation Acinque Innovazione S.r.l. Monza Euro 21,800 100.00% 100.00% Acinque S.p.A. Line-by-line consolidation Acinque Farmacie S.r.l. Sondrio Euro 100 100.00% 100.00% Acinque S.p.A. Line-by-line consolidation Acinque Energy Greenway S.r.l. Monza Euro 8,464 70.00% 70.00% Acinque Tecnologie S.p.A. Line-by-line consolidation A2A E-MOBILITY S.r.l. Milan Euro 1,000 100.00% 100.00% A2A S.p.A. Line-by-line consolidation Ambiente Energia Brianza S.p.A. Seregno (MB) Euro 119,496 33.52% 33.52% A2A S.p.A. Line-by-line consolidation A2A Illuminazione Pubblica S.r.l. Brescia Euro 19,000 100.00% 100.00% Ambiente Energia Brianza S.p.A. Line-by-line consolidation 4 Attachments to the notes to the Consolidated annual report 4.1 1\. Statement of changes in tangible assets 4.2 2\. Statement of changes in intangible assets 4.3 3\. List of companies included in the consolidated annual report 4.4 4\. List of shareholdings in companies carried at equity 4.5 5\. List of holdings in other companies 4.6 Certification of the consolidated financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98 144 A2A Consolidated financial statements 2022 Attachments to the notes to the Consolidated annual report Company name Registered office Currency Share capital (thousands) % of shareholding consolidated by Group at 12 31 2022 Shareholding % Shareholder Valuation method Gelsia S.r.l. Seregno (MB) Euro 20,345 100.00% 100.00% Ambiente Energia Brianza S.p.A. Line-by-line consolidation RetiPiù S.r.l. Desio (MB) Euro 110,000 100.00% 100.00% Ambiente Energia Brianza S.p.A. Line-by-line consolidation Gelsia Ambiente S.r.l. Desio (MB) Euro 4,671 100.00% 100.00% Ambiente Energia Brianza S.p.A. (70%) A2A Integrambiente S.r.l. (30%) Line-by-line consolidation 4NEW S.r.l. Milan Euro 811 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation 4NEW MONTE GRIGHINE S.r.l. Milan Euro 10,000 100.00% 100.00% 4NEW S.r.l. Line-by-line consolidation CERVETERI ENERGIA S.r.l. Milan Euro 21 100.00% 100.00% 4NEW S.r.l. Line-by-line consolidation DE \- STERN 12 S.r.l. Milan Euro 50 100.00% 100.00% 4NEW S.r.l. Line-by-line consolidation STCS S.r.l. Milan Euro 10 100.00% 100.00% 4NEW S.r.l. Line-by-line consolidation LA CASTILLEJA ENERGIA SL Madrid (ES) Euro 4 100.00% 100.00% GLOBAL ONEGA SL Line-by-line consolidation SISTEMES ENERGETICS CONESA I SOCIEDAD LIMITADA Madrid (ES) Euro 3 100.00% 100.00% RESPETO AL MEDIO AMBIENTE SL (50%) GLOBAL ONEGA SL (50%) Line-by-line consolidation GLOBAL ONEGA SL Madrid (ES) Euro 10 100.00% 100.00% 4NEW S.r.l. Line-by-line consolidation RESPETO AL MEDIO AMBIENTE SL Madrid (ES) Euro 3 100.00% 100.00% 4NEW S.r.l. Line-by-line consolidation 3 New & Partners S.r.l. Milan Euro 25,000 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation 3 New & Partners rinnovabili S.r.l. Rome Euro 10 100.00% 100.00% 3 New & Partners S.r.l. Line-by-line consolidation Mimiani wind S.r.l. Milan Euro 100 100.00% 100.00% 3 New & Partners S.r.l. Line-by-line consolidation Daunia Calvello S.r.l. Milan Euro 100 100.00% 100.00% 3 New & Partners rinnovabili S.r.l. (51%) A2A Rinnovabili S.p.A.(49%) Line-by-line consolidation Daunia Serracapriola S.r.l. Milan Euro 2,000 100.00% 100.00% 3 New & Partners rinnovabili S.r.l. (70%) A2A Rinnovabili S.p.A.(30%) Line-by-line consolidation Attachments to the notes to the Consolidated annual report 2022 Consolidated financial statements A2A 145 Company name Registered office Currency Share capital (thousands) % of shareholding consolidated by Group at 12 31 2022 Shareholding % Shareholder Valuation method Gelsia S.r.l. Seregno (MB) Euro 20,345 100.00% 100.00% Ambiente Energia Brianza S.p.A. Line-by-line consolidation RetiPiù S.r.l. Desio (MB) Euro 110,000 100.00% 100.00% Ambiente Energia Brianza S.p.A. Line-by-line consolidation Gelsia Ambiente S.r.l. Desio (MB) Euro 4,671 100.00% 100.00% Ambiente Energia Brianza S.p.A. (70%) A2A Integrambiente S.r.l. (30%) Line-by-line consolidation 4NEW S.r.l. Milan Euro 811 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation 4NEW MONTE GRIGHINE S.r.l. Milan Euro 10,000 100.00% 100.00% 4NEW S.r.l. Line-by-line consolidation CERVETERI ENERGIA S.r.l. Milan Euro 21 100.00% 100.00% 4NEW S.r.l. Line-by-line consolidation DE \- STERN 12 S.r.l. Milan Euro 50 100.00% 100.00% 4NEW S.r.l. Line-by-line consolidation STCS S.r.l. Milan Euro 10 100.00% 100.00% 4NEW S.r.l. Line-by-line consolidation LA CASTILLEJA ENERGIA SL Madrid (ES) Euro 4 100.00% 100.00% GLOBAL ONEGA SL Line-by-line consolidation SISTEMES ENERGETICS CONESA I SOCIEDAD LIMITADA Madrid (ES) Euro 3 100.00% 100.00% RESPETO AL MEDIO AMBIENTE SL (50%) GLOBAL ONEGA SL (50%) Line-by-line consolidation GLOBAL ONEGA SL Madrid (ES) Euro 10 100.00% 100.00% 4NEW S.r.l. Line-by-line consolidation RESPETO AL MEDIO AMBIENTE SL Madrid (ES) Euro 3 100.00% 100.00% 4NEW S.r.l. Line-by-line consolidation 3 New & Partners S.r.l. Milan Euro 25,000 100.00% 100.00% A2A Rinnovabili S.p.A. Line-by-line consolidation 3 New & Partners rinnovabili S.r.l. Rome Euro 10 100.00% 100.00% 3 New & Partners S.r.l. Line-by-line consolidation Mimiani wind S.r.l. Milan Euro 100 100.00% 100.00% 3 New & Partners S.r.l. Line-by-line consolidation Daunia Calvello S.r.l. Milan Euro 100 100.00% 100.00% 3 New & Partners rinnovabili S.r.l. (51%) A2A Rinnovabili S.p.A.(49%) Line-by-line consolidation Daunia Serracapriola S.r.l. Milan Euro 2,000 100.00% 100.00% 3 New & Partners rinnovabili S.r.l. (70%) A2A Rinnovabili S.p.A.(30%) Line-by-line consolidation 4 Attachments to the notes to the Consolidated annual report 4.1 1\. Statement of changes in tangible assets 4.2 2\. Statement of changes in intangible assets 4.3 3\. List of companies included in the consolidated annual report 4.4 4\. List of shareholdings in companies carried at equity 4.5 5\. List of holdings in other companies 4.6 Certification of the consolidated financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98 146 A2A Consolidated financial statements 2022 Attachments to the notes to the Consolidated annual report 4.4 4\. List of shareholdings in companies carried at equity Company name Registered office Currency Share capital (thousands) Shareholding % Shareholder Carrying amount at 12 31 2022 (thousands) Valuation method Shareholdings in companies carried at equity PremiumGas S.p.A. in liquidation Bergamo Euro 120 50.00% A2A Alfa S.r.l. in liquidation \- Equity Ergosud S.p.A. Rome Euro 81,448 50.00% A2A gencogas S.p.A. \- Equity Metamer S.r.l. San Salvo (CH) Euro 650 50.00% A2A Energia S.p.A. 2,683 Equity NETCITY S.r.l. Pescara Euro 20 49.00% A2A Energia S.p.A. 759 Equity SET S.r.l. Toscolano Maderno (BS) Euro 104 49.00% A2A S.p.A. 997 Equity Messina in Luce S.c.a r.l. Monza Euro 20 70.00% Acinque Tecnologie S.p.A. (55%) A2A Illuminazione Pubblica S.r.l.(15%) 11 Equity Serio Energia S.r.l. Concordia sulla Secchia (MO) Euro 1,000 40.00% A2A S.p.A. 795 Equity Visano Soc. Trattamento Reflui S.c.a.r.l. Brescia Euro 25 40.00% A2A S.p.A. 10 Equity COSMO Società Consortile a Responsabilità Limitata Brescia Euro 100 52.00% A2A Calore & Servizi S.r.l. 124 Equity Crit S.c.a.r.l. Cremona Euro 548 32.99% A2A Smart City S.p.A. 213 Equity Suncity Group S.r.l. Pescara Euro 14 26.00% A2A Energy Solution S.r.l. 6,572 Equity G.Eco S.r.l. Treviglio (BG) Euro 500 40.00% Aprica S.p.A. 2,992 Equity Bergamo Pulita S.r.l. Bergamo Euro 10 50.00% A2A Ambiente S.p.A. 67 Equity Tecnoacque Cusio S.p.A. Omegna (VB) Euro 206 25.00% A2A Ambiente S.p.A. 351 Equity Fratelli Omini S.p.A. Novate Milanese (MI) Euro 260 30.00% A2A Ambiente S.p.A. 5,900 Equity ASM Codogno S.r.l. Codogno (LO) Euro 1,898 49.00% Linea Gestioni S.r.l. 3,626 Equity Prealpi Servizi S.r.l. in Liquidation Varese Euro 5,451 12.47% Acinque S.p.A. \- Equity Consul System S.p.A. Ascoli Piceno Euro 2,000 49.00% A2A Energy Solution S.r.l. 7,619 Equity Saxa Gres S.p.A. Anagni (FR) Euro 3,100 27.71% A2A Ambiente S.p.A. \- Equity Società Agricola Mattioli Energia S.r.l. Finale Emilia (MO) Euro 20 20.00% AGRIPOWER S.p.A. 475 Equity Total shareholdings 33,194 Shareholdings held for sale Sviluppo Turistico Lago d’Iseo S.p.A. Iseo (BS) Euro 1,616 2.04% A2A S.p.A. - Equity Attachments to the notes to the Consolidated annual report 2022 Consolidated financial statements A2A 147 Company name Registered office Currency Share capital (thousands) Shareholding % Shareholder Carrying amount at 12 31 2022 (thousands) Valuation method Shareholdings in companies carried at equity PremiumGas S.p.A. in liquidation Bergamo Euro 120 50.00% A2A Alfa S.r.l. in liquidation \- Equity Ergosud S.p.A. Rome Euro 81,448 50.00% A2A gencogas S.p.A. \- Equity Metamer S.r.l. San Salvo (CH) Euro 650 50.00% A2A Energia S.p.A. 2,683 Equity NETCITY S.r.l. Pescara Euro 20 49.00% A2A Energia S.p.A. 759 Equity SET S.r.l. Toscolano Maderno (BS) Euro 104 49.00% A2A S.p.A. 997 Equity Messina in Luce S.c.a r.l. Monza Euro 20 70.00% Acinque Tecnologie S.p.A. (55%) A2A Illuminazione Pubblica S.r.l.(15%) 11 Equity Serio Energia S.r.l. Concordia sulla Secchia (MO) Euro 1,000 40.00% A2A S.p.A. 795 Equity Visano Soc. Trattamento Reflui S.c.a.r.l. Brescia Euro 25 40.00% A2A S.p.A. 10 Equity COSMO Società Consortile a Responsabilità Limitata Brescia Euro 100 52.00% A2A Calore & Servizi S.r.l. 124 Equity Crit S.c.a.r.l. Cremona Euro 548 32.99% A2A Smart City S.p.A. 213 Equity Suncity Group S.r.l. Pescara Euro 14 26.00% A2A Energy Solution S.r.l. 6,572 Equity G.Eco S.r.l. Treviglio (BG) Euro 500 40.00% Aprica S.p.A. 2,992 Equity Bergamo Pulita S.r.l. Bergamo Euro 10 50.00% A2A Ambiente S.p.A. 67 Equity Tecnoacque Cusio S.p.A. Omegna (VB) Euro 206 25.00% A2A Ambiente S.p.A. 351 Equity Fratelli Omini S.p.A. Novate Milanese (MI) Euro 260 30.00% A2A Ambiente S.p.A. 5,900 Equity ASM Codogno S.r.l. Codogno (LO) Euro 1,898 49.00% Linea Gestioni S.r.l. 3,626 Equity Prealpi Servizi S.r.l. in Liquidation Varese Euro 5,451 12.47% Acinque S.p.A. \- Equity Consul System S.p.A. Ascoli Piceno Euro 2,000 49.00% A2A Energy Solution S.r.l. 7,619 Equity Saxa Gres S.p.A. Anagni (FR) Euro 3,100 27.71% A2A Ambiente S.p.A. \- Equity Società Agricola Mattioli Energia S.r.l. Finale Emilia (MO) Euro 20 20.00% AGRIPOWER S.p.A. 475 Equity Total shareholdings 33,194 Shareholdings held for sale Sviluppo Turistico Lago d’Iseo S.p.A. Iseo (BS) Euro 1,616 2.04% A2A S.p.A. - Equity 4 Attachments to the notes to the Consolidated annual report 4.1 1\. Statement of changes in tangible assets 4.2 2\. Statement of changes in intangible assets 4.3 3\. List of companies included in the consolidated annual report 4.4 4\. List of shareholdings in companies carried at equity 4.5 5\. List of holdings in other companies 4.6 Certification of the consolidated financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98 148 A2A Consolidated financial statements 2022 Attachments to the notes to the Consolidated annual report Attachments to the notes to the Consolidated annual report 2022 Consolidated financial statements A2A 149 4.5 5\. List of holdings in other companies Company name Shareholding % Shareholder Carrying amount at 12 31 2022 (thousands) Immobiliare-Fiera di Brescia S.p.A. 0.90% A2A S.p.A. AQM S.r.l. 7.80% A2A S.p.A. (7.52%) LumEnergia S.p.A. (0.28%) AvioValtellina S.p.A. 0.18% A2A S.p.A. Banca di Credito Cooperativo dell'Oglio e del Serio s.c. n.s. A2A S.p.A. L.E.A.P. S.c.a.r.l. 8.29% A2A S.p.A. Guglionesi Ambiente S.c.a.r.l. 1.01% A2A Ambiente S.p.A. S.I.T. S.p.A. 0.26% Aprica S.p.A. Stradivaria S.p.A. n.s. A2A S.p.A. Tirreno Ambiente S.p.A. in liquidation 3.00% A2A Ambiente S.p.A. DI.T.N.E. S.c.a.r.l. 1.73% A2A S.p.A. E.M.I.T. S.r.l. in liquidation 10.00% A2A S.p.A. COMIECO 6.29% A2A Recycling S.r.l. (2.13%) A2A Ambiente S.p.A. (4.16%) CONAPI S.c.a.r.l. 20.00% A2A Recycling S.r.l. Blugas Infrastrutture S.r.l. 27.51% A2A S.p.A. Casalasca Servizi S.p.A. 13.88% Linea Gestioni S.r.l. Sinergie Italiane S.r.l. in liquidation 23.25% A2A S.p.A. (15.70%) Ambiente Energia Brianza S.p.A. (7.55%) Confidi Toscana S.c.a.r.l. n.s. Linea Ambiente S.r.l. Credito Valtellinese n.s. Linea Ambiente S.r.l. Futura S.r.l. 1.00% A2A Calore & Servizi S.r.l. MORINA S.r.l. 5.00% Azienda Servizi Valtrompia S.p.A. Comodepur S.c.p.a. in liquidation 9.81% Acinque S.p.A. T.C.V.V.V. S.p.A. 0.25% Acinque S.p.A. CIAL-CONSORZIO IMBALLAGGIO ALLUMINIO 0.60% A2A Ambiente S.p.A. COREVE 0.88% A2A Ambiente S.p.A. COREPLA-CONSORZIO RECUPERO PLASTICA NAZIONALE 3.04% A2A Ambiente S.p.A. RICREA-CONSORZIO NAZIONALE RICICLO E RECUPERO IMBALLAGGI ACCIAIO n.s. A2A Ambiente S.p.A. CIC-CONSORZIO ITALIANO COMPOSTATORI n.s. A2A Ambiente S.p.A. Musa S.c.a.r.l. 7.00% A2A S.p.A. Total investments in other companies 5,872 4 Attachments to the notes to the Consolidated annual report 4.1 1\. Statement of changes in tangible assets 4.2 2\. Statement of changes in intangible assets 4.3 3\. List of companies included in the consolidated annual report 4.4 4\. List of shareholdings in companies carried at equity 4.5 5\. List of holdings in other companies 4.6 Certification of the consolidated financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98 150 A2A Consolidated financial statements 2022 Attachments to the notes to the Consolidated annual report 4.10 Certification of the consolidated financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98 1\. The undersigned, Renato Mazzoncini, as CEO of A2A S.p.A., and Luca Moroni, as Financial Reporting Manager of A2A S.p.A. also considering the provisions of article 154-bis, paragraphs 3 and 4, of Legislative Decree no. 58 of February 24, 1998, as amended, hereby attest: • the adequacy in relation to the characteristics of the company and • the effective application of administrative and accounting procedures for the preparation of financial statements in the year 2022. 2\. It is also certified that: 2.1 the consolidated financial statements as at December 31, 2022: a) have been prepared in accordance with International Financial Reporting Standards as endorsed by the European Community pursuant to Regulation (EC) no. 1606/2002 of the European Parliament and of the Council of July 19, 2002; b) correspond to the information contained in the accounting ledgers and records; c) provide a true and fair representation of the equity, economic and financial situation of the issuer and the whole of the companies included in the scope of consolidation. 2.2 the Report on Operations includes reliable analysis on the performance, result of operations and the business of the issuer and of all entities included in the consolidated financial statements as well as description of principal risks and uncertainties to which they are exposed. Milan, March 16, 2023 Renato Mazzoncini(Chief Executive Officer) Luca Moroni(Financial Reporting Manager) 5 Independent Auditors’ Report 152 A2A Consolidated financial statements 2022 Independent Auditors’ Report 5 Independent Auditors’ Report Independent Auditors’ Report 2022 Consolidated financial statements A2A 153 5 Independent Auditors’ Report 154 A2A Consolidated financial statements 2022 Independent Auditors’ Report Independent Auditors’ Report 2022 Consolidated financial statements A2A 155 5 Independent Auditors’ Report 156 A2A Consolidated financial statements 2022 Independent Auditors’ Report Independent Auditors’ Report 2022 Consolidated financial statements A2A 157 5 Independent Auditors’ Report 158 A2A Consolidated financial statements 2022 Independent Auditors’ Report Separate financial statements 2022 these Financial Statements are available at the website gruppoa2a.it Contents 2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010 4 Overview of performance, financial conditions and net debt Balance sheet pursuant to Consob Resolution no. 17221 of March 12, 2010 22 Income statement pursuant to Consob Resolution no. 17221 of March 12, 2010 24 Balance sheet 12 Income statement 14 Statement of comprehensive income 15 Cash-flow statement 16 Statement of changes in equity 19 1 Financial statements 3 Notes General information on A2A S.p.A. 26 Financial statements 27 Basis of preparation 28 Changes in international accounting standards 29 Accounting standards and policies 31 Notes to the balance sheet 42 Net debt 61 Notes to the income statement 63 Note on related party transactions 79 Consob Communication no. DEM/6064293 of July 28, 2006 83 Guarantees and commitments with third parties 84 Other information 85 2 A2A Separate financial statements 2022 129 5 Independent Auditors’ Report 135 6 Report of the Board of Auditors 4 Attachments 1\. Statement of changes in tangible assets 110 1\. Statement of changes in intangible assets 112 3/a. Statement of changes in investments in subsidiaries 114 3/b. Statement of changes in investments in affiliates 116 3/c. Statement of changes in investments in other companies 119 4/a. List of investments in subsidiaries 120 4/b. List of investments in affiliates 122 Key data of the financial statements of the main subsidiaries and affiliates prepared according to IAS/IFRS (pursuant to art. 2429.4 of the Italian Civil Code) 124 Key data of the financial statements of the main subsidiaries and affiliates prepared according to ITALIAN GAAP (pursuant to art. 2429.4 of the Italian Civil Code) 126 Certification of the financial statementspursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98 128 2022 Separate financial statements A2A 3 This is a translation of the Italian original “Bilancio separato 2022” and has been prepared solely for the convenience of international readers. In the event of any ambiguity the Italian text will prevail. The Italian original is available at the website gruppoa2a.it 4 A2A Separate financial statements 2022 Overview of performance, financial conditions and net debt Overview of performance, financial conditions and net debt A2A S.p.A. The Parent Company is responsible for strategic vision, planning, control, financial management and coordination of the A2A Group activities. It also provides services to support the business and operating activities of Group companies (administrative, legal, supply, and personnel management services, information technology and communications) in order to optimize the resources available and use existing expertise in the most efficient manner. These services are governed by intercompany service agreements. Finally, A2A S.p.A. provides its subsidiaries with office space and operating areas, as well as related services. A2A S.p.A. owns some hydroelectric plants in Valtellina, the hydroelectric unit in Calabria and the unit in Mese, as well as the hydroelectric plants of the unit in Udine. Results millions of euro 01 01 2022 12 31 2022 01 01 2021 12 31 2021 Change Revenues Revenues from the sale of goods and services 19,667.2 8,196.0 11,471.2 Other operating income 21.1 60.0 (38.9) Total revenues 19,688.3 8,256.0 11,432.3 Operating expenses (19,181.7) (7,903.7) (11,278.0) Labour costs (174.9) (160.0) (14.9) Gross operating income 331.7 192.3 139.4 Depreciation, amortization and write-downs (123.4) (110.9) (12.5) Provisions (38.8) (12.3) (26.5) Net operating income 169.5 69.1 100.4 Result from non-recurring transactions 155.2 - 155.2 Financial balance 372.3 375.8 (3.5) Result before taxes 697.0 444.9 252.1 Income taxes (181.1) 40.9 (222.0) Result after taxes from operating activities 515.9 485.8 30.1 Net result from discontinued operations 29.7 (0.3) 30.0 Net result of the year 545.6 485.5 60.1 In the year in question A2A S.p.A. shows revenues for a total of 19,688.3 million euro (8,256 million euro in the previous year). Sales revenues (19,410.7 million euro) mainly refer to electricity sales to wholesalers, institutional operators, even on IPEX markets (Italian Power Exchange) and subsidiaries, sales of gas and fuels to third parties and subsidiaries, as well as the sale of materials and plants and the sale of environmental certificates. Revenues from services (256.5 million euro) mainly relate to provisions to subsidiaries of administrative, fiscal, legal, managerial and technical services, and revenues from the Municipality of Milan for the video surveillance service. The increase in sales revenues is mainly due to the increase in prices on the wholesale markets for both electricity and gas, as well as to higher revenues for CO2 sales as a result of the recognition of revenue from subsidiaries and associates whose plants are managed by A2A S.p.A. through tolling agreements. Other revenues (21.1 million euro) mainly refer to incentives on net production from renewable sources; they also include rent from subsidiaries, contingent assets recognized as a result of the difference in allocations from previous years, reimbursements for damages and penalties received from customers, insurance companies and private individuals. Operating expenses amounted to 19,181.7 million euro (7,903.7 million euro at December 31, 2021) and refer to costs for raw materials (17,928.4 million euro) related primarily to purchases of energy and fuels, both for electricity production and for resale to customers and wholesalers, in addition to purchases of materials and environmental certificates; service costs (425.6 million euro), which refer to the logistics costs for the transport on the national network of natural gas, costs for maintenance and repairs related to both the plants and Overview of performance, financial conditions and net debt 2022 Separate financial statements A2A 5 the information systems of the company, as well as costs for services from third parties and from subsidiaries and associates; to other operating expenses (827.7 million euro), which refer to the contracting of the thermoelectric production plants “tolling agreement” of subsidiaries, the costs relating to the use of a portion of the electricity capacity of Ergosud S.p.A., as well as water derivation fees, damages and penalties. The increase in operating expenses derives mainly from the increase in costs for raw materials, attributable to the increase in unit supply prices due to the growth recorded in the reference scenario, as well as to the higher quantities purchased, in the purchase costs of CO2 both due to the increase in the procurement price and to the higher volumes issued correlated to the higher thermoelectric production, to the increase in costs for services mainly due to the higher costs for the transport and storage of natural gas and to the higher costs for IT services relating to the development of new projects. Labour costs amounted to 174.9 million euro (160 million euro at December 31, 2021). The increase for the year includes both the effect of new staff additions realized in 2022 and contractual renewals. Due to the dynamics mentioned above the EBITDA amounted to 331.7 million euro (192.3 million euro at December 31, 2021). The increase is mainly related to the performance of the industrial electricity portfolio, mainly attributable to the start of the “Capacity Market” mechanism. “Amortization and depreciation, provisions and write-downs” of the year amounted to 162.2 million euro (123.2 million euro at December 31, 2021) and include amortization, depreciation and write-downs of the tangible and intangible assets for 123.4 million euro (110.9 million euro at December 31, 2021) and provisions for 38.8 million euro (12.3 million euro at December 31, 2021), mainly related to provisions for risks. “Net operating income” was positive for 169.5 million euro (69.1 million euro at December 31, 2021). Financial operations reported a positive balance of 372.3 million euro (positive for 375.8 million euro at December 31, 2021). This item includes dividends from investees of 407.4 million euro (415.3 million euro at December 31, 2021), as well as net financial expenses of 35.1 million euro (38.6 million euro at December 31, 2021). The “Result before taxes” was positive for 697.0 million euro (positive for 444.9 million euro at December 31, 2021). “Income taxes” amounted to 181.1 million euro (tax income for 40.9 million euro at December 31, 2021). Taxation mainly derives from the Extraordinary Solidarity Contribution planned for the year 2023, determined pursuant to Article 1, paragraphs 115-119 of Law No. 197 of December 29, 2022 (Budget Law 2023), as well as from current taxes calculated on taxable income for IRES and IRAP purposes. The “Net result from discontinued operations” was positive for 29.7 million euro (negative for 0.3 million euro at December 31, 2021) and refers to the capital gain, net of the effect of current taxes on the same, realized from the sale of the shareholding in ROMEO GAS S.p.A., after the demerger of the unit in favor of the latter relative to gas distribution referred to ATEM deemed non-strategic by Unareti S.p.A.. The “Net result of the year” was positive for 545.6 million euro (485.5 million euro at December 31, 2021). * * * Net year capex amounted to 177.9 million euro and in particular involved interventions on the hydroelectric plants, computer network equipment and devices, buildings, fixed assets in progress, capex in the Group’s information systems and software and net investments in equity. Overview of performance, financial conditions and net debt Balance sheet and financial position millions of euro 12 31 2022 12 31 2021 Change Capital employed Net fixed capital 5,103.9 5,168.9 (65.0) \- Tangible assets 901.0 934.2 (33.2) \- Intangible assets 168.1 146.4 21.7 \- Shareholdings and other non-current financial assets (*) 4,209.1 4,226.4 (17.3) \- Other non-current assets/liabilities (*) 19.4 9.6 9.8 \- Deferred tax assets/liabilities 66.4 102.9 (36.5) \- Provisions for risks, charges and liabilities for landfills (128.1) (101.4) (26.7) \- Employee benefits (132.0) (149.2) 17.2 of which with counter-entry to equity (50.3) (59.5) Net Working Capital and Other Current Assets/Liabilities (405.6) (103.3) (302.3) Net Working Capital: (562.4) 86.5 (648.9) Inventories 389.2 103.9 285.3 Trade receivables 3,655.0 2,155.5 1,499.5 Trade payables (4,606.6) (2,172.9) (2,433.7) Other current assets/liabilities: 156.8 (189.8) 346.6 \- Other current assets/liabilities (*): 253.4 (244.4) 497.8 \- Current tax assets/tax liabilities (96.6) 54.6 (151.2) of which with counter-entry to equity 32.3 60.0 Assets/liabilities held for sale (*) - 46.8 (46.8) of which with counter-entry to equity - - - Total capital employed 4,698.3 5,112.4 (414.1) Sources of funds Equity 3,603.0 3,332.4 270.6 Total financial position after one year 4,305.4 2,889.6 1,415.8 Total financial debt within one year (3,210.1) (1,109.6) (2,100.5) Total Net Financial Position 1,095.3 1,780.0 (684.7) of which with counter-entry to equity 5.6 (20.0) Total sources 4,698.3 5,112.4 (414.1) (*) Excluding balances included in the Net Financial Position. “Capital Employed” totalled 4,698.3 million euro at December 31, 2022, partly covered by “Equity” in the amount of 3,603 million euro and net debt of 1,095.3 million euro; provided below are the main items that make up the Capital Employed. The “Net fixed capital” amounted to 5,103.9 million euro, down 65 million euro compared to December 31, 2021. Changes are detailed below: • Tangible assets decreased by 33.2 million euro due to: investments made during the year for a total of 39.4 million euro; other increases for 12.5 million euro arising from the change in contracts for rights of use for 15.1 million euro, partially offset by the decrease in the decommissioning provision for 2.5 million euro and other negative changes for 0.1 million euro; decrease of 85.1 million euro for the depreciation charge for the year; • Intangible assets increased by 21.7 million euro compared to December 31, 2021, due to: investments made during the year for a total of 51.7 million euro; other increases for 8.1 million euro; decrease of 0.2 million euro for write-downs; decrease of 37.9 million euro for the amortization charge for the year; 6 A2A Separate financial statements 2022 Overview of performance, financial conditions and net debt • Shareholdings and other non-current financial assets amounted to 4,209.1 million euro, down 17.3 million euro compared to December 31, 2021, attributable to: decrease of 43.0 million euro in the shareholding in Unareti S.p.A. in favor of ROMEO GAS S.p.A. due to the effect of the demerger of the unit relative to gas distribution referring to ATEM considered non-strategic, and subsequent sale of the shareholding in ROMEO GAS S.p.A.; decrease of 0.5 million euro due to the sale of the shareholding in Seasm S.r.l.; increase of 20.0 million euro relating to the capital contribution subscribed in the investee company Yada Energia S.r.l.; increase of 3.0 million euro relating to the capital contribution subscribed in the investee company A2A E-MOBILITY S.r.l.; increase of 3.0 million euro in other financial assets, in particular investments made in innovative start-ups through Corporate Venture Capital projects; • Other non-current assets and liabilities showed an increase of 9.8 million euro as a consequence of the higher non-current assets relating to guarantee deposits; • Deferred tax assets amounted to 66.4 million euro (102.9 million euro at December 31, 2021) and showed a decrease of 36.5 million euro; • Provisions for risks, charges and liabilities for landfills recorded an increase of 26.7 million euro. The following should be noted: an increase resulting from net provisions for the year of 38.1 million euro, mainly related to public water derivation fees and lawsuits pending with third parties; utilisations for the year of 10.2 million euro, while other negative changes amounted to 1.2 million euro; • Employee benefits showed a decrease of 17.2 million euro, referring to actuarial valuations, disbursements for the year and payments to pension funds, partly offset by net provisions for the year. Net Working Capital and Other current assets/liabilities The “Net Working Capital”, defined as the algebraic sum of trade receivables, closing inventories and trade payables, amounted to a negative 562.4 million euro, down by 648.9 million euro compared to December 31, 2021\. Comments on the main items are given below: • “Inventories” amounted to 389.2 million euro (103.9 million euro at December 31, 2021), net of the relative obsolescence provision for 0.7 million euro, unchanged compared to the previous year. The positive change is due to the increase in gas inventories for the sale and storage of gas, as well as coal inventories for the production of electricity, which reflect both the trend in fuel prices and the greater quantities stored; • “Trade receivables” amounted to 3,655.0 million euro (2,155.5 million euro at December 31, 2021), with an increase of 1,499.5 million euro. The increase in trade receivables is primarily linked to the rise in prices on both the electricity and gas wholesale markets, as well as to the growth in volumes sold.The “Bad debts provision”, calculated in compliance with IFRS 9, amounted to 5.3 million euro and showed a net increase of 0.8 million euro compared to December 31, 2021; • “Trade payables”, amounting to 4,606.6 million euro, rose by 2,433.7 million euro due to an increase in unit prices for supplies as a result of the rise in the benchmark energy scenario, as well as growth in volumes purchased. “Other Current Assets/Liabilities” evidenced a net increase of 346.6 million euro, due to: • net increase in derivative assets for 271.9 million euro; • net increase in current tax liabilities for 151.2 million euro; • net decrease in payables resulting from prepayments of electricity and futures contracts of 282 million euro; • decrease in advances to suppliers by 29.7 million euro; • decrease in security deposits for 32.3 million euro; • other decreases in other current liabilities for 5.9 million euro. “Assets/Liabilities held for sale” showed a balance of zero (positive for 46.8 million euro at December 31, 2021) as the sale of the buildings located in Milan, Corso di Porta Vittoria (Signora), Via Gonin and Via Balduccio da Pisa (Orobia), which at December 31, 2021, had been reclassified under “Assets held for sale”, was concluded in February. Overview of performance, financial conditions and net debt 2022 Separate financial statements A2A 7 Overview of performance, financial conditions and net debt Equity “Equity” amounted to 3,603.0 million euro and showed a positive change for a total of 270.6 million euro. The net profit for the year generated a positive effect of 545.4 million euro, offset by the distribution of 283.2 million euro in dividends. There was also a positive effect in the valuation of cash flow hedge derivatives and IAS 19 reserves for 8.4 million euro. The “Net Financial Position” at December 31, 2022 amounted to 1,095.3 million euro (1,780.0 million euro at end 2021). The gross debt amounted to 7,142.7 million euro, up by 1,969.7 million euro compared to 31 December 2021\. Cash and cash equivalents amounted to 2,338.5 million euro, up by 1,452.1 million euro. The other net financial assets/liabilities showed an active balance of 3,708.9 million euro with a net increase of 1,202.3 million euro as compared with December 31, 2021. 8 A2A Separate financial statements 2022 Overview of performance, financial conditions and net debt 1 Financial statements 1.1 Balance sheet (1) Assets amounts in euro Note 12 31 2022 12 31 2021 Non-current assets Tangible assets 1 900,950,676 934,218,394 Intangible assets 2 168,096,678 146,383,435 Shareholdings 3 4,183,541,756 4,204,055,422 Other non-current financial assets 3 1,361,415,880 1,334,677,747 Deferred tax assets 4 66,464,335 102,884,864 Other non-current assets 5 30,061,354 13,053,755 Total non-current assets 6,710,530,679 6,735,273,617 Current assets Inventories 6 389,282,148 103,867,362 Trade receivables 7 3,654,977,757 2,155,509,072 Other current assets 8 2,979,212,244 3,912,370,491 Current financial assets 9 2,365,954,047 1,204,973,806 Current tax assets 10 17,594,228 60,592,132 Cash and cash equivalents 11 2,338,464,796 886,354,322 Total current assets 11,745,485,220 8,323,667,185 Non-current assets held for sale 12 36,920 46,788,054 Total assets 18,456,052,819 15,105,728,856 (1) As required by Consob Resolution no. 17221 of March 12, 2010, the effects of relations with related parties in the separate financial statements are highlighted in the accounting statements in section 2 and commented on in Note 35\. Significant non-recurring events and transactions in the separate financial statements are provided in Note 36 pursuant to Consob Communication DEM/6064293 of July 28, 2006. 12 A2A Separate financial statements 2022 Financial statements Equity and liabilities amounts in euro Note 12 31 2022 12 31 2021 Equity Share capital 13 1,629,110,744 1,629,110,744 (Treasury shares) \- \- Reserves 14 1,428,348,635 1,217,791,460 Net result of the year 15 545,581,220 485,477,683 Total equity 3,603,040,599 3,332,379,887 Liabilities Non-current liabilities Non-current financial liabilities 16 5,648,397,055 4,191,240,086 Employee benefits 17 132,030,237 149,174,579 Provisions for risks, charges and liabilities for landfills 18 128,135,471 101,431,443 Other non-current liabilities 19 3,514,368 14,056,580 Total non-current liabilities 5,912,077,131 4,455,902,688 Current liabilities Trade payables 20 4,606,633,526 2,172,866,259 Other current liabilities 20 2,725,805,437 4,156,909,244 Current financial liabilities 21 1,494,275,653 981,736,220 Tax liabilities 22 114,220,473 5,934,558 Total current liabilities 8,940,935,089 7,317,446,281 Total liabilities 14,853,012,220 11,773,348,969 Liabilities associated with non-current assets held for sale - - Total equity and liabilities 18,456,052,819 15,105,728,856 Financial statements 2022 Separate financial statements A2A 13 1 Financial statements 1.1 Balance sheet 1.2 Income statement 1.3 Statement of comprehensive income 1.4 Cash-flow statement 1.5 Statement of changes in equity 1.2 Income statement (1) amounts in euro Note 01 01 2022 12 31 2022 01 01 2021 12 31 2021 Revenues Revenues from the sale of goods and services 19,667,224,374 8,196,015,067 Other operating income 21,113,211 59,968,651 Total Revenues 24 19,688,337,585 8,255,983,718 Operating expenses Expenses for raw materials and services 18,353,989,353 7,322,231,042 Other operating expenses 827,713,747 581,477,745 Total Operating expenses 25 19,181,703,100 7,903,708,787 Labour costs 26 174,892,072 160,014,697 Gross operating income \- EBITDA 27 331,742,413 192,260,234 Depreciation, amortization, provisions and write-downs 28 162,247,131 123,140,593 Net operating income \- EBIT 29 169,495,282 69,119,641 Result from non-recurring transactions 30 155,202,574 - Financial balance Financial income 469,295,089 448,739,269 Financial expenses 97,033,211 72,965,521 Result from disposal of other shareholdings - - Total financial balance 31 372,261,878 375,773,748 Result before taxes 696,959,734 444,893,389 Income taxes 32 181,087,527 (40,888,556) Result after taxes from operating activities 515,872,207 485,781,945 Net result from discontinued operations 33 29,709,013 (304,262) Net result of the year 34 545,581,220 485,477,683 (1) As required by Consob Resolution no. 17221 of March 12, 2010, the effects of relations with related parties in the separate financial statements are highlighted in the accounting statements in section 2 and commented on in Note 35\. Significant non-recurring events and transactions in the separate financial statements are provided in Note 36 pursuant to Consob Communication DEM/6064293 of July 28, 2006. 14 A2A Separate financial statements 2022 Financial statements 1.3 Statement of comprehensive income amounts in euro 12 31 2022 12 31 2021 Net result of the year (A) 545,581,220 485,477,683 Actuarial gains/(losses) on Employee’s Benefits booked in the Net equity 11,878,337 (31,066,216) Tax effect of other actuarial gains/(losses) on employee benefits recognized in equity (3,043,184) 9,128,469 Total actuarial gains/(losses) net of the tax effect (B) 8,835,153 (21,937,747) Effective part of gains/(losses) on cash flow hedge (2,168,825) 47,083,512 Tax effect of other gains/(losses) 1,627,801 (13,498,212) Total other gains/(losses) net of the tax effect (C) (541,024) 33,585,300 Total comprehensive result (A) \+ (B) \+ (C) 553,875,349 497,125,236 With the exception of the actuarial effects on employee benefits recognized in equity, the other effects stated above will be reclassified to the Income Statement in subsequent years. Financial statements 2022 Separate financial statements A2A 15 1 Financial statements 1.1 Balance sheet 1.2 Income statement 1.3 Statement of comprehensive income 1.4 Cash-flow statement 1.5 Statement of changes in equity 1.4 Cash-flow statement amounts in euro 12 31 2022 12 31 2021 Cash and cash equivalents at the beginning of the year 886,354,322 947,294,052 Operating activities Net Result 545,581,220 485,477,683 Net income taxes 181,087,527 (40,888,556) Net financial interests 35,109,376 38,633,485 Capital gains/expenses (184,956,859) (7,269,512) Tangible assets depreciation 85,164,247 80,667,473 Intangible assets amortization 37,912,640 29,141,818 Fixed assets write-downs/disposals 213,462 1,124,343 Shareholdings write-up/down - 1,800,000 Net provisions 38,956,782 12,218,210 Net financial interests paid (28,966,375) (52,201,144) Net taxes paid (270,217) (3,520,245) Dividends paid (283,214,637) (247,698,115) Change in trade receivables (1,500,295,038) (1,263,371,650) Change in trade payable 2,433,767,267 1,314,701,908 Change in inventories (285,414,786) (39,446,157) Other changes (557,605,259) 234,309,984 Cash flow from operating activities 517,069,350 543,679,525 Investment activities Investments in tangible assets (39,423,862) (45,998,963) Investments in intangible assets and goodwill (51,759,049) (46,415,671) Investments in shareholdings and securities (*) (26,285,000) (80,194,303) Contribution of non-recurring transactions on cash and cash equivalents - 968,869 Disposal of fixed assets and shareholdings 295,360,222 10,232,579 Purchase of treasury shares - (108,745,705) Cash flow from investment activities 177,892,311 (270,153,194) Free Cash Flow 694,961,661 273,526,331 (*) Cleared of balances in return of shareholders’ equity and other balance sheet items. 16 A2A Separate financial statements 2022 Financial statements amounts in euro 12 31 2022 12 31 2021 Financing activities Changes in financial assets Change in intercompany currency accounts (1,136,406,218) (738,248,552) Issuance of loans (95,091,589) (130,470,335) Proceeds from loans 61,117,657 51,293,009 Other changes (14,207,479) (9,154,039) Total changes in financial assets (*) (1,184,587,629) (826,579,917) Changes in financial liabilities Change in intercompany currency accounts 298,273,518 (59,776,819) Borrowings/bonds issued 4,168,000,000 1,100,000,000 Repayment of borrowings/bond (2,497,049,398) (530,506,398) Other changes (27,487,678) (17,602,927) Total changes in financial liabilities (*) 1,941,736,442 492,113,856 Cash flow from financing activities 757,148,813 (334,466,061) Change in cash and cash equivalents 1,452,110,474 (60,939,730) Cash and cash equivalents at the end of the year 2,338,464,796 886,354,322 Financial statements 2022 Separate financial statements A2A 17 1 Financial statements 1.1 Balance sheet 1.2 Income statement 1.3 Statement of comprehensive income 1.4 Cash-flow statement 1.5 Statement of changes in equity 1.5 Statement of changes in equity Changes from January 1, 2021 to December 31, 2021 amounts in euro Share capital Note 13 Treasury shares Cash Flow Hedge Note 14 Reserves Note 14 Net result of the year Note 15 Total Equity Equity at December 31, 2020 1,629,110,744 (53,660,996) (5,909,123) 1,061,341,696 545,729,183 3,176,611,504 Contribution from non-recurring transactions 162,406,701 (367) (136,387,467) 26,018,867 Allocation of net result 545,729,183 (545,729,183) - Dividend distribution (247,698,115) (247,698,115) IAS 19 reserve (*) (21,937,747) (21,937,747) Cash flow hedge reserves (*) 33,585,300 33,585,300 Other changes (108,745,705) (10,931,900) (119,677,605) Net result of the year (*) 485,477,683 485,477,683 Equity at December 31, 2021 1,629,110,744 - 27,675,810 1,190,115,650 485,477,683 3,332,379,887 Changes from January 1, 2022 to December 31, 2022 amounts in euro Share capital Note 13 Treasury shares Cash Flow Hedge Note 14 Reserves Note 14 Net result of the year Note 15 Total Equity Equity at December 31, 2021 1,629,110,744 - 27,675,810 1,190,115,650 485,477,683 3,332,379,887 Allocation of net result 485,477,683 (485,477,683) - Dividend distribution (283,214,637) (283,214,637) IAS 19 reserve (*) 8,835,153 8,835,153 Cash flow hedge reserves (*) (541,024) (541,024) Other changes - Net result of the year (*) 545,581,220 545,581,220 Equity at December 31, 2022 1,629,110,744 - 27,134,786 1,401,213,849 545,581,220 3,603,040,599 Availability of Equity Reserves D A-B-C A: For share capital increase B: To cover losses C: For distribution to Shareholders \- available for 1,206,664,706 euro (**) D: Reserves not avaliable (*) These form part of the statement of comprehensive income. (**) Of which subject to tax moderate suspension equal to 124,783,022 euro, and subject to tax suspension following the realignment of Legislative Decree 104/20 for 227,529,561 euro. Financial statements 2022 Separate financial statements A2A 19 1 Financial statements 1.1 Balance sheet 1.2 Income statement 1.3 Statement of comprehensive income 1.4 Cash-flow statement 1.5 Statement of changes in equity 2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010 2.1 Balance sheet pursuant to Consob Resolution no. 17221 of March 12, 2010 Assets amounts in euro 12 31 2022 of which Related Parties (note 35) 12 31 2021 of which Related Parties (note 35) Non-current assets Tangible assets 900,950,676 35,677,650 934,218,394 41,539,774 Intangible assets 168,096,678 146,383,435 Shareholdings 4,183,541,756 4,183,541,756 4,204,055,422 4,204,055,422 Other non-current financial assets 1,361,415,880 1,340,053,457 1,334,677,747 1,316,584,621 Deferred tax assets 66,464,335 102,884,864 Other non-current assets 30,061,354 9,031 13,053,755 10,745 Total non-current assets 6,710,530,679 6,735,273,617 Current assets Inventories 389,282,148 103,867,362 Trade receivables 3,654,977,757 1,815,966,583 2,155,509,072 937,605,975 Other current assets 2,979,212,244 84,427,159 3,912,370,491 74,846,677 Current financial assets 2,365,954,047 2,363,842,449 1,204,973,806 1,201,667,886 Current tax assets 17,594,228 60,592,132 Cash and cash equivalents 2,338,464,796 886,354,322 Total current assets 11,745,485,220 8,323,667,185 Non-current assets held for sale 36,920 46,788,054 440,404 Total assets 18,456,052,819 15,105,728,856 22 A2A Separate financial statements 2022 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010 Equity and liabilities amounts in euro 12 31 2022 of which Related Parties (note 35) 12 31 2021 of which Related Parties (note 35) Equity Share capital 1,629,110,744 1,629,110,744 (Treasury shares) \- \- Reserves 1,428,348,635 1,217,791,460 Net result of the year 545,581,220 485,477,683 Total equity 3,603,040,599 3,332,379,887 Liabilities Non-current liabilities Non-current financial liabilities 5,648,397,055 32,782,940 4,191,240,086 38,911,162 Employee benefits 132,030,237 149,174,579 Provisions for risks, charges and liabilities for landfills 128,135,471 2,000,000 101,431,443 Other non-current liabilities 3,514,368 14,056,580 Total non-current liabilities 5,912,077,131 4,455,902,688 Current liabilities Trade payables 4,606,633,526 697,422,175 2,172,866,259 430,817,120 Other current liabilities 2,725,805,437 68,158,051 4,156,909,244 69,281,107 Current financial liabilities 1,494,275,653 662,218,839 981,736,220 363,512,176 Tax liabilities 114,220,473 5,934,558 Total current liabilities 8,940,935,089 7,317,446,281 Total liabilities 14,853,012,220 11,773,348,969 Liabilities associated with non-current assets held for sale - - Total equity and liabilities 18,456,052,819 15,105,728,856 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010 2022 Separate financial statements A2A 23 2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010 2.1 Balance sheet pursuant to Consob Resolution no. 17221 of March 12, 2010 2.2 Income statement pursuant to Consob Resolution no. 17221 of March 12, 2010 2.2 Income statement pursuant to Consob Resolution no. 17221 of March 12, 2010 amounts in euro 01 01 2022 12 31 2022 of which Related Parties (note 35) 01 01 2021 12 31 2021 of which Related Parties (note 35) Revenues Revenues from the sale of goods and services 19,667,224,374 8,021,230,680 8,196,015,067 2,862,329,571 Other operating income 21,113,211 5,370,537 59,968,651 4,920,084 Total Revenues 19,688,337,585 8,255,983,718 Operating expenses Expenses for raw materials and services 18,353,989,353 509,080,669 7,322,231,042 306,913,033 Other operating expenses 827,713,747 695,115,105 581,477,745 469,765,365 Total Operating expenses 19,181,703,100 7,903,708,787 Labour costs 174,892,072 1,766,345 160,014,697 1,742,435 Gross operating income \- EBITDA 331,742,413 192,260,234 Depreciation, amortization, provisions and write-downs 162,247,131 7,862,123 123,140,593 5,784,085 Net operating income \- EBIT 169,495,282 69,119,641 Result from non-recurring transactions 155,202,574 - Financial balance Financial income 469,295,089 457,724,023 448,739,269 444,598,443 Financial expenses 97,033,211 397,920 72,965,521 2,306,597 Result from disposal of other shareholdings - - Total financial balance 372,261,878 375,773,748 Result before taxes 696,959,734 444,893,389 Income taxes 181,087,527 (40,888,556) Result after taxes from operating activities 515,872,207 485,781,945 Net result from discontinued operations 29,709,013 (304,262) (294,775) Net result of the year 545,581,220 485,477,683 24 A2A Separate financial statements 2022 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010 3 Notes 26 A2A Separate financial statements 2022 Notes A2A S.p.A. is a company with legal personality organized under the laws of the Italian Republic which operates, also through its subsidiaries ("Group"), both in Italy and abroad. In particular, as the “Parent Company”, A2A S.p.A. is responsible for the guiding strategy, administration, planning and control, financial management and coordinating the activities of the A2A Group. Therefore, Group companies benefit from administrative, tax, legal, personnel management, procurement and communication services, so as to optimize the resources that are available within the Group and to use the existing known how in a cost-effective way. The A2A Group mainly operates in the following sectors: • production, sale and distribution of electricity even from renewable resources; • sale and distribution of gas; • production, distribution and sale of heat through district heating networks; • waste management (from collection and sweeping to disposal) and the construction and management of integrated waste disposal plants and systems, also making these available for other operators; • integrated water cycle management; • technical consultancy relating to energy efficiency certificates. The separate financial statements for A2A S.p.A. are presented in euro, which is also the functional currency in the economies in which the company operates. In particular, the following notes are prepared in thousands of euro. The separate financial statements of A2A S.p.A. at December 31, 2022, have been prepared on a going-concern basis and comprise the balance sheet, income statement, statement of comprehensive income, cash flow statement, statement of changes in equity and these notes. The separate financial statements of A2A S.p.A. at December 31, 2022 have been prepared: • in compliance with Legislative Decree 58/1998 (art. 154-ter) as amended and with the Issuers’ Regulations published by Consob; • in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standard Board (IASB) and approved by the European Union. IFRS means all the revised international accounting standards (IAS) and all the interpretations of the International Financial Reporting Interpretations Committee (IFRIC), formerly known as the Standing Interpretations Committee (SIC). In preparing the separate financial statements, the same standards used for the financial statements at December 31, 2021 were applied, other than the principles and interpretations described in detail in the paragraph below “Changes in accounting principles” adopted for the first time on January 1, 2022\. These explanatory notes include the supplemental information required by the Italian civil code, by Consob Resolutions no. 15519 and 15520 of July 27, 2006, and Consob communication no. 6064293 of July 28, 2006. In this file, use has been made of some Alternative Performance Measures (APM) that are different from the financial indicators expressly provided for by the IAS/IFRS international accounting standards adopted by the company; for details of these indicators, please see the specific paragraph Alternative Performance Measures (APM) in the Report on Operations. These separate financial statements for the year ended December 31, 2022, were approved on March 16, 2023, by the Board of Directors, which authorized its publication, and has been audited by EY S.p.A. in accordance with their appointment by the shareholders of June 11, 2015, for the nine years from 2016 to 2024. 3.1 General information on A2A S.p.A. Notes 2022 Separate financial statements A2A 27 For the balance sheet, the company A2A S.p.A. has adopted a format which separates current and non-current assets and liabilities, as required by paras. 60 et seq. of IAS 1. The “Income statement” is presented by nature, a format which is considered more representative than a presentation by function. The selected format is in agreement with the presentation used by the Group’s major competitors and in line with international practice. The specific line items “Result from non-recurring transactions” and “Result from disposal of other shareholdings” are in the format of the income statement in order to provide clear and immediate identification of the results arising from non-recurring transactions forming part of continuing operations, separating these from the results from discontinued operations/held for sale. In particular, it should be noted that the item "Result from non-recurring transactions" is intended to include the results from the sale of investments in subsidiaries and associates and other non-operating expenses/income. This item is presented between net operating income and the financial balance. In this way net operating income is not affected by non-recurring operations, making it easier to measure the effective performance of the Group’s ordinary operating activities. The “Cash flow statement” has been prepared using the indirect method as permitted by IAS 7. The “Statement of changes in equity” has been prepared in accordance with IAS 1. The accounting schedules included in the annual report are in the same format as those used in the separate financial statements at December 31, 2021. 3.2 Financial statements 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 28 A2A Separate financial statements 2022 Notes The separate financial statements as at December 31, 2022, have been prepared on a historical cost basis, with the exception of those items which under IFRS must be or can be measured at fair value, as discussed in further detail in the accounting policies. The accounting standards, the accounting policies and the methods of measurement used in the preparation of the separate financial statements are consistent with those used to prepare the annual separate financial statements at December 31, 2021, except as specified below regarding newly enacted standards. 3.3 Basis of preparation Notes 2022 Separate financial statements A2A 29 Pursuant to IAS 8, the subsequent paragraph “Accounting standards, amendments and interpretations applicable by the company as of the current year” indicates and briefly illustrates the amendments in force as of January 1, 2022\. The following paragraph, “Accounting standards, amendments and interpretations approved by the European Union” instead detail the accounting standards and interpretations already issued, not yet approved by the European Union and therefore not applicable for the preparation of the financial statements at December 31, 2022, any impacts of which will then be transposed as of the financial statements of the following years. Accounting standards, amendments and interpretations applicable as of the current year As from January 1, 2022, applicable to the Group are the following additions to specific paragraphs of the international accounting standards already adopted by the Group companies in previous years: • IFRS 3 “Business Combination”: issued by the IASB on May 14, 2020 and approved on July 2, 2021, the integration introduces an exception to the valuation standards of IFRS 3 to avoid the risk of potential “day-after” losses or gains arising from liabilities and contingent liabilities that would fall within the scope of IAS 37 or IFRIC 21, if contracted separately. The amendment also added a new paragraph to IFRS 3 to clarify that contingent assets do not qualify as recognizable assets at the acquisition date. The integration did not have any impact on the Group's financial position, as no contingent assets, liabilities and contingent liabilities were recognized for the purpose of these amendments. • IAS 16 “Property, plant and equipment”: issued by the IASB on May 14, 2020 and approved on July 2, 2021, the integration prohibits the deduction from the carrying amount of a fixed asset of any revenue from the sale achieved during the preparation of the fixed asset. These revenues must be recognized in the income statement. The integration did not have any impact on the Group's financial position as no sales related to these fixed assets were realized, before they entered operation before or after the beginning of the previous comparative period. • IAS 37 “Provisions, liabilities and contingent liabilities”: issued by the IASB on May 14, 2020 and endorsed on July 2, 2021, the integration further specifies which costs should be considered in the definition of an onerous contract. An onerous contract is a contract in which the non-discretionary costs (i.e., the costs that the Group cannot avoid because it is a party to a contract) necessary to fulfil its obligations exceed the economic benefits that are supposed to be obtainable from the contract. The amendment specifies that in determining whether a contract is onerous or loss-making, an entity must consider costs directly related to the contract for the provision of goods or services that include both incremental costs (i.e., the cost of direct labour and materials) and costs directly attributable to contractual activities (i.e., depreciation of equipment used to perform the contract as well as costs for managing and supervising the contract). General and administrative expenses are not directly related to a contract and are excluded unless they are explicitly chargeable to the other party under the contract. The integration did not have any impact on the Group's economic and financial situation. • IFRS 1 "First-time Adoption of International Financial Reporting Standards": issued by the IASB on May 14, 2020 and endorsed on July 2, 2021, this amendment allows a subsidiary that elects to apply paragraph D16(a) of IFRS 1 to account for cumulative translation differences based on the amounts recognized by the parent company, considering the date of transition to IFRSs by the parent company. This amendment also applies to associates or joint ventures that elect to apply paragraph D16(a) of IFRS 1\. The integration did not have any impact on the Group's economic and financial situation as the Group is not a first-time adopter. • IFRS 9 "Financial Instruments": issued by the IASB on May 14, 2020 and endorsed on July 2, 2021, this amendment clarifies what fees an entity includes in determining whether the terms and conditions of a new or amended financial liability are materially different from the terms and conditions of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by the borrower or lender on behalf of others. No such amendment has been proposed with regard to IAS 39 Financial Instruments: Recognition and Measurement. The integration did not have any impact on the Group's economic and financial situation. 3.4 Changes in international accounting standards 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 30 A2A Separate financial statements 2022 Notes • IAS 41 "Agriculture": issued by the IASB on May 14, 2020 and endorsed on July 2, 2021, this amendment removes the requirements in paragraph 22 of IAS 41 relating to the exclusion of cash flows for taxes when measuring the fair value of an asset within the scope of IAS 41\. The integration did not have any impact on the Group's economic and financial position as the Group did not have any assets within the scope of IAS 41 at the reporting date. Accounting standards, amendments and interpretations approved this year and applicable as of subsequent years • IFRS 17 “Insurance contracts”: issued by the IASB on May 18, 2017 and approved November 19, 2021, will be applicable to companies that issue insurance contracts from the financial statements closed as of January 1, 2023\. No impacts are expected on the Group's economic and financial situation. • IAS 1 "Presentation of the Financial Statements": issued by the IASB on February 12, 2021 and endorsed on March 2, 2022, which provides guidance and examples to help entities apply materiality judgements to disclosures on accounting standards. The amendments are intended to help entities provide more useful accounting standard disclosures by replacing the requirement for entities to provide their "significant" accounting standards with a requirement to provide disclosures about their "material" accounting standards; in addition, guidance is added on how entities apply the concept of materiality in making accounting standard disclosure decisions. The integration will be applicable to the financial statements closed as from January 1, 2023 and is not expected to have a significant impact on the disclosure of the accounting policies since an analysis by nature and not only by significance is already carried out. • IAS 8 "Accounting Policies, Changes in Accounting Estimates and Errors": issued by the IASB on February 12, 2021 and endorsed on March 2, 2022\. The amendments clarify the distinction between changes in accounting estimates and changes in accounting standards and error correction. They also clarify how entities use measurement techniques and inputs to develop accounting estimates. The integration will be applicable to financial statements for the period beginning January 1, 2023 and is not expected to have significant impacts on the Group's economic and financial situation. • IAS 12 "Income Taxes": issued by the IASB on May 7, 2021 and endorsed on August 11, 2022 in which it clarifies how to account for deferred taxes on transactions such as leases and decommissioning provisions. In particular, the option, previously provided for, not to calculate deferred taxation upon initial recognition of assets and liabilities deriving from lease contracts and/or decommissioning provisions is eliminated. This addition clarifies, therefore, that all companies are required to recognize deferred taxation on the transactions in question. The Group is currently assessing the impacts of these amendments. • IFRS 17 "Insurance Contracts": issued by the IASB on December 9, 2021 and endorsed on September 8, 2022 in which it adds a transition option relating to comparative information presented on first-time application of IFRS 17 and IFRS 9\. The amendment aims to help entities avoid temporary accounting mismatches between financial assets and liabilities of insurance contracts, and therefore at improving the usefulness of comparative information of the financial statements. The integration will be applicable to financial statements for the period beginning January 1, 2023 and is not expected to have an impact on the Group's economic and financial situation. Accounting standards, amendments and interpretations not yet approved by the European Union • On January 23, 2020, July 15, 2020 and October 31, 2022, the IASB issued three additions to IAS 1 "Presentation of Financial Statements" that aim to better define the concept of liabilities and the related classification between short and medium/long-term.Specifically, emphasis is placed on the temporal concept of transferring money or other resources to the counterparty to settle the liability. The following aspects are also clarified: what is meant by a subordination right; that the subordination right must exist at the end of the reporting period; classification is not impacted by the probability that the entity will exercise its subordination right; only if a derivative embedded in a convertible liability is itself an equity instrument does the maturity of the liability not impact its classification.Furthermore, the latest amendment specifies that only covenants that an entity must meet by the reporting date will affect the classification of a liability as current or non-current.These additions will be applicable to financial statements closed on or after January 1, 2024\. The Group is currently assessing the impacts of these amendments. • On September 22, 2022, the IASB issued a supplement to IFRS 16 "Leases" clarifying how to account for a sale and leaseback transaction that provides for variable payments based on the performance or use of the asset subject to the transaction.The integration will be applicable to financial statements for the period beginning January 1, 2024 and no impacts are expected on the Group's economic and financial situation. Notes 2022 Separate financial statements A2A 31 Translation of foreign currency items The consolidated financial statements of the A2A Group are presented in euro; this is also the functional currency of the economies in which the Group operates. Transactions in other currencies are initially recognized at the exchange rates at the date of the transaction. Monetary assets and liabilities denominated in foreign currency are translated into euro at the exchange rates at the balance sheet date. Non-monetary items measured at historical cost in foreign currency are translated at the exchange rates at the date of the transaction. Non-monetary items measured at fair value are translated at the exchange rates at the date when the fair value was determined. Tangible assets Assets for business use are classified as tangible assets, while non-business assets are classified as investment property. Tangible assets are measured at cost, including any additional charges directly attributable to bringing the asset into an operating condition (e.g. transport, customs duty, installation and testing costs, notary and land registry fees and any non-deductible VAT), increased when material and where there are obligations by the present value of the estimated cost of restoring the location from an environmental point of view or dismantling the asset. Borrowing costs, where directly attributable to the purchase or construction of an asset, are capitalized as part of the cost of the asset if the type of asset so warrants. If important components of tangible assets have different useful lives, they are accounted for separately using the “component approach”, assigning to each component its own useful life for the purpose of calculating depreciation (the component approach). Land, whether occupied by residential or industrial buildings or devoid of construction, is not depreciated as it has an unlimited useful life, except for land used in production activities that is subject to deterioration over time (e.g. landfills, quarries). Ordinary maintenance costs are fully expensed to the income statement in the year they are incurred. Costs for maintenance carried out at regular intervals are attributed to the assets to which they refer and are depreciated over the specific residual possibility of use of such. Tangible assets are stated net of accumulated depreciation and any write-downs. Depreciation is charged from the year in which the individual asset enters service on a straight-line basis over the estimated useful life of the asset for the business. The estimated realizable value which is deemed to be recoverable at the end of an asset’s useful life is not depreciated. The useful life of each asset is reviewed annually and any changes, if needed, are made with a view to showing the correct value of the asset. Landfills are depreciated on the basis of the percentage filled, which is calculated as the ratio between the volume occupied at the end of the period and the total volume authorized. The main depreciation rates used are as follows: • non-industrial buildings .....................................................................................................................................................................................12.2% • industrial buildings ...............................................................................................................................................................................................13.3% • production plants ......................................................................................................................................................................................1.4% \- 14.1% • miscellaneous equipment .................................................................................................................................................................9.7% \- 10.0% • furniture and fittings ............................................................................................................................................................................................15.0% • electrical and electronic office machines \- data processing systems ...................................................................10.0% \- 25.0% • means of transport ..............................................................................................................................................................................................10.0% • other miscellaneous assets ..............................................................................................................................................................10.0 \- 20.0% • fibre optic network..................................................................................................................................................................................5.0% \- 10.1% • improvements to third-party assets \- buildings .....................................................................................................................5.2% \- 41.4% Tangible assets are subjected to impairment testing if there is any indication that an asset may be impaired in accordance with the paragraph below “Impairment of assets”; write-downs may be reversed in subsequent periods if the reasons for which they were recognized no longer apply. 3.5 Accounting standards and policies 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 32 A2A Separate financial statements 2022 Notes When an asset is disposed of or if future economic benefits are no longer expected from using an asset, it is removed from the balance sheet and any gain or loss (being the difference between the disposal proceeds and the carrying amount) is recognized in the income statement in the year of the derecognition. Leasing Assets for rights of use are recognized on the start date of the lease, i.e. the date on which the underlying asset is available for use. Rights to use assets are measured at cost, net of accumulated depreciation and impairment losses, and adjusted for any restatement of lease liabilities. The cost of assets for rights of use includes the amount of lease liabilities recognized and lease payments made on or before the commencement of the lease. Assets for right of use are depreciated on a straight-line basis from the effective date to the end of the useful life of the asset consisting of the right of use or at the end of the lease term, whichever is earlier. If the lease transfers ownership of the underlying asset to the lessee at the end of the term of the contract or if the cost of the asset consisting of the right of use reflects the fact that the lessee will exercise the purchase option, the asset consisting of the right of use is depreciated from the effective date until the end of the useful life of the underlying asset. Lease liabilities are recognized at the present value of lease payments not yet paid at the reporting date. Lease payments also include the exercise price of a purchase option if it is reasonably certain that the option will be exercised. Intangible assets Intangible assets are identifiable non-monetary assets without physical substance which are controlled by the enterprise and able to produce future economic benefits, and include goodwill when acquired for consideration. The fact of being identifiable distinguishes an intangible asset that has been acquired from goodwill; this requirement is normally met when: (i) the intangible asset is attributable to a legal or contractual right, or (ii) the asset is separable, in other words it can be sold, transferred, rented or exchanged individually or as an integral part of other assets. Control by the enterprise consists of the right to enjoy the future economic benefits flowing from the asset and to restrict the access of others to those benefits. Intangible assets are stated at purchase or production cost, including ancillary charges, determined in the same way as for tangible assets. Intangible fixed assets produced internally are not capitalized but recognized in the income statement in the year in which the costs are incurred. Intangible assets with a definite useful life are reported in the financial statements net of the related accumulated amortization and impairments in the same way as for tangible assets. Changes in the expected useful life or in the ways in which the future economic benefits of an intangible asset are achieved by the Company are accounted for by suitably adjusting the period or method of amortization, treating them as changes in accounting estimates. The amortization of intangible fixed assets with a definite useful life is charged to income statement in the cost category that reflects the function of the intangible asset concerned. Intangible assets are subjected to impairment testing if there are specific indications that they may be impaired, in accordance with the paragraph below “Impairment of assets”; impairment losses may be reversed in subsequent periods if the reasons for which they were recognized no longer apply. Intangible assets with an indefinite useful life and those that are not yet available for use are subjected to impairment testing on an annual basis, whether or not there are any specific indications that they may be impaired, in accordance with the paragraph below “Impairment of assets”. Impairment losses recognized for goodwill are not reversed. Gains or losses on the disposal of an intangible asset are calculated as the difference between the disposal proceeds and the carrying amount of the asset and recognized in the Income Statement at the time of the disposal. The following amortization rates are applied to intangible assets with a definite useful life: • industrial patents and intellectual property rights ...........................................................................................................................................................20.0% \- 33.3% • concessions, licenses, trademarks and similar rights ...................................................................................................................................................20.0% \- 33.4% • other tangible assets ...........................................................................................................................................................................................................................2.1% \- 33.3% Notes 2022 Separate financial statements A2A 33 Service concession arrangements IFRIC 12 states that, based on the characteristics of the concession arrangement, the infrastructures used in the provision of public services under concession are to be recognized as intangible assets if the operator has the right to receive a payment from the customer for the service provided, and/or as a financial asset if the operator has the right to receive payment from the public sector entity. Impairment/Reversal of tangible assets, intangible assets and equity investments Tangible assets, intangible assets and investments are subjected to impairment testing if there is any specific indication that there may be an impairment loss. Goodwill, other intangible assets with an indefinite useful life and assets not available for use are tested for impairment at least annually or more frequently if there is any specific indication that they may be impaired. Impairment testing consists of comparing the carrying amount of an asset or impairment with an estimate of the related recoverable amount. The recoverable amount of an asset or investment is the higher of its fair value less costs to sell and its value in use. To determine the value in use of an asset or investment, the entity calculates the present value of the estimated future cash flows on the basis of business plans prepared by management, before tax, applying a pre-tax discount rate which reflects current market assessments of the time value of money and the risks specific to the asset or investment. If the recoverable amount of an asset or investment is lower than its carrying amount, a loss is recognized in the Income Statement. If a loss recognized for an asset other than goodwill no longer exists or is reduced, the carrying amount of the asset or cash-generating unit is increased to the new estimate of recoverable value, which may not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset. Reversals of impairment losses are immediately recognized in the income statement. When the recoverable amount of the individual asset cannot be estimated, it is based on the cash generating unit (CGU) or group of CGUs that the asset belongs to and/or to which it may be reasonably allocated. CGUs are identified on the basis of the company’s organizational and business structure as homogeneous aggregations that generate independent cash inflows deriving from the continuous use of the assets allocated to them. Environmental certificates: emission quotas and White Certificates Different accounting policies are applied to quotas or certificates held for own use in the “Industrial Portfolio” and those held for trading purposes in the “Trading Portfolio”. Surplus quotas or certificates held for own use in the “Industrial Portfolio” which are in excess of the Group's requirements in relation to the obligations accruing at year end are recognized as other intangible assets at the actual cost incurred. Quotas or certificates assigned free of charge are recognized at a zero carrying amount. Given that they are assets for instant use, they are not amortized but subjected to impairment testing. The recoverable amount is the higher of value in use and market value. If, on the other hand, there is a deficit because the requirement exceeds the quotas or certificates in portfolio at the balance sheet date, a provision is recognized for the amount needed to meet the residual obligation, estimated on the basis of any purchase contracts, spot or forward, already signed at the balance sheet date; otherwise on the basis of market prices. Quotas or certificates held for trading in the “Trading Portfolio” are recognized in inventories and measured at the lower of purchase cost and estimated realizable value based on market trends. Quotas or certificates assigned free of charge are recognized at a zero carrying amount. Market value is established on the basis of any sales contracts, spot or forward, already signed at the balance sheet date; otherwise on the basis of market prices. Shareholdings in subsidiaries, associates and joint ventures Subsidiaries are companies in which the parent company “is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee”, as defined by IFRS 10\. Control is generally assumed to exist when a company holds either directly or indirectly more than half of the exercisable voting rights at an ordinary shareholders' meeting, also considering potential voting rights, meaning voting rights deriving from convertible financial instruments. Subsidiaries are consolidated on a line-by-line basis. 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 34 A2A Separate financial statements 2022 Notes Associates are companies in which the parent has a significant influence over strategic decisions, despite not having control, also considering potential voting rights, meaning voting rights deriving from convertible financial instruments; significant influence is assumed to exist when A2A S.p.A. holds, either directly or indirectly, more than 20% of voting rights exercisable at an ordinary shareholders' meeting. A joint venture is a contractual agreement whereby two or more parties undertake an income generating activity subject to joint control. Shareholdings in associates and joint ventures are accounted for in the consolidated financial statements using the equity method. Long term construction contracts in progress Construction contracts with durations exceeding one year in progress are valued in accordance with IFRS 15\. In particular, over-the-time revenues are recognized if it can be demonstrated that: a) the customer simultaneously receives and consumes the benefits of the contract in force at the same time as the service is provided b) the service provided improves. Construction contracts currently in progress are measured on the basis of the contractual fees that have accrued with reasonable certainty on the basis of the stage of completion, using the “cost to cost” method, so as to allocate the revenues and net result of the contract to the individual periods to which they belong in proportion to the progress being made on the project. Any difference, positive or negative, between the value of the contracts and advances received is recognized as an asset or a liability respectively. In addition to the contractual fees, contract revenues include variants, price revisions and incentive awards to the extent that it is probable that they represent actual revenues that can be reliably determined. Ascertained losses are recognized independently of the stage of completion of contracts. Inventories Inventories of materials and fuel are measured at the lower of weighted average cost and market value at the balance sheet date. Weighted average cost is determined for the period of reference for each inventory code. Weighted average cost includes any additional costs (such as sea freight, customers charges, insurance and lay or demurrage days in the purchase of fuel). Inventories are constantly monitored and, where necessary, obsolete stocks are written down with a charge to the Income Statement. Gas inventories held for trading purposes, stored in separate facilities with respect to gas used for industrial purposes, are measured at fair value at the reporting date as required by IAS 2 par. 3 letter b. Financial instruments Financial instruments include shareholdings (excluding shareholdings in subsidiaries, joint ventures and associates) held for trading (so-called trading shareholdings) or available for sale, non-current receivables and loans and other non-current financial assets, trade and other receivables deriving from company operations and other current financial assets such as cash and cash equivalents. The latter consist of bank and postal deposits, readily negotiable securities used as temporary investments of surplus cash and financial receivables due within three months. Financial instruments also include financial payables (bank loans and bonds), trade payables, other payables and other financial liabilities and derivatives. Financial assets and liabilities are recognized at the time that the contractual rights and obligations forming part of the instrument arise. Financial assets and liabilities are accounted for in accordance with IFRS 9 “Financial Instruments”. Financial assets Initial recognition Financial assets are classified into two categories alone \- “at fair value” or “at amortized cost”. Classification within the two categories is carried out on the basis of an entity’s business model and the contractual cash flow characteristics of the financial asset. A financial asset is measured at amortized cost if both of the following requirements are met: the objective of the entity’s business model is to hold assets to collect contractual cash flows (and therefore in substance not to earn trading profits) and the characteristics of the cash flows of the asset are solely payments of principal and interest. A financial asset is measured at fair value if it is not measured at amortized cost. All equity instruments both listed and unlisted – must be measured at fair value. An entity has the option of presenting changes in the fair value of equity instruments that are not held for trading in equity; that option is not permitted for equity instruments that are held for trading. This designation is permitted on initial recognition, may be adopted for each individual instrument and is irrevocable. If an election is made for this option, changes in the fair value of these instruments may Notes 2022 Separate financial statements A2A 35 never be reclassified from equity to the income statement. Dividends on the other hand continue to be recognized in the income statement. In addition, the method of expected credit losses is modified, moving to an impairment model that leads to the early recognition of forward-looking losses. Subsequent valuation Measurement subsequent to initial recognition depends on which of the following categories the financial instrument falls into: • Financial assets at amortized cost (debt instruments); • Financial assets at fair value in the Income Statement with reclassification of cumulative gains and losses (debt instruments); • Financial assets at fair value in the Income Statement without reversal of cumulative gains and losses at the time of derecognition (equity instruments); • Financial assets at fair value in the Income Statement. Financial assets at amortized cost Financial assets at amortized cost are valued using the effective interest method and are subject to impairment. Gains and losses are recognized in the income statement when the asset is derecognized, modified or revalued. Investments in equity instruments On initial recognition, the Group may irrevocably choose to classify its equity investments as equity instruments recognized at fair value through profit and loss when they meet the definition of equity instruments pursuant to IAS 32 "Financial instruments: Presentation" and are not held for trading. The classification is determined for each individual instrument. Gains and losses on these financial assets are never reclassified to the income statement. Dividends are recognized as other income in the income statement when the right to payment has been approved, except when the Group benefits from such income as a recovery of part of the cost of the financial asset, in which case such profits are recognized in OCI. Equity instruments recognized at fair value through OCI are not subject to impairment testing. Financial assets measured at fair value through the income statement This category includes assets held for trading, assets designated at the time of initial recognition as financial assets at fair value with changes recognized in the Income Statement, or financial assets that must be measured at fair value. Assets held for trading are all those assets acquired for sale or repurchase in the short term. Derivatives, including those separated, are classified as financial instruments held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that are not represented solely by principal and interest payments are classified and measured at fair value in the Income Statement, regardless of the business model. Notwithstanding the criteria for debt instruments to be classified at amortized cost or at fair value through OCI, as described above, debt instruments may be recognized at fair value in the Income Statement upon initial recognition if this results in the elimination or significant reduction of an accounting mismatch. Financial instruments at fair value with changes recognized in the Income Statement are recognized in the statement of financial position at fair value and net changes in fair value are recognized in profit/(loss) for the year. This category includes derivative instruments and listed equity investments that the Group has not irrevocably chosen to classify at fair value through OCI. Dividends on listed equity investments are also recognized as other income in the statement of profit/(loss) for the year when the right to payment is established. The embedded derivative contained in a non-derivative hybrid contract, in a financial liability or in a principal non-financial contract, is separated from the principal contract and accounted for as a separate derivative, if: its economic characteristics and the risks associated with it are not closely correlated with those of the principal contract; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the hybrid contract is not measured at fair value in the Income Statement. Embedded derivatives are measured at fair value, with changes in fair value recognized in the Income Statement. A restatement occurs only when there is a change in the terms of the contract that significantly changes the cash flows otherwise expected or a reclassification of a financial asset to a category other than fair value in the Income Statement. An embedded derivative included in a hybrid contract that contains a financial asset is not separated from the host contract. The financial asset together with the embedded derivative is classified entirely as a financial asset at fair value in the Income Statement. 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 36 A2A Separate financial statements 2022 Notes Derecognition A financial asset is derecognized when: • the rights to receive cash flows from the asset no longer apply; • the company has transferred to a third party the right to receive cash flows from the asset or has assumed a contractual obligation to transfer them. In substance, the transfer is completed when: the company has transferred all the risks and rewards of ownership of the asset or has transferred control of the asset while maintaining the related risks and rewards. In cases where the company has transferred the rights to receive cash flows from an asset or signed an agreement under which it retains the contractual rights to receive the cash flows from the financial asset but assumes a contractual obligation to pay the cash flows to one or more beneficiaries (pass-through), it assesses whether and to what extent it has retained the risks and rewards of ownership. In the cases in which it has neither transferred nor retained substantially all of the risks and rewards or has not lost control of the asset, it continues to be recognized in the financial statements of the Group to the extent of its continuing involvement in the asset. In this case, the Group also recognizes an associated liability. The transferred asset and the associated liability are valued to reflect the rights and obligations that remain with the Group. When the entity's continuing involvement is a guarantee of the transferred asset, involvement is measured on the basis of the lower of the amount of the asset and the maximum amount of consideration received that the entity might have to repay. Financial liabilities Financial liabilities are classified, at the time of initial recognition, at fair value in the Income Statement, as mortgages and loans or as derivatives designated as hedges. Directly attributable transaction costs are added to the valuation. The Group's financial liabilities include trade payables and other payables, mortgages and loans, including current account overdrafts and derivative financial instruments. The subsequent evaluation depends on the classification of the main instrument: • financial liabilities at fair value in the Income Statement, typically of a trading nature (settlement and transfer in the short term). This category includes financial derivatives held for trading (speculative); • loans and receivables: valued at amortized cost using the effective interest method. Gains and losses are recognized in the Income Statement when the liability is settled, as well as through amortization. A financial liability is derecognized when the obligation underlying the liability is settled or cancelled. Derivative financial instruments and hedge accounting These are initially recognized at fair value on the date the contract is signed and the subsequent measurement is also at fair value. To classify a derivative as a hedge, the company formally designates and documents the hedging relationship, its risk management objectives and the strategy pursued. From January 1, 2018, the following must be identified: a) the hedging instrument b) the nature of the risk being hedged c) the way in which the company will assess the effectiveness of the hedge. The hedging relationship is effective if: • there is an economic relationship between the hedged item and the hedging instrument; • the effect of the credit risk does not prevail over the changes in value resulting from the aforementioned economic relationship; • the hedging ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges and the quantity of the hedging instrument that the Group actually uses to hedge this quantity of hedged item. Transactions that meet the above criteria are accounted for as follows: Fair value hedging If a derivative financial instrument is designated as a hedge against exposure to changes in the fair value of an asset or liability attributable to a specific risk, the gain or loss resulting from subsequent changes in fair value of the hedging instrument is recognized in the Income Statement. The profit or loss deriving from the adjustment to fair value of the item hedged, for the part attributable to the hedged risk, changes the book value of this item and is recognized in the Income Statement. Cash flow hedge \- If a derivative financial instrument is designated to hedge the exposure to the variability of the cash flows of an asset or a liability recognized in the Financial Statements or of a highly probable transaction, the effective portion of the resulting profits or losses deriving from the fair value adjustment of the derivative instrument is recognized in a specific equity reserve. The cumulative profit or loss is reversed from the equity reserve and recorded in the Income Statement in the same years in which the effects of the hedged transaction are recognized in the Income Statement. The gain or loss associated with that part of the ineffective hedge is recognised in the Income Notes 2022 Separate financial statements A2A 37 Statement immediately. If the hedged transaction is no longer considered probable, the unrealized gains or losses recognized in the equity reserve are immediately recognized in the Income Statement. Cash flow hedges The portion of gain or loss on the hedged instrument relating to the effective portion of the hedge is recognized in other comprehensive income in the cash flow hedge reserve, while the ineffective portion is recognized directly in the Income Statement. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging instrument and the cumulative change in the fair value of the hedged item. Amounts accumulated under other components of the comprehensive income statement are recorded, depending on the nature of the underlying hedged transaction. If the hedged transaction subsequently results in the recognition of a non-financial component, the accumulated amount in equity is removed from the separate component of equity and included in the cost or other carrying amount of the asset or liability hedged. This is not considered a reclassification of the items recognized in OCI for the period. This also applies in the case of a hedged forecast transaction of a non-financial asset or a non-financial liability that subsequently becomes an irrevocable commitment to which fair value hedge accounting is applied. For any other cash flow hedge, the amount accumulated in OCI is reclassified in the Income Statement as a reclassification adjustment in the same period or periods during which the hedged cash flows impact profit or loss. If the cash flow hedge accounting is discontinued, the accumulated amount in OCI must remain so if the hedged future cash flows are expected to occur. Otherwise, the amount shall be immediately reclassified to profit or loss for the period as a reclassification adjustment. After suspension, once the hedged cash flow occurs, any accumulated amount remaining in OCI must be accounted for depending on the nature of the underlying transaction as described above. Non-current assets held for sale, disposal groups and discontinued operations \- IFRS 5 Non-current assets held for sale, disposal groups and discontinued operations whose carrying amount will be recovered principally through sale rather than continuous use are measured at the lower of their carrying amount and fair value less costs to sell. A disposal group is a group of assets to be disposed of together as a group in a single transaction together with the liabilities directly associated with those assets that will be transferred in that transaction. Discontinued operations on the other hand consist of a significant component of the Group such as a separate major line of business or a geographical area of operations or a subsidiary acquired exclusively with a view to resale. In accordance with IFRSs, the figures for non-current assets held for sale, disposal groups and discontinued operations are shown on two specific lines in the balance sheet: non-current assets held for sale and liabilities directly associated with non-current assets held for sale. Non-current assets held for sale are not depreciated or amortized and are measured at the lower of carrying amount and fair value less costs to sell; any difference between carrying amount and fair value less costs to sell is recognized in the income statement as a write-down. The net economic results arising from discontinued operations, and only discontinued operations, pending the disposal process, any gains or losses on disposal and the corresponding comparative figures for the previous year or period are recognized in a specific line of the Income Statement: “Net result from discontinued operations”. On the other hand any gains or losses recognized as the result of measuring non-current assets (or disposal groups), classified as held for sale within the meaning of IFRS 5, at fair value less costs to sell are presented in a specific line item of the income statement “Result from non-recurring transactions”, as discussed further in the previous section “Format of financial statements”. Employee benefits The employees’ leaving entitlement (TFR) and pension provisions are determined using actuarial methods; the rights accrued by employees during the year are recognized in the Income Statement as “labour costs”, whereas the figurative financial cost that the company would have to bear if it were to ask the market for an loan of the same amount as the TFR is recognized as part of the “financial balance”. Actuarial gains and losses arising from changes in actuarial assumptions are recognized in income statement taking into account the residual average working life of the employees. Following the introduction of Finance Law no. 296 of December 27, 2006, only the portion of accrued employees’ leaving entitlement that remained in the company has been measured in accordance with IAS 19, as amounts are now paid over to a separate entity as they accrue (either to a supplementary pension scheme or to funds held by INPS). As a result of these payments the company no longer has any obligations in connection with the services employees may render in the future. 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 38 A2A Separate financial statements 2022 Notes Guaranteed employee benefits paid on or after the termination of employment through defined benefit plans (energy discount, health care or other benefits) or long-term benefits (loyalty bonuses) are recognized in the period when the right vests. The liability for defined benefit plans, net of any plan assets, is determined by independent actuaries on the basis of actuarial assumptions and recognized on an accrual basis in line with the work performed to obtain the benefits. Gains and losses arising from actuarial calculations are recognized in a specific equity reserve. Reverse factoring The Group entered into factoring agreements, typically in the technical form of reverse factoring. On the basis of the contractual structures in place, the supplier has the possibility to sell at its discretion, the receivables from the company to a lending institution. In some cases, the payment terms indicated in the invoice are the subject of further deferments agreed between the supplier and the Group; these deferments can be both burdensome and not burdensome. In the event of extensions, a quantitative analysis is carried out to verify whether or not the contractual terms have been amended. In this context, the relations, for which the primary obligation is maintained with the supplier and the possible deferment, if granted, does not involve a substantial change in payment terms, retain their nature and are therefore classified as trading liabilities. Provisions for risks, charges and liabilities for landfills Provisions for risks and charges regard costs of a determinate nature and of certain or probable existence which at year-end are uncertain in terms of timing or amount. Provisions are recognized when there is a legal or constructive present obligation arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits, and it is possible to make a reasonable estimate of the obligation. Provisions are recognized at the best estimate of the amount that the company would have to pay to settle the liability or to transfer it to third parties at the balance sheet date. If the effect of discounting is significant, provisions are calculated by discounting expected future cash flows at a pre-tax discount rate that reflects the current market assessment of the time value of money. If discounting is used the increase in the provision due to the passage of time is recognized as financial expense. If the liability relates to tangible assets (such as the dismantling and reclamation of industrial sites), the initial provision is recognized as a counter-entry to the assets to which it refers; expense is then charged to income statement as the asset in question is depreciated. Treasury shares Treasury shares are accounted for as a deduction from equity. In particular, treasury shares are recognized as a negative equity reserve. Grants Grants, both from public entities and from third party private entities, are measured at fair value when there is the reasonable certainty that they will be received and that the Group will be able to comply with the terms and conditions for obtaining them. Grants received to provide support for the cost of specific assets are recognized as a direct deduction from the assets concerned and credited to the income statement over the life of the depreciable asset to which they refer. Revenue grants (given to provide the company with immediate financial support or as compensation for expenses or losses incurred in a previous accounting period) are recognized in their entirety in the income statement as soon as the conditions for recognizing the grants are met. Revenues and costs The recognition of revenues is based on the following five steps: (i) identification of the contract with the customer; (ii) identification of the performance obligations, represented by the contractual promises to transfer goods and/or services to a customer; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations identified on the basis of the stand-alone sale price of each good or service; (v) recognition of the revenue when the relative performance obligation is satisfied, i.e. when the promised good or service is transferred to the customer; the transfer is considered completed when the customer obtains control of the good or service, which can occur continuously over time diluted and extended or at a point in time. Revenues are stated net of returns, discounts, allowances and rebates, as well as directly related taxes. Expenses relate to goods or services sold or consumed during the year or as a result of systematic allocation; if no future use is envisaged they are recognized directly in the income statement. Result from non-recurring transactions The item "Result from non-recurring transactions" is intended to include the results from the sale of investments in subsidiaries and associates and other non-operating expenses/income. Notes 2022 Separate financial statements A2A 39 Financial income and expenses Financial income is recognized when interest income arises using the effective interest method, i.e. at the rate that exactly discounts expected future cash flows over the expected life of the financial instrument. Financial expense is recognized in the Income Statement on an accrual basis on the basis of the effective interest. Dividends Dividend income is recognized when it is established that the shareholders have a right to receive payment, and is recognized as financial income in the Income Statement. Income taxes Current taxes Current income taxes are based on an estimate of taxable income in compliance with tax regulations in force or substantially approved at the balance sheet date, bearing in mind any exemptions or tax credits due. Account is also taken of the fact that the Group now files for tax on a consolidated basis. Deferred tax assets and liabilities Deferred tax assets and liabilities are calculated on the temporary differences between the carrying amount of assets and liabilities in the balance sheet and their tax bases, with the exception of goodwill which is not deductible for tax purposes and any differences resulting from investments in subsidiaries which are not expected to reverse in the foreseeable future. The tax rates used are those expected to apply to the period when the temporary differences reverse. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the tax benefit will be realized. The measurement of deferred tax assets takes account of the period for which business plans are available. When transactions are recognized directly in equity, any related current or deferred tax effects are also recognized directly in equity. Deferred taxes on the undistributed profits of Group companies are only provided for if there is the real intention to distribute such profits and, in any case, if the taxation is not offset as the result of filing a Group tax return. Deferred tax assets and liabilities are classified as non-current assets and liabilities. Taxes are only offset when they are levied by the same tax authority, when there is the legal right of set-off and when settlement of the net balance is expected. Use of estimates Preparing the financial statements and notes requires the use of estimates and assumptions in determining certain assets and liabilities and measuring contingent assets and liabilities. The actual results after the event could differ from such estimates. Estimates have been used in assessing the recoverability of assets, to determine certain sales revenues, in provisions for risks and charges, in provisions for receivables and other write-downs, amortization and depreciation, the valuation of derivatives, employee benefits and taxes. The underlying estimates and assumptions are regularly reviewed and the effect of any change is immediately recognized in the income statement. The following are the key assumptions made by management as part of the process of making these accounting estimates. The inherently critical element of such estimates comes from using assumptions or professional opinions on matters that are by their very nature uncertain. Changes in the conditions underlying the assumptions and opinions used could have a material impact on subsequent results. Impairment Test The carrying amount of non-current assets (including goodwill and other intangible assets) and of assets held for sale is reviewed periodically and whenever circumstances or events require a more frequent assessment. If it is considered that the book value of a group of fixed assets has had an impairment loss, it is subject to the application of professional judgement by management and is based on assumptions that include: the identification of the Cash Generating Units, the estimate of the future operating cash flows associated with these CGUs during the reference period of the 2021-2030 business plan, the estimate of the cash flows subsequent to this time horizon, the cash flow deriving from the disposal at the end of useful life of the assets, discount rates used ("Wacc"). These assumptions are complex due to their nature and imply recourse to the opinion of 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 40 A2A Separate financial statements 2022 Notes the directors, who are also sensitive to future trends in energy markets, macroeconomic scenarios, and the resolutions of ARERA (Regulatory Authority for Energy Networks and Environment). For the purpose of preparing the impairment test, the company avails itself of the support of an independent expert, external to the A2A Group. In the hypothesis in which the recoverable value is lower than the carrying amount, the latter is written down to the extent applicable. Management is of the opinion that the estimates of such recoverable amounts are reasonable, albeit subject to changes in the factors underlying the estimates on which these recoverable amounts have been calculated could produce different measurements. For further details on the way in which impairment testing was carried out and the results of such testing, reference is made to the specific paragraph. Revenue recognition Revenues for the year include income from the sale of electricity and gas, including through sales on the IPEX markets, from the sale of environmental certificates and from the provision of administrative, fiscal, legal, management and technical services, as well as incentives on net production from renewable sources and rental income. It should be noted that the processes and methods for evaluating and determining these types of revenue do not require the use of complex assumptions. Provisions for risks and charges In certain circumstances it is not easy to identify whether a legal or constructive present obligation exists. The directors assess these situations case by case, together with an estimate of the economic resources required to settle the obligation. Estimating such provisions is the result of a complex process that involves subjective judgements on the part of company management. When the directors are of the opinion that it is only possible that a liability could arise, the risks are disclosed in the section on commitments and contingent liabilities without making any provision. Decommissioning provisions Decommissioning provisions include charges for costs of dismantling and recovery of production sites related to hydroelectric plants. Bad debts provision The entry into force of IFRS 9 on January 1, 2018 has led to a change in the recognition of credit losses for the Group. The approach adopted is a forward-looking one, focusing on the probability of future losses on receivables, even in the absence of events that would suggest the need to write-down a credit position (Expected Losses). Although the provision is considered adequate, the use of different assumptions or changes in prevailing economic conditions, even more so in this period of recession, could give rise to adjustments to the bad debts provision. Amortization Depreciation and amortization charges are a significant cost for the company. Non-current assets are depreciated or amortized on a straight-line basis over the useful lives of the assets. The useful lives of the company's non-current assets are established by the directors, with the assistance of expert appraisers, when they are purchased. The company periodically reviews technological and sector changes, dismantling/closure charges and the recovery amount of assets to update their residual useful lives. This periodic update could lead to a change in the period of depreciation or amortization and hence also in the depreciation or amortization charge in future years. Measurement of derivative instruments The derivatives used are measured at fair value based on the forward market curve at the balance sheet date, if the underlying of the derivative is traded on markets that provide official, liquid forward prices. If the market does not provide forward prices, forecast price curves are used based on simulation models developed by Group companies internally. However, the actual results of derivatives could differ from the measurements made. The serious turbulence on markets for the energy commodities traded by the company, as well the fluctuations in exchange and interest rates. Employee benefits The calculations of expenses and the related liabilities, estimated by independent experts, are based on actuarial assumptions. The full effects of any changes in these actuarial assumptions are recognized in a specific equity reserve. Notes 2022 Separate financial statements A2A 41 Business combinations Accounting for business combinations entails allocating the difference between purchase cost and net carrying amount to the assets and liabilities of the acquired business. For the majority of assets and liabilities this difference is allocated by recognizing the assets and liabilities at fair value. If positive, the unallocated portion is recognized as goodwill. If negative, it is recognized in the income statement. A2A S.p.A. bases its allocations on available information and, for the more significant business combinations, on external appraisals. Current taxes and future recovery of deferred tax assets The uncertainties that exist regarding the way of applying certain tax regulations have led the company to taking an interpretative stance when providing for current taxes in the financial statements; such interpretations could be overturned by official clarifications on the part of the tax authorities. Deferred tax assets are accounted for on the basis of the taxable profit expected to be available in future years. Assessing the expected taxable profit for the purpose of accounting for deferred taxation depends on factors that can vary over time, and may lead to significant effects on the measurement of deferred tax assets. 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 42 A2A Separate financial statements 2022 Notes 3.6 Notes to the balance sheet Assets Non-current assets 1) Tangible assets thousands of euro Balance at 12 31 2021 Changes Balance at 12 31 2022 Invest. Other changes Disposals net of prov. Write-down/Reversal Depr. Total changes Land 27,989 149 572 (8) - - 713 28,702 Buildings 153,715 1,833 3,410 (4) - (7,848) (2,609) 151,106 Plant and machinery 634,199 1,383 7,433 - - (58,875) (50,059) 584,140 Industrial and commercial equipment 4,943 764 - - - (843) (79) 4,864 Other assets 14,280 9,128 214 (29) - (4,579) 4,734 19,014 Construction in progress and advances 43,851 25,943 (14,227) - (4) - 11,712 55,563 Leasehold improvements 511 224 - - - (111) 113 624 Assets for rights of use 54,731 - 15,115 - - (12,908) 2,207 56,938 Total tangible assets 934,219 39,424 12,517 (41) (4) (85,164) (33,268) 900,951 Historical Cost 2,865,829 39,424 10,474 (3,006) (4) - 46,888 2,912,717 Accumulated depreciation (1,579,122) - 2,043 2,965 - (85,164) (80,156) (1,659,278) Write-downs (352,488) - - - - - - (352,488) At December 31, 2022, “Tangible assets” amounted to 900,951 thousand euro (934,219 thousand euro in the previous year) and show a decrease of 33,268 thousand euro resulting from the following transactions: • capex for 39,424 thousand euro; • depreciation for the period for 85,164 thousand euro; • other positive changes of 12,517 thousand euro: 15,115 thousand euro were due to the increase in Assets for rights of use following the application of IFRS 16, offset by negative changes of 2,598 thousand euro, of which 2,425 thousand euro for changes in the decommissioning provision, 138 thousand euro for reclassification to other balance sheet items, and 35 thousand euro for reclassification from property, plant and equipment to intangible assets; • disposals of assets, net of related accumulated depreciation, in the amount of 41 thousand euro due to the sale of land, buildings and vehicles; • write-downs for the period of 4 thousand euro. For a detailed analysis of changes in the period, reference shall be made to annex “1 Statement of changes in tangible assets”. Capex during the period refer for 39,424 thousand euro to: • “Land” for 149 thousand euro; • “Buildings” for a total amount of 1,833 thousand euro.In detail, they refer to: 1,375 thousand euro for various works on the buildings in Via Lamarmora in Brescia; 234 thousand euro for investments for the buildings in Piazza Trento, Bovisa, Caracciolo, Piazza Po, Canavese, and Piazza Olgettina in Milan; 126 thousand euro for various works on the building of the Grosio plant in Valtellina; and 98 thousand euro for other works on buildings; • “Plant and machinery” for 1,383 thousand euro.In particular, they refer to interventions for 766 thousand euro for the power stations of the Valtellina Unit, for 495 thousand euro for the power stations of the Mese and Udine Units; for 80 thousand euro for the power stations of the Calabria Unit, for 42 thousand euro, they refer to the renewal of the automation of distribution systems; • “Industrial and commercial equipment” for 764 thousand euro; Notes 2022 Separate financial statements A2A 43 • “Other assets” for 9,128 thousand euro: in detail, 6,262 thousand euro refer to LAN and WAN network equipment and fixed and mobile telephony equipment, 1,178 thousand euro to charging infrastructure for electric vehicles in the Milan, Cremona, Brescia, Lodi and Bergamo headquarters, for 754 thousand euro for furniture and fittings, in particular for the Vobarno headquarters and for the new S. Silvestro headquarters in Rome, for 765 thousand euro for IT equipment of the “New Data Center”, for 60 thousand euro for the greenpass control system, for 18 thousand euro for the purchase of means of transport for the Calabria unit and for 91 thousand euro for goods worth less than 516 euro; • “Construction in progress and advances” for an amount of 25,943 thousand euro; • “Leasehold improvements” for 224 thousand euro. “Tangible assets” include “Construction in progress and advances” for 55,563 thousand euro (43,851 thousand euro at December 31, 2021), presenting an increase of 11,712 thousand euro resulting from the counter effects of the following items: • the increase of 25,943 thousand euro is mainly attributable to: for 12,000 thousand euro to works on buildings (mainly on the area of Piazza Trento in Milan, on the headquarters in via Lamarmora in Brescia and for the new Rome headquarters); for 13,835 thousand euro to interventions on plant and machinery, mainly on the hydroelectric plants of the Calabria Unit (5,719 thousand euro), on the hydroelectric plants of the Mese and Udine Unit (4,524 thousand euro), on the plants of the Valtellina Unit (3,301 thousand euro) and to the improvement of other plants (291 thousand euro), as well as other assets for 108 thousand euro; • the decrease due to the start of operations amounted to 14,227 thousand euro and is attributable: for 9,856 thousand euro to work on production plants (of which 2,083 thousand euro on the Mese and Udine plants, 4,556 thousand euro on hydroelectric plants in Calabria, 3,173 thousand euro on plants in Valtellina and 44 thousand euro on other minor plants); for 4,031 thousand euro to work on buildings (of which 1,394 thousand euro due to the refurbishment of the Milan South Receiving Building, 149 thousand euro to the refurbishment of the Brescia gasometer, 182 thousand euro to the upgrading of the Brescia Via Lamarmora building, 125 thousand euro to the New Cremona Technological Center Lot and 2,181 thousand euro to the completion of works mainly on the buildings of the Calabria, Udine and Valtellina plants); 213 thousand euro to other assets; 127 thousand euro to the decrease due to the change in advances; • the decrease of 4 thousand euro following the write-down of production plants in progress due to abandonment of the activity. The Company is continuing to analyze the impact of regulatory amendments and confirms, to date, that the amounts recognized in the financial statements for dry and wet works related to hydroelectric concessions are prudent and recoverable also in accordance with the new regulations. “Tangible assets” include “Assets for rights of use” totalling 56,938 thousand euro (54,731 thousand euro at December 31, 2021), recognized in accordance with IFRS 16 and for which the outstanding payable to lessors at December 31, 2022 amounted to 78,802 thousand euro (68,353 thousand euro at December 31, 2021). Below is a breakdown of “Assets for rights of use” deriving from operating and financial leases at December 31, 2022. thousands of euro Balance at 12 31 2021 Changes Balance at 12 31 2022 Increases Other changes Depr. Total changes Land 65 - - (13) (13) 52 Buildings 12,476 3,009 5,899 (4,922) 3,986 16,462 Plant and machinery 38,680 - - (5,335) (5,335) 33,345 Industrial and commercial equipment 34 - - (9) (9) 25 Other assets - 123 - (50) 73 73 Vehicles 3,476 5,484 600 (2,579) 3,505 6,981 Total 54,731 8,616 6,499 (12,908) 2,207 56,938 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 44 A2A Separate financial statements 2022 Notes It is specified that the Company has made use of the option provided for in paragraph 6 of the standard not to apply the provisions of paragraphs 22 to 49 of the standard to the following categories: a) short-term leases; b) leases whose underlying assets are of low value. It should also be noted, in accordance with paragraph 48 of the principle, that the Company does not have assets for rights of use that meet the definition of property investment. 2) Intangible assets thousands of euro Balance at 12 31 2021 Changes Balance at 12 31 2022 Invest. Other changes Disposals net of prov. Write-down/Reversal Amort. Total changes Industrial patents and intellectual property rights 23,880 6,942 3,490 - - (13,669) (3,237) 20,643 Concessions, licences, trademarks and similar rights 39,236 29,529 7,821 - - (23,840) 13,510 52,746 Goodwill 65,144 - - - - - - 65,144 Assets in progress 15,978 14,774 (11,414) - (209) - 3,151 19,129 Other intangible assets 2,146 514 8,178 - - (404) 8,288 10,434 Total intangible assets 146,384 51,759 8,075 - (209) (37,913) 21,712 168,096 “Intangible assets” amounted to 168,096 thousand euro (146,384 thousand euro at December 31, 2021) and show an increase of 21,712 thousand euro resulting from the following transactions: • capex for 51,759 thousand euro; • amortization for 37,913 thousand euro accounted for in the period; • other increases by 8,075 thousand euro; • write-downs for 209 thousand euro. In particular, Capex during the period refer for 51,759 thousand euro to: • 29,529 thousand euro for “concessions, licences, trademarks and similar rights” related to the purchase of software; • 14,774 thousand euro for “intangible assets under construction”; • 6,942 thousand euro for “industrial patents and intellectual property rights” mainly concerning the development of information technology projects; • 514 thousand euro for “other intangible assets”. Included in the total balance of “Intangible assets” are “Assets in progress” for 19,129 thousand euro (15,978 thousand euro as at December 31, 2021), resulting in an increase of 3,151 thousand euro due to the combined effect of the following items: • the increase of 14,774 thousand euro mainly relating to the development of new IT projects; • the decrease of 11,414 thousand euro due to the transition to use of software and computer applications; • the decrease of 209 thousand euro following the write-down of the S.Francisco project software. For more in-depth information, refer to annex “2. Statement of changes in intangible assets”. Goodwill thousands of euro Balance at 12 31 2021 Changes Balance at 12 31 2022 Invest. Reclass./ Other changes Disposals/Sales Write-down/Reversal Amort. Total changes Goodwill 65,144 - - - - - - 65,144 Total goodwill 65,144 - - - - - - 65,144 Notes 2022 Separate financial statements A2A 45 Goodwill equal to 65,144 thousand euro at December 31, 2022, unchanged compared to the end of the previous year, was formed as a result of non-recurring transactions with third parties. Goodwill has been allocated to the following CGUs, which for A2A S.p.A. correspond to investments in subsidiaries: “A2A Reti Gas” for 3,700 thousand euro, “A2A Gas” for 6,800 thousand euro, “A2A Calore” for 18,000 thousand euro and “A2A Ambiente” for 36,644 thousand euro. Under IAS 36 goodwill, an intangible asset with an indefinite useful life, is not amortized systematically but tested at least once a year (“Impairment Test”). As goodwill neither generates independent cash flow nor can it be sold separately, IAS 36 calls for a secondary audit of its recoverable amount, determining cash flows generated by a set of assets that constitute the business to which it belongs, i.e. the Cash Generating Unit (CGU). The verification of the recoverability of the recognized value, carried out as part of the broader Impairment Test activity of the various CGUs for the Consolidated Financial Statements, which includes the goodwill in question, as well as specific sensitivity analyzes carried out, confirmed recoverability thereof. The parameters used for the purposes of the Impairment Test are set out in note 2 of the Consolidated Annual Financial Report, to which reference is made for further details. 3) Shareholdings and other non-current financial assets thousands of euro Balance at 12 31 2021 Changes Balance at 12 31 2022 of which included in the NFP 12 31 2021 12 31 2022 Shareholdings in subsidiaries 4,203,179 (20,514) 4,182,665 Shareholdings in affiliates 877 - 877 Other non-current financial assets 1,334,678 26,738 1,361,416 1,312,273 1,335,880 Total shareholdings and other non-current financial assets 5,538,734 6,224 5,544,958 1,312,273 1,335,880 Shareholdings in subsidiaries “Shareholdings in subsidiaries” amounted to 4,182,665 thousand euro (4,203,179 thousand euro at December 31, 2021). The following table shows the changes in the item: Shareholdings in subsidiaries thousands of euro Total Balance at 12 31 2021 4,203,179 Changes: \- acquisitions and capital increases 23,000 \- sales and decreases (43,514) \- reversals - \- write-downs - \- reclassifications - \- other changes - Total changes (20,514) Balance at 12 31 2022 4,182,665 The value of shareholdings in subsidiary companies presented an overall decrease of 20,514 thousand euro with respect to the close of the previous year due to: • decrease of 42,995 thousand euro in the shareholding in Unareti S.p.A. in favor of ROMEO GAS S.p.A. due to the effect of the demerger of the unit relative to gas distribution referring to ATEM considered non-strategic and subsequent sale of the shareholding in ROMEO GAS S.p.A. for a total of 43,045 thousand euro; 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 46 A2A Separate financial statements 2022 Notes • decrease of 469 thousand euro due to the sale of the shareholding in Seasm S.r.l.; • increase of 20,000 thousand euro relating to the capital contribution subscribed in the investee company Yada Energia S.r.l.; • increase of 3,000 thousand euro relating to the capital contribution subscribed in the investee company A2A E-MOBILITY S.r.l.. During the year, a rationalization of subsidiaries was carried out with the following effects: • transfer of the shareholding in Fragea S.r.l., equal to 100% of the share capital (245 thousand euro) to Agripower S.p.A.; • reduction of the shareholding in Linea Green S.r.l. in favor of the shareholding in Agripower S.p.A. (42,062 thousand euro) and A2A Calore & Servizi S.p.A. (57,323 thousand euro) following the transfer of business units from Linea Green S.r.l. to the other subsidiaries; • transfer of the shareholding in Linea Gestioni S.r.l., equal to 100% of the share capital (21,064 thousand euro), Linea Ambiente S.r.l., equal to 100% of the share capital (16,626 thousand euro) Agripower S.p.A., equal to 100% of the share capital (57,462 thousand euro) to the subsidiary A2A Ambiente S.p.A. with simultaneous increase in the latter’s share capital. Further information regarding movements involving shareholdings in subsidiary companies may be found within annexes 3a and 4a to compare their book value and corresponding portions of net assets. Shareholdings in affiliates and joint ventures “Shareholdings in affiliates and joint ventures” amounted to 877 thousand euro, unchanged compared to the previous year-end. Further details regarding shareholdings in affiliates may be found in annexes 3/b and 4/b. Impairment of shareholdings in subsidiaries, associates and joint ventures The recoverable value of shareholdings has been measured based on the present value of the corresponding expected net cash flows attributable to the shareholdings of A2A S.p.A.. The cash flows used are in line with those used for the Impairment Test of the CGU for the consolidated financial statements. The same applies to the methodological approach and discount rates adopted further detailed in the Consolidated Annual Financial Report (note 2). It shall be recalled that the Impairment Test is carried out for all shareholdings which have a carrying value higher than the corresponding fraction of shareholders’ equity of competence and/or in the presence of specific impairment indicators. In the year under review, the results of the Impairment Test performed did not lead to any impairment/reversal at December 31, 2022. Other non-current financial assets “Other non-current financial assets” amounted to 1,361,416 thousand euro (1,334,678 thousand euro at December 31, 2021), of which: • financial assets measured at amortized cost (HTC) for 1,327,281 thousand euro (1,302,727 thousand euro at December 31, 2021), which refer: for 1,322,764 thousand euro (1,298,288 thousand euro at December 31, 2021) to financial assets with related parties. This item refers to loans to subsidiaries the significant increase of which is due in particular to the disbursement of new interest-bearing inter-Group loans, net of repayments made during the year, as well as the reclassification of the short-term portion of these loans to “Current financial assets”; for 4,517 thousand euro (4,439 thousand euro at December 31, 2021) to financial assets from third parties related to a non-interest-bearing loan granted during the year to the company Sinergie Italiane S.r.l. in liquidation; • other securities for 96 thousand euro (96 thousand euro at December 31, 2021), related to other government securities; • financial assets measured at fair value through profit or loss (FVTPL) 5,157 thousand euro (4,988 thousand euro at December 31, 2021), relating to minority shareholdings, the increase of which derives from the incorporation of the company MUSA-Multilayered Urban Sustainability Action S.c.a.r.l., partially offset by the sale of the investment in Brescia Mobilità S.p.A.; • financial receivables related to rights of use in accordance with IFRS16 (subleases) from subsidiaries for 8,503 thousand euro (9,449 thousand euro at December 31, 2021); • other financial assets of 20,379 thousand euro (17,417 thousand euro at December 31, 2021) relating to shareholdings in innovative start-ups through Corporate projects. Notes 2022 Separate financial statements A2A 47 4) Deferred tax assets thousands of euro Balance at 12 31 2021 Changes Balance at 12 31 2022 Deferred tax assets 102,885 (36,421) 66,464 The item, equal to 66,464 thousand euro, includes the net effect, as detailed in the table below to which reference is made, of deferred tax liabilities and deferred tax assets as per corporate income tax (IRES) and regional tax (IRAP) as well as provisions made solely for tax purposes. For IRES purposes, the recoverability of “Deferred tax assets” recorded in the financial statements is considered likely, as the future Business Plans of the A2A Group envisage taxable income sufficient to use the deferred tax assets on a consolidated basis in accordance with articles 117-129 of Presidential Decree 917/1986, in which the Company acts as consolidating company. For IRAP purposes, the recoverability of “Deferred tax assets” recorded in the financial statements was assessed on the basis of the Company’s future Business Plan: for the years of the plan between 2023 and 2030, IRAP taxable income is expected to be sufficient to absorb the IRAP temporary differences, and therefore the related IRAP deferred tax assets and liabilities were maintained. Deferred tax assets are calculated using the tax rate applicable at the time of repayment. At December 31, 2022, the amounts relative to deferred tax assets/deferred tax liabilities have been expressed as net (“offsetting”) as per IAS 12 standards. This item is detailed within the table below: thousands of euro Balance at 12 31 2022 Balance at 12 31 2021 Value differences of tangible assets 70,448 40,036 Adoption of the finance lease standard (IFRS 16) - 3,832 Measurement differences of intangible assets 3,109 3,185 Deferred capital gains - 8 Other deferred tax liabilities 3,969 4,057 IFRS 5 reclassification - (4,245) Deferred tax liabilities (A) 77,526 46,873 Taxed risk provisions 51,749 45,017 Amortization, depreciation and write-downs 44,110 49,526 Bad debts provision 2,029 1,994 Provisions and employee benefits 18,912 21,393 Goodwill 36,858 42,596 Other deferred tax assets (9,668) (10,688) IFRS 5 reclassification - (80) Deferred tax assets (B) 143,990 149,758 Net effect deferred tax assets (B-A) 66,464 102,885 For further details and information, please refer to the item “Income/expenses for income tax” on the income statement. 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 48 A2A Separate financial statements 2022 Notes 5) Other non-current assets thousands of euro Balance at 12 31 2021 Changes Balance at 12 31 2022 of which included in the NFP 12 31 2021 12 31 2022 Non-current derivatives - 7,168 7,168 - 7,168 Other non-current assets 13,054 9,839 22,893 - - Total other non-current assets 13,054 17,007 30,061 - 7,168 “Other non-current assets” amounted to 30,061 thousand euro (13,054 thousand euro at December 31, 2021), presenting an increase of 17,007 thousand euro over the previous year and consist of: • “Non-current derivative instruments” of 7,168 thousand euro (no value at December 31, 2021), which refer to the fair value of financial derivatives to hedge interest rate risk on variable rate mortgages; • “Other non-current receivables” of 22,893 thousand euro (13,054 thousand euro at December 31, 2021) mainly relating to security deposits. Notes 2022 Separate financial statements A2A 49 Current assets 6) Inventories thousands of euro Balance at 12 31 2021 Changes Balance at 12 31 2022 \- Materials and spare parts 1,269 4 1,273 \- Material obsolescence provision (650) (35) (685) Total materials 619 (31) 588 \- Fuel 103,248 282,158 385,406 Total raw and ancillary materials and consumables 103,867 282,127 385,994 Fuel at third parties - 3,288 3,288 Total inventory 103,867 285,415 389,282 At December 31, 2022, inventories amounted to 389,282 thousand euro (103,867 thousand euro at December 31, 2021); changes for the period are positive for 285,415 thousand euro, and refer to the increase in gas and coal inventories compared to the end of the previous year, which reflects both the trend in fuel prices and the higher quantities stocked. Raw and ancillary materials and consumables consist of inventories of: • materials amounting to 588 thousand euro, net of relative provisions for obsolescence for 685 thousand euro; • fuels, amounting to 385,406 thousand euro, which include gas inventories arising from the sale and storage of gas, as well as inventories of fuels for the production of electricity; • fuels at third parties, for 3,288 thousand euro, relating to coal at the warehouse in Koper that has not cleared customs in Italy yet. 7) Trade receivables thousands of euro Balance at 12 31 2021 Changes Balance at 12 31 2022 Trade receivables \- invoices issued 135,853 90,935 226,788 Trade receivables \- invoices to be issued 2,024,118 1,409,351 3,433,469 Bad debts provision (4,462) (817) (5,279) Total trade receivables 2,155,509 1,499,469 3,654,978 At December 31, 2022, trade receivables amounted to 3,654,978 thousand euro (2,155,509 thousand euro at December 31, 2021) and increased by 1,499,469 thousand euro. These receivables include: • for 1,839,015 thousand euro receivables from customers (1,217,907 thousand euro at December 31, 2021); • for 1,815,963 thousand euro receivables from subsidiaries, controlling entities and associates (937,602 thousand euro at December 31, 2021). The increase in trade receivables is primarily linked to the rise in prices on both the electricity and gas wholesale markets, as well as to the growth in volumes sold. It should be noted that the Company occasionally assigns receivables without recourse and has no revolving factoring programmes in place. At December 31, 2022 the receivables assigned outright and written-off from the assets in compliance with the requirements of IFRS 9, amounted to a total of 83,251 thousand euro (no assignment at December 31, 2021). At the date of publication of the Separate Financial Statements, these receivables were zero. At December 31, 2022, the bad debt provision calculated in accordance with IFRS 9 amounted to 5,279 thousand euro, a decrease of 817 thousand euro. This provision is considered adequate to cover the risks to which it relates. 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 50 A2A Separate financial statements 2022 Notes The detailed changes in the provisions to adjust the values of receivables are outlined in the following table: thousands of euro Balance at 12 31 2021 Provisions Uses Altre Changes Balance at 12 31 2022 Bad debts provision 4,462 826 (9) - 5,279 The following is the aging of trade receivables: thousands of euro 12 31 2021 12 31 2022 Trade receivables of which: 2,155,509 3,654,978 Current 125,039 121,774 Past due of which: 10,814 105,014 \- Up to 30 days past due 5,612 98,919 \- 31 to 180 days past due 794 2,344 \- 181 to 365 days past due 1,071 724 \- Over 365 days past due 3,337 3,027 Invoices to be issued 2,024,118 3,433,469 Bad debts provision (4,462) (5,279) 8) Other current assets thousands of euro Balance at 12 31 2021 Changes Balance at 12 31 2022 of which included in the NFP 12 31 2021 12 31 2022 Current derivatives 3,737,198 (875,612) 2,861,586 - - Other current assets of which: 175,172 (57,546) 117,626 - - \- advances to suppliers 30,420 (29,659) 761 \- receivables from employees 174 1 175 \- tax receivables 12,050 (9,378) 2,672 \- receivables from subsidiaries for tax consolidation 74,849 9,593 84,442 \- receivables related to future years 10,267 1,520 11,787 \- receivables from social security entities 798 (71) 727 \- receivables from stamp office 123 - 123 \- receivables for damage compensation 8 140 148 \- receivables for security deposits 36,013 (32,268) 3,745 \- other sundry receivables 10,470 2,576 13,046 Total other current assets 3,912,370 (933,158) 2,979,212 - - “Other current assets” presented a balance of 2,979,212 thousand euro (3,912,370 thousand euro as at December 31, 2021), a decrease of 933,158 thousand euro with respect to the previous year. “Current derivative instruments” amounting to 2,861,586 thousand euro (3,737,198 thousand euro at December 31, 2021) refer to the fair value valuation of commodity derivatives at the end of the year under review. The decrease was mainly attributable to a reduction in overall volumes traded and the high volatility of energy commodity prices, which had an impact on the differentials between subscription prices and forward prices. “Advances to suppliers” of 761 thousand euro (30,420 thousand euro at December 31, 2021) refer to prepayments on gas purchases. “Tax receivables”, amounting to 2,672 thousand euro (12,050 thousand euro at December 31, 2021, refer to receivables from the tax authorities for excise duties (1,124 thousand euro) VAT credits (1,004 thousand euro), a tax credit from the tax authorities for research Notes 2022 Separate financial statements A2A 51 and development activities recognized for the purposes provided for by art. 3 of Decree Law No. 145 of December 23, 2013 and the Decree of May 27, 2015 issued by the Minister of Economy and Finance in agreement with the Minister of Economic Development for 424 thousand euro, to a tax credit from the tax authorities for sanitization and the purchase of protection devices pursuant to art. 125 of Law Decree 34/2020 \- Decreto Rilancio (Relaunch Decree) (26 thousand euro), as well as other receivables for 94 thousand euro. The decrease of 9,378 thousand euro compared to the previous year is mainly due to the utilisation of tax credits recognised at December 31, 2021 to offset IRES/IRAP advances paid during the year. “Receivables from subsidiaries for tax consolidation” and Group VAT amounted to 84,442 thousand euro (74,849 thousand euro at December 31, 2021). “Receivables for guarantee deposits” of 3,745 thousand euro (36,013 thousand euro at December 31, 2021) mainly refer to the deposit with the Electricity Service Operator (GSE) for participation in the auctions of the guarantee of origin certificates, to the deposit with the Electricity Market Operator (GME) for operations on the electricity market. “Other sundry receivables” include prepayments on electricity futures contracts, the effects of which will manifest in the following financial year, as well as receivables relating to the sale of the shareholding in Ge.S.I. S.r.l.. 9) Current financial assets thousands of euro Balance at 12 31 2021 Changes Balance at 12 31 2022 of which included in the NFP 12 31 2021 12 31 2022 Other financial assets 3,306 (1,194) 2,112 3,306 2,112 Other financial assets from related parties 1,201,668 1,162,174 2,363,842 1,201,668 2,363,842 Total current financial assets 1,204,974 1,160,980 2,365,954 1,204,974 2,365,954 “Current financial assets” amounted to 2,365,954 thousand euro (1,204,974 thousand euro at December 31, 2021), with an increase of 1,160,980 thousand euro referring: • for 2,365,048 thousand euro to “Loans and receivables originated by HTC (Hold to Collect)” (1,204,078 thousand euro at December 31, 2021): from subsidiaries 2,362,936 thousand euro (1,200,772 thousand euro at December 31, 2021) for both the balance of intra-group current accounts on which interest rates are applied, at market conditions, with a variable Euribor basis with specific spreads for companies and for the current portion of loans granted to subsidiaries; from third parties 2,112 thousand euro (3,306 thousand euro at December 31, 2021) related to financial receivables from Seca S.p.A. shareholders for payment of the consideration for the sale of the shareholding; • for 906 thousand euro “IFRS 16 financial receivables (subleases)” from subsidiaries (896 thousand euro at December 31, 2021). 10) Current tax assets thousands of euro Balance at 12 31 2021 Changes Balance at 12 31 2022 Current tax assets 60,592 (42,998) 17,594 At December 31, 2022, this item amounted to 17,594 thousand euro (60,592 thousand euro at December 31, 2021) and refers to IRAP receivables (9,681 thousand euro), IRES receivables (6,586 thousand euro), relating to both current IRES of the period and IRES for amounts requested for reimbursement on payments of previous years, and the remaining credit for Robin Tax (1,299 thousand euro) paid in previous years and that will be recovered in subsequent years from foreign tax authorities (28 thousand euro). 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 52 A2A Separate financial statements 2022 Notes 11) Cash and cash equivalents thousands of euro Balance at 12 31 2021 Changes Balance at 12 31 2022 of which included in the NFP 12 31 2021 12 31 2022 Cash and cash equivalents 886,354 1,452,111 2,338,465 886,354 2,338,465 “Cash and cash equivalents” amounted to 2,338,465 thousand euro at December 31, 2022, (886,354 thousand euro at December 31, 2021). The increase for the year of 1,452,111 thousand euro derives in part from the September 2022 bond issue of 650,000 thousand euro, in Green Bond format, which served the purpose of pre-funding the Company’s future investments and in part as back-up to hedge the risk of increased margin calls for commodities derivatives. This item includes term current accounts, in the amount of 624,968 thousand euro, related to trading on commodity derivative platforms. Bank deposits include accrued interest not yet credited by the end of the period. 12) Non-current assets held for sale thousands of euro Balance at 12 31 2021 Changes Balance at 12 31 2022 of which included in the NFP 12 31 2021 12 31 2022 Non-current assets held for sale 46,788 (46,751) 37 - - The item “Non-current assets held for sale” at December 31, 2022 amounted to 37 thousand euro (46,788 thousand euro at December 31, 2021) and refers to the residual share not yet sold of the shareholding in Sviluppo Turistico Lago d’Iseo S.p.A., which at December 31, 2021 had been reclassified under the item “Non-current assets held for sale”. In February 2022, the sale was finalized of the properties located in Milan in Corso di Porta Vittoria (Signora), Via Gonin and Via Balduccio da Pisa (Orobia), classified in the previous year under “Non-current assets held for sale”. Please refer to the sections “Result from non-recurring transactions” and “Net result from operating assets sold/held for sale” in the Income statement for more details on the gains generated. Notes 2022 Separate financial statements A2A 53 Equity and liabilities Equity Equity, which at December 31, 2022 amounted to 3,603,041 thousand euro (3,332,380 thousand euro at December 31, 2021), is detailed in the following table: thousands of euro Balance at 12 31 2021 Changes Balance at 12 31 2022 Equity Share capital 1,629,111 - 1,629,111 (Treasury shares) - - - Reserves 1,217,791 210,558 1,428,349 Result of the year 485,478 60,103 545,581 Total equity 3,332,380 270,661 3,603,041 13) Share capital At December 31, 2022, the “Share capital” amounted to 1,629,111 thousand euro and is comprised of 3,132,905,277 ordinary shares with a unitary value of 0.52 euro each. 14) Reserves thousands of euro Balance at 12 31 2021 Changes Balance at 12 31 2022 Reserves 1,217,791 210,558 1,428,349 Change in the fair value of cash flow hedge derivatives and Bond fair value 40,134 (2,169) 37,965 Tax effect (12,458) 1,628 (10,830) Reserves of cash flow hedges and fair value bonds 27,676 (541) 27,135 Change in the IAS 19 Revised reserve \- Employee Benefits (74,093) 11,878 (62,215) Tax effect 21,494 (3,043) 18,451 IAS 19 Revised reserve \- Employee Benefits (52,599) 8,835 (43,764) “Reserves”, which at December 31, 2022 amounted to 1,428,349 thousand euro (1,217,791 thousand euro at December 31, 2021), increased by 210,558 thousand euro mainly due to the allocation of the 2021 profit, net of dividends distributed. This item includes the following unavailable reserves: • for 73,066 thousand euro the reserve arising from the corporate separation occurred in 1999\. Such reserve will be available for distribution in portions in the following years based on the amortization carried out by the receiving company on the higher values determining capital gains from contribution; • 27,135 thousand euro for the positive cash flow hedge reserve including the fair value of hedging derivatives and bonds in foreign currency, net of tax; • for 43,764 thousand euro, the negative reserve arising from the adoption of IAS 19 Revised \- Employee Benefits, which requires actuarial profits and losses to be recognized directly in an equity reserve, net of the tax effect. • for 462 thousand euro, the negative available-for-sale reserve including the fair value of certain available-for-sale shareholdings net of the tax effect; • for 306,339 thousand euro, the legal reserve, whose increase of 24,274 thousand euro compared with the previous year derives from the allocation of profit for the previous year. 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 54 A2A Separate financial statements 2022 Notes It shall be noted that in 2021, the company opted, pursuant to L.D. 104/2020, for the realignment of differences between the higher statutory value and the lower tax value of tangible assets via payment of a substitute tax equal to 3% of the realigned value in three annual installments. The company’s reserves are therefore subject to a tax suspension restriction amounting to 227,530 thousand euro, calculated as the difference between the realigned value and the substitute tax due. The distribution of these reserves or their allocation to uses other than loss coverage will result in taxation of the same. The additional reserves and the profits that in case of distribution must be considered as IRES tax suspension amounted to 20,593 thousand euro. It should be noted that during 2022, dividends amounting to 283,215 thousand euro corresponding to 0.0904 euro per share were distributed, as approved by the shareholders’ meeting on April 28, 2022. 15) Result of the year Positive result for 545,581 thousand euro. Notes 2022 Separate financial statements A2A 55 Liabilities Non-current liabilities 16) Non-current financial liabilities thousands of euro Balance at 12 31 2021 Changes Balance at 12 31 2022 of which included in the NFP 12 31 2021 12 31 2022 Non-convertible bonds 3,179,585 1,431,965 4,611,550 3,179,585 4,611,550 Payables to banks 755,023 20,694 775,717 755,023 775,717 Payables to other lenders 199,838 31 199,869 199,838 199,869 Non-current financial payables for rights of use to third parties 17,883 10,595 28,478 17,883 28,478 Non-current financial payables for rights of use to related parties 38,911 (6,128) 32,783 38,911 32,783 Total non-current financial liabilities 4,191,240 1,457,157 5,648,397 4,191,240 5,648,397 “Non-current financial liabilities” amounted to 5,648,397 thousand euro (4,191,240 thousand euro at December 31, 2021), with an increase of 1,457,157 thousand euro. “Non-convertible bonds” amounting to 4,611,550 thousand euro (3,179,585 thousand euro at December 31, 2021) relate to the following bonds, which are accounted for at amortized cost • 299,816 thousand euro, Private Placement maturing in March 2024 and coupon of 1.25%, the nominal value of which is equal to 300,000 thousand euro; • 299,071 thousand euro, maturing in February 2025 and coupon of 1.75%, the nominal value of which is equal to 300,000 thousand euro; • 297,351 thousand euro, maturing in October 2027 and coupon of 1.625%, the nominal value of which is equal to 300,000 thousand euro; • 99,198 thousand euro, Private Placement in yen maturing in August 2036 and fixed rate of 5.405%, the nominal value of which is equal to 14 billion yen; • 395,462 thousand euro, maturing in July 2029 and coupon of 1.00%, the nominal value of which is equal to 400,000 thousand euro; • 493,750 thousand euro, maturing in October 2032 and coupon of 0.625%, the nominal value of which is equal to 500,000 thousand euro; • 496,048 thousand euro, maturing in July 2031 and coupon of 0.625%, the nominal value of which is equal to 500,000 thousand euro; • 494,603 thousand euro, maturing in November 2033 and coupon of 1%, the nominal value of which is equal to 500,000 thousand euro; • 495,226 thousand euro, maturing in March 2028 and coupon of 1.5%, the nominal value of which is equal to 500,000 thousand euro; • 595,665 thousand euro, maturing in June 2026 and coupon of 2.5%, the nominal value of which is equal to 600,000 thousand euro; • 645,360 thousand euro, maturing in September 2030 and coupon of 4.5%, the nominal value of which is equal to 650,000 thousand euro. The increase in the non-current component of “Non-convertible bonds” of 1,431,965 thousand euro compared to December 31, 2021 was due to the counter effect of the subscription of the three new bonds maturing in 2026, 2028 and 2030 (respectively with nominal value 600,000 thousand euro, 500,000 thousand euro and 650,000 thousand euro, recorded in the financial statements net of amortized cost), partly offset by the reclassification to “Current financial liabilities” of the bond maturing in 2023 (299,854 thousand euro) and the decrease in the ECB exchange rate applied to the yen bond. Non-current “Payables to banks” amounted to 775,717 thousand euro (755,023 thousand euro at December 31, 2021) and showed a net increase of 20,694 thousand euro compared to the end of the previous year due to the new bank loans for 500,000 thousand euro, partly offset by the reclassification in the item current liabilities of 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 56 A2A Separate financial statements 2022 Notes the capital installments maturing in 2023\. At year-end, this item recognized the principal portion of loans granted by the European Investment Bank in the amount of 526,719 thousand euro and by various credit institutions in the amount of 250,000 thousand euro, net of the adjustment for amortized cost valuation in the amount of 1,002 thousand euro. “Payables to other lenders” amounted to 199,869 thousand euro (199,838 thousand euro at December 31, 2021) and refer to a loan granted by the Cassa Depositi e Prestiti. “Financial payables for non-current rights of use”, in application of IFRS 16 for leases previously classified as operating, both to third parties and related parties, amounted to 61,261 thousand euro, with an increase of 4,467 thousand euro compared to the end of the previous year. For an analysis of the maturity dates of each item of these payables, please refer to the special detailed table in the “Other information” section in chapter 5) Financial Risk Management in paragraph d. Liquidity risk, while for further analysis of the division between fixed-rate and variable-rate payables, please refer to the special detailed table in paragraph b. Interest rate risk. The following table shows the comparison, for each long-term debt category, between the book value and the fair value, as well as the portion maturing in the following 12 months, as better described in note 21) Current financial liabilities. For listed debt instruments, the fair value is determined using stock prices, while for unlisted securities the fair value is determined using valuation models for each category of financial instrument and using market data relating to the closing date of the financial year, including the credit spreads of A2A S.p.A.. Please note that this table does not contain the valuation of financial payables for rights of use. thousands of euro Nominal value Book value Current portion Non-current portion Fair value Bonds 4,948,000 4,949,784 338,234 4,611,550 4,249,650 Bank loans and Other lenders 1,458,255 1,458,255 482,669 975,586 1,330,611 Total 6,406,255 6,408,039 820,903 5,587,136 5,580,261 17) Employee benefits “Employee Benefits” amounted to 132,030 thousand euro (149,175 thousand euro at December 31, 2021) with changes as follows: thousands of euro Balance at 12 31 2021 Accruals Uses Other changes Balance at 12 31 2022 Employee leaving entitlement (TFR) 23,404 7,245 (2,395) (9,229) 19,025 Employee benefits 125,771 - (6,893) (5,873) 113,005 Total employee benefits 149,175 7,245 (9,288) (15,102) 132,030 The change in the item is attributable for 7,245 thousand euro to provisions for the period, for 9,288 thousand euro to the decrease due to the disbursements of the year and for 15,102 thousand euro to the net increase referred to actuarial valuations, deriving from the combined effect of the increase for interest cost equal to 2,568 thousand euro, of the decrease for actuarial gains/losses equal to 12,013 thousand euro, mainly due to the increase in electricity costs, net of other negative changes for 5,657 thousand euro. Notes 2022 Separate financial statements A2A 57 Technical valuations were carried out on the basis of the following assumptions: thousands of euro 2021 2022 Discount rate from -0.17% to +0.98% from +3.34% to +3.77% Annual inflation rate 1.75% 2.3% Annual seniority bonus increase rate 2.0% 2.0% Annual additional months increase rate 0.0% 0.0% Annual cost of electricity increase rate 2.0% 2.0% Annual cost of gas increase rate 0.0% 0.0% Annual salary increase rate 1.0% 1.0% Annual TFR increase rate 2.8125% 3.225% Average annual increase rate of supplementary pensions 1.125% 1.125% Annual turnover frequencies 5.0% 5.0% Annual TFR advance frequencies 2.0% 2.0% It is noted that: • the annual discount rate used to determine the present value of the bond has been derived, in line with paragraph 83 of IAS 19, from the Iboxx Corporate AA index recognized at the measurement date. For this purpose, the yield with duration comparable to the duration of the work group evaluated was chosen; • the annual rate of salary increase applied exclusively to companies with fewer than 50 employees on average in 2006 was determined on the basis of the reference data communicated by Group companies; • the annual rate of TFR increase, according to art. 2120 of the Civil Code, is equal to 75% of inflation plus 1.5 percentage points; • the annual advance and turnover frequencies are derived from historical experiences of the Group and the frequencies arising from the experience of the Actuary on a significant number of similar companies; • for the demographic technical bases, it is noted that: for “death”, use was made of the tables TG62 (Premungas) and AS62 (Electricity and gas discount); for “inability”, the INPS tables divided by age and gender were used; for “retirement”, the 100% parameter was used upon reaching the requirements of AGO (Obligatory General Insurance) in accordance with LD no. 04/2019; for the “probability of leaving the family”, the table in the INPS model was used for projections to 2010 updated; for the “frequency of the various structures of surviving nuclei and average age of members”, the table in the INPS model was used for projections to 2010. As required by IAS 19, the sensitivity for post-employment employee benefit obligations is outlined below: thousands of euro Turnover rate +1% Turnover rate -1% Inflation rate +0.25% Inflation rate -0.25% Discount rate +0.25% Discount rate -0.25% Employees’ leaving entitlement (TFR) 19,043 18,932 19,164 18,816 18,718 19,267 thousands of euro Discount rate +0.25% Discount rate -0.25% Mortality table increased by 10% Mortality table decreased by 10% Premungas 11,545 11,852 11,130 12,327 Electricity and gas discount 95,012 100,560 100,734 94,971 Additional months 2,084 2,161 n.s. n.s. 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 58 A2A Separate financial statements 2022 Notes 18) Provisions for risks, charges and liabilities for landfills thousands of euro Balance at 12 31 2021 Provisions Releases Uses Other changes Balance at 12 31 2022 Decommissioning provisions 6,782 - - (419) (2,279) 4,084 Tax provisions 2,613 - - - - 2,613 Personnel lawsuits and disputes provisions 13,798 1,600 (2,700) (6,713) (27) 5,958 Other risk provisions 78,238 45,197 (5,966) (3,073) 1,084 115,480 Provisions for risks, charges and liabilities for landfills 101,431 46,797 (8,666) (10,205) (1,222) 128,135 “Decommissioning provisions”, which amounted to 4,084 thousand euro, include charges for costs of dismantling and recovery of production sites related to hydroelectric plants of Valtellina and Calabria. Changes in this item regard: uses of 419 thousand euro and other decreases of 2,279 thousand euro, which refer to the revision of the discount rates used to estimate future charges. “Tax Provisions”, which amounted to 2,613 thousand euro (unchanged compared to the end of the previous year), refer to provisions for pending or potential litigation with the tax authorities or territorial entities for levies and direct and indirect taxes. The “Personnel lawsuits and disputes provisions” amounted to 5,958 thousand euro and refer to lawsuits pending with social security institutions, for contributions not paid for 998 thousand euro, to lawsuits with third parties for 4,713 thousand euro and with employees for 247 thousand euro, to cover the liabilities that could arise from litigations in progress. Changes during the period regard provisions of 1,600 thousand euro, releases of 2,700 thousand euro, uses of 6,713 thousand euro and other negative changes of 27 thousand euro. “Other risk provisions” of 115,480 thousand euro refer to provisions relating to public water derivation fees for 88,197 thousand euro, provisions for contractual expenses for 14,717 thousand euro, to the mobility provision for the costs arising from the corporate restructuring plan for 98 thousand euro, as well as other provisions for risks for 12,468 thousand euro. Changes during the period regard provisions of 45,197 thousand euro, uses of 3,073 thousand euro, releases of 5,966 thousand euro and other increases of 1,084 thousand euro. 19) Other non-current liabilities thousands of euro Balance at 12 31 2021 Changes Balance at 12 31 2022 of which included in the NFP 12 31 2021 12 31 2022 Other non-current liabilities 3,455 - 3,455 - - Non-current derivatives 10,602 (10,543) 59 10,602 59 Total other non-current liabilities 14,057 (10,543) 3,514 10,602 59 “Other non-current liabilities” amounted to 3,514 thousand euro and refer to: • “Other non-current liabilities to third parties” amounted to 3,455 thousand euro (3,455 thousand euro at December 31, 2021), of which: “Other non-current payables” totalling 3,354 thousand euro (3,354 thousand euro at December 31, 2021), which refer to payables linked to Long Term Service Agreements relating to plant maintenance; “Security deposits” of 101 thousand euro (101 thousand euro at December 31, 2021). • “Non-current derivative instruments” of 59 thousand euro (10,602 thousand euro at December 31, 2021), which refer to the fair value of financial derivatives to hedge interest rate risk on variable rate mortgages. Notes 2022 Separate financial statements A2A 59 Current liabilities 20) Trade payables and other current liabilities thousands of euro Balance at 12 31 2021 Changes Balance at 12 31 2022 of which included in the NFP 12 31 2021 12 31 2022 Advances and payables to customers 993 72,389 73,382 Payables to suppliers 1,741,125 2,164,773 3,905,898 Trade payables to related parties of which: 430,748 196,606 627,354 \- subsidiaries 365,207 199,058 564,265 \- joint ventures 65,384 (2,899) 62,485 \- associates 1 448 449 \- Municipalities of Milan and Brescia 156 (1) 155 Total trade payables 2,172,866 2,433,768 4,606,634 \- - Payables to pension and social security institutions 14,649 522 15,171 Current derivatives 3,708,394 (1,147,554) 2,560,840 - - Other current liabilities of which: 433,866 (284,072) 149,794 \- payables to employees 24,085 (1,638) 22,447 \- tax payables 44,728 (622) 44,106 \- payables to subsidiaries for tax consolidation 48,804 14,055 62,859 \- payables for tax transparency 7,167 (1,799) 5,368 \- payables to third-party shareholders 362 29 391 \- payables for liabilities of competence of the following year 129 (92) 37 \- payables for collections to be allocated 9,244 (1,701) 7,543 \- sundry payables 299,347 (292,304) 7,043 Total other current liabilities 4,156,909 (1,431,104) 2,725,805 - - Total trade payables and other current liabilities 6,329,775 1,002,664 7,332,439 - - “Trade payable and other current liabilities” amounted to 7,332,439 thousand euro (6,329,775 thousand euro at December 31, 2021), representing an overall increase of 1,002,664 thousand euro. “Trade payables” amounted to 4,606,634 thousand euro and include advances for 73,382 thousand euro, debt exposure to third-party suppliers (3,905,898 thousand euro) and trade payables to related parties (627,354 thousand euro). The increase in payables to third-party suppliers is mainly attributable to the increase in commodity trading transactions with bilateral counterparties and to an efficient net working capital management policy. “Payables to social security institutions” amounted to 15,171 thousand euro and relate to the company’s debt position with social security and pension institutions, related to contributions of the month of December not yet paid. “Current derivative instruments” amounted to 2,560,840 thousand euro and refer to the fair value valuation of derivatives. The decrease was mainly attributable to a reduction in overall volumes traded and the high volatility of energy commodity prices, which had an impact on the differentials between subscription prices and forward prices. “Other current liabilities” amounting to 149,794 thousand euro (433,866 thousand euro at December 31, 2021) mainly refer to: • Group “payables to subsidiaries for tax consolidation” amounting to 62,859 thousand euro (48,804 thousand euro at December 31, 2021); • “payables to employees” for 22,447 thousand euro (24,085 thousand euro at December 31, 2021), relating to payables to employees for the productivity bonus accrued during the year, as well as the expense for holidays accrued but not taken at December 31, 2022; 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 60 A2A Separate financial statements 2022 Notes • “tax payables” amounting to 44,106 thousand euro (44,728 thousand euro at December 31, 2021) essentially regarding VAT payables, payables for water diversion fees, as well as payables to the tax authorities for withholding tax and excise duties; • “payables for fiscal transparency” for 5,368 thousand euro (7,167 thousand euro at December 31, 2021) to the associate Ergosud S.p.A.. At December 31, 2021, other payables included 276,354 thousand euro related to advance receipts of electricity and gas futures contracts the economic manifestation of which was in the current year, which instead had a zero balance at December 31, 2022. 21) Current financial liabilities thousands of euro Balance at 12 31 2021 Changes Balance at 12 31 2022 of which included in the NFP 12 31 2021 12 31 2022 Non-convertible bonds 533,447 (195,213) 338,234 533,447 338,234 Payables to banks 79,164 402,494 481,658 79,164 481,658 Payables to other lenders - 1,011 1,011 - 1,011 Financial payables to related parties 357,566 298,265 655,831 357,566 655,831 Current financial payables for rights of use to third parties 5,613 5,541 11,154 5,613 11,154 Current payables for rights of use to related parties 5,946 441 6,387 5,946 6,387 Total current financial liabilities 981,736 512,539 1,494,275 981,736 1,494,275 “Current financial liabilities” amounted to 1,494,275 thousand euro, an overall increase of 512,539 thousand euro. “Non-convertible bonds” amounted to 338,234 thousand euro and showed a net decrease of 195,213 thousand euro, due to the redemption of a bond with nominal value of 500,000 thousand euro maturing in January 2022, partly offset by the reclassification from “Non-current financial liabilities” of the bond with nominal value of 300,000 thousand euro maturing in December 2023\. At December 31, 2022, the calculation of interest coupons amounted to 38,380 thousand euro (33,469 thousand euro at December 31, 2021). Current “Payables to banks”, which amounted to 481,658 thousand euro, increased by 402,494 thousand euro in the period, mainly due to the reclassification from “Non-current financial liabilities” of residual loans maturing in 2023, which totalled 419,698 thousand euro, partly offset by the change in accrued interest and amortized cost. “Payables to other lenders” amounted to 1,011 thousand euro and refer to interest calculated on the loan received from Cassa Depositi e Prestiti. “Financial payables for current rights of use”, in application of IFRS 16 for leases previously classified as operating, both to third parties and related parties, amounted to 17,541 thousand euro, with an increase of 5,982 thousand euro compared to the end of the previous year. “Financial payables to related parties” amounted to 655,831 thousand euro with an increase of 298,265 thousand euro and relate to intra-group current accounts on which rates are applied at market conditions, with variable Euribor base with specific spreads for companies. 22) Tax payables thousands of euro Balance at 12 31 2021 Changes Balance at 12 31 2022 Tax liabilities 5,935 108,285 114,220 At December 31, 2022, tax payables amounted to 114,220 thousand euro (5,935 thousand euro at December 31, 2021) and mainly related to the Extraordinary Solidarity Contribution expected for the year 2023, determined pursuant to Article 1, paragraphs 115-119 of Law No. 197 of December 29, 2022 (Budget Law 2023), the recognition of current IRAP for the year 2022, as well as the still unpaid portion of the substitute tax recognized in the year 2021 following the realignment pursuant to L.D. 104/2020. Notes 2022 Separate financial statements A2A 61 3.7 Net debt 23) Net debt (pursuant to CONSOB Communication no. DEM/6064293 of July 28, 2006 and ESMA/2013/319) The following table provides details of net debt: thousands of euro 12 31 2021 12 31 2022 Bonds \- non-current portion 3,179,585 4,611,550 Bank loans \- non-current portion 755,023 775,717 Non-current payables to other lenders 199,838 199,869 Non-current financial payables for rights of use 56,794 61,261 Other non-current liabilities 10,602 59 Total medium/long-term debt 4,201,842 5,648,456 Non-current financial assets \- related parties (1,307,738) (1,331,267) Non-current financial assets (4,535) (4,613) Other non-current assets - (7,168) Total medium/long-term financial receivables (1,312,273) (1,343,048) Total non-current net debt 2,889,569 4,305,408 Bonds \- current portion 533,447 338,234 Bank loans \- current portion 79,164 481,658 Current amounts due to other providers of finance - 1,011 Current financial payables for rights of use 11,559 17,541 Current financial payables to related parties 357,566 655,831 Total short-term debt 981,736 1,494,275 Other current financial assets (3,306) (2,112) Current financial assets \- related parties (1,201,668) (2,363,842) Total short-term financial receivables (1,204,974) (2,365,954) Cash and cash equivalents (886,354) (2,338,465) Total current net debt (1,109,592) (3,210,144) Net financial debt 1,779,977 1,095,264 Pursuant to IAS 7 “Cash Flow Statement”, the following are the changes in financial assets and liabilities: thousands of euro 12 31 2021 Cash flow Non-cash flow Balance at 12 31 2022 Change in fair value Other changes Bonds 3,713,032 1,254,912 (7,848) (10,312) 4,949,784 Financial payables 1,459,944 703,837 - 29,107 2,192,888 Other liabilities 10,602 - (10,543) - 59 Financial assets (2,517,247) (1,184,599) - 12 (3,701,834) Other activities - - (7,168) - (7,168) Net liabilities deriving from financing activities 2,666,331 774,150 (25,559) 18,807 3,433,729 Cash and cash equivalents (886,354) (1,452,111) - - (2,338,465) Net financial debt 1,779,977 (677,961) (25,559) 18,807 1,095,264 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information Notes 2022 Separate financial statements A2A 63 3.8 Notes to the income statement 24) Revenues Revenues at December 31, 2022 amounted to 19,688,338 thousand euro (8,255,984 thousand euro at December 31, 2021). thousands of euro 12 31 2022 12 31 2021 Change Percentage change Revenues from the sale of goods 19,410,770 7,952,044 11,458,726 n.s. Revenues from services 256,455 243,971 12,484 5.1% Total revenues from the sale of goods and services 19,667,225 8,196,015 11,471,210 n.s. Other operating income 21,113 59,969 (38,856) (64.8%) Total Revenues 19,688,338 8,255,984 11,432,354 n.s. 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 64 A2A Separate financial statements 2022 Notes Details of the more significant items are as follows: thousands of euro 12 31 2022 12 31 2021 Change Percentage change Sales of electricity of which: 12,990,045 5,144,815 7,845,230 n.s. \- third-party customers 8,433,754 3,720,278 4,713,476 n.s. \- subsidiaries 4,547,364 1,419,176 3,128,188 n.s. \- associates 8,927 5,361 3,566 66.50% Sales of gas and fuels of which: 5,701,529 2,229,449 3,472,080 n.s. \- third-party customers 3,149,587 1,397,222 1,752,365 n.s. \- subsidiaries 2,538,677 828,776 1,709,901 n.s. \- associates 13,265 3,451 9,814 n.s. Sales of heat of which: 3,068 789 2,279 n.s. \- subsidiaries 3,068 789 2,279 n.s. Sales of materials and equipment of which: 11,278 9,705 1,573 16.20% \- third-party customers 1,576 19 1,557 n.s. \- subsidiaries 9,702 9,686 16 0.20% Sales of emission certificates and allowances of which: 704,850 567,286 137,564 24.20% \- third-party customers and inventory change 59,444 213,814 (154,370) (72.20%) \- subsidiaries 603,205 308,738 294,467 95.40% \- associates 42,201 44,734 (2,533) (5.70%) Total revenues from the sale of goods 19,410,770 7,952,044 11,458,726 n.s. \- Services to third parties 1,641 2,354 (713) (30.30%) \- Services to subsidiaries 251,941 238,730 13,211 5.50% \- Services to associates 182 143 39 27.30% \- Services to parent companies 2,691 2,744 (53) (1.90%) Total revenues from services 256,455 243,971 12,484 5.10% Total revenues from the sale of goods and services 19,667,225 8,196,015 11,471,210 n.s. Damage compensation 801 786 15 1.90% Contingent assets 2,876 9,580 (6,704) (70.00%) Gains on disposals of assets 45 4,477 (4,432) (99.00%) Incentives for production from renewable sources (feed-in tariff) 8,214 36,446 (28,232) (77.50%) Rent income of which: 4,998 5,390 (392) (7.30%) \- third-party customers 463 510 (47) (9.20%) \- subsidiaries 4,527 4,876 (349) (7.20%) \- associates 8 4 4 100.00% Other revenues of which: 4,179 3,290 889 27.00% \- third-party customers 3,343 3,250 93 2.90% \- subsidiaries 563 40 523 n.s. \- associates 273 - 273 n.s. Total other operating revenues 21,113 59,969 (38,856) (64.80%) Total revenues 19,688,338 8,255,984 11,432,354 n.s. Sales revenues amounted to 19,410,770 thousand euro (7,952,044 thousand euro at December 31, 2021), up 11,458,726 thousand euro from the previous year. Sales revenues amounted to 19,410,770 thousand euro and mainly refer to the sale of electricity (12,990,045 thousand euro) to wholesalers and institutional operators (Gestore Mercato Elettrico S.p.A. and Terna S.p.A.), also through sales on the IPEX markets (Italian Power Exchange) as well as to subsidiaries and associates for a total of 19,823 million kWh (+20% compared to December 31, Notes 2022 Separate financial statements A2A 65 2021); to the sale of gas and fuel to third parties and subsidiaries and associates (5,701,529 thousand euro) from the commercialization of 4,606 million cubic meters of gas (+21% compared to the previous year); to the sale of heat (3,068 thousand euro), materials and plants to both third parties and subsidiaries (11,278 thousand euro) and to the sale of environmental certificates to third parties and subsidiaries and associates (704,850 thousand euro). The increase in sales revenues is mainly due to the increase in prices on the wholesale markets for both electricity and gas, as well as to higher revenues for CO2 sales as a result of the recognition of revenue from subsidiaries and associates whose plants are managed by A2A S.p.A. through tolling agreements. Revenues from services amount to 256,455 thousand euro and mainly relate to revenues from provisions to subsidiaries of administrative, fiscal, legal, managerial and technical services, and revenues from the Municipality of Milan for the video surveillance service. “Other operating revenues”, which amounted to 21,113 thousand euro (59,969 thousand euro at December 31, 2021), mainly refer to incentives for production from renewable sources “feed-in tariff” (8,214 thousand euro), rents from subsidiaries, contingent assets recognized as a result of the difference in allocations from previous years, and reimbursements for damages and penalties received from customers, insurance companies and private individuals. 25) Operating expenses “Operating expenses” totalled 19,181,703 thousand euro (7,903,709 thousand euro at December 31, 2021). The main components of this item are as follows: thousands of euro 12 31 2022 12 31 2021 Change Percentage change Costs for raw materials and consumables 17,928,416 6,973,208 10,955,208 n.s. Costs for services 425,573 349,024 76,549 21.93% Total costs for raw materials and services 18,353,989 7,322,232 11,031,757 n.s. Other operating expenses 827,714 581,477 246,237 42.35% Total operating expenses 19,181,703 7,903,709 11,277,994 n.s. 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 66 A2A Separate financial statements 2022 Notes The following table sets out details of the more significant components: thousands of euro 12 31 2022 12 31 2021 Change Percentage change Purchases of electricity of which: 8,079,820 3,246,899 4,832,921 n.s. \- third-party suppliers 7,627,477 2,997,434 4,630,043 n.s. \- subsidiaries 452,206 249,465 202,741 81.27% \- associates 137 - 137 n.s. Purchases of gas of which: 9,305,157 3,238,253 6,066,904 n.s. \- third-party suppliers 9,283,300 3,208,477 6,074,823 n.s. \- subsidiaries 21,857 29,776 (7,919) (26.60%) Purchases of fuel of which: 106,724 2,718 104,006 n.s. \- third-party suppliers 106,720 2,714 104,006 n.s. \- subsidiaries 4 4 - 0.00% Change in inventories of fuel (252,238) (41,793) (210,445) n.s. Purchases of heat of which: 697 450 247 54.89% \- third-party suppliers - 7 (7) (100.00%) \- subsidiaries 697 443 254 57.34% Purchases of water of which: 58 58 - 0.00% \- third-party suppliers 45 53 (8) (15.09%) \- subsidiaries 13 5 8 n.s. Purchases of materials of which: 14,323 11,857 2,466 20.80% \- third-party suppliers 14,317 11,725 2,592 22.11% \- subsidiaries 6 132 (126) (95.45%) Change in inventories of materials 32 146 (114) (78.08%) Hedging losses on operating derivatives 13,799 3,633 10,166 n.s. Hedging gains on operating derivatives (34,483) (12,434) (22,049) n.s. Purchases of emission certificates and allowances of which: 694,527 523,421 171,106 32.69% \- third-party suppliers 692,505 522,970 169,535 32.42% \- subsidiaries 2,022 451 1,571 n.s. Total expenses for raw materials and consumables 17,928,416 6,973,208 10,955,208 n.s. Delivery and transmission costs of which: 249,315 189,446 59,869 31.60% \- third-party suppliers 234,018 178,271 55,747 31.27% \- subsidiaries 15,297 11,175 4,122 36.89% Maintenance and repairs 66,342 51,548 14,794 28.70% Services of which: 109,916 108,030 1,886 1.75% \- third-party suppliers 95,906 93,227 2,679 2.87% \- subsidiaries 14,010 14,803 (793) (5.36%) Total costs for services 425,573 349,024 76,549 21.93% Total costs for raw materials and services 18,353,989 7,322,232 11,031,757 n.s. Leaseholds of which: 725,189 490,923 234,266 47.72% \- third-party suppliers 30,078 21,195 8,883 41.91% \- subsidiaries 628,235 406,193 222,042 54.66% \- associates 66,876 63,535 3,341 5.26% Other operating costs of which: 102,525 90,554 11,971 13.22% \- Concession fees 71,991 62,079 9,912 15.97% \- Contributions to territorial entities, consortia and ARERA 5,241 4,214 1,027 24.37% \- Damages and penalties 803 845 (42) (4.97%) \- Contingent liabilities 1,343 2,457 (1,114) (45.34%) \- Losses on disposal of tangible assets - 2 (2) (100.00%) \- Taxes and duties 14,064 14,829 (765) (5.16%) \- Other costs 9,083 6,128 2,955 48.22% \- other operating expenses 8,738 6,091 2,647 43.46% \- losses on receivables and cash and cash equivalents 341 - 341 n.s. \- subsidiaries 4 37 (33) (89.19%) Other operating expenses 827,714 581,477 246,237 42.35% Total operating expenses 19,181,703 7,903,709 11,277,994 n.s. Notes 2022 Separate financial statements A2A 67 “Expenses for raw materials and services” amounted to 18,353,989 thousand euro (7,322,232 thousand euro at December 31, 2021). Costs for raw materials and consumables amounted to 17,928,416 thousand euro and refer to costs for purchases of electricity, fuel and heat (17,492,398 thousand euro) from third parties and subsidiaries for both electricity production and for resale to customers and wholesalers, the increase of which mainly derives from the increase in procurement unit prices following the growth of the reference scenario, as well as to greater quantities purchased; the change in inventories of fuels (-250,107 thousand euro); the gains/losses from hedging derivatives (-20,684 thousand euro); the purchase of materials and water (14,413 thousand euro including the change in inventories); and the purchase of environmental certificates (694,527 thousand euro), the increase of which refers in particular to higher purchases of CO2 both as a result of the increase in the procurement price and the higher volumes issued correlated to the higher thermoelectric production. Service costs amounted to 425,573 thousand euro and relate to the logistics costs for transport on the natural gas network (249,315 thousand euro), costs for maintenance and repairs (66,342 thousand euro) related to both the plants and information systems of the company, as well as costs for services from third parties and subsidiaries and associates (109,916 thousand euro) that include costs for administrative and technical professional services, costs for certification activities, gas storage costs, expenses for insurance, monitoring, banking and other services. The increase compared to the previous year is mainly due to higher costs for the transport and storage of natural gas and for IT services related to the development of new projects. “Other operating costs” amounted to 827,714 thousand euro (581,477 thousand euro at December 31, 2021). This item includes the use of third-party assets for 725,189 thousand euro mainly relating to the contracting of thermoelectric production plants “tolling agreement” owned by the subsidiaries A2A Energiefuture S.p.A. and A2A gencogas S.p.A., costs related to the use of part of a portion of the electricity capacity of Ergosud S.p.A.; the increase is mainly due to the higher cost of CO2. Other costs amounted to 102,525 thousand euro and mainly refer to public water derivation fees, damages and penalties and contingent liabilities. During the year, the Company paid 3,000 thousand euro in donations to the AEM, ASM and LGH Foundations. Trading margin The following table sets out the results arising from the Trading Portfolio, including the effect of changes in derivative instruments; these figures relate to trading in electricity, gas and environmental certificates. thousands of euro 12 31 2022 12 31 2021 Change Percentage change Revenues 13,373,821 247,231 13,126,590 n.s. Operating expenses (13,293,080) (221,699) (13,071,381) n.s. Total trading margin 80,741 25,532 55,209 n.s. The trading margin was positive for 80,741 thousand euro, an increase of 55,209 thousand euro compared to December 31, 2021. During the financial year 2022, there were multiple values of European electricity and gas prices compared to the values recorded on average during 2021\. In addition to the extraordinary levels of commodity prices, the persistence of exceptional volatility coupled with decreasing market liquidity contributed to the widening of absolute market bid/ask values while forcing traders to execute trades quickly. The concomitant gradual rise in prices was accompanied by a drastic drop in demand with a reduction in natural gas consumption, while the impact of the mild winter was additionally felt in the latter part of the year. The combination of these contingencies led to an uncertainty in the balance between supply and demand. In continuity with what was done in the first half of 2022, it was therefore possible to continue to trade profitably by exploiting opportunities characterised by very narrow execution time windows to the benefit of trading, flow intermediation, price quotation and market making activities. 26) Labour costs At December 31, 2022, labour costs, net of capitalized charges, totalled 174,892 thousand euro (160,014 thousand euro at December 31, 2021), the increase for the year includes both the effect linked to new hires of personnel materialized in 2022 and contract renewals. 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 68 A2A Separate financial statements 2022 Notes “Labour costs” may be analysed as follows: thousands of euro 12 31 2022 12 31 2021 Change Percentage change Wages and salaries 115,847 106,549 9,298 8.7% Social security charges 36,935 34,066 2,869 8.4% Employee leaving entitlement (TFR) 7,245 6,886 359 5.2% Other costs 19,464 17,050 2,414 14.2% Total labour costs before capitalizations 179,491 164,551 14,940 9.1% Capitalized labour costs (4,599) (4,537) (62) 1.4% Total labour costs 174,892 160,014 14,878 9.3% The table below shows the average number of employees during the period, broken down by category: thousands of euro 12 31 2022 12 31 2021 Change Managers 105 109 (4) Middle Managers 368 341 27 White-collar workers 1,316 1,217 99 Blue-collar workers 155 160 (5) Total 1,944 1,827 117 At December 31, 2022, A2A S.p.A. employees totalled 2,004, while at December 31, 2021, they were equal to 1,847. The item also includes the remuneration paid by A2A S.p.A. to the members of the Board of Directors in the period for a total of 1,766 thousand euro; for further details, reference is made to the specific file “Remuneration Report \- 2022”. 27) Gross operating income In light of the dynamics explained above, the “Gross operating income” was positive for 331,743 thousand euro (positive for 192,260 thousand euro at December 31, 2021). 28) Depreciation, amortization, provisions and write-downs “Depreciation, amortization, provisions and write-downs” equalled 162,247 thousand euro (123,140 thousand euro at December 31, 2021). The following table provides details of the individual items: thousands of euro 12 31 2022 12 31 2021 Change Percentage change Amortization of intangible assets 37,913 29,141 8,772 30.10% Depreciation of tangible assets 85,164 80,668 4,496 5.57% Net write-downs of fixed assets 213 1,113 (900) (80.86%) Total depreciation, amortization, provisions and write-downs 123,290 110,922 12,368 11.15% Provisions for risks 38,131 13,861 24,270 n.s. Bad debt provision on receivables recognized as current assets 826 (1,643) 2,469 n.s. Total depreciation, amortization, provisions and write-downs 162,247 123,140 39,107 31.76% In particular, “Depreciation and Amortization” totalled 123,077 thousand euro (109,809 thousand euro at December 31, 2021). The increase compared to December 31, 2021 derives from the combined effect of the higher depreciation for the investments that have entered service, net of the decrease linked to the disposals of the period and to the fixed assets that concluded the depreciation and amortization process in the previous year. Depreciation is calculated on the basis of technical and economic rates considered representative of the remaining useful life of the related tangible assets. Notes 2022 Separate financial statements A2A 69 At December 31, 2022, write-downs of fixed assets amounted to 213 thousand euro (1,113 thousand euro at December 31, 2021) and mainly refer to the write-down of software. The balance of “Provisions for risks and charges” shows a net effect of 38,131 thousand euro (13,861 thousand euro at December 31, 2021) due to allocations of 46,797 thousand euro, offset by the 8,666 thousand euro of risk provisions made in previous years and released in the current year since the original disputes have ceased to exist. Provisions, net of releases in the year, included for 39,231 thousand euro provisions to “Other risk provisions” mainly related to public water derivation fees and for 1,100 thousand euro releases to “Personnel lawsuits and disputes provision”. For further details, reference is made to note 19) Provisions for risks, charges and liabilities for landfills. The “Bad debt provision” showed a negative balance of 826 thousand euro (positive for 1,643 thousand euro at December 31, 2021) and is related to the provisions during the year under review. 29) Net operating income The “Net Operating Income” is positive by 169,496 thousand euro (positive by 69,120 thousand euro at December 31, 2021). 30) Result from non-recurring transactions The “Result from non-recurring transactions” amounted to 155,202 thousand euro (no value at December 31, 2021) and is related to the gain deriving from the sale of the three properties located in Milan in February 2022\. 31) Financial balance The “Financial balance” showed a positive balance of 372,262 thousand euro (positive for 375,773 thousand euro at December 31, 2021), and the breakdown is as follows: thousands of euro 12 31 2022 12 31 2021 Change Percentage change Financial income 469,295 448,739 20,556 4.6% Financial expenses 97,033 72,966 24,067 33.0% Total financial balance 372,262 375,773 (3,511) (0.9%) 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 70 A2A Separate financial statements 2022 Notes Financial income thousands of euro 12 31 2022 12 31 2021 Change Percentage change Gains on disposals of financial assets - 970 (970) (100.0%) Income from financial assets: 469,295 447,769 21,526 4.8% Income from dividends: 407,371 415,304 (7,933) (1.9%) \- subsidiaries 406,979 415,304 (8,325) (2.0%) \- associates 392 - 392 n.s. Income on receivables/securities recorded as current assets: 58,483 30,082 28,401 94.4% \- subsidiaries 50,205 29,082 21,123 72.6% \- associates 148 212 (64) (30.2%) \- third parties of which: 8,130 788 7,342 n.s. \- on bank accounts 2,898 37 2,861 n.s. \- discounting income 195 209 (14) (6.7%) \- on other receivables 5,037 542 4,495 n.s. Foreign exchange gains 3,441 2,383 1,058 44.4% Total financial income 469,295 448,739 20,556 4.6% “Financial income” totalled 469,295 thousand euro (448,739 thousand euro at December 31, 2021) and refers to: • income from dividends in the amount of 407,371 thousand euro (415,304 thousand euro at December 31, 2021) related to dividends distributed by subsidiaries for 406,979 thousand euro, and associates for 392 thousand euro; • income from receivables/securities recognized under current assets for 58,483 thousand euro (30,082 thousand euro at December 31, 2021). This primarily regards interest to subsidiaries accrued on current accounts and intra-group loans totalling 50,205 thousand euro, financial income from associates of 148 thousand euro, interest on bank deposits and interest on sundry receivables of 8,130 thousand euro; • foreign exchange gains for 3,441 thousand euro (2,383 thousand euro at December 31, 2021). In the previous year, this item included 970 thousand euro related to capital gains on the sale of financial assets, which referred to the higher value resulting from the closing of the liquidation process of the shareholdings in Plurigas S.p.A. and Ergon Energia S.r.l. carried out last year. Notes 2022 Separate financial statements A2A 71 Financial expenses thousands of euro 12 31 2022 12 31 2021 Change Percentage change Expenses on derivatives: 1,119 1,851 (732) (39.5%) \- realized on financial derivatives 1,119 1,851 (732) (39.5%) Write-downs/losses of financial assets: - 1,868 (1,868) (100.0%) \- third parties - 1,868 (1,868) (100.0%) Expenses on financial assets: 95,914 69,247 26,667 38.5% \- subsidiaries 391 503 (112) (22.3%) \- associates 7 3 4 n.s. \- third parties of which: 95,516 68,741 26,775 39.0% \- interest on bond loans 74,367 62,478 11,889 19.0% \- interest charged by banks 13,518 2,752 10,766 n.s. \- decommissioning charges 145 45 100 n.s. \- discounting charges 2,857 1,060 1,797 n.s. \- financial expenses IFRS16 327 256 71 27.7% \- other expenses 2,081 579 1502 n.s. \- foreign exchange losses 2,221 1,571 650 41.4% Total financial expenses 97,033 72,966 24,067 33.0% “Financial expenses” amounted to 97,033 thousand euro (72,966 thousand euro in 2021) and referred to: • expenses on financial derivatives for 1,119 thousand euro (1,851 thousand euro at December 31, 2021) related to the negative “realized” of the year; • other expenses from financial liabilities amounting to 95,914 thousand euro (69,247 thousand euro at December 31, 2021), broken down as follows: interest charged by subsidiaries in the amount of 391 thousand euro (503 thousand euro at December 31, 2021) for financial expenses accrued on intra-group accounts; interest charged by associates for 7 thousand euro (3 thousand euro at December 31, 2021); other financial expenses in the amount of 95,516 thousand euro (68,741 thousand euro at December 31, 2021), which essentially relate to interest on bond issues, interest on short-term credit lines for liquidity needs related to margining for commodity derivatives and other financial expenses. In the previous year, this item included write-downs of financial assets for 1,868 thousand euro, which referred for 1,800 thousand euro to the write-down of the shareholding in Linea Gestioni S.r.l. following the results of the specific Impairment Test carried out on the shareholding by an external expert and 68 thousand euro to losses on minor shareholdings. The nature and content of derivatives are described in the section “Other information”. 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 72 A2A Separate financial statements 2022 Notes 32) Income taxes thousands of euro 12 31 2022 12 31 2021 Change Percentage change Current IRES 46,138 17,193 28,945 n.s. Current IRAP 14,961 3,290 11,671 n.s. Effect of differences \- taxes of previous years (11,231) 222 (11,453) n.s. Total current taxes 49,868 20,705 29,163 n.s. Deferred tax assets IRES 6,156 9,829 (3,673) (37.40%) Deferred tax assets IRAP (1,168) (193) (975) n.s. Deferred tax assets 4,988 9,636 (4,648) (48.20%) Deferred tax liabilities IRES 26,424 (61,949) 88,373 n.s. Deferred tax liabilities IRAP (16) (9,281) 9,265 (99.80%) Deferred tax liabilities 26,408 (71,230) 97,638 n.s. Solidarity contribution L. 197/2022 99,824 \- 99,824 n.s. Total losses/gains for income taxes 181,088 (40,889) 221,977 n.s. It is noted that for IRES purposes, the company filed for tax on a consolidated basis, together with its main subsidiaries, in accordance with articles 117-129 of DPR 917/86. To this end, a contract has been entered into with each of the subsidiaries to regulate the tax benefits and burdens transferred, with specific reference to current items. The deferred tax assets and liabilities calculated when determining the subsidiaries’ taxable income, again only for IRES purposes, are not transferred to the parent company, A2A S.p.A., but are recognized in the income statement of the individual subsidiary each time there is an effective divergence between net income calculated for tax reporting purposes and net income calculated for financial reporting purposes due to any temporary differences. The deferred tax assets and liabilities shown in the income statement of A2A are therefore calculated exclusively on the divergences between its income for taxable purposes and income for financial reporting purposes. Current income tax (IRES) of A2A S.p.A. is calculated on its own taxable income net of the adjustments relating to the national tax consolidation filing, in accordance with appendix E of accounting standard OIC 25 of August 2014. In compliance with accounting standard OIC 25, the “income/expense related to consolidation”, which constitute the remuneration/counter-entry for the transfer to the parent company A2A of a tax loss or taxable income, are recognized in the balance sheet. The total amount of IRAP was determined based on the net value of production, suitably adjusted by the increases and decreases required by tax legislation. In compliance with Article 4(2) of Legislative Decree No. 446, IRAP was calculated on the basis of the territorial distribution of the taxable base according to the region of production: Lombardy, Piedmont and Friuli-Venezia Giulia (tax rate 4.20%), Abruzzo, Calabria, Lazio and Apulia (tax rate 5.12%), Campania (tax rate 5.27%) and the Autonomous Province of Trento (tax rate 2.98%). The deferred tax assets and liabilities for IRAP purposes are booked to the income statement so as to show the total tax charge for the year, taking into account the tax effects of temporary differences. The recoverability of the “IRES deferred tax assets” recorded in the financial statements is considered probable, as the future plans provide for IRES taxable income sufficient for the absorption of the temporary differences that will be reversed; on the other hand, deferred tax assets and liabilities recorded for IRAP purposes are those considered adequate with respect to the best forecast of absorption from future taxable income. No items have been excluded from the calculation of deferred taxation for IRES or IRAP purposes, with the exceptions highlighted above, and deferred tax liabilities and assets are recognized according to the balance sheet method. At December 31, 2022, income taxes for the year (IRES and IRAP), amounted to 181,088 thousand euro (-40,889 thousand euro at the end of the previous year) and were made up as follows: • 47,516 thousand for current IRES for the period, an amount net of the tax effect on the taxable portion of the capital gain for the sale of the shareholding in ROMEO GAS (399 thousand euro), recorded as a direct reduction of the book value of the capital gain; • -36 thousand euro for remuneration for the transfer of interest payable to the tax consolidation system; • -562 thousand euro for transfer to Equity reserve of part of income taxes; • -780 thousand euro for the recognition of tax receivables on “art bonus” disbursements; • 14,961 thousand euro in current IRAP of the period; • -11,231 thousand euro related to taxes of previous years; • 26,424 thousand euro for deferred tax liabilities for IRES purposes; Notes 2022 Separate financial statements A2A 73 • -16 thousand euro for deferred tax liabilities for IRAP purposes; • 6,156 thousand euro in deferred tax assets for IRES purposes; • -1,168 thousand euro in deferred tax assets for IRAP purposes; • 99,824 thousand by way of Extraordinary solidarity contribution planned for the year 2023, determined pursuant to Article 1, paragraphs 115-119 of Law No. 197 of December 29, 2022 (Budget Law 2023). The main temporary increases for IRES purposes include: • reversals for non-deductible amortization for 23,867 thousand euro; • reversals for non-deductible provisions for risks for 49,418 thousand euro. The main permanent increases for IRES purposes include the reversals for expenses for cars, telephone costs and fines non-deductible for 2,962 thousand euro. The main decreases include the change related to the capital gain realized on the sale of the properties located in Milan in Corso di Porta Vittoria (Signora), Via Gonin and Via Balduccio da Pisa (Orobia), which were sold in February 2022\. Consistent with the taxation regime provided for in Article 86 of Presidential Decree 917/1986, the capital gain will contribute to forming income in the current year and in the four following years: therefore, the aforementioned decrease is matched by an increase equal to 1/5 of the capital gain realized for tax purposes. Reconciliation between the statutory tax rate and the effective tax rate for IRES and IRAP purposes are presented in the statements below. IRES \- RECONCILIATION BETWEEN STATUTORY AND EFFECTIVE TAXATION Result before taxes 726,668,747 Theoretical tax expense 24.00 % 174,400,499 Permanent differences (749,924,896) Income before taxes adjusted for permanent differences (23,256,149) Current gains/losses on income for the year (5,581,476) Temporary differences deductible in subsequent years 51,976,057 Temporary differences taxable in subsequent years 187,860,131 Reversal of prior year temporary differences (16,931,738) Taxable amount 199,648,302 Current gains/losses on income for the year* 47,915,592 (*) before tax on the taxable portion of the capital gain on the sale of the shareholding in Romeo Gas IRAP \- RECONCILIATION BETWEEN STATUTORY AND EFFECTIVE TAXATION Difference between production value and costs 565,049,627 Costs not relevant for IRAP purposes (235,072,698) Total 329,976,929 Theoretical tax expense 4.24%* 13,997,250 Temporary differences deductible in subsequent years 49,423,722 Temporary differences taxable in subsequent years (120,058) Reversal of prior year temporary differences (26,592,735) Taxable income for IRAP purposes 352,687,858 Current IRAP on income for the year 14,960,622 (*) average IRAP rate 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 74 A2A Separate financial statements 2022 Notes Details are provided below on the analytic situation of the deferred tax assets and liabilities which, as required by international accounting standards, also shows the changes in equity reserves. Taxable temporary differences Case description amounts in euro Previous year Non-recurring transactions Deferred taxes previous year Adjustments (+/-) Uses in current year Sub-total Changes in tax rate Increases for the year Equity Total deferred tax liabilities Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Value differences of tangible assets 166,704,933.82 0.00 166,704,933.82 24% 40,009,184.12 (1,719,191.31) 24% (412,605.91) 59,305,256.39 24% 14,233,261.53 105,680,486.12 24% 25,363,316.67 105,680,486.12 24% 25,363,316.67 187,740,073.35 24% 45,057,617.60 0.00 24% 0.00 293,420,559.47 24% 70,420,934.27 Adoption of the finance lease standard (IAS 17) 15,968,109.37 0.00 15,968,109.37 24% 3,832,346.25 (15,968,109.37) 24% (3,832,346.25) 0.00 24% 0.00 0.00 24% 0.00 0,00 24% 0,00 0,00 24% 0,00 0.00 24% 0.00 0.00 24% 0.00 Application of the financial instrument standard (IAS 39) 0.00 0.00 0.00 24% 0.00 0.00 24% 0.00 0 24% 0.00 0 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0 24% 0.00 Measurement differences of intangible assets 12,685,992.43 0.00 12,685,992.43 24% 3,044,638.18 0.00 24% 0,00 371,875.00 24% 89,250.00 12,314,117.43 24% 2,955,388.18 12,314,117.43 24% 2,955,388.18 120,058.10 24% 28,813.94 0.00 24% 0.00 12,434,175.53 24% 2,984,202.13 Deferred capital gains 31,345.00 0.00 31,345.00 24% 7,522.80 (31,345.00) 24% (7,522.80) 0,00 24% 0,00 0,00 24% 0.00 0.00 24% 0,00 0.00 24% 0,00 0.00 24% 0.00 0,00 24% 0.00 Employee leaving entitlement (TFR) 0.00 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 Other deferred tax liabilities 16,904,204.14 0.00 16,904,204.14 24% 4,057,008.99 13,174.48 24% 3,161.88 379,950.82 24% 91,188.20 16,537,427.80 24% 3,968,982.67 16,537,427.80 24% 3.968.982,67 0.00 24% 0.00 0.00 24% 0.00 16.537.427,80 24% 3,968,982.67 IFRS 5 reclassification (17,687,300.99) 0.00 (17,687,300.99) 24% (4,244,952.24) 17,687,300.99 24% 4,244,952.24 0.00 24% 0.00 0.00 24% 0,00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 Total 194,607,283.77 0.00 194,607,283.77 46,705,748.10 (18,170.21) (4,360.84) 60,057,082.21 14,413,699.73 134,532,031.35 32,287,687.52 134,532,031.35 32,287,687.52 187,860,131.45 45,086,431.55 0.00 0.00 322,392,162.80 77,374,119.07 Deductible temporary differences Case description amounts in euro Previous year Non-recurring transactions Deferred taxes previous year Adjustments (+/-) Uses in current year Sub-total Changes in tax rate Increases for the year Equity Total deferred tax assets Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxed risk provisions 220,767,237.05 0.00 220.767.237,05 24% 52,984,136.89 (480,198.31) 24% (115,247.59) 25,947,375.19 24% 6,227,370.05 194,339,663.55 24% 46,641,519.25 194,339,663.55 24% 46,641,519.25 49,210,259.62 24% 11,810,462.31 (7,810,443.58) 24% (1,874,506.46) 235,739,479.59 24% 56,577,475.10 Amortization, depreciation and write-downs 205,292,940.62 0.00 205.292.940,62 24% 49,270,305.75 (290,595.03) 24% (69,742.81) 24,053,052.95 24% 5,772,732.71 180,949,292.64 24% 43,427,830.23 180,949,292.64 24% 43,427,830.23 2,185,797.57 24% 524,591.42 0.00 24% 0.00 183,135,090.21 24% 43,952,421.65 Application of the financial instrument standard (IAS 39) 10,601,646.00 0.00 10.601.646,00 24% 2,544,395.04 0.00 24% 0.00 0.00 24% 0.00 10,601,646.00 24% 2,544,395.04 10,601,646.00 24% 2,544,395.04 0.00 24% 0.00 (17,710,594.00) 24% (4,250,542.56) (7,108,948.00) 24% (1,706,147.52) Bad debt provision 8,308,107.59 0.00 8.308.107,59 24% 1,993,945.82 154,445.41 24% 37,066.90 9,524.81 24% 2,285.95 8,453,028.19 24% 2,028,726.77 8,453,028.19 24% 2,028,726.77 0.00 24% 0.00 0.00 24% 0.00 8,453,028.19 24% 2,028,726.77 Costs for business combinations 0.00 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 Grants 0.00 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0,00 Goodwill 173,145,140.06 0.00 173.145.140,06 24% 41,554,833.61 0.00 24% 0.00 23,899,941.53 24% 5,735,985.97 149,245,198.53 24% 35,818,847.65 149,245,198.53 24% 35,818,847.65 0.00 24% 0.00 0.00 24% 0.00 149,245,198.53 24% 35,818,847.65 Other deferred tax assets (37,140,324.24) 0.00 (37.140.324,24) 24% (8,913,677.82) (27,345.00) 24% (6,562.80) 3,078,925.25 24% 738,942.06 (40,246,594.49) 24% (9,659,182.68) (40,246,594.49) 24% (9,659,182.68) 580,000.00 24% 139,200.00 19,163,599.21 24% 4,599,263.81 (20,502,995.28) 24% (4,920,718.87) IFRS 5 reclassification (281,771.69) (281.771,69) 24% (67,625.21) 281,771.69 24% 67,625.21 0,00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 Total 580,692,975.39 0.00 580.692.975,39 139,366,314.09 (361,921.24) (86,861.10) 76,988,819.73 18,477,316.74 503,342,234.42 120,802,136.26 503,342,234.42 120,802,136.26 51,976,057,19 12,474,253,73 (6,357,438.37) (1,525,785.21) 548,960,853,24 131,750,604.78 IRES \- Deferred tax assets and liabilities for the year Notes 2022 Separate financial statements A2A 75 Taxable temporary differences Case description amounts in euro Previous year Non-recurring transactions Deferred taxes previous year Adjustments (+/-) Uses in current year Sub-total Changes in tax rate Increases for the year Equity Total deferred tax liabilities Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Value differences of tangible assets 166,704,933.82 0.00 166,704,933.82 24% 40,009,184.12 (1,719,191.31) 24% (412,605.91) 59,305,256.39 24% 14,233,261.53 105,680,486.12 24% 25,363,316.67 105,680,486.12 24% 25,363,316.67 187,740,073.35 24% 45,057,617.60 0.00 24% 0.00 293,420,559.47 24% 70,420,934.27 Adoption of the finance lease standard (IAS 17) 15,968,109.37 0.00 15,968,109.37 24% 3,832,346.25 (15,968,109.37) 24% (3,832,346.25) 0.00 24% 0.00 0.00 24% 0.00 0,00 24% 0,00 0,00 24% 0,00 0.00 24% 0.00 0.00 24% 0.00 Application of the financial instrument standard (IAS 39) 0.00 0.00 0.00 24% 0.00 0.00 24% 0.00 0 24% 0.00 0 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0 24% 0.00 Measurement differences of intangible assets 12,685,992.43 0.00 12,685,992.43 24% 3,044,638.18 0.00 24% 0,00 371,875.00 24% 89,250.00 12,314,117.43 24% 2,955,388.18 12,314,117.43 24% 2,955,388.18 120,058.10 24% 28,813.94 0.00 24% 0.00 12,434,175.53 24% 2,984,202.13 Deferred capital gains 31,345.00 0.00 31,345.00 24% 7,522.80 (31,345.00) 24% (7,522.80) 0,00 24% 0,00 0,00 24% 0.00 0.00 24% 0,00 0.00 24% 0,00 0.00 24% 0.00 0,00 24% 0.00 Employee leaving entitlement (TFR) 0.00 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 Other deferred tax liabilities 16,904,204.14 0.00 16,904,204.14 24% 4,057,008.99 13,174.48 24% 3,161.88 379,950.82 24% 91,188.20 16,537,427.80 24% 3,968,982.67 16,537,427.80 24% 3.968.982,67 0.00 24% 0.00 0.00 24% 0.00 16.537.427,80 24% 3,968,982.67 IFRS 5 reclassification (17,687,300.99) 0.00 (17,687,300.99) 24% (4,244,952.24) 17,687,300.99 24% 4,244,952.24 0.00 24% 0.00 0.00 24% 0,00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 Total 194,607,283.77 0.00 194,607,283.77 46,705,748.10 (18,170.21) (4,360.84) 60,057,082.21 14,413,699.73 134,532,031.35 32,287,687.52 134,532,031.35 32,287,687.52 187,860,131.45 45,086,431.55 0.00 0.00 322,392,162.80 77,374,119.07 Deductible temporary differences Case description amounts in euro Previous year Non-recurring transactions Deferred taxes previous year Adjustments (+/-) Uses in current year Sub-total Changes in tax rate Increases for the year Equity Total deferred tax assets Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxed risk provisions 220,767,237.05 0.00 220.767.237,05 24% 52,984,136.89 (480,198.31) 24% (115,247.59) 25,947,375.19 24% 6,227,370.05 194,339,663.55 24% 46,641,519.25 194,339,663.55 24% 46,641,519.25 49,210,259.62 24% 11,810,462.31 (7,810,443.58) 24% (1,874,506.46) 235,739,479.59 24% 56,577,475.10 Amortization, depreciation and write-downs 205,292,940.62 0.00 205.292.940,62 24% 49,270,305.75 (290,595.03) 24% (69,742.81) 24,053,052.95 24% 5,772,732.71 180,949,292.64 24% 43,427,830.23 180,949,292.64 24% 43,427,830.23 2,185,797.57 24% 524,591.42 0.00 24% 0.00 183,135,090.21 24% 43,952,421.65 Application of the financial instrument standard (IAS 39) 10,601,646.00 0.00 10.601.646,00 24% 2,544,395.04 0.00 24% 0.00 0.00 24% 0.00 10,601,646.00 24% 2,544,395.04 10,601,646.00 24% 2,544,395.04 0.00 24% 0.00 (17,710,594.00) 24% (4,250,542.56) (7,108,948.00) 24% (1,706,147.52) Bad debt provision 8,308,107.59 0.00 8.308.107,59 24% 1,993,945.82 154,445.41 24% 37,066.90 9,524.81 24% 2,285.95 8,453,028.19 24% 2,028,726.77 8,453,028.19 24% 2,028,726.77 0.00 24% 0.00 0.00 24% 0.00 8,453,028.19 24% 2,028,726.77 Costs for business combinations 0.00 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 Grants 0.00 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0,00 Goodwill 173,145,140.06 0.00 173.145.140,06 24% 41,554,833.61 0.00 24% 0.00 23,899,941.53 24% 5,735,985.97 149,245,198.53 24% 35,818,847.65 149,245,198.53 24% 35,818,847.65 0.00 24% 0.00 0.00 24% 0.00 149,245,198.53 24% 35,818,847.65 Other deferred tax assets (37,140,324.24) 0.00 (37.140.324,24) 24% (8,913,677.82) (27,345.00) 24% (6,562.80) 3,078,925.25 24% 738,942.06 (40,246,594.49) 24% (9,659,182.68) (40,246,594.49) 24% (9,659,182.68) 580,000.00 24% 139,200.00 19,163,599.21 24% 4,599,263.81 (20,502,995.28) 24% (4,920,718.87) IFRS 5 reclassification (281,771.69) (281.771,69) 24% (67,625.21) 281,771.69 24% 67,625.21 0,00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 0.00 24% 0.00 Total 580,692,975.39 0.00 580.692.975,39 139,366,314.09 (361,921.24) (86,861.10) 76,988,819.73 18,477,316.74 503,342,234.42 120,802,136.26 503,342,234.42 120,802,136.26 51,976,057,19 12,474,253,73 (6,357,438.37) (1,525,785.21) 548,960,853,24 131,750,604.78 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 76 A2A Separate financial statements 2022 Notes Taxable temporary differences Case description amounts in euro Previous year Non-recurring transactions Deferred taxes previous year Adjustments (+/-) Uses in current year Sub-total Changes in tax rate Increases for the year Equity Total deferred tax liabilities Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Value differences of tangible assets 479,268.16 0.00 479,268.16 5.57% 26,695.24 0.00 5.57% 0.00 0.00 5.57% 0.00 479,268.16 5.57% 26,695.24 479,268.16 5.57% 26,695.24 0.00 5.57% 0.00 0.00 5.57% 0.00 479,268.16 5.57% 26,695.24 Adoption of the finance lease standard (IAS 17) 0.00 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 Measurement differences of intangible assets 2,518,024.26 0.00 2,518,024.26 5.57% 140,253.95 (921.01) 5.57% (51.30) 402,301.89 5.57% 22,408.22 2,114,801.36 5.57% 117,794.44 2,114,801.36 5.57% 117,794.44 120,058.10 5.57% 6,687.24 0.00 5.57% 0.00 2,234,859.46 5.57% 124,481.67 Other deferred tax liabilities 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 IFRS 5 reclassification Total 2,997,292.42 0.00 2,997,292.42 166,949.19 (921.01) (51,30) 402,301.89 22,408.22 2,594,069.52 144,489.67 2,594,069.52 144,489.67 120,058.10 6,687.24 0.00 0.00 2,714,127.62 151,176.91 Deductible temporary differences Case description amounts in euro Previous year Non-recurring transactions Deferred taxes previous year Adjustments (+/-) Uses in current year Sub-total Changes in tax rate Increases for the year Equity Total deferred tax assets Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxed risk provisions 213,633,494.13 0.00 213,633,494,13 5.57% 11,899,385.62 (605,258.39) 5.57% (33,712.89) 25,931,675.19 5.57% 1,444,394.31 187,096,560.55 5.57% 10,421,278.42 187,096,560.55 5.57% 10,421,278.42 49,210,259.62 5.57% 2,741,011.46 (7,810,443.58) 5.57% (435,041.71) 228,496,376.59 5.57% 12,727,248.18 Amortization, depreciation and write-downs 4,583,715.00 0.00 4,583,715.00 5.57% 255,312.93 (896,241.69) 5.57% (49,920.66) 1,063,361.47 5.57% 59,229.23 2,624,111.84 5.57% 146,163.03 2,624,111.84 5.57% 146,163.03 213,462.08 5.57% 11,889.84 0.00 5.57% 0.00 2,837,573.92 5.57% 158,052.87 Costs for business combinations 0 0 0 5.57% 0.00 0 5.57% 0.00 0 5.57% 0.00 0 5.57% 0.00 0 5.57% 0.00 0 5.57% 0.00 0 5.57% 0.00 0 5.57% 0.00 Grants 0.00 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 Goodwill 18,688,104.32 0.00 18,688,104.32 5.57% 1,040,927.41 (31,621.01) 5.57% (1,761.29) 0.00 5.57% 0.00 18,656,483.31 5.57% 1,039,166.12 18,656,483.31 5.57% 1,039,166.12 0.00 5.57% 0.00 0.00 5.57% 0.00 18,656,483.31 5.57% 1,039,166.12 Other deferred tax assets (50,138,676.17) 0.00 (50,138,676.17) 5.57% (2,792,724.26) 0.00 5.57% 0.00 0.00 5.57% 0.00 (50,138,676.17) 5.57% (2,792,724.26) (50,138,676.17) 5.57% (2,792,724.26) 0.00 5.57% 0.00 19,879,349.77 5.57% 1,107,279.78 (30,259,326,40) 5.57% (1,685,444.48) IFRS 5 reclassification (116,853.02) (116,853.02) 5.57% (6,508.71) 116,853.02 5.57% 6,508.71 5.57% 5.57% 5.57% 5.57% 5.57% Total 186,649,784.27 0.00 186,649,784.27 10,396,392.98 (1,416,268.07) (78,886.13) 26,995,036.66 1,503,623.54 158,238,479.54 8,813,883.31 158,238,479.54 8,813,883.31 49,423,721.70 2,752,901.30 12,068,906.19 672,238.07 219,731,107.43 12,239,022.68 IRAP \- Deferred tax assets and liabilities for the year Notes 2022 Separate financial statements A2A 77 Taxable temporary differences Case description amounts in euro Previous year Non-recurring transactions Deferred taxes previous year Adjustments (+/-) Uses in current year Sub-total Changes in tax rate Increases for the year Equity Total deferred tax liabilities Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Value differences of tangible assets 479,268.16 0.00 479,268.16 5.57% 26,695.24 0.00 5.57% 0.00 0.00 5.57% 0.00 479,268.16 5.57% 26,695.24 479,268.16 5.57% 26,695.24 0.00 5.57% 0.00 0.00 5.57% 0.00 479,268.16 5.57% 26,695.24 Adoption of the finance lease standard (IAS 17) 0.00 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 Measurement differences of intangible assets 2,518,024.26 0.00 2,518,024.26 5.57% 140,253.95 (921.01) 5.57% (51.30) 402,301.89 5.57% 22,408.22 2,114,801.36 5.57% 117,794.44 2,114,801.36 5.57% 117,794.44 120,058.10 5.57% 6,687.24 0.00 5.57% 0.00 2,234,859.46 5.57% 124,481.67 Other deferred tax liabilities 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 IFRS 5 reclassification Total 2,997,292.42 0.00 2,997,292.42 166,949.19 (921.01) (51,30) 402,301.89 22,408.22 2,594,069.52 144,489.67 2,594,069.52 144,489.67 120,058.10 6,687.24 0.00 0.00 2,714,127.62 151,176.91 Deductible temporary differences Case description amounts in euro Previous year Non-recurring transactions Deferred taxes previous year Adjustments (+/-) Uses in current year Sub-total Changes in tax rate Increases for the year Equity Total deferred tax assets Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxable amount Rate Tax Taxed risk provisions 213,633,494.13 0.00 213,633,494,13 5.57% 11,899,385.62 (605,258.39) 5.57% (33,712.89) 25,931,675.19 5.57% 1,444,394.31 187,096,560.55 5.57% 10,421,278.42 187,096,560.55 5.57% 10,421,278.42 49,210,259.62 5.57% 2,741,011.46 (7,810,443.58) 5.57% (435,041.71) 228,496,376.59 5.57% 12,727,248.18 Amortization, depreciation and write-downs 4,583,715.00 0.00 4,583,715.00 5.57% 255,312.93 (896,241.69) 5.57% (49,920.66) 1,063,361.47 5.57% 59,229.23 2,624,111.84 5.57% 146,163.03 2,624,111.84 5.57% 146,163.03 213,462.08 5.57% 11,889.84 0.00 5.57% 0.00 2,837,573.92 5.57% 158,052.87 Costs for business combinations 0 0 0 5.57% 0.00 0 5.57% 0.00 0 5.57% 0.00 0 5.57% 0.00 0 5.57% 0.00 0 5.57% 0.00 0 5.57% 0.00 0 5.57% 0.00 Grants 0.00 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 0.00 5.57% 0.00 Goodwill 18,688,104.32 0.00 18,688,104.32 5.57% 1,040,927.41 (31,621.01) 5.57% (1,761.29) 0.00 5.57% 0.00 18,656,483.31 5.57% 1,039,166.12 18,656,483.31 5.57% 1,039,166.12 0.00 5.57% 0.00 0.00 5.57% 0.00 18,656,483.31 5.57% 1,039,166.12 Other deferred tax assets (50,138,676.17) 0.00 (50,138,676.17) 5.57% (2,792,724.26) 0.00 5.57% 0.00 0.00 5.57% 0.00 (50,138,676.17) 5.57% (2,792,724.26) (50,138,676.17) 5.57% (2,792,724.26) 0.00 5.57% 0.00 19,879,349.77 5.57% 1,107,279.78 (30,259,326,40) 5.57% (1,685,444.48) IFRS 5 reclassification (116,853.02) (116,853.02) 5.57% (6,508.71) 116,853.02 5.57% 6,508.71 5.57% 5.57% 5.57% 5.57% 5.57% Total 186,649,784.27 0.00 186,649,784.27 10,396,392.98 (1,416,268.07) (78,886.13) 26,995,036.66 1,503,623.54 158,238,479.54 8,813,883.31 158,238,479.54 8,813,883.31 49,423,721.70 2,752,901.30 12,068,906.19 672,238.07 219,731,107.43 12,239,022.68 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 78 A2A Separate financial statements 2022 Notes 33) Net result from discontinued operations The “Net result from discontinued operations” was positive for 29,709 thousand euro (negative for 304 thousand euro at December 31, 2021) and refers to the capital gain, net of the effect of current taxes on the same, realized from the sale of the shareholding in ROMEO GAS S.p.A., after the demerger of the unit in favor of the latter relative to gas distribution referred to ATEM deemed non-strategic by Unareti S.p.A.. In the previous year, this item included: • for -1,959 thousand euro the reclassification of depreciation related to three buildings in the Milan area that, in accordance with IFRS 5, had been reclassified to “Assets held for sale”; • for -295 thousand euro the recognition of a loss on the investment in Sviluppo Turistico Lago d’Iseo S.p.A., equal to 24.29% of the share capital, for which the company had exercised its right of withdrawal and which had been reclassified under “Assets held for sale”; • for 1,950 thousand euro the gain realized on the sale of the investment held in Ge.S.I. S.r.l. of 47% of the share capital. 34) Result of the year Profit, net of taxes for the year, amounted to 545,581 thousand euro (485,478 thousand euro at December 31, 2021). Notes 2022 Separate financial statements A2A 79 3.9 Note on related party transactions 35) Note on related party transactions The definition of “related parties” is included in the international accounting standard describing the disclosures which must be made for related party transactions in financial statements (revised IAS 24). Relationships with parent companies and their subsidiaries On October 5, 2007, the Municipalities of Milan and Brescia signed a Shareholders’ Agreement to regulate the ownership structure of A2A S.p.A.; this gave the Municipalities joint control over the company. Specifically, the merger effective January 1, 2008, regardless of the legal structure established, was considered a joint venture, whose joint control was exercised by the Municipalities of Milan and Brescia, each of which owned a share equal to 27.5%. On June 13, 2014, the Shareholders’ Meeting modified the company’s governance system, passing from the original two-tier system, adopted in 2007, to a “traditional” system of management and control through the appointment of the Board of Directors. In December 2014, the Municipalities of Milan and Brescia sold a total shareholding of 0.51% of A2A S.p.A., while in the first two months of 2015, the Municipalities of Milan and Brescia sold an additional shareholding of 4.5% of A2A S.p.A.. On October 4, 2016, the Municipalities of Milan and Brescia renewed for another three years, with effect from January 1, 2017, the Shareholders’ Agreement signed on December 30, 2013, concerning 1,566,452,642 ordinary shares representing 50% plus two shares of the share capital of A2A S.p.A.. On May 20, 2016, the two Municipalities had proceeded to sign an appendix to the Agreement, which envisaged reducing from six months to three months the term of the agreement, during which it is possible to terminate the same. On October 26, 2016, the Municipality of Milan received from the Municipality of Brescia the proposal, approved by the Council of said Municipality on October 25, 2016, to partially amend the shareholders’ agreement relating to A2A S.p.A. existing between the two Municipalities. In particular, said proposal requires the commitment of the two Municipalities to maintain syndicated and bound, in the new agreement, a number of shares held by them in equal measure, equal to 42% of the share capital of A2A S.p.A.. On November 4, 2016, the Council of the Municipality of Milan, after having favourably examined the proposal of the Municipality of Brescia of a partial amendment to the shareholders’ agreement, submitted to the Municipal Council the proposal of the new shareholders’ agreement for the final determinations of competence. On January 23, 2017, the Milan City Council approved the new Shareholders’ Agreement between the Municipality of Milan and the Municipality of Brescia regarding the shareholding in A2A S.p.A. and has undertaken the commitment not to proceed with the disposal of any shares owned by the Municipality of Milan. On August 2, 2019, the Municipality of Milan, also on behalf of the Municipality of Brescia, announced that the aforementioned Shareholders’ Agreement was not subject to termination. Consequently, the agreement is to be considered renewed with effect from February 1, 2020 to January 31, 2023. On August 2, 2022, the Municipality of Milan, also on behalf of the Municipality of Brescia, announced that the aforementioned Shareholders’ Agreement was not subject to termination. Consequently, the agreement is to be considered renewed with effect from February 1, 2023 to January 31, 2026\. At the date of approval of these separate financial statements at December 31, 2022, each of the two shareholders had a 25% shareholding of the share capital plus one share (overall equal to 50% plus two shares), which allows the two municipalities to maintain control over the Company. The A2A Group companies and the Municipalities of Milan and Brescia routinely entertain commercial relationships related to the supply of electricity, gas, heat, and potable water, management of public lighting systems and street lights, management of water purification and sewers, garbage collection and street sweeping and video surveillance. Similarly, the A2A Group companies entertain commercial relationships with the companies controlled directly and indirectly by the Municipalities of Milan and Brescia, for example, Metropolitana Milanese S.p.A., ATM S.p.A., Brescia Mobilità S.p.A., Brescia Trasporti S.p.A. and Centrale del Latte di Brescia S.p.A., supplying them with electrical energy, gas, heat, water purification and sewer service at market rates appropriate to the supply conditions and providing the services required. Note that these companies are considered related parties in the preparation of the financial statement schedules pursuant to Consob Resolution 17221 of March 12, 2010. 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 80 A2A Separate financial statements 2022 Notes The relationships between the Municipalities of Milan and Brescia and the A2A Group, in relation to granting the services associated with public lighting, street lights, management and supply of electricity, gas, heat, and water purification and sewer service are regulated by special conventions and specific contracts. The relationships between the companies controlled by the Municipalities of Milan and Brescia, which refer to the supply of electricity, are at arm’s length conditions. On April 12, 2017, Amsa S.p.A., a subsidiary of A2A S.p.A., in execution of the original assignment ordered in 2001, signed a contract with the Municipality of Milan for the management of services aimed at environmental protection for the period from January 1, 2017 to February 8, 2021; following the publication of the first tender cancelled by the municipality in consideration of the appeals notified and the second tender still in progress, the assignment was extended until April 30, 2023\. The tender now in progress was published on December 30, 2021; it is a European open procedure tender for the contracting of the municipal waste management service with reduced environmental impact from a life-cycle perspective, pursuant to the action plan for the environmental sustainability of consumption in the public administration sector (PAN GPP) and the Decree of the Ministry of the Environment and Protection of Land and Sea of February 13, 2014\. The bid submission date, originally set for July 11, 2022, has been set for October 31, 2022\. Two operators notified an appeal against the call for tenders to the Regional Administrative Court of Milan, which in the hearing of November 9, 2022 ordered a verification, appointing ARERA. The next hearing is set for March 8, 2023\. However, it could be postponed if the verification requires additional time. In the context of the same appeals in the second instance, the Council of State ordered the Municipality not to make any award until the conclusion of the judgments on the merits. Amsa submitted a bid. The Municipality of Milan has arranged for technical extensions to ensure the continuity of the service; a new technical extension to December 31, 2023 is being resolved. Relationships with subsidiaries and affiliates The parent company A2A S.p.A., operates like a centralized treasury for the majority of the subsidiaries. Relations between the companies are regulated through current accounts between the parent company and the subsidiaries, on which rates are applied, at market conditions, based on variable Euribor, with specific spreads for companies. Also for the financial year 2022, A2A S.p.A. and its subsidiaries have adopted the VAT procedure of the Group. Note that for IRES purposes, A2A S.p.A. files for tax on a consolidated basis, together with its main subsidiaries, in accordance with arts. 117-129 of DPR 917/86. To this end, with each of the subsidiaries joining, a special contract was drawn up to regulate the tax advantages/disadvantages transferred, with specific reference to the current entries. These contracts also govern the transfer of any excess of ROL as set forth by prevailing legislation. The parent company provides the subsidiaries and affiliates with administrative, fiscal, legal, management and technical services in order to optimize the resources available in the company and to use the existing expertise in terms of economic convenience. These services are governed by specific service contracts stipulated annually. A2A S.p.A. also makes office space and operating areas at its own premises available to subsidiaries and associates, as well as associated services. These are provided at market conditions. The companies A2A gencogas S.p.A. and A2A Energiefuture S.p.A., for a monthly fee related to the actual availability of the thermoelectric plants, provide to the Parent Company the power generation service. As of July 1, 2018, the Acinque (formerly ACSM-AGAM) Group’s related-party transactions with related parties of the A2A Group are shown as related parties. As of November 1, 2020, the AEB Group’s related-party transactions with related parties of the A2A Group are shown as related parties. Lastly, in compliance with the requirements of the “Regulation on provisions relating to related party transactions” adopted by Consob with Resolution no. 17221 of March 12, 2010 and subsequently amended by Resolution no. 17389 of June 23, 2010, by way of a resolution of November 11, 2010 the Management Board approved, following the favorable opinion of the Internal Control Committee, the prescribed procedure for identifying the rules and controls designed to ensure the transparency and substantial and procedural correctness of the related party transactions carried out by A2A S.p.A. directly or through its subsidiaries. The aforementioned Procedure was applied effective January 1, 2011 and subsequently amended on August 1, 2012, November 7 and December 18, 2013 and June 22, 2015. Following a periodic review, the Procedure was subsequently amended/supplemented and approved by the Board of Directors on June 20, 2016, subject to the favourable opinion of the Audit and Risks Committee and then updated on June 22, 2017, in view of Consob Resolution no. 19925 of March 22, 2017 and on December 16, 2019, in view of the amendments to art. 192-quinquies of Legislative Decree February 24, 1998, no. 58 (“TUF”) (art. 4 of Legislative Decree May 10, 2019, no. 49). Lastly, by resolution of the Board of Directors on June 25, 2021, subject to the favourable opinion of the Related Parties Committee established by board resolution of May 13, 2021, the Procedure was amended \- effective as of July 1, 2021 \- to comply with the Related Notes 2022 Separate financial statements A2A 81 Parties Regulation, as amended by Consob Resolution no. 21624 of December 10, 2020, in implementation of the so-called “Shareholders’ Rights II” Directive. The aforementioned Procedure can be found on the website gruppoa2a.it. Below are the tables with detail of the related party transactions, in accordance with the Consob Resolution no. 17221 of March 12, 2010: Balance sheet thousands of euro Total 12 31 2022 Companies subsidiaries Companies associated/related and subsidiaries of associates Municipality of Milan Subsidiaries direct and indirect Municipality of Milan Municipality of Brescia Subsidiaries direct and indirect unicipality of Brescia Related parties individuals Total related parties % effect on the balance sheet item Total assets of which: 18,456,053 9,762,229 59,138 2,003 3 145 \- \- 9,823,518 53.2% Non-current assets 6,710,531 5,549,619 9,663 \- \- \- \- \- 5,559,282 82.8% Tangible assets 900,951 35,678 35,678 4.0% Shareholdings 4,183,542 4,182,665 877 4,183,542 100.0% Other non-current financial assets 1,361,416 1,331,267 8,786 1,340,053 98.4% Other non-current assets 30,061 9 9 0.0% Current assets 11,745,485 4,212,610 49,475 2,003 3 145 \- \- 4,264,236 36.3% Trade receivables 3,654,978 1,764,341 49,475 2,003 3 145 1,815,967 49.7% Other current assets 2,979,212 84,427 84,427 2.8% Current financial assets 2,365,954 2,363,842 2,363,842 99.9% Total liabilities of which: 14,853,012 1,393,860 68,406 155 47 \- \- 113 1,462,581 9.8% Non-current liabilities 5,912,077 34,783 \- \- \- \- \- \- 34,783 0.6% Non-current financial liabilities 5,648,397 32,783 32,783 0.6% Provisions for risks, charges and liabilities for landfills 128,135 2,000 2,000 1.6% Current liabilities 8,940,935 1,359,077 68,406 155 47 \- \- 113 1,427,798 16.0% Trade payables 4,606,634 634,182 63,038 155 47 697,422 15.1% Other current liabilities 2,725,805 62,677 5,368 113 68,158 2.5% Current financial liabilities 1,494,275 662,218 662,218 44.3% 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 82 A2A Separate financial statements 2022 Notes Income statement thousands of euro Total 12 31 2022 Companies subsidiaries Companies associated/related and subsidiaries of associates Municipality of Milan Subsidiaries direct and indirect Municipality of Milan Municipality of Brescia Subsidiaries direct and indirect Municipality of Brescia Related parties individuals Total related parties % effect on the balance sheet item Revenues 19,688,338 7,959,047 64,864 2,615 \- 76 \- \- 8,026,602 40.8% Revenues from the sale of goods and services 19,667,225 7,953,957 64,583 2,615 76 8,021,231 40.8% Other operating income 21,113 5,090 281 5,371 25.4% Eperating expenses 19,181,703 1,134,351 69,313 \- 214 \- 28 290 1,204,196 6.3% Expenses for raw materials and services 18,353,989 506,112 2,437 214 28 290 509,081 2.8% Other operating expenses 827,714 628,239 66,876 695,115 84.0% Labour costs 174,892 \- \- \- \- \- \- 1,766 1,766 1.0% Amortization, depreciation, provisions and write-downs 162,247 7,862 \- \- \- \- \- \- 7,862 4.8% Financial balance 372,262 456,793 533 \- \- \- \- \- 457,326 n.s. Financial income 469,295 457,184 540 457,724 97.5% Financial expenses 97,033 391 7 398 0.4% Section 2 of this file provides complete schedules as required under Consob Resolution no. 17221 of March 12, 2010. It should be noted that during the year, A2A S.p.A. made grants totalling 4,264 thousand euro to foundations that have been included on a voluntary basis among related parties. Specifically, these involve: Fondazione AEM, Fondazione ASM, Fondazione LGH E.T.S., Comitato Banco dell’Energia Onlus, Fondazione Teatro alla Scala, Fondazione Brescia Musei and Associazione Centro Teatrale Bresciano. * * * With regard to the compensation paid to the corporate governance bodies, reference shall be made to the document “Remuneration Report – 2022” available on the website gruppoa2a.it. Notes 2022 Separate financial statements A2A 83 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 36) Consob Communication no. DEM/6064293 of July 28, 2006 During the month of February, the sale of three buildings located in Milan was concluded for 50,507 thousand euro. The sale took place for a monetary countervalue of 221,000 thousand euro and generated an impact on the income statement of 155,202 thousand euro before the tax effect, recorded under the item “Result from non-recurring transactions”, which also takes into account the recognition of net payables for rights of use in the amount of 15,390 thousand euro. April saw the completion of the sale of the shareholding in ROMEO GAS S.p.A. after the demerger of the unit in favour of the latter relative to gas distribution referring to ATEM deemed non-strategic by Unareti S.p.A. for a total of 43,045 thousand euro. The sale took place for a monetary countervalue of 73,253 thousand euro and generated an impact on the income statement of 29,709 thousand euro, which was recorded under “Net result from discontinued operations”. A2A S.p.A. recognized as taxes for the year the extraordinary solidarity contribution provided for the year 2023, determined pursuant to Article 1, paragraphs 115-119 of Law no. 197 of December 29, 2022 (Budget Law 2023) in the amount of 99,824 thousand euro. 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 84 A2A Separate financial statements 2022 Notes thousands of euro 12 31 2022 12 31 2021 Guarantees received 305,449 412,033 Guarantees provided 622,798 218,187 Guarantees received Guarantees received amounted to 305,449 thousand euro (412,033 thousand euro at December 31, 2021) and include 73,026 thousand euro for sureties and security deposits issued by subcontractors to guarantee the proper execution of the work assigned and 232,423 thousand euro for sureties and security deposits received from customers to guarantee the regularity of payments. Guarantees provided and commitments with third parties Guarantees provided amounted to 622,798 thousand euro (218,187 thousand euro at December 31, 2021), of which for obligations undertaken in the loan agreements of 730 thousand euro. Said guarantees include bank sureties for 622,618 thousand euro and parent company guarantees for 180 thousand euro. 3.11 Guarantees and commitments with third parties Notes 2022 Separate financial statements A2A 85 3.12 Other information 1) Significant events after December 31, 2022 Reference should be made to the specific section of this Report on Operations for a description of subsequent events. 2) Information on treasury shares A2A S.p.A. does not hold any treasury shares at December 31, 2022\. At December 31, 2022, no treasury shares were held through subsidiaries, finance companies or nominees. 3) Information on non-current assets held for sale and discontinued operations (IFRS 5) The item “Non-current assets held for sale” as of December 31, 2022 amounted to 37 thousand euro and referred to the portion, yet to be collected, for the sale that took place during the year, of the equity investment in the company Sviluppo Turistico Lago d’Iseo S.p.A., which as of December 31, 2021 had been reclassified to “Non-current assets held for sale”. In February 2022, the sale was finalized of the properties located in Milan in Corso di Porta Vittoria (Signora), Via Gonin and Via Balduccio da Pisa (Orobia), classified in the previous year under “Non-current assets held for sale”. 4) Rules on public funding (Compliance with art. 1, paragraphs 125 et seq. of Law 124/17) Pursuant to art. 1, paragraphs 125 et seq. of Law 124/17, considering that the Group companies have not received “subsidies, grants, advantages, contributions or aid, whether in cash or in kind, not general and with no consideration, remuneration or compensation”, this note is negative. It is understood that other information is (also in line with the principle set out in art. 18 of Law 241/1990) available elsewhere, including the State Aid Register, also under the criterion set out in paragraph 127 of the same art. 1 of Law 124/17, which prescribes to “avoid the accumulation of irrelevant information”. It should also be noted that the companies of the A2A Group operate (for the most part) in regulated sectors. Therefore, some sums are recognized by public bodies, but not as subsidies/contributions, but as recognition of the activities they provide or as forms of compensation for costs incurred to meet specific regulatory obligations and in any case by virtue of a general regime (e.g. energy incentives). Also all these forms of payment have not been indicated: also in compliance with both the literal aspect of the regulations and with the interpretation criteria that the Group companies have identified (see above). 5) Financial risk management The parent company, A2A S.p.A., provides centralized risk management for Group companies. The A2A Group operates in the electricity, natural gas and district heating industry and is exposed to various financial risks in performing its activity: a) commodity risk; b) interest rate risk; c) exchange rate risk not related to commodities; d) liquidity risk; e) credit risk; f) equity risk; g) default and covenant non-compliance risk. The commodity price risk, related to the volatility of energy commodity prices (gas, electricity, fuel oil, coal, etc.) and prices of environmental securities (EUA/ETS emission rights, green certificates, white certificates, etc.), consists of the possible negative effects that a change in the market price of one or more commodities may have on the cash flows and income prospects of the company, including the exchange rate risk related to the same commodities. 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 86 A2A Separate financial statements 2022 Notes Interest rate risk is the risk of additional financial costs as the result of an unfavourable change in interest rates. Currency risk not related to commodities is the risk of higher costs or lower revenues because of an unfavourable change in exchange rates between currencies. Liquidity risk is the risk that financial resources will not be sufficient to meet established financial and business obligations in a timely manner. Credit risk is the exposure to potential losses deriving from non-performance of commitments by commercial, trading and financial counterparties. Equity risk is the possibility of incurring losses due to an unfavourable change in the price of shares. Default and covenant non-compliance risk represent the possibility that loan agreements or bond regulations to which one or more Group companies are party contain provisions allowing the counterparties, banks or bondholders, to ask the debtor for immediate reimbursement of the amounts lent if certain events take place. Details on the risks to which A2A S.p.A. is exposed are provided below. a. Commodity risk a.1) Commodity price risk and exchange rate risk involved in commodity activities A2A S.p.A. is exposed to price risk, including the related exchange rate risk, on all of the energy commodities that it handles, namely electricity, natural gas, heat, coal, fuel oil, and environmental certificates; the financial performance of production, purchasing and sales activities is affected by the related price fluctuations. These fluctuations act both directly and indirectly, through formulas and indexing in the pricing structure. To stabilize cash flows and to assure the Group’s economic and financial stability, A2A S.p.A. has an Energy Risk Policy that sets out clear guidelines to manage and control the above risks, based on guidance by the Committee of Chief Risk Officers Organizational Independence and Governance Working Group (“CCRO”) and the Group on Risk Management of Euroelectric. Reference was also made to the Accords of the Basel Committee on bank supervision and the requirements laid down in international accounting standards on how to recognize the volatility of commodity price and financial derivatives in the Income statement and Balance sheet. In the A2A Group, assessment of this kind of risk is centralized at the holding company, which has established a Group Risk Management Organizational Unit as part of the Planning, Finance and Control Organizational Unit. This unit has the task to manage and monitor market and commodity risks, to create and evaluate structured products, to propose financial energy risk hedging strategies, and to support senior management in defining the Group’s energy risk management policies. Each year, the Board of Directors of A2A S.p.A. sets the Group’s commodity risk limits approving the PaR and VaR proposed (prepared in the Risk Committee) in conjunction with approval of the Budget/Business Plan; Group Risk Management supervises the situation to ensure compliance with these limits and proposes to senior management the hedging strategies designed to bring risk within the set limits, if exceeded. The activities that are subject to risk management include all of the positions on the physical market for energy products, both purchasing/production and sales, and all of the positions in the energy derivatives market taken by Group companies. For the purpose of monitoring risks, industrial and trading portfolios have been separated and are managed in different ways. The industrial portfolio consists of the physical and financial contracts directly relating to the Group’s industrial operations, namely where the objective is to enhance production capacity also through the wholesaling and retailing of gas, electricity and heat. The Trading Portfolio comprises all contracts, both physical and financial, entered into to supplement the profits made from the industrial activities, i.e. all contracts that are ancillary though not strictly necessary to the industrial activity. In order to identify Trading activity, the A2A Group follows the Capital Adequacy Directive and the definition of assets held for trading provided by International Accounting Standard IFRS 9: namely assets held for the purpose of short-term profit taking on market prices or margins, without being for hedging purposes, and designed to create a high-turnover portfolio. Given that they exist for different purposes, the two portfolios have been segregated and are monitored separately with specific tools and limits. More specifically, the trading portfolio is subject to particular risk control and management procedures as laid down in Deal Life Cycle documents. Senior management is systematically updated on changes in the Group’s commodity risk by the Group Risk Management Unit, which controls the Group’s net exposure. This is calculated centrally on the entire asset and contract portfolio and monitors the overall level of economic risk assumed by the industrial and trading portfolios (Profit at Risk \- PaR, Value at Risk \- VaR, Stop Loss). Notes 2022 Separate financial statements A2A 87 a.2) Commodity derivatives, analysis of transactions Derivatives of the Industrial Portfolio considered hedges The hedging of price risk by means of derivatives focuses on protecting against the volatility of energy prices on the power exchange (IPEX-EEX), stabilizing electricity price margins on the wholesale market with particular attention being paid to fixed price energy sales and purchases and stabilizing price differences deriving from various indexing mechanisms for the pricing of gas and electricity. To that end, hedging contracts were executed during the year on electricity purchase and sale agreements and on contracts to hedge the fee for the use of electricity transport capacity between the areas of the IPEX market (CCC contracts); hedging contracts were also concluded for the purchase and sale of gas so as to protect sales margins and at the same time keep the risk profile to within the limits set by the Group’s Energy Risk Policy. As part of the optimization of the portfolio of greenhouse gas emission allowances (see Directive 2003/87/EC), A2A S.p.A. has stipulated Future contracts on the ICE ECX (European Climate Exchange) price. These are considered hedging transactions from an accounting point of view in the event of demonstrable surplus/deficit quotas. The fair value at December 31, 2022 was 32,387 thousand euro (60,114 thousand euro at December 31, 2021). Derivatives of the Industrial Portfolio not considered hedges Again with a view to optimising the Industrial Portfolio, A2A S.p.A. entered into Future contracts on the ICE ECX (European Climate Exchange) stock exchange price. These do not qualify as hedging transactions from an accounting point of view as they fail to meet the requirement set out in the accounting standards. The fair value at December 31, 2022 was 220 thousand euro (252 thousand euro at December 31, 2021). Derivatives of the Trading Portfolio As part of its trading activity, A2A S.p.A. has taken out Future contracts on major European energy stock exchanges (EEX, ICE) and forward contracts on the price of electricity with delivery in Italy and neighboring countries such as France, Germany and Switzerland. A2A S.p.A. has also stipulated Future contracts on the ICE ECX (European Climate Exchange) stock exchange price. Also as part of trading activities, both Future and Forward contracts were also stipulated for the market price of gas (ICE-Endex CEGH, PEGAS). The fair value at December 31, 2022 was 268,140 thousand euro (-31,562 thousand euro at December 31, 2021). a.3) Energy Derivatives, risk assessment of Industrial Portfolio derivatives PaR1 (Profit at Risk) is used to assess the impact that fluctuations in the market price of the underlying have on the financial derivatives taken out by A2A S.p.A. that are attributable to the industrial portfolio. It is the change in the value of a financial instruments portfolio within set probability assumptions as the result of a shift in the market indices. The PaR is calculated using the Montecarlo Method (at least 10,000 trials) and a 99% confidence level. It simulates scenarios for each relevant price driver depending on the volatility and correlations associated with each one, using as the central level the forward market curves at the balance sheet date, if available. By means of this method, after having obtained a distribution of probability associated with changes in the result of outstanding financial contracts, it is possible to extrapolate the maximum change expected over a time horizon given by the accounting period at a set level of probability. Based on this methodology, over the time horizon of the accounting period and in the event of extreme market movements and at a 99% confidence level, the expected maximum negative change in financial derivatives outstanding at December 31, 2022 was 192,226 thousand euro (310,036 thousand euro at December 31, 2021). The following are the results of the simulation with the related maximum variances: thousands of euro 12 31 2022 12 31 2021 Profit at Risk (PaR) Worst case Best case Worst case Best case Confidence level 99% (192,226) 299,227 (310,036) 468,517 This means that with a 99% probability, A2A S.p.A. expects not to have changes in fair value exceeding 192,226 thousand euro in the fair value of its entire portfolio of financial instruments at December 31, 2022 due to commodity price fluctuations in the 12 months following. If there are any negative changes in the fair value of hedge derivatives, these would be compensated by changes in the underlying physical. 1 Profit at Risk: statistical measurement of the maximum potential negative deviation of the margin of an asset portfolio in case of unfavourable market changes over a given time horizon and with a defined confidence interval. 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 88 A2A Separate financial statements 2022 Notes a.4) Energy Derivatives, risk assessment of Trading Portfolio derivatives VaR2 (Value at Risk) is used to assess the impact that fluctuations in the market price of the underlying have on the financial derivatives taken out by A2A S.p.A. that are attributable to the trading portfolio. It is the negative change in the value of a financial instruments portfolio within set probability assumptions as the result of an unfavourable shift in the market indices. VaR is calculated using the RiskMetrics method with a holding period of 3 days and a confidence level of 99%. Alternative methods are used for contracts where it is not possible to perform a daily estimate of VaR such as stress test analysis. Under this method, in the case of extreme market movements, with a confidence level of 99% and a holding period of 3 days, the maximum estimated loss on the derivatives in question was 2,948 thousand euro at December 31, 2022 (1,673 thousand euro at December 31, 2021). In order to ensure closer monitoring of activities, VaR and Stop Loss (the sum of VaR, P&L Realized and P&L Unrealized) limits are also set. The following are the results of the assessments: thousands of euro 12 31 2022 12 31 2021 Value at Risk (VaR) VaR Stop Loss VaR Stop Loss Confidence level 99%, holding period 3 days (2,948) (2,948) (1,673) (1,673) b. Interest rate risk The Group is exposed to the risk that changes in the interest rate curve result in changes in economic results, cash flows and the value of assets and liabilities measured at fair value. The volatility of financial expenses associated to the performance of interest rates is monitored and mitigated through a policy of interest rate risk management aimed at identifying a balanced mix of fixed-rate and floating rate loans and the use of derivatives that limit the effects of fluctuations in interest rates. The book value of bank borrowings and other financing may be analyzed as follows at December 31, 2022: millions of euro 12 31 2022 12 31 2021 No derivatives With derivatives % with derivatives No derivatives With derivatives % with derivatives Fixed rate 4,849 4,969 78% 3,603 3,750 79% Variable rate 1,559 1,439 22% 1,144 997 21% Total 6,408 6,408 100% 4,747 4,747 100% At December 31, 2022, the following are the hedging instruments for interest rate risk: millions of euro 12 31 2022 12 31 2021 Hedging instrument Hedged asset Fair value Notional Fair value Notional Collar Floating rate loan (0.1) 19.0 (1.6) 38.1 Total (0.1) 19.0 (1.6) 38.1 2 Value at Risk: statistical measurement of the maximum potential drop in the fair value of an asset portfolio in the event of unfavourable movements in the market with a given time horizon and confidence level. Notes 2022 Separate financial statements A2A 89 With reference to the accounting treatment, hedging derivatives for interest rate risk can be classified as follows: millions of euro Accounting treatment Type of derivatives Financial assets Financial liabilities Notional at: Fair value at: Notional at: Fair value at: 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 Cash flow hedge Collar - - - - 19.0 38.1 (0.1) (1.6) Total - - - - 19.0 38.1 (0.1) (1.6) The table below shows the technical characteristics and accounting treatment of derivatives existing at December 31, 2022: A2A performs sensitivity analysis by estimating the effects on the value of financial statement items relating to the portfolio of financial instruments deriving from changes in the level of interest rates. Hedged loan Derivative Accounting A2A S.p.A. loan with BEI: expiring in November 2023, residual balance at December 31, 2022 amounting to 19.0 million euro, at variable rate. Collar to fully cover the loan and the same maturity, with a floor on Euribor rate 2.99% and 4.65% cap. At December 31, 2022, the fair value was negative for 0.1 million euro. The loan is measured at amortized cost. The collar is a cash flow hedge, with 100% recognized in a specific equity reserve. In particular, the sensitivity analysis measures the potential impact on the Income Statement and shareholders’ equity of different market scenarios that would determine the change in fair value of derivative financial instruments and the change in financial expenses related to the portion of gross debt not hedged. These market scenarios are obtained by shifting the reference interest rate curve at the reporting date up and down in parallel. Keeping all other variables constant, the pre-tax result is impacted by changes in the level of interest rates as follows: millions of euro Effect on the Income statement (before tax) Effect on Equity (before tax) -50 bps +50 bps -50 bps +50 bps Change in financial expenses on gross variable-rate debt after hedging 3.2 (5.1) - - Change in fair value of derivative financial instruments classified as non-hedge - - - - Change in fair value of derivative financial instruments classified as hedge (excluding BCVA as per IFRS 13): Cash flow hedge - - - - Fair value hedge - - - - 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 90 A2A Separate financial statements 2022 Notes c. Exchange rate risk not related to commodities The Group is exposed to the risk that changes in exchange rates with respect to the currency of account may lead to changes in its results of operations and cash flows. In relation to exchange rate risk other than that included in the price of commodities, the hedging instrument at December 31, 2022 is as follows: millions of euro 12 31 2022 12 31 2021 Hedging instrument Hedged asset Fair value Notional Fair value Notional Cross Currency IRS Fixed rate loan in foreign currency 7.2 98.0 (9.0) 98.0 Total 7.2 98.0 (9.0) 98.0 The accounting treatment of the derivative indicated above is as follows: millions of euro Accounting treatment Type of derivatives Financial assets Financial liabilities Notional at: Fair value at: Notional at: Fair value at: 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 Cash flow hedge CCIRS - - - - 98.0 98.0 7.2 (9.0) Total - - - - 98.0 98.0 7.2 (9.0) In particular, the underlying of the Cross Currency IRS derivative refers to the bond at fixed rate of 14 billion yen with maturity 2036 bullet issued in 2006. A cross currency swap contract was stipulated for the entire duration of this loan, which converts the principal and interest payments from yen into euro. At December 31, 2022, the fair value of the hedge was positive for 7.2 million euro. The fair value and, as a consequence, the effect on equity, would improve by 14.3 million euro in the event of a 10% increase in the forward curve of the euro/yen exchange rate with an appreciation of the yen, while it would worsen by 4.4 million euro in the event of a 10% drop in the forward curve of the euro/yen exchange rate with a depreciation of the yen. This sensitivity analysis was performed with the aim of calculating the effect of changes in the forward curve of the euro/yen exchange rate on the fair value ignoring any impact on the adjustment due to the bCVA. d. Liquidity risk Liquidity risk is the risk that the Group is unable to meet its obligations in a timely manner or that it is able to do so under unfavourable economic conditions due to situations of tension or systemic crisis or to the changed perception of its riskiness by the market. This risk includes: i) the risk related to the company’s inability to raise new funds (Funding Risk) and, ii) the risk related to the company’s inability to liquidate assets on the market in a timely manner and at market conditions (Liquidity Market Risk). One of the main factors influencing the market’s perceived riskiness is the creditworthiness of A2A assigned by rating agencies. This judgement plays a very important role because it influences the ability of A2A to access sources of financing as well as the related costs. A deterioration in creditworthiness could lead to a limitation of access to the capital market and/or financing costs with a negative impact on the economic, financial and equity situation. A2A has a medium- and long-term rating of BBB (negative outlook) with S&P and Baa2 (negative outlook) with Moody’s. The profile of the gross debt maturities of A2A for loans from banks and other lenders is summarized as follows: millions of euro Accounting balance 12 31 2022 Portions maturing within 12 months Portions maturing beyond 12 months Portions maturing by 12 31 2024 12 31 2025 12 31 2026 12 31 2027 After Bonds 4,950 338 4,612 300 299 596 297 3,120 Loans 1,458 483 975 219 75 61 358 262 Total 6,408 821 5,587 519 374 657 655 3,382 Notes 2022 Separate financial statements A2A 91 The risk management policy is realized through (i) a debt management strategy diversified by funding sources and maturities, and (ii) maintenance of financial resources sufficient to meet scheduled and unexpected commitments over a given time horizon. At December 31, 2022, the company had a total of 3,999 million euro, as follows: (i) committed revolving credit lines for 1,660 million euro, of which: a) 600 million euro maturing in 2023, b) 560 million euro maturing in 2025 and c) 500 million euro maturing in 2026, not used; (ii) cash and cash equivalents totalling 2,339 million euro. A2A also maintains a Bond Issue Program (Euro Medium Term Note Programme) of 6 billion euro, of which 1,150 million euro available at December 31, 2022. Over the years, A2A has embarked on a path of issues with ESG characteristics, in the form of Green Bonds and Sustainability-Linked Bonds. For A2A, the failure to meet certain sustainability KPI (ESG) targets may lead to an increase in the financing costs of the debt instruments to which these KPIs are linked. Similarly, failure to realize investments financed with Green Bonds may result in a risk of lack of access to certain sources of financing. The following table analyses the worst case for financial liabilities (including trade payables) in which all of the flows shown are undiscounted future nominal cash flows determined on the basis of residual contractual maturities for both principal and interest; they also include the undiscounted nominal flows of derivative contracts on interest rates. 12 31 2022 millions of euro 1- 3 MONTHS 4- 12 MONTHS BEYOND 12 MONTHS Bonds 19 379 5,165 Payables and other financial liabilities 55 1,122 1,110 Total financial flows 74 1,501 6,275 Payables to suppliers 483 11 2 Total trade payables 483 11 2 12 31 2021 millions of euro 1- 3 MONTHS 4- 12 MONTHS BEYOND 12 MONTHS Bonds 530 35 3,474 Payables and other financial liabilities 1 80 989 Total financial flows 531 115 4,463 Payables to suppliers 172 12 4 Total trade payables 172 12 4 e. Credit risk Credit risk relates to the possibility that a counterparty may be in default, or fail to respect its commitment in the manner and timing provided by contract. This type of risk is managed by the Group through specific procedures (Credit Policy, Energy Risk Management procedure) and appropriate mitigation actions. This risk is overseen by both the Credit Management function allocated centrally (and the corresponding functions of the operating companies) and the Group Risk Management Organizational Unit responsible for supporting the Group companies. Risk mitigation is through the prior assessment of the creditworthiness of the counterparty and the constant verification of compliance with exposure limit as well as through the request for adequate guarantees. The credit terms granted to customers as a whole have a variety of deadlines, in accordance with applicable law and market practice. In cases of delayed payment, default interest is charged as explicitly prescribed by the underlying supply contracts or by current law (application of the default rate as per Legislative Decree 231/2002). Trade receivables are recognized on the balance sheet net of any write-downs. It is felt that the amount shown provides and accurate representation of the fair value of the trade receivables portfolio. For the aging of trade receivables, reference is made to note 7) Trade receivables. 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 92 A2A Separate financial statements 2022 Notes f. Equity risk A2A S.p.A. was not exposed to equity risk at December 31, 2022\. In particular, it should be noted that A2A S.p.A. did not hold any treasury shares at December 31, 2022. As prescribed by IAS/IFRS, treasury shares do not constitute an equity risk as their purchase cost is deducted from equity, and even if they are sold any gain or loss on the purchase cost does not have any effect on Income statement. g. Covenants non-compliance risk Bonds, loans, leases and committed revolving bank lines present terms and conditions in line with market practice for each type of instrument. In particular, they envisage: (i) negative pledge clauses as a result of which the parent company undertakes not to constitute collateral on its assets and those of its relevant subsidiaries (as defined from time to time in the related documentation), with the provision of some exceptions and a threshold maximum permitted specifically identified; (ii) cross default/acceleration clauses that entail the obligation of immediate repayment of bonds and loans in the event of serious defaults; (iii) clauses that provide for the obligation of immediate repayment of bonds and loans in the event of insolvency or other insolvency proceedings of the parent company or its relevant subsidiaries. The bonds include (i) senior unsecured bonds for a nominal amount of 4,850 million euro (book value at December 31, 2022 equal to 4,848 million euro) issued as part of the EMTN Programme, which provide to investors a Change of Control Put option in the event of a change of control of the parent company resulting in a consequent downgrade of the rating to sub-investment grade level in the following 180 days (if within these 180 days, the company’s rating returns to investment grade, the option may not be exercised); (ii) a bond in yen placed privately with a maturity in 2036 for a nominal amount of 98 million euro (book value at December 31, 2022 equal to 101 million euro), which provides to the investor a Put option in the event that the rating of the parent company is lower at BBB- or equivalent level (sub-investment grade). The loans stipulated with the European Investment Bank (EIB), for a total nominal debt of 605 million euro and a book value of 606 million euro, of which 262 million have a maturity of more than five years, include (i) a credit rating clause (if rated lower than BBB- or equivalent sub-investment grade) that provides for the obligation of A2A to inform EIB in the event of a rating downgrade and, in such circumstance, the right of EIB to request additional guarantees from A2A and, where such guarantees are not provided or are not satisfactory to EIB, the right to request early repayment of the loan, and ii) a change of control clause of the parent company, with the right for the bank to invoke, subject to notice to the company containing the reasons, early repayment of the loan. The committed revolving bank lines of A2A, for a total of 1,660 million euro, provide a Change of Control clause which, in the event of a change of control of the parent company causing a Material Adverse Effect, allows the majority of banks lending the line to request the line to be extinguished and any amounts drawn down to be repaid. As at 31 December 2022, there was no non-compliance with the above-mentioned covenants by A2A or its relevant subsidiaries. Analysis of forward transactions and derivatives Tests were performed to determine whether these transactions qualify for hedge accounting in accordance with International Accounting Standard IFRS 9\. In particular: 1) transactions qualifying for hedge accounting under IFRS 9: can be analyzed between transactions to hedge cash flows (cash flow hedges) and transactions to hedge fair value of assets and liabilities (fair value hedges). For the cash flow hedges, the accrued result is included in gross operating margin when realized on commodity derivatives and in the financial balance for interest rate and currency derivatives, whereas the future value is shown in equity. For fair value hedge transactions, the impacts in the Income Statement are recorded within the same line of the financial statements. 2) transactions not considered as hedges for the purposes of IFRS 9, can be: a. margin hedges: for all hedging transactions of cash flows or the market value in line with internal risk policies, the accrued result and future value are included in gross operating margin for commodity derivatives and in the financial balance for interest rate and currency derivatives; b. trading transactions: the accrued result and future value are recognized above gross operating margin for commodities transactions and in financial income and expense for interest rate and currency transactions. The use of derivatives in the A2A Group is governed by a coordinated set of procedures (Energy Risk Policy, Deal Life Cycle) which are based on industry best practices and designed to limit the risk of the Group being exposed to commodity price fluctuations, based on a cash flow hedging strategy. The derivatives are measured at fair value based on the forward market curve at the balance sheet date, if the asset underlying the derivative is traded on markets with a forward pricing structure. In the absence of a forward market curve, fair value is measured on the basis of internal estimates using models that refer to industry best practices. Notes 2022 Separate financial statements A2A 93 A2A S.p.A. uses “continuous-time” discounting to measure fair value. As a discount factor, it uses the interest rate for risk-free assets, identified in the Euro Overnight Index Average (EONIA) rate and represented in its forward structure by the Overnight Index Swap (OIS) curve. The fair value of the cash flow hedges has been classified on the basis of the underlying derivative contracts in accordance with IFRS 9\. In compliance with the provisions of IFRS 13, the fair value of an over-the-counter (OTC) financial instrument is determined taking into account the non-performance risk. To quantify the fair value adjustment attributable to this risk, A2A S.p.A. has, in line with best market practices, developed a proprietary model called the “bilateral Credit Value Adjustment” (bCVA), which takes into account changes in the creditworthiness of the counterpart as well as the changes in its own creditworthiness. The bCVA has two addends, calculated by considering the possibility that both counterparties go bankrupt, known as the Credit Value Adjustment (CVA) and the Debit Value Adjustment (DVA): • the CVA is a negative component and contemplates the probability that a counterparty defaults and, at the same time, A2A S.p.A. has a claim against the counterparty; • the DVA is a positive component and contemplates the probability that A2A S.p.A. defaults and, at the same time, a counterparty has a claim against A2A S.p.A.. The bCVA is therefore calculated with reference to the exposure, measured on the basis of the market value of the derivative at the time of the default, the probability of default (PD) and the loss given default (LGD). This latter item, which represents the non- recoverable portion of the receivable in the case of default, is measured on the basis of the IRB Foundation Methodology as stated in the Basel 2 accords, whereas the PD is measured on the basis of the rating of the counterparties (Internal Rating Based where not available) and the historic probability of default associated with this and published annually by Standard & Poor’s. Applying the above method did not result in significant changes in fair value measurements. 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 94 A2A Separate financial statements 2022 Notes Instruments Outstanding at December 31, 2022 A) On interest and exchange rates The following analyses show the outstanding amounts of derivative contracts stipulated and not expired at the balance sheet date, by maturity. thousands of euro Notional value (a) Balance sheet value (b) Progressive effect to Income statement (c) Due within 1 year Due in 1 to 5 years Due over 5 years to be received to be paid to be received to be paid to be received to be paid Interest rate risk management cash flow hedges as per IFRS 9 19,048 (59) not considered hedges as per IFRS 9 Total derivatives on interest rates - 19,048 - - - - (59) - Exchange rate risk management considered hedges as per IFRS 9 \- on commercial transactions \- on non-commercial transactions 98,000 7,168 not considered hedges as per IFRS 9 \- on commercial transactions \- on non-commercial transactions Total derivatives on exchange rates - - - - - 98,000 7,168 - (a) Represents the sum of the notional value of the elementary contracts that derive from any dismantling of complex contracts. (b) Represents the net receivable (+) or payable (-) recognized in the balance sheet following the measurement of derivatives at fair value. (c) Represents the adjustment of derivatives to fair value recognized progressively over time in the income statement from the stipulation of the contract to the present day. Notes 2022 Separate financial statements A2A 95 B) On commodities The following is an analysis of the commodity derivative contracts outstanding at the balance sheet date set up for the purpose of managing the risk of the fluctuations in the market prices of commodities. Volume by Maturity Notional Value Fair value Due within 1 year Due within two years Due within five years Balance sheet Value (*) Progressive effect to Income statement (**) Energy product price risk management Unit of measurement Quantity Thousands of euro Thousands of euro Thousands of euro A. Cash flow hedges as per IFRS 9, including: 32,386.9 \- \- Electricity TWh 0.6 0.2 0.1 126,609.3 48,153.3 \- Oil Bbl \- Coal Tonnes 70,000 15,692.0 (3,073.2) \- Natural Gas TWh 0.4 0.2 0.0 58,258.7 (11,642.6) \- Natural Gas Millions of cubic metres \- Natural Gas Degrees day \- Exchange rate Millions of dollars \- Emission rights Tonnes 535,000 452,000 84,457.6 (1,050.6) B. considered fair value hedges as per IFRS 9 - - C. not considered hedges as per IFRS 9 of which 268,359.4 299,669.2 C.1 hedge margin 219.8 (32.0) \- Electricity TWh \- Oil Bbl \- Natural Gas TWh \- Natural Gas Millions of cubic metres \- CO2 emission rights Tonnes 120,000 10,779.8 219.8 (32.0) \- Exchange rate Millions of dollars C.2 trading transactions 268,139.6 299,701.2 \- Electricity TWh 13.5 3.9 0.2 4,034,451.3 90,433.5 92,029.2 \- Natural Gas TWh 86.1 13.3 0.4 9,239,811.2 177,376.9 206,972.6 \- CO2 emission rights Tonnes 1,161,000 252,000 118,198.1 329.2 699.4 \- Environmental Certificates MWh \- Environmental Certificates Tep Total 300,746.3 299,669.2 (*) Represents the net receivable (+) or payable (-) recognized in the balance sheet following the measurement of derivatives at fair value. (**) Represents the adjustment of derivatives to fair value recognized over time in the Income Statement from stipulation of the contract to the present date. 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 96 A2A Separate financial statements 2022 Notes C) On investments At December 31, 2022, there are no derivatives on shareholdings like in the previous year. Financial and operating effects for derivative transactions in 2022 Effects on the balance sheet The following table shows the balance sheet figures at December 31, 2022, for derivative transactions. thousands of euro Notes Total Assets Non-current assets 7,168 Other non-current assets \- Derivatives 5 7,168 Current assets 2,861,586 Other current assets \- Derivatives 8 2,861,586 Total assets 2,868,754 Liabilities Non-current liabilities 59 Other non-current liabilities \- Derivatives 19 59 Current liabilities 2,560,840 Trade payables and other current liabilities \- Derivatives 20 2,560,840 Total liabilities 2,560,899 Notes 2022 Separate financial statements A2A 97 Effect on the income statement The following table sets out the income statement figures at December 31, 2022 arising from the management of derivatives. thousands of euro Notes Realised during the year Change in fair value during the year Amounts recognized in the Income statement Revenues 24 Revenues from the sale of goods Energy product price risk management and exchange rate risk management on commodities \- considered hedges as per IFRS 9 782,048 - 782,048 \- not considered hedges as per IFRS 9 916,477 3,718,247 4,634,724 Total revenues from the sale of goods 1,698,525 3,718,247 5,416,772 Operating expenses 25 Expenses for raw materials and services Energy product price risk management and exchange rate risk management on commodities \- considered hedges as per IFRS 9 (122,618) - (122,618) \- not considered hedges as per IFRS 9 (958,356) (3,418,578) (4,376,934) Total costs for raw materials and services (1,080,974) (3,418,578) (4,499,552) Total recognized in Gross operating income (*) 617,551 299,669 917,220 Financial balance 31 Financial income Interest rate risk management and equity risk management Income on derivatives \- considered hedges as per IFRS 9 - - - \- not considered hedges as per IFRS 9 - - - Total - - - Total Financial income - - - Financial expenses Interest rate risk management and equity risk management Expenses on derivatives \- considered hedges as per IFRS 9 (1,119) - (1,119) \- not considered hedges as per IFRS 9 - - - Total (1,119) - (1,119) Total Financial expenses (1,119) - (1,119) Total recognized in financial balance (1,119) - (1,119) (*) The figures do not include the effect of the net presentation of the negotiation margin of trading activities 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 98 A2A Separate financial statements 2022 Notes Classes of financial instruments To complete the analyses required by IFRS 7 and IFRS 13, the following table sets out the various types of financial instrument that are to be found in the various balance sheet items, with an indication of the accounting policies used and, in the case of financial instruments measured at fair value, an indication of where changes are recognized (Income statement or equity). The last column of the table shows the fair value of the instrument at December 31, 2021, where applicable. Criteria to measure the reported amount of financial instruments thousands of euro Notes Financial instruments measured at fair value with changes recognized in: Financial instruments measured at amortized cost Amount as stated in the consolidated balance sheet Fair value Income statement Equity (1) (2) (3) (4) Assets Other non-current financial assets Financial assets measured at fair value of which: -unlisted 5,157 5,157 n.a. -listed - - Financial assets held to maturity 96 96 96 Other non-current financial assets 1,356,163 1,356,163 1,356,163 Total other non-current financial assets 3 1,361,416 Other non-current assets 5 7,168 22,893 30,061 30,061 Trade receivables 7 3,654,978 3,654,978 3,654,978 Other current assets 8 2,801,486 60,100 117,626 2,979,212 2,979,212 Current financial assets 9 3,265,954 3,265,954 3,265,954 Cash and cash equivalents 11 2,338,465 2,338,465 2,338,465 Liabilities Financial liabilities Non-current and current bonds 16 and 21 99,198 4,512,352 4,611,550 4,611,550 Other non-current and current financial liabilities 16 and 21 2,531,122 2,531,122 2,531,122 Other non-current liabilities 19 59 3,455 3,514 3,514 Trade payables 20 4,606,634 4,606,634 4,606,634 Other current liabilities 20 2,533,127 27,713 164,965 2,725,805 2,725,805 (*) The fair value has not been calculated for receivables and payables not related to derivative contracts and loans as the corresponding carrying amount is a good approximation to this. (1) Financial assets and liabilities measured at fair value with the changes in fair value recognized in the Income Statement (2) Cash flow hedges (3) Financial assets available for sale measured at fair value with profit/loss recognized in equity (4) Loans and receivables and financial liabilities measured at amortized cost Notes 2022 Separate financial statements A2A 99 Fair value hierarchy IFRS 7 and IFRS 13 require that fair value classification of financial instruments to be based on the quality of the input source used to calculate the fair value. In particular, IFRS 7 and IFRS 13 set out three levels of fair value: • level 1: this level consists of financial assets and liabilities for which fair value is based on (unadjusted) prices for identical assets or liabilities quoted on active official or over-the-counter markets; • level 2: this level consists of financial assets and liabilities for which fair value is based on inputs other than quoted prices included within level 1 that are observable for the asset or liability either directly or indirectly; • level 3: this level consists of financial assets and liabilities for which fair value is based on unobservable market data. This level includes instruments measured on the basis of internal estimates made using proprietary methods based on best sector practice. An analysis of the assets and liabilities included in the three fair value levels is set out in the following “fair value hierarchy” table. thousands of euro Notes Level 1 Level 2 Level 3 Total Assets measured at fair value 3 888 4,269 5,157 Other non-current assets 5 7,168 7,168 Other current assets 8 2,861,586 2,861,586 Total assets 2,861,586 8,056 4,269 2,873,911 Non-current financial liabilities 16 99,198 99,198 Other non-current liabilities 19 59 59 Other current liabilities 20 2,538,291 11,142 11,407 2,560,840 Total liabilities 2,637,489 11,201 11,407 2,660,097 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 100 A2A Separate financial statements 2022 Notes 6) Main regulatory provisions regarding concessions and agreements in the sectors of activity in which the company operates Large hydroelectric derivation concessions The national discipline on large derivation hydroelectric concessions (i.e. plants with a nominal power greater than or equal to 3 MW) was originally dictated by R.D. december 11, 1933, no. 1775, which was based on the issuance of concessions by the State on a long-term basis. This regulatory framework was subsequently superseded first by electricity sector nationalization Law no. 1643/1962, which resulted in Enel taking over the majority3 of hydroelectric concessions with the relative recognition of an unlimited duration, and then by the liberalization of the market as a result of Legislative Decree no. 79/1999 (implementing Directive 96/92/EC), which introduced with art. 12 (and subsequent amendments) the principles of: • the temporariness of the concessions, establishing a validity period (2029) for concessions without expiration because they are owned by Enel and assigning the term of December 31, 2010 for concessions that have already expired or are expiring by that date; • contestability of concessions in the event of expiration, forfeiture or renunciation, providing, no later than 5 years before the expiration, the call for tenders by the competent administration (i.e. the Region) for the allocation of the same for consideration. Pending the reallocation of concessions, Legislative Decree 79/1999 (article 12, paragraph 8bis) provides that the outgoing concession holder is to continue to operate the concession under the same conditions as those laid down in the regulations and specifications in force. In this stalemate, some Regions have enacted laws aimed at regulating the “temporary continuation of operations” for expired concessions, also providing for the imposition of an additional fee. Article 11-quater of Law no. 12/2019 has, in part, further amended the rules governing large derivation hydroelectric concessions. The new rules provide that the Regions regulate with their own laws the methods, procedures and criteria for the allocation of concessions, which may be entrusted to economic operators identified through a tender, or to public/private joint ventures with selection of the private partner through a tender, or through forms of partnership under Legislative Decree 50/2016. Article 7 of Law no. 118 of August 5, 2022 (Annual Law for the Market and Competition 2021) established that the procedure for awarding the contract must be started within 2 years of the entry into force of the individual Regional Laws and, in any case, no later than December 31, 2023. The duration of the new concessions will be between 20 and 40 years, with the possibility of extending the maximum period by a further 10 years depending on the complexity of the project proposal and the amount of investment. The new rule provides that a specific regional measure (after consulting ARERA) will define: • a State fee to be paid on a six-monthly basis to the Regions, comprising a fixed component linked to the average nominal power of the concession and a variable calculated as a percentage of normalized revenues; • the possible obligation for the concessionaires to supply annually and free of charge 220 kWh per kW of concession power for at least 50% destined to public services of the provincial territories involved in the derivation. Concessions that have expired or are due to expire before December 31, 2024 may be exercised in temporary continuation for no longer than three years from the date of entry into force of the Annual Law for the Market and Competition 2021 (i.e. until August 27, 2025), subject to payment of an additional fee. In terms of compensation to outgoing operators, the rule prescribes: • for “wet works”: the transfer without compensation of ownership to the Regions, except for the compensation only of investments not yet amortized; • for “dry works”: the recognition of a residual value derived from accounting records or certified appraisal. In the event of non-inclusion in the project of the incoming concessionaire, removal and disposal of movable property is envisaged at the expense of the proposer, while immovable property remains the property of the entitled parties. In compliance with the provisions of the legislative framework and in line with the provisions of ARERA Resolution 490/2019/I/eel (“Guidelines for the issue of non-binding opinions on draft regional laws on state fees”4), the Lombardy Region, with article 31 of R.L. 23/2019 di Assestamento al Bilancio (Budget Reconciliation) 2020-22, has defined, starting from 2020, the obligation to supply free energy to the Region by all holders of concessions of large derivation (220 kWh for each kW of concession power), whether they are exercised before or after expiry, providing both the physical delivery and its monetization (even in full) to be calculated on the basis of an average hourly zonal price weighted on the quantity of electricity fed into the grid by the plant. In April 2020, the Lombardy Region approved Regional Law no. 5/2020 (amended with Regional Law no. 19/2021), which regulates the procedures for assigning concessions for large hydroelectric derivations and determines the state fee based on the new two- 3 With the exception of derivations in the ownership of self-producers, municipal companies and local authorities. 4 The variable component of the fee should be equal to a percentage, in any case defined by the Regions, of the sum of the products between the hourly quantity of electricity fed into the grid and the corresponding hourly zonal price recorded on the Day-Ahead Market (MGP), while the fixed component should derive from environmental and/or water-use-related assessments that are outside the Authority’s competence. Notes 2022 Separate financial statements A2A 101 component structure5, in addition to the additional fee payable by the outgoing concessionaire for the temporary continuation of expired concessions until the award procedures are completed (and, in any case, no later than July 31, 2024), determined on a reconnaissance basis at 20 €/kW. The Law also defines the criteria for the acquisition of assets pertaining to the concession (see “dry works” and “wet works”) by the Region and thereconnaissance activity aimed at the subsequent putting out to tender. The large-scale derivation hydroelectric concessions held by A2A S.p.A. located in Valtellina (with a nominal concession capacity of about 215 MW) have for the most part expired: the Lombardy Region with Regional Council Resolution (D.G.R.) no. X/7717 of December 28, 2022 allowed the temporary continuation of the year until December 31, 2023, confirming the payment of an additional fee and the non-application of the partial exemption from the state fee on the Premadio 1, Grosio, Lovero and Stazzona plants. Other A2A S.p.A. concessions (plants in Mese, Udine and Calabria with a total nominal concession capacity of about 345 MW), originally owned by Enel, expire in 2029\. 5 With reference to the fixed component, Council Resolution no. XI/6142 of March 21, 2022 updated the 2021 tariff of 35 euro/kW following the application of the annual variation of the ISTAT index on the industrial price for the production, transport and distribution of electricity, setting it at 46.13 euro/kW for 2022. 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 102 A2A Separate financial statements 2022 Notes 7) Update of the main legal and tax disputes still pending Adequate provisions are provided where necessary for the disputes and litigation described below. It is noted that if there is no explicit reference to the presence of a provision, the company assessed the corresponding risk as possible without appropriating provisions in the financial statements. It should be noted that certain disputes illustrated in previous financial statements and still pending are not further reported due to the absence of updates or the cessation of the previous risk situation. Reorganization of Edison \- compensation cases Carlo Tassara: first lawsuit for damages against EDF and A2A S.p.A. On March 24, 2015, Carlo Tassara S.p.A. notified A2A, Electricité de France (EDF) and Edison a summons requesting the Court of Milan to condemn A2A and EDF to compensation for damages allegedly suffered by Carlo Tassara, in its capacity as minority shareholder of Edison, in relation to the mandatory tender offer launched by EDF on Edison shares consequently to the transaction by which, in 2012, A2A sold its indirect shareholding in Edison to EDF and simultaneously acquired 70% of the capital of Edipower from Edison and Alpiq. In the summons notified, Carlo Tassara complained that, in the transaction, EDF and A2A agreed on a mutual “discount” on the price paid by EDF for the purchase of Edison shares, on the one hand, and on the price paid by A2A for the purchase of 70% of Edipower, on the other. This discount was expected to be the result of abusive conduct by EDF and A2A as shareholders of Edison and the violation, among other things, of the regulations on transactions with related parties. This \- according to Carlo Tassara \- was expected to allow maintaining artificially low the price of the Edison shares paid to A2A and consequently the tender offer price paid to minorities of Edison (which by law was expected to be equal to that paid to A2A). The writ of summons did not quantify the damage allegedly suffered by Carlo Tassara as a result of such transactions. However, with brief on February 20, 2017, Carlo Tassara requested the judge (who rejected the preliminary request) to have an expert witness to calculate the damages (specifying that they should have been quantified in the alleged difference between the tender offer price and the market value that the Edison shares had previously). Carlo Tassara also filed an appraisal in which such damages were quantified in a total amount between 197 and 232 million euro, amount to calculate the compensation due from each of the companies that will be considered responsible by the judge. After several postponements justified also by modifications of the judge, on October 17, 2018, the judge rejected the requests for investigation of the plaintiffs, setting March 19, 2019 as the hearing for clarification of conclusions. On September 8, 2021, the Milan Business Court filed Sentence 7859 rejecting all of the claims made by Carlo Tassara S.p.A., without accepting the reconstruction according to which the shareholders acted to cause an undervaluation of Edison and Edipower. According to the Business Court of First Instance, in the case submitted, the conditions for assessing management and coordination are not met. The Court also found that the price of Edison shares, at which EDF purchased its shares during the tender offer, was not subject to review because it was the price defined by Consob pursuant to article 106 of the TUF; the sentence also highlights the difference between the price of Edison shares and the value of the Edipower subsidiary and, more importantly, the price at which the latter was sold to A2A. Carlo Tassara S.p.A. served a writ of summons on the appeal and A2A S.p.A. entered an appearance requesting that the Tassara S.p.A. appeal be declared inadmissible as well as groundless, and re-proposed the exceptions, defenses and requests raised in the first level of judgement for full protection. At the first hearing on March 2, 2022, the judge adjourned the case to July 12, 2023 for clarification of conclusions. Carlo Tassara: second lawsuit for damages against Transalpina dell’Energia and A2A S.p.A. On April 14, 2022, Carlo Tassara S.p.A. served a new summons on the Court of Milan, requesting that Transalpina Di Energia and A2A be ordered, jointly and severally with each other, to pay Carlo Tassara S.p.A. the damages that will be quantified in the course of the proceedings, after ascertaining and declaring the liability of the two companies for the breach of article 106 TUF (Total Tender Offer). In the writ of summons, Carlo Tassara S.p.A. quantifies the damage caused by the write-down of the value of its equity investment in Edison at 316,843,562.97 euro, figure resulting from the theoretical value of the tender offer calculated by Carlo Tassara S.p.A. on the basis of: a) Value of Edison shares recorded in the financial statements by TDE and A2A (1.5003 euro/share); b) Value assigned by Edison in fair value appraisals (1.3 euro/share); c) Highest edict value identified by Consob (0.95 euro/share); d) Market value to be defined by the Court. The writ of summons provides a description of the facts related to the extraordinary transaction to be ascertained: (i) the avoidance and violation of article 106 of the TUF and (ii) the demonstration of the existence of an alleged pact between the two defendants to depress Edison’s value, prior to launching a takeover bid \- with the consequent violation of the rule protecting minority shareholders of listed companies and non-achievement of the latter of: (i) control price and (ii) market price of the Edison shares held by Carlo Tassara S.p.A. In anticipation of the first hearing set for January 11, 2023, A2A entered an appearance and illustrated the grounds for the rejection of the appeal; at the hearing, the judge declared the default of TDE (which did not enter an appearance and did not appear at the hearing) and, Notes 2022 Separate financial statements A2A 103 on January 12, 2023, with an order outside the hearing, adjourned the case for the definition of the conclusions to July 4, 2023, in order to allow the panel, before considering the merits of the deeded claims, to examine the procedural objections raised by A2A. Class Action notified by ordinary shareholder On May 4, 2022, a natural person shareholder, owner \- at the date of the reorganization transactions of Edison S.p.A. \- of 1,250,000 ordinary shares of Edison S.p.A. (equal to 0.025% of the share capital of Edison S.p.A.), served a summons pursuant to article 140-bis of Legislative Decree September 6, 2005, no. 206 of the Consumer Code for a class action before the Business Court of Milan, seeking an order that Transalpina Di Energia and A2A, jointly and severally with each other, pay to itself, and to all class members who joined the action within the terms that may be set by the Court after declaring the admissibility of the action, compensation for damages to be quantified in the course of the proceedings, after ascertaining and declaring the liability of the two companies for the breach of article 106 TUF (Total Tender Offer). The factual reconstruction proposed by the plaintiff and the alleged liability of the two defendant companies retrace the contents of the writ of summons served a few weeks earlier by Carlo Tassara S.p.A. (reference is therefore made to the statement of this position). The hearing was held on November 24, 2022 and on January 12, 2023, the Court filed an order in which it declared the class action request inadmissible, accepting the objections and defences of A2A and sentencing the plaintiff to pay A2A legal expenses and to publish the operative part of the order in "Il Sole 24 Ore" within the following 30 days, the term in which the order may be appealed to the Court of Appeal, called to set hearing and term for notification. On March 1, 2023, the original applicant served the complaint filed in the Court of Appeal and the order setting the hearing for May 10, 2023. The company, having fulfilled the requirements of the regulations in force, does not consider likely the risk for which it has not allocated any provisions. Derivations of public water for the production of hydroelectricity in Lombardy A number of appeals are still pending in which A2A and Linea Green have challenged the measures issued by the Lombardy Region to regulate the continuation of water derivation for hydroelectric use even after the expiry of their respective concessions. In particular, D.G.R. (Regional Council Resolution) of Lombardy no. 5130/2016 ordered, by implementing paragraph 5 of art. 53-bis of Regional Law 26/2003 introduced by Regional Law 19/2010, the subjection of the Lombardy hydroelectric concessions already expired to an “additional fee” established “provisionally” at 20 €/kW of nominal power of concession, and reserved the request for settlement at the outcome of the assessments by the regional offices regarding the profitability of expired concessions. The additional fee was imposed retroactively from the original expiry of each concession; therefore, for the Grosotto, Lovero and Stazzona concessions, it would be effective from January 1, 2011, for the Premadio 1 concession from July 29, 2013, for the Grosio concession from November 15, 2016 and for the Resio concession from December 31, 2010. A2A and Linea Green, which, like other operators, have always contested, also in the courts, the legitimacy, also constitutional, of article 53-bis, paragraph 5, of Regional Law 26/2003, have challenged before the Superior Court of Public Waters and, sometimes, where the Superior Court of Public Waters has ruled on the appeals of the companies, before the Court of Cassation and other competent instances the D.G.R. 5130/2016 and the related and consequent measures that governed the conditions for the temporary continuation of each concession, and which, where provided for, ordered the revocation of the exemption of part of the State fee. A2A has also more recently challenged the orders whereby the Lombardy Region ordered the company to pay the amount allegedly due for the operation of the large derivations of Grosio, Cancano-Premadio 1, Lovero and Stazzona due to the company’s failure to pay that part of the state fee that is exempt pursuant to article 73 of Royal Decree 1775/1933, a benefit allegedly revoked by some of the resolutions that governed the provisional continuation of the concession after its expiry. This and other related litigation are still ongoing. The case brought by A2A in order to obtain the cancellation of the regional resolutions that governed the temporary continuation of the Cancano-Premadio 1 concession ended with the rejection sentence issued by the Joint Sections of the Supreme Court no. 15990/2020 and the judgement brought by A2A in order to obtain the cancellation of the regional resolutions that governed the temporary continuation of the Grosotto, Lovero and Stazzona concessions ended with the rejection sentence issued by the Joint Sections of the Supreme Court, no. 1043/2021. The provisions of the Regions concerning the temporary continuation of expired or expiring concessions could, as from 2019, be justified by the provisions introduced by the Conversion Law no. 12/2019 of Legislative Decree no. 135/2018, the constitutional compatibility of which is nevertheless controversial. In this last regard, it should be 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 104 A2A Separate financial statements 2022 Notes pointed out that A2A and Linea Green appealed before the TSAP for the annulment of General Director Decree (D.D.G.) no. 10544/2019 by means of which the Lombardy Region ascertained and determined the amounts allegedly owed by the concessionaires as additional fees for 2019, disputes subsequently integrated with reference to the additional fee for the years 2020 and 2021, and with these appeals, they also requested referral to the Constitutional Court of a matter of constitutional legitimacy in relation to the aforementioned provisions introduced by the law converting Decree Law Simplifications with regard to hydroelectric concessions. Also Regional Law 5/20 issued by the Lombardy Region in implementation of Law 12/2019 was submitted to the judgement of constitutionality by the Government, which, however, by Resolution of the Council of Ministers of November 24, 2021 after the amendments resulting from the entry into force of Regional Law no.19 November 4, 2021, waived the appeal. With reference to hydroelectric concessions, national Law 12/2019 also established that regions may introduce an obligation for concessionaires to provide 220 kWh annually and free of charge to the same regions for each kW of average nominal capacity of the concession. Availing itself of this faculty, with art. 31 Regional Law L.R. 23/2019 and, therefore, with Regional Council Resolution D.G.R. 3347/2020, the Lombardy Region regulated the obligation of free transfer of electricity with effect from the year 2020 for expired and unexpired derivation concessions. By Regional Council Resolution D.G.R. no. 191 of 02/11/2022, the Friuli-Venezia Giulia Region also regulated this obligation for expired and unexpired derivation concessions. The aforementioned regional implementation measures were challenged by A2A and Linea Green under various profiles before the TSAP and, at times, before the Court of Cassation. Finally, the same Law 12/2019 stipulated that concessionaires pay the regions a fee every six months, determined by a regional law, consisting of a fixed component and a variable component. A2A and Linea Green have challenged the Lombardy regional measures on various grounds. For disputes relating to public water derivation fees, the Company allocated adequate provisions for risks on a prudent basis, the quantification of which also takes into account the payments \- subject to any subsequent repayment upon the final outcome of the respective legal proceedings \- of certain positions, for the sole purpose of preventing additional costs. Judgments on the integration transaction between A2A and AEB S.p.A. With two initial appeals with cautionary request (R.G. 971/2020 submitted by CST Centro Servizi Termici (Thermal Service Center), DE.CA.BO. S.r.l. and Lombardy Regional Councillor Marco Fumagalli; R.G. 983/2020 submitted by Seregno Municipal Councillor Tiziano Mariani) filed with the Milan Regional Administrative Court, the resolution of the Seregno Municipal Council approving the merger between A2A and AEB was challenged; this resolution was suspended by Ordinances no. 868/2020 and no. 869/2020 by which the Regional Administrative Court accepted the precautionary requests submitted by the appellants and set the merit hearing for December 2, 2020\. On December 2, 2020, the third appeal was also discussed (R.G. 1095/2020 submitted by Idrotech and Ecoterm S.r.l.s.). A2A, the Municipality of Seregno and AEB have filed separate cautionary appeals before the Council of State to obtain the annulment and/or reform of the ordinances. The Council of State, at the outcome of the Council Chamber set for August 27, 2020, on August 28, 2020, upheld the appeals «due to the clear lack of legitimacy and interest of the claimants at first instance and the consequent clear lack of the assumption of direct and immediate harm involving the same claimants from the contested deeds, in view of the nature of the corporate change and the inapplicability of the transaction subject to the appeal at first instance». The resolution of the Municipality of Seregno, therefore, also took effect for the purposes of the corporate deeds that were in fact carried out. The company has evaluated the content of the Council of State’s ordinances and the appeals and, also in light of the position of the appointed lawyers, performed the company transaction, considering the prevalence of the principles of legal certainty and market confidence given the performance of corporate acts. On February 15, 2021, the Milan Regional Administrative Court published the judgments upholding the three appeals filed respectively by (i) CST Centro Servizi Termici di Calzolari Maurizio, Depositi Carboni Bovisa DE.CA.BO. S.r.l. and Marco Fumagalli (Councillor Lombardy Region) Sentence no. 412/21, (ii) Tiziano Mariani (Councillor Municipality of Seregno) Sentence no. 413/21 and (iii) Idrotech di Corno Irwin Maria Sentence no. 414/21. In order to enforce Sentence 413/21, Municipal Councillor Mariani has also appealed to the Milan Regional Administrative Court for a judgement of compliance. On March 2, 2021, the Regional Administrative Court, at the claimant’s request, issued a precautionary decree in which it denied single-court precautionary measures, but set a Council Chamber for March 24, 2021\. Following the hearing on the merits on April 28, 2021, with Sentence no. 1248 of May 20, 2021, the Regional Administrative Court rejected the appeal for compliance, on the grounds that delivery by AEB of the due diligence of the transaction to Councillor Mariani constituted full compliance with Sentence 413/21. In the same sentence, the Lombardy Regional Administrative Court (TAR) also specified that «not included in the compliance effect» of the ruling for which compliance was requested (i.e. of Sentence no. 413/21) are «the validity and effectiveness of the corporate deeds adopted as a consequence of the contested resolution, for which the administrative judge does not have jurisdiction (Civil Cassation, Joint Sections, Ordinance January 23, 2014, no. 1237; Sentence December 30, 2011, no. 30167; Council of State, Plenary Meeting, Sentence June 3, 2011 , no. 10)», thus confirming that the acceptance of the appeal proposed by the Director Mariani did not produce immediate effects on the company deeds that have occurred in the meantime. AEB and the Municipality of Seregno have filed an appeal with the Council of State requesting a suspension of the effects of Sentence 413/21. On March 22, 2021, the Council of State denied the suspension because it found that the ruling did not jeopardize the stability of the corporate integration transaction and, given the peculiarity and delicacy of the matter, scheduled a merit hearing as early as July 1, 2021\. A similar appeal has been filed \- without a request for precautionary measures \- by A2A. Notes 2022 Separate financial statements A2A 105 The Regional Administrative Court 412/2021 Sentences (CST and others) and 414/2021 (Idrotech and others) qualify the business combination as a transformation of AEB S.p.A. into a mixed company carried out in alleged violation of art. 17 Legislative Decree 175/16 and art. 3 Legislative Decree 50/16 and consider that the conditions do not exist for exemption from the procedures dictated by art. 10 of the same Legislative Decree no. 175/16. A2A, as well as AEB and the Municipality of Seregno, has notified appeal to the Council of State to request the annulment of the sentences. The public hearing to discuss the merits of the appeals was held on July 1, 2021, with the sole exception of the appeal notified by A2A against Sentence 413/21 not yet discussed. On September 1, 2021, the Council of State filed Sentence 6143 dismissing the appeals served by the Municipality and AEB against Sentence 413/21 (Director Mariani). A2A was also notified of the sentence on September 2\. On September 1, 2021, the Council of State also filed Sentence 6142 by which it rejected the appeals notified by the Municipality, AEB and A2A against Sentence 414 of February 15, 2021 (which had upheld the appeals notified by Idrotech and Eco Term); and on September 6, 2021, the Council of State also filed Sentence 6213 by which it rejected the appeals notified by the Municipality, AEB and A2A against Sentence 412 of February 15, 2021 (which had upheld the appeal notified by Regional Councillor Fumagalli, CST and DE.CA.BO.). Also in these two cases, therefore, the annulment of the resolution passed by the Seregno City Council on April 20,2020 with number 17 was confirmed. Moreover, on September 3, 2021, the legal counsel of the appellants, Idrotech and Ecoterm, asked the Municipality, AEB and A2A to provide compensation for the damages suffered by the companies as a result of the illegitimate transaction carried out, announcing possible legal action in the event of inactivity. The Municipality replied, fulfilling its obligations to respond to the companies. A2A and AEB have appealed the sentences both before the Council of State by way of revocation and appeal by cassation. In its appeals for revocation, A2A claimed that the Council of State had made a factual error in two respects: on the one hand, in that it mistakenly deemed the companies claiming at first instance to be “operators in the sector” and, as such, legitimated to act against the merger between A2A and AEB; on the other, in that it mistakenly qualified the merger as a public-private partnership aimed at obtaining public assignments, without appreciating the fact that it was objectively unsuitable. In its appeals to the Supreme Court, A2A claimed both absolute lack of jurisdiction on the part of the administrative judge (since it decided on appeals lodged by parties without legitimacy) and excess of jurisdictional power due to exceeding the limits of administrative jurisdiction (since the Council of State’s pronouncements invaded the sphere of regulatory production reserved for the legislator, introducing an obligation to tender in corporate transactions with public companies that is not provided for by the law). The disputes were settled out of court with the original plaintiff companies with the settlement of the compensation claims made, without any acknowledgement of liability, and the consequent waiver by them of the appeals filed in first instance, the Regional Administrative Court rulings and their effects, and the Council of State rulings and their effects, and the waiver by A2A and AEB of the appeals for revocation and cassation. Following the opposition filed by BEA, in the revocation proceedings, in connection with these waivers, the Council of State set the hearing for October 6, 2022, at which the Council ordered an ex officio adjournment to November 3, 2022 to assess preliminary procedural issues. On March 1, 2023, the Council of State filed its rulings on the conclusion of the judgments filed by A2A, which it declared inadmissible, as a result of which it did not ascertain the inadmissibility due to the supervening lack of interest following the settlement and waiver of the first instance appeals by the original appellant companies. The judgments do not rule on the validity of the settlement and the previously ordered corporate actions. The Court of Cassation set the hearing for November 22, 2022 and filed its final orders: (i) Ordinance 219 of January 5, 2023 dismissed the AEB appeal against Sentence 6143/21 (Director Mariani) due to an interpretation of the lack of jurisdiction and the failure of the Municipal Councillor to abandon the original appeal and the resulting sentence, (ii) Ordinances 300 (CST and Decabo position) and (iii) 301 (Idrotec and Ecoterm position) of January 9, 2023 declared the appeals inadmissible in the Court of Cassation, given the waiver by the four original appellant companies of the appeal and the first and second instance rulings with the consequent lack of interest in the appeals. Monza Public Prosecutor’s Office \- Criminal Proceeding no. 1931/2021 R.G.N.R. On July 5, 2021, officers and agents of the Guardia di Finanza of Seregno showed up at the headquarters of AEB S.p.A. in Seregno to execute “personal and local search orders” and “request for delivery \- local search order”. The proceedings, which in the initial phase were against unknown persons, originated from two complaints submitted to the Prosecutor’s Office on November 25, 2019 and on February 10, 2020 by Tiziano Mariani, Municipal Councillor of the Municipality of Seregno, who also notified an appeal to the Regional Administrative Court in the terms referred to above. 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 106 A2A Separate financial statements 2022 Notes The “personal and local search decree” concerns the Chair of the Board of Directors of AEB S.p.A and is also valid as “information of guarantee” pursuant to art. 369 of the Italian Code of Criminal Procedure for the person under investigation. On the basis of this decree, the Chair of AEB is being investigated, in conjunction with others (art. 110 of the Criminal Code), who have not been named, for the offences referred to in art. 353 bis Criminal Code (disturbance of the freedom of the procedure for choosing a contractor), 319 Criminal Code (bribery for an act contrary to the duties of office), 321 Criminal Code (penalties for the briber), committed between “October 2019 and in present permanency.” At the same time, AEB was served with a “request for delivery and a local search decree” with which the Monza Public Prosecutor’s Office ordered the acquisition of documentation concerning the transaction. Subsequently, on September 24, 2021, the Finance Police of Seregno, at the request of the Monza Public Prosecutor’s Office, appeared at the A2A Milan headquarters to serve, as part of Procedure no. 1931/2021 R.G.N.R. relating to the merger between the A2A and AEB Groups, a notice of non-repeatable technical checks on the IT supports already previously seized, with the appointment on October 8, 2021 of a consultant appointed by the Public Prosecutor’s Office to make the forensic copy. The deed in question was notified to persons, other than the current directors of A2A S.p.A., who in A2A S.p.A., Unareti S.p.A. and A2A Illuminazione Pubblica S.r.l. had positions of responsibility, or considered such, for various reasons in the project in question and also contains information about the guarantee and the right of defense in relation to the investigation concerning the hypotheses of crime pursuant to articles 110 of the Italian Criminal Code (conspiracy), 353 bis Criminal Code (disturbance of the freedom of the procedure for choosing a contractor), 319 Criminal Code (bribery for an act contrary to the duties of office), 321 Criminal Code (penalties for the corruptor). * * * The following information is provided in connection with the main litigation of a fiscal nature: A2A S.p.A. \- Registration tax for transfer of business unit and sale of the investment Chi.na.co. S.r.l. On April 4, 2016, the Provincial Directorate I of Milan \- Regional Office of Milan 1 \- notified the invitation to appear to provide clarifications on a business transfer in the company Chi.na.co. S.r.l. and the subsequent sale of the investment held in it under control for registration tax purposes. The invitation was followed by a contradictory with the Office and subsequent notification by the latter of the notice of liquidation to the acquiring counterparty, which filed an appeal on September 28, 2016\. The Provincial Tax Commission of Milan rejected the appeal with sentence filed on July 07, 2017\. On February 13, 2018, the acquiring company filed an appeal, which was rejected by the Milan Regional Administrative Court. On April 8, 2019, the Company filed an appeal with the Supreme Court. On February 21, 2020, the Office filed a counter-appeal and a cross-appeal with the Supreme Court. The risks provision recognized for 1.4 million euro was fully used for the payment of the amounts requested with the liquidation notice. A2A S.p.A. (merging company of AMSA Holding S.p.A.) \- VAT Tax assessments for tax years from 2001 to 2005 In early 2006, the Italian Finance Police – Lombardy Regional Unit, Milan – carried out a tax audit of AMSA Holding S.p.A. (now A2A S.p.A.) for VAT purposes for tax years 2001 to 2005. The audit ended with the issue of a final report contesting the legitimacy of the ordinary VAT rate, in place of the special rate applied by suppliers for waste disposal and plant maintenance, as well as the subsequent deduction made after the invoices issued for these services were duly paid. The report was followed by formal notices of assessment from the Tax Revenue Office – Milan 3 Office – for each year audited; appeals were then filed with the Provincial Tax Commission within the term provided by law. The appeals for 2001 and for 2004 and 2005 were discussed on January 25, 2010 and on February 17, 2010 respectively, with a favourable outcome for the company in all cases. The Tax Revenue Office appealed against the verdict of the first court. The Regional Tax Commission rejected this appeal for all three years, 2001, 2004 and 2005. For 2001, the Tax Revenue Office filed an appeal with the Supreme Court against which AMSA Holding S.p.A. (now A2A S.p.A.), filed a cross-appeal on November 9, 2012\. At the hearing on December 12, 2018, the Company requested that the case be suspended in order to assess the facilitated settlement of the dispute. On May 24, 2019, the company filed an application for a facilitated settlement of pending tax disputes and definitively settled its tax claim. The outcomes of the 2002 and 2003 disputes were also favourable for the company but the Tax Revenue Office filed an appeal against both sentences. The appeal for 2002 was discussed on November 30, 2010, and by way of a sentence lodged on February 2, 2011 the Milan Regional Tax Commission overturned the sentence of the first court, upholding the Tax Revenue Office’s appeal on almost all counts with the exception of the hazardous waste category. The Company filed an appeal with the Supreme Court for 2002\. The hearing was held on December 12, 2018 and the appeal was upheld and the judgement was adjourned to the Regional Technical Committee (CTR). On December 23, 2019, the Company filed an appeal for reinstatement in CTR and an appeal for revocation with the Supreme Court. For 2003 the appeal made by the Tax Revenue Office was discussed on November 7, 2011 before the Regional Tax Commission which rejected it with a sentence filed on November 11, 2011\. The Tax Revenue Office has not appealed to the Supreme Court for 2003, 2004 and 2005 and the sentence has become final, thereby closing the litigation. No provisions for risks have been recognized. Notes 2022 Separate financial statements A2A 107 8) Contingent assets arising from environmental certificates At December 31, 2022, A2A S.p.A. had a surplus of environmental certificates. 9) Auditors’ fees In accordance with Article 2427, paragraph 16-bis, of the Italian Civil Code, it is hereby reported that the company paid EY S.p.A. total fees for the legally required auditing of the annual accounts and for other services provided during the year in the amount of 362 thousand euro. 10) Registered office The registered office of the company is in Brescia in Via Lamarmora 230. 3 Notes 3.1 General information on A2A S.p.A. 3.2 Financial statements 3.3 Basis of preparation 3.4 Changes in international accounting standards 3.5 Accounting standards and policies 3.6 Notes to the balance sheet 3.7 Net debt 3.8 Notes to the income statement 3.9 Note on related party transactions 3.10 Consob Communication no. DEM/6064293 of July 28, 2006 3.11 Guarantees and commitments with third parties 3.12 Other information 4 Attachments 110 A2A Separate financial statements 2022 Attachments 4.1 1\. Statement of changes in tangible assets Tangible assets thousands of euro Balance at 12 31 2021 Changes Changes Balance at 12 31 2022 Acquisitions Changes in category Reclassifications/Other changes Disposals/Sales Write-down Depreciation Total changes Gross value Accumulated depreciation Gross value Accumulated depreciation Land 27,989 149 572 42 (42) (8) - - - 713 28,702 Buildings 153,715 1,833 3,422 (54) 42 (49) 45 - (7,848) (2,609) 151,106 Plant and machinery 634,199 1,383 9,732 (2,299) - - - - (58,875) (50,059) 584,140 Industrial and commercial equipment 4,943 764 - - - (1,084) 1,084 - (843) (79) 4,864 Other assets 14,280 9,128 - 214 - (1,865) 1,836 - (4,579) 4,734 19,014 Construction in progress and advances 43,851 25,943 (14,100) (127) - - - (4) - 11,712 55,563 Leasehold improvements 511 224 - - - - - - (111) 113 624 Assets for rights of use 54,731 - - 13,072 2,043 - - - (12,908) 2,207 56,938 Total tangible assets 934,219 39,424 (374) 10,848 2,043 (3,006) 2,965 (4) (85,164) (33,268) 900,951 Tangible assets thousands of euro Balance at 12 31 2020 Effect non-recurring transactions Changes Changes Balance at 12 31 2021 Acquisitions Changes in category Reclassifications/Other changes Disposals/Sales Write-down Depreciation Total changes Gross value Accumulated depreciation Gross value Accumulated depreciation Land 32,497 - - - (3,879) - (629) - - - (4,508) 27,989 Buildings 204,422 - 1,233 5,317 (92,234) 43,527 (2,617) 1,761 - (7,694) (50,707) 153,715 Plant and machinery 672,245 4,039 2,382 11,350 313 1 (64) 46 - (56,113) (42,085) 634,199 Industrial and commercial equipment 2,452 2,588 702 - - (1) (113) 113 - (798) (97) 4,943 Other assets 9,321 1,368 8,228 96 - - (865) 732 - (4,600) 3,591 14,280 Construction in progress and advances 23,854 4,730 33,397 (16,947) (60) - (10) - (1,113) - 15,267 43,851 Leasehold improvements 50 417 56 169 1 - (192) 192 - (182) 44 511 Assets for rights of use 55,578 2,187 - - 2,705 5,542 - - - (11,281) (3,034) 54,731 Total tangible assets 1,000,419 15,329 45,998 (15) (93,154) 49,069 (4,490) 2,844 (1,113) (80,668) (81,529) 934,219 Attachments 2022 Separate financial statements A2A 111 Tangible assets thousands of euro Balance at 12 31 2021 Changes Changes Balance at 12 31 2022 Acquisitions Changes in category Reclassifications/Other changes Disposals/Sales Write-down Depreciation Total changes Gross value Accumulated depreciation Gross value Accumulated depreciation Land 27,989 149 572 42 (42) (8) - - - 713 28,702 Buildings 153,715 1,833 3,422 (54) 42 (49) 45 - (7,848) (2,609) 151,106 Plant and machinery 634,199 1,383 9,732 (2,299) - - - - (58,875) (50,059) 584,140 Industrial and commercial equipment 4,943 764 - - - (1,084) 1,084 - (843) (79) 4,864 Other assets 14,280 9,128 - 214 - (1,865) 1,836 - (4,579) 4,734 19,014 Construction in progress and advances 43,851 25,943 (14,100) (127) - - - (4) - 11,712 55,563 Leasehold improvements 511 224 - - - - - - (111) 113 624 Assets for rights of use 54,731 - - 13,072 2,043 - - - (12,908) 2,207 56,938 Total tangible assets 934,219 39,424 (374) 10,848 2,043 (3,006) 2,965 (4) (85,164) (33,268) 900,951 Tangible assets thousands of euro Balance at 12 31 2020 Effect non-recurring transactions Changes Changes Balance at 12 31 2021 Acquisitions Changes in category Reclassifications/Other changes Disposals/Sales Write-down Depreciation Total changes Gross value Accumulated depreciation Gross value Accumulated depreciation Land 32,497 - - - (3,879) - (629) - - - (4,508) 27,989 Buildings 204,422 - 1,233 5,317 (92,234) 43,527 (2,617) 1,761 - (7,694) (50,707) 153,715 Plant and machinery 672,245 4,039 2,382 11,350 313 1 (64) 46 - (56,113) (42,085) 634,199 Industrial and commercial equipment 2,452 2,588 702 - - (1) (113) 113 - (798) (97) 4,943 Other assets 9,321 1,368 8,228 96 - - (865) 732 - (4,600) 3,591 14,280 Construction in progress and advances 23,854 4,730 33,397 (16,947) (60) - (10) - (1,113) - 15,267 43,851 Leasehold improvements 50 417 56 169 1 - (192) 192 - (182) 44 511 Assets for rights of use 55,578 2,187 - - 2,705 5,542 - - - (11,281) (3,034) 54,731 Total tangible assets 1,000,419 15,329 45,998 (15) (93,154) 49,069 (4,490) 2,844 (1,113) (80,668) (81,529) 934,219 4 Attachments 4.1 1\. Statement of changes in tangible assets 4.2 2\. Statement of changes in intangible assets 4.3 3/a. Statement of changes in investments in subsidiaries 4.4 3/b. Statement of changes in investments in affiliates 4.5 3/c. Statement of changes in investments in other companies 4.6 4/a. List of investments in subsidiaries 4.7 4/b. List of investments in affiliates 4.8 Key data of the financial statements of the main subsidiaries and affiliates prepared according to IAS/IFRS (pursuant to art. 2429.4 of the Italian Civil Code) 4.9 Key data of the financial statements of the main subsidiaries and affiliates prepared according to ITALIAN GAAP (pursuant to art. 2429.4 of the Italian Civil Code) 4.10 Certification of the financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98 112 A2A Separate financial statements 2022 Attachments 4.2 2\. Statement of changes in intangible assets Intangible assets thousands of euro Balance at 12 31 2021 Changes Changes Balance at 12 31 2022 Acquisitions Changes in category Reclassifications/Other changes Disposals/Sales Impairment/Reversal Amortization Total changes Gross value Accumulated amortization Gross value Accumulated amortization Industrial patent and intellectual property rights 23,880 6,942 3,696 (206) - - - - (13,669) (3,237) 20,643 Concessions, licences, trademarks and similar rights 39,236 29,529 8,076 (255) - (3) 3 - (23,840) 13,510 52,746 Goodwill 65,144 - - - - - - - - - 65,144 Assets in progress 15,978 14,774 (11,398) (16) - - - (209) - 3,151 19,129 Other intangible assets 2,146 514 - 8,178 - - - - (404) 8,288 10,434 Total intangible assets 146,384 51,759 374 7,701 - (3) 3 (209) (37,913) 21,712 168,096 Intangible assets thousands of euro Balance at 12 31 2020 Effect non-recurring transactions Changes Changes Balance at 12 31 2021 Acquisitions Changes in category Reclassifications/Other changes Disposals/Sales Amortization Total changes Gross value Accumulated amortization Gross value Accumulated amortization Industrial patent and intellectual property rights 16,495 94 6,326 10,885 (45) - - - (9,875) 7,291 23,880 Concessions, licences, trademarks and similar rights 27,810 988 27,803 1,616 (123) - - - (18,858) 10,438 39,236 Goodwill 35,641 29,503 - - - - - - - - 65,144 Assets in progress 18,648 158 12,287 (12,486) (88) - (2,541) - - (2,828) 15,978 Other intangible assets 2,225 2,356 - - (2,027) - - - (408) (2,435) 2,146 Total intangible assets 100,819 33,099 46,416 15 (2,283) - (2,541) - (29,141) 12,466 146,384 Attachments 2022 Separate financial statements A2A 113 Intangible assets thousands of euro Balance at 12 31 2021 Changes Changes Balance at 12 31 2022 Acquisitions Changes in category Reclassifications/Other changes Disposals/Sales Impairment/Reversal Amortization Total changes Gross value Accumulated amortization Gross value Accumulated amortization Industrial patent and intellectual property rights 23,880 6,942 3,696 (206) - - - - (13,669) (3,237) 20,643 Concessions, licences, trademarks and similar rights 39,236 29,529 8,076 (255) - (3) 3 - (23,840) 13,510 52,746 Goodwill 65,144 - - - - - - - - - 65,144 Assets in progress 15,978 14,774 (11,398) (16) - - - (209) - 3,151 19,129 Other intangible assets 2,146 514 - 8,178 - - - - (404) 8,288 10,434 Total intangible assets 146,384 51,759 374 7,701 - (3) 3 (209) (37,913) 21,712 168,096 Intangible assets thousands of euro Balance at 12 31 2020 Effect non-recurring transactions Changes Changes Balance at 12 31 2021 Acquisitions Changes in category Reclassifications/Other changes Disposals/Sales Amortization Total changes Gross value Accumulated amortization Gross value Accumulated amortization Industrial patent and intellectual property rights 16,495 94 6,326 10,885 (45) - - - (9,875) 7,291 23,880 Concessions, licences, trademarks and similar rights 27,810 988 27,803 1,616 (123) - - - (18,858) 10,438 39,236 Goodwill 35,641 29,503 - - - - - - - - 65,144 Assets in progress 18,648 158 12,287 (12,486) (88) - (2,541) - - (2,828) 15,978 Other intangible assets 2,225 2,356 - - (2,027) - - - (408) (2,435) 2,146 Total intangible assets 100,819 33,099 46,416 15 (2,283) - (2,541) - (29,141) 12,466 146,384 4 Attachments 4.1 1\. Statement of changes in tangible assets 4.2 2\. Statement of changes in intangible assets 4.3 3/a. Statement of changes in investments in subsidiaries 4.4 3/b. Statement of changes in investments in affiliates 4.5 3/c. Statement of changes in investments in other companies 4.6 4/a. List of investments in subsidiaries 4.7 4/b. List of investments in affiliates 4.8 Key data of the financial statements of the main subsidiaries and affiliates prepared according to IAS/IFRS (pursuant to art. 2429.4 of the Italian Civil Code) 4.9 Key data of the financial statements of the main subsidiaries and affiliates prepared according to ITALIAN GAAP (pursuant to art. 2429.4 of the Italian Civil Code) 4.10 Certification of the financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98 114 A2A Separate financial statements 2022 Attachments 4.3 3/a. Statement of changes in investmentsin subsidiaries Shareholdings thousands of euro Balance at financial statements 12 31 2021 Changes Balance at financial statements 12 31 2022 Share of equity Increases Decreases Other changes Reclassifications % held Equity at 12 31 2022 Pro-rata amount Financial assets Subsidiaries: Unareti S.p.A. 1,381,831 (42,995) 1,338,836 100.00% 1,381,358 1,381,358 A2A Ambiente S.p.A. 639,480 95,154 734,634 100.00% 683,386 683,386 A2A Calore & Servizi S.r.l. 330,627 57,323 387,950 100.00% 439,363 439,363 A2A Ciclo Idrico S.p.A. 167,000 167,000 100.00% 212,522 212,522 A2A gencogas S.p.A. 606,817 606,817 100.00% 680,918 680,918 A2A Energiefuture S.p.A. 189,730 189,730 100.00% 167,115 167,115 A2A Energia S.p.A. 122,545 122,545 100.00% 112,631 112,631 Retragas S.r.l. 30,105 30,105 87.27% 39,245 34,249 A2A Smart City S.p.A. 14,456 14,456 100.00% 13,448 13,448 Proaris S.r.l. in liquidation 3,557 3,557 60.00% 5,039 3,023 Camuna Energia S.r.l. 740 740 74.50% 1,031 768 SEASM S.r.l. 469 (469) - Linea Gestioni S.r.l. 21,064 (21,064) - LD Reti S.r.l. 153,895 153,895 95.60% 167,157 159,802 Linea Green S.p.A. 124,191 (99,385) 24,806 100.00% 28,642 28,642 Linea Ambiente S.r.l. 16,628 (16,628) - Fragea S.r.l. società agricola 245 (245) - AGRIPOWER S.p.A. 15,155 (15,155) - A2A Montenegro d.o.o. 102 102 100.00% 84 84 Azienda Servizi Valtrompia S.p.A. 10,758 10,758 74.55% 25,822 19,251 A2A Security S.c.p.A. 24 24 45.96% 492 226 A2A Energy Solution S.r.l. 4,575 4,575 100.00% 9,521 9,521 A2A Rinnovabili S.p.A. 50 50 100.00% 13,704 13,704 Acinque S.p.A. 190,422 190,422 41.34% 441,166 182,378 Ambiente Energia Brianza S.p.A. 158,638 158,638 33.52% 431,348 144,588 Yada Energia S.r.l. 20,010 20,000 40,010 100.00% 13,696 13,696 A2A E-MOBILITY S.r.l. 10 3,000 3,010 100.00% 1,687 1,687 ROMEO GAS S.p.A. 50 (43,045) 42,995 - ES Energy S.r.l. 5 5 50.00% 910 455 A2A Alfa S.r.l. in liquidation - - 70.00% (17) (12) Total subsidiaries 4,203,179 23,000 (43,514) \- \- 4,182,665 4,870,268 4,302,803 Attachments 2022 Separate financial statements A2A 115 Shareholdings thousands of euro Balance at financial statements 12 31 2021 Changes Balance at financial statements 12 31 2022 Share of equity Increases Decreases Other changes Reclassifications % held Equity at 12 31 2022 Pro-rata amount Financial assets Subsidiaries: Unareti S.p.A. 1,381,831 (42,995) 1,338,836 100.00% 1,381,358 1,381,358 A2A Ambiente S.p.A. 639,480 95,154 734,634 100.00% 683,386 683,386 A2A Calore & Servizi S.r.l. 330,627 57,323 387,950 100.00% 439,363 439,363 A2A Ciclo Idrico S.p.A. 167,000 167,000 100.00% 212,522 212,522 A2A gencogas S.p.A. 606,817 606,817 100.00% 680,918 680,918 A2A Energiefuture S.p.A. 189,730 189,730 100.00% 167,115 167,115 A2A Energia S.p.A. 122,545 122,545 100.00% 112,631 112,631 Retragas S.r.l. 30,105 30,105 87.27% 39,245 34,249 A2A Smart City S.p.A. 14,456 14,456 100.00% 13,448 13,448 Proaris S.r.l. in liquidation 3,557 3,557 60.00% 5,039 3,023 Camuna Energia S.r.l. 740 740 74.50% 1,031 768 SEASM S.r.l. 469 (469) - Linea Gestioni S.r.l. 21,064 (21,064) - LD Reti S.r.l. 153,895 153,895 95.60% 167,157 159,802 Linea Green S.p.A. 124,191 (99,385) 24,806 100.00% 28,642 28,642 Linea Ambiente S.r.l. 16,628 (16,628) - Fragea S.r.l. società agricola 245 (245) - AGRIPOWER S.p.A. 15,155 (15,155) - A2A Montenegro d.o.o. 102 102 100.00% 84 84 Azienda Servizi Valtrompia S.p.A. 10,758 10,758 74.55% 25,822 19,251 A2A Security S.c.p.A. 24 24 45.96% 492 226 A2A Energy Solution S.r.l. 4,575 4,575 100.00% 9,521 9,521 A2A Rinnovabili S.p.A. 50 50 100.00% 13,704 13,704 Acinque S.p.A. 190,422 190,422 41.34% 441,166 182,378 Ambiente Energia Brianza S.p.A. 158,638 158,638 33.52% 431,348 144,588 Yada Energia S.r.l. 20,010 20,000 40,010 100.00% 13,696 13,696 A2A E-MOBILITY S.r.l. 10 3,000 3,010 100.00% 1,687 1,687 ROMEO GAS S.p.A. 50 (43,045) 42,995 - ES Energy S.r.l. 5 5 50.00% 910 455 A2A Alfa S.r.l. in liquidation - - 70.00% (17) (12) Total subsidiaries 4,203,179 23,000 (43,514) \- \- 4,182,665 4,870,268 4,302,803 4 Attachments 4.1 1\. Statement of changes in tangible assets 4.2 2\. Statement of changes in intangible assets 4.3 3/a. Statement of changes in investments in subsidiaries 4.4 3/b. Statement of changes in investments in affiliates 4.5 3/c. Statement of changes in investments in other companies 4.6 4/a. List of investments in subsidiaries 4.7 4/b. List of investments in affiliates 4.8 Key data of the financial statements of the main subsidiaries and affiliates prepared according to IAS/IFRS (pursuant to art. 2429.4 of the Italian Civil Code) 4.9 Key data of the financial statements of the main subsidiaries and affiliates prepared according to ITALIAN GAAP (pursuant to art. 2429.4 of the Italian Civil Code) 4.10 Certification of the financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98 116 A2A Separate financial statements 2022 Attachments 4.4 3/b. Statement of changes in investmentsin affiliates Shareholdings thousands of euro Balance at financial statements 12 31 2021 Changes Balance at financial statements 12 31 2022 Share of equity Increases Decreases Other changes Reclassifications % held Equity at 12 31 2021 (*) Pro-rata amount Financial assets Affiliates: SET S.p.A. 467 467 49.00% 2,834 1,389 Serio Energia S.r.l. 400 400 40.00% 1,988 795 Visano Società Trattamento Reflui S.c.a.r.l. 10 10 40.00% 26 10 Total affiliates 877 - - - - 877 4,848 2,194 Equity investments held for sale Sviluppo Turistico Lago d’Iseo S.p.A. 440 (403) 37 2.04% (*) Figures of the financial statements at December 31, 2021 latest available financial statements. Attachments 2022 Separate financial statements A2A 117 Shareholdings thousands of euro Balance at financial statements 12 31 2021 Changes Balance at financial statements 12 31 2022 Share of equity Increases Decreases Other changes Reclassifications % held Equity at 12 31 2021 (*) Pro-rata amount Financial assets Affiliates: SET S.p.A. 467 467 49.00% 2,834 1,389 Serio Energia S.r.l. 400 400 40.00% 1,988 795 Visano Società Trattamento Reflui S.c.a.r.l. 10 10 40.00% 26 10 Total affiliates 877 - - - - 877 4,848 2,194 Equity investments held for sale Sviluppo Turistico Lago d’Iseo S.p.A. 440 (403) 37 2.04% (*) Figures of the financial statements at December 31, 2021 latest available financial statements. 4 Attachments 4.1 1\. Statement of changes in tangible assets 4.2 2\. Statement of changes in intangible assets 4.3 3/a. Statement of changes in investments in subsidiaries 4.4 3/b. Statement of changes in investments in affiliates 4.5 3/c. Statement of changes in investments in other companies 4.6 4/a. List of investments in subsidiaries 4.7 4/b. List of investments in affiliates 4.8 Key data of the financial statements of the main subsidiaries and affiliates prepared according to IAS/IFRS (pursuant to art. 2429.4 of the Italian Civil Code) 4.9 Key data of the financial statements of the main subsidiaries and affiliates prepared according to ITALIAN GAAP (pursuant to art. 2429.4 of the Italian Civil Code) 4.10 Certification of the financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98 Attachments 2022 Separate financial statements A2A 119 4.5 3/c. Statement of changes in investments in other companies Company Name thousands of euro Shareholding % Shareholder Carrying amount at 12 31 2022 Available-for-sale financial assets Blugas Infrastrutture S.r.l. 27.51% A2A S.p.A. 4,269 Immobiliare-Fiera di Brescia S.p.A. 0.90% A2A S.p.A. 280 Others: AQM S.r.l. 7.52% A2A S.p.A. AvioValtellina S.p.A. 0.18% A2A S.p.A. Banca di Credito Cooperativo dell'Oglio e del Serio s.c. n.s. A2A S.p.A. L.E.A.P. S.c.a.r.l. 8.57% A2A S.p.A. E.M.I.T. S.r.l. in liquidation 10.00% A2A S.p.A. Stradivaria S.p.A. n.s. A2A S.p.A. DI.T.N.E. S.c.a.r.l. 1.82% A2A S.p.A. Sinergie Italiane S.r.l. in liquidation 14.92% A2A S.p.A. MUSA-Multilayered Urban Sustainability Action S.c.a.r.l. 7.00% A2A S.p.A. Total other financial assets 608 Total available-for-sale financial assets 5,157 Note: A2A S.p.A. took part in the setting up of Società Cooperativa Polo dell’innovazione della Valtellina, subscribing 5 shares having a nominal value of 50 euro. 4 Attachments 4.1 1\. Statement of changes in tangible assets 4.2 2\. Statement of changes in intangible assets 4.3 3/a. Statement of changes in investments in subsidiaries 4.4 3/b. Statement of changes in investments in affiliates 4.5 3/c. Statement of changes in investments in other companies 4.6 4/a. List of investments in subsidiaries 4.7 4/b. List of investments in affiliates 4.8 Key data of the financial statements of the main subsidiaries and affiliates prepared according to IAS/IFRS (pursuant to art. 2429.4 of the Italian Civil Code) 4.9 Key data of the financial statements of the main subsidiaries and affiliates prepared according to ITALIAN GAAP (pursuant to art. 2429.4 of the Italian Civil Code) 4.10 Certification of the financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98 120 A2A Separate financial statements 2022 Attachments 4.6 4/a. List of investments in subsidiaries Company Name thousands of euro Registered office Currency Share capital at 12 31 2022 Equity at 12 31 2022 Result at 12 31 2022 % held Pro-rata amount (a) Balance at financial statements (b) Delta (a-b) Subsidiaries: Unareti S.p.A. Brescia euro 965,250 1,381,358 50,557 100.00% 1,381,358 1,338,836 42,522 A2A Ambiente S.p.A. Brescia euro 250,000 683,386 141,746 100.00% 683,386 734,634 (51,248) A2A Calore & Servizi S.r.l. Brescia euro 150,000 439,363 40,848 100.00% 439,363 387,950 51,413 A2A Ciclo Idrico S.p.A. Brescia euro 70,000 212,522 12,622 100.00% 212,522 167,000 45,522 A2A gencogas S.p.A. Milan euro 450,000 680,918 15,965 100.00% 680,918 606,817 74,101 A2A Energia S.p.A. Milan euro 3,000 112,631 (9,806) 100.00% 112,631 122,545 (9,914) Retragas S.r.l. Brescia euro 34,495 39,245 (8) 87.27% 34,249 30,105 4,144 A2A Smart City S.p.A. Brescia euro 3,448 13,448 1,936 100.00% 13,448 14,456 (1,008) Proaris S.r.l. in liquidation Milan euro 1,875 5,039 (111) 60.00% 3,023 3,557 (534) Camuna Energia S.r.l. Cedegolo (BS) euro 900 1,031 19 74.50% 768 740 28 A2A Montenegro d.o.o. Podgorica (Montenegro) euro 100 84 (35) 100.00% 84 102 (18) A2A Energiefuture S.p.A. Milan euro 50,000 167,115 (28,936) 100.00% 167,115 189,730 (22,615) Azienda Servizi Valtrompia S.p.A. Gardone Val Trompia (BS) euro 8,939 25,822 662 74.55% 19,251 10,758 8,493 A2A Security S.c.p.A. Milan euro 52 492 69 45.96% 226 24 202 A2A Energy Solutions S.r.l. Milan euro 4,000 9,521 (125) 100.00% 9,521 4,575 4,946 A2A Rinnovabili S.p.A. Milan euro 50 13,704 12,145 100.00% 13,704 50 13,654 Acinque S.p.A. Monza euro 197,344 441,166 18,134 41.34% 182,378 190,422 (8,044) A2A Alfa S.r.l. in liquidation Milan euro 100 (17) (22) 70.00% (12) - (12) Yada Energia S.r.l. Milan euro 4,000 13,696 (10,671) 100.00% 13,696 40,010 (26,314) A2A E-MOBILITY S.r.l. Milan euro 1,000 1,687 (1,953) 100.00% 1,687 3,010 (1,323) Ambiente Energia Brianza S.p.A. Seregno (MB) euro 119,496 431,348 24,566 33.52% 144,588 158,638 (14,050) ES Energy S.r.l. Jesi (AN) euro 10 910 336 50.00% 455 5 450 LD Reti S.r.l. Lodi euro 32,976 167,157 7,490 95.60% 159,802 153,895 5,907 Linea Green S.p.A. Cremona euro 7,000 28,642 12,476 100.00% 28,642 24,806 3,836 Attachments 2022 Separate financial statements A2A 121 Company Name thousands of euro Registered office Currency Share capital at 12 31 2022 Equity at 12 31 2022 Result at 12 31 2022 % held Pro-rata amount (a) Balance at financial statements (b) Delta (a-b) Subsidiaries: Unareti S.p.A. Brescia euro 965,250 1,381,358 50,557 100.00% 1,381,358 1,338,836 42,522 A2A Ambiente S.p.A. Brescia euro 250,000 683,386 141,746 100.00% 683,386 734,634 (51,248) A2A Calore & Servizi S.r.l. Brescia euro 150,000 439,363 40,848 100.00% 439,363 387,950 51,413 A2A Ciclo Idrico S.p.A. Brescia euro 70,000 212,522 12,622 100.00% 212,522 167,000 45,522 A2A gencogas S.p.A. Milan euro 450,000 680,918 15,965 100.00% 680,918 606,817 74,101 A2A Energia S.p.A. Milan euro 3,000 112,631 (9,806) 100.00% 112,631 122,545 (9,914) Retragas S.r.l. Brescia euro 34,495 39,245 (8) 87.27% 34,249 30,105 4,144 A2A Smart City S.p.A. Brescia euro 3,448 13,448 1,936 100.00% 13,448 14,456 (1,008) Proaris S.r.l. in liquidation Milan euro 1,875 5,039 (111) 60.00% 3,023 3,557 (534) Camuna Energia S.r.l. Cedegolo (BS) euro 900 1,031 19 74.50% 768 740 28 A2A Montenegro d.o.o. Podgorica (Montenegro) euro 100 84 (35) 100.00% 84 102 (18) A2A Energiefuture S.p.A. Milan euro 50,000 167,115 (28,936) 100.00% 167,115 189,730 (22,615) Azienda Servizi Valtrompia S.p.A. Gardone Val Trompia (BS) euro 8,939 25,822 662 74.55% 19,251 10,758 8,493 A2A Security S.c.p.A. Milan euro 52 492 69 45.96% 226 24 202 A2A Energy Solutions S.r.l. Milan euro 4,000 9,521 (125) 100.00% 9,521 4,575 4,946 A2A Rinnovabili S.p.A. Milan euro 50 13,704 12,145 100.00% 13,704 50 13,654 Acinque S.p.A. Monza euro 197,344 441,166 18,134 41.34% 182,378 190,422 (8,044) A2A Alfa S.r.l. in liquidation Milan euro 100 (17) (22) 70.00% (12) - (12) Yada Energia S.r.l. Milan euro 4,000 13,696 (10,671) 100.00% 13,696 40,010 (26,314) A2A E-MOBILITY S.r.l. Milan euro 1,000 1,687 (1,953) 100.00% 1,687 3,010 (1,323) Ambiente Energia Brianza S.p.A. Seregno (MB) euro 119,496 431,348 24,566 33.52% 144,588 158,638 (14,050) ES Energy S.r.l. Jesi (AN) euro 10 910 336 50.00% 455 5 450 LD Reti S.r.l. Lodi euro 32,976 167,157 7,490 95.60% 159,802 153,895 5,907 Linea Green S.p.A. Cremona euro 7,000 28,642 12,476 100.00% 28,642 24,806 3,836 4 Attachments 4.1 1\. Statement of changes in tangible assets 4.2 2\. Statement of changes in intangible assets 4.3 3/a. Statement of changes in investments in subsidiaries 4.4 3/b. Statement of changes in investments in affiliates 4.5 3/c. Statement of changes in investments in other companies 4.6 4/a. List of investments in subsidiaries 4.7 4/b. List of investments in affiliates 4.8 Key data of the financial statements of the main subsidiaries and affiliates prepared according to IAS/IFRS (pursuant to art. 2429.4 of the Italian Civil Code) 4.9 Key data of the financial statements of the main subsidiaries and affiliates prepared according to ITALIAN GAAP (pursuant to art. 2429.4 of the Italian Civil Code) 4.10 Certification of the financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98 122 A2A Separate financial statements 2022 Attachments 4.7 4/b. List of investments in affiliates Company Name thousands of euro Registered office Currency Share capital at 12 31 2021 (*) Equity at 12 31 2021 (*) Result at 12 31 2021 (*) % held Pro-rata amount (a) Balance at financial statements (b) Delta (a-b) SET S.p.A. Toscolano Maderno (BS) euro 104 2,834 762 49.00% 1,389 467 922 Serio Energia S.r.l. Concordia sulla Secchia (MO) euro 1,000 1,988 30 40.00% 795 400 395 Visano Società Trattamento Reflui S.c.a.r.l. Brescia euro 25 26 \- 40.00% 10 10 \- (*) Figures of the financial statements at December 31, 2021 latest available financial statements. Attachments 2022 Separate financial statements A2A 123 Company Name thousands of euro Registered office Currency Share capital at 12 31 2021 (*) Equity at 12 31 2021 (*) Result at 12 31 2021 (*) % held Pro-rata amount (a) Balance at financial statements (b) Delta (a-b) SET S.p.A. Toscolano Maderno (BS) euro 104 2,834 762 49.00% 1,389 467 922 Serio Energia S.r.l. Concordia sulla Secchia (MO) euro 1,000 1,988 30 40.00% 795 400 395 Visano Società Trattamento Reflui S.c.a.r.l. Brescia euro 25 26 \- 40.00% 10 10 \- (*) Figures of the financial statements at December 31, 2021 latest available financial statements. 4 Attachments 4.1 1\. Statement of changes in tangible assets 4.2 2\. Statement of changes in intangible assets 4.3 3/a. Statement of changes in investments in subsidiaries 4.4 3/b. Statement of changes in investments in affiliates 4.5 3/c. Statement of changes in investments in other companies 4.6 4/a. List of investments in subsidiaries 4.7 4/b. List of investments in affiliates 4.8 Key data of the financial statements of the main subsidiaries and affiliates prepared according to IAS/IFRS (pursuant to art. 2429.4 of the Italian Civil Code) 4.9 Key data of the financial statements of the main subsidiaries and affiliates prepared according to ITALIAN GAAP (pursuant to art. 2429.4 of the Italian Civil Code) 4.10 Certification of the financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98 124 A2A Separate financial statements 2022 Attachments 4.8 Key data of the financial statements of the main subsidiaries and affiliates prepared according to IAS/IFRS (pursuant to art. 2429.4 of the Italian Civil Code) Subsidiaries Unareti S.p.A. A2A gencogas S.p.A. A2A Energiefuture S.p.A. A2A Ambiente S.p.A. A2A Calore & Servizi S.r.l. A2A Energia S.p.A. A2A Smart City S.p.A. Retragas S.r.l. A2A Ciclo Idrico S.p.A. Share capital Euro 965,250,000 Euro 450,000,000 Euro 50,000,000 Euro 250,000,000 Euro 150,000,000 Euro 3,000,000 Euro 3,448,276 Euro 34,494,650 Euro 70,000,000 % held A2A S.p.A. 100.00% A2A S.p.A. 100.00% A2A S.p.A. 100.00% A2A S.p.A. 100.00% A2A S.p.A. 100.00% A2A S.p.A. 100.00% A2A S.p.A. 100.00% A2A S.p.A. 87.27% Unareti S.p.A. 4.33% A2A S.p.A. 100.00% Description thousands of euro 12 31 2022 12 31 2021 Revised 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 Revenues 464,044 498,662 594,011 382,267 685,731 383,299 645,286 509,364 410,188 273,751 7,865,570 3,319,878 42,916 44,990 8,485 6,904 105,441 109,564 Gross operating income 209,376 251,300 110,030 57,945 (11,535) 44,559 232,555 205,365 94,250 84,478 104,793 180,363 9,913 2,790 2,805 4,759 42,127 58,894 Net operating income 73,790 116,662 39,017 (16,199) (22,068) 17,365 184,330 150,123 54,862 45,360 (3,145) 136,048 (1,491) (6,146) 105 2,259 19,706 37,470 Result before taxes 66,561 113,319 31,209 (21,731) (24,832) 17,293 192,443 159,440 50,104 41,554 (6,283) 136,974 1,644 (4,013) 104 2,259 17,436 36,176 Result of the year 50,557 83,115 15,965 25,475 (28,936) 11,053 141,746 124,281 40,848 40,841 (9,806) 96,771 1,936 (2,625) (8) 1,564 12,622 26,458 Assets 2,419,438 2,331,018 1,492,827 1,365,697 890,535 492,008 1,376,057 1,128,815 972,116 771,023 2,043,035 1,393,776 108,287 105,470 50,321 48,056 512,407 465,093 Liabilities 1,038,080 884,065 811,909 701,517 723,420 286,024 692,671 582,531 532,753 391,837 1,930,404 1,175,233 94,838 94,049 11,076 7,323 299,885 240,431 Equity 1,381,358 1,446,954 680,918 664,180 167,115 205,984 683,386 546,283 439,363 379,187 112,631 218,543 13,448 11,422 39,245 40,733 212,522 224,662 Net financial position (725,334) (499,678) (250,971) (223,436) 464,489 222,136 (208,819) (217,533) (348,639) (258,715) (377,039) (186,152) (58,118) (66,015) 11,741 11,643 (237,033) (189,326) Subsidiaries LD Reti S.r.l. Linea Green S.p.A. Azienda Servizi Valtrompia S.p.A. A2A Security S.c.p.a. A2A Rinnovabili S.p.A. A2A Energy Solution S.r.l. Yada Energia S.r.l. Acinque S.p.A. Ambiente Energia Brianza S.p.A. Share capital Euro 32,975,717 Euro 7,000,000 Euro 8,938,941 Euro 52,000 Euro 50,000 Euro 4,000,000 Euro 4,000,000 Euro 197,343,794 Euro 119,495,575 % held A2A S.p.A. 95.60% A2A S.p.A. 100.00% A2A S.p.A. 74.55% Unareti S.p.A. 0.25% A2A S.p.A. 45.96% Unareti S.p.A. 18.37% A2A Ciclo Idrico S.p.A. 10.49% Amsa S.p.A. 9.14% A2A gencogas S.p.A. 3.95% A2A Ambiente S.p.A. 3.95% A2A Calore & Servizi S.r.l. 2.60% A2A Energiefuture S.p.A. 1.93% Other companies 3.61% A2A S.p.A. 100.00% A2A S.p.A. 100.00% A2A S.p.A. 100.00% A2A S.p.A. 41.34% A2A S.p.A. 33.52% Description thousands of euro 12 31 2022 12 31 2021 Revised 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 Revenues 50,711 53,942 118,850 85,141 14,078 14,991 1,477 1,517 32,225 18,622 36,394 20,701 29,411 11,915 19,845 33,796 19,007 16,975 Gross operating income 24,087 26,802 35,888 30,346 3,743 6,340 337 319 23,769 13,975 1,149 (289) (9,581) (8,336) (4,764) (4,905) (679) (1,525) Net operating income 10,806 14,260 18,033 14,513 1,234 3,554 102 78 8,596 4,957 (1,197) (2,489) (14,174) (11,799) (10,889) (9,418) (3,518) (4,850) Result before taxes 9,696 13,018 15,814 11,587 845 3,408 100 71 18,270 5,514 (420) 1,930 (14,223) (11,832) 16,508 10,637 23,744 16,256 Result of the year 7,490 9,571 12,476 8,852 662 2,490 69 55 12,145 4,582 (125) 2,346 (10,671) (8,901) 18,134 15,594 24,566 17,082 Assets 272,431 267,910 70,320 293,745 86,982 63,230 1,186 1,454 783,897 247,935 58,693 38,329 36,220 19,474 754,630 717,468 488,593 478,755 Liabilities 105,274 99,720 41,678 168,424 61,159 38,189 694 1,031 770,193 241,932 49,172 30,071 22,525 15,117 313,464 276,187 57,245 61,608 Equity 167,157 168,189 28,642 125,321 25,822 25,041 492 424 13,704 6,003 9,521 8,258 13,696 4,357 441,166 441,281 431,348 417,148 Net financial position (77,502) (66,481) 728 (115,761) (38,204) (27,863) (10) (288) (750,588) (199,485) (33,054) (23,409) 12,270 (5,735) (61,123) (74,155) (7,418) (27,839) Attachments 2022 Separate financial statements A2A 125 Subsidiaries Unareti S.p.A. A2A gencogas S.p.A. A2A Energiefuture S.p.A. A2A Ambiente S.p.A. A2A Calore & Servizi S.r.l. A2A Energia S.p.A. A2A Smart City S.p.A. Retragas S.r.l. A2A Ciclo Idrico S.p.A. Share capital Euro 965,250,000 Euro 450,000,000 Euro 50,000,000 Euro 250,000,000 Euro 150,000,000 Euro 3,000,000 Euro 3,448,276 Euro 34,494,650 Euro 70,000,000 % held A2A S.p.A. 100.00% A2A S.p.A. 100.00% A2A S.p.A. 100.00% A2A S.p.A. 100.00% A2A S.p.A. 100.00% A2A S.p.A. 100.00% A2A S.p.A. 100.00% A2A S.p.A. 87.27% Unareti S.p.A. 4.33% A2A S.p.A. 100.00% Description thousands of euro 12 31 2022 12 31 2021 Revised 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 Revenues 464,044 498,662 594,011 382,267 685,731 383,299 645,286 509,364 410,188 273,751 7,865,570 3,319,878 42,916 44,990 8,485 6,904 105,441 109,564 Gross operating income 209,376 251,300 110,030 57,945 (11,535) 44,559 232,555 205,365 94,250 84,478 104,793 180,363 9,913 2,790 2,805 4,759 42,127 58,894 Net operating income 73,790 116,662 39,017 (16,199) (22,068) 17,365 184,330 150,123 54,862 45,360 (3,145) 136,048 (1,491) (6,146) 105 2,259 19,706 37,470 Result before taxes 66,561 113,319 31,209 (21,731) (24,832) 17,293 192,443 159,440 50,104 41,554 (6,283) 136,974 1,644 (4,013) 104 2,259 17,436 36,176 Result of the year 50,557 83,115 15,965 25,475 (28,936) 11,053 141,746 124,281 40,848 40,841 (9,806) 96,771 1,936 (2,625) (8) 1,564 12,622 26,458 Assets 2,419,438 2,331,018 1,492,827 1,365,697 890,535 492,008 1,376,057 1,128,815 972,116 771,023 2,043,035 1,393,776 108,287 105,470 50,321 48,056 512,407 465,093 Liabilities 1,038,080 884,065 811,909 701,517 723,420 286,024 692,671 582,531 532,753 391,837 1,930,404 1,175,233 94,838 94,049 11,076 7,323 299,885 240,431 Equity 1,381,358 1,446,954 680,918 664,180 167,115 205,984 683,386 546,283 439,363 379,187 112,631 218,543 13,448 11,422 39,245 40,733 212,522 224,662 Net financial position (725,334) (499,678) (250,971) (223,436) 464,489 222,136 (208,819) (217,533) (348,639) (258,715) (377,039) (186,152) (58,118) (66,015) 11,741 11,643 (237,033) (189,326) Subsidiaries LD Reti S.r.l. Linea Green S.p.A. Azienda Servizi Valtrompia S.p.A. A2A Security S.c.p.a. A2A Rinnovabili S.p.A. A2A Energy Solution S.r.l. Yada Energia S.r.l. Acinque S.p.A. Ambiente Energia Brianza S.p.A. Share capital Euro 32,975,717 Euro 7,000,000 Euro 8,938,941 Euro 52,000 Euro 50,000 Euro 4,000,000 Euro 4,000,000 Euro 197,343,794 Euro 119,495,575 % held A2A S.p.A. 95.60% A2A S.p.A. 100.00% A2A S.p.A. 74.55% Unareti S.p.A. 0.25% A2A S.p.A. 45.96% Unareti S.p.A. 18.37% A2A Ciclo Idrico S.p.A. 10.49% Amsa S.p.A. 9.14% A2A gencogas S.p.A. 3.95% A2A Ambiente S.p.A. 3.95% A2A Calore & Servizi S.r.l. 2.60% A2A Energiefuture S.p.A. 1.93% Other companies 3.61% A2A S.p.A. 100.00% A2A S.p.A. 100.00% A2A S.p.A. 100.00% A2A S.p.A. 41.34% A2A S.p.A. 33.52% Description thousands of euro 12 31 2022 12 31 2021 Revised 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 Revenues 50,711 53,942 118,850 85,141 14,078 14,991 1,477 1,517 32,225 18,622 36,394 20,701 29,411 11,915 19,845 33,796 19,007 16,975 Gross operating income 24,087 26,802 35,888 30,346 3,743 6,340 337 319 23,769 13,975 1,149 (289) (9,581) (8,336) (4,764) (4,905) (679) (1,525) Net operating income 10,806 14,260 18,033 14,513 1,234 3,554 102 78 8,596 4,957 (1,197) (2,489) (14,174) (11,799) (10,889) (9,418) (3,518) (4,850) Result before taxes 9,696 13,018 15,814 11,587 845 3,408 100 71 18,270 5,514 (420) 1,930 (14,223) (11,832) 16,508 10,637 23,744 16,256 Result of the year 7,490 9,571 12,476 8,852 662 2,490 69 55 12,145 4,582 (125) 2,346 (10,671) (8,901) 18,134 15,594 24,566 17,082 Assets 272,431 267,910 70,320 293,745 86,982 63,230 1,186 1,454 783,897 247,935 58,693 38,329 36,220 19,474 754,630 717,468 488,593 478,755 Liabilities 105,274 99,720 41,678 168,424 61,159 38,189 694 1,031 770,193 241,932 49,172 30,071 22,525 15,117 313,464 276,187 57,245 61,608 Equity 167,157 168,189 28,642 125,321 25,822 25,041 492 424 13,704 6,003 9,521 8,258 13,696 4,357 441,166 441,281 431,348 417,148 Net financial position (77,502) (66,481) 728 (115,761) (38,204) (27,863) (10) (288) (750,588) (199,485) (33,054) (23,409) 12,270 (5,735) (61,123) (74,155) (7,418) (27,839) 4 Attachments 4.1 1\. Statement of changes in tangible assets 4.2 2\. Statement of changes in intangible assets 4.3 3/a. Statement of changes in investments in subsidiaries 4.4 3/b. Statement of changes in investments in affiliates 4.5 3/c. Statement of changes in investments in other companies 4.6 4/a. List of investments in subsidiaries 4.7 4/b. List of investments in affiliates 4.8 Key data of the financial statements of the main subsidiaries and affiliates prepared according to IAS/IFRS (pursuant to art. 2429.4 of the Italian Civil Code) 4.9 Key data of the financial statements of the main subsidiaries and affiliates prepared according to ITALIAN GAAP (pursuant to art. 2429.4 of the Italian Civil Code) 4.10 Certification of the financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98 126 A2A Separate financial statements 2022 Attachments 4.9 Key data of the financial statements of the main subsidiaries and affiliates prepared according to ITALIAN GAAP (pursuant to art. 2429.4 of the Italian Civil Code) Subsidiaries A2A E-MOBILITY S.r.l. ES Energy S.r.l. Proparis S.r.l. in liquidation Share capital Euro 1,000,000 Euro 10,000 Euro 1,875,000 % held A2A S.p.A. 100.00% A2A S.p.A. 50.00% A2A S.p.A. 60.00% Description thousands of euro 12 31 2022 12 31 2021 12 31 2022 12 31 2021 12 31 2022 12 31 2021 Revenues 5,139 1,195 13,628 8,764 - 720 Gross operating income (1,803) (514) 469 258 (106) (51) Net operating income (2,407) (701) 469 258 (106) (100) Result before taxes (2,508) (729) 469 258 (106) (100) Result of the year (1,953) (555) 336 171 (111) (77) Assets 15,701 6,101 1,856 1,758 5,805 5,842 Liabilities 14,014 5,461 945 1,422 767 713 Equity 1,687 640 910 336 5,039 5,129 Net financial position (8,663) (4,229) 1,141 995 3,349 3,460 Attachments 2022 Separate financial statements A2A 127 Subsidiaries Società Elettrica di Toscolano Maderno S.r.l. Serio Energia S.r.l. Visano Società Trattamento Reflui S.c.a.r.l. Share capital Euro 104,000 Euro 1,000,000 Euro 25,000 % held A2A S.p.A. 49.00% A2A S.p.A. 40.00% A2A S.p.A. 40.00% Description thousands of euro 12 31 2021 12 31 2020 12 31 2021 12 31 2020 12 31 2021 12 31 2020 Revenues 1,446 929 2,138 2,051 30 21 Gross operating income 1,207 672 270 699 - - Net operating income 1,049 514 247 461 - - Result before taxes 1,041 505 32 461 - - Result of the year 762 375 30 337 - - Assets 3,627 2,860 2,576 2,308 53 48 Liabilities 794 788 588 350 27 22 Equity 2,834 2,071 1,988 1,958 26 26 Net financial position 857 (102) 1,237 822 5 - 4 Attachments 4.1 1\. Statement of changes in tangible assets 4.2 2\. Statement of changes in intangible assets 4.3 3/a. Statement of changes in investments in subsidiaries 4.4 3/b. Statement of changes in investments in affiliates 4.5 3/c. Statement of changes in investments in other companies 4.6 4/a. List of investments in subsidiaries 4.7 4/b. List of investments in affiliates 4.8 Key data of the financial statements of the main subsidiaries and affiliates prepared according to IAS/IFRS (pursuant to art. 2429.4 of the Italian Civil Code) 4.9 Key data of the financial statements of the main subsidiaries and affiliates prepared according to ITALIAN GAAP (pursuant to art. 2429.4 of the Italian Civil Code) 4.10 Certification of the financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98 128 A2A Separate financial statements 2022 Attachments 4.10 Certification of the financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98 1\. The undersigned, Renato Mazzoncini, as CEO of A2A S.p.A., and Luca Moroni, as Financial Reporting Manager of A2A S.p.A. also considering the provisions of article 154-bis, paragraphs 3 and 4, of Legislative Decree no. 58 of February 24, 1998, as amended, hereby attest: • the adequacy in relation to the characteristics of the company and • the effective application of administrative and accounting procedures for the preparation of financial statements in the year 2022. 2\. It is also certified that: 2.1 the financial statements at December 31, 2022: a) have been prepared in accordance with International Financial Reporting Standards as endorsed by the European Community pursuant to Regulation (EC) no. 1606/2002 of the European Parliament and of the Council of July 19, 2002; b) correspond to the information contained in the accounting ledgers and records; c) provide a true and fair representation of the equity, economic and financial situation of the issuer; 2.2 the report on operations includes reliable analysis on the performance, result of operations and the business of the issuer, as well as description of principal risks and uncertainties to which is exposed. Milan, March 16, 2023 Renato Mazzoncini(Chief Executive Officer) Luca Moroni(Financial Reporting Manager) 5 Independent Auditors’ Report 130 A2A Separate financial statements 2022 Independent Auditors’ Report 5 Independent Auditors’ Report Independent Auditors’ Report 2022 Separate financial statements A2A 131 5 Independent Auditors’ Report 132 A2A Separate financial statements 2022 Independent Auditors’ Report Independent Auditors’ Report 2022 Separate financial statements A2A 133 5 Independent Auditors’ Report 134 A2A Separate financial statements 2022 Independent Auditors’ Report 6 Report of the Board of Auditors 136 A2A Separate financial statements 2022 Report of the Board of Auditors 6 Report of the Board of Auditors Report of the Board of Auditors 2022 Separate financial statements A2A 137 6 Report of the Board of Auditors 138 A2A Separate financial statements 2022 Report of the Board of Auditors Report of the Board of Auditors 2022 Separate financial statements A2A 139 6 Report of the Board of Auditors 140 A2A Separate financial statements 2022 Report of the Board of Auditors Report of the Board of Auditors 2022 Separate financial statements A2A 141 6 Report of the Board of Auditors 142 A2A Separate financial statements 2022 Report of the Board of Auditors Description thousands of euro Leading Auditor Other auditors A2A S.p.A. Audit of annual financial statements 190 Audit of consolidated financial statements 43 Periodic tests of accounting 23 Review of half-yearly report 86 Audit of the separate annual accounts for ARERA 20 Total 362 - Subsidiaries Audit of annual financial statements 1,335 114 Periodic tests of accounting 258 Review of half-yearly report 241 Audit of the separate annual accounts for ARERA 101 Other consolidated groups (Acinque, AEB) 400 Total 2,335 114 Associates and joint ventures Audit of the information sent to shareholders for the consolidation 38 Total 38 - Total A2A Group 2,735 114 Report of the Board of Auditors 2022 Separate financial statements A2A 143 6 Report of the Board of Auditors 144 A2A Separate financial statements 2022 Report of the Board of Auditors Report of the Board of Auditors 2022 Separate financial statements A2A 145 6 Report of the Board of Auditors 146 A2A Separate financial statements 2022 Report of the Board of Auditors Report of the Board of Auditors 2022 Separate financial statements A2A 147 6 Report of the Board of Auditors 148 A2A Separate financial statements 2022 Report of the Board of Auditors Report of the Board of Auditors 2022 Separate financial statements A2A 149 6 Report of the Board of Auditors 150 A2A Separate financial statements 2022 Report of the Board of Auditors Report of the Board of Auditors 2022 Separate financial statements A2A 151 6 Report of the Board of Auditors 152 A2A Separate financial statements 2022 Report of the Board of Auditors Report of the Board of Auditors 2022 Separate financial statements A2A 153 6 Report of the Board of Auditors 154 A2A Separate financial statements 2022 Report of the Board of Auditors Report of the Board of Auditors 2022 Separate financial statements A2A 155 6 Report of the Board of Auditors 156 A2A Separate financial statements 2022 Report of the Board of Auditors Report of the Board of Auditors 2022 Separate financial statements A2A 157 6 Report of the Board of Auditors 158 A2A Separate financial statements 2022 Report of the Board of Auditors Report of the Board of Auditors 2022 Separate financial statements A2A 159 6 Report of the Board of Auditors