Trends in financial position and cash flows

Equity investments increased by € 15.4 million compared to 31 December 2022. The change was caused by the increase in the measurement of equity measured consolidated companies during the period, which contribute to EBITDA (+€ 14.6 million) and the change in scope (+€ 5.9 million), net of the effects of dividend distribution (-€ 7.7 million) and the impact of the change in the “other comprehensive income” reserves (-€ 4.4 million). Note that “Other equity investments” saw an increase of € 5.1 million following the parent company’s acquisition of 1,250,000 Bonifiche Ferraresi SpA shares.

The stock of employee severance indemnity and other defined benefit plans fell by € 3.1 million, mainly due to the decrease in the isopension fund. The discounting rate went from 4.0% at 31 December 2022 to 3.2% at 31 December 2023.

Provisions for risks and charges increased by € 6.3 million compared to the end of the previous year; the details, divided by the nature of the provisions, are presented below.

Other non-current assets increased by € 114.2 million, mainly due to the rise in long-term receivables from regulatory accounting (+€ 73.6 million), tariff adjustments (+€ 34.5 million) and receivables for deferred taxes (+€ 25.2 million), partially offset by the decrease in the fair value of derivatives receivable (-€ 5.1 million). The increase in other non-current liabilities (+ € 109.5 million) instead mainly refers to greater accrued expenses relative to plant contributions (+€ 113.4 million), partially compensated for by lower security deposits (-€ 4.2 million).

The change in net working capital compared to 31 December 2022 results from the combined effect of a decrease in current receivables (-€ 52.2 million), a decrease in other current assets (-€ 69.0 million), a decrease in current payables (-€ 94.0 million) and an increase in other current liabilities (+€ 10.3 million).

Receivables from users and customers, net of provisions for impairment of receivables, amount to € 1,170.0 million and show a decrease with respect to 31 December 2022 of € 46.1 million, mainly due to the reduction seen in the Commercial Segment (-€ 106.6 million), for the most part affected by energy prices the previous year and lower quantities invoiced; this change was partially offset by the increase in the Water Segment (+€ 42.6 million) and the Networks & Smart Cities Segment (+€ 10.1 million).

The provision for doubtful receivables amounts to € 628.1 million, up with respect to 31 December 2022 (when it was € 615.5 million). Performing receivables totalling € 1,218.6 million were transferred without recourse during 2023, of which € 171.1 million to the Public Administration.

As regards relations with Roma Capitale, the net balance at 31 December 2023 was € 17.2 thousand receivable by the Group (€ 1.7 million at 31 December 2022). Below is a breakdown of the situation with Roma Capitale:

Receivables due from Roma Capitale

Payables due to Roma Capitale

In terms of trade and financial receivables, an overall decrease of € 11.6 million was seen with respect to the previous year, mainly due to the sizeable contribution from amounts collected totalling € 114.6 million, which exceeded the amounts of receivables coming due during the period.

The main changes in the year are as follows:

• Accrual of Acea Ato2 receivables for the supply of water for € 54.1 million;
• Accrual of receivables for the Public Lighting service for € 47.4 million;
• collection/offset of Acea Ato2 receivables for utilities for € 69.4 million;
• collection/offset of Acea Ato2 receivables for IP fees for € 44.3 million.

Payables decreased by € 27.1 million compared to the previous year. The main changes during the period are as follows:

• greater payables for recognition of 50% of share dividends accrued for 2022 by Acea for € 46.2 million (note that in June 2023, when the coupon was detached, Roma Capitale was paid 50% of the dividends for the year, equal to € 46.2 million);
• higher payables due to the recognition of the Acea Ato2 concession fee for 2023 for € 25.3 million;
• higher payables due to the recognition of Acea Ato2 stock dividends for 2022 for € 2.4 million;
• payment of Acea share dividends for 2020, for € 44.3 million;
• payment of Acea Ato2 concession fees for 2022 and 2023 for a total of € 44.4 million, with the consequent elimination of the relative payables at the end of the year;
• payment of the amounts due for road excavation permits by areti to municipalities for a total of € 12.0 million, plus the payable for Cosap 2023 for € 1.9 million.

With specific reference to just offsetting operations during the year, summarised above, below are details on the main operations chronologically:

• April 2023: offsetting of receivables for € 18.1 million related to the water supply service against the Acea Ato2 concession fee for 2022;
• September 2023: offsetting of receivables for € 12.7 million for public lighting fees for the last quarter of 2022 (including the price adjustment component) plus work performed for the IP service against Acea 2020 share dividends;
• October 2023: offsetting of receivables for € 26.3 million related to the water supply service against the Acea Ato2 concession fee for 2022 and 2023;
• October 2023: offsetting of receivables for € 2.4 million relating to the water supply service against Acea Ato2’s share dividends for 2022;
• October 2023: collection of receivables for € 9.2 million relative to the water supply service;
• November 2023: offsetting of receivables for € 17.3 million for fees for the public lighting service for the first half of 2023, against Acea share dividends for 2020;
• December 2023: collection of receivables for € 13.3 million relative to the water supply service;
• December 2023: offsetting of receivables for € 14.3 million for receivables to extraordinary modernisation and maintenance in 2022 for the public lighting network and work associated with the Quality of Light Plan against Acea share dividends for 2020.

Recall that as part of the activities required for the first consolidation of the Acea Group in the 2018 Financial Statements of Roma Capitale, a round table was launched to reconcile the Roma Capitale receivables and payables. The Group companies chiefly concerned are Acea and Acea Ato2. After several meetings and communications, on 22 February 2019 the Technical Department of the Municipality (SIMU) in charge of the management of the contracts with the Acea Group communicated several objections relating to the supply of both works and services for the period 2008-2018. These objections were completely rejected by the Group. In order to arrive at a complete resolution of the differences, during 2019 a specific Joint Technical Committee was set up with the Acea Group. Following several meetings, on 18 October 2019, the Joint Technical Committee drew up a report on the closure of the work, highlighting the results that emerged and proposing a favourable restart of the ordinary execution of the mutual obligations between the Acea Group and Roma Capitale. As a first step after the completion of the work, the parties took steps to implement the results that emerged from the discussions, restarting the payment of their respective receivables and payables.

For the Public Lighting contract at the end of 2020 the AGCM made its position clear regarding the legitimacy of the existing contract, to this day a source of audits, works and joint investigation. Among other things, the measure also gave rise to audits on the congruity of the prices applied. In February 2021, following the aforesaid feedback and works, Roma Capitale confirmed the absolute congruity and convenience of the current economic terms with respect to the CONSIP parameters. Therefore, also during 2021, while awaiting the conclusion and finalisation of these aspects, Acea regularly continued to provide the Public Lighting service. The service has therefore been invoiced and has partly already been paid by Roma Capitale, as seen in the data below:

• in 2020 at total of € 33.3 million of receivables referred to the aforementioned report were settled in the Group;
• During 2021 a new Public Lighting Technical Panel comprising Acea and Roma Capitale was set up with the intention of continuing the resolution of issues preventing the liquidation of receivables. As a result of this work, Roma Capitale paid Acea the Public Lighting receivables for € 75.3 thousand through offsets;
• during 2022, settlement activities with Roma Capitale continued, which allowed continuation of the liquidation of Acea receivables, through offsetting of a total of € 56.5 million, of which € 27.6 million relative to fees for previous years.

Note that on 11 August 2022, the City Executive Committee with resolution no. 312 entitled “Public and artistic-monumental public lighting service on the entire municipal territory – Concessionaire: Acea SpA- Recognition of the perimeter of the payable situation and launch of the consequent procedures” recognised the perimeter of the Administration’s payables to Acea/Areti in relation to the Public Lighting service as of 31 December 2021.

This resolution was published on the institutional website of Roma Capitale on 30 August 2022 and with reference to the same, dialogue is still in progress with Roma Capitale.

During 2023, specifically in September, the Acea Board of Directors, after receiving the opinion of the Related Party Transactions Committee, approved the proposal for a Settlement Agreement with Roma Capitale, to govern their reciprocal positions and the methods for the early consensual termination of the contractual relationships between the parties for the public lighting service provided by the company and for it by the subsidiary areti.

At the same time, Roma Capitale also approved the draft Settlement Agreement in the City’s Assembly in December 2023.

With reference to the economic terms of this possible Settlement Agreement, substantially in line with the City Executive Committee resolution 312 of 11 August 2022, following the reciprocal renunciation by the parties, the agreement calls for the recognition of receivables due to Acea/areti from Roma Capitale for a total of around € 100.6 million. The economic and financial effects of the settlement, following the signing which had not yet occurred as of the reporting date, will not have significant effects as the Group had already updated its estimates in previous financial statements utilising the criteria established in the relevant regulations.

Current payables fell mainly due to the decrease in the stock of trade payables (-€ 60.8 million). This effect for the most part derives from the decrease registered by Acea Energia (-€ 95.2 million), mainly suffering from higher prices on the energy market in the previous year, in part offset by the increase in payables due to contractors for energy efficiency work, as well as electric mobility with reference to Acea Innovation (+€ 38.3 million).

Other current assets and liabilities recorded a decrease in assets of € 69.0 million and an increase in liabilities of € 10.3 million, compared to the previous year. More specifically, other assets decreased due to the drops seen in: i) receivables for energy balancing (-€ 35.6 million); ii) the value of derivative instruments on commodities receivable (-€ 58.9 million); iii) receivables from AATO (-€ 6.7 million) relative to the IWS; iv) receivables for accrued Green Certificates (-€ 5.8 million) mainly due to the scheduling of GRIN incentives as well as vi) IRES and IRAP receivables (-€ 13.2 million) and receivables for advances to suppliers (-€ 7.8 million) mainly attributable to Acea Innovation and relative to the start of energy efficiency contracts. The decrease is partially offset by the increase in tax credits accrued on energy efficiency projects (€ 68.9 million). More specifically, current liabilities increased as an effect of the increase in amounts due to Cassa for energy and environmental services for areti (+€ 99.4 million), due to the change in the regulatory framework relative to the Social Bonus and the reintroduction of general system charges starting in the second quarter of 2023, as well as the increase deriving from advances received on investments financed mainly by Gori (+€ 25.3 million). This change was offset by the decrease in payables due to CSEA (Cassa for Energy and Environmental Services) from Acea Energia (-€ 50.6 million) as an effect of covering imbalances in the equalisation system for electricity purchasing and dispatching costs destined for the greater protection service, the reduction in the payable relative to the acquisition of 35% of Deco for € 33.5 million and the payable for the acquisition of 30% of SIMAM for € 13.0 million, as well as the reduction in the payable for the extraordinary solidarity contribution pursuant to article 37 of Decree Law 21/2022 relative to Acea Produzione (-€ 18.4 million).

The shareholders’ equity amounted to € 2,823.1 million. The changes seen, totalling € 67.8 million, are analytically presented in the relevant table and essentially derive from profits accruing in 2023, distribution of dividends, the change in the scope of consolidation and the change in cash flow hedge reserves, as well as those formed by actuarial gains and losses.

Group debt recorded an overall increase of € 407.1 million, going from € 4,439.7 million at the end of 2022 to € 4,846.8 million at 31 December 2023.

Non-current financial debt increased by € 48.2 million compared with the end of the 2022 financial year. This change derives from an increase in bond loans of € 104.7 million and from a decrease in payables for medium/long-term loans of € 61.7 million, as shown in the following table:

Bonds, equal to € 3,939.2 million at 31 December 2023, show a total increase of € 104.7 million due to the combined effects of the € 5 billion placement on 17 January 2023 under the Euro Medium Term Notes programme (EMTN), of a Green Bond with an initial amount of € 500 million, increased by a further € 200 million on 3 February (3.875% interest rate, maturing on 24 January 2031), offset by € 600.0 million for the reclassification to current of the 10-year bond issued by Acea in July 2014.

Medium/long-term loans amounting to € 752.7 million recorded an overall decrease of € 61.7 million due to the parent company (-€ 31.1 million) and areti (-€ 27.8 million). The following table shows medium/long–term and short-term borrowings (excluding the portion due to application of IFRS 16) by term to maturity and type of interest rate.

The fair value of GORI’s hedging derivatives was a positive € 4.2 million (as at 31 December 2022, it was a positive € 6.6 million). Acquedotto del Fiora was a positive € 3.3 million (as at 31 December 2022, it was a positive € 5.5 million), and that of IWS was a positive € 1.0 million (as at 31 December 2022 it was a positive € 1.6 million). Positive fair values are found under “Non-current financial assets” and are not considered in the balance of correlated loans.

The short-term component was negative at € 76.3 million and, compared to the end of 2022, worsened by € 358.9 million, generated for € 328.7 million by the Parent Company, for € 26.0 million by GORI, for € 10.3 million by Acea Produzione and for € 6.7 million by areti. The change seen by the parent company was mainly generated by the reclassification to current of the short-term portion of the 10-year bond issued by Acea in July 2014 (+€ 600 million), partially offset by the reduction in current financial payables following the payment of the bond which had matured (-€ 300.0 million), the reduction in cash and cash equivalents (-€ 200.5 million) and higher short-term deposits (+€ 351.2 million).

Note that financial debt includes € 107.9 million in payables to Roma Capitale for dividends resolved to be distributed and does not include other payables of around € 12.1 million relating to share purchase options of the companies already held.

At 31 December 2023, the Parent Company had unused committed credit lines of € 700.0 million and uncommitted lines of € 425.0 million, of which € 21.0 million used. No guarantees were granted in obtaining these lines. Additionally, note that on 6 July 2023 Acea signed the contract for the first tranche of € 235 million from the EIB loan to support a portion of the Acea Ato3 investments, not utilised at 31 December 2023.

It must be noted that the long-term Ratings assigned to Acea by the International Ratings Agencies were:

• Fitch BBB+;
• Moody’s Baa2.