Letter to Shareholders

Dear Shareholders,

2023 was characterised by great uncertainty around the geopolitical tensions in Eastern Europe and the Middle East, inflation levels far from the targets of the European Central Bank, and rising interest rates as a result of monetary policies. Moreover, the increase in extreme weather events was and will continue to pose an additional risk factor at national level to both the economy and our ecosystem. It is clear, therefore, that we need to find concrete solutions to address these challenges through an industrial approach to resource management, and by seizing the opportunities that arise from technological innovation and process digitisation for an ethical and sustainable growth.

In this challenging context, the 2023 results of the Acea Group confirm the positive trend seen in the final quarter of 2022, highlighting a consolidated gross operating margin and growing generation of operating cash flow.

In 2023, the Group continued its strategy focused on the development of sustainable infrastructure in regulated contexts to support growth and preserve adequate financial balance. The Group is paying more and more attention to diligent growth, with strong regulation of costs and investments in addition to the continuous optimisation of the financial structure, in order to support economic results and cash generation. One driver for the achievement of these goals is the review of procurement strategies and procedures, accompanied by the definition of lines of action to limit credit risk through prevention and management of customer portfolios. Furthermore, in early 2023, Acea issued a Green Bond worth € 700 million, placed at the most competitive rates on the market.

The company’s operating results in 2023 recorded a 7% increase in EBITDA compared to 2022, for a total of € 1.4 billion, 87% of which was generated by regulated businesses . Investments, of which 88% allocated to regulated activities, amounted to € 1.1 billion, a 9% increase on the previous year. Net profit recorded a 5% growth compared to 2022 (recurring net profit up by 22%), for a total of € 294 million.

In a global context with an increasing focus on environmental and social impacts, the growth in the Group’s results is accompanied by an ongoing commitment to initiatives that combat and adapt to climate change. The heart of the business strategy – in line with the energy transition undertaken – is a systemic approach to circular economy and the pursuit of sustainable business goals. The commitment to integrate sustainability aspects into business management has been met with appreciation from analysts, ratings agencies, and ESG benchmarks. Acea’s response to the Climate Questionnaire of CDP (formerly the Carbon Disclosure Project) allowed for its classification in the “Leadership” category with a score of “A-”, improving on the “B” from the previous year. Moreover, the Sustainability Solicited rating was increased by the independent agency Standard Ethics to “EE+”.

The number one water operator in Italy and the leader in Europe, Acea continued planning and executing relevant measures in the sector in 2023, with the launch of strategic projects for the country that included: the doubling of the Peschiera Aqueduct, one of the ten projects of national interest, to which 700 million in public resources have been allocated, and NRRP projects, for which the Group was awarded funding for € 680 million in Water. Furthermore, Acea has continued to invest to reduce water leaks and to improve water quality, and has launched strategic partnerships with Acquedotto Pugliese, Coldiretti, Bonifiche Ferraresi and the Associazione Nazionale Bonifiche Irrigazioni e Miglioramenti Fondiari for the protection and reuse of water resources. Its aim is to develop synergies for reuse in the agro-industrial and energy sectors, as well as technological innovation. Business development in areas not served by Acea also began through participation in tender procedures for the Integrated Water Service.

The commitment also extends to the Networks and Public Lighting business with the launch onto the market of flexibility services through the “RomeFlex” project, to develop a resilient and remote-controlled electricity distribution grid. 2023 also marked the conclusion of the multi-year dispute with Roma Capitale for the Public Lighting Service and a spontaneous proposal for project financing was presented for the management, modernisation and digitisation of the network and the service, and for the implementation of innovative smart city solutions.

In the Environment business, on 1 March 2023, with a grouping of large national and international operators, leaders in their respective sectors, Acea submitted a declaration of interest in response to the Public Notice issued by the Municipality of Rome for the tender to build the new waste-to-energy plant in Santo Palomba, in line with a strategic vision for waste disposal in the capital and from the perspective of the country system.

In 2023, Acea maintained and renewed management systems that had previously been certified – quality, environment, security, energy, and gender equality – and achieved ISO 37001:2016 certification for its “Corruption Prevention Management System”. It was also one of the first listed Italian companies to receive ISO 10004:2018 certification for customer satisfaction monitoring and measurement processes.

Acea signed a National Framework Protocol to Support Legality with the Italian Ministry of the Interior to consolidate their mutual commitment against risks of criminal infiltration and possible corruption in the worksites of the important strategic projects that the Group will implement over the coming years.

The Company launched a new organisation based on three aspects: welcoming new professionals, generational turnover, and the inclusion of women in top level positions. As further demonstration of the Group’s commitment to People, significant awards were achieved, improving its positioning in various ratings and confirming its “Top Employers” Italy certification for human resources management policies and strategies. With reference to Diversity & Inclusion, Acea has featured in the “Bloomberg Gender Equality Index” for the fourth year in a row.

Acea and the Trade Unions signed a “Charter of the Person and Participation” Protocol, an agreement that aims to strengthen relations between the parties by promoting engagement and placing people at the centre of decisions. The Group is heavily committed to protecting people’s fundamental rights by promoting full respect for human rights in the activities managed, as demonstrated by the approval of the Human Rights Policy, which is also applied by the companies operating abroad.

The achievements of 2023 form a strong foundation for implementing the recently approved Business Plan, which will guide the Group over the next five years. The Plan, named “Green Diligent Growth”, envisages significant growth with a focus on regulated businesses in order to make infrastructure even more sustainable and resilient, while reinforcing the Acea Group’s role as an infrastructure operator in a fast-changing context that offers significant opportunity for development and investment.