Economic performance

Compared to 31 December 2021 the following changes occurred in the consolidation scope:

• on 19 January 2022, the company AE Sun Capital was established, held for 40% by Acea Produzione and 60% by the investment fund Equitix Investment Management;
• on 20 January 2022, Acea Solar acquired 100% of the shares of the company SF Island with registered office in Acquapendente (Viterbo, Italy);
• on 8 February 2022, Acea Ambiente signed the deed of acquisition of 70% of the shares of S.E.R. Plast, a company operating in the recycling of plastic waste;
• at the end of March 2022, Acea finalised the sale of the photovoltaic holding company (Acea Sun Capital) to the British investment fund Equitix. The agreement for the transfer of assets was signed on 24 December 2021. With the closing of the operation, the newco AE Sun Capital Srl, 60% owned by Equitix and 40% by Acea Produzione, acquired from Acea Produzione the photovoltaic holding company of the Acea Group, the holder, through a number of vehicles, of a portfolio of photovoltaic plants, with a total installed capacity of 105 MW, of which 46 MW incentivised on the basis of different Energy Accounts and 59 MW for new construction already connected or being connected to the network.
• on 1 April 2022, a purchase agreement was signed by Adistribuzionegas for 30% of Romeo Gas as part of the sale by A2A of concessions for the natural gas distribution service;
• on 23 May 2022, Acea Ambiente signed the deed of acquisition for an additional 20% of the shares in Cavallari, brining its stake to 80%;
• on 30 June 2022, Acea Ambiente’s acquisition of the business unit known as Polo Cirsu was signed after participation in the competitive bidding process begun with the notice of sale issued by the Court of Teramo. This business unit consists of (i) a landfill known as “Grasciano 1”, completely depleted of authorised volumes, (ii) a landfill known as “Grasciano 2”, consisting of an first lot of 234,000 m³ and a second lot to be built, with an authorised volume of 246,000 m³, and (iii) a recycling and composting plant and a platform to utilise separate waste;
• on 29 July 2022, Acea Solar signed the purchase of 17 vehicle companies in the Basilicata region (Poweris Group), each the holder of development projects for ground-mounted monoaxial photovoltaic plants. The total power is estimated at 338 MWp, with annexed storage systems for 170 MWp of power;
• on 1 September 2022, Acea Renewable 2 Srl and Fergas Solar 2 Srl were established, both 100% held by Acea Solar, to complete the transfer of photovoltaic assets for plants constructed in the industrial and agricultural area. The establishment of the two companies is part of the project to deconsolidate the photovoltaic segment, begun on 22 March 2022 and which calls for a second closing, involving the transfer of plants that will be connected and operating on the date of the transaction;
• on 1 October 2022, the partial demerger of Romeo Gas SpA was completed, implemented by assigning equity shares in favour of Adistribuzionegas Srl. The purpose of the operation is part of an overall corporate reorganisation to achieve more efficient management of gas distribution concessions;
• on 4 October 2022, Acea Ambiente signed the acquisition of 70% of the capital of Tecnoservizi Srl, a company that offers separate urban waste treatment and recovery services. The company’s authorised capacity is treatment of 210,000 tonnes per year in the province of Rome, coming from separate waste of municipalities, entities and businesses;
• on 3 November 2022, Acea Ambiente, through its subsidiary Cavallari Srl, completed acquisition of 100% of Italmacero Srl, a company operating in the mechanical treatment and recovery of separate urban waste (mixed packaging, monomaterial fractions) and special non-hazardous waste;
• on 22 November 2022, the reverse merger by incorporation of AE Sun Capital with the subsidiary Acea Sun Capital was complete. The merger is part of an investment project involving the renewable energy sector and was implemented to achieve advantages through the unification of processes, structures, achieving synergies and economies of scale, as well as cost efficiencies;
• on 6 December 2022, the closing of the initial stage of the business combination with ASM Terni was signed, following the completion public procedure initiated by the latter. The operation is intended to create a single operator working in the integrated water cycle, environment and electricity and gas distribution and sales sectors, During the first half of 2023, a second closing is planned, which will lead to an increase in the equity investment held in ASM Terni. Therefore, Acea is the industrial partner to achieve the established objectives and fully consolidates the company based on the agreements signed, also in accordance with shareholders’ agreements and by-laws;
• on 19 December 2022, DROPMI Srl was established, which carries out research and engineering for next-generation water metres which can operate and be monitored remotely, and also develops smart water solutions for the domestic and international markets.

Lastly, with reference to the 2021 financial year, it should be noted that:

• on 6 October 2021, the Consorcio Acea Lima Sur was established by Acea Perù (99%) and Acea Ato2 (1%) for the management of the water and sewer network in the Lima South zone, with a three-year contract;
• on 14 October 2021 Acea Ambiente acquired 60% of MEG, an operator active in Italy offering professional consultancy for the construction of municipal solid waste packaging treatment plants;
• on 30 November 2021 Acea Ambiente acquired 65% of Deco, a waste management company whose activities also include the construction and operation of relevant plants. The company also holds a 21.8% investment in Picena Ambiente and owns 100% of Ecologica Sangro, a company active in the integrated management of solid urban waste in the Frentano and Sangro Aventino district area. The company itself holds a 75% stake in the Ecofrentano consortium;
• on 22 December 2021 Acea Ambiente acquired 90% of AS Recycling, a company that is currently inactive but which will become a Corepla affiliated centre for secondary plastic SRF recycling (Breakdown of plastics into the various polymer categories for sorting).

The table below shows the main impact of the change in the consolidation scope at 31 December 2022 (gross of intercompany adjustments).

At 31 December 2022, revenue from sales and services came to € 4,957.2 million, up € 1,141.1 million (+29.9%) on the previous year, mainly due to the increase in revenue from electricity sales (+€ 812.4 million) primarily attributable to higher unit prices, offset, to a small extent, by lower quantities.

Electricity sales on the Free Market totalled 6,331 GWh with a 3.5% reduction on the previous year, while electricity sales on the Greater Protection Service totalled 1,411 GWh with a 16.7% decrease on an annual basis. This reduction was affected by the automatic assignment of “small” customers and “micro” enterprises to the Gradual Protection Service, created starting from 1 January 2021 and in part to the decrease in the number of customers.

Also contribution to the increase is i) revenue from sustainable development (+€ 90.2 million) deriving from Acea Innovation energy efficiency projects (+€ 36.6 million), revenue from income deriving from smart services (+€ 38.6 million) and income associated with trading of CO2 emission rights by Acea Energia (+€ 14.2 million), ii) revenue from the integrated water service (+€ 74.9 million), mainly due to the increase in tariff revenue, for the most part attributable to GORI (+€ 45.9 million) and SII (+€ 9.8 million) with reference to pass-through items, mainly associated with greater energy costs and Acea Ato2 (+€ 15.4 million), iii) revenue from gas sales (+€ 77.0 million) mainly attributable to Acea Energia (+€ 55.2 million) and Umbria Energy (+€ 20.2 million) and significantly influenced by price increases, iv) revenue from waste delivery and landfill management (+€ 47.2 million), mainly due to the change in the scope of consolidation (+€ 58.7 million), partially offset by the reduction seen by Demap (-€ 4.2 million) as a consequence of lower quantities entering the plant, the reduction for Acea Ambiente (-€ 5.2 million) due to the combined effects of the tariff component and fewer deliveries to the San Vittore and Terni plant, v) revenue from services to customers (+€ 34.1 million) deriving in part from the increase in the change in inventories for SIMAM (+€ 7.7 million), higher fees for public lighting services provided for Rome Capital due to price trends for the energy component (+€ 17.2 million) and for the remaining part due to the change in the scope of consolidation (+€ 8.4 million), vi) revenue from foreign management (+€ 18.8 million) which mainly suffered from foreign exchange effects.

Lastly, these increases were offset by lower revenue from electricity incentives (€ 16.8 million), mainly attributable to Acea Produzione, due to the price effect and lower volumes produced.

Other revenue shows an increase of € 25.0 million (+16.0%) compared to the previous year. This increase is due to opposing effects and was mainly influenced i) by payment of technical quality premiums for the companies in the water sector (+€ 26.9 million for line-by-line consolidated companies) for 2018-2019 (Resolution 183/2022/R/idr of 26 April 2022), ii) higher reimbursements for damages and penalties (+€ 3.5 million), iii) the positive effects of the resilience plan for € 3.3 million (Areti), higher revenue from regional contributions (+€ 4.6 million), mainly relative to Umbria Energy and SII, iv) higher revenue recorded by GORI (+€ 9.8 million), mainly due to the recognition of the tax credit consequent to energy cost increases, v) from lower contingent assets (-€ 11.8 million), mainly influenced by lower allocations of energy items relative to previous years for financial year 2021, vi) lower contributions recognised by Areti for the fund for energy and environmental services (CSEA), relative to energy efficiency certificates (-€ 9.3 million), determined by lower acquisitions made compared to the previous year and the determination of a lower contribution. Finally, the change in the scope of consolidation impacted the increase for a total of € 4.7 million.

External costs increased overall by € 1,094.8 million (+44.5%) compared to 31 December 2021. The change was mainly due to the following: i) higher costs for the procurement of electricity on the free market, on the gradual protection market (+€ 902.7 million) in line with the trend in revenue; ii) higher costs for to purchase materials (+€ 35.0 million) partly attributable to the change in scope (+€ 6.9 million) and partly to lower capitalised costs (+€ 16.1 million); iii) higher costs for services (+€ 139.7 million), of which € 40.7 million is attributable to the change in scope, € 32.4 million derives from e-efficiency projects, and € 18.1 million derives from smart service activities, in line with what is recognised in revenue, as well as higher costs for electricity consumption (€ 29.4 million), as a consequence of the previously cited increase in market prices; iv) higher costs to lease third-party assets, mainly attributable to the Parent Company and associated with higher costs for software application licenses for € 9.6 million.

The cost of labour increased compared to the previous year by € 29.2 million (10.6%), mainly influenced by the change in the scope of consolidation (+€ 12.8 million) and, for the remaining part, for the most part as a consequence of using less personnel on multi-year projects, the increase in salaries and wages deriving from new hires and stabilisation carried out in 2022, as an effect of higher payment components and adjustments to national collective labour contracts.

The average number of employees was 10,211 and increased by 948 compared to the previous year, owing mainly to the change in scope (+838 employees).

Income from equity investments of a non-financial nature represents the consolidated result according to the equity method included among the components forming the consolidated EBITDA of the strategic companies.

EBITDA for these companies increased by € 6.8 million, mainly from the increases recorded by Publiacqua (+€ 3.8 million) and Acque (+€ 2.1 million), partially due to lower amortisation/depreciation and partially due to contingent assets.

Group EBITDA rose from € 1,256.1 million at 31 December 2021 to € 1,305.0 million at 31 December 2022, recording an increase of € 48.9 million or 3.9%. The change in the consolidation scope (before intercompany elisions) accounts for € 5.0 million, owing mainly to the opposite effects deriving from the consolidation of the Deco Group (€ 9.0 million) and MEG (€ 1.6 million), Tecnoservizi (€ 0.9 million), Consorcio Lima Sur (€ 0.9 million), offset in part by the effects of the deconsolidation of the photovoltaic companies (€ 8.7 million) for the transfer of control of the holding company Acea Sun Capital and its subsidiaries (the so-called “Energy Box”).

With the same scope, EBITDA grew by € 43.0 million and mainly derived from the following contrasting effects: i) Environment Segment +€ 25.6 million from the combined effects of the increase recorded by Acea Ambiente (+€ 30.7 million) due to greater margins generated from sales of electricity due to the positive effect of sales prices (+€ 27.0 million), mainly deriving from the Terni and San Vittore plants. These greater margins were only partially offset by lower volumes and higher costs for € 7.0 million. Also note the positive effects coming from the sale of CO2 rights following resolution no. 66/22 with which the national committee for management of Directive 2003/87/EC and for support in the management of the project activities of the Kyoto Protocol, resolved in relation to the UL1 Plant in Terni, the revocation of authorisation to emit gas, all effective retroactively from 1 January 2021, with the consequence that the EUA quotas for 2021 were sold for a total amount of € 11.1 million and for € 2.5 million for 2022. The reduction of € 1.1 million recorded by Demap, due to lower margins generated following lower quantities entering the plant and, lastly, the lower margins recorded by Berg (-€ 1.7 million) on liquid processing also contributed to the change; ii) Generation Segment +€ 21.6 million for higher revenue from electricity sales (+€ 51.8 million), following price increases on energy markets (+€ 298/MWh), partially offset by lower volumes produced (-95 GWh) compared to the previous year, as well as effects deriving from the Supports Decree Law on revenue from the Sant’Angelo power plant (-€ 18.3 million), the effects of the Financial Law (Law 197/2022) on revenue from renewable source power plants not already falling under the scope of the Supports Decree Law (-€ 2.2 million) and for higher revenue from district heating (+€ 4.4 million) due to higher prices compared to the previous year. These increases were offset by lower revenue for managing the electricity incentive payment (GRIN) for € 13.2 million, lower fees for the energy account (€ 3.0 million), lower margins deriving from PV plants following the transfer of certain plants to Acea Green at the end of 2021 and higher external costs (€ 17.3 million); iii) Water Segment +€ 12.4 million, mainly due to the payment of technical quality bonuses for 2018-2019 (+€ 26.9 million for fully-consolidated companies) only partially offset by non-existent liabilities deriving from tariff components of previous years recalculated when the 2020-2023 tariff was established (+€ 20.1 million) and, in part, by the lower margin recorded by GORI (-€ 8.5 million) as a consequence of non-recognition of the tariff, following the tariff update, mainly for the AMM.Fo.Ni. portion not recognised for investments for 2022 and 2023, and higher costs for sludge disposal and Acea Ato5 (-€ 3.6 million); iv) Overseas Segment +€ 3.9 million deriving, in part, from foreign exchange gains (€ 3.6 million) and for the rest from Acea Dominicana (+€ 0.7 million) for more reconnections following disconnections, as well as an increase in the number of users; v) Commercial and Trading Segment +€ 9.5 million due to the increase seen in the margin for energy efficiency activities and smart services totalling € 10.0 million; the energy margin fell slightly compared to the previous year; vi) Engineering and Services Segment -€ 4.0 million, attributable to Acea Elabori for € 1.4 million, consequent to the reduction in business and the margin due to tariff updates; margins also fell for Ingegnerie Toscane (€ 2.5 million) due to the Acque’s internalisation, starting in the second half of 2022, of the loss research, remote control and SIT sectors; vii) Corporate Segment -€ 4.4 million due to higher costs incurred compared to the previous year, in particular with reference to ITS costs, only partially offset by greater chargebacks to Group companies; higher costs were also recorded for strategic consulting and higher personnel costs. Compared to the past year, there was a reduction in costs incurred for the COVID-19 emergency; viii) Energy Infrastructure Segment -€ 19.4 million due to the contrasting effects of energy balancing (-€ 26.0 million) due to the effects of the reduction in the WACC (from 5.9% to 5.2%) and the lower margin deriving from the open fibre contract. These effects were partially offset by higher revenue from effects associated with resilience (+€ 3.3 million) and lower costs for services and personnel. Additionally, there was an improvement in margins recorded for business linked to management of the public lighting service in the Municipality of Rome (+€ 3.3 million) due to the lower cost of personnel (grid-IP integration project), as well as in the increase in the fee for the Municipality of Rome.

EBIT amounted to € 565,9 million and decreased by € 15.2 million compared to the previous year. Below are details of the items influencing EBIT.

The increase in depreciation, amortisation and impairment (+€ 48.0 million) is mainly linked to investments in the period and the ongoing entry into operation of assets, with particular reference to companies in the water segment (+€ 36.7 million). For this item, the change in the consolidation scope is influenced by the opposing effects deriving from the increase in depreciation and amortisation in the environment segment (+€ 11.8 million), partially offset by the decrease in depreciation and amortisation in the generation segment (-€ 8.8 million) as a result of the cited sale transaction in March 2022. For more information, please see the section “Application of IFRS 5”.

Impairment of receivables, although up compared to the previous year (+€ 27.1 million), maintained essentially the same impact in terms of total Group revenue (2.20% vs. 2.17%). This result, in the absence of any particular issues in amounts collected during 2022, is associated, beyond certain extraordinary items, with business growth and the introduction of a stress scenario for the main Group companies, in order to anticipate potential impairment of customer creditworthiness that may not be identified through current performance but derives from satellite models based on macroeconomic and business information.

Provisions made and released for risks and charges fell compared to the previous year (-€ 11.0 million), mainly due to the contrasting effects of i) lower provisioning done by Acea Energia (-€ 6.7 million), in part due to the release of the provision allocated for the AGCM sanction following the Lazio Regional Administrative Court ruling that cancelled the provision, due to the compliance of Acea Energia’s actions with the reference regulations, as reconstructed by ARERA in its opinion issued as part of the proceedings (€ 2.6 million), ii) lower provisioning by Acea Ato2 (-€ 4.8 million) and by Acea Ato5 (-€ 2.6 million), and iii) greater provisioning by the parent company (+€ 4.1 million) for redundancy and mobility.

The result of financial operations shows net expenses of € 85.7 million, slightly down compared to 2021 as a consequence of the opposing effects deriving from the higher financial income from discounting recorded by GORI (+€ 11.0 million) due to the rescheduling of debt associated with the Campania Region and from higher interest on receivables from customers (+€ 1.4 million), offset by higher expenses on commissions for receivables due to higher transfers in 2022 (+€ 9.0 million) mainly attributable to Areti. Also note higher interest on arrears (+€ 2.2 million) mainly attributable to Acea Energia and interest on bond loans and medium/long-term debt (+€ 2.2 million). The average overall all-in cost of the Acea Group’s debt stood at 1.44% compared to 1.42% the previous year.

Income and expense from equity investments show net income of € 17.8 million and mainly refer to the recognition of net capital gains, totalling € 16.4 million, following the disposal of a group of photovoltaic plants as part of the agreement signed with the British investment fund Equitix.

The estimate of fiscal charges amounted to € 186.8 million, compared to € 150.7 million in the previous year. The total increase of € 36.1 million derived partly from the extraordinary solidarity contribution set out by Article 37 of Law Decree 21/2022 (so-called excess profit contribution) for parties that produce electricity and are involved in the resale of electricity, methane and natural gas within national boundaries and by Article 1 of Law 197/2022. The total amount for the Group is € 38.5 million. The tax rate for 2022 was 37.6% (30.0% on 31 December 2021) considering the effect of the aforesaid contribution. The normalised tax rate was 29.8%.

The net profit attributable to the Group was € 279.7 million and showed a decrease of € 33.6 million compared to the previous year.