Trends in financial position and cash flows

The Environment Segment made investments of € 46.2 million, which increased by € 10.1 million compared to 31 December 2021. The investments of the segment refer mainly to Acea Ambiente (+€ 28.9 million) and regard plant improvements carried out at the plants in San Vittore and Aprilia, the WTE plant in Terni and the one in Monterotondo Marittimo; The investments made by Cavallari (+ € 2.9 million) for the purchase of an industrial shed and a shredder and the change in scope for € 8.3 million contributed to the increase. These increases were in part offset by lower investments recorded by Berg (-€ 1.2 million).

The Commercial and Trading Segment recorded investments of € 49.6 million, in line with 31 December 2021. Investments, mainly referring to Acea Energia, were related to the cost of acquiring new customers under the terms of IFRS 15 (€ 28.6 million) as well as implementation of the new CRM and significant improvements to the support systems for the management of Contact Centre processes and the analysis and monitoring of customer margins (€ 13.9 million). The e-mobility projects of Acea Innovation (€ 5.3 million) and Umbria Energy (€ 1.5 million) contributed to the investments of the Segment.

The Overseas Segment recorded investments of € 5.8 million, up compared to the previous year (+€ 1.2 million) and mainly relative to Aguas de San Pedro.

The Water Segment made total investments for € 611.0 million, an increase of € 88.8 million on the previous year. In particular, higher investments were made by Acea Ato2 (+€ 70.6 million), GORI (+€ 7.6 million), Acquedotto del Fiora (+€ 2.7 million) and SII (+€ 3.5 million). They refer mainly to extraordinary maintenance work, reconstruction, modernisation and expansion of plants and networks, the reclamation and expansion of water and sewer pipes of the various Municipalities and work on purification and transport plants (ducts and feeders). The change in the scope of consolidation mainly refers to ASM Terni, for € 1.8 million.

The Energy Infrastructure Segment contributed to total investments for € 268.8 million and recorded a decrease of € 5.7 million compared to the previous year. The investments refer mainly to Areti and are attributable to the expansion and upgrading of the HV, MV and LV grids, the mass replacement of 2G metering groups, work on the primary stations, secondary substations and meters, and remote control equipment as part of the grid “Adequacy and Safety” and “Innovation and Digitalisation” projects. This was all intended to improve the quality of the service and increase resilience. Intangible investments refer to projects for the re-engineering of information and commercial systems. The Public Lighting sector contributed for € 1.5 million (-€ 2.3 million compared to the previous year).

The Generation Segment made investments for € 30.3 million, down by € 9.2 million compared to 31 December 2021 due to lower investments recorded by Acea Produzione (-€ 7.3 million) and the photovoltaic segment (-€ 2.5 million).

Investments made by Acea Produzione mainly refer to work to upgrade hydroelectric plants, in particular Salisano and S. Angelo, as well as the expansion and restoration of the district heating grid in the Mezzocammino district in the southern area of Rome, and the upgrading and maintenance of photovoltaic plants. Investments in the photovoltaic area mainly refer to investments made by Acea Solar to build photovoltaic plants on agricultural and industrial land and investments made by the newly acquired SF Island.

The Engineering & Services Segment recognised investments for € 5.8 million, mainly attributable to Acea Elabori, down by € 4.1 million mainly due to fewer purchases of equipment and software.

The Corporate Segment made investments for € 32.7 million, down slightly compared to the previous year (-€ 1.7 million), mainly for software licences, IT and hardware development, as well as investments in the company offices.

Equity investments increased by € 56.7 million compared to 31 December 2021. The change is determined by the increase in the valuation of companies consolidated with the equity method (+€ 28.0 million), plus the change in the consolidation scope (+€ 24.6 million) due to the consolidation at equity of (i) Acea Sun Capital (€ 12.3 million) as of the end of March 2022, (ii) the photovoltaic companies acquired by the Powertis Group (€ 9.1 million), (iii) DROPMI, which researches and engineers next-generation water metres, and (iv) the stake held by ASM Terni of Umbria Distribuzionegas. The remaining change mainly refers to the effects of the distribution of dividends (-€ 3.4 million) and changes in OCI (+€ 6.5 million).

The stock of employee severance indemnity and other defined benefit plans reported a decrease of € 7.2 million, mainly due to the increase in the rate used (from 1% at 31 December 2021 to 4% at 31 December 2022).

Provisions for risks and charges increased by € 24.7 million compared to the end of the previous year, mainly following consolidation of ASM Terni (+€ 10.4 million) and the recognition of the post mortem provisions of Acea Ambiente (formerly Polo Cirsu), Deco and Ecologica Sangro, represented in the table under the “Other Changes” column. Provisioning during the period mainly refers to provisions for redundancies and mobility (€ 20.2 million), provisioning for regulatory risks (€ 5.0 million), mainly for higher fees for the derivation of water for hydroelectric use coming from the Sangro, Aventino and Verde rivers to serve the S. Angelo Power Plant, requested from the Abruzzo Region for 2014-2021 and extra BIM (Bacino Imbrifero Montani) fees for the Nera and Aniene rivers (€ 3.3 million), in Acea Produzione, as well as provisioning for other risks (€ 7.3 million), mainly for Areti and associated with penalties, reserves for tenders, investigation rights for IP licenses and ARERA resolution 604/2021 (€ 4.7 million).

The details by nature of the provisions are presented below:

The change in net working capital compared to 31 December 2021 is attributable mainly to an increase in current receivables of € 195.8 million, the increase in other current assets (€ 73.1 million) partially offset by the increase in current payables of € 166.4 million, and the increase of other current liabilities of € 77.3 million.

Receivables from users and customers, net of provisions for impairment of receivables, amounted to € 1,216.1 million and are up by € 189.1 million compared to 31 December 2021. Note: i) an increase in receivables in the Commercial and Trading segment of € 180.3 million, mainly attributable to Acea Energia (+€ 141.0 million) and Acea Innovation (+€ 38.2 million); ii) an increase in receivables in the Generation segment for € 2.3 million, mainly linked to Ecogena and Acea Produzione (+€ 2.1 million); iii) an increase in receivables in the Environment segment for € 5.7 million, mainly associated with the consolidation of Tecnoservizi (+€ 7.9 million) and S.E.R. Plast (+€ 1.1 million), as well as the increase seen by Deco (+€ 3.9 million) and Consorzio Ecologico del Frentano (+€ 1.9 million), partially offset by the reduction recorded by Acea Ambiente (-8,3 million) and Ecologica Sangro (-€ 1.5 million); iv) an increase in receivables for the Overseas segment of € 2.9 million mainly due to the increase in receivables for Consorcio Acea Lima Sur (+€ 0.8 million), Aguas de San Pedro (+€ 0.6 million) and Acea Dominicana (+€ 0.5 million); v) a reduction for the Engineering and Services segment for € 0.8 million associated with the contrasting effects recorded by TWS (+€ 2.6 million) and SIMAM (-€ 3.9 million); vi) a reduction in the Infrastructure and Energy segment of € 7.5 million relative to Areti.

The provision for doubtful receivables amounted to € 615.3 million, up compared to 31 December 2021 (€ 595.2 million). Receivables totalling € 1,332.0 million were transferred without recourse during 2022, of which € 310.1 million to the Public Administration.

As regards relations with Roma Capitale, the net balance at 31 December 2022, as highlighted in the table below was € 1.7 million due to the Group (the payable balance at 31 December 2021 was € 32.2 million).

Trade and financial receivables recorded an overall increase of € 3.1 million compared to the previous year, mainly due to accrual in the period and collections. The main changes in the year are as follows:

• higher receivables of Acea Ato2 for the supply of water for € 51.3 million;
• higher receivables referable to the Public Lighting service for € 53.4 million;
• collection/offsetting of receivables relating to the Public Lighting service for € 56.5 million;
• collection/offset of receivables of Acea Ato2 for € 48.5 million.

Payables decreased by € 33.8 million compared to the previous year. The main changes during the period are as follows:

• higher payables due to the recognition of Acea dividends for 2021 for € 92.3 million;
• higher payables due to the recognition of Acea Ato2 dividends for 2021 for € 2.6 million;
• higher payables due to the recognition of the portion accrued related to the Acea Ato2 concession fee, for € 25.3 million;
• higher payables due to the recognition of the accrued portion relative to COSAP for € 1.7 million;
• payment of Acea share dividends for 2019 and 2020 for a total of € 56.5 million;
• payment of Acea Ato2 concession fees for 2018, 2020 and 2021 for a total of € 35.2 million;
• payment of Acea Ato2 share dividends for 2020, totalling € 2.2 million;
• payment of electricity surcharges prior to 2012 for Acea Energia, totalling € 7.7 million;
• payment by Areti of COSAP liabilities referring to 2017, 2018 and 2021 for a total of € 4.4 million;
• payment of Areti payables for road work totalling € 2.7 million;
• Acea paid Roma Capitale 50% of the 2021 dividends amount, equal to € 46.2 million;
• Areti paid various Rome Capitale municipalities the amounts due for road excavation permits for a total of € 14.9 million, as well as payment of the COSAP payable for € 1.7 million;
• Acea Ato2 through offsetting paid share dividends for the year 2021 totalling € 2.6 million.

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

• April 2022: offsetting of receivables for € 3.6 million for works relating to the Public Lighting service, offsetting Acea’s share dividends for 2019;
• May 2022: offsetting of receivables for € 7.4 million for fees for the last quarter of 2021 for Public Lighting, offsetting Acea’s share dividends for 2019;
• July 2022: offsetting of receivables for € 16.0 million related to the supply service against the Acea Ato2 concession fee for 2021;
• July - August 2022: offsetting of receivables for € 15.4 million for fees for September 2021 and the first quarter of 2022 for the Public Lighting services, as well as works also associated with the Public Lighting services against Acea share dividends for 2019;
• September 2022: offsetting of receivables for € 4.8 million relating to the water supply service against Acea Ato2’s share dividends for 2020 and 2021;
• September 2022: offsetting of receivables for € 9.1 million for fees for 2022 for the Public Lighting Service, offsetting Acea’s share dividends for 2019 and 2020;
• November 2022: offsetting of receivables for € 10.2 million for modernisation and extraordinary maintenance for 2021 for the Public Lighting grid offsetting Acea’s share dividends for 2020;
• December 2022: offsetting of receivables for € 10.8 million for fees for the third quarter of 2022 for Public Lighting, offsetting Acea’s share dividends for 2020;
• December 2022: collection of Acea Ato2 receivables for € 8.4 million relative to the water supply services.

Note that on 2 January 2023, Acea Ato2 paid the balance of the payable for the concession fee for 2021 (€ 2.3 million) and a portion of the payable for the concession fee for 2022, for € 6.1 million.

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. Hence, again in 2021, while awaiting the conclusion and finalisation of these aspects,

Acea 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 established 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. Note that the Municipality liquidated receivables with Acea, again through offsetting, for a total of € 56.5 million, of which € 17.4 million relative to receivables already recognised in previous years.

Note that on 11 August 2022, the City Executive Committee with resolution no. 312 entitled “Public and artistic-monumental public lighting service for 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 and 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.

With reference to the Technical Panel for water use receivables for Acea Ato2, in December 2021 the Parties signed a Technical Report intended to overcome the issues and disputes which have been discussed since 2018, as also indicated in the Notes to the Financial Statements for previous years.

As of the reporting date of these financial statements, Roma Capitale still needs to liquidate most of the receivables reported in the Technical Report.

Note that in September 2022 the Consolidated Financial Statements of Roma Capitale as at 31 December 2021 were approved.

The following table presents an analysis of receivables and payables, including those of a financial nature, between Acea Group and Roma Capitale, as regards both net credit exposure and debt exposure, including financial items.

Current payables rose due to the increase in the stock of trade payables (+ € 187.6 million). This effect is partially influenced by the change in the scope of consolidation (+€ 48.1 million), mainly due to consolidation of ASM Terni (+€ 41.5 million) and in part due to the increase seen by Acea Energia (+€ 42.9 million), Acea Ato2 (+€ 36.3 million) and Acea Innovation (+€ 22.8 million).

Other current assets and liabilities recorded an increase of € 73.1 million and € 77.3 million respectively compared to the previous year. More specifically, other assets increased due to: i) the increase in receivables due to the higher VAT payment relative to the parent company (+€ 15.3 million) and other receivables of Acea Ato2 (+€ 25.3 million), mainly associated with the contractual quality bonus for 2018 and 2019 and tariff adjustments for 2018-2022 that will be invoiced starting in 2024; ii) the increase in tax receivables linked to Umbria Energy (+€ 14.2 million) and Acea Innovation (+€ 5.0 million); iii) the increase in the value of derivatives receivable on commodities (+€ 9.6 million) due to the fair value change at the end of the period in question and the change in amounts hedged; iv) higher receivables due from the Equalisation Fund (+€ 19.4 million) mainly associated with Umbria Energy (+€ 7.6 million), ASM Terni (+€ 4.9 million) and Areti (+6.8 million). The cited increase was partially offset by a decrease in the receivables due from the Equalisation Fund recorded by Acea Energia and due to the settlement by CSEA of amounts due for 2021 and for determination of the amounts due for 2022, in part due to the electrical Social Bonus and in part due to the equalising effect (-€ 52.4 million). Also note greater accrued income and prepaid expenses (+€ 10.5 million), mainly relative to Acea Solar (+€ 5.4 million), Umbria Energy (+€ 2.3 million) and the parent company (+€ 1.6 million).

The increase in other current liabilities instead refers to: i) the increase in payables due to the Equalisation Fund associated with Acea Energia (+€ 43.6 million) due to imbalances in the equalisation system for the costs of purchasing and dispatching electricity for the enhanced protection service; ii) the increase in payables associated with the change in the consolidation scope (+€ 42.5 million), mainly linked to the consolidation of ASM Terni (+€ 38.7 million); iii) the increase in the payable due to GSE due to the Supports Decree Ter with reference to Acea Produzione (+€ 22.3 million), introduced by the government to contain energy price increases; iv) greater tax payables of € 18.4 million relative to Acea Produzione; v) the increase in accrued expenses and deferred income (+€ 25.4 million), mainly linked to Acea Ato2 (+€ 15.2 million), Umbria Energy (+€ 3.1 million) and S.E.R. Plast (+€ 1.5 million). The increase in other current liabilities is partially offset by the reduction in liabilities for “Passive derivative instruments on commodities”, which decreased by € 43.0 million, mainly due to the change in the fair value measurement at the end of the period in question and the change in the amounts hedged.

The shareholders’ equity amounted to € 2,755.2 million. The changes, amounting to € 238.8 million, are detailed in the relevant table and are basically due to the distribution of dividends, the accrual of 2022 profits, the change in the cash flow hedge reserves and those formed by actuarial profits and losses as well as the change in the consolidation scope.

Group debt recorded an overall increase of € 451.3 million, going from € 3,988.4 million at the end of 2021 to € 4,439.7 million at 31 December 2022.

Non-current financial debt decreased by € 69.7 million compared with the end of the 2021 financial year. This change derives from a decrease in bond loans of € 307.5 million offset in part by an increase in payables for medium/long-term loans of € 204.1 million, as shown in the following table:

Bonds of € 3,834.5 million at 31 December 2022 decreased by a total of € 307.5 million, mainly due to the reclassification into the short-term position of the 5-year bond issued by Acea on the Euro Medium Term Notes (EMTN) programme on 1 February 2018.

Medium/long-term loans of € 814.4 million recorded a total increase of € 204.1 million due mainly due to the Parent Company (+€ 211.4 million) for the disbursement in 2022 of € 250.0 million for the EIB loan signed in 2020.

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 hedging derivatives was a positive € 6.6 million (it was a negative € 0.1 million at 31 December 2021); the fair value of Acquedotto del Fiora hedging derivatives was a positive € 5.5 million (at 31 December 2021 it was a negative € 1.9 million), and that of SII 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 a positive € 282.6 million and, compared to the end of 2021, worsened by € 521.0 million, generated for € 503.7 million by the Parent Company and by Adistribuzionegas for € 27.0 million, offset by Acea Produzione for € 10.7 million. The change in the parent company is mainly due to the reclassification into the short-term position of the 5-year bond issued by Acea on the Euro Medium-Term Notes (EMTN) programme on 1 February 2018, for € 300.0 million, lower short-term deposits for € 80 million and lower cash and cash equivalents equal to € 141.6 million.

Note that financial debt includes € 105.9 million in payables to Roma Capitale for dividends resolved to be distributed and does not include other payables of around € 57.5 million relating to share purchase options of the companies already held.

It is necessary to point out that the Group’s sales companies are those most impacted by the macroeconomic scenario resulting from the Russia-Ukraine conflict. The increase in prices on the energy market produced an amplification of the time delay between collections from customers and payments to energy suppliers thus determining a higher absorption of working capital and generating a worsening effect on the Group’s financial debt of approximately € 130.0 million which represents the net balance of the negative effects recorded mainly on Acea Energia and the positive ones recorded by Acea Produzione and Acea Ambiente.

At 31 December 2022, 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.

Also note that, on 17 January 2023, relative to the € 5 billion Euro Medium-Term Notes (EMTN), Acea successfully completed placement of the Green Bond issued for a total of € 500 million (3.875% rate, maturity on 24 January 2031). Again with reference to the same programme, on 3 February, the Green bond issue previously issued was again opened (3.875% rate, maturity 24 January 2031) for € 200 million (“TAP Issue”).

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

• Fitch “BBB+”;
• Moody’s “Baa2”