18/02/2022 - A2A S.p.A.: Webcast Transcript Strategic Plan at 2030

IR:

Good morning and welcome to A2A's strategic update. Our CEO, Renato Mazzoncini, starting from the excellent evidence of 2021, will present the strategy to 2030, which is strongly focused on sustainability.

Our CFO, Andrea Crenna, will explain the economic and financial details.

This will be followed by a question-and-answer session dedicated to financial analysts.

Now I give the floor to Renato Mazzoncini. Please do.

CEO - Mazzoncini:

Thank you, Renata. Good morning, everyone and welcome to the presentation of the update of our industrial plan. We named it "Beyond expectations" because we have indeed closed 2021 beyond our expectations, and this has given us the strength to implement the plan that we will now briefly tell you about.

It's been exactly 12 months since we met with you on January 20, at the presentation of A2A's new 10-year business plan, and we are 12 months since the presentation of our payoff, "Life is our duty", which is really becoming the guide to our mission, to our activity, and which is guiding a little of all the strategies that the company is pursuing.

For this reason, I would like to start by dwelling on these simple facts. We came out of COP26 with the conviction that it would be very important to reach Net Zero in 2050. We all came out of COP26 with the conviction that the 1.5° temperature decrease curve is a goal we must set ourselves.

After that, we also all came out of COP26 without clarity, especially from a technological point of view, on what trajectory to follow.

However, some things are obvious. Today, as you can see in the graph on the left, we still have 64% of fossil fuels, the electron still plays a marginal part, 21% of electrified energy, and 11% is bioenergy, which includes biomass, biogas, biomethane, synthetic fuels, etc.

We have to go to a world where, if we really want to have decarbonisation, by 2050 the electron must reach 51% and all bioenergy must rise to 30%, with a very strong reduction of fossil fuels.

A company like ours, which is active and invests in both the electron and the molecule segments, has a very important role, and I must say that it also has a

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natural hedging between these components, because we do not know exactly how we will land in 2050, but they will be elements that will hedge each other, including obviously the fossil fuels, which will remain in quantities inversely proportional to the growth of the renewable part, both of the molecule and of the electron. These are all components within A2A's activity and perhaps this is one of the specificities that we have to work on.

If we look at a picture of our country, we find ourselves in a situation where, over the next 10 years, we need to make at least 4 billion € in investments in the waste segment, in particular to reduce landfilling, which is still very important, with a total of 17 million tonnes. We made a report on the need to close this gap that we presented in Cernobbio with Ambrosetti last year, and we are targeting our investments on this.

There is a need to implement 70 giga of new renewables, the issues of the energy crisis and gas prices at the moment show the need to accelerate renewables, and as you know our plan is very strong on this side too.

I would like to announce that within this plan we will find three new elements that have been developed, which are the whole world of bioenergy, the world of hydrogen and the world of electric mobility, of recharging infrastructure. These were themes that we had basically announced in January last year and that we have now turned into numbers, economics, Capex and EBITDA, so they are actually important plan numbers.

Again, on that theme, last year we presented the decarbonisation curve linked and certified to the science-based target. In 2017 ,the reference point was 425 grams of CO2 per kilowatt /hour produced, and you may remember that in the last plan we set a target of 226 grams of CO2 per kilowatt /hour produced in 2030.

Now, we have two additional pieces of news. One is that, with the acceleration that we will see later on renewables, we have improved the target slightly, to 216. The second is an announcement that we are working on, that we intend to get to Net Zero by 2040, so 10 years ahead of 2050. We have opened many sites to get to Net Zero.

In particular, consider that we have this issue: the 216 in 2030 is an average with generation, which with the development of renewables will drop a lot. You can see that without other interventions, without carbon capture interventions, just with the shift from fossil fuels to renewables, we already drop to 130 grams of CO2 per

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kilowatt hour, which means, to understand, that we are in a curve very close to that of 1,5°.

Let me give you two numbers. Today the 2° curve brings us to 230 grams of CO2 per kilowatt hour, the 1.5° curve brings us around 85-90. You can see that 130 is very close to 1.5°.

What still keeps us away is the waste segment, in particular waste to energy, which however has an important element: according to data by Ispra, the use of waste-to-energy actually reduces CO2 emissions by 44%, compared to landfill. Considering that the main objective of waste-to-energy is precisely to solve the problem of landfill, we are still talking about a technology that reduces CO2.

Having said that, in order to achieve Net Zero, it will also be necessary to work on the CO2 netisation of waste plants, obviously working on technological issues that could range from carbon capture to decarbonisation strategies, to even different waste-to-chemicals or other technologies.

Exactly the same as last year, this is a comparison with the plan we made 12 months ago. We maintain the emissions reduction target, you see that there is a slight increase in the target for new renewables, on top of the existing fleet, so with

3.9 GW at the end of the plan, compared to 3.7 GW. There is substantial confirmation of the millions of tonnes of additional waste managed, the millions of tonnes of CO2 avoided, 90% of the Capex in line with the UN SDGs, while on the economics you see some significant changes: the 16 billion that had been announced in the 21-30 plan becomes 18, so we are talking about the cumulative 2021-30, this obviously also following the results of 2021. We will then see what the additional € 2 billion in Capex has been invested in.

As a result, these investments generate a higher EBITDA at the end of the plan, which comes to 2.9 billion, with a net income growth of 9%, year on year.

We maintain a very good Net debt/EBITDA ratio position, 2.6 at the end of the plan, with a total of 7,000 people hired over the 10 years, replacing about 5.000. So we find ourselves with a slightly increased population, by a couple of thousand people, but strongly rejuvenated. Out of a total, I would remind you, of about 13,000 people now and 15,000 at the end of the plan.

Let's look at 2021 for a moment. In 2021 there has been a tremendous acceleration on renewables. When we met in January last year, the main question you asked during the presentation was: "You are basically at zero on photovoltaic

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and wind, how do you think you can accelerate in this way? ". Obviously, we started with a strong hydro component, but with 99 mega of photovoltaic.

This is the answer. Today we are at the target we set for 2024, so we are two years ahead on our target plans. We have reached 2.6 GW of installed capacity, basically with three major transactions, which were the Octopus deal at the beginning of the year, in February, including one of the largest Italian solar parks in market parity; and with the operation, closed and announced last week, of the acquisition of the two wind portfolios of Ardian, 3New and 4New - part share, because there are minorities - of 350 MW installed almost all in Italy, with two relatively small, but still symbolic for us, solar plants in Spain, in Andalusia and Catalonia.

This acceleration obviously also has an effect on the green energy produced, which we will look at later.

This was not the only operation in this area, we also built a pipeline. Last year the pipeline question you asked us had "zero" as an answer, basically we had no pipeline. This year we have worked on creating a pipeline of 2.5 giga, partly made up of internal activities made by our renewables team has done, which is continuing to grow, and partly with the acquisition, also announced a few weeks ago, of Volta Green Energy, a company that has been active for many years in the development of renewables, which has brought a significant pipeline into A2A, also as a development stage.

In the meantime, we also worked on the flexibility part of the system. We had four upgrades authorised, at Chivasso, Sermide, Piacenza and Cassano, compared to the two that had been announced in the plan. We have obtained authorisation for the Cassano peaker, as announced, and we have obtained authorisation for three chemical battery storage plants in Gissi, Chivasso and Brindisi.

In the meantime, another very significant element is that we have continued to grow on a national level. I would say that at this point we can definitely announce the third phase of A2A's life. Obviously, A2A started out from its reference territories, Brescia, and Milan, then over the last decade it became a regional multi-utility, including, as you know, many holdings in the regional sphere, and now development in the national sphere is very strong. In particular, the acquisitions that we have closed in southern Italy, that is to say in the area of the environment TecnoA - the large Crotone plant - and 3New and 4New, which are present above all in Puglia,

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