HALF-YEARLY FINANCIAL REPORT AT JUNE 30_ 2011

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					HALF-YEARLY FINANCIAL
       REPORT
   AT JUNE 30, 2011
      Half-yearly financial report at June 30, 2011




     Contents




     0.1 Performance indicators and corporate
         information
 5   The A2A Group at June 30, 2011

6    Financial Highlights

8    A2A S.p.A. on the Stock Exchange

11   Corporate bodies

13   Significant events during the period
                                                                                    1
17   Summary of results, assets and liabilities and financial position of the A2A

     Group

25   Significant events after June 30, 2011




     0.2 Condensed half-year consolidated financial
         statements
28   Consolidated balance sheet

30   Consolidated income statement

32   Consolidated statement of comprehensive income

33   Consolidated cash flow statement

34   Consolidated statement of changes in equity

36   Consolidated balance sheet pursuant to Consob Resolution no. 17221 of

     March 12, 2010

38   Consolidated income statement pursuant to Consob Resolution no. 17221 of

     March 12, 2010
            Half-yearly financial report at June 30, 2011

            Contents




          0.2.1 Notes to the condensed half-year consolidated
                financial statements
     41   General information on A2A S.p.A.

     42   Half-year financial report

     43   Financial statements

    44    Basis of preparation

     45   Changes in international accounting standards

     52   Scope of consolidation

     53   Consolidation policies and procedures

     59   Seasonal nature of the business

    60    A2A Group – Areas of activity

     61   Geographical areas of activity

     62   Results sector by sector

    64    Notes to the balance sheet

     83   Net debt

    84    Notes to the income statement
2
     92   Earnings per share

     93   Note on related party transactions

     97   Consob Communication no. DEM/6064293 of July 28, 2006

    98    Guarantees and commitments with third parties

    100   Other information


          0.2.2 Attachments to the condensed half-year
                consolidated financial statements
    122   1. Statement of changes in tangible assets

    124   2. Statement of changes in intangible assets

    126   3. List of companies included in the consolidated financial statements

    128   4. List of shareholdings in companies carried at equity

    130   5. List of companies included in the consolidated financial statements of the

            Ecodeco Group

    132   6. List of companies included in the consolidated financial statements of the

            Coriance Group

    134   7. List of financial assets available for sale
                                      Half-yearly financial report at June 30, 2011

                                      Contents




                                     0.3 Interim report on operations
                     137             Results sector by sector

                     139             Macroeconomic scenario

                     141             Performance of the energy market

                     144             Energy Sector

                     155             Heat and Services Sector

                     158             Environment Sector

                     162             Networks Sector

                     173             Other Services and Corporate Sector

                     175             Outlook for operations

                     176             Human resources and industrial relations

                     177             Corporate Social Responsibility

                     180             Innovation, development and research

                     185             Risks and uncertainties




                                                                                                                 3
                                     0.4 Certification of the condensed half-year
                                         financial statements pursuant to article 154-bis
                                         paragraph 5 of Legislative Decree no. 58/98
                    207              Certification of the condensed half-year financial statements pursuant to

                                     article 154-bis paragraph 5 of Legislative Decree no. 58/98




This is a translation of the Italian original “Relazione finanziaria semestrale al 30 giugno 2011” and has
been prepared solely for the convenience of international readers. In the event of any ambiguity the
Italian text will prevail. The Italian original is available on the website www.a2a.eu
0.1
Performance
indicators and
corporate
information
                                                         Half-yearly financial report at June 30, 2011




                                                       The A2A Group at June 30, 2011
                                                                  A2A Spa


51.00%              100.00%          100.00%            100.00%              100.00%              100.00%              100.00%              100.00%
Delmi (3)           A2A Trading      A2A Energia        A2A Calore &         Amsa                 A2A Reti             A2A Reti             Selene
                                                        Servizi                                   Elettriche           Gas

 50.00%              70.00%           33.33%            98.08%               100.00%              100.00%              100.00%              100.00%
 Transalpina di      A2A Alfa         Lumenergia        A2A Coriance         Ecodeco              A2A Ciclo Idrico     A2A Servizi alla     A2A Logistica
 Energia                                                                                                               distribuzione

   61.28%              50.00%        100.00%              100.00%            99.97%               99.98%               91.60%               100.00%
   Edison (1)          Premiumgas    A2A                  Coriance           Aprica               BAS-SII              Retragas             Mincio
                                     Montenegro                                                                                             Trasmissione

20.00%              70.00%           43.70%             90.00%                 80.00%             67.00%               74.50%               49.00%
Edipower            Plurigas         EPCG               Varese Risorse (4)     Montichiari        Seasm                Camuna               e-Utile
                                                                               ambiente                                Energia

100.00%             94.95%           39.49%             60.00%               100.00%              90.00%               48.86%               21.94%
Aspem               Abruzzoenergia   Rudnik Uglja ad    Proaris              Partenope            Aspem (4)            ASVT (2)             ACSM-AGAM          5
Energia                              Pljevlja                                Ambiente

                    50.00%                              50.00%                                                                              7.9%
                    Ergosud                             Asm Novara (3)                                                                      Dolomiti Energia


                    50.00%
                    Metamer




                  Areas of activity

                      Energy                           (1) The 61.28% refers to the ordinary shares held in Transalpina di Energia (TdE). The
                                                           actual stake in share capital is 60%. Note that Edison holds 50% of shares in
                      Heat and services                    Edipower.
                                                       (2) 0.38% of these are held through A2A Reti Gas.
                      Environment                      (3) There are call and put options on a further stake in the company's share capital.
                                                       (4) There are put options on a futher stake in the company's share capital.
                      Networks
                                                       This table shows the A2A Group's most significant shareholdings. You are referred to
                      Other companies                  attachments 3, 4, 5, 6 and 7 for full details of all shareholdings.
                                                Half-yearly financial report at June 30, 2011




                                               Financial Highlights (1)




    Revenues                                                                                       3,050 million euro
    Gross operating income                                                                           477 million euro
    Net income                                                                                          120 million euro

    Income statement                                                                             01 01 2011     01 01 2010
    Millions of euro                                                                            06 30 2011     06 30 2010
6
    Revenues                                                                                         3,050          2,858
    Operating expenses                                                                              (2,286)         (2,130)
    Labour costs                                                                                      (287)          (258)
    Gross operating income                                                                             477            470
    Depreciation, amortization, provisions and write-downs                                            (254)          (238)
    Net operating income                                                                               223            232
    Financial balance                                                                                  (80)           (56)
    Other non-operating income                                                                            1             –
    Other non-operating expenses                                                                         (5)            –
    Income before tax                                                                                  139            176
    Income taxes                                                                                       (74)           (68)
    Net result from non-current assets sold or held for sale                                            39            282
    Minorities interests                                                                                16             (19)
    Net income for the period pertaining to the Group                                                  120            371
    Gross operating income/revenues                                                                 15.6%          16.4%




    (1) The figures serve as performance indicators required by CESRN/05/178/B
                                              Half-yearly financial report at June 30, 2011

                                              Financial highlights




 Balance sheet figures                                                                        06 30 2011       12 31 2010
 Millions of euro

 Net capital employed                                                                              8,402            8,738
 Total equity attributable to the Group and minorities                                             4,644            4,845
 Consolidated net financial position                                                              (3,758)          (3,893)
 Consolidated net financial position/Equity attributable to the Group and
 minorities                                                                                          0.81            0.80
 Consolidated net financial position/Market cup                                                      1.06             1.03
                                                                                                                             7




 Financial data                                                                                01 01 2011      01 01 2010
 Millions of euro                                                                             06 30 2011      06 30 2010

 Net cash from operating activities                                                                  398              398
 Net cash used in investing activities                                                               (63)             218
 Free cash flow                                                                                       335             616




 Key figures of A2A S.p.A.                                                                    06 30 2011       12 31 2010

 Share capital (euro)                                                                     1,629,110,744      1,629,110,744
 Number of ordinary shares (par value 0.52 euro)                                         3,132,905,277       3,132,905,277
 Number of treasury shares (par value 0.52 euro)                                              26,917,609       26,917,609




 Key indicators                                                                               06 30 2011      06 30 2010

 Average 6-month Euribor                                                                          1.530%          o.974%
 Average price of Brent crude (USD/bbl)                                                             111.13          78.40
 Average exchange rate €/USD (*)                                                                    1.40              1.33
 Average price of Brent crude (euro/bbl)                                                            79.11            59.15
(*) Source: Italian Foreign Exchange Office
                                               Half-yearly financial report at June 30, 2011




                                               A2A S.p.A. on the Stock Exchange




    A2A in figures
    Capitalization at June 30, 2011 (millions of euro)                                                3,365
    Avarege capitalization in the first half 2011 (millions of euro)                                   3,552
    Average volumes in the first half 2011                                                       10,338,669
    Average price in the first half 2011 (*)                                                           1.134
    Maximum price in the first half 2011 (*)                                                           1.231
    Minimum price in the first half 2011 (*)                                                          1.001

8   Number of shares                                                                           3,132,905,277
    (*) euro per share
    Source: Bloomberg,



    In June 23, 2011 A2A distributed a dividend equal to 0.06 euro per share. In November 24, 2011
    will be distributed an additional non-recurring dividend equal to 0.036 euro per share.


    A2A forms part of the following indices
    FTSE MIB
    DJ STOXX
    DJ EUROSTOXX
    DJ Italy
    WisdomTree
    S&P Developed Ex-US




    Ethical indices
    FTSE4GOOD Global e Europe
    FTSE ECPI Benchmark
    Axia Csr e Ethical
    ECPI Ethical Index Global, Euro e EMU
    Solactive Climate Change
    Source: Bloomberg


    A2A ranked as a leading business in the Carbon Disclosure Project 2010.
                                             Half-yearly financial report at June 30, 2011

                                              A2A S.p.A. on the Stock Exchange




 Shareholders (*)


                                                                               Municipality of
                                        Market                                    Milan
                                        37.5%                                     27.5%




                                                                                                            9
                                  Carlo Tassara
                                      2.5%                                 Municipality of
                                                                             Brescia
                                                  Alpiq Holding               27.5%
                                                       AG
                                                       5%

(*) Quota greater than 2% (updated at June 30, 2011).
Sources: CONSOB




 Rating
                                                                                                 Current

                                                 Medium/long-term rating                            BBB+
 Standard & Poor’s                               Short-time rating                                   A–2
                                                 Outlook                                         Negative
                                                 Medium/long-term rating                              A3
 Moody’s
                                                 Outlook                                         Negative
Sources: rating agencies
                                                 Half-yearly financial report at June 30, 2011

                                                 A2A S.p.A. on the Stock Exchange




      A2A in the first half of 2011
                      1.3


                      1.2
     €/Share




                       1.1




                                                                                                            Volumes
                        1


                      0.9


                      0.8

                               jan      feb      ma                   ap          ma             jun
                                  -11      -11      r-1                 r-1         y-1             -11
                                                        1                   1           1

                                                            Volumes              Price




10
      A2A vs FTSE MIB

                       1.40
                       1.30
                       1.20
      A2A (€/Share)




                                                                                                            FTSE MIB Index


                        1.10
                       1.00
                      0.90
                      0.80
                             jan-11     feb-11   mar-11               apr-11       may-11          jun-11



     Source: Bloomberg
 Half-yearly financial report at June 30, 2011




Corporate bodies




SUPERVISORY BOARD
 CHAIRMAN
  Graziano Tarantini
 DEPUTY CHAIRMAN
  Rosario Bifulco
 DIRECTORS
  Adriano Bandera
  Gianbattista Brivio                            11
  Bruno Caparini
  Gianni Castelli
  Alberto Cavalli
  Stefano Grassani
  Enrico Mattinzoli
  Marco Miccinesi
  Massimo Perona
  Norberto Rosini
  Giorgio Maria Filiberto Sommariva
  Franco Tamburini
  Antonio Matteo Taormina



MANAGEMENT BOARD
 CHAIRMAN
  Giuliano Zuccoli
 DEPUTY CHAIRMAN
  Vittorio Cinquini
 DIRECTORS
  Franco Baiguera
  Mario Cocchi
  Francesco Randazzo
  Renato Ravanelli
  Paolo Rossetti
  Giuseppe Sala
      Half-yearly financial report at June 30, 2011

      Corporate bodies




     GENERAL MANAGERS
      CORPORATE AND MARKET AREA
       Renato Ravanelli
      TECHNICAL-OPERATIONS AREA
       Paolo Rossetti



     INDEPENDENT AUDITORS
12
      PRICEWATERHOUSECOOPERS S.P.A.
                                  Half-yearly financial report at June 30, 2011




                                Significant events during
                                the period




A single sales company for the A2A Group since January

ASMEA S.p.A., Bas-Omniservizi S.r.l. and A2A Servizi al Cliente S.r.l. merged into A2A Energia
S.p.A. on January 1, 2011.

The single sales company arising from this operation concentrates on the sale of electricity
and gas and the related commercial services (call centers, desks and billing).

More specifically, a leading operator on the national energy market has been created which         13
has around 2 million customers (large-scale industry, apartment blocks and domestic
customers) concentrated mostly in the Milan metropolitan area and the provinces of Brescia
and Bergamo.

This represents a further step in the process of rationalizing the Group and rendering it more
efficient, a step which is designed to make it even more competitive on the liberalized
markets.

Lombardy customers will be able to continue to be able to put their trust in quality services
that are close to them locally, a factor which up until now has been a “winning card” for the
Group as certified by the excellent results obtained in customer satisfaction surveys and in the
special league tables regularly prepared by the Electricity and Gas Authority.



A2A Ciclo Idrico S.p.A. comes to life on January 1, 2011

The contribution of the “water cycle” segment by the parent A2A S.p.A. and the demerger of
the “ownership of the end customers of the water business of the province of Brescia”
segment by A2A Energia S.p.A. (formerly Asm Energia e Ambiente S.r.l.) into A2A Ciclo Idrico
S.p.A. became effective on January 1, 2011.

More specifically, this company carries out the following activities, which are listed by way of
example:
                                        Half-yearly financial report at June 30, 2011

                                        Significant events during the period




     • research, production, procurement, capitation, transfer and transportation, conversion,
        distribution and sale of water for primary, industrial and agricultural use;
     • collection and treatment of waste water;
     • use and recovery of energy from the integral water cycle;
     • management, maintenance and development of the water and sewage networks and of
        the plants for the capitation, potabilisation and purification of water.



     A2A as one of the leaders in Italy for the Carbon Disclosure Project

     A2A was classified as one of the Italian “2010 Carbon Performance Leaders” by the Carbon
     Disclosure Project, the body acting on behalf of over 500 institutional investors and which for
     more than 10 years has been providing an analysis of the means by which the largest
     companies in the world counter greenhouse gas emissions.



14   A new Managing Director for Ecodeco S.r.l., a company of the A2A
     Group

     On March 11, 2011, the Board of Directors of Ecodeco S.r.l., one of the companies in the
     Environment Sector of the A2A Group, appointed Mr. Enrico Friz as Managing Director of
     the company. The intention of renewing the subsidiary’s top management is to consolidate
     the company’s development process as part of the Environment Sector of the A2A Group,
     with the aim of optimizing organizational and process synergies and strengthening the
     offer of environmental services.



     Communication of A2A S.p.A., Delmi S.p.A. and EDF S.A. in respect of
     the shareholders’ agreement regarding Edison S.p.A. and Transalpina
     di Energia S.r.l. (TdE)
     On March 15, 2011, as part of the discussions relating to a new industrial project concerning the
     Edison Group and the structure of TdE’s shareholdings, A2A S.p.A., Delmi S.p.A. and EDF S.A.
     reached agreement as to a change in the shareholders’ pacts regarding Edison S.p.A. and
     Transalpina di Energia S.r.l., which provides for an extension to September 15, 2011 of the
     deadline for any possible termination of such pacts. If no termination notice is sent by any of
     the parties by September 15, the agreements will be renewed for the following three years.
     This amendment also provides for the appointment of the boards of directors of Edison S.p.A.
     and Transalpina di Energia S.r.l. for a period of one year by the shareholders’ meetings
     approving the respective annual financial statements.
                                   Half-yearly financial report at June 30, 2011

                                   Significant events during the period




The Supervisory Board of A2A S.p.A. has approved the 2010 results

On April 27, 2011, with Mr. Graziano Tarantini in the chair, the Supervisory Board met and
approved the separate financial statements and consolidated annual financial report of the
A2A Group for the year ended December 31, 2010. The Supervisory Board agreed with the
proposal of the Management Board to submit to the approval of the shareholders’ meeting
the distribution of a dividend of 0.060 euro per ordinary share, to be put into payment on June
23, 2011.

The Supervisory Board additionally agreed with the proposal of the Management Board to
submit to the approval of the shareholders’ meeting the distribution of an additional dividend
of 0.036 euro per ordinary share, to be put into payment on November 24, 2011.



Ecodeco S.r.l. is awarded a contract in Britain for the design and
construction of a new waste treatment plant

3SE, a consortium set up by the British companies Shanks Waste Management and Scottish              15
and Southern Energy, has chosen Ecodeco technology to build a waste treatment plant
located in Yorkshire.

In greater detail, the A2A Group company Ecodeco S.r.l. will be the supplier of the project and
the technology, and will additionally build the plant which will treat the waste of the cities of
Barnsley, Doncaster and Rotherham.

The value of these supplies exceeds 26 million euro and it is also envisaged that Ecodeco will
be paid royalties on the concession for the next 25 years based on each tonne of waste treated.
The plant will be used to treat 250,000 tonnes/year of residual solid urban waste from the
differentiated collection and will serve around 350,000 families. At the end of the treatment
process a secondary fuel will be obtained which will be used in a multifuel plant for producing
electricity.

Glass, plastic and metals will be recovered by building a section for the production of compost.
The agreement provides that the work for the construction of the plant will begin by the
Spring of 2013 and that the first waste will be treated in 2015.



A total of 23.5% of the share capital of Metroweb S.p.A has been sold to
Fondo Infrastrutturale F2i and IMI Investimenti
On May 30, 2011 A2A S.p.A. together with Stirling Square Capital Partners, the majority
shareholder of Metroweb S.p.A., signed an agreement for the sale of their shareholdings in
                                       Half-yearly financial report at June 30, 2011

                                       Significant events during the period




     Metroweb S.p.A. (respectively 23.5% and 76.5%) to Fondo Infrastrutturale F2i and IMI
     Investimenti.
     This transaction will lead to proceeds of 53 million euro for A2A S.p.A. and a capital gain of 38
     million euro. A2A S.p.A. will continue to hold a convertible bond in its portfolio which if the
     option is exercised will enable it to acquire a shareholding in Metroweb S.p.A. of approximately
     25%, linked to a put option valid until November 30, 2013 under the same conditions of the
     present transaction increased by a financial return.




16
                                              Half-yearly financial report at June 30, 2011




                                            Summary of results, assets
                                            and liabilities and financial
                                            position of the A2A Group



Results
The results of the A2A Group for the period ended June 30, 2011 are set out below together
with comparative figures for the first half of the previous year:

 Millions of euro                                                            01 01 2011         01 01 2010            Changes
                                                                            06 30 2011         06 30 2010

 Revenues                                                                        3,050                2,858                 192
 of which:
                                                                                                                                      17
 – Revenues from sales of goods and services                                      2,996                2,815                 181
 – Other operating income                                                            54                   43                   11
 Operating expenses                                                              (2,286)              (2,130)               (156)
 Labour costs                                                                      (287)               (258)                 (29)
 Gross operating income                                                             477                 470                    7
 Depreciation and amortization                                                      (213)              (196)                 (17)
 Provisions and write-downs                                                          (41)                (42)                  1
 Net operating income                                                               223                 232                   (9)
 Net financial expense                                                              (67)               (106)                  39
 Share of results of companies at equity                                             (13)                50                  (63)
 Other non-operating income                                                            1                   –                   1
 Other non-operating expenses                                                         (5)                  –                  (5)
 Income before tax                                                                  139                 176                 (37)
 Income taxes                                                                       (74)                (68)                  (6)
 Income from current operations, net of tax                                          65                 108                 (43)
 Net result from non-current assets sold or held for sale                            39                 282                (243)
 Minority interests                                                                   16                 (19)                 35
 Net income for the period pertaining to the Group                                  120                 371                (251)
Note: the Montenegro subsidiary EPCG has been consolidated on a line-by-line basis for the period ended June 30, 2011; in the first
      half of 2010 it was consolidated on a one-line basis.


The Group earned revenues totaling 3,050 million euro in the first half of 2011, of which 139
million euro relates to the EPCG Group. Revenues from sales and services amounted to 2,996
million euro (of which 138 million euro attributable to the EPCG Group), while other operating
income totaled 54 million euro.
                                             Half-yearly financial report at June 30, 2011

                                             Summary of results, assets and liabilities and financial position of the A2A Group




     The main quantitative data contributing to the formation of these revenues were as follows:

                                                                                             06 30 2011         06 30 2010

     Electricity sold to wholesale and retail customers (GWh)                                     11,204              9,687
     Electricity sold on the Power Exchange (GWh)                                                  6,636               7,852
     Electricity sold on foreign markets (GWh)                                                     6,289               3,354
     Electricity sold (GWh) - EPCG                                                                 2,301                   –
     Gas sold to wholesale and retail customers (Mcm)                                             2,049               2,362
     Heat sold (GWht)                                                                              1,676               1,753
     Electricity distributed (GWh)                                                                 5,756               5,618
     Electricity distributed (GWh) - EPCG                                                          1,272                   –
     Gas distributed (Mcm)                                                                          1,155              1,292
     Water distributed (Mcm)                                                                          33                  34
     Purified water (Mcm)                                                                             19                  19
     Waste disposed of (Kton)                                                                       1,335              1,398


     In particular, sales mainly derived from the following quantities produced by the plants
     managed by the Group:
18

                                                                                             06 30 2011         06 30 2010

     Thermoelectric production (GWh)                                                              4,040               4,260
     Thermoelectric production (GWh) - EPCG                                                          672                   –
     Hydroelectric production (GWh)                                                                1,640              1,869
     Hydroelectric production (GWh) - EPCG                                                          907                    –
     Heat production (GWht)                                                                        1,398               1,474
     Electricity produced by cogeneration (GWh)                                                      370                342
     Electricity produced by waste to energy and biogas plants (GWh)                                 631                606


     Gross operating income for the period of 477 million euro rose by 7 million euro over the same
     period of the previous year.

     Excluding the contribution made by the Montenegro EPCG Group, gross operating income
     amounted to 462 million euro, representing a slight decrease compared to the first half of
     2010.
                                      Half-yearly financial report at June 30, 2011

                                      Summary of results, assets and liabilities and financial position of the A2A Group




The following table sets out changes in gross operating income by business area.

Millions of euro                                                                          Gross              Gross
                                                                                      Operating         Operating
                                                                                        Income             Income
                                                                                      06 30 2011        06 30 2010


Energy Sector                                                                                 163                 191
-electricity                                                                                   113                162
-gas                                                                                           50                  29
Heat and Services Sector                                                                       48                  39
Environment Sector                                                                            152                 141
Networks Sector                                                                               128                 117
Other Services and Corporate Sector                                                           (14)                (18)
Total                                                                                        477                 470


The Energy Sector saw a decrease in gross operating income compared to the first half of
2010: the reduction in margins in the electricity area was only partially offset by the rise in
margins in the gas area.
                                                                                                                           19
The fall in profitability in the electricity area is essentially due to the decrease in hydroelectric
production, which was affected by the reduced hydraulicity at the Calabria hydroelectric
plants, the decision of the San Filippo del Mela power station in Sicily to leave the boundary
regulated by the tolling agreement with Edipower and the fact that the Monfalcone
thermoelectric power station no longer has the essentiality prerequisites.

In the boundary in question there was also a considerable reduction in the utilization factors
of the combined cycle power stations, compensated in terms of overall profitability by an
improvement in unit margins. The margins for commercial activity also fell in comparison with
the first half of 2010.

Finally, the Montenegro subsidiary EPCG had a positive margin of 13 million euro.

In the gas area, the fall in quantities sold as the result of the mild weather of the first few
months of the year and the economic effect of the reduction in the regulated tariffs of the
protected market were more than offset by the positive effects of the renegotiation of the gas
procurement agreements at the beginning of the fourth quarter of 2010.

The gross operating income of the Heat and Services Sector amounted to 48 million euro, a
rise of 9 million euro over the first six months of 2010. This result is mainly due to new
connections to the district heating service, which more than offset the fall in volumes sold as
the result of the mild temperatures experienced in the first quarter of the year, as well as the
recognition of energy efficiency allowances (White Certificates) relating to initiatives taken in
previous years on the Brescia district heating networks.
                                        Half-yearly financial report at June 30, 2011

                                        Summary of results, assets and liabilities and financial position of the A2A Group




     The gross operating income of the Environment Sector amounted to 152 million euro (141
     million euro in the first six months of 2010).

     This positive performance is mainly due to the increased contribution provided by the
     Brescia, Bergamo and Milan waste to energy plants, which in the second quarter of 2010
     underwent a stoppage for planned maintenance, and the increased revenues from the sale of
     electricity.

     The Networks Sector increased its operating results in the first half of 2011, achieving gross
     operating income of 128 million euro (+11 million euro).

     The improvement in margins is mainly due to the electricity distribution area as the result of
     the adjustment of the revenue component relating to the company specific equalization for
     the III regulatory period (2008-2011), not recognized in the first half of 2010, and the reduced
     costs deriving from other equalization mechanisms (in particular the measurement service
     revenues equalization mechanism).

     In addition, electricity distribution in Montenegro provided a positive contribution of 4 million
20
     euro to the sector.

     Depreciation, amortization and write-downs amounted in total to 254 million euro (238
     million euro for the six months ended June 30, 2010). The increase of 16 million euro includes
     an increase of 28 million euro arising from the line-by-line consolidation of the investee EPCG
     and a decrease of 8 million euro resulting from a reduction in the accruals made to the
     provision for bad and doubtful debts regarding activities in Italy.

     As a result of these changes net operating income amounted to 223 million euro, a decrease
     of 9 million euro over the six months ended June 30, 2010.

     Financial expense, net amounted to 67 million euro (106 million euro for the six months
     ended June 30, 2010). This decrease is due to the positive change in the fair value of financial
     derivative contracts hedging interest rate risk and the significant fall in average debt (-458
     million euro compared to the first half of 2010), effects which were partially offset by the rise
     in the average cost of debt as the result of changes in market rates.

     The share of results of companies accounted for at equity amounted to a loss of 13 million
     euro (a profit of 50 million euro for the six months ended June 30, 2010). The investment in
     Transalpina di Energia had a significantly negative effect on the period of 30 million euro,
     compared to a positive result of 29 million euro in the six months ended June 30, 2010. It should
     also be recalled that the investee EPCG made a positive contribution of 14 million euro in the
     first half of 2010 when the investment was consolidated on a one-line basis.
                                   Half-yearly financial report at June 30, 2011

                                   Summary of results, assets and liabilities and financial position of the A2A Group




Other non-operating expenses totaled 4 million euro in the six months ended June 30, 2011
(nil for the six months ended June 30, 2010) and relate to costs incurred as the result of the
consolidation of the EPCG Group.

Income taxes amounted to 74 million euro (68 million euro for the six months ended June 30,
2010).

Net income from non-current assets sold or held for sale totaled 39 million euro (282
million euro for the six months ended June 30, 2010) and mainly consists of the gain arising on
the sale of the investments in Metroweb S.p.A. and CESI, while in the first half of 2010 this item
mainly consisted of the gain arising on the sale of the investment in Alpiq Holding AG.

After deducting the net income attributable to non-controlling interests (of which 14 million
euro is attributable to the minority sharholders of Delmi), the net income attributable to
the Group for the period amounted to 120 million euro (371 million euro for the six months
ended June 30, 2010).


                                                                                                                        21
                                         Half-yearly financial report at June 30, 2011

                                         Summary of results, assets and liabilities and financial position of the A2A Group




     Balance sheet and financial position

     Consolidated net “Capital employed” amounted to 8,402 million euro at June 30, 2011 and is
     covered by equity for 4,644 million euro (of which 1,319 million euro attributable to non-
     controlling interests) and by net debt for 3,758 million euro.

     In particular “Working capital” of 527 million euro has decreased by 236 million euro
     compared to December 31, 2010.

     “Net fixed capital” (which also includes “Assets/liabilities held for sale”) amounted to 7,875
     million euro (-100 million euro).

     The “Net financial position” at June 30, 2011 of 3,758 million euro improved by 135 million
     euro over that at December 31, 2010 thanks to the generation of cash from operations.




22
                                                Half-yearly financial report at June 30, 2011

                                                Summary of results, assets and liabilities and financial position of the A2A Group




 Millions of euro                                                           o6 30 2011          12 31 2010           Changes

 CAPITAL EMPLOYED
 Net fixed capital                                                                7,856               7,911                (55)
 Tangible assets                                                                  4,765               4,872               (107)
 Intangible assets                                                                 1,561               1,552                  9
 Investments and other non-current financial assets (*)                           2,443               2,423                 20
 Other non-current assets/liabilities (*)                                          (124)               (137)                 13
 Deferred tax assets/liabilities                                                    (54)                (63)                  9
 Provisions for risks, charges and liabilities for landfills                       (459)              (460)                   1
 Employee benefits                                                                 (276)               (276)                  –
 of which with counter-entry to equity                                             (106)               (118)


 Working capital                                                                    527                763                (236)
 Inventories                                                                        235                 239                  (4)
 Trade receivables and other current assets (*)                                   2,089               2,416                (327)
 Trade payables and other current liabilities (*)                                 (1,811)            (1,854)                 43      23
 Current tax assets/tax liabilities                                                   14                (38)                 52
 of which with counter-entry to equity                                              (114)                 3


 Assets/liabilities held for sale (*)                                                19                  64                (45)
 of which with counter-entry to equity
 TOTAL CAPITAL EMPLOYED                                                          8,402               8,738                (336)


 SOURCES OF FUNDS
 Equity                                                                          4,644               4,845                (201)
 Total financial position beyond one year                                         3,652               3,635                  17
 Total financial position within one year                                           106                 258                (152)
 Total net financial position                                                     3,758              3,893                (135)
 of which with counter-entry to equity                                               (33)               (41)
 TOTAL SOURCES                                                                   8,402               8,738                (336)
(*) Excluding balances included in the net financial position.
                                                     Half-yearly financial report at June 30, 2011

                                                     Summary of results, assets and liabilities and financial position of the A2A Group




      Millions of euro                                                                                01 01 2011         01 01 2010
                                                                                                     06 30 2011         06 30 2010

      NET FINANCIAL POSITION AT THE BEGINNING OF THE PERIOD                                              (3,893)            (4,644)
      Net income for the period (including minorities) (**)                                                   66                 174
      Depreciation and amortization                                                                          213                196
      Write-downs/disposals of tangible and intangible assets                                                  3                  17
      Results from companies at equity                                                                         13               (50)
      Changes in assets and liabilities (*)                                                                  103                  61
      Net cash flows from operating activities                                                              398                 398
      Net cash flows from investing activities                                                               (63)               218
      Free cash flow                                                                                         335                616
      Dividends paid by the parent company                                                                  (186)               (217)
      Dividends paid by subsidiaries                                                                          (6)                (28)
      Cash flows from the distribution of dividends                                                        (192)               (245)
      Changes in financial assets/liabilities with counter-entry to equity                                    (8)                 15
      NET FINANCIAL POSITION AT THE END OF THE PERIOD                                                    (3,758)             (4,258)
     (*) Excluding balances with counter-entry to equity.
     (**) The result for the period is stated excluding gains on the disposal of investments.
24
                                    Half-yearly financial report at June 30, 2011




                                  Significant events after June 30,
                                  2011




Acerra waste to energy plant: production capacity reaches 100% in the
first six months of 2011
The Acerra waste to energy plant treated 300 thousand tonnes of refuse in the first six months
of 2011, fully in line with the requirements of the Integrated Environmental Authorisation
which envisages a quantity of treatable waste of 600 thousand tonnes/year. At the same time
the plant produced and put 260 GWh of electricity into the grid.
The reported figures, which refer to the first half of the second year in which Partenope
                                                                                                    25
Ambiente S.p.A. has been responsible for the industrial management of the waste to energy
plant, therefore represent an improvement over the already excellent results achieved in
2010, when a total of 516 thousand tonnes of waste were transferred to the plant (being 86%
of its production capacity) and 450 GWh of electricity was put into the grid, equivalent to the
needs of 150 thousand households.
The waste to energy plant worked regularly during the first six months of 2011, succeeding in
maintaining the planned high standards of yield also by means of the maintenance which had
been scheduled by Partenope Ambiente S.p.A. at the beginning of the year and which, in
addition to being absolutely usual in complex set-ups such as waste to energy plants, has the
scope of ensuring safety and efficiency.
Particular emphasis has been placed on environmental aspects: the waste to energy plant is
equipped with leading edge combustion gas purification technologies and a double
“continuous monitoring” system for controlling emissions which provides a constant
guarantee that the plant is working as it should.
Emissions have been well below the limits envisaged by the Authorisation since the start of
plant management, limits which moreover for the Acerra waste to energy plant are fixed at
values which are on the average 50% lower than those envisaged by the community directive
and the Italian legislation transposing it.
In addition to all of the measurements made by Partenope Ambiente S.p.A. on a daily basis,
two outside certified laboratories were engaged in 2010 to carry out five emission monitoring
campaigns, and a further two were performed during the first part of 2011. The data collected
have confirmed the full reliability of the plant and the efficiency of the fume treatment system,
with results well below the emission limits set by the Integrated Environmental Authorisation.
                                         Half-yearly financial report at June 30, 2011

                                         Significant events after June 30, 2011




     A2A and the Confederations of Small and Medium Enterprises sign a
     protocol of understanding on the Joint Settlement Procedure
     A2A, Casartigiani, CNA, Confagricoltura, Confapi, Confartigianato Imprese, Confcommercio
     Imprese per l’Italia and Confesercenti have signed an important joint settlement agreement, putting
     into practice the desire expressed in this respect by the AEEG - the Electricity and Gas Authority.
     This procedure acts as an out of court tool for resolving certain types of dispute which have not been
     resolved by previous complaint procedures, which relate to the supply of electricity and gas on both
     the protected and free markets and which arise between business customers belonging to the
     Confederations and A2A Energia S.p.A., the single sales company of the A2A Group.
     A distinguishing feature of the procedure is its swiftness and informality and the ease by which it may
     be accessed and carried out.
     The settlement procedure may be activated for disputes relating to assessments, contestations and
     the management of problems arising from the supply of electricity or gas, such as: the
     reconstruction of usage following the ascertained malfunctioning of a meter pursuant to the
     resolutions of the Electricity and Gas Authority; contestations relating to issues connected with the
     billing of usage; dealing with a reduction in power or suspension of supply for disputed payment
26
     arrears by the customer; the de-activation of a meter at the customer’s request which has not been
     carried out; and the management of problems connected with the issuing of bills.
     Working in the Settlement Office are qualified operators from A2A and the Confederations who have
     attended specific training courses, a necessary requirement for the qualification to be recognised.
     Staff involved in managing the settlements are required to act in an impartial and neutral manner to
     encourage a compromise being reached which is acceptable to both parties.
     Any measures being taken by A2A Energia S.p.A. to collect the receivable under dispute are
     suspended for the whole period of the settlement process.
     The introduction of the procedure at a national level will be preceded by a trial period of 12 months,
     at the end of which A2A and the Confederations will be entitled to check its effectiveness and agree
     any changes which may be needed.
     The aim of the agreement, which has already been tested on similar occasions, is to improve the
     relationship between Small and Medium Enterprises and energy suppliers under the customer
     satisfaction principle.



     A2A S.p.A.: the acquisition of 5.05% of the share capital of
     Abruzzoenergia S.p.A.

     On July 27, 2011 A2A S.p.A. purchased the remaining 5.05% of the share capital of
     Abruzzoenergia S.p.A. which was held by minority shareholders.

     As a result of this transaction A2A S.p.A. is now the owner of 100% of the company’s share
     capital.
0.2
Condensed half-year
consolidated financial
statements
                                                            Half-yearly financial report at June 30, 2011




                                                          Consolidated
                                                          balance sheet (1)


                                                          Assets

      Millions of euro                                                          Note              06 30 2011               12 31 2010             06 30 2010



      NON-CURRENT ASSETS
      Tangible assets                                                                1                  4,765                   4,872                   4,071
      Intangible assets                                                              2                   1,561                   1,552                   1,479
      Shareholdings carried at equity                                                3                  2,401                    2,411                   3,124
      Other non-current financial assets                                             3                     69                      40                      47
28    Deferred tax assets                                                            4                    426                     430                     423
      Other non-current assets                                                       5                    120                      113                     145
      Total non-current assets                                                                          9,342                   9,418                  9,289
      CURRENT ASSETS
      Inventories                                                                    6                     235                    239                     210
      Trade receivables                                                              7                   1,717                   2,141                  1,709
      Other current assets                                                           8                    372                     275                     379
      Current financial assets                                                       9                     80                       56                       6
      Current tax assets                                                            10                      25                      18                      95
      Cash and cash equivalents                                                     11                    130                      132                      72
      Total current assets                                                                              2,559                   2,861                   2,471
      NON-CURRENT ASSETS HELD FOR SALE                                              12                     39                      82                      36
      TOTAL ASSETS                                                                                     11,940                  12,361                  11,796
     (1)   As laid down in Consob Resolution 17221 of March 12, 2010 the effects of related party transactions in the consolidated financial statements are shown
           in the tables in section 0.2 with comments in Note 40.
           The effects of the significant non-recurring events and transactions are reported in Note 41 of the consolidated financial statements as required by
           Consob Communication DEM/6064293 of July 28, 2006.
                                                        Half-yearly financial report at June 30, 2011

                                                        Consolidated balance sheet




                                                     Equity and liabilities



Millions of euro                                                       Note          06 30 2011         12 31 2010    06 30 2010



EQUITY
Share capital                                                             13              1,629              1,629         1,629
(Treasury shares)                                                         14                (61)               (61)          (61)
Reserves                                                                  15              1,637              1,625          1,575
Net profit for the year                                                   16                  –               308              –
Net profit for the period                                                 16                120                 –            371    29

Equity pertaining to the Group                                                            3,325             3,501          3,514
Minority interests                                                        17               1,319             1,344          894
Total Equity                                                                             4,644              4,845         4,408
LIABILITIES
Non-current liabilities
Non-current financial liabilities                                         18              3,767              3,736         3,759
Deferred tax liabilities                                                  19               480                493            471
Employee benefits                                                        20                 276               276           269
Provisions for risks, charges and liabilities for landfills               21               459                460            427
Other non-current liabilities                                             22                156               177            199
Total non-current liabilities                                                             5,138             5,142          5,125
Current liabilities
Trade payables                                                            23               1,221            1,450          1,026
Other current liabilities                                                 23               590                404            550
Current financial liabilities                                             24                318               448           669
Tax liabilities                                                           25                  11               56              9
Total current liabilities                                                                 2,140             2,358         2,254
Total liabilities                                                                         7,278             7,500          7,379
LIABILITIES DIRECTLY ASSOCIATED
WITH NON-CURRENT ASSETS HELD FOR SALE                                     26                 18                16              9
TOTAL EQUITY AND LIABILITIES                                                             11,940            12,361         11,796
                                                            Half-yearly financial report at June 30, 2011




                                                          Consolidated income
                                                          statement (1-2)




      Millions of euro                                                                 Note             01 01 2011           01 01 2010           01 01 2010
                                                                                                       06 30 2011           06 30 2010            12 31 2010

      Revenues
      Revenues from the sale of goods and services                                                              2,996              2,815                 5,923
      Other operating income                                                                                      54                  43                   118
      Total revenues                                                                       28               3,050                 2,858                 6,041
      Operating expenses
      Expenses for raw material and services                                                                    2,133              1,988                 4,129
30    Other operating expenses                                                                                    153                142                   318
      Total operating expenses                                                             29               2,286                  2,130               4,447
      Labour costs                                                                         30                    287                258                   554
      Gross operating income - EBITDA                                                      31                    477                470                 1,040
      Depreciation, amortization, provisions,
      and write-downs                                                                      32                    254                238                   542
      Net operating income - EBITDA                                                        33                    223                232                   498
      Financial balance
      Financial income                                                                                             18                  7                    58
      Financial expenses                                                                                          85                 113                  190
      Portion of income and charges when shareholdings are carried
      at equity                                                                                                   (13)                50                  (231)
      Total financial balance                                                              34                    (80)               (56)                 (363)
      Other non-operating income                                                           35                       1                  –                     –
      Other non-operating expenses                                                         35                     (5)                  –                    (1)
      Profit before tax                                                                                          139                 176                  134
     (1)   As laid down in Consob Resolution 17221 of March 12, 2010 the effects of related party transactions in the consolidated financial statements are shown
           in the tables in section 0.2 with comments in Note 40.
           The effects of the significant non-recurring events and transactions are reported in Note 41 of the consolidated financial statements as required by
           Consob Communication DEM/6064293 of July 28, 2006.
     (2)   The comparative figures for January-June 2010 for income statement items relating to revenues and operating expenses, depreciation and
           amortization and financial management have been reclassified to reflect the application of IFRS 5.
                                              Half-yearly financial report at June 30, 2011

                                              Consolidated income statement




Millions of euro                                                   Note         01 01 2011     01 01 2010   01 01 2010
                                                                               06 30 2011     06 30 2010    12 31 2010

Income taxes                                                         36                74             68          158
Profit of current operations
net of tax                                                                             65            108          (24)
Net result from non-current assets
held for sale                                                        37                39            282          220
Net profit                                                                            104            390          196
Minorities                                                                             16            (19)          112
Group net profit (loss) for the year/period                          38               120            371          308    31
Earnings per share (in euro):
– basic                                                                            0.0386          0.1194      0.0993
–  basic, from operating activities                                               0.0260          0.0296       0.0286
– diluted                                                                          0.0386          0.1194      0.0993
– diluted, from operating activities                                              0.0260          0.0296       0.0286
                                              Half-yearly financial report at June 30, 2011




                                              Consolidated statement
                                              of comprehensive income




     Millions of euro                                                   06 30 2011            06 30 2010   12 31 2010

     Net income/(loss) for the period/year (A)                                  104                 390          196
     Effective portion of gains/(losses) on cash flow hedges                     (4)                 20           34
     Gains/(losses) on the re-measurement
     of financial assets available for sale                                        –               (316)        (316)
     Tax effect of other gains/(losses)                                            1                (40)         (45)
     Total other gains/(losses) net of the tax effect of
     companies consolidated on a line-by-line basis (B)                         (3)               (336)        (327)
32   Other gains/(losses) of companies valued at equity
     net of the tax effect ( C )                                                 10                  (1)          21
     Total gain/(loss) (A) + (B) + ( C )                                         111                 53        (110)
     Total gain/(loss) attributable to :
     Shareholders of the parent company                                         108                  52          (8)
     Minority interests                                                            3                   1       (102)
                                                 Half-yearly financial report at June 30, 2011




                                               Consolidated cash flow
                                               statement




 Millions of euro                                                                  06 30 2011      12 31 2010   06 30 2010


 CASH AND CASH EQUIVALENTS AT THE BEGINNING
 OF THE PERIOD/YEAR                                                                      132              25           25
 EPCG cash brought in                                                                          –         95             –
 CASH AND CASH EQUIVALENTS AT THE BEGINNING
 OF THE PERIOD/YEAR                                                                      132            120            25
 Operating activities
 Net income for the period/year (**)                                                      66            (26)          174
 Depreciation of tangible assets                                                         172            342           155    33
 Amortization of intangible assets                                                         41             85           41
 Tangible and intangible asset write-downs/disposals                                           3          23           17
 Result from investments carried at equity                                                 13            231          (50)
 Write-down/disposal of investments                                                            –           5            –
 Change in assets and liabilities (*)                                                    103             183           61
 Cash flows from operating activities                                                   398             843          398
 Investing activities
 Investments in tangible assets                                                          (67)          (247)         (103)
 Investments in intangible assets and goodwill                                            (51)           (85)         (38)
 Investments in shareholdings and securities (*)                                           (5)           (14)          (6)
 Disposal of fixed assets and shareholdings                                               56            347           307
 Dividends received from investments carried at equity
 and other investments                                                                         4          59           58
 Cash flows from investment activities                                                   (63)            60           218
 FREE CASH FLOW                                                                          335            903          616
 Financing activities
 Change in financial assets (*)                                                          (38)           (94)          (65)
 Change in financial liabilities (*)                                                    (107)          (552)         (259)
 Dividends paid by the parent company                                                   (186)           (217)        (217)
 Dividends paid by subsidiaries                                                           (6)            (28)         (28)
 Cash flows from financing activities                                                  (337)           (891)        (569)
 CHANGE IN CASH AND CASH EQUIVALENTS                                                      (2)             12           47
 CASH AND CASH EQUIVALENTS AT THE END
 OF THE PERIOD/YEAR                                                                      130            132            72
(*) Excluding balances with counter-entry to equity and other balance sheet items.
(**) The result for the period/year is stated net of gains from the disposal of investments.
                                                  Half-yearly financial report at June 30, 2011




                                                Consolidated statement of
                                                changes in equity




     Description                                                                  Share           Treasury    Cash Flow
     Millions of euro                                                            capital            shares Hedge reserve



                                                                                Note 13            Note 14       Note 15

     Equity at December 31, 2009                                                  1,629               (61)           (3)
     Changes in the first half of 2010
     Allocation of 2009 net income
34   Distribution of dividends
     IAS 32 and IAS 39 reserves (*)                                                                                   12
     Put option on Delmi S.p.A. shares
     Put option on Aspem Group shares
     Other changes
     Group and minorities net profit for the
     period
     Equity at June 30, 2010                                                      1,629                (61)           9
     Changes in the second half of 2010
     IAS 32 and IAS 39 reserves (*)                                                                                   22
     Put option on Delmi S.p.A. shares
     Put option on Aspem Group shares
     Put option on Varese Risorse S.p.A. shares
     Put option on Abruzzo Energia S.p.A. shares
     Consolidation of EPCG Group
     Other changes
     Group and minorities net profit for the
     period
     Equity at December 31, 2010                                                  1,629                (61)           31
     Changes in the first half of 2011
     Allocation of 2010 net income
     Distribution of dividends
     IAS 32 and IAS 39 reserves (*)                                                                                   4
     Put option on Delmi S.p.A. shares
     Other changes
     Dividends resolved but not yet distributed
     Group and minorities net profit for the
     period
     Equity at June 30, 2011                                                      1,629                (61)           35

     (*) These are included in the statement of comprehensive income
                          Half-yearly financial report at June 30, 2011

                          Consolidated statement of changes in equity




Result from    Other resrves     Group net                Total            Minority     Total
 available-              and        income               Group            interests      net
   for-sale        retained          for the         net equity                        equity
  financial        earnings     period/year
     assets
    Note 15          Note 15         Note 16                               Note 17

       350             1,695               80             3,690                905     4,595


                         80               (80)
                        (217)                               (217)              (28)      (245)   35

       (350)                                                (338)                 1      (337)
                           3                                   3                            3
                                                                                  1         1
                           5                                   5                 (4)        1

                                          371                371                 19      390
         –             1,566              371              3,514               894     4,408


                                                              22                 9         31
                          22                                  22                           22
                                                                                 (1)       (1)
                                                                                  1         1
                           3                                   3                 (1)        2
                           3                                   3               572        575
                                                                                  2         2

                                          (63)               (63)              (132)     (195)
         –             1,594             308               3,501             1,344     4,845


                        308              (308)
                        (186)                               (186)               (6)      (192)
                                                               4                  3         7
                          6                                    6                           6
                          (8)                                 (8)                (6)      (14)
                        (112)                               (112)                        (112)

                                          120                120                (16)     104
         –             1,602              120             3,325               1,319    4,644
                                           Half-yearly financial report at June 30, 2011




                                          Consolidated balance sheet
                                          pursuant to Consob resolution 17221 of March 12, 2010

                                          Assets




     Millions of euro                       06 30 2011       of wich    12 31 2010       of wich    06 30 2010       of wich
                                                             Related                     Related                     Related
                                                             Parties                     Parties                     Parties
                                                         (note n. 40)                (note n. 40)                (note n. 40)

     NON-CURRENTS ASSETS
     Tangible assets                             4,765                      4,872                        4,071
     Intangible assets                           1,561                       1,552                       1,479
     Shareholdings carried at equity             2,401          2,401        2,411          2,411        3,124          3,124
36   Other non-current financial assets            69               5          40              6           47              7
     Deferred tax assets                          426                         430                         423
     Other non-current assets                     120                          113                         145
     Total non-current assets                   9,342                       9,418                       9,289
     CURRENT ASSETS
     Inventories                                   235                        239                          210
     Trade receivables                           1,717            175        2,141           120         1,709           124
     Other current assets                         372                         275                         379
     Current financial assets                      80             10           56              9            6               5
     Current tax assets                            25                          18                          95
     Cash and cash equivalents                    130                          132                          72
     Total current assets                       2,559                       2,861                        2,471
     NON-CURRENT ASSETS
     HELD FOR SALE                                 39                          82                          36
     TOTAL ASSETS                              11,940                      12,361                       11,796
                                                Half-yearly financial report at June 30, 2011

                                                Consolidated balance sheet pursuant to Consob Resolution no. 17221 of

                                                March 12, 2010




                                                Equity and liabilities




Millions of euro                                 06 30 2011       of wich    12 31 2010       of wich    06 30 2010        of wich
                                                                  Related                     Related                      Related
                                                                  Parties                     Parties                      Parties
                                                              (note n. 40)                (note n. 40)                 (note n. 40)

EQUITY
Share capital                                         1,629                       1,629                       1,629
(Treasury shares)                                       (61)                        (61)                        (61)
Reserves                                              1,637                       1,625                        1,575
Net profit for the year                                  –                         308                            –                   37
Net profit for the period                              120                           –                          371
Equity pertaining to the Group                        3,325                      3,501                        3,514
Minority interests                                    1,319                       1,344                        894
Total equity                                         4,644                       4,845                       4,408
LIABILITIES
Non-current liabilities
Non-current financial liabilities                     3,767                       3,736                       3,759
Deferred tax liabilities                               480                         493                          471
Employee benefits                                      276                         276                         269
Provisions for risks, charges and liabilities
for landfills                                          459                         460                          427
Other non-current liabilities                           156                        177                          199
Total non-current liabilities                         5,138                      5,142                        5,125
Current liabilities
Trade payables                                        1,221            80        1,450             26         1,026              19
Other current liabilities                              590              17         404              16          550
Current financial liabilities                           318             2          448              3          669               4
Tax liabiliities                                         11                         56                            9
Total current liabilities                            2,140                       2,358                       2,254
Total liabilities                                    7,278                       7,500                        7,379
LIABILITIES DIRECTLY ASSOCIATED
WITH NON-CURRENT ASSETS
HELD FOR SALE                                           18                          16                            9
TOTAL EQUITY AND LIABILITIES                        11,940                      12,361                       11,796
                                                            Half-yearly financial report at June 30, 2011




                                                          Consolidated income statement (1)
                                                          pursuant to Consob Resolution no. 17221 of March 12, 2010




      Millions of euro                                         01 01 2011        of wich         01 01 2010     of wich    01 01 2010       of wich
                                                              06 30 2011         Related        06 30 2010      Related    12 31 2010       Related
                                                                                 Parties                 (1) Parties                        Parties
                                                                             (note n. 40)                   (nota n. 40)                (note n. 40)

      Revenues
      Revenues from the sales of goods and services                 2,996            365                2,815       129         5,923           268
      Other operating income                                            54              1                 43           1          118              1
      Total revenues                                                3,050                              2,858                   6,041
38    Operating expenses
      Expenses for raw materials and services                        2,133            173              1,988          12        4,129            27
      Other operating expenses                                         153            70                 142           1          318             2
      Total operating expenses                                      2,286                              2,130                   4,447
      Labour costs                                                    287              3                 258                     554
      Gross operating income - EBITDA                                 477                               470                    1,040
      Depreciation, amortization,
      provisions and write-downs                                      254                                238                     542
      Net operating income - EBIT                                     223                                232                     498
      Financial balance
      Financial income                                                  18             3                    7         3           58               5
      Financial expenses                                                85                                113                    190
      Portion of income and charges when
      shareholdings are caried at equity                               (13)           (13)                50         50          (231)          (231)
      Total financial balance                                         (80)                               (56)                   (363)
      Other non-operating income                                         1                                 –                       –
      Other non-operating expenses                                      (5)                                –                       (1)
      Profit before tax                                               139                                176                     134
     (1)   The comparative figures for January-June 2010 for income statement items relating to revenues and operating expenses, depreciation and
           amortization and financial management have been reclassified to reflect the application of IFRS 5.
                                       Half-yearly financial report at June 30, 2011

                                       Consolidated income statement pursuant to Consob Resolution no. 17221

                                       of March 12, 2010




Millions of euro                         01 01 2011       of wich     01 01 2010       of wich    01 01 2010       of wich
                                        06 30 2011        Related    06 30 2010        Related    12 31 2010       Related
                                                          Parties                      Parties                     Parties
                                                      (note n. 40)                 (note n. 40)                (note n. 40)

Income taxes                                    74                           68                         158
Income from current operations
net of tax                                      65                          108                         (24)
Net result from non-current assets
held for sale                                   39                          282                         220
Net profit                                     104                          390                         196                   39
Minorities                                      16                          (19)                         112
Group net profit(loss) for the year/
period                                         120                          371                         308
0.2.1
Notes to the condensed
half-year consolidated
financial statements
                                    Half-yearly financial report at June 30, 2011




                                General information
                                on A2A S.p.A.




A2A S.p.A. is a company incorporated under Italian law.

A2A S.p.A. and its subsidiaries (the “Group”) operate both in Italy and abroad, especially
following the acquisitions in France and Montenegro which took place in recent years.

The A2A Group mainly operates in the following sectors:
• the production, sale and distribution of electricity;
• the sale and distribution of gas;                                                          41
• the production, sale and distribution of heat through district heating networks;
• waste management (from collection and sweeping to disposal) and the construction and
   management of integrated waste disposal plants and systems, including making these
   available for other operators;
• integrated water cycle management.
                                       Half-yearly financial report at June 30, 2011




                                      Half-year financial report




     The half-year financial report (hereafter the “half-year report”) at June 30, 2011 of the A2A
     Group is presented in millions of euro; this is also the currency of the economies in which the
     Group operates.

     The half-year report of the A2A Group at June 30, 2011 has been prepared:
     • in compliance with Legislative Decree no. 58/1998 (art. 154-ter) and subsequent
        amendments, and with the Issuers’ Regulations published by Consob;
42
     • in accordance with the International Financial Reporting Standards (IFRS) issued by the
        International Accounting Standard Board (IASB) and approved by the European Union.

     In preparing the half-year report the Group adopted the same principles used in the
     preparation of the annual financial report at December 31, 2010, other than the principles and
     interpretations described in detail in the paragraph below “Changes in accounting principles”
     adopted for the first time on January 1, 2011.

     This half-year report at June 30, 2011, which has been subject to a review by the auditors, was
     approved by the Management Board on August 3, 2011 which authorized publication.
                                     Half-yearly financial report at June 30, 2011




                                Financial statements




The half-year report includes a statement of financial position, an income statement, a cash
flow statement and a statement of changes in equity in order to facilitate an understanding of
the economic performance of the Group for the first six months of 2011 and its financial
position at the end of the period.

The Group has adopted a format for the statement of financial position which presents
current and non-current assets and current and non-current liabilities as separate
                                                                                                 43
classifications, as required by paragraphs 60 and following of IAS 1 (Revised).

The income statement is presented by nature, a format which is considered more
representative than a presentation by function. The selected format is in agreement with the
presentation used by the Group’s major competitors and is line with international practice.

The results of ordinary operations are shown in the income statement separately from
income or expense deriving from transactions that are non-recurring in the business's
ordinary operations, such as gains or losses on the sale of investments and other non-
recurring income or expense; this makes it easier to measure the effective performance of the
Group’s ordinary operating activities.

The cash flow statement has been prepared using the indirect method as permitted by IAS 7.

The statement of changes in equity has been prepared in accordance with IAS 1 (Revised).

The formats adopted for the financial statements are the same as those used to prepare the
annual consolidated financial statements at December 31, 2010.
                                        Half-yearly financial report at June 30, 2011




                                      Basis of preparation




     The half-year financial report at June 30, 2011 has been prepared on a historical cost basis, with
     the exception of those items which under IFRS must or can be measured at fair value.

     The consolidation principles, the accounting principles, the accounting policies and the
     methods of measurement used in the preparation of the half-year report are consistent with
     those used to prepare the annual consolidated financial statements at December 31, 2010, to
     which reference should be made for completeness.
44
                                 Half-yearly financial report at June 30, 2011




                                Changes in international
                                accounting standards




The accounting standards adopted for the first half of 2011 are the same as those used in the
prior year, with the exception of the changes discussed in the paragraph below “Accounting
standards, amendments and interpretations approved by the European Union and taking
effect from the current period and applied where appropriate”.
In the paragraph below “Accounting standards, amendments and interpretations still to be
approved by the European Union” a summary is provided of the changes which will be
adopted in future periods, indicating to the extent possible the estimated effects on the half-
                                                                                                  45
year report of the A2A Group.



Accounting standards, amendments and interpretations approved by
the European Union and taking effect from the current period with the
estimated effects for the Group
Certain changes to international accounting standards and their interpretations became
applicable on January 1, 2011, none of which led to any significant effects for the Group. The
main changes were as follows:
• IAS 24 (Revised) “Related Party Disclosures”: approved on July 19, 2010 and applicable
   from January 1, 2011, this amends the definition of a related party and adds to the minimum
   information to be provided. The current principle requires additional information on
   relationships, transactions and balances with related parties, including commitments, to
   be provided in the consolidated and separate financial statements of a parent, a joint
   venturer or an investor, and that this be disclosed in accordance with IAS 27 “Consolidated
   and Separate Financial Statements”. The current principle is also applicable to separate
   financial statements.
• IFRS 3 “Business Combinations”: applicable prospectively from July 1, 2010, the
   amendment requires that the option to measure non-controlling interests at either fair
   value or at the proportionate share of the net assets of the acquired company at the
   acquisition date should only include non-controlling interests entitling the owner to a
   portion of net assets on liquidation. All other non-controlling interests must be measured
   at their fair value at the date of acquisition unless another IFRS requires a different
   measurement method to be used. This change additionally clarifies that the requirement
                                       Half-yearly financial report at June 30, 2011

                                       Changes in international accounting standards




        to measure quotaholdings or shareholdings of the acquirer which replace the share-based
        payments of the acquiree in accordance with IFRS 2 at the acquisition date (market based
        measure) must also include the share-based payments of the acquiree which are not
        replaced.
     • IFRS 7 “Financial Instruments: Disclosures”: from January 1, 2011, emphasis is given to the
        disclosures of a qualitative and quantitative nature required by the standard regarding the
        nature and extent of the risks implicit in financial instruments. This approach should assist
        the users of the financial statements to link the information that is presented and obtain a
        general description as to the nature and extent of the risks resulting from financial
        instruments. Finally, the requirement to provide disclosures concerning financial assets
        which have expired but have been renegotiated or written down and that relating to the
        fair value of collateral have been eliminated. An amendment was made to this standard in
        October 2010 concerning the transfer of financial assets. This amendment will allow users
        of financial statements to improve their understanding of transfers of financial assets (for
        example securitizations), including an understanding of the possible effects of any risks
        that may remain with the entity that transferred the assets. In particular, this amendment
46
        requires a qualitative description to be given of the nature of the link between the assets
        transferred and the associated liabilities together with a table setting out the fair value of
        the assets transferred and the associated liabilities. Further, additional disclosures
        concerning the amount of the cash flows that would be required in the case of a future
        repurchase of the transferred assets must be provided. The amendment also requires
        additional disclosures to be provided regarding any quantitatively significant transfers
        carried out at year end. The amendment is applicable from July 1, 2011.
     • IAS 1 “Presentation of Financial Statements”: the amendment is applicable from January 1,
        2011 and establishes that an entity may present the analysis relating to other
        comprehensive income either in the statement of changes in equity or in the notes to the
        financial statements. Early application of the amendment is permitted.
     • IAS 34 “Interim Financial Reporting”: from January 1, 2011 the disclosures relating to
        significant events reported in interim financial statements must include an update of the
        significant events discussed in the annual financial statements, with specific reference to
        financial instruments and their fair value.



     Accounting standards, amendments and interpretations approved by
     the European Union and taking effect from the current period with no
     effects for the Group

     The following standards and interpretations already approved by the European Union and
     published in the European Union will become applicable over the next few years:
                                 Half-yearly financial report at June 30, 2011

                                 Changes in international accounting standards




• IFRS 1 “First-time Adoption of International Financial Reporting Standards”: the
   amendment is applicable from January 1, 2011 and clarifies that if an entity makes changes
   to its accounting manual or the use of the exemptions permitted by IFRS following the
   publication of interim financial statements in accordance with IAS 34, but before the first
   financial statements prepared in accordance with International Financial Reporting
   Standards are published, it must motivate these changes and update the reconciliation
   between its previous accounting standards and IFRSs. The requirements of IAS 8
   “Accounting Policies, Changes in Accounting Estimates and Errors” are not applicable in
   these circumstances. Early application of the amendment is permitted.
• IFRIC 13 “Customer Loyalty Programmes”: the amendment, applicable from January 1,
   2011, establishes that an entity may estimate the fair value of award credits by referring to
   the fair value of the awards with which these credits can be redeemed.



Accounting standards, amendments and interpretations still to be
approved by the European Union
                                                                                                   47
The following standards and interpretations have not been applied as at the present time the
competent bodies of the European Union have still to complete their approval process.
• IFRS 10 “Consolidated Financial Statements”, published by the IASB on May 12, 2011, is
   applicable from January 1, 2013. IFRS 10 establishes the criteria for the presentation and
   preparation of consolidated financial statements and emphasizes the concept of control,
   regardless of the nature of the investment held by the entity preparing the consolidated
   financial statements. Control exists if and only if the investor has all of the following
   simultaneously:
   1. power to influence and direct the relevant activities of the investee;
   2. exposure or rights to variable returns from its involvement with the investee;
   3. the ability to use its power over the investee to affect the amount of the investor’s
       returns.
   The power to influence the activities which significantly affect the investee’s returns
   (relevant activities) is most generally exercised through voting rights (including potential
   voting rights) but also on the basis of contractual agreements. In the case of control by
   virtue of voting rights, the relevant activities are represented by operating activities
   (development, purchase and sale of products) and by activities connected with financial
   management (obtaining and negotiating loans, the acquisition and disposal of financial
   assets).
   Variable returns include amongst other things dividends, remuneration linked to the
   supply of services by the parent to the activities of the subsidiary and benefits of a fiscal
   nature.
                                        Half-yearly financial report at June 30, 2011

                                        Changes in international accounting standards




        The third condition in assessing whether there is control considers the interaction
        between the first two. In certain circumstances an entity may have an interest in a
        particular sets of assets and liabilities of the investee on the basis of a legal or contractual
        restriction. IFRS 10 establishes that for the purpose of determining whether control exists,
        this set of assets and liabilities may be considered a separate entity only if it is economically
        separate from the entity as a whole and hence a subsidiary for the purpose of the
        consolidated financial statements. At the same time as this standard was published a
        revised version was also published of IAS 27 “Separate Financial Statements”, which
        maintains its role as the general reference standard on the subject of separate financial
        statements, and IAS 28 “Investments in Associates and Joint Ventures”; in addition, the
        interpretation SIC 12 “Consolidation - Special Purpose Entities” has been superseded.
        Early application of the standard in question is permitted.
     • IFRS 11 “Joint Arrangements”, published by the IASB on May 12, 2011, is applicable from
        January 1, 2013. This standard establishes that a joint arrangement is an arrangement of
        which two or more parties have joint control and that joint control only exists when the
        decisions about the relevant activities require the unanimous consent of the parties
48
        sharing control. IFRS 11 identifies two separate types of joint arrangements:
        1. joint operations;
        2. joint ventures.
        The two types differ on the basis of the rights and obligations which arise for the parties to
        a joint arrangement; in a joint operation the parties have rights regarding the assets and
        obligations regarding the liabilities of the joint arrangement, while in a joint venture the
        parties have rights to the net assets of the arrangement. IFRS 11 establishes that the assets,
        liabilities, revenue and expenses of a joint operation should be recognized by the parties on
        the basis of their interest, while on the other hand joint ventures should be recognized by
        the parties using the equity method, as required by IAS 28 “Investments in Associates and
        Joint Ventures”, with the only exclusion being the possibility to select proportionate
        consolidation (previously permitted by IAS 31 “Interests in Joint Venture”, superseded by
        the introduction of IAS 28 (Revised)).
        Joint operations are recognized in the same way in both the separate and consolidated
        financial statements by recognizing assets, liabilities, revenue and expenses on the basis of
        the percentage interest, while joint ventures, as well as investments in subsidiaries and
        associates, may be recognized in the separate financial statements either at cost or on the
        basis of IFRS 9 “Financial Instruments” (and IAS 39 “Financial Instruments: Recognition
        and Measurement”), as required by IAS 27 “Separate Financial Statements”. For details of
        the disclosures to be provided in the notes to the financial statements reference should be
        made to the requirements of the new IFRS 12 “Disclosure of Interests in Other Entities”.
        Early application of the standard is permitted.
                                   Half-yearly financial report at June 30, 2011

                                   Changes in international accounting standards




• IFRS 12 “Disclosures of Interests in Other Entities”, issued by the IASB on May 12, 2011, is
   applicable from January 1, 2013; this standard establishes the minimum disclosures that an
   entity must provide, integrating these with those already determined by other standards,
   to assist users of the financial statements when assessing the nature and risks associated
   with the interests held by the entity in subsidiaries, associates and joint arrangements (as
   defined in IFRS 11). In particular, an entity must provide information concerning the
   assumptions it has made in determining the existence or otherwise of control, including
   joint control, and the significant influence exercised over another entity. Early application
   of the standard is permitted.
• IFRS 13 “Fair Value Measurement”, issued by the IASB on May 12, 2011, is applicable from
   January 1, 2013. IFRS 13 defines fair value, provides guidance on measuring fair value and
   introduces the disclosures to be provided about how it has been measured. The standard
   does not establish when measurement at fair value is required but explains the way in
   which fair value is calculated when its use is required by other standards. The new
   standard is applicable to all transactions, of a financial and non-financial nature, with the
   exception of transactions recognized on the basis of IFRS 2 “Share-based Payment”,
                                                                                                     49
   leasing transactions within the scope of IAS 17 “Leases” and transactions recognized on
   the basis of net realizable value such as in IAS 2 “Inventories” or value in use such as in IAS
   36 “Impairment of Assets”. The standard defines fair value as the price that would be
   received to sell an asset or paid to transfer a liability in an orderly transaction between
   market participants. If transactions are directly observable in a market, the calculation of
   fair value may be relatively easy, but if this is not the case then a valuation technique is
   used. The standard describes three different valuation techniques to be used to calculate
   fair value, represented by the “market approach”, a technique that uses prices and other
   relevant information generated by market transactions involving identical or comparable
   (i.e. similar) assets and liabilities, the “income approach”, a technique that consists in
   discounting cash inflows and cash outflows, and the “cost approach”, a technique that
   requires an entity to calculate the amount that would be required currently to replace the
   service capacity of an asset. In terms of the disclosures to be provided in the financial
   statements, IFRS 13 extends the three-level hierarchy of fair value already required by IFRS
   7 “Financial Instruments: Disclosures”, where the levels depend on the inputs used in the
   valuation technique, to all of the assets and liabilities forming part of its scope. The
   information provided by certain disclosures may vary on the basis of whether the fair value
   measurement has been made on a recurring or non-recurring basis; recurring fair value
   measurements are those that other IFRSs require or permit at the end of each reporting
   period, while non-recurring fair value measurements are those that other IFRSs require or
   permit in particular circumstances. Early application of the standard is permitted.
• IAS 27 (Revised) “Separate Financial Statements”, issued by the IASB on May 12, 2011, is
                                       Half-yearly financial report at June 30, 2011

                                       Changes in international accounting standards




        applicable from January 1, 2013; at the same time as IFRS 10 “Consolidated Financial
        Statements” was published a revised version was also published of this standard which
        maintains its role as the general reference standard on the subject of separate financial
        statements. This standard applies to the measurement of investments in subsidiaries,
        associates and joint ventures in the separate financial statements of the parent. Joint
        ventures and investments in subsidiaries and associates may be recognized in the separate
        financial statements either at cost or on the basis of IFRS 9 “Financial Instruments” (and
        IAS 39 “Financial Instruments: Recognition and Measurement”). If in accordance with IFRS
        10 “Consolidated Financial Statements” a parent company decides not to prepare
        consolidated financial statements, it must provide disclosures in its separate financial
        statements about its investments in subsidiaries, associates and joint ventures, their
        principal places of business (and country of incorporation if different), its proportion of
        the ownership interest held in each individual investee and a description of the method
        used to account for the investments. Early application of the standard is permitted but
        only if an entity applies it in conjunction with IFRS 10 “Consolidated Financial Statements”,
        IFRS 11 “Joint Arrangements”, IFRS 12 “Disclosure of Interests in Other Entities” and IAS 28
50
        (as amended in 2011).
     • IAS 28 (Revised) “Investments in Associates and Joint Ventures”, issued by the IASB on
        May 12, 2011, is applicable from January 1, 2013; at the same time as IFRS 10 “Consolidated
        Financial Statements” was published a revised version was also published of this standard,
        which has the purpose of establishing the criteria for accounting for investments in
        associates and joint ventures. An entity with joint control of, or significant influence over,
        an investee must account for its investment using the equity method. Early application of
        the standard is permitted but only if an entity applies it in conjunction with IFRS 10
        “Consolidated Financial Statements”, IFRS 11 “Joint Arrangements”, IFRS 12 “Disclosure of
        Interests in Other Entities” and IAS 27 (as amended in 2011).
     • IAS 1 “Presentation of Financial Statements”; this amendment applicable from January 1,
        2012, relates to the presentation of the figures included in the statement of
        comprehensive income. In particular, it keeps the option of presenting the income
        statement and the statement of other comprehensive income in either a single statement
        or in two separate statements with one following directly after the other. In addition an
        entity must group together in the statement of comprehensive income the items which
        will be reclassified to profit and loss in subsequent periods: amounts may be presented
        either net of the related tax effects or before the related tax effects. Early application of
        the amendment is permitted.
     • IAS 19 “Employee Benefits”, applicable from January 1, 2013; the changes made in the
        amendment may be grouped into three main categories:
        (i) recognition and presentation in the financial statements;
                               Half-yearly financial report at June 30, 2011

                               Changes in international accounting standards




(ii) disclosures;
(iii) additional changes.
The first category of changes concerns defined benefit plans. In particular the corridor
method used as a means of recognizing actuarial gains and losses has been eliminated,
with the simultaneous requirement being introduced to recognize these items directly in
profit or loss.
The change in the defined benefit obligation is then separated into three components in
the income statement:
1. an operating component (service cost);
2. a financial component (finance cost);
3. a measurement component (remeasurement cost).
As far as disclosures are concerned, in addition to the elimination of the disclosure relating
to the deferral of the recognition of income components (which is no longer required
following the elimination of the option to select the corridor method), information is
required concerning the features of the plans and the related amounts recognized in the
financial statements and the risks involved in the plans including a sensitivity analysis for
                                                                                                 51
the demographic risk together with details about any participation in multiemployer
pension plans.
                                       Half-yearly financial report at June 30, 2011




                                      Scope of consolidation




     The condensed half-year consolidated financial statements of the A2A Group at June 30, 2011
     include the figures of the parent A2A S.p.A. and those of the subsidiaries over which A2A S.p.A.
     holds, directly or indirectly, the majority of the voting rights which may be exercised in an
     ordinary shareholders’ meeting. In addition, companies in which the parent exercises joint
     control with other entities (joint ventures) and those over which it has a significant influence
     are consolidated using the equity method.

52

     Changes in the scope of consolidation

     The results and assets and liabilities of the Montenegro company EPCG acquired during 2009
     have been consolidated on a line-by-line basis in these condensed half-year consolidated
     financial statements, with 56.3% of its results and net assets being attributed to non-
     controlling interests. This differs from the treatment adopted for the first half of 2010.
     This company was included in the consolidation scope of A2A S.p.A. for the six months ended
     June 30, 2010, but was consolidated on a “one-line” basis as control was acquired at the
     beginning of 2010, as discussed in further detail in the financial statements for the year ended
     December 31, 2010.
                                 Half-yearly financial report at June 30, 2011




                                Consolidation policies
                                and procedures




Consolidation policies

Subsidiaries

The consolidation scope of the A2A Group comprises the parent A2A S.p.A. and the companies
over which it exercises direct or indirect control. Subsidiaries are consolidated from the date
on which the Group effectively acquires control and cease to be consolidated on a line-by-line
basis from the date on which control is transferred to a company outside of the Group.
                                                                                                  53


Associates and joint ventures

Investments in associates, namely those in which the A2A Group has a considerable interest
and is able to exercise significant influence, and those over which A2A has joint control
together with other entities (joint ventures) are accounted for using the equity method.
Gains and losses attributable to the Group are recognized in the half-year financial
statements from the date on which the significant influence or joint control commenced.

In the event that the loss attributable to the Group exceeds the carrying amount of the
investment, the carrying amount is reduced to zero and any excess loss is provided for to
the extent that the Group has legal or constructive obligations in respect of the associate to
make good its losses or, in any case, to make payments on its behalf.



Potential voting rights

If the A2A Group holds call options on shares or other equity instruments that are convertible
into ordinary shares or similar instruments having the potential, if exercised or converted, to
give the Group voting rights or reduce the voting rights of third parties (“potential voting
rights”), such potential voting rights are taken into consideration when assessing whether or
not the Group has the power to govern or influence another company's financial and
operating policies.
                                        Half-yearly financial report at June 30, 2011

                                        Consolidation policies and procedures




     Consolidation procedures

     General procedure
     The financial statements of the subsidiaries, associates and joint ventures consolidated by the
     A2A Group are prepared at the end of each reporting period using the same accounting
     policies as the parent. Any items recognized by using different accounting principles are
     adjusted during the consolidation process to bring them into line with Group accounting
     policies. All intragroup balances and transactions, including any unrealized profits arising
     from transactions between Group companies, are fully eliminated.
     Unrealized gains and losses deriving from transactions with associates and joint ventures are
     eliminated in proportion to the Group’s interest. Unrealized losses are eliminated, unless they
     represent a loss in value of the assets that have been sold.
     In preparing the half-year financial statements the assets, liabilities, income and expenses of
     the companies being consolidated are included in their entirety on a line-by-line basis, stating
     the portion of equity and net income for the period attributable to non-controlling interests
     separately in the balance sheet and income statement.
54   The carrying amount of the investment in each subsidiary is eliminated against the
     corresponding share of its net equity, including any adjustments to fair value at the acquisition
     date; any differences arising are accounted for in accordance with IFRS 3. Transactions with
     non-controlling interests which do not lead to the loss of control in consolidated companies
     are accounted for using the economic entity view approach.



     Consolidation procedure for assets and liabilities held for sale (IFRS 5)

     In the case of particularly large amounts and exclusively in connection with non-current assets
     and liabilities held for sale, and only in this case, in accordance with the requirements of IFRS 5
     the related intragroup financial receivables and payables are not eliminated in order to
     provide a clear presentation of the financial impact of their possible disposal.



     Effect on consolidation procedures of certain contracts concerning the
     shares/quotas of Group companies

     a) Option contracts between A2A S.p.A. and Società Elettrica Altoatesina SEL S.p.A.
        relating to a part of their investment in Delmi S.p.A.
     A2A S.p.A. has signed option contracts with Società Elettrica Altoatesina SEL S.p.A. (SEL) in
     relation to the portion of the shares it holds in Delmi S.p.A..
     Under the option contracts between A2A S.p.A. and SEL S.p.A., the latter has the right to sell to
                                      Half-yearly financial report at June 30, 2011

                                      Consolidation policies and procedures




A2A S.p.A. and A2A S.p.A. has the right to purchase from SEL S.p.A. two lots of Delmi S.p.A.
shares, representing 50% and 35% respectively of SEL S.p.A.’s shareholding in Delmi S.p.A.
(currently 10% of Delmi S.p.A.'s share capital).
The strike price of these options will be calculated for each lot based on various formulas that
take into account SEL S.p.A.’s initial investment and/or the value of Edison S.p.A.'s shares at the
time the options are exercised, depending among other things in the case of SEL S.p.A.'s put
options whether SEL S.p.A. - at the time of exercising the option - has or has not become the
owner of certain of Edison' S.p.A.s hydroelectric power plants located in the Province of
Bolzano.
If exercised, the SEL S.p.A. put options and the A2A S.p.A. call options can be implemented in
stages. A2A S.p.A and SEL S.p.A. have renegotiated the expiry dates of these options,
postponing them beyond the initial deadline. In part, this deferral was due to the fact that the
parties could not agree on whether the conditions for the exercising of one of SEL S.p.A.’s put
options had been satisfied or not. As a result, the options are still outstanding and the new
expiry date is not later than 2015.
In accordance with paragraph 23 of IAS 32, the Group has recognized the present value of the
                                                                                                      55
estimated outlay as a liability.
Changes in the present value of this liability caused by the passing of time are considered as
financial expenses and are recognized in profit or loss.
There is still some uncertainty in international accounting standards as to how to treat the
difference between the present value of the strike price of the put options and the carrying
amount of the non-controlling interests. In the absence of an interpretation of this question
by the IFRIC, the Group has decided to present this difference as a deduction from equity
attributable to the Group (if positive) or as an increase in equity attributable to the Group (if
negative) as an alternative to adjusting goodwill.
This is in line with previous decisions taken by the Group. Accordingly, any changes in the
liability that do not depend on time result in adjustments to Group equity.
If the options expire without being exercised, the liability will be reclassified to equity,
reinstating the non-controlling interests.
The condensed half-year consolidated financial statements at June 30, 2011 present a liability
to third parties for the possible exercise of the put options on the shares of Delmi S.p.A. of 90
million euro (93 million euro at December 31, 2010), a reduction in non-controlling interests of
157 million euro (unchanged with respect to December 31, 2010), a positive change in equity
attributable to the Group of 6 million euro (92 million euro at December 31, 2010) and financial
expense of 2 million euro (5 million euro at December 31, 2010).
The share of Delmi S.p.A.’s result remains 51% as the above options do not currently give A2A
access to the economic benefits associated with the shares under option.
                                        Half-yearly financial report at June 30, 2011

                                        Consolidation policies and procedures




     b) Call option for the purchase of 1% of the share capital of ASM Novara S.p.A.
     A2A S.p.A. owns 50% of the shares of ASM Novara S.p.A., a company with a share capital of one
     million euro set up with other shareholders in order to build and manage a district heating
     network in the town of Novara.
     As a result of an agreement between the shareholders of ASM Novara S.p.A., A2A S.p.A. holds
     a call option to buy 1% of the share capital of that company. Similarly the other shareholders,
     who hold the remaining 50%, have a put option to sell 1% of the share capital to A2A S.p.A..
     Exercising one of these options would give A2A S.p.A. control over ASM Novara S.p.A..
     Any of the parties can exercise their options within three years of the satisfaction of certain
     conditions relating to the construction of the district heating network in Novara: at June 30,
     2011 these conditions had not yet been fulfilled.
     IAS 27, paragraph 14, establishes that when assessing whether an entity has the power to
     govern the financial and operating policies of another entity it has to take account of the
     “potential voting rights” that would derive from exercising the options, providing they are
     currently exercisable. Such potential voting rights should then be added to the existing voting
     rights in order to calculate the total interest held in the share capital, which in turn establishes
56
     the method of consolidation to be applied to the investee.
     Potential voting rights that are not currently exercisable are understood as being, for example,
     those that cannot be exercised until a future date or until some future event takes place.
     Since as explained above the potential voting right held by A2A S.p.A. in ASM Novara S.p.A. is
     not currently exercisable, the shareholding in ASM Novara S.p.A. is consolidated using the
     equity method.
     When the option right is exercised an assessment will be made as to whether ASM Novara
     S.p.A. is controlled by A2A S.p.A. in order to decide on the consolidation method to be used.


     c) Option granted to the Municipality of Varese for the sale of 10% of Aspem S.p.A.
       and 9.8% of Varese Risorse S.p.A.

     A2A S.p.A. holds 90% of the shares of Aspem S.p.A., a company that provides local public
     services in the city of Varese and in other municipalities in the province of Varese.

     Under the shareholders’ agreement between A2A S.p.A. and the Municipality of Varese, the
     latter has the right, but not the obligation, to sell (put option) to A2A S.p.A. 9.8% of the share
     capital of Aspem S.p.A. and 10% of the share capital of Varese Risorse S.p.A. (held 90% by
     Aspem S.p.A.). The two shareholdings must be purchased together within the same context.

     The Municipality of Varese can exercise its option after the expiry date of the period of
     intratransferability of the shares in Aspem S.p.A. and Varese Risorse S.p.A., which lasts for
     three years from the date of signing the shareholders’ agreement: at June 30, 2011, this term
                                   Half-yearly financial report at June 30, 2011

                                   Consolidation policies and procedures




was still in course. These transactions have been valued on the basis of purchase value for
Aspem S.p.A. and enterprise value for Varese Risorse S.p.A..

In accordance with paragraph 23 of IAS 32, the Group has recognized the present value of the
estimated outlay as a liability which it will not be able to avoid if the above option is exercised,
with a corresponding entry to equity.

The condensed half-year consolidated financial statements at June 30, 2011 show a liability of
4 million euro to the Municipality of Varese for the possible exercising of the put option on the
shares of Aspem S.p.A. and Varese Risorse S.p.A., with a corresponding reduction in the equity
attributable to non-controlling interests.


d) Option on the sale of approximately 5.0% of the share capital of PRVA BANKA CME
GORE A.D.

At December 31, 2010 the Montenegro company EPCG held an equity interest in the bank
PRVA BANKA CME GORE A.D. equal to 18.24% of its share capital; in April 2011 EPCG
subscribed a capital increase, resolved by the company’s board of directors on April 18, 2011,         57
increasing its holding to 24.10%. In addition, at the same time a put option contract was signed
with a group of Montenegro investors, which may be exercised between September 1, 2011 and
November 30, 2011, on a number of preferred shares at a price corresponding to their nominal
value. Exercising this option will allow EPCG to take its investment in PRVA BANKA CME GORE
A.D back to the level of December 31, 2010.
                                                           Half-yearly financial report at June 30, 2011

                                                           Consolidation policies and procedures




     Key figures at June 30, 2011 and June 30, 2010 for joint ventures
     (consolidated at equity)

      Key figures for the six months ended June 30, 2011                                   Edipower       Transalpina      Companies      Metamer
      Millions of euro                                                                                      di Energia     of Ecodeco
                                                                                                                                Group
                                                                                                20%              50%           50% (*)       50%

      INCOME STATEMENT
      Sales revenue                                                                             106.4           2,988              5.6         4.1
      Gross operating income - EBITDA                                                           40.7              247              0.1        0.2
      % of net sales                                                                           38.3%             8.2%             1.8%       4.2%
      Depreciation, amortization and write-downs                                                 25.0             204              0.4           –
      Net operating income - EBIT                                                                15.7              43             (0.3)       0.2
      Profit (loss) for the period                                                                7.9             (30)           (0.4)        0.1
      BALANCE SHEET
      Total assets                                                                              771.7           8,385             12.2        9.5
      Net equity                                                                               422.1            3,397              1.0         1.3
      Net debt                                                                                 (214.1)         (2,651)           (3.4)        4.2
     (*) Bellisolina S.r.l., Bergamo Pulita S.r.l., Biotecnica S.r.l. and Sed S.r.l..
58
      Key figures for the six months ended June 30, 2010                 Edipower        Transalpina      Companies         Metamer          Gesi
      Millions of euro                                                                     di Energia     of Ecodeco
                                                                                                               Group
                                                                                 20%            50%            50% (*)           50%        47.5%

      INCOME STATEMENT
      Sales revenues                                                             90.1           2,678              6.3             5.9         1.8
      Gross operating income - EBITDA                                            34.2             312             0.9             0.2         0.4
      % of net sales                                                          38.0%             11.7%           14.3%            3.4%       22.2%
      Depreciation, amortization and write-downs                                 28.3             196             0.6                -        0.2
      Net operating income - EBIT                                                 5.9             116              0.3            0.2         0.2
      Profit (loss) for the period                                                2.5             29              (0.1)            0.1        0.1
      BALANCE SHEET
      Total assets                                                            815.9            8,594              12.8             8.1        3.0 
      Net equity                                                              410.8            3,791               1.2             1.2         1.5 
      Net debt                                                               (247.3)           (2,712)            (4.3)            3.8        0.2
     (*) Bellisolina S.r.l., Bergamo Pulita S.r.l., Biotecnica and Sed S.r.l..
                                Half-yearly financial report at June 30, 2011




                               Seasonal nature of the business




Given the nature of the Group’s ordinary activities the interim results may be affected by
changes in the weather during the period.

In this respect reference should be made to the comments on performance by sector
presented below.



                                                                                             59
                                             Half-yearly financial report at June 30, 2011




                                           A2A Group – Areas of activity




     The A2A Group operates in the production, sale and distribution of gas and electricity, district
     heating, environmental services and the integrated water cycle. These activities in turn form
     part of the following sectors:
     • Energy Sector;
     • Heat and Services Sector;
     • Environment Sector;
     • Networks Sector;
60
     • Other Services and Corporate Sector.

                                                    Sectors of the
                                                    A2A Group

         Thermoelectric         Cogeneration           Collection and             Electricity      Other services
        and hydroelectric         plants              street sweeping             Networks
             plants

            Energy             District heating           Treatment             Gas Networks      Corporate sector
          Management             networks


        Sale of electricity          Sale               Disposal of            Integrated Water
             and gas          of heat and other         waste with                  Cycle
                                   services           energy recovery




     Sectors of the A2A Group

          Energy

          Heat & Services

          Environment

          Networks

          Other services and corporate
                             Half-yearly financial report at June 30, 2011




                             Geographical areas of activity




                                                                             61




Hydroelectric plants
Thermoelectric plants
Cogeneration plants
Waste disposal plants
Technological partnerships
                                                   Half-yearly financial report at June 30, 2011




                                                 Results sector by sector




     Millions of euro                                                                   Energy               Heat and Services


                                                                                 01 01 11      01 01 10      01 01 11      01 01 10
                                                                                06 30 11      06 30 10      06 30 11      06 30 10


     Revenues                                                                      2,397         2,245           216           198
     - of which inter-sectors                                                         102            92            21            16
     Gross operating income - EBITDA                                                  163           191           48             39

62   % of revenues                                                                  6.8%           8.5%        22.2%         19.7%
     Depreciation, amortization, provisions and write-downs                          (114)          (97)          (24)          (27)
     Net operating income - EBIT                                                       49           94             24            12
     % of revenues                                                                  2.0%          4.2%          11.1%          6.1%
     Net financial income/expense
     Non-operating income/expense
     Income before tax
     Income taxes
     Net income
     Net income from non-current assets held for sale
     Income pertaining to minorities
     Group net income for the period
     Gross investments (1)                                                             10            16            31            25

     (1) See "Investments" in the tables reported in notes 1 and 2 on the tangible and intangible assets in the consolidated financial
         statements.




     Millions of euro                                                                   Energy               Heat and Services


                                                                                06 30 11       12 31 10     06 30 11       12 31 10


     Tangible assets                                                                2,226        2,290           470           465
     Intangible assets                                                                 58            60           123           118
     Trade receivables and current financial assets                                  1,333        2,478           139           190
     Trade payables and current financial liabilities                               1,007         2,075            115          163
                                                Half-yearly financial report at June 30, 2011

                                                Results sector by sector




     Networks              Environment             Other Services              Eliminations                 Total Group
                                                   and Corporate
 01 01 11    01 01 10    01 01 11    01 01 10     01 01 11     01 01 10      01 01 11     01 01 10        01 01 11    01 01 10
06 30 11    06 30 10    06 30 11    06 30 10     06 30 11     06 30 10      06 30 11     06 30 10        06 30 11    06 30 10


    347          301        418          395           113         109         (441)        (390)          3.050        2.858
     196         165          16          16          106           101         (441)           (390)
     128         117         152         141           (14)         (16)           –              (2)        477          470
  36.9%       38.9%       36.4%        35.7%       (12.4%)      (14.7%)                                    15.6%        16.4%    63
     (59)        (58)        (48)        (45)          (13)         (16)           4               5         (254)       (238)
     69           59        104           96           (27)         (32)           4               3         223          232
  19.9%        19.6%      24.9%       24.3%        (23.9%)      (29.4%)                                      7.3%        8.1%
                                                                                                              (80)        (56)
                                                                                                               (4)
                                                                                                              139         176
                                                                                                              (74)        (68)
                                                                                                               65         108
                                                                                                               39         282
                                                                                                               16         (19)
                                                                                                              120         371
      55          60           11         30            11           10            –               –          118         141




     Networks              Environment             Other Services              Eliminations                 Total Group
                                                   and Corporate
06 30 11     12 31 10   06 30 11     12 31 10    06 30 11      12 31 10     06 30 11      12 31 10       06 30 11     12 31 10


   1,458        1,481       498          525          224           222          (111)           (111)     4,765       4,872
    1,361       1,357         38          39            74           72          (93)            (94)       1,561       1,552
     302         339         268         255           144          128         (389)       (1.193)         1,797       2,197
     327         298         168         184          303           363         (381)       (1.185)         1,539       1,898
                                     Half-yearly financial report at June 30, 2011




                                    Notes to the balance sheet




     Changes in the consolidation scope compared to December 31, 2010

     There has been a change in the consolidation scope during the six months ended June 30, 2011
     compared to the previous year as a result of the sale of the investments in the following
     companies:
     • Metroweb S.p.A.;
     • Coges S.p.A..
64
                                                         Half-yearly financial report at June 30, 2011

                                                         Notes to the balance sheet




ASSETS

Non-current assets
1) Tangible assets

Millions of euro                                       Balance                             Changes in the period                               Balance
                                                             at                                                                                      at
                                                     12 31 2010     Invest-      Other     Disposals      Write-      Depre-        Total     06 30 201
                                                                    ments/     changes     and sales      downs       ciation    changes
                                                                  additions                                                                           1

Land                                                       247                                                                                     247
Buildings                                                  825           2           2                                   (10)         (6)          819
Plant and machinery                                      3,223          38         20             (2)                    (118)       (62)         3,161
Industrial and commercial equipment                         39            1                                               (2)          (1)          38
Other tangible asssets                                      64           3                                               (10)          (7)          57
Landfills                                                   14            1          2                         (1)        (2)                       14
Assets held under concession (freely transferable)         355            1                                              (26)         (25)         330
Construction in progress and advances                       83          20         (23)                                                (3)          80
Leasehold improvements                                      10            1                                                             1            11    65
Leased assets                                               12                                                            (4)          (4)           8
Total                                                   4,872           67           1           (2)           (1)      (172)       (107)        4,765
of which:
Historical cost                                          7,540          67           1            (5)          (1)                    62         7,602
Accumulated depreciation                                (2,668)                                    3                    (172)       (169)        (2,837)



“Tangible assets” amounted to 4,765 million euro (4,872 million euro at December 31, 2010)
representing a net decrease of 107 million euro.

The following changes took place during the period:
• an increase of 67 million euro due to investments, as described in further detail below;
• a decrease of 2 million euro for disposals, net of accumulated depreciation;
• a reduction of 172 million euro relating to the depreciation charge for the period
• an increase of 1 million euro due to other changes
• a decrease of 1 million euro arising from write-downs for the period.

Investments may be analyzed as follows:
• there was an increase of 10 million euro in the energy sector which related mainly to the
       following: 6 million euro for work carried out at the Monfalcone and Calabria power
       stations; 2 million euro for work carried out at the Cassano d’Adda, Ponti sul Mincio,
       Braulio, Stazzona, Lovero, Grosio and Premadio power stations; 1 million euro for work
       carried out at the Gissi power station;
                                      Half-yearly financial report at June 30, 2011

                                      Notes to the balance sheet




     • investments of 20 million euro in the heat sector regarded the development of the district
        heating network in the Milan, Brescia, Bergamo and Varese areas for 16 million euro;
        extraordinary maintenance work and the development of plants in the area totaled 4
        million euro;
     • the increase of 10 million euro in the environment sector relates to development and
        maintenance work on the waste treatment and disposal plants and the purchase of
        equipment and vehicles for refuse collection
     • investments in the networks sector amounted to 24 million euro and mainly related to
        development and maintenance work carried out on electricity distribution equipment, the
        extension and reconstruction of the low and medium voltage network, the installation of
        new electronic meters and the upgrading of primary plants;
     • investments in the services sector amounted to 3 million euro.

     Included in tangible assets are “Leased assets” for a total of 8 million euro, recognized in
     accordance with the accounting treatment required by IAS 17 and for which the outstanding
     payable to the lessor at June 30, 2011 amounted to 29 million euro.
66
                                                          Half-yearly financial report at June 30, 2011

                                                          Notes to the balance sheet




2) Intangible assets

Millions of euro                                        Balance                            Changes in the period                              Balance
                                                              at                                                                                    at
                                                      12 31 2010     Invest-     Other Disposals/         Write-   Amort-         Total     06 30 2011
                                                                     ments/    changes      sales         downs    ization     changes
                                                                   additions

Industrial patents and intellectual property rights          22           4          3                                  (7)                        22
Concessions, licenses, trademarks and similar
rights                                                     802           41          5                                (30)          16            818
Assets in progress                                           21           6         (9)                                              (3)           18
Other intangible assets                                      32                                                         (4)         (4)            28
Goodwill                                                    675                                                                                   675
Total                                                     1,552          51         (1)                               (41)           9          1,561


“Intangible assets” at June 30, 2011 amounting to 1,561 million euro (1,552 million euro at
December 31, 2010) have increased by 9 million euro compared to the balance at December 31,
2010.

Through the application of IFRIC 12, from financial year 2010 intangible assets also include
                                                                                                                                                         67
assets in concession, which mainly relate to gas distribution and the integrated water cycle.

The following changes took place during the period:
• an increase of 51 million euro due to investments;
• a reduction of 41 million euro relating to the amortization charge for the period;
• a decrease of 1 million euro for other changes.

Investments relate mainly to the following:
• “Industrial patents and intellectual property rights”, for 4 million euro, mainly relating to
     the CRM software, the new receivables management system and the integration of the
     information systems of the A2A Group;
• “Concessions, licenses, trademarks and similar rights ”, for 41 million euro, regarding:
     - development and maintenance of the plant in the gas distribution area relating to the
     connection of new users and the replacement of low and medium pressure underground
     tubing for 22 million euro;
     - intervention on the water transportation and distribution network, on the sewage
     networks and on the purification plants for 6 million euro;
     - investments made in the Coriance Group for 11 million euro;
     - other investments of 2 million euro;
• “Assets in progress”, for 6 million euro, relating mainly to the development of new
     computer projects and the development and maintenance of plants for the distribution of
     gas and water, sewage networks and purification plants.
                                       Half-yearly financial report at June 30, 2011

                                       Notes to the balance sheet




     “Other intangible assets” include the “customer list” which refers to the acquisition of
     customer portfolios by Group companies. These balances are amortized on the basis of the
     estimated benefits expected to be obtained in future years.

     More specifically, the outstanding balance of 26 million euro at June 30, 2011 relates mainly to
     the amount paid in previous years by subsidiaries for the acquisition of customers of the
     business acquired from ENEL in 2003 relating to a portion of the networks and customers of
     the city and province of Bergamo, the value of the customers belonging to the gas sector and
     the valuation of the customer portfolio of the subsidiary Aspem Energia S.r.l., a company
     belonging to the Aspem Group.


     Goodwill

     Millions of euro                          Balance at                Changes in the period              Balance at
                                                12 31 2010                                                   06 30 2011
                                                               Invest-     Other       Write-       Total
                                                               ments/    changes       downs     changes
                                                             additions

     Goodwill                                         675           –           –           –          –           675
68
     Total                                            675           –           –           –          –           675


     There has been no change in goodwill compared with the previous year-end.
                                      Half-yearly financial report at June 30, 2011

                                      Notes to the balance sheet




Goodwill at June 30, 2011 may be analyzed as follows:

Cash Generating Unit - Millions of euro

Electricity networks                                                                                   271
Ecodeco                                                                                               228
Aprica                                                                                                  5
Gas networks                                                                                           38
Gas                                                                                                     7
Heat - Italy                                                                                            21
Heat - France                                                                                           11
EPCG                                                                                                   94
Total goodwill at June 30, 2011                                                                       675


There were no impairment indicators arising during the period which led to write-downs.
Impairment testing is in any case carried out on goodwill at least annually.



3) Investments and other non-current financial assets                                                         69

Millions of euro                   Balance at       Changes         Balance at of which included in the NFP
                                    12 31 2010 in the period        06 30 2011
                                                                                  12 31 2010   06 30 2011

Shareholdings carried according
to equity method                          2,411             (10)           2,401          –             –
Other non-current financial
assets                                      40               29              69          28            27
Total shareholdings and other
non-current financial assets              2,451              19           2,470          28            27



"Shareholdings carried according to equity method" decreased by 10 million euro over
December 31, 2010.
                                            Half-yearly financial report at June 30, 2011

                                            Notes to the balance sheet




     The following table sets out details of the changes:
     Shareholdings carried according to equity method - Millions of euro                        Total

     Balance at December 31, 2010                                                               2,411
     Changes during the period
     – acquisitions and capital increases                                                           –
     – measurement at equity                                                                       (4)
     – Dividends received from shareholdings carried at equity                                     (4)
     – sales                                                                                        –
     – other changes                                                                                –
     – reclassifications                                                                           (2)
     Total changes during the period                                                              (10)
     Balance at June 30, 2011                                                                   2,401


     The changes which took place during the first half year, a decrease of a total of 10 million euro,
     refer to the measurement of investees accounted for using the equity method for 4 million
     euro, in particular Transalpina di Energia S.r.l., Edipower S.p.A., PremiumGas S.p.A., Ergosud
     S.p.A. and Dolomiti Energia S.p.A., the rececipt of dividends for 4 million euro, the
70
     reclassification of the investment in Servizi Valdisotto S.p.A. to “Available-for-sale financial
     assets” for 1 million euro and to the reclassification of the investment in Coges S.p.A. to “Non-
     current assets held for sale” for 1 million euro.

     “Other non-current financial assets” had a balance of 69 million euro at June 30, 2011, a rise
     of 29 million euro over the previous year end. Of this 24 million euro regards the
     reclassification from “Non-current assets held for sale” of the convertible bond issued by
     Metroweb S.p.A. and subscribed by A2A S.p.A., maturing on November 30, 2013, 5 million
     euro relates to the increase in the investment in Prva banka Crne Gore A.D. Podgorica held by
     EPCG, 1 million euro is due to the reclassification of Servizi Valdisotto S.p.A. and ASM Sondrio
     S.p.A., merged into the new company named Azienda Energetica Valtellina e Valchiavenna
     S.p.A., and 1 million euro results from a decrease in other financial receivables from third
     parties. This balance sheet item has been accounted for in accordance with IAS 32 and in this
     respect reference should be made to the financial statements for the year ended December
     31, 2010 in the section discussing accounting standards.

     For more details on the investment in Prva banka Crne Gore A.D. Podgorica held by EPCG
     reference should be made to the paragraph “consolidation procedures”.
                                   Half-yearly financial report at June 30, 2011

                                   Notes to the balance sheet




4) Deferred tax assets

Millions of euro                                               Balance at               Changes        Balance at
                                                                12 31 2010         in the period       06 30 2011

Deferred tax assets                                                   430                    (4)             426


“Deferred tax assets” amount to 426 million euro, representing a decrease of 4 million euro
over December 31, 2010.

The assets arise from charges for provisions, write-downs, depreciation and amortization
recorded by the Group which become deductible for fiscal purposes in future years.

The Group’s forecasts confirm that these assets will be recovered by achieving adequate
future taxable profit..



5) Other non-current assets

Millions of euro                 Balance at       Changes         Balance at of which included in the NFP           71
                                  12 31 2010 in the period        06 30 2011
                                                                                12 31 2010   06 30 2011

Non-current derivatives                  98                4                 102               98            102
Other non-current assets                 15                3                  18                   –           –
Total other non-current assets          113                7             120                   98            102



“Other non-current assets” amount to 120 million euro (113 million euro at December 31,
2010) and consist of the following:
• 102 million euro relating to “Derivatives” hedging non-current financial items, regarding
   mainly Interest Rate Swap (IRS) contracts hedging the risk of an adverse change in interest
   rates on long-term bonds. This item has increased by 4 million euro compared to
   December 31, 2010 mainly as the result of the measurement at fair value of the financial
   instruments;
• 18 million euro per “Other non-current assets”, principally relating to guarantee deposits
   and expenditure incurred but relating to future years.
                                             Half-yearly financial report at June 30, 2011

                                             Notes to the balance sheet




     Current assets

     6) Inventories

     Millions of euro                                                  Balance at           Changes    Balance at
                                                                        12 31 2010     in the period   06 30 2011

     Inventories                                                               239               (4)         235


     “Inventories” amount to 235 million euro (239 million euro at December 31, 2010),
     representing a decrease of 4 million euro which may be analyzed as follows:
     • 1 million euro relating to the decrease in fuel stocks, which at the balance sheet date
        totaled 158 million euro compared to 159 million euro at December 31, 2010;
     • 6 million euro relating to the decrease in other stocks, which at June 30, 2011 amounted to
        15 million euro while the corresponding figure at the end of the previous year was 21 million
        euro;
     • 3 million euro relating to the increase in materials, which totaled 55 million euro at June 30,
        2011 and amounted to 52 million euro at December 31, 2010.
72



     7) Trade receivables

     Millions of euro                                                  Balance at           Changes    Balance at
                                                                        12 31 2010     in the period   06 30 2011

     Trade receivables                                                        2,416            (400)        2,016
     Provision for receivables write-downs                                     (275)            (24)        (299)
     Total trade receivables                                                  2,141            (424)        1,717


     “Trade receivables” amount to 1,717 million euro at June 30, 2011 (2,141 million euro at
     December 31, 2010), representing a decrease of 424 million euro due to the following:
     • for 429 million euro to a decrease in trade receivables from customers; this item had a
        balance of 1,576 million euro at the balance sheet date compared to that of 2,005 million
        euro at December 31, 2010;
     • for 18 million euro to an increase in receivables from the Municipalities of Milan and
        Brescia. This item had a balance of 124 million euro at June 30, 2011 (106 million at the end
        of the previous year);
     • for 6 million euro to the decrease in receivables from associates; this item had a balance of
        8 million euro at the balance sheet date compared to that of 14 million euro at December
        31, 2010;
                                  Half-yearly financial report at June 30, 2011

                                  Notes to the balance sheet




• for 7 million euro to the decrease of contracts in progress, which had a total balance of 9
   million euro (16 million euro at December 31, 2010).

The Group made sales of receivables without recourse to a factoring company during the
period which amounted to 78 million euro. This enabled the Group to derecognize these
receivables.

The provision for receivables write-downs was increased to 24 million euro as the result of
accruals of 26 million euro made during the year, net of utilizations of 2 million euro, made to
provide against the collection risk arising mainly from the current economic situation.



8) Other current assets

Millions of euro                                            Balance at           Changes    Balance at
                                                             12 31 2010     in the period   06 30 2011

Current derivatives                                                   18              30           48
Other current assets                                                 257              67          324
                                                                                                         73
Total other current assets                                          275               97          372


“Other current assets”, had a balance of 372 million euro compared to 275 million euro at
December 31, 2010, representing an increase of 97 million euro, and may be analyzed as
follows:
• an increase of 30 million euro in current derivative instruments which at June 30, 2011
   amounted to 48 million euro (18 million euro at December 31, 2010);
• a decrease of 3 million euro in assets relating to future years amounting to 27 million euro
   at June 30, 2011 (30 million euro at December 31, 2010);
• an increase of 22 million euro in receivables from the Electricity Sector Equalization Fund
   which at June 30, 2011 amounted to 73 million euro and at the end of the previous year
   totaled 51 million euro;
• an increase of 2 million euro in advances to suppliers, which at the end of the period
   amounted to 6 million euro (4 million euro at December 31, 2010);
• an increase of 46 million euro in VAT receivables which at June 30, 2011 amount to 112
   million euro (66 million euro at the end of the previous year);
• an increase of 1 million euro in receivables from the personnel (nil at the end of the
   previous year);
• a decrease in other receivables of 1 million euro which total 105 million euro (106 million
   euro at December 31, 2010).
                                       Half-yearly financial report at June 30, 2011

                                       Notes to the balance sheet




     9) Current financial assets

     Millions of euro               Balance at       Changes           Balance at        of wich included in the NFP
                                     12 31 2010 in the period          06 30 2011
                                                                                           12 31 2010      06 30 2011

     Other financial assets                  47               23                  70               47             70
     Financial assets due from
     related parties                          9                1                  10                   9          10
     Total current financial
     assets                                  56              24                   80               56             80



     This item had a balance of 80 million euro at the balance sheet date (56 million euro at
     December 31, 2010) and relates to receivables of a financial nature due from associates of 10
     million euro.



     10) Current tax assets

     Millions of euro                                               Balance at              Changes        Balance at
74                                                                   12 31 2010        in the period       06 30 2011

     Current tax assets                                                     18                    7               25


     “Current tax assets” amount to 25 million euro (18 million euro at December 31, 2010)
     representing an increase of 7 million euro over the previous year-end.



     11) Cash and cash equivalents

     Millions of euro               Balance at       Changes           Balance at of which included in the NFP
                                     12 31 2010 in the period          06 30 2011
                                                                                     12 31 2010   06 30 2011

     Cash and cash
     equivalents                            132               (2)             130                 132            130


     “Cash and cash equivalents” amounted to 130 million euro at June 30, 2011 compared to 132
     million euro at the beginning of the year, representing a decrease of 2 million euro.

     Bank deposits include accrued interest even though this had not yet \been credited at the end
     of the period.
                                  Half-yearly financial report at June 30, 2011

                                  Notes to the balance sheet




12) Non-current assets held for sale

Millions of euro                Balance at       Changes        Balance at of which included in the NFP
                                 12 31 2010 in the period       06 30 2011
                                                                              12 31 2010   06 30 2011

Non-current assets held
for sale                                82             (43)              39           2             2


“Non-current assets held for sale” had a balance of 39 million euro at June 30, 2011 and refer
to the following:
• for 6 million euro to the goodwill relating to BAS-SII S.p.A.;
• for 31 million euro to the assets of BAS-SII. S.p.A.;
• for 2 million euro to the assets relating to certain businesses of the Ecodeco Group.

The change over the period, a decrease of 43 million euro, is due to the following:
• for 24 million euro to the reclassification to “Investments and other non-current financial
   assets” of the convertible bond issued by Metroweb S.p.A. and wholly underwritten by
   A2A S.p.A.;
• for 17 million euro to the sale of the investment in the associate Metroweb S.p.A., of which            75
   14 million euro relates to the carrying amount of the investment and 3 million euro to the
   receipt of the interest previously capitalized on the convertible bond;
• for 4 million euro to the decrease arising from the sale of the investments in Autostrade
   Lombarde S.p.A., Autostrade Centropadane S.p.A. and Stradivaria S.p.A.;
• for 2 million euro to an increase in the assets of BAS-SII S.p.A..
                                          Half-yearly financial report at June 30, 2011

                                          Notes to the balance sheet




     EQUITY AND LIABILITIES

     Equity
     Equity, which at June 30, 2011 amounted to 4,644 million euro (4,845 million euro at December
     31, 2010), is set out in the following table:

     Millions of euro                                               Balance at           Changes     Balance at
                                                                     12 31 2010     in the period    06 30 2011

     Equity pertaining to the Group:
     Share capital                                                         1,629               –          1,629
     (Treasury shares)                                                       (61)              –            (61)
     Reserves                                                              1,625               12         1,637
     Group net income for the year                                          308             (308)            –
     Group net income for the period                                           –             120           120
     Total Group equity                                                    3,501            (176)         3,325
     Minority interests                                                    1,344              (25)        1,319
     Total equity                                                         4,845             (201)        4,644
76
     The overall change in equity, a reduction of 201 million euro, is due to net income for the
     period of 120 million euro, to the measurement under IAS 32 and 39 of the cash flow hedge
     derivatives, to the valuation of the put option on the shares of Delmi S.p.A. and to the change
     in non-controlling interests.



     13) Share capital

     “Share capital” amounts to 1,629 million euro and consists of 3,132,905,277 ordinary shares
     each of nominal value 0.52 euro.



     14) Treasury shares

     “Treasury shares” amount to 61 million euro, unchanged compared to December 31, 2010, and
     relate to 26,917,609 own shares held by the parent company A2A S.p.A..
                                   Half-yearly financial report at June 30, 2011

                                   Notes to the balance sheet




15)Reserves

Millions of euro                                             Balance at           Changes    Balance at
                                                              12 31 2010     in the period   06 30 2011

Other reserves                                                      1,625              12         1,637


“Reserves”, which amount to 1,637 million euro (1,625 million euro at December 31, 2010),
consist of the legal reserve, the extraordinary reserve arising on consolidation and the
retained earnings of subsidiaries. This item also includes the cash flow hedge reserve, which
relates to the measurement at the end of the period of the derivatives responding to the
requirements for hedge accounting.
The other reserves also include the effect of applying paragraph 23 of IAS 32 to the put options
on the shares of Delmi S.p.A. agreed by A2A S.p.A. with Società Elettrica Altoatesina S.p.A.
(SEL). As discussed in the section “Consolidation policies and procedures”, the difference
between the present value of the strike price of these put options and the carrying amount of
the non-controlling interests is deducted from Group equity (if positive) or added to Group
equity (if negative). The effect of the put options on the shares of Delmi S.p.A. led to a positive
                                                                                                          77
change of 6 million euro in Group equity at June 30, 2011.



16) Net profit for the period

This amounts to 120 million euro and represents the result for the reporting period.



17) Minority interests

Millions of euro                                             Balance at           Changes    Balance at
                                                              12 31 2010     in the period   06 30 2011

Minority interests                                                 1,344              (25)        1,319



“Minority interests” amount to 1,319 million euro (1,344 million euro at December 31, 2010)
and represent the portion of capital, reserves and net income attributable to minority
shareholders.

The decrease for the period of 25 million euro relates to the following:
• the allocation of the portion attributable to minority shareholders amounting to 16 million
   euro, of which minus 14 million euro relating to the share of the result attributable to the
   minority shareholders of Delmi S.p.A., minus 6 million euro attributable to the minority
   shareholders of the EPCG Group and plus 4 million euro attributable to the minority
   shareholders of Plurigas S.p.A. and A2A Alfa S.r.l.;
                                           Half-yearly financial report at June 30, 2011

                                           Notes to the balance sheet




     • negative adjustments of 9 million euro relating to the changes during the period of the
           components of equity attributable to the minority shareholders of the EPCG Group and
           Delmi S.p.A. and Plurigas S.p.A..

     A dividend of 298 million euro was approved in 2011, being 0.096 euro per share, of which 186
     million euro has already been distributed and 112 million euro has yet to be distributed.



     LIABILTIES

     Non-current liabilities

     18) Non-current financial liabilities

     Millions of euro                    Balance at       Changes        Balance at of which included in the NFP
                                          12 31 2010 in the period       06 30 2011
                                                                                       12 31 2010   06 30 2011

     Non-convertible bonds                     2,170              21            2,191       2,170         2,191
     Due to banks                              1,477              36             1,513      1,477         1,513
78
     Due to other providers of finance           66              (21)              45         66            45
     Finance lease payables                       23              (5)              18         23            18
     Total non-current financial
     liabilities                               3,736              31           3,767       3,736         3,767


     “Non-current financial liabilities”, which amount to 3,767 million euro (3,736 million euro at
     December 31, 2010), rose by 31 million euro.

     More specifically, “Non-convertible bonds” are four bonds issued by the Group which relate
     to:
     • a ten-year bond with a nominal value of 500 million euro issued on May 28, 2004 at a
           nominal fixed rate of 4.875%. Its carrying amount of 498 million euro is calculated at
           amortized cost;
     • a thirty-year bond issued in yen on August 10, 2006 at a fixed rate of 5.405%. Its carrying
           amount of 98 million euro is calculated at amortized cost;
     • a ten-year bond with a nominal value of 500 million euro issued on October 30, 2003 at a
           nominal fixed rate of 4.875%. As a result of electing for the fair value option on transition to
           IAS/IFRS the fair value of this bond at June 30, 2011 was 521 million euro;
     • a seven year bond with a nominal value of 1,000 million euro issued on October 27, 2009 at
           a nominal fixed rate of 4.50% which qualifies for fair value hedge accounting. As a result,
           this financial instrument (bond) is measured at amortized cost adjusted by the change in
           the fair value of the underlying risk. Its value at June 30, 2011 was 1,024 million euro.
                                   Half-yearly financial report at June 30, 2011

                                   Notes to the balance sheet




The end-of-period measurement of the fair value and amortized cost of the non-convertible
bonds led to a decrease of 21 million euro in “Non-current financial liabilities”.

Interest of 50 million euro had accrued on bonds at June 30, 2011.

The different accounting treatment used for the four bonds is the result of the different
options selected during the stage of transition to IAS/IFRS by the companies merged on
January 1, 2008.

“Due to banks” increased by 36 million euro over the period. This was mainly due to the use of
new long-term loan facilities. The consolidation of the EPCG Group contributed by 44 million
euro.

The total of 45 million euro “Due to other providers of finance” decreased by 21 million euro
over December 31, 2010 as the result of the reclassification of the portion falling due within
twelve months to current.

“Finance lease payables” amount to 18 million euro, while at December 31, 2010 they
amounted to 23 million euro.                                                                              79




19) Deferred tax liabilities

Millions of euro                                             Balance at           Changes    Balance at
                                                              12 31 2010     in the period   06 30 2011

Deferred tax liabilities                                             493              (13)         480


Deferred tax liabilities arise from capital gains that have been realized but are deferred on an
installment basis for fiscal purposes and from differences between the bases of tangible and
intangible assets for accounting and fiscal purposes, including those resulting from the
consolidation process and from accounting for finance leases and financial instruments under
international accounting standards.
                                             Half-yearly financial report at June 30, 2011

                                             Notes to the balance sheet




     20) Employee benefits

     The balance on this item amounted to 276 million euro at June 30, 2011 (unchanged compared
     to December 31, 2010) and moved as follows during the period:

     Millions of euro                      Balance at     Provisions       Utilizations        Other    Balance at
                                            12 31 2010                                       changes    06 30 2011

     Severance indemnities                        147                11              (7)          (7)         144
     Employee benefits                            129                –               (4)           7           132
     Total employee benefits                      276               11              (11)          –           276




     21) Provisions for risks, charges and liabilities for landfills

     Millions of euro                      Balance at     Provisions       Utilizations        Other    Balance at
                                            12 31 2010                                       changes    06 30 2011

     Provisions for risk, charges
     and liabilities for landfills               460                14              (19)          4           459
80
     These provisions totaled 459 million euro at June 30, 2011 (460 million euro at the previous
     year end). Accruals were made amounting to 14 million euro which mainly related to
     provisions made for disputes in course with certain social security bodies and local authorities
     and for litigation with personnel and third parties. The utilizations of 19 million euro refer
     mainly to the amount used for payments made during the period, while other changes totaled
     4 million euro.



     22) Other non-current liabilities

     Millions of euro                      Balance at       Changes         Balance at of which included in the NFP
                                            12 31 2010 in the period        06 30 2011
                                                                                          12 31 2010   06 30 2011

     Other non-current liabilities                 152             (10)             142            –            –
     Non-current derivatives                       25               (11)             14           25            14
     Total other non-current liabilities          177              (21)            156            25           14



     The decrease of 21 million euro in “Other non-current liabilities” is mainly due to the change in
     payables to third parties arising from the valuation of the put option on Delmi S.p.A. shares
     and the valuation of the non-current derivatives regarding the adjustment of fair value
     recognized in the period.
                                           Half-yearly financial report at June 30, 2011

                                           Notes to the balance sheet




Current liabilities

23) Trade payables and other current liabilities

Millions of euro                                                        Balance at               Changes        Balance at
                                                                         12 31 2010         in the period       06 30 2011

Advances                                                                        23                    (9)                14
Payables to suppliers                                                         1,427                 (220)            1,207
Total trade payables                                                         1,450                  (229)            1,221
Payables to social security institutions                                        36                     (3)               33
Other current liabilities                                                       351                  169              520
Current derivatives                                                              17                   20                 37
Total other current liabilities                                               404                    186              590
Total trade playable and other current liabilities                           1,854                   (43)            1,811



“Trade payables and other current liabilities” amount to 1,811 million euro (1,854 million euro
at December 31, 2010), representing an overall decrease of 43 million euro which arises mainly
from a reduction in “Trade payables” which was partially offset by an increase in “Other                                      81
current liabilities” and “Current derivatives”. The consolidation of the EPCG Group had an
effect of 47 million euro.

“Other current liabilities” include 112 million euro as the amount due to shareholders for the
non-recurring dividend approved in general meeting on June 15, 2011 which will be disbursed in
November 2011.

“Other current liabilities” include an amount of 16 million euro as the effect arising from the
application of a tax transparency agreement entered into by the parent A2A S.p.A. with an
associate, as per “Tax liabilities”.



24) Current financial liabilities

Millions of euro                       Balance at       Changes            Balance at             included in the NFP
                                        12 31 2010 in the period           06 30 2011
                                                                                                12 31 2010      06 30 2011

Due to banks                                   390              (130)             260                 390             260
Due to other providers of finance                43                –                  43                43              43
Finance lease payables                           12               (1)                  11               12               11
Financial payables to
related parties                                   1                1                    2                   1             2
Financial payables to
disposal subsidiaries                             2                –                    2                   2             2
Total current financial
liabilities                                    448             (130)                  318             448               318
                                          Half-yearly financial report at June 30, 2011

                                          Notes to the balance sheet




     “Current financial liabilities” amount to 318 million euro, compared to 448 million euro at
     December 31, 2010. The decrease of 130 million euro is mainly due to a decrease in “Due to
     banks” arising from repayments made during the period and a decrease in the use of revolving
     credit lines expiring within twelve months. The consolidation of the EPCG Group had an effect
     of 6 million euro.



     25) Tax liabilities

     Millions of euro                                               Balance at           Changes    Balance at
                                                                     12 31 2010     in the period   06 30 2011

     Tax liabilities                                                          56             (45)           11


     “Tax liabilities” amount to 11 million euro (56 million euro at December 31, 2010), representing
     a decrease of 45 million euro.

     This item includes the effect arising from the application of a tax transparency agreement
82   entered into by the parent company A2A S.p.A. with an associate.



     26) Liabilities directly associated with non-current assets held for sale

     Millions of euro                                               Balance at           Changes    Balance at
                                                                     12 31 2010     in the period   06 30 2011

     Liabilities directly associeted with non-current assets
     held for sale                                                            16               2           18


     The balance on this item amounted to 18 million euro at June 30, 2011 of which 16 million euro
     regards the liabilities connected with BAS-SII S.p.A. and 2 million euro relates to the Ecodeco
     Group in respect of the liabilities connected with certain businesses held for sale.
                                           Half-yearly financial report at June 30, 2011




                                         Net Debt




27) Net Debt
(pursuant to CONSOB Communication no. DEM/6064293 of July 28, 2006)

The following table provides details of net debt.

Millions of euro                                                               Note        06 30 2011    12 31 2010

Bonds - non-current portion                                                        18           2,191         2,170
Bank loans - non-current portion                                                   18            1,513        1,477
                                                                                                                       83
Amounts due to other providers of finance - non-current portion                    18              45           66
Finance leases - non-current portion                                               18              18           23
Other non-current liabilities                                                      22              14           25
Total medium/long-term debt                                                                     3,781        3,761
Non-current financial assets with related parties                                   3              (5)          (6)
Non-current financial assets                                                        3             (22)         (22)
Other non-current assets                                                            5            (102)         (98)
Total medium/long-term financial receivables                                                    (129)         (126)
TOTAL NON-CURRENT NET DEBT                                                                     3,652         3,635
Bank loans - current portion                                                       24            260           390
Amounts due to other providers of finance - current portion                        24              43           43
Finance leases - current portion                                                   24               11           12
Current financial liabilities with related parties                                 24               2             1
Financial payables to companies held for sale                                      24               2            2
Total short-term debt                                                                            318          448
Other current financial assets                                                      9            (70)          (47)
Current financial assets with related parties                                       9             (10)          (9)
Financial receivables in assets held for sale                                      12              (2)           (2)
Total short-term financial receivables                                                           (82)          (58)
Cash and cash equivalents                                                          11            (130)         (132)
TOTAL CURRENT NET DEBT                                                                           106           258
NET DEBT                                                                                       3,758         3,893
                                       Half-yearly financial report at June 30, 2011




                                      Notes to the income statement




     Changes in the consolidation scope compared to June 30, 2010

     There has been a change in the consolidation scope during the six months ended June 30, 2011
     compared to the previous year as a result of the sale of the investments in the following:

     • Metroweb S.p.A.;

     • Coges S.p.A..
84
     EPCG has been consolidated on a line-by-line basis for the six months ended June 30, 2011,
     while for the six months ended June 30, 2010 it was consolidated on a “one-line” basis.

     The comparative figures for the items of the income statement relating to revenues and
     operating expenses and financial management for the corresponding period of the previous
     year have been reclassified to reflect:

     • the application of IFRS 5 regarding the reclassification of the results of the investment in
        BAS-SII S.p.A., which was previously consolidated on a line-by-line basis, to the item “net
        result from non-current assets held for sale” following management’s decision to finalize
        the sale;

     • the application of IFRS 5, with the reclassification of the results of the investment in
        Metroweb S.p.A., which was previously accounted for using the equity method, to the item
        “net result from non-current assets held for sale” following management’s decision to
        finalize the sale; applying IFRS 5 also led to the reclassification of the financial income
        relating to the bond due from Metroweb S.p.A..
                                          Half-yearly financial report at June 30, 2011

                                          Notes to the income statement




28) Revenues

Revenues for the period totaled 3,050 million euro (2,858 million euro for the six months
ended June 30, 2010), representing an increase therefore of 192 million euro.

The more significant items of this balance were as follows:

Revenues - Millions of euro                                                               06 30 2011   06 30 2010

Revenues from the sales of goods                                                               2,594        2,450
Revenues from services                                                                          400           351
Revenus from long-term contracts                                                                  2            14
Total revenues from the sales of goods and services                                           2,996         2,815
Other operating income                                                                           54           43
Total revenues                                                                                3,050        2,858


“Revenues from sales and services” amounted in total to 2,996 million euro (2,815 million euro
in the corresponding period of the previous year), of which 139 million euro relates to the
consolidation of the EPCG Group, representing an increase of 181 million euro. This increase is
                                                                                                                     85
due to increased sales revenues of 144 million euro, a rise in services income of 49 million euro
and a decrease of 12 million euro in revenues from long-term contracts.

“Other operating income” amounted to 54 million euro, of which 1 million euro relating to the
consolidation of the EPCG Group, representing an increase of 11 million euro compared to the
first half of 2010.

Further details of the main items are as follows:

Revenues from sales of goods and services - Millions of euro                              06 30 2011   06 30 2010

Sale and distribution of electricity                                                           1,620        1,461
Sale and distribution of gas                                                                    780          799
Sale of heat                                                                                     110         107
Water and utilities sold to civil customers                                                      20           22
Hedging gains on operating derivatives                                                             1            -
Hedging losses on operating derivatives                                                           –            (1)
Sale of emission certificates and allowances                                                     48           48
Connection contributions                                                                          15           14
Total revenues from sales                                                                     2,594        2,450
Services to customers                                                                           400           351
Total revenue from services                                                                     400           351
Revenues from long-term contracts                                                                 2           14
Total revenues from sales of goods and services                                               2,996         2,815
Other operating revenues                                                                         54           43
Total revenues                                                                                3,050        2,858
                                             Half-yearly financial report at June 30, 2011

                                             Notes to the income statement




     Trading margin

     The following table sets out the results arising from the trading portfolio; these figures relate to
     trading in electricity, gas and environmental certificates.

     Millions of euro                                                         Note           06 30 2011   06 30 2010

     Trading margin
     Revenues                                                                   28                  431          267
     Operating expenses                                                         29                (424)        (265)
     Total trading margin                                                                            7             2




     29) Operating expenses

     “Operating expenses” amounted to 2,286 million euro (2,130 million euro in the
     corresponding period of the previous year), of which 98 million euro relating to the
     consolidation of the EPCG Group, therefore representing an increase of 156 million euro.
86
     Details of the main components are as follows:

     Operating expenses - Millions of euro                                                   06 30 2011   06 30 2010

     Costs for raw materials and consumables                                                      1,720         1,613
     Service costs                                                                                  413          375
     Total expenses for raw materials and services                                                2,133        1,988
     Other operating expenses                                                                      153          142
     Total operating expenses                                                                    2,286         2,130


     “Costs for raw materials and services” amounted to 2,133 million euro (1,988 million euro for
     the six months ended June 30, 2010), of which 88 million euro relating to the consolidation of
     the EPCG Group, representing an increase of 145 million euro.
     This increase is due to the following:

     • an increase of 92 million euro in the purchase of raw materials and consumables, due to
        increased costs for the purchase of power and fuel of 88 million euro, a decrease in the
        charges relating to the purchase of emission certificates and allowances of 2 million euro,
        a decrease in the cost of purchases of materials of 3 million euro and the net gains of 9
        million euro arising from hedging gains and losses on operating derivatives; the
        consolidation of the EPCG Group contributed for 73 million euro;

     • an increase of 38 million euro in costs for delivery, subcontracted work and services, of
        which 15 million euro relates to the consolidation of the EPCG Group;

     • a positive change of 15 million euro in stocks of fuels and materials.
                                        Half-yearly financial report at June 30, 2011

                                        Notes to the income statement




The following table sets out details of the more significant components:

Expenses of raw materials and consumables - Millions of euro                            06 30 2011    06 30 2010

Purchases of power and fuel                                                                  1,674         1,586
Purchases of materials                                                                         34             37
Purchases of water                                                                              2              2
Hedging charges on operating derivatives                                                         5            7
Hedging income on operating derivatives                                                         (5)          (16)
Purchases of emission certificates and allowances                                               12            14
Total expenses of raw materials and consumables                                              1,722         1,630
Costs for delivery, subcontracted work and services                                            413           375
Total service costs                                                                           413           375
Change in inventories of fuels and materials                                                    (2)          (17)
Total expenses of raw materials and services                                                 2,133         1,988
Other operating expenses                                                                      153           142
Total operating expenses                                                                    2,286          2,130




                                                                                                                    87
30) Labour costs

Excluding capitalized costs, personnel costs for the six months ended June 30, 2011 amounted
to 287 million euro (258 million euro for the six months ended June 30, 2010), of which 26
million euro relates to the consolidation of the EPCG Group, representing an increase of 29
million euro.

“Labour costs” may be analyzed as follows:

Labour costs - Millions of euro                                                         06 30 2011    06 30 2010

Wages and salaries                                                                             187           167
Social security charges                                                                         71           63
Severance indemnities                                                                           11            11
Other costs                                                                                     16            17
Total labour costs                                                                            287           258


The A2A Group had an average workforce of 11,878 during the six months ended June 30, 2011,
of whom 2,750 belong to the EPCG Group. The increase in labour costs is attributable to the
increase in the average workforce as a result in the change in consolidation scope and the
increase in costs resulting from the rises in wages and salaries provided by employment
agreements.
                                                 Half-yearly financial report at June 30, 2011

                                                 Notes to the income statement




     31) Gross operating income - EBITDA

     As a result of the above movements, consolidated “Gross operating income” for the six
     months ended June 30, 2011 amounted to 477 million euro (470 million euro for the six months
     ended June 30, 2010), of which 15 million euro relates to amounts brought in by the EPCG
     Group.

     Further details may be found in the section “Results by sector”.


     32) Depreciation, amortization, provisions and write-downs

     “Depreciation, amortization provisions and write-downs” totaled 254 million euro for the six
     months ended June 30, 2011 (238 million euro for the first half of 2010), of which 28 million
     euro relates to the consolidation of the EPCG Group, representing an increase of 16 million
     euro.

     The following table provides details of the individual items:
88
     Depreciation, amortization, provisions and write-downs
     Millions of euro                                                                            06 30 2011   06 30 2010

     Amortization of intangible assets                                                                   41           41
     Depreciation of tangible assets of which:                                                          172          155
     – 1. ordinary depreciation                                                                        146           125
     – 2. depreciation of assets held under concession (freely trasferable)                             26           30
     Total depreciation and amortization                                                               213          196
     Provisions for risks and charges                                                                    14           18
     Write-down of receivables included in current assets                                               26           24
     Other write-downs of fixed assets                                                                    1            –
     Total depreciation, amortization, provisions and write-downs                                      254          238


     More specifically, “Depreciation and amortization” totaled 213 million euro (196 million euro
     in the corresponding six months of the previous year), of which 18 million euro related to the
     consolidation of the EPCG Group, representing an increase of 17 million euro. Excluding the
     consolidation of the EPCG Group depreciation and amortization would have amounted to 195
     million euro, essentially unchanged compared to the first half of 2010.

     “Provisions for risks and charges” amounted to 14 million euro (18 million euro for the six
     months ended June 30, 2010) and relate to the provisions made in the period for disputes in
     course with certain social security bodies and accruals for outstanding litigation.

     “Write-down of receivables included in current assets” amount to 26 million euro (24 million
     euro for the six months ended June 30, 2010), of which 10 million euro relates to the
                                       Half-yearly financial report at June 30, 2011

                                       Notes to the income statement




consolidation of the EPCG Group. The prudent accrual made for the period is affected by the
persistence of a generally economic situation making it difficult for businesses and individuals
to respect their obligations within the agreed terms. For conservative reasons, therefore, the
sales companies, being those which are most exposed to insolvency risk, have adjusted their
estimates of the expected recoverable amount of outstanding receivables from end
customers.

“Other write-downs of fixed assets” amounting to 1 million euro regard certain write-downs
made by the Ecodeco group.



33) Net operating income - EBIT

“Net operating income” amounted to 223 million euro (232 million euro for the six months
ended June 30, 2010), of which 13 million euro of expenses relate to the EPCG Group.



                                                                                                                   89
34) Financial balance

“Financial balance” closed with net financial expense of 80 million euro (56 million euro for
the six months ended June 30, 2010), including the positive contribution of 7 million euro
arising from the consolidation of the EPCG Group.

Details of the more significant items are as follows:

Financial balance - Millions of euro                                                   06 30 2011    06 30 2010

Financial income                                                                               18             7
Financial expense                                                                             (85)         (113)
Portion of income and charges when shareholdings are carried at equity                        (13)          50
Total financial balance                                                                      (80)          (56)


“Financial income” amounted to 18 million euro, of which 8 million euro relates to the
consolidation of the EPCG Group, representing an increase of 11 million euro over the first half
of 2010 mainly due to the positive effect of the change in the fair value of the financial
derivative contracts relating to the bond of 500 million euro, the revolving credit lines and the
loan granted by Cassa Depositi e Prestiti.
                                               Half-yearly financial report at June 30, 2011

                                               Notes to the income statement




     “Financial expense”, which amounted to 85 million euro, decreased by 28 million euro over the
     six months ended June 30, 2010 and may be analyzed as follows:
     • charges of 82 million euro from financial liabilities (77 million euro for the six months
        ended June 30, 2010) detailed as follows:

     Expenses on financial liabilities - Millions of euro                                      06 30 2011   06 30 2010

     Interest on bond loans                                                                            51           51
     Interest charged by bank                                                                          18           15
     Interest on loans by Cassa Depositi e Prestiti                                                     1            1
     Interest on finance leases                                                                         1            1
     Other financial expenses                                                                          11           9
     Total charges from financial liabilities                                                         82           77

     • charges on financial derivatives of 3 million euro (36 million euro for the six months ended
        June 30, 2010). The decrease is mainly due to the fair value of the bond of 500 million euro,
        accounted for using the fair value option method, and the derivatives on the revolving
        credit lines, the loan granted by Cassa Depositi e Prestiti and the bond of 1,000 million
90      euro, which had a positive effect for the six months ended June 30, 2011.

     The “Portion of income and charges when shareholdings are carried at equity” was negative
     for 13 million euro (positive for 50 million euro for the six months ended June 30, 2010). This
     item mainly consists of the effects of the results of the valuations of the investments in
     Transalpina di Energia S.r.l., Dolomiti Energia S.p.A., Edipower S.p.A., PremiumGas S.p.A. and
     Ergosud S.p.A..



     35) Other non-operating income and expenses

     “Other non-operating income and expenses” had a balance of 4 million euro (nil for the six
     months ended June 30, 2010) and relates to the expenses incurred by the EPCG Group.
                                    Half-yearly financial report at June 30, 2011

                                    Notes to the income statement




36) Income taxes

Income taxes - Millions of euro                                                     06 30 2011    06 30 2010

Current taxes                                                                              83             91
Deferred tax assets                                                                         2             (7)
Deferred tax liabilities                                                                   (11)          (16)
Total income taxes                                                                         74            68


Taxes for the period, calculated on the basis of current accounting standards and proper
consolidation criteria, have been calculated as follows:
• current taxes for the period relating to IRES corporate income tax, the “Robin Hood” tax
   and IRAP regional production tax, for 83 million euro;
• expense of 2 million euro relating to deferred tax assets;
• income of 11 million euro relating to deferred tax liabilities.

Paragraphs 5 and 6 of article 23 of Decree Law no. 98/2011 converted with amendments into Law
no. 111 of July 15, 2011, published in Official Journal no. 164 of July 16, 2011, introduce an increase
in the IRAP tax rate from 3.90% to 4.20% for companies acting as concessionaires other than                     91
those in the construction industry or involved in the management of motorways and tunnels.



37) Net result from non-current assets held for sale

There was a positive balance of 39 million euro on this item for the six months ended June 30,
2011, which relates mainly to the sale of the investments in Metroweb S.p.A. and CESI.



38) Group net profit for the period

The Group’s consolidated profit, net of minority interests of 16 million euro (-19 million euro
for the six months ended June 30, 2010), amounted to 120 million euro (371 million euro for
the six months ended June 30, 2010).
                                              Half-yearly financial report at June 30, 2011




                                              Earnings per share




     39) Earnings per share

                                                                                               01 01 2011      01 01 2010
                                                                                              06 30 2011      06 30 2010

     Earnings (loss) per share (euro)
     –   basic                                                                                    0.0386           0.1194
     –   basic, from operating activities                                                        0.0260           0.0296
     –   diluted                                                                                  0.0386           0.1194
92   –   diluted, from operating activities                                                      0.0260           0.0296
     Weighted average number of shares in circulation for the calculation of
     earnings (loss) per share
     –   basic                                                                           3,105,987,497      3,105,987,497
     –   diluted                                                                         3,105,987,497      3.,105,987,497
                                    Half-yearly financial report at June 30, 2011




                                  Note on related party
                                  transactions




40) Note on related party transactions

“Related parties” are the persons and entities defined in IAS 24 (Revised) “Related Party
Disclosures”.



Relations with Parent Entities and their subsidiaries
                                                                                                         93
On October 5, 2007, the Municipalities of Milan and Brescia entered a shareholders’ agreement to
regulate the ownership structure and corporate governance of A2A, giving rise to joint control by
the Municipalities over the company by means of a dualistic system of administration and control.

More specifically, regardless of the legal structure adopted the merger which took place on
January 1, 2008 resulted in the creation of a joint venture under the joint control of the
Municipality of Brescia and the Municipality of Milan, which each hold an interest of 27.5%.

Dealings between companies of the A2A Group and the Municipalities of Milan and Brescia are of a
commercial nature, involving the supply of electricity, gas, heat and drinking water, services
involving the public lighting and traffic light systems, services involving the water purification and
sewerage plants, collection and sweeping services and video surveillance systems.

Similarly, the companies of the A2A Group have commercial dealings with the companies
controlled by the Municipalities of Milan and Brescia, such as by way of example SEA S.p.A.,
Metropolitana Milanese S.p.A., Brescia Mobilità S.p.A., Brescia Trasporti S.p.A. and Centrale del
Latte di Brescia S.p.A., providing them with electricity, gas, heat, sewage management and water
purification services at market rates adapted to the specific supply conditions and performing the
services requested by these companies. It is stressed that these companies are not considered
related parties in the summary schedules prepared in accordance with Consob Resolution no.
17221 of March 12, 2010.

Dealings between the Municipalities of Milan and Brescia and the A2A Group relating to public
lighting and traffic light services, the management and distribution of electricity, gas, heat and
                                        Half-yearly financial report at June 30, 2011

                                        Note on related party transactions




     sewerage and water purification services are governed by suitable agreements and specific
     contracts.

     All transactions with entities controlled by the Municipalities of Milan and Brescia which involve
     supplying electricity are carried out at normal market conditions.


     Dealings with subsidiaries and associates

     The parent A2A S.p.A. provides centralized treasury services for the majority of its
     subsidiaries. Intragroup transactions are regulated through current accounts between the
     parent and the subsidiaries; balances on these accounts bear interest at a 3-month Euribor
     rate increased for the creditor positions (of A2A S.p.A.) or reduced for the debtor positions by
     a margin in line with that applied by the financial market.

     A2A S.p.A. and its subsidiaries continued filing their VAT return on a group basis in 2011.

     For IRES purposes, A2A S.p.A. files for tax on a consolidated basis together with its main
94   subsidiaries in accordance with articles 117-129 of Presidential Decree no. 917/86. To this end a
     contract has been stipulated with each of the subsidiaries involved in the Group tax return to
     regulate the tax benefits and charges transferred, with specific reference to current items.
     These contracts also govern the transfer of any unused tax losses, as provided by current
     legislation.

     A2A S.p.A has signed a tax transparency agreement with an associate having effect from 2010.

     The parent provides its subsidiaries and associates with administrative, tax, legal, managerial
     and technical services so as to optimize the resources available within the company and make
     the best use of its know-how in the most economical way. These services are governed by
     specific supply contracts that are stipulated annually. A2A S.p.A. also makes available office
     space and operating areas at its own premises to subsidiaries and associates, as well as
     providing services relating to their use. These are provided at market conditions.

     The parent provides a power generation service to A2A Trading S.r.l. for a monthly fee that
     depends on the actual availability of the thermoelectric and hydroelectric plants.

     A2A S.p.A. purchases an insignificant quantity of rights needed for hydroelectric production
     from the associate Società Servizi Valdisotto S.p.A. under a contractual agreement. IT services
     are provided by the subsidiariy Selene S.p.A. and by the associate e-Utile S.p.A.

     Telecommunications services are provided by the subsidiary Selene S.p.A. and computer
     services by the associate e-Utile S.p.A..
                                                Half-yearly financial report at June 30, 2011

                                                Note on related party transactions




As regards the consolidation using the equity method of the Transalpina di Energia Group,
which is jointly controlled through the subsidiary Delmi S.p.A., the parent sells electricity to
companies of the Transalpina di Energia Group and some subsidiaries have dealings of a
commercial nature with certain companies of the Transalpina di Energia Group.

As a result of the requirements of the Consob Communication issued on September 24, 2010
containing provisions regarding related party transactions pursuant to Consob Resolution no.
17221 of March 12, 2010 and subsequent amendments, on receiving the favorable opinion of
the Internal Control Committee, the Management Board of A2A S.p.A. approved the
Procedure for Governing Related Party Transactions on November 11, 2010 and this became
effective on January 1, 2011. The aim of this procedure is to assure the transparency and the
propriety in substance and procedure of transactions entered into by A2A S.p.A. directly or
through its subsidiaries with related parties identified in accordance with international
accounting standard IAS 24 Revised.

Summary schedules of balances and transaction with related parties pursuant to Consob
Resolution no. 17221 of March 12, 2010 are set out below:
                                                                                                                                      95
Balance sheet                        Total                               Of which regarding related parties
                                06 30 2011
                                             Asso-    Related   Muni-    Subsids.      Muni- Subsids. Indivi-       Total      % of
Millions of euro                             ciates   compa- cipality    of Muni- cipality of Muni- duals as      related   balance
                                                         nies of Milan    cipality of Brescia cipality related    parties     sheet
                                                                         of Milan            of Brescia parties                item

TOTAL ASSETS OF WHICH:            11,940     2,419        34      108          9          21                       2,591     21.7%
Non-current assets                  9,342    2.401                                         5                       2,406     25.8%
Investments                         2,401    2,401                                                                 2,401    100.0%
Other non-current
financial assets                       69                                                  5                           5      7.2%
Current assets                      2,559       18        34      108           9         16                         185      7.2%
Trade receivables                    1,717       8        34      108           9         16                         175     10.2%
Current financial assets              80        10                                                                    10      12.5%
TOTAL LIABILITIES
OF WHICH:                           7,278       38        41        11          1          7                  1      99       1.4%
Current liabilities                 2,140       38        41        11          1          7                  1       99      4.6%
Trade payables                       1,221      20        41        11          1          7                          80      6.6%
Other current liabilities            590        16                                                            1       17      2.9%
Current financial liabilities         318        2                                                                     2      0.6%
                                                      Half-yearly financial report at June 30, 2011

                                                      Note on related party transactions




     Statement of comprehensive            Total                               Of which regarding related parties
     income                           06 30 2011
                                                   Asso-    Related   Muni-    Subsids.      Muni- Subsids. Indivi-       Total      % of
     Millions of euro                              ciates   compa- cipality    of Muni- cipality of Muni- duals as      related   balance
                                                               nies of Milan    cipality of Brescia cipality related    parties     sheet
                                                                               of Milan            of Brescia parties                item

     REVENUES FROM SALES OF
     GOODS AND SERVICES                  3,050         2       171      166           3         23           1            366      12.0%
     Revenues from sales of goods
     and services                         2,996        1       171       166          3         23           1             365      12.2%
     Other operating income                  54        1                                                                     1       1.9%
     OPERATING EXPENSES                  2,286        13       226                    1                     3             243      10.6%
     Cost of raw materials
     and services                          2.133      13       160                                                         173       8.1%
     Other operating expenses               153                 66                    1                     3               70     45.8%
     LABOUR COSTS                          287                                                                      3        3      1.0%
     FINANCIAL BALANCE                     (80)      (13)                                        3                         (10)    12.5%
     Financial income                        18                                                  3                           3      16.7%
     Financial expense                      (85)

96   Portion of income and charges
     when shareholdings are carried
     at equity                              (13)     (13)                                                                  (13)   100.0%



     Section 0.2 of this report contains the complete schedules required by Consob Resolution no.
     17221 of March 12, 2010.
                                Half-yearly financial report at June 30, 2011




                              Consob communication no.
                              DEM/6064293 of July 28, 2006




41) Consob communication no. DEM/6064293 of July 28, 2006

There were no non-recurring transactions during the period.




                                                                                97
                                       Half-yearly financial report at June 30, 2011




                                     Guarantees and commitments
                                     with third parties




     Millions of euro                                                                  06 30 2011   12 31 2010

     Guarantee deposits received                                                             407          402
     Guarantees given                                                                       1,226        1,214




     Guarantee deposits received
98
     Guarantee deposits received from subcontractors and performance bonds received amount
     in total to 407 million euro (402 million euro at December 31, 2010).



     Guarantees given and commitments with third parties

     These amount to 1,226 million euro (1,214 million euro at December 31, 2010) and relate to
     performance bonds and deposits pledged as guarantees of obligations assumed with third
     parties.



     Collateral pledged

     The convertible bond issued by Metroweb S.p.A. and subscribed by A2A S.p.A., having a
     nominal value of 24 million euro, has been pledged to the banks financing Metroweb S.p.A..

     The shares of Edipower S.p.A. owned by A2A S.p.A., having a carrying amount of 398 million
     euro, have been pledged to a syndicate of banks for the loans they have granted.
                                  Half-yearly financial report at June 30, 2011

                                  Guarantees and commitments with third parties




Other commitments and risks

As is normal for transactions of such size and duration, take or pay clauses are included in the
natural gas import agreements of Plurigas S.p.A.. These are clauses that require the purchaser
to pay for quantities not withdrawn in comparison with a pre-determined threshold if this is
for reasons not foreseen in the agreement, except for the possibility over the contract term to
recover the volume already partially paid for but not withdrawn under certain conditions.




Group companies hold third party assets under concession having a value of 147 million euro.




                                                                                                   99
                                           Half-yearly financial report at June 30, 2011




                                           Other information




      1) Subsequent events

      Reference should be made to the specific paragraph of this half-year financial report for a
      discussion of subsequent events.



      2) Information relating to treasury shares
100
      At June 30, 2011 A2A S.p.A. held 26,917,609 treasury shares, equal to 0.859% of its share capital
      consisting of 3,132,905,277 shares, unchanged compared to the end of the previous year. At
      June 30, 2011 no treasury shares were held through subsidiaries, finance companies or
      nominees.



      3) Information relating to non-current assets held for sale and
      discontinued operations (IFRS 5)

      The items “Non-current assets held for sale” and “Liabilities directly associated with non-
      current assets held for sale” consist of balances arising from the Ecodeco Group, and in
      particular assets belonging to certain businesses held for sale, together with the assets and
      the liabilities of BAS-SII S.p.A..

      For further details reference should be made to note 12 to the statement of financial position.
                                          Half-yearly financial report at June 30, 2011

                                          Other information




The main information regarding the assets and liabilities of the above investments and
businesses is set out in the following table.



Figures at june 30, 2011

Assets and liabilities of the companies                                            BAS-SII     Ecodeco   Total
held for sale                                                                       S.p.A.       Group
Millions of euro


Non-current assets                                                                        23         –     23
Current assets                                                                            14         2      16
Total assets                                                                              37         2     39
Non-current liabilities                                                                    3         –       3
Current liabilities                                                                       13         2      15
Total liabilities                                                                         16         2     18


BAS-SII S.p.A. had an effect of 0.8 million euro on profit or loss.
                                                                                                                 101


4) Update of the main pending legal and tax disputes

EC infringement procedure

On June 5, 2002, the European Commission published Decision no. 2003/193/EC declaring
that the three-year exemption from income tax (under article 3.70 of Law no. 549/95 and
article 66.14 of Decree Law no. 331/1993, converted into Law no. 427/93) and the advantages
deriving from loans granted pursuant to article 9-bis of Decree no. 318/1986, converted into
Law no.488/96, to public majority-owned companies formed under Law no. 142/90 were
incompatible with EC law, since they were deemed to represent State aid which is prohibited
under article 87.1 of the EC Treaty. The Commission did not however consider the tax
exemption on business contributions under article 3.69 of Law no. 549/95 to be State aid.

This decision was notified on June 7, 2002 to the Italian State, which appealed against it to the
Court of Justice. Subsequently, by order of the Court of Justice dated June 8, 2004, the case
was transferred to the Court of First Instance with reference number T-222/04, following the
expansion of that court's functions by the Treaty of Nice.

In July 2002, the Commission communicated the decision to the companies concerned, which
appealed against this to the Court of First Instance of the European Community on September
30, 2002, pursuant to article 230.4 of the EC Treaty. Further appeals against this decision have
also been filed by other public sector commercial companies and by Confservizi.
                                          Half-yearly financial report at June 30, 2011

                                          Other information




      The Italian State did not ask the Court of Justice to suspend execution of the Commission's June
      2002 decision so as not to prejudice the resolution of merit in the event of a refusal. In fact, it is
      rare for the Court to concede a stay of execution, above all in matters regarding State aid.

      The decision is therefore fully effective and binding on the Italian State, which is obliged to
      recover the aid granted.

      On the invitation of the Commission and while continuing to pursue action to overturn the
      decision, the Italian State has therefore activated a recovery procedure. This process has
      involved the preparation of a survey questionnaire to identify the public sector commercial
      companies that have benefited from the above tax exemption and from loans granted by
      Cassa Depositi e Prestiti in the years under consideration.

      The Italian State's recovery initiatives continued with the predisposition of an amendment to
      the EC law, which was approved by the Senate on April 13, 2005 (article 27, Law no. 62 of April
      18, 2005). The measure envisages detailed recovery procedures based on ordinary tax rules to
      adjust any recovery to the effective existence of recoverable aid (considering the specific
102   circumstances of each position and bearing in mind any outstanding disputes with the tax
      authorities). In particular, this measure envisaged certain declarations on the part of the
      taxpayer and presumed certain official acts specifying the application methods and guidelines
      for a correct evaluation of cases of non-application. The guidelines were then amended to
      make them more precise by article 1.133 of Law no. 266 of March 23, 2006 (Finance Law 2006).

      Subsequently, following Italy's condemnation by the Court of Justice for the delay in
      recovering the "aid" (Sentence June 1, 2006, case C – 207/05), Decree Law no. 10 of February
      15, 2007 (converted into Law no. 46 of April 6, 2007) made further amendments to the existing
      recovery procedures.

      In this connection, new instructions were issued for the implementation of European
      Commission Decision no. 2003/193/EC with a view to the recovery of aid equivalent to the
      unpaid taxes and related interest resulting from application of the tax exemption regime
      envisaged in article 3.70 of Law no. 549 of December 28, 1995 and article 66.14 of Decree Law
      no. 331 of August 30, 1993, converted with amendments into Law no. 427 of October 29, 1993.

      In the first half of 2007 the Tax Revenue Office sent notices to AEM S.p.A. and ASM S.p.A. -
      pursuant to Decree no. 10/2007 - in the form of a "communication-injunction" concerning the
      alleged State aid enjoyed during the moratorium period.

      On April 30, 2009, the Tax Revenue Office notified five further assessments in connection with
      the position of the former AEM S.p.A. and the former ASM S.p.A. pursuant to article 27, Decree
      Law no. 185 of November 29, 2008, as converted with amendments into Law no. 2 of January
      28, 2009, for approximately 64 million euro including interest.
                                  Half-yearly financial report at June 30, 2011

                                  Other information




Decree no. 135 of September 25, 2009 (article 19) introduced new instructions regarding the
recovery of the aid mentioned, essentially involving (i) the possible notification of further
repayment assessments, (ii) the irrelevance for recovery purposes of any realized capital
gains. As a result, on October 2, 2009, the company received six further assessments from the
competent offices for the recovery of amounts additional to those already claimed totaling
approximately 220 million euro.

On this basis, the Tax Revenue Office activated the recovery procedure by means of a fiscal
type assessment without offering any possibility to defer or suspend payment.

On the merits, the guidelines for recovery can be found in Day Order no. 901972/071 of the
Chamber of Deputies, which was approved at the session held on January 14, 2009. In the
guidelines, it is explained that the recovery "cannot take the form of a simple tax assessment,
without any specific criteria; instead, it has to determine if and how much aid has to be
recovered, clarifying in particular that it is recoverable only if actually enjoyed and verifying
case by case whether the companies have actually made use of illegitimate State aid that has
altered the principles of free competition and a company’s freedom of establishment". In line
                                                                                                    103
with this concept, "those resources that have already been involved in forms of
reimbursement" have to be considered "excluded from the recovery measure".

In exercising the powers granted, the Tax Revenue Office should therefore have identified, in
the specific circumstances, the actual enjoyment of illegitimate State aid that has not already
been reimbursed.

Given that the lawsuits involving the merging company AEM S.p.A. (now A2A S.p.A.) and the
merged company ASM S.p.A. are the subject of separate proceedings at the Court of First
Instance of the European Community and have different positioning in relation to the
“communication-injunction" and the assessments, the two situations are explained separately
below for the sake of clarity.


Former AEM S.p.A. (now A2A S.p.A.)

In the action promoted by AEM S.p.A., on January 6, 2003 the Commission filed an objection
claiming that it could not accept the appeal. AEM promptly replied before the legal deadline.
The Court arranged the meeting concerning the objection claiming that it could not accept
the appeal on its merit by order dated August 5, 2005. On March 15, 2006, AEM filed a brief in
relation to the judgment pending before the Court of First Instance. On February 28, 2008, the
Court of First Instance communicated to AEM its intention to combine (only for the oral
phase) the various lawsuits being brought by AEM S.p.A, Confservizi, other public sector
commercial companies and the Italian State, asking for the opinions of the parties concerned.
                                         Half-yearly financial report at June 30, 2011

                                         Other information




      On March 6, 2008, AEM S.p.A. communicated to the Court that it would welcome a move to
      combine the various lawsuits and, apparently, the other appellants also responded in the same
      way. The final hearing was held on April 16, 2008, and by a ruling dated June 11, 2009 the Court
      of First Instance declared that the appeal presented by AEM S.p.A. was admissible but rejected
      it on merit - as for those presented by the other appellants - taking the view that the measure
      in question constituted State aid that was prohibited under article 87.1 of the EC Treaty,
      therefore confirming the decision of the Commission. AEM S.p.A. impugned this sentence on
      a timely basis before the European Court of Justice. On July 14, 2011 an oral hearing was held
      before the Court of Justice on the appeal lodged by A2A S.p.A. and the other former municipal
      utilities; the Court has reserved the right to decide.

      With reference to article 27 of Law no. 62 of April 18, 2005, AEM S.p.A. has carefully complied
      with the obligations placed on the former municipal utilities that are contained in the above-
      mentioned recovery regulations and related enabling instructions.

      For completeness, it should be noted that on October 27, 2005 the Tax Revenue Office visited
      the head office of AEM S.p.A. to acquire the accounting documentation necessary to check the
104
      correctness of the figures declared in the tax returns filed in accordance with art. 27 of Law no.
      62. The visit was merely to ascertain and finalize the amount of any taxes that were to be
      reimbursed. AEM S.p.A. provided the inspectors with an ample statement as to how the tax
      returns had been compiled. Even if all possible forms of legal protection failed, it was deemed
      reasonable to assume that the Italian Government's recovery actions would have involved
      revoking the benefits granted in different ways, depending on the public service sectors
      concerned. In particular, it was assumed that such action would have taken account of the
      actual degree of competition during the effective period of the measures being contested
      and, therefore, of the extent to which it may have been distorted.

      In this regard, the appeal made by AEM S.p.A. explained that, during the 1996-1999 period
      examined by the Commission, the company operated in sectors such as electricity and gas
      that were not opened up to competition and in which AEM S.p.A. did not take part in any
      tenders for the provision of the related services (an observation that was subsequently
      repeated to the Court of Justice).

      In the light of the uncertainty regarding the outcome of the appeals and the ways in which the
      Commission's Decisions would be applied, the company believed it possible, but not probable,
      that it risks having to return all of the aid received if the result of the entire appeal procedure
      turns out to be negative: consequently, no provisions were made for this matter in any of its
      financial statements up to December 31, 2006. This decision took account of objective
      uncertainties as to the possibility of making a sufficiently reasonable estimate of the charges
      that would be borne by AEM S.p.A. as a consequence of the above decision.
                                  Half-yearly financial report at June 30, 2011

                                  Other information




Lastly, the majority of the profits distributed by AEM S.p.A. during the tax moratorium period
were paid to the Municipality of Milan, which is part of the Public Administration. AEM S.p.A.
did not receive any assisted loans from Cassa Depositi e Prestiti under the laws mentioned
during the period considered by the Commission.

On March 30, 2007, the Milan Tax Revenue Office notified four assessments, or
"communication-injunctions" under Decree Law no. 10/2007 – relating to the alleged aid used
during the periods 1996, 1997, 1998 and 1999.

The amounts requested in these assessments, totaling 4.8 million euro inclusive of interest,
were based on the company's declaration made in July 2005, except for the disallowance of
the effect of applying the so-called "tombstone" tax amnesty under Law no. 289/2002.

Pursuant to Decree Law no. 10/2007 the amounts established but not paid over are subject to
forcible collection via inclusion on the tax roll; the rules do not permit any extended payment
terms or suspensions, not even in the event of appeal.

Having taken note of these communications, considered Decree Law no. 10/2007 and related
                                                                                                    105
conversion law and checked that the amounts requested agree with those originally declared,
the company decided on April 27, 2007 to pay the amounts requested.

As a result of the above, the amounts paid were included in the 2007 accounts under
“Financial expenses” and “Other non-operating expenses”.

In any case the arguments presented by the company before the European Union jurisdiction
against the Decision of the EU Commission of June 5, 2002 remain valid; the same arguments
have been represented before the Court of Justice. If the actions taken before the European
Union jurisdiction are successful, all the amounts paid by the company ought to be reimbursed
since the concept of aid recovery would not be valid. The company prudently decided to appeal
against these communication-injunctions to the competent tax jurisdiction. The Provincial Tax
Commission of Milan - Section 21 rejected these appeals in ruling no. 8 of January 25, 2008 and
the sentence that establishes the amount of the recoverable aid is now definitive.

On April 30, 2009, the Tax Authorities notified three assessments, issued under article 24 of
Decree no. 185/2008, for the recovery of alleged State aid that conflicts with EC legislation and
the earlier decision of the European Commission. Appeals against these assessments have
been filed with the Milan Provincial Tax Commissioners where the case is still pending. An oral
hearing will be held on September 19, 2011.

Based on current law, the amount requested, namely a total of 23 million euro, had to be paid
within thirty days of notification of the provision and accordingly made the payment on May 8,
2009.
                                         Half-yearly financial report at June 30, 2011

                                         Other information




      On June 11, 2009, the European Court of First Instance issued its sentence on the lawsuit no.
      T-301/02 brought by the former AEM, rejecting its appeal. An appeal against this ruling has
      been filed with the European Court of Justice.

      As mentioned, on October 2, 2009 the Tax Revenue Office notified four assessments issued
      under article 19 of Decree no. 135/2009 for the further recovery of alleged State aid to the
      former AEM S.p.A. that has been stated to conflict with EC legislation.

      Having paid a total of 184 million euro on October 22, 2009 - to avoid the charges involved in
      being entered on the tax rolls and the accrual of further interest - the company appealed
      against these notices before the Milan Provincial Tax Commission which - after meeting in
      connection with those relating to ASM S.p.A. - discussed the merit of the case on January 19,
      2010 and upheld the appeal with sentence no. 137/01/10.

      Following this sentence, A2A S.p.A. requested the Tax Revenue Office to return the sums paid
      as a refund of the alleged "State Aid" but has yet to receive a reply.

      On April 9, 2010 an appeal was lodged against this sentence by the Regional Department of the
106
      Tax Revenue Office of Lombardy and by the Tax Revenue Office - Milan 1 Office.
                                   Half-yearly financial report at June 30, 2011

                                   Other information




Former ASM S.p.A. (merged into A2A S.p.A. from January 2008)

As regards ASM's S.p.A.’s position, the company has also impugned the decision before the
Court of First Instance in Luxembourg with an appeal filed on its own account on January 2,
2003 and "ad adiuvandum" in support of AEM S.p.A. and AMGA S.p.A..

ASM moreover considered that the European Commission's decision no. 2003/293/EC of July
5, 2002 was not applicable because of the particular nature of its situation: during the period
under consideration the services provided by ASM S.p.A. in its areas of operations were not
open to the market or free competition.

On January 6, 2003 the Commission filed an objection claiming that it could not accept the
appeal. ASM S.p.A. promptly replied before the legal deadline. The Court set the meeting
concerning the objection claiming that it could not accept the appeal on the merit by order
dated August 5, 2005.

On February 28, 2008 the Court of First Instance communicated to ASM S.p.A its intention to
combine (only for the oral phase) the various lawsuits being brought by ASM S.p.A.,
                                                                                                    107
Confservizi, other majority-held public sector commercial companies and the Italian State,
asking for the opinions of the parties concerned. ASM S.p.A. communicated to the Court that
it would welcome such a move to combine the various lawsuits.

The final hearing was held on April 16, 2008, and by a ruling dated June 11, 2009 the Court of
First Instance declared that the appeal presented by AEM S.p.A. was admissible, but rejected it
on merit - as for those presented by the other appellants - taking the view that the measure in
question constituted State aid that was prohibited under art. 87.1 of the EC Treaty, therefore
confirming the decision made by the Commission. This sentence was impugned before the
European Court of Justice and on July 14, 2011 an oral discussion was held before that court;
the court has reserved the right to decide.

The companies of the ASM Group involved in the recovery procedure (ASM S.p.A., also on
behalf of the merged BAS S.p.A. and Azienda Servizi Valtrompia S.p.A), in accordance with the
request contained in article 27 of Law no. 62 of April 18, 2005, sent the declaration required by
article 27 of said law for each of the periods affected by the tax moratorium.

BAS Bergamo, which was merged with effect from May 18, 2005, and Azienda Servizi
Valtrompia S.p.A had negative taxable income during the years in which the moratorium
applied and so it is probable that no tax will be due.

In April 2007 ASM S.p.A. received notification of the communication-injunction under article
1 of Legislative Decree no. 10/2007 from the Brescia Tax Revenue Office for the periods 1998
and 1999.
                                         Half-yearly financial report at June 30, 2011

                                         Other information




      Based on the opinion of its tax advisors and experts in EC law, ASM S.p.A. pointed out to the
      Brescia Tax Revenue Office that the communication-injunction that it had received was
      contrary to the provisions of this decree both in content and in amount.

      At the same time ASM S.p.A. appealed to the Brescia Court for this injunction to be declared
      null and void; it also asked for a court order suspending payment.

      On May 23 the Tax Revenue Office acknowledged that ASM S.p.A.'s arguments were correct
      and cancelled the communication-injunction to pay. In any case the arguments presented by
      the company before European jurisdiction against the Decision of the Commission of June 5,
      2002 remain valid; the same arguments are being re-proposed before the Court of Justice.

      In the light of the uncertainty regarding the outcome of the appeals and the ways in which the
      Commission's Decisions would be applied, the company believes it possible, but not probable,
      that it risks having to return all of the aid received if the result of the entire appeal procedure
      turns out to be negative: consequently no provision has been made for this matter in the
      financial statements.
108
      While waiting for the question to be decided, the shareholders' meeting of ASM S.p.A. has
      resolved not to consider distributable an amount of 13 million euro representing a portion of
      the available reserves formed during the period of the "tax moratorium".

      On April 30, 2009 the Tax Revenue Office notified two assessments, issued under article 24 of
      Decree Law no.185/2008, for the recovery of alleged State aid to the former ASM S.p.A. stated
      to be in conflict with EC regulations. Appeals against these assessments have been filed with
      the Milan Provincial Tax Commissioners. An oral hearing will be held on September 19, 2011.

      Under current regulations the amount requested, 41.6 million euro, had to be paid within
      thirty days of the provision being notified and so A2A S.p.A. paid on May 8, 2009.

      As mentioned on October 2, 2009 the Tax Authorities notified two assessments, issued under
      art. 19 of Decree Law no. 135/2009, for the further recovery of alleged State aid to the former
      ASM S.p.A. that is stated to be in conflict with EC regulations.

      Having paid a total of 35.8 million euro on October 22, 2009 - to avoid the charges involved
      in being entered on the tax rolls and the accrual of further interest - the company appealed
      against these notices before the Milan Provincial Tax Commission, which - after meeting
      with ASM S.p.A. - discussed the merit of the case on January 19, 2010 and upheld the appeals
      with sentence no. 137/01/10. Following this sentence A2A S.p.A. requested the Tax Revenue
      Office to return the sums paid as a refund of the alleged "State Aid" but has yet to receive a
      reply.
                                     Half-yearly financial report at June 30, 2011

                                     Other information




On April 9, 2010 an appeal was lodged against this sentence by the Regional Department of the
Tax Revenue Office of Lombardy and by the Tax Revenue Office - Milan 1 Office.

                                                    ***


Ruling on the appeal proposed by the Tax Authority by way of sentence 137/01/10 concerning
the positions of the former AEM S.p.A. and the former ASM S.p.A.

Following the proposal received, A2A S.p.A. appealed and filed counter-arguments and
subsequent pleading.

The Tax Revenue Office’s appeal was discussed on July 5, 2010 before the Regional Tax
Tribunal, which upheld it.

The company filed an appeal to the supreme court on a timely basis, specifying the
inconsistencies in the appeal court’s ruling; the date of this hearing has not been set yet.


Consul Latina S.r.l./BAS S.p.A. (now A2A S.p.A.)
                                                                                                           109
The purchase of the investment in HISA by BAS S.p.A. was made through a local consultant,
Consul Latina S.r.l..

Given that the wording of the contract was not totally clear and the fact that BAS S.p.A. on its
own did not buy 100% of HISA, BAS S.p.A. did not pay the fee due to Consul Latina S.r.l. which
in 1998 initiated legal action for payment.

The lawsuit is still in underway with various procedural objections, some recent, such as the
fact that all court proceedings after May 18, 2005 were declared null and void for lack of right
of attorney, a problem that has subsequently been resolved.

In the appeal ref. EXP 82218, Sentence no. 3697/3000 dated May 9, 2008, Consul Latina S.r.l.
requested that the proceedings be declared null and void given that the lawyers had no
powers and claimed damages due to a delay in the filing of documents by BAS S.p.A. in 2008;
the court rejected all these claims, recognizing that ASM took over from BAS.

The judge also rejected the appeal ref. EXP 90779, Sentence 5317534 dated May 20, 2005, in
which Consul Latina S.r.l. claimed that the lawyer Mr. De Florio had no powers of representation
at the hearing held in August 2005 due to the merger of BAS S.p.A. into ASM S.p.A..

On November 10, 2008, Consul Latina S.r.l. attempted to file a new claim against BAS S.p.A.,
EXP 095148, requesting information about Enerfin S.r.l. in liquidation, designed to find out if
ASM S.p.A. was still a shareholder and, if it had sold the investment, the sales price. It appears
that the way in which Consul Latina S.r.l. notified this request was considered inadequate by the Court.
                                         Half-yearly financial report at June 30, 2011

                                         Other information




      On the basis of information received from the lawyer, Mr De Florio, according to Consul Latina
      S.r.l. the amount payable on May 10, 2007 was $1,872,000, calculated as capital of $720,000
      plus interest of 1% from April 1999.

      As of that date a possible offer by ASM S.p.A. to settle the dispute for $400,000 was not
      considered acceptable.

      In a more recent communication (November 18, 2008), the lawyer recalled that the
      coefficient to be applied to the value of the principal to understand the sum due by BAS S.p.A.
      in the event of losing the lawsuit was 27.22%. He also confirmed that, over the last two years,
      the interest rate applicable to commercial settlements had remained unaltered at 1.55%.

      In May 2009 the lawyers filed new documents but without outcome.

      On November 16, 2009 the judge condemned A2A to pay a fine of 300 pesos per day from May
      6, 2009 for not having provided the information requested about the sale on that date; the
      lawyers appealed immediately against this sentence and for this reason no fine has yet been
      paid.
110
      In the lawyers' opinion the sentence will be quashed; if this does not happen, the fine accruing
      up to February 2010, the date of the last deed deposited as part of the appeal, amounts to
      $22,265.

      In February 2010, A2A S.p.A. renewed its mandate with the Garrido law firm to identify a
      solution for settling the original lawsuit brought by Consult Latina and to take the necessary
      steps to revoke the pledge filed by Consul Latina S.r.l. on HISA's subsidiaries.

      The international rogatory notification was sent on July 30, 2010 with the request that A2A
      S.p.A. be formally questioned about the irreogatories formulated by the Buenos Aires Court;
      the hearing was held on September 17, 2010. The evidence will be sent the Buenos Aires appeal
      court for its judgment.

      The lawyers representing A2A S.p.A. believe that the testimony provided by A2A S.p.A. is
      positive but are unable to estimate a date for the issuing of a sentence nor are they able to
      forecast the outcome of the litigation.

      The company is represented by the legal firm Garrido of Buenos Aires.
                                  Half-yearly financial report at June 30, 2011

                                  Other information




ENEL/AEM Elettricità S.p.A. (now A2A Reti Elettriche S.p.A., a subsidiary of A2A
S.p.A.)

By means of a writ served in 2001, ENEL requested annulment of the decision made by the
Board of Arbitrators appointed in accordance with Decree no. 79 of March 16, 1999 (the so-
called "Bersani Decree"), which set at 820 billion lire the price to be paid to ENEL for the sale
to AEM Elettricità S.p.A. (now A2A Reti Elettriche S.p.A.) of the power distribution business in
the municipalities of Milan and Rozzano. AEM Elettricità S.p.A. asked for ENEL’s request to be
rejected, as the arbitrators' decision could not be considered manifestly unfair or erroneous
in accordance with article 1349 of the Italian Civil Code. AEM Elettricità S.p.A. in turn filed a
counter-claim asking for ENEL to be sentenced to pay compensation for the damages caused
by the delay with which ENEL implemented the sale of the business, as imposed by the law.

In AEM Elettricità S.p.A’s opinion, the judge would only be able to change the arbitrators'
decision if it appeared to be "manifestly unfair or erroneous", as also confirmed by an expert
witness's report which the judge has ordered.

The Court-appointed expert witness carried out a detailed review of the situation, making           111
numerous adjustments, and in the end established a figure of 66 million euro as the upper
value of the business, net of the damages which the expert recommended should be awarded
to AEM Elettricità S.p.A..

In a sentence filed on June 9, 2008, the Milan Court set a new price for the business based on
the indications of the expert witness (990.8 billion lire) and rejected the claim for damages
made by AEM Elettricità S.p.A. According to the Court, the difference between the expert
witness's valuation and that carried out by the Board of Experts was such as to make the latter
manifestly unfair. In other words, the Judge believed that he could fully trust the conclusions
reached by the expert witness appointed by him, even though some of the choices made
appeared to be the result of exercising in a different way the technical discretion that is
inherent in valuations, leading to a very different result from that reached by the Board of
Experts. The Judge also based his decision on certain affirmations made by the expert witness
regarding the "inappropriate nature" of certain parameters used by the Board of Experts.

Considering therefore that the price established by the Board of Experts was unfair, the Judge
also rejected the claim made by AEM Elettricità S.p.A. for damages caused by the delay in
transferring the business. In fact, according to the Judge, ENEL was justified in not
transferring the business as the price was unfair.

There are various objections that can be made to this sentence.
                                          Half-yearly financial report at June 30, 2011

                                          Other information




      To start with, the assumption is not accepted that the price established by the Board of
      Experts was affected by errors, or that it was unfair. The Board consisted of illustrious
      professors with years of acknowledged experience in company valuations, so the fact that the
      Judge simply “replaced” their calculation with the one performed by the expert witness is
      totally unsatisfactory. From another standpoint, there appears to be no justification for
      rejecting the request for damages because of the delayed transfer of the business, given that
      ENEL could quite easily have handed it over - as indeed it did - while at the same time asking for
      a fairness review of the price set by the Board of Experts. A2A S.p.A. has appealed against the
      Court sentence with a writ served on October 23, 2008; the hearing for the statement of the
      conclusions is expected on April 5, 2011. Subsequently, with a writ served on May 28, 2009,
      Enel has sued A2A S.p.A, based on this sentence by the Milan Court (which was not a sentence
      of condemnation), asking that A2A should be condemned to pay Euro 88,244,342, as well as
      interest at the legal rate and monetary revaluation from October 31, 2002. At the first hearing
      of this case on November 24, 2009, the plaintiff waived the injunction and the parties are now
      waiting for the above appeal to go ahead.

112   An agreement was negotiated with the counterpart during 2009 allowing any costs to be paid
      in installments to eliminate the risk that the Company may have to pay out a sizeable amount
      all at the same time.

      When preparing the 2009 annual report, it was decided in the interests of prudence to
      maintain the book value of 88 million euro recognized for goodwill already disclosed as a
      balance sheet asset for the business transferred, booking a contra-entry to a provision for
      risks and charges (under liabilities) of the same amount and recognizing ancillary charges of
      24 million euro in the same way.

      As the result of the need to reorganize the rolls, the case has been rescheduled and the hearing
      for the statement of the conclusions, originally planned for April 5, 2011, has been deferred to
      September 18, 2012.


      Investigation into gas meters

      There is a nationwide investigation pending at the Public Prosecutor's Office in Brescia
      concerning the way that gas consumption is measured. This investigation involves a number
      of A2A Group companies and certain of their directors and managers. The alleged offence is
      fraud as well as other matters. The investigation was initiated by the Milan Judicial Authority
      but then transferred to Brescia for a question of territorial jurisdiction.

      With a ruling issued on January 12, 2011 by the Public Prosecutor's Office, on February 7, 2011
      notification was issued on the conclusion of the preliminary investigation at A2A Energia S.p.A.
      and A2A Reti Gas S.p.A., whilst A2A S.p.A. is still awaiting notification.
                                   Half-yearly financial report at June 30, 2011

                                   Other information




All physical persons involved in the investigation received a copy of the aforementioned
notification.


A2A S.p.A./ Mr. Buzzi

Mr. Buzzi sued AEM S.p.A. (now A2A S.p.A.) before the Milan Court by a writ served on May 24,
2001.

Mr. Buzzi challenged before the Milan Court the resolutions by which the shareholders'
meeting approved the financial statements and authorized the sale by AEM S.p.A. to e.Biscom
S.p.A. of the 30.8% stake then held by AEM S.p.A. in Fastweb S.p.A. with the simultaneous
purchase by AEM S.p.A. of the interest of 33% held by e.Biscom S.p.A. in Metroweb S.p.A. and
the subscription of a bond.

AEM S.p.A. appeared at the hearing on November 19, 2003, filing a defense statement.

The parties appeared at the hearing on April 20, 2004, whereas the hearing at which the case
was discussed was held on November 9, 2004. The parties' legal counsel exchanged
                                                                                                   113
statements in accordance with articles 183.5 and 184 of the Code of Civil Procedure. Mr. Buzzi's
counsel asked the Judge to admit evidence from witnesses, to request an expert witness's
report and to order the acquisition "of the appraisal carried out at the time by Morgan Stanley
on the valuation of Fastweb S.p.A. and Metroweb for the purposes of the share exchange
between e.Biscom S.p.A. and AEM S.p.A. and collateral transactions and Metroweb S.p.A.'s
financial statements at December 31, 2002 and December 31, 2003”. AEM S.p.A.'s defense
counsel opposed this and at the hearing of February 28, 2005 the Investigating Judge
dismissed Mr. Buzzi's requests. Then, considering that the case was ready for a final decision,
he set April 4, 2006 as the date for the hearing at which the conclusions would be heard.

With a sentence filed on June 7, 2007, the Judge of the Milan Court rejected the plaintiff's
requests, sentencing him to pay the legal expenses.

Mr. Buzzi appealed against this decision by the Court with a writ served on July 10, 2008. The
first hearing of the appeal was scheduled for December 9, 2008; the hearing for the statement
of the conclusions has been postponed to April 5, 2011.

Despite being unable to predict the outcome of the appeal, there does not appear to be a
considerable risk that the judgment of the Court of First Instance will be reformulated.

The decision of the Court will most likely be issued in late 2011 or early 2012.
                                         Half-yearly financial report at June 30, 2011

                                         Other information




      Arbitration initiated by Ecovolt for violation of the Quotaholders’ Agreement for the
      Investment in Ostros Energia S.r.l. (now in liquidation)

      On May 25, 2009 the minority quotaholders of Ostros Energia S.r.l. (now in liquidation)
      initiated arbitration proceedings under a settlement clause contained in the Investment
      Agreement signed with ASM S.p.A. on January 30, 2007, with a view to establishing a breach of
      the agreement by A2A S.p.A. for having failed to finance the development of Ostros Energia
      S.r.l. (now in liquidation) and not complying with the provisions of article 2.5 of the
      Agreement.

      These matters were first examined by the parties towards the end of 2008 and legal opinions
      were obtained.

      The Board of Arbitration is made up of Prof. N. Irti, Prof. G. Sbisà and Prof. M. Cera. During the
      first meeting on March 4, 2010, convened to make the obligatory attempt at reconciliation, the
      board took note of the absence of the parties as the conditions did not exist for a settlement
      and scheduled the hearing to cross-examine the parties for April 26, 2010, to this end inviting
114   their legal representatives or informed persons with right of attorney to attend. The board
      also established November 20, 2010 as the deadline to conclude the arbitration proceedings.

      Following the aforementioned cross-examination hearing the board issued order no. 6309/20
      on June 3, 2010 requesting the Chamber of Arbitration to appoint an expert assessor to qualify
      the difference between the projects mentioned in the January 31, 2007 Investment
      Agreement, in particular the San Biagio project and those included in the Baltic agreement.

      In an order of the Board of Arbitrators of July 1, 2010, Deutsches Windenergie GmbH Institute
      Branch DeEI Italia was appointed as expert assessor; subsequently, the Board scheduled a
      hearing for September 23 to confirm the arbitration question and determine the dates when
      the appraisal would commence (October 15, 2010) and when the final report would be due
      (January 10, 2011), and also to allow the parties involved to appoint their own expert advisors.

      At this hearing, A2A S.p.A. appointed the firm D’Apollonia as its expert advisor and Ecovolt
      appointed Prof. Zaninelli.

      On September 28, the Chamber of Arbitration notified that the expert which it had appointed
      with the above order had withdrawn from the case.

      In a letter dated October 13, 2010, the Chamber of Arbitration gave notice of order 1611/21
      issued on October 12, 2010 in which Prof. Villacci of the University of Sannio was appointed as
      the new expert. On December 23, 2010, the expert made an application to the Arbitrators to
      obtain an extension of the deadline established for the for the filing of the expert’s report until
      February 25, 2011. The deadline has been further extended to April 6, 2011.

      The company is represented by the legal firm Chiomenti.
                                    Half-yearly financial report at June 30, 2011

                                    Other information




Arbitration initiated by S.F.C. S.A. and Eurosviluppo Industriale S.p.A. against A2A
S.p.A. and E.ON Europa S.L. for alleged non-fulfillment of the private deed for the
purchase of the shares of Eurosviluppo Industriale S.p.A., now ERGOSUD S.p.A. (no.
4011)

On May 2 and May 3, 2011 respectively the Milan Arbitration Chamber sent A2A S.p.A. (the
holder of an interest of 50% in the share capital of Ergosud S.p.A.) and E.ON Europa S.L. (a
former shareholder of Ergosud – the investment is currently held by E.ON Italia S.p.A.) a
request for arbitration in which Société Financiere Cremonese S.A. in conjunction with
Eurosviluppo Industriale S.p.A. initiate an arbitration procedure against such companies,
requesting (i) ascertainment as to non-fulfillment by E.ON Europa S.L. and A2A S.p.A. of the
obligations assumed in the agreements of December 16, 2004, October 15, 2004 and July 25,
2007 inter partes and (ii) by virtue of the effect, that they be condemned to the payment of
the remaining part of the price for the sale of the shares making up the whole share capital of
Ergosud S.p.A., amounting to 10,000,000 euro, as well as compensation for the damages
suffered by Société Financiarie Cremonese S.A. and Eurosviluppo Industriale S.r.l. from the
double standpoint of the consequential loss or damage and loss of profits in the amount of               115
126,496,496 euro, save better specification, plus damages for the stoppage at the worksite,
interest and revaluation.

E.ON Europa and A2A S.p.A. have duly appeared before the court calling for the request to be
rejected in full and by cross-claim calling for the counterparts to be condemned to pay
compensation for the damages suffered by the defendants as the result of the numerous
examples of contractual non-fulfillment, quantified initially in the amount of 30,500,000 euro
or alternatively the greater or lesser sum considered equitable, quantified also pursuant to
article 1226 of the Italian Civil Code, plus interest, ex article 1283 of the Italian Civil Code and
monetary revaluation, ex article 1284 of the Italian Civil Code

The company is represented by the legal firms Chiomenti and Simmons & Simmons.


Consorzio Eurosviluppo Scarl / Ergosud S.p.A. and A2A S.p.A. – Civil Court of Rome

On May 27, 2011 Consorzio Eurosviluppo Industriale S.p.A. served a writ on Ergosud S.p.A. and
A2A S.p.A. with the following claims: (i) compensation for damages, of both a contractual and
extra-contractual nature, jointly, or alternatively exclusively and separately, in the amount of
35,411,997 euro (of which 1,065,529 euro as the residual portion of their share of the
expenses); (ii) compensation for damages for the stoppage at the worksite and the failure to
return the areas of pertinence to the Consortium.

In the filing of appearance Ergosud S.p.A. and A2A S.p.A. will call for the request to be rejected
in full because it is unfounded in its merit and in its substance, and will point out: (i) the lack of
                                         Half-yearly financial report at June 30, 2011

                                         Other information




      the right of the Consortium to institute proceedings as it is currently in a state of bankruptcy,
      (ii) the lack of the right of the Consortium to institute proceedings for the damages allegedly
      suffered by Fin Podella at the item “anticipation of program contract” for 6,153,437 euro and
      the damages allegedly suffered by Conservificio Laratta S.r.l. for 359,000 euro.

      The first hearing has been fixed for October 30, 2011.

      At that hearing Ergosud S.p.A. and A2A S.p.A. will not be able to make any cross-claims as that
      is the competence of the Bankruptcy Judge.

      The company is represented by the legal firm Simmons & Simmons.

                                                        ***

      The following information is provided in connection with the main fiscal litigation involving
      Group companies.


      A2A S.p.A. – Assessments for IRES, IRAP and VAT purposes for tax year 2005
116
      The Regional Department of the Lombardy tax office in Milan notified A2A S.p.A (formerly
      ASM Brescia S.p.A.) on December 23, 2010 of IRES, IRAP and VAT tax assessments for tax year
      2005 as a result of a general tax audit carried out in 2008 by the Brescia 2 tax office into that
      tax year.

      These assessments are based on the Regional Department's claim that the company has not
      fulfilled its direct tax and VAT obligations; on this basis, additional IRES, IRAP and VAT
      payments are claimed as well as penalties and interest amounting to a total of 3.3 million euro.

      Appeals against each of these assessments have been filed with the relevant Tax
      Commissioners.

      On the same date, the Regional Department served notice of IRES assessments (level 2 notice)
      for tax year 2005 on A2A S.p.A. as the consolidating company of Aprica S.p.A. and A2A Reti Gas
      S.p.A..

      The sum demanded was paid concerning the notice served as the consolidating company of
      A2A Reti Gas S.p.A., thereby definitively closing the case.

      The notice served as the consolidating company of Aprica S.p.A. was, however, the subject of
      an appeal as part of the dispute currently in course for the level I notice, received in 2010 for
      the same reasons regarding Aprica S.p.A..
                                   Half-yearly financial report at June 30, 2011

                                   Other information




A2A Trading S.r.l. - Assessments for VAT Green Certificates regarding 2004 and 2005

On December 23, 2009 the Milan Tax Revenue Office served A2A Trading S.r.l. with a VAT tax
assessment concerning tax year 2004. This notice cited the company's failure to invoice
taxable transactions and required the company to pay additional VAT as well as penalties and
interest amounting to a total of 3.3 million euro.

In particular, under this assessment the Tax Revenue Office served a penalty on A2A Trading
S.r.l. for not having invoiced the tollee (Edipower) for the Green Certificates allegedly
transferred between the two.

After appropriate examination, which also included the other tollers, it was considered that
the Tax Revenue Office's conclusions could not be accepted. In fact under tolling
arrangements tollers are on the one hand the owners of the raw materials, including fuel, that
they supply to the tollees to produce electricity, and on the other are the "ab origine" owners
of the electricity produced. The delivery of Green Certificates to tollees by tollers can in no
way be considered as the transfer of title of such.
                                                                                                  117
A2A Trading S.r.l. has therefore not committed any breach of regulations and accordingly no
provision has been made in the financial statements for this matter.

On December 16, 2010, the Milan Tax Revenue Office served notice of a VAT tax assessment
concerning tax year 2005 for the same reasons, requiring the company to pay additional VAT
as well as penalties and interest amounting to a total of 4.8 million euro. As for 2004, A2A
Trading S.r.l. did not breach any regulations in 2005 either and accordingly no provision has
been made in the financial statements for this matter.

A2A Trading S.r.l. has lodged an appeal with the relevant bodies against both notices,
requesting that the claim for additional taxes be fully annulled.


A2A Reti Elettriche S.p.A. - registration tax assessment for adjustments to the value
of the sale of the “protected categories” business to A2A Energia S.p.A.

On February 16, 2010, the Milan 3 Office of the Tax Revenue Office served notice of the
correction and settlement of registration tax due on the sale of the "protected categories"
business from Aem Elettricità S.p.A. (now A2A Reti Elettriche S.p.A.) to Aem Energia S.p.A.
(now A2A Energia S.p.A.) on February 1, 2008. In an assessment notice, the tax office
contested the figure disclosed for “goodwill” and as a result the corresponding registration
tax payable. The company attempted to reach a tax settlement but since no agreement was
reached the assessing office has challenged the notice served by lodging an appeal.
                                         Half-yearly financial report at June 30, 2011

                                         Other information




      A2A Reti Gas S.p.A. - General IRES/IRAP/VAT audit for tax year 2007

      On February 24, 2010 the Tax Revenue Office (Brescia 2 Office) commenced a general tax
      audit of A2A Reti Gas S.p.A. (previously Asm Reti S.p.A.) for IRES, IRAP and VAT purposes for
      tax year 2007. This audit was completed on April 29, 2010.

      Significant violations were found, mainly regarding direct taxation.

      To date assessment notices have been served for 2005, 2006, 2007 and 2008.

      The company communicated its acceptance on February 21, 2011 for 2005, on May 25, 2011 for
      2006 and on June 6, 2011 for 2008.

      On June 30, 2011 the company made an application for settlement concerning the assessment
      notice for 2007.


      Aprica S.p.A. - General IRES/IRAP/VAT audit for tax year 2007

      On January 10, 2011 the Tax Revenue Office (Brescia 2 Office) commenced a general tax audit
118
      of Aprica S.p.A. for IRES, IRAP and VAT purpose for tax year 2007. The audit was completed on
      February 8, 2011.

      Significant violations were found, mainly regarding direct taxation.

      No assessment notice has been received to date.


      A2A S.p.A. (merging company of AMSA Holding S.p.A.) – Assessments for VAT
      purposes for tax years 2001 to 2005

      In early 2006, the Italian Finance Police - Lombardy Regional Unit, Milan - carried out an audit
      of AMSA Holding S.p.A. (now A2A S.p.A.) for VAT purposes for tax years 2001 to 2005.

      The audit ended with the issue of a final report contesting the legitimacy of the ordinary VAT
      rate applied by suppliers in place of the special rate for waste disposal and plant maintenance,
      as well as the subsequent deduction made after the invoices issued for these services were
      duly paid.

      The report was followed by formal notices of assessment from the Tax Revenue Office (Milan
      3 Office) for each year audited; appeals were then lodged with the Provincial Tax Commission
      within the term provided by law.

      The appeals for 2001 and for 2004 and 2005 were discussed on January 25, 2010 and on
      February 17, 2010 respectively, with a favorable outcome for the company in all cases.
                                  Half-yearly financial report at June 30, 2011

                                  Other information




The outcomes of the 2002 and 2003 disputes were also favorable for the company but the Tax
Revenue Office lodged an appeal against both sentences. The appeal for 2002 was discussed
on November 30, 2010, and on February 23, 2011 the Milan Regional Tax Commission issued its
ruling, revising the initial sentence and upholding the Tax Revenue Office’s appeal on almost all
counts with the exception of the hazardous waste category. The company will file an appeal
with the Supreme Court for 2002, while for 2003 it has submitted its counter-arguments to
the Tax Revenue Office’s appeal and a discussion has been arranged on this matter for
November 7, 2011.


Plurigas S.p.A. - Duty audit for tax years 2009, 2010 and 2011

On May 25, 2011 the Finance Police - Milan Tax Unit - began a tax audit into Plurigas S.p.A. in
connections with duty for the tax years 2009, 2010 and 2011 limited to the date of access.

This audit has yet to be completed and is at present suspended for reasons concerning the
service of the auditors.

                                                                                                    119
Ecodeco S.r.l. – Assessment for VAT purposes for tax years 2006 and 2007

On July 5 and 6, 2010 the Milan Tax Revenue Office served VAT tax assessment notices for the
years 2006 and 2007 contesting the reduced VAT rates applied to the disposal of fuel
produced from waste. This claim was accompanied by a demand for additional VAT of 472
thousand euro (plus penalties and interest) for 2006 and 496 thousand euro (plus penalties
and interest) for 2007.

Ecodeco S.r.l. has lodged an appeal with the appropriate authorities for both tax assessment
notices.


Asrab S.r.l. - Assessments for IRES and IRAP purposes for tax year 2004

On December 21, 2009 the Milan 2 Tax Revenue Office served notices of IRES and IRAP tax
assessments for tax year 2004 contesting several items of amortization and depreciation
charged against taxable income along with costs relating to "assignment rights" which the
company pays each year to Co.s.r.a.b.. The claim was accompanied by a demand for additional
IRES of 233 thousand euro (plus penalties and interest) and an additional 40 thousand euro for
IRAP (plus penalties and interest).

The company lodged an appeal with the Provincial Tax Commission (CTP) of Milan on May 20,
2010. The Commission upheld the request made by the company to suspend proceedings and
in May 2011 the Milan Tax Commission upheld the appeal, cancelling the assessment notice
relating to the costs for "assignment rights".
                                       Half-yearly financial report at June 30, 2011

                                       Other information




      Asrab S.r.l. - Assessments for IRES and IRAP purposes for tax year 2005

      On March 9, 2011 the Biella Tax Revenue Office served notices of IRES and IRAP tax
      assessments contesting several items of amortization and depreciation charged against
      taxable income along with costs related to “assignment rights” that the company pays each
      year to Co.s.r.a.b.. The claim was accompanied by a demand for additional IRES of 456
      thousand euro (plus penalties and interest) and 58 thousand euro for IRAP (plus penalties and
      interest).

      The company lodged an appeal with the Provincial Tax Commission (CTP) of Biella on May 20,
      2011.


      Asrab S.r.l. - Assessments for IRES and IRAP purposes for tax year 2006

      The company was served notices of IRES and IRAP tax assessments in the period between
      June 10 and 17, 2011 contesting several items of amortization and depreciation charged against
      taxable income along with costs related to “assignment rights” that the company pays each
120   year to Co.s.r.a.b.. The claim was accompanied by a demand for additional IRES of 646
      thousand euro (plus penalties and interest) and 83 thousand euro for IRAP (plus penalties and
      interest).

      The company will appeal against these assessments to the appropriate authorities.



      5) Environmental certificates as contingent assets

      At June 30, 2011 the Group has an excess of environmental certificates (Emission Allowances,
      Green Certificates, and White Certificates).
0.2.2
Attachments to the
condensed half-year
consolidated financial
statements
                                                           Half-yearly financial report at June 30, 2011




                                                     1 - Statement of changes in
                                                     tangible assets




      Tangible fixed assets                                                                       Net book          Changes in the period
      Millions of euro                                                                              value at
                                                                                                  12 31 2010     Investments       Category
                                                                                                                                    changes




      Land                                                                                                 247             –                 –
      Buildings                                                                                            825             2                 2
      Plant and machinery                                                                             3,223               38                20
122   Industrial and commercial equipments                                                                  39             1                 –
      Other assets                                                                                         64              3                  1
      Landfills                                                                                             14             1                 2
      Assets held under concession (freely transferable)                                                   355             1                 –
      Assets under construction and advances                                                                83           20                 (25)
      Leasehold improvements                                                                                10             1                 –
      Leased assets                                                                                         12             –                 –
      Total                                                                                           4,872              67                  –
                             Half-yearly financial report at June 30, 2011

                             1 Statement of changes in tangible assets




                                           Changes in the period                                         Net book
                                                                                                          value at
Other changes           Write-downs           Disposals/Sales          Amortization            Total    06 30 2011
                                                                                            changes
Gross    Accumulated                   Value of asset Accumulated                      in the period
Value    amortization                                 amortization


    –              –              –               –                –              –               –           247
    –              –              –               –                –            (10)             (6)          819
    –              –              –              (3)               1           (118)            (62)         3,161
    –              –              –               –                –             (2)              (1)          38    123
   (1)             –              –              (2)               2            (10)             (7)           57
    –              –             (1)              –                –             (2)              –            14
    –              –              –               –                –            (26)            (25)          330
    2              –              –               –                –              –              (3)           80
    –              –              –               –                –              –                1            11
    –              –              –               –                –             (4)             (4)            8
    1              –             (1)             (5)               3           (172)           (107)        4,765
                                                            Half-yearly financial report at June 30, 2011




                                                        2 - Statement of changes in
                                                        intangible assets




      Intangible assets                                                                            Net book        Changes in the period
      Millions of euro                                                                               value at
                                                                                                   12 31 2010     Purchases       Category
124                                                                                                                                changes




      Industrial patents and intellectual property rights                                                    22           4                 3
      Concessions, trademarks, licenses and similar rights                                               802             41                6
      Assets under formation                                                                                 21           6                (9)
      Other intangible assets                                                                                32           –                –
      Goodwill                                                                                              675           –                –
      Total intangible assets                                                                          1,552             51                –
                             Half-yearly financial report at June 30, 2011

                             2 Statement of changes in intangible assets




                    Changes in the period                                                          Net book
                                                                                                    value at
Reclassifications                Disposals          Write-downs Amortization             Total    06 30 2011
                                                                     charge         changes in                 125
Gross Accumulated             Gross Accumulated                                     the period
value amortization            value amortization



     –              –              –            –             –               (7)           –            22
    (3)             2             (1)           1             –              (30)           16          818
     –              –              –            –             –                –            (3)          18
     –              –              –            –             –               (4)           (4)          28
     –              –              –            –             –                –            –           675
    (3)             2             (1)           1             –              (41)           9         1,561
                                                     Half-yearly financial report at June 30, 2011




                                                    3 - List of companies included in the
                                                    consolidated financial statements
       Name                                                                              Registered office    Currency         Share
                                                                                                                              capital
                                                                                                                          (thousands)




       Consolidation area
       A2A Reti Gas S.p.A.                                                                          Brescia       Euro       442,000
       A2A Reti Elettriche S.p.A.                                                                   Brescia       Euro       520,000
       AMSA S.p.A.                                                                                    Milan       Euro          52,179
       A2A Calore & Servizi S.r.l.                                                                  Brescia       Euro       150,000
       Selene S.p.A.                                                                                Brescia       Euro          3,000
       A2A Servizi alla Distribuzione S.p.A.                                                        Brescia       Euro            300
       A2A Energia S.p.A.                                                                             Milan       Euro            520
       A2A Trading S.r.l.                                                                             Milan       Euro          1,000
       Partenope Ambiente S.p.A.                                                                    Brescia       Euro             120
       A2A Logistica S.p.A.                                                                         Brescia       Euro            250
126    A2A Ciclo Idrico S.p.A.                                                                      Brescia       Euro        70,000
       Ecodeco S.r.l.                                                                                 Milan       Euro          7,469
       Aspem Energia S.r.l.                                                                         Varese        Euro          2,000
       A2A Montenegro d.o.o.                                                       Podgorica (Montenegro)         Euro            300
       Mincio Trasmissione S.r.l.                                                                   Brescia       Euro              10
       Aprica S.p.A.                                                                                Brescia       Euro       204,698
       A2A Coriance S.a.s.                                                         Noisy Le Grand (Francia)       Euro         32,562
       Assoenergia S.p.A. in liquidazione                                                           Brescia       Euro             126
       Abruzzoenergia S.p.A.                                                                     Gissi (Ch)       Euro       130,000
       Retragas S.r.l.                                                                              Brescia       Euro         34,495

       Aspem S.p.A.                                                                                 Varese         Euro             174
       Varese Risorse S.p.A.                                                                        Varese         Euro         3,624
       Montichiariambiente S.p.A.                                                                   Brescia        Euro         1,500
       Ostros Energia S.r.l. in liquidazione                                                        Brescia        Euro            350
       Camuna Energia S.r.l.                                                                  Cedegolo (Bs)        Euro           900
       A2A Alfa S.r.l.                                                                                Milan        Euro            100
       Plurigas S.p.A.                                                                                Milan        Euro           800
       SEASM S.r.l.                                                                                 Brescia        Euro           700
       Proaris S.r.l.                                                                                 Milan        Euro          1,875
       Delmi S.p.A.                                                                                   Milan        Euro     1,466,868
       Ecofert S.r.l.                                                            S, Gervasio Bresciano (Bs)        Euro          1,787
       Elektroprivreda Cnre Gore AD Niksic (EPCG)                                      Niksic (Montenegro)         Euro       958,666
       EPCG d.o.o. Beograd                                                                Belgrade (Serbia)   Dinar RSD              35
       Zeta Energy d.o.o.                                                        Danilovgrad (Montenegro)          Euro        10,240
       Shareholdings held for sale
       BAS-SII S.p.A.                                                                             Bergamo         Euro          17,166
      For investments in the subsidiaries of the Ecodeco Group refer to schedule 5.
      For investments in the subsidiaries of the Coraince Group refer to schedule 6.
      Half-yearly financial report at June 30, 2011

      3 List of companies included in the consolidated financial statements




           %         Stake               Shareholder                Valuation method
consolidated          held
       Group            %
shareholding
at 06 30 2011




    100.00%        100.00%                  A2A S.p.A.        Line-by-line consolidation
    100.00%        100.00%                  A2A S.p.A.        Line-by-line consolidation
    100.00%        100.00%                  A2A S.p.A.        Line-by-line consolidation
    100.00%        100.00%                  A2A S.p.A.        Line-by-line consolidation
    100.00%        100.00%                  A2A S.p.A.        Line-by-line consolidation
    100.00%        100.00%                  A2A S.p.A.        Line-by-line consolidation
    100.00%        100.00%                  A2A S.p.A.        Line-by-line consolidation
    100.00%        100.00%                  A2A S.p.A.        Line-by-line consolidation
    100.00%        100.00%                  A2A S.p.A.        Line-by-line consolidation
    100.00%        100.00%                  A2A S.p.A.        Line-by-line consolidation
    100.00%        100.00%                  A2A S.p.A.        Line-by-line consolidation   127
    100.00%        100.00%                  A2A S.p.A.        Line-by-line consolidation
    100.00%        100.00%               Aspem S.p.A.         Line-by-line consolidation
    100.00%        100.00%                  A2A S.p.A.        Line-by-line consolidation
    100.00%        100.00%                  A2A S.p.A.        Line-by-line consolidation
     99.99%         99.97%                  A2A S.p.A.        Line-by-line consolidation
     98.08%         98.08%                  A2A S.p.A.        Line-by-line consolidation
      97.76%         97.76%                 A2A S.p.A.        Line-by-line consolidation
     94.95%         94.95%                  A2A S.p.A.        Line-by-line consolidation
      91.60%         91.60%        A2A S.p.A. (87.27%)
                              A2A Reti Gas Sp.A. (4.33%)      Line-by-line consolidation
     90.00%         90.00%                  A2A S.p.A.        Line-by-line consolidation
     90.00%         90.00%               Aspem S.p.A.         Line-by-line consolidation
     80.00%         80.00%                Aprica S.p.A.       Line-by-line consolidation
     80.00%         80.00%                  A2A S.p.A.        Line-by-line consolidation
     74.50%         74.50%                  A2A S.p.A.        Line-by-line consolidation
     70.00%         70.00%           A2A Trading S.r.l.       Line-by-line consolidation
     70.00%         70.00%                  A2A S.p.A.        Line-by-line consolidation
     67.00%         67.00%                  A2A S.p.A.        Line-by-line consolidation
     60.00%         60.00%                  A2A S.p.A.        Line-by-line consolidation
      51.00%         51.00%                 A2A S.p.A.        Line-by-line consolidation
     47.00%         47.00%                  A2A S.p.A.        Line-by-line consolidation
     43.70%         43.70%                  A2A S.p.A.        Line-by-line consolidation
    100.00%        100.00%                        EPCG        Line-by-line consolidation
     80.47%         80.47%                        EPCG        Line-by-line consolidation

      99.98%        99.98%                  A2A S.p.A.                            IFRS5
                                                       Half-yearly financial report at June 30, 2011




                                                    4 - List of shareholdings in
                                                    companies carried at equity



       Name                                                                                Registered office    Currency         Share
                                                                                                                                capital
                                                                                                                           (thousands)



       Shareholdings in companies carried at equity
       Transalpina di Energia S.r.l.                                                                   Milan        Euro      3,146,000
       PremiumGas S.p.A.                                                                           Bergamo          Euro            120
       Ergosud S.p.A.                                                                                  Roma         Euro         81,448
       Ergon Energia S.r.l. in liquidazione                                                            Milan        Euro           600
       Metamer S.r.l.                                                                         San Salvo (Ch)        Euro            650
       Asm Novara S.p.A.                                                                             Brescia        Euro          1,000
128    Bergamo Servizi S.r.l.                                                                   Sarnico (Bg)        Euro             10
       SET S.p.A.                                                                 Toscolano Maderno (Bs)            Euro            104
       e-Utile S.p.A.                                                                                  Milan        Euro          1,000
       Azienda Servizi Valtrompia S.p.A.                                          Gardone Valtrompia (Bs)           Euro          6,000

       Ge.S.I. S.r.l.                                                                                Brescia        Euro          1,000
       Centrale Termoelettrica del Mincio S.r.l.                                       Ponti s/Mincio (Mn)          Euro              11
       Serio Energia S.r.l.                                                      Concordia s/Secchia (Mo)           Euro          1,000
       Visano Soc. Trattamento Reflui Scarl                                                          Brescia        Euro             25
       LumEnergia S.p.A.                                                                     Lumezzane (Bs)         Euro            300
       Sviluppo Turistico Lago d'Iseo S.p.A.                                                        Iseo (Bs)       Euro           1,194
       ACSM-AGAM S.p.A.                                                                               Monza         Euro         76,619
       Edipower S.p.A.                                                                                 Milan        Euro       1,441,300
       Utilia S.p.A.                                                                                  Rimini        Euro           900
       Futura S.r.l.                                                                                 Brescia        Euro          2,500
       Prealpi Servizi S.r.l.                                                                         Varese        Euro          2,250
       COSMO Società Consortile a Responsabilità Limitata                                            Brescia        Euro            100
       Dolomiti Energia S.p.A.                                                                 Rovereto (Tn)        Euro        219,000
       Rudnik Uglja Ad Plejvlja                                                      Plejvlja (Montenegro)          Euro          21,493
       Consolidamento Gruppo Ecodeco (1)
       Consolidamento Gruppo Coriance (2)
       Total shareholdings
      (1) For investments in the subsidiaries of the Ecodeco Group refer to schedule 5.
      (2) For investments in the subsidiaries of the Coraince Group refer to schedule 6.
Half-yearly financial report at June 30, 2011

4 List of shareholdings in companies carried at equity




 Stake               Shareholder                Book     Valuation method
  held                                       value at
    %                                      06 30 2011
                                        (thousands)



50.00%                  Delmi S.p.A.        1,738,483       Equity method
50.00%                A2A Alfa S.r.l.           5,683       Equity method
50.00%                    A2A S.p.A.          86,780        Equity method
50.00%                    A2A S.p.A.           2,487        Equity method
50.00%                    A2A S.p.A.            1,241       Equity method
50.00%                    A2A S.p.A.             346        Equity method
50.00%                 Aprica S.p.A.             209        Equity method    129
49.00%                    A2A S.p.A.             509        Equity method
49.00%                    A2A S.p.A.            1,806       Equity method
48.86%        A2A S.p.A. (48.48%)
         A2A Reti Gas S.p.A. (0.38%)           4,022        Equity method
44.50%                    A2A S.p.A.            1,852       Equity method
45.00%                    A2A S.p.A.               8        Equity method
40.00%                    A2A S.p.A.             672        Equity method
40.00%                    A2A S.p.A.              10        Equity method
33.33%           A2A Energia S.p.A.              823        Equity method
24.29%                    A2A S.p.A.             830        Equity method
21.94%                    A2A S.p.A.           35,810       Equity method
20.00%                    A2A S.p.A.         432,822        Equity method
20.00%           A2A Energia S.p.A.              192        Equity method
20.00%    A2A Calore & Servizi S.r.l.            500        Equity method
12.47%                Aspem S.p.A.               806        Equity method
52.00%    A2A Calore & Servizi S.r.l.             52        Equity method
 7.90%                    A2A S.p.A.          60,585        Equity method
39.49%                    A2A S.p.A.          19,066        Equity method
                                                1,641     See attachment 5
                                                1,766     See attachment 6
                                           2,399,001
                                                     Half-yearly financial report at June 30, 2011




                                                 5 -List of companies included in
                                                 the consolidated financial
                                                 statements of the Ecodeco Group




      Name                                                                           Registered office     Currency         Share
                                                                                                                           capital
                                                                                                                      (thousands)




      Consolidation area
      Ecodeco S.r.l.                                                                              Milan        Euro          7,469
      Ecodeco Hellas S.A.                                                                         Atene        Euro             60
130   Ecolombardia 18 S.r.l.                                                                      Milan        Euro            658
      Ecolombardia 4 S.p.A.                                                                       Milan        Euro          17,727
      Sicura S.r.l.                                                                               Milan        Euro          1,040
      Sistema Ecodeco UK Ltd                                                    Canvey Island Essex (UK)        Lst            250
      Vespia S.r.l.                                                                              Torino        Euro             10
      A.S.R.A.B. S.p.A.                                                                           Biella       Euro          2,582
      Nicosiambiente S.r.l.                                                                       Milan        Euro             50
      Ecoair S.r.l.                                                                               Milan        Euro             10


      Shareholdings in companies carried at equity
      SED S.r.l.                                                                      Robassomero (To)         Euro          1,250
      Bergamo Pulita S.r.l.                                                                    Bergamo         Euro             10
      Tecnoacque Cusio S.p.A.                                                             Omegna (Vb)          Euro            206
      Bellisolina S.r.l.                                                                Montanaso (Lo)         Euro             52
      Total shareholdings
                  Half-yearly financial report at June 30, 2011

                  5 List of companies included in the consolidated financial statements of the

                  Ecodeco Group




            %      Stake            Shareholder              Book             Valuation method
 consolidated       held                                  value at
        Group         %                                 06 30 2011
shareholdings                                        (thousands)
 at 06 30 2011




                                                                        Line-by-line consolidation
     100.00%     100.00%            Ecodeco S.r.l.                      Line-by-line consolidation
       91.66%     91.66%            Ecodeco S.r.l.                      Line-by-line consolidation   131
       68.55%     68.55%            Ecodeco S.r.l.                      Line-by-line consolidation
       96.80%    96.80%             Ecodeco S.r.l.                      Line-by-line consolidation
     100.00%     100.00%            Ecodeco S.r.l.                      Line-by-line consolidation
       98.90%    98.90%             Ecodeco S.r.l.                      Line-by-line consolidation
      69.00%     69.00%             Ecodeco S.r.l.                      Line-by-line consolidation
       99.90%    99.90%             Ecodeco S.r.l.                      Line-by-line consolidation
     100.00%     100.00%            Ecodeco S.r.l.                      Line-by-line consolidation




                 50.00%             Ecodeco S.r.l.           1,213                 Equity method
                 50.00%             Ecodeco S.r.l.            184                  Equity method
                  25.00%            Ecodeco S.r.l.            244                  Equity method
                 50.00%             Ecodeco S.r.l.               -                 Equity method
                                                             1,641
                                                         Half-yearly financial report at June 30, 2011




                                                     6 - List of companies included in
                                                     the consolidated financial
                                                     statements of the Coriance
                                                     Group


      Name                                                                                Registered office       Currency         Share
                                                                                                                                  capital
                                                                                                                             (thousands)




      Consolidation area
      Coriance Sas                                                                   Noisy Le Grand - France          Euro          5,407
      Aulnay Energie Services Sas                                                  Aulnay-sous-Bois - France          Euro           610
132   Calo Rem Sas                                                                        Manosque - France           Euro            40
      Castres Energie Services Sas                                                           Castres - France         Euro            38
      Mebois-Montrond Bois Energie Sas                                          Montrond-Les-Bains - France           Euro            40
      Andrezieux Boutheon Energie Services Sas                                  Andrezieuz-Boutheon - France          Euro            40
      Energie Meaux Sas                                                                       Meaux - France          Euro          3,050
      Les Mureaux Energie Services Sas                                                   Le Mureaux - France          Euro            40
      Societé Thermique De Villiers Le Bel Gonesse Sas                                Villiers-Le-Bel - France        Euro            150
      Blanc Mesnil Energie Services Sas                                              Le Blanc Mesnil - France         Euro            40
      Chelles Chaleur Sas                                                                    Chelles - France         Euro           369
      Drome Energie Services Sas                                                           Pierelatte - France        Euro           200
      Eneriance Sas                                                                        Toulouse - France          Euro            150
      Ris Energie Services Sas                                                           Ris Orangis - France         Euro            38
      Societé Thermique De La Doua Sas                                                 Villeurbanne - France          Euro            40
      VLBG Energie Sa                                                                   Viliers-le-Bel - France       Euro            781
      Inter Industrie Thermique Sas                                                        Nemours - France           Euro            60
      Sogatherm Sas                                                                Chalett sur Loing - France         Euro             8
      SOFREDITH Société Fresnoise de la Distribution Thermique Sa                            Fresnes - France         Euro           229
      Societé Thermique De Salon De Provence Sa                                   Salon De Provence - France          Euro            39
      SOFREGE Société fresnoise de Géothermique Sas                                          Fresnes - France         Euro          1,000


      Shareholdings in companies carried at equity
      Gennedith Sas                                                                        Nanterre - France          Euro            85
      Stade Energie Sas                                                              Noisy-le-Grand - France          Euro            153
      Eriva Sas                                                                          Montereau - France           Euro           100
      Societé Thermique de Laval Saint Nicolas Sa                                               Laval - France        Euro           472
      Via Confort Sas                                                                          Villars - France       Euro          1,100
      Coge Sante Lille Gie                                                       Sant-André-es-Lille - France         Euro           n.a.
      Total shareholdings
                  Half-yearly financial report at June 30, 2011

                  6 List of companies included in the consolidated financial statements of the

                  Coriance Group




            %      Stake            Shareholder            Book               Valuation method
consolidated        held                                value at
        Group         %                               06 30 2011
shareholding                                       (thousands)
 at 06 30 2011




     100.00%     100.00%        A2A Coriance Sas                        Line-by-line consolidation
     100.00%     100.00%            Coriance Sas                        Line-by-line consolidation
     100.00%     100.00%            Coriance Sas                        Line-by-line consolidation   133
     100.00%     100.00%            Coriance Sas                        Line-by-line consolidation
     100.00%     100.00%            Coriance Sas                        Line-by-line consolidation
     100.00%     100.00%            Coriance Sas                        Line-by-line consolidation
     100.00%     100.00%            Coriance Sas                        Line-by-line consolidation
     100.00%     100.00%            Coriance Sas                        Line-by-line consolidation
     100.00%     100.00%            Coriance Sas                        Line-by-line consolidation
     100.00%     100.00%            Coriance Sas                        Line-by-line consolidation
     100.00%     100.00%            Coriance Sas                        Line-by-line consolidation
     100.00%     100.00%            Coriance Sas                        Line-by-line consolidation
     100.00%     100.00%            Coriance Sas                        Line-by-line consolidation
     100.00%     100.00%            Coriance Sas                        Line-by-line consolidation
     100.00%     100.00%            Coriance Sas                        Line-by-line consolidation
     100.00%     100.00%            Coriance Sas                        Line-by-line consolidation
      92.00%     92.00%             Coriance Sas                        Line-by-line consolidation
     100.00%     100.00%            Coriance Sas                        Line-by-line consolidation
      50.98%      50.98%            Coriance Sas                        Line-by-line consolidation
       51.00%     51.00%            Coriance Sas                        Line-by-line consolidation
     100.00%     100.00%            Coriance Sas                        Line-by-line consolidation




                 26.00%             Coriance Sas            291                    Equity method
                 50.00%             Coriance Sas          1,080                    Equity method
                 50.00%             Coriance Sas            146                    Equity method
                  25.00%            Coriance Sas            241                    Equity method
                 49.00%             Coriance Sas              8                    Equity method
                 34.00%             Coriance Sas               -                   Equity method
                                                          1,766
                                              Half-yearly financial report at June 30, 2011




                                            7 - List of financial assets available
                                            for sale




      Name                                                                    Stale      Shareholder              Book
                                                                               held                            value at
                                                                                 %                           06 30 2011
                                                                                                           (thousands)

      Financial assets available for sale
      Infracom S.p.A.                                                          1.57%          A2A S.p.A.         2,011
      Immobiliare-Fiera di Brescia S.p.A.                                     9.44%           A2A S.p.A.          1,101
134
      E.M.I.T. S.p.A.                                                       10.00%            A2A S.p.A.         1,247
      Azienda Energetica Valtellina e Valchiavenna S.p.A. (AEVV)              9.39%           A2A S.p.A.         1,846


      Others:
      A.C.B. Servizi S.r.l.
      Alesa S.r.l.
      ANCCP S.r.l.
      AQM S.r.l.
      AvioValtellina S.p.A.
      Banca di Credito Cooperativo di Calcio e Covo Società
      Cooperativa
      Bergamo Energia S.p.A.
      Brescia Mobilità S.p.A.
      Brixia Expo-Fiera di Brescia S.p.A.
      Cavaglià Sud S.r.l. in liquidazione
      Consorzio DIX.IT in liquidazione
      Consorzio Intellimech
      Consorzio Italiano Compostatori
      Consorzio L.E.A.P.
      Consorzio Milano Sistema in liquidazione
      Consorzio Polieco
      Cramer Scrl
      Curdem
                                                Half-yearly financial report at June 30, 2011

                                                7 List of financial assets available for sale




 Name                                                                           Interest        Shareholder             Carrying
                                                                                    held                              amount at
                                                                                      %                                06 30 2011
                                                                                                                     (thousands)

 Emittenti Titoli S.p.A.
 Guglionesi Ambiente S.c.a.r.l.
 INN.TEC. S.r.l.
 Isfor 2000 S.c.p.a.
 S.I.T. S.p.A.
 Stradivaria S.p.A.
 Tirreno Ambiente S.p.A.
 Prva banka Crne Gore A.D. Podgorica (*)
 Total other financial assets                                                                                               11,729
 Total financial assets available for sale                                                                                 17,934
(*)   Although representing 24.10% of share capital the investment in Prva banka Crne Gore A.D. Podgorica is classified as AFS for the
      reasons discussed in the section "Consolidation procedures"




                                                                                                                                         135
0.3
Interim report on
operations
                                    Half-yearly financial report at June 30, 2011




                                  Results by sector




The A2A Group operates in the following sectors:



Energy Sector

This sector’s activity is the sale of electricity and natural gas on wholesale and retail electricity
and methane gas markets. The support of the marketing areas is assured by fuel procurement,
electricity generation plant planning and dispatching, portfolio optimization and trading on            137
domestic and foreign markets.



Heat and Services Sector

This sector’s activity is mainly the sale of heat and electricity produced by cogeneration plants
(mostly owned by the Group). Cogenerated heat is sold through district heating networks.
The sector also provides services, such as managing district heating plants owned by third
parties (heat management services).



Environment Sector

This sector’s activity relates to the whole waste management cycle, which ranges from
collection and street sweeping to the treatment, disposal and recovery of materials and
energy. This sector’s activity includes the recovery of the energy content in waste by means of
waste to energy or biogas plants.



Networks Sector

This sector’s activity consists of the technical and operational management of networks for
the transmission and distribution of electricity, the transport and distribution of natural gas
and the management of the entire Integrated Water Cycle (water captation, aqueduct
                                       Half-yearly financial report at June 30, 2011

                                       Results by sector




      management, water distribution, sewerage network management, water purification). Also
      included are activities relating to public lighting, traffic regulation systems, the management
      of votive lights in cemeteries and systems design services.



      Corporate and Other Services

      Corporate services include various activities such as guidance, strategic direction,
      coordination and control of industrial operations, as well as services to support business and
      operating activities (e.g. administrative and accounting services, legal services, procurement,
      personnel management, information technology, telecommunications etc.). Other services
      also include video-surveillance, data transmission, telephony and internet access services.




138
                                 Half-yearly financial report at June 30, 2011




                                Macroeconomic scenario




World economic activity continued to display a robust expansion increasingly capable of self-
sustainment in a situation where global financial conditions are improving. The latest
indicators however point to a slight slowing down of activities compared to the high rates of
increase seen at the beginning of the year. At the same time there are considerable differences
between the various regions.

In the advanced economies the effect of natural disasters, the need for more rigor in reviving
                                                                                                  139
the public finances and the continuing process of adjustment to accounts in the private sector
have contributed to slowing down growth. More specifically, the recovery in the United States
has remained at a rather moderate level, given the seriousness of the recession arising from
the world financial crisis, but is increasingly supported by domestic demand. In Japan the
earthquake which hit the eastern area of the country has caused a sharp contraction in short-
term activity, although its global repercussions ought to be somewhat limited. In the United
Kingdom growth was slowed down by the adverse weather conditions and then continued to
demonstrate a rather stagnant trend in the presence of fiscal restriction measures. In the
emerging economies on the other hand activity has remained vigorous. Price overheating
pressure continues, especially in Asia, despite the steps taken to limit growth by means of
more restrictive monetary and fiscal policies. In South America the economy has obtained
additional support from the high level of raw materials prices.

In Italy the recovery has been slowed down by the process involving the consolidation of the
financial statements of banks, as well as the rigorous approach taken to revive the public
finances.

The ECB’s forecasts state that the increase in global GDP in real terms will rise from 4.5% in
2011 to 4.7% in 2012.

Macroeconomic projections for the eurozone drawn up in June by the Eurosystem experts
point to GDP growth rates in real terms of between 1.5% and 2.3% in 2011 and between 0.6%
and 2.8% in 2012. Among the European countries moving ahead quickly there is always
                                          Half-yearly financial report at June 30, 2011

                                          Macroeconomic scenario




      Germany. As far as Italy is concerned, latest estimates indicate a rise of 0.8% in GDP in 2011 and
      1.3% in 2012, remaining at the same level as 2010 (source: IMF-WEO).

      In terms of prices, Eurostat’s estimates show that there was inflation of 2.7% over the twelve
      months to June. The relatively high inflation rates over the past few months are to a large
      extent due to rises in the prices of energy and raw materials. For the future, it is likely that they
      will remain above 2% over the next few months. The upwards pressure on inflation can also be
      seen at the initial stages of the production process. The macroeconomic projections
      formulated for the eurozone by the Eurosystem experts indicate that there will be an annual
      inflation rate of between 2.5% and 2.7% in 2011 and between 1.1% and 2.3% in 2012. In Italy the
      retail price index has to a large extent reflected the changes in prices in the eurozone and
      reached 2.7% in June.

      As far as interest rates are concerned at its meeting of July 7 the ECB decided to raise its
      reference interest rate by 25 basis points to 1.50% on the basis of its usual economic and
      monetary analysis. Liquidity is still abundant and might encourage the pressure on prices to
      settle in the eurozone. In addition, recent data confirm that underlying changes in economic
140
      activity in the eurozone are positive. Taken overall, the orientation of monetary policy remains
      accommodating, providing support for the economy. On the other hand after taking the cost
      of money to its lowest ever level of 0.925% in the second half of 2008, the Fed has continued
      to keep it at that level.

      In the first five months of 2011, the euro/dollar exchange rate appreciated considerably,
      absorbing the fall at the end of 2010, only then to suddenly depreciate. After a further period
      of volatility in May and the beginning of June the rate settled at 1.44 in the latter month. The
      average rate for the six months was 1.40 dollars (source: ECB). The appreciation in the single
      currency between January and the start of May appears linked to the mitigation of fears about
      the sustainability of the public finances in certain economies in the eurozone and the gradual
      widening of interest rate spreads in favor of the euro. The subsequent depreciation is
      probably connected with a renewal of risk aversion, in the wake of increased concerns about
      the budget prospects of certain countries in the eurozone.
                                     Half-yearly financial report at June 30, 2011




                                   Energy market trends




The energy scenario for the first half of 2011 has been characterized by a rising trend in the
price of Brent - the reference commodity for the fuel market - and in general of all the oil-
based commodities. Quotations in dollars of these products which reached their maximum in
April remained at high levels for the remainder of the half year. These quotations were only
partially mitigated by the rise in the single currency against the dollar from 1.34 dollars in
January to 1.44 dollars in June.
                                                                                                    141
The average price of Brent for the period from January to June 2011 was 111.1 $/bbl (79.1 €/bbl).

The rise in oil-based commodity prices in the first four months of 2011 was only partially due
to an increase in global demand and expansionary monetary policies. Contributing in addition
were the high level of geopolitical instability in North Africa and the Middle East and the
tremendous earthquake which struck Japan.

As far as the domestic electricity market scenario is concerned, following the reversal of the
trend which took place during the previous year, electricity volumes traded (purchases/sales)
in Italy in the first half of 2011 continued to pick up.

During the first half of 2011 there was a demand for electricity of 162.9 TWh, representing an
increase of 1.0% over the same period in the previous year. Load coverage was guaranteed by
national production for 86.1% and by net imports for the remaining 13.9% (Terna data).

(Net) domestic electricity production was guaranteed as to 76.0% by thermoelectric sources,
17.1% by hydroelectric sources and 5.0% by geo-thermoelectric and wind sources, and for the
remaining 1.9% by photovoltaic sources.

Compared to the same period of the previous year there was a contraction in generation from
hydroelectric sources by 11.3%; on the other hand there was an increase in production from
geo-thermoelectric (+5.8%) and wind (+2.8%) sources, from thermoelectric sources (+2.0%)
and from photovoltaic sources (+284.6%).

Net domestic production rose by 1.0% while the foreign balance fell by 0.7%.
                                          Half-yearly financial report at June 30, 2011

                                          Energy market trends




      The average quotation of the PUN (Base Loan Single Nationwide Price) for the period
      between January and June 2011 reached a level of 67.4 €/MWh, representing an increase of
      9.4% over the equivalent figure in the same period of the previous year (61.6 €/MWh).

      During the first six months the PUN displayed an upwards trend. This increase, partially offset
      by the increase in the quotations of commodities, caused a considerable increase in the
      margins of market operators.



      Methane gas

      On the basis of the figures published by the Ministry for Economic Development for the
      natural gas market for Italy the volume of gas consumed in the first half of 2011 amounted to
      42,160 cm, representing a fall of 4.4% over the same period in 2010 (when it increased by
      14.4%); this is a larger decrease than that of 2.6% recorded in April.

      Imports also fell during the first half year (by 2.4% amounting to 39,041 million cm), as did
142   withdrawals from stocks, with a fall in levels of 88%, and domestic production (-3.2% equal to
      4,154 million cm).

      Among the entry points there was a significant increase in Russian gas arriving at Tarvisio
      (+54.7%, equal to 8,863 million cm) and the GNL at Gorizia (+45.6%, equal to 90 million cm).
      Gas arriving from Northern Europe through Passo Gries fell however (-29.3%, equal to 4,819
      million cm). The entry point at Gela, regarding gas arriving from Libya, remained at a standstill
      (-72.9%, equal to 1,343 million cm imported in the first months of the year).

      The procurement market for gas in Italy was affected in the first half of 2011 by significant
      events occurring at two of the seven gas import points.

      The Transitgas methane pipeline which brings methane into Italy from Northern Europe and
      which was closed as the result of a landslip in July 2010 reopened on a provisional basis on
      December 24, 2010, and with subsequent extensions continued to be available throughout the
      winter without interruption. The somewhat favorable weather allowed the new course of the
      methane pipeline to be built where the landslip occurred. In April 2011 a connection was made
      between the new course of the methane pipeline that had been built and the rest of the
      course; the infrastructure has therefore become available again on a non-provisional basis.
      The recent events in Libya led ENI to suspend gas production and close the Greenstream
      methane pipeline which brings methane of Libyan origin into Italy (representing around 10%
      of total Italian supplies). The effect of the lack of this infrastructure in respect of the safety of
      supplies was mitigated by the imminent end of the winter season, with stocks being
      replenished at a level still sufficient to ensure that civil usage was guaranteed and a
                                  Half-yearly financial report at June 30, 2011

                                  Energy market trends




structurally long market which characterized the whole of the thermal year in progress. The
lack of availability of the Greenstream infrastructure did not even have any repercussions on
the replenishment of stocks during the summer period, which is proceeding in line with that
of previous years.

The events in Libya and in the Middle East in general on the other hand had a significant
indirect effect on the price of gas, connected with the repercussions of oil-based products on
the market. The price of Brent DTD rose from 105 $/bbl to over 120 $/bbl, fluctuating between
125 $/bbl and 105 $/bbl in a highly volatile manner. Long-term contract gas prices which are
linked to the international quotations of oil-based products therefore had a very significant
increase due to contractual lag, and will continue to do so in the second half of the year.




                                                                                                 143
                                                  Half-yearly financial report at June 30, 2011




                                                Energy Sector




      The Energy Sector comprises the following activities:
      • Electricity generation: power plant management through a generation pool of
          hydroelectric and thermoelectric plants with installed power of 6.5 GW .
      • Energy management: the purchase and sale of electricity and gaseous and non-gaseous
          fuels on national and international wholesale markets; the procurement of the fuels
          needed to cover the requirements of the thermoelectric plants and customers; the
          planning, programming and dispatching of electricity generation plants.
144
      • Sale of electricity and gas: marketing of electricity and gas to the eligible customer
          market. Also included is the sale of electricity to customers eligible for “higher
          protection”.

      In addition to the activities carried on directly by A2A S.p.A. the Energy Sector also includes the
      following companies:




                    Energy                         Consolidated companies of the A2A Group

               Thermoelectric and                    • Abruzzoenergia                             • Plurigas
               hydroelectric plants
                                                     • A2A Energia                                • Aspem Energia
              Energy Management
                                                     • A2A Trading                                • EPCG

            Sale of Electricty and Gas



      (1) Includes 20% of the Edipower plants and the EPCG plants
                                   Half-yearly financial report at June 30, 2011

                                   Energy Sector




Recent changes in legislation in the electricity sector

Large hydroelectric concessions

With Law no. 122/2010 the deadline for outstanding concessions was extended for a period of
5 years in order to allow the term for the calling of tenders for the new allocation of these
concessions to be respected.

With the law of December 20, 2010 the Region of Lombardy adopted additional provisions on
the subject, in view of the expiry of certain of the outstanding concessions in the relative local
area.

With Resolution no. 1205 of December 29, 2010 the Regional Council initiated implementation
of the above mentioned provisions, activating the “temporary continuation” by A2A S.p.A. of
the use of the shunting and hydroelectric plants of Stazzona, Lovero and Grosotto, which
notwithstanding the above-mentioned provisions of State legislation were considered
expired at December 31, 2010.

A2A S.p.A. and other operators have appealed against the provision at the High Court of Public       145
Waters.

On February 23, 2011 the Cabinet also adopted a resolution to challenge before the
Constitutional Court certain of the provisions adopted, as being prejudicial to State
jurisdiction.

It is however not possible to ascertain what effect this proceeding may have in this respect
given that the regime relating to the extension of the outstanding concessions has not been
challenged by the Government.

In a communication of March 15, 2011 the European Union notified our country that a default
letter had been issued against the Republic of Italy calling for clarifications in respect of the
provisions of Law no. 122/2010.

Further details may be found in the discussion on this matter to be found in the section
relating to Legislative and Regulatory Risk.



Remuneration of production capacity
The provisional mechanism established by Resolution no. 48/04 of the Authority provides for
the recognition of a set fee to entities which make production capacity available for the needs
of balancing the system, against the fulfillment of the commitment to make production
capacity available on high and medium critical days, together with an additional fee to be paid
                                       Half-yearly financial report at June 30, 2011

                                       Energy Sector




      when the actual revenues earned by the individual producer on the electricity markets are, on
      an annual basis, lower than a reference level equal to the revenues which the same producer
      would have earned under the previous administered regime.

      With Resolution ARG/elt no. 166/10, the formula for calculating the additional fee to cover the
      remuneration of the production capacity, as per article 48 of Attachment A of Resolution no.
      111/06, has been revised. Since the envisaged method of calculation is of a discriminatory and
      distorting nature with respect to the mechanism by which the reference markets work, A2A
      Trading S.r.l. has lodged an appeal against the Authority with the Regional Administrative
      Court (TAR) in order to have the provision repealed. With an order issued on February 18
      concerning the appeal lodged by ENEL against Resolution ARG/elt no. 166/10, the Lombardy
      TAR suspended the effects of the provision, freezing the use of the amount of the fee set aside
      following billing to end customers, in the fourth quarter of 2010, to cover the costs for the
      remuneration of the availability of production capacity (as per article 48 of Attachment A of
      Resolution no. 111/06) increased for that period to 0.130 eurocents per kWh.

      The hearing for the discussion of the merit has been arranged for October 13, 2011.
146



      Resources essential for the safety of the electricity system

      With Resolution ARG/elt no. 8/11 the Authority amended Resolution no. 161/10 on the
      calculation of the fees to be paid for the plants considered essential for the safety of the
      electricity system (whose owners may decide to avail themselves of the ordinary
      remuneration method), with specific reference to the offer conditions for the energy
      produced by units admitted to the reintegration of costs.



      Incentives for production from renewable sources

      On March 29 Legislative Decree no. 28/2011 became effective, implementing European
      Directive 2009/28/EC on the promotion of the use of energy from renewable sources.

      The main measures envisaged, though, may only be implemented following the issue of
      further ministerial decrees (the majority of which by the Ministry for Economic Development
      and the Ministry for the Environment).

      Reference should be made to the section discussing Legislative Risk for a summary of the
      contents of the regulations adopted.
                                   Half-yearly financial report at June 30, 2011

                                   Energy Sector




Bid price of Green Certificates held by the Energy Services Manager
(GSE) - 2011

With Resolution ARG/elt no. 5/11, applying the criteria established by Resolution ARG/elt no.
24/08, the Authority determined the bid price of the Green Certificates held by the Energy
Services Manager (GSE) for 2011 to be 66.90 euro/MWh (the price for 2010 was 67.18
euro/MWh in accordance with Resolution ARG/elt no. 3/10).



Emissions Trading

In accordance with EU Directive 2003/87/EC, from January 1, 2005 the operators of plants
which emit CO2 into the atmosphere must hold an authorization issued by the competent
national authority and cover their emissions with equivalent rights, part of which are issued
free of charge on the basis of the Emissions Allocation Plan adopted by each country.

With Decree Law no. 72 of May 20, 2010 urgent measures were adopted for assigning CO2
emission quotas for plants (“new entrants”) which entered use after the adoption of the                147
National Allocation Plan (PNA) referring to the second period of application of the European
Emissions Trading System (2008-2012).

With Resolution no. 117/10 the Authority established that the credits due to each entitled party
would be calculated annually on the basis of the allowances sent to the Electricity and Gas
Authority (AEEG) by the National Committee responsible for managing Directive 2003/87/EC
by recognizing a valuation for each emission allowance that takes into account the arithmetic
average of the daily price of the EUAs and the volumes traded on the main organized European
markets.

As far as 2010 and the following two years are concerned, Resolution no. 16/2010 of the
National Committee responsible for managing Directive 2003/87/EC established that the
allowances to be considered as the basis for the credit due for the Canavese (A2A Calore &
Servizi S.r.l.) plant and the integrated cogeneration heating-cooling plant (Varese Risorse
S.p.A.) were to be 56,285 tonnes and 10,518 tonnes respectively for each year.

With Resolution ARG/elt no. 38/11, the Authority quantified the credits due for 2010 to
operators of plants or parts of plants recognized as new entrants in the Emissions Trading
System pursuant to article 3, paragraph 1m) of Legislative Decree no. 216 of April 4, 2006.

More specifically the following were recognized:
• credits of 807,126.90 euro to A2A Calore & Servizi S.r.l. for its Canavese plant, to cover the
   failure to recognize emission allowances for 56,285 tonnes of CO2 valued at 14.34 euro per tonne;
                                         Half-yearly financial report at June 30, 2011

                                         Energy Sector




      • credits of 150,828.12 euro to Varese Risorse S.p.A. for the integrated cogeneration heating-
          cooling plant, to cover the failure to recognize allowances for 10,518 tonnes of CO2 valued
          at 14.34 euro per tonne.

      The amounts relating to 2010 for the Scandale plant, which will be entitled to the credits due
      to new entrants up to 2012, will be established by a later provision.

      With the Determination of April 5, 2011, applying the methodology established in Resolution
      ARG/elt no. 77/08, the Authority additionally determined the criteria for the recognition for
      2010, pursuant to CIP Provision no. 6/92, of the charges deriving from the application of
      Directive 2003/87/EC limited to the electricity sold to the Electricity Services Manager (GSE)
      as part of destined sale conventions stipulated pursuant to the mentioned provision.

      In particular, for the purposes of applying article 5 of resolution ARG/elt no. 77/08 for 2010, the
      Authority determined the value of the PFLEX term in 12.30 €/t and the value of the PEUA term
      in 14.13 €/t.


148
      Electricity sales price for owners of plants under the CIP 6/92
      convention

      Law no. 99/09 provided that starting from 2009 the value of the component relating to the
      Avoided Fuel Cost (CEC) of the sales price of CIP 6 electricity due to owners of plants forming
      part of the convention, to be recognized on account until the annual settlement price is fixed,
      should be determined by a decree of the Ministry for Economic Development, on the proposal
      of the AEEG. In addition, the law clarified that these updates must be carried out on the basis
      of the quarterly periods for the recording of the quotations of the products of the basket of
      reference of the conventional component relating to the value of natural gas as per Resolution
      no. 154/08 of the AEEG.

      In February 2011 the Electricity Services Manager (GSE) published the tables for the sales
      prices of electricity produced under the CIP 6/92 regime which must be used by producers
      who are owners of plants with that convention for valuing electricity sold to the GSE in the first
      quarter of 2011.

      With the Ministerial Decree of 8 June, on the proposal of the Energy Authority, for the
      purpose of determining the 2010 settlement value for the Avoided Fuel cost for plants under
      the CIP 6/92 regime, the Ministry for Economic Development quantified the average price of
      the fuel for 2010 as per the convention to be 29.05 €/cm (with the Ministerial Decree of July 12,
      2010 the price was quantified as 29.59 €/cm for the 2009 settlement).
                                   Half-yearly financial report at June 30, 2011

                                   Energy Sector




Regulation of the electricity sector in Montenegro

The electricity sector in Montenegro is regulated by the Energy Law (a first Energy Law was
issued in 2003 and new legislation in this respect was issued in 2010 which is currently in
force).

On the basis of this law, in establishing the country’s economic policy the Government must
also indicate a strategy for the energy sector. The Energy Regulatory Agency (RAE), an
autonomous and independent body established by the 2003 Energy Law, has the task of
regulating the sector along all the stages of the chain (generation, transmission, distribution
and sale to the end customer) in accordance with the Government’s indications and on the
basis of the provisions contained in the Energy Law.

The new law dictates provisions in terms of the functional unbundling (separation of
accounting, separation of management and separation of sensitive commercial information)
of all the activities of the electricity sector; in addition, distribution must be separated from a
corporate standpoint from the other activities managed by the vertically integrated company
by the end of 2011.                                                                                   149

At present regulatory periods have a term of one year, despite the fact that the 2010 law
allowed for the possibility of establishing multi-year regulatory periods.

Until 2010 tariffs were determined on the basis of the “Electricity tariff rules” adopted by the
RAE pursuant to the 2003 law. The methodology applied by the RAE is based on a cost-plus
type cost remuneration principle, under which tariffs are established in such a way as to
ensure that the operator’s actual costs are covered, thus guaranteeing remuneration of the
capital invested without however encouraging efficiency in any specific way.
With a decision of December 14, 2010 the RAE established the tariffs to be applied in the first
quarter of 2011, essentially confirming the values approved for 2010 (a provision already
challenged by EPCG).



Recent legislative changes in the natural gas sector

Upstream gas market

Reorganization of the market and regulations governing the equalization of the
economic merit of natural gas

With Resolution ARG/gas no. 45/11 the Electricity and Gas Authority introduced changes to the
regulatory framework regarding the transportation, equalization and storage of natural gas in
order to introduce a discipline for the equalization of natural gas based on market criteria.
                                         Half-yearly financial report at June 30, 2011

                                         Energy Sector




      This discipline provides for the start-up, during the first stage, of a simplified system
      consisting of a daily equalization market session in which the quantities of natural gas bought
      or sold by the person responsible for the equalization and by users for each gas day are
      determined, together with the related fees, as part of a platform managed by the Electricity
      Market Operator (GME).

      To deal with the delay in the implementation of the information systems of Snam Rete Gas, the
      opportunity to complete the disciplining of the settlement and the definition of the system of
      guarantees covering the system, together with the failure to adjust the platform of the GME,
      with Resolution ARG/gas no. 81/11 the Authority subsequently intervened by deferring the
      timing of the start up of the discipline to the first available gas day in December 2011.


      The discipline introduced by the Storage Decree

      In April 2011 the procedure to allocate new storage capacity as per article 6.5 of Legislative
      Decree no. 130/2010 (the “Storage Decree”) went live with the start of the first stage of the
      tender procedures for the new storage capacity made available by Stogit amounting in total to
150
      3 billion cm: 2.033 billion mc was assigned to industrial customers (compared to a demand of
      over 9 billion cm) and 967 cm was assigned to SMEs (compared to a demand of over 1 billion
      cm), at a price of 1.250155 euro/GJ. There is accordingly no capacity available for
      thermoelectric customers for thermal year 2011/2012.



      Gas supply

      Protected economic conditions

      The dispute regarding Resolution ARG/gas no. 89/10, approved in June 2010, by which the
      AEEG amended the method of updating the price of the supply of gas for the protected service
      by applying a reducing coefficient k to the indexed component (a variable fee covering the
      costs of provisioning), is currently in progress.



      Provisions common to both sectors (electricity and gas)

      A commercial code of conduct has been in force since January 1, 2011 which was introduced by
      resolution ARG/com no. 104/10 and which is applicable in the case when a supply contract on
      the free market is proposed by any seller to an end customer supplied at low voltage and/or
      having a consumption of natural gas not exceeding 200,000 scm/year.
                                                Half-yearly financial report at June 30, 2011

                                                Energy Sector




Quantitative data-electricity sector

Key quantitative data relating to the energy sector are summarized below.

 GWh                                                      06 30 2011          06 30 2010               Change         % 2011/2010

 SOURCES
 Net production                                                5,680                 6,129                (449)              (7.3%)
 – thermoelectric production                                    4,040                4,260                 (220)             (5.2%)
 – hydroelectric production                                     1,640                1,869                 (229)             (12.3%)
 Purchases                                                    18,449               14,764                3,685               25.0%
 – single buyer                                                  1,502                1,657                 (155)            (9.3%)
 – exchange                                                      5,522               6,520                 (998)             (15.3%)
 – foreign markets                                               7,681               4,821                2,860              59.3%
 – other purchases                                              3,744                1,766                1,978              112.0%
 TOTAL SOURCES                                                24,129               20,893                3,236               15.5%
 USES
 Protected market sales                                          1,502                1,657                 (155)            (9.4%)
 Sales to eligible customers and wholesalers                    9,702                8,030                 1,672             20.8%
 Sales on the exchange                                          6,636                7,852                (1,216)            (15.5%)   151
 Sales on foreign markets                                       6,289                3,354                2,935              87.5%
 TOTAL USES                                                   24,129               20,893                3,236               15.5%
Note: the sales figures are stated gross of any losses. The quantitative data relating to the EPCG Group are not included.



The Group's electricity output in the first half of 2011 amounted to 5,680 GWh, to which should
be added purchases of 18,449 GWh for a total availability of 24,129 GWh.

Production fell compared with the same period of the previous year.

The drop in thermoelectric production (-220 GWh) was caused by a lower load factor in the
Group’s power stations and the departure of the San Filippo del Mela oil-fired power station
from the tolling agreement with Edipower.

The decrease in hydroelectric production was on the other hand mainly due to the reduced
contribution of the Calabria hydroelectric plants, which in the first six months of 2010
benefited from greater hydraulicity.

Purchases of electricity rose by 25.0% over the first half of 2010 from 14,764 GWh to 18,449
GWh.

In addition there was an increase in sales on the retail and wholesale markets and a rise in the
quantity of electricity brokered on foreign markets, which more than offset the decrease in
electricity brokered on the Ipex platform.

The subsidiary Elektroprivreda Crne Gore AD Niksic (EPCG) was consolidated on a line-by-line
                                            Half-yearly financial report at June 30, 2011

                                            Energy Sector




      basis for the period ended June 30, 2011, while for that ended June 30, 2010 it was
      consolidated using the “one line” method.

      EPCG has an efficient production mix with total installed capacity of 0.9 GW, of which 0.2 GW
      is thermoelectric and 0.7 GW is hydroelectric.

      The following is a summary of the quantitative data relating to the first half of 2011 for the
      electricity sector of the EPCG Group:

      GWh                                                                                                 06 30 2011

      SOURCES
      Production                                                                                               1,579
      – thermoelectric production                                                                               672
      – hydroelectric production                                                                                907
      Imports and other sources                                                                                 722
      – imports                                                                                                 526
      – other sources                                                                                            20
      – EPS (Serbian Electricity Company)                                                                        176
152   TOTAL SOURCES                                                                                            2,301
      USES
      Domestic market consumption                                                                              1,729
      Network losses                                                                                            345
      Other uses                                                                                                  17
      Exports                                                                                                   210
      TOTAL USES                                                                                               2,301




      Quantitative data-gas sector

      Milioni di mc                                 06 30 2011        06 30 2010            Change     % 2011/2010

      SOURCES
      Procurement                                         2,940             3,209             (269)          (8,4%)
      Withdrawals from stock                                (40)                (5)             (35)           n.d.
      Internal consumption/GNC                              (20)               (16)             (4)          25,0%
      TOTAL SOURCES                                      2,880               3,188            (308)         (9,7%)
      USES
      End uses                                              954               1.137            (183)        (16,1%)
      Thermoelectric uses                                   660               642               18            2,8%
      Heat uses                                              125               131              (6)          (4,6%)
      Wholesalers                                           1.141            1.278             (137)        (10,7%)
      TOTAL USES                                         2,880               3,188            (308)         (9,7%)
                                       Half-yearly financial report at June 30, 2011

                                       Energy Sector




During 2011 volumes provisioned amounted to 2,940 Mcm, a decrease of 269 Mcm over the
same period of the previous year, mainly due to the mild temperatures experienced during the
first few months of the year.



Economic data

Millions of euro                                                   01 01 2011           01 01 2010   Change
                                                                  06 30 2011           06 30 2010

Revenues                                                                2,397               2,245       152
Gross operating income                                                    163                  191      (28)
% of revenues                                                           6.8%                 8.5%
Depreciation, amortization and provisions                                (114)                (97)      (17)
Net operating income                                                       49                  94       (45)
% of revenues                                                           2.0%                 4.2%
Investments                                                                10                  16        (6)


The revenues of the Energy Sector amounted to 2,397 million euro in the first half of the year                 153
(2,245 million euro in the six months ended June 30, 2010), of which 146 million euro relates to
the production and sale of electricity by the EPCG Group.

Gross operating income of 163 million euro fell by 28 million euro compared to the first half of
2010: the decrease of 49 million euro in the margin in the electricity subsector was only
partially offset by the increase of 21 million euro in the margin in the gas subsector.

The fall in profitability in the electricity subsector is mainly due to a decrease in hydroelectric
production, which was affected by the lower hydraulicity at the Calabria hydroelectric plants,
the departure from the regulated boundary of the tolling agreement stipulated by the San
Filippo del Mela power station in Sicily with Edipower and the loss by the Monfalcone power
station of its essentiality requisites.

There were considerable falls in the utilization factors of the combined cycle power stations in
the boundary in question, offset in terms of overall profitability by an improvement in unit
margins. The margins of marketing activity also contracted compared to the first half of 2010.

The Montenegro consolidated company EPCG made a positive contribution of 13 million euro.

In the gas subsector the decrease in quantities sold as the result of the mild weather
experienced during the first few months of the year and the economic impact of the reduction
in tariffs regulated by the protected market were more than offset by the positive effects of
renegotiating gas procurement agreements at the start of the fourth quarter of 2010.
                                         Half-yearly financial report at June 30, 2011

                                         Energy Sector




      Depreciation, amortization and provisions totaled 114 million euro (97 million euro for the six
      months ended June 30, 2010). Compared with the first half of 2010, this item includes
      depreciation, amortization and provisions of 19 million euro relating to the electricity sector
      of the EPCG Group.

      As a result of the above changes, net operating income amounted to 49 million euro (of which
      -6 million euro relates to the electricity sector of the EPCG Group), a decrease of 45 million
      euro compared to the first half of 2010.

      Capital expenditure totaled 10 million euro and mainly regarded extraordinary maintenance at
      the Timpagrande hydroelectric plant (modernization and replacement of turbine
      components for 2.5 million euro) and the Satriano hydroelectric plant (0.6 million euro), the
      other hydroelectric plants in Calabria (0.6 million euro), the hydroelectric plants in the
      Valtellina (0.8 million euro) and the thermoelectric plant at Gissi (1.2 million euro).

      In addition extraordinary maintenance was carried out on the thermoelectric plants at
      Cassano D’Adda (0.6 million euro), Monfalcone (2.4 million euro mainly relating to work to
154   adjust groups 1 and 2) and Ponti sul Mincio (0.2 million euro).
                                 Half-yearly financial report at June 30, 2011




                                Heat and services sector




The Heat and Services Sector comprises the activities of cogeneration, district heating and
the sale of heat, as well as other activities relating to heat management and facility
management services. The following is a short description of these activities:
• Cogeneration and district heating: production, distribution and sale of heat,
   production and sale of electricity, as well as operation and maintenance activities on the
   cogeneration plants and district heating networks.
• Heat and other services: management of heating plants owned by third parties.
                                                                                                155
The companies listed below form part of the Heat and Services Sector:




  Heat and services               Consolidated companies of the A2A Group

      Cogeneration plants          • A2A Calore & Servizi                    • Coriance Group
                                   • Proaris                                 • Varese Risorse
   District heating networks

          Sale of heat
       and other services
                                                     Half-yearly financial report at June 30, 2011

                                                     Heat and services sector




      Key quantitative and economic data of the sector are reported below.



      Quantitative data

       GWht                                                   06 30 2011          06 30 2010                 Change    % 2011/2010

       SOURCES
       Plants at:                                                     968                1,007                  (39)        (3.9%)
       - Lamarmora                                                     304                  327                 (23)         (7.0%)
       - Famagosta                                                       81                 86                   (5)         (5.8%)
       - Tecnocity                                                      39                   41                  (2)         (4.9%)
       - Impianti Coriance                                             341                 356                  (15)         (4.2%)
       - Other plants                                                  203                  197                   6          3.0%
       Purchases from:                                                708                  746                  (38)        (5.1%)
       - Third parties                                                 288                  301                 (13)         (4.3%)
       - Other sectors                                                420                  445                  (25)         (5.6%)
       TOTAL SOURCES (*)                                            1,676                1,753                  (77)        (4.4%)

156    USES
       Sales to end customers                                        1,676                1,753                 (77)         (4.4%)
       TOTAL USES                                                   1,676                1,753                  (77)        (4.4%)
      (*) net of losses.
      Note:
      -   The figures refer to district heating alone. sales relating to heat management are not included.
      -   The quantities of heat purchased from the Environment Sector are included among purchases.


      There was a fall of 4.4% in the sale of heat to end customers in the first half of 2011, mainly the
      result of the mild temperatures experienced during the winter months.

      For the above reasons a total of 968 GWht of heat was produced, a decrease of 3.9%
      compared to the first half of 2010. A similar fall took place in the quantity of heat purchased
      from Group companies (Amsa S.p.A. and Aprica S.p.A.) and from third parties.
                                       Half-yearly financial report at June 30, 2011

                                       Heat and services sector




Economic data

Millions of euro                                                   01 01 2011           01 01 2010   Change
                                                                  06 30 2011           06 30 2010

Revenues                                                                  216                 198        18
Gross operating income                                                     48                  39         9
% of revenues                                                          22.2%                19.7%
Depreciation, amortization and provisions                                 (24)                (27)        3
Net operating income                                                       24                   12       12
% of revenues                                                           11.1%                6.1%
Investments                                                                31                  25         6


Revenues amounted to 216 million euro in the period (198 million euro for the six months
ended June 30, 2010). The increase of 18 million euro is mainly due to rises over the first half of
2010 in unit revenues for the sale of heat and electricity.

Gross operating income amounted 48 million euro, an increase of 9 million euro over the first
half of 2010: the increase in margins arising from new connections to the district heating
                                                                                                              157
service was partially offset by the decrease in volumes sold as the result of the mild
temperatures experienced during the first quarter of the year. Also contributing to the rise in
margins was the recognition of energy efficiency credits relating to prior year initiatives on the
Brescia district heating networks and the good performance of the French subsidiary
Coriance.

Depreciation, amortization and provisions amounted to 24 million euro, a decrease of 3
million euro compared to the same period of the previous year.

As a result of these changes, net operating income closed at 24 million euro (12 million for the
first half of 2010).

Capital expenditure of 31 million euro during the six months involved the development of the
district heating networks in the Milan and Bergamo areas (14 million euro), development and
extraordinary maintenance at the cogeneration plants in the Milan, Brescia, Bergamo and
Varese areas (6 million euro) and development investments made by the Coriance Group (11
million euro). This latter expenditure included an amount of 6 million euro spent on the start-
up of work to construct the biomass cogeneration plant at Drome.
                                          Half-yearly financial report at June 30, 2011




                                          Environment Sector




      The Environment Sector comprises the activities relating to the entire waste management
      cycle. These activities are briefly described below:
      • Collection and street sweeping: cleaning streets and collecting refuse for
         transportation to its destination.
      • Treatment: carried out in dedicated centers specializing in the recovery or
         transformation of waste to make it suitable for recycling, waste-to-energy system or
         disposed of in landfill sites.
158
      • Disposal: this involves the final disposal of urban and special waste in combustion plants
         or landfills, where possible recovering energy through incineration or the use of biogas.

      The Environment Sector also includes the following companies:




            Environment                   Consolidated companies of the A2A Group

               Collection and              • Ecodeco Group                            • Partenope Ambiente
              street sweeping
                                           • Amsa                                     • Aspem S.p.A.
                Treatment
                                           • Aprica

            Disposal and energy            • Montichiariambiente
                 recovery                  • Ecofert
                                            Half-yearly financial report at June 30, 2011

                                            Environment Sector




Recent changes in legislation in the environment sector

At the end of July 2010 the Government issued the implementing regulation for the provisions
contained in article 23-bis (concerning local public services of economic importance) of Law
no. 133/08 , as amended by Decree Law no. 135/09 (“community obligations”) converted by
Law no. 166/09.

In addition, the community obligations Decree Law introduced an amendment to the
transitional period during which mandates which are outstanding and do not derive from
public procedures for water and waste management services remain in force.

As the result of the referendum held in Italy on June 12 and 13, 2011, article 23-bis of Law no.
133/08 is in the process of being repealed.
Further details in this respect may be found in the section Risks and uncertainties.



Consolidated Environment Law
                                                                                                                               159
Decree no. 152 of April 3, 2006 "Regulations on environmental matters" (as subsequently
amended and supplemented, most recently by Legislative Decree no. 205/10 which dictated
measures implementing Directive 2008/98/EC on waste) acts as the reference legislation for
the waste sector and was revised during 2008 by the "Unified Amendment". This provision
(the Consolidated Law) ratifies the repeal of Legislative Decree no. 22 of February 5, 1997, the
“Ronchi Decree”, which until then had been the national framework legislation on this subject.

Certain regulatory technical rules required to carry out collection and transfer services
currently remain in force from the preceding legislative framework on a transitional basis until
the rules implementing the Consolidated Law are issued.

Of particular interest in the changes made to the framework law by Decree no. 205/10 is the
regulation regarding the new ways of classifying waste, which call for ecotox tests to be
carried out to determine whether the waste is hazardous or non-hazardous.




(1) Converting into law, with amendments, Decree Law no. 112 of June 25, 2008 on urgent provisions for economic development,
    simplification, competitiveness, the stabilization of the public finances and tax equalization.
                                                    Half-yearly financial report at June 30, 2011

                                                    Environment Sector




      Waste tracking control system
      With the Ministerial Decree of December 17, 2009, subsequently amended and supplemented
      by the Ministerial Decrees of February 15, July 9, September 28 and December 22, 2010, a
      Waste tracking control system has been set up, run by the Carabinieri Unit for the Protection
      of the Environment, to enable the special waste chain to be computerized at a national level
      (and that of urban waste for the Campania region).
      The system simplifies the procedures and formalities which are the responsibility of sector
      operators, reducing the costs incurred by businesses, and manages a complex and variegated
      process in an innovative and efficient way, with guarantees for increased transparency,
      knowledge and the prevention of illegal acts.



      Province of Brescia Provincial Waste Management Plan

      The Province of Brescia Provincial Waste Management Plan was approved with Decree no.
      9/661 of October 20, 2010 of the Council of the Lombardy Region; this proposes measures
160   having the objective of reducing the per capita production of waste and improving
      differentiated collection (which is planned to reach 65% of the waste produced by 2016,
      consistent with European provisions in this respect).

      Key quantitative and economic data of the sector are reported below.



      Quantitative data

                                                              06 30 2011         06 30 2010         Change    % 2011/2010

       Waste collected (Kton)*                                        492                 502          (10)         (2.0%)
       Waste disposed of (Kton)                                      1,335               1,398         (63)         (4.5%)
       Electricity sold (GWh)                                         631                606            25           4.1%
       heat sold (GWht)**                                             472                 502          (30)        (6.0%)
      (*) Waste collected in the Municipalities of Milan, Brescia, Bergamo and Varese.
      (**) Quantities at the plant entrance.

      In the first six months of the year the quantity of waste collected amounted to 492 thousand
      tonnes, substantially in line with the first half of 2010.


      The decrease in the amount of waste disposed of compared to the same period of 2010 (-
      4.5%) was on caused by the reduction in transfers to industrial waste landfills, also as the
      result of the new acceptance criteria established by the legislation which came into effect at
      the end of 2010, and a fall in the transfer of urban waste (in particular biological sludge not
      transferred for agricultural purposes due to unfavorable weather conditions).
                                       Half-yearly financial report at June 30, 2011

                                       Environment Sector




The increase in quantity of electricity sold (+4.1%) over the same period of the previous year
was due to the rise in the production of the Brescia and Milan waste to energy plants.
The reduced production of heat (-6.0%) was essentially the result of lower requests made by
end customers.



Economic data

Millions of euro                                                   01 01 2011           01 01 2010   Change
                                                                  06 30 2011           06 30 2010

Revenues                                                                  418                 395        23
Gross operating income                                                    152                  141       11
% of revenues                                                          36.4%                35.7%
Depreciation, amortization and provisions                                 (48)                (45)       (3)
Net operating income                                                      104                  96         8
% of revenues                                                          24.9%                24.3%
Investments                                                                 11                 30       (19)

                                                                                                               161
The Environment Sector recorded revenues of 418 million euro in the first half of 2011 (395
million euro for the six months ended June 30, 2010).

Gross operating income closed at 152 million euro, an increase over the first half of 2010 (141
million euro). This positive performance is basically due to an increase in the contribution
made by the Brescia, Bergamo and Milan waste to energy plants which during the first second
quarter of 2010 underwent a stoppage for scheduled maintenance and an increase in
revenues from the sale of electricity.

Depreciation, amortization and provisions amounted to 48 million euro, representing an
increase of 3 million euro over the same period of the previous year.

As a result of these changes net operating income amounted to 104 million euro, an increase
of 8 million euro over the first half of 2010.

Capital expenditure during the period amounted to 11 million euro and related mainly to
collection vehicles and containers (5 million euro) and maintenance and development work
on waste to energy plants (2 million euro), treatment plants (2 million euro) and landfills
(2 million euro).
                                        Half-yearly financial report at June 30, 2011




                                       Networks sector




      The Networks Sector comprises the activities regulated by sector Authorities, namely the
      management of the electricity and gas networks and the integrated water cycle. These
      activities are briefly described below:
      • Electricity networks: the transmission and distribution of electricity.
      • Gas networks: the transport and distribution of natural gas.
      • Integrated water cycle: water captation, aqueduct management, water distribution,
         sewerage and water purification.
162
      • Other services: activities relating to public lighting, traffic regulation systems, the
         management of votive lights and systems design services.

      The Networks Sector also includes the following companies:




              Networks                   Consolidated companies of the A2A Group

            Electricity networks          • A2A Reti Elettriche                     • Camuna Energia
                                          • A2A Reti Gas                            • Retragas
               Gas networks
                                          • A2A Ciclo Idrico                        • Seasm

           Integrated water cycle         • EPCG                                    • Aspem S.p.A.
                                          • Mincio Trasmissione                     • A2A Servizi alla
                                                                                      distribuzione
                                        Half-yearly financial report at June 30, 2011

                                        Networks sector




Recent regulatory changes in the distribution sector

Legislative Decree no. 28/11 became effective on March 29, 2011, implementing European
Directive 2009/28/EC on the promotion of the use of energy from renewable sources.

The main measures envisaged, though, may only be implemented following the issue of
further ministerial decrees (the majority of which by the Ministry for Economic Development
and the Ministry for the Environment), for which half-monthly deadlines are planned starting
from the effective date of the legislation.



Natural gas distribution

Allocation and performance of the distribution service

With respect to the natural gas distribution service, in safeguarding the provisions of
Legislative Decree no. 164/2000 and article 46-bis of Decree Law no. 159 of October 1, 2007,
converted with amendments into Law no. 222 of November 29, 2007 regarding the
                                                                                                                    163
distribution of natural gas, Law no. 99/2009, the “Development Law”, defines the new
“Minimum Territorial Ambits” for which tenders will be called to allocate the service to the
Ministry for Economic Development, in conjunction with the Ministry for Regional Affairs,
after consulting with the Combined Conference and the Electricity and Gas Authority.

On March 31, 2011 the Decree of the Ministry for Economic Development dated January 19,
2011 was published in the Official Journal; this identifies 177 Minimum Territorial Ambits and
provides details by region in attachment 1.

Nevertheless, the precise identification of the individual municipalities making up each
Minimum Territorial Ambit has been deferred to a subsequent decree of the Ministry for
Economic Development, “attachment 2”, which will be adopted in conjunction with the
Ministry for Regional Affairs and is to be communicated to the Combined Conference.

The criteria followed for identifying the municipalities included in each individual Ambit
envisage a maximum of 50 municipalities for Ambits with more than 50,000 effective
customers; in addition, municipalities fed by the same distribution plant will be included in the
same Ambit. Account will also be taken of population density and the specifics of the area.

In respect of the possibility of calling new tenders before this discipline is completed, by means of Legislative
Decree no. 23 of June 1, 2011 (Third Energy Package) the legislator has specified that all tenders for which by
the effective date of this law a tender notice has been published in the case of an open procedure or
invitation letters have been sent in the case of a restricted procedure may be carried out on the basis of the
procedures applicable at the date on which they were called, provided that such documents include the
criteria for evaluating the offer and the repayment amount for the outgoing operator.
                                          Half-yearly financial report at June 30, 2011

                                          Networks sector




      On the other hand from June 29, 2011, the date on which the decree became effective, tenders
      not included in these cases must be carried out exclusively for Territorial Ambits as per article
      46-bis of Law no. 222 of 2007 and on the basis of the criteria referred to therein, to be issued
      shortly.

      In respect of the criteria for the tenders for the allocation of the distribution service, said
      article 46-bis establishes that the Ministry for Economic Development, in conjunction with
      the Ministry for Regional Affairs, after consulting with the Combined Conference and on the
      basis of the opinion of the Electricity and Gas Authority, shall identify the “criteria for the
      tender and the valuation of the offer for allocating the gas distribution service”. The criteria to
      be used for this purpose are, in addition to the economic conditions, the benefits for
      consumers, the quality and safety standards and the soundness of the investment and
      development plan. At the present time the opinion of the State Council is awaited together
      with the signatures of the competent ministers.

      Finally, the Ministerial Decree dated April 21, 2011 has been published which concerns
      provisions for regulating the social effects connected with the new means of allocating gas
164   distribution concessions, the “Social Clause” measure.

      This decree, drawn up by the Ministry for Economic Development and the Ministry for
      Employment and Social Policies, contains regulations to safeguard the jobs of the personnel
      of the outgoing distribution company following the awarding of the service to another
      company, together with a series of obligations for the latter company.

      The protection envisaged for the company’s employees consist in the fact that they will be
      immediately directly transferred to the company taking over, with the employment
      conditions they previously enjoyed of an economic nature and relating to length of service
      schemes of which they are members being guaranteed.

      Suitable lay-off schemes will be applied for those members of staff who on the basis of the
      above-mentioned conditions turn out to be in excess to needs, without prejudice to the
      possibility of being rehired should the new company seek additional personnel within two
      years of the date of the tender.


      Distribution tariffs

      With Resolution ARG/gas no. 159/08 (Consolidated Text on the regulation of the quality and tariffs
      of services for the Distribution and measurement of Gas for the regulatory period 2009-2012
      (TUDG): approval of part II “Tariff Regulation for services for the Distribution and measurement
      of Gas for the regulatory period 2009-2012” (RTDG)), the Authority established a compulsory
      tariff, separated into six tariff areas and applicable for the calendar year, as coverage of the costs
      relating to the distribution, measurement and marketing service.
                                    Half-yearly financial report at June 30, 2011

                                    Networks sector




The tariff regime envisages remuneration of the net invested capital at a rate of 7.6% for
distribution and 8% for measurement.

Operating costs are updated by applying a price cap. The price cap applied to distribution
operating costs is differentiated by company size.

Since analyses showed that the level of net invested capital at a national level, determined on the
basis of the definitive data acquired for the first year of the regulatory period in course, exceeded
the value recognized to the same companies with reference to thermal year 2007-2008 by more
than 5%, a graduality mechanism has been introduced. As a result, the restrictions of the
companies have been reduced by the percentages provided by article 17 of the RTDG.

With Resolution ARG/gas no. 235/110 the Authority has updated the compulsory tariffs for the
natural gas distribution and measurement services for 2011 and the tariff options for the
distribution and measurement of gas other than natural gas by means of channeled networks,
and has initiated a proceeding for re-exercising tariff regulation powers in accordance with
sentences nos. 6912, 6914, 6915 and 6916 of the Lombardy Regional Administrative Court (TAR),
Section III, dated October 11, 2010, by which the following have been cancelled:                        165
• the reduction of 10% in the tariff restriction for the previous regulatory period for
   operators who do not supply the data requested, either wholly or in part;
• the missing estimate of the “volume effect”, namely the exclusion of the possibility to
   recover in the tariff the negative meteorological effect occurring during the last two years
   of the second regulatory period;
• the estimate of a productivity recovery coefficient, the “X-factor”, constant for the whole
   term of the third regulatory period.

The lack of alignment between tariff receipts and the restriction on revenues, as possibly
recalculated, will be compensated by equalization mechanisms.



Electricity distribution

Distribution service tariff regime
With Resolution no. 348/07 the Authority adopted the Integrated Text of the provisions for the
regulation of the transmission, distribution and measurement of electricity for the third
regulatory period (2008-2011).
The provision provides for a general equalization regime and a specific company-based
equalization regime, ensuring that changes in the costs incurred by companies due to external
factors are covered.
For the purposes of calculating tariff levels:
• the recognized return on capital invested is established as 7.0% for the distribution
   service, including the related marketing activities, and 7.2% for measurement services;
                                         Half-yearly financial report at June 30, 2011

                                         Networks sector




      • in respect of the portion of the tariff components covering operating costs, the provision
         establishes an annual productivity increase target (the “X-factor”) in order that the
         increased recoveries in efficiency already achieved by companies in the second regulatory
         period, as identified at an average national level, equal to 1.9% for distribution and 5.0% for
         the measurement service, may be transferred to end customers within eight years for
         transmission and distribution and within six years for the measurement service;
      • with regard to annual updates, the depreciation charge is excluded from the sphere of
         application of the price cap.


      Measurement equalization

      With Resolution ARG/elt no. 74/11, the Authority approved the results of the equalization of
      measurement service revenues for 2009 and the settlements for the equalization of
      measurement service revenues for 2008 (amounts already recognized with Resolution
      ARG/elt no. 40/10), recalculated following the communication of various adjustments. A2A
      Reti Elettriche S.p.A. therefore paid an equalization amount of 6.18 million euro into the
166   Electricity Sector Settlement Fund.


      Investments in Smart Grids
      With Resolution ARG/elt no. 12/11, the Authority published the classification list of the projects
      admitted to incentive treatment as per paragraph 11.4 d) of the TIT.
      In particular, the investments relating to the pilot projects presented by A2A Reti Elettriche
      S.p.A. consisting of automation, protection and control systems for medium voltage active
      networks (smart grids) relating to the Lambrate Primary cabin (Milan) and the Gavardo
      Primary cabin (Brescia ambit) were classified in first and third places.
      For new investments relating to pilot projects consisting of automation, protection and
      control systems for medium voltage active networks (smart grids), paragraph 11.4 of the TIT
      provides for the recognition of an increase of 2% in the remuneration rate for invested capital
      for 12 years.


      Penalty for breaching Authority provisions on withdrawal point data

      Closing the proceeding initiated with Resolution VIS no. 171/09, with resolution VIS no. 15/11 the
      Authority inflicted a penalty of 302,000 euro on A2A Reti Elettriche S.p.A. for breaching
      provisions on managing the data regarding the points of withdrawal and aggregation of
      withdrawal measurements for the dispatch of electricity, as per Resolutions no.168/03 and no.
      111/06.
                                  Half-yearly financial report at June 30, 2011

                                  Networks sector




Regulation of the electricity sector in Montenegro

Reference should be made to the specific paragraph of the Energy Sector for details of the
regulation of the electricity sector in Montenegro.



Provisions common to the two sectors (gas and electricity
distribution)

Energy efficiency
The decree of the Ministry for Economic Development of December 21, 2007 revised and
updated the decrees of the Minister of Productive Activities and the Minister of the Environment
of July 20, 2004, which required distributors of electricity and natural gas who on December 31,
2001 served at least 100,000 end-customers to comply with specific energy saving objectives
based on the energy distributed. In order to achieve these objectives, distributors must develop
energy saving projects in compliance with the provisions of Law no. 239/04 (Marzano Law) and
the related implementation instructions, especially in matters concerning post-meter activity.
                                                                                                   167
The 2007 decree establishes new reference objectives for the three-year period 2010 – 2012.
On March 29, the new legislative decree implementing European Directive 2009/28/EC on the
promotion of the use of energy from renewable sources became effective.
The main measures envisaged, though, may only be implemented following the issue of further
ministerial decrees (the majority of which by the Ministry for Economic Development and the
Ministry for the Environment).


Tariff grant
The unit tariff grant recognized for each year (t+1) obligatory after 2008 is defined by the
Authority by November 30 of the previous year (t).
The tariff grant recognized for achieving the energy savings objectives for 2011, laid down in
Resolution EEN no. 16/10 (as amended by Resolution EEN no. 17/10), is worth 93.68 euro/tonne
of oil equivalent (toe) saved.


Energy saving objectives for 2011

With Resolution EEN no. 18/10, the Authority established the specific objectives for primary
energy savings in 2011 for the distributors of gas and electricity. The objectives set for the
obligated distributors of the A2A Group are set out in the following table:

Distributor                                                                          Objective
                                                                                          2011
                                                                                         (toe)

A2A Reti Elettriche S.p.A.                                                              144,103
A2A Reti Gas S.p.A.                                                                     144,162
                                        Half-yearly financial report at June 30, 2011

                                        Networks sector




      Achievement of energy saving objectives for 2010

      Pursuant to Resolution no. 98/06 as subsequently amended and supplemented, the two
      obligated distributors of the A2A Group requested the cancellation of the following energy
      efficiency credits for 2010:

      Distributor                                                                       Obligation   Obligation
                                                                                              2010        2009

      A2A Reti Elettriche S.p.A.                                                            89,371        1,946
      A2A Reti Gas S.p.A.                                                                  101,694        1,636

      Both distributors fulfilled the specific energy saving objective for 2010, as established by
      Resolution EEN no. 25/09 as amended and supplemented by Resolution EEN no. 1/10, as to 84%
      of the total obligation. Pursuant to the Ministerial Decree of December 21, 2007, the extent to
      which fulfillment was not achieved in 2010 must be compensated in the year following that to
      which the obligation relates.
      In addition, the distributors arranged for the cancellation of the credits corresponding to the
      part of the energy saving obligation for 2009, not compensated on the cancelation of the
168   objective for that year.



      Provisions concerning accounting and functional separation
      (unbundling)

      With Resolution no. 11/07, partially amended by Resolutions no. 253/07 and ARG/com no. 57/10,
      the Authority issued an Integrated Text on administrative and accounting unbundling for
      companies operating in the electricity and gas sectors, modifying the current rules
      (established by Resolutions no. 310/01 and no. 311/01).

      This resolution introduces the requirement for vertically integrated groups to unbundle from
      a functional standpoint the distribution of electricity and gas, the transmission of electricity
      and the transport of gas from the activities it carries on in the free market. The purpose is to
      ensure neutrality in the management of these infrastructures and to prevent discrimination in
      the access to commercially sensitive information and cross-transfers of resources between
      segments of the various sectors (this latter objective is more directly pursued through the
      provisions regarding accounting unbundling).

      On the basis of the legislation, the activities subject to functional unbundling have been given
      decision-making and organizational autonomy by assigning the administration to an
      "Independent Manager".

      In implementing the provisions adopted by the AEEG with Determination no. 6/10 of the
      Director of the Tariff Department, A2A Reti Elettriche S.p.A., A2A Reti Gas S.p.A. and Azienda
                                   Half-yearly financial report at June 30, 2011

                                   Networks sector




Servizi Valtrompia S.p.A. have carried out the requirements of the TIU for 2010, while the
Independent Managers of Retragas S.r.l., Mincio Trasmissione S.r.l. and Seasm S.r.l. were
appointed during the first half of 2011.



Integrated water service
With Decree Law no. 225 of December 29, 2010 (the “Thousand extensions decree”) provision
was made for the general extension to March 31, 2011 (a date extendible to December 31, 2011
through decrees of the Prime Minister in conjunction with the Minister for the Economy and
Finance) of certain legal regimes - with expiry prior to March 15, 2011.
The conversion into law of Decree Law no. 2 of January 25, 2010 in fact provided for the
abolition of the Optimum Territorial Ambit Authorities and gave the regions the task of
assigning (possibly to new entities) the functions exercised by the Optimal Territorial Ambit
Authorities in accordance with the principles of subsidiarity, differentiation and suitability.
With Regional Law no. 21 of December 27, 2010, the Region of Lombardy required the
functions exercised by the Ambit Authorities to be assigned to the provinces. The Decree of
                                                                                                      169
the Prime Minister of March 25, 2011 entitled “Additional extension of terms relating to the
Ministry for the Environment and the Protection of Land and Sea” established December 31,
2011 as the end of the term for the suppression of the Ambit Authorities and completion of the
subsequent formalities.
With the community obligation Decree Law the legislator introduced a change to the
discipline of the transitional period for the concessions in course not deriving from public
procedures and relating to the water and waste management services.
However as the result of the referendum held in Italy on June 12 and 13, 2011, the formal repeal
is currently awaited of article 23-bis of Law no. 133/08 as amended by the above decree and the
requirement of article 154, paragraph 1 of Legislative Decree no. 152 of 2006, limited to the
section which envisages that “The tariff represents the fee for the integrated water service
and is calculated amongst other things by taking into account (…) the adequacy of the
remuneration of the capital invested (…)”.
As a consequence, therefore, the legislation on integrated water services is liable to change
during the year.
Further details in this respect may be found in the section relating to risks.


Optimal Territorial Ambit Province of Brescia
During the Consortium general meeting on December 21, 2010 details of tariffs for 2011 were
approved; these are applicable, for the various uses, in the municipalities belonging to the Ambit.
The municipalities of the Brescia Ambit have been subdivided into three tariff areas.
                                                  Half-yearly financial report at June 30, 2011

                                                  Networks sector




      In addition, the amount of the restricted portion of the water purification tariff applicable to
      users lacking a purification service was approved.

      A summary of the key quantitative and economic data of the sector are reported below.

      Quantitative data

                                                           06 30 2011        06 30 2010                Change     % 2011/2010

      Electricity distributed (GWh)                              5,756              5,618                 138            2,5%
      Gas distributed (Mcm)                                       1,155             1,292                 (137)        (10.6%)
      Gas supply points (Number)*                            1,255,821           1,255,821                  –                –
      Gas transported (Mcm)                                        226                249                 (23)          (9.2%)
      Water distributed (Mcm)                                       32                 34                  (2)          (5.9%)
      (*) Number of supply points used by the AEEG to determine admitted revenues for 2009 and 2010.


      Electricity distributed in the first half of 2011 amounted to 5,756 GWh, representing an
      increase over the same period of 2010 which arose mainly from a pick-up in consumption by
      industrial customers.
170
      The quantities of gas distributed totaled 1,155 Mcm, 10.6% down on the first half of the
      previous year. This trend was essentially due to the mild temperatures experienced during the
      first few months of 2011 which had an adverse effect on the demand for gas for heating
      purposes.

      For the same reasons the amount of gas transported amounted to 226 Mcm (249 Mcm for the
      six months ended June 30, 2010).

      The water distributed of 32 Mcm fell slightly over the same period of the previous year (-5.9%).

      The electricity distribution network management activities of the EPCG Group, acquired in
      September 2009 and consolidated on a line-by-line basis from the year ended December 31,
      2010, are also included in A2A’s Network Sector. Overall EPCG owns 18,500 km. of electricity
      network at low and medium voltage.

      The electricity distributed in Montenegro in the first half of 2011 was as follows:

      EPCG                                                                                                           06 30 2011

      Electricity distributed (GWh)                                                                                       1,272
                                       Half-yearly financial report at June 30, 2011

                                       Networks sector




Economic data

Millions of euro                                                   01 01 2011           01 01 2010   Change
                                                                  06 30 2011           06 30 2010

Revenues                                                                  347                 301        46
Gross operating income                                                    128                  117       11
% of revenues                                                          36.9%                38.9%
Depreciation, amortization and provisions                                 (59)                (58)       (1)
Net operating income                                                       69                  59        10
% of revenues                                                          19.9%                19.6%
Investments                                                                55                  60        (5)


The Networks Sector had revenues of 347 million euro in the first half of 2011 (301 million euro
for the six months ended June 30, 2010). The increase of 46 million euro is mainly due to the
contribution of the networks sector of the EPCG Group (34 million euro).

Gross operating income closed at 128 million euro (117 million euro for the six months ended
June 30, 2010), of which 4 million euro relating to the networks sector of the EPCG Group.
                                                                                                               171
Activities for managing the networks for the distribution and transportation of gas closed
with a gross operating income of 53 million euro in the first half of 2011, a rise over the same
period of the previous year (50 million euro for the six months ended June 30, 2010). This
increase is mainly due to the increase in the revenues admitted by the Electricity and Gas
Authority, arising mostly from the application of graduality mechanisms.

Electricity distribution activities closed with a net operating income of 71 million euro for the
period, an increase of 12 million euro over the first half of 2010. This change is due for 4 million
euro to the inclusion of the EPCG Group’s networks sector in the boundary of the sector and
for 8 million euro to electricity distribution in the Milan and Brescia areas. This latter increase
is mainly due to the income relating to the “specific company equalization”, arising from the
determination of the specific company correction factor for the III regulatory period (2008-
2011) at the end of September 2010 and therefore not recognized in the first half of 2010, as
well as minor costs arising from other equalization mechanisms (in particular the mechanism
equalizing measurement revenues).

Gross operating income for the water sector, amounting to 2 million euro, fell slightly over the
same period of the previous year (5 million euro for the six months ended June 30, 2010). This
fall was mainly the result of the lower volumes of water distributed during the period and
settlements relating to previous years.

Depreciation, amortization and provisions amounted to 59 million euro (58 million euro for the six months
ended June 30, 2010); of this 10 million euro relates to the networks sector of the EPCG Group.
                                         Half-yearly financial report at June 30, 2011

                                         Networks sector




      As a result of these changes, net operating income amounted to 69 million euro (59 million
      euro in the first half of 2010).

      Capital expenditure in the Milan and Brescia areas amounted to 54 million euro and regarded:
      • as far as electricity distribution is concerned, development and maintenance work on
         plant, and in particular the connection of new users, maintenance on secondary cabins,
         the extension and refurbishment of the medium and low voltage network and the
         maintenance and upgrading of primary plants (22 million euro);
      • in the gas distribution area, development and maintenance work on gas plant relating to
         the connection of new users and the replacement of medium and low pressure piping and
         meters (24 million euro);
      • in the integrated water cycle, work carried out on the water transportation and
         distribution network and the sewerage networks (8 million euro).




172
                                              Half-yearly financial report at June 30, 2011




                                            Other services and corporate




The following is a brief description of the activities carried out by this sector:
• Corporate (1): direction, coordination and control activities, such as business
    development, strategic direction, planning and control, financial management and the
    coordination of the Group's activities; central services to support the business and
    operating activities (e.g. administrative and accounting services, legal services,
    procurement, personnel management, information technology, communication services,
    etc.) provided by the parent company under specific intercompany service agreements.
                                                                                                                                    173
• Other services: activities relating to video-surveillance, data transmission, telephony and
    internet access services.

In addition to the activities carried out directly by A2A S.p.A., this area also includes the
following companies:



    Other services and
       corporate                                 Consolidated companies of the A2A Group

            Other services                     • Selene                                      • A2A Logistica
                                               • Aspem S.p.A.                                • EPCG
              Corporate




(1) This includes the General Manager's Office (Corporate and Market Area), the General Manager's staff (Technical and Operations
    Area) and the staff of the Office of the Chairman of the Management Board and the Chairman of the Supervisory Board.
                                             Half-yearly financial report at June 30, 2011

                                             Other services and corporate




      Economic data

      Millions of euro                                                   01 01 2011           01 01 2010    Change
                                                                        06 30 2011           06 30 2010

      Revenues                                                                  113                 109          4
      Gross operating income                                                    (14)                 (16)        2
      % of revenues                                                         (12.4%)              (14.7%)
      Depreciation, amortization and provisions                                 (13)                 (16)        3
      Net operating income                                                      (27)                 (32)        5
      % of revenues                                                         (23.9%)              (29.4%)
      Investments                                                                 11                 10          1


      The Other Services and Corporate Sector earned revenues of 113 million euro in the half year,
      of which 6 million euro relating to the services sector of the EPCG Group.

      The gross operating loss amounted to 14 million euro of which 2 million euro related to the
      EPCG Group.

174   After depreciation, amortization and provisions, there was a net operating loss of 27 million
      euro.

      Capital expenditure for the period amounted to 11 million euro and mainly related to
      investments in information systems (9 million euro).
                                   Half-yearly financial report at June 30, 2011




                                 Outlook for operations




The difficult situation in the energy and gas industries which by now has become structural,
which sees a significant lack of balance between production (or import) capacity and the level
of domestic demand, will be confirmed in the second half of 2011.

In terms of industrial performance, the good results of the Environment Sector and Heat and
Service Sector will partially offset a contraction in results in the Energy Sector.

                                                                                                 175
                                         Half-yearly financial report at June 30, 2011




                                       Human resources
                                       and industrial relations




      At June 30, 2011 the Group had 11,888 employees, of whom 2,758 work for the EPCG Group.

      Excluding other personnel costs, labor cost has risen by 11.4% compared with the
      corresponding six months in 2010, mainly as the result of the extension of the consolidation of
      EPCG from December 31, 2010, which led to an increase in costs of 25.1 million euro compared
      to the first half of 2010.

176   Excluding EPCG unit cost rose per employee in the boundary rose by 1.8 % in the first half of
      2011, mainly as the result of automatic contractual increases.

      Agreement on the local company contract for the areas of Milan and the Valtellina was
      reached during the first half of 2011.

      On completion of the trades union procedure for transferring the “Water Cycle” business
      from A2A S.p.A to A2A Ciclo Idrico S.p.A., the Gas-Water national collective bargaining
      agreement (CCNL) became applicable for the transferred employees on January 1, 2011,
      consistent with the new company’s corporate object; as a consequence negotiations have
      begun with the Brescia trades union organizations with the aim of governing certain aspects
      resulting from the application of the new CCNL by means of a local company contract.

      Discussions continued with the national sector organizations of the trades unions on subjects
      relating to the harmonization processes in the Group.

      Technical training has also been stepped up by means of courses relating in particular to
      compliance with legal requirements for safety in the workplace (Legislative Decree no.
      231/2001) amounting to approximately 12,000 hours, support for IT technologies (office and
      operating systems) and specialist technical matters. In total, training in the half year
      amounted to a total of some 30,000 hours.
                                  Half-yearly financial report at June 30, 2011




                                 Corporate Social Responsibility




A2A has Sustainability as one of its founding values, taking shape in the ability to generate and
distribute value in a long-lasting and harmonic way by reconciling the needs of the various
subjects with whom it interacts: investors, workers, local communities, suppliers, customers
and institutions.
An approach which is the result of over a hundred years of history which grows and renews
itself in the face of new challenges: the liberalization of the markets, the economic crisis,
internationalization, climate change and the rise in society’s sensitivity to environmental
                                                                                                    177
matters.
Underlying this commitment is the awareness that the main sectors in which the Group works
have a fundamental impact on the economic wellbeing of companies, the quality of life of
citizens, social development and the safeguarding of the environment.

This commitment is put into practice by the Group amongst other things by deploying
certified management systems in the spheres of quality, environment and safety. More
specifically as far as the environment is concerned the ISO14001 certification covers:

Plants
• 100% of installed hydroelectric power
• 100% of installed thermoelectric power
• 80% of the thermal power and 85% of the electric power of the cogeneration pool from
   fossil/renewable sources
• 100% of the waste treatment capacity in the waste to energy plants
• 87% of the treatment capacity of the other plants of the integrated waste cycle.

Networks
• Milan area gas distribution network
• Milan area electricity distribution network
• integrated water cycle of the Brescia Municipality (including the Verziano purifier)
• Milan area and Brescia area district heating network.
                                          Half-yearly financial report at June 30, 2011

                                          Corporate Social Responsibility




      In addition 11 assets are EMAS registered.

      In 2010 the A2A Group published its third Sustainability Report, the means it has used since
      2008 to account for its performance to its main interlocutors in terms of sustainable growth
      from an environmental, economic and social standpoint. This document is prepared in
      accordance with the rigorous principles of the GRI (Global Reporting Initiative) as integrated
      by the guidelines of the Energy Sector Utility supplement, obtaining a B+ level of compliance
      (verified by an external firm).
      Thanks to its performance in the sustainability field and its commitment to reporting this, A2A
      was listed in ten ethical financial indices in 2010.

      A selection of the main results reached by the Group in the Corporate Social Responsibility
      field since the beginning of 2011 are as follows:
      • in the March 2011 audit, A2A’s position as a member of the London Stock Exchange
         FTSE4Good ethical index was confirmed. This index is designed to measure the
         performance of companies which meet globally recognized corporate responsibility
         standards, in order to facilitate investment in those companies. The assessment carried
178
         out by the research provider EIRIS into the three Socially Responsible Investment (SRI)
         areas, the environment, social justice and corporate governance, required for being
         assigned a rating was positive.
      • On June 14, 2011, in the Assolombarda Auditorium, A2A reached the final of the “Initiative
         in favor of the environment” category of the Sodalitas Social Award with its Contagio
         environmental awareness project. This award is given each year to companies, business
         associations, industrial clusters and organizations who have been actively involved in
         Corporate Social Responsibility and Sustainability projects, consistent with their declared
         values. The Ninth Edition of the Award saw 206 companies taking part with a total of 251
         projects.
      • The Canavese district heating plant was awarded the Certificate of Merit in the “New
         district heating systems” category on the occasion of the 2011 edition of the International
         District Heating Energy Climate Awards, organized by the International Energy Agency
         (IEA) and by Euro Heat & Power (the European association of district heating operators).
      • In the sphere of its relations with trade associations, the general manager of the Technical
         and Operations Area, Paolo Rossetti, has been appointed for the next three years to lead
         the CIG, the Italian Gas Committee, the UNI-federated body delegated with the
         responsibility for technical standards for fuel gases in Italy.
      • In terms of human resource appraisal, the performance management system initiated in 2009
         has been extended to all of the Group’s employees, reaching the 4,300 people appraised in
         June. In addition, in the first part of 2011 an induction training program for over 200 newly
         hired employees began with the aim of presenting the Group’s main activities and businesses.
                                   Half-yearly financial report at June 30, 2011

                                   Corporate Social Responsibility




• The Group companies A2A S.p.A. and Partenope Ambiente S.p.A. supported the exhibition
    dedicated to Margherita di Savoia, the first queen of Italy, in the rooms of the Royal Palace
    in Naples. By doing this it was the aim of the Group, which has recently developed its
    industrial presence in Campania, to show its proximity to the local area and its support for
    obtaining the most out of the region’s historical and cultural heritage.
• Together with the Region of Lombardy A2A S.p.A. and Aprica S.p.A. began the sixth step in
    the Waste Reduction Action Plan (P.A.A.R), which concern farm delivery. In practical terms
    this service consists in providing a crate of biological, in-season fruit and mixed vegetables
    each week to every family in the system; on delivery, the crate used the previous week is
    collected for re-use.
• In 2011 A2A Energia S.p.A. entered an agreement with the Municipality of Milan for the
    supply of 100% renewable energy: 236 million clean kilowatt-hours supplied leading to a
    reduction of 90 thousand tonnes of CO2 a year. In addition, a plate is fixed onto buildings
    fed by green energy certifying that only energy from renewable sources is used there,
    thanks also to the use of the “Energia A2A Rinnovabile 100%. Certificata Recs” certificate.
.
                                                                                                     179
                                        Half-yearly financial report at June 30, 2011




                                        Innovation, development and
                                        research




      Research and constant innovation are essential factors for pursuing the objectives which the
      A2A Group has set itself and which are stated in its Charter of Values.
      These are activities which thanks also to the collaboration of external organizations such as
      research institutions and bodies provide considerable value added to the Group’s
      development and growth.



180
      District heating development plan for milan

      The realization of the “District heating development plan for the city of Milan” continued in
      2011; this plan, an integral part of the agreement stipulated in 2007 between the Municipality
      of Milan and A2A, has as its objective the upgrading of district heating throughout the city in
      order to achieve a significant reduction in the polluting emissions deriving from energy
      requirements for city heating.
      The plan aims to serve around 380,000 inhabitant equivalents by the end of 2012 and to
      achieve a total increase of 600,000 inhabitant equivalents over 2007 by the end of 2015.
      Amongst the more significant activities started up by A2A to reach these objectives and
      worthy of note are the development of the Figino network towards the San Siro quarter which
      is fed by the Silla 2 waste to energy plant and the development of the network fed by the
      Canavese plant towards the city center for the link with the Court as user. Included among the
      activities carried out at the production plants, emphasis should be given to the installation and
      start-up of the large-scale heat pump (15 MW) at the Famagosta power station.

      The following table sets out the energy and environmental benefits which may be achieved by
      putting the plan into practice.
                                      Half-yearly financial report at June 30, 2011

                                      Innovation, development and research research




District heating development plan for the city of Milan – Estimate of
the energy and environmental benefits to be achieved by 2015

                                                                                                 District
                                                                                                 Heating
                                                                                                    Plan

Inhabitant equivalents served [no.]                                                          + 600,000
Target                                                                                              2015
Reduction in fuel consumption [GWh/year]                                                             (413)
Reduction in emissions [tonnes/year]
NOx                                                                                                 (268)
SO2                                                                                                 (408)
PM10                                                                                                  (23)
CO2                                                                                              (163,384)




New heating-cooling plant with cogeneration at Varese hosptal

Varese Risorse is implementing a project for the construction of a heating-cooling plant with                181
cogeneration at the new Varese Hospital. On September 24, 2009 the thermal section of this
new plant, which produces steam and hot water to support/supplement the district heating by
means of three dual fuel boilers (natural gas and diesel) and has a heating core power of ~27
MWt, entered service. The cooling section (total installed power of 10 MWf through 4
absorption groups, 2 fuelled by hot water and 2 by steam) and cogeneration section (1 MWe
motor) of the new plant will enter service in September 2011.
Completion of this project will enable the so-called trigeneration (the combined generation of
electricity heat and cooling), which is seen by everybody as the new frontier of cogeneration, to be
achieved through this project. In addition, there will be a significant saving of energy and reduction
of greenhouse gas (GHG) emissions arising from the increase in the number of hours worked in
cogeneration mode by the turbogas having nominal power of MWe existing in the Via Rossi district
heating plant.
The total savings achieved in this way will be entitled to white certificates (Energy Efficiency
Credits).



A2A electric mobility

E-moving is the electric mobility project being promoted by A2A in partnership with Renault and in
conjunction with the municipal administrations of Brescia and Milan. A2A is in charge of realizing the
infrastructure for the recharging of electric cars while Renault provides vehicles from its zero emission
range (saloon cars and small vans), equipped with the latest generation lithium-ion batteries.
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                                        Innovation, development and research




      The pilot stage took off in June 2010 and will continue for the whole of 2011. The two
      Lombardy municipalities see themselves becoming the cities of reference for electric mobility
      in Italy, being the first to begin developing a complete cutting edge structured electric
      recharging network, with a total of 270 recharging points, of which around 150 will be available
      for the use of motorists in public places (roads, parking lots etc.), while the remainder will be
      for private use (garages, condominium parking lots, business parking lots).
      As of today 18 columns have been installed in Brescia, making a total of 36 recharging points;
      as regards private points, 3 have been set up at Renault dealers and 31 are aimed for company
      fleets and private users.
      In Milan 32 columns have been installed for a total of 64 recharging points on public land. For
      the private areas there are 10 recharging points at Cadorna station, where a short while ago
      the new electric car-sharing service E-VAI, created from the collaboration between the Region
      of Lombardy, A2A, Trenitalia – Ferrovie Nord and Sems, a company of the Fnm group, was
      inaugurated. Eight recharging points have been set up at Renault dealers (the partner in the
      project), 4 in A2A areas and 4 in areas belonging to the Municipality. To these a further 40
      recharging points at ATM interchange points are about to be added. 
182
      The objective of E-moving is to test every component of the electric mobility operating model:
      the technology and the locating of the recharging infrastructure, the processes and
      commercial solutions, the interaction between the recharging network and the vehicles, the
      supply of energy, the billing systems, battery management and car maintenance.
      Consistent with the initiative’s environmental aims, the electricity to fuel the vehicles will
      mostly be produced from renewable sources, a factor useful in pursuing the objective of
      having a complete zero emission cycle.


      Acerra waste to energy plant

      The Acerra waste to energy plant treated 300 thousand tonnes of refuse in the first six months
      of 2011, fully in line with the requirements of the Integrated Environmental Authorization
      which envisages a quantity of treatable waste of 600 thousand tonnes/year. At the same time
      the plant produced and put 260 GWh of electricity into the grid.
      Particular emphasis has been placed on environmental aspects: the waste to energy plant is
      equipped with leading edge combustion gas purification technologies and as part of the
      structural improvement measures envisaged by the Integrated Environmental Authorization
      the following have been installed at the plant under specific instructions from the Prime
      Minister’s Office: a portal measuring the radioactivity of the vehicles transporting the waste,
      a second continuous monitoring system for controlling furnace emissions (SME), a
      continuous system for monitoring the mercury in the fumes and a system for sampling micro-
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                                  Innovation, development and research




pollutants (PAHs, dioxins and furans and PCBs).
These instruments entered service fully in February 2011.



Project for the soundproofing of double chamber compressors for the
collection of glass and paper

The objective of this project is to identify measures to soundproof the rear part of the double
chamber compressors used in the city of Milan to collect glass and paper and evaluate these
by testing.
Between 2011 and 2012, 36 vehicles will be equipped with a rear cap soundproofing system
developed by Amsa which consists in the installation of sound absorption panels inside and
outside the equipment and a hydraulic system aimed at slowing down the speed at which the
glass falls into the collecting bin. The sound absorption material has a composite and stratified
nature, while the intervention on the equipment envisages the presence of a flap positioned
on the mouth from which the glass falls, activated by a hydraulic cylinder which remains in a
closed position when the bin is emptied and subsequently assumes an open position.
                                                                                                    183
This interruption to the fall and the panel soundproofing have enabled a reduction of up to 12
decibels to be achieved at the rear part of the vehicle and at a distance of six meters when the
glass is being collected, which in terms of noise peaks, measured in pascals, means a
decrease from 40 to 10 Pa.



District heating from the Cassano d’Adda thermoelectric plant -
auxiliary boiler

The Cassano d’Adda (MI) thermoelectric plant produces electricity by means of two
combined cycles for a total installed electric power of 995 MW. The heat for the district
heating users of the Cassano d’Adda municipality is extracted from the combined cycles. As of
today the power installed with users amounts to approximately 33 thermal MW; the
development plan for the district heating network envisages a further increase in users during
2011 and 2012, which also includes the district of Albignano in the municipality of Truccazzano
(MI).



Brescia waste to energy plant: air nozzle testing in the NOx reduction
system

Following the start of industrial use of the new high-dust catalyzers on all three combustion
lines at the end of 2010 (an initiative included in a European research project called
NextGenBioWaste – Innovative Demonstration for the Next Generation of Biomass and Waste
                                          Half-yearly financial report at June 30, 2011

                                          Innovation, development and research




      combustion plants for energy recovery and renewable electricity production), since June 2011
      testing has been taking place on optimizing the non-catalytic reduction system (SNCR) with
      which the plant has been equipped since it entered use. An air nozzle will be installed on line 3
      to inject ammonia solution into the combustion chamber to check the possibility of replacing
      the present water injection system in order to obtain better nebulization and hence a more
      effective reaction of the ammonia to reduce NOx.


      Brescia waste to energy plant: new fire detection system in the waste
      bunker

      Since the end of 2010 a system of infra-red television cameras connected to monitors situated
      in the control room and the overhead travelling crane command cabin has been in service at
      the plant, with the aim of detecting sources of heat in the waste in the bunker in order to
      prevent potential fires breaking out in the bunker and in any case enabling the equipment to
      be maneuvered in the event of low visibility, for example in the case of intervention with
      remote-controlled hydrants on the source of a fire.
184


      Brescia waste to energy plant: inertization of fly ash (COSMOS project)

      A project has been initiated for the inertization of fly ash through the use of pilot equipment to
      check the effectiveness of the process, which has already been demonstrated in laboratory
      tests, also on a pre-industrial scale.
      The process for rendering end filtration dust inert has been developed by the University of
      Brescia and is funded by the European Commission as part of the LIFE+08 Program- Project
      ENV/IT/434 title COSMOS "COlloidal Silica Medium to Obtain Safe inert".
      The equipment, which resides in an area of approximately 100 m2 inside the Brescia waste to
      energy plant, is made up of four separate units:
      1) storage and moving of dusts and liquids;
      2) blending of dusts with suitable additives;
      3) dosage of dusts and additives/control panel;
      4) sludge washing.
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                                 Risks and uncertainties




The A2A Group has a risk assessment and reporting process based on the Enterprise Risk
Management method of the Committee of Sponsoring Organizations of the Treadway
Commission (COSO report), whose purpose is to make business risk management an integral
and systematic part of management processes.

In particular, A2A has defined a risk model that takes account of the Group's characteristics, its
multi-business vocation and the sector to which it belongs; it has also commenced a process
of self-assessment of risks which directly involves management.                                      185

This process accompanies the monitoring of commodity price risk which is already
consolidated practice for the Group. This risk is looked after centrally by the parent company,
which has the task of managing it and monitoring the way it evolves.

Set out below is a description of the main risks and uncertainties to which the Group is
exposed, considering the sectors in which it operates and the specific aspects of its business
model.



Risks connected with the external environment

Commodity price risk (energy risk management)

Commodity price risk, namely the market risk linked to changes in the price of energy raw
materials such as electricity, natural gas, coal and fuel oil as well as the by-products of these
materials, is handled as part of the Risk Management Organizational Unit.

Risk Management has the objective of stabilizing the cash flows generated by the asset
portfolio and outstanding contracts through the use of derivative financial instruments, to
ensure there is economic and financial equilibrium in the Group.

More specifically, the market risk linked to fluctuations in energy commodity prices and the
exchange rates associated with these are managed centrally by means of a netting process
applied to the entire exposure of the Group's portfolio, which is constantly monitored.
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                                          Risks and uncertainties




      Each year the Management Board of A2A S.p.A. defines the commodity risk limits for the
      Group.

      Consistent with the Group’s Energy Risk Policy, the Risk Committee ensures compliance with
      these limits and where necessary defines the hedging strategies designed to bring risk within
      the set limits.



      Interest rate risk

      Interest rate risk is connected with medium-long term loans and has a different effect
      depending on whether the loan bears interest at a fixed or floating interest rate. If interest is
      payable at a floating rate then the interest rate risk is on the cash flows, while if interest is
      payable at a fixed rate then the interest rate risk is on the fair value.
      The interest rate risk management policy that has been adopted is designed to reduce any
      losses arising from a fluctuation in interest rates in the floating rate case to a minimum by
      converting these to fixed rates or arranging collar contracts, and to reduce the increased cost
186
      of the fixed rate over the floating rate (“negative carry”) to a minimum.

      A structured model has been developed internally to analyze and manage interest rate risk. The
      method used to calculate the exposure to this risk is based on the Montecarlo method, which
      enables the effect that fluctuations in interest rates have on future cash flows to be calculated.
      Under this methodology at least ten thousand scenarios are simulated for each key variable, on
      the basis of the volatilities and correlations associated with them, using market rate forward
      curves for future levels. In this way a probability distribution of the results is obtained from which
      the worst case scenario and best case scenario are extrapolated using a 99% confidence level.



      Liquidity risk

      The Group is currently not exposed to short-term liquidity risk, having 2,080 million euro of
      committed lines of credit available at the balance sheet date of June 30, 2011. In the fourth
      quarter of 2010, A2A S.p.A. agreed new committed lines having terms ranging from 5 to 7 years.
      These new lines replaced the committed lines expiring mainly in 2011, increasing availability in the
      medium to long term. These lines will be used to satisfy temporary liquidity requirements.

      In addition, the Group has medium-long term facilities, forming part of agreements but not
      yet used, totaling 253 million euro.
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                                  Risks and uncertainties




Default risk and covenants

In October 2003 and in May 2004, A2A S.p.A. issued two bond loans each having a nominal
value 500 million euro and a 10-year maturity. In 2009, the Company issued a bond loan of 1
billion euro maturing in November 2016.

There is a credit rating clause in the agreement with the EIB for the loan originally of 100
million euro repayable in 2012 (a rating lower than BBB), for the loan originally of 100 million
euro repayable in 2014-2016 (a rating lower than BBB), for the loan originally of 200 million
euro repayable in 2023 (a rating lower than BBB) and for the loan originally of 200 million euro,
of which 150 million euro is repayable in 2025 (a rating lower than BBB) and 50 million euro
repayable in 2026 (a rating lower than BBB), and in the agreement with CSA for a bond loan in
yen repayable in 2036 and the related cross-currency swap contract ("put right" with a rating
lower than BBB-).

There is a credit rating clause in the agreement for the A2A S.p.A. loan of 85 million euro,
brokered by EIB, bearing floating rate interest and repayable in June 2018; more specifically,
the company has undertaken to maintain an investment grade rating throughout the whole              187
term of the loan.

If that commitment is not met, there are balance sheet, income statement and financial
covenants linked to the debt/equity ratio, the debt/gross operating income ratio and the gross
operating income/financial expenses ratio. The company calculates these ratios every twelve
months on the basis of its consolidated financial statements in order to review the covenants.

The A2A Group has stipulated a number of committed lines of credit with various financial
institutions for a total of 2,950 million euro (of which 2,835 million euro stipulated by A2A
S.p.A.) which are not subject to any covenants.
As regards the bond loans, the above-mentioned loans and the committed lines of credit
contain (i) negative pledge clauses under which A2A S.p.A. undertakes not to set up real
guarantees on the assets of A2A S.p.A. and those of its directly held subsidiaries over and
above a specific threshold; (ii) cross default/acceleration clauses which entail immediate
reimbursement of the loans in the event of serious non-performance; and (iii) clauses that
provide for immediate repayment in the event of declared insolvency on the part of certain
directly held subsidiaries..

A2A S.p.A. has undertaken not to give up control over Delmi S.p.A. for certain committed lines
of credit and for all lines to reserve the same treatment for the lending banks as that due to
creditors under other unsecured loan agreements (pari passu).

In addition, the loan of the subsidiary Abruzzoenergia S.p.A. is secured by a mortgage of up to
264 million euro.
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                                         Risks and uncertainties




      As matters currently stand there is no default on the part of companies of the A2A Group nor
      a breach of any of the covenants mentioned above.



      Legislative and regulatory risk
      The Group operates in a highly regulated sector. As a consequence, one of the risk factors of
      the business is the constant and not always predictable evolution of the legislative and
      regulatory situation for the electricity and natural gas sectors, as well as for the sectors
      relating to the management of the water cycle and environmental services.

      In order to deal with these risk factors the Group has adopted a policy of monitoring and
      managing legislative risk by having various levels of control, in order to mitigate the impact of
      this to the extent this is possible. This involves collaborative dialogue with the institutions and
      with the bodies which govern and regulate the sector, active participation in trade
      associations and the work groups set up at these entities and a detailed review of changes in
      legislation and the provisions issued by the sector Authority.
188
      It also involves constant dialogue with the business units affected by legislative changes in
      order to assess the potential effects in full.

      The main topics involved in current changes in legislation are as follows:
      • the rules governing the terms and conditions of large hydroelectric concessions;
      • the evolution in the rules of CIP 6/92 conventions;
      • the rules on the regulation of local public services, particularly in light of the amendments
         and additions made to article 23-bis of Law no. 133/08 on the duration of the transitional
         period for current mandates, as per article 15 of Law no. 166/2009 referred to above;
      • the evolution of the rules for the Green Certificates market.


      Large hydroelectric concessions

      The 2006 Finance Law provided for a 10-year extension of large concessions regarding water
      for hydroelectric use in exchange for adequate investment in the modernization of the
      installations. (This 10-year extension was based on paragraphs 6, 7 and 8 of article 12 of
      Legislative Decree no. 79/99, the "Bersani Decree"). Sentence no. 1/2008 of the Constitutional
      Court declared that part of the law was illegitimate as it violated constitutional provisions
      regarding the jurisdiction of regions over energy matters with respect to the State. This sentence
      by the Court led to a situation where it was no longer possible to extend the concessions,
      although it did not entirely reinstate the rules contained in article 12 of the Bersani Decree
      (paragraphs 3 and 5 remain repealed, paragraph 2 has been repealed and paragraph 1 has been
      replaced by the first part of paragraph 483 of article 1 of the 2006 Finance Law). According to the
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                                   Risks and uncertainties




sentence of the Constitutional Court, the determination of the tender parameters (minimum
organizational and financial requisites for operators, parameters for the increase in power and
energy generated) by the Ministry for Economic Development will also have to provide for the
suitable involvement of the regions which can be achieved through the Joint Conference.

Article 15, paragraph 6 of Decree Law no. 78/2010 (the Budget Decree Law), published in the
Official Journal of May 31, intervened on this matter by raising the bases for the calculation of
the extra fees payable on large hydroelectric concessions (article 15, paragraph 6).

With an amendment to the text, in view of the conversion of the decree into law which was
carried out at the end of July by means of Law no. 122/2010, the above legislation was
supplemented by additional provisions concerning the duration of outstanding concessions,
in turn declared illegitimate by sentence no. 205/2011 of the Constitutional Court published on
July 13, 2011.

In addition, with a note of March 15, 2011, the European Union provided communication to the
Italian Government as to the issue of a notification of default letter against the Republic of Italy
for the request for clarifications regarding the provisions as per Law no. 122/2010. The               189
Commission believes in this respect that the means by which an extension to the concessions
provided therein is given may represent a breach of freedom of establishment regulations as
per article 49 of the TFEU. The infringement procedure is expected however to be dismissed
following sentence no. 205/2011 of the Constitutional Court.

The following matters are highlighted in particular with respect to the provisions introduced
by Law no. 122/2010:
• from January 1, 2010 the municipalities and consortia of mountain catch basins receive
    from the holders of large hydroelectric concessions the extra fees as per articles 1 and 2 of
    Law no. 925 of 1980, updated respectively in the amounts of 28 and 7 euro for each kW of
    nominal power, without prejudice to the methods of additional updating in force;
• the Ministry for Economic Development, in conjunction with the Ministry for the
    Environment and subject to agreement with the Joint Conference, must determine by
    means of a measure of its own the minimum organizational and financial requisites, the
    parameters and the timing regarding the tender procedure;
• if at expiry date of the outstanding concessions as extended the procedure to identify the
    concessionaire has not yet been completed, the outgoing concessionaire shall continue in
    management, with unchanged conditions, until the party to whom the tender is awarded
    takes over;
• the amounts received by the Municipalities and the State pursuant to the provisions of the
    2006 Finance Law prior to sentence no. 1 of the Constitutional Court of January 2008 shall
    be kept on a definitive basis by the bodies which received them;
                                        Half-yearly financial report at June 30, 2011

                                        Risks and uncertainties




      • the concessions and related plant which are governed by international conventions shall
         remain exclusively subject to the legislation of the State, including for the purpose of the
         ratification of any agreement modifying the respective regime; with respect to A2A S.p.A.,
         this provision is applicable to the concession held by the Spoel, the governance of which
         derives from an international convention between the Republic of Italy and the Swiss
         Confederation.
         By means of the Regional Law of December 20, 2010, published in the Official Bulletin of
         the Lombardy Region of December 27, 2010, the Region of Lombardy has adopted
         additional provisions on the subject, in view of the expiry of certain of the outstanding
         concessions.


      Temporary continuation of use

      More specifically, the Regional Council may, solely for concessions expiring up to December
      31, 2015, permit the granting of the concession to the outgoing concessionaire to continue on
      a temporary basis for the time required to complete the assignment procedures and for
190   periods which in any case do not exceed five years.

      For the period of the temporary continuation of the concession, the outgoing concessionaire
      is required to carry out the following:
      • to pay the region an additional fee (of an amount not currently quantified) with respect to
         the fee and extra fee and free of charge sale of energy already established;
      • to observe the additional technical and economic usage conditions required by the
         regional council through its resolution;
      • to carry out at its own expense any ordinary and extraordinary maintenance required to
         ensure the full efficiency of the assets and works and to notify the regional council of the
         program of interventions to be realized.


      Expiry of the mandate

      On the expiry of the mandate, the region acquires title to the works and plant subject to the
      concession, in order to contribute them, within 6 months of that date, in ownership to special-
      purpose companies with non-transferable wholly-owned public capital which are controlled
      by the region, and in which local authorities and/or their forms of aggregation participate,
      without charge, in an amount of not less than 30%. The industrial usage of the works and plant
      will then be entrusted to third parties by means of publicly open competitive procedures or
      alternatively to mixed public and private companies held by the mountain province having
      territorial jurisdiction (provided the selection of the private shareholder is made by means of
      a competitive procedure whose object is the quality of the shareholder and the assignment of
      specific operational tasks connected with the industrial management and the investment of
                                      Half-yearly financial report at June 30, 2011

                                      Risks and uncertainties




the private shareholder is between 40% and 60% of share capital, and on condition that if the
provinces of reference do not fall within the parameters established by the 2007 Finance Law
and referred to by Law no. 122/2010 then they have 50% of their territory at least 500 meters
above sea level).


Use of infrastructure and plant
In order to use the infrastructure and the plant, the mandated party will obtain access to the assets
owned by the special-purpose company against payment of a fee in part fixed (determined on the
basis of the average annual nominal power of the plant) and in part variable (in proportion to the
production achieved, valued on the basis of the results of the power markets).
The Council of Ministers has appealed to the Constitutional Court against certain clauses of article
53-bis of Regional Law no. 26/2003 introduced by the Regional Law of December 20, 2010 on the
basis that these are prejudicial to State jurisdiction. It is not, however, possible to determine what
effect this proceeding may have on the regime relating to the extension of outstanding
concessions, which has not been challenged by the Government. The hearing of the Constitutional
Court is expected to take place in October.
                                                                                                                191
With Resolution no. 1205 of December 29, 2010 the Regional Council initiated the “temporary
continuation” by A2A S.p.A. of the use of the shunting and hydroelectric plants of Stazzona, Lovero
and Grosotto. A2A S.p.A. and other operators, for the concessions which regard them and who find
themselves in the same condition, have appealed against the resolution at the High Court of Public
Waters. In its appeal to the High Court, A2A has also requested the judge to raise a question of
constitutional illegitimacy incidentally concerning the regional legislation regarding the
“temporary continuation of use” which has not been challenged by the Government.


Evolution of the rules of the CIP 6/92 conventions

Law no. 99/2009 (the "Development Law") establishes that the Ministry for Economic
Development has responsibility for defining the criteria for the updating of the Avoided Fuel
Cost and that mechanisms be proposed to producers for the early termination of the CIP 6/92
conventions in order to reduce the costs of maintaining these arrangements.

This regulation was introduced by a decree of December 2, 2009, which applies solely to plants fed by
process or residual fuels or by energy recoveries, or similar types fed by fossil fuels, and by a decree of
August 2, 2010 on the early termination of the CIP 6/92 conventions for approximately 2,000 MW of similar
plant fed by fossil fuels.

Both decrees describe the method of calculating the fees due in the case of the continuation of the
conventions through to their expiry date and the fees to be paid in the case of early termination, entrusting
the Energy Services Manager (GSE) with the task of checking - as an essential condition for termination -
that the difference between the two is positive and thus leads to a saving for consumers in absolute terms.
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                                               Risks and uncertainties




      The categories of plant for which as of today provisions have been issued implementing the rules
      contained in the Development Law therefore do not include plants fed by renewable sources and by
      waste, for which the implementation of the provision will be carried out by means yet to be established
      following further assessments by the Energy Services Manager, the Ministry for Economic Development
      and the Electricity and Gas Authority.


      Regulation of local public services
      At the end of July 2010 the Government issued the regulation implementing the provisions of
      article 23-bis of Law no. 133/08 regarding local public services of economic importance.
      The provisions relating to the distribution of natural gas and electricity were excluded from
      the application of the provisions of article 23-bis, firstly by article 30, paragraph 1 of Law no.
      99/09 and then by article 15, paragraph 1 a) of Decree Law no. 135/09.
      This legislation therefore regards the water and waste sectors.


      Integrated Water Service and Waste Management

192   By community obligations Decree Law no. 135/09, for assigning the management of local
      public services governed by the rules in article 23-bis, the legislator provides for an ordinary
      and special process.
      • Under the ordinary process the appointment is made by public procedure with the
          beneficiary being either a private economic subject or a mixed public-private subject,
          providing however for strict conditions on the features of the private partner.
      • The special process, which envisages an in-house mandate, may only be used in
          exceptional circumstances which are identified by the legislation (economic, social, geo-
          morphological conditions), subordinate moreover to the requirement to suitable
          publicity and the motivation and opinion of the antitrust regulator.

      The community obligations Decree Law has additionally introduced a change in the discipline
      of the transitional period during which mandates which are outstanding and do not derive
      from public procedures remain in force.

      Certain scenarios may be outlined on the basis of the provisions which have been introduced.

      In particular, as far as it may be of interest, the provision exists by which the direct
      appointments assigned at October 1, 2003 to companies having a public investment which are
      already listed on the stock market at that date and to subsidiaries of these pursuant to article
      2359 of the Italian civil code cease at the expiry date envisaged in the service contract, on
      condition that the public investment reduces, also gradually, by means of a public procedure
      or forms of private placement with qualified investors and industrial operators, to a holding
      not exceeding 40% at June 30, 2013 and 30% at December 31, 2015; if that is not the case, the
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                                     Risks and uncertainties




appointments will cease, without deferral and without the need for a suitable resolution by
the appointing body, on June 30, 2013 and December 31, 2015 respectively.

The regulatory framework summarized above was repealed as a consequence of the repealing
referendum of June 12 and 13, 2011, as enunciated finally by Presidential Decree no. 113 of July
18, 2011.

As a result of this referendum the following no longer hold (i) the dates of the anticipated
cessation of outstanding concessions arising from other than public procedures, (ii) the
reasons for not being able to take part in new public procedures and (iii) the standardization
of the means by which local public services are allocated.

In the absence of further laws or regulations on this matter, the outstanding concessions may
continue until their original deadline. For the main urban hygiene contracts held by the Group
(collection, street sweeping - excluding management-ownership of disposal plants) the
original deadlines are as follows:
• Amsa - Municipality of Milano natural termination in 2021;
• Aprica - Municipality of Brescia natural termination in 2050 (under the original bylaws of          193
    ASM Brescia, which becomes 2100 if the post-merger bylaws are considered);
• Aprica - Municipality of Bergamo natural termination in 2023;
• Aspem - Municipality of Varese natural termination in 2030.

For the main Brescia province water service contracts:
• A2A Ciclo Idrico - Municipality of Brescia natural termination in 2050.

Future concessions will also not be subject to the regime as per article 23-bis, which has been
removed from legislation.

As a means of carrying out the requirements on admission of the question, until new
legislation or regulations are issued on the matter, at the present time municipalities must
apply community principles.

The outcome of the consultation concerning referendum question no. 2, as stated in
Presidential Decree no. 166 of July 18, 2011, has on the other hand led to the repealing of article
154, paragraph 1 of Legislative Decree no. 152 of 2006 (reported below), restricted to the
following section:
• “The tariff represents the fee for the integrated water service and this shall be calculated
    by taking into account the quality of the water service and the service provided, the
    necessary works and adjustments, the extent of the costs for managing the works, the
    adequacy of the remuneration of the capital employed and the costs for managing the
    protected areas, and a share of the running costs of the Ambit Authority, in order that full
    coverage of the investment and running costs is assured in accordance with the cost
                                         Half-yearly financial report at June 30, 2011

                                         Risks and uncertainties




         recovery principle and in accordance with the principle of “who pollutes pays”. All the
         portions of the tariff for the integrated water service have the nature of a fee”.

      For the purpose of determining the tariff for the integrated water service, therefore, the
      normalized method will continue to apply. This method is dictated by the Ministerial Decree of
      August 1, 1996, legislation delegated by article 13 of Law no. 34/96, and provides for the
      remuneration of employed capital, until the legislator issues the decree envisaged by article
      154.

      In this respect, it should also be noted that also in the event of a generalized application of the
      principles contained in the Water Framework Directive (2000/60/EC), at article 9 this latter
      establishes the principle of the “recovery of costs for water services”, which must be pursued
      starting from an economic analysis (Annex III) which considers an estimate of the investments
      connected with meeting long-term supply and demand..

      Finally, it should be noted that the inter-ministerial decrees that must be issued to implement
      article 154 of Legislative Decree no. 152/06 must take into account the repeal required by the
194   referendum and hence regulate the tariff in consideration of all the additional factors also
      present in paragraph 1:
      – quality of the water resource
      – quality of the service provided
      – necessary works and adjustments
      – running costs for the works
      – costs for managing the protected areas
      – share of the functioning costs of the AATOs (which are shortly expected to be replaced by
         other bodies).


      Natural Gas and Electricity Distribution

      As far as the distribution of electricity is concerned, article 1, paragraph 2 c) of Law no. 239/04
      states that concessions are granted for electricity distribution on the basis of the
      requirements of law, while at article 9 the Bersani Legislative Decree (no. 79/99) identifies the
      Ministry for Economic Development as the body granting the local concession, comprising
      one or more municipalities.

      With respect to the natural gas distribution service, in safeguarding the provisions of
      Legislative Decree no. 164/2000 and article 46-bis of Decree Law no. 159 of October 1, 2007,
      converted with amendments into Law no. 222 of November 29, 2007 regarding the
      distribution of natural gas, Law no. 99/2009, the “Development Law”, defines the new
      “Minimum Territorial Ambits” for which tenders will be called to allocate the service to the
                                      Half-yearly financial report at June 30, 2011

                                      Risks and uncertainties




Ministry for Economic Development, in conjunction with the Ministry for Regional Affairs,
after consulting with the Combined Conference and the Electricity and Gas Authority.

On March 31, 2011 the Decree of the Ministry for Economic Development dated January 19,
2011 was published in the Official Journal; this identifies 177 Minimum Territorial Ambits and
provides details by region in Attachment 1.

Nevertheless, the precise identification of the individual municipalities making up each
Minimum Territorial Ambit has been deferred to a subsequent decree of the Ministry for
Economic Development, “Attachment 2”, which will be adopted in conjunction with the
Ministry for Regional Affairs and is to be communicated to the Combined Conference. This
communication is currently expected to be made in September 2011.

The criteria followed for identifying the municipalities included in each individual Ambit
envisage a maximum of 50 municipalities for Ambits with more than 50,000 effective
customers; in addition, municipalities fed by the same distribution plant will be included in the
same Ambit. Account will also be taken of population density and the specifics of the area.
                                                                                                              195
In respect of the blocking of tenders it should be noted that at article 24, paragraph 4 of
Legislative Decree no. 93 of June 1, 2011 (Third Energy Package), published in the Official
Journal on June 28, 2011, the legislator has specified in more detail than earlier which of the
tenders for assigning the gas distribution service which have already started up and have yet
to be completed may be awarded on the basis of the procedures applicable at the date when
they were called.

More specifically, all the tenders for which by the effective date of the above-mentioned
legislative decree a tender notice has been published in the case of an open procedure or
invitation letters have been sent in the case of a restricted procedure may be carried out on
the basis of the procedures applicable at the date on which they were called, provided that
such documents include the criteria for evaluating the offer and the repayment amount for
the outgoing operator.

On the other hand tenders not included in these cases must, from June 29, 2011, the date on
which the above-mentioned decree became effective, be carried out exclusively for Territorial
Ambits as per article 46-bis of Law no. 222 of 2007 and on the basis of the criteria referred to
therein, to be issued shortly.

In respect of the criteria for the tenders for the allocation of the distribution service, said article 46-
bis establishes that the Ministry for Economic Development, in conjunction with the Ministry for
Regional Affairs, after consulting with the Combined Conference and on the basis of the opinion of
the Electricity and Gas Authority, shall identify the “criteria for the tender and the valuation of the
                                         Half-yearly financial report at June 30, 2011

                                         Risks and uncertainties




      offer for allocating the gas distribution service”. The criteria to be used for this purpose are, in
      addition to the economic conditions, the benefits for consumers, the quality and safety standards
      and the soundness of the investment and development plan. At the present time the opinion of the
      State Council is awaited together with the signatures of the competent ministers.

      Finally, the Ministerial Decree dated April 21, 2011 has been published in the Official Journal no.
      102 of the ordinary series of May 4, 2011, becoming effective the following day; this concerns
      provisions for regulating the social effects connected with the new means of allocating gas
      distribution concessions, the “Social Clause” measure.

      This decree, drawn up by the Ministry for Economic Development and the Ministry for
      Employment and Social Policies, contains regulations to safeguard the jobs of the personnel
      of the outgoing distribution company following the awarding of the service to another
      company, together with a series of obligations for this latter company. The incoming operator
      is required to hire at least a number of employees not exceeding the sum of the staff at the
      plants forming part of the tender and a portion of the personnel with central functions
      supporting distribution and measurement.
196
      The protection envisaged for employees with the above hiring requirement consists in the
      fact that they will be immediately directly transferred to the company taking over, with
      guarantees being made of their previous employment conditions of an economic nature and
      long-term service schemes of which they are members. Suitable lay-off schemes will be
      applied for those members of staff who on the basis of the above-mentioned conditions turn
      out to be in excess to needs, without prejudice to the possibility of being rehired should the
      new company seek additional personnel within two years of the date of the tender.


      Evolution of the market rules regarding Green Certificates and legislation regarding
      the encouragement of production from renewable sources

      On March 29, 2011 the Legislative Decree implementing Directive 2009/28/EC on the promotion of
      the use of energy from renewable sources became effective; this had already been available in draft
      form since December 2010 and was subsequently submitted for review by the parliamentary
      committees.
      Certain aspects of the draft proposed in December were amended during the subsequent review.
      The main measures adopted by the decree, though, may only be implemented following the issue
      of further ministerial decrees (the majority of which by the Ministry for Economic Development
      and the Ministry for the Environment) with six-monthly deadlines, starting from the effective
      date of the legislation.
                                    Half-yearly financial report at June 30, 2011

                                    Risks and uncertainties




Reform of mechanisms to encourage renewable sources - Reference provisions when
fully operational

The decree requires that production from renewable sources for plants entering use after
December 31, 2012 should be given incentives by:
• recognizing a feed-in tariff for plants of up to 5 MW of installed power (this threshold will
   vary on the basis of the characteristics of the various renewable sources used);
• Dutch auction mechanisms run by the GSE for plants having installed power exceeding the
   above limits.

The feed-in tariff will be attributed exclusively to the production of new plants, including
those built following complete reconstruction, upgraded plants, limited to the additional
production available, and hybrid power plants, limited to the portion of energy produced from
renewable sources.

The incentive will additionally be allocated, “for power quotas”, to the production of plants
which have been fully or partially refurbished, up to a maximum of 25% for partial
refurbishment and 50% for total refurbishment. The two portions can increase to 80% and              197
90% (respectively in the cases of partial and total refurbishment) for plants fuelled by
biomasses, including those fuelled by the biodegradable fraction of waste.


Reform of mechanisms to encourage renewable sources - Transition to the regime

Production from renewable sources for plants entering use by December 31, 2012 will be
encouraged with the existing mechanisms. For the Green Certificate mechanism a gradual
reduction of the required portion is however envisaged, which will fall to zero by 2015, as well
as the repeal of the reference legislation (as per article 11 of the Bersani Decree) starting from
2016, after which therefore producers from renewable sources will no longer receive the
Certificates.

From 2012 to 2015 the GSE will withdraw the certificates issued for production from
renewable sources and left unsold at a price of 78% of that established by paragraph 148 of
article 2 of the 2008 Finance Law. Over the same period of time the GSE will additionally
withdraw the unsold certificates issued for production from cogeneration sources connected
with district heating at the average price of the certificates on the market during 2010.

Electricity imported from January 1, 2012 will not be liable to the requirement to purchase Green
Certificates only if it forms part of national energy saving objectives.

The implementation decrees for the incentive mechanisms planned when everything is fully
operational (feed-in tariffs and Dutch auctions) will govern the transition from the old to the
new incentive mechanism, in particular as far as the right to use the Green Certificates for
years after 2015 is concerned.
                                        Half-yearly financial report at June 30, 2011

                                        Risks and uncertainties




      Guarantee of origin

      The decree requires that by the means envisaged by article 1, paragraph 5 of Decree Law no. 73
      of June 18, 2007 (completing the liberalization of the sale of electricity), converted with
      amendments into Law no. 125 of August 3, 2007, the method for the issue, recognition and use
      of the guarantee that the electricity has been produced from renewable sources should be
      updated in compliance with the provisions of article 15 of Directive 2009/28/EC.

      From January 1, 2012, electricity suppliers will only be able to use that guarantee to attest to
      the portion/quantity of energy from renewable sources included in their energy mix.


      Support regimes for the production of thermal energy from renewable sources for
      energy efficiency

      The decree provides for incentives for measures increasing energy efficiency and producing
      thermal energy from renewable sources by means of the following support regimes:
         a) contributions valid for natural gas tariffs for small-sized measures;
198      b) the issue of White Certificates for all measures which do not fall amongst those
             included at the previous point.
      a) Incentive is given to small-sized measures for the production of thermal energy from
         renewable sources and increasing energy efficiency carried out after December 31, 2011.
         With the aim of ensuring a fair remuneration of the investment, the incentive is
         proportional to the energy savings produced by the measures and its term may not exceed
         ten years staring from the date of completion of the measure.
      b) Consistent with the provisions of article 7 of Legislative Decree no. 115 of May 30, 2008, the
         means are established by which the obligations of the distribution companies as per article
         9.1 of Legislative Decree no. 79 of 1999 and article 16.4 of Legislative Decree no. 164 of
         2000 tie in with the national energy efficiency objectives.

      The decree links the period of entitlement to Green Certificates to the useful life of the
      measure and envisages that the energy savings realized by efficiency measures for the
      electricity and gas networks may form part of reaching the obligations of the distribution
      companies without the issue of White Certificates.


      Third Energy Package

      On June 29, 2011, following publication in the Official Journal, Legislative Decree no. 93/2011
      came into force implementing the Third Energy Package Directives 2009/72/EC, 2009/73/EC
      and 2008/92/EC regarding community legislation on the internal electricity and natural gas
      markets and a community procedure on the transparency of the price of gas and electricity
      for the end industrial user and the repealing of Directives 2003/54/EC and 2003/55/EC.
                                   Half-yearly financial report at June 30, 2011

                                   Risks and uncertainties




The following is a summary of the main provisions of interest which have to be implemented
by the Regulator.


Provisions concerning accounting and functional unbundling

The provisions dictated by the decree for the two sectors concerning functional unbundling
for distribution activities in substance follow those already in force, as contained in AEEG
Resolution no. 11/04.

The decree dictates measures concerning accounting unbundling only for the gas sector, but
in this case too these relate to provisions already implemented pursuant to Resolution no.
11/07.


Further provisions relating to the natural gas sector – protection of end customers

The suitability of all customers is confirmed and categories of “vulnerable” end customers are
identified (domestic customers, hospitals, nursing homes, retirement homes and similar
institutions, as well as civil and non-civil customers with a usage not exceeding 50,000 cm a        199
year), for whom there is the requirement to assure supply with the highest safety level, also at
critical times.

For these customers, additionally, the AEEG will continue on a transitional basis to determine the
reference points.

In addition to the last resort service, if these customers find themselves without any supply
and lacking the requirements for activating such service (FUI), the distributor will guarantee
the balancing of its network in relation to withdrawal at that point for the period when
physical disconnection is not possible, in accordance with the terms and conditions
established by the AEEG, which has to ensure that the distribution company receives
adequate remuneration for the service provided (in addition to the costs it incurs).

A period of up to three weeks is envisaged for satisfying the requests for a change of supplier,
with the additional clarification that the switch-over must begin from the first day of the
month.


Further provisions relating to the natural gas sector - unbundling of transportation activities

The AEEG is required to start up a certification procedure for each company owning a
transportation network which at the same date also acts as an operator.

The procedure should be concluded within four months of notification and provide
authorization for companies which are the owners of infrastructure to perform
                                        Half-yearly financial report at June 30, 2011

                                        Risks and uncertainties




      transportation activities, as operators of transport systems.

      It is additionally planned for the operators of transport systems to be certified by the
      Authority by March 3, 2012.

      In addition, by March 3, 2012 vertically integrated groups other than the major transport
      company which are owners of gas transportation companies may decide whether to separate
      the company from an ownership standpoint or whether to propose an independent system
      operator to the Ministry for Economic Development.

      In addition, the smaller regional transportation companies who are owners of gas pipelines as
      per the decree of the Industry Ministry of September 29, 2005, used mainly for the
      transportation of natural gas, may not apply the above provisions.


      Further provisions relating to the electricity sector – protection of end customers

      The regulation confirms the suitability of all end customers and takes up the measures already
      adopted by means of Law no. 125/07 to confirm their framework of reference (the setting up
200
      of markets for greater protection and safeguarding).

      In addition, the three week term for the activation of a new supply as the result of the switch-
      over is also introduced for the sale of electricity (the regulation is consistent with the
      provisions introduced for natural gas).


      Further provisions relating to the electricity sector – retail markets

      The provisions as per article 41 require the communication and branding policies relating to
      sales to customers on the free market or to customers on the markets for greater protection
      not to create confusion between the businesses or between the companies performing such
      activities.

      In particular, commercially sensitive information concerning each activity must be disclosed
      in a non-discriminatory way.

      Finally, it is stated that in the case where a single company performs both activities, the AEEG
      should adopt the provisions required to prevent that company from obtaining a competitive
      advantage from the availability of the data relating to the same user, both as far as end
      customers are concerned and “from the standpoint of the assessments which the Authority
      makes as to the quality of the service”, with respect to a corporate structure in which the two
      activities are entrusted to different companies within the same group.
                                   Half-yearly financial report at June 30, 2011

                                   Risks and uncertainties




Powers of the Electricity and Gas Authority

Note is made in particular in this respect of the provision by which a company receiving
sanction measures from the AEEG may propose commitments which serve to pursue the
interests protected by the regulations for which the violation is raised in the most effective
manner.



Process risks

Business interruption risk

All of the Group's sectors of activity involve managing production sites which are
technologically and operationally complex (electric power stations, waste disposal plants,
cogeneration plants, distribution networks, etc.), where a breakdown or accidental damage
could lead to a lack of availability and in turn to financial losses and possibly harm to the
Group's reputation due to the interruption of the services provided.
                                                                                                     201
These risks are linked to a variety of factors which, in the case of certain plants, could
moreover be accentuated by changes in the competitive context and in the markets of
reference. While the risk of unavailability of the plants may be considered an inherent part of
the business and one that is impossible to eliminate entirely, the A2A S.p.A. sets up preventive
risk mitigation strategies in all of its sectors to reduce the probability of such risks occurring
and action strategies aimed at limiting any impact.

Safeguarding the Group's assets involves adopting procedures of scheduled maintenance and
periodic revision of the plants and networks and keeping these constantly updated with respect
to best practice; it also involves providing specific training courses for technical personnel,
including on the operating procedures currently in force. The Group also makes widespread
use of instruments for the control and remote control of technical parameters capable of
permitting adequate monitoring and timely detection of any anomalies as well as having a back-
up of the components needed to guarantee operational continuity, where possible.

Improvements designed to further mitigate the risk of business interruption continued
during 2011. These measures regarded the Group’s assets, by means of steps geared towards
plants and networks of a critical nature, the development of interconnections between
transmission networks to avoid congestion risks and the start-up of the pooling of critical
spare parts for the plants, and a continuous updating of the procedural documentation
supporting operations in order to manage the main operational processes safely.
                                         Half-yearly financial report at June 30, 2011

                                         Risks and uncertainties




      When new production sites are acquired specific steps are taken to encourage these to be
      brought into line with Group standards in terms of maintenance, control and personnel
      training methods.

      Finally, the Group takes out insurance to cover any direct and indirect damages which may
      arise from other types of risk.



      ICT infrastructure

      The activities of the A2A Group are managed through complex ICT systems which support the
      main business processes: operational, administrative and commercial. Possible risk factors
      include the inadequacy of such systems compared to business needs, possible "downtime",
      making them unavailable, or inadequate handling of the aspects linked to the integrity and
      confidentiality of information. These risk factors are mitigated by controls governed by the
      Information & Communication Technology Department.

202   In 2010, the Group continued to integrate and consolidate its ICT systems, also in the light of
      changes in corporate structures.

      The Group has continued to rationalize its outsourced ICT services, periodically revising the
      tasks assigned to the service companies with respect to the key skills maintained internally, in
      order to have increasingly efficient operational support at its disposal.

      In order to mitigate the potential risk of business interruption for processes that are
      considered strategic, the Group is equipped with hardware/software back-up facilities to
      ensure continuity of service in the event of a breakdown.

      Given the importance of the activities that are carried out every day on the Italian Power
      Exchange, particular attention is given to protecting the systems interfacing with the market;
      these systems have in fact been duplicated and are subject to specific management and
      maintenance procedures to ensure their stability.

      The Group also has a disaster recovery system that ensures service and data continuity at an
      alternative ICT centre. The efficiency of this system is tested periodically. The Group has now
      completed the system for mutual recovery between the ICT centers in Milan and Brescia,
      providing better protection against the risk of potential interruptions.

      Data confidentiality and security are subject to specific controls by the Group, both through
      internal policies and by means of tools to segregate access to information, as well as by
      specific contractual agreements with any third parties who may have to access the
      information handled.
                                     Half-yearly financial report at June 30, 2011

                                     Risks and uncertainties




In particular, work has initiated that is aimed at checking the alignment between the
organizational role model and the segregation of duties technical role model implemented in
the systems. Consistent with this work, it is planned to gradually adopt identity management
and access control tools designed to ensure an increasingly effect control over the processing
of data critical for the business.



Environmental risk

The risks associated with events that impact the environment or the health of the population
living in the areas of influence of the Group's activities (for example for the disposal of
production waste, emissions from production processes, waste collection and disposal
management) are the object of increasingly close attention by public regulators and more and
more stringent legislation.

The Group pays constant attention to the prevention of such risks, and in particular has
adopted a policy document entitled "Policy for the Quality, Environment and Safety of the A2A
                                                                                                 203
Group", which is now the instrument that lays down the Group's approach to such questions.

This document, which is widely distributed both internally and externally, explains the values
which underlie the Group's operations and which the Quality, Environment and Safety
Department is committed to spreading and sharing as guidance for the day-to-day work of all
concerned.

The purpose of the Quality, Environment and Safety Department is also to provide top
management with support in establishing company policy in these areas, and it checks that
this is implemented properly in compliance with the rules applicable in all areas and internal
processes.

Operational implementation of the policy takes place through the use of an Environmental
Management System (EMAS) in the Group entities that are more exposed to both direct and
indirect potential environmental impact. This system provides for a program of progressive
extension and upgrading to the standards of ISO14001 certification for those of the Group's
main activities having a greater impact on the environment, as well as the management of
EMAS certification for the Group's main plants.

For the purpose of arriving at a single model measures which are at the completion stage are
currently being taken which will allow all the operating companies of the Group to make
reference to a single, integrated Quality, Environment and Safety system by the end of 2011.
The Quality, Environment and Safety Department has also set up organizational control units,
                                         Half-yearly financial report at June 30, 2011

                                         Risks and uncertainties




      which among other things carry out periodic environmental analyses and audits to detect and
      prevent conduct that does not comply with the environmental procedures established for all
      of the Group’s operating companies.

      In the perspective of having a constant evolution of the systems controlling environmental
      risk, the Group joined the ARPA (Regional Agency for the Protection of the Environment)
      Lombardy Project in 2010, whose purpose is to improve the efficiency of the system for
      controlling the more significant emissions, including in the light of technical developments in
      the sector, by connecting all the Emission Monitoring Systems (SMEs) to a single control
      centre.

      The A2A Group has taken out insurance against damage from both accidental and gradual
      pollution, in order to cover any residual environmental risk.

      Each year the Group also publishes a Sustainability Report which reports key data and
      information on environmental aspects in order to encourage the circulation of these among
      the public. Starting in 2010, the Sustainability Report is certified by the auditors, who attest
204   that it is in compliance with the Sustainability Reporting Guidelines issued by the Global
      Reporting Initiative.



      Health and safety risk

      The Group operates in a heterogeneous business context characterized by a strong
      technology element and the presence of personnel at its plants and throughout its territory.
      Certain Group activities are, by their nature, more exposed to the risk of “typically work-
      related” accidents linked to the operational services in the territory and the performance of
      technical services and activities at the plants.

      Through the Quality, Environment and Safety Policy (which provides for a program to
      upgrade the personnel safety management system to comply with ISO 14001 and OHSAS
      18001 standards), the prevention measures adopted aim for a "zero risk" objective,
      encouraging a constant rise in the level of safety in the workplace.

      A central Prevention and Protection Service has been set up as part of the Quality,
      Environment and Safety Department in order to harmonize the objectives of safety and
      protection in Group companies and to monitor that these standards are also being followed
      by contractors at both the prequalification stage and execution stage at worksites.
      Control sections have then been set up at the various Group companies, coordinated by A2A
      S.p.A.'s Safety Unit, which among other things carry out specific inspections to monitor
                                 Half-yearly financial report at June 30, 2011

                                 Risks and uncertainties




compliance with the procedures for implementing legislation on prevention and protection
and workers' health and safety as well as personnel update training.

There is also a program of employee health surveillance, conducted with the aid of a team of
doctors located in the various areas who carry out periodic assessments on the state of health
of personnel.

A system of monitoring, recording and reporting accidents has been set up to assist in the
process of constantly improving safety, together with an after-the-event analysis to identify
any causes and undertake corrective and mitigating action. A process is currently taking place
to manage this accident monitoring system by computer with the aim of making the analysis
and resolution of the causes of accidents in the Group even more efficient and of creating a
tool that can provide employees and collaborators with information about matters regarding
health and safety in the workplace and make them more aware of these.




                                                                                                 205
      0.4
      Certification of the
      condensed half-year
206
      financial statements
      pursuant to art. 154-
      bis para. 5
      of Legislative Decree
      no. 58/98
                                    Half-yearly financial report at June 30, 2011

                                    Sintesi economica, patrimoniale e finanziaria




                                  Certification of the condensed
                                  half-year financial statements
                                  pursuant to art. 154-bis para. 5 of
                                  Legislative Decree no. 58/98


1. The undersigned Giuliano Zuccoli, in the name and on behalf of the entire Management
   Board of A2A S.p.A., and Stefano Micheli, as the Manager in charge of preparing the
   corporate accounting documents of A2A S.p.A., certify the following, taking into account
   the provisions of art. 154-bis, paras. 3 and 4, of Legislative Decree no. 58 of February 24, 1998:
• the adequacy in relation to the characteristics of the business and
• the effective application
of the administrative and accounting procedures for the preparation of the condensed half-
                                                                                                         207
year financial statements during the first half of 2011.
2. We also certify that:
2.1 the condensed half-year financial statements:
a) have been prepared in accordance with the international accounting standards approved
   by the European Community pursuant to Regulation (EC) no. 1606/2002 of the European
   Parliament and of the Council of July 19, 2002;
b) agree with the balances on the books of account and accounting entries;
c) are able to give a true and fair view of the assets and liabilities, results and financial position
   of the issuer and of the set of companies included in the consolidation;
2.2 the interim report on operations includes a reliable analysis of key events that took place
   during the first six months of the year and of their impact on the condensed half-year
   financial statements, together with a description of the main risks and uncertainties to
   which the business is exposed for the remaining six months of the year. The interim report
   on operations also includes a reliable analysis of the information on significant related
   party transactions.


Milan, August 3, 2011


Giuliano Zuccoli                                                       Stefano Micheli
(on behalf of the Management Board)                                    (Manager in charge of
                                                                       preparing the corporate
                                                                       accounting documents)
0.5
Independed Auditor's
report
Half-yearly financial report at June 30, 2011




Independed Auditor’s
report




                                                209
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