The A2A S.p.A. Management Board has examined and approved the half year financial report at 30 June 2011

Wed Aug 3, 2011 7:21am EDT

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Revenues in the six month period exceeded 3 billion euros (+6.7%)
Gross Operating Margin (EBITDA) amounted to 477 million euros (+1.5%)

Net profit for the period, amounting to 120 million euros, is down by 251 million euros, essentially due to the different capital gains generated in the first six months of 2010 and 2011 following the disposal of shareholdings (Alpiq and Metroweb, respectively)

There was a further reduction of the Net Financial Debt, down by 135 million euros in
the six month period.

Milan, 03 August 2011 - At today's meeting of the A2A S.p.A. Management Board, chaired by Mr. Giuliano Zuccoli, the Board examined and approved the Half year financial report at 30 June 2011.

The Board acknowledged with satisfaction the Group's maintenance of the industrial profitability levels, in a sector-based context characterized by productive over-capacity and stagnant demand for electricity and gas. The financial performance in the six month period was also positive and, despite the payment of dividends for 186 million euros in the period, allowed the net debt to be reduced by a further 135 million euros.

In terms of net profit, there was satisfaction about the capital gain of 39 million euros connected to the disposal of the shareholding in Metroweb (in the first half of 2010 the disposal of Alpiq generated a capital gain of 277 million euros), while there was concern over the effects of the consolidation of the shareholding indirectly held in Edison which had a negative impact of 30 million euros in comparison with the first half of 2010.

Main consolidated results for the first half of 2011

Millions of euros 30.06.2011 (*) 30.06.2010 (**) Change
Revenues 3,050 2,858 6.7%
Gross Operating Margin - EBITDA 477 470 1.5%
Net Operating Margin - EBIT 223 232 -3.9%
Group Net Profit 120 371  
  30.06.2011 31.12.2010  
Net Financial Debt 3,758 3,893 -135

 

(*) The values of the year 2011 include EPCG
(**) The comparative values of 2010 are reclassified to reflect the application of the IFRS 5

Operating Data

The electricity sold on the wholesale and retail markets by the Group's companies (net of the contribution of the subsidiary company EPCG in Montenegro) equalled 2 1,009 GWh1, an increase compared to the first half of 2010 (+20%). The sales concerned the domestic market for 14,540 GWh and foreign markets for 6,469 GWh.
Production from the Group's plants, which equalled 6,68 1 GWh (-6%), contributed to fulfil the demand. Thermoelectric production (4,040 GWh) was down by 5% compared to the first half of 2010 following the lower load factor of the Group's plants and the exit from the perimeter of the Tolling Agreement with Edipower of the plant in San Filippo del Mela. These effects were partially offset by the contribution of the thermoelectric plant in Scandale, which came into operation in June 2010 (Group 1) and October 2010 (Group 2).
Hydroelectric production, equal to 1,640 GWh (-12%), was affected by the lower hydraulicity recorded by the plants in Calabria.
The production of electricity from co-generation, waste-to-energy and biogas plants (1,001 GWh) was up by 6% in the first half year in question.

Through the subsidiary company Elektroprivreda Crne Gore AD Niksic (EPCG), consolidated since December 2010, the A2A Group expanded its perimeter of activity into the production and sale of electricity in Montenegro. The subsidiary company produced a total of 1,579 GWh, mainly from hydroelectric sources (907 GWh). The sales for the six month period equalled 2,301 GWh.

Gas sales to wholesale and retail customers (2,049 million cubic metres, -13%), and sales of heat (1,676 thermal GWh, -4%) were down in the six month period in question due to unfavourable climatic conditions.

1 net of the energy sold and simultaneously acquired by the Power Exchange

The Group's co-generation and waste-to-energy plants contributed to covering the thermal load with a production of 1,398 thermal GWh, down by 5% compared to the first half of 2010.

The quantity of waste disposed off equalled 1,335 thousand tonnes, down by 4% compared to the same period of the previous year.

Management of the distribution networks was essentially in line concerning the quantity of electricity distributed (5,756 GWh), while the quantity of water distributed recorded a slight reduction (33 million cubic metres) .. The supply points of the gas distribution network, taken as reference by AEEG in order to calculate the allowed revenues, amount to 1,255,82 1, unvaried compared to the corresponding six month period of 2010.
Finally, in the period in question the electricity distributed in Montenegro by the company EPCG equalled 1,272 GWh.

***

Economic results

Comments on the A2A Group's results in the period in question are set out below, compared to the economic results at 30 June 2010 and the financial data at 31 December 2010.

"Revenues" of the A2A Group were certified at 3,050 million euros, up by 7% compared to the first half of 2010.

The "Gross Operating Margin" of the period equalled 477 million euros, an increase of 7 million euros (+1.5%) compared to the six month period of 2010. The first half of 2011 includes the positive contribution linked to the consolidation of the subsidiary company EPCG in Montenegro (15 million euros).

The following table shows the dynamics of the industrial result by business areas:

Millions of euros Gross Operating Margin
30.06.2011
Gross Operating Margin
30.06.20 10
Energy business of which: 163 191
- electricity 113 162
- gas 50 29
Heat and Services Business 48 39
Environment Business 152 141
Networks Business 128 117
Other Services and Corporate (14) (18)
Total 477 470


 

The Energy business shows a reduction in the margin compared to the same period of the previous year; the lower results of the electricity sector were partially offset by the increased margins in the gas sector.

Decreased profitability in the electricity sector can largely be attributed to the lower hydraulicity of the hydroelectric plant in Calabria, the lack of the essential requirements previuosly recognized in the thermoelectric plant in Monfalcone (carbon and fuel oil), as well as the deconsolidation of the economic results in terms of the gross operating margin of the San Filippo del Mela plant in Sicily (fuel oil) which exited the perimeter regulated by Tolling Agreement contracts with Edipower. The perimeter in question also recorded significantly lower utilization factors of the combined-cycle plants, offset in terms of overall profitability by an improvement in the unit margins. The margins of commercial activities were also down compared to the first half of 2010.

Activity concerning the production and sale of electricity in Montenegro provided the sector with a positive contribution of around 13 million euros.

In the gas sector, the effects connected to the particularly mild seasonal weather, as well as the tariff measures on the sales prices to the protected market, were more than offset by the positive effects of the renegotiation of gas purchasing contracts that occurred at the beginning of the last quarter of 2010.

The positive performance of the Environment business is mainly connected to the increased production availability of the waste-to-energy plants in Bergamo, Brescia and Milan which were halted for planned maintenance works in 2010.

The Heat and Services business also shows improved industrial results due to the significant increase in the connected volumes and the consequent increase of the volumes of heat distributed, only partially compensated by the effects connected to particularly mild seasonal temperatures. The first half of the year also benefited from the recognition of higher energy efficiency certificates (White Certificates) connected to the development of the district heating networks.

The improvement in the margins of the Networks business can essentially be attributed to the electricity distribution sector, which benefitted from the higher revenues due to company specific equalization following the adjustment of revenues provided for the III regulatory period (2008-20 1 1), not yet implemented in the first half of 2010, as well as non-recurrent positive items of income recorded in the first half of the previous year.
Activity concerning the distribution of electricity in Montenegro also provided the business with a positive contribution of around 4 million euros.

***

The "Amortisation and depreciation, write-downs and provisions" equalled 254 million euros (238 million euros at 30 June 2010). The increase of 16 million euros incorporates the consolidation of the subsidiary company EPCG for 28 million euros and lower credit risk provisions relative to activities carried out in Italy for 8 million euros.

The "Net financial charges" equalled 67 million euros (106 million euros at 30 June 2010). The reduction can be attributed to the positive trend of the fair value relating to contracts on financial hedging derivatives for interest rate risks and the considerable reduction of the average debt (-458 million euros compared to the first half of 2010), effects partially offset by the increase in the average cost of the debt connected to the market rates dynamic.

"Affiliates" are negative by 13 million euros (positive by 50 million euros at 30 June 2010). The shareholding indirectly held in Transalpina di Energia had a negative effect for around 30 million euros in the period in question, with respect to a positive result of 29 million euros recorded at 30 June 2010. It should also be remembered that the subsidiary company EPCG had made a positive contribution of 14 million euros in the first half of 2010 when it was consolidated using the equity method.

"Other non-operating expenses and income" amount to 4 million euros at 30 June 2011 (no value at 30 June 2010) and refer to charges following the consolidation of the EPCG Group.

"Income taxes" in the period in question equalled 74 million euros (68 million euros at 30 June 2010).

The "Net earnings from non-current assets held for sale" equal to 39 million euros (282 million euros at 30 June 2010) mainly concern the capital gains generated by the disposal of the shareholding in the company Metroweb S.p.A. and the company CESI, while at 30 June 2010 it mainly included the capital gain from the disposal of the shareholding in Alpiq Holding AG.

"Group's net profit for the period", after the "Minorities" was deducted (of which 14 million euros relates to minority shareholders of Delmi), amounted to 120 million euros (371 million euros at 30 June 2010).

Financial position and assets

The consolidated "Net employed capital", at 30 June 2011, came to 8,402 million euros and was covered by the Net Equity for 4,644 million euros (of which 1,319 million euros referred to minorities) and the net financial debt for 3,75 8 million euros.

In particular, the "Operating capital", equal to 527 million euros, is down by 236 million euros compared to 31 December 2010.

The "Net fixed assets", including the "Assets/Liabilities held for sale", equals 7,875 million euros (-100 million euros).

The "Net financial position", equal to 3,758 million euros at 30 June 2011, improved by 135 million euros compared to 31 December 2010, due to the generation of cash flow from ordinary operations.


 

Business outlook

The second half of 2011 will confirm the structurally difficult situation in the electricity and gas sectors where there is significant imbalance between production capacity (or importing) and the level of domestic demand.

In terms of industrial performance, the positive trend of the Environment business and the Heat and Services business will help to partially offset the lower results of the Energy business.

***

The Executive responsible for drawing up A2A S.p.A. 's company accounting documents declares - in accordance with article 154-bis, subsection 2 of the Financial Act (TUF) (Legislative Decree 58/1998) - that the accounting information contained in this press release corresponds to the documentary evidence, books and accounting records.

***

The following are attached: the A2A Group 's accounting statements, derived from the half year financial report at 30 June 2011 subject to auditing.

The half year Financial Report at 30 June 2011 will be available to the public at the company Head Office, at the Borsa Italiana S.p.A. and on the website www.a2a.eu from 5 August 2011.

For further information:
Communications and External Relations - Media Relations tel. 02 7720.4582, ufficiostampa@a2a.eu

Investor Relations
tel.02 7720.3974, ir@a2a.eu
www.a2a.eu

Duty to notify the public in accordance with Consob decision n° 11971 of 05/14/1999 as amended.

 

 




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