MARKET OUTLOOK

The ongoing conflict between Russia and Ukraine is further increasing the volatility of energy commodity prices, which were already at record levels before the outbreak of the war. In addition to the direct impacts on the production and sale of electricity and gas, such a price increase could lead to a general increase in inflation with particular reference to the prices of oil derivatives and foodstuffs, as well as tensions on financial markets, technological impacts and a possible increase in cyber-attacks.

FINANCIAL OUTLOOK

The A2A Group, as part of its industrial activity of generating energy carriers and marketing them on a wholesale basis, is managing the growing volatility of the price of gas both by monitoring the limits of exposure to commodity risk and by optimising its buying and selling strategies. It should also be noted that the Group, in its procurement activities, mainly operates on platforms. Should the supply situation become critical and in line with national energy policy choices, the reactivation of the Monfalcone coal-fired thermoelectric power plant and the possibility of interrupting, requested by the network operator, the supply of energy to specific industrial entities cannot be ruled out. It is also noted that recently the Law Decree 17/22 followed by the DM MITE Gas storage 2022-2023 and the Resolution ARERA 110/2022/R/GAS, required operators to bring the filling of storage to at least 90% of the available capacity.

With reference to the activity of retail marketing of electricity and gas, the increase in the price of commodities causes an increase in credit exposures to customers (even in the event of constant volumes). This greater exposure naturally generates a greater risk of default by individual counterparties and a greater financial commitment in the event of late payment. The extent of these tensions, which have been modest so far, will depend on how the crisis develops and how long it lasts.

The other business units (Waste and Smart Infrastructures) are less exposed to commodity risk. The impacts of the Russia-Ukraine conflict are therefore estimated to be indirect and, essentially, related to the potential reduction in GDP and the rise in inflation.

In order to face possible scenarios of liquidity tension, it should be noted that the Group's solid liquidity position, also supported by committed and uncommitted back-up lines (€1.7Bn as at March 14, 2022), is enabling it to manage margining calls relating to the exposure on the commodities market as well as any temporary increases in working capital due to price increases. A2A has recently successfully issued a 500 million euro bond in a very complex market context in addition to subscribing to medium-term bilateral credit lines, demonstrating the Group's ability to access capital and credit markets.

Finally, in the presence of high alert for cyber-attacks, the Group has activated a channel with the National Security leadership to exchange information, accelerating the programme to secure endpoints with advanced malware protection tools.

Dividend Policy

The Strategic Plan 2021-2030 Update, despite the increase in investments, confirms the targets of dividend distribution to shareholders:

• At least 8.5 euro cents per share on the profit for 2022
• At least 8.7 euro cents per share on the profit for 2023

For the following years, a minimum growth of 3% per year is expected.

For more information

A2A believes that the issuance of Green Financing Instruments – including Green Bonds and Sustainability-Linked Bonds under EMTN Programme – could contribute to enabling energy transition and circular economy projects (existing or new ones), giving financial backing to them, with a positive impact in terms of sustainability​

In May 2021 A2A adopted a new Sustainable Finance Framework that combines Use of Proceeds and Sustainability-linked instruments. The Framework was updated in 2022, in line with the new objectives of the 2021-2030 Strategic Plan.
The Framework gives investors:

• The transparency to better allocate their funds and measure their contribution to sustainability with the green use of proceeds format
• well-defined targets to measure the strong engagement of A2A in ESG management and continuous improvement at corporate level (sustainability-linked format)

Bonds issued

Notes: (1) Date from which interest is paid

For more information about all A2A Bonds, current ratings  and the new Sustainable Finance Framework clik here

A2A launched a new web page dedicated to ESG investors, where you may find information on some relevant ESG themes:

• ENVIRONMENT – Circular Economy, Energy Transition
• SOCIAL – Human Capital Development and Diversity, Cyber Security and Data Protection
• GOVERNANCE – Key Governance Reporting, Risk Management

Moreover, the page has been enriched with some significant case studies (The Corporate Venture Capital programme, Banco dell'Energia Onlus, risks on electricity networks and impact on communities) that show A2A commitment towards Sustainability

On these page you can also find other in-depths regarding Sustainable Finance, Innovation, Covid-19 Initiatives and information about engagement

In 2021 has been also published a new ESG Database, an Excel file that includes a set of historical KPIs for each of the three dimensions of Sustainability to support investors and analysts on ESG themes.

Discover more