Strategy

Strategic Plan 2020-2024

The Board of Directors of the A2A Group has examined and approved the Strategic Plan 2020-2024. However, the Board has taken note that i) the renewal of governance envisaged with the forthcoming shareholders' meeting could significantly change the composition of the Board itself, and ii) the Strategic Plan was drawn up before the Covid-19 health emergency; although the company has carried out sensitivity analysis on the effects of the epidemic, and the first measures to contain the possible effects in the current year have been identified, the great uncertainty of the current global macroeconomic context will certainly require further and more detailed analysis in the coming months.

For both reasons, the Board of Directors considers it useful that this Plan is submitted to the attention of the incoming Board of Directors for any changes, additions, updates

Press release

Abstract of Strategic Plan 2020-2024

Transformation

Business strengthening & change

GENERATION - Flexible and greener energy

KEY ACTIONS

Process of transformation towards a greener generation portfolio

Further expansion of RES platform
Reconversion of conventional plants

Provider of adequacy and flexibility services, with the aim of meeting the growing electric system needs

Leadership consolidation in flexible CCGT plants
Exploration of innovative flexibility services

HIGHLIGHTS

Over 150 MW of new RES, up to 280 MW (owned and managed), for a total capacity installed of 2.2 GW including hydro
Reactive power for grid voltage regulation services (10 years, Brindisi plant)
Acceleration of thermal plant reconversion through solutions based on A2A core competences, with a circular economy perspective and designed according to local needs
Opportunities in gas peakers, storage and hydro pumping to meet growing flexibility need

KEY ECONOMIC TARGETS

323 million euros of EBITDA at 2023, -115 million euros from environmental market and SFM, +79 million euros mainly from RES development and capacity market
582 million euros of cumulated CAPEX at 2023, of which 295 million euros from M&A and RES development

MARKET - More solutions to involve customers

KEY ACTIONS

Greater focus on customers, in a context of deep market transformation

Outstanding client service, with improved multi-channel customer experience
Preservation of excellent operations
VAS in safety, comfort, energy-saving
Advisor for SMEs and large enterprise
Digitalization to enhance service/acquisition

Growth in new services, to be more competitive in an increasingly demanding market

New services: flexibility, DERs and storage
New EPCs in energy efficiency services
Organic growth in Public Lighting
Expansion of electric mobility business

HIGHLIGHTS

2.7 million mass market power & gas free customers, within a stable customer base (full liberalization expected by July 2020), with further opportunities in “safeguard”, leveraging excellent meter-to-cash management
Over 1,660 e-cars charging stations by 2023, to develop the e-mobility infrastructure network on key territories
Strong boost of EPC projects with significant investments (81 €M vs. 10 €M previous plan)
Contracts for heat management of private buildings (about 30 €M CAPEX)

KEY ECONOMIC TARGETS

323 million euros of EBITDA at 2023, +95 million euros from Power & Gas, cost to acquire and other operating costs, +41 million euros from new energy services (energy solutions, smart cities, public lighting and value added sercices)
402 million euros of cumulated CAPEX at 2023, of which over 40% Digital & Tech CAPEX

WASTE - Value from end to beginning

KEY ACTIONS

Consider waste more and more as a commodity and not as waste (“from waste to commodity”)

Become Italian leader in recycling, also with downstream integration with high-quality secondary raw materials
New WTE capacity (projects approved) to maintain safety of the Italian waste treatment system

Become a unique partner for urban services offered, growing in new geographical areas by exploiting our collection capabilities and developing innovative solutions

Enlarging geographic presence, leveraging on value chain integration
Smart and innovative solutions for our territories

HIGHLIGHTS

9 new treatment plants to strengthen our leadership in municipal solid waste market and to boost a full circular approach to achieve effective material and energy recovery in areas characterized by infrastructural gap
contribute to reduce the Italian shortage of WTE capacity with 400 ktons of waste treated by WTEs
Industrial waste:
- Speed-up in the treatment of non-hazardous special waste, boosting innovation and new technologies (i.e. AI for robotic picking)
- Focus on collection and waste logistic services dedicated to SMEs
- Entering environmental services segment, and partnership in hazardous waste
Vertical integration downstream in order to support secondary raw material use, focusing on plastic and paper

KEY ECONOMIC TARGETS

381 million euros of EBITDA at 2023, +107 million euros from new plants
943 million euros of cumulated CAPEX at 2023, 82% in plants

NETWORKS - Smarter and more reliable

KEY ACTIONS

Increase the quality of networks, the stability and reliability of the electricity grid

Development of smarter and resilient networks
Increase water cycle performance
Multi-business operation synergies with adoption of automated and digital solutions

Renewed commitment to participate in tenders for the awarding of gas concessions, with the goal to increasing the number of delivery points (POD) managed

Selective growth in high-priority ATEMs
Focus on geographical consolidation

HIGHLIGHTS

35 primary stations supporting Milan and Brescia electrification
1.4 million smart meters installed in Plan years: 420,000 gas, 850,000 electricity, 143,000 water
Decarbonization of DH sources, through further development of storage and waste heat recovery
Phase-out of Lamarmora coal plant

KEY ECONOMIC TARGETS

518 million euros of EBITDA at 2023, +62 million euros from Gas and Electricity, +25 million euros from Water Cycle, +26 million euros from district heating
1.963 million euros of cumulated CAPEX at 2023, of which 504 million euros from Gas Tenders

Excellence

Agile organization - Leader in operational excellence

MULTI-BUSINESS VALUE CREATION

Three-fold benefit from diversification

Typical “multi-business“ benefits
scale synergies on financing, sharing of central unit costs, cost duplication avoidance, …
Vertical integration
in each BU value chain: end-to-end results control, commodities natural hedging, certainty of supply/demand, …
Synergies inter adjacent businesses
sharing of competence centers, natural hedging inter Bus, single regulation interface, …

Attractive platform for further industrial partnerships

50+ €M from intercompany business transactions, up to 70 €M by 2023

OPERATIONAL EXCELLENCE

Both En&A and Mistral projects up and running
2018 targets achieved and exceeded
Targets @2023 confirmed: ~80 €M of additional savings vs. 2018
Further projects under evaluation contributing up to 20 €M of additional EBITDA *

* _{Additional projects (not included in BP numbers}

DE-RISKING: Asset rebalancing

Fixed assets

Note
* Merchant includes High and Low Volatility

Path of invested capital reshape towards a lower-risk profile

DIGITAL & TECHNOLOGICAL INNOVATION: Dedicated capex

Examples

Smart meters
E-mobility
New Electric primary stations
New IT tools for trading activities
Advanced Analytics for predictive maintenance, route optimization, …
Robotic Process Automation
IoT for urban development
Artificial Intelligence
Inspections with drones

680+ €M of cumulated CAPEX on Digital & Technology innovation in 2019-2023

Community

Attract and empower people - Engage external ecosystem

AGILE ORGANIZATION: People strategy

Trasformation

Excellence

Community

DIGITALIZATION

DNA Digital readiness
New digital workplace
Digitalization of HR processes

SKILLS AND CHANGE MANAGEMENT

Network Academy
Improvement performance

PROCESSES REDESIGN

Shared Service Center
Reorganization

MULTIBUSINESS PORTFOLIO

Families/roles cross BUs
Intercompany contracts

AGILE ORGANIZATION

Staff units pooling
Dynamic sizing

SAFE WORK ENVIRONMENT

HSE core unit inside HR perimeter
Work environment reshape
Organizational Health

PEOPLE CARING

Welfare
Employability program
Worker interaction

PEOPLE DEVELOPMENT

Junior/Senior Talent
Key people
Performance management

DIVERSITY MANAGEMENT

Diversity program

Enhancing an agile organization to manage complexity

LOCAL AGGREGATIONS

A2A Community widening, consolidating new territories: ACSM-AGAM

#5 provinces covered

~900 k inhabitants served

Growth key drivers

Contribution of 120+ €M @2023

INNOVATION WITH EXTERNAL ECOSYSTEM

2018

4
Innovation committee screening sessions

4+
Innovation Managers

7+
initiatives in scale-up

90+
A2A people for idea generation

200+
startups met

Keep innovating

Internal innovation program 2.0
Open Innovation (eg. Open Italy, …)
Partnership
Dealflow management

2021 Target

A2A among the most innovative companies
listed on FTSE MIB by 2021

Be part of the community

Events (eg. Futureland, B-Heroes, …)
Idea Challenge (eg. Hackathon, Crowdsourcing, …)
Employer Branding (University, Roundtables, …)
Social Media Strategy

Crowd as a partner

Bottom-up innovation with dedicated instruments (innovation platform, Innoroom,…)
I have/need an idea (internal challenge)

NEW WORKING SPACES for A2A community

Building optimization
in Milan, Brescia and Bergamo

30+ €M net cash effect
from net divestments

Commuting reduction
with less travels and efficient smart offices

Smart offices
to foster collaboration, teamwork & cross synergies

Full digital
work place

From 7 corporate buildings in Milan to 1 single hub

1,500 people in 20,000 square meters for the new A2A hub by 2022

Real estate optimization to re-design company culture

A2A 2019-23 Strategic Plan
mp3 file of Conference Call
Annexes

Press Release

The Board of Directors of A2A S.p.A. has approved the 2018 results

The Board of Directors examined and approved the 2019-2023 Strategic Plan of the A2A Group

Key points

TEC framework confirmed
Lower risk profile
Targets enhanced
Higher focus on sustainable businesses
Improved and reliable dividend policy

Where we start from:

Delivered strategic value from 2014

Relaunch

Consistent industrial growth
Selective external growth

+560 K customers (EE and Gas free market customer base)
+800 Kt waste treated
+200 €M of RAB
~130 €M of operating efficiency
14 M&A deals +105 €M EBITDA
Largest territory aggregations (+1 in pipeline)