Summary of Results: trends in financial position and cash flows

Consolidated balance sheet data

Compared to 31 December 2018, non-current assets and liabilities increased by € 711.5 million (+ 13.9%) mainly due to the growth in fixed assets (+ € 774.3 million), the provision for risks (+ € 14.8 million) and the increase in other non-current liabilities (+ € 42.9 million).

Investments increased by € 161.9 million (+ 25.7%)

See the following table as regards the investments made in each Operating Segment.

The Environment Segment recorded an increase in investments of € 31.9 million compared with the previous year. They refer mainly to: (i) the revamping of the Monterotondo Marittimo plant; the inauguration of the expansion of the plant for the treatment of composting and anaerobic digestion waste took place on 10 October; (ii) the works carried out at the WTE plants in Terni and San Vittore; (iii) the works for the extension of the landfill located in Orvieto.

The Sales and Trading Segment recorded an increase of € 17.9 million mainly attributable to Acea Energia for investments related to the acquisition of new customers in accordance with IFRS 15 (€ 17.9 million), for IT implementation projects (€ 14.1 million) and for cloud licences that form the basis of the new Customer Relationship Management (€ 9.9 million).

The Overseas Segment recorded an increase of € 0.4 million compared to last year, mainly due to the investments made by Aguas de San Pedro for the expansion and extraordinary maintenance of the water and sewerage network in the areas managed.

The Water Segment made investments totalling € 380.1 million, with an increase of € 50.4 million mainly due to the consolidation of Gori and AdF, which contributed € 43.8 million and € 11.1 million respectively. These increases were partly offset by Acea Ato 2, which recorded a reduction in investments of € 8.7 million. The main investments in the year include those relating to the work carried out for the reclamation and expansion of the water and sewage pipes of the various Municipalities, the extraordinary maintenance of the water centres, the interventions on the treatment plants, works to reduce water leaks and improve relationships with users and the local region and on IT applications.

The Energy Infrastructure Segment recorded an increase in investments of € 49.4 million, mainly in areti (+ € 47.2 million), only partly offset by lower investments by Acea Produzione (- € 3.4 million). The investments in areti mainly refer to the renewal and upgrading of the MV/LV network and the development of TSIE Technology, Sustainability and Education Innovation projects (+ € 38.5 million), interventions on primary and secondary cabins and meters. We also note the purchase of the Via Flaminia headquarters (€ 2.8 million). Intangible investments refer to projects for the re-engineering of information and commercial systems. Investments made by Acea Produzione mainly concern plant revamping works for the Mandela and Tor di Valle and Montemartini hydroelectric power plants; there were also static and functional upgrades of the tunnels deriving from the San Cosimato dam reservoir and the extension of the district heating network in the Mezzocammino district in the south of Rome.

The Engineering and Services Segment recorded purchases of equipment for the Grottarossa laboratory and investments in IT systems.

Acea Corporate made investments of € 21.7 million (+ € 11.7 million), which mainly refer to IT developments and investments in the company's operations.

Group investments concerning shared IT infrastructure totalled € 41.6 million.

Equity investments decreased by € 10.9 million compared to 31 December 2018. The change is due to negative values. Among these we note:

• the valuation of companies consolidated using the equity method for a total of € 44.0 million, which shows a reduction of € 1.8 million compared to 2018;
• the effect in reduction of the distribution of dividends for € 19.9 million;
• the reduction due to the change in the scope of consolidation of € 37.7 million, due to the full consolidation of AdF previously valued using the equity method;
• changes with a positive sign of other comprehensive income for € 2.6 million.

The stock of employee severance indemnity and other defined benefit plans reported an increase of € 0.7 million, mainly due to the effect of the change in the scope of consolidation of AdF, partly offset by the decrease in the rate used (from 1.57% at 31 December 2018 to 0.77% at 31 December 2019).

Provisions for risks and charges increased by 10.8% compared to the previous year. Changes during the period are shown below:

The change in the scope of consolidation (gross of changes during the period) amounts to € 9.1 million. The other main changes in the period include:

• an increase of € 3.4 million in the provision set aside to cover the costs deriving from the Group's mobility and subsidised personnel plan;
• an increase of € 5.9 million in the provision for charges to others, mainly attributable to Acea Ato 5 and relating to the provision of € 4.5 million resulting from the decisions made during the reconciliation between Optimal Territorial Area Authority no. 5 Southern Lazio - Frosinone) and Acea Ato 5 SpA as investments to be made without any tariff recognition, to be borne entirely by the Operator. For further information see the details discussed in the section "Conciliation Board with AATO 5" included in the section "Significant events for the 2019 financial year".

The net working capital is negative for € 656.2 million and dropped € 13.5 million compared to the end of 2018The change in net working capital compared to 31 December 2018 is mainly due to items with an opposite sign like the increase in current receivables (+ € 107.6 million), of which € 71.9 million from users and customers, offset by an increase in current payables of € 75.4 million and other current liabilities of € 16.9 million, as well as a decrease in other current assets of € 37.4 million.

The net working capital is negative for € 656.2 million and dropped € 13.5 million compared to the end of 2018

The change in net working capital compared to 31 December 2018 is mainly due to items with an opposite sign like the increase in current receivables (+ € 107.6 million), of which € 71.9 million from users and customers, offset by an increase in current payables of € 75.4 million and other current liabilities of € 16.9 million, as well as a decrease in other current assets of € 37.4 million.

Receivables from users and customers increased by € 71.9 million compared to 31 December 2018, of which € 57.0 million due to the change in scope. Gross of the allowance for doubtful accounts, these receivables increased by € 29.2 million: (i) an increase of € 73.5 million in receivables from the Water Segment, mainly due to the change in the scope of consolidation (+ € 51.7 million) and Acea Ato 2 (+ € 4.6 million); (ii) an increase of € 19.0 million in receivables from the Energy Infrastructure Area, mainly due to the recognition of the income from the elimination of the regulatory lag, which amounted at 31 December 2019 to € 87.6 million (+ € 12.2 million), while the non-current portion relating to regulatory accounting, equal to € 91.1 million (+ € 11.1 million), is included under fixed assets; the change in the scope of consolidation related to the acquisition of the photovoltaic companies contributed to the increase in gross receivables for € 8.4 million; (iii) the increase in receivables of the Environment Segment for € 7.1 million, mainly resulting from the change in the consolidation area following the consolidation of Demap (+ € 3.3 million) and Berg (+ € 2.7 million); (iv) the decrease in receivables of the Commercial and Trading Segment for € 73.2 million resulting from the improved collection performance of Acea Energia.

Receivables from customers are shown net of the Provision for impairment of receivables, amounted to € 651.5 million compared to € 694.2 million at the end of 2018. The change is mainly due to Acea Energia (- € 43.6 million), in relation to uses for the period (- € 70.9 million) net of provisions and other changes (+ € 28.5 million).

Receivables totalling € 1,370.6 million were transferred without recourse during 2019, of which € 204.5 million to the Public Administration.

Roma Capitale: net balance is positive for € 33.7 million

As regards the relations with Roma Capitale, the net balance at 31 December 2019 was € 33.7 million receivable by the Group, a reduction compared to 31 December 2018. The change in receivables and payables is due to the accrual of the period and the effects of compensations. In 2019, the stock of trade receivables recorded growth of € 34.2 million compared to the previous year, mainly due to the increase in receivables for water accounts.

As regards financial receivables, growth of € 44.6 million was recorded compared to the previous year, to be attributed to the accrual during the period of receivables relative to the public lighting service agreement, to the modernisation of security, to extraordinary maintenance, to the LED plan agreement and to the works relating to the public lighting service.

Payables increased by a total of € 93.2 million. The main changes are listed below:

• recognition of the payable for Acea's share dividends accrued in 2018 of € 77.1 million, as resolved by the Shareholders in April 2019;
• registration of the portion accrued in the year for the concession fee of Acea Ato 2 for € 25.0 million;
• inclusion of the debt for Acea Ato 2 security dividends accrued in 2018 equal to € 2.4 million;
• reduction in payables relating to authorisations for excavations defined as new road cables regulations for - € 2.6 million;
• decrease in the Acea Ato 2 concession fee for 2016 for a total of € 85 million following payment through compensation.

Note that in April 2019 areti paid the Cosap for the current year worth € 1.4 million.

As described in the Consolidated Financial Statements as at 31 December 2018 as part of the activities required for the first consolidation of the Acea Group in the 2018 Financial Statements of Roma Capitale, a round table was launched to reconcile the Roma Capitale Receivables and Payables. After several meetings and communications, on 22 February 2019 the technical department of the Municipality in charge of the management of the contracts with the Acea Group communicated several objections relating to the supply of both works and services for the period 2008-2018. These objections were fully rejected by the Group.

On 26 February 2019 the General Management of the Municipality of Rome sent a communication stating that it had taken note of the objections raised by the technical department and the lack of recognition thereof by the Acea Group, and in order to find a complete resolution of the differences it proposed setting up a Joint Technical Committee with the Acea Group that could resolve the mutual claims.

Following several meetings, on 18 October 2019 the Joint Technical Committee drew up a report on the closure of the work, highlighting the results that emerged and proposing a favourable restart of the ordinary execution of the mutual obligations between the Acea Group and Roma Capitale. As a first step after the completion of the work, the parties took steps to implement the results that emerged from the discussions, restarting the payment of their respective receivables and payables.

In particular, between December 2019 and March 2020 the following offsets were made for a total of € 39.3 million; the types of receivables concerned are listed below:

• December 2019: receivables for € 7.2 million relating to water services for the years 2009-2014 in exchange for the Acea Ato 2 concession fee;
• December 2019: receivables for € 1.3 million mainly for works for the completion of the water and sanitary network for 2009 and water service contract for 2018 in exchange for the Acea Ato 2 concession fee;
• February 2020: receivables for Public Lighting for € 10.5 million referring to 2018 and 2016-2018 pro-rata amounts in exchange for Acea's share dividends for the year 2018;
• March 2020: receivables for € 20.4 million relating to water services for the years 2017-2018 in exchange for the Acea Ato 2 concession fee.

Also note that in December 2019 Roma Capitale approved its Consolidated Financial Statements as at 31 December 2018, including for the first time the Acea Group in this scope of consolidation.

The following tables also provide a breakdown of Group receivables/payables due from/to Roma Capitale.

Current payables increased by € 75.4 million

Current payables increased by € 75.4 million compared to the end of 2018 due to the increase in trade payables (+ € 58.9 million), mainly due to the change in the scope of consolidation (+ € 45.4 million) largely relating to AdF (+ € 34.6 million) and payables to parent company for € 14.0 million primarily attributable to Acea Ato 2 (+ € 16.6 million) for payables to Roma Capitale relating to the concession fee.

The Other Current Assets and Liabilities recorded a decrease of € 37.4 million and an increase of € 16.9 million respectively compared to last year. More specifically, other assets decreased as a result of the reduction in receivables from the energy equalisation compensation fund (- € 22.7 million) and receivables for fair value of commodities (- € 8.6 million). As regards the increase in other current liabilities, the change in the scope of consolidation accounted for € 31.9 million, of which € 16.5 million for payables relating to the acquisition of equity investments in the photovoltaic sector. There was also an increase in payables to Municipalities (+ € 10.4 million), in payables to the Equalisation Fund (+ € 7.5 million) partly offset by the reduction in payables for IRES and IRAP (- € 15.6 million).

Shareholders' equity amounted to € 2.1 billion

The net shareholders' equity amounted to € 2,106.7 million. The changes, amounting to € 203.2 million, are analytically described in the relevant table and are basically due to the distribution of dividends, the accrual of period profits, the change in the area of consolidation and the change in the cash flow hedge reserves and those formed by actuarial profits and losses.

Net financial debt increased by € 494.8 million compared to the end of 2018

Group debt recorded an overall increase of € 494.8 million, going from € 2,568.0 million at the end of 2018 to € 3,062.8 million at 31 December 2019. This change is a direct consequence of the growing increase in investments made during the period, including those of a technological nature, and of the dynamics of the operating cash flow. The financial liability relating to the application of IFRS 16 (from 1 January 2019) for € 64.3 million contributed to the increase in debt. With regard to the change in the scope of consolidation, the new consolidation of AdF contributed € 89.6 million, that of Pescara Distribuzione Gas € 7.1 million and the new companies in the Environment Segment (Berg and Demap) a total of € 0.8 million. Moreover, the increase is also due to the as yet unpaid 2018 dividends from Roma Capitale for € 77.1 million.

As regards the medium/long-term component, the increase of € 181.9 million compared to the end of 2018 refers almost exclusively to € 177.8 million for the increase in non-current payables and financial liabilities. This change derives from the increase in bonds for € 75.9 million and in the increase in non-current financial payables and liabilities for € 101.8 million, as shown in the following table:

Bonds of € 2,754.3 million increased by a total of € 75.9 million mainly due to the combined effect of the placement of the bond issued in May 2019 by the Parent Company under the Euro Medium Term Notes (EMTN) programme (€ 493.3 million including the long-term portion of the underwriting costs) and the reclassification of the bond issued by the Parent Company and maturing on 16 March 2020 as a short-term position (€ 422.7 million including the residual portion of the underwriting costs).

Medium/long-term loans of € 797.6 million saw an overall increase of € 101.8 million due to the combined effect of the recognition of the medium/long-term portion of the financial liability relating to the application of IFRS 16 amounting to € 51.7 million and the newly-consolidated AdF for € 114,2 million and the new photovoltaic companies for € 7.5 million, from the acquisition of Pescara Distribuzione Gas for a total of € 1.2 million offset by the reduction of the Parent Company for € 41.0 million for the reclassification of the shares maturing in the following financial year for existing loans.

The following table shows medium/long–term and short-term borrowings by term to maturity and type of interest rate:

The fair value of Acea hedging derivatives was a negative € 1.0 million, decreasing by € 1.0 million compared to 31 December 2018 (was a negative € 2.1 million), while that of AdF was negative for € 4.1 million.

The short-term component was positive for € 460.5 million, a reduction of € 312.8 million

The short-term component is positive for € 460.5 million and, compared with the end of 2018, showed a reduction of € 312.8 million due for € 232.4 million to the reduction in cash and cash equivalents, of which € 290.4 million relating to the Parent Company offset by the change in the scope of consolidation. The recognition of the short-term portion of the financial liability relating to the application of IFRS 16 is € 12.8 million.

The Acea rating 

At 31 December 2019 the Parent Company held unused uncommitted credit lines totalling € 628 million. No guarantees were granted in obtaining these lines. 

It must be noted that the long-term Ratings assigned to Acea by the International Ratings Agencies were:

• Fitch "BBB+"; 
• Moody's "Baa2"