Significant events for the 2018 financial year

Energy Infrastructures Operating Segments

Gala

With Resolution 50/2018/R/eel of 1 February 2018, the Authority approved a mechanism for recognising charges otherwise not recoverable due to the failure to collect general system charges. This regulation provides for the recognition of receivables accrued from 1 January 2016, with the request for recognition to be submitted by July 2018, referring to bills that have expired for at least 12 months.

This regulation establishes that only distributors that have paid the amount of charges for which they are to be reimbursed to CSEA and the GSE can access the mechanism. In addition, some restrictions have been introduced like not allowing full recognition of the portion relating to general charges. Being interested in joining the mechanism to obtain a partial re-integration, the Company, having regularly anticipated the share of charges to CSEA and GSE, promptly filed a petition. Consequently, on 30 September 2018, by virtue of the mechanism described above, areti was able to recover the amount of € 28.4 million to partially offset the system charges.

At 31 December 2018 the total receivables accrued by the Company amounted to € 73.6 million, including billed interest.

Currently, also taking into account the changes in the regulatory framework deriving from the approval of the mechanism for reimbursing general expenses, the reduction in the value of the areti receivable from GALA was prudentially determined with reference to transport and works.

It should also be noted that, with resolution no. 583 of 20 November 2018, the ARERA rejected the complaint presented by Gala Power S.r.l., a company of the Gala Group, regarding areti's refusal to stipulate a transport contract with it given the established existence of a single decision-making centre subsisting between Gala Power and its parent company Gala, in light of the significant debt exposure accrued by the latter with respect to areti

ARERA fines

With regard to Resolution 62/2014/S/eel of ARERA, the results of the preliminary investigation are still awaited, while as regards Resolution 512/2013/S/eel of ARERA, the Authority gave a mandate to appeal the judgement of the Lombardy Regional Administrative Court to the Council of State. With a sentence of 22 February 2018, the Council of State completely voided the penalty on the grounds that, as with areti, the regulation then in force did not include any obligation to register the reminders following a first notification already recorded for the same customer.

Technological innovation projects

Pilot Project “New Digital Meter Plan” and “2.1G Digital Meter Project”

In order to assess the various technologies to be used in view of the end of the life cycle of the current digital meters (2019-2020), areti has completed detailed technical studies linked to the development and consolidation of the new standards being normalised in Europe, also taking into account AEEGSI resolution 87/2016/R/eel dated 8 March 2016 concerning the “Functional specifications for second generation intelligent meters (2G)”.

Experiments were also completed on the various technologies available for the communication protocol transmitted between the meter and the concentrator and the communication protocol for the back-up communication channel.

Once the aforementioned experiment related to the PILOT project was completed, the "2.1G DIGITAL METER" project was launched.

In particular, the procedure was initiated for the selection of the field equipment supplier (meter and concentrator) and of the related Management Centre (the latter to be considered as an optional supply), with the related support services, with the goal of starting the development of the solution during 2019 and mass installation during the following year.

The launch of the mass installation project is subject to the approval of the Mass Replacement Plan by the Authority, to be presented according to regulatory deadlines.

Smart Grid Intelligence platform evolution (SGI - Electrical data)

The algorithms for calculating the impact indices, the failure rate and the element risks (branches and nodes) of the MV network were tested and released. This allows the SGI system to calculate and update the impact metric, failure rate and risk for the MV network in real time. The development of the SGI platform is envisaged in the strategic plan, in accordance with the plans for the integration of data and systems dedicated to sensors in the field and with those relating to innovative central system platforms, with particular attention to the implementation of algorithms that are specific for risk assessment.

San Saba Project

The project consists in the redevelopment of a portion of the LV and MV networks in a public and private metropolitan setting and in the simultaneous preparation of a fibre optic network to support the electricity service. These new systems allow the use of technologically advanced equipment, above all aimed at guaranteeing greater flexibility in the manoeuvring and protection of the portions of the network supplying power to final customers, with the aim of improving the quality and continuity of the service provided.

DRONES project

With regard to the Drone Project, in 2017 the use of remote controlled aircraft (developed in 2016) was experimented with for inspections of overhead power lines to detect partial discharges on overhead lines, the patent relating to the "Ultrasound Sound System" being filed on 6 June 2017, . Further developments are under way to define solutions that use passive drones for simplified mass inspections. Finally, the land drone project (rubberised) was defined for automatic inspections in primary cabins and/or other sensitive sites. This project involves the completion of the first step during 2019. In September 2018 a drone was delivered to be used with specific operational tests during 2019. In December 2018 a Pick-up was delivered for building a mobile laboratory for work assignments with drones.

Primary and Secondary Cabinet Project 2.0

The Primary Cabinet Project 2.0 (CP 2.0), to be developed in the two-year period 2018-2019 with implementation in the field immediately following, provides for the definition of a new Architecture of the Command Protection System, Control of the Primary Cabinet (CP) which envisages an apparatus that has the function of integrated management of the underlying MV network within the primary cabin.

The Secondary Cabin Project 2.0 developed during 2018 for the design and prototyping part is planned to be completed in 2019 with the consolidation of the solution. In addition to what is already envisaged for the remote control and the automation of the MV components of the secondary cabin, the project calls for the definition of a secondary cabin apparatus that implements the integrated management of the entire underlying LV network.

FIBRE OPTIC Project

The Company is planning and building a fibre optic network for connecting the primary substations of the distribution network, which is also the main telecommunications backbone that the underlying secondary network developed under the "secondary FO project" is connected to. This backbone will guarantee security and reliability in the transit of information between the centre and the periphery to ensure the correct operation of the Operation Technology systems and network management systems. Parallel with this activity, together with the LV and MV Regulatory Plans, areti has planned the construction of a fibre optic network. In particular, this network will make it possible to reach each secondary substation for the remote control of the installed equipment and, where possible, the measurement points for the purpose of transmitting all the information acquired through sensors and field devices to the central systems.

Furthermore, in parallel with the MV and LV regulatory plans, areti is building the fibre optic network of the Open Fiber company under a signed agreement for the development of the respective electronic communication networks by mutually exploiting the works realised by the individual companies. This agreement will guarantee to areti the possibility of connecting every node of its own network (CP or CS) even in the areas of the territory where no works are being done on the electrical grid.

Public Lighting

As at 31 December 2018, 13,511 transformations had been carried out (for a total of 170,556 transformations). The Plan projected the end of activities by the first months of 2018. However, following the revision of the colour temperature and the colour rendering index carried out by the working group that involved the SIMU, the Superintendency and the University of Rome La Sapienza, the transformations of the artistic and ornamental fixtures were rescheduled, thus postponing the conclusion. The remaining approximately 12,000 lighting fixtures, mainly located in the city centre, will therefore be transformed during 2019. It should be noted that LED transformation projects and technological upgrades of important historical and artistic sites like the Capitoline Hill, Tiber Island, Piazza Navona and Ponte Mazzini were launched.

Production of electrical energy

The Acea Produzione production system is currently constituted by a group of generation plants, with an overall installed power of 226.6 MW, comprising five hydroelectric plants (three in Lazio, one in Umbria and one in Abruzzo), two so-called "mini hydro" plants in Cecchina and Madonna del Rosario, and two thermoelectric power plants in Montemartini and Tor di Valle, the latter was the subject of an important repowering completed at the end of 2017. Tor di Valle is now a modern high-efficiency cogeneration plant, replacing the previous combined-cycle plant. The new plant consists of two high-efficiency methane gas powered engines each with an electrical power of 9.5 MW, for a total of 19 MW, as well as three supplemental boilers and 6 storage tanks. In the current configuration, in addition to selling electricity to the market during the most profitable hours, the plant provides electricity in SEU to the total electricity users of the adjoining Rome South Treatment Plant and the thermal energy necessary for the supply of district heating service in the districts of Torrino Sud, Mostacciano and Mezzocammino in the Municipality of Rome. Again with regard to the Tor di Valle production site, the old co-generation module was demolished in 2018, consisting of an open cycle gas turbine of 19 MW electrical, operational since the early 1980s, in line with the provisions of the Integrated Environmental Authorisation issued.

This equipment will be supplemented by 52 photovoltaic plants with an overall installed power of 8.6 MWp.

In the 2018 financial year, the Company generated a volume of 548.6 GWh through the directly owned power plants. During the period, the Company's production was subdivided into the portion related to hydroelectric plant production of 467.7 GWh, the share of production from mini-hydro plants of 2.6 GWh, the share of thermoelectric production of 68.4 GWh and the portion related to photovoltaic production of 10.1 GWh.

With regard to district heating, the Company, through the cogeneration module of the Tor di Valle power plant, supplied heat to the Torrino Sud and Mostacciano districts (located in the south of Rome) for a total of 73.1 GWht, for a total of 3,244 utilities served (253 condominiums and 2,991 real estate units).

Co-generation

The operational management of Ecogena focuses mainly on three areas: (i) consulting in the Esco sector and offering services related to obligations to increase the energy efficiency of third parties; (ii) the supply of energy service through the management of cogeneration (or trigeneration) plants and district heating networks and the sale of energy produced to customers; and (iii) the coordination of Group companies with regard to energy efficiency projects.

Today the Company's production system is made up of a set of cogeneration plants, combined with district heating networks, for a total of 6.6 MW of installed electric power in Umbria and Lazio. In 2018 the Company achieved a production volume of around 15 GWh (electricity), 26 GWh (thermal) and 9 GWh of refrigeration.

With reference to the Europarco plant, the supply of the service to the ENI 4 building was launched in June 2018. Work on the construction of the ENI2 building was completed, with the start-up of the service scheduled for 1 February 2019.

The activities envisaged by the August 2017 settlement act continue, with particular reference to the work that the Upside Fund has undertaken to entrust to Ecogena. The contract between Ecogena and Upside for the construction of a 450-space elevated parking lot is expected to be signed by February 2019.

Lastly, it should be noted that on the subject of disputes, on 27 December 2018 a Transaction Agreement was signed with Cinecittà Parchi that envisages the termination of both existing contracts and comprehensive settlement payment by Cinecittà to Ecogena of € 1.0 million with Ecogena committing to dismantle the plant by 2021. On the basis of this transaction, both parties have agreed to abandon any legal proceeding and/or executive procedure concluded or ongoing between them.

With regard to Energy Efficiency and Development, the first report for the final balance of the savings for lot 0 of the Roma Capitale LED Plan was presented. We are waiting for the approval process to be completed in order to proceed with the presentation of the second report. Furthermore, in the month of August the first reporting phase was started for lot 2 of the Roma Capitale LED Plan, while in September the request for completion of the final project presented to the GSE for the Roma Capitale LED Plan concerning the galleries was received.