Summary of results: trends in financial position and cash flows

Consolidated balance sheet data (€ million)31/12/201831/12/17Change% Change
NET WORKING CAPITAL(642.7)(286.3)(356.4)124.5 %
INVESTED CAPITAL4,471.54,232.7238.85.6 %
NET DEBT(2,568.0)(2,421.5)(146.5)6.0 %
Total shareholders’ equity(1,903.5)(1,811.2)(92.3)5.1 %
Total sources of financing4,471.54,232.7238.85.6 %

The non-current assets and liabilities increased by € 595.2 million (+ 13.2%) compared to 31 December 2017, mainly due to the increase in intangible fixed assets (+ € 474.5 million).

The non-current assets and liabilities increased by 13.2 % thanks to the investments in the period (+18.5%)

€ million31/12/201831/12/17Change% Change
Tangible/intangible fixed assets4,790.74,320.4470.310.9%
Equity investments281.7283.5(1.8)(0.6%)
Other non-current assets630.5412.6217.952.8%
Employee severance indemnity and other defined benefit plans(103.9)(108.4)4.5(4.2%)
Provisions for risks and charges(136.7)(204.8)68.1(33.3%)
Other non-current liabilities(348.2)(184.3)(163.9)88.9%
Non-current assets and liabilities5,114.24,519.0595.213.2%

The change in intangible fixed assets is mainly due to the investments, which reached € 630.8 million, and amortisations and value reductions, totalling € 366.8 million.

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

Investments per operating segment (€ million)31/12/201831/12/17Change% Change
ENVIRONMENT20.015.44.630.1 %
OVERSEAS6.65.21.427.1 %
WATER329.7271.458.221.5 %
Integrated water service329.5271.458.121.4 %
Lazio - Campania329.5271.458.121.4 %
Tuscany - Umbria0.00.00.00 %
ENERGY INFRASTRUCTURES238.3209.428.913.8 %
Distribution218.4185.732.717.6 %
Public Lighting4.40.63.8n.s.
ACEA (Corporate)10.010.7(0.6)(5.9%)
TOTAL630.8532.398.618.5 %

Investments increased by € 98.6 million (+ 18.5 %)

Investments in the Environment Segment mainly refer to the investments made by Acea Ambiente relating to the expansion of the Monterotondo Marittimo plant, the works carried out in the WTE plants of Terni and San Vittore, the work on the waste treatment plant and biogas production site in Orvieto and the acquisition of industrial land near Chiusi.

The Commercial and Trading Segment recorded an increase of € 5.3 million to be attributed to Acea Energia, mainly due to the costs for agents for the acquisition of the customer base and in line with the provisions of the new IFRS 15 international standard (+ € 9.5 million).

The Overseas Segment showed an increase of € 1.4 million, mainly due to the company Aguas de San Pedro.

The Water Segment made total investments of € 329.7 million, up € 58.2 million compared to 31 December 2017. 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 € 28.9 million as a result of works on the HV, MV and LV network, as well as a series of projects for the expansion of the MV networks and extraordinary maintenance on the overhead lines, mainly relating to areti. The investments made by Acea Produzione, on the other hand, refer mostly to the revamping works of the Mandela hydroelectric plant and for the extension works of the district heating network in the Mezzocammino area in the south of Rome.

The Engineering and Services Segment recorded investments of € 1.6 million, mainly due to the purchase of industrial and trade equipment by Acea Elabori.

Corporate carried out investments of € 10.0 million, which mainly relate to IT developments and investments in offices used for company activities.

Group investments concerning shared IT infrastructure totalled € 31.6 million.

Equity investments increased by € 1.8 million compared to 31 December 2017. The change is due to negative values. Among these we note:

  • the valuation of companies consolidated using the equity method in accordance with the application of IFRS 11 for € 44.1 million;
  • change in the scope of consolidation for - € 47.4 million due to the full consolidation of GORI (previously consolidated under shareholders' equity);
  • the effect deriving from the first application of the new international standards IFRS 15 and IFRS 9 equal to - € 2.1 million.
  • other changes for € 3.5 million.

The stock of the employee severance indemnity and other defined benefit plans recorded a decrease of € 4.5 million, mainly due to the drop of the rate used (from 1.30% at 31 December 2017 to 1.57% in 31 December 2018).

Provisions for risks and charges decreased by 33.3 % compared to the previous year.

€ million31/12/17UsesProvisionsPayment of Redundancy FundsReclassifications/Other changes31/12/2018
Tax Office9.3(3.7)5.400.0(0.2)10.7
Regulatory risks61.0(1.6)11.4(44.2)0.026.6
Contributory risks2.6(0.1)0.3(1.5)(0.2)1.1
Insurance excess2.1(2.1)2.5(0.2)7.29.6
Other risks and charges14.8(8.1)12.6(2.5)6.723.5
Total Provision for Risks 112.3(17.4)35.9(49.6)11.292.3
Early retirements and redundancies18.2(18.9)28.2(1.8)0.025.7
VAT Variation Notes26.
Post mortem17.30.00.0(1.0)0.416.7
Provision for Settlement Charges0.2(0.2)
Provision for Charges of others0.
Provisions for restoration charges29.70.00.0(0.5)(29.2)0.0
Total Provision for Charges92.4(19.1)30.1(3.4)(55.8)44.3
Total Provisions for Risks and Charges204.8(36.5)65.9(53.0)(44.0)136.7

The main changes in the period include:

  • the release of the risk provision relating to GORI for € 44.2 million following the disappearance of the conditions for its establishment due to the effects linked to the agreements stipulated with the Campania Region;
  • the reclassification of provisions for the coverage of any refund of VAT to the tax authorities reclassified to the provision for impairment of receivables (- € 26.7 million);
  • the release of the provision allocated following the recording – according to the acquisition method – of the first consolidation of the TWS group (€ 8.9 million) at the closure of the Business Combination. For more details, please refer to the 2017 Consolidated Financial Statements;
  • the increase of € 7.5 million net of releases and uses of the provision allocated to cover the charges deriving from the voluntary redundancy and early retirement plan;
  • there was a € 5.3 million increase in the Investee provision to account for the impairments in previous years of certain equity investments in associated companies previously carried out as a reduction of the item "Equity Investments";
  • the decrease in the provision for restoration charges following the change in the methods of application of the criteria for estimating IFRIC 12 adopted by the group.

€ million31/12/201831/12/17Change
Current receivables927.8985.5(57.6)
- due from end users/customers863.2901.3(38.1)
- due to Roma Capitale52.547.74.9
Other current assets262.6210.152.6
Current payables(1,524.9)(1,237.8)(287.1)
- due to Suppliers(1,413.9)(1,106.7)(307.2)
- due to Roma Capitale(107.6)(126.1)18.5
Other current liabilities(357.1)(284.3)(72.9)
Net working capital(642.7) (286.3)(356.4)

The net working capital is negative for € 642.7 million and increased € 356.4 million compared to the end of 2017.

The change in net working capital with respect to 31 December 2017 is mainly attributable to:

  • a decrease in receivables from users and customers (- € 38.1 million) due to the combined effect of higher receivables for € 252.5 million and a higher provision for bad debts for € 290.6 million. The increase in receivables is mainly attributable to the consolidation of GORI (+ € 211.6 million), while the substantial increase in the provisions for impairment of € 193.3 million derived from the first application of IFRS 9 starting from 1 January 2018, which, as noted in the Measurement Criteria and Accounting Principles of the Notes to the Financial Statements, replaced the previous IAS 39 accounting standard. The determination of the first application of IFRS 9 was revised with respect to the interim year-end closings due to a revision of the recovery estimates relating to receivables prior to 31 December 2017. Furthermore, it should be noted that the provision for impairment of receivables at 31 December 2017 did not include the amounts relating to the VAT Change Note (€ 26.7 million) included in the previous year within the specific item of the provision for risks.
  • to the increase in trade payables (+ € 307.2 million) mainly due to the consolidation of GORI (+ € 306.8 million).

Receivables from users and customers, including the provision and the consolidation of GORI, recorded an increase of approximately € 55.6 million. Please note: (i) a decrease in receivables of the Energy Infrastructure Segment which refers to the combined effect deriving on the one hand from the regulatory changes that led to the recognition of the income deriving from the elimination of so-called regulatory lag, whose amount at the end of 2018 was € 75.4 million (+ € 22 million compared to the end of 2017), on the other hand by the improvement in collection performance;the non-current portion relating to regulatory accounting, amounting to € 80.0 million, is included in fixed assets; and (ii) a decrease in Commercial and Trading Segment receivables due to the effects deriving on the one hand from the reduction in turnover and an improvement in the collection performance and on the other by greater sales and write-offs.

Receivables totalling € 1,375.8 million were transferred without recourse during 2018, of which € 203.9 million to the Public Administration.

Roma Capitale: net balance is positive for € 47.9 million

As regards the relations with Roma Capitale, the net balance at 31 December 2018 was € 47.9 million receivable by the Group, an increase compared to 31 December 2017. The change in receivables and payables was mainly due to the accrual of the year and the effects of compensations and receipts. In 2018, collections and adjustments were recognised for a total of € 93.2 million, including € 56.2 million for receivables related to the public lighting contract and € 25.8 million for receivables for water utilities. 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 exchanges, Roma Capitale expressed various objections concerning the supply of both works and services for the 2008-2018 period. These objections were fully rejected by the Acea Group.However, in order to identify a complete resolution of the divergences, a joint Acea Group - Roma Capitale Committee will be launched during 2019 that will seek to settle the various claims. Given the uncertainty over the full recovery of receivables due from Roma Capitale, the Group has prudently drawn up its best estimate of their recovery, updating the assessments already carried out, in particular with reference to the receivables relating to the Public Lighting service for the periods prior to 31 December 2017.

The following table presents an analysis of receivables and payables, including those of a financial nature, between Acea Group and Roma Capitale, as regards both net credit exposure and debt exposure, including financial items. Receivables are expressed net of the related provision for doubtful accounts which at 31 December 2018 amounts to € 51.5 million (€ 23.1 million at 31 December 2017). During the year, € 9.5 million was written down for receivables arising during the year (of which € 4.2 million for default interest) and for € 15.7 million the valuation at 1 January 2018 was updated as the first application of accounting principle IFRS 9.

Amounts due from Roma Capitale (€ million)31/12/201831/12/17Change
Utility receivables55.643.112.6
Provision for write-downs(9.3)(5.0)(4.3)
Total receivables from users46.338.18.3
Receivables for water works and services3.34.6(1.3)
Receivables for water works and services to be invoiced1.51.30.2
Provision for write-downs(1.9)00.0(1.9)
Receivables for electrical works and services3.61.22.4
Provision for write-downs(0.3)00.0(0.3)
Total receivables for works6.29.5(3.3)
Total trade receivables52.547.64.9
Financial receivables for Public lighting services billed99.1118.3(19.2)
Provision for write-downs(30.2)(12.5)(17.7)
Financial receivables for Public lighting services to be billed25.717.38.4
Provision for write-downs(9.8)(5.6)(4.2)
M/L term financial receivables for Public lighting services18.722.2(3.5)
Total public lighting receivables103.5139.7(36.2)
Total Receivables 156.0187.3(31.3)
Payables due to Roma Capitale (€ million)31/12/201831/12/17Change
Electricity surtax payable(15.3)(15.3)00.0
Concession fees payable(79.8)(100.2)20.4
Other payables(13.0)(11.4)(1.6)
Dividend payables00.0(2.2)2.2
Total payables(108.1)(129.1)21.0
Net balance receivables payables47.958.2(10.3)

Current payables increased by € 287.1 million

Current payables net of the increase resulting from the consolidation of GORI (+ € 306.8 million) decreased by € 19.7 million compared to the end of 2017.

The Other Current Assets and Liabilities recorded an increase of € 52.6 million and € 72.9 million respectively compared to last year.

In detail, the other activities increased due to the consolidation of GORI (+ € 76.3 million), due to the effects of the first application of the new IFRS 15 international standard on Acea Energia and areti, the reduction of tax receivables for € 28.4 million and receivables from the compensation fund (- € 14.1 million).

Current liabilities increased due to the consolidation of GORI (+ € 37.4 million) and the effects related to the first application of the new international standards mainly linked to the application of IFRS 15 (+ € 30.9 million).

Shareholders’ equity amounted to € 1.9 billion

The net shareholders’ equity amounted to € 1,903.5 million. The changes amounting to € 92.3 million are analytically described in the relevant table and are basically due to the distribution of dividends, the accrual of 2018 profits and the change in the cash flow hedge reserves and those formed by actuarial profits and losses, as well as to the registration of the FTA - First Time Adoption reserve for the application of the new international standards (IFRS 9 and IFRS 15).

Net financial debt increased by € 146.5 million compared to the end of 2017

Group debt recorded an overall increase of € 146.5 million, going from € 2,421.5 million at the end of 2017 to € 2,568.0 million at 31 December 2018. This change is a direct result of investments in the period, including those of a technological nature. The increase in the debt position of the Water Segment (+ € 117.8 million) and the Energy Infrastructure Segment (+ € 85.2 million) was due to the growing volume of investments and the dynamics of operating cash flows influenced by the numerous payments made by the Water Segment companies offset by the improvement in the Parent Company's position (- € 20.9 million).

€ million31/12/201831/12/17Change% Change
Non-current financial assets/(liabilities)1.82.7(0.9)(33.6%)
Parent Companies, Subsidiaries and Associates non-current financial assets/(liabilities)30.935.6(4.8)(13.3%)
Non-current borrowings and financial liabilities(3,374.1)(2,745.0)(629.1)22.9 %
Net medium/long-term debt(3,341.4)(2,706.7)(634.8)23.5 %
Cash and cash equivalents and securities1,068.1680.6387.556.9 %
Short-term debt(351.8)(544.6)192.7(35.4%)
Current financial assets (liabilities)(29.0)32.9(61.8)(188.2%)
Parent Company and Associates non-current financial assets/(liabilities)86.1116.2(30.1)(25.9%)
Short-term financial position773.4285.1488.3171.3 %
Total net financial position(2,568.0)(2,421.5)(146.5)6.0%

Medium and long-term borrowings increased by € 634.9 million

As regards the medium/long-term component, the increase of € 634.9 million compared to the end of 2017 refers to € 629.1 million for the increase in non-current payables and financial liabilities. This change derives from the opposite effect due to the increase in bonds for € 983.4 million offset by the reduction in non-current financial payables and liabilities for € 354.3 million, as shown in the following table:

€ million31/12/201831/12/17Change Change %
Medium/long-term borrowings695.71,050.0(354.3)(33.7%)
Medium/long-term debt3,374.12,745.0629.122.9 %

Bonds amounted to € 2,678.4 million, registering an increase of € 983.4 million, essentially due to the placement of two bond issues in the first quarter of 2018 amounting to € 300 million and € 700 million respectively for the Euro Medium Term Notes (EMTN) programme.

Medium/long-term loans of € 695.7 million decreased by € 354.3 million, which almost exclusively refers to the parent company (€ 341.4 million). This change is mainly due to the early repayment of an EIB loan of € 50 million and the reclassification to the short-term position of two other loans falling due in January and June 2019 of € 100.0 million and € 150.0 million respectively, in addition to the reclassification of the portions expiring in the following year.

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

Bank Loans:Total Residual DebtBy 31.12.2019Due from 31.12.2019 to 31.12.2023After 31.12.2023
fixed rate496.4273.2103.1120.1
floating rate493.539.6213.9240.0
floating rate to fixed rate27.18.318.70.0

The fair value of Acea hedging derivatives was a negative € 2.1 million, decreasing by € 1.4 million compared to 31 December 2017 (was a negative € 3.4 million).

The short-term component was positive for € 773.4 million, an increase of € 488.3 million

The short-term component is positive for € 773.4 million and, compared to the end of 2017, shows an increase of € 488.3 million, € 387.5 million of which are due to an increase in cash and cash equivalents generated for € 451.1 million from the parent company.

The Acea rating

At 31 December 2018 the Parent Company held unused uncommitted credit lines totalling € 679 million, of which € 529 million unused. No guarantees were issued to obtain these credit lines.

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

  • Fitch's 'BBB+'
  • Moody’s “Baa2”.