conference call transition to ias/ifrs and first half 2005

Conference call

Transition to IAS/IFRS and First Half 2005

29 September 2005

• As of financial statements ending at December 31st 2005, Aem Group is required to prepare consolidated financial statements in accordance with International Financial Reporting Standards.

• Aem is presenting First Half Interim Financial Statements in accordance with IAS 34.

• The information have been prepared in accordance with IAS/IFRS expected to be in force at the end of 2005.

• In this respect it should be noted that IAS/IFRSs in force at year end may differ from those applied for the preparation of this document.

• In fact EC might alter its stance with respect to the approval of the IAS/IFRS or the IASB or IFRIC might issue new pronouncements before the end of 2005. In those cases, AEM may adopt the new interpretations of the new principles starting from 1.1.05, if allowed.

Transition to IAS/IFRS - Disclaimer

FROM ITGAAP to IAS/IFRS

• 1st January 2004 as First Time Adoption for all IAS except 32 and 39

• 1st January 2005 as Transition date for IAS 32 and 39

• 1st Half 2005 Financial Statement in accordance with IAS/IFRS

• No impact on group strategy and financial targets

• Increase in EBITDA (Gross Operating Income) due to Edipower proportional consolidation in comparison with ITGAAP

• Reduction in Shareholders’ Equity at 1.1.04

• Increase in Shareholders’ Equity at 1.1.05 greater than 1.1.04 reduction

• Positive Ias 32 and 39 impact

• Conservative approach (“Fair Value Option” early adoption)

ITGAAP IAS/IFRS

Transition to IAS/IFRS - Summary

1,366.4-11.2

15.7

-34.9-4.8

-25.1

-9.4

1,299.1

2.6-0.2

1250

1270

1290

1310

1330

1350

1370

1390

Equity

ITGAA

P 01/0

1/04

Tangi

ble as

sets

Intang

ible as

sets

Goodw

ill

Edipw

conso

lidation

Emplo

yee Be

nefits

Equity

Inves

tments

Treasu

ry Shar

es

Other ad

justm

ents

Edipw

propor

t. C

onsol

.

Deferr

ed Ta

x

Equity

IFRS 0

1/01/0

4

-67.2

Transition to IAS/IFRS - From ITGAAP to IAS/IFRS 1.1.04 (€ m)

1,385

1,299.1 -35

0.6

-

-89.1

209.7

1100

1150

1200

1250

1300

1350

1400

1450

Net Equity01/01/04

Treasury shares Dividends Net Income Minorities/other Net Equity31/12/2004

+86.1

Transition to IAS/IFRS - From IAS/IFRS 1.1.04 to IAS/IFRS 31.12.04 (€ m)

1,514

1,385

22.9 -34.2

1.54.8133.9

1300

1350

1400

1450

1500

1550

1600

Equity IAS/IFRS31/12/2004

Avaible for sales Derivatives Fair value Option Ias 32-39 toPlurigas andEdipower

Deferred Tax Equity IAS/IFRS01/01/05

+129

Transition to IAS/IFRS - From IAS/IFRS 31.12.04 to IAS/IFRS 1.1.05 (€ m)

Transition to IAS/IFRS - Debt/Equity (€ m)

IAS IAS 01/01/04 IAS 30/06/2004 IAS 31/12/2004 IAS FTA 01/01/2005 IAS 30/06/2005

NET DEBT -1.926 -2.007 -1.982 -2.007 -1.665EQUITY 1.299 1.321 1.385 1.514 1.597DEBT/EQUITY (IAS) 1,48 1,52 1,43 1,33 1,04

ITGAAP ITGAAP 01/01/04 ITGAAP 30/06/2004 ITGAAP 31/12/2004 ITGAAP FTA 01/01/2005 ITGAAP 30/06/2005

NET DEBT -1.183 -1.522 -1.502 -1.502 n/aEQUITY 1.366 1.458 1.450 1.450 n/aDEBT/EQUITY (ITGAAP) 0,87 1,04 1,04 1,04 n/a

Transition to IAS/IFRS - Net Debt (€ m)

1.400

1.500

1.600

1.700

1.800

1.900

2.000

2.100

2.200

IAS 01/01/04 IAS 30/06/2004 IAS 31/12/2004 IAS FTA 01/01/2005 IAS 30/06/2005

Transition to IAS/IFRS - Debt/Equity (x)

0,80

0,90

1,00

1,10

1,20

1,30

1,40

1,50

1,60

IAS 01/01/04 IAS 30/06/2004 IAS 31/12/2004 IAS FTA 01/01/2005 IAS 30/06/2005

Euro million

ITGAAP IAS30 june 2004 30 june 2004 Difference NOTE

Revenues 924,2 100,0% 932,8 100,0% 8,6 1

Raw materials and services used (-) 595,0 64,4% 556,6 59,7% -38,4 2

Value Added 329,2 35,6% 376,2 40,3% 47,0

Labout costs (-) 60,9 6,6% 74,3 8,0% 13,4 3

Gross Operating Income 268,3 29,0% 301,9 32,4% 33,6

Depreciation, Amortization and writedowns (-) 66,3 7,2% 76,2 8,2% 9,9 4

Net Operating Income 202,0 21,9% 225,7 24,2% 23,7

Income/Expenses on equity investments -15,2 -1,6% 0,0 0,0% 15,2 5Net financial income (expenses) -16,0 -1,7% -28,4 -3,0% -12,4 6

Ordinary Profit 170,8 18,5% 197,3 21,2% 26,5

Other non recurring income/expenses 9,8 1,1% 10,5 1,1% 0,7

Profit before taxes 180,6 19,5% 207,8 22,3% 27,2Income taxes -70,0 -7,5%

Profit (Loss) before minority interest 0,0% 137,8 14,8%Minority interest -0,4Group interest in profit 0,0% 137,4 14,7%

IAS/IFRS impact on Profit and Loss 30.06.04

Revenues

EBITDA

Net Profit

Pro-forma EBITDA (*)

€ m H1 2005 IAS

1,034.8

276.8

145.0

294.5

H1 2004 IAS

932.8

301.9

137.4

301.9

+10.9

-8.3

+5.5

-2.5

%

(*) 2005 figures include premia on contracts for difference with Single Buyer (€17.7 m)

Financial Highlights

767

1,728

709

1,241

2,431

612

2,214

712

5,5684,876

H12004 H12005 H12004 H12005 H12004 H12005

2,495

1,950

3,043

2,925

-7.5%

AEM Production n hydro n thermal

Edipower and other sources

n Edipower n Other

TotalAvailability Single Buyer

1,276

2,600

2004 2005

-28.2%

-8.9%

+16.2%

-12.0%

+103.8%

Electricity: production and availability (GWh)

H12004 H12005

Electricity: plants unavailability

From To Notes

CHIVASSO 1 05/02/2005 30/03/2005 Breakage of Module 1 GT compressor

CHIVASSO 2 03/02/2005 24/03/2005 Breakage of GT compressorSERMIDE 4 19/03/2005 31/05/2005 Compressor stage substitution of 1 GT module

BRINDISI 3 04/03/2005 30/06/2005 Judicial seizure of coal bunker BRINDISI 4 04/03/2005 30/06/2005 Judicial seizure of coal bunker

CC1 23/04/2005 06/06/20051 month extension versus budget of programmed maintenance for problems in the alternator

CC2 25/01/2005 06/02/2005Heater problems caused by ethylene glycol (partially operated at limited load and partially shutdown)

11/03/2005 20/03/2005Partial burners substitution for the above mentioned problem (shutdown)

AEM operations in the competitive energy sector

Up to 30th March 2004 As of 1st April 2004

Hydro Thermal Edipower et al

AEM SpA Generation

AEM Trading

AEM Energia AEM ElettricitàOther wholesalers

Eligible clients Captive clients

Hydro Thermal Edipower et al

AEM SpA Generation

AEM Trading

AEM EnergiaAEM Elettricità

IPEXOther wholesalers

Gas, coal and fuel

oil suppliers

Single buyer

Eligible clients Captive clients

Market price

Tariffs

Gas, coal and fueloil suppliers

H1 2004 H1 2005 %

CaptiveEligible

6,587 7,257 +10.2

657

3,425

1,803

3,016

H1 2004 H1 2005 H1 2004 H1 2005

4,082

4,819

2,505 2,438

CaptiveEligible Clients and Wholesalers

IPEX

+18.1% Total sales

-2.7%

Electricity sales (GWh)

Natural gas (Mmc) Heat (GWht)

27.2

649.0

H1 2004 H1 2005

687.1 676.2

Clientifinali

Traders

H1 2004 H1 2005

227.1245.1

-1.6%

+7.9%

Traders Final clients

Gas and heat sales

Electricity (GWh) Gas (Mmc)

H1 2004 H1 2005

3,617 3,745

H1 2004 H1 2005

771.4 777.5+0.8%

+3.5%

Distribution

Labour cost (€ m) AverageManpower *

9.9

74.3

9.8

75.5

H1 2004 H1 2005

84.2 85.3

capitalized

+1.3%

* Edipower and Plurigas not included

Manpower at 30.6.05 *

H1 2004

2,9262,803

2,906

2,749-123 -157

Labour cost and manpower

H1 2005 H1 2004 H1 2005

Production

Consolidated (*)

+18.2%

-6%

Networks

Market (*)

Area ProduzioneEdipower 20%

AEM Elettricità MetrowebAEM TrasmissiomeAEM Gas Serenissima Gas

CorporateAEM ServiceZincar

AEM Trading AEM EnergiaSerenissima EnergiaAEM Calore e ServiziQuota Plurigas

Services

-15.5%

-2.5%

+38.8%

301.9

89.9

127.5

92.4

294.5

106.3119.9

78.1

-6.7 -9.3

1H 20041H 2005

EBITDA composition (€ m)


EBITDA 30/6/2004

Low hydraulicity

Lower tolling (Cassano)

Hydro rent for 2001

Highertolling

for Edipower

Other EBITDA30/6/2005

89.9

-2.8 -2.2

18.6 2.4 0.4 106.3

Production: EBITDA step analysis (€ m)

EBITDA 30/06/04

Electricity tarff review

Equalisation

Higherfuel

margin

Gas tariff

review

Quantityeffect (both

electricityand gas)

Other Revenues

(newconnections

etc)

Settlementswith

Single Buyer(2004)

Balances-previous

years(gas)

Higher Costs

(taxes, rents,

fees etc.)

EBITDA30/06/05

127.5

-3.3 -4.4

1.7

-5.7

2.4

-2.2

3.9 2.4

-2.3119.9

Networks: EBITDA step analysis (€ m)

EBITDA30/06/2004

Lower unit

margins for

traded electricity

Lowertraded

electricity

Highercosts-green

certificates

IPEX 2004-contingent

liability

Lower gas

sales

Plurigascontribution

Contributionfromheat

division

EBITDA30/06/2005

92.4

-5.3-7.1 -3.7

-5.0 -2.2-8.9

5.410.3 2.2 78.1 (*)

Market: EBITDA step analysis (€ m)

Lower gasunit

margin

Balances-previous

Years(gas)


Depreciation

Provision on Bad Debts

Gross OperatingIncome

Other Provisions

1H 05

-73.2

-3.4

+276.8

-24.8

1H 04

-66.1

-1.1

-25.1

-9.0

-7.1

-2.3

+301.9

-15.8

r Notes

Net OperatingIncome

+171.0 -54.8+225.7

Other fixed assetswrite-downs

-4.5 -4.5

Canale Viola is on stream ,

increase in Edipower depreciation

Distribution assets

€ m

From Ebitda to Ebit

Financial Gains/Losses

Gains and Losses on disposals

Net OperatingIncome

1H 05

+32.3

-0.9

+171.0

1H 04

-28.4

+10.4

-54.7

+60.7

-11.3

+225.7

r Notes

EBT +202.3 -5.5+207.8

Affiliates -0.1 -0.2

Write-off Aem Elettricità’s

assets

+0.1

From Ebit to EBT

€ m

Taxes

EBT

1H 05

-56.4

1H 04

-70.0 +13.6

r

Net Profit

+202.3 -5.5+207.8

Minorities -0.9 -0.5-0.4

+145.0 +7.6+137.4

From EBT to Net Profit

€ m

Net Debt

Equity

Net Capital Invested

Leverage

30.06.05

1,664.8

1,597.2

3,262.0

1.04x

31.12.04

1,982.1

1,385.2

3,367.3

1.43x

-317.3

+212.0

-105.3

r

Capital structure

€ m

-

Net Debt=1664.8

Net Debt=1982.1

L=190.2

L=221.5

PFN 31/12/2004 PFN 30/06/2005

GrossDebt: 2203.6

GrossDebt: 1855

Net Debt=1982.1

Net Debt=1664.8

-45.1

-306.7

55.7

NFP@31/12/2004

Operating CashFlow

Net Investments Other NFP@30/06/05Net Debt31/12/2004

OperatingCash Flow 06/2004

Net Investments Other Differences Net Debt30/06/2004Net Debt

31/12/2004Net Debt30/6/2005

Gross Debt- Net Debt – Cash Flow

€ m

conference call transition to ias/ifrs and first half 2005

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