Segment reporting

The Iren Group identifies the following business segments:

• Networks (Electricity distribution networks, Gas distribution networks, Integrated Water Service)
• Waste Management (Waste collection, treatment and disposal)
• Energy (Hydroelectric production and other renewable sources, combined heat and power, district heating networks, thermoelectric production, energy efficiency services, public lighting, global services, heat management)
• Market (Sale of electricity, gas, heat and other customer services)
• Other services (Laboratories, Telecommunications and other minor).

These operating segments are reported on pursuant to IFRS 8, which requires the disclosure about operating segments to be based on the elements which management uses in making operational and strategic decisions.

For a proper interpretation of the income statements relating to individual operating segments presented and commented on below, revenue and expense referring to general activities were fully allocated to the segments based on actual usage of the services provided or according to technical and economic drivers.

Given the fact that the Group mainly operates in one area, the following segment information does not include a breakdown by geographical segment.

Net invested capital by business segment compared to the figures as at 31 December 2020 restated and income statements (up to the operating profit/(loss)) for the current year by business segment are presented below, compared against the 2020 figures restated. At 31 December 2021, non-regulated activities contributed 30% to the gross operating profit (28% at 31 December 2020), regulated activities accounted for 46% (down from 50% in 2020), and semi-regulated activities contributed 24% (22% in 2020).

 

 

 

 

 

Networks SBU

For the year ended 31 December 2021, the Networks business segment, which includes the Gas Distribution, Electricity and Integrated Water Service businesses, reported revenue of 990.8 million euro, down by -4.8% compared to 1,040.9 million euro in 2020. This contraction can be attributed to the provision of the Ministry of Ecological Transaction (MITE), which reduced the quantitative obligation related to Energy Efficiency Certificates (EECs) by a decree dated 21 May 2021. In fact, the application of the decree resulted in lower costs due to the reduction in the number of certificates purchased to meet the obligation and, at the same time, a related reduction in revenue due to the lower number of certificates delivered to the CSEA, however with positive effects on the income statement due to the difference between revenue and costs.

The Gross Operating Profit (EBITDA) amounted to 382.5 million euro, up +1.7% on the 375.8 million euro for 2020, while operating profit (EBIT) was 188.1 million euro, an increase of +1.1% compared to 186.0 million euro in 2020. The trend in the operating profit (EBIT) was characterised by higher depreciation and amortisation of approximately 9 million euro, related to increased investments, higher releases of provisions for about 2 million euro and lower impairment losses on loans and receivables of approximately 3 million euro, as a result of an improvement, compared to last year, in the estimate of the effects of the Covid-19 pandemic on expected losses.

 

Networks SBU - Electricity

Gross operating profit (EBITDA) amounted to 81.8 million euro, up +3% compared to 79.3 million euro in 2020. The improvement is mainly due to higher tariff revenue related to the increase in tariff invested capital (RAB) and to the reduction in the obligation of energy efficiency certificates (EEC), which more than offset contingent liabilities and higher operating costs.

Investments amounted to 58.6 million euro, up +11.5% from 52.5 million euro in 2020, relating mainly to connections, line resilience activities and the construction of new substations and LV/MV lines.

Networks SBU - Gas Distribution

Gross operating profit (EBITDA) amounted to 89.9 million euro, up +5.3% from the 85.3 million euro of 2020. The increase in is due to the growth in tariff revenue and in particular to the effect of some extraordinary items referable to previous years and no longer repeatable, mainly related to the reduction of the obligations connected to the energy efficiency certificates (EEC).

Investments amounted to 40.9 million euro, down -19.2% compared with 50.6 million euro in 2020, and involved upgrading the network to cathodic protection and installing electronic meters.

Networks SBU - Water Cycle

Gross operating profit (EBITDA) amounted to 210.9 million euro, substantially equal to the 211.2 million euro of 2020. The increase in the restriction on tariff revenue (VRG) due to the increase in tariff invested capital (RAB) was absorbed by higher operating costs linked to the improvement in service quality and the absence of the accounting effects of certain extraordinary items that had characterised the previous year and are no longer repeatable.

Investments amounted to 202.2 million euro, up 10.9% compared to 182.3 million euro in 2020. These activities relate to the construction, development and extraordinary maintenance of distribution networks and plants and of the sewerage network, as well as the installation of measuring units mainly subject to remote reading.

In addition, investments of 6 million euro were made in information systems and the development of electric mobility across the three businesses.

Waste Management SBU

For the year ended 31 December 2021, the segment’s revenue amounted to 916.1 million euro, up by +19.8% compared to 764.8 million euro in 2020. The increase of 97 million euro is due mainly to the expansion of the consolidation scope (companies in the Waste Management Division of the Unieco Group, +65 million euro and I.Blu, +32 million euro). There was also an increase in energy revenue (+48 million euro) due to the increase in the price of electricity and revenue from collection services (+19 million euro), while revenue decreased from disposal, intermediation and special waste management activities (-15 million euro) mainly due to the lower use of landfills.

Gross operating profit (EBITDA) of the segment amounted to 227.4 million euro, upwards +31.6% compared to 172.8 million euro in 2020. The increase is attributable not only to the change in the consolidation scope, with an increase of approximately +22 million euro, but also to the strong improvement in energy profits following the increase in the sale price of electricity (the average PUN of 125.5 euro/MWh is in fact up 222.6% compared to 2020) and to the profits from the collection and sale of recovered materials resulting from sorted waste collection. Profits on special waste intermediation and disposal activities decreased, the latter due to reduced use of the Collegno landfill, on which maintenance and expansion works are under way.

Operating profit (EBIT) amounted to 92.0 million euro, up +85.2% compared to 49.7 million euro in 2020. The positive trend in EBIT was partially absorbed by an increase in amortisation and depreciation of approximately 6 million euro, higher write-downs of approximately 21 million euro relating primarily to the assets, already non-operational, of the Scarlino Energia plant, partially offset by a greater release of provisions of approximately 15 million euro.

Investments made amounted to 164.3 million euro, a significant increase from 116.3 million euro in 2020. Investments related to the purchase of collection vehicles and equipment and the construction of plants; in particular, the latter include the paper and plastic sorting plant in Parma, the wood treatment plant in Vercelli, the plastic sorting plant in Borgaro. The change in the consolidation scope also contributed to the growth of investments, with particular reference to the plastic recycling plant in San Giorgio di Nogaro (I. Blu).

Energy SBU

For the year ended 31 December 2021, the revenue of the Energy SBU, which includes the production of electricity and heat, management of district heating, public lighting and energy efficiency, amounted to 2,280.1 million euro, an increase of +99.2% compared to 1,144.7 million euro in 2020. The increase in revenue reflects primarily higher sales prices for electricity (over +1,000 million euro), resulting from the energy scenario, partially offset by a decrease in the amount of electricity sold (-78 million euro). Revenue from heat production is also up, due both to an increase in volumes, as a result of a more favourable heating season, and to higher sales prices, as well as revenue from activities connected with energy requalification and building restructuring favoured by recent tax breaks (around +100 million euro).

 

In 2021, electricity produced was 9,173.7 GWh, down -2.9% compared to 9,444.5 GWh of the previous year 2020.

Total thermoelectric production was 7,947.5 GWh, of which 5,610.2 GWh from cogeneration sources, up +2.9% compared to the 5,454.5 GWh of 2020 and 2,337.3 GWh from conventional thermoelectric sources, down -13.6% compared to the 2,706.3 GWh of 2020.

Production from renewable sources amounted to 1,226.1 GWh, of which 1,205.7 GWh deriving from hydroelectric sources and, marginally, approximately 20.4 GWh from other renewable sources (photovoltaic); overall production is down by -4.5% compared to 1,283.7 GWh in 2020 mainly due to the poor water supply of the year.

The Gross operating profit (EBITDA) amounted to 297.8 million euro, up +30.6% compared to 228.1 million euro in the previous year.

The growth trend in domestic demand for electricity that had characterised the nine months of 2021 also continued in the fourth quarter and at 31 December, stood at 318.1 TWh, an increase of +5% compared with 302.8 TWh in 2020.

The trend in the energy scenario was characterised not only by rising demand and a sharp increase in electricity prices, but also by a gradual rise in the price of gas used as a raw material in generation activities. These dynamics led to a significant increase in the margins generated in all the electricity production sectors (Hydroelectric, Electric Cogeneration and Thermoelectric), also thanks to services on the Dispatching Service Market (MSD), partially absorbed by lower profits in the heat cogeneration sector, despite the greater quantities of heat produced.

The improvement compared is also supported by the energy efficiency sector which, thanks to energy requalification and building renovation activities, favoured by recent tax concessions (e.g. facade bonus and 110% superbonus), shows an improvement of approximately +9 million euro.

The operating profit of 157.4 million euro was up by + 41.4% compared to the 111.3 million euro of the previous year, which also benefited from a release of provisions for over 18 million euro. Depreciation, amortisation and impairment losses increased by 4 million euro.

Investments amounted to 169.4 million euro, down -1.2% from the 171.6 million euro in 2020. The main ones include the repowering of the Turbigo thermoelectric plant (78.9 million euro) and the development of district heating networks.

Market SBU

As at 31 December 2021, the segment’s revenue amounted to 3,070.9 million euro, up by +47.3% compared to 2,084.6 million euro in 2020. Approximately +83% of the increase in revenue is due to the sharp rise in the prices of both gas and electricity, and +17% is due to the higher quantities of electricity and gas sold. Effective 1 July 2021, SidIren was acquired, which contributed approximately 14 million euro to the revenue of the Market SBU.

Gross operating profit (EBITDA) amounted to 104.4 million euro, down -28.9% compared to 147 million euro in 2020. The sharp contraction is primarily attributable to electricity sales, whilst gas, partly thanks to the use of storage facilities, was less affected by the sharply rising energy scenario. The other services sector made a positive contribution to EBITDA, thanks to significant development of the services and accessory products marketed (e-mobility, boilers, energy system maintenance, etc.).

Operating profit (EBIT) amounted to 14.8 million euro, down -78% compared to 67.3 million euro in 2020. During 2021, there was higher depreciation and amortisation of approximately 15 million euro and lower impairment losses on loans and receivables of approximately 4 million euro due to an improvement, compared to last year, in the estimate of the effects of the Covid-19 pandemic on expected losses.

 

Sale of electricity

The volumes of electricity sold on the free market amounted to 7,353.7 GWh, an increase of +0.8% compared to 7,295.9 GWh in 2020.

The increase in the deregulated market regarded the small business segment, with sales of 897.7 GWh (up 55.8%), and the retail segment, with sales of 1,543.9 GWh (up 20.3%), partly due to the higher quantities sold in the residential gradual protection auctions. On the other hand, sales were down in the Business segment (-9.6%) and in the Wholesale segment (-8.7%), to 2,857.1 GWh and 1,736.7 GWh, respectively.

Sales in the protected market amounted to 318.3 GWh, down by -14.4% compared to 371.8 GWh in 2020.

The gross operating profit (EBITDA) from the sale of electricity amounted to 12.4 million euro, down -77.7% compared to 55.5 million euro in 2020. The sharp contraction is due to the scenario effect on uncovered sales, partially offset by increases in the PCV (sales prices) and RCV (sales marketing remuneration) components and extraordinary items related to the refund of System General Charges.

The table below shows the quantities sold by class of customer sector:

Sale of Natural Gas

Purchased volumes amounted to 2,926.9 Mm³, down -3%, compared to 3,017.7 Mm³ in 2020.

Gas sold by the Group amounted to 1,028.3 Mm³, down by -4.8% compared to 1,080.4 Mm³ in 2020.

The gas used for internal consumption within the Group amounted to 1,679.1 Mm³, a decrease of -2.8% compared to 1,728.2 Mm³ in the previous year.

The gross operating profit (EBITDA) from the sale of gas amounted to 81.5 million euro, down -5.4% compared to 86.1 million euro in 2020.

The increase in profits linked to the management and use of stockpiles was more than offset by higher operating costs linked to the development of new services.

Sale of heat and other services

The sale of heat and other services shows a gross operating profit of 10.5 million euro, a strong improvement compared to the 5.3 million euro in 2020. The increase is primarily attributable to the commercial activities of Iren Plus and Iren GO, the two business lines marketing goods and services ancillary to the supply of commodities and electric mobility.

Investments of the Market SBU amounted to 64.6 million euro, up +27.8% from the 50.6 million euro in 2020.

Services and other

For the year ended 31 December 2021, revenue of the segment, which includes the activities of the analysis laboratories, telecommunications and other minor activities, was 26.3 million euro, up by +5.4% compared to the 24.9 million euro in 2020.

Gross operating profit (EBITDA) amounted to 3.9 million euro, up +19.8% compared to 3.3 million euro in 2020.

Investments in the year amounted to 51.6 million euro, down by -2.2% compared to the 52.8 million euro of the year 2020 and mainly related to information systems, vehicles and buildings.

 

ENERGY BALANCES