Eligibility analysis and economic/financial KPIS
During the year, Acea carried out a cross-sectional project, which involved the Administration, Finance and Control Department and the Investor Relations & Sustainability Department of the Parent Company and the Companies included within the scope of the Consolidated Non-Financial Statement27, aimed at the eligibility analysis of the activities managed by such Companies and the identification of the related KPIs, in compliance with the regulation, according to the provisions of the Disclosure Delegated Act.
Furthermore, despite not being explicitly required by the Regulation, the Group also wished to calculate the portion of EBITDA28 eligible for the Taxonomy. In this way, Acea sought to return an additional financial metric at consolidated level which will make it possible to illustrate the actual economic performance of an integrated multi-utility company as fully as possible.
During the eligibility analysis, intended to verify whether the activities performed matched the description of the activities listed in annexes I and II of the Climate Delegated Act, dedicated to the climate mitigation and adaptation objectives respectively, Acea adopted as inclusive an approach as possible, going beyond the verification of correspondence between the NACE codes of reference, retrieved for each activity within the Regulation, and their ATECO equivalents, by entering into the detailed description of each activity alongside the Companies involved.
In particular, to date, the Taxonomy has identified 13 sectors29 that include, in total, 103 economic activities, 80 of which can make a substantial contribution to the mitigation and adaptation objectives, 8 to mitigation only and 15 to adaptation only.
Following the eligibility analysis of Acea’s business, operating mainly in public water services (integrated water service), energy (generation, distribution, sales and public lighting) and environment (energy development, recovery of material, treatment and composting), it was found that the Companies included in the scope manage, within 7 of the 13 sectors identified by the Regulation30, a total of 27 eligible activities, 22 of which can contribute to the climate objectives of both mitigation and adaptation, 4 for mitigation only and one for adaptation only.
In particular, the water and environment segments are especially eligible for activities that fall under the sector of “Water supply, sewerage, waste management and remediation” such as the construction, extension, management and renewal of water collection, treatment and supply systems and the anaerobic digestion of bio-waste. The environment segment is also eligible for the “Energy” sector, which includes generation from solar photovoltaic technology and from bioenergy. In the same way, the generation segment, responsible for most of the Group’s electricity production, is eligible for the activities of generation from hydropower, from solar photovoltaic technology and for district heating distribution.
The energy infrastructure segment, again within the “Energy” sector, is mainly eligible due to the transmission and distribution activity. The engineering and services segment, also committed to research and innovation, design and laboratories, with many activities serving the Group companies31, is eligible due to the activities of the “Professional, scientific and technical activities” sector. Lastly, the energy (commercial and trading) segment, which mostly manages the sale of electricity, worth 49% of the Group’s turnover in 2021, is only partially eligible, since, as we know, the European Commission does not currently include sales among the eligible activities for the first two climate objectives. Despite this, the segment corresponds with the Taxonomy for the activities of the “Construction and real estate” sector, such as the installation, maintenance and repair of energy efficiency equipment or, for the “Transport” sector, the construction, modernisation, maintenance and operation of infrastructure that is required for zero tailpipe CO2 operation of zero-emissions road transport.
Based on the analysis performed, as mentioned, 22 of the 27 activities identified as eligible are able to contribute to both climate objectives (mitigation and adaptation), the description of which in the Climate Delegated Act (in 20 of 22 cases) is fully aligned. In these cases, only the technical screening criteria, functional thresholds for assessing the alignment of the activities with the Taxonomy (obligation which will come into force from 2023) – not just their eligibility – highlight differences between the activities, based on the objective in question. Therefore, in this first year of reporting, Acea decided to attribute the eligible activities to the mitigation objective only, with the exception of the sole activity attributable to the adaptation objective. This evaluation, which brings with it a clear imbalance in allocation of the KPIs in relation to the climate change mitigation objective, arising from the impossibility to attribute them to both, is to be considered provisional and subject to a different outcome for the next analysis cycle.
In line with the indications of the Regulation and on the basis of the accounting standards defined by Acea (see section Accounting standards and supplementary information pursuant to Regulation 852/2020), the Group has calculated the percentages of turnover, CapEx and OpEx related to the eligible activities.
It is important to note that these percentages do not represent a summary of the sustainability performances described in the Sustainability Report but correspond exclusively to a specific interpretation required by the Taxonomy – in relation to a number of specific environmental objectives – to support the implementation of the European Action Plan for Sustainable Finance and should therefore be confined to such purposes, which differ from the wider context of sustainability initiatives promoted by the Group.
Looking at the financial results achieved by the Group as at 31/12/2021, the portion of eligible turnover is equal to 41% of the total. In terms of CapEx32, the Group is eligible for 78% of the total, while for OpEx the percentage of eligibility comes to 69% of the operating expenses that can be considered for Taxonomy purposes. It should be taken into account that a residual part of the three KPIs (9% of turnover, 3% of total CapEx and 6% of OpEx that can be considered for Taxonomy purposes and attributable to the companies outside the scope of the NFS) is to be considered not subject to assessment.
Chart no. 8 – Total eligible, ineligible and non-assessed turnover, CapEx and OpEx
As mentioned, for this year, Acea decided to attribute the eligible activities to the mitigation objective only, with the exception of the sole activity attributable to the adaptation objective.
In 2021, this activity only generated OpEx, making 100% of the turnover and the CapEx eligible for the mitigation objective only.
Chart no. 9 – Total eligible turnover, CapEx and OpEx by industrial segment
The interpretation of the data by Industrial Segment shows the unique contributions to the Group’s eligibility, in particular:
- of the Group’s total turnover for 2021, equal to € 3,972 million, € 1,624 million is eligible. The two business areas that contribute the most are Water with 69% of the value (1,129 million) and Energy Infrastructure with 24% (385 million);
- of the total CapEx, equal to € 970 million, € 755 million is eligible, of which 61% is attributable to investments by companies in the Water segment (464 million) and 32% to Energy Infrastructure (238 million);
- of the total OpEx that can be considered for Taxonomy purposes, equal to € 181 million, € 125 million is eligible. Again in this case, approximately 90% derives from activities performed in the Water segment (112 million), following by the Generation segment which contributes to 5% of the total (6 million).
As an additional indicator, in the year in question, an EBITDA value of € 1,256 million is noted, of which € 1,076 million is eligible, equal to 85% of the total. As shown in the following chart, the greatest contribution to the eligible EBITDA value comes from the Water segment with 63% of the eligible total (802 million), followed by Energy Infrastructure for 19% (247 million) and the Generation segment with 3% of the eligible total (36 million).
Chart no. 10 – Total eligible EBITDA by industrial segment
27See Disclosing sustainability: methodological note for the process of defining the scope and the list of companies therein. Note that these Companies, identified for their adequate representation of the performance and the impacts generated by the Group (pursuant to Italian Legislative Decree no. 254/2016), cover, with reference to the KPIs set out by Regulation (EU) 852/2020, 91% of the turnover, 97% of the CapEx and 94% of the OpEx of the full list of consolidated companies.
28EBITDA: Earnings Before Interest, Tax, Depreciation and Amortisation.
29European Commission, C (2021) 2800 final, 2021, Annex 1 and 2.
30In particular, the activities managed by the Group, considered eligible, fall under the following sectors: Environmental protection and restoration activities; Energy; Water supply, sewerage, waste management and remediation; Transport; Construction and real estate; Information and communication; Professional, scientific and technical activities.
31Intragroup activities are removed from the accounting of the KPIs, in accordance with the Regulation. 32Note that, for the first year of application of the Regulation, limited to the eligibility analysis and not the assessment of their alignment, it is not possible to take account of the specifications relative to the CapEx Plan (under points 184.108.40.206 and 220.127.116.11 in Annex I of the Disclosure Delegated Act) since these are subject to the verification of compliance with the technical screening criteria. This verification will be taken into consideration for the disclosure relative to tax year 2022.