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Analysis of the Energy Segment

The electricity segment has become the most important segment in the Group in terms of revenues, contributing to about a third of overall Group business, as a result of the merger with Meta, and the acquisition of the former Enel network in the province of Modena, thereby increasing sales to end clients and trading activities.

Between 2006 and 2007, the importance of this area also increased in terms of its overall contribution to the EBITDA by over 3.5 percentage points, increasing from 5.9% in 2006 to 9.4% in 2007. We note that the percentage weight was less than 3.0% prior to the acquisition of the Modena network.

(mln/)

31-Dec-2006

31-Dec-2007

Change

Change %

Area EBITDA

25.2

42.7

+17.5

+69.4%

Group EBITDA

426.7

453.4

+26.7

+6.3%

Percentage weight

5.9%

9.4%

+3.5 p.p.

An analysis of the electricity segment results is given below:

Income statement (mln/)

31-Dec-2006

Inc%

07-gen-00

Inc%

Change

Change %

Revenues

389.4

989.2

+599.8

+154.0%

Operating costs

(362.1)

-93.0%

(945.1)

-95.5%

+583.0

+161.0%

Personnel costs

(16.0)

-4.1%

(20.0)

-2.0%

+4.0

+25.0%

Capitalised costs

14.0

3.6%

18.6

1.9%

+4.6

+32.9%

EBITDA

25.2

6.5%

42.7

4.3%

+17.5

+69.4%

Sales revenues more than doubled, increasing from Euro 389.4 million in 2006 to Euro 989.2 million in 2007 as a result of the above-mentioned factors.

The following table gives a detailed breakdown of the revenues by type:

(millions of Euro)

31-Dec-2006

Inc%

31-Dec-2007

Inc%

Change

Change %

Sales revenues

271.4

69.7%

412.0

41.6%

+140.6

+51.8%

Distribution revenues

43.4

11.1%

50.5

5.1%

+7.2

+16.6%

Trading / other

74.6

19.2%

526.7

53.2%

+452.1

+606.0%

Total revenues

389.4

100.0%

989.2

100.0%

+599.8

+154.0%

Raw material costs have stayed high since 2006.

Operating costs increased as a result of (i) the higher quantity of energy sold, (ii) activities linked to the acquisition of the former Enel grid, (iii) higher sales costs.

Labour costs increased considerably due to the greater absorption of sales costs in the gas area, and for the contribution of the former Enel network personnel for the entire year.

The quantitative data for the area shows volume trends related to the afore-mentioned management policies:

Quantitative data

31-Dec-2006

31-Dec-2007

Change

Change %

Number of customers (thousand units)

263.7

273.2

+9.5

+3.6%

Volumes sold (Gw/h)

3,133.1

4,334.7

+1,201.6

+38.4%

Volumes distributed (Gw/h)

1,879.6

2,247.9

+368.3

+19.6%

The increase in volumes is related to (i) the acquisition of the former Enel network and (ii) the higher sales volumes which were made possible by the higher availability of energy supplied by the plants started up during 2007.

We should note that the electricity sales market was fully de-regulated on 1 July 2007, just as had previously been done for the gas market: this de-regulation did not have any significant effects on the 2007 results.

The EBITDA increased by 69.1%, increasing from Euro 25.2 million in 2006 to Euro 42.7 million in 2007.