Vito Gamberale - strategic role of gas and power networks

Vito GamberaleVito Gamberale
Strategic role of gas and power networks
Daily relay
Rome – February 19, 2013
Vito Gamberale

Vito Gamberale
2
Table of contents
– Foreword Pg. 3
– Deficiencies in the integrated water cycle Pg. 8
– Deficiencies in the waste disposal sector Pg. 18
– A modern finance example: the role of F2i Pg. 26
–Industry examples Pg. 35
– Conclusions Pg. 40

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Foreword
– This meeting will focus on the strategic role of gas and power networks: this
topic has been widely discussed with extreme competence by the previous
speakers, among whom SNAM and Terna’s Chief Executives. These companies
can be addressed as “European champions” in the field of gas distribution
and power supply.
– These networks are managed on an unbundling model basis, i.e. with separated
ownership and management: they represent an example for all the other
infrastructure networks in Italy, granting the following for users and operators:
– equal access terms to networks
– asset rationalisation
– adequate investments and plant improvement
– standardisation of the provided services
– measurement transparency
– Ffair rates.
– With regards to energy networks, the gas and power supply sectors have not yet
achieved the evolution level mentioned above.

Vito Gamberale
A higher concentration of this sector could provide a balanced development
of the system, both in terms of network reconditioning, development and
measurement transparency (electronic meter remote reading). 5
Foreword
The Italian gas supply sector is still very fragmented, especially when compared
to those of other big countries, despite the presence of two big operators, such as
Italgas (proceeds: 900 mil €, EBITDA: 663 mil €; margins: 74%) and F2i Reti Italia
- ERG (proceeds: 606 mil €, EBITDA: 326 mil €; margins: 54%):
22,6%
17,0%
6,5% 6,5% 6,1%
3,1%
2,3%
1,7%
F2i
Reti
Italia
23.1%
17.3%
6.5% 6.1% 5.9%
3.2%
2.3%
2.1%
ERG
10.1
%
2iG
3.2%
G6
4.0%
UK
GDF
Suez
94%
Altri 6%
France
Gas
Natural
69%
Altri
31%
Spain
250 operators (mainly public)
+
Italy
Market shares in gas supply (per carried volumes)
National
Grid
51%
Altri
49%
Others

Vito Gamberale
More efficiency in this sector could be achieved by aggregating the too small
operators and, in particular, through a network spin-off by the incumbent.
This would particularly favour investments for the creation of a smart-grid, in
order to also include the significant generation from non-programmable
sources (renewables).
6
Foreword
The Italian power supply sector is much more concentrated, with the ENEL Group
holding over 85% of market share. However, this sector also includes many players
on the market (134), mainly public and holding microscopic shares.
131 operators+
Market shares in power supply (per carried volumes)
86.0%
3.9% 3.2% 1.4% 0.7%
ENEL A2A ACEA IREN Dolomiti Energia

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Foreword
– Despite some necessary improvements in the distribution, the energy networks
remain balanced, advanced regarding plants and offered services, thanks to:
– a (relatively) clear and consistent regulation system
– rates apt to grant an adequate remuneration to investors
– a minor gap between existing and necessary infrastructures.
– In the area of infrastructures, there are still, on the contrary, deficit sectors that show
opposite features compared to «balanced» sectors; these are often publicly owned
and ususally characterised by:
– a great number of members (often without a reference stakeholder) with
different concerns that usually influence each other
– a lack of the necessary financial resources (determined by public shareholders’
issues) to initiate important investments to maintain and develop the managed
assets
– fragmentation of the sector in which they operate, caused by parochial politics
that do not integrate in a national common strategy.
– The integrated water cycle and waste disposal sector are among the
deficiting sectors, which I will address later in this presentation.

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Deficiencies in the integrated water cycle

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The Italian market of water services, compared to those of the major European
countries (Germany representing the sole exception, thanks to a system still
managed publicly and locally for the main part), is characterised by:
– low privatisation: private operators represent 30% of the market (only
5% excluding publicly-controlled operators)
Privatisation in this sector (%)
Data from: BCG
30%
80%
88%
>60%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Italy France UK Spain

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– low concentration levels: determined by the local dimension
(municipality/province) of the managing companies:
10
MdA
RIE
Others1
342
95
125
122
Data from: BCG
Data from: BCG
ITALY SPAIN FRANCE
First 3
operators
25.8%
Others
74.2%
Others
65.0%
Others
38.0% Others
30.0%
First 3
operators
35.0%
First 3
operators
62.0%
First 3
operators
70.0%
LISTED MULTI-UTILITY COMPANIES BIG MUNICIPALISED COMPANIES
About 3,000
other
operators
Market
share
1. Other minor subsidiaries: SAP, AM Ter, Idrotigullio, Acos and Asp (Piedmont), ASA Livorno (Monza), Astea (Marche), Aquenna (Sicilia)

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– Rates are much lower
compared to the European
average…
– …preventing an adequate level of
investment:
Yearly investments (€/m3 carried water)
Average supply and sewage rates (€/m3)
Dati BCG e Utlitatis
However, area plans foresee
investments for 64 bil € in 30 years, of
which 11% are covered by public
assets!
0.37
1.24
1.00
0.91
-
0.20
0.40
0.60
0.80
1.00
1.20
1.40
Italy Germany France UK
1.25
5.30
3.10
3.80
-
1.00
2.00
3.00
4.00
5.00
6.00

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The issues described determine the critical conditions of the water network
in the entire industry (water system, depuration, sewage):
Water network leakages (%)
Data from: BCG
Water services – population coverage (%)
At least 8 million people, connected
to the network, are not adequately
supplied with drinkable water.
From a healthcare point of view, Italy’s
water system is at the same level as
those of third world countries!
32%
7%
26%
19%
0%
5%
10%
15%
20%
25%
30%
35%
95.5%
84.7%
70.4%
99.0%
94.5% 94.5%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Water system Sewage Depuration
Italy European average

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Such conditions determine a low level of trust in water quality among
Italians, which accounts for the large consumption of bottled water (Italy is the
biggest consumer in Europe):
Bottled water consumption per person (l/year)
Source: “Vento a favore” – Colucci / Ronchi 2011
On average, each year the expenses in Italy for mineral water per person (3%
of total water consumption) equals to the expenses for the water system
supply (97% of total water consumption): 90 €!
197
125
142
23
133
0
50
100
150
200
250
Italy Germany France UK Spain

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– The current critical situation of the water sector has also been determined by
fragmented and uncertain regulations.
– In the last 20 years, there have been numerous law interventions piled up (over 10
national laws and almost 70 regional regulations since 1995) that have not always
been consistent with each other and have often been misunderstood:
14
2011
LD 70-2011 – «Development Decree»
Creates the National Surveillance Agency for water
resources
Referendum June 12/13, 2011
Abolishes art. 23 bis of the Ronchi Law and the assignment
in fees of the invested capital remuneration
14Inconsistent features
LD 135-2009 – «Ronchi Decree»
Initiates liberalisation of local public services and sets
minimum levels for private participation
LD 2-2010
With the objective of reducing
political costs, the 2010
budget abolishes the area
authorities1
and confers
Regions with the power to
assign the Territorial
Authorities functions by law.
Eg: non-separation between management
and ownership in Lombardy
LD 222-2007
One year delay on the assignment
to SII and to private subjects
•December 2007 – December 2008
•Based on a population law promoted
by the «Italian Forum of movements
for water»
LD 152-2006
Abolishes and replaces the Galli Law
•Updates the Galli Law and officialises
the Territorial Authorities and the Area
Authorities
•Rules the management of water
resources and water protection
National Laws
Laws to determine rates and the
modalities for the assignment of
the management
Decree
1/8/1996
MD
280-2001
LD 36-1994 – «Galli Law»
Starts the Italian water system reform
by:
•dividing the territory in macroareas
(Territorial Authorities)
•integrating the functions of the water
cycle management segments in a single
Integrated Water System (SII)
•separating ownership from management
of the water network
•setting a fee to cover operational costs
Regional Laws
63 regional laws to put into action the
Galli Law, mainly developed between
1995 and 2001, sometimes clashing
with the inspiring principles of the
reform
1. Approved on March 16 by the Deputy Chamber and on March 23 by the Senate. Source: Press Search, www.parlamento.it

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This situation peaked with the June 2011 referendum, a thoughtless action
caused by a lack of information and by the demagogic belief of «public
water» (by «public» the idea in this case meant «free»).
–Only rain water is free!
–Water is collected, filtered and delivered to end-users for domestic, agricultural or
industrial use: this process requires massive infrastructures and expensive
depuration procedures!
–Waste water must then be filtered additionally and disposed through sewage networks.
–Therefore, distributed and depurated water cannot be delivered for free, exactly as
gas and power are not supplied for free (for example, delivery and distribution costs
and system management fees for gas and power almost equal the «raw material» costs).
–A fair rate for water would determine a more conscious cunsumption of such a
vital and limited resource. This input should be also determined through the abolition of
fees and rates (still widely spread) that take responsibility away from users:
– single building meters (to be replaced by separated meters for each home unit)
– flat rates (to be replaced by rates based on consumption).

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The referendum therefore had additional negative effects on an already
deficiting sector, as it:
– stopped the sector privatisation at its starting point (envisioned in the
«Ronchi Decree») that could have determined a water system development
based on the European model
– led to a feeling of uncertainty, still ongoing, due to the effort of meeting
the referendum requirements without causing an economic and financial
unbalance of the managing bodies
– created an even bigger overlap of competencies between government
authority, regional agencies and their province sections (the formerly
abolished Territorial Authorities) leaving management afflicted by local
conflicting interests.
Although this sector needs concentration, the efforts in coordinating the
operators at a regional level have still not brought results. The persisting
parochial needs still allow «one water system for each municipality».

Vito Gamberale
In order to achieve such objectives, it is necessary to apply modern financing tools,
to create a new «institutional capitalism»! It is indeed necessary for institutional
investors (banks, foundations, insurance companies, pension funds, etc.) to finance
big sector «public companies», to generate «national champions» able to
promote an efficient management and asset development. 17
What should be done to bring the Italian water sector at the same level as
the rest of Europe?
– The Italian water sector has, to a certain extent, the same features of the power
sector 50 years ago: it is inadequate, made of many small operators – mainly local
and public – that have insufficient resources to provide a service of good quality.
– We need to quickly resort to create the necessary investments to ensure the
healthiness of the water we drink and in which we bathe.
– The solution to the power sector issues was «nationalisation», i.e. concentrating the
business in one single national operator able to provide an adequate and standard
level of service.
– Today that kind of nationalisation would not be feasible, as it would go against the
European economic policies.
– The nationalisation process could however be undertaken by rationalising and
concentrating the thousands local operators in a few – maximum three – big
«public companies» of national outreach.

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Deficiencies in the waste disposal sector

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Waste disposal follows a very similar profile as water supply.
–The national waste market presents high levels of «pulverisation»: in 2011 the
main 9 operators (whose ownership is mainly held by local bodies) have managed
only 7% of the total volumes:
Main operators on the Italian market – per volumes disposed (data 2011 - kt)
Analysis: BCG
Business model
Collection YES YES YES NO YES NO NO YES NO
Treatment YES YES YES NO YES NO NO NO NO
Waste to energy (WTE) plants YES YES YES YES YES YES YES YES YES
Landfills YES YES NO YES YES YES NO NO NO
3,382
2,800
1,800
1,100 1,017
600
331
208 90
0
1,000
2,000
3,000
4,000
Hera A2A AMA
Roma
Veolia Iren Acea APS
Acegas
Waste
Italia
ACSM

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– On the contrary, the European waste management market – particularly in France,
Germany and in the UK – is made of large operators, usually private, integrated
in the whole industry business:
Main operators on the Italian market – per volumes
disposed (2011 data)
France: a consolidated market, over
60% controlled by the two main
operators (Veolia and Sita Suez).
These operators have also
accomplished important acquisitions
on all major European markets.
Germany: the German market has
experienced an intensive M&A
phase, with also the participation of
some investment funds (Apax,
Blackstone, KKR) and in which
Remondis established its leadership.
UK: this market has experienced a
rapid and important consolidation
process in the past 10 years; in this
timespan the share held by the 5
major operators grew from 15% to
over 60%.
Analysis: BCG
Business model
Collection YES YES YES YES
Treatment YES YES YES YES
Waste to energy WTE plants YES YES YES YES
Landfills YES YES YES YES
60,000
27,000
18,000
13,000
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Veolia Remondis Sita Suez Biffa

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− The market fragmentation, as well as
the fundamentalist environmentalism
that slows down the sector
development, are the reasons for Italy’s
few active plants compared to the other
main European countries…
− …and for the plants’ limited
dimensions.
Operating WTE plants
WTE plants average capacity
(thousands of tons of disposed solid urban
waste [SUW]/year)
Analysis by F2i, based on data from BCG and Eurostat
52
70
130
0
20
40
60
80
100
120
140
Italy Germany France
100
429
154
0
50
100
150
200
250
300
350
400
450

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− Germany and France could dispose over half of their solid urban waste (SUW) with
waste to energy plants. Italy just one-sixth!
WTE capacity per inhabitant
(kg/inhabitant/year)
WTE capacity compared to total SUW 16.2% 62.3% 57.9%
− The excess capacity allows some European countries to profit from waste disposal
coming from countries in difficulty, setting very high fees (e.g. waste from Naples
sent to Germany).
86
367
309
0
50
100
150
200
250
300
350
400
Analysis by F2i, based on data from BCG and Eurostat

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− The lack of WTE plants in Italy makes it the country with the highest number
of landfills in Europe (to dispose over 50% of Italy’s SUW)…
SUW disposal modalities in the main European countries
− …thus causing recurrent environmental emergencies (in Naples, Palermo,
Rome, etc.).
Data from: Eurostat
14%
38%
34%
53%
0%
31%32%
62%
35%
0%
10%
20%
30%
40%
50%
60%
70%
WTE Landfills Recycling

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Exactly as with the power sector, the Italian waste sector is extremely
fragmented and suffers from a lack of information caused by pseudo-
environmental beliefs and a «NIMBY» logic:
–waste to energy plants in Europe and northern Italy (where they are managed by
multi-utility companies such as A2A, Hera, etc.) stand for progress, while in central
and southern Italy they stand for pollution
–opposition against the creation of new WTE plants is based on utopic (and wrong)
beliefs, according to which the full waste production could be recycled through the
sorting of waste. This theory has no real foundation as even the countries that
achieved the «zero landfill» status (e.g. Germany) resort to WTE anyway for a third of
their waste production
–potentiating the sorting of waste is an extremely important objective, it cannot
however be the right solution for the full disposal of waste. The only alternative to
waste-to-energy are landfills (extremely pollutant and soon to be forbidden by law in
Europe) or sending waste abroad (extremely expensive).
Today Italy keeps on creating new landfills, procrastinating the closure of
existing landfills and paying stellar fines. This heavily (and often hidden)
affects the rates for customers: we estimate that the new tax on waste
(TARES) will approximately equal to the tax on estate (IMU).

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Exactly as for the water sector, developing the waste sector doesn’t
require extra-complicated science. We just need to «replicate» the
good practices established in other European countries.
–The Italian market is now in transition and, as it happened in other European
countries, seems to be about to face a consolidation phase. This should bring the
major operators, active today at a province/regional level, to aggregate and extend
their scope of action to a national level and start to reach out for international grounds.
–This sector, however, needs relevant investments to achieve the same WTE
capacity as Europe. For example, to match Germany’s capacity (i.e. dispose 1/3 of all
SUW through WTE) Italy should enable an additional capacity of 7 Mt, with an
investment of about 5−7 bil € (assuming an investment of 700–1,000 €/t).
–The players currently acting on the market cannot provide such resources, as they
are too small and controlled by shareholders, mainly public, who are facing more and
more pressing financial problems.
Therefore, a strong aggregation force should be also foreseen in the waste
sector, with the creation of a «national champion» (following the Veolia
example in France), which is a big «public company» financed by
«institutional assets» that can provide for efficient management and adequate
investments.

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A modern finance example: the role of F2i

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– The lack of public financing, which prevents from creating new
infrastructures and from efficiently managing the existing ones, can
only be balanced today with private financing.
– The key topics brought out through this analysis include:
o the fragmentation of infrastructures, the often public ownership and
the need for privatisation of some key sectors
o a lack of public financing
o the possibility to create «national champions» specialised in the
various infrastructure sectors following the model of big Italian and
foreign players.
…we therefore came up with the idea of F2i, a private yet institutional
fund that can aggregate the existing infrastructures in industries
using funds from this asset management to allow for their
development.

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– Thanks to a fundraising of 1,852 mil €, F2i is the biggest fund operating
in Italy and counts among the biggest country infrastructure funds
worldwide.
– Recently, F2i has performed the first closing of a second fund, which
already raised 575 mil € (final target: 1,200 mil €).
– F2i was created as a private, yet institutional tool by high standing
sponsors, who contributed to the establishment of the Fund’s solid
reputation:
 the government, through CDP
 major Italian banks (Unicredit, Intesa SanPaolo)
 an important international bank (Merrill Lynch – BoA)
 the networks of former banking foundations and private welfare
funds
 life insurance companies and pension funds.

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F2i investors (per category)
 Following its mission and the institutional nature of its investors, F2i
aims for long-term participation with an industrial understanding.
Categories (Fund I) N. Invest. Subscribed
amount
% on the
Fund
Banks 7 593 M€ 32.02%
Welfare funds 13 487 M€ 26.30%
Foundations 26 439 M€ 23.70%
Insurances 4 175 M€ 9.45%
Public financial institutions (CDP) 1 150 M€ 8.10%
Management SGR / Sponsors 1 8 M€ 0.43%
Total 52 1,852 M€ 100.00%
Categories (Fund II) - First closing N. Invest. Subscribed
amount
% on the
Fund
Banks 2 200 M€ 34.78%
Welfare funds 2 90 M€ 15,65%
Foundations 6 185 M€ 32.17%
Public financial institutions (CDP) 1 100 M€ 17.39%
Total 11 575 M€ 100,00%

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1
1
For SAGAT all commitments until 2014 are
considered (share acquisition by other
private partners)
F2i has created 7 industries now reunited in a structured group, committing over 2,190 mil € (90% of total
fundraising).
1
75% 85.1%
100%
100%
100% 40%
40%
49.0%
100%
60.0%
100% 70%
67.7%
44.3%
87.2%
100.0%
53,8%
85.0%
15.9%
100%
49.8%
26.3%
2,134.4 97.4%
Dismissions 31.7 1.4%
Fund management costs 25.3 1.2%
TOTAL COMMITTED 2,191.4
% of raised funds 90.3%
Highways
272.9 12.5%
242.5 11.1%
53.5 2.4%
AirportsTLCRenewables
747.6 34.1%
Water
Environ
ment
Infracis
Alerion CP
Committed
RIE Parma
F2i
Reti Italia
ERG
2iGas
G6
F2i Rete
Idrica Italiana
Mediterranea
delle Acque
Funds 1+2
436.5 19.9%
Gas
SAGAT
Iren Ambiente
F2i
Environment
TRM
HFV
F2i
Airports
GESAC
SEA
Saster Net
Metroweb
Italia
Metroweb
Brescia
Metrobit
252.0 11.5%
129.5 5.9%F2i Renewable
Resources

Vito Gamberale
2i Gas (ex E.On Rete)
31
ENEL Rete Gas
Alerion
HFV
Infracis
Mediterranea delle
Acque
Rete Idrica Parma
GESAC
SEA
SAGAT
G6 Rete Gas
Metroweb
SasterNet
MetroBit, Brescia
GAS
RENEWABLES
HIGHWAYS
WATER
AIRPORTS
TLC
F2i acts as a true «public company»: each project is developed with the
objective to create an industry within a specific sector, fostering
cooperation among subsidiaries and the integration of the managed
infrastructure networks:
Objective: to represent the first independent manager of gas distribution
networks and to act as an aggregating entity in a currently strengthening
sector. Envisions independence between sales and distribution.
Objective: to develop two independent entities with authoritative
shareholders, managers and management. Today the renewable energy
sector is afflicted by contradicting regulations that prevent its future
development in Italy.
Objective: to access the closed sector of highways as reference
stakeholders for companies with extremely fragmented public
shareholders.
Objective: to create a «national champion» in a sector crucial to Italy,
which requires great investments to modernise the existing plants,
despite the demagogy created by the referendum in 2011.
Objective: to create an aggregation focus in a strongly fragmented
sector, characterised by a distorting and worrisome «low-cost»
predominance, mainly publicly-owned, with no specific strategy.
Objective: to facilitate the development of optic fibre in the most
populated and developed areas of Italy.
TRM
Iren AmbienteENVIRONMENT
Objective: to promote alongside Iren a national leader (following Veolia’s
model) that can operate according to the best European practices in a
still very fragmented sector that needs development.

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− In the timelapse of a few years, F2i offered a new business model for
infrastructures in Italy, creating a structured group of companies and
company industries, each representing a benchmark in their
respective sector.
− The companies where F2i holds the majority of shares or plays an
important role in their governance, registered in 20111
:
o aggregated turnover: 1,608 mil€
o EBITDA: 650 mil€ (EBITDA margin: 40%)
o employees: 8,550
o investments: 593 mil€ (91% EBITDA).
1
Aggregated closing data 2011. Referred to: ERG, 2i Gas, G6 Rete, Alerion CleanPower, HFV, Mediterranea delle
Acque, GESAC, SEA, Metroweb, SasterNet and SAGAT.
In 2011 F2i subsidiaries have invested over 90% of their EBITDA.
No infrastructure system invests such a high portion of their EBITDA!

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Thanks to F2i, important assets managed by foreign companies have
returned, together with their cash flows, under Italian control:
− E.On Rete Gas
− Gesac
− G6 Rete
− Metroweb

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F2i was created as a private, yet institutional investment tool to aggregate
existing infrastructures in production chains in order to guarantee
subsidiaries with:
– operational effectiveness
– a balanced financial management, avoiding that companies become
poorer through exaggerated debts and extraordinary high dividends
– a focus on development, reinvesting a great part of the cash
flows generated by strengthening managed networks and assets.
In a time of very poor public financing, the infrastructure gap – both
quantitative and technological – needs to be filled with the modern
finance model proposed by F2i: using resources from an efficient
management of existing infrastructures to finance the development of
new plants and works.

Vito Gamberale
Examples of industries
35
WATER
− F2i approached the water system with the acquisition of 40% of
Mediterranea delle Acque (“MdA”) in 2010.
− The company manages the integrated water system of both municipality
and province of Genoa; it delivers water to about 875,000 inhabitants.
− It reports to the Iren Group, a multi-utility group in Genoa, Turin, Parma
and Piacenza, born from the merge of Iride and Enìa.
− Thanks to its long water
network of over 2,500 km and
its long sewage and
depuration network of 1,600
km, MdA delivers to the network
about 95 mil m3 of drinkable
water.
− Its current area plan includes
about 700 mil € of
investments, of which 600 mil
€ still to be accomplished.
− MdA employs about 415
people.
The water and environment industries are practical examples of
how F2i acts to aggregate infrastructure assets.
100% 100%
60% 40%
49% 66.50%
IREN SpA
IREN Acqua e Gas SpA
MdA
F2i
F2i Rete Idrica Italiana
AM.TER. IDRO-TIGULLIO

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WATER
− Following MdA’s successful case, F2i and Iren are currently and
progressively assigning the water activities of the Group to MdA in the
Emilia Romagna region (provinces of Piacenza, Reggio Emilia and
Parma).
− This operation rationale is to dimensionally increase MdA following, for
instance, a geographical proximity pattern.
− MdA’s dimensions (turnover and
EBITDA in 2011 were,
respectively, about 130 mil € and
48.5 mil €) may actually double at
the completion of the assignment.
− This operation will develop in
three different steps: each will
focus on assigning activities in
each of the three provinces.
Based on the political
opportunities available, both
partners decided to start in the
province of Parma (this first step
– currently facing opposition by
the Water System Agency of the
Emilia Romagna Region – should
be completed by the first half of
2013).
Water network Emilia
Romagna region

Vito Gamberale
37
The objectives of F2i’s operations are:
−access a strategically crucial sector in Italy that requires important
investments and bringing fresh financial resources to develop
the managed assest
−create a partnership with IREN, the major operator in the utility
sector in Italy. This partnership scored a positive result with the MdA
operation and is currently further developing through the aggregation
of the IREN Group’s water system assets in the Emilia Romagna
Region
−use the growth and consolidation opportunities of a fragmented
sector, creating a «national champion».
To achieve this, F2i will operate on new initiatives with the objective
to aggregate some of the major national entities of this sector.
WATER

Vito Gamberale
38
− In the past two years F2i has frequently searched for an entry point in this
sector, by analysing various unsuccessful opportunities (HeraAmbiente,
Acegas, Marcegaglia Group’s plants).
− In December 2012 F2i, together with IREN, obtained the management
of TRM, the new WTE plant with 520,000 t/y capacity, currently in its
building phase in Turin, to be operational at the beginning of 2013.
− This plant, which received approval for about 420,000 t/y (load factor: 80%),
will dispose urban waste (after sorting it out) from special wastes similar to
solid urban and non hazardous waste.
− Moreover, the fund is now closing the acquisition of an important
share of Iren Ambiente (the fifth national operator), operating in this sector
with 2 WTE plants, a landfill, 16 treatment plants, an environmental hub
(currently being built).
ENVIRONMENT
− In addition, another landfill and
3 plants are being developed.
Other
operators
Parma
•1 automatic selection
waste plant
•2 storage and
treatment plants
•Integrated
environmental hub
Piacenza
•6 storage and
treatment plants
•WTE technotown
Reggio Emilia
•WTE via Gonzaga
•Poiatica landfill
•5 storage and treatment
plants
•2 compost plants

Vito Gamberale
39
ENVIRONMENT
− F2i accessed the environmental sector with the objective to push it forward
following the best European practices, meaning working to achieve a
more concentrated and efficient market.
− F2i and Iren (already cooperating in the water sector) would like to
promote and grow their partnership at national level by creating a
«national champion» (following Veolia’s example in France), which
could set its leadership in the market together with Hera and A2A
(currently leaders in this sector).
− There are various growth opportunities for external lines; the most feasible
projects include consolidated entities, also characterised by significant
revamping initiatives and new site development plans.
− The development of this sector also implies changing the approach and
attitude of public administrations and population towards waste disposal (in
particular in central and southern Italy), whose opinion can sometimes be
manipulated by pseudo-environmental outlooks.

Vito Gamberale
Conclusions
41
− Energy networks (particularly the power delivery and gas carriage
systems and, given a few critical issues, the distribution networks as well)
clearly represent a balanced sector characterised by a stable
regulatory system, adequate infrastructures and fair rates.
− A different situation is presented by the infrastructure sectors, especially
the water cycle and the waste disposal system.
− These sectors are still very much fragmented and characterised by a
local dimension, mainly public ownership, uncertain regulations and
a lack of information, caused by scientifically-unfounded, pseudo-
environmentalism.
− These factors limited and, in some cases, hastily discontinued
investments for infrastructure development, creating a gap in
comparison with other main European countries.
− In addition, in this sector in particular, the lack of infrastructure
development can bring out health issues (excessive leakage from
water systems, water unhealthiness, soil and groundwater pollution) which
can lead to putting people’s health at risk.

Vito Gamberale
Conclusions
42
− To function properly, these infrastructures have to be created and
managed as networks. They have to develop and be coordinated
rationally: their management should succeed on a «country system»
basis, replacing the «parochial types of management» and financial
speculation.
− In order to achieve this, an amendement of art. 5 of the Constitution
may be necessary to avoid obstacles and gridlocks from the current
excessive local autonomy to devlop the necessary infrastructures of
national outreach.
− In Italy, as in other big countries, it is necessary to concentrate and
centralise such sectors, to create a few «national champions» able to
ensure adequate investments, efficiency and transparency in
managing the assets.
− In order to achieve this, we need to create an «institutional
capitalism», to provide the necessary funds to develop the networks,
finance big sector public companies while granting their management
independence.
F2i is the Italian example of this model. A true «public company» that
could start an infrastructure network system (able to interact to push
the country forward) with optimised management and careful
development.

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