fnm-2022-12-31-en

MANAGEMENT REPORT

of the year 2022

1.LETTER TO THE SHAREHOLDERS

Dear Shareholders,

The year 2022 was characterised, on one hand, by the recovery of mobility thanks to the

progressive easing of the consequences of the COVID-19 pandemic, which resulted in a steady

recovery of MISE's motorway traffic to levels now only marginally lower than in the pre-pandemic

period, and a significant recovery of passenger volumes handled by Trenord. Demand for local

public transport by both rail and road, although increasing compared to 2021, is still lower than in

2019.

On the other hand, the financial year was affected by higher energy prices and higher inflation -

especially on certain key components in the infrastructure sector - which, although they had already

started to emerge in the final months of 2021, were exacerbated by the serious uncertainties linked

to the continuation of the conflict between Russia and Ukraine that broke out on 24 February 2022.

In this context, the FNM Group has confirmed its resilience and ability to handle market changes

while preserving its role as an integrated and sustainable mobility operator, a leader in Lombardy

and an enabler of local development, by guaranteeing connections and responding to changes in

people's mobility needs.

Despite the problems encountered in the supply chain, which also led to delays in the delivery of

new fleets, in 2022 the FNM Group pursued the achievement of its strategic objectives thanks to the

renewal of the RoSCo fleet, with the entry into service of 4 new TILO trains and the revamping of

TAF rolling stock, as well as the modernisation of the bus fleet with 84 new buses.

FERROVIENORD also oversaw the supply of 47 new trainsets (bringing the number of trains

delivered to 86) on behalf of the Lombardy Region as part of the multi-year programme for the

renewal of the rolling stock leased to Trenord.


	FNM Group


Financial Report as at 31 December 2022	page 1

With regard to the management of MISE's motorway infrastructure, the S.P. 46 Rho-Monza road

redevelopment with motorway characteristics was fully opened to traffic; on the other hand, work

continues on the structural upgrading and seismic adaptation of the bridge over the Po River along

the A7. It should also be noted that, in the first half of the year, the project was launched for the

construction of five hydrogen refuelling stations in the same number of unused areas along the

MISE motorway infrastructure, which obtained non-repayable financing of EUR 13.7 million from

the European Union within the framework of the European call for tenders “CEF Transport 2021

for Alternative Fuels Infrastructure Facility (AFIF)”, in view of its contribution to transport network

decarbonisation. This is the first phase of a modular project aiming to create Italy's first motorway

hydrogen refuelling network, consistent with the Group's strategy to promote the energy transition

process through the introduction of hydrogen as a low environmental impact fuel.

As is well known, the iconic initiative in this area launched with the 2021-2025 Strategic Plan is the

H2iseO project for the decarbonisation of Valcamonica, which will see the first hydrogen-powered

train available in 2023 for the first test runs and in 2024 the delivery of 6 trains to begin commercial

service. In 2022, the FNM Group focused on project implementation with the establishment of

FNM Power, which will be active in the field of hydrogen production and distribution plants, the

authorisation of the hydrogen production, storage and distribution plant in Iseo and the start of

construction of the hydrogen train maintenance plant in Rovato. The authorisation process for the

mobile refuelling plant in Rovato is also currently underway. It should be noted that the Lombardy

Region has made EUR 80.1 million available for the financing of the project's infrastructure,

through the Ferrovienord Programme Agreement, and has submitted a funding request to the

Ministry to access the resources provided by the NRRP.

As part of the FILI urban redevelopment project, and in particular with regard to the development

of the platform covering the tracks from Cadorna station to the Via Mario Pagano bridge, in the

heart of Milan, in 2022 a public-private partnership proposal was received from an international

financial group, which was positively evaluated in terms of relevance to and consistency with the

Group's strategic objectives, and was forwarded to the Lombardy Region for the promotion of a

programme agreement aimed at completing the evaluation process.

As far as the development of the logistics terminals is concerned, despite a slowdown in 2022

compared to growth expectations due to some problems on the international and national

infrastructure, the track extension work planned for 2023 is expected to allow longer trains to be

managed and thus increase the competitiveness of the Sacconago Terminal.

Also with reference to the implementation of the Strategic Plan, and specifically the development of

intermodal and digital mobility services, in 2022 activities were intensified to organise on-demand


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Financial Report as at 31 December 2022	page 2

solutions made available on the FlexyMob platform, to meet the mobility needs expressed by

demand, specifically in relation to generator/aggregator hubs or events of various kinds

(commuting, fairs, concerts, sporting events, etc.).

From the contractual perspective, 2022 was characterised by the renewal for the 2023-2027 period

of the Public Service Contract between Ferrovienord and the Lombardy Region within the scope of

the concession for the management of the railway infrastructure, while the Public Service Contract

between Trenord and the Lombardy Region, which expired at the end of 2020, was extended further

to 31 July 2023. In light of the ruling of the Piedmont Regional Administrative Court (TAR) no.

24/2023, which rejected MISE's appeal against the ART resolutions on tariffs, MISE began the

process for the approval of the new Economic and Financial Plan, which fully incorporates the

indications of ART Resolution 69/2019, particularly with regard to boosting efficiency and the

effects of shifting the 2020-2024 tariff regulatory period. With regard to road LPT, pending the

launch of tenders for the award of new concessions/Public Service Contracts, FNMA's existing

concessions/Public Service Contracts currently expire on 31 December 2023, while the extension of

the ATV Public Service Contracts that expired at the end of 2022 is still pending.

Thanks to the actions undertaken, in 2022 the FNM Group strengthened its mechanisms for

managing ESG topics, achieving significant results in line with the targets set out in the 2021-2025

Strategic Plan, including a reduction of more than 7% to 68.4 tonnes CO2eq/M€ of Scope 1 e Scope

2 CO2 emissions compared to 2021. On the other hand, the use of renewable energy for services

decreased from 51% in 2021 to 47% in 2022, mainly due to the growing use of electricity,

attributable in particular to MISE's consumption, which in 2022 is considered for 12 months

compared to 10 months in the previous year, partly offset by lower consumption for services along

the managed railway infrastructure. It should be noted that FNM has embarked upon the path of

defining the targets for the reduction of GHG (greenhouse gas) emissions based on a scientific

calculation by joining the SBTi (Science Based Target initiative) to align with the Paris Agreement

targets. This year, activities were implemented with the calculation of Scope 3 indirect emissions

that are generated by FNM's value chain. Confirming its commitment to its sustainability strategy,

once again, the FNM Group has renewed its adherence to the 10 founding principles of the Global

Compact in the areas of human rights, working conditions, the environment and the fight against

corruption, with the aim of contributing to the achievement of the Sustainable Development Goals

(SDGs) defined by the UN, and for the first time has voluntarily requested an ESG Risk Rating. In

particular, the FNM Group obtained a score from Morningstar Sustainalytics of 7.4, placing it

amongst the 50 top-rated companies worldwide and in 4th place amongst those active in the

transport infrastructure sector.


	FNM Group


Financial Report as at 31 December 2022	page 3

With a particular focus on the people who make up the corporate community, again in 2022 the

FNM Group dedicated itself to a project for the evolution of the company welfare system as a

distinctive and strategic element to guarantee the Group’s social sustainability. A new way of

“looking” at people, valuing them, responding to their needs, improving individual and

organisational well-being, and leveraging a sense of identification and belonging.

In addition, FNM has taken steps to contribute to the ecological and digital transition through

projects of social value, starting with sustainable mobility: in 2022 the development of a business

foundation as a tool for study, research and innovation, education and the promotion of historical

heritage was completed.

In spite of the uncertainties that characterised the past year, the financial year closed with

improving results, in line with expectations, and a solid financial structure, with the Adjusted NFP/

EBITDA ratio down to 4.0 from 4.6 in 2021, consistent with the investment grade profile,

supporting future growth plans. Based on these results, the Board of Directors proposes a unit

dividend of EUR 0.023 to the Shareholders' Meeting to be held on 21 April, confirming an

attractive and sustainable shareholder remuneration policy.

2VISION

Improving the lives of people, of cities and businesses, by developing connections and meeting

mobility needs.

3MISSION

Developing an integrated platform of mobility services, built according to environmental and

economic sustainability criteria, which incorporates in a system and connects (physically and

digitally) attractions, urban hubs and transport networks, to create social value and promote the

productivity of the territory.


	FNM Group


Financial Report as at 31 December 2022	page 4

4HISTORY

1. 24.7% stake acquired, subsequently increased to 40% in December 2021, following the subscription of a share capital increase by FNM S.p.A.

2. Acquisition of a 13.6% share from ASTM on 29 July 2020 and an 82.4% share from the Lombardy Region on 26 February 2021, the date from

which MISE was consolidated in the FNM financial statements. The shareholding in MISE increased to 100% following the liquidation of the

minority shareholders in 2022.

5SIGNIFICANT INDICATORS FOR THE YEAR


	FNM Group


Financial Report as at 31 December 2022	page 5

5.1FNM GROUP


Amounts in millions of euros	2022	2021	Change	Change %
Revenues*	605.4	543.7	61.7	11.3 %
Adjusted EBITDA*	193.1	165.3	27.8	16.8 %
EBITDA*	193.1	165.7	27.4	16.5 %
Operating income*	101.1	86.0	15.1	17.6 %
Earnings Before Tax*	97.0	64.7	32.3	49.9 %
Adjusted net profit*	68.8	45.6	23.2	50.9 %
Operating result*	69.6	50.7	18.9	37.3 %
Shareholders' equity (A)	306.9	228.3	78.6	34.4 %
Net Financial Position (Cash) (B)	724.6	697.2	27.4	3.9 %
Adjusted net financial position (Debt / (-Cash))	766.9	755.6	11.3	1.5 %
Net invested capital (A+B)	1,031.5	925.5	106.0	11.5 %
Market capitalisation at 31.12	184.6	267.0	(82.4)	-30.9 %
Investments*	634.0	417.9	216.1	51.7 %

* The values for the year 2021 consider the consolidation of MISE as of 1 January 2021.

Market capitalisation as at 31.12.2022: EUR 184.6 million

As at 31.12.2021: EUR 267.0 million

Credit Ratings1


Moody's
Long term	Baa3
Outlook	stable
Assignment date	25 January 2021
Fitch
Long term	BBB
Outlook	stable
Assignment date	20 December 2021


	FNM Group


Financial Report as at 31 December 2022	page 6

1 After the assignment date, the credit ratings in the table were confirmed by the rating agencies following periodic

credit assessments.

5.2FNM S.p.A.


Amounts in thousands of euros	2022	2021	Change	Change %
Revenues	84.2	79.0	5.2	6.6 %
EBITDA	47.3	47.9	(0.6)	-1.3 %
EBIT	17.3	18.8	(1.5)	-8.0 %
Net profit	8.00	5.40	2.60	48.1 %
Shareholders' equity (A)	413.1	405.0	8.1	2.0 %
(Net financial position)/Net financial debt (B)	721.8	684.3	37.5	5.5 %
Net invested capital (A+B)	1,134.9	1,089.3	45.6	4.2 %
Investments	51.8	29.8	22.0	73.8 %

6GROUP STRUCTURE AND BUSINESS SEGMENTS AS AT 31 DECEMBER 2022

FNM is the leading integrated sustainable mobility Group in Lombardy. It is the first

organisation in Italy to combine railway infrastructure management with road transport and

motorway infrastructure management in order to offer an innovative model for managing mobility

supply and demand that optimises flows and is environmentally and economically sustainable. It

is one of Italy’s leading non-state investors in the sector. FNM S.p.A. is a public company that has

been listed on the Italian Stock Exchange since 1926. The majority shareholder is the Lombardy

Region, which holds a 57.57% stake.


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Financial Report as at 31 December 2022	page 7

FNM GROUP OPERATIONS

CORPORATE STRUCTURE


	FNM Group


Financial Report as at 31 December 2022	page 8

1. Companies that manage complementary digital platforms, enabling the implementation of Mobility as an EU strategic paradigm (MaaC).The

Snowit and Bikeit brand names refer to Sportit.

2. Companies operating in the freight transport and logistics sector, today included respectively in the Railway Infrastructure and Ro.S.Co. &

Services segments. Malpensa Distripark is in the start-up phase.

3. Company operating in road passenger road mobility, but considered in the Ro.S.CO. segment for the purposes of preparing the financial

statements.

4. Companies classified as “Discontinued Operations” under IFRS 5 following a resolution of the FNM Board of Directors that on 20 July 2022

approved the sale of the shares in La Linea S.p.A. and Martini Bus S.r.l.

The FNM Group is present, through controlling shareholdings and/or shareholdings in companies

subject to joint control or associates, in the following four segments:

6.1RO.S.CO. & SERVICES

The parent company FNM S.p.A.(or FNM) purchases and leases rolling stock directly to its

subsidiaries operating in the LPT (Local Public Transport) and freight transport sector, primarily

Trenord and DB Cargo Italia, acting as Rolling Stock Company (hereinafter referred to as

“Ro.S.Co.”).

Trenord (50% jointly owned with Trenitalia S.p.A.) is the main manager of suburban and regional

rail passenger transport services in the Lombardy Region. For further details please refer to section

6.5. DB Cargo Italia (40% owned by FNM S.p.A. with DB Cargo Italy S.r.l.) offers logistics and

freight movement services, mainly in Italy and on the infrastructure network managed by the Italian

Railway Network (RFI), relying on a fleet of 42 electric and diesel locomotives.


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Financial Report as at 31 December 2022	page 9

Trenord and DB Cargo Italia are valued using the equity method in the consolidated financial

statements of the FNM Group.

It should be noted that in collaboration with FERROVIENORD and Trenord, FNM is engaged in

the promotion of the H2iseO project, which aims to develop a Hydrogen Valley in Valcamonica,

starting from the use of hydrogen in local public transport. The project involves the purchase of 14

hydrogen-powered trains for the Brescia-Edolo railway line to replace the current diesel-powered

trains. In December 2020 FNM entered into a Framework Agreement with Alstom for the supply of

30 bi-directional hydrogen-powered trains and signed the first Executive Contract for 6 trains, with

delivery of the first train for the initial trial runs by the end of 2023. The first 6 trainsets are

scheduled to start commercial service by 2024. By 2025, the hydrogen fuel solution is also expected

to be extended to road transport, starting with the roughly 40 vehicles operated in Valle Camonica

by FNMA.

Also as part of the H2iseO Project, the construction of hydrogen production facilities is planned,

initially intended for the new trainsets. To this end, the company FNM Power S.r.l. was established

in April 2022 (FNM Power - wholly-owned by FNM S.p.A.), which will be active in the field of

hydrogen production and distribution plants, also with reference to the subsequent operational

phase. During 2022, the hydrogen production, storage and distribution plant in Iseo was authorised;

the construction of the hydrogen train maintenance plant in Rovato began and the authorisation

process for the mobile refuelling plant in Rovato is currently under way. It should be noted that the

Lombardy Region, through Regional Government Decree no. 7328 of 14 November 2022, made

EUR 80.1 million available to finance the project’s infrastructure through the FERROVIENORD

Programme Agreement and submitted a funding request to the Ministry of Infrastructure and

Sustainable Mobility to access the resources provided by the NRRP (measure M2C2, investment

3.4 “Hydrogen experimentation for rail transport”). In February 2023, FERROVIENORD

published four calls for tenders for the construction of production and distribution facilities for

hydrogen trains and buses, and for the upgrading of the railway infrastructure in Edolo and Brescia

Borgo San Giovanni, aimed at allowing trains to be refuelled and parked. The entire project is

expected to be completed by 2025, and in any case within the timeframe set forth in the NRRP.

The total investment is estimated to be around EUR 300 million, of which more than EUR 165

million for trains, of which EUR 80.1 million financed with funds made available by the Lombardy

Region through the FERROVIENORD Programme Agreement, EUR 82.6 million contributed by

FNM S.p.A. for the purchase of trains and, to define the coverage of the remaining part, the

company is awaiting the decree for the allocation of the resources provided by the NRRP.


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Financial Report as at 31 December 2022	page 10

FNM S.p.A. also provides administrative services to its subsidiaries, manages its real estate assets

and is involved, together with its subsidiary FERROVIENORD, in the development FILI project

dedicated to the redevelopment of FERROVIENORD's main connection centres on the Milan-

Malpensa line, as described in more detail in section 14.

Consistent with the 2021-2025 Strategic Plan, within the People/Community pillar, FNM is also

active in the development of complementary digital platforms which, together with the transport

services offered by the Group, enable the implementation of the EU’s Mobility as a Community

(MaaC) strategic paradigm as an enabling tool of the new digital mobility focusing on the mobility

needs of communities. From this perspective, in 2020 the Group entered the digital payment

services sector with the establishment of FNMPAY S.p.A. (hereinafter referred to as “FNMPAY”),

a wholly-owned subsidiary of FNM S.p.A., active in digital payment services to perform primarily

acquiring services (payment acceptance through physical/virtual POS) focusing firstly on the

Group’s captive companies.

The development of the MaaC strategy includes the equity investments in Busforfun.Com S.r.l.

(“Busforfun”) and Sportit S.r.l. (“Sportit”). Busforfun, of which FNM S.p.A. currently holds 40%

of the share capital, is a startup that develops innovative road transport solutions, capable of

responding to the new mobility needs of both people (B2C) and businesses (B2B), acting as a

mobility partner with a green and shared transport solution. Sportit, of which FNM S.p.A. acquired

a 33.3% shareholding in December 2021, is a company active under the Snowit brand and the main

marketplace for the integrated online sale of ski passes, ski-related services and experiences relating

to the mountain world. In April 2022, under the brand name Bikeit, Sportit launched a new platform

for the sale of service packages to bicycle tourists, which can be customised to meet the needs of

individual users.

In addition, the FNM Group also extended its operations into the Information & Communication

Technology sector with the joint venture NordCom, which operates both for the benefit of the FNM

Group and for third parties.

With regard to the jointly controlled company NORD ENERGIA S.p.A. and its subsidiary CMC

Mesta S.A., on 8 July 2022 it became no longer possible to commercially exploit the capacity to

import electricity via the Mendrisio-Cagno powerline included in the national transmission grid, in

accordance with the provisions of the Decree of the Minister of Production Activities of 21 October

2005, due to the expiry of the concession under which the investee operates. The company was

therefore placed in liquidation as of 10 January 2023.


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Financial Report as at 31 December 2022	page 11

6.2RAILWAY INFRASTRUCTURE

The Group is active in the management of railway infrastructures in Lombardy through

FERROVIENORD S.p.A. (FERROVIENORD), which is entrusted with the management and

maintenance of a 330 km railway network, divided between the Milan (222 km) and Iseo (108 km)

branches, on the basis of the concession expiring on 31 October 2060 (the ''Concession”), the

Programme Agreement for investments (the “Programme Agreement”) and the Public Service

Contract for management (the “Public Service Contract”), both expiring in 2027, entered into with

the Lombardy Region. Furthermore, FERROVIENORD avails itself of the services provided by

NORD_ING S.r.l. for design activity, as well as technical and administrative support for

investments in the railway network.

As concerns the Concession, with Regional Council Resolution no. X/4823 of 15 February 2016,

the Lombardy Region ordered the Concession to FERROVIENORD for the construction, operation

and management of the Regional Railway Network be renewed from 18 March 2016 to 31 October

2060. The concession agreement includes the construction, management and maintenance of the

railway infrastructure, the upgrading and modernisation of the network, traffic management and the

allocation of capacity. The concessionaire also has the role of acquiring and managing, on a non-

exclusive basis, the fleet necessary to provide railway services and the enhancement of railway

assets including those of historical value. The concessionaire is also assigned the tasks governed by

the Programme Agreement, Public Service Contract or other administrative measure, which

constitute the contractual deeds implementing the principles and obligations set forth in the

Concession.

The Public Service Contract governs the specific terms and conditions, including economic terms,

of the ordinary management and maintenance of the railway infrastructure, as well as the activities

concerning the purchase and management of the rolling stock made available to the railway

companies on behalf of the Region by FERROVIENORD, in accordance with the principles and

obligations established in the Concession. In particular, the Public Service Contract establishes a

fee aimed at compensating the cost items that the law does not require be covered by the fees paid

by railway companies for infrastructure use. In December 2022, the Public Service Contract

expiring on 31 December 2022 was renewed for the 1 January 2023 - 31 December 2027 period

under the conditions described in section 9.2.


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Financial Report as at 31 December 2022	page 12

The Programme Agreement is aimed at governing the programmatic framework of investments

relating to the renewal, expansion and modernisation of infrastructure and technology, as well as

extraordinary maintenance works on the infrastructure network managed by FERROVIENORD, in

line with the regional planning of railway services, as well as the financial management procedures

for such interventions. In particular, FERROVIENORD is called upon to perform the following

tasks: (i) design and implementation of the works necessary for the development, upgrading and

improvement of the safety levels of the regional railway network and (ii) performance of the

extraordinary maintenance activities necessary to keep the network operating safely and reliably.

The financial coverage of the activities in question derives for the most part from EU, state and

regional resources, disbursed by the Lombardy Region in favour of FERROVIENORD through the

reimbursement of costs incurred, in line with work progress, and the lump-sum reimbursement of

“technical costs” and “general costs” calculated as a percentage of the value of the works and the

amount of the works.

On 28 July 2016 - following Regional Council Resolution no. X/5476 of 25 July 2016 - the new

“Programme Agreement for investments and extraordinary maintenance on the regional rail

network under concession to FERROVIENORD S.p.A. between the Lombardy Region and

FERROVIENORD S.p.A. for the 28/07/2016 - 31/12/2022 period” was signed (later extended to 31

December 2027). The Programme Agreement defines:

1.activities for the renewal, extension and modernisation of the infrastructure and technological

systems, to improve service quality, develop the infrastructure and achieve high levels of safety

in accordance with the provisions of the Regional Mobility and Transport Programme

(“PRMT”);

2.extraordinary maintenance activities to maintain network efficiency in accordance with the

provisions of the Public Service Contract of 16 March 2017.

Pursuant to Art. 7, paragraph b) of the Programme Agreement - which provides for “the update of

the agreement if the Region identifies the need to amend the Programme of activities, as agreed to

be necessary by the Parties, or as a consequence new available financial resources” - in the

2017-2021 period the programme of activities2 was updated five times, incorporating, inter alia, the

“MARSHALL PLAN” - PROGRAMME OF MEASURES FOR ECONOMIC RECOVERY, approved

by the Lombardy Region in 2020, aimed at further improving the safety and regularity of the


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Financial Report as at 31 December 2022	page 13

2 Regional Government Decree no. 7645 of 28 December 2017, Regional Government Decree no. 383 of 23 July 2018, Regional Government Decree

no. XI/2054 of 31 July 2019, Regional Government Decree no. XI-4010 of 14 December 2020 which in particular incorporates the “MARSHALL

PLAN” - PROGRAMME OF ACTIVITIES FOR ECONOMIC RECOVERY, approved by the Lombardy Region with Regional Government Decree

no. 3531 of 5 August 2020 and updated with Regional Government Decree no. 3749 of 30 October 2020 and, lastly, Regional Government Decree

no. XI/5589 of 23 November 2021.

service, upgrading the infrastructure and renewing the facilities. In particular, infrastructural

enhancements include the construction of the railway connection of the Malpensa T2 station with

the RFI Sempione line, the activation of hydrogen trains for the Brescia-Iseo-Edolo line, as well as

the selective doubling and the redevelopment of crossings along the Varese-Laveno line.

At 31 December 2022, the total financial resources allocated to the Programme Agreement

amounted to EUR 1,553 million, including the following updates approved last year:

Sixth update of the Programme Agreement

With Regional Government Decree no. XI/6047 of 1 March 2022 the Region, within the

“Programme of activities for economic recovery”, approved, inter alia, the allocation of additional

resources for some works included in the Programme Agreement programming. In particular:

•EUR 11.0 million for “Bovisa Node” works;

•EUR 10.0 million for the “Adaptation of facilities with the construction of crossing kits, station

underpasses, the redevelopment of platforms and shelters (Castegnato) and infrastructural

enhancement connected to the activation of hydrogen trains”;

•EUR 1.67 million for the “Completion of the replacement of ACEI equipment and

centralisation with ACC-M installations - Milan network and network interventions for

timetable stabilisation”.

With Regional Government Decree no. XI/7328 of 14 November 2022, the Lombardy Region

approved the sixth “Update of the Programme Agreement for investments and extraordinary

maintenance on the Network under concession signed on 28 July 2016 and updated on 28

December 2017, 23 July 2018, 31 July 2019, 14 December 2020, 23 November 2021 and 1 March

2022 (Regional Law no. 6/2012). Amendments to Regional Government Decree no. XI/6047/2022

of 01/03/2022 - Lombardy Plan - Programme of activities for economic recovery”, which

specifically provides for:

•the “freezing” of certain projects in order to shift the relative resources (amounting to EUR

106.4 million) to other priority projects - in the approval or tendering or execution phase - to

deal, as requested by FERROVIENORD, with the increase in the relative financial requirements,

resulting from the increase in the costs of construction materials and the extraordinary updating

of the reference price lists;


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Financial Report as at 31 December 2022	page 14

•the allocation of EUR 35.0 million (EUR 7.0 million for 5 years) for extraordinary maintenance

works for the 2023-2027 period.

Finally, pursuant to the provisions of the agreement and the Public Service Contract, on behalf of

the Lombardy Region, FERROVIENORD purchases, manages, maintains and keeps in custody the

rolling stock for the regional railway service against the payment of a commission set at 1% of the

amount of the train supply contracts as remuneration for the overhead costs of managing the order.

The programme for the renewal of rolling stock for regional rail services for the years 2017 -

2032 of the Lombardy Region currently being implemented calls for the introduction of 222 new

trainsets into service by 2025, thanks to a total budget of EUR 1.740 billion, and has been updated

over the years as illustrated below:

Original Purchase Programme

By Resolution of the Regional Council no. X/6932 of 24/7/2017 “Rolling Stock Purchase

Programme for the regional rail service for the years 2017 - 2032 and integration of supplies of the

rolling stock purchase programme as per Regional Government Decree no. X/4177 of 16/10/2015”,

the Lombardy Region has authorised FERROVIENORD to purchase 161 new trainsets (100 high-

capacity electric trains to be used on high-frequency lines, 31 medium-capacity electric trains to be

used on medium-frequency lines and 30 diesel trains to be used on non-electrified lines) by 2025,

covered in the total amount of EUR 1.607 billion guaranteed by the Lombardy Region3. For the

supply of trainsets, following a tender process, FNM, on behalf of FERROVIENORD, entered into

three framework agreements with HITACHI RAIL ITALY S.p.A. (“Hitachi”), ALSTOM

FERROVIARIA S.p.A. (“Alstom”) and STADLER BUSSNANG AG (“Stadler”).

In relation to the financial strategy necessary to combine the time requirement for the purchase of

new trains by 2025 with the cash flows authorised by the Lombardy Region under the “Rolling

Stock Purchase Programme for the regional rail service for the years 2017 - 2032”, please recall

that in 2018 FERROVIENORD and Cassa Depositi e Prestiti (“CDP”) had signed a loan agreement

for EUR 650 million, with funding granted by the European Investment Bank (“EIB”).Considering

the amount of the resources allocated by the Lombardy Region, which make it possible to ensure

alignment with the supply timetables currently under way with no need to request any loans, as of 6

September 2022, FERROVIENORD requested and obtained the voluntary cancellation of the entire


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Financial Report as at 31 December 2022	page 15

3 Attachment A, Part 1 of Resolution no. X/6932 of 24 July 2017 sets out the framework of resources, amounting to a total of EUR 1.607 billion,

available subject to the approval of the budget-balancing law for 2017-2019 (see Bill 358/2017), on the 2017-2019 Budget and on Budgets from 2020

to 2032.

loan, still completely unused, in accordance with the joint provisions of Regional Council

Resolution no. XI/6841 of 2 August 2022 “Programme for the purchase of rolling stock for the

regional railway service: determinations regarding financing” and Regional Law no. 17 of 8

August 2022 “Adjustment to the 2022 - 2024 budget with amendments of regional laws”.

With Regional Government Decree no. 7207 of 24 October 2022, the Lombardy Region re-

determined the cost of the fleet renewal programme as EUR 1.389 billion in order to take into

account the tender discounts on supplies as well as the voluntary cancellation of the initially

planned CDP loan. At the same time, the new outline of the Implementation Agreement was

approved and signed on 27 October 2022 by FERROVIENORD.

Supplementary Purchase Programme

By Resolution of the Regional Council no. XI/1619 of 15/5/2019, the Lombardy Region authorised

FERROVIENORD to purchase an additional 15 trainsets (5 “Rock” type high-capacity trainsets to

be used on medium-frequency lines and 10 “Pop” type medium-capacity trainsets to be used on

high-frequency lines), taking advantage of the assignment of the supply contract with Hitachi and

ALSTOM respectively by Trenitalia S.p.A.. The resources to cover the investment became

available thanks to savings on the first two tenders awarded by FNM4.

Marshall Plan

With Regional Council Resolution no. XI/3531 of 5 August 2020 “Programme of activities for

economic recovery” (“Marshall Plan”), in Annex 3, the Lombardy Region provided funding of

EUR 351 million for the “Acquisition of trains to upgrade services on the Milan/Sondrio/Tirano

and Milan/Airports routes”, with the aim of putting the trains into service in time for the Milan-

Cortina 2026 Winter Olympics.

With Regional Council Resolution no. XI/4421 of 17 March 2021 “PROGRAMME FOR THE

ACQUISITION OF ROLLING STOCK FOR THE REGIONAL RAILWAY SERVICE:

PURCHASE ORDER FOR 46 TRAINS WITH RESOURCES FOR ECONOMIC RECOVERY

(Regional Law 9/2020)”, the Lombardy Region authorised FERROVIENORD to proceed with the

purchase of the following types of trainsets under the existing Framework Agreements: 10 Hitachi


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Financial Report as at 31 December 2022	page 16

4 Resolution no. XI/1619 of 15 May 2019 approves, as a supplement to the original purchase programme, the supplementary purchase programme,

financed by means of tender discounts on High Capacity and Diesel trains, to be implemented operationally by means of the transfer by Trenitalia in

favour of Ferrovienord of supply implementation contracts, resulting from the framework agreements of Trenitalia entered into with Alstom

Ferroviaria S.p.A. (Pop trains) and Hitachi Rail ltaly S.p.A. (Rock trains) on 3 August 2016, concerning, respectively, 10 “Pop” type medium-

capacity trainsets and 5 “Rock” type high-capacity trainsets.

Caravaggios to be used for the Malpensa airport service(“Malpensa Express”); 20 Donizetti

Alstoms for service on the Milan/Sondrio/Tirano route (“Valtellina”); 16 Hitachi Caravaggios to be

used for the Bergamo airport service (“Orio al Serio”).

The tables below illustrate the implementation of the rolling stock renewal programme. In addition

to the supply of trains, the contracts also cover scheduled first-level maintenance, corrective

maintenance for vandalism and accidental events, as well as the supply of technical stock:

More details on the progress of deliveries are provided in section 9.2.


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Financial Report as at 31 December 2022	page 17

The segment also includes the management activities of the Sacconago intermodal terminal in

Busto Arsizio (VA), near the Malpensa airport, carried out by Malpensa Intermodale S.r.l. The

company receives complete trains which it manages by means of self-propelled cranes, positioning

the intermodal transport units in the storage locations, or it provides direct delivery to the customer.

The terminal is equipped with two operational tracks with an extension of approximately 48,000

square metres and benefits from a service and logistics development area of more than 200,000

square metres.

Malpensa Distripark S.r.l. is instead entrusted with the real estate development of the areas adjacent

to the Sacconago Terminal, which is key to the management of intermodal connections in the cargo

sector handled by Malpensa Intermodale.

6.3ROAD PASSENGER MOBILITY

FNM operates in the road mobility sector with different companies depending on territorial

competence or the service rendered.

In Lombardy, FNM Autoservizi S.p.A. (hereinafter also referred to as “FNMA”) is the

concessionaire of portions of public transport services by road in the provinces of Varese and

Brescia, and is the holder, as part of an A.T.I. (temporary association of companies) with ASF

Autolinee S.r.l. (49% owned by Omnibus Partecipazioni5 - 50% owned by FNM S.p.A.) of a Public

Service Contract for those in the Province of Como. FNMA also operates substitute train services

on behalf of Trenord.

LPT activities in the provinces of Varese and Brescia are carried out under Concession, while those

in the province of Como are governed by a Public Service Contract; the subsidiary is operating

under an extension of the original contracts and the duration has currently been extended until 31

December 2023. It should be noted that, under Regional Law no. 8 of 25 May 2021, art. 30, the

Lombardy Region approved the amendment to art. 60 of Law no. 6/2012, postponing the deadline

for bidding for the renewal of service concessions/contracts by 2 years after the conclusion of the

state of emergency (set at 31 March 2022 under Decree Law no. 24 of 24 March 2022).

In Veneto, FNM is present with Azienda Trasporti Verona S.r.l. (hereinafter also referred to as

“ATV”), that provides urban public transport services in the municipalities of Verona and Legnago

and extra-urban services throughout the province of Verona on the basis of three Public Service

Contracts, which expired on 31 December 2022 and are currently awaiting extension. By resolution

no. 24 of the President of the Province of Verona dated 25 February 2021, the community tender


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Financial Report as at 31 December 2022	page 18

5 Company operating in road passenger road mobility, but considered in the Ro.S.CO. segment for the purposes of drafting of the financial

statements. It is accounted for using the equity method in the consolidated financial statements of the FNM Group.

for the identification of the concessionaires of Verona's public transport services6 was suspended,

pursuant to art. 2 of Decree Law no. 18/2020 (converted with amendments by Law no. 27/2020),

until 12 months after the conclusion of the COVID-19 state of emergency, planned for 31 March

2022 on the basis of Decree Law no. 24 of 24 March 2022.

As things currently stand, the Government Authority has not yet defined the continuation of

activities at the end of the 12 months following the end of the emergency period. Also under

consideration, at the initiative of ATV, is the possibility of an extension to 31 December 2026 in

application of the provisions of art. 24, paragraph 5-bis of Legislative Decree 4/2022, i.e. following

the presentation of an economic and financial plan for the following years that calls for, among

other things, significant investments, including partial self-financing.

Regarding the remuneration of local public transport services carried out by FNMA and ATV,

they receive remuneration agreed upon ex ante, which takes into account the budgeted tariff

revenues (“Net Cost” type), updated on an actual basis considering the actual kilometres travelled

defined in local programming.

With regard to the three Public Service Contracts pertaining to the Verona LPT area, every year the

Veneto Region defines the level of minimum services eligible for contribution for each contract/

authority and the fee per kilometre for the current year (the parameter used is Euro/km). During

2022, there were two adjustments in the fee recognised per kilometre travelled: the first resulting

from one-off funding from the Veneto Region following the increase in traction costs (Regional

Government Decree 1012/2022), and the second came about with Regional Government Decree

1657/2022 following the adjustment of FNT funding at a national level (from 2022 to 2025 about

EUR 100 million per year is expected for the sector). The tariff model is instead based on

increasing kilometre classes according to the distance travelled, the unit amounts of which have

remained largely unchanged over the years. Precisely on the subject of fare adjustments, talks are

underway with the government authority with the aim of obtaining a partial adjustment of current

ticket prices, which date back to 2012.

Activities relating to Lombardy road LPT, also because of the different regulatory requirements of

the Public Service Contracts and Concessions, are characterised by a rather complex scenario: (i)

with reference to the Como Public Service Contract, the Resolution of the Board of Directors of the

Como-Lecco-Varese LPT Agency no. 50 of 3 November 2021 calls for the redefinition of fee

adjustments as a result of inflation, assessed through the actual price index for wage earners and


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Financial Report as at 31 December 2022	page 19

6 In December 2017, the restricted procedure announcement was published for the selection of the public transport manager in Verona and the

province; essentially relating to the services currently provided by ATV, it provides for the assignment of two lots (one urban with Catullo airport

service, the other extra-urban including the Municipality of Legnago). In 2018, the company filed an appeal with the Veneto Regional Administrative

Court challenging both the type of tender planned and the division in lots. The date of the first hearing still has to be set.

employees, up to the limit of 2%; (ii) with reference to the Varese and Brescia Concessions, to date

no fee adjustment is planned as a result of inflation trends. With regard to tariffs, art. 26, par. 1,

letter b) of Tariff Regulation no. 4 of 10 June 2014 establishes that tariff adjustments are to be

defined by means of the regulatory authorities' own measures, with regard to the aspects under their

jurisdiction. Furthermore, art. 26, par. 2 of the same Regulation establishes that the adjustments for

which the Regulatory Authorities are responsible are to be determined by a measure normally

issued by 15 July of each year, effective as of 1 September of the same year. Paragraph 3 of the

same article 26 also states that the above adjustments are calculated according to an automatic

annual adjustment mechanism consisting of two items: (i) generalised and weighted sector cost

trends, calculated in April of each year by the Lombardy Region on the basis of the general price

index for wage earners and employees, excluding tobacco; and (ii) the quantity and quality of

services measured through the definition of appropriate indicators for the LPT Agencies.

The following table shows the situation of existing credit lines at 31 December 2022, following the

procedures described above:


Company	Awarding body	Legal instrument	Remuneration system	Expiration	LPT network extension (km)

FNMA (Varese)	Como - Lecco - Varese LPT Agency	Concession	Net Cost + Regulated tariff	31/12/2023	223
FNMA (Brescia)	Brescia LPT Agency	Concession	Net Cost + Regulated tariff	31/12/2023	331
FNMA (Como, temporary grouping with ASF)	Como - Lecco - Varese LPT Agency	Public Service Contract	Net Cost + Regulated tariff	31/12/2023	196
ATV (Verona Area)	Province of Verona	Public Service Contract	Net Cost + Regulated tariff	31/12/2022	3,828
ATV (Verona)	Municipality of Verona	Public Service Contract	Net Cost + Regulated tariff	31/12/2022	417
ATV (Legnano)	Municipality of Legnago (VR)	Public Service Contract	Net Cost + Regulated tariff	31/12/2022	32

Lastly, please note that as regards the future dates of tenders for the award of road LPT services,

any loss of services would have a significant impact on the company's revenues, but would also

lead to a proportional reduction in costs, since under current legislation, the incoming company

must take over the staff and equipment dedicated to the service. Any depots owned by the company

would remain under its ownership, without any obligation of transfer to, or use by, the incoming

company.

Also in the Veneto region, FNM operates in the sector of local public road transport and also hires

out buses with driver, through La Linea S.p.A. (“La Linea” – with a 51% share) and its subsidiary

Martini Bus S.r.l.

In order to rationalise its operations in the area of public bus transport services, on 20 July 2022, the

FNM Board of Directors resolved to sell the shares of the company La Linea S.p.A. for an amount


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Financial Report as at 31 December 2022	page 20

of EUR 5.4 million (a value aligned to the value of the assets and liabilities recognised in the

financial statements, classified according to IFRS 5). On 7 December 2022, a preliminary

agreement was entered into with Alilaguna S.p.A., Powerbus S.r.l. and Mr Massimo Fiorese for the

sale of the 1,611,600 shares held by FNM, representing 51% of the share capital of La Linea S.p.A.

As set forth in the aforementioned preliminary agreement, the sale of 893,332 shares, corresponding

to 28.27% of the share capital, was finalised on 16 January 2023 (“First Closing”). By 31 March

2023 (“Second Closing”), the parties undertake to finalise the sale of the remaining 718,268 shares,

corresponding to 22.73% of the share capital. At the same time as the Second Closing, La Linea

shall also proceed with the full settlement of its payables to FNM, deriving from the two existing

loan agreements, for a total of EUR 7.3 million. Any failure to extinguish these loan agreements

constitutes a condition subsequent of the First Closing and a condition precedent of the Second

Closing. To this end, on 16 December 2022, the La Linea Board of Directors decided to submit a

request for the disbursement of a bank loan for a total of EUR 8.0 million, which has not yet been

taken out.

Lastly, the road transport offer is complemented by the car sharing service provided by E-Vai S.r.l.

(hereinafter also referred to as “E-Vai”) integrated with the railway service (covering 46 railway

stations) and the three main airports in Lombardy. The service offering currently comprises the

following models, the first aimed at the consumer segment and the others at the B2B segment:(i)

Regional Electric - “station-based” regional electric car sharing service integrated with the regional

rail service network; (ii) Public - service aimed at municipalities during working hours and at

citizens at other times and on weekends; (iii) Corporate - service aimed at companies and their

employees during working hours and for private use.

Lastly, it should be noted that the Lombardy ecological car sharing service is entrusted to

FERROVIENORD as part of the commitment with the Lombardy Region to provide an

“ecological” car sharing service in exchange for the payment of a fee of EUR 1.8 million per year.

The latter contribution ceased with the renewal of the Public Service Contract in force as of 1

January 2023 (see section 9.2 for further details).

6.4MOTORWAYS

The FNM Group is also present in the motorway infrastructure management sector thanks to its

shareholding in Milano Serravalle – Milano Tangenziali S.p.A. (“MISE”), fully consolidated in the

FNM Group’s financial statements starting on 26 February 2021. Thanks to the acquisition of

MISE, FNM created a strategic group in the infrastructure sector in Lombardy for the management


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Financial Report as at 31 December 2022	page 21

of the mobility system that integrates rail transport, local public road transport and motorway

infrastructure. On the one hand, the transaction allowed FNM to strengthen its presence in

Lombardy and in the areas of highest demand for transport, on the other hand it allowed the FNM

Group to diversify its revenues, with an improvement in its income profile and a simultaneous

diversification of its regulatory risk.

The investment in MISE derives from the acquisition, at the end of July 2020, of the 13.6% stake in

MISE's share capital held directly and indirectly by ASTM, and the acquisition of a further 82.4%

stake in the share capital held by the Lombardy Region, completed on 26 February 2021. The total

consideration paid for the 96% stake in MISE was EUR 604.8 million (or EUR 3.5 per share).

Following the request to liquidate the 4% minority shareholding held by the Milan Monza Brianza

Lodi Chamber of Commerce and Parcam S.r.l. - and the waiver by FNM to exercise the option right

on the shares offered for sale - on 28 July 2022 the liquidation of the withdrawing shareholders was

finalised. The appraisal value established pursuant to art. 2437-ter of the Italian Civil Code is EUR

3.01 for each of the 7,200,000 shares forming part of the non-controlling package, corresponding to

a total payment of EUR 22.0 million, including interest. The liquidation of the shareholding of the

Chamber of Commerce of Milan Monza Brianza Lodi and Parcam S.r.l. resulted in the cancellation

of the corresponding 7,200,000 shares with no share capital reduction.

MISE operates under a concession, which will expire on 31 October 2028, on the basis of the

Consolidated Agreement entered into with the Awarding Body ANAS (now the Ministry of

Infrastructure and Sustainable Mobility - or “MIMS”) on 7 November 2007, approved by Law no.

101 of 6 June 2008, which converted Decree Law no. 59 of 8 April 2008. On 10 March 2017,

following communication by the Awarding Body, the Additional Agreement, relating to the second

regulatory period 2013-2017, approved by ID no. 422 of 2 December 2016 and registered by the

Court of Auditors on 1 February 2017, became effective. In particular, MISE is the concessionaire

of the A7 Motorway, from Milan to Serravalle Scrivia, and the three Milan ring roads: A50

Tangenziale Ovest, A51 Tangenziale Est, A52 Tangenziale Nord. The Company also manages the

western ring road of Pavia (A54) and the Bereguardo-Pavia (A53) motorway link. Located at the

centre of one of the main European motorway networks, the network covers 184.9 km - of which

124.1 km with three lanes- and consists of the following:


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Financial Report as at 31 December 2022	page 22


	Section	Km

A7	Milan Serravalle Motorway from Milan Piazza Maggi to Serravalle Scrivia	86.3
A53	Bereguardo-Pavia link road	9.1
A54	Pavia bypass	8.4
A50	Milan West bypass Motorway with Fiera Rho-Pero link	33.0
A51	Milan East bypass Motorway	29.4
A52	Milan North bypass Motorway	18.7

	TOTAL	184.9

The total length of the network in operation has increased compared to 31 December 2021. In

particular, the Milan North Bypass Motorway, following the opening to traffic on 14 November

2022 of the redeveloped S.P. 46 Rho-Monza with motorway characteristics, increased by 5.8 km.

The network is interconnected to the main motorway sections in northern Italy:

•A4 SATAP S.p.A., Turin-Milan

•A4 Autostrade per l'Italia S.p.A. (Area 2 Office), Milan-Venice

•A8 Autostrade per l'Italia S.p.A. (Area 2 Office), Milan-Laghi

•A1 Autostrade per l'Italia S.p.A. (Area 2 Office), Milan-Bologna

•A7 Autostrade per l'Italia S.p.A. (Area 1 Office), Serravalle-Genoa

•A21 SATAP S.p.A., Turin-Piacenza

•A26 Autostrade per l'Italia S.p.A. (Area 1 Office), A7-A26 link road, Predosa Bettole

MISE's activities also include the management of contractual relations with sub-concessionaires,

which are entrusted with the management of the 19 service areas located along the concession

sections. In this regard, it should be recalled that in 2018 the service area sub-concession contracts

came to an end and, with the expiry of the contracts – as provided for in the “Plan for the

restructuring of the network of service areas on motorway sites” approved by the MIMS in

agreement with the Ministry of Economic Development, by Interministerial Decree of 7 August

2015 – three service areas were definitively closed to the public and a tender procedure was started

for the assignment under concession of 32 lots. On 9 October 2020, the award measures for all 32

lots subject to the tender became effective and draft agreements were sent to the new successful

bidders for review in the first half of December 2020. However, given the continuation of the

COVID-19 epidemiological emergency and the restrictions imposed, the transition activities

between the outgoing operators and the successful bidders slowed down, and the sub-concession

contracts were not signed with the first new incoming operators until February 2021. The signing of

new sub-concession contracts continued during the year, and at 31 December 2022, the takeover of

29 lots in 17 service areas had been finalised. In 2023, the takeover of the remaining lots is


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Financial Report as at 31 December 2022	page 23

expected to be completed and work on upgrading facilities and enhancing services will begin. In

fact, as set forth in the deeds defined over time with the outgoing sub-concessionaires, the

aforementioned properties must be transferred and/or assigned free of charge since they fall within

the scope of motorway areas (to be subsequently given free of charge to the Awarding Body).

The gradual transition from the old sub-concession contracts entered into starting in the 1960s to

the new agreements resulting from the tender process has resulted in a shift of revenues from fixed

fees to royalties. The new concessions call for only a variable fee calculated on the sales of fuel and

refreshment areas, plus a maintenance fee to reimburse the costs incurred by the Company for

maintenance activities on the common parts of the service areas (road paving, horizontal and

vertical signage, guardrails, yard lighting, etc.). In addition, the new contracts establish more

favourable economic conditions for MISE, especially with regard to fuel sales. Lastly, as set forth

during the tender, the new sub-concessionaires have planned significant modernisations of the

facilities and enhancements of the services offered so as to make them more suited to the needs of

motorway customers, including the installation of photovoltaic panels and charging stations for

electric cars, the latter in every service area throughout the network under concession.

MISE also provides design, as well as technical and administrative support, services for

infrastructure investments on the motorway network through Milano Serravalle Engineering

(“MISE Engineering”), of which it holds 100% of the share capital.

On 18 May 2022 MISE Engineering, MISE and its subsidiary Autostrada Pedemontana Lombarda

S.p.A. (“APL”) signed a “Letter of Intent” with the aim of outlining a negotiation process for the

possible acquisition by APL of a business unit belonging to the subsidiary MISE Engineering.

Indeed, APL, taking into account the signing of the Senior Loan Agreement 1, the signing of the

contract with the General Contractor for the construction of sections B2 and C, as well as the need

to rapidly define section D (as specified in more detail in section 6.5), decided to internally

consolidate the engineering activities necessary for the construction of the work by making recourse

to an extraordinary transaction.

In the months that followed, talks took place between the parties and their consultants, aimed at

defining the “business unit” and the relative consideration, which were finalised, subject to the

acquisition of authorisations from the financing banks, on 16 December 2022 with the signing

between the parties of a contract for the “sale of the Business Unit”.

The total value of the business unit, EUR 259 thousand, was determined by an independent

appraiser on 31 May 2022. This amount was subjected to a price adjustment mechanism that, while


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Financial Report as at 31 December 2022	page 24

the value of goodwill remained unchanged, took into account the net book value of the business

unit at the effective date of the final deed. On 31 January 2023, in accordance with contractual

timelines, a financial position adjustment as at 16 December 2022 was submitted. Subsequently, on

27 February 2023, the parties - also after obtaining the favourable acknowledgement of the lending

banks on 24 February 2023 - signed the deed defining the scope of the Business Unit and

ascertaining the price adjustment, allowing the transaction to become fully effective on the basis of

the values defined on 16 December 2022, with the resulting transfer of two active orders - job order

320 Dalmine-Como-Varese-Valico del Gaggiolo motorway link and associated works - Drafting of

the Final Plan of “short” section D, and job order 285 “Visual inspection and assessment of the

maintenance status of structures along the sections” as well as the relative dedicated resources.

Based on the financial position at 16 December 2022, the total value of the transaction was set at

EUR 1.3 million. As a result, a gain on disposal of EUR 0.9 million was recognised in 2022.

Lastly, MISE holds minority interests in some motorway concession companies, the main ones

being APL (with 36.7% of the capital) and Tangenziali Esterne di Milano S.p.A.(hereinafter

referred to as “TEM”), described in more detail in section 6.5.

With respect to TEM, on 15 April 2022 MISE finalised the acquisition of 11,015,963 shares held by

the Lombardy Region in the share capital of Tangenziali Esterne di Milano S.p.A. for a total value

of EUR 8.4 million. As a result of the share transfer, MISE's shareholding in the share capital of

TEM increased by 3.75%, from 18.80% to 22.55% (total 66,250,652 shares). Also as part of the

rationalisation of equity investments in the motorway sector, on 28 June 2022 the sale of the shares

held by MISE in the share capital of Autostrade Lombarde S.p.A. and Società di Progetto Brebemi

S.p.A. to Aleàtica S.A.U. was finalised. On the same date, Milano Serravalle Engineering also

finalised the sale of its entire shareholding in the share capital of Brebemi to the same company.

The total consideration for the two disposals is EUR 6.3 million.

Renewal and approval of the Economic and Financial Plan

With regard to the issues relating to the renewal and approval of the Economic and Financial Plan

(EFP) attached to the motorway concession, and the relative impacts on tariff trends, please recall

that motorway sector regulations require the EFP to be updated every five years by 30 June of the

first year of the new regulatory period. Pursuant to the Consolidated Agreement entered into on 7

November 2007, the second regulatory period 2013-2017 ended on 31 December 2017 and


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Financial Report as at 31 December 2022	page 25

therefore it was necessary to proceed with the approval of Additional Agreement no. 2, and the

updating of the EFP.

As mentioned in previous reports, although the subsidiary took action within the regulatory

timeframe, the process of updating the EFP has been affected by numerous regulatory changes over

the years and therefore is still ongoing. In this sense, on 23 February 2022 MIMS sent MISE the

draft of Additional Agreement no. 2 for the complete drafting of the EFP update file to be submitted

to ART to obtain its opinion. Lastly, on 9 January 2023, with ruling no. 24/2023, the Piedmont

Regional Administrative Court rejected the appeal filed by the subsidiary against ART resolutions

no. 16/2019 and no. 69/2019, aimed at introducing a toll rate system relating to motorway

concessions that includes elements of strong discontinuity with respect to the provisions of the

Consolidated Agreement signed on 7 November 2007.

In light of the foregoing, in order to define Additional Agreement no. 2, MISE began the process of

approving a new proposal to update the EFP that fully incorporates the indications of the above-

mentioned ART resolutions, particularly with regard to efficiency gains and the effects of shifting

the tariff regulatory period. It should be noted that, complying with the dictates of ART Resolution

no. 69/2019, the EFP update was prepared starting from the development of a Regulatory Financial

Plan (RFP) for the period from 2020 to 2028. Indeed, in accordance with the resolution, 2018

represents the “base” year and 2019 represents the “bridge” year on which to calculate the changes

in the operating tariff at the beginning of the regulatory period, which extends from 2020 to 2024

(originally 2018-2022).

In addition, activities began for the certification of relief relating to the quantification of the

economic effects of COVID-19. The recovery of these lost revenues, as well as the simulation of

the impact of the adoption of estimated new inflation rates as of financial year 2024, will be

included in the EFP by way of the “notional items” mechanism as of the next regulatory period.

Automotive hydrogen distributors

The subsidiary developed the project for five hydrogen refuelling stations at unused service areas

on the A50 in Rho, the A51 in Carugate, and the former motorway toll stations in Tortona on the

A7. The project is modular and allows for progressive implementation (according to the evolution

of hydrogen demand and new technologies, providing a state-of-the-art design) in terms of number

of hydrogen filling stations on the network and capacity (quantity of hydrogen).

The investment fits within the Group's strategies, with reference to Directive 2014/94/EU,

transposed by Legislative Decree 257/2016, which calls for the construction of an adequate number


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Financial Report as at 31 December 2022	page 26

of hydrogen refuelling points. The project aims to develop Italy's first motorway hydrogen

refuelling network by creating a “Zero-Emission” motorway corridor and has as its main objective

the activation of a coordinated network of hydrogen refuelling points.

In June 2022, the five projects were submitted to the European Commission to obtain a grant (EU

action grant) through participation in the “CEF Transport 2021 for Alternative Fuels Infrastructure

Facility” call for tenders. Also in June, the SUAP (One-stop service desk for business activities)

procedures of the respective municipalities were activated for the initiation of service conferences

aimed at obtaining authorisations, clearances and permits for the construction of the five fuelling

stations. All relevant authorisations were received at 31 December 2022.

On 12 September 2022, the project received the above-mentioned CEF contribution of EUR 13.7

million from the European Commission, representing 30% of the total investment. One of the

grant’s condition is the co-financing of at least 10% of the initiative amount by a financial

intermediary. In order to meet this requirement, on 2 December 2022 MISE took out a loan for

about EUR 4.7 million from the credit institution Intesa Sanpaolo S.p.A, which expressed its

willingness to support the initiative.

At its meeting on 30 November 2022, the Board of Directors decided to proceed with a restricted

procedure pursuant to art. 61 of the Code for the conclusion of a framework agreement with a single

operator pursuant to art. 54, paragraph 3 of the Code for the executive design and construction of

the five hydrogen service stations.

6.5MAIN INVESTEES MEASURED WITH THE EQUITY METHOD

TRENORD

Trenord (50% jointly owned with Trenitalia S.p.A.) is one of the most important suburban and

regional local public rail transport companies in Europe, in terms of both size and widespread

service: its 460 stations, located across 2,000 kilometres of railway network in Lombardy and some

provinces in neighbouring regions under the jurisdiction of two operators (FERROVIENORD and

RFI of the FS Group), mean that 77% of Lombardy's municipalities have a railway station within a

radius of 5 km, serving 92% of the region's residents. Trenord also manages passenger transport

services on the Milan Railway Link and connects seven provinces of neighbouring regions

(Alessandria, Novara, Parma, Piacenza, Verbano-Cusio-Ossola, Vercelli and Verona), as well as the

Canton of Ticino, through TILO (50% owned jointly with the Swiss Federal Railways) and operates

the Malpensa Express airport connection to Malpensa International Airport.


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Financial Report as at 31 December 2022	page 27

The subsidiary has a fleet of more than 400 trainsets leased from FNM and TRENITALIA, or made

available, through FERROVIENORD, by the Lombardy Region, which enable it to operate around

2,200 trains every day.

The railway service is managed under a Public Service Contract for public rail transport with the

Lombardy Region for the period 2015-2020, extended to the end of 2022 and then subsequently

pursuant to article 16 of Regional Law no. 17 of 8 August 2022, until 31 July 2023, under the same

contractual conditions. In addition to the basic contract, Trenord manages the Public Service

Contract - in a temporary grouping of companies with ATM S.p.A. - concerning services on the S5

Varese/Gallarate/Pioltello/Treviglio Line signed on 18 December 2008.

The renewal of the Public Service Contract for the duration of 120 months starting from 1 August

2023 is currently being negotiated, consistent with the pre-information notice regarding the

assignment to Trenord of the public rail transport service pursuant to Regulation (EC) no.

1370/2007 published in the Official Journal of the European Union on 27 December 2019, as

amended on 20 December 2021.

The subsidiary also provides traction and personnel for international train connections between

Italy, Germany and Austria on the Brennero line in cooperation with Deutsche Bahn and

Österreische Bundes Bahn.

AUTOSTRADA PEDEMONTANA LOMBARDA (APL)

Another one of MISE’s investee companies is APL: a concessionaire company for the design,

construction and management of the motorway between Dalmine, Como, Varese, Valico di

Gaggiolo and associated works, for a total of approximately 200 km (including junctions and

associated works), of which 85 km in operation since 2015 (A and B1 sections, A59 and A60),

based on a 30-year concession starting from the entry into operation of the entire motorway link.

Relations between APL and the Awarding Body (Concessioni Autostradali Lombarde S.p.A. or

“CAL”) are governed by the Consolidated Agreement entered into on 1 August 2007 and the

relative Additional Agreements (Additional Agreement no. 1 entered into on 6 May 2010,

Additional Agreement no. 2 entered into on 29 September 2016 and effective as of February 2020).

It is a complex intervention, on an engineering and environmental level, due to the development of

the route, the importance of the connected infrastructures and the type of territory crossed. APL is

also the first motorway in Italy to have the Free Flow Multi Lane collection system, which allows


	FNM Group


Financial Report as at 31 December 2022	page 28

the amount of the toll to be calculated according to the actual use of the infrastructure, avoiding the

use of toll booths and physical barriers.

Sections B2, C and D

For the complete implementation of the services covered by the Agreement, as of today the

executive design and construction activities of the second part of the work, consisting of motorway

sections B2, C and D, and associated works, remain under the responsibility of APL.

With regard to the B2 and C sections, in the second half of 2022 the dispute with Consorzio Stabile

SIS, which, on 2 October 2021, had challenged the tender award decision before the Milan

Regional Administrative Court, was settled in APL’s favour, thus permitting the operational phase

of relations with the General Contractor to begin. Therefore, on 5 December 2022, a contract was

signed with Webuild Italia S.p.A. (lead company of the temporary grouping of companies

consisting of the companies Webuild Italia S.p.A., Partecipazioni Italia S.p.A and Impresa

Pizzarotti & C S.p.A.7) for the assignment of executive design activities, safety coordination during

the executive design phase and the execution of the works. With a start order dated 12 December

2022, contractual activities began, including the drafting of the executive project. Lastly, by means

of an appeal notified on 25 November 2022, Consorzio Stabile SIS lodged an appeal before the

Council of State to annul and/or amend the ruling of the Lombardy Regional Administrative Court

that ruled on the first instance case concerning the challenge against the final award of the tender to

the General Contractor. The hearing was scheduled by the Council of State for 23 February 2023,

after which judgement in the case was deferred to a later date.

With regard to the works for section D, it should be noted that the updating of the final project for

the section in question was temporarily suspended, consistent with the provisions of Additional

Agreement no. 2 to the Consolidated Agreement and the requests of the Awarding Body to evaluate

alternatives to the final project of 2010. Following the approval of the Technical-Economic

Feasibility Project on 13 July 2021, the final design of “short section D” began on 12 October 2021,

and is expected to be completed by 30 June 2023. The acquisition of the business unit from MISE

Engineering, described in more detail in section 6.4, fits within this context.

Renewal and approval of the Economic and Financial Plan


	FNM Group


Financial Report as at 31 December 2022	page 29

7 The companies Webuild S.p.A. and Astaldi S.p.A. were involved in extraordinary corporate transactions, concerning

the sale of business units affected by the assignment in question. Due to these extraordinary transactions, the current composition of

the RTI is as follows: Webuild Italia S.p.A. (instead of Webuild S.p.A.), Partecipazioni Italia S.p.A. (in place of Astaldi S.p.A.) and Pizzarotti S.p.A.

Following the conclusion, with a negative outcome, of the legal proceedings on the appeal brought

by APL against ART resolution no. 106/2020, the work of the technical roundtable continued in the

course of 2022 to finalise the approval of Additional Agreement no. 3 and the relative EFP - the

conclusion of which is one of the conditions precedent to the disbursement of the Senior Loan 1

referred to below - which led on 18 May 2022 to the approval by APL of the 2020 EFP Rev. 2 as

well as its submission to the MIMS and ART on 8 June 2022. ART opinion no. 11/2022 published

on 23 September 2022 highlighted new observations, the implementation of which entailed

amendments to the Consolidated Agreement and subsequent Additional Agreements, in order to

adapt the agreement provisions to the changed regulatory framework on motorway concessions and,

in particular, in consideration of the tariff system approved by the above-mentioned ART resolution

no. 106/2020. This activity was concluded with the approval by APL's Board of Directors on 6

December 2022 of the EFP and the draft Additional Agreement no. 3 to the Consolidated

Agreement, updated in accordance with ART opinion no. 11/2022 and the ART note of 6 May

2021, subsequently sent to CAL on 14 December 2022. The above documents were transmitted by

the Awarding Body to the MIMS for the continuation of the approval process on 19 December

2022.

Financing the construction of sections B2 and C

To support the construction of sections B2 and C, on 31 August 2021 APL took out a EUR 1,741

million loan (Senior Loan 1) from a pool of banks together with Cassa Depositi e Prestiti and the

EIB, with the support of the Lombardy Region as lead partner.

Having met the deadline of 31 August 2021, APL will also be able to benefit from the tax

exemption as per Additional Agreement no. 2 to the Consolidated Agreement approved by the

CIPESS for a nominal total of EUR 800 million. The tax exemption measures were granted in lieu

of an additional public grant due to APL to ensure the economic-financial balance of the

infrastructure works and consist of the possibility of offsetting, in full or in part, both direct and

indirect taxes (IRES, IRAP and VAT) for the entire duration of the concession.

It should lastly be recalled that in 2021, again in order to support the financeability of the

construction of sections B2 and C of the Pedemontana infrastructure, the Lombardy Region made

available a shareholder loan totalling EUR 900 million, disbursed and/or set aside from 2025 to

2044.

With reference to Senior Loan Agreement 1, the constant discussions with the financing institutions

aimed at enforcing the fulfilment of the requirements set forth in the Senior Loan Agreement 1 in


	FNM Group


Financial Report as at 31 December 2022	page 30

order to have the funds disbursed led, in the course of 2022, to the formulation by APL of certain

requests for waivers/authorisations. In this regard, APL obtained the second letter of consent in

March 2022, postponing certain authorisations until more visibility could be obtained as to the work

construction schedule. The company also formalised an “overall” request for consent on 22

December 2022 - followed by a supplement on 20 January 2023 - in which it mainly: (i) informed

the banks of the contractual text signed with the General Contractor as well as the approval of

Additional Agreement no. 3 and the EFP as described above; (ii) requested the postponement of the

“Long Stop Date” from 31 January 2023 to 15 December 2023 (the date from which, theoretically,

the financing institutions have the right to revoke the credit lines if the conditions precedent have

not been met); (iii) requested consent for the acquisition of the business unit from MISE

Engineering (as described in section 6.5); (iv) requested the possibility of making short-term

investments with available liquidity, pending the investment in the construction of sections B2 and

C. The lending institutions expressed their consent to the Company's requests.

TANGENZIALI ESTERNE DI MILANO (TEM)

As mentioned in chapter 6.4, MISE owns 22.55% of the share capital of TEM, which in turn holds

a single shareholding of 48.4% of the capital of the motorway concessionaire Tangenziale Esterna

S.p.A.(hereinafter “TE”), responsible for the design, construction and management of the Milan

East Outer Bypass (hereinafter “TEEM”), entrusted to it under a concession by public tender with a

negotiated project financing procedure. Following the awarding of the tender on 27 March 2009,

the Consolidated Agreement was signed with the Awarding Body CAL, the content of which was

subsequently supplemented and amended: the new Agreement signed on 29 July 2010 became fully

effective on 22 November 2010.

The TEEM motorway route has a length of 32 km, from Melegnano (A1 Milan - Bologna

motorway) to Agrate Brianza (A4 Milan - Venice motorway). Together with the motorway section,

important work was also carried out on the ordinary provincial and municipal roads, for a total of

38 km of associated newly constructed road works and 15 km of upgraded existing roads.

On 11 June 2012, work began on the construction of the works, while the entry into operation of the

motorway infrastructure took place for a first section on 23 July 2014 and for the entire project on

16 May 2015. The duration of the Concession is set at fifty years starting from the entry into

operation of the entire motorway link.

In 2019, coinciding with the expiry of the first regulatory period, the application for the revision of

the EFP and Additional Agreement no. 3 was formally initiated. On 18 July 2022, the Court of


	FNM Group


Financial Report as at 31 December 2022	page 31

Auditors proceeded with the registration of Interministerial Decree no. 169 of 1 June 2022, which

approved Additional Agreement no. 3 to the Concession Agreement, signed on 22 December 2021

by Tangenziale Esterna and the Awarding Body CAL. With the registration of the Court of

Auditors, the long process of updating the EFP which began in 2019 was therefore concluded and

the investee company was able to have the toll rate increases for 2022 and 2023 recognised,

respectively equal to 4.34% as of 1 August 2022 (Interministerial Decree no. 553 of 31 December

2021) and 4.34% as of 1 January 2023 (Interministerial Decree no. 438 of 30 December 2022).

------ o ------

It should be noted that, as a result of the valuation using the equity method, the contribution of the

jointly controlled companies Trenord (and its associated company TILO), NORD ENERGIA (and

its subsidiary CMC Mesta), NordCom, Omnibus Partecipazioni and the associated companies DB

Cargo, Busforfun, SportIT, APL and Tangenziali Esterne di Milano has no impact on the individual

items of the consolidated statement of financial position and the consolidated income statement,

with the exception of the items “Investments” and “Net profit of companies measured with the

equity method”, respectively.

7INFORMATION FOR INVESTORS

FNM is a joint-stock company listed since 1926 on the Euronext Milan market (EXM, formerly

Mercato Telematico Azionario - MTA) organised and managed by Borsa Italiana.

The FNM share is also present in the general indexes of the Italian Stock Exchange (FTSE Italia All

Share, FTSE Italia All Share Capped and FTSE Italia Small Cap) and is part of the FTSE Italy

Travel and Leisure super sector.


Market on which the shares are listed	EXM (ex. MTA)
ISIN Code	IT0000060886
Ticker	FNM

7.1THE MACROECONOMIC SCENARIO IN 20228

During 2022, the international economic environment was characterised by a high degree of

uncertainty, impacted initially by the spread of the COVID-19 Omicron variant, more contagious

but less severe than its predecessors, which resulted in a gradual easing of the pandemic over the

course of the first half of the year. 2022 was also affected by rising geopolitical tensions


	FNM Group


Financial Report as at 31 December 2022	page 32

8 Sources: Economic Bulletin 2, 3 and 4/2022, 1/2023, Istat, Ance, Factset, Ministry of Environment and Energy Security

culminating in Russia's invasion of Ukraine and the restrictive orientation of monetary policies

aimed at limiting inflation.

The various shocks that struck the global economy dampened the pace of global GDP growth,

which came to +3.3%. The global economy was also affected by the health restrictions imposed in

China to control new pandemic outbreaks and the recession in the housing sector, which led to a

sharp slowdown in China's GDP growth rate. As regards economic activity in the Eurozone, the

macroeconomic projections formulated in December 2022 by Eurosystem experts forecast annual

real GDP growth of +3.4% in 2022, mostly due to the strong recovery over the summer. Italy's

GDP is expected to grow at a sustained pace in 2022 (+3.9%) driven by the trend in domestic

demand, thanks to the high level of private savings accumulated in past years.

Starting at the end of February, the Russian invasion of Ukraine caused sharp rises in the prices of

several commodities. According to ANCE data, the price of reinforcing bars rose by +40.2%

compared to the same period last year, after +54.1% in 2021, reaching an annual increase of +111%

in May 2022 and then gradually falling back over the following months. Similarly, bitumen also

recorded a price increase of +37.6% in the period under review, although the price is beginning a

slight decline from the peaks reached in Q1 2022. The impact was particularly strong in the natural

gas market - quickly transferring to electricity prices - due to the increased relevance of

infrastructure constraints and the European Union's high dependence on imports from Russia to

cover its energy needs. In addition, strategic considerations led many European states to embark on

an accelerated path of reducing oil and gas imports from Russia.

In particular, the price of European natural gas traded on the Dutch Title Transfer Facility (TTF)

market was extremely volatile, reaching an all-time high of EUR 345.7 per megawatt-hour

following the announcement that the taps would be closed on the NordStream pipeline. Efforts to

secure alternative non-Russian gas supplies, particularly mild weather conditions, and European

storage facilities close to full capacity in mid-November led to a sharp drop in gas prices in Europe,

close to the values recorded in 2021. As regards the Italian market specifically, the VTP index - the

main reference in Italy for defining the wholesale gas price - shows a similar trend: the average gas

price was around EUR 1.2 per cubic metre in December 2022, basically stable compared to

December 2021.


	FNM Group


Financial Report as at 31 December 2022	page 33

Source: FactSet

A similar trend, albeit less pronounced, can be seen in the price of oil (the average Brent price was

USD 99.8 per barrel in 2022 vs. USD 70.8 per barrel in 2021) which, together with the EUR/USD

exchange rate trend, drove fuel prices upwards: the price of automotive diesel was around EUR 1.7

per litre in December 2022 (a trend that takes into account the Government's mitigating measures

such as excise duty cuts) compared to EUR 1.6 per litre at the end of 2021.


	FNM Group


Financial Report as at 31 December 2022	page 34

Source: Ministry of Environment and Energy Security, Energy and Mining Statistics

Inflation, already on the rise since 2021, accelerated rapidly on a global scale, also due to the

indirect effects of the energy shock on other goods and services: for 2022, the change in the HCPI

harmonised consumer price index is strongly influenced by energy price trends (+35%) and

amounted to +8.7%.

As regards the labour market, the number of employed persons as well as total hours worked

returned to the levels observed at the end of 2019: the employment rate in November stood at

60.3%, while unemployment stood at 7.8%. Contractual wage trends, excluding one-off

components, remained moderate, reflecting the multi-year duration of national collective

agreements and the limited impact of automatic wage indexing mechanisms. The agreements signed

in 2022 (including the renewal of the National Collective Labour Agreement for road, rail and tram

workers) resulted in average increases of between 2% and 3%.

The rapid rise of inflation to extraordinarily high levels and a faster-than-expected post-pandemic

recovery led central banks to begin to phase out their monetary stimulus measures, resulting in a net

contraction of security purchases and an increase in the cost of money:

•the Federal Reserve raised the reference rate (federal funds rate) target range by 25 basis points

in March, followed by a series of consecutive hikes bringing the target rate to a level between

4.25% and 4.5% (the tightest monetary policy action since the early 1990s). The plan to reduce


	FNM Group


Financial Report as at 31 December 2022	page 35

its budget was also announced, marking a sharp change from the strongly expansionary trend

of the past decade;

•the European Central Bank started the process of normalising monetary policy, gradually

ending its net purchases of financial assets and announcing from July onwards a phase of

raising official rates. Accordingly, the interest rates on the main refinancing operations,

marginal refinancing transactions and deposits at the central bank will be raised to 3.00%,

3.25% and 2.50% respectively, effective as of 8 February 2023. In view of the risks for

financial stability, the ECB also announced its intention to implement a new instrument to

counter market fragmentation (the “anti-spread shield”).

The shift in monetary policy caused a rapid rise in medium- and long-term rates in European

markets. The 5- and 10-year rates rose by 354 and 345 basis points respectively compared to

December 2021. Together with increasing uncertainty in the international scenario, the rise in rates

and the reduction in official purchases by the ECB led to a further expansion of the BTP-Bund

spread, which stood at around 210 basis points at the end of December. The euro depreciated

sharply against the dollar, reflecting the faster reorientation of monetary policy in the United States

and reaching its lowest levels in September, to then return to parity at the end of the year.

7.2OUTLOOK 20239

According to projections published by the ECB in December, Eurozone GDP is expected to grow

by 0.5% in 2023, and thereafter by 1.9% in 2024 and 1.8% in 2025. Compared to the September

projections, the outlook for the GDP growth rate was revised upwards by 0.3 percentage points for

2022, due to the better-than-expected data in the summer, and downwards by 0.4 percentage points

for 2023, while it is unchanged for 2024. On the other hand, the updated projections for the Italian

economy published by the Bank of Italy estimate a GDP that, after an increase of nearly 4% in

2022, will slow its rate of growth over the next three years, coming to 0.6% in 2023 and 1.2% in

2024-2025. Inflation is expected to fall to 6.5% in 2023 and more decisively thereafter, to 2% in

2025. Wage trends should accelerate moderately in 2023, partly mitigated by protracted negotiation

processes in some private service sectors, where the share of employees awaiting renewals remains

high.

Last November - following the achievement of the 45 targets and objectives set out in the National

Recovery and Resilience Plan (NRRP) for the first half of last year - Italy received EUR 21 billion


	FNM Group


Financial Report as at 31 December 2022	page 36

9 ECB (December 2022) - Eurosystem staff macroeconomic projections for the euro area, Bank of Italy (January 2023)

- Economic Bulletin 1/2023

(EUR 10 billion in grants and EUR 11 billion in loans) relating to the second tranche of NRRP

funds, bringing the total funding received so far to almost EUR 67 billion. By virtue of the

achievement of the 55 targets and objectives for the second half of the year, on 30 December 2022

the Ministry of Economy and Finance sent the European Commission the request for the payment

of the third instalment of the resources provided under the plan; the disbursement of the amount

due, equal to EUR 19 billion, will take place at the end of the assessment process in the coming

months. In the first half of 2023, 27 actions are planned, which will need to be completed before the

fourth instalment can be paid.

In December, the European Parliament and the EU Council reached an initial agreement on

REPowerEU financing, the funds of which may be used in national plans to respond to the energy

crisis; the agreement calls for the plan to be fuelled mainly by unused loans from the Next

Generation EU programme. The possibility of transferring additional resources from other

European funds is also established. Once REPowerEU has received final approval, Member States

will be able to receive additional resources by including a special chapter in their national plan.

7.3EVOLUTION OF MOBILITY DEMAND

With regard more specifically to the transport sector, activity at the beginning of the year was

affected by the rise in infections associated with the spread of the COVID-19 Omicron variant.

However, the improvement in the epidemiological scenario, and the concomitant relaxation of

restrictions, generally supported both demand for local public transport and mobility by private

means. Indeed, according to the quarterly report published by the Observatory on Mobility Trends

prepared by the MIMS10, the transport sector showed strong growth in demand for essentially all

modes of transport in 2022.

A summary of the mobility demand trend during 2022 compared to the corresponding period in

2021 is provided below:


	FNM Group


Financial Report as at 31 December 2022	page 37

10 Quarterly report of the Observatory on Mobility Trends prepared by the Technical Mission Structure of the Ministry of Infrastructure and

Sustainable Mobility (MIMS), March 2023.

With regard to road transport, the traffic volumes of light vehicles on the ANAS network and on

the motorway network under concession showed a positive trend when compared with 2021,

reflecting the full resumption of work activities and the lifting of travel restrictions. In contrast, the

traffic recorded in the second half of the year did not show similar increases since the recovery of

traffic was already under way in the same months of 2021. A comparison with the pre-pandemic

period shows that traffic levels are still 5% and 3% lower than in 2019, respectively. On the other

hand, the traffic volumes of heavy vehicles showed an acceleration of travel in 2022, respectively

4% higher on the ANAS network and 3% higher on the motorway network, now stably above 2019

levels.

Rail transport - High-Speed (HS), Intercity (IC) and Intercity Night (ICN) - against a decline in

the supply of HS services of 10% compared to 2019, showed a strong yearly rebound in passenger

traffic, especially in the first part of the year, but was still 16% lower than in 2019. Regarding IC/


	FNM Group


Financial Report as at 31 December 2022	page 38

ICN services, despite a stable offer due to the regulated nature of the segment, the number of

passengers was still 10% lower than in 2029, showing a less marked recovery than HS.

As concerns local public transport trends, in particular with regard to regional rail transport, the

recovery in travel that had already begun in 2021 continued in 2022, stabilising however at levels

still 21% lower than in 2019. This trend is influenced by many factors, including the type of routes

served and passengers, also in view of the changing economic environment and changes in traveller

habits (e.g. the introduction and institutionalisation of smartworking policies). Finally, it is

significant to point out that, except for the period coinciding with the lockdown, there was no phase

of reduction in kilometres travelled, in accordance with Ministerial Decrees, in order to ensure

social distancing and avoid congestion.

7.4SHAREHOLDINGS

As at 31 December 2022 the share capital amounted to EUR 230,000,000.00, corresponding to

434,902,568 ordinary shares with no par value.

At the same date, to the best of the Company’s knowledge based on the communications received

in accordance with article 120 of the Consolidated Law on Finance (“TUF”) and other available

information, the shareholder structure of the Company shows the following material shareholdings:


	FNM Group


Financial Report as at 31 December 2022	page 39

The graph shows the composition of shareholders who own stakes of over 5% of the total share

capital and who have voting powers. The Lombardy Region is the majority shareholder with a

57.57% shareholding. A further 14.74% of the share capital is owned by Ferrovie dello Stato

Italiane S.p.A., while the remaining shares are owned by private parties, as the Company is listed

on the stock exchange.

7.5FNM STOCK PERFORMANCE

The FNM share price at 31 December 2022 was EUR 0.42, which corresponds to a market

capitalisation of EUR 184.6 million, showing a decrease of -30.9% compared to the same period in

2021. During the period under review, however, the stock was characterised by high price volatility,

reaching a high of EUR 0.64 and a low of EUR 0.41 at 16 December 2022. The average price for

the year was EUR 0.49, corresponding to an average market capitalisation of EUR 211.1 million.

Average daily trading of the shares amounted to approximately 194.1 thousand shares traded daily.

In the period under analysis, a total of 49.9 million shares were traded, i.e. approximately 11.5% of

the share capital, a value lower than the previous year (103.1 million shares, amounting to 24.0% of

the share capital).

The share price performance during the current financial year is shown below:


	FNM Group


Financial Report as at 31 December 2022	page 40


Key share and stock market data for 2022

Closing price on 30/12/2022	EUR 0.42
Number of ordinary shares (million)	434.9
Market capitalisation (EUR million)	EUR 184.6

Average price	EUR 0.49
Maximum price	EUR 0.64
Minimum price	EUR 0.41

Average volumes traded (thousand)	194.1
Maximum volumes traded (thousand)	2,220.9
Minimum volumes traded (thousand)	8.8

Source: FactSet Prices

Financial conditions in international markets became tenser overall, affected by high inflation, the

accelerating normalisation of monetary policy by the major central banks and downside risks to the

international economy. After a broadly positive start to the year for the markets, favoured by

improving corporate earnings and positive sentiment about the easing of pandemic-related

restrictions, prices started to fall in correspondence with the initial war-related tensions, while at the

same time registering a significant increase in volatility. From mid-October to mid-December, share

prices rose in all major markets, returning to mid-2022 levels.

As regards the Italian market, in the first half of 2022 the FTSE Italia All Share fell by 14.1% since

the start of the year, more than the other major Eurozone economies (Stoxx Europe 600 index


	FNM Group


Financial Report as at 31 December 2022	page 41

-12.9%).Similar trends were recorded for the small cap indexes. Over the same period, FNM's share

price fell by 30.9% from EUR 0.61 per share at 31 December 2021 to EUR 0.42 per share at 31

December 2022. In the second half of the year, the share price substantially stabilised around an

average of EUR 0.44 per share, not benefiting from the recovery in market sentiment in the final

quarter of 2022.

The FNM stock performance compared to the main reference indexes in 2022 is shown below:

Source: FactSet Prices

7.6RATING

The Company's creditworthiness has been evaluated as investment grade by two leading rating

agencies, with Fitch assigning it a rating of BBB with stable outlook and Moody’s assigning it a

rating of Baa3 with stable outlook, both unchanged compared to 2021.

Both ratings also apply to the EMTN Programme (Euro Medium Term Note Programme), the

constitution of which was approved on 16 September 2021, and the EUR 650 million bond issue

placed on 13 October 2021.

For further information, please refer to the notes published on the Agencies' websites, and in the

Investor > Debt and Credit Rating > Credit Rating section of the Group's website.


	FNM Group


Financial Report as at 31 December 2022	page 42

8CONSOLIDATED OPERATING AND FINANCIAL PERFORMANCE

8.1ECONOMIC DATA SUMMARY

The reclassified income statement for the year is shown below, compared with that of 2021. For the

sake of a complete disclosure, in the following reclassified income statement the items “costs of

construction services - IFRIC 12” and “revenues from construction services - IFRIC 12”, relating

exclusively to the concessionaire companies FERROVIENORD and MISE in which, in application

of IFRIC 12, the amounts of the funded investments made during the year and the corresponding

contributions are recognised, are stated net in “Other revenues and income”. Comments on the

gross values of investments are provided in section 8.3.

The item “Adjusted EBITDA” was determined by excluding non-recurring items from the previous

items in the income statement, which were reclassified under “non-ordinary income and expenses”.

As indicated in paragraph 6.4 below, the twelve-month period of 2021 includes the economic

effects arising from the line-by-line consolidation of MISE and its subsidiary Milano Serravalle

Engineering from 26 February 2021.


Amounts in millions of euros	2022	2021	Change	Change %
Revenues from sales and services	567.2	483.3	83.9	17.4 %
Other revenues and income	38.2	30.7	7.5	24.4 %
TOTAL REVENUES AND OTHER INCOME	605.4	514.0	91.4	17.8 %
Operating costs	(250.2)	(207.0)	(43.2)	20.9 %
Personnel costs	(162.1)	(153.5)	(8.6)	5.6 %
ADJUSTED EBITDA	193.1	153.5	39.6	25.8 %
Non-ordinary Income and Expenses	—	0.4	(0.4)	-100.0 %
EBITDA	193.1	153.9	39.2	25.5 %
Depreciation, amortisation and write-downs	(92.0)	(78.0)	(14.0)	17.9 %
EBIT	101.1	75.9	25.2	33.2 %
Financial income	8.7	2.9	5.8	N/A
Financial expenses	(12.8)	(24.3)	11.5	N/A
NET FINANCIAL INCOME	(4.1)	(21.4)	17.3	N/A
EARNINGS BEFORE TAX	97.0	54.5	42.5	N/A
Income taxes	(28.2)	(17.1)	(11.1)	N/A
ADJUSTED COMPREHENSIVE INCOME	68.8	37.4	31.4	N/A
Profit of companies measured with the Equity method	0.8	5.7	(4.9)	N/A
COMPREHENSIVE INCOME	69.6	43.1	26.5	N/A
PROFIT ATTRIBUTABLE TO NON-CONTROLLING INTEREST	1.1	2.3	(1.2)	N/A
COMPREHENSIVE GROUP INCOME	68.5	40.8	27.7	N/A


	FNM Group


Financial Report as at 31 December 2022	page 43

In order to better represent the changes in the year, the pro-forma reclassified income statement is

shown below, considering for 2021 the consolidation of MISE from 1 January 2021, rather than as

of 26 February 2021.

The income statement is shown below with only the pro-forma balances for 2022 and the

comparison year 2021.


Amounts in millions of euros	2022	2021 PRO-FORMA	Change	Change %
Revenues from sales and services	567.2	511.7	55.5	10.8 %
Other revenues and income	38.2	32.0	6.2	19.4 %
TOTAL REVENUES AND OTHER INCOME	605.4	543.7	61.7	11.3 %
Operating costs	(250.2)	(217.4)	(32.8)	15.1 %
Personnel costs	(162.1)	(161.0)	(1.1)	0.7 %
ADJUSTED EBITDA	193.1	165.3	27.8	16.8 %
Non-ordinary Income and Expenses	—	0.4	(0.4)	-100.0 %
EBITDA	193.1	165.7	27.4	16.5 %
Depreciation, amortisation and write-downs	(92.0)	(79.7)	(12.3)	15.4 %
EBIT	101.1	86.0	15.1	17.6 %
Financial income	8.7	4.0	4.7	N/A
Financial expenses	(12.8)	(25.3)	12.5	N/A
NET FINANCIAL INCOME	(4.1)	(21.3)	17.2	N/A
EARNINGS BEFORE TAX	97.0	64.7	32.3	N/A
Income taxes	(28.2)	(19.1)	(9.1)	N/A
ADJUSTED COMPREHENSIVE INCOME	68.8	45.6	23.2	N/A
Profit of companies measured with the Equity method	0.8	5.1	(4.3)	N/A
COMPREHENSIVE INCOME	69.6	50.7	18.9	N/A
PROFIT ATTRIBUTABLE TO NON-CONTROLLING INTEREST	1.1	2.3	(1.2)	N/A
COMPREHENSIVE GROUP INCOME	68.5	48.4	20.1	N/A


	FNM Group


Financial Report as at 31 December 2022	page 44

The comments below refer to the pro-forma income statement, which considers both years on a

like-for-like basis.

The revenues from sales and services, inclusive of public grants, recorded a net increase of EUR

55.5 million, i.e. approximately 10.8%, for the following reasons:

–motorway toll revenues of EUR 255.0 million (EUR 225.7 million in 2021) increased by

EUR 29.3 million, or 13.0% compared to 2021, mainly due to the 2.62% toll increase applied as of

January 2022 on the motorway network under concession, as well as the traffic trend (+12.35%)

and its composition between light and heavy vehicles;

–revenues related to design and construction supervision for works on the railway network

increased by EUR 4.7 million;

–revenues from ticketing on public road transport increased by EUR 6.6 million, in relation

to the gradual regression of the COVID-19 emergency and the associated easing of the restrictions

on movement, going from EUR 31.9 million in 2021 to EUR 27.8 million during the year;

–revenues from the rental of rolling stock increased by EUR 3.5 million mainly due to higher

revenues on ROCK, POP, Caravaggio and Donizetti trains, for EUR 3.8 million, on TILO trains

rented to Trenord, for EUR 2.8 million, and on DE 520 locomotives, for EUR 0.2 million, partially

offset by the reduction in consideration following the renewal of the operating lease agreement with

Trenord for CSA trains, for EUR 1.8 million, and TAF, for EUR 1 million.

–income from service area concessions benefited not only from the positive traffic trend but

also from the renewal of several contracts, with more favourable economic conditions, resulting in

an increase of EUR 3.1 million, equal to a 66.8% increase compared to 2021;

–the fee from the Infrastructure Management Public Service Contract decreased by EUR 21.2

million, from EUR 84.9 million to EUR 63.7 million. The change is mainly due to the different way

in which the network access fee is charged, which, as a result of Regional Government Decree no.

X/56356 of 30 November 2021, means that the access fee is paid directly by the railway companies

(thus rising from EUR 2.4 million to EUR 23.6 million, an increase of EUR 21.3 million compared

to 2021) and no longer as a consideration for the Public Service Contract;

–revenues from public contracts and grants relating to the public road transport service

remained substantially unchanged due to the combined effect of the Veneto Region's recognition of

two adjustments to the per-kilometre fee recognised against the kilometres travelled, which offset

the decrease in offsetting measures (EUR -4.2 million) relating to the loss of LPT traffic revenues


	FNM Group


Financial Report as at 31 December 2022	page 45

as a result of the COVID-19 emergency11. Specifically with regard to adjustments, the first comes

from a one-off contribution by the Veneto Region, amounting to EUR 0.9 million, to offset the

increase in the cost of fuels (Regional Government Decree 1012/2022), and the second was

obtained as a result of the allocation of additional resources by the State to the National Transport

Fund (about EUR 100 million/year for the LPT sector from 2022 to 2025), amounting to about

EUR 1.3 million.

Other revenues and income showed a net increase of EUR 6.2 million compared to 2021,

attributable, for EUR 3.3 million, to higher income from the recovery of general expenses related to

construction services for the renewal of rolling stock and the modernisation of railway

infrastructure, in relation to higher investments compared to the comparative year and, for EUR 2.4

million, to the higher recovery of management costs of the Agrate and Terrazzano barriers,

recoveries of service area maintenance expenses and income from the management of the

interconnected network.


	FNM Group


Financial Report as at 31 December 2022	page 46

11 1) Law no. 77 of 17 July 2020 (art. 200 par. 1, “Relaunch Decree”): “In order to support the local and regional public passenger

transport service subject to public service obligation following the negative effects deriving from the COVID-19 epidemiological

emergency, a fund is established with the Ministry for Infrastructure and Transport with an initial amount of EUR 500 million for the

year 2020, to offset the reduction of fee revenues from passengers in the period from 23 February 2020 to 31 December 2020

compared to the average fee revenues recorded in the same period of the previous two years…”.

2) Law no. 126 of 13 October 2020 (art. 44, “August Decree”): “In order to support the local and regional public passenger transport

sector subject to a public service obligation and allow the provision of local public transport services in compliance with the

measures to contain the spread of COVID-19 referred to in the decree-law no. 19 of 25 March 2020, converted, with amendments, by

law no. 35 of 22 May 2020, and the decree-law no. 33 of 16 May 2020, converted, with amendments, by law no. 74 of 14 July 2020,

the endowment of the fund referred to in paragraph 1 of article 200 of the decree-law no. 34 of 19 May 2020, converted, with

amendments, by law no. 77 of 17 July 2020, increased by EUR 400 million for the year 2020. These resources can be used, as well

as for the same purposes referred to in the aforementioned article 200, also for the financing, within the limit of EUR 300 million, of

additional local and regional public transport services, also intended for students, necessary to meet the transport needs resulting

from the implementation of containment measures deriving from the application of the Guidelines for information to users and the

organisational methods for containing the spread of COVID-19 in the field of public transport, and the Guidelines for dedicated

school transport, where the aforementioned services in the period prior to the spread of COVID-19 had reached more than 80 percent

capacity…”.

3) Law no. 176 of 18 December 2020 (art. 22-ter, “Relief-Bis Decree”): “In article 200, paragraph 1, of decree-law no. 34 of 19 May

2020, converted, with amendments, by law no. 77 of 17 July 2020, the words: “during the period from 23 February 2020 to 31

December 2020” are replaced by the following: “during the period from 23 February 2020 to 31 January 2021.” 2. For the purposes

of paragraph 1, the endowment of the fund provided by article 200, paragraph 1, of decree-law no. 34 of 19 May 2020, converted,

with amendments, by law no. 77 of 17 July 2020, shall be increased by EUR 390 million for the year 2021. These resources may be

used not only for the same purposes as those set forth in the aforementioned article 200, but also for the financing, within the limit of

EUR 190 million, of additional local and regional public transport services, also intended for students, needed in 2021 to meet the

transport needs resulting from the implementation of the containment measures where the aforementioned services in the period prior

to the spread of the COVID-19 had a higher capacity than that provided for by the decree of the President of the Council of Ministers

in force at the time of the issuance of the decree referred to in paragraph 3...”

4) Decree-Law no. 41 of 22 March 2021 (art. 29, “Support Decree”): “In order to support the local and regional public passenger

transport sector subject to a public service obligation and allow the provision of local public transport services in compliance with

the measures to contain the spread of COVID-19 referred to in article 2 of decree-law no. 19 of 25 March 2020, converted, with

amendments, by law no. 35 of 22 May 2020, the endowment of the fund referred to in paragraph 1 of article 200 of decree-law no. 34

of 19 May 2020, converted, with amendments, by law no. 77 of 17 July 2020, increased by EUR 800 million for the year 2021.

These resources are set aside to offset the reduction in fee revenues relating to passengers suffered by the entities referred to in art.

200, paragraph 2 of decree-law no. 34 of 19 May 2020, converted, with amendments, by law no. 77 of 17 July 2020 in the period

from 23 February 2020 until the end of the application of the limitations on the maximum capacity of the vehicles used for public

transport services identified, with the measures referred to in article 2 of decree-law no. 19 of 25 March 2020, converted, with

amendments, by law no. 35 of 22 May 2020, compared to the average fee revenues relating to passengers recorded in the same

period of the two-year period 2018-2019”.

Total revenues and other income thus rose by 11.3% and can be broken down into the four business

areas as follows:


Amounts in millions of euros	2022	2021 PROFORMA	Change	Chg %

Rosco & Services	82.1	77.1	5.0	6.5 %
Railway infrastructure	144.4	131.8	12.6	9.6 %
Road passenger mobility	133.5	124.0	9.5	7.7 %
Motorways	280.7	242.6	38.1	15.7 %
Intercompany eliminations	(35.3)	(31.8)	(3.5)	11.0 %

Total	605.4	543.7	61.7	11.3 %

Operating costs recorded a net increase of EUR 32.8 million (15.1%) for the following main

reasons:

–diesel and methane costs, at EUR 20.0 million, increased by EUR 8.0 million in relation to

the increase in the purchase price recorded during the year and the increase in kilometres travelled;

–an increase of EUR 6.1 million in expenses of design, project management and safety

coordination activities outsourced to third parties, of which EUR 4.6 million for railway

infrastructure maintenance and EUR 1.0 million for motorway infrastructure maintenance;

–increase in utilities due to price increases, of EUR 4.9 million;

–increase of EUR 3.2 million in motorway traffic-related costs (collection costs and

concession fee);

–increase in provisions for cyclical maintenance due to the entry into service of the ROCK,

POP, Caravaggio and Donizetti trains, in the amount of EUR 2.1 million;

–increase in insurance costs due to the renewal of policies at more onerous conditions, in the

amount of EUR 1.6 million.

Personnel costs, which increased from EUR 161.0 million to EUR 162.1 million, are substantially

in line with the 2022 comparative period due to the combined effect of higher costs due to the

increase in the average number of employees (+12 FTEs), partially offset by lower provisions for

the CCNL (National Collective Bargaining Agreement) renewal fund amounting to EUR 1.1

million, and by the reimbursement for the higher social security charges incurred by companies in

the local public transport sector as a supplement to sickness benefits for the years 2015, 2016, 2017

and 2018, amounting to EUR 1.9 million.


	FNM Group


Financial Report as at 31 December 2022	page 47

Adjusted EBITDA (excluding non-ordinary items), amounting to EUR 193.1 million, increased by

16.8% and is broken down into the four business segments as follows:


Amounts in millions of euros	12 MONTHS 2022	12 MONTHS 2021	Change	Chg %

Rosco & Services	45.5	46.2	(0.7)	-1.5 %
Railway infrastructure	7.7	5.1	2.6	51.0 %
Road passenger mobility	11.9	12.7	(0.8)	-6.3 %
Motorways	128.0	101.3	26.7	26.4 %

Total adjusted EBITDA	193.1	165.3	27.8	16.8 %

Non-ordinary income/expenses for the comparative year amounted to EUR 0.4 million and were

attributable to income from the release of a provision for risks following the partial closure of a

dispute. This income of EUR 2.2 million was partially offset by development project costs of EUR

1.8 million, mainly attributable to costs incurred for the MISE acquisition.

Depreciation, amortisation and write-downs showed a net increase of EUR 12.3 million,

primarily due to the impairment of goodwill referring to the subsidiary ATV and the right of use of

E-Vai, amounting to EUR 2.7 million and EUR 2.9 million, respectively.

Comprehensive EBIT amounted to EUR 101.1 million, compared with EUR 86.0 million in 2021,

a net increase of EUR 15.1 million compared to the previous year.

The comprehensive net financial loss in 2022 was EUR -4.1 million compared to a loss of EUR

-21.3 million in 2021, due to lower financial expenses in the current period mainly arising from the

bond loan compared to those relating to the Bridge Loan recognised in the comparative period.

Also, it should be noted that income of EUR 4.2 million related to the change in the discount rate

for the motorway infrastructure upgrade and rolling cyclical maintenance provision.

Earnings before taxes, that do not include the result of the companies accounted for using the

equity method, amounted to EUR 97.0 million, an increase compared to EUR 64.7 million in 2021.

Income taxes, amounting to EUR 28.2 million, increased by EUR 9.1 million compared to 2021

due to the Group’s higher taxable income.


	FNM Group


Financial Report as at 31 December 2022	page 48

The profit/(loss) of companies valued by the equity method recorded a profit of EUR 0.8 million,

compared with a profit of EUR 5.1 million in 2021, mainly due to the trend in the result of the

investees Trenord and APL. This item is broken down as follows:


Amounts in thousands of euros	2022	2021	Change
Trenord S.r.l. *	(3,553)	57	(3,610)
Autostrada Pedemontana Lombarda	(402)	626	(1,028)
Tangenziali Esterne di Milano S.p.A.	(1,383)	(1,866)	483
NORD ENERGIA S.p.A. in liquidation**	1,705	2,068	(363)
DB Cargo Italia S.r.l.	2,774	2,356	418
Omnibus Partecipazioni S.r.l. ***	1,711	1,937	(226)
NordCom S.p.A.	231	453	(222)
Busforfun.Com S.r.l.	(4)	(550)	546
SportIT	(262)	(9)	(253)
Result of companies valued at equity	817	5,072	(4,255)

* includes the result of TILO SA

** includes the result of CMC MeSta SA

*** includes the result of ASF Autolinee S.r.l.

For more information on the results of the investees Trenord and APL, please refer to what is set

forth in paragraph 9, “Operating performance of business segments”, in the sections dedicated to

Ro.S.Co. & Services and Motorways, respectively.

In the FY 2022, as in the comparative year 2021, there were no profits from discontinued

operations.

The consolidated comprehensive Net Result of the year 2022 is a profit of EUR 69.6 million,

versus a profit of EUR 50.7 million in 2021, due to the effects described above essentially deriving

from the regression of the epidemic emergency.

8.2RECLASSIFIED STATEMENT OF FINANCIAL POSITION

Below is the reclassified statement of financial position as at 31 December 2022, compared with

that as at 31 December 2021.

Please note that, in order to improve the representation of balance sheet trends, as of the first

quarter of 2022 the net financial position for funded investments includes only the funded

investment items (cash and financial payables) relating to the “Rolling Stock Purchase Programme

for the regional rail service for the years 2017 - 2032 and integration of supplies of the rolling stock

purchase programme as per Regional Government Decree no. X/4177 of 16/10/2015” (hereinafter

the “2017 - 2032 Rolling Stock Programme”), illustrated in detail in paragraph 6.2 of the


	FNM Group


Financial Report as at 31 December 2022	page 49

management report at 31 December 2021, which should be referred to for more information.

Likewise, in net working capital, the items “Other receivables - Rolling Stock 2017 - 2032”,

“Receivables for funded investments - Rolling Stock 2017 - 2032” and “Trade payables - Rolling

Stock 2017 - 2032”, again relating to funded investments in the renewal of rolling stock, have been

shown separately. These reclassifications are also shown for the comparative year.


Amounts in millions of euros	31/12/2022	31/12/2021	Change
Inventories	12.1	9.5	2.6
Trade receivables	153.0	133.1	19.9
Other current receivables	85.8	83.2	2.6
Current financial assets	8.9	7.8	1.1
Receivables for funded investments	47.6	39.8	7.8
Trade payables	(166.6)	(168.3)	1.7
Other current payables and current provisions	(147.4)	(120.1)	(27.3)
Operating Net Working Capital	(6.6)	(15.0)	8.4
Other receivables - Rolling Stock 2017 - 2032	64.0	47.5	16.5
Receivables for funded investments - Rolling stock 2017 - 2032	201.7	98.3	103.4
Trade Payables - Rolling Stock 2017 - 2032	(304.1)	(204.0)	(100.1)
Net Working Capital Funded Investments	(38.4)	(58.2)	19.8
Net Working Capital Total	(45.0)	(73.2)	28.2
Fixed assets	840.8	748.4	92.4
Equity investments	171.8	158.7	13.1
Assets and liabilities held for sale	14.9	—	14.9
Non-current receivables	175.1	241.3	(66.2)
Non-current payables	(31.1)	(25.9)	(5.2)
Provisions	(95.0)	(123.8)	28.8
NET INVESTED CAPITAL	1,031.5	925.5	106.0

Equity	306.9	228.3	78.6
Adjusted Net Financial Position (Debt / -Cash)	766.9	755.6	11.3
Net Financial Position for funded investments (cash)	(42.3)	(58.4)	16.1
Total net financial position (Debt / -Cash)	724.6	697.2	27.4
TOTAL SOURCES	1,031.5	925.5	106.0

Net operating working capital, net of changes for funded investments, increased by EUR 8.4

million as a result of the following changes:

–trade receivables increased by EUR 19.9 million, mainly due to the increase in receivables

for interconnection relations with interconnected motorway companies;

–receivables for funded investments include receivables for funded investments in railway

infrastructure, an increase of EUR 7.8 million due to the fact that the progress on orders for

the renewal of rolling stock was greater than the advances granted by the Lombardy Region;

–other current payables increased as a result of the reclassification from non-current to

current provisions relating to cyclical maintenance and motorway renewal provisions, as

well as the higher payable deriving from the Group's tax consolidation.


	FNM Group


Financial Report as at 31 December 2022	page 50

As concerns net working capital for funded investments:

–other receivables - Rolling Stock 2017 - 2032, amounting to EUR 64.0 million, increased

by EUR 16.5 million in relation to the advance payment made for the start of a new project

for the renewal of rolling stock with borrowed funds, amounting to EUR 83.7 million,

partially offset by the progress made on projects already started, amounting to EUR 67.3

million;

–receivables for funded investments - Rolling Stock 2017 - 2032 increased by EUR 103.4

million due to the recognition of the progress on the investments made, measured according

to the percentage of completion and not yet collected during the period, amounting to EUR

425.4 million; collections from the Awarding Body for the year amounted to EUR 324.0

million;

–trade payables - Rolling Stock 2017 - 2032 rose due to the progress made on projects

during the period; this change was partially offset by the payments made amounting to EUR

341.4 million. These investments were paid with the available funds allocated by the

Lombardy Region on restricted funds, excluded from the Adjusted NFP.

The item fixed assets comprises mainly tangible assets of EUR 480.5 million, of which EUR 352.2

million pertain to rolling stock, intangible assets for EUR 340.0 million, of which EUR 332.7

million relating to the motorway infrastructure freely revertible to the awarding body (MIMS) and

EUR 20.2 million for rights of use.

The value of equity investments was up by EUR 13.1 million, mainly due to the acquisition of

TEM shares, amounting to EUR 8.4 million, the result for the year of EUR 0.8 million and other

changes in the statement of comprehensive income, amounting to EUR 4.7 million.

Non-current receivables include contractual assets deriving from investments made in the

motorway network up to 31 December 2022 for EUR 77.2 million, down by EUR 67.9 million, but

not yet recognised, loans from MISE to investees for EUR 54.7 million and deferred tax assets of

EUR 32.7 million.


	FNM Group


Financial Report as at 31 December 2022	page 51

Provisions include primarily non-current provisions related to cyclical maintenance, the Motorway

Infrastructure Renewal Fund and severance pay.

Below is the breakdown of the Group's net financial position as at 31 December 2022, compared

with 31 December 2021.

In order to better represent the ability to generate cash as well as the Group NFP, an adjusted NFP

was also calculated, which excludes the effects deriving from adoption of IFRIC 12, for

investments in Rolling Stock 2017-2032 of the subsidiary FERROVIENORD:


Amounts in millions of euros	31/12/2022	31/12/2021	Change
Liquidity	(194.6)	(293.4)	98.8
Current financial debt	140.6	201.1	(60.5)
Current Net Financial Position (Debt / -Cash)	(54.0)	(92.3)	38.3
Non-current financial debt	820.9	847.9	(27.0)
Adjusted Net Financial Position (Debt / -Cash)	766.9	755.6	11.3
Net Financial Position for funded investments (Debt / -Cash)	(42.3)	(58.4)	16.1
Net Financial Position (Debt / -Cash)	724.6	697.2	27.4

As at 31 December 2022, the total net financial position was EUR 724.6 million, compared to a

balance of EUR 697.2 million as at 31 December 2021.

It should be noted that the total net financial position as at 31 December 2022 has been calculated,

also for the balance as at 31 December 2021, excluding current financial assets in order to

implement the indications of CONSOB Information Notice 5/21 of 29 April 2021, which replaced

CONSOB Communication 6064293 of July 2006.

Isolating the amount relating to funded investments (EUR 42.3 million), the Adjusted Net Financial

Position was EUR 766.9 million, compared to a balance of EUR 755.6 million at 31 December

2021.

Please also note that as at 31 December 2022 the Group has liquidity headroom of roughly EUR

123 million in uncommitted lines.

The adjusted net financial position is represented by the cash flow changes in the reference year:


	FNM Group


Financial Report as at 31 December 2022	page 52


Amounts in millions of euros	31/12/2022	31/12/2021
EBITDA	193.1	153.9
Net Working Capital	(25.5)	(38.0)
Tax paid	(18.1)	(14.8)
Financial expenses/income	(8.7)	(19.9)
Free cash flow from operations	140.8	81.2
Gross investments paid with own funds	(86.6)	(38.3)
Motorway infrastructure investments paid with own funds	(58.9)	(53.5)
Change in NWC for investments with own funds	4.3	(26.4)
Funded investments in railway infrastructure	(63.1)	(57.9)
Change in NWC for funded investments in railway infrastructure	(10.9)	22.8
Public contributions collected for railway infrastructure	58.8	37.1
Public contributions collected for motorway infrastructure	13.3	10.2
Cash flow generation	(2.3)	(24.8)
Acquisition of equity investments	(30.3)	(363.6)
Financial investments	-	(9.0)
Loan disbursement to investees	(1.0)	-
Dividends cash-in	0.9	3.9
Divestments	7.7	-
Free cash flow	(25.0)	(393.5)
Cash flow	(25.0)	(393.5)

Adjusted NFP (Debt/-Cash) INITIAL 01.01	755.6	43.8
Cash flow generation	25.0	393.5
Other changes in financial payables	(17.3)	(3.1)
IFRS 16 Effect	3.6	3.2
MISE contribution Payables to banks and financial liabilities	—	318.2
Total change in NFP	11.3	711.8
Adjusted NFP (Debt/-Cash) FINAL 31.12	766.9	755.6

The operating cash flow deriving from income management is a positive EUR 140.8 million, due

to EBITDA of EUR 193.1 million, in part negatively affected by the change in net working capital,

mainly due to the increase in receivables for interconnection relationships with other motorway

companies and receivables from public bodies for investment grants.

Net investments of approximately EUR 143.1 million were paid during the year (compared to EUR

106.0 million paid in 2021). Lastly, it should be noted that cash generation for the period was

affected by the rationalisation of MISE's shareholdings, which involved, on one hand, the

acquisition of the stake held by the Lombardy Region in Tangenziali Esterne di Milano S.p.A.

(TEM) for EUR 8.4 million, in respect of the sale by MISE and MISE Engineering of the shares

held in Autostrade Lombarde S.p.A. and Società di Progetto Brebemi S.p.A. for a total

consideration of EUR 6.3 million. The item Divestments also includes the sale of the MISE

Engineering business unit to APL, in the amount of EUR 1.4 million.

The items “Purchase of equity investments” and “Other changes in financial payables” include the

amount paid to the non-controlling shareholder of MISE, in the amount of EUR 21.9 million.


	FNM Group


Financial Report as at 31 December 2022	page 53

Existing loans at the date of approval of the financial statements:

•FNM Loan - European Investment Bank (“EIB”)

On 21 December 2017, in order to guarantee the financial coverage of the investment totalling EUR

95.1 million, pertaining to the purchase of nine 6-body electric trains to be used for the

development and enhancement of the cross-border services connected with the opening of the

Monte Ceneri base tunnel, the FNM Board of Directors approved a loan to be taken out from the

EIB. On the signing of the agreement, the EIB undertook to grant FNM financial resources for a

maximum amount of EUR 50 million, and in any event not exceeding 50% of the cost of acquiring

the rolling stock. The funding was fully utilised in the course of 2020. In particular, on 20 March

2020, the first tranche of EUR 10 million was used, and on 12 October 2020 the second tranche of

EUR 40 million.

The first tranche of the loan has a fixed rate of 0.377%, with six-year maturity and repayment plan

in constant annual instalments with the first due date on 1 February 2021.

The second tranche of the loan has a fixed rate of 0.446%, with six-year maturity and repayment

plan in constant annual instalments with the first due date on 12 October 2021.

In relation to FNM's commitments under the loan agreement, on 15 January 2021 a request was sent

to the EIB for consent to the completion of the MISE acquisition transaction and for the amendment

of the materiality thresholds of permitted extraordinary transactions and financial covenants; the

EIB granted its consent to the acquisition transaction and thus amended, as of 3 March 2021, the

financial covenants calculated on the Group's consolidated balance sheet:

•NFP/Shareholders' equity ≤ 2.25

•NFP/EBITDA ≤ 5.85

•EBITDA/Financial expenses ≥ 5.77

As a result of the consolidation of MISE, on 26 February 2021, a reduction was recorded in the

Group Shareholders’ Equity in the amount of EUR 295 million, resulting in failure to comply with

the NFP/Shareholders’ equity covenant. Consequently, the “EIB loan” was classified under current

payables to banks in compliance with international accounting standards.

In the year 2022, following the receipt of the waiver letter and the contractual amendment regarding

the NFP/shareholders’ equity financial covenant, the debt was reclassified as non-current for

instalments due beyond 12 months.


	FNM Group


Financial Report as at 31 December 2022	page 54

As a result, the EIB amended the financial covenants, calculated on the Group's consolidated

financial statements (annual and half-year), as of the monitoring date of 31 December 2021:

–NFP/Shareholders’ equity ≤ 4.5 at the calculation dates of 31 December 2021 and 30

June 2022, ≤ 3.5 at the calculation dates of 31 December 2022 and 30 June 2023, ≤ 3.0 at

the calculation dates of 31 December 2023 and 30 June 2024, ≤ 2.5 for subsequent

calculation dates;

–NFP/EBITDA ≤ 5.85;

–EBITDA/Financial expenses ≥ 5.77.

At the closing date of 31 December 2022 all financial covenants had been complied with.

•MISE Funding

As at the date of this report, the Group, through its subsidiary MISE, has the following outstanding

bank loans:

1) Loan from a pool of financial institutions (Intesa San Paolo, former UBI Banca and Banco BPM)

taken out on 13 December 2010 for a total of EUR 90 million with a duration of 15 years.

The loan has been fully drawn down and its interest rate is equal to the 6-month Euribor (without

floor) plus a margin of 2%.

The financial covenants are as follows:

–NFP/Shareholders' equity ≤ 2

–NFP/EBITDA ≤ 5.

As at 31 December 2022, the remaining amount to be repaid is EUR 22.5 million.

2) Loan from a pool of financial institutions (BNL and MPS) taken out on 13 December 2010 for a

total of EUR 150 million with a duration of 15 years.

The loan has been fully drawn down and its interest rate is equal to the 6-month Euribor (without

floor) plus a margin of 2.25%.

The financial covenants are as follows:

–- NFP/Shareholders' equity ≤ 2

–- NFP/EBITDA ≤ 5.

As at 31 December 2022, the remaining amount to be repaid is EUR 37.5 million.


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Financial Report as at 31 December 2022	page 55

3) Loan from BPER, former Banca Carige (brokered by the European Investment Bank) taken out

on 2 March 2012 for a total of EUR 20 million with a duration of 13 years. The loan has been fully

drawn down and has a fixed interest rate of 3.617%. It has no financial covenants.

As at 31 December 2022, the remaining amount to be repaid is EUR 6 million.

4) Loan from Finlombarda taken out on 19 December 2017 for a total of EUR 40 million with a

duration of 5 years.

The loan has been fully drawn down and its interest rate is equal to the 6-month Euribor (zero floor)

plus a margin of 2.50%.

The financial covenants are as follows:

–NFP/Shareholders' equity ≤ 2

–NFP/EBITDA ≤ 5.

On 19 December 2022, the loan was fully repaid when the final instalment was paid.

5) Loan from a pool of financial institutions (Intesa Sanpaolo, UBI Banca, Banco BPM, Unicredit

and BNL) taken out on 18 December 2019 for a total of EUR 150 million with a duration of 7

years.

The loan has been fully drawn down and its interest rate is equal to the 6-month Euribor (without

floor) plus a margin of 1.80%.

The financial covenants are as follows:

–NFP/Shareholders' equity ≤ 2

–NFP/EBITDA ≤ 4.

As at 31 December 2022, the remaining amount to be repaid is EUR 100 million.

The loans referred to in points 1 to 5 above have complied with all the covenants as at the

calculation date of 31 December 2022.

6) On 2 December 2022, a bilateral loan was taken out from Intesa Sanpaolo in the amount of EUR

4.740 million, aimed at supporting the project to build 5 hydrogen fuelling stations on motorway

sections under concession.

The underwriting of the new funding became necessary because in order for the underlying project

to access the grant from the European Commission, it must be co-financed by a loan from a

Financial Intermediary for at least 10% of the total amount of the initiative.

The loan agreement provides for a utilisation period until 30 November 2023, a short pre-

amortisation period and six-monthly straight-line principal amortisation starting on 30 June 2024


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Financial Report as at 31 December 2022	page 56

and ending on 31 December 2026, the final repayment date of the loan. The loan conditions agreed

upon are aligned with those already in place and it bears interest at a variable rate (6-month

Euribor) with a margin of 2.35%.

It has no financial covenants.

At 31 December 2022, the loan had not been used.

At the closing date of 31 December 2022 all financial covenants had been complied with.

•Bond Loan

On 13 October 2021, FNM successfully completed the placement of a non-convertible senior

unsecured bond for EUR 650 million, with a duration of 5 years. The bond represents the inaugural

issue under the Euro Medium Term Non-Convertible Note Programme (the “EMTN Programme”)

of up to EUR 1 billion, the establishment of which was approved by FNM's Board of Directors on

16 September 2021. The Bond was offered for subscription to Italian and foreign institutional

investors in accordance with current regulations (except for limitations relating to certain countries,

including the United States of America) and is listed on the regulated market of the Irish Stock

Exchange – Euronext Dublin. The settlement of the issue took place on 20 October 2021. The

securities were placed at an issue price of 99.824% and have a fixed rate with an annual coupon of

0.75% and an annual yield of 0.786%, corresponding to a spread of 88 basis points with respect to

the mid-swap reference rate. The securities representing the bond have been assigned a Baa3 rating

by Moody’s and a BBB- rating by Fitch, which was upgraded to BBB at the end of 2021, in line

with those of the issuer.

The proceeds of the bond loan were used for the early repayment of the outstanding debt assumed

in connection with the acquisition of MISE, maturing in early 2022, and to maintain adequate levels

of liquidity to meet operating and investment needs.

The first coupon of EUR 4.875 million was settled on 20 October 2022.

8.3INVESTMENTS

Investments in the year amounted to a total of EUR 633.8 million compared to the EUR 417.9

million of the previous year.

In particular, investments made with own funds by the FNM Group gross of collections of the

consideration for construction services attributable to the year globally amount to EUR 145.5

million compared to EUR 99.1 million in the previous year, and are itemised as follows:


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Financial Report as at 31 December 2022	page 57

•investments related to the Ro.S.Co. & Service segment, for EUR 51.9 million, of which in

rolling stock leased to Trenord and DB Cargo for EUR 49.3 million (EUR 28.9 million in

2021), which mainly refers to the commissioning of 4 TILO trainsets (EUR 38.0 million) and

the revamping of TAF rolling stock (EUR 9.5 million);

•investments classified in the Rail Infrastructure segment amounting to EUR 8.0 million

(EUR 3.9 million in 2021), relating to the car park at the Affori station and investments in the

expansion of the Sacconago Terminal;

•investments in the Road Passenger Mobility segment of EUR 26.7 million (EUR 5.5 million

in 2021), mainly attributable to the purchase of 104 buses, of which 20 electric buses;

•investments in revertible assets made on the motorway infrastructure amounting to EUR

58.9 million (EUR 60.8 million in 2021) mainly related to the upgrading of S.P. 46 Rho-Monza

and extraordinary maintenance on the Po bridge viaduct.

The investments financed by the Lombardy Region gross of contributions collected, and managed

by the FNM Group in 2022, on behalf of the Lombardy Region, in accordance with the Programme

Agreement and the Public Service Contract include:

•Investments in Railway Infrastructure of EUR 63.1 million (EUR 57.9 million in 2021)

relating to the modernisation of railway infrastructure;

•Investments for the renewal of 2017-2032 rolling stock amounting to EUR 425.4 million

(EUR 260.9 million in 2021).Please note that these investments do not contribute to the

determination of the Adjusted NFP. As far as rolling stock is concerned, the following were

delivered during 2022:

–20 high-capacity (EMU), long configuration, “Caravaggio” type trains;

–6 high-capacity (EMU), short configuration, “Caravaggio” type trains;

–16 “Donizetti” type (EMU) trains;

–5 “Colleoni” type trains.


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Financial Report as at 31 December 2022	page 58

9OPERATING PERFORMANCE OF BUSINESS SEGMENTS

The following table shows the economic performance of the consolidated business segments in the

two years in question, before intercompany eliminations:


	2022						2021 PRO-FORMA*
Amounts in millions of euros	Ro.S.Co. & Services	Railway infrastructure	Road passenger mobility	Motorways	Elisions	Total	Ro.S.Co. & Services	Railway infrastructure	Road passenger mobility	Motorways	Elisions	Total

Revenues from third parties	68.1	129.5	121.6	278.3		597.5	65.1	122.0	111.5	240.5		539.1
Intercompany revenues	14.0	7.0	11.9	2.4	(35.3)	0.0	12.0	5.2	12.5	2.1	(31.8)	0.0
Revenues from construction services net of funded investment costs	0.0	7.9	0.0	0.0		7.9	0.0	4.6	0.0			4.6

Segment revenues	82.1	144.4	133.5	280.7	(35.3)	605.4	77.1	131.8	124.0	242.6	(31.8)	543.7

Adjusted EBITDA	45.5	7.7	11.9	128.0		193.1	46.2	5.1	12.7	101.3		165.3
Adjusted EBITDA %	24 %	4 %	6 %	66 %			28 %	3 %	8 %	61 %

EBITDA	45.5	7.7	11.9	128.0		193.1	44.4	7.3	12.7	101.3		165.7
EBITDA %	24 %	4 %	6 %	66 %			27 %	4 %	8 %	61 %

EBIT	13.3	5.5	(1.3)	83.6		101.1	15.0	4.9	3.8	62.3		86.0

*The values consider the consolidation of MISE as of 1 January 2021.

9.1RO.S.CO & SERVICES

Operating data

In the course of 2022, the last four TILO electric trains, intended to be leased to Trenord for the

Ticino-Lombardy cross-border service, entered into service. At 31 December 2022, the FNM-

owned fleet is therefore made up of 98 trainsets divided between 71 trains and 27 owned

locomotives, in addition to 4 locomotives sub-leased from Railpool, leased to the investees

operating in the LPT and freight transport sector (Trenord, DB Cargo Italia) as shown below:


Fleet	Number of rolling stock	Type	User

TSR	19	Passengers	Trenord
CORADIA	10	Passengers	Trenord
CSA	8	Passengers	Trenord
FLIRT TILO	9	Passengers	Trenord
TAF	25	Passengers	Trenord
E483	8	Freight	DB Cargo Italia
E494 TRAXX DC3 (leased from Railpool)	4	Freight	DB Cargo Italia
EFFISHUNTER EFF1000	4	Rescue/Manoeuvre	Trenord
ES64 F4	1	Freight	DB Cargo Italia
DE520	14	Rescue/Manoeuvre/Freight	Trenord (4), DB Cargo Italia (10)


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Financial Report as at 31 December 2022	page 59

Economic performance


Amounts in millions of euros	2022	2021	Chg	Chg %

Leasing rolling stock	52.5	52.1	0.4	0.8 %
Other revenues	29.6	25.0	4.6	18.4 %

Total revenues	82.1	77.1	5.0	6.5 %

Adj. EBITDA	45.5	46.2	(0.7)	-1.5%
Adj. EBITDA %	55.4%	59.9%
EBIT	13.3	15.0	(1.7)	-11.3%

Revenues for this segment amounted to EUR 82.1 million, up EUR 5.0 million compared to EUR

77.1 million in 2021. The main revenue item is represented by rental fees on rolling stock,

primarily to Trenord, amounting to EUR 52.5 million, slightly up on that recognised in the same

period of 2021, thanks to higher revenues on TILO trains and locomotives (Effishunter and DE520)

following the entry into full operation of the new fleets against the reduction in consideration

following the renewal of the operating lease agreement with Trenord for CSA and TAF trainsets.

Other revenues, which include administrative services, i.e. the management of centralised

corporate activities through service contracts with investee companies, and management of owned

properties, rose by EUR 4.6 compared to 2021 to EUR 29.6 million. The change is attributable to

higher revenues for IT services, primarily provided to MISE, rents on commercial premises and the

recovery of some development costs linked to the FILI project by Trenord and Ferrovienord as well

as the H2iseO Project.

Adjusted EBITDA decreased marginally to EUR 45.5 million from EUR 46.2 million in the

previous year, mainly reflecting higher personnel costs connected, inter alia, to the increase in the

average headcount (+12 FTE), costs for services, IT, insurance, membership fees and property

management, as well as higher compensation paid to the corporate bodies, also in connection with


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Financial Report as at 31 December 2022	page 60

the new positions taken. Adjusted EBITDA is also impacted by FNMPAY start-up costs and the

development costs of the H2iseO and FILI projects.

With regard to the development of FNMPAY, compared to the initial plan, according to which

services would begin being provided in the second half of 2022, there was a postponement to the

first quarter of 2023 due to the longer timeframes identified in activities for preparing agreements

with partners, which were not facilitated by the economic context during the period. In this regard,

a 10-year framework agreement was signed with Trenord that defines FNMPAY's role as the

reference “payment service provider” to support innovation strategies in the area of payments.

9.2 RAILWAY INFRASTRUCTURE

With Regional Government Decree no. XI/7543 of 15/12/2022 “Approval of the service contract

template for the management of the railway infrastructure of regional and local interest under

concession to FERROVIENORD S.p.A. for the years 2023-2027”, the Public Service Contract

expiring on 31 December 2022 was renewed for the 1 January 2023 - 31 December 2027 period

(hereinafter the “New Public Service Contract”), signed on 21 December 2022 by

FERROVIENORD.

The text of the New Public Service Contract governs existing mandatory relationships between the

parties, specifically setting forth the terms and conditions (including economic terms) for the

performance of management activities and ordinary maintenance of the infrastructure by

FERROVIENORD, in substantial continuity with the previous contractual provisions, without

prejudice to: (i) the inclusion of the study and design activities in preparation for the development

of the infrastructure and transport systems in general and the enhancement of the network and

assets; (ii) the elimination of the provisions on electric mobility systems and car sharing, which are

no longer the subject of the contractual agreements.

The characteristics of the services and benefits offered, for the purposes of defining the

consideration, are identified through the “Catalogue” tool, which is broken down in such a way so

as to take into account the different regulatory system in force for:

•the Milan Branch (“Interconnected Network”): the payment of the toll to FERROVIENORD is

made directly by the railway company TRENORD, as network access services are provided by

FERROVIENORD to TRENORD on the basis of a specific network access contract;

•the Iseo Branch (“Isolated Network”): at present, FERROVIENORD does not receive toll

payments from the railway company TRENORD, because remuneration for services relating to

operational management are contained in a separate item in the Catalogue.


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Financial Report as at 31 December 2022	page 61

The New Public Service Contract, however, no longer includes: (i) the automatic unit fee reduction

mechanism, which provided for decreasing fees in favour of the Concessionaire (“efficiency

gains”); (ii) the payment of the annual contribution of EUR 1.8 million for the development of

sustainable mobility and car sharing of E-vai S.r.l.; (iii) the payment, in favour of

FERROVIENORD, of access fees to the Interconnected Network, which are instead collected

directly from the railway companies in continuity with what was already established in the

adjustment of December 2021 following ART resolutions.

In addition, the New Public Service Contract allows the possible application of penalties to be borne

by FERROVIENORD in the event of non-compliance with quality standards and/or non-

compliance with deadlines due to work stoppages, up to a maximum threshold of 2% calculated, on

an annual basis, with reference to the consideration for each year in which the contract is in force.

It should be noted that on the basis of the current Public Service Contract, the second-level

maintenance costs of the train fleet managed by FERROVIENORD on behalf of the Lombardy

Region are now recognised year by year pro rata by TRENORD to FERROVIENORD in the form

of a rental fee and allocated by the latter to special cyclical maintenance provision (amounting to

EUR 53.6 million at 31 December 2022). In this respect, the New Public Service Contract confirms

the above provisions only until 31 December 2023. As of 1 January 2024, on the other hand, the

costs of the second-level maintenance of the train fleet managed by FERROVIENORD will be

accounted for as investments entirely financed by the Lombardy Region on the basis of the multi-

year planning set forth by the user railway company (TRENORD). The trend in the movements

relating to cyclical maintenance, the utilisations of the existing provision and their impact on the

Net Financial Position in the coming years will be defined in the course of 2023.

For each of the areas defined above, the New Public Service Contract determines the quantification

of the fee, for each calendar year, on the basis of the criteria set out below and the services actually

rendered:

A.Isolated Network operational management: production volume, defined in terms of total annual

train paths (train-km of regional rail service);

B.Ordinary infrastructure maintenance: (i) for the part of maintenance independent of the wear

generated by traffic: physical extent of the network, measured in track kilometres, available for


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Financial Report as at 31 December 2022	page 62

operation during the year, (ii) for the traffic-dependent part of maintenance: production

volume, defined as total annual train paths (train-km of regional rail service);

C.Station and system accessibility services: number of stations/stops broken down by type, each

of which corresponds to a different breakdown and complexity of the services offered (only

stations where passenger services are provided in the reference year are counted);

D.Purchase and management of the regional fleet: (i) for the organisation and management of

procedures for the financing and purchase of new rolling stock lots: economic value of the

orders, (ii) for the administration, monitoring and financing of planned second-level

maintenance: number of items of rolling stock managed;

E.Engineering and assets: annual fixed value during the term of the New Public Service Contract;

F.Specific functions of the railway infrastructure manager: annual fixed value during the term of

the New Public Service Contract;

G.General and administrative functions: annual fixed percentage value depending on the

economic value of the other services;

H.Preservation, protection and enhancement of historical railway heritage: value to be indicated

in the budget (annual) and subject to adjustment according to the costs incurred for specific

projects and for the running of historical tourist trains;

I.Network and heritage enhancement and promotion studies: value to be budgeted (annually) and

subject to adjustment according to costs incurred for specific projects.

The New Public Service Contract confirms the application of the “actual” remuneration mechanism,

under which the fee for each calendar year will be quantified and updated on the basis of factors

such as (i) inflationary adjustment and - for the Catalogue items linked to specific drivers - (ii) the

following factors, i.e. (a) the actual production volume in terms of train-km for passenger service;

(b) network development in terms of kilometres of track; (c) the number and type of stations with

active passenger services; and (d) items related to safety, asset management, engineering services

for infrastructure investments and fleet development. The forecasts of the New Public Service

Contract show, for the years following the first, the scheduled train-km, which may be subject to

updating based on regional planning and the actual availability of new infrastructure, in compliance

with the deadlines set forth in the network information prospectuses(“NIP”) of infrastructure

managers, which govern infrastructure access by railway companies.


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Financial Report as at 31 December 2022	page 63

As regards the revision mechanisms, the fees in favour of the Concessionaire may be subject to

adjustment to ensure Agreement balance, in the event of

•positive or negative cost variations that have been quantified in the preventive technical report

on operating costs, approved by the Region during the final design phase of the infrastructural

interventions and/or network upgrading, in the manners governed by the Programme

Agreement implementing regulation. Any changes in production costs that do not have a direct

effect on the Catalogue model set forth in the New Public Service Contract will in any case be

recorded in the manners laid out in the above-mentioned regulation and will be taken into

account during revision;

•decreases in train-km travelled, at least equal to 5% of the train-km scheduled during the

reference year according to the corresponding billing letter;

•other infrastructural, contextual or force majeure changes that cause an increase in production

costs or a reduction in revenues, by a percentage greater than 5%, compared to those resulting

from the New Public Service Contract, not offset by other lower operating costs incurred and/

or higher commercial revenues that may have been earned during the reference year.

The maximum total value of the New Public Service Contract may be estimated at EUR 330.6

million, of which EUR 64.1 million as the consideration portion of the New Public Service Contract

for the year 2023, calculated as from 1 January 2023. For subsequent years, fees are envisaged for

the Concessionaire, to be quantified and updated annually on the basis of the mechanism described

above.

Moreover, on this point please recall that on 14 November 2022 the Region approved the sixth

update to the Programme Agreement for investments and extraordinary maintenance on the network

under concession to FERROVIENORD (described in section 6.2). Its provisions include an

allocation of EUR 35 million (EUR 7.0 million for 5 years) for extraordinary maintenance works

for the 2023-2027 period, previously covered by the expiring Public Service Contract.

Operational data:


Mobility indicators		2022	2021	Chg %	2019	Chg %

Production capacity	million train-km	9.6	9.4	2.1 %	10.0	-4.0 %

Use of the network
- Number of trains	Trains/day	780.0	780.0	100.0 %	813.0	-4.1 %
- Number of passengers	Pax/day	230,000	190,000	121.1 %	280,000	-17.9 %

In 2022 the train paths travelled amount to 9.6 million train-km (of which 8.5 million train-km on

the Milan Branch and 1.1 million train-km on the Iseo Branch), an increase of 2.1% compared to


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Financial Report as at 31 December 2022	page 64

2021, despite a service level conditioned by the consequences for COVID-19 (e.g. limitation of

airport service to Terminal 1), the limitation of trains (S1 and S2 service) due to anomalous wear of

wheel flanges on the Railway Link and the events on the Brescia-Iseo-Edolo line (Sellero Tunnel

rockfall, Niardo flooding and Iseo train derailment). FERROVIENORD network was travelled on

in 2022 mainly for LPT services; freight traffic, which was marginal in extent, amounted to 16.7

thousand train-km.

The implementation status at 31 December 2022 of the rolling stock renewal programme for

regional rail services for the years 2017 - 2032 is shown below:

The COVID-19 emergency led to a delay in deliveries and in obtaining authorisation for the trains

to enter the market. As far as Hitachi deliveries are concerned, at 31 December 2022, the 50

Caravaggio trains covered by the first and second executive contracts have been delivered, and

deliveries of the last lot began in February 2023 with completion scheduled by November 2024.

With regard to Alstom, 16 Donizetti trains relating to the first executive contract were delivered at

31 December 2022. Alstom proposed an updated and accelerated trainset supply plan in order to

make up for the delay and complete deliveries in April 2024, ahead of the original contractual

schedule. On the other hand, there were more delays for the delivery of Colleoni trains by Stadler

(only 5 delivered at 31 December 2022), which have shown considerable reliability problems

following their commissioning by Trenord.

In relation to the Sacconago Terminal, a special agreement was signed with the Lombardy Region

on 9 June 2022 for the implementation of the project called “Sacconago Terminal accessibility


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Financial Report as at 31 December 2022	page 65

enhancement” to govern the use of the financing of EUR 8.3 million allocated as part of the

economic recovery investment programme - Lombardy Plan (Attachment 1 of Regional

Government Decree XI/6047 of 01/03/2022 - SUSTAINABLE MOBILITY Initiatives - Sacconago

Terminal accessibility enhancement). The tender for the awarding of the contract for the works,

which include the upgrading and improvement of the track system in order to increase the shunting

capacity in the terminal, has been completed.

Economic performance


Amounts in millions of euros	2022	2021	Chg	Chg %

Public contracts and grants	111.2	101.7	9.5	9.3 %
Leasing rolling stock	15.4	12.3	3.1	25.2 %
Other revenues	17.8	17.8	—	— %

Total revenues	144.4	131.8	12.6	9.6 %

Adj. EBITDA	7.7	5.1	2.6	51.0%
Adj. EBITDA %	5.3%	3.9%
EBIT	5.5	4.9	0.6	12.2%

Segment revenues amounted to EUR 144.4 million, up EUR 12.6 million compared to EUR 131.8

million in 2021. In particular, revenues relating to public contracts and grants, which include the

consideration deriving from the Public Service Contract for infrastructure management and the

Programme Agreement for the management of investments and maintenance on the network, as

well as for the purchase and management of rolling stock on behalf of the Lombardy Region, and

the network access fee received directly from the railway companies starting from December 2021,

amounted to EUR 111.2 million and increased by EUR 9.5 million compared to 2021. This trend is

mainly caused by higher recoveries for planning activities and for costs relating to interventions on


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Financial Report as at 31 December 2022	page 66

the network and funded rolling stock, in relation to the progress of the orders as set forth in the

Programme Agreement (EUR +8 million).

Revenues from the rental of rolling stock, referring to fees for the management and maintenance

of rolling stock leased by the Lombardy Region to Trenord and managed by Ferrovienord,

increased by EUR 3.1 million as a result of the expansion of the Lombardy Region fleet made

available to Trenord.

The other revenues which refer to rental income, the sale of scrap metal and revenue from the

handling of goods at the Sacconago terminal are stable overall compared to 2021.

Segment Adjusted EBITDA increased by EUR 2.6 million to EUR 7.7 million. The change, in a

context of growing revenues, takes into account a less than proportional increase in costs for

infrastructure and maintenance planning activities, as well as increased expenses for materials and

maintenance on infrastructure and plants, particularly at the Iseo, Castegnato and Milan stations.

Charges for utilities, waste disposal, insurance and the improvement of IT systems also increased

during the period. It should also be noted that the increase in provisions for cyclical maintenance on

the fleet made available to Trenord corresponds to higher revenues from the lease of rolling stock

recognised. Personnel costs, on the other hand, decreased compared to the same period of the

previous year due to the release of a portion of the provision for risks relating to the renewal of the

National Collective Bargaining Agreement for road and rail workers (CCNL Autoferro) following

the national and company agreements signed in 2022 and the recognition of contributions to cover

higher social security charges for illness for the 2015-2018 period, partially offset by higher

variable compensation and the higher average number of employees during the year (+15 FTE).It

should be noted that 2021 EBITDA included contingent liabilities and provisions for bad debts on

funded contracts in the amount of EUR 4.8 million, partially offset by contributions received from

the Lombardy Region to shift the railway offer in the amount of EUR 1.2 million following the

COVID-19 pandemic.

As far as terminal operations are concerned, during the period revenues decreased to EUR 1.2

million from EUR 1.6 million, mainly due to numerous line interruptions in Northern Europe and

critical issues on the Italian national network. The revenue trend is reflected in the reduction of

EBITDA to EUR -1.1 million from EUR -0.5 million in 2021.

9.3 PASSENGER ROAD TRANSPORT


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Financial Report as at 31 December 2022	page 67

Operational data


Mobility indicators		2022	2021	Chg %	2019	Chg %

Passengers	million	58.8	48.1	22.1 %	77.4	-24.0 %
- ATV	million	55.4	46.2	19.9 %	73.4	-24.5 %
- FNMA	million	3.4	1.9	75.0 %	4.0	-14.5 %

LPT	mln bus/km	25.5	25.3	0.8%	24.2	5.6%
- ATV	mln bus/km	21.0	20.9	0.5 %	19.8	6.1 %
- FNMA	mln bus/km	4.5	4.4	2.3 %	4.4	2.3 %

Car Sharing:
Rental hours - Regional Electric	hours/year	286,427	93,499	206.3 %	69,394	312.8 %
Car sharing hires	unit	93,981	76,505	22.8 %	29,367	220.0 %
E-Vai Points	unit	307	185	65.9 %	112	174.1 %

At 31 December 2022, the fleet consisted of 702 buses in service, of which 158 were owned by

FNMA and 544 by ATV (plus 11 unregistered buses), with a carrying value of EUR 41.6 million

and an average age of approximately 10.3 and 13.8 years respectively.

Overall, travellers carried in 2022 totalled 58.8 million, up 22.1% from 48.2 million in 2021, and in

any event 24.0% lower than in 2019. Local public transport services accounted for 25.5 million bus-

km, essentially stable compared to 2021 and up by 5.6% compared to 2019 due to the expansion of

services, especially school services, to ensure social distancing.

Regarding the operations of the car sharing service at 31 December 2022, E-Vai's car fleet

consisted of a total of 392 vehicles, of which 374 electric (272 at December 2021, of which 250

electric). Geographical presence is also increasing: E-Vai Points have increased by 122 units (total

307), charging stations by 10 units (total 127) and municipalities covered by the service by 10 units

(total 106).

Economic performance


Amounts in millions of euros	2022	2021	Chg	Chg %

Public contracts and grants	62.3	60.7	1.6	2.6 %
Transport services	64.8	56.8	8.0	14.1 %
Other revenues	6.4	6.5	(0.1)	-1.5 %

Total revenues	133.5	124.0	9.5	7.7 %

Adj. EBITDA	11.9	12.7	(0.8)	-6.3%
Adj. EBITDA %	8.9%	10.2%
EBIT	(1.3)	3.8	(5.1)	ns


	FNM Group


Financial Report as at 31 December 2022	page 68

Revenues for the year showed an increase of EUR 9.5 million (+7.7%), reaching EUR 133.5

million compared to EUR 124.0 million in 2021; in particular:

a.revenues from public contracts and grants are up by EUR 1.6 million compared to the

previous year, reaching EUR 62.3 million, and take into account, on one hand, the lower

offsetting measures for the LPT sector following the pandemic emergency, which fell from

EUR 13.5 million to EUR 8.2 million, offset by the higher income from Public Service

Contracts and other contributions to cover the increase in raw material prices. More

specifically, the aggregate benefited from (i) the higher contribution per kilometre recognised

by the Veneto Region pursuant to Regional Government Decree no. 1012 of 16 August 2022

and Regional Government Decree no. 1657 of 30 December 2022 amounting to EUR 2.2

million, (ii) the contribution to cover the increase in fuel costs established by Decree Laws 115,

144 and 179 of 2022 for EUR 1.7 million due to LPT companies, (iii) the receipt of EUR 0.3

million in grants to support companies operating in the tourism sector, due to Martini Bus, and

(iv) the recognition of the tax credit for EUR 1.5 million on energy consumption due to

companies with high natural gas consumption, as established under Decree Law no. 17 of 1

March 2022. By contrast, as regards offsetting measures, in 2022 contributions for additional

services amounted to EUR 4.2 million compared to EUR 6.3 million in 2021, while

compensation for lost ticket revenue amounted to EUR 4.0 million compared to EUR 7.2

million in 2021. It should also be recalled that the provision introduced by the “Cura Italia

Decree” (Decree Law no. 18 of 2020), which provides for the recognition of fees on the basis

of contractual planning despite the adjustment of the offer implemented as a result of the


	FNM Group


Financial Report as at 31 December 2022	page 69

epidemiological emergency, was extended until 31 March 2022, the end date of the state of

emergency set by Decree Law no. 24 of 24 March 2022;

b.revenues from transport services (ticketing, replacement services provided by FNMA on

behalf of Trenord, sub-contracted activities and car-sharing by E-Vai), increased during the

period by EUR 8.0 million (+14.1%) compared to the previous year, reaching EUR 64.8

million. The trend compared to 2021 is mainly attributable to (i) higher revenue from passenger

transport in the amount of EUR 4.5 million, (ii) higher fees invoiced for train replacement

services in the amount of EUR 1.9 million and (iii) growth in revenues from car sharing by

EUR 0.9 million;

c.the other revenues, which include the recovery of excise duties, are substantially stable

compared to 2021, amounting to EUR 6.4 million.

Adjusted EBITDA for the period was EUR 11.9 million, down EUR 0.8 million compared to

2021. The main impact on the company's operations is linked to the increase in costs incurred for

energy consumption (mainly higher average Euro/litre costs, also partly due to the increase in

kilometres travelled): methane and diesel fuel resulted in higher traction costs of EUR 8.0 million

compared to 2021 (+68.1%). Personnel costs are also on the rise. Finally, E-Vai reported higher

operating costs of EUR 1.0 million as a result of the expansion of the car sharing business.

9.4 MOTORWAYS

Traffic and tariff trends


Paying traffic		2022	2021	Chg %	2019	Chg %

Light vehicles	mln vehicle- km	2,354.9	2,038.8	15.5 %	2,511.8	-6.2 %
Heavy vehicles	mln vehicle- km	621.2	610.2	1.8 %	603.0	3.0 %
Total	mln vehicle- km	2,976.1	2,649.0	12.3 %	3,114.8	-4.5 %

The comparison of traffic data for 2022 with those for the years 2019 and 2021 shows a steady

recovery in traffic volumes with a gradual approximation of the curves to the pre-pandemic figure,

especially from the summer months onwards. For road freight traffic, on the other hand, the upward

trend in 2022 is confirmed, with overall travel higher than in 2019.


	FNM Group


Financial Report as at 31 December 2022	page 70

Looking at the evolution of paying traffic by individual month, it can be seen that the increases in

the first six months of 2022 are a consequence of the improved post-pandemic situation, which in

the first half of last year stil

l severely limited travel. In contrast, the traffic recorded in the second half of the year did not show

similar increases since the recovery of traffic was already under way in the same months of 2021.

In 2022, the total number of accidents on the network under concession increased by 6.6%

compared to 2021, also due to the increase in traffic. Fatal accidents rose from 5 in 2021 to 7 in

2022. In terms of safety, the Company has defined a programme of actions aimed at reinforcing

video surveillance of the sections under its jurisdiction, as well as increasing user awareness of

compliance with the Highway Code and of how to behave in the event of an accident.

The accident rate (calculated as the number of accidents per 100 million vehicle-km) for the year

2022 stood at 53.23 - down 2.87% from 56.1 in the corresponding period of the previous year. It

can be seen that even with an increase in the number of accidents, the parameter is regressing.

With regard to tariffs, the regulatory measures issued on tariffs subsequent to the 2019 tariff

adjustment postpone any tariff adjustment to the update of the EFP, to be approved by the

Awarding Body (as described in section 6.4).


	FNM Group


Financial Report as at 31 December 2022	page 71

During the board meeting of 23 December 2021, the company, in light of the status of the process

of approving the proposed EFP for the 2018-2022 regulatory period, deemed it appropriate to

reconsider the decision to maintain the suspension of the 2019 tariff adjustment, approving the

activation of the tariff update authorised by Interministerial Decree no. 579 of 31 December 2018,

which had previously been suspended. As a result, as of 1 January 2022, the company's per

kilometre unit tariffs rose by 2.62%, in respect of which the company did not receive any

communication from the Awarding Body; the only information is to be found in a press release that

appeared on the MIMS website dated 31 December 2021.

Following the opening to traffic of both carriageways of Lot 1 and Lot 2 of the redeveloped S.P. 46

Rho-Monza with motorway characteristics, which took place on 14 November 2022, on the

following 6 December the Company submitted a request, in compliance with the Agreements in

force, to adjust the conventional distance at the toll application points of the Milan North Bypass

Motorway. On 29 December 2022, the Awarding Body acknowledged the Company's request and

authorised it to adjust the conventional distance at the toll application points of the Milan North

Bypass Motorway as of 1 January 2023. On the same date, the Company informed the Awarding

Body, by virtue of the current socio-economic situation, of the temporary suspension of the above-

mentioned adjustment, pending the submission of the issue to its Board of Directors. During the

meeting held on 26 January 2022, the Board of Directors approved the adjustment of the

conventional distance at the toll application points of the A52 - Milan North Bypass Motorway as

of 1 March 2023.

In relation to the preliminary investigation concerning the tariff adjustment for the year 2023, on 17

October 2022 the Company transmitted to the Awarding Body the information based on the ART

resolution concerning the proposed adjustment, for the year 2023, of the user tariffs on the

motorway sections under management. On the following 4 January 2023, the Awarding Body

acknowledged the request, pointing out that, based on Decree Law no. 198/2022, the deadline for

the adjustment of motorway tariffs relating to the years 2020 and 2021 and those relating to all the

years included in the new regulatory period was deferred until the definition of the procedure for

updating the EFP prepared in compliance with the resolutions adopted by ART. More specifically,

the note reported that: “Considering that the conditions set forth in the above-mentioned legislation

are not met for this Company, please note that the conditions are not met for the recognition of the

tariff adjustment as of 1 January 2023, based on the request submitted on 17 October 2022. It

should be noted that, in accordance with the principle of continuity, the recovery of any tariff


	FNM Group


Financial Report as at 31 December 2022	page 72

changes that may have been applicable since the start of the current regulatory period is ensured

under the reference regulation”.

A steady decrease in the use of manual (cash) lanes by users and a consequent steady increase in

traffic on lanes equipped with automatic toll collection systems (telepass and cards) was also

observed in 2022. In this context, accreditation activities continued for the both Italian and foreign

service providers that wish to market their toll payment services via electronic toll collection in all

EU countries. The table below shows the breakdown of the different toll payment methods:

Economic performance


Amounts in millions of euros	2022	2021 PRO- FORMA*	Chg	Chg %

Toll revenues	255.0	226.1	28.9	12.8 %
Other revenues	25.7	16.5	9.2	55.8 %

Total revenues	280.7	242.6	38.1	15.7 %

Adj. EBITDA	128.0	101.3	26.7	26.4%
Adj. EBITDA %	45.6%	41.8%
EBIT	83.6	62.3	21.3	34.2%

*The values consider the consolidation of MISE as of 1 January 2021.


	FNM Group


Financial Report as at 31 December 2022	page 73

In 2022, the Motorways segment showed revenues of EUR 280.7 million, up EUR 38.1 million

compared to EUR 242.6 million in the same period of 2021 (pro-forma figure), mainly due to the

increase in toll revenues (EUR +28.9 million) as a result of the 2.62% tariff increase introduced as

of 1 January 2022 and the increased traffic recorded, which saw the light vehicle component

compared to 2021), due to higher income from service area concessions, which benefited from the

recovery in mobility, and the renewal of some contracts at more favourable economic conditions for

MISE and which entail the recovery of the costs of maintenance performed at service areas, as well

as thanks to the recoveries from Autostrade per l’Italia for extraordinary works carried out at the

Agrate and Terrazzano stations (automatic cashiers, lane software update, upgrading of lighting

installations and ventilation).

Adjusted EBITDA for the period was EUR 128.0 million, up EUR 26.7 million primarily due to

the increase in revenues. EBITDA was also impacted by higher maintenance costs for structures (in

particular for the maintenance of the Po viaduct), the upgrading of toll booths and electrical and

mechanical equipment, partially offset by a reduction in net changes in provisions, which takes into

account the release of the provision for delayed maintenance in relation to works carried out, the

release of amounts allocated to the provision for risks in relation to settlements concluded and

higher net renewal provisions to adjust them to the investments planned for the remaining duration

of the concession and with the updating of ANAS price lists. In this regard, it should be noted that

both the cost of the maintenance performed and the adjustment of the renewal provision include the

effect of the update of the ANAS price lists, as set forth in Decree Law no. 50 of 17 May 2022,

converted by Law no. 91 of 15 July 2022. The increase in costs is also attributable to higher costs

linked to the resumption of traffic (including collection charges and concession fees), electricity


	FNM Group


Financial Report as at 31 December 2022	page 74

utilities mainly due to the higher cost of energy, costs for professional engagements and service

activities carried out by the parent company, as well as insurance premiums. Labour costs also

increased slightly due to the combined effect of the renewal of the national collective labour

agreement, redundancy incentives linked to the procedure aimed at realigning the workforce to the

new requirements, which was formalised with the agreement signed on 20 July 2022 with the trade

union representatives, and the reduction in headcount (-21 FTE).

9.5 MAIN INVESTEE COMPANIES

TRENORD

Service performance

2022, particularly the second half of the year, was characterised by a good recovery in both the

number of travellers and the kilometres travelled.

In particular, the past financial year saw an increase in travellers compared to 2021 of 29.8%, but

still 29.6% less than in 2019. Despite the recovery in the final months of 2022, the initial months of


	FNM Group


Financial Report as at 31 December 2022	page 75

the year were again characterised by severe mobility restrictions due to the resurgence of the virus,

which strongly affected the number of commutes monitored on Trenord's routes. Starting in May,

pandemic period restrictions were lifted, triggering a gradual rise in the number of travellers, which,

starting in September, brought demand back to more consistent levels, reaching up to 650 thousand

daily travellers on some days, however still around 20% lower than in the same period of 2019. On

public holidays, however, values were in line with 2019 values.

During 2022, two surveys were carried out on all 40 routes in the Lombardy region and in the

neighbouring Canton of Ticino, where Trenord operates the cross-border service together with the

Swiss Federal Railways. Taken as a whole, the surveys carried out made it possible to further define

the profile of Trenord's customers and the changes in their behaviour compared to previous years.

In particular, it was seen that customer habits have changed, especially in terms of frequency of

travel. While prior to the pandemic train travel took place on a daily basis for more than half of the

clientele, by 2022 this was true for just under 45%, while occasional trips were taken by less than

40% of passengers (just over 30% in 2019).

In 2022, 38.8 million train-km were travelled, in line with 2021, but 5.4% lower than in 2019. The

service in 2022 confirms an almost complete resumption as planned in the pre-pandemic period,

with around 2,200 trains scheduled per day on weekdays. The difference essentially concerns some

trains that are no longer needed, due to the reduction in passenger numbers, mostly running in the

late evening hours.

Also with regard to tourism products and the Malpensa Express, the year 2022 made it possible to

make up for much of the ground lost in 2020-2021. Overall, the Malpensa Express recorded strong

growth over 2021, bringing volumes back to 2019 levels. The trend was characterised by an initial

phase still impacted by travel restrictions, especially international, due to the Omicron variant, and

by a subsequent full resumption of service, which saw production consolidate at higher levels than

in 2019 (with the exception of the period coinciding with the closure of Linate). This recovery

owed to the increase in foreign ''leisure'' airport traffic, the resumption of business traffic for Milan

and Lombardy, and the increase in travellers choosing the train to travel to the airport, which

continued to be higher than in 2021.

The commissioning of new trains resulting from the investments made by the Lombardy Region

continued, with the delivery of 56 new trains in the course of 2022, including 26 Caravaggio

electric trains, 16 Donizetti trains, 5 Colleoni diesel-electric trains and 9 Italy-Switzerland

interoperable FLIRT TSI trains for TILO services. As a result, the retirement of older trains

continued according to the plan defined in 2020. The new trainsets bring greater comfort and


	FNM Group


Financial Report as at 31 December 2022	page 76

improved service punctuality and reliability on the lines on which they run, especially on routes on

which they make a high percentage of scheduled trips.

As far as operational performance is concerned, punctuality within 5 minutes perceived by the

customer (no cause excluded) stands at 83.4%, essentially the same value reached in 2021 where,

however, in the first few months of the year, it “benefited” from the overall reduction in traffic on

the main railway lines due to the pandemic (+3.7% compared to 2019). The trend over the course of

the year was characterised by higher punctuality in the early months of the year, and lower values in

the summer months due to the effects of the exceptionally high temperatures, which had a negative

impact on both trains (especially the older ones) and the railway infrastructure. Then, in the final

months of the year, slightly lower punctuality values were recorded, but in line with the seasonal

trends of this period.

It should be pointed out that the punctuality value, and above all the value of cancellations, has

been heavily influenced by the closure of part of Milan's Railway Link due to the seizure of part of

the Railway Link ordered by the Milan Public Prosecutor's Office at the end of July, following an

anomalous wear on wheel flanges reported by Trenord to the infrastructure manager RFI. In

August, following the release from seizure and the conclusion of the work of the technical panel set

up between Trenord and RFI at the instruction of the Public Prosecutor's Office, the tracks affected

by the phenomenon described above were replaced. As a result, traffic on the Rail Loop was able to

resume gradually starting in August until its complete reactivation starting from the end of

September.

Economic and financial data summary


Amounts in millions of euros	2022	2021	Change	Change %
Revenues from sales and services	781.0	649.7	131.3	20.2 %
Other revenues and income	50.9	110.4	(59.5)	-53.9 %
TOTAL REVENUES AND OTHER INCOME	831.9	760.2	71.8	9.4 %
Operating costs	(388.0)	(343.7)	(44.3)	12.9 %
Personnel costs	(284.1)	(270.7)	(13.4)	5.0 %
EBITDA	159.8	145.8	14.0	9.6 %
Depreciation, amortisation and write-downs	(175.0)	(171.8)	(3.2)	1.9 %
EBIT	(15.2)	(26.0)	10.8	n.s.
Net financial income (loss)	(2.9)	(0.8)	(2.2)	286.6 %
EARNINGS (LOSS) BEFORE TAX	(18.1)	(26.8)	8.6	-32.3 %
Income taxes	8.7	26.9	(18.2)	n.s.
NET COMPREHENSIVE RESULT	(9.5)	0.1	(9.6)	n.s.

The year 2022 recorded a net loss of EUR 9.5 million, marking a deterioration of EUR 9.6 million

compared to the 2021 figure (EUR +0.1 million). It should be noted that this result is affected not

only by the effects of the lack of contributions to compensate for the lower revenues due to the


	FNM Group


Financial Report as at 31 December 2022	page 77

effects of the pandemic - already quantified only for the remaining amount from the year 2021 as

more than EUR 30 million - but also by the unrecovered damages deriving from the interruption of

part of the Railway Link during the summer months, with an estimated loss of at least EUR 10

million.

Overall, in 2022 revenues have increased by EUR 71.8 million to EUR 831.9 million from EUR

760.2 million. In detail:

•revenues from rail traffic amounted to EUR 311.0 million, up by EUR 117.9 million

compared to EUR 193.1 million in the previous year. The trend is mainly attributable to the

growth in ticketing revenues, which increased from EUR 193.1 million in 2021 to EUR 311.0

million in 2022 (+61.1%), benefiting from the recovery in passenger volume following the

improvement of the pandemic situation and, in part, from the update of tariffs as of 1

September 202212. Nevertheless, compared to 2019, the reduction in traffic revenues was

approximately EUR 40.0 million;

•Revenues from the Public Service Contract amounted to EUR 438.7 million, up by EUR 5.3

million compared to 2021 (+1.2%). The main changes refer to (i) the recovery of higher costs

for network access for EUR 15.8 million to partially cover the increase in energy costs, (ii)

partly offset by lower reimbursements for the rental of rolling stock for EUR 5.8 million, and

(iii) the increase in penalties for EUR 6.2 million (of which EUR 5 million is attributable to the

interruption of the Railway Link);

•other revenues from sales and services (mainly revenues from medium/long-distance lines,

train rental to SBB and from services provided to Trenitalia) amounted to EUR 31.3 million, up

EUR 8.1 million on 2021;

•other income amounted to EUR 50.9 million, a decrease of EUR 59.5 million compared to

EUR 110.4 million in 2021, mainly due to lower relief for loss of revenue, which amounted to

EUR 98.3 million in 2021 and EUR 38.3 million in the reference period13. With respect to the

economic impact of the pandemic, it should be noted that there was an estimated impact

compared to 2019 on ticketing revenues of about EUR 200 million in 2020, about EUR 160

million in 2021 and about EUR 40 million in 2022, alongside higher costs incurred for


	FNM Group


Financial Report as at 31 December 2022	page 78

12 As per Regional Government Decree no. XI/6623 of 4 July 2022 concerning “DETERMINATIONS REGARDING TARIFFS FOR REGIONAL

AND LOCAL PUBLIC TRANSPORT SERVICES FOR THE YEARS 2022 AND 2023, PURSUANT TO REGIONAL REGULATION NO. 4 OF 10

JUNE 2014”, as of September 2022 an update of the tariffs came into force for ordinary (single trips and season tickets) and integrated (IVOL, IVOP

and trenocittà) tickets: the tariff adjustment consists of 3.82% for rail tickets and 1.91% for integrated tickets. Subsequently, the LPT Agency of the

Milan, Monza and Brianza area, with resolution no. 10/2022 of 26 August 2022, also approved the tariff adjustment coefficients of the applicable

STIBM Integrated Tariff System: the new tariffs are applied as of 9 January 2023.

13 The grants recognised in 2022 refer for EUR 11.3 million to the amounts referred to in art. 29 of Decree Law 41/2021 (Support Decree) and for

EUR 27.0 million to the amounts referred to in art. 2 bis of Law 197/2022 (2023 Budget Law).

sanitation and social distancing. These reduced resources were only partly offset by the

incremental resources made available by the government to clients through specific decrees. To

date, resources have been allocated to allow for full coverage of only the year 2020 and a

portion of 2021. The share of lost revenue still to be covered for the year 2021, based on the

data provided to the LPT Observatory, is equal to more than EUR 30 million over the amount

accounted for in the year 2022. The share of lost revenue from the year 2022 (amounting to

approximately EUR 40.0 million) also must be added to these values. In the absence of further

extraordinary allocations by the Central Government, the shortfall in revenues will have to be

compensated on the basis of the mechanisms provided for in the current Public Service

Contract, with particular reference to what is expressly provided for in art. 1370/2007 of the

European Regulation.

Personnel costs amounted to EUR 284.1 million (EUR 270.7 million in 2021), marking a net

increase of EUR 13.4 million. This change is mainly related to the increase in the number of

resources employed (+215 FTE), in large part linked to the completion of the shunting personnel

internalisation process, the strengthening of commercial activities for customer service, ground

control and on-board personnel.

Operating costs amounted to EUR 388.0 million, up by EUR 44.3 million compared to 2021. The

main cost increases concern toll fees (EUR +27.1 million), utilities (EUR +5.4 million),

commission expenses (EUR +5.4 million), insurance (EUR +3.6 million) and replacement services

(EUR +2.3 million). The operating costs also take into account the extraordinary costs incurred in

repairing the damage to the rolling stock caused by the failure of the Railway Link.

EBITDA amounted to EUR 159.8 million, up by EUR 14.0 million compared to EUR 145.8

million in 2021, due to the increase in revenues and contributions, partly offset by the increase in

labour and operating costs.

Depreciation of fixed assets amounted to EUR 174.0 million (EUR 170.8 million in 2021) and

mainly related to the depreciation of leased rolling stock as well as depreciation on cyclical

maintenance on supplied and rented materials. Write-downs amounted to EUR 1 million, in line

with the previous year. They mainly refer to the write-down of doubtful receivables (EUR 0.5

million) and the write-down of fixed assets (EUR 0.5 million).

The value of EBIT was negative by EUR 15.1 million, an improvement from the value of the

previous year (EUR -26.0 million).


	FNM Group


Financial Report as at 31 December 2022	page 79

The net financial loss recorded a value of EUR -2.9 million compared to EUR -0.8 million in 2021,

mainly due to higher interest expenses accrued on financial payables taken out for leased assets in

application of IFRS 16.

The loss before taxes amounted to EUR -18.1 million, an improvement from the value of 2021

(EUR -26.8 million).

The item income taxes was positive at EUR 8.7 million (EUR 26.9 million in 2021) and is entirely

attributable to the recognition of higher net deferred tax assets against the IRES tax loss for the

period and tax changes connected to provisions for the year that the Company believes with

reasonable certainty will be recovered in future years.

The year 2022 therefore closed with a net loss of EUR 9.5 million, a deterioration compared to the

basically break-even level recorded in 2021.

The following table shows the reclassified Balance Sheet at 31 December 2022 compared to 31

December 2021:


Amounts in millions of euros	31/12/2022	31/12/2021	Change
Inventories	114.3	113.3	0.9
Trade receivables	154.2	207.9	(53.7)
Trade payables	(237.3)	(226.5)	(10.8)
Other net current assets	(83.8)	(69.6)	(14.1)
Net Working Capital	(52.7)	25.1	(77.8)
Net non-current assets	383.2	349.8	33.4
Other net non-current assets	83.8	77.4	6.4
Provisions for risks and charges	(41.3)	(44.4)	3.0
NET INVESTED CAPITAL	373.0	407.9	(35.0)

Equity	(79.5)	(87.6)	8.1
Total net financial position (Debt / -Cash)	(293.5)	(320.3)	26.9
TOTAL SOURCES	(373.0)	(407.9)	35.0

Net Invested Capital

Net Working Capital was a negative EUR 52.7 million, recording a decrease of EUR 77.8 million

compared to 31 December 2021, consisting of the following:(i) a reduction in trade receivables of

EUR 53.7 million that mainly related to the collection of grants allocated in 2021 to cover lower

traffic revenues from the Lombardy Region for EUR 82.4 million and the receivable from the

Ministry of Labour and Social Policies for EUR 8.5 million relating to the recovery of the transport

bonus; (ii) higher trade payables of EUR 10.7 million, especially to Trenitalia (EUR +11.1 million);

and (iii) lower net other current assets of EUR 14.1 million relating to the increase in other

liabilities (EUR +15.1 million).


	FNM Group


Financial Report as at 31 December 2022	page 80

Net non-current assets amounted to EUR 383.2 million, an increase of EUR 33.4 million due to

the increase in rights of use of third-party assets (EUR +34.1 million) as a result of the recognition

of the extension of existing lease agreements resulting from the extension of the Public Service

Contract. This item includes:

•the value of third-party assets in use, amounting to EUR 207.8 million, of which EUR 189.6

million referring to rolling stock and EUR 15.2 million to buildings;

•property, plant and equipment, amounting to EUR 165.2 million that include mainly the

residual value of rolling stock in use (EUR 107.2 million);

•intangible assets, amounting to EUR 7.5 million;

•equity investments amounting to EUR 2.5 million, which refer mainly to the subsidiary Tilo

S.p.A., and - to a minimal extent - to the associates Consorzio SBE and Consorzio Elio Scarl.

The amount of net investments for the year came to EUR 116 million and referred to investments

in property, plant and equipment for EUR 62.4 million (mainly second-level maintenance work on

rolling stock for EUR 38.1 million), an increase in rights of use on third-party assets of EUR 49.5

million and investments in intangible assets of EUR 4.1 million.

Other non-current net assets amounted to EUR 83.8 million and increased by EUR 6.4 million. In

particular, deferred tax assets increased by EUR 8.2 million, partially offset by the increase of EUR

1.9 million in payables for non-current liabilities.

The value of provisions for risks and charges amounted to EUR 41.3 million and decreased by

EUR 3.0 million compared to the value at 31 December 2021.

Net Financial Position

Overall, net financial debt at 31 December 2022 amounted - prior to the application of IFRS 16 - to

EUR 47.6 million, with an increase of EUR 49.4 million compared to 31 December 2021,

essentially due to the decrease in the need to utilise the credit lines available with major banks. The

residual value of IFRS 16 financial payables relating to leased assets amounted to EUR 245.9

million, with an increase of EUR 22.5 million compared to 31 December 2021, thus bringing the

total balance of financial debt to EUR 293.5 million, marking a decrease compared to 2021 of EUR

26.8 million, as shown in the table below:


	FNM Group


Financial Report as at 31 December 2022	page 81


Amounts in millions of euros	31/12/2022	31/12/2021	Change
Liquidity	(52.6)	(53.0)	0.4
Current financial debt	253.4	310.8	(57.4)
Current Net Financial Position (Debt / -Cash)	200.8	257.8	(57.0)
Non-current financial debt	92.6	62.5	30.1
Net Financial Position (Debt / -Cash)	293.4	320.3	(26.9)

AUTOSTRADA PEDEMONTANA LOMBARDA

Traffic and tariff trends


Paying traffic		2022	2021	Chg %	2019	Chg %

Light vehicles	mln vehicle- km	239.9	196.6	22.0 %	232.5	3.2 %
Heavy vehicles	mln vehicle- km	60.6	55.3	9.6 %	54.7	10.8 %
Total	mln vehicle- km	300.5	251.9	19.3 %	287.2	4.6 %

The traffic recorded in 2022 showed a significant improvement over 2021 (+19.3%), still partially

affected by the COVID-19 emergency. It should also be noted that traffic volumes in 2022 are

higher than those in 2019 (+4.6%) and better in general since APL's motorway sections came into

operation.

Once the most important sections of the A36, i.e., Sections B2, C and D, have been completed, the

Brianza and Bergamo demand areas will be reached, in addition to the one intercepted by the

interconnection with the main routes in the area, i.e. the SS35 Milan-Meda, which will be replaced

by Section B2, the SS 36 Spluga, the A51 and the A4 motorway.

Below is a graph summarising the traffic trend on a monthly basis over the last two years, compared

with the pre-COVID period:


	FNM Group


Financial Report as at 31 December 2022	page 82

With regard to tariffs, as of 1 January 2021 no increases in motorway tariffs were granted to the

Company. The recognition of the tariff adjustment was influenced, according to the approach of the

Competent Authorities, by the failure to complete the process of updating the EFP, as explained in

section 6.5.

In the absence of the regulatory prerequisites represented by the existence of a EFP in force, the

Ministry of Infrastructure and Transport (MIT) deemed that again in 2023 it could not accept the

requests to update the tariff submitted by the Company, as was the case for the years 2022 and

2021. The MIT has in any case communicated that, when the new EFP becomes effective, the

recovery of any tariff adjustments accrued as of the beginning of the current regulatory period will

in any event be possible.

The Company challenged the measure referred to in the MIT note of 4 January 2023 whereby the

request for a tariff adjustment as of 1 January 2023 was rejected. The Company also challenged the

measures for the years 2022 and 2021.

As for the methods used to pay tolls, 2022 shows electronic toll collection accounting for 77.9%,

slightly down from 2021 (78.9%). On the other hand, the percentage of tolls not paid within the 15-

day deadline was 13.03%, up slightly from 12.42% in 2021. The figures are consistent with the

increase in traffic and occasional users, who are less accustomed to automatic payment systems and

who are more likely to fail to pay the toll. It should be noted, however, that thanks to debt collection


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Financial Report as at 31 December 2022	page 83

activities, the proportion of unpaid tolls for 2022 fell from 13.03% to 9.26% by December 2022 and

is set to fall further when the debt collection process is completed, similar to what happened for

2021, when the proportion of unpaid tolls fell from 12.42% to 5.29% by the end of 2022.

Economic and financial data summary

The following data are reported in accordance with the regulations of the Italian Civil Code,

interpreted and supplemented by the accounting principles issued by the Italian Accounting Body

(OIC).


Amounts in millions of euros	2022	2021	Change	Change %
Toll revenues	40.1	34.1	6.1	17.8 %
Other revenues and income	7.1	5.9	1.2	20.7 %
TOTAL REVENUES AND OTHER INCOME	47.2	39.9	7.3	18.2 %
Operating costs	(18.2)	(16.1)	(2.1)	13.1 %
Personnel costs	(6.6)	(6.3)	(0.4)	5.9 %
EBITDA	22.3	17.6	4.8	27.3 %
Depreciation, amortisation, provisions and write-downs	(6.3)	(6.1)	(0.1)	1.9 %
EBIT	16.1	11.4	4.7	40.9 %
Net financial income (loss)	(21.3)	(12.8)	(8.5)	66.7 %
EARNINGS (LOSS) BEFORE TAX	(5.2)	(1.4)	(3.8)	n.s.
Income taxes	(0.7)	(0.6)	(0.1)	16.2 %
COMPREHENSIVE RESULT	(5.9)	(2.0)	(3.9)	n.s.

In 2022, APL generated revenues of EUR 47.2 million, up from EUR 39.9 million in 2021, mainly

due to traffic growth.

Operating costs increased, albeit to a lesser extent, due to higher energy costs and costs correlated

with revenue trends (e.g. concession fees), which were partly absorbed by savings on other cost

items. Personnel costs increased by EUR 0.4 million as a result of contractual increases and the

revaluation of severance pay.

EBITDA for the period was therefore EUR 22.3 million, up EUR 4.8 million compared to 2021.

EBIT increased by EUR 4.7 million to EUR 22.3 million, and takes into account substantially

stable amortisation, depreciation, provisions and write-downs, due to the combined effect of higher

financial amortisation and depreciation of non-compensated assets closely linked to the increase in

EBITDA and lower provisions for bad debts and the provision for renewal, respectively, due to

better credit recovery performance and the consistency of the existing renewal provision with

respect to the need to maintain and/or restore the production capacity of the revertible assets.

In 2022, APL recorded financial expenses of EUR 21.3 million, an increase of EUR 8.5 million

compared to the previous year, as a result of the effect of the application of amortised cost

throughout 2022 to the accessory costs of the Senior Loan 1 which, in 2021, only took effect as of


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Financial Report as at 31 December 2022	page 84

31 August (the date on which the loan was taken out), and which will not be capitalised on the

value of the work until the project commences. The effect of higher interest rates on the Bridge

Loan 2 and the variable-rate Shareholder Loan also contributed to the increase in financial

expenses.

The period therefore closed with a Net loss of EUR -5.9 million, compared to a loss of EUR - 2.0

million in 2021, in the presence of substantially stable taxes year-on-year.


Amounts in millions of euros	31/12/2022	31/12/2021	Change
Liquidity	(358.6)	(367.7)	9.1
Current financial debt	8.9	16.1	(7.2)
Current Net Financial Position (Debt / -Cash)	(349.7)	(351.6)	1.9
Non-current financial debt	342.2	346.7	(4.5)
Net Financial Position (Debt / -Cash)	(7.5)	(4.9)	(2.6)

As at 31 December 2022, the net financial position is positive with cash of EUR 7.5 million, up by

EUR 2.6 million compared to 31 December in the previous year.

Cash and cash equivalents decreased by EUR 9.1 million due to the payment of residual one-off

fees on the Senior Loan 1 and financial expenses relating to the Bridge Loan 2, as well as the

repayment of the principal of the latter.

Non-current financial debt includes the Shareholder Loan granted by MISE in previous years,

which increased to EUR 180.5 million in 2022 (from EUR 176.3 million in 2021) due to interest for

the year, which was not paid as it was subordinated to bank debt.

Amounts due to banks decreased overall by EUR 15.9 million (to EUR 170.6 million at 31

December 2022 from EUR 186.5 million at the end of 2021), mainly due to the combined effect of

the payment of charges relating to the Senior Loan 1 (EUR 7.5 million), and the repayment of the

principal of the Bridge Loan 2 (EUR 8.4 million). The latter was taken out in February 2016 from a

pool of Italian banks and supplemented with the addendum signed in November 2017, which

rescheduled the repayment terms, providing for repayment in six-monthly instalments until 30 June

2034.

10FNM S.P.A. OPERATING AND FINANCIAL PERFORMANCE

10.1ECONOMIC DATA SUMMARY

The reclassified income statement for the year is shown below, compared with that of 2021, with an

indication of the differences in absolute and percentage terms.


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Financial Report as at 31 December 2022	page 85


Amounts in millions of euros	2022	2021	Change	Change %
Revenues from sales and services	79.3	74.6	4.7	6.3 %
Other revenues and income	4.9	4.4	0.5	11.4 %
TOTAL REVENUES	84.2	79.0	5.2	6.6 %
EBITDA	47.3	47.9	(0.6)	(1.3) %
EBIT	17.3	18.8	(1.5)	(8.0) %
Net financial income (loss)	(7.4)	(12.6)	5.2	(41.3) %
COMPREHENSIVE INCOME	8.0	5.4	2.6	48.1 %

Revenues from sales and services increased compared to 2021 by EUR 4.7 million, mainly due to

higher revenues for centralised services provided to Group companies for EUR 4.1 million and for

leasing new trainsets to Trenord for EUR 0.4 million.

Other revenues and income amounted to EUR 4.9 million compared to EUR 4.4 million in 2021.

External operating costs rose by EUR 4.2 million, from EUR 16.1 million to EUR 20.2 million,

primarily due to higher service costs of EUR 1 million, institutional communication expenses of

EUR 0.5 million, higher IT service costs of EUR 0.6 million, higher insurance costs of EUR 0.5

million and lastly higher costs for membership fees of EUR 0.4 million.

Personnel costs amounted to EUR 16.7 million, up by EUR 1.6 million compared to EUR 15.1

million in 2021, mainly in relation to the different composition of the average number of employees

and the increase in amounts disbursed due to the early termination of employment relationships.

EBITDA, which fell from EUR 47.9 million to EUR 47.3 million, decreased by 1.2% due to the

combined effect of an increase in revenues and an increase in operating costs.

Depreciation, amortisation and provisions increased by EUR 0.9 million compared to 2022 in

connection with the gradual commissioning of new TILO rolling stock starting in December 2020.

EBIT, determined by the combined effect of the performance of the previously discussed revenue

and cost categories, amounted to EUR 17.3 million compared to EUR 18.8 million in 2021,

declining by EUR 1.5 million, or 7.9%.

The item net financial income (loss) was a loss of EUR 7.4 million, up by EUR 5.3 million

compared to EUR -12.6 million in 2021; in particular, interest expense on loans amounted to EUR

6.5 million (EUR 16.3 million in the 2021 comparative period), as the year 2021 included higher

non-recurring financial expenses relating to the Bridge loan taken out to finance the acquisition of

MISE, amounting to a total of EUR 8.6 million, relating to the share for the year of the upfront fee,

the extension fee and accessory costs. The lower financial expenses were offset by lower dividends,

which decreased from EUR 3.9 million in 2021 to EUR 0.9 million this year.


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Financial Report as at 31 December 2022	page 86

Earnings before taxes amounted to EUR 10.0 million versus EUR 6.2 million in 2021.

Income taxes of EUR 1.9 million increased due to higher taxable income.

The profit for the year amounted to EUR 8.0 million, an increase on the EUR 5.4 million recorded

for FY 2021.

10.2RECLASSIFIED FINANCIAL POSITION AND SUMMARY INDICATORS OF

RESULT

Below is the reclassified financial position of the financial year and the previous one:


Amounts in millions of euros	31/12/2022	31/12/2021	Change
Current receivables	54.6	40.8	13.8
Current payables	(54.0)	(53.6)	(0.4)
Net Working Capital	0.6	(12.8)	13.4
Fixed assets	411.5	389.0	22.5
Equity investments	710.0	710.6	(0.6)
Non-current receivables	20.3	10.3	10.0
Non-current provisions and payables	(7.5)	(7.8)	0.3
NET INVESTED CAPITAL	1,134.9	1,089.3	45.6

Equity	413.1	405.0	8.1
Net financial position (Debt/-Cash)	721.8	684.3	37.5
TOTAL SOURCES	1,134.9	1,089.3	45.6

Current receivables increased due to the inclusion of the subsidiary MISE in the tax consolidation.

The net financial position increased from EUR 684.3 million to EUR 721.8 million, mainly due to

the investments paid during the year, amounting to EUR 57.3 million.

The Company manages the liquidity of the other Group companies in cash pooling; therefore, in

view of cash on bank deposits of EUR 115.8 million, FNM has giro account receivables of EUR 0.4

million (EUR 0.8 million at 31 December 2021) and giro account payables of EUR 152.8 million

(EUR 88.0 million at 31 December 2021).

As shown in the statement of cash flows, to which reference is made, operating activities generated

liquidity of EUR 39.9 million, investment activities absorbed financial resources of EUR 69.9

million, while financing activities generated liquidity of EUR 49.3 million.

11REGULATORY FRAMEWORK

11.1 RAILWAY INFRASTRUCTURE


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Financial Report as at 31 December 2022	page 87

By Decree of the Minister of Infrastructure and Transport of 5 August 2016, the FERROVIENORD

- Milan Branch network was transferred as of 15/09/2016 under the National Agency for Railway

Safety (ANSF), with the termination of all responsibilities that had been assigned to the Ministry of

Infrastructure and Transport.

FERROVIENORD has developed its own safety management system in accordance with

regulations in force and the provisions issued by ANSF, implementing the provisions of Legislative

Decree no. 162/2007, now replaced by Legislative Decree no. 50 of 14 May 2019.

On 17 April 2018 ANSF issued to FERROVIENORD Safety Authorisation no. IT2120180001,

renewed in June 2019 until 2021 (reference no. IT2120190004 of 11/06/2019) and in June 2021

until April 2023 (reference no. IT2120210002 of 28/06/2021). The renewal procedure is ongoing.

The Decree of the Ministry of Infrastructure and Transport of 2 August 2019 identified - in

accordance with art. 2, paragraph 4, of Legislative Decree no. 50 of 14 May 2019, “Implementing

Directive 2016/798 of the European Parliament and of the Council of 11 May 2016 on railway

safety” - the Brescia Iseo Edolo line (Iseo Branch) between the railway networks functionally

isolated from the rest of the railway system, subject to the application of the rules defined by ANSF

Decrees no. 1/2019 and no. 3/2019 with the resulting cessation of all responsibilities of the Ministry

of Infrastructure and Transport.

In June 2021 FERROVIENORD obtained the Certificate of Approval (reference no. GI2021001

of 28/06/2021), valid until April 2023.

11.2 LOCAL PUBLIC TRANSPORT

Updates are provided below on national legislative developments relating to the LPT sector.

To address the COVID-19 epidemiological emergency, in 2020, 2021 and 2022, several national

and regional measures containing financial and other support measures were issued to public and

private LPT operators. The main regulations aimed at making up for lost tariff revenues are outlined

below.

Article 92, paragraph 4-bis of Decree Law no. 18 of 17 March 2020 provided for the recognition of

fees on the basis of contractual programming, despite the remodulation of the offer implemented

following the epidemiological emergency.

To partially offset loss of ticketing revenues, article 200, paragraph 1, of Decree Law no. 34 of 19

May 2020 (Relaunch Decree) converted, with amendments, by Law no. 77 of 17 July 2020,


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Financial Report as at 31 December 2022	page 88

established a fund with the Ministry for Infrastructure and Transport with an initial amount of EUR

500 million for the year 2020, to offset the reduction of tariff revenues from passengers in the

period from 23 February 2020 to 31 December 2020 compared to the average tariff revenues

recorded in the same period of the previous two years.

The endowment of the fund was then increased by EUR 400 million for 2020 by art. 44, paragraph

1 of Decree Law no. 104/2020 (August Decree). This provision also provided the possibility to use

the greater resources allocated, up to a limit of EUR 300 million, to finance additional local and

regional public transport services for students as well.

With the subsequent art. 27 of Decree Law 149/2020 (Ristori bis decree) converted into law by Law

176/2020 art. 22-ter was extended until 31 January 2021, the reference period in relation to which

companies may make use of the Fund for local public transport companies due to the lower tariff

revenues realised during the COVID-19 emergency period, in addition, the Fund's endowment was

increased by a further EUR 390 million, of which a portion of up to EUR 190 million to finance

additional local and regional public transport services, including for students. Therefore, of the

additional EUR 390 million allocated for 2021, EUR 200 million is earmarked to compensate for

the lower revenues of the LPT companies already identified by art. 200, paragraph 1 of the

aforementioned Decree Law no. 34/2020 and EUR 190 million for additional local and regional

public transport services.

Decree Law no. 41 of 22 March 2021 (“Support Decree” - converted with amendments by Law no.

69/2021), which allocated an additional EUR 800 million to compensate for the reduction in tariff

revenues deriving from the decrease in passengers. This appropriation is allocated on a priority

basis for lost revenues for 2020 and, for the remainder, from January 2021 until the expiry of

regulatory measures aimed at establishing limitations on vehicle capacity; Decree Law no. 73 of 25

May 2021 (“Support bis Decree” - converted with amendments by Law no. 106/2021), allocated

funds of EUR 450 million to be allocated to additional LPT services.

Decree Law no. 105 of 23 July 2021 (converted with amendments by Law no. 126/2021), which

extended to 31 December 2021 the term - provided for by art. 92, paragraph 4 bis, of the “Cura

Italia Decree” - until which the Entities awarding LPT services may not apply to the operators of

the aforesaid services either fee reductions, or penalties or sanctions due to the reduced number of

runs made or distances covered as a result of the pandemic. The fee guarantee was then extended to

31 March 2022 by means of a provision introduced during the conversion of Decree Law no. 221 of

24 December 2021.


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Financial Report as at 31 December 2022	page 89

Article 1, paragraph 186 of Law no. 178 of 30 December 2020, regarding the law on the State

budget for financial year 2021 and the multi-year budget for the 2021-2023 three-year period

provided for an increase by a further EUR 450 million in the endowment of the fund to be intended

for additional LPT services allocated by Decree Law no. 73 of 25 May 2021 (“Support bis Decree”

- converted with amendments by Law no. 106/2021). The endowment of the latter Fund was further

increased by EUR 80 million for 2022 by article 24, paragraph 1 of Decree Law no. 4 of 27 January

2022. These resources, until 31 March 2022, the end of the state of emergency, are allocated to fund

additional services planned in order to handle the effects arising from the limitations placed on the

vehicle filling coefficient, and subject to the detection of actual use by users in the year 2021.

Lastly, Law no. 197 of 29 December 2022 (State Budget for the 2023 financial year and multi-year

budget for 2023-2025) addressed the subject of compensation for lost revenues as a result of the

COVID emergency with the provision set forth in article 1, paragraph 477, supplementing article

200 of Decree Law no. 34/2020 with paragraph 2-bis; the measure provides for the refinancing, for

a total of EUR 350 million (EUR 100 million for 2023 and EUR 250 million for 2024), of the

“traffic revenue shortfall fund” to cover the reduction in passenger fare revenues suffered by local

and regional public transport companies, state-owned companies and awarding bodies (in the case

of gross cost Public Service Contracts) in the period from 1 January 2021 to 31 March 2022.

In connection with the above-mentioned measures, grants corresponding to 90% of the allocated

resources were paid out on the basis of the Ministry's LPT Observatory data collection. The

disbursement of the remaining 10% remains conditional on the results of 2022 monitoring and the

verification of any 2020-2021 overcompensation pursuant to art. 2 paragraph 3 of Decree 489 of 2

December 2021.

To complete the regulatory framework related to the COVID-19 epidemiological emergency

concerning Local Public Transport, it should be noted that art. 4-bis of the already mentioned

Decree Law no. 18 of 17 March 2020 establishes that “Until the end of the measures for the

containment of the COVID-19 virus, all the procedures in progress, relating to the awarding of local

public transport services, may be suspended, with the option of extending the contracts in place on

23 February 2020 for up to twelve months after the declaration of the end of the emergency; the

public procedures relating to local public transport services already defined by awarding on 23

February 2020 remain excluded”.


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Financial Report as at 31 December 2022	page 90

It should be noted that the Lombardy Region approved on 25 May 2021, no. 8 art. 30, the

amendment of art. 60 of Law 6 of 2012, postponing the deadline for carrying out tenders for the

renewal of concessions/service contracts by 2 years, after the end of the emergency period.

Finally, again in order to contain the negative effects of the epidemiological emergency, it should

be noted that art. 5 of Regional Law no. 4 of 2-4-2021 “Interventions in support of the economic

fabric of Lombardy” guarantees that “in order to contain the negative effects of the COVID-19

epidemiological emergency, starting on 23 February 2020 and until the end of the state of

epidemiological emergency and, in any case, not beyond 30 April 2021, the Region, as client, does

not apply to the operator of regional railway infrastructure, even where provided for by contract,

measures to increase the efficiency of costs and reductions in fees due to the lower number of trips

made on the network under its responsibility, for reasons not attributable to the operator itself,

compared to what was budgeted at the beginning of each year.”

11.3 MOTORWAY INFRASTRUCTURE

On 23 February 2022, the Ministry of Infrastructure and Sustainable Mobility sent the subsidiary

the draft outline of the second additional agreement, for the complete drafting of the file relating to

the update of the Economic and Financial Plan to be submitted to the Transport Regulatory

Authority in order to obtain its opinion.

Following the request made to the Awarding Body by the Company on 17 February 2022 in

relation to the release of a portion of the “Provision for delayed maintenance”, corresponding to the

greater expenditure incurred in 2021 with respect to the contractual forecasts in force, on 5 April

2022 the Awarding Body expressed its authorisation to release the provision. The communication

specifies that this is without prejudice to the Company's obligation to carry out all the maintenance

operations necessary to ensure the full functioning of the infrastructure under its management in

compliance with the contractual commitments and the obligations arising from current legislation.

At the end of June of this year, a memorandum of understanding was signed between the subsidiary

and the Awarding Body “for the approval of the operating plans prepared by the motorway section

managers”. The protocol calls for the implementation of a dynamic monitoring system for the

remote control of bridges, viaducts and tunnels, and also provides special financial resources for all

concessionaires in connection with this implementation. The subsidiary will receive a EUR 5.4

million contribution in return for the activity established in the protocol, to be disbursed in

2022-2026, the year in which all activities set forth in the plan are to be considered completed.


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Financial Report as at 31 December 2022	page 91

As noted above, in October, the subsidiary filed a petition with the Awarding Body in connection

with the tariff adjustment to be applied as of 1 January 2023. The request, as instructed by the

Awarding Body, was developed using the elements set out in ART Resolution 69/2019. The

approval of the above-mentioned application was postponed until the definition of the procedure to

update the economic and financial plan prepared in accordance with the resolutions adopted by the

Transport Regulatory Authority.

In light of ruling no. 24/2023 of the Piedmont Regional Administrative Court, as mentioned above,

which rejected the Company's appeal against the Transport Regulatory Authority resolutions, the

Company is in the process of preparing a new proposal to update the Economic and Financial Plan.

12MAIN RISKS AND UNCERTAINTIES

In carrying out its activities, the Group is exposed to external risks and uncertainties, deriving from

external factors connected to the general macroeconomic context in addition to those specific to the

operating segments in which the operations are carried out, to which the risks deriving from

strategic and internal management choices are added.

FNM S.p.A. prepared and adopted, as an integral part of its Internal Control and Risk Management

system, a Risk Management process aimed at identifying and managing the various types of risk to

which the Company and the Group are exposed both in relation to the external context of reference

and to the specific technical and operational characteristics of the various sectors in which the

investee companies operate.

The main purpose of the process is to adopt a systematic approach to the identification of priority

risks, to assess potential negative effects and to take the appropriate actions to mitigate them.

To this end, FNM S.p.A. has adopted a risk management model and recognition methodology that

assigns an index of relevance to risk based on the assessment of the overall impact, probability of

occurrence and level of control.

Under the coordination of the Risk Committee the identified Process Owners identify and assess the

risks under their remit through a Risk Self-Assessment process and provide a first indication of

associated mitigation actions. The results of the process are subsequently consolidated at a central

level in a map, where the risks are prioritised on the basis of the resulting scoring and aggregated to

allow for the coordination of mitigation plans in an integrated risk management perspective.

During the year and as part of the periodic risk assessment activities carried out by FNM - with the

support of the Risk Manager - it defined risk threshold values, which are parameterised and


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Financial Report as at 31 December 2022	page 92

proportionate to the activity and size of the Group’s individual subsidiaries, the surpassing of which

is not deemed compatible with the Issuer's risk appetite. The risk scenarios thus identified qualify as

“top-risk”, against which FNM's management has mitigation plans in place to bring risk values

within limits consistent with the identified threshold values.

In addition, during 2022, the annual business risk assessment was updated and the 2022 Risk

Assessment plan was approved on 18 March 2022. The activity is currently being finalised and has

been conducted in continuity and integration with previous analyses, following approval by the

Risk Committee, with the aim of:

•ensuring a better understanding of the risks to which the Group is exposed and,

consequently, of the potential impact of those risks on the economic and financial results;

•identifying improvement actions to be implemented on the existing prevention and

protection solutions;

•assessing possible margins for improvement of current insurance coverage programmes in

place.

The reference methodology used for risk management is UNI ISO 31000:2018.

The main risk scenarios are provided below, separately identifying those common to the various

operating segments and those of each sector.

Finally, in relation to specific financial risks and more detailed analyses of credit and liquidity risk,

please refer to the Notes to the separate financial statements (Note 35) and the consolidated

financial statements (Note 51).

12.1MAIN RISKS

Uncertainty of the legislative and regulatory framework

The FNM Group chiefly operates in the railway and automotive local public transport (LPT)

segment. This segment is characterised by considerable legislative and regulatory complexity and,

for over ten years, has been the object of a deep and radical transformation process, not always

without interpretative and applicative uncertainties and far from being considered stabilised.

In relation to railway transport specifically, on 13 April 2015, the Lombardy Region and Trenord

signed the new Public Service Contract for regional and local public rail transport for the period

from 1 January 2015 to 31 December 2020. The expiry date - initially extended to 31 December

2021 by art. 2 of Regional Law no. 26 of 28 December 2020 - was extended to 31 July 2023 by

Regional Law no. 17 of 8 August 2022 on account of the exceptional economic instability situation


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Financial Report as at 31 December 2022	page 93

in progress, particularly with reference to the increase in the costs of raw materials and the

evolution of the inflationary process, which results in a framework of economic and financial

uncertainty, pending the assignment of the regional railway service in compliance with the

provisions of European Regulation no. 1370/2007 of the European Parliament and of the Council of

23 October 2007.

On the other hand, on 15 February 2016 the concession to FERROVIENORD was renewed to 31

October 2060, on 21 December 2022 the new Public Service Contract was signed, with a duration

from 1 January 2023 to 31 December 2027, to the same company, while on 28 July 2016 the new

Programme Agreement was signed, with a term from 28 July 2016 to 31 December 2022, later

extended to 31 December 2027 with Regional Government Decree of 14 December 2020, as

previously described in paragraph 6.2 “Railway infrastructure”.

In relation to road transport and, consequently, to the LPT activities of the Group through FNM

Autoservizi S.p.A. and ASF Autolinee S.r.l., despite the uncertainty deriving from the management

of the concessions for the provinces of Brescia and Varese extended to 31 December 2023 or the

date when the new operator takes over the service (only relating to FNM Autoservizi S.p.A.) and of

the Public Service Contract for the province of Como extended to 31 December 2023 or the date

when the new operator (for both investee companies) takes over the service, the risk of non-

assignment/renewal is shared by all competitors as, in this hypothesis, the costs of the Group would

be reduced due to the regulatory provisions for the new operator to take over the use of vehicles and

personnel.

The same considerations apply in relation to LPT activity carried out by ATV S.r.l. in Verona and

province, with a contract expiring in June 2019, extended to 31 December 2023.

Failure to comply with the commitments to the Awarding Body

Inability to comply with contractual commitments or an impairment of the Group's image from a

reduction of the service quality provided represents a significant risk for maintaining the cost-

effectiveness of the Public Service Contracts, Programme Agreements and Concession Agreements

due to the risk of contractual penalties being debited.

Faced with this risk, the Group continuously monitors the quality of the service provided to the

Awarding Body (with reference to the quantitative and qualitative parameters defined in the

Agreements) and to the Customer (with reference to the perceived level of satisfaction with service

quality and safety), both through continuous checks on procedures and processes, carried out by the

relevant internal departments and by external bodies, and through staff training activities to ensure

high service standards, as well as through systematic reviews of procedures and operating processes


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Financial Report as at 31 December 2022	page 94

aimed at maintaining the efficiency and effectiveness of the service provided and the safety of

Group personnel.

Employee-related risks

Labour costs represent a significant production factor for the four main operating segments. The

need to maintain service levels consistent with the Awarding Body and Customer's expectations and

the complexity of labour law regulations lead to limited flexibility in the management of labour

resources; therefore, significant increases in staff unit costs could significantly affect the Group's

profitability, since the possibility downsizing the workforce and ensuring the same level of quality

and efficiency of operations is limited.

From this point of view, as described in paragraph 13 below “Employees: Numbers, costs and

training”, the Group considers it a priority to maintain a constructive dialogue with staff and trade

unions to guarantee the satisfaction of efficiency and effectiveness objectives for production

processes with full assumption of social responsibility, job security and guaranteed employment

even in recession periods.

In addition, there is difficulty in finding specialised personnel, a phenomenon influenced by several

factors including: the rising cost of obtaining qualifications and professional licences and an

extremely dynamic and competitive labour market. In this sense, companies in the road and

motorway sector offer specific categories of workers ad hoc training courses and specific

development plans.

Cyber security risk

With respect to the risk of cyber attacks, also in view of a context in which the number of hacker

attacks is constantly increasing in terms of both frequency and impact, the Group has adopted

significant measures to protect both software and hardware infrastructures (e.g. by activating a

Security Operation Centre, or “SOC”, service) in addition to setting up Disaster Recovery and IT

Business Continuity systems.

Climate change risk

The assessment of the impact of the Company's businesses on climate change is currently of

priority importance, as also shown by the 2022 materiality list set forth in the Non-Financial

Statement, updated following the performance of shareholder engagement activities. FNM attaches

great importance to this issue and has put actions into place to guard against the risks and

opportunities involved.


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Financial Report as at 31 December 2022	page 95

Aware of the importance of safeguarding the environment, the FNM Group strives to play a

proactive role in the energy transition, which it believes is a fundamental objective to be pursued

and an opportunity for future development. From this perspective, on 16 September 2021 FNM's

Board of Directors approved the 2021-2025 Strategic Plan which establishes the Group as an

integrated operator of sustainable mobility, guided by environmental, social and governance (ESG)

sustainability principles. For the first time, the plan integrates and quantifies ESG objectives in the

definition of the Group's business strategy in order to develop new forms of multimodal, integrated

and sustainable mobility, leveraging the synergistic management and development of the Group's

complementary infrastructure portfolio, acting as a mobility partner for the communities served. In

this sense, the development of new mobility services, implemented through the use of digital

technologies and adapted to meet user requirements, is accompanied by the maintenance and

improvement of conditions of safety and resilience to extreme natural events. An integral part of the

plan, which contributes to the achievement of 10 of the 17 UN 2030 Agenda Sustainable

Development Goals (SDGs) on which it has an impact, it therefore also provides concrete support

to local development, through environmental and urban redevelopment projects along the railway

route.

To enable the achievement of sustainability goals and active participation in the energy transition

process, for the first time the Plan identifies key indicators with precise targets for 2025, including

fleet development and decarbonisation.

All of this translates into an investment plan of about EUR 850 million in the 2021-2025 period, of

which more than one-third in activities eligible for definition as “green” by the European

Taxonomy.

Below are the main objectives that the Group has set to demonstrate its commitment to fostering

and promoting the energy transition process and which are associated mainly with fleet

modernisation policies, with the introduction of alternative fuel vehicles (e.g. hydrogen trains,

electric buses, etc.):


	2025	2022	2021

Scope 1 and Scope 2 CO2 emissions / revenues	48 ton/Co2eq/M€ (-35% vs 2020)	68.4 ton/Co2eq/ M€ (-7.6% vs 2020)	70.4 ton/Co2eq/ M€

Use of electricity from renewable sources for corporate consumption and services throughout the infrastructure managed by the Group	100.0 %	47.0%	51.0 %

It should be noted that in 2022 the Group further reduced its Scope 1 and Scope 2 CO2 emissions in

relation to revenues, achieving a reduction of more than 7% compared to 2020 levels (equal to 74.0


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Financial Report as at 31 December 2022	page 96

tonnes of CO2eq/M€). In contrast, the use of renewable energy for corporate consumption and

services throughout the Group's infrastructure decreased by 4 percentage points compared to 2021,

as the 2022 figure was affected by higher electricity consumption, mainly attributable to the higher

incidence of MISE consumption, which is considered for 12 months in 2022 compared to 10

months in 2021. This increase more than offset the lower consumption for services throughout the

managed railway infrastructure, which also corresponded to more significant certified renewable

energy purchases compared to the other segments considered, which decreased more than

proportionally year-on-year.

Risks associated with the COVID-19 pandemic

Group companies have processes and procedures in place that support the identification,

management and monitoring of pandemic events with potential significant impacts on the

company's resources and business. To this end, a company protocol has been drawn up regarding

preventive measures aimed at combating and limiting the spread of COVID-19.

The Group companies, especially in the automotive and rail passenger transport operating segment,

have committed themselves to ensuring a prompt response to the COVID-19 pandemic threat with

the aim of addressing certain aspects during the pandemic situation and, in the following months,

defining how service will resume.

These processes are aimed at maximising the timeliness and effectiveness of the actions taken in

order to offer added value to stakeholders, trying to limit the impact of adverse events that could

generate discontinuity in the transport service and ensuing inconveniences for travellers, while

protecting the interests and safety of customers, employees, shareholders and partners.

Inflation risk

The recovery in demand, in the presence of raw material and intermediate good supply chain

tensions that hinder manufacturing production, and the rise in energy prices, led to an increase in

inflation already in 2021. In view of the serious uncertainties linked to the conflict between Russia

and Ukraine that broke out on 24 February 2022 and the economic sanctions imposed, in 2022 there

was a significant increase in inflation, especially caused by rising energy and raw material prices.

The Group is also exposed to these risks.

With reference to the risk of an increase in energy costs, in particular for the fuels (diesel and

methane) used for local public transport by road and for utilities (which include headquarters and

railway infrastructure lighting), as well as for the costs incurred by Trenord for railway traction,

mixed price (fixed and variable component) purchase contracts are assigned on the basis of auctions


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Financial Report as at 31 December 2022	page 97

with a maximum duration of one year. MISE's power purchase contracts, on the other hand, are

variable price.

In the case of the Rail Infrastructure segment, any price increases are partially mitigated by the

annual adjustment to inflation of the Public Service Contract between Ferrovienord and the

Lombardy Region. In the Road passenger mobility segment, partial protection is provided by the

annual adjustment, in some of the areas served, of the service contract and tariffs following the

increase in the inflation rate. Both railway infrastructure managers and LPT road operators

benefited in 2022 from the special energy concessions for energy-intensive companies. It should be

noted that feasibility studies are under way for the installation of photovoltaic systems along the

managed railway network.

Ro.S.Co. rolling stock lease revenues are instead not adjusted for inflation.

As for the Motorways segment, the rate increase applied in 2022, which recovers the increase

voluntarily suspended by MISE that was authorised as of 1 January 2019, offset at least in part the

effect of the increase in energy prices. The rate adjustment established with the new 2020-2024

EFP, which is currently being approved, could offer additional partial protection against the

increase in inflation as it is calculated on the basis of parameters that take account of the

programmed increase in inflation set at 0.80%. The updating of the effects of the inflationary

parameter is postponed to the renewal of the Economic and Financial Plan when the next

2025-2028 regulatory period expires.

With regard to Trenord, the service contract currently in place until 31 July 2023 provides for the

direct recognition of the costs of electrical traction on the RFI network by the Lombardy Region.

As part of the negotiations for the new 10-year service contract beginning on 1 August 2023, which

will be based on the principles defined by the ART, the allocation of the risk of fluctuations in

energy prices to the Awarding Body is under discussion.

Regarding maintenance costs, which are exposed to increases in the prices of raw materials, as well

as other production cost items, it should be noted that, in line with market trends, in all segments,

suppliers are requesting a review of contract prices.

It should be noted that in order to cope with the exceptional increases in the prices of certain

construction materials as well as fuels and energy products to be used in the execution of public

works, art. 26 of Decree Law no. 50 of 17 May 2022 was introduced into the legal system,

containing “Urgent measures on national energy policies, business productivity and the attraction of

investments, as well as on social policies and the Ukrainian crisis” (“Aid Decree”, converted into


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Financial Report as at 31 December 2022	page 98

Law no. 91 of 15 July 2022), which, in order to allow for the performance of contracts awarded on

the basis of bids with a final submission deadline by 31 December 2021, provided for the

application of updated price schedules, also as an exception to the specific contractual clauses, for

all works accounted for from 1 January 2022 to 31 December 2022.

With Law no. 197 of 29 December 2022 (“State Budget for the 2023 financial year and multi-year

budget for 2023-2025”), the Aid Decree mechanism was substantially extended also with reference

to the year 2023.

The Group has taken steps to obtain recognition of the higher charges as required by the

regulations.

In view of the above, operators may request extraordinary support from the authorities in order to

guarantee the provision of the public service, also taking into account the principle laid out in art. 4

of EU Regulation no. 1370/2007, which establishes that public service operators must maintain

economic and financial balance.

Lastly, as already noted in previous years, in addition to price increases, production chains continue

to be negatively impacted by delays in the supply of raw materials and semi-finished goods. The

Group could therefore be affected by this situation, which could lead to delays in the delivery of

materials, rolling stock and vehicles.

The Group remains flexible in the effective management of variable and discretionary costs and

carefully monitors developments in order to understand whether and to what extent price increases

could have an impact on the Group's expected results.

Risk of rising interest rates

The rapid rise of inflation to extraordinarily high levels in 2022, and a faster-than-expected post-

pandemic recovery, have prompted central banks to initiate the withdrawal of monetary stimulus

measures in order to pursue price stability and safeguard financial stability. In particular, the ECB

gradually ended its net purchases of financial assets and announced from July onwards a phase of

official rate hikes that led to interest rates on main refinancing operations, marginal refinancing

operations and deposits with the central bank being set at 3.00%, 3.25% and 2.50%, respectively,

effective as of 8 February 2023.

The FNM Group has limited exposure to the risk of rising interest rates. Thanks to the issue of the

EUR 650 million fixed-rate bond maturing in October 2026, which enabled the repayment of the

floating-rate Bridge Loan taken out to finance the acquisition of MISE, 85% of the Group's gross

debt at 31 December 2022 is represented by fixed-rate loans. The remaining 15% of debt is

represented by loans held by MISE taken out at variable rates. As highlighted in chapter 51, a 125


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Financial Report as at 31 December 2022	page 99

bps increase or decrease in interest rates represents a net increase or decrease in the incidence of

financial expense on the net profit of EUR 1.4 million, net of the tax effect.

The fixed coupon of 0.75% on the bond made it possible to reduce the average cost of debt for the

Group for 2022 from 1.94% to 1.27%.

The Group is subject to other specific risks of the individual operating sectors, as described below:

12.2TYPICAL RISKS OF THE RAILWAY INFRASTRUCTURE OPERATING

SEGMENT

Railway network maintenance management by FERROVIENORD on the basis of a Public Service

Contract as already described in the comments on activities in this segment, does not present

particular areas of risk as it is a service governed by extremely stringent regulations relating to the

safety of stations and the network and by precise planning of financed interventions agreed with the

Awarding Body.

However, it should be noted that, in relation to the planning of improvement activities on the

network aimed at increasing service efficiency and the cost of renewing the network itself, the

Group faces a risk of low availability of long-term loans and dependence on financial resources

from the public operator, which are also influenced by external variables that are difficult to

control.

Service and network security

Security risk must be separated into that linked to traffic safety and of the security of people and

assets.

For both areas, the operating segments of the Group are subject to a high level of regulation from

the point of view of operations management and numerous inspections carried out by the competent

supervisory bodies.

Failure to comply with the regulations in force, in addition to exposing the Group to the risk of

litigation, may result in the loss of reputation with Licensers and Customers, at the risk of

compromising the cost of the Public Service Contracts.

With specific reference to FERROVIENORD, the progressive installation of Train Stop Systems

(SCMT and SSC) across the entire network significantly increased the level of safety guaranteed.

The progressive availability of new technologically advanced rolling stock than that currently in use

will also contribute to the further increase in traffic safety.


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Financial Report as at 31 December 2022	page 100

The safety of people and property is constantly monitored with reference to assaults and acts of

vandalism, but also taken into account the perception of the safety of passengers and employees. As

part of its plans for the technological evolution of its security, safety and passenger assistance

systems, in 2022 FERROVIENORD continued:

•the executive phase of the “Renewal of video surveillance systems” in the station areas and

associated sensitive areas;

•the implementation phase of the “Integrated Supervision Software Platform (PIS) for

controlling FERROVIENORD stations”;

•the development of the “FERROVIENORD Single Operations Room” project - in

implementation of the specific “Process Digitalisation” pillar of the Business Plan - with the

aim of improving the operational management processes of the railway network, making the

maintenance process more efficient and the management of railway traffic more effective,

also thanks to the use of innovative technologies.

12.3TYPICAL RISKS FOR THE ROAD PASSENGER MOBILITY OPERATING

SEGMENT

Risks related to fare policies and traffic developments

Historically, the companies operating in LPT in Italy have had a fare system that has not allowed

for a progressive approach to fares as seen in other European countries with the result that the fares

currently in force, recognised by the Public Service Contracts, are considerably low with respect to

international rates.

The reduction in the demand for mobility, also in view of the evolution of the economic context and

the changes in travellers' habits resulting from the pandemic crisis, the rising cost of the main

production factors and a failure to adjust tariffs could pose a risk to the continued profitability of

existing service contracts.

Service scheduling management processes and careful management of cost trends enable the

maintenance of income balances. The investee companies are also engaged in negotiations with the

Awarding Bodies to revise tariff trends consistent with cost dynamics.

Risk of increased fuel costs


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Financial Report as at 31 December 2022	page 101

The variable “diesel and methane fuel price” significantly affects the profitability of auto mobile

transport, as shown by the performance of the investee companies FNMA, ATV, La Linea and ASF

Autolinee, as fuel represents a fundamental production factor; in the context of the uncertainty set

out in the previous paragraph “Main risks - Uncertainty of the legislative and regulatory

framework”, the impossibility of governing this exogenous variable can only be countered with

service revision proposals consistent with the dynamics of diesel and methane costs.

12.4TYPICAL RISKS OF THE MOTORWAY OPERATING SEGMENT

Operational risk

With regard to operational and management risks, the subsidiary has set up preventive procedures

and controls that can be traced back to plans for monitoring maintenance operations, as well as an

insurance coverage plan to limit the economic impact that may arise as a result of motorway

accidents.

Regulatory risk

By offering a public utility service, the subsidiary operates under a concession regime and is subject

to specific regulations issued by the Regulatory Body, therefore it is exposed to regulatory

provisions that may affect the determination of the motorway toll and turnover in general with

consequences on economic and financial balance as well as the implementation of the investment

program, without prejudice to the conventional provisions relating to the updating of the Economic

and Financial Plan in the presence of extraordinary events or at the end of the regulatory period.

12.5TYPICAL RISKS FOR RAIL PASSENGER TRANSPORT

Risks related to fare policies

Historically, the companies operating in LPT in Italy have had a fare system that has not allowed

for a progressive approach to fares as seen in other European countries with the result that the fares

currently in force, recognised by the Public Service Contracts, are considerably low with respect to

international rates.

A contribution to the resolution of this problem is provided by the tariff policy envisaged by the

LPT Pact signed in 2009 by the Lombardy Region with segment operators, which provides for

increases not only linked to inflation recovery, but also to an effective improvement in service

quality.


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Financial Report as at 31 December 2022	page 102

A significant portion of revenues in the operational segment of Passenger Transport by rail is from

tickets and season tickets, even in the context of a segment strongly influenced by social needs and

therefore supported by public grants. Revenues deriving from fares only cover a part of the service

management costs. The national legislator defined at least 35% of traffic revenue as an adequate

level a coverage of transport management costs. For 2019, Trenord guaranteed coverage of more

than 46% of operating costs with revenues from tickets and season tickets. Restrictions imposed on

the movement of people reduced that percentage to about 23% in 2020, 26% in 2021 and 39% in

2022. However, the investee continues to pursue the continuous improvement of the efficiency of

its production processes.

Risk of fare evasion

Fare evasion represents a significant risk for Trenord, given the size of the company's business and

the number of travellers who use the Trenord fleet every day to get around.

In 2022 Trenord pursued its objectives of combating fare evasion through the implementation of

actions that provide for the adoption of greater supervision and controls in the stations considered

most critical by hiring dedicated personnel for ground and on-board controls (“Assistance and

Control” project) and adopting ticket issuing methods capable of combating this phenomenon (e.g.

implementation of STIBM and SBME, introduction of new automatic ticketing machines).

Risk of traffic evolution

Market revenues are affected by the change in demand for rail services in terms of volumes on

some or all of the routes served and the type of passenger, also taking into account the evolution of

the economic context and any changes in traveller habits connected, for example, to the effects of

the spread of the Covid-19 pandemic.

Trenord pursued its continuous monitoring process in terms of traffic flow and trends during 2022,

and further investments are planned to analyse market demand and as a result define an appropriate

mobility offer. Specifically, this includes initiatives such as Automatic People Counting - which

makes it possible to know in real time who is on board the train, providing useful information for

both the company and its passengers - as well as analysis and evaluation tools based on big data

aimed at studying demand for mobility in order to ensure offer flexibility and service effectiveness.

This was done not only to respond to the effects of the pandemic but, from a strategic perspective,

to have an instrument capable of providing concrete indications of demand dynamics, in order to

provide adequate service that meets the needs of actual demand. It is evident that the risks


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Financial Report as at 31 December 2022	page 103

connected to the continuation of mobility habits in the wake of the pandemic are certainly still

factors of utmost importance with respect to the evolution of railway traffic.

Risk of delay in fleet renewal

In order to improve the quality of service, an investment plan was launched by the Lombardy

Region to renew the fleet of rolling stock in operation. As part of the required continuous increase

in production, it is more important than ever to monitor the plan for the development and entry into

operation of new rolling stock in order to avoid repercussions on service quality in the event of

delays in deliveries from the manufacturers.

The company monitors the rolling stock renewal plan, compliance of new rolling stock delivery

with contractual specifications and any delivery delays. During 2022, there were some delays in the

new rolling stock delivery schedule due to the difficult international raw material supply situation.

To date, production planning is such as to use the available and maintained rolling stock with the

consequent mitigation of the risk in question.

12.6TYPICAL RISKS FOR RAIL FREIGHT TRANSPORT

Reduced traffic flow

Any exogenous or endogenous variable that determines a reduction in freight traffic flows has an

impact on the operating segment under consideration. Uncontrollable exogenous factors that can

affect traffic flow are recession, oil price trends and in general the cost of transport which have an

effect on the propensity to move goods. The impact of the risk in question is chiefly economic with

a reduction in sales and profitability.

12.7TYPICAL RISKS OF THE GROUP’S OTHER AREAS OF OPERATION

Risk of deterioration of the macroeconomic situation and cuts in public spending

In relation to operational risks of IT consulting activities developed by the Group through

NordCom it should be noted that the development of IT activities with third-party customers and

government is conditioned by uncontrollable external variables such as the macroeconomic

situation and government spending power: given the impossibility of controlling this variable,

NordCom maintains a flexible cost structure in order to be able to reduce any impact on

profitability connected to the fall in revenues from these counterparties.


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Financial Report as at 31 December 2022	page 104

13.MOST RELEVANT LITIGATION AND OTHER INFORMATION

The most relevant litigations for FNM and Group companies are summarised below. It should be

noted that, also based on the opinion of appointed consultants, additional charges are not expected

with respect to those already reflected in the separate and consolidated financial statements as at 31

December 2021.

13.1 FERROVIENORD

In relation to the status of the ongoing litigation with the supplier Cogel S.p.A. under liquidation,

which was noted in the management report to the financial statements as at 31 December 2020, it

should be noted that actions to protect the subsidiary's interest continue, with the monitoring of the

liquidation situation of the counterparties. The litigation is currently in the third instance.

It should also be noted that, as a result of the positive judicial decisions, the guarantees relating to

these contracts were collected for an amount of EUR 0.7 million.

The Cogel judgement was concluded in the first instance with the Court of Milan decision

recognising the legitimacy of all three resolutions of the contracts agreed with Cogel (also ordering

the contractor to pay the Affori contract penalty equal to EUR 887,239 and make the insurance

payment in the Busto contract equal to EUR 63,194). At the same time, though, it rejected the

FERROVIENORD’s damage claims and ordered the railway company (in relation to the Affori

contract) to repay to Cogel - by way of Restitutio ad integrum - the value of the contract works

already carried out, i.e. EUR 7,468,694.96. The decision was appealed by FERROVIENORD and

on 1 February 2018 decision no. 534/2018 of the Court of Appeal was published: it confirmed

Cogel's right to the value of the works, as already decided in the Court of first instance, but unlike

the Court, the Court of Appeal quantified the sum due, resulting from the work progress report, as

EUR 8,398,737.40 (and not EUR 7,468,694.96 as claimed by Cogel). The Court of Appeal

amended the Court's judgement to the extent that it had not taken into account the fact that most of

the value of the works executed at the time of the resolution had already been paid for by

FERROVIENORD in the amount of EUR 7,087,783.68. The Court of Appeal therefore ordered

FERROVIENORD to pay Cogel the residual value of the works, amounting to EUR 1,310,953.72

and not EUR 7,468,694.96 as ordered by the first Court. The Court of Appeal also confirmed the

first instance judgement to the extent in which it ordered Cogel to pay the Affori penalty and the

Busto Arsizio insurance. Finally, FERROVIENORD, jointly and severally with Cogel, must pay

legal fees in favour of Generali Italia S.p.A., for the total amount of EUR 25,560.00 with any

additional sums as required by law and flat-rate reimbursement.


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Financial Report as at 31 December 2022	page 105

The Court of Appeal's judgement was challenged by Generali Italia S.p.A. who asked for

FERROVIENORD jointly and severally with Cogel or exclusively to be ordered to repay the

amount of EUR 680,406.91 plus interest and revaluation (equal to the amount already paid as a

guarantee). Subsequently, Cogel also challenged the same judgement requesting the recognition of

default interest pursuant to Legislative Decree 231/2002 for an amount of EUR 963,369 (in addition

to the legal interest already recognised in the second-degree decision in its favour).

FERROVIENORD defended the proceedings and in turn challenged the second instance judgement

to, among other things, the extent in which it rejected the claim for compensation for the damages

quantified as EUR 3,332,154.54. On 17 June 2021, judgement no. 17453/2021 was issued in which

the Court of Cassation: i) rejected the demand of Generali Italia S.p.A. seeking an order requiring

FERROVIENORD to pay EUR 680,406.91; ii) rejected the cross-appeal of Cogel seeking an order

requiring FERROVIENORD to pay EUR 963,638.99; iii) upheld the second grounds of

FERROVIENORD's cross-appeal (relating to the damages suffered due to the higher amount paid

to the new contractor for the Saronno-Seregno works); iv) referred the case back to the Milan Court

of Appeal for the continuation of the proceedings between FERROVIENORD and Cogel for the

damages referred to in the previous point and for legal costs; v) ordered Generali Italia S.p.A. to

pay the legal fees in favour of FERROVIENORD, amounting to EUR 11,200.00 plus additional

sums as required by law. With regard to the quantification of the damages suffered by

FERROVIENORD for the higher amount paid to the new contractor for the Saronno-Seregno

works (iii above), the case was resumed by FERROVIENORD before the Milan Court of Appeal.

At the first hearing held on 3 March 2022, the parties informed the panel that negotiations were

under way for an amicable settlement of the dispute. The Court of Appeal acknowledged the

negotiations and adjourned the case to the hearing on 28 September 2023 for closing arguments.

In two separate appeals, 41 contractor workers filed an application for the order for Ferrovienord

(acting jointly and severally) to make a contribution to INPS, respectively of EUR 99,363 and EUR

88,001 for social security contributions accrued under the procurement contract. Subsequently, five

other workers also lodged appeals with two further appeals with which an additional EUR 18,294

was requested.

Having declared their lack of jurisdictional competence due to the applicants' residence, the cases

were sent to the various courts of the workers’ places of residence. There are currently three cases

pending in first instance, while twelve cases were adjudicated against FERROVIENORD jointly

and severally with Lucentissima, subject to the benefit of prior enforcement against Lucentissima.

FERROVIENORD has appealed to amend the ten first instance rulings. The appeals have already


	FNM Group


Financial Report as at 31 December 2022	page 106

been concluded with rulings which, while upholding the joint and several liability of

FERROVIENORD and La Lucentissima, partially reduced the amounts awarded to workers. La

Lucentissima was declared bankrupt by a judgment dated 28 April 2021 and, consequently, as the

declaration of bankruptcy is brought to the attention of the Judge in accordance with procedural

formalities, the proceedings still pending will be discontinued. They will therefore need to be

resumed by the applicants against the bankruptcy.

Tax inspections and assessments

With reference to the dispute with the Customs Agency, in relation to the appeal filed by the Como

Customs Agency to overturn ruling no. 155/2016 of the Provincial Tax Commission of Como, in

favour of FERROVIENORD, filed on 20 April 2016, after several adjournments, the hearing to

discuss the dispute in question before the Regional Tax Commission was scheduled for 13 June

2019.

At the hearing of 13 June 2019, a further adjournment was granted to continue the adversarial

procedure with the Office; the case was first adjourned to 12 December 2019 and, at that time,

placed on a new docket.

During the talks aimed at settling the matter out of court, also in consideration of the recent note

Doc. no. 12243/RU of 6 March 2019, where the Central Directorate of Legislation and Customs

Procedures specified that “the importer may be considered to have met its obligation by self-

invoicing (reverse charge) of the VAT relating to royalties on the imported goods”, it was agreed to

verify the full and actual payment, by FERROVIENORD, of VAT by reverse charge, thus, the

complete fulfilment of the obligation to pay the tax.

For this purpose, the Company provided the Office with the documentation necessary for a

reconciliation between the invoices issued by the supplier (the Swiss Company Stadler Bussnang

AG) and the corresponding self-invoices issued by FERROVIENORD.

Given the positive outcome of this reconciliation, FERROVIENORD submitted to the Como

Customs Office a petition for nullification by internal review of the notice of assessment and

correction doc. no. ASP RU 15537/14 and of the order to impose administrative penalties doc. no.

ASP. RU 15550/14, to involve the Regional Directorate of the Customs Agency and the Central

Directorate in the matter.

Despite the various attempts to reach a settlement of the matter, to date it has not been possible to

reach an out-of-court solution, so the dispute pending before the Regional Tax Commission of


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Financial Report as at 31 December 2022	page 107

Milan will continue, which was concluded with ruling no. 1815/7/2021 handed down on 15 April

2021 and filed on 13 May 2021.

With the above ruling the Lombardy Regional Tax Commission rejected the appeal lodged by the

Office limited to the recovery of the tax, declaring, on the other hand, that the fine claimed by the

Agency was legitimate, although it was recalculated to EUR 1,333,076.44 in application of art. 13

of Legislative Decree no. 471/1997.

Lastly, the Customs Agency appealed this decision before the Court of Cassation, to which

FERROVIENORD S.p.A. responded by lodging a counter-appeal on 4 October 2021, together with

a cross-appeal in which it contested the aspects and points of the ruling against it.

Finally, in 2022 discussions were resumed with the State Attorney in charge of the case, who

expressed willingness to consider a proposal for an out-of-court settlement of the dispute, to be

submitted to the Agency for examination.

14PROPERTY ASSETS

As at 31 December 2022, the FNM Group owned some areas in proximity to railway stations and

the related construction rights, the main ones relating to the area of Milan Cadorna, Milan Bovisa,

Saronno, Milan Affori and the Sacconago, Garbagnate Milanese and Novara Terminals.

Information about the main initiatives pursued by the Group to valorise these areas is provided

below.

FILI PROJECT

FNM, FERROVIENORD and Trenord, together with the Lombardy Region, are committed to

“FILI”, an innovative project for the redevelopment of FERROVIENORD's main connection

centres. On the Milan-Malpensa axis, the largest urban and suburban regeneration project in Europe

is planned: a corridor for the Milan-Cortina 2026 Olympics, with new green, modern and high

visibility urban scenarios, which connects the stations of Milan Cadorna, Milan Bovisa, Saronno,

Busto Arsizio and Malpensa with an unprecedented technological and environmental journey.

For the urban part, the creation of a “synthetic forest” of around 72,000 square metres from Milano

Cadorna station to Domodossola station, which will produce oxygen for Milan thanks to the use of

advanced biotechnologies, will be of fundamental importance. In 2022, a public-private partnership

proposal was received from an international financial group that was positively evaluated in terms

of relevance and consistency with the strategic objectives of urban redevelopment and


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Financial Report as at 31 December 2022	page 108

sustainability, as included in the FNM Group's 2021-2025 Strategic Plan. The proposal was then

forwarded to the Lombardy Region in order to complete the evaluation process.

A programme of urban and environmental redevelopment in Busto Arsizio will involve the

relocation of car parks to a multi-storey building, allowing large areas of green space to be used for

collective activities, thus connecting the north and south of the city. Technical discussions with the

municipal administration began in 2022.

For the extra-urban part, reforestation is planned with the “Piantalalì” planting of 800,000 trees in

the Lombardy industrial triangle between Milan, Varese and Como, which includes an area of about

41 thousand hectares crossing 24 municipalities in two provinces of Lombardy.

The project will not only focus on forestation work or the creation of tree and shrub belts in

uncultivated areas, but will also involve nature-based work to be carried out in stations (pertinence

and proximity areas) aimed at improving the comfort of railway service users, as well as more

general environmental resilience, without reducing the function of modal interchange.

Furthermore, FERROVIENORD's project to upgrade the main connection centres includes a 72.7

km super cycle track that will connect Cadorna station to Malpensa airport without interruption. In

2022, the cycle track saw the completion of both the technical and governance feasibility project.

Finally, as described in more detail below, the project includes activities by FERROVIENORD for

the redevelopment of the Bovisa Node with innovative and sustainability-oriented criteria within

the framework of the Reinventing Cities call for tenders and for the reorganisation of the Saronno

Centro technological and maintenance infrastructure hub, with a view to achieving high standards

of functionality and safety, in addition to improving accessibility and viability.

Milano Bovisa

In March 2018, FERROVIENORD, implementing the provision updating the Programme

Agreement, presented the feasibility study for the modernisation and strengthening of the Bovisa

Node, which envisages the installation of four new tracks and a series of activities on the plant to

improve its potential and flexibility and to allow for the extension of some existing railway services

and the establishment of two new suburban lines.

The Zoning Plan (PGT), approved with Municipal Council resolution no. 34 of 14 October 2019,

placed a portion of areas of FERROVIENORD inside the perimeter of one of the “Interchange

nodes”, for which the Plan identified a specific set of rules because of the specific role attributed to

the interchange function and of the need to promote interventions for the requalification of the

system of public spaces and, in the specific case of the Bovisa Node, of the transformation areas


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present near the station and the railway embankment. The areas under FERROVIENORD’s

competence obtained a building ratio index of 0.35/sqm.

On 2 December 2019, the regulatory agreements of the partnership between FERROVIENORD and

the Municipality of Milan were formalised for participation in the “Reinventing Cities” call for

tenders, an infrastructure enhancement and urban redevelopment initiative promoted by C40.By

decision of 18 May 2021, the Municipality of Milan appointed as winner and definitively awarded

the “Bovisa Interchange Node” Site to the Mo.Le.Co.La. Team- represented by the lead company

Hines Italy RE S.r.l. - the proposal of which also included the construction of the FNM Group

headquarters.

FERROVIENORD announced the positive outcome of the verification of the fairness of

Mo.Le.Co.La.'s economic offer, particularly with reference to the economic balance between the

offer for the concession of surface rights and the costs for the construction of the headquarters.

However, by note dated 27 July 2022, FERROVIENORD informed the Municipality of Milan and

HINES Italy RE that it was no longer interested in the construction of the FNM Group's

headquarters, which will be located in the neighbouring Bovisa-Goccia area, affected by the

expansion project of the Polytechnic University of Milan Campus developed by the firm RPBW

with Renzo Piano. Following HINES Italy RE's request dated 29 November 2022, on 30 November

2022 the Municipality of Milan confirmed the extension from 30 November 2022 to 30 March 2023

of the terms set forth in the call for tenders for the signing of the preliminary contract for the

establishment of the surface right, while keeping the tender offer unchanged.

In the course of 2022, the final design of the railway works for the Bovisa Node enhancement was

finalised and the services conference was called for the approval of the project.

In consideration of the fact that the interventions concerning the railway plan, which are

fundamental for the development of the railway service, constitute substantially independent

choices, while the remaining activities are also related to the development of other important

projects in progress/under development in the area (Mo.le.co.la. project, Goccia project/”Renzo

Piano” Master Plan, light rail), the determination of the conclusion of the Services Conference

established the possibility that the project may also be implemented by functional lots.

Saronno

The project calls for the reorganisation and move of the FERROVIENORD workshops and

facilities from the areas adjacent to the Saronno Centro station to the FNM areas of Saronno Sud,


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which represents the necessary condition to definitively identify the areas available for the

presentation of an urban requalification proposal.

With Resolution no. 3 of 18 February 2021, the Saronno Municipal Council approved the Guideline

for the upgrading of Saronno Centro railway station and reorganisation of the technological -

maintenance infrastructure hub, expressing its approval of the request to the Lombardy Region to

initiate and convene the Services Conference pursuant to art. 19 of Regional Law no. 9 of 4 May

2001.

Municipal Council Resolution no. 34 of 11 March 2021 decided on the “Approval of the

Memorandum of Understanding for the upgrading of Saronno Centro railway station and

reorganisation of the technological - maintenance infrastructure hub”, in implementation of the

guidelines expressed by the Municipal Council in Resolution no. 3 of 18 February 2021.

On 5 March 2021, FERROVIENORD sent the Lombardy Region the documents constituting the

technical and economic feasibility project for the job in question, while also requesting that the

Conference of Services be convened pursuant in particular to Regional Law 9/2001. On 29 October

2021, the Lombardy Region began the procedure for the approval of the technical and economic

feasibility project with the convening of a Services Conference, pursuant to arts. 14, paragraph 3,

and 14-bis of Law 241/1990, art. 3 of Regional Law 20/2020 and art. 19 of Regional Law 9/2001.

On 26 January 2022, the Lombardy Region transmitted the final report of the Services Conference

and with Regional Government Decree no. XI/6340 of 2 May 2022 approved the technical and

economic feasibility project.

In 2022, the final planning began with an optimisation of the planimetric/volumetric and functional

layout of the project.

At the same time, dialogue continued with the owner of the adjacent Isotta Fraschini area and the

municipal administration in order to coordinate the two redevelopment projects and provide a site

for the relocation of the railway museum.

MILAN AFFORI

Approximately 54,000 square metres are involved in the project, of which 53% is owned by FNM

and 47% by FERROVIENORD. The approved Integrated Intervention Program (“PII”) envisaged

the construction of a total floor area of 27,700 square metres, of which 24,700 sqm for reception

and tertiary activities and 3,000 sqm for commercial and other compatible uses.


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The procedure for the selection of an operator interested in the execution of the PII resulted in the

signing of a real estate purchase and sale contract for a total of EUR 14 million with the company

GDF SYSTEM S.r.l. (a company of the Della Frera S.p.A. Group) with deferred payment until

2018.

Having obtained the building permit from the Municipality of Milan on 25 May 2017,

FERROVIENORD proceeded with the call for tenders for joint assignment of the executive design

and execution of the building works for the underground parking lot as envisaged in Art. 6 of the

Recognition and Specification Act of 26 June 2014. The tender procedure for the joint award of the

executive design and execution of the works ended with the tender being awarded to the company

Paolo Beltrami Costruzioni S.p.A., and the relative contract was signed on 18 July 2018. In 2019,

the Contractor developed the executive design and, on 15 April 2019, work started on the car park.

The works under the responsibility of the company Paolo Beltrami Costruzioni S.p.A. were

completed in December 2022. The final cost of the works - taking into account the 2 Submission

Documents and 1 Amicable Agreement signed as well as price revisions - amounted to EUR 7.5

million, with an increase of EUR 2.9 million compared to the contractual amount.

However, in the absence of the project for the square above the car park, intended to host the

market (“Market Square”), which is the responsibility of the operator GDF SYSTEM and the

Municipality of Milan, it has not been possible to definitively complete the emergency exits of the

car park on the square and obtain the necessary authorisations, inevitably compromising its full

usability.

Therefore, also considering the time elapsed from the stipulation of the 2014 Recognition Act, the

Municipality, FNM and GDF System agreed on the need to activate a coordinating roundtable to

prepare all documents directed at the stipulation of a new revision document amending and/or

reformulating some conventional obligations. Furthermore, noting that the economic framework

used as a reference when the Agreement was signed has changed radically, FERROVIENORD

commissioned the Polytechnic University of Milan to carry out a study to assess the economic

sustainability of the investment in light of all the relevant elements. The Polytechnic study showed

that parking occupancy rate is a decisive variable and is considered highly volatile and uncertain. In

the case of parking with rotating parking spaces at municipal rates, it is not possible to reach

economic balance, as set forth in the Affori PII Recognition Act, and in case of the exclusive

application of municipal rates, it is destined to be managed at a loss.

The Municipality was sent the Polytechnic study and amendments were requested to art. 6 of the

Recognition Act in order to give FERROVIENORD maximum flexibility in managing the car park.

The Municipality did not provide any feedback.


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On the other hand, on 21 September 2021, the Municipality signed a deed with GDF SYSTEM

updating the Agreement and the Recognition Act, without involving FERROVIENORD and FNM,

by virtue of which GDF SYSTEM was granted a change in the functional mix, or the

transformation of 5,000 square metres of floor space from hotel accommodation to residential. This

deed adversely affects FERROVIENORD's position in that (i) it makes it jointly and severally

liable for the obligations assumed by GDF SYSTEM and (ii) it significantly reduces the occupancy

capacity of the car park, since the construction of a 5,000 sqm hotel has been eliminated.

In view of this, on 26 November 2021 FERROVIENORD, together with FNM, notified the

Municipality and GDF SYSTEM of an appeal before the Milan Regional Administrative Court to

annul the executive decision approving the above-mentioned deed, with the aim of inducing the

Municipality to take FERROVIENORD's requests into consideration, initiating a review of art. 6 of

the Recognition Act, which governs the interchange car park. Further meetings were held with the

Mobility Directorate of the Municipality of Milan in 2022 to propose and share a mechanism to

ensure economic and financial balance. By note no. 10029 of 2 November 2022,

FERROVIENORD wrote to the Municipality of Milan pointing out the imminent completion of

works for the construction of the car park and the possible harm caused to FERROVIENORD from

the delay in the opening of the car park and asking for: (i) the rapid approval of the Market Square

project; (ii) the formalisation of the already agreed compensation mechanism for car park costs and

revenues necessary to guarantee its economic and financial balance, as inferred from the EFP of 23

September 2022.

SACCONAGO TERMINAL

The construction and management of the Sacconago railway terminal (in the municipality of Busto

Arsizio) was governed by the “Programme Agreement” of 15/05/2006 between the Province of

Varese and FERROVIENORD and by the “Implementation Agreement of the Programme

Agreement entered into between FERROVIENORD S.p.A. and the Province of Varese for the

management of the Busto Sacconago railway terminal” dated 25 June 2009, which called for - at

the expiry of the twenty-year period following the completion of the construction works (2009) -

the transfer of ownership from the Province of Varese to FERROVIENORD, which was already

required to manage the Terminal during the twenty-year period in return for the payment of a six-

monthly fee.

FERROVIENORD - following the guidance and coordination deed of FNM S.p.A. dated 15 May

2018 regarding the acquisition of ownership of the Terminal in advance of the term established by


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the agreements (2029) - by deed dated 28 December 2018 acquired ownership of the Terminal from

the Province of Varese against the payment of the amount of EUR 4,352,907.50, resulting from the

difference between the total price of EUR 5,291,269.39 and the amounts paid by

FERROVIENORD by way of advance payment pursuant to the agreements.

At the same time, FERROVIENORD signed with the company Malpensa Intermodale S.r.l., a

subsidiary of FNM S.p.A., the lease agreement on the Terminal and the connection contract for the

use of the section of infrastructure connecting the tracks serving the Terminal with the regional

railway infrastructure.

The company Malpensa Intermodale S.r.l. is managing the project to upgrade the Sacconago

intermodal terminal, which calls for an expansion on an area of 40,000 square metres, next to the

current terminal in operation. With the expansion project, the following will be created: (i) a new

buffer area (for the storage of goods and for the organisation of loading and unloading operations

and interchange by road) of approximately 20,000 square metres to improve goods handling; (ii) the

second module of the terminal, which will consist of a single operational track; (iii) a three-track

area for parking and carriage gauge; (iv) work to widen the platforms of the two existing tracks to

facilitate train loading and unloading activities. To compensate for the expansion, a green area of

about 11,000 square metres will be created in the immediate vicinity of the terminal.

From the point of view of the terminal's impact, the expansion will not affect its maximum

capacity, which is currently 3 trains per day for 70 truck entries per day. Indeed, the aim is to make

the currently under-utilised freight terminal more efficient. The works to be carried out, particularly

the third track, will make it easier to accommodate longer trains with semitrailers and avoid

queuing outside the terminal compared to the current situation.

The project Master Plan, which is broken down into three phases (0, 1 and 2), was submitted to the

Municipality on 20 December 2019 and calls for the expansion of the existing Terminal by

approximately 45,000 sqm by laying a third operational track as well as building a buffer area

where incoming/outgoing goods can be handled. During 2020, the Company focused on the

approval process for obtaining building permits, which resulted in a new version of the Master Plan

being drafted, on which the Municipal Council passed a positive resolution on 11 November 2020.

By virtue of this resolution, on 23 December 2020 an application was filed for an approved building

permit for Phase 0.

The building permit was prepared in the course of 2021 in order to proceed to the negotiation phase

with the Municipality to define the content of the Agreement, which will also govern subsequent

Master Plan developments, particularly with reference to the compensatory works in connection

with Phases 1 and 2.


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In the course of 2022, Malpensa Distripark completed the process of defining the Agreement,

including compensatory works, to be signed with the Municipality of Busto Arsizio in order to be

able to begin Phase 0 works. At the end of this procedure, the Municipality approved the final text

of the Agreement. This Agreement also governed the value of the land owned by the Municipality,

to be acquired by Malpensa Distripark, and the Municipality agreed to undertake to revalue residual

building rights in areas adjacent to the planned development.

As at 31 December 2022, Malpensa Distripark has acquired over 80% of the development areas for

logistics use, as well as all the areas already owned by FERROVIENORD in order to be able to

proceed in the course of 2023 with the execution of Phase 0 and began the process for the

implementation plan and the necessary environmental impact assessments for Phase 1 and Phase 2

works, as well as the construction of the “life path” to partially complete the compensatory

environmental works.

15EMPLOYEES: NUMBERS, COSTS AND TRAINING

15.1NUMBERS AND COSTS

The average number of FNM Group FTE employees decreased from 2,797 in 2021 to 2,809 in

2022, a decrease of 0.4%.

In particular, the Parent Company FNM had an average number of employees of 192 compared to

189 for the previous year (+1.7%).

15.2INDUSTRIAL RELATIONS

Significant discussions took place within the FNM Group with the trade unions in 2022.

On 10 May 2022, the employers' organisations Asstra, Agens and Anav and the trade unions FILT/

CGIL, FIT/CISL, UILTRASPORTI, FAISA CISAL and UGL/FNA signed the renewal of the

national collective labour agreement for road, rail and tram workers, which had expired in 2017.

This renewal will be valid until 31 December 2023. The renewal provided for the payment of a one-

off contribution to make up for the contractual holiday period, worth EUR 500 at parameter 175,

which was paid in two instalments in July 2022 and January 2023. Pay increases totalling EUR 90

per month at the benchmark were then established, to be paid in three tranches of equal amounts in

July 2022, June 2023 and September 2023. An allowance to be paid during days of leave of EUR 8

was also defined. Lastly, the obligation was established of joining the LPT Health Fund, with a

monthly contribution of EUR 12 for each employee hired on an indefinite-term basis and not in the

probation period.


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In addition, a second-level agreement was signed on 29 September 2022, which provided for an

adjustment of some contractual terms. An increase was recognised in the middle managers

allowance, the company contribution to the FNM Pension Fund was increased, the value of meal

vouchers was raised from EUR 7 to EUR 8 per day, the monthly productivity bonus for office

workers was increased, linking it to new productivity and organisational efficiency objectives, and

the structure of the Performance Bonus for office workers and operational staff was revised,

particularly with regard to the possibility of converting it into company welfare benefits.

Lastly, the agreement signed in August 2021, which revised the organisation of the Maintenance

Service, came into effect during the year, entailing greater flexibility in work performance, an

increase in the professional skills required of employees, and a different distribution of activities

throughout the working day.

Concerning the National Collective Bargaining Agreement for Motorway and Tunnels Companies

and Consortia, the Agreement for this category expired on 30 June 2022. The ACAP Employers'

Association agreed on a number of meetings with the trade union counterparty to begin examining

the platform submitted by the trade unions in the second half of 2022. The complexity of the

platform submitted required multiple detailed thematic analyses from the Parties, that did not allow

for the development of a unitary proposal to be discussed by the end of 2022. Therefore, the Parties

agreed on the continuation of activities during the first half of 2023.

Bargaining for the renewal of the second-level supplementary agreement started during the first

quarter of 2022. A new agreement was reached with the Territorial Secretariats of the FIT-CISL,

FIT CGIL, UIL Trasporti, SLA-Cisal and UGL trade unions, together with their company union

representatives, on last 15 December, whereby it was agreed: i) to renew the agreement on the

Performance Bonus for the year 2022; ii) to lay the foundations for the new second-level agreement

for the 2023-2025 three-year period, basing it on criteria that more strongly value individual

contributions, as well as, where possible, hinging it on the achievement of specific objectives

concerning collaboration/synergy between the operational and administrative areas.

As a direct extension of the Framework Agreement signed in September 2021, a further framework

agreement was entered into in March with the Territorial Secretariats of the trade unions that signed

the sector's national collective labour agreement and the relative company union representatives,

that will govern specific organisational and management processes for the next two-year period. In

the circumstance, the Company and the FILT-CGIL, FIT-CISL, UIL Trasporti, SLA-Cisal and

UGL-Viabilità e Trasporti trade unions, together with their company union representatives, reached


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Financial Report as at 31 December 2022	page 116

agreements outlining the guidelines and identifying safeguards on which the revision of the

workforce and generational turnover would be based.

Also as a result of these discussions, the subsidiary asked Assolombarda - Confindustria di Milano,

Monza-Brianza e Lodi to activate the procedure established in article 4, paragraph 2, of Law no.

223/1991, aimed at realigning the workforce with new requirements.

On 8 June 2022, Assolombarda formally notified the FILT-CGIL, FIT-CISL, UIL Trasporti, SLA-

Cisal and UGL-Viabilità e Trasporti and CUB Trasporti trade unions of the initiation of this

procedure, inviting the trade unions and their company union representatives to meet with the

Company. This discussion was duly opened on 13 June, in the presence of all invited trade unions,

which set as a precondition for the finalisation of the agreement the stipulation of an agreement

within the company on service levels and workforce management in the operating divisions.

Consistent with the provisions of the Framework Agreement of 23 March 2022 and following the

communication made to Assolombarda asking the employer's association to activate the workforce

rebalancing procedure to be carried out pursuant to art. 4, paragraph 2, of Law 223/1991, on 20 July

2022 the parties - trade unions, company union representatives and the Company assisted by

Assolombarda - reached an agreement relating to service levels and workforce management

procedures for the operating divisions. The agreement in question acknowledged the successful

completion of the trade union phase of the procedure which calls for the termination of the

employment relationship for up to 70 employees. The Parties have identified the worker's non-

compliance with the terms and conditions of the Agreement as the condition to be met for accessing

the procedure.

On 15 December 2022, an agreement was reached with the Territorial Secretariats of the trade

unions, which agreed on the application in the Company of a model of industrial relations divided

into four areas and a related annual number of hours of trade union activities, to allow the company

union representatives to carry out the relative activities.

In addition, in relation to the area of dispute settlement and management, the Parties entered into a

Protocol according to which workers who intend to initiate an individual labour dispute concerning

the relationships referred to in art. 40 of the Code of Criminal Procedure must first initiate the

amicable dispute resolution procedures governed by the Protocol. An Amicable Dispute Resolution

Committee was set up for this purpose and will perform its function in accordance with the

regulations described in the Protocol.

15.3TRAINING

The year 2022 was characterised by a gradual resumption of normal in-person training activities.


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A total of about seventy thousand hours of training was provided to the employees of Group

companies, in full compliance with the training plan; where possible, Fidimpresa and Fondirigenti

funds were used during the year.

Furthermore, during the year the Group continued to participate in the MaaM, “Maternity as a

Master” project, an innovative educational programme focused on the theme and importance of

being a parent in the company.

16RESEARCH AND DEVELOPMENT ACTIVITIES

In the course of 2022, the Framework Agreement for scientific collaboration between

FERROVIENORD and the MILAN POLYTECHNIC was still in force; its goal is to develop joint

training and research initiatives in areas like: electric systems and energy efficiency; maintenance

and advanced diagnostic activities; railway engineering; urban planning in relation to

infrastructures and transport systems; rolling stock; innovative systems for station surveillance and

security.

In June 2022, FNM was awarded, as industrial partner, the “National Centre for Sustainable

Mobility” project funded by the NRRP, which will last for 36 months. Specifically, the project

consists of 14 macro-activities, called “Spokes”, within which the FNM subsidiaries will have to

carry out certain tasks aimed at developing sustainable mobility and national decarbonisation by

developing digital solutions with cutting-edge technologies and a strong interconnection with the

industrial fabric. E-Vai was placed within spoke 9 “Urban mobility”, which will involve the

creation of physical living labs where shared and 100% sustainable mobility services are to be

offered.

MISE was instead involved in activities relating to Spoke 7 (CCAM, Connected Networks and

Smart Infrastructure).The duration of Spoke 7 is 3 years (2023÷2025).

Moreover, as far as E-Vai is concerned:

–a new project proposal was uploaded at the end of October 2022, in cooperation with

Busforfun and FNM, within the European LIFE programme, which will enable the creation

of the innovative “Eco-stations” product and the “Flexymob” MAAC platform in specific

areas of Valcamonica;

–in November 2022, the LIVELINESS project, financed by the Interreg programme, was

completed, making it possible to implement sustainable (i.e. environmentally, economically

and socially), inclusive cross-border mobility solutions that optimised the connectivity and


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Financial Report as at 31 December 2022	page 118

competitiveness of the mountain areas of the Valtellina cluster, Val Poschiavo and the

Bernina Region;

–in December 2022, E-Vai signed a supply chain agreement, in its capacity as lead partner,

with 10 other companies from Lombardy for the “Eco-hub out of the ordinary” project as

part of the Lombardy region's “Process innovation and organisation of production and

service chains and industrial and economic ecosystems in Lombardy” call for tenders. The

project will start in March 2023.

As far as MISE is concerned:

–in July, an experimental test was performed for aerial monitoring and surveillance on a

section of the A7 motorway, at the Po bridge redevelopment site, using drones and

advanced surveying technologies.

–in December, a contract was signed with the Polytechnic University of Milan for the

performance of a research service aimed at testing the possibilities offered by artificial

intelligence techniques for the development of predictive algorithms for monitoring the

status of motorway elements and the management of maintenance activities (predictive and

ordinary).

17NON-FINANCIAL STATEMENT, ESG RISKS AND THEIR INTEGRATION INTO

THE INTERNAL CONTROL SYSTEM

On 15 March 2023 the Board of Directors approved the Sustainability Report - Consolidated Non-

Financial Statement (“NFS”) prepared pursuant to the Legislative Decree no. 254/2016. The NFS,

which is contained in a report separate from the Management Report, illustrates the activities of the

Group, its progress, results and impact produced in relation to environmental, social, personnel-

related issues, respect for human rights and the fight against active and passive corruption.

The NFS of the FNM Group reports its sustainability performance in accordance with the “GRI

Sustainability Reporting Standards” in its latest update 2021; also for 2022 the NFS has been

structured according to the principles of the Integrated Report.

A first part of the document illustrates how the strategy, governance, performance and prospects of

the organisation enable us to create value in the short, medium and long term, in the context within

which it operates. The second part is focussed on presenting the different types of capital

(Economic-Financial capital, Human Resources, Natural Capital, Social and Relationship Capital),

namely, the material and immaterial “resources” that have been increased, decreased or transformed

as a result of the organisation’s activities and outputs and that determine the creation of value. The


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capitals have contributed to the achievement of 10 Sustainable Development Goals (SDGs) under

the 2030 Agenda.

In order to be sustainable, long-term value creation must take into account the impacts that the

company's activities have on society and the environment in which it operates; it therefore becomes

important to govern the risk factors related to the company's activities by identifying existing or

future challenges or threats and the tools that can mitigate their effects. A summary of the ESG

risks identified for the FNM Group and their management in the internal control system is provided

below. More details can be found in Chapter 6 of the 2022 Sustainability Report.

Integrated management of non-financial risks in the internal control system

An analysis of risks compatible with strategic objectives cannot be separated from the assessment

of sustainability issues. Therefore, in line with the Corporate Governance Code and major

international trends, the Risk Manager, in cooperation with the CSR-Sustainability Function,

annually carries out the mapping and assessment of the main risks associated with the areas

identified by Legislative Decree no. 254/2016 in order to take appropriate mitigation actions in

agreement with the Risk Owners (Enterprise Risk Management - ERM). The ERM Risk

Assessment activity, which covered all the pivotal companies consolidated line-by-line of the

2021-2025 Strategic Plan, has the objective of carrying out a specific assessment of transition and

physical ESG risks for all business segments, with an in-depth focus on risks linked to the

geopolitical context, particularly with reference to the impacts on supply chain resilience and the

increase in the cost of raw materials following the war in Ukraine, and the exacerbation of the

effects of climate change. These risks are classified in an ad hoc category called “CSR

Sustainability (Legislative Decree 254/16)”, divided into 4 areas (Environmental, Social, Personnel

Issues, Combating Active and Passive Corruption) and include the issues explicitly required by

Legislative Decree 254/16, as well as those defined through the materiality analysis.

In fact, again in 2022, an analysis of material issues was carried out for the FNM Group which,

following the new approach proposed by the update of the GRI Universal standards (2021) for non-

financial reporting, placed a specific focus on the concept of impact, understood as the effect that an

organisation has or could have externally on the economy, the environment and people, including

human rights, as a result of its activities or business relations. Therefore, in 2022 the Group carried

out an analysis throughout its value chain, with the aim of understanding its reference scope and the

possible effects generated, in relation to the main business relationships, the sustainability context

in which it operates, the main ESG risks and opportunities and the expectations of its stakeholders.


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The impacts identified were linked to 18 material topics specific to FNM's business model and

subdivided in turn into 5 categories: “Environmental responsibility”, “Governance”, “Integrity and

Economic Responsibility”, “Human resources”, “Responsibility to customers”, “Infrastructure and

transport systems”, “Social responsibility (community) and supply chain”. The impact assessment

process involved both internal stakeholders (representatives of the top management and front lines

of the Parent Company and subsidiaries, including Trenord) and external stakeholders (including a

panel selected from academia, NGOs, foundations, the media, industry representatives and the

motorway sector) of the Group.

Engagement activities brought to light stakeholder awareness concerning the impacts generated by

rising raw material costs, both in terms of direct repercussions on the Group's management costs

and investment timing, and in terms of their effect on daily mobility service choices on the part of

users. LPT is also recognised as an economically, socially and environmentally sustainable solution

for the communities in which the Group operates. Lastly, most of the stakeholders expressed a

positive opinion regarding the impact that FNM's investments in the areas of hydrogen and

technological innovation, as well as urban regeneration interventions, can have in contributing to

the energy transition.

Following the stakeholder engagement activities, on the basis of the assessment of the significance

of the correlated impacts, material topics were prioritised in decreasing order of significance and,

consistent with the new GRI Universal Standards, they were included on the 2022 materiality list.

It should be noted that the top material topics include: Sustainable infrastructure management,

Energy consumption, Atmospheric emissions and climate change, Service quality and customer

safety in stations and on the move, Talent attraction and human capital development, Occupational

health and safety, Noise and vibration management, Welfare for employees and Service and

infrastructure accessibility.

The results of the risk mapping and assessment activities were shared at the Risk Committee

meeting on 3 March 2023 and were presented to the Control, Risks and Related Party Transactions

Committee on 6 March 2023, while the materiality list was shared with the Social Responsibility

and Ethics Committee on 23 February and the Board of Directors on 6 March 2023. Lastly, the

FNM Board of Directors approved the updated Risk Register and the 2022 Sustainability Report-

NFS on 15 March 2023.


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Risks and material issues

The mapping of the main ESG risks made it possible to update the correlation between the most

relevant issues identified with the materiality list and the other material topics required by

Legislative Decree 254/2016 relating to personnel, environmental and social aspects and the main

risks and how they are managed. In 2022, the risk identification and assessment process was

strengthened by introducing, among other things, an analysis of the causes and consequences of

each risk scenario in order to identify possible “worst-case scenarios” and to streamline the entire

risk catalogue. As explained in more detail in Chapter 6 of the 2022 Sustainability Report for each

risk category, the main ESG risk factors that emerged for the FNM Group are as follows:

Environmental area: energy consumption, atmospheric emissions and climate change; biodiversity

protection, noise and vibration management, waste management and water resource management;

Social area: service quality and customer safety in stations and on the move (Security and Safety),

service and infrastructure accessibility, intermodality and service integration, technological and

digital innovation, sustainable infrastructure management, dialogue with stakeholders and local

development, sustainable procurement;

Fight against active and passive corruption area: ethics and business integrity; systemic risk

management and business resilience;

Personnel-related topics area: talent attraction and human capital development, welfare of

employees, respect for diversity and inclusion; occupational health and safety.

First of all, with regard to the main ways in which risks are mitigated and managed, the Group has

established a clear governance of sustainability, through the CSR-Sustainability Function and the

Social Responsibility and Ethics Committee. The Group constantly monitors the evolution of

applicable regulations in the various areas, organises working groups internally and with trade

associations to ensure compliance, adopts regulations and procedures to manage specific risks

(including the FNM Group Sustainability Policy approved on 23 February 2023) and promotes a

number of initiatives to foster dialogue with the various stakeholders concerned. As highlighted in

chapter 3, section 3.3, in 2022 the FNM Group voluntarily applied for an ESG rating from

Morningstar Sustainalytics, which rated the ESG risk profile to which the FNM Group is exposed

as negligible and gave it an ESG Risk Rating of 7.4.

In general, risk mitigation is implemented through the adoption by the most exposed companies of

specific certified management systems, including environmental, occupational health and safety,


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Financial Report as at 31 December 2022	page 122

service quality, energy and corruption prevention, as well as infrastructure and traffic safety (both

rail and road) and information management systems. Another key tool is staff training and

awareness-raising, delivered on sensitive topics such as emergency management, waste

management, IT risks, occupational safety, active and passive corruption offences and sustainability

issues in general. All infrastructure (railways and motorways), civil works and fleets are constantly

monitored, checked and maintained in order to minimise environmental impact, in terms of both

energy and water consumption as well as the generation of atmospheric emissions, waste, vibrations

and noise pollution. These activities also aim to ensure high standards of safety, service and

resilience against extreme natural events. As part of work design activities, adaptations have been

made to meet requirements of removing architectural barriers, create protected wildlife crossings to

safeguard biodiversity and provide appropriately sized and maintained fire prevention systems.

With particular reference to environmental risks, the Group has initiated an investment process

aimed at modernising its fleet with environmentally friendly vehicles (electric and hydrogen),

which will also help to introduce higher standards of comfort, safety and reliability for users.

Environmental, social and anti-corruption issues have become increasingly important in the supplier

qualification and management process, governed by the adoption of Sustainable Procurement

Guidelines and due diligence activities to mitigate the risk of corruption. The focus on personnel

should also not be overlooked, both in terms of offering technical and professional training courses

and welfare programmes and introducing evaluation plans based on objectives (Management by

Objectives), and in terms of developing professional succession plans and monitoring and

preventing any pandemic outbreaks in the company. It is also important to attract resources with

specific knowledge to ensure the development of business opportunities with the application of

innovative and digital technologies capable of combining the evolving needs of the target market

with the evolution of applicable regulations. The Group also considers it a priority to safeguard

occupational health and safety by adopting a Health and Safety Policy and planning appropriate

actions to manage risk factors.

Finally, it should be noted that the Audit, Risks and Related Party Transactions Committee and the

Social Responsibility and Ethics Committee in addition to the Compliance Function provide

oversight for the management of corruption risk, thanks to the application of the Code of Ethics and

Conduct, the adoption of a Model pursuant to Legislative Decree 231/2001, the implementation of a

whistleblowing channel and the performance of regular audits.


	FNM Group


Financial Report as at 31 December 2022	page 123

18FNM S.p.A. CORPORATE GOVERNANCE

FNM S.p.A. corporate governance is based on the traditional system: the corporate bodies are the

Shareholders' Meeting, Board of Directors and Board of Statutory Auditors and, as an external

body, the Independent Auditor.

FNM S.p.A. has adopted a corporate governance system that complies with the legal provisions and

CONSOB regulations in force, aligned with the contents of the Corporate Governance Code of

listed companies of Borsa Italiana S.p.A. and national and international best practices.

In particular, FNM S.p.A. exercises management and coordination activities for some of the

subsidiaries, pursuant to the provisions of current legal provisions and company agreements with

partners.

FNM S.p.A. also holds equity investments in companies that guarantee the presence of the Group in

activities consistent with the corporate purpose and in segments complementary to its core business.

The corporate governance system adopted by FNM S.p.A. is based on compliance with current

regulations, maximising value for shareholders, controlling business risks, transparency with

respect to the market and reconciling the interests of all shareholders. The in-house rules system is

consistent with the principles of the FNM Group's Code of Ethics and Conduct.

The following procedures form an integral part of the corporate governance system:

–the Guidelines for the Internal Control and Risk Management System;

–the Procedure for the regulation of transactions with related parties;

–the Regulation for internal management and public disclosure of documents and information

regarding FNM S.p.A. and the establishment, management and maintenance of the register

of people who have access to it;

–the Code of Conduct for the identification of Internal Dealing parties and for the

communication of transactions they have carried out, the “Internal Dealing Code”;

–The Code of Ethics and Conduct of the FNM Group;

–The Organisation, Management and Control Model pursuant to Legislative Decree

231/2001;

–the Regulation of the Executive in charge of financial reporting;

–the Shareholders' Meeting Regulations.

On 18 July 2019, FNM approved the revision of the Regulation of the Executive in charge of

financial reporting, aligning its content to the changes that have taken place in its organisational


	FNM Group


Financial Report as at 31 December 2022	page 124

structure and providing for the 262 tests to be carried out by outside consultants, as well as by the

Internal Audit Function.

The Organisation, Management and Control Model pursuant to Legislative Decree no. 231/2001

was revised on 16 September 2021, adding offence types and the organisational changes that had

taken place in the meantime.

The Parent Company Board of Directors, at the same time of the approval of these financial

statements, approved the Annual Report on Corporate Governance, to which reference is made here

for a detailed illustration of the FNM S.p.A. governance system.

The aforesaid Report can be found on the Company's website at the address www.fnmgroup.it

(Governance section).

The Company, aware of the need to guarantee the conditions of transparency and fairness in the

conduct of business activities, considered it appropriate to adopt its own Organisation, Management

and Control Model (“Model”) as required by Legislative Decree 8 June 2001 no. 231 and a Code of

Ethics and Conduct of the FNM Group which forms an integral part of the Model, and the FNM

Anti-corruption Policy. The current version of the Model was updated by resolution of the Board of

Directors on 16 September 2021. The Model is aimed at preventing the commission of specific

offences provided for by current legislation and considered relevant to the Company; it is constantly

monitored and, where deemed necessary, updated to ensure a continuous improvement in internal

control. The Model, based on the Confindustria and ASSTRA Guidelines, was prepared taking into

account the structure and activity currently carried out by the Company and the nature and size of

its organisation. The Company carried out a preliminary analysis of its own business context and

subsequently an analysis of the areas of activity that present potential risk profiles in relation to the

commission of the offences indicated in the Decree.

In line with the provisions of Legislative Decree 231/2001, the Company also appointed an

autonomous, independent and competent Supervisory Body in the field of risk control relating to

the specific activity performed by the Company and the related legal profiles. This body, of a

collegial nature, is made up of two chartered accountants outside the Company and a criminal

lawyer, also outside the Company - also appointed Chairman, with proven technical skill in legal

matters.

The Supervisory Body has the task of constantly monitoring:

•compliance with the Model by the company boards, employees and consultants of the

Company;


	FNM Group


Financial Report as at 31 December 2022	page 125

•effectiveness of the Model in preventing the commission of the offences referred to in the

Decree;

•implementation of the provisions of the Model in the performance of Company activities;

•updating of the Model, in the event that it is necessary to adapt it following changes in the

structure and/or the corporate organisation or in relation to the evolution of the reference

regulatory framework.

To carry out of the assigned duties, the Supervisory Body is invested with all the powers of

initiative and control over each company activity and employee level, and reports to the Board of

Directors through its Chairman. The Supervisory Body carries out its functions in coordination with

the other bodies and control departments in the Company.

The Supervisory Body, in supervising the actual implementation of the Model, is endowed with the

powers and duties it exercises in compliance with the law and with the individual rights of workers

and interested parties.

19TRANSACTIONS OF THE PARENT COMPANY FNM S.p.A. WITH RELATED

PARTIES

The Group’s transactions with related parties can be qualified neither as atypical or unusual, as they

fall within the ordinary operations of the Company. These transactions are carried out in the interest

of the Company and of the Group at normal market conditions.

Please refer to Notes 49 of the consolidated financial statements and 34 of the separate financial

statements, for additional information about related party transactions.

Information relative to fees for Directors, Statutory Auditors and Key Personnel are indicated in the

Annual Report on Remuneration prepared pursuant to article 123-ter of Legislative Decree 58/98

(Consolidated Law on Finance) as amended.

The “Procedure for related party transactions” is available on the website of the Company

(www.fnmgroup.it – Governance section – documents and procedures).

20FINANCIAL INSTRUMENTS

It should be noted that during the year and at 31 December 2022 the Company did not use any

derivative financial instruments.


	FNM Group


Financial Report as at 31 December 2022	page 126

Amongst the subsidiaries and investees, at 31 December 2022 MISE has outstanding derivatives

referring to interest rate swap contracts entered into in order to prevent the risk of changes in

interest rates, the fair value of which is negative.

21EQUITY INVESTMENTS HELD BY DIRECTORS, AUDITORS AND GENERAL

MANAGERS; ARTICLE 2428, PARAGRAPH 3, NUMBERS 3-4 OF THE ITALIAN

CIVIL CODE

Pursuant to and in accordance with the provisions of Art. 79 of CONSOB resolution no. 11971 of

14 May 1999 and subsequent amendments, it is specified that, from the information resulting from

the shareholder's register and from the acquired notifications, the directors and auditors, as well as

their spouses who are not legally separated and their minor children, do not hold equity investments

in the Company and in companies under its control, neither directly nor through trust companies

nor through third parties.

Furthermore, as required by the Code of Conduct on Internal Dealing approved on 13 May 2019,

there were no transactions on FNM S.p.A. financial instruments by any of the relevant persons

subject to the disclosure obligations.

Lastly, it should be noted that the company does not come under any of the cases indicated by Art.

2428, paragraph 3, numbers 3 and 4 of the Italian Civil Code.

22SIGNIFICANT EVENTS DURING THE YEAR

The Shareholders' Meeting approves the 2021 financial statements.

26 April 2022: the Shareholders' Meeting approved the separate financial statements of FNM

S.p.A. and examined the consolidated financial statements of the FNM Group as at 31 December

2021. Following the vote of the majority shareholder the Lombardy Region, the Shareholders'

Meeting resolved not to distribute dividends and therefore to allocate the profit for the 2021

financial year as follows:

- EUR 270,387 to the legal reserve;

- EUR 5,137,359 to retained earnings.

The Shareholders' Meeting also:

–approved the Report on the remuneration policy and compensation paid, and


	FNM Group


Financial Report as at 31 December 2022	page 127

–and renewed the authorisation for the purchase and disposal of treasury shares, subject to

revocation of the authorisation granted by the Meeting on 30 April 2021.

ESG rating of 7.4 received from Morningstar Sustainalytics

18 July 2022 - In order to reinforce its commitment to the greater integration of ESG principles

within the Group's strategies and management, and with a view to stakeholder transparency, FNM

voluntarily asked Morningstar Sustainalytics to assign an ESG Risk Rating to the FNM Group.

Sustainalytics assessed the ESG risk profile to which the FNM Group is exposed as negligible,

assigning an ESG Risk Rating of 7.4 (on a scale between 0 and > 40, where 0 indicates the best

rating and >40 the worst).

Its score ranks in the 50 top rated companies of the more than 15,000 entities evaluated by

Sustainalytics worldwide and in 4th place amongst the 171 entities active in the transport

infrastructure sector.

Appointment of new CFO and Executive in charge of financial reporting

26 October 2022- The Board of Directors of FNM S.p.A. appointed Mr. Eugenio Giavatto as

Executive in charge of financial reporting with effect from 1 November 2022, pursuant to art. 154-

bis of Legislative Decree no. 58/1998, after receiving the favourable opinion of the Board of

Statutory Auditors and in compliance with the professionalism requirements set forth in art. 20 of

the Company's Articles of Association. Mr. Giavatto assumed the position of Director of

Administration, Finance and Control with effect from that same date.

The appointment followed the resignation of Ms. Valentina Montanari, who held her position at the

FNM Group until 31 October 2022.

Renewal of the Public Service Contract between Ferrovienord and the Lombardy Region

December 2022 - On 2 December 2022, the Board of Directors of FERROVIENORD (or the

“Concessionaire”) approved the contractual text for the renewal of the service contract with the

Lombardy Region, set to expire on 31 December 2022 (the “Public Service Contract”), for the

period from 1 January 2023 to 31 December 2027 (the “New Public Service Contract”).

In particular, the Public Service Contract, along with the Programme Agreement, governs the

specific terms and conditions, including economic terms, of the ordinary management and

maintenance of the railway infrastructure, as well as the activities concerning the purchase and


	FNM Group


Financial Report as at 31 December 2022	page 128

management of the rolling stock made available to the railway companies on behalf of the Region

by FERROVIENORD, in accordance with the principles and obligations established in the

concession renewed by the Region in favour of FERROVIENORD, by a resolution dated 15

February 2016, until 31 October 2060.

The characteristics of the New Public Service Contract are described in section 9.2.

The text of the New Public Service Contract was then approved by the Lombardy Region with a

resolution of the Regional Council passed on 15 December and signed by the Concessionaire and

the Region on 21 December 2022.

In view of the relationship between the Region, the controlling shareholder of FNM, and

FERROVIENORD, a wholly owned subsidiary of FNM, the New Public Service Contract was

considered suitable to fall within the scope of application of the Regulation containing provisions

on transactions with related parties adopted by Consob by resolution no. 17221 of 12 March 2010,

as subsequently amended and supplemented (the “RPT Regulation”), as well as the procedure for

related party transactions adopted by FNM on 29 November 2010 as subsequently amended and

supplemented (the “RPT Procedure”).

Therefore, given that the value of the New Public Service Contract (amounting to a total of EUR

330.6 million) exceeds the materiality thresholds set forth in the aforementioned RPT Regulation

and the RPT Procedure, FERROVIENORD's approval of the text of the New Public Service

Contract was subject to a prior favourable reasoned opinion of the Related Party Transactions

Committee of FNM (the “RPT Committee”) on the interest of FERROVIENORD (and of FNM) in

undertaking the transaction of greater significance, as well as on the cost effectiveness and

substantial fairness of the relative conditions, given on 1 December 2022. The RPT Committee was

actively involved in the negotiation and preliminary phase of the transaction, through the exchange

of complete and up-to-date information on the progress of the negotiations. Following its

verifications, the RPT Committee gave a positive assessment of the consistency of the consideration

envisaged for the Concessionaire, from both an economic valuation and a strategic value point of

view for FERROVIENORD (and, consequently, for FNM), considering that the consideration set

out in the New Public Service Contract allows FERROVIENORD to maintain value conditions for

the entire term of the contract.

Furthermore, on 2 December, in accordance with the framework resolution passed on 13 May 2021

and Recommendation no. 1(e), of the Corporate Governance Code (January 2020 ed.), FNM's

Board of Directors also positively assessed the renewal of the New Public Service Contract set to

expire on 31 December 2022.


	FNM Group


Financial Report as at 31 December 2022	page 129

In consideration of the foregoing, on 22 December FNM published the information document

relating to significant transactions with related parties, prepared in accordance with article 5 and in

compliance with the format set out in Annex 4 of the RPT Regulation, as well as in accordance with

article 7 of the RPT Procedure, concerning the transaction.

23SIGNIFICANT EVENTS AFTER THE CLOSING OF THE YEAR

With regard to significant subsequent events, reference should be made to Note 56 to the

consolidated financial statements and Note 39 to the separate financial statements.

24MANAGEMENT OUTLOOK

Also for 2023, the Company maintains its forecast of a gradual recovery in mobility demand.

Motorway traffic is expected to reach levels in line with the pre-pandemic period, with heavy traffic

higher than in 2019 and light traffic steadily recovering from 2022. By contrast, demand for local

public transport will remain even lower than in 2019.

The current estimates for the FNM Group in 2023 take into account the uncertainty related to

inflation trends as well as the fuel and energy prices recorded in the last year, which are reflected in

particular on the Road Passenger Mobility segment and motorway infrastructure maintenance costs.

No assumptions are included for motorway toll increases or extraordinary contributions to cover

lower traffic revenues and/or to compensate for higher charges associated with increased energy

costs.

In light of these considerations, in 2023, the FNM Group is expected to have:

–revenue growth in the range of 1%-5% compared to 2022 (this growth would be in the range of

2%-7% if 2022 were considered on a like-for-like basis with 2023, i.e. if 2022 excluded the

values of La Linea and Martini, which are in the process of being disposed of, and the loss of

the annual contribution for the development of car sharing),

–Adjusted EBITDA growth in the range of 1%-5% compared to 2022 (this growth would be in

the range of 2%-7% if 2022 were considered on a like-for-like basis with 2023, i.e. if 2022

excluded the values of La Linea and Martini, which are in the process of being disposed of, and

the loss of the annual contribution for the development of car sharing)

–the Adjusted EBITDA/Revenues ratio is expected to remain constant with respect to 2022.


	FNM Group


Financial Report as at 31 December 2022	page 130

The net financial debt at the end of 2023 (“Adjusted NFP”) is expected to be in the range of EUR

700-750 million, with an Adjusted NFP/EBITDA ratio of 3.5x - 4.0x, showing an improvement

compared to the ratio level recorded at the end 2022. The forecast of net financial debt takes into

account investments financed by the FNM Group gross of public contributions, decreasing by

10-20% compared to 2022.

For Trenord - valued according to the equity method - transport demand is expected to recover

markedly as well compared to 2022, with a gradual recovery in volumes to pre-pandemic levels

over a period of a few years. The investee company continues to constantly monitor all the main

KPIs, regarding the performance of the service, passengers, receipts and the cost-revenue ratio.

Milan, 15 March 2023

The Board of Directors


	FNM Group


Financial Report as at 31 December 2022	page 131

GLOSSARY OF TERMS AND ALTERNATIVE PERFORMANCE INDICATORS USED

This document, in addition to the conventional financial statements and indicators prescribed by

IFRS, presents some reclassified statements and some alternative performance indicators in order to

allow a better assessment of the economic-financial performance of the Group. These statements

and indicators should not be deemed to be replacements for the conventional ones prescribed by

IFRS. For these quantities, the descriptions of the criteria adopted in their preparation and the

appropriate notes referring to the items contained in the mandatory statements are provided in

accordance with the indications of Consob Communication no. 6064293 of 28 July 2006, in Consob

Communication no. 0092543 of 3 December 2015 and of the ESMA 2015/1415 guidelines for

alternative performance indicators (“Non GAAP Measures”).

In particular, among the alternative indicators used, the following are pointed out:

EBITDA: it represents the earnings for the year before income taxes, of the other financial income

and expenses, of depreciation, amortisation and impairments of fixed assets. The Group also

provides an indication of the incidence of EBITDA on net sales. The calculation of EBITDA

carried out by the Group allows to compare the operating results with those of other companies,

excluding any effects deriving from financial and tax components and from depreciation and

amortisation, which may vary from company to company for reasons not correlated with the

general operating performance.

EBITDA %: it represents the percentage of EBITDA over total revenues.

Adjusted EBITDA: it is represented by EBITDA as identified above, excluding non-ordinary

expenses and income, such as:

(i)income and expenses deriving from restructuring, reorganisation and business combinations;

(ii)income and expenses not directly referred to the ordinary performance of the business,

clearly identified;

(iii)in addition to any income and expenses deriving from significant non-ordinary

events and transactions as defined by Consob communication DEM6064293 of 28/07/2006.

With reference to the adjusted EBITDA of 2021, the following components were excluded from

EBITDA:

a)release of a provision for risks following the partial closure of the dispute with the Customs

Agency for EUR 2.2 million;

b)non-ordinary expenses deriving from development projects, amounting to EUR 1.8 million.


	FNM Group


Financial Report as at 31 December 2022	page 132

Adjusted EBITDA %: it represents the percentage of Adjusted EBITDA over total revenues.

EBIT: it represents the earnings for the year before the income deriving from sold/disposed assets,

income taxes, financial income and expenses and the result of the companies measured at equity.

Net Working Capital: it includes current assets (excluding cash and cash equivalents included in

the net financial position), and current liabilities (excluding the current financial liabilities included

in the net financial position).

Net Invested Capital: it is equal to the algebraic sum of fixed capital, which includes non-current

assets and non-current liabilities (excluding the non-current financial liabilities included in the net

financial position) and of net working capital.

NFP (Net Financial Position): it includes cash and cash equivalents and current financial

liabilities.

Adjusted NFP: it is represented by the Net Financial Position as identified above, excluding the

impacts of the timing of collections of the consideration for construction services from the

Awarding Body on funded investments for the renewal of railway rolling stock and the related

payments made to suppliers, recognised in accordance with IFRIC 12.


	FNM Group


Financial Report as at 31 December 2022	page 133

Consolidated Financial Statements

for the year ended 31 December 2022

–Consolidated Statement of Financial Position

–Consolidated Income Statement

–Consolidated Comprehensive Income

–Statement of changes in consolidated shareholders'

equity

–Consolidated Statement of Cash Flows

–Notes to the Consolidated Financial Statements


	FNM Group


Financial Report as at 31 December 2022	page 134

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31.12.2022


Amounts in thousands of euros	Notes	31/12/2022	31/12/2021

ASSETS
NON-CURRENT ASSETS
Property, plant and machinery	6	480,501	447,543
Intangible assets	7	340,038	269,573
Goodwill	8	0	3,440
Right of use	9	20,233	27,810
Investments measured with the equity method	10	160,690	147,577
Equity investments measured at fair value through profit or loss	10	11,141	11,074
Other financial assets measured at amortised cost	11	57,316	53,120
of which: Related Parties	11	56,316	52,119
Financial Assets measured at fair value through profit or loss	12	4,324	5,419
Contractual assets	14	77,208	145,088
of which: Related Parties	14	0	0
Deferred tax assets	15	32,658	35,773
Tax receivables	19	17	17
Other Assets	18	3,542	1,918
of which: Related Parties	18	7	7
TOTAL NON-CURRENT ASSETS		1,187,668	1,148,352

CURRENT ASSETS
Inventories	16	12,109	9,504
Trade Receivables	17	152,964	133,067
of which: Related Parties	17	70,529	62,917
Other Assets	18	149,490	123,012
of which: Related Parties	18	25,566	17,968
Tax receivables	19	212	1,501
Other financial assets measured at amortised cost	11	1,174	862
of which: Related Parties	11	481	329
Financial Assets measured at fair value through profit or loss	12	7,709	7,000
Investments in other companies	10	0	6,313
Receivables for investments in services under concession	13	249,333	138,061
of which: Related Parties	13	247,336	136,064
Cash and cash equivalents	20	236,928	351,832
TOTAL CURRENT ASSETS		809,919	771,152
Assets held for sale	21	21,966	0
TOTAL ASSETS		2,019,553	1,919,504


	FNM Group


Financial Report as at 31 December 2022	page 135




Amounts in thousands of euros	Notes	31/12/2022	31/12/2021

LIABILITIES

Share capital		230,000	230,000
Other reserves		13,335	6,873
Reserve for indivisible profit		(22,721)	(63,596)
Reserve for actuarial gains/(losses)		(5,357)	(7,478)
Translation reserve		200	147
Profit/(loss) for the year		68,476	40,875
SHAREHOLDERS' EQUITY ATTRIBUTABLE TO THE GROUP		283,933	206,821

SHAREHOLDERS' EQUITY ATTRIBUTABLE TO NON-CONTROLLING INTERESTS		22,980	21,512

TOTAL SHAREHOLDERS' EQUITY	22	306,913	228,333

NON-CURRENT LIABILITIES
Payables to banks	23	143,681	165,683
Bond Loan	24	644,398	642,958
Financial Payables	24	2,197	3,923
Lease liabilities	24	18,029	22,793
of which: Related Parties	24	20	106
Payables for funded investments	25	12,587	12,581
of which: Related Parties	25	6,763	6,759
Other liabilities	27	31,095	25,901
of which: Related Parties	27	10,075	8,433
Deferred tax liabilities	15	0	0
Provisions for risks and charges	28	74,540	95,773
Post-employment benefits	29	20,410	28,011
TOTAL NON-CURRENT LIABILITIES		946,937	997,623

CURRENT LIABILITIES
Payables to banks	23	55,070	88,774
Bond Loan	24	961	962
Financial Payables	24	35,679	67,441
of which: Related Parties	24	30,586	39,148
Lease liabilities	24	7,746	6,947
of which: Related Parties	24	115	21
Payables for funded investments	25	41,112	36,978
of which: Related Parties	25	41,112	36,978
Trade payables	30	470,689	372,327
of which: Related Parties	30	13,405	10,855
Payables for taxes	31	9,382	1,551
Tax payables	31	6,676	6,189
Other liabilities	32	63,722	62,220
of which: Related Parties	32	17,696	18,416
Provisions for risks and charges	28	67,641	50,159
TOTAL CURRENT LIABILITIES		758,678	693,548
Liabilities related to assets held for sale	21	7,025	0
TOT. LIABILITIES AND SHAREHOLDERS' EQUITY		2,019,553	1,919,504


	FNM Group


Financial Report as at 31 December 2022	page 136

CONSOLIDATED INCOME STATEMENT FOR THE YEAR 2022


	FNM Group


Financial Report as at 31 December 2022	page 137


Amounts in thousands of euros	Notes	2022	2021

Revenues from sales and services	33	543,434	458,134
of which: Related Parties	33	188,833	174,599
Revenues from construction services - IFRIC 12	35	110,432	105,997
of which: Related Parties	35	71,215	63,001
Grants	34	23,760	25,118
of which: Related Parties	34	8,570	9,627
Other income	36	30,328	26,132
of which: Related Parties	36	8,502	8,720

TOTAL REVENUES AND OTHER INCOME		707,954	615,381

Raw materials, consumables and goods used	37	(36,519)	(23,888)
Service costs	38	(161,906)	(139,629)
of which: Related Parties	38	(10,455)	(9,113)
of which: Non Recurring	38	0	(1,808)
Personnel costs	39	(162,108)	(153,456)
Depreciation, amortisation and write-downs	40	(92,055)	(77,993)
Write-down of financial assets and contractual assets	41	(1,741)	(3,158)
Other operating costs	42	(50,047)	(39,930)
of which: Related Parties	42	(104)	(190)
of which: Non Recurring	42	0	2,237
Costs of construction services - IFRIC 12	35	(102,518)	(101,380)
TOTAL COSTS		(606,894)	(539,434)

EBIT		101,060	75,947

Financial income	43	8,708	2,918
of which: Related Parties	43	3,647	2,412
Financial expenses	44	(12,764)	(24,303)
of which: Related Parties	44	(214)	(2,414)
of which: Non Recurring	44	0	(10,614)
NET FINANCIAL INCOME		(4,056)	(21,385)
Net profit of companies measured with the equity method	45	817	5,718
EARNINGS BEFORE TAX		97,821	60,280

Income taxes	46	(28,270)	(17,144)
NET PROFIT / (LOSS) FOR THE YEAR FROM CONTINUING OPERATIONS		69,551	43,136

NET PROFIT FROM DISCONTINUED OPERATIONS	47	0	0
PROFIT (LOSS) FOR THE FINANCIAL YEAR		69,551	43,136

Profit/(loss) attributable to NCIs		1,075	2,261
Profit/(loss) attributable to Parent Company shareholders		68,476	40,875

Profit/(loss) attributable to NCIs for discontinued operations		—	—
Profit/(loss) attributable to Parent Company shareholders for discontinued operations		—	—

Earnings per share attributable to Group shareholders
Basic earnings per share (euro)	48	0.16	0.09
Diluted earnings per share (euro)	48	0.16	0.09
Earnings per share attributable to Group shareholders for discontinued operations
Basic earnings per share (euro)	48	—	—
Diluted earnings per share (euro)	48	—	—


	FNM Group


Financial Report as at 31 December 2022	page 138

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR 2022


Amounts in thousands of euros	Notes	2022	2021

PROFIT (LOSS) FOR THE FINANCIAL YEAR		69,551	43,136

Other components of companies consolidated on a line-by-line basis

Post-employment benefit actuarial gain/(loss)	29	2,611	(184)
Tax effect	15	(728)	51
Total components that will not be reclassified in the operating result		1,883	(133)

Fair value measurement of derivatives	24	3,190	2,305
Tax effect	15	(765)	(551)
Total components that will be reclassified in the operating result		2,425	1,754

Total companies consolidated on a line-by-line basis		4,308	1,621

Other components of companies measured with the equity method

Post-employment benefit actuarial gain/(loss) of companies measured with the equity method		631	313
Total components that will not be reclassified in the operating result	10	631	313

Fair value measurement of derivatives		4,037	1,552
Gains/(losses) arising from the translation of financial statements of foreign companies		53	42
Total components that will be reclassified in the operating result	10	4,090	1,594

Total companies measured with the equity method		4,721	1,907

Total Other Comprehensive Income	50	9,029	3,528

TOTAL COMPREHENSIVE PROFIT/(LOSS)		78,580	46,664

Comprehensive Profit/(Loss) attributable to non-controlling interest		1,468	2,269
Comprehensive Profit/(Loss) attributable to Parent Company shareholders		77,112	44,395


	FNM Group


Financial Report as at 31 December 2022	page 139

STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY


Amounts in thousands of euros	Share capital	Other reserves	Indivisible Profits/ Losses	Reserve for actuarial gain/loss	Translatio n reserve	Profit/Loss for the year	Shareholde rs' equity attributabl e to the Group	Shareholde rs' equity attributabl e to non- controlling interests	Total Shareholde rs' Equity

Balance as at 01.01.2021	230,000	7,788	203,387	(7,661)	105	24,185	457,804	19,304	477,108

Profit for the year						40,875	40,875	2,261	43,136
Other changes in profit or loss		3,306		172	42		3,520	8	3,528
Total Comprehensive Income		3,306		172	42	40,875	44,395	2,269	46,664

Allocation of 2020 profit			24,185			(24,185)	—		—
Change in the scope of consolidation		(4,221)	(291,168)	11			(295,378)	(61)	(295,439)

Balance as at 31.12.2021	230,000	6,873	(63,596)	(7,478)	147	40,875	206,821	21,512	228,333

Profit for the year						68,476	68,476	1,075	69,551
Other changes in profit or loss		6,462		2,121	53		8,636	393	9,029
Total Comprehensive Income		6,462		2,121	53	68,476	77,112	1,468	78,580

Allocation of 2021 profit			40,875			(40,875)	—		—

Balance as at 31.12.2022	230,000	13,335	(22,721)	(5,357)	200	68,476	283,933	22,980	306,913

Notes	22	22	22	50	50	22	22	22	22


	FNM Group


Financial Report as at 31 December 2022	page 140

CONSOLIDATED STATEMENT OF CASH FLOWS


Amounts in thousands of euros	Notes	31/12/2022	31/12/2021
Cash flow from operating activities		Total	Total
Operating result		69,551	43,136
Income taxes	46	28,270	17,144
Net profit of companies measured with the equity method	45	(817)	(5,718)
Amortisation for the period of intangible assets	7	42,586	35,634
Depreciation for the period of property, plant and equipment	6	35,866	33,935
Amortisation of right of use	9	7,651	6,632
Impairment of intangible assets and property, plant and equipment	8	5,952	1,793
Provisions for risks and charges	28	38,538	46,283
Releases of provisions for risks and charges	28	(11,416)	(9,059)
Provision for bad debts	17	506	1,701
Allocation to the provision for inventory obsolescence	16	342	—
Gains from disposal of property, plant and equipment	36	(595)	(364)
Write-down of contractual assets	14	1,155	—
Releases provision for bad debts	17	(202)	—
Gains from disposal of business unit	36	(874)	—
Capital grants for the period	34	(3,470)	(3,578)
Interest income	43	(8,708)	(2,918)
Interest expense	44	12,764	24,303
Other non-monetary income	36	—	(210)

Cash flow from income activities		217,099	188,714

Net change in the provision for post-employment benefit	29	(3,551)	(2,298)
Net change in provision for risks and charges	28	(16,006)	(26,602)
(Increase)/Decrease in trade receivables	17	(24,422)	(9,747)
(Increase)/Decrease in inventories	16	(4,341)	1,689
(Increase)/Decrease in other receivables	18	(12,671)	(4,779)
Increase/(Decrease) in trade payables	30	9,268	(414)
Increase/(Decrease) in other liabilities	32	(2,031)	8,665
Payment of taxes		(18,122)	(14,810)

Total cash flow from operating activities		145,223	140,418

Cash flow from/(for) investing activities
Investments in intangible assets with own funds	7	(3,028)	(2,163)
Investments in property, plant and equipment with own funds	6	(84,480)	(36,100)
Payment of capitalised financial charges on motorway infrastructure	14	(1,577)	(1,269)
Decrease in trade payables for investments with own funds		(4,782)	(28,641)
Collection of motorway infrastructure investment funding	14	13,265	10,197
Gross funded investment in rolling stock		(342,649)	(125,552)
Collection of rolling stock investment funding	13	323,955	54,193
Gross funded railway infrastructure investment		(74,003)	(39,907)
Collection of railway infrastructure investment funding	13	58,849	41,977
Gross investments in non-compensated assets for motorway infrastructure		(48,255)	(50,419)
Disposal value of property, plant and equipment		925	1,323
MISE (Ministry of Economic Development) acquisition net of cash received	10	—	(363,552)
Other changes from investing activities		4,259	—
Other changes in equity investments	10	(8,400)	(3,010)
Dividends distributed by investees measured with the equity method	10	900	3,861
Other changes in financial receivables	11	108	642
Interest income collected		1,013	—
Investment in financial instruments	11	—	(8,000)
Loan disbursement to investee companies		(950)	(1,050)


	FNM Group


Financial Report as at 31 December 2022	page 141


Collection from the disposal of assets held for sale	20	6,313	—
Conam acquisition net of cash held		—	(251)
Disposal of Business Unit	11	1,341	—

Total cash flow from investing activities		(157,196)	(547,721)

Cash flow from/(for) financing activities
Repayment of finance lease payables	24	(6,991)	(6,518)
Loan repayment	23	(55,569)	(725,244)
New loans	23	—	620,000
Bond issue	24	—	644,631
Interest paid		(4,865)	(10,191)
Interest paid on bond loan	24	(4,875)	—
Non-controlling shareholder withdrawal	24	(21,858)	—
Increase/(Decrease) in other financial liabilities	24	(8,431)	(16,887)

Total cash flow from financing activities		(102,589)	505,791

Liquidity generated (+)/absorbed (-)		(114,562)	98,488
Cash and cash equivalents at start of period	20	351,832	253,344
IFRS 5	21	(342)	—
Cash and cash equivalents at end of period	20	236,928	351,832
Liquidity generated (+)/absorbed (-)		(114,562)	98,488

FNM S.p.A.

Registered Office in Piazzale Cadorna 14 – 20123 Milan

Share capital EUR 230,000,000.00 fully paid up

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31.12.2022

NOTA 1GENERAL INFORMATION

GROUP OPERATIONS

FNM is the leading integrated sustainable mobility Group in Lombardy. It is the first organisation

in Italy to combine railway infrastructure management with road transport and motorway

infrastructure management in order to offer an innovative model for managing mobility supply and

demand that optimises flows and is environmentally and economically sustainable.

Companies belonging to the FNM Group (hereinafter the “Group”), mainly carry out activities in

the management of railway infrastructure and in the sector of passenger road transport (including

sustainable mobility) and the management of Ro.S.Co activities as well as central activities carried

out by FNM (hereafter, also the “Parent Company” or “FNM”); in particular, section 7 of the

Management Report, “Operating performance of business segments” analyses the activities carried

out by the Group. Reference is made to Note 5 “Segment reporting” for a more detailed analysis of

the effect of segment disclosure on consolidation with the equity method of investments in joint

ventures operating in particular in the passenger rail transport sector, energy (consisting of the

operation of the Mendrisio - Cagno power line), of cargo rail transport sector and of Information &

Communication Technology.

The Parent Company FNM S.p.A., domiciled in P.le Cadorna, 14 – MILAN (Italy), is listed on the

Standard Class 1 market, Milan (ISIN IT0000060886).


	FNM Group


Financial Report as at 31 December 2022	page 142

FORM AND CONTENT OF THE CONSOLIDATED FINANCIAL STATEMENTS

These Consolidated Financial Statements, prepared in compliance with CONSOB provisions in

Resolution no. 11971/1999 as amended, including in particular provisions introduced by

Resolutions no. 14990 of 14 April 2005 and no. 15519 of 27 July 2006, contain the financial

statements and notes relative to the Company, produced on the basis of international accounting

standards (IFRS) issued by the IASB (International Accounting Standards Boards) and adopted by

the European Union. IFRS mean all “International Financial Reporting Standards”, all

“International Accounting Standards” (IAS) and all interpretations of the “International Financial

Reporting Standards Interpretations Committee” (IFRS IC, formerly IFRIC), previously called the

“Standard Interpretations Committee” (SIC). In particular, IFRS were adopted in a manner

consistent with all periods presented in this document.

These Consolidated Financial Statements were prepared on a going concern basis, as the Directors

verified that no indicators of a financial, management or other nature exist indicating criticalities as

to the Group's ability to meet its obligations in the foreseeable future. Business risks and

uncertainties are described in relative sections in the Management Report. Note 49 “Risk

Management” describes how the Group manages financial risks, including liquidity and capital risk.

These draft financial statements were prepared and authorised for publication by the Board of

Directors of the Company in the course of its meeting of 15 March 2023.

This financial statements has been translated into the English language solely for the convenience

of international readers. Accordingly, only the original text in Italian language is authoritative.

PRESENTATION OF THE FINANCIAL STATEMENTS

The following presentation of the financial statements was adopted:

a)in the Consolidated Statement of Financial Position, assets and liabilities are entered as

current or non-current items; an asset/liability is classified as current when it meets one of

the following criteria:

–it is expected to be realised/settled or to be sold/used in the entity's normal operating

cycle or

–it is held primarily for the purpose of trading or

–it is expected to be realised/settled within 12 months after the reporting period.

– If these three conditions are not met, the assets/liabilities are classified as non-current.

b)in the Consolidated Income Statement, positive and negative income components are stated

by nature;

c)in Consolidated Comprehensive Income, all changes in Other comprehensive income, in the

year, generated by transactions other than those carried out with Shareholders and based on

specific IAS/IFRS are recognised. These changes are presented in a separate statement from

the Income Statement. Changes in Other consolidated comprehensive income are recognised

net of related tax effects, separately indicating components that will be recorded in

subsequent years in the income statement, and components for which no recognition in the

income statement is expected, pursuant to IAS 1R in effect since 1 January 2013. Moreover,

as provided for by the amendment to IAS 1 – Disclosure Initiative, applicable from years

starting on or after 1 January 2016 (Note 2 “Accounting standards and measurement

criteria”), the portion of Other Comprehensive Income (“OCI”) of associates and joint


	FNM Group


Financial Report as at 31 December 2022	page 143

ventures measured with the equity method was already presented in aggregate form in a

single item, broken down in turn into components which could be reclassified in the future

in the income statement;

d)the Consolidated Statement of Changes in Equity, as required by international accounting

standards, provides separate evident of income for the period and any other change not

recorded in the Income Statement, but directly recognised as Other consolidated

comprehensive income based on specific IAS/IFRS, as well as transactions with

Shareholders, in their capacity as Shareholders;

e)the Consolidated Statement of Cash Flows has been prepared using the indirect method.

With reference to CONSOB resolution no. 15519 of 27 July 2006, related-party transactions are

indicated separately in the consolidated statement of financial position and consolidated income

statement, given their significance. With reference to the above resolution, income and expenses

arising from non-recurrent transactions or events that are not repeated frequently during normal

activities are indicated separately in the consolidated income statement; non-recurrent transactions

are identified in Note 53 “Non recurring events and significant transactions”, using internal

management criteria in the absence of reference standards, and this identification might differ from

that adopted by other Issuers or operators in the sector.

Lastly, with reference to disclosure required by IFRS 8, main information refers to the operating

segments “Ro.S.Co. & Services”, “Railway infrastructure”, “Road passenger mobility” (including

Sustainable Mobility) and “Motorways” (Note 5 “Segment reporting”).

NOTA 2ACCOUNTING STANDARDS AND MEASUREMENT CRITERIA

In preparing these Consolidated Financial Statements, the same accounting standards and

measurement criteria used to prepare the Consolidated Financial Statements at 31 December 2021

were used, supplemented as described in the section “IFRS accounting standards, amendments and

interpretations adopted from 1 January 2022”.

Areas requiring a greater degree of discretion and significant assumptions and estimates are

reported in Note 4 “Items subject to significant assumptions and estimates”.

All amounts in the Consolidated Financial Statements are in thousands of Euro, unless otherwise

indicated.

IFRS ACCOUNTING STANDARDS, AMENDMENTS AND INTERPRETATIONS

ADOPTED FROM 1 JANUARY 2022

The following IFRS accounting standards, amendments and interpretations were adopted for the

first time by the Group, starting from 1 January 2022:

•On 14 May 2020, the IASB published the following amendments:

◦Amendments to IFRS 3 Business Combinations: the purpose of the amendments is to revise

the reference present in IFRS 3 to the Conceptual Framework in the revised version, without

thereby entailing amendments to the provisions of the standard.


	FNM Group


Financial Report as at 31 December 2022	page 144

◦Amendments to IAS 16 Property, Plant and Equipment: the purpose of the amendments is to

prohibit deducting from the cost of an item of property, plant and equipment any proceeds

from selling items produced while testing that asset. These sale revenues and the related

costs will therefore be recognised in the income statement.

◦Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets: the

amendment clarifies that in assessing whether a contract is onerous, all costs directly

relating to the contract should be considered. Consequently, the assessment of whether a

contract is onerous includes not only incremental costs (for example, the cost of the direct

material employed in the work processes), but also all costs which the enterprise cannot

avoid because it has stipulated the contract (for example, the portion of the depreciation of

the machinery used for the performance of the contract).

◦Annual Improvements 2018-2020: the amendments were made to IFRS 1 First-time

Adoption of International Financial Reporting Standards, to IFRS 9 Financial Instruments,

to IAS 41 Agriculture and to the Illustrative Examples of IFRS 16 Leases.

The adoption of these amendments did not therefore have any effects on the consolidated

financial statements of the Group.

IFRS AND IFRIC ACCOUNTING STANDARDS, AMENDMENTS AND

INTERPRETATIONS ENDORSED BY THE EUROPEAN UNION, NOT YET

APPLICABLE AND NOT ADOPTED IN ADVANCE BY THE GROUP AT 31 December

2022

•On 18 May 2017, the IASB published IFRS 17 – Insurance Contracts which is to replace IFRS

4 – Insurance Contracts.

The purpose of the new standard is to guarantee that an entity provides relative information

which faithfully represents the rights and obligations arising from insurance contracts issued.

The IASB has developed the standard to eliminate inconsistencies and weaknesses in existing

accounting policies, providing a single principle-based framework, in order to consider all

types of insurance contract, including reinsurance contracts, held by an insurance undertaking.

The new standard also establishes requirements for presentation and disclosure in order to

improve comparability between entities belonging to this sector.

The new standard measures an insurance contract based on a General Model or a simplified

version of this model called the Premium Allocation Approach (“PAA”).

The main characteristics of the General Model are:

•estimates and assumptions of future cash flows are always current;

•the measurement reflects the time value of money;

•estimates are based on an extensive use of observable market information;

•a current and explicit measurement of risk exists;

•expected profit is deferred and aggregated in groups of insurance contracts on initial

recognition; and,

•expected profit is recognised in the contract coverage period, considering adjustments

arising from changes in assumptions concerning cash flows relative to each group of

contracts.

The PAA requires the measurement of the liability for the remaining coverage of a group of

insurance contracts on condition that, at the time of initial recognition, the entity expects the

liability to reasonably represent an approximation of the General Model. Contracts with a


	FNM Group


Financial Report as at 31 December 2022	page 145

coverage of one year or less are automatically suitable for the PAA. The simplifications arising

from the adoption of PPA do not apply to the measurement of liabilities for claims, which are

measured using the General Model. However, it is not necessary to discount those cash flows if

the balance to pay or receive is expected within one year from the date when the claim was

made.

The entity shall apply the new standard to insurance contracts issued, including reinsurance

contracts issued, to reinsurance contracts held and also to investment contracts with a

discretionary participation feature (DPF).

The standard applies starting from 1 January 2023 but early adoption is permitted, only for

entities that adopt IFRS 9 – Financial Instruments and IFRS 15 – Revenue from Contracts with

Customers. The Directors do not expect the adoption of this standard to have a significant

effect on the consolidated financial statements of the Group.

•On 9 December 2021, the IASB published an amendment entitled “Amendments to IFRS 17

Insurance contracts: Initial Application of IFRS 17 and IFRS 9 - Comparative Information”.

The amendment is a transition option relating to comparative information on financial assets

presented at the date of initial application of IFRS 17. The amendment is intended to avoid

temporary accounting mismatches between financial assets and insurance contract liabilities,

and thus improve the usefulness of comparative information for financial statement readers.

The amendments will apply from 1 January 2023, together with the application of IFRS 17.

The Directors do not expect the adoption of this amendment to have a significant effect on the

consolidated financial statements of the Group.

•On 12 February 2021, the IASB issued two amendments entitled “Disclosure of Accounting

Policies-Amendments to IAS 1 and IFRS Practice Statement 2” and “Definition of Accounting

Estimates-Amendments to IAS 8”. The amendments are intended to improve the disclosure of

accounting policies so as to provide more useful information to investors and other primary

users of financial statements and to help companies distinguish between changes in accounting

estimates and changes in accounting policies. The amendments apply from 1 January 2023, but

early adoption is permitted. The Directors do not expect the adoption of these amendments to

have a significant effect on the consolidated financial statements of the Group.

•On 7 May 2021, the IASB published an amendment entitled “Amendments to IAS 12 Income

Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction”. The

paper clarifies how deferred taxes should be accounted for on certain transactions that can

generate assets and liabilities of equal amounts, such as leases and decommissioning

obligations. The amendments apply from 1 January 2023, but early adoption is permitted.

The Directors do not expect the adoption of this amendment to have a significant effect on the

consolidated financial statements of the Group.

IFRS ACCOUNTING STANDARDS, AMENDMENTS AND INTERPRETATIONS NOT

YET ENDORSED BY THE EUROPEAN UNION

At the end of the reporting period, competent bodies of the European Union had not completed the

approval process necessary to adopt the amendments and standards described below.

•On 23 January 2020, the IASB published an amendment entitled “Amendments to IAS 1

Presentation of Financial Statements: Classification of Liabilities as Current or Non-current”

and on 31 October 2022, it published an amendment entitled “Amendments to IAS 1


	FNM Group


Financial Report as at 31 December 2022	page 146

Presentation of Financial Statements: Non-Current Liabilities with Covenants”. The purpose of

the documents is to clarify how to classify payables and other short-term or long-term

liabilities. The amendments apply from 1 January 2024, but early adoption is permitted.

The Directors do not expect the adoption of this amendment to have a significant effect on the

consolidated financial statements of the Group.

•On 22 September 2022, the IASB published an amendment entitled “Amendments to IFRS 16

Leases: Lease Liability in a Sale and Leaseback”. The document requires the seller-lessee to

value the lease liability arising from a sale & leaseback transaction so as not to recognise

income or a loss relating to the right of use retained. The amendments apply from 1 January

2024, but early adoption is permitted.

The Directors do not expect the adoption of this amendment to have a significant effect on the

consolidated financial statements of the Group.

NOTA 3SCOPE AND PRINCIPLES OF CONSOLIDATION

Principles of consolidation

The scope of consolidation includes the financial statements of FNM S.p.A. and its subsidiaries at

31 December 2022.

As stated in paragraph 6 of the Management Report, the Group scope changed compared to 31

December 2022, as described below:

•the company FNM Power S.r.l. was set up on 8 April 2022 (with capital wholly owned by

FNM) was established, for the design, construction and management of plants for the

production of hydrogen and other industrial gases, as well as plants for the treatment, storage,

distribution and transformation of hydrogen and energy carriers for industrial uses and for

powering public transport. At 31 December 2022, the subsidiary is not yet operational;

•on 15 April 2022, MISE finalised the acquisition of 11,015,963 shares held by the Lombardy

Region in the share capital of Tangenziali Esterne di Milano S.p.A. (hereinafter “TEM”) for a

total value of EUR 8,400 thousand. As a result of the share transfer, MISE's shareholding in the

share capital of TEM increased by 3.75%, from 18.80% to 22.55% (total 66,250,652 shares).

Please recall that TEM holds a 48.4% stake in the share capital of the motorway concessionaire

Tangenziale Esterna S.p.A., which designed, built and has managed since May 2015 the entire

motorway infrastructure from Melegnano - Milan/Bologna A1 Motorway - to Agrate Brianza -

Milan/Venice A4 Motorway (32 km long) based on a fifty-year concession starting from the

entry into operation of the entire motorway link.

•In order to rationalise its operations in the area of public bus transport services, on 30 August

2022 FNM accepted the proposal to purchase shares transmitted on 15 July by the companies

Alilaguna and Ecobus. The investment was reclassified to assets held for sale, as the conditions

of IFRS 5 had been met.

Subsequently, on 2 December 2022, the Board of Directors authorised the Chairman to finalise

the negotiation and signing of the preliminary agreement for the sale of the entirety of the

shares held by FNM in the company La Linea S.p.A.

The preliminary agreement, signed on 7 December 2022, establishes that the purchase

obligation, at a sale price of EUR 5,400 thousand, will be met in two tranches:(i) by 15 January

2023, hereinafter referred to as the “First Closing”, for the sale of 221,200 shares to Alilaguna,

316,000 shares to Powerbus (formerly Ecobus) and 356,132 shares to Massimo Fiorese, for a

total of 28.27% of the shares of La Linea S.p.A. for EUR 2,993 thousand; (ii) by no later than

31 March 2023, hereinafter the “Second Closing”, 316,000 shares will be acquired by


	FNM Group


Financial Report as at 31 December 2022	page 147

Alilaguna and 402,268 shares will be acquired by Powerbus, for a total of 22.73% of the share

capital of La Linea S.p.A., for EUR 2,407 thousand.

At the same time as the Second Closing, La Linea shall also proceed with the full settlement of

its payables to FNM, deriving from the two existing loan agreements, for a total of EUR 7.3

million at 31 December 2022. Any failure to extinguish these loan agreements constitutes a

condition subsequent of the First Closing and a condition precedent of the Second Closing.

On 16 January 2023, the First Closing took place, so FNM now holds a shareholding of

22.73%. The Second Closing has not yet been carried out as at the date of publication of these

financial statements.

Subsidiaries are considered to be those where the Group simultaneously has the following three

factors: (a) has power; (b) is exposed to, or has the rights to, variable returns arising from its

involvement with said entity; (c) has the capacity to use power to influence the amount of such

variable returns.

The financial statements of consolidated companies are prepared by the Boards of Director for

approval by the Shareholders' Meetings, suitable aligned to IAS/IFRS and Group policies.

The financial statements of subsidiaries were consolidated on a line-by-line basis.

With this method, the total amount of assets, liabilities, costs and revenues is recorded (regardless

of the scale of the investment held) and the portion of shareholders' equity and result for the year

are attributed to non-controlling interest, in specific items of the consolidated financial statements.

Intergroup transactions and profit not realised between Group companies are eliminated.

Unrealised losses are also eliminated, unless the transaction provides evidence of an impairment

loss of the asset.

As regards procedures for the valuation of joint ventures, FNM S.p.A., in preparing consolidated

financial disclosure, measures the joint venture investees Trenord S.r.l. (and investee TILO S.A.),

NordCom S.p.A., NORD ENERGIA S.p.A. (and its subsidiary CMC MeSta S.A.) and Omnibus

Partecipazioni S.r.l. (and its subsidiary ASF Autolinee S.r.l.) with the “equity method”.

The associated companies DB Cargo Italia S.r.l., Autostrada Pedemontana Lombarda S.p.A.

(hereinafter “APL”), Tangenziali Esterne di Milano S.p.A., BusForFun.com S.r.l. and Sportit S.r.l.

were also measured by applying the “equity method”.

Joint ventures are investments in companies in which the Group exercises joint control with another

investor. In joint ventures, activities are developed with a specialist partner, with whom financial

decisions about significant operations are shared, also backed up by partner agreements and by the

articles of association in which joint control of the investees is established, even when FNM holds

the majority of voting rights, as in the case of the investee NordCom S.p.A. and NORD ENERGIA

S.p.A.

The economic results of joint ventures or associates are therefore recognised in the consolidated

income statement under the item “Net profit of companies measured with the equity method”. A

brief analysis of the nature of costs and revenues of joint ventures, and additional information

required by IFRS 12, are given in Note 45.

Reference is made to Attachment 1 for information on the list of companies included in the scope of

consolidation (including the companies measured with the equity method), their registered office,

percentages held, type of control and consolidation method adopted.


	FNM Group


Financial Report as at 31 December 2022	page 148

Business combinations

Business combinations are recognised according to the acquisition method. According to this

method, the consideration transferred in a business combination is measured at fair value,

calculated as the sum of the fair values of the transferred assets and liabilities undertaken by the

Group at the acquisition date and the equity instruments issued in exchange for control of the

purchased entity. Costs related to the transaction are generally recognised in the income statement

when they are incurred.

At the acquisition date, identifiable acquired assets and liabilities undertaken are measured at the

fair value at the acquisition date; the following items are an exception, which instead are measured

according to their reference standard:

◦deferred tax assets and liabilities;

◦assets and liabilities for employee benefits;

◦liabilities or equity instruments relative to share-based payments of the purchased entity or

share-based payments relative to the Group issued to replace contracts of the acquired

entity;

◦assets held for sale and discontinued assets and liabilities;

◦assets and liabilities relating to lease agreements.

Goodwill is determined as the excess between the sum of amounts transferred in a business

combination, the value of equity attributable to non-controlling interest and the fair value of any

investment previously held in the acquired entity compared to the fair value of net assets acquired

and liabilities undertaken at the acquisition date. If the value of net assets acquired and liabilities

undertaken at the acquisition date exceeds the sum of amounts transferred, the value of

shareholders' equity attributable to non-controlling interest and the fair value of any investment

previously held in the acquired entity, this excess is immediately recognised in the income

statement as income arising from the completed transaction.

Shareholders' equity attributable to non-controlling interest, may be measured at fair value or at the

pro-quota of the value of net assets recognised for the acquired company. The measurement method

is selected for each transaction.

In the case of the acquisition of a subsidiary in stages, IFRS 3 (2008) establishes that a business

combination occurs only when control is acquired and, at this stage, all identifiable net assets of the

acquired company must be measured at fair value.

In the acquisition of a subsidiary where control is acquired in stages, the investment previously

held, recognised up until that time according to IFRS 9 – Financial instruments, or according to IAS

28 – Investments in associates or according to IFRS 11 – Joint arrangements, must be treated as if it

had been sold and re-purchased at the date when control is acquired. This investment must therefore

be measured at its fair value at the date of “disposal” and losses and gains resulting from this

measurement must be recognised in the income statement.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment mainly consist of:

a)land;

b)buildings;

c)plant and machinery;

d)rolling stock (trains, buses).


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Financial Report as at 31 December 2022	page 149

Property, plant and equipment may be owned and may be funded by grants or specific public funds.

Own property, plant and equipment are recognised at purchase or production cost including directly

related costs. The cost is reduced by depreciation, apart from land, which is not depreciated, and

write-downs. If funded by government grants, property, plant and equipment are recognised

including the grant, which is entered in the item “Other liabilities” according to criteria indicated in

the accounting standard “Government grants”.

Depreciation is calculated on a straight-line basis using percentages that reflect the economic and

technical deterioration of the asset. Depreciation is calculated when the asset becomes available for

use according to Management's intentions.

Significant parts of tangible assets that have different useful lives are recognised separately and

depreciated based on their useful life.

The useful lives and residual values are revised annually at the end of the reporting period.

Useful lives are as follows:

Buildings: 50 years

Plant and machinery: 4 -16 years

Rolling stock (trains): 15 - 25 years

Rolling stock (buses): 4 - 15 years

If an impairment loss is recorded, the property, plant or equipment is written down according to

criteria indicated below in the section “Impairment loss of intangible assets, property, plant and

equipment and investments”.

PROPERTY ASSETS

Property assets are represented by assets held for rent income or to appreciate their value.

In compliance with IAS 40, the Group opted to measure these assets at cost, net of depreciation and

impairment, using the same treatment adopted for plant, property and equipment and, given their

limited significance, these items are not recorded in a separate line of assets in relation to “Property,

plant and equipment”.

IFRS 16 LEASES

The accounting standard introduced a new definition of leases based on control of the underlying

asset, i.e. the right to use an identified asset and to obtain substantially all of its economic benefits

through the management of the use of the asset itself, for a period of time in exchange for

consideration.

IFRS 16 provides a single accounting model for lease agreements, based on which the lessee must

recognise, as an asset, the right to use the leased asset (“Right of use”) as a contra entry to a liability

representing the financial obligation (“Financial liabilities for leased assets”) determined by

discounting the payments for the minimum guaranteed future lease payment, thus eliminating, for

the lessee (leases as lessee) the accounting distinction between operating and finance leases, as was

instead previously required by IAS 17.

Accounting model for the lessee

The Group recognises in the statement of financial position the assets for the right of use and the

financial liabilities for leased assets for most leases, with the exception of low value assets under

lease, i.e. having a new value of less than EUR 5,000. Therefore, the Group recognises the


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Financial Report as at 31 December 2022	page 150

payments due for the leases relating to the aforesaid leases as cost with a straight line criterion

throughout the duration of the lease.

On the effective date of the lease, the Group recognises the asset for the right of use and the

financial liability for leased assets.

The asset for the right of use is initially measured at cost, and subsequently at cost less amortisation

and impairment losses, cumulated, and adjusted to reflect the write-backs of the lease liability.

The Group measures the financial liability for leased assets at the present value of the payment due

for the leases not paid as at the effective date, discounting them using the implied interest rate of the

lease. Whenever it is not possible to determine this rate easily, the Group uses the marginal lending

rate. Generally, the Group uses the marginal lending rate as the discounting rate. The financial

liability for leased assets is subsequently increased by the interest that accrue on said liability and

decreased by the payments due for the leases carried out and it is revalued in case of change in the

future payments due for the lease deriving from a change in the index or rate, in case of change of

the amount the Group expects to have to pay by way of guarantee on the residual value or when the

Group changes its valuation with reference to whether or not a buy, extension or termination option

is exercised.

In determining the lease term any extension options were considered if under the Group's control

and if the Group has reasonable certainty that it will exercise them. Similarly, in cases where the

extension option is under the lessor's control, the non-cancellable lease period includes the period

covered by the lease termination option.

Accounting model for the lessor

The Group sub-leases to third parties the right of use of some leased assets for a duration

prevalently coinciding with that of the main agreement. The accounting principles applicable to the

Group as lessor do not deviate from those prescribed by IAS 17. However, when the Group acts as

intermediate lessor, sub-leases are classified referring to the asset for a right of use deriving from

the main lease, rather than to the underlying asset.

INTANGIBLE ASSETS

Intangible assets refer to costs, including related charges, incurred to purchase resources without

physical substance on condition that their amount can be reliably quantified, and the asset is clearly

identifiable and controlled by the Group.

Intangible assets are recognised at purchase or production cost including related costs and are

amortised based on their future use.

If an impairment loss is recorded, the intangible asset is written down according to criteria indicated

below in the section “Impairment losses of intangible assets, property, plant and equipment and

investments”.

On the basis of the contractual agreements (concessions) that fall within the scope of application of

IFRIC 12, the concessionaire operates as a provider of services relating to (i) the construction and/

or improvement of the infrastructure used to provide the public service and (ii) the management and

maintenance of the same, for a specific period of time. It follows that the activity of constructing

and improving infrastructure is similar to that of a construction company; therefore, during the

period in which these services are provided, revenues and costs from construction are recognised in

the income statement in accordance with IFRS 15. As established by IFRIC 12, in exchange for

construction and/or improvement services rendered by the concessionaire, the awarding body pays

the concessionaire a fee, to be recognised at fair value, which may consist of rights to: a) a financial

asset, the so-called financial asset model (adopted by the Group for FERROVIENORD's assets); or


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Financial Report as at 31 December 2022	page 151

b) an intangible asset, the so-called intangible asset model (adopted by the Group for MISE's

assets).

In the intangible asset model, the concessionaire, in return for the infrastructure construction and

improvement services rendered, acquires the right to charge users for the use of the infrastructure.

Therefore, the concessionaire's cash flows are not guaranteed by the awarding body, but are related

to the actual use of the infrastructure by users, thus entailing demand risk for the concessionaire.

This is the risk that revenues from the exploitation of the right to charge users for the use of the

infrastructure will not be sufficient to ensure a reasonable return on the investments made.

“Non-compensated assets” represent the Concessionaire's right to use the asset under concession in

consideration of the costs incurred to design and construct the asset. The value corresponds to the

fair value of planning and construction activities and is posted to the income statement as a contra-

entry to the item “Revenues from construction services - IFRIC 12”. Moreover, the amount posted

under “non-compensated assets” is increased by the capitalised financial expenses - in compliance

with the requirements set out in IAS 23 - during the construction phase and net of collections of the

consideration for construction services.

Furthermore, the item includes the rights accrued against specific obligations to carry out

infrastructure expansion and upgrading construction services, for which no additional economic

benefits are expected. These rights are initially calculated and recognised at the fair value of the

construction services to be rendered in the future (equal to their present value, net of the portion

covered by grants, and excluding any financial charges to be incurred in the construction period)

and have as their contra-entry the “provision for commitments from agreements”, in the same

amount, recognised in the liabilities section of the statement of financial position; the initial value

of these rights changes over time, as a result not only of amortisation but also of the periodic

recalculation of the fair value of the portion of construction services not yet rendered at year-end

close.

Non-compensated assets are depreciated throughout the duration of the relative concession, with an

approach reflecting the estimated methods of consumption of the economic benefits incorporated

into the right. To this end, taking into account that the concessions owned by MISE concern mature

motorway infrastructures that have been in operation for many years and for which traffic variations

are substantially contained within a long-term horizon, depreciation is calculated on a straight-line

basis.

Depreciation starts from the moment when the non-compensated assets start producing the relative

economic benefits, whether related to motorway transit or to the recognition in the tariff by the

Awarding Body of the investments made by the company.

With regard to assets reversible free of charge, the amortisation provision and the provision for

restoration or replacement expenses, considered as a whole, ensure adequate coverage of the

following charges:

–free transfer to the Awarding Body at the expiry of the concession of reversible assets with a

useful life exceeding the duration of the concession;

–restoration and replacement of components subject to wear and tear of reversible assets;

–recovery of the investment also in relation to the new works forecast in financial plans.


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Financial Report as at 31 December 2022	page 152

Costs for the purchase of software licences, together with related costs, are capitalised and

amortised based on the expected useful lives represented by the licence duration (5 years).

Amortisation starts when the asset becomes available for use according to Management's intentions.

Other intangible assets are amortised based on their remaining useful life. Useful lives are mainly

estimated in five years.

EQUITY INVESTMENTS

Joint ventures are investments in companies in which the Group exercises joint control with another

investor. In joint ventures (identified in Attachment 1 to these notes), activities are developed with a

specialist partner, with whom financial decisions about significant operations are shared, also

backed up by partner agreements or provisions of the articles of association in which joint control

of the investees is established, even when FNM holds the majority of voting rights. Section 6 of the

management report “Group structure and business segments” specifically analyses the activities

carried out by joint ventures.

Investments in associates are investments in which the Group has a significant influence.

Investments in joint ventures and associates are measured using the equity method and are initially

recognised at cost. Investments include goodwill identified at the time of the acquisition, net of any

accumulated impairment losses. The Consolidated Financial Statements include gains or losses

attributable to investees measured according to the equity method, net of reclassifications necessary

to align accounting standards, starting from the date when significant influence or joint control

started, up to the date when said influence or control stopped.

The economic results of joint ventures or associates are therefore recognised in the consolidated

income statement under the item “Net profit of companies measured with the equity method”. A

brief analysis of the nature of costs and revenues of joint ventures, and additional information

required by IFRS 12, are given in Note 45.

Investments in other companies are classified, for measurement purposes, as financial assets at “fair

value”, with a contra-entry in the income statement.

Economic results and assets and liabilities of associates and joint ventures are recognised in the

Consolidated Financial Statements using the equity method.

CURRENT AND NON-CURRENT FINANCIAL ASSETS

Receivables and loans are initially recognised at their fair value, which corresponds to the nominal

value. Subsequently they are measured at amortised cost based on the original effective rate of

return of the financial asset. Financial assets are eliminated from the statement of financial position

when the contractual right to receive cash flows has been transferred and the entity no longer has

control of said financial assets.

Receivables and loans recognised as current assets are recorded at their nominal value as the

present value would not vary significantly. At the end of each reporting period, the Group assesses

the possibility of recovering the receivables, taking into account expected future cash flows, as

described in more detail in the paragraph below on write-downs of financial assets.

WRITE-DOWNS OF FINANCIAL ASSETS

The recoverability of financial assets measured at amortised cost is evaluated by estimating

“expected credit losses” (ECL), based on the value of expected cash flows. These flows, taking into


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Financial Report as at 31 December 2022	page 153

account the estimated likelihood that the counterparty will not meet its payment obligation, are

determined in relation to the expected recovery time, the estimated realisable value, any guarantees

received and the costs that are expected to be incurred to collect the receivables. For receivables

relating to counterparties that do not present a significant increase in credit risk, ECLs are

determined on the basis of expected losses in the 12 months following the reporting date; in other

cases, expected losses are estimated up to the end of the life of the financial instrument. With regard

to trade and other receivables, internal customer ratings, which are periodically checked, including

through time series analyses, are used to determine the probability of counterparty non-

performance.

DEFERRED TAX ASSETS AND LIABILITIES

Deferred tax assets and liabilities are determined based on temporary taxable differences existing

between the carrying amount of assets and liabilities and their tax value and are classified as non-

current assets and liabilities.

Deferred tax assets are only recognised to the extent that the existence of adequate future taxable

income against which said deferred tax assets can be used is probable.

The value of deferred tax assets that may be presented in the financial statements is tested annually.

When results are directly recognised in shareholders' equity, in particular in the reserves “actuarial

gains (losses)” and “gains/(losses) arising from the translation of financial statements of foreign

companies”, current taxes, deferred tax assets and or deferred tax liabilities are also directly

recognised in shareholders' equity.

The value of deferred tax assets and liabilities is determined based on expected tax rates for the

period when the deferrals will be realised, applying the tax rates (and tax legislation) in force or

substantially in force at the reporting date.

Deferred tax assets and liabilities are offset if, and only if:

a) the Group has a legally enforceable right to set off current tax assets against current tax

liabilities; and

b) the deferred tax assets and liabilities relate to income taxes levied by the same tax jurisdiction.

TRADE RECEIVABLES

They are recognised at amortised cost if the following two conditions are met:

a) the financial asset management model consists of holding the financial asset for the purpose of

collecting the relative cash flows; and

b) the financial asset contractually generates, at predetermined dates, cash flows representing solely

the return on such financial asset.

Receivables measured at amortised cost are initially recorded at the fair value of the underlying

asset, net of any directly attributable transaction income; valuation at amortised cost is performed

using the effective interest rate method, net of the relative impairment losses with reference to

amounts considered uncollectable. Amounts deemed uncollectable are estimated on the basis of the

methodology set forth in the “Impairment of financial assets” section. The original value of

receivables is reinstated in subsequent years to the extent to which the reasons for the adjustment no

longer apply. In that case, the reversal of the impairment loss is recognised in profit and loss and

may not in any event exceed the amortised cost that the loan would have had in the absence of

previous adjustments.

Trade receivables with a maturity falling within normal commercial terms are not discounted.


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Financial Report as at 31 December 2022	page 154

INVENTORIES

Inventories mainly refer to spare parts and are measured at the lower of purchase/production cost

and net realisable value inferred from market trends. The cost is determined adopting the average

weighted cost method.

Inventories are written down when the realisable value inferred from market trends is lower than

the relative carrying amount. Obsolete and slow-moving socks are written down in relation to their

possible use or realisable value.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash and sight deposits and are recognised at nominal value. For

an investment to qualify as cash or a cash equivalent it must be readily convertible to a known

amount of cash and have an insignificant risk of change in value.

In relation to the adoption of IFRS 9, based on the expected losses model, the Group considers the

expected losses along the life of the financial asset at each reference date of the financial

statements.

ASSETS HELD FOR SALE

As provided for in IFRS 5 “Non-current assets held for sale and discontinued operations”, non-

current assets whose carrying amount is mainly recovered through a sale rather than continual use,

if the requirements of the standard are met, are classified as held for sale and recognised at the

lower of the carrying amount and fair value, net of the cost to sell. From the date when these assets

are classified in the category of non-current assets held for sale, relative amortisation/depreciation is

suspended. The liabilities connected with these assets are classified under “Liabilities relative to

assets held for sale”, while the economic result concerning these assets is recognised under “Other

income” of the Consolidated Income Statement.

LOANS AND CORPORATE BONDS

Loans and corporate bonds are initially recognised at fair value.

After initial recognition, loans and corporate bonds are measured according to the amortised cost

method calculated by adopting the effective interest rate.

Amortised cost is calculated taking into account issue costs and any discount or premium at the

time of settlement.

DERIVATIVE FINANCIAL INSTRUMENTS

All derivative financial instruments are shown in the financial statements at their fair value,

determined at year-end close. Derivatives are classified as hedging instruments, in accordance with

IFRS 9, when the relationship between the derivative and the hedged item is formally documented

and the effectiveness of the hedge, verified initially and periodically, is high.

For cash flow hedge instruments that hedge the risk of changes in cash flows of the hedged assets

and liabilities (including prospective and highly probable ones), changes in fair value are

recognised in other comprehensive income and any ineffective portion of the hedge is recognised in

profit or loss.

For instruments that hedge the risk of changes in the fair value of hedged assets and liabilities (fair

value hedges), changes in fair value are recognised in the income statement for the period.

Accordingly, the related hedged assets and liabilities are also adjusted to fair value, with an impact

on the income statement.

Where an instrument is entered into for the purpose of hedging the risk of changes in the fair value

of an asset whose changes in fair value are recognised in other comprehensive income, changes in


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Financial Report as at 31 December 2022	page 155

the fair value of the hedging instrument are also recognised in other comprehensive income.

Changes in the fair value of derivatives that do not qualify for hedge accounting under IFRS 9 are

recognised in the income statement.

Moreover, some measuring processes, in particular the most complex ones such as the

determination of any impairment losses on non-current assets, are generally carried out

comprehensively only when preparing the annual financial statements, when all information that

may be necessary is available, barring cases in which there are impairment indicators requiring an

immediate assessment of any impairment.

In the reference year there were no transfers between the various levels of the hierarchical fair value

scale used to measure the fair value of financial instruments, nor were any changes made in the

classifications of the financial assets with respect to those as at 31 December 2021.

EMPLOYEE BENEFITS

Employee benefits provided at the end of employment or afterwards mainly refer to post-

employment benefit.

Law no. 296 of 27 December 2006 (“2007 Budget Law”) and subsequent decrees and regulations

issued in the first few months of 2007 introduced significant changes to legislation on post-

employment benefit, including the possibility for employees to choose the allocation of the post-

employment benefit they accrue.

This means, for IFRS purposes, a different accounting treatment which is explained below:

a)Post-employment benefit accruing as from 1 January 2007: this is a defined contribution

plan, both in the case of the employee opting for a supplementary pension and in the case of

the employee opting to pay the post-employment benefit into the Treasury Fund held with

Italy's state social security institute (INPS). The accounting treatment will therefore be the

same as that adopted for various social security/pension payments.

b)Post-employment benefit accrued at 31 December 2006: this item remains a defined benefits

plan, with the consequent need for actuarial calculations to be carried out by independent

actuaries, who shall exclude the component related to future salary increases. The difference

resulting from the new calculation compared to the previous one was treated as a

curtailment, as defined in paragraph 109 of IAS 19 and consequently recognised in the

income statement in the first half of 2007. The liability is entered in the financial statements

at the present value of the Group's obligation based on actuarial assumptions made using the

projected unit credit method. Actuarial gains and losses arising from changes in assumptions

and changes in final and hypothesized data are recognised in the statement of

comprehensive income in a specific reserve of shareholders' equity called “Reserve for

actuarial gains/(losses)”. The present value of the obligation is determined by discounting

future cash flows at an interest rate based on the Euro swap benchmark rate (AA rating with

reference to 2014 and the comparative year) with an average financial duration for the item

in question.


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Financial Report as at 31 December 2022	page 156

PROVISIONS FOR RISKS AND CHARGES

Provisions for risks and charges include allocations arising from current (legal or implicit)

obligations resulting from a past event which, in order to be met, will probably require the use of

resources, that can be reliably estimated.

If the expected use of resources goes beyond the following year, the obligation is recognised at the

present value determined by discounting expected future flows by a rate that takes into account the

cost of money and risk of the liability.

Instead no provision is made for risks for which the occurrence of a liability is only possible. In this

case, specific disclosure is provided in the section on commitments and risks and no allocation is

made.

The “Renewal provision” includes the present value of the estimated charges to be incurred for the

contractual obligation to restore and replace the infrastructure under concession, as established in

the agreement signed by the Company with the Awarding Body and aimed at ensuring its due

functionality and safety. Indeed, as these charges cannot be recognised as an increase in the value of

the assets at the time they are actually incurred, in the absence of the necessary accounting

requirement (intangible assets) for the assets for which they are intended, they are allocated to a

provision in accordance with IAS 37, depending on the degree of use of the infrastructure, as they

represent the probable charge that the company will need to incur in order to guarantee, over time,

the correct fulfilment of its obligation to maintain the functional and safety requirements of the

assets under concession. Allocations to this provision are determined on the basis of the wear and

tear and age of the motorway infrastructure at the end of the financial year and, therefore, of the

planned interventions, taking into account, if significant, the financial component linked to the

passage of time. The provision is discounted on the basis of the criteria already described above.

Ordinary maintenance costs, on the other hand, are recognised in the Income Statement at the time

they are incurred and, therefore, are not included in the provision. The provision, which refers to

cyclical maintenance operations, includes an estimate of the charges that will arise from a single

maintenance cycle and is determined separately for each category of infrastructure work (viaducts,

overpasses, tunnels, safety barriers, motorway paving). For each category, based on specific

technical evaluations, available knowledge, current motorway traffic conditions, and existing

materials and technology:

–the duration of the repair or replacement cycle is estimated;

–the state of conservation of the works is assessed, grouping the interventions into uniform

classes in relation to the degree of wear of the infrastructure and the number of years

remaining until the planned intervention;

–costs are determined for each class on the basis of documented verifiable evidence at the

date and comparable interventions;

–the total value of the interventions is determined with reference to the relative cycle;

–the provision at the reporting date is calculated, allocating the charges in the Income

Statement in relation to the remaining years until the expected date of the intervention,

consistent with the uniform infrastructure wear class, discounting the value thus obtained at

the valuation date on the basis of an interest rate with a duration consistent with that of the

expected cash flows.

The effects, as determined above, are posted to the following Income Statement items:

–“Allocation to renewal provision”, related to the effects of the updated estimates deriving

from the technical assessments (amount of the works to be carried out and their expected

timing) and the change in the discount rate used compared to the previous year;


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Financial Report as at 31 December 2022	page 157

–“Financial expense from discounting”, referring to the effect of the passage of time,

calculated on the basis of the value of the provision and the interest rate used to discount the

provision at the previous year’s reporting date.

When the intervention expenses are incurred, the costs are recorded by nature in the individual

items of the Income Statement for the year and the item “Use of renewal provision” includes the

use of the provision previously set aside.

FINANCIAL AND TRADE PAYABLES

Payables are initially recognised at fair value, and subsequently recognised at amortised cost, which

generally corresponds to the nominal value.

Financial liabilities are eliminated from the statement of financial position when, and only when,

they are settled, or when the specific contract obligation has been met or cancelled or has expired.

REVENUES

Revenues for the provision of services are recognised at the time the service is provided. The main

sources of revenue are as follows:

a.motorway tolls: this refers to revenues from motorway tolls and income from service area

concessions;

b.service contracts for the automotive sector: fees for contracts are recognised in the

Consolidated Income Statement on an accrual basis;

c.products of automotive traffic: these refer to revenues from tickets and travel passes for

passenger road transport. They are recognised in the Consolidated Income Statement based

on the validity of the tickets/travel passes;

d.railway infrastructure management service contract: consideration referring to the

“Infrastructure Management Contract” paid by the Lombardy Region to operate lines under

concession, are recognised in the Consolidated Income Statement on an accrual basis;

e.network access revenues: they are recognised in the Consolidated Income Statement on an

accrual basis;

f.rolling stock lease: operating lease payments relative to rolling stock;

g.consideration for administration services provided centrally to Group companies not

consolidated on a line-by-line basis “services invoiced”: accounting and financial reporting,

payroll processing, management of centralised treasury and of the IT services connected

with SAP and communication coordination;

h.real estate income: these refer to the rental of civil and commercial property of the Group;

i.design and project management: this refers to design and project management activities for

railway and motorway infrastructure modernisation projects;

j.train replacement: train replacement runs made by bus.

All revenues from letter a) to letter j) are recognised on an accrual basis.

GOVERNMENT GRANTS

Government grants are recorded in accordance with IAS 20 when there is a reasonable certainty

that they can be received and when there is a reasonable certainty that the Group has complied with

the conditions for receiving them.


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Financial Report as at 31 December 2022	page 158

Government grants are recognised in accordance with the “income approach” whereby a grant is

recognised in the consolidated income statement in one or more years in which the Group

recognises as costs the relative expenses that the grants are intended to offset.

Government grants that are collectible as compensation for costs or losses already incurred are

recognised in the consolidated income statement for the year in which they become receivable.

Grants relative to the purchase of property, plant and equipment, disbursed by the Lombardy

Region or third parties (other public bodies) are presented according to the “indirect method”, with

the deferred revenue component recognised in the non-current and current items of “Other

liabilities” and the applicable share determined on the basis of the expected useful life of the assets

they refer to credited to the income statement on a straight-line basis.

The public grants provided at national level to mitigate the loss of revenues and the increase in

costs deriving from the spread of the COVID-19 virus were recorded on the basis of the resources

specifically allocated, as described in more detail in Note 4 below “Items subject to significant

estimates and assumptions”.

Government operating grants and the share for the year of capital grants are shown separately in the

income statement under “Grants” without any set-off between the grant and the cost to which it

relates.

REVENUES FROM CONSTRUCTION SERVICES

In accordance with IFRIC 12, the railway infrastructure management contract of the subsidiary

FERROVIENORD S.p.A. was recognised in the consolidated financial statements according to the

financial asset model, starting from the financial year ended 31 December 2010.

In particular, as provided for in IFRIC 12, the financial asset model may be applied as the operator

FERROVIENORD S.p.A. has the unconditional right to receive contractually guaranteed cash

flows from the investment guarantor - i.e. the Lombardy Region - regardless of the actual use of the

railway infrastructure. These cash flows correspond to costs incurred for contract management.

Consequently, the operator must not recognise the infrastructure in its assets, or more generally, the

funded asset. Instead it must recognise costs relative to the investment in the income statement for

the year, as contemplated by IFRS 15, and must recognise the amount corresponding to the

investments as revenues, according to the investment completion percentage. The amount of these

revenues not yet received at the reporting date is recognised as a short-term financial receivable.

Consequently, the items “Revenues from construction services - IFRIC 12” and “Costs for

construction services - IFRIC 12” were recognised for amounts determined as contemplated by

IFRS 15.

As of 26 February 2021, in connection with the change in the Group's scope, IFRIC 12 is also

applied in the intangible asset model for the subsidiary MISE.

In the intangible asset model, the concessionaire, in return for the infrastructure construction and

improvement services rendered, acquires the right to charge users for the use of the infrastructure.

Therefore, the concessionaire's cash flows are not guaranteed by the awarding body, but are related

to the actual use of the infrastructure by users, thus entailing demand risk for the concessionaire.

This is the risk that revenues from the exploitation of the right to charge users for the use of the

infrastructure will not be sufficient to ensure a reasonable return on the investments made.

“Assets reversible free of charge” represent the Concessionaire's right to use the asset under

concession in consideration of the costs incurred to design and construct the asset. The value

corresponds to the fair value of planning and construction activities and is posted to the income

statement as a contra-entry to the item “Revenues from construction services - IFRIC 12”, while the


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Financial Report as at 31 December 2022	page 159

costs related to the investment made are posted to the item “Costs for construction services - IFRIC

12” and are measured according to their percentage of completion.

For information about the aspects of the agreement for concession services, please refer to

paragraphs 7.1 “Railway infrastructure” and 7.4 “Motorways” of the Management Report.

IMPAIRMENT LOSS OF INTANGIBLE ASSETS, PROPERTY, PLANT AND

EQUIPMENT AND INVESTMENTS

Non-current assets include - among others - property, rolling stock, intangible assets and

investments. Management periodically revises the carrying amount of non-current assets held and

used and assets that must be disposed of, when required by facts and circumstances.

In assessing whether there is an indication that an asset may be impaired, the Group considers

available internal and external information sources.

Impairment testing on non-current assets is carried out by comparing the carrying amount of the

asset and the greater of the fair value, net of costs to sell, and the value in use of the asset. In the

absence of market values considered representative of the actual value of the investment, estimate

methods and valuation models are used based on data and assumptions which are sustainable and

reasonable, based on historical experience and future expectations of the market and foreseeable

changes in the specific legal framework. The value in use is determined based on estimates of cash

flows expected from the use or sale of the asset, approved by competent bodies and based on

projections that do not exceed five years and discount rates to calculate the present value, referred

to market conditions.

When the carrying amount of a non-current asset is impaired, the Group records a write-down for

the excess between the carrying amount of the asset and its recoverable value through use or sale,

determined with reference to the Group's most recent plans, and recognised under “Amortisation,

depreciation and write-downs”.

For assets not subject to amortisation/depreciation and intangible assets not yet available for use,

impairment testing is carried out annually, regardless of whether or not specific indicators are

present.

If the conditions for a previous write-down no longer apply, the carrying amount, with the

exception of goodwill, is restored to the new estimated value, which will not exceed the net

carrying amount the asset would have had, if it had not been written down. Reversals are recorded

in the Income Statement.

INCOME AND CHARGES FROM THE SALE OF INVESTMENTS

Operations to sell controlling interests that do not cause a loss of control of the sold investee result

in the recognition of the difference between the carrying amount of net consolidated assets

concerning the sold investment and the consideration of the sale directly recognised in consolidated

shareholders' equity; on the other hand, operations to sell controlling interests that cause a loss of

control of the sold investee result in the recognition of the difference between the carrying amount

of net consolidated assets concerning the sold investment and the consideration of the sale in the

income statement for the year.

DIVIDENDS

Revenues for dividends are recognised when the right to collection arises, which normally coincides

with the resolution of the shareholders' meeting to distribute dividends.

Resolved dividends are recognised as a payable to Shareholders at the time of the resolution on

distribution.


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Financial Report as at 31 December 2022	page 160

FINANCIAL INCOME AND FINANCIAL EXPENSES

Financial income and expenses are recognised in the Consolidated Income Statement during the

year when they are accrued or sustained, on an accrual basis.

Financial expenses that are directly attributable to the acquisition, construction or production of a

qualifying asset have been capitalised.

CURRENT TAXES

Current taxes are recognised and determined based on a realistic estimate of taxable income in

compliance with applicable tax regulations of the country, applying the tax rates in force or

substantially in force at the reporting date and considering applicable exemptions and any tax

receivables due.

TAX CONSOLIDATION

The Parent Company renewed the option for the National Tax Consolidation Scheme for the 2022 -

2024 three-year time interval (article 117, paragraph 1 of the Consolidated Income Tax Act), which

subsidiaries of FNM are also party to, pursuant to article 2359 of the Italian Civil Code. This

provision enables FNM S.p.A. to manage all obligations to make periodic payments to the Revenue

Agency and offset any credit positions of other Group companies against relative debt positions.

Subsidiaries determine taxes, and revenue payments are made exclusively by FNM S.p.A. On

payment, companies transfer their IRES receivable/payable, recording the payable/receivable to the

Parent Company, which in turn records the IRES receivable/payable transferred by the subsidiaries

and the payable/receivable towards them, proceeding with payment or collection.

GROUP VAT

The Parent has chosen the option in article 73, paragraph 3 of Italian Presidential Decree 633/72

relative to Group VAT. This provision enables FNM S.p.A. in a capacity as Parent pursuant to

article 73, paragraph 3, to manage all obligations to make periodic payments to the Revenue

Agency and offset any credit positions of other Group companies against relative debt positions.

Subsidiaries periodically liquidate VAT and payments are made exclusively by FNM S.p.A. On

payment, companies transfer their VAT receivable/payable, recording the payable/receivable to the

Parent Company, which in turn records the VAT receivable/payable transferred by the subsidiaries

and the payable/receivable towards them, proceeding with payment or collection.

EARNINGS PER SHARE

Basic earnings per share are calculated dividing net profit for the year attributable to owners of

ordinary shares of the Parent by the weighted average number of ordinary shares outstanding in the

period, excluding treasury shares.

DILUTED EARNINGS PER SHARE

Diluted earnings per share are determined by adjusting the weighted average of outstanding shares

to take into account all dilutive potential ordinary shares.


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Financial Report as at 31 December 2022	page 161

TRANSLATION OF FOREIGN CURRENCY ITEMS

Functional currency

Group companies prepare their financial statements based on the money of account used in

individual countries. The functional currency of the Parent is the Euro, which is the presentation

currency of the Consolidated Financial Statements.

Transactions and accounting records

Transactions in foreign currency are initially recognised at the exchange rate in effect at the

transaction date.

At the end of the reporting, period, monetary assets and liabilities in foreign currency are re-

translated based on the exchange rate in effect at that date.

Non-monetary items measured at historical cost in foreign currency are translated using the

exchange rate in effect at the transaction date.

Non-monetary items recognised at fair value are translated using the exchange rate in effect at the

date when the value was determined.

NOTA 4ITEMS SUBJECT TO SIGNIFICANT ASSUMPTIONS AND ESTIMATES

The preparation of the Consolidated Financial Statements and notes requires Management to use

estimates and assumptions that have an effect on financial statement assets and liabilities and on the

disclosure of potential assets and liabilities at the reporting date. The estimates and assumptions

used are based on experience and other factors considered material. Final results could differ from

these estimates. Estimates and assumptions are revised periodically and the effects of all changes

are reflected in the Consolidated Income Statement in the year when the estimate is revised if the

revision only impacts that year, or also in subsequent years, if the revision has effects on the current

year as well as on future years.

There were no changes in estimates during the current year.

The main critical measurement processes and key assumptions used by Management in adopting

accounting standards, concerning the future and which may have significant effects on figures in

the Consolidated Financial Statements or for which there is a risk that value adjustments to the

carrying amount of assets and liabilities in the year following the reporting period in question may

be identified, are summarised below.

Provision for bad debts

The provision for bad debts reflects Management estimates of losses relative to the receivables

portfolio.

The estimate of the provision for bad debts is based on losses expected by the Group, determined

based on past experience with similar receivables, current and historical past due receivables, and

losses and collections, the careful monitoring of credit quality and forecasts of economic and

market conditions, assisted by legal advisors representing the Group during pre-litigation and

litigation stages.

Inventory impairment

Inventory impairment is an estimate process subject to the uncertainty of determining the

replacement value of rolling stock components and consumables which varies over time and

according to market conditions.


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Financial Report as at 31 December 2022	page 162

Determination of useful lives

Asset depreciation and amortisation is a significant cost for the Group. The cost of tangible and

intangible assets with a finite useful life is depreciated/amortised over the estimated useful life of

the relative assets. The determination of the depreciation/amortisation of such assets represents a

complex accounting estimate and is subjective in nature, as it is influenced by multiple factors

including:

–the identification of each component with a relevant cost in relation to the total cost of the

item to be depreciated/amortised separately (“component approach”) as well as the estimate

of the relative useful life;

–the estimate of the residual value. According to the provisions of IAS 16 and 38, the

depreciable cost of tangible assets is determined by deducting their residual value. Residual

value is determined as the estimated value that the entity could receive on disposal, less the

estimated costs to sell, if it were already at the time and in the condition expected at the end

of the concession or the use of the asset. Companies periodically review the residual value

and assess its recoverability based on the best information available at the date. This

periodic update could lead to a change in the depreciation rate for future years;

–impacts of any changes in the regulatory framework.

The economic useful life of the Group's assets is determined by the Directors when the asset is

acquired. It is based on historical experience for similar assets, market conditions and expectations

regarding future events that may impact their useful life. Therefore, the actual economic life may

differ from the estimated useful life. Any periodic updating of the useful life could lead to a change

in the depreciation/amortisation period and thus also in the depreciation/amortisation rate for future

years.

Recoverable value of property, plant and equipment, intangible assets and investments

Non-current assets include land, property, plant and machinery and other assets and intangible

assets, as well as investments. As stated in the accounting standard “Impairment of intangible

assets, property, plant and equipment and investments in other companies”, management

periodically revises the carrying amount of non-current assets held and used and of assets to be

disposed of, as required by facts and circumstances.

In assessing whether there is an indication that an asset may be impaired, the Group considers

available internal and external information sources.

With regard to the process of identifying impairment for the purposes of the Group's consolidated

financial statements at 31 December 2022, the documents issued by ESMA and summarised below

were also taken into consideration:

•ESMA document of 28 October 2022 that, specifically with regard to impairment testing,

calls for an assessment, where relevant, of possible indicators of impairment arising from

measures to prevent or mitigate climate change risks, the use of assumptions that reflect

climate change issues and the adaptation of the sensitivity analysis to take into account

climate change risks and commitments;

•ESMA Public Statement of 13 May 2022, the content of which is echoed in CONSOB

Warning Notice no. 3/22 of the following 19 May, which draws attention to the

consequences, on the valuation process, of the effects arising from the Russo-Ukrainian

conflict, in particular aimed at verifying whether the new contextual conditions following

the War in Ukraine may have generated a presumption of impairment or not;


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Financial Report as at 31 December 2022	page 163

•Warning Notice no. 1/21 of 16 February 2021, concerning COVID-19, which also referred

to the ESMA document of 28 October 2020, emphasised that in a COVID-19 context,

“special attention must be paid to the planning process, taking into account the possible

impacts on business objectives and risks arising from: the pandemic, the use of economic

support measures and their discontinuation”.

The assumptions underlying budgets and business plans were then analysed to check for any trigger

events. In this regard, no structural external factors were identified relating to changes in market

conditions or competitive profiles in the markets in which the investee companies operate such so

as to give rise to indicators of impairment.

The analysis of business plans and the analysis of deviations (in terms of revenue, EBITDA, EBIT

and net profit) between the actual results for 2022 and the 2022 budget, conducted at business

segment and investee company level, revealed the need to proceed with an impairment test of the

investee companies ATV, E-vai and Trenord, as described in more detail in the Goodwill, Right of

Use and Equity Investments sections of these notes.

This impairment test was carried out using estimates of expected cash flows and adequate discount

rates to calculate the present value and is therefore based on a set of assumptions relative to future

events and the actions of administrative bodies of the Group that might not necessarily occur

according to expected times and procedures.

The Cash Generating Units (CGUs) identified by the Group, corresponding to the individual legal

entities, constitute the smallest group of assets that generate incoming cash flows largely

independent of the incoming cash flows from other assets or groups of assets.

Deferred tax assets and liabilities

The Group recognises current taxes and deferred tax assets and liabilities based on applicable laws.

The recognition of taxes requires the use of estimates and assumptions concerning procedures to

interpret applicable regulations, regarding operations carried out during the year, and their effect on

company taxes. Moreover, the recognition of deferred tax assets and liabilities requires the use of

estimates concerning prospective taxable income and relative developments, as well as tax rates that

are actually applicable. This takes place through the analysis of transactions and their tax profiles,

assisted by external consultants as necessary for various issues addressed and the use of simulations

of prospective income and relative sensitivity analysis.

Defined benefit plans

Post-employment benefit may be classified as a defined benefit plan for the portion accrued up to

31 December 2006. Management uses various statistical assumptions and valuation factors with the

aim of anticipating future events to calculate expenses, liabilities and assets relative to such plans.

The assumptions concern the discount rate and rates of future salary increases. Moreover, actuaries

acting as consultants for the Group use subjective factors, such as mortality and resignation rates.

Potential liabilities and provisions for risks

The Group may be involved in legal, and tax litigation, arising from complex and difficult issues,

with varying degrees of uncertainty, including factors and circumstances inherent to each case,

jurisdiction and different applicable laws.

Given the uncertainties of these issues, it is difficult to predict outflows that could arise from these

disputes, with certainty.

Consequently, Management, after consulting with its legal and tax advisors, recognises a liability

for these disputes when a financial outflow is likely and when the amount of resulting losses can be


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Financial Report as at 31 December 2022	page 164

reasonably estimated. If a financial outflow becomes possible but the amount cannot be determined,

the situation is reported in the notes to the financial statements.

Compensatory measures for loss of traffic revenues

To partially offset loss of ticketing revenues, article 200, paragraph 1, of Decree Law no. 34 of 19

May 2020 converted, with amendments, by Law no. 77 of 17 July 2020 established a fund with the

Ministry for Infrastructure and Transport with an initial amount of EUR 500 million for the year

2020, to offset the reduction of tariff revenues from passengers in the period from 23 February 2020

to 31 December 2020 compared to the average tariff revenues recorded in the same period of the

previous two years.

The endowment of the fund was then increased by EUR 400 million for 2020 by art. 44, paragraph

1 of Decree Law no. 104/2020. This provision also provided the possibility to use the greater

resources allocated, up to a limit of EUR 300 million, to finance additional local and regional public

transport services for students as well.

With the subsequent art. 27 of Decree Law 149/2020 (Ristori bis) converted into law by Law 176 of

2020 art. 22-ter was extended until 31 January 2021, the reference period in relation to which

companies may make use of the Fund for local public transport companies due to the lower tariff

revenues realised during the COVID-19 emergency period, in addition, the Fund's endowment was

increased by a further EUR 390 million, of which a portion of up to EUR 190 million to finance

additional local and regional public transport services, including for students. Therefore, of the

additional EUR 390 million allocated for 2021, EUR 200 million is earmarked to compensate for

the lower revenues of the local public transport companies already identified by art. 200, paragraph

1 of the aforementioned Decree Law no. 34/2020 and EUR 190 million for additional local and

regional public transport services.

Finally, with article 1, paragraph 816 of Law no. 178 of 30 December 2020 (2021 Budget Law), an

additional EUR 200 million was set aside for the year 2021 to enable the provision of additional

local and regional public transport services., which was later increased by EUR 450 million for the

year 2021 by art. 51 of Decree Law no. 73/2021 and refinanced with EUR 80 million for 2022 by

Decree Law no. 4 of 2022, which also established that part of the fund's resources, up to a limit of

EUR 45 million, may be used to offset the higher costs incurred for vehicle disinfection and

sanitisation.