Biancamano fileAs for the valuation, a peers’ analysis was developed considering two different...

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Biancamano Technology & Services Applied to Waste Management

Biancamano - Key estimates and data Y/E December 2007A 2008E 2009E 2010ERevenues EUR M 73.5 93.9 120.0 133.4EBITDA EUR M 10.2 13.2 17.2 19.6EBIT EUR M 5.6 7.8 11.2 13.0Net income EUR M 3.0 4.1 6.0 6.8Dividend ord. EUR 0.05 0.05 0.05 0.05Adj. EPS EUR 0.09 0.12 0.18 0.20EV/EBITDA x 8.7 7.3 6.1 5.5Adj. P/E x 27.5 19.9 13.7 11.9 A: actual; E: estimates; Source: Company data and Intesa Sanpaolo Research

A nationwide player. Biancamano is an Italian leader in urban waste management and also works in waste disposal through a proprietary landfill, based in the province of Imperia. The group operates in 10 Italian regions in urban waste management, with 1,500 employees, 1,200 transportation vehicles and serving around 1.3 million inhabitants.

Increasing the new contract portfolio. In 2007 and 2008 the group acquired several new urban waste management contracts. In 2007 the group closed contracts for more than EUR 50M, which are expected to have an impact on 2008 sales. In the first part of 2008 new contracts for roughly EUR 8M were closed. The contracts acquisition strategy is focused on the following key drivers: 1) increasing the average duration of the portfolio; 2) expanding the average dimension of contracts in order to increase profitability and 3) widening its national presence. At the end of 2007, the average duration of contracts was 42 - 54 months. The recent more relevant contracts awarded were related to Catanzaro (EUR 20.6M) and ATO Catania 5 (EUR 21.8M). The group has roughly EUR 43M of outstanding bids.

A strong growth profile. Thanks to the efficient approach to waste management based on technology and a wide range of services offered, the group is acquiring a high expected growth profile. The targets announced during the March 2007 IPO concerning an expected doubling of sales in 2009 (EUR 120M) vs. 2005 (EUR 56.8M), were reconfirmed by management. Recent positive results and developments support these objectives. 1Q08 sales increased by 31.8% (after +12.4% realised in 2007).

Valuation and recommendation. As for the valuation, a peers’ analysis was developed considering two different baskets of comparables distinguishing between: 1) Italian Local Utilities, selecting those groups fitting better with Biancamano in terms of dimension and presence in the waste sector (Hera, Acegas, ACSM Como and Enia) and 2) foreign listed players operating in the waste business. No other private waste manager is listed on the domestic market. On foreign markets a number of private listed players can be found identifying a significant reference basket with Biancamano business model. We also applied a DCF approach incorporating more cautious assumptions with a risk free rate of 4.75% (vs. the previous level applied of 4.5%). We reach a target price of EUR 2.70/share (+13% upward potential) and an ADD recommendation.

Risks. The main risks to Biancamano are related to the slow implementation of contracts and services related to the presence of Municipalities and public entities as main clients. The limited duration of concessions and estimated capacity of the proprietary landfill in Ponticelli (2011), located near Imperia could imply substantial investments to expand activities in other fields, already found and owned by the group, subject to approval by Local Authorities. The Ponticelli landfill authorisation renewal could take time and therefore generate uncertainty.

11 July 2008

ADD Target Price: EUR 2.70

Waste Management Initiation of Coverage

Intesa Sanpaolo Research Department

Maria Paola Toschi Research Analyst +39 02 7261 2293

Price performance, -1Y 11/7/08

J A S O N D J F M A M J J1.60

1.80

2.00

2.20

2.40

2.60

2.80

3.00

3.20

BIANCAMANOMILAN MIBTEL - PRICE INDEX

Source: Thomson Reuters

Data priced on 08.07.2008 Target price (€) 2.70Target upside (%) 13Market price (€) 2.452-week range (€) 3.3/1.8Market cap (€ M) 81.5No. of shares (M) 34.0Free float (%) 22.0Major shareholder (%)

Biancamano, Lux, 50.3

Reuters BIAN.MIBloomberg BIAN IM Mibtel 22336

Performance % Absolute Rel. to Mibtel -1M -1 -1M -3-3M 12 -3M 8

-12M -23 -12M 7Source: Intesa Sanpaolo Research estimates and Thomson Reuters

Equity Company Note

Equity Company Note 11 July 2008

2 Intesa Sanpaolo Research Department

Contents

Investment Summary 3

Valuation 4

Company Profile 7

Urban Waste Management Business Model 9

Waste Disposal Business Model 10

Shareholding Structure 10

Reference Market 11

Regulatory Framework 11

Group Strategy 13

SWOT Analysis 14

2007 Financial Results 15

1Q08 at a Glance 16

Outlook 17

Performance 19

Financials 20


Intesa Sanpaolo Research Department 3

Investment Summary

In April 2008, Biancamano won a bid in the urban waste collection for the Municipalities of Tavagnacco and Frazioni in the Udine province for a total of 14,000 clients served. With this deal Biancamano now operates in 10 Italian regions and confirmed its national presence. During 2007 the group won several important bids for more than EUR 50M, with additional contracts awarded in the first part of 2008 for roughly EUR 8M. The group has outstanding offers for roughly EUR 43M confirming the strong commitment to portfolio enlargement. The new contracts contributed to: 1) extend the average contract portfolio duration; 2) increase the average single contract dimension and 3) increase profitability.

The group has recently participated in some international bids (Tunisia among others) adding the international expansion project to its strategy based on the following key drivers: 1) corporate management optimisation; 2) organic growth, 3) external growth. The bid for the Tunis city waste management contract could be very important (roughly EUR 5M per year for 5 years, renewable for another 5 years) and could support the company strategy.

Biancamano’s management based its successful track record in contract achievements on investments in technology and on a wide range of services offered. The company created a so called “firm panel” linked to a network of 40 operating centres and based on GPS services that is able to monitor different activities in the territory, costs and means movement. The Company is able to supply customised services and specific solutions, that differ by client need and geographical characteristics in the areas served.

The group is maintaining the targets outlined during the March 2007 IPO, with an expected turnover almost doubling in 2009 (vs. 2005), thus reaching around EUR 120M (vs. EUR 56.8M in 2005), thanks to the award of new larger contracts. The new contracts pipeline supports this outlook. In 1Q08 Biancamano realised EUR 21.3M sales with a relevant increase of 31.8% (after +12.4% realised in 2007). 1Q profitability level was in line with 2007 results.

Biancamano’s outlook is based on the following drivers: 1) Urban waste collection is expected to be driven by new contracts with an estimated 2007-10E sales CAGR of 23%; 2) for the waste disposal SBU (strategic business unit) we estimate substantially stable volumes and fee increases slightly higher and in line or slightly higher than inflation estimates (4.0%). We expect an increase in profitability. Group EBITDA in 2010E is estimated at 14.7% (vs. 13.9% in 2007) pushed by an Aimeri Ambiente improvement. Ponticelli’s EBITDA margin is already very high (39.8% in 2007) and has been left unchanged in the next few years outlook. Despite increasing financial charges and a tax rate estimated between 41-42%, 2007-10E Net Profit CAGR is estimated at 32.1%.

As for the valuation, a peers’ analysis was developed considering two different baskets of comparables distinguishing between: 1) Italian Local Utilities, selecting those companies that better fit with Biancamano in terms of dimension and involvement in the waste management business and 2) foreign listed players operating in the waste business. We also applied a DCF approach using more cautious assumptions (a risk free rate of 4.75% vs. the previous 4.5%). We reach a target price of EUR 2.70/share and an ADD recommendation.

We view the main Biancamano risks as being related to the slow implementation of contracts and services related to the presence of Municipalities and public entities as main clients. The limited duration of concessions and the estimated capacity of the proprietary landfill in Ponticelli (2011), located near Imperia, could imply substantial investments to expand activities in other fields subject to approval by Local Authorities. A stronger attention to themes related to waste management and disposal in Italy could facilitate a more friendly regulatory framework. Biancamano is not involved in the Campania waste management problems. After the solution of the emergency situation in terms of waste disposal, the region could represent an opportunity for Biancamano in terms of new waste management contract acquisitions.

10 regions served

International expansion

Focus on technology and services

IPO targets confirmed

Outlook

Valuation

Risks



Valuation

Peers’ analysis

We used two different baskets of comparables distinguishing between: 1) Italian Municipalities and 2) listed foreign players operating in the waste business.

Both public local utilities and private players manage the waste business in Italy. But no private player is listed on the domestic market (except for Biancamano). Among listed local utilities, we selected HERA, Acegas, ACSM Como and Enia that fit better with Biancamano in terms of dimension and presence in the waste management sector.

In the follow table we present the basket average multiples of the selected Italian Municipalities.

Italian local utilities average multiples 2008E 2009EEV/Sales X 1.1 1.1EV/EBITDA X 7.6 6.6EV/EBIT X 16.1 12.7P/E X 29.9 17.1P/CF X 5.9 5.2 Source: Intesa Sanpaolo Research estimates on JCF

Abroad the situation is quite different with a certain number of listed players operating in the waste business. We selected a number of private waste management players operating in different countries with different dimensions and competitive positions. We identified the following companies: Casella Waste Systems (USA), Lassilla and Tikanoja (Finland), Seche Environment (France), Shanks Group (GB), Biffa (GB), Allied Waste Industries (USA), Republic Services (USA), Waste Connections (USA) and Waste Services (GB). They are a group of companies involved in the waste management business with an average greater dimension respect Biancamano. The basket average market cap is EUR 1.2M.

In the following table we present the foreign waste management players basket average multiples.

Foreign waste management players average multiples 2008E 2009EEV/Sales X 1.8 1.6EV/EBITDA X 7.4 6.8EV/EBIT X 12.4 11.5P/E X 17.8 14.6P/CF X 7.6 6.8 Source: Intesa Sanpaolo Research estimates on JCF

Applying Italian Local Utilities multiples to Biancamano estimates we reach a fair value EUR 2.8/share. Following the same approach applying foreign waste managers multiples to Biancamano estimates we reach EUR 2.9/share.

Value map approach

We developed a value map approach including the two different baskets selected and already presented. In the following chart we display the relationship between 2008 EBITDA margin and 2008 EV/Sales for the two alternative baskets.

We reached EUR 2.32/share, when applying the correlation that emerged between the Italian Local Utilities and Foreign waste management players to Biancamano’s estimates. We highlight the very high level of profitability by foreign players. According to consensus estimates the average expected 2008E EBITDA margin for the foreign player basket is 24% vs. 15% of the selected Italian Local Utilities and 14.1% expected for Biancamano.

Italian Local Utilities

Foreign waste managers

Peers’ analysis fair values

Value map approach fair values



Value map

Enia

Acegas Hera

Acsm Waste Services

Waste Connections

Republic Services

Allied Waste Industries

Shanks

Seche Environnement

Lassila And Tikanoja

Casella Waste S.

y = 7.7985x - 0.0948R2 = 0.8507

-

0.50

1.00

1.50

2.00

2.50

3.00

0% 5% 10% 15% 20% 25% 30% 35%

2008E EBITDA margin %

2008

E EV

/Sal

es

Source: Intesa Sanpaolo Research estimates on JCF

DCF valuation

In the following table, we summarise our main DCF model assumptions.

Biancamano DCF main assumptions (%) 2007-2017E sales CAGR 5.42007-2017E EBIT CAGR 7.5Perpetual growth rate 2.5Average 2007-2017E EBIT margin 9.8Average 2007-2017E tax rate 41.0Average 2007-2017E Capex to sales ratio 7.5Average 2007-2017E Working Capital to sales 21.2 NA: not meaningful; Source: Intesa Sanpaolo Research estimates

We apply a WACC of 6.7% coming from the following set of additional conditions.

Biancamano WACC calculation (%) Free risk rate 4.75Risk premium 4.50Beta (*) 0.63Cost of equity 7.60Gross cost of debt 6.0Tax shield 33.0Net cost of debt 4.0Gearing ratio 24.9WACC 6.7 (*) Bloomberg. Source: Intesa Sanpaolo Research estimates

Biancamano DCF valuation (EUR M)

Value of forecast cash flow 9.5Residual value 95.1Total net present value 104.7Net cash / -debt (End of 2008) -7.2Severance Provisions -5.0Minorities 0.01Total value 92.5Number of shares (M) 34.0Value per share (EUR) 2.72 Note: Total outstanding shares include 0.1M non-convertible savings shares; Source: Intesa Sanpaolo Research estimates

Long Term assumptions

WACC assumptions



We highlight the high impact of the residual value, 91% of total net present value due to the very high investments estimated in 2008-10. We reach a DCF-based fair value of EUR 2.72/share.

Biancamano sensitivity analysis Rate/Growth 1.5% 2.0% 2.5% 3.0% 3.5%5.8% 3.04 3.46 4.00 4.75 5.846.3% 2.56 2.88 3.27 3.79 4.516.8% 2.18 2.42 2.72 3.10 3.607.3% 1.87 2.06 2.29 2.57 2.937.8% 1.61 1.76 1.94 2.16 2.43 Source: Intesa Sanpaolo Research estimates

Conclusions

In the following table, we see all the different fair values obtained under the various valuation approaches.

Target price recap DCF EUR 2.72Peers' Analysis Waste managers EUR 2.94Italian Utilities EUR 2.79Value Map EUR 2.32Average Peers' EUR 2.68Target Price EUR 2.70 Source: Intesa Sanpaolo Research estimates

Our valuation points to a target price of EUR 2.70/share (+13% vs. market price). We set an ADD recommendation.

At our settled target price the 2008E and 2009E EV/EBITDA are respectively 8.1x and 6.5x. See the following table.

Biancamano Implicit multiples 2008E 2009E 2010EEV Target EUR M 107.1 114.7 119.1Mkt Cap Target EUR M 91.8 91.8 91.8EV/Sales x 1.1 1.0 0.9EV/EBITDA x 8.1 6.7 6.1P/E x 22.4 15.4 13.4 Source: Intesa Sanpaolo Research estimates

DCF approach fair value and sensitivity analysis

Target price

Implicit multiples



Company Profile

Biancamano is a leading private player operating in the waste sector in Italy, with more than 1,500 employees, 1,200 transportation means and around 1.3 million inhabitants served (Company data at the end of 2007).

The group operates in ten regions: Piedmont, Liguria, Lombardy, Sicily, Abruzzo, Sardinia, Valle d’Aosta, Tuscany, Calabria and Friuli Venezia Giulia.

The Biancamano group was born in 2004 as a result of the acquisition of Aimeri Ambiente, a company operating in the urban waste sector and Ponticelli, a company operating in the waste disposal sector through a proprietary landfill near Imperia. The group structure is shown in the following chart.

Biancamano Group structure

Biancamano Spa

Aimeri Ambiente Ponticelli

Aimeri Ecologic

Eco Imperia

Acquazzurra

99.95% 95.00%

50.00%

49.00%

20.00%

Urban waste collection

Waste disposal and Storage

5%

Source: Company data

Biancamano operates in the urban waste collection business, which represented 92% of total 2007 sales through the controlled company, Aimeri Ambiente (operating in the business since 1973). Biancamano acquired Aimeri Ambiente in 2004.

The main activities managed by Aimeri Ambiente are the following:

1. Sweeping: manually and/or mechanically cleaning (using combined or mechanical vacuum street sweepers) public outdoor areas (streets, squares and sidewalks) based on a differentiated schedule;

2. Street cleaning: cleaning with suitable vehicles (tankers with pressurised sprays) and materials (solutions) in sanitising streets, squares and sidewalks and removing pollutant dusts; and

3. Waste collection: emptying roadside containers designated for the collection of materials, which are then sent to recycling centres or suitable waste disposal facilities (eg, for special or dangerous waste). In this last case, different collection methods may also be adopted (eg, door-to-door or dedicated containers for special customers).

A leading private player

10 Italian regions served

Group structure and SBU

Urban Waste collection

Kind of services offered



Biancamano is present in the waste disposal business through Ponticelli, which has operated in the disposal segment since 1977 through an urban solid waste landfill located in the province of Imperia. Ponticelli manages the activity under an authorisation released in July 2007 that has been temporarily extended by the province of Imperia, while awaiting a long term renewal. The landfill can operate up to 2011 without any further investment.

Ponticelli activities have a low growth potential due to stable volumes conferred to the landfill by surrounding areas, as established by the Liguria Region. In 2007 sales increased by 1.5%. As far as Aimeri Ambiente is concerned, 2007 urban waste management sales increased by 11.8%.

Revenues breakdown – 2007 results

92

8

Urban waste collection

Waste disposal & storage


Despite the limited impact of Ponticelli’s waste disposal activities, we highlight that this company has a very high profitability. In 2007 Ponticelli’s EBITDA margin was 39.8%. In the same year Aimeri Ambiente’s EBITDA margin was 11.9% increasing from 9.2% in 2006.

EBITDA breakdown – 2007 results

Ponticelli; 26.1

Aimeri Ambiente; 73.9


The current waste disposal business comprises the following activities: 1) mechanical separation; 2) selection; 3) treatment; 4) composting and bio-stabilisation; 5) treatment and recovery of special liquid waste and sludge; and 6) controlled landfill disposal of un-recovered waste.

According to company estimates, the Ponticelli landfill can work until 2011. Nevertheless, the group can expand the landfill capacity thanks to the enlargement of the landfill activity in the surrounding grounds already held by Biancamano.

Waste disposal

Sales breakdown

Strong focus on urban waste collection

Profitability breakdown

Services offered



Biancamano is the only player with a national geographical presence. Group strategy is focused on supplying an integrated offer, based also on consultancy and the supply of other services.

The Company invested in technology building a so called “firm panel”. Through this firm panel the company is able to monitor different activities in the territory and costs and means movement through a network of 40 operating centres. The network is based on GPS services installed on the urban waste collection means and linked to the operating centres.

Clients and Municipalities can verify the quality of services offered, by a connection to the operating network. Each municipality has a password to connect with the network.

Urban Waste Management Business Model

Due to its type of activities, Biancamano works a lot with Municipalities but the business model differs in the two sectors. As far as urban waste management is concerned, Public Municipalities represent more than 95% of sales (2007 results). The remaining stake is represented by Private clients.

In the urban waste management sector the business model is mainly focused on the acquisition of public client contracts with an increasing attention to larger contracts awarded by big ATOs (Ambiti Territoriali Ottimali). The group is rationalising the contract portfolio by increasing the weight of more profitable larger contracts that are gradually substituting old small concessions. Larger contracts are able to cover costs more efficiently, with greater economies of scale vs. small contracts.

The Aimeri Ambiente business strategy is based on an extension of the contract duration that allows higher visibility on revenues flows.

The concessions vs. Municipalities are based on fixed fee contracts. In 2007, 84% of sales were represented by fixed fee contracts giving higher stability and visibility to this sales portion. These contracts include some yearly adjustments related to inflation rates. Prices of services offered are part of the concession conditions but there are some yearly adjustments which take into consideration some critical costs like: 1) fuel, 2) labour and 4) inflation.

The success keys for contract acquisitions include a wide range of services and specific solutions studied for the different types of customers and different geographical areas to be served. Biancamano has a strong know how in complex project management. Services and customised solutions are considered more relevant success keys in the contracts acquisition.

Biancamano operates through a group of core employees, roughly 80 people mainly dedicated to central activities, environment engineers and specialists able to prepare offers and launch new projects. Environmental operators working in the territory are also company employees, but are related to the various contracts. Despite the high weight of labour costs on group sales (50% in 2007), 99% of labour costs is a variable item being related and linked to the contracts acquired.

A similar approach is followed for the means and equipment management. 99% of investments on equipment and waste containers are realised under leasing contracts that are related to the duration of each single contract. The average contract duration is 5/7 years. Leasing duration is usually lower than the real life of the equipment.

A technological network

Customer mix

Waste management business model

Average long concession duration

High percentage of fixed fees sales

A wide range of services

Labour costs

Means and equipment



Waste Disposal Business Model

In the waste disposal sector, Ponticelli is one of the two landfills operating in the Imperia province. The waste disposal company operates in a sort of duopoly. It receives waste produced by some Municipalities in the surrounding area and applies fees, both defined by the Liguria Region.

Ponticelli’s activities and business model can be summarised as follows:

1. Stable volumes managed;

2. Fees defined by Liguria region;

3. Very high profitability;

4. A full capacity operating activity;

5. Absence of competition;

6. Holding a duopoly.

Shareholding Structure

After the March 2007IPO, the main shareholder is Biancamano Luxembourg, with 50.3%.

Biancamano shareholders Biancamano Luxembourg % 50.3 GB Pizzimbone % 1.2 PB Pizzimbone % 1.2 Amber Capital % 15.3 Financiere de Champlain % 5.3 Other Institutional % 4.8 Free Float % 22.0 Total % 100.0 Source: Consob

Biancamano Luxembourg is controlled through GBP Investments & Properties, which holds 63.5%. GBP Investments & Properties LTD is 100% controlled by Giovanni Battista Pizzimbone (Chairman and CEO of Biancamano).

The shareholders’ meeting of 28 April 2008 approved a buy back programme by Biancamano on 3.4M shares corresponding to 10% of the share capital to be realised in the next 18 months. Before the 28 April approval the group already had a buy back programme that was dealt by Pontincelli.

At 9 July 2008, Ponticelli had 999,384 shares corresponding to 2.939% of share capital and Biancamano had 13,000 Treasury shares.

A duopoly

Limited free float

Buy back

Treasury shares



Reference Market

The waste sector in Italy is characterised by a slightly below EU average per-capita waste production, with a growing trend that is expected to reduce the gap in the coming years.

According to Eurostat/EU data and the “Italian Waste Management Annual Report” published by the “Osservatorio Nazionale sui Rifiuti” in 2005, the production of urban waste per capita in the EU has grown from 457kg in 1995 to 534kg in 2003.

In Italy, the production of urban waste has recorded a continual growth trend in the last decade (a 1995-2004 CAGR of 2.3%), with a sustained growth path in 1995-2000 (a 2.4% CAGR), a slowdown in 2000-03, due to the macroeconomic deceleration (a 1.2% CAGR) and a subsequent recovery in 2004 (up 3.7% yoy).

Europe - Waste per capita production (1995 and 2003) Italy – Urban waste production (1996-2004)

0

200

400

600

800

Ger

man

y

Spai

n

Fran

ce

Ital

y

Aus

tria

UK

Switz

EU15

1995 2003(kg/person)

25.96 26.61 26.85 28.36 28.96 29.41 29.86 30.03 31.15

1996 1997 1998 1999 2000 2001 2002 2003 2004

(M tonnes)CAGR: +2.3%

+3.7%

Source: Eurostat/EU data Source: Osservatorio Nazionale sui Rifiuti

As for waste disposal, we highlight that the total amount of waste disposed of in landfills in Italy began to gradually decline as from 1999, to around 50% of the total waste produced in 2004. The remaining waste is subject to several different types of treatment, such as thermal and composting of the organic fractions from both differentiated collection and separation plants. The overall volumes of differentiated waste collection have substantially increased from 3.7M tonnes in 2000 to 7.1M tonnes in 2004 (up 92.0%). In 2004, the total differentiated waste collection accounted for 22.7% of the total urban waste, increasing from 21.4% in 2003.

The highest percentage of differentiated waste collection was recorded in the northern regions of Italy, reaching the target of 25% of total waste in 2001, as set by the current regulation. This percentage further increased in the following years, reaching 33.5% in 2003 and 35.5% in 2004. In the central regions of Italy, the percentage of differentiated waste collection was lower at 17.1% in 2003 and 18.3% in 2004. In the southern regions, the percentage was even lower, with 7.7% in 2003 and 8.1% in 2004.

Regulatory Framework

The Ronchi Decree (Legislative decree 05.02.1997, n. 22), issued in accordance with the EU directive 91/156 on waste management, the EU directive 91/689 on dangerous waste and the EU directive 94/62 on packaging has been the national regulation reference in the Italian waste sector up to the introduction of the “Codice dell’Ambiente” (Legislative Decree 03.04.2006, n. 152), which combines all the previous rules and regulations on the sector into a single text.

The Ronchi Decree updated the previous waste management regulations and prescribes that the collection, transport, recovery and urban waste disposal activities must be organised based on Optimum Territorial Areas (ATOs). The Decree also subordinates the exercise of the waste disposal and recovery activities in obtaining the required authorisation.

Different treatments for waste

Differentiated waste collection

Ronchi Decree, 1997

ATO creation and definition



Article 113 of the Legislative Decree 18.08.2000, n. 267 (“Unified Body of Laws of the Local Municipalities”) is currently the central regulation that disciplines management of the local public services.

On 10.02.2006, the Cabinet approved the draft legislative decree containing the “Environmental Regulations”, thus exercising the authority attributed thereto by Law no. 308 of 15.12.2004, which assigned the government the responsibility for reforming, reorganising and rationalising the entire regulatory framework (waste management, territory and water protection, assessment of environmental impact, and large-scale combustion plants), through assimilation in the Italian order of other directives including the EU directive on the protection and management of waters.

The new legislation introduces important aspects especially with regard to municipal waste management, for which new criteria of assimilation have been provided in addition to the possibility, under certain conditions, of removing substantial portions of materials conventionally included in the integrated management cycle, if these are directly recycled in the production process (so-called “secondary prime materials”).

Reform of Local Public Services, 2000

Local Public Service: changes in regulations



Group Strategy

Thanks to its national presence, critical mass and integration in the waste collection and disposal businesses, Biancamano intends to become one of the most pro-active private players in the Italian waste sector, reaping the opportunities arising from the gradual liberalisation of the sector.

The IPO proceeds, corresponding to EUR 32.3M, net of IPO charges, were finalised to the implementation of a growth strategy based on organic and external growth.

The key drivers of the group expansion strategy are: 1) corporate management optimisation; 2) organic growth; 3) International Expansion and 4) external growth.

The group is further committed to optimising its organisational structure, aimed at further cost cuts and increasing efficiency. The group intends to increase its operational efficiency, especially in the urban waste collection services, through the implementation of its new IT systems for the different costs’ analytic monitoring. In addition, Biancamano intends to continue to offer innovative solutions to its clients for urban waste services’ management, mainly based on the optimisation of logistics.

The gradual liberalisation of the sector should offer interesting opportunities for the group, especially in the urban waste collection business, as all the contracts near to expiry should be re-awarded through bids, thus more transparency and limiting the possibility of renewals through direct in-house assignments. According to management, the key strengths for successfully competing in this business are logistics, dedicated people and vehicles and the capacity to select the most profitable contracts before any bid.

With the recent participation in some bids in foreign countries, like Tunisia among others, the Biancamo group has more aggressively started an international expansion strategy. In June 2008, the group participated in a bid for the waste management and collection for the city of Tunis. This contract could reach EUR 5M per year for 5 years, renewable for another 5 years. The success of this strategy could significantly boost growth.

The Italian waste sector is currently highly fragmented in terms of players, with the presence of both public and private operators, in the majority of cases, small companies. Biancamano intends to act as a potential catalyst in the sector consolidation in the coming years, acquiring both small/medium sized companies and/or business divisions. In addition, the group does not rule out the possibility of expanding the range of services offered to its clients, entering into other businesses, such as waste reclamation.

IPO proceeds

Corporate management optimisation

Organic growth

International expansion

External growth



SWOT Analysis Strengths Opportunities

An integrated operator with critical mass.

A long track record and know how in urban wastemanagement (Aimeri Ambiente operates since 1977) andwaste disposal (Ponticelli since 1977).

High profitability by Ponticelli (2007 EBITDA margin at 39.8%)

High know how in bid acquisitions and management.

An innovative approach to urban waste services’management.

A good visibility on contracted volumes in urban wastecollection thanks to the average high duration of contractswith municipalities.

Growing volumes of waste production in Italy in the last few years.

The gradual liberalisation of the urban waste sector in Italy based on ATOs, favours efficient and modern players.

Constant growth of waste production in Italy (CAGR 2000-05: +5.1%).

High know how and commitment in complex bidacquisitions and presentation.

Fragmented structure of the reference market represented by small private producers.

The ongoing waste sector consolidation could offer acquisition opportunities.

A more transparent and efficient system of concessionawarding.

In 2009/10 the group could reconsider the opportunity of participating in the Campania and Naples area concessions.

Biancamano could be a defensive investment due to the utility business model and the expected growth rates in the reference market.

Weaknesses Risks

Limited duration of the waste disposal concession (2011).

Limited track-record in the newly created group structure(2004).

Limited track record of successful bids with municipalities.

Revenues concentration (in previous years roughly 30% ofsales referred to the first three customers).

Low visibility on group long term turnover growth potential.

High dependence on a limited number of substantialcontacts.

Low 2008E expected dividend yield vs. Italian Local Utilities.

Possible increasing competition in the public contract bids.

Unstable regulatory framework.



2007 Financial Results

In 2007 the Biancamano group had sales of EUR 73.5M, a 12.4% increase vs. 2006. 91.9% of sales were concentrated in urban waste collection (increased vs. 91.2% in 2006). 2007 benefited from the implementation of contracts acquired in 2006 and 2007.

The main new contracts acquired by Biancamano in the last part of 2007 with some Municipalities were:

Castellanza (VA) for EUR 4.5M and 60 months duration;

Catanzaro for EUR 20.6M and 42 months duration;

ATO Catania 5 for EUR 21.8M and 48 months duration;

Barga (LU) for EUR 7.6M and 60 months duration.

The increased average expiry of the portfolio contracts increased and was positioned between 42 and 60 months at the end of 2007.

We also highlight that 84% of total 2007 sales were represented by sales generated by fixed fee contracts giving higher stability and visibility to this sales portion. These contracts include some yearly adjustments related to inflation rates.

As for urban waste collection, (91.2% of total 2007 sales), in 2007 the number of regions included in the group portfolio reached 9. Calabria and Tuscany were added. 33% of sales were realised in Piedmont, followed by Liguria (22.5%), Sicily (21.5%) and Lombardy (17.2%).

Revenues breakdown by region – 2007 results


New contracts also contributed to slightly increase the group profitability. 2007 EBITDA margin moved to 13.9% (from the previous 13.7%), followed by a slight increase in terms of EBIT margin at 7.6% (from the previous 7.5%). More profitable contracts contributed for only a few months. The group also benefited from economies of scale and increased cost control and management thanks to investments in operating centres realised in previous years.

Lower financial charges and a reduced tax rate contributed to the relevant net profit increase (+99.2%) of EUR 2.97M.

The tax rate moved to 40.2% (from 61.7% in 2006) due to the new fiscal ratios that already impacted 2007 deferred and paid forward tax calculations.

Strong focus on Urban waste collection

Several new contracts in last part of 2007

High portion of fixed fees

Revenue breakdown by region

Higher profitability of new contracts

Reduced tax rate

Piedmont; 32.9

Liguria; 22.5

Valle d'Aosta; 2.0

Others; 4.0

Lombardy; 17.2

Sicily; 21.4



2007 results 2006 2007 yoy %Revenues 65.4 73.5 12.4EBITDA 8.9 10.2 14.0EBITDA margin % 13.7 13.9EBIT 4.9 5.6 13.3EBIT margin % 7.5 7.6EBT 3.9 5.0 27.4Tax -2.4 -2.0Tax rate % 61.7 40.2Net Profit 1.5 3.0 99.2 Source: Company data

The IPO proceeds contributed to reduce net debt exposure. IPO proceeds amounted to EUR 32.3M, net of IPO proceeds. Net debt at the end of 2007 was EUR -7.2M (from EUR -25.7M in 2006) and the debt/Equity ratio moved to 0.17 (from 4.98 in 2006).

2007 investments amounted to EUR 13.9M, mainly dedicated to industrial vehicles and waste containers. 71% of investments were realised under leasing contracts. At the end of 2007 group total industrial vehicles amounted to 1,223.

The increased activity determined an expansion of Net Working Capital that at the end of 2007 was EUR 18.9M corresponding to 25.7% of sales vs. EUR 11.5M from 17.6% in 2006. The increase was mainly related to the trade receivables that moved to EUR 29.7M (from 20.9M in 2006) with a weight on sales of 40.4% (vs. 32.1% in 2006). According to our calculations the average trade receivable days increased to 147.5 (vs. 117.1 in 2006) due to the impact of some new clients.

1Q08 at a Glance

In the first few months of 2008 Biancamano realised sales of EUR 21.3M, a 31.8% increase.

In April 2008, Biancamano won a bid in the urban waste collection for the Municipalities of Tavagnacco and Frazioni in the Udine province for a total of 14,000 clients served. With this deal, Biancamano now operates in 10 Italian regions. The contract will have a duration of three years for an amount of EUR 0.63M per year.

As far as new production is concerned, we highlight that the group was awarded the following new contracts:

Two new contracts in Liguria for limited impacts;

CSEA Consortium in Cuneo for EUR 6M for 2008;

ACEM Consortium in Cuneo for EUR 1.1M for 2008.

We highlight that the CSEA and ACEM contracts were renewed (and not new).

The group participated in some substantial bids for a total amount of potential sales of roughly EUR 43M confirming the strong commitment to the contracts portfolio enlargement. New contracts underwritten and new outstanding bids are contributing to extend the average concession duration.

Profitability levels were maintained in line with 2007.

IPO proceeds

Investments

Increased NWC

Sales +31.8%

10 regions served

New production

Outstanding bids

Profitability level in line



Outlook

During the March 2007 IPO, group management set a target of doubling turnover in 2009, thus reaching around EUR 120M (vs. EUR 56.8M in 2005), thanks to the award of new larger contracts. Company management are confirming these targets, and the new contracts pipeline supports this earnings outlook.

Thanks to the new contracts awarded during 2007 and the beginning of 2008 we estimate that 2008 sales could reach EUR 93.9M, 93.4% in the urban waste collection. In this sector almost 26% can be considered new production, which according to our approach, means sales coming from newly awarded contracts.

In the following table we present our sales estimates and breakdown between the two sectors. Urban waste management growth is driven by newly awarded contracts; while waste disposal activity is expected to involve stable volumes and increasing fees (roughly in line or slightly higher with medium term inflation expectations; +4.0% per year).

Sales expected trend and breakdown EUR M 2007A 2008E 2009E 2010EUrban waste collection 67.5 87.7 113.6 126.7Waste disposal 5.9 6.2 6.4 6.7Total sales 73.5 93.9 120.0 133.4Weight (%) 2007A 2008E 2009E 2010EUrban waste collection 91.9 93.4 94.6 95.0Waste disposal 8.1 6.6 5.4 5.0Total sales 100.0 100.0 100.0 100.0Yoy (%) 2007A 2008E 2009E 2010EUrban waste collection 13.2 29.9 29.5 11.5Waste disposal 4.6 4.0 4.0 4.0Total sales 12.4 27.8 27.8 11.1 Source: Intesa Sanpaolo Research estimates

In terms of costs and profitability we assume that: 1) Aimeri Ambienti could increase its profitability level thanks to an increase in the average amount of each single contract, which could create economies of scale. On the Ponticelli side, we assume an unchanged level of profitability.

Sales expected trend and breakdown 2007 2008E 2009E 2010EAimeri Ambiente EBITDA 7.7 10.7 14.7 17.0EBITDA margin % 11.9 12.2 12.9 13.4Ponticelli EBITDA 2.7 2.5 2.6 2.7EBITDA margin % 39.8 39.8 39.8 39.8Aggregate EBITDA 10.4 13.2 17.2 19.6Consolidated EBITDA 10.2 13.2 17.2 19.6Consolidated EBITDA margin 13.9 14.1 14.3 14.7Intergroup Adjustment ratio 0.98 1.0 1.0 1.0 Source: Intesa Sanpaolo Research estimates

We assume that investments remain high vs. sales with a relevant portion represented by leasing investments.

Management IPO targets

Strong boost from new production

Sales estimates and breakdown

EBITDA estimates and breakdown

Investments and net financial position



Capex estimates and breakdown Investments 2006 2007 2008E 2009E 2010ETangibles -1.1 -3.2 -1.9 -2.4 -2.7Leasing tangibles -0.9 -9.9 -9.4 -9.6 -10.0Intangibles -0.5 -0.9 -0.7 -0.6 -0.5Total capex -2.5 -13.9 -12.0 -12.6 -13.2Total capex/sales 3.9 19.0 12.7 10.5 9.9 Source: Intesa Sanpaolo Research estimates

As a consequence net debt is expected to increase, but net debt/Equity estimates should remain low.

Net debt estimates Net Debt 2006 2007 2008E 2009E 2010ENet debt -26.7 -7.2 -15.3 -22.9 -27.3Net Debt/Equity 5.0 0.2 0.3 0.5 0.5Net Debt/EBITDA 3.0 0.7 1.2 1.3 1.4 Source: Intesa Sanpaolo Research estimates

We have settled net financial charges according to gross and net debt composition. Net debt structure is mainly linked to EURIBOR 1m or 3m, with a spread between 100 and 150 basis points.

The high weight of labour costs on sales (50% in 2007 and assumed in line in the next few years), is expected to impact the tax rate, which we estimate at 41-42%.

Tax rate estimates 2007 2008E 2009E 2010EEBT 5.0 7.1 10.1 11.5IRAP Tax income in Italy 42.4 55.0 71.9 80.7IRAP -1.8 -2.2 -2.8 -3.2Pre-tax profit 5.0 7.1 10.1 11.5IRPEG 33% -1.6 -2.0 -2.8 -3.2Total taxes 0.0 0.0 0.0 0.0Effective tax -3.4 -4.1 -5.6 -6.4Adjustment ratio -2.0 -3.0 -4.1 -4.7Tax rate (%) 40.2 42.6 40.9 40.6 Source: Intesa Sanpaolo Research estimates

After the all above considerations we estimates that net profit could reach EUR 6.8M in 2010E (vs. EUR 2.9M in 2007) with a CAGR of 32.1%.

Net debt estimates

EURIBOR is the reference for financial charges

Tax rate

Net profit CAGR >30%



Performance

Biancamano was listed in March 2007. In the first year since listing, Biancamano performed better than the All Star Index. Biancamano’s relative performance vs. the All Star Index in the last 3 months was positive for 8%. In the following table we included the performance of a wide basket of Foreign waste managers and Local Italian utilities, also including some groups not directly included in the multiple reference basket due to the different size and business model positioning.

Biancamano vs. its reference basket Company 1M% 3M% 6M% 1A%Biancamano SpA -1 12 -11 -23Casella Waste Systems -2 0 -13 -6WCA Waste Corp. 15 -6 -7 -39Waste Industries Usa 0 2 -1 -3Lassila And Tikanoja -5 -17 -24 -38Seche Environnement -16 -9 -39 -43Shanks Group -7 -11 -14 -29Allied Waste Industries -9 7 12 -24Republic Services -15 -5 -11 -20Waste Connections -6 -1 -5 -12GPE Groupe Pizzorno Environnement -16 -17 -26 -58Waste Management -4 4 7 -21Waste Services -10 -12 -20 -50Biffa 0 -1 -1 7Severn Trent -7 -8 -18 -17Pennon Group 1 1 -14 -12A2A -5 -1 -23 -10Acsm -9 -9 -13 -37Iride -12 -3 -25 -28Hera -11 3 -17 -19Acegas -1 -9 -19 -38Enia -15 -21 -35Mibstar Bench (IT) 2 3 -10 -30Mibtel Bench (IT) 1 0 -11 -25Biancamano vs. Mibstar -3 8 -1 7 Source: JCF

Biancamano vs. main local Italian utilities Biancamano vs. main waste management player

J A S O N D J F M A M J1.40

1.60

1.80

2.00

2.20

2.40

2.60

2.80

3.00

3.20

BIANCAMANOACEGAS APSACSM Source: Thomson Datastream

J A S O N D J F M A M J1.50

2.00

2.50

3.00

3.50

4.00

4.50

BIANCAMANOCASELLA WASTE SYS.A(FRA)LASSILA & TIKANOJA

SECHE ENVIRONNEMENT

Source: Thomson Datastream

Source: Datastream Source: Datastream

First year of listing



Financials Biancamano – Income statement (2005-10E)

EUR M 2005 2006 2007 2008E 2009E 2010ETotal Sales 56.8 65.4 73.5 93.9 120.0 133.4Growth (%) 83.5 15.1 12.4 27.8 27.8 11.1Operating costs -22.2 -23.3 -26.5 -33.5 -42.2 -46.1Labour costs -28.8 -33.1 -36.8 -47.2 -60.6 -67.7EBITDA 5.8 8.9 10.2 13.2 17.2 19.6Growth (%) 75.6 53.6 14.0 29.4 30.5 13.9EBITDA margin (%) 10.2 13.7 13.9 14.1 14.3 14.7Depreciation & Amortisation -2.6 -4.0 -4.6 -5.4 -6.0 -6.6EBIT 3.2 4.9 5.6 7.8 11.2 13.0EBIT margin (%) 5.7 7.5 7.6 8.3 9.4 9.8Financial items -1.0 -1.0 -0.6 -0.7 -1.1 -1.5Extraordinary items 0.0 0.0 0.0 0.0 0.0 0.0EBT 2.2 3.9 5.0 7.1 10.1 11.5Taxes -1.7 -2.4 -2.0 -3.0 -4.1 -4.7Tax rate % 76 62 40 43 41 41Minorities 0.1 0.0 0.0 0.0 0.0 0.0Net income 0.5 1.5 3.0 4.1 6.0 6.8 Source: Company data and Intesa Sanpaolo Research estimates

Biancamano – Balance sheet (2005-10E)

EUR M 2005 2006 2007 2008E 2009E 2010ENet working capital 4.0 3.8 12.1 17.5 24.7 28.8Net Fixed Assets 35.4 33.6 42.9 49.6 56.2 62.9Funds -7.5 -5.3 -5.3 -6.7 -8.5 -9.5Net Capital Employed 31.9 32.1 49.8 60.4 72.5 82.2Net Financial Position -27.3 -26.7 -7.2 -15.3 -22.9 -27.3Net Equity 4.6 5.4 42.6 45.2 49.6 54.9 Source: Company data and Intesa Sanpaolo Research estimates

Biancamano – Cash flow statement (2005-10E)

EUR M 2005 2006 2007 2008E 2009E 2010ECash Income 3.0 5.5 7.6 9.4 11.9 13.4Change in long term liabilities 0.1 -2.3 0.0 1.4 1.8 1.0Change in working capital -2.0 0.2 -8.3 -5.4 -7.2 -4.1Operating cash flow 1.1 3.5 -0.8 5.4 6.5 10.3Capex & Investments -14.5 -2.2 -13.9 -12.0 -12.6 -13.2Free cash flow -13.4 1.3 -14.8 -6.5 -6.1 -2.9Changes in Net Equity 2.0 -0.7 34.3 -1.5 -1.5 -1.5Net Cash Flow -11.3 0.6 19.5 -8.1 -7.6 -4.4NFP initial -15.9 -27.3 -26.7 -7.2 -15.3 -22.9NFP final -27.3 -26.7 -7.2 -15.3 -22.9 -27.3 Source: Company data and Intesa Sanpaolo Research estimates



Biancamano - Key figures Ordinary ADDSector Components Mkt price EUR/Share 2.40 Waste Mgmnt REUTERS CODE BIAN.MI Target price EUR/Share 2.70 Values per share (EUR) 2006A 2007A 2008E 2009E 2010ENo. ordinary shares (M) 34.0 34.0 34.0 34.0 34.0No. NC saving/preferred shares (M) 0.0 0.0 0.0 0.0 0.0Total no. of shares (M) 34.0 34.0 34.0 34.0 34.0Adj. EPS 0.044 0.087 0.121 0.175 0.201CFPS 0.161 0.222 0.278 0.350 0.394BVPS 0.158 1.252 1.328 1.459 1.615 Dividend Ord 0.000 0.045 0.045 0.045 0.045 Dividend SAV Nc - - - - -Income statement (EUR M) 2006A 2007A 2008E 2009E 2010ESales 65.4 73.5 93.9 120.0 133.4 EBITDA 8.9 10.2 13.2 17.2 19.6 EBIT 4.9 5.6 7.8 11.2 13.0 Pre-tax income 3.9 5.0 7.1 10.1 11.5 Net income 1.5 3.0 4.1 6.0 6.8 Adj. net income 1.5 3.0 4.1 6.0 6.8 Cash flow (EUR M) 2006A 2007A 2008E 2009E 2010ENet income before minorities 1.5 3.0 4.1 6.0 6.8Depreciation and provisions 4.0 4.6 5.3 5.9 6.5Change in working capital 0.2 -8.3 -5.4 -7.2 -4.1Operating cash flow 5.7 -0.8 4.0 4.7 9.3Capital expenditure -2.2 -13.9 -12.0 -12.6 -13.2Other (uses of Funds) -2.3 0.0 1.4 1.8 1.0Free cash flow 1.3 -14.8 -6.5 -6.1 -2.9Dividends and equity changes -0.7 34.3 -1.5 -1.5 -1.5Net cash flow 0.6 19.5 -8.1 -7.6 -4.4Balance sheet (EUR M) 2006A 2007A 2008E 2009E 2010ENet capital employed 32.1 49.8 60.4 72.5 82.2of which associates 0.0 0.0 0.0 0.0 0.0Net debt/-cash -26.7 -7.2 -15.3 -22.9 -27.3Minorities 0.0 0.0 0.0 0.0 0.0Net equity 5.4 42.6 45.2 49.6 54.9Market cap 81.5 81.5 81.5 81.5 81.5Minorities value 0.0 0.0 - - -Enterprise value (*) 108.3 88.8 96.8 104.4 108.8Stock market ratios (x) 2006A 2007A 2008E 2009E 2010EAdj. P/E 54.7 27.5 19.9 13.7 11.9 P/CEPS 14.9 10.8 8.6 6.8 6.1 P/BVPS 15.2 1.9 1.8 1.6 1.5 Dividend yield (% ord) 0.0 1.9 1.9 1.9 1.9EV/sales 1.7 1.2 1.0 0.9 0.8 EV/EBITDA 12.1 8.7 7.3 6.1 5.5 EV/EBIT 22.0 15.9 12.4 9.3 8.4 EV/CE 3.4 1.8 1.6 1.4 1.3 D/EBITDA 3.0 0.7 1.2 1.3 1.4 D/EBIT 5.4 1.3 2.0 2.0 2.1 Profitability & financial ratios (%) 2006A 2007A 2008E 2009E 2010EEBITDA margin 13.7 13.9 14.1 14.3 14.7EBIT margin 7.5 7.6 8.3 9.4 9.8Tax rate 61.7 40.2 42.6 40.9 40.6Net income margin 2.3 4.0 4.4 5.0 5.1ROE 27.8 7.0 9.1 12.0 12.5Debt/equity ratio 497.6 16.9 33.8 46.1 49.7Growth (%) 2006A 2007A 2008E 2009E 2010ESales 15.1 12.4 27.8 27.8 11.1EBITDA 53.6 14.0 29.4 30.5 13.9EBIT 53.5 13.3 40.0 43.8 15.8Pre-tax income 77.2 27.4 44.0 41.3 14.0Net income 213.2 99.0 38.2 45.5 14.7Adj. net income 215.9 99.0 38.2 45.5 14.7 (*) EV = Mkt cap+ Net Debt + Minorities Value - Associates A: actual; E: estimates; Source: Company data and Intesa Sanpaolo Equity Research



Disclaimer Analyst certification

The financial analyst who prepared this report, and whose name and role appear on the first page, certifies that:

(1) The views expressed on companies mentioned herein accurately reflect independent, fair and balanced personal views; (2) No direct or indirect compensation has been or will be received in exchange for any views expressed.

Specific disclosures

1. Neither the analyst nor any member of the analyst’s household has a financial interest in the securities of the Company.

2. Neither the analyst nor any member of the analyst’s household serves as an officer, director or advisory board member of the Company.

3. The analyst named in the document is a member of AIAF.

4. The analyst named in this document is not registered with or qualified by FINRA, the U.S. regulatory body with oversight over Banca IMI Securities Corp. Accordingly, the analyst may not be subject to NASD Rule 2711 and NYSE Rule 472 with respect to communicates with a subject company, public appearances and trading securities in a personal account. For additional information, please contact the Compliance Department of Banca IMI Securities Corp at 212-326-1133.

5. The analyst of this report does not receive bonuses, salaries, or any other form of compensation that is based upon specific investment banking transactions.

6. The research department supervisors do not have a financial interest in the securities of the Company.

This research has been prepared by Intesa Sanpaolo S.p.A. and distributed by Banca IMI S.p.A. Milan, Banca IMI S.p.A-London Branch (a member of the London Stock Exchange) and Banca IMI Securities Corp (a member of the NYSE and NASD). Intesa Sanpaolo S.p.A. accepts full responsibility for the contents of this report and also reserves the right to issue this document to its own clients. Banca IMI S.p.A. and Intesa Sanpaolo S.p.A., which are both part of the Intesa Sanpaolo Group, are both authorised by the Banca d'Italia and are both regulated by the Financial Services Authority in the conduct of designated investment business in the UK and by the SEC for the conduct of US business.

Opinions and estimates in this research are as at the date of this material and are subject to change without notice to the recipient. Information and opinions have been obtained from sources believed to be reliable, but no representation or warranty is made as to their accuracy or correctness. Past performance is not a guarantee of future results. The investments and strategies discussed in this research may not be suitable for all investors. If you are in any doubt you should consult your investment advisor.

This report has been prepared solely for information purposes and is not intended as an offer or solicitation with respect to the purchase or sale of any financial products. It should not be regarded as a substitute for the exercise of the recipient’s own judgment. No Intesa Sanpaolo S.p.A. or Banca IMI S.p.A. entities accept any liability whatsoever for any direct, consequential or indirect loss arising from any use of material contained in this report. This document may only be reproduced or published together with the name of Intesa Sanpaolo S.p.A. and Banca IMI S.p.A.

Intesa Sanpaolo S.p.A. and Banca IMI S.p.A. have in place a Joint Conflicts Management Policy for managing effectively the conflicts of interest which might affect the impartiality of all investment research which is held out, or where it is reasonable for the user to rely on the research, as being an impartial assessment of the value or prospects of its subject matter. A copy of this Policy is available to the recipient of this research upon making a written request to the Compliance Officer, Intesa Sanpaolo S.p.A., 90 Queen Street, London EC4N 1SA. Intesa Sanpaolo S.p.A. has formalised a set of principles and procedures for dealing with conflicts of interest (“Research Policy”). The Research Policy is clearly explained in the relevant section of Intesa Sanpaolo’s web site (www.intesasanpaolo.com).

Member companies of the Intesa Sanpaolo Group, or their directors and/or representatives and/or employees and/or members of their households, may have a long or short position in any securities mentioned at any time, and may make a purchase and/or sale, or offer to make a purchase and/or sale, of any of the securities from time to time in the open market or otherwise.

Intesa Sanpaolo S.p.A. issues and circulates research to Qualified Institutional Investors in the USA only through Banca IMI Securities Corp., 1 William Street, New York, NY 10004, USA, Tel: (1) 212 326 1230.

Residents in Italy: This document is intended for distribution only to professional investors as defined in art.31, Consob Regulation no. 11522 of 1.07.1998 either as a printed document and/or in electronic form.

Person and residents in the UK: This document is not for distribution in the United Kingdom to persons who would be defined as private customers under rules of the FSA.

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Valuation methodology

The Intesa Sanpaolo S.p.A. Equity Research Department values the companies for which it assigns recommendations as follows:

We obtain a fair value using a number of valuation methodologies including: discounted cash flow method (DCF), dividend discount model (DDM), embedded value methodology, return on allocated capital, break-up value, asset-based valuation method, sum-of-the-parts, and multiples-based models (for example PE, P/BV, PCF, EV/Sales, EV/EBITDA, EV/EBIT, etc.). The financial analysts use the above valuation methods alternatively and/or jointly at their discretion. The assigned target price may differ from the fair value, as it also takes into account overall market/sector conditions, corporate/market events, and corporate specifics (ie, holding discounts) reasonably considered to be possible drivers of the company’s share price performance. These factors may also be assessed using the methodology indicated above.



Equity rating key

In its recommendations, Intesa Sanpaolo S.p.A. uses an “absolute” rating system, which is not related to market performance and whose key is reported below:

BUY: if the target price is 20% higher than the market price.

ADD: if the target price is 10%-20% higher than the market price.

HOLD: if the target price is 10% below or 10% above the market price.

REDUCE: if the target price is 10%-20% lower than the market price.

SELL: if the target price is 20% lower than the market price.

Target price: the market price that the analyst believes the share may reach within a one-year time horizon.

Market price: closing price on the day before the issue date of the report, as indicated on the first page, except where otherwise indicated, as shown on the first page.

RATING SUSPENDED: the rating and target price have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstances, including when Intesa Sanpaolo Group is acting in an advisory capacity in a merger or strategic transaction involving the company.

NO RATING: the company is or may be covered by the Research Department but no rating or target price is assigned.

Coverage policy and frequency of research reports

The list of companies covered by the Research Department is available upon request. Intesa Sanpaolo S.p.A. aims to provide continuous coverage of the companies on the list in conjunction with the timing of periodical accounting reports and any exceptional event that affects the issuer’s operations. The companies for which Banca IMI acts as sponsor or specialist are covered in compliance with regulations issued by regulatory bodies with jurisdiction. In the case of a short note, we advise investors to refer to the most recent company report published by Intesa Sanpaolo S.p.A’s Research Department for a full analysis of valuation methodology, earnings assumptions, risks and the historical of recommendation and target price. Research is available on Banca IMI’s web site (www.bancaimi.com or www.intesasanpaolo.com) or by contacting your sales representative.

Historical recommendations and market price trend (-1Y) Historical recommendations and target price trend (-1Y) NA NA

Specific disclosures

Banca IMI discloses interests and conflicts of interest, as defined by: Articles 69-quater and 69-quinquies, of Consob Resolution No.11971 of 14.05.1999, as subsequently amended and supplemented; the NYSE’s Rule 472 and the NASD’s Rule 2711; the FSA Policy Statement 04/06 “Conflicts of Interest in Investment Research – March 2004 and the Policy Statement 05/03 “Implementation of Market Abuse Directive”, March 2005. The Intesa Sanpaolo Group maintains procedures and organisational mechanisms (Information barriers) to professionally manage conflicts of interest in relation to investment research. We provide the following information on Intesa Sanpaolo Group’s conflicts of interest:

1 The Intesa Sanpaolo Group has a conflict of interest inasmuch as it plans to solicit investment banking business or intends to seek compensation from the Company in the next three months.

Intesa Sanpaolo Research Rating Distribution (at 1 May 2008) Number of companies covered: 105 BUY ADD HOLD REDUCE SELLTotal Equity Research Coverage (%) 36 29 29 4 2of which Intesa Sanpaolo’s Clients* (%) 28 33 33 25 100 (*) Companies on behalf of whom Intesa Sanpaolo and the other companies of the Intesa Sanpaolo Group have provided corporate and Investment banking services in the last 12 months; percentage of clients in each rating category



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