Hera Group-Consolidate quarterly report as at 30 september 2016

Consolidate
quarterly
report
as at 30 september 2016

Hera Group – Consolidated quarterly report as at 30 September 2016
1
Approved by Hera Spa’s Board of Directors in the meeting of 09 November 2016

TABLE OF CONTENTS

Introduction
Governance and control bodies   002
Mission 003

Management Report
1.01 Economic and financial performance overview and alternative performance measures
definitions 004
1.01.01 Operating results    007
1.01.02 Analysis of the Group’s financial structure and investments 011
1.01.03 Analysis of net cash (net borrowings) 013
1.02 Analysis by business area    014
1.02.01 Gas 015
1.02.02 Electricity 018
1.02.03 Integrated Water Cycle 021
1.02.04 Waste Management 026
1.02.05 Other services 030
1.03 Share performance and investor relations   033
1.04 Reference scenario and strategic approach   036
1.05 Human resources   039

Abbreviated consolidated financial statements
2.01 Financial statements   040
2.01.01 Income statement 040
2.01.02 Statement of comprehensive income 041
2.01.03  Statement of financial position 042
2.01.04  Cash flow statement   044
2.01.05  Statement of changes in equity                                   045
2.02 Explanatory notes 046
2.03 Net Borrowings 049
2.04 Equity investments 050

2

GOVERNANCE AND CONTROL BODIES

Board of Directors
Chairman Tomaso Tommasi di Vignano
CEO Stefano Venier
Vice-Chairman Giovanni Basile
Director Mara Bernardini
Director Forte Clò
Director Giorgia Gagliardi
Director Massimo Giusti
Director Riccardo Illy
Director Stefano Manara
Director Luca Mandrioli
Director Danilo Manfredi
Director Cesare Pillon
Director Tiziana Primori
Director Bruno Tani
Board of Statutory Auditors
Chairman Sergio Santi
Standing Auditor Antonio Gaiani
Standing Auditor Marianna Girolomini
Control and Risk Committee
Chairman Giovanni Basile
Member Massimo Giusti
Member Stefano Manara
Member Danilo Manfredi
Remuneration Committee
Chairman Giovanni Basile
Member Mara Bernardini
Member Luca Mandrioli
Member Cesare Pillon
Executive Committee
Chairman Tomaso Tommasi di Vignano
Vice-Chairman Giovanni Basile
Member Stefano Venier
Member Riccardo Illy
Ethics Committee
Chairman Massimo Giusti
Member Mario Viviani
Member Filippo Maria Bocchi
Independent auditing firm
Deloitte & Touche

3

MISSION

“Hera’s goal is to be the best multi‐utility in Italy for its customers, workforce and shareholders. It
aims to achieve this through further development of an original corporate model capable of
innovation and of forging strong links with the areas in which it operates by respecting the local
environment".

“For Hera to be the best means to represent a reason for pride and trust for: customers, who
receive, thanks to Hera’s constant responsiveness to their needs, quality services that satisfy their
expectations. The women and men who work at Hera, whose skills, engagement and passion are
the foundation of the company’s success; shareholders, confident that the economic value of the
company will continue to be generated in full respect of the principles of social responsibility; the
reference areas, because economic, social and environmental health represent the promise of a
sustainable future; and suppliers, key elements in the value chain and partners for growth".

chapter 1
REport
on operations

4

1.01 ECONOMIC AND FINANCIAL PERFORMANCE OVERVIEW AND ALTERNATIVE
PERFORMANCE MEASURES DEFINITIONS

The Hera Group uses Alternative Performance Measures (APM) to more effectively convey
information about the profitability of the business in which it operates as well as its financial
situation. In accordance with the guidelines published 5 October 2015 by the European Securities
and Markets Authority (ESMA/2015/1415) and in keeping with the provisions of Consob
communication no. 92543 of 12/3/2015, the content and criterion for determining the
Alternative Performance Indicators used in this financial statement are explained below.

The EBITDA is an operating performance indicator and is calculated as “EBIT” plus “Depreciation,
amortization and provisions.” This measure is used as the financial target in internal
presentations (business plans) and external presentations (to analysts and investors), and is a
useful measure for evaluating the operating performance of the Group (as a whole, and at the
level of each Business Unit), including by comparing the operating profitability of the reporting
period with that of previous periods. In this way it is possible to analyze trends and compare the
efficiency achieved in different periods.

The EBITDA on revenues, EBIT on revenues and Net profit on revenues are used as the financial
target in internal presentations (business plans) and external presentations (to analysts and
investors) and they measure the Group’s operating performance by representing a proportion, in
Economic indicators and investments
(€/mln)
Sept 2016 Sept 2015 Abs. change % change
Revenues 3,104.8 3,246.4 -141.6 -4.4%
EBITDA 650.6 640.2 +10.4 +1.6%
EBITDA/Revenues 21.0% 19.7% -1.3 p.p.
EBIT 329.2 317.3 +11.9 +3.8%
EBIT/Revenues 10.6% 9.8% -0.8 p.p.
Net profit 151.8 134.9 +16.9 +12.5%
Net profit/Revenues 4.9% 4.2% -0.7 p.p.
Net investments 241.2 220.6 +20.6 +9.3%
Economic and financial indicators
(€/mln)
Sept 2016 Dec 2015 Abs. change % change
Net fixed assets 5,521.2 5,511.3 +9.9 +0.2%
Net working capital 82.1 157.0 -74.9 -47.7%
Provisions (535.8) (513.5) -22.3 -4.3%
Net invested capital 5,067.5 5,154.8 -87.3 -1.7%
Net financial debt (2,567.0) (2,651.7) +84.7 +3.2%
Economic
indicators and
investments
Economic and
financial
indicators
Definition of
Alternative
Performance
Measures
(APM)
Economic
APMs and
Investments

5

terms of percentage, of the gross operating margin, operating profit and net profit divided by the
value of Revenues.

Net investments are calculated as investments in property, plant and equipment, intangible
assets and non‐controlling interests net of capital contributions. This measure is used as the
financial target in internal presentations (business plans) and external presentations (to analysts
and investors), and is a useful measure for evaluating the spending capacity in terms of
investments in maintenance and development of the Group (as a whole and at the level of each
Business Unit), including through comparison with previous periods. In this way it is possible to
analyze trends and compare the efficiency achieved in different periods.

Net non‐current assets are calculated as the sum of: property, plant and equipment; Intangible
assets and goodwill; non‐controlling interests; and Deferred tax assets and liabilities. This
measure is used as the financial target in internal presentations (business plans) and external
presentations (to analysts and investors), and is a useful measure for evaluating the Group’s net
assets as a whole, including through comparison with previous periods. In this way it is possible
to analyze trends and compare the efficiency achieved in different periods.

Net working capital is calculated as the sum of: Inventories; Trade receivables and payables;
Current tax assets and liabilities; Other current assets and liabilities; and Current assets and
liabilities for commodity derivatives. This measure is used as the financial target in internal
presentations (business plans) and external presentations (to analysts and investors), and is a
useful measure for evaluating the Group’s ability to generate cash flow through operating
activities over a period of 12 months, including through comparison with previous periods. In this
way it is possible to analyze trends and compare the efficiency achieved in different periods.

Funds includes the sum of the items “Post‐employment and other benefits” and “Provisions for
risks and charges”. This measure is used as the financial target in internal presentations (business
plans) and external presentations (to analysts and investors), and is a useful measure for
evaluating the Group’s ability to cope with possible future liabilities, including through
comparison with previous periods. In this way it is possible to analyze trends and compare the
efficiency achieved in different periods.

Net invested capital is determined by the sum of “Net non‐current assets”, “Net working capital”
and “Funds”. This measure is used as the financial target in internal presentations (business
evaluating all of the Group’s current and non‐current operating assets and liabilities, as specified
above.

Net borrowings is a measure of the company’s financial structure determined in accordance with
Consob communication 15519/2006, adding the value of non‐current financial assets. This
measure is therefore calculated by adding together the following items: Current and non‐current
financial assets; Cash and cash equivalents; Current and non‐current financial liabilities; current
Economic and
financial APMs

6

and non‐current assets and liabilities for Derivative financial instruments on interest and
exchange rates. This measure is used as the financial target in internal presentations (business
evaluating the Group's financial debt, including through comparison with prior periods. In this
way it is possible to analyze trends and compare the efficiency achieved in different periods.

The item source of financing is calculated as the sum of “net borrowings” and “equity”. This
measure is used as the financial target in internal presentations (business plans) and external
presentations (to analysts and investors) and represents the breakdown of funding sources
distinguishing between the company’s own equity and that of third parties; this is an indicator of
the Group’s financial autonomy and solidity.

7

1.01.01 OPERATING RESULTS
At the end of the first nine months of 2016, the Hera Group shows growth in all economic
indicators, even when faced with an increasingly challenging context as defined by various
competitive and regulatory factors. The Hera Group has proved able to manage this scenario and
operate in a balanced and dynamic way: a comparison with the previous year, in fact, shows
EBITDA rising by 1.6%, operating income by 3.8% and net profits by 12.5%.
The main corporate and business operations that led to changes in the Group’s corporate
structure as of 30 September 2016 were as follows:
 As of 1 November 2015, Biogas 2015 became part of the Group’s corporate structure.
This company’s activities include energy recovery and energy production from waste
recycling, as well as constructing, installing and managing the plants involved.

 On 23 December 2015 Herambiente acquired 100% of shareholding in Waste Recycling
Spa, which is involved in special waste treatment and recovery in the province of Pisa
and in turn holds shares in Rew Trasporti Srl and Neweco Srl. During the second half of
2016 the two controlled companies were merged into Waste Recycling Spa.

 As of 1 December 2015 Herambiente acquired effective control of a number of business
branches from Geo Nova Spa, taking over in particular the dangerous and non‐
dangerous waste storage plant in San Vito al Tagliamento (Pordenone) and the active
landfills for non‐dangerous waste located in Loria (Treviso) and Sommacampagna
(Verona).

 On 29 December 2015 Hera Spa transferred 90% of the company Hera Energie
Rinnovabili to third parties; subsequently renamed Aloe Spa, it is no longer part of the
Group’s consolidated scope.

 On 30 December 2015, AcegasApsAmga Spa divested its shares held in Trieste Onoranze
e Trasporti Funebri.

 On 8 April 2016 Hera Comm Srl was definitively awarded the tender announced by the
Municipality of Giulianova for the acquisition of 100% of the share capital of Julia Servizi
Più, a gas and electricity sales company operating in the area surrounding Teramo.

 Effective as of 1 July 2016, Hera Spa conferred its business branch dedicated to activities
in the sector of electricity and gas distribution to Inrete Distribuzione Energia Spa. This
company was established to manage activities in natural gas and electricity distribution
coherently with the requirements concerning functional and accounting unbundling
foreseen by the regulations of the Authority fo Electricity, Gas and Water System
(Aeegsi) for enterprises operating in the electricity and gas sectors, aimed at improving
competitiveness, efficiency and quality in providing energy services.

Constant
results
maintained

Approved by H

Constant an
expanding
increases
Revenues a
€ 3.1 billion
Hera Spa’s Boar
This
“Serv
unch
servi

The t

In the
roug
are r
by ro
and w
roug
chan
inves
class
e
amou
been
show
volum
€ 4.1
pass‐
reven
roug

Incom
Reven
Other
Raw m
Servic
Other
Perso
Capita
EBITD
Amort
Opera
Finan
Pre-ta
Taxes
Net p
Attribu
Share
Non-c
nd
at
rd of Directors in
consolidated
vice concessio
anged, is that
ces, are ackno
table below sh
e first nine mo
hly 4.4% com
esponsible fo
oughly € 180 m
water cycle s
hly € 25.6 m
ge in the
sted capital;
ification in th
“other op
unting to roug
n included. Th
w growth: re
mes of gas sol
1 million; a
‐through reve
nues from the
hly € 48 millio
me statement (€/m
nues
r operating revenue
materials
ce costs
r operating costs
onnel costs
alised costs
DA
t. & Prov.
ating profit
ncial operations
ax profit
s
profit for the perio
utable to:
eholders of the Pa
controlling interests
n the meeting o
income stat
on arrangeme
t investments
owledged in t
hows the econ
onths of 2016
pared to the
r this decreas
million followi
ervices, the d
illion is due
rate of retu
lastly, a di
he items “rev
perating in
ghly € 15 milli
he following
venues for g
ld coming to r
greater port
enue related
e environmen
on and, lastly,
mln)
es
od
arent Company
s
Hera Gro
of 09 November
tement reflec
ents”. The effe
s made in goo
he income sta
nomic results
6, revenues am
€ 3,246.4 mil
se: revenues f
ing a drop in t
drop of
to the
urn on
ifferent
venues”
ncome”
ion has
figures
greater
roughly
tion of
to non‐netw
nt area, owing
larger revenu
Sept 2016
3,104.8
259.9
(1,437.4)
(872.0)
(34.7)
(390.1)
20.0
650.6
(321.3)
329.2
(90.2)
239.1
(87.2)
151.8
142.2
9.6
oup – Consolida
2016
cts the applic
ect of applying
ods granted un
atement.
as at 30 Sept
mounted to €
lion seen in th
from electricit
the price of ra
work distribut
g to both an i
ues covering g
% Inc. S
8.4%
-46.3%
-28.1%
-1.1%
-12.6%
0.6%
21.0%
-10.3%
10.6%
-2.9%
7.7%
-2.8%
4.9%
4.6%
0.3%
ated quarterly re
cation of acc
g this principl
nder concessio
ember 2016 a
3,104.8 millio
he same perio
ty and gas sal
w materials; i
ion, coming
ncrease in wa
greater service
Sept 2015 %
3,246.4
226.0
(1,613.2) -49
(815.4) -25
(40.9) -
(380.5) -1
17.9 0
640.2 1
(323.0) -9
317.3
(98.8) -3
218.4
(83.5) -2
134.9
125.0
9.9 0
eport as at 30 S
counting prin
le, which leav
on, only inclu
and 2015:
on, down € 14
od in 2015. Va
les and tradin
in regulated g
to roughly €
aste disposed
es in regulate
% Inc. Abs. chang
-14
7.0% +3
9.7% -17
5.1% +5
1.3% -
1.7% +
0.6% +
9.7% +1
9.9% -
9.8% +1
3.0% -
6.7% +2
2.6% +
4.2% +1
3.9% +1
0.3% -
September 2016
8
ciple IFRIC12
ves the results
uding network
41.6 million or
arious factors
ng were down
gas, electricity
12.0 million,
of coming to
d businesses.
ge % change
1.6 -4.4%
3.9 +15.0%
5.8 -10.9%
6.6 +6.9%
6.2 -15.1%
9.6 +2.5%
2.1 +11.8%
0.4 +1.6%
1.7 -0.5%
1.9 +3.8%
8.6 -8.7%
0.7 +9.5%
3.7 +4.4%
6.9 +12.5%
7.2 +13.8%
0.3 -2.8%
6
8
2
s
k

r
s
n
y
,
o
e
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%

Approved by H

EBITDA at
€ 650.6 millio
(+1.6%)
Hera Spa’s Boar
For f

Othe
grow
incre
(€ 2.8
differ
from

The
mont
of ga
mate
Othe
and €
scope
distri
highe
The c
2015
provi
Envir
prese
Capit
year.
EBITD
perio
great
busin
from
parti
that
suffe
elect
total
€ 8.5
€ 14.
redu
capit
inflat
on
rd of Directors in
urther details
er operating i
wth is mainly d
ease in the ex
8 million), a
rent classifica
“revenues” t
cost of raw
ths of 2015, s
as purchased
erials and a dif
er operating c
€ 6.2 million
e of consolida
ibution, large
er costs of dis
cost of person
5 to € 390.1 m
ided for by th
ronment area
ence.
talised costs g
.
DA settled at
od in 2015. Th
ter EBITDA re
ness and the c
distribution
cularly sign
the first nine
ered from less
tricity and
ling € 25.6 m
in gas, € 2.
9 in wate
ction in re
tal in regul
tion.
n the meeting o
, see the anal
ncome grew
due to a larger
xchange price
greater contr
ation, amount
o “other oper
and other m
showing a cha
and lesser tr
fferent accou
osts grew by
in lesser ope
ation (€ 20.0
ly attributable
posal for the
nnel rose by €
illion in the sa
e National lab
a and Julia Se
grew by € 2.1
t € 650.6 mill
he growth in e
sulting from p
contribution c
n. This res
ificant cons
months of th
ser revenues
water distr
million (respe
2 in electrici
er) following
eturn on in
lated sector
Hera Gro
of 09 November
yses of the sin
compared to
r contribution
e (roughly € 1
ribution com
ting to rough
rating income
materials drop
ange of 10.9%
rading activity
nting mechan
€ 50.4 million
erating expen
million), a ris
e to the pass‐
rise in volume
€ 9.6 million o
ame period of
bour agreeme
ervizi Più is p
1 million or 1
ion, recordin
electricity com
power plants,
coming
sult is
sidering
he year
in gas,
ribution
ctively:
ity and
g the
nvested
rs and
oup – Consolida
2016
ngle business
o September
n coming from
13 million), h
ing from sort
ly € 15 million
e”.
pped by € 175
%. As with rev
y, as well as a
nism used for
n overall (€ 56
ses), which is
se in the cost
‐through reve
es treated and
or 2.5%, going
f 2016. This in
ent. The entra
artially comp
1.8% at Sept
g a growth o
mpensates the
, the good pe
ated quarterly re
areas.
2015 by € 33
m energy savin
higher revenu
ted waste (€
n, of certifica
5.8 million co
enues, this fa
an overall dec
energy incent
6.6 million in
s mainly attri
of electricity
enues mention
d greater IFRIC
g from € 380.
ncrease is mai
nce of resour
ensated by a
ember 2016 c
of € 10.4 milli
e drop in othe
rformance see
eport as at 30 S
3.9 million, o
ngs certificate
ues ensuing f
€ 3.5 million),
ate sales reve
ompared to t
all is due to le
crease in the
tives.
greater costs
butable to ch
y and gas tran
ned above (€
C 12 costs (€ 5
.5 million at 3
nly due to the
rces from com
a reduction in
compared to
ion, or 1.6%
er business are
en in the sale
September 2016
9
r 15.0%. This
es owing to an
rom IFRIC 12
as well as a
nues, passing
the first nine
esser volumes
e price of raw
s for services,
hanges in the
nsmission and
12.0 million),
5 million).
30 September
e salary raises
mpanies in the
n the average
the previous
on the same
eas, thanks to
es and trading
6
9
s
n
2
a
g
e
s
w
,
e
d
,
r
s
e
e
s
e
o
g

E
m
€
(+
Approved by H

EBIT at € 329
million (+3.8
arnings post
minorities at
142.2 million
+13.8%)
Hera Spa’s Boar
Amo
€ 323
The d
third
more
Hera
for th
EBIT
€ 317
The
at th
2016
impr
comp
This g
lesse
effici
the r
addit
and c
In lig
nine
Incom
tax r
year.
appli
conc
relate
inter
appli
Net p
first
millio

Grou
millio
to th
with
9.2
%)
t
n
rd of Directors in
rtisation, dep
3.0 million in
decrease in a
party assets
e than compe
mbiente Grou
he credit write
at 30 Septem
7.3 seen in the
results of fin
he end of th
6 came to
oving by € 8
pared to the s
good perform
er average
ency in rates
reimbursemen
tion to an o
cash equivalen
ht of the abo
months of 20
me taxes pert
ate of 36.5%,
. The reason
cation of the
essions for m
ed to previou
pretation tha
cation of Ias/
profits therefo
nine month
on in the same
up net profits
on, rising by €
he first nine m
Group profits

n the meeting o
preciation and
the first nine
mortisation o
in the gas are
nsated the hig
up companies
e‐down fund.
mber 2016 am
e same period
ancial manag
he third qua
o € 90.2 m
8.6 million o
same period in
mance is due t
debt and g
obtained tha
nt of a few lo
ptimisation o
nts.
ve, pre‐tax pr
015 to € 239.1
taining to the
, an improvem
for this decr
“patent box”
maxi amortisat
us years for a
t is more con
Ifrs.
ore rose by 12
s of 2015 t
e period in 20
s amounted t
€ 17.2 million
months of 20
s.
Hera Gro
of 09 November
d provisions d
e months of 2
of landfills an
ea due to the d
gher amortisa
s and Julia Se
mounted to
d in 2015.
gement
rter of
million,
r 8.7%
n 2015.
to both
greater
anks to
oans, in
of cash
rofits grew by
1 million in the
first nine mo
ment compar
rease can lar
” and tax cred
tions. Also no
a total of € 1
nsistent with
2.5%, equivale
to € 151.8
016.
to € 142.2
compared
015, in line
oup – Consolida
2016
dropped overa
2015, to € 32
d WTE plants
duration of th
ation for new
rvizi Più. A sli
€ 329.2 millio
y € 20.7 millio
e same period
onths of 2016,
ed to the 38.
gely be ascri
dits for resear
ote that in the
1.5 million we
legislation co
ent to € 16.9 m
ated quarterly re
all by € 1.7 m
1.3 million in
s, along with
he concession
investments a
ight increase
on, up € 11.9
n, going from
d of 2016.
, which came
2% in the sam
bed to the b
rch and devel
e first nine mo
ere recorded,
oncerning a fe
million, going
eport as at 30 S
million or 0.5%
the same pe
the drop in p
in the Forlì‐C
and the chang
was seen in a
9 million or 3
m € 218.4 milli
e to € 87.2 mil
me period of
benefits deriv
opment, in ad
onths of 2016
, mainly resu
ew changes c
from € 134.9
September 2016
10
%, going from
eriod in 2016.
provisions for
esena region,
ge in scope of
amortisations
.8% over the
on in the first
llion, define a
the previous
ving from the
ddition to tax
6 lesser taxes
lting from an
caused by the
million in the
6
0
m
.
r
,
f
s
e
t
a
s
e
x
s
n
e
e

11

1.01.02 ANALYSIS OF THE GROUP’S FINANCIAL STRUCTURE AND INVESTMENTS

The table below shows changes in the Group’s net invested capital and sources of financing for
the period ended 30 September 2016:
At 30 September 2016, net invested
capital dropped compared to 31
December 2015 by € 87.3 million. This
change is related to the good
performance of net working capital,
which recorded a considerable
decrease due to the good performance
of trade receivables.
Group investments came to € 241.2 million in the first three quarters of 2016, with a further
€ 10.5 million in capital grants, of which € 4.2 million for the New Investments Fund (FoNI), as
provided for by the tariff method for the Integrated water service. Including capital grants, the
Group’s overall investments amounted to € 251.5 million. Net investments rose by € 20.6 million,
going from € 220.6 million in September 2015 to € 241.2 million in September 2016.

Invested capital and sources of
financing (€/mln)
30 Sep 2016 Inc. % 31 Dec 2015 Inc. % Abs. change % change
Net non-current assets 5,523.2 108.9% 5,511.3 106.9% +11.9 +0.2%
Net working capital 82.1 1.6% 157.0 3.0% (74.9) (47.7%)
(Funds) (535.8) -10.6% (513.5) -10.0% (22.3) +4.3%
Net invested capital 5,069.5 100.0% 5,154.8 100.0% (85.3) (1.7%)
Equity (2,502.5) 49.4% (2,503.1) 48.6% +0.6 (0.0%)
Long-term borrowings (2,729.0) 53.8% (2,743.6) 53.2% +14.6 (0.5%)
Net cash/short term borrowings 162.0 -3.2% 91.9 -1.8% +70.1 +76.3%
Net financial debt (2,567.0) 50.6% (2,651.7) 51.4% +84.7 (3.2%)
Total sources of financing (5,069.5) -100.0% (5,154.8) 100.0% +85.3 (1.7%)
The Group’s
magnitude
increases
Net invested
capital: € 5.1
billion
Net investments
rise to € 241.2
million
5,1 5,1
5,2
5,1
Dec 2014 Sep 2015 Dec 2015 Sep 2016
Net invested capital (€/bln)

12

The following table shows a subdivision by sector, with separate mention of capital grants:
Capital expenditure totalled € 251.5 million, up 9.6% over September 2015, and mainly
concerned interventions on plants, networks and infrastructures. In addition, updating activities
were performed as required by new regulations, mainly concerning gas distribution, with a large‐
scale metre substitution, and the purification and sewerage area.
Remarks on investments in each single area are included in the analysis by business area.

At the Group’s headquarters, investments concerned interventions on corporate buildings, IT
systems and the vehicle fleet, as well as laboratories and remote control structures. Overall
investments in structures rose by € 3.3 million compared to the same period in the previous year,
an increase mainly due to substitutions of vehicles and equipment as well as work on corporate
buildings.
At September 2016, provisions amounted to € 535.8 million, growing compared to December
2015 thanks to provisions for the period in question, which covered usage expenses and the
effects of the adjustment of the TFR fund, calculated according to actuarial criteria, and
provisions following the enlargement of the Ravenna landfill.

Equity was essentially in line with the figures seen at 31 December of the previous year, passing
from € 2,503.1 million at 31 December 2015 to € 2,500.5 million at 30 September 2016, following
a dividend payment totalling roughly € 144.0 million, more than compensated for by the results
for the period, coming to € 151.8 million.

Total investments
(€/mln)
Sept 2016 Sept 2015 Abs.change % change
Gas area 64.1 57.6 +6.5 +11.3%
Electricity area 16.7 15.1 +1.6 +10.6%
Water cycle area 93.1 91.6 +1.5 +1.6%
Waste management area 32.2 21.8 +10.4 +47.7%
Other services area 9.2 10.5 -1.3 -12.4%
Headquarters 36.3 33.0 +3.3 +10.0%
Total operating investments 251.5 229.5 +22.0 +9.6%
Total financial investments 0.2 0.4 -0.2 -50.0%
Total gross investments 251.7 230.0 +21.7 +9.4%
Capital contributions 10.5 9.3 +1.2 +12.9%
of which FoNI (New Investment Fund) 4.2 7.3 -3.1 -42.5%
Total net investments 241.2 220.6 +20.6 +9.3%
Provisions
come to € 535.8
million
€ 2.5 billion in
equity
Strong
commitment
continues in
operating
investments in
plants and
infrastructures
Investments at
headquarters in
buildings, IT
systems and
vehicle fleet

13

1.01.03 ANALYSIS OF NET CASH (NET BORROWINGS)

An analysis of net borrowings is provided in the following table:
Current borrowings consist mainly in shares of bank loans reaching maturity for roughly € 85.4
million, accrued interest for roughly € 67 million and usage of current credit lines for roughly € 29
million. The amount of bank loans reaching maturity has fallen since 31 December 2015, as a
consequence of the reimbursement of a € 195.4 million bond in February 2016. The amount
related to non‐current bank debt and bonds is prevalently made up of bonds issued on the
European market and listed on the Luxembourg Stock Exchange (78% of the total) with
repayment at maturity.
As a whole, borrowings show an average term to maturity of over 8 years, with 73% maturing
after more than 5 years.
Net financial debt went down from
€ 2,651.7 at 31 December 2015 to
€ 2,567.0 at 30 September 2016. This
positive result, which is due to the cash
flow generated by operational
management,  allowed dividends to be
entirely financed and net borrowings to
be reduced by over € 84 million.
An important contribution came from
the good performance of trade receivables and the ensuing optimisation of net working capital
(€/mln) 30 Sep 2016 31 Dec 2015
a Cash and cash equivalents 379.3 541.6
b Other current financial receivables 28.8 34.6
Current financial debt (96.3) (129.2)
Current bank debt (86.2) (284.9)
Other current financial liabilities (62.0) (68.2)
Finance lease payments maturing within 12 months (1.6) (2.0)
c Current financial debt (246.1) (484.3)
d=a+b+c Net current financial debt 162.0 91.9
Non-current bank debt and bonds issued (2,821.5) (2,845.4)
Other non-current financial liabilities (5.2) (5.8)
Finance lease payments maturing after 12 months (15.5) (17.6)
e Non-current financial debt (2,842.2) (2,868.8)
f=d+e Net borrowings - Consob communication n° 15519/2006 (2,680.2) (2,776.9)
g Non-current financial receivables 113.2 125.2
h=f+g Net financial debt (2,567.0) (2,651.7)
A strong
financial
position
Net financial
debt drops to
€ 2.6 billion
2,6 2,6
2,7
2,6
Dec 2014 Sep 2015 Dec 2015 Sep 2016
Net financial debt (€/bln)

14

1.02 ANALYSIS BY BUSINESS AREA
An analysis of the results achieved by management in the various business areas in which the
Group operates is provided below, including: the gas area, which covers services in natural gas
and LPG distribution and sales, district heating and heat management; the electricity area, which
covers services in electricity production, distribution and sales; the integrated water cycle area,
which covers aqueduct, purification and sewerage services; the waste management area, which
covers services in waste collection, treatment, recovery and disposal; the other services area,
which covers services in public lighting and telecommunications, as well as other minor services.
As of September 2016, the Hera Group has revised the layout of its own multi‐business portfolio
in order to improve and simplify the process of financial reporting concerning its own industrial
structures: the business of industrial cogeneration has been transferred from the electricity area
to the gas business area, uniting it with heat management, which also respects the Group’s
organisational vision. Pertinent data from 2015 has been restated in line with this change.
The Group’s income statements include corporate headquarter costs and reflect intercompany
transactions accounted for at arm’s length.

The following analyses of each single business area take into account all increased revenues and
costs, with no impact on EBITDA, related to the application of IFRIC 12, as shown in the Group's
consolidated income statement. The business areas affected by IFRIC 12 are: natural gas
distribution services, electricity distribution services, all integrated water cycle services and
public lighting services.

28,7%
16,0%
26,7%
26,5%
2,1%
September 2016 EBITDA
Gas Electricity IWC Waste Other Services
The contributions
to EBITDA
coming from the
Group’s different
areas show a
balanced mix,
coherent with the
Group’s multi-
business strategy

Approved by H

Contribution
overall EBIT
decreases
Gas area EB
falls by 9.3%
1.3 million g
customers
Gas: EBITDA
Hera Spa’s Boar
1.02
The g
Thes
in wh
the m
in the
resol
nine
recla
as fu
EBITD
perso
The f
Total
Septe
comm
set in
wide
parti
Più,
contr
custo
(€/m
Area
Grou
Perc
n to
TDA
BITDA
%
as
A falls
rd of Directors in
.01 GAS
gas area saw a
e results mus
hich resolutio
methods used
e gas sector, w
ution’s negat
months of the
ssification of
rther specifie
DA, made up
onnel costs; re
following tabl
l gas custome
ember 2015
mercial and c
n place to co
r customer
cular with the
which occu
ributed with
omers to the o
mln)
a EBITDA
up EBITDA
centage weigh
n the meeting o
a decrease as
st be consider
on 583/2015/R
d in calculating
with the aim o
tive impact o
e year. Note t
the business o
d in paragrap
of € 10 millio
egarding inves
e shows the c
ers rose by 1
5, owing to
customer loya
ontrast compe
base, in cen
e acquisition o
rred in June
h roughly 1
overall numbe
t
Hera Gro
of 09 November
at 30 Septem
red within a r
R/com of 2 D
g the rate of
of introducing
n revenues a
that a pro form
of industrial c
ph 1.02. The e
on in revenues
stments, the
changes occur
1.8% over 30
o both the
alty initiatives
etition, and a
ntral Italy in
of Julia Servizi
e 2016 and
13 thousand
er.
Se
oup – Consolida
2016
mber compare
egulatory con
December 201
return for inv
g greater stab
nd EBITDA am
ma version of
cogeneration f
effect of this r
s, € 7.5 millio
reclassificatio
rred in terms o
0
e
s
a
n
i
d
d
ep 2016
186.5
650.6
28.7%
ated quarterly re
d to the same
ntext that def
15 took effect
vested capital
ility into the r
mounted to €
the 2015 dat
from the elect
eclassification
n in operating
n comes to €
of EBITDA:
Sep 2015 A
205.6
640.2
32.1%
eport as at 30 S
e date in the p
fined 2016 as
t. This resolut
for infrastruc
regulatory fra
€ 8.5 million
ta is provided
tricity area to
n amounts to
g costs and €
1.5 million.
Abs. change
-19.1
+10.4
-3.4 p.p.
September 2016
15
previous year.
the first year
tion modified
cture services
mework. This
over the first
as part of the
o the gas area,
€ 2 million in
0.5 million in
% change
-9.3%
+1.6%
6
5
.
r
d
s
s
t
e
,
n
n

Approved by H

Increase in
volumes sold
+10.5%
Gas revenue
at € 1,032.2
million
Gas: overall
EBITDA drop
Hera Spa’s Boar
Volum
nine
the f
exclu
incre
+9.5%
final
2015
Servi
spite
milde
The f
Reve
same
the
impa
millio
lowe
roug
the
corre
effec
the p
the
sold,
millio
effici
and g
This f
from
overa
Inco
Reve
Oper
Pers
Capi
EBIT
d:
es
ps
rd of Directors in
mes of gas so
months of 20
first six month
usively due
ease in volume
% of total vo
customers w
5, thanks to
zi Più, (with
of the drop
er winter seen
following tabl
enues went fro
e period in 20
price of ra
acted sales b
on and tradin
r regulated
hly € 7.9 milli
reduction in
esponding to
cts were partia
positive contri
rise in volum
amounting
on, greater r
ency certifica
greater reven
fall in revenu
€ 834.2 millio
all drop of € 7
me statement (
enues
rating costs
onnel costs
talised costs
TDA
n the meeting o
old rose by 24
015 to 2,526.4
hs of 2016. T
to a 239.4
es of trading
olumes). Volu
ere essentiall
the contribu
roughly 9.2 m
in volumes o
n in 2016.
e summarises
om € 1,127.3
016, falling by
aw materials
by roughly €
ng by € 24.5 m
revenues to
ion largely ow
the rate of
€ 8.5 million.
ally compensa
ibution comin
mes of natur
to roughly
evenues for
ates ensuing f
ues owing to t
es was reflect
on in the first
73.8 million co
(€/mln) Sep
1,0
(76
(92
6
18
Hera Gro
of 09 November
40.1 million m
4 million m3
in
This change is
million m3
(representing
umes sold to
ly in line with
ution of Julia
million m3
), in
owing to the
s the income s
million in the
€ 95.1 million
s that
€ 81.7
million;
otalling
wing to
return
. These
ated by
ng from
ral gas
y € 4.1
energy
from the pric
the applicatio
ted proportio
nine months
ompared to th
2016 %
32.2
60.4) -73
2.2) -8
6.9 0
86.5 18
oup – Consolida
2016
3
or 10.5%, go
n
s
3
g
o
h
a
n
e
statement for
e first nine mo
n or 8.4%. Th
e increase an
on of IFRIC 12
onately by a d
of 2015 to €
he first six mo
% Inc. Sep 2
1,1
3.7% (83
8.9% (9
0.7%
8.1% 2
ated quarterly re
oing from 2,2
r the gas area:
onths of 2015
e main reason
nd amounting
amounting to
decrease in op
760.4 million
nths of 2015.
2015 % In
27.3
34.2) -74.0%
93.5) -8.3%
6.1 0.5%
205.6 18.2%
eport as at 30 S
286.3 million m
:
5 to € 1,032.2
ns for this inc
g to roughly €
o roughly € 2.6
perating costs
in 2016, thus
c. Abs. chang
-95
% -73
% -1
% +0
% -19
September 2016
16
m3
in the first
million in the
clude: a fall in
€ 11.8 million,
6 million.
s, which went
s recording an
ge % change
5.1 -8.4%
3.8 -8.8%
.3 -1.4%
0.8 +13.2%
9.1 -9.3%
6
6
t
e
n
,
t
n
%
%
%
%
%

G
€
In
N
in
€
Approved by H

Gas EBITDA:
€ 186.5 millio
nvestments r
Net investmen
n the Gas Are
64.1 million
Hera Spa’s Boar
EBITD
passi
mont
perio
tradi
servi
had a
At 30
area
gas
recor
regul
554/
a la
invol
to hi
and
netw
first
seen
to th
situa
Inves
€ 2.8
plant
Deta
Gas
(€/m
Netw
RH/
Tota
Cap
Tota
n
ise
nts
ea:
rd of Directors in
DA was down
ing from € 20
ths of 2015 to
od in 2016,
ng and lesse
ces, in which
an € 8.5 millio
0 September 2
amounted to
distribution,
rded, mainly
latory upgra
15 (priorly re
rge‐scale me
ved lower‐cla
gher non‐rou
plants, and
works in the P
three quarte
in requests f
he previous y
tion.
stments increa
8 million in re
t. New connec
ils of operatin
s
mln)
works and pla
Heat manage
al Gas Gross
pital contributio
al Gas Net
n the meeting o
n by € 19.1 m
05.6 million in
o € 186.5 milli
due to lesse
er revenues f
the reduced
on impact.
2016, investm
o € 64.1 millio
a € 4.3 milli
y caused b
ding pursuan
esolution 631
etre substitu
ass devices (G
tine maintena
cathodic p
Padua and Tri
ers of 2016 a
for new conne
year, an activ
ased by € 2.2
mote heating
ctions in remo
ng investment
nts
ment
ons
Hera Gro
of 09 November
million or 9.3%
n the first nin
ion in the sam
er earnings
from regulate
d rate of retu
ments in the g
on, up € 6.6 m
ion increase
by activities
nt to resolu
/13) consistin
ution which
G4‐G6), in add
ance on netw
rotection in
este areas. In
a slight drop
ections comp
vity which con
million in rem
g mainly invol
ote heating w
ts in the Gas A
Sep
4
1
6
6
oup – Consolida
2016
%,
ne
me
in
ed
rn
as
million over th
was
s in
ution
ng in
also
dition
works
gas
n the
was
pared
ntinues to fe
mote heating
ving the reva
ere in line wit
Area are as fol
p 2016 Se
48.9
15.2
64.1
0.0
64.1
ated quarterly re
he same perio
el the effects
and heat man
mping of Bolo
th the figures
llows:
ep 2015 Ab
44.6
13.0
57.6
0.1
57.5
eport as at 30 S
od in the prev
s of the over
nagement as w
ogna’s Barca
seen in the p
bs. change
+4.3
+2.2
+6.5
-0.1
+6.6
September 2016
17
vious year. In
rall economic
well, of which
cogeneration
revious year.
% change
+9.6%
+16.9%
+11.3%
-100.0%
+11.5%
6
7
n
c
h
n

E
E
4
E
c
8
Approved by H

Electricity:
increase in
EBITDA
Contribution
overall EBIT
+4.6%
Electricity are
EBITDA grow
43.4%
Electricity
customers rea
863.8 thousan
Hera Spa’s Boar
1.02
In th
perce
defin
imple
capit
on re
nine
tariff
Note
busin
in pa
€ 10
regar
The f
The
2.3%
grow
confi
main
activ
(€/m
Area
Grou
Perc
n to
TDA:
ea
ws by
ach
nd
rd of Directors in
.02 ELECTR
he first nine m
entage of Gro
ned 2016 as
emented, wh
tal for infrastr
evenues and
months of th
fary adjustme
e that a pro fo
ness of indust
ragraph 1.02.
million in rev
rding investm
following tabl
number of e
% (19.4 thous
wth in the fre
irming the gro
nly due to a
ities.
mln)
a EBITDA
up EBITDA
centage weight
n the meeting o
RICITY
months of 20
oup EBITDA. T
the first ye
ich modified
ructure servic
EBITDA, owin
e year. Reven
nt return and
orma version
trial cogenera
. The effect of
venues, € 7.5
ents, the recla
e shows the c
electricity cus
sand) increas
ee market, w
owth trend se
a reinforceme
t
Hera Gro
of 09 November
016, the Elec
These results a
ear in which
the method
ces in the elec
ng solely to th
nues as at 30
amortisation
of the 2015 d
ation from the
f this reclassif
5 million in o
assification co
changes occur
stomers reco
se, mainly d
which came to
een in recent
ent of comm
Sep
oup – Consolida
2016
ctricity Area g
are to be cons
h resolution
used in calc
ctricity sector
he rate of ret
September 2
n of investmen
data is provid
e electricity ar
fication amou
perating cost
omes to € 1.5
rred in terms o
rded a
due to
o 9.3%
t years,
mercial
p 2016
104.3
650.6
16.0%
ated quarterly re
grew in both
sidered within
583/2015/R/
ulating the ra
. The negative
turn, came to
016 furtherm
nts, in light of
ded as part of
rea to the gas
nts to € 2 mil
s and € 0.5 m
million.
of EBITDA:
Sep 2015 A
72.7
640.2
11.4%
eport as at 30 S
absolute ter
n a regulatory
/com of 02/1
ate of return
e impact of t
o € 2.2 million
more include t
resolution 65
f the reclassif
s area, as furt
lion in EBITDA
million in per
Abs. change
+31.6
+10.4
+4.6 p.p.
September 2016
18
rms and as a
y context that
12/2015 was
n on invested
his resolution
n for the first
he effect of a
54/15/R/eel.
ication of the
ther specified
A, made up of
rsonnel costs;
% chang
+43.4
+1.6
6
8
a
t
s
d
n
t
a
e
d
f
;
ge
4%
6%

V
s
€
in
re
Ele
EB
inc
43.
Approved by H

Volumes sold
slightly, by 0.
1,075.5 millio
electricity
evenues
ectricity:
ITDA
creases by
4%
Hera Spa’s Boar
Volum
7,245
2015
perio
0.2%
due
activ
acqu
in o
activ
last r
The f
Reve
€ 1,0
millio
are:
Natio
avera
whic
reven
reven
regul
servi
rate
conta
price
therm
Oper
decre
Inco
Reve
Ope
Pers
Cap
EBIT
d drop
.2%
on
rd of Directors in
mes of electr
5.6 GWh in th
5 to 7,233.7
od of 2016, w
%. This trend
to a red
ities, com
isitions on th
order to re
ities and incr
resort custom
following tabl
enues decreas
075.5 million i
on. The main
a fall in the
onwide Price
age compare
h caused € 4
nues, € 64 m
nues and €
lated reven
ces, an effect
of return. Th
ained by both
e increase, fo
moelectric pla
rating costs fe
ease in revenu
ome statement
enues
rating costs
sonnel costs
italised costs
TDA
n the meeting o
ricity sold we
he first nine m
GWh in th
with a slight
in volumes is
uction in
mpensated
e free market
einforce com
ease volumes
ers.
e summarises
sed by 6.3%, p
in the same p
reasons for t
e price of e
e) coming to
d to the pre
40 million in
million in les
€ 2.2 million
nues for
t of the reduc
ese effects w
h higher reve
or roughly € 2
ants, coming t
ell by € 107.8
ues for the low
t (€/mln) Se
1
(
Hera Gro
of 09 November
ent from
months of
he same
drop of
s mainly
reselling
greater
t, mainly
mmercial
s sold to
s the income s
passing from
period in 201
this decrease
energy (Pun,
o 27.6% on
evious year,
lesser sales
sser trading
n in lesser
distribution
ction of the
were partially
enues for ene
2.1 million, a
to roughly € 4
8 million or 1
wer cost of ra
ep 2016 %
1,075.5
(939.0) -87
(37.5) -3
5.3 0
104.3 9
oup – Consolida
2016
statement for
€ 1,147.8 mil
16, and thus s
ergy efficiency
and by great
million.
10.3%; this fi
aw materials.
% Inc. Sep
1,
7.3% (1,0
3.5% (
0.5%
9.7%
ated quarterly re
r the area:
lion in the fir
showing an ov
y certificates,
er revenues
gure is propo
2015 % Inc
147.8
046.8) -91.2%
(33.9) -3.0%
5.5 0.5%
72.7 6.3%
eport as at 30 S
rst nine mont
verall reducti
, mainly ensu
for energy p
ortionally hig
. Abs.change
-72.
% -107.
% +3.
% -0.2
% +31.
September 2016
19
hs of 2015 to
ion of € 72.3
uing from the
production in
gher than the
e % change
3 -6.3%
8 -10.3%
6 +10.6%
2 -3.6%
6 +43.4%
6
9
o
3
e
n
e
%
%
%
%
%

Ele
EB
mil
A
Approved by H

ectricity
ITDA at € 104
llion
Net investme
in the Electri
Area: € 16.6
million
Hera Spa’s Boar
At th
EBITD
going
2015
highe
highe
due
dispa
parti
reven
Inves
€ 1.5
seen
carrie
main
surro
Goriz
previ
routi
conc
in Im
Requ
comp
year.
The
Elet
(€/m
Netw
Tota
Cap
Tota
4.3
ents
city
rd of Directors in
he end of the f
DA rose by
g from € 72.7
5 to € 104.3 m
er margins
er margins i
to the po
atching servic
ally reduced
nues in the re
stments made
million com
in the previo
ed out ma
ntenance of p
ounding Mod
zia. Compared
ious year, a
ne mainten
erning interve
mola.
uests for new
pared of the s
.
details of op
ricity
mln)
works and plan
al Electricty Gr
ital contribution
al Electricity N
n the meeting o
first nine mon
€ 31.6 million
7 million at 30
million in 201
on sales ac
n electricity
ositive perfo
ces. These e
by € 2.2 mill
gulated distri
e in the Elect
pared to the
ous year. The
inly concern
lants and grid
dena, Imola,
d to the same
higher amo
ance was
entions on th
w connections
same period i
perating inves
ts
ross
ns
Net
Hera Gro
of 09 November
nths of 2016,
n or 43.4%,
0 September
16, thanks to
ctivities and
production,
ormance of
effects were
ion in lesser
bution service
tricity Area ca
€ 15.1 millio
e intervention
n non‐routin
ds in the area
, Trieste an
e period in th
ount of non
seen, main
he Cogen plan
s grew slight
in the previou
stments in th
oup – Consolida
2016
e, owing to th
ame to € 16.6
on
ns
ne
as
nd
he
n‐
ly
nt
ly
us
he electricity
Sep 2016
16.7
16.7
0.0
16.6
ated quarterly re
he fall in the ra
6 million at S
area are as
Sep 2015
15.1
15.1
0.0
15.1
eport as at 30 S
ate of return.
September 20
follows:
Abs. change
+1.6
+1.6
+0.0
+1.5
September 2016
20
016, rising by
% change
+10.6%
+10.6%
+0.0%
+9.9%
6
0
y

Approved by H

Integrated W
Cycle: slight
Water Cycle
EBITDA falls
0.6%
Contribution
EBITDA: dow
0.6%
Hera Spa’s Boar
1.02
Over
drop
as th
meth
invo
reve
amo

The f
Area
Grou
Perc
Water
t drop
e Area
s by
n to
wn
rd of Directors in
.03 INTEGR
r the first nin
p compared t
he absolute v
hod defined
lving in a red
nues and EB
unts to € 14
following tab
a EBITDA
up EBITDA
centage weight
n the meeting o
RATED WAT
ne months of
to the same
value of this
by the AEEG
duction in th
BITDA, resulti
.9 million for
ble shows th
(€/mln
Hera Gro
of 09 November
TER CYCLE
f 2016, the in
period in 20
single busine
GSI for 2016‐
e rate of ret
ing from the
r the first nin
he changes o
n) Sep 2
1
6
26
oup – Consolida
2016
E
ntegrated wa
15, both as a
ess area. 201
2019 (resolu
urn. The reso
e rate of retu
ne months o
ccurred in te
2016 Se
173.7
650.6
6.7%
ated quarterly re
ater cycle ar
a contributio
16 is the first
ution 664/20
olution’s neg
rn and the re
f 2016.
erms of EBIT
ep 2015 A
174.7
640.2
27.3%
eport as at 30 S
rea recorded
on to Group
t year in whi
015) takes eff
gative impac
estriction on
DA:
bs.change
(1.0)
+10.4
-0.6 p.p.
September 2016
21
a slight
EBITDA and
ch the tariff
fect, largely
ct on
n revenues,
% change
(0.6%)
+1.6%
6
1

Approved by H

1.5 million W
Cycle custo
228.1 millio
managed in
aqueduct
Hera Spa’s Boar
The
settl
by 4
com
mon
the t
seen
the G
area
resp
this g
The
Volu
purif
trend
with
cons
indic
equa
inde
Water
mers
on m
3
n the
rd of Directors in
number of w
ed at 1.5 mi
.2 thousand
pared to the
nths of 2015
trend of orga
n across the a
Group. The E
managed by
onsible for t
growth, than
main quantit
umes dispens
fication, show
d is tied to c
respect to s
sumption. Vo
cator of activ
alisation purs
pendently o
n the meeting o
water custom
llion, increas
(+0.3%)
e first nine
and confirm
anic growth
areas served
Emilia Romag
y Hera Spa is
he majority
nks to a sligh
tative indica
sed through
wed a slight
limatic facto
seasonal ave
olumes distri
vities in the g
suant to regu
f volumes di
Hera Gro
of 09 November
mers
sing
ing
d by
gna
s
of
ht recovery in
tors of the a
the aqueduc
decline com
ors in early su
rages, and a
ibuted, follow
geographical
ulations that
stributed.
oup – Consolida
2016
n the numbe
area are as fo
ct, along with
mpared to the
ummer 2016
minor decre
wing AEEGSI
l areas serve
t call for a re
ated quarterly re
er of new con
ollows:
h volumes of
e first nine m
6, i.e. particu
ease in both
resolution 6
d by the Gro
gulated reve
eport as at 30 S
nnections.
f sewerage a
months of 20
larly heavy p
industrial an
664/2015, ar
oup and are s
enue to be re
September 2016
22
and
15; this
precipitation
nd domestic
re an
subject to
ecognised
6
2

In
Cy
in
E
m
W
r
€
Approved by H

tegrated Wat
ycle: slight fa
EBITDA
EBITDA at € 1
million
Water Cycle
revenues at
€ 594.4 million
Hera Spa’s Boar
The t

Reve
2016
0.8%
in 20
2015
main
millio
distr
in th
millio
the r
costs
millio
from
cont
Oper
elect
EBIT
€ 1.0
€ 17
mon
in 20
in les
caus
of re
restr
com
high
Inco
Reve
Oper
Pers
Capi
EBIT
ter
all
73.7
n
rd of Directors in
table below
enues for the
6 showed a s
% with respec
015, going fro
5 to € 594.4 m
n reasons for
on in lower r
ribution, owi
e rate of ret
on, due to th
restriction on
s acknowled
on in higher
m connection
tributed with
rating costs f
tricity for pla
DA saw a slig
0 million, or 0
4.7 million in
nths of 2015 t
016. This is d
sser revenue
sed by the de
eturn and the
riction on rev
pensated by
er revenues
me statement (
enues
rating costs
onnel costs
talised costs
TDA
n the meeting o
synthesises
e first nine m
slight decrea
ct to the sam
om € 599.1 m
million in 20
r this include
revenues for
ng to the red
urn, and € 1
he reformula
n revenues, o
ged by the A
revenues fo
s and from t
h € 1.8 millio
fell by € 6.2
ants, lower o
ght decrease
0.6%, passin
n the first nin
to € 173.7 m
ue to € 10.9
es for dispen
ecrease in th
e newly defin
venues, large
y lower opera
from new co
(€/mln) Sep
5
(3
(1
1
Hera Gro
of 09 November
the income
months of
se, down
me period
million in
016. The
e € 10.9
r
duction
4.9
ation of
only partially
Authority. Th
or subcontrac
the applicatio
n.
million or 2.0
operating cos
e of
g from
ne
million
million
nsing
e rate
ned
ely
ating and str
onnections.
p 2016 % I
94.4 -
06.0) -51.
17.2) -19.
2.6 0.4
73.7 29.2
oup – Consolida
2016
statement fo
y compensat
his drop was
cted works, a
on of accoun
0%, largely o
sts and lesse
ructural costs
nc. Sep 20
- 599.1
5% (312.2
7% (114.7
4% 2.5
2% 174.7
ated quarterly re
or the water
ted by highe
partially com
as well as hig
nting princip
on account o
r expenses e
s, subcontra
015 % Inc.
1 -
2) -52.1%
7) -19.2%
0.4%
7 29.2%
eport as at 30 S
r area:
r revenues c
mpensated b
gher revenue
le IFRIC 12, w
of the lower c
employed fo
cting activiti
Abs. change
(4.7)
(6.2)
+2.5
+0.1
(1.0)
September 2016
23
covering
by € 1.6
es coming
which
cost of
r structures.
es and
e % change
(0.8%)
(2.0%)
+2.2%
+4.0%
(0.6%)
6
3

N
in
W
€
Approved by H

Net investmen
n the Integrat
Water Cycle A
82.7 million
Hera Spa’s Boar
Inves
Cycle
millio
year
inves
€ 93
main
recla
upgr
upgr
purif
Inves
€ 20
Amo
netw
trans
wate
Prot
in pu
on th
purif
work
Requ
prev
in th
Capi
com
prev
nts
ted
Area:
rd of Directors in
stments in th
e Area amou
on, in line w
. Including ca
stments in th
.1 million. Th
nly concerne
amations and
rading, in add
rades which
fication and
stments tota
.9 million in
ong the more
works in the h
sportation ro
er system; in
ection Plan,
urification, th
he Cattolica
fication plan
ks in upgradi
uests for new
vious year, re
e constructi
tal grants am
ponent of th
vious year by

n the meeting o
he Integrate
unted to € 82
ith the previ
apital grants
his area cam
he interventi
d extensions
d network an
dition to reg
largely involv
sewerage.
alled € 44.9 m
purification.
e significant w
historical cen
oute “Crealis
sewerage, c
in addition t
he creation o
purifier, reva
t in Bologna
ing the large
w water and
emaining rath
on sector.
mounting to €
he New Inves
y € 1.6 million
Hera Gro
of 09 November
d Water
2.7
ious
s,
me to
ions
s,
nd plant
gulatory
ved
million in the
.
works, note:
ntre of Bolog
s”, and an up
continued pr
to redevelop
of the head t
amping of th
and, in the a
e purification
sewerage co
her low none
€ 10.4 millio
stments Fun
n, in spite of
oup – Consolida
2016
e aqueduct, €
: in the aque
gna which ac
pgrading of in
rogress in wo
pment of the
tank of the R
he oxygen pr
areas served
plants in Se
onnections r
etheless, com
on included €
d (FoNI), and
a reduced a
ated quarterly re
€ 27.3 millio
duct, an upg
ccompanied
nterconnecti
orks for the R
sewerage ne
Riccione purif
oduction fac
d by AcegasA
rvola, Cà No
ose by € 1.3
mpared to th
€ 4.2 million
d increased o
mount comi
eport as at 30 S
n in sewerag
grading of wa
the creation
ions in the M
Rimini Seawa
etwork in ot
fication plan
cility in the Id
ApsAmga, con
ordio and Aba
million over
he pre‐crisis
pertaining to
overall comp
ing from the
September 2016
24
ge and
ater
n of the
Modena
ater
her areas;
nt, upgrading
dar
ntinued
ano Terme.
r the
conditions
o the tariff
pared to the
FoNI.
6
4
g

25

Details of operating investments in the Integrated Water Cycle Area are as follows:
Water Cycle Area
(€/mln)
Sep 2016 Sep 2015 Abs.change % change
Aqueduct 44.9 43.3 +1.6 +3.7%
Purification 20.9 22.6 -1.7 -7.5%
Sewage 27.3 25.7 +1.6 +6.2%
Total Water Cycle Gross 93.1 91.6 +1.5 +1.6%
of which FoNI (New Investment Fund) 4.2 7.3 -3.1 -42.5%
Total Water Cycle Net 82.7 82.8 -0.1 -0.1%

Was
Man
Are
stab
Approved by H

ste
nagement
ea: EBITDA
ble
Market wast
+18.4%
Hera Spa’s Boar
1.02
In th
came
2015
The f
Volum
An an
in co
acqu
mana
in so
tonn
(€/m
Area
Grou
Perc
Quan
Urba
Mark
Wast
Plant
Wast
te:
rd of Directors in
.04 WASTE
e first nine m
e to 26.5%, wi
5.
following tabl
mes markete
nalysis of the
ommercial wa
isitions of W
agement of in
rted waste w
es. The increa
mln)
a EBITDA
up EBITDA
centage weight
ntitative data (th
n waste
ket waste
te marketed
t by-products
te treated by typ
n the meeting o
E MANAGEM
months of 201
ith a sector EB
e shows the c
d and treated
volumes trea
ste coming to
aste Recyclin
ndustrial wast
which compens
ase in by‐prod
t
housand of tonn
pe
Hera Gro
of 09 November
MENT
16, the waste
BITDA that rem
changes occur
d by the Gro
ted shows a 9
o 18.4%. This
g and the Ge
te. Urban was
sated for the
ducts is mainly
nes)
oup – Consolida
2016
e managemen
mained funda
rred in terms o
up in the firs
9.0% increase
s growth is ac
eonova plants
ste remained
drop in stran
y due to the co
Sep 201
172.
650.
26.5%
Sep 2016
1,533.4
1,747.6
3,281.0
1,869.8
5,150.9
ated quarterly re
nt area’s cont
amentally in lin
of EBITDA:
st nine month
in waste mar
ccounted for a
s, which gave
in line with 2
nd waste, whi
ompany merg
6 Sep 2015
2 172.5
6 640.2
% 26.9%
Sep 2015
1,533.0
1,476.2
3,009.2
1,717.2
4,726.4
eport as at 30 S
tribution to G
ne with the sa
hs of 2016 ar
rketed, mainly
above all by t
e a significant
2015 thanks t
ich came to 1
gers mentione
Abs. change
-0.3
+10.4
-0.4 p.p
Abs. change
+0.4
+271.4
+271.8
+152.6
+424.5
September 2016
26
Group EBITDA
ame period in
re as follows:
y due to a rise
the late‐2015
t impetus to
o an increase
12.3 thousand
ed above.
e %change
3 -0.2%
4 +1.6%
p.
% change
+0.0%
+18.4%
+9.0%
+8.9%
+9.0%
6
6
A
n
:
e
5
o
e
d

Sh
us
+
w
Approved by H

harp drop in t
se of landfills
+0.9% in sort
waste
Hera Spa’s Boar
Sorte
furth
to 5
expa
perce
to e
first
wast
by H
by
confi
of st
the T

The H
and d
/dige
comp
conta
Quan
Land
Wast
Selec
Com
Stabi
Othe
Wast
the
ted
rd of Directors in
ed urban
her progress,
5.8% primari
nsion proje
entages of ov
nvironmental
nine months
e grew by 0.5
era Spa, by 2
Marche M
irmed in 2016
trong growth
Triveneto regio
Hera Group o
disposal plant
esters and 9
panies Biogas
aining a few p
ntitative data (tho
dfills
te-to-energy plan
cting plant and o
posting and stab
ilisation and che
er plants
te treated by plan
n the meeting o
waste reco
rising from 5
ly thanks to
cts. These
erall recovery
l benefits. In
s of 2016, s
5% in areas se
2% in areas se
Multiservizi
6 as well the t
seen in are
on, up 2.6%.
operates in th
ts, the most im
selecting pla
2015 and Wa
plants.
ousand of tonnes
nts
other
bilisation plants
mical-physical p
nt
Hera Gro
of 09 November
orded
54.9%
new
high
y lead
n the
orted
erved
erved
and
trend
eas of
he entire wast
mportant of w
nts. Note tha
ste Recycling
) Se
5
1
4
2
lants 8
2
5
oup – Consolida
2016
te cycle, with
which are: 10
at towards th
were purcha
ep 2016 Se
573.4 6
,009.8 1
406.1 3
291.7 3
849.5 9
,020.4 1
,150.9 4
ated quarterly re
83 urban an
waste to ene
he end of th
sed, along wit
ep 2015 Abs
685.3 -
,021.6
329.5
340.8
903.5
,445.7 +
4,726.4 +
eport as at 30 S
d special was
ergy plants, 1
e 2015 finan
th the branch
s.change %
-111.9 -
-11.8
+76.6 +
-49.1 -
-54.0
+574.7 +
+424.5
September 2016
27
ste treatment
1 composters
ncial year the
h of Geo Nova
%change
-16.3%
-1.2%
+23.2%
-14.4%
-6.0%
+39.8%
+9.0%
6
7
t
s
e
a

Approved by H

Waste
managemen
EBITDA stab
Waste
Managemen
revenues at
€ 727.6 milli
Waste
manageme
EBITDA at
€ 172.2 mill
Hera Spa’s Boar
Wast
expla
Recy
had a
The

Reve
2016
€ 679
2015
2016
volum
statin
recor
in u
amou
effec
decre
plant
Oper
line w
of t
certif
EBITD
of 20
a fall
to th
and e
the h
enha
swee
Inco
Reve
Oper
Pers
Capi
EBIT
nt:
ble
nt
on
ent
lion
rd of Directors in
te treatment
ained by the
cling, and an
already been s
table below
enues rose in
6 by 7.1% or
9.3 million in
5 to € 727.6 m
6. This growt
mes treated,
ng energy inc
rded as lesser
urban hygien
unt of service
cts were part
ease in the C
ts.
rating costs fo
with the rise i
the new m
ficated, as des
DA went from
015 to € 172.2
of € 0.3 millio
he lower price
energy certific
higher volum
ancing action
eping.
ome statement
enues
rating costs
sonnel costs
talised costs
TDA
n the meeting o
increased by
higher volum
increase in in
seen througho
w summarises
n the first ni
€ 48.3 millio
n the first ni
million in the s
th is due to
a different m
centives, that
r costs, and hi
ne covering
es requested.
ially compens
CIP6/CEC unit
or this area du
in waste treat
ethod of c
scribed above
m € 172.5 milli
2 million in 20
on, or 0.2%. T
e of both elec
cates, partially
mes treated a
ns set in plac
(€/mln) Sep
72
(43
(12
4
17
Hera Gro
of 09 November
y 9.0% over th
mes managed
ntermediation
out 2015.
s the incom
ne months o
on, going from
ne months o
same period i
o the greate
method used i
in 2015 wer
igher revenue
the greate
These positiv
sated by less
t price and a
uring the first
ted and the e
calculating g
e.
on in the first
016, thus sho
This trend was
ctricity produc
y compensate
and the effici
ce in disposa
p 2016 %
27.6
30.6) -5
28.9) -1
4.1
72.2 2
oup – Consolida
2016
he first nine
by “Other pl
n, that compe
me statement
of
m
of
n
er
n
re
es
er
ve
er revenues f
decrease in
t nine months
effect
green
t half
wing
s due
ction
ed by
ency
al and recove
% Inc. Sep
6
59.2% (3
7.7% (1
0.6%
23.7%
ated quarterly re
months of 20
ants”, due to
ensated for th
t for the w
for electricity
green certific
s of 2016 incr
ery as well a
2015 % In
679.3
385.2) -56.7
24.5) -18.3
3.0 0.4
172.5 25.4
eport as at 30 S
015. This grow
o the acquisit
he lesser land
waste manag
y production
cate recognit
reased by € 45
s in collectio
nc. Abs.chang
+48
7% +45
3% +4
4% +1
4% -0
September 2016
28
wth is mainly
tion of Waste
dfill usage, as
gement area:
following the
ion for some
5.4 million, in
on and street
ge % change
8.3 +7.1%
5.4 +11.8%
4.4 +3.5%
1.1 +37.1%
0.3 -0.2%
6
8
y
e
s
:

e
e
n
t
e
%
%
%
%
%

Op
inv
Approved by H

Net investm
in the Wast
Managemen
Area at € 32
perating
vestments ri
Hera Spa’s Boar
Net
Area
upgra
€ 10.
The
subse
previ
the
signif
comp
Ozza
Sant’
proje
The a
trace
new
insta
road
In th
more
comp
Inves
activ
and i
In re
main
and
In se
the c
chem
Deta
Was
(€/m
Com
Land
WTE
RS P
Ecol
Tran
Tota
Cap
Tota
ments
te
nt
2.2
se
rd of Directors in
investments
involving
ading amoun
8 million over
figures seen
ector decreas
ious year, as
Rimini plan
ficant interve
pensated by
no (refinin
’Agata (activi
ect) composte
appreciable in
ed to the crea
Sommacampa
llation of a ne
access.
e WTE subsec
e extensive w
pensated by 2
stments in th
ities on the R
mprovement
use and recy
nly due to inve
Abano Term
lection and tr
consolidation
mical‐physical
ils of operatin
ste Manageme
mln)
mposting/Diges
dfills
E
Plants
logical areas a
nsshipment, se
al Waste Mana
ital contributio
al Waste Mana
n the meeting o
in the Wast
plant ma
nted to € 3
r 2015.
in the com
sed slightly c
an effect of
nt, which h
entions in 201
greater inve
g line co
ties tied to
ers.
ncrease in inv
tion of the 9t
agna landfill. A
ew motor and
ctor, the € 1.1
works on pla
2016 investme
he Special Wa
Ravenna plant
s to cooling to
cling centres
estments for
me, in addit
ranshipment p
of the compa
treatment pla
ng investment
ent
stors
and gathering e
election and ot
agement Gros
ns
agement Net
Hera Gro
of 09 November
te Managem
intenance a
2.2 million,

mposting/diges
compared to
lesser works
had undergo
15, only parti
estments in
ompleted) a
the biometha
vestments for
h
sector of th
Also note the
d a biogas inta
1 decrease co
ants in Padu
ents in the Mo
aste Plants su
ts owing to in
owers).
and gatherin
sorted waste
tion to inte
plants, the € 1
any Waste Re
ant and cover
ts in the waste
equipment
her plants
ss
oup – Consolida
2016
ment
and
up
ster
the
on
one
ally
the
and
ane
r landfills, com
e Ravenna lan
e interventions
ake network,
ompared to th
a and Triest
odena, Ferrara
ubsector sho
nterventions c
g equipment,
collection in
erventions fo
1.1 million inc
ecycling and in
ring the basin
e managemen
Sep 2016
1.9
14.0
5.4
1.7
6.0
3.2
32.2
0.0
32.2
ated quarterly re
ming to € 10.0
ndfill and the
s on the Tre M
as well as wo
he previous ye
e implement
a and Pozzilli p
wed a slight
completed in
, an increase
the areas sur
or the Colle
rease recorde
nvolves the co
of the biologi
nt area are as
Sep 2015
2.3
4.0
6.5
1.8
5.1
2.1
21.8
0.4
21.4
eport as at 30 S
0 million, can
beginning of
Monti landfill,
rks on landsli
ear was main
ted in 2015,
plants.
decrease in
2015 (sludge
of € 0.9 milli
rrounding Pad
ection Centre
ed is largely a
ompletion of
ical treatment
follows:
Abs. change
-0.4
+10.0
-1.1
-0.1
+0.9
+1.1
+10.4
-0.4
+10.8
September 2016
29
n primarily be
works on the
including the
de repair and
nly due to the
not entirely
maintenance
e dehydration
on was seen,
dova, Triestre
e in Pesaro.
ttributable to
works on the
t plant.
e % change
-17.4%
+250.0%
-16.9%
-5.6%
+17.6%
+52.4%
+47.7%
-100.0%
+50.5%
6
9
e
e
e
d
e
y
e
n
,
e
.
o
e

O
A
fa
m
Approved by H

Other
Services:
decrease in
EBITDA
Slight drop i
contribution
overall EBIT
Other Services
Area EBITDA
alls by € 0.9
million
517.6
thousand
lighting po
Hera Spa’s Boar
1.02
The
inclu
Durin
decr
first
The
The
An a
lighti
thou
regio
mana
muni
(€/m
Area
Grou
Perc
Qua
Publ
Light
Mun
n
to
DA
s
oints
rd of Directors in
.05 OTHER
other servic
uding public l
ng the first n
rease compa
nine months
changes occ
following tab
analysis of th
ing points an
sand lighting
on, to which
aged by Hera
icipalities serv
mln)
a EBITDA
up EBITDA
centage weight
ntative data
lic lighting
ting points (thou
icipalities serve
n the meeting o
SERVICES
ces area br
ighting, telec
nine months
ared to the p
of 2015 to €
curred in EBI
ble shows are
e data regard
nd a loss of
points in 11 n
greater requ
Luce; this allo
ved to be cont
t
usands)
ed
Hera Gro
of 09 November
S
rings togethe
communicati
of 2016, the
previous yea
€ 13.9 million
ITDA are as
ea’s main ind
ding public li
6 municipali
new municipa
uests for ser
owed the loss
tained.
Sep
6
Sep 2016
517.6
151.0
oup – Consolida
2016
er all minor
ons and cem
e results of
ar, with EBIT
n in the same
follows
dicators as re
ighting shows
ties served.
alities, above a
rvices in mun
s of approxima
2016 Se
13.9
650.6
2.1%
6 Sep 2
522
157
ated quarterly re
r services m
metery servic
the other se
TDA going fr
e period in 20
egards publi
s an overall d
The Hera Gr
all in Lazio, Lo
nicipalities alr
ately 25 thous
ep 2015 Abs
14.8
640.2
2.3%
2015 Abs.
.6
.0
eport as at 30 S
managed by
ces.
ervices area
rom € 14.8 m
016.
c lighting se
decrease of
roup acquired
ombardy and
ready served
sand lighting
s. change
-0.9
+10.4
-0.2 p.p.
change
(5.0)
(6.0)
September 2016
30
the Group,
saw a 6.2%
million in the
rvices
5.0 thousand
d roughly 20
the Triveneto
in the area
points and 17
% change
-6.2%
+1.6%
% change
(1.0%)
(3.8%)
6
0
,
%
e
d
0
o
a
7

Approved by H

Other Servic
revenues
increase
Revenues fo
Other Servic
€ 90.9 millio
EBITDA falls
€ 0.9 million
Net
investments
€ 9.2 million
Hera Spa’s Boar
A sum
Reve
previ
2015
Trasp
Not
Othe
€ 2.2
comi
Emili
telec
EBITD
comp
chan
of EB
lesse
North
requ
only
perfo
is du
in the
Inves
to € 9
to th
In
inves
IDC (
2015
in pu
€ 2.4
enha
Inco
Reve
Oper
Pers
Capi
EBIT
ces:
or
ces at
on
s by
n
s:
n
rd of Directors in
mmary of the
enues in this a
ious year, in
5 of the com
porti Funebri
including thi
er Services are
2 million th
ng from pub
a Romagna a
communicatio
DA shows a
pared to Sept
ge is account
BITDA for pu
er contributio
h‐Eastern Ita
ests by the m
partially com
ormance of H
ue to EBITDA
e telecommun
stments in the
9.2 million, fa
e same period
telecommun
stments were
(Internet Data
5.
ublic lighting
4 million conc
ancement and
me statement (
enues
rating costs
onnel costs
talised costs
TDA
n the meeting o
income state
area grew co
spite of the t
mpany Triest
, held by Ac
s change, re
ea would hav
anks to the
blic lighting
rea and great
ns.
€ 0.9 millio
tember 2015.
ed for by a lo
ublic lighting,
n coming fro
ly mainly du
municipalities
mpensated b
Hera Luce. The
in cemetery s
nications busi
e Other Servic
alling by € 1.3
d in the previo
ications, €
made in netw
a Center) ser
services, inv
cerned lampp
d modernisatio
(€/mln) Sep
90
(63
(14
1
13
Hera Gro
of 09 November
ement for the
ompared to th
transfer in la
e Onoranze
cegasApsAmg
evenues in th
ve increased b
e contributio
mainly in th
ter revenues
on decrease
. Half of this
ower amount
, where the
om areas in
ue to lesser
served was
by the good
e remainder
services and
iness.
ces Area amou
3 million comp
ous year.
6.8 million
works and TLC
rvices, in line
vestments tot
post mainten
on interven
2016 %
0.9
3.9) -70
4.2) -15
.1 1
3.9 15
oup – Consolida
2016
other service
he
te
e
ga.
he
by
on
he
in
unted
pared
of
C and
with
talling
ance,
tions,
Inc. Sep 2
8
0.3% (62
5.6% (13
.2%
5.2% 1
ated quarterly re
s area is provi
015 % Inc
89.9
2.0) -69.0%
3.9) -15.4%
0.8 0.9%
14.8 16.4%
eport as at 30 S
ided below:
. Abs. change
+1.0
% +1.9
% +0.3
% +0.3
% -0.9
September 2016
31
% change
0 +1.1%
9 +3.1%
3 +2.2%
3 +37.0%
9 -6.2%
6
1

32

with a € 1.3 overall reduction that concerned both the company Hera Luce and the company
Insigna within AcegasApsAmga’s consolidated scope.

Details of operating investments in the Other Services Area are as follows:

Other Services
(€/mln)
Sep 2016 Sep 2015 Abs.change % change
TLC 6.8 6.8 +0.0 +0.0%
Public Lighting and Street Lights 2.4 3.7 -1.3 -35.1%
Total Other Services Gross 9.2 10.5 -1.3 -12.4%
Total Other Services Net 9.2 10.5 -1.3 -12.4%

33

1.03 SHARE PERFORMANCE AND INVESTOR RELATIONS

Over the first nine months of 2016, the economic scenario has progressively deteriorated owing
to a series of geopolitical events that led to an increased volatility in financial markets. The
apprehension associated with the global economic slowdown and higher US interest rates set by
the Federal Reserve, during the first quarter of 2016,impacted on the performance of the stocks
further aggravated at the end of June by the unexpected results of the referendum on the United
Kingdom’s exit from the European Union. The stock exchanges in the Eurozone, in fact,
responded to the referendum results with a loss in capitalization amounting to over 410 billion
Euros, with Piazza Affari recording the worst performance in the history of Italian stock
exchanges. During the summer, the markets recorded a cautious increase in investments,
resulting in a partial recovery in stock value, interrupted in early September by rumours about an
increase in US interest rates. The impending constitutional referendum in Italy, scheduled to take
place in the first half of December, further impacted on the stock market: as a matter of fact, a
higher political risk perceived by investors reflected in domestic stock prices, resulting in an
overall negative downturn of their value.

Within this context, Hera stock amply outperformed both the FTSE All Share and the exchange
index of the sector in question, showing more resilience and less volatility. As at 30
September2016 its listings closed, after dividend paid out at 9 cent each, at an official price of
€ 2.378 per share. The stock’s evolution showed a beta coefficient significantly lower than the
market, settling around 0.4. This shows how the Group’s economic‐financial stability and the
growth prospects seen in its business plan, investors perceive the riskiness of Hera stock to be
significantly lower than other stock market shares, a perception also highlighted by the limited
cost of debt set at the beginning of October, in connection with the issuing of a bond on
international markets.

Hera; (2,7%)
FTSE All Share;
(22,4%)
Local Utilities;
(3,4%)
(35,0%)
(30,0%)
(25,0%)
(20,0%)
(15,0%)
(10,0%)
(5,0%)
+0,0%
+5,0%
+10,0%
+15,0%
A macro-scenario
marked by greater
perceived risk, due
to the referendum that
after Brexit has raise
concerns among
investors.
2.378 €
the price of Hera stock
at the end as at
30/09/2016. Hera
outperforms the
market and its own
sector

34

In line with the indications set out in its latest business plan, on 20 June Hera paid a dividend of 9
cents per share, the fourteenth in a series of uninterrupted growth since being listed.

Thanks to the combination of continuously remunerating shareholders with dividends and raising
the price of the stock, the total shareholders’ return accumulated since listing has constantly
remained positive, even in the most difficult moments of the financial crisis, reaching, at the end
of the period in question, +173.7%.
The Hera Group’s market capitalisation shows a value amounting to € 3.5billion (ranking no. 30 in
the Italian stock exchange), confirming its superiority to some stocks that are part of the FTSE
Mib, the main Italian stock exchange index.
No change occurred in the number of financial analysts covering the company: Banca Akros,
Banca IMI, Equita, Fidentiis, Goldman Sachs, ICBPI, Intermonte, Kepler Cheuvreux, MainFirst and
Mediobanca. At the end of the first half of 2016, Hera is able to reconfirm a clear majority of
positive reports, with almost all recommendations defined as “Buy/Outperform” and the
consensus target price set at € 2.84.

Breakdown of Group shareholders at 30/09/2016

At 30 June, the corporate structure shows its usual balance, with 51.3% of shares belonging to
118public shareholders located across the geographical areas served and regulated by a three‐
year Stockholders’ Agreement signed on 26 June 2015.
In keeping with the Agreement, on 8 July 12 Municipality shareholders sold, in a coordinated and
transparent way, through an Accelerated Book Building operation, roughly 16 million shares,
corresponding to 1.1% of total share capital, to over thirty Italian and foreign institutional
investors. Thanks to a demand that reached over four times the amount put on sale, the placing
occurred at a price of € 2.35 per share, with the lowest discount seen on the market since the
beginning of the year for similar operations, set at 4.3% of the price at closing time on the
previous day. The placing led to a rise in floating stock, with clear benefits for trade liquidity.
Since 2006, Hera has adopted a share buyback program, renewed by the Shareholders’ Meeting
of 28 April 2016 for 18 further months, for a maximum amount of € 180 million. This plan is
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
DPS (€) 0.04 0.05 0.06 0.07 0.08 0.08 0.08 0.08 0.09 0.09 0.09 0.09 0.09 0.09
Flottante; 40,5%
Patto soci privati;
8,2%
Patto soci
pubblici; 51,3%
51.3%
of share capital held
by members of the
Stockholders’
Agreement made
up of public
shareholders
Dividends per
share paid out in line
with expectations

Total
shareholders’
return over IPO:
+173.7%
2.84 €:
the average
target price set
by analysts
The placement of
1.1% of public
shareholders’ share
capital attracted a
demand 4 times
greater than the
offer

35

aimed at financing M&A opportunities involving smaller companies, and smoothing out any
anomalous market price fluctuations vis‐à‐vis those of similar large Italian companies. At the end
of the period under review, Hera held 16.1 million treasury shares.
In the first half of the year, Hera’s senior management engaged in an intense dialogue with
investors, above all with its Business Plan Road Show in the first quarter and its participation in
sector conferences in the second and third quarter.
The intensity and commitment that the Group puts into communicating with investors has
helped reinforce its market reputation, which is now an intangible asset that provides a clear
advantage for Hera’s stock and its stakeholders.

Dialogue with the
market: a major
intangible asset

36

1.04 REFERENCE SCENARIO AND GROUP STRATEGY

Italy’s primary public utility service sector is at present highly fragmented, consisting of a large
number of local public enterprises. Today, with the expiry of grants for gas distribution, waste
collection and street sweeping services, and the introduction of new grants defined on an
expanded province‐wide geographical basis, a period of competitive tenders is approaching that
will go to the advantage, as part of sector consolidation, of well‐structured enterprises, and will
thus entail a reduction in the number of operators involved in gas distribution, waste gathering
and street sweeping.

For this reason, the Hera Group, due to its ability to make the most of scale economies and
develop the high level of proficiency found in local enterprises, will be able to propose a model
for development that is well‐suited to these upcoming changes. The “Hera model” was in fact
conceived with a widely diversified ownership framework, regulated by a simple governance,
which proved able to provide the basis for an industrial and managerial approach aimed at
transforming a multitude of local enterprises into a single, integrated system, guaranteeing a
higher degree of efficiency and service quality. These results were pursued with a view to
economic, social and environmental sustainability, and achieved by sharing the economies and
synergies derived from a close relation with the localities in question.

This business model has led to continuous internal and external growth, constantly attracting
other municipalised multi‐utility enterprises from bordering geographical areas. Over 13 years,
following the original model, 22 enterprises from 4 regions in Central North‐Eastern Italy have in
fact been integrated, allowing the Group to reach outstanding national market positions,
quadrupling its EBITDA and, more generally, improving all KPI in socio‐environmental
sustainability. Currently, the model adopted by the Group can be seen as a point of reference for
the transformation of the sector, an issue which is currently on the Government’s agenda and
under examination by the regulated services Authority.

The Group’s growth strategy, pursued with continuity over the years, has maintained a perfect
balance between regulated and free market activities in its core businesses. Growth in regulated
activities has been achieved both through organic development and by improving the efficiency
of, while integrating, the municipalised enterprises acquired, while an expanded customer base
and plant system has led to gaining new market shares and acquiring “mono‐business”
companies operating in sectors presenting the most interest. This balanced portfolio mix has
ensured an effective expansion of the Group as well as a high degree of risk diversification.

Exposure to market risks and competition has been contained through a carefully considered
management of the Group’s risk profile and return on activities. This is what underlies the choice
to expand activities in waste treatment, which are inadequate across the entire country and
necessary for the sustainability of the services offered, and to focus on commercial development.
A further decision in line with this risk‐adverse strategy concerns gas procurement with short‐
term contracts, instead of turning to long‐term supply contracts, which provide more guarantees
but are also more exposed to the risks involved in demand and price fluctuation. In Italy, the
sector’s evolution towards a less fragmentary structure is now supported by a legislative
Reference
scenario and
competitive
context

A reproducible
model underlying
competitiveness
A balanced
development of
the activity
portfolio
A risk adverse
strategy
The Hera Group’s
model on the
market

37

framework that encourages operators to consolidate. This will come about thanks to tenders
issued for some services whose grants have already expired, with the introduction of new laws
and a reformulation of currently existing ones (i.e. decrees implementing the “Madia” law)
concerning local public services and public administration, aimed at providing incentives for
rationalising or transferring shares held in primary public utility services of general economic
interest.

This new legislation represents a break with the past, introducing a series of measures whose
goal is to encourage smaller municipalised enterprises to consolidate, an objective shared by the
recent revision of the tariff systems established by the AEEGSI, providing incentives for
enterprises that strive towards a higher level of efficiency. This complex context defines the
reference scenario for the new business plan to 2019, presented on 11 January 2016, that calls
for continued growth in EBITDA, reaching over € 1 billion by the end of the period in question.
This growth will be sustained by the Group’s time‐tested development model, which is propelled
by two complementary “motors”: organic and external growth. The first motor, i.e. organic
growth, will pursue a form of management geared towards searching for efficiencies, developing
the plant base and the customer portfolio, and extracting synergies from companies acquired in
recent years. These levers will be able to more than compensate for both the impact of tariff
revisions in regulated services as nationally defined by the AEEGSI, and the reduction in
incentives for energy management from renewable sources. The second motor of growth,
involving external lines, will make the most of tenders awarded for gas distribution in localities
served (based on the level of efficiency already reached and a majority presence in most of the
areas subject to tender), as well as the integration of four multi‐utilities in regions in which the
Group currently operates. The use of this second motor is expected to contribute, as has been
the case in the past, to a rise in EBITDA.

With its new business plan, the Group intends to support the development of this sector in Italy,
counting on the knowhow it has accumulated in the past with M&As, and relying on its own
model of governance, open to the entry of new municipalised multi‐utilities and their public
shareholders. Building on the previous business plan, four strategic levers will be activated as
regards the company’s organisation and each of its businesses: growth, efficiency, innovation and
excellence. This orientation, which has already proven its validity over the last two years, is at the
root of all main strategic projects envisaged for the next four years.

Growth will be fostered by investments expected to total over € 2.2 billion, accumulated over the
duration of the plan. 78% of these investments will be directed towards regulated assets,
maintaining solid asset ratios, thanks to the full coverage guaranteed by cash flow generation
coming from operational activities. At the same time, the Group’s already strong current
presence in free markets will also be reinforced, in particular by developing the number of
customers in energy sales activities and boosting activities in waste treatment, by way of an
increasingly eco‐compatible management. Objectives for growth in the environment sector are
expected to remain in line with market trends seen in the recent past, with a contribution coming
from the acquisitions finalised in late 2015 of Geo Nova and Waste Recycling, confirming the
rationale of regional expansion and the preference given to plants that are complementary to
those currently possessed by the Group. In the energy sector, Hera can rely on a customer base
Future prospects
in the sector
The new
Business Plan to
2019

Growth

38

with approximately 2.2 million contracts, and aims at a greater presence in the retail sector,
clearly marked by a more stable and resilient consumption. The objective set for the duration of
the plan is to increase electricity customers, prolonging the trend seen in recent years and
continuing to benefit from flexible energy commodity procurement sources. The expansion of
this market will be accompanied by continued improvement in service quality, development of
new commercial offers and cross selling opportunities for current customers. In this business
area, Hera will attempt to contain the effects of the increase in competition, making the most of
its present critical mass and market position.

The Group will continue to dedicate close attention to efficiency and synergy extraction, with a
view to not only creating value for its shareholders, but also protecting its own competitiveness
on the market. The Group’s multi‐utility model, which already guarantees a ‘cost‐to‐serve’ among
the best in the sector, represents a competitive advantage in the search for efficiency, because it
allows new organisation and process solutions to increase their benefits, with the possibility of
specific applications in the various businesses and an improvement in customer satisfaction.
Impetus towards growth will also come from innovation. As confirmation of the importance that
Hera gives to this strategic imperative, an Innovation Management branch was created in 2014,
specifically intended to act as a receptacle for ideas and new technologies and to propel their
implementation across the Group. The business plan includes 51 innovative projects that will not
only contribute to developing new lines of revenue, but will also be responsible for about 10% of
the efficiencies planned for the period in question. Hera intends to confirm its customary
strategic framework, standing out for its excellence, surpassing the quality and efficiency
standards set out by the Authority for regulated services, consolidating its leadership in
environmental services and maintaining a level of customer satisfaction among the highest in the
sector, all within the context of sustainable growth and continuous development of intangible
assets. These objectives are matched by a dividend foreseen at 9 cents per share through to
2019. This policy can be considered feasible thanks among other things to the expected cash flow
that, in addition to guaranteeing full coverage of the investment plan, confirms the Group’s solid
financial structure.

Efficiency
Innovation
Excellence

39

1.05 HUMAN RESOURCES
As of 30 September 2016, the Hera Group's permanent employees numbered 8,380
(consolidated companies), with the following distribution by role:
managers (154), middle managers (525), clerks (4,482), workers (3,219). This structure
was determined by the following movements: new hires (128) and exits (180), along with
the changes in the company’s perimeter with the entrance of Julia Servizi, which provided
for the entry of six units.
In detail, the effective movements were the following:
The movements for the period essentially result from:
 fixed-term contracts turned into open-ended contracts
 recruitment of professional profiles that were not present in the Group
 the reduction in the number of workers is offset by the entry of equivalent fixed-
term profiles, who were gradually introduced into open-ended contract
consolidation schemes.
 changes in the scope with the entrance of Julia Servizi

30‐Sep‐16 31‐Dec‐15 Change
Managers 154 146 8
Middle managers 525 526 ‐1
Employees 4482 4449 33
Workers 3219 3305 ‐86
Total 8380 8426 ‐46
Work force as at 31 December 2015 8426
Additions 128
Exit ‐180
Net flows ‐52
Additions due to change in the scope of consolidation 6
Total 8.380

chapter 2
Consolidated
Financial Statements
of the Hera Group

40

2.01 FINANCIAL STATEMENTS

2.01.01 Income Statement

(€/mln)
30-sep-2016
(9 months)
30-sep-2015
(9 months)
Third Quarter 2016 (3
months)
Third Quarter 2015
(3 months)
Revenues 3,104.8 3,246.4 952.1 1,033.4
Other operating revenues 259.9 226.0 97.9 70.1
Use of raw materials and consumables (1,437.4) (1,613.2) (439.4) (509.3)
Service costs (872.0) (815.4) (301.7) (284.7)
Personnel costs (390.1) (380.5) (123.4) (119.8)
Amortisation, depreciation, provisions (321.3) (323.0) (108.6) (109.0)
Other operating costs (34.7) (40.9) (13.9) (14.0)
Capitalised costs 20.0 17.8 8.8 5.5
Operating profit 329.2 317.2 71.8 72.2
Portion of profits (loss) pertaining to joint ventures and associated compan 8.0 6.1 1.5 (0.2)
Financial income 85.2 66.1 16.6 8.8
Financial expense (183.4) (171.0) (50.3) (46.1)
Total financial operations (90.2) (98.8) (32.2) (37.5)
Pre-tax profit 239.0 218.4 39.6 34.7
Taxes (87.2) (83.5) (16.0) (15.2)
Net profit for the period 151.8 134.9 23.6 19.5
Attributable to:
Shareholders of the Parent Company 142.2 125.0 21.2 17.7
Non-controlling interests 9.6 9.9 2.4 1.8
Earnings per share
basic 0.097 0.085
diluted 0.097 0.085

Hera Group-Consolidate quarterly report as at 30 september 2016

Hera Group-Consolidate quarterly report as at 30 september 2016

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Hera Group-Consolidate quarterly report as at 30 september 2016