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Analyst presentation: business plan to 2020

Gruppo Hera provides an investment proposition focused on reliable growth in its core multi-utility business sectors of networks, waste, and energy. It has demonstrated an uninterrupted track record of growth since being established in 2002 through organic growth and acquisitions. The company aims to continue this growth trajectory with its 2020 business plan targeting over 200 million euro in additional EBITDA through organic initiatives and M&A activity focused on its core regions in Northern and Central Italy. Hera maintains a low risk profile through a balanced portfolio across regulated and liberalized sectors.

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INDEX CLOSING REMARKS ANNEX Industrial DEVELOP- MENT Solid TRACK RECORD Inclusive GOVER- NANCE Persistent LOW RISK FINANCIAL Soundness Growing DIVIDEND Uninterrupted GROWTH PAG. 2 PAG. 31 PAG. 6 PAG. 32 PAG. 37 PAG. 38 PAG. 7 PAG. 15 PAG. 36
GRUPPOHERA TOMASO TOMMASI DI VIGNANO Executive Chairman Key points: • Execution of Prior Business Plan to ‘19 • Business Plan to ‘20 • Investment proposition
Hera backbone 01GRUPPOHERA Unique investment proposition RELIABLE GROWTHIndustrial DEVELOP- MENT Solid TRACK RECORD Inclusive GOVER- NANCE Persistent LOW RISK FINANCIAL Soundness Growing DIVIDEND Uninterrupted GROWTH
02GRUPPOHERA An uninterrupted growth EPS Cagr: ̴ 9% 192 243 293 386 427 454 528 567 607 645 662 810 868 884 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Ever growing results since establishment (M€, % GDP growth) EBITDA GDP Growth Development Waste Track record Governance Low risk Development Networks Development Energy Financial Dividend Industrial Development
03GRUPPOHERA Expanding presence in the North-East Leadership achieved in all sectors Our footprint todayOur footprint todayOur footprint todayOur footprint today Market position (Market position (Market position (Market position (2015201520152015)))) FriuliFriuliFriuliFriuli VenetoVenetoVenetoVeneto Emilia RomagnaEmilia RomagnaEmilia RomagnaEmilia Romagna MarcheMarcheMarcheMarche TrentinoTrentinoTrentinoTrentino LombardyLombardyLombardyLombardy PiedmontPiedmontPiedmontPiedmont LiguriaLiguriaLiguriaLiguria TuscanyTuscanyTuscanyTuscany UmbriaUmbriaUmbriaUmbria GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
04GRUPPOHERA A synergic multi-utility portfolio Guaranteeing resilient results in any scenario (of which 7% regulated) 23% 49% NETWORKS (Fully regulated) WASTE EBITDA A‘15 884 m€ ENERGY (Fully liberalised) • 100% protected by l/t concessions • Tariffs set for the next 3 years • Strong contiguity in geographical scope • Market Leader both in Urban and Special • Leading waste mgmt change • Sole deeply integrated operator • Positive growth 8 years in a row • Loyal customer base (>2.2 mln) • Marginal exposure to commodity prices 26% GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
05GRUPPOHERA Our ‘two pillars’ model An effective formula behind the growth 192 884 +296 +396 A'02 M&A Org. Growth & Synergies A'15 Ebitda grown by 4.6 times (M€) 1 or 2 deals per annum1 or 2 deals per annum1 or 2 deals per annum1 or 2 deals per annum on average SynergiesSynergiesSynergiesSynergies achieved +25%+25%+25%+25% EbitdaEbitdaEbitdaEbitda in 5Y First mover in the consolidation processFirst mover in the consolidation processFirst mover in the consolidation processFirst mover in the consolidation process Cost cuttingCost cuttingCost cuttingCost cutting, Process optimization Development capexDevelopment capexDevelopment capexDevelopment capex (netw. and plants) Market expansionMarket expansionMarket expansionMarket expansion in liberalized markets 22 deals in 13 years Org. Ebitda +9% Cagr GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
06GRUPPOHERA Inclusive shareholding provides stability A PUBLIC «public» company Shareholding today Free float Founders public shareholders 49% 29% M&A public shareholders 22% 1st Shareholder’s stake <10% Same mgmt team since establishment GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
Old BP to ’19: execution well on track Forecast ’16 Ebitda (M€) 841 >905 1.030 43 >61 (40) A'14 Growth A'15 Growth F'16 Wacc&Inc. F'16 F'16 BP E'19 Further ‘16 on top of targetsFurther ‘16 on top of targetsFurther ‘16 on top of targetsFurther ‘16 on top of targets • Default gas supply won tenders • Liability management • Trading performance/asset mgmt 07GRUPPOHERA GrowthTrack record Governance Low risk Financial Dividend Forecast’Forecast’Forecast’Forecast’16161616 full yearfull yearfull yearfull year EbitdaEbitdaEbitdaEbitda • Growth above +61 m€ offsetting negative effects of: • Wacc cut: 25 m€ • Incentive expired: >15 m€ Ebitda growth ‘15/’16 in line with targets with almost all negative effects deployed in 2016 Industrial Development Development Waste Development Networks Development Energy
08GRUPPOHERA Business plan target to 2020 Further planned growth of ~200m€ 884 1,080 (55) +27 +118 +106 A'15 Wacc & Inc. Org. Growth Tenders M&A E'20 Internal Growth +145m€ External Growth Ebitda growth to 2020 (M€) GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
09GRUPPOHERA Organic growth: several levers to put at work Deploying our expertise to squeeze additional value Internal Growth Ebitda contribution (M€) +80 +118 Efficiencies Dev. Growth/Syn. E'20 GrowthTrack record Governance Low risk Financial Dividend +38 Industrial Development Development Waste Development Networks Development Energy
Organic Growth (2): focus on efficiencies Efficiencies +80 m€ NETWORKS +20.4 m€ WASTE +31.0 m€ ENERGY 10.9 m€ CORPORATE +17.9 m€ 10GRUPPOHERA Several projects at work in all Group units Efficiencies breakdown (M€) Growth: Waste Growth: Networks Growth: Energy Growth: Industrial GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
• Competition pressure in energy supplyCompetition pressure in energy supplyCompetition pressure in energy supplyCompetition pressure in energy supply • Capital intensive Waste treatment plantsCapital intensive Waste treatment plantsCapital intensive Waste treatment plantsCapital intensive Waste treatment plants • DifficultDifficultDifficultDifficult authorization process for new plantsauthorization process for new plantsauthorization process for new plantsauthorization process for new plants Organic Growth (3): acquisitions executed recently In BP to ’20 targets enclosed only “executed” acquisitions 11GRUPPOHERA Waste treatment Energy supply In progress Gran Sasso Julia Servizi Più Waste Recycling Geo Nova Acquisitions since 31/12/2015: 1.1.1.1. Cash availabilityCash availabilityCash availabilityCash availability 2.2.2.2. Top market playerTop market playerTop market playerTop market player 3.3.3.3. Margins best in classMargins best in classMargins best in classMargins best in class ENABLERSENABLERSENABLERSENABLERS HERA’S ADVANTAGESHERA’S ADVANTAGESHERA’S ADVANTAGESHERA’S ADVANTAGES Aliplast Acquisitions executed in the last 13 months Growth Growth: Waste Track record Governance Low risk Growth: Networks Growth: Energy Financial Dividend Growth: Industrial Sangro Servizi Teseco
AliplastAliplastAliplastAliplast datadatadatadata Organic Growth (4): Aliplast has opened up new horizons A strategic move to further enhance our market expansion potential 12GRUPPOHERA Main customers/relationsMain customers/relationsMain customers/relationsMain customers/relations • RevenuesRevenuesRevenuesRevenues:::: ̴ 100100100100 mmmm€€€€ • EbitdaEbitdaEbitdaEbitda:::: 15151515////16161616 mmmm€€€€ • Net financial positionNet financial positionNet financial positionNet financial position belowbelowbelowbelow 10101010mmmm€€€€ • Plastic treated:Plastic treated:Plastic treated:Plastic treated: ̴ 80808080 ktonktonktonkton/y/y/y/y • Customers:Customers:Customers:Customers: ̴ 2222,,,,000000000000 • Plants:Plants:Plants:Plants: 11111111 • Employees:Employees:Employees:Employees: 280280280280 Aliplast territorial presence GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
Tenders: confirming our current Gas distr. concessions AssumptionsAssumptionsAssumptionsAssumptions 13131313 ATEM wonATEM wonATEM wonATEM won 9 ATEM not incl. Hera’sHera’sHera’sHera’s avgavgavgavg stake:stake:stake:stake: 70707070%%%% Hera presence 5 11 153 284 350 2016 2017 2018 2019 2020 CumCumCumCum. CapexCapexCapexCapex Plan (mPlan (mPlan (mPlan (m€€€€)))) 13GRUPPOHERA VIR/RAB highlights our hidden value (about +25%) Modena 1 Modena 2 Bologna Ferrara Ravenna Forlì-Cesena Rimini Pesaro-Urbino Padua 1 Padua 2 Udine 1 Udine 2 Udine 3 Pordenone Gorizia Trieste EbitdaEbitdaEbitdaEbitda growthgrowthgrowthgrowth ++++27272727mmmm€€€€ Gas distr. tenders in Hera reference territory GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
14GRUPPOHERA M&A: +106m Euro from a typical driver of our business model In this “risiko”, Hera’s outposts are ready in all regions of interest ENABLERSENABLERSENABLERSENABLERS HERA’S ADVANTAGESHERA’S ADVANTAGESHERA’S ADVANTAGESHERA’S ADVANTAGES ((((1111) Industry trends) Industry trends) Industry trends) Industry trends • TendersTendersTendersTenders • HigherHigherHigherHigher investmentsinvestmentsinvestmentsinvestments • Higher qualityHigher qualityHigher qualityHigher quality stdstdstdstd (2)(2)(2)(2) MadiaMadiaMadiaMadia LawLawLawLaw • RationalizRationalizRationalizRationaliz. planplanplanplan yearly • InInInIn----HouseHouseHouseHouse strong limits • 500 k500 k500 k500 k€€€€ potential penaltiespenaltiespenaltiespenalties Reference territories 3.3.3.3. Visible Dividend policyVisible Dividend policyVisible Dividend policyVisible Dividend policy 4.4.4.4. Full integration /SynergiesFull integration /SynergiesFull integration /SynergiesFull integration /Synergies (+25% Ebitda within 5y) 1.1.1.1. Inclusive GovernanceInclusive GovernanceInclusive GovernanceInclusive Governance 2.2.2.2. Hera’s premium priceHera’s premium priceHera’s premium priceHera’s premium price Hera reference territory GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
GrowthTrack record Governance Growth: Industrial STEFANO VENIER CEO Key points: • Solid strategic framework • Move to enhance market positioning • Growth down to bottom line • Further ahead on sustainability GrowthTrack record Governance Growth: Industrial Low risk Financial DividendGrowthTrack record Governance Industrial Development Development Waste Development Networks Development Energy
Low risk Financial Dividend 15GRUPPOHERA Circular economy Customer experience Industry (Utility) 4.0 Our levers …New trends Waste Energy Networks Other Multi-utility GROWTHGROWTHGROWTHGROWTH EFFICIENCYEFFICIENCYEFFICIENCYEFFICIENCY EXCELLENCEEXCELLENCEEXCELLENCEEXCELLENCE INNOVATIONINNOVATIONINNOVATIONINNOVATION AGILITYAGILITYAGILITYAGILITY Confirming market leadership exploiting new opportunities Hera strategic focus GrowthTrack record Governance Industrial Development Development Waste Development Networks Development Energy
16GRUPPOHERA +4.5% +4.6% +2.0% +8.2%Cagr 428 533 230 +105 +59 289 205 +22 226 21 +10 31 A'15 Networks Waste Energy Other E'20 884 1.080 Enhancing results in all core activities Maintaining our low risk profile Ebitda growth by ASA (M€) E’20 mix regulated/liberalized (%) RegulatedRegulatedRegulatedRegulated 57575757%%%% LiberalizedLiberalizedLiberalizedLiberalized 43434343%%%% GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
GRUPPOHERA WASTE The braces of our strategy: • Growth • Agility • Innovation • Excellence • Efficiency
289 230 +16 +73 (30) A'15 Collection Treatment Incentives E'20 A further expansion in a growing market Deploying a solid platform and expertise Ebitda growth by business (M€) GRUPPOHERA 17 GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
A'15 E'20 Saved plant capacity 275k ton 55% 66% Sorted Urb. W. increase freeing plant capacity Hera vs EU sustainability targets Recycling Energy Recovery45% 34% Regulated urban waste just achieved further savings Beyond UN agenda and EU targets on sustainability 18GRUPPOHERA HeraHeraHeraHeraEU targetEU targetEU targetEU target Urban WUrban WUrban WUrban W. inininin landfillslandfillslandfillslandfills Below 10% within 2030 Already today PackagingPackagingPackagingPackaging recyclingrecyclingrecyclingrecycling Above 65% within 2025 5Y in advance Urban WUrban WUrban WUrban W. recycledrecycledrecycledrecycled 65% within 2030 10Y in advance CIRCULAR ECONOMYCIRCULAR ECONOMYCIRCULAR ECONOMYCIRCULAR ECONOMY GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
143 230 A'15 E'16 E'17 E'18 E'19 E'20 «One stop shop» for all customer’s issuesItalian treatment Infrastructure shortage Single service Benefit from an integrated platform and a growing demand Growing Special Waste exploiting market potentials 19GRUPPOHERA Waste mgmt “crisis” Proper infrastr. HeraHeraHeraHera Full service Business customers Waste emergency • Extensive landfill use prohibited • Shortage of other treatm. plants • UE penalties increased • Difficult authorization process for new plants GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
New horizons of our waste management 20GRUPPOHERA GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy Pioneering transformation of Biogas into methaneAliplast: a step ahead in circular economy Contributing to Energy & Resource efficiency Business Customers Industrial Waste Products Biodigester Organic waste Cracking BiogasNaturalgas 7mcm/Y
URBANURBANURBANURBAN WASTEWASTEWASTEWASTE SPECIALSPECIALSPECIALSPECIAL WASTEWASTEWASTEWASTE ENERGY RECOVER MATERIAL RECOVERMATERIAL RECOVERMATERIAL RECOVERMATERIAL RECOVER REUSE SORTED COLLECTION OPTIMIZING PRODUCTIVE PROCESSES SPECIAL WASTE RECYCLE TREATMENT AND DISPOSAL Inerting systems (che-phy., WTE) On the black board: further move towards a Circular Economy paradigm … developing our leadership 21GRUPPOHERA GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy 66%66%66%66%
GRUPPOHERA NETWORKS The braces of our strategy: • Efficiency • Innovation • Growth • Excellence
533 428 +10 +41 (25) +27 +52 A'15 Synergies Org. growth Wacc Tenders M&A E'20 Strengthening our regulated asset base Growing despite stable tariffs Ebitda growth drivers (M€) 22GRUPPOHERA GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
RegRegRegReg. periodperiodperiodperiod ConcessionConcessionConcessionConcession lengthlengthlengthlength RegRegRegReg. ReturnsReturnsReturnsReturns WaterWaterWaterWater ‘16-’18 ~’24 5.3%* GasGasGasGas distribdistribdistribdistrib. ‘16-’18 ‘17-’20 6.1% ElectricityElectricityElectricityElectricity distribdistribdistribdistrib. ‘16-’18 ~’30 5.6% 3.07 3.48 0.27 +0.11 0.37 +0,10 +0,30 A'15 Water Energy distr. 3rd parties E'20 3.9 3.3 Protected from the tariffs’ resilient WACC mechanism RAB growth profile (mergers’ effect not included) (B€) RegulatedRegulatedRegulatedRegulated returnsreturnsreturnsreturns 23GRUPPOHERA ReinvestmReinvestmReinvestmReinvestm. Rate in RABRate in RABRate in RABRate in RAB From 19% (avg last 3 years) to 25%25%25%25% Returns and RAB evolutions GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy Property RAB Third parties RAB Low risk and stable cash generator with a material hidden value
Advanced Network monitoring Satellite scanning Radiometric measurem. Algorithm analysis Smart App interface Smart Water Modelling HergoReti OSCAR control system Pilot project to control sewerage water Sophisticated air conditioning to reduce nitrogen residuals Low energy consumptions Pilot project in FE for real time mgmt decision making Predictive system on networks function Prevention from critical operating conditions High tech content underpinning efficiency gains Exploiting synergies from Nets, big data and “smart” technologies 24GRUPPOHERA Hergoreti, new IT integrated system, improve all the scheduled and non- scheduled operating activities on plants and gas, water, energy, remote heating networks GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
On the black board: Industry (Utility) 4.0 trends add value… … to our main tangible assets 25GRUPPOHERA GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
GRUPPOHERA ENERGY The braces of our strategy: • Growth • Intangible assets • Agility • Innovation
Aiming at continuing growth Tackling with pressure on margins 226 205 (30) +21 +30 A'15 Mkt Competition Mkt Expansion External Growth E'20 Ebitda growth drivers (M€) 26GRUPPOHERA GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
Our solid Energy customer base … … aiming at 3 million customers 1.327 857 A'15 E'20 Gas Electricity Customer base: filling the gap through cross selling (unit) Towards mkt liberalization: ongoing derisking (%) 73% 84% 28% 16% A'15 E'18 Free Mkt Protected Mkt 27GRUPPOHERA GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy ~1,400 ~1,000
• Cost to serve (€/POD) • +200k Energy customers in the next 5Y • 25% digital customers Evolving our CRM to enhance the customer experience More potentials to our proactive marketing actions 28GRUPPOHERA Proactive Problem solving KPIs evolving considering more and more “soft” skills Tailored offers … at work enabling better assistance and cross selling Fast & Smart Strong language ID Customer Relationship Management system GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy 23,824,1 + 1.2 ( 1.5) A'15 Inflation Efficiency E'20
Hera Enel Safeguarded Elect. and Default gas supply in 11 regions Mkt expansion leveraging upon our nationwide presence Next 2 years results underpinned by won tenders Hera Enel 29GRUPPOHERA Energy Ebitda curve ‘15-E’20 expected (M€) 205 226 A '15 E'16 E'17 E'18 E'19 E'20 GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy New tenders
Expanding the value of our main intangible asset On the black board: focusing on Customer Experience 30GRUPPOHERA GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
Sensitivity to PUN pricesSensitivity to PUN pricesSensitivity to PUN pricesSensitivity to PUN prices (plus or minus 1€/MWh, impact in M€, % impact on Group Ebitda) GROUP EBITDAGROUP EBITDAGROUP EBITDAGROUP EBITDA Sensitivity to GDPSensitivity to GDPSensitivity to GDPSensitivity to GDP (plus or minus 1%, impact in M€, % impact on Group Ebitda) Sensitivity to Gas pricesSensitivity to Gas pricesSensitivity to Gas pricesSensitivity to Gas prices (plus or minus 1 Eurocent per cubic meter, impact in M€, % impact on Group Ebitda) GROUP EBITDAGROUP EBITDAGROUP EBITDAGROUP EBITDA 1111$/Barrel$/Barrel$/Barrel$/Barrel 1%1%1%1% 1111€€€€////MWhMWhMWhMWh 1111cccc€€€€/M/M/M/M3333 GROUP EBITDAGROUP EBITDAGROUP EBITDAGROUP EBITDA GROUP EBITDAGROUP EBITDAGROUP EBITDAGROUP EBITDA Sensitivity to oil pricesSensitivity to oil pricesSensitivity to oil pricesSensitivity to oil prices (dollar per barrel impact in M€, % impact on Group Ebitda) 31GRUPPOHERA Sensitivity highlights a resilient portfolio mix Low risk profile is core in our strategy GrowthTrack record Governance Low risk Financial Dividend <0.05M€ <0<0<0<0.01%01%01%01% 4.00M€ 0000.38383838%%%% 0.70M€ 0000,,,,07070707%%%% 0.50M€ 0000.05050505%%%% Industrial Development Development Waste Development Networks Development Energy
325 289 317 349 346 391 443 430 346 330 6 142 131 66 12 34 59 59391 461 606 536 455 A'11 A'12 A'13 A'14 A'15 F'16 E'17 E'18 E'19 E'20 Maint. Mergers Gas tenders Capex plan Capex plan to 2020: 2.45 b€ to grow and strengthen assets (M€) 32GRUPPOHERA Enhancing our main assets GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
Capex are mainly focused on regulated activities Targeting 8.3% ROI in 2020 22% 5% 69% NETWORKS WASTE CAPEX 2.45 b€ ENERGY 1,1x 1,2x 1,4x 1,2x 1,0x '16 '17 '18 '19 '20 Capex breakdown by business (%) Group Capex / Group Depreciation (x) 33GRUPPOHERA GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
Debt/Ebitda to 2020: strong CF improves fin. flexibility (M€) 34GRUPPOHERA Further Acquisitions sustainable with our financial flexibility Growth: Waste Growth: Networks Growth: Energy Growth: Industrial GrowthTrack record Governance Low risk Financial Dividend Max leverage Industrial Development Development Waste Development Networks Development Energy 3,1x 3,3x 3,2x 3,0x 3,0x ~2.9x 2,8x A'11 A'12 A'13 A'14 A'15 F'16 E'17 E'18 E'19 E'20 Financial structure
Improving financial profile Achieving 8.0% ROE in 2020 Cost of Debt (%) Tax rate (%) 4,0% 3,8% 3,7% 3,5% '14 '15 F'16 E'20 40,2% 38,4% ~36.5% 33,0% '14 '15 F'16 E'20 35GRUPPOHERA EPS growth New vs Old Plan (% of cumulated increase) GrowthTrack record Governance Low risk Financial Dividend 2014 2015 2016 2017 2018 2019 2020 Old Plan New Plan E’20 E’19 A’14 Adj. +30% +52% Industrial Development Development Waste Development Networks Development Energy
GRUPPOHERA TOMASO TOMMASI DI VIGNANO Executive Chairman Key points: • Dividend Policy • Closing remarks
9,0 9,0 9,0 9,0 9,0 9,0 9,5 9,5 10,0 10,0 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 Dividend policy 100% 88% 76% 79% 73% 66% '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 DPS (€c) Payout ratio (%) 36GRUPPOHERA Providing DPS growth still betting on an external growth story Hera’s dividend qualityHera’s dividend qualityHera’s dividend qualityHera’s dividend quality Unique track recordUnique track recordUnique track recordUnique track record • Always guaranteed • Never decreased • Transparent policy Potential upside for shareholdersPotential upside for shareholdersPotential upside for shareholdersPotential upside for shareholders • Room to fund mergers with “Buy back”“Buy back”“Buy back”“Buy back” shares Hera included in “Aristocrats ETF” (with Atlantia and Recordati) GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
Closing remarks Investor Relations contacts: Mail: ir@gruppohera.it +39 051 287040 Head of IR Jens Klint Hansen jens.hansen@gruppohera.it • Solid premises to lead industry changes • Continuing a safe growth through our “two pillar” business model • High visibility on growing shareholders return GRUPPOHERA GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy 37
Annex GRUPPOHERA
Main assumptionsMain assumptionsMain assumptionsMain assumptions A’A’A’A’14141414 A’15A’15A’15A’15 E’20E’20E’20E’20 BrentBrentBrentBrent (Dollar/Barrel) 99.5 53.7 55.0 Exchange ratioExchange ratioExchange ratioExchange ratio €/$ 1.33 1.11 1.10 PUNPUNPUNPUN (€/MWh) 52.1 52.3 52.5 InflationInflationInflationInflation (5Y moving average) 0.2% 0% 1.0% Green certificateGreen certificateGreen certificateGreen certificate –––– biomass plantsbiomass plantsbiomass plantsbiomass plants (€/MWh) 97.4 99.5 80.3 Green certificateGreen certificateGreen certificateGreen certificate –––– other plantsother plantsother plantsother plants (€/MWh) 97.4 99.5 101.0 White certificatesWhite certificatesWhite certificatesWhite certificates (€/TEP) 106.2 106.1 115.5 COCOCOCO2222 certificatescertificatescertificatescertificates (€/ton) 7.2 8.2 11.0 Tax rateTax rateTax rateTax rate (%) 40.2% 38.4% 33% Cost of DebtCost of DebtCost of DebtCost of Debt (%) 4.0% 3.8% 3.5% 38GRUPPOHERA Business Plan main assumptions
Ebit by strategic area (M€) 100 131 205 6 442M€ A’15 E’20 125 146 238 16 525M€ Waste EnergyNetworks 39GRUPPOHERA Consolidated Group Ebit target
40,0 659,970,8 52,5 448,0 48,6 2.593,7 3,253.6 '16 '17 '18 '19 '20 Post Gross Debt Gross debt maturities (M€) Interest rate breakdown in 2020 (%) 36% 64% Variable Fixed Rates 40GRUPPOHERA Financial Debt 2,594
An unique, effective & reliable “two pillar business model” 192 884 +296 +396 A'02 M&A Org. Growth & Synergies A'15 Ebitda Growth by 4.6x: drivers (M€) 20-25% avg. synergy extraction Organic Growth & Synergies always positive (M€) 396 +50 +25 +29 +23 +21 +60 +23 +40 +29 +11 +38 +18 +29 A'02 A'15 Tot. 296 +25 +65 +18 +6 +15 +16 (16) +6 +110 +13 +14 A'15 Tot. Avg. Growth per annum: +31 m€ Avg. Growth per annum: +23 m€ Constant M&A contribution to Ebitda (M€) 22 deals executed Outstanding & constant track record 41GRUPPOHERA Track record of Hera’s “two pillar” Business model
WaterWaterWaterWater Awarded with quality premium More efficient sewerage water plants (new in Trieste and Rimini e 6 other plants refurbished) Energy efficiency &Energy efficiency &Energy efficiency &Energy efficiency & Climate changeClimate changeClimate changeClimate change Energy connsumptions -5% within ‘20 Offers to assist customers deploying our expertice Bio-digester to produce “bio- methane” with lower emissions EnvironmentEnvironmentEnvironmentEnvironment 65% of urban waste recycling within ‘20 +4% CAGR elect. generation from renewables (70% of total generation) WorkWorkWorkWork • New welfare system • Internal climate: 65/100 • -3% accidents 42GRUPPOHERA Some more sustainability ahead (’20 targets)
EconomicsEconomicsEconomicsEconomics (M€) Capex E’16-E’20: 545 m€ (M€) Ebitda Breakdown (M€) Highlights (M€) A'15 E'16 E'17 E'18 E'19 E'20 230 289 A'15 E'20 Collection Treatment * Excluding volumes from M&A A’15A’15A’15A’15 E’20E’20E’20E’20 EBITDAEBITDAEBITDAEBITDA 230.0 288288288288.6666 EBITEBITEBITEBIT 99.0 125125125125.0000 A’15 E’20 Waste treated 6,226 7,774 Urban 2,041 1,963 Special 2,002 3,217 by products 2,183 2,593 43GRUPPOHERA Waste business
A'15 E'16 E'17 E'18 E'19 E'20 Capex E’16-E’20: 745 m€ (M€) Volumes sold (Mmc) RAB (M€) EconomicsEconomicsEconomicsEconomics (M€) A’A’A’A’15151515 E’20E’20E’20E’20 EBITDAEBITDAEBITDAEBITDA 232.5 283283283283.5555 EBITEBITEBITEBIT 117.1 114114114114.5555 A’15 E’20 RAB* 1,407 1,507 300 295 A'15 E'20 *Numbers exclude M&A 44GRUPPOHERA Water business *Numbers exclude M&A
M€ 2014 Adj. E2019 Cagr Ebitda 269.7 308.9 +2.8% Ebit 171.2 175.3 +0.5% A'15 E'16 E'17 E'18 E'19 E'20 Capex Gas Tenders Economics (M€) Capex E’16-E’20: 924 m€ (M€) Ebitda Breakdown (M€) 296 348 A'15 E'20 Gas distribution Gas sales District Heating Heat Management *Numbers include gas tenders and exclude M&A and third parties RAB EconomicsEconomicsEconomicsEconomics (M€) A’A’A’A’15151515 E’20E’20E’20E’20 EBITDAEBITDAEBITDAEBITDA 295.8 348348348348.4444 EBITEBITEBITEBIT 181.1 198198198198.0000 Highlights A’15 E’20 Volume Sales &Trading (Mcm) 3,383 3,224 RAB* (gas distr.+D.H. in m€) 1,266 1,579 45GRUPPOHERA Gas business
A'15 E'16 E'17 E'18 E'19 E'20 Capex E’16-E’20: 159 m€ (M€) Ebitda Breakdown (M€) Highlights A'15 E'20 EE Distribution EE Sales Other A’15A’15A’15A’15 E’20E’20E’20E’20 EBITDAEBITDAEBITDAEBITDA 101.0 127127127127.5555 EBITEBITEBITEBIT 38.2 71717171.6666 A’15 E’20 Volume Sold (TWh) 9.6 9.4 RAB* (m€) 361 351 105 127 EconomicsEconomicsEconomicsEconomics (M€) *Numbers exclude M&A 46GRUPPOHERA Electricity business
This presentation contains forward-looking statements regarding future events (which impact the Hera Group’s future results) that are based on current expectations, estimates and opinions of management. These forward-looking statements are subject to risks, uncertainties and events that are unpredictable and depend on circumstances that might change in future. As a result, any expectation on Group results and estimates set out in this presentation may differ significantly depending on changes in the unpredictable circumstances on which they are based. Therefore, any forward -looking statement made by or on behalf of the Hera Group refer on the date they are made. The Hera Group shall not undertake to update forward-looking statements to reflect any changes in the Group’s expectations or in the events, conditions or circumstances on which any such statements are based. Nevertheless, the Hera Group has a “profit warning policy” , in accordance with Italian laws, that shall notify the market (under “price-sensitive” communication rules) regarding any “sensible change” that might occur in Group expectations on future results. 47GRUPPOHERA Disclaimer

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Analyst presentation: business plan to 2020

  • 2.
  • 3.
    GRUPPOHERA TOMASO TOMMASI DIVIGNANO Executive Chairman Key points: • Execution of Prior Business Plan to ‘19 • Business Plan to ‘20 • Investment proposition
  • 4.
    Hera backbone 01GRUPPOHERA Unique investmentproposition RELIABLE GROWTHIndustrial DEVELOP- MENT Solid TRACK RECORD Inclusive GOVER- NANCE Persistent LOW RISK FINANCIAL Soundness Growing DIVIDEND Uninterrupted GROWTH
  • 5.
    02GRUPPOHERA An uninterrupted growth EPSCagr: ̴ 9% 192 243 293 386 427 454 528 567 607 645 662 810 868 884 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Ever growing results since establishment (M€, % GDP growth) EBITDA GDP Growth Development Waste Track record Governance Low risk Development Networks Development Energy Financial Dividend Industrial Development
  • 6.
    03GRUPPOHERA Expanding presence inthe North-East Leadership achieved in all sectors Our footprint todayOur footprint todayOur footprint todayOur footprint today Market position (Market position (Market position (Market position (2015201520152015)))) FriuliFriuliFriuliFriuli VenetoVenetoVenetoVeneto Emilia RomagnaEmilia RomagnaEmilia RomagnaEmilia Romagna MarcheMarcheMarcheMarche TrentinoTrentinoTrentinoTrentino LombardyLombardyLombardyLombardy PiedmontPiedmontPiedmontPiedmont LiguriaLiguriaLiguriaLiguria TuscanyTuscanyTuscanyTuscany UmbriaUmbriaUmbriaUmbria GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
  • 7.
    04GRUPPOHERA A synergic multi-utilityportfolio Guaranteeing resilient results in any scenario (of which 7% regulated) 23% 49% NETWORKS (Fully regulated) WASTE EBITDA A‘15 884 m€ ENERGY (Fully liberalised) • 100% protected by l/t concessions • Tariffs set for the next 3 years • Strong contiguity in geographical scope • Market Leader both in Urban and Special • Leading waste mgmt change • Sole deeply integrated operator • Positive growth 8 years in a row • Loyal customer base (>2.2 mln) • Marginal exposure to commodity prices 26% GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
  • 8.
    05GRUPPOHERA Our ‘two pillars’model An effective formula behind the growth 192 884 +296 +396 A'02 M&A Org. Growth & Synergies A'15 Ebitda grown by 4.6 times (M€) 1 or 2 deals per annum1 or 2 deals per annum1 or 2 deals per annum1 or 2 deals per annum on average SynergiesSynergiesSynergiesSynergies achieved +25%+25%+25%+25% EbitdaEbitdaEbitdaEbitda in 5Y First mover in the consolidation processFirst mover in the consolidation processFirst mover in the consolidation processFirst mover in the consolidation process Cost cuttingCost cuttingCost cuttingCost cutting, Process optimization Development capexDevelopment capexDevelopment capexDevelopment capex (netw. and plants) Market expansionMarket expansionMarket expansionMarket expansion in liberalized markets 22 deals in 13 years Org. Ebitda +9% Cagr GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
  • 9.
    06GRUPPOHERA Inclusive shareholding providesstability A PUBLIC «public» company Shareholding today Free float Founders public shareholders 49% 29% M&A public shareholders 22% 1st Shareholder’s stake <10% Same mgmt team since establishment GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
  • 10.
    Old BP to’19: execution well on track Forecast ’16 Ebitda (M€) 841 >905 1.030 43 >61 (40) A'14 Growth A'15 Growth F'16 Wacc&Inc. F'16 F'16 BP E'19 Further ‘16 on top of targetsFurther ‘16 on top of targetsFurther ‘16 on top of targetsFurther ‘16 on top of targets • Default gas supply won tenders • Liability management • Trading performance/asset mgmt 07GRUPPOHERA GrowthTrack record Governance Low risk Financial Dividend Forecast’Forecast’Forecast’Forecast’16161616 full yearfull yearfull yearfull year EbitdaEbitdaEbitdaEbitda • Growth above +61 m€ offsetting negative effects of: • Wacc cut: 25 m€ • Incentive expired: >15 m€ Ebitda growth ‘15/’16 in line with targets with almost all negative effects deployed in 2016 Industrial Development Development Waste Development Networks Development Energy
  • 11.
    08GRUPPOHERA Business plan targetto 2020 Further planned growth of ~200m€ 884 1,080 (55) +27 +118 +106 A'15 Wacc & Inc. Org. Growth Tenders M&A E'20 Internal Growth +145m€ External Growth Ebitda growth to 2020 (M€) GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
  • 12.
    09GRUPPOHERA Organic growth: severallevers to put at work Deploying our expertise to squeeze additional value Internal Growth Ebitda contribution (M€) +80 +118 Efficiencies Dev. Growth/Syn. E'20 GrowthTrack record Governance Low risk Financial Dividend +38 Industrial Development Development Waste Development Networks Development Energy
  • 13.
    Organic Growth (2):focus on efficiencies Efficiencies +80 m€ NETWORKS +20.4 m€ WASTE +31.0 m€ ENERGY 10.9 m€ CORPORATE +17.9 m€ 10GRUPPOHERA Several projects at work in all Group units Efficiencies breakdown (M€) Growth: Waste Growth: Networks Growth: Energy Growth: Industrial GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
  • 14.
    • Competition pressurein energy supplyCompetition pressure in energy supplyCompetition pressure in energy supplyCompetition pressure in energy supply • Capital intensive Waste treatment plantsCapital intensive Waste treatment plantsCapital intensive Waste treatment plantsCapital intensive Waste treatment plants • DifficultDifficultDifficultDifficult authorization process for new plantsauthorization process for new plantsauthorization process for new plantsauthorization process for new plants Organic Growth (3): acquisitions executed recently In BP to ’20 targets enclosed only “executed” acquisitions 11GRUPPOHERA Waste treatment Energy supply In progress Gran Sasso Julia Servizi Più Waste Recycling Geo Nova Acquisitions since 31/12/2015: 1.1.1.1. Cash availabilityCash availabilityCash availabilityCash availability 2.2.2.2. Top market playerTop market playerTop market playerTop market player 3.3.3.3. Margins best in classMargins best in classMargins best in classMargins best in class ENABLERSENABLERSENABLERSENABLERS HERA’S ADVANTAGESHERA’S ADVANTAGESHERA’S ADVANTAGESHERA’S ADVANTAGES Aliplast Acquisitions executed in the last 13 months Growth Growth: Waste Track record Governance Low risk Growth: Networks Growth: Energy Financial Dividend Growth: Industrial Sangro Servizi Teseco
  • 15.
    AliplastAliplastAliplastAliplast datadatadatadata Organic Growth(4): Aliplast has opened up new horizons A strategic move to further enhance our market expansion potential 12GRUPPOHERA Main customers/relationsMain customers/relationsMain customers/relationsMain customers/relations • RevenuesRevenuesRevenuesRevenues:::: ̴ 100100100100 mmmm€€€€ • EbitdaEbitdaEbitdaEbitda:::: 15151515////16161616 mmmm€€€€ • Net financial positionNet financial positionNet financial positionNet financial position belowbelowbelowbelow 10101010mmmm€€€€ • Plastic treated:Plastic treated:Plastic treated:Plastic treated: ̴ 80808080 ktonktonktonkton/y/y/y/y • Customers:Customers:Customers:Customers: ̴ 2222,,,,000000000000 • Plants:Plants:Plants:Plants: 11111111 • Employees:Employees:Employees:Employees: 280280280280 Aliplast territorial presence GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
  • 16.
    Tenders: confirming ourcurrent Gas distr. concessions AssumptionsAssumptionsAssumptionsAssumptions 13131313 ATEM wonATEM wonATEM wonATEM won 9 ATEM not incl. Hera’sHera’sHera’sHera’s avgavgavgavg stake:stake:stake:stake: 70707070%%%% Hera presence 5 11 153 284 350 2016 2017 2018 2019 2020 CumCumCumCum. CapexCapexCapexCapex Plan (mPlan (mPlan (mPlan (m€€€€)))) 13GRUPPOHERA VIR/RAB highlights our hidden value (about +25%) Modena 1 Modena 2 Bologna Ferrara Ravenna Forlì-Cesena Rimini Pesaro-Urbino Padua 1 Padua 2 Udine 1 Udine 2 Udine 3 Pordenone Gorizia Trieste EbitdaEbitdaEbitdaEbitda growthgrowthgrowthgrowth ++++27272727mmmm€€€€ Gas distr. tenders in Hera reference territory GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
  • 17.
    14GRUPPOHERA M&A: +106m Eurofrom a typical driver of our business model In this “risiko”, Hera’s outposts are ready in all regions of interest ENABLERSENABLERSENABLERSENABLERS HERA’S ADVANTAGESHERA’S ADVANTAGESHERA’S ADVANTAGESHERA’S ADVANTAGES ((((1111) Industry trends) Industry trends) Industry trends) Industry trends • TendersTendersTendersTenders • HigherHigherHigherHigher investmentsinvestmentsinvestmentsinvestments • Higher qualityHigher qualityHigher qualityHigher quality stdstdstdstd (2)(2)(2)(2) MadiaMadiaMadiaMadia LawLawLawLaw • RationalizRationalizRationalizRationaliz. planplanplanplan yearly • InInInIn----HouseHouseHouseHouse strong limits • 500 k500 k500 k500 k€€€€ potential penaltiespenaltiespenaltiespenalties Reference territories 3.3.3.3. Visible Dividend policyVisible Dividend policyVisible Dividend policyVisible Dividend policy 4.4.4.4. Full integration /SynergiesFull integration /SynergiesFull integration /SynergiesFull integration /Synergies (+25% Ebitda within 5y) 1.1.1.1. Inclusive GovernanceInclusive GovernanceInclusive GovernanceInclusive Governance 2.2.2.2. Hera’s premium priceHera’s premium priceHera’s premium priceHera’s premium price Hera reference territory GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
  • 18.
    GrowthTrack record Governance Growth: Industrial STEFANOVENIER CEO Key points: • Solid strategic framework • Move to enhance market positioning • Growth down to bottom line • Further ahead on sustainability GrowthTrack record Governance Growth: Industrial Low risk Financial DividendGrowthTrack record Governance Industrial Development Development Waste Development Networks Development Energy
  • 19.
    Low risk FinancialDividend 15GRUPPOHERA Circular economy Customer experience Industry (Utility) 4.0 Our levers …New trends Waste Energy Networks Other Multi-utility GROWTHGROWTHGROWTHGROWTH EFFICIENCYEFFICIENCYEFFICIENCYEFFICIENCY EXCELLENCEEXCELLENCEEXCELLENCEEXCELLENCE INNOVATIONINNOVATIONINNOVATIONINNOVATION AGILITYAGILITYAGILITYAGILITY Confirming market leadership exploiting new opportunities Hera strategic focus GrowthTrack record Governance Industrial Development Development Waste Development Networks Development Energy
  • 20.
    16GRUPPOHERA +4.5% +4.6% +2.0%+8.2%Cagr 428 533 230 +105 +59 289 205 +22 226 21 +10 31 A'15 Networks Waste Energy Other E'20 884 1.080 Enhancing results in all core activities Maintaining our low risk profile Ebitda growth by ASA (M€) E’20 mix regulated/liberalized (%) RegulatedRegulatedRegulatedRegulated 57575757%%%% LiberalizedLiberalizedLiberalizedLiberalized 43434343%%%% GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
  • 21.
    GRUPPOHERA WASTE The braces ofour strategy: • Growth • Agility • Innovation • Excellence • Efficiency
  • 22.
    289 230 +16 +73 (30) A'15 Collection TreatmentIncentives E'20 A further expansion in a growing market Deploying a solid platform and expertise Ebitda growth by business (M€) GRUPPOHERA 17 GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
  • 23.
    A'15 E'20 Saved plant capacity 275kton 55% 66% Sorted Urb. W. increase freeing plant capacity Hera vs EU sustainability targets Recycling Energy Recovery45% 34% Regulated urban waste just achieved further savings Beyond UN agenda and EU targets on sustainability 18GRUPPOHERA HeraHeraHeraHeraEU targetEU targetEU targetEU target Urban WUrban WUrban WUrban W. inininin landfillslandfillslandfillslandfills Below 10% within 2030 Already today PackagingPackagingPackagingPackaging recyclingrecyclingrecyclingrecycling Above 65% within 2025 5Y in advance Urban WUrban WUrban WUrban W. recycledrecycledrecycledrecycled 65% within 2030 10Y in advance CIRCULAR ECONOMYCIRCULAR ECONOMYCIRCULAR ECONOMYCIRCULAR ECONOMY GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
  • 24.
    143 230 A'15 E'16 E'17E'18 E'19 E'20 «One stop shop» for all customer’s issuesItalian treatment Infrastructure shortage Single service Benefit from an integrated platform and a growing demand Growing Special Waste exploiting market potentials 19GRUPPOHERA Waste mgmt “crisis” Proper infrastr. HeraHeraHeraHera Full service Business customers Waste emergency • Extensive landfill use prohibited • Shortage of other treatm. plants • UE penalties increased • Difficult authorization process for new plants GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
  • 25.
    New horizons ofour waste management 20GRUPPOHERA GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy Pioneering transformation of Biogas into methaneAliplast: a step ahead in circular economy Contributing to Energy & Resource efficiency Business Customers Industrial Waste Products Biodigester Organic waste Cracking BiogasNaturalgas 7mcm/Y
  • 26.
    URBANURBANURBANURBAN WASTEWASTEWASTEWASTE SPECIALSPECIALSPECIALSPECIAL WASTEWASTEWASTEWASTE ENERGY RECOVER MATERIAL RECOVERMATERIALRECOVERMATERIAL RECOVERMATERIAL RECOVER REUSE SORTED COLLECTION OPTIMIZING PRODUCTIVE PROCESSES SPECIAL WASTE RECYCLE TREATMENT AND DISPOSAL Inerting systems (che-phy., WTE) On the black board: further move towards a Circular Economy paradigm … developing our leadership 21GRUPPOHERA GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy 66%66%66%66%
  • 27.
    GRUPPOHERA NETWORKS The braces ofour strategy: • Efficiency • Innovation • Growth • Excellence
  • 28.
    533 428 +10 +41 (25) +27 +52 A'15 SynergiesOrg. growth Wacc Tenders M&A E'20 Strengthening our regulated asset base Growing despite stable tariffs Ebitda growth drivers (M€) 22GRUPPOHERA GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
  • 29.
    RegRegRegReg. periodperiodperiodperiod ConcessionConcessionConcessionConcession lengthlengthlengthlength RegRegRegReg. ReturnsReturnsReturnsReturns WaterWaterWaterWater ‘16-’18 ~’245.3%* GasGasGasGas distribdistribdistribdistrib. ‘16-’18 ‘17-’20 6.1% ElectricityElectricityElectricityElectricity distribdistribdistribdistrib. ‘16-’18 ~’30 5.6% 3.07 3.48 0.27 +0.11 0.37 +0,10 +0,30 A'15 Water Energy distr. 3rd parties E'20 3.9 3.3 Protected from the tariffs’ resilient WACC mechanism RAB growth profile (mergers’ effect not included) (B€) RegulatedRegulatedRegulatedRegulated returnsreturnsreturnsreturns 23GRUPPOHERA ReinvestmReinvestmReinvestmReinvestm. Rate in RABRate in RABRate in RABRate in RAB From 19% (avg last 3 years) to 25%25%25%25% Returns and RAB evolutions GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy Property RAB Third parties RAB Low risk and stable cash generator with a material hidden value
  • 30.
    Advanced Network monitoring Satellite scanning Radiometricmeasurem. Algorithm analysis Smart App interface Smart Water Modelling HergoReti OSCAR control system Pilot project to control sewerage water Sophisticated air conditioning to reduce nitrogen residuals Low energy consumptions Pilot project in FE for real time mgmt decision making Predictive system on networks function Prevention from critical operating conditions High tech content underpinning efficiency gains Exploiting synergies from Nets, big data and “smart” technologies 24GRUPPOHERA Hergoreti, new IT integrated system, improve all the scheduled and non- scheduled operating activities on plants and gas, water, energy, remote heating networks GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
  • 31.
    On the blackboard: Industry (Utility) 4.0 trends add value… … to our main tangible assets 25GRUPPOHERA GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
  • 32.
    GRUPPOHERA ENERGY The braces ofour strategy: • Growth • Intangible assets • Agility • Innovation
  • 33.
    Aiming at continuinggrowth Tackling with pressure on margins 226 205 (30) +21 +30 A'15 Mkt Competition Mkt Expansion External Growth E'20 Ebitda growth drivers (M€) 26GRUPPOHERA GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
  • 34.
    Our solid Energycustomer base … … aiming at 3 million customers 1.327 857 A'15 E'20 Gas Electricity Customer base: filling the gap through cross selling (unit) Towards mkt liberalization: ongoing derisking (%) 73% 84% 28% 16% A'15 E'18 Free Mkt Protected Mkt 27GRUPPOHERA GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy ~1,400 ~1,000
  • 35.
    • Cost toserve (€/POD) • +200k Energy customers in the next 5Y • 25% digital customers Evolving our CRM to enhance the customer experience More potentials to our proactive marketing actions 28GRUPPOHERA Proactive Problem solving KPIs evolving considering more and more “soft” skills Tailored offers … at work enabling better assistance and cross selling Fast & Smart Strong language ID Customer Relationship Management system GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy 23,824,1 + 1.2 ( 1.5) A'15 Inflation Efficiency E'20
  • 36.
    Hera Enel Safeguarded Elect. andDefault gas supply in 11 regions Mkt expansion leveraging upon our nationwide presence Next 2 years results underpinned by won tenders Hera Enel 29GRUPPOHERA Energy Ebitda curve ‘15-E’20 expected (M€) 205 226 A '15 E'16 E'17 E'18 E'19 E'20 GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy New tenders
  • 37.
    Expanding the valueof our main intangible asset On the black board: focusing on Customer Experience 30GRUPPOHERA GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
  • 38.
    Sensitivity to PUNpricesSensitivity to PUN pricesSensitivity to PUN pricesSensitivity to PUN prices (plus or minus 1€/MWh, impact in M€, % impact on Group Ebitda) GROUP EBITDAGROUP EBITDAGROUP EBITDAGROUP EBITDA Sensitivity to GDPSensitivity to GDPSensitivity to GDPSensitivity to GDP (plus or minus 1%, impact in M€, % impact on Group Ebitda) Sensitivity to Gas pricesSensitivity to Gas pricesSensitivity to Gas pricesSensitivity to Gas prices (plus or minus 1 Eurocent per cubic meter, impact in M€, % impact on Group Ebitda) GROUP EBITDAGROUP EBITDAGROUP EBITDAGROUP EBITDA 1111$/Barrel$/Barrel$/Barrel$/Barrel 1%1%1%1% 1111€€€€////MWhMWhMWhMWh 1111cccc€€€€/M/M/M/M3333 GROUP EBITDAGROUP EBITDAGROUP EBITDAGROUP EBITDA GROUP EBITDAGROUP EBITDAGROUP EBITDAGROUP EBITDA Sensitivity to oil pricesSensitivity to oil pricesSensitivity to oil pricesSensitivity to oil prices (dollar per barrel impact in M€, % impact on Group Ebitda) 31GRUPPOHERA Sensitivity highlights a resilient portfolio mix Low risk profile is core in our strategy GrowthTrack record Governance Low risk Financial Dividend <0.05M€ <0<0<0<0.01%01%01%01% 4.00M€ 0000.38383838%%%% 0.70M€ 0000,,,,07070707%%%% 0.50M€ 0000.05050505%%%% Industrial Development Development Waste Development Networks Development Energy
  • 39.
    325 289 317349 346 391 443 430 346 330 6 142 131 66 12 34 59 59391 461 606 536 455 A'11 A'12 A'13 A'14 A'15 F'16 E'17 E'18 E'19 E'20 Maint. Mergers Gas tenders Capex plan Capex plan to 2020: 2.45 b€ to grow and strengthen assets (M€) 32GRUPPOHERA Enhancing our main assets GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
  • 40.
    Capex are mainlyfocused on regulated activities Targeting 8.3% ROI in 2020 22% 5% 69% NETWORKS WASTE CAPEX 2.45 b€ ENERGY 1,1x 1,2x 1,4x 1,2x 1,0x '16 '17 '18 '19 '20 Capex breakdown by business (%) Group Capex / Group Depreciation (x) 33GRUPPOHERA GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
  • 41.
    Debt/Ebitda to 2020:strong CF improves fin. flexibility (M€) 34GRUPPOHERA Further Acquisitions sustainable with our financial flexibility Growth: Waste Growth: Networks Growth: Energy Growth: Industrial GrowthTrack record Governance Low risk Financial Dividend Max leverage Industrial Development Development Waste Development Networks Development Energy 3,1x 3,3x 3,2x 3,0x 3,0x ~2.9x 2,8x A'11 A'12 A'13 A'14 A'15 F'16 E'17 E'18 E'19 E'20 Financial structure
  • 42.
    Improving financial profile Achieving8.0% ROE in 2020 Cost of Debt (%) Tax rate (%) 4,0% 3,8% 3,7% 3,5% '14 '15 F'16 E'20 40,2% 38,4% ~36.5% 33,0% '14 '15 F'16 E'20 35GRUPPOHERA EPS growth New vs Old Plan (% of cumulated increase) GrowthTrack record Governance Low risk Financial Dividend 2014 2015 2016 2017 2018 2019 2020 Old Plan New Plan E’20 E’19 A’14 Adj. +30% +52% Industrial Development Development Waste Development Networks Development Energy
  • 43.
    GRUPPOHERA TOMASO TOMMASI DIVIGNANO Executive Chairman Key points: • Dividend Policy • Closing remarks
  • 44.
    9,0 9,0 9,09,0 9,0 9,0 9,5 9,5 10,0 10,0 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 Dividend policy 100% 88% 76% 79% 73% 66% '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 DPS (€c) Payout ratio (%) 36GRUPPOHERA Providing DPS growth still betting on an external growth story Hera’s dividend qualityHera’s dividend qualityHera’s dividend qualityHera’s dividend quality Unique track recordUnique track recordUnique track recordUnique track record • Always guaranteed • Never decreased • Transparent policy Potential upside for shareholdersPotential upside for shareholdersPotential upside for shareholdersPotential upside for shareholders • Room to fund mergers with “Buy back”“Buy back”“Buy back”“Buy back” shares Hera included in “Aristocrats ETF” (with Atlantia and Recordati) GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy
  • 45.
    Closing remarks Investor Relationscontacts: Mail: ir@gruppohera.it +39 051 287040 Head of IR Jens Klint Hansen jens.hansen@gruppohera.it • Solid premises to lead industry changes • Continuing a safe growth through our “two pillar” business model • High visibility on growing shareholders return GRUPPOHERA GrowthTrack record Governance Low risk Financial Dividend Industrial Development Development Waste Development Networks Development Energy 37
  • 46.
  • 47.
    Main assumptionsMain assumptionsMainassumptionsMain assumptions A’A’A’A’14141414 A’15A’15A’15A’15 E’20E’20E’20E’20 BrentBrentBrentBrent (Dollar/Barrel) 99.5 53.7 55.0 Exchange ratioExchange ratioExchange ratioExchange ratio €/$ 1.33 1.11 1.10 PUNPUNPUNPUN (€/MWh) 52.1 52.3 52.5 InflationInflationInflationInflation (5Y moving average) 0.2% 0% 1.0% Green certificateGreen certificateGreen certificateGreen certificate –––– biomass plantsbiomass plantsbiomass plantsbiomass plants (€/MWh) 97.4 99.5 80.3 Green certificateGreen certificateGreen certificateGreen certificate –––– other plantsother plantsother plantsother plants (€/MWh) 97.4 99.5 101.0 White certificatesWhite certificatesWhite certificatesWhite certificates (€/TEP) 106.2 106.1 115.5 COCOCOCO2222 certificatescertificatescertificatescertificates (€/ton) 7.2 8.2 11.0 Tax rateTax rateTax rateTax rate (%) 40.2% 38.4% 33% Cost of DebtCost of DebtCost of DebtCost of Debt (%) 4.0% 3.8% 3.5% 38GRUPPOHERA Business Plan main assumptions
  • 48.
    Ebit by strategicarea (M€) 100 131 205 6 442M€ A’15 E’20 125 146 238 16 525M€ Waste EnergyNetworks 39GRUPPOHERA Consolidated Group Ebit target
  • 49.
    40,0 659,970,8 52,5 448,0 48,6 2.593,73,253.6 '16 '17 '18 '19 '20 Post Gross Debt Gross debt maturities (M€) Interest rate breakdown in 2020 (%) 36% 64% Variable Fixed Rates 40GRUPPOHERA Financial Debt 2,594
  • 50.
    An unique, effective& reliable “two pillar business model” 192 884 +296 +396 A'02 M&A Org. Growth & Synergies A'15 Ebitda Growth by 4.6x: drivers (M€) 20-25% avg. synergy extraction Organic Growth & Synergies always positive (M€) 396 +50 +25 +29 +23 +21 +60 +23 +40 +29 +11 +38 +18 +29 A'02 A'15 Tot. 296 +25 +65 +18 +6 +15 +16 (16) +6 +110 +13 +14 A'15 Tot. Avg. Growth per annum: +31 m€ Avg. Growth per annum: +23 m€ Constant M&A contribution to Ebitda (M€) 22 deals executed Outstanding & constant track record 41GRUPPOHERA Track record of Hera’s “two pillar” Business model
  • 51.
    WaterWaterWaterWater Awarded with quality premium More efficient seweragewater plants (new in Trieste and Rimini e 6 other plants refurbished) Energy efficiency &Energy efficiency &Energy efficiency &Energy efficiency & Climate changeClimate changeClimate changeClimate change Energy connsumptions -5% within ‘20 Offers to assist customers deploying our expertice Bio-digester to produce “bio- methane” with lower emissions EnvironmentEnvironmentEnvironmentEnvironment 65% of urban waste recycling within ‘20 +4% CAGR elect. generation from renewables (70% of total generation) WorkWorkWorkWork • New welfare system • Internal climate: 65/100 • -3% accidents 42GRUPPOHERA Some more sustainability ahead (’20 targets)
  • 52.
    EconomicsEconomicsEconomicsEconomics (M€) Capex E’16-E’20: 545m€ (M€) Ebitda Breakdown (M€) Highlights (M€) A'15 E'16 E'17 E'18 E'19 E'20 230 289 A'15 E'20 Collection Treatment * Excluding volumes from M&A A’15A’15A’15A’15 E’20E’20E’20E’20 EBITDAEBITDAEBITDAEBITDA 230.0 288288288288.6666 EBITEBITEBITEBIT 99.0 125125125125.0000 A’15 E’20 Waste treated 6,226 7,774 Urban 2,041 1,963 Special 2,002 3,217 by products 2,183 2,593 43GRUPPOHERA Waste business
  • 53.
    A'15 E'16 E'17E'18 E'19 E'20 Capex E’16-E’20: 745 m€ (M€) Volumes sold (Mmc) RAB (M€) EconomicsEconomicsEconomicsEconomics (M€) A’A’A’A’15151515 E’20E’20E’20E’20 EBITDAEBITDAEBITDAEBITDA 232.5 283283283283.5555 EBITEBITEBITEBIT 117.1 114114114114.5555 A’15 E’20 RAB* 1,407 1,507 300 295 A'15 E'20 *Numbers exclude M&A 44GRUPPOHERA Water business *Numbers exclude M&A
  • 54.
    M€ 2014 Adj.E2019 Cagr Ebitda 269.7 308.9 +2.8% Ebit 171.2 175.3 +0.5% A'15 E'16 E'17 E'18 E'19 E'20 Capex Gas Tenders Economics (M€) Capex E’16-E’20: 924 m€ (M€) Ebitda Breakdown (M€) 296 348 A'15 E'20 Gas distribution Gas sales District Heating Heat Management *Numbers include gas tenders and exclude M&A and third parties RAB EconomicsEconomicsEconomicsEconomics (M€) A’A’A’A’15151515 E’20E’20E’20E’20 EBITDAEBITDAEBITDAEBITDA 295.8 348348348348.4444 EBITEBITEBITEBIT 181.1 198198198198.0000 Highlights A’15 E’20 Volume Sales &Trading (Mcm) 3,383 3,224 RAB* (gas distr.+D.H. in m€) 1,266 1,579 45GRUPPOHERA Gas business
  • 55.
    A'15 E'16 E'17E'18 E'19 E'20 Capex E’16-E’20: 159 m€ (M€) Ebitda Breakdown (M€) Highlights A'15 E'20 EE Distribution EE Sales Other A’15A’15A’15A’15 E’20E’20E’20E’20 EBITDAEBITDAEBITDAEBITDA 101.0 127127127127.5555 EBITEBITEBITEBIT 38.2 71717171.6666 A’15 E’20 Volume Sold (TWh) 9.6 9.4 RAB* (m€) 361 351 105 127 EconomicsEconomicsEconomicsEconomics (M€) *Numbers exclude M&A 46GRUPPOHERA Electricity business
  • 56.
    This presentation containsforward-looking statements regarding future events (which impact the Hera Group’s future results) that are based on current expectations, estimates and opinions of management. These forward-looking statements are subject to risks, uncertainties and events that are unpredictable and depend on circumstances that might change in future. As a result, any expectation on Group results and estimates set out in this presentation may differ significantly depending on changes in the unpredictable circumstances on which they are based. Therefore, any forward -looking statement made by or on behalf of the Hera Group refer on the date they are made. The Hera Group shall not undertake to update forward-looking statements to reflect any changes in the Group’s expectations or in the events, conditions or circumstances on which any such statements are based. Nevertheless, the Hera Group has a “profit warning policy” , in accordance with Italian laws, that shall notify the market (under “price-sensitive” communication rules) regarding any “sensible change” that might occur in Group expectations on future results. 47GRUPPOHERA Disclaimer