Consolidatequarterlyreportas at 31 march 2016

Hera Group – Consolidated quarterly report as at 31 march 2016

Approved by Hera Spa’s Board of Directors in the meeting of 11 may 2016 1

 

TABLE OF CONTENTS

Introduction

Governance and Control Bodies 002

Mission 003

Directors’ Report

1.01 Overview of Group management and performance 004

1.01.01 Operating results 004

1.01.02 Analysis of the Group’s Financial Structure and investments 008

1.01.03 Analysis of Net Cash (Net Borrowings) 010

1.02 Analysis by strategic business area 012

1.02.01 Gas 013

1.02.02 Electricity 017

1.02.03 Integrated Water Cycle 020

1.02.04 Waste Management 024

1.02.05 Other Services 028

1.03 Share Performance and Investor Relations 031

1.04 Reference Scenario and Group Strategy 033

1.05 Personnel structure 036

Hera Group Consolidated Financial Statements

2.01 Financial Statements 037

2.01.01 Income Statements 037

2.01.02 Statement of financial position 038

2.01.03 Cash Flow Statement 040

2.01.04 Statement of changes in equity 041

2.02 Explanatory notes 042

2.03 Net Borrowings 044

2.04 Equity Investments 045

introduction

Hera Group – Consolidated quarterly report as at 31 march 2016

Approved by Hera Spa’s Board of Directors in the meeting of 11 may 2016 2

 

GOVERNANCE AND CONTROL BODIES

Board of Directors

Chairman Tomaso Tommasi di Vignano

CEO Stefano Venier

Vice President 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 President 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

Hera Group – Consolidated quarterly report as at 31 march 2016

Approved by Hera Spa’s Board of Directors in the meeting of 11 may 2016 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

Hera Group – Consolidated quarterly report as at 31 march 2016

Approved by Hera Spa’s Board of Directors in the meeting of 11 may 2016 4

 

1.01 OVERVIEW OF GROUP MANAGEMENT AND PERFORMANCE

1.01.01 OPERATING RESULTS

The Hera Group, at the end of the first quarter of 2016, showed growth in all economic

indicators: EBITDA rose by o.4%, operating profits by 0.4% and net profits by 4.7%.

These results, obtained thanks to the Group's consolidated multi-business strategy, have

been achieved in a competitive and increasingly challenging regulatory environment in

which the Group operates in a balanced and dynamic way.

The main corporate and business operations that have generated changes in the scope

over the first quarter of 2016 are:

As of 23 December 2015, Herambiente acquired a 100% shareholding in Waste

Recycling Spa, whose activities involve the treatment and recovery of special

waste in the province of Pisa, and which in turn holds shares in Rew Trasporti Srl

and Neweco Srl.

As of 1 December 2015, Herambiente acquired control of several branches of

Geo Nova Spa. In particular, the hazardous and non-hazardous waste storage

plant in San Vito al Tagliamento (near Pordenone) and the active landfills for non-

dangerous waste in Loria (near Treviso) and Sommacampagna (near Verona)

were taken over.

As of 29 December 2015, Hera Spa sold 90% of Hera Energie Rinnovabili, later

renamed Aloe Spa, to third parties, thus removing it from the scope of

consolidation.

As of 1 November 2015, Biogas 2015 became part of the Group's corporate

structure. This company's activities involve energy recovery and energy

production from waste recycling, and it is also responsible for constructing,

installing and managing the plants involved.

As of 30 December 2015 the stake held by AcegasApsAmga Spa in Trieste

Onoranze e Trasporti Funebri was sold.

This consolidated income statement reflects the application of accounting principle

IFRIC12 "Service concession arrangements". The effect of applying this principle, which

leaves the results unchanged, is that investments made in goods granted under

concession, including only network services, are acknowledged in the income statement.

(€/mln) Mar 2016 Mar 2015 Abs. Change % Change

Revenues 1,235.4 1,311.9 -76.5 -5.8%

EBITDA 278.4 22.5% 277.2 21.1% +1.2 +0.4%

Operating profit 170.8 13.8% 170.1 13.0% +0.7 +0.4%

Net profit 96.8 7.8% 92.5 7.0% +4.3 +4.7%

Constant and balanced growth

Approved by H

 

Constant angrowing increments

1.2 billion Euros in revenues

Hera Spa’s Boar

The

Reve

(equ

2015

decr

tradi

drop

resu

mate

regu

serv

9.5 m

583/

meth

on

serv

secto

whic

parti

of ap

powe

dispo

For f

Incom

Reve

Othe

Raw

Servi

Othe

Perso

Capit

EBITD

Amor

Oper

Finan

Pre-t

Taxes

Net p

AttribSharNon-

nd

rd of Directors in

table below

enues for the

al to approx

5. There are

reased by 2

ng of elec

pped by abou

lt of the dec

erials; Fina

lated gas,

ices there w

million Euros

/2015/R/com

hod for calcu

capital inve

ices in the g

or as well as

ch defines th

ally offset by

pproximately

er plants and

osed of.

further detail

me statement (€

enues

r operating reven

materials

ce costs

r operating costs

onnel costs

talised costs

DA

rt. & Prov.

rating profit

ncial operations

tax profit

s

profit of the year

utable to:reholders of the -controlling intere

n the meeting o

shows the ec

e first quarter

ximately 6%)

e several re

0 million Eu

ctricity and

ut 90 million

cline in the p

lly, in the

electricity

was a declin

s mainly due

, which m

ulating the ra

ested for in

as sector an

s decree 664

he rules for

y higher reve

y 12 million E

d, finally, by

s, see the an

€/mln)

nues

s

r

Parent Companests

Her

of 11 may 2016

conomic res

r amounted t

) from the 1,

easons for th

uros due to

gas have

Euros as a

price of raw

e area of

and water

ne of about

e to decree

odified the

ate of return

nfrastructure

nd electricity

4/2015/R/idr,

the second

enues due to

Euros, by gr

an increase

nalyses of th

Mar 2016

1,235.4

73.7

(608.5)

(281.7)

(12.1)

(132.9)

4.6

278.4

(107.6)

170.8

(25.7)

145.1

(48.4)

96.8

y 91.25.6

ra Group – Cons

ults for the fi

to 1,235.4 m

,311.9 million

his decline:

the mild cl

regulatory p

o higher volum

reater energ

in revenues

e single bus

% Inc. M

6.0%

-49.3%

-22.8%

-1.0%

-10.8%

0.4%

22.5%

-8.7%

13.8%

-2.1%

11.7%

-3.9%

7.8%

7.4%0.5%

solidated quarte

rst quarter o

million Euros,

n Euros see

in the gas

imate; reven

period. Thes

mes of elect

y production

s resulting fro

iness areas.

Mar 2015

1,311.9

71.4

(702.3) -5

(266.6) -2

(9.9)

(131.4) -1

4.1

277.2 2

(107.1)

170.1 1

(29.4)

140.7 1

(48.2)

92.5

86.65.9

erly report as at

of 2016 and 2

down 76.5 m

en in the sam

service, sa

nues from th

se negative e

tricity sold, in

n revenues f

om an increa

% Inc. Abs. cha

-

5.4%

53.5% -

20.3% +

-0.8%

10.0%

0.3%

21.1%

-8.2%

13.0%

-2.2%

10.7%

-3.7%

7.0%

6.6%0.4%

31 march 2016

5

2015:

million Euros

me period of

les volumes

he sale and

effects were

n the amount

from thermal

ase in waste

nge % Chan

76.5 -5.8

+2.3 +3.2

93.8 -13.4

15.1 +5.7

+2.2 +22.2

+1.5 +1.1

+0.5 +12.1

+1.2 +0.

+0.5 +0.5

+0.7 +0.

-3.7 -12.6

+4.4 +3.

+0.2 +0.4

+4.3 +4.

+4.6 +5.-0.3 -4.8

6

5

s

f

s

d

e

t

l

e

ge

8%

2%

4%

7%

2%

1%

1%

.4%

5%

.4%

6%

.1%

4%

.7%

.3%8%

Approved by H

 

EBITDA at 27million Euros(+0.4%)

Hera Spa’s Boar

Othe

due

amo

Cost

quar

the l

in the

Othe

serv

incre

costs

Pers

in th

incre

agre

the r

As o

to th

EBIT

millio

show

Euro

parti

that

reve

wate

Euro

4.9

the

grow

0.3 m

decr

Amo

going

same

the a

of 1.

com

chan

Third

78.4 s

rd of Directors in

er operating

to higher re

unt of which

ts of raw and

rter of 2015,

ower volume

e cost of raw

er operating

ices coming

ease is main

s of hosting a

sonnel costs

he first quar

ease is main

eement and t

reduction of t

of March 201

e same perio

TDA rose fro

on Euros a

wing an inc

os, equal to

cularly signi

the quarter w

nues in the

er sector am

os (3.9 in gas

in water, re

reduction o

wth of the gas

million Euros

reases in the

ortizations an

g from 107.1

e period of 2

amount of 2.

7 million Eur

panies. This

nge in duties

d Party Good

n the meeting o

revenues inc

evenues res

was due ma

d other mate

equal to a 1

es of gas sol

w materials.

revenues th

to 15.1 millio

nly due to ch

and transpor

rose by 1.5

rter of 2015

ly due to the

the entrance

the average

6, capitalize

od of 2015.

om the 277.2

as of Marc

crease of 1

0.4%. This

ificant if we

was affected

e gas, elect

mounting to 9

s, 0.7 in elec

espectively)

of the WA

s sector, amo

s, and the e

areas of wa

nd provisions

1 million Eur

2016. This in

0 million Eu

ros, and high

effect is offs

s on the form

ds in the gas

Her

of 11 may 2016

creased by 2

sulting from

ainly to increa

erials decrea

3.4% change

ld, less subs

hus increased

on Euros an

hanges in the

rting electrici

million Euros

to 132.9 m

e wage increa

of the Envir

presence of

ed costs sligh

2 million Euro

ch 2016,

.2 million

s result is

consider

d by lower

tricity and

9.5 million

ctricity and

following

ACC. The

ounting to

electricity AR

ater cycle and

s showed an

ros in the fir

ncrease is d

ros, higher a

her provision

set by a redu

mer Akron pl

s area.

ra Group – Cons

2.3 million E

the applicat

ased payme

ased by 93.8

e; as with re

stantial tradin

d by 17.3 m

d higher ope

e scope (5.0

ty and gas (

s (equal to 1

million Euros

ases establis

ronment unit

resources.

htly increase

os reported

REA amoun

d environme

n overall inc

rst quarter o

due to a cha

amortizations

ns for doubtfu

uction in the

ants followin

solidated quarte

uros, 1.7 mil

ion of IFRIC

nts for sorted

8 million Eur

venues, this

ng activities a

million Euros

erating expen

0 million Euro

10 million Eu

.1%), going f

in the sam

shed by the n

into the com

d, up 0.5 mi

for the first q

ting to 3.9 m

nt.

rease of 0.5

f 2015 to 10

nge in the s

s for new inv

ul accounts,

amortization

ng a corpora

erly report as at

llion Euros o

C 12 and th

d waste colle

ros compare

change is m

and the over

overall (high

nses coming

os) and incre

uros).

from 131.4 m

me period of

national colle

mpany, partia

llion Euros a

quarter of 20

million Euros

5 million Euro

07.6 million

scope of con

vestments in

in particular

n of WTE pla

ate merger a

31 march 2016

6

of which was

e remaining

ection.

d to the first

mainly due to

rall decrease

her costs for

to 2.2). The

eases in the

million Euros

f 2016. This

ective labour

ally offset by

as compared

015 to 278.4

s, offset the

os, or 0.5%,

Euros in the

nsolidation in

n the amount

r in the sales

ants and the

and on some

6

6

s

g

t

o

e

r

e

e

s

s

r

y

d

4

e

,

e

n

t

s

e

e

Neminm(+

Approved by H

 

Operating prat 170.8 milliEuros (+0.4%

et profits posminority nterests at 91

million Euros +5.3%)

Hera Spa’s Boar

Ope

reac

millio

170.

perio

The

Euro

2015

achie

In lig

140.

repo

The

rate

reas

year

deve

amo

Net

repo

of 20

Grou

Euro

first

othe

inter

com

Rom

rofits on

%)

st

.2

rd of Directors in

rating profit

hed 170.8

on Euros or 0

1 million Eur

od of 2015.

result of fina

os, an increa

5. This good

eved due to

ght of the ab

7 million Eu

orted in the sa

taxes for the

of 33.3%, a

on for this d

r resulting fro

elopment (2

rtizations (20

profits theref

orted in the fi

016.

up profits ca

os, up 4.6 m

quarter of 2

r things to a

rests mainly

plete acquis

magna Compo

n the meeting o

ts as of M

million Eur

0.4% as com

ros reported

ancial manag

ase of 3.7 m

performance

the repayme

bove, adjuste

uros reporte

ame period o

e first quarte

n improveme

ecrease is m

om the appl

015 Stability

016 stability

fore rose by

rst quarter o

ame to 91.2

illion Euros

2015, thanks

reduction of

y derived fr

sition of Ak

ost.

Her

of 11 may 2016

March 2016

ros, up 0.7

mpared to the

in the same

gement at th

million Euros

e is due both

ent of certain

ed pre-tax p

ed in the fir

of 2016.

er of 2016, a

ent as comp

mainly due to

lication of th

ty Law) as

Law).

4.7% or 4.3

of 2015 to the

2 million

from the

s among

f minority

from the

kron and

ra Group – Cons

6

7

e

e

he end of the

s or 12.6% a

h to lower av

loans as we

profits rose b

st quarter o

amounting to

pared to the

o the benefits

he "patent bo

well as th

3 million Euro

e 96.8 millio

solidated quarte

e first quarte

as compared

erage debt a

ell as the opti

by 4.4 million

of 2015 to t

o 48.4 million

same period

s that will be

ox" and tax

e concessio

os, rising from

n Euros repo

erly report as at

er of 2016 is

d to the sam

and to efficie

imization of c

n Euros, go

the 145.1 m

n Euros, com

d of 2015 (3

e enjoyed in t

credit for re

ons in term

m the 92.5 m

orted in the s

31 march 2016

7

25.7 million

me period of

ncy on rates

cash.

ing from the

million Euros

mprise a tax

34.3%). The

the 2016 tax

esearch and

ms of maxi-

million Euros

same period

6

7

n

f

s

e

s

x

e

x

d

-

s

d

Gin

Nc5

NrE

Approved by H

 

Group size ncreases

Net invested capital reache5.1 billion Eur

Net investmenise to 68.5 m

Euros

Hera Spa’s Boar

1.01

INES

The

finan

As o

inves

to 3

whol

work

decr

the c

redu

of tra

In th

from

Inves

Serv

Euro

repo

The with

Invesfinan

Net n

Net w

(Prov

Net i

Equit

Long

Net c

Net b

Tota

es ros

nts illion

rd of Directors in

1.02 ANAL

STMENTS

table below

ncing for the

of 31 March

sted capital d

1 Decembe

lly due to a

king capital w

rease due to

core busine

ction due to

ade receivab

e first quarte

4.5 million

stments Fun

vice. Includin

os. Net inves

orted in Marc

following tabthe total amo

sted capital andncing (€/mln)

non-current asse

working capital

visions)

nvested capital

ty

g-term borrowing

cash/short term

borrowings

l sources of fina

n the meeting o

LYSIS OF

w shows cha

period endin

h 2016, the

decreased a

r 2015. The

a positive tr

which, in add

o the season

ss, registere

o the good p

bles.

er of 2016, G

n Euros in

nd (FoNI), as

ng capital gr

stments grew

h 2015 to the

ble shows totount of capit

d sources of

ets

gs

borrowings

ancing

Her

of 11 may 2016

THE GR

anges in the

ng 31 March

amount of

as compared

e change is

rend in net

dition to the

nal nature of

ed a further

performance

Group investm

capital gran

s provided f

rants, the Gr

w by 6.3 m

e 68.5 million

tal investmental grants and

31 Mar 2016

5,509.0

105.0

(512.7)

5,101.3

(2,596.8)

(2,746.5)

242.0

(2,504.5)

(5,101.3)

ra Group – Cons

ROUP'S FI

e Group's n

2016.

ments amou

nts, of whic

or by the ta

roup's overa

million Euros,

n Euros repo

nts includingd separate m

% Inc. 31 D

108.0% 5

2.1%

-10.1% (

100.0% 5

50.9% (2

53.8% (2

-4.7%

49.1% (2

-100.0% (5

solidated quarte

INANCIAL

net invested

nted to 68.5

ch 2.6 millio

riff method f

all investmen

going from

orted in 2016

capital granmention of the

Dec 2015 % I

5,511.3 106

157.0 3.0

513.5) -10

5,154.8 100

2,503.1) 48

2,743.6) 53

91.9 -1.

2,651.7) 51

5,154.8) 100

erly report as at

STRUCTU

capital and

million Euro

on Euros fo

for the Integ

nts came to

m the 62.2 m

6.

nts, subdividee FoNI:

Inc. Abs. chan

6.9% (2.3)

0% (52.0

0.0% +0.8

0.0% (53.5

.6% (93.7

.2% (2.9)

.8% +150.

.4% +147.2

0.0% +53.5

31 march 2016

8

URE AND

d sources of

os, benefiting

or the New

grated Water

73.0 million

million Euros

ed by sector,

nge % Change

(0.0%)

) (33.1%)

(0.2%)

) (1.0%)

) +3.7%

+0.1%

1 +163.3%

2 (5.6%)

5 (1.0%)

6

8

f

g

w

r

n

s

P5E

2in

Ghinosf

Approved by H

 

Provisions at 512.7 million Euros

2.6 billion Eurn equity

Group headquartersnvestments i

offices, IT systems and leets

Strong commitmentinvestment iplants and infrastructurcontinues

Hera Spa’s Boar

Capi

Euro

quar

inter

infra

were

main

large

the p

inves

the a

At t

build

struc

Marc

As o

than

expe

Equi

Euro

whic

Tota(€/m

Gas

Elec

Wat

Was

Othe

Hea

Tota

Tota

Tota

Cap

Tota

ros

: n

t to n

res

rd of Directors in

ital expendit

os, rose 13

rter of 2

rventions

structures.

e performed

nly concerni

e-scale opera

purification a

stments in e

analyses by b

the Group's

dings, IT sys

ctures. Overa

ch 2015, prev

of March 20

ks to the p

enditures for

ty increased

os as of 31 M

ch equaled 96

al investmentmln)

s area

ctricity area

ter cycle area

ste managem

er services ar

adquarters

al operating in

al financial inv

al gross inves

pital contributio

of which FoNI

al net investm

n the meeting o

ture, amoun

3.9% as co

015 and

on plants

In addition

as required

ng the gas

ation replaci

and sewerag

each single

business are

s headquart

stems and th

all investme

valently in th

16, the fund

provisions fo

use.

d from 2.503

March 2016,

6.8 million E

ts

ment area

rea

nvestments

vestments

stments

ons

(New Investme

ments

Her

of 11 may 2016

nting to 73.

ompared to

mainly c

s, network

, updating

d by new re

s sector, ef

ng meters, a

ge area. Re

area are in

ea.

ters, investm

he vehicle fl

nts in struct

he IT systems

ds totalled 5

or the perio

31 billion Eu

thanks to the

uros.

M

ent Fund)

ra Group – Cons

.0 million

the first

concerned

ks and

activities

egulations

ffecting a

as well as

marks on

cluded in

ments conc

eet, as well

tures rose by

s and work c

12.7 million

od which we

uros as of 3

e contributio

Mar 2016

19.5

3.9

30.1

6.3

2.8

10.5

73.0

0.0

73.0

4.5

2.6

68.5

solidated quarte

cerned inter

as laborato

y 1.0 million

carried out in

Euros, in lin

ere substan

1 Decembe

n made by th

Mar 2015 A

12.7

4.0

30.2

5.3

2.5

9.5

64.1

0.0

64.1

1.9

1.8

62.2

erly report as at

rventions on

ories and rem

n Euros as c

n the corpora

ne with Dec

ntially equiva

r 2015 to 2

he results fo

Abs. Change

+6.8

-0.1

-0.1

+1.0

+0.3

+1.0

+8.9

+0.0

+8.9

+2.6

+0.8

+6.3

31 march 2016

9

n corporate

mote control

compared to

ate offices.

ember 2015

alent to the

.5968 billion

or the period,

% Change

+53.5%

-2.5%

-0.3%

+18.9%

+12.0%

+10.5%

+13.9%

+0.0%

+13.9%

+136.8%

+44.4%

+10.1%

6

9

e

l

o

5

e

n

,

Hera Group – Consolidated quarterly report as at 31 march 2016

Approved by Hera Spa’s Board of Directors in the meeting of 11 may 2016 10

 

1.01.03 ANALYSIS OF THE GROUP'S FINANCIAL STRUCTURE

Analysis of net financial debt:

Current debt is mainly made up of operations using bank accounts, in the amount of

approximately 40 million Euros, and of instalments of bank loans coming to maturity, in

the amount of approximately 89 million, a decrease as compared to 31 December 2015

as a result of repayment of the 195.4 million Euros bond that occurred 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 (77.3% of

the total), with repayment at maturity.

Debt overall shows an average term to maturity of approximately 8.4 years, with 73%

maturing after more than 5 years.

(€/mln) 31 Mar 2016 31 Dec 2015

a Cash and cash equivalents 385 541

b Other current financial receivables 35 35

Current f inancial debt (80) (129)

Current bank debt (89) (285)

Other current f inancial liabilities (7) (68)

Finance lease payments maturing w ithin 12 months (2) (2)

c Current financial debt (178) (484)

d=a+b+c Net current financial debt 242 92

Non-current bank debt and bonds issued (2,850) (2,845)

Other non-current f inancial liabilities (6) (6)

Finance lease payments maturing after 12 months (17) (18)

e Non-current financial debt (2,873) (2,869)

f=d+e Net financial position - CONSOB Communication No 15519 of 28/07/2006 (2,631) (2,777)

g Non-current financial receivables 127 125

h=f+g Net financial debt (2,504) (2,652)

A solid financial position

Hera Group – Consolidated quarterly report as at 31 march 2016

Approved by Hera Spa’s Board of Directors in the meeting of 11 may 2016 11

 

Net borrowings decreased from the

2,651.7 reported in 2015 to the

2,504.5 reported as of 31 March

2016. This decline, part of which is

physiological and linked to the

seasonal nature of the gas business,

is further enhanced by a good level

of trade receivables.

 

Net borrowings drop to 2.50 billion Euros

2,62,6

2,7

2,5

Dic 2014 Mar 2015 Dic 2015 Mar 2016

Net Borrowings (€/bln)

Hera Group – Consolidated quarterly report as at 31 march 2016

Approved by Hera Spa’s Board of Directors in the meeting of 11 may 2016 12

 

1.02 ANALYSIS BY STRATEGIC 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, remote 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.

The Group's income statements include corporate headquarter costs and reflect

intercompany transactions accounted for at market price.

The following analysis 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.

46,2%

11,9%

17,9%

22,4%

1,5%

EBITDA March 2016

Gas Electricity Water Waste Manag. Other Services

Contribution coming from the various areas to Group EBITDA highlights a balanced mix, coherent with the Group's multi-business strategy.

Energy areas play a significant role, totalling roughly 58% of EBITDA

Approved by H

 

Gas: marginin line with thpast

Contributiontotal EBITDAline with the

The EBITDA the gas area increased by

1.3 million gacustomers

Hera Spa’s Boar

1.02

The

same

regu

mod

serv

and

and

The

The

incre

the

chan

com

initia

com

custo

parti

acqu

2015

(€/m

Area

Grou

Perc

ality he

n to A in

past

for

y 0.2%

as

rd of Directors in

2.01 GAS

first quarter

e period of

latory contex

ified the met

ices in the g

predictable r

EBITDA is 3

following tab

number of

eased 0.9%,

first quarter

nge is d

mercial and

atives set in

petition, as

omer base,

cular, tha

uisition of Ale

5.

mln)

a EBITDA

up EBITDA

centage weig

n the meeting o

r of 2016 sh

the last fin

xt in which, i

thod for calc

as sector wa

regulatory fra

3.9 million Eu

ble shows the

gas custom

as compare

r of 2015.

due to

customer lo

place to con

well as a w

in central Ita

anks to

ento Gas in

ht

Her

of 11 may 2016

hows the ga

ancial year.

in 2016, Res

ulating the ra

as first imple

amework. Th

uros for the fi

e changes oc

mers

ed to

This

both

oyalty

ntrast

wider

aly in

the

May

Mar

4

ra Group – Cons

as sector slig

These resu

solution 583/

ate of return

emented, in o

he negative i

rst quarter o

ccurred in te

2016 M

128.7

278.4

46.2%

solidated quarte

ghtly increas

ults should

/2015 / R / c

on invested

order to esta

impact of the

f the year.

rms of EBIT

Mar 2015 Abs

128.4

277.2

46.3%

erly report as at

sed as comp

be understo

com of 02.12

d capital for in

blish a more

e resolution

DA:

s. Change %

+0.3

+1.2

-0.1 p.p.

31 march 2016

13

pared to the

ood within a

2.2015 which

nfrastructure

e transparent

on revenues

% Change

+0.2%

+0.4%

6

3

e

a

h

e

t

s

a

Gov

Approved by H

 

Reduction involumes sold7.4%

Gas revenuesat 557.9 milliEuros

Gas: increase verall earning

Hera Spa’s Boar

Volu

101.

1,36

of 20

of 20

perfo

and

amo

of to

days

the p

to th

The

Reve

the

millio

2016

Euro

are:

volum

millio

of th

41 m

activ

Euro

trade

redu

n d: -

s ion

in gs

Inco(€/m

Rev

Ope

Pers

Cap

EBIT

rd of Directors in

mes of gas

1 million m3

2.3 million m

015 to 1,261

016. The ma

ormance we

a reduction

unting to 32

otal volumes)

s shows a d

previous yea

e historical a

following tab

enues went

first quarte

on Euros in

6, a decrea

os or -11.7%

a decrea

mes sold o

on Euros, a

he raw mate

million Euros;

vities of app

os due main

ed; and lowe

ction of the W

ome statememln)

venues

erating costs

sonnel costs

pitalised costs

TDA

n the meeting o

s sold decre

3 (7.4%), go

m3 in the firs

1.2 in the firs

ain factors be

ere the mild

n in trading

2.5 million m

). The trend

decrease of

ar and 13% c

average.

ble summaris

from 632.1

r of 2015

the same

ase of 74.

%. The main

ase in nat

of approxim

decrease in

erial of appr

a decrease

proximately

nly to lower

er regulated r

WACC.

nt Ma

5

(3

(

s

1

Her

of 11 may 2016

eased by

oing from

st quarter

rst quarter

ehind this

d climate

volumes,

m3 (-2.6%

in degree

5% over

compared

ses the econ

million in

to 557.9

period of

.2 million

n reasons

tural gas

mately 23

the price

roximately

in trading

6 million

r volumes

revenues in t

ar 2016

557.9

394.1)

(36.8)

1.7

128.7

ra Group – Cons

omic results

the amount o

% Inc. M

-70.6%

-6.6%

0.3%

23.1%

solidated quarte

for this area

of 3.9 million

Mar 2015

632.1

(467.5) -

(37.5)

1.4

128.4 2

erly report as at

a:

n Euros main

% Inc. Abs. c

74.0%

-5.9%

0.2%

20.3%

31 march 2016

14

ly due to the

change % C

-74.2 -

-73.4 -

-0.7

+0.3 +

+0.3

6

4

e

hange

-11.7%

-15.7%

-1.9%

+21.4%

+0.2%

Nin19

Approved by H

 

Gas EBITDA:128.7 million Euros

Net investmenn the Gas Are9.5 million Eu

Hera Spa’s Boar

The

prop

redu

went

first

Euro

over

Euro

quar

EBIT

quar

volum

by th

heat

the l

millio

In th

the g

reco

as c

prev

was

was

com

554/

631/

repla

class

plant

In th

com

the o

Inves

as w

Bolo

to he

vario

2015

:

nts ea: uros

rd of Directors in

reduction

portionately

ction in ope

t from 467.5

quarter of 20

os in 2016,

rall decreas

os as comp

rter of 2015.

TDA rose by

rter of 2015

mes of sales

he lower cost

ting and hea

ower revenu

on Euros.

he first quart

gas area ca

rding an inc

compared to

ious year.

an increase

mainly drive

pliance purs

/15 (forme

/13) for a

acing meters

s equipment

ts.

e first quarte

pared to the

overall econo

stments grew

well, 1.9 millio

ogna's Barca

eat managem

ous 2016 pro

5.

n the meeting o

in revenu

reflected

erating costs

million Euro

015 to 394.1

thus display

e of 73.4

pared to th

y 0.3 million

to 128.7 mil

s and trading

ts purchasin

at manageme

ues from regu

er of 2016,

ame to 19.5

rease of 6.8

o the same

In gas dist

of 2.7 millio

en by activitie

suant to Legi

erly Legisla

large-scale

s which also

t (G4-G6) a

er of 2016 th

previous yea

omic situation

w by 4.1 milli

on Euros of w

neighbourho

ment, mainly

ojects with t

Her

of 11 may 2016

ues is

in the

, which

os in the

million

ying an

million

he first

n Euros (0.2

llion Euros in

g, in which l

g costs for th

ent service;

ulated servic

investments

million Euro

8 million Eur

period of t

tribution, the

on Euros wh

es of regulato

islative Decr

ative Decr

operation

involves low

and increase

here was a s

ar, although

n.

ion Euros in

which was d

ood in distric

y in Sinergie

the delay of

ra Group – Cons

%), going fr

n the same

ower revenu

he raw mate

this positive

ces as a resu

in

os,

ros

the

ere

ich

ory

ree

ree

of

wer

ed extraordin

light increas

this sector c

the district h

due to the rev

ct heating an

e Spa due to

f some jobs

solidated quarte

rom 128.4 m

period of 20

ues for the v

rial and high

e trend esse

ult of the WA

nary mainten

e in demand

continues to

heating and h

vamping of t

d 2.2 million

o the combin

that occurre

erly report as at

million Euros

016, thanks t

volumes sold

her margins i

entially comp

ACC in the am

nance on ne

d for new con

suffer from t

heat manage

the cogenera

Euros of wh

ned effect o

ed in the firs

31 march 2016

15

s in the first

to the larger

d were offset

n the district

pensated for

mount of 3.9

etworks and

nnections as

the effects of

ement sector

ation plant in

hich was due

f moving up

st quarter of

6

5

t

r

t

t

r

9

d

s

f

r

n

e

p

f

Hera Group – Consolidated quarterly report as at 31 march 2016

Approved by Hera Spa’s Board of Directors in the meeting of 11 may 2016 16

 

Details of operating investments in the Gas Area are as follows:

Gas(€/mln)

Mar 2016 Mar 2015 Abs. change % Change

Networks and plants 13.3 10.6 +2.7 +25.5%

RH/Heat management 6.1 2.0 +4.1 +205.0%

Total Gas Gross 19.5 12.7 +6.8 +53.5%

Capital contributions 0.0 0.0 +0.0 +0.0%

Total Gas Net 19.5 12.7 +6.8 +53.5%

Investments grow

Approved by H

 

Electricity: rEBITDA

ContributionGroup EBITD+1.3%

Electricity arEBITDA grew13.3%

862.6 thouselectricity customers

Hera Spa’s Boar

1.02

In th

of p

regu

mod

serv

trans

on re

quar

The

The

custo

of 6.

due

whic

the t

year

reinf

activ

2016

(€/m

Area

Grou

Perc

rise in

n to DA:

rea w by

sand

rd of Directors in

2.02 ELECT

e first quarte

ercentage o

latory contex

ified the met

ices in the

sparent and

evenues and

rter of the yea

following tab

number

omers recor

.7% ( 54.4 th

to growth in

ch came to 1

trend of grow

rs, owing a

forcement

vities, imple

6 as well.

mln)

a EBITDA

up EBITDA

centage weig

n the meeting o

TRICITY

er of 2016, th

of the Group

xt in which, i

thod for calc

electricity se

predictable

d EBITDA fo

ar.

ble shows the

of elect

rded an incr

housand), m

the free ma

3.3%, confir

wth seen in re

above all t

of comme

emented d

ht

Her

of 11 may 2016

he Electricity

p's EBITDA.

in 2016, Res

ulating the ra

ector was fi

regulatory fr

or the WACC

e changes oc

tricity

rease

mainly

arket,

rming

ecent

to a

ercial

uring

Mar

1

ra Group – Cons

y sector grew

These resu

solution 583/

ate of return

irst impleme

ramework. T

C alone com

ccurred in te

2016 M

33.2

278.4

11.9%

solidated quarte

w both in abs

ults should

/2015 / R / c

on invested

ented, in ord

he negative

mes to 0.7 m

rms of EBIT

Mar 2015 A

29.3

277.2

10.6%

erly report as at

solute terms

be understo

com of 02.12

d capital for in

der to estab

impact of th

million Euros

DA:

Abs. change

+3.9

+1.2

+1.3 p.p.

31 march 2016

17

and in terms

ood within a

2.2015 which

nfrastructure

blish a more

he resolution

s for the first

% Chang

+13.3

+0.4

6

7

s

a

h

e

e

n

t

ge

3%

%

Elerev36Eu

EleEB

Approved by H

 

Volumes solrose by 6.2%

ectricity venues for

62.9 million uros

ctricity: rise ITDA

Hera Spa’s Boar

Volu

from

quar

the s

over

incre

main

com

incre

entit

The

the i

Reve

362.

main

in th

decr

com

decr

of 1

tradi

millio

reve

amo

the r

were

12 m

ener

the o

Ope

reve

Incom(€/mln

Reven

Opera

Perso

Capita

EBITD

ld %

in

rd of Directors in

mes of elec

2,377.9 G

rter of 2015 t

same period

rall increase

ease in sale

nly due to the

mercial ac

ease in vo

ies in Safegu

following ta

ncome state

enues decre

9 million Eu

n reasons of

he price of

reased by

pared to the

rease in sale

9 million E

ng revenue

on Euros,

nues of the

unt of 0.7 m

reduction of

e partly conta

million euros

rgy productio

optimization

rating costs

nues.

me statementn)

nues

ating costs

onnel costs

alised costs

DA

n the meeting o

ctricity sold

GWh in the

to 2,524.2 GW

of 2016, w

e of 6.2%.

es volumes

e strengthen

ctivity and

olumes sol

uarding.

able summa

ment for the

eased by 7.3

ros in the sa

this contract

f electricity

an average

previous ye

es revenues

Euros and a

es in the a

and low

distribution

million Euros

the WACC.

ained thanks

s related to

on revenues

activities car

fell by 34.2

t Mar

36

(31

(1

1

3

Her

of 11 may 2016

went

e first

Wh in

ith an

The

s was

ning of

the

ld to

arises

area:

3%, going fr

ame period

tion are: a dr

(Pun), wh

e of 24%

ear leading to

in the amou

a decrease

amount of

wer regulat

service in t

mainly due

. These effe

s to both high

increased

from power

rried out.

2 million Eu

r 2016 % In

62.9

19.4) -88.0

1.7) -3.2

1.4 0.4

3.2 9.1

ra Group – Cons

rom 391.4 m

of 2016, a d

rop

ich

as

o a

unt

in

27

ted

the

to

cts

her volumes

business ac

r plants due

ros, or 9.7%

nc. Mar 20

39

0% (353

2% (10

4%

1% 2

solidated quarte

million in the

decrease of

sold in the a

ctivity, which

to favorable

%, in propor

015 % Inc.

91.4

3.6) -90.3%

0.0) -2.6%

1.5 0.4%

29.3 7.5%

erly report as at

first quarte

28.5 million

amount of ap

h generates

e market con

rtion to the

Abs. change

-28.5

-34.2

+1.7

-0.1

+3.9

31 march 2016

18

r of 2015 to

Euros. The

pproximately

the largest

nditions, and

decrease in

% Change

-7.3%

-9.7%

+17.0%

-6.7%

+13.3%

6

8

o

e

y

t

d

n

Eleat 3Eur

Approved by H

 

ectricity EBITD33.2 million ros

Net investmein the ElectriArea: 3.9 milEuros

Hera Spa’s Boar

At th

2016

millio

Euro

of 20

same

highe

activ

the

decr

for

regu

Inves

Euro

millio

year

The

conc

and

surro

Goriz

Com

year

main

plant

this a

As re

millio

Deta

Elet(€/m

Netw

Indu

Tota

Cap

Tota

DA

ents icity llion

rd of Directors in

he end of t

6, the EBIT

on Euros (1

o 29.3 million

015 to 33.2

e period of 2

er margins i

vities, and h

production

rease is par

by lower r

lated distribu

stments in th

o 3.9 million

on Euros in t

r.

interventi

cerned non-r

distribution

ounding Mo

zia.

mpared to the

r, a lowe

ntenance wa

ts, in the am

area as well,

egards indus

on euros com

ails of operat

ricity mln)

works and pla

ustrial cogene

al Electricty G

pital contributio

al Electricity N

n the meeting o

the first qua

TDA rose

13.3%), goin

n in the first

million Euros

2016, thanks

n sales and

igher margin

of electricity

rtially compe

evenues fro

ution service

he electricity

n Euros, as

the first quar

ions imple

routine main

n networks

odena, Imo

e same perio

er amount

s carried ou

mount of 0.4

, connections

strial cogene

mpared to the

ing investme

ants

eration

Gross

ons

Net

Her

of 11 may 2016

arter of

by 3.9

ng from

quarter

s in the

s to the

trading

nality in

y. This

ensated

om the

e in the amou

y area amoun

compared

rter of the pr

emented

ntenance of

s in the

ola, Trieste

od of the pr

of non-r

ut on network

4 million Eu

s showed a s

eration for En

e same perio

ents in the El

ra Group – Cons

unt of 0.7 mil

nted to

to 4.0

revious

mainly

plants

areas

e and

revious

routine

ks and

ros. In

slight increas

nergy Service

od of the prev

ectricity Area

Mar 2016

3.6

0.3

3.9

0.0

3.9

solidated quarte

lion Euros.

se compared

e activities, i

vious year.

a are as follo

Mar 2015

4.0

0.0

4.0

0.0

4.0

erly report as at

d to the previ

interventions

ows:

Abs. change

-0.4

+0.3

-0.1

+0.0

-0.1

31 march 2016

19

ous year.

s rose by 0.3

e % Change

-10.0%

+100.0%

-2.5%

+0.0%

-2.5%

6

9

3

e

Tharby

Approved by H

 

Integrated WCycle: slight

he water cyclrea EBITDA fey 1.3%

Water Cycle customers amillion

ContributionGroup EBITD0.3%

Hera Spa’s Boar

1.02

In th

same

2016

reso

of re

for th

The

The

as c

2015

orga

Grou

of th

Emil

Hera

serve

rema

serve

Grou

in the

(€/mln

Area E

Group

Percen

Water t drop

le ell

are 1.4

n to DA: -

rd of Directors in

2.03 INTEG

e first quarte

e period of

6 is the first

lution numbe

educing the W

he WACC alo

following are

number of w

compared to

5, confirming

anic growth

up's referenc

e growth con

ia Romagna

a Spa, 15%

ed by Acega

ainder was

ed by the

up, thanks to

e number of

)

EBITDA

EBITDA

ntage weight

n the meeting o

GRATED W

er of 2016, th

2015, both

t year in wh

er 664/2015)

WACC. The

one amounts

e changes oc

water custom

o the first qu

g the trend

seen acro

ce areas. Of

ncerned area

a region man

% referred t

asApsAmga

reported in

Marche Mu

o the slight

connections

Her

of 11 may 2016

WATER CY

he integrated

as a contrib

hich the wa

) was applie

e negative im

s to 4.9 millio

ccurred in te

mers settled a

uarter of

towards

oss the

the 78%

as in the

naged by

to areas

and the

n areas

ultiservizi

increase

s.

Mar 2016

49.8

278.4

17.

ra Group – Cons

CLE

d water cycle

bution to Gro

ter tariff me

d for the pe

mpact of the

on Euros for

rms of EBITD

at 1.4 million,

6 Mar 20

50.5

277

9%

solidated quarte

area record

oup EBITDA

ethod defined

riod 2016-20

resolution on

the first quar

DA:

, increasing b

015 Abs.

5 (

.2 +

18.2%

erly report as at

ded a slight d

A and in abs

d by the AE

019, with the

n revenues a

rter of the ye

by 4.5 thous

change %

(0.7)

+1.2

-0.3 p.p.

31 march 2016

20

drop over the

solute terms.

EEGSI (with

e main effect

and EBITDA

ear.

and (+0.3%)

% Change

(1.3%)

+0.4%

6

0

e

.

h

t

A

)

RInCm

IntCyin

Approved by H

 

Revenues for ntegrated Wa

Cycle at 179.4million euros

tegrated Watycle: slight drEBITDA

69.8 millionmanaged inaqueduct

Hera Spa’s Boar

The

Volu

2015

activ

equa

inde

The

Reve

millio

as c

2015

in 20

first q

are l

the a

cons

WAC

cove

auth

Euro

conn

Ope

decr

Inco

Rev

Ope

Pers

Cap

EBIT

the ater 4

ter rop

m3 n the

rd of Directors in

main metrics

mes provide

5. Volumes d

vities in the

alisation purs

pendently of

following sum

enues decre

on euros in th

compared to

5, going from

015 to 179.4

quarter of 20

lower revenu

amount of 4

sequence of

CC, despite

er the cos

ority, and lo

os. These e

nections.

rating costs

rease in subc

ome stateme

venues

erating costs

sonnel costs

pitalised costs

TDA

n the meeting o

s for this sec

ed, through t

dispensed, in

geographica

suant to reg

f the volumes

mmarises the

eased by E

he first quart

o the same

m 182.6 mil

4 million Eu

016. The ma

ues from dist

4.9 million eu

f the reducti

higher rev

sts reported

ower revenu

effects are

decreased b

contracted w

nt (€/mln) M

s

Her

of 11 may 2016

ctor are show

the aqueduct

n line with A

al areas in

gulations tha

s distributed.

e income sta

Euro 1.8%

ter of 2016

period of

lion Euros

uros in the

in reasons

tribution in

uros, as a

ion of the

venues to

d by the

es from sub

partially com

by 2.8 million

works linked

Mar 2016

179.4

(94.3)

(35.7)

0.5

49.8

ra Group – Cons

wn below:

t, are substa

AEEGSI reso

which the G

t call for a r

.

atement for t

bcontracted

mpensated

n Euros (2.9

to the curren

% Inc. M

-

-52.6%

-19.9%

0.3%

27.8%

solidated quarte

antially in line

olution 664/2

Group opera

regulated rev

he area:

works in the

for by high

%), mainly d

nt state of p

Mar 2015 %

182.6

(97.1) -53

(35.4) -19

0.5 0

50.5 27

erly report as at

e with the fir

2015, are an

ates and are

venue to be

e amount o

her revenues

due to a 1.3

rogression o

Inc. Abs. ch

- (3.2

3.2% (2.8

9.4% +0.

.3% +0.

7.7% (0.7

31 march 2016

21

rst quarter of

n indicator of

e subject to

e recognised

f 1.3 million

s from new

million Euro

of contracted

ange % Cha

2) (1.8

8) (2.9

.3 +0.8

.0 +0.0

7) (1.3

6

1

f

f

o

d

n

w

o

d

ange

8%)

9%)

8%

0%

3%)

Approved by H

 

EBITDA rise49.8 million

Investments Water Cycle 25.6 million E

Hera Spa’s Boar

proje

millio

EBIT

millio

millio

2015

perio

distr

decr

of 4.

part

oper

Net

show

inves

30.1

with

Inter

conc

and

addit

conc

sewe

Inves

in th

sewe

Amo

syste

com

in se

inclu

purif

of th

Nord

Requ

com

elect

Capi

tariff

first q

es to Euros

in the Area:

Euros

rd of Directors in

ects, and low

on Euros.

TDA slightly

on Euros (1.3

on Euros in

5 to 49.8 mill

od of 201

ibution reve

rease of the W

9 million Eur

compensa

rating costs.

investments

wing a decre

stments in t

million Euro

the previous

rventions in

cerned exte

network an

tion to regul

cerned abov

erage.

stments tota

he aqueduct

erage and 6.

ong the more

em intercon

plex and sub

ewerage, pr

uding the cre

fication plant

he Idar purifi

dio and Aban

uests for ne

pared to the

tricity areas i

ital grants am

f component

quarter of 20

n the meeting o

wer costs for

y dropped

3%), going fr

the first qu

ion Euro in t

6, due to

nues caused

WACC in the

ros, which ar

ated for by

s in the inte

ease of 2.7 m

this area am

os, substant

s year.

the water cy

ensions, re

nd plant upg

atory upgrad

ve all purific

alled 15.1 mi

t, 8.1 million

9 million Eur

e significant w

nections an

bstantial upg

rogress was

eation of the

was built, an

er in Bologn

no Terme pur

ew water and

e previous y

in the area o

mounted to 4

for the new

015 by 2.7 m

Her

of 11 may 2016

the applicat

by 0.7

rom 50.5

uarter of

the same

o lower

d by the

e amount

re only in

y lower

egrated wate

million Euros

mounted to

tially in line

ycle mainly

eclamations

grading, in

ding, which

cation and

illion Euros

n Euros in

ros in purifica

works, the fo

nd networks

grading of wa

s made in w

Ausa tank; i

nd revampin

na, in additio

rifiers in the

d sewerage

year, confirm

of water servi

4.5 million Eu

w investments

million Euros.

ra Group – Cons

tion of the IF

er cycle are

over the pre

ation.

ollowing are o

and plant

ater network

work on the

n purification

g was carrie

on to continu

territory of A

connections

ming the impr

ice as well.

uros, of whic

s fund (FoNi

solidated quarte

RIC12 princ

a amounted

evious year.

of note: in the

upgrading,

s in the histo

e Rimini Sea

n, the balanc

d out on the

uing with upg

AcegasApsAm

s increased

rovement dis

ch 2.6 millio

) and increa

erly report as at

ciple in the am

d to 25.6 m

Including ca

e aqueduct s

including a

orical centre

awater Prot

cing tank of t

oxygen prod

grading the

mga.

by 0.3 millio

splayed by t

on Euros wer

ased as com

31 march 2016

22

mount of 1.8

illion Euros,

apital grants,

sector, water

particularly

of Bologna;

ection Plan,

the Riccione

duction plant

Servola, Cà

on Euros as

the gas and

re due to the

pared to the

6

2

8

,

,

r

y

;

,

e

t

à

s

d

e

e

Hera Group – Consolidated quarterly report as at 31 march 2016

Approved by Hera Spa’s Board of Directors in the meeting of 11 may 2016 23

 

Details of operating investments in the integrated water cycle area are as follows:

Water Cycle Area(€/mln)

Mar 2016 Mar 2015 Abs. change % Change

Aqueduct 15.1 14.3 +0.8 +5.6%

Purification 6.9 7.3 -0.4 -5.5%

Sewage 8.1 8.6 -0.5 -5.8%

Total Water Cycle Gross 30.1 30.2 -0.1 -0.3%

Capital contributions 4.5 1.8 +2.7 +150.0%

of which FoNI (New Investment Fund) 2.6 1.8 +0.8 +44.4%

Total Water Cycle Net 25.6 28.3 -2.7 -9.5%

Approved by H

 

Waste Managemendecreasing EBITDA

Urban Wast+0.2%

Hera Spa’s Boar

1.02

In th

Grou

2015

Belo

The the f

A tragrowRecywast

Urbasepa

(€/m

Are

Gro

Per

Quan

Urba

Mark

Was

Plan

Was

nt:

te:

rd of Directors in

2.04 WAS

e first quarte

up's profitabi

5.

ow are the va

table displayfirst quarter o

ade volume wth (24.0%) ycling and Gte managem

an waste is arate waste,

mln)

ea EBITDA

oup EBITDA

rcentage weig

ntitative data (t

an waste

ket waste

ste marketed

t by-products

ste treated by ty

n the meeting o

STE MANA

er of 2016, th

ility, with an

ariations in E

ys an analysof 2016:

analysis shoin the waste

Geonova acent sector.

in line with tgrowing by 4

ght

housand of ton

ype

Her

of 11 may 2016

AGEMENT

he waste ma

EBITDA dro

BITDA:

sis of the vo

ows a 12.1%e market. Th

cquisitions, w

the first quar4.6%, and m

nnes)

ra Group – Cons

anagement a

opping by 3.

olumes sold

% rise in mahis growth iswhich was a

rter of 2015 ixed waste, f

Mar 201

62.

278.

22.4%

Mar 2016

471.0

581.0

1,052.0

625.7

1,677.7

solidated quarte

rea accounte

.8% compare

and process

arketed wasts the effect a substantial

(0.2%), with falling by 4.3

6 Mar 2015

.4 64.9

.4 277.2

% 23.4%

Mar 2015

470.1

468.7

938.8

647.2

1,586.0

erly report as at

ed for 22.4%

ed to the firs

sed by the G

te, mainly reof the late

l boost to th

a different m3%.

Abs. change

-2.5

+1.2

-1.0 p.p

Abs.Change

+0.9

+112.3

+113.2

-21.5

+91.7

31 march 2016

24

% of the Hera

st quarter of

Group during

esulting from2015 Wastehe industrial

mix between

e % Change

5 -3.8%

2 +0.4%

p.

% Change

+0.2%

+24.0%

+12.1%

-3.3%

+5.8%

6

4

a

f

g

m e l

n

Lathe

+1.0was

Approved by H

 

andfill use one decline

0 % in sortedted

Hera Spa’s Boar

MaingrewrecoenvirincreareacollepercIt incin thsteadpercthe T

The urbacom

The 2015caseto th

It is and sharacqu

Quan

Urba

Mark

Was

Plan

Was

rd of Directors in

nly on accouw further fromvery percronmental eased flexibias managedection increentage point

creased by ae Marche Mdy growth wentage point

Triveneto.

Hera Group an and specposters/dige

waste treatm5 in the use oe throughout e acquisition

worth mentioorganization

re capital of tuisition, the

ntitative data (t

an waste

ket waste

ste marketed

t by-products

ste treated by ty

n the meeting o

unt of the nem 55.2% to 5centage ebenefits, aslity in plant d by Heraeased by t in the first

almost two peMultiservizi tewith an incrts is still conf

operates in ial waste, wsters and 8 s

ment sector of waste-to-e2015. The la

n of Waste R

oning that thnal - in the sthe Akron cocompany de

housand of ton

ype

Her

of 11 may 2016

ew projects 56.2%. The

entails gres well ascapacity. In

a Spa, soalmost

quarter of 2ercentage po

erritories, whrease by ovfirmed in 201

the full wastwith its mainselection pla

shows a slenergy plantsarger volume

Recycling.

he environmesecond quarompanies, 57ealt with se

nes)

ra Group – Cons

aimed to itshigh

eater an

n the orted

one 2016. oints

hile a ver 3 16 in

te cycle with facilities be

ants.

ight growth s, and a deces handled b

ent sector unrter of last ye7.5% of whiclecting sepa

Mar 2016

471.0

581.0

1,052.0

625.7

1,677.7

solidated quarte

s expansion,

83 treatmeneing: 10 was

as compareline in the usy the selectio

nderwent maear, i.e. the h is held by

arate collecti

Mar 2015

470.1

468.7

938.8

647.2

1,586.0

erly report as at

sorted was

nt and disposste-to-energy

ed to the firsse of landfillson plants are

ajor changesacquisition Herambienteion material

Abs. change

+0.9

+112.3

+113.2

-21.5

+91.7

31 march 2016

25

ste collection

sal plants fory plants, 11

st quarter ofs, as was thee mainly due

s - corporateof the entiree; before thes through a

% Change

+0.2%

+24.0%

+12.1%

-3.3%

+5.8%

6

5

n

r

f e e

e e e a

Approved by H

 

Waste Managemenslight marginality downturn

235.4 millionEuros in revenues froWaste Managemen

Waste ManagementEBITDA at 62.4 million

Hera Spa’s Boar

chainTriesimprestawherWas

IIn thincrethe fmillioThis volumhygiecoveincreall ofromamoCIP6decr

The resudeliv

The quarperioabso3.8%

Incom(€/mln

Reven

Opera

Perso

Capita

EBITD

nt:

n

om

nt

t

rd of Directors in

n of dedicatste were tranroving integrblished. Morreas Biogas

ste Recycling

he first quarteasing from first three mon euros in

increase ismes handleene revenuerage and ease for spof these offs electricity ng other fa

6/CEC unit reased recog

area operatlt of the spr

vering more c

EBITDA fellrter of 2015 od of 2016, olute terms in%.

me statement n)

nues

ating costs

onnel costs

alised costs

DA

n the meeting o

ted facilitiesnsferred overation, efficiereover, Rom 2015, the

g Group were

ter of 2016, 214.7 millio

months of 20the same 2

s a result ofed, of higues, of extof the ave

pecial/hazardset the lowe

production, actors - fro

price angnition of gree

ting costs roread of sortecollection and

l from 64.9 mto 62.4 milwhich deno

n the amoun

Mar 2

235

(129

(43.

0.6

62.

Her

of 11 may 2016

s. Eventuallyer to Herambency and fu

magna Compbusiness un

e acquired. H

revenues inon euros in 15 to 235.4

2016 period. f the larger

gher urban xtra service erage price dous waste; er revenues

ensuing -om a lower d from a en certificate

ose by 23.1 ed waste cold street clea

million Eurosllion Euros iotes a slighnt of 2.5 mill

2016 % I

5.4

9.7) -55.

.9) -18.

6 0.

.4 26.

ra Group – Cons

y, the wastebiente, and ll control of

post and Henit containingHere is a sum

ncreased by

es in some fa

million Eurollection, whic

aning service

s in the firstin the same

ht decline inion Euros or

Inc. Mar 20

21

1% (106

7% (43

3%

5% 6

solidated quarte

e disposal aHestambientf the WTE perambiente Rg a few Geo

mmary of the

9.6% (equa

acilities.

os in the firsch entails has.

t e

r

015 % Inc

4.7

6.6) -49.6%

3.7) -20.4%

0.5 0.2%

4.9 30.2%

erly report as at

activities for te, a compaplants groupRecovery weo Nova plansector resul

alling 20.7 m

st quarter ofandling more

c. Abs. change

+20.7

% +23.1

% +0.2

% +0.1

% -2.5

31 march 2016

26

Padua andany aimed atp wide, wasere merged,nts, and thets:

illion euros),

f 2016, as ae waste and

e % Change

7 +9.6%

1 +21.7%

2 +0.5%

1 +19.7%

5 -3.9%

6

6

d t s ,

e

,

a d

Approved by H

 

6.3 million Enet investmein Waste Management

Hera Spa’s Boar

Net iinvolamoEuroThe comincreinvesoffseVolta

The of foin lalandfnew devecomin the

Invesyearenha

As fsameplant

Ope

Was(€/m

Com

Lan

WTE

RS P

Eco

Tran

Tota

Cap

Tota

Euros ents

t

rd of Directors in

investments lve facility munt to 6.3 m

os as compacomposter/dpared to the

ease in stments in et by fewer ana plants du

separation armer Akron indfill investmfill, in additioengine and

elopment wopared to the e first quarte

stments in thr. A slight ancement of

for selection e period lasts (Bologna i

rational inves

ste Managemmln)

mposting/Dige

dfills

E

Plants

logical areas

nsshipment, s

al Waste Man

pital contributio

al Waste Man

n the meeting o

in the Wastemaintenance million Eurosared to the fidigester chaiprevious yethe Sant'Abiomethane interventionsuring 2015.

and biostabiin Tre Monti ments is maon to the Tred for the bioorks. In the

previous yeer of 2015.

he Special Wdrop in mthe cooling t

and transsst year, and in 2015, Sas

stments in th

ment

estors

and gathering

selection and

nagement Gro

ons

nagement Net

Her

of 11 may 2016

e Managemeand upgradi

s, up by 1.1irst quarter oin is more bar. The yearAgata com

activities, ws in the Rim

lization invehave also binly due to te Monti landogas collectiWTE chain,

ear, due to ad

Waste Plant aintenance towers and r

hipment facare offset b

ssuolo and C

he environme

g equipment

other plants

oss

t

ra Group – Cons

ent area ing, and 1 million of 2015. alanced

r saw an mposting which is mini and

stments een accountthe enactmedfill activitieson network,, investmentdditional wor

chain are saffected th

replacement

cilities, invesby minor ope

Cervia in 2016

ent area are

Mar 2016

0.3

3.5

0.6

0.3

1.2

0.6

6.3

0.0

6.3

solidated quarte

ed for. The 2nt of the 9th, providing f as well asts dropped brk on the Pad

ubstantially e Ravennaof the vibrati

tments are erations carr6).

detailed belo

Mar 2015

0.3

1.0

1.3

0.4

1.8

0.5

5.3

0.1

5.2

erly report as at

2.5 million Eh sector in tfor the cons

s for landslidby 0.7 milliodua and Trie

in line with ta plants (sling sieves).

broadly in lried out on

ow:

Abs. Change

+0.0

+2.5

-0.7

-0.1

-0.6

+0.1

+1.0

-0.1

+1.1

31 march 2016

27

uro increasehe Ravennatruction of a

de and roadon Euros aseste systems

the previousudge dryer,

ine with thethe different

e % Change

+0.0%

+250.0%

-53.8%

-25.0%

-33.3%

+20.0%

+18.9%

-100.0%

+21.2%

6

7

e a a d s s

s ,

e t

EOSsrm

Approved by H

 

Other Services: slight margiincrease

Contributiontotal marginality

EBITDA for Other Services: slightly on therise, up 0.1 million Euros

Lighting poinnumber 525.thousand

Hera Spa’s Boar

1.02

Othe

lighti

In th

com

quar

EBIT

Belo

 

The

5,00

Marc

Appr

Cesa

Pied

acqu

(€/m

Area

Grou

Perc

Qua

Pub

Ligh

Mun

in

n to

e

nts 4

rd of Directors in

2.05 OTHE

er Services

ing, telecomm

e first quarte

pared to the

rter of 2015 t

TDA variation

ow are the ma

quantitative

00 as well a

ch 2015, app

roximately 3

areo and Ca

mont, where

uisitions have

mln)

a EBITDA

up EBITDA

centage weig

antative data

blic lighting

hting points (th

nicipalities se

n the meeting o

ER SERVIC

refers to th

munications

er of 2016, th

e previous ye

o 4.2 million

ns are detaile

ain indicators

public lighti

s the loss of

proximately 1

30% of thes

ave and ap

eas the rest

e fully offset

ht

housands)

rved

Her

of 11 may 2016

CES

e minor ser

and cemete

he Other Ser

ear: the EBIT

Euros in the

ed below:

s for public li

ing data sho

f 6 municipal

19,000 light

se were in

proximately

t were in a

the decrease

Mar 2

27

1

Mar 20

525.4

151.0

ra Group – Cons

rvices delive

ry services.

rvices area d

TDA increas

e same perio

ighting:

ow an increa

ities. As to li

points were

Lazio, in th

17% in a n

reas handle

e in municipa

016 Mar

4.2

78.4 2

.5%

016 Ma

4 5

0 1

solidated quarte

ered by the

displayed a s

ed from 4.1

d of 2016.

ase in light

ght point ma

acquired in t

he municipal

number of t

ed by Acega

alities.

2015 Abs. C

4.1

277.2

1.5% +

r 2015 A

520.4

57.0

erly report as at

Group, suc

slight increas

million Euro

points in the

anagement, c

the first qua

lities of Fer

towns in Lo

asApsAmga.

Change %

+0.1

+1.2

+0.0 p.p.

Abs. change

+5.0

(6.0)

31 march 2016

28

ch as public

se (4.5%) as

os in the first

e amount of

compared to

rter of 2016.

rentino, San

mbardy and

The above

% Change

+4.5%

+0.4%

% Change

+1.0%

(3.8%)

6

8

c

s

t

f

o

.

n

d

e

e

2inin

Approved by H

 

Other Servicrevenues in

Revenues foOther Servicequalling 31million Euro

EBITDA groby 0.1 millioEuros

.8 million Eurn net nvestments

Hera Spa’s Boar

The

with

desp

the

Tries

Fune

Aceg

this

reco

incre

posit

telec

The

Euro

of

Aceg

millio

the f

most

perfo

busin

Rom

millio

grow

perim

The

as c

have

Inco(€/m

Reve

Ope

Pers

Cap

EBIT

ces: n line

or ces 1.2 os

ows on

ros

rd of Directors in

area revenu

the pre

pite the late

funeral s

ste Onoranz

ebri ow

gasApsAmga

change, Ot

rded a 0.4

ease, on ac

tive perform

communicatio

EBITDA r

os; net of the

the com

gasApsAmga

on Euro incre

first quarter o

tly connecte

ormance of

ness, espe

magna, whic

on Euro incre

wth trend of

meter.

Other Servic

compared to

e been invest

ome statemenmln)

enues

erating costs

sonnel costs

pitalised costs

TDA

n the meeting o

ues are in lin

evious yea

2015 sale o

service firm

ze e Traspor

wned b

a. Aside from

ther Service

million Eur

ccount of it

mances in p

ons ensuing

rose by 0.1

e aforesaid 2

pany own

a, it recorde

ease as com

of 2015. This

ed with the

the public

ecially in

ch recorded

ease in the f

f Hera Luce

ces investme

the same p

ted in netwo

nt Mar

3

(2

(4

0

4

Her

of 11 may 2016

ne

ar,

of

m

rti

by

m

es

ro

ts

public lighti

from an incr

1 million

2015 sale

ned by

ed a 0.2

mpared to

s trend is

positive

c lighting

Emilia-

d a 0.5

first quarter o

e has fully

ents amount

period of 201

rking and in

r 2016 %

31.2

22.5) -7

4.8) -1

0.4

4.2 1

ra Group – Cons

ng tenders,

reased delive

of 2016 as co

covered the

to 2.8 millio

15. As to tel

TLC and IDC

% Inc. Mar

2.2% (

5.3%

1.1%

3.6%

solidated quarte

and of th

ery of service

ompared to t

e lower ma

on Euros, a 0

ecommunica

C (Internet D

2015 % I

31.2

(22.7) -72.7

(4.7) -15.0

0.2 0.8

4.1 13.0

erly report as at

he higher r

es.

the previous

argins of th

0.3 million E

ations, 2.4 m

Data Center)

nc. Abs. chan

+

7% -

0% +

8% +

0% +

31 march 2016

29

revenues in

s period. The

e Northeast

uro increase

million Euros

services.

nge % Chang

+0.0 +0.0

-0.2 -0.9

+0.1 +2.1

+0.2 +82.7

+0.1 +4.5

6

9

n

e

t

e

s

ge

0%

9%

%

7%

5%

Approved by H

 

Net investmecome to € 2.million

Hera Spa’s Boar

Inves

amo

millio

In te

inves

and

serv

In t

millio

main

mod

The

Othe(€/m

TLC

Pub

Tota

Cap

Tota

ents .8

rd of Directors in

stments in t

unted to € 2

on over the s

elecommunic

stments wen

Tlc and Idc

ices.

the public

on in inve

ntenance,

ernization of

operational i

er Servicesmln)

C

blic Lighting an

al Other Serv

pital contributio

al Other Serv

n the meeting o

the other se

.8 million, ris

same period

cations, € 2.

nt towards t

c (Internet D

lighting ser

estments co

upgradin

f the lighting

investments

nd Street Ligh

ices Gross

ons

ices Net

Her

of 11 may 2016

ervices area

sing by € 0.3

in 2015.

.4 million of

the network

Data Center)

rvice, € 0.4

overed the

ng and

systems.

in the Other

Mar 20

2.4

hts 0.4

2.8

0.0

2.8

ra Group – Cons

a

3

f

k

)

4

e

d

r Services are

016 Mar 20

1.8

0.7

2.5

0.0

2.5

solidated quarte

e detailed be

015 Abs. cha

+0.6

-0.3

+0.

+0.

+0.

Investmeserv

erly report as at

elow:

ange % Cha

6 +33.

3 -42.

3 +12.

0 +0.0

3 +12.

ents in the ovices (€ mln

31 march 2016

30

ange

.3%

9%

.0%

0%

.0%

other n) 

6

0

Hera Group – Consolidated quarterly report as at 31 march 2016

Approved by Hera Spa’s Board of Directors in the meeting of 11 may 2016 31

 

1.03 STOCK EXCHANGE PERFORMANCE AND INVESTOR RELATIONS

Equity markets were characterized by instability in early 2016. Investors showed an

increased aversion to risk, due to growing concerns over the actual health of the Chinese

economy, over raw material price drops and over potential interest rate rises by the

Federal Reserve. Among the stock lists of the Western countries, Italy recorded the worst

performance, being more exposed to the banking sector. The latter has been penalised

by the bail-in regulatory enforcement, as well as by concerns about the high amount of

non-performing loans to total assets. Only in the second half of the quarter did stock

prices show a partial recovery, driven by the accommodating monetary policy measures

restated by central banks in the March meetings.

In this setting, the Hera share largely outperformed the Italian stock market and its peer

industry index, with a very divergent trend in the first weeks of the year, thanks to the

presentation of the new Strategic Business Plan, which was fully appreciated by the

financial community. As at 31/03/2016, the official share price reached € 2.626 increasing

by 7.5% since the beginning of the year.

The share price rise and the steady distribution of dividends since its listing has brought

the total shareholders' return to settle at + 186.3% at the end of the quarter. Hera Group's

market capitalization amounted to 3.9 billion Euros at the end of the same period; still the

highest in its peer group, it also excelled securities listed in the FTSE MIB index, the main

Italian stock exchange index.

The number of financial analysts covering the share remains unchanged: Banca Akros,

Banca IMI, Equita, Fidentiis, Goldman Sachs, ICBPI, Intermonte, Kepler Cheuvreux,

MainFirst and Mediobanca. At the end of the first quarter of 2016, approvals were still

predominant, with a marked majority of "Buy / Outperform" recommendations; the

consensus target price has been revised upwards - from € 2.77 to € 2.83 - since the

publication of the yearly results.

Hera; +7,5%

FTSE All Share; (14,8%)

Local Utilities; +0,3%

(30,0%)

(25,0%)

(20,0%)

(15,0%)

(10,0%)

(5,0%)

+0,0%

+5,0%

+10,0%

+15,0%

+186.3% total shareholders’ return from IPO

+7.5% Hera share upturn in the first quarter of 2016. Hera overperforms market and reference sector

 

2.83 € consensus target has been revised upwards since the publication of FY results 

Hera Group – Consolidated quarterly report as at 31 march 2016

Approved by Hera Spa’s Board of Directors in the meeting of 11 may 2016 32

 

Shareholder composition as at 31/03/2016

As of March 31, the company structure shows its standard balance, with 51.9% of shares

held by 118 public shareholders in the reference territories, regulated by a Shareholders'

Agreement, signed on June 26, 2015 and effective for three years. Since 2006, Hera has

adopted a plan to repurchase its own shares; this was extended for a further 18 months

by the Shareholders' meeting on 28 April 2016, with a maximum total amount of 180

million Euros. This plan aims to fund the integration of smaller companies and to

standardise any atypical price fluctuations against the main Italian peer companies. At the

end of the first quarter, Hera held 16.6 million shares in its portfolio.

After the release of the new 2015-2019 Strategic Business Plan, the Hera top

management took part in a road show in the major European and North American

financial centers to present investors the growth targets set by the Group, as well as the

strategy needed to achieve such targets. This intense activity harvested much interest

from institutional investors and was rewarded by the share performance in the reporting

period. The Group's intense commitment to interacting with investors has helped

consolidate its reputation in the markets and is an intangible asset, to the benefit of the

share and of Hera stakeholders.

Flottante; 39,9%

Patto soci privati; 8,2%

Patto soci pubblici; 51,9%

51.9% Public shareholders' agreement share capital 

Market contact as intangible asset

 

Hera Group – Consolidated quarterly report as at 31 march 2016

Approved by Hera Spa’s Board of Directors in the meeting of 11 may 2016 33

 

1.04 THE REFERENCE SCENARIO AND STRATEGIC APPROACH OF THE

GROUP

Italy's primary public utility service sector is fragmented still today into a large number of

local public enterprises. At present, with the expiry of grants for gas distribution, waste

gathering and street sweeping services and the introduction of new grants defined on a

larger geographical basis (province-wide), a period of competitive tenders is approaching

that will cause serious difficulties for many small enterprises and lead to a reduction in the

number of operators (of which there are currently over 200 in the gas distribution sector,

and over 450 in waste gathering and sweeping services). A very high number of small-

medium sized enterprises also currently operate in the free market waste treatment and

energy sales services sectors. They find themselves operating in rather difficult

conditions due to a progressive rise in competition coming from larger-sized companies.

In this context, the Hera Group is able to propose a model for development that can

respond to upcoming changes thanks to its ability to make the most of scale economies,

and bring together and develop the excellent proficiency that characterize local

enterprises. The "Hera model" was in fact conceived as a widely diversified ownership

framework, regulated by simple governance, which provided the basis for an industrial

and managerial approach to transforming a multitude of "local" enterprises into a single,

integrated system, aimed at reaching a higher degree of efficiency and service quality.

The results were pursued with a view to economic, social and environmental

sustainability, by sharing the economies and synergies derived from a close relationship

with the localities in question and an active collaboration between multiple protagonists,

as stated in the Group’s mission.

This business model has proven its efficiency in both internal and external growth,

constantly attracting other municipalised multi-utility enterprises from bordering

geographical areas. In less than 12 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. The model currently

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 the municipalised enterprises acquired while integrating

them. An expanded customer base and plant system has been achieved by gaining new

market shares and acquiring "mono-business" companies operating in these sectors. This

balanced portfolio mix has ensured an effective expansion of the Group as well as a high

degree of risk diversification.

The reference scenario and the context as regards competition 

The Hera Group model on the market 

A reproducible model underlies competitiveness 

A balanced development of the activity portfolio 

Hera Group – Consolidated quarterly report as at 31 march 2016

Approved by Hera Spa’s Board of Directors in the meeting of 11 may 2016 34

 

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

lay behind 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 of demand and price fluctuation.

In Italy, the sector's evolution towards a less fragmentary structure is now supported by a

legislative framework that encourages operators to consolidate. In addition to tenders

issued for some services whose grants have already expired, this will come about thanks

to the introduction of new laws and a reformulation of currently existing ones (i.e. decrees

intended to implement 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 Authority for Electricity, Gas and

the Water Cycle (hereinafter 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, which calls for continued growth in EBITDA, reaching

over 1 billion Euros by the end of the period in question. This goal 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 presence in 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 to a rise in EBITDA, as was the case in the past. With its

new business plan, the Group intends to support the development of this sector in Italy,

counting on the knowhow is 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.

Organic growth 

A "risk adverse" strategy 

Future prospects in the sector 

The new business plan to 2019 

Hera Group – Consolidated quarterly report as at 31 march 2016

Approved by Hera Spa’s Board of Directors in the meeting of 11 may 2016 35

 

Growth will be fostered by investments expected to total more than 2.2 billion Euros,

accumulated over the duration of the plan. 78% of these investments will be directed

towards regulated assets and 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 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 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 foreseen by the

Plan.

Hera intends to confirm its customary strategic framework, which is distinguished by its

excellence, surpassing the quality and efficiency standards the Authority has established

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 policy of 9 cents per share. 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 

Growth 

Hera Group – Consolidated quarterly report as at 31 march 2016

Approved by Hera Spa’s Board of Directors in the meeting of 11 may 2016 36

 

1.05 PERSONNEL STRUCTURE

As of March 2016, Hera Group's permanent employees are 8,432 (consolidated

companies), with the following distribution by role: managers (151), middle managers

(530), clerks (4,482), workers (3,269). This structure has been determined by the

following dynamic: 68 new recruits and -62 exits.

Detailed below are the period dynamics, which essentially result from:

fixed-term contracts turned into open-ended contracts

recruitment of professional profiles that were not present in the Group

entry of 5 executives within the Waste Recycling delta perimeter

The reduced number of workers is offset by the entry of equivalent fixed-term profiles,

who were gradually introduced into open-ended contract consolidation schemes.

31 Mar 2016 31 Dec 2015 Change

Executive  Managers 151 146 5

Middle  Managers 530 526 4

Clerks 4,482 4,449 33

Workers 3,269 3,305 ‐36

Total 8,432 8,426 6

Resources as of 31st December 2015  8,426

Entries 68

Leaving ‐62

Net flows 6

Resources as of 31st March 2016 8,432

chapter 2

consolidatedFinancial statementsoF the hera Group

Hera Group – Consolidated quarterly report as at 31 march 2016

Approved by Hera Spa’s Board of Directors in the meeting of 11 may 2016 37

 

2.01 FINANCIAL STATEMENTS

2.01.01 Income Statement

(€/mln) 31 March 2016 31 March 2015 31 December 2015(3 months) (3 months) (12 months)

Revenues 1,235 1,312 4,487

Other operating revenues 74 71 331

Use of raw materials and consumables (609) (702) (2,257)

Service costs (282) (267) (1,132)

Personnel costs (133) (131) (511)

Amortisation, depreciation,provisions (107) (107) (442)

Other operating costs (12) (10) (62)

Capitalised costs 5 4 28

Operating profit 171 170 442

Portion of profits (loss) pertaining to joint ventures and ass 5 5 12

Financial income 29 30 81

Financial expense (60) (65) (227)

Total financial operations (26) (30) (134)

Pre-tax profit 145 140 308

Taxes for the period (48) (48) (114)

Net profit for the period 97 92 194

Attributable to:

Shareholders of the Parent Company 91 86 180

Non-controlling interests 6 6 14

Earnings per share

basic 0.062 0.056 0.123

diluted 0.062 0.056 0.123

Hera Group – Consolidated quarterly report as at 31 march 2016

Approved by Hera Spa’s Board of Directors in the meeting of 11 may 2016 38

 

2.01.02 Statement financial position

cont.

(€/mln) 31 March 2016 31 December 2015

ASSETS

Non-current assets

Property,plant and equipment 2,010 2,028

Intangible assets 2,902 2,896

Property investments 4 4

Goodw ill 378 378

Equity investments 162 157

Financial assets 127 125

Deferred tax assets 77 73

Financial instruments - derivatives 124 108

Total non-current financial assets 5,784 5,769

Current assets

Inventories 66 116

Trade receivables 1,683 1,533

Current f inancial assets 35 35

Current tax assets 29 29

Other current assets 254 226

Financial instruments - derivatives 31 7

Cash and cash equivalents 385 541

Total current assets 2,483 2,487

TOTAL ASSETS 8,267 8,256

Hera Group – Consolidated quarterly report as at 31 march 2016

Approved by Hera Spa’s Board of Directors in the meeting of 11 may 2016 39

 

(€/mln) 31-mar-16 31-dic-15

SHAREHOLDERS' EQUITY AND LIABILITIES

Share capital and reserves

Share capital 1,473 1,474

Reserves 882 704

Profit (loss) for the period 91 180

Group equity 2,446 2,358

Non-controlling interests 151 145

Total equity 2,597 2,503

Non-current liabilities

Non-current f inancial liabilities 2,948 2,944

Post-employment benefits 147 148

Provisions for risks and charges 366 365

Deferrred tax liabilities 23 24

Financial instruments - derivatives 49 34

Total non-current liabilities 3,533 3,515

Current liabilities

Current f inancial liabilities 178 484

Trade payables 1,080 1,121

Current tax liabilities 79 26

Other current liabilities 758 585

Financial instruments - derivatives 42 22

Total current liabilities 2,137 2,238

TOTAL LIABILITIES 5,670 5,753

TOTAL EQUITY AND LIABILITIES 8,267 8,256

Hera Group – Consolidated quarterly report as at 31 march 2016

Approved by Hera Spa’s Board of Directors in the meeting of 11 may 2016 40

 

2.01.03 Cash flow statement

(€/mln) 31-mar-16 31-mar-15

Pre-tax profit 145 140

Adjustment to reconciliate net profit w ith cash flow from operating activities:

Amortisation and impairment of tangible assets 39 40

Amortisation and impairment of intangible assets 45 43

Allocation to provisions 23 25

Effect from valuation w ith the equity method (5) (5)

Financial income / (expense) 31 35

(Capital gain) / loss and other non monetary elements(valuations commodities derivatives included)

(5) -

Change in provisions for risks and charges (8) (5)

Change in provisions for employee benefits (2) (2)

Total cash flow before change in working capital 263 271

(Increase) / Decrease inventory 50 60

(Increase) / Decrease trade receivables (169) (347)

(Increase) / Decrease trade payables (41) (17)

(Increase) / Decrease other current asset/liabilities 149 237

Change in working capital (11) (67)

Interest income and other f inancial income collected 5 5

Interest expense and other f inancial charges paid (52) (57)

Taxes paid - (1)

Cash generated from operating activity (a) 205 151

Investment in tangible assets (21) (16)

Investment in intangible assets (52) (48)

Selling price of tangible and intangible assets(including lease-back transactions)

1 1

(Increase) / Decrease other investment activities (1) 13

Cash generated / (absorbed) by investment activity (b) (73) (50)

Refund and other change in f inancial debt (283) (263)

Fees paid for f inancial leasing (1) (1)

Acquisition of share in consolidated companies - (27)

Dividends distributed to Hera shareholders (1) (3)

Change treasury shares (3) 7

Cash generated / (absorbed) by financing activity (b) (288) (287)

Effect of change in exchange rate on cash (d) - -

Increase / (Decrease) Cash (a+b+c+d) (156) (186)

Cash and cash equivalents at the begining of the period 541 834

Cash and cash equivalents at the end of the period 385 648

Hera Group – Consolidated quarterly report as at 31 march 2016

Approved by Hera Spa’s Board of Directors in the meeting of 11 may 2016 41

 

2.01.04 Statement of change in equity

 

(€/mln)Share capital

Reserves

Reserves for derivatives

instruments recognized at fair

value

Reserve actuarial income/(losses)

post-employment benefits

Profit (loss) for

the period

Equity Non-controlling

interestsTotal

Balance at 31 December 2014 1,470 707 (1) (30) 165 2,311 148 2,459

Profit for the period 86 86 6 92

Change treasury shares 3 4 7 7

changes in equity interests (21) (21) (6) (27)

Allocation of 2014 profit :

- allocation to other reserves 135 (135) - -

- allocation to retained earnings 30 (30) - -

Balance at 31 March 2015 1,473 855 (1) (30) 86 2,383 148 2,531

Balance at 31 December 2015 1,474 730 (1) (25) 180 2,358 145 2,503

Profit for the period 91 91 6 97

Change treasury shares (1) (2) (3) (3)

Allocation of 2015 profit :

- allocation to other reserves 172 (172) - -

- allocation to retained earnings 8 (8) - -

Balance at 31 March 2016 1,473 908 (1) (25) 91 2,446 151 2,597

Hera Group – Consolidated quarterly report as at 31 march 2016

Approved by Hera Spa’s Board of Directors in the meeting of 11 may 2016 42

 

2.02 EXPLANATORY NOTES

Accounting policies and significant accounting estimates

With reference to legislative decree 25/2016, an implementation of Directive 2013/50/EU (Transparency Directive), the

Hera Group, pending application of the Consob’s regulatory jurisdiction, has voluntarily decided to publish the

consolidated three-month report for the period ended 31 March 2016, interim financial statements, as in the past.

The Group further specifies that this decision may be retracted on the basis of changes in regulations, and therefore

must not be understood as binding in the future. When the framework in question reaches completion, the Group intends

to define a policy for managing financial information that will be adopted according to Consob recommendations.

This interim report was not prepared in accordance with IAS 34 - Interim Financial Reporting. The accounting standards

adopted for this report are however the same as those used to prepare the consolidated financial statements for the year

ended 31 December 2015, to which reference is made for further information, in addition to those applicable as of 1

January 2016.

The preparation of this interim report requires estimates and assumptions to be made concerning the value of revenues,

costs, assets and liabilities and disclosures relating to contingent assets and liabilities at the reporting date. If, in future,

such estimates and assumptions, which are based on the management's best judgment, should differ from actual events,

they will be adjusted accordingly in order to give a true representation of the results of operations.

It should also be noted that some measurement methods, particularly the more complex ones, such as detecting any

impairment of non‐current assets, are generally entirely applied only during the preparation of the annual financial

statements, unless there are indications of impairment which require an immediate impairment test.

Income taxes are recognised based on the best estimate of the weighted average rate for the entire financial year.

The disclosures contained in this interim report are comparable with those for prior periods.

Financial statements

The format used for the financial statements is the same as that used for the consolidated financial statements at 31

December 2015. Specifically, the income statement is presented in vertical format, with the individual items analysed by

nature. This presentation, also used by the company's major competitors, is considered consistent with international

practice and is the one that best represents the company's performance.

The statement of financial position shows the distinction between current and non-current assets and liabilities.

The overall income statement is not presented as part of this interim report, due to the non-relevance of its components.

The cash flows statement has been prepared using the indirect method, in accordance with IAS 7.

The financial statements contained in this interim report are expressed in millions of Euros, unless otherwise indicated.

Scope of consolidation

This interim report includes the financial statements of the Parent Company, Hera Spa, and its subsidiaries. Control

exists when the parent company has the power to influence the subsidiary’s variable returns or, when, through exercise

of its currently valid rights it has the ability to direct the subsidiary’s significant activities. Subsidiary companies which are

not significant in size and those in which voting rights are subject to severe long‐term restrictions are excluded from the

scope of line‐by‐line consolidation and are carried at cost.

Hera Group – Consolidated quarterly report as at 31 march 2016

Approved by Hera Spa’s Board of Directors in the meeting of 11 may 2016 43

 

Investments in joint ventures, which the Group controls jointly with other companies, are accounted for with the equity

method. Also companies on which a significant influence is exercised are accounted for with the equity method.

Investments held for negligible amounts are recognized at cost.

Companies held for sale are excluded from consolidation and measured at their fair value, with the exception of cases in

which fair value cannot be determined accurately, when they are recognized at cost. These investments are recorded as

separate items.

No changes in the scope of consolidation have come about in the first three months of 2016 with respect to the financial

statements for the year ended 31 December 2015.

The list of companies included in the scope of consolidation is available at the end of these explanatory notes.

Other information

These interim financial statements for the three months ended on 31 March 2016 were prepared by the Board of Directors and approved by it during the meeting held on 11 May 2016.

Hera Group – Consolidated quarterly report as at 31 march 2016

Approved by Hera Spa’s Board of Directors in the meeting of 11 may 2016 44

 

2.03 NET BORROWINGS

(€/mln) 31 Mar 16 31 Dec 15

a Cash and cash equivalents 385 541

b Other current financial receivables 35 35

Current bank debt (80) (129)

Current bank debt (89) (285)

Other current f inancial liabilities (7) (68)

Finance lease payments maturing w ithin 12 months (2) (2)

c Current financial debt (178) (484)

d=a+b+c Net current financial debt 242 92

Non-current bank debt and bonds issued (2,850) (2,845)

Other non-current f inancial liabilities (6) (6)

Finance lease payments maturing after 12 months (17) (18)

e Non-current financial debt (2,873) (2,869)

f=d+e Net borrowings - Consob communication n° 15519 of 28/07/2006 (2,631) (2,777)

g Non-current financial receivables 127 125

h=f+g Net financial debt (2,504) (2,652)

Hera Group – Consolidated quarterly report as at 31 march 2016

Approved by Hera Spa’s Board of Directors in the meeting of 11 may 2016 45

 

2.04 EQUITY INVESTMENTS

Subsidiaries

Name Registered office Share capital Total interest

direct indirect

Parent Company: Hera Spa Bologna 1,489,538,745

Acantho Spa Imola (BO) 23,573,079 77.36% 77.36%AcegasApsAmga Spa Trieste 284,677,324 100.00% 100.00%AcegasAps Service Srl Padova 180,000 100.00% 100.00%Amga Calore & Impianti Srl Udine 119,000 100.00% 100.00%Amga Energia & Servizi Srl Udine 600,000 100.00% 100.00%ASA Scpa Castelmaggiore (BO) 1,820,000 38.25% 38.25%Biogas 2015 Srl Bologna 1,000,000 75.00% 75.00%Black Sea Technology Company AD Varna (Bulgaria) 15.905.235 Lev 99.97% 99.97%Black Sea Gas Company o.o.d Varna (Bulgaria) 5.000 Lev 99.97% 99.97%Esil Scarl Bologna 10,000 100.00% 100.00%Feronia Srl Finale Emilia (MO) 2,430,000 52.50% 52.50%Frullo Energia Ambiente Srl Bologna 17,139,100 38.25% 38.25%Fucino Gas Srl Luco dei Marsi (AQ) 10,000 100.00% 100.00%HeraAmbiente Spa Bologna 271,648,000 75.00% 75.00%Herambiente Servizi Industriali Srl Bologna 1,748,472 75.00% 75.00%Hera Comm Srl Imola (BO) 53,536,987 100.00% 100.00%Hera Comm Marche Srl Urbino (PU) 1,977,332 72.01% 72.01%Hera Luce Srl San Mauro Pascoli (FC) 1,000,000 100.00% 100.00%Hera Servizi Energia Srl Forlì 1,110,430 57.89% 57.89%Hera Trading Srl Trieste 22,600,000 100.00% 100.00%HestAmbiente Srl Trieste 1,010,000 82.50% 82.50%Insigna Srl Padova 10,000 100.00% 100.00%Marche Multiservizi Spa Pesaro 13,484,242 49.59% 49.59%Medea Spa Sassari 4,500,000 100.00% 100.00%New eco Srl Santa Croce sull'Arno (PI) 100,000 75.00% 75.00%Rew Trasporti Srl Santa Croce sull'Arno (PI) 99,000 75.00% 75.00%Rila Gas EAD Sofia (Bulgaria) 32.891.000 Lev 100.00% 100.00%SiGas d.o.o Pozega (Serbia) 162.260.058 Rsd 95.78% 95.78%Sinergie Spa Padova 11,168,284 100.00% 100.00%Sviluppo Ambiente Toscana Srl Bologna 10,000 95.00% 3.75% 98.75%Tri-Generazione Srl Padova 100,000 70.00% 70.00%Uniflotte Srl Bologna 2,254,177 97.00% 97.00%Waste Recycling Spa Santa Croce sull'Arno (PI) 1,100,000 75.00% 75.00%

Jointly Controlled Companies

Name Registered office Share capital Total interest

direct indirectEnomondo Srl Faenza (RA) 14,000,000 37.50% 37.50%Estenergy Spa Trieste 1,718,096 51.00% 51.00%

Associated Companies

Name Registered office Share capital Total interest

direct indirectAimag Spa* Mirandola (MO) 78,027,681 25.00% 25.00%Ghirlandina Solare Srl Concordia Sulla Secchia (MO) 60,000 33.00% 33.00%Q.Thermo Srl Firenze 10,000 39.50% 39.50%Set Spa Milano 120,000 39.00% 39.00%So.Sel Spa Modena 240,240 26.00% 26.00%Sgr Servizi Spa Rimini 5,982,262 29.61% 29.61%Tamarete Energia Srl Ortona (CH) 3,600,000 40.00% 40.00%

* The Company's share capital is composed of € 67.577.681 of ordinary shares and € 10.450.000 of related shares

% held

% held

% held

2015Consolidated and SeparateFinancial Statements

Hera S.p.A.Registered Offi ce: Viale C. Berti Pichat 2/4 - 40127 Bolognaphone: +39 051.28.71.11 fax: +39 051.28.75.25

www.gruppohera.it

Share capital Euro 1.489.538.745 fully paid upTax code/VAT and Bologna Business Reg. no. 04245520376

HERA GROUP CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS 2015