2. Index
Introduction Annex
Who and where we are page I Scenario page 13
Hera Group business portfolio page II Ebit breakdown page 14
10 years track record page III Share capital & Governance page 15
Recent news flow page IV Financial strategy page 16
Acegas APS merger: industrial rational page V Acegas APS page 17
Fondo Strategico Italiano page IX AIMG page 19
Energonut page X Sustainability KPI page 20
WASTE details page 21
Business plan to 2016
NETWORK details page 23
Strategy page 1
ENERGY details page 26
Industrial targets page 2
Business plan by Business page 28
Ebitda drivers page 3
Ebitda breakdown page 4
Key challenges and opportunities page 5
Waste page 6
Network page 7
Energy page 8
M&A strategy page 9
Capex plan page 10
Financial structure page 11
Closing remarks page 12
4. Hera Group
Hera reference territory
• In 2002: consolidation of 11 companies in E-R.
• Up to 2011: expanded by merging other
companies in E-R and in the Northern part of
Marche region.
Friuli
Veneto
region
• In 2012: in progress to expand (Aimag in Modena
region Province and Acegas Aps in Padua and Trieste
Trieste province).
Padua
Ebitda Growth Drivers
(m€)
Bologna +14.4% Cagr 645
E-R region +151
600 +83
+219
400
192
200
2002 Marche
region
0
2002-2011: M&A executed
2002 Syn. & New plants M&A 2011
2012: M&A in progress
Org. G.
Expanding at covering 4 of the wealthiest regions of Italy
I
6. Fast and resilient growth despite difficult macro scenario
Ever growing operating results Maintaining sustainable Debt/Ebitda
(m€) (x)
Ebitda
Ebit
Overcoming peak in capex* Progressing dividend per share
(m€) (€c)
*Gross capex
III
7. Recent news flow
Jul. 2012
Aug. 2012
Sept. 2012
Oct. 2012
SPA for
H1 2012 FSI Energonut
Merger agreement Financial results Fondo Strategico Italiano
share capital increase &
BP to 2016
IV
8. Merger with Acegas Aps
Just across the regional borders
Friuli
region
• Nearby territories. Padua is located 40
Veneto
region
km from Emilia-Romagna
Trieste
Acegas APS
Hera
Padua
40 km
distance
• Acegas Aps regional territories
Bologna
have similar industrial development
E-R region
as Emilia-Romagna
Marche
• Similar background and
region
shareholding printing.
Perfect match of business mix (’11 Ebitda)
• Same business portfolio
• Balance between regulated and
liberalised activities
• Strong positioning in all services
Waste, Energy and Water
Enlarged platform to tackle with business opportunities
V
9. Strengthening market positions
2011 Key industrial data 2011 Financial Highlights
(m€)
2011 Hera Acegas Combined
Revenues 4,106 585 4,691
Ranking
Sector Ebitda 645 119 764
combined
Ebit 334 53 387
Waste
3,713k Net profit 105 18 123
Volumes 331k 3,382k
treatm.from 3° 9% 91% 1st Net financial debt 1,987 447 2,434
parties (Ton)
NFP/Ebitda 3.1x 3.8x 3.2x
Water clients 253k 1,184k 1,437k Market cap.ˆ 1,486 311 1,797
^ As at 19th October 2012 in million Euro
(#) 18% 82% 2nd
2011 Ebitda ranking
Gas 1,374k (m€)
clients 260k* 1,114k
(#)
19% 81% 3rd
Electric clients 142k 482k 624k
(#) 23% 77% 7th
Gas RAB ~200 ~850
(€m) 19% 81%
~1,050
* EstEnergy (51% AcegasAps, 49% Ascopiave)
VI
10. Focusing on extracting synergies from merger
Synergies to 2016*
(m€)
LEVERS
Procurement optimization (material and services) 9-10 Procurement • Volume concentration
optimisation • Price benchmarking
Network management 2 • Supplier base alignment and
40%
Waste operations 4-5 e-procurement
Commercial and trading activities 4-5
Network • WFM on water network operations
Shared services and G&A 4-5 management • Remote control concentration
6% • Alignment on maintenance policies
Total increase of Ebitda ~25 • In-sourcing
*on top of efficiency plan set by Acegas APS business plan
Waste operations • Best practices on service
18% management
Synergies timing • O&M policies alignment (demand
(m€) mgmt)
• In-sourcing
+5 +25
Commercial and
• Volume concentration and
+5 sourcing mgmt
energy trading
+8 18% • Costing alignment (mainly back
office)
• Commercial development
+7
Shared services • Billing
and G&A • Fleet mgmt
0 18% • IT services
2013 2014 2015 2016 Total • G&A rationalisation
Plus enhancement on capex spending VII
11. Acegas APS next steps following EGM approval (15th Oct.)
2012 2013
1 Merger into HERA of 2 Public offer to minority
AcegasAps Holding AcegasAps shareholders
Swap ratio: 0.763x Swap ratio: 4.16x
New issued Hera shares: 143.38m New issued Hera shares: 84.83m +228.21m new Hera shares
Cash proceeds: 3.4m€ Cash proceeds: 5.6m€ +9.0m€ cash proceeds
62.7% 34,466,941 37.2% 20,393,006 100.0% 54,859,947
(AcegasAps shares) (AcegasAps shares) (AcegasAps shares)
HOLDING
Other
Share capital: 188m€
shareholders
Own Shares : 118,883
NFP 06/30/’12: 6m€
VIII
12. FSI agreement to became Hera shareholder
• Fondo Strategico Italiano signed an agreement to
enter into Hera Share capital
• Strategic rational: support further cash M&A to
strengthen development strategy being long term
shareholder
• Terms of the share capital increase:
- Max 80 million new issued Hera shares (up to 5.6%-6.0%
stake of post merger share capital)
- Up to 100 million € investment from FSI (1.25€ p.s.)
- Subject to a minimum stake of 2.6% in Hera
- 1 new Board member appointed by FSI
• FSI partnership enhances post Acegas APS financial
structure
• Condition president: Closing Acegas APS merger and
clearance from Authorities
Enhancing Hera financial structure and flexibility with a l/t shareholder
IX
13. Herambiente signed SPA with Veolia for 100% stake of Energonut
Description WTE in Italy
1
• Energonut, located in Molise region, 0
13
1
3
owns a CIP6 WTE plant for RDF and a 2
8
solar plant 0
8 1
• Area characterized by plant 0
0
shortage/high waste production 4 1 2
1
1
• Client portfolio encompasses mid-term 2
and established players 1
Balanced situation
• CIP6 will expire mid 2016 Waste emergency 1
Waste mgmt crisis
Opportunity to optimize Hera coverage of national market
X
14. Energonut key highlights
Financial Highlights
(m€)
1 2 E2012
Enhance WTE normalised
Expand market leadership Revenues 26
“Area short of plants” “National coverage” Ebitda 17
Ebit 12
3 4 Net Profit 6
Synergy potentials Positive CF &
Net invested capital* 49
Dividend flows
“Herambiente network &
economies of scale” “Create value”
*as of 31/12/2012
Energonut technical data Deal details
WTE plant Solar plant
Power gen. capacity: 13.4MW inst Power gen.
Enterprise value 49 m€
0.5MW
capacity
Net electricity Closing expected
produced/Y:
83.4 GWh 2012
Electricity
1GWh
within:
produced/Y
Incentive: Cip6
Cash acquisition of
RDF treated/Y: 93.5k ton
Incentive escl. 100%
PUN (€/MWh)
320 share capital
Personnel: 27 people
Equity IRR >15%
Emas,
Certified: ISO1400,18001
Leader in Italy with 10 WTE in 4 regions
XI
16. Tight to multi-utility expansion strategy
Multi-business mix Expand downstream
1 2
Extracting synergies Enlarge customer base
leveraging on larger scale and Cross selling
operating efficiency and service Enhance service quality
coverage
“Tackling with tougher
“Deploying economies of competition and economic
scale, service enhancement” environment””
3 4
Evolve and complement Merger & Acquisition
asset base
Execute deal in progress
Increase recycling/waste treatment assets
Pursue M&A selecting new
Enhance generation from renewables
opportunities
Deploy an integrated perspective on
smart network
“Create value through
“Leveraging on unique strengths” strategy execution”
Creating value and sustainable dividend flows for shareholders
1
17. Remarkable step forward in business size
2011 2016
Sector Key Industrial targets
Volume of waste treated from 3°parties (m ton) 3.4 4.8
Urban waste collected (m ton) 1.8 2.4
WASTE
Number of plants 79 >90
Electricity generated from biomass (GWh) 400 600
Water volume (m m3) 254 327
NETWORK Gas POD (m unit) 1.2 1.7
Heat sold (GWht) 499 663
Gas sold & traded (bcm) 3.3 4.5
ENERGY Electricity sold (TWh) 10.0 10.6
Energy clients (m unit) 1.6 2.5
2
18. EBITDA growth leveraging upon “all” drivers
Next 5Y Ebitda Target
(m€)
+9% cagr 990
+25 +54
+152
645 +114
2011 Hera syn. & Agegas APS Acegas APS Hera gas E2016
org. g. stand alone synergies tenders +
Aimag
Hera syn. & org. growth Acegas APS Gas tenders M&A: Aimag
(m€) (m€)
27
Aiming at confirming Ongoing negotiation were
25
23 current concessions and interrupted due to
21
gas distribution (implying earthquake.
25.0
19
22.5 23.0 extensions of current territories
20.8
17
served by Hera with 120k POD More conservative projec-
15
Avg '06-'11 Old BP 2011 Avg '12-'16
and additional Ebitda of 14m€) tion vs old BP (40m€)
EBIT CAGR expected to grow at +10% on average per annum
3
19. Overview on Ebitda growth by strategic areas
Ebitda growth drivers
(m€)
4
20. Key challenges and opportunities
Challanges Opportunities
• Changing business • Evolve asset base exploiting
model in waste mgmt recovery/recycling
WASTE
• Volume development • Enhance market coverage (by territory,
by technology)
• Gas tenders • Consolidate “in current territory”
NETWORK • New regulatory • Capitalise on capex performed and
framework in water efficiency achieved
• Volume development • Exploit peculiarity of reference territory
ENERGY • Gas tariff reform • Steer “soft landing” through optimisation
of costs and active customer portfolio
mgmt.
5
21. WASTE: Maximize value extraction
Strategy Ebitda breakdown
(m€)
Enhance Returns Develop Market & Asset
“Focus on special waste mkt” +137m€
“Pricing optimization”
“Asset portfolio mgmt” “Develop asset base consistently +10 331
+35 +7
with sorted collection increase” +85
194
Follow regulation Integration synergies
“Contribute to new regulatory setting”
“Tackle with authorization process” “Acegas aggregation”
“Confirm current concessions on “Reduce cost base” 2011 Syn & Acegas AA Syn. Aimag E2016
waste collection” Org. G. APS
Hera waste management benchmarking Extract value from 100% urban waste*
E2016
1 2 5 20 EU ranking
37%
50% 48%
67% Landfill
17% WTE
29% Other (composting,
recovery, TMB)
49% 46%
33%
0% 1% 23%
HOLLAND SWEDEN HERA ITALY
* Hera stand alone
Leveraging upon plant capacity in market shortage 6
22. NETWORKS: Confirm concessions and extract value from assets
Strategy Ebitda breakdown
(m€)
Gas & Electric. distr. Water services
+173m€ +20 467
“Aiming at guaranting proper +76 +9
“Focus on upcoming tenders”
“Electronic meter substitution” return on RAB”
“Focus on leakages”
+14
+54
294
Smart mgmt system Enhance Returns
“Deploy intelligence to enhance “Asset value enhacem.”
service quality and costing” “Enhance D.H. activities” 2011 Syn & Gas Acegas AA Syn. Aimag E2016
Org. G. tenders APS
“Smart” network management Key targets on efficiency
• Grid Automation • Remote control lightings
• Integrated mgmt of power gen. • LED technology and
2011 E2016
sources automatic flow regulation
• Water net leakages 27% 25%
Energy Storage • Energy efficiency
• Smart info Electr. Net/employee (km) 5.3 7
Smart city/
Smart area Gas & water net/employee (km) 33.4 47
• Wireless Water
• Plant and gates Electr. POD/employee (unit) 138 195
• Monitoring automation
Gas
• Communication platforms • Roll out electr. meters Water & Gas POD/employee (‘000 km) 1.27 1.8
• Interconnections to by pass
interruptions
Tackling with Authority’s higher efficiency requirements safeguarding returns 7
23. ENERGY: Progress on down stream development
Strategy Ebitda breakdown
(m€)
Expand market Tackle with margin
+32m€
“Cross selling to achieve 2.5 million squeezing +9 170
+30 +7
customers” “Manage pricing and customer
“Complement new areas
138 (14)
segments”
with Acegas Aps”
Upstream optimization Cost control
“Synergies Acegas Aps”
“Re-define trading scope to
“Reduce cost to serve and
tackle margin squeeze” 2011 Syn & Acegas AA Syn. Aimag E2016
enhance virtualization”
Org. G. APS
Gas and Electricity volumes Key targets on efficiency
Gas Electricity
(bcm) (TWh) 2011 E2016
4.5 11 10.0 10.6
Avg. contracts per client 2.07 2.2
1.5
9
3.3 Multi-service invoice (m CA) 0.77 1,1
7
6.5 6.4
5
Automatic payments (mln contract) 1.9 2.3
3
55% 49% 3.5 35% 25%
1 2.7 On-line customers (‘000) 129 279
-1
2011 E2016 Cost to serve (€/POD) 20 19
Customers 1.1 1.5 0.5 1.0 On-line billing (k CA) 53 187
(m unit)
Own pro ductio n M arket M &A
Enhance marketing intelligence to tackle with changing scenario
8
24. M&A strategy focused on “traditional core dimensions”
M&A scope and guidelines Rational
Multi-utility
Similar portfolio mix
In surroundings territories
• Increase economies of scale
Reasonably sound financials
• Consolidate territorial presence
• Exploit value from Hera business
Not diluitive model
Pursuing controlling stake
Energy & Waste
National scope • Strengthen competitive positioning
Sound financials • Leverage on leadership
Primarily through cash • Exploit expertice
2013 focused on full integration of Acegas APS
9
25. Capital expenditures
2012-2016 capex plan by business Capex plan by legal entity
(m€) (m€)
460
Total Capex: 1.94b€ 435
394 86
362 123
25 75
288 65
260
’12-’16
1.94b€
283
1,480
2012 2013 2014 2015 2016
Hera Acegas APS Aimag Gas tenders
Capex by regulated/liberalised activities Development capex plan
(m€) (m€)
123 123
586
’12-’16 ’12-’16 934
1.94b€ 1.94b€
881
1,229
Liberalised activities Regulated activities Gas tenders Development capex Maintenance capex Gas tenders
10
27. Closing remarks
Leveraging upon well known levers to create value
990m€ Ebitda in 2016
M&A: synergy exploitation and business portfolio rationalization
organic growth perspectives with Energonut
Identify further opportunities matching Hera policies
Focusing on EPS (>5%cagr) and Free Cash Flows (>200m€)
Sound debt structure (2.7x Debt/Ebitda)
DPS policy: guaranteeing a floor at 9c€ per year
Maintaining a balance in cash flows
Capitalizing a reliable & sound equity story
12
29. Assumptions
2011 E2014 E2016
Brent (Dollar/Barrel) 111 106 105
Exchange ratio $/€ 1.39 1.35 1.35
PUN: Avg Northern Italy elect. price (€/MWh) 70 75 80
Inflation (%) 2% 2% 2%
Italian GDP trend (%) +0.7% +1.4% +1.4%
Green certificate (€/MWh) 83 78 73
CEC (Cip6 avoid cost) (€/MWh) 118 127 126
White certificates (€/TEP) 94 80 81
CO2 certificates (€/ton) 17 12 16
WATER services revenues* (Cagr ’11-’16) +2.5%
GAS distribution revenues* (Cagr ’11-’16) +1.8%
ELECTRICITY distribution revenues* (Cagr ’11-’16) +1.1%
WASTE Collection revenues* (Cagr ’11-’16) +4.3%
*Data refers to Hera stand alone
13
30. Change in Governance
Share capital develop. Hera Group Board of Directors
2013 2014
1,115 4 1%
14 18
Bod
m
Hera 2011 shares
member
59%
s 4
2
1,343 20
4 1%
14 Bod
m
member
Hera post Acegas shares
s
4
Public offer 48%
2
Hera post 38% 12
15
1,423 21
FSI Bod Bod
m 14 member
member 4
shares s
s 3
46%
1
Hera municipalities Acegas Aps municipalities Other shareholders FSI
14
31. Consolidated Group Ebit
Ebit 2011 Ebit 2016
1 4
85
172
By strategic area 156
334m€ 255 543m€
By legal entity
18 9
93 81
112
Waste Energy Networks Other Waste Energy Networks Other 543m€
33 1 35 3
85 435
172
Hera Acegas APS
By Business
334m€ 216
543m€ Aimag Gas tenders
147
69
116
Waste Water Gas Electricity Other
15
32. Financial Strategy
Refinancing needs to 2016 Pursuing balanced interest nature
(m€)
1 6 00 589 1.50 0
1 6 00 450 1.50 0
1 4 00
1 4 00
1 2 00
1 2 00 230 1 000
284
1 000
500 8 00
104
8 00
6 00
303 Fixed 50% Rates 50% Varialble
6 00
4 00 180 4 00
220
2 00 +140 2 00
0 0
Convert. BEI Euro Loan Acegas Total 2012 2013 2014 2015 2016 Total
bond bond amort.
Focus on Acegas Debt structure Hera Group financial strategy
Fixed 3% Mid
term
32% • Maintain financial liabilities homogeneous
Time
with investment time horizons
Interest
rate horizon • Non speculative financing
68% • Optimize mix variable/fixed to stabilise
Variable 97% Short related cash flows
term
16
33. Acegas APS Deal
Deal valuation issues Activities in Bulgaria
• Companies valuation based on business
fundamentals, accounting perspective
returns on recent investments/capex (i.e.
40m€ RAB in Bulgaria still not AcegasAPS - Rilagas
•Population: 324k
contributing to ’11 Ebitda). •Cities: 7+
•Network completed (km): 1,020
•RAB: 40m€
•Concession: 35 years
• The deal doesn’t affect Hera sound financial
structure.
Multi-utility players in Veneto/Friuli
• Almost neutral on ’11 EPS upfront,
accretive on EPS by 8%-11% post synergies.
• Implied 2012 Ebitda multiple ~6x (~5.5x
net of Bulgarian assets)
• Further upside driven by the new business
opportunities (including potential M&A).
17
34. Acegas APS: Further business plan details
Acegas APS Ebitda Ebitda growth ’12-’16
(m€) (m€)
By strategic area By Business
+8 +10 152
152 180.00
119 +4 +11
160.00 152
140.00 11.6
119 119 14.3
120.00 8.7 1.9
100.00 53.7
80.00 49.9
60.00 37.2
40.00 34.7
20.00
-
24.1 35.2
0
2011 E2016 2011 Energy Waste Netw ork Other E2016
Waste Water Gas Electricity Other
Capex plan Key Acegas APS growth drivers
(m€)
By strategic area By Business
11
48
10.6
• Waste: Full operation of WTE and market
29.2 48.0
enlargement
’12-’16 21 ’12-’16 • Other: Growth relates to Bulgaria and
260m€ 260m€ public lighting
98.8 73.2
180 • Tariffs of regulated businesses projected to
Waste Energy
Waste Water Gas
grow moderately
Electricity Other
Networks Other
18
35. AIMAG: Further details
Ebitda Target 2016 2011 Industrial data & Financials
(m€)
By strategic area By Business 2011
40
50.00
40 Industrial data 2011 Revenues 243
45.00
40.00 2.5 0.6 Gas sold (mm3) 365 Ebitda 44
35.00
30.00 15.5
Gas distrib. (mm3) 290
25.00 Ebit 22
Water sold (mm3) 15
20.00
15.00 11.4 Net Profit 12
10.00
5.00 10.1 Net invested
231
- capital
E2016 Net Debt 85
Waste Water Gas Electricity Other
Capex plan Key growth drivers and Deal issue
(m€)
By strategic area By Business • Aimag was prudently accounted for in Hera
15 15.2 15.1
BP projecting steady results through out the
business plan period.
’12-’16 ’12-’16 • Financials structure as of 31/12/’11:
75m€ 75m€
• Net financial position : 90m€
60
44.7
• Net Equity: 146m€
Waste Water Gas
• Expected to issue 33m shares to merge
Waste Networks
Aimag.
Hera owns 25% stake of Aimag (35m€ cash consideration) 19
41. Networks internal growth drivers (1)
Visible and safe tariff enhancement* Benefitting from new asset base*
Avg. revenue per m3 of water distributed Hera heating production sources (excl. leakages)
(€/m3) (GWht)
+2.2% Cagr
+5.3% Cagr
20%
20% Efficient 21%
519
thermal energy
384 20%
production 17%
12%
Total gas revenues 13%
10%
(m€)
+1.8 % Cagr
35% 32%
Hera heating production sources
Total electricity revenues Increase volume sold to new customer
(m€) +0.02% Cagr
(new urbanization)
Efficient sources for heat production
Waste contribution to increase heat gen.
Increase of margins/environmental perf.
E2016 Ebitda of D.H. expected to increase
by +15m€ (from 11 m€ of 2011)
* Hera stand alone
23
42. Networks internal growth drivers* (2)
Economies of scale in networks management
Gas
(€/POD)
(0.2%)Cagr
Average Cost per POD 44,1
(€/POD) 43,7
+1.2% Cagr
157
148
2011 E2016
Electricity Water
(€/POD) (€/POD)
+1.5% Cagr
(0.4%) Cagr 281
260
140 137
2011 E2016
Increase below inflation rate 2011 E2016 2011 E2016
* Hera stand alone
24
43. Networks targets
Ebitda breakdown RAB/NIC*
(m€) (m€)
2,182
2500
2,035
2000 234
217
500 467 1500 908
848
450 26.8
1000
400 307 322
350 294 500
708
236 663
300
11.4 0
250
200 150 2011 E2016
36
150 Gas Electricity Water D.H.
100
26
166
50 107 Gas RAB (data do not include third parties RAB under
0 management of about 240m€) do not include the
2011 E2016 expected from Gas tenders
Water data refer to RAB of Hera property only
(excluding third parties RAB under management of
about 124m€).
Electricity network data refer to the net invested capital
District Heating data refer to the net invested capital
Gas Electricity Water D.H.
* Hera stand alone
25
45. ENERGY: challenging scenario
Gas demand & Import capacity Italy Italian (PSV) vs EU (EEX) Gas Spot price
(bcm) (€/MWh)
113
Un utilized
Import
capacity
44%
Gap
Closing gap due to:
Increase stocking
capacity by +25%
“Use or loose it”
CCI will include
increasing spot
prices
E2016
Elect. demand slow down & over capacity Electricity PUN national average
(bcm) (€/MWh)
339.9 339.5 332.3 332.5 332.5 336.0 337.8 341.6
320.3 330.5
83%
78% 77% 75%
23% 25% Reduction in gas prices effect more
17% 22%
than Offset by increase in “A3” and
potential capacity payment
New Total demand
Renewables
capacity +3.8 +3.1 +4.1 +1.8
Conventional sources
26
46. Keeping a balanced and effective energy upstream strategy
Ebitda breakdown
(m€)
170
180
160 138 21
140 6 7
120 4 Heat mgmt
100 Cogeneration
85 94
80 Power generation
60 Sale&Trading Gas
40
Sale&Trading Electr.
20 43 47
0
2011 E2016
• Gas Sales and Trading activities expected to benefit from M&A contribution, more than offsetting negative
projections on current sales & trading margins (due to progressive alignment of commodity cost component
– “CCI” – to gas spot prices included in retail sales prices).
• Electricity Sales and Trading activities affected by a projected reduction in volume sold to “salvaguardia” clients.
27
53. Disclaimer
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.
33