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Comment by Maurizio Chiarini
Hera S.p.A. Chief Executive Officer

Maurizio Chiarini
Maurizio Chiarini

Financial results
On 22 March, the Board of Directors approved the draft financial statements and, at the same time, the Sustainability Report.
You will be aware that for approximately 5 years we have submitted these two documents to the Board of Directors at the same time because we feel that both the financial results and those related to the activity of the company as a whole should be evaluated together in a 360° outlook.
These documents were then presented to the Shareholders' Meeting on 27 April for final approval.
2011 proved to be a very difficult year, not least for the Italian economy, which suffered under the weight of serious problems. Our specific sector of local public services also experienced many difficulties, causing many companies like ours, including several of the main multiutility companies, to end 2011 with results that were below their expectations. In some cases, firms even recorded losses.
Luckily this was not the case for Hera Group, which ended 2011 in a very strong economic and financial position.
We saw a significant increase in sales compared with the previous year, up 12% to approximately €4.2 billion.
EBITDA increased to €644.8 million, up €37 million, or 6.2%, over the previous year; this increase was perfectly in line with the company's growth in EBITDA over the last 10 years.
The net profit was €126 million, compared with €85 million 2 years ago. This represents significant growth, and this net profit has allowed us to distribute €100 million in dividends to our shareholders, in line with both their expectations and our budget.
We were able to pay out these dividends, 62% of which I should like to remind you went to public shareholders, unlike all the other multiutilities which, for the reasons I mentioned earlier relating to macroeconomic difficulties and difficulties within the companies themselves, were unable to distribute dividends this year and satisfy the expectations of their shareholders.
The last piece of information, which I believe is both important and positive, is our net financial position, which has remained basically unchanged with a slight improvement over the previous year but in line with budget forecasts. EBITDA has increased on the one hand and the NFP has remained stable, ensuring that the ratio between the NFP and EBITDA has decreased, going from 3.3 last year to 3.1, exactly in line with financial market predictions.
In spite of the difficulties encountered in 2011, for us it has been a year of excellent economic and financial results and continued growth.
From the point of view of the Sustainability Report on the other hand, I should like to point out first of all that our aim has, above all, been to check whether we have reached the targets we set ourselves when the previous year's Sustainability Report was approved. It is therefore a document which, on the one hand, concentrates on the results achieved and, on the other hand, sets the targets for the coming year.

Three reports for transparency
This year, together with the Sustainability Report, we have produced another three very important documents.
The first is the report which we have produced for three years on the water system called "In buone acque" ("In Good Waters"), in which we define and include all the information vital for understanding how our group manages the water sector. I believe the level of information is all the more interesting because more attention has been focused in recent years on water-related problems.
A second very important report is "Sulle tracce dei rifiuti" ("The Waste Trail"). This report is also one which only we produce in Italy. It documents where the separated-waste collection ends up and to what extent the waste is reused. This document is also very important because it basically shows that all the waste collected by Hera, in the vast majority of cases, has a recycling level of more than 90%.
This year we have added a further document called "Tariffe chiare come l'acqua" ("Tariffs as clear as water"). You can find this document on our website and it has also been published in daily newspapers.
It is designed to clarify certain aspects surrounding tariff problems related to the water cycle after the referendum which have remained unclear. During the referendum campaign, the information given to members of the public was totally biased and we want to use this document to make all the information about the water tariff system more transparent.

Targets reached
As you are aware, our Sustainability Report is formulated for individual stakeholders. We identify what the targets and expectations are for every stakeholder and to what extent the results have been achieved.
The most important figure is definitely the amount of added value which the group has produced and distributed. This year added value will exceed €1 billion, standing at €1.042 billion, an increase of 3% over the previous year. Of these billion euros, more than €800 million, €815 million to be precise, is distributed to local stakeholders. It is important to stress this fact in order to remember that a great extent of the work the company does, in terms of distributing the resources produced, stays local.
If we count supplies on top of the added value produced, we reach a figure of around €1.7 billion which can be considered the economic impact of Hera Group activities at a local level.
Out of this added value produced, the majority, 34%, obviously goes towards remunerating employees and 22% remains within the company in the form of self-financing.
With reference to the workplace, in 2011 permanent employees accounted for more than 96% of our total workforce. It should be noted that over the last three years we have hired 524 people on permanent contracts, and over the last 10 years our Group has taken on more than 2,700 full-time employees.

Working in the Group
This year we conducted a climate survey. As you know this is something we do every two years. I can say that the in-house climate is noticeably improving. This year the figure reached 64, an increase of 6 points compared with the last survey conducted. This means that the work that has been done and the improvement measures taken are starting to produce extremely significant results.
Specifically, the improvement in the employee satisfaction level has been very marked in the most populous areas of the company. i.e. manual workers and clerical staff. This makes us very happy
because our goal was precisely to reach and involve this large group of employees who obviously make up the most significant section of the Group.

Quality and Safety
Health and safety is another extremely delicate topic and one on which we have greatly concentrated our efforts in recent years.
I should like to remind you that 2011 was the year we launched the "A year for safety in Hera Group" project. It is producing significant results. However, the most important thing is that figures for accidents in the workplace are very encouraging.
The accident rate has decreased to 23, having previously stood at over 50 in 2004, 56 to be precise. This decrease has been constant, year on year. There has been a 21% improvement compared with last year, and it is a figure that everyone should be pleased about.
I think that the subject of safety is one that should not only be tackled from the point of view of certification systems, but also from the aspect of introducing a corporate culture associated with safety and risk awareness which needs to be developed in all aspects of the work environment.

Customer satisfaction
As far as customers are concerned, it should be stated that the customer satisfaction survey which we have conducted every year since 2005, has again, in 2011, confirmed the high level of satisfaction of our customers. The figure stands at 70 points, one point higher than last year, but one point more or less does not make a difference. The important thing is that overall, for three years now, customer satisfaction levels have stood at between 69 and 70 - a level that analysts believe shows our customers are completely satisfied.
Naturally it is an area on which we never stop working and trying to improve. We must therefore continue with a dedicated customer satisfaction policy. Nevertheless, these surveys are providing us with very positive feedback, confirmed by the results of two very important means of contact with customers, namely our call centres on the one hand and our branches on the other.
A few years ago there was a series of problems which caused longer waiting times at call centres. We have now reached an average waiting time of around 40 seconds. Bear in mind that we answered more than 1.6 million phone calls in 2011, which is a very large figure.
I believe that this 40-second waiting time is now stable and should remain so in the near future, likewise contacts and waiting times at branches.
I should like to remind you that we have 84 branches throughout Italy. We have not reduced the number of branches; on the contrary, we have maintained and improved them.
Waiting times at branches in 2011 stood at 10 minutes. Here too we have reached a time which absolutely cannot be shortened any further. I believe that it is a very satisfactory level as far as our customers are concerned and the climate survey has confirmed that it will be difficult to surpass.

Suppliers and the effect on the local community
Another subject is the one related to suppliers, which throws up specific problems connected with procurement methods, especially public tenders and the involvement of social cooperatives.
All public tenders put out by Hera Group in 2011 were awarded using the most economically advantageous bid criterion.
Three years have passed since we definitively abandoned the lowest-tender criterion. I believe this has been positive in terms of results.
This information should be circulated throughout our area because not everyone is yet aware that Hera stopped awarding contracts to the lowest bidder three years ago.
The important fact to be stressed is that an extremely high share of our tenders are reserved for social cooperative bids to the extent that the value of supplies from social cooperatives in 2011 stood at almost €30 million. Through these contracts we managed to involve 537 disadvantaged persons who, in one form or another, work for Hera Group. I believe that this also has a very important impact from a social point of view.
As far as suppliers are concerned, this year we have included an extra indicator in the Sustainability Report in an attempt to understand the indirect employment created by Hera Group activity. As you are aware we have 6,500 employees, to which we can add a further 4,150 workers in an indirect form. Our suppliers are involved in Group contracts so, overall, we can say that ,in terms of employment, Hera Group activities affect around 10,000 workers.

Moving on to the environment, there are always two topics on the agenda: one involving waste-to-energy plant emissions and the other being leaks from the water service.
As far as waste-to-energy plant emissions are concerned, with the opening of the latest plants in Ferrara, Modena and Rimini, we have reached emission levels that are approximately 10 times lower than legal limits.
We cannot do any more than this: the emissions from our plants are barely perceptible. These emissions are constantly monitored and can be viewed by anyone on our website. I think this demonstrates that we have achieved extremely safe levels for the population.
Non-invoiced water, in other words leaks from the network, account for 7.9 m³ per network kilometre per day. This is the second-lowest amount of network leaks in Italy. This result has been achieved through the enormous investments we have made in recent years in the water sector. On average, we have invested €90 million per year, every year recently. Since the establishment of Hera, we have invested a total of almost €900 million in the water sector.
These investments have produced significant results both from the point of view of improvements in purification systems and from the point of view of stemming network leaks. A large question mark obviously hangs over all of this in relation to the outcome of the referendum. Obviously, if there will not be an adequate return in the future on investments made in this sector, companies with a large proportion of private shareholders will be forced to review the amount of investments they make in this area.
Staying with stakeholders, I wish to stress that separated-waste collection for our Group has reached a figure of over 50%. I should like to remind you that we initially began with separated-waste collection figures of around 12-13%, which means that there has been a very significant increase over the last 10 years. The most important thing which should be stressed is that if we take a look at the number of kilos collected per citizen, at a national level, the cities occupying the first three places in terms of separated-waste collection percentages are Rimini, Forlì and Ravenna, the three cities run by Hera Group. I believe that the work done in this area is very important and is producing very significant results.
I was telling you earlier about the Waste Trail report, which checks the recycling level for every type of waste collected. We can also confirm for this year a recycling figure in excess of 90% in all areas and in all sectors and for all types of waste, with the only exception being plastic where, as you are aware, there are difficulties in treating plastic to make it clean in order to be able to recycle it. Here the figure stands at around 78%.
It should be remembered that we are the only company in Italy which carries out a regular and in-depth survey into the destination of separated-waste collection.
Lastly, the final figures I want to share with you, still in the area of the environment, are the use of landfills for the disposal of urban waste, which has been reduced to 23%, while, as I was saying earlier, the percentage of separated-waste collection stands above 50%. The remainder of our waste, i.e. approximately 27%, is treated in waste-to-energy plants.
This means that our Group is getting close to the most developed countries in terms of waste treatment and disposal methods. For several years, Sweden, Denmark and the Netherlands have operated two waste disposal systems: separated-waste collection, which varies between 50% and 60%, and incinerators using the most sophisticated technologies to dispose of the remaining amount, while landfills are no longer used for waste disposal in these countries.

These were the most important figures that I wanted to tell you about in connection with the 2011 results. I believe that from both the point of view of the financial results and from the point of view of sustainability results, 2011 has definitely been a very positive year for our group, thanks to the commitment of everyone involved.
The future is tricky because, as you are aware, the economic situation is certainly not going to improve quickly. However, with the commitment we are making on a daily basis, we hope to continue to be able to present you with similar positive results to those of 2011 next year too.
Thank you and goodbye.

Bologna, 12 April 2012

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