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mln € 916.6 EBITDA
mln € 457.1 Operating profits
mln € 207.3 Profits for shareholders
mln € 2,558.9 Net financial position
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2016 Overview
Once again Hera can affirm growth in its results, with EBITDA rising by 3.6% and an increase in Shared Value activities, in line with the call to action contained in the UN's global agenda for 2030
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What is Shared Value and how does Hera work in this direction

Porter and Kramer, in a well-known article published in 2011, assert that companies can create Shared value with policies and practices that reinforce their own competitiveness, meeting at the same time the needs of local communities and the challenges faced by society. Hera's multi-utility activities are strongly integrated within the socio-economic fabric of the areas in which it operates, and at present the company can already provide evidence of a significant amount of Shared value expressed through services, activities intended for the region and industrial projects. The figures expressing a portion of the year's EBITDA represent the amount of industrial income that can be directly attributed to the Group's activities and linked to the total economic value distributed to stakeholders in the regions in which it operates.

In 2016 Hera generated roughly € 300 million in EBITDA (or 33% of the total) from "Shared value" activities.

What is Shared Value and how does Hera work in this direction

TheUN's 2030 agenda, with its 17 objectives for sustainable growth, represents a reference framework for enterprises that are called to "adopt sustainable practices and integrate sustainability information into their reporting cycle".

Overall consolidated results

The Group achieved a good level of overall growth in 2016: EBITDA increased by 3.6%, operating profits by 3.4% and net profits by 14.8%. From a financial point of view as well, positive results were recorded: net debt dropped by 3.5% and the net debt/EBITDA measure settled at 2.79, with a clear improvement over the previous year.

Operating highlights

+3.6% 916.6 mln EBITDA
+14.8% 207.3 mln Profits for shareholders
(3.5%) 2,558.9 mln Net financial position
Areas of activity

Data by business

ciclo idrico
investor kit
Highlight on Hera's performance in 2016, the peer benchmark and the opinion of financial analysts.
Gas Ciclo idrico integrato Ambiente Energia elettrica
EBITDA '14 Networks Waste Energy
Results Capex e cash flow Debt/Ebitda DPS

Hera stock and the creation of value for shareholders

In 2016 Hera was included in the Thomson Reuters GLOBAL DIVERSITY & INCLUSION INDEX, which classifies, worldwide, the top 100 publicly traded companies, as measured by a series of metrics involving diversity and inclusion. The index helps investors extend their own "sustainable investment", focusing on a new and increasingly important set of issues, "diversity & inclusion".

In 2016, trends in financial markets were marked by a general increase in instability, repeatedly sparked by the unforeseeable outcome of a series of events with geopolitical implications (the Brexit referendum, the elections in the USA, the Italian referendum) and by apprehensions of a change of course with respect to the expansionary monetary policies of the main central banks.

At the beginning of the year, fears of a rise in interest rates introduced by the Federal Reserve were accompanied by signs of a slowdown in the world's advanced economies. Repercussions were thus seen on stock exchange quotations and on the value of all main commodities, with the price of oil halved in only a few weeks. The Italian market showed a worse performance than most major global stock exchanges, since the factors of uncertainty caused by the macro-scenario were compounded by the effects of the turbulent situation of the nation's banking sector.

Later, in the month of June, investors' attention shifted towards the negative outcome of the referendum concerning the future of the United Kingdom's membership in the European Union, which led to capital losses reaching 410 billion in a single Stock exchange day. In early September, rumours of a rise in US interest rates and the possibility of a reduction in government bond purchasing by the ECB set off a rising trend in yields requested on bond markets and, on the other hand, weighed on the performance of the European utility sector. In December, instead, it was the uncertainty surrounding the constitutional referendum in Italy that negatively influenced the performance of the nation's stock markets, with negative repercussions extending throughout the entire fourth quarter. Only the end of this uncertainty, after the referendum, subdued investors' risk aversion, who returned to buying stock whose value had been heavily penalised.

Within this context, Hera stock showed its usual strong resilience, particularly in the first three quarters of the year: its performance was in fact constantly superior to that of the market, thanks above all to its growing operating results. The stock's trend fell back in line with that of the stock exchange in the fourth quarter, due to the large degree to which Hera is exposed to Anglo-Saxon investors, leading to a significant divide between the stock's listed value and that of its fundamental economic indicators. This divide subsided in the weeks following the referendum, with Hera stock showing a swift recovery and closing the year at 2.188 euro, after having touched a minimum of 1.895. The upturn continued over the first few months of 2017, supported by the presentation of the new business plan to 2020. At the end of February, the listed price had returned to roughly 2.35 euro.

 I trim.II trim.III trim.IV trim.
Hera  +7.5% (0.1%) (2.7%) (10.5%)
FTSE Mib (15.4%) (24.4%) (23.4%) (10.2%)

No changes were seen in the number of financial analysts covering the company: Banca Akros, Banca Imi, Equita, Fidentiis, Goldman Sachs, Icbpi, Intermonte, Kepler Cheuvreux, MainFirst and Mediobanca. At the end of 2016, positive judgements continued to prevail, will almost all recommendations defined as buy/outperform, and no analyst expressed a negative recommendation. Hera's consensus target price is set at 2.77 euro per share.

Shareholder breakdown at 31/12/2016

At 31 December 2016, the corporate structure shows its usual balance, with 51.3% of shares belonging to 118 public shareholders located across the geographical areas served and regulated by a Stockholders' Agreement signed on 26 June 2015 and in force for three years.

On 8 July, in keeping with the Agreement, 12 Municipality shareholders sold, in a coordinated and transparent way, through an accelerated book building operation, roughly 16 million shares, corresponding to 1.1% of total share capital, to over 30 Italian and foreign institutional investors. Thanks to a demand that reached over four times the amount put on sale, the placing occurred at a price of euro 2.35 per share, with the lowest discount seen on the market since the beginning of the year for similar operations, set at 4.3% of the price at closing time on the previous day. The placing led to a rise in floating stock, with clear benefits for trade liquidity.

Since 2006, Hera has adopted a share buyback program, renewed by the Shareholders' Meeting of 28 April 2016 for 18 further months, for an overall maximum amount of euro 180 million. This plan is aimed at financing M&A opportunities involving smaller companies, and smoothing out any anomalous market price fluctuations vis-à-vis those of the main comparable Italian companies. At the end of the year, Hera held 20.8 million treasury shares.

In the period under review, Hera's senior management engaged in an intense dialogue with investors, above all with its business plan road show in the first quarter and its participation in sector conferences in the second and third quarters.

Hera's commitment towards transferring to all stakeholders the value generated by its activity also takes concrete shape in a continuous improvement of the tools and channels used in financial communication. In 2016 this commitment was rewarded with two important recognitions:

  • Hera's year-end financial statements were a finalist in Ferpi's balance sheet Oscars for their excellent structure and immediate readability;

  • Hera's website came in second in the Webranking proposed by the company Lundquist, rising by no less than two positions compared to the previous year.

The intense dialogue cultivated by Hera with investors and all stakeholders has helped reinforce its market reputation, and now represents an intangible asset that favours a correct evaluation of Hera's stock.

Meet the Team

via Carlo Berti Pichat 2/4
40127 Bologna
TEL. 39 051 287040
MAIL IR@gruppohera.it


Information on financial figures, data processing and analysis

+39 051 287034



IR Communication, road show & events

+39 051 287040



Director of Investor Relations

+39 051 287737


Hera's stories

From "sustainable projects" to "creation of shared value": the key role of innovation

The projects developed by Hera over the year that has just come to a close represent a further step forwards, along the path towards the creation of shared value.

They stand out, in fact, for their strong innovative and technological content, that leads towards an improvement in operating effectiveness, environmental impact, economic return and therefore overall value created to the advantage of stakeholders.

The following chart illustrates the four main themes developed by the Group in a highly innovative way as part of its long-term strategy, whose details are presented in the latest business plan. For each theme, one project is mentioned that was conceived, launched or brought to conclusion in 2016, and that stands out for its excellence within the area in question.

  • Energy map
    of the city
    introducing technologies useful in hi-tech development of cities
  • Thermal hydrolysis plant
    for biogas recovery
    from sewage sludge
    involving the environmental sustainability of the Group's actions and plans
  • Power grid
    with drones
    UTILITY 4.0
    involved in implementing new information technology in company processes
  • Customer experience
    aimed at understanding consumers' needs
    and wishes

In line with its sustainability policy, Hera Group promotes the consultation of financial reporting through the web. Therefore a HTML version of the interim report as at June 30, 2016 was designed, for an easy online reading.

However, in case of need, the entire H1 file or just the section of interest can be downloaded and printed with a simple click.

Online reading and download center of financial statements

Energy maps of the city


"Energy maps" are tools that provide an analysis of the energy consumed in buildings, useful in evaluating the timeline of consumption and formulating predictions as to its future trends. These maps allow gas, district heating and electricity consumption to be correlated with water consumption and the amount due in waste tax. They furthermore allow information with added value to be extracted, such as calculations of a building's energy class, evaluations of the coherence between water consumption and the number of declared residents and, lastly, a global analysis of electricity consumption over the reference area, indispensable in obtaining more complete information on the types of heating systems and combustibles used.

Using its "energy maps", the Group will be able to analyse the way consumption is distributed and to identify buildings that use sources of heating that are harmful to the environment, such as wood and pellets. The data gleaned from them can furthermore support local administrations in better knowing their own area and identifying any possible violations of current regulations.

The pilot project has been launched in the city of Modena.

Hera's agility - smart city:

Smart City - the introduction of technologies to the technological development of the city



The Thermal hydrolysis project is aimed at identifying new technologies for reducing the quantity of biological sludge to be disposed of at the end of the process of urban waste water purification, producing the maximum amount of biogas possible. The technologies identified at present are based on the process of steam explosion (a thermal treatment with high pressure steam) that makes the sludge more digestible by the bacteria that produce biogas and at the same time allows intracellular water to be released, leading to a more efficient dehydration. This treatment can come into play, according to the characteristics of the purifiers, either before or after the phase of sludge digestion. In both cases, two benefits arise: biogas production increases and the amount of sludge to be transferred to final disposal plants is reduced.

The process of anaerobic digestion for biogas recovery is aimed at maximising the production of biogas to produce electricity and heat via cogeneration, and reducing the quantity of sludge headed for disposal. To this end, a device used for dynamic thickening is expected to be installed, which will allow a drier and less voluminous sludge to be sent to the digestion phase. This process is also aimed at saving heat during the phase of digestion: the longer amount of time required will in fact lead to an increase in biogas production and a lesser quantity of sludge to be disposed. Along the biogas production plant line, a cogenerator will be installed whose purpose will be to produce electricity and renewable heat that will be used directly in the plant.

Hera's efficiency - circular economy:

related to the environmental sustainability of the Group's actions and projects

Controlling electrical networks via drones


Check-ups on the power grid are generally carried out by visually inspecting the lines, in order to identify any damage to the supports and insulators. These activities, normally done by operators who move along the lines to inspect the elements of the network with binoculars, has recently been integrated with video inspection done via drones. Drones, for which an Enac piloting licence has recently been acquired for 7 employees, can hover over the infrastructures and film them to verify their condition. The use of this technology furthermore allows damage to the infrastructure to be rapidly identified, especially in particularly difficult meteorological conditions (for example, with large quantities of snow on the ground), allowing the damage to be repaired without delay.

Hera's innovation - utility 4.0:

linked to the implementation of new information technologies in business processes

The actions that transform customers into partners


The customer experience project has concretely improved Hera's relations with its customers through higher fluidity in communication, by offering analytical tools for a more efficient management of consumption and by sharing concrete actions for cost reduction.

During the year that has just gone by, commercial offers have in fact been planned that guide the customer in monitoring their own consumption, to reduce waste and obtain significant savings in their bills.

The Group has furthermore decided to use, in its direct written communications, a more trimmed-down, precise and immediate language, which simplifies comprehension and facilitates orientation within the services. In this way, the customer receives clear, exhaustive and concrete answers, reducing incomprehension and misunderstandings.

As regards contact channel development, in 2016 Hera renewed a number of pre-existing online services, among which meter reading, contract and bill management, and introduced new ones, such as the call-back (for assistance and commercial information), consumption graphs with a timeline of daily averages related to the bill, and tracking activation in stipulated contracts.

During the previous year a new app was also introduced, the "aquologist", that allows customers to send their own meter readings, point out any leakages, receive information on service interruptions and consult the reports on the quality of the water distributed by Hera, comparing the average quality measurements with those established by the law.

Hera's excellence - customer experience:

focused on understanding the needs and wishes of consumers

Annual report in summary

The year 2016 ended with all the economic indicators in growth compared to 2015. Ebitda increased by 3.6%, operating profit is up by +3.4% and net profit posted a +13.4 %. Even from a financial point of view results are positive: net debt stood at 2.79x, among the best in the industry.

These results are even more remarkable considering that they have been achieved in a still troubled and rather challenging macro scenario.

Here is the HTML version of the 2016 financial results, together with interactive charts and graphs that allow a more transparent, fast and effective reading of the Group's economic performance.

For further info about numbers and KPI, please contact the IR team of Hera IR@gruppohera.it

2016 Financial results: interactive charts

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Directors' Report

Overview of Group performance

Operating APMs and investments

Operating indicators and Investments
Dec 2016Dec 2015Abs. change % Change
Revenues 4,460.2 4,487.0 -26.8 -0.6%
EBITDA 916.6 884.4 +32.2 +3.6%
EBITDA/Revenues ratio 20.6% 19.7% +0.9 p.p.  
Operating profit  457.1 442.2 +14.9 +3.4%
Operating profit/Revenues ratio 10.2% 9.9% +0.3 p.p.  
Net profit  220.4 194.4 +26.0 +13.4%
Net profit/revenues ratio 4.9% 4.3% +0.6 p.p.  
Net investments 366.4 332.7 +33.7 +10.1%

Financial APMs

Operating-financial indicators
Dec 2016Dec 2015Abs. change % Change
Net non-current assets 5,564.5 5,511.3 +53.2 +1.0%
Net working capital 99.9 157.0 -57.1 -36.4%
Provisions (543.4) (513.5) -29.9 -5.8%
Net invested capital 5,121.0 5,154.8 -33.8 -0.7%
Net financial debt  (2,558.9) (2,651.7) +92.8 +3.5%

Operating-financial APMs

Operating-financial indicatorsDec 2016Dec 2015Abs. change 
Net debt/EBITDA ratio 2.79 3.00 -0.2
FFO/Net debt 22.6% 20.5% +2.1 p.p.
ROI 8.9% 8.6% +0.3 p.p.
ROE 8.6% 7.8% +0.8 p.p.
Cash Flow 109.0 64.8 +44.2


Operating and financial results

Constant growth in all indicators

All of the Hera Group's economic indicators for 2016 showed growth over the previous year. EBITDA rose by 3.6%, operating profits by 3.4% and net profits by 13.4%. From a financial point of view as well, positive results were seen: net debt dropped by 3.5% and the net debt/EBITDA indicator settled at 2.79, with a clear improvement compared to 2015.

The economic-financial results achieved in 2016 point once again towards the Group's consolidated multi-business strategy and its ability to successfully balance regulated and free-market activities, while at the same time maintaining a sustainable risk profile. These results are furthermore the outcome of a well-adjusted combination of internal and external growth.

2016 was particularly positive if one considers the increasingly challenging context defined by regulatory and market factors, within which Hera proved its agility and demonstrated a great capacity to react when faced with changes in external circumstances. Among the main events that marked the year, one must recall the reduction in regulated revenue, following the revision of return on regulated invested capital (Wacc, weighted average cost of capital) introduced by the Authority for electricity, gas and the integrated water cycle (hereinafter the "Authority") and the reduction in incentives for environmental certificates.

The main corporate operations having an effect on 2016 are described as follows, in chronological order. Concerning above all the waste and sales businesses, they allowed the Group to maintain its sector leadership and to consolidate its presence in the market.

  • 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 1 December 2015, Herambiente acquired control of a few branches of Geo Nova Spa. In particular, the dangerous and non-dangerous waste storage plant in San Vito al Tagliamento (near Pordenone) and the active landfills for non-dangerous waste in Loria (near Treviso) e Sommacampagna (near Verona) were taken over. Additionally, as of 28 December 2016, a further branch was acquired, involved in non-dangerous waste disposal at the landfill in the municipality of Cordenons.

  • On 23 December 2015 Herambiente acquired 100% of shareholding in Waste Recycling Spa, whose activities concern the treatment and recovery of special waste in the province of Pisa, and that in turn holds shares in Rew Trasporti Srl and Neweco Srl. During the second half of 2016 the two aforementioned controlled companies were fused into Waste Recycling Spa.

  • On 29 December 2015 Hera Spa sold 90% of Hera Energie Rinnovabili, later renamed Aloe Spa, to third parties. It therefore no longer falls within the Group's consolidated scope.

  • On 30 December 2015 the interest held in Trieste Onoranze e Trasporti Funebri by AcegasApsAmga Spa was sold.

  • On 8 April 2016 Hera Comm Srl definitively won the call for tenders announced by the Municipality of Giulianova to acquire 100% of the share capital of Julia Servizi Più Srl, a gas and electricity sales company which operates in the municipality of, and the area surrounding, Teramo.

  • As of 1 November 2016 the company Gran Sasso Srl, which is involved in free market electricity and gas sales in the L'Aquila, Pescara and Chieti areas, became part of the Group's consolidated scope.

In order to respect sector regulations concerning unbundling, with effective date 1 July 2016 Hera Spa conferred its corporate branch dealing with electricity and gas distribution on Inrete Distribuzione Energia Spa.

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

Constant and increasing growth

The following table shows the economic results for the years ended 31 December 2016 and 2015:

Income statement (€/mln)Dec 2016% Inc.Dec 2015% Inc.Abs. change %Change 
Revenues 4,460.2   4,487.0   -26.8 -0.6%
Other operating revenues 403.4 9.0% 330.8 7.4% +72.6 +21.9%
Raw materials (2,176.8) -48.8% (2,256.6) -50.3% -79.8 -3.5%
Service costs (1,198.8) -26.9% (1,132.1) -25.2% +66.7 +5.9%
Other operating costs (75.0) -1.7% (62.3) -1.4% +12.7 +20.4%
Personnel costs (524.1) -11.7% (510.8) -11.4% +13.3 +2.6%
Capitalised costs 27.8 0.6% 28.5 0.6% -0.7 -2.5%
EBITDA 916.6 20.6% 884.4 19.7% +32.2 +3.6%
Amort. & Prov. (459.6) -10.3% (442.2) -9.9% +17.4 +3.9%
Operating profit 457.1 10.2% 442.2 9.9% +14.9 +3.4%
Financial operations (117.4) -2.6% (134.3) -3.0% -16.9 -12.6%
Pre-tax profit 339.6 7.6% 307.9 6.9% +31.7 +10.3%
Taxes (119.3) -2.7% (113.5) -2.5% +5.8 +5.1%
Net profit of the year 220.4 4.9% 194.4 4.3% +26.0 +13.4%
Attributable to:            
Shareholders of the Parent Company 207.3 4.6% 180.5 4.0% +26.8 +14.8%
Non-controlling interests 13.1 0.3% 13.9 0.3% -0.8 -5.8%

euro 4.5 billion in revenues

Consolidated revenues amounted to euro 4,460.2 million in 2016, dropping by euro 26.8 million (0.6%) compared to the euro 4,487.0 million recorded in 2016. Various factors are responsible for this contraction: revenues from electricity and gas sales and trading fell by roughly euro 198 million following a decrease in the price of raw materials; regulated gas, electricity and water cycle services saw a drop of roughly euro 31.1 million due to a change in the rate of return on invested capital, partially offset by other positive tariffary effects coming to roughly euro 19 million; and the euro 16 million decrease caused by a reduction in incentives for environmental certificates. This reduction was almost entirely offset by the revenues derived from higher volumes of gas sold, the greater amount of waste disposed of, higher revenues for production activities on the dispatch market and, lastly, changes in the scope of operations.

For further details, see the analyses of each single business area.

Other operating revenues grew over December 2015 by euro 72.6 million (21.9%). This increase is mainly due to the contribution coming from energy efficiency certificates following the greater obligations assigned to distributors coming to roughly euro 50 million, higher revenues from Ifric12 concessions amounting to roughly euro 9 million, greater contributions for recovery of materials, capital gains from the sale of goods involving the transfer to Unica Reti Spa of the gas networks in the Municipalities of Meldola and Forlimpopoli, including works and plants.

The cost of raw and other materials fell by euro 79.8 million compared to 2015, down 3.5%; as with revenues, this drop was due to lesser trading activities, an overall decrease in the price of raw materials and the different method used in recording energy incentives, as further explained in paragraph 1.02.04.

Other operating costs increased by euro 79.4 million overall (euro 66.7 in higher costs for services and euro 12.7 million in higher operating expenses), mainly caused by changes in the scope of operations (euro 29.0 million), higher disposal costs for the increase in volumes treated, and higher Ifric12 costs (euro 11 million). Furthermore, note the higher costs for the implementation of transactional systems in some Group companies, higher costs for sales personnel in commercial companies, aimed at widening the customer base, and higher costs for plant maintenance in network services.

Personnel costs rose by euro 13.3 million (2.6%), going from euro 510.8 million at 31 December 2015 to euro 524.1 million in 2016. This increase is mainly related to the salary raises provided for by the National labour agreement. The entrance of new resources belonging to acquired companies in the waste area was partially offset by a reduction in the average presence of resources.

Capitalised costs at 31 December 2016 fell compared to the previous year by euro 0.7 million (2.5%).

EBITDA at euro 916.6 million (+3.6%)

EBITDA settled at euro 916.6 million, recording a growth of euro 32.2 million (3.6%) compared to 2015. This increase in EBITDA is essentially due to the performance of the energy areas, thanks to the greater profit margins derived from power plants and the good performance of the sales and trading business. A positive result also came from the networks area, considering that 2016 felt the effects of lower revenues in gas, electricity and water distribution coming to euro 31.1 million (respectively: 9.8 in gas, 2.9 in electricity and 18.4 in water) following the reduction in return on regulated invested capital and inflation. The waste area was stable, in spite of lower energy incentives coming to roughly euro 16 million.

Amortisation and provisions rose overall by euro 17.4 million (3.9%), going from euro 442.2 million in 2015 to euro 459.6 million in 2016. Amortisation increased mainly due to the change in the scope of operations of Group company Herambiente and of the sales companies Julia Servizi Più Srl and Gran Sasso Srl, while the decrease in amortisation for landfills and WTE plants and the decrease in provisions for third party assents in the gas area due to the duration of the concession in the Forlì-Cesena area more than offset the higher amortisation for new investments. Provisions for bad debts rose, mainly in the AcegasApsAmga Group and in the sales companies.

EBIT at euro 457.1 million (+3.4%)

EBIT at 31 December 2016 reached euro 457.1 million, up euro 14.9 million (3.4%) compared to the euro 442.2 million seen in 2015.

The results of financial management at the end of 2016 came to euro 117.4 million, improving by euro 16.9 million (12.6%) compared to 2015. The good performances are due to lower average debt, efficiency in rates obtained among other things thanks to the effects of the liability management operations set in place during the year, and higher earnings involving recovery of default indemnities from safeguarded customers. 2016 includes roughly euro 13.1 million in devaluation of shares mainly held in the company Galsi Spa, compared to the euro 8.1 million seen in 2015.

In light of the above, pre-tax profits grew by euro 31.7 million, going from euro 307.9 million in 2015 to euro 339.6 million in 2016.

Income taxes went from the euro 113.5 million seen in 2015 to euro 119.3 million in 2016. The tax rate also improved notably, going from 36.9% to 35.1%. The reasons for this improvement include the benefits introduced by the recent Stability Laws: the patent box and tax credits for maxi amortisations and for research and development, in addition to Help for Economic Growth benefits ("beneficio ACE") and the positive effects created by the payment of a substitute tax for exemption from goodwill and by higher values created following non-recurring operations finalised during the year. Note furthermore that the 2015 tax rate suffered from a non-recurring effect caused by adjusting deferred taxes to the new IRES rate of del 24%, effective as of 2017.

Net profits therefore rose by 13.4%, equivalent to euro 26.0 million, going from euro 194.4 million in 2015 to euro 220.4 million in 2016.

Earnings post minorities at euro 207.3 million (+14.8%)

Group net profits reached euro 207.3 million, rising by euro 26.8 million over the amount seen in 2015.


Analysis of the Group's financial structure and investments

Group's magnitude increases

The table below shows changes in the Group's net invested capital and sources of financing for the year ended 30 December 2016:

Invested capital and sources of financing (€/mln)31 Dec 16Inc. %31 Dec 15% Inc. Abs. change % Change 
Net non-current assets 5,564.5 108.7% 5,511.3 106.9% +53.2 +1.0%
Net working capital 99.9 2.0% 157.0 3.0% (57.1) (36.4%)
(Provisions) (543.4) -10.6% (513.5) -10.0% (29.9) (5.8%)
Net invested capital 5,121.0 100.0% 5,154.8 100.0% (33.8) (0.7%)
Equity (2,562.1) 50.0% (2,503.1) 48.6% (59.0) (2.4%)
Long-term borrowings (2,757.5) 53.8% (2,743.6) 53.2% (13.9) (0.5%)
Net cash/short term borrowings 198.6 -3.9% 91.9 -1.8% +106.7 +116.1%
Net financial debt (2,558.9) 50.0% (2,651.7) 51.4% +92.8 +3.5%
Total sources of financing (5,121.0) -100.0% (5,154.8) 100.0% +33.8 +0.7%

Net invested capital settles at euro 5.1 billion

In 2016, net invested capital amounted to euro 5,121.0 million, showing a decrease of 0.7% compared to the euro 5,154.8 million seen in 2015. This drop is due to net working capital reaching euro 99.9 million (-36.4%), which benefitted cash flow by euro 57.1 million.

Net investments rise to euro 366.4 million, growing by euro 33.7 million

Group investments came to euro 366.4 million in 2016, with a further euro 20.3 million in capital grants, of which euro 7.3 million for the New investments fund (FoNi), as provided for by the tariff method for the integrated water service.

Including capital grants, the Group's overall investments came to euro 386.7 million. Net investments rose by euro 33.7 million, going from euro 332.7 million in 2015 to euro 366.4 million in 2016.

The following table shows a subdivision by sector, with separate mention of capital grants:

Total investments
Dec 2016Dec 2015Abs. change % Change 
Gas area 94.8 90.5 +4.3 +4.8%
Electricity area 25.2 24.4 +0.8 +3.3%
Water cycle area 131.8 127.2 +4.6 +3.6%
Waste management area 50.7 35.2 +15.5 +44.0%
Other services area 15.9 15.3 +0.6 +3.9%
Headquarters 67.6 53.3 +14.3 +26.8%
Total operating investments 386.1 345.9 +40.2 +11.6%
Total financial investments 0.6 0.5 +0.1 +20.0%
Total gross investments 386.7 346.4 +40.3 +11.6%
Capital grants 20.3 13.7 +6.6 +48.2%
        of which FoNI (New Investment Fund) 7.3 2.3 +5.0 +217.4%
Total net investments 366.4 332.7 +33.7 +10.1%

Operating investments came to euro 386.1 million, growing by 11.6% over the previous year, and mainly concerned interventions on plants, networks and infrastructures, in addition to regulatory upgrading involving above all gas distribution, with a large-scale substitution of metres, and the depuration and sewerage areas.

At Group headquarters, investments in corporate buildings, IT systems and the vehicle fleet

Remarks on investments in each single area are included in the analysis by business area.

At Group headquarters, investments concerned interventions on corporate buildings, IT systems and the vehicle fleet, as well as laboratories and remote control structures. Overall investments in structures increased by euro 14.3 million compared to the previous year.

Net working capital drops to euro 99.9 million

2016 came to a close with euro 99.9 million in working capital, down 34.6% from the euro 157.0 million at the end of 2015.

This positive result is due to the performance obtained by debt deferments mainly involving raw materials and the good performances of core service credits, which offset the increase in credits from safeguarded electricity customers. The change in the latter refers to credits from customers that cannot be disconnected, which, if payments are not collected, will be reimbursed by the Fund for energy and environment services (Csea), as provided for by resolution 370/12, issued by the Authority. On this matter, note that the total amount of credits towards customers includes euro 146.3 million (against euro 104.9 million at the end of 2015 - see note 29) in credits towards safeguarded customers for whom payment from the Csea has already been received, because the payment has been recorded among other current liabilities.

Provisions come to euro 543.4 million

In 2016, provisions amounted to euro 543.4 million, with an increase over the sum recorded at the end of the previous year. This result is mainly due to period provisions, which offset usage expenses and the effects of the adjustment of the TFR fund, calculated according to actuarial criteria. For details on the movements of the provisions, see the explanatory note.

Equity rises to euro 2.6 billion

Equity increased from the euro 2,503.1 million seen in 2015 to euro 2,562.1 million at the end of 2016, benefiting the Group's financial structure. This amount of equity reinforces the Group's solidity, thanks to the good net result of management in 2016, coming to euro 220.4 million, which net of the euro 144.0 million in dividends paid over the course of the year guarantees self-financing amounting to euro 76.4 million.

ROI at 8.9%

Return on net invested capital (ROI) settled at 8.9% in 2016. This result, an increase over the 8.6% seen in 2015, is due to the better operating result recorded in 2016 compared to net invested capital, which on the contrary recorded a slight drop as a consequence of an improvement in net working capital.

ROE at 8.6%

Return on equity (ROE) went from 7.8% in 2015 to 8.6% in 2016. This positive result is due to the good outcome of management in 2016.

Reconciliation between separate and consolidated financial statements

 Net profitEquity
Balances as per Parent's Company's separate financial statements 144.7 2,260.9
Excess of equity over the carrying amounts of Investments in consolidated companies 62.6 54.3
Consolidation adjustments :    
-    Measurement with the equity method of investments reported at cost in the separate financial
4.2 45.8
-    Difference between purchase price and book value of corresponding portion of equity (4.5) 80.6
-    Elimination of intercompany transactions 0.3 (23.7)
Total 207.3 2,417.9
Non-controlling interests 13.1 144.2
Balances as per consolidated financial statements 220.4 2,562.1


Analysis of the net cash (net debt)

A solid financial position

An analysis of net borrowings is provided in the following table:

€/mln 31 Dec 1631 Dec 15
a Cash and cash equivalents   351.5 541.6
b Other current financial receivables  29.4 34.6
  Current bank debt  (72.1) (129.2)
  Current bank debt   (71.7) (284.9)
  Other current financial liabilities  (36.2) (68.2)
  Finance lease payments maturing within 12 months   (2.3) (2.0)
c Current financial debt  (182.3) (484.3)
d=a+b+c Net current financial debt  198.6 91.9
  Non-current bank debt and bonds issued  (2,847.8) (2,845.4)
  Other non-current financial liabilities   (5.0) (5.8)
  Finance lease payments maturing after 12 months   (14.9) (17.6)
e Non-current financial debt  (2,867.7) (2,868.8)
f=d+e Net debt - Consob communication n° 15519/2006  (2,669.1) (2,776.9)
g Non-current financial receivables  110.2 125.2
h=f+g Net financial debt  (2,558.9) (2,651.7)

The overall amount of net financial debt, euro 2,558.9 million, improved by roughly euro 92,8 million compared to the previous year. The Group's financial structure at 31 December 2016 shows current borrowings totalling euro 182.3 million, of which roughly euro 71.7 million in bank loans reaching maturity in 2017 and roughly euro 72.1 million in current bank debt. The latter consists in use of current credit lines for euro 20.9 and accrued interest on loans for euro 51.2 million. The amount of current financial debt decreased compared to 31 December 2015, above all due to the reimbursement of a euro 195.4 million bond in February 2016 and a lesser use of current credit lines. The amount concerning non-current bank debt and bonds issued is essentially the same as the previous year, in spite of the new issuance, in October 2016, of a bond with a notional value of euro 400 million, used to partially refinance bonds maturing in 2019 and 2021. At 31 December 2016, medium-long term debt is largely made up of bonds issued on the European market and listed on the Luxembourg Stock Exchange (79% of the total), with repayment at maturity.

As a whole, borrowings show an average term to maturity of over eight years, with 73% maturing after more than 5 years.

Net financial debt settles at euro 2.56 billion

Net financial debt went from euro 2,651.7 million in 2015 to euro 2,558.9 in 2016. This result is mainly due to the positive operating cash flow that more than financed dividend payments.

Group's management generated an operating cash flow higher than the previous year, thanks to both a better result for the period and a good performance of net working capital, which made a greater amount of self-financing available to the Group.

Cash flow thus allowed dividend payments, amounting to euro 144.0 million, to be entirely covered.

Cash flow after dividend payment was positive by euro 109.0 million, and by euro 92.8 million after a few acquisitions made in 2016 (Julia Servizi Più Srl, Gran Sasso Srl).

Net debt / EBITDA: 2.8

The net debt/EBITDA ratio fell to 2.8, benefitting from both operating results that grew over the previous year and a reduced net debt.

These results confirm the financial solidity of the Group, which holds a BAA1 rating with negative outlook from Moody's and a BBB rating with stable outlook from Standard & Poor's.

Funds from operations (FFO)/Net debt: 22.6%

The Funds from operations (FFO)/Net debt ratio grew over the results seen in 2015. This measure as well, like the previously discussed Net debt/EBITDA ratio, benefited from an improved net debt and an increase in operating cash flow, confirming the Group's rising financial stability thanks to a positive generation of operating cash flow, which guarantees its ability to meet its financial obligations.


  • Gas
  • Energia elettrica
  • Ciclo idrico
  • Ambiente
  • Altri servizi


An analysis of the results achieved by management in the various business areas in which the Group operates is provided below, including: the gas area, which covers services in natural gas and LPG distribution and sales, district heating and heat management; the electricity area, which covers services in electricity production, distribution and sales; the integrated water cycle area, which covers aqueduct, purification and sewerage services; the waste management area, which covers services in waste collection, treatment, recovery and disposal; the other services area, which covers services in public lighting and telecommunications, as well as other minor services. The Hera Group has recently revised the arrangement of its multi-business portfolio in order to improve and simplify financial reporting on its industrial structures: the industrial cogeneration business has been transferred from the electricity area to the gas area, bringing it together with heat management, which furthermore respects the Group's organizational outlook. The respective 2015 data has been reclassified so as to reflect these changes.

Contribution coming from the Group's various areas towards overall EBITDA shows a balanced mix, in line with its multi-business strategy

The Group's income statements include corporate headquarter costs and reflect intercompany transactions accounted for at arm's length.

The following analyses of the single business areas take into account all increased revenues and costs, having 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.


Gas: slight growth in margins

At 31 December 2016 the gas area showed growth over 2015 as regards both EBITDA and volumes sold. These results must be considered within a regulatory context that defined 2016 as the third year of the fourth regulatory period (2014-2019) of the tariff system for gas distribution and metering, regulated by resolutions 367/2014/R/Gas and 775/2016/R/Gas. Furthermore, 2016 was the first year in which resolution 583/2015/R/com of 2 December 2015 took effect, modifying the methods used in calculating the rate of return on invested capital for infrastructure services in the gas sector, with the aim of introducing greater stability into the regulatory framework. As of the present financial statement, the revenue covering the underlying cost of amortisation related to investments made in 2016 is recognized on an accrual basis.

Contributo al margine totale in diminuzione

Gas area EBITDA grows slightly, by 0.4%

The following table shows the changes occurred in terms of EBITDA:

(€/mln)Dec 2016Dec 2015Abs. change % Change 
Area EBITDA 300.6 299.5 +1.1 +0.4%
Group EBITDA 916.6 884.4 +32.2 +3.6%
Percentage weight 32.8% 33.9% -1.1 p.p.  

1.4 million gas customers

Total gas customers rose by 4.1.% over 2015, owing to both the commercial and customer loyalty initiatives set in place in order to contrast competition, and a wider customer base, in central Italy in particular with the acquisition of Julia Servizi Più (later merged into Hera Comm Marche Srl), which occurred in June 2016 and contributed with roughly 13 thousand customers, and of Gran Sasso Srl, which contributed with roughly 16 thousand customers.

15.7% increase in volumes sold

Volumes of gas sold rose by 530.9 million m3, or 15.7%, going from 3,382.9 million m3 in 2015 to 3,913.8 in 2016. This change is mainly due to an increase in trading volumes, coming to 472.6 million m3 (12.1% of total volumes). Volumes sold to final customers showed a 1.7% growth compared to 2015, thanks to the increase in the customer base and the contribution coming from Gran Sasso Srl, with 10.7 million m3, and from Julia Servizi Più Srl, with roughly 15.1 million m3. Also note that being awarded a higher portion of the tender for default gas services led to an increase in volumes served over the last months of the year.

Gas: overall EBITDA rises

The following table summarises operating results for the gas area:

Income statement (€/mln)Dec 2016% Inc.Dec 2015% Inc.Abs. change % Change 
Revenues 1,655.3   1,633.5   +21.8 +1.3%
Operating costs (1,241.9) -75.0% (1,216.0) -74.4% +25.9 +2.1%
Personnel costs (122.2) -7.4% (129.2) -7.9% -7.0 -5.4%
Capitalised costs 9.3 0.6% 11.1 0.7% -1.8 -16.2%
EBITDA 300.6 18.2% 299.5 18.3% +1.1 +0.4%

Gas revenues at euro 1,655.3 million

Revenues went from euro 1,633.5 million in 2015 to euro 1,655.3 million at 31 December 2016, growing by euro 21.8 million (1.3%). The main reasons for this include: an increase in volumes of natural gas sold coming to roughly euro 65.1 million, higher revenues for energy savings certificates ensuing from both an increase in price and the greater obligations assigned to distributors and coming to roughly euro 46.5 million, higher revenues tied to the application of accounting principle Ifric12 amounting to roughly euro 4.4 million, higher revenues in district heating and heat management services for a total of euro 4 million, an expanded scope of operations following the acquisition of Gran Sasso Srl which contributed with roughly euro 8.1 million and, lastly, euro 4.1 million for capital gains for the sales of goods involving the transfer to Unica Reti Spa of gas networks in the Municipalities of Meldola and Forlimpopoli, covering both works and plants. These positive effects were partially offset by a fall in the price of raw materials, which had a euro 108.0 impact on sales and trading, and lower regulated revenues due to the reduction in the rate of return, amounting to euro 9.8 million.

The increase in revenues had a proportional effect on operating costs, which grew from euro 1,216.0 million in 2015 to euro 1,241.9 million in 2016, thus showing an overall increase of euro 25.9 million over 2015

Gas EBITDA: euro 300.6 million

EBITDA rose by euro 1.1 million (0.4%), going from euro 299.5 million in 2015 to euro 300.6 million at the end of 2016, thanks to both higher volumes of gas sold and the contribution coming from district heating, which offset lower margins in trading and lower revenues in regulated services, on which the reduced rate of return had a euro 9.8 million impact.

Net investments in the gas area grow to euro 94.8 million

In 2016, investments in the gas area came to euro 94.8 million, recording a euro 5.2 million increase over 2015. In gas distribution, a euro 3.1 million increase was seen, mainly derived from activities in regulatory upgrading as per resolution 554/15 (ex-resolution 631/13) for a large-scale meter substitution, which also involved lower-class devices (G4-G6). Non-routine maintenance on networks and plants also rose, as did interventions for cathodic protection of gas lines in the areas surrounding Padua and Trieste, while requests for new connections recorded a slight drop compared to the previous year.

Investments also increased in district heating, mainly for the revamping of the Barca cogeneration plant in Bologna. New connections for district heating were essentially in line with the amount seen in the previous year.

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

Investments grow

Dec 2016Dec 2015Abs. change % Change 
Networks and plants 71.0 67.9 +3.1 +4.6%
DH/Heat management 23.8 22.6 +1.2 +5.3%
Total Gas Gross 94.8 90.5 +4.3 +4.8%
Capital grants 0.0 0.9 -0.9 -100.0%
Total Gas Net 94.8 89.6 +5.2 +5.8%

2016 RAB: euro 1.066 billion

The Regulatory Asset Base (RAB), which defines the value of assets recognised by the Authority for return on invested capital, increased over 2015.

For further details on this point, see paragraph 1.06.01, Regulatory framework and regulated revenues.


Electricity: an increase in EBITDA

In 2016, EBITDA pertaining to the electricity area grew substantially both in absolute terms and as a contribution to overall Group EBITDA.

Sales and trading activities widened the customer base and grasped the opportunities created in Italy's system as an effect of the crisis in French nuclear plants, and production activities recorded positive performances on the dispatching market.

Furthermore, 2016 was also the first year of the fifth regulatory period (resolution 654/2015/R/eel) for distribution, transmission and metering activities, and the first year in which resolution 583/2015/R/com of 2 December 2015 was implemented, which modified the method used in calculating the rate of return on invested capital for infrastructure services in the electricity business.

As of the present financial statement, the revenue covering the underlying cost of amortisation related to investments made in 2016 is recognized on an accrual basis.

Contribution to EBITDA: +3.4%

Electricity area EBITDA rises by 34.0%

The following table shows the changes occurred in terms of EBITDA:

(€/mln)Dec 2016Dec 2015Abs. change % Change 
Area EBITDA 135.3 101.0 +34.3 +34.0%
Group EBITDA 916.6 884.4 +32.2 +3.6%
Percentage weight 14.8% 11.4% +3.4 p.p.  

880,200 electricity customers

The number of electricity customers saw a 2.7% increase (23.4 thousand), mainly due to growth in the free market, which came to 10.7%, confirming the trend of growth seen in recent years owing to a reinforcement of commercial activities implemented, and to the wider customer base established in 2016 with the acquisition of Gran Sasso Srl, which contributed with roughly 3.7 thousand customers.

Volumes sold fell slightly, by 0.5%

Volumes of electricity sold went from 9,626.0 GWh in December 2015 to 9,577.8 GWh in 2016, showing a slight decrease. The Hera Group limited this drop to 0.5% thanks to the good performance of commercial policies implemented in 2016.

The following table summarises operating results for the area:

Income statement (€/mln)Dec 2016% Inc.Dec 2015% Inc.Abs. change % Change 
Revenues 1,523.5   1,599.9   -76.4 -4.8%
Operating costs (1,349.1) -88.6% (1,461.0) -91.3% -111.9 -7.7%
Personnel costs (46.0) -3.0% (46.0) -2.9% +0.0 +0.0%
Capitalised costs 6.9 0.5% 8.0 0.5% -1.1 -13.7%
EBITDA 135.3 8.9% 101.0 6.3% +34.3 +34.0%

euro 1,523.5 million in revenues in the electricity area

Revenues fell by 4.8%, going from euro 1,599.9 million in December 2015 to euro 1,525.3 million in 2016, thus showing a drop in absolute terms of euro 76.4 million. The main reason for this decrease lies in the fall of the price of energy (Pun, Nationwide price), which dropped on average by 18.2% compared to the previous year, leading to lower sales revenues coming to euro 32 million and lower trading revenues coming to euro 63 million. This effect was partially contained by higher revenues for energy efficiency certificates attained mainly due to the price increase, coming to roughly euro 5.0 million, higher revenues from electricity production in thermoelectric plants, coming to roughly euro 12 million, a greater level of production nationwide to make up for lower imports from France, and higher regulated revenues for the distribution service, coming to euro 3.3 million, in spite of the reduction in the rate of return whose influence came to roughly euro 2.9 million.

Operating costs fell by euro 111.9 million (7.7%); this figure is proportionally higher than the decrease in revenues for the lower cost of raw materials.

Electricity area EBITDA at euro 135.3 million

At the end of 2016, EBITDA increased by euro 34.3 million (34%), going from euro 101.0 million in 2015 to euro 135.3 million in 2016, thanks to higher margins on sales activities and the higher margins in electricity production, on account of a positive trend in dispatching services and higher regulated revenues in distribution, only partially reduced by the drop in the rate of return, for a total of euro 2.9 million.

Net investments in the electricity area reach euro 25.1 million

2016 investments in the electricity area amounted to euro 25.1 million, showing an increase of euro 0.7 million compared to the euro 24.4 million seen in the previous year.

The main interventions concerned non-routine maintenance of plants and grids in the areas surrounding Modena, Imola, Trieste and Gorizia.

Compared to the previous year, higher investments were seen, mainly for non-routine maintenance involving the Cogen plant in Imola.

Requests for new connections in this area showed a slight increase with respect to the previous year.

The details of operating investments in the electricity area are as follows:

Dec 2016Dec 2015Abs. change % Change 
Networks and plants 25.2 24.4 +0.8 +3.3%
Totale Energia Elettrica Lordi  25.2 24.4 +0.8 +3.3%
Capital grants 0.0 0.0 +0.0 +0.0%
Total Electricity Net 25.1 24.4 +0.7 +2.9%

2016 RAB: euro 0.36 billion

The Regulatory Asset Base (RAB), which defines the value of assets recognised by the Authority for return on invested capital, increased over 2015.

For further details on this point, see paragraph 1.06.01, Regulatory framework and regulated revenues.

Integrated water cycle

Integrated water cycle: slight decrease due to lower tariff revenues

In 2016, the integrated water cycle recorded a slight drop compared to 2015, both as a contribution to Group EBITDA and as the absolute value of this single business area. This result is particularly positive considering that 2016 is the first year in which the tariff method defined by the Authority for 2016-2019 (resolution 664/2015) was applied, whose effect mainly lies in a reduction in inflation and in the rate of return on invested capital, which impacted Group EBITDA by euro 18.4 million. As of the present financial statement, the revenue covering the underlying cost of amortisation related to investments made in 2016 is recognized on an accrual basis.

Contribution to EBITDA: -1.3%

Water cycle EBITDA falls by 1.6%

The following table shows the changes occurred in terms of EBITDA:

(€/mln)Dec 2016Dec 2015Abs. change % Change 
Area EBITDA 228.8 232.5 (3.7) (1.6%)
Group EBITDA 916.6 884.4 +32.2 +3.6%
Percentage weight 25.0% 26.3% -1.3 p.p.  

1.5 million customers in the water cycle

The number of water customers settled at 1.5 million, increasing by 3.3 thousand (0.2%) compared to 2015, confirming the trend of internal growth seen across the areas served by the Group. The Emilia Romagna region managed by Hera Spa is responsible for the majority of this growth, thanks to a recovery in the number of new connections.

300 million m3 of water managed in the aqueduct

The main quantitative indicators of the area are as follows:

Volumes dispensed through the aqueduct were essentially in line with 2015: a small increase was seen in the amount managed in sewerage (coming to roughly 0.2%) and purification (roughly 0.7%) compared to the quantities of the previous year. Volumes dispensed, following AEEGSI resolution 664/2015, are an indicator of the Group's activities in the geographical areas it serves, and are subject to equalisation pursuant to regulations that call for a regulated revenue to be recognised independently of volumes distributed.

Non-revenue water stable

Non-billed water, which represents the effectiveness and efficiency of the distribution system, is in line with 2015.


Integrated water cycle: decrease in EBITDA

The table below synthesises the income statement for the water area:

Income statement (€/mln)Dec 2016% Inc.Dec 2015% Inc.Abs. change % Change 
Revenues 807.7 - 796.2 - +11.5 +1.4%
Operating costs (420.6) -52.1% (415.5) -52.2% +5.1 +1.2%
Personnel costs (161.9) -20.0% (151.2) -19.0% +10.7 +7.1%
Capitalised costs 3.6 0.4% 3.0 0.4% +0.6 +19.8%
EBITDA 228.8 28.3% 232.5 29.2% (3.7) (1.6%)

Revenues from the integrated water cycle area at euro 807.7 million

Revenues showed an increase of 1.4%, going from euro 796.2 million at 31 December 2015 to euro 807.7 million in 2016. This euro 11.5 million growth is particularly significant considering that distribution revenues dropped by euro 8.6 million, as an overall effect embracing the reduction in the rate of return for euro 18.4 million, higher revenues covering the underlying cost of amortisation mentioned above, and the redefinition of the restriction on revenues provided for by the Authority for the second regulatory period 2016-2019 (Mti-2). A positive impact came from euro 4.7 million higher revenues for subcontracted works, euro 1.1 million in higher revenues for connections and greater contributions above all in the North-East amounting to roughly euro 3.0 million. Lastly, note the increase in revenues due to the application of accounting principle Ifric12, amounting to euro 5.2 million.

Operating costs rose by euro 5.1 million (1.2%), owing to higher costs for the application of accounting principle Ifric12 coming to euro 5.2 million and a higher amount of subcontracted works. Keeping the operational cost fixed, the Group continually searches for efficiencies and skills in implementation, maintaining constantly increasing quality standards.

EBITDA at euro 228.8 million

EBITDA showed a slight drop, falling by euro 3.7 million (-1.6%), going from euro 232.5 million in 2015 to euro 228.8 million in 2016. This was due to lower dispensing revenues coming to euro 8.6 million, mainly due to the reduction in the rate of return. This drop was partially offset by subcontracting and higher revenues from new connections.


Net investments in the integrated water cycle area: euro 111.8 million

Net investments in the integrated water cycle area amounted to euro 111.8 million, falling compared to the previous year but only as an effect of the higher amount of capital grants received (+7.8 million). Including this contribution, investments rose by euro 4.6 million over the euro 127.2 million seen in 2015, coming to euro 131.8 million.

The interventions mainly concerned extensions, reclamations and network and plant upgrading, in addition to regulatory upgrades involving above all purification and sewerage.

Investments totalled euro 61.5 in the aqueduct, euro 37.6 million in sewerage and euro 32.7 million in purification.

Among the more significant works, note in particular: in the aqueduct, upgrading lines in the historical centre of Bologna, carried out at the same time as the creation of the transportation line Crealis, and an upgrading of interconnections in the Modena water system; in sewerage, continued progress in works for the Rimini

Seawater Protection Plan, including the first phase of the Ausa basin with the underground beach section and the creation of the southern ridge with the Hospital lamination basin, in addition to redevelopment of the sewerage network in other areas; in purification, the creation of the head tank of the Riccione purification plant, upgrading on the Cattolica purifier, revamping of the oxygen production facility in the Idar purification plant in Bologna and, in the areas served by AcegasApsAmga, continued works in upgrading the large purification plants in Servola, Cà Nordio and Abano Terme.

Requests for new water and sewerage connections rose over the previous year, remaining rather low nonetheless due to the situation in the construction sector.

Capital grants amounting to euro 20.0 million included euro 7.3 million pertaining to the tariff component provided for by tariff method for the New Investments Fund (FoNI).

Significant operating investments on aqueducts, sewerage and purification

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

Water Cycle Business
Dec 2016Dec 2015Abs. change % Change 
Aqueduct 61.5 59.1 +2.4 +4.1%
Purification 32.7 33.8 -1.1 -3.3%
Sewage 37.6 34.3 +3.3 +9.6%
Total Water Cycle Gross  131.8 127.2 +4.6 +3.6%
Capital grants 20.0 12.2 +7.8 +63.9%
     of which FoNI (New Investment Fund) 7.3 2.3 +5.0 +217.4%
Total Water Cycle Net 111.8 114.9 -3.1 -2.7%

Rab a 1,42 miliardi di euro

The Regulatory Asset Base (RAB), which defines the value of assets recognised by the Authority for return on invested capital, dropped slightly compared to 2015, mainly owing to the decrease in net operating capital, for the higher funds that lower the RAB and for the effects of the new 2016-2019 regulatory framework (Mti-2).

Waste management

At 31 December 2016 the waste management area's contribution to Group EBITDA came to 25.2%, presenting slight growth in its own EBITDA compared to 2015.

Waste area: slight growth in EBITDA

The following table shows the changes occurred in terms of EBITDA:

(€/mln)Dec 2016Dec 2015Abs. change % Change 
Business EBITDA 230.7 230.0 +0.7 +0.3%
Group EBITDA 916.6 884.4 +32.2 +3.6%
Percentage weight 25.2% 26.0% -0.8 p.p.  

Volumes marketed and treated by the Group in 2016 are as follows:

Quantitative data (thousand of tonnes)Dec 2016Dec 2015Abs. change % Change 
Urban waste 2,047.7 2,040.7 +7.0 +0.3%
Commercial waste 2,340.6 2,002.1 +338.5 +16.9%
Waste marketed 4,388.3 4,042.8 +345.5 +8.5%
Plant by-products 2,479.3 2,182.9 +296.4 +13.6%
Waste treated by type 6,867.6 6,225.7 +641.9 +10.3%

Commercial waste: +16.9%

An analysis of the volumes treated shows an 8.5% increase in waste marketed, thanks to a rise in commercial waste coming to 16.9%. This growth is accounted for above all by the late-2015 acquisitions of Waste Recycling and the Geo Nova Spa plants, which gave significant impetus to industrial waste management. Urban waste increased compared to 2015, thanks to an increase in sorted waste which offset the 10.8 thousand tonne fall in strand waste and the reduction in non-sorted waste. The rise in by-products is mainly due to the corporate acquisitions mentioned above.

+1.0% in sorted waste

Sorted urban waste recorded further progress, passing from 55.4% to 56.4%. In 2016, sorted waste grew in the areas managed by Hera Spa by 0.8%, in those managed by Marche Multiservizi Spa by 2.3%, and in the Triveneto area growth reached 2.5%.

Sharp decrease in the use of landfills

Quantitative data (thousand of tonnes)Dec 2016Dec 2015Abs. change % Change 
Landfill 777.7 918.5 -140.8 -15.3%
Waste-to-energy plants 1,336.3 1,390.3 -54.0 -3.9%
Selecting plant and other 535.5 432.7 +102.8 +23.8%
Composting and stabilisation plants 388.2 455.3 -67.1 -14.7%
Stabilisation and chemical-physical plants 1,154.2 1,141.6 +12.6 +1.1%
Other plants 2,675.8 1,887.2 +788.6 +41.8%
Waste treated by plant 6,867.6 6,225.7 +641.9 +10.3%

The Hera Group operates in the entire waste cycle, with 82 urban and special waste treatment and disposal plants, the most important of which are: 10 waste to energy plants, 11 composters/digesters and 9 selecting plants. Note that in late 2015 the companies Biogas 2015 Srl and Waste Recycling Spa were acquired, as was the corporate branch containing a few Geo Nova Spa plants.

Waste treatment increased by 10.3% over 2015. This trend is mainly explained by the higher volumes managed in the "other plants" section, owing to the changes in scope of operations mentioned above, and an increase in intermediation, which mitigated the fall in landfill usage that had already been seen in 2015.

Waste: slight increase in EBITDA

The table below summarises the income statement for the waste management area:

Income statement (€/mln)Dec 2016% Inc.Dec 2015% Inc.Abs. change % Change 
Revenues 967.3   894.3   +73.0 +8.2%
Operating costs (568.4) -58.8% (502.8) -56.2% +65.6 +13.0%
Personnel costs (174.4) -18.0% (166.0) -18.6% +8.4 +5.1%
Capitalised costs 6.3 0.7% 4.5 0.5% +1.8 +40.3%
EBITDA 230.7 23.9% 230.0 25.7% +0.7 +0.3%

Waste revenues come to euro 967.3

Revenues rose in 2016 by 8.2% or euro 73.0 million, going from euro 894.3 million at the end of 2015 to euro 967.3 million in 2016. The reasons behind this growth include an increase in volumes treated, a different method used in recording energy incentives that as of 2016 are recognised as incentives under the form of revenues instead of a reduction of the cost for green certificates, and the higher revenues from urban hygiene covering the greater services requested. These positive effects were partially offset by lower revenues from electricity production following the decrease in the Cip6/Cec unit price and the reduction in the recognition of green certificates in some plants. Lastly, the changes seen in the price of waste confirm the positive trend in the price of special waste in all commercial assortments.

Operating costs rose by euro 65.6 million in 2016, in line with the higher amount of waste treated and the effect of the different accounting method used for green certificates, as described above.

Waste EBITDA at euro 230.7 million

EBITDA went from euro 230.0 million in 2015 to euro 230.7 million in 2016, thus showing a growth in absolute terms of euro 0.7 million, or 0.3%. This growth must be considered particularly positive, recalling the strong drop in revenues in energy management, amounting to roughly euro 16 million, due to the lower prices of electricity produced and energy certificates. The good performances in the urban hygiene business and in recovered materials sales should also be underlined, along with the rise in volumes marketed, as mentioned above.

Net investments in the waste management area amounting to euro 50.6 million

Net investments in the waste management area involved plant maintenance and upgrading and amounted to euro 50.6 million, up euro 15.5 million over 2015. The figures seen in the composting / digester subsector were in line with the previous year: interventions were carried out in the Ozzano and Cesena composters, and work was done on the Sant'Agata biomethane project.

The increase in investments for landfills, coming to euro 10.8 million, can primarily be traced to the creation of the 9th sector of the Ravenna landfill, the beginning of works on the 5th sector of the Sommacampagna landfill and the 4th sector of Loria. Also note the interventions on the Tre Monti landfill, involving the installation of a new motor and a biogas intake network, as well as works on landslide repair and road access. The WTE subsector showed a slight increase over the previous year, for interventions on the Modena, Ferrara and Pozzilli plants, while in the special waste plant subsector the increases mainly concerned maintenance works on the Ravenna plants.

In ecological islands and collecting equipment, an increase of euro 2.0 million was seen due to investments for sorted waste in the areas surrounding Padua, Trieste and Abano Terme, in addition to interventions for the Collection Centre in Pesaro. Note, furthermore, the implementation in the Triveneto region of HergoAmbiente, the innovative information system that offers integrated management of all the activities of the Hera Group's waste services, managing a network of people and devices, interconnected to administer planning, operational programming and on-field implementation.

In selection and transhipment plants, the euro 1.9 million increase recorded is largely attributable to the consolidation of the company Waste Recycling, and involves the completion of works on the chemical-physical treatment plant, covering the basin of the biological purifier and the new distilling plant for solvent recovery.

Details of operating investments in the waste management area are as follows:

Operating investments increase

Waste Management
Dec 2016Dec 2015Abs. change % Change 
Composting/Digestors 3.2 3.2 +0.0 +0.0%
Landfill 17.0 6.2 +10.8 +174.2%
WTE 9.4 9.1 +0.3 +3.3%
RS Plants 2.9 2.5 +0.4 +16.0%
Ecological areas and gathering equipment 12.3 10.3 +2.0 +19.4%
Transshipment, selection and other plants 5.8 3.9 +1.9 +48.7%
Total Waste Management Gross 50.7 35.2 +15.5 +44.0%
Capital grants 0.1 0.6 -0.5 -83.3%
Total Waste Management Net 50.6 34.6 +16.0 +46.2%

Other services

Other services: EBITDA stable

The other services area brings together all minor services managed by the Group, including public lighting, telecommunications and cemetery services.

During 2016, the results of the other services area remained fundamentally in line with the previous year, with EBITDA going from euro 21.4 million in 2015 to euro 21.3 million in 2016.

Slight drop in contribution to overall EBITDA

Slight decrease in other services area EBITDA

The changes occurred in EBITDA are as follows:

(€/mln)Dec 2016Dec 2015Abs. change Change %
Area EBITDA 21.3 21.4 -0.1 -0.6%
Group EBITDA 916.6 884.4 +32.2 +3.6%
Percentage weight 2.3% 2.4% -0.1 p.p.  

The following table shows the area's main indicators as regards public lighting services:

Quantative dataDec 2016Dec 2015Abs. change % Change 
Public lighting        
Lighting points (thousands) 517.0 523.7 (6.7) (1.3%)
Municipalities served 153.0 157.0 (4.0) (2.5%)

517.0 thousand lighting points

An analysis of the data regarding public lighting shows an decrease of 6.7 thousand lighting points and a loss of 4 municipalities served. Over the course of 2016, the Hera Group acquired roughly 21 thousand lighting points in 14 new municipalities. The most significant acquisition were in Lombardy, with roughly 5 thousand lighting points mainly concentrated in the provinces of Brescia, Bergamo and Varese, in Lazio with roughly 2 thousand lighting points and in the Triveneto area with roughly 8 thousand lighting points, mainly in the provinces of Pordenone, Treviso and Padua, to which one must add a higher number of service requests in municipalities already managed by the Group. The year's increases allowed the loss of roughly 28 thousand lighting points and 18 municipalities managed, above all in Lazio and Lombardy, to be contained.

Other services: revenues rise

The operating results of the area are as follows:

Income statement (€/mln)Dec 2016% Inc.Dec 2015% Inc.Abs. change % Change 
Revenues 131.8   126.2   +5.6 +4.4%
Operating costs (92.7) -70.3% (88.3) -70.0% +4.4 +5.0%
Personnel costs (19.6) -14.8% (18.4) -14.6% +1.2 +6.5%
Capitalised costs 1.7 1.3% 1.9 1.5% -0.2 -10.6%
EBITDA 21.3 16.1% 21.4 16.9% -0.1 -0.6%

Revenues for the other services area at euro 131.8 million

Revenues in the area grew over the previous year, in spite of the transfer in late 2015 of the company Trieste Onoranze e Trasporti Funebri Srl, held by AcegasApsAmga Spa, thanks to both the increase grazie in revenues in the public lighting business in the Emilia-Romagna area and telecommunications.

EBITDA falls by euro 0.1 million

EBITDA showed a slight drop of euro 0.1 million compared to 2015. This trend is due to lower margins in telecommunications services and cemetery services, owing to the late-2015 company transfer mentioned above, despite the higher margins in public illumination, due to the good performances of Hera Luce.

Net investments of euro 15.8 million

Investments in the other services area reached euro 15.8 million, increasing by euro 0.5 million over the previous year.

In telecommunications, investments coming to euro 8.9 million were made in networks and TLC and IDC (Internet Data Centre) services, with a slight fall compared to 2015.

Investments totalling euro 7.0 million in public lighting services mainly went to maintaining, enhancing and modernising lampposts, with an overall increase of euro 1.0 million that included both the company Hera Luce Srl and management of services in AcegasApsAmga's operating area.

Details of operating investments in the other services area are as follows:

Other Services
Dec 2016Dec 2015Abs. change % Change 
TLC 8.9 9.3 -0.4 -4.3%
Public Lighting and Street Lights 7.0 6.0 +1.0 +16.7%
Total Other Services Gross 15.9 15.3 +0.6 +3.9%
Capital contributions 0.2 0.0 +0.2 +100.0%
Total Other Services Net 15.8 15.3 +0.5 +3.3%


Trading and procurement policy

Upturn in gas consumption:+5.2%

The recovery in natural gas consumption continued in 2016, reaching 70.4 billion m3, up 5.2% compared to the 66.9 billion m3 seen in the previous year, thus confirming the turnaround that began in 2015. More specifically, this growth in gas consumption is due to a rise in demand in thermoelectric plants, which settled at 23.3 billion m3, an increase of 12.4% over the previous year. This rise can mainly be explained by the lower electricity imports coming from France and a fall in hydroelectric production. The recovery was also significant in industrial consumption, which grew by 4.8% over 2015 and reached 13.4 billion m3. Household consumption instead, which represents over 40% of overall demand, remained virtually in line with 2015 (-0.3%), at 31.4 billion m3.

An optimised portfolio

Trading operations were oriented on the one hand towards optimizing the portfolio, with a view to balancing short-term positions, and on the other towards negotiating and managing new supply contracts for the 2016/2017 thermal year.

Going into further detail, short-term adjustments, oriented by an efficient prediction of upcoming demand, were implemented through purchase or sales agreements at the Virtual exchange point (VEP-Italy), the Virtual trading point (VTP-Austria), the Title transfer facility (TTF-Holland) and Net Connect Germany (NCG-Germany). The conditions for these transactions were generally favourable and allowed objectives in terms of expected economic results to be met.

As of April, Hera Trading initiated gas procurement aimed at both filling the storage capacity purchased by auction, with roughly 0.35 billion m3, and providing gas destined to the free market for the Group's sales companies for the 2016/17 thermal year, with roughly 0.5 billion m3, sourcing it directly from the spot market.

Negotiation of modulated gas for roughly 1.6 billion m3

During the month of April, as in the previous year, negotiations also took place for modulated gas intended for the protected market delivery points (so-called REMI) of the Group's sales companies. The total amount reached roughly 1.6 billion m3 for the 2016/17 thermal year, as per the supply conditions resolved by the Authority beginning in October 2013. This negotiation allowed particularly favourable terms to be obtained in terms of both prices and payment conditions.

Electricity consumption begins to decline once again:-2.1%

After the turnaround seen in 2015, electricity consumption in 2016 began to fall again. According to the preliminary data elaborated by the national network transmission company (Terna), the total amount of electricity requested in Italy in 2016 reached 310.2 billion kWh, dropping by 2.1% compared to 2015.

This decrease did not change significantly among the country's various regions, with the exception of the islands, where the fall in demand came to -4%.

Despite the drop in consumption, national electricity production recorded an increase of 1.2%, which can be attributed to the sharp decline in the net balance towards foreign countries, coming to 37.0 TWh compared to the 46.4 TWh seen in 2015 (-20.2%). These lower net imports were offset by both a recovery in thermoelectric production, which increased by 2.5%, going from 182.9 TWh in 2015 to 187.5 TWh in 2016, and the significant rise in wind power generation, from 14.7 TWh in the previous year to 17.5 TWh in 2016 (+18.7%). Both photovoltaic and geothermal power generation were instead stable, at 22.5 TWh and 5.9 TWh respectively. An opposite trend was seen in hydroelectric production, which owing to lower precipitation dropped by 8.9%, settling at 42.3 TWh compared to the 46.5 TWh seen in 2015.

Increase in earnings from power plants

Earnings coming from thermoelectric plants, in Teverola e Sparanise in particular, showed a significant increase compared to the figures seen in 2015. Contributions to this result came from both Terna's greater usage of the Dispatching services market (Msd) and the noteworthy increase in the National single price (Pun) in the fourth quarter of 2016, as a direct consequence of the increase in prices seen on the French electricity market.

The first half of 2016 saw the end of interventions on the Sparanise plant intended to increase the level of flexibility, with a view towards the moment when the capacity market will be introduced. Problems remain in the performance of the Ortona plant, located in an area with scarce demand on the Msd, even though the results improved compared to the previous year

Electricity market reform

The progressive increase in dispatching expenses incurred by Terna towards the middle of 2016 led the Authority to adopt, with resolution 444/2016/R/eel "Priority measures in evaluating actual imbalances in electricity dispatching", a temporary regulation intended to discourage over/under-planning strategies, while waiting for fully operational regulations to be defined. In particular, the resolution calls for, regarding consumption units and non-enabled production units which are not Non-programmable renewable source production units (Frnp), a mixed, single-dual pricing system to be used in evaluating actual imbalances, with a tolerance band of ±15%.

Higher earnings from electricity trading and imports

In 2016, the strong instability in prices witnessed in the last quarter, ensuing from the tension seen in the availability of French nuclear power plants, allowed for a greater valorisation of portfolio optimization activities, and in particular a significant valorisation of the capacity to import electricity.

Furthermore, the management/optimisation of Hera Comm Srl's purchasing portfolio, by operating on the Stock exchange and on Over the counter platforms (Otc), was particularly effective.

Commodity and exchange risk management proved once again to be particularly appropriate, allowing for a unitary and efficient management of price risk, which supported commercial activities in the gas and electricity areas, in compliance with Group policies.

Remit obligations respected

During 2016, obligations concerning data reporting to the Agency for the cooperation of energy regulators (Acer), called for by the Regulation on wholesale energy market integrity and transparency (Remit), came into effect. Group companies falling under scope of this regulation, in particular Hera Trading Srl, took steps to adapt, in terms of their tools and procedures, in order to comply with these obligations.


Financial policies and ratings

A difficult recovery, not without risks, unbalance

Eight years after the beginning of the global financial crisis, the world's economy is still struggling to regain momentum. The first half of 2016 confirmed the signs of recovery that had been seen in 2015; and yet, the last few months of the year also brought to light the presence of increasing risks of stagnation which could further undermine the already fragile recovery. The economic growth recorded over the last two years is too slow, and the performance of most of the world's economies have remained below their potential for too long.

In the euro area, even though growth continues, the risks associated with trends in foreign demand and geopolitical uncertainties have become accentuated. The unemployment rate stood at 11.9% at year-end, its highest level since June 2015.

In general, the performance of the major European economies proved to be unsatisfactory, especially considering the highly favourable conditions that characterize the current situation, which should lead to much more pronounced growth. Raw materials, especially energy, have in fact seen their prices fall continuously over the past two years, and since all major European economies are net importers of raw materials, this factor should promote competitiveness. Similarly, the weaker euro created by the highly expansionary monetary policy implemented by the ECB, along with less restrictive fiscal policies, should have favoured recovery and led to an increase in consumption and investment. However, despite the simultaneous presence of all these incentives, Europe's economies have grown very slowly and the possibility that some of these factors may disappear increases uncertainty.

ECB: no change in interest rates and continued expansionary monetary policies

In its latest monetary policy meeting, the ECB decided to leave interest rates unchanged, with the main rate coming to zero, the rate on bank deposits to minus 40 bps and the rate on marginal lending to 25 bps, while medium-long term swap rates increased in the final months of the year, driven by the sharp rise in Treasuries in the Trump era. Quantitative easing (QE) will continue until March 2017 to the tune of 80 billion euro per month and then fall to 60 billion euro until December 2017, or in any case until it achieves its inflation target. Furthermore, it will also be possible to purchase eurozone government bonds at levels of return below the marginal lending rate expected for the repurchase program.

The measures taken by the ECB's Governing Council could support economic activity in various ways: by encouraging an influx of credit to the economy and reducing its cost; providing certainties as to the availability and cost of bank deposits; lowering the cost of capital for companies; reinforcing the value of the financial and real wealth of families; stimulating the housing market. Support for economic activity and employment is a prerequisite for the return of inflation to levels consistent with price stability.

10-year Btp-Bund Spread vs. Hera Spread

The spread between European government securities, despite being significantly reduced by QE, continues to indicate the difference in sovereign risk among eurozone member countries. In the final months of the year, the spread between the Italian BTP and the German Bund widened due to uncertainties as to the future of the Italian Government, eventually paying a yield of 1.9%, with a differential with respect to the Bund that, after reaching a minimum of 95 bps in early 2016, climbed, reaching peaks of 187 bps in November, only to re-stabilise, after the referendum, around 160 bps.

In spite of this, Hera's ten-year spread was not affected, thanks to the strong confidence shown by investors and its stable credit rating.

Liability management to optimise the average cost of debt

The Group gives constant attention to a financial management capable of maximising its yield profile while maintaining a cautious risk strategy. The average cost of debt has been optimised through forms of liability and financial risk management aimed at seizing favourable market opportunities. In particular, in October, a bond was issued for 400 million euro with a time to maturity of ten years, to partially refinance two bonds maturing in 2019 and 2021, allowing the Group to extend its average length of debt and fix for the next ten years a particularly low rate, under 1%.

To support liquidity risk indicators and optimise the costs/convenience of funding, the Group has obtained committed credit lines amounting to € 395 million, with an average age of over two years.

Financial risk management strategy

A list is provided hereunder of the policies and principles aimed at financial risk management and control, including liquidity risk with the related default risk and debt covenants, interest rate risk, exchange rate risk and rating risk.

Liquidity risk

Proactive liquidity management

The Group attempts to match the maturities of its assets and liabilities, linking its investments to sources of funds that are consistent in terms of maturity and manner of repayment, taking into account the refinancing requirements of its current debt structure.

Liquidity risk refers to a company's potential failure to meet its financial obligations, due to an inability to obtain new funds or sell assets on the market.

The Group's objective is to ensure such a level of liquidity as to make it possible to meet its contractual obligations under both normal and critical conditions by maintaining available lines of credit, liquidity and a timely start of negotiations on maturing loans, optimizing the cost of funding on the basis of current and future market conditions.

The table below shows the 'worst case scenario', where no consideration is given to assets (cash, trade receivables etc.) and emphasis is placed on financial liabilities, both principal and interest, trade payables and interest rate derivatives. All demand loans are called in while other loans mature on the date when repayment can be demanded.

Adequate liquidity for a worst case scenario

Worst case scenario31.12.201631.12.2015
(mln/€) from 1 to 3 months from 3 months to 1 year from 1 to 2 years from 1 to 3 months from 3 months to 1 year from 1 to 2 years
Bonds 38 76 76 242 84 84
Debts and other financial liabilities 76 77 57 134 97 75
Trade payables 1,271 0 0 1,121 0 0
Total 1,386 153 133 1,497 181 160

In order to guarantee sufficient liquidity to meet every financial obligation for at least the next two years (the time limit of the worst case scenario shown above), at 31 December 2016 the Group had € 351.5 million in liquidity, € 474 million in unused lines of credit of which € 395 million in committed lines of credit, and a substantial amount that can be drawn down under uncommitted lines of credit (€ 1,000 million).

The lines of credit and the corresponding financial assets are not concentrated on a specific lender, but distributed among major Italian and foreign banks, with a usage much lower than the total available.

The Group's financial structure is both solid and balanced in terms of composition and time to maturity, bringing liquidity risk to a minimum even in the event of particularly critical scenarios.

Average term to maturity of debt: over eight years

The Group's financial structure is both solid and balanced in terms of composition and time to maturity, bringing liquidity risk to a minimum even in the event of particularly critical scenarios.

The amount of debt that matures within the year has fallen to 4.4% compared to the month of December (11.8%) as an effect of the reimbursement of the eurobond that matured in February 2016 (€ 195.4 million) and a lesser usage of short-term lines, repayable on demand.

The amount of long-term debt comes to roughly 95.6% of total financial debt, of which approximately 80% consists in bonds with repayment at maturity. The average term to maturity is over 8 years, of which 69% maturing beyond 5 years.

The table below shows cash outflows broken down by annual maturity, within and beyond five years.

Debt nominal outflow  (mln/€)31.12.201731.12.201831.12.201931.12.202031.12.2021Over 5 yearsTotal
Bonds 0 0 395 0 290 1,935 2,620
Bank debt/due to others 144 53 53 49 47 320 666
Total 144 53 448 49 337 2,256 3,285

No financial covenants

Default risk and debt covenants

This risk is related to the possibility that loan agreements entered into contain clauses whereby the lender may demand accelerated repayment of the loan if and when certain events occur, thus giving rise to a potential liquidity risk.

This risk is related to the possibility that loan agreements entered into contain clauses whereby the lender may demand accelerated repayment of the loan if and when certain events occur, thus giving rise to a potential liquidity risk.

As to acceleration clauses, there are no financial covenants on debt except a corporate rating limit, specifying that no amount in excess of €150 million in debt can be rated below investment grade (BBB-) by even one rating agency.

Change of control & Investement grade

Sulla parte restante del debito si prevede un rimborso anticipato obbligatorio solo in caso di un cambiamento significativo dell'assetto di controllo del Gruppo (change of control) che ne comporti un downgrade a un livello non-investment grade, o inferiore, ovvero la cessazione della pubblicazione del rating.

Interest rate risk

Active and prudential management of interest rate risk

The Group uses external funding sources in the form of medium- to long-term financial debt and various types of short-term credit facilities, and invests its available cash primarily in immediately realizable highly liquid money market instruments. Changes in market interest rates affect both the financial costs associated with different types of financing and the revenue from different types of liquidity investment, thus impacting the Group's cash flows and net financial charges.

The Group's financial policy has been designed to identify an optimal mix of fixed- and floating-rate funding, in line with a prudential approach to interest rate risk management. The latter aims to stabilize cash flows, so as to maintain the margins and certainty of cash flows from operating activities.

Interest rate risk management entails, from time to time, and depending on market conditions, transactions involving a specific combination of fixed-rate and floating-rate financial instruments as well as derivative products.

The Group's exposure to interest rate risk, including the effect of derivatives, comes to 16% of total borrowings, while the remaining 84% of debt is at fixed rates.

The Group applies a financial management approach based on risk mitigation, adopting a risk hedging policy that leaves no room for the use of derivatives for speculative purposes, derivatives being a perfect hedge of the underlying debt instruments.

84% of debt at fixed rates

Gross borrowings (*)31.12.201631.12.2015
(mln/€) without derivates with derivates % with derivates without derivates with derivates % with derivates
fixed rate 2,693.2 2,711.8 84% 2,799 2,826 83%
floating rate 520.0 501.4 16% 593 567 17%
Total 3,213 3,213 100% 3,392 3,392 100%

Exchange risk unrelated to commodity risk

The Group adopts a prudential approach towards exposure to currency risk, in which all currency positions are netted or hedged using derivative instruments (cross-currency swaps). The Group currently has a bond outstanding for 20 billion Japanese yen, fully hedged by a cross currency swap.


Ratings confirm the strong points built up by the Group over time

Hera Spa has been given a long-term 'BAA1 outlook negative' rating by Moody's and a 'BBB outlook stabile' rating by Standard & Poor's (S&P).

On 1 June 2016 Moody's issued a credit opinion confirming the "BAA1" rating with a stable outlook. This positive appraisal of the Group's risk profile is due to its solid and balanced business portfolio, in addition to its good operating performance and consolidated strategy. On 12 December, following a deterioration in the nation's risk profile, the outlook was modified from stable to negative, since 50% of the Group's EBITDA is derived from regulated businesses. Nevertheless, the Groups remains one notch above the sovereign rating thanks to the solidity of the remaining 50% of its non-regulated businesses, its good liquidity profile and its resilient indicators in credit worthiness.

In August, the rating previously issued by Standard & Poor's was also confirmed, because the Group had met its targets in credit worthiness. S&P believes that the Group's solvency is not completely dependent on the conditions of sovereign risk, and that the premises for it being affected by the latter do not subsist.

Given the current macroeconomic context and the prolonged uncertainty of Italy's economic prospects, the Group's actions and strategies are always calibrated so as to maintain and/or upgrade its ratings.


Sustainability policy

Over the course of 2016 the Group enjoyed significant improvement in terms of social and environmental sustainability, as attested by results and the number of initiatives and projects it launched.

Sustainability has played a key role in Hera's strategy since its establishment and the Group's approach provides for the integration of sustainability in planning and control systems. This has been implemented through:

  • a balanced scorecard system linked to incentives and involving the entire management (on average, sustainability goals accounted for 22% of the variable manager remuneration in 2016);

  • a progressive improvement of the Group's accountability profile, as attested by the sustainability report (covering the maximum application level of the GRI-G4 guidelines) approved as part of the financial statement beginning in 2007 (and thus 10 years before the introduction of recent regulations that made it mandatory) as well as by the specific sustainability reports supplemented in 2016 by a new report dedicated to customers and local communities, titled "the thousand faces of our service".

In 2016 a process was initiated aimed at identifying Hera's approach to creating shared value (CSV) inspired by the suggestions Porter and Kramer have been offering since 2011 and taking into account the new EU communications concerning CSR from the same year. This process made it possible to develop a specific definition of CSV that will guide the evolution of the Group's approach to CSR and further enrich sustainability reporting with new visions and perspectives, some of which have already been anticipated in the 2016 Sustainability Report.

Furthermore, Hera's approach to CSV will inspire a new direction for the future strategy of the individual businesses managed by the Group, a strategy that already fully integrates elements of sustainability, in line with the objectives for sustainable development as defined in the 2030 UN Agenda. This long-established approach already enables the Group to present projects and activities in the direction of CSV. Many of these are described in the 2016 Sustainability Report which also includes, for the first time, the EBITDA generated from activities that comply with CSV.

The significant focus on value systems was reflected in 2016 with the third update of the ethical code carried out through a participatory process and completed with the approval of the fourth edition of the code by the Board of Directors on 15 February 2017. Additionally, the awareness-raising seminars on the code of ethics and corporate social responsibility targeting executives, managers and new employees have continued and the AlfabEtico training process extended to Triveneto involved, at the end of 2016, 85% of the employees of AcegasApsAmg.

The sustainability goals achieved and the main events carried out in 2016 have covered the following areas:

Safety at work, welfare and professional development

Thanks to the awareness programs and the OHSAS 18001 certification, covering 91% of the Group's employees, the 2016 accident frequency rate dropped, equaling 17.8 (vs 20,6 in 2015). This reduction was recorded in all of the Group's main companies as well as in the labor force population, for which the frequency rate decreased by 11% compared to 2015. In 2016, the Hextra welfare system was launched with the allocation of 1.9 million Euros and which 97% of workers subscribed to. Finally, the training maintained high levels in 2016, with average 29 training hours per capita (as compared to 31 hours in 2015 and 28 in 2014).

Waste management: state-of-the-art in Italy, consistent with EU objectives concerning circular economy

The year 2016 saw a further drop in landfill use for urban waste disposal: 7.6% against 8.6% in the previous year (Italian 2015 average: 30%). Concerning this aspect, Hera was nearly 15 years ahead of the EU target on circular economy and is ranked among the best performing European countries. Sorted collection increased from 54.4% to 56.6% (2015 Italian average: 47.5%).

The environmental performance results of the Group's 10 waste-to-energy plantsare encouraging; atmosphere emissions were very limited in 2016 and, on average, 86% lower than the maximum level. Finally, in November last year Hera issued the 7° edition of the `Tracing waste' report. Certified by an independent body, DNV-GL, this report provides citizens with factual evidence that sorted collection is still on the rise and totals 94.4%. For the first time, the report includes the positioning of the area served by Hera with respect to the recycling targets set by the EU as part of the circular economy package: the overall recycling rate (at 48%, Hera is already close to the objective for 2020) and recycling rate for packaging (Hera is already close to the objective for 2025).

Service quality and customer support

Hera Comm's customer contact quality standards rose again in 2016: the average waiting time at the call center equaled 34 seconds for residential customers and 36 seconds for business customers. The average waiting time was 10.4 minutes in 2016. In Triveneto, contact channel performance greatly improved, partly overcoming the issues originating from the transfer of the IT invoicing systems to the Group's systems. A strong improvement is expected for 2017.

The constantly increasing web-run accounts also affected customer support sustainability: customers registering for online services rose to 17.5% in 2016, whereas applications for electronic billing rose to 16.1% (+14% and +21% respectively).

The 2016 survey on the Group's service quality (about 5,900 interviews) recorded a high customer satisfaction rate(70/100), increasing compared to the previous year. Survey data will be used to define further progress, in addition to the measures being planned as part of the "Customer experience" project aiming to improve customers' experience with Hera that was launched in 2015 and continued over 2016.

Energy efficiency among our priorities

The implemented ISO 50001 measures (incorporated into the energy improvement plan) have already enabled us to reduce energy consumption by about 6,100 tep, equaling 2.6% of 2013 consumption. The improvement plan provides further energy efficiency steps (totaling 2,500 tep) to be implemented by 2017, providing a 3.7% total savings compared to energy consumption in 2013. To grant weight to the Group's commitment in this regard, the Valore all'Energia report, dedicated entirely to energy efficiency and published for the first time in 2015, was extended to AcegasApsAmga and Marche Multiservizi in 2016 and was once again publicly presented at Ecomondo. In addition, many energy efficiency measures are being carried out with customer/partner companies, with the Group offering its know-how, including through Hera Servizi Energia. These include commercial offers such as Nuova Idea Hera, Hera Thermo and Hera Caldo Smart that enable customers to reduce their consumption.

Significant commitment to sewage treatment sustainability

In 2016, the main measures were aimed at redesigning the Rimini sewage and purification system (5 out of 11 interventions under the Optimized Bathing Safeguard Plan concluded), refurbishing the Servola purifier in Trieste (with the launch of its new purification system scheduled for 2017), and upgrading the purifying efficiency and/or reducing energy consumption for the Padua (Cà Nordio), Abano Terme (Pd),Cesenatico (Fc) and Cattolica (Rn) purifiers, work which is to be completed. The multi-annual adaptation of urban centers continued: 7 more were adapted in 2016, for 459 thousand residents.

Our focus on sustainability extends to the supply chain

In 2016 as well, in selecting its suppliers the Group prioritized the most profitable bid method used in public procurement procedures, used in 97% of public calls for tenders (in terms of value) for an overall 63% of the total value of allotments. The average score for social and environmental aspects was 26/100. The employment of disadvantaged people (743 in 2016) resulted in a further growth in the value of supplies from social cooperatives, which reached 57.2 million Euros last year (+ 23% compared to 2015). Supplies from local providers grew by 69%, while the estimated employment spin-off equals about 6,037 people, thus confirming the Group's leading role in local development. Supplier monitoring under SA8000 regulation continued in 2016, as did accident research monitoring for the leading suppliers (those involved in such monitoring account for 71% of the value of goods and services).

Focus on territory and communities

Environmental education in schools was again carried out in 2016; in all of the areas, 'La Grande Macchina' and 'Un Pozzo di Scienza' events were consolidated, with over 96,000 participants. Our focus on the local area was expressed through the continuation of the 'Regala un Albero alla tua Città' campaign in 2016,with a new target of 50,000 electronic bill subscribers, associated with an additional 1,000 trees. Thanks to the two editions of the campaign, 150,000 new customers started using electronic billing, which made it possible to plant 3,000 trees and create 111 green areas in 59 municipalities. Thanks to this outcome, it is possible to avoid using 3.6 million paper sheets and producing 67 tons of CO2 emissions each year.

Other evidence of our innovative focus on community and local sustainable development are:

  • the spread of the 'Il Rifiutologo' (The Wastologist) app, downloaded by over 118,000 people, which informs users about proper sorted collection while enabling them to report malpractice through their smartphones (activated in all of the 135 municipalities served by Hera Spa, as well as Padua and Trieste and scheduled to be extended to Marche in 2017);

  • the extension of several waste reduction programs (eg 'Cambia il Finale', 'Farmaco Amico', 'Cibo Amico'), resulted in encouraging social outcomes and preventing about 10,600 tons of waste in 2016, corresponding to the yearly production of about 17,000 people;

  • the extension of the pilot scheme for the multi-stakeholder local committee 'Hera LAB' established in 2013 in the Emilia-Romagna area, to interface with local communities and develop better sustainability in Hera-managed services. As many as 69 representatives from different stakeholder categories, appointed by the Board of Directors, are involved in the 6 active, local Hera LABs. There were 14 schemes proposed by the LABs at the end of 2016, and 17 to be launched shortly.

For a more extensive analysis of the results in these areas, please refer to the Sustainability Report.


Technological innovation

Over the course of the year a number of initiatives were developed in the areas of circular economy, energy efficiency and new services for the city. The main projects are described here below.


This project involves revamping the composting plant in Sant'Agata Bolognese (Bo) aimed at producing bio-methane from the organic component of sorted waste collection. The project provides for the insertion of an anaerobic digestion section and a system for purifying the biogas produced (upgrading). This plant will be able to treat 100 thousand t/y of organic waste from sorted waste collection, and produce about 7 million cubic meters/y of bio-methane as well as about 20 thousand t/y of compost.

Over the course of 2016, the activities for the authorization process went forward and authorization is expected to be obtained in the first quarter of 2017; the insertion of bio-methane into the Snam transport network has been defined with the relevant authorities. The call for tenders to assign civil works was concluded; this, together with the provider of the anaerobic digestion and upgrading systems, completes the set of the main actors needed for the construction of the new plant.

The introduction of bio-methane into the Snam network is scheduled to begin in the second half of 2018, thus achieving a perfect example of circular economy: food waste can be used to produce reusable methane gas for domestic use to cook other foods (or even to fuel natural gas vehicles).

Biomethane 2.0 and bioethanol

The types of waste managed by the Group include vegetable waste from the maintenance of parks and gardens. With a view to circular economy a study was launched analyzing the technology aimed at producing sustainable bio-energy fuels from the waste treatment.

These waste materials are currently used in composting processes or sent to energy recovery through combustion, but they could be exploited in a more effective way in the production of bio-ethanol or bio-methane. These fuels fall within the definition of advanced fuels because they are produced from waste material rather than from dedicated energy crops that subtract land and resources that could be used for human or animal food production. In the European and Italian scenario types of fuel defined as advanced will play an increasingly important role in reducing environmental impacts

To obtain bio-ethanol or bio-methane from wood-cellulose waste, it is necessary to use special thermal pretreatments with steam under pressure, which makes the material more suitable to the action of bacteria or yeasts, in anaerobic digestion processes or with alcoholic fermentation.

Initial evaluations were conducted during the year 2016 to determine the potential production of bio-ethanol or bio-methane; in 2017 more specific surveys will be initiated to characterize the wood-cellulose waste that vary seasonally and depending on the area.

Smart waste

In collaboration with the Consorzio Futuro in Ricerca of Ferrara and the Department of Architecture of the University of Ferrara, a prototype for the indoor collection of municipal waste was developed as an alternative and complementary solution of the collection systems already present in the local areas. In the new model the collection of waste is managed through user identification and the weight and volume of the waste conferred is determined through image recognition systems, adopting technical and plant devices to facilitate the transfer of assets. The innovative aspect of this prototype regards the aggregation into one advanced device (smart totem) of other services for the city such as environmental monitoring, video surveillance, other services of Information and Communication Technology (ICT) and electrical charging for bikes and cars. All data and information can be transmitted to a central system, the operation center, which is able to perform data processing and trigger actions such as emptying full bins, calling for the intervention of the police, etc.

Energy recovery of biogas from sewage sludge

These are two efficiency projects of the sludge line in the urban waste water treatment plants of Modena and Rimini that aim to produce renewable energy and reduce the amount of sludge to be disposed of.

It involves the installation of a dynamic sludge thickener prior to the anaerobic digestion section and a co-generator, which will aim to produce renewable electrical and heat energy; these energy resources will be directly used in the plant.

In Modena the final project was completed and the authorization procedure will be activated by the first quarter of 2017.

A S. Giustina (Rn) the feasibility study was concluded and the authorization phase is expected to start by the end of 2017.

Smart city

New services for the city were tested through demonstration installations and mainly involved video analysis, environmental monitoring, coordination worksites and the integration of services through a single technology platform.


The video analysis systems used as part of the Advanced water security project were installed in the plants of the water systems of Bologna Borgo Panigale and Bologna San Vitale. These applications are intended to assess their suitability and reliability.

In each of the two plants a thermal camera and an optical were installed, in the first case a fixed shot camera and in another with movement to analyze a more extensive area, which can acquire images in synchronization and activate the registration in case of detected intrusion of the thermal camera.

The detected intrusion trigger alarms that are managed by the Milestone software and sent to the relevant organs.

Environmental monitoring

For environmental monitoring a new generation controller has been identified, its reasonable price allows a widespread use compared to more expensive equipment currently in use. The main parameters measured are the atmospheric particulate matter (PM 2.5 and PM 10), ozone, nitrogen oxides, carbon monoxide, carbon dioxide, volatile organic compounds, temperature, humidity and environmental noise. The units feature a CPU, a card for acquiring and transmitting data, and a system powered by solar panel or electric line. Over the course of 2017, the functioning of the control units and the correct correlation with the trends of the parameters measured by the ARPA monitoring stations will be tested.

Ufm (Underground facility management)

The coordination system for the worksites was developed with thetechnology of the Consorzio Futuro in Ricerca Ferrara and represents a true intra-group coordination platform to optimize the activities carried out in the local area, by reducing the number of excavations, and will manage in an integrated way the authorization documents and worksite data. This system may possibly also be extended to local administrations for managing all the excavation operations.

Operation center

The above services are included in a single IT platform called operation center, which makes it possible to display data in real time, process them, put them in correlation and create value-added synoptic views. The operation center is designed to be integrated with other services such as energy maps or the smart totem. It can be used to manage both the Group's assets and the services offered by public administrations as a dashboard for managing and analyzing the local area and information to citizens.

The challenge for the smart city is, in addition to the acquisition of data through the sensors in the local area, in the implementation of integrated systems for data processing; only in this way it will be possible to incorporate new knowledge and subsequent lines of urban and business development.

Other initiatives

To keep pace with developments taking place in the environment surrounding the Group other initiatives have been undertaken such as:

  • the search for new technologies and solutions on the market;

  • the monitoring of European (Horizon 2020 and Life) and national / regional calls (POR / ERDF).

  • the creation of the open innovation platform HEuRekA open to all employees to collect, comment and evaluate innovative ideas and proposals;

  • the creation or dissemination of tools to facilitate work (videopresence tools, apps for accessing the main services available for employees, Wi-Fi coverage for the Group's main business locations, etc.).


Quality, safety and environment

Nel 2016 la Direzione Qualità Sicurezza Ambiente ha ottenuto il mantenimento di tutte le certificazioni dei sistemi di gestione (ISO 9001, ISO 14001, OHSAS 18000, ISO 50001, ISO 11352 e SA 8000) anche tenuto conto delle modifiche societarie intervenute.

Si è consolidato il ruolo di un governo centrale da parte della Direzione su temi trasversali al Gruppo quali ad esempio: gestione bonifiche manufatti contenenti amianto, gestione delle emergenze nei siti civili, presidio privacy anche dove non era presente il service della Direzione Qualità Sicurezza Ambiente.

Avvio analisi e definizione riorganizzativa della Direzione in un'ottica di efficienza e agilità organizzativa, creando un pool di risorse flessibili, per agevolare una gestione per progetti relativi alle necessità dei clienti interni.

Avvio processo di revisione del sistema di gestione a seguito delle nuove norme ISO 9001:2015 e ISO 14000:2015 attraverso una gap analysis in preparazione del mantenimento delle certificazioni programmato nel 2017.

Senza soluzione di continuità con gli anni precedenti gli indici infortunistici sono diminuiti.


Industrial relations, development and staff training

Industrial relations

At the Group level, the New protocol agreement regarding procurement was signed, drafted in keeping with the new arrangements and regulatory requirements on procurement and outsourcing of services and work as well as the agreement on the integrated welfare system which provides, for the 2016-2018 three-year period, a flexible annual welfare package that each employee will allocate to various welfare initiatives. Still at the Group level, the framework agreement on funded training.

In the Emilia-Romagna area, the joint review process required by law has been completed relating to the transfer, by Hera Spa to In rete Distributione Energia Spa, of the energy distribution networks business unit and by Hera Spa to Heratech Srl, the business unit comprising the technical department of clients and engineering department.

It was also decided to carry out in some areas actions of fine tuning compared to current availability models. In the networks, aqueduct and sewer systems sector, in some areas a new hourly breakdown for the summer period has been agreed, resulting in a reduction of on-call overtime. Consequently, the obligations arising from the Authority resolution no. 655/2015 defined a new articulation of the working hours for clerical staff of Hera Comm Srl, operating in the field of family market Department, in the areas of Cesena, Ferrara, Ravenna and Rimini. It was also established that for Hera Group's staff covered by the collective labor agreement for the Chemical industry, beginning in the year 2017, the attendance bonus will be abolished and included as a specific objective in the Group's performance bonus. An agreement was also signed on a new organization of the availability for Herambiente Spa's selection and recovery plants. In compliance with the procedure provided for in the renewal of the collective labor agreement for Utilitalia Environmental Services of July 10, 2016, the comparison for determining the application methods of the new working hours ended, with the agreement of 38 hours per week beginning on 1 January 2017, (procedure carried out in all Group areas).

In the Friuli Venezia Giulia and Veneto area, the shares of the Company Trieste Trasporti Onoranze Funebri Srl, held in its entirety by AcegasApsAmga Spa, were all sold to another shareholder. The agreement on welfare of the Hera Group was implemented, in addition initiating a number of negotiations relating the harmonization of the company Crals located in the various areas. An agreement concerning the possibility of extending the possibility to transfer activities in the field of environmental services to social cooperation was also signed. With regard to the Company AcegasApsAmga Spa, a joint examination procedure was also carried out in order to complete the sale of the business unit comprising the laboratories in Padua and Trieste of AcegasApsAmga Spa to Heratech Srl.

In the Marche area, the agreement to set aside four days of closure to facilitate the use of vacation days was signed. Agreements on funded training were also signed. A memorandum of understanding for the transfer to Marche Multiservizi Falconara Srl of 74 employees of the Marche Multiservizi Spa Company in Pesaro was also signed, as a result of the transfer of the business unit.


Our commitment to training and to spreading the Group's leadership model continued: a series of initiatives aimed at managers and executives have been implemented since 2010. The "focus on service" training sessions - mainly designed for the Group's executives, managers and directors - took place in the first term of 2016 and the AcegasApsAmga and Marche Multiservizi employees were fully integrated in the scheme.

In 2015 the sixth climate survey started involving the participation of the Group's entire workforce; in the first semester of 2016, a number of centrally directed and budget-unit directed improvement processes were launched, in keeping with what shown by the results. During the first half of the year, the results of the climate survey were made available to the entire workforce of the company, as part of the meetings with workers.

In the first half of 2016, approximately 5000 people were assessed and given feedback. The assessment, concerning performance and managerial skills, was carried out by the manager in charge and calibrated within the larger organizational structure; the manager in charge also provides feedback to person assessed.

In 2016, the Group undertook a path of renovation and construction of the new leadership model that will be made available to the entire workforce over the course of 2017: this path involved top executives and managers, and gathered the contributions of a corporate base of approximately 700 people.


A total of 245,583 training hours were delivered in 2016: 29.3 hours per capita, roughly 22% higher than the 2016 overall target. Also at the Group level, about 98% of the employees were involved in at least one training activity. The related economic investment, net of trainee and in-house trainer costs, amounted toEuro1,129,000 of which Euro 623,000 from training funds. These figures confirm the Hera Group's significant commitment, both economically speaking and with respect to other resources, to continually developing and maximizing the potential of its human capital, also through the continuation of HerAcademy's activities, the Group's corporate university.

As to the HerAcademy programs, particularly noteworthy is the workshop Mercati & Tecnologia: a new cycle of exchange between customer experience and growth, the fifth edition of the initiative providing guidance for university , as well as the third edition of the initiative providing guidance for the labor market, and the positive conclusion of the first year managing students alternating between work and school, based on a logic of integrating commercial and scholastic skills, launched following the agreement protocol with the regional Educational Office of Emilia Romagna, signed on 25th September 2015, which provides for 180 training schemes alternating school and work, and for summer internships over the next three years.

Welfare e Diversity

The Hera Group has always been distinguished by its special attention to its employees as a key factor in the achievement of corporate goals.

The new corporate welfare plan, Hextra, launched on July 4, 2016 moves in this direction. Through Hextra, Hera has made available to its own resources a range of initiatives and services that are consistent with the evidence emerged during the listening phase (held in 2015), the corporate culture and values can increase the individual and family well-being of employees in terms of economic and social factors. A single integrated system for all the companies of the Group, but which can be tailored to each individual choice. The proposed initiatives and services are classified according to the following broad categories:

  • Health and healthcare services

  • Insurance and welfare

  • Allowance for education/ child support

  • Personal services

  • Wellbeing and income support

  • Hera Solidale.

Each long-term employee was given a flexible welfare share, that is to say an equal budget for all the employees with the objective of providing everyone with the opportunity to combine according to their own preferences the individual activities from the six macro categories identified. For example, a reimbursement of certain medical expenses can be obtained or a supplement for a contractual pension fund; it will be possible to purchase goods and services such as free tickets to the movies, the gym membership or extra professional training packages, and obtain reimbursement for educational expenses of children. For 2016, the flexible welfare quota allocated to each employee for an indefinite period was 200 EUR.

In addition to the flexible welfare share, Hera grants support to employees with school-aged children by giving them an additional educational allowance to be used exclusively for educational expenses, starting from kindergarten all the way to university, such as: registration and attendance at kindergarten, schools, pre- and post-school activities, summer / winter camps and language courses. Additionally, the purchase of school books, trips, and cafeteria fall under this category. For the 2016/2017 school year, 3,821 requests were received for a total amount of approximately 380,000.

All services have been made available through a dedicated web portal. A technology platform for the exclusive use of Hera employees comprising the basket of available services and allows employees to subtract the quotas for the services they select and use from their individual budgets.

In 2016 Hextra recorded the enrollment of 7,987 members, representing 97% of the potential population, with 1,902,456 Euros allocated to employees.

Furthermore, the positive summer camp experience continued in 2016 for the employees' children: the service was made available for use under particularly favorable conditions during the summer weeks, with a 50% contribution to the registration fee for the first week, along with CRAL and through agreements with local partners in the areas covered by the Hera Group.


Commercial policy and Customer Care

Growth of the Group's client base

The Group's customer base grew further in 2016, with varying performance in the individual services.

The number of gas customers rose by 4.1%, thanks to our ongoing commitment to innovative initiatives, the strengthening of the Group's presence in Abruzzo through the acquisition of Julia Servizi Più from Giulianova (Te) and Gran Sasso from Pratola Peligna (Aq) and the consolidation of its gas provider role in end user services (Default and Fui).

The electricity client base grew by 2.7% as a result of a significant increase in the number of residential clients, both in the Group's already established territory and in newly developed areas.

The water service customers grew by 0.3%, in line with the same change detected in the previous financial year.

Contracts 31 Dec 1631 Dec 15Delta pdf n°Delta pdf %
Gas 1381.4 1327.6 53.8 4.1%
Electricity 880.1 856.8 23.3 2.7%
Water 1453.9 1449.4 4.5 0.3%
District heating 11.9 11.8 0.1 1.1%

Rise in the number of customers contacting Hera Comm

In 2016, contacts handled by the Hera Group's channels of communication increased by 11.6%. This change was due in part to meter readings provided from customers (+ 7%), the start of the Rai fee billing, and requests for information about contracts and bills. The call center is still the most widely used contact channel, followed by IVR, customer assistance front desks, the www, text messages and regular mail.

In 2016, the Groups continued to invest in technology to improve the efficiency of communications channels, and specifically customer assistance desks. The most important and innovative projects of 2016 at the help desks involve the development and systemic implementation of the management system, the use of debit and credit cards and rendering the premises safe through a virtual security monitoring system.

Call center as customers' preferred channel

At the end of 2016, the Group's network had 130 front desks. During the year, work continued to homogenize and develop physical customer service points in the various local area while also consolidating management processes.

Special attention continues to be paid to staff training and problem solving in order to perfect the one-call solution and increase customer satisfaction.

Proactivity towards the customer is also ongoing, aimed at increasing the direct debiting and electronic delivery of bills.

Below are the main front desk and call center indicators (Hera).

Average waiting time - contact center (sec.)201620152014
Residential customers 33.8 30.2 40
Business customers 35.9 26.1 31
Average waiting time - customer (min.) 201620152014
Average 10.2 8.5 11.1


Information system

The Information Systems department is responsible for ensuring the development and efficiency of the Group's information systems to support its business. It also ensures that the systems are continuous adapted to comply with the sector's regulatory requirements and business needs, reducing risks in terms of technology and security in full accordance with the Group's strategic guidelines and sustainability objectives.

Corporate evolution

In relation to this point, it should be noted that the new company Inrete Distribuzione Energia Spa has begun production as part of the Group's information systems.

Standardisation of systems in other companies

The process of harmonizing information systems has involved bringing the companies Julia Servizi Più Srl and Fucino Gas Srl into the Group's platforms as well as the continuation of the multi-year plan for AcegasApsAmga Spa (Integrated water service, environmental services, environmental maintenance systems) and Marche Multiservizi Spa (financial management and control, purchasing cycle and supplier portal, TARI environment management and maintenance of environmental facilities).


The operations associated with the last phase of regulatory unbundling were carried out in relation to updating the CRM system, managing the RAI fee and dealing with payments in arrears. Adjustments were also carried out in association with the implementation of the integrated water service (Resolution 628/15 and 102/16), the minimum regulation reform of the PDR (Resolution 117/16) and the method for setting the water tariff for the second regulatory period (Resolution 664/15). The register of persons with access to inside information (CONSOB regulations) has also been set up.

Support to business

This framework includes the introduction of new systems/options such as the system for developing and administering the mobile app, talent management, geocoding of work orders, the management of quote documentation and the management of internal auditing.

Reduction of technological risk

As part of the process of continuous technological innovation and improving the performance of the Group's information systems, activities were carried out to upgrade the Active Directory system and implement Active Directory federated services process (ADFS).

Information system safety

The IT and enterprise data safety systems, in compliance with data protection regulations, are among the key objectives of the Information Systems Division. Our commitment to preventing and monitoring potential cyber attacks is ongoing, conducted through a periodic risk analysis on the production systems(vulnerability assessment), updates of existing systems and the adoption of new specialized solutions (the evolution of the identity management system and implementation of an enterprise user security tool).

During the six-month period, checks were carried out for the renewal of ISO 9001 certification.


Personnel structure

Human resources

Hera Group's employees with open-ended contracts as of 31 December 2016 numbered 8,374 (consolidated scope) and are distributed by role as: executive managers (151), middle managers (524), office clerks (4,514), and workers (3,185). This structure ensues from 226 entries and 284 exits as well as changes in the company scope of Julia Servizi Srrl, which introduced 6 new units. Hiring mainly results from a quality turnover entailing the entry of skilled workforce.


Industrial and operational integration: the Hera model

The Hera model stands out in the multi-utility industry for implementing industrial and operational integration under one leading holding company, through central departments tasked with setting guidelines and carrying out checks, which ensures an overall governance for the Group.

The management of business units is entrusted to the individual departments and companies that are under the control of Hera's top management and, as far as energy, integrated water services and environmental services are concerned, are coordinated by the General Operations department.

The utility sector is increasingly characterized by rapid changes, with competitive dynamics and a specialty-oriented regulatory setting, as well as other key elements such as water and environmental services legislation, service allocation tenders and regional regulations. In short, it is a field in which growth depends on the ability of enterprises to continually introduce innovations in industrial processes, taking advantage of synergies associated with economies of scale and ensuring the maximum efficiency of services.

Innovation and streamlining of operating processes

In 2016 the Group consolidated its organizational model and completed the activities required to complete the spin-off of natural gas and electricity distribution, continuing efforts to simplify funtioning mechanisms and further increasing its commitment to innovating technology and procseses, with the aim of identifying the tools needed to achieve the Group's aims.

Below is the Group's organizational macrostructure as at 1 January 2017:

In line with regulatory developments on functional unbundling, since 1 January 2016 the organizational changes associated with the process of spin-off in gas and electricity distribution have been implemented. In particular, beginning 1 July 2016, the Energy Networks unit became part of the Hera Group company Inrete Distribuzione Energia Spa, which is responsible for overseeing the management of activities involved in gas and electricity distribution services in the designated area in the perimeter of Emilia Romagna, wholly in compliance with the functional unbundling requirements for companies operating in the electricity and gas sectors as required by Authority resolution no. 296/201.

As part of the same process of reorganization, during the second half of 2016 functional activities were completed for the establishment, on 1 January 2017, of the Hera Group company Heratech Srl, which will be aimed at achieving further objectives of effectiveness and efficiency as part of the management of processes for designing and constructing plants and networks, the management of technical activities for the final customer, the measurement and control of consumption and the management of the activities carried out by the Laboratories and the Group's remote fluid monitoring system.

Further integration of the Group's laboratory system is also planned, including for current areas of AcegasApsAmga, thus generating operational excellence for laboratory analyses in the Northeast region.

Through its organization, processes, resources and systems, the Group aims to balance its business prospects and territorial roots while pursuing maximum effectiveness and efficiency in service delivery.

Making AcegasApsAmga's organisational model uniform

AcegasApsAmga's structural harmonization process was still ongoing in 2016.

To this end, the Group established the technical customer management department that coordinates the technical activities associated with customer management for all the business units, in keeping with the Group's organizational model.

A company-wide project aimed at improving performance and the levels of service provided in AcegaApsAmga contact structures was launched, promoting an integrated view of the diverse customer management issues. As part of this process the customer operations framework has been merged into Administration, Finance and Customer Operations and for the sake of completeness it has also taken on the coordination of billing activities.

Finally, activities related to the management of public lighting and cemetery services have been focalized in the public lighting and services department, and activities of relating with local stakeholders have been made part of the Planning, Control and Relations with Local Authorities department.

Main developments in Herambiente

During 2016, the organizational model of the Market Department was modified by splitting commercial structures into two areas, Global Service, and SMEs and Micro-collection, each one tailored to a specific customer segment. The rationale behind this development was to maximize customer satisfaction through a directed, efficient service and the optimization of processes through the introduction of a lean organizational approach.

At the same time, in logistics, the Group's market orientation was further reinforced with the establishment of the new operational client management structure, which is aimed at providing a proactive response to customer needs.

An Authorizations and Environmental Monitoring department was also set up directly under the supervision of Herambiente Spa's CEO, aimed at centralizing responsibilities and activities related to the configuration and technical and administrative management of environmental permits.

As of 1 July 2016 operations were completed to lease the business unit comprising the hazardous and non-hazardous waste storage facility located in San Vito al Tagliamento (Pn) from Herambiente to Herambiente Servizi Industriali Srl.

Hera Spa: Main developments in the Central Market Department

As regards the Central Market Department, during 2016 the following changes of note occurred:

  • effective as of 1 January 2016, the new Energy Services Department was established to reinforce the Group's focus on the Energy Service business as well as to attain transversal cooperation between the group companies operating in this area and the District Heating Department.

  • effective as of 1 January 2016, the Direct Selling structure in the Top Business market was reallocated within the Marketing and Indirect Sales Management (renamed Marketing and Sales) in order to underpin the overall coverage of the Top Business customer segment, and to encourage interaction with strategic marketing configuration activities;

  • effective 1 July 2016, the reorganization of Amga Calore & Impianti, aimed in particular on focusing technical management on core operating activities (and the associated enucleation of customer management activities) and strengthening technical-economic optimization of plant operations;

  • effective 1 November 2016 there was a reorganization of the District Heating Department aimed in particular at pursuing further synergies and areas of operational alignment with the other structures making up the Central Market Management, specifically activities of optimization/planning of production and development as well as commercial management.

Hera Spa: Main developments in Central Bodies

  • with reference to the organizational changes ensuing from the above spin-offs, the reallocation - effective as of 1 January 2016 - of the Insurance structure, which was previously under the Customer Technical Department and reported directly to Risk Management and Insurance at the Central Legal and Corporate Affairs Department.

  • effective 1 January 2016, the reallocation of Uniflotte Srl's supplier and general accounting activities within the Department of Administration, Finance and Control, in line with the Group's operating model;

  • effective March 2016, the Director of Administration, Finance and Control was put in charge of the organizational unit responsible for monitoring EMIR legislation on derivatives contracts;

  • effective May 2016, the area managers of the various territories, previously allocated to the Relations with Local Authorities department, were repositioned directly under the Strategic Planning and Regulatory Affairs department, which was simultaneously renamed Central Planning, Regulatory Affairs and Local Authorities;

  • over the course of the year, a project was implemented aimed at optimizing auditing processes fat the Group level, with particular reference to possible operational synergies between the activities carried out by the Quality, Safety and Environment Department, the Internal Auditing Department and the Central Administration, Finance and Control department.

  • As regards the Central Innovation Department, during 2016 the following changes of note occurred:

    • effective April 2016, Hera Luce Srl underwent a reorganization aimed in particular at further strengthening the management of participation in service provision calls for tenders and the rationalization of staff activities in line with the integration processes underway in the relevant central structures;

    • effective May 2016, the Technical Department of Acantho Spa underwent reorganization aimed in particular at developing an integrated vision of processes in the network field and in keeping with an end to end logic with regard to customer management, network infrastructure management and assurance activities;

    effective July 2016, a customer operations structure was established in Acantho Spa's field of Sales Management, in which customer care activities were located, and which comprises the accounts receivable and debt collection activities previously allocated to Management, Quality and Purchases Control.

New committees: Management Review and Business Review

In addition to the internal committees, appointed directly by the Board to perform an advisory and proactive role in specific areas of expertise, the Group's management provides for two collegial committees:

  • Management Review, which deals with examining and sharing corporate policies, strategies, goals and operational planning group-wide, as well as with fostering integration between corporate entities.

  • Business Review, whose duty is to report on periodic operating performance to each of the corporate business areas, and to assess the progress of specific budget unit actions set forth under the budget and business plans.


Annual report

Income Statement

Revenue  1 4,460.2 4,487.0
Other operating revenues 2 403.4 330.8
Use of raw materials and consumables  3 (2,176.8) (2,256.6)
Service costs 4 (1,198.8) (1,132.1)
Personnel costs 5 (524.1) (510.8)
Other operating costs 6 (75.0) (62.4)
Capitalised costs 7 27.8 28.5
Amortisation, depreciation,provisions 8 (459.6) (442.2)
Operating profit   457.1 442.2
Portion of profits (loss) pertaining to joint ventures and associated companies 9 13.8 11.8
Financial income 10 80.1 81.1
Financial expense 10 (211.3) (227.2)
Financial operations   (117.4) (134.3)
Pre-tax profit   339.7 307.9
Taxes 11 (119.3) (113.5)
Net profit for the year   220.4 194.4
Attributable to:      
Shareholders of the Parent Company   207.3 180.5
Non-controlling interests   13.1 13.9
Earnings per share 12    
basic   0.141 0.123
diluted   0.141 0.123


Comprehensive Income Statement

Profit (loss) for the period   220.4 194.4
Items reclassifiable to the income statement      
fair value of derivatives, change in the year 19 0.6 1.2
Tax effect related to the other reclassifiable items of the comprehensive income statement   (0.2) (0.4)
Items not reclassifiable to the income statement      
Actuarial income/(losses) post-employment benefits 26 (4.1) 7.8
Tax effect related to the other not reclassifiable items of the comprehensive income statement   (0.1) (2.3)
Total comprehensive income/ (loss) for the year   216.6 200.7
Attributable to:      
Shareholders of the Parent Company   203.5 185.9
Non-controlling interests   13.1 14.8


Statement of Financial Position


€/mlnnotes31 Dec 1631 Dec 15
Non-current assets      
Property, plant and equipment 13 2,019.2 2,031.6
Intangible assets 14 2,968.0 2,895.6
Goodwill 15 375.7 378.0
Non-controlling interests 16 148.5 157.1
Non-current financial assets 17 110.2 125.2
Deferred tax assets 18 80.3 73.0
Financial instruments - derivatives 19 109.5 108.2
Total non-current assets   5,811.4 5,768.7
Current assets      
Inventories 20 104.5 116.3
Trade receivables  21 1,665.5 1,533.0
Current financial assets 17 29.4 34.6
Current tax assets 22 33.9 29.1
Other current assets 23 232.4 226.1
Financial derivatives instruments  19 56.5 6.5
Cash and cash equivalents 17, 30 351.5 541.6
Total current assets   2,473.7 2,487.2
TOTAL ASSETS   8,285.1 8,255.9

Shareholders' equity and liabilities

€/mlnnotes31 Dec 1631 Dec 15
Share capital and reserves 24    
Share capital    1,468.1 1,474.2
Reserves    742.5 703.7
Profit (loss) for the period   207.3 180.5
Group equity   2,417.9 2,358.4
Non-controlling interests   144.2 144.7
Total equity   2,562.1 2,503.1
Non-current liabilities      
Non-current financial liabilities 25 2,933.1 2,943.8
Post-employment benefits  26 145.8 148.3
Provisions for risks and charges 27 397.6 365.3
Deferrred tax liabilities 18 27.2 23.8
Financial derivatives instruments  19 44.1 33.4
Total non-current liabilities   3,547.8 3,514.6
Current liabilities      
Current financial liabilities 25 182.3 484.3
Trade payables 28 1,270.8 1,121.3
Current tax liabilities 22 21.0 25.7
Other current liabilities 29 636.3 584.6
Financial derivatives instruments  19 64.8 22.3
Total current liabilities   2,175.2 2,238.2
TOTAL LIABILITIES   5,723.0 5,752.8


Cash Flow Statement

€/mlnnotes31 Dec 1631 Dec 15
Pre-tax profit   339.7 307.9
Adjustments to reconcile net profit to the cashflow from operating activities:    
Amortisation and impairment of property, plant and equipment   157.1 161.2
Amortisation and impairment of intangible assets   189.0 177.5
Allocations to provisions   113.5 103.6
Effect of valuation using the equity method   (13.8) (11.8)
Financial expense / (Income)   131.2 146.1
(Capital gains) / Losses and other non-monetary elements
(including valuation of commodity derivatives)
  4.4 8.0
Change in provisions for risks and charges   (22.1) (29.5)
Change in provisions for employee benefits   (10.0) (11.6)
Total cash flow before changes in net working capital   889.0 851.4
(Increase) / Decrease in inventories   10.7 3.5
(Increase) / Decrease in trade receivables   (229.6) (124.7)
Increase / (Decrease) in trade payables   140.7 (75.7)
(Increase) / Decrease in other current assets/ liabilities   67.4 134.0
Change in working capitals   (10.8) (62.9)
Dividends collected   9.9 5.2
Interests income and other financial income collected   64.1 49.6
Interests expense and other financial charges paid   (151.2) (159.3)
Taxes paid   (137.9) (126.5)
Cash flow from (for) operating activities (a)   663.1 557.5
Investments in property, plant and development   (133.2) (109.7)
Investments in intangible fixed assets   (251.2) (236.2)
Investments in companies and business units net of cash and cash equivalents 30 (19.0) (66.6)
Sale price of property,plant and equipment and intangible assets
(including lease-back transations)
  20.5 6.9
Divestment of unconsolidated companies and contingent consideration   0.4 1.4
(Increase) / Decrease in other investment activities   5.3 (22.9)
Cash flow from (for) investing activities (b)   (377.2) (427.1)
New issues of long-term bonds   88.2 100.0
Repayments and other net changes in borrowings   (401.9) (359.4)
Lease finance payments   (3.3) (4.6)
Investments in consolidated companies                                 - (33.4)
Share capital increase                                 - 9.1
Dividends paid out to Hera shareholders and non-controlling interests   (145.4) (145.0)
Change in treasury shares   (13.4) 10.0
Other minor changes   (0.2)                               -
Cash flow from (for) financing activities (c)   (476.0) (423.3)
Effect of change in exchange rates on cash and cash equivalents (d)                                 -                               -
Increase / (Decrease) in cash and cash equivalents (a+b+c+d)   (190.1) (292.9)
Cash and cash equivalents at the beginning of the period   541.6 834.5
Cash and cash equivalents at the end of the period   351.5 541.6



Income Statement December 2016

 GasElectricityWaterWaste managementOther ServicesHeadquartersTotalConsolidated Financial Statements
Direct revenues 1,593.8 1,464.6 779.5 919.7 99.0 7.0 4,863.6 4,863.6
Infracyclical revenues 49.4 54.7 6.2 39.6 32.7 39.5 222.1  
Total direct revenues 1,643.1 1,519.3 785.7 959.3 131.6 46.5 5,085.6 4,863.6
Indirect revenues 12.2 4.2 22.0 8.0 0.1 -46.5 0.0  
Total revenue 1,655.3 1,523.5 807.7 967.3 131.8 0.0 5,085.6 4,863.6
EBITDA 300.6 135.3 228.8 230.7 21.3 0.0 916.6 916.6
Amortization, depreciation and direct provisions 116.4 60.9 100.8 119.1 14.3 48.1 459.6 459.6
Amortization, depreciation and indirect provisions 9.2 2.9 20.0 15.6 0.3 -48.1 0.0  
Total amortization, depreciation and provisions 125.6 63.8 120.8 134.8 14.5 0.0 459.6 459.6
R.O. 175.0 71.4 108.0 95.9 6.7 0.0 457.1 457.1

Proforma December 2015 Income statement

 GasElectricityWaterWaste managementOther ServicesHeadquartersTotalConsolidated Financial Statements
Direct revenues 1,572.5 1,534.2 772.8 834.2 96.1 8.0 4,817.8 4,817.8
Infracyclical revenues 47.2 61.5 5.4 53.4 30.1 34.9 232.5  
Total direct revenues 1,619.7 1,595.7 778.2 887.5 126.1 42.9 5,050.3 4,817.8
Indirect revenues 13.8 4.2 18.0 6.8 0.1 -42.9 0.0  
Total revenue 1,633.5 1,599.9 796.2 894.3 126.2 0.0 5,050.3 4,817.8
EBITDA 299.5 101.0 232.5 230.0 21.4 0.0 884.4 884.4
Amortization, depreciation and direct provisions 106.3 58.6 99.8 128.9 15.1 33.5 442.2 442.2
Amortization, depreciation and indirect provisions 11.1 5.1 15.6 1.3 0.4 -33.5    
Total amortization, depreciation and provisions 117.4 63.7 115.5 130.2 15.5 0.0 442.2 442.2
R.O. 182.1 37.3 117.1 99.9 5.9 0.0 442.2 442.2

Net financial debt

€/mln 31 Dec 1631 Dec 15
a Cash and cash equivalents   351.5 541.6
b Other current financial receivables  29.4 34.6
  Current bank debt  (72.1) (129.2)
  Current portion of bank debt   (71.7) (284.9)
  Other current financial liabilities  (36.2) (68.2)
  Finance lease payables due within 12 months   (2.3) (2.0)
c Current financial debt  (182.3) (484.3)
d=a+b+c Net current financial debt  198.6 91.9
  Non-current bank debt and bonds issued  (2,847.8) (2,845.4)
  Other current financial liabilities   (5.0) (5.8)
  Lease payments due after 12 months   (14.9) (17.6)
e Non-current financial debt  (2,867.7) (2,868.8)
f=d+e Net debt - CONSOB Communication No 15519/2006  (2,669.1) (2,776.9)
g Non-current financial receivables  110.2 125.2
h=f+g Net non-current financial debt  (2,558.9) (2,651.7)


Our fourteenth annual report, which coincides with the first year of the new business plan to 2020, once again shows positive results and an improved financial position. The growth seen in all main indicators, reached with the contribution of both internal and external development, is all the more admirable considering the particularly significant challenges that characterised the reference scenario throughout the period in question. In addition to maintaining a successful and uninterrupted equity story, the Group has guaranteed an attractive level of return to shareholders, paying dividends of 9 cents per share last June.

This year as well, we wish to communicate the results we have reached by publishing an HTML version on our site, allowing them to be consulted in an in-depth and agile way, while offering rich contents and providing the basis for an effective and transparent dialogue with our stakeholders.

The financial year in question was particularly important, not only for the notable improvement seen in operative-financial components, but above all for the industrial initiatives that led to a long-lasting and sustainable growth of both the value of the company and the social value it produces: in 2016 the Group generated on the whole roughly € 300 million of its EBITDA - close to 33% of the total - from "Shared Value" activities.

Hera thus proved able to reinforce its own competitiveness through policies and practices that answer the needs of the community in which it operates, while lending credibility to the implementation of this strategic prospective for the future.

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