Message from the Executive Chairman

The 2019 results demonstrate the merits of Hera’s multi-utility formula and confirm our track record, with 17 years of uninterrupted growth, further improving our financial solidity in a year in which unprecedented efforts were seen in capital expenditures.



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The 2019 results demonstrate the merits of Hera’s multi-utility formula and confirm our track record, with 17 years of uninterrupted growth, further improving our financial solidity in a year in which unprecedented efforts were seen in capital expenditures.

A year with plenty of growth opportunities that have made possible to reach two fundamental targets included in the business plan to 2022 in advance: the finalised transaction with Ascopiave led the Hera Group to amply meet its objective of 3 million energy customers and, with our enlarged set of waste treatment plants, we were fully able to grasp the positive market trends seen as of 2019.

Furthermore, leveraging on the EBITDA organic growth of 87 million euro and the contribution from the newly-consolidated acquisitions for 7 million, we succeeded in holding back the expected margin reduction in the Safeguard business and a further partial reduction in incentives, which had an impact of 70 million euro.

In 2020, we will continue along our path, according to what we have clearly stated in the strategy presented in the new Business Plan, with a time-horizon extended to 2030 for some projects.


Tomaso Tommasi di Vignano
Executive Chairman

Areas of activity

Total EBITDA Group 1,085.1 mln €, + 5.2% vs. '18







  • EBIT MLN €


  • Creation of Share Value 2019Sustainability, strategy and shared value
  • Creation of Share Value 2019intelligent use of energy
  • Creation of Share Value 2019efficient use of resources
  • Creation of Share Value 2019innovation and contribution to development
  • 2023 TargetsAll plan targets increase
    creating shared value
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Summary Report


  Consensus Hera's results Δ %
Ebitda (mln €) 1,083,7 1,085.1 +0.1%
Ebit (mln €) 551.5 542.5 (1.6%)
Net profit post min. (mln €) 322.3 385.7 +19.7%
Net Financial Position (mln €) 3,274.3 3,274.2 +0.0%

Target Price

    Preview Post Results
Analista Broker Rating Target Price (€) Rating Target Price (€)
Emanuele Oggioni Banca Akros Buy 4.10 Buy 3.90
Roberto Ranieri Banca IMI Buy 4.70 Buy 4.70
Roberto Letizia Equita Sim Buy 3.80 Buy 3.80
Dario Michi Fidentiis Hold 4.20 Hold 4.20
Federico Pezzetti Intermonte Outperform 4.20 Outperform 4.20
Claudia Introvigne Kepler Cheuvreux Hold 3.50 Hold 3.50
Enrico Bartoli MainFirst Neutral 4.03 Neutral 3.40
Javier Suarez Mediobanca Neutral 4.10 Outperform 4.00
    Media 4.09 Media 3.96

Summary Report

Broker Analysts' comments on financial results
Banca Akros "The complete FY19 results were in line with our estimates. HERA’s post Covid-19 crisis EBITDA guidance is some 2% lower than our (pre-crisis) estimate, before the management’s actions to contain opex and to increase the cost efficiencies. This shows the group’s business resiliency. We update our target price to EUR 3.90 and we confirm our positive stance on the stock.."
Banca IMI "Results were positive, in line with our and consensus estimates, with a solid adjusted net income growth yoy (+7% yoy). The released FY19A EBITDA and dividend proposal confirmed the company’s guidance outlined in the business plan. Management is working hard on the integration of Hera and Ascopiave policies and commercial offers to clients in the JV EstEnergy, from which we believe material revenue and cost synergies could be extracted."
Equita Sim "Results broadly in line. Solid contribution from the Waste business (+4.8% YoY), Water business (+6.2% YoY), Gas business (+7.9% YoY), that compensate the expected decrease in Electricity business (-2.7% YoY). The indications regarding the economic impacts of the emergency from Covid-19 seem to support the defensive nature of the business (50% -60% regulated). Rating BUY confirmed, the stock trades on the minimum of the range 13-18x in terms of PE."
Fidentis "The company’s business mix allowed Hera to post better results YoY. In our view, the sound results delivered are already factored in the current market prices, we thus confirm our neutral stance on the stock."
Intermonte "After reporting preliminary Ebitda and net debt back in January, yesterday Hera reported a set of complete FY19 results that did not contain any significant surprise. We continue to like Hera as we believe that the group is well positioned to benefit from the growth of the Energy supply customer base, leadership in the Waste business, as well as slow but sure market consolidation. The recent freeze to economic activity generated by the coronavirus emergency will clearly affect all companies; still we expect the group to be able to show above average resilience in the face of the economic slowdown and would view any further weakness in the share price as a buying opportunity."
Kepler Cheuvreux "FY 2019 ordinary results came out in line with our estimates, and the company assessment of COVID-19 confirmed our view that the impact of the virus could be moderate for HERA, focused on working capital and provisions."
MainFirst "Solid FY-19 results, in line with estimates, confirmed Hera's historical growth trend. We expect that Hera would offer strong resiliency to the new scenario determined by the COVID-19 emergency. Nevertheless, we reiterate our Hold rating on valuation basis."
Mediobanca "A Solid Model to Navigate Uncharted Waters. Impact of Covid-19 should be limited and
management highlighted that the company’s offices are all active and continue to operate. The stock has lost -25% since mid-February, and currently trades at 8x EV/EBITDA, a multiple that we see attractive for a high-quality company. Therefore, we upgrade to Outperform (from previous Neutral)."
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The company was established to last, to help society improve and the grant a better environment for future generations, according to the following strategic priorities:

  • Innovation: The pivotal point of the main projects foreseen by each business area over the duration of the Plan consists in the opportunities made available by technological innovation.
  • Excellence: Hera has always given attention to pursuing a high service level in all business areas in which it is active, with the aim of surpassing the quality standards imposed by the Authority. Service quality is a key element in constructing a long-term relation with our stakeholders, and also represents a source of economic value.
  • Agility: Within the context of an increasingly dynamic sector, this lever is useful in facing change in the best possible way and is therefore also applied to the Group’s leadership model.
  • Efficiency: The reference context as regards competition requires a boost in efficiency, achieved through internal and external levers.
  • Growth: The Group’s growth has historically been guaranteed by a balanced mix of internal and external growth, and ensures that the services offered are efficiently managed, both in terms of its ability to deal with adverse conditions and discontinuity, and as the drive needed to maintain a leading role in consolidating sectors that remain extremely fragmentary.

The Hera share

Share performance and investor relations

Positive trends were seen in all of the world’s main stock indexes in 2019, driven by the optimism shown once again by financial operators after the negative performances witnessed in 2018.

Hera stock closed the period with an official price of 3.909 euro, up 46.2%, outperforming both the Italian market (+27.2%) and its own sector (+35.0%). The trend seen in the price of Hera shares reflects the strategy, clearly geared towards growth, contained in the Business plan to 2022, along with the Group’s valid fundamentals as confirmed by its year-end and quarterly results, and its announcement of a transaction aimed at external growth by reinforcing its partnership with Ascopiave Spa in the energy sales sector.


Share performance

Our performance in 2019 confirms that Hera’s path of growth relies on a well-balanced asset portfolio, managed with particular attention to market opportunities, sustainability and maintaining a low risk profile.
Consolidated Ebitda showed growth coming to 54.0 mln € (+5.2%) over 2018, thanks to a positive contribution coming from our main business areas. A significant rise was also seen in the creation of shared value, in which additional progress was made towards reaching 11 of the 17 fundamental goals defined by the UN.

Shared value Ebitda settled in fact at 422.5 mln €, up 12.6% compared to 2018, while the overall value distributed to the areas served came to 2,131 million euro, equivalent to 78% of overall economic value, increasing by 11% with respect to 2018.

Stefano Venier


The growth achieved by the Group in 2019 concerned all operating and financial areas, with strong attention going towards sustainability, in line with the goals on the 2030 Agenda.
Sustainability and shared value are indeed the two cornerstones on which the Group’s strategy is constructed, bringing operating and financial targets together with environmental and social objectives.
Bearing in mind Hera’s all-round approach to sustainability, here are five aspects of Group management: return on investment, green finance, crisis management, the remuneration system and proxy advisor management.


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ESG Analysts: the Group’s policy

In order to guarantee reliable, updated and complete third-party disclosure, the Hera Group assists a small number of carefully chosen independent ESG analysts. To do so, it has recently implemented an ESG rating and Proxy Advisor management policy


Investors, including those not traditionally considered SRIs, are increasingly aware of issues linked to sustainability in business management. In addition to the higher attention they give to aspects concerning ESG and circularity, they also closely follow the concrete actions introduced by companies to promote a development of their activities that respects the indications provided by the United Nations concerning SDGs. 

To highlight the aspects of sustainability that characterise its management, in 2016 Hera introduced a new form of accountability, that measures the degree to which Ebitda and investments, both completed and planned, are in line with SDGs (Creating Shared Value, as defined by Michael Porter). The data collected is included in the Group’s financial statements and its sustainability report which, for over 10 years, have been drafted and approved by the Board of Directors at the same time.

To facilitate “independent third-party” analyses concerning the sustainability of the Group’s management, in addition to providing transparent communication, Hera has dedicated strong efforts to assisting various analysts/proxy advisors. This collaborative approach, however, has not always led to the improvements expected in the quality of the studies and analyses published and made available to investors. Studies with out-of-date or incomplete information, and analyses that are superficial and at times incorrect, have indeed appeared repeatedly.

Well aware that clear and transparent information is crucial for shareholders, the Group has recently introduced a Proxy management policy, to select the external parties with whom to engage in a discussion aimed at advancing their knowledge of the company’s ESG aspects. Guaranteeing assistance and providing analyses and timely responses to their queries, Hera has ensured that the information given to investors reflects the company’s actual situation as clearly as possible. 

Nine criteria are involved in selecting the Proxies, including market research on investors’ opinions, the types of analyses published in recent years, the experience gained in previous relations, preferences expressed by shareholders and comparisons with other companies included in the FTSE MIB, only to mention a few. 

Hera’s policy in covering ESG analysts thus selected 4 ESG firms and 2 indices dedicated to specific issues:

  1. CDP
  2. MSCI
  3. RobecoSAM di S&P Global
  4. Sustainaliytics
  5. Diversity & Inclusion Index (D&I) di Refinitiv
  6. Integrated Governance Index (IGI)

Only research carried out by the chosen parties will continue to receive assistance and data verification by the Group. This policy will be scrutinised every 1-2 years, based on the quality of the research published, so that the reports released reflect the company’s disclosure and performance.

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The compensation system and the main KPIs

Hera is committed to creating value and sharing it with all stakeholders. The Group’s sense of corporate responsibility translates into an approach to remuneration based on targets aligned with the stakeholders’ interests.



As of this year, the Shareholders meeting’s vote on the Report on remuneration will be “binding”, reflecting the high amount of interest shown by investors towards this issue. 

Hera’s remuneration system has always been in line with its corporate mission and has been effective in satisfying investors and other main stakeholders. The cumulative Total Shareholders Return has always remained positive since the IPO, in spite of the periods of crisis witnessed on financial markets from 2003 to the present. The bankruptcy of Lehman Brothers in 2008, the European sovereign debt crisis in 2013 and the various national political crises that ensued are only a few of the many external events that caused a momentary drop in TSR, which recovered over time.

Total shareholder's return from IPO
Total Shareholders

The average rate of growth in TSR (+9.5% CAGR), in line with the average growth in net profits (+10% CGR) for 17 consecutive years, is the first sign that the value created has been fully passed on to investors. This transfer of the value created, tenaciously pursued by management and at the root of the parameters to which the variable remuneration system is linked, was done through continuous dividend payments, always increasing or stable, and was due to an increase in market capitalisation, bolstered by growth in the Group’s fundamentals.

A strategic parameter such as customer satisfaction also points towards gradual improvement and shows that increasing service quality is at the heart of the goals set by management.

overall residential

At Hera, the system incentivises both improvement in short-term operating-financial fundamentals and the creation of value for shareholders over the long term. 

The system is intended to incentivise the creation of a return that is higher than the average cost of the capital used, to allow targets concerning return for shareholders to be set in advance. Furthermore, it requires a conservative risk profile to be maintained, alongside a high degree of attention towards sustainable management, with particular incentives rewarding models which aim at a circular economy and mitigate the impact of climate change, protecting the asset base and the company’s activities.


The short-term variable retribution system is based on reaching certain operating and financial goals, each given a specific weight within the overall set of indicators:

  • 30% Ebitda
  • 20% Net profits
  • 25% Net debt/Ebitda
  • 25% Customer satisfaction rate

The evaluation system calls for the results achieved to be monitored on a quarterly basis. It is provided with a series of mechanisms which are helpful in introducing corrective actions, aimed at guaranteeing that the preset annual targets are reached. At the end of each year, variable retribution is defined according to the degree to which the preset goals are reached, and contains a bonus mechanism if and when these goals are outperformed in the final data. For executive members of the BoD, in any case, variable remuneration has an upper limit set at 46% of fixed annual remuneration.

Hera’s remuneration system also includes a long-term (3 year) variable component, to incentivise achieving corporate goals that are in line with stakeholders’ interests. In this case, the targets to be reached are linked to parameters concerning the “fundamentals”, aligned with stakeholders’ objectives. The performance measurement is based on 3 criteria, each given equal weight:

  • 33% Enterprise Value Added (NOPAT-WACC) 
  • 33% Creation of Shared Value (CSV)
  • 33% Debt/Ebitda

These indicators are directly linked to the creation of value, with emphasis clearly going to sustainability. While EVA is a typically financial parameter that, guaranteeing a return higher than the average cost of invested capital, ensures a positive return for shareholders, CSV is calculated as the amount of Ebitda produced by activities that can be traced to projects that meet the SDGs found on the UN Agenda. No less than 11 of the 17 SDGs have been included in this calculation and applied to the Group’s activities in order to measure their sustainability.

Sustaining growth, creating value, sharing this value in a sustainable direction, and maintaining a conservative risk profile: these are the criteria on which Hera’s system of variable remuneration is based. They are also the principles that guide the efforts made by management to guarantee stakeholder consensus and ensure a positive corporate performance.

The system’s efficiency can also be gauged by observing the positive trend in results and sustainability KPIs progressively reached since public listing. This continuous growth has led the Group to increase its size 5.7 times over in terms of Ebitda and to boost its market capitalisation by roughly 6 times, given that the value of shares went from roughly 1 bn€ in 2003 to roughly 6 bn€ at the end of 2019. The operating and sustainability goals set along this path of continuous growth, confirming once again the efficiency of the retribution system, have always been reached, significantly exceeding the targets preset by each five-year plan.

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At Hera, finance is becoming increasingly sustainable

Today, one third of Group investments, amounting to 30,000 m$, are «SRI» (Socially Responsible Investments). Based on the current rate of growth, within the next 10 years its overall investments, coming to roughly 93,000 m$, are expected to be almost entirely «SRI».



Approximately one third of the institutional investors found among Hera’s shareholders are SRI, a figure that perfectly reflects the proportions that can be observed in the capital market. 
Considering the remarkable increase, in 2019 as well, in the number of meetings with investors in which sustainability was the central issue, the weight of socially responsible investors among shareholders has most likely increased. We must however wait before verifying the exact amount, based on the share registers dividends paid in June 2020.

SRI Asset under management globali
(Mld $)

Moreover, SRI investors also account for 36% of the debt financed with SRI sources of investments. The Group issued Italy’s first Green Bond in 2014, with an overall amount of 500 m€ maturing in 2024. A second Green Bond was issued in 2019, also totalling 500m€ (maturing in 2027). Lastly, over 100m€ are financed with an EIB loan maturing in 2030, and “sustainable” credit lines currently amount to 200m€. This credit line’s bonus mechanism, applied when certain targets set on some ESG KPIs are reached, will allow Hera to enjoy more favourable rates over time.



The strategic plan to 2023 defines a series of investments that orient management of the Group’s various activities towards a more evolved sustainability, also with a view to a circular economy and reducing the impact of climate change. This is why the Group has launched a “Green Financing Framework”, certified by expert independent analysts, that contains an exhaustive illustration of investment projects lasting a number of years, whether ongoing or set to begin within the next 2 years, whose financing is covered by the cash flow expected to be created.

Sri in Hera

Considering the maturity of the financial debt to be refinanced over the next 2 years, which comes to 361m€, and the opportunities offered by the “Framework”, the Group expects a higher amount of resources to come from SRIs, along with an increase in the forms of debt financing, in line with market trends.

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Sustainability pays off

In addition to improving our reputation, can a sustainable approach protect us from potential risks over the long term?
According to an analysis of our activity portfolio, yes.



The results for 2019, which outperformed expectations, confirm the long trend of constant and uninterrupted growth that has now lasted 17 years. Moreover, this growth has always created value: return on invested capital (ROI) and on equity (ROE) are once again both close to 10%, while the average cost of capital (WACC) is now 4.5%.

How large an effect has sustainability had on the creation of value?

At Hera, the answer lies in the “mix” of activities managed: in different forms, each business contributes to the sustainability and/or reduction of risk. It furthermore lowers the cost of capital, giving a return higher than the cost of invested capital. 

Among the businesses in its portfolio, we find regulated activities, which represent 51% of Group Ebitda. They are exposed to regulatory risk and thus appertain to the decisions made by the Authority, whose long track record however clearly indicates a mitigation of this risk. Since it was established, the Authority’s conduct has always remained coherent, constantly and promptly applying its own regulations and carrying out its role, regardless of the changing ideas expressed in politics or the various governments in power over time. 

ARERA furthermore defines tariff systems for regulated activities, which represent roughly 70% of Hera’s invested capital (3.2 bn€ overall), and sets the “basic” returns on investments:

Value drivers


Gas Distribution

Electricity Distribution

Municipal waste collection

Invested Capital –RAB (bn€)





Return (real and pre-tax)





Length of concessions


Under prorogation


Under prorogation

Tenders for re-assigning concessions


Process begun


Process begun






Actual returns can be higher, thanks to the premium mechanisms included in the tariff systems, which mainly follow 3 criteria:

  1. higher levels of efficiency than the standards set by the Authority;
  2. recognised investments that are given higher returns (electronic meters);
  3. premiums for the quality of services and infrastructures (e.g. resilience to climate change, reduced losses in networks, etc.).

The tariff systems, which sustain investments linked to sustainability, often contain the premises required to benefit from premiums, or extra returns, with the low risk profile that is typical of regulated activities.

For example, in industrial water activities, a sustainable approach to water resource management can generate value. Indeed, greater attention towards reusing purified water allows profit to be gained from waste water, which after being treated is dispersed in the environment or used in agriculture. As a consequence, agricultural companies also benefit in terms of reduced costs and increased turnover. 

In Energy sales activities, instead, services in energy commodity supply can obtain a premium price for sustainable marketing offers. Two examples might include certified “Green” electricity supply and carbon-neutral natural gas supply, i.e. gas that is certified as to the neutralisation of the CO2 emissions produced. Practically speaking, each cubic metre of gas is sold with a grey certificate and each KWh is sold with a GO certificate.

Other “green” marketing offers, such as sales of energy efficiency devices, including heat pumps, smart apps, insulation and micro-generation (defined as VAS, Value Added Services), are meeting with unexpected success on the market: in 2019 alone, roughly 60 thousand new contracts were signed, with interesting margins and important results concerning the “scope 3” Carbon Footprint. Sustainability, therefore, carries value creation with itself, matched by a very low risk profile, thanks to a strategy that has always aimed at eliminating the risk of exposure to volatility in commodity prices.

In waste collection and treatment as well, final retail users are becoming increasingly sensitive to sustainability, probably at least partially due to the various awareness campaigns on sorted waste, intended to promote reuse, recycling, regeneration and use of discarded resources, in which Hera has been investing for years. The increase in sorted waste, now at 64.6%, shows the quality of the initiatives set into place, and makes our target of reaching 75% by 2023 come into sight. 

This result allows the Group to use its own plant capacity to treat industrial, or again special municipal waste, as well. Since it is not regulated, this waste guarantees a return on invested capital that is higher than the return coming from municipal waste. This is also clear from market trends, which over the last 4 years have seen a considerable and constant rise in prices. 

Another example concerns plants involved in “disposal”, dedicated to the part of waste that cannot be recycled; in addition to landfills, Hera also owns 9 waste-to-energy plants that allow energy to be extracted from discarded materials, making waste inert and eliminating emissions of “Greenhouse Gasses”. These plants are thus sustainable, and bring returns that benefit from significant incentives, still in force today.

The most “noble” example, however, consists in organic municipal waste: it is collected separately and a “circular” management sends it to biodigesters, to extract its value as energy and transform what remains into agricultural compost. The latest innovation in this sector is biomethane production, from the biogas contained in organic waste, which is then used for regional transportation or distributed in the SNAM network. Here, not only are CO2 emissions completely eliminated, but the incentives involved are higher than for biodigesters and guarantee an interesting return on investments. 



Lastly, as regards a circular economy, through Aliplast Hera regenerates and re-elaborates some categories of plastic waste (PE and PET), providing our industrial customers with a semi-finished product that can replace the plastic originally used in packaging production. The added value and the growth in activity prove the sustainability, in an economic sense as well, of this approach. In terms of return, it has a low risk profile thanks to the fact that regenerated plastic products are much more independent from the value of the underlying commodity; the competitive risk is also limited, because this industry is still in an initial phase of development, in which Aliplast holds a leading position on the European market; furthermore, since this product has a high added value, it allows for greater return. 

All these processes in waste treatment benefit from various extra returns, which is undoubtedly accompanied by a competitive risk, as is typical of freely competitive markets. The impact of this risk is however very limited by the current lack of plants, a widespread problem in our country due to the extreme difficulty in receiving authorisation to build new plants. 

Among other activities, Public Lighting has turned circularity into a competitive advantage. In recent years, indeed, HeraLuce has been awarded many new long-term contracts in public tenders, thanks to its innovative offer that guarantees a circular management of this service. This success has led Hera to expand its market share, meaning that it can also benefit from economies of scale. 

In a nutshell, for Hera “sustainability” is an approach and an investment with an excellent risk/return profile. Chances for extra returns appear both in free-market activities, where sustainability is currently “requested” by customers, who are willing to pay a premium price for it, and in public utility services, thanks to a tariff system oriented towards awarding bonuses to infrastructures that show higher sustainability. 

From this point of view, Hera has a distinct advantage as a “first mover”. It has always been highly aware of sustainability issues, in both management and investments, and the Group now looks towards a future that clearly continues along this path, with plans already made for further sustainable investments amounting to 950 million.

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Crisis management: a systemic approach

Protecting our collective health and activities, above all when “primary” services are at stake, cannot possibly be left to the mercy of extraordinary events. Today, with the case of the “new Coronavirus”, it is clear that “crisis management” is a must, even to continue adequately covering our social role. At Hera, we are prepared for all of this.



To guarantee its own survival, society must take risks, at times extraordinary ones. A proactive approach to risk management allows us to manage potential “crises”, which may be defined as a set of hypothetical and unforeseeable events that may damage a company’s assets and reputation, negatively impacting its business activities and thus harming the interests of its various stakeholders. 

With a view to prevention, Hera has elaborated “Crisis management” plans that have proven useful in facing the Coronavirus emergency, protecting the health of its employees along with that of main stakeholders such as customers and suppliers. These plans have also helped safeguard Hera’s reputation, guaranteeing uninterrupted service in all businesses, without neglecting the rules of sustainability, including social sustainability. 


 crisis management
In red, the areas showing contagion at the end of March, the period with the highest number of contagions. In blue, the areas served by Hera.

Following the national state of alarm announced by the Italian authorities on the weekend of 22 and 23 February, when the first emergency measures for containing contagion were introduced, Hera immediately convened its Crisis Management Committee, even though none of the areas served by the Group were directly stricken. A small group of crucial managers, guided by executive members of the BoD, set in motion the procedures defined by the Group’s emergency plan. On Monday 24 February, the Committee thus finalised and approved the operating guidelines held to be most appropriate for the current situation.

These procedures were implemented immediately, nor was any time lost in ensuring the safety of personnel and facilities and communicating the emergency protocol to all employees. In under a week, all necessary adaptations were made and all protocols were activated in facilities in areas bordering on the “red zones”, later extended to the other areas served. In addition to keeping the stakeholders concerned informed, Hera promptly reassured the Authorities as to the security measures adopted, to guarantee continuity in the primary services managed by the Group.

The rapidity with which the precautionary procedures were introduced allowed the potential impact to be considerable reduced. The protection of people and infrastructures was thus guaranteed, consolidating the reputation of the Group, which once again proved to be highly conscious of its mission.

At the moment, the data collected shows that the cost involved in implementing these procedures will have a negligible impact on results. Even though they cannot be precisely estimated, these were non-recurring expenses, linked above all to purchasing sanitary materials. 

Today, approximately one month after the crisis began, all services have been provided and all business activities have continued without interruption in all areas served. Thanks to the procedures deployed, all active personnel can operate in conditions with higher safety, relying on a range of solutions, from items for individual protection to smart working (as at March 25, 3200 employees are able to work remotely), significantly limiting the potential spread of the virus. Indeed, out of 9,200 employees, only 10 have tested positive to the Covid-19 virus. 



Hera then introduced concrete actions that confirm its sustainable approach to management, even during a time of crisis. Indeed, extraordinary measures were introduced in favour of the Group’s main stakeholders, to provide them with further tools for sustainment during the emergency. For employees, an insurance plan has been introduced for support in case of contagion; for customers, ways of paying bills by instalments have been designed; for suppliers, special measures have been foreseen to facilitate settling credits towards the Group. 

While the Group’s current structure has been arranged according to the level of alarm seen at present, observed in the areas served, plans for action in dealing with a potential escalation of the crisis have been defined and will be activated, if and when necessary. 

Currently, it is difficult to make any kind of prediction for the future, and yet it is worthwhile recalling that all of Hera’s businesses are «essential», and its activities must continue without interruption. Furthermore, these businesses have always proven to only marginally feel – and in some cases are even protected from – the effects of macro-variables such as GDP, inflation, the price of commodities and oil, and, significantly, even changes in demand. As an example, we might mention that the reduction of exports, which also concerns waste, imposed by the Government to face the Coronavirus emergency, calls for a stronger response from the treatment and disposal sector, known to be lacking an adequate number of plants. This is however the sector in which Hera is the most highly structured operator, thanks among other things to the recent expansion of its set of plants.

Investor case

A tool useful to evaluate the Group’s investment case and thus allow those interested in investing in Hera to do so with a full awareness of the return expected by this company from its investment plan and a clear idea of the policy adopted in profit distribution.

The data presented comes from the Group’s 2019 Financial statements and provides an overview of its various businesses, along with the factors involved in its growth and its sustainable approach towards society, aimed at the creation of shared value.

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Our HISTORY at a glance

Hera was founded in 2002 from the merger of 11 multi-utilities operating in Northern Italy.
The company, listed on the Milan Stock Exchange since 2003, has shown a 50% increase in net profits already in its first annual financial report.
These results were achieved thanks to several factors:

  • the expansion of its business model through the merger with 41 other companies in the surrounding areas;
  • the continuous extraction of synergies, cost reduction and efficiency improvement, obtained through economies of scale with a clear management orientation towards the creation of shared value;

The uninterrupted growth brought the Ebitda and the Net Invested Capital to a 5x increase and to a cash generation that reduced the Debt / Ebitda of the company to 5.7x, despite the fact that the shareholders have always been granted a stable/growing dividend per share.

Today the Group operates in the northern, central and north-eastern area of ​​Italy and presents excellent prospects for further growth, thanks to its ability to meet the constant challenges of the market and exploit its strong competitive advantages.



EBITDA 2019 (M€)



National chart

National chart






  • RAB inflated
  • Neutral to spread
  • Neutral to demand cyclicality





  • Low competition (due to lack of treatment plants in Italy





  • Negligible power generation
  • Flexible procurement/supply contracts to fully hedge commodity prices fluctuation








  • 1 notch above Country (Italy) credit standing
  • Debt with no covenants (only remain above investment grade)
  • No material refinancing needs in next 6 years
  • 300 m€ committed credit lines available
  • 87% Debt fixed rate
  • 70% Debt made of floated bonds
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Our uninterrupted growth


Track record Ebitda by drivers (M€)

Track record Ebitda by drivers


Cash flows resilient and un-interrupted growth (Net profit+Depreciations, Capex)



Debt/EBITDA (x)


 *after figurative items (without cash outlay) as a result of the partnership with the Ascopiave Group in the sales sector


ROI% vs. WACC%

ROI% vs. WACC%



Infrastructure developments (M€)

Infrastructure developments
  • Strong efforts to renew asset base in 2002-2012
  • Negligible write offs in 17 years
  • Solid asset platform in all activities


Market P/E multiples (x)

Market P/E multiples



Ebitda per employ (EBITDA PER EMPLOYEE k€ per capita)

MOL per dipendente


Ebitda per employ


EPS (c€)


*Including the special items

Share capital increase due to mergers executed (mln of shares)

Aumento del capitale sociale in seguito alle fusioni


2002-2012: infrastructure renewal (Debt/Ebitda)

2002-2012: rinnovamento delle infrastrutture e significativi investimenti

2012-2017: solid infrastructures (Debt/Ebitda)

2012-2019: estrazione di valore da una solida base
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Stable shareholding

Stable shareholding


  • Mail shareholder holds < than 10% stake
  • High diversification among public entities (111 Municipalities have 38% of share capital locked in a pact)
  • Large presence of institutional shareholders from EU, US, UK and Australia


Stable shareholding


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Dividend policy


Dividend per share (c€)

Dividendo per azione


  • One of the few European stocks that has always paid a stable/growing dividend
  • As a consequence, Hera is included in the SPDR S&P Euro Dividend Aristocratics Ucits ETF.


Total Shareholder’s Return since IPO
+319% as at 31.12.2019



Dividend per Share(c€)

Dividendo per azione


Payout (%)

  • Always granted DPS payments
  • Sustainable payout ratios
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Shared Value and Sustainability

Since its establishment, Hera has always been committed to its stakeholders, in a constant attempt to combine economic and social development.
In 2016, a process was launched to identify the Hera approach to Creating Shared Value (CSV).

For Hera, the creation of shared value is achieved through all those business activities that generate operating margins while responding to the drivers of the global UN agenda on social/environmental issues.

For Hera, the strategic goal is to improve environmental conditions; guarantee quality and safety; open a dialogue with stakeholders, operate in transparency; select qualified suppliers and employees with which it is possible to pursue a sustainable growth.

The Group adheres to important global programs with a strong sustainability content:






Sustainability profile



422.5 m€ from shared value activities
39% of total Group Ebita, +13% compared to 2018

202.4 m€ shared value investments
40% of total Group investments

Thomson Reuters Diversity & Inclusion index
The Group ranks 3rd in Italy and 14th in the world in the D&I index

ISO 37001
Hera Spa earns accreditations to ISO standard on anti-bribery management systems

CE 100
Hera among the world's leading circular economy companies in the Ellen MacArthur Foundation program



Energy consumption vs 2013

Carbon footprint vs 2013

Sorted waste collection

Group’s water consumption

Reused soil in new plants


6.5 mln/mc

biomethane production in the new plant of S. Agata Bolognese

72.8 m/ton

recycled plastic sold by Aliplast (+22% compared to 2017)

78 m/€

for innovation, digitalisation, smart city projects, circular Economy, data analytics and utility 4.0

Financial results

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Trends and contexts, strategic approach and Group management policies

Trends and contexts

Hera makes ongoing efforts to interpret the signs coming from the contexts in which it operates, in an attempt to obtain an overall view of what lies ahead for the Group and its stakeholders. In order to anticipate future developments, the main drivers of change and their inextricable interrelations are outlined below. Particular attention will go to identifying macro-trends in the Group’s various contexts and its main management policies, i.e. industrial strategy and its links to sustainability (concerning the environment, technology and human capital).

Macroeconomy and finance

The global economy in 2019

The world economy showed moderate growth in 2019, with a slowdown compared to the expansion seen in 2018. According to the data provided by the International Monetary Fund (IMF), growth in global GDP came to slightly under 3% in 2019, as against 3.6% in 2018. The causes for this contraction lie mainly in rising geopolitical tension (first and foremost, the controversy between the United States and Iran), the ongoing trade war between the United States and China, in progress since 2018, and social and economic deterioration in some areas of South America.
The slowdown concerned all of the world’s main economies. The Chinese economy continued its gradual deceleration, showing a growth rate of 6.1%, down half a percentage point compared to one year earlier. Growth in the USA economy was also more restrained, settling at +2.3%, compared to +2.9% in 2018.

The European economy in 2019

Within the eurozone, economic growth was slight (+1.2% over the previous year) and dropped compared to the rate of growth recorded in 2018 (+1.9%). Uncertainty as to the outcome of Brexit was seen during the entire year, and weaknesses appeared in the manufacturing and automobile sectors, along with instances of social tension (e.g. the gilet jaunes in France) and situations of political instability, such as in Italy. The inflation rate in the eurozone remained rather low, settling at close to +1.3% at the end of 2019.

World and European economic outlook

The IMF revised downwards its forecast for the rate of global growth in upcoming years with respect to the estimates released in October 2019, as a result of the ongoing trade wards and rising geopolitical tension. Growth in world GDP is expected to come to +3.3% in 2020 and +3.4% in 2021, while for the eurozone, the most recent projections saw growth coming to +1.3% and +1.4% over the next two years; progress in the current worldwide epidemic will however require these figures to be revised. The IMF, for example, updated its forecast in the second half of February, estimating a further slowdown in Chinese growth coming to 0.4 p.p. compared to the previous forecast, resulting in a 0.1 p.p. reduction in global growth; this situation will be updated in the months to come.

2019 data and outlook for the Italian economy

In line with the trends seen in the eurozone, in 2019 the IMF observed a very slight growth in the Italian economy, coming to +0.3%. The Bank of Italy’s initial analyses link this slowdown to a reduced contribution to growth coming from business investments (which in any case increased by +1.4%, half of the +3.1% seen in 2018) and national consumption (with a modest improvement in household consumption, resulting from an increase in available income; public administration spending dropped). Foreign trade improved; a downward trend was seen in imports (-0.4%) and exports showed a +1.2% increase, despite the significant reduction that appeared in the last quarter.
Preliminary estimates for the 2019 consumer price index show an increase coming to 0.5% over 2018, due to the price of transportation, housing and expenses for water, electricity and combustibles. As regards the job market, the unemployment rate fell below 10%, down 0.7 p.p. compared to 2018.


The projections calculated by the IMF for the development of the Italian economy before the epidemic broke out were not particularly optimistic, but pointed towards a slight upturn over the next two years. GDP was expected to grow by 0.5% in 2020 and by 0.7% in 2021, leaving room for faint signs of recovery. These projections will have to be updated by the main international institutes to account for the epidemic, and a downward adjustment for growth in our country is quite likely.

Macro-financial data: global, European and national markets

Financial markets felt the effects of macro-economic uncertainty in 2019, showing contrasting signs that alternated recovery with a fall in the volume of financial instruments traded. The first meeting held by the European central bank (ECB) under its new president Lagarde maintained the monetary policy measures seen previously, as regards both interest rates and asset purchasing; the Ecb’s forward guidance expects rates not to rise above their current level until inflation comes sufficiently close to 2%.
With the goal of bringing inflation to this level, furthermore, the ECB stated its wish to continue with an accommodative monetary policy at least until mid-2020. In order to deal with the Coronavirus crisis without additional reductions in interest rates, the ECB announced further liquidity auctions for banks, relaxing the criteria for assigning money so that it can flow more easily towards small-to-medium enterprises. The bond-buying program, furthermore, which as of 1 November came to 20 billion euro per month with no preset maturity, increased by 120 billion. Supervision criteria for banks were also revised, to give them greater flexibility in facing these extraordinary circumstances. The ECB also introduced an additional special purchasing program (Pepp – Pandemic Emergency Purchase Program) amounting to 750 billion, as a response to the uncertainty has compromised liquidity on the European secondary market. These purchases, which will continue for the entire duration of the Covid-19 crisis (and in any case at least until the end of 2020), will not be subject to the capital key rule (that is, they may not proportionally reflect the amount held by each country among ECB shareholders); the purchases may be made with a certain degree of flexibility, and Greek bonds will also be included.
The yield curve continued however to show a downward trend, reaching negative rates even for long-term maturities. The 10-year swap yield, for example, fell below zero with forward rates showing no signs of rising.

The 10-year Btp-Bund spread decreased by roughly 100 bps compared to the previous year and, after approaching 300 bps over the year, settled at around 150 bps in December.

Hera’s 10-year spread remained considerably lower than the Btp-Bund spread for the same time period, thanks to the Group’s good credit rating, which helped consolidate its continuous growth.

Spread decennale di Hera

Businesses and regulation

Trends in Group businesses

The weakness seen in the Italian economy, as described above, was reflected by energy consumption, which dropped slightly compared to the previous year. According to the preliminary data released by the company responsible for the national transmission grid (Terna), total demand for electricity in Italy came to 319.6 TWh, falling by 0.6% compared to 2018.
Over the year, 88.8% of the demand was met by national generation, which increased by 283.8 TWh over the previous year, while imports amounted to 38.2 TWh.
In 2019, net national generation from renewable sources came to 39.8% of total production, amounting to 112.9 TWh, up over the 111.5 TWh produced in 2018, bringing the amount of consumption covered by renewables to 35%. This result is mainly due to an increase in photovoltaic generation (+9%, from 22.3 TWh in 2018 to 24.3 TWh in 2019) and wind power (+14%, from 17.6 TWh to 20.1 TWh). A decrease was seen, instead, in hydroelectric generation, which fell by 6%, settling at slightly under 47 TWh.
According to the initial estimates provided by the Authority for energy markets (Gme), natural gas consumption began to rise after the decrease recorded one year earlier, going from 72.1 billion m3 in 2018 to 73.8 billion m3, thus rising by 2.3%.
The most significant increase in consumption came from higher demand in thermoelectric plants, which settled at 25.7 billion m3, with a significant +10% growth over the previous year. This consumption was boosted by the higher cost of CO2 emission permits – unfavourable to carbon generation – and a phase in which lower prices were seen for gas, which lasted for all of 2019.

As regards waste, the annual production of municipal waste in Italy comes to roughly 30 million tons, with an average of slightly below 500 kilos per inhabitant. Updated information for 2019 is not currently available, but considering the correlation between this figure and certain socio-economic indicators (first and foremost, GDP and consumer spending), the amount is expected to be essentially in line with 2018.

Water consumption in Italy comes to approximately 9 billion cubic metres and, according to the estimates available at present (calculations based on the Regulatory authority for energy, networks and the environment’s yearly report for 2019 and Blue Book 19 on Istat data), agriculture continues to be the sector with the highest consumption, followed by energy production, with lesser amounts consumed in industry, for household use and in services.

The context in terms of competition

As regards competition in the sectors in which utility companies typically operate, a rise in the degree of competition was seen once again in 2019, in both free-market and regulated businesses.

As regards free-market businesses, competition is intense and is increasingly concentrated on the customer experience offered to clients and the competitive nature of the services proposed.
In the energy market, the level of competition is very high and is leading towards a gradual fall in average margins, with the churn rate rising in both gas and electricity sales.
A few elements found in this context have contributed to increasing competition in last resort services – the safeguarded electricity service, default gas and last resort gas supply. In particular, for the default gas service and last resort gas supply, the duration of concessions has been reduced by one year compared to the previous two years. Increasing interest has also been shown by operators towards tenders for safeguarded electricity service concessions.

In the area of industrial waste treatment and recovery, the competitive arena is marked by the presence of large European players who offer integrated services along the entire waste chain and purchase plant capacity and competences on the market. The context within which these operators compete shows an ongoing capacity gap, with an additional estimated 27 million tons of waste disposal required in waste-to-energy plants each year. Within Italy, the situation is similarly critical and this gap varies between 9 and 10.5 million tons per year, with extreme differences appearing from one region to another.
This context means that over 2019 prices for all main types of waste treatment in Italy came into line with the higher ones seen on the European market. This increase is primarily due to the persistent difficulty shown by in the Italian system in constructing the necessary number of plants.

As regards regulated businesses, the Hera Group operates within the market regulated by the Regulatory authority for energy, networks and the environment (Arera). In regulated markets, European regulations set out the basic procedures for both the mechanisms with which prices are defined and payment for/transfer of the good being bought or sold. The supervisory Authority approves the rules concerning access to the market and its operation, and obligations concerning transparency must be respected.
The beginning of the procedures used for assigning gas distribution, integrated water cycle and waste management service concessions was seen in 2019. In the upcoming years as well, these businesses will continue to take into account the deadlines for the various tenders for concession assignments. In gas distribution, however, the amount of time involved in announcing the tenders, and in awarding the concessions at a later date, is expected to be longer than originally planned.

Legislative and regulatory context

The legislative and regulatory measures approved by Arera in 2019 with the greatest consequences for the Hera Group include: the approval of the 2019-2021 Strategic Framework; the beginning of the fifth regulatory period for gas distribution and measurement; infra-period updating for regulations in the electricity distribution service; the beginning of the third tariffary period for the integrated water cycle and the definition of regulations for arrears; the beginning of the new tariffary period for the integrated waste management service.

2019-2021 strategic framework: objectives

Arera, with resolution 242/2019/A, approved the strategic framework for the 2019-2021 three-year period. This document, subdivided across areas and into sectors, is an important tool for transparency towards stakeholders. Among the strategic objectives concerning more than one sector, note the more central role given to consumers (who will be provided with tools giving them greater awareness in making choices), the valorisation of technological innovation and new approaches intended to guarantee that goals in decarbonisation and development of a circular economy are reached. Among the strategic goals with relevance for the energy area, importance is given to developing markets that are efficient and integrated across Europe. Arera thus intends to promote a reform of dispatching and imbalances, complete the capacity market and reinforce monitoring tools to contrast unauthorised practices. In the gas market, measures will be aimed at bringing Italian prices into line with European ones, enhancing infrastructures and overcoming long-term contracts. The strategic framework furthermore contains a focus on the retail market and reaching the end of protected markets. Arera intends to guarantee that the transition to the free market comes about with full awareness on behalf of end customers and without distortions in competitiveness, furthermore taking into due account the evolution of prosumers and the services surrounding the system, encouraging aggregation in demand. On this matter, as regards counterparty risk in regulated services, with reference going to system charge collection, on the one hand tools aimed at measuring operators’ financial solidity will be introduced, and on the other systems for providing minimal guarantees and mechanisms for recovering unpaid fees will be developed. In the area of energy infrastructures, importance will go to selectivity in interventions on networks and to an efficient use of resources, with the aim of combining providers’ operating and financial balance with objectives in service efficiency improvement. A few measures aimed in this direction include: progressively and gradually overcoming the current approach towards cost recognition, differentiated as it is between operating costs and capital costs, in favour of an integrated approach (totex); completing (in gas distribution) the progress made on aligning recognised costs and efficient costs, overcoming the current differentiations based on the size of operators. As regards the water and waste services, Arera has noted the need to overcome the sharp differences found within the country in both infrastructures and service quality and transparency.

Foreseeable future

The impact of regulation on each business is largely foreseeable, thanks to the tariff regulations approved for the upcoming regulatory periods, and prospect for the single services are specific to each sector.

Gas sector: distribution and measurement

In the gas distribution and measurement sector, with resolution 570/2019 the Authority approved tariffary regulations for the fifth regulatory period, covering 2020-2025. The methodology set out in the framework is, for the first three years, 2020-2022, essentially in line with the previous period, effectively postponing until the second half of the regulatory period, also covering three-years, the most innovative interventions. And yet, even within this context of methodological continuity, a few interventions planned by Arera for 2020 are particularly significant, such as a reduction in operating costs for distribution services and a higher level of efficiency enhancement required from businesses, in addition to an alignment between the rate of return on the service and the value of distribution (6.3%). Concerning the significant drop in the recognition of operating costs introduced by resolution 570/2019, in February 2020 Inrete Distribuzione Energia Spa, the Group’s foremost distributing company, along with other main operators in the sector contested this measure at the Lombardy-Milan Tar. As regards the technical and commercial service quality, Arera guaranteed that the rules would not be changed, even while including new and gradual obligations for upgrading distribution networks.

Electricity sector: distribution and measurement

For the electricity distribution and measurement sector, with resolution 568/2019, Arera approved the unified text for tariff regulations in the 2020-2023 regulatory semi-period. In this case as well, the measures approved are fundamentally similar to the methodology used in the first semi-period, but a few new tools were introduced in order to make the most of synergies among sectors and improve the service offered. For example, a net revenue sharing mechanism was introduced, since optic fibre has passed into the electricity infrastructures. With resolution 566/2019, Arera furthermore updated, for the 2020-2023 regulatory semi-period, regulations for bonuses-penalties for service quality. The Authority wishes to improve services for customers and reduce the gap still seen from one region to the next; this will come about by adopting special regulations for areas experiencing greater difficulties and introducing extraordinary forms of regulation for innovative experiments proposed by operators. While waiting for a complete application of the clean energy package, definitively approved by the European commission in spring 2019, a few of the measures adopted by Arera are already aimed at promoting an energy transition towards renewable sources, regarding collective self-consumption in particular.

Integrated water service

As regards the integrated water service, with resolution 580/2019, Arera approved the tariff method for the third regulatory period, covering 2020-2023 (MTI-3), which combines elements that remain unchanged with respect to the previous period and innovative aspects. The new method indeed confirms the structure of a guaranteed revenue and an upper limit on annual increases in tariffs, differentiated according to the specific characteristics of each Water Manager (so-called “asymmetrical” regulation). From the point of view of the cost of capital, a gradual decrease is foreseen in remuneration for a few specific ongoing works (with the exception of those defined as strategic). The rate covering financial and fiscal charges is instead essentially the same as in the previous regulatory period (5.24%). Note furthermore the introduction of significant incentives going towards interventions intended to promote energy efficiency and environmental sustainability, for example promoting the recovery of materials and energy from purification sludge; in the process of applying the circular economy package, for example, the government began revising decree 99/92 concerning the use of purification sludge in agriculture, also introducing regulations for energy recovery from this sludge. For the costs linked to arrearage, the unpaid amount of sales volumes recorded in a given year is expected to be recognised (unpaid ratio at 24 months); with the goal of reducing arrearage during this regulatory period, resolution 311/2019 was aimed at unifying water managers’ debt collection processes nationwide. Lastly, as of 2020 the bonuses and penalties involved in promoting technical service quality will be quantified, as will, as of 2022, bonuses and penalties for contract quality, established by the new national mechanism described in resolution 547/2019.

Integrated waste cycle

Within this regulatory context, one significant new element consists in the introduction of tariffary regulations for the integrated waste cycle (concerning the period covering 2018-2021). In order to recognise an increase in compensation that reflects objectives in improving the quality of the services offered or changes in the scope of operations, Arera has set out a regulatory framework that is valid nationwide on the one hand, and asymmetrical on the other. For the two-year period covering 2020-2021, resolution 443/2019 defined a tariffary regulation for the entire municipal and similar waste chain (thus including treatment activities). The principles of full cost recovery and Rab-based regulation, linked to setting a the rate of return on invested capital at 6.3%, are the basis for the sector’s tariffary regulation. In the new tariff method, a great deal of significance goes to incentives for developing activities in material and energy valorisation, by implementing mechanisms through which the ensuing revenues are shared between service managers and customers, including the mechanisms recognised by Conai covering the higher charges for packaging waste collection. Arera’s recent activity does not overlook promoting the quality of the services offered: a regulation that calls for both generic and specific levels of quality in the services offered to customers will indeed be introduced.

During 2019, the Ministry of the Environment began the work foreseen by European enabling act (L.117/2019) concerning the implementation of directives on waste (Directive 2018/851 on waste, Directive 850/2018 on landfills, Directive 2018/852 on packaging and Directive on end-of-life vehicles, batteries and electronic waste 2018/849). This enabling act is intended to introduce a reform of national legislation on waste management. The new legislative framework is expected ot be published within 2020. On a European level, Directive 019/904 on single-use plastics was published, introducing new elements as to production, commercialisation and waste management for certain categories of plastic products.

The framework for regulating district heating services is nearing completion, through a consolidation of the requirements concerning technical and commercial quality, adapting the basic mechanisms of the more time-tested energy regulation. More specifically, regulations have been introduced for service transparency in the regulatory period covering 1 January 2020 – 31 December 2023 and technical quality for the regulatory period covering 1 July 2020 – 31 December 2023. Lastly, concerning the right of withdrawal from supply contracts, the regulations have been revised so as to offer greater protection to the investments made by operators.

The updates in the regulatory periods illustrated above have also caused, as described, slight changes in the definition of the rates of return in each single sector; this was possible because the regulations allow Arera, while updating the single regulatory periods, to intervene in setting the sector’s level of risk (Beta), while all the other parameters that make up rates of regulatory return (risk free rate, premium country risk, etc.) are set by a specific regulation that is renewed every six years and updated every three.

The main factors involved in tariffs for each regulated activity, based on the legislative framework in force in 2019 and expected to last until the end of the current regulatory periods, are shown below.

  Natural gas distribution and measurement Electricity distribution and measurement Integrated water service Integrated waste cycle
Regulatory period 2014-2019
4th regulatory period
(resolution 573/13)
5th regulatory period
(resolution 570/19)
first sub-period of the 5th regulatory period
(resolution 654/15)
second sub-period of the 5th regulatory period
(resolution 568/19)
2nd regulatory period
(resolution 664/15)
3rd regulatory period
(resolution 580/19)
1st regulatory period
(res. 443/19) (1)
Regulatory governance Single level (Arera) Single level (Arera) Double level
(Ega, Arera)
Double level
(Local authority, Arera)
Invested capital recognised for regulatory purposes (RAB) Previous cost revised (distribution)
Average between standard cost and actual cost (measurement)
Parametric recognition (centralised capital)
Parametric recognition for assets until 2007
Previous cost revised for assets as of 2008
Previous cost revised Previous cost revised
Regulatory lag for investment recognition 1 year 1 year 2 years 2 years
Return on invested capital (2) (real, pre-tax) 2019
6.3% Distribution
6.8% Measurement
6.3% Distribution and measurement

+1% for investments as of 2012, covering the regulatory lag

+1% for investments as of 2018, covering the regulatory lag
Recognised operating costs Average value of actual costs by company grouping (size/density), based on 2011 (for revenues until 2019) and 2018 (for revenues as of 2020)
Sharing efficiencies achieved with respect to recognsied costs
Update with price-cap
Average value of actual sector costs based on 2014 (for revenues until 2019) and 2018 (for revenues as of 2020)
Sharing efficiencies achieved with respect to recognsied costs
Update with price-cap
Efficiency-applicable costs (3): actual values for manager 2011 adj. for inflation
Updatable costs: actual values with 2 year lag
Added charges for specific purposes (previsional)
Actual costs for manager with 2 year regulatory lag (beginning with 2020 tariffs on 2018 costs)
Added costs for quality improvement and changes in manager's scope (previsional)
Balance for 2018-2019 based on 2017 costs (gradual)
Annual efficiency factor operating costs Annual X-factor

1.7% large businesses
2.5% medium businesses
Measurement and commercialisation: 0%
As of 2020:
3.53% large busnisses
4.79% medium businesses Measurement: 0% Commercialisation: 1.57%
Annual X-factor

Distribution: 1.9%
Measurement: 1.3%
As of 2020:
Distribution: 1.3%
Measurement: 0.7%
Efficiency-applicable mechanisms based on:
Sharing manager's 2016 efficiencies
Level of sharing differentiated for the distance between actual cost and manager's efficient cost
Incentive mechanisms   Sharing for net revenues derived from the tranfer of fibre optics into electricity infrastructures Sharing for costs of electricity based on energy savings achieved Recognition of 75% of margins from activities aimed at environmental and energy sustainability Sharing for revenues deriving from material and energy sales (range 0.3-0.6) and CONAI incentives
Annual limit on tariff increases     Asymmetric, based on:
investment requirements management cost estimates changes in scope

Possibility of motion guaranteeing operating-financial balance
Asymmetric, based on the presence of: changes in scope
quality level improvement

Possibility of motion guaranteeing operating-financial balance

1The regulation reference unit for defining reference revenues for regulated businesses is the Rab (Regulatory asset base), i.e. the value of net invested capital calculated according to the rules defined by Arera.

Resolution 443/19 is applied to operators in the integrated waste cycle, including treatment and disposal or recovery activities only if they are included in the company’s consolidated scope. A specific measure will instead be introduced for tariffary regulation of compensation for plants falling outside this scope.

This measure will be effective as of the 2020 tariff year, following the application procedure foreseen in the measure itself.

For the energy and waste sectors the Wacc methodology is applied, while for the integrated water service the amounts indicated refer to coverage of the financial and fiscal charges.

Efficiency-applicable costs refer to internal operating costs, which can be directly controlled by operators.

Technology, the environment and human capital

The institutional and regulatory conditions of today’s markets requires existing infrastructures to be modernised ever more frequently, with faster telecommunications, higher efficiency and flexibility in energy networks and network services, as well as investments in intangible assets such as the research and development (R&D) related to feasibility and spread of new technologies.
Countries that have traditionally given great attention to technological development and that show stable links with overall productivity in this area (China, USA and UK are a few examples) invest increasingly in intellectual property. Most of these investments are increasingly oriented towards two groups of technologies: internet, digitalisation and artificial intelligence; renewable energies and storage.
These investments have an effect on the job market and the environmental context. The arrival of robotisation and artificial intelligence, accompanied by moving management from the field to advanced remote control centres, requires working processes to be deeply rethought. The purpose of this is to make them more flexible and integrate those activities that can be managed by evolved machines with human activities, reallocating to the latter the distinctive added value that is typical of human capital. From an environmental point of view, one of the most important innovations involves substituting fossil fuels with renewable sources. This however requires significant financial investments whose economic benefits are not always immediately tangible, since they only appear over the long term if well-focused systems of incentives or compensation for externalities are lacking.
It became clear at the 2019 World Economic Forum that the companies who have automated their most operative tasks are the ones that will hire the most in upcoming years, and will thus have to concentrate on the skills of the future. A report published by the OECD in February 2019 shows that technological innovation alone is not sufficient to increase productivity; in addition to exogenous reasons involving global, economic and social contexts, this is due to endogenous reasons linked to an organisation’s ability to ma, update and develop the skills of human capital. Today’s digital leaders must be at the forefront in promoting the values of continued learning, because our chances of success depend on our ability to work throughout all corporate processes and in all individual behaviour. The organisational context is no longer limited to a company’s physical boundaries or the logical ones of its business strictly speaking, but must now cover the interrelations that characterise it and its objectives in sustainable development. The external projection of a company’s mission becomes extremely significant for multi-utilities who, given that they manage key elements of the environment (water, materials, energy) must commit themselves to reaching objectives that pertain to the community and the area served: put briefly, they must “create value”. This type of action has positive repercussions on a corporate environment and on its ability to recruit the best resources, who wish for their work to have an effect on a larger scale and with broader objectives, including the external context.

Technological scenario

The digital and technological opportunities now seen on the market give utilities the chance to increase the number and variety of their activities and be more flexible and dynamic across all levels of the value chain. Digital evolution is the cornerstone of current technological transformation, since it is an enabling factor in evolutions that insist on extensive infrastructures and relations with individuals.
The main information and communication technology (ICT) trends seen in the sector can be grouped into Internet of Things (IoT), Automation, Artificial intelligence (AI), Data analytics, Cloud and information security.

Trends in the world of ICT: enabling elements (Cloud, IoT), technologies (AI, automation) and cybersecurity

As regards the technologies applied to utility infrastructures, the category receiving the most attention includes field sensors (which allow important data to be collected concerning network functionality and state of maintenance) and technologies supporting remote management of plants and other resources in the local area.
Applying the IoT to an industrial context is often referred to as the Industrial internet of things (IIoT). In this direction, network infrastructures managed by utilities have become increasingly smart, that is, assets able to communicate with the manager and provide important data for the networks’ oepratinos and evolution.
The volume of data collected through field sensors has become quite considerable; utilities make the most of them in terms of optimising asset management through the data analytics associated with new technologies based on artificial intelligence.
As regards interaction with customers, instead, the latter are increasingly accustomed to interacting with service managers through digital channels and mobile tools, such as smartphones and tablets. This context is based on the need for a single vision in managing all customer requests (customer centrality), interacting with customers through various channels (omnichannel) and reducing response time (flexibility and speed). Utilities, therefore, are changing their way of interacting with customers, making increasing use of dedicated channels and chatbot to offer timely responses, along with data analysis tools to study and predict the behaviour of their customers, whether current or potential. Offering services and tools that are ever more oriented towards checking one’s own consumption, and managing other devices directly “at home” are two ways to reinforce ties with customers and learn about the main features of their behaviour.
The enabling factors of the digital revolution also include clouds, which allow significant volumes of data to be collected, managed and stored, along with giving simple access to it for gradually decreasing costs and easily scalable technologies in situations of growth. Europe’s policies concerning digitalisation have laid the foundations for increasing confidence in clouds and their adoption as a rapid and cost-effective instrument for digitally transforming companies, providing better guarantees in terms of reliability, security and privacy. Italy, just like the rest of Europe, is becoming increasingly digital thanks to the significant progress made in the use of services in cloud mode that, in a few cases, is the only mode offered by software providers and information platforms. The availability of accessible cloud services has gradually shifted the focus of utilities and other companies from an approach based on ownership of software and infrastructures towards more versatile solutions such as Software as a service, Platform as a service or Infrastructure as a service.
The most significant and innovative technologies also include solutions in industrial automation, such as Robotic Process Automation (RPA) and the application of Artificial intelligence algorithms. The former help reduce the highly repetitive and manual activities entrusted to a company’s personnel, freeing up resources for activities with higher added value. Furthermore, solutions in process automation (which can be applied to many typically corporate areas) represent a starting platform for developing more advanced solutions, based on Artificial intelligence and self-learning systems. Developments that are already in the works allow machines to interact directly with individuals, adapting to different behaviour, or again to analyse higher volumes of data or images than could be imagined with traditional technology, in order to identify interactions and correlations able to optimise the choices made by management.
As is the case in other sectors, for utilities as well attention towards issues in information security is on the rise, due to both their nature as public utility services, and the likeliness that these networks are infrastructures spread out over the local area, and thus potentially more exposed to the attacks.
This phenomenon is growing: the European commission, for example, has reported that in 2016, in the European Union alone, 4 thousands cases of ransomware were seen on a daily basis, and that in 2018 over 80% of European companies suffered from at least one information attack.

The human and economic resources dedicated to the issue of cybersecurity are expected to evolve in upcoming years as well, so that the best technologies and solutions capable of facing possible attacks can continually be used. From the benchmark analyses provided by the most prominent observers of the information market (Gartner, Forrester, IDC and others), information security spending is estimated at between 4% and 10% of annual ICT spending in companies. Between 2012 and 2018, average spending in cybersecurity per employee almost doubled and over the next few years this trend will continue. Indeed, the International Data Corporation (IDC) expects this item of expenditure to increase globally at an average annual rate of 10% until 2022.

Environmental scenario

The increase in individual awareness of environmental and social inclusion issues is one of the factors sought after by market operators, i.e. by the best resources. Our planet’s climate has always changed over time; the new and worrying aspect consists in humanity’s contribution to accelerating this change.

Climate change: regulations, causes, impact and initiatives announced

Changes in individual expectations and priorities as regards environmental issues have been accompanied by praiseworthy ambitions at a global and European level; the most outstanding include the 17 goals on the 2030 Agenda for Sustainable Development, the objectives contained in the Paris Agreement on climate change (whose objective is to keep global warming under 2ºC), those included in the long-term climate strategy, referred to as A Clean Planet For All, presented by the European Commission during one of the most recent Conferences of the parties to the Convention on climate change (Cop 24)1 , which stressed the need to maintain global warming below 1.5° C and outlined a new total decarbonisation scenario, reached through greenhouse gas emission neutrality within 2050 and, more recently, those contained in the Green Deal2.
The European Green Deal lies at the heart of the political program of the new Von Der Leyen Commission and, according to the intentions of the community executive, it will bring actions favouring a containment of global warming together with opportunities for developing Europe’s industrial layout, with important effects concerning employment. The political package will be made up of over 50 legislative and strategic initiatives which will come to light over 2020 and 2021, covering a wide range of sectors including energy and mobility.
Energy and transportation indeed contribute significantly to climate-changing gas emissions in Europe, considering among other things the still heavy use of fossil sources. Over the past decade, renewable sources have become progressively more important within the mix of electricity generation in the EU (e.g. wind and solar power), but have still not been able to make their way into the mobility sector and struggle to emerge as an alternative for solutions in warming/cooling.
Europe’s strategy in laying out the conditions for an energy transition in transportation will thus have to concentrate on promoting technologies with a lower environmental impact for private mobility (e.g. electric cars), public mobility (e.g. renewable gasses, hydrogen) or again for freight transport (e.g. intermodality).
Along similar lines, the transition in the energy sector will be based on an increased role of electricity to satisfy final consumption, along with power generation from renewable sources. However, it will also have to unite aspects including reliable procurement and competitiveness for the industrial system, which require an integrated approach to the sector, making the most of the strong points of electricity and gas, also including the ideas involved in sector coupling.
The focus of the European Commission and the international community in responding to climate change will then be extended to other sectors, including waste management and water.
The European Green Deal will be built around the promotion of circular solutions involving the entire production chain, from production to consumption of a given good, as well as waste management. Until present, indeed, some important steps have been made in this direction, and yet the most significant legislation has focused on some links in the chain (e.g. waste management) or some areas of production (e.g. the plastics sector). The EU thus aims at giving greater attention to the phase of production/importing of manufactured goods that are as reusable and recyclable as possible, enhancing the recycled materials market and replacing virgin materials, including some specific chains that must be individually reoriented.

The main consequences of climate change, highlighted by recent European studies, include an increase in sea level, a reduction in the volume of glaciers and the snow cover, as well as effects on health linked to climate-sensitive diseases. Some zones risk being submerged and, last but not least, extreme weather conditions have gradually increased in intensity and frequency.
It is increasingly necessary to adopt a sustainable management system for water resources that is able to reconcile needs in storage and conservation, efficiency in consumption and the possibility of reusing waste water, which at the same time allows natural ecosystems to be reconstituted. The exhaustion of water resources is furthermore one of the main threats to economic growth: energy production is one of the leading causes of freshwater resource consumption.

In order to sustain the projects mentioned above, on 14 January 2020 the European Commission presented its investment plan for a sustainable Europe, which will mobilise the EU funds required for the transition towards a climatically neutral economy, which is green, competitive and inclusive. This plan, which includes other initiatives announced in the draft for the Green Deal, is structured around three areas: allocating a certain amount of public spending to actions for the climate and the environment (as well as attracting private funding, thanks to the European investment bank); providing incentives to encourage and reorient public and private investments; giving practical sustainment to public authorities and promoters for the phases of planning, processing and implementing sustainable projects. In line with the other European countries, the Italian government stressed its intention to follow up on the Green Deal with its 2020 Budget Law, launched a green pact which, through incentive mechanisms intended for the industrial and production sector, aims at the transition towards a circular economy model. Among the tools designed to contrast climate change included in the new Budget Law, a few examples that must be mentioned include: introducing tax credits (coming to 36%) for sustainable expenses made by businesses in purchasing recycled products; channelling resources towards municipal administrations for projects in improving energy efficiency and ensuring public asset security; introducing funds for activating sustainable projects in urban upgrading and energy conversion, to incentivise the use of renewable sources.

Human capital scenario

Trends in the economic, political, environmental and social system, combined with exponential growth in digital transformation, impact various aspects of human capital. Developments in technological applications, along with significant growth in the technological ability to manage data, make it all the more important to invest in the human ability to interpret phenomena, aimed at generating value. The relation between man and machine is increasingly aimed at integration on the workplace, rather than simply enhancing cost efficiency in a rationale based on substitution. Future paths in technological development require companies to increase their management abilities, orienting their choices based on ethical aspects no less than technical ones. Increased digitalisation shapes models for education, and yet risks creating a sharp gap between those who rapidly acquire excellent digital skills and those who struggle to gain this knowledge. Abilities in interpersonal relations become increasingly important, as do abilities in interpreting and managing complex contexts. Increases in the information and tools available for collaboration at a distance cause changes in the way of working and measuring performance. Individual priorities are also changing with respect to the past: the need for stability in employment and retribution observed until present is matched by a search for challenging contexts, attractive in their ability to offer a connected environment in terms of human relations.

1Cop 25, which came to a close on 15 December 2019, simply confirmed the conclusions of the previous Conference of Parties and deferred a discussion of all new issues, including the intentions of member countries as regards reducing emissions, to the upcoming Cop 26 in Glasgow.
2The European Commission’s new president insisted repeatedly on the centrality of the environment in her executive action and promised a Green Deal for Europe in her first 100 days in office (beginning on 1 December 2019). The draft for the strategy presented by the European Commission stresses its ambition to become the first carbon-neutral continent, within 2050, i.e. a region where CO2 emissions produced are offset by an equal amount of absorption. This ambition will take the shape of a European climate law and, in light of this, the 2030 target for greenhouse gas reduction might be increased by at least 55%.

Strategic approach and management policies

Macroeconomic and financial factors

The Hera Group pursues a debt structure that is compatible with business requirements in terms of the length of financing and exposure to interest rates. The Group currently shows and strives to constantly maintain a financial management capable of maximising its yield profile while maintaining a cautious risk strategy.
Hera carefully plans its financial resources, cash flows and debt over the long term; the average cost of debt is continually optimised through forms of liability and financial risk management aimed at seizing favourable market opportunities.

The capital market and the Green financing framework

In line with these goals, as regards capital markets, in July 2019 Hera issued a green bond with an overall value of five hundred million euro, maturing in eight years, with the coupon set at 0.875%, and a 1.084% return, as part of the company’s funding strategy. This green bond was listed on the Dublin and Luxembourg regulated stock exchanges and on Borsa Italiana’s Extra Mot platform; the transaction saw significant participation coming from green and sustainable investors. The funds raised will be used to finance or refinance numerous projects included in the Business plan, which pursue some of the goals on the UN’s 2030 Agenda in the areas of energy efficiency, circular economy and sustainable waste management and water infrastructures.
Note furthermore that in 2019 Hera drafted its own Green financing framework (Gff), available on the Group’s website. This is a programming document that informs investors as to the green projects financed (the document has received ISS-oekom certification). As regards the process of optimising the Group’s financial structure, two bonds, maturing in 2021 and 2024, were also repurchased (the amounts of repurchased debt come to 40 million euro and 171 million euro respectively).

The banking market

As regards the banking market, at 31 December 2019 Hera had 363 million euro in liquidity, 600 million euro in committed lines of credit and 537 million euro in uncommitted lines of credit (of which 37 million euro currently used).
The lines of credit and the corresponding financial assets are distributed among major Italian and foreign banks, and their conditions are highly competitive.

Derivative financial instruments used for hedging

The Group’s financial management furthermore includes the use of derivative financial instruments mainly used for hedging; in 2019 the latter were perfectly in line with the underlying debt.

Average cost of debt

Taken as a whole, these transactions on bond or banking markets allowed for an optimisation in the conditions for a further reduction in the average cost of medium-term debt, which in 2019 settled at 3.5%.


Over the year, the Group continue communicating as usual with the rating agencies Moody’s and Standard & Poor’s (S&P): both agencies maintained their positive opinion of the creditworthiness of the Group, which has a solid medium-long term investment grade. Moody’s (Baa2, stable outlook) and S&P (BBB/A-2, positive outlook) confirmed their opinion for reasons including the positive results reached over the year in the Group’s credit metrics.
The Group’s risk profile was positively evaluated by rating agencies, in terms of the solidity and good balance of the portfolio of businesses managed, as well as its good operating performance, its liquidity risk and its resilient creditworthiness indicators. It must however be stressed that the Group’s rating is closely related to Italy’s, since the majority of its Ebitda derives from domestic business and is thus exposed to the country’s macroeconomic trends and its political scenario.
Hera Spa’s actions and strategies are always particularly prudent and aimed at guaranteeing that adequate ratings are maintained and improved.

Business factors: industrial strategy

The Group presented its business plan in January 2020, which sets out Hera’s strategy in effectively responding to the complex context outlined until present.

The Group’s strategic orientation

The three foremost strategic guidelines in the plan to 2023 are:

  • industrial growth, an indispensable condition in order to continue distributing increasing value, benefitting all stakeholders within the ecosystem in which the Group operates;
  • risk management, in particular adopting the medium-long term approach required to deal with the risks to which utilities are exposed and identify the most effective steps to mitigate them (e.g. climate risks);
  • circular economy, as a reference model for bringing Hera’s business activities into line with the paradigms of reduction, reuse, recycling, recovery and regeneration.

Furthermore, the Group will leverage and continue to elaborate some of its assets and strong points, such as its wide and diversified service portfolio (marked by a significant amount of regulated activities), its financial solidity, its constant search for innovative solutions in promoting higher efficiency and better service quality, and its continuous investment in training for its own resources so that its employees’ skills evolve alongside the overall context.

Free-market businesses

As regards free-market businesses, the Group’s strategy will unfold mainly in the areas of industrial growth and circular economy.

In energy markets, growth in the customer base is expected to reach 3.5 million customers by 2023. This target was revised upwards compared to the previous plan, thanks to the contribution coming from the recent partnership with Ascopiave, which consolidated the Group’s position in North-Eastern Italy.
Growth in the customer base will results, first and foremost, from marketing development, supported by innovative offers, added value services and increasing customer experience for each type of client.
Among marketing offers, mention must go to the ones aimed at promoting business circularity through renewable energy supply, or initiatives supporting energy efficiency, through means including applying the principles of behavioural economics to influence individual habits.
Once again in the area of circular initiatives, the Group will aim at developing and implementing solutions in energy savings for public administrations, industrial firms and condominiums, with offers tailored to the specific needs of each category of customers.
Over the period covered by the plan, furthermore, the Group will continue participating in competitive procedures for last resort markets (held annually for the gas service and every two years for the safeguarded electricity service). The leading role played by Hera until present in this area is expected to be confirmed.
Lastly, an important new feature in this line of business will consist in the gradual liberalisation of the protected electricity market, which will give the Group opportunities in terms of widening its customer base.

In the waste treatment and recovery sector, the Group intends to confirm its national commercial and technological leadership, which is due to its avant-garde set of plants, in line with European best practices, and will be further developed in upcoming years, with the goal of obtaining the maximum reuse possible of natural resources. In this sense, based on the experience gained with the Sant’Agata Bolognese plant, over the period covered by the plan biomethane production is expected to increase thanks to an anaerobic digester.
Attention towards circularity will also guide the strategy of the subsidiary company Aliplast Spa, thanks to which the Group is now involved in rigid plastic recovery and recycling and is carrying out initial experiments in molecular pet recycling.

Development of the industrial customer portfolio will be based on integrated and circular marketing solutions that can be adapted to the specific needs of each customer and offer complete waste management, which may also include looking for opportunities in water and energy efficiency within the production processes of industrial customers.

Regulated businesses

As regards regulated businesses as well, which mainly concern distribution infrastructure management, the strategic guidelines set out above will be fully implemented. Industrial growth will be fuelled by a significant investment plan (to which roughly 70% of total Group investments will go over the period covered by the plan) and by participating in tenders for regulated service assignment in most of the areas served by Hera.

As regards tenders for gas distribution service concessions, part of the competitive procedures concerning the areas managed by the Group are expected to come to a close within 2023. This estimate is based on the initial tenders held nationwide, which showed some postponement due to delays in initiating the tenders, the complexity of the procedures and the appeals later filed by some of those participating.
In the water cycle the Group will take part in the procedures used for assigning this service in the Rimini area, and for municipal waste tenders are expected to be concluded in all areas of Emilia Romagna. The Group’s goal is to be confirmed as the reference operator in all areas already served, counting on its level of service quality and its innovative solutions made available to users.

The introduction of new technologies will not only be a distinctive feature to be highlighted during tenders, but also an enabling factor in extracting efficiencies from operations and offering to communities services that are up to date with the technological evolution of the context. The Group has in fact made plans to replace metres in gas and electricity networks and in water infrastructures. In particular, Hera has developed a new gas metre – called NexMeter – that is able to interrupt the flow of gas and make the user’s system safe in the event of significant earthquakes, gas leaks or smaller latent leakage. These interventions meet the need to increase resilience towards exogenous conditions in network infrastructures, an important action to undertake in mitigating the increasing climate risks.

In the integrated water cycle, the Group’s strategy will be focused on water resource protection, through both increased activity in searching for network leakage and services in water management intended to promote increasing sustainability and awareness in water management, both inside and outside the company. Particular will also be given to reusing purified water, following the principles of a circular economy. Purified water can be reused (e.g. in agriculture) and can also stimulate local regeneration initiatives (e.g. maintaining hydrologic balance in times of drought).

The same principles will also be applied to the district heating business, with a strategy focused on technological network and plant renovation and on maximising hear recovery and its final use, through means including extensions of or improved interconnections between previously existing systems.

Promoting circular behaviour will be a cornerstone of Group strategy in municipal waste, by introducing new technological solutions able to increase the quantity and quality of sorted waste, and through communication and training initiatives aimed at raising awareness among citizens and getting them more involved.

The strategy outlined until present will lead to an increase in Group Ebitda, reaching the target of 1.25 billion euro by 2023. All business areas will contribute to this growth in Ebitda and, over the period covered by the plan, positive balance will be confirmed in the contribution coming from free-market and regulated activities.
Investments totalling roughly 2.9 billion euro have furthermore been included in the strategic plan, an amount higher than the previous five-year period. These investments will respect the proper balance in proportions among the macro-areas served by the Group and will be mainly concentrated in regulated activities, with the interventions going to modernisation and infrastructure development, as described above.

The business plan confirms the Group’s strong attention towards sustainability, which has always been in Hera’s DNA and now respects the goals contained in the 2030 Agenda. Almost 75% of the growth expected over the period covered by the plan will be fuelled by shared value projects, i.e. those that are able to respond to the UN’s calls to action. The amount of shared value Ebitda and investments in 2023 will reach 530 and 750 million euro respectively, coming to 42% of overall Ebitda and 35% of total Group investments, thus helping construct a business model that is ever more resilient and regenerative.

Technological, environmental and human capital factors: sustainable development

In order to meet the needs of the areas served and satisfy customers, three critical factors in success have been identified: technology, circularity and the ecosystem.
Technological evolution, taken as a whole, and digitalisation in particular, are elements that cover the nation’s entire industrial scene. The Group wishes to make the most of the opportunities offered by new technology and extract cost efficiencies and related synergies from data management, which will take on a significant role in facilitating the expansion of a smart approach across the area served, in particular in the case of smart cities.

The Group continually carries out studies to understand which goals defined by the 2030 Agenda for sustainable development and the fight against climate change (as confirmed by a series of legislative and regulatory agreements) it can better contribute to reaching with its activities, projects and policies, all anchored to a circular economy. Circular economy is a response to a range of critical elements that must be faced by modern society, which go from increasingly scarce resources to a reduction of emissions into the atmosphere, or again a reduction in non-recoverable waste. Over the years, the Group has developed industrial strategies inspired by sustainability, and its future actions will be equally aimed at goals in circularity and decarbonisation, with effective solutions and determination.

Belonging to a reference ecosystem in a continually changing context furthermore increases companies’ resilience towards transformations of the context and accelerates changes in the corporate environment thanks to external contamination. The Group’s strategy has always been based on a close relation with the areas served and its ecosystem; today, this distinctive element is considered an asset by investors rating agencies.

Sustainable development

Hera contributes heavily towards six of the 2030 Agenda’s sustainable development goals: 7) affordable and clean energy, 13) combat climate change, 6) clean water and sanitation, 12) responsible consumption and production, 9) industry, innovation and infrastructure and 11) sustainable cities and communities.
For further details on the actions the Group intends to promote, contributing in a broad sense to 169 targets within the 11 Goals on the UN 2030 Agenda mapped into the 2019 Csv framework, see the Group’s website (Social responsibility section) and its Sustainability report (“Shared value” section). Note, furthermore, that over 2019 two training events on SDGs were organised, to consider Hera’s current and potential contribution to the 2030 Agenda. The main actions include those aimed at promoting energy efficiency and sustainable water management, selecting qualified suppliers in terms of environmental and social sustainability, developing employment and new skills, and working towards increased innovation and digitalisation.
The increasing energy sustainability towards which the Hera Group is moving is guided by a few significant investments, made during 2019 or ongoing: 4 industrial cogeneration plants, the Sant’Agata Bolognese plant which produces biomethane and injects it into the gas network, and the introduction of led light bulbs in public lighting, along with initiatives in reducing electricity consumption and its carbon footprint. The green offers (nature package and zero footprint, to name only two) that the Group expects to cover 58% of all gas and electricity customers by 2023, are evidence of an additional strategy planned in this sense.
As regards sustainable management of water resources, note above all Hera’s intention to continue improving the sewerage-purification sector in the areas served, and the interventions for resource availability and purified water reuse contained in the business plan.

Generally speaking, with regard to the waste management sector, the continued work done by EU institutions in the area of circular economy has been confirmed, meaning that this trend is being consolidated as a paradigm towards which all models of production and consumption will move. In other words, the element underlying all activities in the Group’s strategy is its increasing attention to all kinds of footprints: from carbon to water, including the more general resource footprint left by the Group and its main stakeholders, from suppliers to customers and citizens.

Sustainable development

The Global Risks Interconnections Map 2020. Fonte: World Economic Forum Global Risks

A path of sustainable industrial growth is a fundamental condition for continuing to distribute value to stakeholders in the areas served by the Group. The 2019 Global Risk Report, published by the World Economic Forum, presents climate change and technological risks as the two families of risk that most concern multi-utilities, and that could produce the most significant impact worldwide.
The evolution expected in the context in which one operates makes it even more necessary to anticipate and mitigate the significant risks that utilities such as Hera will have to face, working towards constructing an increasingly resilient and regenerative model.
Circularity is the primary strategy in designing the businesses of the future and concretely contributing to the future wellbeing of the system in which companies act.
Evolving technology and digitalisation is an opportunity that will be carefully considered and grasped, to avoid underestimating the commitment required for a digital corporate and organisational transformation.
Digitalisation leads towards new development opportunities for businesses; adopting new solutions in Artificial intelligence is however necessarily tied to the specific activity in question, and machine learning is thus time-consuming and have to be repeated for each type of activity/process. The leading technological evolutions that concern the waste (first and foremost, plastic) and energy (biofuels and biogas) chains, as part of the search for concrete solutions that can be of aid in the challenges posed by climate change or natural resource depletion, are instead the progress made in the chemical industry and engineering. This progress is strategically exploited in order to define plastic recycling processes that are complementary to mechanical recycling, and in order to effectively recycle the less pure or less valuable portions of plastic as well. This same progress furthermore allows experimental solutions to be tried, which use the excess of renewable electricity (otherwise unusable) to divide water molecules into hydrogen and oxygen and then convert them into substitute natural gas with the addition of carbon (from CO2).

Human caital development strategy

To effectively deal with this context, the Group is now equipped with a human capital development strategy that is able to generate value over time. The goal is to create and constantly develop a model of agile learning organization, understood as an organisation able to learn and rapidly translate this learning into action, within a purpose-driven strategy. Human resource management and development processes are designed to conserve the skills and distinctive values built up over time, and simultaneously search for all aspects that can generate an added value that is sustainable over the long term.

One important step taken in this direction consisted in reconsidering the workforce planning process. With strategic workforce planning, indeed, a greater knowledge of the dynamics of the workforce becomes possible, helping us understand the impact of business strategy on priorities in developing human resource processes. The strategic dialogue between different lines of business and the function of human resources, for example, allows the most significant ongoing trends to be analysed, sharing the meaning of the business challenges shaped over the years by the business plan, along with the risks and opportunities these challenges carry with themselves, and bringing all human resource processes within a coherent plan of action, able to orient their implementation and allow the correlated risk mitigation strategies to be managed.

In particular, it is becoming increasingly important to invest in the continuous development of an inclusive and performance-driven work environment, in which employees are the protagonists of their own self-development; to encourage an environment that reflects agile organization and to develop the latter; to redefine the rules so as to promote higher rotation in roles and processes and optimise people’s experience, through means including digital tools.
Furthermore, in order to make fully operational the automation and digitalisation processes that must involve all company employees, and thus require a transition in the working environment, it is increasingly urgent to develop paths in focused reskilling for personnel engaged in activities that, by their very nature, can be automated to a significant degree, helping employees along a path that valorises their employability.

With the aim of encouraging access to training that is increasingly tailored to the specific features of each role, and that takes people as its starting point, the Group’s strategy is furthermore designed around a knowledge management system that is highly adaptable to various organisational and individual contexts. The development processes thus reward the resources who invest in their own learning and facilitate the application of learning agility as a condition for gaining access to roles with greater responsibility.

Hera’s Human Resources function therefore pursues its social purpose, working in the interests of the environment, communities, employees, suppliers and customers, promoting the continuous development of the corporate environment within the Group and gradually bringing individuals in line with this goal.

In other words, after defining the factors that will lead the utilities of the future to success, goals in industrial growth, circularity and risk management are translated into corporate processes. To orient the actions to be undertaken, the priorities that will guide the Group’s projects until 2023 have been identified.



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Operating and financial results

Constant growth in all indicators

With its 2019 financial report, the Hera Group shows continued growth in all operational, financial and sustainability indicators. Ebitda settled at 1,085.1 million euro, up 5.2%, Ebit reached 542.5 million euro, increasing by 6.4%, and net profits came to 402.0 million euro, growing by 35.5%. From a financial point of view as well, improvement was seen over 2018, due to the Group’s solid financial structure: the adjusted net debt/Ebitda ratio came to 2.48; adjusted Roi settled at 9.4% and adjusted Roe at 10.4%.

These 2019 results confirm the Group’s path of uninterrupted growth and its solid foundations, having by now consolidated its multi-business strategy, balanced between regulated and free market activities. Reaching these results, which were matched by similar ones in terms of sustainability and opportunities for creating shared value through the principles of a circular economy, was made possible by respecting the pillars of the Hera Group’s strategy, aimed at synergic growth: innovation, efficiency, agility, excellence and growth. The partnership with Ascopiave Spa, as described above, will also be highly important in the years to come.

The main corporate and business operations which must be taken into account in evaluating the changes with respect to 2018 are as follows:

  • Hera Comm Spa was awarded seven portions out of ten in safeguarded electricity auctions for the 2019-2020 two-year period held by the Single Purchaser, with 15 regions assigned (Liguria, Piedmont, Valle d’Aosta, Trentino-Alto Adige, Lombardy, Veneto, Emilia-Romagna, Friuli-Venezia Giulia, Sardinia, Lazio, Campania, Abruzzo, Puglia, Molise and Basilicata).
  • On 1 February 2019, after winning the public auction, Hera Spa acquired 0.5% of Marche Multiservizi Spa from shareholder Unione Montana Alta Valle del Metauro, thus increasing its shareholding from 46.2% to 46.7%.
  • As of 1 March 2019, the Hera Group merged the natural gas distribution activities of CMV Servizi, through the company A Tutta Rete Srl, and the energy sales activities of CMV Energia e Impianti Srl. The two companies were owned by the Municipalities of Cento, Vigarano Mainarda, Bondeno, Poggio Renatico, Terre del Reno and Goro. The transaction involved roughly 25 thousand customers (21,300 in gas and 3,500 in electricity) and roughly 30 thousand delivery points (26,500 in the Ferrara area and over 3,100 in the Bologna area) in natural gas distribution.
  • On 23 April, Hera Spa acquired 3.28% of the share capital of Acantho Spa from Aimag Spa, thus increasing its shareholding from 77.36% to 80.64%.
  • On 9 May 2019, Hera Spa was definitively awarded the tender for acquiring 100% of shares of Cosea Ambiente Spa, a company managing municipal and similar waste services mainly in the province of Bologna. Cosea Ambiente Spa was consolidated as of June 2019, with operating and financial effects backdated to 1 January 2019. Furthermore, a Concession Act was stipulated between Cosea Consorzio Servizi Ambientali and Herambiente Spa which conceded the municipal, assimilated and special non-dangerous waste disposal plant located in Gaggio Montano to Herambiente Spa.
  • Effective as of 1 July 2019 and with accounting effects backdated to 1 January 2019, the company  Waste Recycling Spa was merged by incorporation into Herambiente Servizi Industriali Srl. This transaction was aimed at simplifying and generally improving operating efficiency, and led to the establishment of Italy’s largest operator in industrial waste management.
  • On 17 July 2019, Herambiente Spa acquired the entire shareholding of Pistoia Ambiente Srl, involved in managing the special waste landfill located in the Municipality of Serravalle Pistoiese. The company was consolidated with operating and financial effects as of 1 July 2019.
  • Hera Comm Spa was awarded the tender, for the period from 1 October 2019 to 30 September 2020, four portions of the gas service (for customers in public services or without a supplier) and two portions of the default gas distribution service (for customers in arrears).
  • On 19 December, with the finalised closing of the corporate transaction between the Hera Group and the Ascopiave Group, the following operations were completed: shareholdings in the companies Ascotrade Spa, Ascopiave Energie Spa, Blue Meta Spa, Etra Energia Srl, Asm Set Srl and Hera Comm NordEst Srl were transferred to Estenergy Spa, a company controlled by Hera Comm Spa; shareholding in the company Amgas Blu Srl was transferred to Hera Comm Spa; shareholding in the company AP Reti Gas Nord Est Srl was transferred to Ascopiave Spa. Furthermore, AcegasApsAmga Spa’s Gas Distribution branch concerning the Padua 1, Padua 2, Udine 3 and Pordenone Atems, effective as of 31 December 2019, was transferred to AP Reti Gas Nord Est Srl For further information, see paragraph 1.03.01.

The acquisitions of Sangroservizi Srl, Cmv and Atr Srl in the energy area and Cosea Ambiente Spa, Pistoia Ambiente Srl and the Gaggio Montano plant in the waste management area are considered as a change in the scope of operations in the remainder of this report. The Ascopiave transaction has no operating effects on the Group’s income statement at 31 December 2019.

As of 2019, accounting standard Ifrs 16 leases came into effect, which provides a new definition of leases and introduces a criterion based on the right of use of an asset to distinguish leasing contracts from service contracts. Put briefly, what this standard entails for the Hera Group, in the first adoption phase, are lower costs for services but higher amortisation and financial charges in the income statement, and from a financial point of view, higher non-current assets and higher financial debt.

As indicated by accounting standard Ifrs 15, the costs involved in commissions paid to agents, amounting to roughly 13 million euro, have been recorded as assets and are amortised according to the average useful life of the customers acquired (churn rate).

The following table shows operating results at 31 December 2019 and 2018:

Constant and increasing growth

Income statement
Dec 19 % inc. Dec 18 % inc. Abs. change % change
Revenues 6,912.8   6,134.4   +778.4 +12.7%
Other operating revenues 530.8 7.7% 492.0 8.0% +38.8 +7.9%
Raw and other materials (3,458.2) -50.0% (2,984.1) -48.6% +474.1 +15.9%
Service costs (2,318.2) -33.5% (2,040.5) -33.3% +277.7 +13.6%
Other operating costs (59.3) -0.9% (62.5) -1.0% -3.2 -5.1%
Personnel costs (560.4) -8.1% (551.4) -9.0% +9.0 +1.6%
Capitalised costs 37.6 0.5% 43.3 0.7% -5.7 -13.2%
Ebitda 1,085.1 15.7% 1,031.1 16.8% +54.0 +5.2%
Amortisation, depreciation and provisions (542.6) -7.8% (521.0) -8.5% +21.6 +4.1%
Ebit 542.5 7.8% 510.1 8.3% +32.4 +6.4%
Financial operations (100.0) -1.4% (91.7) -1.5% +8.3 +9.1%
Pre-tax profit 442.5 6.4% 418.4 6.8% +24.1 +5.8%
Taxes (125.4) -1.8% (121.8) -2.0% +3.6 +3.0%
Net result 317.1 4.6% 296.6 4.8% +20.5 +6.9%
Result from special items 84.9 1.2% 0.0 0.0% +84.9 +100.0%
Net profit for the period 402.0 5.8% 296.6 4.8% +105.4 +35.5%
Attributable to:            
Parent company shareholders 385.7 5.6% 281.9 4.6% +103.8 +36.8%
Non-controlling interests 16.3 0.2% 14.7 0.2% +1.6 +10.9%


Revenues grow thanks to higher volumes of energy sold and trading

Revenues came to 6,912.8 million euro, up 778.4 million euro or 12.7% over the 6.134,4 million euro seen in 2018. In the area of energy, this growth in revenues was sustained by roughly 435 million euro in trading, roughly 59 million euro in higher volumes of gas and electricity sold, roughly 14 million euro in higher revenues from electricity generation, and pass-through revenues for volumes transmitted and system charges coming to 205 million euro; a decrease was seen in gas and electricity sales revenues, owing to the lower price of commodities, coming to roughly 21 million euro. Furthermore, higher regulated revenues were seen in the gas, electricity and water cycle areas, amounting to 16 million euro overall and, lastly, in the waste management area higher revenues were seen for waste treatment. Changes in the scope of operations led to an overall rise in revenues amounting 25 million euro. Growth in foreign activities, in Bulgaria, contributed with 5 million euro.

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

Revenues (bn€)


Other operating revenues increased over the previous year by 38.8 million euro or 7.9%. This growth is mainly due to higher revenues from Ifric 12 commissions coming to 46 million euro and higher contributions from sorted waste totalling roughly 5.0 million euro. The increase was offset by a lower contribution from energy efficiency certificates coming to roughly 4 million euro, the loss of CEC contributions in two Group plants amounting to roughly 5 million euro and lower reimbursements and non-recurring contributions from the previous year totalling roughly 3 million euro.


Rise in costs of raw materials linked to higher revenues

Costs for raw and other materials rose by 474.1 million euro compared to 31 December 2018, up 15.9%. This increase, not including changes in the scope of operations, which accounted for roughly 1.5 million euro, was due to a larger amount of trading, a rise in the price of raw materials and higher volumes of gas and electricity sold.

Other operating costs rose by 274.5 million euro overall (with higher costs for services coming to 277.7 million euro and lower operating expenses amounting to 3.2 million euro). Not including changes in the scope of operations, which accounted for roughly 13 million euro, note the higher pass-through costs for service charges and volumes transmitted coming to roughly 205 million euro, higher costs in gas trading services totalling 18 million euro, roughly 34.5 million euro in higher costs for Ifric 12 commissions, higher costs in the waste management area coming to roughly 29.0 million euro and expenses in the Ict area amounting to roughly 7 million euro for the Group’s ongoing digitalisation and innovation processes. The higher costs noted above were only partially offset by lower costs for leasing, following the application of accounting standard Ifrs 16, amounting to roughly 16.6 million euro, and lower costs in the income statement owing to the acquisition of energy customers which are capitalised, as indicated above, amounting to 13 million euro.

+1.6% increase in the cost of personnel

The cost of personnel rose by 9.0 million euro or 1.6%. This increase is due to changes in the scope of operations, amounting to 7.0 million euro, while the remainder results from the increases in remuneration foreseen by the National labour contract, offset by reductions in contribution benefits and a lower average presence.

Capitalised costs at 31 December 2019 fell compared to the previous year by 5.7 million euro or 13.2%, owing to a lower amount of interventions on plants and work on Group assets.

Ebitda settled at 1,085.1 million euro, up 54.0 million euro or 5.2% over 2018. This growth in Ebitda can be traced to the excellent performance seen in almost all business areas. The energy areas grew by 20.1 million euro overall, thanks to the good of the gas area, whose result increased by 25.1 million euro, offsetting the trend seen in the electricity area, which dropped by 5.0 million euro. The water cycle area contributed to growth with 15.6 million euro, the waste management area with 12.2 million euro and, lastly, the other services area with 6.1 million euro.

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

Ebitda (mn€)

Higher amortisation owing to Ifrs 16 and adjustment in rates for useful life in the water sector

Amortisation, depreciation and provisions at 31 December 2019 increased by 21.6 million euro over the previous year, going from 521.0 million euro to 542.6 million euro. Amortisation rose on account of new operating investments and by way of the application of accounting standard Ifrs16 concerning the statement of leasing contracts, and due to an adjustment in the technical-economic useful lives of assets in the integrated water cycle. This analysis, carried out in collaboration with a company working in asset valuation, led to an increase in amortisation rates whose net effect came to roughly 8.2 million; following this revision, amortisation rates for the integrated water cycle were essentially in line with the ones set by Arera for the 2020 – 2023 tariff period.
Allocations to the doubtful debt provision dropped, in particular in the sales company.

Ebit for 2019 came to 542.5 million euro, up 32.4 million euro or 6.4% over the 510.1 million euro seen one year earlier.


Ebit (mn€)

Financial operations increase due to non-recurring elements

The result of financial operations came to 100.0 million euro at the end of 2019, up 8.3 million euro or 9.1% compared to 31 December 2018. This increase is due to lower non-recurring income received in the previous period: higher dividends paid by subsidiary Veneta Sanitaria Finanza di Progetto coming to roughly 2.0 million euro, the application of international accounting standard Ifrs 16 on operating leases, which had a roughly 3.5 million euro impact on charges. Lastly, lower profits amounting to roughly 1.5 million euro came from affiliated companies and joint ventures.

Pre-tax results rose by 24.0 million euro or 5.7%, going from 418.5 million euro at 31 December 2018 to 442.5 million euro in 2019.

Tax rate falls

Taxes went from 121.9 million in 2018 to 125.4 in 2019. The adjusted tax rate, calculated on the pre-tax result net of the special items described above, came to 28.3% and thus improved sharply compared to the 29.1% seen one year earlier. This result is mainly due to the benefits grasped in terms of large and extremely large amortisations and the patent box, in particular concerning investments added to the ones made in previous years to move towards the technological, digital and environmental transformation pursued by the Group.

The net result increased by 6.9%, amounting to 20.5 million euro, going from 296.6 million euro at the end of 2018 to 317.1 million euro in 2019

In 2019, the result was increased by special items coming to 84.9 million euro. As regards the Hera – Ascopiave partnership and the effects on the income statement of the entire transaction, note:

  • as regards gas distribution, Ascopiave Spa acquired from the Hera Group an area of concessions covering roughly 188,000 users in the Veneto and Friuli-Venezia Giulia regions. This transfer caused a capital gain of 30.2 million euro for the Hera Group, classified in the income statement under “Other non-operating revenues” (see note 11 in the explanatory notes).
  • the reassessment of the previous shareholding in EstEnergy Spa (coming to 51% of the share capital), following the control obtained over that company, led 81.4 million euro in profits to be included in the income statement, classified among “Other non-operating revenues”  (see note 11 in the explanatory notes).

Furthermore, the impairment process carried out on a yearly basis for electricity generation assets led to a depreciation amounting to 26 million euro, classified in the income statement under “financial charges”.  For a more detailed description of the entire process, see note 32 in the explanatory notes. The effect on taxes coming from the Ascopiave transaction, which amounted to 0.7 million euro, involved taxes applied to capital gains/losses on transfers of branches and shareholdings between the parties, once again concerning the same transaction, classified in the income statement under “taxes”, (see note 12 in the explanatory notes).

+35.5% Net profit

Net profit thus rose by 35.5% or 105.4 million euro, going from 296.6 million euro in 2018 to 402.0 million euro at the end of 2019.

Profits pertaining to the Group amounted to 385.7 million euro, up 103.8 million euro over the amount seen in 2018.

Net profit post minorities (mn€)
Net profit post minorities



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Analysis of the Group’s financial structure and investments

What follows in an analysis of trends in the Group’s net invested capital and sources of financing at 31 December 2019.

Invested capital and sources of financing (mn€) Dec 19 % inc. Dec 18 % inc. Abs. change % change
Net non-current assets 6,846.3 108.9% 5,905.1 108.7% +941.2 +15.9%
Net working capital 87.0 1.4% 115.4 2.1% -28.4 -24.6%
(Provisions) (649.1) -10.3% (588.2) -10.8% -60.9 -10.4%
Net invested capital 6,284.2 100.0% 5,432.3 100.0% +851.9 +15.7%
Equity (3,010.0) 47.9% (2,846.7) 52.4% -163.3 -5.7%
Long-term borrowings (3,383.4) 53.8% (2,558.8) 47.1% -824.6 -32.2%
Net current financial debt 109.2 -1.7% (26.8) 0.5% +136.0 -507.5%
Net debt (3,274.2) 52.1% (2,585.6) 47.6% -688.6 -26.6%
Total sources of financing (6,284.2) -100.0% (5,432.3) 100.0% -851.9 -15.7%


Group solidity increases

Net invested capital (Nic) amounted to 6,284.2 million euro, with a 15.7% increase over the 5,432.3 million euro seen at the end of 2018.
This higher amount is due to a rise in net non-current assets, mainly resulting from the Hera - Ascopiave
partnership transaction, which involved an exchange of assets having the same value in the energy sales and gas distribution areas. The transaction was accounted for according to international accounting standard Ifrs 3, and led a client list to be registered coming to 430.7 million euro, in addition to 430.6 million euro in higher goodwill and 93.0 million euro in deferred tax liabilities.
The increase in net non-current assets was also due to the application of accounting standard Ifrs 16 on operating leases
, which led the right of use to be recorded, as well as the significant investment policy introduced over 2019 and, lastly, M&A transactions including Herambiente Spa’s acquisition of the entire shareholding of Pistoia Ambiente Srl, a company involved in managing the special waste landfill located in the Municipality of Serravalle Pistoiese.

Net invested capital (bn€)
Net invested capital

Net investments rise to 509.2 million euro, up 77.4 million

In 2019, Group investments amounted to 509.2 million euro, including 24.5 million in capital grants, of which 13.4 million in FoNI investments, as per the tariff method for the integrated water service.
Excluding capital grants, overall Groups investments came to 533.8 million euro. Net investments rose by 77.4 million euro, going from 431.8 million euro in 2018 to 509.2 million euro in 2019.

Total net investments (mn€)
Total Net Investment

Strong commitment continues to be seen in operating investments in plants and infrastructures

The following table shows a breakdown by business area, with separate mention of capital grants:

Total investments (mn€) Dec 19 Dec 18 Abs. change % change
Gas area 138.3 115.4 +22.9 +19.8%
Electricity area 43.4 23.0 +20.4 +88.7%
Integrated water cycle area 175.8 157.9 +17.9 +11.3%
Waste management area 81.8 78.1 +3.7 +4.7%
Other services area 16.0 18.8 -2.8 -14.9%
Headquarters 78.2 69.1 +9.1 +13.2%
Total operating investments 533.5 462.3 +71.2 +15.4%
Total financial investments 0.2 0.3 -0.1 -33.3%
Total gross investments 533.8 462.6 +71.2 +15.4%
Capital grants 24.5 30.8 -6.3 -20.5%
of which FoNI (New Investments Fund) 13.4 12.5 +0.9 +7.2%
Total net investments 509.2 431.8 +77.4 +17.9%


The Group’s operating investments came to 533.5 million euro, up 15.4% over the previous year, and mainly involved interventions on plants, networks and infrastructures, in addition to regulatory upgrading involving above all gas distribution, with a large-scale metre substitution, and the purification and sewerage areas.
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 9.1 million euro compared to the previous year, mainly due to improvements in the IT system and substitutions in the vehicle fleet.

87.0 million euro net working capital

2019 closed with net working capital amounting to 87.0 million euro, down compared to the 115.4 million euro seen at the end of 2018. This result is due to various factors that influenced trends in 2019. While on the one hand the amount of Nwc increased due to the integration of sales activities acquired from Ascopiave, on the other a like-for-like analysis of Nwc shows a decrease coming to roughly 28.4 million euro. This drop is mainly due to a positive trend in trade receivables, thanks to ongoing and careful monitoring of processes in receivables, which offset the impact on reduced trade payables introduced by changes in payment deadlines, from 60 to 30 days, which began in 2018.

649.1 million euro provisions

In 2019, provisions rose to 649.1 million euro, increasing over the figure seen at the end of the previous year. This result is mainly a consequence of period-specific provisions and an increase in post-mortem landfill provision adjustments and reinstatements of third party goods, due to the application of accounting standard Ias 37, which offset expenses for usage. For further details, see the explanatory note.

3.0 billion euro equity

Equity increased from 2,846.7 million euro in 2018 to 3,010.0 million euro in 2019. Equity reinforced the Group’s solidity thanks to the positive net result achieved by management in 2019, coming to 402.0 million euro (317.1 adjusted for special items) which, net of the 160.5 million euro in dividends paid during the year, guaranteed the Group’s self-financing.

Return on net invested capital (Roi), excluding the effects of the Ascopiave transaction, settled at 9.4% in 2019, in line with the result for 2018.

Adjusted Roi (%)

Return on equity (Roe) was also stable at 10.4%, confirming the good operating results achieved.

Adjusted Roe (%)

Reconciliation between separate and consolidated financial statements

Reconciliation between separate and consolidated financial statements

  Net result Equity
Balances as per Parent Company's seperate balance sheets 166.3 2,390.4
Excess of equity over the carrying amount in consolidated companies 256.1 118.3
Consolidation adjustments:    
measurement with the equity method of investments reported at cost in the seperate financial statement 0.7 31.0
difference between purchase price and book value of corresponding portion of equity 74.0 286.4
elimination of intercompany transations (111.4) (17.6)
Total 385.7 2,808.5
Restoration of third-party assets 16.3 201.5
Balances as per consolidated financial statements 402.0 3,010.0


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Analysis of net cash (net borrowings)

A solid financial position

An analysis of net financial debt is shown in the following table:

mn€   Dec 19 Ascopiave transaction Dec 19 adjusted Dec 18
a Cash and cash equivalents 364.0 18.1 345.9 535.5
b Other current financial receivables 70.1 16.4 53.7 37.3
  Current bank debt (111.5) - (111.5) (70.3)
  Current part of bank borrowings (63.1) - (63.1) (451.5)
  Other current financial liabilities (excluding put option) (130.9) - (130.9) (76.1)
  Current lease payments (19.4) (1.1) (18.3) (1.7)
c Current financial debt (324.9) - (323.8) (599.6)
d=a+b+c Net current financial debt 109.2 - 75.8 (26.8)
  Non-current bank debt and bonds issued (2,869.1) (54.0) (2,815.1) (2,644.3)
  Other non-current financial liabilities (excluding put option) (20.2) (7.0) (13.2) (20.7)
  Non-current lease payments (76.1) (2.5) (73.6) (12.2)
e Non-current financial debt (2,965.4) - (2,901.9) (2,677.2)
f Non-current financial receivables 135.3 - 135.3 118.4
g=d+e+f Net financial debt excluding sales option (2,720.9) - (2,690.8) (2,585.6)
  Nominal amount - fair value put option (396.6) (396.6) - -
  Net financial debt with adjusted sale option (adj put option net debt) (3,117.5) - (2,690.8) (2,585.6)
  Amount of future dividends - fair value put option (156.7) (156.7) - -
  Adjusted net debt (3,274.2) - (2,690.8) (2,585.6)

The overall amount of adjusted net financial debt, excluding the Ascopiave transaction, came to 2,690.8 million euro, with an increase coming to roughly 105.2 million euro over the previous year.

The Group’s financial structure shows current debt coming to 323.8 million euro, of which 63.1 million euro in medium-term bank loans reaching maturity within the year, 130.9 million euro in debts towards other lenders, 111.5 million euro in debts towards banks referring to passive interest on financing coming to 49.6 million euro,  and usage of current credit lines coming to roughly 61.9 million euro.
The amount of “Non-current bank debt and bonds issued” increased over the previous year, above all due to the liability management operation carried out in July, which led a 500 million euro green bond to be issued, at the same time repurchasing part of the bonds maturing in 2021, for a total of 40 million euro, and in 2024, for a total of 171 million euro.
Also note increases with respect to 2018 in current and non-current liabilities for leasing, which were mainly affected by the application of international accounting standard Ifrs 16 on operating leases, amounting to 81.6 million euro.

At 30 June 2019, medium- and long-term debt was largely made up of bonds issued on the European market and listed on the Luxembourg Stock Exchange (77.9% of the total), with repayment at maturity.

The total debt shows an average time to maturity of 7 years, with 61% maturing after more than five years.
The impact on the 2019 financial statements of the Ascopiave transaction, and its structure, are fully illustrated in paragraph 1.03.01, Hera – Ascopiave Partnership.
Since this transaction involved an exchange of assets having the same value, the effect on financial debt, coming to 583.4 million euro, mainly refers to debt for the sales option linked to the minority shareholding in EstEnergy Spa, amounting to 553.3 million euro, and the minority shareholding in Hera Comm Spa, which is included under “Non-current bank debt and bonds issued” and amounts to 54 million euro.

Adjusted net financial debt went from 2,585.6 million euro in 2018 to 2,690.8 million euro at the end of 2019.

Adjusted net financial debt (bn€)
Adjusted net financial debt (bn€)

The Group’s characteristic management generated positive operating cash flows coming to 189.2 million euro, which entirely financed dividend payments and part of the M&A transactions, in particular the acquisition of the shareholding of Pistoia Ambiente Srl.
Net financial debt increased mainly due to the recording at fair value of the sales option linked to Ascopiave Spa, coming to roughly 553.3 million euro, and the application of international accounting standard Ifrs 16 on operating leases, coming to 81.6 million euro.

Cash flow (mn€)
Cash Flow

The Adjusted net debt/Ebitda ratio fell to 2.48, thanks to the positive operating and financial performance seen.

Adjusted net debt/Ebitda
Adjusted net debt/Ebitda

The same effect was seen in Funds from operations (Ffo)/ Adjusted net debt, which increased over the figure seen in 2018. This indicator as well, just as the previous one, benefitted from positive trends in operating flows, which rose more than proportionally compared to the growth in net debt, confirming the Group’s financial solidity and its ability to meet its financial obligations.

Ffo/Adjusted Net debt (%)
 Ffo/Adjusted Net debt


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Analysis by business area

A multi-business strategy

An analysis of the operating results achieved in the Group’s business areas is provided below, including: the gas area, which covers services in natural gas distribution and sales, district heating and heat management; the electricity area, which covers services in electricity generation, 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 and recovery; the other services area, which covers services in public lighting and telecommunications, as well as other minor services.

The contribution coming from the Group’s various areas to overall Ebitda shows a balanced mix, in line with its multi-business strategy


2019 ebitda
2019 Ebitda


The Group’s income statements include corporate headquarter costs and account for intercompany transactions at arm’s length.

The following analyses of each single business area take into account all increased revenues and costs, having no impact on Ebitda, related to the application of Ifric 12. The business areas affected by this accounting standard are: natural gas distribution services, electricity distribution services, all integrated water cycle services and public lighting services.

In all business areas, as in the income statements, accounting standard Ifrs 16 on operating leases has been applied.


Ebitda rises

At 31 December 2019, the gas area showed substantial growth over the previous year, in terms of both Ebitda and volumes sold. The result was achieved mainly due to a higher amount of sales and trading.

Ebitda Gas area 2019
Ebitda Gas area 2019


Ebitda Gas area 2018
Ebitda Gas area 2018


Growth in Ebitda: +7.9%

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

(mn€) Dec 19 Dec 18 Abs. change % change
Area Ebitda 341.6 316.5 +25.1 +7.9%
Group Ebitda 1,085.1 1,031.1 +54.0 +5.2%
Percentage weight 31.5% 30.7% +0.8 p.p.  

The number of gas customers increased by 593.6 thousand, up 40.8% over 31 December 2018. The entry of the companies belonging to the EstEnergy Group and AmgasBlue within the Group’s consolidated scope contributed with 611.0 thousand customers, while the expanded scope due to the acquisitions of CMV Energia e Impianti Srl and Sangroservizi Srl contributed with 27.9 thousand customers. Participation in tenders led to a decrease coming to 43.6 thousand customer, but with higher margins. The remainder of customers, excluding the churn rate and acquisitions, dropped slightly, by 1.7 thousand customers.

Customers (k)

Overall volumes of gas sold increased by 3,682.5 million m3, or 59.7%, going from 6,168.2 million m3 at the end of 2018 to 9,850.7 million m3 at 31 December 2019. Trading volumes showed growth coming to 3,724.8 million m3, or 60.4% of total volumes, due to a higher amount of foreign trading. Volumes sold to end customers decreased slightly, by 42.3 million m3 or 1.8% of total volumes sold, which in any case is lower than the effect of a very mild winter, whose average temperatures were 6% higher than in 2018.

Volumes sold (mn m3)
Volumes sold


The following table summarises operating results for the gas area:

Income statement (mn€) Dec 19 % change Dec 18 % change Abs. change % change
Revenues 2,971.9   2,371.0   +600.9 +25.3%
Operating costs (2,529.2) -85.1% (1,958.2) -82.6% +571.0 +29.2%
Personnel costs (114.1) -3.8% (111.2) -4.7% +2.9 +2.6%
Capitalised costs 13.0 0.4% 14.8 0.6% -1.8 -12.1%
Ebitda 341.6 11.5% 316.5 13.3% +25.1 +7.9%

Revenues went from 2,371.0 million euro at the end of 2018 to 2,971.9 million euro at 31 December 2019, with growth coming to 600.9 million euro or 25.3%. The main reasons for this growth lie in the higher volumes involved in intensified trading activities, amounting to roughly 553 million euro, the higher price of gas as a raw material, coming to roughly 30 million euro, and higher revenues from transmission and system charges, amounting to roughly 28 million euro, in spite of the lower revenues for volumes of gas sold, coming to roughly 28 million euro.
Revenues for companies operating abroad, in Bulgaria, rose thanks to developments in marketing by 5.4 million euro, as did regulated revenues from gas distribution, by 5.2 million euro, and revenues from long-term commissions and subcontracts, by 10.3 million euro, with an equivalent effect on operating costs. This growth was contained by revenues for energy efficiency certificates, which dropped by roughly 8 million euro.

Revenues (mn€)

This growth in revenues was reflected by an increase in operating costs, which went from 1,958.2 million euro at the end of 2018 to 2,529.2 million euro at 31 December 2019, thus showing an overall growth coming to 571.0 million euro. This trend is largely due to a higher amount of trading and the higher cost of raw materials. Lastly, the application of accounting standard Ifrs 16 reduced costs by roughly 1.6 million euro.

Ebitda increased by 25.1 million euro or 7.9%, going from 316.5 million euro at the end of 2018 to 341.6 million euro at 31 December 2019, thanks to the higher amount of trading, higher margins in sales both to end customers and in last resort and default services. Note that, for the latter two services, the concessions awarded for 1 October 2019 – 30 September 2020 include a different mix than the services provided until 30 September 2019, with a lower number of customers than in the previous year but more advantageous margins.

Regulated revenues rose by 5.0 million euro, up 2.1% over 2018. This increase is due to a higher Wacc rate of return, +0.2%, as well as periodic updates concerning return on investments, concerning meters in particular.

Further positive effects were due to the introduction of accounting standard Ifrs 16, amounting to 1.6 million euro, and lower costs for acquiring energy customers, which no longer appear in the income statement, as mentioned in paragraph 1.03.01, but under investments.

Ebitda (mn€)

In 2019, net investments in the gas area amounted to 138.3 million euro, up 22.9 million euro over the previous year. A 10.7 million euro increase was seen in gas distribution, mainly due to higher non-recurring maintenance on networks and plants, a large-scale metre substitution (deliberation 554) and ongoing work in cathodic protection upgrading in the areas served by AcegasApsAmga. Requests for new connections also increased over the previous year. Investments totalling 8.3 million euro were seen in gas sales, for activities involved in acquiring new customers.
Investments also increased in district heating, and remained essentially in line with the previous year in heat management, with the activities of the companies Hera Servizi Energia Srl and AcegasApsAmga Servizi Energetici Spa. New connections in district heating dropped slightly compared to the previous year..

Net investments gas (mn€)
Net investments gas

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

Gas (mn€) Dec 19 Dec 18 Abs. change % change
Networks and plants 103.1 92.4 +10.7 +11.6%
Acquisition gas customers 8.3 0.3 +8.0 2,666.7%
DH/heat management 26.9 22.8 +4.1 +18.0%
Total gas gross 138.3 115.4 +22.9 +19.8%
Capital grants 0.0 0.0 +0.0 +0.0%
Total gas net 138.3 115.4 +22.9 +19.8%

The Regulatory asset base (Rab) for assets owned, which defines the value of assets recognised by the Authority for return on invested capital, rose compared to 2018, owing to the entry of Atr Srl within the Group’s scope of operations and increased investments for the roll-out of electronic meters.

RAB (bn€)


Growth in Ebitda

At the end of 2019, the electricity area dropped by 2.7% compared to the previous year. The positive contribution coming from generation and a strong drive in marketing almost entirely offset the negative effects of the new tender for safeguarded services, for the 2019-2020 two-year period, in which a high degree of competiveness led to lower prices compared to the previous tender.

EEbitda electricity area 2019
Ebitda electricity area 2019


Ebitda electricity area 2018
Ebitda electricity area 2018


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

-2.7% fall in Ebitda

(mn€) Dec 19 Dec 18 Abs. change % change
Area Ebitda 178.5 183.5 -5.0 -2.7%
Group Ebitda 1,085.1 1,031.1 +54.0 +5.2%
Percentage weight 16.4% 17.8% -1.4 p.p.  

The number of electricity customers settled at 1.3 million supply points, up 17.2% or 184.2 thousand customers, compared to 31 December 2018. The entry within the Group’s consolidated scope of the companies belonging to the EstEnergy Group and AmgasBlu contributed with 102.6 thousand customers, while the remaining growth of 81.6 thousand customers, equivalent to 7.6%, was created by the reinforced marketing initiatives introduced, above all in the Marche, Tuscany, Veneto and Friuli regions. This growth, along with the 3.5 thousand customers brought by the entry of CMV Energia e Impianti Srl, mitigated the fall in protected customers.


Volumes of electricity sold went from 5,866.5 GWh at 30 June 2018 to 6,124.5 GWh at 30 June 2019, with an overall increase of 4.4% or 258.0 GWh. Volumes sold on the free market rose by 2.7% of the total, while safeguarded volumes increased by 2.5% of the total, thanks to the new portions obtained.

Volumes sold (GWh)
Volumes sold

The following table summarises operating results for the area:

Ebitda drops by 5.0 million euro

Income statement (mn€) Dec 19 % inc. Dec 18 % change Abs. change % change
Revenues 2,590.4   2,462.1   +128.3 +5.2%
Operating costs (2,376.1) -91.7% (2,244.9) -91.2% +131.2 +5.8%
Personnel costs (45.0) -1.7% (44.9) -1.8% +0.1 +0.2%
Capitalised costs 9.1 0.4% 11.1 0.5% -2.0 -18.0%
Ebitda 178.5 6.9% 183.5 7.5% -5.0 -2.7%

million euro in 2019, with growth amounting to 128.3 million euro. the main reasons for this increase lie in the higher amount of volumes sold, which created roughly 87 million euro in higher revenues, higher revenues from electricity generation amounting to roughly 14.0 million euro, and transmitssion outside the grid coming to roughly 182 million euro, with no change in costs. Countering these trends, note the lower revenues for trading totalling 118.0 million euro and the lower price of raw materials coming to roughly 43 million euro.
Regulated revenues increased by 1.6 million euro, up 1.8% over 2018. This rise is due to a higher Wacc rate of return, up 0.3%, as well as the naturally occurring updates in recognition for investments and accruals.
Revenues for long-term commissions and subcontracted works increased by 3.5 million euro, with an equal effect on operating costs, while revenues from energy efficiency certificates fell by roughly 1.2 million euro.

Revenues (mn€)


The increase in revenues was reflected to an equal degree by a rise in operating costs, which went from 2,244.9 million euro at the end of 2018 to 2,376.1 million euro in 2019, thus showing an overall increase of 131.2 million euro. This trend is mainly due to higher volumes sold and a higher amount of electricity generation. Lastly, the application of accounting standard Ifrs 16 reduced costs by roughly 0.4 million euro.
At 31 December 2019, Ebitda dropped by 5.0 million euro or 2.7%, going from 183.5 million euro in 2018 to 178.5 million euro in 2019, due to lower earnings coming from both higher competition on the safeguarded market and the different mix of portions managed. Offsetting this effect, note the higher margins in electricity generation on the dispatching market, higher volumes sold and lower costs for acquiring energy customers, that no longer appear in the income statement, as mentioned in paragraph 1.03.02, but under investments.

Ebitda (mn€)

Investments in the electricity area came to 43.4 million euro in 2019, up 20.4 million euro compared to the previous year, of which 15.5 million euro were involved in energy sales, for activities linked to acquiring new customers.
Interventions mainly concerned non-recurring maintenance on plants and distribution networks in the Modena, Imola, Trieste and Gorizia areas, which led to growth in investments for electricity distribution coming to 4.9 million euro over the previous year, mainly involving interventions on networks and plants in the Trieste area and the new Modena Est primary substation.
Requests for new connections also rose with respect to the previous year.

Net investments electricity (mn€)
Net investments electricity

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

Electricity (mn€) Dec 19 Dec 18 Abs. change % change
Networks and plants 27.9 23.0 +4.9 +21.3%
Acquisition electricity customers 15.5 0.0 +15.5 +100.0%
Total electricity gross 43.4 23.0 +20.4 +88.7%
Capital grants 0.0 0.0 +0.0 +0.0%
Total electricity net 43.4 23.0 +20.4 +88.7%

Rab, which defines the value of assets recognised by the Authority for return on invested capital, was in line with the figure seen in 2018.

RAB (bn€)


Growing results

In 2019, the integrated water cycle area showed growth in operating margins amounting to 6.2%. 2019 is the last year in which the tariff method defined by the Authority for the 2016-2019 period (resolution 664/2015) is applied. A revenue (Vrg) is assigned to each operator, defined on the basis of operating costs and capital costs according to the investments made.


Ebitda water cycle area 2019
Ebitda water cycle area 2019


Ebitda water cycle area 2018
Ebitda water cycle area 2018


+6.2% Ebitda increases

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

(mn€) Dec 19 Dec 18 Abs. Change % change
Area Ebitda 265.3 249.7 +15.6 +6.2%
Group Ebitda 1,085.1 1,031.1 +54.0 +5.2%
Percentage weight 24.5% 24.2% +0.3 p.p.  

The Hera Group covers all areas of the water cycle, from sourcing and treatment, with over 400 plants, to drinking water distribution, with over 35 thousand km of pipelines, sewerage management, with over 18 thousand km of pipelines managed, and purification and environmental restoration, with over one thousand plants and purification systems.

The number of water customers settled at 1.5 million, increasing by 4.3 thousand or 0.3% compared to 2018, confirming the moderate trend towards internal growth seen in the Group’s reference areas, mainly in the Emilia-Romagna region managed by Hera Spa.


289.3 million m3: quantity managed in the aqueduct

Quantity managed 2019 (mn m3)                        
Quantity managed 2019


Quantity managed 2018 (mn m3)  
Quantity managed 2018


Volumes dispensed through the aqueduct showed a slight drop, down 1.8 million m3 or 0.6% compared to the previous year. Furthermore, compared to 2018, a slight decrease was seen in the quantity managed in purification (coming to roughly 1.2%), while the quantity managed in sewerage was essentially in line with the previous year. The volumes dispensed, following the Authority’s resolution 664/2015, are an indicator of activity in the areas in which the Group operates and are subject to equalisation owing to legislation that calls for a regulated revenue to be recognised independently from volumes distributed.
Network efficiency maintenance showed clear improvement, and the amount of breakage per km of pipeline went from 7.0 breaks per km in 2018 to 6.2 breaks per km in 2019. This figure expresses the relation between the total number of breaks repaired and the length of the pipeline, and the decrease is due to careful management of reparations and investments intended to guarantee an increasingly performing aqueduct.

The electricity consumed in plants fell by 6.4 GWh, going from 381.4 GWh at the end of 2018 to 375.0 GWh in 2019. This decrease is linked to both the lower volumes dispensed in 2019 and the Group’s commitment towards increasing efficiency and prudence in energy resource management, which is achieved through innovative interventions on plants.


An overview of operating results for the water area is provided in the table below:

Income statement (mn€) Dec 19 % inc. Dec 18 % inc. Abs. change % change
Revenues 911.9   878.6   +33.3 +3.8%
Operating costs (471.8) -51.7% (455.7) -51.9% +16.1 +3.5%
Personnel costs (179.9) -19.7% (179.3) -20.4% +0.6 +0.3%
Capitalised costs 5.2 0.6% 6.1 0.7% (0.9) (14.8%)
Ebitda 265.3 29.1% 249.7 28.4% +15.6 +6.2%

Revenues at the end of 2019 grew by 33.3 million euro or 3.8%, going from 878.6 million euro in 2018 to 911.9 million euro in 2019. This trend is due to higher revenues involving subcontracted works and those commissioned by third parties carried out in 2019 amounting to roughly 19.0 million euro, and higher revenues from new connections coming to roughly 1.4 million euro. Revenues from dispensing reflected the overall result of the tariffs introduced by the Authority for 2016-2019 and the recognition of premiums for contract quality in 2019, which increased by 13.3 million euro.

Revenues (mn€)

Operating costs saw an increase coming to 16.1 million euro or 3.5%, going from 455.7 million euro in 2018 to 471.8 million euro at the end of 2019. This trend is due to the higher costs involved in the works carried out, as described under revenues, coming to 19.0 million euro overall, and higher operating costs for network and plant management amounting to 3.0 million euro. This growth was partially offset by the lower cost ensuing from the application of Ifrs 16, amounting to roughly 4.0 million euro, and lowers costs for electricity consumed by plants, coming to roughly 2.0 million euro (due to both the lower price of electricity and the lower volumes consumed).

Ebitda grew by 15.6 million euro or 6.2%, going from 249.7 million euro at the end of 2018 to 265.3 million euro in 2019, largely thanks to higher revenues from dispensing, higher revenues from new connections and, lastly, the effects of the application of Ifrs 16, coming to 4.0 million euro.

Ebitda (mn€)

In 2019, net investments in the integrated water cycle area amounted to 151.5 million euro, up 23.9 million euro over the previous year. Including the capital grants received, which fell by 6.0 million euro, the investments made increased by 17.9 million euro and reached 175.8 million euro, compared to the 157.9 million euro seen one year earlier.
These investments mainly involved extensions, reclamations and network and plant upgrading, in addition to regulatory upgrades involving above all purification and sewerage.
Investments were made coming to 99.7 million euro in the aqueduct, 48.3 million euro in sewerage and 27.7 million euro in purification.

Net investments water cycle (mn€)
Net investments water cycle


The more significant works include: in the aqueduct, the increased activity in network improvement linked to Arera resolution 917/2017 on the regulation of the technical quality of the integrated water system, upgrading interconnections in the Modena area water system, and interventions aimed at introducing district-based networks; in sewerage, continued progress was made in the important works for the Rimini seawater protection plan, in addition to redevelopment of the sewerage network in other areas, including Budrio, Argenta, East Modena and, in the areas served by AcegasApsAmga, Padua and Trieste; in purification, creating the second line and first rainwater reservoir in the Sasso Marconi purifier and revamping the water line in the Ravenna purifier, in addition to work on plants in the area served by the AcegasApsAmga Group.  
Requests for new water and sewerage connections increased over the previous year.
Capital grants amounting to 24.2 million euro included 13.4 million euro deriving from the tariff component called for by the New Investments Fund (FoNI) tariff method and fell by 6.0 million euro compared to the previous year.

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

Significant operating investments in the aqueduct, sewerage and purification

Integrated water cycle (mn€) Dec 19 Dec 18 Abs. change % change
Aqueduct 99.7 81.5 +18.2 +22.3%
Purification 27.7 26.9 +0.8 +3.0%
Sewerage 48.3 49.5 -1.2 -2.4%
Total integrated water cycle gross 175.8 157.9 +17.9 +11.3%
Capital grants 24.2 30.2 -6.0 -19.9%
of which FoNI (Nre investment fund) 13.4 12.5 +0.9 +7.2%
Total integrated water cycle net 151.5 127.6 +23.9 +18.7%

Rab, which defines the value of assets recognised by the Authority for return on invested capital, rose compared to the figure seen in 2018, thanks to growth in all Group companies.

Rab (bn€)



Ebitda increases

At the end of 2019, the waste management area accounted for 24.3% of the Hera Group’s overall Ebitda, showing a 4.8% growth in Ebitda over the previous year. In waste treatment and recovery, consolidated its national leadership in 2019 by deploying complete and integrated marketing offers, shaping marketing partnerships with main sector players and remaining constantly present in calls for tenders, in addition to maintaining a complete and avant-garde set of plants able to offer effective and sustainable solutions that support a circular economy.
As examples of the latter point, note the further reinforcement of Aliplast Spa’s outstanding activity in plastic recycling and the contribution coming from the Sant’Agata Bolognese biomethane production plant. This new asset creates a virtuous cycle that begins with households, through the sorted collection of organic waste, and goes back to the area served, since the gas produced is injected into the network, to fuel private vehicles or public transportation, or again for household use, with an immediate benefit on air quality. Note furthermore that, in the third quarter of 2019, strategies in simplification and overall operating efficiency improvement led Waste Recycling Spa to be merged into Herambiente Servizi Industriali Srl, which thus became Italy’s largest company dedicated to industrial waste management.
As regards municipal waste management services, the Hera Group offers this service to 189 municipalities; compared to December 2018, mention must go to the entry within the Group’s consolidated scope of Cosea Ambiente, a company that manages waste collection and street sweeping services mainly within the province of Bologna.
Environmental resource protection was confirmed as a priority goal in 2019 as well, along with optimising reuse, as is demonstrated by the Group’s special focus on promoting sorted waste in all areas served.

waste management area EBITDA 2019
Waste management area EBITDA 2019


waste management area EBITDA 2018
Waste management area EBITDA 2018


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

Growth in Ebitda: +4.8%

(mn€) Dec 19 Dec 18 Abs. change % change
Area Ebitda 264.2 252.0 +12.2 +4.8%
Group Ebitda 1,085.1 1,031.1 +54.0 +5.2%
Percentage weight 24.3% 24.4% -0.1 p.p.  

Market waste: +3.2%

Volumes marketed and treated by the Group in 2019 are as follows:

Quantity (k tons) Dec 19 Dec 18 Abs. change % change
Municipal waste 2,347.8 2,348.0 -0.2 -0.0%
Market waste 2,211.1 2,142.8 +68.3 +3.2%
Commercialized waste 4,558.9 4,490.8 +68.1 +1.5%
Plant by-products 2,616.2 2,802.2 -186.0 -6.6%
Waste treated by type 7,175.1 7,293.0 -117.9 -1.6%

An analysis of this data shows a rise in commercial waste due to market waste, which rose by 3.2%, with municipal waste remaining essentially stable. The growth in market volumes is a result of the fully operational status of the Sant’Agata biomethane plant and the new line in Ostellato, as well as the additions to the scope of operations discussed below. Lastly, market volumes benefitted from an increase in intermediated flows.
While municipal waste was virtually unchanged, sorted and sandy shore waste increased by 6.9% and unsorted waste showed a 6.9% drop.

Plant by-products decreased, owing to a lower production of leachate in landfills, caused by the lower amount of rainfall seen in 2019.

Further progress was made in sorted municipal waste, which went from 62.5% at the end of 2018 to 64.6% in 2019. At the end of 2019, sorted waste increased by 2.1% in the areas served by Hera Spa and by 0.8% in the areas served by Marche Multiservizi Spa, while growth settled at 2.4% in the Triveneto region.


Sorted waste(%)
Sorted waste

 Lesser use of landfills

Waste treated
by type of plant 2019
Waste treated by type of plant 2019


Waste treated
by type of plant 2018
Waste treated by type of plant 2018



Quantity (k tons) Dec 19 Dec 18 Abs. change % change
Landfills 663.5 704.3 -40.8 -5.8%
Wte 1,259.9 1,309.8 -49.9 -3.8%
Selecting plants and other 572.8 531.2 +41.6 +7.8%
Composting and stabilisation plants 506.1 361.5 +144.6 +40.0%
Inertisation and chemical-physical plants 1,600.2 1,231.7 +368.5 +29.9%
Other plants 2,572.7 3,154.6 -581.9 -18.4%
Waste treated by plant 7,175.1 7,293.0 -117.9 -1.6%

The Hera Group operates in the entire waste cycle, with 95 plants used for municipal and special waste treatment and plastic material regeneration. The most important of these include: 10 waste-to-energy plants, 12 composters/digesters and 15 selecting plants.

The Group’s path of growth in the industrial waste treatment and environmental services for businesses sector continued in 2019, due to reasons including the acquisition of Pistoia Ambiente Srl, which manages the Serravalle Pistoiese landfill. Lastly, the second half of the year saw a new non-dangerous waste treatment plant inaugurated in Cordenons, in the province of Pordenone, and municipal and non-dangerous special waste treatment plant managed in Gaggio Montano.

Waste treatment showed a 1.6% decrease compared to 2018. Note in particular the lower quantity in landfills, while in the chain of waste-to-energy plants the drop in waste treated compared to 2018 is mainly due to changes in scheduled shut-downs and planned maintenance. The higher amount treated in selecting plants is mainly due to a different classification of some plants in the subcontracted/other plants area. The higher amount treated in composters and stabilisers is mainly due to the higher volumes treated in the Sant’Agata plants and the new line in Ostellato. The higher amount treated in stabilisation and chemical-physical plants is due to a different classification of some plants in the subcontracted/other plants area, despite the decrease in landfill leachate due to lesser rainfall. Lastly, the decrease in subcontracted/other plants is mainly due to a lower amount of by-products, mainly waste water, treated in subcontracted plants, and the representation of a few plants in other categories (as mentioned above), in spite of the higher volumes created by the entry of Cosea Ambiente Spa.

Ebitda increases

The table below summarises the area’s operating results:

Income statement (mn€) Dec 19 % inc. Dec 18 % inc. Abs. change % change
Revenues 1,190.5   1,123.7   +66.8 +5.9%
Operating costs (733.5) -61.6% (684.3) -60.9% +49.2 +7.2%
Personnel costs (201.2) -16.9% (196.1) -17.4% +5.1 +2.6%
Capitalised costs 8.4 0.7% 8.8 0.8% -0.4 -4.6%
Ebitda 264.2 22.2% 252.0 22.4% +12.2 +4.8%

Revenues rose by 5.9% or 66.8 million euro, going from 1,123.7 million euro at 31 December 2018 to 1,190.5 million euro in 2019. Excluding the change in scope of operations due to the entry of Cosea Ambiente Spa, Pistoia Ambiente Srl and the Gaggio Montano plant (hereafter, changes in scope of operations), which contributed with roughly 22.9 million euro, the waste management area saw revenues grow by roughly 44 million euro over the previous year. This change is due to a positive trend seen in prices for special waste, the contribution coming from the Sant’Agata biomethane plant, which  began working in 2018 but whose inclusion among operating results began in 2019, and the one coming from Aliplast, owing to higher quantities managed and sold. These positive factors, along with higher revenues for developments in sorted waste in municipal waste services, were only partially offset by the lower volumes treated and lower revenues from electricity generation. As regards the latter, they are due to the loss of energy incentives for some plants, lower production in W-t-e and biogas, and a decrease in Grin, in spite of increased prices in market and thermal energy and  the guarantee of origin certificates obtained. The latter were gained following the certification of some Group plants as suitable for producing the energy injected into the national electricity grid from renewable sources.

Revenues (mn€)

Operating costs at the end of 2019 increased by 7.2% or 49.2 million euro, going from 684.3 million euro in December 2018 to 733.5 million euro in 2019. Not including the changes in scope of operations, which contributed with 12.4 million euro, higher costs were seen totalling 36.9 million euro. In the waste treatment business, note the higher costs involved in marketing development and upgrading, in addition to higher costs involved in planned maintenance on some Group plants. Furthermore, note the decrease in purchasing costs on the Pet sustained by Aliplast Spa. As regards municipal waste, note the higher costs involved in developing new projects for sorted waste. Lastly, note the lower costs tied to the application of accounting standard Ifrs 16, coming to roughly 6.1 million euro.

The cost of personnel, not including the changes in scope of operations mentioned above, increased by roughly 4.5 million euro or 0.3%.

Ebitda went from 252.0 million at the end of 2018 to 264.2 million euro in 2019, showing growth amounting to 12.2 million euro or 4.8%. This change was sustained by higher prices for special and industrial waste treatment, lower costs traceable to the application of accounting standard Ifrs 16, the contribution coming from Aliplast Spa and the new scope of operations. The positive factors indicated above more than offset the lower revenues due to the fall in volumes treated and lesser incentives for electricity generation.

Ebitda (mn€)

Net investments in the waste management area concerned plant maintenance and upgrading and amounted to 81.5 million euro, up 3.8 million euro over the previous year.
The composter/digester sector dropped by 16.2 million euro, due to the significant interventions carried out one year earlier on the Sant’Agata Bolognese composter in constructing the biomethane plant, in addition to other interventions including upgrading the Tre Monti mechanical biological treatment plant.
Investments in landfills rose by 6.3 million euro, mainly due to the work done on the first part of the Cordenons plant and interventions on the tenth sector of the Ravenna landfill.
The Wte plants sector saw a 3.7 million euro increase in investments, mainly involving non-recurring maintenance done on the Padua, Bologna and Trieste plants.
Increased investments in the special waste plants sector, coming to 0.9 million euro, mainly concerned maintenance on the Ravenna industrial waste treatment plants.

The ecological islands and collection equipment sector showed higher investments coming to 4.7 million euro, mainly concentrated in the areas served by Hera Spa, while the 4.1 million euro increase in the selection and recovery plants sector is mainly due to interventions on the mobile soil washing plant in Chioggia, installation of the polyethylene extruder and higher non-recurring maintenance in companies belonging to the Aliplast Group.

Net investments waste management (mn€)
Net investments waste management

Operating investments rise

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

Waste management (mn€) Dec 19 Dec 18 Abs. Change % change
Composting/digestors 8.3 24.5 -16.2 -66.1%
Landfills 17.1 10.8 +6.3 +58.3%
Wte 14.0 10.3 +3.7 +35.9%
Rs plants 4.5 3.6 +0.9 +25.0%
Ecological areas and collection equipment 17.0 12.3 +4.7 +38.2%
Transshipment, selecting and other plants 20.9 16.8 +4.1 +24.4%
Total waste management gross 81.8 78.1 +3.7 +4.7%
Capital grants 0.3 0.4 -0.1 -25.0%
Total waste management net 81.5 77.7 +3.8 +4.9%


Ebitda rises

The other services area covers all minor businesses managed by the Group, including public lighting, telecommunications and cemetery services. At the end of 2019, this area’s results showed a 21.1% increase over the previous year, with Ebitda going from 29.3 million euro at December 2018 to 35.5 million euro in 2019.

Ebitda other services 2019
Ebitda other services 2019


Ebitda other services 2018
Ebitda other services 2018


The changes occurred in terms of Ebitda are as follows:

(mn€) Dec 19 Dec 18 Abs. change % change
Area Ebitda 35.5 29.3 +6.2 +21.1%
Group Ebitda 1,085.1 1,031.1 +54.0 +5.2%
Percentage weight 3.3% 2.8% +0.5 p.p.  

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

Quantity Dec 19 Dec 18 Abs. change % change
Public lighting        
Lighting points (k) 548.7 534.3 +14.4 +2.7%
of which led 27.5% 14.9% +12.6 p.p.  
Municipalities served 181.0 176.0 +5.0 +2.8%


548.7 thousand lighting points

An analysis of the data regarding public lighting shows a growth of 14.4 thousand lighting points and the acquisition of five new municipalities served. Over 2019, the Hera Group acquired roughly 20 thousand lighting points in ten new municipalities. The most significant of these were: roughly 2 thousand lighting points in Lazio, roughly 8 thousand lighting points in Lombardy, roughly 8 thousand lighting points in Emilia-Romagna and roughly 2 thousand lighting points in the areas served by Marche Multiservizi Spa. These increases fully offset the loss of roughly 6 thousand lighting points and five municipalities served in the provinces of Ravenna, Forlì, Rimini and Padua. The percentage of lighting points using led light bulbs also increased, settling at 27.5% in 2019, up 12.6 percentage points. This trend reflects the constant attention shown by the Group towards an increasingly efficient and sustainable management of public lighting.
Among the indicators for the other services area, note also the 4,200 Km fibre optic ultra-broadband network owned by the Hera Group through its digital company, Acantho Spa. This network serves the main cities in the Emilia Romagna region as well as Padua and Trieste, offering businesses and private customers a high-performance connectivity with outstanding reliability, system and data security and service continuity.

Area grows

The area’s operating results are provided in the table below:

Income statement (mn€) Dec 19 % inc. Dec 18 % inc. Abs. change % change
Revenues 148.1   147.1   +1.0 +0.7%
Operating costs (94.3) -63.7% (100.2) -68.1% -5.9 -5.9%
Personnel costs (20.2) -13.7% (20.0) -13.6% +0.2 +1.0%
Capitalised costs 2.0 1.4% 2.5 1.7% -0.5 -20.3%
Ebitda 35.5 24.0% 29.3 19.9% +6.2 +21.1%

Revenues for the area were essentially in line with December 2018, showing slight growth coming to 0.7%, the equivalent of 1 million euro. This trend is mainly due to higher revenues in the telecommunications and public lighting businesses, in spite of lower revenues in cemetery services.

Revenues (mn€)

Ebitda showed a 6.2 million euro growth over December 2018. This trend is due to higher margins in telecommunications services and lower costs due to the application of Ifrs 16 coming to roughly 4 million euro.


Ebitda (mn€)

Investments in the other services area came to 16.0 million euro, down compared to the previous year.
In telecommunications, 10.1 million euro were invested in networks and Tlc and Idc (Internet data centre) services, in line with 2018, while the 5.9 million euro invested in the public lighting service went to maintaining, upgrading and modernising lampposts in the areas served. These investments fell by 2.8 million euro due to the substantial interventions dating to the previous year in the municipality of Pesaro carried out by the company Marche Multiservizi Spa and in the municipalities served by the company Hera Luce Srl, in addition to the changes in the way of recording works falling under the application of accounting standard Ifric 12.

Net investments other services (mn€)


Net investments other services

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

Other services (mn€) Dec 19 Dec 18 Abs. change % change
Tlc 10.1 10.0 +0.1 +1.0%
Public lighting and street lights 5.9 8.7 -2.8 -32.2%
Total other services gross 16.0 18.8 -2.8 -14.9%
Capital grants 0.0 0.0 +0.0 +0.0%
Total other services net 16.0 18.8 -2.8 -14.9%



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Sustainability results

The Group’s efforts in reporting the results obtained in the areas of creating shared value (Csv) and sustainability to its stakeholders have been fully confirmed, this year as well, by its Sustainability Report, available at within the section entitled Social responsibility.
The Sustainability Report contains consolidated non-financial statements prepared by the Hera Group, pursuant to legislative decree 254/16, and is a distinct report with respect to the present Directors’ Report, as foreseen by article 5, paragraph 3, letter b) of legislative decree 254/16. The Sustainability Report also includes indicators and information concerning the environment and personnel, as well as research and development.
An overview of the main results included in the 2019 Sustainability Report is provided below.

Further progress was made in areas pertaining to Csv and in prospects for sustainability in 2019, in terms of both results obtained and new projects in measurement and external reporting implemented. As regards the latter aspects, many elements have enriched the Group’s corporate social responsibility and accountability profile:

  • the approval, by Hera Spa’s Board of Directors, of the Group’s new Code of ethics, updated with many new elements that distinguish it, following a process that involved the collaboration of many employees and the supervision of the Ethics and sustainability committee;
  • an improvement of three of the five reports dedicated to specific issues in sustainability, which integrate the financial statements and refer in particular to the Group’s commitment towards innovation (report: I mille volti del servizio), reducing water consumption and reusing water (report: In buone acque) and recovering materials including minor portions of sorted waste such as vegetable oils, electric waste and fabrics (report: Sulle tracce dei rifiuti);
  • the introduction, within the 2019 Sustainability report (released as of 2016, two years earlier than required by Gri standards) of the following changes:
    • a first step towards bringing the Group’s reporting in line with the recommendations made by the Task force on climate-related financial disclosure (Tcfd), based on the results of a work group created in 2019, which will be operational for all of 2020;
    • adopting, one year early, two new Gri standards: 303 Water and effluents and 403 Occupational health and safety;
    • including, in the content index of the financial statements, indicators on the environmental benefits ensuing from the investments financed with the green bond issued in 2019;
    • broadening disclosure to include new areas defined on the basis of analyses of topics such as information and corruption risk prevention and management, and the adoption of circular economy principles in purchasing processes.

Creating shared value: Csv Ebitda rises to 422.5 million euro (38.9% of total Ebitda); Csv investments amount to 202.4 million euro (+10% over 2018)

The 2019 Sustainability Report confirms the innovative representation of its content introduced in 2017 and focused on shared value creation as seen in the Group’s strategic approach, inspired by the indications offered by Porter and Kramer. The results achieved and the goals set for the future thus continue to be accompanied by an overview of the scenario as regards the three drivers identified for creating shared value: (i) smart use of energy, (ii) efficient use of resources and (iii) innovation and contribution to local development. Hera’s position with respect to the significant environmental and socio-economic challenges found in future development, and its response to these issues, are thus clearly represented. These three Csv drivers each receive, in the 2019 report as well, one of the three most important chapters of the report.
One of the strong points of the Group’s Csv reporting is the quantification of Csv Ebitda, i.e. the portion of total Ebitda deriving from business activities that are able to respond to the goals on the Global agenda. This agenda brings together calls to action for an evolution towards sustainable growth, indicated by da 75 policies on a global (including the UN Agenda), European, national and local level, duly analysed over the 2016-2018 three-year period and summarised in the three drivers mentioned above. This set of policies was enhanced with 14 new policies analysed in 2019. In 2019, Csv Ebitda reached 422.5 million euro, up 12.6% compared to the previous year, corresponding to 38.9% of total Ebitda. This result matches the path set out by the 2019-2023 business plan, designed so that roughly 42% of 2023 Ebitda derives from business activities that meet the priorities of the Global agenda for sustainability which are compatible the Group activities. The Group’s contribution towards creating shared value also involves making investments in the three Csv drivers, which in 2019 amounted to 202.4 million euro (+10% over 2018), roughly 40% of total investments. This quantification of 2019 shared value Ebitda and investments was submitted for the first time to an auditing firm, with the intention of making the full value of these distinctive aspects of the Group’s reporting clear to all stakeholders.
The Hera Group’s commitment towards Csv is also confirmed by its active participation in the Ellen MacArthur Foundation’s CE100 program, a network that brings together the world’s 100 companies most engaged in the transition towards a circular economy. Particular mention must go to our participation in the New Plastics Economy Global Commitment, with a formulation of specific goals concerning increased plastic collection and recycling by 2025, and the first reporting carried out in 2019 as regards the objectives defined, which show positive results, higher than the trend expected for collected and selected plastic.
Once again in 2019, Hera participated in:

  • developing the beta testing phase, along with 30 other organisations, of Circulytics, a digital tool launched in January 2020 by the Foundation which will allow companies to measure and monitor the progress made in the transition towards a circular economy;
  • developing, along with 66 other organisations, including 30 companies, the Sdg Action Manager, a new tool conceived by Global Compact and B Lab to support companies in measuring and reporting their way of contributing to reaching SDGs, and in defining new business opportunities in line with the UN’s 2030 Agenda.

Smart use of energy: -5.1% in energy consumption; 20% of contracts include energy efficiency services; -22% in the carbon footprint

The initiatives identified by Hera Spa, Inrete Distribuzione Energia Spa, AcegasApsAmga Spa and Marche Multiservizi Spa concerning Iso 50001 (included in the energy improvement plan) and already implemented have led energy consumption to be reduced by 11,748 Toe, 5.1% of 2013 consumption. The improvement plan calls for further energy efficiency initiatives (per circa 2,000 Toe) which will give way, once again with respect to 2013, to an overall savings of 5.9%, amply exceeding the 5% target set for 2020.
Numerous energy efficiency initiatives have also been introduced in customer/partner companies, to whom the Group makes its know-how available: 25 agreements have been made with trade associations and local businesses, in effect until the end of 2019. The initiatives aimed at promoting energy efficiency with residential customers include marketing offers such as Hera Led, Hera Thermo and Hera ContaWatt, to which one must now add the Consumption log, re-planned in 2019 with the collaboration of the Milan Polytechnic to raise awareness among customers about energy savings, based on the principles of behavioural economics. This report is freely available to Hera’s gas, electricity and district heating customers, which allows them to compare their consumption to that of similar families. At the end of 2019, 20% of gas and electricity contracts contained energy efficiency solutions.
This area also includes Hera Spa’s activity towards the Energy services manager (Gse) in order to obtain white certificates: ten new energy efficiency initiatives were presented in 2019.
The Group’s commitment towards a smart use of energy, in particular to counter climate change, is rounded off by: the introduction of the new offer Hera Impronta Zero (Hera Zero Footprint); a purchasing program involving renewable sources which covers 74% of the Group’s overall consumption; the production of 6.5 million m3 of biomethane from the organic portion of waste in the Sant’Agata biorefinery in the province of Bologna; the production of 584 GWh of renewable energy; a 22% reduction in the carbon footprint for energy production compared to 2013. The total amount of greenhouse gasses avoided thanks to Group initiatives is estimated at 2.3 million tons.

Efficient use of resources: sorted waste at 64.6%; packaging recycling at 72%; water management activity introduced

2019 saw a further increase in sorted waste, now at 64.6% (2018 Italian average: 58.1%), and at the same time a reduction in the use of landfills for municipal waste disposal, which fell to 3.4% (2018 Italian average: 24%). In this area, Hera is almost 20 years in advance with respect to the EU circular economy goal and is in line with the most advanced European countries.
In November 2019, Hera published the tenth edition of its report entitled Sulle tracce dei rifiuti (Retracing waste), verified by Dnv-Gl, thus providing a guarantee to citizens as to the actual recovery of sorted waste, coming to 92%. This report contains a ranking of the area served by Hera with respect to the recycling objectives defined by the EU within the circular economy package: the overall amount of recycling came to 53%, meaning that Hera is already close to the goal of 55% set for 2025; and the amount of packaging recycling came to 72%, meaning that the Group has already reached the goal set for 2030. As regards waste prevention, the Group has launched numerous projects in partnerships with approximately 50 local non-profit organisations in order to recover non-expired medicine, voluminous objects that are still in good condition and food that is still edible. In 2019 alone, thanks to these projects non-expired medicine worth over 668 thousand euro was reused, as were over 630 tons of voluminous objects, while 9,700 meals were recovered.
Once again concerning circular economy, increases were seen in recovery of materials and energy in Herambiente Spa’s selection plants, coming to 83% in 2019 (as compared to 77% in 2018) and in the recycled plastic sold by the Aliplast Group, which in 2019 amounted to 72.8 thousand tons (+22% compared to 2017, the baseline for the commitment made towards the New Plastics Economy Global Commitment, mentioned above).
The Group’s efforts towards sustainability in the sewerage-purification area continued in 2019 as well, with the multi-year plan for compliance with regulations for urban agglomerates >2.000 P.E.: at the end of 2019, 97.3% of agglomerates proved to be adequate in terms of population equivalent (as against 92.2% in 2018). Important initiatives also regarded water resource conservation, such as the launch of the internal water management project, which led to a 5.5% reduction in consumption in 2019 (compared to the 2017 baseline) and the aforementioned Consumption log, which as of October 2019, in a testing phase, was distributed to a sample of roughly 80 thousand household customers in the water service.

Innovation and contribution to sustainable local development; investments in innovation and digitalisation: 78 mn€, economic value distributed to the local area: 2.1 bn€, amount of local supplies: 69%

In 2019, the Group achieved significant results in areas of Csv linked to the economic and occupational development of the local area, innovation and digitalisation, and air and soil protection.
The overall economic value distributed to the local area came to 2,131 million euro, or 78% of total economic value, showing an 11% growth over 2018. The amount distributed to local suppliers was 69% of the total, reaching 695 million (+10% compared to the previous year), while induced employment is estimated at approximately 8,400 workers; this data confirms the Group’s leading role in local development. As regards induced employment, note in particular the inclusion of disadvantaged workers (875 in total), which showed further growth and was linked to supply from social cooperatives, coming to 66.4 million euro in 2019.
Investments in innovation came to roughly 78 million euro, dedicated to projects in four areas: smart city, circular economy, utility 4.0 and customer experience. Among smart city projects, note the smart recycling depots and the dashboard offered to municipalities, universities and businesses to monitor their environmental sustainability. Further projects, in the circular economy area, aim at recovering energy from the sludge produced during waste water purification and reducing its quantity, reusing the water leaving purifiers and producing biomethane from wooden-cellulose waste and bioplastic from cellulose.
As regards digitalisation, in addition to numerous projects intended to further optimise operating processes, including the use of highly evolved data analysis tools, improving safety and continuity in services, as well as the quality of work and internal efficiency, in 2019 efforts continued to be made in developing digital channels for customer relations. In 2019, the Acquologo and Rifiutologo apps were actively used by over 200 thousand customers and over 59 thousand photos were sent by citizens (+51% compared to 2018), while the My Hera app, dedicated to residential customers, was downloaded over 230 thousand times. Digitalisation in customer relations also led to a constant increase in the procedures managed over the web channel: in 2019, the amount of customers using online services rose to 23.8%, while those who requested e-billing reached 30.1%. The attention given to this area in 2019, along with the work done together with local communities, led to the third edition of the promotional campaign for e-billing, called Digi e Lode, sending an additional 125 thousand euro in economic premiums for digitalisation to schools in the area served.
As regards air protection, positive results were confirmed in the environmental performance of the Group’s waste-to-energy plants, which in 2019 as well produced a very limited amount of atmospheric emissions, 86% lower than the legal limits on average, while the average concentration of PM10 in the Imola cogeneration plant was 99% lower than these limits. Lastly, as regards soil protection, note that a 77% reuse of soil was achieved in the projects carried out by HeraTech in 2019.

The results achieved in terms of shared value are complementary to the ones reached in the following areas, which round off the Group’s social responsibility and sustainability profile.

  • Thanks to awareness-raising programs and the adoption of 18001/ISO 45001 certification, which covers 83% of Group employees, in 2018 the accident frequency rate saw a further drop, down to 14.1 (as against 15.7 in 2018). A reduction was also seen in the area of blue-collar workers alone. The corporate welfare system, Hextra, provided over 4.5 million euro to employees in 2019; 98.8% of all workers are covered by this program. Training is still given high priority: in 2019, almost 29 hours of training per capita were seen on average. Employee satisfaction increased (Esi at 68/100 in the eighth enquiry on the internal business environment), as did the weight given to sustainability goals in the balanced scorecard system, linked to the system of incentives that is applied to all management personnel: in 2019, 34% of variable retribution for the Group’s senior and middle managers was linked to sustainability project-goals, and the weight given to sustainability project-goals aimed at creating shared value came to 20% (as opposed to 17% in 2018).
  • In 2019 as well, quality standards for customer relations channels remained high: the average waiting time at the call centre came to 27 seconds for household customers and 24 seconds for business customers. The average waiting time at help desks was 9.4 minutes in 2019. The 2019 inquiry on the quality of the services provided by the Group (with over 7,000 interviews carried out with residential customers) showed a high customer satisfaction rate (73/100), two points above the one seen one year earlier.
  • In 2019, to select its suppliers Group used a method based on the most economically advantageous offer in 84% of public tenders and 68% of overall contracts (in economic terms). In both cases, the average weight given to social and environmental aspects came to approximately 34/100. Supplier monitoring focused on the social responsibility towards workers continued to take place in 2019, as did accident monitoring among the main suppliers (involving 77% of the value of service supply and the most significant works as regards work safety). 2019 also saw the activation of a project aimed at including criteria coherent with the principles of a circular economy within the guidelines for Group procurement, defining the priority types of commodity purchasing in which to apply, as of 2020, the first set of 20 circularity criteria that can be used in selecting suppliers.
  • Interactions with locals communities led the new model of HeraLAB to be introduced in Bologna and Rimini in 2019. This is the tool that Hera provides to the areas it serves in order to set up a well-defined channel for reciprocal communication with local communities. Each LAB is made up of 12 representatives of local interests, appointed by Hera’s BoD. The LABs met four times during 2019, and co-planned, along with Hera, ten local initiatives that will be introduced in 2020-2021.
  • Lastly, in 2019 Hera was once again at the forefront in adopting sustainable financial tools. After having issued the first Italian green bond in 2014 and an Esg credit line in 2018, in July 2019 Hera issued another green bond amounting to 500 million euro overall, maturing in eight years, to finance investments in three areas (energy efficiency, circular economy and sustainable water resource management) all reflecting green bond principles. The 2019 Sustainability report contains a section dedicated to reporting on the funds allocated to each intervention and the environmental performance reached. This section as well is subjected to the auditing firm that verifies the Sustainability report.



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Hera – Ascopiave Partnership

On 19 December 2019, following up on the framework agreement signed on 30 July and the approval later given by the authorities and responsible parties, the Hera Group and the Ascopiave Group completed a transaction involving an exchange of assets having equal value in energy sales and gas distribution. In reporting the transaction, a total consideration of 607.3 million euro was assessed, as illustrated in greater detail in the text and tables below.
As regards energy sales, the partnership involves the creation of a single operator with over one million customers for sales activities in the Veneto, Friuli-Venezia Giulia and Lombardy regions, through EstEnergy Spa, a company already jointly controlled by both Groups. More specifically, the sales assets pertaining to the Ascopiave Group (through the controlled companies Ascotrade Spa, Ascopiave Energie Spa, Blue Meta Spa, Etra Energia Srl and the associated companies Asm Set Srl and Sinergie Italiane Srl, in liquidation) and those pertaining to the Hera Group through the controlled company Hera Comm Nord-Est Srl, both merged into EstEnergy Spa, over which the Hera Group obtained full control, including amendments to the governance agreements.
As regards gas distribution, Ascopiave Spa acquired from the Hera Group, for a price set at 168 million euro, an area of concessions covering roughly 188,000 users in the Veneto and Friuli-Venezia Giulia regions, which as of 31 December 2019 merged into the company AP Reti Gas Nord-Est, entirely controlled by Ascopiave Spa. The value of the assets transferred, almost entirely consisting in distribution networks and related plants, amounts to 134.3 million euro. The transfer created a capital gain coming to 30.2 million euro, classified in the income statement under “Other non-operating revenues”.

The Group acquired these energy sales activities through a complex series of corporate transactions, all defined within the framework agreement and implemented at the closing date. The logical and functional sequence of these transactions (which involved a net income of 1.7 million euro) is as follows:

  • the Hera Group acquired 49% of the shares of EstEnergy Spa from Ascopiave Spa, obtaining total control over the company;
  • EstEnergy Spa acquired shareholdings in Ascotrade Spa, Ascopiave Energie Spa, Blue Meta Spa, Etra Energia Srl, Asm Set Srl, Sinergie Italiane Srl, in liquidation, and Hera Comm Nord Est Srl (this latter operation does not qualify as an acquisition because the company was already controlled by the Hera Group);
  • transfer of 48% of the shares of EstEnergy Spa from the Hera Group to Ascopiave Spa, following all of the previous transactions.

At the end of this corporate reorganisation, 52% of the share capital of EstEnergy Spa was held by the Hera Group and 48% by Ascopiave Spa. At the same time, Ascopiave Spa was given an irrevocable sale option regarding its minority shareholding in EstEnergy Spa. This option may be exercised annually, at discretion involving all or part of the shareholding, within the period of time from 15 July and 31 October and, in any case, within 31 December 2026.
According to Ias/Ifrs international accounting standards, if and when a minority shareholder has this sort of right, it may be necessary to classify the option on Estenergy Spa shares currently held by Ascopiave in the financial statements as financial debt (and not as a derivative instrument). In line with its own accounting policies, the Group has not recorded Ascopiave Spa’s minority shareholding in its consolidated financial statements, thus considering the shareholding in EstEnergy Spa, from an accounting point of view, as entirely owned. The fair value of the debt for the sale option was thus calculated based on the information that is currently available, that is, by referring to the future scenario regarding the exercise of this option held to be most probable by the Group’s management. This fair value was defined, essentially, through multiples applied to indicators of margins according to the conditions agreed upon by the parties and discounting the corresponding future cash flows, using the Group’s average cost of long-term debt at the date of the transaction as the base rate.
Since the Group’s policy does not call for the interest of minority shareholders to be included within period results, the amount of debt for the option was valued based on any dividends expected to be paid by EstEnergy Spa during the hypothetical life of the option itself (the corresponding cash flows will indeed adjust the amount to be paid on the date at which the option is exercised, according to the contractual mechanisms shared by the parties). The fair value included in the financial statements as a liability therefore does not only represent the current value of the price foreseen for the sale option at the date in which it is exercised (396.6 million euro), but also contains a discounted estimate of the future dividends paid (156.7 million euro) because it is to be considered, pursuant to the contractual agreements, as part of the variable payment due to the counterparty; the overall value thus comes to 553.3 million euro.

Completing the content of the framework agreement, the Hera Group directly acquired control over Amgas Blu Srl, an energy sales company operating in the province of Foggia, which however does not fall within the partnership agreement concerning energy sales activities in North-Eastern Italy.

Lastly, the Hera Group transferred 3% of the share capital of Hera Comm Spa to Ascopiave Spa for 54 million euro. This transaction, from an accounting point of view, owing to the conditions contained in the contract and the obligations pertaining to the counterparties (a sale option in favour of Ascopiave Spa was included among the clauses), does not give way to a derecognition of the shareholding, but is recorded as the subscription of a fixed-rate loan, valuated based on the criterion of amortised cost.

Valuation of assets acquired, liabilities assumed and goodwill

The partnership transaction was recorded according to the indications contained in international accounting standard Ifrs 3. The Group’s management assessed, assisted by independent professionals, the fair value of assets, liabilities and potential liabilities, based on information concerning the facts and circumstances available at the date of acquisition. At 31 December 2019, the valuation period is still ongoing: if, over the next 12 months, new and currently unknown additional information emerges, in line with the content of the accounting standards referred to above, the aforementioned valuation at fair value could be partially modified. Note that, considering the unavailability of a reference interim situation at the date of acquisition, i.e. 19 December 2019, the values at 31 December 2019 were taken into account, thus excluding revenues and costs for the last 12 days of the financial year. The effect of this simplification is considered to be irrelevant, both for the 2019 income statement and for the operating-financial alternative performance measures.

The following table shows the results of the valuation carried out on 19 December 2019 concerning the net assets acquired and the amount transferred:


  Reporting value Valuation adjustments Fair value
Property, plants and equipment and use rights 3.5   3.5
Customer lists   430.7 430.7
Equity investments 0.2 19.3 19.5
Deferred tax assets 2.5 1.4 3.9
Trade receivables 179.6   179.6
Current and non-current financial assets 16.6   16.6
Other current assets 27.7   27.7
Cash and cash equivalents 16.4   16.4
Other provisions (2.6)   (2.6)
Deferred tax liabilities   (93.0) (93.0)
Current and non-current financial liabilities (10.6)   (10.6)
Trade payables (132.9)   (132.9)
Other current liabilities (25.9)   (25.9)
Exemption liabilities   (40.2) (40.2)
Potential liabilities   (5.0) (5.0)
A) Total net assets acquired 74.5 313.2 387.7
Equivalent Fair value     722.5
Previously held fair value interests     92.2
Non-controlling interests acquired     3.6
B) Total value of the business combination     818.3
B) – A) Goodwill     430.6

The valuations made by management regarding the fair value of tangible and intangible assets, which also took into account the recoverable value of said assets (calculated based on the business plans of the acquired companies), identified the following significant differences between the book value recorded in the financial statements of the companies and the fair value found in the Group’s consolidated financial statements:

  • 430.7 million euro involved in valuing the customer lists, whose value was defined based on the characteristics of the reference context using the incremental cash flow method (Meem). The useful life expected in customer lists, following an analysis of changes in the customer base and the related churn rates, was estimated at 25 years;
  • 19.3 million euro linked to the shareholdings in Asm Set Srl and Sinergie Italiane Srl, in liquidation, valued at the price negotiated before signing the framework agreement, because it was held to be in line with their fair value.

In the valuation of the fair value of the tangible assets acquired, instead, no significant differences emerged compared to the amounts previously recorded in the companies’ financial statements, also in light of their non-significance. No adjustments were therefore made to the corresponding entries in the financial statements, nor were further assets recorded. Liabilities amounting to 93 million euro were recorded for the deferred taxes corresponding to these valuations.

The exemption liabilities, coming to 40.2 million euro, represent the amount of substitutive tax pertaining to the Group as regards a process of fiscal optimisation, closely related to the transaction, which will be finalised during 2020. During the course of valuation and negotiation with the counterparty, indeed, it was considered significant, in order for the transaction to reach a positive conclusion, to be able to proceed with the exemption for tax purposes, of the higher values implicit in the transaction’s prices. This debt is recorded under “Other current liabilities”.

Based on the information available at the date of acquisition, 19 December 2019, the management’s valuations also identified a potential liability concerning obligations that arose prior to the date of acquisition and proved to be measurable with a sufficient degree of reliability, thanks to factors including the verifications carried out by consultants. This liability, whose value was set at 5 million euro, refers to the potentially unfavourable outcome of tax litigation following the audit notices received by the company Ascotrade Spa. Note that, during the negotiations, Ascopiave and the Hera Group agreed upon specific indemnity for any tax liabilities related to the aforementioned tax audit, and the amount recorded in the financial statements therefore represents the value in excess of this indemnity, calculated as the difference with respect to the maximum potential risk that Ascotrade Spa may have to pay to tax authorities if it loses the litigation. The current state of this situation does not allow the possible outcome of the litigation, nor the probability of a loss, to be defined.

The fair value of the previously owned interest refers to the valuation of the shareholding already owned in EstEnergy Spa (coming to 51% of the share capital). Obtaining control of this company, over which the Group previously had joint control, falls within the definition of a business combination achieved in stages provided by international accounting standard Ifrs 3. In such cases, the acquirer must recalculate the interest previously held in the acquired company at its respective fair value at the date of the transaction and take note of profits or losses in period results. Since the value at which EstEnergy Spa was recorded in the consolidated financial statements al 19 dicembre 2019 comes to 10.8 million euro, this valuation led profits to be included in the income statement amounting to 81.4 million euro, classified under “Other non-operating revenues”. More precisely, the fair value of the amount already owned was defined based on the overall valuations made by the counterparties during negotiations, which led to the price defined for the Hera Group to acquire the remaining 49%.

As previously mentioned, the partnership between Hera and Ascopiave took the shape of an exchange of assets having equal value in energy sales and gas distribution. To bring the representation in the financial statements into line with the fundamental structure of the transaction at the closing date, the following table contains the considerations made concerning the amounts transferred at the time when the transaction was completed (“Net cash flows”), as well as those decided to be transferred at the moment in which the options described above are exercised (“Fair value sale option EstEnergy Spa” and “Payables for share repurchasing Hera Comm”):

  Energy business Gas distribution Hera Comm Spa shares Total partnership
  Acquisition of control Transfer Hera Comm Nord Est Srl      
Cash outlay for acquisition 616.2       616.2
Proceeds from divestiture (319.6) (76.3) (168.0) (54.0) (617.9)
Net cash flows 296.6 (76.3) (168.0) (54.0) (1.7)
Fair value put option EstEnergy Spa 425.9 127.4     553.3
Payables for share repurchasing Hera Comm Spa       54.0 54
Hera Comm Spa          
Equivalent fair value 722.5 51.1 (168.0) - 607.3

At the date of this year-end financial report, the Ascopiave transaction generated a positive net cash flow for the Group coming to 1.7 million euro. For the upcoming years, it is expected that this partnership will translate into positive net cash flows for the Group, ensuing from the profits produced by the sales companies acquired, net of the loss of flows related to the gas distribution assets transferred. Based on the scenarios foreseen, furthermore, in future years this agreement will bring about financial flows leaving the Group as a result of Ascopiave Spa exercising its sale option for 48% of EstEnergy Spa and 3% di Hera Comm Spa. On this matter, note that the debt for the sale option linked to the minority shareholding in EstEnergy Spa (energy sales assets), amounting to 553.3 million euro overall, since it is a discounted amount, will lead notional financial charges to be recorded in future years. Any possible changes in the underlying hypotheses, which may give way to a different valuation of the amount and/or timing of the financial flows, will also be recorded in the income statement as financial charges or income for the period. Furthermore note that the sale option linked to Ascopiave Spa’s minority shareholding in Hera Comm Spa, owing to the content of the contracts, has been recorded as a financing debt and will be valued using the amortised cost method. The initial nominal value of this debt, as well as the repayment value, has been set at 54 million euro.
The values classified as “Transfer Hera Comm Nord Est Srl” involve the transfer of Hera Comm Spa’s entire shareholding in Hera Comm Nord Est Srl to EstEnergy Spa. It must be specified that these figures do not represent the amounts seen in specific transactions, but the allocation of a portion of the transfer value of 48% of the shares of EstEnergy Spa to Ascopiave Spa (which, due to the corporate transaction mentioned above also includes, among its controlled companies, Hera Comm Nord Est Srl) and the related amount of the fair value of the debt for the sale option. Since these amounts refer to a company over which control has not been lost, the capital gain created by the transaction, coming to 51.1 million euro, has been recorded directly under consolidated equity.

Impact on alternative performance measures

The acquisition of these energy sales assets is an important step for the Group as regards the evolution of its business portfolio, fully respecting the lines of development contained in the business plan. With this transaction, indeed, the Group reached the goal included in its business plan to 2022 in advance, now managing roughly 3.3 million customers in energy sales.

To guarantee a better evaluation of Group performance and make the data more easily comparable, it was considered suitable to introduce a new statement entitled “Adjusted net debt”, containing a higher degree of segregation between items and two new alternative performance measures: Net financial debt excluding the amounts involved in the Ascopiave transaction (Adjusted net debt), referring to the financial statements for the year closed on 31 December 2019; Net financial debt with adjusted sale option (Adjusted put option net debt), referring to financial statements for future years.

As regards Adjusted net debt, it was considered suitable to eliminate the effects of the Ascopiave transaction from the amount of net financial debt included in the financial statements, in order to compare net financial debt at 31 December 2019 with the same indicator at 31 December 2018 with respect to an equal scope of operations. This also reflects the fact that, owing to the date on which it was completed, the transaction is only included in the Group’s consolidated financial statements as regards its financial effects, and it is therefore not possible to draw a relation between the debt deriving from the acquisition of the sales company previously owned by Ascopiave Spa with the profits generated by the same company over 2019. This indicator was thus used to calculate the APMs Net debt/Ebitda and Ffo/Net debt for the current year.

As regards the indicator Adjusted put option net debt, which will be used in the years to come, the reason it was adopted lies in the contractual procedures defined for the payment of the value of the option which, essentially and as illustrated above, call for part of the price of the transaction to be paid through an amount of dividends equal to the profits generated by the purchased companies over the period in which the option is exercisable. Given the structure of the transaction, it follows that, over this period of time and taking into account the chain of control, 48% the profits generated by the purchased companies will be paid to Ascopiave Spa and 52% will be paid to the Hera Group. This mechanism ensures that the fair value part of the sale option that will be extinguished through payment of future dividends is actually self-liquidating, since the financial resources required (i.e. 48% of the dividends) will be directly generated by the purchased companies, and will thus not create any real additional financial needs during this period for the Group. Therefore, in order to express the actual additional financial needs created by the transaction and correlate the latter to the Group’s increased profitability, it was considered suitable to also state, among the alternative performance measures, the amount of net financial debt that will include the adjusted fair value of the sale option so as not to consider the dividends expected to be paid in the future (based on the projections contained in the multi-year business plans) for the period covered by the option. As a consequence, in calculating Net debt/Ebitda and Ffo/Net debt, in upcoming years the indicator “Adjusted put option net debt” will be used in addition to the indicator “Net debt”.

See paragraph Analysis of net cash (net borrowings)” for an accurate comparison of the amounts used in the adjusted statement.


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Risk factors: actors, methodology and areas of management

Risk governance

The organisational structure adopted by the Hera Group allows it to manage the risk exposure involved in its various businesses while simultaneously ensuring that its management remains effective and profitable along the entire value chain.
The system of corporate governance adopted allows strategies to be oriented in a unitary and coherent way. The main managerial body that orients, monitors and provides information with respect to risk management strategies is the Risk committee. Alongside it, the Internal control and risk management committee, made up of members of the BoD, in accordance with article seven of the Corporate Governance Code, is tasked with overseeing the internal control system, the efficiency of company operations, the reliability of financial information, compliance with the law and regulations, and protection of company assets. These bodies, in order to reach the utmost coherence in management strategies, meet periodically. During 2019, the Risk committee held four meeting and the Internal control and risk committee held seven meetings.

The Group has adopted an approach to defence from risks set out over three levels, defining an appropriate separation between:

  • the role of risk management, entrusted to risk owners at various level of organisation;
  • the role of orienting and controlling risks, entrusted to the Risk committee, which turns to risk specialists who carry out second-level controls, meaning that they are asked to define, apply and update risk analysis methods and implement controls in their own area of responsibility (review challenge and control);
  • the role of evaluating the adequacy of risk management processes, i.e. the internal control and risk management, assigned to the Internal Auditing Department.

The Risk committee defines the general guidelines for the risk management processes, guarantees that corporate risks are mapped and monitored, ensures that risk policies are defined, as are the protocols containing information for the Internal control and risk committee, the Internal Auditing Department and the Board of Auditors.

The Board of Directors approves the risk policies and the parameters used in measurement, and provides orientation for and evaluation of the adequacy of the internal control and risk management system. The Internal control and risk committee supports the Board of Directors in defining the orientation of the internal control and risk management system.

The Executive Chairman and the CEO supervise, each within their own area of responsibility, the functionality of the internal control and risk management system. The Vice Chairman supervises the coordination between the Risk committee and the Internal control and risk committee, maintaining an independent role.

The architecture of the Group’s risk governance can be represented as follows:

Risk governance: the Risk Committee
Architecture and bodies involved in management



Risk governance: the Risk Committee


Management methodology 

Hera has adopted the Enterprise risk management (Erm) process in order to provide the Board of Directors with all that is required to evaluate the nature of corporate risks and define a risk profile that concerns the medium-long term in particular. The definition of the risk profile is made explicit by the Board of Directors, by approving the Group risk management policy and the risk limits it defines.

The risk management framework is subdivided into three fundamental areas:

  • the risk model, which identifies the types of current and emerging risk to which the Group is potentially exposed, and which is periodically revised;
  • the Group's risk appetite, which defines the level of risk that is acceptable according to the risk management strategy, and identifies:
    • key areas of risk;
    • risk metrics;
    • the limits associated with each key area of risk;
    • monitoring, escalation and updating processes, intended to promptly identify any instance in which a predefined level of risk is exceeded, identify and implement corrective actions, properly monitor all significant areas of risk and bring the limits into line with the Group’s risk appetite;
  • risk management activities, which effectively monitor the Group’s potential risk profile as a whole and the way in which it is managed. The activities are subdivided into:
    • ongoing risk management, including a sector-specific approach entrusted to dedicated risk specialists/risk owners;
    • enterprise risk management, aimed at analysing changes in the Group’s overall risk profile, supporting awareness in taking on risk and defining strategic objectives.

On 10 January 2020, the fifth Enterprise risk management report, related to the 2020-2023 business plan, was presented to the Board of Directors.
Over 2019, Erm analysis studied further details and refined its methodology in the following areas:

  • Erm analysis backtesting of the previous year was done, aimed at evaluating the degree to which actual impacts were in line with estimated ones. The effects of these scenarios were furthermore quantified, if and when they had impacts on the plan;
  • an analysis of Group resilience factors introduced in previous years to face risks that may compromise continuity in major activities allowed further mitigation interventions to be planned (in the 2020-2023 business plan), intended to increase the network infrastructures’ ability to deal with adverse conditions deriving from potential business interruption events (caused by natural or technical events in a range of areas);
  • the control system for the supply chain was studied in further detail, as were possible initiatives in subcontracting, set out in the area of certified management systems, identifying the factors and scenarios presenting significant risk found in the process, recognising impacts on significant stakeholders and evaluating currently overseen situations and the related risks;
  • the risk scenarios involved in climate change (both physical and transitional) having significance for Group activities were mapped. 

The 2019 Erm analysis did not show any critical risks as regards their reputational or operating-financial impact.
As regards significant risks, they were confirmed in the reputational impact coming from potential procedures carried out by supervisory/regulation/investigation bodies (even though the Hera Group’s behaviour respects all legal provisions) involving different degrees of discretion in the beginning of supervisory/investigation procedures and where unclear interpretational orientations are present. Significant risks were also confirmed regarding the operating-financial risk posed by high-intensity earthquakes on networks. Two new risks were furthermore identified. The first derives from legislative orientations as to substituting critical materials in gas networks; it was thus deemed appropriate to quantify (as part of Erm analysis) the possible impact. The second derives from the possibility of fires in production lines linked to waste treatment and recovery. The impacts of the latter risk are irrelevant in terms of consequences for Group results and have practically no impact on the environment nor on operational continuity; these events can have significant reputational consequences, owing to the perceived risk coming from the increasing social sensitivity towards this issue.

Areas of risk: identification and management of risk factors

The currently existing and emerging risks Hera must deal with fall into various categories: risks deriving from the evolution of market contexts, macroeconomic and financial risks, business (regulatory and competitive) risks, technological risks, risks involved in social, environmental and climate-related sustainability and risks involving human capital.
To mitigate its exposure to these risks, Hera carries out specific activities in analysis, measurement, monitoring and management that are described below. See, however, the paragraph “Trends and contexts, strategic approach and Group management policies” for a detailed analysis of the factors that represent some of the basic premises for these risks.

Operations and finance

Identification of country risk and business risk

Energy business: stagnation in consumption and price volatility

Hera mainly operates in Italy, where an economic context of limited growth continues to be seen, as does stagnation in energy consumption and volumes of waste disposed of. Energy market risks are concentrated in the Group Direction for the Market, responsible for electricity and gas purchasing and sales, which involve risk positions that deriving from price volatility in energy commodities. Decreases in energy demand put pressure on sales margins which, combined with higher competition on the free market, may have an impact on Group profits. Furthermore, changes in the amount of retail energy consumption could require Hera to purchase or sell additional energy in unfavourable conditions.

Waste business: changes in waste production and infrastructure unavailability

A potential reduction in waste production (which might derive from the economic context and European and national legislative orientations, or from new tendencies in customer behaviour), or again the unavailability of treatment and recovery infrastructures, could have a negative impact on the Group’s ability to meet its preset goals. The risks of the waste management business concerning plant management are concentrated in the Herambiente Group.

Management of country risk and business risk

As regards the energy market, Hera has structured its processes so as to obtain an efficient management of procurement and hedging activities, with a high focalisation in responsibilities. The approach adopted by the Group involves a single interface for managing market risk, provided by Hera Trading Srl.

Energy business: combined management of procurement and hedging

A combined risk management, while respecting the policies assigned, brings advantages in terms of reaching a higher level of coverage, optimising costs by resorting less to the market (through position netting) and gaining more flexibility in structuring procurement and supplying customers.
The Group has maintained a high degree of flexibility in its energy commodity procurement sources, while at the same time developing is activities in coverage, minimising its operating risk exposure for electricity generation and, also considering the absence of long-term contracts in gas procurement (take or pay clauses), allowing it to remain constantly in line with the market and maximise its natural hedging.

Waste business: set of plants, recycling opportunities

In waste management and treatment, the Group’s diversified set of plants, marked by avant-garde technologies, highly performing in terms of environmental impact, have allowed it to meet its strategic goals. Implementing its strategy in the area of circularity, through Aliplast Spa’s entry within the process of recycling polymeric materials, and planning an increase in recycling lines to include further forms of plastic, indeed allow it to grasp the opportunities coming from recent directions in European regulations, expected to come into force over the decade that has just begun.
Analyses of the risk coming from changes in the operating context (Gdp and inflation), and market conditions in energy (price of gas and electricity), allow for a quantification of the elasticity shown by Group Ebitda with respect to changes in these primary operating-financial figures.
In particular, a 1% reduction in Gdp, compared to the scenario included in the business plan, would lead to a drop in average annual Ebitda coming to roughly 3 million euro, due to both the effects of lower consumption in energy sales and reduced margins for electricity generation.

Sensitivity analysis

A 1% decrease in the inflation rate, compared to the scenario included in the business plan, would lead to a drop in average annual Ebitda coming to roughly 13 million euro, due to the impact of inflation on the tariff components of regulated network businesses.
A decrease in the price of electricity on the wholesale market coming to 1 euro per MWh, compared to the scenario included in the business plan, would lead to a drop in average annual Ebitda coming to roughly 0.7 million euro.
Lastly, a decrease in the price of gas coming to 1 €c/scm, compared to the scenario included in the business plan, would lead to a drop in average annual Ebitda coming to roughly 0.5 million euro.

Identification of financial risks involved in the debt market

Fluctuations in interest rates, exchange rates and credit spread

The operating-financial context, in addition to fluctuation in energy and commodity prices, shows changes in interest rates, exchange rates, the credit spread and liquidity crises. These fluctuations can have an impact on Group results, its future growth and its strategic investments (for example, ensuing from high refinancing costs). The Group might not succeed in meeting its payment obligations, due to an inability to find new funds, to do so only under unfavourable economic conditions, or again an inability to liquidate assets on the market, or else changes in the perception of its riskiness by the market.

Liquidity and opinion risk

Among the factors that define this perceived riskiness, the creditworthiness assigned to Hera by rating agencies plays a fundamental role, because it has an influence on the Group’s chances of gaining access to financing and on the related economic conditions. The Group’s debt structure is not subject to financial covenants on debt, with the exception of a limit on corporate rating defined for an amount of debt coming to roughly 150 million euro (which consists in one of the rating agencies assigning an opinion lower than BBB-). On the remaining portion of current debt, instead, an obligatory anticipated reimbursement is foreseen only in the event of a significant change of control in the Group, a concession event, or a significant sale of assets event that leads to a downgrade of the Group to non-investment grade or lower, or a suspension of the rating publication.

Management of financial risks involved in the debt market

Hera’s financial management is concentrated in its Group Direction for Administration, Finance and Control, which 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.

Reduced exposure to fluctuations and management actions to satisfy liquidity requirements

In order to meet its medium- and long-term commitments, Hera pursues a strategy calling for a diversified structure of sources of financing and a balanced maturity profile, constantly monitoring rating indicators and the availability of long-term credit lines. 95% of Group debt is long-term; 78% consists in bonds with payment at maturity, and the average term to maturity of the remainder is approximately seven years (of which roughly 64% maturing after over five years).
In other words, the Group’s financial structure is both solid and well-balanced in terms of its composition and time to maturity, bringing liquidity risk to a minimum even in the event of particularly critical scenarios.
The Group’s actions and strategies, furthermore, are aimed at guaranteeing that the maximum rating (one notch above the sovereign rating) is maintained.
Financial risk control and management processes are based on a close monitoring of the Group's main financial indicators. Constant coverage of the relevant markets is aimed at minimising the impact of rate volatility and to deliver efficient debt service. The Group makes use of derivative financial instruments to reduce its exposition to fluctuations in interest rates and exchange rates. At 31 December 2019, the Group showed a 13% exposure to rate risk, including the effect of derivatives; 87% of debt is thus at fixed rates.
Procedures complying with Law 262/2005, which includes specific requirements for listed companies in the area of financial reporting, have been suitably arranged and implemented in order to ensure complete and reliable financial reporting.

Sensitivity analysis

A 1% increase in the reference interest rate, compared to the scenario included in the business plan, based on the hypothesis of a shift in the coupon rate, and on the Group’s debt structure as described in the business plan, would lead to a 10 million euro increase in financial charges.

Identification of risks associated with counterparties

Hera operates with counterparties who might be unable to fulfil their obligations, failing to comply with either the economic terms or contract provisions (delivery of the good /service). Credit risk, furthermore, affects the Group across all of the areas commercial activity is found: energy commodity and service sales, waste treatment and telecommunications services.

Management of risks associated with counterparties

The origination process

Hera employs a structured origination process, defined by specific credit risk management procedures, which allows counterparties to be adequately selected through credit checks and, if appropriate, requests for guarantees. In addition, positions towards the counterparties are regularly monitored and proactive measures are planned to manage them, which may also include including external risk relocation through credit transfer. In 2019, the Group’s main sales companies’ 24-month unpaid ratio came to 0.8%.

Regulations and competition

Identification of competitive-regulatory risks

Changes in the legislative and regulatory context and concessions

Hera carries out part of its activities in a regulated market, and its operations thus depend on regulations defined by sector authorities and lawmakers (concerning tariffs and market structure), government incentives on renewables, concessions from local authorities (concerning regulated activities in waste collection, gas distribution, the integrated water service and public lighting) and national ones (concerning electricity distribution), as well as the impact expected from changes in the structure of the market and its liberalisation, and changes in supply and demand in the energy and waste management sectors.
At this particular moment in time, the Group is subject to the risk that concessions reaching their end will not be renewed or, in the case of renewal, the risk that economic conditions similar to the current ones will not be maintained, leading to a negative impact on margins and return on investments. This risk, however, it mitigated by a reimbursement mechanism benefitting operators in the event that concessions are not renewed.

Changes in the legislative and regulatory context and revisions of tariffs in the regulated waste, water and energy sectors

Periodic updates in the national and European legislative and regulatory framework, can have a significant impact, influencing profitability in the sectors in which in cui Hera operates.

The competitive-regulatory risks impact network (water, gas and electricity distribution) and market (electricity and gas sales) businesses, and appear in new or modified economic, organisational and informational requirements which Hera is bound to respect, as well as possible changes in market assets they bring about.
The tenders for gas distribution, the integrated water service and waste collection and street sweeping that will be held over the period of time covered by the plan introduce the risk that some of the areas currently managed may be lost, in the presence of significant competitive contexts. If this management is lost, the Group will however be compensated with the amount of invested capital not yet amortised.

Management of competitive-regulatory risks

A proactive approach towards the regulatory framework

The Group has provided itself with an organisational structure that manages relations with national and local authorities, consulting extensively with institutional figures, actively participating in workgroups created by authorities and adopting a transparent, collaborative and proactive approach as regards instability in the regulatory framework.
Over the years, free-market businesses have taken on increasing weight in the Group’s portfolio and contributed significantly to its operating results, but at the same time expose it to increasing competitive pressure. The Group deals with the challenge of competition through continuous innovation and rapid interventions in its marketing offers, increasing its presence and customer base on the free market and ensuring that expectations are satisfied in terms of the range and quality of the services offered.

A proactive approach towards the free market

The Group furthermore valorises its own technical abilities and management efficiency, and enriches its offers with services oriented towards sustainability and circularity. Hera’s attention towards service quality, cost efficiency and innovative solutions indeed represents a competitive resource during tenders for gas distribution, integrated water cycle and waste collection and street sweeping services.

Identification of strategic risks

The strategic risks associated with long-term planning, financial sustainability, involvement in strategic initiatives and investment decisions influence the degree of solidity in the results reached in the various business sectors and units. The Group’s ability to reach its strategic goals, furthermore, could be compromised if it is not able to maintain or obtain the licenses, authorisations and permits required to carry out its regular activities.
Achieving the results planned thus depends on various endogenous and exogenous risks, which are appropriately simulated, measured and controlled.

Management of strategic risks

Hera has developed a well-organised strategic risk analysis model designed to gauge the solidity of the assumptions underlying its business plan with respect to a variety of adverse risk scenarios, contributing to an integrated representation of risks from an enterprise-wide point of view. This system provides for scenario analyses, stress testing and what-if in the business plan’s hypotheses, through an adequate analysis of risk factors and the variables linked to them, allowing the level of risk in the various business areas to be adequately evaluated.
Hera is constantly present in authorisation processes and proactively participates in round tables to obtain permits, licenses and authorisations, in order to overcome the possibility that its regular activities are compromised.

Technology, the environment and human capital

Identification of risks

Interruption of essential and digital services and personal data breach

Earthquakes and meteorological events, witnessed more frequently in recent years, can nullify the resources deployed and thus the Group’s performance. Hera wishes to valorise these resources and guarantee that they are conserved and developed, in order to continue enjoying their benefits in the future. In this area, particular significance goes to the environmental risks caused by climate change, as well as accidents within Group plants, which in turn can cause potential damage to the environment. Increasing importance also goes to the cybercrime risks caused by malicious actions intended to cause damage to management infrastructure or breach personal data. Hera also evaluates the impact of these risks in terms of service continuity. It is furthermore crucial to verify whether these accidents involve a risk for the rights and freedom of individuals, or if they cause physical, material or immaterial damage, based on the parameters and acceptability thresholds set out in Group policies (published on the company’s website).

Environmental risks

  • Hera uses natural resources to guarantee essential services to its customers. Since its activities leave an environmental footprint, involving water and carbon, it is aware of the need to conserve natural resources and thus the necessity of adopting mitigation and adaptation initiatives intended to reduce these risks. In line with the challenging path of greenhouse gas reduction compared to the current amount, set out by international institutions, over 2019 Hera mapped a series of climate change risk scenarios, both physical and transitional, having significance for its activities. These scenarios were then analysed as to their potential consequences on Group businesses, and subjected to further evaluations concerning impact and mitigation as regards their material nature (for example, extreme weather conditions such as floods and drought, or risks concerning health or the economy).
  • As regards the environmental standards that Hera must guarantee in its activities, the latter are subject to various norms and regulations, including those concerning CO2 emissions, along with emissions of other substances caused combustion, sewerage and dangerous and solid waste management. Not respecting the limits set for CO2 favours climate change, while disregarding the legal limits for other environmental aspects worsens these same environmental conditions, in addition to exposing the Group to sanctions.
  • Scarcity in water resources or the possible contamination of water reserves can influence regular water supply and lead to service interruptions or significant damage, both environmental and socio-economic, also increasing the water stress felt by natural resources in order to satisfy water demand.
  • Note furthermore the risks related to the impact on the Group caused by variations in meteorological conditions, concerning electricity and gas demand. The foremost area of impact is the Group Direction for Markets, which in its electricity, gas and heat sales is exposed to variations in demand ensuing from various meteorological scenarios.

Technological and human capital risks

Exceptional events and regular service supply

The negative externalities generated by exceptional events, in spite of careful planning and insurance coverage, may compromise business continuity and increase the financial resources required to restore regular operations. Offering public utility services thus calls for precautionary activities to be carried out, as well as actions in containing interruptions, delays in service or inadequate levels of service. Technological risks include operating security in distribution networks (fluids and electricity), logical security for information, security in communications networks and information systems, and the reliability of remote control systems. The main threats for on-premise systems (found at the company’s data centres) or in clouds include identity theft, phishing aimed at taking control of a personal computer in order to attack central systems and attacks on exposed systems, for example public websites.
Security in the information used, produced and transformed by the company depends on the ways in which it is managed and the human and technological resources involved; an appropriate evaluation of the risk involved is therefore fundamental. Any loss of privacy, integrity and availability of company information, whether crucial for business or personal (i.e. and data concerning physical persons, as defined in greater detail by the privacy code, legislative decree 196/03) could lead to serious financial losses and a related damage to image on the market. To identify and evaluate this risk, a methodology based on the international Magerit framework has been adopted, in which the three dimensions of security are evaluated: availability, integrity and privacy. Group Direction for Quality, Safety and the Environment and the Logical Security and Privacy Department support the Group’s structures and the Risk Committee in carrying out evaluations and notifications of IT security incidents. The main types of incident that may occur impact cloud service supply, electricity, gas and drinking water supply and distribution as well as service continuity and the personal data being treated.

Worker health and safety and social risks

Management of technological, environmental and human capital risks

The approach to risk management is subdivided according to the specific areas in which environmental, technological and human capital risks emerge. Investments in preventing and reducing the frequency of harmful events take on a fundamental role, as do those allowing mitigation measures to be obtained that reduce their severity.

Environmental risks

  • As regards long-term trends, the Group’s commitment reducing CO2 began with reporting on its performance and efforts made to combat climate change. It now continues with projects activated to promote energy production from renewable sources, reduce energy consumption and offer customers opportunities aimed at reducing their own greenhouse gas emissions. The Group is dedicated to contributing to mitigating environmental risk, reaching the energy efficiency goals set by the legislator and the United Nations, persisting with continuous improvement in its production system and incentivising virtuous and responsible consumption by clients. The electricity intake of the Group’s production sites is entirely covered by energy coming from renewable sources. As regards the consequences of extreme events, which are expected to occur ever more frequently as a possible consequence of climate change, Hera has undertaken important interventions, such as the Rimini Seawater safety protection plan which, in addition to ensuring that the quality of seawater is maintained, increases the resilience towards extreme events shown by the rainwater drainage infrastructure. For further details on specific initiatives, see the section “Greenhouse gas reduction” in the Hera Group’s Sustainability Report.
  • Hera has set in place an adequate system of environmental control, which covers both governance of environmental certification processes and the related auditing, and operating management involving controls and samples. The Group is able to face environmental risks thanks to continual monitoring of potential pollution factors, guaranteeing transparency in its samples, and significant investments in technological plants to guarantee air and water quality that is constantly higher than legally required. Furthermore, in line with its circular economy strategy, Hera has already made (and will continue to make, in its medium-long term planning) investments in selector, recovery and composting plants, increasing the amount of waste treated and at the same time reducing the use of landfills, thus succeeding in anticipating what is required by European and national regulations. For further details, see the section “Transition to a circular economy” in the Sustainability Report.
  • In 2019, more in-depth studies began of the resilience shown by the Group’s water procurement and distribution system, from a medium-long term point of view. A reduction in the water footprint is furthermore pursued by the water management system, designed to promote sustainable management of this resources both within the Group’s operating activities (by contrasting network leakage, reducing widespread consumption, recovering rainwater for irrigating green areas and washing vehicles) and externally (by checking household consumption, offering advice and solutions to optimise it, supporting technological solutions for customers with considerable water needs, supporting the construction of treatment plants for water reuse/recovery). Implementing the integrated services contained in the water safety plan furthermore makes room for an approach to managing water resource quality based on risk evaluation and management, which involve prevention and control.
  • As regards the risk coming from variations in weather conditions, the Group can rely on advanced tools in predicting demand, which allow it to optimise the use of renewable sources. Additionally, is has sufficient flexibility in procurement sources for energy commodities, which ensure its availability at market conditions. A drop of one degree in average winter temperatures with respect to the figures contained in the Business plan would cause an average annual reduction in Ebitda coming to roughly 13 million euro.

Technological and human capital risks

Attention towards physical security and monitoring sites

Centralised systems of network monitoring (remote control for fluids and electricity grid) allow these networks to be continuously supervised in real time and, in some areas, remote control allows potentially critical situations to be promptly communicated to quick response centres which, when possible, can directly intervene and resolve these situations. These systems have been applied in a range of situations, allowing services to be reactivated in a reasonable amount of time and guaranteeing adequate resilience in the services offered.

Attention towards information privacy

The Group constantly monitors the amount of risk in information security, carries out tests to continually evaluate network security and the degree to which its systems can be penetrated and organises training campaigns to raise awareness among all users. During 2019, work progresses on interventions aimed at guaranteeing the integrity and availability of Hera’s systems; the main initiatives set in place, whose technology is continually renewed, are oriented towards increasing Ict security and protecting infrastructures, devices and personal identity. They involve introducing the best technology on the market and monitoring and control systems that continue 24 hours a day, 365 days a year. Information security was further reinforced by the introduction, alongside the quality, safety and environment process owner (responsible for regulatory compliance and risk analysis), of an Ict security process owner, responsible for operating strategy, Ict security procedures and requirements and risk mitigation and intervention plans. Management of the company’s information and information systems influences the reputation enjoyed by the Hera Group, and therefore its executive management has introduced an information security management process that follows the guidelines defined by Iso/Iec standard 27001:2005, which calls for support and participation coming from all Group employees. During 2019, no complaints were filed against the Group concerning privacy issues or loss of data of its customers.
In order to guarantee worker health and safety and mitigate the risk of accidents on the workplace, the Group gives constant attention to initiatives aimed at more efficiently monitoring and improving protection and prevention processes in the area of safety, intended to reduce the frequency and severity of accidents.

Health, safety and social protection for workers

In order to guarantee worker health and safety and mitigate the risk of accidents on the workplace, the Group gives constant attention to initiatives aimed at more efficiently monitoring and improving protection and prevention processes in the area of safety, intended to reduce the frequency and severity of accidents. The topics chosen for worker training will no longer be simply be technical or normative but will be oriented towards developing self-awareness in perceiving risks and favouring safe and conscious behaviour. Attention towards these aspects is a fundamental operating element in order to confirm the continuous decrease in the number of accidents, their frequency rate and their seriousness, and the number of days of leave due to accidents. On this matter, important certifications have been obtained including ISO 9001 (quality management system), ISO 14001 (environmental management system) and OHSAS 18001, on health and safety on the workplace. The procedure used in identifying dangers and evaluating and controlling risks is carried out preventively and proactively (rather than reactively) in order to define adequate measures in risk reduction and control. As an example, during 2019 activities continued in communication, awareness and training on issues in road safety, introducing the initiatives proposed in the safety challenge Herueka+ and maintaining the previously existing learning magazine Guido come vivo; furthermore, training activities have been planned for 2019-2021 intended for virtually all employees as regards field safety.
Each of us is responsible for their own health and safety, alongside that of the people with whom they interact and, as foreseen by the procedure entitled Management of the process of identifying dangers and assessing risks for the health and safety of workers, and the related links available on Hera’s company information portal, is bound to report and promptly stop any situation containing risks or unsafe behaviour. The commitment shown by all those involved, and the integration of safety in processes and training, are the fundamental elements in the Group’s corporate culture in the area of safety.
With the goal of encouraging a positive working environment, Hera has created a welfare system based on attention towards people. This system includes monetary and non-monetary interventions, such as services concerning the family, education, work-life balance, wellbeing, free time and health.



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mln/euro notes 2019 2018
Revenues 1 6,912.8 6,134.40
Other operating revenues 2 530.8 492
Use of raw materials and consumables 3 (3,458.2) (2,984.1)
Service costs 4 (2,318.2) (2,040.5)
Personnel costs 5 (560.4) (551.4)
Other operating costs 6 (59.3) (62.5)
Capitalized costs 7 37.6 43.2
Amortisation, depreciation and provisions 8 (542.6) (521)
Operating revenues   542.5 510.1
Share of profits (losses) pertaining to associated companies 9 13.4 14.9
Financial income 10 108.2 96.9
Financial expenses 10 (247.6) (203.5)
Financial operations   (126) (91.7)
Other non-operating revenues (expenses) 11 111.6
Earnings before taxes   528.1 418.4
Taxes 12 (126.1) (121.8)
Net profit for the period   402 296.6
Attributable to:      
parent company shareholders   385.7 281.9
minority shareholders   16.3 14.7
Earnings per share 13    
Basic   0.262 0.192
Diluted   0.262 0.192

Pursuant to Consob Resolution no. 15519 of 27 July 2006, the effects of relationships with related parties are accounted for in the appropriate income statement in paragraph 2.04.01 of this consolidated financial statement.


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mln/euro notes 2019 2018
Profit (loss) for the period   402.0 296.6
Items reclassifiable to the income statement      
fair value of derivatives, change for the period 21 (76.8) 18.1
Tax effect related to items reclassifiable to the income statement   22.4 (5.6)
Items not reclassifiable to the income statement      
Actuarial income/(losses) post-employment benefits 28 (5.6) 2.7
Tax effect related to items not reclassifiable to the income statement   1.4 (0.7)
Total comprehensive profit (loss) for the period   343.4 311.1
Attributable to:      
parent company shareholders   327.3 296.2
minority shareholders   16.1 14.9


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mln/euro notes 31 Dec 19 31 Dec 18
Non-current assets      
Property, plant and equipment 14.32 1,992.7 2,003.7
Rights of use 15.32 96.9  
Intangible assets 16.32 3,780.2 3,254.9
Goodwill 17.32 812.9 381.3
Equity investments 18.32 143.5 149.1
Non-current financial assets 19.35 135.3 118.4
Deferred tax assets 20 174.8 159.2
Derivative financial instruments 21 41.1 45.3
Total non-current assets   7,177.4 6,111.9
Current assets      
Inventories 22 176.5 157.3
Trade receivables 23.35 2,065.3 1,842.2
Current financial assets 19.35 70.1 37.3
Current tax assets 24.35 42.1 34.3
Other current assets 25.35 395.7 281.2
Derivative financial instruments 21 72.2 111.9
Cash and cash equivalents 19.33 364 535.5
Total current assets   3,185.9 2,999.7
TOTAL ASSETS   10,363.3 9,111.6

Pursuant to Consob Resolution no. 15519 of 27 July 2006, the effects of relationships with related parties are accounted for in the appropriate statement of financial position outlined in paragraph 2.04.02 of this consolidated financial statement.


mln/euro notes 31 Dec 19 31 Dec 18
Share capital and reserves 26    
Share capital   1,474.8 1,465.3
Reserves   948 913.5
Profit (loss) for the year   385.7 281.9
Group net equity   2,808.5 2,660.7
Non-controlling interests   201.5 186
Total net equity   3,010.0 2,846.7
Non-current liabilities      
Non-current financial liabilities 27.35 3,456.3 2,672.4
Non-current lease liabilities 15.35 76.1 12.2
Post-employment and other benefits 28 127.3 129.5
Provisions for risks and charges 29 521.8 458.6
Deferred tax liabilities 20 154.5 43.1
Derivative financial instruments 21 27.4 37.9
Total non-current liabilities   4,363.4 3,353.7
Current liabilities      
Current financial liabilities 27.35 305.5 609.9
Current lease liabilities 15.35 19.4 1.7
Trade payables 30.35 1,391.8 1,360.4
Current tax liabilities 24.35 86.9 6
Other current liabilities 31.35 1,047.9 866.9
Derivative financial instruments 21 138.4 66.3
Total current liabilities   2,989.9 2,911.2
TOTAL LIABILITIES   7,353.3 6,264.9

Pursuant to Consob Resolution no. 15519 of 27 July 2006, the effects of relationships with related parties are accounted for in the appropriate statement of financial position outlined in paragraph 2.04.02 of this consolidated financial statement.


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mln/euro notes 31 Dec 19 31 Dec 18
Earnings before taxes   528.1 418.4
Adjustments to reconcile net profit to the cashflow from operating activities      
Amortization and impairment of assets   433.7 391.5
Allocation to provisions   108.9 129.5
Effects of valuation using the equity method   (13.4) (14.9)
Other non-operating revenues   (111.6)  
Financial (income) expenses   139.4 106.6
(Capital gains) losses and other non-monetary elements   7 (18)
(including valuation of commodity derivatives)
Change in provision for risks and charges   (28.5) (29)
Change in provision for employee benefits   (12.2) (12.2)
Total cash flow before changes in net working capital   1,051.4 971.9
(Increase) decrease in inventories   (17.9) (36)
(Increase) decrease in trade receivables   (162.5) (183.3)
Increase (decrease) in trade payables   (65) (38.59
Increase/decrease in other current assets/liabilities   103.6 124.4
Changes in working capital   (141.8) (133.4)
Dividends collected   13.3 15.3
Interest income and other financial income collected   44.9 70.9
Interest expenses and other financial charges paid   (115) (126.6)
Taxes paid   (123.1) (176.6)
Cash flow from operating activities (a)   729.7 621.5
Investments in property, plant and equipment   (164.2) (159.2)
Investments in intangible assets   (369) (305.2)
Investments in companies and business units net of cash and cash equivalents 33 (195.7) (10.1)
Sale price of property, plant and equipment   4.7 5.8
Divestments in consolidated companies and contingent consideration 33 168.2 15.9
(Increase) decrease in other investment activities   (31.1) 15.2
Cash flow from (for) investing activities (b)   (587.1) (437.6)
New issue of long-term financial liabilities 34 315 221.3
Repayments of non-current financial liabilities 34 (100.7) (0.2)
Repayments and other net changes in financial payables 34 (377) (133.7)
Lease finance payments 34 (19) (2.3)
Proceeds from the sale of shares without loss of control   1.8
Acquisition of Interests in consolidated companies   (2.2) (11.3)
Dividends paid out to Hera shareholders and non-controlling interests   (161.5) (151.4)
Changes in treasury shares   31.3 (23.1)
Cash flow from (for) financing activities (c)   (314.19 (98.9)
Increase (decrease) in cash and cash equivalents (a+b+c)   (171.5) 85
Cash and cash equivalents at the beginning of the period   535.5 450.5
Cash and cash equivalents at the end of the period   364 535.5

Pursuant to Consob Resolution no. 15519 of 27 July 2006, the effects of relationships with related parties are accounted for in the appropriate cash flow statement in paragraph 2.04.03 of this consolidated financial statement.


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mln/euro Share capital Reserves Reserves derivatives valued at fair value Reserves actuarial income/(losses) post-employment benefits Profit for the period Net equity Non-controlling interests Total
Balance as of 31 Dec 17 1,473.6 847.8 4.1 (31.7) 251.4 2,545.2 160.8 2,706.0
Adoption of IFRS 9   (19.3)       (19.3) (0.6) (19.9)
Balance as of 1 Jan 18 1,473.6 828.5 4.1 (31.7) 251.4 2,525.9 160.2 2,686.1
Profit for the period         281.9 281.9 14.7 296.6
Other components of comprehensive income:                
fair value of derivatives, change for the period     12.4     12.4 0.1 12.5
Actuarial income/(losses) post-employment benefits       1.9   1.9 0.1 2
Overall profit for the period 12.4 1.9 281.9 296.2 14.9 311.1
change in treasury share (8.3) (14.8)       (23.1)   (23.1)
change in equity investments   (4.1)       (4.1) (5.4) (9.5)
change in the scope of consolidation   6.7       6.7 27.7 34.4
Allocation of revenues:                
dividends paid out         (140.9) (140.9) (11.4) (152.3)
allocation to reserves   110.5     (110.59  
Balance as of 31 Dec 18 1,465.3 926.8 16.5 (29.8) 281.9 2,660.7 186 2,846.7
Adoption of IFRS 16   (3.4)       (3.4) (0.6) (4)
Balance as of 1 Jan 2019 1,465.3 923.4 16.5 (29.8) 281.9 2,657.3 185.4 2,842.7
Profit for the period         385.7 385.7 16.3 402
Other components of comprehensive income:                
fair value of derivatives, change for the period     (54.4)     (54.4)   (54.4)
Actuarial income/(losses) post-employment benefits       (4)   (4) (0.2) (4.2)
Overall profit for the period (54.4) (4) 385.7 327.3 16.1 343.4
change in treasury share 9.5 22.6       32.1 (0.8) 31.3
change in equity investments   (0.7)       (0.7) (1.5) (2.2)
change in the scope of consolidation   (58.4)       (58.4) 13.7 (44.7)
Allocation of revenues:                
dividends paid out         (149.1) (149.1) (11.4) (160.5)
allocation to reserves   132.8     (132.8)  
Balance as of 31 Dec 19 1,474.8 1,019.7 (37.9) (33.8) 385.7 2,808.5 201.5 3,010.0




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Net financial indebtedness

    31 Dec 19 31 Dec 18
a Cash and cash equivalents 364 535.5
b Other current financial receivables 70.1 37.3
  Current bank payables (111.5) (70.39)
  Current portion of bank indebtedness (63.1) (451.5)
  Other current financial payables (130.9) (76.1)
  Current lease liabilities (19.4) (1.7)
c Current financial indebtedness (324.9) (599.6)
d=a+b+c Current net financial indebtedness 109.2 (26.8)
  Non-current bank payables and bonds issued (2,869.1) (2,644.3)
  Other non-current financial payables (573.5) (20.7)
  Non-current lease liabilities (76.1) (12.29
e Non-current financial indebtedness (3,518.7) (2,677.2)
f=d+e Net financial position - CONSOB Communication no. 15519/2006 (3,409.5) (2,704.0)
g Non-current financial receivables 135.3 118.4
h=f+g Net financial indebtedness (3,274.2) (2,585.6)



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