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Strategy and Business plan

The new Hera Business Plan aims to create value for the main stakeholders through a growth strategy levaraging both internal and external lines. The future scenario highlights a good concentration of opportunities in the business sectors in which the Group operates. The strategic structure pursued is presented in continuity with the past experience and lays its foundations on the solid strengths characterizing Hera. Growth is in fact pursued through the implementation of the usual levers (efficiency, innovation, agility and excellence), with extended sustainability targets for the achievement of targets also in the "benefit corporation" sphere.

The strategy envisages a major infrastructural development, with a further evolution of the customer experience and customer engagement initiatives. The financial soundness that characterizes the Group (with a net financial position / EBITDA always below the 3x threshold) allows a plan of investments in the period equal to 3.12 billion euro (+ 260 million euro compared to the previous one), for an EBITDA of  1.185 b€ in 2022, 40% of which deriving from shared value activities

Transparency has been confirmed, together with continuity in the dialogue with investors, to which Hera reserves complete visibility on capital investments and dividend policies, with an extended view of activities aiming at creating shared value.

Strategic focusInternal Growth M/A Risk analysis Financial targets Capital allocation

 

Capital allocation

Faced with the opportunities of the scenario, the Group has selected the most promising investment projects to support a remunerative infrastructural upgrade, to which it will allocate, in the period, 3.14 b€, +260m€  compared to the 17-21plan. The increase in the investment plan will be largely self-financed, with the maintenance of a leverage below 3 times (Debt / Ebitda ratio), as planned in the previous business plan.

 
Capex plan evolution
 

Hera’s strategy

WHY

A series of macro-tendencies can now be observed globally having an impact on the environment and on resources, with their social and economic implications raising significant challenges. The United Nations has elaborated a list of objectives with the precise aim of countering these trends; multi-utilities, by way of the particular nature of the services they offer and their close relation with the localities served, can actively contribute to this ongoing transition. The Hera Group, as a national reference point in the sector, fully embraces this global call to action and has elaborated it point by point within its own strategy.

Taking a leading role in the transition currently underway is furthermore in line with the company’s mission, defined 15 years ago when it was established. Here, Hera states that its « goal is to be the best multi-utility in Italy for its customers, workforce and shareholders. It aims to achieve this through further development of an original corporate model capable of innovation and of forging strong links with the areas in which it operates by respecting the local environment.

For Hera, being the best means inspiring the pride and trust of:
customers, who receive, thanks to Hera's responsiveness to their needs, quality services that satisfy their expectations;
the women and men who work at Hera, whose skills, engagement and passion are the foundation of the company's success;
shareholders, confident that the economic value of the company will continue to be generated, in full respect for the principles of social responsibility;
the areas in which Hera operates, where economic, social and  environmental health represent the promise of a sustainable future;
suppliers, key links in the value chain and partners for growth ».

 

HOW

The strategic levers through which the Group will be able to reach its goals are:

  • 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 strategic layout constructed by the Group is furthermore in line with the sustainable development goals set out by the United Nations, which can take the shape of concrete actions within each of the business areas in which the Group is involved.

 

WHAT

The Group’s strategy is elaborated through concrete projects that coherently respect its strategic levers and goals in sustainability:

  • Public Lighting: contributing to an intelligent use of energy, with LED lighting points and automation systems;
  • Waste treatment plants that contribute to the recovery of materials and energy, especially our biomethane plant, currently under construction;
  • The energy services we offer to companies, residential buildings and public administrations, aimed at promoting unique solutions to improve energy efficiency in production systems and energy absorption;
  • The Water Cycle meets both general objectives in resource recovery and specific ones concerning water that is suitable for drinking and the quality of purification;
  • District heating offers an efficient and sustainable solution, since it is combined with heat production from renewable sources;

Care is given to diversity and inclusion in not only in the Group’s governance, but also its various internal and external stakeholders.

 

Concrete actions to deliver on our strategy

 

Growth, creation of shared value, circular economy

Hera's strategic goal is to continue growing and creating shared value, in particular carrying out the projects launched in 2016 and starting new ones inspired by the circular economy. In October 2017, the Group joined Ellen MacArthur Foundation CE100 program, to promote ideas, activities and business models based on circular economy principles and intends to intensify its collaboration with the MacArthur Foundation in order to follow and contribute to the best international practice in this field.

Hera's Chief Executive Officer, Stefano Venier, met Ellen MacArthur to discuss the current situation and future perspectives.

The 2018-2022 Business Plan and the creation of shared value

A key element of the Plan to 2022 concerns the long-term orientation in the smart use of energy, in the efficient use of resources, in innovation and in the eco-social development of the territory, in a logic embracing the creation of shared value. As a result, in 2022 Hera envisages approximately 470 M€, corresponding to 40% of the Group total Ebitda, deriving from these activities.

 
Global Goal Value in 2022
 

Value to the shareholders wil be increased, underpinned by an even more challenging dividend policy

The Plan confirms the attention to the creation of value for shareholders and for a challenging dividend policy. The coupon, which has already risen to 9.5 cents per share in 2017, will in fact reach 10 cents per share in 2018 and 2019, 10.5 in 2020 and 2021 and 11 in 2022 (+ 16% compared to the last payment), with an increase of 0.5 cents every 2 years.

Page updated 10 January 2019

 
 
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