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Strategy and Business plan

The Group has enhanced its five-year strategy, following the new European directives and at the same time maintaining its coherence with the goals of the UN’s 2030 Agenda, which for years has guided Hera’s commitment towards sustainable development.
European policies have thus become the reference framework for the strategies found in the new Business Plan, while the SDGs (that is, the 17 targets for sustainable development defined by the United Nations, to be reached within 2030) remain at the root of Hera’s “purpose”, the reason for which the Group exists and its underlying motivation.

 
Strategic map

The Business Plan to 2024 confirms and reinforces the growth expected by the previous Plan: within 2024, the Hera Group expects Ebitda to reach 1.3bn€, (+215 million compared to the 1,085 million seen in 2019), with an average annual increase coming to approximately 43 million.

Investments totalling 3.2bn€,up 12% compared to the Plan to 2023 (+339mn€) and +40% compared to the accumulated investments made over the last 5 years. Of these, 2.9bn€ will go to the internal development of all businesses in the Group’s portfolio, while the remaining 300bn€ will go toM&A transactions and tendersfor regulated services.

Dividends paid are expected to increase at a rate of “5€cent/year”, in line with the previous plan, reaching 12.5€cents in 2024 (+25% compared to the last dividend paid).

Operating cash flows will increase, supporting investments, dividends and expansion through M&As and tenders for regulated service assignment, maintaining financial solidity with the Debt/Ebitda ratio at 2.8x in 2024, thus leaving room for other investment projects not included in the Plan.

Operating-financial policiesfully confirmed and commitment towards development and growth renewed, with interventions focused on energy transition and environmental protection, technological evolution and social cohesion.

Concrete efforts towards sustainable development: approximately 88% of the growth in Ebitda expected by the Plan is in line with EU sustainability directives.

 
 
  • The new Business Plan revolves around three strategic focal points – the environment, socio-economic factors and innovation – according to which Hera’s projects will take shape, in all business areas, with the aim of uniting the Group’s development with that of the context in which it operates, creating a “win-win” situation and increasing shared value.

    The environmental focal points include promoting a circular economy by recovering, reusing and regenerating resources, with interventions aimed at increasing infrastructural resilience so as to prevent and mitigate risks, and, more generally, actions aimed at countering climate change – an area in which Hera has been a leading figure for some time – in order to reach carbon neutrality, promoting bioenergies/green gas (such as biomethane, hydrogen and green syngas) and energy efficiency.

    The socio-economic factors, instead, are aimed at creating “shared value” for stakeholders and the areas served, making the most of the Group’s physical and commercial assets. This also involves new services having added value for customers, collaborations with external partners and projects for listening to local and social needs, as well as finalising acquisitions or tenders for regulated service assignments.

    Innovation, lastly, covers the opportunities linked to technological evolution, digitalisation, artificial intelligence and data analysis, to increase efficiency and service quality, with increasingly agile employment solutions, while maintaining the correct balance between people and technology.

    The new Plan will thus also allow the Group to face, in an integrated and synergic way, all of the challenges that are now inevitably dictated by the international context, thanks to its full control over risks, its awareness of a wide range of opportunities and its tactical operations, clearly outlined for each activity managed.

     
     
  • TARGET FOR FIVE-YEAR GROWTH IN EBITDA, 2020-2024: +215m€
    (average annual growth of +3.7% approx.)
    Reduction of margins
    -10m€ 2020-2024
    Internal growth levers
    +145m€ 2020-2024
    External growth levers
    +80m€ 2020-2024
    • End of incentives
      (linked to renewables)

    Growth in revenues

    • Expansion treatment mkt
    • Expansion energy mkt
    • Cross selling
    • Bonuses for quality
    • Gas tenders
    • Other services tenders
    • Plant expansion

    Cost reduction

    • Savings in costs
    • Operating efficiencies
    • Synergies with merged companies
    • Increase in personnel productivity
    • Digitalisation
    • Innovation and AI

    M&A

    • Multi-utilities
    • Energy sales companies
    • Waste treatment companies or plants
     
     
  • In order to even more concretely orient Hera’s long-term objectives, and better define its contribution to implementing European policies and the UN’s recommendations, the Group has extended its perspective to 2030.

    One of the most significant challenges involves pursuing carbon neutrality: Hera aims at being the Italian multi-utility with the most ambitious goal, in line with the criteria of the “Science Based Target initiative” (as regards, in particular, “Well below 2°C”, intended to limit the increase in the earth’s temperature to significantly under 2°C). This means lowering the amount of carbon dioxide emitted into the atmosphere by over 15% within 2024 and by roughly 33% within 2030, in both cases compared to 2019, calculating the emissions produced by both the Group and its customers, as regards electricity and gas sales.

    Once again with an eye to 2030, the Group will continue to make efforts towards a circular economy, with a 150% increase in the amount of plastic recycled by Aliplast (compared to 2017), an over 75% rise in the amount of packaging recycled and growth in the percentage of recycled urban waste, coming to 67%.

    Furthermore, the Group is giving greater attention to the contribution that may come from hydrogen, with reference on the one hand to the evolution and preparation of its own assets, beginning with gas distribution networks, and on the other to the new business opportunities that may be pursued thanks to its multi-utility platform; these prospects for development will also be pursued in partnerships with a number of important industrial actors.

     
     
     
  • -33%Decrease, compared to 2015, of the Carbon intensity in energy produced
      
    +150%Increase, compared to 2017, of plastics recycled by Aliplast
      
    >75%Exceed 75% of recycled packaging
      
    >30%Increase green energy sold
      
    >30 mcm/yIncrease biomethane production from organic waste
      
    -25%Decrease, compared to 2017, of Hera's water consumptions
      
    -10%Decrease, compared to 2013, of energy consumed by Hera
      
    -10%Reduce water network losses (linear loss reduction rate compared to 2018)
      
    +15%Increase the reuse of wastewater up to 15% of the total wastewater
      
    TOP10Positioning in the global index of Diversity & Inclusion of Refinitiv

     

     
     
  • The same commitment that will guide our actions supporting carbon neutrality, will also orient our actions in favour of a circular economy and people development.

     
    Circular economy
     
    Risk management
     
    Industrial growth
     


    With this Business Plan, the Group has confirmed the coherence between its own strategy and the most recent and ambitious European policies as well as the recommendations on the UN Agenda. The significant amount of investments linked to Shared Value initiatives and the ensuing economic growth provide a guarantee for the Group's medium-long term growth.

     
     
  • The rate at which dividends will increase by 2024,The new Plan further reinforces the Group’s attention towards generating value for its shareholders, who can rely on a return on invested capital that is decidedly higher than the average weighted cost of capital and on a solid and transparent dividend policy, whose payment was fully confirmed in 2020, despite the difficulties faced by the entire country. indeed, is in line with the one included in the previous Plan, with a 0.5 cent/share rise each year.

    The dividend pertaining to 2020, expected at 10.5 cents per share, will increase, reaching 12.5 cents by 2024 (+25% more than the last dividend paid).

     
     
     

THE 2020-2024 BUSINESS PLAN AND SHARED VALUE CREATION

The new Business plan points yet again towards strong sustainable growth. Attention towards sustainability continues to be a fundamental element in the Group's strategy, in line with the goals set out in the 2030 Agenda that can be applied to its activities (covering 11 of the UN's 17 SDGs) which have become part of the basic strategic objective or "the Purpose" of the Group.

The shared value framework of the new Plan focuses attention on 6 SDGs of the UN 2030 Agenda as priorities to guide the Group's strategic choices:

 
 
 


The amount of Ebitda involving shared value – i.e., the value of business activities that, in addition to generating earnings, respect sustainable growth drivers – will reach almost 648 million euro in 2024 (equivalent to 50% of overall Ebitda).

The increase in Ebitda that reflects the goals on the UN’s 2030 Agenda will be achieved thanks to total investments for shared value projects corresponding to roughly 60% of overall 2020-2024 investments (3.2mld€).

Our main sustainable projects (2020-2024) include:

  • interventions to increase the resilience of the aqueduct and gas and electricity distribution networks coming to over 500mn€;
  • promoting innovation falling under Utility 4.0, including investments for digitalisation, remote control, laboratories, Acantho, etc., with an overall amount of roughly 170mn€;
  • energy efficiency interventionsbenefitting companies, residential buildings and public administrations, channelled through the company AcegasApsAmga Servizi Energetici and HSE, coming to over 60mn€;
  • creating biomethane production plants with over 50mn€
 


Hera’s attention towards sustainability and transparency has been confirmed also by its decision to commit itself to the goal “Well below 2°C” of the “Science Based Targets initiative” and to apply the recommendations of the “Task Force on Climate-related Financial Disclosures” (TCFD) in its reporting as of the 2020 financial year, so as to offer all stakeholders the information required to evaluate opportunities and risks linked to the climate.

Page updated 13 January 2021

 
 
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