Message from the Executive Chairman

“The results achieved confirm the Hera Group’s ability to continue along its path of creating sustainable value. The increase in the main economic-financial indicators and continuous improvement in return on invested capital, with ROI rising to 10.4% and Total shareholders return exceeding 35%, are clear signs of the solidity of our industrial model. We obtained significant growth in both our free market and regulated businesses, with Ebitda reaching close to 1.6 billion euro in 2024, while gross operating investments stood at 860.3 million euro, 35% higher than the average of the previous five years, 76% of which was aimed at pursuing decarbonisation, resilience and the circular economy. The growth in shared-value Ebitda as well, in absolute and percentage terms, testifies to our constant focus on creating not only economic, but also social and environmental value. Evidence of this lies in the economic value distributed in the local areas in which we operate, which in 2024 reached 2.1 billion euro. In addition to our infrastructural growth, we have also achieved commercial growth in all free market businesses and, in particular, in energy supplies, where we have reached 4.6 million customers, up 20%. Thanks to this further development, more than 13% of Italy’s population now receives at least one service from the Hera Group. In light of the results achieved and the Group’s financial solidity, we will propose to the Shareholders Meeting the payment of a dividend set at 15 euro cents per share, up 7.1% compared to the last dividend paid. The effects of this increase will extend to our entire dividend policy for the upcoming years. The results for 2024 therefore confirm once again the validity of our Group’s strategic vision and constitute the first building block of our Business plan.”

Cristian Fabbri
Executive Chairman

Message from the CEO

“In 2024, the Hera Group confirmed its solidity and capacity for growth, recording an increase of over 30% in net profit for Shareholders, which rose to almost 500 million euro. All business areas contributed to this result, which proves the Hera Group’s ability to continue growing in a complex macroeconomic context. The positive operating performances were supported by effective financial operations, since 2024 benefited from the liability management and debt rationalisation initiatives undertaken since the beginning of the energy market crisis, which have helped maintain a net debt to Ebitda ratio of 2.5x, ensuring that the Group has significant financial solidity and flexibility among the lowest reached in last two decades. This operating-financial solidity allows us to continue along our path of external growth, fully consistent with the perspectives defined in the Business plan. Moreover, we continued to accelerate our commitment to the green transition, with a focus on decarbonisation, circular economy and resource protection, also thanks to the contribution coming from of the EIB financing line. In 2024, gross operating investments reached 860.3 million euro, continuing the trend in infrastructure development that has lasted for years, aimed at improving the quality of services and the efficiency of assets, thus making the local areas served increasingly liveable, competitive and resilient. The Hera Group has therefore once again demonstrated its ability to combine economic development and sustainability, making a significant contribution to the creation of value in the areas it serves and to the achievement of its sustainability objectives, using the lever of innovation to ensure efficiency and new opportunities for growth. Lastly, we must mention that this year we have drafted a Sustainability reporting that covers all the core standards defined by the ESRS (European Sustainability Reporting Standards).”

Orazio Iacono
CEO

Summary Report

 

Estimates

	Consensus	Hera's results	Δ %
Ebitda (mln €)	1,555.2	1,587.6	+2.1%
Ebit (mln €)	811.3	829.9	+2.3%
Net profit post min. (mln €)	445.0	494.5	+11.1%
Net Financial Position (mln €)	4,040.7	3,963.7	(1.9%)

 

Target Price

		Preview		Post Results
Analyst	Broker	Rating	Target Price (€)	Rating	Target Price (€)
Francesco Sala	Banca Akros	Accumulate	3.80	Accumulate	4.20
Davide Candela	Banca Intesa Sanpaolo	Buy	4.00	Buy	4.00
Roberto Letizia	Equita SIM	Hold	3.70	Hold	3.70
Federico Pezzetti	Intermonte	Outperform	4.00	Neutral	4.20
Emanuele Oggioni	Kepler Cheuvreux	Buy	4.30	Buy	4.40
Javier Suarez	Mediobanca	Outperform	4.50	Outperform	4.50
		Average	4.05	Average	4.17

 

Summary Report

Broker	Analysts' comments on financial results
Banca Akros	"The company’s results were good and above our estimates (2% and 3% respectively for Ebitda and Net profit) while the leverage was lower (2.5x net debt/Ebitda vs. 2.6x “reported” in the preliminary results). The company’s leverage is sizeably lower than the Italian sector’s average (~2.9x excluding fully regulated players). We revised upwards our 2025-2028 EPS estimates (up 3% on average) and, after the model roll-over, we increased our target price to € 4.2. Accumulate confirmed."
Intesa Sanpaolo	"Hera’s delivery in 2024 was solid, with operations coming in above the preliminary indications and marginally outpacing our consensus view in 4Q/FY. Results at the bottom-line level were aligned to our estimates on an adjusted basis, mainly due to higher provisions accounted in 4Q, which nonetheless decreased yoy. In view of 2024 results and following conference call messages, we think consensus in 2025 could move up at a low single digit."
Equita Sim	"FY2024 results were slightly better than expectations and the preliminary figures announced at the end of January (along with the new 2024-2028 Business Plan), mainly driven by the gas business. The DPS was confirmed at 15 cents (yield <4%), in line with the Business Plan’s guidance. The call’s indications are broadly consistent with the company’s statements during the presentation of the 2028 Plan. We confirm our recommendation and target price at €3.70."
Intermonte	"Following 4Q24 results, we are raising our 2025-2026 Ebitda estimates by 1.5% on average and EPS by 3.5%. We continue to believe that the Group is very well placed to benefit from its leadership in the Waste business and further growth in its retail customer base. Moreover, Hera’s financial flexibility (over 1.0 bn€) enables it to continue to seize growth opportunities in its core markets, which are still highly fragmented. We move our recommendation to neutral. Thanks to the change in estimates (including a lower Net debt) our target price moves from €4.00 to €4.20."
Kepler Cheuvreux	"The full results for 2024 were positive, compared with the preliminary release in January. We highlight the strong FCF generation and the lower debt. As usual, management has not provided guidance for the current year. Executive Chairman said that 2025 had started well and the lower profitability of the Gradual Protection Service customers will be more than offset by growth in the other businesses. The stock is trading at appealing multiples (<7x EV/EBITDA 2025/26E and c. 12x P/E), given its high quality and low volatility in terms of EPS growth. We confirm our Buy rating and slightly increase our SOP-based target price from €4.30 to €4.40."
Mediobanca	"‘24 numbers, +2% ahead our numbers and consensus, showed the solidity of Hera’s business model, exposed to secular trends thanks to its leading position in Waste & Water segments. Reported Net Income included a capital gain of 48 m€ from the anticipated exercise of put option by Ascopiave on EstEnergy. Net Debt at 4.0 bn€ and corresponded to 2.5x Net Debt to EBITDA ratio, better than latest guidance of 2.6x, offers the company ample financial opportunities. We fine-tune our estimates to include the final ’24 numbers, with a negligible c1% impact in our estimates. We maintain our € 4.50 target price and our Outperform recommendation unchanged."

 

Trends and contexts

 

The Hera Group (hereinafter also Hera or the Group) 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. To anticipate future developments, the main drivers of change and their essential interrelations are identified below. In particular, the macro-trends of the Group’s reference contexts are identified, so that its main management policies, which contribute to an industrial strategy consistent with its corporate purpose, can be defined accordingly.

Macroeconomic

The January 2025 scenario published by the International Monetary Fund (IMF) in its World Economic Outlook (WEO) report shows a +3.2% increase in global Gross domestic product (GDP) for 2024 (slightly down from +3.3% in 2023). World growth therefore appears stable albeit weak, affected by various elements of risk and uncertainty, such as the escalation of geopolitical tensions, weaker trade, debt crises and the growth of great powers such as China being lower than expected, in particular due to fragility in the real estate sector and a slowdown in industrial production. 

After peaking at 9.4% in the third quarter of 2022, global inflation gradually dropped due to the restrictive monetary policies adopted by the major central banks, reaching 5.8% at the end of 2024. Although the downward trend of inflation may favour further interest rate cuts, the IMF emphasises that central banks will have to remain alert and prepared to adjust their monetary policies according to evolving global economic conditions, which could change very quickly and reverse current trends.

The euro area, penalised by lacklustre consumption and investment in addition to declining exports, showed the most modest growth among advanced economies, with GDP increasing by +0.8% in 2024 (which is still an improvement on the +0.4% seen in 2023). Starting in the second half of 2024, inflation in the euro area, in line with the global trend, fell steadily until it settling close to the reference target defined by the European Central Bank (ECB) of 2% in October (down from 3% in the same month of 2023).

According to IMF estimates, growth in the world economy will remain modest over the next two years due to risks related to heightened international tensions that could increase market volatility and make the economic context less stable, including the tightened US trade policy recently announced by the new administration. World GDP is expected to increase by +3.3% in both 2025 and 2026, in line with the growth recorded in the last two years but still below the historical average (+3.7%) seen in the decade preceding the pandemic. In the euro area, instead, growth is expected to remain more subdued, with GDP expanding by +1.1% in 2025 and +1.4% in 2026, affected by a slow recovery in exports and household spending.

Over the next two years, it is expected that global inflation will continue to fall, reaching 4.2% in 2025 and 3.5% in 2026, while European inflation will stabilise around the 2% target, with markets anticipating further interest rate cuts by the ECB.

At the national level, the most recent Bank of Italy projections estimate a +0.5% increase in economic activity in 2024, affected like the rest of the euro area by persistent weakness in manufacturing and a slowdown in the tertiary sector. Over the next two years, forecasts indicate a modest increase in Italian GDP, estimating +0.8% in 2025 and +1.1% in 2026. These limited growth prospects are mainly due to the slowdown in investments caused by the downsizing of incentives for residential construction and to the slow recovery of both foreign and domestic demand (caused by a reduction in household and business confidence).

According to the preliminary estimates released by the Bank of Italy, average inflation in Italy in 2024 will be slightly above 1%, mainly due to lower energy and intermediate goods prices. For 2025-2026, forecasts indicate an increase in inflation to 1.5 %, mainly due to rises in wages, which could put upward pressure on consumer prices.

Financial

Global financial markets showed a complex balance at the end of 2024, following significant events that led to major swings in the main indices and assets. Despite moments of turbulence and geopolitical tensions, it was a particularly positive year in the technology sector, supported by the growing demand for artificial intelligence solutions, and innovations in blockchain for cryptocurrencies. Stock exchanges continued the strong upward trend that had already begun in 2023, albeit with significant geographical differences: while the US stock exchange achieved a +25% increase, the euro area settled at +10% (with the Italian stock exchange at +18%) and the emerging markets, in aggregate, stood at just under +14%. Government bond indices also recorded positive results, albeit with fluctuating trends, benefiting from narrower spreads and a favourable context of economic growth. On the foreign exchange market, there was a significant weakening of the euro against the dollar (-6.7%) and against sterling (-4.8%), and a significant appreciation against the yen (+4.5%) and the Swiss franc (+ 1%). Inflation, mentioned above, influenced the price of gold, which performed very well as a result of increased demand from central banks, to diversify their reserves.

The monetary policy decisions made by the Federal Reserve (Fed) and the European Central Bank (ECB), which, albeit with different prospective assessments, had a significant influence on financial market trends. Indeed, while the ECB considered it feasible to reach the 2% inflation target, the Fed was much more cautious about future rate cuts, given the resilience shown by the US economy to the high cost of money. After about a year of rate hikes, aimed at countering rising inflation, and a standstill in the first part of the year, central banks gradually changed direction, ushering in a period of rate cuts in the second half of 2024 for the transmission of their monetary policy, while maintaining a cautious and data-dependent approach. The ECB, for the first time in its history, anticipated the Fed, and on 12 June started to cut the cost of money by 25 basis points, then cut rates three more times over the following months, meaning that by the end of the year the level of the official refinancing rate was brought down from its peak of 4.5% to 3.15% and the deposit rate from 4% to 2.75%. The Fed, on the other hand, started to cut rates by 50 basis points in September, followed by two more cuts in November and December, bringing the reference rate to 4.5%.

The rate cut introduced by the ECB had an immediate effect on short-term Euribor rates, which, at the end of the year, closed down by approximately 120 basis points on average compared to the end of the previous year. In the area of medium-long term euro-swap rates (IRS), 2024 was characterised by high volatility, due to the uncertainties fuelled both by geopolitical tensions and a context in which the monetary policy orientation of the central banks was unclear during the first part of the year, in addition to concerns about growth prospects, which were also put at risk by a possible return to more protectionist policies in some advanced economies. During the year, IRS rates fluctuated in a range going from a minimum of 2% to a value of over 3%, closing at the end of the year at an average level of 2.3%, down, albeit moderately, about 20 basis points on average compared to the end of December 2023. As regards future estimates on possible interest rates, the market consensus sees the return, in a year’s time, of an interest rate curve that is no longer inverted, and therefore with short-term rates lower than medium/long-term rates. In particular, Euribor rates (1-6 months) are expected to settle at around 2% on average with Euro-swap rates (2-15 years) staying substantially flat, approximately 2.3% on average and thus in line with the average closing values of 2024.

The ten-year spread between the Italian BTP and the German Bund narrowed year-on-year by 50 basis points (bps) to 116 bps, due to Italy’s improved growth prospects, also considering the ECB’s easing of monetary policy. At 31 December 2024, the yield on the ten-year Bund fell to 2.36%, while the yield on the Italian ten-year bond settled at 3.52%. On the secondary market, prices were affected by the volatility of yield rates over the medium to long term, which, albeit with a limited impact, led to an increase in Hera Bond spreads at times, only to return to levels essentially in line with market prices. In particular, the spread of the Hera Bond maturing in 2034 (10-year benchmark) recorded, at 31 December 2024, a level of 116 bps, up 10 bps compared to the December 2023 closing, but still in line with the levels expected by investors and with the sovereign spread, with respect to which the differential of 60 basis points recorded at the 2023 closing disappeared.

Business

The European gas market remains fragile, with high price volatility mainly due to insufficient growth in liquefied natural gas (LNG) supply and geopolitical tensions. Wholesale gas prices rose to around €50/MWh at the end of 2024, double the lows recorded in February 2024, and with confirmation of the end of Russian gas transiting through Ukraine as of 1 January 2025. Over the past year, our country recorded a 2.5% decrease in gas consumption, stabilising at 61.7 billion cubic metres, bringing it to the lowest level in the last 15 years as a result of milder temperatures and the restraining effect of prices. The drop in consumption appears to have mainly affected LNG supplies (-10.1%) and pipeline imports (-0.9%), particularly due to the lower contribution of gas from North Africa.

In 2024, the European electricity market saw a significant increase in production from renewable energy sources, which generated roughly 50% of electricity in the EU in the first six months of the year, thus contributing to greater stability in energy prices. Within Italy, the data processed by Terna showed a 2.2% increase in consumption for 2024 compared to 2023, with national consumption coming to 312.3 TWh. In line with European trends, a significant increase in national production of renewable energy emerged (+13.4% over the previous year), capable of covering 41.2% of total energy consumption (as against 37.1% in 2023), thanks to the positive contribution coming from all sources, particularly hydroelectric and photovoltaic.

As regards the waste management and water businesses, while the data referring to 2024 is not yet available, the most recent figures published by the main national institutes are provided below.

For the waste management sector, the latest calculations made by the Institute for environmental protection and research (ISPRA, 2024 Municipal Waste Report) report a national production of municipal waste in Italy in 2023 of 29.3 million tonnes, up 211 thousand tonnes compared to 2022 (+0.7%), with an average per capita amount of 496 kg of waste produced. This increase is partly linked to growth in national GDP (+0.7%) and the increase in household consumption, always a strong influence on waste production. The data for sorted waste collection improved to 66.6%, up 1.4 percentage points compared to 2022. The regional breakdown shows a still significant gap between the north (73.4%) and the south (58.9%), which is however progressively narrowing.

The Blue Book 2024, a comprehensive report containing national data on the integrated water sector published by the Utilitatis Foundation, shows that the management of this service in Italy is still highly fragmented, especially in the south. Despite the fact that 83% of the population (48 million inhabitants) is served by a single party, the remaining 17% resides in municipalities where management is divided among several operators or takes place “in economy”, with the municipal administration directly managing at least one of the three services: the aqueduct, sewerage or purification. This report notes that overcoming fragmentation is crucial to increasing investment in the water sector and improving the management of this resource and the quality of the service.

In 2022, the water injected into distribution networks amounted to approximately 8 billion cubic metres (ISTAT data), stable compared to previous years. However, leaks in the networks continue to be a significant issue, with approximately 42.4% of the water injected (or 3.4 billion cubic metres) being wasted due to infrastructural inefficiency. These challenges are compounded by the effect of climate change, which is intensifying the frequency of extreme events such as droughts and floods. Increasingly hot summers and erratic rainfall are reducing the availability of water resources in several regions, with ensuing impacts on supplies for civil, agricultural and industrial use.

In the energy sector, an increasing degree of competition was seen, fuelled by the gradual elimination of safeguarded services. As of 1 January 2024, the safeguarded service for non-vulnerable gas customers was definitively phased out and all consumers in this category were transferred to the free market, while 1 July 2024 saw the end of the safeguarded service for non-vulnerable electricity customers. Customers who did not choose an offer in the free market were automatically transferred to the gradual protection service, managed by suppliers selected through competitive auctions. This move represents a further step towards the full liberalisation of the market, encouraging competition between suppliers and offering consumers the opportunity to access more advantageous solutions.

In 2023 the switch rate (change of supplier) for household customers increased in the electricity sector by 1 p.p. compared to the previous year, and by about 1.5 p.p. in the gas sector (ARERA, Regulatory authority for energy networks and the environment, annual report 2024). This increase confirms the inclination of Italian consumers to change supplier, searching for better conditions, both in terms of tariffs and services. In recent years, in fact, competition has no longer been limited to the commodity itself, but has also extended to value-added services (VAS). Operators in particular are increasingly orienting their offers towards sustainable, energy-saving and consumer-friendly solutions.

In the waste treatment and recovery sector, the orientation of the main operators towards market acquisitions of specialised companies equipped with plants and skills was confirmed. There was also a trend of growing attention paid by companies, including medium-sized operators, towards sustainability and improved environmental performance, also considering European targets for recycling and disposing of waste in landfills. Companies operating in this sector face challenges involving efficient material management, cost reduction and technological innovation. European and national legislation on waste and recycling is stimulating the creation of increasingly advanced plants, with the aim of optimising recovery processes and reducing environmental impacts: in particular, EU regulatory developments are promoting the proximity principle of waste management, placing new limits on waste exports. Moreover, competition between companies also extends to the ability to offer integrated solutions, capable of optimising the entire life cycle of materials, from collection to final recovery.

Regulated businesses

As regards regulated businesses, competition involves the procedures for awarding service concessions and their subsequent management.

Turning to legislative factors, the most important interventions concerning the Group, issued in 2024, include:

• provisions to promote the country’s energy security (Law no. 11/2024, converting Decree law Energy-bis) which, in addition to defining the procedures for assigning the electricity supply service to vulnerable customers, provided for, as of 1 January 2025, the application of zonal prices to all electricity customers, defined on the basis of trends in the wholesale electricity market, thus eliminating the prices indexed to the Single national price (PUN), albeit with temporary measures for a gradual introduction;
• urgent provisions on critical raw materials having strategic interest (Law no. 115/2024, converting Decree law Critical raw materials), which implements the provisions of Regulation (EU) 2024/1252 and establishes a framework to ensure a secure and sustainable supply of critical raw materials. To this end, actions are defined to strengthen the supply chains of critical raw materials and boost the development of strategic projects thanks, among other things, to simplified authorisation procedures;
• provisions for the implementation of obligations deriving from acts of the European Union and from infringement and pre-infringement proceedings pending against the Italian state (Law no. 166/2024, converting Decree law Save Infringement), which introduces measures to encourage the recovery of critical raw materials from waste from electrical and electronic equipment (WEEE), as well as measures on extended producer responsibility in the e-commerce sector;
• urgent provisions for the country’s environmental protection (Law no. 191/2024 converting Decree law Environment), which provides for the inclusion of landscape and public green care and maintenance activities among circular economy practices, as well as the postponement of the terms of application of certain exemptions expected for the disposal of waste in landfills;
• annual Market and competition law 2023 (Law no. 193/2024, Annual competition law 2024), which contains provisions for vulnerable domestic customers to access the gradual protection service. It gives vulnerable household electricity customers the possibility to request, within 30 June 2025, access to the gradual protection service. ARERA is responsible for establishing the procedures for implementing this article, including those for certifying the presence of the requirements that define vulnerability;
• state budget for the year 2025 (Law no. 207/2024, entitled Budget law 2025) which, as regards electricity distribution, provides that within 180 days from the date of entry into force of the law, the terms and procedures for concessionaires of the service to present extraordinary multi-year investment plans for the purpose of reshaping the duration of existing concessions up to a maximum of twenty years, and, as regards waste, subjects waste disposal services to the ordinary VAT rate of 22% (instead of reduced to 10%) if they are carried out by landfilling or by incineration without efficient energy recovery; as regards the energy efficiency of buildings, the law reduces the rates of tax deductions and implements the EU obligation concerning the elimination of incentives for boilers powered by natural gas;
• Legislative decree 147/2024, which implements the reform of the Directive governing greenhouse gas emission allowance trading (Emission Trading System, ETS), which is extended to buildings, road transport and other industrial sectors as of 2027 (so-called ETS II);
• Legislative decree 190/2024 (so-called Renewable energy sources consolidation act), which defines the administrative procedures for the construction, operation, modification, upgrading and renovation of plants producing energy from renewable sources, as well as for related works and infrastructures;
• Ministerial decree MASE 268/2024, Energy release, which regulates a mechanism for creating new electricity generation capacity from renewable sources by energy-intensive end customers, through a procedure for the anticipation of electricity available to the GSE and its subsequent restitution;
• Ministerial decree MASE 236/2024, Eligible Areas, which identifies the regional distribution of renewable power related to the objectives of the Integrated national plan for energy and the climate (PNIEC) and establishes uniform principles and criteria for identifying the relevant eligible areas for installation.

As regards new regulations, the measures having the most significance for the Group, adopted in 2024 by the Regulatory authority for energy, networks and the environment (ARERA) are as follows:

• integration of tariff concessions in favour of residents affected by the 2023 flooding events (Resolution 10/2024/R/com) and introduction of amendments aimed at reducing the overall charges imposed on operators and managers;
• revision of the structure and content of the Bill 2.0 for energy end customers, in order to increase the transparency and readability of bills (Resolution 315/2024/R/com);
• introduction of rules for making end customer electricity and natural gas metering data available to authorised third parties and consequent updating of the private area of the Consumption portal (Resolution 509/2024/R/com);
• provisions for increasing the efficiency of the Code of business conduct for the benefit of electricity and natural gas end customers (Resolution 395/2024/R/com);
• approval of the procedures for assigning and providing the gradual protection service for small businesses for the period from 1 July 2024 to 31 March 2027 (Resolution 119/2024/R/eel);
• introduction of a mechanism for adjusting the operating costs of the corporately separate greater protection operators for the year 2024 (Resolution 538/2024/R/eel);
• regulation of competition procedures for the assignment of the safeguarded electricity service for the two-year period 2025-2026 (Resolution 388/2024/R/eel);
• update of the WACCs for energy infrastructure services valid for the next three-year period 2025-2027, which set WACC for gas distribution at 5.9% and WACC for electricity distribution at 5.6%, down from the rates applied in 2024 (Resolution 514/2024/R/com);
• approval of the documents to be used as guidelines in preparing the Electricity distribution development plan as of the 2025 edition (Resolution 521/2024/R/eel);
• completion of the incentive regulation related to the benefits of development interventions on electricity distribution networks for larger companies having the obligation to prepare Development plans (Resolution 472/2024/R/eel);
• introduction of the initial rules for the reform of the electricity settlement regulations as of 2026 and updating of the Integrated settlement text (TIS) for 2025, for implementing a fifteen-minute settlement pursuant to the provisions of Article 53 of Regulation (EU) 2017/2195 and the TIDE (Resolution 325/2024/R/eel);
• recalculation upwards of the rate of change of the gross fixed investment deflator for gas distribution tariffs for 2024 (set at 5.3%) in order to recognise, on an extraordinary basis, the effects of revisions to ISTAT data (Resolution 173/2024/R/gas);
• recalculation of the reference tariffs for the natural gas metering service for tariff years 2015 to 2023, in order to recognise the amount of residual depreciation for smart meters installed from 2012 to 2018 (manufactured up to 2016) and decommissioned before the end of their useful life (Resolution 376/2024/R/gas);
• recalculation of the operating costs recognised to gas distributors for the years 2020-2022 in order to take into account the correction of the calculation error found by the administrative judge in the appeals against Resolution no. 570/2019/R/gas (Resolution no. 134/2024/R/gas); the effects of the State Council’s rulings on the disputes against Resolution no. 570 will extend beyond this measure, since the final Resolution, expected in early 2025, should revise the entire methodological framework following the annulments by the State Council;
• approval of the Integrated text with provisions on gas distribution tenders, which unifies the measures relating to VIR-RAB variance assessment procedures and the analyses of tender documentation, in order to simplify and speed up the procedures for both currently ongoing and future proceedings (Resolution 296/2024/R/gas);
• extension to 2025 of the transitional district heating tariff method already in force in 2024, accompanied by the introduction of an incentive component for systems with a low environmental impact (Resolution 597/2024/R/tlr);
• initiation of the procedure for quantitative evaluations of the incentive mechanisms (rewards and penalties) for the contractual and technical quality of the integrated water service for the two-year period 2022-2023 (Resolutions 37 and 39/2024/R/idr);
• definition of the factors underlying the calculation of the M0b indicator (Water resilience at the superordinate level) which, along with the previously defined M0a indicator (Water resilience at the water service management level), completes the path of determining the overall macro-indicator M0 Water resilience which is part of the incentive mechanism for the technical quality of this service (Resolution 595/2024/R/idr);
• revision of the theoretical purchase mix for the purposes of determining the maximum amount of electricity expenditure recognised by the water service tariff method: the theoretical mix for the purposes of the 2027 adjustment (to guide purchases for 2025) defines an incidence of 90% for variable prices and 10% for fixed prices (Resolution 570/2024/R/idr);
• abrogation of the national waste treatment tariff method defined by ARERA for the two-year period 2022-2023 (in which the systems prior to national regulation are applied, ex-post) and postponement of the starting date for the tariff method up to 2024 (Resolution 7/2024/R/rif);
• introduction, as of 1 January 2026, of a standard outline for calls for tenders for assigning the integrated municipal waste management service, which provides for the uniformization of certain elements nationwide, including the scope of the activities covered by the concession, the duration of the service, the value of the assignment, the conditions of participation and the assignment criteria (Resolution 596/2024/R/rif);
• extension to the municipal waste sector of the contact centre and complaints services provided by the Consumer energy and waste help desk, as well as the introduction of the possibility for users, in the event that a complaint to the operator is not sufficient to resolve the problem, to choose between sending a follow-up complaint to the help desk or activating the Conciliation service. The services are scheduled to be in force as of 1 April 2025 for the contact centre service and as of 1 October 2025 for the conciliation service (Resolution 574/2024/E/ref).

Focusing on the Group’s most significant activities, more specific details are provided below concerning the new tariff method for the energy infrastructure sectors, the electricity grid development plans and the tariff method for the waste sector.

As regards the energy infrastructure sectors, note that ARERA, for the first time (albeit provisionally), approved reference tariffs involving a ROSS-base tariff methodology (Resolution 206/2024/R/eel). According to this new methodology, which comes into force as of 2024 (Resolutions 163/2023/R/com as amended and 497/2023/R/eel), recognised costs depend on the actual (total) expenditure of distributors, which is compared annually with a reference expenditure defined by the regulatory authority (the so-called baseline). The total costs covered by the new methodology includes all types of costs incurred by operators as of the year 2024, with the sole exclusion of capital costs relating to 2G smart metering systems, for which the Authority had already defined an ad hoc recognition. It may be helpful to point out that continuity in criteria is applied for the tariff treatment of the capital stock existing at the date of transition to the new methodology. The most important change concerns the quantification of the operating cost baseline, which is differentiated for each company on the basis of the level of its actual costs in the year 2022. Furthermore, it was established that the total efficiency recovery is fully allocated to operations, and therefore, the expenditure eligible for tariff recognition is the sum of the total actual expenditure and the efficiency incentives allocated to operations. Each distributor was also given the opportunity to choose the degree to which any efficiencies/inefficiencies achieved are shared with users (ARERA introduced two options in the incentive menu: low incentive potential and high incentive potential). The timeline for the recognition of tariffs for eligible expenditure was also regulated by introducing a “regulatory capitalisation rate” differentiated by company on the basis of the historical trend, that divides expenditure into two portions: “slow money”, representing capital costs, and “fast money”, representing operating costs. Lastly, note that ARERA, for monetary revaluations in the new ROSS methodology, will take into account the inflationary update actually aligned to the total capital and operating costs falling under the tariff year.

ARERA has introduced new provisions for companies with more than 100 thousand end customers, as preparation for Electricity grid development plans starting from 2025, with the aim of promoting a selective approach to development initiatives, following a rationale of prioritising those with greater added value for end customers.

In particular, resolution no. 521/2024 approved the guidelines for drafting Development plans, which specifically defined the main sections of each Plan, its contents and the accompanying documents, including information on the temporal and economic progress of each development initiative, with the aim of ensuring transparency towards end users.

With Resolution no. 472/2024, the Authority also completed the regulation of the (optional) incentive mechanism aimed at rewarding development initiatives capable of generating significant benefits for end users. These incentives will go, for example, towards strengthening the resilience of the grid, increasing the integration of renewable sources and, in general, ensuring greater security, reliability and sustainability for network users.

As regards tariff regulations for the waste sector, note that Resolution no. 7/2024/R/rif, in addition to repealing the treatment tariff method for the two-year period 2022-2023 (postponing its effective date to 2024), provided for the application of the systems used prior to the national regulation for the years 2022-2023, in order to comply with the rulings of the State Council concerning the annulment of the criteria for identifying minimum treatment plants. With this measure, ARERA essentially confirmed the institution of “minimum” cycle closure plants, even while making them come into effect as of the two-year period 2024-2025. Therefore, the methodological reference framework for access tariffs to plants that will be subject to tariff regulation remains unchanged, even while waiting for the subject to be reorganised by the state legislature, which has been recognised as having exclusive competence in the field of environmental protection and competition.

A timeline showing the main regulatory periods and related measures introduced by ARERA, pertaining to the Group’s sectors of activity, is provided below:

Lastly, the table below indicates the main tariff references for each regulated sector, based on the regulatory framework in force in 2024 and expected to remain until the end of the current regulatory periods.

	Natural gas distribution and measurement	Electricity distribution and measurement	Integrated water service	Integrated waste cycle
Regulatory period	2023-2025 Second sub-period of the fifth regulatory period (Resolution 737/22)	2024-2027 Sixth regulatory period (resolution 616/23) (1)	2024-2029 Second sub-period of MTI-4 (resolution 639/23)	2024-2025 Second sub-period of MTR-2 (resolution 389/23) (2)
Regulatory governance	Single level (ARERA)	Single level (ARERA)	Dual level (governmental authority, ARERA)	Dual level (regional authority, ARERA)
Recognised investment capital for regulatory purposes (RAB)	Previous cost revised (distribution) Weighted average between actual cost and standard cost (measurement) Parametric recognition (centralised capital)	As of 2024: Introduction of the ROSS which, for the capital cost of distribution, confirms the revised previous cost method   As of 2022 Recognition based on a comparison between planned costs presented to ARERA (RARI motion) and actual expenditure (measurement)	Previous cost revised	Previous cost revised
Regulatory lag investment recognition	1 year	1 year	2 years	2 years
Return on investment (3) (real, pre-tax)	2024 6.5%	2024 6,0%	2024-2025 6.1% +1% for investments as of 2012, covering the regulatory lag	2024-2025(4) 6.3% Collection  6.6% Treatment +1% for investments as of 2018, covering the regulatory lag
	2025 5.9%	2025 5,6%
Recognised operating costs	Average actual cost values by company grouping (size/density), based on 2011 (for revenues until 2019) and 2018 (for revenues as of 2020) (5) Sharing for efficiencies achieved against recognised costs Upgrade with price-cap	As of 2024: Actual cost for operator + efficiency incentive for operating costs calculated based on a regulatory menu that calls for sharing, with customers, the delta between the average actual cost for the operator based on 2022 (for revenues until 2027), called baseline, and the actual cost paid by the operator during the year	Efficient costs: operator’s actual 2011 values inflated Updatable costs: actual values with 2-year lag Additional charges for specific purposes (provisional)	Collection and treatment Actual operator costs with 2-year regulatory lag Additional costs for quality improvement and changes in the operator’s scope (provisional) Additional charges for specific purposes (provisional)
Annual efficiency operating costs	Annual X-factor As of 2020: Distribution: 3.39% large companies 4.62% medium-sized companies Measurement: 0% Marketing: 1.57%.	As of 2024: Distribution + Measurement: 0.5% if the high-potential menu is chosen 0% for the low-potential menu	Efficiency mechanism based on: sharing 2016 operator efficiencies Differentiated sharing level with respect to the distance between actual cost and efficient cost of the operator
Incentive mechanisms		As of 2024 Z-factor: recognition of extra costs linked to the energy transition Public contribution: recognition of 10% of the value in three quotas	Sharing of electricity costs based on energy savings achieved Recognition of 75% of margins from activities aimed at environmental and energy sustainability	Collection Sharing on revenues from the sale of material and energy (range 0.3-0.6) and from Conai fees Treatment Sharing not explicitly recognised by the method, although it can be traced back to the general principles supporting the development of the circular economy
Annual limit on tariff increases			On an asymmetrical basis and depending on: investment needs cost-effectiveness of management changes in scope of operations Mechanism to guarantee operating and financial balance	Collection On an asymmetrical basis and depending on the presence of: changes in scope of operations improved service quality Treatment Limit to growth less tight since the efficiency factor is not provided for, it depending on: inflationary growth environmental impact of plants Collection and treatment Mechanism to guarantee operating and financial balance

 

(1) Resolution 616/23 defines the tariff regulation for electricity distribution and metering services for 2024-2027, implementing, for the determination of the recognised cost, the application criteria of the new ROSS (Regulation by expenditure and service targets) regulation, defined by resolution 497/23/R/com.
(2) Resolution 389/23 follows up on 363/2021/R/rif, which updated the previous regulatory period and introduced tariff regulation for treatment in the case of “minimum” facilities, i.e. essential for closing the municipal waste cycle.
(3) For the energy and waste sectors, reference is made to the WACC methodology, while for the integrated water service the values refer to the coverage rate of financial and fiscal charges.
(4) For 2022-2023, the reference deliberation for WACC in the waste sector is resolution 68/2022/R/rif; for 2024-2025, the reference deliberation for WACC is resolution 7/2024/R/rif
(5) In February 2020, Inrete Distribuzione Energia Spa, the Group’s main distributor, along with other operators in the sector, challenged the deliberation before the Lombardy-Milan Regional Administrative Court (TAR) with regard to the significant reduction in the recognition of operating costs introduced by resolution 570/2019.

Climate and the environment

Within this complex context of deep economic and technological transformation, climate change in its increasingly frequent manifestations also represents an unavoidable challenge for all organisations. Regulatory and economic measures for managing climate change and grasping the opportunities arising from dealing with the risks associated with it are priorities for international and national institutions, as well as economic operators in every sector. The Group’s priorities in the pursuit of environmental sustainability are represented by the goals of the 2030 Agenda for Sustainable Development (SDGs), and also by the indications of the Paris Agreement to keep global warming below 2º C, as well as the long-term climate strategy “A clean planet for all” (adopted by the European Union) to achieve carbon neutrality by 2050 and to maintain the temperature increase below 1.5º C. Further significant indications moving in this direction include the changes called for by the Green Deal, the European Commission’s plan for a Europe that is more competitive in the fight against climate change and increasingly capable of transforming the economy and society by setting them on a path of sustainable development and, in the wake of this, the Circular economy action plan (CEAP). The initiatives introduced by European and national institutions are coordinated and converge towards the goals of a fair, sustainable and inclusive transition.

National policies are developing in a European context where priorities are defined and available resources allocated accordingly. In this sense, the National recovery and resilience plan (NRRP), which makes use of the European funds made available by the measures contained in the NextGenerationEU package, supplemented by a complementary national fund, guides Italy in the implementation phase of the European Green Deal, with the aim of:

• accelerating the process of ecological and digital transition;
• accelerating the transition to a regenerative and circular growth model;
• providing a tool to help investors in the transition to a low-carbon economy.

The drive to decarbonise the European economy has been addressed through long-term initiatives, in particular the Fit for 55 package, which foresees a series of measures aimed at reducing climate-changing emissions by 55% by 2030, focusing on an increase in renewable energies in the production mix. Energy efficiency targets will be pursued by giving a leading role to public construction in the process of making Europe’s real estate stock more efficient. In terms of renewable energies, whose increased production is decisive in gradually replacing fossil fuels and reducing carbon intensity, the electrification of consumption will require considerable investments along the entire supply chain and, as far as local energy planning is concerned, the recovery of waste heat from industrial processes is expected to offer significant potential for local areas. The development of renewable gases, including hydrogen, by constructing electrolysers powered by renewable energy sources, will also be a priority.

As regards the Italian context, for the water cycle and waste sector, the NRRP aims to modernise networks and plants and reduce the infrastructure gap between the north and south of the country, assigning a central role to the national Plan for the water sector (as regards providing public funding), and the national Programme for waste management. In the energy sector, the NRRP focuses on developing renewable energy sources, modernising electricity grids (to increase their digitalisation and resilience against climatic events) and energy-saving solutions. Other key interventions include the integrated development of the hydrogen supply chain, promoting production- and consumption-side projects at the same time and the principle of energy efficiency as the first zero-emission fuel.

The inevitability of climate change, which has led the European Commission to anticipate its emission reduction targets to 2030, with the hope of achieving full decarbonisation by 2050, is also forcing local authorities to revise their priorities and courses of action, orienting regional policies towards circular economy initiatives, sustainable mobility, carbon neutrality and digitisation. This scenario offers new opportunities to the utility sector, since all types of customers (household, industrial and public administrations) will be called upon to introduce technological improvements that can reduce their energy needs. Promoting and selling products and services for energy efficiency and supporting the energy efficiency of buildings are some of the initiatives being incentivised.

The new lines of development are closely linked to the full exploitation of data (seen as a real corporate asset) and a greater focus on cybersecurity, to protect the company and its data. The speed of change makes it essential to define training plans that enable the corporate population to better manage change (first and foremost digital change), which includes training that may be fragmentary but is still able to provide the necessary continuity (self-development).

Technological evolution

Digital technological evolution involves a continuous acceleration of some major trends in Information and communication technology (ICT) and, in addition to moving beyond the paradigms found in economic and social contexts with increasing speed, it alters entire market segments and social relationship patterns. The rise of artificial intelligence, including the generative branch, robotic process automation, data collection and management (internet of things, data governance and data analytics), cybersecurity and, lastly, cloud-based platforms all favour an increase in the amount of data produced and the speed of its availability, generating new opportunities for companies. The internet of things and digital interaction between people (exemplified by the automation of more standardised customer relations through chatbots) favour a continuous and growing flow of data, which allows not only rapid analyses of different situations (real time analytics), but also a more precise definition of the decisions and actions to be taken, often with the support of artificial intelligence, which is becoming more qualitatively efficient every day. In this direction, the EU Commission, adopting the communication “Digital compass for 2030” has confirmed the path for an ethical digital development in Europe. 

In this context, attentive monitoring goes to the evolving regulatory focus on artificial intelligence, as exemplified by the European Union’s AI Act, with the aim of immediately adopting regulations for AI providers and users, in order to exploit the great potential of this technology through solutions having risk profiles amply falling within this regulatory framework.

The benefits of digitally-aware development have been defined in Italy by the “Strategy for Technological Innovation and Digitisation”, one of whose main challenges is to accelerate the transition to a digital society, prepared to achieve the European targets. This strategy intends to innovate while safeguarding economic, environmental and social sustainability and guaranteeing equal opportunities for participation. The NRRP also intends to direct funds towards a major digital acceleration in the country, as a lever to give a decisive boost to the nation’s competitiveness. Thanks to their relationship with public administrations and SMEs, utilities play an important role in supporting the digital transformation, mainly through the supply of digital services to optimise the yield of production processes, but also through sensors installed for data collection and analysis, without forgetting connected machinery for automatic task performance and predictive maintenance. Examples of this can be found in various applications in the respective businesses, such as data-driven energy management solutions, thanks to connected and smart-sensor-equipped systems and devices inside public buildings, or sensors and smart devices distributed throughout the local area, coordinated and integrated by digital platforms that process the generated big data for resource planning and service optimisation.

Human resources

Analysing the current context leads to new challenges and interconnected trends that require an integrated approach to human resource strategy, capable of valuing people and adequately supporting business.

One initial element of this context involves the concept of purpose. The search for an alignment between the sense taken on by a company and an individual is the key to setting people’s engagement in motion and transforming it into virtuous behaviour, above and beyond customer satisfaction and shareholder remuneration. Values such as consistency and transparency, combined with trust, empowerment and emotional intelligence become central to offering people a valuable corporate experience.

The social and cultural dimension is equally important and points to a “permacrisis” context, i.e. a widespread and stagnating crisis on several fronts, destined to last for a long time. This involves the phenomenon of longevity, with people staying longer in the workplace, rising unemployment rates and the population referred to as NEET (Not in Education, Employment or Training), as well as a growing focus on the gender gap and individual mental health and well-being. The evolving socio-cultural ecosystem requires an optimal management of generations, diversity and multiculturalism for greater perceived equity.

Alongside this dimension are the energy, environmental and technological transitions, which require a rethinking of skills development and increased investments, especially in Stem disciplines. Companies need to implement change management and reskilling paths, especially to appropriately manage the impact of the development of Artificial intelligence.

In a context of such rapid innovation, a rising average age of the working population and marked by a growing need for professional retraining, training thus becomes a strategic asset to bridge the gap between industrial needs and the education system.

To remain competitive, companies must therefore be able to respond very quickly to changes in the market, anticipating emerging trends and adapting organisational models with a greater focus on human capital, paying close attention to activities such as talent attraction and engagement, and involves adopting practices that orient business agility by adopting flexible and rapid solutions.

 

Strategic approach and group management policies

 

The Hera Group’s corporate purpose is the essential reference for defining the broadest aspects of its strategy. More specifically, the Group’s path for development to generate value for shareholders and create shared value for its stakeholders is based on five strategic references and an enabling lever:

• profitability and financial sustainability, through a search for efficiencies and the identification of development initiatives with good profitability, even in challenging external scenarios, and at the same time the definition of an amount of investments that does not compromise financial-operating balance;
• resilience, carefully selecting interventions that can ensure that the Group’s assets and processes have the greatest possible capacity to cope with increasingly frequent and intense exogenous phenomena;
• carbon neutrality, pursuing decarbonisation goals within the Group’s own operations and supporting its stakeholders’ energy transition;
• resource regeneration, promoting and adopting circular business models to reduce the consumption of the planet’s natural resources by encouraging responsible stakeholder behaviour;
• social equity and prosperity, contributing to the development of local ecosystems, thus benefitting businesses and citizens, with particular attention to situations of vulnerability.

Pursuing these strategic references will require leveraging the support offered by innovation and digitalisation, to enhance the evolution of the Group’s activities, thanks to the opportunities offered by the most advanced technologies, with the aim of increasing the efficiency and quality of the services provided, multiplying opportunities for stakeholder engagement and accelerating the widespread adoption of behaviours and skills capable of responding to the challenges of a constantly evolving context.

As is clear from what has been stated thus far, sustainability issues pervade the Hera Group’s strategy, being both an integral part of it and a point of reference. For a detailed representation of objectives and results, as better defined by the reference standards, see paragraph 1.07 “Consolidated sustainability reporting” (hereinafter Sustainability reporting) of this document.

Macroeconomy and finance

The debt structure towards which the Hera Group is oriented responds to its business needs, not only in terms of the duration of loans, but also interest rate exposure. The Group’s financial strategy, in turn, is aimed at minimising its expenses while maintaining a prudential approach and minimising risk.

The Group’s financial structure is based on an attentive long-term planning of the necessary financial resources, which it carries out, based on its Business plan, by estimating, analysing and monitoring prospective cash flows, with a view to maintaining a flexible and efficient financial structure. The average cost of debt, in particular, is constantly monitored, through financial risk management activities aimed at limiting the risk of interest rate fluctuations, and through the evaluation of liability management operations aimed at seizing favourable market opportunities and maintaining a debt repayment profile that is evenly distributed over time.

Whereas the Group’s financial structure currently shows 96.7% of fixed-rate debt, by the end of the outlook of the Business plan, in 2028, it is expected that 50% of the current debt will be residual, of which 49% will be fixed-rate and 1% variable-rate. For the remaining 50%, refinancing has been planned in relation to residual needs, whose type of rate will be defined on the basis of future market conditions and within the limits of the financial risk policy. In addition, the strategy of meeting financial requirements through bond issues, including green and/or sustainable bonds, and through subsidised finance lines (including loans granted by the European Investment Bank) has been confirmed, in order to meet the Group's investment needs with further efficiency gains and thus guarantee the implementation of innovative and sustainable projects in the waste management, water and energy sectors. The funding strategy is reflected in the actions included in the Business plan for projects to reduce greenhouse gas emissions and increase the amount of recycled plastic.

Most of the Group’s business is concentrated in Italy, and Hera’s rating is thus closely linked to the country’s rating, macroeconomic trends and political scenario. Hera’s actions and strategies are oriented towards maintaining and improving adequate ratings; its habitual communications with the rating agencies Moody’s and Standard & Poor’s (S&P) have resulted in positive feedback in terms of the solidity and excellent balance of its business portfolio, and in terms of its excellent operating performance, efficient and proactive risk management and resilient creditworthiness indicators. In 2024, Moody’s rating was confirmed at BAA2, with a stable outlook, in line with the sovereign rating’s outlook (even though the Group’s operations are recognised as sound and sustainable, a company’s rating cannot be more than 1 notch higher than that of the country in which it operates). S&P’s rating was also confirmed at BBB+ with a stable outlook, one notch higher than the sovereign rating and among the best compared to other Italian and foreign utilities, confirming the significant growth achieved over the years and results that are always in line with multi-year forecasts.

Over the period covered by the plan, adopting financial sustainability reporting best practices will support the Group’s green financing and ratings. Hera has been committed to green funding for some time, since it was the first Italian company to issue a Green Bond in 2014 and adopted a Green financing framework (GFF) in 2019. In 2022, the Green financing framework was updated and aligned with the latest regulatory changes on sustainability, becoming Taxonomy compliant. Over the years, the Hera Group has issued three additional Geen Bonds, in 2019, 2022 and 2025. In October 2021, Hera published its Sustainability-linked financing framework, updated in December 2023, which includes two environmental indicators and related intermediate and long-term targets. In particular, the first indicator concerns the Group’s greenhouse gas emissions (Scope 1+2+3 from downstream electricity and gas sales), while the second involves the amount of plastics recycled by the Group. As part of this framework, the Group issued two Sustainability-Linked Bonds in 2021 and 2023, expanding its debt portfolio with sustainable funding instruments.

In this context, the Group’s presence in the Dow Jones Sustainability Index (DJSI) as one of the world’s leading companies in terms of sustainability in its sector, bears witness to the validity and credibility of the path undertaken. Recognitions of this type, in fact, act above all as a stimulus and allow Hera to identify the areas to be developed for further improvement in its performance and, at the same time, to include among its reference investors those who are engaged in socially responsible investing (SRI), a segment that, as mentioned above, is undergoing considerable and continuous expansion.

Business areas and industrial strategy

The Hera Group recently approved its 2024-2028 Business plan, which confirms the objective of creating sustainable value to the benefit of all stakeholders through the development of a balanced business portfolio, creating resilient industrial assets even in a scenario characterised by continuous volatility and an increasing frequency of extreme weather events linked to climate change.

Focusing on a just transition will lead to a path of excellence in creating shared value, with 77% of planned investments between 2024 and 2028 contributing to 11 of the 17 goals set by the UN 2030 Agenda. These investments fall under the three areas of shared value creation defined by the Group: pursuing carbon neutrality, regenerating resources and closing the circle, enabling resilience and innovating.

More specifically, 22% of total investments will be dedicated to accelerating the decarbonisation process, mainly by developing renewable plants, energy efficiency initiatives and projects supporting the transition for stakeholders. In relation to this commitment, and in line with the target of a 37% reduction in climate-altering emissions by 2030 (compared to 2019) validated by the international network Science Based Targets initiative (SBTi), the Hera Group, in its Climate transition plan drafted in 2024, has set itself the goal of achieving Net Zero emissions by 2050.

In the area of resource regeneration, 39% of the planned investments will reduce natural resource consumption through the development and adoption of circular economy solutions and models.

At the same time, to enable the organisation to respond effectively to increasingly frequent and intense exogenous events, 47% of the investments defined in the Plan will be allocated to further increasing the resilience of the assets under the Group’s management and its operations, ensuring quality and continuity of service.

Regulated businesses will receive 61% of the investments, while the remaining 39% will go towards fuelling growth in market-based businesses.

As regards free-market businesses, the Group’s main guidelines involve three strategic levers: working towards growth in its customer base, expanding and diversifying its commercial offer, and reinforcing its set of plants.

In energy sales, the Group is now the third largest operator in Italy in terms of number of customers, and intends to continue developing its customer base from 3.8 million in 2023 to reach 4.5 million by 2028, with a substantial growth in electricity customers, which will reach 2.4 million, surpassing the number of gas customers, thanks to the important contribution resulting from the 7 lots awarded in the Gradual protection service tender in 2024 and the development of a rich and diversified portfolio of services for decarbonisation.

The growing demand for integrated energy solutions coming from public administrations, apartment blocks and industrial customers will lead the Group’s Energy service companies (Escos) to introduce new multi-business commercial proposals with an integration and differentiation of the offer, which will be developed in services for energy requalification, sustainable mobility, public lighting and smart cities.

In order to achieve its ambitious decarbonisation targets, in the area of photovoltaic power generation, the Hera Group confirms its goal of installing more than 300 MW by 2028, favouring solutions involving plants at consumption centres as well as Group sites that do not require further land consumption, such as agrivoltaic plants and the numerous projects being implemented on landfills or water cycle plants, alongside installations at clients’ facilities, including renewable energy communities.

In the waste treatment and recovery market, the Group aims to further consolidate its nationwide leadership and strengthen its presence in Europe, by leveraging the integration of plant development and commercial growth, addressing the needs of an increasingly diversified and qualified customer base.

Thanks to its set of plants, consisting of more than one hundred state-of-the-art facilities (with five new structures planned by 2028) that treat municipal and special waste, the Hera Group expects to reach a total of approximately 9.6 million tonnes disposed of and marketed by 2028, as against 7.7 million tonnes in 2023 (+24% of waste treated).

With reference to commercial development, opportunities for collaboration will drive growth in the reclamation area (given the country’s need to reclaim over 13,000 sites), in which the Hera Group has significantly strengthened its market leadership by integrating the Modena-based A.C.R. di Reggiani Albertino Spa (ACR Spa).

In the plastics recovery market, Group subsidiary Aliplast Spa, one of Italy’s main operators in the flexible plastics segment, will continue along its path of growth, increasing volumes of recycling and, at the same time, expanding the range of polymers processed thanks to the development of an innovative multi-matrix plant. The increasing European legislative trend with Single use plastics (SUP) and Packaging and packaging waste regulation (PPWR) will cause progressive growth in demand, against which the Plan expects to double the plants in Novara for polyethylene (PE) and Polyethylene terephthalate (PET) regeneration, alongside innovative projects such as the Imola plant for carbon fibre recovery, inaugurated in March 2025, and the one for the regeneration of high quality rigid plastics under construction in Modena.

In regulated businesses, the Group’s strategy will be based on infrastructure development, in line with the needs of the local area and system, facing significant challenges related to the management of water scarcity and surplus, decarbonisation and the electrification of consumption, while maintaining high quality standards and increasing the efficiency of operations.

In particular, the Group’s initiatives in the integrated water cycle will focus on implementing works to ensure a secure and stable supply, as well as introducing advanced technological and digital solutions to ensure greater resilience to exogenous events, which are increasingly frequent and intense, optimising end uses. For example, applying innovative technologies and predictive maintenance will make it possible to reduce network leakage, supported by the implementation of districtisation and network reclamation, as well as the installation of more than 640 thousand smart meters by 2028. In addition, initiatives are planned for upgrading purification and sewage systems to enable better water outflow and promoting reuse and regeneration of resources to support the ecological transition.

As regards electricity distribution, the increased electrification of consumption will require initiatives to ensure asset reliability and flexibility for additional service quality and continuity, such as the evolution of electricity grids to improve energy management and increase hosting capacity (+400 MW to 2028, +30% compared to 2023). Asset renewal will also go towards an even better governance of electrification through automation and technological development, also ensured by the deployment of 2G smart metering (464 thousand installations by 2028).

To encourage the decarbonisation of gas distribution, the Group will focus on enabling networks to transport green molecules as well, as is the case with the experimentation currently underway on the municipal distribution network in Castelfranco Emilia (MO). At the same time, the Group will also focus on innovative solutions such as the installation of the Group’s patented NexMeter Gas smart meters (523 thousand by 2028), with advanced safety functions in the event of leaks or earthquakes, which can also be used for mixtures of natural and green gas. Or again, the power-to-gas plant in Bologna will make it possible to reuse purified water to produce first renewable hydrogen and then biomethane, using waste oxygen for purification processes.

Lastly, among the assets enabling the energy transition of the local areas served, the Group’s strategy now includes an additional development of district heating, to adapt the distribution network and optimise management, making the systems more efficient and reducing the carbon footprint of the heat produced.

In the area of municipal waste, thanks to the recent renewal of long-term concessions, the Group aims to further improve the efficiency and completeness of the service offered to local communities, including through the introduction of new devices and innovative infrastructures and the active involvement of citizens and stakeholders. The validity of this strategy is proven by the results already achieved by the Group, which has reached the goals set for the recycling rate and the reduction of waste going to landfills ahead of the EU targets: by 2028, the percentage of urban waste disposed of in landfills will fall below 3%, compared to the European limit set at 10%. In addition, the recycling rate will reach 64% by 2028, exceeding the EU target of 60% by 2030, while packaging recycling will stand at 68%, as against the EU target of 70% by 2030.

The industrial strategy outlined hereto projects an Ebitda target of 1,700 million euro in 2028. Shared-value Ebitda is also expected to grow significantly, exceeding 1,100 million euro in 2028, compared to 776 million euro in 2023, reaching 66% of the Group’s total Earnings before interest, taxes, depreciation and amortisation (Ebitda), in line with the target set at 70% by 2030.

Shared-value Ebitda is the portion of the Group’s Ebitda generated by activities that create shared value in the three areas defined by the Group (pursuing carbon neutrality; regenerating resources and closing the circle; enabling resilience and innovating) and that contribute to 11 of the 17 goals of the UN 2030 Agenda.

Gross investments totalling 5.1 billion euro are foreseen by the Plan, up more than 6% compared to the previous strategic document and 46% higher than the resources invested in the last five years. Of this, 500 million euro will come from PNRR funding and contributions from other institutions, while the remaining 4.6 billion euro will be directly financed by the Group.

In terms of distribution by business area, networks will receive more than half of the investments (2.5 billion euro), ensuring the resilience and adaptation of assets and thus confirming their position as the most capital-intensive business area. Waste management follows, with 24% of total investments (1.1 billion euro), and energy with 21% (1 billion euro).

Consistent with the dictates of the European framework, the Group estimates that 2.6 billion euro of its own expected operational investments (or 96% of eligible investments) will be aligned with the European Taxonomy for sustainable projects, thus gaining full access to subsidised sustainable finance instruments, with a benefit also in terms of financial costs.

The significant financial commitment required over the five-year period to support the investment plan, to benefit industrial development and expand the scope of operations with external growth, will be financed by a significant cash flow produced by the Group, which will make it possible to keep financial leverage below the prudential level of 3x (2.8x by 2028), confirming financial solidity. The robust cashflow also allowed for an upward revision of the prospective dividend curve, to reach 17 eurocents in 2028, up +21% from the last coupon paid.

Climate and the environment

For Hera, the need to guarantee quality and continuity of essential services in such a changing context, subject to an increase in climatic risks, represents a cost but at the same time an opportunity. The necessary increase in investments to increase the resilience of its assets puts the Group, thanks to its solidity and financial capacity, in an advantageous position with respect to smaller competitors, which could meet greater difficulties in facing such an amount of investments. Furthermore, strengthening internal skills, accompanied by external growth and tenders, will allow the Group to seize all opportunities for development that may arise in the most effective way.

In paragraph 1.07 Sustainability reporting, the actions that the Group promotes and intends to promote with respect to the issues of resilience and adaptation to climate change, as well as the objectives and metrics that guide its environmental strategy, are comprehensively and articulately represented in accordance with the Corporate sustainability reporting directive (CSRD).

Tecnology: green innovation and digital strategy

Advances in the chemical and engineering industries are at the forefront of technological developments in production processes, and concern the waste management (plastics first and foremost) or energy (biofuels and bio-combustibles) sectors, in a search for concrete solutions that may prove to be fruitful in facing the challenge of adapting to climate change or combating the depletion of natural resources. The Group makes strategic use of these advances in order to identify plastic recycling processes that are complementary to mechanical recycling and make the process effective even for less pure and less valuable portions of plastic. The same advances make it possible, for example, to experiment with solutions that use excess renewable electricity (otherwise unusable) to split water molecules into hydrogen and oxygen and then convert it into synthetic methane gas by adding carbon (from CO₂).

Hera has formulated a Group strategy to make the best possible use of all available information and ensure high quality and speed in data flow exchange. The guiding principles for the implementation of this strategy involve an organisational approach for data architecture, which is subdivided into an organisation of information by domains, development according to a product strategy, on a self-service technology platform and with the adoption of a federated governance model.

The Group’s data strategy model and related guidelines are discussed in training courses dedicated to individual business units, with the aim of raising awareness of the strategic plan at all levels. For an increased ability to prepare for anomalous events, the data sources used in the convergence between management environments (applications) and industrial environments (Group plants) must be continuously extended. Vulnerability assessment activities on both environments, aimed at preventing attacks on systems and plants, are fundamental; to this end, the model includes distributed actions and responsibilities, and it will be further strengthened in the period covered by the Plan, through projects aimed at increasing monitoring capacity and the evolution of prevention tools.

The dynamic nature of the main sectors in which the Group operates, in a market and regulatory context characterised by high instability and constantly evolving scenarios, requires an ability to evolve rapidly and experiment with new digital and technological solutions. Therefore, it becomes crucial to build and consolidate agile processes for adopting and applying new technologies, in order to give value to open innovation activities in time for the Group’s adaptation and resilience strategies.

Data strategy development is increasingly aimed at transforming the Group into a data-driven company, where data-driven decisions, valued as a corporate asset and subject to ethical and conscious interpretation, highlight the growing importance of data management and the resources dedicated to its protection.

The evolution of technology and digitalisation, which requires employees’ skills and their ensuing training needs to be continuously developed, confirms the Group’s strategic decision to introduce cloud-based platforms to increase individual productivity and as main collaboration tools, since cooperation between humans and technology requires continuous evolution in our way of working. Based on this approach, advanced functionalities based on generative artificial intelligence were introduced in digital workplaces. In conjunction with this, an adoption programme was initiated that follows employees from the initial stages of getting to know the new functionalities, through to defining best practices in the use of AI in these applications and stimulating employee initiatives to create or discover new applications of AI in business processes.

The Group intends to use data to generate value for people and for business, and this intention is confirmed by the progressive digitalisation of human resources management processes, as well as the creation of the reference architecture for the integration of systems and data available following a rationale of prescriptive analytics.

Human resources

In the light of the challenges and transitions described, the Hera Group’s strategy in the area of human capital is based on the following people value proposition: “we wish to generate value for people, the company and the community, developing innovative approaches guided by our purpose and based on individual responsibility, skills, well-being and the uniqueness of people.”

Five main lines for development in valorising the Hera Group’s people emerge from the context and the strategic direction defined:

• cultivate a working environment based on a deep sense of belonging, consistency and transparency, where trust and empowerment of each person are pillars for shared evolution and growth;
• consolidate behaviour and promote the evolution and application of skills to address the energy, digital and environmental transition in a programmatic way;
• understand and anticipate changes in the context, to reshape strategy, operational and organisational models, processes and technologies to support business;
• create a working environment that is oriented towards well-being, that embraces the uniqueness of individuals and encourages each person to give full expression to his or her potential;
• develop HR processes to offer customised solutions, making people participative, aware of and responsible for their own activities.

Risk factors: actors, methodology and areas of management

 

Risk governance

The organizational structure adopted by the Hera Group is designed to uphold management effectiveness and profitability across the entire value chain while at the same time monitoring and managing any risk exposure arising from its businesses.

Hera’s corporate governance system enables strategies to be handled uniformly and consistently. The Risks committee is the main policy-making, monitoring and reporting organ for risk management strategies. Additionally, under article seven of the Self-Governance Code, the Controls and risks committee oversees the internal auditing system, the efficiency of corporate operations, the reliability of financial reporting and compliance with laws and regulations, as well as the protection of company assets. In order to maximise the consistency of the management strategy, these bodies meet periodically. During 2024, the Risks committee met five times and the Controls and risks committee met nine times.

The Group has adopted a three-tier risk defence strategy, appropriately distinguishing between:

• the role of risk management, entrusted to the risk owners in charge of the various organizational sections;
• the role of risk guidance and control, entrusted to the Risks committee, which relies on risk specialists who carry out second-level controls, i.e. who are responsible for defining, applying and updating risk analysis methodologies and carrying out control activities for the areas under their responsibility (review challenge and control);
• the role of assessing the effectiveness of risk management processes and the internal control and risk management system, entrusted to the Internal auditing department.

The Risks committee sets the general risk management guidelines, maps and monitors corporate risks, ensures that risk policies are set forth and outlines the information protocols targeted to the Controls and risks committee, the Internal auditing management and the Statutory auditors.

The Board of Directors approves the risk policies and measurement parameters, and guides and assesses the adequacy of the internal control and risk management system. The Controls and risks committee supports the Board of Directors in defining internal control and risk management guidelines.

The Executive Chairman and the CEO supervise, each within their area of responsibility, the internal control and risk management functions. The Vice Chairman oversees coordination between the Risks committee and the Controls and risks committee, maintaining an independent status. 

The risk governance structure is outlined below:

Management methodology

Hera has adopted the Enterprise risk management (ERM) process, to provide the Board of Directors with useful elements for assessing the nature of corporate risks and defining the Group’s risk profile, particularly in the medium to long term. The definition of the risk profile is made explicit by the Board of Directors itself through the approval of the Group risk management policy and the risk limits established therein.

The risk management framework is formulated through three key elements:

• the risk model, which identifies the types of existing and emerging risks to which the Group is potentially exposed, and is subject to periodic review;
• the Group’s risk propensity, which defines acceptable risk levels consistently with risk management strategy, through the identification of:
  • key risk factors;
  • risk metrics;
  • the limitations associated with each key risk;
  • monitoring, escalation and updating processes to ensure that corrective actions are identified and implemented;
• risk management activities, which ensure effective monitoring and management of the risk universe to which the Group is potentially exposed. The activities are broken down into:
  • ongoing risk management, including by means of sectoral management entrusted to dedicated risk specialists/risk owners;
  • enterprise risk management, aimed at analysing the evolution of the Group’s overall risk profile, to support informed risk-taking and the identification of strategic objectives.

On 26 February 2025, the tenth Enterprise risk management report on the 2025-2028 Business plan was presented to the Board of Directors. Over the course of 2024, the ERM analysis introduced further improvements and methodological refinements, aimed at integrating ESG risks into the Group’s risk model, for a better intelligibility.

At the same time, the Erm analysis did not reveal any critical risks terms of reputational or operating-financial impact.

In the area of significant risks, compared to the previous year, no new risks were identified, while the scenario of potential impacts from rating downgrades is no longer included, thanks to a financial structure consistent with the Plan’s growth prospects.

In the same area, the risk of a reputational impact deriving from possible proceedings undertaken by supervisory/regulatory/investigation bodies was confirmed, generated by the degrees of discretion on the start of verification/investigation procedures, in the presence of non-univocal interpretative guidelines (despite the Group’s conduct always complying with the law), as was an operating-financial risk, deriving from high-intensity seismic events relating to networks.

The risk arising from the possibility of fires at waste treatment and recovery plants, while confirmed, has a negligible impact in terms of consequences on the Group’s results and none whatsoever for the environment and business continuity. However, due to the growing social awareness on the issue, such events can lead to significant reputational consequences due to perceived risk.

As part of a process based on ongoing development and refinement of its control and risk management system, the Group’s larger companies have adopted a tax control framework model, in order to detect, measure, manage and control tax risk, understood as the risk of incurring violations of tax regulations or contrasting with the principles and purposes of the law.

In particular, the Group has adopted a tax strategy that outlines the principles for managing tax variables and strategic lines aimed at ensuring compliance with regulations, as well as processes and procedures to mitigate tax risk, providing for a decision-making escalation correlated to the magnitude of the risk.

The Board of Directors annually reviews the report on the progress of tax risk management and is the corporate body in charge of making final decisions should cases arise that present the highest risk profile due to uncertainty in legislative interpretation.

Risk areas: identifying and managing risk factors

The existing and emerging risks which Hera faces belong to different types: risks deriving from the evolution of the operating and financial, business (regulatory and competitive), environmental, technological and human capital contexts, including a constantly increasing attention towards climate change and sustainable development. Paragraph 1.01, “Contexts and trends, strategic approach and Group management policies”, provides a detailed analysis of the factors constituting some of the fundamental prerequisites for identifying these risks.
In order to mitigate exposure to these risks, introduce optimisation measures (including technological and efficiency improvements) within current structures and develop strategic planning that offers coherent responses, Hera carries out the specific analysis, measurement, monitoring and management activities described below.

RISK TREATMENT AND MANAGEMENT

Operating and financial area

Identifying commodity price risk

The Group operates in an integrated manner in the supply and sale of electricity and gas at different stages of the value chain. Hera is therefore exposed to risks arising from the volatility of energy markets, which can be mitigated by an integrated assessment of these markets and associated management strategies. Energy market risks are centralised in the Market Central Department, which is responsible for the purchase and sale of electricity and gas.

Managing commodity price risk

In order to standardise the approach to risk taken by the various corporate structures involved and with the aim of optimising the use of the market for hedging operations, the Group has adopted specific policies aimed at setting guidelines and operating procedures for the energy risk control and management process. Hera has structured these processes to achieve an effective management of procurement and hedging, with a clear focus on the skills involved.

The Group’s approach provides for a single interface for the management of risk deriving from the energy market, the company Hera Trading.

A unified risk management approach, in compliance with the assigned policies, provides advantages in terms of achieving higher levels of coverage, cost optimization by resorting less to the market, and greater flexibility in structuring procurement and supplying customers.

Identifying risks associated with the debt market

The operating and financial area, in addition to being characterised by fluctuating energy and commodity prices, may show different scenarios as a result of changes in interest rates, exchange rates, the credit spread and as an effect of possible liquidity crises.

These fluctuations may have an impact on Group results, future growth and strategic investments (e.g. due to high refinancing costs).

The Group might not be able to meet its payment obligations due to an inability to raise new funds, or it may only be able to do so on unfavourable economic terms, due to an inability to liquidate assets on the market, or due to a changed risk perception.

Among the factors determining this perceived risk, the creditworthiness assigned to Hera by rating agencies plays a key role, as it influences the possibility of accessing sources of funding and the related economic conditions.

The Group’s debt structure is not subject to financial covenants on debt balances.

Mandatory early repayment is provided for only in the event of a significant change of control over the Group, in the event that a concession having significant weight for the Group is revoked (concession event), or assets are divested (sale of assets event), resulting in downgrading the Group to a sub-investment grade, or termination of the publication of the rating by at least one rating agency.

Managing risks associated with the debt market

Hera’s financial management is centralised in the Administration, Finance and Control Central Department, which aims to maintain an adequate balance between the maturities of assets and liabilities, matching investments to consistent sources of financing in terms of duration and repayment methods while taking into account the need to refinance the current debt structure.

In order to meet its medium- and long-term commitments, Hera’s strategy involves diversified financing sources and a balanced maturity profile, constantly monitoring rating indicators and the availability of long-term credit lines.

This strategy is considered effective in minimising liquidity risk even in the event of particularly critical scenarios. Approximately 87% of the Group’s financial debt is medium-long term (of which 44% over five years) and 74% of this is represented by bonds with repayment at maturity. See note 19 to the consolidated financial statements, “Financial liabilities”, for further details in terms of worst-case scenarios.

Moreover, the Group’s activities and strategies are particularly focused on ensuring that an adequate rating level is maintained, as appears in its BBB+ rating with a stable outlook confirmed by S&P, or the Baa2 rating with a stable outlook confirmed by Moody’s.

Financial risk control and management processes are based on a careful monitoring of the Group’s financial indicators, as well as a permanent presence on the benchmark markets, to minimise the impact of interest rate and spread volatility so as to ensure efficient debt servicing. The Group also uses derivative financial instruments, where necessary, to reduce its exposure to interest and exchange rate fluctuations.

At 31 December 2024, the Group’s exposure to the risk of interest rate fluctuations was 3.3%, while the remaining 96.7% of debt is at a fixed rate.

A 1% increase in the benchmark interest rate for the portion of variable-rate debt outstanding as of 31 December 2024, compared to what was assumed in the projected interest rate scenario for the Business plan to 2028, would lead to an average increase in financial expenses coming to approximately 0.8 million euro per year.

Identifying risks from counterparties

Hera operates with counterparties that might fail to fulfil their obligations, unable to comply with either economic terms or any contract provisions (delivery of goods or services). Additionally, credit risk affects the Group across the board, above all in the areas where commercial activities are carried out: the sale of energy commodities and services, waste treatment activities and telecommunication services.

Managing risks from counterparties

Hera has provided itself with a structured origination process, formalised in specific credit risk management procedures; this process allows the Group to adequately select its counterparties through credit checks and requests for guarantees, where applicable.

In addition, its positions in relation to counterparties are regularly monitored while articulated, proactive actions are planned in their management, including external risk relocation through credit transfer, where appropriate.

Expected losses are constantly estimated and monitored; the Group employs measures of default probability, exposure at default and loss-given default developed on the basis of its own historical series, customer payment behaviour and current credit processes. In order to test the soundness of the models, both internal and external information is used that may serve as a benchmark for the evolution of the macroeconomic environment.

In 2024, the estimated 24-month unpaid ratio related to invoices issued in 2023 of the Group’s main sales companies came to 0.72%.

Regulatory and business area

Identifying competition and economic risks

Within the final reference market, which is mainly limited to Italy, the economic and geopolitical context, volatility in the prices of energy and other raw materials, as well as the difficulties connected to global logistics chains, all contribute to putting pressure on sales margins which, added to the increased competition on the free market, may impact the Group’s profitability.

The difficulty in forecasting volumes to cover the needs of the sales portfolio, continuously changing partially due to the effect of more contained consumption and higher efficiency in the sector, may furthermore require Hera to purchase or sell additional energy on potentially unfavourable terms.

A potential reduction in waste production, related to the economic context and European and national regulatory frameworks and from new trends in customer behaviour, together with a possible unavailability of treatment and recovery infrastructures, may have a negative impact on the Group’s ability to pursue its objectives. The risks of the waste management business related to the management of its set of plants are concentrated in Herambiente Spa.

Managing competition and economic risks

The Group has maintained elevated flexibility in energy commodity procurement sources while at the same time developing hedging activities to minimize exposure to operating risks from electricity generation, thus ensuring alignment with the market and maximising natural hedging.

In waste management and treatment activities, the Group’s diversified plant equipment features advanced technologies that are high-performance in terms of environmental impact, which to date have enabled the Group to achieve the strategic objectives assigned. The implementation of a circularity strategy – for example, through the polymeric material recycling process carried out by Aliplast Spa – and the development of recycling lines for other types of plastics, furthermore, make it possible to seize the opportunities offered by the evolution of European regulations.

The Group’s portfolio includes free-market businesses, which have gained increasing importance, contributing significantly to its operating performance but also exposing it to growing competition. The Group responds to the challenge of competition by continuously innovating its sales offers and introducing new products in a timely manner, increasing its presence and customer base on the free market and aiming to ensure the fulfilment of expectations in terms of service range and quality. 

Risk analyses deriving from changes in the economic context (GDP and inflation) and energy market conditions (gas and electricity prices) make it possible to quantify the sensitivity of the Group’s Ebitda to changes in primary operating and financial indicators.

In particular, a 1% reduction in GDP compared with the scenario referred to in the Business plan would lead to an average annual drop in Ebitda coming to approximately 3.7 million euro.

A 1% reduction in the inflation rate compared with the scenario referred to in the Business plan would lead to an average annual drop in Ebitda coming to approximately 8 million euro (regulated market). A 1€/MWh increase in the price of gas and an ensuing rise coming to 2€/MWh in the price of electricity on the wholesale market compared to the scenario referred to in the Business plan would lead to an average annual drop in Ebitda coming to roughly 0.97 million euro, an impact that is expected to decrease in view of ARERA’s regulatory intervention on the district heating business.

Identifying regulatory risks

Hera carries out part of its activities in a regulated market, and its operations are therefore influenced by the regulatory measures taken by the sector authorities and the government (in particular concerning tariffs and market structure), the concessions granted through tenders by local authorities (for regulated activities relating to waste collection services, gas distribution, the integrated water service and public lighting) and national authorities (for electricity distribution), as well as the impacts expected from changes in the market structure and its liberalisation, and from the evolution of supply and demand in the energy and waste management sectors.

Periodic updates of the legislative and regulatory framework, both at national and European levels, may therefore significantly impact the sectors in which Hera operates, influencing its profitability as a consequence.

Regulatory risks impact network businesses (water cycle, gas and electricity distribution and district heating) and the municipal waste collection business and the related waste treatment, and result in the introduction or modification of economic, organizational and IT requirements to be met by Hera, and on potential market structure changes caused by them.

Tenders for gas distribution, the integrated water service, waste collection and street sweeping scheduled for the time covered by the Plan determine the risk of losing some of the areas currently managed, especially in contexts with a significant presence of competition, only partially offset by compensation for the portion of invested capital not yet amortized.

Managing regulatory risks

The Group’s organisational structure liaises with national and local authorities and carries out extensive consultation with institutional stakeholders, actively taking part in working groups established by authorities and adopting a transparent, co-operative, proactive approach towards possible situations of regulatory instability.

The Group operates by making the most of its technical skills and management efficiency. Indeed, Hera’s focus on service quality, cost efficiency and innovative solutions is a competitive strength in tenders for gas distribution, the integrated water service and waste collection and street sweeping services.

Identifying strategic risks

Strategic risks, associated with long-term planning, financial sustainability, involvement in strategic initiatives and appropriate investment decisions, affect the soundness of results for the various supply chains and business units. Moreover, the Group’s ability to achieve its strategic objectives may be compromised if the necessary licences, authorisations and permits to carry out its regular activities are not maintained or obtained.

Achieving the planned results is therefore conditioned by the different endogenous and exogenous risks that are simulated, measured and controlled as appropriate.

Managing strategic risks

Hera has developed a well-planned strategic risk analysis model designed to gauge the soundness of its Business plan against a variety of adverse risk scenarios, which supports an integrated risk projection from an enterprise-wide viewpoint. Thanks to this model, it is possible to carry out scenario analyses, stress testing and what-if analyses of plan forecasts, through an effective analysis of risk factors and related variables, and enables an adequate assessment of the risk level of the various business sectors.

Hera constantly monitors the authorisation processes and proactively participates in the working tables for obtaining permits, licences and authorisations, to avoid the possibility of jeopardising the regular performance of its activities.

Climatic-environmental, technological and human capital areas

Seismic, atmospheric and other climatic events may impact the Group’s performance. Hera intends to continue valorising its resources and ensure that they are preserved and developed, so as to continue to enjoy their benefits in the future.

The physical and transitional risks linked to climate change, as well as accidents in plant equipment, may generate potential environmental damage, and therefore the operating and strategic implementation of best practices in risk management and the opportunities deriving from climate change are a fundamental objective for the Group.

Risks arising from cybercrime, which Hera also assesses in terms of their impact on service continuity, are also given increasing attention.

Since accidents may pose a risk to people’s rights and freedoms, i.e. if they cause physical, material or immaterial damage, the Group’s policies regarding the parameters and acceptability thresholds are published on its web portal.

The risk management approach is organised according to the specific areas in which environmental, technological and human capital risks occur.

Identifying environmental-catastrophe risks

Hera, while aware of the need to preserve natural resources, uses them to provide essential services to its customers.

The Group’s activities, in turn, make use of environmental, water and carbon resources, and therefore adopting mitigation and adaptation measures to reduce environmental-catastrophe risks is increasingly crucial.

In keeping with the ambitious goal to reduce current levels of greenhouse gas emissions compared to their current level, as set out by international organisations, the physical and transitional climate change risk scenarios relevant to the Group’s activities have been identified. For further details, see the next section, “Identifying climate change risks”.

As regards the environmental standards with which Hera must comply in carrying out its businesses, the Group’s activities are subject to various types of legislation and regulation, including those relating to CO₂ emissions, emissions of other substances produced by combustion, water discharge and the handling of hazardous and solid waste. Non-compliance with CO₂ limits contributes to climate change, while non-compliance with legal limits on other environmental aspects leads to worsened environmental conditions and exposes the Group to fines.

Scarcity of water resources, or possible contamination of water reserves, may affect the regular water supply and cause service interruptions or significant environmental, economic and social damage, worsening the water stress by which these natural resources are affected by their very nature, in order to meet water demand.

In addition, note the risks stemming from the impact on the Group of weather variability in relation to the electricity and gas demand deriving from the various scenarios.

Managing environmental-catastrophe risks

Investments aimed at preventing and reducing the frequency of harmful events, along with measures to curb their severity, play a key role.

The Group’s commitment to reducing carbon dioxide production involves reporting on its own performance and commitments in the area of climate change, alongside projects to promote energy production from renewable sources, reduce energy consumption, and provide customers with opportunities to cut their own greenhouse gas emissions. The Group is committed to contributing to mitigating environmental risks by complying with the energy efficiency objectives set by national legislation and the United Nations, continuing to improve its production facilities and encouraging virtuous and responsible forms of consumption on the part of its customers. The Group only uses electricity from renewable sources to operate its production sites. In relation to the consequences of extreme events, which are expected to occur with increasing frequency as a possible consequence of climate change, Hera has taken steps to adopt important measures. 

Hera has adopted an environmental control system that is effective both in terms of the governance of environmental certification processes and related audits, and in terms of the operational management of controls and surveys. The Group is able to face environmental hazards by constantly monitoring potential pollution factors and ensuring transparency in surveys, as well as through substantial investments in technological plants that ensure consistently better air and water quality than required by legal limits. Moreover, in line with its circular economy strategy, Hera has already invested (and continues to do so in the medium-to-long term) in sorting, recovery and composting plants, increasing the amount of waste treated while at the same time reducing the use of landfills, thus anticipating the requirements of European and national regulations.

The reduction of the Group’s water footprint is pursued through the water management system, which aims to promote a sustainable management of this resource both inside the Group (by preventing network leaks, reducing diffuse consumption, recovering rainwater for irrigating green areas and washing vehicles) and externally (by monitoring domestic consumption and offering advice and solutions to optimise it, providing support with technological solutions for water-demanding customers, and providing support for the construction of treatment plants to reuse/recover water). The implementation of water safety plans in the integrated water service also ensures an approach to water quality management based on risk assessment and management, and thus on prevention and control.

For an in-depth discussion of all initiatives implemented by the Group to manage environmental risks, see section 1.07.01 of the Sustainability reporting.

Regarding weather-variable risks, the Group relies on advanced energy demand-forecasting tools that ensure an optimal use of the available sources. It also relies on adequate flexibility in the supply sources of energy commodities, ensuring their availability at market rates. A 1°C increase in the average winter temperature, compared with the scenario set out in the Business plan, would lead to an average annual drop in Ebitda of approximately 15 million euro.

Identifying climate change risks

The physical and transitional risks from climate change scenarios pertinent to the Group’s activities have been classified according to their potential consequences on business, and submitted to further impact and mitigation assessments in relation to their criticality (some examples include extreme weather phenomena such as floods and droughts as well as health and economic risks).

Climate scenario analysis is a methodology to test the resilience of business plans under different assumed future developments. Hera selected the two most relevant scenarios, of which the IEA ETP 2DS transition scenario by the International Energy Agency, chosen as an ambitious climate scenario, foresees a future evolution characterised by strong decarbonisation processes in order to keep the temperature increase below 2°C: this scenario has been used in identifying transition risks. The IPCC RCP 8.5 physical scenario, chosen as a pessimistic scenario, instead foresees a business-as-usual trend and consequent sharp temperature rise (approximately 4°C): this scenario has been used in identifying physical risks.

Based on these scenarios, eight physical risks and eight transition risks were identified, associated with related business impacts. For further methodological details, see the section "Climate risk analysis based on the TCFD Recommendations" in paragraph 1.07 of this report.

In order to assess potential impacts on the Group’s assets deriving from extreme phenomena related to climate change, a flood risk analysis was completed in 2022, with a medium/long-term time projection.

Risk assessment activities are also continuing with the appropriate level of detail, especially with regard to transition risks and their modelling. Based on the current analyses, there are no risks that could lead to the need for impairment losses on the Group’s assets.

For assessments of the potential effects in terms of impairment tests, specifically in relation to gas consumption, see note 25 of the consolidated financial statements in paragraph 2.02, “Explanatory notes”.

Managing climate change risks

Hera has launched a series of initiatives to mitigate the effects of climate change, and at the same time reduce its own carbon footprint. One or more management modalities have been associated with each risk: 21 management modalities have been identified for physical risks and 13 for transitional risks; some of the ensuing actions have already been integrated into the investments made, and included in the Business plan. For further details, see paragraph 1.07 and in particular the analysis of climate risks based on TCFD recommendations. The investments and the mitigation and adaptation actions planned to date, defined on the basis of the energy transition towards carbon neutrality and the environmental transition towards a circular economy, as well as technological evolution, are in line with European strategies and the goals set out in the UN 2030 Agenda, have become part of the Group’s modus operandi and are often carried out ahead of the estimated timeframe thanks to the Group’s positive results.

Identifying operational and ICT security risks

Despite careful planning and insurance protection, negative externalities generated by exceptional events may jeopardise business continuity and increase the financial requirements for restoring normal operations. Providing public utilities therefore requires both preventive activities and actions to counter interruptions, delays or poor service levels. Technological risks include the operational security of distribution networks (fluids and electricity), the logical security of information, the security of communication networks and information systems, and the reliability of remote-control systems. The main threats to on-premise systems (hosted in company data centres) or in the cloud include identity theft, phishing aimed at taking control of a personal computer and then attacking central systems, and attacks on exposed services such as public websites.

The security of the information used, produced and processed by the company depends on the way it is managed and the human and technological resources involved. The loss of confidentiality, integrity and availability of corporate information, whether business-critical information or personal information (i.e. any data relating to natural persons, as more fully defined by the European regulation GDPR and the privacy code of Legislative Decree 196/03) may result in serious financial losses with consequent damage to market image. A business impact analysis has been carried out on all ICT systems used by the Group, and a security risk analysis is carried out annually to identify and assess risk, using a methodology based on a framework that considers three areas of security: availability, integrity and confidentiality.

Managing operational and ICT security risks

The main service for managing operational risks is centralised network monitoring (remote control of fluids and the electricity grid), which ensures continuous real-time monitoring and supervision and, in some areas, remote management. In operational terms, centralised monitoring makes possible to promptly report potential critical factors to the technical structures in charge of emergency response and, where possible, to intervene directly to resolve the potential critical situation. These systems have been used in a variety of situations, allowing the service to be restored within an appropriate timeframe and ensuring adequate resilience of the services offered.

As regards cybersecurity, the Group’s Security operation centre (SOC) is active, i.e. the centralised service for real-time monitoring of events affecting information systems, IT infrastructures and industrial areas (OT). In operational terms, this service works through the use of hardware probes and software agents, and sees a continuous increase in alerts coming both from external factors (continuous increase in attacks and their level of sophistication), and from the increase in the perimeter analysed due to the increase in computer and industrial systems belonging to the Group. This service is constantly being developed in terms of the new correlation and regulation rules put in place, to counter false positives and not lose effectiveness in detecting anomalous events in the early stages of possible chains of compromise. In addition to the SOC service, as every year, vulnerability assessment activities continued, to continuously assess the level of penetrability of exposed systems and network security, through an analysis of the Group’s perimeter exposed on the Internet. As regards the human factor risk, awareness-raising campaigns intended for all Group employees continued, in addition to periodic ethical phishing simulations and technical exercises intended for IT specialists. During 2024, actions aimed at ensuring the confidentiality, integrity and availability of Hera systems continued to be implemented. For example, in the context of industrial plants, ongoing development went to the converging cyber security monitoring model between the IT (information technology) and OT (operation technology) areas. In order to detect any vulnerabilities on systems or applications that could be exploited by an attacker, vulnerability assessment activities also continued for the industrial plant area.

Identifying people’s safety and development risks

People and their behaviour increasingly influence the effectiveness of corporate strategies. Protecting people thus remains a key element, in terms of both workplace health and safety and social protection. The Group therefore continually focuses on the emerging needs and requirements of all employees.

Hera’s structured process for identifying hazards and the related risk assessment in the area of health and safety concentrates on an analysis of roles, work activities, processes, workplaces, equipment, vehicles, plants and substances used. As regards the specific nature of its business and its local presence, the Group has integrated Enterprise risk management into its risk assessments.

The risk mitigation measures adopted and the effectiveness of their implementation are periodically monitored and reviewed. To this end, a specific control checklist has been developed for the periodic monitoring of personnel conduct by the heads of the various organisational units.

With the aim of identifying, measuring and monitoring the risks that threaten the Group’s assets and the continuity with which it provides essential services, a risk assessment model has been implemented for the physical security of these assets. This model aims to prevent and mitigate threats and impacts caused by events (malicious, culpable or accidental) such as fire, theft and acts of sabotage/vandalism and terrorism.

Managing people’s safety and development risks

In order to ensure worker health and safety and mitigate on-the-job injury risk, the Group is constantly committed to measures promoting better monitoring as well as to the enhancement of safety protection and prevention practices aimed at reducing the frequency and severity of accidents.

The prevention and protection measures put in place by the Group aim to minimize the probability of an adverse event occurring, and lower the severity of the consequences following the event.

For further methodological details, see the section dedicated to “Workers in the value chain” in paragraph 1.07.03 Social information.

 

Operating results and investments

 

Growth in operating results and investments

In 2024, the Hera Group continued along its path of growth involving both operations and the investments made. As regards the former, adjusted Ebitda amounted to 1,587.6 million euro, up 6.2%; adjusted Ebit was up 12.0%, and adjusted net profit increased by 28.5%. As regards investments, growth amounted to 4.2% compared to 2023, reflecting the Group’s ongoing focus on increasing, enhancing and strengthening the resilience of the assets under management. From a financial point of view, a solid capital structure was also confirmed: the Net debt/ adjusted Ebitda ratio settled at 2.5x, while adjusted ROI reached 10.4% and adjusted ROE stood at 12.2%.

The 2024 results must be considered against an external scenario that showed less volatility in energy commodity prices, allowing the Hera Group to operate once again in a more stable market context, even if not yet similar to the levels seen prior to the crisis.

The Group’s performance was once again driven by its multi-business strategy, balanced between regulated and free market activities, with a focus on sustainability and the circular economy. The Hera Group pursues this model through both internal growth and the opportunities offered by the market thanks to external development, with the aim of providing customers with innovative, competitive and increasingly complete solutions.

In particular, note that in 2024 the Hera Group continued to expand its scope of operations, especially in the waste management area, through the acquisition of 70% of TRS Ecology Srl, a company that manages a multi-purpose platform for special waste treatment in Caorso (PC). This is a substantial company focused on industrial waste treatment and recovery with a total of approximately 2,700 customers. Detailed information on this matter is provided in paragraph 1.06.04.

Note that Hera Comm Spa was awarded seven lots in the national tender called by the Single Purchaser for the Gradual protection service for non-vulnerable household customers, leading over 1 million new electricity customers to be included in the Group’s portfolio as of 1 July 2024. Detailed information on this matter is provided in paragraph 1.06.02.

The following table shows operating results at 31 December 2024 and 2023:

Income statement (mn€)	Dec 24	% Inc.	Dec 23 Redetermined	% Inc.	Abs.change	% change
Revenues	12,889.7	0.0%	15,331.1	0.0%	(2,441.4)	(15.9)%
Other income	154.7	1.2%	234.0	1.5%	(79.3)	(33.9)%
Raw and other materials	(7,056.4)	(54.7)%	(9,765.2)	(63.7)%	(2,708.8)	(27.7)%
Service costs	(3,724.9)	(28.9)%	(3,655.9)	(23.8)%	69.0	1.9%
Other operating expenses	(97.3)	(0.8)%	(90.3)	(0.6)%	7.0	7.8%
Personnel costs	(667.5)	(5.2)%	(641.1)	(4.2)%	26.4	4.1%
Capitalised costs	89.3	0.7%	82.1	0.5%	7.2	8.8%
Ebitda*	1,587.6	12.3%	1,494.7	9.7%	92.9	6.2%
Amortization, depreciation and provisions	(757.7)	(5.9)%	(753.7)	(4.9)%	4.0	0.5%
Ebit*	829.9	6.4%	741.0	4.8%	88.9	12.0%
Financial operations	(153.8)	(1.2)%	(214.8)	(1.4)%	(61.0)	(28.4)%
Share of profits (losses) pertaining to joint ventures and associated companies	12.3	0.1%	10.3	0.1%	(2.0)	19.4%
Result before taxes*	688.4	+5.3%	536.5	3.5%	151.9	28.3%
Taxes	(200.3)	(1.6)%	(146.4)	(1.0)%	53.9	36.8%
Net result*	488.1	3.8%	390.1	2.5%	98.0	25.1%
Attributable to:
Adjusted Parent company shareholders*	446.7	3.5%	348.3	2.3%	98.4	28.2%
Non-controlling interests	41.4	0.3%	41.8	0.3%	(0.4)	(1.0)%
Result from special items	47.8	0.4%	26.9	0.2%	20.9	100.0%
Net profit for the period *	535.9	4.2%	417.0	2.7%	118.9	28.5%
Attributable to:
Parent company shareholders*	494.5	3.8%	375.2	2.4%	119.3	31.8%
Non-controlling interests	41.4	0.3%	41.8	0.3%	(0.4)	(1.0)%

* adjusted results, as described in paragraph 1.04

REVENUES
(bn/€)

Revenues were down by 2,441.4 million euro in December 2024 compared to the equivalent period in 2023. The energy sectors showed a 1,819 million euro decrease, mainly due to lower energy commodity prices, and lower volumes of gas sold to end customers due to both higher average temperatures and lower consumption by the customer base as a result of increasingly widespread energy-saving measures, in line with climate-changing emissions reduction targets. This drop was partially offset by the higher volumes of gas traded and the higher volumes of electricity sold, thanks to the significant commercial development achieved by the Group, and by higher revenues from system charges.

In addition, a reduction occurred in incentivised activities in Energy saving services, concerning residential buildings, mainly as a consequence of the effective termination of the 110% super-bonus, and a slight decrease in value-added services for customers. These factors accounted for roughly 884 million euro of the reduction in revenues.

Lastly, revenues in network services increased by a total of 174 million euro, due to higher tariff revenues resulting from the Authority’s resolutions, which defined new performance benchmarks for all regulated businesses, whose effects are described in paragraph 1.06, Analysis by business area. Higher revenues were also seen for new connections, services to customers, and contracts on assets under concession. The above-mentioned increases were only partially offset by lower revenues in the district heating business, due to the application of the transitional tariff method that provides for tariff regulation based on the avoided cost criterion.

For further details, see the analyses of the individual business areas in paragraph 1.06.

Other income in December 2024 was down by 79.3 million euro compared to the same period in 2023. This decrease was mainly due to the presence in 2023 of grants to reimburse costs incurred for the management of the flood emergency that affected Emilia-Romagna and neighbouring regions in May 2023, and to the end of the gas and electricity grants provided by the Government to face the high energy price emergency.

Costs for raw materials linked to the trend in revenues

Costs for raw and other materials dropped by 2,708.8 million euro compared to December 2023. This decrease was mainly related to the performance of energy revenues, linked to the decrease in the price of energy raw materials, due to more stable markets, and the aforementioned lower volumes of gas sold to end customers. These factors were partially offset by the increase in electricity volumes sold, as described above under revenues.

Other operating costs increased by 76 million euro (higher service costs amounting to 69 million euro and higher operating expenses coming to 7 million euro). Approximately 791 million euro of higher costs overall were seen in the energy sector, mainly related to system charges for the gas and electricity businesses, due to the conclusion of the exceptional regulatory interventions introduced in previous years to face the energy crisis. Energy services for energy efficiency improvements saw lower costs for works amounting to approximately 789 million euro, mainly as a consequence of the end of the incentives mentioned under revenues. Higher costs coming to roughly 18 million euro were recorded for the development of sorted waste collection projects, supplementary services in the municipal waste collection service, higher transport costs related to the larger volumes of waste treated, and the recent corporate acquisition in the industrial market. Lastly, higher overall costs were related to contracts on assets under concession amounting to approximately 13 million euro and higher other costs related to price increases for all major services.

+4.1% increase in personnel costs

Personnel costs increased by 4.1% compared to December 2023 and amounted to 26.4 million euro. This increase was linked to the salary increases provided for by the national collective labour agreement and the higher average presence, partially due to the recent corporate acquisition in the industry market mentioned above.

Capitalised costs totalled 89.3 million euro in December 2024, up compared to the previous year due to higher capitalised works on Group-owned assets.

EBITDA*
(mn/euro)

Adjusted Ebitda increased by 92.9 million euro compared to December 2023, up 6.2%. This trend is due to the overall contribution coming from the energy areas, amounting to 50.2 million euro, the positive contribution of the water cycle, coming to 25.7 million euro, the good performance of the waste management area, up by 13.6 million euro, and other services, amounting to 3.4 million euro.

For further details, see the analyses of the individual business areas.

Amortisation, depreciation and provisions at 31 December 2024 increased by 4.0 million euro year-on-year, up 0.5%. Higher amortisation and depreciation were recorded mainly due to new operating investments, particularly in the regulated sectors and in waste treatment, as well as an increase in activities to acquire new customers in the energy markets. Provisions for risks also increased overall, particularly in the sales company Hera Comm and in networks, partially offset by the lower specific provisions in 2023 related to the residential housing bonus and waste treatment. Allocations to the provision for bad debts decreased, mainly due to the trend in energy commodity prices and the unpaid ratio.

Ebit*
(mn/€)

Adjusted Ebit amounted to 829.9 million euro, up 12.0% compared to 2023, showing a higher level of growth than Ebitda*, since amortisation, depreciation and provisions, as described above, increased to a lesser degree than the rise in Ebitda*.

Financial operation improve

The result of financial operations stood at 153.8 million euro, improving by 61.0 million euro compared to the previous year. Income generated by discounting the value of tax credits related to 2023 incentivised works, in addition to lower valuation charges on incentivised works pertaining to 2024, contributed to reducing financial operations by approximately 92.4 million euro. A significant reduction amounting to 12.5 million euro in charges related to debt for financing was also confirmed, thanks to the optimisation of the financial structure. The positive effects mentioned hereto were partially offset by 27 million euro in write-downs on equity investments (of which 22.1 million euro concerning SET Spa and 4.9 million euro concerning Aimag Spa), along with higher IAS charges from discounting and lower income from indemnities for arrears.

Result of equity method valuation

The share of profits (losses) pertaining to joint ventures and associated companies include the effects of the valuation using the equity method for the companies included in the scope of consolidation. At December 2024, this amounted to 12.3 million euro, up 2 million euro compared to the previous year. For further details, see section 2.02 “Operating and Financial Performance” of the Explanatory notes.

The adjusted pre-tax result showed a 28.3% increase compared to December 2023, since the growth deriving from Ebit was accompanied by the trend in financial operations mentioned above.

Tax rate at 29.1%

Taxes for 2024 amounted to 200.3 million euro, up from 146.4 million euro in 2023, an amount that takes into account managerial adjustments. The significant increase in the tax burden, in absolute terms, is due to the higher results produced by the Group. In percentage terms, the tax rate for the year is expected to stand at 29.1%, up from 27.3% in the period under comparison. This change is linked to the elimination or dilution of the effects of certain benefits which the Group was able to take advantage of in the past (first and foremost, the Ace tax incentives), a number of write-downs made during the year that were not valid for tax purposes, and the elimination of the credit related to the request for reimbursement for the 2022 extra-profits tax. Lastly, note that the tax rate for the year under comparison was positively impacted by the extraordinary concessions, recognised in the form of tax credits, for the purchase of electricity and gas during the energy crisis of the previous years, considered as untaxed components of income.

+25.1 net result*

The adjusted net result increased by 25.1%, or 98.0 million euro; the increase coming from the pre-tax result was reduced by higher taxes.

In 2024, the result from special items amounted to a total of 47.8 million euro, as against 26.9 million euro in 2023. Detailed descriptions of these items can be found at the beginning of paragraph 1.04 “Overview of operating and financial trends and definition of alternative performance measures”.

+28.5% net profit*

As a result of all the events described above, adjusted net profit increased by 118.9 million euro compared to the figure seen in December 2023.

Net investments rise to 812.1 million euro

At the end of 2024, the Group’s net investments amounted to 812.1 million euro, up 32.9 million euro compared to the previous year. This increase was mainly caused by higher operating investments, which recovered from the previous year’s slowdown in carrying out works due to the flooding events that occurred in May 2023.

Capital grants amounted to 48.6 million euro, of which 6.8 million euro were related to FoNI investments, as foreseen by the tariff method for the integrated water service, and increased by a total of 12.1 million euro over the previous year.

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

Total investments (mn€)	Dec 24	Dec 23	Abs. change	% change
Gas area	180.5	191.8	(11.3)	(5.9)%
Electricity area	127.2	128.4	(1.2)	(0.9)%
Integrated water cycle area	261.1	228.2	32.9	+14.4%
Waste management area	162.3	150.8	11.5	+7.6%
Other services area	11.0	9.8	1.2	+12.2%
Headquarters	118.1	106.7	11.4	+10.7%
Total gross operating investments	860.3	815.8	44.5	+5.5%
Capital grants	48.6	36.5	12.1	+33.2%
of which FoNi (New Investments Fund)	6.8	19.5	(12.7)	(65.1)%
Total net operating investments	811.7	779.2	32.5	+4.2%
Financial investments	0.4	‐	0.4	+100.0%
Total net investments	812.1	779.2	32.9	+4.2%

 

TOTAL NET OPERATING INVESTMENTS
(mn/euro)

Including capital grants, the Group’s operating investments amounted to 860.3 million euro, up 44.5 million euro over the previous year, and were mainly related to works on plants, networks and infrastructures. In addition, regulatory upgrading was carried out, especially in the gas distribution sector for the large-scale metre replacement, and in the purification and sewage sector.

Comments on investments in the individual areas are provided 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, structural investments amounted to 118.1 million euro, up 11.4 million euro compared to the previous year, mainly due to investments in Group information systems and work carried out on Group premises.

Financial structure and adjusted net debt

 

What follows is an analysis of trends in the Group's net invested capital and sources of financing at 31 December 2024.

Invested capital and sources of financing (mn€)	31 Dec 24	% inc.	31 Dec 23	% inc.	Abs. change	% change
Net non-current assets	8,496.4	+106.9%	8,119.2	+107.1%	377.2	+4.6%
Net working capital	227.2	+2.9%	166.0	+2.2%	61.2	+36.9%
(Provisions)	(773.0)	(9.7)%	(705.9)	(9.3)%	(67.1)	(9.5)%
Net invested capital	7,950.6	+100.0%	7,579.3	+100.0%	371.3	+4.9%
Equity	3,986.9	+50.1%	3,751.6	+49.5%	235.3	(6.3)%
Long-term borrowings	4,051.3	+51.0%	4,315.4	+56.9%	(264.1)	+6.1%
Net current financial debt	(87.6)	(1.1)%	(487.7)	(6.4)%	400.1	(82.0)%
Net financial debt	3,963.7	+49.9%	3,827.7	+50.5%	136.0	(3.6)%
Total sources of financing	7,950.6	+100.0%	7,579.3	+100.0%	371.3	(4.9)%

227.2 million euro net working capital

Net working capital amounted to 227.2 million euro at the end of 2024, up from 166.0 million euro at the end of 2023. This change was due to the fair value of commodity derivatives, which decreased by 66.1 million euro compared to the previous year, with a corresponding impact on equity for hedging contracts recognised as cash flow hedges and, to a lesser extent, on the income statement for the year for trading derivatives. The changes in net working capital that led to a corresponding impact in net financial debt were mainly due to:

• the significant reduction in trade payables and VAT due to the impact of the 110% super-bonus incentive works, as a result of the end of the super-bonus tax incentives;
• the reclassification from “Current financial liabilities” to “Trade payables” of the amounts received as advances related to the gas settlement process, which at 31 December 2023 amounted to 154.1 million euro. For further details, see section 2.02.01 “Introduction” in the consolidated financial statements.

As regards the amount of trade receivables, no critical issues appeared in the performances of collections.

773.0 million euro provisions

In 2024, provisions amounted to 773.0 million euro, up from 705.9 million euro at the end of the previous year. This result is mainly the consequence of provisions for the period and adjustments to the post-mortem provisions for landfills and restoration of third-party assets, which more than offset releases for utilisation.

4.0 billion euro equity

Equity rose from 3,751.6 million euro in 2023 to 3,986.9 million euro in 2024, increasing the Group’s solidity thanks to the net result from operations in 2024, amounting to 535.9 million euro, which more than offset the reduction in cash flow hedge reserves, dividend payments and changes in treasury shares.

Adjusted return on net invested capital (ROI*) settled at 10.4% in 2024, up from 2023 ROI, which came to 9.8%, due to the more than proportional increase in results from operations (Ebit) compared to the rise in net invested capital (NIC).

 

ROI*
(%)

*adjusted for non-recurring entries

The results of management led to an adjusted return on equity (ROE*) coming to 12.2%, up from the figure seen in 2023. This increase was due to a rise in the net result for the period, proportionally higher than the increase in equity.

 

ROE*
(%)

*adjusted for non-recurring entries

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

 

mn€		31 Dec 24	31 Dec 23
A	Cash holdings	1,315.6	1,332.8
B	Cash equivalents	‐	‐
C	Other current financial assets	23.1	90.9
D	Liquidity (A+B+C)	1,338.7	1,423.7
E	Current financial debt	(525.8)	(411.9)
F	Current portion of non-current financial debt	(474.1)	(524.1)
G	Current financial indebtedness (E+F)	(999.9)	(936.0)
H	Net current financial indebtedness (G+D)	338.8	487.7
I	Non-current financial debt	(712.6)	(703.9)
J	Debt instruments	(3,401.3)	(3,391.2)
K	Non-current trade and other payables	‐	‐
L	Non-current financial indebtedness (I+J+K)	(4,113.9)	(4,095.1)
M	Total financial indebtedness (H+L)	(3,775.1)	(3,607.4)
	Non-current financial receivables	158.0	162.8
	Net financial debt (excluding put option)	(3,617.1)	(3,444.6)
	Nominal amount - fair value put option	(318.4)	(337.2)
	Net financial debt adjusted with put option	(3,935.5)	(3,781.8)
	Portion of future dividends - fair value put option	(28.2)	(45.9)
	Net financial debt (Net debt)	(3,963.7)	(3,827.7)

Total net financial debt amounted to 3,963.7 million euro, up by 136 million euro over the previous year.

During the year, the Group rescheduled trade payables through letters of credit, with a total amount of 321.3 million euro (as against 404.6 million euro in the previous year). At the end of the year, there were no transactions outstanding. By means of these transactions, the Group optimised its payment terms, while keeping the same amount recorded under trade payables, since this is part of its typical working capital management. Note, in fact, that the Group has trade payables, with different payment terms, based on the contractual agreements defined with the individual counterparties of the various businesses in which it operates, ranging from 7 days to 60 days from the date of invoice issuance.

A decrease occurred in current financial assets coming to roughly 67.8 million euro, mainly due to the transfer of 43.6 million euro in Hse Spa tax credits stated as financial assets in December 2023 and with collection in January 2024.

The financial structure showed total current indebtedness coming to 999.9 million euro, up by 63.9 million euro compared to December 2023. The portion amounting to 525.8 million euro refers to payables to banks, such as bank utilisations, accruals for interest on loans and other debts. In particular, other payables included a 154.1 million euro decrease due to the reclassification of advances received linked to the gas settlement process from financial payables to trade payables, offset by other payables to banks related to transactions based on pro soluto credit transfers.

The current portion of non-current financial debt came to 474.1 million euro and included 375 euro in bank lines maturing in early August 2025 and therefore reclassified from long to short term. It furthermore included 15 million in a residual bond named “Private Placement 32” maturing in May 2025 and 24.4 million euro in current payables for leasing contracts.

Non-current financial debt amounted to 4,113.9 million euro, remaining in line with the previous period. Note that in July and August, 438.1 million euro of maturing bonds (Green Bond, 288.3 million euro, and Aflac, 149.8 million euro) were repaid, and the disbursement of the 460 million euro EIB credit line, agreed upon in July 2023, was requested in September.

Cash holdings amounted to 1,315.6 million euro, remaining at the same level as the previous year (1,332.8 million euro).

At 31 December 2024, 74% of medium- and long-term debt consisted of bonds with repayment at maturity. Total medium- and long-term debt, 97% of which is fixed-rate, had an average residual maturity coming to approximately five years and two months, with 44% of debt maturing after five years.

NET FINANCIAL DEBT (NET DEBT)
(bn/€)

Operating cash flow showed a positive balance, at 108.5 million euro, after financing both 811.7 million euro of operating investments for the period and the change in net working capital, and succeeding in partially financing dividend payments coming to 251.5 million euro.

Among shareholding acquisitions, note the acquisition of 70% of TRS Ecology Srl, a company that manages a multifunctional platform for special waste treatment in Caorso (PC).

CASH FLOW
(mn/€)

The Net debt/Ebitda ratio for 2024 came to 2.50x, in line with the 2.56 seen in 2023.

 

NET DEBT/EBITDA*
(X)

The FFO*/Net debt ratio settled at 28.7%, confirming the Group’s financial solidity and its ability to meet its financial obligations.

FFO*/NET DEBT
(%)

Consolidated sustainability reporting

 

General Information

Strategy and business model

The Hera Group

Hera operates throughout Italy and provides regulated public services in 316 municipalities spread across five of the country’s regions (Emilia-Romagna, Veneto, Friuli-Venezia Giulia, Marche and Tuscany). AresGas, a subsidiary of AcegasApsAmga, provides methane gas distribution and sales services and electricity sales to about 29 thousand customers in Bulgaria. The Group is also present in other European countries by way of the plastic recycling plants owned by subsidiary Aliplast.

Refer to the corresponding chapter below for a comprehensive discussion of the topics.

 

Environmental information

Climate change

Description of relevant impacts, risks and opportunities

The double relevance analysis, together with the climate risk analysis based on the TCFD recommendations complementing the ERM analysis, identified climate change as one of the most relevant topics, declined in the following sub-themes: climate change mitigation, climate change adaptation and energy.

The topic of climate change is related to the following areas of impact for the creation of shared value presented in the General Information chapter: promotion of energy efficiency; energy transition and renewables; resilience and adaptation. For each area of shared value creation, actions and targets related to climate change are reported later in this chapter.

Refer to the corresponding chapter below for a comprehensive discussion of the topics.

 

Social Information

Workforce

Description of relevant impacts, risks and opportunities

The dual materiality analysis identified the Hera Group’s workforce as one of the most important issues for the Hera Group. This is broken down into sub-topics relating to: working conditions, equal treatment and opportunities for all.

The topic of workforce is related to the impact area of shared value creation, discussed in General information: Job creation and development of new skills. In terms of shared value creation, the actions and objectives relating to workforce are discussed later in this section.

Refer to the corresponding chapter below for a comprehensive discussion of the topics.

 

Governance information

Business conduct

Description of relevant impacts, risks and opportunities

The double-relevance analysis identified business conduct as one of the most relevant topics, broken down into the following sub-topics: business culture, political engagement and lobbying, and management of relationships with suppliers, including payment practices.

Refer to the corresponding chapter below for a comprehensive discussion of the topics.

 

 

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 energy services; the electricity area, which covers generation, distribution and sales services and public lighting services; 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 telecommunications and other minor services.

Note that as of 2024, in order to provide a better representation, public lighting services have been included within the electricity area and no longer in other services; therefore, the 2023 figures have been restated consistently with this reclassification.

EBITDA* DECEMBER 2024

 

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 adjusted 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, waste collection services and public lighting services. 

The value of adjusted Ebitda, broken down by strategic business areas, reflects the adjustment to the valuation of gas storage described in the introduction to paragraph 1.04. For 2024, this value is aligned. To provide a detailed identification of the effects of this adjustment, the values of Adjusted Ebitda and Ebitda are shown below:

 

	Dec 24		Dec 23
(mn€)	Ebitda*	Ebitda	Ebitda*	Ebitda
Gas Area	571.4	571.4	516.9	609.9
Electricity Area	322.0	322.0	326.3	326.3
Integrated Water Cycle Area	297.1	297.1	271.4	271.4
Waste Management Area	367.0	367.0	353.4	353.4
Other Services Area	30.1	30.1	26.7	26.7
Total	1,587.6	1,587.6	1,494.7	1,587.7

* adjusted results, as described in paragraph 1.04

 

Gas

The results for 2024 show an upward trend compared to the previous year, since variability on energy markets returned to pre-crisis levels, despite the significant change in legislation on 110% super-bonus incentives linked to energy saving measures, which reduced the number of beneficiaries, the mild temperatures seen in the early months of the year and the approximately 14% drop in average prices for energy raw materials compared to the previous year.

The Group maintained its leading presence in last resort markets of and supplies to public administrations, given that Hera Comm Spa has been awarded tenders for the following lots across Italy:

• eight of the nine lots of the last resort gas service (for customers involved in public services or without a supplier) for the period from 1 October 2023 - 30 September 2025 in: Valle d’Aosta, Piedmont, Liguria, Trentino A.A., Veneto, Friuli-Venezia Giulia, Emilia-Romagna, Tuscany, Umbria, Marche, Abruzzo, Molise, Basilicata, Puglia, Lazio and Campania. In the previous tender, Hera Comm was awarded six out of nine lots;
• all nine lots of the default gas distribution service (for customers in arrears), for the period from 1 October 2023 - 30 September 2025 in: Valle d’Aosta, Piedmont, Liguria, Lombardy, Trentino A.A., Veneto, Friuli-Venezia Giulia, Emilia-Romagna, Tuscany, Umbria, Marche, Abruzzo, Molise, Basilicata, Puglia, Lazio, Campania, Sicily and Calabria. In the previous tender as well, Hera Comm was awarded nine out of nine lots;
• three of the 12 lots of the Consip GAS15bis tender for supplying natural gas to public administrations in 2023-24: the two lots in Lombardy were confirmed and a new lot, including Emilia Romagna and Friuli Venezia Giulia, was awarded.

 

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

(mn€)	Dec 24	Dec 23	Abs. change	% change
Area Ebitda*	571.4	516.9	54.5	+10.5%
Group Ebitda*	1,587.6	1,494.7	92.9	+6.2%
Percentage weight	36.0%	34.6%	+1.4 p.p.

* adjusted results, as described in paragraph 1.04

CUSTOMERS
(k)

 

The total number of gas customers was lower than the previous year, down 96.1 thousand, mainly in traditional markets, which dropped by 80.2 thousand, and to a lesser degree in last resort markets, down 15.9 thousand. 

VOLUMES SOLD
(mn m³)

 

Total volumes of gas sold increased by 578.4 million m³ (+5.4%) due to higher intermediation, amounting to 808.7 million m³. Volumes sold to end customers fell by 230.3 million m³ (-7.5%), due to both last resort markets, down 199.6 million m³ (-41.2%) and traditional markets, down 30.7 million m³ (-1.2%). This trend was affected by the higher average temperatures seen in 2024, as mentioned above, and the drop in the customer base, in addition to the behaviour shown by customers in the area of energy savings.  

The following table summarises operating results for the gas area:

Income statement (mn€)	Dec 24	Inc.%	Dec 23	Inc.%	Abs. change	% change
Revenues	5,809.0		8,557.1		(2,748.1)	(32.1)%
Operating costs	(5,139.5)	(88.5)%	(7,936.7)	(92.8)%	(2,797.2)	(35.2)%
Personnel costs	(121.5)	(2.1)%	(119.9)	(1.4)%	1.6	+1.3%
Capitalised costs	23.3	+0.4%	16.5	0.2%	6.8	+41.3%
Ebitda*	571.4	9.8%	516.9	6.0%	54.5	+10.5%

* adjusted results, as described in paragraph 1.04.

REVENUES
(mn/€)

 

In 2024, 89% of revenues referred to sales and trading activities (82% in 2023), 8% came from distribution and district heating revenues (6% in 2023) and 3% from energy efficiency activities (12% in 2023). The sum of revenues from sales, trading and distribution accounts for 42% of Group revenues (48% in 2023) and the entire gas area accounts for 45%.

Compared to the previous year, revenues decreased by 2,748.1 million euro. The main reasons for this include lower raw material prices, higher average temperatures and lower consumption by the customer base, despite the increase in system charges and higher intermediation volumes, which affected sales and trading by 1,867 million euro overall. Revenues from energy efficiency activities decreased by 871 million euro as a result of the legislative changes mentioned above.

In addition, a decrease occurred in district heating revenues, following resolution 638/2023/R/tlr introducing the District heating tariff method (Mtl-T) for 2024, IFRIC 12 concession assets and the assets in Bulgaria, leading to an overall decrease of approximately 26 million euro.

Regulated revenues were up by 33 million euro. From a regulatory point of view, through resolution 556/2023/R/com, published in late 2023, Arera adjusted the criteria for determining and updating the rate of return on invested capital (WACC) recognised for gas distribution activities, increasing it from 5.6% in 2023 to 6.5% in 2024.

The drop in revenues was proportionally reflected in operating expenses, which showed an overall decrease of 2,797.2 million euro. This trend was mainly linked to the fall in raw material prices and the lower energy efficiency activities related to the change in the legislation concerning the 110% super-bonus incentives mentioned above.

EBITDA*
(mn/€)

* adjusted results, as described in paragraph 1.04.

Adjusted Ebitda increased by 54.5 million euro, up 10.5% due to the positive performance of traditional sales markets and regulated distribution revenues, as a result of the recovery of higher inflation and WACC. This increase was partially offset by the changes in government incentives for energy efficiency activities, as well as lower margins in trading and last resort markets.

 

NET INVESTMENTS GAS
(mn/€)

 

 

In 2024, net investments in the gas area amounted to 177.1 million euro, down 13.8 million euro compared to the previous year. The reduction in gas distribution mainly involved a 12.1 million euro investment linked to the reimbursement value for plants and networks in complementary municipalities, awarded through the Atem Udine2 tender in 2023, and the reduction in the replacement of metering units for remote management, pursuant to del. 631/2013/R/GAS. Non-recurring maintenance work on networks and plants was essentially in line with the previous year.

In gas sales, investments decreased by 4.6 million euro, due to activities related to the acquisition of new customers.

In district heating and energy services, investments were up by a total of 12.4 million euro compared to the previous year, with the activities of the company Hera Servizi Energia Spa and interventions on district heating networks and plants both increasing. Requests for new connections in the gas area were down compared to the previous year

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

Gas (mn€)	Dec 24	Dec 23	Abs. change	% change
Networks and plants	117.6	136.8	(19.2)	(14.0)%
Acquisition gas customers	23.2	27.8	(4.6)	(16.5)%
DH/Energy services	39.7	27.3	12.4	+45.4%
Total gas gross	180.5	191.8	(11.3)	(5.9)%
Capital grants	3.5	1.0	2.5	+250.0%
Total gas net	177.1	190.9	(13.8)	(7.2)%

The Regulatory asset base (RAB) for assets owned by the Group in the gas area, which defines the value of the assets recognised by the Authority as regards return on invested capital, increased compared to 2023.

RAB
(bn/€)

 

Electricity

The results for 2024 show a slight drop compared to the previous year, due to trading activities and a decrease in value-added services following legislative changes that essentially eliminated the possibility of including discounts in invoices or transferring credits, despite the increase in both volumes sold to end customers, due to commercial development, especially in the free market, and in margins due to the reduction in modulation costs resulting from the drop in PUN prices (-15% on average).

As of July 2024, with the definitive end of the protected service the Group acquired almost 1 million customers (+80%), after winning seven lots (the maximum allowed out of the total 26) in the tender for the graduated protection service for household customers in 37 Italian provinces, strengthening its presence in several Italian regions (Emilia-Romagna, Veneto, Friuli-Venezia Giulia, Marche, Tuscany, Abruzzo, Lazio, Umbria, Liguria, Piedmont, Lombardy and Campania) and consolidating its position as the third largest operator nationwide. This was also made possible by Hera Comm being awarded:

• four of the 17 lots in the Consip EE21 tender for supplying electricity to public administrations in 2024 in: the Province of Rome, Lazio, Campania, Calabria, confirming the number of lots awarded in the previous tender;
• three of the nine lots of the gradual protection service for supplying electricity to public administrations for the period from 1 July 2021 to 30 June 2024, in: Campania, Marche, Umbria, Abruzzo, Molise, Basilicata, Calabria, Sicily and Sardinia;
• two of the nine lots for the safeguarded service for 2023 and 2024 in: Campania, Abruzzo, Umbria and Calabria, with one additional lot awarded compared to the previous two-year period;
• one of the 12 lots in the gradual protection service for supplying electricity to micro-businesses for the period from 1 April 2023 to 31 March 2027 in: Friuli-Venezia Giulia, Trentino-Alto Adige and in the Provinces of Belluno, Venezia and Verona.

 

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

(mn€)	Dec 24	Dec 23**	Abs. change	% change
Area Ebitda	322.0	326.3	(4.3)	(1.3)%
Group Ebitda*	1,587.6	1,494.7	92.9	6.2%
Percentage weight	20.3%	21.8%	(1.5) pp

* adjusted results, as described in paragraph 1.04
** this data has been restated, reclassifying the public lighting segment from other services to electricity

CUSTOMERS
(k)

 

At December 2024, customers of the Group’s electricity sales reached 2,597 thousand, up 869.9 thousand (+50.4%) compared to 2023. Growth in the free market, coming to approximately 918.0 thousand customers (+56.2%), was particularly significant due to the contribution of the positive outcome of the previously mentioned gradual protection service tender, which contributed with approximately 848 thousand customers. The remaining increase confirms the positive contribution coming from the strengthened commercial actions implemented. These effects largely offset the drop in the protected market, down by roughly 41.2 thousand customers (-61.3%) and in the safeguarded market, down 6.9 thousand (-25.8%).

Customer appreciation and loyalty was confirmed, including the value-added services offered by the Group, which were requested by roughly 86 thousand customers at December 2024, despite the legislative changes mentioned above.

 

VOLUMES SOLD
(GWh)

 

Volumes of electricity sold in 2024 increased by 1,736.5 GWh, up 12.0% compared to the previous year. This trend was caused by the increase in volumes on the free market coming to 2,021.5 GWh (15.2%), mainly driven by the contribution coming from commercial reinforcement, along with the positive effects of the first six months of the new scope of the gradual protection service (as of July 2024) and the Consip tenders. These effects were partially offset by the drop in safeguarded volumes, which fell by 234.5 GWh, down 21.4%, and in the protected service, which decreased by 50.5 GWh, or 42.3%. 

The main indicators concerning public lighting are as follows:

Quantity	Dec 24	Dec 23*	Abs. change	% change
Public lighting
Lighting points (k)	645.1	642.8	+2.3	+0.4%
of which LED	52.9%	45.2%	+7.7 p.p.
Municipalities served	226	208	+18	+8.7%

* the 2023 data has been updated to reflect the consolidation of municipalities and lighting points consistently with the same period in 2024.

In 2024, the Hera Group acquired approximately 44.5 thousand lighting points in 24 new municipalities. From a geographical point of view, the most significant acquisition included 10.1 thousand lighting points in Tuscany, 7.7 thousand lighting points in Emilia-Romagna, 6 thousand lighting points in Lombardy, 4.1 thousand lighting points in Umbria, 4.9 thousand lighting points in Liguria and 3.6 thousand lighting points in Sardinia. Also note the acquisitions made in other regions, mainly in central Italy, coming to 8.1 thousand lighting points. The increases seen during the period fully offset the loss of 42.2 thousand lighting points and six municipalities served, mainly in the Triveneto area.

The percentage of lighting points using LED lamps settled at 52.9%, up 7.7 percentage points. This trend highlights the Group’s continued focus on an increasingly efficient and sustainable management of public lighting.

The following table summarises operating results for the electricity area:

Income statement (mn€)	Dec 24	Inc.%	Dec 23*	Inc.%	Abs. change	% change
Revenues	4,939.3		4,825.5		113.8	2.4%
Operating costs	(4,574.0)	(92.6)%	(4,460.8)	(92.4)%	113.2	2.5%
Personnel costs	(71.9)	(1.5)%	(69.5)	(1.4)%	2.4	3.5%
Capitalised costs	28.7	0.6%	31.1	0.6%	(2.4)	(7.7)%
Ebitda	322.0	6.5%	326.3	6.8%	(4.3)	(1.3)%

* this data has been restated, reclassifying the public lighting segment from other services to electricity

REVENUES
(mn/€)

* this data has been restated, reclassifying the public lighting segment from other services to electricity.

In 2024, 93% of revenues came from sales and trading activities (92% in 2023), 3% from distribution revenues (2% in 2023), 3% from public lighting and value-added services (3% in 2023 as well) and 1% from generation revenues (2% in 2023). The sum of revenues from sales, trading and distribution accounts for 36% of the Group's revenues (29% in 2023) and the entire electricity area accounts for 38%.

Revenues increased by 113.8 million euro compared to the previous year. This trend was mainly due to increased sales volumes caused by the factors mentioned above and higher revenues from system charges, following the conclusion of the exceptional regulatory interventions in previous years to face the energy crisis, which were only partially offset by the decrease in sales, trading and generation revenues linked to the drop in energy prices. These effects generated an increase of 112 million euro, along with higher revenues from IFRIC 12 assets under concession coming to roughly 8 million euro, offset by lower revenues from value-added services to customers amounting to 27 million euro, as a result of changes in government incentives.

Regulated revenues increased by 25 million euro, partially as a result of resolution 497/2023/R/com, which introduced regulation by expenditure and service objectives (ROSS), in order to incentivise efficiency and transparency in investments and recognised costs. In addition, through resolution 556/2023/R/com, published at the end of 2023, ARERA adjusted the criteria for determining and updating the rate of return on invested capital (WACC), recognised for electricity distribution activities, increasing it from 5.2% in 2023 to 6.0% in 2024.

The increase in revenues was proportionally reflected in operating costs, which were up by 113.2 million euro. This trend was mainly due to the increase in raw material costs linked to higher sales volumes, partially offset by the positive effect of the stability seen on energy markets. Lastly, costs for system charges were higher, as mentioned above.

 

EBITDA
(mn/€)

* this data has been restated, reclassifying the Public lighting segment from Other services to Electricity.

Ebitda decreased by 4.3 million euro compared to 2023. This slight drop is due to trading, generation and a reduction in value-added services mainly due to lower installations of photovoltaic systems, despite the good performance of sales activities, which benefited from lower modulation charges and higher volumes sold, thanks to the development of the customer base in the free market. Distribution also increased, thanks to the application of the ROSS regulatory criterion, inflation recovery and the increase in WACC.

In the electricity area, investments in 2024 amounted to 123.5 million euro and were down by 4.9 million euro overall compared to the previous year.

In the electricity distribution sector, work mainly involved extraordinary maintenance and upgrading of plants and distribution networks in the Modena, Imola, Trieste and Gorizia areas, as well as the ongoing large-scale replacement of old-generation meters and work to improve network resilience. Investments in electricity distribution increased by 10.5 million euro compared to the previous year.

In energy sales, investments in activities related to acquiring new customers decreased by 10.3 million euro and in public lighting by 1.3 million euro.

Requests for new connections in the electricity area were essentially in line with the previous year.

 

NET INVESTMENTS ELECTRICITY
(mn/€)

* this data has been restated, reclassifying the public lighting segment from other services to electricity.

Operating investments in the electricity area were as follows:

Electricity (mn€)	Dec 24	Dec 23*	Abs. change	% change
Networks and plants	82.2	71.7	10.5	+14.6%
Acquisition electricity customers / other sales	42.4	52.7	(10.3)	(19.5)%
Public lighting and traffic lights	2.7	4.0	(1.3)	(32.5)%
Total electricity gross	127.2	128.4	(1.2)	(0.9)%
Capital grants	3.8	‐	3.8	+100.0%
Total electricity net	123.5	128.4	(4.9)	(3.8)%

* this data has been restated, reclassifying the public lighting segment from other services to electricity.

RAB, which defines the value of the assets recognised by the Authority as regards return on invested capital, increased compared to 2023.

RAB
(bn/€)

 

Integrated water cycle

Growth in results for 2024

In 2024, the integrated water cycle area showed increased results compared to the previous year, with Ebitda standing at 297.1 million euro.

From a regulatory point of view, note that 2024 is the first year in which the tariff method defined by the Authority for the fourth regulatory period (MTI-4), 2024-2029 (Resolution 639/2023/R/idr) was applied. MTI-4 will have a duration of six years, with WACC increasing from 4.8% during MTI-3 to 6.13% for 2024 and, among other new elements, it calls for the component covering the cost of electricity, which has been subject to sharp fluctuations in recent years, to be updated. Each operator is recognised a revenue (VRG) determined on the basis of operating and capital costs, according to the investments made, with a view to increasing cost efficiency, in addition to measures to promote and valorise sustainability and resilience.

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

(mn€)	Dec 24	Dec 23	Abs. change	% change
Area Ebitda	297.1	271.4	25.7	+9.5%
Group Ebitda*	1,587.6	1,494.7	92.9	+6.2%
Percentage weight	18.7%	18.2%	+0.5 p.p.

* adjusted results, as described in paragraph 1.04

CUSTOMERS
(k)

 

The number of water customers increased compared to December 2023 by 6.3 thousand, up +0.4%, confirming the moderate trend of internal growth in the Group’s reference areas. This growth refers mainly to the Emilia-Romagna area, managed by Hera Spa.

The main indicators for the area are as follows:

285.0 million m³: quantity managed in the aqueduct

Volumes supplied through aqueducts stood at 285.0 million cubic metres, increasing by 0.6% or 1.6 million cubic metres compared to December 2023.

At December 2024, the quantities managed related to sewerage amounted to 238.4 million cubic metres, up 2.4% compared to the previous year, while those related to purification stood at 236.8 million cubic metres, up 2.0% compared to December 2023. The volumes supplied, following the Authority’s resolution 639/2023, are an indicator of the activity of the areas in which the Group operates and are subject to equalisation, owing to legislation that provides for a regulated revenue, recognised independently from volumes distributed.

ELECTRICITY CONSUMED
(GWh)

 

The electricity consumed by plants amounted to 349.4 GWh, essentially in line with the previous year.

The following table summarises operating results for this area:

Income statement (mn€)	Dec 24	% inc.	Dec 23	% inc.	Abs. change	% change
Revenues	1,162.8		1,067.9		94.9	+8.9%
Operating costs	(670.2)	(57.6)%	(607.7)	(56.9)%	62.5	+10.3%
Personnel costs	(201.5)	(17.3)%	(193.9)	(18.2)%	7.6	+3.9%
Capitalised costs	5.9	0.5%	5.1	0.5%	0.8	+15.6%
Ebitda	297.1	25.5%	271.4	25.4%	25.7	+9.5%

REVENUES
(mn/€)

 

Water cycle revenues increased by 8.9% year-on-year, going from 1,067.9 million euro in December 2023 to 1,162.8 million euro in December 2024.

Note the lower revenues for equalisations of energy components, that were more than offset by higher regulated revenues due to the adjustments resulting from the application of the MTI-4 tariff method, introduced by ARERA resolution 639/2023/R/idr. Overall, these effects reflect about 59.6 million euro of higher revenues, mainly due to increased WACC and inflation recovery. Lastly, higher revenues coming to roughly 35 million euro were mainly related to contracts completed in 2024 and connections.

The increase in operating expenses at December 2024 was mainly due to the increase in costs for subcontracted work and higher costs related to price increases in all major material supplies and, in particular, chemicals and services.

This effect was only partly offset by lower procurement costs for energy components as a result of an energy scenario with falling commodity prices compared to the previous year.

 

EBITDA
 (mn/€)

 

Ebitda increased by 25.7 million euro, up 9.5% from 271.4 million euro in 2023 to 297.1 million euro in 2024.

The higher revenues resulting from the application of the MTI-4 tariff method were partially offset by higher operating costs for reasons including an increase in the price lists of all major supplies.

In 2024, net investments in the integrated water cycle area amounted to 222.1 million euro, up 29.1 million euro compared to the previous year. Including the capital grants received, the investments made amounted to 261.1 million euro.

Investments mainly went towards extensions, reclamation and upgrading on networks and plants, as well as regulatory adjustments mainly in the water and sewerage sector, and amounted to 164.0 million euro in the aqueduct, 55.8 million euro in sewerage and 41.3 million euro in purification.

 

NET INVESTMENTS WATER CYCLE
(mn/€)

 

The main interventions include: in the aqueduct, ongoing remediation activities on networks and connections related to ARERA resolution 917/2017 on the regulation of the technical quality of the integrated water service, the interventions to resolve the interference of the water network with the works for the construction of the fourth lane of the A14 motorway in the Imola section and the extension of the Modena ring road, as well as the installation of Smart Meter meters with a view to reducing network leakage

In the sewerage sector, in addition to the ongoing implementation of the Rimini seawater protection plan (PSBO), maintenance works involved upgrading the sewerage network in other localities served, works to adapt drains to Dgr 201/2016, the construction of a first rainwater basin in the municipality of Cattolica and the sewerage works concomitant to the extension of the Forlì and Modena ring roads

In the water purification sector, note the construction of the new Power to gas plant at the IDAR purification plant in Bologna, as well as upgrading and expansion on the Lugo and Ravenna purification plants.

Requests for new water and sewage connections were also up on the previous year. Capital grants, standing at 38.9 million euro, were up by 3.7 million euro over the previous year and included contributions from projects accessing PNRR funds, as well as 6.8 million euro from the tariff component of the tariff method for the New Investment Fund (FoNI).

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

Integrated water cycle (mn€)	Dec 24	Dec 23	Abs. change	% change
Aqueduct	164.0	131.7	32.3	+24.5%
Purification	41.3	37.5	3.8	+10.1%
Sewerage	55.8	58.9	(3.1)	(5.3)%
Total integrated water cycle gross	261.1	228.2	32.9	+14.4%
Capital grants	38.9	35.2	3.7	+10.5%
of which FoNi (New Investments Fund)	6.8	19.5	(12.7)	(65.1)%
Total integrated water cycle net	222.1	193.0	29.1	+15.1%

RAB, which defines the value of the assets recognised by the Authority as regards return on invested capital, increased compared to 2023.

RAB
(bn/€)

 

Waste management

Ebitda rises

In 2024, the waste management area accounted for 23.1% to the Hera Group’s overall Ebitda, this area’s Ebitda increasing by 13.6 million euro compared to the previous year. The Group therefore continues along its path of growth in this business area, thanks to the diversification of its offer, the breadth of its customer portfolio and its responsiveness in providing the services it offers despite a complex macroeconomic context with repercussions in the markets in which it operates.

Herambiente's leadership in the Industry market in particular was consolidated with the acquisition, finalised in the third quarter of 2024, of 70% of the company TRS Ecology, expanding the Group’s scope of action and strengthening the growth prospects of a well-established local company. 

All major circular economy and decarbonisation initiatives continued in 2024, to implement the objectives of creating value and environmental sustainability.

In this regard, note the CO₂ capture project promoted by the Hera Group in collaboration with Saipem, which will be the first industrial-scale example of CCS (Carbon Capture and Storage) applied to a plant of this type in Italy. This project is one of the main decarbonisation levers foreseen in the Group’s Climate transition plan to reduce internal emissions. The project involves capturing carbon dioxide from the vents of waste-to-energy plants and storing it in depleted natural gas fields, thus significantly reducing plant emissions and contributing to the decarbonisation of local areas.

Protecting environmental resources was a priority objective in 2024 as well, as was the maximisation of their reuse, as is demonstrated by the special attention devoted to the development of sorted waste collection, which, thanks to the strong commitment shown by the Group in all regions served, increased by two percentage points compared to 2023.

 

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

(mn€)	Dec 24	Dec 23	Abs. change	% change
Area Ebitda	367.0	353.4	13.6	+3.8%
Group Ebitda*	1,587.6	1,494.7	92.9	+6.2%
Percentage weight	23.1%	23.6%	(0.5) pp

* adjusted results, as described in paragraph 1.04

 

Volumes commercialised and treated by the Group in 2024 are as follows:

Quantity (k tons)	Dec 24	Dec 23*	Abs. change	% change
Municipal waste	2,254.8	2,310.2	-55.4	(2.4)%
Market waste	3,311.0	3,065.6	245.4	+8.0%
Waste commercialised	5,565.9	5,375.7	190.2	+3.5%
Plant by-products	2,946.8	2,661.0	285.8	+10.7%
Waste treated by type	8,512.7	8,036.7	476.0	+5.9%

* The amount of waste treated in 2023 has been updated to include the amount of waste of the company ACR in the item "Market waste", consistently with the amount recorded for the same period in 2024.

An analysis of the quantitative data shows an increase in waste commercialised mainly due to an increase in market waste. As regards municipal waste, a 2.4% decrease was seen in 2024 compared to the previous year, mainly due to extraordinary waste deliveries following the 2023 flooding. 

Market volumes, instead, increased by +8.0% compared to the same period of 2023, due to the consolidation of existing business relationships, the development of the customer portfolio, in particular in the industry market, and changes in the scope of consolidation thanks to recent acquisitions also in the industry market. 

Lastly, increased volumes of plant by-products were seen compared to the previous year, mainly due to the higher rainfall recorded, especially in the last quarter of 2024.

 

SORTED WASTE
(%)

 

As mentioned previously, sorted collection of municipal waste stood at 74.3%, up 2.1 percentage points over the previous year, thanks to the development of numerous projects in the local areas managed by the Group.

The Hera Group operates in the entire waste cycle, with almost one hundred plants for treating municipal and special waste and regenerating plastic materials. The main plants include: nine waste-to-energy plants, 12 composting/digestion plants and 17 selecting plants.

The close attention paid to the set of plants has always been a distinctive element of the Group’s propensity for excellence: operations are indeed ongoing to provide plants with the best available technologies.

Quantity (k tons)	Dec 24	Dec 23*	Abs. change	% change
Landfills	754.6	608.9	145.7	+23.9%
WTE	1,248.0	1,277.7	(29.7)	(2.3)%
Selecting plants and other	610.0	605.6	4.4	+0.7%
Composting and stabilisation plants	526.6	502.6	24.0	+4.8%
Inertisation and chemical-physical plants	1,768.4	1,597.5	170.9	+10.7%
Recovery plants	107.7	120.6	(12.9)	(10.7)%
Purification plants	487.6	453.7	33.9	+7.5%
Storage/Soil Washing	247.9	230.7	17.2	+7.5%
Other plants	2,761.9	2,639.3	122.6	+4.6%
Waste treated by plant	8,512.7	8,036.7	476.0	+5.9%
Plastic recycled by Aliplast	83.9	84.6	(0.7)	(0.8)%

* The amount of waste treated in 2023 has been updated to include the amount of waste of the company ACR in the item "Other plants", consistently with the amount recorded for the same period in 2024.

Waste treatment showed an overall increase coming to 5.9% compared to 2023. Analysing the individual sectors, note the increase in quantities in landfills mainly due to the resumed conferrals at Tre Monti (Bo) in the second half of 2023, while, as regards waste-to-energy plants, the downward trend, partially offset by the resumed conferrals at the F3 plant in Ravenna, was mainly due to lower volumes treated at both the Rimini plant, due to an incident that occurred in January, and the shutdown for planned maintenance at the Modena plant carried out in 2024.

The slight increase in quantities in selecting plants is due to the higher quantities processed in the plants, particularly in the Modena plant, due to growth in sorted waste collection.

In composting and stabilisation plants, volumes increased mainly due to higher quantities treated in the stabilisation plants at Tre Monti (Bo) and in the digester at Spilamberto, while in inertisation and chemical-physical plants, the increased quantities were mainly due to the volumes of liquid waste treated partially as a result of the higher rainfall seen during the last period of 2024.

In recovery plants, the decreased incoming volumes were affected by competition in the virgin plastic market. In addition, an increase occurred in waste treated at purification plants, while in the storage/soil washing sector, the increased volumes were mainly due to the change in the scope of operations due to recent acquisitions in the industrial market. Lastly, in other plants, the quantities intermediated at third-party plants increased compared to the previous year. 

The following table summarises operating results for the area:

Income statement (mn€)	Dec 24	Inc.%	Dec 23	Inc.%	Abs. change	% change
Revenues	1,766.2		1,737.9		28.3	+1.6%
Operating costs	(1,169.1)	(66.2)%	(1,166.5)	(67.1)%	2.6	+0.2%
Personnel costs	(258.5)	(14.6)%	(244.6)	(14.1)%	13.9	+5.7%
Capitalised costs	28.5	1.6%	26.6	1.5%	1.9	+7.1%
Ebitda	367.0	20.8%	353.4	20.3%	13.6	+3.8%

REVENUES
(mn/€)

 

In 2024, revenues increased slightly compared to the previous year, up +1.6%. The 8.9 million euro decrease in revenues from energy production was mainly due to a drop in market prices and reduced volumes in WTEs, due to the temporary shutdowns at the Rimini and Modena plants. This change was more than offset by strong development in the industrial market thanks to increased prices, the changed scope of consolidation resulting from a recent corporate acquisition and higher revenues from waste treatment due to increased volumes.

Operating costs increased slightly in 2024, up +0.2%. Higher costs were due to the changed scope of consolidation owing to a recent corporate acquisition in the industry market, and increased by-product treatment and transport costs due to increased supplier list prices and higher volumes managed. These changes were partially offset by decreases in the costs of chemical products and costs for purchasing raw materials, due to the drop in commodity prices.

As regards municipal waste collection, note the increased activities related to the development of new sorted waste collection projects.

 

EBITDA
(mn/€)

 

Ebitda increased by 13.6 million euro compared to the previous year. The positive effect of the increase in volumes and prices for waste treated and the changed scope of consolidation resulting from the recent acquisitions in the industry market was partially offset by the negative change in energy management and the increase in operating costs.

Net investments in the waste management area were related to maintenance and upgrading on waste treatment and recovery plants and amounted to 160.2 million euro, up 9.8 million euro compared to the previous year.

The composting/digester sector showed a decrease in investments coming to 4.7 million euro compared to the previous year, due to the increased works carried out in the first half of 2023 on the Cesena plant and by the company Biorg, while a decrease of 5.4 million euro was seen in landfills compared to the previous year, mainly due to the works carried out on plants belonging to the company Marche Multiservizi Spa in 2023.

The waste to energy (WTE) sector saw a 15.5 million euro increase in investments, mainly involving the work done by the company HestAmbiente on line 4 of the Padua plant and the planned non-recurring maintenance done on the Modena, Forlì and Rimini plants, while in the industrial waste plants sector the 13.2 million euro drop was mainly due to the revamping of the F3 plant in Ravenna, completed in 2023.

The collection area and equipment sector showed a 6.7 million euro increase in investments, while the sorting and recovery plants sector saw an overall increase coming to 12.6 million euro, as a result of the work done by the companies Hea Spa and Vallortigara Servizi Ambientali Spa to expand the Torrebelvicino plant, as well as the construction of the rigid plastics processing plant by the company Aliplast Spa, an operation accessed PNRR funding.

 

NET INVESTMENTS WASTE MANAGEMENT
(mn/€)

 

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

Waste management (mn€)	Dec 24	Dec 23	Abs. change	% change
Composters/digesters	5.7	10.4	(4.7)	(45.2)%
Landfills	18.3	23.7	(5.4)	(22.8)%
WTE	37.4	21.9	15.5	+70.8%
SW plants	3.5	16.7	(13.2)	(79.0)%
Collection areas and equipment	24.8	18.1	6.7	+37.0%
Transshipment, selecting and other plants	72.5	59.9	12.6	+21.0%
Total waste management gross	162.3	150.8	11.5	+7.6%
Capital grants	2.1	0.4	1.7	+425.0%
Total waste management net	160.2	150.4	9.8	+6.5%

Other services

Ebitda rises

The other services area covers all minor businesses managed by the Group, including telecommunications, in which the Group offers connectivity for private customers and companies, telephone and data centre services through its own digital company, and cemetery services, the latter only in the Municipality of Trieste with an overall management of ten cemeteries. At December 2024, results in this area stood at 30.1 million euro, up 3.4 million euro over the previous year.

The changes occurred in terms of Ebitda are as follows:

(mn€)	Dec 24	Dec 23**	Abs. change	% change
Area Ebitda	30.1	26.7	3.4	+12.8%
Group Ebitda*	1,587.6	1,494.7	92.9	+6.2%
Percentage weight	1.9%	1.8%	+0.1 p.p.

* adjusted results, as described in paragraph 1.04
** this data has been restated, reclassifying the public lighting segment from other services to electricity

 

Quantitative indicators in the other services area also include the approximately 6,800 km of proprietary ultra-wideband fibre optic network that the Hera Group owns through its digital company, Acantho Spa. This network serves the main cities in Emilia-Romagna, Padua and Trieste, and provides companies and individuals a high-performance connectivity, with high reliability and maximum security for systems, data and service continuity.

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

Income statement (mn€)	Dec 24	% Inc.	Dec 23*	% Inc.	Abs. change	% change
Revenues	199.8		90.9		8.9	+9.8%
Operating costs	(58.5)	(58.6)%	(53.9)	(59.3)%	4.6	+8.5%
Personnel costs	(14.0)	(14.1)%	(13.1)	(14.4)%	0.9	+6.9%
Capitalised costs	2.8	2.8%	2.8	3.0%	‐	+0.0%
Ebitda	30.1	30.2%	26.7	29.3%	3.4	+12.8%

* this data has been restated, reclassifying the public lighting segment from other services to electricity

 

REVENUES
(mn/€)

* this data has been restated, reclassifying the public lighting segment from other services to electricity.

 

In December 2024, revenues amounted to 99.8 million euro, up 8.9 million euro, mainly due to the telecommunications business. This result was supported by increased activities in telephony and connectivity services, which were also driven by an important commercial development thanks to the acquisition of new customers, especially in Northeastern Italy.

The above-mentioned increase in turnover was supported by a higher operating capacity, resulting in an increase in both operating and personnel costs.

 

EBITDA
(mn/€)

* this data has been restated, reclassifying the public lighting segment from other services to electricity.

 

Ebitda for the other services business as a whole increased by 12.8% or 3.4 million euro, going from 26.7 million euro in December 2023 to 30.1 million euro in the equivalent period of 2024, largely due to the contribution coming from telecommunications, mainly involving the increased activities in telephony and connectivity services, driven above all by commercial development.

In 2024, net investments in the other services area amounted to 11.0 million euro, up 1.2 million euro compared to the previous year.

Investments were made in the telecommunications service involving network operations and in TLC services, a sector that saw the expansion of its geographical area and customer base served with the integration with the company Asco TLC, operating in the Veneto region and incorporated into the company Acantho Spa in 2023.

 

NET INVESTMENTS OTHER SERVICES
(mn/€)

* this data has been restated, reclassifying the public lighting segment from other services to electricity.

 

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

other services (mn€)	Dec 24	Dec 23*	Abs. change	% change
TLC	11.0	9.8	1.2	+12.2%
Other	‐	0.0	‐	+0.0%
Total other services gross	11.0	9.8	1.2	+12.2%
Capital grants	‐	‐	‐	+0.0%
Total other services net	11.0	9.8	1.2	+12.2%

* this data has been restated, reclassifying the public lighting segment from other services to electricity.

 

Income statement

 

 

mn€	notes	2024	2023
Revenues	1	12,889.7	15,331.1
Other income	2	154.7	234.0
Raw and other materials	3	(7,056.4)	(9,672.2)
Service costs	4	(3,724.9)	(3,655.9)
Personnel costs	5	(667.5)	(641.1)
Other operating expenses	6	(97.3)	(90.3)
Capitalised costs	7	89.3	82.1
Amortisation, provisions and depreciation	8	(757.7)	(753.7)
Operating profit		829.9	834.0
Financial income	9	202.5	157.1
Financial expenses	10	(308.5)	(345.0)
Financial operations		(106.0)	(187.9)
Share of profits (losses) pertaining to joint ventures and associated companies	11	12.3	10.3
Earnings before taxes		736.2	656.4
Taxes	12	(200.3)	(173.2)
Net profit for the period		535.9	483.2
Attributable to:
parent company shareholders		494.5	441.4
minority shareholders		41.4	41.8
Earnings per share
basic	17	0.343	0.305
diluted	17	0.343	0.305

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 outlined in paragraph 2.03.01 of this consolidated financial statement.

Statement of comprehensive income

 

mn€	notes	2024	2023
Net profit (loss) for the period		535.9	483.2
Items reclassifiable to the income statement
Fair value of derivatives, change for the period	29	(72.7)	(289.1)
Tax effect related to reclassifiable items		20.5	83.2
Other components of comprehensive income companies valued at net equity		(0.1)	‐
Items not reclassifiable to the income statement
Actuarial income (losses) employee benefit provisions	30	1.8	(2.0)
Shareholdings valued at fair value	26	(3.9)	10.9
Tax effect related to not reclassifiable items		(0.3)	0.4
Total comprehensive profit (loss) for the period		481.2	286.6
Attributable to:
parent company shareholders		449.7	238.8
minority shareholders		31.5	47.8

 

Statement of financial position

 

Assets

mn€	notes	31 Dec 24	31 Dec 23
ASSETS
Non-current assets
Property, plants and equipment	21, 25	2,160.7	2,059.3
Rights of use	22, 25	84.2	90.6
Intangible assets	23, 25	4,945.8	4,719.6
Goodwill	24, 25	933.0	908.7
Shareholdings valued using the equity method	26, 27	127.3	147.0
Other shareholdings	26	47.3	48.6
Non-current financial assets	18	158.0	162.8
Deferred tax assets	14	342.9	302.3
Derivative instruments	29	‐	0.3
Total non-current assets		8,799.2	8,439.2
Current assets
Inventories	32	168.1	198.5
Trade receivables	33	3,172.5	3,586.8
Current financial assets	18	23.1	90.9
Current tax assets	13	31.3	11.4
Current assets from contracts with customers	35	263.9	433.1
Other current assets	37	1,104.5	509.3
Derivative instruments	29	182.4	478.0
Cash and cash equivalents	18	1,315.6	1,332.8
Total current assets		6,261.4	6,640.8
TOTAL ASSETS		15,060.6	15,080.0

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 2.03.02 of this consolidated financial statement.

Net equity and liabilities

mn€	notes	31 Dec 24	31 Dec 23
NET EQUITY AND LIABILITIES
Share capital and reserves
Share capital	15	1,440.8	1,443.0
Reserves	15	1,744.8	1,553.8
Profit (loss) for the period	15	494.5	441.4
Group net equity		3,680.1	3,438.2
Non-controlling interests	16	306.8	313.4
Total net equity		3,986.9	3,751.6
Non-current liabilities
Non-current financial liabilities	19	4,154.6	4,421.7
Non-current lease liabilities	22	54.7	56.8
Employee benefits	30	79.9	88.1
Provisions	31	693.1	617.8
Deferred tax liabilities	14	144.8	156.9
Total non-current liabilities		5,127.1	5,341.3
Current liabilities
Current financial liabilities	19	1,226.7	890.8
Current lease liabilities	22	24.4	24.5
Trade payables	34	2,723.9	2,619.3
Current tax liabilities	13	48.2	110.2
Current liabilities from contracts with customers	36	203.2	397.4
Other current liabilities	38	1,512.8	1,487.3
Derivative instruments	29	207.4	457.6
Total current liabilities		5,946.6	5,987.1
TOTAL LIABILITIES		11,073.7	11,328.4
TOTAL NET EQUITY AND LIABILITIES		15,060.6	15,080.0

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 2.03.02 of this consolidated financial statement.

Cash flow statement

 

mn€	notes	31 Dec 24	31 Dec 23
Earnings before taxes		736.2	656.4
Adjustments to reconcile net profit to cash flow from operating activities
Amortisation and impairment of assets	8	563.4	526.2
Allocation to provisions	8	194.3	227.5
Effects from valuation using the equity method	11	(12.3)	(10.3)
Financial (income) expenses	9, 10	106.0	187.9
(Capital gains) losses and other non-monetary elements		(1.2)	(8.4)
Change in provisions	31	(34.9)	(27.7)
Change in employee benefit provisions	30	(10.0)	(11.0)
Total cash flow before changes in net working capital		1,541.5	1,540.6
(Increase) decrease in inventories	39	39.5	378.9
(Increase) decrease in trade receivables	39	(800.9)	(81.9)
Increase (decrease) in trade payables	39	(49.0)	(507.7)
Increase/decrease in other current assets/liabilities, including contracts with customers	39	438.2	439.9
Changes in working capital		(372.2)	229.2
Dividends collected	39	12.8	15.1
Interest income and other financial income collected	39	56.8	77.8
Interest expenses, net charges on derivatives and other financial charges paid	39	(192.6)	(193.4)
Taxes paid	39	(193.3)	(96.6)
Cash flow from (for) operating activities (a)		853.0	1,572.7
Investments in property, plants and equipment	21	(282.1)	(242.7)
Investments in intangible assets	23	(578.2)	(573.1)
Investments in subsidiary companies and business units net of cash holdings	28	(33.1)	(76.2)
Other equity investments	28	(0.4)	‐
Sale price of property, plants, equipment and intangible assets		8.0	2.6
(Increase) decrease in other investment activities	28	81.2	30.1
Cash flow from (for) investing activities (b)		(804.6)	(859.3)
New issue of long-term bonds	20	471.1	614.9
Repayments of non-current financial liabilities	20	(7.9)	(750.0)
Repayments and other net changes in financial liabilities	20	(252.9)	(908.5)
Repayments of lease liabilities	20	(20.6)	(22.4)
Acquisition of interests in consolidated companies	20	(1.3)	(0.1)
Increase in minority share capital	20	1.3	1.9
Dividends paid out to Hera shareholders and non-controlling interests	20	(248.8)	(239.1)
(Investments) divestments in treasury shares	15	(6.5)	(19.7)
Cash flow from (for) financing activities (c)		(65.6)	(1,323.0)
Increase (decrease) in cash holdings (a+b+c)		(17.2)	(609.6)
Cash and cash equivalents at the beginning of the period	18	1,332.8	1,942.4
Cash and cash equivalents at the end of the period	18	1,315.6	1,332.8

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 outlined in paragraph 2.03.03 of this consolidated financial statement.

Statement of changes in net equity

 

mn€	Share capital	Reserves	Reserves derivatives valued at fair value	Reserves actuarial income (losses) employee benefits	Reserves share-holdings valued at fair value	Profit for the period	Net equity	Non-controlling interests	Total
Balance at 1 Jan 23	1,450.3	1,485.8	256.6	(31.8)	(17.7)	255.2	3,398.4	246.3	3,644.7
Profit for the period						441.4	441.4	41.8	483.2
Other components of comprehensive income:
fair value of derivatives, change for the period			(212.1)				(212.1)	6.2	(205.9)
actuarial income (losses) employee benefit provisions				(1.3)			(1.3)	(0.2)	(1.5)
fair value of shareholdings, change for the period					10.8		10.8		10.8
Overall profit for the period	‐	‐	(212.1)	(1.3)	10.8	441.4	238.8	47.8	286.6
change in treasury shares	(7.3)	(12.4)					(19.7)		(19.7)
minority share payments							‐	1.9	1.9
change in equity investments		2.9					2.9	(3.0)	(0.1)
changes in scope of consolidation							‐	56.8	56.8
other movements		(13)					(1.3)	(0.6)	(1.9)
Allocation of revenues:
dividends paid out						(180.9)	(180.9)	(35.8)	(216.7)
allocation to reserves		74.3				(74.3)	‐		‐
Balance at 31 Dec 23	1,443.0	1,549.3	44.5	(33.1)	(6.9)	441.4	3,438.2	313.4	3,751.6
Balance at 1 Jan 24	1,443.0	1,549.3	44.5	(33.1)	(6.9)	441.4	3,438.2	313.4	3,751.6
Profit for the period						494.5	494.5	41.4	535.9
Other components of comprehensive income:
fair value of derivatives, change for the period			(42.3)				(42.3)	(9.9)	(52.2)
actuarial income (losses) employee benefit provisions				1.4			1.4		1.4
fair value of shareholdings, change for the period					(3.8)		(3.8)		(3.8)
other business components valued at net equity		(0.1)					(0.1)		(0.1)
Overall profit for the period	‐	(0.1)	(42.3)	1.4	(3.8)	494.5	449.7	31.5	481.2
change in treasury shares	(2.2)	(4.3)					(6.5)		(6.5)
minority share payments							‐	0.2	0.2
change in equity investments		(0.2)					(0.2)	(1.1)	(1.3)
other movements		0.8					0.8	0.2	1.0
Allocation of revenues:
dividends paid out						(201.9)	(201.9)	(37.4)	(239.3)
allocation to reserves		239.5				(239.5)	‐		‐
Balance at 31 Dec 24	1,440.8	1,785.0	2.2	(31.7)	(10.7)	494.5	3,680.1	306.8	3,986.9

Net financial debt

 

		notes	31 Dec 24	31 Dec 23
A	Cash	18	1,315.6	1,332.8
B	Cash equivalents	18	‐	‐
C	Other current financial assets	18	23.1	90.9
D	Liquidity (A+B+C)		1,338.7	1,423.7
E	Current financial debt	19	(777.0)	(411.9)
F	Current portion of non-current financial debt	19, 22	(474.1)	(524.1)
G	Current financial indebtedness (E+F)		(1,251.1)	(936.0)
H	Net current financial indebtedness (G+D)		87.6	487.7
I	Non-current financial debt	19, 22, 29	(808.0)	(1,087.0)
J	Debt instruments	19	(3,401.3)	(3,391.2)
K	Non-current trade and other payables		‐	‐
L	Non-current financial indebtedness (I+J+K)		(4,209.3)	(4,478.2)
M	Total financial indebtedness (H+L) ESMA guidelines 32 - 382 - 1138		(4,121.7)	(3,990.5)
	Non-current financial receivables	18	158.0	162.8
	Net financial debt		(3,963.7)	(3,827.7)

 

Business plan to 2028

In a highly complex and uncertain context, one important success factor for the Group will continue to be its ability to build and maintain partnerships with its various stakeholders, fully aware that belonging to a solid and cohesive ecosystem is a value when facing the challenges of the transitions currently underway.

With this Plan, we will make the most of various abilities that the Group is able to bring into play:

• LEADERSHIP
  Ability to innovate and evolve, covering broad market segments

• PARTNERSHIP
  Ability to develop bilateral relationships to help partners with transitions

• RELATIONSHIP
  Ability to share the benefits and value generated with communities

 

DRIVER

To respond to the most significant challenges in the sector, with outstanding projects in all local areas in which we operate, the guidelines of the new Business Plan are set out according to three strategic levers:

1. CREATING VALUE
2. SUSTAINABLE GROWTH
3. REINFORCED RISK MANAGEMENT AND INCREASED RESILIENCE

The strategy to 2028 was designed to ensure that we play a leading role in addressing a challenge as complex as climate change, through initiatives that support the decarbonisation process, the expansion of the circular economy and secondary materials markets, and a reinforced resilience of the essential assets and services we provide locally, with actions focused on the circular economy, the energy transition, environmental protection, technological evolution and social cohesion.

Thanks to the three strategic levers “creating value”, “sustainable growth” and “reinforced risk management and increased resilience”, we can confirm both our prudent operating and financial policies and our commitment to economic development and corporate growth.

 

CREATING VALUE

Our strategy focuses on creating value through four main growth levers:

1. efficient allocation of capital to investment projects with the best risk-return profiles,
2. expansion of market shares in all business areas,
3. expanded scope of operations through M&A transactions,
4. extraction of synergies or cost efficiencies, including financial ones.

With total Ebitda at 1,700 million euro in 2028 and return on invested capital (ROI) at 9.5% in 2028, up from an adjusted 8.7% in 2023, the rate of return demonstrates a significant increase in value creation, while maintaining our historically conservative risk profile. In fact, the differential between ROI and the weighted average cost of capital (WACC) will go from 220 percentage points in 2022 to 400 percentage points in 2028.

In the five-year period 2024-2028, shared-value Ebitda will increase by 45%, reflecting the growing weight of initiatives that not only generate margins for the company, but are also in line with the goals on the UN Agenda.

Along the path towards a “just transition”, we will continue to generate positive effects for all our local stakeholders, with economic value distributed over the 5-year period covered by the Plan estimated at 11 billion euro and investments dedicated to the green transition coming to roughly 3 billion euro.

As regards dividends, we expect a steady annual increase, reaching a 17 euro cent coupon by 2028 (+21% compared to the last dividend paid), with net earnings per share expected to grow by 6% on average each year. As a result, the total shareholder return (TSR), which takes into account both the expected trend in earnings and the dividend yield, stands at an average annual rate of around 11%

 

SUSTAINABLE GROWTH

Our new strategic plan confirms an important commitment to the circular economy and decarbonisation, consistent with the achievement of the 2030 strategic goals. We want to encourage and support the ecological transition of the local areas we serve, with concrete initiatives intended for citizens, public administrations and industrial customers, offering extensive set of plants and the know-how we have acquired in the various sectors of our activity.

At the same time, we will continue to generate shared-value Ebitda, which will rise to 66% of Group Ebitda in 2028, and up to 70% in 2030.

Actions to contribute to carbon neutrality and the energy transition are confirmed: to promote decarbonisation, in line with the 37% emission reduction targets for 2030 (compared to 2019) validated by the prestigious international network Science Based Targets initiative (SBTi), we aim to achieve Net Zero emissions by 2050, by reducing of Scope 1, 2 and 3 emissions by around 90% compared to 2019 and removing all remaining emissions at the end of the path to decarbonisation. The targets involved in «Net Zero» al 2050 are explicitly stated in the Group’s Climate Transition Plan. 

To promote the regeneration of resources, we confirm our adoption of circular business models, with targets to increase recoverable wastewater (to 14.4% of total wastewater in 2028), reduce internal water consumption (-24% in 2028) and increase recycled plastics by 165% (in 2028 compared to 2017, thus exceeding the previous 2030 target of +150%). In sorted waste collection, we expect to increase both quality and quantity, going from 72.2% in 2023 to 77.7% in 2028.

 

INCREASED RESILIENCE

The strategy of a diversified management of the assets in the portfolio confirms our focus on strengthening our three main lines of business, while maintaining their current balance, which has ensured strong resilience in the Group’s results, in all the scenarios experienced over the last twenty years, and a constant and uninterrupted growth in targets based on sustainability, operating-financial factors and service quality.

Regulated activities represent approximately 60% of invested capital to 2028, and thus provide regulatory protection against cyclical demand, inflation and interest rate fluctuations.

In the remaining 40% of the portfolio, which involves free market activities, a strategy based on low risk appetite is ensured by implementing hedging policies on operational risks in managing activities, which have proven particularly effective even in the situations showing wide imbalances in commodity prices experienced in the past.

61% of the investments will be earmarked for regulated businesses, while the remaining 39% will go towards promoting growth in free market businesses. More than half of the investments (2.5 billion, or 54%) will be dedicated to networks. In addition, about 8% of the resources will be used to grasp opportunities for external growth.

The investments will be allocated as follows:

• 2 billion, or 39% of planned investments, will reduce the consumption of natural resources through the development and adoption of circular economy solutions and models
• 1.1 billion, or 22% of the resources allocated in the Plan, will reduce or contain climate-changing emissions mainly through the development of renewable plant equipment, energy efficiency initiatives and projects supporting the transition of our stakeholders
• 2.4 billion, or 47% of total investments, will be allocated to increasing the resilience the of assets under management and initiatives to cope with increasingly frequent and intense exogenous phenomena
• 1.3 billion, or 25% of investments, will be aimed at applying and developing advanced technologies and introducing innovative solutions to gain a competitive advantage in all business sectors in which the Group is active, helping to seize market opportunities and ensure financial sustainability, efficiency and quality.

 

INVESTMENTS

Over the period from 2024 to 2028, the Business plan calls for investments totalling 5.1 billion euro, with a financial commitment 6% higher than the previous strategic document and 46% higher than investments in the last five years: in addition to 4.6 billion in investments directly financed by the Group, almost 500 million will also come from PNRR contributions and resources from other institutions.

Within these operational investments, 2.6 billion euro (or 96% of eligible investments) will be aligned with the European Taxonomy for sustainable projects, thus gaining full access to subsidised sustainable finance instruments, with benefits in terms of financial costs as well. Lastly, 77% of the investment plan (or 4 billion) will go towards initiatives capable of creating shared-value Ebitda.

Overall, 4.6 billion in investments are planned for the period covered by the Plan, dedicated to maintaining the set of plants, and internal and external growth initiatives, including M&A opportunities.

• 22% of investments will contribute to decarbonisation,
• 39% will go towards resource regeneration,
• 25% will be allocated to innovation,
• 47% will be dedicated to improving the resilience of our assets.

In terms of sustainability, about 77% of total investments have been allocated to projects that generate shared value not only for shareholders but for all stakeholders; this meets the targets set by the UN Global Agenda 2030, and supports the increase in shared-value Ebitda to 66% of Group Ebitda by 2028.

 

TARGETS

The Plan to 2028 defines the specific goals the Group aims to achieve in order to create economic and social value in a sustainable way and ensure the long-term success of the company.

EBITDA

The new Business plan confirms and reinforces growth in overall Ebitda, which will reach 1,700 million euro by 2028. The projects included in the Plan work towards an overall structural growth in Ebitda coming to 475 million euro, exactly in line with the targets set in the previous Business plan, with a 7% average annual growth rate. Internal development, with 375 million euro in Ebitda over the period covered by the plan, represents the main lever and will be fuelled by the development investment plan, expansion in volumes and customers on liberalised markets, efficiencies and the tariff adjustments defined by the Authority on all regulated activities. In line with the Group’s track record, a contribution to growth in Ebitda amounting to 100 million euro will also come from M&A transactions, thus continuing to expand the company’s scope of operations, generating significant synergies and benefits for local communities as well. This growth will more than offset the loss of non-recurring business opportunities totalling 170 million euro over the period covered by the plan.

Il “Shared-value” Ebitda

By 2028, the CSV Ebitda will account for 66% of the Group’s total Ebitda, rising to 70% in 2030, following a path with a medium- and long-term outlook that generates concrete benefits for the areas and communities served, alongside the company’s own development.

The projects set out in the new Plan to 2028 will make it possible to shape a path of growth consistent with the ecological transition targets to be met by 2030: these targets are measured against industry indicators that summarise the areas of carbon neutrality and the circular economy, so that for each one it is possible to verify how the target to 2028 is consistent with the goals required to meet the 2030 objectives.

DIVIDEND POLICY

In light of the positive preliminary results for 2024, the entire dividend policy was once again revised upwards, expecting to pay a dividend set at 15 eurocents per share in June 2025, up 7.1% compared to the 2023 coupon paid in 2024, as against the 3.5% growth expected in the previous Business plan (14.5 eurocents).

The pace of increases in dividends to 2028 will therefore be higher than projected in the previous Business plan: in addition to the increase of 1 eurocent per share in 2024, an increase of 0.5 eurocents is expected for the following years, reaching 17 eurocents in 2028, which guarantees an average yield of approximately 5% and offers full visibility of the prospective dividend in each year covered by the Plan.

FINANCIAL SOLIDITY

The Business plan to 2028 intends to maintain our strong financial position, by continuously monitoring all risk factors and an attentive cash flow management.

Thanks to a solid balance sheet, attentive management of working capital and the adoption of risk management practices, our financial strength will allow us to achieve our strategic goals and generate a positive operating cash flow that will self-finance almost all investments.

The 2024 year-end results show a Net debt/Ebitda ratio at 2.5x, compared to the all-time high of 3.3x, a figure that confirms the Group’s sound financial fundamentals.

Operating cash flows are expected to grow additionally, supporting investments, dividends and M&A expansion, preserving financial solidity with a Debt/Ebitda ratio at 2.8x in 2028, leaving room for other investment projects not included in the Plan.

This flexibility will be allocated following the Group’s usual prudent criteria, which is: M&As to create value (with non-dilutive multiples on synergistic core businesses), and fully authorised investment projects with a risk/return profile consistent with the current portfolio.

 

VIDEO CONFERENCE TO PRESENT THE NEW BUSINESS PLAN

On 23 January 2025, a video conference was held in Bologna to present the new Business plan to 2028.