External growth

The model was designed to be "open" to external growth, with an inclusive governance that allows the group of shareholders to be widened, taking in new shareholders in exchange for the contribution coming from their business activities. The Group's diversified set of shareholders, unique in the multi-utility sector, facilitates this kind of expansion.

The strategy of expansion through M&As represents an important source of value creation. Since the transactions were carried out with non dilutive multiples, shareholders can rely on the extraction of synergies (which lead to the creation of value) from mergers that make the most of scale economies and cross selling. In the past, this strategy has guaranteed an average increase in the Ebitda of merged companies coming to +25% in less than 5 years.

The strategy of external growth through M&As marks the transactions with "Mono-business" target companies and "Multi-utility" companies.

In the first case, Mono-business companies mainly include those involved in free market activities (waste treatment and energy sales) and generally owned by private entrepreneurs, which allows a transaction for a "cash" acquisition. As regards the geographic scope, even though the market is national and not local, Hera concentrates its areas for potential expansion along the Adriatic coast for activities in Commodity sales. In the waste treatment market, instead, the scope is national, since plants that are close to the customer are strategic (to reduce costs in logistics). Hera is indeed the nation's leader in this sector, by quantity of plants and volumes managed.

In the second case, Multi-utility companies are mainly owned by local authorities (Municipalities), with geographically localised activities that often concern concessions for services (water, waste collection, gas and electricity distribution). The geographic scope involves areas bordering with the reference area, i.e. North-Eastern Italy (Emilia-Romagna, Marche and Triveneto regions), since the speed and amount of the synergies that can be extracted from mergers are increased by geographical proximity. These transactions can take the form of mergers with the "partner" company in which the owners generally prefer to become Group shareholders. These transactions are usually carried out with exchanges of shares between the parties.

Hera will continue to focus on M&A transactions, selecting investments that offer potential synergies and are complementary to the Group's current activity portfolio: particular attention will go so selecting the targets (multi-utilities, in addition to companies involved in energy sales and waste treatment) in parts of the nation held to be strategic for each activity.

The projections included in the new plan to 2028 are based on a market analysis and the Group's track record. The goal for 2028 is for growth through M&As to contribute to Ebitda with +100m€.

The ways in which this target will be reached depend on the opportunities offered by a market which is still highly fragmentary and contains an excessive number of small-medium enterprises with a sub-optimal size, that have difficulty in remaining effectively and efficiently on the market. The wide range of options concerns all sectors in which the Group is active, i.e. multi-utilities, energy sales or waste treatment.