InvestorNews

In the new Plan’s figures, structural components drive growth
Preliminary data for the year just ended indicate a net profit increase of 4%, therefore above 460 million euro, with a leverage ratio remaining at a very low level, below 2.6 times: this proves how Hera managed to compensate for the continuous reduction in contributions from temporary opportunities with structural growth factors. We succeeded in taking full advantage of the opportunities provided by the SuperEcobonus and tenders for the supply of energy in profitable segments in recent years. This has enabled us to generate a cumulative EBITDA of approximately 900 million euro – resources that now allow us to start 2026 with a low level of leverage.

The new Plan not only excludes temporary opportunities in its starting year but does not incorporate them in the following years either, except for minimal, historically recurring contributions. Therefore, it relies on growth drivers with a high degree of certainty and visibility.

From the distinctive features of the multi-business model, we capture opportunities for low-risk growth
The growth strategy leverages a diverse set of drivers, which enable us to create value while maintaining a low risk profile.

The 400 basis points of excess
return over the weighted
average cost of capital is a
target we consider achievable,
considering the nature of the
levers we have identified to
drive our growth.

As a well-developed multi-utility company, we can count on economies of scale and synergies, benefit from cross-fertilisation between different business areas, and seize diverse opportunities, given the wide range of activities in which we operate – all of which feature highly fragmented competitive structures. Last but not least, we can present ourselves as an integrated operator of targeted utility services, reaping the benefits of a more loyal customer base.

Our business portfolio catches a number of macro trends that are becoming increasingly clear​​

The opportunities for growth
are evident for an operator,
such as Hera, capable of
providing effective responses to
new needs.

In terms of business strategy, we have a clear understanding of the main trends that may impact the three areas in which Hera operates. We have therefore formulated the most appropriate actions to gain new market shares and greater efficiency, with the aim of creating value.
In Water, significant investments are urgently needed given extreme weather events caused by climate change and in line with the new, more stringent standards required by the Regulation to bring about significant improvements over the current state of infrastructure in Italy. Therefore, our investments will be based on greater innovation and digitalisation to promote the reuse of this fundamental resource, by improving depuration and sewage processes as well as ensuring the continuity of supply by reducing leaks.

In the Energy area, according to the updated scenarios in the Integrated National Energy and Climate Plan and in line with the forecasts of the Transmission System Operators, Snam and Terna, gas in Italy will continue to meet around one third of total demand in 2040, despite the expanding use of energy conveyed by the electrical grid. These scenarios recognise that gas infrastructure will therefore remain a key element of the Italian energy system. In this context, we will focus our investments on improving the reliability and efficiency of the networks, while at the same time making them fit for purpose to accommodate new gases. We will also encourage the development of district heating systems, wherever possible, and the expansion of the electrical distribution network to meet the demands of electrification of consumption and increasingly widespread generation. On the energy sales front, we will focus on responding to decarbonisation needs by increasing VAS services, in line with the electrification of consumption, and developing renewable energy projects dedicated to our customers.

Lastly, in Waste, where EU directives require greater circularity, and in an Italian context with significant plant under-capacity, we will leverage our solid know-how and broad base of 6,500 customers to expand in terms of assets and increase intermediation, intercepting the growing demand for higher value-added services. Counting on Aliplast, which stands out for its production of high-quality recycled plastics, we will also enhance resource recovery and regeneration activities. Moreover, we plan to complete the building of the Imola FiB3R plant, dedicated to carbon fibre recovery and reducing the use of virgin material. In the special waste segment, the Group aims to expand the customer base and services of Global Waste Management, including through M&A deals and new industrial partnerships. Lastly, as leaders in the remediation and decommissioning sector, we will seize the growing opportunities for environmental restoration projects.

We grow by investing where our services provide an effective response to the demand for greater sustainability and circularity
Accordingly, at the top of our agenda there will be initiatives aimed at creating value for shareholders by strengthening asset resilience; a strategy capable of maintaining a low risk profile in our multi-business portfolio while achieving increased sustainability in our operations.

Leveraging this effective
strategic outline, we can confirm a
double-digit TSR.

Under the 2025-2029 Plan, we expect the growth to be based strictly on a broad set of recurring drivers, including the physiological driver of M&A, without the contribution of temporary opportunities that had boosted earnings in 2024 by 63 million euro. The weighted average structural growth rate in Earnings per Share will be 6%. This factor, combined with an average dividend yield that remains above 4%, despite the strong share price appreciation over the past year, allows us to project an average annual shareholder return of around 10%.

We are strengthening shareholder remuneration in terms of quality, visibility and weight of the dividend
The quality of the Total Shareholder Return reflects the structural nature of the expected 6% earnings growth. Another factor strengthening the TSR is the revised earnings distribution policy, which envisages a steady increase in the dividend per share to 19-euro cents by 2029.
This level of distribution continues to represent the floor, or minimum basis, of our policy. In the event of earnings benefiting from business opportunities that cannot be predicted today, Hera will always offer its shareholders the opportunity to share the fruits of the positive results of the individual financial year through higher remuneration.

We wish to stick to that prudent approach which has been the fundamental prerequisite for achieving continuous growth over time
Hera’s 2025-2029 Plan has all the elements needed to ensure that potential impacts from external factors, such as inflation and interest rates, will continue to be neutralised, with the aim of catching all the benefits from business growth drivers. Mostly during the several crises we have been through in our history – whether they were economic, financial, health or energy crises – we have always managed to keep growing because we have consistently followed strict risk management policies. In the future we will continue to leverage a well-diversified multi-utility portfolio, capable of fully recovering inflation, building on the investments made over the past decade to make our assets increasingly resilient to climate change. We will continue to fully hedge interest rate risk while sterilising commodity price fluctuations with careful hedging measures.
Sustainability will hence continue to shape the way we create value. This is proven by 2.6 billion euro invested in resilience, 2.0 billion euro in circular economy initiatives, over 1.4 billion euro in innovation, and 1.3 billion euro dedicated to decarbonisation, which will lead us to Net Zero by 2050.

The 5.5-billion-euro investment
plan thus delivers benefits not
only in terms of new returns,
but also in terms of enhanced
sustainability and circularity.

We have a clear agenda also regarding capital allocation
Our priority will remain to invest in further developing the business portfolio and enhancing its efficiency and returns.
At the same time, we will allocate excess cash across our different areas of activity to seize the most promising growth opportunities and maintain an adequate balance between the different portfolio components.
Although the new Plan implies total investments that are 39% higher than those carried out in the previous five-year period, we will ensure that sufficient room is preserved to fund additional development opportunities while maintaining adequate financial flexibility.
Out of the overall 5.0-billion-euro investments, net of 0.5 billion euro of non-repayable grants, half will be used to fund maintenance costs, 2.1 billion to support organic growth, while the remaining 0.4 billion will be dedicated to M&A transactions. The year 2026 also begins with a valuable deal just signed – that of Sostelia, major Italian private player operating in the treatment of industrial and residential water – which is fully in line with our expansion strategy in the Waste sector, especially in wastewater treatment, which continues to be a form of “structural” growth for us as a business model – in this case mainly providing synergies in both the Water and the Waste area.
The largest share of investments, around 60%, will be focused on regulated businesses, which are characterised by high capital intensity and a low-risk profile.

Investments will drive higher returns, both in terms of ROI and EBITDA
Through the execution of this investment plan, we expect to succeed in increasing the portfolio's ROI to 9.3%, despite the unavoidable decrease in regulated businesses, as a result of WACC cuts set by the Regulator.
In terms of EBITDA, we expect to reach 1.76 billion euro by the end of the Plan, with a boost from all businesses in our portfolio.
This allocation will enable us to project ourselves into 2029 with a very balanced business mix in terms of EBITDA breakdown between Networks, Energy and Waste.

This balanced allocation of
contributions to consolidated
EBITDA across the three
business segments will be a
key factor in keeping our overall
risk profile under control.

We create value also through a mindful reinvestment of free cash flow
We will achieve our goal to have a balanced distribution of the various businesses in our portfolio through the partial reinvestment of the 1.7-billion-euro Free Cash Flow from the Energy area into Networks, which will absorb 1.5 out of the total 2.9 billion dedicated to development investments and M&A. The Energy segment itself will absorb 0.6 billion euro as reinvestment, out of the total 1.7 billion euro of FCF generated, while 0.7 billion euro will be dedicated to shareholder remuneration through the dividend. Lastly, we will entirely reinvest in the Waste area the 800 million FCF that we expect to be generated there.

In fact, we will carry out a
“securitisation” of the excess
cash flows generated, which
will contribute to strengthening
the RAB in the Networks.

A fully funded Plan, which enables us to maintain a low leverage ratio and keep the door open for additional investment opportunities
Counting on strong cash generation, over the Plan period we will be able to cover both investments and dividend distribution while preserving significant financial firepower to fund additional investments. We expect the Debt-to-EBITDA ratio to be at 2.6x at the end of 2029, in line with the level forecast for the end of 2025, even considering the strong investment plan and the increased dividend policy.
Thus, we will continue to have significant means available to finance M&A transactions, which we will only undertake at non-dilutive multiples. We will also be able to take advantage of re-leveraging opportunities to continue expansion in our core businesses and territories, as well as to carry on with new projects already fully authorised.
Given the solid starting point of the sound results achieved in 2025 and relying on the proven structure of our strategy, we are confident that we can reaffirm our commitment to continue creating value for our shareholders. A commitment that starts with our proposal of dividend distribution of 16-euro cents for fiscal year 2025 – an amount exceeding expectation – to reach a 2029 dividend of 19-euro cents, which represents an increase of 27% compared to the last dividend paid in 2025 for the results of 2024.