Slide 1: Acquisition of remaining 51% stake of Agea
Acquisition of remaining 51% stake of Agea. Preparing 100% merger of Multi-utility operation of AGEA in HERA GROUP Conference call held on 28th July 2004
Slide 2: Index
Executive Summary Agea The Acquisition Combined Hera + Agea Synergy Potentials Conclusions Index 2
Slide 3: Executive Summary
TOPICS HIGHLIGHTS Strategy • Within sector consolidation process, Hera aims at expanding into surrounding territories (to exploit synergy potentials), seeking 100% operational integration with complementary multiutility companies deploying Hera unique business model. The Deal • (1) Acquisition of 51
Slide 4: Agea: Overview
Description of Agea Shareholdings Other Municip. Agea operations: 11.2% Gas sale and distribution * Hera 43.1% Geothermic district heating and cogeneration Waste collection and treatment Water integrated business Other services (Public Lighting and other services) Municip. Ferrara 45.8%
Slide 5: The Acquisition: Step 1 – Acquisition of 49% stake of Agea
1. Acquisition of 49,0% of Agea ( paid 55.2 mln €*) a. 42,0% on October 2003 Agea b. 7,0% end of September 2004: Municip.: 51% HERA: 49% Acosea Water Service Municip.: 24,5% Agea: 75,5% Acosea Reti Water Assets Acosea: 100,0% * On top of the cost of 55.2 mln €, Hera has subscribed an increase of cap
Slide 6: The Acquisition: Step 2 – Spin off Acosea water assets
1. Acquisition of 49,0% of Agea ( paid 55.2 mln €*) a. 42,0% on October 2003 Agea Agea b. 7,0% end of September 2004: Municip.: 51% Municip.: 51% 2. 2 Demerge into two businesses HERA: 49% HERA: 49% (“Water service” and “Water Acosea Gestioni assets”) and Spin off the Water Service “Water assets” in
Slide 7: The Acquisition: Merge of Agea and Acosea Gestioni into Hera
1. Acquisition of 49,0% of Agea ( paid 55.2 mln €*) a. 42,0% on October 2003 Agea Agea Agea b. 7,0% end of September 3 2004: Municip.: 51% Municip.: 51% 2. 2 Demerge into two businesses HERA: 49% HERA: 49% HERA: 100,0% (“Water service” and “Water Acosea Gestioni Acosea Gestioni network”) and Spin of
Slide 8: The Acquisition: Sale of Acosea Impianti
1. Acquisition of 49,0% of Agea ( paid 55.2 mln €*) a. 42,0% on October 2003 Agea Agea Agea b. 7,0% end of September 3 2004: Municip.: 51% Municip.: 51% 2. 2 Demerge into two businesses HERA: 49% HERA: 49% (“Water service” and “Water Acosea Acosea Gestioni Gestioni network”) and Spin off the Water S
Slide 9: The Acquisition: Integration of Agea into Hera model
Agea Agea Agea 100,0% 3 Hera Hera Hera Hera Rimini Rimini Ravenna Ravenna Municip.: 51% Municip.: 51% HERA: 49% HERA: 49% Acosea Acosea Hera Hera Hera Hera Imola-Faenza Bologna Bologna Gestioni Gestioni Water Service 4 Water Service Acosea Municip.: 24,5% Hera Hera Hera Hera Ferrara Ferrara Forlì-Ce
Slide 10: The Acquisition: Agea merged into Hera
The Spin off and sale of Acosea Impianti increases Agea ROI from 6.6% (2003) to 9.8% (Proforma 2003). Agea Acosea Cash Agea Pro_ 2003 Impianti Consid. Forma 2003 Proforma** Net Equity 108,8 (25,3) 83,5 NFP 49,5 (24,3) (19,1) 6,2 * Net Invested Capital 158,3 (49,6) (19,1) 89,7 ROI 6,5% 9,8% *The Net
Slide 11: Hera equity value for the share swap
• The purchase agreement determines the consideration in shares to be paid by Hera to the Agea and Acosea Gestioni shareholders for their stakes (respectively 51% and 24,5% stake). • The purchase agreement sets Hera’s equity value for the share swap ratio based on the average market price recorded i
Slide 12: The Acquisition: The valuation
AGEA • Agea equity value defined for the share € mln swap ratio is equal to 135.0 mln € 200.0 (determined applying Hera EV/Ebitda of 190.0 180.0 7,44x to Agea Ebitda and taking into 170.0 157 consideration also the effects of the spin 160.0 150.0 135.0 off and sell of Acosea Impianti). 140.0 130.0 1
Slide 13: The Acquisition: Number of Shares to be Issued by Hera
Exchange ratio Hera / Agea Equity Value Agea (€ mln) 135.0 N. of share Agea (mln) 1.502 Value per share Agea (€) 89.903 Equity Value Hera (€ mln) 1,336.47 N. of shares Hera (mln) 793.202 Average value per Hera share (€) 1.685 N. of Hera shares for each Agea share (swap ratio) 53.36 N. of Hera share
Slide 14: The Acquisition: Transaction Enterprise Value
• The Transaction, (acquisition of 100% of Agea, 24.5% and of Acosea Gestioni, spin off and sale of 75.5% of Acosea Impianti), has an Enterprise value of 140.5 mln €. 160,0 15.0** (19.1) 0.9 140,0 120,0 100,0 68.9 80,0 9.8 140.5 143.7 60,0 40,0 65.0* 20,0 0,0 Acquisit. of 24.5% Acosea 51% Agea Total
Slide 15: The Acquisition: Transaction Implicit EV/Ebitda 2004 Multiple
• The implicit EV/Ebitda ’04 multiples of the transaction are better than Hera market multiples Implicit Multiple EV/Ebitda of the transaction EV transaction (€ mln) 140.5 Ebitda Agea 2004 post spin off (€ mln) 24.0* Implicit Multiple EV/Ebitda Agea 2004 5.9x … based only on core business … Hera mar
Slide 16: Combined Hera + Agea
Gas Gas District Heating Teleriscaldamento Volume Sold Volume sold M.ni MC 2.000 GWht 400 204 1.838 124 365 1.634 1.500 300 +51,5% +12,5% Target Ebitda E2004 241 Consolidated 1.000 200 € mln 500 100 24 300 0 0 276 Hera Agea Cons. Hera Agea Cons. Waste treated Waste Ambiente Water Volume sold Ciclo I
Slide 17: Synergy potentials
• The business portfolio of Agea is similar to Hera’s and synergy potentials have been indentified in the following areas: • Lower Procurement cost Gas EBITDA EBITDA E2007* E2007* • Customer loyalty and further expansion (dual Fuel 40 comercial proposition) € mln 4 • Expansion of business: District
Slide 18: The Acquisition: Hera Shareholdings post transaction
Current Shareholdings Hera Post Transaction shareholding Hera (Pre-Bonus Share) (Post Bonus Share)* Other minori Comuni Municipalities Comuni ex Municipalities ex Agea ex- Acosea Acosea Soeglia Comuni of Municipalities ex- Agea 0,8% 0,6% Soelia 0.6% 0,3% Ravenna 0.8% 0.3% Comuni 7,5% Municipalities
Slide 19: Conclusions
Agea represents a further step in the sector consolidation process and Hera development. Agea has a complementary business portfolio that strenghtens: Hera market position synergy exploitation and organic growth Agea represents a full operational merger into Hera business model The merge
Slide 20: Back Up
_— Back Up HEA
Slide 21: Agea: Overview
Turnover 2003 Breakdown EBITDA 2003 Breakdown * OtherAltri servizi services Other Altriservices servizi 8% 13% Energia Energy Water Servizio Idrico Energia Energy Water Servizio Idrico 45% 22% 47% 37% Ambiente Waste Ambiente Waste 18% 10% Main key performance data 2002 2003 Gas sold Mln mc 189,9 203
Slide 22: Agea: Reclassified Financial report 2003
Profit & Loss - Euro (mln) 2002A 2003A Balance sheet - Euro mln 2002A 2003A Tangible 39,4 162,0 Sales 89,0 130,6 Intangible 10,0 21,1 % change n.a.. 46,7% Financial 21,6 9,2 Other revenues 8,4 9 Fixed assets 71,0 192,2 % change n.a.. 3,6% Turnover 97,4 139,3 Stock 2 3 % change n.a.. 43,0% Receivable