Slide 1: Investors presentation – Inaugural Eurobond Issue
Investors presentation Inaugural Eurobond Issue 1
Slide 2: Agenda
Agenda ■ Company and strategic overview ■ Business portfolio overview ■ Financial highlights
Slide 3: Company and strategic overview
Company and strategic overview Maurizio Chiarini - CEO
Slide 4: Company overview – Milestones
Company overview Milestones Hera is created from the consolidation of 11 public utility companies in the Emilia Nov. 2002 Romagna region, a first time ever in Italy Public offering and listing on the Italian Stock Exchange (44.5% of share capital free Jun. 2003 float) Acquisition of 42% of Agea Ferr
Slide 5: Company overview (cont.)
Company overview (cont.) Hera is Italy’s largest regional utility and a leading provider of integrated multi-utility services in the country . . . ■ The Hera Group focuses on: Size – 2004 revenues (€Mln) ■ Waste Management (Urban and Special 1,917 Waste) 1,816 1,757 1,639 ■ Water (Integrated cycle)
Slide 6: Company overview (cont.) – leading position in core businesses
Company overview (cont.) . . . and with a leading position in all core businesses Hera’s market position after Meta merger… …. and repositioning in the utility sector High Incumbent 2004* Ranks Enel ENI Multi-utility Waste population served Sales in Italy 2.4 1st players (mln) Local Energy Edison Pl
Slide 7: Multi-business portfolio with diversification
Company overview (cont.) A multi-business portfolio that guarantees an optimal diversification in a sector with a low regulatory risk WATER 2004* WASTE 2004* Distributed (mln m3) 231 Urban waste (mln tons) 1.6 Population served (mln unit) 2.2 Special waste (mln tons) 1.4 Customers (K unit) 930 Popul
Slide 8: Conservative risk profile with regulated and competitive businesses
Company overview (cont.) A conservative risk profile thanks to a well balanced portfolio comprising regulated services managed under “concessions” and businesses managed under free competition ■ Balanced businesses among regulated (with Weight of regulated activities on Group Ebitda long term conces
Slide 9: Unique shareholding and organisational model
Company overview (cont.) Hera unique shareholding and organisational model have promoted internal and external growth ■ Hera expansion has been carried out through Shareholding 1,016.75Mln shares mergers of utilities owned by local authorities committed to controlling 51% of share capital, as specif
Slide 10: Six years of strong track record
Company overview (cont.) “Six” years of strong track records ■ Hera recorded strong growth in all main 2002-2004 Ebitda growth (€Mln) economic metrics mainly thanks to internal 25 (8) growth drivers . . . 34 (audited) 49 (€mln) 2002 2003 2004* Cagr 02-04 292 Sales 1,099 1,241 1,520 17.6% Ebitda 192
Slide 11: Strategic overview and main business targets
Strategic overview and main business targets Hera strategy focuses on creating stable and predictable cash flow… Mission CONTINUE CONTINUE TO TO CREATE CREATE STABLE STABLE AND AND PREDICTABLE PREDICTABLE CASH CASH FLOW FLOW Strategies Growth in the Synergies and Sustainable core businesses rational
Slide 12: Business portfolio overview
Business portfolio overview Roberto Barilli – General Manager
Slide 13: Business portfolio overview – main business targets
Business portfolio overview – main business targets Complementary and balanced business growth by maintaining the peculiar balance between the regulated and competitive activities WASTE: Ebitda 2004 and E2008 by Business (€Mln) ■ Construction of 4 new WTE plants (+330K tons) Gas Electricity and cons
Slide 14: Business Portfolio Overview – Waste Management
Business Portfolio Overview – Waste Management Sector and perspectives Ebitda 2004 and E2008 (€Mln) 221 ■ Legal increase of tariff not fully implemented in Italy implying remuneration below legal terms 59 URBAN URBAN ■ Few Italian players with insufficient plant capacity Hera benefits from an agreed
Slide 15: Business Portfolio Overview – Water
Business Portfolio Overview – Water Sector and perspectives Ebitda 2004 and E2008 (€Mln) 140 ■ Fragmented market among players with inefficient dimension 52 ■ National inefficient network (leakage > 40%) 77 ■ Returns on invested capital below law standards due to 66 11 late ATO establishment 54 ■ Ta
Slide 16: Business Portfolio Overview – Gas
Business Portfolio Overview – Gas Sector and perspectives Ebitda 2004 and E2008 (€Mln) 135 ■ Increased competitive pressure in sales activity from 7 national player causes pressure on margins 100 106 22 ■ Dual Fuel proposal offer is a key competitive advantage 71 ■ Commodity cost and availability be
Slide 17: Business Portfolio Overview – Electricity
Business Portfolio Overview – Electricity Sector and perspectives Ebitda 2004 and E2008 (€Mln) 63 4 ■ In 2008-2009 sufficient production capacity is expected to come on stream creating a more liquid market 24 ■ Strong competition from national foreign players ■ Long term distribution concessions 12
Slide 18: Business Portfolio Overview – Other services
Business Portfolio Overview – Other services Sector and perspectives Ebitda 2004 and E2008 (€Mln) Other ■ Co-leader in Public Lighting, a business run on long term District Heating basis 10 Public lighting 8 ■ District Heating is a long term relationship. Tariffs follow gas trends 7 6 ■ Hera is amon
Slide 19: Business portfolio overview – New Plants
Business portfolio overview – New Plants Each plant will contribute to Ebitda by around €10Mln on a 12 month basis in 2009 ■ 3 CCGT new plants and 4 WTE Plant entering into operations in 2005-2008 repowering of existing plants contribute to Ebitda growth for €83Mln Plants 2005 2006 2007 2008 CCGT Sp
Slide 20: Financial Highlights
Financial Highlights Giovanni Barberis – CFO
Slide 21: Financials highlights – income statement
Financials highlights Since its inception, Hera has recorded a steady increase in the main financial figures. . . Income Statement €Mln 2002 2003 2004* Cagr 02-04 E2008 Cagr 04-08 Sales 1,099 1,241 1,520 17.6% 2,625 14.7% Ebitda 192 242 292 23.3% 597 19.6% Ebitda margin 17.4% 19.5% 19.2% 21.8% Ebit
Slide 22: Financials highlights – balance sheet
Financials highlights . . . while maintaining a solid financial structure Balance Sheet €Mln 2002 2003 2004* E2008 Net capital invested 1,119 1,339 1,625 2,500 Shareholder’s Equity 866 895 1,064 Net Financial Position 254 444 561 Net Debt/Ebitda 1.7 1.8 1.9 ~1.6 Debt/Equity 0.29 0.49 0.57 ~0.60 * IA
Slide 23: 2005/2008 expected growth breakdown by drivers
Financial highlights – 2005/2008 expected growth breakdown by drivers Hera expansion strategy is based on conservatives assumptions ■ Synergies driven by further cost cutting, 2004 – E2008 Ebitda Build up (€Mln) efficiency improvement and personnel reduction enabled by new initiatives and Meta 77 me
Slide 24: Investment plan of €1.4bn to sustain growth
Financial highlights – Investment plan of €1.4bn to sustain growth 2005-2008 investment plan focused on strengthening the asset base ■ After three years of sector consolidation (Agea, E2005-E2008 Investments Breakdown (€Bn) CE Ravenna and Meta), the 2005-2008 business plan will focus mainly on stren
Slide 25: Cash flow vs capex
Financials highlights – Cash flow vs capex Strong operating cash flow starting already from 2007 ■ The benefits from synergies, organic growth and Meta consolidation contribute to an increase in the operating cash flow starting Capex vs Operating Cash Flow already in 2005 Cash flow €mln ■ Operating
Slide 26: Financial strategy and targets
Financial highlights – Financial strategy and targets Conservative financial strategy in line with current rating Commitment to maintain: RATIOS ■ a solid financial structure AND EXPOSURE ■ an adequate level of committed facilities to cover all TO RISK maturing obligations and contingent liabilities
Slide 27: Background and outline of the offering
Background and outline of the offering Issuer HERA S.p.A. ■ Increase average debt maturity Issuer ratings S&P: A+ (Negative), Moody’s: A1 (Stable) Issue amount €500Mln ■ Diversification of sources Maturity [10/15 years] ■ Secure debt cost Coupon Fixed rate ■ Access international Listing Luxembourg i
Slide 28: Key Investment considerations
Key Investment considerations Italy’s largest regional utility Leading market position – #1 player in the Italian Waste Sector and #2 player in the Water sector Reduced business risk – strong, predictable and growing cash flow generation Solid and growing margins Very supportive shareholding structu