Message from the Executive Chairman of the Board
Investments continue, as Hera can leverage a growing EBITDA

The sharp increase in the price of energy commodities experienced in the third quarter of 2022 and the WACC cut made by the Regulator starting from January did not prevent Hera from achieving growth at the consolidated EBITDA level in the first nine months of 2022. 

A policy of well-balanced diversification of the businesses in the portfolio and careful management of the risk profile enabled Hera to achieve sound operating performance even in an unfavourable scenario. Therefore, Hera could keep executing its investment plan, while also seizing additional opportunities through the purchase of significant quantities of gas in storage that guarantee the security of supply to customers for the current thermal year at predefined conditions.

At the same time, the Group maintained a solid financial profile, creating the premises to continue along a healthy long-term growth path in the years to come, despite the persistent uncertainties in the external scenario.


Dear Shareholders,

in the third quarter of 2022 we experienced a further worsening of the operating context, even compared to the difficult scenario we already had to face in the first half of the year. At the end of August, in a crucial time for supply activities ahead of the winter season, gas and electricity prices reached peak levels. The sharp rise in energy commodity prices fuelled the ongoing inflationary drive, triggering the need for a series of restrictive measures of monetary policy. 


Despite such a challenging scenario, Hera nevertheless managed to neutralise a large part of the negative impacts on its financial performance

The results of the first nine months of 2022 indicate that Hera’s business model and reactive capacity allowed us to contain the effects of external variables to a significant extent. With an EBITDA reaching 874.8 million euro, up 2.4% compared to the first nine months of 2021, we can state that the growth trend continues uninterrupted. 

As of today, we have therefore already achieved 44% of the Plan’s five-year EBITDA growth target to 2025, being just over a third of the way along the timeline. An achievement that becomes even more remarkable considering that the scenario assumptions on which the Plan was built did not foresee the critical levels of key variables that we experienced in 2022.

The solid EBITDA performance leverages on a balanced business mix and consistent portfolio policies

Relying on a well-balanced portfolio between regulated and liberalised activities, as well as on a management of operations geared to maintaining a low risk profile, Hera succeeded in neutralising the slightly negative performance of the Energy Area due to the price peaks of energy raw materials, while leveraging the positive margins achieved in power generation from waste treatment plants. 

We have not only counterbalanced the energy commodity inflation, but also the WACC cut in regulated activities

The 20.4 million euro increase recorded at consolidated EBITDA level reflects the contribution of both organic and external-line growth: together with the positive results from the circular economy business, they have more than compensated the lack of 16.5 million euro compared to the first nine months of 2021, due to the WACC reduction set by ARERA for the new regulatory period started in January 2022.

Relying on visible EBITDA, we made significant investments

Since we could count on this natural hedging of the business, which offers visibility on the resilience of the consolidated EBITDA, we were able to continue maintenance investments and carry out significant development investments, particularly in the Environment area. Therefore, in the first nine months of 2022 capex reached the total amount of 446 million euro, a 15% increase compared to the same period of the previous year. 

In the third quarter, we also seized the opportunity to make almost a billion euro of extraordinary investments. We continued the storage of additional quantities of gas already started last June, investing 878 million euro to secure 700 million cubic meters of gas. This stock allows us to guarantee supplies to customers at already defined price conditions throughout the thermal season. We have thus avoided exposing ourselves completely to the uncertainties of the spot market, while keeping the way open for arbitrage opportunities.

In parallel, we continued our M&A path with transactions whose value totals 64 million euro, focusing on the waste treatment business and energy sales companies.

Prudent provisions made, with the aim to protect against fluctuations of energy commodity prices 

In line with the policies adopted in the first half of the year, counting on a growing EBITDA, in the third quarter we also had room to charge prudent provisions, exclusively with the aim of covering the risks of price increases in energy commodities, as the quality of trade receivables continues to be good, with average collection times remaining substantially unchanged over the last two years and an unpaid receivables rate that in the retail segment stays below 1%. Any difficulties in coping with the sudden increase in bills have been managed by granting time extensions to about 246 thousand customers who have requested them since the start of the pandemic, thus following a stakeholder relations management philosophy that has already proved rewarding.

The decrease in Net Profit essentially reflects higher Depreciation and Amortisation 

Net Profit post minorities, at 214.1 million euro, compares with a similar figure of approximately 231 million euro, net of 56.2 million of positive Special Items for the same period of 2021. This change at the bottom line mainly reflects the increase of 25.3 million euro in the item “Depreciation, Amortisation and Provisions”, as a result of the investments made and prudent provisioning policies.

Net Debt-to-EBITDA ratio stays under the threshold of 3x  

After the investment of more than 878 million euro for the purchase of gas to be stored, the Debt-to-EBITDA ratio amounts to 3.62x. Since Hera has already contracted such gas at defined prices for sale to end customers by the end of the thermal season, it has no impact on the Group’s financial risk profile in the medium to long term. Excluding stored gas, we would in fact have a Debt-to-EBITDA ratio of 2.9x.

Recent evidence on the performance of our financials made us even more confident. In that spirit, we are updating our Plan path in a scenario that remains uncertain

These results are therefore a confirmation of how, having a clear strategy, an effective business model and a solid financial profile, we can continue to grow at the EBITDA level without slowing down investments, which are, moreover, the premise for giving continuity to the path of future growth. 

This evidence of the resilience of our performance in very unfavourable scenarios is even more important in a context that remains very uncertain, even though energy prices have fallen back a little from the historical highs of the end of August.

Based on the confirmations that we have received from the results of the first nine months, we are therefore finalising the Business Plan to 2026, which we will present in the early months of next year. We remain focused, as always, on pursuing profitable growth characterised by a balanced risk profile, which will also allow us to provide our shareholders with an adequate remuneration.

Tomaso Tommasi di Vignano
Tomaso Tommasi di Vignano
9 November 2022
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