Gruppo Hera. Activity summary : ISIN Code : IT MSCI Sector : 55 Utilities

Transcription

1 Gruppo Hera ISIN Code : IT MSCI Sector : 55 Utilities Activity summary : Hera S.p.A. engages in energy, water, and environmental operations in Italy and Europe offering services to approximately 2.9 million users. The group was founded in 2002 after mergers involving 11 local public service concerns. It offers water cycle services, including potability, wastewater treatment, sewer services (more than 180 municipalities served and 241 million cubic metres sold); distribution and sale of methane gas and energy, energy savings, district heating, and management of public lighting and traffic lights ( customers, 3.1 TWh sold); and environmental services management (145 municipalities representing 1.7 million tonnes collected, 72 treatment plants including 2 sites focusing on hazardous waste), including waste collection and disposal, city cleaning, thermal waste treatment, and composting. The company also involves in public park maintenance, and cemetery management and funeral services. It serves 170 municipalities in the 6 provinces of Bologna, Rimini, Ravenna, Forli Cesena, Ferrara, and Modena in Italy. Hera develops the energy segment by investing more and more in the production based on renewable sources or equivalent such as cogeneration, waste to energy and biogaz. In 2007, MWh of electricity have been produced from renewable sources (78% of energy produced) and 462,226 MWH of thermal energy including 57.9% from renewable sources. Organisationally, the structure of Hera is based on six Divisions and seven Territorial Operative Companies. The Divisions of the Hera SpA holding company have guidance and coordination functions. The Waste Management, Services and Sales and Marketing Divisions directly manage their operations or production plants. The Territorial Operative Companies are operational within their respective areas and manage those services which more directly impact the end 2009/05/11 Page 1

2 customer: urban hygiene, gas distribution, integrated water cycle and customer relations management via a network of branch operators. In 2007, the Company derived an annual turnover of EUR 2909 millions (EUR 2,364 millions in 2006). The EBITDA was derived from 3 main activities: energy (32%), water (26%) and waste (35%). Other activities represented 7%. Net profit was EUR millions. In 2007, Hera employed an average of 6,699 persons (6,415 workers as of 31/12/2007). 33% operate in the waste management sector and 34% in grid services (gas, electricity, district heating, and water service). 7% are employed in the commercial structure and 7% in other services. Coordination activities absorb 18% of the workforce. As of 31/12/2007, the market capitalisation was up to EUR 3. billions and it was 1.8 billion as of 01/11/2008. The shareholding structure was the following: - Municipalities of Bologna Province: 20.3% - Municipalities of Modena Procinve: 15% - Municipalities of Ferrera Province: 2.7% - Municipalities of Romagna Provinces: 21% - Free float: 41%. On the 11/10/2008, Hera announced that negotiations with Iride and Enìa concluded with a negative outcome due to disagreements on the merger project and due to the impossibility to stretch the timing agreed initially (the 2 companies had signed a Memorandum of Understanding a few months before). 2009/05/11 Page 2

3 Research summary Hera provides a clear demonstration of its willingness to implement best CSR practices. The Company overall performance is good as all stakeholders expectations are taken into consideration. This allows Hera to be one of the best companies in its sector. The main factors of the Company successful strategy are a true governance of non financial risks, a good reporting system and the inclusion of stakeholders expectations in performance reviews. Hera has also been transparent and has answered our questions easily. In order to improve its global performance, the Company should provide a more detailed reporting on some environmental issues. Despite the publication of several indicators, additional information and clear targets in the field of water consumption or air emissions would straighten the global performance. Finally, considering Hera s ambitious development projects, the Company is facing an important challenge to maintain a high CSR performance. Hera has also been confronted to several controversies, including an accident killing 5 people in Italy in Security and customer care will be one of the major challenges in the next coming years. Countries of operation The Company has activities in the Emilia Romana region in Italia only. 2009/05/11 Page 3

4 Corporate Governance Hera has implemented a governance model that reflects its profile and history, as the Company was publicly traded in 2003, and that shows its willingness to implement best practices and to promote a strategic approach of sustainable development. Shares are mainly owned by municipalities which result in the large presence of their representatives among members of the Board of Directors. Shareholder representatives have also been nominated, none of them holding more than 5% of shares. The Board has defined formal rules of functioning and it has set independent audit, remuneration and nomination committees. Hera has well identified all the relevant non financial risks it has to cope with. Yet, no detailed mapping of those risks has been disclosed. Hera has progressively implemented procedures to control and pursue the identification of non financial risks, including their integration into the internal audit framework. Compared to the issues the Company points out, it appears that its ethics policy is relevant and exhaustive. Hera s financial communication is transparent and essential information for investors is available in English. 2009/05/11 Page 4

5 Human Resources Hera has published a detailed and exhaustive reporting covering all relevant issues related to human resources. Moreover the reporting procedures have been independently verified. The Company performance is good and reflects the global strategy communicated by the Company. Thus one can observe that the Company has successfully managed the continuous growth of its workforce while taking into consideration at the same time its global strategic objectives and the reorganization process of its activities. In particular, the Company has implemented measures to reduce the number of low skilled workers in conjunction with unions while avoiding the recourse to restructuring programs. Thus, training and development policies should continue to be a priority, as it as recently been pointed at by trade unions. Besides, from a global perspective Hera has developed a proactive and innovative policy regarding social dialogue with the conclusion of an agreement on CSR and Health and Safety issues. Hera has also implemented good working conditions, for example in the fields of benefits sharing and equal opportunities. A health and safety management system has been implemented globally and related risks have been mapped. The Company performance regarding health and safety remains quite good but could be further improved in the coming years. 2009/05/11 Page 5

6 Environment Hera has adopted a relevant environmental policy and has disclosed a detailed mapping of environmental impacts related to its activities. An environmental management system certified to ISO has been implemented but it seems to only cover waste management activities, also progressively certified to EMAS. The environmental reporting is rather complete as the main key indicators and data have been disclosed. Yet there are some important data missing, such as historical data on GHG emissions or information on the use of chemical substances (there is no information about the impact REACH). The main strengths of the Company are the performance related to energy efficiency and recovery. Also it is worth to note that the Company is in compliance with the main environmental directives. Thus Hera performs well globally but it can improve significantly, mainly as regards the publication of information, data and targets. Hera is confronted to numerous litigations in relation with environmental issues and provisions have been made in this area. 2009/05/11 Page 6

7 Relations with External Stakeholders The Company CSR performance as regards its relations with external stakeholders is good as Hera has well identified the related risks and opportunities. Thus the Company has implemented a formal system for the selection of suppliers and subcontractors based on Environmental, Health and Safety (EHS) criteria (but few details have been communicated on this issue). As for relations with the communities, the main thing to notice is the implementation of innovative measures to consult stakeholders that are potentially affected by impacts arising from the construction of new factories, and to report real-time atmospheric emissions. The Company has developed initiatives to reduce visual, odour and noise nuisances. The Company has also defined policies and implemented measures to improve its commitments toward its customers in the field of CSR. But these procedures are not systematic and should be spread out on a larger scale. The key issue of quality and security seems to be well managed. Yet it is important to notice that the related procedures had to be reinforced following and accident that occurred in /05/11 Page 7

8 This report is for information purposes only and should not be considered as a solicitation to buy or sell any security. This report is based upon information collected by EthiFinance and according to the EthiFinance.s proprietary methodology for assessing corporate social responsibility. The information is based on sources EthiFinance believes to be reliable. This report should not be communicated without our agreement. EthiFinance shall not be liable for any results from its usage. EthiFinance 2009, all rights reserved. 2009/05/11 Page 8