RoadshowRoadshow presentationpresentation

99--20 20 JuneJune 20032003

IndexIndex

Introduction to the IPO

Overview

Business

Financials

Strategy

Conclusion

Introduction to the IPOIntroduction to the IPO

4

Issuer HERA S.p.A.Global Offer size Up to approx. 305,000,000 Secondary shares (c. 39%)Over-allotment option Up to 45,750,000 additional Secondary shares (15% of G.O.)

Price range 1,192 – 1,408 (€)Indicative Capitalisation 940 – 1.110 (mln €) Indicative offering size (preGS) 364 – 429 (mln €)

Offering Italian retail tranche (min. 30% of G.O.)Offer to domestic and international institutional investors-Reg.S(max. 70% of G.O.)

Selling shareholders Current HERA shareholders (approx. 140 municipalities)

Retail benefit Bonus shares 1:20 if held for 12 months (1:10 for employees and other reserved categories)

Lock up 18 months for HERA and current shareholdersListing Milan Stock Exchange - (MTA), Blue Chip Segment

OfferOfferinging summarysummary

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Joint Global Co-ordinators UniCredit Banca Mobiliare and ABN Amro Rothschild

Co-global Co-ordinator Banca IMI

Joint Bookrunners Banca IMI and UniCredit Banca Mobiliare

Sponsor UniCredit Banca Mobiliare

Financial Advisors Banca OPI, Unipol Merchant

Timetable 9 June – 20 June: Institutional Roadshow & Bookbuilding

15 June: Maximum Price announced

16 –20 June: Italian retail offer

20 June: Pricing

23 June: Allocation and announcement of offer results

By 26 June: Settlement & start trading

OfferOfferinging summarysummary

6

Pre IPOPre IPOPre IPO Post IPO (GS included)Post IPOPost IPO (GS (GS includedincluded))

Comune diBologna

37.6%

Comune di Ravenna11.0%Comune di Forli'

5.4%

Comune di Cesena5.2%

CON.AMI7.9%

Comune di Rimini5.8%

Comune di Imola2.6%

Other pact shareholders

24.1%

Other "non-pact" shareholders

0.4%

Note: all shareholders will reduce their holding on a substantial pro-rata basis post-IPO

Shareholders structureShareholders structure

Free float44%

Public local bodies56%

OverviewOverview

8

OverviewOverviewHERA at a glanceHERA at a glance

The result of a unique integration

Second largest local utility in Italy

Dominant presence in Emilia-Romagna

Substantial scope for synergies from the recent integration

Cross selling, new concessions and acquisitions create growth potential

Well positioned to win market share with ongoing sector liberalisation and consolidation process

Well diversified and balanced business portfolio

Strong financial position and secure cash flow allow significant pay-out ratios

9

Overview Overview Integration process Integration process rationalerationale

Successfully in gathering broad aggregation consensus

Management capable to execute complexintegration

Efficiently scalable organisational model

No single shareholder control

Create a strong player to become a sector consolidatorReach critical mass to compete effectively in a liberalising environmentPursue operational efficiency through scale and best practiceSeek further cross selling potentialsSmooth out seasonality factors

Rationale for integrationRationale for integrationRationale for integration

Efficiencies

Integration

Scale

VALUE

Overview Overview Integration process: Integration process: Group structureGroup structure

HeraRiminiHera

RiminiHera

RavennaHera

Ravenna

HeraBologna

HeraBologna

HeraAmi Imola

HeraAmi Imola

HeraForlì-Cesena

HeraForlì-CesenaLo

cal O

pera

ting

com

pani

es

Service DivisionService Division

Env.t Plants Division

Env.t Plants Division

Network DivisionNetwork Division

Sales & Marketing Division*

Sales & Marketing Division*

* supervises Hera Comm

Hera SpADefine and execute strategyManage activities of business unitsCentralise marketing and sales, procurement and finance functionsCentralise general services (administration, IT, legal, HR)Develop new initiatives and select investment opportunities

Cultivate local franchiseManage non-scale sensitive operational activitiesDevelop efficient customer service and implement quality improvement programmesNetwork maintenance

General services

Open-ended organisational model built to facilitate further integrations

OverviewOverviewIntegration process:Integration process: creation of critical masscreation of critical mass

Turnover (mln €)Turnover (Turnover (mlnmln €)€) Italian local utility companies - 2002Italian local utility companies Italian local utility companies -- 20022002

455

175

152

14061

115 1,098 1,133

0

200

400

600

800

1,000

1,200

Seabo Unica AREA AMI AMIA Altre HERA HERA

2001

Società del Perimetro (“Perimetro”)

2002 1,336

1,1331,041

785

502

341262 240

ACEA HERA AEMMI

ASM AEMTO

AMGA Meta Acegas

2002 Turnover mln €

OverviewOverviewEstabilishedEstabilished presence in Emiliapresence in Emilia--RomagnaRomagna

GDP per capita (2000):

Emilia-Romagna 25,637 €

Italian average 20,165 €

Bologna

Ravenna

AMF

AMI

AMIA

AMIR

AREA

ASC

SIS

Taularia

TEAM

UNICA Forlì-Cesena

Imola

Rimini

Rimini

Imola

Cesenatico

Faenza

Savignano

Lugo

Gas WaterElect. WasteSEABO

OverviewOverviewBusiness breakdown Business breakdown -- 20022002

Turnover - 1,133 mln €Turnover Turnover -- 1,133 1,133 mlnmln €€ EBITDA - 192 mln €EBITDA EBITDA -- 192 192 mlnmln €€

Note: net of internal consumption

Water22.4%

Gas42.6%

Electricity7.0%

Enviroment & Waste25.6%

Other Services

2.4% Water27.9%

Gas36.7%

Electricity4.8%

Enviroment & Waste30.3%

Other Services

0.2%

Diversified sector exposure mitigatesregulatory risks

Business Business

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Business Business GasGas

Distribution and sale of natural gas

Distribution and sale of LPG

District heating and heat management

Other services (public lighting and traffic light installations)

Largest Italian local utility by gas sales (1.5 bln m3 to 670,000 customers)

Significant gas procurement savings (8% discount in 2002/2003)

Competitive advantage based on long-term distribution concessions (until year 2009)

Business activitiesBusiness activitiesBusiness activities HERA key strengthsHERA key strengthsHERA key strengths

Turnover + 526 485Revenues 514 474Gas & LPG 476 433District heating & heat mgt. 24 26Public lighting & traffic lights 14 15EBITDA 63 71EBITDA margin * 12.0% 14.6%

mlnmln €€ 20012001 20022002

+ Turnover = Revenues + inventories + work in progress +other revenues

* as % of turnover

Total volumes sold (mln m3), and customersTotal volumes sold (Total volumes sold (mlnmln mm33), and customers), and customers

266

1,059

296

1,150

296

1,149

2000 2001 2002

Non-eligibleEligible

1,3251,440 1,444

(“ex Deroghe”)

599,208 638,734 667,930 Customers

Financial HighlightsFinancial HighlightsFinancial Highlights

16

32%

68%

56%

44%

74%

26%

2000 2001 2002Elegible Non-elegible

Business Business ElectricityElectricity

Sale of electricity to eligible and non-eligible customers

Distribution of electricity

Production of electricity, mainly through plants associated with other production processes (co-generation, waste-to energy, etc)

Business activitiesBusiness activitiesBusiness activities Key strengthsKey strengthsKey strengths

Significant potential for dual fuel, given dominant position in gasRapidly increasing market share in eligible customer segment in covered area (from 10% in 2001 to 15% in 2002)Flexible sourcing strategy through 5.5% in TirrenoPower (140 MW allocated to Hera) and agreement with Atel (1TW/year for 4 year )Significant portion of electricity produced and sold at attractive CIP 6 terms

Turnover+ 63 80Revenues 62 78EBITDA 10 9EBITDA margin* 15.3% 11.6%

€€ mlnmln 20012001 20022002

+ Turnover = Revenues + inventories + work in progress + other revenues

* as% of turnover

Financial HighlightsFinancial HighlightsFinancial Highlights

Capacity installed (MW)

Construction Operational

New ProjectsNew ProjectsNew Projects Volumes by customer (GWh)Volumes by customer (Volumes by customer (GWhGWh))

491621

948

8.2

80

230

10.3

10.3

20

Inc.Forlì (WTE)

Inc.Rimini(WTE)

Rimini (CCGT)

Imola (CCGT)

Inc.Caviro(WTE)

Fea (WTE)

Interpower

2003 2004 2005 2006 2007

140

17

599,033

433,230496,547

616,860

470,343528,297

2001 2002

WaterSewerageTreatment

Business Business WaterWater

Integrated water cycle:

Water collection, purification and distribution

Sewerage

Treatment

Business activitiesBusiness activitiesBusiness activities HERA key strengthsHERA key strengthsHERA key strengths

Among top five Italian players by volume distributed and by users served (2 mln)Additional 3 mln summer residents on the coastThe only Italian company currently operating in 4 ATOsPotential upside from new tariffs schemeWell positioned to continue expansion within the 4 ATOs with no competitor during the safeguard periodLong-term concessions (until year 2012)

Turnover+ 235 256Revenues 210 226Water collection 150 163Treatment 48 48Sewerage 12 15EBITDA 52 54EBITDA margin* 22.2% 21.0%

mlnmln €€ 20012001 20022002

+ Turnover = Revenues + inventories + work in progress + other revenues

* as% of turnover

Financial HighlightsFinancial HighlightsFinancial Highlights Number of customers 2002 in 4 ATOsNumber of customers 2002 in 4 Number of customers 2002 in 4 ATOsATOs

97% 79% 95% MKT share

18

382

1,035

632

412

1,114

728

492

1,171

828

2000 2001 2002Hera special w. Hera urban w.Third party w.

Business Business Environment & wasteEnvironment & waste

Environmental services (collection of urban and special waste, cleaning of public areas)

Waste treatment (treatment and recovery of urban and special waste)

Business activitiesBusiness activitiesBusiness activities Key strengthsKey strengthsKey strengths

Focus on waste to energy at CIP6/”Certificati Verdi”Unique network of high efficient urban and special waste treatment plants with considerable spare capacityProgressive outsourcing of limited value added activitiesWell positioned to gain additional business in all 4 ATOsOpportunities in tax-to-tariff transitionLong term concessions (until year 2012)

Financial HighlightsFinancial HighlightsFinancial Highlights

+ Turnover = Revenues + inventories + work in progress + other revenues

* as% of turnover

€€ mlnmln 2001 20022001 2002

Turnover+ 254 291Revenues 241 278EBITDA 56 58EBITDA margin* 22.2% 20.0%

2,0502,252

2,490

Total volume of waste treatedTotal volume of waste treatedTotal volume of waste treated

27%

38%

15%

15%5% Composit.

Sorting

WTE

Landfills

ChemicalTreatm.

FinancialsFinancials

20

FinancialsFinancialsSummary profit & loss (Summary profit & loss (mlnmln €)€)

+ Turnover = Revenues + inventories + work in progress + other revenues

* as% of turnover

Turnover+ 1,098 1,133 401Operating Costs 746 752 270Labour costs 172 189 50

EBITDA 181 192 81EBITDA margin* 16.4% 16.9% 20.2%

EBIT 83 78 52EBIT margin* 7.6% 6.8% 12.9%

PBT 76 75Tax 40 39Profit (incl. minorities) 37 37Profit margin* 3.4% 3.2%

2001 2002 31/3/2003

21

Financials Financials Summary balance sheet (Summary balance sheet (mlnmln €)€)

* determined on 2002 average Capital Employed (NFP+Equity)

2001 2002 31/3/2003Net working capital 118 117Intangible assets 386 383Tangible assets 642 774Financial assets 39 44Total fixed assets 1,067 1,202Funds & other 169 200Capital Employed 1,016 1,119

Equity 855 865Net financial debt - short term 66 68 86Net financial debt - long term 95 186 192Net financial debt 161 254 278.6Equity & net financial debt 1,016 1,119ROACE* 7.3%

22

NFP 12/2001 Net Profit D&A

Net WorkingCapital &

Investments*

Dividends &Net Equitychanges NFP 12/2002

Financials Financials NFP evolution (NFP evolution (mlnmln €)€)

Strong financial position and robust cash flow generation from current activities2002 increase in investments financed by long term debt2002 main WTE investment fully funded through a no-recourse facility

* Includes changes in the consolidation area

-66ST

33

-95LT

108

-211

-23

-68ST

-186LT161

254

StrategyStrategy

24

StrStrategyategy“In a nutshell”“In a nutshell”

EBITDA margin and ROACE improvement

Revenue growth

Value-based investment selection

Gearing

Strategy themesSStrategytrategy themesthemes Overriding objectiveOverOverridingriding objectiveobjective Performance measuresPPerformanceerformance measuresmeasures

Operational efficiencyOperational efficiencyOperational efficiency

Top line growthTopTop line line growthgrowth

Shareholder return Capital DisciplineCapital DisciplineCapital Discipline

25

StrStrategyategyOperational Operational efficieefficiencyncy

Supply cost reductionFurther savings from scale in gas procurement

Savings in electricity from increase in generation and diversification of sources

Reduction of operating cost through:Natural outflow of approx. 500 employees

Decrease in equipment and services costs

Adopting best practice throughout the group

Standardisation of group IT systems

Integrating waste management network

Integrating water distribution, sewerage and treatment networks

LEVERS FOR EFFICIENCY IMPROVEMENTS

LEVERS FOR EFFICIENCY LEVERS FOR EFFICIENCY IMIMPROVEMENTSPROVEMENTS CUMULATED COST SAVINGSCUMULATED COST SAVINGSCUMULATED COST SAVINGS

2003 2007

Gas Labour G&A IT

26

1,133

2002 2003 5-year target

StrStrategyategyTopTop line line growthgrowth

KEY COMPANY OBJECTIVESKEY COMPANY OBJECTIVESKEY COMPANY OBJECTIVESAVENUES OF DEVELOPMENTAVEAVENUES OF DEVELOPMENTNUES OF DEVELOPMENT

Revenues breakdown

RevenuesComplete service supply in franchisearea through:

leveraging off existing customer base to develop sales of electricity sourced at competitive prices

acquisition of additional gas concessions (e.g. Comune di S. Pietro) and completion of water and waste ATOs coverage

Increase cogeneration and WTE capacity

Further aggregate surrounding local utilities (e.g. Geat)

Water23.0%Waste

26.0%

Others2.0%

Electricity7.0%

Gas42.0%

Water19.0%

Electricity17.0%

Waste24.0%

Others3.0%

Gas37.0%

2002 5-year target

27

StrStrategyategyInvestments in core businessInvestments in core business

Expected cumulated investments should total approx. 850* mln € in the next 5 years, including more than 360 mln € in CCGT and WTE plantsMaintenance capex amounts to approx. 90-100 mln € per year

2003 2005 2007

Gas Electricity Water Waste*

Cumulated investments in Core Business 2003-07 mln €

Cumulated investments in Core Business Cumulated investments in Core Business 20032003--07 07 mlnmln €€

160

530

820

* includes WTE investments

*includes approx. 30 mln € in Other Services

28

Ebitda 2002 Efficiencies OrganicGrowth

OrganicEbitda 2007

NewInitiatives

Ebitda 2007

StrStrategyategyProfitability Profitability improvementimprovement

Efficiencies on existing business based on conservative rationalisation assumptions

Organic growth which is on the low end of the historical trend of core business

New initiatives, of which:

A significant part (Frullo) already locked-in

Other initiatives for which projects and authorisations are well under way

Ebitda Build-upEbitdaEbitda BBuilduild--upup

* Existing plant of Frullo

** Other WTE and CCGT initiatives

***

29

ConclusionConclusionInvestment Investment CCasease

Leading utility consolidator enforcing effective, open-endedorganisational modelSector consolidatorSector consolidatorSector consolidator

Diversified portfolioDiversified portfolioDiversified portfolioWell diversified business portfolio with broad sector exposureand regulatory upside

Capital disciplineCapiCapital disciplinetal disciplineSafe financial profile managed with shareholder-focusedcapital discipline

GrowthGrowthGrowthSubstantial growth potential based on cross-selling to largeexisting client franchise sustained by a huge investment plan

EfficiencyEfficiencyEfficiencySignificant room for (ongoing) cost rationalisation, achievedthrough scale and centralisation synergies

RoadshowRoadshow presentationpresentation

99--20 20 JuneJune 20032003

AppendixAppendix

32

AppendixAppendixIntegration process: Integration process: Key elementsKey elementsIntegration allows compliance with Art. 35 (L. Finanziaria 2002)

Assets

Ope

ratin

g C

ompa

nies

Ass

et

Com

pani

es

Operatingactivities

Perimetro Companies (AMIA, AMIR, AMF, AREA, ASC, SIS, TEAM, UNICA) Mergers

(AMI and TAULARIA)

MunicipalitiesMunicipalities

Pre-existing concessions

Lease payments

100%

min

51%

Operatingactivities

Assets

33

AppendixAppendixFinancial notesFinancial notes

Data based on consolidated accounts 2002 of HERA Group

Integration legal effects from 1 November 2002, accounting and fiscal effects from 1 January 2002

Pro forma 2001 consolidated accounts aimed at:

giving consistency of historical data

reflecting spin-off of distribution network and plants, lease payments in favour of asset companies, provisions for the assets leased to HERA

reflecting the integration of 11 businesses and applying the same accounting principles for over 30 consolidated companies

Accounting principles used for 2002 consolidated HERA Group accounts adopted in the pro-forma 2001 accounts

In 2002 a minor increase in the consolidated area has occurred

34

AppendixAppendixCorporate GovernanceCorporate Governance

Shareholders Agreement, lasting 3 years, comprising 51% of the capital post IPO Limit of 2% participation for shareholders other than local public entities Effective BoD appointment mechanism Broad power to the Board of Directors Extensive executive mandate to Chairman and CEO3 additional BoD members to be appointed by new shareholders post IPO

Hera Corporate Governance is compliant with the Preda Code, adopted on a voluntary basisTwo internal committees set for internal auditing and remuneration controlHera has adopted strict rules, in order to regulate the internal dealings

35

+1 year: when, following mergers among different companies, the number of customers (served by the biggest company participating in the merger) doubles

+2 years: for companies serving a population of over 100,000 or selling more than 100 mln m3

+2 years: for companies with a 40% stake or higher held by private investors Minimum concession period for distribution: 5 years, starting 1 January 2001, extended:

GAS WATER WASTE

HERA Expiring concessions

31/12/2009 31/12/2012 31/12/2012

AppendixAppendixConcessionsConcessions

5 years: if a merger between entities within the safeguarded ATO has occurred and that the merged entities are at least 50% larger than the largest individual business participating in the merger

10 years: if the company covers at least 75% of the population living in the ATO

6 years: if a merger between entities within the safeguarded ATO has occurred and that the merged entities are at least 50% larger than the largest individual business participating in the merger

10 years: if the company covers at least 75% of the population living in the ATO

15 years: if the company covers 100% of the population living in the ATO

Minimum concession period for distribution: 5 years, starting 1

January 2001, extended:

Minimum Safeguard period:

3 years, extended:

Minimum Safeguard period:

3 years, extended: