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Growth policies

The external expansion strategy led to the acquisition of 25% of AIMAGs share capital (AIMAG is a multi-utility operating in Modena and Mantova provinces) in 2009, and to the conclusion of a memorandum of understanding with ACAM, a multi-utility active in La Spezia province, in 2010. The latter transaction could lead to the possible acquisition of a significant ACAM minority share in 2011, as well as a possible subsequent complete integration in 2012 which can be achieved only if the company implements the agreed-upon industrial and financial restructuring process.

As far as energy activities are concerned, the development strategies aim to consolidate the relevant position in the gas industry within the territory of reference by improving the customer care and by expanding the offer to customers with the addition of electricity services (cross selling with the dual fuel offer) in line with European trends. The action in defence of the existing customer base which also aims to achieve growth in the surrounding territories led to a continuous growth of Group results and also confirmed its market position at a local level and the achievement of a significant role throughout the Country.

The development of the electricity supply brought a considerable increase of market share, also in areas not previously supplied with gas services. In 2010, despite the Italian slow economic recovery and increased competition, electricity customers increased by 14.1% (from 335 a 383 thousands) and volumes by approximately 0,7 TWh (from 7 to 7,7 TWh). The rapid expansion of electricity sales (+4,6 TWh in only 5 years) was supported by a balanced strategy of upstream development, which aims at ensuring the necessary coverage from own resources while maintaining a low risk profile, in line with Group policies. With a minority presence in specific joint ventures in the generation activity, together with an indirect investment of 5.5% in Tirreno Power, the construction of an 80 MW cogeneration plant and other projects in renewable resources area, the Group ensured coverage of sales equal to approximately 50%. In addition to own sources, a wide diversification of suppliers and market trading activity ensure flexible total coverage of sales. This strategic approach has shielded the Group from operating risks and allowed to take advantage from the Italian market overcapacity conditions due to the recent economic crisis.

In the waste disposal market, of which Hera is a national leader, the Group strategy focused on strengthening plant structures in order to support the expansion in the market In 2010 the multi-year plan for the updating of the plants was completed. It resulted in the construction of 5 new waste-to-energy plants for unsorted waist, one for hazardous special waste, the expansion of the capacity of landfills and the development of technologically advanced plants to recycle and extraction from waste to energy. This asset base belonging to Hera represents a symbol of excellence, not only in the reference territory, but also insofar as environmental sustainability and the production of electricity from waste is concerned. Furthermore, the expertise gained in the management and construction of waste to energy plants is a particularly significant advantage in a country where many regions must adapt their waste disposal administration to stringent European directives.

In the regulated businesses,Hera has adopted an efficiency and plant development strategy that brought the Group to one of the first places insofar in efficiency and quality of services. This was made possible through improved efficiency and remote control. In fact, about 40 thousand kilometres of water, natural gas and district heating networks managed by the Group are controlled through a single technologically advanced centre, thereby rendering the processes less costly and more efficient. Furthermore, thanks to the mergers with other surrounding multi-utility companies, in these sectors Hera has achieved significant critical mass and continuous, uniform presence in the territory of reference, covering a large part of the Emilia-Romagna region and the northern portion of the Marche region. These conditions place the Group in a strong position from which to participate in the imminent auctions for the distribution of gas.

The completion of the large plants, the efficiency levels reached and the strong development of all the markets engaged in free competition, allowed the Hera Group to consolidate in a few years a plant capacity that solidifies its current market positions and the prospects for further development throughout all its core businesses. With reference to economic and financial results, in 2010 the signs of this strategic framework that resulted in further improvement in the economic results and financial profile were evident. This underpins the forecasted increase in dividends and the returns to investors in the future, despite the lingering of the economic difficulties in Italy.

 
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