GUIDE LINES

Hera Spa is one of the best public utility service companies at international level.
The Group serves  daily, over 3,6 million customers in the fields of:
– environment: collection of municipal waste and treatment of urban and industrial waste;
– networks: distribution of water, gas and electricity and district heating;
– energy: gas and electricity trading and sales, electricity generation.
Strengths of multiutility are related at the following aspects:
– wide and diverse customers portfolio: cities and states, even the most rich ones of Italy, like Friuli, Veneto, Emilia Romagna, part of Marche and Abruzzo are offered with this service;
– over 50% of contracts value are regulated, conditions that offer a stable and tangible cash flow;
– the percentage market share in deregulated activities is not negligible;
– there is a high releasable synergy potential from business management among similar companies.
– a first-level plant budget is available: assets supplied in numbers and technology content puts the company at the sector’s service through competitive advantage ;
– stable, experienced top management, aware of world’s economy sudden constant changes, enabling to anticipate and previously organize its actions.
Hera Spa is a company owned by a majority of public capital, where the main decisions are taken by the shareholders meeting with the majority of votes being on charge of municipalities shareholder’s agreement. Senior corporate positions, BOD and voting Trust Committee (the 10 mayors of the municipalities with major holdings) confront each other constantly to keep governance balances to meet the need of services and infrastructures, on the public side, and return on investment, on private investors ‘ side. This task is very complex for the following reasons:
1. the company manages basic and necessary public utility goods;
2. more than 50% in value of the services are regulated i.e. made to public bodies of the community such as hospitals, schools, barracks, etc.;
3. the distribution networks at the time were made for free by public bodies, and were built with public money, from citizens’ taxes;
4. the top management is publicly appointed.
The company is positively inserted in the environmental scene in which it operates, thanks to:
– constant conversations with public managers of areas in which they are often members;
– community interaction with initiatives like HeraLab, HerAcademy aimed at comparison with companies, associations, schools and educational institutions and vocational guidance;
– shareholders’ meeting, when shareholders have the right to freely express their views and proposals, and can personally interact with top management and shareholders public administrators;
– a carefully managed corporate website willing to provide full accounting of the Group, with both synthetic and analytical data, presenting in a pleasant way the very aspects, facts and results of an often complex and diverse reality. From this website, one can also interact with the company’s various departments and relevant areas, always receiving a ready answer to questions of most diverse areas.We hold the executive management performed by the executives as to be effective, valid and appropriate, in past and present years. From top positions – Chairman, CEO, CTO and CFO – on, we hold the management, to be competent, reliable, reporting fairly and with  a sense of innovation and transparency. Thanks to its management, Hera Group is an important reality for our country to be proud of and to trust in.
The underlying feeling, which expresses a modest opinion on behalf of Azionehera Association, is that the political leadership of ownership resulted to be little present. The management’s performance has filled this gap, with competence and credit, but the role of reaffirming the principle of common interest regarding, particularly, the shareholders, lies within the 10 Majors part of the municipalities shareholder’s agreement. The observations that we would like to do as Azionehera are therefore addressed to the mayors, because it is their responsibility to provide the industrial guidelines.

In light of the aforementioned, we would like to address to the Mayors of the municipalities members of Hera some managerial remarks, which concerns actions that the management obviously knows and certainly already partially implements it on a daily basis.  The issue here is how to pursue certain aspects, namely, the level of “depthness” of certain actions instead of others, under the background scope of aiming to keep the company’s gravity center on the original territory.

1. Evaluate some possible strategic guidelines concerning market evolution in a, in general, adverse situation, distinguished from decreased consumption:
2. Seek providing customers with the best service at a logical cost. Hera Group could consider positioning regarding competitors aiming “green economy” and heavily invest in capital goods and infrastructure, state of the art technologies. Then one wouldn’t think twice on offering the lowest possible cost when it comes to the health of the environment and its region.
3. Seek organic and external growth particularly in the technical fields to get to an integrated structure in the areas of business sectors.
   This allows the company to sell both the distribution service and the “implementing know-how” required for the network’s construction and maintenance.
4. Seek investing resources of profits generated in capital expenditures for investments in capital goods and assets, enhancing the security value in the long run instead of a high dividend policy.
5. Reduce bank debt, to save more resources for general taxation. Where possible and on equal terms, as much as possible, borrow from institutions included in the reference area circuits (eg. Cassa DDPP, Iccrea Banca, Acri Casse di Risparmio) to optimize benefits for the community.
6. Opening of the capital to a public partner as the Fondo Strategico Italiano di Cassa Depositi e Prestiti (Italian Strategic Funds of Deposits and Loans). This would allow the opening of lines of credit at subsidized interest rates for long-term infrastructure investments, favoring revenue on the main amount level rather than revenue in interest portion.
7. Share profits to employees with a distribution plan of action, with the provision that they cannot resell it as long as they remain employed.
   Employees will have the opportunity to elect up to four colleagues -one for each business-unit as a Board Advisor, who will be voted for on the basis of a warrant program. The adviser will be allowed to attend meetings with the electricity, gas and water systems Authority, in Atesir and Utilitalia.
8. Promote the meeting of members in stages, separating the cognitive and confrontation moments of the deliberative ones. This would place the Group forefront in the members’ participation rights, constituting the first and only case of its kind. It should be included on Municipalities Civil Rights services performed by the Group, summarize the issues to be discussed and stimulate discussions at least twice, prior to the annual meeting of shareholders.  In all cases, it would be transposed to Dir. 2007/36 / EU, which tends to remove obstacles to the “shareholders’ participation”, enabling voting and communications regarding the shareholders’ meetings agenda through e-mail.
9. Spread the public offer plan culture among customers. In order to facilitate the procedures for participating of shareholders’ life as also required by the Shareholders Rights Directive, and encourage a better comparison among associates, it is  foreseen:
10. “Libro Soci” (Shareholders’ Register)  available to shareholders in electronic format for free, subject to the requirement of non-disclosure of names of shareholders in compliance with privacy laws.
11. Allow individual shareholders to submit proposals on the institutional website,  create an official special section dedicated to the dialogue between shareholders, in a “forum” appropriately moderate, offline and outside the corporate website.
12. Inform customers by means of communication bills informing the corporate form of Hera Group and the alternatives on how to become a shareholder from the listed companies, without asking for any kind of public savings in any form, direct or indirect.
13. In the field of waste management, point waste recycling and reuse, gradually reducing waste and transforming it into energy, solution applicable mainly to biomass and hospital waste products. The idea here outlines a differentiation between an operator and a machine, where, here, the process would be carried out automatically with mechanical sorting lines, such as those proposed by innovative local companies such as Plasticsort of Imola.  Estimate the possibility of implementing on existing plants the insertion of a plastic presorting station upstream from the furnace entrance, adjusting the combustion temperature with a methane spear to balance the changes in temperature. The shift in mindset from a “differentiated recycling” to a “differentiated selection” would provide the following benefits:
    1. a single undifferentiated dumpster would greatly simplify the lives of citizens.
    2. With an automated mechanical sorting, the waste is better selected and drastically reduces the non-recoverable percentage due to “mixing”. Today it holds a very high rate of around 40-50%, being crushed and incinerated, with the cryptic name of waste fuel (CDR combustibile da rifiuti ).
    3. Hera SpA would acquire a competitive advantage by implementing in-house such plants, that would make the company a world leader in terms of service quality in the industry.
14. Create scale economy simply by making partnerships and agreements with multiutilities even competing at national level. This could take place at the research & development departments and through the creation of groups of raw materials purchase, perhaps coordinated by public bodies such as ANCI and related  computer platforms such as Ancitel, and even, Utilitalia. These partnerships would allow for the typical advantages of mergers and acquisitions without the burdens and costs that often arise from such processes, such debts, and without the disadvantages caused by difficulty of harmonization between IT systems.
15. Develop technical know-how for organic growth by developing internal techniques to design turnkey systems as:
    – Small, medium and large incinerators,
    – implementing automated  sorting plants;
    – implementing water purification and micro purification through citizens channels;
    – central cogeneration from biomass, wind, geothermal, hydraulic;
    – development of Totem technology from Engineer Mario Palazzetti;
    – acquisition of technology from ‘Rubbia’ method of combustion of methane;
    – acquisition of compostable chain.
16. In a situation where the political entity sets a law to which the resources distributed by the subsidiaries are bound for institutional purposes, a series of works that represent the ABC of civil society can be done, such as:
    1. construction of fountains in city squares.
    2. Supply of “clean kit” consisting of brooms, shovels, bags, gloves, masks and harnesses to recognize those in need who receive aid and support from the municipality and who are willing to return the help offered.
    3. Recover the role of the “street sweeper” to rebuild the relationship between Hera and the community, from the streets on, being able to information citizens on how to control the differentiated collection, which also protects and restore control over the territory.

1. WATER BASIC MINIMUM GUARANTEED
   Minimum water consumption per capita free. For civil customers every individual shall be entitled to 50 liters /day of potable water for free. Over this threshold, the price of drinking water increases disproportionately. This is due to the fact that the right to water is as an extension of the right to life.
2. DRAINAGE POINTS REGISTER
   Implementation of a registry updated of collection and drainage points. Along with technicians of public and private sector institutions (Regione Emilia-Romagna, Atesir ex Ato, Autorità del Bacino del fiume Po, etc.), it is appropriate to make an updating of both registry of collection points and a reshaping of royalties concession for collection, particularly for non-sustainable activities. Eg. Golf Course (requires on average over 300 square meters of water a day during high temperatures season), snow cannons (about 100 square meters a day), mineral springs, soft drink bottling plants, etc. The concept is to provide a model for those who “takes up huge amounts of water, are to be charged for this “.
3. DISCHARGE POINTS REGISTER
   Likewise it is appropriate to make an updated registry of discharge points, and a reshaping of fees and penalties for discharges of potentially polluting activities, particularly of productive activities, and the discharge of waste water in civil whitewater canals, in the historic centers. A green tax on pesticides and herbicides, which often end up in groundwater and surface waters should also be included. The concept is an updating over the control principle of “who pollutes, pays.”
4. INDEX OF WATER NETWORK LOSS 
   Set the economic management indexes to make efficient the water system. Today the water network wastes water, electrical energy and purification chemicals for about 30%.
5. NETWORK STATE OF MAINTENANCE REPORT
   It is appropriate to provide to the customers’ community and shareholders a report over the state of the managed networks, tracking the lines indicating a life cycle end that requires special maintenance, and at the same time, providing for an ordinary and extraordinary maintenance plan with relative costs and coverage plan. Parameters that express the minimum investment rate in the ordinary and extraordinary maintenance of networks should be set. The indexes are based on sales and dividend shares.
6. PERSONNEL REMUNERATION POLICY
   Remuneration policies and personnel. The salary for executives and top positions must not exceed twice of the municipality’s Mayor of a population greater than 500,000, and in any case, within the limits of 310 000 euro as expected from Decreto Monti and it is defined by the Renzi government. The difference between the current and the proposed remuneration will be distributed to raise the wages of workers, particularly, the ones who perform hard services and under dangerous and uncomfortable conditions (exposure to sewage stench, replacing vanadium filters in incinerators, etc.).
7. PERSONNEL CROSS COMPETENCE TRAINING
   A combination of paid positions within the Group or parent, subsidiary or affiliate is not possible. For a period of time of 100 hours per year, executives must perform field operational services, as assistants to other employees who perform operational services, as ‘hands-on’ working: working in different roles in an end-to-end way so one can better understand the potential problems and be able to solve them better, as actually happened in the case of the American company Waste Management.
8. GREEN ATTITUDE 
   Seek the criteria of “cost-effectiveness and profitability,” bearing in mind the principle of prudence in the protection of human health and the environment, through forms encouraging the use of state of the art available technologies. The principle to be followed when choosing the investment is to cause the least impact on the health of citizens and the environment. For this we need to introduce new laws in order to:
   encourage the use of eco-packaging with biodegradable packaging and incineration processes without releasing dioxins and furans. The yellow, blue and black bags, distributed to customers from multiutilities will have to be made with environmentally friendly materials, that is, from plants and compostable originated so that when incinerated or dumped in landfill they don’t negate pollution.
   Imposing a limit to the number of polymers (PET, PVC, PE, PP, etc.) deployed for the various types of rigid and flexible packaging in order to simplify the recycling.
   Focus on machinery biological treatment by recycling the waste prior on recover poles over incineration and landfilling.
   Seek “cost-effectiveness and profitability,” policy bearing in mind the principle of proximity, whereby the waste should be handled and treated in a place as close as possible to that in which it is originated. This is due to the fact that the transport to treatment centers that are far away costs much higher and since the cost is calculated over the rates charged in the bill, this cost is paid by customers. In addition to the economic point of view, there is also a civic equality point of view, according to which every community must offer equal opportunities regarding public services. Under the principle “who pollutes, pays” it is already regulated, under the regulatory aspects and already accepted as correct, that municipal politics would introduce the legal requirement that would state that the community that produces waste should also ensure it has the facilities to treat them or assure this with the closest companies existing in the reference area.
9. TAX EQUITY
   Check at EU policy level, the possibility of imposing restrictions for suppliers to companies that evade taxes. I.e., the possibility of introducing, in the by-laws of the public administrations and societies over a majority of votes, restrictions to the public capital investments in tenders to companies that evade directly or indirectly the general taxation of the analogue country by transferring it to the tax office in a country belonging to the “black list”, i.e. in tax havens, performing, therefore, transfer pricing.
   Check at EU policy level, the possibility of imposing restrictions for suppliers to companies convicted and fined for unfair practices. I.e., the possibility of introducing in the by-laws of the public administrations and societies over the majority of public capital of the restrictions to the public capital investments in tenders or to those companies producing goods and services that were guilty of charge over serious crimes, as happened to some big credit institutes (istituti di credito.)
   Commit the resources collected by public bodies in interest rate or share amount only for institutional purposes of the subsidiary to which they are generated. The concept is that the money generated from dividends or from the sales of shares cannot be used to organize film festivals or festivals nor other forms of “circensem”, but must be invested in services and infrastructure such as the arrangement of water network, the construction of purifiers and reservoirs of water supply, and the introduction of good practices.
   

Control of Hera Group is now effectively on the hands of the Board, presenting the guidelines of the industrial plan to the comitato del sindacato di voto, (vote agreement committee) i.e., the mayors of the 10 municipalities with significant holdings who only have the time to sign it. Today we must rebalance this relationship, ensuring the public ownership to provide the guidelines to industrial policies to the top management, which is appointed by public shareholders. This demands that when one votes for someone who is running for mayor, they should also include in their electoral program guidelines for the industrial policy to portfolio companies that will control on behalf of citizens, as representatives. These guidelines must be clearly represented on corporate websites either of investee companies, so that its civil networks may be known in advance, either by shareholders or by the citizens. As long as citizens aren’t aware of this knowledge and don’t demand to be consulted over their own civil networks of their own Municipality, there will be no one who will do this for us.