ACTION 2: UTILITALIA

As previously mentioned, the Hera Group would not be what it is today without the effective, competent, and appropriate management executed by its executive leadership over the years. The management has demonstrated reliability and a transparent relationship with both the community and its shareholders. Hera’s significance for our region, providing quality services at fair and logical costs, can largely be credited to its leadership, including previous Chairman Tommasi di Vignano and actual Christian Fabbri, previous CEO Stefano Venier and actual Orazio Iacono, COO Roberto Barilli, CFO Jens Hansen, IGM Salvatore Molè, CEO Herambiente Andrea Ramonda, WM Emidio Castelli, GC Mila Fabbri and others. However, public administrators—such as the ten mayors of municipalities with significant shares (see Consob 3.1, “Content and Organs of the Pact”)—have largely played a secondary role, granting the management considerable freedom. The dimensional growth model pursued by management has delivered benefits up to a certain Optimal Territorial Area (ATO), beyond which structural issues may arise, necessitating a strategic adjustment. In recent years, AzioneHera has advocated for a strategic rebalancing of the mix between dimensional growth and growth through expertise. This involves acquiring smaller companies with specialized know-how in engineering and product innovation, aiming to develop manufacturing capabilities for resale and drastically reduce debt. Such a strategy would help ensure long-term economic and financial stability, which has recently been lacking. Recognizing the high level of management performance, we propose several actions to enhance the positive local impact of the company’s activities, prioritize qualitative growth through expertise, and reduce the focus on quantitative growth through size. These steps would also help the region recover its weakened manufacturing capabilities, which have been compromised by significant debt, partly due to profit distribution as dividends rather than reinvestment.

A company’s large size and substantial revenue enable the creation of economies of scale, which can be achieved in three ways: Organic internal growth, by developing in-house expertise. External growth, through mergers and acquisitions. Creation of purchasing groups among companies, even competitors. In a global economy, the third method—developing a coordinated development model via purchasing groups among publicly owned companies—could be expanded. This approach would achieve the necessary critical mass to create economies of scale without the burden of added overhead.

Example: Energy Experience Consortium This model has been successfully applied in the Emilia Energia Consortium, established by Unindustria and LegaCoop. In the Italian public utilities sector, multiutilities could negotiate better prices for goods and services (e.g., gas, machinery, credit, fleets) by creating informational synergies between entities such as:

– Regulatory Authority for Energy, Networks and Environment (ARERA) is an independent administrative authority of the Italian Republic that has the function of promoting the development of competitive markets in the electricity, natural gas and drinking water, district heating/cooling and waste disposal sectors, mainly through the regulation of tariffs, access to networks, quality standards of services, the functioning of markets and the protection of customers and end users. The resources for its operation do not come from the State budget but from a contribution on the revenues of regulated operators.

– Agenzia Territoriale dell’Emilia-Romagna per i servizi idrici e i rifiuti (ATESIR), public entities managing water services.

– The Ministry for Business and Made in Italy, providing estimates for procurement (e.g., natural gas volumes).

– ANCITEL, a purchasing platform for municipalities, supervised by the National Association of Italian Municipalities (ANCI).

– UTILITALIA, the association representing public utility companies, which should prioritize citizen interests financed by utility bills.

For example, consolidating municipalities’ natural gas needs could result in larger total procurement volumes, enabling better pricing through framework agreements with major suppliers. This concept of aggregating municipal purchasing requirements could extend to all goods and services at virtually no additional cost.

A cooperative consortium model coordinated with ANCITEL would complement Hera’s M&A strategy, used in recent years to grow incrementally. The cost savings achieved through this approach could be used to reduce debt and lower the associated interest payments.

Investments in research and development (R&D) require significant capital to discover innovative products and processes. Given that Italy has lost its leadership in several manufacturing sectors, it would be beneficial to pool resources among publicly owned multiutilities to strengthen collective capabilities. Potential collaborative R&D areas include: Development of materials to replace asbestos cement in pipelines, as an alternative to polyethylene, which has limitations due to biofilm generation. Research into clean combustion of natural gas, an area where Italian Nobel laureate Carlo Rubbia was forced to pursue work abroad. By combining efforts in such critical areas, multiutility alliances could restore innovation leadership, reduce dependence on outdated technologies, and strengthen the region’s competitive position globally.

The fact that the Hera Group is a private company and majority-owned by public capital would allow the introduction of principles of equity and solidarity into the statute that would allow revenues to be redistributed in the territory that originated them, using local suppliers as much as possible. Since the group’s sources consist for the vast majority of bills paid by citizens and companies that use the reference territory, for over half with regulated contracts, the investments should remain as much as possible in the territory in a proportional manner, using mostly local suppliers. Current suppliers based in countries with non-equivalent tax systems (tax havens) should be identified, particularly for the services sector (financial and banking institutions), and/or with production in countries where labor costs are not comparable to ours. The underlying concept is that politics must act to make laws against those companies that have evasive behaviors and do not operate in a real competition regime. If the territory does not offer local suppliers with the required characteristics and quality standards, it is necessary that the large public multi-utilities could create an industrial alliance to finance companies in a production logic of the supply chain, jointly investing in the development of companies that have a non-evasive type of taxation, taking into consideration manufacturing companies with warehouses and real workers, and not commercial trading offices. This also applies to administrative and financial services, favoring collaboration with local credit institutions with a territorial vocation such as cooperative credit, savings banks, Italian post offices, to give work to the territorial system, which is thanks to that which, by paying the bills, originates the company’s revenue.

The top management of the company is appointed by the owners, who in Hera spa are the Mayors of the Municipalities, who in turn are the representatives of the citizens: it is clear that those who represent the citizens are responsible for the execution of an Industrial Plan capable of balancing the collective interest of the citizens and the particular interest of the shareholders. For this reason, the guidelines with the political directions of the industrial plan should be made public to the citizens. The Program with the guidelines of AzioneHera is very clear and understandable to all. The guidelines of the current Industrial Plan of the Hera Group should be provided by the public owners, and not by the Board of Directors who deliver them to the owners, who then ratify them with an “act of faith”. For this reason, Azionehera proposes to our political administrators in the Municipalities having shares in the multiutility that they present to their citizens a program with their ideas and proposals for industrial policy both for the Hera Group and for all the other subsidiaries.