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Introduction

Introduction

In the first half of 2010, the Hera Group recorded additional growth in all operating results until net profit, despite the fact that Italy’s macro-economic situation is still affected by a serious global financial crisis. The results achieved benefited from the economic contribution of plants started up, as well as from the contribution due to the usual organic growth factors in both regulated and deregulated activities.

The contribution of new plants started up was however, a partial expression of the real potential: the  waste-to-energy plant in Modena was stopped for about one month in the first quarter for normal annual maintenance works, and the waste-to-energy plant in Rimini was started up at the beginning of June. Moreover, the new 80 MW cogeneration plant in Imola has mainly operated in generating heat and benefitted from the favourable winter weather trend. As for electricity generation, the plans recorded low generation levels due to the unfavourable price levels on the energy market.

The low level of electricity prices and the better conditions in the national methane gas supply market were underlying causes of a reduction in turnover achieved. A drop procurement costs resulted in an increase in both profitability in the deregulated energy businesses and profitability in the percentage profit at consolidated Group level. These results highlight the positive contribution of the strategies pursued in the balance upstream development of energy activities to cover only part of sales to end clients.

The growth strategy on deregulated markets, which was supported by a solid trade structure, an effective cross selling policy and an efficient customer assistance service, continued in the first half as well, to support the growth in electricity sales, confirming the sound coverage of the deregulated markets. Thanks to cooler winter temperatures, an increase in volumes of gas sold was recorded due to higher consumption, especially by residential customers.

Waste disposal recorded growth of approximately 8.1% commercialized waste, thanks to the recovery of levels of industrial production, favouring a recovery in demand for waste treatment from retail and business clients. These levels of business were supported due to the strengthening of the treatment plant capacity with the new WTE plants coming on stream. The positive growth was therefore influenced by the reduced possibility of using the plants in landfills, given the difficult access of vehicles due to snowfalls this winter.

Even the concession managed activities for the distribution of energy, collection of urban waste and integrated water services contributed to the growth in profit in the first half, mainly due to the tariff adjustments in accordance with the national legally guaranteed returns and the new tariff systems. Specifically, the national authorities established tariff levels for this year based on the revaluation of assets due to the adoption of a exact measurement system of the invested system instead of the “parameter-based” system used in past times.

Lastly, the external line development strategy also contributed to the improved results. This strategy resulted in lower leasing fees for gas and district heating networks acquired in 2009.

The operational results for the half year improved with respect to the same period in the previous year, thanks to the contribution of all strategic business areas (Waste Management, Energy and Networks) of the Group, with the help of all growth factors, both internal and external. Moreover, these developments supported the growth of the Group consolidated net profit, in spite of the increase in amortisation and financial charges, which were respectively influenced by the operation of new plants e dall’aumento dell’indebitamento netto che č passato dai 1.788,4 milioni di euro del giugno 2009, ai 1.970,6 milioni di euro del giugno 2010.

In the first half, the Group financial situation also benefited from the generation of positive cash flow deriving from operational management and the reduction in investments linked to plant development. These effects partially offset the effect of payment of dividends and profit pertaining to minority interests (DPS of Euro 8 cents per share) and reconfirmed the soundness of the Group’s financial structure.

Operations during the first half of the year reconfirmed the soundness of the competitive positions in free market businesses and provided greater visibility to the growth trend for all Group activities envisaged by the business plan. Moreover, through the disposal of a minority share in Herambiente (equal to 20%, with an option of reaching 25% by the end of the year) concluded in July, the foundation was built to pursue additional growth opportunities for the Group.

 
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