Viale C.BertiPichat2/4-40127Bologna Viale Capitale Socialeint.vers. C.F./P. IVA Reg.Imp.BO04245520376 .+39051287112F. +390512814036 T. Holding EnergiaRisorseAmbiente www.gruppohera.it € 793.202.121 Hera s.p.a.

SR sustainability report 2003 sustainability report 2003 SR Viale C.BertiPichat2/4–40127 Bologna Capitale Sociale int. vers. T. +39051287112F. +390512814036 C.F./P. IVA Reg.Imp.BO 04245520376 Holding EnergiaRisorseAmbiente € 793.202.121 Hera s.p.a. sustainability report 2003

SR Hera S.p.A. page 2 SR sustainability report 2003 ancient African proverb it fromour children ancestors: weborrow the Earth from our donotinherit We (ancient Africanproverb) ehopeyouenjoyreadingourReport! We responsibility. resources providingfurtherinsightintocorporatesocial available. Hereyoucanfindothercompanydocumentsand the referencesprovidedhereatfoot.ACDROMversionisalso can directlycontactthecompanyorganizationconcernedusing version eitherinItalianorEnglish.Shouldthisnotsuffice,you www.gruppohera.it, fromwhere youcandownloadtheonline For furtherexplanationorinformation,youcanvisitourwebsite attheendofReport. defined intheglossary tospecialists”are terminologies: termsnormally“reserved The presentationadoptscommonlyuseddefinitionsand management andcommunicationtool. achieving sustainability, andinparticularoftheReport,aGroup implementation ofthethree-yearprojectaimedatgoal of 2003, alsopresentstheresultsoffirstyear of The presentReport,whichdetailstheHeragroup’s activitiesin aspects ofsustainability:economic,socialandenvironmental. appropriate andadvancedtooltofullyintegratethethree (hereafter theReport),whichappearstobemost Last yeartheHeragrouppublisheditsfirstSustainabilityReport e-mail [email protected] www.gruppohera.it Tel. ++39051287147-Fax287145 Information : HeraS.p.A.–Quality, SafetyandEnvironmentManagement,VialeBertiPichat,2/4-40127Bologna • the reader Note for

Hera S.p.A. page 3 SR sustainability report 2003 note for the reader This document is the property of Hera S.p.A.. All rights reserved. No part of this document may be reproduced unless previously authorized in writing. 2nd edition Prepared by: Hera S. p. A. - Bologna Graphic design: Koan Moltimedia Photographs by Ippolito Alfieri, Cesare Cicardini For the publication of this report we have used Cyclus Offset 100% recycled ecological paper and digital photographs: the photographic films are not recyclable. Publishing project coordinated by Comunicazione Hera S.p.A. Attilio Ruffo, Marina Bellei 4.7 4.6 4.5 4.4 4.3 4.2 4.1 3.3 3.2 3.1 2.8 2.7 2.6 2.5 2.4 2.3 2.2 2.1 1.5 1.4 1.3 1.2 1.1 4 3 2 1 omnt 98 95 88 84 83 78 Community 68 Institutions Customers Suppliers 62 Financial backers 59 Shareholders 56 Employees PERFORMANCE SOCIALE 60 Calculation andallocationofaddedvalue 50 Economic indicators 46 Operating results 48 ECONOMIC PERFORMANCE 44 49 of certifications obtainedandplanned Overview The QSEorganizationalstructure 43 42 Management System Hera group’s QualitySafetyandEnvironment Social Responsibility Governance systemspromoting 40 38 sustainability objectives Creation ofvalueandstrategic Sustainable Quality Strategic managementofSocialResponsibility: Corporate governance 28 32 in theHeragroup Corporate socialresponsibility 30 GOVERNANCE OFSUSTAINABILITY 24 14 26 Institutional andorganizationalstructure Strategic orientation Values andprinciplesofconduct 12 20 The referencecontext origins andmainstagesofdevelopment The Heragroup: IDENTITY Methodological premise CONTENTS

Hera S.p.A. page 5 SR sustainability report 2003 CONTENTS Hera S.p.A. page 6 SR sustainability report 2003 CONTENTS 6.3 6.2 6.1 5.6 5.5 5.4 5.3 5.2 5.1 5 7 6 ae etr122 112 108 Water sector Energy Sector 102 Resource useandemissions ENVIRONMENTAL PERFORMANCE lsay164 167 158 Attestation ofproceduralcompliance 156 156 Glossary 160 RESULTS ANDFUTURECOMMITMENTS IMPROVEMENT OBJECTIVES:2003 ofresults Overview 146 Approach adopted 154 132 Project aims 148 DIALOGUE WITHSTAKEHOLDERS andotherservices Global services Other activities Environment sector

Hera S.p.A. page 7 SR sustainability report 2003 Hera S.p.A. page 8 SR sustainability report 2003 they reachlevelsofexcellence. current qualitystandardsandimprovingthemuntil in Italy, industry" service withtheaimofconsolidating sector thatitispossibletobuildatrue"publicutility The establishmentofHeraprovedtotheentire public utilityservices. successful businesstraditioninthemanagementof Italy, heirtoadeep-rooted,wide-rangingand operatorsin the largestlocalpublicutilityservice Forlì-Cesena, RavennaandRimini:itisnowoneof companies operatingintheProvincesofBologna, an integrationprocessinvolvingtwelvemulti-utility The Heragroupwasestablishedin2002following the territory. in handwithanincreasethequalityoflifewithin new horizonsforthecreationofvaluecangohand so thatthecompany’s dimensionalgrowthandits feedback enablingHeratobetterdefineitsservices, least matchtheirexpectations.Customersprovide weprovidemustat satisfaction withtheservices possible relationshipwithcustomers,whoselevelof which weoperate.We wanttoestablishthebest in best energiesandskillspresentintheterritory must, driveandstimulatethedevelopmentof Suppliers arepartnersofHera:TheGroupcan,and parties, activelyinvolvingthemintheprocess. possible ifitcansatisfythedemandsofallinterested long-term developmentmustbeguaranteed.Thisis ecologically compatiblemanner, aphilosophyof creation ofvalueinasociallyresponsibleand In ordertoachieveacompany'sgoal,i.e.,the skills ofallthosewhoworkwithus. commitment, energy, competence andprofessional of lifewouldhavebeenimpossiblewithoutthe Naturally, theresultsthatHera achievedinitsfirstyear which weplantoinvest. projects intheenergyandenvironmentalsector develop designsandseekauthorization,forimportant participation inpublicaffairs,wehavecontinuedto characterizes ourregionanditstraditionsofcitizen grow; amidtheintenseandattentivediscussionthat plants withenvironmentalcertificationcontinuesto regardtotheenvironment,numberofour With satisfied. demonstrate thatbusinessexpectationshavebeen response tothepublicationofour2003results exchange performanceandtheexceptionalmarket commitments undertaken:ourexcellentstock andfullyinlinewiththe more thansatisfactory The resultsofthefirstfinancialperiod,2003,were Chairman oftheBoard of Directors Tomaso Tommasi diVignano compatible withtheenvironment. demands ofsocialpromotionandprotection term economicdevelopmentinlinewiththe a strategicgoal:goaltobeachievedwithlong- use ofnaturalresources.Asaresult,sustainabilityis the levelofsociallegitimizationandtoefficient In fact,economicperformanceiscloselylinkedto resources atthebasisofvaluecreationprocess. environmental, inordertoincreaseintangible consider threeaspects,economic,socialand sustainability. Itsdevelopmentmustsimultaneously when itsmanagementisorientedtowardthegoalof It canbeassertedthatacompanycreatesvalue •

Hera S.p.A. page 9 SR sustainability report 2003 Tomaso Tommasi di Vignano Hera S.p.A. page 10 SR sustainability report 2003 Stefano Aldrovandi public atlarge. that havenowbecomeextremelyimportanttothe environmental andsocialefficiency, anticipatingissues and socialrelationshasintroducedelementsof choices. Herethesystemofinstitutional,economic governments andonethatguidestheirpolicymaking have foryearsrepresentedatypicalconcernoflocal operates, theprinciplesofsustainabledevelopment In theregionandsectorsinwhichHeragroup economic, socialandenvironmentalaspects. appropriate internalreportingmethodsthatintegrate efficient management,acompanymustdevelop to fulfilltheseexpectationsandensureeffective legitimate expectationsvis-à-visthecompany. Inorder deliver avalidresponsetoallthosewhoharbor Balanced developmentdependsonthecapacityto harmony withtheenvironment. of localeconomicandsocialdevelopmentinfull represents, thankstoitsmultipleoffshoots,a“driver” ofthecommunity,a furthertoolattheservice onethat endow itwithavisionandstrengthsuchastomake successful start,wemustsharpenitscapabilities, Nowthatthecompanyhasgotofftoa “industry”. and has,theobjectiveofbuildingagenuineservice tool thatwasplacedinourhands,asdirectors,had, formerly providedby“municipal”enterprises.Andthe efficient administrationoflocalpublicutilityservices assigning itthetaskofperpetuatingtraditional launched in2002whentheycreatedtheGroup, accepting thechallengethatitsshareholdersboldly Hera aimstoplayaleadingroleinthiscontext,fully Intranet. and employees,canaccessitthroughthecompany available ontheGroup’s website(www.gruppohera.it) corporate socialresponsibility. TheReportisalso materials anddocumentsrelatingtothesubjectof version onCD-ROM,plusadditionalcompany reach awidertarget,whichalsofeaturesthecomplete It ispublishedtogetherwithanabstract,designedto national methodologicalguidelines. been laidoutonthebasisofcurrentinternationaland The contentsofHera’s SustainabilityReporthave building afully“sustainable”business. bear highlyeloquenttestimonytoourcommitment we providedataonaGrouplevel,which,inourview, principles withinitsstrategies.InthissecondReport project forthecompleteembraceofsustainability social performance,Herahaslaunchedathree-year improvements initseconomic,environmentaland year, andwiththeaimofachievingcontinuous After drawingupits“SustainabilityReport2002”last Amministratore Delegato Stefano Aldrovandi development. rewarding goalsforincreasinglysustainable suggestions sothatwecanachievenewand give usconstructivecriticismandstimulating Report tobetterunderstandourwayofworking, involved inourbusinesseswillusethisSustainability I hopethatallthosewhoaredirectlyorindirectly •

Hera S.p.A. page 11 SR sustainability report 2003 Hera S.p.A. page 12 SR sustainability report 2003 Methodological premise Methodological premise 2. 1. + followed byacertificationofconformity: The SustainabilityReport2003isdividedintosevensections,precededbya Methodologicalpremiseand — — — The Heragroup’s SustainabilityReport2003referencesthefollowing: — — — — 2003 SustainabilityReportfeaturessomeimprovementscomparedtothefirst edition: accordance withGRIguidelines(GlobalReportingInitiative-“InformalApplicationoftheGuidelines”), Thanks tothesocial-environmentalreportingproceduresthatGroupisprogressivelyimplementingin environmental responsibilitiestowarddifferentstakeholders. harmonic developmentoftheGroup,suchastocombineeconomicgrowthwithHera’s socialand In fact,theSustainabilityReportlendsvisibilitytomanagement’s commitmentandeffortsinpromotinga reporting” ofsocial,environmentalandbusinessperformance. management ofSocialResponsibilityintheHeragroupandconsequentprocess“integrated The SustainabilityReport2003istheresultofaprocesscontinuousimprovementbothin social responsibility. Thissectionoutlinesthegovernancemodeladoptedby Grouptomanage Group’s sustainabilityprinciplesandthemainsystemsformanagingquality, environment,safetyand ofsustainability governance Group arealsohighlighted; Theinstitutional andorganizationalcharacteristicsofthe strategic designandchoicesofaction. corporate identity reporting process; methodological premise the principlesfordrawingupSocialReport2001,setforthby StudyGroup(GBS). relevant indicators; of theeconomic,environmentalandsocialperformancebusinesses,from which ithasderivedthe the Sustainabilityreportingguidelines2002,drawnupbyGlobalReportingInitiative fortheassessment on stakeholderinvolvement; Account Ability1000(draftedbytheISEA),guidelinesforsocialreportingwhich focusspecialattention new indicators. enrichment ofthesectionsdedicatedtosocialandenvironmentalperformance, withtheinclusionof progressive extensionofthescopereportingtoincludeotherGroupcompanies; refinement ofthesectiondedicatedtogovernancesustainability; a newsectiondedicatedto“Dialoguewithstakeholders”; : explicitexpressionofthebasicvalueswhichguide,togetherwithmission, the : adescriptionofthepostulatesandprinciplesadoptedtoguide : theHeragroupandSustainableQuality. Anillustrationisgivenofthe whole. Finally, itshallbenotedthatthetermsHera,Company, EnterpriseandGroupreferto theHeragroupasa — — — integral methodasat31/12/03.Morespecifically: contained intheSustainabilityReportrefertoHeraandGroupcompanies consolidatedwiththe Report embracingthemainGroupcompanies.Unlessotherwisespecified, dataandinformation and environmentaldatainformationrelatingtoitssubsidiaries,inorder prepare aSustainability The Grouphascommittednumerousresourcesandenergiestoimplementa systemforcollectingsocial Scope + 7. 6. 5. 4. 3. other thanaccountingrecords. refer toGroupcompaniesconsolidatedwiththeintegralmethodandhavebeen acquiredfromsources the dataandinformationrelatingtosocialenvironmentalperformance,unless otherwisespecified, Consolidated FinancialStatements; the dataandinformationrelatedtoeconomicperformancehavebeendrawn fromtheGroup’s Information ofastrategic,organizationalandprogrammaticnaturereferstothe Heragroup; conforms totheapplicablestandardsand“bestpractices”. Certification ofprocedural conformity in 2003. ofstakeholders,withinformationontheresultsachieved improvement objectivessetforeachcategory improvement objectives orienting futuremanagementchoices; stakeholders involvedintheprocessaregatheredforpurposeofmonitoring satisfactionandbetter is sufficientlyclear, completeandunderstandable.Thesuggestionsforimprovement proposedby dialogue withstakeholders utilized, characteristicsoftheprocessandconsequentemissions; Fondazione EniEnricoMattei main environment-relatedaspectsoftheGroupdefinedaccordingtomethodproposedby environmental performance providers, institutionsandcommunities); interactions withthemainstakeholders(employees,shareholders,customers,suppliers,financial social performance calculating anddistributingvalueaddedaccordingtothePrinciplesofSocialReportingStudyGroup; economic performance Hera callsit“SustainableQuality”; Social Responsibility:basedonthemethodologicalapproachof“Total ResponsibilityManagement”, • : areportonsocialrelations,i.e.qualitativeandquantitativerepresentationof : areportdisclosingtheeconomicresourcesproducedandmethodof , 2003resultsandfuturecommitments:aprogrammaticoutlineofthe , whichanalyzesenvironmentalperformancebyidentifyingtheresources : surveying systemdesignedtoassesswhethertheSustainabilityReport : surveying : theenvironmentaldimension,i.e.adescriptionofprocessesand : issuedbyKPMG,evidencethatthereportingprocess Territorial Operative Companies 100 %HeraImola-FaenzaS.r.l. 100 %HeraForlì-CesenaS.r.l. 100 %HeraBolognaS.r.l. 100 %HeraRavennaS.r.l. 100 %HeraRiminiS.r.l Single-Sinergia S.r.l. Single-member Single-member Single-member Single-member nryEvrnetOthers Environment Energy 72.49 %EOSENERGIAS.p.A. 80 %AMGAENERGIAS.r.l. 100 %HeraCommS.r.l. 51 %HeraLuceS.r.l. 50.09 %CalesS.r.l. 51 %SinergiaS.r.l. Single-member Hera S.p.A. ROMAGNA COMPOSTS.r.l. Frullo EnergiaAmbienteS.r.l. Baricella AmbienteS.p.A. Nuova GeovisS.p.A. 51 %AKRONS.p.A. 100 %DIRAMAS.r.l. GEAT SERVICES.r.l. CIR SECCOS.p.A. SELECTA S.p.A. GAL. A.S.p.A. SOTRIS 100 % 100 % 51 % 62 % 51 % 51 % 50 % 51 % Annual Report) integral method,forcompletedataseethe (limited tosubsidiariesconsolidatedwiththe Group ownershipstructure FAMULA ONLINES.p.A. ARES S.p.A.Consortium HERASOCREM S.p,A, SEAS Consortium UNIFLOTTE S.r.l. MEDEA S.p.A. INGENIA S.r.l. 94.99 % SBI S.r.l. 100 % 100 % 51 % 51 % 74 % 60 % 1% 51

Hera S.p.A. page 13 SR sustainability report 2003 Group ownership structure < Group ownership structure 1 IDENTITY page 15 S.p.A. Hera

pages 18-19: SR sustainability report 2003 1 IL GRUPPO HERA 1.1 Dati sintetici e missione di Hera 14-15 Hera's motorvehicle inRimini,PiazzaCavour. : Forlì,theMarket; 16-17 : Ravenna,Piazza delPopolo;

SR sustainability report 2003 1 IL GRUPPO HERA 1.1 Dati sintetici e missione di Hera Population served: 2 million Number of employees: 4,428

1.1 Value of production: 1,331.3 million euros The Hera group: The Hera group came into being at the end of 2002 following one of the most ambitious and complex merger operations ever achieved in Italy in the public utilities sector. It is one of the Costs for raw materials and services: 829 million euros origins and largest local utility groups: Italian leader in the environment sector in terms of waste treatment capacity, it ranks second in the domestic gas industry and among the top five in the water sector. The process of aggregation leading to the creation of the Hera group was founded on a vision Gas customers: 700 thousand main stages of shared by its founders, which was to build a modern enterprise capable of combining the creation of wealth with environmental protection and of fulfilling the legitimate expectations of all development stakeholders.• Water customers: 640 thousand Environment customers: 1.749 million Gas sold: 1,634 million m3 1846-1900 In the latter half of the 19th century, as a consequence of the progressive development of cities and towns, the first municipal gas, water and electricity distribution services began to appear and spread throughout Europe. 1.1

1846 A gasworks was created in Bologna 1.1 1871 A gasworks was created in Cesena Electrical power sold: 1,628 GWh 1900 The City of Bologna contributed to the birth of the Municipal Gas Utility 3 IDENTITY 1900-1945 1903 The Italian parliament approved a law on the direct provision of public utility services by municipalities. Water sold: 180 million m IDENTITY 1 1 Municipalized services underwent broad expansion: not only the management of gas and water supplies but also the collection and treatment of waste, distribution of electricity, cemetery services, road and park public maintenance and transportation. 1903 A Municipal Utility was founded in Imola, later to become AMI. Waste collected: 1.1 million tonnes 1904 A Municipal Gas and Water Utility (AMGA) was established in the city of Forlì. 1926 A Water Consortium was created by the municipalities of Savignano sul Rubicone and San Mauro Pascoli, from which the utility AURA would later arise in 1982. The key numbers for Hera (2003) 1942 The Cesena gasworks also took over management of the municipal water supply, becoming AMGA Waste treated: 2.4 million tonnes

1945-1990 1947 The Federation of Municipal Utilities (CoM) was created for the entities that provided such public services as electricity, gas and water distribution and transportation, etc. 1948 In Bologna AMNU, later AMIU, was created with the mission of reorganizing waste collection services 1962 Again in Bologna, the gas and water utilities were merged into AMGA; in the same year the city of Forlì established a sustainability report 2003 report sustainability sustainability report 2003 sustainability report municipal sanitation company (AMIU) to manage the waste collection and disposal services.

SR 1965 A municipal water utility was created in Rimini, later to become AMIR in 1995. SR 1972 Birth of AMIA, entrusted with the management of the waste collection and disposal service in Rimini. 1973 Birth of AMF, municipal utility company of Faenza. 1984 The municipalities in the Province of Bologna formed Co.Se.R. (Reno Utilities Consortium); the former AMGA became a special utility with the name A.Co.Se.R (Reno Consortium Utility Company). HERA HERA Ravenna 1990-2002 The 1990s witnessed a number of legislative changes in the utilities sector: new laws liberalized the Bologna management of services that were up to that time an exclusive monopoly of publicly owned enterprises; against a new framework of reference, utility companies began seeking opportunities for mergers that would enable them to integrate their know-how and technical and management experience. HERA 1995 In Forlì, the gas, water and sanitation services for the entire province were combined in the CIS. Imola-Faenza 1996 In Ravenna, AREA was created from the merger of municipal gas, water and waste collection and disposal utilities. 1997 In Bologna A.Co.Se.R and AMIU were merged into SEABO S.p.A. 1999 In the municipality of Lugo, the TEAM consortium (Territory Environment Consortium) was created by merging the utilities HERA CO.SE.CO (waste management) and SEDARCO (integrated water cycle). Forlì-Cesena 1993-2000 The major utility companies that would later give rise to the Hera group became stock corporations: AMGA Cesena, HERA AURA, CIS Forlì, AMF, AMIA, AMI Rimini. Rimini 2001 AMGA, AURA and CIS merged to form UNICA SpA 11/11/2002 SEABO, AMF, AMI, AMIA, AMIR, AREA, ASC, SIS, TAULARIA, TEAM and UNICA merged to form a new entity: HERA. page 20 page 21 S.p.A. S.p.A. Hera Hera Hera S.p.A. page 22 SR sustainability report 2003 1 IDENTITY 1.1 2003 and2004: Purchase ofgoodsandservices40% The Group created 725millioneuro the present value intheterritory: 1_Forlì, strollingundertheporch. Investments 29% Employees 24% Net profit 7% otherservices — environment — integrated watercycle — energy — over 2millionresidents: Today Heraisamulti-utilitythatoperatesinthefollowingsectorsofactivity, with inaterritory policy, whichcombinesthesaleofgasandenergyonfreemarket. electricity distributionmarketandtoexploit,in particular, theso-called“DualFuel”marketing This fifteen-yearagreementwillenabletheHera grouptobecomeanimportantplayerinthe captive customers. the SwissAtelcorporationtobuyelectricityfor distributionintheregionalmarketofnon- InOctober2003theGroupalsoreachedanagreement with volume andpopulationserved. complete abasicterritorialstrategythathasresulted inapproximately10%growthtermsof steps confirmedthevalidityofGroup’s to modelofterritorialexpansionandserved 42% stakeinAgeaS.p.A.,theformermunicipally-owned utilityofthecityFerrara.These inthemunicipalityofRiccioneandneighboringtowns, purchase ofa lighting services with theconsolidationofoperationsGeat SpA,aproviderofenvironmentalandpublic their respectivetargetterritories.Theprocess of reorganizationcontinuedthroughout2003 management ofnetworks,plantsandwastecollection, attentivetotheneedsofcustomersin company HeraS.p.A.).Theselocalutilitiesengage inthemainactivitiesrelatedto Rimini, HeraRavenna,Forlì-Cesena, Imola-Faenza(whollyownedbytheparent 2003thefollowingcompanieshavebeenoperational:HeraBologna, Hera As of1January and socialdevelopmenthere. High quality, havealwaysbeenahallmarkofeconomic extensivelocalpublicutilityservices boasts agrossproductandpercapitaconsumptionthatareamongthehighestinEurope. belonging totheprovincesofBologna,Rimini,RavennaandForlì–Cesena.Thisterritory Today theHeragroupoperates inabout140municipalitiestheregionofEmilia-Romagna, complementary services. complementary energy treatmentanddisposal); segregated collectionand streetsweeping)andwastetreatment(recycling, waste-to- treatment; sale); : gas(distributionandsale ofnaturalgasandLPG)electricity(distribution and : operative environmental services (wastecollectionandtransport, : operativeenvironmental services : district heating, public lighting, cemetery services andother services : districtheating,public lighting,cemetery • : collection,adduction and distribution,sewerswastewater 1

Hera S.p.A. page 23 SR sustainability report 2003 1 IDENTITY 1.1 Hera S.p.A. page 24 SR sustainability report 2003 1 IDENTITY 1.2 Factors influencingdefinitionofHera The reference group’s strategicplan: 2_Bologna, relaxinthecitycenter. context 1.2 relevance”. of“economic 2004havebeennewlydefinedasservices relevance, whichsince19February having anindustrial course fromthepreviouslawno.326/03.The sentenceregardsservices towhollypubliclyownedstockcorporations,reflectingachange in public utilityservices by theCouncilofState(SectionVsentence679/04) legitimizesthedirectassignmentof However, thelegislativeframeworkisnotyetfullydefined:infact,asentencerecentlypassed physically possibletodividethenetworkfrom the service. awarding, throughopentenders,ofcontractsforthemanagementutilitieswhichitis provisionaswellthe separation betweeninfrastructureownership-managementandservice procedures. Thistrendwasconfirmedbyart.35ofthe2002financeact,whichcallsfora be localauthorities,whichwillinsteadhavethetaskofregulatingcontractassignment providerswillnolonger public utilitiesoperate.Inthenewcompetitivecontext,utilityservice havebroughtaboutaprogressivetransformationinthecompetitivecontextwhich services Changing laws,technologicalprogressandgrowingcustomerdemandsfornew, efficient + + + + + + + + + + growing publicawarenessofenvironmentalmatters planning strategiesderivingfromclimaticchanges environmental certificationsoflocalauthorities) plans forsustainabledevelopment(localAgenda21s, customer demandforhigherquality technological evolution decrease inpublictransfers operators rate andfinancingpoliciesefficiencyofpublicservice territorial planningandenergypolicies aggregation ofpublicutilities liberalisation ofmarkets • 2 — — — — — ("Ronchi Decree"),whichpursuessuchobjectivesas: guidelinesinthissectorarestillbasedonLeg.decreeno.22/97 The fundamentalregulatory committeesofusersandinterfaceswiththeOptimumTerritorialadvisory AreaAgencies. theuseofwaterresources,regulatessystemrelationswith committee thatsupervises ThisAuthorityreliesonamonitoringsystem,collaborateswiththe Waste ManagementServices. ofWaterRegional councilappointedaAuthorityfortheSupervision andMunicipalSolid the andmunicipalsolidwastemanagementservices”, organization ofintegratedwaterservices territorial areasandregulationoftheformscooperationamonglocalauthoritiesfor (OTA). InEmilia-Romagna,inimplementationofRegionalLaw25/99“Definitionoptimum andindustrializationofthesystemthroughcreationOptimumTerritorialwater services Areas to overcomethefragmentationofutilitiesinwatersectorbylaunchingareorganization 1994(“GalliLaw”),whichaimed The watersectorismainlygovernedbylawno.36of5January — — — The “BersaniDecree”(Leg.decreeno.79/99)governsallaspectsoftheelectricitymarket: “gas exchange”modeledaftertheonealreadyexistinginelectricitysector. competition, ithasimposednewinformationrequirementsonsellersaswellinstitutinga definition ofratesisleftuptotheElectricityandGasAuthority(AEEG):encourage gas market.Underthisdecreeallconsumersarefreetochoosewhombuyfrom.The 164/00), whichimplementedDirective98/30/CEregardingthecreationofaEuropeannatural The gasmarketismainlyregulatedbythe"LettaDecree"ofJune2000(Legislativedecreeno. — gathering data and information about services providedtopromotemoreactiveuser gatheringdataandinformationaboutservices — qualitystandards; definingservice — administeringtheinstrumentalmeansentrustedto it bylocalauthorities; — providedtothemanagementauthorityinaccordancewith monitoringtheservice — outtheproceduresforcontractingservices; carrying — — drafting and approving a program of intervention, budgetplanandorganizational and drafting andapprovingaprogramofintervention, — demand; specifyingservice — provincial territory. Itsmainfunctionsare: within the of theintegratedwatersystemandmunicipalsolid wastemanagementservice Regional Lawno.25/99assignstheOTA Agencyfunctionsrelatedtoregulationandcontrol determiningtheareatariffandratesstructure; — T oon 0921.907 352.225 356.659 274.669 60 18 30 20 The changing scenarioofsocialresponsibility intheutilities sector OTA Bologna OTA Forlì-Cesena OTA Ravenna OTA Rimini The OTAs Hera interactswithare: cost-effective, efficient, effective service management. cost-effective, efficient,effectiveservice promotion ofsegregatedwastecollection; environmental impactreduction; unified managementoftheentirecyclewithindefinedoptimumareas; definition ofoptimummanagementdistricts,coincidingorliewithinOTAs; of anenergyexchange. free market)and“captive”customers(notinapositiontobuyonthemarket),withinstitution sale: enduserswerebrokendowninto“noncaptive”customers(whomaypurchaseenergyonthe (GRTN); transmission: gridownershipisassignedtoTERNA,distributiontheNationalGridOperator production: nocompanycancontrolmorethan50%ofelectricityproductioninItaly; specific termscontainedinthecontract; management model; participation. • o fmncplte °ofresidents(ISTAT 2001) N° No. ofmunicipalities • • (OTA) Agencies The OptimumTerritorial Area Environment Sector 1.2.3 Energy Sector 1.2.1 Water Sector 1.2.2

Hera S.p.A. page 25 SR sustainability report 2003 1 IDENTITY 1.2 1.2.1 1.2.2 1.2.3 Hera S.p.A. page 26 SR sustainability report 2003 1 IDENTITY 1.3 and principles of conduct Values 1.3 On February 16 On February confidential informationforpurposesnotrelated totheperformanceoftheirjob. Directors, employeesandoutsidepersonnelengaged bytheGroupareforbiddentouse The Groupassurestheconfidentialityofallpersonal andsensitivedatainitspossession. Confidentiality written communications. and withinthecompany. Informationistransmittedinaclear, simplemanner, normallythrough complete, accurate,adequateandtimelyinformation bothoutside(Authorities,market,users) The Directors,employeesandoutsidepersonnel engagedbytheGroupundertaketosupply Transparency withefficient,cost-effectivemanagement. communities served technological andorganizationalsolutionsaimed atcombiningfulfillmentoftheneeds qualityimprovementplansand adopting processes byformulatingandimplementingservice The Groupundertakestoconstantlyimprovethe effectivenessandefficiencyofitscompany Effectiveness andefficiency procedures suchastoensureitsapplicationand enforcement. ofthelawandtodevelopingprograms The Groupisconstantlycommittedtoobservance Honesty dependingonthenatureandinstitutionalroleofpartiesconcerned. vary those withwhomitcomesincontact,thoughtheformsofinteractionandcommunicationmay is committedtoactinginafairandimpartialmanneradoptsthesamebehaviortoward all based onage,sex,health,race,nationality, political opinionsandreligion.Inshort,theGroup and selectionmanagementofsuppliers,theGroupavoidsallformsdiscrimination agencies, communicationwithshareholders,personnelmanagementandorganizationofwork In itsrelationswithdifferentstakeholders,contactsthecommunityandgovernment andimpartiality Fairness impacts resultingfromthecompany’s activities. of achievingcontinuousimprovementinthisparticulararea,alsoviewtheenvironmental Hera managesitsactivitieswithaneyetoprotectingtheenvironment.Ithassetitselfgoal Focus ontheenvironment the naturalheritageofterritoriesinwhichitworks. consumers' associationstoworktogetherimprovethequalityoflifecitizensandprotect particular, itpromotesparticipativedialoguewithalllocal authorities,institutionsand The Groupworksthroughdialogueopentothelegitimateexpectationsofallstakeholders.In Sustainability Community. dealing withsuppliersandgovernmentagenciesactiveinvolvementinthesociallifeof the shareholders andtransparencyinrelationswiththelatter, correctnessandtransparencyin other workingties),theattentionitdevotestocustomerneedsanddemands,itsconcernfor the Groupplacesonthosewhoworkforit(whetheremployeesorindividualswithwhomhas women andmenwithwhomitinteracts.Thefocusonpeopleisexpressedthroughthevalue The Groupundertakestorespecttherightsandphysical,culturalmoralintegrityofall Focus onPeople resources. by combiningefficientandeffectivebusinessmanagementwithasustainableuseof all onthevalueoffocusingpeople,sincelastingeconomicgrowthcanbeguaranteedonly importance fortheattainmentofHera’s socialandbusinessobjectives.Emphasisislaidfirstof isoffundamental provide partnersandstakeholderswithguidelineswhoseobservance th 2004 theBoardofDirectorsapprovedaGroupCodeEthics,designedto • Mission synergies ofscopeintheshort-mediumterm.” area ofreferencethatofferthepotentialfor achievingeconomiesofscaleand Develop corebusinessactivitiesinterritories neighboringthecurrentgeographical relationship withthelocalterritory. quality, respectfortheenvironmentandanongoing continuityandsafetyofservices, always offeringresponsessuitedtotheneeds ofconsumers/customers,ensuringthe Combine theabilitytosuccessfullymeetmarket expectationswiththeobjectiveof cost/quality ratio,andensuringadditionalmarginsofgrowthdevelopment. Create a“Herasystem”byformingsynergiesandmaximizingresourceswithinbetter that willariseasaresultofmarketliberalization. the valueofGroupanditscompetitivecapabilities,byseizingopportunities experience inthecorebusinessareasofutilitiestakingpartmerger;increase ““To conqueramarketpositionthatenhancesthe value ofplants,networksand This underlyingphilosophyisexpressedintheGroup’s missionstatement: Group withsustainabledevelopmentoftheterritory. inordertocombinebusinessexpansionofthe provision ofpublicutilityservices, Hera aimstocreatevaluebyoptimizingtheinfrastructuresitmanages,setupfor •

Hera S.p.A. page 27 SR sustainability report 2003 1 IDENTITY 1.3 Hera S.p.A. page 28 SR sustainability report 2003 1 IDENTITY 1.4 orientation Strategic 4_Cattolica, Potabilityplant. 3_Brisighella, therailroad. 1.4 — The Group’s strategic developmentin2003wasconsistentwith thisapproach;infactit: these threemacroobjectives. sustainability objectives.ThesuccessoftheHeramodeldependsonaharmonicapplication of The Group’s strategycanbebrokendownintomacro-objectives:operational,developmentand information /accounting system.Progressiveupgradingoftheinformation system operative companieshad successfullycompletedimplementationof the newSAP/R3 organizational, accounting andmanagementfunctions.Bytheendof 2003,allthe to formHera:weneed only considertheeffortmadetocomplete integrationof of reorganizationthatcapitalized ontheexperienceofeachtwelve companiesjoining worked totransformthe utilitiesinvolvedinthemergerintoasingleentity throughaprocess 3 4 • • • • • • target territory. Acanthohasbeenappointed tomanagethisproject. The subsidiary joining alllocalgovernment organizationswithintheregion,andinparticular withintheGroup’s a substantialcontribution ofregionalfunds,willenableconstruction acomputernetwork for the “Emilia-RomagnaLocalGovernmentNetwork”. Theseinvestments,backedby services Plan fortheconstruction offiberopticinfrastructuresandtheprovision ofmanagement We shallalsopointouttheimportanceofinvestments connectedtotheRegionalTelematic + + + + + + the endofApril2004situationstoodasfollows: activities andinitiativestogainauthorizationfor strategicplantsincludedinitsindustrialplan.At Consistently withitsstrategicorientation,theGrouphascontinuedintenseengineering strategic planswillbeaimedat: sustainable developmenttobeanoverridingstrategicobjective.InfutureyearstheGroup’s reorganization process,themanagementhaveconsideredsocialresponsibilityand It isimportanttohighlightthat,despitethenumerousprioritiestiedGroup — espoused; investing inactivitiesconsistentwiththesustainabledevelopmentpoliciesGrouphas a responsibleplayeranditsstructuralcapital; enhancing itsintangibleassetssuchashumancapital,relationalnetworks,reputation optimization ofcostsandmanagementprocesses; further exploitingtheimportantsynergiesresultingfromrecentmerger, throughan Province ofRiminihasadopted theInter-provincial Waste ManagementPlan. completed. AnEIAapplication andenvironmentalstatementwillbesubmitted oncethe Rimini waste-to-energyplant:theEnvironmental ImpactStudyandFinalProjecthavebeen shortly; have beencompleted.AnEIAapplicationand environmental statementwillbesubmitted Faenza “CDR”waste-to-energyplant:theEnvironmental ImpactStudyandFinalProject immediately thereafter; Study andFinalProjectisbeingcompleted.A request foranEIAwouldbesubmitted Ravenna waste-to-energyplant:thedocumentation relatingtotheEnvironmentalImpact May; from theProvinceofForlì-Cesena.Afinalresponse ontheEIAisexpectedbyendof Forlì waste-to-energyplant:arequestfortheenvironmental statementhasbeenreceived two months; the endofJune.TheofficialoutcomeEIA isexpectedtocomewithinthefollowing 230 MWcombined-cycleplantinRimini:thelast utilitiesconferencemaybeannouncedby the EIAislikelytobeknownbyendofJuly; Environmental ImpactAssessment(EIA)application areexpected.Theofficialoutcomeof 80 MWcogenerationplantinImola:requestsfor thestatementcompleting Companies”, suchasTirreno PowerandCalenia Energia). plants withanoverallcapacityof310MWandfinancialinvestmentsin“Generation electrical powerproductioncapacity(throughtheconstructionoftwocombined-cycle of electricityundertheincentivessystem,CIP6andgreencertificates)increasing expanding currentwaste-to-energyconversioncapacity(incombinationwiththeproduction plan thatprovidesforonebillioneurosininvestmentsoverthenextfiveyears; expanding productioncapacityinallcorebusinesssectorsthroughtheimplementationofa a firstsignificantoutcomeofthisstrategy; customers anintegratedsupplyofelectricityandgas)launchedduringtheyearrepresents opportunities arisingfromthemulti-utilitybusiness.The“DualFuel”policy(offering andoptimizingthe increasing turnoverbyofferingcustomersavastrangeofservices offer asignificantpotentialforthecreationofsynergies. integration withtheGroup,haveeconomicandfinancialsituationsinlineHera’s and territories, preferablyaccordingtothemulti-utilitymodel,whichareopencomplete seeking newopportunitiesforgrowththroughcompaniesoperatinginneighboring acquiring a42%stakeinAgea,utilitybasedFerrara.TheGroup’s goalistocontinue began implementingtheGroupexpansionstrategyoutlinedinindustrialplanby within theterritory; organizational andcommercialefficiencyfavorayetmoreeffectiveresponsetoneeds IS/U andCRMbySiebel),which,besidesbeingintegratedwithSAP/R3,willenhance continues andin2004theGrouphaslaunchedaprojectfornewcustomersystem(SAP •

Hera S.p.A. page 29 SR sustainability report 2003 1 IDENTITY 1.4 Hera S.p.A. page 30 SR sustainability report 2003 1 IDENTITY 1.5 1.5.1 Prevention Services Manager L.Morelli Institutional and Protection and Institutional structure organizational R. Barilli Manager General structure C. Poli and Finance Administration C. Macrelli Contracts Purchases and Organization chart M. Tiviroli Rimini Hera 1.5.1 1.5 G. Campri Organization Personnel and M. Guerrini Division Services Pay Committee Management presence ofinstitutional investors(seebreakdowninsection4.2). single controllingshareholder –atypicaltraitofallotherItalianmulti-utilities –andasignificant At thetimeofpublic offering,theownershipstructurewascharacterized bythelackofa remaining 44.5%arefree-floating shares. (Municipalities: thelargest shareholderistheCityofBolognawithabout 19.7%)andthe that tookplaceon26June 2003,55.5%ofthesharesareheldbygovernment bodies the stabilityofcompany’s governingbodies.Followingthe successofthepublicoffering Hera istheonlyItalianmulti-utility companywithadiversifiedownership structurethatensures .Fogacci F. Reporting Budget and .Sami F. Imola-Faenza Hera O. Penazzi Auditing Internal M. Fabbri Lawyer Corporate C. Galli Division Environment M. Corsi Environment Quality, Safety and .Mazzoni T. Ravenna Hera S. Aldrovandi Director Managing Directors Board of R. Barilli ad interim Relations External G. Leoni R&D Division Networks and S. Venier Strategic Planning Business Dev. and A. Bruschi Bologna Hera Committee Executive L. Lorenzi Marketing Division Sales and Internal Control Committee for • staff ..Randi G.C. Forlì-Cesena Hera underway, withfurtherdisposalsplanned. companies andmerging4intoothersubsidiaries.Therationalizationprocessis still the Grouphadrationalizeditssharecapitalinvestmentsbyselling17subsidiaries,liquidating 7 extent, stakesnolongerconsideredofstrategicvalueweredisposedof.Bytheend2003, investments in2003:shareholdingswerecombined,subsidiariesmergedand,toalesser The presentGroupconfigurationisalsotheresultofanintensereorganizationsharecapital corporate lawsprovidingfortheseparationofdistributionandsales. The saleofgasandelectricityhasbeenconcentratedinHeraComm.,alsotocomplywith Operative Companies,whollycontrolledsubsidiariesofHera. (wastecollectionandsanitation)werereorganizedassignedtothefiveTerritorialservices At thestartof2003alloperationsrelatedtowater, gasdistributionandenvironmental experience inthesector. best professionalassetsinthemergedcompanies;allkeyfiguresboastlongtime Operative Companiesattheendofamanagementassessmentprocesswhichidentified The mainresponsibilitiesweredividedupbetweentheHoldingCompanyandTerritorial quality. at aGrouplevelandbenefitfromthesynergiescreated,theycanassurehighstandard of needs oftheirrespectiveterritories.Beingabletodrawonthe“bestpractices”established Group managementwhilemaintainingalocalorganizationcapableoffullyinterpretingthe replicated, thusallowingnewmembercompaniestoacquirearoleandtakepartinoverall The modeladoptedisbasedonan“openbusinessformula”,whichmaybefurther and expandingbusiness. up astreamlinedorganizationwithstrongfocusontheobjectivesofimprovingprofitability havebeenreorganizedbytheGeneralManagement,whichhasset The maincentralservices customers andtheirneedforefficientservices. Operative Companies,theoperationalactivitiesentailinganongoingrelationshipwith achieved intheholdingcompanyandmaintainedlocallyreorganized,throughTerritorial concentrated thestrategiesandallactivitiesforwhicheconomiesofscalecouldbe becamethedistinctivefeatureofabusinessmodelwhich utilities withintheirterritory In 2003Heracompletedthecomplexprocessofinternalreorganization:rootingpublic Networks Environment Quality, Safety, and GeneralServices Personnel Directors Holding company'sBoard of Purchases and Contracts Environment DIRECTOR • Control Accounting and with localadministrations Relationships of Directors TOCs' Board Management Customer Organizational structure 1.5.2 TOC organization

Hera S.p.A. page 31 SR sustainability report 2003 1 IDENTITY 1.5 1.5.2 2 GOVERNANCE OF SUSTAINABILITY page 33 S.p.A. Hera SR sustainability report 2003 2 GOVERNO DELLA SOSTENIBILITÀ 2.1 La responsabilità sociale d’impresa nel Gruppo Hera pages 36-37 : Imola, sunday morning inthecitycenter.: Imola,sunday morning 32-33 : Bologna, Via dell’Archiginnasio;: Bologna,Via 34-35 : Rimini,relax inPiazzaCavour;

SR sustainability report 2003 2 GOVERNO DELLA SOSTENIBILITÀ 2.1 La responsabilità sociale d’impresa nel Gruppo Hera Hera S.p.A. page 38 SR sustainability report 2003 2 GOVERNANCE OF SUSTAINABILITY 2.1 responsibility in the Heragroup Corporate social 2.1 + + + three aspectsofsustainabledevelopment: For theHeragroup,beingsociallyresponsible meansactinginsuchawayastocombinethe tend toconvergeinthemediumandlongterm. interests ofshareholdersandthesocialenvironmental interestsofallotherstakeholders a recentstudyconductedbytheAustraliangovernment, whichshowsthattheeconomic customers, workersandallthosewithwhomthey interact.Supportforthisclaimcomesfrom competitiveness withoutcausingdamagetothe environmentandprotecttheinterestsof inordertostrengtheneconomicgrowthand responsible behaviorisnecessary shareholders cannotbeachievedsimplybymaximizing short-termprofits,butratherthat Businesses arebecomingincreasinglyawarethatcommercialsuccessandbenefitsfor ontheother.legitimate expectationsofstakeholdersanddevelopmenttheterritory successfully balancefinancialandgrowthobjectivesontheonehandwithsatisfactionof For Hera,beingasociallyresponsiblecompanymeansadoptingbusinessmodelthatcan environmental concerns withinitsterritory, forexamplebytapping watersourcesinplaces resources; thisimplies the needforacompanytotakeintoaccount the different development referstothe capacitytomaintainthequalityandreproducibility ofnatural for thebenefitoffuture generations.Theenvironmentaldimensionof sustainable thenaturalenvironment environmental impactof productionprocessessoastopreserve environmental responsibility: producingwhileminimizingthedirectand indirect services; businessofacompanysuchasHera thatprovidesessentialpublic directly totheeveryday opportunities intheterritory, andtheabilitytorespecthuman laborrights,relates sustainability, definedastheabilitytoensurefairlydistributedwell-beingandgrowth legitimate expectationsofdifferentstakeholders inaccordancewithsharedvalues.Social social responsibility:promotinganethicalbusiness conductandsimultaneouslyfulfillingthe unrelinquishable objectiveofsustainabledevelopment; renderedbytheGrouprepresents an balance intheindustrialmanagementofservices economic dimensioninvolvestheabilitytogenerate income,profitandwork;economic continuity throughtheapplicationofanadvanced modelofcorporategovernance.The toincreasethecompany’sonly serve valueintheshorttermbutalsoguaranteelong-term economic responsibility:actinginsuchaway as toensurethatbusinessdecisionsdonot 1 users. dimension throughtheapplicationofreduced rates tovariouscategoriesofdisadvantaged rates tobeappliedeveninareaswithalower userdensity. Finally, itisevidentinthesocial "area" rates,thusattainingeconomiesofscale inmanagement,whichturnallowmodest example, thehighconcentrationofusersin provincialcapitalsmakesitpossibletoapply capital, Bologna.Thesystemicprincipleismanifested intheeconomicdimensionwhere,for many municipalitiesinthesurroundingareais treated atthelargeplantinprovincial at anotherplantlocatedinCastelMaggiore.Equally, muchoftheliquidwasteproducedin (Granarolo, Baricella,etc.);partofthesludge produced bytheGranaroloplantisdisposedof Bologna) istreatedinlargeplantslocatedthe municipalitiesoftheBolognaplains waste collectedinovertwentymunicipalitiesof thecentralProvinceofBologna(including butwhichactforlargeportionsthereof:example thesolid in variouspartsoftheterritory This isexpressedattheenvironmentallevelthroughpresenceofspecificplantslocated itoperatesin. follow alogicconsistinginanintegratedsystemicapproachwithintheterritory The threedimensionsofresponsibilityrepresentthefoundationHera’s actions,which groundwater reserves tobereplenished. groundwater reserves where thisactionwillcausetheleastenvironmentalimpact(subsidence)andthusallow • 1+2_Faenza, Smalllakeinthepark. 2

Hera S.p.A. page 39 SR sustainability report 2003 2 GOVERNANCE OF SUSTAINABILITY 2.1 Hera S.p.A. page 40 SR sustainability report 2003 2 GOVERNANCE OF SUSTAINABILITY 2.2 3_The CouncilRoominHeraheadquarters, VialeBertiPichat,Bologna. governance Corporate 2.2 would bemadeupof13 members,11ofwhomindependentnon-executive directors. During thegeneralshareholders’ meetingofOctober16 Composition responsibility. TheBoardofDirectorsmet25timesin2003. of achievingthecompany’s goals,exceptthoseplacedspecificallyundertheshareholders’ andexpedientforthepurpose outallsuchactionsasitdeemsnecessary empowered tocarry administrationofthecompany;itis andextraordinary unrestricted powersfortheordinary theBoardofDirectorsisendowedwithbroadand the Chairmanjudgesnecessary; time Under thearticlesofassociation,Boardmeets atleastonaquarterlybasisorevery Functions — — — — — — — — of association,whichassignthefollowingrights: The proceduresforappointingtheBoardofDirectorsarelaiddowninarticle17articles Board ofdirectors minority interests. company waslistedonthestockexchange,threenewdirectorswereelectedtorepresent the guidelinescontainedinItalianStockExchangeCodeofConduct.In2003,after Concerning corporategovernance,theGrouphasadoptedcodifiedproceduresadheringto Board ofdirectors ieCara lad euz Independentnon-executivedirector Executive director Independent non-executivedirector Aleardo Benuzzi Tomaso Tommasi diVignano Name andSurname StefanoAldrovandi Vice Chairman Managing Director Chairman Office Private investors:3boardmembers City ofCesena(andonbehalf25othermunicipalities): 1boardmember City ofRimini(andonbehalf26othermunicipalities): 1boardmember City ofForlì:1director City ofRavenna(andonbehalf11othermunicipalities): 1boardmember Con.Ami: 1boardmember Province ofBologna(onbehalf47othermunicipalities): 1boardmember City ofBologna:4boardmembers th , 2003itwasdecided that theboard 3 chairman. Directors cantakepartincommitteemeetingsontheexpressinvitationof The Committeeismadeupof3directors:theManagingDirectorandChairmanBoard of Composition pay restswiththeManagingDirector. In2003theCommittee metonlyonce. the salariesofmanagers,thoughtaskdefiningpoliciesandlevelsmanagement based ontheindicationsfurnishedbyManagingDirector, itsetsdowngeneralcriteriafor the ManagingDirector, ChairmanandGroupmanagers whoholdspecialoffices.Inaddition, It hasthetaskofsubmittingproposalstoBoardDirectorsforsalariesbepaid Function Pay Committee committees: thePayCommitteeandforInternalControl. the year2004.InperformanceofitsdutiesBoardDirectorsisaidedby2technical The presentBoardofDirectorswillremaininofficeuntiltheapprovalannualreportfor Directors. TheCommittee forInternalControlmet6timesin2003. invitation ofthecommittee chairman,theManagingDirectorandChairman oftheBoard of theBoardAuditors oranotherauditorappointedbythelatterand, upontheexpress the Committeeismade upof3directors.Theparticipantsinitsmeetings includetheChairman Composition — — — — — and regulationsthesafeguardingofcompany assets. Specifically, theCommitteeforInternalControl: efficiency ofcompanyoperations,aswellthereliability offinancialinformation,compliancewithlaws independent. Ithasthetaskofevaluatingreliability oftheinternalcontrolsysteminordertoassure functionsandismadeupofnon-executivedirectors,amajoritywhom mustbe It hasadvisory Function ControlCommittee forInternal Member Member Chairman Office Member Member Chairman Office or ebrGoan abrn Independentnon-executivedirector Independentnon-executivedirector Independentnon-executivedirector Independentnon-executivedirector Independentnon-executivedirector Independent non-executivedirector GiovanniTamburini RobertoSacchetti Independent non-executivedirector Independentnon-executivedirector FabioRoversiMonaco Non-executivedirector Independentnon-executivedirector NicodemoMontanari GianluigiMagri Board Member PierGiuseppeDolcini Board Member PieroCollina Board Member FilippoBrandolini Board Member EnricoBiscaglia Board Member ErmannoVichi Board Member Board Member Board Member Board Member Vice Chairman opinion regardingtheefficiencyofInternal Control System. annual reportandinterimfinancialstatements, toillustratetheactivitiesconductedandits sixmonths,ontheoccasionofapproval thesemi- reports totheBoardatleastevery report andletterofrecommendations; well astheworkingschemesetoutforauditing proceduresandtheresultspresentedin evaluates theproposalsformulatedbyindependent auditingfirmsseekingappointmentas consolidated financialstatements; the accountingprinciplesadoptedandtheirconsistency forthepurposesofpreparing assesses, jointlywiththecompany’s administrativedirectorsandauditors,thesuitability of from thelatter; assesses theworkplanpreparedbyinternal controllersandreceivesperiodicreports assists theBoardofDirectorsinfulfillingabove-described duties; Fabio Roversi Monaco Name /Surname Name /Surname Aleardo Benuzzi Enrico Biscaglia Gianluigi Magri Ermanno Vichi Piero Collina

Hera S.p.A. page 41 SR sustainability report 2003 2 GOVERNANCE OF SUSTAINABILITY 2.2 Hera S.p.A. page 42 SR sustainability report 2003 2 GOVERNANCE OF SUSTAINABILITY 2.2 2.3 Responsibility: management Sustainable Strategic of Social Compagnia AssicuratriceUnipolS.p.A. Assitalia-Le Assicurazionid'ItaliaS.p.A. Riunione AdriaticadiSicurtàS.p.A. Quality Assicurazioni GeneraliS.p.A. Milano AssicurazioniS.p.A. 2.3 — — — — — — — — — principles of“Total ResponsibilityManagement(TRM)”. Sustainable Quality In theItaliancontext,Groupisdevelopingan originalandinnovativeapproachdefined Environment managementsystem(QSEsystem). In theHeragroupCorporateGovernancealsorepresents themainstayofQuality, Safetyand and protectindividuals. company’s specificneedsanddesignedtoprotectcompanyassets,covergeneralliability risks consultants werealsocalledin.Theresultisan insurancecoveragepackagetailoredtothe year termandwasformulatedonthebasisof a previousriskanalysis,forwhichoutside have formedajointventure.Theinsuranceprogram wasassignedbyopentender, hasathree- The insuranceneedsoftheHeragrouparemet byapoolofmajorinsurancecompaniesthat company assets. at keepingrisksundercontrolandassuringanincreasinglyefficientmanagementtoprotect organizational framework.ItrepresentstheconcreteimplementationofGrouppoliciesaimed control /verificationofRiskManagementpolicies. risk awareness,identificationofhazards,analysis,managementandhandling and overcomebusinessrisks.Itspracticalimplementationtypicallyinvolvessuchaspectsas Risk Managementisbaseduponasystematic,non-stopcontrolprocessdesignedtoconfront dialectical exchangebetweeninsurersandthecompanyitself. document andillustratethecompany’s riskprofileintangibleform,therebypermittinga The adoptionofastructured,solidriskmanagementsystemwithinHeramakesitpossibleto Risk Management totheholdingcompanyanditssubsidiaries. services The InternalAuditingfunctionofHeraSpAisdesignedtobenefitthewholeGroup;itprovides the organization’s goals. The internalcontrolsystemandauditingfunctionthusofferanopportunityforattaining standards. flows bothoutsideandinsidethecompany)conformityofbehaviorwithapplicable (operational efficiencyandeffectiveness),information(transparencyreliabilityof reliability, theachievementofacompany’s mainobjectivesintermsofbusinessandproduction organizational structures,activitiesandrulesdesignedtoensure,withareasonabledegreeof Thus InternalAuditingispartoftheinternalcontrolsystem,understoodasacompleteset processes. value sinceitisgearedtowardimprovingcontrol,riskmanagementandcorporategovernance attaining itsobjectivesbymeansofasystematic,professionalapproachthatgeneratesadded improving theeffectivenessandefficiencyoforganization.Itaidsorganizationin The InternalAuditingfunctionprovidesindependent,objectiveassuranceandadviceaimed at the BoardofDirectors. andreportstotheChairmanof Auditing function,whichisplaceddirectlyunderhissupervision order,April 4th2003,theManagingDirectorhasinstituted,viaaspecificservice anInternal the BoardofDirectorsHeraformallyadheredinaresolutionadoptedduringmeeting of ConductforcompanieslistedontheItalianstockexchange(so-calledPredaCode),towhich In ordertofulfillinternalcontrolrequirementsaccordingtheguidelinessetforthbyCode AuditingFunction Internal In January 2004HerasetupaRiskManagement&Insurancefunctionwithinits In January promoting responsibleleadership. enhancement ofhuman capital; transparent reportingof economic, environmentalandsocialimpact performance; encourages responsible practices; definition ofalearningsystem toprovidemanagementwithguidelinesand astructurethat management practices; integration ofthesocialresponsibility managementsystemintoexistingstrategies and improvement; assessment ofproblems andrisks,withtheimplementationofintegrated initiativesfor awareness aboutbasicvalues,strategiesandactions aimedattheattainmentofobjectives; involvement ofallstakeholdersinthecontinuous improvementprocess; integration ofresponsibilitiesforeconomic,environmental andsocialperformance; , whichintegratesthebasicprinciplesofTotal QualityManagement withthe • performance isjudged. the balancebetweenbenefits forHeraandbenefitsstakeholdersisanother criterionbywhich sustainability, inwhichKPIs (KeyPerformanceIndicators)aredefinedforeach strategicobjective; quantitative standpoint.The identificationoftheseobjectivesistiedtoa process aimedat the useofresourcesand thelong-termpatternsofresourceavailability, from bothaqualitativeand In pursuingtheseobjectives, theGroupisparticularlycarefultoidentify rightbalancebetween — — — — — — — complement theGroup’s businessandfinancialobjectives.Theyinclude: Sustainable qualityobjectiveshavebeenidentified asanintegralpartofHera’s to strategy serving in ordertoachieveobjectives,andtheevolution ofexpectedoutcomes. business sectorlevels.Itthengoesontoillustrate strategicchoices,theactionstobecarriedout document thatbeginsbyintroducingthecompetitive strategiesatthecorporateaswell The IndustrialPlanisupdatedyearlyandsetsthe outlookfortheupcomingfiveyears.Itisa objectives thatmakeitpossibletomaximizethe creationofvalue. The Heragroup'sIndustrialPlanrepresentsanopportunity tofocusondefiningstrategiesand the Group’s strategicplanningprocess. and strategicthinking.Theaimistoincreasingly integratesocialresponsibilitymanagementwithin activities andQSEplanningcontrolactivities, accordingtoalogicofcontinuousimprovement strategically importanttomaintaintightintegrationbetweenoperationalplanningandcontrol identifying businessrisksandopportunities.To thisend,theHeragrouphasdeemedittobe At Herathisprocessisimplementedbymeansofaplanningandcontrolprocedurethatbegins by creation ofvalue. Management, intheutilitiessector, sustainabilityobjectives arethefundamentaldriversbehind Development –Lausanne,Switzerland)inconjunctionwiththeForumforCorporateSustainability highlighted byarecentstudyconductedtheIMD(InternationalInstituteforManagement events whosemanifestationmaypreventthecompanyfromattainingitsstrategicgoals.As order toperformeffectivelyandachievebetterresultsthancompetitorswhiletheriskfactorsare in success andcorporateriskfactors.Thecriticalfactorsofaretheelementsnecessary management processesandthedriversofvalue,whichareinturntiedtocriticalfactors satisfying theManagement’s informationrequirements,whichlargelydependoncritical the frameworkofthisapproach,aspecificsystemhasbeendevisedwiththeaim Within training,monitoring,auditingandreporting. 3) integrationwithinmanagementstrategiesandprocesses; 2) definitionoftheconceptandsystemresponsibleleadership; 1) The approachtoTotal ResponsibilityManagementisfoundeduponthreewell-definedelements: dialoguing withstakeholders. disseminating abusiness culturecoherentwiththeguidingprinciplesand values; making atangiblecontributiontoenvironmental protection; enhancing plantandnetworkassetsinthecore business areas; reducing risks; enriching humancapital; building areputationforreliability, efficiencyandsustainability; • • objectives sustainability strategic value and Creation of 2.4 From TQMtoTRM,2001 Internal analysis,adaptedfromWaddock-Bodwell,

Hera S.p.A. page 43 SR sustainability report 2003 2 GOVERNANCE OF SUSTAINABILITY 2.3 2.4 Hera S.p.A. page 44 SR sustainability report 2003 2 GOVERNANCE OF SUSTAINABILITY 2.5 2.5.1 Responsibility Organizational model for thepreventionof Governance corporate crime promoting systems Social 2.5.1 2.5 — — the endof2003andbeginning of2004thefollowingactivitieswerecompleted: The Grouphasimplemented theorganizationalmodeloutlinedinLeg.Decree 231andbetween Decree no.61/2002. and companyassets,for whichseveraladditionalcategoriesofcrimewere envisagedbyLeg. where crimesarelikelyto beperpetratedarethoseinvolvingrelationswith governmentagencies penal andcivilliabilityoftheindividualswhomaterially commitcrimes.Thespheresofactivity system theprincipleofcorporateadministrative responsibility, whichnowexistsalongsidethe employees, outsidepersonnelandbusinesspartners. Leg.Decree231introducedintoItalianlegal providers)inordertopreventillicitbehavior bydirectors, associations ofmanufacturersandservice (Italian Decree no.231of2001andguidelinesissuedby ConfindustriaandConfservizi day-to-day activities,theGrouphasadoptedan organizationalmodelconformingtoItalianLeg. To increasethevisibilityofitscommitmenttoapplyingprinciples oflegalityandtransparencyin — — — — of socialresponsibilitythroughoutthecompany. More specifically, ithas: The Heragroupisdevelopingaseriesofmanagementtoolsandsystemsthatfavortheextension envisaged bythedecree (formalizedintheCodeofEthics); definition ofethicalandbehavioral standards,takingintoaccountthecategories ofcrime and analysisoftheexisting controlprocedures; mapping of“sensitive”company activities,i.e.wherecorporatecrimeis more likelytooccur, created aspecialRiskManagementfunction continued initsimplementationoftheQSEsystem; defined aCodeofEthics; defined anorganizationalmodelforthepreventionofcorporatecrime; (see section2.2) . • management, andisrelied ontoensureeffectiveimplementationofthe model. that isindependentofthose whoaresubjecttomonitoring,sinceitanswers directlytothetop implementation andcontrolmechanisms:theGroup hasdefinedaninternalmonitoringfunction underlying internalandexternalrelations.Itends bydefiningtheresponsiblebodiesand illustrates thebasicvaluesandprinciplesadopted anddescribesthestandardsofconduct The HeraCodeofEthicsstartsoffwithanintroduction explainingtheprojectgoals.Itthen of proceduresandcontrolactivitiesdesignedto preventillicitconduct. and control,inaccordancewithLeg.Decree231. Itaimstocreateanorganic,structuredsystem throughout theGroup,wasapprovedinconjunction withthemodeloforganization,management stakeholder needsandapositive,transparentreputation forHera.TheCodeofEthics,applied external relations,inordertoencouragepolicies andbehaviorsconducivetothesatisfactionof principles asrespectforthelaw, professionalintegrityandeconomicefficiency, inbothinternaland The CodeofEthicshastheaimguidingGroup managementactivitiesaccordingtosuch — — — — — subject toperiodicupdates. organizational model,aswellforverifyingperformance andbehaviorwithinthecompany, definition ofresponsibilitiesforapproving,receiving, completingandimplementingthe of behavior; information, disseminationandbuildingofawareness abouttheestablishedproceduresandrules the guidelinessetforthinorganizationalmodel; measuresforpunishingfailuretocomplywith definition andapplicationofsuitabledisciplinary Body; definition oftheinformationtobefurnishedSupervisory functioning oftheorganizationalmodel; Bodyresponsibleforensuringthecorrectandefficient identification oftheSupervisory • • 4_Directional OfficesinVialeBertiPichat, Bologna. Code ofEthics 2.5.2 4

Hera S.p.A. page 45 SR sustainability report 2003 2 GOVERNANCE OF SUSTAINABILITY 2.5 2.5.1 2.5.2 Hera S.p.A. page 46 SR sustainability report 2003 2 GOVERNANCE OF SUSTAINABILITY 2.6 2.6.1 Quality Safety Management Hera group’s Environment Basic principles The vituouscircleofthequalityinHera Group. 5_Analysis laboratory ofHeraGroup. 5_Analysis laboratory System and 2.6.1 2.6 sustainable quality. efficiency oftheoverallmanagementsystem in relationtothepolicyandobjectivesof regular andsystematicassessmentsoftheappropriateness, adequacy, effectivenessand out Management system.Theultimateaimofthe QSEmanagementsystemistocarry framework ofgovernance,andtocreatesynergies withtheInternalAuditingandRisk regard Herahasmadethestrategicdecision to integratetheQSESystemwithin objectivesandevaluatetheoveralleffectivenessoforganization.Inthis complementary Integrating thevariouspartsofsystemmakesiteasiertoplan,allocateresources,identify with thedefinitionofsustainability. objectives, suchasthoserelatingtogrowth,financingandprofitability, objectivesconsistent requirements ofallstakeholders.TheQSEobjectivescomplementtheotherorganizational and theenvironmentcapableofadequatelysatisfyingneeds,expectations management systemthatintendstoproduceresultsintermsofobjectivesforquality, safety The QSE(Quality, SafetyandEnvironment)management systemisthatpartofHera's customers andotherstakeholders. provide aframeworkforcontinuousimprovementandtoincreasethelikelihoodofsatisfying correlated orinteractingelementsthatestablishpoliciesandobjectives.Suchasystemmay According toISOstandards9000:2000,amanagementsystemisdefinedassetof actions corrective Checks and Review Management • Implementation IMPROVEMENT ONGOING planning Activity QSE policy 5 + the followingcommitments: This goal,whichislinkedtotheprincipleofsustainabledevelopmentatlocallevel,translates into coherent withtheobjectivesofeconomic,environmentalandsocialsustainability other countriesoftheEuropeanUnion,anactualpublicutilitiesindustry, throughactions fully HERA S.p.A.representsthetangiblerealizationofanindustrialpolicychoiceaimedatcreating, asin Quality, safetyandenvironmentpolicy Tomaso Tommasi DiVignano Chairman oftheBoard + + + Stefano Aldrovandi Managing Director periodically reviewed,notifiedtoallpersonnel andmadeavailabletothepublic. ensuring andperiodicallyverifyingthattheQSE Policyisdocumented,implemented,keptactive, The ManagingDirectorispersonallyinvolved in upholdingandimplementingthesecommitments, management systemforQuality, SafetyandtheEnvironment. The BoardofDirectorsrecognizesasastrategic choicetheintroductionofanintegrated + + + + + awareness the environment adopting, wherepossible,thetechnologiesavailableonmarketthataremostcompatible with environmental aspectsandworkplacesafety; guaranteeing legislativecompliance account thedemandsofpartiesconcerned. authorities, citizens,environmentalassociations, etc.),withafirmcommitmenttotakeinto sustainable; guaranteeing aneffectivesystemformonitoringandreporting educating andtraining communicating ourownperformance for ever health andsafetyofemployeescitizens; preventing orreducingthenegativeenvironmentalimpact customers communicating annual basis; objectives andtargetsaswellindicators:goalsarereviewedonatleast an accidents andillnessesthataffectemployees; customers, themostsignificantenvironmentalaspectsrelatedtobusinessactivities,workplace pursuing continuousimprovement y actionanddecision and citizens of environmental,qualityandsafetyaspects,involvingemployees commitments regardingenvironmental,qualityandsafetypolicies,raising and mostapttoprotecthealthsafety, aswellbeingeconomically company personnel to observe regulationsandinternal procedures; company personneltoobserve in ourbusinessobjectivesandtargets; made, alsoconsideringthecorrespondingimpactonquality, of ourperformancebydefiningmeasurable,comparable in theareasofenvironment,qualityandsafety; and promotingdialogue of ouractivitiesandtherisks the quality of service offeredto the qualityofservice with allinterestedparties(public , suppliers to the ,

Hera S.p.A. page 47 SR sustainability report 2003 2 GOVERNANCE OF SUSTAINABILITY 2.6 2.6.1 Hera S.p.A. page 48 SR sustainability report 2003 2 GOVERNANCE OF SUSTAINABILITY 2.6.2 2.7 2.7.1 2.7.2 Divisions ofHera S.p.A. organizational Territorial Operative Top Management The QSEcontrol Companies and system: control of HeraS.p.A. The QSE plans andKPI structure to measure of services the quality 2nd level: 1st level: 2.7.2 2.6.2 2.7.1 2.7 the maincompanyprocesses,ofwhich,inmostcasescustomershavedirectperception. providedinaggregateandconciseformthetrend and measurethequalityofservices qualityKPIareusedtomonitor are explainedinamonthlyreportfortopmanagement.Service qualityKPI)which indicators inadditiontotheclassiceconomicandfinancial(service qualityperformance The processcontrolstrategyadoptedbyHeraincludeskeyservice andresultshavebeencorrectlyinterpreted. whether thepre-setlimitshavebeenobserved each “accreditedtestingmethod”.Theuncertaintyfactorisakeyelementin:determining accreditationrequirestherelativeuncertaintytobestatedfor the QSEsystemandlaboratory processes intoaccount,andthataimstoensurereliablemanagementthereof.Certificationof thisend,Herahasdevelopeda“Controlplan”thattakesthecharacteristicsof To — — — supervised: In ordertomeettheseaims,Herahasalsoidentifiedthefollowingthreekeyaspectsbe governance attentivetothegrowthofvariouslocalcomponents. to itsQSEmanagementsystem,whichinvolvesidentifyingallproblemsthatrequirecentralized policies. Forthisreasonithasdecidedtoapplyafewprinciplesofso-called“multi-sitelogic” Hera considersitfundamentalfortheparentcompanytoclearlyidentifyguidelinesand must illustratethattheprocessesarecapableofattainingplannedresults. These methodsmustmonitorandmeasurethemanagementsystemprocesses;thusthey operation andcontroloftheseprocesses. of stepsandmutualinteractions,Heradeterminedthecriteriamethodstoensureeffective After identifyingtheprocessesneededtomanageitsactivitiesandestablishingsequence — — — The QSEmanagementsystemthatHerahascreatedessentiallymeetsthreerequisites: safety andthemanagement ofenvironmentalaspects. themanagementofmeasures forprotectingemployees'healthand ofservices, delivery managed byDivisionsof HeraS.p.A..Thislevel,againbywayofexample, includesthe the systemwhichpertain tolocaloperations(TOC)andtheproductive systemsdirectly Experts inthisunitfollow thedevelopmentandsubsequentmanagement ofthoseparts Integrated Management SystemoftheGroup. Environment Unitisavailablewhichincharge ofcontrollingthesecondtierQSE In eachTerritorial OperativeCompanyandDivisionofHeraS.p.A. aQuality, Safetyand as wellcentrallymanagedprocessessuch aspurchasingandcontrolplans. management ofthosepartsthesysteminwhich theGroup'stopmanagementisinvolved The expertswhoarepartofthisunitincharge ofdevelopingandcoordinatingthe Management SystemoftheHeragroup. Management: theyareentrustedwiththetask ofcontrollingthefirsttierQSEIntegrated The GeneralManagementofHeraS.p.A.also includestheQuality, SafetyandEnvironment information andprotectionofconsumers/citizens. technically competenttestinglaboratories; processes instatistical“controlstatus; control. product andservice process control; the logicof“multi-site”certification; • • • certification toanadditionalgroupofplants. and territorialoperativecompanies)bytheendof2004extensionISO14001:96 Hera planstoobtainISO9001:2000certificationoftheentireGroup(HeraS.p.A.,Comm — — — — At theendof2003,Heracouldboastfollowingcertifications: Cesena S.r.l. (appliessolelyfortheDistrictofForlì). management ofthethreecycles(water, energyand environment)”,awardedtoHeraForlì- fortheintegrated ISO 9001:2000,withapplicationin“Designandmanagementofservices Unit; RRS Division–Laboratory ISO 9001:2000and17025(accreditingoftestprocedures),awardedtoHeraS.p.A.- registration (Reg.CE761/2001)of1plant,awardedtoHeraS.p.A.–EnvironmentDivision; hazardous andT/N)disposal,treatmentrecyclingplants”foreightplantsplusEMAS ISO 14001:1996,withapplicationin“Designandmanagementofwaste(hazardous,non- Hera S.p.A.; of: integratedmanagementofthethreecycles(water, energyandenvironment)”,awardedto ISO 9001:2000,withapplicationin“Planningandcontrolofthemanagementservices • and planned obtained of certifications Overview 2.8

Hera S.p.A. page 49 SR sustainability report 2003 2 GOVERNANCE OF SUSTAINABILITY 2.8 3 ECONOMIC PERFORMANCE page 51 S.p.A. Hera Hera S.p.A. page 52 SR sustainability report 2003 1 IL GRUPPO HERA 1.1 Dati sintetici e missione di Hera Cavour; pages Hera S.p.A. pag BS bilanciosustainability di sostenibilità report 20032003 11 ILIL GRUPPOGRUPPO HERAHERA 1.11.1 Dati sintetici e missione di Hera 50-51 54-55 : Financialoperators inthecenterofBologna; Castel SanPietro, bales of hay 52-53 Rimini, Piazza

Hera S.p.A. page 55 SR sustainability report 2003 1 IL GRUPPO HERA 1.1 Dati sintetici e missione di Hera Hera S.p.A. page 56 SR sustainability report 2003 3 ECONOMIC PERFORMANCE 3.1 3.1.1 income statement Operating Reclassified results

3.1.1 3.1 Annual Reportfor2003. calculated onthebasisofreclassifiedincomestatementsubmittedwithConsolidated The presentSustainabilityReportcontainsdataandindexesbothfor20022003, allocation amongallthosewhobenefitfromitbyvirtueoftheirinterrelationswiththecompany. The reportincludesacalculationofthevalueaddedcreatedbycompanyactivitiesandits complete pictureoftheGroup’s positionfromaneconomicandfinancialviewpoint. the consolidatedfinancialstatements.Itpresentsresultsandindicatorsthatprovidea This sectionfocusesonthebusinessperformanceofHeragroupanddirectlyreferences e rft3. .%5. .%44.8% 45.4% 17.7% 4.0% 8.5% 53.0 6.7% 2.9% 112.8 26.4% 49.1% 88.6 3.2% 18.2% (0.3%) 6.8% 1.6% 3.7% 242.5 36.6 (3.5) 77.6 6.6% 19.2% 49.5 (14.5%) (39.6%) 75.3 16.9% (192.4) (0.3%) (67.3%) 191.9 165.6% 2.9% (896.4) (3.4) 17.5% (16.7%) 13.5% 33.2 14.5% (189.4) (66.4%) 100.0% 19.5 (9.7%) (752.0) 1,331.3 (129.7) 90.3 Net profit pertainingtotheGroup 100.0% Profit pertainingtothirdparties 1,133.3 Net profit (10.1%) 1,221.5 Profit beforetax (114.3) EBIT 32.3 Depreciation, AmortizationandAllowances EBITDA 34.0 Cost oflabor 1,067.0 Operating costs Value ofProduction Incr. inconstruct.andworkprogress Other incomeandrevenues Revenues fromsaleandservices (million euros) • 1Dc0 1Dc0 %change % 31-Dec-03 % 31-Dec-02 Electric Energy Area 11% Gas Area 39% Water CycleArea 21% Environment Area 20% Other ServicesArea 9% OA 4 1,105 8.6% 95 20.2% 38.9% 21.3% 224 430 948 235 10.9% 2.8% 121 27 1,222 24.6% 6.9% 43.8% 21.3% 233 84 415 202 7.5% 23.3% 71 42.1% 17.4% 285 514 212 10.4% 1,058 2.3% 127 24 27.2% 44.7% 18.4% 288 473 195 7.4% 78 TOTAL Other services Environment area Water cyclearea Electrical energyarea Gas area (million euros) Breakdown ofproduction costsbybusinessarea TOTAL Other services Environment area Water cyclearea Electrical energyarea Gas area (million euros) Turnover bybusinesssector 2002 2003 2002 2003 Electric Energy Area 10% Other servicesArea 7% Environment Area 23% Water CycleArea 17% Gas Area 43% 2003 turnoverbyactivityarea 2003 costsbyactivityarea

Hera S.p.A. page 57 SR sustainability report 2003 3 ECONOMIC PERFORMANCE 3.1 3.1.1 Hera S.p.A. page 58 SR sustainability report 2003 3 ECONOMIC PERFORMANCE 3.1 3.1.2 3.1.3 Integrated Water CycleArea 26% Central Structure Area 15% Other ServicesArea 11% investments by Environment Area 37% balance sheet business area Breakdown of 2003 Investment Reclassified Gas Area 10% EE Area 1% 3.1.3 3.1.2 Acantho, alsoreceivedmajorregionalfunding. Local GovernmentNetworkinEmilia-Romagna. Theproject,assignedtothesubsidiary of fiberopticinfrastructures,asparttheRegional Telematic Planfortherationalizationof area,worthyofnoteisa13.2millioneuroinvestmentinthe construction In theOtherServices owned bytheGroup. the rationalizationandmaintenanceofwaste disposalandtreatmentcapacityoftheplants toincreasetheGroup’slines, whichwillserve capacityinthissector. Otherinitiatives regarded activities andproceduresforrequestingauthorization toconstructfournewwaste-to-energy engineering During thefinancialperiod,companyalso completed allthepreliminary waste-to-energy plantinBologna,whichisexpected tobecomefullyoperationalin2004. The datapertainingtotheEnvironmentareahighlight theeffortsrequiredtocompletenew requirementsandspecialmaintenanceonwatertreatmentplants. with regulatory routine maintenancecostsandextensionofthe distributionnetwork,aswellcompliance In theIntegratedWater Cycleareathehugeincreaseininvestments madeisascribableto to 1,423km. As regardstheelectricalenergyarea,powergridmanagedbyHeraincreasedfrom1,410 municipalities. users), whichwentfrom7,880to8,261kmfollowingtheawardingofutilitycontractsinnew maintenance, upgradingandextensionofthedistributionnetwork(includinglinkupnew During theyear2003,maininvestmentsinGasareawereearmarkedforspecial Listed belowaretheinvestmentsmadebyHeragroupindifferentbusinessareas. e qiy8537.%84566.8% 33.2% 894.5 6.9% 100.0% 444.3 (13.3%) 1338.8 (177.4) 92.2 6.6% 26.3% 77.3% 352.1 22.7% 88.9 100.0% 100.0% 865.3 (14.1%) 1119.1 253.8 1338.8 11.7% 6.1% (157.3) 68.0% 156.7 16.6% 68.5 6.6% 26.9% 909.8 100.0% 185.3 1119.1 360.8 73.8 106.6% 4.0% 1427.3 69.2% 44.9 34.3% 774.4 383.3 107.5% Total sources ofloan 1202.6 Net FinancialStanding Short-term financialpayables Long-term financialpayables Net equity Net capitalinvested (Funds) Net workingcapital Total fixedassetsandl/tinvestments Long-term investments Tangible fixedassets Intangible fixedassets (million euros) eta raiain2. 30.8 23.5 77.4 29.4 54.8 12.8 61.9 42.9 TOTAL Central organization area Other services Environment area Integrated watercyclearea EE area Gas area (million euros) Investments • 1Dc0 1Dc0 % 31-Dec-03 % 31-Dec-02 7. 210.6 177.0 022003 2002 7721.4 27.7 . 2.7 2.3 servicing itsfinancialdebts. servicing the benefitsoffinancialleveragesincereturns oncapitalinvestedarehigherthanthecostsof burden; leverage:somewhathigherthaninthe previous year(+15.7%);thecompanycanexploit operations: practicallyunchangedfromtheprevious year(-0.4%),itismainlytiedtothetax improvement inthemarginofoperationson valueofproduction;incidenceextraordinary return oninvestments(ROI)sawasubstantialincrease (+21.5%),mainlyasaresultofthe forecast, fromthemerger, notonlyinthemedium/longterm,butalsoshortterm.Infact: the shows thattheresultachievedislargelyascribable tothemajoroperatingsynergiesarising,as 2003 itrosesignificantly, from4.2%to5.9%.AbreakdownofROEintoitsconstituentfactors Return onequity(ROE)isaconciseindicatorof thecompany’s overallbusinessperformance. In financial risk. comparison isalwaysmadewithcorporateentities havingthesamedegreeofoperationaland ensurethatperformanceasexpressedbytheseindicatorsiscorrectlyinterpreted, a To liabilities. organizational structure,thatistosaytheshort-andlong-termbalancebetweenassets The mainindicatorsregardtheprofitabilityofcompanyactivitiesandsolidity year. however, thecomparabilityofconsolidatedfinancial datawiththosepertainingtotheprevious This entailedadistributionofresultsamongtheindividualGroupcompanies,whichdidnotaffect, companies whichhadmergedintotheHeragroupatendof2002. The year2003wascharacterizedbyreorganizationactivitiesaimedatunifyingthegroupof results. Economic indicatorsarecalculatedtoanalyzethecompany’s “health”andmanagement indicator ofemployees' performance inalongtimelapse. to thecompany’s activitiesandtheachievementofcompany results.Theyarealsoanimportant Employee performanceindexesareusefultodetermine employeeparticipationinandcontribution ROE (NetProfit/NetEquity) Profitability indexes O OeaigIcm/eeus .%92 +26.0% +15.7% +21.5% -4.3% 9.2% 1.50% 8.4% -0.4% 91.2% 7.3% 1.29% 47.0% 6.9% 95.3% 47.2% Rotation ofInvestedCapital(Revenues/NetInvested) Leverage (NetCapitalInvested/NetEquity) operations(NetIncome/OperatingIncome) Incidence ofextraordinary ROS (OperatingIncome/Revenues) ROI (OperatingIncome/NetCapitalInvested) mlye sa 11 .3 .2 -2.4% 52.8% 29.5% 4.1% 17.3% 4.428 11.2 54.8 4.538 43.5 275.9 7.3 42.3 41.7 235.1 Employees asat31/12 Net incomeperemployee Average costperemployee EBITDA peremployee Turnover peremployee Employee performanceindexes ( • € 00 0220 Changes% 2003 2002 /000) • 0220 Changes% 2003 2002 .%59 +40.1% 5.9% 4.2% 1 3.2.2 Profitability indexes 3.2.1 indicators Economic 3.2 performance indexes Employee 1_Hera Groupcustomercareoffices, Bologna

Hera S.p.A. page 59 SR sustainability report 2003 3 ECONOMIC PERFORMANCE 3.2 3.2.1 3.2.2 Hera S.p.A. page 60 SR sustainability report 2003 3 ECONOMIC PERFORMANCE 3.3 Calculation and added value allocation of 3.3 Report StudyGroup),whichguidetheallocationofAddedValue amongallbeneficiaries. beyond traditionalapproachesandisbasedontheprincipleslaiddownbyGBS(Social shareholders, suppliers,customers,institutionsandcommunity. Thisreclassificationgoes quantifies theexchangesbetweencompanyandmainstakeholders:employees, Value added,understoodasthedifferencebetweenvalueandcostsofproduction, oa 2691.7 39,258 11.47% 42,699 19,958 3.70% 9,174 19,958 35,588 13,777 42,040 -5,504 12,105 13,777 38,659 3,553 7,414 -8,065 199,700 27,529 95,518 52.46% 3,459 5,627 195,369 5,728 1,543 Total 192,429 contributions givenforoperating expenses 81,471 taxes otherthanincome income taxes(irpegandirap) 4,195 1,776 institutions Government 189,398 45,593 Total financial charges 8.32% Financial backers Total 30,988 minority interestinnetincome 102,932 dividends allocated Shareholders 23.39% Total 87,098 amortization anddepreciation self-financing Company system Total expenses foremployees fees paidtodirectors wages andsalaries Employees VALUE ADDEDALLOCATION mriaino nagbefxdast 3,1)(38,025) 411,991 (57,493) 3,964 (2,905) 372,384 (32,110) (2,905) (49,361) (5,216) 4,707 416,148 (4,157) 12,054 -1,252 (909,647) 12,054 (6,304) -570 (5,277) (23) 360,900 (3,775) 11,484 (764,286) (290,386) (7,893) (2,918) (983) (199,731) 1,325,795 (520,583) Amortization ofintangiblefixedassets (58,217) Depreciation oftangiblefixedassets (30,359) 19,443 Global valueadded,gross 1,125,186 Balance ofancillaryandextraordinary items (469,392) (54,386) Balance ofextraordinary items income(expenses) Net extraordinary (28,983) 32,290 items Balance ofancillary (5,504) 23,131 31/12/03 Adjustment ofinvestmentassets Financial income 67,501 Ancillary andextraordinary items 31/12/02 1,221,533 Gross 2,713 valueadded (8,065) Costs ofproduction Accruals toprovisionsforcontingenciesandother 1,066,974 30,990 Write-downs ofreceivables Write-downs offixedassets expenses Sundry Costs forservices Costs foruseofnon-ownedproperty (net ofchangeininventories) Consumption ofraw, andexpendablematerialsgoods auxiliary Production value Contributions receivedfrompublicinstitutions Other revenuesandincome 284 Increases inassetsduetointernalimprovements Change incontractworkprogress Changes intheinvent.ofworkprogressandsemi-finishedfinishedproducts Revenues fromsalesandservices thousands ofEUR VALUE ADDED lblvleadd e 9,1 316,473 290,913 (95,518) (81,471) Global valueadded,net Total amortizationanddepreciation offixedassets (thousands of € ) 02%20 % 2003 % 2002 11.07% 24.98% 48.48% 9.53% 4.84% -309 campaigns designedto promotesustainabledevelopmentoftheterritory. sponsorships ofevents (cultural,artistic,etc.)andinvestmentsinawareness-building Approximately 1%ofthe valueaddedistransferredtothecommunity throughgiftsand 11% ofvalueaddedin the formofdividendsandincomeduetominority interests. account forthesharedestined togovernmentagencies.Shareholders receiveapproximately provided. Taxesservice paid (netofcontributionsreceivedtowardoperating costs)totally primarily duetoconstant productioninvestmentsaimedatimproving theefficiencyof protecting it.Thecompany systemalsoreceivesasignificantshareof valueadded;thisis importance thecompanyattributestothisstakeholder groupandastrongcommitmentto The largestshareofvalueaddedisabsorbed by employees,furtherevidenceofthe oa ,5 .6 4,550 463 0.66% 2,453 4,087 109 411,991 2,344 372,384 GROSS OVERALLVALUE ADDED Total sponsorships andadvertising donations Community • 1.10% Employees 48,48% Institutions 9,53% Added valueallocation Financial Providers 4,84% Businness system24,98% Community 1,10% Shareholders 11,07%

Hera S.p.A. page 61 SR sustainability report 2003 3 ECONOMIC PERFORMANCE 3.3 4 SOCIAL PERFORMANCE page 63 S.p.A. Hera SR sustainability report 2003 4 SOCIAL PERFORMANCE 2.1 La responsabilità sociale d’impresa nel Gruppo Hera Bologna; pages SR sustainability report 2003 4 SOCIAL PERFORMANCE 2.1 La responsabilità sociale d’impresa nel Gruppo Hera 62-63 66-67 : Forlì,waste-to-energy plant; Cesena, citycenter 64-65 Waste collectioninthecenterof Hera S.p.A. page 68 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.1 4.1.1 Personnel policies Employees

4.1.1 4.1 + + + + + + + + + + + The basicprinciplesunderlyingtherelationship betweentheGroupanditsemployeesare: activities andbyplanningprogramsofincentives andprofessionalgrowth. Hera payscloseattentiontoenhancingitshuman resourcesthroughintensivetraining for newjobswhereapplicable. placement orretraining devoted toprotectingworkers’rightinorder guaranteesatisfactory parties throughanopenexchangeofinformation andconsultation;specialattentionwas socially responsibleapproach,whichensuredtheparticipationandinvolvementofinterested The entireprocessleadingtothecreationofHeragroupwasconductedaccordinga improvement ofperformance. and allowingthecompanytoseekincreasedcustomersatisfaction,throughcontinuous toconsumers Employees representthekeyfactorfordeliveringandensuringqualityservices to guaranteetheprotection ofworker'shealthandsafetyintheworkplace. to maintaingoodrelationships withinternalandexternalworkers'representatives; to ensurethattheassessment proceduresandtheawardingofbonuses arecleartoall; to respecttheprinciplesofnondiscrimination andpromoteequalopportunities; knowledge andskills; to protectandnurturetheworkforce,with aim ofimprovingandincreasingindividual to guaranteeahighlevelofprofessionalismin linewiththerolesanddutiesofpersonnel; to provideemployeeswithappropriateeducation andtraining; to establishafairandtransparentworkingrelationship; to increasejobefficiencyandpromoteahelpful, respectfulattitudetowardcustomers; company andcooperationamongcoworkers; to createaserene,sociallyresponsibleworking climatetoenhancecohesionwithinthe share thecompany’s goalsandstrivetowardtheirattainment; to promoteinvolvementofbothemployeesand outsidepersonnelbymotivatingthemto • • VI. V. IV. III. II. I. www.unglobalcompact.org) inregardtohumanandworkers’rightsare: The PrinciplesoftheGlobalCompact(availableatwebsite — — — — — — — — www.cepaa.org )regardthefollowingtopics: The principlessetforthinstandardSA8000(availableatthewebsite standards. for example,theGlobalCompact,standardSA8000andrelated ILO principal internationalguidelinespertainingtoworkers’rights,such as, The Group’s personnelmanagementpoliciesareconsistentwiththe Pay Working hours procedures Disciplinary Discrimination Freedom ofassociationandrighttocollectivebargaining Worker healthandsafety Forced labor Child labor elimination of every formofjobandprofessionaldiscrimination. elimination ofevery effective eliminationofchildlabor; eliminating allformsofforcedlabor; right tocollectivebargaining; supporting workers’freedomof associationandrecognizingthe human rightsabuses; to making sureyouareneitheradirect orindirectaccessory within therespectivespheresof influence; promoting andrespectinguniversally recognizedhumanrights

Hera S.p.A. page 69 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.1 4.1.1 Hera S.p.A. page 70 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.1 4.1.2 of thelaborforce Composition 4.1.2 214 employeescomparedtotheendof2002:277leftwhile63newwerehired. Considering thesamescopeofconsolidation,totalworkforceshowsanetdecrease - together employatotalof4,232people,orabout93%theGroupworkforce. considered HeraS.p.A,CommandthefiveTerritorial OperativeCompanies,which in thesectionunderheading“Scope”,whereasSustainabilityReport2002only The 2003datapresentedinthissectionrefertothecompaniesofHeragroup,asdefined As at31December2003,thetotalofemployeeswithinHeragroupwas4,428. oa vrg ,7 68 - 1,474 1,720 1,786 Overtime Regular 74 Total average Labor Clerical 1,490 Managers Executives Hours workedpercapita 2003 67 150 4,428 2,547 910 37 5 198 3,518 2,349 113 62 4,232 2,442 2003 96 879 68 180 3,353 17 2,262 5 1,664 79 670 63 994 2002 1,626 677 TOTAL Labor Clerical 949 Managers Executives No. ofemployees te rvne 7 27 890 865 179 540 99 2,106 734 857 925 87 3,571 595 1,799 124 879 2003 137 3,353 46 51 334 2002 818 2003 2003 1,592 754 67 262 13 47 945 1,279 1 2002 666 2002 Total Other provinces 3 Province ofRimini 23 Province ofRavenna 81% 327 Province ofForlì-Cesena 13 Province ofBologna 13 57 n.a. 320 Breakdown byplaceofresidence 37 379 50 n.a. TOTAL 4,428 Sales Administration 326 29 29 Production –Environ.Sector 53 Production -Water Sector 52 2003 Production -EnergySector 4,048 Breakdown byfunction People hiredwithopen-termcontracts 2002 % ofJTCexpiredandreplacedbyopen-termcontracts No. ofemployeeswithjobtrainingcontractsasat31/12 Job training Total Trainees andSeasonalWorkers Professional services Trainees Employer-coordinated freelancework Temporary workers Other workers: Job trainingcontracts Fixed-term contracts Open-term contracts Employees: Employment contracttype e oe oa e oe Total Women Men Total Women Men MWMW ,4 65 1,443 ,3 4,428 4,232 4,568 4,232 ..6 n.a. only onhighlyqualified,sought-afterresources, accordingtotheabove-describedcriteria. turnover andfurtheroutsourcingofactivitieswith limitedaddedvalue.Recruitmenteffortsfocus made availablebytheinternalrationalizationprocesses. Thisimpliesanefficientmanagementof into Heramustincludeaplanfortheenhancement andredeploymentofthehumanresources According tothecurrentpersonnelpolicy, theprocessofintegrationforcompaniesmerged etn ..8,969 522,034 22,474 19,638 1,856 1,667 225 41 65,455 82,624 561,375 322,874 n.a. n.a. 42 85,800 2003 41 2003 71,225 45 42 47,700 356,650 41 41-50 31-40 48 26-30 2003 < 25 2002 Age brackets 2002 49 Labor Clerical Managers Executives 50 Average age TOTAL Union leave Meeting Strike Accident Pregnancy Sickness Absences (inhours) 119 4,428 620 TOTAL > 61 51-60 eprr1 11 5 28 11 +104 106 63 2003 10 2,547 4,428 49 187 1,664 66 150 2002 297 - 277 - - Total 312 Professional services Professional services 8 63 Employer-coordinated freelancework Employer-coordinated freelancework Temporary Temporar 41 67 Other workers: 10 Job trainingcontracts 4,538 Seasonal 2,719 Fixed-term contracts 1,646 Open-term contracts 105 Employees: Changesinscopeofconsol. Recruitment Employed asat31/12/03 - Dismissedorretired Hired Employedasat31/12/02 4 TOTAL Labor Clerical Managers Executives 68 Turnover ofpersonnel* te 4 02 821209 6 367 93 1 2 4,428 2 2,026 1,727 52 18 23 5 3 1 24 W 61 62 8 M 1 4 97 20 144 37 128 1 W 14 113 48 M 1 1 670 1 496 994 W 3 TOTAL 7 674 54 M 198 TOTAL 2,349 160 62 4 EXECUTIVES Other 721 W 81 University Degree 111 M CADRES 1,400 Abbreviated degree OFFICEPERSONELL High SchoolDiploma education Secondary LABOR education Primary (as at31/12/03) Academic qualifications 5176 4,428 346 570 809 682 1,845 2003 8 10 TOTAL 10 > 25 11 20-25 13 16-20 11-15 17 6-10 < 5 2003 Seniority 12 Labor 2002 Clerical Managers Executives 12 Years ofservice 80 4 leavers) thatoccurredinthecompanies in2003. included tosummarizethetotalchanges (newentriesand completeness, a“ConsolidationChanges” columnhasbeen occurring in2003;thusonlythetotal isshown.Forthesakeof duetopromotionsandconsolidationchanges category * Itwasnotpossibletobreakdown the employeesleavingby

Hera S.p.A. page 71 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.1 4.1.2 Hera S.p.A. page 72 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.1 4.1.2 4.1.3 Diversity andequal opportunities 1_Hera Groupcallcenter, Bologna. 4.1.3 — — — — graduates inthefirstthreeyearsconsistsin: extreme care,fromrecruitmenttohiringanddevelopment.Thedevelopmentplanfor University graduatesrepresentavaluableresourceforthecompany, onetobetreatedwith + + + the three-yearperiodwillbebasedonneedandinvolvefollowingstages: operational standpointbutalsotocontributethecompany’s overalldevelopment.Hiringin recruitment ofhighlyeducatedprofessionalsinordertonotonlyimproveefficiencyfroman Over thenextthreeyearsHeraplanstoinvestinhumanresourceswithahighpotentialand Hera fulfilleditsobligations underItalianLawno.68/99. workforce andsocietythrough theuseofinformationtechnologyand telecommunications. ONLUS, anassociation thatpromotestheintegrationofdisabledindividuals inschools,the In 2003Heracontributed, withthepaymentofamembershipfee,to theactivitiesofASPHI particularly intheenvironmental hygienesector. jobs classifiableas“male” duetothephysicallyarduousnatureof taskstypicallyassigned, labor category, it is worthnotingthatthepresenceofwomen not insignificant(4%),evenin which employeesareentitled bylaw, bothintheclericaland laborcategories.Asregardsthe In ourcompanytheabsences duetomaternityarenormallylongerthan theminimumleaveto own request,werewomen. At December31st2003,85%ofemployeeshired onapart-timebasis,mostoftenattheir psychological profilesandaptitudeswhilerespecting thecandidate’s privatesphere andopinions. In selectingpersonnelitaimstoprotectequalopportunities byassessingprofessionaland forms ofdiscrimination. The Groupisawareoftheissuesrelatedtoequal opportunitiesandcommittedtoavoidingall Group reliedonoutsideemploymentagencies. Personnel forclericalorlaborjobsareselectedbyinternalrecruitment.To fillhigh-leveljobs,the eeto rcs %ofapplicationsreceived Selection process ie 33.24 63 1,945 12.03 Hired 234 Interviews Applications received verification ofjobsuitabilityandperformanceassessment. training, meetings withtopmanagementandpersonnelmanagers, hiring plan, hiring onanindefinitebasis,conditionaluponthepositiveoutcomeofemployeeassessments. fixed-term contractforthefirst18months, recruitment byassessment, • • 1 in particular. training, vocationaltraining orguidanceprogramstootheruniversitydepartments, Engineering In 2004Heraplanstoextendtheagreementfor theplacementofstudentsinfreecurricular of theUniversityBolognainforma10,000 EURgrantusedforascholarship. or guidance.Fortheacademicyear2003-2004, HeraprovidedfundingtotheHigherCollege Engineering, underwhichstudentsmaybenefit fromfreecurriculartraining,vocationaltraining Hera moreoverstipulatedaframeworkagreement withtheDepartmentofChemical total of96,150EURin2003)awardedrespectively toundergraduatesandgraduates.In2003 waste management.Theseincentivesconsist in6-monthand12-monthscholarships(fora the trainingofundergraduatesandgraduates, withaparticularemphasisonwater, energyand Hera presentlyhasanagreementwiththeUniversity ofBolognawhichprovidesincentivesfor the coursestiedtonewinformationsystem. exceeded 400,000EUR:the2004budgethas setaside700,000EURfortraining,excluding In 2003theexpenditurefortraining(withoutconsidering thecostsduetonon-production) adequate standardsofsafety, healthandenvironmental protection. to promotecontinualimprovementinemployeeawarenessaboutthesetopicsandassure Finally, traininginthequality, safetyandenvironmentareashasbeenfurtherincreasedinorder for changemanagementintheinaugurationofnewinformationprocedures. support investment ofresourcesinallGroupcompanies,suchastoguaranteethenecessary Teaching stafftousethenew CompanyInformationSystemhasentailedasubstantial management areas. Several importantinitiativeshavebeendedicatedtocommunicationandcustomer company’s listingonthestockexchange. management modelscoherentwiththeneworganizationalstructureandeffectsof The trainingplanforthedevelopmentofmanagerialskillsfocusesonsharing required inthemulti-utilitiessector. machinery, equipmentandnewtechnologythediversityoftechnicalknow-how resources givenboththenumberofemployeeswhoneedtoupdatetheirskillsinuse Vocational trainingandspecializededucationofpersonnelentailasignificantcommitment and environmentalprotection. improve theefficiencyofproductionprocessesandmaintainhighstandardsquality, safety administrative staffandincludeson-the-jobfieldtraining.Theseactionsprimarilyaimto management policy. Itismanifestedthroughactions aimedmainlyattechnicaland Continual trainingofworkersisparttheGroup’s humanresourcedevelopmentand implementing thenewcompanyinformationsystem. inordertospeeduptheprocessofchangecurrentlyunderwayand skills necessary itswealthoftechnicalknow-how,activities aimedatpreserving developingthemanagerial In 2003,consistentlywithitsjobtrainingprogram,thecompanyengagedinintense performance. managing organizationalchangeandensuringthegrowthof Employee trainingisadistinguishingfeatureofHeragroup,animportantstrategicleverfor and byplanningprogramsofincentivesprofessionalgrowth. Hera payscloseattentiontoenhancingitshumancapitalthroughintensivetrainingactivities Total Information technology Management training Safety andenvironment Quality Vocational trainingandspecializededucation (in manhours,asregardsHeraS.p.A.,CommandtheTerritorial OperativeCompanies) Training • enrichment Training and 4.1.4 ** Fromthe2004Training Plan * Estimates 9785,4 119,098 59,540 79,896 7,962 59,738 24,665 10,916 44,244 02*20 Target 2003 2002 * ,7 ,5 7,263 4,051 4,578 43016,040 14,330 8,532 2004** 15,889

Hera S.p.A. page 73 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.1 4.1.4 Hera S.p.A. page 74 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.1 4.1.5 4.1.6 * valuesroundedtohundredsofthousands ofeuros Pay andincentive Health andsafety system 4.1.6 4.1.5 protecting them. of theimportancecompanyattributestothesestakeholdersandastrongcommitment Over 48%ofthevalueaddedcreatedin2003wasabsorbedbyemployees,furtherevidence from theemployee’s leavingindemnity. contributions withheldfromemployees’wages,employerandamountsdeducted pension plansprovidedforunderlaboragreements.Theplanisfinancedthrough Finally, withregardtosocialsecurity, Heraemployeeshavetheoptionofjoiningvoluntary and workingindifferentrolesorathigherlevelsofresponsibility. fordevelopment to provideanobjectiveanalysisofprofessionaltraitsandabilitiesnecessary measure theresultsofaperson’s workinatransparentfashion)andassessmentsdesigned system formanagementpersonnelbasedonanappraisalofperformance(whichaimsto Again asof2003,initiativeshavebeenunderwaytodefineandstandardizetheincentive as awhole,andforexecutivesthreecompanyobjectivesplusindividualobjectives. forecasts, basedforthetopmanagementonthreeobjectiveswhicharevalidcompany based onachievingspecificobjectivesforeachareaofresults,accordingtoprecisebudget remuneration. To thiseffectasof2003amanagementmechanismhasbeenimplemented to establishahomogeneousandtransparentpolicy, withintheframeworkoftotal A Management-by-ObjectivessystemhasbeenputintoeffectformanagersatHera.Itsaim is organizations toharmonizethebonusacrossGroup. defined objectives;in2004thecompanywillseektoreachanagreementwithunion be awardedproductivitybonusesaccordingtothedegreewhichresultsattainedmeet The nationalcollectivelaboragreementsappliedwithintheGroupprovidethatallemployees consulted andinformed throughbothinformalcontactsandformalmeetings. Theappointed different staffmembers. Workers' Representatives forSafetyissues(WRS)areperiodically responsibilities present in thesphereofoperationsandsupportthat mustbeprovidedby ensure effectivemonitoring ofworkerhealthandsafety, particularlywithrespect tothe The organizationaldocument clarifiestherolesthateachcompanyfigure mustperformto procedures formanaging personalsafetyequipment. 2003 werethedefinition ofsafetyorganizationguidelinesandstandardization ofthe experience acquiredby individualtechniciansovertheyears.Theprincipal resultsachievedin ofthemainGroupcompaniesandmay countontheprofessional Protection Services The SafetyCoordinationfunctionreliesoninput fromthemanagersofPreventionand exchanges ofthebestexperiencestobefound intheGroup. levels ofsafetythroughouttheGroupbyimplementing and/orfacilitatingsynergiesand department oftheholdingcompanyinMarch 2003. Itisassignedthetaskofharmonizing A SafetyCoordinationfunctionwasinstituted within theQuality, SafetyandEnvironment Organization ofSafety systemisbased. regulatory and safetyattheworkplace,referencingguiding principlesuponwhichthecurrent The Heragroupintendstomakeanongoingcommitment toensurehighstandardsofhealth mlyelaigidmiy1,3 9,922 134,010 47,473 10,335 131,272 45,284 2003 192,500 2002 12.1% 23,200 31.0% 39.0% 15.5% 59,700 2.4% 75,100 189,500 29,900 17.9% 2003 5.0% 4,600 34,500 34.3% 9,400 41.8% 16.9% 65,000 Total 79,100 2.0% 32,200 18.9% Other costs Employee leavingindemnity 36,000 3,800 Social securitycontributions 2002 Wages andsalaries (thousands ofeuros) Breakdown oflaborcosts Total Other services Environment sector Water sector - electricalenergyarea - gasarea Energy sector (thousands ofeuros) Cost oflabor* • 8,9 192,427 189,398 ,0 1,022 2,507 Uniflotte. Hera S.p.A.,Territorial OperativeCompanies,FrulloEnergiaAmbiente, FamulaOn-lineand ofthehealthmonitoringactivitiesconductedin2003onemployees of Below isasummary checks bylaw. workers, whetherornottheirjobrequiresthem toundergopreventiveandroutinehealth Hera reliesonqualifiedoutsidephysicianstoverify thesoundmentalandphysicalhealthof Health monitoring guiding behavior. In2004,such actions,which,inconsiderationofthecharacteristics activities (investmentplan, annualbudget),includetechnicalinitiatives andactionsaimedat The programs,designed fullyinlinewiththemethodsforplanning andcontrolofcompany be suitablemeasuresfor ensuringimprovementsinthelevelsofsafety overtime. participation ofallinterested parties,thecompanyhasdefinedprograms ofwhatitjudgesto For 2004,basedonthe resultsofriskassessmentsandinternalaudits conductedwiththe Improvement programs showed adownwardtrend. our commitmentisdemonstratedbythefactthatin2003allmainaccidentindexes identifying andremovethecausesunderlyingeachevent,especiallymostseriousones: It isforthisreasonthatweconstantlyandthoroughlyanalyzeaccidentswiththefinalaimof related phenomena. Hera devotesagreatdealofattentiontopreventionandthecontinuousreductionaccident- Accidents In 2003,personnelreceived8,532hoursofsafetyandenvironmenttraining. + + + + + The mainactionsinclude: needs: through traininginitiativesimplementedwithyearlyprogramsbasedonananalysisof as wellattitudesandbehaviorsconsistentwiththecultureofworkplacehealthsafety In 2003,withintheneworganizationalframeworks,effortscontinuedtoenhanceawareness Information, trainingandeducation the advantageofallthoseinGroupwhoareexposedtosamerisk. definition ofcentralizedtrialprocedures,whichallowtheworkafewpeopletobeturned to spares. Theeffortswithregardtopersonalsafetyequipmenthavealsoresultedinthe most suitableequipmentandbypurchasingstafftomanagepurchasesdeviceskeptas employed withintheGroup.Nowcatalogueisusedbyeachtechniciantochoose includes descriptionsandtechnicalspecificationsofallthepersonalsafetyequipment The standardizationofpersonalsafetyequipmentisfoundeduponasinglecataloguethat constant, activesupporttowardimprovingthelevelsofsafety. physicians, whosimilarlyestablishedtheirowncoordinationsystemattheendof2003,offer uimti n prmti et 2,290 2,408 Biological monitoring Screening ofvision Audiometric andspirometrictests Electrocardiograms tests Laboratory Clinical services Preventive androutinemedicalcheckups Description 10.23 11.15 67.58 1.62 73.17 1.90 Average lengthofabsenceduetoaccidents(absencesaccident/number ofaccidents) Rate index(numberofaccidents/numberemployees*100) Severity index(daysofabsenceduetoaccidents/hoursworked*1,000) Frequency index(numberofaccidents/hoursworked*1,000,000) Indicator * training inemergencymanagement. training infire-fightingprocedures; cornerstone ofthesafetymanagementsystemlaiddownbyLeg.Decree626/94; outtheroleof“safetysupervisor”, skillstobestcarry acquisition orupdatingofthenecessary in-depth coursesforhomogeneousdepartmentsorgroups; information andtrainingofnewrecruitsworkerswhoarechangingtheirroles; 59 23.94 25.97 022003 2002 1,291 560 794 474 46 Operative Companies * ThedatarefertoHeraSpA,CommandthefiveTerritorial

Hera S.p.A. page 75 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.1 4.1.6 Hera S.p.A. page 76 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.1 4.1.6 4.1.7 00/32husalwri rq 75 warinIraq %particip. 15.1 25.8 15.9 Reason 70.8 44.1 threatofwarinIraq Measurestiedtothe“BiagiLaw” Measurestiedtothe“BiagiLaw” Socialsecurityreforms, political,economic Government’s industrial policy all FGA(CGIL) all FDA(CGIL) CCNL FDA(CGIL) 2hours 2hours FGAFDE(CGIL) 2hours 4hours FGAandFDE 24hours 4hours Duration 24/10/03 03/10/03 26/09/03 20/03/03 15/03/03 21/02/03 Data Industrial relations 4husFAandsocialreforms advancedbythegovernment 24 hoursFDA 4.1.7 — — implemented bothintheindividualcompaniesandonaGrouplevel: common tomostaccidents,webelievecanbringaboutareductioninindexes,willbe possible costsderiving therefrom.In2003eightdisputesweresettled. disputes pendingwithindividual employeesandaspecificprovision was madetocoverthe For thesakeofcompleteness, itwillbenotedthatattheendof2003 thereweretwentyfive no industrialactionwastakenlocallyorinrelation toGrouppolicies. agreements, to19,638in2003,againconnection withdomesticpoliticalevents,whereas connected todomesticpoliticaleventsandthe renewalofnationalcollectivelabor The hoursofabsenceduetostrikesfellsfrom 85,800in2002,whentheywereexclusively that isconsistentwiththeGroup’s sizeandintegrity. companies aconcreterealityalsoasfarhumanresourcesareconcerned,favoringprofile The processrequestedandfollowedbybothsidesaimstomaketheunificationof13 benefits andthelegalconditionspayofGroupemployees. Lastly, negotiationshavebeenopenedwiththeobjective ofstandardizingemployment bonus forallGroupemployees. Industrial Relations.Asecondinitiativehastheobjectiveofdefiningasingleperformance to furtheranexchangethathadbeeninauguratedin2002defineanewsystemofGroup As ofthebeginning2004severalimportantunioninitiativeshavebeenunderway. Oneaims through theformulationofdifferentagreements. of specificcompetencies.Thelabororganizationshavesharedaroleintheseprocesses,also thus becamereferencesfortheGroup,inlinewithastrategyofexpansionandreinforcement within thecompaniessetupforspecificpurposes(HeraComm,FamulaandUniflotte),which Information Systems,FleetandEquipmentManagement)werealsoreinforceddeveloped As partoftheprocessdefinitionGroup’s structure,severalactivities(CallCenters, ofcurrentlaws. by aconstructiveexchangewithunionsinobservance adjustment intheinternalorganizationofdifferentGroupstructurescontinued,accompanied In 2003,followingtheinitialstageofconsolidationcorporatestructure,process relations withlabororganizations. The evolutionoftheHeragroupischaracterizedbyconstant,transparentandsuitable G .6 .2 0.09% 76.51% 3.48% 15.54% 0.12% 81.42% 12.22% 4.98% 15.10% 45.18% 69.72% 0.06% 11.50% 1.41% 16.15% 49.72% 13.22% 38.88% Total Labor Managers/clerical Total UGL CISAL UIL CISL CGIL Trade union Unionization oftheHeragroup asat31/12/03(%) measures bybothHeraworkersandtheemployeesofcontractingcompanies. safety auditsontheefficacyofandcompliancewithexistingpreventionprotection strategies foritseffectivefulfillment; aspectsconnectedtotheirroleandthebest together theymaydiscusstheregulatory systemcurrentlyinforceunderLeg.Decree626/94,sothat of theoverallregulatory hundred technicianswhooccupythisrole,ofcentralimportanceforthecorrectapplication beforeclassesof15-18peoplewewillbringseveral training forsafetysupervisors: • • members, onthebasisofannualbudgetsand plans. The associationsareindependentlymanaged by anexecutiveboardelecteddirectlythe well asdiscountsinsomeshopsandtravelagencies student employeesandemployees'children, contributions forsportscoursesoractivitiesas Furthermore, membersarealsoentitledtocontributions towardthepurchaseoftextbooksfor Sport activitiesincludetournamentsofvarious sports,fishingcompetitionsandskiingtrips. party). carnival partiesaswellfestiveeventstied totraditionandthecompanyculture(water Recreational activitiesincludesocialdinnersandtrips,cardgames,Christmas Furthermore, librariesarealsoavailablefromwhichbookscanbeborrowed. events. Cultural activitiesincludetheatreseasontickets,photographicexhibitionsandliterary company's employeestomeetandinteract. organizing cultural,recreational,sportandtouristactivitiesasanopportunityforthe the differentTerritorial OperativeCompaniesoftheGroup,whichmainlyaimatpromotingand Social activitiesforemployeesaremanagedbyrecreationalandculturalassociationswithin 2 activity. brings themuptodateonthestateofart,resultsandkeyissuestiedGroup’s A newcommunicationtoolaimedatmanagementistheconvention,whichperiodically concern thecompany'sstrategyandpolicy. water issues,energy, waste,environment,telecommunications, aswellissuesthatmay This reviewincludesarticleswithnewsonHeraandotheroperatorsinthesector, newson morning. every In additionareviewoflocalandnationalnewspapersissentthroughthecompanyintranet is issuedonaweeklybasis. issuesofinteresttothecompany A legalinformationbulletincontainingupdatesonregulatory Provision,specifyingissueandscope. Regulatory The internalproceduresrelevanttothecompanyarecommunicatedallmanagersthrough a The BulletinBoardhasallnoticesconcerninginternalmobility. instructions, newrulesandcommunications. procedural Internal Communicationsdealwithnewsorgeneralprovisions,supplementary specific employeesmustconform. inrelationtoaspecifictopicandlaydownactionsbehaviorswhichallor service Provisionssetrules,includingtransitionalregulatingoperativemethodsfora Regulatory revocation andchangesinthenameoforganizationalunits. appointments, terminationsofworkrelations,transfers,assignmenttasksandtheir The Directivesconcernthecreation,suspensionorchangeofhierarchicalorders, boards. electronic mailtoallthepeopleconcernedand/ormanagers,withpostingsonnotice The Groupadoptscodifiedandconsolidatedmethodsofinternalcommunicationvia • • organizational climate Social activitiesand 4.1.9 2_Leisure activitiesattherecreational center. Internal communication 4.1.8

Hera S.p.A. page 77 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.1 4.1.8 4.1.9 Hera S.p.A. page 78 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.2 Shareholders 4.2 stock exchange.TheGroupiscommittedtocreating medium-andlong-termvalueforits codeofconduct)promotedby theItalian and the“CodicediAutodisciplina”(self-regulatory and guaranteeingreturnsontheirinvestment: the systemconformstorequirementsoflaw The HeragroupadoptsaCorporateGovernance systemaimedatprotectingitsshareholders shares), whichwillbedistributedtothoseentitled on26June2004. 10or20 in thepublicoffering,andwillbenefitfrom awardingofaBonusshare(1every expectations. Retailinvestorsmoreoverbenefited from2%discountinthesharepricequoted 1.24 to deriving fromtheuptrendinpriceofHera stock inthefirstmonthsof2004(+37%,from The returnonshareholders’capitalisnoteworthy alsoconsideringthesubstantialcapitalgains extraordinary reserves) and representsa4.2%returnontheshareplacingprice( reserves) extraordinary This correspondstoapayoutratiohigherthan 86%(afterappropriationstothelegaland million Euros,distributedtoshareholdersinthe formofadividend0.053Eurospershare. thanks tocompanyperformanceduringtheyear, whichgeneratedprofitsofaround49.4 The portionofvalueaddedallocatedtoHerashareholders in2003waspositive(about11%) categories ofinvestorsinallmajorEuropeanand Americanfinancialmarkets. behavior hasinducedtheGrouptoincrease intensityofitsinterrelationswithdifferent increasingly global,sensitiveandconcernedaboutensuringcorrect,sustainablecorporate placement ofasignificantpercentageitscapitalstockinfinancialmarketthatis pursued throughintenserelationshipbuildingactivitiesstartingfromtheyearjustended.The and transparencywithregardtotheinvestmentmadeisaprioritythatHeragrouphas Maintaining apositiveongoingrelationshipwithshareholdersandofferingthemguarantees € 1.70 attheendofApril),followingdisclosure of2003resultsthatsurpassedall € 1.25). € minority interests. communicated. ThesecommitteesincludeBoard ofDirectorsmemberswhorepresent all relevanttransactionsmadebymanagement concerningthecompany’s stockbe duly codeofconductforso-called“internaldealing”,which providesthat adopted aself-regulatory It hassetupaManagementPayCommitteeand aCommitteeforInternalControl:ithas Code” ofconduct. traded companiesandintroducedchangesbased ontheprinciplescontainedin“Preda oftherequirementsset forpublicly procedural rulesforshareholders’meetingsin observance In 2003,tofurtherprotectitsshareholders,Hera amendeditsarticlesofassociationand resolutions. information establishedbyConsob(Italiansecurities andexchangecommission) Information isdisseminatedinaccordancewith theguidelinesconcerning“price-sensitive” the capitalinvested. based onthecompany’s strategicchoices,businessperformanceandexpectedreturns on complete, accurate,balancedandtimelyinformation sothatinvestors’decisionsmaybe choices itmakesandtheinformationrelatingto companyperformance.Henceitoffers The Grouppursuesitsmissionassuringthefull transparency, totheoutsideworld,of stakeholders. values andofthetransparencyproceduresgoverningmanagementrelationswithall the adoptionofaCodeEthics(seechapter2),whichensurestransparencyethical management ofthebusinesssectorsitoperatesin.Thiscommitmentismanifestedthrough shareholders throughthepursuitofitsmissionandasociallyresponsible,sustainable • 3_People ofallagesmeetinginBologna’s mainsquare,PiazzaMaggiore. 3

Hera S.p.A. page 79 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.2 Hera S.p.A. page 80 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.22.1 La4.2.1 responsabilità sociale d’impresa nel Gruppo Hera Shareholders afterthepublicoffering Municipality ofBologna19.7% Other institutionalandprivate Municipality ofRavenna 7.1% Municipality ofCesena 3.4% Exchange Listing Municipality ofRimini3.8% Other Municipalities11.2% Municipality ofForlì3.5% Hera’s Stock investors 40.1% CON.AMI 6.8% Nextra 2.3% Kairos 2.0% 4.2.1 On June26 shares representingafurther5.7%ofcapitalstock. thousand), whichresultedinafullexerciseofthegreenshoeoptionfor45millionadditional United Kingdom,Germany, SwitzerlandandFrance) andprivateinvestors(about90 institutional investors(about150majorplayersofEurope’s biggestcapitalmarkets:Italy, The IPOsawademandthatwas2.4timesthevolumeofsharesoffered,comingbothfrom blue chipsegment. 38.7% ofregisteredstock,HerawasadmittedtoalistingontheItalianStockExchange,in the te ntttoa n rvt netr 40.1% Total Free float Other institutionalandprivateinvestors Kairos Nextra Total Municipalities Other Municipalities Municipality ofBologna Municipality ofRavenna CON AMI Municipality ofForlì Municipality ofCesena Municipality ofRimini Shareholders afterthepublicoffering th 2003, followingapublicofferingof305millioncommonsharesrepresenting • 100.0% 44.5% 55.5% 11.2% 19.7% 2.0% 2.3% 7.1% 6.8% 3.5% 3.4% 3.8% company Agea. the importationofnaturalgasfromabroad)anditspurchasea42%stakeinutility agreements withinternationalplayers(withAtelforthepurchaseofelectricityandVNG transactionsmadebytheGroup,suchasitsstrategicsupply several extraordinary Performance ofthestockswasfurtherbuoyedbymarket’s positivereceptionof areas. periods oftheyear, thankstothepositivegrowthdisplayed bytheGroupinallbusiness In 2003,HerastocksperformedbetterthantheUtilitiesindex(referencebenchmark)forlong market performance:theIPOpricewassubstantiallyreconfirmedinyear-end trading. euros forprivateinvestors),alsoprovedtobeinasuccesstermsofsubsequentstock The IPOdescribedpreviously, whichfixedaselling price of1.25eurospershare(1.225 substitute) areappointedbyprivateshareholders. memberanda by privateshareholders;twomembersoftheBoardAuditors(astatutory 2003 thetotalmembershipincreasedto13followingadditionofthreedirectorsappointed For adescriptionofthemechanismsforappointingBoardDirectors,seeChap.2:in most a2%votingrightinshareholderdecisions. enterprise andthereforeprovidethateachindividualprivateshareholdermaybeallowedat The articlesofassociationHeraS.p.A.reflectitsnatureasamainlypubliclyowned floating. The capitalstockismadeupof793,202,121commonshares,350millionwhichfree target territory. as otheractivitiespreviouslymanageddirectlybyseveralmunicipalitiesintheGroup’s intheEnvironmentandPublicLightingsectorsprovinceofRimini)aswell services integration ofabusinessdivisionthecompanyGeatSpA(relatingtoprovision capitalwasincreasedbyabout6.7millionsharesfollowingthe In 2003reserved and KairosInvestmentLtdheldastakeofmorethan2%). presence ofinstitutionalinvestors(asat31December2003NextraAssetManagementSGR of asinglecontrollinginterest–typicalfeatureotherItalianmulti-utilitiesandsignificant At thedateoflisting,companyownershipstructurewascharacterizedbyabsence • performance Stock market 4.2.3 breakdown capital andits Evolution ofshare 4.2.2 Utility MIBTEL Hera Analysts consensus

Hera S.p.A. page 81 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.2 4.2.2 4.2.3 Hera S.p.A. page 82 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.2 4.2.3 4.2.4 Relations withinvestors Average dailytradingvolumesofherastocks 4.2.4 as shownbythedottedlineingraph). the analysts(this,too,hasbeengaininguninterruptedlysincemonthofSeptember2003, The averagemarketvalueinMayhoveredneartheeconomicascribedbyconsensus of performance. data, whichrevealedgrowthinallbusinesssectorsandanimprovementfinancial quarterly compared tothebeginningofyear)followingpublicationpreliminary and gainedfurthermomentumtowardtheendofMay(attaininggrowtharound+50% expectations. Sharepricescontinuedtorisesteadilythroughoutthefirstmonthsofyear coinciding withthedisclosureof2003resultswhichsurpassedhighestmarket In thismarketcontextHerastockshaveenjoyedastronguptrendin2004,thesharpestrise averages. investments suchasutilitystocks,whichperformedwellinthemarketplacecomparedtolist fears ofinterestrateincreases).Preferencesshiftedtowarddefensive,«recession-proof» and politicaluncertainty(adollarthatcontinuedtofallagainsttheeuro,highoilprices In early2004investorstookacautiousstanceduetosituationofincreasedmacroeconomic floating percentage(over44%). foreign andItalianinstitutionalinvestorsthatactively tradethesecurityaswellahigh The significantlevelsoftradingillustratedhave benefitedfromthesubstantialnumberof volumes surgingfrom570,000(in2003)toover 1,100,000. Average daily tradingofHerasharesincreasedsignificantlyinthefirstpart2004,with The Group’s institutional website(www.gruppohera.it) nowfeaturesanInvestorRelations financial marketplaces. results toover150institutional investorsinthemostimportantEuropean andAmerican Board ofDirectors,an extensive roadshowwasstagedinwhichmanagement illustratedthe On theoccasionof presentationofthedraftfinancialstatements approved bytheHera Group anddiversifythe shareholder base. Kingdom, Denmark,France, Germany, Switzerland),designedtoincrease acquaintancewiththe roadshows,alsoinaninternational setting(Canada,USA,United in theformofvoluntary the stockexchange,in2003managementarranged overahundredmeetingswithinvestors Besides theinitialrelationsestablishedwitharoad showstagedfortheplacementofshareson exchange. financial marketsinaccordancewiththeguidelines setdownbyConsobandtheItalianstock In March2003HerainstitutedanInvestorRelations function,whichoverseesrelationswith activities conductedtoensurethecontinuityand transparencyoftherelationship. Relations aremaintainedwithinvestorsthrough shareholders’ meetingsandavastrangeofother • Hera isnotinvolvedin any litigationwithfinancialproviders. debts remainedatalevel ofabout5%. itsborrowing The portionofvalueadded generatedbythecompanywhichisused toservice borrowed frombanksto financefurthersharecapitalinvestments(e.g. Tirreno Power). a poolofbanks,usedto thepurchasestakeinAgeaFerrara.The remainderwas energy plant(totalof48 millionEuros),aswelltheacquisitionofa 65millionEuroloanfrom increase innon-recourse projectfinancetiedtotheconstructionof newFrullowaste-to- requirements associated withinvestmentsinfixedassets.Inparticular weshallnotethe Long-term borrowingincreasedby166.8million Euros,reflectingtheincreasedfinancial Financial Statementsfordetails). The threemainfinancialbackersofHeraaccount forabout18%ofitsoverallborrowing(see and totalsourcesoffinanceisequalto0.33. It isworthhighlightingtheleveragemaintained bytheGroup,whoseratiobetweendebtcapital financial period. 1,338.8 millionEuros,primarilyasaresultofthe majorinvestmentplancarriedoutduringthe The netcapitalinvestedbytheGroupincreased by219.7millionEuros,from1,119.1to market quotation.Heraisnotinvolvedinanylitigationwithshareholders. expressed positiveratingsandassessmentsalsoinviewofthesharpuptrendstock In 2004theyearlyresultsachievedbyHeragrouphavereassuredanalysts,who with 4recommendationsto«Buy». 4.2.3.). Analysts’recommendationsimprovedaccordingly:allthumbsupasatMay21 worth ofHerastocks)rosesteadilyafterthelistingonstockexchange(seegraphinpar. The consensusamonganalysts(themedianratingexpressedbywithregardtothe Jefferies, RasbankandUBM). Actinvest, Caboto,ChevreuxIndosuez,Euromobiliare,Cofiri,IMI,IntermonteSecurities,ING, 2004 therewere13financialanalystswhoissuedupdatedstudiesontheGroup(AbnAmro, The Heragroupisundergoingscrutinybyagrowingnumberoffinancialanalysts;inMarch Kempen SNSSmallerEuropeSRIIndex,asustainabilityindexforsmallEuropeanenterprises. foreign lendinginstitutions. transparency andcorrectnessincommunication:2003ithadrelationswithmajorItalian The Groupadoptsapolicytowardfinancialbackersthatisdesignedtoensureutmost As atApril15 Finanza “Leoned’oro”prize(awardedonMarch8 The activityoffinancialcommunicationconductedduringtheyearearnedHeraMilano shareholders (newsletters,real-timepresentationofresultsonline,conferencecalls,etc.). adopted toimprovethevisibilityandtransparencyoffinancialcommunicationaimedat section containinginformationupdatedonareal-timebasisandvariousothertoolshavebeen rating formingtheAxiaEthicalindex;moreover, since April1 e hr embroig-92,249 -194,087 9,935 -5,165 -352,648 -352,096 292 260 Total netborrowing Net shorttermborrowing Investment assetsthatdonotrepresentfixed Cash andbanks Short-term payablestobanks/loans Other financialreceivables Short-term payablesforbondedloans Medium/long-term borrowing Long-term payablestobanks/loans Receivables forloanscoveredbygovernmenttransfers Securities heldasfixedassetsandotherfinancialreceivables Net short-termborrowing th 2004, Herastockswereincludedinthebasketofsecuritieswithahighethical (thousands ofeuros) th 2004). st • 2004 ithasbeenincludedinthe • - 444,345 31/12/03 st 92,718 4,350 2004, • backers Financial 4.3 of Herastocks analysts andtheworth Relations withfinancial 4.2.5

Hera S.p.A. page 83 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.2 4.2.4 4.2.5 4.3 Hera S.p.A. page 84 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.4 4.4.1 4.4.2 analysis ofsuppliers Characteristics and Policies regarding Suppliers 4_Bologna, streetsweeper. suppliers 4.4.2 4.4.1 4.4 founded onsustainabilityprinciples. pursues indirectlybyinducingsuppliersandallalliedenterprisestoadoptabusinessculture suppliers, believingintheimportanceofsustainabledevelopment,whichcompanyalso subcontractors andtheiremployees.Herahaschosentoestablishapartnershipwithits a company’s sustainabilityisrealizedthroughoutitsproductionchain:fromsuppliersto As expresslystatedintheEuropeanUnion’s GreenPaperonCorporateSocialResponsibility, purchased ontheEuropean marketfromvariousinternationaloperatorsand importedindependently 84% fromENIGas&Power S.p.A.,6%fromotherminordomesticsuppliers, while10%was The naturalgasdistributed bytheHeragroupin2003wasobtainedfrom thefollowingsources: Supply ofrawmaterials (gas,electricity, water) more completedatafor 2004. and Uniflotte.Theupgrading oftheinformationsystem,currentlyunder way, willenableustohave S.p.A., HeraComm,the Territorial Operative Companies,FamulaonLine,FrulloEnergia Ambiente The supplierdataincluded inthisSustainabilityReportreferstothecommercial tiesof:Hera + + + The basicelementsofthisactionregarded: In 2003theGroupengagedinintenseefforts to buildandimproveitsrelationswithsuppliers. relationship. Complete, correct,adequateandtimelyinformation assuretransparencyinevery opportunities, loyaltyandimpartialjudgment. competitive advantagegoeshandinwith acommitmenttoguaranteeequalpartnership impartiality, itssearch forthehighest stageinthepurchase ofgoodsandservices; atevery The Groupbasesallitsrelationswithsuppliers onprinciplesofcorrectness,fairnessand certificates, conformitywithlawsandregulations, verificationofauthorizations. requirements includecompanyqualitysystem certifications,producttest provided: complex qualificationcriteriaforitemscriticalto thequalityofservice redefinition oftheprocessforincludingsuppliers inthelistofqualifiedsuppliers,withmore forms tobeusedbothforpubliccontractbidding andprivatenegotiations; definition ofstandardrulesfortheselectionsuppliers, tobeappliedthroughouttheGroup; • • 4 connections) involvedinthemaintenanceofournetworks. the constructionwork(excavationandroadrepair)technologicalareas(supplymains developed andcontinuetobuild,workingtogetherwithourengineers,specializedskillsbothin between Heraandbusinessesplayingasignificantroleinlocalproduction,thathave estimated 30,000,000Eurosperyear. Thesecontracts representanimportantpartnership cooperative enterprisesbasedontheoutcomeofbiddingprocedures,assignedjobsworthan networks. Attheendof2003,elevencontracts,tenwhichawardedtolocal,privateand foritswaterandgas Of greatimportancetotheGroupisprovisionofmaintenanceservices — — — speaking, threeworkingapproachesareused: policies illustratedatthestartofchapterandworkingmethodsdescribedbelow. Basically wereguidedbythe In 2003therelationswithover9,000suppliersofgoodsandservices Supply ofgoodsandservices ofRidracoli(Forlì-Cesena). shareholders ofHeraownastake,andwhichmanagesthereservoir supplied byRomagnaAcqueS.p.A.,acompanyinwhichmanyofthemunicipalitiesthatare drawing onitsownsupplysources(springs,riversandlakes,wellfields):theremaining21%was As regardsthewatersector, in2003theGroupcovered about79%ofitswaterdemandby imported energyhasbeenineffectwiththeSwissATEL sincethebeginningof2004. CIP 6auctionsandHera’s ownproduction.Along-termagreementforthesupplyofdomesticand electrical powersoldtoeligiblecustomerswere:wholesalersoperatinginthefreemarket,imports, imported independentlyareexpectedtoundergoaprogressiveincrease.Thesourcesofthe (the mostimportantsupplyagreementwasreachedwithVNGofLeipzig).In2004thequantities As oftheend2003,purchasing processeshavebeenmanagedviaSAP/R3 managementsoftware. — — — — expressed inspecificprocedures: must satisfyadditional,morerestrictiveenvironmental performancerequirements, services In contextswhereISO 14001 orEmascertificationsarepresent,suppliers ofgoodsand supplied. services whenever itdetectsseriousnonconformitiesthat underminethequalityofgoodsand/or In itsongoingrelationshipwithsuppliers,Hera promotescorrectiveorpreventiveactions + + + + + + + + + + + + purchased: of goodsandservices and optional.Theyareessentiallybasedonorganizational criteriaandtiedtothequality The requirementslistedbelowareexpresslydefined andclassifiedasmandatory, fundamental growth oftheirorganizationalculture. Periodic supplierassessmentsensuretheconstantsuitabilityofsuppliersandpromote broad socialcommitment,accordingtospecific,formalizedinternalrules. and cost-effectiveness,technicalprofessionalproficiency, respectfortheenvironmentand suppliersarebasedonassessmentsofquality The criteriaforchoosingproductandservice to furthermarginsforimprovement. standardization: overcomingspecificityandtheconsequentfragmentationinpurchasingleads Group andthusofthequantitiessupplied; bargaining: toexploitthemarginsofsavingsmadepossiblebynewdimensions about 19millioneuros; 2003 70centralizedagreementswereinplace,foranestimatedoverallyearlyturnoverof centralization ofsupplyagreements:processstartedatthebeginning2003;end personnel withadequate trainingandawareness. compliance withallenvironmental standards, safety intheeventofenvironmental emergencies, environmental certifications, adoption ofmeasurestolessendamage. forproduction, quality ofservice quality ofcustomerservice, completeness ofdocumentation, times, delivery technical requirements, compliance withlawsandregulations, public healthandsafety, results oftestsandinspectionsonsupplysamples, analysis ofsuppliers’self-assessmentquestionnaires, results ofauditsconductedbyHera, certifications, • • Supplier qualification 4.4.3

Hera S.p.A. page 85 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.4 4.4.2 4.4.3 Hera S.p.A. page 86 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.4 4.4.4 4.4.5 4.4.6 Contribution tolocal 5_Rimini, shoppingonFridaymorning inPiazzaCavour. Terms ofbusiness Information and communication communities 4.4.5 4.4.4 4.4.6 knowledge andcloserinsightintothechanging needsofthepartiesonbothsides. inspections andmutualassessments,thehistorical natureofrelationsenablesmoredetailed mutual growthandcooperation:companiesare favoredandgrowthankstoperiodic the closelinksbetweenHeragroupcompanies andsuppliersfacilitatesaprocessof Hera operates.Thehighpercentageofsuppliers basedinEmilia-Romagna(over70%)reflects within theSMEsthathavehistoricallycharacterizedproductivecontextinregionwhere ithasanopportunitytopromotetheexchangeanddisseminationofgoodpractices services, operates inbyincreasingthevalueofallrelatedactivities;processbuyinggoodsand it The Heragroupcontributestothedevelopmentoflocalcommunitiesandterritory their companyorganization. and employmentofworkerswhoarenotdulyinsured,technicalreliabilitycontractors dealt withinthemanagementofpubliccontracts,e.g.worksitesafety, banonlaborbrokerage The SpecialContractSpecificationsfocusspecialattentiononthemostdelicateissuestobe and priceadjustments. standards ofqualityintermsguarantees,insurancecoverage,paymentterms,advances contract provisionsrelatingtothekeyeconomicaspects,thusguaranteeingcommon practices adoptedbythemergedcompanies.Thisprocessenablesastandardizationof andsupplies,incorporatingthebest interests inthemanagementofoutsourcedjobs,services Hera’scompanies alsomakesitpossibletoidentifythecontractconditionsthatbestserve process ofnormalizingandstandardizingthebehaviorshowntowardsuppliersbyallGroup ensuring transparencyintheawardingofcontractsandassessmentcontractors.The topreventdiscriminationamongfirms, Consistency anduniformityincontractconditionsserve recourse toillegallabor. with thelawinmattersrelatedtowages,socialsecurityandinsuranceorderprevent respecttothe employeesofcontractorfirms,specialemphasisislaidoncompliance With and forcoordinationofHeracustomers. for thejobbeingcontractedout,needcooperationamongcompaniesconcerned conducted bycontractorsandthespecificrisksenvironmentalhazardsidentifiedHera ofsafetyregulations,highlightingtheneedtointegrateriskassessments observance contractedouttootherfirms.Inparticularitrevisedthetermsconcerning services In 2003Herastandardizedthebasicconditionsandspecificationsrelatingtojobs improvements asnecessary. supplied. In2004theGroupplanstoextendthispracticeallitslocalunits,introducing tied todelivery, qualityovertimeandtheresponsibilitiesrelatedtogoodsservices Supply Conditions",adocumentsenttoallsuppliersforacceptance.Itregulatesaspects standardization which,in2003,fortheareaofBologna,ledtodefinition"Standard Heralaunchedaprocessofdocument As regardspurchasesofgoodsandservices, Hera iscurrentlyinvolved infoursignificantlegaldisputeswithsuppliers. and toverifythetechnical andfinancialtermspresented. suppliers atenderrequest todeterminewhetherthecompanymeets technicalrequirements not precededbyopencompetitivebidding,the standardmethodofcommunicationistosend require Heratoabidebyproceduresofpublic disclosure.Wheretheawardingofacontractis a rulethesearepublishedontheGroup’s Internetsite(www.gruppohera.it) wherecurrentlaws The ContractsFunctioncommunicateswithsuppliers throughpublicinvitationsfortenders;as technical specification. Request. Initpotentialsuppliersareaskedto specify theircontracttermsinrelationtoa is theTenderThe maincommunicationtoolsupportingthepurchase ofgoodsandservices eino mlaRmga66570.27 6,605 64.93 % 6,103 Number Region ofEmiliaRomagna Hera Territory (ProvincesofBO-RA-FC-RN) 2003 suppliersbygeographicalregion • • • 5

Hera S.p.A. page 87 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.4 Hera S.p.A. page 88 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.5 4.5.1 Customers 6_Tourists strolling aroundForlì. Policies 4.5.1 4.5 offerings andsaleschannels andacquisitiontoolsprocesses. withtheaimofdefining themostsuitablecommercial and usersoutsideitstraditional territory tomedium-sizedbusinesses In 2003,theGroupalso launchedapolicyofofferingservices provider.efficiency ofthesystem toasingleservice toensuretherationalizationand maintenance, fuelpurchasing andalloperationsnecessary buildings; itoffersthepossibility ofentrustingthemanagement centralheatingsystem, idealforthemanagementofheating systemsinapartment include theEnergyService, whichallowenergysavingstobecombined withadditionaladvantages.These meter services) Value havealsobeendeveloped fortheenjoymentofenergyproducts(post- added services offer areductioninoperatingcosts(twoproducts, onesupplier). gas andelectricity(DualFuelpackage),which enablesittobuildaloyalcustomerbaseand The packageitofferstoeligiblecustomersin the energysectorisbasedonacombinationof products. energy sector(electricityandgas),whereithas developednewofferingsandcommercial provided,inparticular inthe Hera alsoaimsatconstantlyincreasingthevalue oftheservices placed onanequalfooting. activities, usingsimpleandunderstandablelanguage andalwaysensuringthatcustomersare offeredandthe Group’sconstantly informingthemaboutthecharacteristics oftheservices The Groupcommunicateswithcustomersina clearandtransparentfashion,correctly these standardsofservice. All employeesandoutsidepersonneloftheGroup arecommittedtoensuringcompliancewith Charters”. standards publishedinthe“Service providedmeetthe minimum The Groupqualitypolicyisaimedatensuring that theservices image andtheattainmentofcompanyobjectives. importance forits customer careandsatisfaction,considered factorsofprimary which insomesectorsofactivityisnowlikea freemarket.TheGroup’s focusisprimarily on The creationoftheHeragrouphasalsoentailed adifferentapproachtothetargetmarket, 6 more rationaluse,intermsofmethodsconsumption,gasandelectricity. profile forusersegmentstoenablecustomersbenefitfromtheadvantagesderiving a offeredonthefreemarketwerecharacterizedbycreationofastandard The services uiiaiissre 946 17 39 1,026 49,049 14 138 48,796 1,674 14,432 2003 699,885 14,833 1,614 667,930 2002 Municipalities served Public lightingmanagement Municipalities served Traffic lightmanagement Total Non-captive users Captive users Electrical power Residential unitsserved District heating Customers served GPL Customers served Natural gas Energy Sector uiiaiissre 11 6 796,000 8 64 6 796,000 1,499,217 104 64 1,499,217 1,749,194 2003 100 1,663,241 1,404 543,819 2002 1,181 1,316 526,984 486,411 103,866 1,058 469,285 Municipalities served Beach cleaning 2003 104,114 535,697 Inhabitants served Municipalities served Winter road clearanceservice Inhabitants served 512,746 2002 Municipalities served Street sweepingandcleaning Inhabitants served Municipalities served Waste collection Environment Sector Total Industrial users Civil users Water treatment Total Industrial users Civil users Sewer system Total Others Domestic users Water supplysystem Water Sector 2,0 545,223 528,300 487,592 470,343 639,563 616,860 89450,075 48,934 •

Hera S.p.A. page 89 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.5 4.5.1 Hera S.p.A. page 90 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.5 4.5.2 analysis ofthemarket Characteristics and served 4.5.2 outside partners. forbusinessesandhomes, alsoinconjunctionwith developing anewrange ofservices Lastly, and Heraisbuildingnewtools andchannelsforcustomercontactservice — — — — with theaimof: fabric oftheregionwhereHeraoperates,itwas decidedtosetupaRelationalMarketingUnit For tradeassociations,whichhaveanimportant roledeeplyrootedinthelocalsocioeconomic specific marketsegments:apartmentbuilding managers andgovernmentagencies. In 2003anotherdedicatedareawasdefinedfor themanagementanddevelopmentoftwo consumption andthesupplyvariablesforeach customer. supply andafter-sale requirements;specialcareistakentoconstantlymonitor service companies throughanorganizationofdedicated operatorscapableofsatisfyingspecific large companiesontheonehandandSMEs on theother. HeraComminterfaceswithlarge As regardsbusinesscustomersinparticular, HeraCommhastwospecificareasdedicatedto — — — soddisfazione delclienteinterminidi: èlostrumentoperraggiungeregliobiettividi La nuovaorganizzazionedelservizio — — — the followingsteps: The creationofasingleGroupcontactcenter, one of themajorobjectives2003,involved captive. liberalizedand is activeinalltargetprovinces,formarketsegmentsandservices, As afirstpointofcommunicationwithcustomers,HeraCommrunscontactcenterwhich customers broadcoverage. toguarantee thus endowedwithacommercialorganizationextendingthroughouttheterritory competitive settingarisingfromtheprocessofliberalizationinitstargetmarket.HeraComm is Comm, whosemissionistoplayaforefrontrole,onregionalandnationallevel,inthenew (gasandelectricity),Herahasestablishedthecompany For thesaleofenergyservices — — — — sales activities,channelshavebeendifferentiatedaccordingtotypeofcustomer: different activitiesinaunified,integratedmanner. In addition,tomaximizetheefficiencyof opportunities vis-à-visendcustomers,theGroup’s commercialchannelsmanagetheir aswell.Inordertoachieveeconomiesofscopeandexploitthecross-selling this territory onthefreemarketoutside Bologna, Ravenna,Forlì-CesenaandRiminioffersitsservices thatincludesalmost140municipalitiesintheprovincesof Hera operatesinaterritory international events. managing ‘jointparticipation’ofHeraandassociations intradeshowsandnational pursuing anyactionsofmutualinterest,such as theacquisitionofEUfunding,etc.; associations; devising, coordinatingandmonitoringtherelational andmarketinginitiativesaimedattrade regard toenvironmentalandsocioeconomicissues, etc.; territory, relationstoberenewedor‘recovered’, tobestartedupand/ormanagedwith maintaining closerelations,conducivetoloyalty building,withassociationsthroughoutthe openingtimes. harmonization andextensionofservice throughout Hera’s territory; uniformprocessesandproceduresforallservices consistent standardsofservice, quality; levels ofservice implementation ofanewCRM(customerrelationsmanagement)informationsystem; establishment ofasingletoll-freenumberforthewholeterritory; bycenteringactivityonthreepoles; structuring andoptimizationofservices, segments accordingtobehavioralcharacteristicsandattitudes. residential customersand“smalloffices”(“Massmarket”),dividedintodifferentsub- apartment buildings; trade associationsorconsortiums; activity anddimensionnumberofsitespresentintheterritory; which havebeensub-segmentedbasedongeographicallocation,specificsectorof medium andlarge-sizedcompanies(“Business”)governmentagencies(Government), • details oftheofferings aimed atcustomersandprivacyregulations. required tocompleteanin-depthtrainingcourse thatdealswithgeneralcontractconditions, accordance withapplicabledataprotectionlaws. Whensellersfirstjoinasalesunit,theyare this regard,Heraconstantlyseekscustomers’ consentbeforeusingsensitivedata,in second halfof2004,willprovidegreaterassurance oftheconfidentialitypersonaldata.In The introductionoftheSAPIS/Uplatformand Siebelapplicationprogram,scheduledforthe Protection ofprivacy models ofbehavioraimedatkeepingequipment runningefficientlyandreliablyovertime. importance ofcomplyingwiththemaingasequipment safetystandardsandtopromote Hera moreoverpromotesinformationcampaigns todrawcustomers’attentionthe damage tothedistributionnetwork. up toassurethathelparrivesonthesiteof callwithinanhourincaseofgasleaksor hasbeenset guaranteethesafetyofequipmentonuserpremises,anemergencyservice To Safety ofusergasequipment and firesafety. application ofotherinnovativetechnologiesfor remotemonitoringofplants,accesscontrol iscompletedbybroad andstoredtoallowsubsequentviewing.Videosurveillance necessary that aremanned24hoursadaytoensure immediateactionwillbetakenwhen processes. Theimagescapturedbythecameras installedintheplantsarerelayedtostations considered tobethemostlikelypointsofintrusionandstrategicforvisualmonitoring These systemsaremadeupoffixed,trainabletelevisioncameraslocatedinplaces systems. presence ofvideosurveillance stages havebeendefinedbythelocalpoliceauthorities(Prefecture),arebasedonanample plans,whosemostcritical (intrusions bywould-bethievesorterrorists).Thesurveillance from accidents(fires,roadwithspillingoftoxicsubstances,…)anddeliberateacts strategic prioritytoprotectcompanyplants,andwatersupplyinfrastructuresinparticular, both The unstableinternationalsituationandfrequentactsofterrorismsabotagemakeita Plant surveillance onthefreemarket. the basicconditionsofferedforservices directions onhowtocontacttheGroup.Italsospecifiestariffsforcaptivemarketand providedand dedicated tocustomers,containingcompleteinformationabouttheservices The newwebsiteoftheHeragroup(onlineasMay2004)featuresaspecificsection importance ofsuchassurancesforItalianbusinesses. international market,arebornebyHera.We needonlyconsider, forexample,thestrategic potential ‘risks’ofaccessingthemarket,whichdependonchangingconditions Customers areguaranteedgassuppliesatafixed,all-inclusiveprice:allthecostsand the Authorities:Groupstrictlyappliessetguidelinesregardinginformationtousers. In captivemarkets(water, gas,electricity, users’rightsareassuredby environmentservices) in ayearlyreportsubmittedbythegasutility. maintenance onpipelines.Theparameterscontainedinthetworesolutionsmustbeincluded disruptionsduetospecial andthenumberdurationofservice breakdown service distribution: itfocusesonsuchaspectsastheefficiencyandpromptnessofemergency problem andcomplainthandling.Resolution236addressesthetopicofsafetyingas deskforany such concernsashookuptimes,theresponsetocustomerswhogoaservice distributormustabideby:itaddresses resolution establishescommercialstandardsthatevery Theformer particular importanceinguaranteeingcustomersagasdistributionservice. contract, Resolutions47and236issuedbytheElectricityGasAuthorityin2000takeon In theenergysector, wheretherelationshipwitheach customerisregulatedviaasupply changes. and drawnupinconformitywithregulatory for agreementsaremadewiththelocalauthoritiesweprovideenvironmentalservices Service Charters”. supply contractsand,whereprovidedbyspecificlaws,“Service agreements”, framework offormalcontractualcommitmentstodaytakingtheform“service weprovidetoourcustomershasalwaysbeenregulatedwithinthe The qualityoftheservice • and safety quality Service 4.5.3

Hera S.p.A. page 91 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.5 4.5.3 Hera S.p.A. page 92 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.5 4.5.4 if themunicipalityhasnotswitchedtotariffsystemitcan The rateincrease appliedin2003 decide whethertotransfertheincreaseresidents (*) Theincreasereferstothetarifforcontractrates: leads toaweightedaverage Tariff system Environment +5,8% increase of2.6% Water +3,7% Gas +1,0% 4.5.4 distributed through localnetworks areobligedtoofferall customers(resolution no. In itsresolutionno.138/03 theAuthoritydefineda“basictariff”that vendorsofnaturalgas electricity sector. through bettercustomer managementtiedtoactualconsumptionpatterns, asoccursinthe implementation ofthese optionswillenablegasutilitiestooptimizethe flowsofrevenues information fordefiningthetariffoptions newheatingseason;the necessary During theyear, theAuthority (AEEG)askednaturalgasdistributioncompanies toprovidethe (AEEG). Hera forcaptivecustomers followthecriteriafixedbyElectricity andGasAuthority For thedistributionand saleofnaturalgas,LPGandelectricitythe tariffsappliedby evc 0120 2003 2002 0.0599 2001 0.097 euros/m 0.101 euros/m euros/m euros/kWh Wastewater treatment euros/m Sewer system Water supply Sale ofelectricity Distribution/sale ofnaturalgasandLPG Service Yearly averagetariffs 3 3 3 3 .7 .7 0.292 0.102 0.862 0.277 0.24 0.098 0.82 0.275 0.087 0.28 0.754 0.31 effect. (Rimini) andwemayassume thatin2004agreementswiththeother OTAs willlikewise gointo wassigned byHerain2002withOTAAgreement” forthewaste managementservice 9 of 2003contractualagreements werestillmainlydefinedwithmunicipalities; thefirst“Start-up decree istheendof2004. ThoughOTAs have beencreatedwithintheregion,asatend collection andtreatmentcyclehasnotyetbeen completed:thedeadlinesetbyRonchi The transitiontoasystemof“normalizedtariffs” coveringthecostsofentirewaste costs. providedandtheentityof operating related tothequantityofwastehandled, service (including, inparticular, infrastructuralinvestmentsanddepreciation)avariableportion, and comprisesafixedportion,basedonthe essentialcostcomponentsoftheservice The tariffiscalculatedusingparametersthat differ fordomesticandnon-domesticusers provider.service replaced byatariffthatcoversallwastemanagement costsandisdirectlycollectedbythe The RonchiDecree(Leg.22/97)provides fortheTARSU tobephasedoutand municipalities andatariffinothers. taketheformofataxonsolidwastedisposal(“TARSU”)waste treatmentservices insome The feesforthecollectionofmunicipalsolidand kindredwasteandstreetsweeping capital. August 1996).Thetariffswilltakeintoaccount operatingcosts,depreciationandreturnon determined bytheOTA Agenciesusingthe“normalized”method(ministerialdecreeof1 asdothoseforthesupplyofdrinkingwater.districts served, Inthefuturetariffswillbe inthedifferent vary farming,…). Thetariffsforsewerandwastewater treatmentservices sector,to useoftheresource(domestic,industrial,commercialorservice animalhusbandry, aredifferentiatedaccording Planning) directives.Thetariffsappliedforthewatersupplyservice Water tariffsaredeterminedonthebasisofCIPE(InterdepartmentalCommittee forEconomic “price cap”fordistributionactivitiesintheyearsafter2004. period2004-2007,fixinga3.5% transport, distributionandsaleofelectricityintheregulatory 2004theElectricityandGasAuthority(AEEG)definedtariffstructurefor On 31January value throughprojectsforsavingenergyatthepointsofuse. frameworktoeffectivelymeettherequirementsoflawandcreate react tothenewregulatory market basedonenergyefficiencycertificateswillenablecompaniesthatwerepromptto and gasdistributorsweredefinedintermsofenergyefficiencygains.Theestablishment a process thatbeganwiththeBersaniandLettadecrees,wherebyobligationsofelectricity 24 April2001)werepublishedintheOfficialGazette.Theguidelinescompletelegislative decreesof ofIndustry assessment ofprojectsseekingenergyefficiencycertification(Ministry On 8October2003theguidelinesadoptedbyAuthorityforpresentationand whom tobuyelectricityfrom. complete liberalizationoftheelectricitymarket)allcustomerswillbeabletofreelychoose domestic” consumersandasofJuly1st2007(deadlinefixedbythenewEUdirectivefor business customersbeimmediatelyconsidered“eligible”;asofJuly1st2004all“non- September, aimstospeedupliberalizationoftheelectricity market,proposingthatall Committeesince “Marzano bill”),whichhasbeenundergoingscrutinybytheSenateIndustry In theelectricitysector, thelegislativebillforreorganization ofenergymarkets(so-called in theperiod2002/2003. predefined maximumonretailchargestocustomerswithaconsumptionofup20GJ/year reduction, theAuthorityhasgrantedutilitiesoptionofapplyingincreasesuptoa expected inthe2ndquarterof2004.To partlyoffsettheeconomiceffectofaveragetariff per cubicmeter, equivalenttoareductionof2.3%-2.4%. Nofurthersignificantchangesare tocuttheaveragegaspricebyabout0.77eurocents In 2004thenewregulationwillserve electricity sector. vendors andintroduceda“gasexchange”modeledaftertheonealreadyexistingin side. To stimulate competition,theAuthorityhasimposednewinformationrequirementson strict pricecontrolcontinuestoprevail,pendingagreateropeningofthemarketonsupply 1st2003,therefore,asituationof Despite thecompleteopeningofmarketasJanuary networks). 237/2000 continuestoapplyforgassuppliedthroughchannelsotherthanthedistribution •

Hera S.p.A. page 93 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.5 4.5.4 Hera S.p.A. page 94 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.5 4.5.5 4.5.6 Customer satisfaction 7_Talking tothecity throughtheHeracommunicationcampaign. Information and communication surveys 4.5.5 4.5.6 — — — — — providedbytheGroup revealed: asking customerstoratethewaterandenvironment services expectations astotheirimprovement.Inoneof theareaswithinHera’s territory, asurvey andcustomer aimedatassessingtheperceptionandqualityofservices satisfaction surveys For thesereasons,inthepastcompaniesthatmergedintoHerahaveconducteduser + + + + + + to: this objectiveitisnecessary itprovidestocustomers.ToHera placesapriorityonassuringthequalityofservices attain • • • • • • • • In 2003Groupcompaniesemployeddifferent toolstocommunicatewithusers: There isonlyonesignificant pendinglawsuitwithacustomer. constructive criticismand asapartner. associations, whichHera considersanimportantcounterpart,bothas asourceofstimuliand As regardscontactwith users,anincreasinglyimportantroleisbeing playedbyconsumers’ a highlypositiveoverallratingofthewaterservice. dissatisfaction withthetariffscharged; appreciation fortheregularityofwastecollection services; expansion; a highlevelofawarenessconcerningthebenefits ofsegregatedcollection,withcallsforits a highdegreeofsatisfactionwithwastecollection services; employees, financialbackers,localcommunities,…). ensure abalancedapproachtowardcustomersandotherstakeholders(shareholders, manage customerrelationsinasystematicfashion; measure customersatisfactionandactaccordingly; communicate thesecustomerrequirementsandexpectationstothewholeorganization; requirements andexpectations; ensure thattheobjectivesandgoalsoforganizationareconsistentwithcustomer identify andunderstandcustomerrequirementsexpectations; free numbers,localsmeetings andassemblies). locations,toll- traditional channelsofcommunication withusers(officesopeninallservice scientific meetings; advertising; press conferences; Internet sites; radio andTVbroadcasts; on topicsrelatedtoutilityservices; partnerships withmunicipalperiodicalspublished withintheterritory, withfull-pagefeatures periodic newslettersandpresscampaignsthrough majorlocalweeklypublications; • • 7 — — Water sector: + + + + Energy Sector: institutions Herahasrelations withare: context,themain theframeworkofliberalizationprocessandnewregulatory With to playanactiveandproactiveroleininstitutional relations. authorities, whoarebothshareholdersandcustomers ofthecompany, aswellthedecision Hera group'scooperationwithinstitutionsisthe resultofthechoicetocollaboratewithlocal companies. aninterestorgainingadvantageoftheirownonbehalfGroup serving (suchasrepresentativesoftheauthoritiesorlocalgovernment),with the aimof service external personneloftheGrouptopublicofficials orindividualsappointedtopublic No benefitsorpromisesoffavorsmaybeoffered byDirectors,employeesor ambiguous ormisleadinginterpretationsbyinstitutional figures. reasons mustensuremaximumtransparency, clarityandcorrectnesstopreventpartial,false, The personnelwhohaverelationswithinstitutions andgovernmentagenciesforvarious outitsactivities. it interactswithincarrying and,onanationalandsupranationallevel,the organizations operating initsreferenceterritory The Heragrouppromotespositiverelationswith institutions,inparticularwiththeinstitutions of Ethics”project. to ensurecompliancewiththelaw, particularlyasregardsLeg.Decree231/01,andthe“Code Chap. 2containsadescriptionoftheinternalcontrolsystemGrouphasadoptedinorder effective. both sides,suchastoinstillaclimateofmutualtrustthatmakesthesetoolscredibleand encourage businessesbypromotingafreeandtransparentexchangeofinformationon CSR, helpsbringbenefitstotheentirecommunity;forthisreasonitisessential Institutions acknowledgethatcompanies’adherence,albeitvoluntary, totheprinciples of activity.framework thatconsidersthesocialandenvironmentaldimensionofevery relations betweenbusinessesandinstitutionsacentralroleinpromotingproductive The EuropeanCommission’s statementonCorporateSocialResponsibilityascribestothe Region ofEmilia-Romagna. Optimal Territorial Area(OTA) Agencies, Electricity MarketOperator (GMES.p.A.). Single Buyer(SB), National GridOperator (GRTN), Electricity andGasAuthority, • • relations Methods ofinstitutional 4.6.2 Policies 4.6.1 Institutions 4.6

Hera S.p.A. page 95 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.6 4.6.1 4.6.2 Hera S.p.A. page 96 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.6 4.6.2 4.6.3 4.6.4 research organizations, 8_Cable storagefacility, Heraheadquarters,VialeBertiPichat,Bologna. public institutionsand contributions paid Partnership with other taxesand Income taxes, universities 4.6.4 4.6.3 + + + Environment Area Main research activitiesin2003 research centers,universities,othercompanies andpublicinstitutions. staff butalsoengagesintechnicalandscientific collaborationwithoutsidepartners,including distinguishing them.ForitsprojectsHeranotonly availsitselfofaqualifiedinternalresearch projects, haveoftenbenefitedfrompublicfunding thankstotheinnovativecharacter Research anddevelopmentactivities,focusing bothonappliedresearchanddevelopment + + + + The choicetoinvestsubstantialresourcesinresearchaimsmeetthefollowingobjectives: research projects. areas ofactiondefinedbythesixthprogram,oninnovative,specificallytargeted Hera workstogetherwithresearchorganizations,publicinstitutionsanduniversitiesinthe — — — — innovative projectsaddressingenvironmentalconcerns.Thepriorityareasforactionare: policies oftheCommunity, whichwillcontributetechnical know-howandfundingtosupport for reducingpollutionandlimitingtheuseofnaturalresourcesareassignedamajorrolein environmental sector. Suchactivitiesasappliedresearch andthedevelopmentofnewtechnologies principles, objectivesandprioritiesthatshouldbethefocusofEuropeanCommunityactivitiesin established the“SixthCommunityEnvironmentActionProgram”,whichaimedtodefineguidelines, Decision no.1600/2002/ECoftheEuropeanParliamentandCouncil22July2002 the formoftaxes. Approximately 9.5%ofvalueaddedistransferredtogovernmentagencies,almostentirelyin • • • • Environment Sector: Operative Companiesthroughthe“RelationswithLocalInstitutions”function. theGroup, relationswithlocalinstitutionsaredirectlymaintainedbytheTerritorialWithin noetxs(RE n RP 86935,588 9,174 38,659 12,105 Income taxes(IRPEGandIRAP) Taxes otherthanincometaxes (in thousandsofeuros) andagencies Amounts paidtonationalandlocalgovernment tourist centers:theproject willcometoanendin2004. LIFE-GIDUT projectfor segregated wastecollectionandcommunication intheleading a focusonvitrificationby exposuretoelectricalcurrents(Jouleeffect) andbiodegradation. innovative methodsfor reclaiming landpollutedbyinorganicandorganic substances,with project includedtraining andresearchactivitiesaimedatthedevelopment anduseof the UniversityofBologna, NationalInstituteforCancerResearchand EdisonS.p.A.The ofEducation,UniversityandResearch conductedinconjunctionwith Italian Ministry Termination oftheproject“Technologies forReclamationofPolluted Land”, fundedbythe University andResearch). ofEducation, University ofBolognaandreceivesfundingfrom theMIUR(ItalianMinistry efficiency andcuttingplantmaintenancecosts. Theprojectisbeingconductedjointlywith plants, withtheaimofreducingpollutingcontent offumes,increasingenergyrecovery Experimentation ofafluidbedreactorforhandling corrosivegasesinwaste-to-energy managedandoptimizingthetariffpolicy.increasing thevolumeofservices to increasethegrossoperatingmargin(EBITDA): byreducinglossesandinefficiencies, projects anddisseminationofthebestpractices fornetworkmanagementandmaintenance; and to reduceoperatingcosts:definitionoftechnical specificationsformaterials,services plans; to guideinvestments:coordinationofrawmaterials purchasingstrategiesandinvestment sustainability andincreasingtheavailabilityof water andenergyresources; projectsandstudiesaimedatimprovingquality to improveproductsandservices: natural resourcesandwaste. environment andhealthqualityoflife; nature andbiodiversity; climate change; Municipal authorities. Provincial authorities, Region ofEmilia-Romagna, Italian government, • 022003 2002 • + + + + + + + Main developmentactivitiesin2003 + + Other initiatives + + + + + + Networks Area (Water andEnergy) oa ,4,8 2,300,000 2,344,580 950,000 400,000 950,000 1,022,080 460,000 872,500 2003 2002 Total Services Sundry Environment Area Networks Area Research andDevelopment Investments chlorites, dioxins,asbestos fibers. Scheme foridentifying the mostcriticalparametersforwaterand environmentservices: Definition oftechnicalguidelines forthequalificationofpolyethylenesuppliers. Start-up ofaprojectto defineanemergencyplanfortheintegratedwater service. (effectiveness andefficiency indexes). Definition ofsharedoperating standardsforthemanagementofnetwork services facilities. Implementation ofasingleinformationsystem forthelaboratoriesanddistrictlab specifications andfrequentjobsperformedin connection withnetworks. Normalization andstandardizationofthemain materials used,maintenanceandoperating Identification ofthebestpracticesfornetwork maintenanceandintervention. Ceramico. processes). DevelopedinconjunctionwithIPEG S.p.A.,SmaltochimicaSrl,Centro volatile organicsubstancesandodorsingases emittedduringceramictilefiring 46/82 forthenewcontinuousVOSmonitoring systems(monitoringoftheemission Financing obtainedundertheTechnological InnovationFundintroduced bylawno. to improvemethodsforverifyingthematerials used andassessingsuppliers. Pyrolytic analysisofpolymersusedbyHera(above allpolyethylenepipingforwaterandgas) surface water:theprojectcametoanendin2003. European universities.Itrepresentsastrideforwardintheanalysisofbiologicalcontent purpose ofmonitoringmicrobiologicaldiversity, conducted inconjunctionwithanumberof MIDI-CHIP (MicrobialDiversityChip)project,whichanalyzesDNAinmicroarraysforthe Rimini; OptimumTerritorial AreaAgencyoftheProvinceRimini. Emilia Romagna;Marecchia-ConcaInterregionalBasinAuthority;ProvinceofRimini;City wetland zonesofthePoDeltaParkwaslaunched.Theprojectpartnersare:Region experimental trial(ISA)onthetreatmentandreuseoftreatedeffluentstosafeguard quantitative analysistosupportsustainablewaterresourcemanagement,andan Research continuedintotheMarecchiariverwaterbasin,consistinginqualitativeand light thepossibilityofachievingfurthereconomiesinsludgemanagement. sludge comingdirectlyfrommunicipalwastewatertreatmentplants;theprojectbroughtto extensive farmingenterprisededicatedtothereuse,innon-foodagriculture,ofdehydrated SASCO project(PlowingSystemsforControlledSpreadofSludge),prototypean Framework Program. Science Technology &Medicine(UK);fundingwasprovidedbytheEUunder5thR&D Technology (NL),SwissFederal InstituteofTechnology (CH)andtheImperialCollegeof AGSM Verona, UniversityofTuebingen (D),UniversitéLouisPasteur(F),DelftUniversityof defined. TheprojectwasconductedinconjunctionwithCityofBologna,MilanPolytechnic, Assessment). TheareaofprotectiontheprincipalwellsinRenowaterbasinwas drinking water(W-SAHARA project-StochasticAnalysisofWell HeadProtectionandRisk Development ofamodelfordeterminingtheareasprotectionwellsusedtosupply main plantinBologna. wastewater treatmentplants.In2004experimentationwillcontinuewithfieldtrialsatthe wastewater. Continuousmonitoringmayenableanimprovement inthemanagementof technologyforreal-timemonitoringofvolatileorganicsubstancesin Spectrometry) trialswithadevicebasedonMIMS(MembraneIntroductionMass Laboratory for undertheLIFEEnvironmentprogram. extending throughouttheGroup’s EuropeanCommunityfundinghasbeenapplied territory; project wassubsequentlydefinedfortheconstructionofanintegratedmonitoringsystem organic substancesindrinkingwater. Inconjunction withARPA ERandVARIAN Inc.,a technologyforreal-timemonitoringofvolatile (Membrane IntroductionMassSpectrometry) Trials conductedinsomedrinking waterproductionplantstotestadevicebasedonMIMS • 8

Hera S.p.A. page 97 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.6 4.6.4 Hera S.p.A. page 98 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.6 4.6.5 4.7 4.7.1 4.7.2 The publicoffering Community Information and communication 9_Touring thehills of Bologna. Policies 4.7.2 4.7.1 4.6.5 4.7 For informationaboutpendinglitigationseesection4.7. aimed atthemayorsofmunicipalitieswithastakeinHera. The strategiccommunicationplanapprovedfor2004includesaseriesofinitiativesspecifically identifying localneeds. optimizing localresources,inharmonywiththeprincipleof“sustainablequality”,and underthebestpossibleconditions,by community andthatitintendstoprovidesuchservices thatareessentialtothewhole services Hera isthekeypartnerinprovisionofeveryday new Group.Thisinitiativeaimedtoconveyoneofthemajorstakeholdersmessagethat arranged aseriesofmeetingswithMayorstoinformthemabouttheactivitieslaunchedby to themunicipalauthoritiesinfourprovincesHeraoperatesin,Top Management In linewiththeobjectiveofperiodicallyreportingoperatingresultsattainedinspecificareas effectively publicizethe publicofferinganditsaims. for interfacingwithusers (customerdesks,toll-freenumbers,localmeetings) inorderto advertising indailynewspapers andgeneralspecializedmagazines, radio,TVandtools sponsorships, eventsand mediarelationsactivities)andusedthemain contacttools,suchas of thiscampaign,thecompany activatedallmajorcommunicationlevers (advertising, Aspart its actions,committed to creatingvalueonbehalfofallthepeopleliving initsterritory”. macro objective:“Hera, areliablepartnerforallstakeholders,focused onthesustainabilityof earned thecompanya prize forthebestfinancialcommunicationof year, fitswithinthe communication. Theexcellent resultobtainedwiththeshares’debut the stockmarket,which S.p.A., whichsawthesuccessfuldeployment ofalargeparttheresourcesdedicatedto A highlightof2003intermscommunication wastheinitialpublicofferingofsharesinHera About 1%ofthevalueaddedderivingfromcompany operationsgoestowardthecommunity. Hera. the Group:community, ingeneral,isastakeholderwithbroad-ranginginterests i.e. allindividuals,groupsororganizationswith legitimateinterestsorrightsconnectedto The Groupstrivestomaintainanddeveloppositive ethicalrelationswithallstakeholders, • • • 9 water”). anddeliverkeymessages(e.g. “thequalityof Hera experience,showthequalityofservice use ofwaterresources.Similarly, theGroupwillpromoteandsponsoreventstopublicize help improvetheirquality, theimportanceofsavingenergy, segregatedcollectionandacareful quality,service correctlyto environmentalimpact,educating citizenshowtouseHeraservices life ofthecitizenslivingthere).Institutionalcampaigns willthusbepromotedonsuchtopicsas andimprovingthequalityof standards) anditssocialcommitment(toenhancingoftheterritory (qualitativeandtechnological affirming bothitsroleasapartnerintheprovisionofservices of values,assuranceandreliabilityHera’s resultsthroughoutthetargetgeographicalregion, All communicationactivitieswillthusbeaimedatreinforcinganimageofstrengthandsafety, continuity andsafety. inwhichitconductsitsactivities,assuring providedbyHeraacrosstheterritory services In 2004theGroup’s communicationwillfocuson“Quality”,tohighlightthequalityof inwhichHeraoperates. territory The sametopicsalsounderlietheprojectsaimedatschoolsthroughoutrestof context. andplantsmanagedbythecompanytheirrelationshipwithenvironmental services The topicsaddressedineducationalactivitiesarewasteandsegregatedcollection,water, the issues. the environment,usefulforpromotinganewlivingculturethatissensitivetosustainability changeinbehaviortoward attitudes. Theircontributionfavorsafundamentalandnecessary their respectivefamiliesandsocietyatlarge,beingasyetfreeofprejudicesentrenched life,ofecologicalconceptsandbehaviorwithin information, thebestadvocates,ineveryday Children areidealtargetsbecausetheyrepresentthemosteffectivechannelforconveying with the“Scartabellando”project. environmental educationinitiativespromotedinpreviousyearshavebeenfurtherextended teachers intheRavennaandLugoschooldistricts;academicyear2003-2004 the mostimportantinitiativesis“Materiality”SchoolProjectdedicatedtopupilsand visits toplants,workshops,competitions,gamesandrefreshercoursesforteachers.Oneof significantly impactsourterritory. TheEnvironmentalEducationprojectsforschoolsincluded correctly whendroppingoffwaste,andtheAsiantigermosquito,aphenomenonthat most frequentlyaddressedtopicsweresegregatedwastecollectionandhowtobehave Education projectstargetingschoolsandyoungpeopleinparticular. Intheformercase, them correctly. We launchedinformationandadvertisingcampaignsEnvironmental about environmentalproblems,promotingknowledgeofnaturalresourcesandhowtouse In 2003Heraengagedincommunicationactivitiesaimedatraisingawarenessamongcitizens principles andmaybedividedintoseveralprincipalmacroareas. customers andcitizens);henceitsrelationswiththemediaarealsoinformedbysame sense ofresponsibilitytowardindividualstakeholders(investors,financialcommunity, The Group’s strategyplacesapriorityontheprinciplesofclarityandtransparency original mediaandlanguagesforcommunicating thecompanyanditsbusinesses. further developedin2004,hastheaimofexploiting localcreativeresourcesandidentifying business –andwerecreatedusingcomputerized videotechniques.Thisactivity, whichwillbe Artists). Theworksfocusedonenvironmental issues –relatingtoHera’s environmental hygiene with themunicipalitiesofBologna,Forlì,Ravenna andRimini,sponsoredbyGAI(Young Italian development. Onthisoccasionanexhibitofyoung artists’workswasorganizedinconjunction ofmaterialsandenergysustainable international exhibitiondedicatedtotherecovery conferences andsportsentertainmentevents. HeraalsotookpartinEcomondo2003,an The Group’s initiativestosupportcultureandsportincludedthesponsorshipofexhibitions, • • culture andsports Initiatives insupportof 4.7.4 Hera’s communication 4.7.3

Hera S.p.A. page 99 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.7 4.7.3 4.7.4 Hera S.p.A. page 100 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.7 4.7.5 4.7.6 10_The newwebsiteoftheHeraGroup hasbeenonlinesinceMay2004. The projectforWoliso Investments incommunities(sponsorshipofeventsandexhibitions) Social andenvironmentalcommunication oain n te ibreet nbhl flclcmuiis(col,cmuiycnes )1913215 143 Other communicationexpenses 109 Communication forthepublicoffering Other gifts Donations andotherdisbursementsonbehalfoflocalcommunities(schools,communitycenters,…) (in thousandsofeuros) Gifts andsponsorships Media relations Woreda 4.7.6 4.7.5 documentation forinternal/external use. asavalidsupportforpresentingthe company,out, whichwillserve aswellspecific Hera inthemainItaliannewspapersandmagazines; apurposivepressreviewwillbecarried access forjournalists.Criticalanalyseswillbe periodicallyconductedonthearticlesabout the companyandaPressareawillbesetup inside thenewcompanywebsite,withdedicated number ofjournalistsinordertoquantitatively and qualitativelymeasurewhattheyknowabout of Hera’s (mediaaudit)willbeconductedamongaselected focusonthepress,asurvey with theorganizationofsuchinitiativesasguided toursforjournalists.Asfurtherconfirmation development oftheGroup’s plantsandfacilities,againtopromoteinvolvement sharing, advertisements intrademagazines.Particular attention willalsobegiventoprojectsforthe conferences) andplanin-depthfeaturesinspecial nationaleditionsandeditorial both nationallyandlocally, wewillrelyontraditionalpressinvolvementchannels(releasesand occasions forcommunicatingHera’s andquality;forthispurpose, resultsintermsofservice specific sectorsofactivity(energy, water, environment),this areawilloffernumerous providing insightintotheGroup’s growthstrategies.Astobusinessdevelopmentin the three pressconferences/press briefings) in othercommunicationactivities(interviews/meetings, presentation ofperiodicdata(annualandinterim reports,shareholders’meetings)andengage national press,Heraplanstoissuepressreleases relatingtomajoroccasionsforthe In 2004,asregardstheeconomic-financialarea, whichwillimpactmoredirectlyonthe press. journalsandthetrade detail, theGroupplannedaseriesofeditorialadvertisementsinindustry to communicateitsknow-howandplantperformanceinthecorebusinesssectorsgreater units weresetuplocallywiththefunctionofsupportingHoldingcompany. Finally, inorder organizational level,toconfirmthedesireforinvolvementandsharing,territorialcommunication communication betweenthepressandformerlocalutilitieswereconfirmed:onan Finanza forthebestfinancialcommunication.Onalocallevel,existingflowsof by thesuccessofIPOandHera’s beingawardedthe2003“Leoned’Oro”prizebyMilano communication ofaneconomic-financialnature,whoseeffectivenesswasdemonstratedboth conferences, companyprofiles).Onanationallevel,attentionwasturnedmainlyto releases,press both nationalandlocalmediathroughtheuseofdedicatedtools(interviews, subsequent stockexchangelisting.To thisenditengagedinintensepressrelations,targeting transparency, theHeraproject,whichembraced twomainstagesofthemergerand From thestandpointofpressrelations,2003wasdefinitelyfocusedonsharing,withabsolute social changeandinsupportingprojectstohelpchildrenthirdworldpopulations. but ratherrepresentsaprecisecommitmentofHera,whichseekstoplayanimportantrolein and associations.ThepledgemadeonbehalfofSaveChildrenisnotanadhocdonation, project involvesdifferentstakeholders:employees,consultants,customers,mayors,suppliers thousands ofpeopleaccesstopotablewater. Consistently withtheGroup’s mission,the Woreda, atotalof75waterpointsin8villagesand57smallcommunities thatwillguarantee completed by2005,providesfortherealizationofwellsandspringsinareaWoliso bring sustainablelong-termimprovementstothepeopleofEthiopia.Theproject,be For Christmas2003,HeradevelopedaprojectinconjunctionwithSaveTheChildrenthatwill • 2,344 0220 Budget2004 2003 2002 6 - - N.D. 364 2,000 320 - - - 7 982 1307 978 745 • 10 regulations, thoughthisdidnotresultinanydamagetotheenvironmentorthirdparties. environmental investigationandlargelyconcernthefailuretoobserve at thestageofpreliminary At theendof2003,therewerealsotwelvecriminalcasespending:withoneexceptiontheyare all Operator) andarbitrationproceedingsagainsttwoprivatecompanies. was reachedinfourlegaldisputeswithprivatecompanies,onetheGRTN(NationalGrid five arbitrationproceedingsarecurrentlyunderwayforthesamereasons.In2003asettlement regard advanceextinctionofgasutilitycontractsinseveralshareholdermunicipalities,while At theendof2003,Herahadtwenty-eightlawsuitspendingwithprivatecompanies:eleven In 2003therewasnoviolationofadvertisingandmarketingregulations. by theTerritorial Operative Companies. activities andtocomplementtheenvironmentaleducationprojectsalreadyimplementedlocally educational-games areaforkidswillalsobedevelopedtoteachaboutthecompany’s shareholders andthefinancialcommunity, businesses andindustrialassociations.Aspecial professional users.Morespecifically, areaswillbededicated tocitizens/customers, respect,whichmaysuccessfullytargetboththepublicatlargeand high qualityinevery precise qualitativeparametersintheproductionstageitmakespossibletobuildprojects of This logicdoesnotplaceaconstraintoncreativityandinnovation;thecontrary, by setting access Web technologies. usability andaccessibilitylogicofinternationalstandards,whichenablealltypesusersto focused ontheneedsofendusersanddevelopmentadesignthatiscoherentwith These objectivescanbeattainedthankstothedevelopmentofaprojectthatisstrongly orientedwithaparticularfocusoncustomerneeds. interactive, stronglyservice There areplanstorevisethepresentwebsitein2004makeitbothinformativeand time duringtheprocessoforganizationalintegrationcurrentlyunderwayinGroup. providedthroughtheWeb;companies andthepublicservices thispartwillbedevelopedover communicating theorganizationalcomplexityofHera,localpeculiaritiesitsmember In 2003thenewInternetsiteofHeragroupwascreatedwithobjective • • Lawsuits pending 4.7.8 Group’s Internetsite Virtual community:the 4.7.7

Hera S.p.A. page 101 SR sustainability report 2003 4 SOCIAL PERFORMANCE 4.7 4.7.7 4.7.8 PERFORMANCE ENVIRONMENTAL 5

Hera S.p.A. page 103 5 ENVIRONMENTAL PERFORMANCE 1.1 Dati sintetici e missione di Hera SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 1.1 Dati sintetici e missione di Hera pages 102-103: Waste collection in Piazza dei Martiri, Rimini; 104-105 Riolo Terme, trees lining the strada della Lavanda; 106-107 Imola, bins for segregated waste collection. Hera S.p.A. page 108 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.1 5.1.1 and emissions Resource use Energy consumption 2_Every residentcontributestokeepingthecityclean. 2_Every 1_Lights inBologna. 5.1.1 5.1 has madeestimatesbasedoninstalledpower and/or historicaltrends. data arederivedfrompointmeasurements;where thelatterareunavailable,EnergyManager consumption ofHeraS.p.A.plusthatthefive Territorial Operative Companies).Themajorityof the responsibilityofmonitoringefficiencyinterms ofenergyconsumption(thedatapertaintothe 1991, isascribed better knowas“Energymanager”,who,inart. 19 ofLawno.109January andrationaluseofenergy,Handicrafts bythetechnicianinchargeofconservation afigure ofIndustry,Shown belowaretheenergyconsumptiondata submittedtotheMinistry Trade and resource consumptionandemissions. management alsoprovidesforastandardizationofthemethodsmonitoringandreporting basis forthewholeGroup.Thethree-yearprojectdevelopmentofsustainable information systems,notyetfullyharmonized,thusprecludingdataprocessingonauniform difficulties, aboveallbecauseoftheincompletestagedevelopmentinsecond-tier collection ofdataregardingresourceconsumptionandemissionscontinuestoposesome should enableHeratoproduceacompleteSustainabilityReportfortheyear2004.The to afewmatrixes.Thegradualimplementationofthesustainabilitymanagementsystem starts offbypresentingaggregatedataonresourceconsumptionandemissions,albeitlimited identifying theresourcesused,characteristicsofprocessesandresultingemissions. It The purposeofthischapteristoanalyzetheGroup’s environmentalperformanceby inwhichoneoperates. into accountthevariousenvironmentalsensitivitiesofterritory The abilitytomaintainthequalityofandregeneratenaturalresourcesimpliesneedtake aua a o etn fie 4,203.34 47,743.72 Total Diesel forprocesses Transport BTZ oilforheating Natural gasforheatingoffices Natural gasforprocesses electricity LV HV/MV electricity Energy source and/oruse • • 131,922.61 28,524.12 45,304.87 5,849.03 261.91 35.62 ETP 1 treatment activitiesareshownbelow. Data relatingtothemaintypesofwasteproduced inintegratedwatercycleandwaste facilities. and thelechatesfromlandfillsaretreatedinchemical –physicalbiologicaltreatment waste resultingfromthemaintenanceofcompany greenareasistreatedincompostingplants dispose» ofalargepartthewasteproducedinotherGroupfacilities.Forexample, Group’s ownfacilities.ThediversityoftheplantsmanagedbyHeraenablesit,infact,to«self- subsequently treatedinordertorecoverenergyormaterialdisposedofinternally, inthe depending onitsspecificchemicalandphysicalcharacteristics,thiswastecaneitherbe The activitiesconductedbytheHeragroupimplyproductionofdifferenttypeswaste: ehtsfo adil 164,165 t 89,807 2,451 3,623 t 73,245 5,601 t 150,477 t 13,352 t 2003 t t t Lechates fromlandfills Sludge fromchemical-physical-biologicaltreatment Sludge fromthermaltreatmentwastewater Ash fromwaste-to-energyplants Dust fromelectrofiltersofwaste-to-energyplants Environment Sector Ash fromincinerationofsludge Sludge fromwastewatertreatment Sludge frompotabilitytreatment Water Sector Main typesofwasteproduced • Waste produced 5.1.2 2

Hera S.p.A. page 109 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.1 5.1.2 Hera S.p.A. page 110 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.1 5.1.3 5.1.4 Therefore, itisconventionallyassumedthatthecarbondioxidederiving from theairbyplantsthroughchlorophyllianphotosynthesis;innatural substantially confirmedbydataresultingfromananalysisofincoming reported intheliterature,fractionoffossilcarbonisapproximately (contained inwood,paper, cardboard,textiles,organic,etc.)orfossil aen 1581,8 0.356 0.200 14,286 31,237 per tonneofwaste 11,508 45,632 byenergyrecovery (t) from plant(t) Direct CO Total Rimini Ravenna Forlì Bologna energy plant Waste-to- Greenhouse gasemissionsin2003forHerawaste-to-energyplants carbon containedinfractionsofbiogenicoriginwasinitiallyremoved deriving from degradation processes. Combustion merely serves to deriving fromdegradationprocesses.Combustionmerelyserves 1/3 oftotalcarbonpresentinmunicipalwaste:thisvaluehasbeen (2) ifthisenergyweresuppliedbyfossilfuel,CO occur asaresult),calculatedusingthestandardemissionfactorof speed upaprocessthatwouldoccurspontaneouslyinanycase. from thecombustionoforganiccarbondoesnotcontributeto (1) CalculationofCO origin (containedinplastic,rubberandsyntheticresins,etc.).The calculation ofCO conditions itwouldreturntotheatmosphereinformofCO 0.550 g/kWh(sourceANPA 2000),averagevalueof domestic complete transformationofcarbon,whetherbiogenicorigin greenhouse effectandforthisreasonitisnotincludedinthe Vehicle emissions 3_Imola, cogenerationplant,Adelmo Dalprato. 2 Carbon dioxide equivalent emissions.Accordingtoestimates 2 of fossilorigin.Waste incinerationcausesa emissions waste attheBolognaplant. thermoelectric plants. 2 emissions would 5.1.4 5.1.3 2 , + evaluation wasmadeofthedifferentconstituentsof: In ordertoquantifythegreenhousegasemissionsassociatedwithwastecombustion,an Method ofcalculation generated bytheGroup’s waste-to-energyplantsin2003. is themainsourceofnitrousoxideemissions(NO + Hera canreportthelevelofgreenhousegasemissions(expressedint/yearCO of thegreenhousegas(GHG)emissionsconnectedtocompany’s activity. For this firstyear, Hera hasstartedanin-depthanalysisthat,asofnextyear, willprovideuswithacompletepicture 27,709,863 kmtraveled,around90%ofthetotal distancetraveled. replaced withestimates.Theanalysisregarded 2,113 vehicles(seepar. 5.6.3)andatotalof down byfuelandvehicleclass(EuroI,…).Where suchdatawerenotavailable,they Environment Agencywasappliedondataderiving fromconsumptionmeasurements,broken recommended undertheCORINAIR(COordination-INformation-AIR) projectoftheEuropean produced bythegasoline,dieselandbiodiesel fueled vehiclesitusesforitsactivity. Themethod For theyear2003Grouphasconducteda study onsomeofthemainatmosphericemissions around 25%alreadybelongtotheEUROIIIclass oflowenvironmentalimpactvehicles. fuels withareducedenvironmentalimpact(methane, biodieselandelectricpoweredvehicles) atmospheric pollution:approximately15%ofthe vehiclesmakingupthecompanyfleetrunon The Heragrouphasalwaysbeencommittedto using technologicalsolutionsthataimtolimit “Environmental DataYearbook” APAT 2003). 36.2%), fineparticles(PM10-30.2%)andcarbon monoxide(CO-64.7%)(datasource: In Italythetransportationsectoraccountsfor24.3% oftotalenergyconsumption;roadtransport M9.5 167.8 16.4 Tonnes CO PM CO COV NO Substances emitted direct emissions,i.e.emissionsofCO combustion process; the combustionprocess. emissions avoidedthroughtheproductionofelectricalandthermalenergyrecoveredfrom x 2 2 msin CO emissions 0,2 2290.200 72,279 106,026 6462,8 0.171 0.137 20,183 6,573 36,486 12,400 1 2 • 21,012.6 77.9 2 2 msin vie CO emissions avoided and N x 2 - 53.2%),volatileorganiccompounds(VOC O (nitrousoxide)derivingfromthe • 2 emissions avoided 2 equivalent) 3 the ItalianAssociationforMunicipalHeating(AIRU). emissions resultingfromtheseenergyproductionsystems:thestudyfollowsguidelines of For theyear2003Grouphasconductedastudyonseveralofmainatmospheric by highenergyandenvironmentalefficiency(seedetailsinsection5.2). engineering anddistributionsolutionssuchascogenerationdistrictheatingcharacterized The Heragroupmanagesfacilitiesthatproduceelectricandthermalenergyusingplant ol . 285.5 4,049.6 232.2 1,791.2 0.7 3.0 82.2 0.4 1.3 40,657.8 3,926.7 - 0.2 7,773.2 - 62.6 1.5 9.0 - 17.8 24,265.6 - - - 37.3 - - SO S.Giacomo -Bologna Telefrullo -Bologna Berti Pichat-Bologna Plants providing backupthermalcapacity Forlì Montericco –Imola(BO) Monterenzio (BO) Ecocity -Casalecchio(BO) Fossolo -Bologna Barca (formerCogen)-Bologna Cogeneration Emissions 2003(int) otrni B)-02324.0 403.3 936.3 2,552.6 0.2 0.3 0.7 3,838.8 1.9 8,917.3 - - 2.9 - 7.2 - - 3.9 Monterenzio (BO) Ecocity -Casalecchio(BO) Fossolo -Bologna Barca (formerCogen)-Bologna Forlì Montericco –Imola(BO) • 2 NO x CO 2 energy electric andthermal the productionof Emissions derivingfrom 5.1.5

Hera S.p.A. page 111 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.1 5.1.5 sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.2 Hera S.p.A. page 112 SR Energy Sector 4_Castel Bolognese,cogenerationplant fordistrictheatingplant. 5.2 4 energy source,fortheproductionofelectrical andthermalenergy. the distributionofmethanegasanduse gas,i.e.,consumptionofanon-renewable types ofenvironmentalimpactfromtheenergy cyclearetheuseofenergyandodorizersfor andfromkindredsources. Other production fromrenewablesources,energy recovery of greenhousegas.Alsoforthisreason,theGroup hassetthegoalofincreasingitsenergy The maintypeofenvironmentalimpactderiving fromEnergySectoractivitiesistheemission + + + + + The GroupEnergySectorincludes: sale ofelectricitytocaptiveandnon-captivecustomers. electricity distribution; electricity production; management; districtheating,heat,publiclightingandtrafficlights provision ofotherutilityservices: distribution andsaleofmethanegasLPG; • excellence forresearch andapplicationofcutting-edgetechnologies. andtheacademiccommunity,with Emilia-Romagna-basedutilities,industry aregionof disposal: itcanapplyforEuropeanUniongrants, whichitcanusetopromote,inpartnership the reachofanysubject,howeverimportant.The Regioncertainlydoeshavenewtoolsatits great dealmoreresearch,whichwillinturnrequire acriticalmassofresourcesthatisbeyond Hydrogen hasinspiredthefancyofmany, lifewilltakea butitsintroductionintoeveryday their habits. direction indicated;theacademiccommunity, byexperimenting;andcitizens,changing issuing guidelinesandmakingresourcesavailable; industry, bydirectingitseffortsinthe mustdotheirpart:government, by short term.Ifwearetoobtainconcreteresults, everyone However, itishardtoimaginealarge-scaleapplicationofsuchunripetechnologiesinthe joint projectbeingsetupwithaGermanpartner. Finally, Heraisdirectlyparticipatinginthedevelopmentofhydrogentechnologythrougha build newplants,themarketcanonlybenefit. regardtoliberalization,itisevidentthatifindependent operatorslikeHera fuel oilplants.With the electricityweconsumeaboveandbeyond ourneedscomesinlargepartfromcoaland technology allows.Theoverallenvironmentalimpact canonlydecrease,becauseuptotoday system onaregionalbasis.Theplantsrunby Heraaredeliveringthemaximumoutputthat cannot bebuilt,theansweristosupportregional economicgrowthwithareliableelectrical Since theinterconnectionswithothersystemsarebeingusedtocapacity, andotherones occurring atalivelyrateinourRegion. The pointisthatconsumptioncontinuestorise,thanksalsoeconomicgrowth,which is undoubtedlythemeaningofpressurestoachieveenergyself-sufficiencyinourRegion. Citizens andbusinesseswantasafeelectricalsystemaccesstolow-costenergy. This on theoverallenergybalance. through thesystemofsegregatedcollection,pluslow-costenergy. Thishasapositiveimpact municipal solidwastedisposedofinlandfillsordertorecoverasmuchmaterialpossible we mustdelivertocitizens.Accordingly, Heraisready toconstantlyreducethequantityof merely anenergyproducer, asithasglobalresponsibilities forthequalityofenvironment The reasonisclear:giventheroleitoccupies,companynot,norconsidersitself, are alwaysbasedonanintegratedoutlooktowardenergysuppliesandenvironmentalissues. Closing thematerial-energy-environmentcycleisinHera’s “genes”:itsinvestmentdecisions given theircharacteristicsandthesourcesused. by introducingsimplifiedproceduresforplantsobjectivelyhavingalowenvironmentalimpact 77/2001, whichpromotestheuseofrenewablesourcesindomesticelectricitymarket Italian legislatorshavechosentoimplementtheEUdirectiveonrenewablesources,no. employed onbehalfoftheenvironment:wearepleasedtonote,fromthispointview, that issue. Indeed,itfeelsthatacertainnumberofenergypolicytoolsshouldbeusefully firmly believesthattheenvironmentissuecannotandmustnotbeseparatedfromenergy addressing thistopic,theManagingDirectorofHera,StefanoAldrovandiaffirmedthatHera on theinterconnectionbetweenregionalenergybalanceandenvironmentissue.In 2004,duringtheEuropolisexhibition,focused A conferenceheldinBolognaon4February Energy andenvironment

Hera S.p.A. page 113 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.2 Hera S.p.A. page 114 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.2 5.2.1 Distribution andsale of gas 5.2.1 — — decompression: into thelocaldistributionnetworktocompensatefortemperaturedecreaseresultingfrom from transporttodistributionnetworkoperatingpressuresandpreheatingpriorintroduction At theofftakepointsgasundergoesfilteringtoremoveanyimpurities,decompression — — endusersandcomprisestwophases: pipelines serving consistsintransportingthegasitselfthroughlocal The naturalgasdistributionservice municipalities intheprovincesofBologna,Forlì-CesenaandFlorence. approximately 1,400,000cubicmetersofLPGto1,750customerslocatedin 9 manages anLPGdistributionnetworkofapproximately33km,andin2003sold municipalities intheprovincesofBologna,Ravenna,Forlì-CesenaandFlorence.Italso 2003 sold1,634,000,000cubicmetersofgasto699,885customerslocatedin88 Hera managesanaturalgasdistributionnetworkof8,261km,721strisebooths,andin The naturalgastreatedatthe1 tankers. bycentralstorage tanks,periodicallyfilledby sells LPGthroughsmall networksserved In someareasnotyetreachedbythenatural gas distributionnetwork,Heradistributesand recovery. Thisenergyissuppliedtointernal usersorsoldtocustomers. At some1 remotealarmsystemsaresimilarlyusedforthedetectionoffaults. intervention; of thenetworkandplants:remotecontrolsystems arewidelyusedforroutineandemergency continuity.and service aredesignedtopreventfailuresandmonitor theefficiency Interventions tomaintainadequatelevelsofsafety,Routine plantandnetworkmaintenanceserves quality Network lossesarewithinthelimitsestablished bytheElectricityandGasAuthority. linesfittedwithmetersystems. users throughservice reduced. Downstreamfromthesestationsisthe low-pressuredistributionnetworksupplying the adductionnetworksthattransportitto 2 Total Ravenna turbo-expansionplant Forlì turbo-expansionplant Bologna turbo-expansionplant odorless initsnaturalstate. addition ofodorizerstoenableidentificationaccidentalleaks,giventhatmethaneis measurement ofofftakequantities; transport anddistributiontousers. gas offtakefromdiSNAMReteGasS.p.A.pipelinesatthefirstrisepoints; • st rise offtakepointstheGrouphasinstalledturbo expansionplantsforenergy st rise offtakepointsisintroducedatamediumpressure into nd rise stations,wherepressureisfurther Installed electricalpower (MW) 4.2 1.5 1.7 1 distribution network Technical characteristicsofthegas Other materials2,5% Polyethylene 7,7% Cast iron 7,2% Steel 82,6%

Hera S.p.A. page 115 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.2 5.2.1 Hera S.p.A. page 116 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.2 5.2.2 ol 4,0 ,5 -8 -6 59 0 1,759 7,480 1,609 13,555 8 1,238 282,054 1,707 11,659 87,917 242 5 134.9 161,787 1.7 3.52 88.66 20,166 2 21.88 1 6.14 12 1 1 1 443,000 494,448 5 4,233,627 1 1,107,641 35,260 77,000 841 14,432 Estimatedenergy 1,860,751 Thermalenergy 4,447 215,527 8 Total extensionofdistrict 7,393 Districtheating TOTAL Cesena Tertiary volumeserved Forlì 1,743 Castel Bolognese Buildings Imola Monterenzio Casalecchio diReno Bologna Municipality District heatingandcogeneration District heatingand cogeneration 5_Electric sunsetinthehillsofBologna. served (n) servita (m servita (n) served 5.2.2 times less)thaninthecaseofindependentsystems. emissions ispracticallynil.Moreover, themaximum concentration isdistinctlylower(about80 cogeneration plantthereisanarea(ofabout800xmeters)wheretheconcentrationof (small boilers,evenlydistributed).Thecomparisonshowedthataroundthestackof the parametersassociatedwithdesignedplant)thatofindependentheatingsystems order tocomparethesituationwithacogenerationplantanddistrictheatingnetwork(using simulating thephenomenaofatmosphericdispersionfumesemittedfromapointsource in Assessment (EIA)wasconducted;itincludedtheapplicationofamathematicalmodel theframework ofacogenerationanddistrictheatingproject,anEnvironmentalImpact Within heating. temperature fraction,insteadofbeingdispersedintheenvironment,isusedfordistrict the fractionofenergyatahighertemperatureisconvertedintoelectricitywhilelower the air. energyderivedfromfuelsinamoreefficientmanner: Cogenerationusestheprimary energy sourcesandincreasethepossibilitiesofcontrolling,and,thusreducingemissionsinto distribution ofheatthroughdistrictheatingnetworks,makesitpossibletooptimizetheuse of The productionofelectricalandthermalenergyincogenerationplants,completedbythe superheated waterdeliveredthroughadistributionnetwork. District heatingconsistsinthesupplyofheat(thermalenergy)formhotor 3 ytm n etn ewrs(m rdcd(W) savings(etp) produced(MWh) heating networks(km) systems(n) ) with widelydistributedboilers and districtheating with cogenerationplant • 5 customers; finally, asubstantialportionisconsumed internally. (interministerial pricecommittee)resolutionno.6/92;anotherportionissoldtotheGroup’s at particularlyfavorableconditions,undertheincentivesprogramestablishedbyCIP A portionoftheelectricpowerproducedbyHeraissoldtoGRTN(NationalGridOperator) cogeneration), amountedto274,419MWhin2003. processes(turboexpansionand and assimilatedsourcesderivingfromenergyrecovery to-energy, useofbiogasfromlandfillsandwastewater treatmentplants,hydroelectricplants) The Group’s productionofelectricity, basedontheexploitationofrenewablesources(waste- In 2003,gridlosseswereestimatedat3.85%. contractors andtheaerialpowerlinesunderwentinspectioncontrolprocedures. In 2003scheduledmaintenanceactivitieswerecarriedoutbothbyinternalstaffand loads. system thathasthedualpurposeofpromptlydetectingfaultsandcontrollingcurrent transformerstations,Herareliesonaremotecontrol distribution linesandsecondary For themaintenanceofitspowergridandsubstationmonitoringsystem,high-voltage and LV network. MV aerial powerlines,whereasundergroundinsulatedcablesmakeup30%ofthesecondary LVsecondary distributionnetworkismadeupentirely of distributionnetwork.Theprimary MV electricityisfurthertransformedintoLV electricity(220/380V)andinjectedintothe network. MVdistribution where itistransformedintoMV(15kV)andtheninjectedthesecondary interconnection withENELDistribuzioneS.p.A..HVelectricityistransportedtotwosubstations distributionnetworkdrawshigh-voltageelectricity(130kV)attwopointsof The primary receivers/substations andtransformerstations. The powergridcompriseshigh(HV),medium(MV)andlow(LV) voltagenetworks, network extendingfor1,423km. Massalombarda andBagnaradiRomagna(ProvinceofRavenna),consistsinaHV, MVandLV municipalities ofImolaandMordano(ProvinceBologna),Sant’AgatasulSanterno, usersinthe brokered 382.5GWhtoothertraders.TheHERApowergrid,serving customers, and1,018GWh(+40%comparedto2002)1,026non-captivecustomers In 2003Herasold228GWhofelectricity(-5%comparedto2002)49,049captive • • Electricity production 5.2.3 and sale Electricity distribution 5.2.4

Hera S.p.A. page 117 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.2 5.2.3 5.2.4 Hera S.p.A. page 118 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.2 5.2.5 Future plans 6_Strolling throughthepark,Faenza. 5.2.5 leading operatorsinthe sector. possibility ofparticipating inotherprojectsfortheconstructionofcombined-cycle plantswith theaimoffurtherdevelopingitsbusiness intheelectricitysector,With Herawillevaluatethe Caserta (Sparanise). S.p.A., whichwillbuild an 800MWcombined-cycleelectricpowerplant intheprovinceof Through oneofitssubsidiaries Heraholdsa10%stakeinthecompany CaleniaEnergia — — the mostadvancedstageintermsofdesignactivitiesandauthorizationprocedures: As regardstheeffortsinthisdirectionatbeginningof2004followinginitiativeswere at generated powerdeficit,inharmonywiththeenvironmentandspecificlocalneeds. Hera intendstoparticipateactivelyintheRegionalEnergyPlancontributeeliminating number ofplantswithinstalledelectricalpowerabout2,600MW. In early2003Heraacquireda5.5%stakeinTirreno Power, formerlyInterpower, whichownsa energy savingsofaround11,000ETP. sector(2.9millioncubicmeters),withfurther inthetertiary buildings) andvolumesserved determining significantincreasesbothintermsofresidentialusers(withtheaddition24,500 isnotpresentlyavailable–ofprojectsaimedat also inProvinceswheretheservice In thedistrictheatingsector, Hera’s industrialplanprovidesforthedevelopmentby2007– Algerian gasintoItaly. determine thefeasibilityofdevelopinganAlgeria-Italygaspipeline,viaSardinia,toimport operator belongingtotheBASFGroup),eachwith15%.Thepurposeofthiscompanyis A.G.(Germanenergy Edison GasS.p.A.with20%,ENELPowerandWintershall partners includeSonatrech(AlgerianNationalHydrocarbonSociety),whichowns40%, liberalized gasmarket,Herahasacquireda10%stakeinGALSIS.p.A.,whoseother theaimof creatingalternativesthatmayenhancetheGroup’sWith competitivenessinthe the supplyofnaturalgasandelectricity. andtoimplementitsdualfuelmarketingpolicy,territory i.e.acommercialpackagecombining It willcontinueinitseffortstogainnewcustomersmunicipalitiesoutsidereference neighboring territories. inmunicipalitiesof andacquirecontractsformanagingtheservice that arenotyetserved The Groupwillseektoextendthegasdistributionnetworkmunicipalitieswithinitsterritory + + + + + upgrading andconstructionofwaste-to-energy plants + + combined-cycle electricpowerplants 75 GWh/year. will allowdisposalofanadditional120,000per yearofWDF, of withanenergyrecovery Ravenna -construction,bytheendof2007, asecondwaste-to-energyline,which of54GWh/year; disposed of,withanenergyrecovery fully operationalwillallowanadditional120,000 tonnesofmunicipalurbanwastetobe Rimini -construction,bySeptember2006,of a fourthwaste-to-energyline,whichwhen of54GWh/year; disposed of,withanenergyrecovery operational willallowanadditional120,000tonnes ofmunicipalurbanwastetobe Forlì -construction,byJune2006,ofathirdwaste-to-energy line,whichwhenfully electricity productionof56GWh/year; recovered fromabout60,000tonnesayearof WDF(Waste DerivedFuel),withan Caviro, ofanewplantsituatedinsideanexisting plant,whichwillallowenergytobe Faenza -construction,byAugust2005,ina50% joint-venturewiththecompany against thecurrent41GWh/year; capacityofabout130GWh/year by theendof2004,anelectricenergyrecovery Frullo (Bologna)-renovationandenvironmental upgradingoftheplantinordertoreach, months; consequently, theofficialresultofEIAshouldbe expectedwithinthenexttwo (MAP)maybescheduledbyJune2004; The lastministerialconferenceonservices capacity of230MW, whichwillprovideabout1,650GWh/yearwhenfullyoperational. Rimini -construction,bytheendof2006,acombinedcycleplantwithaninstalled result maybeexpectedbytheendofJuly2004; operational. Anenvironmentalimpactassessmentispresentlyunderway, andtheofficial capacity ofabout80MW, whichwillprovideabout580GWh/yearwhenfully Imola -construction,bytheendof2005,acogenerationplantwithaninstalled • 6

Hera S.p.A. page 119 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.2 5.2.5 Hera S.p.A. page 120 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.2 5.2.6 * DataregardingonlytheterritoriesofBologna,Ravenna,Imola-Faenza hra nry(rmIEtroepnin W 88,924 361,897 MWh t Sm Sm Thermal energy(fromIREturboexpansion) Electric energy Methane(thermalplants) Methane Waste Conventional sources Assimilated sources Renewable sources RESOURCES * a o eee ntmtrd/addt ewr)%0710.997 12.00 71.93 3.850 16.07 0.771 11.04 47.39 72.94 2.947 52.61 16.02 43.09 11.49 56.91 69.27 2.259 19.24 41.41 8.88 58.59 68.20 5.165 22.92 % % % 53.79 % 46.21 % % % Share ofthermalenergyproducedfromconventionalsources Share ofthermalenergyproducedfromassimilatedsources Share ofthermalenergyproducedfromrenewablesources Share ofelectricenergyproducedfromassimilatedsources Share ofelectricenergyproducedfromrenewablesources Average rateoflossesinelectricitydistribution Gas notmetered(not/addedtonetwork) INDICATORS Data andindicators T ulolt267 29 117 312 t t t t BTZ Fueloil Biodiesel (thermalplants) L.P.G. (thermalplants) Diesel (thermalplants) 5.2.6 Distribution ofgasandLPG Production anddistributionofelectricthermalenergy lcrceeg W 492 2003 2002 2001 2000 MWh millionsofSm Electric energy Natural gaspurchased RESOURCES RCS 0020 022003 2002 2001 2000 millionsofSm millionsofSm LPG distributed (excluding Herausers) Natural gasdistributed PROCESS W 209,127 MWh 3 3 3 3 3 0020 022003 2002 2001 2000 0020 022003 2002 2001 2000 . . . 1.4 1.2 1.0 0.9 ,4. 1,657.6 1,440.8 ,5 1,674.3 1,452 12,956,970 42,288,605 rmasmltdsucsttlfo siiae ore W 0,1 6081864130,055 108,604 86,098 103,018 MWh 274,419 252,037 207,919 144,364 191,530 143,433 totalfromassimilatedsources MWh 121,821 - fromassimilatedsources 88,512 MWh totalfromrenewablesources Totale - fromrenewablesources Electricity produced PROCESS lcrct neigpwrgi W 8 8 0 529 509 487 484 GWh 33,920 27,839 26,349 16,548 203,256 282,580 45,404 MWh 183,846 252,066 40,381 158,883 Network losses 229,352 Electricity distributed 44,120 Electricity enteringpowergrid 127,084 186,332 MWh 42,700 MWh totalfromconventionalsources MWh - fromconventionalsources totalfromassimilatedsources totalfromrenewablesources - fromassimilatedsources Total - fromrenewablesources Useful thermalenergyproduced eeaMh2193467,480 N.A. 1,759 3,486 2,305 2,106 1,707 2,139 N.A. N.A. 1,000 0 1,164 N.A. 435 942 334 960 15,635 0 1,755 252 570 MWh 13,120 MWh 7,339 6,250 932 MWh 3,903 12,480 87,917 1,238 410 32 78,076 MWh 10,526 1,068 11,840 3,520 20,166 11,109 - 62,541 MWh MWh MWh MWh 1,070 16,495 3,410 300 9,670 400 57,474 83,409 15,300 810 MWh 10,139 - 771 75,721 349 MWh 8,730 44,994 10,835 11,850 MWh 69,480 MWh 40,381 3,555 Cesena 119,916 3,416 55 - MWh 9,660 Forlì 97,769 Castel Bolognese 3,168 48,220 468 2,885 44,120 2,843 Imola 13,746 61,633 8,427 S.Giacomo (Bologna) 5,107 76,438 MWh MWh Telefrullo (Bologna) 416 6,148 6,740 42,700 3,075 1,815 48,581 Sede BertiPichat(Bologna) MWh 1,329 94,591 7,031 4,770 MWh Cesena 2,920 38,837 288 2,472 Forlì MWh MWh 2,188 123 1,443 MWh Montericco Imola 1,329 3,923 3,035 Monterenzio Bologna 52,918 MWh 36,629 17,322 MWh 2,080 Ecocity CasalecchioBo 2,048 10 338 2,300 1,443 Fossolo Bologna 1,961 6,866 MWh 34,473 16,819 MWh 5,411 Barca (formerCogen)Bologna - 3,082 2,090 8,195 1,643 2,300 MWh Ravenna treatmentplant 33,335 9,879 - MWh 1,054 Bologna waste-to-energyplant 3,151 MWh MWh 2,161 3,490 1,643 35,924 1,180 - 6,509 Turbo expansion 2,642 113 Ravenna turboexpansionplant MWh 2,004 125,713 MWh Forlì turboexpansionplant 1,232 MWh Bologna turboexpansionplant 11,196 125,171 2,626 - Cogeneration 354 MWh MWh Cesena 43,645 13,483 1,449 109,642 MWh Forlì MWh MWh Montericco Imola 49,161 8,500 430 29,663 Monterenzio Bologna 80,360 MWh MWh 41,209 Ecocity CasalecchioBo 41,306 25,969 Fossolo Bologna MWh 36,558 Barca (formerCogen)Bologna MWh 31,685 23,574 Hydroelectric 36,262 Cavaticcio Bologna MWh Biogas combustion 12,402 MWh Cesena treatmentplant 36,273 Ravenna treatmentplant MWh IDAR Bolognatreatmentplant MWh Lugo landfill Ravenna landfill Imola landfill Baricella landfill Guelfa Bolognalandfill Waste toenergy Rimini waste-to-energyplant Forlì waste-to-energyplant Ravenna waste-to-energyplant Bologna waste-to-energyplant W 51 520 509 15 494 11 476 25 459 GWh GWh 0020 022003 2002 2001 2000

Hera S.p.A. page 121 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.2 5.2.6 Hera S.p.A. page 122 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.3 5.3.1 Water supplyservice Water sector 7_Potability plant,SassoMarconi. 5.3.1 5.3 7 (also see section 1.2): integrated water service, protectionofwaterqualityand water savings. (also seesection1.2):integratedwaterservice, framework inthissector committed tothebasicprinciplesembracedby thecurrentregulatory underground sourcesandthreequartersfromsurface sources.TheHeragroupisstrongly Italy hasoneofthehighestper-capita ratesofwaterconsumption,aquarterwhichcomesfrom — — — — The Heragroupmanagestheintegratedwaterservice: Bologna (maximumflow rate4,000L/s)andthepipelinesofRomagna Acque(maximumflow systemof The mainadductionnetworks usedbytheGrouparerepresented theprimary + + + + + specifically, to: thetreatmentsserve substances presentathigherlevelsthanallowed undercurrentdrinkingwaterstandards.More The watercollectedbyHeraundergoesapotability treatmenttoeliminateanypolluting the suppliesfromRomagnaAcque. fields, with6surfacewaterofftakesfrom7main groupsofsprings:addedtothiswaterare Water collection,i.e.the withdrawalofwaterfromsupplysources,takesplacein26well — — — — Water supplymanagement involvesthefollowingsequenceofphases: water ground water surface waste-water treated in nearlyallofthemunicipalitieslocateditsterritory. wastewater treatment; sewers; water supply; eliminate undesirablemicroorganisms bydisinfection. eliminate ironandmanganese fromdeepgroundwater; with ahighresidential, commercial oragriculturaldensity; eliminate nitrogenouscompounds fromgroundwaterandsurfacewater situatedinareas groundwater orsurface watersituatedinareaswithahighindustrialdensity; eliminate, wherepresent, organo-halogenatecompounds,chieflyofindustrial origin,from eliminate suspendedsolids andmicropollutantspresentinsurfacewaters; reservoirs. distribution ofdrinkingwaterthroughasystem ofnetworks,pumpingstationsand adduction ofpotablewatertothedistribution network; potability treatmentoftheextractedwater; collection ofwater; nryr energy Wastewater OFFTAKE treatment emissions eagents nryeeg r energy energy water storm- collection Sewage osslosses losses energy nryr energy leaks Distribution TREATMENT POTABILITY emissions emissions eagents eagents • on Water Resources –2002). national meanofabout30years(Source:Report toParliamentoftheWatchdog Committee iron andothermaterials.Theaverageageofthe pipelinesisabout25years,lowerthanthe The distributionnetworkconsistsinpipesmade ofpolyethylene,asbestoscement,steel,cast contamination. the capacitytomakeupforsurfacewatershortagesinperiodsofdroughtoranomalous Groundwater ishoweverindispensabletoensurethesystemhasahighdegreeofsafety, i.e. municipalities withastakeinHeraandamongtheresidentsofdifferentterritorialareas. faster ratethanthenaturalrechargingtime)andrepresentsafactorofsolidarityamong lowering oftheundergroundwatertable,inturncausedbywithdrawalgroundwaterata extraction ithelpsslowdownthephenomenonofsubsidence(sinkingsoilcausedby surface water, beingawarethat,thoughthisprocess ismorecostlythangroundwater Hera seekstoreducegroundwatercollectionbyexploitingthefullestplantssupplied by water eitherwithtankersorbyproducinganddeliveringin15literbags. ensuresthedistributionofdrinking In theeventofsupplydisruptions,emergencyservice electricity blackouts. backing upthemainsupplysystemattimesofpeakhourlyconsumptionandincase of 1,824 reservoirs withanoverallcapacityof480,767m of 1,824reservoirs ones,foratotal plus1,772secondary (52mainreservoirs The Groupusesstoragereservoirs used. adequate levelofpressure,48mainplantsandabout700smallerpumpingstationsare isdistributiontotheusers.Inorderassurean The finalphaseofthewatersupplyservice disruptionsinsectionsofthenetwork. temporary supplied fromseveralpointssothatdrinkingwatercanbedistributedtousersevenincase of are interconnectedwiththedistributionsystem,whosemesh-likeconfigurationallowsittobe rate 3,000L/s),supplementedbyotherminoradductionnetworks.Thenetworks 2000 oa 1,1 0 1,0 0 1,4 0 2,5 100 226,656 2003 3.79 25.80 29.06 70.94 41.35 100 8,594 214,442 58,479 65,856 160,800 93,727 2002 29.54 24.90 75.10 3.45 42.11 100 212,004 63,349 53,392 161,050 7,391 90,310 73.99 31.37 26.01 2001 39.86 2.76 100 156,864 215,314 66,496 55,140 84,507 2.715,861 5,830 74.9 29.22 25.1 42.97 161,268 62,920 54,046 2000 92,518 Total and otherminorsources (thsdsofm From RomagnaAcque(1) Total ownsources Springs Surface water Groundwater to network Water added anptblt lns1 21 26 6 48 17 26 18,052 6 48 17,465 31/12/03 31/12/02 Main pumpingplants(>150kW) Main potabilityplants Surface offtakes(>50L/s) Well fieldsprings Main springs Network length(km) The Herawatersupplysystem vrg al hogpt(/)6806,800 6,800 Average dailythroughput(L/s) 54.32% 42.97% 2.71% 2001 39.86% 57.38% 2.76% 3 (thsdsofm % ) 2002 42.11% 54.44% 3 ) to maintain a reserve ofwaterfor ) tomaintainareserve 3.45% 3 (thsdsofm % ) 2003 77 41.35% 54.86% 3.79% 3 (thsdsofm % ) Supply sources (1) Sourceofsurfacewater Groundwater Surface water Sources 3 )%

Hera S.p.A. page 123 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.3 5.3.1 Hera S.p.A. page 124 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.3 5.3.1 8 Asbestos-cement 26% Plastic material49% Distribution network Other materials1% Cast iron 6% Steel 18% paving. lengthy excavationwouldbeproblematic,forexample inbusystreetsorplaceswithvaluable inareaswhere thesetechniquesitispossible tointervene aggregates areconsumed.With inconvenience: workiscompletedfaster, lessnoise,dustanddebrisareproducedfewer techniques, whichenableustoworkaboveground, withoutexcavation,soastominimize Lastly, afteranalyzingnetworkbreaksandleaks,we proceed torepairthepipesusingrelining the numberofuserconnectionspresentandpeopleaffected. to thenetwork:priorityisgivenareaswherebreakdownsaremorefrequent,inrelation For thesamepurposecompanyisimplementingarehabilitationplanforuserconnections break, wheretheoutflowofwaterwillbeproportionatetopressureinpipelines. breaks andthesmall,hard-to-detectundergroundleaksofwateroftenprecedinganactual todecrease the stressandleveloftensiontowhichpipesaresubjected.Thisstepserves regularization systemsinitsownnetwork,particulartheprovinceofBologna,toreduce theaimofreducing networklosses,Herahasinstalledpressurereductionand With Water Resources–2002). national averageof42%(Source:ReporttoParliamenttheWatchdog Committeeon succeed inkeepingnetworklosseswithinarangeof15-20%,farbelowtheestimated phenomena. ThedatarelatingtothelastfewyearsconfirmsthatGroup’s controlefforts breakdown shownisbasedontheeffectsofdifferentphysicalandadministrative losses) ormeasurementerrorsinternalconsumption(administrativelosses):the efforts tolocatenetworklosses.Networklossesareduepipelinesbreaks(physical Network monitoringmainlyconsistsinpressureandflowratemeasurements,aswell inspections. basedonthenecessitiesthatemergeduring followed upbyscheduledinterventions aremonitoredinturnbymeansofpreventiveperiodicinspections, areas oftheterritory signals andrecordsprocessparameters24hoursaday. Theplantslocatedindifferent The mainpartsofthesystemaremonitoredviaaremotethatpicksupalarm provides tousers. it system withtheobjectiveofmaintainingandfurtherenhancingqualityservice The Heragroupcarriesoutmonitoringactivitiesandmaintenanceofthewaterdistribution oa oss1.%1.%1.%19.35% 16.4% 43.86 180.7 15.1% 35.2 226.7 176.3 15.8% 32 214.4 171.5 212 181 34 215 Total losses Administrative losses Physical losses Water billedtousers Water notmetered Water addedtonetwork (in millionsofm • 3 ) 1 2 .%91 04 11.35% 10.4% 9.1% 9.8% 0020 022003 2002 2001 2000 %6 %8% 6% 6% 6% between billingandactualconsumptionintheperiodconcerned. (2) Theincreaseinadministrativelosses2003isduetoadiscrepancy micro fracturescausedbyslightgroundshifts. patterns: theprolongeddroughtcausedanincreasedinunderground (1) Theincreaseinphysicallosses2003isattributabletoclimate 8_A betterenvironmentforeveryone.

Hera S.p.A. page 125 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.3 5.3.1 5.3.2 The sewerage service consists in the collection of wastewater, which is disposed of Residual concentration of pollutants in water leaving unit of Bologna Imola Cesena Ravenna Rimini through drains and channeled through pumping stations and trunk lines into treatment some of the main plants: yearly averages measurement (1 plant) (2 plants) (1 plant) (13 plants) (1 plant) Sewers and plants. Based on the purposes for which the water was used, the sewage is classified as Total treated water millions of m3 49 10.7 7.5 36.8 13.6 domestic or industrial. Domestic sewage originates from household or kindred types of use COD (lim 125) mg/L 39 66 28 42.2 35 wastewater treatment and contains both organic substances and substances deriving from household cleaning BOD5 (lim 25) mg/L 14 5 6 8.7 6 products or products used for personal hygiene. Industrial sewage is made up of SST (lim 35) mg/L 22 21 12 11.1 10 wastewater from manufacturing processes, which generally contains large quantities of Ammonia nitrogen (lim 15) mg/L 11 2 1 4.2 3 polluting substances. Nitrous nitrogen (lim 0.6) mg/L 0.4 0.4 - 0.3 0.2 The sewerage system comprises three types of sewers: combined, sanitary and storm-water. Nitric nitrogen (lim 20) mg/L 8 5 7 7.9 18 Combined sewers collect domestic and industrial wastewater and storm-water sewage in a Total phosphorous mg/L 2.4 1.8 2.6 0.9 0.7 single sewer main; sanitary sewers collect only domestic and industrial wastewater; storm- water sewers collect only storm water runoff. The prevalence of combined sewers makes it Treatment Potential Wastewater Wastewater Type Wastewater necessary to have a large number of overflows whose function is to divert diluted wastewater plant (thousands of A.E.) treated 2002 treated 2003 of treatment source into surface bodies of water in the event of rainfall, according to the limits set in the disposal (millions of m3) (millions of m3) permits issued by the Provincial Authorities. With the exception of the sewer lines constructed in the last few years (property of the Hera Bologna 900 49 49 Biological activated sludge Bologna and 9 group), the sewer system is owned by the municipalities or asset management companies treatment with energy municipalities of Bologna from biogas produced province, industrial sludge 5.3 5.3.2

5.3 5.3.2 and managed by Hera under contract. The sewer service is carried out in 89 municipalities of the provinces of Bologna, Forlì- by sludge digestion treatment plant Cesena, Ravenna, Rimini, Florence and Pesaro-Urbino. Imola (BO) 75 4.3 4.2 Biological activated sludge treatment Imola and 4 neighboring Main sewer system data 2002 2003 municipalities Volumes (millions of m3) 133.9 136.7 - civil 122.1 125.9 Faenza (RA) 100 N.D. 6.5 Biological activated sludge treatment Faenza - industrial 11.8 10.8 Total length of sewer lines (km) 6,601 6,812 Cesena 193 7.5 7.5 Biological activated sludge treatment Cesena and neighboring areas, - combined 4,066 4,132 characterized by the presence ENVIRONMENTAL PERFORMANCE ENVIRONMENTAL ENVIRONMENTAL PERFORMANCE ENVIRONMENTAL - sanitary 1,726 1,806 of numerous livestock farms 5 5 - storm-water 809 874 Ravenna 180 16.7 15.6 Biological activated sludge treatment Ravenna, rural, coast In order to limit the environmental impact of wastewater, the sewer system in coastal areas is with refinement process for and industrial zone equipped with barrier mechanisms that regulate sewage discharge into the sea in the event of phosphorous and nitrogen removal heavy rainfall. Tanks are also being built to collect runoff water, which will later be sent to treatment plants. Santa Giustina (RN) 440 13 13.6 Biological activated sludge treatment Rimini and 6 municipalities Sewer system management entails such activities as emergency intervention, routine with refinement process for of Rimini province, maintenance, monitoring of the performance of pumping stations, removal of sediment and phosphorous and nitrogen removal Republic of San Marino obstructions blocking the flow of water, maintenance of street manhole covers, special maintenance aimed at restoring or improving the necessary level of hydraulic efficiency and infrastructure safety. The final phase of the water supply service is distribution to the users. In order to assure an sustainability report 2003 sustainability report sustainability report 2003 sustainability report The integrated water service is completed by wastewater treatment and subsequent adequate level of pressure, 48 main plants and about 700 smaller pumping stations are used. SR reintroduction into the environment. The sludge resulting from treatment processes is first SR dehydrated and then disposed of by incineration, landfilled or, when possible, sold as Constructed wetland agricultural fertilizer. Hera manages wastewater treatment plants known as “constructed wetlands”. These are systems Hera’s main wastewater treatment plants are equipped with odor treatment systems using to further refine wastewater already subjected to treatment, made with a system of biological biofilters. These plants are supervised around the clock by personnel who work in rotating ponds and of macrophytic vegetation that function as actual “filter ecosystems,” with the aim of shifts, supported during daytime hours by maintenance personnel. further improving treated water. This project involves reclaiming borderline areas, recreating For all the other plants, management is organized with daily visits or 2-3 visits per week, aesthetically pleasing environments with significant “architectural” value as nature oases and in depending on plant size. terms of landscape, refuge for various species of birds, amphibians and reptiles. The “constructed wetland” reserves an important role for plants in removing certain pollutants from Wastewater treatment 2002 2003 wastewater such as suspended solids, organic substances, nitrogen, phosphorous, heavy Volumes (millions of m3) 153.8 158.3 metals, viruses and bacteria, through the combined action of natural processes including - civil 141.2 146.4 sedimentation, filtration, bioaccumulation, adsorption, microbes working in both aerobic and - industrial 12.6 11.9 anaerobic conditions, and sunlight.

The Bentivoglio (BO) experience The utility manages the wastewater treatment service in 124 municipalities with about 1.7 In Bentivoglio Hera manages a constructed wetland facility built in collaboration with the million inhabitants. It relies on 346 treatment plants, of which 10% are capable on their own of Municipalities of Bentivoglio, Argelato and San Giorgio di Piano. The purification system used on treating over 90% of the total wastewater collected from the sewer lines managed. the Bentivoglio sewer drains consists of an activated sludge plant with biological disks, followed page 126 by a final “constructed wetland” stage consisting of a swampland rebuilt to form a free water page 127 S.p.A. S.p.A. surface (FWS). Hera Hera Hera S.p.A. page 128 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.3 5.3.2 5.3.3 Water qualitycontrol 5.3.3 the service. analyzed: thefrequencyandtypeoftestingvaries accordingtothepotentialandimportancefor in theplantsandpipelinesofwatersupplysystem andtreatedwastewaterissimilarly The chemical,physicalandmicrobiologicalcharacteristics ofwateraremonitoredandcontrolled served. a routinebasisthroughouttheterritory asbestos fiberdetectionprogramhasbeendeveloped andisimplementedbytheHeragroupon quality:therefore,an because itspresenceisperceivedbyusersasindicativeofpoorservice orhealthhazard(ruledoutbytheworldHealthOrganization),butrather pose aspecificsanitary attentionnotsomuchbecauseitmay Union. Thepresenceofasbestosfibersinwaterdeserves reference, sincenospecificguidelinesonthissubjectexisteitherinItalyortheEuropean (Environmental ProtectionAgency)drinkingwaterstandards,whichtheGrouphastakenasits The levelsfoundhavealwaysshowntobewellbelowthelimitsset,inUnitedStates,byEPA asbestos. are madeofasbestoscement,sampleswatertakenandtestedforthepresence regulations. Giventhatasignificantpercentageofthepipesmakingupdistributionnetwork providedandcompliancewithcurrentlaws order toassurethequalityofservices Hera conductsconstantandaccuratetestsanalysesondrinkingwaterwastewaterin over asurfaceareaofapproximately48,000m The systemconsistsofaseriesbiologicalpondsthatusemacrophyticvegetation,extending fishing”, thusreusingthepurifiedwaterforbreedingfish. the finaleffluenttoaseriesoflakeswherelocalrecreationalassociationpractices“sports Finally, anautomaticliftingstationhasbeenprovided, equippedwithsubmergedpumps,tosend such aspondweed,waterlilies,rushes,reeds,cattails. spontaneousplantgrowth engineering criteriaandincludesapondwherevisitorscanobserve This latterareaofapproximately5,000m plants alongaspeciallydesignededucationalpath. At theendofcyclearetwofinishingponds,andfinallyaswampzonegrowingvariousrare and tench,whichpreventundesirableplantplanktondevelopment. Water containingnotonlycommongoldfishbutalsocarp thusflowsintoafishbreedingreservoir the floodedarea. areadjustablewoodenbenchesthatmaintainthepredeterminedlevelsfor Between thereservoirs plant (pleustophyte). holdwaterlentils(Lemnagibba),afloating phragmites genus.Thenexttworeservoirs contains rootedplantsemergingfromthewater(helophyte)typha,scirpusand The firstsection,madeupofthreebasinswithawaterbladeapproximately50cmdeep, water plantsthatdevelopbestinwetlandenvironments. usedasactualbiologicalprocessingsystems,growvariousspeciesof The waterreservoirs, water treatmentintheformofwetlandsurface. • 2 has beendevelopedaccordingtonaturalistic 2 , ofwhich24,000aresetasidefortheactual • 2004 arenowavailable. 2004andpartialdataforthefirstmonths of The KPImeasurementsbeganinJanuary + + + + Product conformityisanaggregateKPIcalculated asfollows: + + + + Product qualityisanaggregateKPIcalculatedasfollows: andhealthconcerns. treatment processesandaddressingsanitary significant forthepurposeofidentifying,andhencepreventing,potentialproblemsin allowed. Thethreeparameterswerechosenbecausejudgedtobeamongthemost added inrelationtospecificlocalcharacteristics)–withthemaximumconcentrations Hera (Chlorites,Trihalomethanes and by served measured concentrationsofthreeparameters–thesameforwholeterritory Decree no.31/01,toobtainasimplerassessmentforinternalusewecomparedthe Noting thatproductconformityissystematicallymonitoredinaccordancewithItalianLeg. because theyareamongthemostrepresentativeandhaveimmediateimpact. established bytheWHO,andpresence/absenceofodor. Theseparameterswereselected Fixed Residueat180°C,Nitrates,ChloridesandFluorides,accordingtotheoptimalranges relevant parameters.Productqualityisassessedonthebasisofspecificparameters:Hardness, referred toastheproductqualityandconformityKPI,whichtakesintoaccountmost continuously improveitsqualitativecharacteristics,Herareliesonaperformanceindicator, In ordertomonitorthequalityofdrinkingwateranditsconformitywithstandards weighted averageforthevolumessuppliedper month. average ratiosforeachhomogeneousarea,per month; ratio tothemaxconcentrationforeachparameter, homogenousareaandmonth; average concentrationmeasuredforeachparameter, homogenousareaandmonth; weighted averageforthevolumessuppliedper month. average ratingforeachhomogeneousarea,per month; parameter, homogeneousareaandmonth; attribution ofaperformancerating(from1to10)basedontheoptimalrangeforeach average concentrationmeasuredforeachparameter, homogenousareaandmonth; Escherichia coli , towhichotherparametersmaybe

Hera S.p.A. page 129 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.3 5.3.3 Hera S.p.A. page 130 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.3 5.3.4 in thewaterservice Future plans Problem areas and strategies 5.3.4 AllofEmilia-Romagnawill soonbeconsidereda + Newlawshaveintroducedmore severepenaltiesforthe + Wastewater treatmentplantsneedtobemodernized + Thesewersystemisnotalwaysadequatelysizedand + Customersarenotalwayssatisfiedwithwater quality. + Somepotabilityanddisinfectionplantsdo notfull + Networklossesremainsignificant. + Economicandoperatingimbalancesdue to seasonal + Supplydeficiencieswithaprevalentuseofgroundwater. + impact thanthoseusedtoday. protection ofgroundwatersourcesanddevelopingdisinfectionsystemswithalowerenvironmental In addition,Heraisapartnerinresearchanddevelopmentprogramsaimedatenhancingthe interconnection ofdistributionnetworksandafurtherreductioninnetworklosses. The Groupiscommittedtoseekingabettercombinationofsupplysources,moreeffective plants fordenitrification andphosphorusremoval. tobuild additional sensitive area.It willbenecessary imperative. industrial waste.Amoreeffective controlofeffluentsis dumping oftoxicsubstances,even ifderivingfrom membranes. dual treatmentlines,rainwatertanks, filtersand plans providingfortheinstallation ofequalizationtanks, technologies: workisalreadyunderway withtransitional to updatethesystemswithincreasingly complex and upgraded.Increasinglystrict regulationsrequireus sewer systemsfromfirstflushtanks. Major projectshavebeenplanned fortheseparationof almost completelydevoidoffirst flushcollectiontanks. develop remotenetworkmonitoringsystems. Evaluate innovativedisinfectiontechnologiesandfurther indicates thatthemainplantsneedtobeupgraded. conform tonewstandards.Thepresenceofchlorites factors (Rimini,Ravenna). reservoir. (Bologna), highcostofwaterfromtheRidracoli of groundwaterindenselypopulatedurbanareas Subsidence, torrentialregimeandprogressivepollution • Collection, potabilitytreatment,distribution Wastewater treatment lcrclpwr* Mh104,782 MWh 3,142 EMISSIONS t Coagulants/flocculants Reagents andproducts Electrical power** Industrial water RESOURCES igsfo ldedgsinTtlboa rdcdm Total biogasproduced Biogas fromsludgedigestion PROCESS Sludge ** rmsug nieao C g264 kg 902 3,623 84,520 23,182 kg t t t 1.6 Biogas productionperm Electricity consumptionperm HCl Natural gasconsumptionper m INDICATORS particulatematerial t 5,548 inagriculture from sludgeincinerator inlandfills 85,711 Atmospheric emissions Sludge incinerationashdisposedof Liquid t MWh Sludge disposal Sludge produced EMISSIONS Liquidoxygen Lubricant oilsandgrease Reagents Natural gas Electric energy RESOURCES 3 ftetdwtrm of treatedwater 3 ftetdwtrkWh/m of treatedwater 3 ftetdwtrSm of treatedwater lcrct rdcdMh3,138 MWh Electricity produced 97 4 331 1 124 t 136 t t 3 t t t 2,012 101 127 t 1,692 t t Reagents forsludgetreatment t t Liquid oxygen 1.627 Polyphosphate Caustic soda Carbon dioxide Activated carbon t Sodium chlorite(24%p/p) Hydrochloric acid(9%p/p) Hydrochloric acid(32%p/p) Sodium Hypochlorite(12%activeClp/p) Oxidants Flocculation aids nlnflst7,459 9,933 36,354 127,295 6,005 t t t t t NO 718 in sludgeincinerator in composting in landfills 1,617 treatment plant t 2,789 Solid t 343 t 128 t 26 t Sodium aluminate t Aluminum polychloride Flocculants andpolyelectrolyte Peracetic acidsolut. Hydrochloric acidandsodiumchloritesolut. Sodium hypochloritesolut. SO x x Sm 3 3 /m /m m g10,815 kg g407 kg 3 3 5,601 t 3 3 3 3 11.749762 4,352,146 2,645,361 0.027 0.017 2003 2003 2003 2003 2003 2003 0.54 ** ThisfiguredoesnotincludetheForlì-CesenaandRiminiterritory * ThisfiguredoesnotincludetheForlì-Cesenaterritory Data andindicators 5.3.5

Hera S.p.A. page 131 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.3 5.3.5 Hera S.p.A. page 132 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.4 Environment 9_A lovelypanoramaofthehillsabove Brisighella. sector 5.4 recovery, andtoassuringitsfinal disposalinthemostenvironmentallyappropriatemanner. Decree, iscommittedtoreducingtheproduction ofwaste,toincreasingitsre-use,recyclingand regardtotheseaspects,Hera,inconformity with theprinciplesandgoalsofRonchi With impacts connectedtothemanagementoflandfills. emissions inairandwater, andsolidresiduesgeneratedbywastetreatmentplants,plus use offuelsandtheconsequentemissionsconnected tostreetcleaningandwastecollection, The mainenvironmentalimpactsderivingfrom thewastemanagementcycleconsistof (Registration n.I-000085). with ISO14001:1996,since2001theBaricella landfill(BO)hasbeenregisteredunderEMAS Safety andEnvironmentSystem:attheendof 2003eightplantswerecertifiedinconformity (EMAS), agoalpursuedthroughtheadoption and managementofanintegratedQuality, to standardsUNIENISO9001:2000;14001:96andECRegulation761/2001 commitments undertaken,Herahassetitselftheobjectiveofprogressivelycertifyingitsplants needs ofitstargetterritoriesinahighlyefficient,cost-effectivemanner. Inlinewiththe has acomplexsystemenablingittocovertheentirewastetreatmentcycleandhandle The Heragroupcanboastsolidknow-howinplantdesign,constructionandmanagement • 9

Hera S.p.A. page 133 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.4 Hera S.p.A. page 134 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.4 5.4.1 environmental services Segregated collectionlevels * Source“APAT 2003Waste Report” Operative 5.4.1 viewpoint. sectors whichcannotbe treatedasmunicipalsolidwastefromaqualitative orquantitative Hera alsocollectsspecial waste,i.e.wasteproducedbytheindustrial, commercial andservice fraction andwetfraction). collection (glass,paper, aluminum cans,batteries,plastic)withcombinedmaterial collection(dry quantities derivingfrom street sweeping)thankstotheintegrationoftraditional single-material have seentheaverage percentage ofsegregatedwastejumpfrom11% to29.3%(netofthe when theRonchidecree wentintoeffect,thecompanieswhichmerged toformtheHeragroup drop offdifferenttypesof waste(seetablesattheendofthischapter). Since1997,theyear byHera:herecitizenscan served ecological stationsarebeingsetupthroughout theterritory various othercontainersforsegregatedwastecollection: moreover, speciallyequipped landfills, whichalsomeansalowerenvironmental impact.Herausesdumpsters,binsand ofmaterialsandenergy)reducesthequantitywastethatends upin and recovery significantly: thisfacilitatessubsequenttreatment andeconomicexploitationofwaste(production be bestexploited.Inrecentyearsthepercentage ofsegregatedwastehasincreased or directlytorecyclingfacilities;mixedwastematerials areallocatedaccordingtohowtheymay drugs, chemicalproducts),aredeliveredtosector consortiums(e.g.CONAI,COMIECO,CIAL) from single-materialcollection,includingsome types ofdangerousmunicipalwaste(batteries, materials collectedaretakentorecyclingordisposal facilitiesasappropriate:thewastederiving fraction,“wet”fraction,…). The aluminum, plastic,batteries…)andmixedmaterials (“dry” The Heragroupengagesinsegregatedcollection bothofsinglematerials(paper, glass, plants,landfill). plant, compostingtreatmentandrecovery transport todisposalfacilitiesandsortingwaste accordingtoitsfinaldestination(waste-to-energy storageintransferstations.Temporarytemporary thepurposeofoptimizing storageserves The non-segregatedwastecollectedistakento adisposalfacility, eitherdirectlyorafter operator” vehicles,andtheuseofalternativefuels (methane,biodieselanddiesel/wateremulsion). andlimittheenvironmentalimpact,Herahasintroducednewequipment, e.g.“single- service To served. the emptyingofbinsanddumpstersinterritory increasetheefficiency ofthe Non-segregated collectionofmunicipalsolidwasteandtreatedassuchmainlyconsists in periods wheniceislikelytoform. withtheaimofkeepingroadsopenandsafeincasesnowfall maintenance service tourists flocktotheseresortareas.OnbehalfofsomemunicipalitiesHeraprovidesawinterroad Romagna coast.Thisactivityisofparticularimportance,especiallyinsummertimewhen20million totheelevenmunicipalitieslocatedon The Groupalsoprovidesabeachcleaningservice 2003, comparedtoanaverageinItalyof522.6kg. production ofmunicipalsolidwasteisamongthehighestinnation:665kgperinhabitant Hera’s whoseyearlypercapita coveraterritory sweepingandwastecollectionservices carried outbothmanuallyandmechanically. maintenance ofrubbishbins,streetandsidewalkcleaningweedremoval.Sweepingis The activitiesaimedatkeepingpublicoutdoorareascleanincludestreetsweeping,emptyingand — — — The Group’s include: activitiesinthesectorofenvironmentalservices collection ofspecialwaste. segregated andnon-segregatedcollectionofmunicipalsolidwastekindredwaste; sweeping andcleaningofpublicoutdoorareas; • through thecollection,recovery, andrecyclingofpackagingwaste. of resources environment, paysspecialattentiontotheallocation ofmaterialsandconservation importance ofdifferentiatedcollection,sustainable development,andrespectforthe This clearandforcefulcommunication,aimed atincreasingpublicawarenessofthe system,” thewastelifecycle,andhowcan berecovered/reused. and informationonhowtocorrectlyseparatewaste, aswellabouttheGroup’s “environment In addition,morethan700,000Heracustomers weredeliveredapamphletcontainingadvice successfully reachthepublic. Rimini, andutilisesavarietyofmeans(posters, buses,press,radio,breadbags)to The campaignisbeingconductedintheprovinces ofBologna,Ravenna,Forlì-Cesenaand PROPERLY” communicationcampaigninApril2004. the 35%targetprovidedbyRonchiDecree. To achievethis,it launched thenew“RECYCLE Hera’s goalforthefutureistoincreasepercentageofdifferentiatedcollectionand reach collection andresourceconservation A newcommunicationcampaign to stimulatedifferentiatedwaste Glass 11% Organic waste11% Multi-material waste17% Other (iron, aluminum,batteries)19% Bulky 8% Plant residues 14% Paper andcardboard 20%

Hera S.p.A. page 135 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.4 5.4.1 Hera S.p.A. page 136 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.4 5.4.2 * including84,000tofwastetreatedinSotris,notaccountedfor the 2003AnnualReportduetoadelayindatatransmission Special non-hazardous waste Waste treatment Waste-to-energy plant3% waste-to-energy plant6% Special hazardous waste Chemical-physical 39% Chemical-physical 62% Trend intreated waste Landfill 35% Landfill 20% Other 15% Other 20% 5.4.2 the environmentandreducingpotentialharmfulnessoflandfilledwaste. producing electricand/orthermalenergy, reintroducing theresiduesoftreatmentprocessesinto Waste treatmentactivitiesareaimedatrecoveringmaterialstobereused inproductioncycles, — — — Waste treatmentactivitiesinclude: 1997 Total wastetreated* Non-hazardous Hazardous Special waste Municipal waste Waste treated landfill disposalofnon-recyclablewaste. treatment andrecyclingofspecialliquidwaste/sludge; + + + + recycling andtreatmentofmunicipalsolidwastespecialwaste: composting andbiostabilization; waste-to-energy treatment; selection; mechanical separation; 1,474 1998 (thousands oftonnes) 1,675 1999 1,966 in 2003 2000 2,051 oae1,182,989 236,029 414,685 466,071 66,204 Totale other treatments chemical-physical waste-to-energy plant 116,011 landfill DESTINATION 17,382 23,226 71,934 3,469 Total other treatments chemical-physical waste-to-energy plant landfill DESTINATION 2001 2,252 2002 2,490 2003 2,478 t t 2,478 1,183 1,299 1,179 116 other waste-to-energyplants ordisposedofinlandfills. fraction)issenttowaste-to-energy plants;theremainderissentto which representsthe“dry” WDF(waste-derived fuel, biostabilization plants;metalsaresenttosector consortiumsorindustry; ofmaterials:wetfractions aresentto The treatmentisdesignedtoensureacorrectrecovery from non-segregatedcollection. and metalscontainedinmunicipalsolidwasteor wastetreatedassuchandspecialsolid fraction, wetfraction Hera makesuseofspecificfacilitiesforthemechanical separationofthedry Mechanical separationplants composting plantslikewiseshowedanincrease. selection andseparation)forthepurposeofrecovering materials;thefractionstreatedby 2003 confirmedtheuptrendinquantityofwaste undergoingpretreatments(mechanical material orevenenergy. sortingprocess,cannotbeexploited torecover waste, which,despitegoingthroughapreliminary enable ittorecycleagood80%ofthewastecollected, allocatingtolandfillsonlytheremainderof ofmaterialsandenergyfromwaste.By2007,theGroup’sa focusontherecovery plantswill The industrialplanofHeracallsforaphasingout oflandfilldisposalwithinthenextfouryearsand only 44%ofwaste. which 67.1%*ofwastewenttolandfilldisposal in 2001,whereasthesameyearHeralandfilled In 2003thepercentageofwastedisposeddirectly inlandfillswas40%,anItaliancontext Hera, brokendownbytypeoffacility. The tablebelowshowsthetrendinquantityofwaste(municipalandspecial)handledby support tootherregionsofItalythatarefacing“garbageemergencies”. material, havingoptimizeditstreatmentanddisposalcapacities,sufficienttoensurecooperative The Grouphasbuiltuplongtimeexperienceandistodayabletohandlesignificantflowsof ones. its treatmentcapacityithaslaunchedtheconstructionofnewplantsandupgradedexisting Hera operatesover40wastetreatment,recyclinganddisposalplantstofurtherincrease opsigpat 98 76 710141 2,478 2,490 130 991 433 2,252 57 956 366 2,051 362 1,966 1.009 180 60 371 1,675 932 169 550 332 1,474 67 971 667 141 306 87 932 674 138 300 830 59 584 107 278 487 293 240 Total 185 Inertization andchemical-physicaltreatments Composting plants Selection plants Heat-to-energy plants Landfill (in thousandsoftonnes) ol 0 68 Municipalsolid Municipalsolid Munic.solidandspecial 260.89 16.89 123.24 120.76 438 108 150 180 Total Forlì Bologna CDR Ravenna (in thousandsoft/year) chemical-physical plants22% Composting plants6% Waste-to-energy 15% Selection plants17% Neutralization and Landfills 40% 9719 9920 0120 2003 2002 2001 2000 1999 1998 1997 uhrzdcpct t.o at rae Type ofwastetreated Qty. ofwastetreated Authorized capacity * Source“APAT Waste Report2003”

Hera S.p.A. page 137 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.4 5.4.2 Hera S.p.A. page 138 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.4 5.4.2 flows connectedwiththermaltreatment i ec 9 9Municipalsolidandnon-hazardousspecial 172 79 Municipalsolidandnon-hazardous special Municipalsolidandnon-hazardous special 42 23 231.48 90 67.5 73.98 Total Other externalplants Cir Secco Mordano (BO)-Dirama Coriano (RN)-Selecta (in thousandsoft/year) iii1760176017974,6 365-- - - - 52,328 - 46,405 - 52,328 125,713 43,645 29,663 46,405 125,171 49,161 25,969 11,196 13,483 41,209 361,897 117,997 40,093 36,558 47,813 155,994 400,100 127,600 56,500 392,100 127,600 60,000 56,500 156,000 60,000 148,000 Total Rimini Ravenna Forlì-Cesena Frullo (BO)FEA of onetonnemunicipalsolidwaste Diagram showingmassandenergy uhrzdcpct t.o at Eeti nry Thermalenergy Electricenergy Qty. ofwaste Authorized capacity 0220 0320 0320 2003 2002 2003 2002 2003 2003 2002 tya)tetdpoue Mh produced (Gcal) produced (MWh) treated (t/year) uhrzdcpct t.o at rae Type ofwastetreated Qty. ofwastetreated Authorized capacity + + + environmental impact: In thewaste-to-energyprocess,threemainoutflowsareproducedwhichhaveapotential electrical powerthusproducedisclassifiedasenergyfromrenewablesources. activityandthe treatment ofwasteforenergyproductionisconsideredbylawarecovery for producingelectricityfromtheheatrecoveredwastecombustionprocess.Thermal The Groupoperatesfourwaste-to-energyplants,oneforeachprovince,andtheyhavesections C. about 1,100° Cand energy atthesametime.Thewasteistreatedatemperaturerangingbetween850° treatment, i.e.aprocessallowingthemtobedisposedofwhileproducingelectricandthermal Municipal andspecialsolidwaste(includinghospitalwaste)undergoeswaste-to-energy Waste-to-energy plants for theirreintroductionintomanufacturingcycles,ordirectlytoindustry. production processes;theselectedmaterialsaredeliveredtosectorconsortiums,whichprovide activity ofselectionhastheobjectiveenablingmaterialstoberecycledandreusedin material segregatedcollectionandspecialsolidwastecollectedfrommanufacturingfacilities.The Hera operatesspecificplantsforsortingthemunicipalsolidwasteobtainedthroughsingle- Selection plants sewer system. extinguish cinders,undergoesachemical-physicaltreatmentpriortobeingdisposedofinthe the wastewaterfromfumecleaningprocesswhich,togetherwithwaterusedto with systemsthatcontinuouslymonitortheconcentrationofmainpollutants; released throughthestack.To keepfumequalityundertightcontrol,theplantsareequipped andwettreatmentbeforebeing the fumesproducedbycombustion,whichundergodry treated asspecialwasteanddisposedofinsuitablelandfills; ash, correspondingtoabout8%involumeand28%weightofthewastetreated.Thisis 28 cover overlandfills. plants. Theproductobtainedcanbeusedforenvironmentalengineeringpurposesandplanting fractionsinseparation segregated wastecollection,aftertheyhavebeenseparatedfromthedry Biostabilization, ontheotherhand,isatreatmentcarriedoutwetfractionsfromnon- gardening. and innursery material similartoaloamrichinhumus.Itmaybeusedforenvironmentalrehabilitation,farming from theagroindustrialsector. Theproductobtained attheendoftreatmentiscompost,a from segregatedwastecollection(e.g.kitchenscraps),leavesandprunings,aswellrefuse process. Compostingenablesustoderiveagriculturalfertilizerbytransformingthewetfractions of waste.Theprocessreproducesandaccelerates,incontrolledconditions,anaturalbiological Composting isaprocessconsistingintheaerobicdigestionofbiodegradableorganicfraction Composting andbiostabilizationplants needs andhealthofendusersconsumers. distribution. Itisthusatthebasisofanincreasingly ecologicalagriculture attentivetothe possible totracktheproduct’s entire history, from production toprocessing and – satisfiesthemostimportantstandards relating toproduct identificationandmakesit Traceability –ensured by assigningan“electronic identitycard” toeachproduction batch health. identifying thebestsolutionsfordefending the environment andprotecting workers’ ISO 14001certificationare anexpression ofadesire toinvestinsafety, always Traceability, availabilityofrecords documentingtheoriginofrawmaterialsand throughout theproduction sector. products are aimedatpromoting ecologicalawareness andenvironmental education placing Xenawithinadesignframeworkgeared toward sustainable development:allthe imposed bycertificationtothisfamilyofstandards, areflection ofthecommitmentto The production plantoperatesinaccordance withISO14000 andthestrictprocedures structure. composts. Theiruserestores thenaturalfertilityofsoilaswellimproving itsphysical materials usedandthecompliancewithhighstandards ofqualityintheselection from specificsegregated collectionsandstandoutforthetraceabilityofraw Xena loamsandfertilizersderivefrom carefully selectedorganicmatrixesobtained and saleofacompleterangefarminggardening products. The synergywiththepartnerUniecohasbeenexploitedinorder tolaunchtheproduction XENA (forecologicalnaturalagricolture)

Hera S.p.A. page 139 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.4 5.4.2 Hera S.p.A. page 140 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.4 5.4.2 wastewater treatmentfacilities. The treatmentisperformeddirectlyintheplantsorliquidfractionsenttomunicipal eliminate thepollutantsfromorganicsubstances. fraction, priortobeingreleasedintosurfacewater, undergoesabiologicaltreatmentdesignedto solid fractioncontainingpollutingmaterialsislandfilledinfacilitiesforspecialwaste.Theliquid substances presentinliquidwasteandsludgebyseparatingthesolidfractions.The inertization …),hastheaimofreducingpollutioncausedbyorganicandinorganic treatment, whichreliesondifferenttechniques(chemical-physical,filtration,sedimentation, The waste derivingfromtreatmentplantsandtheperformanceofenvironmentalservices. The Heragrouptreatsspecialliquidwaste/sludgearisingfrommanufacturingactivitiesand Inertization andchemical-physicaltreatment plants atmosphere. possible toreducetheuseofnaturalgasand,consequently, theemissionofpollutantsinto energy fromlandfillbiogas,in2003theyproduced 14,184MWhofelectricity, thusmakingit of volumetric capacityof4,671,870cubicmeters. Beingsetupwithafacilityforon-siterecovery In 2003thelandfillsmanagedbyHerareceived 991,000tonnesofwaste,witharesidual Decree, tolimitrecourselandfilldisposalinfavor ofrecyclingandwaste-to-energytreatments. It isapriorityobjectiveoftheHeragroup,inharmony withtheprinciplessetforthinRonchi 2003. the classificationgivenbyItalianlegislativedecree no.36of13January The Groupmanagesdisposalfacilitiesforinert, hazardous andnon-hazardouswaste,basedon The materialsnotrecycled,orrecyclable,andnumerousothertypesofwastearelandfilled. Landfill disposal opsig(n 518.29 8.68 101.21 35 15 115.5 Nuova GeovisSant’Agata(Bo) Romagna Compost(FC) Composting (Rn) (in thousandsoft/year) oa 8. 141.46 11.28 181.5 16 Total Other externalplants Nuova GeovisOzzano(Bo) oa 6 550.4 12.4 92.58 134.63 22.12 760 26.04 79.49 153.80 100 15 29.34 170 85 70 100 180 40 Total Sotris (inertization) ITFI Bologna Lugo Ravenna Russi chemicalphys. Alfonsine chemicalphys. Ravenna sludgetreat. Ravenna chemicalphys. Forlì (PTN)chemicalphys. (in thousandsoft/year) • of qualityplansandstandard operating procedures. applicable lawsandahigh assuranceofreliability thankstotheapplication maximum guarantees for workersafety, instrictcompliancewith for therehabilitation ofcontaminated sites.Eachproject iscarriedoutwith The Heragroup provides technicalconsultingservices andplansprojects Environmental rehabilitation uhrzdcpct Qty. ofwastetreated Authorized capacity uhrzdcpct Qty. ofwastetreated Authorized capacity 2,0 + + Bologna, thelocalpublichealthcareunitandIstitutoRamazzini,providedfor: ARPA (RegionalEnvironmentalProtectionAgency)ofBolognainconjunctionwiththeUniversity Granarolo), intheareasurroundingplant.Theproject,financedbyHeraandconducted agreement withthelocalauthorities(ProvinceofBologna,MunicipalitiesCastenasoand people’s health,achemical-biologicalmonitoringsystemwassetup,onthebasisofvoluntary In ordertoeffectivelymonitoritsoperationandassessimpactontheenvironment continuous fumeanalysis. electrofilter ashseparationsystem,energyrecovery, fumecleaning,wastewater treatment and improvements intermsofenvironmentalandenergyperformance:post-combustionchambers, Granarolo Emilia,hasbeenoperationalsince1973.Overtheyearsitundergonemajor The Frullowaste-to-energyplant,situatedabout11kmnortheastofBolognainthetown Frullo waste-to-energyplant describe afewofthemostnoteworthymonitoringsystemsimplemented. to thesafetyofplantsvis-à-vissurroundingenvironment.Bywayexample,weshall institutions andauthoritieswiththeaimofacquiringfurtherscientificstatisticalbasesattesting certified bynotifiedbodiesanddevelopsnumerousinitiativespartnershipswithpublic requirements:theGrouphasadoptedenvironmentalmanagementsystems with regulatory related aspectsusingthebestavailabletechnology. Theseactivitiestakeplaceinfullaccordance analysis andmonitoringinorderthatwemayidentifymanageallsignificantenvironment- Each wastetreatmentanddisposalfacilityoperatedbytheHeragroupundergoesconstant observed inthebroaderterritorialcontextwhich centerissituated. observed The resultsoftheanalyses conductedonsamplesshowednodeviations fromthemeans proximity tothefacility. investigating andanalyzing bioaccumulationinanimalsandplants(livestock andcrops)in The Voltana wastetreatment centerwasthefocusofanenvironmentalmonitoringstudyaimedat Voltana Facility(Lugo-RA) and wereconsistentwiththedatarecordedinprevious years. The resultsshowednoevidenceofpollutionattributable totheactivitiestakingplaceonsite plant. of groundwatersamplesdrawnfrompiezometric wellsinstalledalongtheperimeterof The monitoringtookplaceonasix-monthlybasis andconsistedinthecollectionanalysis A projectwasconductedinconjunctionwiththe localARPA tomonitorgroundwater quality. Forlì TNPlatform limits. regulatory took placeinthefinalmonthsof2003.Thefindings showedthatconcentrationswerewellbelow to monitorPM10intheemissionsfromstacks ofthewaste-to-energyplant;monitoring neighborhood oftheplant.Anotherprojectwas carried outinpartnershipwiththeCSAlaboratory acids) atdepositionmonitoringstations(Wet depositionmeasurements)installedinthe &Dry fallout. Thestudyaimedtomeasuretheconcentration ofspecificpollutants(metals,halogenate A broadstudywasconductedinconjunctionwith theUniversityofBolognatomonitorairpollution Coriano -Riminiwaste-to-energyplant upgrading oftheplant,scheduledforcompletion bytheendof2004. this isastrongcommitment,coherentwiththeprojectforrenovationandenvironmental with thelocalauthoritiesconcerned,whichwouldprovideforperiodicrepetitionofmonitoring: In 2004theProvinceofBologna,inpartnershipwithHera,isworkingtowardanewagreement undergoinginvestigation. of theterritory and publichealthbythefalloutofemissionshasnosignificantrelevanceinrelationtoquality The resultsofthemonitoringledARPA toconcludethattheimpactcausedonenvironment + + municipalities ofCastenasoandGranarolo. epidemiologic investigationintothecausesofdeathandhospitalizationamongresidents stations, eachcomprisingtwohives; tests forthepresenceofheavymetalsinfreshhoneyproducedbybeesfivespeciallybuilt samplers, bioaccumulationofheavymetalsthroughlichen; naturally deposited dry residue,concentrationofHCl,SO naturally depositeddry identification oftensamplingstationsformonitoringthequalitysoil,stormwater, dust, tests onemissionsfromtheplant; x , NO x , inair, and,usingpassive • monitoring ofplants Environmental 5.4.3

Hera S.p.A. page 141 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.4 5.4.3 Hera S.p.A. page 142 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.4 5.4.4 10 Future plans 10_Sweeper atworkinRimini. 5.4.4 maintenance oftheGroup’s wastedisposalandtreatmentcapacity. the Group’s treatmentcapacity. Otherplant projects wereaimedattherationalizationand to increase application forauthorizationtobuildthenewwaste-to-energy lines,whichwillserve plantengineeringactivitiesandproceduresrelated toour In 2003wecompletedthepreliminary obtained CIP6authorizationforthe22MWofinstalledpowergenerationcapacity. schedule, in2004.Theplantwillhaveawastedisposalcapacityofabout180,000t/yearandhas upgrading oftheBolognawaste-to-energyplant,whichwillbecomefullyoperationa,laccording to The abovedatahighlighttheentityofcommitmentforrenovationandenvironmental purpose ofboostingthecapacitywaste-to-energyplants. plans toinvestaround230millionEurosinthissectorbetween2003and2007,largelyforthe Hera considerstheactivitiesinenvironmentsectortobestrategicforGroup’s growthand (RA). and specialwaste,whileanotherplantwitha45,000t/yearcapacityisunderconstructioninLugo 2003 andhasacapacityforhandling35,000t/yearofwetfractionsfrommunicipalsolidwaste agricultural fertilizers,newcompostingplantsarebeingbuilt.OnewasopenedinRiminiJune reducetheamountofwasteinlandfillsandtakeadvantagepotentialdemandfor To 54 GWh/year. new linethatwillraiseitscapacityby120,000tonnesperyearandelectricityproductionabout GWh/year. Inaddition,theoutputofForlìplantwill be increasedthroughtheconstructionofa raise thetreatmentcapacityofRiminiplantto220,000t/yearandelectricityproduction103 ofabout130GWh/year.t/year andelectricenergyrecovery We haveappliedforpermissionto (Bologna) inordertoreach,bytheendof2004,awastetreatmentcapacityaround180,000 currently underway, providesfortherenovationandtechnological upgradingoftheFrulloplant surplus ofnon-segregatedmunicipalsolidwastethatisstilllandfilled.Onesuchprojects, treatment andenergyproductioncapacitiesofwaste-to-energyplantsinordertoexploitthe In thewastetreatmentsector, theGrouphaslaunched projectsaimedatincreasingthewaste the environmentalimpactsconnectedtonoiseandroadtrafficproduced. reorganization ofcollectionandsweepingactivities,whichwillfollowatimetablesuchastolimit use lowenvironmentalimpactfuels(methane,biodieselanddiesel/wateremulsion)the sector,In theenvironmentalservices Heraintendstoproceedwiththeintroductionofvehicles that oon at-oeeg ln 755.5 15.1 27 23.9 Total Other investments Waste disposalandtreatmentfacilities New waste-to-energyprojects Bologna waste-to-energyplant Investments intheenvironment area (in millionsofEuros) • 022003 2002 1977.4 61.9 14.4 11 2.4 Waste-to-energy plants Sweeping andcollection oa egnst166138106774,807 717 81 1,056 1,640 21,935 101 605 34 1,378 17 38,117 1,656 9 27 8,917 15,000 57 t 68 13 4,475 Total 1,435 22 5,500 7 12,548 528 Ravenna 5 12,177 Forlì 1,640 Sm kg MWh t Bologna m m m t t Rimini m Caustic soda (30-33%) t m Total reagents Hydrocloricacid(30%) water andtreatment Reagents andadditivesforboiler Bicarbonate Causticsoda and wastewatertreatment Reagents forfumecleaning Oil andgrease Methane Electric energy Total water Surface water Well water Industrial water Drinking water Resources utilized uiiaiissre 104 100.500 n t 1.749.194 52,372 n t Multi-materialwaste Segregated wastecollection Total wastecollectedbysweeping Inhabitants inthemunicipalitiesserved Municipalities served PROCESS aadu at olce 82,602 t 294,932 19.94 812,957 1,107,889 t t t % 17.76 Paperandcardboard % Hazardous waste collected Total wastecollectedinallmunicipalitiesservedbyHera Total non-segregated wasteinallmunicipalitiesserved Total segregated wasteinallmunicipalitiesserved Multi-materialwaste waste fractions Percentages ofthemainsegregated iet4428641,306 654 248 404 t Lime test1 9 305 628 33 108 3 290 354 15 1 11 274 25 97 4 t t t Antiscaling agentsandotherproducts t Others Ferric chloride Sodium hypochlorite sdcohn 0.48 2.14 7.95 11.53 14.51 % % 11.77 % % % % 40 Plastic containers 74 Used clothing 15,882 1 77 29,936 Oversized items 124 Green waste t t t t Organic waste 908 t Glass t t 386 1,035 Others (iron,tires,etc…) t Waste labeledTand/orF 201 Toner cartridges 1,427 6,319 t t Expired drugs Used batteries 23,444 34,014 42,786 t t t Wood 34,708 Aluminum t t t Durable goods t Automotive batteries Hazardous munic.waste 58,799 Refrigerators Plastic containers t Used clothing Oversized items Green waste Organic waste Glass Paper andcardboard 3 3 3 3 3 3 7,3 2,2 2,2 7,1 1,509,311 278,719 124,226 626,827 479,539 886669342054,9 1,158,771 40,897 422,075 656,933 38,866 886524175548182,163 428 137,575 5,294 38,866 2003 5,0 555,108 555,108 6512450381,031 284,500 96,531 Data andindicators 5.4.5 04940,469 40,469

Hera S.p.A. page 143 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.4 5.4.5 Hera S.p.A. page 144 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.4 5.4.5 CHEMICAL-PHYSICAL TREATMENT ANDINERTIZATION PLANTS islfe o eils L3507902101,0 1.501,06 16,000 2,100 10,368 875 904 1,425 121 TOTAL 152 Sotris 7,900 5,968 ITFI 3,500 Lugo 841 ChifiBi ChifiBi 82 L Sludge m t 2,451 ChifiBi 12.9 CHIFI 1,149.90 127 30.2 13,352 Diesel fuelforvehicles 1,773 44.9 4,930 Reagents andadditives m Industrial waterand/orrecoveredbybiotreatment Drinking water 551 971 6.4 Resources utilized 4,974 g/t Total 2,477 Polveri m 1,149.90 t Ravenna mg/Nm Emissioni inariarapportoalrifiutotrattato t Forlì t Dusts(lim30) Bologna Rimini Atmospheric emissions Water leavingthetreatmentplant Sludge fromwatertreatments Ash Residual sodicby-products Electrofilter dust Emissions from waste-to-energytreatment NO x (lim 600includingSO enhmdt 36 90.00 20.00 63.62 19.80 0.30 23 10.52 2.5 % 2.50 % mean humidity % mean humidity % mean humidity mean humidity SO O(i 0) mg/Nm CO (lim100) 3 3 C lm5)mg/Nm HCl (lim50) x lm30 mg/Nm (lim 300) ol aen ra.AfnieRsiRvnaBologna Ravenna Ravenna Russi Alfonsine treat. (PTN) Forlì Ravenna ,0 ,1 ,3 ,0 ,0 0001,9 ,0 77,649 3,100 14,593 40,000 1,300 2,700 4,537 9,919 1,500 0 ,1 ,0 7,119 - 3,200 - - 5 - 3,214 700 NO SO C / 332. 591.0 15.9 25.6 33.3 g/t HCl Ogt2. 6. 8910.1 38.9 160.3 20.4 g/t CO x x x mg/Nm ) 5724,2 2215089,807 520 12,261 41,324 35,702 t / 491102. 1.0 29.70 25.00 1,609.7 25.7 0.400 8.73 774.5 0.04 426.69 141.0 9.68 1.900 1,557.8 1.200 0.04 64.500 14.9 25.000 0.52 696.5 22.000 37.000 0.800 2.40 g/t 1.400 1.76 243.000 g/t 4.000 82.19 7.00 t 3.93 t 0.76 t t t 3 3 3 3 3 3 5. 9. 1. 158.8 117.0 297.0 154.0 65126514001,8 322,635.5 15,884 124,000 182,665 86.5 . 1059<1 <1 5.9 4.0 <0,005 1.3 31.0 2.2 27.0 3.7 4.7 3.7 4.1 8.7 7.3 1.6 eaae ist5518673 73,245 433,030 6..590 2..500 415 100,897 128 96,300 390 20,100 21,500 545 57..004 35,176 6..346 159,057 t t t Surnatant frombiotreatment Separated oils Sludge produced Emissions produced LPG ml a.125007,6 ,7 - 2,048 - 3,082 - - - 2,188 8,775 12,562 2,361 - 2,421 48,659 4,505 76,869 88,724 1,925 417 9,849 8,273 81,526 218,926 43,191 1,675 14,551 3,364 31,248 6,335 41,205 215,000 *** 9,677 1,736,870 183,275 1,059,000 Electricity 17,214 12,000 Full 510,000 Cat.1 Full 30,000 Lechate Cat.1 Cat.1 Cat.1 315,000 460,000 Quantity Cat.2 Cat.1 Cat.1 Cat.2 Cat.2 Cat.1 Cat.1 Residual IL PAGO Imola TRE MONTIImola BARICELLA GALLIERA Category LANDFILL 1CLUGO LANDFILL 2CRa 2A+2B Piangipane LANDFILL 2BRa LANDFILL 1CRa BUSCA CIVITELLA FC DiscaricheLandfills ORSLF BSPRCt 1,0 980- - 59,800 12,900 119,000 215,000 Cat.2 Cat.2 Total DISC. SOGLIANO(external) SOTRIS L.F. 2BSUPERTN SOTRIS L.F. 2BSUPER oa lcrceeg eoee W 87,597 MWh 633.435 29.28 1.735 0.465 kg/inh % kg/g/inh kg/g/inh 0.24 MWh/t Electric energyrecoveredperunitofwastetreatedinwaste-to-energy plant Total electricenergyrecovered Segregated wastecollectedperinhabitantserved Waste collectedperdayinhabitantserved Waste collectedperinhabitantserved Percentage ofsegregatedwastecollection INDICATORS uhrzdcpct fwsercie rdcd from biogas produced ofwastereceived authorized capacity as at31/12/03(m ,7,7 9,7 6,6 14,184 164,165 991,374 4,671,870 3 tya)(/er (MWh) (t/year) (t/year) ) 2003 6,0 - 162,000 receive 105,000tofwasteperyear). 2005-expectedto *** Authorizationno.155119of19/12/2000(expiry 10.178

Hera S.p.A. page 145 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.4 5.4.5 Hera S.p.A. page 146 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.5 5.5.1 Other activities 11+12_Suggestive playoflightsand shadowsonaspringtime Telecommunications evening inBologna. 5.5.1 5.5 11 maintenance activitieson thedistributionnetworksmanaged. scheduled undertheRegional Telematic Planandalsoachievedsignificantsynergieswith the outthework In 2003theGroupmade investmentsof13.2millionEurosinorderto carry (above allinurbandistricts) andprovideinterconnectionsdropcables. AcanthoS.p.A.,willcomplete partofthetelematicnetwork which, throughitssubsidiary upgrade itsnetworkof ducts toaccommodatethefiberopticcables – andtheHeragroup, The projectpartnersaretheRegionalgovernment, ConsorzioRomagna-Acque–whichwill tocitizens. mile” towardofferinginnovativetelematicservices Private entitieswillalsolaterbeallowedtooperate onthesamenetwork,thusgoing“last efficiently. exchange documents,dataandothermaterials (pictures,audiofiles,…)fasterandmore government organizations,universities,public enterprises andinstitutions,whichwillbeableto The fiberopticnetwork,withaguaranteed100 megabittransmissioncapacity, willlinkalllocal Europe andearnitareputationascutting-edge “digitalland”. This projectwillplaceEmilia-Romagnaamong themosttechnologicallyadvancedregionsin also providesforsatellitelinkupstocoverhard-to-reach mountaincommunities. interconnections betweenthebackboneand municipalitiesintheareasinvolved.ThePlan Cesena andRiminiinafiberopticnetworkconsisting in460kmofcablesand200 forlinkingtheprovincesofBologna,Ravenna, Forlì- technological infrastructuresnecessary through whichtheRegionofEmilia-Romagna aims todevelop,bytheendof2004, In thetelecommunicationssector, HeraisanactivepartnerintheRegionalTelematic Plan, management, publicparkandgardenmaintenance andotherminorservices. ofBologna)andheat we tookovermanagementofthemunicipalfuneralservices (weshallpointoutthatinearly2003 services The Groupalsoprovidesfuneralandcemetery further optimizedandrationalizedin2004. Theseactivitieswillbe public lighting,trafficlightsystemsandtelecommunicationservices. our mainoperations,namely:districtheating,alreadydescribedinthechapteronenergy, to theHera group, wemanagesomeactivitiesthatmaybeconsideredcomplementary Within • • S.r.l., a GroupcompanybasedinSanLazzaro(Bologna). contractedtoHerahavebeencarriedoutby Luce traffic lightsmanagementservice 2004,thetechnicalandoperationalactivitiestiedtopublic lighting and Since 1January and equipmentconditions. lamps withotherlong-life,highluminousefficiency lampsandanoverallupgradingoftechnical vapor and realconsumptionthankstothegradualreplacement ofincandescentandmercury Hera’s whilereducingpowerdemand publiclightingmanagementgoalsaretoimproveservice georeferenced managementofinstallationsdata. construction ofnewinstallationsorupgradingexistingtomeetregulationsand scheduled maintenance,supplyofelectricpoweranddatatransmission,design weofferincludesacallcenter,The service specialand faultreportingandemergencyservice, concerned andto17municipalitiesinthecaseoftrafficlightsystems. to46(42asat31/12/03)municipalitiesfarpubliclightingis assuring efficientservice The Heragroupmanagesabout202,000lightfixturesand490trafficinstallations, • management and trafficlights Public lighting 5.5.2 12

Hera S.p.A. page 147 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.5 5.5.2 Hera S.p.A. page 148 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.6 5.6.1 Global services Testing laboratories 13_A refreshingtasteofcoolwaterin thepark. and other services 5.6.1 5.6 this context,whichoffers usanopportunitytofindresearchideasand internationalvalidationof research organizationsin thesector, comparisoncircuit”.In Heratakespartinthe“Interlaboratory As afurthertoolforpromoting thecultureofqualityandexchangewith different operationaland Bologna, Rimini,Cattolica, Lugo). units(Imola,Forlì2, laboratories (Ravennaand SassoMarconi-BO)andsevendistrictlaboratory The operationalstructureoftheHeragroup’s centersofanalysisistodaymadeup oftwo the-art testinstruments:tothisareatheGrouphas dedicatedaspecificinvestmentplan. certification fortheremainingsevenlabunitsas well.Thelaboratoriesareequippedwithstate-of- n. 0392):atwo-yearplanhasalsobeendefined withtheaimofobtainingISO9001:2000 The twomainlaboratorieslocatedinBolognaand RavennaareaccreditedbySINAL(n.0110and tendering forwaterandlandenvironmentalmonitoring contracts. toexternalcustomersrose52%compared2002,alsoasaresultof competitive services the foodandothersectorswerealsoperformed onbehalfofexternalcustomers.Revenuesfrom The analysesconcernedtheGroup’s threecorebusinesses(water, gas,waste);determinationsin were likewisestandardized. contracts rationalized throughtheimplementationofstandard methodsandsupplyservice toconsolidatetheorganizationoflaboratories:procedures were and analysisactivitiesserved In2003theprocessofintegration ofsampling continuous monitoringofthequalityitsservices. activitiesasfundamentaltoolsforthemaintenance and The Heragroupviewslaboratory NETET 04-20 0420 0620 Total 2007 2006 2005 2004 INVESTMENTS 2004-2007 4,0 0,0 9,0 8,0 1,727,000 386,000 691,000 208,000 442,000 13 consequent improvementofmeasuringprecision andreliability. our analyticmethods,weplayapartinthedissemination ofknowledgeinanalyticfieldsandthe — — — — — — — For 2004thefollowingmajorprojectsandlines ofdevelopmentareplanned: atwtrUIHMWastewater chemicalparameters CIRCUIT Microbiologicalagentsinwater EqualschemeforindicatororganismEQA-Water Microbiology SENATE Water Microbiologyscheme CIC(Consorzioitaliano compostatori–ItalianCompostingConsortium) Aquaceckchemicalparameters UNICHIM ORGANIZATION WATER RESEARCHCENTRE ISSandUNICHIM GKBioProdutsDID HPACompost OXOID Drinking waterandwastewater Wastewater Drinking andsurfacewater Drinking andsurfacewater Drinking andsurfacewater MATRIX Participation ininterlaboratorycomparisoncircuits application of service agreementswithGroupcompanies. application ofservice unification ofthedistrict laboratoriesofRimini/Cattolicaandthetwounits inForlì; extension ofaccredited parameterstoboththeBolognaandRavenna laboratories; increase inbusinessfrom outsourcing; assignment ofaunivocal codetoallsamplingpoints; standardization ofinternal procedures; InformationManagement System); unification oftheinformationsystem(LIMS-Laboratory BOLOGNA ANDRAVENNA LABORATORIES DISTRICT LABORATORY FACILITIES OF Imola,Forlì,Rimini,Lugo,BolognaItfi MARCONI SASSO BOLOGNA IMOLA S. AGATA SUL SANTERNO • FORLÌ RAVENNA FORLIMPOPOLI RIMINI The Hera Group laboratory system The HeraGrouplaboratory CATTOLICA

Hera S.p.A. page 149 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.6 5.6.1 Hera S.p.A. page 150 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.6 5.6.2 Office management 15_ BuildingsiteofthenewRiminioffices. Gas metersnewBolognaheadquarters. 14_Picture of the “Cervellati” project– 14_Picture ofthe“Cervellati” 5.6.2 green areas,facilitiesandopportunitiesforenjoyment. It isaprojectforthecity, memorieswhileofferingcitizensadditional onedesignedtoconserve will endowthehistoricalcitycenterwithcultural and representativevalue. The area’s renewalwillthusbeanexampleof“urbanrestoration”,which,combiningoldandnew, fountain, whilegymswillbeobtainedbyconvertingexistingbuildingsinviaRanzani. “Gasworks”, inthe1930s.Thegasometerswillbesetavastpublicparkwithgazeboand to thenorthandsouthwillresultinanimagereminiscentofoneexistingattime The restorationoftheexistinggasometerandreconstructionadjacentonetwo Bologna willhavenewgreenareas,homes,undergroundparkingfacilitiesandgyms. an occasionforreinventingtheentirespace,exploitingpastbyconnectingittotoday’s needs. theprojectforrenewalofthisareahasbecome Under theleadofarchitectPierluigiCervellati, day.every TheyremainastestimonytotheproductivityandmodernityofBologneseefficiency. bridge inviaStalingradoarevestigesofatimewhenpeopleusedcoalforheatingandcooking of Bologna’s thegasometer, history: visiblefrommuchofthecityandironcantileverroofby accommodate offices,vehiclerepairshops,frontofficeandcafeteria.Thearearepresentsapiece “industrial archaeology”standalongsideothersinavarietyofarchitecturalstyles,which Hera’s headquartersaresituatedpracticallyintheheartofBologna,wherebuildingsclassifiableas Berti Pichat-Bologna logistical aidsconnectedtoouractivitiesareeliminated.Theseprojectsare: whilethestrainonenvironmentcausedbyvehiclesand for residentialuseandservices of movingoperationalactivitiesintooutlyingdistrictssothatvacatedcityareasmayberecovered Two projects stand outfortheirparticularsocialandenvironmentalvalue:theyhavetheobjective — — also throughphysicalpointsforreceivingcitizens.Theseguidelinesmaybesummarizedasfollows: astrongbondwithlocalcommunities, essentially residentialareasovertheyearsandtopreserve environmental impactscausedbythepresenceofofficesandworkshopsinwhathavebecome The guidelinesfollowedforthemanagementofcompanypremisesaimtoreducesocialand The newheadquartersof HeraRimini,designedbyarchitectGaeAulenti, arecurrentlyunder Rimini the centerofBologna,in thevicinityofpresent“Frullo”facility. built inthemunicipalityof Castenaso,aboutadozenkilometersawayfrom theavenuesdelimiting The operationalactivities presentlylocatedinBertiPichatwillbemoved tonewpremisesbe Frullo eorecnupinb fie 2003 Diesel fuel Natural gas Electricity Water Resource consumptionbyoffices extensive local presence of help desks and front-office services forcontactwithcustomers. extensive localpresenceofhelpdesksandfront-officeservices logistical departments); andnetworkmanagement maintenance shops,testlaboratories,environmentalservices rationalization: centralizationofoperationalactivitiesinlargerheadquarters(e.g.vehicle 14 W 8,050,000 kWh m m 476,000 L 3 3 2,093,000 314,000 15 trees arrangedinageometricpatternthatrelatestotheaxesdefiningbuildingsthemselves. The landscapinghasanarchitectonicfunction:expansesoflawnalternatewiththicklyplanted conceived asalargeopenspace,makingitextremelyflexible. management andadministrativeoffices,thelargestinsize,willrisetoaheightoffourstoreys.It is The areaisclosetotheimportantRiminiSudexitofA14highway. Thebuildinghousingthe accommodate thepresident’s office. a buildingwithemployeedressingroomsplustheremodelingofanexistingruralto construction: theprojectprovidesforanewofficebuilding,multifunctionalandleisurefacility further benefit. obstructed bytraffic),the loweracousticimpactproducedbymethane-fueled systemsisyeta above allinurbanareas, oftenintheeveningoratnight(toavoidgetting inthewayoforbeing compactor trucksand14 sweepers:giventhatthesearefairlynoisyvehicles, whichoperate In 2003weintroduced64newvehicles,among whichweshouldhighlight10methane-fueled fleet managementandtechnologicaldevelopment. Hera S.p.A.,setuptogetherwithseveralsector operatorsforthepurposeofoptimizingglobal of 2004,thecompanyfleetismanagedbyUniflotte,a subsidiary As ofJanuary bicycles). trucks, theuseofbiodieselandelectricvehicles (somevans,tricars,motor-assisted pedal Among thelowenvironmentalimpactvehicles we shallmentionmethane-fueledcompactor 54 vehiclesareelectricpowered. 150 arefueledbymethane,1,023gasoline, 107byafuelmixture,1,396dieseland Hera usesafleetofabout2,730vehiclesdrivenbyendothermalengines:thistotal, + + + mechanical sweeping.Thebasicpoliciesmaybesummedupasfollows: atmospheric emissionsandnoiseproduced,especiallyinsuchactivitiesasbinemptying the environmentalimpactsconnectedtoresourceconsumption(non-renewablefuels,…), sweepers, …)ortosupportnetworkmanagement(vans,cars,payingconstantattention to Hera managesthefleetofvehiclesitusesforoperationalpurposes(compactortrucks, lcrct W 242,860 kWh Sm - Electricity - Methane - Gasoline - Biodiesel Consumption 2003 - Dieselfuel the majorityofvehicles,periodusehasbeenestablishedassevenyears. best opportunitiesofferedbytechnologicaldevelopment,particularlyinurbandistricts.For measures forkeepingoperationalperformanceandenvironmentalimpactsinlinewiththe constant fleetrenewal:theGrouphasidentifiedturnoverasoneoffundamental moving aroundindowntownareas; trucks, andtouseotheralternativesystems,suchassmallelectric-poweredvehiclesfor have alsostartedtointroduceoperationalvehiclesthatrunonmethane,e.g.compactor constant useofmethane-andbiodiesel-fueledvehiclesovertheyears.Inrecentyearswe use offuelswithlowenvironmentalimpact:thecompaniesmergingtoformHerahavemade tools; to treatemissionsandassurethesafetyofworkperformedusingfixedequipment maintenance shopssoastoconcentrateactivitiesinmodernfacilities,dulyequippedboth toreducetravelfornon-operationalpurposesand,conversely,territory theclosureof small optimize transporttotheplants,settingupoffacilitiesindifferentlocationswithin empty binsinnarrowstreetsandthentransferthewasteintovehiclesofhighercapacityto waste collectionwithso-called“satellite”logisticsystems,whichusesmallervehiclesto logistical rationalization:thisstrategicpolicyembracesoperationssuchas,forexample, • 916,718 185,829 L L 6,064,200 L 3 230,400 Total • Company fleet 5.6.3

Hera S.p.A. page 151 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.6 5.6.2 5.6.3 Hera S.p.A. page 152 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.6 5.6.3 * Vehicles soldornotusedin2003areexcludedfromthecalculations. *** Forlightdieselfuelandgasolinefrom1998to2000. ** Forlightdieselfuelandgasolinefrom1993to1997. 2.1 kglessCO literofbiodieselusedintheplacedieselfuel, It isestimatedthatforevery fuel isobtainedfrom. primarily duetotheprocessofphotosynthesis carriedoutbytheplants Its productionmoreoverallowsareductionincarbondioxideemissions, will onlydegradeby40%. biodegradable, upto95%in28days:thesamenumberofdaysdiesel gasoline, mainlyfortworeasons:ithasahigherflashpointandishighly heavy metalssuchasleadandcadmium.Itisalsosafertostorethan It containsnoaromaticpolycyclichydrocarbons,compoundsor formation. does notproducesulfurdioxidenorisitresponsibleforacidrain emissions. Inapurestate,biodieselfueliscompletelysulfurfree,soit toreducethemainair-pollutingtraditional dieselfuelinfactserves Its partial(inthecaseofmixtures)ortotalapurestate)replacement significant advantagesfortheenvironment. Based oncurrentlyavailabledataitisbelievedthatusingthisfuelprovides derived forexamplefromrapeseed,sunflowerseedsandsoybeans. Biodiesel isafuelobtainedbychemicalconversionofvegetableoils, motor vehicles. group, launchedanexperimentalprojectfortheuseofbiodieselasfuel performance, Area,aRavenna-basedutilitythathassincejoinedtheHera In 2000,withinthesphereofactionsaimedatimprovingenvironmental The experienceinRavennawithbiodiesel 2 islN 270197398 256 1.121 Total N. EURO3 EURO2*** EURO1** Diesel Conventional Breakd. ofHerafleet* ehn .82038 54 120 242736 45 N. 132 140283248 189 N. 860 Electric N. Methane N. Biodiesel Gasoline will bereleasedintotheatmosphere. m3,853,1982,750,2525,897,089 4,019,630 16,520,169 km m495,000 87,228282,323447,930 539,374 1,356,855 km 170,025368,645543,881 971,469 km 2,054,020 909,7633,297,0312,736,725 2,192,155 9,135,674 km km u o19)(9219)(9620)(2001-2004) (1996-2000) (1992-1995) (up to1991) 53 — — — — following modulesweretohavebeenreleased throughouttheGroup: Division.Inearly2004the organizational unitwassetupwithintheparentcompanyService theaimofextending useofthistoolinacompleteandintegratedmanner,With in2003aTIS — — — — — — — — — — — The Territorial Information System(TIS)implementedinBolognacomprises: planning stagetocompleterestorationoftheroadoncejobisdone. be efficientlymanagedwhileexploitingallthepotentialsynergieswithotheroperators,from over time,allroutineandspecialmaintenanceinvolvingroadwork:excavation,forexample,can using theWEBGISsystemtomapandmanage,inacoordinatedmannerwithcontinuity agreements withinstitutionsandcompaniesthatplayaroleinthemanagementofterritory, jurisdiction. BasedontheexperiencewhichstartedinBologna1988,Heraplanstodefine of players tostayabreastofthestateart,andplanactivitieswithintheirterritory In thiscontext,itisfundamentaltodevelopsharedmethodsandtools,suchasenableall there. and/orthosewhowork generally speaking,alltheorganizationstheymanagewithinterritory imperative forutilitycompanies,municipal,provincialandregionalauthoritiesand,more Real-time mappingoftheoperationsconductedwithinone’s isindubitablyan territory Georeferenced CallCenter(GEOCenter). system formanagementofpost-meterworkand mappingofnetworkconsumption; onthewaterandgasnetworks; real-time georeferencingoffaultreportsandinterventions planning ofnetworkrepairjobsonthebasis statisticalanalysesandmodelsgeneratedby GPS managementofcompanyfleets; weather reportingsystemsandformonitoringefficiencyproductivityindexes. GIS applicationsforthemanagementofdatabankslinkedtoremotemonitoringsystems, WEB disseminationofnumericalmappingdata; possibility ofviewingallmappingdatainthedatabankviacompanyIntranet; the ElectricityandGasAuthority; generation ofproceduresanddatabanksastoolsforsatisfyingrequirementsintroducedby management ofnetworkbreakdownandemergencyservices; management ofgasandwatersamplingpoints; served; management oftheroadgraphcoveringterritory management ofsweepingroutes,wintersnowandiceclearance,wastecollection; waste; management ofcollectionsitesandcontainersformunicipalsolidwastesegregated mapped andmanaged); excavation andworksitesystem(sinceSeptember2001,over7,000worksiteshavebeen lights; networks, districtheating,digitaltelecommunicationsnetwork,publiclightingandtraffic management oftechnologicalnetworks:water, gas, sewerandwastewatertreatment • of localoperations in themanagement TIS support 5.6.4

Hera S.p.A. page 153 SR sustainability report 2003 5 ENVIRONMENTAL PERFORMANCE 5.6 5.6.4 6 DIALOGUE WITH STAKEHOLDERS page 155 S.p.A. Imola, strolling in via Emilia Hera Hera S.p.A. page 156 SR sustainability report 2003 6 DIALOGUE WITH STAKEHOLDERS 6.1 6.2 Project aims Approach adopted

6.2 6.1 + + + The followingdialoguetoolswereused: represented. have beenadoptedtoinvestigatethemostrelevant issuesforeachcategory The effortsundertakenthusfarhaveinvolved a varietyofstakeholdersanddifferentmethods which shouldunderliecorporatedecision-making. principally withregardtotheprinciplesofsocial, economicandenvironmentalsustainability new concernsandexpectationsofcitizens,consumers, governmentagenciesandinvestors, Through apolicyofopendialoguewiththemain stakeholders,Heraseekstorespondthe governance capableofreconcilingtheinterests ofvariousstakeholders. andconventionalrequirements,embracingasystemof open that gobeyondregulatory context, theCompanystatesitssocialresponsibility andvoluntarilytakesoncommitments shareholders, investors,consumers,publicauthorities andnon-profitorganizations.Inthis environmental pressuresarisingthroughinteraction withallinterestedparties:employees, responsibility concerningthenecessityofresponding tothesocial,economicand Hera fullyespousestheprincipleexpressedin theGreenPaperoncorporatesocial outside thecompany. Group inauguratedaprocessofdialogueandexchangewiththemainstakeholdersinside useful suggestionsforimprovingthelayoutandcontentsofSustainabilityReport, In 2003,inordertoimplementapolicyofconstructivedialoguewithstakeholdersandgather personal questionnaires. discuss theirrespective positions; meeting,thevariousgroups group consensusona specific topic;inasubsequentplenary interest; smallgroupsare formed,eachaidedbyafacilitator, thegoalbeing toarriveata workshops: planneddiscussions aimedatgatheringperceptionsabout definedareasof be addressed; during discussion,ledby amoderatorwhoguidesparticipationandoutlines thetopicsto interest, conductedingroupswhosemembers interactandmutuallyinfluenceoneanother focus groups:planneddiscussionsaimedatgathering perceptionsaboutdefinedareasof • • FOCUS GROUP WORKSHOP NAIRES QUESTION- ehd agt ujcsivle cp Topics Scope Subjectsinvolved Targets Methods and government Institutions institutions Financial associations Institutions and Hera Employees Municipality ofCesena S. Pietro Municipality ofCastel Municipality ofRavenna Province ofForlì-Cesena Legambiente Forlì-Cesena ADICONSUM Bologna Agency) EmiliaRomagna Environmental Protection ARPA (Regional Romagna of Craftsmen)Emilia (National Federation Bologna, CNA Bologna, Assindustria Bologna, Legacoop Water Services,API the Supervisionof Regional Authorityfor Calvert Group Management Kempen Capital Management Morley Fund and workers Office personnel and Executives Managers problem area and potential critical aspects treatment of ness inthe and thorough- Completeness of information and usefulness Completeness of communication completeness and usefulness, Effectiveness and control. transparency of theReportfor Use andvalue terms ofresults expectations in Hera: fearsand one yearof Assessment of and strategies group policies relation toHera the BSin weaknesses of Strengths and Performance Social Performance Environmental identity Corporate stakeholders with Relationship Communication Reliability Completeness information Type of of thetool Usefulness work Organization of Safety Training Communication Strategy stakeholders for thevarious communication strategies and improving Ideas for

Hera S.p.A. page 157 SR sustainability report 2003 6 DIALOGUE WITH STAKEHOLDERS 6.2 Hera S.p.A. page 158 SR sustainability report 2003 6 DIALOGUE WITH STAKEHOLDERS 6.3 6.3.1 6.3.2 “Controllers” Workshop Overview of Overview Questionnaires 1_Bologna headquarters,VialeBerti Pichat. results 6.3.2 6.3.1 6.3 + + + + oftheresultsquestionnaires. Below isapoint-by-pointoverview the economic,socialand environmentalcapitalofallrelatedsectors. social responsibility, aswell integratingandinvolvingthelocalcommunityin thedevelopmentof with thesestakeholders, suchdialoguerepresentinganessentialtoolfor communicatingcorporate as regardsrelationswith localauthoritiesandcustomers,Heraisexpected tobeopendialogue different localcontextsand thecomplexityofexternalstakeholdersit interactswith.Inparticular, The topicsofdiscussion arisingduringtheworkshopparticularlyconcerned Hera’s tieswithallthe + + + + Among therelevantpointsthatemerged,byconsensus ofthemajorityparticipants: and socialresponsibility. depth toevaluateitsmeaningfulnessasatool forcommunicatingthecompany’s sustainability The aimofthemeetingwastoexaminecontents oftheSustainabilityReport2002in the SustainabilityReport2002withrespectto criticalaspectsandpotentialproblemareas. specific realmsofdiscussioninordertoassess thecompletenessandcomprehensivenessof bodieshaving acloseinvolvementwithHera’ssupervisory activities, attentionwasfocusedon In theworkshopconductedwithrepresentatives ofgovernmentagencies,associationsand — — — Additional informationdeemedusefulforreportingthecompany’s sustainability: — — — Communication: with respondentsalsohopingtoseegreaterinvolvementinfutureyears. Appreciation wasexpressedfortheprocessofdialogueinauguratedwithstakeholders, sustainability. analysts, inparticular, pointedoutthatitisanindispensable toolforevaluatingtheGroup’s The SustainabilityReportwasjudgedtobeahighlyusefultoolbyallrespondents;financial openness andtransparency. strengthening citizens’/customers’ confidenceandsenseofbelonging through apolicyof national andinternational benchmarkingstudy; usefulness ofacomparisonwithotherplayersoperating intheutilitiessectorbymeansofa the company; performance andconductgivecitizens-users agreaterpossibilityofcommunicatingwith external communication:introducethevoiceof stakeholdersconcerningthecompany’s areprovided; inwhichservices activities inrelationtotheterritory corporate identity:extensionoftheinformation about thecompany’s organizationand breakdown ofdatabylocalterritories. more detaileddescriptionoffuturecommitmentsandplansforimprovement; the pathofcorporatesocialresponsibility; to compareHera’s performancetothatofothercompanieshavesimilarlychosen national andinternationalbenchmarkingwithmajorplayersintheutilitiessectororder appreciation fortheclarityandtransparencyofdatareportedyear2002. invest moreinthecommunicationofHera’s sustainability; understandable, whichreferredreaderstotheGroup’s websiteforin-depthinformation; it wassuggestedtoprepareaconciseSustainabilityReport,easilyandimmediately • • 1 commitment toimplementing asociallyresponsiblecorporatemodel. stakeholders; thedrafting ofaSustainabilityReportisitselfdemonstration oftheGroup’s The employeesinvolved inthemeetingpositivelyviewedHera’s policyofdialoguewithall success. Group’s objectives andstrategiestobeconveyedefficiently, thusincreasing thelikelihoodof efficiency. Theimplementation ofnewcommunicationtoolsandmethodswould enablethe as thebasisforreinforcingbothsharedidentity oftheGroupandoperating may serve utmost importance:infact,openandtransparent dialogueacrossalllevelsoforganization Among thetopicsaddressedbyFocusGroup, internalcommunicationprovedtobeof + + + + + company situations. were askedtotakepartsoashaveasample groupof25peoplerepresentativeall Office staffandworkersfromdifferentdepartments anddifferentterritorialoperativecompanies year aftertheGroup’s establishment,comparingtheresultsattainedwithinternalexpectations. theopinionsofworkforce one The objectiveofthemeetingwithemployeeswas tosurvey + + + + Relevant suggestionswerealsomadeonthetopicofcommunication + + + The mostrelevanttopicsthatemerged,byconsensusofthemajorityparticipants,were: take partsoastohaveasamplegroupof15peoplerepresentativeallcompanysituations. Managers fromdifferentdepartmentsandterritorialoperativecompanieswereaskedto group. weaknesses oftheSustainabilityReport2002inaddressingpoliciesandstrategiesHera The meetingwithHera’s managementpersonnelwasaimedatevaluatingthestrengthsand to limitrecourseoutsourcing,focusinginstead onpromotingprocessesofinternalgrowth. to improvetheorganizationalmachine; represented valuesinthecultureofcompanies thatmergedintoHera; to continueprioritizinginvestmentsintrainingand safety, aspectsthathavealways divisions anddifferentGroupcompanies; to implementhighlyefficientsystemsforinternal communicationamongdifferentoperational to reinforceanddisseminatetheGroup’s mission,objectivesandcommitments; — — integrate theactionofdifferentGroupcompaniesinspherecommunication: — — formulate guidelinesformanagingnon-stabilizedcommunication,where: stakeholders; enhance thepotentialofSustainabilityReportasatoolforimprovingcommunicationwith — — — reinforce communicationaimedatallstakeholders,highlightinginparticular: always respected,theGroupmustemphasizevalueoftransparencyoffered. transparency ofitscommercialofferings;inafreemarketcontext,wherethisconditionisnot customers: initsrelationswithcustomers,Heraattributesgreatimportancetothe social cooperatives); similarly agoodideatocontinuerelationshipsthatconsiderthesocialvalueofsuppliers(e.g. consideration, therefore,ofhowthedistributionvalueaddedimpactsrelatedsectors;itis standards; theCompanymustreconcilethesebenefitswithterritorialcharacterofHera,in agreements hasbroughtlargebenefitsintermsofcostreductionandproductquality suppliers: centralizationasregardsbothsupplierselectionandtheformulationofframework safety, qualityoflife)mustremainatthecentercompany commitments; however, thedifferentoperatingnecessities.Thesame focusonemployees(enrichment, divisions inordertoachieveahomogeneousmanagementapproachthattakesintoaccount, organization ofwork:needtopursuetheprocessharmonizationamongallorganizational exploit thebenefitsofdialoguewithlocalrealities. the Holdingcompanymustaimatdefinitionofsharedstrategies,whileTOCscan the informationcommunicatedmustbeconsistent; the sourcesofinformationchangeasorganizationchanges; organization; the subjectsofcommunicationchangeduetorapid,continualchangesin best practicesimplementedinvariousoperatingsectors; identity, organization,rolesandresponsibility; company missionandvalues; • • : personnel andworkers Focus group:office 6.3.4 managers executives Focus group: 6.3.3

Hera S.p.A. page 159 SR sustainability report 2003 6 DIALOGUE WITH STAKEHOLDERS 6.3 6.3.3 6.3.4 7 IMPROVEMENT OBJECTIVES: 2003 RESULTS AND FUTURE COMMITMENTS page 161 S.p.A. Faenza, playing, and growing up, in the park. Hera Hera S.p.A. page 162 SR sustainability report 2003 7 IMPROVEMENT OBJECTIVES: 2003 RESULTS AND FUTURE COMMITMENTS omnt cetyugpol o Cniu atesi ihUiest f DefinestablerelationswithUniversities Develop occasionsformeetingsbetween Continuepartnershipwith Universityof Accept youngpeoplefor LocalmeetingswithHera Community Monthlyelectronicnewsletter;six-monthly Hold meetingswithcitizens Community TheTop ManagementofHerametwith ImplementtheCodeofEthics,introduce Periodicallyreporttothe Institutions Therulesgoverningrelationswith Favorrelationshipswithsuppliers Suppliers mlye uls ni-os esetr aaeetcnetoswr raie.Quarterlymanagement conventions, outtrainingonsharedvaluesand Carry Managementconventionswereorganized. Publishanin-house newsletter Training wasprovided,alsointhe Employees out trainingonmarket/ Carry Employees mlye nrdc aae Tepoeswssatdwt h DefineaperformancebonusforallGroup ISO9001:2000 certificationofHeraSpA Theprocesswasstartedwiththe ISO9001:2000certificationof Introduceamanager Continuedeveloping indicators,sothat Achievecertificationofour Increasethedialoguewithstakeholders Commitments 2004andbeyond Employees Involvementactivitieswere implemented Dialoguewithinternalandexternal AfirstseriesofGroupindicators All Progressivelyrefinethe All 2003Results All CommitmentinSR02 Stakeholder prniehp n nenhp oon n atr erePorm and/orMasters Programs,withinaGroup criteriainsupplier assessments Bolognaand Masters DegreePrograms supplychain,include sustainablequality apprenticeships andinternships specificcommunication initiatives compliancewithstandard SA8000inthe launchedby thenewGroups conferenceswithactivityreports; achieved inspecificterritories regarding theoperativeresults Mayorstoinformthemabout theactivities provinces inwhichweoperate municipal administratorsofthefour supplierswereharmonized and environmentalsustainability principles ofeconomic,social who basetheiractionson fepoes a omltdIntranet,definitionof communityspaces, in2004andexpenditure of700,000Euros disseminationofdataandmaterialsthrough wasformulated anestimatedtotal ofabout120,000hours expenditureofover400,000Euros Aninternalcommunicationplan managementandoperationalskills,for about60,000 hours in2003and of employees) (to facilitateinvolvement areasindicated,foratotal of of decisions value andawareness customer orientationandthe aeysses businesssectorsby2004. viewoftheGroup’s economic, socialand andTOCsinrelationtothethreecore HeraSpA(planningandcontrol). safety systems quality, environmentand theyprovideanincreasingly comprehensive system) the surveying (seechap.6) and workingtogether(implement stakeholders viaspecificmeetings wasappliedintheSustainabilityReport Sustainability Report indicators includedinthe results attainedin2003withrespecttothecommitmentsdescribed2002Report. belowwepresentthe definition ofimprovementobjectivesforeachstakeholdercategory: environmental, socialandeconomicspheres.Thisisalsodemonstratedbytheprecise responsibility, throughtheintegratedmanagementof thedifferentpathstoexcellencein aimed atcontinuouslyimprovingthecorporateculturewithinaframeworkofsocial For theHeragroup,SustainabilityReportistestimonytoamanagementprocesswhich is utiaiiyRpr individual citizensorassociations operationaldivisionsofthe Groupand Sustainability Report technicians, focusgroups onthe sesetsse personnel,asanincentivetoimproving assessment system planning framework two-monthly houseorgan productivity andqualityofwork environmental performances • niomn nry–Criytehaig nevrnetlmngmn ytm Apply theenvironmentalmanagement Anenvironmentalmanagement system Implementprojects torenovateandboost RenewexistingISO14001(9)andEMAS Energy–Certifytheheating Environment RenewalofexistingISO14001(6)and Environment –Certifythe Environment Seesection5.4 Defineandimplementasystem for Environment–Recovermore Environment Segregatedwastecollectionincreased Proceedwithdevelopment oftheprojects Environment–Recovermore Environment Completespecialmaintenanceonuser Completionofprojectforreducingthe Seesection5.3 Water –Improveefficiency Environment Energy–Improveenergy Environment tkhle omteti R220 eut Commitments2004andbeyond Drawupareportontheimpactof Start-up ofstudiesforanalyzingimpactdue Energy–Improveenergyefficiency Institutionalcampaignsonsuchthemesas Environment Seeinformationabout2003awareness 2003Results Educatecitizenshowtouse Community CommitmentinSR02 Stakeholder fteHr oon etn haigsse system,certifyittoISO14001 capacityofwaste-to-energy plants; treatup to49%oftotalcollected wasteby2007 systemoftheHeraBologna heating heating system was developedfortheHeraBologna moreplantsin 2004and5in2005 system of theHeraBolognaheating system EMASregistration (1)certifications;extend certificationto3 extended toanadditional3plants Reach35%by2007 by 2005 all mainwastetreatment plants EMAS(1)certifications, ISO14001 system EMASregistration of and safetymanagement recoveredfromsegregatedwaste. monitoringthequantitiesofmaterials integrated quality, segregatedwastematerialrecovery environment treatment underway to29.28%.Increase incomposting Increase waste-to-energy energy fromwaste. Terms introducedformonitoring biostabilization Increase compostingand material fromwaste. andnetworks Bologna connectionsandnetworks maintenanceonuserconnections network,continuationofspecial distribution networksfor user connectionsand special maintenanceof operatingpressureinthe Bolognacity Reduce operatingpressure, reducing networklosses. in theuseofwaterresources, projectsunderway Proceedwithdevelopmentofthe Extend districtheating efficiency ofthelocalsystem procedures/engineeringofprojects plants.Continuationofauthorization and assimilatedsources production fromrenewable h motneo aig Engageinenvironmental education citizenawareness. quality, service environmentalimpactand resources and acarefuluseofwater energy, segregatedcollection buildingcampaigninsection 4.7 the importanceofsaving improve theirquality, about correctlytohelp Hera services nraeeetia nry toCO Increase electricalenergy and cogenerationplants to expandcapacityatwaste-to-energy 2 msin fwset-nry Group’s activitiesongreenhousegases. emissions ofwaste-to-energy and EMAS

Hera S.p.A. page 163 SR sustainability report 2003 7 IMPROVEMENT OBJECTIVES: 2003 RESULTS AND FUTURE COMMITMENTS Hera S.p.A. page 164 SR sustainability report 2003 GLOSSARY Global ReportingInitiative(GRI) Corporate SocialResponsibility Glossary Environmental aspect Cathodic protection Green Certificates Captive customer Greenhouse gas Energy recovery ISO 14001:1996 District Heating Environment Electric box Fiber optics EMAS AEEG (CSR) CIP 6 ETP International standardsetting therequirementsforenvironmentalmanagementsystem certification. chlorofluorocarbons andnitrogen oxides. gases, themaingreenhouse gasesresultingfromhumanactivitiesarecarbon dioxide,methane, Gases thatcontributetoclimate changesduetoagreenhouseeffect:inaddition tonaturallyoccurring energy fromrenewablesources. assigned avalueof100MWh. Thesecertificatescanbetradedtofulfillthe obligation ofprocuring production ofelectricityfromrenewablesourcesis entitledtoreceivecertification(GreenCertificates), renewable energyplants.Forthefirsteightyearsfollowing theinspectionandstart-upperiod, on 11November1999.Eachproducerorimporter mustprocure2%ofhiselectricpowerfrom ofIndustry,Certificates definedinarticle5ofthedecreeissued bytheMinistry Trade andHandicrafts environmental reporting. An institutionwhosemissionistodevelopandextend theapplicabilityofguidelinesforsocialand beams. informationintheformoflight Cables consistingofslendersiliconorglassfiber strands. Theycarry 10,000 Mcal,ortheenergyobtainedfromcombustion ofonetonnepetroleum. Equivalent tonnesofpetroleum.Conventionalunit ofmeasurementforenergysources,equivalentto environment (definitionaccordingtoUNIENISO 14001:1996). whichcaninteractwithan Element oftheorganization'sactivities,products, orservices fauna, humans,andtheirinterrelation. Surroundings inwhichanorganizationoperates, includingair, water, land,naturalresources,flora, statement). public natureandthefactthatitisopentolocalcommunity(preparationofenvironmental community eco-managementandauditscheme.WhatdistinguishesitfromISO14001:1996isits adherence byorganizationstoa EC regulationno.761/2001dated19March2001onvoluntary and/or electricity. Using theenergyreleasedduringaprocess(ofcombustion,pressurechange,…)toproducesteam networks. Enclosure containingelectricalequipmentand/ortransformersconnectedtotransportordistribution through anenergyvector(hotwater, superheatedwater, steam). Transfer ofheatoriginatingfromthermalpowerplantsorcogenerationwaste-to-energy meet thelegitimateexpectationsofstakeholders. The wholesetofsocial,environmentalandeconomicresponsibilitiesthatacompanymusttakeonto renewable andassimilatedsources. to theproductionandsaleENEL(nationalelectricpowerutility)ofenergyfromconventional, production ofelectricityfromrenewablesources.Itdeterminesthetariffsandcontributionsrelative Ruling no.6/92oftheCIP(InterministerialPriceCommittee)concerningincentivesto electric potential. System forpreventingcorrosionofundergroundmetalpipes,consistingintheapplicationanegative intheareawhereuserislocated. service This isanendcustomerwhomaystipulatesupplycontractssolelywiththedistributoroffering for thepurposeofregulatingandcontrollingItalianenergymarket. Electricity andGasAuthority, establishedunderItalian Law481/95.Itisagovernmentagencysetup day biochemicaloxygendemand(BOD Unit ofmeasurementdefinedbysectorregulations as“organicbiodegradableloadhavingafive- environmental services. and fragmentation oflocalutilitiesandachieveeconomies ofscaleintheintegratedwaterservice Instituted bytheGalliLawtoallowmanagemententitiesofadequatesize,overcome all municipaladministrativefunctionswithrespecttowaterandenvironmentalservices. authorities ofeachOTA; itrepresentsthemutualinterestsoflocalauthoritiesinvolved andfulfills Form ofcooperationintroducedbyart.3theGalliLaw, setupbytheprovincialandmunicipal assuring safedistributionanduse. methane gastolenditacharacteristicodor, thereby enablinganyleakstobedetectedand Sulfurized organicgaseouscompoundormixtureofcompoundsaddedintracequantitiesto stipulate supplycontractswithanymanufacturer, distributor orwholesaler, eitherinItalyorabroad. referencetotheelectricalenergysector,With thisisanindividualororganizationthat iseligibleto electricity injectedintothenetworkexceedsactualconsumption. They aretheconsequenceofnetworkleakage.Duetotheselosses,quantitygas,waterand hydrocarbons. Hereintheterms“methanegas”or“gas”areusedsynonymouslywith“naturalgas”. Gaseous fossilfuelmadeupofmethane(from88to98%)andsmallquantitiesother local communitytodefineplansofactionforpursuingsustainabilityatalevel. It istheprocessofpartnershipthroughwhichlocalauthoritiesworktogetherwithallsectors with apowerof1kW. Unit ofmeasureforelectricalenergy, equivalenttothe energyproducedin1hourbyamachine social orembraceseveraldimensions. company performance.Theymaybefinancial,production-related,commercial,environmentalor Specific indicatorsselectedaccordingtocompanyinformationrequirementsandusedmonitor as “Vision2000”). International standardsettingtherequirementsforqualitymanagementsystemcertification(alsoreferred to which itsholderhasdiscarded, orhasdecidedtoisrequireddiscard”. 1997 defineswasteas“anysubstanceorobject|…| Italian legislativedecreeno. 22of5February –costsofbought-inmaterialsand services. in inventory and selffinancing,labor: wagesandsalaries).Value addedisgivenby:revenues+/-changes It isanindicationofthereturn oninternalfactorsofproduction(capital:amortization, depreciation Development, 1987) generations tomeettheir ownneeds”(BrundtlandReport–World CommissionforEconomic “Development thatmeetstheneedsofpresent, withoutcompromisingtheabilityoffuture withdrawal ofgroundwateratarateexceedingthat ofnaturalrecharging. Sinking ofthesoilcausedbyloweringunderground watertable,inturncausedby and community. stakeholders are:employees,shareholders,financial backers,customers,suppliers,institutions able toinfluencethechoicesandconductofabusiness andhelpdetermineitssuccess.Themain Individuals andgroupsinsideoutsideacompany, withdifferentinterestsandneeds,whoare Technological platformforintegrateddevelopmentofcompanyinformationsystems. inhabitant, i.e.individualperson. load inthewastewaterenteringatreatmentplant tobeexpressedastheassumedloadper 5 ) of60gramsoxygenperday”:itallowsthepolluting Waste Value added Sustainable development Subsidence (interested parties) Stakeholders SAP Population equivalent OTA (OptimumTerritorial Area) (OTA Agency) Optimum Territorial Area Agency Odorizer Non-captive customer Network losses Natural gas Local Agenda21 Kilowatt hour(kWh) Key PerformanceIndicators(KPI) ISO 9001:2000

Hera S.p.A. page 165 SR sustainability report 2003 GLOSSARY Hera S.p.A. page 166 SR sustainability report 2003 CERTIFICATION OF PROCEDURAL CONFORMANCE

Hera S.p.A. page 167 SR sustainability report 2003 CERTIFICATION OF PROCEDURAL CONFORMANCE Hera S.p.A. page 168 SR sustainability report 2003 Send to: I wishtoreceivetheSustainability Report2004 and/or thequalityofsocialengagementbetween Heraanditsstakeholders? Do youhaveanyremarkstomakeorsuggestions onhowimprovementscanbemadetonextyear'sSustainabilityReport expectations ofthevariousstakeholders? Do youfeelthatHerahasactedconsistentlywith thevaluesstatedinSustainabilityReportandlinewithlegitimat How doyourateHera’s SustainabilityReport? stakeholders? Do youbelievethattheSustainabilityReportrepresentsanopportunityforafairandaccuraterating ofHera'srelationswith doyoubelongto? Which stakeholdercategory Rating ofthe2003SustainabilityReport otoe iyTw:Prov./Cty./State: City/Town: Surname: N°: e-mail: Postcode: St. Address: Name: ifNo,whynot? No Yes xeln odAeaeFi Poor Fair Average f) Overallratingofthecompany’s performanceinthefollowingfields: e) Graphiclayout Good d) Abilitytoincreaseawarenessofthecompany c) Completenessoftheinformationgiven b) Clarityofthedocument a) Clarityofthemethodemployed ifNo,why not? Excellent No Yes upir utmr ntttosCommunity Institutions FinancialBackers Customers Shareholders Suppliers Employees environmental social economic-financial e its